Core bank­ing vi­tal for new gen­er­a­tion

The Pak Banker - - COMPANIES/BOSS -

S K V Srini­vasan, Ex­ec­u­tive Di­rec­tor, IDBI Bank says IDBI Bank keeps up with cur­rent trends of dig­i­tal­i­sa­tion and mo­bil­ity as it plans to ex­pand across the globe.

He said IDBI Bank is the youngest, new gen­er­a­tion, pub­lic sec­tor uni­ver­sal bank that rides on a cut­ting-edge core bank­ing in­for­ma­tion tech­nol­ogy plat­form, en­abling it to of­fer per­son­alised bank­ing and fi­nan­cial so­lu­tions to its clients.

The out­look for bank­ing is bet­ter in 2016, as GDP is ex­pected to grow at around 7.5 per cent and credit de­mand is ex­pected to pick up on the back of govern­ment spends and be­gin­ning of capex cy­cle. Banks are on the road to raise cap­i­tal and strengthen the cap­i­tal base for cov­er­ing prob­lem as­sets and growth.

Other fac­tors in­clude the govern­ment's com­mit­ment to pro­vide rea­son­able cap­i­tal to PSU banks, the Re­serve Bank of In­dia's strate­gic di­rec­tives to banks to cleanse the book to free up man­age­ment re­sources for busi­ness fo­cus, which to­day is largely spent in sav­ing non-per­form­ing as­sets (NPAs).

Then there are fac­tors such as con­tin­ued buoy­ancy in retail credit off-take, be­nign crude prices, im­prov­ing cur­rent ac­count and fis­cal deficit, stress of the new govern­ment to­wards man­u­fac­tur­ing sec­tor from pre­dom­i­nant ser­vice sec­tor, com­mit­ment of the govern­ment to find a way out for stalled projects, re­struc­tur­ing of state power util­i­ties through 'Uday,' in­clu­sive growth through schemes like Jand­han with Aad­har, Mudra loans that lift the ru­ral econ­omy and par­tially de-risks them from to­tal de­pen­dence on agri­cul­ture, im­proved op­er­a­tional ef­fi­cien­cies to be de­rived by the banks from dis­rup­tive tech­nolo­gies that will be ush­ered in by new banks in the small fi­nance and pay­ment space, and the use of an­a­lyt­ics to tar­get cus­tomers.

Con­scious ef­forts over a pe­riod of time have to­day led to shift in trans­ac­tions from branches to ATMs and In­ter­net bank­ing. Branches will still be needed but the for­mat will change. We will have compact branches with ef­fi­cient mar­ket­ing staff do­ing sales with more cen­tralised op­er­a­tions. The cur­rent trend is dig­i­tal­i­sa­tion and mo­bil­ity.

Tele­com con­nec­tiv­ity in ru­ral and semi­ur­ban ar­eas is im­prov­ing and smart phones are be­ing made avail­able at rea­son­able prices. Hence, mo­bile bank­ing and e-wal­lets will pro­lif­er­ate in a big way, mak­ing pay­ments eas­ier, and lead the way to a cashless so­ci­ety. As trans­ac­tions get dig­i­talised, the ca­pa­bil­ity to get good an­a­lyt­ics of the big data will en­hance the abil­ity of banks to tar­get cus­tomers with right prod­ucts.

Loan de­mand is a func­tion of GDP growth. Hence, it is rea­son­able to ex­pect about 15 per cent growth in credit over the next year. This growth, how­ever, will be led by retail credit growth ex­pected above 20 per cent as big cor­po­rates still have highly lever­aged bal­ance sheets mak­ing lend­ing more risky. Good cor­po­rate loans are com­pet­ing with mu­tual funds and bonds. Be­sides, banks are in­creas­ingly em­brac­ing strong risk prac­tices with the right port­fo­lio mix be­tween less delin­quent gran­u­lar retail loans with geo­graphic spread and chunky cor­po­rate loans where even a sin­gle delin­quency can hit the bal­ance sheet hard.

The ru­pee will re­main range-bound be­tween 66 and 69 with RBI in­ter­ven­ing to pro­tect it from high volatil­ity and at the same time al­low­ing the cur­rency to fall grad­u­ally to an ex­tent that it is in the over­all ben­e­fit of the econ­omy. The RBI will be guided by the fact that the global econ­omy is still limp­ing and there­fore large de­pre­ci­a­tion in cur­rency may not lift ex­ports. Dump­ing of goods to the detri­ment of lo­cal man­u­fac­tur­ers from weak cur­rency coun­tries will be con­trolled through anti-dump­ing du­ties rather than com­pet­i­tive de­pre­ci­a­tion of ru­pee.

In­di­ans' share of global re­mit­tance mar­ket is high at 12 per cent with $72 bil­lion, con­tribut­ing to about four per cent of GDP from about 25 mil­lion mem­bers of over­seas In­dian di­as­pora. With the econ­omy and equity mar­ket look­ing up, re­mit­tances will only in­crease.

Be­sides, the Make in In­dia ini­tia­tive is also likely to bring more re­mit­tance from over­seas In­di­ans who would look to re­lo­cate to In­dia to ex­ploit emerg­ing op­por­tu­ni­ties.

The govern­ment is bring­ing in more reg­u­la­tions to con­trol the real es­tate mar­ket and this would again add to the in-flow of re­mit­tances from over­seas In­di­ans try­ing to in­vest in homes and com­mer­cial real es­tates. Small re­mit­tances from Saudi Ara­bia and the UAE are grow­ing as com­pe­ti­tion has made forex mar­gin com­pet­i­tive. Tech­nol­ogy is also re­duc­ing the op­er­at­ing cost, thus bring­ing down the cost of small re­mit­tances. We al­ready have an off­shore branch in Dubai, and as part of over­all strat­egy, we are look­ing to ex­pand across the globe, in­clud­ing the Gulf.

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