Banks eyeing consolidation

Finance Minister P. Chidambaram on Wednesday said public sector banks were looking at consolidation as one of the strategies to increase com...

Finance Minister P. Chidambaram on Wednesday said public sector banks were looking at consolidation as one of the strategies to increase competitiveness.

Replying to a calling attention motion by Gurudas Dasgupta of the CPI, the minister said the government was contemplating new initiatives to bring substantive changes in the banking sector.

He also stated that revision of foreign direct investment (FDI) limit in private sector banks would create an enabling environment for higher FDI inflows and would result in infusion of new technology and management practices resulting in enhanced competitiveness.

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The Finance Minister told the Parliament that in order to regulate the flow of FDI and set out the roadmap for this purpose, RBI has placed in the public domain draft guidelines in July this year and was in the process of considering suggestions and feedback received.

Observing that public sector banks accounted for around 76 per cent of the total banking business in the country, Chidambaram said, ‘‘in order to bring the banking industry to global levels, new initiatives are being contemplated to bring substantive changes’’ in this sector.

He said consolidation would allow economies of scale in terms of footprint, manpower and other resources.