C O N T E N T S

Down but not out
The poor offtake of retail loans has pulled down credit growth

Red alert
After a sharp reduction in the last three years, NPAs are creeping back into banks’ balance sheets

A vote for the future
A distinguished Jury picks State Bank of India Chairman O P Bhatt as the Business Standard Banker of the year

Making the elephant dance
Interview with SBI Chairman O P Bhatt on his efforts at re-energising the bank

Round Table
Seven top bankers discuss “2009: Are banks in India ready for it?”

Dial ‘R’ for restraint
Cases of coercion and violence are forcing banks to soften their approach towards debt recovery

Overcoming obstacles
RBI has softened its stand on co-operative banks, but the guidelines are still strict

Database
All the data you wanted on banks

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Banking Annual 2006
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Towards 2009

Reserve Bank of India Deputy Governor V Leeladhar stirred a hornet’s nest at the Banker’s Conference late last month by saying that the Indian regulatory regime for foreign banks is non-discriminatory, and is, in fact, very liberal by global standards.

In a sense, Leeladhar’s statement poured cold water on the hopes of many foreign banks that the contours of the Indian banking landscape will change dramatically after April 1, 2009. Yet, most Indian banks feel that RBI is still not averse to opening up the sector after 2009, the underlying idea being that a competitive banking market will lead to efficiency gains that will benefit the entire economy.

Are Indian banks ready for the challenges in 2009? The Round Table discussion, the excerpts of which have been carried in this magazine, focuses on this key issue. Seven leading bankers have tried to answer some of the critical questions relating to resources, capital, consolidation and scale.

The message that came out clearly was this: while leading private and foreign banks are putting their houses in order to meet the challenge, the public sector banks are trying to make rapid strides though most of them are still struggling with legacy issues.

That’s sad as all of them also agreed that the opportunity is limitless. With the GDP growing at around 9 per cent and more financial deepening resulting in an increase of the share of overall credit in the national output, business can go only one way – up.

This is despite the signal that credit growth may well taper off this year. As our cover story shows, retail credit, which was clocking a brisk 30 per cent y-o-y just a year back, is now struggling to grow in double digits. But the encouraging sign is that many bankers believe it is a temporary blip and the second half of the year should see a pick-up in retail credit.

As credit grows, some Indian banks were under fire for alleged strong arm tactics to recover debt. As a report in this magazine shows, banks have been forced to either soften their stand on loan recovery or exit the sub-prime loan segment.

The Banking Annual is also about celebrating success. The Best Banker award (decided by an eminent jury) goes to State Bank of India Chairman O P Bhatt for his initiative to re-energise the 200-year old bank. The Jury felt that Mr Bhatt deserved the award for the initiatives he has taken to position the country’s largest bank to compete with private bank challengers who operate with much more operational freedom.

Though SBI was not at the top in any of the financial parameters considered, the vote was one for the future with the bank under Mr Bhatt’s stewardship considered best positioned to make a difference to all the stakeholders.

Enjoy this comprehensive snapshot of where the banking industry has arrived in its increasingly exciting journey.•

Business Standard • December 2007