The Indian banking sector offers huge opportunities for growth, so the foreign banks have looked at an inorganic route to expand their presence for a long time, he said.
Kumar expressed fears that the uninhibited entry of foreign banks “would lead the country into economic slavery and they would plunder the resources”.
He added that AIBOC as a stakeholder is requesting it Indian Reserve Bank (RBI) to reconsider its position on the proposed merger of national interest.
Under the draft merger scheme that RBI floated on Tuesday, it proposed merging the besieged private sector lender LVB with DBS Bank India Ltd. (DBIL), the local entity of Singapore-based DBS Holdings.
“DBIL has a healthy balance sheet with strong capital support. Although DBIL is well capitalized, it will bring in an additional capital of DKK 2,500 in advance. In support of the merged entity’s credit growth,” RBI had said.
Old generation private sector banks have served the nation before independence and they have almost worked as PSBs in this country, Kumar said.
He added that it would thus have to be merged with any public sector bank (PSB) in order to maintain their character rather than a subsidiary of foreign bank.
In the past, all old-generation private banks were merged with a PSB when they came under financial stress, he said.
“PSBs do not just commercial banking, but social banking with nation first as their engine. It has been proven time and time again and most recently in the COVID-19 period,” he said.
Kumar added that comparing PSBs with private sector banks would be unfair as private sector lenders only conduct banking with profitability as the sole objective.
It was bankers in the public sector who extended government financial assistance to accounts for the poor in remote areas, naxal-affected villages and in-hospital locations, he said.
DBS has been in India since 1994. In March 2019, DBS converted its operations in India into a wholly owned subsidiary DBIL to expand the franchise and build on a larger scale. DBIL is now present in 24 cities in 13 states.
LVB’s problems started after it shifted its focus to lending to large companies from small and medium-sized enterprises. With rising defaulted assets (NPAs), the bank was put under the RBI’s rapid framework for corrective action in September 2019.
The bank had recorded a net loss of Rs 396.99 crore in the second quarter ending September 2020, which was expanded from Rs 357.17 crore in the same quarter a year ago.
Net NPAs or bad loans accounted for 7.01 percent of the net loan at the end of September 2020 against 10.24 percent per. March 31, 2020 and 10.47 percent by September 2019.
Started in 1926, LVB has so far expanded with 566 branches and 918 ATMs in 19 states and 1 EU territory.