C O N T E N T S

EDITORIAL

Down but not out
The poor offtake of retail loans has pulled down credit growth

Red alert
After a sharp reduction in the last three years, NPAs are creeping back into banks’ balance sheets

A vote for the future
A distinguished Jury picks State Bank of India Chairman O P Bhatt as the Business Standard Banker of the year

Making the elephant dance
Interview with SBI Chairman O P Bhatt on his efforts at re-energising the bank

Dial ‘R’ for restraint
Cases of coercion and violence are forcing banks to soften their approach towards debt recovery

Overcoming obstacles
RBI has softened its stand on co-operative banks, but the guidelines are still strict

Database
All the data you wanted on banks

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What I would like to see between now and 2009 is a clear vision statement from the government on where it expects the banking sector to be. I would also argue for a much more powerful corporate sector with much better governance standards.

A K KHANDELWAL: I think too much noise is being made about 2009.. The real challenge was when private banks came. That was the time when people were writing off public sector banks, and I think public sector banks have come out with great reputation. But I think the biggest challenge is on the human resource front. I say it because I face it daily. If you see a typical PSU bank, every two years, one-third of the management retires. And you can’t produce leaders on a conveyor belt. In fact HR has become a human risk for public sector banks. Seventy per cent of PSU bank staff is workmen, the messengers and clerks. How do you re-balance this staff? There is a limit to training and re-skilling. The second challenge is capital and the third is the size.

M B N RAO CMD, Canara Bank If the Tatas can buy Corus, many Indian banks can also buy abroad

In most areas, including GDP growth, we are competing with the best in the world today. But in terms of size, only one bank figures among the top 100 in the world.

YOGESH AGARWAL: My sense is that some banks would be ready for any kind of challenge, some will not be. In the developed markets, more emphasis is placed on the market cap, how the market perceives how the bank is doing. I believe those banks which have been able to put value to their market cap, put value to their shareholding, are the ones which will definitely survive. I am sure consolidation would take place among banks which have been able to show better operational efficiency.

There is a tendency to look down on PSU banks as inefficient banks. But several of us have shown that ownership by the government is no excuse for operational inefficiency. Khandelwal talked about challenges from private sector banks. But I think the challenge from foreign banks will be a different ballgame altogether. That is the time when the men will be separated from the boys.

S K GOEL: I think Indian banks have certain challenges in the form of capital risk management. But they have one great advantage – that is their presence in the world markets. If they concentrate more on these markets and strengthen their position there, I think they will be doing well to position themselves.

MODERATOR: The two words that featured consistently in the opening remarks were consolidation, capital and human resource. Let’s look at consolidation and capital first. It’s obvious that without the scale, the banking industry cannot support the growth story.

SWAROOP: I think the compulsion of consolidation has been low in the last four years partly because of the rapid growth. But there is a case for better run public sector banks merging with the not-so-well run banks. The government will need to examine how they can provide greater autonomy to managements in public sector banks to be able to take some of these decisions more easily. The consolidation by foreign banks has been slow mainly due to the not-so-transparent regulatory environment.

Business Standard • December 2007