Reliance Bank will challenge Public Sector Banks

The announcement by the Reliance group to enter banking sector has made ripples among the staff and officers of the Public sector Banks. They believe that their entry will make a change in Indian Banking industry to move the people away from Public Sector Banks ultimately resulting in losses and closure of PSBs. This amounts to the reversal of Nationalisation Policy. In 1969 the banks in India were nationalised. The state control over the banking sector has helped the government to run the economy. More social upliftment programme were implemented through public sector Banks. A decade back Reserve bank of India granted new licenses for banking. Under liberalisation and globalisation more private players and international banks have jumped in the huge Indian market. There is resentment among public that the public sector banks are not providing efficient services. It is alleged that the Banks discriminate between low value and high value banking customers. They provide loan facilities only to asset holders ignoring the meritorious entrepreneurs. Even the educational loans are not provided to eligible persons. But the bank officers feel that they are indeed doing a good service considering the work load imposed on them. With the introduction of private banking there should be stiff competition to improve service. But it has not happened in the past. The private banks have become elite banks by charging more with the affordable sections of the people. This has resulted in hijacking the high value customers to Private banks. But public sector banks were not much affected since there is still more space for them in the huge market. They enjoy a near monopoly among the middle class people. Now India is having 27 PSBs 22 Private Banks and 31 Foreign banks. This number may be misleading. At present most of the customers are with PSBs. A news is spread that the RBI plans for greater competition in banking sector to widen the availability of banking services to rural India which has little or no access to formal loans and saving facilities. This is to prepare grounds for allowing more private banks. There is always a lobby in the government to encourage Private sector and discourage Public sector enterprises. Some ministers tried to sell profit making PSUs. Now if rural services are to be enhanced it can be done by expanding financial services through Post offices which have a wider network and establishment in India. Some initiatives in this direction were introduced by former telecom minister A,Raja. But such moves are not continued. The big news now is that Anil Ambani’s financial services group Reliance Capital is to start a New Bank. This NBFC worth of n Rs. 8,000 crore is involved in mutual funds, pension funds, insurance, corporate finance, broking and portfolio management. They have already built an empire of 2 crore customers and 8,000 offices with a staff strength of over 18,000 people. Therefore their entry in Banking is already half completed. Whatever may be arguments for and against the Private Banks, the entry of Reliance in Banking is a welcome step. The Government should take necessary measures to protect the interests of PSBs by preventing unfair means by private players in promoting business in this sector . The people trust is with PSBs. At the same time Reliance have also developed a trust among investors. The real competition is set to unfold. 

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