RBI not keen on bank consolidation for the present

26 Nov 2009

1

Though the finance ministry is learnt to have started the groundwork consolidation of public sector banks, the Reserve Bank of India (RBI) does not appear to be enthusiastic about it.

RBI deputy governor KC Chakrabarty said on Wednesday that consolidation in the sector can wait and the need of the hour was to extend banking services to more Indians.
Earlier in the day, RBI governor D Subbarao called for the strengthening of the banks' capital base to usher in better risk management.

According to KC Chakrabarty deputy governor, RBI the time for consolidation had not arrived although there was a problem of there being a few dominant players, but financial inclusion was more important than bank consolidation.

He pointed out that 60 per cent of the Indian population, still has no bank account and 90 per cent have no access to banking services.

Speaking at the International Finance and Banking Conference', organised jointly by the Indian Merchants' Chamber and the Institute of Chartered Accountants of India in Mumbai on Wednesday, he said that if there was a sweet shop in Churchgate and one in Virar an extended suburb to the north of Mumbai, the way forward was not fewer sweetshops, but more of them along the way.

This is not the first time that the RBI has opposed bank M&As according to industry watchers. However, with the UPA government getting cracking on financial sector reform in its second term, mergers may well happen they say.

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