Bank consolidation to pick up in India: Assocham

New Delhi, Oct 4: With the RBI roadmap for opening the financial sector and allowing foreign banks to freely operate in the country by April 2009, consolidation would pick up in the Indian banking system, an Assocham study said today.

The study on 'Bank Cosolidation' predicted that by 2009, Indian financial markets would be set free, allowing foreign banks to operate in India, thereby exposing Indian banks to an even more stiff competition and possible threat of takeovers by the overseas banks.

Therefore, to harness the benefits of scope and scale, the Indian banks shall have to capitalise on their strengths and gain the competitive edge to face such global competition, it added.

''Mergers and acquisitions are an effective means to acquire competitive size that offers banks, both domestic and international, an opportunity to gain sizeable market share by building brand image and gainfully reducing the costs of product development and delivery,'' the study paper said.

However, the study warned, merging banks should keep in mind the inherent strengths and weaknesses of both the entities.

''Fundamental features like portfolio, NPA levels, capital adequacy, technology levels, cultural divergence and employee issues should be meticulously examined.'' Assocham also suggested making the procedure of bank consolidation simple. ''To derive synergies from the consolidation process, it is desirable to promote voluntary mergers between public and private sector banks, as inter-public sector amalgamation or inter-private sector integration may not yield commensurate results,'' it said.

UNI