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Indian Banks M&A to rise in three years- Fitch
By siliconindia staff writer
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Wednesday, 26 January 2005, 20:30 IST
MUMBAI: Mergers and Acquisitions among Indian Banks will pick up in three years as weaker players try to merge with a bigger entity rather than cease to exist, Fitch Ratings official said today.
Ambreesh Srivastava, Director of the rating agency, said conducive factors included the government becoming mindful of the benefits of consolidation for strengthening banks.
He said the likely merger cases are State Bank of India with its seven associates and deals between state-owned banks, shrinking their number to 10 to 12 from 19, which would in turn prompt M&A among private players and more foreign investment, he said.
The banks will look to M&A as they increase in size to gain market share at home and expand overseas.
"The current (government) seems very keen," Srivastava told reporters on the sidelines of its Asian Regional Seminar. "They have seen it elsewhere ... weaker players being weeded out. They are keen that some banks become larger and better."
Ninety-six commercial banks in India hold 55 percent of all financial assets in the country, he said adding twenty-seven are state-owned, yet they account for three-quarters of all commercial banks' assets.
Srivastava said consolidation would force banks to grow their businesses by taking on more risks. A bigger capital base would allow more flexibility in lending and investing, helping banks chase bigger clients or offer loans to rapidly growing sectors such as infrastructure, he said.
Increased size would also create critical mass to establish a presence overseas. Leading players like State Bank of India and Bank of India are even planning overseas acquisitions.