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| ANDHRA BANK | |||||||||||||||||||||||
| Still
Retain Almost 3/4 of the Market Share |
Interview with Kalyan Mukherjee, Executive Director, Andhra Bank | ||||||||||||||||||||||
What is your assessment
of the current situation in the banking industry in India?
Currently, banking industry in India is
on a robust growth path. Asset quality is high as evidenced by the very
low Non-performing assets in the Indian banking industry. The fact that
we have been largely immune to the global turbulences such as the
subprime crises is itself an evidence of our robustness. Adherence to
the systems and standard operating procedures and stringent compliance
to regulations resulted in the robustness discussed above. During the
past decade, especially since liberalisaion, we have progressed leaps
and bounds in technology adoption and its adaptation to the changing
needs. Currently, most banks are on course to rolling over to core
banking platforms. Our banks are also well equipped to deal with
challenges posed by Basel-II since most banks possess capital adequacy
ratios well above the norm of 9%. Many of our banks have also emerged
as global players over the past decade. Hence, I would say that Indian
banking industry is well poised to taken on any future challenges as
well as the stated competition from other players.
How do you view the Indian banking sector’s significant progress since nationalisation? Nationalisation of the Indian banks have
helped in achieving the socio-economic objective of extending the arms
of banking to the rural and unbanked sections to a great extent. The
Public Sector Banks have played a major role in this regard by setting
up vast branch networks in rural and semi-urban areas for banking
services. It is significant that even after private and foreign banks
have arrived, public sector banks still retain almost three fourths of
the market share. Even as of now, Indian banks, especially Public
Sector banks are working towards total financial inclusion. However,
the banking penetration in India is still not at the optimum level. The
credit-GDP ratio, for instance, in India is only 45-50% while for China
it is more than 100%. Around 50 percent are still outside the purview
of the banking sector. Hence, though significant strides have been
achieved since nationalisation, it needs to be carried forward with the
same vigour to ensure that the benefits of banking is extended to all
sections of the society. Hence, the need for financial inclusion as
discussed above.
Where does Indian banking sector stand compared to international banking sector? Indian banking sector is fast achieving
scale, with many of the Indian banks setting up offices and branches
abroad. However, there are no Indian banks among the top ten global
banks. Hence, Indian banks are yet to emerge as powerful players in the
global financial scene, though significant progress in that direction
is being achieved rapidly.
However, in terms of best practices, we
are at par with any of our global counterparts. The absence of exposure
to the risky Collateralised Loan markets in the U.S is a case in point.
Such robust best practices assured us immunity from major global crises
even in the past. The Asian financial crisis is a case in point. Thus,
I would say that while in scale, we have a long way to go our
compliance with best banking practices are the best in the world. It is
relevant to submit here that while financial giants like Societe
General and Citi Group suffered heavy losses, there was no bearing on
us and we emerged unscathed from the turbulence.
What are the key issues facing the banking sector today? Today, banks in India are faced with
several issues, which may impact significantly on their operational and
financial performance, if not addressed in the right earnest. Some of
the vital issues are:
Which are the thrust
areas for banking sector in India?
There are several areas which require focus for the Indian banking system, of for that matter, banking industry anywhere across the globe. However, the thrust areas for the banking sector in India would be:
Banking industry in India has played a
significant role in financial intermediation since independence and has
played a vital role in contributing to the high GDP growth rate
witnessed by our economy. In the future, banking will become even more
decisive in order to sustain the growth rate. Banking will also see a
transition to newer areas and customised products geared to meet the
needs of the customer. Wealth management, portfolio management, risk
management, etc. are already undertaken by some banks. Banks have also
entered into areas like life insurance to increase market share and
garner more fee-based income. Thus banking activity is significantly
increasing in scope and it will be so in the future as well.
What will be the future strategy of Andhra Bank? Our immediate objective is to achieve a
transition from a mid sized bank at present to a large bank by
achieving more than 120,000 crore of business by 2009. For this, we are
planning branch expansion all over India and customising products to
suit the changing needs of the customers. Technology is yet another
area that we are focusing. We have already initiated the rollover to
Centralised Core Banking Solution. Yet another focus area would be to
go global we have a Representative Office at Dubai and got approval
from New Jersey state in U.S. to start a Representative Office there.
We have also formed an insurance joint venture with Legal and General,
U.K. and Bank of Baroda. More such initiatives are on the anvil.
Capital adequacy issues are also taken care of. However, we have enough
headroom for raising capital which will boost the CRAR further. These
are some of the future strategies of our bank.
What would you advise your customer to be the best way to manage the money? Though I may sound a bit conservative, I
would advise the customer that bank deposits must constitute a
significant share of their savings portfolio. This is because of its
inherent character of safety as well as immunity from huge volatilities
seen in equity markets and mutual fund returns. Nowadays, banks have
also ventured to offer portfolio and wealth management services to
customers. Hence, customers can avail of such services as well.
What are you doing about improvement of the services of Andhra Bank? As mentioned earlier, we have already
initiated the rollover to centralised core banking platform, which will
make banking hassle free for the customer. We have also introduced a
slew of products like, Biometric and Mobile ATMs, AB Kiddy Bank scheme,
AB-Quick (booking air tickets of Kingfisher Airlines through bank’s
debit/ATM Card or any Visa Card), AB e-Rail ticket facility (general
public can reserve train tickets through internet with debit cards,
educational loans etc. In fact, educational loans are one area where we
are active in a big way.
Financial
inclusion is yet another area where we are actively focusing our
attention on. We have already achieved 100% inclusion in Srikakulam in
A.P. and Ganjam district in Orissa. I would like to reiterate the
commitment of our bank to all the stakeholders and towards good
corporate governance. Further, we would like to take financial
decisions keeping in view ‘the concept of Corporate Social
Responsibility’. Our motto would be achieving a steady steam of
profits, without compromising on ‘customer satisfaction’ and the
interests of our stakeholders and handling quality assets.
How do you see the banking industry in the year 2020? Banking industry has been witnessing a
compounded growth rate of more than 20% during the past decade and the
trend is likely to continue in the future as well. It is estimated by
leading think tanks like Goldman Sachs and McKinsey that the per capita
income would also increase significantly in the future. A significant
share of this would find its way into bank deposits. Moreover, banking
transactions will also increase. One significant development would be
emergence of the customers in the age bracket of 25-40 by 2020. Hence,
banks will have to customise their products to suit these segments. The
banking sector in India will be a mix of public sector, private sector
as well as foreign banks. Customers will be offered a whole range of
banking products to choose from. Banks will also enter newer, niche
segments to sustain market share. Customer Relationship Management will
become more relevant since there will be a host of players to suit
products according to customer needs. Those banks which are able to
differentiate their products relative to the other banks will emerge as
the most successful ones.
Priority sector credit targets have not been met in many cases. What is the reason behind it? Regarding Andhra Bank, I can say that we
have met all our priority sector targets. This is because; we are
wedded to social commitment, while maintaining a steady stream of
profits. However, we are further expanding our reach in terms of
offering banking services so that we can attain our priority sector
targets well above the levels at present.
What about recent activities of Andhra Bank? During the past one year, we have
launched a slew of new products and services such as Mobile ATM,
Biometric ATM, e-Rail ticket facility (general public can reserve train
tickets through internet with debit cards), AB Kiddy Bank scheme,
AB-Quick (booking air tickets of Kingfisher Airlines through bank’s
debit/ATM Card or any Visa card) etc. During the current financial
year, we have entered into Joint Ventures with LG and Bank of Baroda
for life insurance business. Among banks having ‘Corporate Agency’ with
LIC of India, our bank stood at the No.1 position with the maximum in
premium income from bancassurance for the first half of the current
financial year. One of our major achievements recently is the approval
we got for opening a Representative Office in the state of ‘New Jersey’
from the New Jersey Dept of banking, USA. These are some of our recent
activities that I wish to highlight. I would also like to state that we
are well on course to meet Basel-II preparedness.
Any comments on government policy? Nationalisation has enabled us to reach
out to the masses in a big way. The government has been initiating
measures aimed at granting more autonomy to banks though gradually. I
would like to state that these need to be carried forward.
Have you any observation on any other issues? I would like to add a few more points
about our bank. I am happy to mention that we are the pioneers in many
fronts. We were the first to start ‘banking on wheels’ where banking
services are extended at the doorsteps of the people in unbanked and
under-banked areas. We also the pioneered ‘credit cards’ among banks in
India. We are also the first public sector bank to successfully
implement the idea of ‘client relationship officers’. ‘Biometric ATM’
and ‘Mobile ATM’ are the other facilities launched by Andhra Bank,
where we are front runners. We also took the initiate in implementing
‘single window system’ in banks. Other major areas where we are leaders
include deposit linked housing loan scheme and savings bank accounts
with accident insurance facility and Life Insurance facility. As
discussed earlier, we have also tied up with Legal and General and Bank
or Baroda for our insurance foray.
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