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.

Every bank’s golden opportunity!

If you thought it is only Indian women who are crazy about the yellow metal, or elderly parents using gold as an investment for the future, think again. Zoom in to Koramangala, India, the IT hub, where several youngsters buy gold coins and bars, invest in gold saving schemes through monthly instalments and allot themselves, an additional budget for light jewellery as daily office wear. Jewellers cash in on the trend by devising special schemes for the auspicious Akshay Tritiya and Diwali. The Swarndhara Scheme, akin to a fixed deposit, has helped jewelers reap a golden harvest, luring 3 lakh customers. You can even book a small amount every month, like in a savings scheme, through the Swarn Mangal Kalash, offered by another popular jeweller. Then there is Tanishq tempting with its Golden Harvest. But does the customer really benefit? What about making charges? Conversion costs while redeeming?

Fear about the financial crisis, insecurity of other assets like government bonds have made customers believe gold is a safe haven. In fact, In Germany, 1 gm gold wafers and 10gm bars can be obtained from vending machines at airports and railway stations, through GoldtoGo for safety-seeking shoppers. Money from exchange-traded funds (ETFs) will be pooled to buy gold. This is how banks are rebuilding gold reserves. ETFs save investors the bother of purchasing and keeping gold, in fact these allow buying and selling on the stock market, at wholesale rate and even guarantee purity. Paper gold, then amply proves to be the best bet for small investors.

The festive season has once again accelerated gold buying, considered part of Indian tradition. Banks and financial institutions have geared up; selling gold at lower prices than the prevailing market price. ICICI Bank has offered a discount, for online purchase of the metal, with its Pure Gold offer. Punjab National Bank and Oriental Commerce Bank have offered rebate for a single purchase of gold coins of any denomination, on a day. Will your bank be a part of the gold rush?

Belligerent nature versus banks and nations

Hurricane Sandy or cyclone Nilam; is the banking industry geared to handle natural disasters?

“2 days worth of economic activity amounting to $20 billion lost,” “potential insured losses equal $15 billion and counting”… read the grim headlines.  But there’s always a softer side. Since the storm hit early in the quarter, and operation clean-up amounts to $20 billion, the real blow on America’s GDP would be zero. Another silver lining is rebuilding will create new jobs. In fact, the construction industry will experience a boom. A multiplier effect to the tune of $36 billion will surely make the mood upbeat.

Devastation is more in terms of damage to homes and small businesses like restaurants which have no scope for rebound. Besides, standard insurance in the US does not cover flood damage. Insurers like Chubb, Allstate and Travelers will have to bear the brunt due to their presence in the affected areas. Rebuilding is at the cost of investment. Also, when external money is pumped in, it could slow down growth at the state level.

India too, has witnessed a similar calamity though on a smaller scale. The poetry-inspiring, Coromandal Coast, faces the fury of tropical cyclone, Nilam. Paddy and maize crops destroyed. An oil tanker ran aground, off Marina Beach. Fishing operations suspended.  Economic losses pegged at Rs 70-80 crore, an additional Rs 20 crore daily, until fishing operations are resumed. Fishing is the only means of livelihood for 591 villages in Andhra Pradesh. Add to this, the detrimental effect on Mahabalipuram, a popular tourist destination, now deserted due to closed hotels.

Do banks have a unique disaster management policy to speedily mobilize relief funds? Country’s cyclone risk mitigation project, initiated in 2009, for a 5-year span has been unable to strengthen vital communication infrastructure, crucial for sounding alerts and warnings. Villages lack sirens, alarm bells; have no access to radio, television or internet. Banks can pitch in with technical and implementation assistance, especially now with thousands rendered homeless.

 

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.

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.