Old private banks asked to step up coverage in areas of operation

 

Mangalore, Feb.18:  Old generation private sector banks, while focusing on their territories and niche business, should enhance their coverage in their areas of operations to source more customers without increasing cost and risk, according to Ms Usha Thorat, former Deputy Governor of the Reserve Bank of India and Director of the Centre for Advanced Financial Research and Learning. Speaking on the theme ‘Old private sector banks in India: Challenges and opportunities' at the 88th Founders' Day celebration of Karnataka Bank Ltd here on Saturday, she said there has been a fairly steady growth in deposits and advances for old private sector banks but their market share has gone down, especially after 2005. “This is most probably due to the aggressive actions by the new private banks to source more customers and offer a whole slew of services to them thereby increasing their value to the bank,” she said. Their strategy should be to capitalise on their strength of knowledge of the region and business to increase the outreach and coverage in their areas which have witnessed very high economic growth in the recent past. More inclusive banking will be good business while keeping concentration risk low, she said. Ms Thorat suggested that there should be a conscious efforts not to get tempted into sensitive sectors that may give higher returns - exotic products that are not very well understood and those that pose higher risk. Equally there should be conscious efforts to see that the liability base is well diversified and on a large retail deposit base, she said. An attempt should be made to move carefully into regions that show good potential for growth and where banking services are not so well developed. Being present largely in areas which have had very high growth has created an enabling environment for the old private sector banks to grow reasonably, but with falling market share. Focus on small ticket loan accounts and increasing outreach will prove to be a good strategy. “Small business can be good business” should perhaps be the slogan going forward, she added.

HBL