The recent global turmoil is endlessly spiraling towards nowhere! The economists can not predict it, the politicians and “policy makers” can not control it, and the people can not see it nearing an end. But somewhere in Asia, or precisely in India a welcome change has arrived. Its the rise of the public-sector units, especially in banking and finance sector that are booking profits, hiring and investing in technology (while others are begging for mercy). How is it all happening? Let’s check that out.
The public-sector banks have been long perceived in India as belonging to government. During the financial crisis, the deposit rate in the public sector banks rose astoundingly, hitting foreign banks even badly. In a recent survey by Reserve Bank of India (RBI), it was revealed that in fiscal year 2008, the deposits at public-sector banks grew by 24.1%, that in private sector by modest 8% and in foreign banks by 7.8%. The sharp contrast was more than visible because, during fiscal year 2007, the growth rate for foreign banks was 29.1%, for private sector banks was 19.9% and for public-sector banks, it was grossly unchanged. It can be argued though that the policies in India are lot conservative for foreign banks, stinting their growth mechanism, but in entirety they are actually facing the aftermath of what happened with Goldman Sachs and Lehman brothers alike.
Image courtesy: http://shssonirika.com/
The superb performance of public sector banks is not just the virtue of collapse of foreign and private players, but also smarter use of investments in technology and manpower by them. In year 2009-10, it is expected that PSU banks will hire up to 30,000 people in contrast to the downsizing moves undertaken by the rest. O.P. Bhatt, Chairman of State Bank of India (SBI), says that it would be an understatement because SBI alone will hire 25000! It turns out that the students from leading management institutes, IIMs, are dumping traditional hirer like, Goldman Sachs and Lehmann Brothers over Union Bank of India and Bank of Baroda. That’s not over yet! The advertisement expenditures have gone up in financial sector by 66%. Its partially also because of the dire need to present cleaner image in front of people, that the banks have gone to that extent.
Some analysts have criticized public-sector units of being overtly conservative in lending and saving rates, and also RBI’s policies that dampen the growth of foreign banks on Indian soil. For example, any foreign bank can not still set up fully-owned subsidaries, thereby limiting its investments and take-over options. But few optimists have spotted opportunity to expand PSUs on global scale, or consolidate by merging and aquiring smaller players. According to Rana Kapoor of Yes Bank, the future belongs to those who have been proactive, investing in new technology and improving over-all efficiency.This might be the big change for them. It was predicted that Indian government will play a crucial role in bailing out economy, but it is turning out that its public-sector banks that were so far called as “laggards” are beating the heat with ease! Kudos to PSU!!!
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@Welcome gundappa
Hey Amol,
That’s quite a brilliant display of stats man! whoa! how do you have access to all the stats? nice anyways.
and hey, I sorta agree with RBI’s policy towards foreign banks. With the way our fellow countrymen act towards anything European, if RBI ever flexed its policy towards RBS or Barclays or Deutsche Bank, it’ll take all the revenue out of our IBs and SBIs and IOBs.
Even foreign insurance companies are quite a big risk for the economy…wat do you reckon?
and hey…sorry mate, my feeddemon somehow fails to show updates these days. So I wasnt aware of the recent posts. SOrry about the delay in reading. It’s quite late here in Perth, will read ur other posts in the morning!
Cheers!
Thanks for the wonderful comment Varun! I really appreciate that you regularly follow our website. Thank you very much on behalf of the whole team! And say no “sorry”, mate…!!!
I found the material after googling for terms like “Indian Banking sector”, “RBI policies”, etc. There are some documents to download as well.
RBI’s been ever aggressive, but is that for our own good? Because Indian banks are doing better than any other at the moment. We don’t know about the future!!!