Bankers agree, current scenario offers room for introspection

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Mumbai, Aug 20: Current challenges in the Indian economy, and the banking sector in particular, are a good time for banks to introspect, redraw strategies and focus on the critical issue of financial inclusion. This was the overwhelming consensus among major bankers, policymakers and market players at the FE Roundtable Conference on ‘Banking: The New Reality’, in Mumbai on Wednesday.

Turmoil in financial markets overseas and the problem of high inflation and interest rates actually present an opportunity for banks to strengthen their basic framework and focus on critical issues like cost cutting, risk management and take a close look at their lending practices, particularly retail lending, bankers said.

Setting the tone for an engaging debate, Pawan Kumar Bansal, minister of state for finance said though there is pressure on banks due to rising interest rates, the sector has been the major driving force for the country’s growth over the past four to five years. “When the world is grappling with the possibility of recession, Indian banks have fared well. Hundred per cent financial inclusion seems to be a possibility now as the bankers’ committees of various states have already given figures of the areas covered under financial inclusion,” said Bansal.

The minister said low-cost current account-savings account funds could prove advantageous for banks while serving the objective of financial inclusion. Traditional banks should get ready to face competition. “Competition has helped Indian banks in a big way. I still think that a change in the mindset is the need of the hour,” Bansal said.

Among other vital issues for public sector banks, Bansal said retention of staff has become a big issue.

Pointing to the mad rush for retail lending, the minister said creditworthiness of the customer has become important in the present context.

MV Nair, CMD, Union Bank of India, said: “This is the time banks need to tighten their belts as regulatory requirement would lead banks to bring down credit to curb inflation. There are challenges before public sector banks,” he said. According to him, the moot question is, why state-owned banks lost 10% of marketshare to foreign and new generation private sector banks.