Private sector banks with sound capital have bright future – Usha Thorat

Private sector banks with sound capital have bright future – Usha Thorat

Mangalore Today News Network

Mangalore, Feb 19, 2012: Delivering the Founders Day address at the headquarters of the Karnataka Bank in Mangalore on Feb 18, Ms. Usha Thorat, the former deputy governor of Reserve Bank of India (RBI), said that private sector banks with sound capital base have a great future. 

She further said that the profit of old private sector banks, though almost equal to the public sector banks, is not as high as the new private sector banks. Owing to the competition from new private sector banks, old private sector banks need to take the required steps to meet this competition.

Also the director of the Centre for Advanced Financial Research and Learning, Ms. Thorat was speaking on the topic Challenges and Opportunities of the Old Private Sector Bank.

Speaking of the challenges faced by old private sector banks, she said that the new private sector banks are aggressive with a high market share compared to that of the old banks and are threatening the very existence of old banks.

Citing an example, she said that, during the past 10 years, seven old private sector banks had to be shut down and that, of the 12 new private sector banks set up after 1993, only seven survived. Of the banks that survived, those that were promoted by individuals witnessed muted growth, she added.

Further, she said that the RBI believes that small banks with small capital have failed to survive in India, owing to which a strong capital base is essential for private sector banks, both old and new, to survive. Stating that the rate of growth of the old private sector banks has been good for the last 15 years, she said that it is not as good as the rate of growth of new private sector banks. She said that old banks will, therefore, have to maintain high growth rate in order to continue surviving during this decade. 

Ms. Thorat further said that banks must focus on enhancing coverage in their operational areas to get more customers in order to continue surviving. She also said that old banks must stress on coverage regions that have witnessed high rate of economic growth. They must also attempt to reach out to those areas that have potential for growth, but where the banking service has not been developed. 

Some of her other tips included competitive management, planning and execution, and qualitative staff. Urging small banks to remain small, she said that small business can be good business. 

Delivering the presidential address, Chairman Ananthakrishna said that the bank will remain a private sector bank for the next 100 years as they believe that small is beautiful. 

Ms Thorat also released the Karnataka Bank Gift Card and Travel Card on the occasion.
MD P. Jayaram Bhat delivered the welcome and introductory address.

The bank’s board of directors, former chairman, and senior executives from banks such as IOB, Corporation Bank, Canara Bank, Syndicate Bank, and others were also present.