November 30, 2009

After a period of relative quiet, the subject of consolidation in the Indian banking industry is back in focus. While no policy statements have come from either the government or the Reserve Bank of India, reports of a meeting that the chairmen of the five top public sector banks had with officials of the Finance Ministry have evoked renewed interest in the subject.The heads of Punjab National Bank, Canara Bank, Bank of Baroda, Bank of India and Union Bank of India were reportedly asked for their views on consolidation so that a road map could be prepared.

No discussion paper, leave alone a major policy announcement on bank mergers, is round the corner. In fact one of the participating bank chairmen — K. R. Kamath of Punjab National Bank — said a few days later that consolidation of public sector banks through mergers would be a long-drawn out affair and that it was vital to convince all the stakeholders before finalising a merger.