Can the elephants dance?

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The government has put consolidation of public sector banks back on the table, and if the grapevine is to be believed, one of the criteria would be to identify banks that complement each other on geographical reach. For example, Dena Bank, which has a strong presence in the western region, could be a candidate to merge with Punjab National Bank, which is strong in the north. If such a merger happens, the total number of branches of the merged entity will be double those of ICICI Bank or HDFC Bank. Similarly, if IDBI Bank and United Bank of India (UBI), which has a strong presence in the east, are merged, the number of branches of the merged entity will almost equal the number of branches the top two private banks have individually. IDBI Bank and UBI, though, have informed the exchanges no such proposal was discussed by their boards or any communication received from the government on the issue. However, the point to note is the market capitalisation of such merged entities will be far below those of HDFC Bank or ICICI Bank, reflecting the relative market value of private and public sector banks.