Pitching for bold reforms, State Bank of India chairperson Arundhati Bhattacharya on Thursday said banks should be allowed to take decisions on mergers and issue shares with differential voting rights to raise additional capital.
“It is extremely important for India to have three to four major banks. We should allow the banks to come together and talk among themselves. In the past, we have seen government has forced some mergers but it is important to start a conversation with banks as to who should merge with whom,” Bhattacharya said.
While pitching for consolidation in the sector, she, however, said strong banks must not be forced to rescue bad banks. “A much better merger is of good banks with good banks and bad banks with bad banks. Mergers must be between consenting banks,” she said, adding that the government could also think of selling some of the loss-making banks. “Many banks have just started and have no branch network. They can take over such banks,” she said at the Delhi Economics Conclave.
Welcoming the government’s decision to allow public sector banks (PSBs) to raise capital from the market to meet BASEL III norms, Bhattacharya said lenders should also be permitted to issue shares with differential voting rights. The Union Cabinet had on Wednesday permitted PSBs to dilute government shareholding to 52 per cent to help raise Rs 1.60 lakh crore from the markets.
She also said that the government needs to work on developing the bond and equity markets in order to help finance infrastructure projects. “Banks need some kind of backup on take-out financing,” Bhattacharya said, pointing out that banks are already doing 90 per cent of the project financing despite problems of asset-liability mismatch.
‘Budget should give more rebates for home loans’
NEW DELHI: SBI chairperson Arundhati Bhattacharya on Thursday listed out the banking sector’s demands for the Union Budget 2015-16 including a higher interest subvention on housing loans of up to Rs 25 lakh and increasing the cost of house to Rs 35 lakh.
Further, the interest subvention on education loans should be extended to those based on income criteria. In agriculture sector, the government must allow subvention of term loans rather than crop loans, she said. ENS