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New Banking LicensesImpact on

Indian Banking SectorPresented ByArrivals 2014.

Dr. Nilesh Khadse (Asst. Manager IDBI)

Ms. Chandani Bhoota (Asst. Manager IDBI) Mr. Vikash Gupta (Asst. Manager IDBI)

Mr. Amar Kumar Bihari (Asst. Manager IDBI)

Mr. B.Anupam Benerji (Asst. Manager IDBI)

Mr. Praveen Kamble (Asst. Manager IDBI)

Ms. Manika Sahu (Asst. Manager IDBI)

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Introduction

BankingMore than 60% financial assets of Indian

Economy.

India has 27 PSBs Cover 70% of total banking assets.

Low credit /GDPRatio.

Large chunk of population is left out.

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Need for new licenses.

Huge untapped Potential- Demographic dividend

Burgeoning middle class

Increasing purchasing power parity

Widespread access to internet and mobile

Financial inclusion

RBI has granted in principle approval to IDFC ,

Bandhan Financial Services Private Limited.

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Impact on Indian Banking Sector

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Enhanced Competition

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Enhanced competition

Pros

Beneficial for the customer- improved service;

Decreased charges.

Cons

Public sector bank is the first one to get hit.

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Higher Deposit Rate And Lower Lending Rate

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Higher Deposit Rate And Lower LendingRate

Pros Higher return and cheaper credit .

Marginalised sections of the society will have access to credit.

Deposit and credit growth.

Decrease in concentration risk.

Cons It will adversely affect the profit margin.

Stringent application of BASEL III norms. RBIs Priority Sector Lending norms

More merger and acquisition possibilities.

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Financial Innovation

Pros Enhanced customer satisfaction.

More customised new banking products.

Cons

Banks may indulge in riskier credit propositions , there

is a potential for increase in volatility.

Regulatory costs will go up.

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Use of Technology

Pros To reduce the operational costs new banks can opt fortechnology.

Cheaper and faster customer services.

Cons

Security and privacy concerns .

Increased risk of sabotage.

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Financial InclusionPros

Reaching the masses.

Coverage ,Outreach ,Deployment.

Cons

Time frame of scaling up from rural to urban areas.

Complexity in regulatory compliance

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Corporate Governance

Pros

Dilution of Equity

Cons

Conflict of interest

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Conclusion

New entrantsunlikely to make material difference.

PSBs in line of fire.

Progressive approach to mass serving .

New Bankers New Era

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References

http://www.rbi.org.in/home.aspx

http://www.arthapedia.in

http://www.iba.org.in/

Banks in India:Challenges & Opportunities- Keynote address delivered by

Shri Harun R Khan, Deputy Governor a t the BFSI Conference 2014 . Business Standard.

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