Why does the government need so many banks? With different names, multiple branches, multiple ATM booths,….but essentially doing the same work.

The metros are over banked – seeing 4-5 branches in a small road is a given.

Well the reasons are simple. If there is a Rs. 10 crore fraud in a small private sector bank, it is enough to bring the bank down. The figure changes as the scene changes, that is all. So a small bank with a big NPA problem is hard to handle.

So a small bank will be merged with a slightly bigger assets under management. So if a small bank is merged into a slightly bigger bank, the NPA can be hidden for a longer period of time.

So all the small banks will be merged with slightly bigger banks – and the process will continue……for a long period of time. Of course if it backed by a higher end politician it will be constantly bailed out – so that it can retain its entity….

Sadly these banks will continue to recruit, ‘train’ , ….and help a lot of people make a living. This will not be a ‘career’ but it will pay a decent indexed salary and an indexed pension. Not bad considering how difficult it is to get jobs outside.

These banks – and their associates – brokerage, mutual funds, commodities, life and general insurance – DO NOT HAVE TO EARN money, so they will queer the pitch for the other players. This is already happening in the housing loan/ mortgage market.

Anyway as time goes by a few will be merged, why some may even be closed, inshahallah…


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  1. Hi Subra,
    Many people says that banks are yet to reach large masses. So we need more number of banks, may be govt should give some incentives to open branches in Villages. I think direct cash system may influence to reach banking facilities to poor too…

    But I could not understand why it should be a concern for us (the common people), because banks cannot cheat(Govt won’t it protect?) people right?

  2. are there any risks while keeping your money invested in banks either in savings or fd’s? and are the government ones safer than the private ones when it comes to closures and bankruptcies?

  3. The positive momentum is gonna to go away within few weeks/months.

    Whatever said and done, domestic mutual funds withdraw 45k – 50k from Indian stock markets and it is only the FII who are investing. Chidambaram historically believes to measure the economy’s growth using nifty levels. So he must be happy.

    Yes, we are tired of predicting as the government machinery is fully supporting the unethical business practices, real estate bubble etc etc. But there is a limit to everything. Whatever you can control within your control you can manage, but India has reached a point where we can no longer stage manage certain things.

    1. Real Estate price is not international. It is within India you can manage. You don’t want to regulate. You don’t want to prick the bubble. Let it be. We will come to this later.

    2. Gold price is international. You cannot control. Now shamelessly Government is asking people to stop buying gold and note here it is the only instrument which withstands the government fueled inflation assault. Not only government is asking, even they put pressure on RBI officials to ask people not to buy gold. Poor RBI fellows!. They forget basic economics and dance to the tune of government.

    3. Rupee conversion rate. If huge money is stuck and hoarded in real estate. Every company is investing in real estate where is the real money to do real business? Now, a stage will come where everybody will think it is better to buy some flats and need not do any other business. This has come already. I saw in a kirana shop in addition to prices of dal and oil they have put prices of houses also ! ROFL!. Coming back to the point, the Rupee value nosedived to 55 now. This inspite of artifical euphoria about the ‘so called reforms’ act of selling money making business to foreigners.

    4. The export sector will get a beating only due to inflation effects mark by words. Rupee can easily touch 60 and above. Whatever election games played by Government they cannot control gold price, Currency etc. That will cause doom to this comedy.

    5. Reserve bank may cut rates. And I am wondering if the government and RBI is making unnecessary noises about cutting rates ( cheap money) how the hell the inflation will come down? Do we all forgot basic economics?

    6. I wonder now every business leader and stock market operator is predicting that the economy is bottoming out. What is the evidence Mr? It is going down and it is gonna to accelerate See the IT companies. They have managed their balance sheets for couple of quarters now they cannot continue that. Some skeletons will tumble out soon. Other industries will follow.

    7. If govt stop playing in interest rates, banks also will face the music. There will be times where government will be made to stop playing in interest rates and the time is very near due to Rupee conversion and all.


    If US recovers, FII will pull out the money and run out of sinking ship India that will cause a massive crash in indian stock markets.

    Wave counts also indicates the top is very near.

  4. More banks will bring competition and thereby benefit customer.

    My relatives had a Current a/c with overdraft with a PSU bank from past few years. With more req of working capital they asked form increase in OD, but the bank denies. They simply enquired with other (PSU) banks and got what they want.

    Simply customer will be king until (atleast) there is competition.

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