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
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
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
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)