State-run banks need to revisit business models

NEW DELHI - Public sector banks need to revisit their business models to meet the needs of the modern, technology savvy customers, S. Sridhar, chairman and managing director of the Central Bank of India, said Monday.

“In order to meet the challenges posed by the new class of customers who are technology savvy, they need to look beyond consumer financing. The days of vanilla banking need to be left behind,” Sridhar said, addressing a banking conference organised by the CII.

Sridhar said state-run banks needed to review their risk management strategies and consider revising salaries of employees to attract and retain talent.

The government has been pushing banking institutions to expand their footprint across India and has offered incentives to banks who are opening up branches or access points in under-penetrated regions.

The major barriers to financial exclusion, according to the Reserve Bank of India Governor D. Subbarao are lack of access, lack of physical and social infrastructure, lack of understanding and knowledge, lack of technology, lack of support, and lack of confidence.

Currently only 30 percent of bank branches are in the rural areas that house 72.2 percent of the country’s population. Rural India accounts for just 9 percent of total deposits, 7 percent of total credit and 10 percent of life insurance business.

“Banks are the key to a rural-urban merger. If India has to achieve the double-digit growth figure several areas require urgent redressal. Rural finance and rural infrastructure should be developed. Regulators too, should be more active in the positive direction,” said Shridhar.