Foreign banks can control Indian banks: FM

 The government plans to allow creeping acquisition by foreign banks by letting them pick 10% stake in Indian private sector banks every year and acquire control in 3-4 years.

"Public-sector banks would remain as state-owned units, and would be allowed to raise money from the markets," finance minister P Chidambaram said today.

"We will encourage level playing field for public sector, private as well as foreign banks in the country, and the Reserve Bank is putting in place necessary guidelines for it," Chidambaram said after inaugurating the new corporate office of Dena Bank at the Bandra-Kurla Complex.

The government, however, would not favour one particular segment of banks in the country, but would like to seek consolidation of Indian banks, he added.

Allaying fears over the fate of PSU banks, he said PSU banks would be encouraged to raise capital from the market, and the government would not provide any equity support.

"The government was in favour of small or minority shareholders of PSU banks getting positions on the board of directors," he said.

Commenting on divesting government stake in PSU banks, as was done in the case of NTPC, Chidambaram said not much headroom was available for it.

He also said the government would re-introduce a bill to remove the 10% cap on voting rights. "We will hold discussions with alliance partners in this regard," Chidambaram said.

The finance minister also sent out clear signals to banks to go for mega-mergers, saying they should "think big and act globally."

 Expressing happiness that banks have begun talking to one another for mergers & acquisitions, he said the government "will not force anyone (banks) for merger or alliance, but will bless the marriage (merger) if it comes through".  "Think big and act globally... by 2010, I want Indian banks accepted globally on par with international banks," Chidambaram said.  Public sector banks can also look at private banks if they are suitable candidates, Chidambaram said.  He said size was important along with efficiency, and each one should become a powerhouse by itself. "Once consolidation takes place, I want to see at least three-four Indian banks among the top 100 banks in the world," he added.  He added that big banks were also necessary to take Indian companies global.  Chidambaram expressed confidence that banks would meet the agriculture credit target of Rs 1,05,000 crore set by the government for this fiscal.  "Farmers must be encouraged as we have the capacity to feed half the world, and the government was taking steps in this regard to lift various controls," he added.