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Banks: ‘no alternative to consolidation’

— PHOTO: K. GOPINATHAN

FOR THE YOUTH: Union Finance Minister P. Chidambaram with the Chairman and Managing Director of Vijaya Bank Prakash P. Mallya (right), at the opening of the bank’s 1000th branch and the launching of V-GenUth in Bangalore on Saturday.

BANGALORE: Union Finance Minister P. Chidambaram on Saturday asked the banking sector not to resist the process of consolidation, “which is inevitable considering the pace at which the Indian economy is growing and transforming itself. Sectors such as banks, can grow only inorganically.”

He reminded the bank staff as a whole that they resisted computerisation 20 years ago and later had to adopt it to face competition in a free economy. “When we appreciate the steel and pharmaceutical sectors consolidating, and even going for acquisitions overseas, why should anyone be afraid of consolidation among banks?” he asked, after inaugurating the 1000th branch of Vijaya Bank near IIM-Bangalore.

Those who could match the rapid pace at which changes were happening in all sectors and used the available opportunities would grow, while others might be left behind, Mr. Chidambaram remarked. Another factor that would count in India’s future growth as a strong economy would be giving top priority to improve the quality of human resources, though sheer numbers already existed.

Talking to reporters later, Mr. Chidambaram said the ‘Bonds Redemption Fund,’ considered by State Bank of India towards consolidation, might not be a precedent for the Union Government to shore up the capital adequacy ratio of other banks and the outcome of the SBI rights issue might decide the government’s future action.

On IFCI considering fresh bids for disinvestment, he said the IFCI board had to decide it and the government would not intervene.

Vijaya Bank Chairman and Managing Director Prakash P. Mallya said the bank’s V-GenUth product, launched by the Union Minister, could be used by all children and students to build up funds for higher education and the product was the bank’s way of helping the improvement of human resources, as suggested by Mr. Chidambaram. The bank hoped to reach the total business target of Rs. 76,000 crore this fiscal and would try to reach Rs. 100,000 crore by 2009-10. The number of branches would grow to 1,050 by the end of March 2008.

Speaking later after launching 101-year-old Canara Bank’s new brand identity on Saturday, Mr. Chidambaram said “Our nine per cent growth and the capability to become the world’s third largest economy 20 years ahead, needs financing not only from banks but also from others such as insurance, PF and pension funds and mutual funds”. Banks too need to think in terms of “larger scale, size and reach to maintain the growth momentum,” he said.

Canara Bank’s Chairman and Managing Director, M. B. N. Rao, said the bank had received Reserve Bank of India (RBI) approval to open five international branches and the new logo and catchphrase ‘Together We can’ was to enhance ‘brand recall’ in a competitive environment.

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