Letters to the editor

The finance minister has again pitched for consolidation among public sector banks (PSBs). It makes sense that in this increasingly globalised environment the country will need at least two to three global-size banks that can take on greater challenges. India is an emerging market economy and corporates are going for overseas acquisitions to expand their business. Barring perhaps one or two banks, again with limited capability, no other banks in India have the required resources and ability to finance corporates for their cross-border acquisitions. Debt market is underdeveloped in India and the industry looks to large part of funding from banks. A consortium arrangement with more members often results in avoidable delays. As many as 26 PSBs have now been divided into seven groups. While SBI has been given the responsibility of coordinating the functioning of its five associate banks, six other group leaders are assigned the responsibility of coordinating the activities of remaining 14 PSBs, mainly mid- and small-sized, allotted in their respective group in six specified areas of operation. Whether or not it is a prelude to merger exercise is not known but it will certainly be a good step forward in moving towards consolidation. The number of PSBs operating now can be trimmed to seven large banks. Bigger banks will have a high risk-bearing appetite and can perform relatively better in the increasingly uncertain environment that warrants frequent realigning of policies and systems in tune with the prevailing market forces. It does not make any

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