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.
