Amidst the challenges, a lot of hope

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: always link the banking sector with economic growth and when the economy is slowing down because of the measures to tackle inflation along with fiscal slippages, it will have an impact on the banking sector. I think accretion of retail NPAs is also part of the process. Once inflation starts declining, I think our confidence will come back.’’

Shah also points out that the market is carefully studying how banks face the resource-raising challenge in these times, and tackle the competition they are facing from mutual funds and insurance companies which are also targeting household sector savings

But it’s not all gloom, argues Meera Sanyal, head, India operations, at ABN Amro Bank. Says Sanyal: “We are realizing that the current disturbing scenario is certainly a short-term phenomenon and actually, from the infrastructure point of view, there are positive trends. We have seen execution of good projects. There are cash flows in these projects. With the use of technology, the traditional way of mobilising resources is changing and is becoming easier and convenient.”

From an expert point of view, there are clear dos and don’ts which banks have to follow in these tough times.

Viren Mehta, partner, financial services, Ernst and Young says, “No doubt, the banks’ balance sheets is under pressure and they have to find innovative ways to face the situation. There is a need for cheaper resources for the banks and with the help of technology they can penetrate the rural areas for accessing the lower cost deposits.’’

However, Mehta says there’s little clarity on consolidation among public sector banks. Consolidation has to be undertaken carefully, he says.

“There are certain issues that have to be addressed to facilitate consolidation among the public sector banks. Unless we are able to redeploy the excess man power, it would be difficult to opt for any kind of consolidation,’’ he points out.

Summing up, Kapoor says the current situation might be different, but there are no structural issues facing banks.