Fault line in banking sector raises concerns: Pranab

He was speaking at the first year anniversary of Bandhan Bank's operations

There was a fault line in the Indian banking sector, given the sluggishness in recovery and injudicious lending, among other things, President Pranab Mukherjee said on Tuesday.

At an event to mark the first year of Bandhan Bank’s operations, the President said, “There is a problem with managing and financing. There is a sluggishness in recovery and (a problem of) injudicious advances, which clearly shows there is a fault line in the banking sector.”

Mukherjee further said that lending to the rural and unorganised sectors was still very low in India.

Reserve Bank of India (RBI) Deputy Governor N S Vishvanathan, who was also present at the event, said sound internal governance, good risk management practices and strong internal, independent audit were important ingredients for the success of any bank.

“If a bank is not taking risk, it is not doing business. However, taking risk does not mean being reckless. It means identifying risk, measuring it and mitigating it, so that it is consistent with risk tolerance,” Vishvanathan said.

The RBI deputy governor also said that banks need to be customer-centric on account of a proposed line-up of new banks. He further said, the regulator, over the past few years, was moving towards deregulation, which meant it was more important that banks have good policies to function in a deregulated way.

Chandra Shekhar Ghosh, managing director and chief executive officer, Bandhan Bank, underlined the importance of growing with caution.

"Banking is not a sprint, it is a marathon, the game of a long distance runner. We cannot do everything overnight, we should not do because we must be extremely careful about risks. We cannot indulge in reckless risks, we cannot indulge in reckless growth. Our mission is to do simple things and create products and services to meet needs," he said.

Bandhan Bank  has garnered a deposit base of Rs 16,000 crore and its current customer base stands at nine million. The bank has 701 branches and is looking to take it to 1,000 branches over the next one year. It will also enter Goa, J&K and Andaman & Nicobar soon.

"We have busted a myth that banking is a very complex business. Thousands of my colleagues who had no banking experience and who knew only microfinance are now actively involved in running the bank. Of course, we got senior bankers on board who have made a lateral entry. Both the microfinance employees as well as the bankers together have formed a terrific team and are running the bank," Ghosh said.

Bandhan Bank will soon roll out a new app called Unified Payment Interface (UPI).

"The mobile app will ensure seamless fund transfer and merchant payments. It is expected to go live soon," he added.