Business Daily from THE HINDU group of publications
Saturday, Jul 22, 2006

Cross Currency

Group Sites

Money & Banking - Mergers & Acquisitions
Get rid of mental block against consolidation: FM

Our Bureau

`Initiative must come from banks' management, employees'

THE FINANCE MINISTER, Mr P. Chidambaram, with the CMDs of public sector banks— (from right) Mr O.N. Singh, Allahabad Bank; Mr S.C. Gupta, Punjab National Bank; and Mr V.P. Shetty, IDBI — before a meeting in the Capital on Friday. — Kamal Narang

New Delhi , July 21

The Finance Minister, Mr P. Chidambaram, has warned that Indian banks would be reduced to small players if they don't consolidate and get rid of the mental block against consolidation.

"World over, consolidation is taking place. Consolidation is the driver of all industries including pharmaceuticals, steel etc. When Mr L.N. Mittal takes over Arcelor, everybody is happy. But when one big bank consolidates with a smaller bank, there is all kind of apprehension," Mr Chidambaram told reporters after his meeting with the chief executives of public sector banks here on Friday.

Asked whether any proposal for consolidation was before the Finance Ministry, he replied in the negative.

"I have spoken about consolidation now for two years... I have not received any proposal," he said.

The Finance Minister said that the initiative must come from management and employee representatives. He, however, said that bank managements are ready for consolidation.

Outsourcing issue

On the strike planned by employees in protest against outsourcing of banking activities, Mr Chidambaram said that it was "unfortunate and unnecessary".

He urged the bank employees to "move with the times".

The Finance Minister said that outsourcing by banks was in line with the RBI guidelines on this matter and that no core activities of banks are being outsourced.

He said the RBI had, as a regulator of banks, allowed outsourcing in certain non-core functions and this should not raise any apprehensions.Mr Chidambaram also pointed out that bulk of India's software industry depends on outsourcing. "When America outsources to India, we are happy", he said.

At the meeting, the Finance Minister reviewed the working of the public sector banks during 2005-06.

Mr Chidambaram said that last year (2005-06) was a "difficult year" for public sector banks because of the impact of treasury management.

"With interest rates rising, bond prices fell and many had to make provisions for that," he said. Mr Chidambaram said that the performance of these banks in 2005-06 showed that the Indian banking system was getting stronger.

More Stories on : Mergers & Acquisitions

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
`New pension system to ensure reasonable retirement income'

IDBI hands over dividend cheque
SKS bags award
Forex reserves dip by $601 m
Rupee recovers marginally vs $
P&SB net profit surges in Q1
Madras School of Economics ties up with GE Money
Bond prices up
Banks allowed to raise long-term capital in foreign currency
Exim Bank to raise more funds
Govt notifies auction size for 4-year bond at Rs 4,000 cr
MPs urge banks to be considerate to the poor
Non-food credit up by Rs 22,265 cr
Call rates unchanged
Catholic Syrian Bank's debit card
Get rid of mental block against consolidation: FM
`Inflation rate of 4.68 pc tolerable'
`Bill of Lading law needs updating'

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2006, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line