This refers to the report "Banks seek LIC's helping hand" (February 11). Why are public sector banks (PSBs) after another insurance behemoth, the Life Insurance Corporation (LIC) of India, for supporting their fund-raising plans? The answer is quite obvious: a state-owned financial institution will definitely bail out another set of government banks. In all fairness, LIC has no choice even if its due diligence process alerts against its investment choice. At this rate, the insurance giant would soon find itself in the sick insurer's list. Rating agency Standard & Poor's retention of a negative outlook on Indian banks further jeopardises PSBs plans to raise capital. The day is not far when we could see PSBs stuttering, leaving no choice but for a merger with their private sector counterparts. Instead of issuing new bank licences, the Reserve Bank of India should put forward certain proposals to the finance ministry. The government could also invite some of the private sector banks such as ICICI Bank, HDFC Bank to seek mergers of certain PSBs with them. This would, of course, entail severe labour and political pains. The government should be prepared to accept a one-time loss, but it is definitely worth pursuing considering the seriousness of the issue.
K V Rao Bangalore
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