Column : Trusting state banks

Font Size

Print

Feedback

Email

Discuss

: also dictate their terms. To deal with this heavy demand PSU banks led by SBI have further raised their deposit rates and so the rush to them has intensified. This increase is despite the cut in CRR and Repo rate by the RBI. Of course life is not all easy. In an election year, and with all this turmoil, there are many pressures on them. Every sector is petitioning the finance minister to get these banks to lend to them. It is not just the strong groups that are doing the petitioning—the SME sector, the real estate sector, the NBFCs, and the list goes on, all want credit. PSU banks will need to walk the tightrope between supporting the economy and retaining healthy balance sheets.

Despite this, in my view, the greatest risk for PSU banks is to believe these times will become permanent and therefore get complacent. For the past ten years PSU banks have been under tremendous competitive pressure and most of them have reacted by improving their game. By any metric—profitability, bad loans, employee productivity, customer service and technology use—they have vastly improved.

This is not the time for complacence though. The crisis constrains their important foreign competitors and provides an opportunity for them to come out stronger than before. The current gains on account of a flight to safety need to be consolidated by improved customer orientation.

When the crisis abates, less anxious customers will again seek the best service. PSU banks should gear up so that their new customers stay with them because of the quality of their service and not the fear that others will fail.