Banking : Economical Challenges and Solution

We have witnessed a rapid change in the phenomenon of Indian banking; In short in last decade our banks changed tiny to huge and also changed its ways of working from orthodox to modern. Our banks are expending and developing very rapidly. And being in a developing stage, it automatically invites lots of challenges. Lets point out the challenges and their solution for the economical growth of Indian Banking industry. The challenges we have to face are many; but those need to be solved first are-

·         Credit Delivery System:

         this is what banks depend a lot on to yield profit, as bank tends to earn as much as fast and expended this system is, but it is rather slow, NBFC with the fast and easy credit delivery are diverting customers from banks to them and Infrastructure financing Institutions are enjoying the high profile landing in infrastructure projects with their better asset-liability management. If we have a look on the Credit Deposit Ratio it seems as splendid as 78.1% for March 2012. Though deposit declined to 13.4% in the same time from 17% in March 2011, which raises an alarm. RBI’s stick monetary policy and frequent changes in RR, RRR and CRR also forbidding banks to deliver the adequate amount of credit. Moreover the bed circles of global economy are also adding insult to injury.

Overall we cannot afford any abbreviation to a sound Credit Delivery System, The points to be concerned about-

1.      1) Make it easier for the customer to avail advances from banks so that the credit and profit may increase and we also have to take care of deposit part.

2.      2) We need to find a way to manage and to reduce the risk factor in infrastructure project landing; asset and liability mismatch can be handled with the adequate support from government and International financial institutions like IMF, World Bank and Asian Development bank.

·         Financial Inclusion – 

       A huge part of our country is still has no access to banking facility especially the low wage earning laborers and  who are living in far villages, banks cannot be opened until there is an ample business potential. Forget the profit once but the operational cost at least to be recovered. Though Government has identified unbanked population and with the help of commercial banks it is working under FI plan and trying to provide the banking facility to those, business correspondents has also been appointed in few areas but somehow this scheme is not getting the expected response and it is universally understood fact that without the inclusion of every household we cannot grow much. So utilizing the full capacity of Indian market is also one of the bigger challenges.

Solution- As the frame work is already been prepared to combat this challenge, only the right strategies need to be made and their right execution required to be assured. Apart from these we need to spread awareness and let the unbanked people know the benefits of including to the banking.

·         Technologies and Alternative channels :- 

       Indian banking is now technically updated no more ledgers are there and after the introduction of CBS, banks are enabled to provide better service, RTGS, NEFT and other mode of electronic transactions are quite successful in saving the time and cutting the cost but being a part of a technically backward country we are bound to face many obstacles, branches have evidently been facing slow or no connectivity very often. The bigger issue is the lesser participation of public in using the alternative banking channels i.e. mobile and net banking because of what our branches are bearing the load of innumerable foot-steps inside the branches  subsequently banks are tolerating the extra operational cost and the precious time is being over occupied by the regular transactions.

The solution is not that tricky just have to make sure that we are encouraging our youth and other capables to use these alternative channels, we need to divert as much of masses to ATM, debit card, mobile banking, net banking and other alternative as possible so that our man power can be used to achieve the greater objectives and for this- the numbers of time we give lucrative offers to customer and incentives to staff can be increased, which is already in practice to an extent.

·      CRM-  

      We have witnessed a great turnaround in our banking industries in last two decade as the  foreign and private bank came in the picture and brought up competitiveness and changed banking from Service based to Sales Based. Owing to the load of work and being habitual of not giving importance to a customer we may lose many of our potential customer as they have other options i.e. for investment -Stock market, for finance- NBFC , so the importance of Customer Relationship Management is increased to retain the customers.

The need is to aware our bankers about the fact and to motivate to bring in an innovative and customer friendly approaches. Specially designed training programs can do the trick.

·     The Upcoming Bulk Retirements- 

      This is the universally known fact that the main force of our banks are going to retire in bulk by 2015 as the 40-50% of bank’s higher and middle management officials are approaching their 60s. Undoubtedly the young bankers are capable enough but as we know there is no alternative to the experience. After their separation it may be difficult for the banks to maintain the pace.

We need not to wait till the time but should fasten our belt as immediate as possible, young guns should be provided with some real responsibility and a proper guidance so that they can be prepared for the tough time ahead. We can identify the potential and nature them accordingly.

The Bed Economical Cycles-

being a part of global economy our banking sector cannot escape from the growth/down-backs of global economy, the bed economical cycles like recessions, Debt Crisis, lowering Credit Ratings and Stock-Market slowdown and all other likewise factors are concerns of worry. And a developing nation like India is obligated to make strict monetary policies, which only add insult to the injury.

As these cycles cannot be avoided so we can only be prepared to face them. To do so we should increase our customer base and join hands with other economies of the world, this will assure much required and adequate help in the time of misery and by going International we can open the doors of more business, more oppertunities and more growth but prior to this our banks are highly recommended to include all the individuals in banking under the financial inclusion.

·     Working Conditions- 

      Whenever it is about comparison of work environment of bank with other sectors it causes a dissatisfaction among the bankers, this problem is much monstrous in the reference to the Public Sector banks. Increasing the salary and wages seems the only solution but this will only lead to another problem i.e. less profitability apart from this rural posting, frequent transfers, after working hour work, lack of adequate staff and the bulk of work load is also making the issue more nasty.

First of all we need to generate more profit. Parallel banking or third party product and non interest income are the areas that should be focused on more, and more effectively. A special task force or sales team is required which can come up with sound strategies and can yield extra profit, outsourcing should be in control, so that our banks may provide better emoluments to staff and earn more profit.

·     Frauds and Scams- 

      The frauds and scams are too frequent now a day, with the expansion of technology there is a huge numbers of cyber criminals apart from this bribery and fake note circulations are also doing no good for the growth of our industry. Despite of all security- accounts are being hacked, ATM’s being looted and fake loans being disbursed.

Banks are the places to be vigilant, not only our staff but also customers should be aware of the ways and manners of these activities are being committed and should be trained to tackle them. I would appeal the bankers to take the initiative and share their experience in connection to this issue with our staffs and customers through bank magazines and day to day discussion. This is an issue that can only be solved with better set of mind and co-operation.

 As far as I am concerned our banking industry is booming and promising and providing a way of development to itself, its employees and our country. All depends to us (the bankers), how we take it to another level. The problems are everywhere and there are thousands of the solutions of each a problem, we just need to keep our spirits high.

" Challenges are no problems but opportunities to turn the miseries into achievements......"