The concept of having 5-6 anchor banks and merging weaker banks with them to drive consolidation among public sector banks (PSBs) has been put on the back-burner. Instead, an alternative proposal is before the Finance Ministry, according to T.N. Manoharan, chairman, Canara Bank.
“The major hurdle comes in the form of culture when it comes to integration. Instead, one of the suggestions made to the Finance Ministry is classifying banks into three categories,” he said.
One is a universal bank which does all kinds of banking, including corporate lending. The second type includes national retail banks that would focus only on retail lending. Regional retail banks constitute the third type. Mr. Manoharan and Shyam Srinivasan, MD and CEO of Federal Bank, were speaking on the topic ‘Banks-from the brink.’ The Canara Bank Chairman also said Finance Minister Piyush Goyal was keen on the concept of a ‘bad’ bank and if it went through, it would help public sector banks to start afresh.
Infra projects
“Contrary to public perception that bad loans are due to wilful defaulters and indiscriminate lending, it is only a small segment,” said Mr. Manoharan. “The real issue is commercial banks lending to big infrastructure projects, which got into problems,” he said.
Mr. Srinivasan said that the phase of recognition of bad loans was over and now, the focus was on recovery.