Bangalore: Favouring the Union Government's move to merge public sector banks, B. Sambamurthy, chairman and managing director of the public sector Corporation Bank, said here on Tuesday that it would boost economic viability and help banks venture into uncharted areas.

"Merger does not mean that the public sector banks are not functioning properly. The merger will lead to economic viability and help in reaching areas where the sector has not made any inroads," he told presspersons on the sidelines of the `Banking Conclave 2006' organised by TVS Electronics.

Mr. Sambamurthy noted that the merger of regional rural banks with some banks in the country had helped them concentrate more on consumer service.

Prime Minister Manmohan Singh and Union Finance Minister P. Chidambaram have both underlined the need for consolidation of public sector banks to give them depth and reach.

Speaking at the valedictory function of the centenary celebrations of Canara Bank here on June 23, Dr. Singh said that the presence of foreign banks in the country had been useful in bringing greater competition in certain segments of the market.

The increased presence of foreign banks over time would pose further competitive challenges to domestic banks.

"Domestic banks are smaller in size relative to their international competitors, which are now very large indeed. If these large banks have emerged as a result of real economies of scale and scope, our own banking system will have to respond in kind, both domestically and abroad. They need to seriously examine possibilities for consolidation of PSU banks to give them depth and reach. They must also devise effective global strategies for improving their international presence," the Prime Minister had stated.

World-class banks

According to Mr. Chidambaram, larger public interest and national interest lie in building "world-size and world-class banks."

"The Government resolves to build a handful of world-size and world-class banks," he said on the same occasion. Delivering the keynote address at the Banking Conclave, Mr. Sambamurthy called for spreading digital technology to far-flung areas of the country.

IT industry

"Of the total 600,000 villages, the IT industry might have reached only about 100,000 villages. But what is needed, especially for the banking sector, is to reach out to as many customers as possible, especially in rural areas," he said.

While banks offered advanced banking services to the IT-savvy younger generation, it was equally important for it to look after aged customers as they were not adept at handling computers and other technological advancements that had been made in banking.

There was a need for physical presence to teach them the process, Mr. Sambamurthy added.

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