FM focus on ‘SBI size’ banks in country

Stressing on growing needs of the economy, Finance Minister (FM) Nirmala Sitharaman has said  the country needs 4-5 ‘SBI size’ banks. Sitharaman said as far as the long-term future is concerned, it is going to be largely driven by digitised processes and there is a need for seamless and interconnected digital systems for a sustainable future for the Indian banking industry.

The FM was addressing the 74th Annual General Meeting of the Indian Banks’ Association (IBA) where she said the industry needs to imagine how Indian banking has to be in the immediate and long-term future.

Finance Minister Nirmala Sitharaman

Why ‘SBI size’ banks are important

“Amalgamation, after all, is an important exercise even as important to the Indian Banks’ Association because of the way in which the economy is shifting to a different plane altogether, the way in which economy together with the industry is also looking at various different ways of adapting to a post-pandemic era…”, she said.

Also read: अमेरिका से लौटने के बाद नए संसद भवन के निर्माण का निरीक्षण करने पहुँच गए प्रधानमंत्री नरेंद्र मोदी

Asserting that the driving force for the amalgamation was to build scale, Sitharaman said India needs a lot more banks and a lot of global size banks.

“India needs at least four different ‘SBI size’ banks. So, one of the driving forces was for the amalgamation that we need to scale up banking.”

“We need to scale up banking to meet the new changing and growing requirements but that was thought of even before the pandemic. Now, all the more reason why we would need four or five more ‘SBI size’ banks in this country,” she said.

Amalgamating the banks

The FM went on to add ,”Although I did say that in the amalgamation process, your systems have spoken to each other, there wasn’t a problem of those amalgamating banks. And, I remember the banking secretary at that time, Rajiv Kumar, telling me that we have ensured that the amalgamating banks do have their systems in such a way that they can align with each other,” she said.

Mega consolidation was announced in 2019 when Kumar was the financial services secretary but was implemented by his successor Debasish Panda effective April 2020.

Also read: Khiladi Kumar’s reply to IPS officer is too cool!

As part of the mega consolidation exercise, Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank; Syndicate Bank into Canara Bank; Andhra Bank and Corporation Bank into Union Bank of India; and Allahabad Bank into Indian Bank.

Following the consolidation, there are now seven large public sector banks and five smaller ones. There were as many as 27 public sector banks (PSBs) in 2017.

Kumar, now an Election Commissioner of India, was instrumental in laying a digital pipeline that was leveraged during the pandemic to transfer money into accounts of crores of the vulnerable and needy with a click of button.

The finance minister said banks, whether public or private sector, cannot work in digital silos and systems should be speaking to each other.

“So, I would think that’s one of the areas in which you would give some more time and make sure that bridge crossed,” she said.

Appreciating the efforts of bankers to carry out smooth consolidation exercise during the challenging time of the pandemic, the Finance Minister said it did not cause inconvenience to the customer and there was no aberration.

“Amalgamation, after all, is an important exercise even as important to the Indian Banks’ Association because of the way in which the economy is shifting to a different plane altogether, the way in which economy together with the industry is also looking at various different ways of adapting to a post-pandemic era…”, she said.

Paying homage to bankers who lost their lives in the line of duty during the pandemic, the finance minister urged IBA to help and support the families of the deceased.

“I do pay my humble homage to those who have served, but also suffered because of the pandemic but unfortunately couldn’t survive it. I am sure the IBA will do everything that it takes to support their families, and keep them spirited and morally sound because the loss is irreparable,” she said.

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