"Companies will acquire, merge and hive off businesses to the competitive. Banks must play a pivotal role in funding such activities," he said adding "banks should think of innovative schemes and products to help corporate houses to strengthen their market value."

The M&M chief called for privatisation of the banking industry. "There has to be a massive restructuring of our banks--mergers and acquisitions to bring about size and interference by government must go... Government's only role ought to be to regulate and lay down codes of discipline," Mahindra said. This is the first time that an industrialist addressed the AGM of the bankers' body.

Mahindra refrained from demanding "denationalisation" of banks as it would raise "political hue and cryirrespective of whether politicians understand it or not". The M&M chief also sounded sceptical about the feasibility of his suggestion (of government following a hands-off policy) as he himself said "the question that arises is whether the party in power will have the political will to do so."

IBA chairman and Union Bank chief AT Pannir Selvam said Indian banks' spread has narrowed and it will affect the bottomlines of banks. He said, "Banks need to reposition their deposit products and pricing in order to have an efficient asset-liability management".

"Decent spreads are important for banks in India to enhance their capital base, modernise their operations, make advances in product design and delivery and build up adequate competitive strengths to withstand global competition," he said.

Talking about the rising non-performing assets (NPAs) of the banks, Selvam said, "banks are never as serious as they are now about the management of their assets and particularly on containing the emergence of baddebts." Only recently at the global banking conference in New Delhi Selvam had said the NPA situation is not as alarming as it has been projected to be.

RBI governor Bimal Jalan, however, said the banks should take an exaggerated view of the NPA problem and tackle it on a war-footing. Selvam also expressed concern about the slackness in non-food credit growth.