HDFC head calls for consolidation in banking sector

By Katie Reid

ST. GALLEN, Switzerland (Reuters) - The head of Housing Development Finance Corporation Limited called on Friday for consolidation in the Indian banking industry.

"In the long run it is advisable that consolidation should happen in both the private and public sector," HDFC Chairman Deepak Parekh told Reuters on the sidelines of the St. Gallen Symposium.

Parekh said there should be a small number of large banks rather than a large number of small banks so that Indian banks could keep up with the growing balance sheets of large Indian companies and play a role in big takeover deals.

HDFC is India's leading mortgage firm and the parent company of HDFC Bank, India's second-largest private sector lender.

HDFC would be interested in going for an acquisition if something were to come up in India, Parekh said in the interview, adding that raising money for a deal would not be an issue thanks to its huge balance sheet.

"Raising a couple of billion dollars is the least of our problems," Parekh said. "There are not many banks that are willing to sell".

Parekh said Indian banks were strong and that liquidity was abundant, adding that a strict credit and regulatory regime meant that they had not moved into risky positions, but he said demand for loans had slowed.

Some have said banks in India are grappling with rising defaults by customers, caused by high borrowing costs and a slowing economy that has hit some jobs.