Wednesday, August 31 2005 11:08 Hrs (IST) - World Time -

New Delhi: The government yesterday(August 30, 2005) ruled out privatisation of Public Sector Unit(PSU) banks, but asked them to prepare for competition, consolidation and convergence.

While favouring more autonomy for PSU banks, Finance Minister P Chidambaram yesterday(August 30, 2005) said the government would hold them accountable for their performance.

"While competition has already come whether one likes it or not, consolidation cannot be put off for long," Chidambaram said at a function to mark the 100 per cent networking of State Bank of Patiala.

Asking banks to go for convergence, he said PSU banks should become a "one-stop-shop for all financial services" on the lines of changing structure of stand-alone shops to retail chain to malls.

The government does not have any intention of privatising PSU banks, but it would hold them accountable to their statements of intent, Chidambaram said.

"We have no intention to privatise PSU banks...we will give you autonomy, remove the shackles and allow to grow and become world class. But at the end of the day we will hold you accountable," the Finance Minister said.

He said the government would support consolidation if the initiative comes from the board and staff of the banks concerned.

Referring to benefits of consolidation, Chidambaram said: "State Bank of India is the largest bank in the country. But we are not happy that it is not the largest bank in Asia or a global bank. That is why we are pushing for consolidation." Chidambaram said PSU banks would be held accountable on four occasions, including the performance as projected in the statement of intent.

While giving more freedom to banks in operations, the government would ensure that its stake does not fall below 51 per cent at any point of time.

The government would retain the powers to appoint chairmen and executive directors, ensure that banks adhere to corporate governance and the performance is accordance with the "statement of intent" signed by the bank chairman.

Citing the example of State Bank of Patiala, Chidambaram said: "With proper management and environment to work together, motivation, reward and punishment, it is possible for any organisation to carve a niche and a make a mark."