Public sector bank mergers necessary: Chidambaram

NEW DELHI, MARCH 24. The Finance Minister, P. Chidambaram, today made it clear that the United Progressive Alliance Government would go ahead with its policy decision of encouraging mergers and acquisitions for consolidation of public sector banks (PSBs) as they were necessary for competition in the global financial markets.

Inaugurating a branch of the Punjab National Bank here, he urged the PSB staff to bear in mind that "competition, convergence and consolidation will be the key drivers of the banking industry in the future." And in this, the banking staff and the management should take the lead in spreading the message at every level as a matter of responsibility, he said.

"There are unions, associations in each bank. Each one has a responsibility to communicate about the new drivers — competition, convergence and consolidation — of the banking industry among the employees and staff."

Consolidation stressed

Appealing to the employees to reflect on consolidation as an absolute necessity in the current competitive global environment, Mr. Chidambaram said: "It [consolidation] adds size, scale, muscle, technology and reduces cost of operations. We need strong banks and I am confident we are on the right path. I spoke to the Prime Minister and we reflected on the issue...this is the path we must take." For, it was not the number of banks, but the strength of the banks that counted.

Heassured the bank employees that these changes by way of mergers to become bigger entities should not be viewed as lesser avenues for employment.

"The fear of job losses is not justified. On the contrary, jobs will be created."

Similar apprehension over loss of jobs were expressed even when the banking sector was opened up in the nineties.

Instead, the public sector banks over the last 15 years had only become stronger, with a wide array of products and services and greater avenues for employment.

The next logical step now, he said, was consolidation through mergers and acquisitions, wherever feasible, as that would make the banks stronger, reduce costs, facilitate increased lending and help expand business by foraying into new areas.

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