Distinct segments of banking institutions may emerge in the coming years. What would be a possible scenario in India? What are likely benefits of consolidation of Public Sector Banks? Where the focus has to be?

In the near future, this is likely to be a very different banking sector in terms of structure and business model. The first segment may consist of large India banks with domestic and international presence. These process will be augmented by the merger of Public Sector Banks (PSBs). The second segment likely to comprise several mid-sized banking institutions including niche banks with economy wide present. The third segment may encompass smaller private sector banks, small finance banks, regional rural banks and co-operative banks, which may specifically cater to the credit requirements of small borrowers in the unorganised sector in rural/local areas. The forth segment may consist of digital players who may act as service providers directly to customers or through banks by action as their agents or associates. The reoriented banking system will of course be characterised by a continuum of banks. The banking space would also include both traditional players with strong customer base and new technology led players. Consolidation of Public Sector Banks: In the content of the emerging scenario, a properly worked out consolidation of Public Sector Banks can generate synergies in allocation of workforce and branches as well as streamlining of operations to meet the future challenges. The focus has to be on enhancing in significant improvement in efficiency and rationalisation of share capita to meet the capital adequacy requirements. Investment in technology and skill building has to be stepped up. Bigger and agile banks may be able to reposition themselves with better branding exercises backed by improved technology, skills and business models.