‘PSBs have shown consistent improvement in recent times’

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Anil K Khandelwal has been responsible for a major transformation of the state-owned Bank of Baroda from a stodgy public sector bank to one which is now technology-focused, customer-savvy and nimble-footed. During his tenure, BoB undertook a major rebranding exercise, on the lines of some of the best private sector and foreign banks. As he prepares to hang up his boots at the end of the month, Khandelwal shares his thoughts on the banking sector in India in an exclusive interview with Sourav Majumdar and Sitanshu Swain. Excerpts:

Banking has become very dynamic, competitive and volatile of late. How do you see the public sector banks (PSBs) tackling the emerging situation? What are the changes they need to make to maintain their leadership in the new environment?

The major disadvantage that the PSBs faced vis-à-vis new generation private as well as MNC banks was technological backwardness. However, most of them have made aggressive efforts in last few years to set up core banking networks, internet and mobile banking, etc. While they continue to have large branch networks, their ATM count has also increased considerably. Thanks to the regulatory compulsion of compliance with the Basel II framework, they invested large sums in improving risk management capabilities, especially credit scoring models and databases to manage operational risks.

They have also been raising capital either by diluting the government ownership (if there is a scope) or by way of upper tier II bonds, etc. All of them enjoy CRAR close to 12.0%. The Banks like Bank of Baroda, which have strong presence overseas are rapidly expanding their overseas presence to diversify the business and to make their balance sheet less vulnerable to any specific country’s downturn.

In order to consolidate their position in the market, they have been paying special and focused attention to improvement in marketing and customer centricity. Some of them have undertaken aggressive re-branding exercises to reposition themselves more firmly in the market.To summarise, by concentrating on cutting edge technology and risk management systems, by improving capital base, by developing marketing skills and customer service and by making a conscious effort to expand globally, the PSBs can maintain their leadership in the new environment.

2009 is just a year away. Are the PSBs ready for consolidation? What are BoB’s plans now?