While addressing the
bankers on June 10, 2009, the
Finance Minister of India, Pranab Mukherjee, asked
Public Sector Banks (PSBs) to regard mergers and acquisitions as an
important option. He assured all possible support from the
government for consolidation since it would help the banks to become globally
competitive. He advised banks to look at consolidation as a serious
option in order to reduce risks and to face the competition. The stock
market cheered the Finance Minister's talk on consolidation with many
PSB stocks recording a surge and closing the day with more than
3% gains over the previous day's close. Finance Secretary, Ashok
Chawla said, "There is scope for consolidation of PSBs, the initiatives
must be from the bank managements, the government will be happy to
facilitate."
Reacting to this, SBI Chairman, OP Bhatt said, "There is
an underlying desire to have a dominant international player in
the banking sector. Even SBI is substantially smaller to its
Chinese counterparts in terms of market cap and total assets."
According to Viren Mehta, Director of Ernst & Young,
India, "Size, to some extent, is a constraint. With large balance
sheets and good risk management, banks can fund large deals, achieve
financial inclusion with more sharpness, invest higher in
technology and survive better during downturns." |
