Vol. 3, Issue 3 (2018)
A study on challenges of banking sector
Author(s): P Padmavathi, DAR Subrahmanyam
Abstract: The Bank sector is currently in a transition phase. On the one hand, the PSBs, which are the main stay of the Indian Banking system, are in the process of shedding their flab in terms of excessive manpower, excessive non-Performing Assets (NPAs) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions. PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The private players however cannot match the PSB‟s great reach great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last two years, the industry has witnessed several such instances. For instance, HDFC Bank’s merger with Times Bank ICICI Bank’s acquisition of ITC Classic, Anagram Finance and Bank of Madura. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the lookout.