With increase in credit penetration and as credit to GDP ratio increases from present levels of 50 percent, PSBs with a market share of over 70 per cent need to contribute significantly in the process. Without strong PSBs which are efficient, competitive and well-capitalised, meeting higher demands of bank credit would be quite challenging in future. 9.
Recent proposals on Large Exposure norms which limit banks’ exposure to a group by 25% of their common equity will further limit their capacity to fund large credit demands. It is therefore imperative that some consolidation among PSBs do happen to support the growth potential of the economy. 10. After the crisis, internationally there has been a significant tightening of regulatory norms.