Bigger banks have more ability to absorb shocks: SBI Chairmanhttps://indianexpress.com/article/business/banking-and-finance/bigger-banks-have-more-ability-to-absorb-shocks-sbi-chairman-5952509/

Bigger banks have more ability to absorb shocks: SBI Chairman

According to SBI Chairman Rajnish Kumar, the decision to have separate mechanism for sanctioning and monitoring of big loans will ring-fence the banks against potential frauds.

SBI chief Rajnish Kumar says bank already big, more mergers are not advisable
SBI chairman Rajnish Kumar at the bank’s headquarters in Mumbai. (Express photo by Ganesh Shirsekar)

State Bank of India (SBI) Chairman Rajnish Kumar on Friday said the announcement on bank mergers is “a cohesive and a clear recognition” that bigger banks have that much more ability to absorb shocks, reap economies of scale as well as the capacity to raise resources without depending unduly on the exchequer.

Reacting to the merger announcement of public sector undertaking (PSU) banks on Friday, Kumar said the bank mergers also underline the fact that “the government recognises the importance of a robust banking system in achieving the goal of $5 trillion economy as bigger banks will be better armed to meet the credit needs of a fast growing economy like ours”.

According to him, the decision to have separate mechanism for sanctioning and monitoring of big loans will ring-fence the banks against potential frauds.

Further, the decision to empower bank boards and operational flexibility in hiring from the market will prioritise robust risk management practices in decision making”.

Five associates and the Bharatiya Mahila Bank became part of State Bank of India on April 1, 2017, catapulting the country’s largest lender to among the top 50 banks in the world. State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), were the five associates that merged with SBI, in the first series of PSU banks mergers initiated by the government.