Banks’ consolidation: déjà vu bl-premium-article-image

NS Vageesh Updated - January 20, 2018 at 01:56 PM.

It’s time for the finance ministry to seize the initiative

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Recently, the deputy governor of the RBI, R Gandhi, said in a speech that PSBs may require a nudge from their largest shareholder, the Government, to move towards consolidation since the banks themselves were unwilling to do this voluntarily. Gandhi was probably being diplomatic and restrained. It will require a lot more than a nudge, nod or wink to get PSBs moving anywhere in the direction that says consolidation.

Not until bankers have the breathing room to think beyond the next quarter or next year’s problems, can they think of anything that forbidding. Now the top management in banks have more prosaic matters to deal with such as survival and retiring honourably without the blemish of a CBI or vigilance enquiry or investigation into their past/current decisions.  Lofty goals such as consolidation with other PSBs are headaches they can happily do without.

Successive governments have debated the idea for more than two decades. The matter was even brought up at the first and second Gyan Sangams for bankers. It is another matter that while in the first Sangam, bankers had concluded that the time was not appropriate for merger or consolidation, they did a smart reversal in the next Sangam held a few months ago. The roadmap and operational logistics are yet to be decided.

Gandhi, in the course of that speech, suggested another committee to explore these options. If the past is any guide, the new committee will study the issue for a few months and lob the ball to the bank boards themselves — who will in turn solemnly decide that the initiative has to come from the finance ministry. Déjà vu!

 An easier if slightly facetious solution for Messrs Modi and Jaitley is this: Simply have a public draw of lots with names of the banks to be consolidated and have the President of India pick them. The alternative, of course, is to keep debating consolidation for the next 25 years.

Associate Editor

Published on May 12, 2016 15:49