Indian banks are steeped in history. In the boardroom in State Bank of India’s (SBI's) Mumbai headquarters there is a photograph of the inaugural board of the Imperial Bank of India, the oldest lender in the country, set up in 1921 under British colonial rule and the precursor to SBI. But while public sector banks such as SBI retain unique historical value, today they also have some of the highest non-performing asset (NPA) ratios and lowest capitalisations in the industry.
The ministry of finance and the Reserve Bank of India (RBI), the country’s central bank, are rolling out policy reforms aimed at strengthening public sector banks. Even the lenders themselves are pushing for change. But transforming some of India’s oldest banks, which are deeply linked to the government, the economy and India’s population, will not happen quickly. So now is the time for India’s younger, more nimble private sector lenders to finally build up market share in a banking sector historically dominated by state lenders, say market participants. Private banks’ growth strategies will involve using technology and reaching out to unbanked customers in India’s rural areas.
