India's banking sector is facing a wave of consolidation needed to achieve global clout and contend with fierce local competition, starting with the merger of two high-profile lenders last week, analysts say.
Competition in the overwhelmingly state-dominated industry is becoming increasingly cutthroat with a host of new private players since the government began its drive to liberalize the industry a decade ago, the experts said.
"The Indian economy is opening up and they [the banks] will have to compete on an international scale and become competitive," said Abhilash Lal, an analyst at the global consultancy firm AT Kearney.
Last week, the state-run Oriental Bank of Commerce, a leading north Indian-based bank, said it would merge with ailing private Global Trust Bank, based in the country's south, in what Oriental said was an ideal marriage thanks to complimentary geographic bases.
While the merger announcement was a case of a weak bank combining with a strong one due to financial woes, many future hook-ups will be about gaining enough clout to compete on a global scale, analysts said.
The critical factor in competing with international players would be banks' size and scope for offering cheap finance, and they can only do that if they achieve "critical mass" in the sector.
To do this, banks will need to widen their retail networks, increase their product portfolios, reduce costs and boost assets.
Analysts also say commercial logic dictates mergers, as India has too many banks chasing too few customers, with about 100 commercial banks and 200 regional rural banks.
"There are a host of banks since the market was opened to private players in 1994. The Indian financial system can't support so many banks. They will merge or become niche banks," said analyst Rajesh Malhani at Pranav Securities.
Competition will pick up further if the central bank allows foreign banks to operate 100 percent subsidiaries or pick up 74 percent equity in domestic banks, he said. Such moves are under consideration, industry officials say.
"The primary reason for mergers is going to be purely commercial, whether it's a footprint need or because of complimentary products," Lal said. "One's definitely going to see greater consolidation."
But the process could be slowed by opposition from unions, which dislike mergers due to fears they could spell job losses. Banks represent India's second-biggest group of employers with around 800,000 workers.
Political change also may be needed, as many of India's states own banks to fund regional development. Until legislators ease rules obliging public-sector banks to be 51 percent government-owned, a large slice of the activity is likely to be in the state bank arena.
Two prime state-run Indian retail candidates that may be seeking domestic takeover targets are the Bank of Baroda and the Bank of India, which are both looking to expand overseas, analysts said.
Another leading state-run development finance bank, IFCI, is expected to announce this year its merger with state-run Punjab National Bank, a retail bank, banking officials said. Two state-owned banks, Union Bank and Syndicate Bank, are also mentioned as likely merger candidates.
But even without consolidation, change is afoot. Private banks have gnawed into the monopoly of state-run banks and have cornered an estimated 20 percent to 25 percent of the domestic market.
This has had the effect of forcing state-run bank monoliths to abandon their earlier ways, where customers had to stand in long lines just to cash a check.
Competition has seen a handful of banks emerging at the top in three separate segments of state-run banks, private banks and foreign banks operating in India. These are the ones that will try to gain greater market share through mergers and acquisitions, they said.
"Banks have to clearly identify how they are going and where they are going. If they do not perform, they will be takeover targets," Lal said.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique