Indian Banking: Broadening Horizons - Mohan V. Tanksale, Ex-CMD, Central Bank of India

This is the first instance in my 40 years of banking experience that I have taken up the task of editing a financial journal as a Guest Editor. The main factor that prompted me to take up this assignment was the fact that it dealt with a subject that has been very close to my heart for almost my entire life - banking. This is a very good initiative by Dalal Street Investment Journal, where they have tried to bring perspective to the challenges that the banking industry has been facing in the current economic circumstances. Most importantly, there is a congregation of the best minds from across the wide array of stakeholders, which clearly points at the brilliant future of the banking sector in India.

I have seen the Indian banking industry evolve over my long career as a banker. The government's move to nationalise the banking industry in 1969 put the sector in a very challenging yet interesting phase over the next three, or rather four decades. The industry has expanded by leaps and bounds over this time, with some very important concepts having taken root. In the initial phase when the industry was first nationalised, we began work by giving each bank the responsibility of being the ‘lead bank’ for a few districts for the overall development of the district, which was then followed up by institutionalisation of the Regional Rural Banks and eventually by developmental programmes like the Integrated Rural Development Programme (IRDP). This set the ball rolling for the larger benefit of the Indian masses through what is today popularly known as Financial Inclusion.

Looking back at the way the Indian banking sector has evolved over the past four decades, we have gone through many cycles and have of course learned a lot from them. There are three key changes that the industry has seen. The first was privatisation, and this naturally threw a whole new set of challenges before the state-owned nationalised banks. The second was the evolution of the BFSI space overall and not just banking. Financial services have grown manifold, especially over the past two decades. So, in the real sense, public sector banks actually began their journey to the top somewhere in 1994 with the coming in of private banking players.

Another important change that we have seen is the computerisation of the industry. Leveraging technology has led to a remarkable transformation of the banking industry. There has been a complete change in perspective from when the time where customers needed banks to a time when banks need customers. Today, the approach of banking players is to be customer-centric, and each one of them is constantly working towards providing better services in the most efficient manner by utilising technology optimally. This customer-centric approach will be the real catalyst of change.

The views gathered on various aspects from banking captains of the changing landscape of Indian banking provide some very good insight on where we are headed. The impact of newer players coming in, commitment towards financial inclusion and the changes that can be expected point towards a vibrant tomorrow for the sector. My colleagues in the banking industry have articulated their views very well, from which it emerges clearly that today the customer is the pivot point for any banking player.

One must remember that the economy is at a very challenging stage today. It is within these challenges that the banking industry faces the onerous task of ensuring proper consolidation and maintaining a healthy asset quality.

We are no more mere domestic players, or for that matter, are no more insulated from external shocks. We are now a set of global players, who would be impacted by even small movements that are happening in the banking domain or the economy, be it in the US, EU or even East Asia. Given this scenario, I think that the banking industry will have to be extremely careful when it comes to creating assets.

Once you have supported the credit seekers, you have to ensure that your investments turn out to be productive lending. Unless you ensure that, you will have a tough time. I sincerely appeal to all the bankers and corporates that this is the time when you will have to really partner each other well. Bankers have been seen as lenders all along, but the time has come where they have to be seen as partners. The bankers have to understand the pain of corporates/customers and vice versa. If there is a gap between bankers and corporates, it will create real chaos where crores of rupees of the public and the exchequer are at stake. In my view, partnership is the only mechanism to look forward to at this point.

I am sure that this issue of Dalal Street Investment Journal would be liked by every reader who wishes to know where the banking sector is headed in the near and distant future. I would like to end my note to readers by placing on record my sincere thanks to all my colleagues from the industry who have contributed their thoughts to this very interesting edition of the magazine. Last, but not the least, it has been a great pleasure interacting with all those at Dalal Street Investment Journal who have painstakingly worked to ensure that we come out with really good insights on the banking industry.