The credit from banks must grow by 12 per cent every year to meet the Centre's target to achieve a USD 5-trillion economy within the next five years and the step taken for mergers of the PSBs is in the right direction to meet the goal, a top SBI official said Friday.
Supporting the move to merge the public sector banks (PSBs) by the Union Finance Ministry, State Bank of India (SBI) MD Dinesh Kumar Khara said that the merger is "well- thought of" and will strengthen the banking system to support the economy to pursue USD 5-trillion target.
"The banks' credit must grow by 12 per cent year-on- year to meet the goal. Now the banks' credit is about Rs 98 lakh crore. The decision to merge the PSBs is in the right direction to meet the target," Khara said at an event, organised by CII here.
SBI Deputy MD S K Varma said credit demand from the large corporates was "sluggish" so far in this fiscal but a revival in near future with good monsoon is expected.
He further said there was "no shortage" in liquidity.
In the biggest consolidation exercise in the banking space, the government had announced four major mergers of public sector banks, bringing down their total number to 12 from 27 in 2017.
United Bank of India and Oriental Bank of Commerce will be merged with Punjab National Bank, making the proposed entity the second largest PSB.
Similarly, Syndicate Bank will be merged with Canara Bank, while Allahabad Bank will be amalgamated with Indian Bank. Andhra Bank and Corporation Bank will be consolidated with Union Bank of India.
PSBs are under pressure to meet the capital adequacy requirements under Basel III and looking at the government support for capital, Khara said.
"Government had been supportive to capitalise these banks. There is a question mark on how long this will happen. Keeping this in mind, perhaps, the merger has been conceived. Maybe, the government needs to ensure that the funds are used as growth capital," Khara said while replying to a question.
Elaborating the benefit of merger of its associate banks with SBI, he said the bank had saved Rs 4,350 crore in rationalising human resources in its branches, another Rs 1,800 crore from treasury operations and others and Rs 400 crore through reduction of cost of resources.
It helped in improving financial positions and better ratings on the global benchmarks, he added.
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