Ashvin Parekh, PriceWaterhouse Coopers
By I think banks realised the need to restructure in | 15 Feb 1999
On financial
sector changes
I think banks realised the need to restructure in
early 1992 when the Reserve Bank of India articulated a reform programme. Phase I of the
programme aimed at restructuring financial reporting and provisioning norms, and
improvement of recovery management.
Several progressive banks took the RBI's advice and started examining their business direction and structure. There were several defects and inefficiencies in the system. Our banks realise the significance of strengthening business planning and development, credit and distribution, operations and executions, and controlling risk management.
There has been a setback in the last two years. Phase II of the reform, which is about more autonomy for banks in human resource management, has gone off the rails. Likewise, in insurance, the public sector companies in the non-life and life businesses have to reorient themselves to face competition.
On M&A and its impact in India
I see ownership changes happening in 1999 -- with
new gusto. A large number of Indian companies have lost their values in the market and
could be targets for acquisition. Our regulatory environment continues to offer good
shields against hostile acquisitions. But I am sure the very size of the problem will make
the regulators rethink these shields.
In the financial sector, we have some peculiar problems, arising out of ownership issues. A substantial part of it is still government-owned. The government owns about 85 per cent of commercial banking, and all of insurance. There is also need for clarity about the people question, and we need regulation here for a business-driven M&A scenario here to materialise.
On IT and management
Some of our financial service companies have
attempted to articulate their business direction, plans and strategy. They have
reorganised or restructured themselves in line with their revised business plans, and are
now ready for business and information technology changes. Organisations like ICICI, IDBI,
SBI, and GIC are investing immense amounts of resources and effort into upgrading their
technology infrastructure.
Other companies are still grappling with their strategic and structural issues. They are not yet ready for technology upgradation. If they invest in technology without comprehending the business direction, they will tend to waste their effort and resources.
No amount of emphasis would be enough to highlight the significance of information technology in financial services. It is an integral part of all aspects of financial services and the sooner the financial companies embrace new technology, the greater their chances of survival.
