Strategy for Banks in India in the Era of Economic Slowdown: Need for Thrust on Retail Banking with a Focus on Housing Finance

It is widely recognized that India is passing through an era of acute economic slowdown and there is an imminent need for kick-starting the economy by way of suitable revival measures. Indian banking sector is facing unprecedented challenges, like, mounting NPAs, diminishing profitability, eroding capital and so on. At this critical juncture, what could be the broad strategy for the industry that can get rid of most of these chronic issues and at the same time ensure sustained growth and profitability without compromising on asset quality? What could be the strategy to create more employment and also to revive the key sectors of the economy? This paper analyses the need for a strategy of „Retail banking focus with a housing finance thrust, along with proper ICT integration‟, and the capability of this strategy to diversify risks, maintain asset quality, reduce bad debts, create employment avenues, lure the new generation customers, and above all kick-start the recession-hit sectors of the economy because of the vast linkages of housing industry. Retail banking is the only feasible strategy for public sector banks (PSBs) in the current era of PSB consolidation. This strategy suits well with the national goal of „Housing for All by 2022‟. The role of banks in meeting this key goal by fulfilling the housing finance needs of the masses will be more vital in the future, since the market share of housing finance companies (HFCs) that has already been falling will start falling faster with the RBI‟s mandate to link loan rates to some specific external benchmark from 01st Oct.2019. Government package for housing sector declared on 14th Sept.2019 will boost housing credit.