‘We have decided to cap high-cost deposits’

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Among public sector banks, Mumbai-based Union Bank of India is rapidly undertaking an all-round transformation. In an exclusive interview to FE’s Sitanshu Swain and Kumud Das, MV Nair, chairman & managing director, Union Bank of India, explains his agenda of making the bank a leader in the Indian banking space. Excerpts:

Do you think with the new political atmosphere, the issue of consolidation in the public sector banking space would gather momentum?

There are two questions you need to ask when it comes to the issue of consolidation. First, why consolidation is necessary. Consolidation could be for two reasons. The first one is that I gain strength by it globally and support the corporates who are expanding into different regions of the world.

The second question is that you need size. If you don’t have size, you can’t do the business. The way lending takes place in India, it’s an important base for all banks to come together to support. Also another important point is that the sector is being opened up in 2009, when foreign banks may be allowed to acquire higher stakes in Indian banks. While the Japanese banks had taken over the top position in the global banking space in the nineties by replacing their American and UK-based peers, it is now the Chinese banks that are on top. Such a scenario is possible as China’s economy is doing very well.

So from that point of view, India’s economy has also started doing well now. So, the Indian banks have a fair chance of occupying the top position in the next 10-20 years in a very natural way.

Market capitalization wise, Indian banks have done quite well. Indian banks’ revenue has gone up by 25% in past three years against the global average growth of 10%. When constantly your revenue grows, higher than the global average, your market capitalization is expected to go up.