 "Arundhati Bhattacharya")
Arundhati Bhattacharya, chairman of State Bank of India, country's largest lender, said that she doesn't forsee stiff competition arising with the coming of the new niche banks as they are yet to come up with a business model that can be termed as viable.
"Neither the payment banks nor the small finance banks seem to have as yet devised a business model that can be adjudicated as viable. Mobile customer who is also a customer for payment services will be less free to migrate to a competition for mobile services. Hence it is hard to see payment banks taking away customers or income from commercial banks in a big way. Similar arguments hold for small finance banks," said Bhattacharya.
Read more from our special coverage on "PAYMENTS BANKS"
This is a significant departure from Bhattacharya's earlier stand where she had said that the coming of the payments and the small finance bank will intensify competition so much that it will lead to a "dog eat dog's world".
Last year, the Reserve Bank of India granted an in-principal approval tp 10 payments and ten small finance banks. SBI also has an equity investment of 30% in the payments banks that will be promoted by Reliance Industries.
However, she also added that going ahead banks will see competition from technology firms also, apart from the new banks. And strengthening digital capabilities will be very effective in dealing with competition and for protecting market share.
"Banks that succeed in digital or mobile banking can expect to see increase in low cost float funds. They can also better access and analyse data of customers especially of retail customers and thus reduce NPAs," said Bhattacharya.
She also stressed on the fact that there is not a very significant difference between the performance of the private sector and the public sector banks, as has been perceived.
"This is not really debated in the public domain that the NPAs of private and PSBs have actually boomed almost in tandem with private sector actually showing an increasing amount of NPAs when public sector was down and then subsequently the vice versa that is the public sector NPAs going up when private sector was coming down. So over a longer period you will find that the CAGR was almost equivalent," added Bhattacharya.
She also stressed on the fact that at a time when most of the banks are focusing on retail, select lenders that are driving the growth in infrastructure and project financing should be empowered and not admonished. "We need to empower the banks to do it ( project financing) rather than rap them on their knuckles for having done it."
