| "If SBI is serious about its international expansion plans and the government is serious about consolidation in the Indian banking industry, this will trigger consolidation in the Indian banking sector," said Ambreesh Srivastava, director (Financial Institutions), Fitch Ratings. |
| If the political will remains as strong as it is today, then over the next two-three years, the number of public sector banks will fall to about 10-12, he added. |
| "Government policy in terms of sops and incentives will provide the trigger for consolidation in India," said Srivastava. |
| "The present administration (meaning the prime minister and the finance minister) is more mindful of the benefits and need of consolidation. Continuity (of government) needs to be there for a while even though the process is today still at a thought stage," added Srivastava. |
| Currently lack of clarity in the government policy with regards to foreign direct investment in private sector banks and the long-standing voting rights issue, fail to drive consolidation of the Indian banking sector. |
| "Macro-economic considerations will not drive consolidation. However, the merged entity will be able to take greater advantage of the economic considerations, provided tangible cost benefit is derived in terms of lowered costs," said Srivastava. |
| The absence of a trigger has prevented any large scale bank consolidation in India so far, though there is immense scope for consolidation among second-tier government banks. |
| In contrast, most Asian banking systems have undergone extensive consolidation in the last decade. This has been forced by the Asian flu (Japan, Korea, Thailand) or pro-active government policies (Malaysia and partly Singapore). Market forces have played only a minor role in the consolidation of the banking sector, said David Marshall, managing director (Financial Institutions), Fitch Ratings. |
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