BIG-SIZE BANKS NECESSARY TO MEET ECONOMY DEMAND: LENDERS

Two of the country's biggest lenders called for larger banks with scale and capital to meet the growing needs of the country, which is growing at a faster pace and is poised to attain double-digit economic expansion.

Stating that the balance sheet size of this (SBI) bank is at par only with the tenth largest lender in China, State Bank of India Chairman O P Bhatt said that in the next 5 years, there would be an addition of up to 500 million people to the middle class, which would demand huge support from banking and financial sector.

The public sector banks will have to play a pivotal role in helping the large middle class populace meet its aspirations, he said, expressing reservations if the state-owned institutions' had wherewithal to meet the demand.

Bhatt also expressed concerns if there was enough liquidity to fund the growth, saying the situation was not at "comfort" level.

ICICI Bank's Chief Executive and Managing Director Chanda Kochhar said Indian banking sector would have to grow at 25 per cent every year or 2.5 times over the next five years if our country were to sustain the 8-10 per cent per annum growth rate.

Agreeing with Bhatt, she said, the country needed to deepen the bond, debt and take-out financing markets so that banks could meet the funding requirements necessary for infrastructure development.

The Government has set a USD 1-trillion investment in the infrastructure sector in the twelfth five-year plan period and is on the way to set up a Rs 50,000-crore dedicated infrastructure fund.

Both Bhatt and Kochhar said achieving the financial inclusion objective would not be enough to fuel growth and help the vast majority of the poor jump out of poverty. They said financial conclusion would have to be complimented by holistic approach with attention in areas like education, health and vocational training.

Bhatt said in the next 5-7 years the banking and financial services industry would face a severe capacity crunch in terms of talent to serve the growing needs of the middle class.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Big-size-banks-necessary-to-meet-economy-demand-Lenders/articleshow/6908071.cms