The merger and acquisition arena in Indian banking has been rather dry due to peculiarities of ownership. But that may be about to change, though at a snail’s pace, as reality begins to bite. The dominant position of the government and community ownership of small private lenders made even the most daring of rainmakers to temper their aggression. Regulatory conservatism has been a stumbling block too. Now, both the government and the managements may be beginning to think of possibilities of consolidation for different reasons. February 2017 saw some unprecendented events. A young deputy governor of the Reserve Bank of India, Viral Acharya, sounded the bugle for ending the government largesse to the banks and also talked about merging banks for efficiency. Meanwhile, State Bank of India is in the last leg of merging five associates with itself nearly 15 years after the first proposal. Consolidation may happen in three different segments of Indian banking – state-owned, privately managed, and the old private sector community-dominated banks – for three different reasons. The government is no more willing to keep pouring capital into the black hole, equity investors are shunning old private banks with no management vision, and the new-age private ones may be just getting a bit bolder.

(Economic Times)