New Players Must Imbibe Right Strategies And Innovative Methods - George Alexander Muthoot, MD, Muthoot Finance

The Indian banking Industry has witnessed strong growth in the past decade and has created wealth for its stakeholders. What kinds of opportunities do you foresee going ahead in this sector?

The Indian banking sector is likely to experience tremendous growth and would generate huge employment opportunities, along with improving efficiency and increasing its capital base to meet the credit needs of the economy.

Where do you foresee major growth coming from - urban or rural areas? What is your major focus - Tier I Cities or Tier II & III cities?

I feel that growth would be exceptionally larger in rural areas in a developing economy like India, as a majority of our population is living in tier II, III and IV markets and the new license approval norms state that 25 per cent of a bank’s branches must be located in rural areas. Given this norm, new banks’ agenda would be to have a presence in these markets which in turn would encourage innovative methods to enable the rural class to become more banking savvy in the times to come.

As we already have 60 per cent of our branches in rural areas, we would like to continue our expansion in metro cities. This will not just be a regulatory requirement for us but we plan to convert this in to an overall strategy for our business. 

Would you like to make a pan India presence or would it be a regional play in the banking sector? 

We would like to have a pan India presence.

Do you feel that there still are opportunities for new players as the current environment in banking is quite competitive already?

Yes very much, there are a number of opportunities available for new players in spite of the current competitive environment as it is more or less dependent on your connect with the ‘aam aadmi’. One needs to imbibe the right strategies and innovative methods which in turn can make your journey serene. 

What kind of challenges do you foresee for new players (those who have applied for the banking license recently) as against the already established players?

There are a couple of challenges which the new players would face as many of the applicants are likely to need investment in new systems and processes to manage new asset risks. The transformation of existing franchises will be slow, as most will have to start from scratch. Asset-finance applicants could leverage their existing customer base, but it is largely unbanked. Those applicants with financial firepower and strong management to handle transition and growth are likely to be successful. 

Do you feel that the new era private banks would be able to compete with PSU banks having better penetration in rural areas as well?

Yes, certainly. I feel that the new era private banks will be able to compete with the existing PSUs, provided their genuine interest lies in servicing the rural class and maintaining their profit margins.