Bank Challenges

8/6/2019 Bank Challenges

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REVOLUTIONARY

CHANGES & GLOBALCHALLENGES IN BANKING

INDUSTRY


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INDIAN BANKING:

KEY PARAMETERS

Indicators June

1969

March

1990

March

2004

No. of Commercial Banks 89 274 290

No. of Reporting Offices(Branches)

8262 59572 69071

Population Per Office (000) 64 14 16

Aggregate Deposit (Rs. In

Billion)

46.46 1735.15 12786.67

Gross Credit (Rs. In Billion) 35.99 1054.50 7592.10

Credit Deposit Ratio 77.50 60.80 59.40


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Various factors that are prerequisites for our

banking industry to attain global heights are

enumerated as under

1. Consolidation in the banking industry.

2. Technological upgradation.3. Improved work culture and environment.

4. Better Internal Control system.

5. Skilled and Trained personal.6. More transparent regulatory system.


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STANDARDS IN BASSEL II

1. Return on Assets (ROA) > 1%.

2. Return on owned funds (ROF) > 18%.

3. *GNPA% < 3%

4. *NNPA% < 1%

5. *CAR > 12.5%6. Cost-Income > 40%

7. Cost-Average Assets < 1%

8. Net Interest Income average Assets > 3.5%

*GNPA (Gross NPA / Total Advances)

*NNPA (Net NPA / Total Advances)

*CAR(Capital Adequacy Ratio = Risk Weighted Assets / Capital + Reserves)


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Strategies for repositioning of the banks

in India keeping in view the following

objectivesa) Increasing the capital base for expanding

operations.

b) Reducing the transaction costs involved.

c) Reaping the economies ofscale.d) Exploiting the geographical, product &

information technology synergies.

e) Evolving as a one stop shop forall financial

products and services.f) Reducing the effort and cost involved in

placement of IT infrastructure andimplementation of CBS and Basel II norms.


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The various factors that are driving the

banking industry towards the road of

consolidation are as under

1. Global competition.

2. Size

3. Need for Wider Market Reach

4. Basel II norms

5. Level of NPAs


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Leveraging Optimum IT applications require

1. Total integration of technology into business

plan.

2. Business segment-wise IT plan, if need be

3. Networking solution (Core Banking)

4. Thrust on customization of hi-tech services

5. Leveraging IT towards rightsizing overheads


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Banks have to follow the following

parameters in meeting the Basel II deadline

in time

1. Risk Management

2. Data Management

3. Technology

4. Trained personnel


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RISK MANAGEMENT

If there is one work which describes howbusiness is today Vs half a century ago, the

word would be risky. Measured by the range

of possible out terms in any business scenario,

measured by how rapidly various trends

fluctuate, measured by key operating

parameters, measured by the pace of

technological change, the world is clearly ariskier place than it was at the II world war.


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DIFFERENTTYPES OF RISKS

1. Credit risk2. Country risk

3. Business Risk

4. Operational risk5. Management risk

6. Regulations (Systems) risk

7. Technology Risk


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Listed here under are the challenges likely

to be faced by Banks that could affect the

future growth ofRetail Banking

1. Rising indebtedness

2. Technology advancements

3. Customer information

4. Distribution network

5. KYC (Know Your Customer) issues


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Reform initiatives leading to decline of NPAs

1. SARFAESI (Securitisation & Reconstruction of

financial assets & enforcement of security

interest) Act 2002.2. Increased provisioning

3. Debt Recovery Tribunal

4. Corporate Debt Restructuring.


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It is interesting to note from the list below

the Banks exposure to various sectors in

the past 1 year (on a scale of 1-7 with 7being maximum exposure)

1. SMEs

2. Large Enterprises3. Services Sector

4. Retail

5. Infrastructure

6. Agriculture & Micro Credit

7. Export Financing


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New tools forTreasury Management

1. Derivatives & Futures

2. Interest rate options

3. Interest rate swaps

4. Fex derivatives

5. Equity linked derivatives

6. Commodity linked derivatives.


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Information Technology for international

Banking system.

SWIFT (Society for Worldwide Inter-Bank FinancialTechnology) Communications.

It provides users with a communication servicefor inter banking messages which are sent earlier

by mail or cable. Messages are stored at switching centers and

users are able to input transactions whether thereceiving terminal is available or not.

It has helped to create standards among banksexchanging information at the international level.

It operates worldwide, supporting a range ofmanagement activities.


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CustomerService & Branch Banking

Executive Survey Customer Survey

Service 24 hrs access &

convenience key

Responsive

service; personal

attention more

than convenience

Internet / Online

services

Quickly becoming

a basic

requirement

Not yet important

to most consumers

Branches / Offices Declining inimportance

Remain highlyimportant for

banking customers

Non-traditional

providers

Greatest

competitive threat

Most customers

not yet interested.


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How to achieve our goals?

It is by creating a knowledge culture. Knowledge isthe life blood of all Corporates. Dont confuse it withinformation. There must by lust for knowledge.

Successful Banks set world class standards for

a)Product Development.b)Process Innovation.

c)Product & process quality.

They encourage participative decision making in

process innovation & product portfolio applyingknowledge is done by personal communicationacross hierarchies, cross functional teams &synchronized goals across functions.


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CONCLUSION

To conclude, revolutionary changes in internationalbanking bring about lot of challenges globally. Tomeet it knowledge culture is required.

Then only a Corporate transformation can be

achieved to meet these challenges without crisis.To end I quote the words of Jonathan Day &Michael Jung of Mckinseys

The art of leading deep corporate change can be

learned. The trick is to help each member of thecompany discover a new reality.


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CONCLUSION

Banks have finally recovered from thehangover brought about by the giddy

exuberance of the dot com boom.

They are focusing on super fast pricing

engines, error free post trade functions and

good internal risk management rather than

fancy websites.

EUROMONEY


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THANKYOU

Bank Challenges

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