The Hindu Business Line : ‘Govt encouraging banks to expand overseas’

Mumbai, Nov. 26 Indian banks are being encouraged to expand overseas as well as enter into ‘operational collaborations’ with each other to cope with the kind of challenges that would be thrown up when the second phase of the opening up of the banking sector to foreign competition starts in April 2009.

Mr Pawan Kumar Bansal, Minister of State for Finance, said this at the opening session of the BANCON 2007, the annual bankers conclave organised by Indian Banks’ Association (IBA) and hosted by Bank of Baroda.

Speaking about the need for financial inclusion, the Minister pointed out that only 27 per cent of the population had access to formal credit. About 22 per cent had access to informal credit - but at usurious rates. A full 51 per cent of the population have no access to any form of credit. He urged banks to make an all-out effort to reach out to a wider customer base.

Responding to a plea voiced earlier with regard to the difficulties faced by public sector banks in hiring and retaining top talent, Mr Bansal did not give any assurances but said, “I know the difficulties that you face which call for in-depth discussions.”

Speaking immediately afterwards on the sidelines, Mr Bansal said that the government was moving away from its role as owner to its role as facilitator. He said that Indian banking was on the threshold of exponential growth and that public sector bank boards would decide on the measures to expand their capital base.

Earlier, Mr M.B.N. Rao, Chairman of IBA, made a plea to the Minister to allow Indian banks to go global.

Noting that a number of Indians were holding top positions at top MNC banks, and Indian software companies such as Infosys and i-Flex were providing the software for most banks, he expressed the hope that Indian banks would also follow these examples.

He pointed to the difficulties in retaining talent by pointing out that recently top investment banks such as Goldman Sachs and Merrill Lynch had recruited as many as 45 students from IIM-A.

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