Grow inorganically to compete: Bansal

Pawan Kumar Bansal, minister of state for finance, today said Indian banks will have to continuously acquire and adapt themselves to best global practice in major areas like risk management, information technology effectiveness, customer service and development of human talent to face the challenge from global banks.

He emphasised that there is empirical cross-country evidence to indicate that inorganic growth is one of the best ways to compete with large-sized global banks.

He assured the banking sector that the government would continue to invest in infrastructure, financial sector liberalisation in consultation with all stakeholders to ensure that Indian banks are well equipped to compete with best in the world while not losing sight of the financial excluded.

Bansal added that to enable Indian banks to compete with their counterparts globally, banks are being encouraged to expand overseas as part of their long term strategic planning. the government is also facilitating operational collaboration between banks, and recently many banks have done so.

Some of these collaborations aim to enter new lines of business like insurance. Insurance companies are also tying up with banks to benefit from their branch network.

Implementation of Basel II, Bansal said, will be a major milestone in the journey of our banking industry.

"Recognising this, the government and Reserve Bank of India are continuously exploring necessary measures to facilitate capital raising by banks, especially the public sector banks,'' added Bansal.

He reteriated that banks would also have to work towards financial inclusion. "Higher level of sustainable development requires increasing absorption of India's rural masses into the mainstream banking activities. The banking sector has to make an all out effort to increase penetration to reach out to a wider customer base from rural areas,'' said Bansal.

"Delivering superior customer service is a key challenge for Indian banks to attract newer and younger customers and retain the old and loyal customers by effectively deploying newly operational systems. Banks will have to acquire new ways to manage customer relations as they will have to compete with global players who have well maintained customer databases,'' emphasised Bansal.