- Wednesday, January 08, 2025
By: Shubham Ghosh
INDIAN finance minister Nirmala Sitharaman on Sunday (26) said the country needs at least four or five banks of a size matching the State Bank of India (SBI), its biggest lender, to meet the economy’s growing requirements.
Speaking at the annual meeting of the Indian Banks’ Association, the minister said the rationale for merging banks even when the Covid-19 pandemic had not started was to scale up to meet the economy’s new, changing and growing needs.
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“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 praised the banks that merged for doing it successfully during the pandemic 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, Sitharaman 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.
Sitharaman on the occasion also urged the banks to penetrate more into India’s interiors that have a high level of economic activity but lack banking services. She advised the banks to have a balanced approach between physical and digital presence as that would help the Narendra Modi government’s agenda of financial inclusion.
