MUMBAI: Hours after triggering the merger process on Saturday, Arundhati Bhattacharya, chairman, SBI, batted for further consolidation in the Indian banking industry.
According to her, there was a need for three-four large banks in the country, as size offers the ability to withstand risks. In an exclusive interaction with Express, Bhattacharya said it was important to have a few large banks of almost equivalent size and a lot of smaller players.
“The bigger the bank, the easier it is to ensure that they follow the right kind of processes,” she added.
Drawing parallels with other countries, where a few large banks play a dominant role, the sexagenarian said nations like Australia have 80 per cent of banking services catered by four banks. Ditto with China and even Canada, where just a handful of banks cater to the masses.
“It’s like an infant and a grown-up. If you have an infection, the infant is more at risk than a grown-up. Size does make a difference, and you need that size to evolve in the changing world, as the pace of change has become rapid,” she said, adding, “you need to withstand those changes, to be able to participate in those changes, and if you don’t have that, you are at more at risk.”
Following the SBI-Associate banks merger, SBI will break into the global top 50 banks with a solid customer base of 450 million, and deposits and advances worth Rs 25 lakh crore and Rs 19 lakh crore respectively. Prior to the merger, SBI is ranked 64 globally. The combined entity’s market share in India will be 23 per cent up from 17 per cent.
Currently, there are 22 public sector banks, including the combined SBI entity, and clamour for consolidation is growing louder. However, for this to happen, the NPA issue needs to be resolved. “We are trying to resolve bad loans. We have got some good laws for the resolution process, but implementation takes time,” Bhattacharya added.