Banks told to check investment portfolios

Indian Banks' Association (IBA) chief executive H N Sinor called upon banks to take a close look at their investment portfolios as they may end up being badly hit if interest rates firm up.

He was addressing a joint seminar held by IBA and PriceWaterhouseCoopers on Basel II in Mumbai.

The introduction of Basel II accord prudential norms for risk management and capital adequacy is likely to trigger consolidation in the banking sector to meet capital requirement, he said.

Some of the banks would need to tap the market in order to meet their capital requirements.

The recent RBI notification permitting foreign banks to acquire 74 per cent stake in private banks will open the floodgates for inorganic growth in the sector, said Sinor.

PriceWaterhouseCoopers executive director (Singapore) Chris Matten told Business Standard that Basel II will be one of the key drivers for mergers and acquisitions in the banking sector as some of the banks do not have adequate resources.

In his inaugural address, Reserve Bank of India (RBI) executive director Shyamala Gopinath acknowledged that the Basel II accord posed major challenges for both banks and the regulator.