FinMin asks large banks to act as coordinators for groups of smaller banks
By Vaibhav Aggarwal
Oct 26, 2012
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To improve the functioning and internal processes of small public sector banks, finance ministry has asked big players in the banking industry to act as a guide and coordinator of small banks. The ministry has suggested the setting up of seven pools of small banks, each of which will be assigned a large bank which will act as coordinator for the small banks under it.

The finance ministry has issued a letter to banks on this matter. Initially, small banks were apprehensive of such a process fearing consolidation by larger banks. But, the ministry dismissed the consolidation fears stating that the government will not force banks into mergers or acquisitions.

On the matter, a ministry official said, "Some banks had come to us seeking clarification. This is not a step towards consolidation. We just want them to share experiences with each other. Currently, they are working as isolated islands. Why should PSBs, with about 80 per cent market share, lag on so many issues?"

The groups of banks, along with their coordinating bank, have been asked to keep all channels of communication open on matters like e-governance, human resources, internal audit, fraud detection, recovery, business process re-engineering etc.       

Talking about the ministry's suggested mechanism, the chief of a public sector bank said, "They (the finance ministry) want some kind of standardisation in the processes of banks. We can use our collective wisdom and understand best practices from each other.'

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