Finance
minister P Chidambaram, yesterday said that the government
would encourage consolidation within public sector banks
and would help bring about a favourable legislative
framework that would facilitate mergers.
However,
he said that the decision on the actual process of mergers
would be left to the boards of the banks. "We are
not going to push for consolidation. However, if banks
want to consolidate we will not come in the way,"
Chidambaram said after a meeting with chief executives
of public sector banks.
He
said that legal amendments, including minor ones required
in the Income-Tax Act, would be brought about to remove
any hurdles in consolidation. "We need a small
amendment in the I-T Act which would be carried out
in February next," Chidambaram said.
Chidambaram
also said that the government would encourage banks
to raise further capital by way of public issues. "I
have encouraged them to go to the capital market,"
he said.
On
the interest rate movement, Chidambaram said that he
expected stability in interest rates in the medium term.
"In the medium term, interest rates are expected
to be stable. That is my assessment," he said.
The finance minister said that there was excess liquidity
in the market and banks would be encouraged to lend.
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