BoI to take merger issue to directors

Taking cues from the finance minister P Chidambaram's call to lead the consolidation process in the banking sector, Bank of India (BoI) will discuss the issue of mergers and acquisitions with its board of directors and staff to garner their support.

Speaking to Business Standard, the bank's chairman and managing director, M Balachandran said that BoI will consider the finance minister's suggestion and take the consolidation issue to the board and staff members.

Chidambaram, while addressing a function to mark BoI's centenary year celebrations on Saturday, said India with a population of 102 crore needs just four to five giant banks.

He highlighted that seven public sector banks, namely Bank of India, State Bank of India, Punjab National Bank, Canara Bank, Union Bank of India, Bank of Baroda and Central Bank of India, should look at consolidation.

These banks together having assets in excess of Rs 50,000 crore should look at consolidation among themselves or with other smaller public sector or private sector banks.Last year the central government had extended support to the merger proposal between BoI and Union Bank of India.

Balachandran however, said certain legal and regulatory amendments were necessary to provide an enabling environment for the consolidation among public sector banks.

Necessary amendments to the provisions of Bank Nationalisation Act and a clear roadmap from the Reserve Bank of India (RBI) are essential for consolidation among public sector banks, said the CMD of an other public sector bank.

According to a report of Indian Banks' Association (IBA) on consolidation, an omnibus provision should be made in the Banking Regulation Act for a banking entity to obtain prior approval of the RBI to acquire other businesses or merge with a bank or a non-banking financial institution.

Meanwhile, speaking to mediapersons, Chidambaram cautioned that the rise in oil prices would have an adverse impact on inflation, but he also added that the government and the RBI would take necessary steps to keep it moderate.