Bancon2012 in a nutshell

The last weekend of November saw the men in black – bankers in their formal best, troop into Mariott Pune for BANCON 2012, to review, reform, and rethink banking. Bank of Maharashtra had the privilege of hosting it in partnership with Indian Banks Association (IBA). Day 1 witnessed a flurry of activity with the Hon’ble Finance Minister, Shri P Chidambaram, inaugurating the meet with the traditional lighting of the lamp, releasing a report by McKinsey & Co, launching the Ru-Pay card and presenting it to five farmers and also a single number for financial assistance. Ru-Pay jointly with NABARD gives farmers the opportunity of financial inclusion and its catch jingle, Chal pade gaon, toh chal pade India aptly summed up its theme. *99# will empower users through mobile banking. The minister began his impressive speech by comparing the financial system as the lifeline of any economy, with banks being the heart in a body. He spoke about farmers, students and women as good customers for their repayment record. His interesting observations included how people in non-metros want to borrow amounts as small as 10,000 to upgrade their set-up. He urged banks to channelize this demand and regional banks to maintain their own distinct flavor; even after consolidation of top banks, when India becomes the third largest economy.

Post-lunch, when Chief Minister, Shri Prithviraj Chavan took to the dais, he also shared interesting nuggets like the scope for voice-input technology and how credit to farming increased by 47% due to commercial banking. Many speakers lauded NABARD for its phenomenal work. A cultural programme was lined up for the evening consisting of the fisherfolk song amongst others by the Gandharva troupe and popular Bollywood numbers belted by Sa Re Ga Ma Pa participants.

Day 2 was action packed with parallel sessions. Granularity as a way of thinking was the focus and how standardization by banks works against it. Dr Subir Gokarn, DG, RBI, enthralled the audience by reflecting the reality about India’s skyrocketing demand for gold and how Gold Accumulation Plan, Gold Linked Account, Gold Pension Plan, ETFs could work in this scenario.

The audience radiated inner peace with the smile guru Shri Sri Sri Ravi Shankar’s tips on how to build an inhibition-free intellect and violence-free society. Stay in the present, just like a child, he advised and strongly made a case against Indian society giving business a bad name. Meditation helped the sleep-deprived, stressed bankers prep up for the marathon round of sessions in the afternoon. 

 

 
Mr H R Khan, DG, RBI stated 40% in India have a bank account; 13% have credit cards and 2% have debit cards and elaborated on GIRO system, BBAN and E-BAAT. Shri Naro Narain Meena, Hon’ble Union Minister, State for Finance explicitly mentioned how entrepreneurs could use a good blend of innovations and technology.

Chief Minister, culture & cohesive focus on Innovation

The post lunch session had a peppy start thanks to the fast-paced, thought-provoking AV by Mr Erik Roth, McKinsey & Co, who drew a few laughs and in his own inimitable style posed this question to the audience: How do large Companies innovate? 80% executives agree that their business models are at risk. When there is no natural incentive for innovation, then Companies struggle to innovate.  Profitable innovation is not an accident. Quoting Edison he reinforced, “Genius is 1% inspiration, 99% perspiration” and continued with recent innovations like a cat-shaped mouse that was used before the mouse became omnipresent. Innovation has different rules; real breakthroughs are low cost. Constraint breeds creativity. New customer segments are the best to find new insight. These are some of the nuggets he shared with the audience. 

 

One of the speakers narrated his online experience with amazon.com and how the corporate is able to attract browsers and turn them into buyers. Banking is necessary, banks are not. Dr S B Majumdar, Chancellor, Symbiosis, said speed, scale and sustainability are essential for innovation. Drawing from his personal experience he said how even tables in a bank could intimidate the marginalized, tribals or those who have never seen bank interiors. To make them feel at home, he was advised to place bidis in a corner, wear simple clothing and talk their language.

Hon’ble Chief Minister, Mr Prithviraj Chavan, made a dignified entry and took a trip down memory lane – globally reprimanded on nationalization of PSBs. Banking will play an important role in legislating the Right to Credit. Our natural resources can’t make us rich, dams need to be upstreamed, ExpertSystems developed to further hone technological innovations and migration should be addressed.

Mr Sasi Sunkara, McKinsey mentioned PSUs have been more prevalent at the cost of co-operative banks. Polarisation of rural masses exemplifies affluence. Banks should modify strategy to suit opportunity cannot merely downsize an urban model. 

Mr Mathew Titus, Executive Director, Sa-Dhan, opined that India should have been more urbanized, China has overtaken us. Ms Archana Bhargava, Executive Director, Canara Bank, explained how life in villages was self-sufficent, but not anymore. Banks should undertake financial literacy. Mr R Shridhar, MD & CEO, Shriram Capital, elaborated on the perspective of first time truck drivers applying for a loan; without having anything to offer as collateral or security; repaying loans in instalments. A member of the audience, Arun Kaushik, Birla Sun Life, put forth his view that sharing resources like co-branding ATMs, will reduce costs.

To refresh after a grueling day, the delegates were treated to an engaging entertainment programme by the famous Gandharva troupe that performed several dances. Beginning with invoking not just Ganesha but also his wives Riddhi-Siddhi, followed by a song-and-story combo of the Kolis (fisherfolk), depicting their travails at sea and another in which bulls are worshipped to thank them for their contribution in ploughing the soil. This was followed by contestants of a popular television musical, Sa Re Ga Ma Pa, regaling the audience with foot-tapping numbers. The first performer, a banking student introduced herself as Pune-chi-mulgi after she rendered a snazzy number from an evergreen Hindi movie.

Day 2 at Bancon 2012

Day 2 at the Mariott Pune, saw BANCON 2012 begin on a more relaxed note. There were two parallel sessions: Unlocking the digital financial services opportunity and Granularity of growth, with both having eminent panelists.

Mr R K Dubey, Exec Director, CBI began on a positive note that despite problems in Indian economy, there still exists immense potential to do wonders. 50% of India’s population is youth with more purchasing power than their predecessors. His insight that financial inclusion should not be restricted to villages is an eye opener; particularly when he stated how 40 lac people in Delhi form the migrant labour class from neighboring states like Bihar, UP and do not know where to save their money. He urged banks to sensitize proactively while doing a needs assessment.

Another eminent panelist explained that granularity has challenges in terms of scale. A manager in charge of a branch generating revenue worth 500 crores and also another branch with a not too impressive amount; the latter is given shoddy treatment. So granularity is operations related. Even bank-by-bank definition of SMEs is different; banks need to identify growth spaces. The concept of how a bank-within-a-bank originated, was discussed. Banks have to willing to invest resources to boost granularity of growth. In ’89-’91 a suggestion was floated in opening branches in Sikandpur for the Gurgaon region; had this recommendation been implemented, the bank would have become a dominant player. Similarly, it was recalled how a farmer felt miffed at what he thought was impersonal treatment, when the manager directed him to an ATM instead of being offered tea or coffee! The farmer hoping for pleasantries and dialogue was waiting for an opportunity to invite the manager, but felt intimated. This necessitated counseling and this counseling (technical/financial) should also be extended to SMEs. An SME rating product has been developed with CRISIL. 

Dr Subir Gokarn, DG, RBI declared in his address: India is a large gold consumer & how this stresses the economy. While gold supply has remained constant, demand has increased tremendously, making the BOP lop-sided. In his thought-provoking analysis, he revealed how new financial instruments can provide gold-like qualities, such as liquidity. ETFs, Gold Pension Plan etc were presented in detail.

Before breaking for lunch, delegates were treated to a feast for the soul with the presence of Shri Sri Sri Ravi Shankar, who took to the dias with a soothing “Om Shanti” chant. In highly calm, reassuring tones

His highly calm tone engulfed the buzzing hall with an aura of tranquility the same way his message stirred everyone to embrace each other with love. Innovation is moving towards something that doesn’t exist; he  incorporated banking jargon: happiness capital, GDH not GDP, (Gross Domestic Happiness); he has developed Know Your Team module and to a specific question from the audience about differences with boss, said change the communication style. He categorically stated a mindblock that has harmed India Inc: Business considered a  bad thing and entrepreneur made to feel guilty. He guided the audience towards a stress-busting exercise and meditation.

Post lunch parallel sessions had the audience thinking on their feet again. Achieving a step change in sales productivity and Defining the next frontier in wholesale banking. The former emphasized how employees are valuable and harnessing their skill sets for better productivity. Training enhances their potential resulting in improved customer relations. Akash Lal, Mckinsey & Co described the evolving behavior of Indian corporate, how banks need to identify pain points. There are niche players in both fund & non-fund based markets. Moderator, Zarine Daruwalla, President, Wholesale Bkg, ICICI asked how Indian banks are ready for rupee depreciation and helping corporates. Mr Rathi, MD, Sudarshan Chemical Industries Ltd, replied mid-sized corporate are not ready; banks should advise not to give complex derivatives.

This was followed by a session, Financial inclusion & payment systems, by RBI DG, Mr H R Khan who spoke about ushering in a cashless society, 906.62 million mobile users and banks not adhering to RBI specified fund structures . The valedictory session by Shri Namo Narain Meena, Hon’ble Union Minister, State for Finance,

Covered customer service as a key factor to banking which will leqad the way ahead in the coming dhe also   keeping with the topic he also empahiseised on the noble and innovative methods used by Indian entrepreneurs 

Finance Minister, P. Chidambaram at Bancon2012

On Day 1, the Finance Minister, P Chidambaram began his speech to BANCON 2012 delegates with an analogy: the financial system is the lifeline of any economy and banks are like the heart in a body; the heartbeat reflecting the state of health, whether or not the nation is pulsating with life.

He wanted PSUs to participate more fully and to make it happen, the next IBA Chairman should be from a PSU. He then went on to state that the world economy is still in a crisis despite efforts to stabilize it and many countries are still in depression; advanced economies in steeper decline. India has to find ways and means to use resources and funds for growth. The country’s financial growth rate cannot be less than 8%; this is not an aspiration, but an imperative. Income and job generation depend on this growth. The President of India declared 2010-2020 as as the decade for innovation.

He referred to the McKinsey report he had released: Creating a virtuous innovative cycle and mentioned what one of the essays highlighted:

1)      New customers – Farmers are good customers as they borrow and repay. Same with students and women who want to enhance their economic status through self-employment loans. But banks still need to find more such new customers. People queue up for deposits. Earlier many branches feared they would not mobilize enough savings in rural areas, but their fears were unfounded. The Hon’ble Minister gave his own example, of how he was born and raised in a small village which has mobilized 15 crore as deposits. It is the bank’s duty to seek such depositors.

2)      New offers/products – The Finance Minister mentioned the cards that have particularly helped the farmer such as the Kisan credit and the one he himself launched, minutes ago; the Ru-Pay card in association with NABARD that equipped farmers with the opportunity of financial inclusion. It has elevated mobile banking to a new realm; under its umbrella 1 lac ATMs are channelized for farmers to make cash less payments. It is also linked to AADHAR numbers and AADHAR is also another innovation.

3)      New way of doing things - Electronic banking will help reach customers as banking is a service not a product of commodity. Brick-and-mortar banks encourage “lazy banking” as it forces the customer to come to the bank, not the other way round. Every rural family should have an account. Most people want to borrow extremely small accounts like ten thousand rupees; banks should focus on such customer-centric needs.

4)      New business models – Simply put, look at things differently. Quoting Sherlock Holmes, “…if you want to hide something, place it on the table. The Finance Minister further explained that most obvious ways of doing things escape us. He continued in the same vein, “drawing on the strength of our postal system.” He is opposed to uniformity and further added that banks cannot clone each other. Goals are common but paths should be different banking systems with their own dominant regional flavor and functioning.

Among various other things the Finance Minister acknowledged that India will be the third largest economy and hence consolidation of top banks is required but local area banks (started in 1996) should not be dwarfed.

Bancon2012: A Curtain Raiser

The dazzling banking event BANCON 2012 that will be the scene stealer and hog the news over the weekend, in Pune began at 2.15 today on this pleasantly warm Friday afternoon. All roads led to J W Mariott, where the banking event was hosted by Bank of Maharashtra in association with Indian Bank’s Association, (IBA), with McKinsey & Company as knowledge partner. The compere, Darrpan Mehta took to the stage to introduce the distinguished panel, as they took their seats on the dias: Mr Narendra Singh, Chairman & Managing Director, Bank of Maharashtra, Mr. K Ramakrishnan, Chief Executive, IBA and Mr Jatin Pant, Director McKinsey & Co, Mr. C V R Rajendran, ED, Bank of Maharashtra.

To bring attention to this year’s theme, Innovating to unlock the next decade, he quoted Steve Jobs, “Innovation distinguishes between a leader and a follower” promptly sparking interest in the media about the weekend conference where banking heavyweights will assemble to exchange ideas.

Speaking on the occasion, Mr Narendra Singh explained how technological initiatives have brought in its wake, the problem of shortage of hands as well as handling data; its sheer volume and velocity and even the opportunity for leveraging it.

Next to take to the mike was Mr Ramkrishnan. He proudly stated how total industry assets had risen six fold between 2001-2010. He highlighted major shifts like the prolific spread of ATMs and mobile banking; growth of the middle class and increasing rural affluence, and lastly the growing demand for SME’s.

This was followed by Mr. Jatin Pant’s analysis. His presentation lucidly elaborated on a) the top 10 Indian banks featuring among Asia’s top 30 value creator banks in the next decade, b) Indian banking revenue pools likely to quadruple in the next 10 years.

An interesting Q&A round concluded the session.

The rural-urban banking divide in India

Many Hindi movies zoom in on an impressive shot of money-capital, Mumbai’s landmark railway station, (recently christened as CST) to showcase the wronged-hero’s migration from an oppressive village to the city of dreams, to make it big. Banks too have played a significant role in propelling population influx to urban centres by focusing on growth solely in cities. Only 32,500 villages out of 600,000 have banking facilities. Why are economies of scale so difficult to achieve in rural India, typically characterized by the post office as its most vital banking intermediary?

Take another instance: 600 mobile users in India waiting to be tapped. Supposing average revenue per user, is Rs 120, services will be charged at a premium for the telecom companies to recover their investments. Result? Elite users only. Will this change with RBI mandating that banks open 25% or their new branches in unbanked rural areas and offer priority sector lending? The dynamics of an urban model with its high staff cost will not work among people who believe their money will be safer with a moneylender. Instead of the brick-and-mortar branch, banks can hire local people to establish a comfort level or use business correspondents and mobile vans. SBI has tied up with Bharti Airtel and ICICI with Vodafone to provide mobile banking. While at the other end of the spectrum, convenience is defined by a citizen in the capital walking into a Standard Chartered or Citibank branch as late as 9pm and availing of facilities. While private players have pioneered internet banking they cannot match the PSU’s in terms of reach and access to low cost deposits. Mergers then seem to be the answer; like HDFC with Times Bank, Anagram Finance with Bank of Madura.

But how will banks tackle another kind of mindbloc, like the one widely prevalent in Tier II cities, where even  an educated populace will not opt for online shopping; and similarly would prefer traditional modes of banking too. Despite this, SBI, one of the few banking giants, is aggressively expanding its ATM presence in non-metros, according to an ASSOCHAM study. Even in rural areas, banks do not give step-motherly treatment, as is commonly believed. Regional Rural Banks (RRBs) have been sponsored by many commercial banks in several States. These banks, along with the cooperative banks, take care of the farmer-specific needs of credit and other banking facilities.

What steps have your bank taken to bridge the urban-rural divide? Share with us.