The Hindu Business Line : `Cost efficiency to drive bankprofits this year'

COST efficiencies will be the driver of profitability for most banks in the year ahead, according to the Indian Banks' Association Chairman, Mr V. Leeladhar, who is also the CMD of Union Bank of India.

As treasury income, the main driver of profits for banks for the last two years, dries up on interest rates showing no signs of going down further and competition in most businesses peaking, "banks will have to learn to live with lesser margins. Competition will ensure that margins are always under pressure," concurred Mr H.N. Sinor, Chief Executive, IBA, at a press conference held here today to unveil IBA's vision report, `Banking Industry Vision 2010'. Maintaining profitability will not be major concern in the coming year, he assured.

Cost efficiencies will come out of branch rationalisation and lower rentals and this will be the main contributor to profitability, said Mr Leeladhar. For instance, Union Bank has 100-odd branches in Mumbai, which may not all be necessary, he said. He also suggested that a VRS couple of years down the line and new business streams would also help the bottomline.

Along with crystal gazing through the report, IBA has set up a committee to look into desired regulatory changes. All trade-related Acts such as the Negotiable Instruments Act, the Sale of Property Act, the Warehousing Act need to be revamped, said Mr Sinor. "These are all archaic laws created by the British which we have merely amended from time to time. How can banks get into commodities business when warehouse receipts are still not recognised?" he asked.

IBA plans to enumerate the requisite legislative changes and make representations on the same to the Reserve Bank of India.

IBA has already suggested to the RBI that the Chief Vigilance Commission's hold on public sector banks be brought down. Only the board of directors and the general managers should be under its purview, said Mr Leeladhar. Currently all officers from the board of directors up to scale III officers are under its watch.

The vision report, built on the backbone of the Planning Commission's India Vision 2020, urges banks to adopt global standards in capital adequacy, income recognition and provisioning norms.

More Stories on : Insight | Public Sector Banks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Tractor finance scheme for farmers

`Cost efficiency to drive bankprofits this year'

Dollar breaches 1.25 to Euro

Rupee range-bound; G-secs trend lower

Lloyds Finance `fails to repay investors' despite CLB order

Pravasi insurance counters an instant hit

Central Bank lowers PLR to 11 pc

SBT fixes benchmark PLR at 11 per cent

Banking set to turn tech-intensive, fee-dependent

Allahabad Bank too cuts PLR

Banks in Dakshina Kannada register Rs 8,100-cr business