Tag: India

Millennials are killing it… Don’t LOL, BFSI News, ET BFSI

Personal Finance

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– By Tarika Sethia

They are not just young but their choices are too unusual. While the traditional investors are still confused over cryptocurrency, millennials have already found solace in it.

Millennials investing in crypto

Vartika, a 28-year-old girl living in Mayur Vihar, Delhi, has seen hundreds of videos on YouTube which are related to cryptocurrency investments. She has invested in bitcoin and also made some money.

“I understood what cryptocurrency is by watching videos and decided to invest in it,” she said.

Around one crore investors are holding over $ 1 billion of cryptocurrency investments in India and the majority of them are millennials.

About 62% of users at WazirX, India’s biggest cryptocurrency exchange, are below 34 years of age. According to CoinDCX’s report titled ‘Mood of the Nation- 2020’, 71% of respondents below the age of 35 had invested in crypto at least once.

According to the CNBC Millionaire survey, more than 33% of millionaire investors belonging to the millennial generation have over half their wealth in cryptocurrencies. As mainstream and quotidian as it gets, it becomes essential to ask why some Indian millennials are throwing all their savings into a volatile virtual currency that they cannot afford to lose or is it just an alternate investment.

Cryptocurrency and Millennials

All these numbers shed light on the curious eyes of the millennial demography. The notion of crypto being a young person’s asset choice isn’t a farce. However, the question remains, why? While the equity markets were touching fresh lows each day during the Covid lockdown in 2020, cryptocurrencies kept rallying. It was 2020 when many began surfing the crypto wave. Work from home expanded the opportunity to do more than just work and allowed some free time to people leading to huge clamour for ‘meme’ stocks on social media. Fear Of Missing Out (FOMO) has made millennials dash for a chunk of the crypto pie.

Two things are attracting millennials towards cryptocurrencies. First, everything is digital and can be processed seamlessly on the smartphone. Second, it fetches high returns which no other asset class seems to offer.

“I have done my calculations. There are high chances that I will earn far more than what I invest,” said Syed, a 25-year-old intern in a private company.

Living in a digital world, convenience leaves millennials drooling. With copious platforms emerging for crypto trading and each one of them innovating to provide a better user experience, investing and trading has become easier. Brisk KYC to instant crypto purchases, investing in digital currency has become swift and seamless. It is the gift of having everything at your fingertip.

Millennials are not risk-averse

With skyrocketing growth and hard-hitting falls, cryptocurrencies are not for the risk-averse. Millennials are still young enough to afford risking a part of their investment into highly oscillating asset classes, as advised by financial advisors and influencers on Instagram and YouTube. This isn’t very fresh advice but has always lingered in the investment world. However, now it has welcomed a new asset class. This ideology served with the appeal of building wealth faster encourages this bracket to run towards crypto.

Cryptocurrency and regulations

Neither the government nor the regulator has taken any firm stand on cryptocurrencies yet. The crypto exchanges are trying their best to convince the regulator. While India’s central bank has clearly stated that they have issues against cryptocurrency, the Finance Ministry has a different view.

“We want to make sure there is a window available for all kinds of experiments which will have to take place in the crypto world. The world is moving fast with technology. We cannot pretend we don’t want it,” said, Nirmala Sitharaman, Finance Minister.

Cryptocurrency and Global Push
The virtual currency has been dancing over tweets and has even attracted eyeballs of governments from El Salvador to India.

The curiosity about crypto is all over the world. It reached a new high when Tesla founder Elon Musk joined the race. In fact, after a drastic fall, Bitcoin soared this week after Musk’s tweets again favour the crypto.

Moreover, the European Investment Bank (EIB) issued its first digital bond on the Ethereum blockchain, in April this year. Richard Teichmeister, the head of funding at the EIB called the blockchain technology “revolutionary”. Dogecoin that started as a meme currency shot up in value when the tech billionaire Elon Musk tweeted about it.



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Google Pay launches cards tokenisation with SBI, other banks in collaboration with Visa, BFSI News, ET BFSI

Banking & Finance

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Google Pay on Wednesday said it has expanded its network of bank partners offering cards tokenisation on the Google Pay app and added lenders including SBI, IndusInd Bank, Federal Bank, and HSBC India. “After successfully rolling out tokenisation with Kotak Mahindra Bank, SBI Cards, and Axis Bank, Google Pay has now added debit cards by SBI, IndusInd Bank, and Federal Bank and credit cards by IndusInd Bank and HSBC India to its slate,” a statement said.

Tokenisation is a feature that enables users to make debit or credit card payments through a secure digital token attached to their phone without having to physically share their credit or debit card details.

The feature also works with online merchants, delivering more native and seamless OTP experiences without redirecting users to 3D Secure sites.

Google Pay said with tokenisation, it will enable safe and secure omnichannel experiences to help consumers use near-field communication (NFC) capable devices/phones to make contactless payments at over 2.5 million visa merchant locations, scan and pay at more than 1.5 million Bharat QR-enabled merchants, and pay bills and recharges from within their Google Pay app using their credit card.

“We’re committed to offering the most secure payments experience to our growing base of users, and tokenisation helps to replace sensitive data such as credit and debit card numbers with tokens, eliminating any chances of fraud. We are hopeful that the tokenisation feature will further encourage users to transact securely and safely in the current times and expand merchant transactions both online and offline,” Sajith Sivanandan, Business Head at Google Pay and NBU – APAC, said.

He added that the addition of SBI and Federal debit cards, IndusInd Bank debit and credit cards, and HSBC credit cards helps extend this offering to millions of card users on the Visa network.

“We are working closely with other banking partners to further expand the adoption of card-based payments with tokenisation in India,” he said.

Visa India and South Asia Group Country Manager TR Ramachandran said with tokenised, contactless forms of payment, millions of mobile first users will be able to use their credit and debit cards on Google Pay, bolstering confidence in a large segment that is new to digital.

Visa has already issued over two billion token credentials globally and with Google Pay live in India, these numbers are expected to grow significantly, he added.



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Growth of Indian consumer credit market to outrun major economies, BFSI News, ET BFSI

Banking & Finance

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New Delhi, India‘s credit ecosystem remains resilient despite the pandemic and the consumer credit market is projected to grow at a higher rate than most major economies globally, according to a report by Experian and Invest India.

Titled ‘A Review of India’s Credit Ecosystem’, it noted that the growth would be be driven by a shift in India’s demography, a burgeoning affluent middle class ramping up private consumption, as well as growth in rural populations, all catalysed by technology.

It noted that NBFCs and fintech firms have transformed the lending landscape to cater to the financial needs of the consumers.

The data, which tracks India’s credit ecosystem from March 2017 to February 2021, highlights a v-shaped recovery across Indian markets, with a gradual and steady improvement in sourcing trends.

New sourcing crossed the pre-Covid-19 level in October 2020. However, sourcing volumes declined from January 2021 onwards, due to the second Covid-19wave and lockdowns being imposed.

It said that a remarkable recovery was observed across all unsecured credit products. Recovery of personal loans has been high in both low (sub Rs 1 lakh) and high (above Rs 5 lakh) ticket size segments while the recovery in higher ticket size loans is also improving steadily.

The credit portfolio has been resilient, and in February 2021, growth stood at eight percent year-on-year for the portfolio of key products, lower than the 13 per cent observed for March 2020.

The pace of growth slowed down for all products, however, with unsecured products experiencing a faster year-on-year growth rate compared to secured loans.

Experian India Managing Director Neeraj Dhawan said: “The behavioural shift in Indian population has been tremendous just over the last five years. Consumerism has been growing in the previously untapped semi-urban and rural regions as millennials become the main driving force of the mass market.”

Noting that technological adaption is steep which has, in turn, created acceptance for new financial tools, he said: “The biggest beneficiary of this change is the credit market, which is evolving into a self-generating and self-sustaining one. In line with this trend, the risk appetite of traditionally conservative lenders is growing as the horizon of creditworthiness expands.”

Invest India Managing Director & CEO Deepak Bagla said: “India is making giant strides in financial inclusion. The rise in the affluent middle class and growth in the rural economy is changing consumer spending patterns and driving the bulk of India’s consumption growth.”

Additionally, rapid technological advancements have further expedited the growth of the credit lending ecosystem, he added.



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FIS, BFSI News, ET BFSI

Banking & Finance

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As the Covid-19 pandemic accelerated the adoption of digital payments in India, 68 percent of Indian consumers surveyed by FIS are now using online or mobile banking applications to transact.

A survey conducted by FIS between June 2020 and April 2021 looks at how the pandemic has impacted the consumer behavior on how they transact and found that there’s a significant shift on digital payments uptake where 94 percent of GenZ users own mobile wallets.

A similar surge is seen in the Buy Now, Pay Later (BNPL) during the pandemic, especially among younger generations. On an average, 32 percent of consumers own a BNPL app, and most often consumers use Amazon or Flipkart’s BNPL option.

Bharat Panchal, Chief Risk Officer, APMEA, FIS said: “The pandemic has led India to a new phase of digital payments adoption. To be successful, it’s vital that the banking sector provides technology-centric strategies which meet the diverse preferences of consumers’ rapidly changing habits, while also driving financial inclusion for underserved communities around the country.”

The report also points out that as the usage increases there has been an increase in financial frauds during the pandemic where consumers increasingly become more vulnerable. Around 34 percent of people surveyed have reported financial frauds in the past 12 months.

The fraud number rises to 41 percent among Gen Y and financial frauds were mostly related through phishing, QR code/UPI scams and card scams too.



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LIC Cards launches RuPay Prepaid Gift Card ‘Shagun’ Powered by IDBI Bank, BFSI News, ET BFSI

Banking & Finance

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A contactless prepaid Gift Card – ‘Shagun’ has been launched by LIC Cards Services Limited (LIC CSL) in collaboration with IDBI Bank on the RuPay platform with intent to promote cashless ways of gifting and present a wide range of end-use choices. It also presents itself as a future foray into the market of e-Gift Cards.

“We are delighted to partner with IDBI Bank and RuPay for the launch of LIC Gift Card powered by IDBI Bank on RuPay Platform. We believe that gifting is one of the biggest social interactions and social events in our society. We aim to enhance the value of digital transactions by providing a variety of benefits/cards thereby saving time and cost of transactions for both Gift Card buyer and recipient. LIC CSL has a vision to be the top Brand in Cards and Digital Payments, catering to all segments with geographical spread across the Country.” a spokesperson of LIC Cards Services Limited (LIC CSL) stated.

Shagun Gift card can be used at millions of merchant outlets and e-commerce websites in India to diversify spending options on the card. The card will provide users the freedom to make purchases at various merchant locations including departmental stores, petrol pumps, restaurants, jewelry stores, apparel stores, etc. They can also shop online, pay utility bills, book tickets for air, rail, bus, and so on through various mobile wallets and E-commerce portals or Apps using this card.

“In continuum with our on-going business synergies with LIC, we are glad to also have NPCI and LIC Cards Services Ltd as partners on-board for this initiative. This product has been curated keeping in mind the distinct privileges for the cardholders as well as the convenience of the contactless payment feature.” added Rakesh Sharma, MD & CEO, IDBI Bank.

“We look forward to continued collaboration with LIC CSL and IDBI Bank to take this product to the masses in coming months and further strengthen our customer base.” said Dilip Asbe, MD & CEO, NPCI.



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BCG, BFSI News, ET BFSI

Personal Finance

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Financial wealth and people’s lives during the pandemic are inversely related to each other. According to a new report by Boston Consulting Group (BCG), financial wealth in India grew by 11% p.a. to USD 3.4 trillion from 2015 to 2020. In line with the emerging economic recovery, the report reveals growth in prosperity and wealth significantly through the crisis and is likely to expand in the next five years. India is expected to lead a percentage growth of fortunes worth $100 million in 2025.

Ashish Garg, a member of Boston Consulting Group’s Center for Digital Government, and a core member of the Financial Institutions and Public Sector practices said, “The next five years have the potential to usher in a wave of prosperity for individuals and wealth managers alike. They now have a chance to put that perspective into practice in their own work and pursue a client agenda. The report lays out what it takes to attract and retain clients and serve them in a competitively sustainable way.”

The report, titled ‘Global Wealth 2021: When Clients Take the Lead’ states that India represents 6.5% of the region’s financial wealth in 2020. 13.7% were the region’s real assets in 2020 which grew from 2015 to 2020 by 12.1% p.a. to USD 12.4 trillion. Liabilities grew by 13.3% p.a. to USD 0.9 trillion and Liabilities are expected to grow by 9.4% p.a. to USD 1.3 trillion by 2025. Bonds are expected to grow the fastest with 15.1% p.a. Life Insurance and Pensions will be the 3rd largest asset class in the future.

According to the report, North America, Asia (excluding Japan), and Western Europe will be the leading generators of financial wealth globally, accounting for 87% of new financial wealth growth worldwide between now and 2025.

Embracing fresh options

With the aim of earning higher returns than usual, many wealth management clients shifted away from low-yield debt securities in 2020. Hence, real assets, led primarily by real estate ownership, reached an all-time high of $235 trillion. Nevertheless, Asia, which has the largest concentration of wealth in real assets ($84 trillion, 64% of the regional total) will see financial asset growth exceed real asset growth (7.9% versus 6.7%) in coming years. In particular, investment funds in the region will become the fastest-growing financial asset class, with a projected compound annual growth rate (CAGR) of 11.6% through 2025, according to the report.

Attractive segments

The report talks about three market opportunities and segments for wealth managers. One consists of individuals with simple investment needs and financial wealth between $100,000 and $3 million. This “simple-needs segment” comprises 331 million individuals worldwide, holds $59 trillion in investable wealth, and has the potential to contribute $118 billion to the global wealth revenue pool.

“Wealth managers often underserve those in the simple-needs segment with a standardized set of products, and the result is a poor client experience with no “wow” factor. This is essentially a missed opportunity. To better serve this key segment, wealth managers must embrace a new approach that lets them reach a larger audience in a cost-effective and scalable way, but with a highly personalized offering.” said Anna Zakrzewski, a BCG managing director and partner, global leader of the firm’s wealth management segment.

Retirees form the second lucrative market, according to the report. Individuals over 65 own $29.3 trillion in financial assets accessible to wealth managers. This figure is expected to grow at a CAGR of close to 7% over the next five years. By 2050, 1.5 billion people globally will fall into the 65+ category, representing an enormous source of wealth.

The third category is the “ultra” wealth category—individuals whose personal wealth exceeds $100 million—expanded in 2020, with 6000 people joining the 60,000-strong cohort, which has seen year-on-year growth of 9% since 2015. The category currently holds a combined $22 trillion in investable wealth, 15% of the world’s total.

The BCG report reveals that China is on track to overtake the US as the country with the largest concentration of ultras by the end of the decade. If investable wealth continues to rise there at its current annual rate of 13%, China will host $10.4 trillion in ultra assets by 2029, more than any other market in the world. The US will be close behind, with a forecasted total of $9.9 trillion in such wealth by 2029.

“High-growth markets represent a massive opportunity, but wealth managers must build a genuine understanding of local differences and also key demographic changes.” said BCG’s Zakrzewski. “For example, women now account for 12% of ultras, most of whom are based in the US, Germany, and China. The next-gen segment is also going to be an influential driver of future growth in the next decade or so. Whether it’s a simple-needs or ultra-high-net-worth client, managers need to offer a personalized service in order to effectively capture the next wave of growth.”



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Not ICICI Bank or HDFC Bank, this lender is the best in India, as per Forbes, BFSI News, ET BFSI

Banking & Finance

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DBS Bank has been adjudged the best bank of India, ahead of top private banks HDFC Bank and Kotak Mahindra Bank and top lender State Bank of India.

In the third edition of the ‘World’s Best Banks’ list released by Forbes. DBS Bank has clinched the top position in a list of the best banks in India, DBS Bank has won the title for the second consecutive year among 30 domestic and international banks operating in India. The list was compiled by Forbes in partnership with market research firm Statista.

The order

CSB Bank is in the second position, ICICI Bank in the third, HDFC Bank in the fourth. Kotak Mahindra Bank follows at the fifth position while Axis Bank is at the sixth spot. The country’s top lender State Bank of India is in seventh position, followed by Federal Bank at eighth, Saraswat Bank at ninth and Standard Chartered Bank at the tenth spot.

The survey

Over 43,000 banking customers across the globe were surveyed on their current and former banking relationships. Banks were rated on general satisfaction and key attributes like trust, fees, digital services and financial advice, according to Forbes.

DBS Bank India was also recognised as ‘India’s Best International Bank 2021’ by Asiamoney. DBS was named ‘Safest Bank in Asia’ for the 12th consecutive year by New York-based trade publication Global Finance in 2020.

The bank was also Global Finance’s pick for ‘Best Bank in the World’ in the same year, making it the third consecutive global Best Bank accolade received by DBS. Previously, DBS was named ‘World’s Best Bank’ by leading financial publication Euromoney in 2019.

DBS Bank has been present in India for 26 years and has grown consistently by strengthening its small and medium-sized enterprise business and consumer lending operations to build scale and become a full-service bank.



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Ritesh Saxena, IndusInd Bank, BFSI News, ET BFSI

Banking & Finance

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Maintaining the cost of acquiring customers digitally is not easy as multiple banks & Fintechs are targeting the same set of customer base segment as compared to the physical branch led model where the costs are fixed.

Organisations acquiring customers digitally have often been at the mercy of aggregators and big search engines and so is the case similar with banks trying to funnel in customers through digital marketing and other platforms.

Ritesh Saxena, Head – Direct Banking at IndusInd Bank in a conversation with ETBFSI talks about the strategy at IndusInd Bank with digital acquisition, how digital marketing plays a role, important metrics and the partnership model. Edited Excerpts:

Ritesh Saxena, Head – Direct Banking, IndusInd Bank

Q. What is the strategy for digital business at IndusInd Bank?

The banking service is digital in nature with cash being the only physical aspect. To a large extent digital business in banking is evolving as compared to 3-4 years back when a lot of digital enablement was in nature of servicing only and not a way of doing business.

As a challenger bank, we had to be aggressive. Digital business evolved in two stages, one organic and inorganic – website, social media presence, ATMs which are web-enabled, mobile applications are now transformed into customer acquisition channels whereas previously functioned more from servicing point. Regulations and public infrastructure like Aadhar has helped a lot, we brought onboarding platforms on our web to acquire for both our asset & deposit customers.

KYC is just one part of onboarding, the customer does not give any business till he transacts or passes credit worthiness test. Getting these journeys completely digital, frictionless and seamless is important to ensure prospective customers don’t drop off.

Investments have gone beyond technology infrastructure, like – analytics, evolving credit models, partnerships with payment service providers. These internal and external parts come together to funnel the customer in and service them. The loss in physical onboarding through branches was off-set by digital acquisition channel through digital marketing with seamless onboarding to ensure there was no blip to business.

Q. How is digital marketing leveraged for direct digital business?Digital marketing is the other area of evolution which is core to digital business. While we create the digital platforms, we need to have a digital plan to work with platforms like Google and Facebook to get the right economics of acquiring customers. All Fintechs, start-ups have realised that creating a product, simple user journey is perhaps the easier part given all the tech evolution is happening, but getting the customer economics in (cost of customer acquisition) which does not kill you is tough. Reality is these Big Tech platforms don’t let you do digital marketing in a cost-friendly manner. That is the sad story which a lot of start-ups face and burn a lot of cash.

We banks don’t have investors (VC) funds to burn to get customers as it’s a P&L involved decision of optimising your cost of acquisition through various digital marketing initiatives like SEO, Redirecting advertisements and a lot of other initiatives.

Getting a customer and is he really worth following as few might funnel but not all are worth following. These are things that take time to perfect and eventually get the right implemental economics.

Digital marketing led acquisition is a different ball game as physical acquisition costs are fixed and given. Also, important to note banks are eyeing for the same pie of the business on the same medium for the same customer, unit economics really matters here.

Fintechs have mono-product lines as compared to banks that have multiple products, if a customer funnels in and may not have qualified for a credit card; we can pitch him a credit card against his FD so he gets serviced by some other product.

Most customers are price sensitive and everything is price led, it allows you to optimise the investments to get the customer by ensuring if he is not satisfied with one product you are able to get him another product and it’s a win-win.

Q. How does it work with the existing customer base?

Existing customers have been traditionally covered by RMs or through branches or contact centers for cross-sell or upgrading. The new digital platforms backed by analytics have allowed us to run it centrally without the need of assisted channels as a start point.

The bank has invested in a very Deep Artificial Intelligence led engine which runs across products and client databases from different segments like deposit to credit card to vehicle finance. I have that same universe within the bank. All we need is to create an ability similar to what aggregators (like Paisabazaar, Bank Bazaar) created for the open market.

A lot of good work and actual business has happened on the asset cross sell which is personal loan and credit card offerings to customers who keep their salary account or deposit account with us. More than 50% of our retail lending, deposit and even wealth business happens through digital channels and not just through open market but through a lot of analytics led, direct to customer, app based, email based and if required even tele-assisted follow-up for closure and a lot of these businesses have moved out of branches.

This is the next version of retail banking in India, if IndusInd Bank has 2000 branches in India which do an X business, for it to go 2X do we need 2X branches? or can I move all of the next X business to digital platforms without having to put a brick and mortar branch. That’s essentially the go-to. Physical channels will continue but a lot of the assisted business is moving to the sky RM models (digital).

Q. How are the metrics around digital marketing?

We doubled and tripled the investments in the digital marketing front across products and services not because we wanted to offset the dip in branch led business but because more customers were reaching out through these digital platforms. Pull-based business opportunities like health insurance were also in demand; a lot of digital marketing initiatives got fast tracked.

Video KYC changed the economics and at a fraction of physical cost we can do the physical KYC and do multiple business with him or would’ve been only one business of deposit before video-KYC where the customer wasn’t verified face-to-face.

On vectors being measured, earlier things were not straight through; most of our digital marketing arrangement partners were on the basis of cost per lead which captured mobile number either paid on per lead or impressions. Now the straight through journey changed the equation on this, earlier you were at the mercy of the aggregators and what would be the quality of the lead as banks make money on conversion of that lead.

The equation has moved from paying per lead to paying per converted customer and some of those have helped focus to target better and ensure that the same lead is not going to dozens of banks and see sub-optimal conversion.

Digital business is not only about aggregator arrangements it’s also on the payment side where merchant aggregators which are country wide operating in the payment gateway space and non-digital merchant led aggregators like old-age Pine Labs and similar players and how they’ve metamorphosed and deeply integrated with banks through APIs.

These payment partners get merchant customers to bank equivalent to current account journeys which have been created with more control as entity verification is bigger science than individual verification. For entities, you’ve to check their registrations, office, etc. all these risk parameters have been added to the onboarding mechanism and we have been among the first ones to launch a digital current account onboarding.



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Amid economic uncertainty, many banks eye capital raising plans

Banking & Finance

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With expectations of further economic uncertainty as the second wave of the Covid-19 pandemic continues and expectations of a third wave, banks are looking to raise funds to improve their capital buffers and fund expansion plans.

Private sector lender Federal Bank said its board will meet on June 16 to consider proposals for issuance of equity shares by way of a preferential allotment and raising of equity capital of the bank either through Rights Issue, Private Placement, Preferential Issue, Further Public Offer, Qualified Institutional Placement, Global Depository Receipts, American Depository Receipts annd Foreign Currency Convertible Bonds.

Also read: Public sector banks support for Covid-19 health infra gathers pace

The board will also consider a proposal for borrowing or raising of funds in Indian Currency or any other permitted foreign currency by way of issue debt instruments including but not limited to Additional Tier-I bonds, Tier-II bonds, Long Term Bonds (Infrastructure and Affordable Housing), Masala Bonds, Green bonds, Non-convertible Debentures or such other debt securities as may be permitted by RBI from time to time, in domestic market and/or overseas market, on a private placement basis, it said in a regulatory filing.

More plans ahead

In recent weeks, other lenders too have announced plans to raise funds and expectations are that more will be finalising plans soon. Private sector lender Yes Bank had on June 10 said it has received approval from its board of directors to raise ₹10,000 crore through debt securities.

Similarly, public sector Canara Bank has also announced board approval for its capital raising plan for 2021-22, amounting up to ₹9,000 crore by way of equity and debt instruments.

Bank of Maharashtra is also looking to raise up to ₹2,000 crore through the qualified institutional placement route before end of July. Reserve Bank of India governor Shaktikanta Das had on June 4 also urged banks and NBFCs to build capital buffers and ensure adequate provisioning to face challenges emanating from the second wave.

“Building adequate provisioning and capital buffers, together with sound corporate governance in financial entities, have become much more important than ever before, more so in the context of banks and NBFCs being at the forefront of our efforts to mitigate the economic impact of Covid-19,” he had said on June 4.

Public and private sector lenders had also raised funds in 2020-21 amidst the Covid-19 led economic uncertainty.

“Banks and need to augment their capital because there could be stress arising out of the second wave,” Das had told reporters post the monetary policy announcement. Their overall capital position is at a very stable level currently, he had further said.

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Raghuram Rajan says privatisation is a blunder; Rajnish Kumar cites failures in private banks, BFSI News, ET BFSI

Banking & Finance

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As the government speeds up on privatisation of public sector entities, industry mavens are not sure about the move. Former RBI chairman Raghuram Rajan spoke against privatisation while Rajnish Kumar former chairman of SBI has said that there are failures in private banks as well.

The government has made it clear that it doesn’t want to have more than five entities in any business. That’s a strategic decision that the government has taken recently. But the government has been talking about reducing its stake in PSBs for a long time. It merged 10 PSBs into 4. There are many recommendations for the government to reduce its stake in banks to only 51%. The idea is this will give enough funds to the government and the banks will also become more professionalised. But while the government is thinking of divesting its stake, Raghuram Rajan believes that it has not benefited the developed countries like the US.

“Time has come to recognise the crucial sectors of the country to be preserved. The Indian government is trying hard to sell the public sector banks to corporate hands which is a grave concern for an economy like India. Time is to understand Privatization is a blunder,” Raghuram Rajan, former Governor RBI and IMF Chief Economist, tweeted.

Rajan was replying to US President Joe Biden’s tweet on the divestment of government companies.

The developed countries like the US too are finding it difficult to create jobs after disinvesting heavily. Biden tweeted about his focus on creating government jobs.

“After decades of disinvestment, our roads, bridges, and water systems are crumbling. We must pass the American Jobs Plan. Together, we will rebuild our country’s infrastructure and create millions of good-paying union jobs in the process,”

This is not the first time Rajan made his viewpoint clear on privatisation. In an interview with PTI in March, he said, “I think it would be a colossal mistake to sell the banks to industrial houses. It will also be politically infeasible to sell any decent-sized bank to foreign banks,”

Bank employees’ associations and federations are already opposing the bank privatisation decision and held the 3-4 day strike very recently.

In an interaction with ETBFSI, Rajnish Kumar, former Chairman of SBI presented a different view to this discussion. He said if the government’s agenda is to bring governance then the government should change the ownership. “If the government wants to improve only the governance they can shift the ownership of the PSBs to RBI. And the issue would have been resolved. RBI would become the sole regulator and banks would achieve similar results,” said Kumar.

He also added, “The major issue is how long should the government capitalise the PSBs. And the government’s policy is also that it doesn’t want more than four entities in non-strategic sectors. There can be a question whether private banks perform better? But there is not an easy answer to this because there are failures in private banks as well.”



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