Finance minister Pranab Mukherjee struck a bullish note on Saturday to tell Indian banks this is the year to push for growth and expansion. In his first major speech in India?s commercial capital after presenting the Budget in Parliament in July, the minister told the packed house of financial sector and corporate leaders at the FE India?s Best Banks Awards on Saturday, ?Look for new opportunities?.
Mukherjee said Indian banks are well poised to take the chances coming their way. Without going into specifics, the minister struck the right chord with the expectations of bankers and industrialists, who all said domestic banks must expand their footprint to become globally effective. He spelt out the government?s position that the economy has been able to weather the global slowdown and, therefore, it was the right environment for the banks to expand their role. ?We have noted that better-then-expected GDP numbers for the financial year 2008-09 improved the sentiments in the market and industrial production is showing improved performance in the last two months of the current financial year.?
The minister was, therefore, sure this was the time for banks to move up a gear. ?It is often said that testing times bring out the best in a person and in an entity. Banks should look for new opportunities during these times.?
The finance minister has timed his direction to the bankers very appropriately, just two days ahead of the announcement of the annual credit policy of the RBI. This will be read with the policy direction that RBI gives to the banks for the year, as the economy showing signs that it has come back on the path of the recovery.
The government has already lined up a series of steps to push for growth of the domestic banks. In Budget 2009-10, Mukherjee indicated that public sector entities will tap the equities market to finance their expansion plans. SBI?s plans to merge State Bank of Indore is on the finance minister?s table for approval. Mukherjee will reply to the debate on the Finance Bill in Parliament on Monday.
All bank chiefs present in full attendance at the FE annual event,therefore, weighed the minister?s comments carefully in the context of the upcoming policy. SBI chairman OP Bhatt, who is also the winner of the banker of the year award, was clear about expansion. ?There is a need for more than three or even four banks of the size of SBI to develop?, he said speaking at the panel discussion, later in the evening.
Chanda Kochhar, managing director, ICICI Bank said banks have moved up the learning curve. ?We feel there will definitely be recovery in the banking industry. If the economy has to grow at anywhere near 8%, the banking industry has to grow at thrice that rate to sustain it?.
The finance minister said opportunities can be developed by improving the ?operational effectiveness? of the banks. This ?could help them to meet the challenges of the future which is still uncertain. By now, our banks are equipped to handle both, the social obligations and commercial banking with equal aplomb?. He said ?the global turmoil was due to large stressed assets which affected the strength of the system as a whole. Under Basel II regime,capital and risk management are quite critical for the banks. The banks have to fine-tune their risk management system to save of their capital. Profitability, growth and efficiency are also important for the banking system. In all these parameters, banks require meticulous planning, dedication to work and implementation of the ideas.? Congratulating the winners for their ?hard work and dedication?, Mukherjee said this was the way to not only improve their efficiency, but also ?offer healthy competition to the winners which will definitely improve the overall performance and the efficiency of the system as a whole and do well to maintain the financial stability.?