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From Product-Centric to Customer-Centric
Interview with P. K. Gupta, CMD, United Bank of India

What is your assessment of the current situation in the banking industry in India?
Indian Banking system is presently strong and vibrant with its own standing and reputation in the global financial market.  During last 2 years credit growth has out paced the deposit growth in India.  NBFCs, Venture Capital Funds, FDIs and ECBs etc are also increasingly occupying the ‘credit’ space.  The traditional services of collection and remittances are becoming less relevant in view of introduction of CBS/RTGS/ECS and SFMS etc. With the rising yield on securities banks’ investment portfolio is suffering from huge depreciation.  The cost of technology is also pushing operating expenses.  Introduction of New Capital Accord (Basel – II norms) is another challenge for the industry.  The banks are required to maintain increasing quantum of risk-adjusted capital as per the new framework. The banking industry is witnessing the convergence of banking and insurance and other financial services like mutual funds, etc. Technology has enabled the industry to provide innovative products like Anywhere Banking, Tele-banking, and Internet Banking, Web banking, e-banking, etc. Today’s knowledge savvy consumers have forced the banks to re-orient their strategy from product-centric to customer-centric focus with the help of Customer Relation Management in this regime of retail banking having a very high growth potential. Even conservative predictions hold that India will rank among the world’s top five economies by GDP 2025, up from 10th today.  I am sure that Indian banking would play its due role to make it happen.

How do you view the Indian banking sector’s significant progress since nationalisation?
With nationalization of fourteen major banks in 1969 and six banks in 1980, major share of India banking came under the public sector, thereby changing the outlook of these banks from Class banking to Mass banking and from profit oriented to social service oriented banking. In early 1990 the banks in India embarked on a policy of liberalization. This move, along with the rapid growth in the economy, kick started the banking sector in India. This was followed by relaxation in the norms for FDI, where all FIs in banks were given voting rights, which could exceed the then cap of 10%. The new policy has shaken the banking sector in the country. The new wave ushered in a modern techno-savvy outlook leading to retail boom in the country.

Where does Indian banking sector stand compared to international banking sector?
India’s banking sector is growing at a fast pace and India has become one of the most preferred banking destinations in the world.  Indian markets provide growth opportunities, which are unlikely to be matched by the mature banking markets around the world.  Some of the major strengths of the Indian banking industry which have helped it to make a place on the global banking scene, highlighted by the survey respondents were Regulatory Systems, Economic Growth Rate, Technological Advancement, Risk Assessment Systems and Credit Quality. All public sector banks have achieved the minimum capital adequacy of 9% prescribed by Reserve Bank of India, in line with the standards of Basel Committee of Bank of International Settlements (BIS).  RBI has taken various steps to upgrade the soundness of Indian banks.  Size is increasingly becoming important particularly for global banks.  Consolidation in the financial sector has emerged to be the most significant measure required for achieving global competitiveness. Though it is long way to go, the Bankers’ listing shows that India’s largest bank’s asset base is about $126,930 million and positioned itself within the top 100 banks in the world.

What are the key issues facing banking sector today?
Today the banking industry is confronted with a host of issues – such as implementation of New Capital Accord of Basel II norm, Financial inclusion, funding agri-entrepreneurs, credit quality, SME Financing, funding infrastructure growth through innovative instruments, technology for excellence, consolidation and creation of global banks.

Which are the thrust areas for banking sector in India?
As I have already mentioned that recently the credit growth has outpaced the growth of deposit.  Banks’ main thrust area now is resource mobilization at competitive price with an eye to increase the net interest margin. Faster reduction of NPA is another area of attention. Banks are also thriving for alternate source of income from ancillary and allied business to improve its bottom line. Here technology plays an important role to provide innovative products, which have hitherto not been offered by banking industry in India. Risk management is a concern arising from emerging challenges of the Basel II norms.  The banks are exploiting the considerable opportunities available to upgrade risk management system to become more efficient and competitive.  Increase in priority sector lending, particularly to Agriculture and SME sectors are also being given thrust as per Government of India’s policy.

How do you look at the future of Indian banking sector?
Globalisation has led to expansion of international money, capital and securities markets.  Banks role is pivotal in each of these areas.  It is for Indian banks to position themselves competitively in international scenario.  The complexity of operations and sophistication of financial products call for development of new skills and expertise.  However, a combination of factors including regulatory support and technological upgrades will enable Indian banks to achieve their global aspirations.  As domestic and international competition are heating up, banks will have to shift their focus to cost and cost control with efficient use of resources and increase in productivity will determine the winners.

What will be the future strategy of United Bank of India?
Expansion of clientele base is the most important strategy of the Bank. The Bank has a dominant presence in Eastern and North Eastern part of the country with 87% of its branch network there. Expansion of Bank’s branch network to other parts of the country is the Bank’s future strategy to give it a pan-India presence and also to penetrate into business opportunities there, which is yet to be availed. Marketing of Bank’s products and cross selling of the products providing improved and techno savvy customer service and advancement of technology are some of the strategies of the Bank to keep itself competitive in the market. Reduction of non-performing assets, growth of quality assets and increase in non-interest income will continue to remain in focal areas in future too.

What would you advise your customer to be the best way to manage money?
Before any advice to customers we must ensure wide scale awareness amongst the entire cross section of the Bank’s customers about our whole range of products offered to them. Then it becomes much easier for the customers to select the right product according to their respective suitability. The Bank has wide range of retail products both in deposits and loan with intrinsic benefits like insurance (both life and non-life), tax benefits, etc. We also immensely value the customers’ feedbacks and suggestions to improve products and services further. 

What are the steps taken to improve the services of United Bank of India further?
Besides the wide range of innovative retail products offered to the customers, we have taken special drive to improve the branch ambiences to provide a healthy environment necessary to render efficient and more improved services. The Bank is now experimenting with the concept of “United Mitra” by involving the subordinate staff in welcoming the customers in the branch with smile, guiding them to the right desk, helping to get all the required stationary forms, attending their general queries, guiding them in usage of ATM, etc. Thus the “United Mitra” is expected to be the true friend of the visitors of the branch. The Bank has recently rolled out its pilot branches under Core Banking System (CBS), which will go a long way to improve the customer service with speed and accuracy. Efforts are continuing to improve communication skill and developing inter-personal relationship amongst the branch personnel to improve the personal relationship needed for broadening the customer base.

How do you see the banking industry in the year 2010?
The Indian Banking Industry visualizes development of the domestic financial sector into a mature and dynamic industry to function efficiently and effectively as an intermediary, both at the national and international levels. Transparency, Technology and Transformation – these are the three issues on which the Indian banking sector needs to evolve over the coming years. The growth of banking in the coming years is likely to be more qualitative than quantitative. Based on the projections made in “India Vision 2020” prepared by the Planning Commission, the balance sheets of the banks are likely to downsize. The ability to gauge the risks and take appropriate position will be the key to successful banking in the emerging scenario. Banking industry in India is gearing up to face the challenges of 2010 and moving ahead in right direction by building up robust risk management system, evolving good human relation policies, embracing technology, effective communication, excellent inter-personal relations and by adopting creative thinking and innovative methodology.   

Priority sector credit targets have not been met in many cases - what is the reason behind it?   
During the year 2005-06, the Bank’s performance under priority sector lending was quite impressive. The ratio of priority sector lending to net bank credit was 44.5% as against the national target of 40%. The Bank has doubled its disbursal of credit to agriculture sector in two years instead of the stipulated period of three years as directed by the Hon’ble Union Finance Minister for doubling farm credit. The target of lending to sectors, however, is yet to reached. The significant factors standing in the way are current status of rural financial markets depicting low access to small and marginal players engaged in agriculture and small enterprises, particularly in the command areas of our Bank and low credit absorption capacity of those markets. Inadequate infrastructural facilities, and absence of definite forward and backward linkages also have negative impact on the potential for accelerate growth in credit deployment in agri-sector.

What about recent activities of United Bank of India?
All our recent activities revolve around achieving the corporate goal of making the organization techno-savvy, market-driven, customer-centric and professionally competent. On technology front the Bank has implemented its own Virtual Private Network, launched Internet Banking Service – ‘United Online’ and started rolling out of pilot branches under CBS. ‘Mission One Million’ – a strategy for clientele acquisition/expansion has been successfully accomplished.  The Bank has consolidated its position in the North-Eastern part of the country by opening branches in each state capital of eight states and is now planning to open branches in other parts of the country to give the Bank a pan-India presence. As a part of Bank’s efforts to serve all the sections of the society, it complies with the govt. policy in extending and enhancing credit to agriculture and SME sectors.  The Bank received second National Award for Excellence in SSI lending in 2005-06 from the Govt. of India.  Bank has started Financial Inclusion in compliance with Govt. policy to serve those people of the society who were so long been a deprived class.

Any comment on government policy?
The policies of the government are framed in the right spirit and in right direction aiming at fostering economic growth and social development as also removing regional disparities. Banks act as backbone of the country’s economy. It is acting as a catalyst for growth of various sections of the economy and the society in tune with government policies. With the increasing size of branch network the banks are channelising the funds required for priority and other sectors of the economy augmenting scope of employment generation.  With the autonomy bestowed upon them, the public sector banks are now better placed to meet all these expectations more professionally and efficiently.

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