In a discussion on consolidation in banking sector with CNBC-TV18, industry expert AK Purwar said consolidation is key for the industry. "Banks at the helm must flex their muscles and they must acquire their poorer cousins who are not so well managed," Purwar said. Such mergers result in better management of smaller banks, he said.
Veteran banking experts believe a serious NPA problem cannot be bilaterally solved by bankers and borrowers, it has to have major policy support from the government, the RBI and the administration.
Rajiv Lall, MD & CEO of IDFC Bank said that about 45 percent of the outstanding credit of banking system is only to 300 corporates. About 60 percent of household savings are not in banks and hence there is a lot of opportunity to reach out to customers.
Broadly there seems to be four categories of tasks which the new RBI governor will have to look at. One is bringing inflation to 4 perfect. Two, would be keeping the rupee stable, while ensuring liquidity for growth. Three would be cleaning up bank balancesheets and fourth would be meeting the payments, digital and inclusion revolution.
M Damodaran, Former Chairman, Sebi says the problem with public sector banks has been the perceived lack of empowerment, backseat driving, remote control, inappropriate selection process over the last several years. Those problems can be fixed without tinkering with the structure, he says.
A bank union has suggested to Prime Minister Narendra Modi that banking sector reforms should focus on the objectives of bank nationalisation and initiate stringent measures for recovery of bad loans.
"Having short tenure stands to be a major problem for banks that may be not remedied in the near-term, " says AK Purwar who once served as chairman of SBI.
AK Purwar, former chairman of State Bank of India and industry expert feels this time the focus could be on organisations which can work for financial inclusion and highly specialized institutions focusing on infrastructure, healthcare education, services sector, among others.
The unchanged CRR, SLR norms, which are stringently set by RBI, will weed out non-serious players in the race to get new bank licence.
At long last the banking sector has been opened to the big guns of corporate India. The Budget has had only a day's impact on the market. But the release of final rules on how new bank licenses will be issued will have a longer lasting impact on the economy and financial sector.
CNBC-TV18’s Latha Venkatesh talks to V Vaidyanathan, Vice Chairman & Managing Director of Future Capital and Ak Purwar, industry expert to get their reaction and talk about the effect of the Draft Guidelines for licensing of new banks in the private sector.
Banks should not own mutual funds or insurance companies as subsidiaries. Instead, an RBI panel has recommended that financial conglomerates be structured so that a holding company is created with 3 distinct arms - the bank, the insurance company, and the mutual fund.
Banking sector veteran AK Purwar believes the pressure on margins for banks could be short-lived. "In the medium-term and the long-term, the banks will see to it that the margins are protected and maintained," he feels.