FM moots PSU bank mergers to create 2-3 global entities
21 May 2013 1:29 PM IST
Finance Minister P Chidambaram on Monday favoured mergers in the banking industry so that India can have two-three global sized banks. ‘There are other sectors that may well need restructuring .... For example, some banks, including some public sector banks among 26 public sector banks that we have, may be better off merging.’
‘The need for two or three world sized banks in an economy that is poised to become one among the five largest in the world is rather obvious,’ he said at the Competition Commission of India’s (CCI) inaugural Annual Day lecture. Favouring mergers of banks, he said, ‘We have seen bank mergers lead to too-big-to-fail entities.’
He said that while restructuring may be needed in some sectors, mergers may reduce competition in certain segments or geographies substantially and alter competition between banks and non-banks.
Commenting on private US credit rating agency Standard and Poor’s (S&P) warning that it may downgrade India’s sovereign rating to junk grade, the Harvard Business School graduate retorted that it is a rating upgrade that India deserves.
‘Our case is that we deserve an upgrade both on the outlook and the rating. S&P may not have been convinced about that...,’ he said. ‘There is nothing to worry. Our macroeconomic position today is much better than what it was in August 2012,’ Chidambaram said, adding that the Indian economy is entering a new phase of strong growth.
‘The need for two or three world sized banks in an economy that is poised to become one among the five largest in the world is rather obvious,’ he said at the Competition Commission of India’s (CCI) inaugural Annual Day lecture. Favouring mergers of banks, he said, ‘We have seen bank mergers lead to too-big-to-fail entities.’
He said that while restructuring may be needed in some sectors, mergers may reduce competition in certain segments or geographies substantially and alter competition between banks and non-banks.
Commenting on private US credit rating agency Standard and Poor’s (S&P) warning that it may downgrade India’s sovereign rating to junk grade, the Harvard Business School graduate retorted that it is a rating upgrade that India deserves.
‘Our case is that we deserve an upgrade both on the outlook and the rating. S&P may not have been convinced about that...,’ he said. ‘There is nothing to worry. Our macroeconomic position today is much better than what it was in August 2012,’ Chidambaram said, adding that the Indian economy is entering a new phase of strong growth.
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