A shake-out is imminent in the co-operative banking sector, feels Shashikant Bugde, managing director of the Pune-based Cosmos Co-operative Bank Ltd.
As mergers become the norm, jobs become scarce, the Reserve Bank tightens screws, there will be pressure on margins and the environment will turn competitive, says Bugde, managing director of one of the biggest co-operative sector banks in the country.
Bugde gave a run down on the prospects of the sector and Cosmos' plans to meet anticipated challenges. "The prognosis for most in the sector may not be so good, but those who survive, the slaughter will emerge bigger and stronger and give commercial banks a run for their money," he felt.
Bugde said service levels will improve like never before, more products will be available across the counter and the customer will be king.
"We cannot continue to run scared of technology. People are going to compare and shift their business elsewhere if we are found wanting," he said.
The 96-year-old bank has tied up with Infosys Technologies for introducing a tailor-made Rs 15 crore software package in its branches as a decisive step towards harnessing new technology and hopes to be able to offer anywhere banking when it achieves full connectivity by December 2002.
"After connectivity and further improving our service levels we will be at par with private banks," Bugde said. On the sidelines of the talk, he disclosed that Cosmos already has an arrangement with HDFC Bank for sharing ATM facilities and after full connectivity will be offering the same from all its branches for HDFC customers. Bugde said once co-operative banks upgrade their standards up to the mark of new generation private banks, they will present a unique opportunity to these very banks for increasing their market presence.
"There will be sharing of infrastructure and competing bank networks will go hand in hand," he observed adding that there will be "real cooperation between banks and it will all benefit the customer".
Cosmos operates through 39 branches in Maharashtra, Gujarat, Karnataka, Andhra Pradesh and Madhya Pradesh and will soon be opening three more branches at Pashan (Pune), Bandra and Chembur (Mumbai).
"We are holding licences for opening these three branches and also later plan to open one at Chennai," said Bugde.
Describing 2000-01 as a tumultuous year for the co-operative banking sector due to the Madhavpura scam and consequent increase in control levels by the RBI, Bugde said Cosmos could isolate itself as even though it opened its Surat branch in the middle of the upheaval, it managed to overachieve the targeted Rs 10 crore of business.
"It showed that people still repose trust in institutions of good standing and have not completely given up on co-operative banks," he said. Cosmos intends closing the year with 28 per cent growth in business at around Rs. 3,200 crore.
Bugde said the bank was planning for the future and though it boasted of a trim organisation with 1,300 employees (business per employee at Rs 2.5 crore), it was alert towards new management practices. "We believe only professional set-ups will survive and as people become more demanding, more professionalism will have to be applied," he said.
Bugde said, Cosmos Bank was also in the race for offering insurance products across its counters. "We are negotiating with Bajaj Allianz and Reliance and have planned for a separate counter in every branch for life and general insurance services," he said.
He said public sector general insurance companies, Oriental and New India Assurance had also approached Cosmos Bank for retailing their products.
Bugde said the bank was searching for new avenues for doing business. "We have even gone to the extent of offering our services to smaller co-operative banks for handling their investment portfolios," he disclosed. Bugde said, following RBI's directions, liquidity had to be converted into government securities and many banks did not have either the infrastructure or the expertise of doing so. "We are offering our skills to 40 banks in Maharashtra and tutoring them on how to purchase government securities, how long to hold and when to sell and make a killing," he said.
Bugde said other private banks were also providing the same service, but were not very keen in educating smaller co-operative banks. Cosmos Bank's way of working was appreciated at Aurangabad recently when a cluster of 15 co-operative banks chose it to handle their money over ICICI Bank and HDFC Bank. "We have already placed Rs 30 crore for them in less than a week. The amount will go up further," said Bugde.
