Q. Sound and effective banking is critical to healthy economy. How is the banking sector shaping up in India?
A. Banking has come of age in India, however, there is a polar distinction. At the developed end of the spectrum there is intense competition, innovative products and new entrants keen to enter, and high growth. At the other end, a large part of India is still under banked, under serviced and has very poor financial tools available.
Q. How has privatisation impacted the overall banking scenario in India?
A. Public sector banks have also done exceedingly well and some have developed sustainable long-term profitable models in rural areas, which is where the private players are reluctant to enhance their footprints.
I believe, it is a healthy situation with foreign banks bringing world-class servicing standards, large public sector banks with phenomenal reach and profitable private sector banks that have been successful in penetrating segments and expanding the market with excellent service levels and aggressive marketing.
Q. Public sector banks have always been attacked for their non-performing assets and lower productivity compared to private and foreign banks. What reasons do you attribute to it?
A. I would attribute this to the mindset of the public sector banks, the relative poor use of technology and the wrong risk management practices employed. Having said that, India’s growth and position in the world to a large extent is a direct result of the financial support and related risks that the PSU banks in have provided to the Indian industry.
Q. Do you agree that private sector banks today lag behind in terms of quality workforce?
A. I do not agree. Private sector banks have been employing quality staff from leading Indian educational institutions. Public sector banks are increasingly adopting this model. However, there needs to be a mindset change in the PSU banks’ culture to employ and attract more talented youth.
Q. Most private banks like ICICI and Citibank have elaborate grievance redressal mechanism, while public sector banks have more bureaucratic system. Is that one prime reason for customers turning to private banks?
A. To some extent it is true, however, it is not all hunky-dory with private banks as well. As banks become larger institutions, whether public or private, those that invest in technology, trained manpower and in continuous training of their staff, will be gainers.
Q. How do public sector banks fare in terms of customer service, technology adoption, risk management systems and accounting standards?
A. PSU banks are increasingly adopting these standards, albeit at a slower pace than their private sector rivals. Clearly, in banking these are not optional and CEOs know this very well. They are pushing their culture to adopt best practices.
Q. There is a growing realisation that without proactive measures in changing the methodology and content of various HR systems, public sector banks are likely to lose the edge in market.
A. Yes, I do agree that investing in right talent, managing talent, having transparent and rewarding culture is critical to succeed. In a bank, talent is the most critical weapon to effectively compete and hence a large emphasis must be placed on talent.
Q. What lessons can the public sector banks take from their private counterparts?
A. Significantly improving customer services levels, employing technology, attracting quality staff and providing a rewarding career will certainly pay rich dividends to PSU banks. They have the scale and size to compete in India and on the global scale. We do not see an Indian bank in the top 10 global banks but I am certain that will happen by 2020 as India is poised to become the third largest economy in the world and Indian banks will have to carry industry on their shoulders.
Q. There is a perception that private sector banks are more adept than public sector ones to meet requirements of fast-growing corporate India. What are your views?
A. I do not completely agree with this as there are several examples where PSU banks have bailed out large corporations and helped prevent companies from going under, and avoid thousands of job losses. This is a vital role that PSU banks have played, where their private counterparts, either do not have the capacity or the risk appetite. Clearly there are risks in this strategy, but one cannot undermine their vital role. Private banks are more adept in pitching for funding mandates which are extremely attractive and hence they have to compete fiercely to win these mandates.
Q. This is the time of M&As and we have already seen the mergers of HDFC and Times bank, ICICI Bank and Bank of Madurai that have been successful. How do you see the future in terms of mergers and acquisition?
A. I do believe there is a need for the consolidation of banks to compete effectively on the global front. There will always be banks which have a regional and national focus which is a good thing for our developing economy.
The regional banks will support local business houses and SMEs grow and large national banks will bid for mega projects and help support the development of our infrastructure development. There will be new banks exploiting new growth areas as well as evolving needs of customers.
