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Private banks are unperturbed by the merger of SBI and its associate banks. They think they have room to operate in the country which is fairly diverse in nature.
“One cannot bring in or superimpose a global model to say the country needs only five or seven banks. I have a view that everybody is just gazing into the wilderness. There is no established model which says this is right or that is right,” Shyam Srinivasan, Managing Director and CEO, Federal Bank, told BusinessLine .
“There is room for regional banks, large banks, and small banks as well. I think the big question is strong banks. Consolidation does not automatically make it strong. Just by taking four challenged banks, you cannot create a fifth one which is stronger,” he said.
Stressing on the quality of assets over size of operations, Srinivasan said: “I carry the view that the near-term solution to this is not necessarily consolidation; it is taking some aggressive decisions on the quality of assets. Now, once that is done and banks will be back to growth, then you can decide based on strategic reasons whether to consolidate or not.”
He further said: “In my view, consolidation is not a solution to a problem, it should be an opportunity. Consolidation should be done for strategic reasons such as to get new geography, new segment, new talent or a new market. Then you can consolidate strategically or merge depending on commercial and business reasons.”
Interest rateTalking about the shaping up of the interest-rate scenario, Srinivasan said: “A lot of factors affect interest rates, including policy rate and credit-demand pick-up. Besides, some banks are still battling credit-related challenges, so there is a provisioning requirement. Third, there are some very large banks — now nationally we have one of the largest global banks here; so to that extent, their pricing power also sets the tone for the market.
“Comparative interest rates on government-related schemes such as saving-schemes have started to trend on; so I would think deposit rates will trend down, but not very substantially.
“The bigger thing is, liquidity is very high in the market. Liquidity is not the challenge, borrowing and courage to lend is the challenge.”
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