January 31, 2010: The coming of Druk Punjab National Bank (DPNB) has its own pros and cons. While, the banks are bound for more competition, banking services are expected to improve eventually benefiting the customers.

However, certain quarters have been raising the issue of the survival of local banks with the arrival of the second largest public sector bank of India in Bhutan that has a 51% stake. The local partners will own a mere 19% of the equity with the balance 30% to be floated through Royal Bhutan Securities (RSEB).

The risk, a few economists say, is the survival of local banks with such a big player coming into the scene.

“Within the decade PNB will probably dominate the banking sector in Bhutan resulting in local players like Bank of Bhutan, Bhutan National Bank and Bhutan Development Finance Corporation, including lending institutions like the Royal Insurance Corporation of Bhutan and the newly-established Bhutan Insurance Corporation to have drastically reduced businesses and profits,” opines the executive director of DHI.

The over-a-century old experience of PNB in India will work against the already disadvantaged local banks, say observers. In addition, the vastness of its operation in India and worldwide and the man power and resources puts DPNB at a more competitive edge than the local banks.

The PNB was established in 1895 and boasts of 5,000 service outlets in India, 4 branches in the UK, 2 branches in Hongkong, a joint venture in Nepal, offices in Dubai, Shanghai, and Kazakhstan.

BT after talking to several Bhutanese economists made a list of reasons on the possibilities of how the local banks may lose out in the competition with the DNPB.

Economists therefore suggest that Bank of Bhutan, Bhutan National Bank, including the insurance companies should now find ways to encounter these challenges. And a plausible one at that is to sell majority equity shares to a large Indian bank that can compete with PNB.

The BOB already has the State Bank of India owning 20%.

Kipchu Tshering, chief executive officer of BNB said, BNB welcomes the competition as it’s good for the customers as a whole.  “With our own strategic planning, BNB can face challenges,” he affirmed.