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Will the ATM survive? Bankers explain how technology is changing their work

Is the future of banking fin tech or tech fin? Will technology follow banking, or the other way round? Top bankers discuss at Business Standard's Annual Banking Forum.

Photo: istock
Photo: istock

Is the future of banking fin tech or tech fin? Will technology follow banking, or the other way round? A panel of six top bankers discussed this at Business Standard’s Annual Banking Forum debated in Mumbai on Thursday.

Business Standard's consulting editor Tamal Bandyopadhyay, who moderated the debate, said tech-fin companies are nimble and innovative with finances compared—they are disruptive but they are not necessarily banks. Fin-tech companies, in contrast, have the experience and infrastructure to manage finances, but they are waking up to the disruption created by technology.

The work banks do will change because of technology and they have to innovate quickly: that was the broad view of HDFC Bank's Nitin Chugh, Payments Council of India chairman Naveen Surya, ICICI Bank's B Madhivanan, InfrasoftTech's Rajesh Mirjankar, Bank of Baroda's Akhil Handa, and National Payments Corp of India's Dilip Asbe.

“Bank branches will stay but their size and nature of their work will change,” said Madhivanan, who is Chief technology and Digital Officer at ICICI Bank. There will be a bank branch and the ATM will survive too but there will probably be a humanoid to help customers, he said.

“I think in 5-10 years down the line it will be common for people to interact with robots, whether it is at banks or hospitals,” said Chugh, who is HDFC’s country head for digital banking.

Surya, of the Payments Council of India, said traditional banks will have to first invest in and build technology. “Before you disrupt, you built and we’ve not built the digital system yet. We have to create a converge moment and not a WhatsApp moment,” he said.

“We don’t have a choice but to innovate. We don’t have an option,” said Handa, head of fintech and new business initiatives at state-run Bank of Baroda.

Jio Payments, Jana Bank's mantra for success: financial inclusion

Jio Payments Bank and Jana Small Finance Bank are regarded as new kids on the block: businesses that are just starting up but aim to change how their business works.

How do the new entrants plan to make a difference? Tamal Bandyopadhyay asked this at the second session of Business Standard's Annual Banking Forum.

By becoming platforms for “financial inclusion”, said H Srikrishnan, managing director and chief executive officer of Jio Payments, and Ajay Kanwal, managing director of Jana. 

“Small finance banks will stand the test of time because customers will value their relationship we are building,” said Kanwal. “Customers trust us because we are not just about borrowing.”

Srikrishnan said Jio Banking was doing live trials and unlike mainstream, commercial banks it first had to first “scale up” and build its entire infrastructure before it could provide its services. 

Commercial banks have been unable to meet their mandate of financial inclusion—their digital platforms serve a small percentage of their customers. “Payments bank will give financial services to the last mile to the lowest strata,” said Srikrishnan.

“From the milkman to the bhajiwali (vegetable seller)” will be on telecom-driven financial services, he said.

Merger, merger on the wall

P S Jayakumar and V Vaidyanathan are closely watched men in Indian banking, tasked with carrying out challenging and complex mergers

Jayakumar, as managing director and chief executive officer of Bank of Baroda, is leading the state-owned lender’s merger with Dena Bank and Vijaya Bank. The merged entity will be the third-largest lender in India after State Bank of India and HDFC Bank Ltd, with total business of Rs 14.82 trillion.

Vaidyanathan is executive chairman of non-banking finance company Capital First, which will merge with IDFC Bank Ltd to create a bank with an asset base of roughly Rs 900 billion, media reports say.

What challenges do the two men face in the merger process? Business Standard's consulting editor Tamal Bandyopadhyay asked them at the newspaper’s annual Banking Roundtable.

“One of the top reasons why amalgamations don't work is lack of clarity on the central business purpose--what is the new institution supposed to do as opposed to what the individual businesses were doing,” said Jayakumar.

Jayakumar believed each of the three state lenders had unique talents and their personnel were excited about the transformation process.

Vaidyanathan said his target for IDFC First Bank, the name of the institution to be formed after merger, was transforming from a wholesale bank to a retail bank.

The aim is to “fundamentally transpose” from being 30%-70% wholesale and retail bank to being 70%-30% retail and wholesale bank.

“A banking licence is very precious—the RBI (India’s central bank) gives it rarely. Our aim is to create high-quality (retail) banking for the common man- a-high quality bank for the new India,” he said. 

Is the worst over?

Banks have had a tough time in recent years for a variety of reasons: from non-performing assets (NPA) to tycoons fleeing India after defaulting on loans. With news rules and better monitoring, the tide seems to be turning.

Is the worst over for Indian banking then? Tamal Bandyopadhyay asked five leading bankers. Here is what they had to say.

Rajkiran Rai, managing director and chief executive officer of Union Bank of India: Gross NPAs are going to come down, (but it’s early to say the worst is over) because whenever we make this statement that quarter hits back with something different. If you ask me, good times are ahead of us because NPAs are moderating. I'm not saying we will not have NPAs but the recognition part is complete. 

Chandra Shekhar Ghosh, Chairman and Managing Director of Bandhan: Year-on-year, NPA trend is decreasing--which means repayments are coming good. If irregularities don't increase, it is good for us.

Pramit Jhaveri, chief executive officer of Citi India: I don't think it's appropriate to paint the entire banking industry with one brush. The narrative of the banking industry has changed. I think the most important thing that has happened is that behaviour (of borrowers) has changed. People have been incentivised to behave.

Romesh Sobti, MD & CEO, IndusInd Bank: The worst is just behind, but there is (risk) of lot of pain. We recently had Nirav Modi and IL&FS. There is one more aspect--retail. There has been a 10-year hiatus since we had negative movement in the retail part. (But) the operating environment has changed.

Rajnish Kumar, Chairman of State Bank of India: As for as the NPA cycle is concerned, March 2018 was the peak. After that most banks have shown improvement.