The Hindu : Business : Hike in FDI cap on insurance likely

Online edition of India's National Newspaper
Tuesday, Nov 29, 2005

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Business

Hike in FDI cap on insurance likely

Special Correspondent

`Mergers and acquisitions in banks must for consolidation'

NEW DELHI: The Central Government on Monday maintained that reforms in the insurance and pension sectors were under way while reiterating the "tremendous'' need for consolidation among banks to help them acquire financial strength and the ability to absorb risks.

Speaking at the India Economic Summit organised here by the the Confederation of Indian Industry (CII) and the World Economic Forum (WEF), the Secretary, Department of Economic Affairs (DEA), Ashok Jha, however, minced no words in declaring that the merger and acquisition (M&A) proposals of banks would not be directed or organised by the Government as the decision to do so would be left to each individual bank.

"If PSU banks want to go for the marriage, [the] Government will bless them. But it [the Government] will not find the suitor,'' Mr. Jha said.

Making out a case for the urgent need for consolidation so as to have the strength to absorb risks, Mr. Jha picked up State Bank of India. SBI, he noted, was the country's biggest bank but globally, it was still very small, having been ranked 83rd among the international players. "There is tremendous need for consolidation among both public and private sector banks. Apart from giving economies of scale, they [large banks] would be in a better position to absorb the risks,'' he said.

As for the insurance sector, Mr. Jha said: "As far as hike in FDI is concerned, an announcement has been made already. The legislation is under consideration."

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