India to use regional-based model to consolidate public-sector banks -official

HONG KONG, March 28 (Reuters) - India plans to adopt a

regional-based model for consolidating its bloated public-sector

banks, the chairman of its Banks Board Bureau said on Tuesday.

"We have to plan a model for consolidation which will be

region-based so that we have a few strong banks in the west,

north, south and east," Vinod Rai said. "That will also avoid

branch-based redundancies."

Rai was speaking at the annual Credit Suisse Asian

investment conference in Hong Kong.

India's lenders had stressed loans of 9.64 trillion rupees

($147.33 billion) as of end-December, Santosh Gangwar, minister

of state for finance, told Indian lawmakers this month, with

nearly 90 percent of the pile with government-run institutions.

Consolidation of India's public-sector banks is seen as a

final step in rebuilding a financial system capable of

underwriting credit growth and job-creating investment in Asia's

third-largest economy.

In reply to a question on whether he had any targeted market

share that private banks and public sector banks should have in

India, Rai replied in the negative and added public sector banks

are crucial for infrastructure and long-term project lending,

sectors which most private banks usually steer clear of.

Asked if he had market-share targets for private banks and

public sector banks in India, Rai said no, adding that public

sector banks are crucial for infrastructure and long-term

project lending that most private banks don't provide.

Rai also said the government does not have the financial

capacity to keep raising capital to recapitalize its banks at an

increasing pace.

Finance Minister Arun Jaitley has earmarked 700 billion

rupees ($10.5 billion) in bank capital injections from budgets

covering a four-year period ending March 2019.

Some of India's public-sector banks are listed, including

Bank of Baroda, Bank of India and Canara Bank

.

Rai said the government is thinking that more minority

shareholders will invest in such institutions as "these banks

are trading at less than their book value"

A former auditor-general, Rai was appointed to run the Banks

Board Bureau when it was formed last year.

(Reporting by Saikat Chatterjee; Additional reporting by

Devidutta Tripathy in MUMBAI; Editing by Richard Borsuk)