While people continue to criticise the services offered by public sector banks, it is the foreign and private players who seem to be attracting the most complaints
According to the 2008-2009 report published under the RBI’s Banking Ombudsman Scheme, the number of complaints received per 1,000 accounts is the highest among foreign banks and banks in the private sector, with banks in the public sector having comparatively fewer complaints.
The study, included in the annex of the RBI annual report, reveals the total number of complaints received under the Banking Ombudsman (BO) Scheme, started in 2006, along with break-ups showing the number of complaints against individual banks, number of complaints per 1,000 accounts (non-credit card related) and number of credit/debit card related complaints per 1,000 credit/debit card accounts.
In our analysis of the report, which is available on the RBI website, we have focused mainly on the number of complaints per 1,000 account holders, as opposed to the total number of complaints. This is because banks with larger numbers of customers will face a larger number of complaints, and looking at the number of complaints per 1,000 accounts is the only way to put all banks on an equal footing. We have also disregarded outliers who have only a few accounts.
The results show that foreign banks have the highest complaints followed by private sector banks; public sector banks have the least number of complaints—which is surprising and contrary to general perception.
This lends credence to the charge of a banker, who does not want to be named, who said that foreign and private sector banks have savvier customers who are more aware of their rights and more likely to lodge formal complaints.
Hence, we decided to focus more on comparisons within this group.The report shows that among foreign banks, Barclays Bank and ABN AMRO were the most complained about with 1.31 and 1.02 complaints per 1,000 accounts.
The other big foreign banks also showed large, though relatively lesser complaints, with HSBC having 0.35, Citibank having 0.34 and Standard Chartered Bank showing 0.34 complaints per 1,000 accounts.
In terms of credit and debit card related complaints, Barclays again topped the charts with 1.59 complaints per 1,000 card holders. Coming in at a distant second with 0.65 complaints per 1,000 was again ABN AMRO. HSBC and Standard Chartered followed with 0.57 and 0.44 respectively. Citibank had 0.23 complaints per 1,000 card holders.
HSBC had the highest number of complaints overall with 2,838 followed by Citibank with 2,563. As noted earlier, this is primarily because they are much larger than their competitors, and the total figure should not be viewed as an indicator of performance.
Private sector banks also had high levels of complaints with Kotak Mahindra Bank having 0.71 complaints per 1,000 account holders. Among the larger banks, another surprise was that HDFC Bank had 0.43 complaints per 1,000 accounts, which was significantly higher than ICICI Bank which had 0.28 complaints. This is again contrary to perception. A pleasant exception to the trend was Axis Bank which had only 0.17 complaints per 1,000 account holders. ICICI Bank had the highest number of total complaints with 11,453.
When looking at credit and debit card related complaints, the trend was more uniform with ICICI Bank having 0.17 complaints per 1,000 card accounts and HDFC Bank and Kotak Mahindra receiving 0.13 and 0.12 complaints per 1,000 card accounts respectively. Axis Bank again had the fewest complaints with only 0.04 complaints received per 1,000 credit or debit card holders.
Public sector banks showed the most surprising results, considering the common perception of nationalised banks offering poor facilities and service.
State Bank of India (SBI), India’s largest bank, had received 0.13 complaints per 1,000 accounts and 0.09 credit or debit card related complaints for 1,000 credit/debit card accounts.
Bank of Baroda had 0.06, Bank of India had 0.04, Canara Bank had 0.05, Central Bank of India had 0.06, Punjab National Bank had 0.07 and Union Bank of India had 0.06 complaints per 1,000 accounts.
The figures for credit and debit card related complaints for the above entities were 0.05, 0.03, 0.03, 0.06, 0.03 and 0.04 complaints per 1,000 card accounts respectively.
The numbers show that whether it is because of poor service or more aware customers, foreign and private sector banks have some issues they need to address.
Players from various sectors are looking at entering the power segment, expecting huge returns from an electricity-starved economy
Since 2009, the power sector has seen the entry of players from diverse sectors ranging from auto-makers to real-estate players. Experts say that expected high returns are the key driver for this growing interest. However, coal issues, lack of managerial expertise and merchant power tariffs are key risks to watch out for.
Among the recent major announcements of forays into the power sector were by Shree Cement Ltd, Emami Ltd, Sundaram Clayton Ltd, Madhucon Projects Ltd (MPL), Era Infra Engineering Ltd, SKIL Infrastructure, Adhunik Metaliks, Singareni Collieries Company Ltd and the latest is by the Hiranandani Group.
“One of the main reasons to get into the power sector is that some of these companies saw a major downturn in the segment they were operating, for example real estate. Infrastructure projects, though capital intensive, provide a steady cash flow after the construction phase,” said Chaula Desai, associate director, Ernst &Young. She has been advising a couple of companies in their power-venture plans.
Ms Desai also pointed out that power portfolios have helped in attracting more investor interest. “Some of the companies or groups that have had power in their portfolios and who have listed these entities have done pretty well. This has been the driving force,” she added.
Apart from the high returns of a minimum of 18% that they are looking at, such ventures also allow players from diverse sectors to sell their projects or licenses at higher valuations later.
Last year, transformer maker Emco Ltd sold its subsidiary, Emco Energy Ltd, to the GMR Group. Emco was in the process of developing a 600-MW power project.
“They can get a return of around 20% to 30% on the cost, which is a good one,” said Amit Srivastava, research analyst, Karvy Stock Broking Ltd.
“Even if they are selling it (the project) at a later stage, they are getting good attractive valuations if the project is ready. However, there could be huge gains if they consolidate and list a larger capacity (power company),” said Ms Desai.
Venturing into the power sector is a natural expansion plan for companies like Era Infra and SKIL Infrastructure, who belong to the infrastructure segment. It also makes sense in terms of backward or forward integration for companies like Singareni Collieries Company Ltd (SCCL) and Adhunik Metaliks who are in the mining business. However, the power sector is completely new terrain for auto, real estate and FMCG companies like Emami, Hiranandani Group and Sundaram Clayton.
What would be important from an investor’s perspective? “If we were to analyse this from an investor’s perspective, we may not go for the new players due to their lack of expertise. Issues like whether they would be able to execute the project or if they will eventually sell the license to another player are also factors to be taken into consideration. Coal supply is another risk involved. Coal imports may not solve the issue as India lacks the port capacity required to manage its coal requirements,” said Mr Srivastava.
“Building a team to execute these projects would be the key challenge. The other option is to outsource through turnkey projects,” said Ms Desai. However, in terms of turnkey projects, the margins are impacted by 15% to 20%, which makes a huge difference to the bottom-line.
Further, the periodic fall and rise in merchant power tariffs is also a concern these companies may face. A number of them plan to sell the power generated in the open market, including companies like Shree Cement and SCCL.
“Long-term fluctuation in the merchant power segment is a risk that these players will be facing. However, they are content with the fact that even if the tariffs were to fall, the returns would still be decent at 15% to 18%,” said Mr Srivastava. However, Ms Desai shares a positive outlook on the merchant power risk. “The merchant power market is here to stay. They are looking at margins of 30% to 35% (in certain cases), which is quite attractive for these companies,” said Ms Desai.