Similarly, the correlation of overall cost of capital appears to be stronger with EVA as against cost of equity. However, the weighted cost of capital for PSU banks remained lower than private sector banks and varied from 7.1 per cent to 6.3 per cent in the past three years. From the above observations in performance, it is clear that the banking industry in India is undergoing a rapid metamorphosis. The traditional banker has been replaced by inancial services provider. Most of the PSU and private banks in our country have already started looking at their portfolio of services offered and what they should do in the future for remaining competitive in the industry.
Major consolidation has to take place in the PSU banks.
While the market immediately reacted sharply by increasing capitalisation, shareholders of all these banks saw appreciable increase in their wealth. Indian banks in the new millennium therefore must attempt to make investment in strategies and not merely remain confined to borrowing and lending .