Core banking vital for new generation

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.