Indian banking system is resilient and continues to offer better growth opportunities compared to other BRIC (Brazil, Russia, India and China) nations, according to a survey by Federation of Indian Chambers of Commerce and Industry (FICCI).
The survey found the Indian regulatory system to be better than Brazil, Russia, China and even the UK. In terms of risk management systems, credit quality and banking technology systems India is ahead of its BRIC counterparts.
Some of the major strengths of the Indian banking industry, making it resilient in the current economic turmoil, were regulatory system (93.75%), economic growth (75%), and relative insulation from external market (68.75%). Other strengths were the further scope for new entrants in the market as there are opportunities in unbanked areas.
However, public, private and overseas banks have reported difficulty in hiring qualified youngsters because of high staff cost overheads, poaching of skilled quality staff and high attrition rates.
57.14% felt that non-banking financial companies may be allowed to be established as banking institutions but only if adequate capitalization levels, cap on promoter’s holdings and other regulatory limitations are ensured.
Over 92% of the respondents felt that Indian banks have capacity to absorb twice the amount of their non performing asset levels. Almost 80% of the banks expected personal loans as having the potential for default, followed by corporate loans and credit cards.
More than 62% of the respondents saw consolidation as an inevitable process in the future while remainder did not consider it an essential factor for their future progress. However, majority of the public sector banks were not in favor of foreign banks playing a major role in the consolidation process.
Established in 1927, FICCI is the voice of India’s business and industry. FICCI has direct membership from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 83,000 companies from regional chambers of commerce.
FICCI works closely with the government on policy issues, enhancing efficiency, competitiveness and expanding business opportunities for industry through a range of specialized services and global linkages. It also provides a platform for sector specific consensus building and networking.