India needs more banks like its largest lender SBI: Sitharaman
India’s finance minister Nirmala Sitharaman (Photo: MONEY SHARMA/AFP/Getty Images)
INDIA needs at least four or five banks of a size matching its biggest lender State Bank of India (SBI) to meet the economy’s growing requirements, the country’s finance minister Nirmala Sitharaman on Sunday (26) said.
The minister, who was speaking at the annual meeting of the Indian Banks’ Association, said the rationale for merging banks even when the coronavirus pandemic had not started was to scale up to meet the economy’s needs — new, changing and growing.
“The economy is shifting to a different plane altogether,” Sitharaman said, adding, “Even before the pandemic the driving force for amalgamation (of banks) was that India needs a lot more banks, but a lot more big banks.”
“Now all the more reason we would need four or five more SBIs in the country,” Sitharaman said.
While the finance minister did not share details on the matter, it has been learnt that the Indian government has been consolidating state-run banks to combat the pandemic slowdown and set up larger and stronger banks while looking to sell its stakes in, and privatise, at least two government banks.
Last month, the SBI reported a record first-quarter profit and bet on economic activity picking up to contain a rise in bad loans, sending shares of the public bank to a record high.
Sitharaman lauded the banks that merged for doing it successfully despite the pandemic-time challenges and without putting the customers in inconvenience. She said the banks’ internal systems must have regular communication with each other.
“You cannot any more be in a digital silos,” she said, adding, “All of your systems should be speaking to one another.” The minister said the banks are under less burden today as cleaner books will slash the government’s burden in recapitalising them, she added.
The recently formed National Asset Reconstruction Co and the Debt Restructuring Co will be able to cull non-performing assets (NPAs) from the banking system, restructuring and selling them, the Indian finance minister said.
“This is not a bad bank. Because it is bank-driven and because it is driven with a sense of having to clear up quickly, you have given yourself this framework which is going to help in speedily disposing of them (NPAs) with responsibility,” she said.