No threat to established pvt sector banks from new entrants

Tags: News
New players in the process of making their foray into banking sector have enough growth opportunities and they will not be a threat to existing private sector banks, a top HDFC Bank executive said today.

"I think the market is large enough to support the growth of more new private-sector banks," HDFC Bank Deputy Managing Director Paresh Sukthankar said at the IIFL Investor Conference here.

"If you look at the last couple of banks that came in, they have done extremely well for themselves, but that does not mean that it has affected the growth rates of say ICICI, Axis or us, which are the older private sector banks," he said.

A four-member panel headed by former RBI governor Bimal Jalan is scrutinising applications for new banking licences, for which 25 entities, including those belonging to large corporate houses like Anil Ambani-led Reliance Group, Aditya Birla Group, Bajaj, L&T and Religare groups, are in the fray.

Other members of the committee include former RBI deputy governor Usha Thorat, former Securities and Exchange Board of India (Sebi) chairman C B Bhave, and Nachiket Mor, director on the central board of RBI.

Suthankar added that new players will take at least 5-10 years to establish themselves.

"Banks that have earlier tried to acquire retail loans primarily through sales agents, through third party distributors have had their challenges both in terms of acquisition costs and in terms of asset quality," he said.

On the impact of Basel-II norms on banks' return over equity, Suthankar said, "So essentially, if you have to maintain high single digit Tier I or low double digit Tier I, the peak ROEs will come off."

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