THEME – BANKING FOR THE BILLION

With the pace at which the economy is growing, banks have been increasingly finding it difficult to meet the rising demand of credit and keep pace with it. The changing lifestyle of an altogether new young generation with high disposable incomes, the rise in employment opportunities, to demands of farmers and the rural masses that need to be brought under financial inclusion to the requirements of the growing services and manufacturing industry have all thrown up huge business opportunities for banks to cash on. But are banks in a position to tap all these opportunities? Are banks losing a major chunk of the business pie to global banks especially funding large Indian corporate M&As? Nevertheless with these challenges emerging out of the rapid growth rate (from 9 % to 10%) the industry, is undergoing a facelift in multi-tasking, outsourcing and exploring areas of newer business opportunities.

Government banks, which hitherto were obliged to lend under the priority sector lending, that usually ended up as non-performing assets, as part of government’s social obligation towards the rural poor, are today looking at the same population to grow their businesses. There is also a rush to set up new branches all over the country, with several banks lining up with expansion plans. This is not a case of once bitten, twice shy. Even profit-centric, private sector banks, are looking at rural India, and bringing those masses under the “financial inclusion’’ programme so much revered by policy makers and regulators.

Banking has finally arrived from the select few who could only afford to open bank accounts (until banks got nationalised in 1969) to the salaried class who later joined the bandwagon to now the masses is indeed a great achievement for the government. The economy has brought about major changes in thinking of rural poor as well, thanks to NGOs who are doing a great job in micro-finance. Banks along with NGOs are not only tapping genuine borrowers and lifting their standards of living of rural poor— a scheme (priority sector lending) that failed after the government nationalised banks in 1969— but they are also educating them on the benefits of being creditworthy.

The fact that the growth of one sector is leading to the birth of another industry, the fact the employment levels have risen, the fact that health and quality of life have improved has led to one major challenge for the banking sector-- whether they could pace up with this rapid pace?