So­cial bank­ing to the fore

Banking Frontiers - - Conference Highlights -

Assocham held its 13th An­nual Bank­ing Sum­mit-cum-So­cial Bank­ing Ex­cel­lence Awards 2017 in Mum­bai. High­lights of the pre­sen­ta­tions by the speak­ers:

MD & CEO, UAE Ex­change & Fi­nan­cial Ser­vices

We have an un­equal In­dia. We are the se­cond most un­equal coun­try in the world. Just 10% of the peo­ple own 76% of the wealth. Only 10% of small businesses have ac­cess to for­mal fi­nance. And 19% of the pop­u­la­tion is still un­banked. We have to dis­rupt our mind­set. We have to save cap­i­tal­ism from the cap­i­tal­ists. We need to move to best of breed fi­nan­cial ser­vices. We must change the ap­proach from charg­ing a price to take share of profit / hap­pi­ness. This will be a part­ner­ship ap­proach. There is $1 tril­lion worth of gold in In­dian house­holds.

Man­ag­ing Part­ner, Ashvin Parekh Ad­vi­sory Ser­vices

To­day there are more chal­lenges and less op­por­tu­ni­ties for uni­ver­sal bank­ing. The ma­jor chal­lenge is cap­i­tal. There are 2 chal­lenges with re­spect to cap­i­tal. The largest is the mo­bi­liza­tion of cap­i­tal. The bank­ing sys­tem has to show per­for­mance to raise cap­i­tal. Of the `88,000 crore cap­i­tal in­fu­sion, `55,000 crore was for cap­i­tal of banks and `33,000 crore for eco­nomic ac­tiv­ity. But it seems that the largest amount will be used in clean­ing the sys­tem. New guide­lines are now in force about mon­i­tor­ing of ac­counts. It is un­for­tu­nate that the reg­u­la­tor has to say how to mon­i­tor the ac­counts. Bank­ing sec­tor should turn more to­wards MSMEs and small bor­row­ers. Mak­ing so­cial bank­ing closer to bor­row­ers and at the doorsteps have been around for a long while. The in­fra­struc­ture for so­cial bank­ing is more im­por­tant than so­cial bank­ing it­self.

for­mer Deputy Gov­er­nor, RBI Do we treat so­cial and uni­ver­sal as two dif­fer­ent ac­tiv­i­ties? Uni­ver­sal is all ser­vices from one or­ga­ni­za­tion. The so­cial sec­tor ac­tu­ally needs uni­ver­sal bank­ing. Law of na­ture is that dark­ness is most in­tense be­fore dawn. In some time to come, creative de­struc­tion in bank­ing is in­evitable. Post this de­struc­tion, the bank­ing sec­tor will emerge more eth­i­cal, cleaner and pro-ac­tive.

Af­ter the global fi­nan­cial cri­sis, ev­ery bank is mov­ing to­wards so­cial bank­ing. It has been pointed out at the in­ter­na­tional ILO con­fer­ence that poverty any­where is a threat to pros­per­ity ev­ery­where.

Bank­ing is evolv­ing and there is a need to ex­pand the def­i­ni­tion of so­cial bank­ing: In ad­di­tion to sus­tain­able and in­clu­sive bank­ing, it should in­clude bank­ing that should be done on the so­cial net­work­ing plat­forms. It is time for so­cial lend­ing, such as through P2P plat­forms.

In MSME fi­nanc­ing in UK, 14-15% is through P2P plat­forms. So, this is not a pass­ing fad. Also im­por­tant is con­cern for the en­vi­ron­ment and eth­i­cal bank­ing.

RBI has rede­fined sin­gle and mul­ti­ex­po­sure lim­its. The fi­nance min­is­ter has said in the bud­get that cor­po­rates should tap mar­kets for funds to some ex­tent. Any lend­ing in MSME is still half work done un­less the lender is ca­pa­ble of know­ing and meet­ing life­cy­cle needs. Typ­i­cally, the lend­ing com­mu­nity pulls their hands dur­ing time of max­i­mum need. Se­condly, to­day there is a lot of in­for­ma­tion asym­me­try be­tween bankers and bor­row­ers, leading to dis­ad­van­tage of bor­row­ers. So, there is need for fi­nan­cial lit­er­acy.

Look­ing at de­ploy­ment of bank credit in agri­cul­ture, the long-term credit is de­clin­ing and is be­ing re­placed by short term credit. So in­fra cre­ation in agri­cul­ture is not hap­pen­ing. There is also con­tin­u­ous frag­men­ta­tion of land hold­ing. Sim­i­larly, while bankers are gen­er­ally ex­ceed­ing agri­cul­ture lend­ing tar­get, a large part of the credit is go­ing to farm­ers with large land hold­ings.

for­mer Deputy Gov­er­nor, RBI Un­der­stand­ing of so­cial bank­ing has changed over a pe­riod of time. Main­stream bankers have been goaded to go into new sec­tors. Tech­nol­ogy is bring­ing bor­row­ers and lenders to­gether di­rectly. In the medium term, bank­ing space will re­duce in the en­tire fi­nan­cial sys­tem. Banks will re­duce cor­po­rate and in­fra credit. That leaves MSMEs and re­tail. There will also be change in li­a­bil­i­ties of banks. Sav­ings will shift from bank de­posits to other in­stru­ments. RBI has a le­gal man­date for in­fla­tion tar­get­ing. With low in­ter­est rate regime, sav­ings will

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