P Chidambaram favours merger of banks to create 2-3 global entities

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In order to create 2-3 global sized banks in India, Finance Minister P Chidambaram has favoured mergers in the country's banking industry.

"There are other sectors that may well need restructuring .... For example, some banks, including some public sector banks among 26 public sector banks that we have, may be better off merging.

"The need for two or three world sized banks in an economy that is poised to become one among the five largest in the world is rather obvious," he said in the inaugural lecture on the occasion of Annual Day of Competition Commission of India.

Favouring mergers of banks, he said, "We have seen bank mergers lead to too-big-to-fail entities."

Chidambaram further said while restructuring may be needed in some sectors, mergers may reduce competition in certain segments or geographies substantially and may alter competition between banks and non-banks.

"Are our regulators well positioned to evaluate the consequences to competition in different sub-markets and across regulatory jurisdiction?," he asked.

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Story first published: Tuesday, May 21, 2013, 13:30 [IST]
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