Banking: 10 things to look out for in 2015

2014 made a lot of promises; can the new year deliver?

Rate cut: Despite pressure from the finance ministry, the Reserve Bank of India (RBI) did not reduce rates in 2014. The first policy review of the new year is scheduled on February 3, 2015.

New monetary policy framework: A new monetary framework, with a monetary policy committee, with specific inflation targeting could be announced in the Union Budget. Such a framework will radically change the way monetary policy is formulated, as the RBI will be held accountable for missing the inflation target.

Banking reforms: The long-pending banking-sector reforms to improve governance, particularly in public-sector banks, are expected in 2015. The finance ministry will have a brainstorming session on this issue on January 2-3, 2015 to thrash out ideas with the heads of public-sector banks, RBI officials and industry experts. A blueprint for reform will be presented to the Prime Minister, who will attend the concluding session.

New faces in top position of PSBs: After cancelling the appointments of CMDs in public-sector banks, which were decided by the previous government, the new government will announce new names for banks, including large ones such as Punjab National Bank, Canara Bank and Bank of Baroda.

New banks: Year 2015 will see two new banks start operations. The RBI had given licences to micro financier Bandhan and infra developer IDFC. The new licences come after a gap of about a decade.

New types of banks: RBI has invited applications for awarding licences for payment banks and small finance banks - entities that could start operations in 2015. This is the first time that the central bank will give differentiated bank licences. The last date for submitting applications is January 16, 2015.

On-tap licensing: The banking regulator is likely to allow applications for banking licences on a continuous basis from 2015.

This will increase the number of banks within next few years.

Business growth: With economic activity expected to pick up, banks are looking for revival in business growth after a lacklustre 2014, which saw loan and deposit growth of 10.9 per cent and 10.6 per cent, respectively.

Respite on asset quality: Between March 2013 and September 2014, gross non-performing asset (NPA) as a percentage of gross advances went up sharply from 3.4 per cent to 4.5 per cent. Similarly, stressed asset ratio of banks - gross NPA and standard restructured advances - rose from 9.2 per cent to 10.7 per cent. Bankers are hopeful of an economic recovery along with a lower interest regime, which could turn the NPA cycle in 2015.