Indian banks must face foreign challenge: minister


Mumbai : The Indian banking sector has to explore alternate ways of generating income to meet challenges thrown up by the entry of foreign banks in the country, Minister of State for Finance Pawan Kumar Bansal said here Monday.

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“Foreign banks have advanced technology, better skilled personnel, better audit and accounting practices and are armed with large capital bases. They are emerging to pose significant challenges to the Indian banking sector,” Bansal said at Bancon 2007, the annual bankers’ gathering in Mumbai.

“The RBI has either received applications or is in talks with a host of foreign banks for licenses to operate in India. The foreign banks are attracted by the idea of servicing a fast-growing economy and the promise of a liberalised scenario in 2009,” he added.

“There is need for inorganic growth, the best way to compete with foreign banks,” he added.

“The government would also encourage banks, besides creating new products and devising new distribution strategies, to find alternative revenue generation streams,” said Bansal while releasing a McKinsey report on “Measurement of Global Competitiveness of Indian Banks”.

The Indian banking sector has registered significant growth in the current fiscal, which has attracted a host of foreign banks to Indian shores, Bansal disclosed.

“The country’s banking sector has registered exception growth in the credit-deposit ratio, which has shown an improvement of 74 percent in 2006-07 from 53.1 percent in 2000-01, while it has registered a 23.3 percent credit growth in the current fiscal,” the minister said.