Speaking on the 74th Annual General Meeting of the Indian Bankers Association, FM Sitharaman stated that India needs many more and larger banks to meet the country’s growing needs.
The country needs four-five banks the size of the State Bank of India to meet changing and growing demands in the post-pandemic world, Union Finance Minister Nirmala Sitharaman said on Sunday.
Addressing the 74th Annual General Meeting of the Banking Lobby, which brings together the Association of Indian Banks, FM Sitharaman said India increasingly needs bigger banks to meet the country’s growing needs to achieve a brilliant recovery from the Covid 19 pandemic.
Merging of banks in 2020
The Finance Minister’s statement aligns with the Union Cabinet Decision of March 4, 2020, to merge 10 Public Sector Banks (PSBs) into four to enable the “creation of digitally controlled consolidated banks with commercial synergies and global weight”.
The reason banks got amalgamated before the pandemic was to scale to meet the new, changing, and growing demands of the economy, FM Sitharaman said.
The government merged the Oriental Bank of Commerce and the United Bank of India with the Punjab National Bank; Andhra Bank and Corporation Bank with the Union Bank of India; Syndicate bank with Canara Bank; and Allahabad Bank with Indian Bank as of April 1, 2020.
While “no concrete proposal” considerS merging additional PSBs, Union budget 202122 announced the government’s intention to privatize two state banks.
Deputy Finance Minister Bhagwat Karad informed the Lok Sabha on August 2, 2021. According to the government’s public sector policy, banking is one of the strategic sectors where PSBs will have a minimal presence.
According to Sandra Global Market Intelligence’s annual ranking of global banks for 2021, SBI was ranked 57th with assets of $ 638.49 billion, up from 55th last year. Ranked number one, the Industrial and Commercial Bank of China has assets valued at $ 5107.54 billion.
The four largest banks are Chinese (Industrial and Commercial Bank of China, China Construction Bank Corp, Agricultural Bank of China, and Bank of China), with more than $ 17 trillion. IBI is the only Indian bank to make it into the top 100 list.
The statement said the finance minister appreciated the efforts of the PSBs to keep the merger and regular banking operations running smoothly despite the pandemic. Sitharaman urged banks to be futuristic.
“You need to have a vision for the immediate and long-term future. While digitization could be the immediate goal, banks need to explore other unique opportunities for the future,” the statement said.
Why do we need more banks like SBI?
“The economy is changing on a whole different level,” said Sitharaman. “Even before the pandemic, the driving force behind the (bank) merger was that India needs a lot more banks, but a lot bigger bank.” She added, “The more we need four or five more SBIs in the country.”
She did not give details, but the government has consolidated state banks to combat the slowdown in the pandemic and create bigger and stronger banks while trying to sell its shares and privatize at least two state banks.
Sitharaman noted that not many organizations or associations are fortunate enough to have a parallel formation and curriculum vitae as their own countries and said that “several of their milestones coincide with the economic history of India”.
She said that the IBA would benefit from a more vibrant economy to which India will contribute as much as it does in the future.