Consolidation is needed in the Indian banking sector and therefore mergers and acquisitions should take place, but it is not happening for various reasons, according to Mohan V. Tanksale, Chairman and Managing Director of Central Bank of India.

He was addressing the media here on Friday evening. Earlier in the day, he had inaugurated an ultra small branch at Kandarada village near Pithapuram in East Godavari district. He said Indian banks were nowhere in the global list of big banks and therefore it was preferrable that mergers should take place to achieve size and compete in the global market. “Our Finance Minister has expressed the wish that consolidation should take place in the banking sector, but it is not happening. When two banks come together, there should be compatibility in organisational cultures and there should be technological convergence — objectives which are difficult to achieve, but by no means impossible,” he said.

He said his bank would strive to take banking services to the rural areas and achieve financial inclusion. “Our bank has been allotted 3,750 villages in the country and we will open ultra small branches by appointing business correspondents. Zero balance accounts will be opened and each household will be covered in the village. Each such branch will be attached to a bigger branch in the vicinity and the manager of the bigger branch would visit the ultra small branch once a week and monitor its functioning.”

Referring to the banking scenario in the country, he said there may be some improvement in the next quarter and the inflation position may ease accompanied by a rate cut. “We have already reduced interest rates to an extent. The situation may improve. On the whole, the Indian banking sector has shown great resilience on many occasions in the recent past. There may be ups and downs, but we have survived them all,” he said.

He said public sector banks in the country were performing well and they were able to hold their own against the private sector banks. “In the key areas of technology adaptation and customer service, the public sector banks are competing well with the private ones. In any event, in a vast country like India, there is room for both,” he said.

Referring to Andhra Pradesh, Tanksale said the bank was in expansion mode in the State and it would add 26 more branches to the existing 174 to make it 200 by the end of the current financial year.

(This article was published on December 8, 2012)
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