Indian banking challenges, reforms & expected outcomes
Challenges for 2014-15
- Deceleration in economic growth impacting expansion of banking sector
- Maintaining asset quality in the face of growing non-performing assets and restructuring of advances
- Augmenting capital and maintaining prudential capital
- Preserving and augment profitability in a stressed environment
- Implementing financial inclusion & Direct Benefits Transfer
- Increased competition from both within the banking sector with various banks becoming aggressive
- Adopting and adapting to technological changes/innovation to meet regulatory norms and tap alternative channels
- Improving quality of human resources for working efficiently under the latest technological developments
- Stringent norms pertaining to bad loans and restructured assets and their resolution
- Consolidation and mergers and entry of new players
- Continuous bank licensing
- Converting some urban coop banks into commercial banks
- Separate licences for niche areas like wealth management investment banking
- Reforms in corporate debt market, government debt market & money market
- Focus on asset–liability management for banks
- Increased usage of technology in banking
- Focus on financial inclusion/deepening
- Steps to remove structural bottlenecks on credit delivery and free pricing of financial assets
- Transparency, improvement in clearing and settlement practices
- Reforms aimed at creating liquidity and depth for efficient price discovery of banking products
- Norms on NPA to improve asset quality, recovery, liquidity and the balance sheets of banks
- Consolidation of banks & new players to bring competition, innovation and productivity. It would also bring economies of scale
- Conversion of Urban banks into commercial banks could aid them to operate in mainstream with lower risk.
- Higher technology usage to help in upgradation, design more e-products; also sustain and scale business
- Financial deepening to make banking more inclusive, improve geographical coverage, reduce regional imbalances and credit to the unorganised sector
Based on CARE Survey