New banks need to attune with national priorities: FM

Written by fe Bureau | Mumbai | Updated: Sep 18 2011, 08:24am hrs
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With just 40% of Indias population having bank accounts, finance minister Pranab Mukherjee on Saturday exhorted banks to do more for financial inclusion. Speaking at the FE Best Banks Awards ceremony, Mukherjee said he expected the new banks which are going to come would be in a position to effectively compete with existing players and attune themselves with national priorities. This, the finance minister said, included government schemes for mandated lending, priority sector lending and on financial inclusion.

While coaxing banks to continue to strive for further excellence, Mukherjee said the most important aspect of the FE Best Banks Awards event, now in its 15th year, was that it set benchmarks for others to try and live up to it. Recognising the role played by public sector banks, which account for nearly three-fourths of bank lending, the FM said in the last quarter there had been a 10-20% growth in the topline of banks and a profit growth of more than 25%.

Referring to the crisis in global banking, the FM said this highlighted the need to take a serious look at the fragmented regulatory system in global financial markets. Giving the Indian regulatory system a pat on its back, he said Indian banks continued their robust growth while not compromising on asset quality. The issue of financial stability and the banking system, the FM said, have now become an integral part of policy discussions and macro-economic objectives in the developed and the developing world. It is, he said, a testimony to our consistent view that reforms in global standards have to be adapted to local conditions.

All the FE Best Bank Awards winners honoured on Saturday, in a glittering function which was attended by Maharashtra chief minister Prithviraj Chavan and deputy chief minister Ajit Pawar, have exemplified one or the other of the qualities, the finance minister highlighted. HDFC vice-chairman and CEO Keki Mistry won the Banker of the Year award. Receiving the award from the finance minister, Mistry said, This is truly an honour for HDFC and it would not have been possible without the hard work and commitment of all our employees and I dedicate this award to them.

The Lifetime Achievement award went to PJ Nayak, who took Axis Bank to the third-largest private sector bank in the country within a short span of nine years. A former bureaucrat, Nayak transformed the bank into a robust, well-capitalised organisation with a de-risked business model. At 40%, it had amongst the highest CASAs in the industry, and the return on assets improved significantly from 0.77% in 2000 to 1.44% in March 2009.

While accepting the award, Nayak said what the financial sector needed to function smoothly was a greater harmony in the regulatory environment.

He said Indias two financial regulators needed greater coordination.

Given how the UIDAI project is all set to emerge as the gamechanger in terms of how India delivers public services, not surprisingly, Nandan Nilekani is FEs Innovator of the Year. Nilekani had an illustrious career at Infosys. Nilekani said he was particularly honoured to get the award from the finance minister since the UIDAI project was a means to implement his dream of financial inclusion, as well as to ensure people got their money without large leakages. Nilekani said the government spends around R3,00,000 crore on subsidies and public programmes such as Nrega and the UIDAI was aiming to streamline leakages in this area.

Corporation Bank and Indian Bank topped the PSU category. While Corporation Banks cash management was noteworthy, Indian Bank re-established itself as a fast-growing and profitable bank by pioneering many schemes for financial inclusion and also forayed overseas.

Yes Bank won the award in the new private bank category. In a span of just seven years, it carved out a niche for itself in the competitive Indian banking arena; it grew at a scorching pace without compromising on the quality of its assets. HDFC Bank was the other winner in this category. It grew its balancesheet at a rapid pace to nearly R3 lakh crore, a success which was the result of an excellent strategy both on the assets and liabilities side.

In the old private bank category, J&K Bank won for managing to acquire a more national character. Today, a fair share of the banks business is generated outside its home state. Karur Vysya Bank, the other winner in the old private bank category, was one of the first to adopt technology across its branch network, an initiative that gave it an edge over its competitors.

DBS Bank India, which entered India in 1994, was one of the winners in the foreign bank category, for its sharp focus on wholesale banking and by offering a bouquet of services like investment banking, treasury and trade finance.

India has now become the third-largest contributor to revenues of DBS after Hong Kong and Singapore. Deutsche Bank, the other winner in this category, is today among the leading players in the investment banking space, having been involved in almost every large issue of debt and equity.