Financial inclusion, when will it be priority?

In 2010, RBI Governor Duvvuri Subbarao and Deputy Governor Kamalesh Chandra Chakrabarty had taken bankers head on when the latter adopted the stance that financial inclusion is unviable.  “Commerce for the poor is always more viable, more profitable than commerce for the rich.” Mr Chakrabarty is quoted as saying.

What is it that makes Indian banks shy away from extending technology to rural markets and capitalizing on vast untapped potential of rural India? With 70% of India’s population living in villages and these households having growing incomes, corporate should make a beeline to stroke demand for consumer goods specially jeeps, scooters, televisions, fans and even washing machines. There is also an increasing market for cosmetics and mobiles and with multi-brand retail channelizing over Rs 400 billion, it will surely be boom time for the rural populace.

In this scenario, banks can project themselves as facilitators and project an image of being caring, much like a family member by initiating jatras and forums to educate about thrift, saving, availing loans for education and building small enterprises; establishing kiosks so that even the semi-literate farmer gets a feel and convenience of an ATM. In one such programme, Syndicate Bank adopted a poor locality in Hyderabad and mobilized 2,000 new savings accounts.

At the other extreme, social control of interest rates on loans less than Rs 2 lakh, renders financial services to micro-clients uneconomical and hinders financial inclusion.  Another factor for serious consideration is whether co-operative banks are fulfilling the lacuna? Probably a common accounting system without external influence and audit procedures will help to provide the much-needed co-operative credit reform. While few reforms have led to diversification of financial services, rural banking yet, till date continues to receive step- motherly treatment from the banking industry.

Wholesome growth for wholesale banking

What is it that makes Indian industry take an optimistic view of its scope for growth in an economy riddled with inflation and a not-too-evolved range of capital finance products? Should foreign banks continue vying with Indian banks for a share of the wholesale banking pie, when other BRIC countries such as Russia and South Africa require minimal procedures for new ventures?

Players in the wholesale banking scenario in our country need to gear up, to cash in on opportunities as number of outbound acquisitions increase. Besides, as foreign trade gets bigger, it is imperative for wholesale banking to focus on trade and treasury requirements. But these are extremely minor challenges which can be easily overcome by the banking industry, if it has to make an impact in today’s fiercely competitive Asian market - one characterized by China’s steep growth of over 10% per annum in the next five years.  

However, despite revenue slowdown and a fall in market capitalisation in the last two years, the future of wholesale banking in India holds promise. One positive factor contributing to this is the simplified FDI regulations which have opened up avenues like deal structuring and treasury and trade finance. Banks can meet these challenges by developing high-end technology platforms and talent pools. An off-shoot is that banks have begun to pursue smaller or mid-sized corporates for funding.

Another heartening factor is infrastructure, the raison d’etre of wholesale banking which will get a massive fillip in this year’s Five Year Plan (2012-2017). This means big time project financing in terms of lending, debt syndication and capital raising. But are banks ready to take the leap? If yes, then wholesale banking which currently contributes to 30% of India’s total banking revenue will see a spurt more than double its value.

Can banking follow a Darwinian led evolution?

Has India made seismic progress with digital technology as compared to Australia or Singapore, given or inspite of our rather dismal internet penetration of just 1.65% and a diverse geography that makes even formalizing a central policy a mind-boggling task? While the world has made gargantuan strides with pocket-sized calendars that help one view financial history and make on-the-spot decisions, or a 19-inch touch screen which portrays currently relevant info about the transaction at hand, is India lagging behind with its sparsely scattered ATMs?

Opinions vary.  While most banks in India have in place their biometric smart card, handheld biometric POS devices for authentication and transaction, GPRS-enabled mobile phones and core banking solutions, Louwke van der Steen, Country Manager at Logica for India and SAARC firmly emphasizes that “…India needs to adopt technology more rapidly, especially on the mobile fronts.”

 Indian banks spend an average of Rs 150 crore on internet banking and developing banking software and hardware. The World bank has also allocated a whopping automation fund whereby banks like Dena Bank, Bank of India, Bank of Baroda each can mobilize Rs 100 crore. This augurs well for the Indian banking scenario so that it can rewrite ground-breaking rules much like PayPal integrating micropayments into its Facebook application as though building the world’s first virtual global currency.

Another interesting factor is how this translates for the average urban Indian comfortable with the ICICI launched iMobile, to pay bills, check balance, locate an ATM and order a checkbook. Surprisingly, our culture that does not permit us the glossy ‘spend-now-pay-later’ rhetoric provides us with perks we have taken for granted. While our US counterparts have to restrict calls to customer care and ATM transactions to just two in a month; we enjoy unlimited privileges; most of which play a major role in striking the right work-life balance.

To review, reform, rethink banking

What is a typical day like in the life of a banker? But then Nov 24-25^th are not typical days for anyone in the banking industry what with all roads leading to Marriott Hotel & Convention Centre for the ultimate banking summit, Bancon 2012. Co-hosted by Bank of Maharashtra and Indian Bank’s Association, this conference is a gathering of the who’s who in the banking industry. With the inauguration by Hon’ble Finance Minister Pranab Mukherjee, this prestigious meeting of bankers and finance heads is defined as a gathering that reviews, reforms and rethinks banking. Of credit and constraints, of revenues and rural markets, Bancon 2012 like its predecessors will provide a gigantic platform for key decision-makers to influence change, mould lifestyles and alter not just the economy but also the collective destiny of our country.  

The theme this year:

 Innovating to unlock the next decade, will cover major shifts spanning business models across the banking sector highlighting not just growth from the previous year but also growth opportunities in the next decade. A quantum leap of how the industry has transformed,  considering the humble origins of banking from the time silver coins were used as payments to soldiers and merchants hoarding their often ill-gotten gold in private vaults to present-day banking at the touch of a button.

But can digital progress in this domain be lauded when India’s ATM density is a mere 35 per million people, compared to America’s 1300?Or another dismal truth that despite the powers that be exhort financial inclusion, 70% of the rural population cannot boast of having even a bank account and continue to mortgage with moneylenders and friends.

At Bancon 2012, banks pan India will throw light on these issues through eminent speakers elaborating on divergent growth, technology disruptions, regulatory structures as well as panel discussions based on the day’s agenda.

While Bancon 2012 is poised to unleash an exciting future, equipped to handle any challenge, Bank of Maharashtra with its equally distinguished background is proud to associate itself with this event. While its roots can be traced to 1936, it has always been a frontrunner in technological innovation. In fact, this dynamism even enabled the bank to add 99 branches to its network, way back in 1977; a feat that won them appreciation from the then Prime Minister, the late Smt Indira Gandhi.

Delegates at Bancon 2012 will also have a rejuvenating experience by enjoying a cultural profusion of Maharashtrian folklore through an entertaining event that showcases the distinctive identity of the state. The Warli tribal dance, the Lavni and several other performances have been lined up to regale the participants who can relax on the concluding day with an exhaustive tour that captures the raw scenic beauty of forts and architectural marvels dotting Pune.

Looking forward to your visit, next month. Destination: Bancon 2012, Marriott Hotel & Convention Centre, Pune.