Fin min wants banks to take M&A course

Written by Mahua Venkatesh | New Delhi, Dec 28 | Updated: Dec 29 2007, 04:32am hrs
Consolidation in the banking sector is all set to hot up in 2008. Once the stage is set for the merger of the State Bank of India (SBI) with its associate banks, other PSU banks like Bank of Baroda and Bank of India will be under pressure to act accordingly. It is understood that the finance ministry has already started nudging the banks to start acting on merger and acquisition (M&A) exercise.

The boards of SBI and its associate banks will hold a meeting to discuss the issue of merger in January. Meanwhile, the Cabinet is expected to give a go ahead to the merger of State Bank of Saurashtra with its parent bank.

Currently it is a wait and watch situation, banks will start taking concrete steps towards consolidation after assessing the merger process of SBI, an industry source said. He also pointed out that the onus would be on the bigger banks to initiate the merger process once the stage is set for SBI merger.

However, senior bankers said that no bank would like to lose its identity after the merger. This has been a major hurdle from the beginning, the source said, adding that the issue has to be carefully handled.

Earlier, the government said that the respective bank boards would have to take a decision on the merger process. Underlining the need to consolidate in the wake of competition from foreign and private sector players, finance minister P Chidambaram said that the government would only play the role of a facilitator in the merger process.