'Tap services sector'

With the service sector turning into the driving force for economic growth and employment, the Indian banking industry will have to reposition its lending strategies to include the sector, the speakers said at the session on Strategy for Financing Services Sector at FICCI's conference on 'Global Banking: Paradigm Shift'.

M B N Rao, chairman and managing director, Indian Bank said the services sector mostly operated with their own funds. However, they require project finance to prop up the machine, equipment and space and this offered the potential to Indian banks, he said.

At the moment though, banks have restricted themselves to financing IT, BPO and communications, besides agri-lending thanks to government pressure. Opportunities loom large in financing arenas like malls, hotels, marriage halls, hospitals besides education sector, he said.

While ambiguities do persist in the form of unavailability of tangible collateral, discrepancies in valuations of building contracts, shares and scrips, the sector cannot be ignored and banks should devise ways to mitigate the risks, he added.

Further, they can opt for the organised lending route by funding NBFCs and smaller institutions to tap small services like hair dressers, beauticians and internet parlours, he said.

Rao's views were shared by Gerard Binet, deputy managing director, Cardiff and executive committee member BNP Paribas. He spoke on building in innovations like revenue-sharing to service the sector.

Meanwhile T S Bhattacharya, managing director, State Bank of India echoed the sentiments and said innovations will create a financial services category.

Banks should fund private medical facilities in rural and semi-urban areas where there was a demand for such facilities, he said. He added that banks should also woo amusement and theme parks, film makers, tour operators, libraries and transcription agents.