Cover
Story
ICICI
Bank: A Consistent Performer --
Katuri Nageswara Rao
ICICI
Bank has been a consistent performer. It has occupied
the first place among private sector banks and second
place among all the banks on the basis of its assets.
The merger of Bank of Madura and ICICI has accorded
the status of the first universal bank in India. This
tech-savvy bank always follows well-defined business
strategies. Its present emphasis is on retail banking.
While it has many strengths and opportunities, it faces
challenges in the form of higher incidence of NPAs,
unfavorable funding composition and the need to comply
with the 40% priority sector norms in the coming years.
©IUP. All Rights Reserved.
Karur
Vysya Bank: A Consistent Performers --IUP Research Team
Karur
Vysya Bank which was established 82 years ago, has been
a consistent performer especially in the areas of profitability,
staff productivity and dividend pay-outs. Its main problem
is with regard to raising NPAs. Net NPA percentage at
6.33 is very high. While many banks are able to curtail
rising NPAs, Karur Vysya Bank has been showing deterioration
in percentage. However, the overall consistent performance
has placed the bank in the top five league among old
private banks for quite some years now. This mid-sized
bank proves that size does not really matter in the
Indian context.
©IUP. All Rights Reserved.
Banking
Scenario
Does
India Really Need Foreign Banks? --K V Krishnamurthy
Reserve
Bank of India has recently paved the way for foreign
banks for a bigger role in India. If we look at the
value added by these banks to the Indian banking industry,
it is not much encouraging. The new technology they
brought into the country is not shared with the system.
They are only doing the business with the creamy layer
in almost all areas like retail loans, housing loans
and corporate banking, thereby ensuring higher returns.
On the other hand, private and public sector banks have
been actively playing their intermediatory role in the
era of new economic order. Foreign banks unlike public
sector banks are not sharing the burden of social banking.
In such a situation, the government should decide as
to what role these foreign banks are allowed to play
in India. Should they be allowed more free play? Can
they really revolutionize the banking system? What is
required is a level play by Indian and foreign banks.
©Business
Standard, November 7, 2002. Reprinted with permission.
Foreign
Banks: New Options to Expand --
C R L Narasimhan
Foreign
banks have a long presence in India. After liberalization,
they got much leeway in terms of geographical reach,
range of products and services they offer. In addition
to the liberalization for expansion activities, they
are also given the option to open subsidiaries and joint
ventures which will be treated on par with other private
banks in all policy matters. Despite the policy change
announced in Union Budget 2002-03, Reserve Bank of India
has not still come out with any clear guidelines; however,
it has provided the pros and cons of both routes (branch
or subsidiary) in its Annual Report, August 2002.
©
The Hindu, October 28, 2002. Reprinted with permission.
Strategic
Banking
Europe's
Banks and Mergers --Olivier Hamoir, Carl McCamish, Marc Niederkorn, and
Christopher Thiersch
In
Europe, opportunities for domestic consolidation among
banks have been exhausted, forcing the banks for cross-border
mergers to increase their profits. However, the economic
benefits of cross-border mergers are unlikely to be
as high as their domestic counterparts, due to large
differences among countries in labor, management and
corporate governance practices. However, the economic
regulatory and cultural conditions for mergers and acquisitions
among Europe's major banks are improving. In the coming
wave of cross-border consolidation, banks that keep
their potential specialties in mind will probably do
better in the long-term than those that rush headlong
into the first available deal.
©The
Mckinsey Quarterly, 2002 Number 3. Reprinted with permission.
Originally published as "Europe's Banks: Verging
on Merging".
International
Banking
Japanese
Banks: The Nightmare Continues --
D Satish
Takenaka's
appointment as head of Japan's banking watchdog was
widely read by investors as a signal that Prime Minister
Junichiro Koizumi now intends to unleash a new wave
of public money toward fixing the banks; forcing some
to shutdown or to submit to government control. Will
he be able to reform the ailing banking system?
©IUP. All Rights Reserved.
Chinese
Banks: On the Road to Ruin --
David Lague
According
to one estimate, Non-Performing Loans (NPLs) in the
Chinese banking system are around 50% of the GDP. The
big, state-owned banks in China account for approximately
70% of its NPLs.
It
could take 20 years to reach at manageable level of
5% of NPLs if the banks choose to absorb losses over
time. The liquidity at Chinese banks is high only because
savers have no other options while depositors repose
trust in government banks and there is no deposit insurance
scheme. There is a need for huge amount of capital infusion
in these banks to make them viable. But any loss of
confidence in the banks or government could be a catalyst
for a run on the banks. The Chinese leaders are reluctant
to take any liberal approach to banking reforms because
it could lead to foreclosure of state-owned enterprises
and surge in unemployment, a risk which the government
cannot afford.
©Far
Eastern Economic Review, November 14, 2002. Reprinted
with permission.
Monetary
Management
Credit
Policy: Symbolism is All
-- NA Mujumdar
The
Credit Policy measures touch only a small segment of
the banking sector's problem; they are nothing more
than symbolic. The core issues of the banking system
continue to remain unaltered. The major measures taken
in the Credit Policy are reduction in bank rate, cash
reserve ratio and repo rate. As excessive liquidity
is available with banks, reduced rates would serve no
purpose as credit off take has slowed down and banks
are reluctant to reduce spread any further. Reduced
bank rate will only help the government to borrow funds
at low cost. Even now it is not too late for the RBI
to take corrective measures to the emerging situation.
©
Business Line, November 1, 2002. Reprinted with permission.
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