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

Bank mergersSubscribe to Bank mergers

Public Sector Bank Mergers

The slowdown in the economy and the resultant rise in bad loans have led to criticism of public sector banks and questioning of their raison d’être. While there is a rush to find a quick solution by merging PSBs, it would be wise to examine the ground realities closely. India needs a mix of efficiently run PSBs and aggressive private banks to achieve growth and development along with social justice.

Revisiting Bank Mergers

The central government’s policy favouring bank mergers assumes enhanced efficiency of the merged banks through economies of scale and scope. An econometric analysis of India’s scheduled commercial banks, however, establishes that in the Indian banking sector, mergers may actually be detrimental to efficiency. This paper argues that public sector banks were set up to serve the welfare needs of the underprivileged and to promote financial inclusion, not to make profits. In the case of bank mergers, economies of scale and scope are being used to veil the promotion of economies of exclusion.

Public Sector Banks Are Adrift

With credit and deposit growth slowing in key sectors and only retail credit growing, low capital adequacy ratios of banks, senior management changes in the offi ng, and bank mergers, the National Democratic Alliance government needs to ask itself what it envisages for public sector banks, and indeed for the Indian economy.

Signs of Incipient Industrial Recovery

Reflecting the incipient and selective upturn in the industrial sector, there has been a sizeable turnaround in non-food bank credit in the first quarter of 2002-03. A major disappointment, however, has been the term-financing institutions whose sanctions and disbursements were sharply lower in 2001-02 than in the preceding year.
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