latest trends in banking

7/29/2019 Latest Trends in Banking

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Organised banking

In India

General Bank of Indiain 1786


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Indian Banking-

Past,Present & Future

The Indian Banking system is

unique and has no parellels in the

Banking history of any country in the

world.

Various Phases of Indian Banking are:-

1. Phase I:: 1948 to 1968 Character

2. Phase II:: 1969 to 1991 Nationalised

3. Phase III:: 1992 to 2002 Prudential

4. Phase IV:: Beyond 2002 Universal


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Todays Banking

Banking


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3 T s Of Present DayBanking

Technology

Transparency

Transformation


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Where did we start?

3---6---3 Banking


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Accept Deposits @ 3%

Lend @ 6%

Go for Golf @ 3 pm


9/98

The Bank ingBus iness has gone

through fundamentalChange.

There is so muchpressure on Cos t .


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Business of Banking

AcceptDeposits

at lowrates

Security

oriented

lending---Lend against

security likegold, land &

building


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4 or 5Indian banks could

potentially enter theglobal top 20 by

market capitalisationby 2020.


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FICCI-BCG Report (August 2011)

Indias Gross Domestic Product(GDP) growth will make the Indian

banking industry the third largest

in asset size in the world by 2025


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Bankingis now

365X24


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Plastic money hasreplaced paper money.


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Why technology? Diligence Accuracy Speed Storage Automation Versatility


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CBS is nolonger a choice,but a compulsiondriven by Marketreality.


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You cannot doTodays JobwithYesterdaysMethodsand want to bein BusinessTomorrow


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It is not technology itself

that supplies returns to aBusiness but how

technology is employed to

meet businessrequirements

Standing examples::

ICICI Bank, HDFC Bank, Axis Bank etc


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Competition Competition is fiercer than ever

There is increasing pressure to reduceprices

Blaming each other for non performance

There is an urgent need to launch newproducts at an unprecedented rate

Large %age of work force lack adequateskills to cope up with present day

requirements People are overloaded with routine work

People do not come out with creative

ideas for expanding business


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What we see today? Increased competition New IT avenues Erosion of Product boundaries Less Govt.restrictions Erosion of & Geographic boundaries Pressure on bottom line Increased use of HR practices Customer centric policies/action High expectations of Customers who arewell informed & Possess TechnicalKnowledge. BASEL Accord III


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Technology BenefitsLarge Scale Use of Computers in Banking

Operations implies improvement in

Efficiency,

Productivity,

Customer Satisfaction,

Profitability


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Are we seeing these benefits fully?

Only partially

Increasing NPAshave drained the

profits


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Interest rate deregulation

Only SB and NRI deposits within the

RBI regulations now.

In the advances front, ROI on Exports,

DRI, Small loans upto Rs.2 lakhs

regulated by RBI.

All other rates at the discretion of the

individual Banks

Lowering of reserve


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Lowering of reserve

requirements

The CRR 4%Introduced in 1935 :: 7%

Highest in 1989 to 1992 ::15%

The SLR 23%Introduced in 1949-20%

Highest in 1990 to 1992-38.50%


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Govt equity in Banks has

been reduced. Banks are allowed to access

the capital market foradditional capital


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F i


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Foreign

Banks

permitted to

expand their

operations,including thru

subsidiaries.

N i t


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New private

sector

banks will

be

licenced.

New norms

announced


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Insurance

Infrastructure financing Gold Banking

Investment banking

Asset management

Factoring

Forfaiting

Adoption of Global standards w.r.t Capital

adequacy, Asset classification, Incomerecognition.

Risk based supervision

Best international practices

BANKS


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Narasimhan Committee 1998 Capital Adequacy,

ASSET QUALITY, NPAs,

Directed credit,

Prudential norms, Disclosure requirements,

Asset liability Mgmt.,

Earnings and Profitability, Systems & Methods

Review of Banking sector

Laws

Restructuring

includingmergers &

amalgamation

Reduction in

Govt.& RBI

share holding

to 33% in PSBs.

DONE

ToBE

DO

NE

Challenges for


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Challenges for

Banks Internally

Strategic planning

Staffing

the regulatory environment

Marketing


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Let us hear

about a

fewbanking

experiences


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B ki t d i N ti li ti


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Banking trends since Nationalisation Social banking

Lead bank scheme

Priority sector lending

Service area approach

Micro credit

Self Help Groups

Banking sector reforms

Asset Liability Management

Risk Management

Asset Classification

Capital Adequacy norms

Anti Money Laundering

Out sourcing of Banking services

Core banking


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The implementation of the International

Financial Reporting Standards (IFRS) in

india:

Select Companies from 1.04.2011

Insurance Cos from 1.04 2012

Banks & NBFCs from 1.04.2013

Convergence effected for IND Ass for 35

sections


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BanksWoo Indians

LivingAbroad

N t d


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Newer trends

Upgraded technology

Governance & Policies

Rating methodologies

Innovative products Emerging services

Simplified procedures

HR policies

Outsourcing of services

G & li i


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Governance & policies

Mergers & Acquisitions

HR Challenges

Microfinance

Risk management

New Basle accord-Basle I to III E Banking

Merchant Banking

Retail banking

CRM in Banking

Financial Inclusion

Bancassurance


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Transferring

money

A decade ago, transferring money from

your account to a family member's would

have meant a visit to the nearest bank

branch, a long queue and a few days-longwait.

Today, you can use your mobile phone to

make the same transaction instantly.


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Pilgrimages to bank

branches

Innovations such as automatic bill

payment, cash transfers through mobile

phones and online banking have ensured

that customers no longer have to make

pilgrimages to bank branches.

Passbook entries have been replaced by

hassle-free e-statements;

ATMs facilitate easy withdrawals and

payments.


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Are these transactions safe and

secure?

YES

S C


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The HT-MaRS Bank and Credit

Card Satisfaction Survey 2012

ranked banks according to customers'satisfaction across various categories.

I HDFC Bank

II ICICI Bank IIIAxis Bank

PSBs were down in the list.

Can you highlight the reason for this?


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Technology and constant

upgradation helped thePrivate sector Banks.


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Customer satisfaction

Top 10 slots went toPSBs

Bank of Baroda --best

government-run bank.


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Changing global and localfinancial regulations, such

as Basel III, will further

exert pressure on Indian

banks.


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Core Banking solutions(CBS)

Banks have come a long way from

the old days of manually recording

transactions in registers andtallying them up at the end of the

day.


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--More and more people are

shifting to alternative deliverychannels, which account for

nearly 30-40% of customers atpresent.

--Over the next few years this islikely to go up to 70-80 %,

Ch d K hh MD d CEO


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Chanda Kochhar, MD and CEO

ICICI Bank Ltd says::

only 15% of transactions on an average

take place through the branches. The rest

are happening outside.

ATM ld t f th lt ti


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ATM --oldest of the alternative

banking channels

Enjoys the highest level of acceptanceamong customers .

The number of ATMs in India has doubled

in the past three years. Currently, thereare more than 100,000 ATMs.

Around 70% of the ATMs are in urbanlocations.

The number of ATMs is to double by 2016,with more than 50% being set up in smalltowns.
http://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.htmlhttp://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.htmlhttp://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.htmlhttp://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.html


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RBI data 2011-12

---the volume of online fund transfers through

NEFT (National Electronic Funds Transfer,

used for low-value transactions) grew by71%

---RTGS (Real Time Gross Settlement, used

for high-value transaction) grew by 11.7 %,

Use of Cheques


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Use of Cheques

Charges for issue of

cheque books

RBI discouraging use of

cheques by advising banksto levy charges

Electronic cheque


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Electronic cheque

CTS 2010 Cheque


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Cheques

Physical cheques

Truncated cheques

Electronic cheques


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Technology & Cost

Technology is not only making bankingconvenient for customers, it has alsoallowed banks to expand their businesses

faster and bring down costs. The cost of servicing a customer :

-- at a branch Rs.200

--ATMs Rs.20--online and mobile phones, further less


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Moving to alternative channels

is a win-win for both sides,

viz; customers and Banks

Business correspondent


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Business correspondent

model

A third party serves as the

interface between a bank and its

customers.

To expand the Banks reach and

bring more people under formal

banking using technologies such ashandheld devices and micro-ATMs.


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Business

facilitatorModel

NGOs, Farmers clubs,

Cooperatives, Agri clinics,

Krishi vigyan kendras etc are

eligible. Services like identification of

borrowers, promotion of

SHGs, loan process, follow upetc are rendered.

Facilitates Financial inclusion


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The road


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The road

ahead We have come a long way since the 1991

reforms. We rejoice in our achievements and

success

We must have the humility toacknowledge that much more needs to

be achieved in our pursuit of excellence.

Challenges that lie


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Challenges that lie

ahead

A. Challenges in coping

up with the emerging regulatory

and supervisory framework B. Challenges in meeting the

specific needs of the economy

C. Challenges in fixing the fault

lines in the system.

I t


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Importance

oftechnology

for Bankoperations,andsurvival.


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Personnel

Departmentto

HRD

HRD in Banks


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HRD in Banks

Translates corporateobjectives into

achievements and

transforms the organisation.

The PSBs must hasten the

HR reengineering processand reposition their

resources


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HRD in thebanking industry

is to facilitateperformanceimprovement


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HR PoliciesEarlier

Appointmentthru referrals

Enquiry to

evaluatesuitability

Training afterrecruitment

Seniority basedpromotion

Present trend

Specialistqualifications

Campus recruitment

Online tests

Training beforerecruitment

Performance linkedpromotions

Innovativecompensationpackages

HR and Skill


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HR and Skill

Development

A sound and futuristic HR policy is

essential New technology is transforming the

skill structure in banking.

How should an HR Manager in abank respond to this fast-changing

scenario?

What exactly is the impact of technology on


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What exactly is the impact of technology on

the human resources employed in banking?

These new and enhanced skills would require new knowledge andbehavioral adjustments in respect of existing human resources.

In this context, the training system will emerge as an important toolof intervention. The training system in the banking industry has astrong structural base. However, in the past, the training activitieshave been more ritualistic due to absence of a strategic link between

training and human resources development. Today, it is importantthat the training function is made an effective organizationalintervention by establishing a clear policy of training anddevelopment within the framework of total human resourcedevelopment. The training establishments need to be activelyinvolved in the total training process starting from the identification oftraining needs, evaluation of training effectiveness, and the benefits

of training to the end-users, viz., the internal and externalcustomers.


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Emerging Models

Myopic (short term,involving

replacements for

retirement)

Telescopic (longterm, involving

development and

replacement)

Could be a Hybrid approach


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Emerging Hybrid approach

Impetus to recognize the talent within the

organization

Design bold initiatives for acquiring fresh

resources.

The attitude silos among the existing staff

about the understanding and conviction of

the new business models and theirpositioning, will be the drivers of success.

Junior management


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g

cadre

In the junior management cadre, quality isas important as quantity.

The attractive opportunities in Privatesector Banks leave PSB banks with onlymediocre talent.

But attrition is a game in any industry and

banks have to handle this in a pragmaticway.

In this context, myopic human resourceplanning will help.

PSB banks look at the following


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options: - Looking inward and recognizing the talent within the bank by

framing an HR policy to spot the staff from a specific age-group and promoting them, subject to suitability andeligibility and developing them for the future. This will resultin motivation and building commitment and loyalty.

Creating a new sub-junior management cadre for the frontoffice operations, and marketing and selecting newresources by loading performance-driven career pushes inthe cadre to make it attractive and, thus, reduce attrition.

The compensation should be innovatively structuredmatching the performance levels with clearly defined rolefunctions and responsibilities.

This model has been successfully implemented by somenew generation private sector banks.

The level of responsibility and accountability shouldinfluence the compensation to act as an exit-barrier.


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A special pool of people from the organisation can be identified and createdbased on their competencies for new and emerging business opportunities.A residual service of, say, eight to ten years, will be the enabler forstructuring a position-oriented career path and preparing them for theimmediate senior management positions which will open up in the very near

future. From the immediate next batch, with a residual service of, say, 10-15 years,

after a competency mapping, eligible human resources have to be identifiedand an action plan should be drawn to develop them for taking theorganisation forward in the next decade.

This segment is important for keeping the banks afloat in the HR front, andhas to be taken care of with regard to developing business initiatives skills.

This segment will be at the helm of affairs when banks will not only re-engineer the business models but also get engaged in a host of newbusiness initiatives. Retraining and re-skilling will be the top-most priority forthis segment.

S


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PSBs

Needs a HR Vision and

Mission Document in

tandem with the BusinessVision and Mission

Document.

R i i B k


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Recruitment process in Banks

Old procedure::

Thru referrals

Advt in papers

Now::

Camus visits

Selection process

Specialists recruited Online tests

IBPS mode

Changing


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g g

business lines

From plain vanilla banking solutions to

holistic financial and beyond financial

solutions provider This necessitates a clear understanding

of the changing business paradigm.

The middle-management resources withstrong banking background will be the

right fit for meeting these challenges.

Basel Committee Norms


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Basel III


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Basel III

According to Basel Committee onBanking Supervision "Basel III is a

comprehensive set of reform measures,

developed by the Basel Committee onBanking Supervision, to strengthen the

regulation, supervision and risk

management of the banking sector".

B l III


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Basel III

Basel III is only a continuation of effortinitiated by the Basel Committee on

Banking Supervision to enhance the

banking regulatory framework under

Basel I and Basel II.

Basel III seeks to improve the banking

sector's ability to deal with financial

and economic stress, improve riskmanagement and strengthen the banks'

transparency.

Basel 3 aims to:


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Improve the banking sector's

ability to absorb shocks arisingfrom financial and economic

stress, whatever the source

Improve risk management

and governance

Strengthen banks'transparency and disclosures.


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M bil b ki


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Mobile banking

has hit a tipping point.

New technologies, investment, and

infrastructure are enabling Banks to unlock

a new domain of financial services.

Wide range of services provided

bil b ki


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mobile banking

mobile banking is leapfrogging traditionalbanking to bring services to millions of

unbanked customers.

mobile banking is becoming a way of lifefor many consumers


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Banks have adopted several

innovative means to enhance

their base and make theirservice accessible .

ATM C d


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ATM Card ATMs are mini banks without employees.

Customers can withdraw cash from theaccount and get statements on their bankbalance using such machines .

This is a personlised plastic card bearing anumber for each customer .

The card is to be inserted into the machine

and enter the personal identificationnumber.

It gives accessibility for 24hrs a day and365 days in a year.

C dit d


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Credit card

This is a popular means for providing retailcredit.

A credit card is an instrument issued by a

bank in the name of the customerproviding for credit upto a specific amount.

Outstanding balances can be converted

into emis repayable in different months.

Financial


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Financial

Inclusion1. Delivery of banking services at an affordable

cost to vast sections of disadvantaged and low

income groups.

2. Some features:: Basic Savings account(No frill

a/c), Easier credit facility(General purpose credit

card Rs 25000), Simpler KYC norms, Use of IT(Smart cards with biometric identification, Mobile

held electronic devices for Bkg transactions , EFT)

Achievements


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The modern banking industry has

brought greater businessdiversification.

Some banks have entered into

investments, underwriting of securities,portfolio management and the

insurance businesses.

Taken together, these changes havemade banks an even more important

entity in the global business

community.

The unfortunate trends


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The unfortunate trends

Increasing Frauds

Increasing Cyber frauds Increasing NPAs

To reiterate


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The Critical areas of Change

1. Change in the concern & Approachtowards Business (From walk in

business to Go Out concept)

2. Change on account of financial

sector reforms

3. Technology Change4. Product change & Process change


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Tomorrow belongs topeople who prepare

for ittoday.

Lastly, The Winning Formula


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1. Improve bas ic eff ic iency-al l the t ime

2. Th ink as s imp ly & d i rec tly as poss ib leabou t what you are do ing & why

3. Behave to o thers as you wou ld w ish

them to behave towards you.

4. Evaluate each bus iness & bus iness

oppo rtun i ty with al l the object ive facts &

log ic you can muster

5. Concen trate on what you do well

6. Ask ques tions ceaseless ly about your

performance, your markets, your

object ives


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The Winning Formula ..contd 7.Make money-unless you do, you cant do

anything else8. Economize -doing most with the least.9. Flatten the company, so that authority isspread over---not a pyramid10. Admit to your failings & shortcomings,for improvement11. Share the benefits of success widely

among all those who helped to achieveit.12. Tighten the organisation whenevernecessary, because success tends to

breed slackness.

Time and Tide ait for none


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Time and Tide wait for none.

Let us keep moving.

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