New Banking Licenses Impact on

Indian Banking Sector

Presented By
Arrivals 2014.
Dr. Nilesh Khadse (Asst. Manager IDBI)
Ms. Chandani Bhoota (Asst. Manager IDBI)
Mr. Vikash Gupta (Asst. Manager IDBI)
Mr. Amar Kumar Bihari (Asst. Manager IDBI)
Mr. B.Anupam Benerji (Asst. Manager IDBI)
Mr. Praveen Kamble (Asst. Manager IDBI)
Ms. Manika Sahu (Asst. Manager IDBI)
Points of Discussion
Introduction
Impacts
Enhanced Competition
Lower Lending and Higher Deposit Rate
Financial Innovation
Use of Technology
Financial Inclusion
Corporate Governance
Conclusion
References


Introduction
Banking More than 60% financial assets of Indian
Economy.
India has 27 PSBs Cover 70% of total banking assets.
Low credit /GDP Ratio.
Large chunk of population is left out.


Need for new licenses.
Huge untapped Potential-
Demographic dividend
Burgeoning middle class
Increasing purchasing power parity
Widespread access to internet and mobile
Financial inclusion
RBI has granted in principle approval to IDFC ,
Bandhan Financial Services Private Limited.

Impact on Indian Banking Sector
Enhanced Competition
Enhanced competition

Pros
Beneficial for the customer- improved service;
Decreased charges.

Cons
Public sector bank is the first one to get hit.





Higher Deposit Rate And Lower Lending Rate
Higher Deposit Rate And Lower Lending
Rate
Pros
Higher return and cheaper credit .
Marginalised sections of the society will have access to credit.
Deposit and credit growth.
Decrease in concentration risk.
Cons
It will adversely affect the profit margin.
Stringent application of BASEL III norms.
RBIs Priority Sector Lending norms
More merger and acquisition possibilities.

Financial Innovation
Pros
Enhanced customer satisfaction.
More customised new banking products.

Cons
Banks may indulge in riskier credit propositions , there
is a potential for increase in volatility.
Regulatory costs will go up.


Use of Technology
Pros
To reduce the operational costs new banks can opt for
technology.
Cheaper and faster customer services.

Cons
Security and privacy concerns .
Increased risk of sabotage.


Financial Inclusion
Pros
Reaching the masses.
Coverage ,Outreach ,Deployment.


Cons
Time frame of scaling up from rural to urban areas.
Complexity in regulatory compliance
Corporate Governance

Pros
Dilution of Equity


Cons
Conflict of interest



Conclusion
New entrants unlikely to make material difference.

PSBs in line of fire.

Progressive approach to mass serving .

New Bankers New Era
References
http://www.rbi.org.in/home.aspx
http://www.arthapedia.in
http://www.iba.org.in/
Banks in India:Challenges & Opportunities- Keynote address delivered by
Shri Harun R Khan, Deputy Governor a t the BFSI Conference 2014 .
Business Standard.