Money & Banking
Chidambaram says most banks are ‘clones’ of each other

Banks in India offer similar products and services to customers and I would regret if new banking licences are given to similar cloned entities, the finance minister said

Finance minister P Chidambaram has called banks in the country as 'clone' of each other that offers similar products and services to customer. While speaking at BANCON 2013 in Mumbai, Chidambaram said there is no difference in most of the bank's approach in services and products.

"In January 2014 new banking licenses will be issued and I wish it would be given to banks with innovative or different models of banking. We need different kinds of banks to cater to different segments in our country. And I would regret if 'clone' banks are given new licences," the finance minister said.

At present, the Reserve Bank of India (RBI) is scrutinising 26 applications by private entities to run banks. This includes little known microfinance institutions (MFIs) as well as conglomerates like the Tatas, Birlas, Ambanis, Bajaj and Larsen & Toubro (L&T). Interestingly, when the banking licences were issued last time, only two out of 100 applicants were successful in 2003. Over the last two decades, the RBI licensed only 12 banks in the private sector, in two phases.

Calling bankers to focus on reality of India, Chidambaram said at present quality of service and innovative products are being used to serve small number of customers from big cities. He said "At the same time majority of the population do not have access to banking system. Access to banking is denied to those living in rural areas and only small percentage is able to use banking services."

"For most of the people from rural areas, it is either bank or moneylender; there is no other source of funding. Almost 70% of rural population have access to just 9% of the total credit provided by banks in India. This needs to be changed. Banks must cater to small and medium enterprises (SMEs) and small and individual borrowers from rural areas," Chidambaram said.

According to a paper submitted by McKinsey & Company, financial inclusion remains a concern in rural India even after significant efforts. "Rural India has around 60 million households that are financially excluded-constituting about 40% of the rural population. With only about 30,000 bank branches to cover more than 6 lakh villages, inadequate distribution has resulted in a large population of the rural population staying outside the fold of the formal banking sector," says the paper titled "Reimagining Banking in India: Gearing up to meet the new environment".

 Talking about increasing non-performing assets (NPAs) or bad loans in banks, Chidambaram said banks need to differential between a wilful defaulter and victims of circumstances. "Banks should be stern with wilful or habitual defaulters but hand hold victims of external circumstances," he said.

Assuring banks that all commercial decisions taken by them will be defended, the finance minister said most of the decisions are taken based on the circumstances and facts at that particular time, which may turn out to be poor or wrong decisions. However, such decisions may not have to be dishonest or malicious and the union government would stand by bankers who would have taken these decisions, he said.



MG Warrier

3 years ago

The FM has again given indications as to the norms that will be followed in selecting the winners from the 26 candidates for commencing banking business in the private sector makes things easy for the Jalan Committee and finally for the RBI Governor Dr Raghuram Rajan. Earlier FM had talked about 7 New Bank each with some unique features to avoid the look-alike syndrome, with a mandate to attempt to do different things and ‘do them differently and each following a different path. The present observations are in continuation. We cannot beg for more clarity. Much earlier, by declaring the take off of All Women’s Bank in public sector, FM has already shown how deadlines can be fixed and institutional structure can be defined, if there is a will.
Now, it is for the Jalan Committee to express their views on the future intitutional framework in the banking sector, based on the Committee’s perceptions on the material on 26 applicants furnished to it and for RBI to select the 7 from those eligible candidates which conform to the FM’s prescriptions.
Even if RBI is willing to go half way together, the clear indication from the FM is that the walk is going to be on parallel paths. The way things are moving, Rajan is too willing for such a contingency.

Suiketu Shah

3 years ago

Wise not to take his comments at all seriously.


3 years ago

Whoelse can better say that banks are clones. After all every weekend PSBs keep opening (cloning) branches in his constituency.

Amara Raja Batteries Q2 net profit up 35% on strong volumes

Amara Raja Batteries net profit was boosted by the automotive battery business, aided by volume expansion both in four- and two-wheeler segments

Amara Raja Batteries Ltd (Amara Raja), a Chennai based manufacturer of automotive batteries, in its quarter to end September posted 35% growth in its net profit on strong sales growth.

For the quarter to end September, Amara Raja said its net profit increased 35% at Rs94.58 crore from Rs70.10 crore a year ago period, while its net sales increased 13% at Rs804.72 crore from Rs716.15 crore, in a year ago period.

 “The automotive battery business reported double digit growth revenue, aided by strong volume expansion both in four-wheeler and two-wheeler batteries in the replacement market, while the original equipment manufacturer (OEM) demand continued to be sluggish. The trading volume in home uninterruptible power supply (UPS) business suffered due to unfavourable season on account of mild summer and good monsoon,” said Amara Raja in its press release.

“I am happy to note that our sustained good performance continues to be in line with our annual plan and expectations, despite slowing economy, volatile rupee and sluggish demand in the automotive and UPS and OEM sectors,” said Jayadev Galla, vice chairman and managing director, Amara Raja Batteries.

The promoters’ shareholding in the company remained at 52.06% as on 30 September 2013; foreign institutional investors (FIIs) share holding grew from 6.32% from same period last year to 11.08% as on 30 September 2013, an increase of 4.76 percentage points ; public shareholding fell 1.11 percentage points to 21.89%; domestic institutional investors (DIIs) shareholding fell 3.65 percentage points to14.97%.

“The industrial battery business has also reported double digit growth despite capacity constraints and subdued demand for UPS batteries. The company has substantially enhanced the quality of business through various initiatives in the market coupled with internal efficiencies to improve overall profitability. The company’s quick recharge series of telecom batteries (Powerstack) are gaining acceptance from all tower companies and operators enhancing demand. While the OEM demand in UPS sector is under stress, the preference for the company’s UPS batteries (Quanta) in replacement market is encouraging,” Amara Raja further stated in its press release.

On Thursday, share price of Amara Raja Batteries Ltd closed 1.11% up at Rs315.30 on the BSE, while the S&P BSE Sensex ended 205 points up at 20,399.

For more stock results, check out this page


Coal India’s disappointing quarterly results show it needs to cooperate with MDOs!

The disappointing results of CIL show that it needs a new framework from planning commission to operate with mines developers and operators (MDOs) to harness synergy

Coal India (CIL) is beset with a lot of problems. The second quarter profit at Rs3,052.35 crore is marginally lower than last year's profit in the same quarter, due to increase in cost of production. Although there was an increase in sales through e-auction at 12.88 million tonnes (mt), the realisation per tonne was lower at Rs1,418, a tad cheaper by Rs19. Last year's production was 452 mt, half of which was obtained through the services of Mine Developers and Operators (MDOs), who have three to seven year contracts and who paid for every tonne of coal mined.


The government did not arrange for their replacement and only three of them were "re-appointed" last month, with still four more to be filled. It is a pity that the government did not nominate new directors or propose re-appointment, at least 90 days before the existing independent directors retired.


From the operational side, in order to move the mined coal, CIL has to depend upon the use of heavy duty dumpers of 190-240 tonne capacity, which are manufactured only by a few makers like Komatsu, Caterpillar, Liebherr and Belaz. These are not made in India and so miners are obliged to import them at great cost. In fact, the most important element is the tyre, costing around Rs4 lakh each, with a 5,000 hours guarantee. But, due to the extremely difficult terrain, the tyres wear out fast. If maintenance costs are included, it would mean that each dumper would cost in excess of Rs50 crore!


It appears, in the last tender, except for Belaz of Belarus, others objected to the inclusion of tyres in the maintenance cover, but CIL did not place the order on this sole tenderer. This kind of vacillation is detrimental to progress and the work suffers as a result, since dumpers are useless without the tyres!


It may be recalled that Coal India is in the process of divesting 5% of its equity shares held by the Government of India, sometime in December, which is  expected to fetch about Rs8,000 crore for the exchequer. This move has been opposed by the five major trade unions and if the opposition gathers momentum, chances are that this may have to be postponed.


In the meanwhile, seven of its independent directors have retired this year and, in spite of knowing this essential need to run the day-to-day operations and take major decisions, the government did not arrange for their replacement. So far only three have been "re-appointed" with four more left to be filled. It is sad that the government did not deem it essential to either nominate new independent directors or re-appoint some of the existing ones, at least 60/90 days before their retirements were due. Such inaction also hinders the work of chief managing director, Narsing Rao.


Because of the need to develop our own resources and not import coal at high value, it appears CIL sought the assistance of Planning Commission to draw up a suitable model concession agreement (MCA). As a result, the Planning Commission has now come out with a draft proposal that is comprehensive; but the bottomline is that the MCA holds CIL to be ultimately responsible for everything, starting from getting the required approvals, clearances for land acquisitions, matters relating to rehabilitation issues, Ministry of Environment and Forests (MoEF) and state clearances etc, which simply means, handing over a ready to operate mine, on a silver spoon, to an MDO! We need to study this entire document in detail to be able to comment further and make suggestions for consideration.


We are constrained to observe that CIL is already overburdened with handling so many units and to ensure continuous coal supplies to the needs of one and all. They cannot be further burdened with the responsibility of obtaining clearances from all concerned to make it easy for the MDOs to operate. We feel that the MDOs should be actively associated in getting the job done, rather than make CIL work for them!


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


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