EDITORIAL

Valuation Vortex
How undervalued are Indian banks?

Banker Of The Year
ICICI Bank CEO & MD K V Kamath

Innovate & flourish
Bankers are tweaking their products to attract customers. Will they bite?

The Urge To Merge
The only option left for weak & small co-operative banks is to merge with bigger peers

The Vanishing NPAs
Banks bounce back in 2005-06, posting a growth in net profits and reducing NPAs

Database
All the data you wanted on banks

Database on Co-operative banks

Database of PSU, Foreign & Private banks

Bandyopadhyay: Thanks Kamath for providing some of the answers to the questions raised and admitting that the onus is on the bankers and not the government or the RBI.

OP Bhatt: Post-independence, the public sector banking industry always rose to the challenges meeting the needs of agriculture, small industries, big corporates and so on. The Indian growth story is there to stay for the next 20 years and banks will be supporting it. Definitely there are issues and concerns. Our exports are growing at about 24 per cent but our ports are not growing at that rate.

In three to four years, foreign trade will double but will the capacity of ports to handle this growth double? No. So the growth in infrastructure is not keeping with the pace of the growth of the economy. We will require huge money. Kidwai mentioned about $ 200 billion worth of gold lying under mattresses and in lockers and there should be a way of getting it out. Some banks are already working on how to get it out. About 800 to 900 tonnes of gold is imported every year. About 500 tonnes are imported through the regular banking channels. About 200 tonnes of gold is recycled and about 150 tonnes of retail gold coins are sold in this country. All these worth about Rs 100,000 crore. We talk about a similar amount for investment in infrastructure being spread over the next five to ten years. Gold is just one example which can unlock funds. Look at the rate at which land is being sold in Delhi.

We need to follow the US model where direct financial intermediation is much lower than in India M B N Rao, CMD, Canara Bank

DLF bought land at Rs 250 crore a hectare. If you were to just sell 100 hectares or 1000 hectares of land, you get Rs 25,000 crore. So there are tonnes of money and resource is not a constraint.

The other major issue is technology. The industry is fragmented and technology is even more fragmented. What is worse is that the same bank is using umpteen kinds of technology. We may have about 200 vendors in SBI!

Financial inclusion is another big issue. How do we reach out to thousands of villages not necessarily to take money from people in the form of deposits but to lend money to them? The current brick and mortar system is too expensive. So, we must have the right technology to reach out to the masses.

Another major issue, specially in the public sector banks, is people. We don’t have enough people to man the banking activities. The issue will grow bigger in the next 10 years.

Bandyopadhyay: I wonder whether any other CEO has the guts to admit that his bank has 200 technology vendors! A lot of questions have been raised. Let’s look for some answers. The most important issue seems to be the resources. On the Indian banking turf, the next round of battle will be fought for gathering deposits and not disbursing loans. How do you go about it?

Balachandran: There are people who have got enough money but don’t keep their money in banks. They go for gold and other investments. To get them into the banking fold, there has to be an appropriate kind of pricing of deposits.

Then there are 600 million people still outside the banking purview. Today they may seem to be economically weak but over a period of time, given the opportunities, they will become savers and I firmly believe that this is a vast reservoir for banking resources.

With appropriate access and pricing we shall be able to mobilise the resources that we need. All other factors can then be subsequently managed.

HOME    Business Standard • November 2006