Consolidation must for PSU banks to face competition: Ficci survey

The banking sector favours the creation of six or seven large entities like the State Bank of India to enable it to face competition, according to a survey by the Federation of Indian Chambers of Commerce and Industry (Ficci).

The survey has also suggested the diversification of markets beyond big cities, reduction in transaction costs, increased labour flexibilities, and improved human resource management to achieve growth in the future.

According to the survey, "Indian banking system: The current state and the road ahead," as many as 92 per cent of public sector banks lamented the lack of sufficient autonomy to offer attractive incentives to their employees for retaining them and raising their productivity.

In the face of growing competition, consolidation in the banking sector was the most significant measure to achieve global standards, besides strict corporate governance norms and higher FDI limits to create an efficient, seamless banking system, the survey said.

Most of the respondents believed the Indian banking sector was adequately prepared to achieve the BASEL II deadline by March 31, 2007.

More than 84 per cent of the respondents said sound regulatory systems had ensured the Indian banking system a place in the global banking scenario, while 63 per cent and 52.63 per cent attributed the positive perception of India's banking system to robust economic growth and technological advancements, respectively.