PSB mergers a long-drawn process: PNB chief

EYEING SOUTHERN MARKETS: K.R. Kamath (left), Chairman and Managing Director, and Guha Roy, Deputy General Manager, Large Corporate Branch, Bangalore, Punjab National Bank, at a press conference in Bangalore on Saturday. Photo: G.R.N. Somashekar

Notwithstanding the Centre’s intention of bringing about consolidation in the public sector banking (PSB) space, Punjab National Bank (PNB) Chairman K. R. Kamath on Saturday said that it was going to be a long-drawn process.

Unlike the past, when mergers were a kind of ‘bailout’ and ‘distress marriage’ to protect the interest of depositors, the one being talked about now is ‘arranged marriage’ where suitors can take their time, he said here.

The government had earlier this week kicked off a discussion process towards consolidation in the PSU banking space at a meeting with the chiefs of five large PSBs, including PNB.

“Consolidation has been in talks since the past three years. It is being talked about today also,” Mr. Kamath said, adding, “but it is not happening tomorrow or next month. It is a long way. It is in a very, very nascent stage.”

He pointed out that “there are things to be put in place” in terms of requirements, including amendments.

The Chairman also felt that mergers and acquisitions going forward would be a kind of ‘arranged marriage’, and not ‘distressed’ or ‘bailout’ ones, forced to protect depositors’ interests, as witnessed earlier.

He said consolidation was being discussed in the background of the Narasimham Committee report.

“Now the question is what is the size of banks in India compared to the banks abroad. This is the issue which is being discussed,” he said.

Mr. Kamath saw value in inorganic growth, which, he said, allowed banks to build scale more rapidly than the organic route, cutting ‘gestation period’ as it took around three years for any new bank branch to ‘mature’.

He refused to talk about PNB’s preference on bank that it wants to take over, but hinted that it could be one that had a strong presence in the Western or Southern markets or in both regions.

“I (PNB) am strong in the North and to some extent in the East. So, below that (the West and the South where it needs to consolidate)”, Mr. Kamath said. “I will look at all banks to find out which matches me best in all areas,” he added.