Will India Become a Superpower? Here are 12 Hints

With its abysmal poverty levels, its rampant corruption, and surprisingly low per capita income, India still doesn’t come across as a superpower in the making. But a closer look at recent developments hints at several unique strengths that can offset these intrinsic disadvantages for India in the coming days.

World’s First CEO-Style Prime Minister
Who introduced professional leadership in politics? Barack Obama? Of course not. For all his NGO work, his oratory powers, and his professional education, the fact remains that Obama is a political leader and not a seasoned professional in economics or governance. He has to consult Ben Bernanke and others economists to understand the complex challenges. Contrast this with India’s once makeshift Prime Minister. He will never win a Nobel Prize for Economics, but Dr. Manmohan Singh’s Oxford education, and his professional career with UNCTAD, India’s Ministry of Foreign Trade, Ministry of Finance, and as the Governor of Reserve Bank of India, make him more than enough to understand the complex economic challenges on his own. In a world where the political challenges are all increasingly economical, that is a definite plus for India. More than that, Dr. Singh’s repeat success in 2009 has forced other political combinations like the BJP-NDA too to consider professional leadership, which is a development that can transform India into a superpower much earlier than anticipations.

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Family Values Drive Savings & Entrepreneurship
Nobody knows for sure whether family as an institution will survive as long as the earth, but if it does, India will be family’s last bastion. It is not just a matter of allowing or not allowing gay and lesbian sex, but a matter of children, children’s children, and transcending one’s existence. Struggling to have children, struggling more to bring them up, and struggling even more to keep them from fighting each other like Kokilaben, and forcing them to have families of their own are all chapters of the Great Indian Story. 22 years is considered late for a girl to get engaged, even if she is Sania Mirza. Here children never grow up, at least for their parents. And reverse mortgage will never become fashionable. Here homes and houses are for keeps, for generations. How this will translate to a booming India is simple – India’s entrepreneurship and its savings culture are rooted in its family. Grandparents, uncles, or parents run joint families almost like a small business. Family is India Inc’s smallest unit. And family keeps India young. If nations like USA, UK, & Japan had once reached superpower status relying on their strong families, and started withering based on their weakening families, India has an unbeatable long-term edge in this regard.

Cricket Fosters the Competitive Spirit
Yes, it is India’s cricket. Not an Englishman’s game anymore. Don’t be fooled by Pakistan and Sri Lanka battling it out for top honors recently, while India watched on the sidelines. That is Indian complacency, Indian overconfidence. But India will rebound. If Ramayana, Mahabharata, & Gandhiji were the only things holding this diverse nation together once, today India has cricket. Whether you like it or not, Sachin and Dhoni are as revered as characters from the epics or India’s freedom struggle. And not without reason too. It was cricket that defined India’s competitive spirit. The man on the street can’t understand India’s philosophical uniqueness or the country’s software prowess. But the moment he watches Dhoni & Co playing the Australians, he realizes – India can! India’s population strength will ensure that the cricket industry will be more and more India centric, even while forcing traditional sporting giants but non-players like USA, Brazil, and the European nations to adopt the game. Cricket is something that made India shrug off its non-competitive attitude from the ancient times. Every superpower needs its brand of nationalism, and cricket is India’s version.

Passionate About Information Technology
If anybody thought India’s information technology is only about business applications programming and outsourcing, they are going to be wrong. TCS, Infosys, Wipro, and the hundreds of smaller IT companies are only part of the story. Indian engineers have a noticeable presence, if not a dominant presence in the world’s top IT products and consumer applications companies like Google, Microsoft, Yahoo, Oracle, IBM, HP, Adobe, and lots more. Imagine a scenario where India somehow taps into this talent base. That day we will wonder what we used to call IT until now. Information Technology will achieve for India what automobiles did for making USA a superpower, what electronics did for making Japan a superpower, and what military manufacturing did for making Russia a superpower.

No Enmity With Any Nation
Not exactly Gandhi’s non-violence, but India still is one of the most non-violent nations on earth. And it is a mature, seasoned non-violence. Because, India had its experiments with strategic violence, be it Bhindranwale or Prabhakaran. But India was fed up soon. Violent means to achieve anything is not just Indian. India is interested in the world, but not terribly interested in Middle East, Afghanistan, or North Korea, thereby freeing enormous energy and resources for development. Even the response to the 2008 Mumbai terrorist attacks was superb, something only India was capable of. Had India responded immaturely then, Pakistan would have been torn apart into two nations by the Taliban, which would have been an even dangerous scenario for India. India's patience with Pakistan has ultimately forced the world and Pakistan to admit its experiments with terrorism, including owning up the 2008 Mumbai terrorist attacks. The country’s eventual superpower status will be unique in that India will be the first non-violent superpower, not resorting to violent means in its past, present, or future.

Of The People, By The People, For The People
The good news is that the world’s largest democracy is working. If showing the door to the flashy types is one parameter of a vibrant democracy, Indian democracy is alive and kicking. Lalu, Mayawati, & Buddhadeb learnt it the hard way. Indian voters can’t be fooled easily. They reiterated many things that were always true. Like for example, Advani is no replacement for Vajpayee. Best performing Chief Ministers from all sides led their parties to thumping victories in the last general elections. With 33% and 50% reservation coming for women in parliament and local governments soon, India’s democracy looks just unstoppable. Isn’t it just a matter of time before the world’s largest democracy becomes one of the world’s superpowers too?

Communalism is Getting Weaker
Leaders like Gandhi and Nehru harped on about secularism with a definite agenda. Because, they were smart enough to realize that communalism is the country’s only bane. But India is finally showing definite signs of growing up on this front. The miserable failure of the Ayodhya Temple plank during the recent election is a definite sign that the people are more Indian and less Hindu or Muslim now. With one of the largest Muslim and Christian populations in absolute numbers, India’s secular credentials will only get stronger by the years. Ongoing economic development will make secularism stronger and stronger, thus taking India closer and closer to superpower status.

Not a Lawless Land Anymore
One of 2009’s most startling Indian images is of Maya Kodnani, a Gujarat Minister, getting arrested for her alleged involvement in post-Godhra communal violence. Whatever be the court verdict on her eventually, that simple act proved a profound lesson – this country which is often tarnished for its lawless pockets, is not just the same anymore. Kerala’s CPM Party Secretary Pinarayi Vijayan also learnt the bitter lesson recently, when CBI charge-sheeted him on a major corruption case. India sometimes resorts to strange tactics to ensure rule of law. Prabhakaran was wanted for killing former Prime Minister Rajiv Gandhi, and India maintained an aggressive silence when neighbor Sri Lanka finished off Prabhakaran and his LTTE systematically. A similar tactic is now pursued by US against Taliban , Al-Qaeda, and Osama bin Laden, by using Pakistan. The fact that India can decisively move against the guilty, however mighty they might be, and whether they are inside or outside the country, speaks about the country’s emerging superpower-class power.

A Talented Race
It is not just APJ Abdul Kalam, AR Rahman or Saina Nehwal. Indian talents are getting noticed in diverse fields like business, technology, governance and what not. It is a sort of coming off age for Indian talents now. Agreed, not many like Ram Charan, Indra Nooyi, Padmasree Warrior, Arun Sarin, Sanjay K Jha, or Rajiv Ouseph are working or playing for India. But the message is clear. Indians are supremely talented. If USA became a superpower by attracting talents from worldwide, India has plenty inside.

Native English Speakers, Almost
One hundred years from now, there is every reason that English will be identified with India and not England or US. With a population more than double that of English strongholds like USA, UK, Canada, & Australia combined, this should be a reasonable projection. Middleclass Indian youth are not learning English anymore; it is almost their native language. If English is the international language of business and collaboration, this poses some problems to India’s competitors like China & Brazil to be the next superpower.

Natural Aces Like the Himalayas & Coastline
The natural resources of India are still to be realized. Just two examples would suffice – the country’s long coastline and the one and only Himalayas. Today’s technology may not be enough to fully tap these resources, but a day will come when India will be looked upon as a much more resourceful country than ever thought before. And just as in the case of USA, natural resources will be an ace up India’s sleeve in the days to come. India’s possession of two-thirds of the global occurrence of thorium, the alternate nuclear fuel to uranium, is just one hint.

International Competition is More Like Tug-of-War Now
Yes, there was a time when India used to think of her children as one billion mouths to feed. Not any more. Today it is like playing tug-of-war. Each nation’s youthful working class is their team. And India has a pretty growing team. With a burgeoning working middleclass – that is larger than USA’s population - it is only a matter of time before many teams slide against India. For the second-largest population in this globe, becoming at least the second-most powerful superpower might be easier than imagined.

No other aspiring superpower has all the core drivers of a superpower – population, democracy, leadership, nationalism, talent, youth, language, and resources – as much as India has. If India takes on its triple challenges of alleviating poverty, eliminating corruption, and ensuring growth, it will enter the superpower league effortlessly.

Canara Bank’s Growth Avenues & Challenges

Though Canara Bank is trying to grow organically at 23% this year to reach a business-mix of Rs. 4,00,000 crore by opening 200 new branches as well as 10 overseas braches, Chairman & Managing Director AC Mahajan had recently opined that mergers and acquisitions are the only way to grow. This hints at the pressures the bank is facing in competing with players one rung above them like State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, and Union Bank of India.

Canara Bank is one of the four public sector banks (PSBs) that has a significant exposure to the troubled national carrier Air India. The airline has sought more time from Canara Bank to repay its existing loans.

A medium-sized public sector bank (PSB), Canara Bank has completed selecting 1800 new employees, which might add strain in a recessionary environment, especially since there is still no performance-based pay structure in place. Canara Bank needs to put such a structure in place as nearly 20% of its 45,000 workforce will retire within three years.

Canara Bank’s Net Interest Margin (NIM) is still below the comfortable 3%, unlike many of its peers. The bank faces an uphill task in improving NIM.

Canara Bank has recently put on hold a plan for selling its Non Performing Assets (NPAs) as there were no takers from the Asset Reconstruction Companies (ARCs). But it might cause Canara Bank some strain, with the worsening loan-to-value (LTV) ratios, especially in commercial properties.

Bombay Stock Exchange (BSE) has recently halted trading in derivatives of Canara Bank. The public sector bank apparently couldn’t meet the guidelines set forth by BSE. Canara Bank is the only bank to have this trading facility stopped.

Moody’s Investors Service has placed Canara Bank’s rating on watch for a possible downgrade.

What Dena Bank’s Core Numbers Speak

Dena Bank showed significant optimism when it recorded one of the largest percentage rises in advance taxes among banks this fiscal. However, there are several serious challenges before the bank.

Dena Bank is in need of recapitalization by Indian Government to shore up its Capital Adequacy Ratio (CAR). But World Bank, from where the Government hopes to get funds for recapitalizing public sector banks (PSBs) like Dena Bank, has put forth certain conditions that is difficult to meet. It is a sensitive issue for Dena Bank as its government ownership is among the lowest of all public sector banks at just 51.2%.

Dena Bank has now sought Rs. 900 crore as recapitalization support from the government over the next two years, out of which Rs. 500 crore is expected this fiscal and the remaining in 2010-11. It will boost Dena Bank’s CAR from the present 12.07%, and will extend the bank’s lending support.

Dena Bank Chairman DL Rawal’s previous stints were with Punjab National Bank (PNB) and Canara Bank. He is widely expected to have a definite mandate till October 31st 2011 for pursuing growth avenues. Chairman Rawal’s aim is 400 more branches and a business-mix of Rs. 1,26,000 crores.

But against a net profit growth of 79% in fiscal 2008, Dena Bank’s net profit growth declined to 18% in fiscal 2009. This was quite unlike many PSBs, and hints at possible problems specific to Dena Bank.

The overall financial health of Dena Bank also needs to be significantly improved as the bank is challenged on both the Net Interest Margin (NIM) front (around 2.5%) and the Non Performing Assets (NPA) front (above 1%). Very few PSBs share this dual risk.

Like some other PSBs, Dena Bank too had recently restructured many loans – a move which is alleged to prevent some NPAs from appearing in the last balance sheets of these public sector banks.

Dena Bank’s recent performance might also include government compensating for non-performing agricultural loans, as well as large government funds like the National Rural Employee Guarantee (NREG) scheme switching to PSBs for disbursement, thereby forcing millions of hitherto un-banked to open accounts.

Though headquartered at Mumbai, Dena Bank has a sharp focus on Gujarat, which can affect the prospects of the bank positively or negatively in tune with the prospects of Gujarat, its current administration, and the state’s relationship with the new government at the Centre.

Confused About Diabetes Symptoms?

Are diabetes symptoms too vague or too late? Here is how you can be more precise with the classic diabetes symptoms, as well as about more reliable ways to be sure whether you have diabetes or not.

We have all heard the list – fatigue, thirst, hunger, urination, weight loss – all in excess. Yet, it will be interesting to analyze how many people have actually found out about their diabetes through such symptoms.

55-year old Theresa was shocked not as much with the news that she had diabetes, but when her doctor told that she had probably contracted it 15 to 20 years back. A pregnancy that happened in her late 30s would have sounded it off, but she had suffered an early miscarriage.

And finally, when she came to know it, it was not due to recognizing any diabetes symptom on her own, but her ophthalmologist getting alarmed at her eye condition. How could she probably have missed all the symptoms for 20 years? On hindsight, she did recognize many diabetes symptoms, but all of which she had put down on aging.

Anthony was 42 when he went for a varicocele operation. His pre-operative diabetes test was fine, but the incision failed to heal even after a week. Suspicious, the doctors tested him again, and were alarmed at what they saw. Anthony was quite fit, not feeling any diabetes symptoms at all.

The problem is that while some of the diabetes symptoms are vague, some other diabetes symptoms appear too late, and some other diabetes symptoms don’t appear at all.

Take for example diabetes symptoms like excessive fatigue, thirst, or hunger. Any or all of these diabetes symptoms can appear due to a variety of reasons, of which hyperglycemia (high blood sugar) is only one reason. But a diabetologist can help you be more precise – is your fatigue increasing in evenings or getting worse with sugary stuff? That kind of fatigue is a defining diabetes symptom.

On the other hand are diabetes symptoms like blurred vision, tingling sensation in the extremities, erectile dysfunction etc – none of which appear as soon as you develop diabetes. It might take years to develop these serious diabetes symptoms, as they are not direct symptoms due to hyperglycemia (high blood sugar), but symptoms arising out of organ damage brought about by diabetes. But by the time one diagnoses through such diabetes symptoms, the damage is done.

Some other commonly mentioned diabetes symptoms like excessive urination or weight loss may not appear in everyone with diabetes. Even worse, many people who develop Type 2 diabetes are overweight, not underweight.

Some quirky diabetes symptoms like irritability and dry mouth are harder to pin down, but a physician can educate on the typical diabetes breath. Type 1 and Type 2 diabetic patients are often found to have different smelling breaths. Similarly, a physician’s help is needed to ascertain whether wounds that refuse to heal or peculiar skin infections are diabetes symptoms or not in your case.

The nature of diabetes symptoms being such, the question is whether there is any easier way to know for yourself. Nowadays there are many inexpensive home glucose monitors and their test strips are also cheaper now. They are ideal for self-use and don’t require drawing blood into a syringe. A simple prick with the lancet would do.

If you prefer not to invest in a home glucose monitor, you can check for diabetes at a local clinic or hospital. It would be ideal to check for HbA1c and not the usual fasting, postprandial (PP), or random blood glucose tests. Unlike these regular tests that give only a snapshot of the current glucose level, checking for Glycosylated Hemoglobin (HbA1c) gives an estimate of how your blood glucose levels have been over the past 1 to 3 months. HbA1c is also ideal to detect insulin resistance or pre-diabetes, much before the actual disease sets in.

If you think you have one or two diabetes symptoms, you need to verify it by visiting a doctor or going for a test at your home or clinic. Though not all reasons behind developing diabetes are known, some factors make a person more susceptible to the disease. These risks include genetic factors (mom or dad or both having diabetes), obesity, lethargic lifestyle, high stress levels, and existence of other diseases like high blood pressure or high cholesterol. People with such multiple factors should never rely on self-diagnosing diabetes symptoms and should check their blood sugar often (every three months or so) and seek medical help if tested positive.

Why is Axis Bank a Distant Third Against ICICI & HDFC?

ICICI Bank, HDFC Bank, & Axis Bank started out at the same time – around 1994 – when RBI allowed private banks to be set up. While all three thrived, there is no doubt that Axis Bank (then UTI Bank) has always been the distant third.

All three banks had lots in common, like their strong parents, but while ICICI Bank and HDFC Bank moved with decisive momentum throughout these 15 years, UTI Bank even had to undergo a painful name change to Axis Bank.

Even recently, while there was smooth leadership change at both ICICI & HDFC with home-grown executives, Axis Bank had to bring in ICICI veteran Shikha Sharma for the top post.

Axis Bank needs to move much quicker with painful decisions like what ICICI Bank did with their PoS terminal division recently. After a rapid innings of growing their Point of Sale (PoS) business to 1.8 lakh terminals – the country’s largest, ICICI Bank decided to sell the entire business to First Data, citing increased pressure from shrinking margins. Axis Bank is still to take a call on this, even while having only lower margins, and a PoS business of 1.2 lakh terminals.

And even while Axis Bank finds it challenging to compete with ICICI Bank and HDFC, it is facing increased pressure from public sector banks (PSBs). PSBs are lending at 11 – 12.25%, against Axis Bank’s 12.75 – 16%.

One problem with Axis Bank seems to be its split ownership between - LIC, GIC, New India Assurance, Oriental Insurance, United Insurance, & Specified Undertaking of UTI (SUUTI). Even recently, Government had to intervene when most of the partners protested LIC’s bid to take over the stake of SUUTI.

Anil Ambani Eyeing Dhanalakshmi Bank?

Is Reliance - Anil Dhirubhai Ambani Group (R-ADAG) again eyeing Dhanalakshmi Bank? If the rumours are true this time, Dhanalakshmi Bank will become the second Kerala based bank after Catholic Syrian Bank to develop insecurity, despite having a not-so-bad history.

Ever since he changed over to Dhanalakshmi Bank from Reliance Capital Asset Management Company, a Reliance-ADAG company, Managing Director Amitabh Chaturvedi has battled suspicions that a buyout by R-ADAG is imminent. Despite many refutals, the controversy refuses to die down, taking into account the advantages Anil Ambani would have with a small bank in his fold.

And Dhanalakshmi Bank is no ordinary small bank. It has a history of 82-years, an uncommon feature in the country’s private sector banking.

However, after Amitabh Chaturvedi took over the helm, Dhanalakshmi Bank has been trying to shrug off its traditional roots and re-brand as a new generation bank. The wisdom of that move is doubtful, considering their traditional and community-oriented shareholders and customers, as well as the unreliable brand image of many new generation banks.

If the Reliance-ADAG takeover rumours are true, Dhanalakshmi Bank will be the second Kerala based bank to face a similar situation, with Federal Bank trying to take over Catholic Syrian Bank.

Amitabh Chaturvedi has expressed plans to grow Dhanalakshmi Bank even by 100% to bring it within the first-five segment of private banks. But with no inorganic opportunity in the horizon, the achievability of this plan is doubtable.

Dhanalakshmi Bank recently announced a venture fund with Rs. 2000 crore corpus, a move that will give it a better long-term investment view in selected companies. The fundamentals are also good with profit for 2008-09 nearly doubling over the previous year, making it attractive for deep-pocketed investors like Reliance-ADAG.

However, some recent strategies of Dhanalakshmi Bank are enigmatic.

Even in a recessionary environment, Dhanalakshmi Bank has announced plans to double its employee base by recruiting 1300 new people. The safety of this move is not clear, taking into account the level of performance-linked wage structure in place at the bank.

Dhanalakshmi Bank had also recently entered into an exclusive deal with Bajaj Allianz to distribute their insurance products. It was a rather strange strategy as no other private bank is relying on a single insurance brand. Moreover, many peer banks are entering the insurance management business and not just the insurance distribution business.

Until recently, Dhanalakshmi Bank exhibited surprising lethargy in decisively moving forward. The Board’s reluctance to reduce a major shareholder’s stake below 10%, as well as to increase their net worth above Rs. 400 crores were surprising, as it prevented further branch expansion as per RBI norms. Similar was the case with the long delay in removing the chit clause from Dhanalakshmi Bank’s MoA. Now these three issues stand solved. But investors and customers can’t be blamed for suspecting that further such surprises might be there in the bank’s books.

How will United Bank of India Fare This Year?

A once award-winning bank for its support for farmers, self-help groups (SHGs), rural job creation, and NREG, Kolkata-based United Bank of India will be tested this year with major challenges like capital restructuring, initial public offer (IPO), non-performing asset (NPA) sale, a major recruitment drive, and a still-to-improve capital adequacy ratio (CAR). Under Chairman & Managing Director SC Gupta, this North-East focused bank has introduced policies like personalized biometric smart cards for farmers, and is taking a leadership role during local crises like the recent Aila hit. Seasonal Magazine checks the strategies of United Bank of India through an interview with SC Gupta who is qualified in banking, law, & engineering:

Seasonal Magazine: Why can’t United Bank of India go for its IPO with the current EPS and book value? Why do you need to reduce your capital base artificially to tweak at these figures?

SC Gupta: United Bank of India is in a peculiar situation in respect of its capital structure. While various other banks in the Industry had adjusted major portion of their losses against the Capital, thereby bringing down their capital to manageable and serviceable size, our Bank did not set off the accumulated losses amounting to Rs 1434 crore as on 31.3.1997 against capital and continued to adjust the accumulated losses from profit over the years 1997-2005 totaling to Rs 1156 crore. Thereafter, on a request made by the Bank, the Government of India allowed writing off the reduced accumulated loss of Rs 278 crore against the capital during 2005-06 bringing down the equity capital to Rs 1532 crore as on 31.3.2006. It is very clear that with such a bloated size of capital the Bank cannot go for an IPO, since the current EPS and book value of share with such large capital base would not be attractive to the investors. After the restructuring of capital , as approved by government, our equity capital would reduce to Rs 266 crore which will be comparable with other banks in the industry and which would enable us to tap the Capital Market at a suitable time.

Seasonal Magazine: Why couldn’t United Bank of India meet the mandatory norm of 40% of Adjusted Net Bank Credit (ANBC) to priority sector last year?

SC Gupta: As on March 2009, priority sector advances of the Bank stood at 41.8% of ANBC which was above the national target of 40%. Our priority sector advances grew by 17.3 percent during 2008-09 to reach Rs 11757 crores as at the end of March 2009. Lending to agriculture , MSEs and other priority sectors has been our focus area.

Seasonal Magazine: Are you worried that World Bank pre-conditions will delay Government’s capital infusion to shore up your CAR?

SC Gupta: The Capital Adequacy Ratio (CAR) of the Bank as on 31st March 2009 stood at 13.28%. We do not apprehend delay in Government’s capital infusion in the banking system as a whole. The Government has permitted our Bank to restructure the Capital and has also subscribed to the PNCPS issued by the Bank. It is expected that there will be further capital infusion by the Government. Apart from this we are also planning to come out with our IPO during the current financial year. Moreover, we have the option of raising fresh Tier II capital against the headroom available if necessary. These together with our internal generations will provide us sufficient capital to maintain at least 12% CAR .

Seasonal Magazine: United Bank of India is reportedly contemplating auctions for 100 NPAs worth Rs 300 crore. With ARCs still not eager to lap up NPAs, what will be your strategy?

SC Gupta: Recovery of NPAs is one of our top priorities. We are taking all possible steps in this direction. Organising recovery camps on a regular basis, personal follow-up of large NPAs by the executives of the Bank, making compromise settlement as per the extant guidelines , resorting to legal actions including using SARFAESI Act are some of the initiatives taken by the Bank for recovery of NPAs. As a result of these initiatives the Bank has been able to achieve a gross reduction of NPAs to the extent of Rs 552 crore during 2008-09. In addition, the Bank has been exploring the possibilities of selling NPAs to the ARCs. We have placed NPAs worth Rs 300 crore to the ARCs and after examination of the offers received thereagainst the Bank finally accepted and disposed of NPAs worth Rs 86 crore during the current financial year. The Bank has further placed NPAs worth Rs 162 crore to the ARCs which is under examination at their end. Decisions will be taken in this regard on receipt of offers from the ARCs against such amount.

Seasonal Magazine: United Bank of India has announced recruiting 1500 new employees this fiscal. How do you rationalize this move in a difficult year, even while being unable to impose a pay-per-performance wage structure as in private banks?

SC Gupta: Every vibrant organization needs proper succession planning. Process of recruitment of 1000 officers and 500 clerks has been commenced by the Bank to fill up a part of the huge vacancies which will be created out of mass retirement during next three years. Secondly induction of tech-savvy new generation of workforce and talent pool would rejuvenate our existing strong and dedicated workforce and would add more value to the organisation. Thirdly our business is thriving in leaps and bounds . To match our growth we are in recruitment spree. The “difficult year” should not be a deterrent to such recruitment. In fact, the banking sector has emerged as the biggest job generator in the current fiscal. Lastly, this recruitment would also be cost effective in the sense that the wage bill of the incoming workforce would be much less than that of retiring employees who have reached the highest pay scale. Our recruitment programme is well planned and need based.

Seasonal Magazine: Serious concerns have recently been raised about PSBs resorting to mass restructuring of loans to temporarily whitewash NPAs from the balance sheet. Won’t they come back to haunt you in the next balance sheet? What is your take on this?

SC Gupta: Restructuring of loan is an effective and established tool to support the borrowers at the time of their temporary crisis. To overcome the present economic turmoil the Reserve Bank of India has come out with specific guidelines on this score. To support the affected borrowers from the impact of sagging economy banks have gone for restructuring of loan accounts as per the guidelines of RBI. As United Bank of India has restructured eligible accounts having assets and considering genuine needs of the customers and viability of the projects to overcome the temporary crisis, this should not pose problems in future.

Seasonal Magazine: How will you counter the allegation that PSB’s performance is largly driven by government compensating for non-performing agricultural loans, as well as large government funds like the NREG switching to PSBs for disbursement, thereby forcing millions of hitherto unbanked to open accounts?

SC Gupta: Government’s relief measures to farmers by way of Agricultural Debt Waiver and Debt Relief Scheme 2008 is a boon to those farmers who have been struggling to repay their loans. This has no doubt created momentum in the recovery front of banks’ agricultural loans. For United Bank of India the proportion of NPAs out of the eligible amount is small. Further ,we have been extending fresh loan to the eligible farmers benefited under the scheme. For our Bank the total amount eligible for reimbursement from the government is only a small part of our vast advance portfolio and has negligible impact on the overall performance of the Bank. NREG is a reliable relief measure and a useful tool to bring into the main stream sections of population that feel alienated because of serious underdevelopment. United Banks of India's services to this segment is a continuous process. We have adapted our strategies to tap the opportunities and meet the challenges. One of our avowed goal is to serve the unbanked areas and the down-trodden people to translate the growth into reduction of poverty- i.e., the growth to which the poor contribute and from which the poor also benefit. Disbursement of government fund may be an opportunity to reach such people but that’s not the end. In the banking system people’s participation in large number can be ensured by building relationship and promoting banking habit for inclusive growth. Our performance is propelled by our strategies and staff commitment.

Betting on Allahabad Bank

Under Chairman KR Kamath's charge, Allahabad Bank’s non-performing assets (NPAs) have gone down, and the bank faces no emergency recapitalization.

However, Reserve Bank of India's (RBI) recent directive to stop lending below prime lending rate (sub-PLR) may affect Allahabad Bank’s prospects adversely. Its loan book is currently dominated by sub-PLR loans at 64%.

Allahabad Bank’s net profit growth declined to 19% in fiscal 2009, compared to previous year’s 30%. This was quite unlike many PSBs, and hints about possible problems specific to Allahabad Bank, apart from the ongoing downturn.

Like some other PSBs, Allahabad Bank too had recently restructured many loans – a move which is alleged to prevent some NPAs from appearing in the last balance sheets of these public sector banks.

Allahabad Bank’s recent performance might also include government compensating for non-performing agricultural loans, as well as large government funds like the National Rural Employee Guarantee (NREG) scheme switching to PSBs for disbursement, thereby forcing millions of hitherto un-banked to open accounts.

Allahabad Bank recently faced major embarrassments in the form of two fraud cases – one by EOW and another by CBI, possibly caused by failure in due-diligence by some of its frontline officers.

Not many banks have seen all three – 19th, 18th, & 20th centuries. Established in 1865 by European bankers, this Kolkata based public sector bank (PSB) is the country’s oldest joint stock bank. Chairman KR Kamath who took charge in late 2008 is the youngest CMD ever of a state-owned bank, and is known for his articulation.

Why Federal Bank – Catholic Syrian Bank Merger is Bad For Both

With reports coming in about the proposed merger of Federal Bank and Catholic Syrian Bank (CSB), the big question in the minds of public stakeholders – both investors & employees - of both banks is who needs such a merger.

Not a Merger
Though touted as a merger, there is no doubt that this is going to be a buyout of the Thrissur-headquartered Catholic Syrian Bank (CSB) by Federal Bank. Because, profit-wise, Catholic Syrian Bank is less than one-tenth the size of Federal Bank. However, this is not a distress sale, or a purchase motivated by any banking regulators. That means, the main motivation for the move is from some Directors in the Board of Aluva-based Federal Bank. But why?

Branch Network Overlap
Firstly, both banks mainly operate in the same field – Kerala, and some cities of South India. Federal Bank has 615 branches against CSB’s 375. They have similar branches – often nearby to each other – in the same villages, towns, & cities. In other words, a serious overlap of branch networks. For either bank, a tie-up with another with a different geographical spread would be the ideal thing. In fact, Federal Bank was trying for long to find such a match in North, West, or East India.

Catholic Syrian Bank’s Weak Fundamentals
Secondly, CSB is not at a hot-buy as it has so many negatives – it hasn’t completed core banking implementation, it is not a listed company, and is generally looked upon as a not very professional setup. In fact, not many – except for Federal Bank - have come up to buy Catholic Syrian Bank’s largest shareholder Surachan Chawla’s 21% stake in the bank for more than an year now, despite an RBI directive for this NRI to sell to a domestic investor as soon as possible.

Overvaluing Catholic Syrian Bank
Thirdly, CSB is reportedly asking for a huge price – estimates vary between 1.25 to 2 Federal shares for 1 Catholic Syrian Bank share – in lieu of Federal retaining its name in the combined entity and Catholic Syrian Bank losing its name entirely. This has been a sticky issue with Kerala’s Catholic Syrian Church, CSB’s original promoter, and still an influential minority shareholder. In other words, Federal is seriously overvaluing CSB to get over such hurdles.

Employee Dissatisfaction
The employees of both banks are also not happy with the move, with Federal employees fearing fewer avenues for promotion, and Catholic Syrian Bank employees panicking about job losses. Such fears are valid since the branch network overlap will make many branches and employees on both sides redundant. Catholic Syrian Bank Officers Federation led by Jose Antony has already approached RBI to block the merger move.

Federal Bank Too is Lethargic
Lastly, for CSB shareholders too, Federal is not such a good buyer. The efficiency of Federal Bank is questionable since its total annual business of less than Rs. 55,000 crore is tiny compared with its net worth. For example, excess capital is restricting Federal’s Return on Equity (RoE) to just 13%.

Business Ethics
Federal Bank’s business ethics is also questionable, a point which came to light when Gujarat’s State Dispute Redressal Commission (SDRC) recently charged Federal Bank with unfair trade practice for revising upwards the fixed interest rates of 58 long-term housing loans. Federal had attracted these floating-rate customers from ICICI & HDFC promising a fixed-rate, but later revised it upwards.

Federal Bank’s Foreign Identity
Federal Bank is also facing another hurdle ever since the new FDI guidelines came into effect in February. Reserve Bank of India has pointed out that under these guidelines Federal Bank should be classified as a foreign-owned bank as its foreign ownership is now 50% or more.

Can Bank of India Balance Growth and Profitability?

When it comes to Indian banking, there are certain notions regarding private sectors banks and public sector banks. Profits, for one example. Which is the most profitable bank? An agile new-generation private bank like Axis Bank or a traditional public sector bank like Bank of India (BoI)? Axis is no doubt the country’s most profitable private sector bank at 13.22% profitability, but BoI beats it squarely at 15.50%. In fact, the 103-year old BoI is the country’s second most profitable bank. Bank of India, however, has no plans to rest on its laurels. BoI is embarking on a grand plan that will see a business mix of Rs. 4,00,000 crore by the end of this fiscal. For this plan to succeed, deposits should grow by 20% and advances by at least 22%. But BoI finds the target achievable, as so far it has managed to grow at a rate above the industry-average – 26.5% YoY in deposits and 27.5% YoY in advances. 2009-10 would be a tougher year, but BoI plans to tackle it with creative initiatives like expansion in high-margin overseas markets – Kenya, for one example, a nationwide co-promotion with Tata Motors for commercial vehicles, and of course, the latest in technology implementation. Recently, tech major Hewlett-Packard completed Core Banking Solution (CBS) implementation in 100% of BoI branches; its greatness being that not only were there 3023 branches to cover, but the remotest of them were powered by Solar UPSs and VSATs. BoI’s free credit counselling service ‘Abhay’ deserves special mention for its grassroots approach. Debt-ridden customers – of home loans, car loans, credit cards, or personal loans - of all banks are welcome here, and BoI’s officers would not only counsel them, but negotiate with individual banks for restructuring their debt by way of increasing repayment term or lowering interest rates.