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25 April 2017
Reserve
Bank Governor Urjit Patel says that merging public sector banks and having
fewer of them would be better for the sector and also help deal with problem of
non-performing assets (NPA). The Total
Investment & Insurance Solutions
Do
we need so many public sector banks, he asked while delivering the Kotak Family
Distinguished Lecture at Columbia University here on Monday. It is better to
consolidate them into fewer banks, he said. The Total Investment & Insurance Solutions
Some
of these banks can be merged in return for government assistance in taking care
of the NPA problem and this would also make them more efficient, he said.
There
was already a trend in that direction, according to him.
"The
weaker banks are losing market share (and) that is a good thing," Patel
said. "The stronger banks are gaining market share, which is a good thing,
particularly the private sector banks. In a way it is working; those who need
to shrink are shrinking."
"Lenders
who are stronger are gaining more market share," he added. "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, he said. The Total Investment
& Insurance Solutions
Some
of the employees could be offered buyouts, he said adding that younger,
digital-savvy personnel can be hired to further expand digital banking
operations.
Patel
also said that divestment in public sector banks would have a positive role for
the sector.
"Divestment
measures would improve overall banking sector health," he said.
Improved
market valuations would create an opportune time for the government to divest
some of the ownership in the restructured banks and this would reduce the
overall amount that the government needs to inject into them to deal with the
NPA problem, he added.The Total Investment
& Insurance Solutions
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