ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Bank Consolidation

India's public sector banks lack a compelling rationale for consolidation. Contrary to the experience elsewhere, spreads at PSBs have not declined consequent to deregulation and profitability has improved sharply, making the Indian banking system the second most profitable in the world. The performance of PSBs, measured by the appreciation in stock values, has also been very impressive. It is hard to argue, against this background of improving performance, that greater size is the key to further performance improvement. At the very least, such a contention needs to be backed by rigorous research as to what constitutes the optimal size of assets in the Indian context.

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