This refers to the reports "PSBs' poor valuation hurt equity-raising plans" and "Moody's downgrades deposits of two banks" (March 4). One can finally see that the merger of public sector banks is on the cards. The government has been wanting this for long. They have the majority ownership in public banks and can always begin the process. But apart from minor shareholders and unions creating issues, this move has political implications as well. The government has been suggesting that banks should find suitable partners for a merger on their own. The bank managements, however, have hardly responded.
Now, circumstances might force the merger. Starved of capital from the government kitty and facing poor valuation, some banks may find it difficult to grow. Moreover, downgraded ratings will raise their cost. The combination of these two factors could choke a few banks, which may look for breathing space in the cradle of some stronger banks.
Shiva Kumar Mumbai
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