India needs fewer public sector banks for better banking system: Urjit Patel

New York: Reserve bank of India governor Urjit Patel has suggested to merge the public sector banks and have fewer of them in order to ensure better functioning in them.

While delivering a lecture at Columbia University, on Monday last, the RBI governor stated that India does not need so may public sector banks. It is better to consolidate them into fewer bank. This would also help them deal with problem of non-performing assets (NPA).

Patel further said that some of the those banks have can be merged in return for government assistance in taking care of the NPA problem and this would also make them more efficient.

According to the RBI governor, there was already a trend in that direction.

What else Urjit Patel said:

• The weaker banks are losing market share (and) that is a good thing
• The stronger banks are gaining market share, which is a good thing, particularly the private sector banks.
• In a way it is working and those who need to shrink are shrinking.
• Lenders who are stronger are gaining more market share.
• I think there is a nice shift happening and we need to work with that to resolve this.
• The merger of banks would lead to savings through consolidation of bank branches and operations and disinvestment measures would improve overall health of the banking sector.
• Many employees could be offered buyouts and younger, digital-savvy personnel can be hired to further expand digital banking operations.
• This step will also improve the market valuations which would further create an opportunity for the government divest some of the ownership in the restructured bank.
• The step will further reduce the overall amount that the government needs to inject into these Public Sector Banks to deal with the NPA problem