SBI chief concerned about new banks
Bhattacharya's comment comes just days after RBI gave 11 entities in-principle nod to open payment banks
Mumbai: State Bank of India (SBI) chairperson Arundhati Bhattacharya on Monday expressed concern about the spate of new banks.
“It’s a dog-eat-dog world out there... I am not sure how much capital new banks have to burn,” Bhattacharya said on the sidelines of the banking conference organised by the Federation of Indian Chambers of Commerce and Industry (Ficci).
Bhattacharya’s comment comes just days after Reserve Bank of India (RBI) gave 11 entities an in-principle nod to open payment banks and a day after Kolkata-based Bandhan Bank launched full-service operations on Sunday.
Bhattacharya had last week said that new payment banks could wean precious low-cost savings bank deposits away from the established full-service players, thus diminishing their ability to price loans at a competitive level. On Monday, she said she feared “cannibalistic” behaviour by new banks who could poach customers from banks like SBI.
“New banks will have no legacy and won’t be held hostage by industry agreements,” she said.
Bhattacharya later clarified that she was more worried about payment banks because they are a relatively unknown entity.
“We don’t know what their model will be. How much capital they are willing to invest... so, in a sense, they are unknown. Whenever things are unknown, there are risks. The two new banks are more or less known entities,” she said.
Bhattacharya said private sector banks have been growing at a faster rate by taking away public sector bank projects once they are near completion.
“Today why is the private sector growing at 22%? Because they are cannibalizing the completed projects at low cost (because) risks have gone down,” she said.
The SBI chief said during the financial crisis, the state-run lenders supported projects by lending, which helped build infrastructure and generate employment.
However, during tough times, private sector lenders stay away because the risks are high, she said.
Bhattacharya was quick to point out that private sector lenders have not been able to cannibalise a large size lender like SBI, but smaller state-run banks have suffered.
She sought to dismiss notions that state-run banks get a lot of capital from the government, pointing out that the support which Chinese banks receive from their government is much larger.
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First Published:25 Aug 2015, 12:29 AM IST
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