Indian banking system robust: FICCI Survey

New Delhi, Feb 7: 

 
A sample Survey by FICCI today brought out that Indian industry believes that the country's banking system is better in most parameters as compared to big economies as well as nations where the banking system is too well established.

It also brought out that industry is convinced that consolidation is the only way forward, while a significant number are against mergers and amalgamations among foreign banks.

The Survey brought out that Indian banks need to improve their customer service and travel some distance with regard to technology and risk management system.

By and large, the view is that the Indian banking system is robust, having weathered the global financial storm with firmness and strength.

In many ways, the banking system is even better than that of China, Brazil, Russia, the United Kingdom and the United States.

The following are the other highlights of the Survey findings: 

 * Regulatory systems of Indian banks were rated better than China, Brazil, Russia, the UK; at par with Japan, Singapore and Hong Kong; while all the respondents felt above par or at par with the US; --Respondents rated India's risk management systems as more advanced than China, Brazil and Russia; 75 per cent of the respondents felt above or at par with Japan, 55.55 per cent with Hong Kong, Singapore and the UK, and 62.5 per cent with the US. 
* Credit quality of banks has been rated above par than China, Brazil, Russia, the UK and the US, but at par with Hong Kong and Singapore and 85.72 per cent of the respondents felt at par with Japan. 
* Technology systems of Indian banks have been rated more advanced than Brazil and Russia, but below par with China, Japan, Hong Kong, Singapore, the UK and the US. 
* 69 per cent of respondents felt that the Indian banking industry was in a very good to excellent shape; 25 per cent felt that it was in good shape and only 6.25 per cent said the performance of the industry was just an average; --53.33 per cent of respondents were confident in a growth rate of 15-20 per cent for the banking industry in 2009-10 and a more than 20 per cent growth rate for 2014-15; --93.75 per cent of respondents saw expansion of operations as important in the future, with branch expansion and strategic alliances the most important organic and inorganic means for global expansion respectively; --Over 92 per cent of the participants agree with recent stress test results that Indian banks have the capacity to absorb twice the amount of their current NPA levels; --Almost 80 per cent of the banks see personal loans as having the greatest potential for default, followed by corporate loans and credit cards; --87.5 per cent of the respondents consider credit information bureaus vital for the measurement of asset quality. 

Nevertheless, at the same time, over 60 per cent of respondents felt the need for regulation capping FDI at 49 per cent and voting rights to 10 per cent in Credit Information bureaus; --93 per cent of participants still find rural markets to be a profitable avenue, with 53 per cent of respondents finding it lucrative in spite of it being a difficult market; 

--More than 81.25 per cent of all respondents have a strategy in place to tap rural markets, with the remainder as yet undecided on their plan of action;

--Almost 62 per cent of the respondents see consolidation as an inevitable process for their banks in the future, while the remainder does not consider it an essential factor for their future progress. 

 
* 77.78 per cent of public sector respondents were of the opinion that foreign banks should not be allowed to play a greater role in the consolidation process.