Making banking services accessible and transactions affordable has reduced to being a regulatory agenda. Improving profitability has become the primary motive for bank managements, according to a top central bank official.

“In my view, while for the private sector banks, shareholders have, perhaps, emerged as the sole focus.

“For the public sector banks, employees and their well-being has become the primary focus. In my opinion, neither approach is sustainable in the long run,” said K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, in his address at the IMI, Delhi, recently.

The touchstone of any successful business lies in the edict that “customer is king”. Serving customers is, essentially, the reason why the banks exist in the first place, said the deputy governor.

“But over the years, I believe, the customer has become rather peripheral in the banks’ scheme of things,” said Chakrabarty.

Outlook for economy

While, on the one hand, the outlook for the global economy continues to be grim, the outlook for the domestic economy is also far more subdued than the last year, said Chakrabarty.

“Growth of the Indian economy for 2012-13 is projected at 5 per cent — significantly below the 9 per cent growth rate envisaged during the 12th Plan (2012-2017) and well below our desired goal of double digit growth rate,” he said.

Chakrabarty observed that going forward the banking system will continue to face a challenging environment given that its fortunes are closely linked with those of the economy - domestic and global.

Asset quality of banks has come under increasing pressure with rising non-performing assets (NPAs) and restructured loans.

The Gross NPA ratio for the banking system, which was 2.4 per cent in March 2011, increased to 3.6 per cent by September 2012.

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