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Cover
Story
Malaysian
Banks : Small but Strong -
Katuri Nageswara Rao
Malaysian
banks have undergone significant consolidation in the
wake of South East Asian financial crisis with mergers,
acquisitions between banks and finance groups. There
are only ten domestic banks now accounting for about
76% of banking business. Foreign banks account for the
remaining 24%, but their share appears to be growing,
forcing domestic sector to strengthen and become competitive.
Domestic banks may be termed as conventional pure form
bankers extending finance to traditional sectors like
industries, trade, personal and SME sectors. They are
not big by size of assets but they are becoming stronger
due to the reforms process. Services like insurance
and wealth management are yet to pick up through cross
selling opportunities. Non-performing assets are a little
on the higher side needing greater attention. Recapitalization,
sale of weak loans to Asset Management Companies, Corporate
Debt Restructuring, tightening of credit appraisal and
supervision techniques have all contributed in bringing
down the NPA level. Malaysia has a long way to go in
areas like corporate governance and risk management.
Malaysia
is an important sector for islamic banking as well;
with the establishment of Islamic Financial Services
Board last year, this form of banking may gain further
momentum.
© IUP. All Rights Reserved.
Malaysian
Banks : AmBank Group - Katuri
Nageswara Rao
Formed
after the merger between MBf Finance and Arab Malaysian
Bank, the AmBank Group has grown strong, thanks to the
benefits from the business operations of commercial
banking and the finance company. It has a varied portfolio
of products supported by state of art technolgy for
its end-users. It has expanded its operations widely
and has set-up branches and ATMs in good number. The
bank's financials have been impressive.
© IUP. All Rights Reserved.
Banking
Scenario
A
Pioneer's Progress Banking Sector in Karnataka --Ravi Sharma
Karnataka
is the cradle of banking sector in the country. It has
seven major banks both private and public sector. The
entrepreneurs started selling financial services in
the region, which is inaccessible and not very hospitable
for business to grow. The passing of the Cooperative
act in 1912 has also provided fillip to the financial
sector. Many private sector banks have also started
their journey during the Independence movement. While
these banks started to serve particular communities
or professions, after nationalization their focus was
changed to social banking. With the onset of reforms,
these banks restructured themselves to face the new
challenges. Today, many of these banks are outshining
their rivals.
©
Frontline, July 16 - August 1, 2003. Reprinted with
permission.
Regulatory
Environment
Equator
Principles : Why Indian Banks too Should be Guided by Them ?
--Pratap Ravindran
Equator
principles are guidelines for banks and financial institutions
for voluntarily managing social and environmental issues
while financing development projects. Banks categorize
projects into high, medium and low environmental and
social risks categories, globally based on IFC's categorization
process. Banks in India are not signatories to these
priniciples as of now. While they finance projects,
with prior clearance of the environment issues, the
adoption of these principles could benfit the stakeholders.
The
Equator principles will apply to project with a minimum
value of $50 mn. These principles will increase the
banks' learning on project financing and better enable
them to advise clients and control risks.
©
Business Line, July 25, 2003. Reprinted with permission.
International
Banking
Banking
in the Gulf States
--Nasr-Eddine
Benaissa, Laurent Nordin, and Hans-Martin Stockmeier
Retail
Banks in the gulf region are facing tough competition
from foreign banks and domestic banks. As the retail
market grows, many banks are offering innovative, customized
products besides bringing best practices in marketing
and distribution for deeper penetration and revenue
growth. These new products are posing challenges to
conventional banking in the region, which says investment
should be productive rather than speculative and lenders
instead of charging interest, should share profits.
Foreign banks, which are also active in this region
effectuate expertise and innovation. Conventional banks
need innovative products, sales and distribution channels
to survive. To prosper in an increasingly competitive
market, retail banks in Gulf States must evolve from
deposits, loans and transaction services to more sophisticated
fare.
©The
McKinsey Quarterly, 2003 Number 2 (www.mckinseyquarterly.com).
Copyright 1992-2003. McKinsey and Company, Inc. All
Rights Reserved. Reprinted with permission.
American
Banks : Withstanding the Storms - D Satish
Banks
in general suffer during recession. In contrast, the
US banks are reporting healthy profits. What are the
factors contributing to their vibrancy?
© IUP. All Rights Reserved.
Credit
Management
Can
We Have Credit-less Growth?
--Mythili
Bhusnurmath
Corporate
credit is not picking up, while macroeconomic fundamentals
are improving in India. Strict asset classification
norms, better inventory management, and high plough
back of profits, besides threat of the securitization
act might have collectively contributed to low corporate
credit growth. The rising investment by banks in government
paper could be resulting in consumption led growth in
industries. But then, unless industries enhance investments,
real economic growth cannot happen. While US has been
witnessing jobless growth, is India passing through
a phase of credit-less growth?
©The
Economic Times, August 4, 2003. Reprinted with permission.
Corporate
Debt Restructuring Borrowers' bounty --Hina
Shah
Corporate
Debt Restructuring (CDR) is a proactive and preemptive
approach in attacking potential NPAs (Non-Performing
Assets). Earlier, the restructuring efforts were fragmented
resulting in delays and cases remained unresolved. CDR's
objective is to establish timely and transparent mechanism
of restructuring. This mechanism helps viable companies.
To be eligible for CDR, an asset need not to be a sticky
NPA. This is voluntary arrangement between borrowers
and lenders. It is a three-tired structure. At first
tire, CDR forum will lay down policies and guidelines.
Second, an empowering group comprising executive director
level representatives will approve the package of restructuring.
Third-tier is the CDR cell, which acts like a secretariat
and scrutinizes rehabilitation proposals.
Many
banks are adopting the CDR mechanism. About 35 domestic
banks and institutions have already signed the agreement.
©
Business India, July 21-August 3, 2003. Reprinted with
permission.
Banking
Products
Securitization
: A
Promising market for India
- Yash Paul Pahuja
The
securitization market in India is at its infancy, but
holds great promise. While it is time consuming, complicated
and can be expensive, securitization does offer access
to large amounts of funds.
© IUP. All Rights Reserved.
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