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Modern Trends in Banking

Date post: 09-Apr-2018
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  • 8/8/2019 Modern Trends in Banking

    1/15

    PLAYERS in the Banking Arena

    Public Sector Banks-SBI, Indian, PNBLarger Network, Larger Manpower, good growth rate, selective channels,

    average productivity

    Old Private sector Banks-Federal, KVB, LVBLimited Network, Medium Manpower, fair growth , limited channels,

    medium productivity

    New Private Sector Banks-HDFC, ICICI, IDBIGrowing Network, faster growth, high productivity, partnership with third

    parties

    Foreign Banks-HSBC, SCB, CitiLimited Network, Partnership with third parties, Lesser Manpower, higher

    productivity, faster growth rate, all channels,

  • 8/8/2019 Modern Trends in Banking

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    Changes in Banking Scenario

    Sellers Market to Buyerss market

    Institutional to Universal Banking to Niche

    Banking

    Corporates move into Capital Market

    Hotting Competition in SME /EC Market

    Exploring Retail Market

    Experimentation with fee based income / value

    added services

    Delivery thro multiple channels

  • 8/8/2019 Modern Trends in Banking

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    Past vs Present/ Future Banking

    Past Banking Present/ Future Banking

    Market Place Confined Unlimited

    Competition

    between

    Banks Brands

    Product One for all- limited One for each- extensive

    Delivery channel Single Multiple

    Revenue thro Margin Fees/ Value added

    services

    Focus on Business Growth Revenue increase, cost

    decrease

    Presence of

    Customer

    Physical Not needed, E-Banking

  • 8/8/2019 Modern Trends in Banking

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    Milestones in Banking

    Regulatory control by RBI

    Banking Sector Reforms (Narasimham)

    Standards of disclosureCapital requirements- Basle

    Alignment of Indian to InternationalStandards

    Provisioning norms

    Risk based control

  • 8/8/2019 Modern Trends in Banking

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    Indian banks are facing substantial competitive pressures as bankinglandscape gets redefined

    BANKS

    Deregulation

    Increasingfinancial

    disclosure

    requirements and

    credit rating

    requirements for

    banks

    Basel-IIrequirements,

    income

    recognition and

    provisioning

    standards

    Greater managerial

    autonomy to banks

    Consolidation /

    Increasing M & A

    activity

    Privatisation /

    corporatisation / IPOs

    Availability of risk

    management

    products like

    derivatives

    Managing asset

    quality, NPA

    Improving

    productivity

    E-Business

    Forces shaping banking sector

  • 8/8/2019 Modern Trends in Banking

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    New Business Initiatives

    Customer

    RelationshipManagement

    Infrastructure

    Support

    Product /ServiceDvpt

    Changing customer

    profiles

    Increasing demands by

    customers

    Higherexpectationsof

    service quality especially

    foranytime,anywhere

    banking

    Increased focusonretail banking

    Tie-ups with financialinstitutionsto market

    third party products

    Foray into merchant banking

    Technology upgradation

    triggering need forredesigned processes

    Increase effectiveness of

    the HR function

  • 8/8/2019 Modern Trends in Banking

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    Key BankingKey BankingTechnology AspectsTechnology Aspects

    Cost Cutting Cost thro Integration

    Better Information Management

    Risk ManagementComplexitiesEasier Risk IdentificationEasier to Assess Risks

    Customer Reaching Customers

    Faster Managing Diverse

    NeedsCompetition Competitive Edge

    in its Strategic Group

    The winners will be those institutions that tie their technology to theirstrategies in order to meet their challenges.

    Performance & Evaluation Better Metrics to Benchmark

    Against Objective Evaluation Process

    Key Banking Technology Aspects

  • 8/8/2019 Modern Trends in Banking

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    Importance of Core Banking Solution

    Faster Response toCustomer Demands

    AllowsFaster New Product Developments

    CBS Architecture Allows for Existing Products to be QuicklyCustomized

    Online Validation of Data at the Time of Entry

    Independent from the Organization Structure and Supports thefour Primary Entities Customer, Account, Product and Business

    Organization

    Runs in Real Time UpdateMode

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    RISKS associatedwith BANKING

    Strategic Risk

    Operational Risk

    People Risk

    Credit Risk

    Market Risk

    Financial Risk

    Interest rate Risk Maturity Risk

    Information Risk

  • 8/8/2019 Modern Trends in Banking

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    Changesinthe Banking Environment

    Changing Delivery Channels

    Changes in Core Banking Solutions

    Changes in Support Functions

  • 8/8/2019 Modern Trends in Banking

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    CHANGING DELIVERYCHANNELS

    Post Office

    Internet

    Tele-Marketing

    Branch

    Third Party

    ATMs

    Point of Sale Sales Force

    Call Centre

  • 8/8/2019 Modern Trends in Banking

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    CHANGES INCORE BANKING SOLUTION

    ProductManagement

    Marketingproducts

    Developproducts Maintain

    Review portfolios

    Modify products Studycompetition

    Operations

    Process &Maintain

    Accounts Moneytransactions

    Complywith

    Regulations- KYC,AML, Risk

    provisioning

  • 8/8/2019 Modern Trends in Banking

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    CHANGES IN SUPPORTFUNCTIONS

    Asset Recovery- DRT, SARFAESI

    Manage Fixed Assets

    Finance and Accounting

    TreasuryOperations Domestic , FX

    IT support innovations

    Risk Management

    HR Recruitment, Training and retention

    Audit Risk Based Audit, Sampling

  • 8/8/2019 Modern Trends in Banking

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    CHALLENGES IN FUTURE

    Increased Competition and Customer Retention- CRM

    Reduction in Customer Response time

    Complexity of Business

    Highly demanding Customer- CRM, Product Innovation, Mobile

    Banking, Anywhere Bkg, Internet based Banking

    Increase level of efficiency & productivity- HR Culture, skills/

    knowledge improvement

    Process Outsourcing

    Lending Long-term skill set & ALM Increased Technology- RTGS, Core Banking Solution, INFINET

    (Indian Financial Network)

    Security of Data

  • 8/8/2019 Modern Trends in Banking

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    FUTUREOF BANKING

    Re-structuring and Re-positioning

    Mergers and Acquisitions and Takeovers

    Regulatory Supervision / Intervention

    Financial Supply Chain Management

    Outsourcing of non-core activities

    In-sourcing of Cash / Receivables Management

    Management of Asset quality..

    BUTBanks will continue to manage liquidity, create

    & sustain trust and manage risk.


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