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| CANARA BANK | |||||||
| Basel II: Another Key Challenge | Interview with MBN Rao, CMD,
Canara Bank |
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What is your assessment of the current situation in the banking industry in India? The present banking environment have
several positive features to its credit, thanks to the path breaking
and market led policy initiatives and more importantly, the proactive
role played by the banking entities. Sound regulatory environment
coupled with prudent risk management has been responsible for making
Indian banking resilient to both internal and external shocks.
With the adoption of global best practices, Indian Banks have
reinvented their core competence and have avoided the recent financial
turmoil. Banks are doing exceedingly well under core business as
well as earnings. The major feature relates to the increasing
application of IT in banks have immensely helped streamlining the
payment and settlement system. As Indian economy is poised to
sustain its growth, Indian banking sector is well placed to experience
robust growth in the coming years. The banking industry in India is
relatively better placed to gain from the competition, consolidation
and convergence in post-Basel II and Post 2009 scenario.
How do you view the Indian banking sector’s significant progress since nationalization? Post Nationalization, the spread of
branch network saw rapid expansion. Nationalization of banks gave way
to the balanced disbursal of credit with adequate thrust on the
priority sectors. Apart from this, Clientele base of the banks recorded
a significant growth. In 1991, the introduction of financial sector
reforms have significantly strengthened the commercial banking sector
in terms of profitability, asset quality and bottom-line growth.
Several balance sheet and profitability indicators of the Indian
Banking sector have inched closer to the global benchmarks. Adoption of
international best practices in several crucial areas of importance,
such as, prudential norms, banking supervision, data dissemination and
corporate governance have collectively enhanced the resilience of the
banking system.
Where does Indian banking sector stands compared to the international banking sector? Indian Banking sector has grown manifold
not only in terms of balance sheet size but also in profitability and
efficiency matrix. Sound regulatory and supervisory systems along with
a well calibrated reform process have transformed the financial sector
in the country to match with global financial system. The adoption of
international best practices, such as, KYC and AML norms, fair
practices for customers and various prudential norms– income
recognition and asset classification have further strengthened the
banking sector in India. Its sound footing and strong fundamentals are
now comparable with the best in the world.
What are the key issues facing banking sector today? The world is experiencing an increased
level of globalization and openness, facilitated by fast development of
Information and Communication Technology. One of the major issues
associated with the banking system is that many banks are small in size
and limited geographic presence. If the financial system has to be
resilient to the foreign competition, Indian banks need to grow in to
match with global size and stature. This requires the consolidation
among banks. Three factors, which are increasingly going to shape
Indian banking sector are competition, consolidation and convergence.
These apart, prevalence of unorganized financial structure and also
large-scale financial exclusion has significantly affected the growth
of the banks and the economy. This is going to unlock growth potential
in the coming years.
Which are the thrust areas for banking in India? The banking, being a service-oriented
business, has been experiencing a continuous change, ushered in by the
advent of information technology and innovations at the products/
services level. Competition in the banking industry will further
intensify with the entry of foreign banks post 2009. Strengthening the
financial sector through mergers and acquisitions (M&As),
technology upgradation and human resource management will be the most
vital areas of for the banking industry in India. Making a smooth
switchover to the Basel II framework from March 2008 is another key
challenge for banking sector in the country.
How do you look at the future of Indian banking sector? Banking industry in India has undergone
significant changes in the recent past, especially after the initiation
of the reform process in 1991. Many of the Indian banks have succeeded
in expanding and upgrading the financial services through the
introduction of tech-enabled services, advanced delivery channels and
innovative financial products. Competition from foreign banks is
expected to intensify with increasing diversification and
specialization in financial services, especially post 2009. Pressure
for operating on a thinner spread and enhanced operational efficiency
is emerging as the new banking order post 2009, with expected forays
into highly competitive foreign market.
What will be the future strategy of Canara Bank? For the last two financials FY06 and
FY07 have seen Canara Bank retaining its number one status among the
nationalized banks in terms of aggregate business. The Bank has the
necessary wherewithal and business strategies in place to continue its
position in future also. To emerge as a strong ‘financial
conglomerate’, the Bank has recently formed Joint Ventures in Insurance
and Asset Management segments with global majors as partners. In
pursuit of global aspirations, the Bank has moved a step closer to its
overseas expansion drive, with the permission by RBI for commissioning
of 5 branches obtained out of 21 international centers identified for
expansion in the medium term. Recently, the Bank has launched new
brand identity to position itself as a value creator and further
reinforce it image as a customer centric bank. The change in the
external outlook has been supplemented by a host of internal changes-
organizational restructuring and reorientation in terms of people,
technology and business process to sustain growth. Going forward, the
Bank will successfully explore new opportunities to position itself as
a global bank with best practices.
What would you advise your customer to be the best way to manage money? Canara Bank offers a wide range of
products and services for wealth management. With the peaked
interest rate scenario, the term deposits will be an attractive option
for the savers. The Bank offers several special deposit schemes
including SB Gold Scheme, Can Premium Current Account Scheme and
others, which assures higher returns for the customers/ Savers.
The Bank also cross-sells Mutual Funds and insurance products as part
of the total financial solution.
What are you doing about improvement of the service of Canara Bank? Canara Bank stands as a premier
financial service provider in India with strong fundamentals and
customer centric ethos. Canara Bank has significantly increased its
delivery channels through over 1680 ATMs across the country for
customer convenience. A significant number of the Bank’s branches are
also offering internet and mobile banking and advanced payment system
like RTGS and NEFT. The Bank is making all out efforts to bring a
larger number of branches under Core Banking mode, for creating new
revenue streams and enhancing operational efficiency. By end March
2008, about 1000 branches will be CBS enabled. Our current
initiatives have been the introduction of Mobile ATMs, Bio-metric ATMs,
e-Kiosks in rural areas. Canara Bank has already made several moves in
the realm of total financial inclusion and most of our financial
inclusion related initiatives are going to be technology driven for
deeper and cost effective outreach to the un-banked and under-banked
segments.
How do you see the Banking industry in 2010? While the future policy initiatives are
expected to ensure greater strength and stability in the system, a
major part of the initiatives will be with an eye on progressive
globalization of the economy. By 2010, the banking landscape is
expected to witness significant changes for two important reasons. The
implementation of Basel II capital accord will strengthen risk
management systems of the banks. Further, intensification of the
competition in the banking sector is likely to increase competency
levels of banks and bring about transformation in the business of
banking in terms of greater breadth of products, depth in delivery
channels and efficiency in operations.
Priority Sector Credit targets have not been met in many cases… What is the reason behind it? In sync with the policy focus on
productive segments, the Bank has laid its utmost thrust on priority
sector credit including most desirable segments of the
economy-agriculture, SMEs, weaker sections and marginal farmers. The
Bank’s performance under priority sector has been very good.
Outstanding priority sector advances of the Bank as at March 2007
recorded a year-on-year growth of 22%. Priority sector advances formed
40.21% of the Bank’s net credit. During the first half year of FY 08,
the Bank has recorded a year-on-year growth of 25% in priority sector
advances covering 30 lakh borrowers. It also covered 12 of its 24
lead districts under total financial inclusion.
What about recent initiatives of Canara Bank? Canara Bank has introduced a host of
customer friendly initiatives in the recent time. Most recently, Canara
Bank along with HSBC (Asia Pacific) Holdings and Oriental Bank of
Commerce has formed a Joint Venture Company in Life Insurance segment.
Similarly in Asset Management, Canara Bank has formed a Joint Venture
with internationally acclaimed Robeco Groep N.V. for asset management.
The customers of the Bank have the privilege of availing of the benefit
of world class sophisticated products under Life Insurance as well as
Mutual Funds. With the launching of new brand identity, Canara
Bank will emerge more proactive in making its presence across clientele
and business segments for a sustained growth.
Any comments on Government policy? The reform process undertaken by the
Government of India has changed the face of Indian banking environment.
The policy initiatives have helped many banks to gain operational
efficiency, diversified earnings profile, accounting standards,
application of technology and augmented profit pool. More
importantly, the competency levels have increased and most of the banks
with the adoption of best practices have achieved stable top-line and
bottom-line growth. Reforms in the financial sector, with the
cautious and calibrated regulatory approach adopted by the RBI, have
helped the banks in India become more resilient and
stronger.
Have you any observation on any other issues? Future of Indian banking sector is going
to be increasingly shaped by competition, consolidation and
convergence. These forces will augment efficiency level and
reduce intermediation cost for the benefit of customers, with
introduction of product sophistication, wealth management and
relationship banking. Banking will be more tech-savvy and
experience seamless expansion of branchless banking, with a large
coverage of hitherto under-banked and un-banked population.
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| RNI No.
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