Axis Bank Chief Executive Amitabh Choudhary said India will need “at least eight to 10” big banks to support economic growth as the pace of consolidation increases across the region.
“It’s a play on the entire product suite” and “we don’t have that in the country right now,” he said in an interview with Bloomberg TV’s Haslinda Amin ahead of the World Economic Forum in Davos on Monday.
India is discussing options for creating larger public sector banks, in line with the government’s need to finance large-scale infrastructure and industrial projects in Asia’s third-largest economy. Prime Minister Narendra Modi has set a target of transforming India into a developed economy by 2047.
There are currently 12 public sector banks and 21 private banks in India. Chaudhary said only five to six lenders in the country are currently established to offer products in the financial ecosystem.
Currently, only State Bank of India and HDFC Bank Ltd feature in the top 100 global sector list by total assets. According to data compiled by Bloomberg, the 10 biggest rivals include China and the US.
How much assets does Axis Bank Limited have? ₹Rs 16.76 lakh crore and has branches at 5,976 locations across the country as of September end.
Smaller banks may choose to serve specific customer segments or product lines, but those aiming to reach a broader base with a broader offering will have to be much larger than they are today, Choudhary said, adding that Axis Bank is well prepared to deal with the competition.
Either smaller banks “decide to remain small and cater to a certain segment of the population,” he said. “If they want to be big, if they want to play across the spectrum, they need to be much bigger.”
Funding remains a key battlefield in India’s crowded banking industry, with competition for both assets and liabilities set to intensify with Japanese and other foreign lenders increasing investment in the industry.
Chaudhary said that pressure on deposits is likely to remain amid the cut in interest rates by the Reserve Bank of India. He said it may take 18-24 months for deposit growth momentum to return, underscoring the need for liquidity support from the RBI.
