Sindh Bank

So Sindh finally has it. After pushing its case for a few years and overcoming regulatory obstacles, the provincial government has gotten its way.
Where the natives of Sindh praised the governments effort to uplift the regional economy, others in the industry are concerned about the viability of such a new bank when the threats of economic stagnation and saturation in banking industry loom large.
From a political standpoint, the governments of KP and Punjab own banks and so lawmakers in the province of Sindh were well within their right to demand the same. And they have managed to put up the Rs10 billion ticket price slapped by the regulator.
Reportedly, the refusal to grant a banking license to Sindh Bank and not letting it bid for the RBS ultimately led to Salim Razas stepping down from the helm at SBP.
The newly appointed management of the bank argue that penetration in the rural areas of the province, and credit enhancement to the small farmer and the SME sector will be a key priority for Sindh Bank.
"While funding agricultural activity is a good sign, given the looming food security issues in the country, the sector is challenging because of lack of documentation and literacy levels of the prospective clientele," remarked seasoned banker, A.B. Shahid.
As it is, credit penetration and the use of information technology in the rural areas of Sindh is much less than the comparable segment in Punjab. Repayment rates in the small scale agricultural and SME sectors are not very encouraging either.
The banking sector has faced rising NPLs since the economic crisis of 2008. Though the rate of growth in toxic assets has stemmed in recent months, most industry leaders feel NPLs will continue to burden the system in the upcoming quarters.
In such a scenario, it will be difficult for a new bank to establish its brand and mobilise good quality asset base. And the aggressive growth plans of opening up 50 branches in the first year might be quite a challenge for the new bank.
"Its got the capital, it may do well to acquire a small or distressed bank and leverage their branch network for its operations,", Khalid Iqbal Siddiqui at Invest and Finance Securities told BR Research. Such a move would enable Sindh Bank to benefit from information and technology platforms, but most small banks are concentrated in urban areas, especially in Punjab, so penetration in rural Sindh will become a challenge and regionality of the bank will be undermined.
Perhaps the most daunting task for Bilal Sheikh and his team will be to fend off political influence in its operations. If the experience of public sector banking in the country is anything to go by, brace yourself for a bumpy ride.