Surprisingly Public Sector Banks!

By

Neerav Nagar
Senior Lecturer (Finance)
Aravali Institute of Management
Marwar Bhawan, Polo No. II, Paota, Jodhpur–342 006
(Rajasthan)
 

No matter whatever is the topic we discuss whether it is in economics or business or trade, first half of 90s always comes out as a distinct period. That was the period when we adopted the path of economic reforms or popularly known as the advent of LPG: Liberalization, Privatization and Globalization. This was more of a conditionality for receiving US $ 6.8 bn bail out from International Monetary Fund in 1991 than a conscious macro economic planning decision.

Of course, even banking industry wasn't untouched and what we see now is something which public sector banks (PSBs) could never have imagined and which has become their nemesis. Yes, we are talking about the advent of private banks, the huge market share that has been captured by them and the slew of innovative products being offered by them. Whether it is personal loans, housing loans, fixed deposits, credit cards or corporate lending, they appear to be ruling everywhere.

Who is in fault for this sorry state of PSBs? Of course they themselves are responsible. Being in business for so many years, they could not foresee the future and they kept on leaving the ball thinking that the game is a 5-day Cricket Test Match. However, on the other hand, private banks came out with a professional approach - proper and innovative thinking, hard selling and proactive customer relations armed with latest technology, taking it as a One Day Cricket Match and keeping in mind that an experienced player always prepares in advance, changes the tempo according to the match situation and plays accordingly. Within no time they took the match away from PSBs.

Today, private banks are providing those services, which we could, only dreamt of. If you want to pay your electricity bill, you need not search for a Bill Collection Centre. Instead go to the nearest branch of the bank in which you have account and give them the instructions. Moreover, that's to be given only once! Further, if you need talk-time, don't talk to vendor, go to the nearest ATM and get recharged – cellular phone as well as you! You can also pay your direct tax, service tax and insurance premium in the same manner. If you want an accident insurance cover and a credit card, there is no need of going to an insurance company first and a bank later on. You will get this accident insurance cover free of cost once you apply for a credit card. Also, if you want to undertake any of the above-mentioned transactions, you need not move! Just log on to the Internet: Click of a mouse and it is done!

It is ironical that private banks have forced PSBs to think that a working man/woman needs 8 to 8 banking and Internet Banking. He/She may want to check his/her account balance through his/her cellular phone. Still if one doesn't get time, at least that person can go to the nearest ATM after working hours, which is just at a 2 minutes drive from his/her home. And why ATM in night? Now, 24 Hours banking facility is also available! Let us not forget the Anywhere Banking facility, which has also been initiated by private banks.

Private banks have been a pioneer in providing all these services. Here, it will be worthwhile to mention that foreign banks have also come up with innovative products and services but they are yet to garner a major market share.

However, it does not mean that PSBs have been just spectators. They have definitely made some progress. The question to be asked is that are they too late? Were they sleeping? If after so many years one of the PSBs feels that it needs to change its logo so as to give it a fresh look or so as to give an international appeal, one can only be amazed at this approach. Take another example. A PSB feels that it needs to surprise people with the advertisements that it has the largest number of ATMs in India! So many years after the establishment, it is not a surprise at all. The point being made is that if it is trying to make people realize about this fact then there has been definitely been some deficiency in its approach towards the customers. That's why they don't know this fact. Why did all the PSBs take so much time to realize that cost of a transaction through an ATM is far lesser than that through branch banking!

Instead of being leaders, PSBs have been followers. But it is well said: Better late than never. Gradually PSBs are waking up and realizing the importance of a customer-centric approach.

Criticisms go along with praises. At least PSBs have been able to percolate to the rural areas accompanied by an increase in priority sector lending, which private banks have not been able to do. The probable reason is the low level of social responsibility of business on the part of private and foreign banks. Another notable thing is that by and large PSBs have been ethical as compared to their counterparts in private sector. For God's sake, they don't resort to gangsters or force a common man to sell his kidneys to recover loans. In case of private banks, the fine print is often more dangerous than the bold print on agreements with the customers. What we need is strong corporate governance norms that do not restrict themselves to filling and filing of forms and returns. What we need is good banking practices and clear customer relationship. If not, what is the difference between a Dubai or Karachi based don and a foreign or private bank.

Hence, PSBs are understanding the rules of the game. But now, do they need to score a six on every ball or can they manage by scoring 5 runs an over. Only time will tell this.
 

Neerav Nagar
Senior Lecturer (Finance)
Aravali Institute of Management
Marwar Bhawan, Polo No. II, Paota, Jodhpur–342 006
(Rajasthan)
 

Source: E-mail May 31, 2006

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