Monday, March 15, 2010

New New Private Sector Banks

The immediate previous experience of new Private Sector Banks in 1993-95 is mixed; Times Bank, Bank of Punjab, Centurion Bank - all got merged in HDFC Bank; while Global Trust Bank failed and was forced to merge with the well run PSB - Oriental Bank of Commerce. ICICI Bank (reverse merged with parent ICICI) has been hitting headlines now and then for right or wrong reasons. UTI Bank withstood the shake up in its parent UTI and was re-named as AXIS Bank. IDBI Bank was slow starter in aggressive banking, also got reverse-merged with its parent IDBI and is actively campaigning for Retail Banking. The recent entrants Kotak Mahindra (NBFC converted) and Yes Banks are steady, compliant with all regulations and are growing in all spheres. IndusInd Bank is not being heard in a big way but okay. All these new generation banks had the advantage of starting with clean slate during reforms era; but still struggling.

Amidst this stiff competition from PSBs and old/new Private Banks, it is interesting to watch some more new Private Banks coming up. Has the Govt or RBI have in mind any big industrial houses to start these new banks? The principle of original nationalisations in 1969 and 1980 were to take banking in to grass roots level with huge branch expansion; but loan melas and debt write-offs and expansion of operations without mechanisation lead to chaos in the banking system. This was the primary cause for reforms in banking system in early nineties. Nearly twenty years are over, almost all the banks have set right their Balance Sheets, adopt ALM and Risk Management, follow Corporate Governance policies, concentrate on productivity and profitability as also keen for Financial Inclusion and Micro Credit. However, another experiment by the GOI of opening five Local Area Banks was also aborted (with one already closed) because the experience is not encouraging.  Strangely, the same Govt / RBI are making noise in last four years about Financial Inclusion!

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