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Time not ripe for bank consolidation: PNB chief

— Photo: Kamal Narang

NEW SERVICE: K. C. Chakrabarty (right), outgoing CMD, Punjab National Bank and the newly appointed Deputy Governor of RBI, addressing media persons along with M. V. Tanksale, Executive Director, Punjab National Bank in New Delhi on Saturday.

NEW DELHI: The time is not ripe for consolidation in the banking sector, outgoing Punjab National Bank Chairman and Managing Director K. C. Chakrabarty said here on Saturday.

Talking to media, Mr. Chakrabarty, who will take charge as Reserve Bank of India Deputy Governor on Monday, said, “It will take at least two more years before the banking system is ready for consolidation as still more than 60 per cent of citizens do not have access to banking services even today.” He, however, said consolidation of public sector banks was essential to reach world-class scale efficiency.

Mr. Chakrabarty said its newly-formed subsidiary for merchant banking services and investment consultancy, PNB Investment Services Ltd., would become operational early next month.

It would provide consultancy services related to capital markets like mergers and acquisitions as well as issue management, he added.

The new subsidiary has been incorporated with an initial paid-up capital of Rs. 5 crore, while the share capital is likely to be enhanced to

Rs. 20 crore in the next 2-3 years.

On the interest rate regime, Mr. Chakrabarty said long-term interest rates were unlikely to come down drastically as the economy needed to raise its savings rate from the current 35 per cent to at least 40 per cent to sustain a growth rate of 8-9 per cent, even if the global economy did not pick up. “As we cannot afford to disincentivise the saver, it is unlikely that interest rates would go down drastically under present circumstances,” Mr. Chakrabarty added.

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