The Telegraph
Since 1st March, 1999
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Weak banks must merge with strong, says Adsul

New Delhi, April 5: Anand Rao Adsul, minister of state for finance, today said there is a need to merge the operations of small and loss-making banks with larger, more profitable units.

In an interview with The Telegraph, Adsul said the government would take steps to improve profits and operational-efficiency of state-owned banks and said he would take up the matter soon.

“There is a proliferation of banks in the country,” he said. “We need to rationalise the operations of banks and consequently we would like to merge the smaller and weaker banks.”

Adsul claimed that the rationalisation of operations would improve the health of the country’s banking system. “The modalities of the merger process needs to be worked out and we would soon prepare a report on this,” said Adsul.

Asked if the finance ministry had received any proposal from foreign banks to raise their stakes, Adsul replied in the negative. The 2003-03 Union Budget had allowed foreign banks to raise their stakes in domestic private banks to 74 per cent from a current 49 per cent.

Lat December, Bank of Nova Scotia had said it would pick up equity stakes in domestic banks. “We want to increase our investments in India and would foray into the retail-banking system,” Richard E Waugh, vice-chairman of the bank executive offices had told The Telegraph.

At present, 97 commercial banks — 27 state-run banks which includes the State Bank Group (8), 30 private sector banks and 40 foreign banks — operate in the country.

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