Banks applying for new banking licenses in India will be challenged by the Reserve Bank of India's (RBI) stringent new guidelines, which emphasize financial inclusion, rural banking, technology innovation and financial credibility. At the same time, these issues can open opportunities for consulting firms and service providers.
The Reserve Bank of India released a draft report from a working group examining issues related to discrimination in pricing of credit, which made several recommendations to promote transparency and fairness in credit pricing, including moving towards computing base rates based on marginal cost of funds, ensuring boards approve pricing policies to prevent discrimination, and developing new benchmarks for floating rate loan products. The report also recommended improving grievance redressal systems, financial education initiatives, and enhancing borrower mobility between loans.
This document is the report of the Working Group on Pricing of Credit constituted by the Reserve Bank of India. It discusses international practices on pricing of floating rate loans and determination of credit spreads. It notes that in India, interest rates have moved from an administered regime to a deregulated one. However, concerns remain regarding downward stickiness of rates, discriminatory treatment of old vs new borrowers, and arbitrary changes in spreads. The Working Group was tasked to review these issues and suggest measures to improve transparency in pricing of floating rate loans.
This document discusses non-performing assets (NPAs) in the Indian banking system. It provides background on the banking system and regulations around NPAs. The key points are:
1) NPAs are a major issue for Indian banks, particularly public sector banks, and reducing NPAs is a national priority. High NPAs negatively impact bank profitability and ability to lend.
2) Basel accords introduced capital adequacy requirements and guidelines for identifying and classifying NPAs. NPAs are classified as gross NPAs or net NPAs depending on provisions made.
3) High NPAs in public sector banks are due to factors like directed lending to priority sectors and loan waiver programs. Strategies to reduce
Merger of public sector banks & it’s impact on private sector banksANKUSH PAL
In Indian banking sector Mergers and acquisition has become admire trend throughout the country.
A large number of public sector banks and other banks are engaged in mergers and acquisition activities in India.
The main motive behind mergers in the banking sector is to harvest the benefit of economics of scales.
Mergers can be a large source of growth in any economy but particularly in one that’s comparatively stagnant and mired in deep uncertainty.
The document provides an executive summary of the project report on evaluating the advertising effectiveness of Axis Bank. It includes an introduction to the project for MBA students, the project title, objectives, and an overview of what will be studied regarding Axis Bank's TV advertising effectiveness and consumer relationships. The summary also notes that key parameters like brand recall, top-of-mind awareness, and consumer perspectives will be examined to understand the relationships between Axis Bank customers and its TV media campaigns.
This document analyzes the SWOT of private sector banks in India. It discusses their evolution since the early 20th century and present scenario. Private banks have strengths like professional manpower, efficiency, and compliance with regulations. Their weaknesses include limited geographic reach and high employee turnover. Opportunities exist in decision making autonomy and technology, while threats include competition from foreign and public sector banks. Specific SWOT analyses are also provided for ICICI Bank, Kotak Bank, and Axis Bank.
The document summarizes the history and development of the Indian banking system from its origins in the 18th century to recent reforms and liberalization. It describes the nationalization of major banks in 1969 and changes introduced in the 1990s that opened the sector to private competition and globalization. The summary highlights the transformation of the Indian economy and banking sector from a regulated system focused on industry to an increasingly liberalized and competitive system mirroring broader macroeconomic changes.
The Reserve Bank of India released a draft report from a working group examining issues related to discrimination in pricing of credit, which made several recommendations to promote transparency and fairness in credit pricing, including moving towards computing base rates based on marginal cost of funds, ensuring boards approve pricing policies to prevent discrimination, and developing new benchmarks for floating rate loan products. The report also recommended improving grievance redressal systems, financial education initiatives, and enhancing borrower mobility between loans.
This document is the report of the Working Group on Pricing of Credit constituted by the Reserve Bank of India. It discusses international practices on pricing of floating rate loans and determination of credit spreads. It notes that in India, interest rates have moved from an administered regime to a deregulated one. However, concerns remain regarding downward stickiness of rates, discriminatory treatment of old vs new borrowers, and arbitrary changes in spreads. The Working Group was tasked to review these issues and suggest measures to improve transparency in pricing of floating rate loans.
This document discusses non-performing assets (NPAs) in the Indian banking system. It provides background on the banking system and regulations around NPAs. The key points are:
1) NPAs are a major issue for Indian banks, particularly public sector banks, and reducing NPAs is a national priority. High NPAs negatively impact bank profitability and ability to lend.
2) Basel accords introduced capital adequacy requirements and guidelines for identifying and classifying NPAs. NPAs are classified as gross NPAs or net NPAs depending on provisions made.
3) High NPAs in public sector banks are due to factors like directed lending to priority sectors and loan waiver programs. Strategies to reduce
Merger of public sector banks & it’s impact on private sector banksANKUSH PAL
In Indian banking sector Mergers and acquisition has become admire trend throughout the country.
A large number of public sector banks and other banks are engaged in mergers and acquisition activities in India.
The main motive behind mergers in the banking sector is to harvest the benefit of economics of scales.
Mergers can be a large source of growth in any economy but particularly in one that’s comparatively stagnant and mired in deep uncertainty.
The document provides an executive summary of the project report on evaluating the advertising effectiveness of Axis Bank. It includes an introduction to the project for MBA students, the project title, objectives, and an overview of what will be studied regarding Axis Bank's TV advertising effectiveness and consumer relationships. The summary also notes that key parameters like brand recall, top-of-mind awareness, and consumer perspectives will be examined to understand the relationships between Axis Bank customers and its TV media campaigns.
This document analyzes the SWOT of private sector banks in India. It discusses their evolution since the early 20th century and present scenario. Private banks have strengths like professional manpower, efficiency, and compliance with regulations. Their weaknesses include limited geographic reach and high employee turnover. Opportunities exist in decision making autonomy and technology, while threats include competition from foreign and public sector banks. Specific SWOT analyses are also provided for ICICI Bank, Kotak Bank, and Axis Bank.
The document summarizes the history and development of the Indian banking system from its origins in the 18th century to recent reforms and liberalization. It describes the nationalization of major banks in 1969 and changes introduced in the 1990s that opened the sector to private competition and globalization. The summary highlights the transformation of the Indian economy and banking sector from a regulated system focused on industry to an increasingly liberalized and competitive system mirroring broader macroeconomic changes.
This course focuses on commercial banking management including liabilities management, credit management, capital adequacy management, investment management, and risk management such as liquidity risk, interest rate risk, credit risk, and operational risk. It provides an overview of the Indian banking sector including its evolution, nationalization, financial reforms, policies, and current institutional structure. Key trends in the banking industry include increased competition, consolidation, globalization, technology adoption, and initiatives for financial inclusion.
The document provides an overview of the Indian banking industry. It discusses advances, deposits, investments, non-performing assets, operating expenditures, net profit margins, and major players like SBI and ICICI Bank. The banking industry has grown at a healthy pace with advances increasing at a 17% CAGR. Deposits have also increased steadily. While NPAs pose some challenges, the future outlook remains positive due to government initiatives and increasing penetration of banking services.
Challenges for banking in current scenarioHumsi Singh
The presentation describes the challenges faced by the banking sector in today's scenario. It tells about the various problems faced by banks nowadays.
The document discusses the need for consolidation in the Indian banking industry due to factors such as increased competition from foreign banks, changes in banking regulations, and the need for Indian banks to grow in order to finance large acquisitions by Indian companies. It proposes merging IDBI Bank, which has a large MSME and infrastructure lending portfolio and strong technology, with Canara Bank, which has a large retail customer base and a strong presence in South India. This merger could create synergies and benefit both banks. The document provides an overview of the Indian banking sector and macroeconomic conditions in India, and discusses the types and benefits of bank mergers in India.
The document provides an overview of the Indian and Chinese banking industries. It discusses the history and structure of banking in India, including the nationalization of banks in 1969. It outlines the major players in India by market share and growth over the past 5 years. For China, it describes the structure with the central bank and four largest state-owned commercial banks. It also analyzes the market dominance of these big four Chinese banks and provides rankings by assets, profits and other financial metrics.
Indian Banking Industry: Challenges and OpportunitiesWaqas Tariq
Abstract: The banking industry in India has a huge canvas of history, which covers the traditional banking practices from the time of Britishers to the reforms period, nationalization to privatization of banks and now increasing numbers of foreign banks in India. Therefore, Banking in India has been through a long journey. Banking industry in India has also achieved a new height with the changing times. The use of technology has brought a revolution in the working style of the banks. Nevertheless, the fundamental aspects of banking i.e. trust and the confidence of the people on the institution remain the same. The majority of the banks are still successful in keeping with the confidence of the shareholders as well as other stakeholders. However, with the changing dynamics of banking business brings new kind of risk exposure. In this paper an attempt has been made to identify the general sentiments, challenges and opportunities for the Indian Banking Industry. This article is divided in three parts. First part includes the introduction and general scenario of Indian banking industry. The second part discusses the various challenges and opportunities faced by Indian banking industry. Third part concludes that urgent emphasis is required on the Indian banking product and marketing strategies in order to get sustainable competitive edge over the intense competition from national and global banks. This article is a small seed to existing branch of knowledge in banking industry and is useful for bankers, strategist, policy makers and researchers. Key words: Rural Market, Risk Management, Global Banking, Employee and Customer Retention.
The document summarizes the Indian banking industry. It discusses the various types of banks and financial institutions in India, including commercial banks (public sector banks, private banks, cooperative banks), long-term lending institutions, non-bank finance companies, foreign banks, cooperative banks, and insurance companies/mutual funds. It provides data on the number of banks/offices/employees and business/profit per employee for public sector banks, private sector banks, foreign banks, and cooperative banks over the period of 2008-2009 to 2012-2013. Overall, the banking industry has grown consistently over the last decade but faced challenges in 2013 from an industrial slowdown and high inflation.
Presentation on banking sector needs consolidationPankajSingla
This document discusses various topics related to banking in India, including types of banks, facilities offered by banks, adoption of banking technology, consolidation in the banking sector, and functions of the Reserve Bank of India. It notes that consolidation can provide benefits like growth, universal banking models, synergy benefits, and strategic and market advantages. However, challenges include integrating people and technology between merging banks.
The Reserve Bank of India regulates the Indian banking industry. Until 1991, the industry was heavily regulated but reforms since then have liberalized and intensified competition. Today the industry includes public and private sector banks, co-operative banks, long-term lending institutions, non-bank finance companies, and more. In recent years growth has been consistent but high inflation in 2013 impacted some public sector banks' profitability. Rising incomes and economic growth are expected to continue driving growth in the banking sector.
Payment banks are a new model of banks in India conceptualized by the Reserve Bank of India to promote financial inclusion. Payment banks can accept deposits up to Rs. 1 lakh, offer remittance services, mobile payments/transfers and other banking services like ATM/debit cards and net banking, but cannot issue loans or credit cards. The document discusses the functions of payment banks in detail, including how they can facilitate e-commerce payments in India and their significance for the Indian economy by promoting digital transactions. It also provides context on the Indian banking industry and reviews previous literature on banking performance.
HDFC Bank Ltd. conducted research on its functional areas and performance. The objectives were to understand functions, evaluate industry performance, and measure individual area performance. Primary and secondary data was collected through employee interviews. Department heads and managers were interviewed as a non-probability sample. The history of banking in India dates back to Vedic times, with early indigenous bankers and agency houses. Major developments included the establishment of presidency banks, the Reserve Bank of India, nationalization of banks, and reforms allowing private banks. Banking sector reforms have improved profitability, productivity and efficiency.
The four pillars of the financial system are savers, users, financial markets, and financial intermediaries. Banks are a key financial intermediary that mobilizes deposits from savers and lends to users, providing various financial services. While traditional banking has benefits like personal relationships, modern banking provides advantages such as accessibility, speed, and lower transaction costs through new technologies. Both systems have pros and cons, and majority of customers in India still prefer traditional banking.
The document summarizes the evolution of the Indian banking sector from the pre-1950 period to the present day. It discusses the foundational phase in the 1950s-1970s, the expansion phase in the 1970s-1980s following nationalization, the consolidation phase of the 1980s-1990s, and the ongoing reformatory phase since liberalization. It outlines the performance improvements seen in the sector as well as ongoing challenges around infrastructure, technology, skills, and competition in a changing market. Overall the banking sector has strengthened but continues transforming to meet new demands.
Banking industry of india analysis - PDFdeniver003
Let’s have an analysis of Indian Banking industries. This PDF Contains various banking overview, and a dig at the segmentation of the Indian banking industry, as well as classification, NBFCs, Digitalization of banking, and role of RBI.
Commercial banking in Bangladesh began with 6 nationalized banks after independence and has since expanded to include private and specialized banks. There are now 57 scheduled banks operating under the central bank, including 6 state-owned commercial banks, 2 specialized banks, 40 private commercial banks, and 9 foreign commercial banks. In addition to accepting deposits and lending, commercial banks play important roles in mobilizing savings, financing industry, trade, agriculture, and consumers. However, the banking sector faces challenges like deteriorating asset quality as non-performing loans rise, weak capital adequacy, and lack of innovation. Regulators and banks must take actions to strengthen prudential regulations and governance, improve asset quality, bolster capital bases, and promote financial innovation.
Public sector banks are owned by the government, while private sector banks are owned by private individuals or groups. Interest rates are typically lower for public sector banks compared to private sector banks. Public sector banks are considered more secure since they are run by the government of India, while there is a higher risk of fraud with private banks. Private banks can make business decisions and launch new products/services more quickly than public sector banks which require government approval.
July 2014 Edition of BEACON, A Monthly Newsletter by SIMCON.
Inside this issue:
INDUSTRY ANALYSIS :Banking Industry
COMPANY ANALYSIS : ICICI Bank
Concept of the Month
Quiz
Did You Know?
By Mukund P Unny
The practice of lending and borrowing is millenniums old. The concept of banking was incepted ever since humans started engaging in economic transactions of any kind. The banking system has evolved since then. We have well-established banks now in the 21st century-huge ones having more than $1 trillion in assets. The banking (or credit) sector is one that hold the reins of the world economy. Without the presence of a well-established credit-system, we cannot expect the economy to roll on. A dynamic banking system is essential for a thriving economy.
Legal and regulatory aspects of banking and non banking companiesTOSHISH SARODE
This document provides an overview of various legal and regulatory aspects related to banking and non-banking companies in India. It discusses definitions of banking, the legal framework for bank regulation including the Reserve Bank of India Act and the Banking Regulation Act. It also summarizes Basel II and III capital adequacy frameworks, guidelines on licensing of payment banks, the Payment and Settlement Systems Act 2007, and various principles related to prevention of money laundering and debt recovery.
The document provides details on the proposed expansion plans for a bank called ABCFL over the next 5 years after obtaining a new banking license. It discusses plans to focus on rural markets through increasing branches in rural areas from 40% to 60% of total branches. It outlines marketing strategies targeting rural customers through various channels. Financial projections show profits reaching Rs. 1361 crores by year 5 with a loan book split focusing more on retail loans like housing, vehicle, and personal loans. Risk mitigation strategies are also discussed to deal with challenges of being a new entrant and potential for higher NPAs in rural areas.
This course focuses on commercial banking management including liabilities management, credit management, capital adequacy management, investment management, and risk management such as liquidity risk, interest rate risk, credit risk, and operational risk. It provides an overview of the Indian banking sector including its evolution, nationalization, financial reforms, policies, and current institutional structure. Key trends in the banking industry include increased competition, consolidation, globalization, technology adoption, and initiatives for financial inclusion.
The document provides an overview of the Indian banking industry. It discusses advances, deposits, investments, non-performing assets, operating expenditures, net profit margins, and major players like SBI and ICICI Bank. The banking industry has grown at a healthy pace with advances increasing at a 17% CAGR. Deposits have also increased steadily. While NPAs pose some challenges, the future outlook remains positive due to government initiatives and increasing penetration of banking services.
Challenges for banking in current scenarioHumsi Singh
The presentation describes the challenges faced by the banking sector in today's scenario. It tells about the various problems faced by banks nowadays.
The document discusses the need for consolidation in the Indian banking industry due to factors such as increased competition from foreign banks, changes in banking regulations, and the need for Indian banks to grow in order to finance large acquisitions by Indian companies. It proposes merging IDBI Bank, which has a large MSME and infrastructure lending portfolio and strong technology, with Canara Bank, which has a large retail customer base and a strong presence in South India. This merger could create synergies and benefit both banks. The document provides an overview of the Indian banking sector and macroeconomic conditions in India, and discusses the types and benefits of bank mergers in India.
The document provides an overview of the Indian and Chinese banking industries. It discusses the history and structure of banking in India, including the nationalization of banks in 1969. It outlines the major players in India by market share and growth over the past 5 years. For China, it describes the structure with the central bank and four largest state-owned commercial banks. It also analyzes the market dominance of these big four Chinese banks and provides rankings by assets, profits and other financial metrics.
Indian Banking Industry: Challenges and OpportunitiesWaqas Tariq
Abstract: The banking industry in India has a huge canvas of history, which covers the traditional banking practices from the time of Britishers to the reforms period, nationalization to privatization of banks and now increasing numbers of foreign banks in India. Therefore, Banking in India has been through a long journey. Banking industry in India has also achieved a new height with the changing times. The use of technology has brought a revolution in the working style of the banks. Nevertheless, the fundamental aspects of banking i.e. trust and the confidence of the people on the institution remain the same. The majority of the banks are still successful in keeping with the confidence of the shareholders as well as other stakeholders. However, with the changing dynamics of banking business brings new kind of risk exposure. In this paper an attempt has been made to identify the general sentiments, challenges and opportunities for the Indian Banking Industry. This article is divided in three parts. First part includes the introduction and general scenario of Indian banking industry. The second part discusses the various challenges and opportunities faced by Indian banking industry. Third part concludes that urgent emphasis is required on the Indian banking product and marketing strategies in order to get sustainable competitive edge over the intense competition from national and global banks. This article is a small seed to existing branch of knowledge in banking industry and is useful for bankers, strategist, policy makers and researchers. Key words: Rural Market, Risk Management, Global Banking, Employee and Customer Retention.
The document summarizes the Indian banking industry. It discusses the various types of banks and financial institutions in India, including commercial banks (public sector banks, private banks, cooperative banks), long-term lending institutions, non-bank finance companies, foreign banks, cooperative banks, and insurance companies/mutual funds. It provides data on the number of banks/offices/employees and business/profit per employee for public sector banks, private sector banks, foreign banks, and cooperative banks over the period of 2008-2009 to 2012-2013. Overall, the banking industry has grown consistently over the last decade but faced challenges in 2013 from an industrial slowdown and high inflation.
Presentation on banking sector needs consolidationPankajSingla
This document discusses various topics related to banking in India, including types of banks, facilities offered by banks, adoption of banking technology, consolidation in the banking sector, and functions of the Reserve Bank of India. It notes that consolidation can provide benefits like growth, universal banking models, synergy benefits, and strategic and market advantages. However, challenges include integrating people and technology between merging banks.
The Reserve Bank of India regulates the Indian banking industry. Until 1991, the industry was heavily regulated but reforms since then have liberalized and intensified competition. Today the industry includes public and private sector banks, co-operative banks, long-term lending institutions, non-bank finance companies, and more. In recent years growth has been consistent but high inflation in 2013 impacted some public sector banks' profitability. Rising incomes and economic growth are expected to continue driving growth in the banking sector.
Payment banks are a new model of banks in India conceptualized by the Reserve Bank of India to promote financial inclusion. Payment banks can accept deposits up to Rs. 1 lakh, offer remittance services, mobile payments/transfers and other banking services like ATM/debit cards and net banking, but cannot issue loans or credit cards. The document discusses the functions of payment banks in detail, including how they can facilitate e-commerce payments in India and their significance for the Indian economy by promoting digital transactions. It also provides context on the Indian banking industry and reviews previous literature on banking performance.
HDFC Bank Ltd. conducted research on its functional areas and performance. The objectives were to understand functions, evaluate industry performance, and measure individual area performance. Primary and secondary data was collected through employee interviews. Department heads and managers were interviewed as a non-probability sample. The history of banking in India dates back to Vedic times, with early indigenous bankers and agency houses. Major developments included the establishment of presidency banks, the Reserve Bank of India, nationalization of banks, and reforms allowing private banks. Banking sector reforms have improved profitability, productivity and efficiency.
The four pillars of the financial system are savers, users, financial markets, and financial intermediaries. Banks are a key financial intermediary that mobilizes deposits from savers and lends to users, providing various financial services. While traditional banking has benefits like personal relationships, modern banking provides advantages such as accessibility, speed, and lower transaction costs through new technologies. Both systems have pros and cons, and majority of customers in India still prefer traditional banking.
The document summarizes the evolution of the Indian banking sector from the pre-1950 period to the present day. It discusses the foundational phase in the 1950s-1970s, the expansion phase in the 1970s-1980s following nationalization, the consolidation phase of the 1980s-1990s, and the ongoing reformatory phase since liberalization. It outlines the performance improvements seen in the sector as well as ongoing challenges around infrastructure, technology, skills, and competition in a changing market. Overall the banking sector has strengthened but continues transforming to meet new demands.
Banking industry of india analysis - PDFdeniver003
Let’s have an analysis of Indian Banking industries. This PDF Contains various banking overview, and a dig at the segmentation of the Indian banking industry, as well as classification, NBFCs, Digitalization of banking, and role of RBI.
Commercial banking in Bangladesh began with 6 nationalized banks after independence and has since expanded to include private and specialized banks. There are now 57 scheduled banks operating under the central bank, including 6 state-owned commercial banks, 2 specialized banks, 40 private commercial banks, and 9 foreign commercial banks. In addition to accepting deposits and lending, commercial banks play important roles in mobilizing savings, financing industry, trade, agriculture, and consumers. However, the banking sector faces challenges like deteriorating asset quality as non-performing loans rise, weak capital adequacy, and lack of innovation. Regulators and banks must take actions to strengthen prudential regulations and governance, improve asset quality, bolster capital bases, and promote financial innovation.
Public sector banks are owned by the government, while private sector banks are owned by private individuals or groups. Interest rates are typically lower for public sector banks compared to private sector banks. Public sector banks are considered more secure since they are run by the government of India, while there is a higher risk of fraud with private banks. Private banks can make business decisions and launch new products/services more quickly than public sector banks which require government approval.
July 2014 Edition of BEACON, A Monthly Newsletter by SIMCON.
Inside this issue:
INDUSTRY ANALYSIS :Banking Industry
COMPANY ANALYSIS : ICICI Bank
Concept of the Month
Quiz
Did You Know?
By Mukund P Unny
The practice of lending and borrowing is millenniums old. The concept of banking was incepted ever since humans started engaging in economic transactions of any kind. The banking system has evolved since then. We have well-established banks now in the 21st century-huge ones having more than $1 trillion in assets. The banking (or credit) sector is one that hold the reins of the world economy. Without the presence of a well-established credit-system, we cannot expect the economy to roll on. A dynamic banking system is essential for a thriving economy.
Legal and regulatory aspects of banking and non banking companiesTOSHISH SARODE
This document provides an overview of various legal and regulatory aspects related to banking and non-banking companies in India. It discusses definitions of banking, the legal framework for bank regulation including the Reserve Bank of India Act and the Banking Regulation Act. It also summarizes Basel II and III capital adequacy frameworks, guidelines on licensing of payment banks, the Payment and Settlement Systems Act 2007, and various principles related to prevention of money laundering and debt recovery.
The document provides details on the proposed expansion plans for a bank called ABCFL over the next 5 years after obtaining a new banking license. It discusses plans to focus on rural markets through increasing branches in rural areas from 40% to 60% of total branches. It outlines marketing strategies targeting rural customers through various channels. Financial projections show profits reaching Rs. 1361 crores by year 5 with a loan book split focusing more on retail loans like housing, vehicle, and personal loans. Risk mitigation strategies are also discussed to deal with challenges of being a new entrant and potential for higher NPAs in rural areas.
This document provides an overview of the evolution of banking in India from pre-independence to post-independence. It discusses the various types of banks that were established over time, including Firangi Banks established by the British, Swadeshi Banks focused on local merchants, and the establishment of the Reserve Bank of India in 1934. Post-independence, it notes the nationalization of banks in 1969 and 1980. The document also discusses the establishment of specialized banks like Regional Rural Banks, cooperative banks, and the National Bank for Agriculture and Rural Development.
This study examines the relationship between bank efficiency and different types of regulations in 10 new EU member states from 1996-2009. The authors use data envelopment analysis to measure bank cost efficiency and panel regression analysis to analyze the impact of credit, labor, and business regulations on efficiency. The results provide some evidence that credit regulations positively impact efficiency, while labor regulations initially have a negative effect. Variance decompositions from a panel vector autoregression confirm the strong causality from credit regulations to efficiency, with privatization and foreign competition being most important. Overall, the findings suggest regulations across multiple sectors can significantly impact bank efficiency.
The document summarizes the evolution of the banking system in India. It describes the old banking system from 1786 to 1969 which involved manual documentation and few services. It then discusses the nationalization of banks from 1969 to 1991. Finally, it outlines the new banking system post-1991 reforms involving increased technology usage through tools like core banking solutions, ATMs, and online services that have improved customer experience but also introduced new risks like hacking and phishing.
This document provides an overview of the banking system in India. It defines banking and outlines the key laws and institutions that govern banking operations, including the Reserve Bank of India Act and the Banking Regulation Act. It describes the structure of banks in India, categorizing them as commercial banks, cooperative banks, and development banks. It provides details on the various types of commercial banks, cooperative banks, and development banks in India. It also summarizes the major functions and roles of the Reserve Bank of India in regulating the banking system.
Indian Banking Industry - Challenges, Opportunities and Growth Driver of Bank...Resurgent India
Indian banks face challenges such as low banking access rates and rising customer expectations, but also opportunities for growth. Key challenges include implementing Basel III capital requirements, increasing competition, and rising non-performing assets. However, opportunities exist in expanding mortgage lending, wealth management, and rapid ATM/branch growth. Economic development, favorable demographics, and policy support can further drive the banking industry's growth in infrastructure financing, financial inclusion, and technological innovation.
INDUSTRY OVERVIEW
Evolution of Banking Sector in India
Structure of Banking in India
Parameters/ Indicator – banking Sector
Growth of the Industry with Examples
Prominent Companies in the Banking Sector
New entrants in the Banking Sector
Exit of Banks
Major Decisions take by the Government for Banking Sector
The document discusses the introduction and process of credit appraisal. It defines credit appraisal as evaluating a loan proposal to assess the borrower's repayment capacity by analyzing various factors like market, management, technical and financial. The key objectives are to ensure safety of funds and that money is given to borrowers who can repay. The process involves assessing the creditworthiness, willingness and capacity of the borrower to repay, along with risks that may impact repayment. A thorough appraisal justifies spending money on a project by considering technical, commercial, financial and other factors.
Indian Banking Moving towards a new landscape - Impact of UIDAI (Aadhaar) in...Resurgent India
The document summarizes the impact of Aadhaar (UIDAI) in promoting financial inclusion in India. It discusses how Aadhaar addresses the lack of documentation many Indians face by providing a unique identification number. This allows people to open bank accounts and access government services. The document also outlines recent RBI initiatives like granting licenses for payments banks and small finance banks, which are aimed at expanding access to financial services in rural areas and underserved sectors.
Financial inclusion – objectives - Micro finance as a Development Tool - The Indian Experience - Evolution and Character of micro finance in India - Micro finance Delivery Methodologies and models- Legal and Regulatory Framework- Impact of Micro finance - Revenue Models of Micro finance- Profitability, Efficiency and Productivity Emerging issues
The document discusses payment banks in India. Payment banks will help further financial inclusion by providing small savings accounts and payment/remittance services. They can accept deposits up to Rs. 1 lakh and enable digital payments and money transfers through mobile phones. Eleven firms have been granted licenses to start payment banks, including telecom and retail companies. Payment banks have the potential to transform financial services access for underserved populations by leveraging technology and existing customer bases.
This document provides an overview of changing business practices in the Indian banking sector due to technological adaptations. It discusses the introduction of payment banks in India, which are non-full service niche banks allowed to accept deposits and provide remittance services but not lending. Regulations for payment banks regarding financial requirements, ownership structures, and permissible activities are outlined. Recent developments and a list of new payment banks launching in India are also mentioned. Mobile wallets and small finance banks, which are other emerging technologies being adopted in the banking sector, are briefly discussed as well.
The document provides an overview of the banking industry in India. It discusses that banks have become an attractive way for people to invest their savings and that HDFC was one of the first private sector banks established in India. It then analyzes the financial ratios of HDFC Bank compared to other private banks like ICICI, ING Vysya, Citibank, and Kotak Mahindra. The analysis found that HDFC Bank's current assets are lower than ICICI Bank but some of its ratios like return on total resources are satisfactory. It provides some suggestions like increasing current assets and capturing younger customers through mobile banking.
- The Indian banking industry is at a critical juncture and faces both opportunities and challenges over the next decade. Ten major trends will shape the industry.
- Mortgages are expected to grow rapidly and cross Rs. 40 trillion by 2020 driven by rising incomes and changing demographics. Wealth management will also see 10x growth as wealth gets concentrated among the rich.
- "The Next Billion" customer segment earning Rs. 90,000-200,000 annually will be the largest group and demand low-cost banking solutions to serve them profitably. Meeting this demand and other expectations like financial inclusion pose significant challenges for banks over the coming decade.
This document is a project report submitted by Rajesh Kumar Sitaram to Dr. Ambedkar College of Commerce and Economics in Mumbai, India for his M.Com program in Advanced Accounting in 2013-2014. The report focuses on analyzing various aspects of banks in India such as their roles, functions, governing statutes, non-performing assets, and financial statements. It also provides a case study analysis of home loans offered by HDFC Bank. The project was guided by Prof. Suresh Pujari and aims to provide an overview of the banking sector in India.
Licensing new banks in private sector is a bold step in the path of financial sector reforms. In fact the ball was set rolling after the Union Finance Minister in his Budget Speech 2010-11 made a significant announcement that: “RBI is to consider giving some additional banking licenses to private sector players.” The objective is clear and loud: to extend banking outreach, instill competitive efficiency, bring in new technology and achieve inclusive growth.
RBI issued the final “Guidelines for Licensing of New Banks in the Private Sector” in February 2013 after taking into account the important amendments to the Banking Regulation Act, 1949, feedbacks received from the public, and consultation with the Central Government.
An innovative corporate structure of the promoters of banks is prescribed. Entities / groups in the private sector and entities in the public sector shall be eligible to promote a bank through a Non–Operative Financial Holding Company (NOFHC). The corporate structure is designed to ring-fence the banks from spill-over risks from other entities of the group.
Financial inclusion has emerged as major policy plank of the Centre and RBI. The task is challenging with large population and the geographical spread of our country. The data released from the recent Census of India shows that only 54.4 per cent of rural households have access to banking services
RBI received 26 applications for bank license. On the recommendations of a High Powered Committee headed by Dr Bimal Jalan, former RBI Governor, RBI, issued "in principle" approval to two entities viz IDFC ( an NBFC) and Bandhan( NBFC-MFI) to set up banks. Presently they are functioning as NBFCs; they need to obtain license from RBI under Sec 22 of the Banking Regulation Act, 1949.
. The earlier experimentation of bank licensing infused the much needed competition and technology in the banking sector. Notably, the business models adopted by these banks support class banking, profit maximization and risk-taking. Expectedly, the new generation banks would bring an evolutionary change to meet the “needs of modern economy” and alongside “improve access to banking services” to the lower strata of the society.
April 2014 Edition of BEACON, A Monthly Newsletter by SIMCON.
Inside this issue:
INDUSTRY ANALYSIS : Non Banking Financial Company
COMPANY ANALYSIS : STFC Ltd.
Concept of the Month
Quiz
Did You Know?
The document discusses the future of financial services for the poor in India, predicting a shift towards multiproduct offerings delivered through individual accounts and mobile/technology platforms, as well as increased regulation requiring banks' direct involvement in lending through business correspondent models. It also examines opportunities for microfinance institutions to partner with banks to expand access to financial services in rural areas by acting as business correspondents and agents.
Effectiveness of training @ canara bank project reportBabasab Patil
The document provides an overview of Canara Bank, a leading public sector bank in India established in 1906. It discusses the bank's financial performance over the last two years, achieving the highest net profit among nationalized banks in 2004 and 2005. The report also describes a study conducted on the bank's training programs, finding that the programs were successful and met respondents' needs and expectations. It provides suggestions such as introducing more marketing and product awareness programs.
This is a latest development in Indian banking landscape after the Government of India announced the intention to license new commercial banks in private sector. Reserve bank of India, the banking regulator has set the process. This is a milestone development in Indian banking landscape. Final guidelines would be issued by Reserve Bank after necessary dialogue with government.
Payment banks and small banks were introduced in India to promote financial inclusion and provide banking services to underserved populations. The Reserve Bank of India issued licenses to 11 entities to launch payments banks and 10 entities to start small banks. These banks aim to offer basic banking services like deposits and remittances while focusing on rural and low-income customers. However, as they are restricted from lending, payments banks will need to rely on fee income from high transaction volumes to be profitable. The introduction of these banks was recommended by RBI committees to expand access to financial services across India.
This document is a student's project submission on priority sector lending in India. It includes sections on the introduction, history and background of priority sector lending in India, pre-reform and post-reform periods, key thrust areas and need for priority sector lending. It also discusses changing criteria of priority sectors, interest rate structures, and analysis of non-performing assets in priority sector lending between public and private sector banks. The document provides an overview of priority sector lending guidelines and regulations in India.
August 2015 Edition of BEACON, A Monthly Newsletter by SIMCON.
Inside this issue:
About Us
Our Team
INDUSTRY ANALYSIS : NBFC Industry
COMPANY ANALYSIS : HDFC Bank
BRAND ANALYSIS : Rolex
Concept of the month: Pricing Myopia
Using Adaptive Scrum to Tame Process Reverse Engineering in Data Analytics Pr...Cognizant
Organizations rely on analytics to make intelligent decisions and improve business performance, which sometimes requires reproducing business processes from a legacy application to a digital-native state to reduce the functional, technical and operational debts. Adaptive Scrum can reduce the complexity of the reproduction process iteratively as well as provide transparency in data analytics porojects.
Data Modernization: Breaking the AI Vicious Cycle for Superior Decision-makingCognizant
The document discusses how most companies are not fully leveraging artificial intelligence (AI) and data for decision-making. It finds that only 20% of companies are "leaders" in using AI for decisions, while the remaining 80% are stuck in a "vicious cycle" of not understanding AI's potential, having low trust in AI, and limited adoption. Leaders use more sophisticated verification of AI decisions and a wider range of AI technologies beyond chatbots. The document provides recommendations for breaking the vicious cycle, including appointing AI champions, starting with specific high-impact decisions, and institutionalizing continuous learning about AI advances.
It Takes an Ecosystem: How Technology Companies Deliver Exceptional ExperiencesCognizant
Experience is becoming a key strategy for technology companies as they shift to cloud-based subscription models. This requires building an "experience ecosystem" that breaks down silos and involves partners. Building such an ecosystem involves adopting a cross-functional approach to experience, making experience data-driven to generate insights, and creating platforms to enable connected selling between companies and partners.
Intuition is not a mystery but rather a mechanistic process based on accumulated experience. Leading businesses are engineering intuition into their organizations by harnessing machine learning software, massive cloud processing power, huge amounts of data, and design thinking in experiences. This allows them to anticipate and act with speed and insight, improving decision making through data-driven insights and acting as if on intuition.
The Work Ahead: Transportation and Logistics Delivering on the Digital-Physic...Cognizant
The T&L industry appears poised to accelerate its long-overdue modernization drive, as the pandemic spurs an increased need for agility and resilience, according to our study.
Enhancing Desirability: Five Considerations for Winning Digital InitiativesCognizant
To be a modern digital business in the post-COVID era, organizations must be fanatical about the experiences they deliver to an increasingly savvy and expectant user community. Getting there requires a mastery of human-design thinking, compelling user interface and interaction design, and a focus on functional and nonfunctional capabilities that drive business differentiation and results.
The Work Ahead in Manufacturing: Fulfilling the Agility MandateCognizant
Manufacturers are ahead of other industries in IoT deployments but lag in investments in analytics and AI needed to maximize IoT's benefits. While many have IoT pilots, few have implemented machine learning at scale to analyze sensor data and optimize processes. To fully digitize manufacturing, investments in automation, analytics, and AI must increase from the current 5.5% of revenue to over 11% to integrate IT, OT, and PT across the value chain.
The Work Ahead in Higher Education: Repaving the Road for the Employees of To...Cognizant
Higher-ed institutions expect pandemic-driven disruption to continue, especially as hyperconnectivity, analytics and AI drive personalized education models over the lifetime of the learner, according to our recent research.
Engineering the Next-Gen Digital Claims Organisation for Australian General I...Cognizant
The document discusses potential future states for the claims organization of Australian general insurers. It notes that gradual changes like increasing climate volatility, new technologies, and changing customer demographics will reshape the insurance industry and claims processes. Five potential end states for claims organizations are described: 1) traditional claims will demand faster processing; 2) a larger percentage of claims will come from new digital risks; 3) claims processes may become "Uberized" through partnerships; 4) claims organizations will face challenges in risk management propositions; 5) humans and machines will work together to adjudicate claims using large data and computing power. The document argues that insurers must transform claims through digital technologies to concurrently improve customer experience, operational effectiveness, and efficiencies
Profitability in the Direct-to-Consumer Marketplace: A Playbook for Media and...Cognizant
Amid constant change, industry leaders need an upgraded IT infrastructure capable of adapting to audience expectations while proactively anticipating ever-evolving business requirements.
Green Rush: The Economic Imperative for SustainabilityCognizant
Green business is good business, according to our recent research, whether for companies monetizing tech tools used for sustainability or for those that see the impact of these initiatives on business goals.
Policy Administration Modernization: Four Paths for InsurersCognizant
The pivot to digital is fraught with numerous obstacles but with proper planning and execution, legacy carriers can update their core systems and keep pace with the competition, while proactively addressing customer needs.
The Work Ahead in Utilities: Powering a Sustainable Future with DigitalCognizant
Utilities are starting to adopt digital technologies to eliminate slow processes, elevate customer experience and boost sustainability, according to our recent study.
AI in Media & Entertainment: Starting the Journey to ValueCognizant
Up to now, the global media & entertainment industry (M&E) has been lagging most other sectors in its adoption of artificial intelligence (AI). But our research shows that M&E companies are set to close the gap over the coming three years, as they ramp up their investments in AI and reap rising returns. The first steps? Getting a firm grip on data – the foundation of any successful AI strategy – and balancing technology spend with investments in AI skills.
Operations Workforce Management: A Data-Informed, Digital-First ApproachCognizant
As #WorkFromAnywhere becomes the rule rather than the exception, organizations face an important question: How can they increase their digital quotient to engage and enable a remote operations workforce to work collaboratively to deliver onclient requirements and contractual commitments?
Five Priorities for Quality Engineering When Taking Banking to the CloudCognizant
As banks move to cloud-based banking platforms for lower costs and greater agility, they must seamlessly integrate technologies and workflows while ensuring security, performance and an enhanced user experience. Here are five ways cloud-focused quality assurance helps banks maximize the benefits.
Getting Ahead With AI: How APAC Companies Replicate Success by Remaining FocusedCognizant
Changing market dynamics are propelling Asia-Pacific businesses to take a highly disciplined and focused approach to ensuring that their AI initiatives rapidly scale and quickly generate heightened business impact.
The Work Ahead in Intelligent Automation: Coping with Complexity in a Post-Pa...Cognizant
Intelligent automation continues to be a top driver of the future of work, according to our recent study. To reap the full advantages, businesses need to move from isolated to widespread deployment.
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
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Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
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Obtaining New Banking Licenses in India: Challenges and Opportunities
1. • Cognizant 20-20 Insights
Obtaining New Banking Licenses in India:
Challenges and Opportunities
New banks in India will not have an easy time securing licenses, given
the Reserve Bank of India's guidelines and expectations for promoting
financial inclusion, rural banking and technology innovations.
Executive Summary
On July 1, 2013 the list of 26 applicants for new
banking licenses to be issued by the Reserve Bank
of India (RBI) was announced – marking the end
of the first phase of a process that played out
in the 2010-2011 time frame. During that period,
RBI posted a discussion paper on its Web site –
inviting comments and feedback on the proposal
to offer new banking licenses to private sector
players. Among other things, RBI sought views/
comments on the minimum capital required for
new banks; the promoter’s contribution; foreign
shareholding in the new banks, and the business
model for the new banks. 1 Based on responses –
from banks, the general public and non-banking
financial companies (NBFCs), as well as microfinance institutions (MFIs), analyses opinion
pieces in the media and discussions with relevant
stakeholders – the RBI issued specific guidelines,
“Licensing of New Banks in the Private Sector,” in
February, 2013.
The guidelines take into account the existing economic environment, RBI’s objective regarding
banking sector reforms, and its past experience
with banking licenses issued in 1993 and 2003.
cognizant 20-20 insights | november 2013
Apart from stringent entry-level guidelines, RBI
expects new banks to take the lead in achieving
greater financial inclusion, enhancing rural bank ing facilities, reaching priority-sector lending tar gets, and ushering in technology innovations in
the banking industry. Applicants that were issued
licenses in the earlier two stages have reached a
certain degree of success in some, but not all, of
the above. It will be a tough task for the beneficiaries of the new banking licenses to meet RBI’s
expectations while ensuring they establish and
run a financially strong entity.
This paper looks at why applicants find it desir able to apply for a banking license, and what
they can expect from its allotment. Among
other benefits, the new banks will have access
to a vast unbanked/underbanked populace, lowcost funds, as well as opportunities in credit and
investment products. We will analyze the cur rent position of banks that were issued licenses
earlier, and attempt to interpret RBI’s guidelines.
This paper will also cover the challenges that
new banks are likely to face, such as compliance
with RBI guidelines on financial inclusion, rural
banking and priority-sector lending, plus the
2. significant capital expenditures and competition
from existing banks. Inherent advantages that
some applicants possess, such as an infrastructure for a Public Sector Undertaking (PSU), or
a client base from an NBFC/MFI (Non Banking
Financial Company/Microfinance Company), will
be analyzed as well. Finally, we will examine business opportunities for consulting firms in areas
like business process modeling, core banking
product selection, core banking implementation,
governance, risk and compliance.
Those objectives were probably met to a large
extent by newer entrants, since RBI proceeded
with issuing another round of banking licenses
during 2003 and 2004.
RBI’s intent can be broadly attributed to three
objectives:3
Financial inclusion — Providing affordable
banking services to the lowest strata of the
population is one of the primary goals. RBI
has mandated that commercial banks achieve
financial inclusion by offering “no-frills” savings-bank accounts and easy access to credit
facilities through general-purpose credit cards
(GCCs). KYC (Know Your Customer) norms have
also been relaxed to achieve greater financial
inclusion. Additionally, CRISIL Inclusix provides
a comprehensive index for measuring financial
inclusion in the country (see Figure 1).
Background
Following the nationalization of banks in the
1960s and 1980s, the Reserve Bank of India began
issuing banking licenses to 10 private sector
banks between 1993 and 1994, and to another two
between 2003 and 2004. The first set of licenses
led to the emergence of private banks such as
ICICI Bank Ltd., HDFC Bank Ltd., and Axis Bank
Ltd. Promoted by various financial institutions,
these went on to become the biggest private sector banks in India. A few other banks that had
come into existence at the same time as these
“Big Three” either collapsed or were merged with
one of the three. Times Bank merged with HDFC
Bank, while Bank of Punjab was acquired by Centurion Bank to form Centurion Bank of Punjab,
which in turn was acquired by HDFC Bank. Global
Trust Bank failed – subsequently merging with the
Oriental Bank of Commerce. Only two licenses
were issued between 2003 and 2004, creating
Kotak Mahindra Bank and Yes Bank.
The issuing of banking licenses between 1993
and 1994 (and to a lesser extent during 2003 and
2004) was probably the outcome of economic liberalization initiated by the then-government. The
current licensing cycle seems to be prompted by
RBI’s objectives of financial inclusion and taking
banking to the unbanked and underbanked areas.
CRISIL Inclusix Score
41
39
37
35
33
2010
2009
CRISIL Inclusix Score
Source: www.crisil.com
Figure 1
CRISIL Inclusix measures financial inclusion on
three parameters: branch penetration, deposit
penetration and credit penetration.
New Banking Licenses — Why Now?
Economic conditions during 1993 and 1994
demanded new banking licenses. Economic liberalization was underway, and the role of banks and
other financial sector intermediaries was becoming prominent. PSU banks held 91% of the total
bank branches in India, and collectively accounted
for 85% of the total banking business in the country.2 New banking licenses were issued to move
financial sector reforms forward, upgrade technology in the financial services sector, and avoid
placing economic power in the hands of a few.
cognizant 20-20 insights
2011
As seen in Figure 1, financial inclusion has
improved from 2009 (score of 35.4) to 2011
(score of 40.1) but is still low, and reflects
under-penetration of banking services in the
country. Other findings from the index also
indicate significant room for improving this
score (see Figure 2, next page).
2
3. Significant Room for Improvement
Findings from the Index
Interpretation
Number of savings bank
accounts is close to four times
the number of loan accounts.
1 Access to credit facilities is restricted to a small section
of the population, possibly due to the stringent regulations
that are in place.
2 There is significant opportunity for banks/other financial
intermediaries.
3 Banks are looking to mobilize low-cost funds and focus less
on extending credit to every category of depositors.
India’s six largest cities have
11% of the total bank branches.
1 Banks have largely ignored smaller cities and rural areas.
2 Indian cities may be overbanked.
There are four districts in the
Northeast with only one bank
branch among them.
1 Some regions in the country are highly underbanked,
in spite of RBI-mandated financial inclusion measures.
Source: www.crisil.com
Figure 2
To rectify this situation, RBI has mandated
that new banks would have to open at least
25% of their branches in unbanked rural areas.
This would result in:
A wider reach of financial services — For
banking to be truly inclusive, banking and
financial services must reach a large section
of the general population. Consumers can then
benefit from access to a wide variety of banking products and services; banks win by bringing more people into the banking fold, which
reduces the cost of offering such services.
Penetration of banking services also achieves
the greater good of financial inclusion.
The percentage of growth in rural and urban
households availing themselves of banking
services (see Figure 3) can be attributed to
the increasing reach of such services in rural
centers.
“Average Population per Bank Branch” (APBB)
for rural and semi—urban areas (see Figure 4,
next page) fell from 17,200 in 2005 to 12,100 in
2013. The APBB is likely to continue to decline
as the number of branches increases.
Out of a total of 102,343 branches of scheduled commercial banks in India (as of March 31,
2013), 37,953 (37%) are located in rural areas. Of
these, private sector banks account for just 1,937
(only 5.1%).4
As Figure 5 (next page) indicates, private sector
banks and foreign banks have the least number of
rural branches.
Clearly, private sector banks have lagged behind
in terms of providing banking services to rural
A Wider Reach of Financial Services
80
Rural banking — Penetration of banking
services in rural areas is RBI’s third objective
regarding issuing new banking licenses. During
1993 and 1994, new banks were obligated to
open branches in rural areas; between 2003
and 2004 they were required to have 25% of
their branches in rural and semi-urban centers.
This time around, RBI has specified that new
banks must set up 25% of their branches in
unbanked rural centers (having a population of
up to 9,999). This guideline emphasizes RBI’s
focus on rural banking.
60
40
20
0
2001
Rural Households
Source: financialservices.gov.in
Figure 3
cognizant 20-20 insights
2011
Urban Households
3
4. the financial services sector, with a significant
portion of their existing business coming from
rural areas (see Figure 5). Therefore, they are
likely to have better access to low-cost funds
in the form of current and savings deposits.
Deposit holders in the rural and semi-urban
areas are not as financially literate as their
urban counterparts; hence, they are largely
unaware of alternative financial and investment products. They are more apt to keep
surplus funds in the bank rather than invest in
other instruments.
Data on Average Population Per
Bank Branch (APBB)
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2005
2010
2013
Low credit penetration — As we mentioned earlier, the number of deposit accounts in India is
almost four times the number of loan accounts.
The reasons could range from stringent credit
checks to the Indian mindset of not turning to
loans. However, this also indicates that credit
penetration still has ample room to grow, and
that newer and more aggressive entrants can
take advantage of this opportunity.
APBB
Source: financialservices.gov.in
Figure 4
areas. By issuing guidelines for setting up
branches in those parts of the country, the RBI
hopes to correct this situation.
What is in it for Applicants?
Low penetration of financial products and
services — Nowadays, distribution of thirdparty products (TPPs) such as mutual funds
and insurance, and services such as portfolio
management, form a sizable portion of a bank’s
income. However, in spite of aggressive marketing by banks, mutual fund penetration in India
stands at 4.7%, while insurance penetration is
at 5.1%.9 The new banking license applicants
will be looking to tap into this market.
The number of applicants for new banking
licenses has come down – from 113 in the 19931994 time frame to 100 between 2003 and 2004,
to just 26 in the current cycle.5 This can be attributed to the stringent guidelines issued by RBI and
an uncertain operating environment. However,
the fact that 26 applicants across NBFCs, PSUs
and large business houses have applied for a
banking license indicates that these entities see
business and other opportunities in this sector.
A few reasons why new applicants could succeed
can be attributed to:
An underbanked population — For the financial year ending March 31, 2012, there were
26 nationalized banks, 40 foreign banks and
21 private sector banks (including both old
and new-generation private sector banks).6
In addition to these, there were 86 regional
rural banks, 1,721 urban cooperatives, 31 state
cooperatives and 371 district central cooperative banks.7 However, as Figure 6 (next page)
indicates,8 India has a lot of ground to cover
compared to other emerging economies and
developed economies. This represents a significant opportunity for newer entrants, since
they have access to this vast and probably
underbanked population.
Access to low-cost funds — Most of the
26 applicants already have a presence in
Dissatisfaction with existing banks — Newer
entrants will seek to leverage customer
dissatisfaction with existing banks due to
Percentage Distribution of Rural
and Other Branches
100
80
60
40
20
0
Public
Private
Foreign
Sector Banks Sector Banks Banks
Rural Branches
cognizant 20-20 insights
Other Branches
Source: financialservices.gov.in
Figure 5
4
Regional
Rural Banks
5. Bank Branches per 100,000 Adults
50
40
30
20
10
0
Brazil
France
India
Indonesia
Japan
South
Korea
Mexico
Russia
U.S.
Bank Branches per 100,000 Adults
Source: worldbank.org
Figure 6
declining standards in customer service, lack
of technological innovations and limitations in
geographical reach, for example.
in the Indian financial markets. Along the
way, these entities also got listed on major
stock exchanges in India, such as the Bombay
Stock Exchange (BSE) and the National Stock
Exchange (NSE), as well as overseas (The New
York Stock Exchange [NYSE] and the London
Stock Exchange [LSE]) – creating more value
for shareholders. New applicants will be looking to emulate the business model of such
banks.
Use of existing infrastructure and experience —
The list of 26 applicants for banking licenses
comprises entities such as Bajaj Finserv Ltd.,
JM Financial Ltd., LIC Housing Finance Ltd.
and Reliance Capital Ltd., which have ample
experience in dealing in financial products and
services. Apart from experience, these entities
also possess the infrastructure and client base
necessary to support their foray into banking.
Licenses Issued Earlier — Successes
and Failures
Banks that came into existence post the 19931994 time period are referred to as New Generation Private Sector Banks (as opposed to the Old
Generation Private Sector Banks, such as South
Indian Bank, Federal Bank and Karnataka Bank,
for example). Most of the banks that came into
existence as a result of banking licenses issued in
the 1990s and early 2000s have done well.
Success stories of earlier entrants — Licenses
issued in the earlier phases resulted in the formation of banks such as ICICI Bank Ltd., HDFC
Bank Ltd., Axis Bank Ltd., Kotak Mahindra
Bank Ltd. and Yes Bank Ltd. These institutions
have grown in size, income and geographical
reach, and now wield considerable influence
Performance of Banks
FY11
FY12
Canara
Bank
BoI
ICICI
Bank
HDFC
Bank
Source: KPMG-Indian Banks:Performance Benchmarking Report FY12 Results.
Figure 7
cognizant 20-20 insights
5
1,806
2,427
2,856
BoB
2,225
2,774
3,379
PNB
Axis Bank
354
456
576
SBI
374
509
657
0
3,634
4,062
4,736
4,000
2,750
3,512
3,845
2,966
3,783
4,582
8,000
2,647
3,359
3,742
12,000
2,783
3,584
4,473
16,000
FY10
10,534
12,237
13,355
Total assets (INR billion)
KMB
IIB
6. The new private sector banks, such as ICICI
Bank, HDFC Bank and Axis Bank, which were set
up post-1991, compare favorably (see Figure 7,
previous page) to the PSU Banks such as PNB
(founded in 1895), Bank of Baroda (founded in
1908), Canara Bank (founded in 1906) and Bank
of India (founded in 1906) (See Figure 8, below).
These banks have also been able to create
and enhance value for their shareholders in the
comparatively short period of time they have
been listed.
the experience gained from functioning banks
that were issued licenses earlier, and the existing macroeconomic and banking sector scenario
(see Figure 9, next page).
Challenges for New Applicants
Top Business Challenges
Regulatory requirements — New banks will
have to meet CRR (cash reserve ratio) and
SLR (service level requirements) mandates
from day one. They will have to raise enough
Market Capitalization of Banks Currently Under Review
Year of
Listing
Market Cap
(INR crores)*
Name of
Bank
Year of
Listing
Market Cap
(INR billion)*
SBI
1993
107643
ICICI Bank
1997
97661
Punjab National Bank
2002
17242
HDFC Bank
1995
147982
Bank of Baroda
1996
19985
Axis Bank
1998
45957
Canara Bank
2002
9482
Kotak Mahindra Bank
2003
49649
Bank of India
1996
8878
IndusInd Bank
1997
19648
Name of Bank
* as of 08/26/2013 (rounded off)
Source: moneycontrol.com
Note: Market cap on a particular day has been used for illustrative purposes.
Figure 8
However, not all banks that came into existence
post-1991 have managed to survive and prosper.
Global Trust Bank had to be merged with the
Oriental Bank of Commerce; Centurion Bank
and Bank of Punjab merged with HDFC Bank,
largely due to lack of financial strength. Times
Bank voluntarily merged with HDFC Bank.
The banks that did well were those promoted by
financial institutions. They had adequate experience in the financial services field, financial
resources, and a sound business model, and were
well equipped in every way to run a bank. Banks
that were promoted by individuals with banking
experience either collapsed or merged with other
banks; for example, Global Trust Bank and Centurion Bank. Development Credit Bank, which was
earlier a cooperative bank, and IndusInd Bank,
which was promoted by an individual, continue to
function.10
Guidelines for Licensing New Banks in
the Private Sector — An Analysis
low-cost deposits to park funds with RBI and
also invest in government securities.
Financial inclusion and priority sector
lending — RBI’s two primary objectives in
issuing new licenses could prove costly and
difficult for most applicants. Taking banking
services to unbanked areas and lending to
priority sectors could significantly pressure
banks’ balance sheets.
Consolidation of existing financial services
operations — Most applicants for the licenses
are predominantly lenders, and would need
to merge their lending business with that of
the newly formed bank. This might impact the
balance sheet of the new bank, due to the
quality of assets (loans) and RBI’s provisioning
requirements for banks. On the other hand,
the nature of loans given out may help the new
banks meet their PSL requirements.
Similarly, entities running other financial
services such as insurance, broking and the
like would need to bring such businesses under
the NOFHC.
Guidelines for licensing new banks are formulated by the Reserve Bank of India, based on
cognizant 20-20 insights
6
7. Guidelines for Licensing of New Banks in the Private Sector – An Analysis
Key Features of
Guidelines
Eligibility Criteria
Comments/Analysis
Eligible
promoters
NBFCs and entities in
the public and private
sectors are eligible to
set up a bank through an
NOFHC.*
The earlier restriction on large industrial houses has been removed.
The financial resources and management expertise that such
applicants bring has been recognised. This is relevant in light of the
failure of banks promoted by individuals and banking professionals.
“Fit and
proper”
criteria
Applicants should have
sound credentials and a
10-year track record of
running their business
successfully.
RBI has given due importance to the credentials and integrity of
applicants. The 10-year track record criteria should ensure that only
those applicants with a sound business model and those that have
demonstrated the ability to run a successful business are given
entry into this sector. This too seems to be largely driven by the
experience from licenses given earlier, as well as by recent media
reports on some banks flouting AML guidelines.
Corporate
structure
of the
NOFHC
The NOFHC should
be wholly owned by
applicants.
As a holding company, the NOFHC will hold the bank and any other
financial service entities of the bank, e.g., it will be the holding
company for activities conducted through a subsidiary/JV – such as
insurance, broking and also the holding company – and for activities
conducetd internally or through subsidiaries/JV such as credit cards.
The objective of the holding company is to separate the regulated
financial service entities of the promoter groups from its other
activities. Through such an arrangement, the RBI would be able
to regulate the financial service activities of the holding company
on a consolidated basis.
The NOFHC is to be registered as an NBFC with the RBI.
Minimum
equity
capital
INR 500 crores to be
put up by applicants.
Bank to list itself within
three years from start
of operations.
The minimum capital to be brought in by promoters was capped at
Rs 500 crores, considering the capital outlay that would be required
for setting up a new banking business. It has been raised from
Rs 200 crores from the earlier cycle, taking into consideration the
changed economic conditions. Additional capital may be approved
if the promoters’ business plans make a compelling case.
Foreign
shareholding
Not to exceed 49%
for the first five years.
The current FDI policy notwithstanding, non-resident shareholding is to be kept under 49% for the first five years from the date
of issuance of the license. This guideline seeks to ensure that the
new bank does not become a takeover target in the initial years of
its existence – a period when financials may not be very strong and
valuations are likely to be cheap. This guideline may also ensure
that the new bank remains classified as an “Indian” bank and is
regulated accordingly.
Corporate
governance
of the
NOFHC
At least 50% of
directors should be
independent directors.
Independent directors bring with them objectivity, and are generally not susceptible to internal pressures. They also bring a different
perspective to any issue, compared to the bank’s own directors.
They are in a better position to protect shareholders’ interests and
also ensure that the entity is being run effectively and ethically.
The RBI has mandated that independent directors should have
experience/knowledge of one or more of the following subject
areas: accounting, finance, banking, insurance, law, MSME,
agriculture and rural economy, for example.
Exposure
norms of
the NOFHC
NOFHC and the bank
will have no exposure
to the promoter group.
The bank cannot invest
in capital instruments of
financial entities held by
the NOFHC.
This should ensure that the promoter group’s banking
business functions separately, and is regulated apart from
its other businesses.
Rural bank
branches
and priority sector
lending
Bank to open at least
25% of its branches in
unbanked rural centers,
and also comply with PSL
targets and sub-targets.
This will ensure that the new banks get serious about the RBI’s
agenda of financial inclusion and rural banking. Unlike earlier, when
the mandate was to open branches in rural and semi-urban areas,
this time around the focus is on rural banking.
* Non-Operative Financial Holding Company (NOFHC)
Source: Guidelines-rbi.org
Figure 9
cognizant 20-20 insights
7
8. Capital investment — Following issuance of
licenses, the new banks will need to set up an
operational branch within 18 months. This will
require investments in land, premises, IT and
other infrastructure; recruitment and training
of personnel; and advertising and publicity,
for example. New banks will also need to bear
the cost of setting up branches in rural areas
without the possibility of immediate returns.
Specific Challenges and Inherent
Advantages
The applicants for new banking licenses can be
broadly categorized as follows:
Applicant Categories
Category
Regulatory reporting and compliance automation — The regulatory reporting environment for a bank is very different than that of
other financial entities. Apart from setting up
a regulatory reporting process, new banks will
also have to be ADF (automated data flow)
compliant – automatiing regulatory reports
per RBI guidelines.
Broking Houses/
Capital Market Entities
JM Financial, India
Infoline, Edelweiss
Microfinance Institutions
Bandhan, Janalakshmi
Other NBFCs
Muthoot Finance,
Shriram Capital
INMACS,
UAE Exchange
Source: rbi.org
Figure 10
By applying for licenses, applicants will be
looking to leverage advantages intrinsic to them
and to their category. However, they are also
likely to be hampered by the challenges facing
the sector (category) to which they belong. This
is explored in greater detail below:
•
A highly competitive marketplace — Even
though new banks are expected to tap
unbanked areas, this may not happen immediately. As and when it does happen, new
customers may provide volumes but not
profitability. New banks will have to look at
metropolitan and urban areas to increase their
customer base and also maintain operational
profitability. Thus, they would be competing
with entrenched public and private sector
banks, as well as cooperatives and other financial intermediaries.
Customer loyalty — Not all customers are
dissatisfied with their existing banks, and not
all dissatisfied customers are likely to switch
banks. New banks need to consider this when
they start looking for customers.
cognizant 20-20 insights
Aditya Birla Nuvo,
L&T, Reliance Capital
Others
IT infrastructure — Applicants that are given
licenses will need to considerably enhance
their IT infrastructure. Tasks like core banking
implementation and multi-channel banking are
likely to pose major challenges for a new bank.
Department of Posts,
TFCI, IFCI
Corporate
Human resources — The new banks will
need staff that is trained for work in a banking set-up. Apart from technical skills, staff
will need to be proficient in “soft skills” as
well, since banking today is also about relationship management. Additionally, banks will
need to spend time and funds on training and
recruitment.
Applicants (e.g.)
Public Sector
Undertakings
8
Public sector undertakings: Government support is the biggest advantage that a PSU has.
The Department of Posts has a network of
approximately 1.55 lakh post offices across the
country, of which around 1.39 lakh offices are
in rural areas.11 (In comparision, SBI has around
13,000 branches across the country). Thus,
a PSU is better placed than most other applicants to satisfy the RBI’s guidelines on financial
inclusion and rural banking. The IT modernization project, undertaken by the Department of
Posts, can be enhanced to include the implementation of core banking solutions (CBS)
and other IT requirements. Its large workforce,
including “feet-on-the-street,” can be an advantage in reaching out to potential customers.
However, it can also be a liability, since most
of the project’s workforce is untrained in the
specific skills required for banking and selling
financial products. Also, a bank promoted by
the postal department may not find many takers in the urban areas, where usage and dependency on the post has been on the decline.
The other PSU applicant, TFCI, has no experience in the financial services domain.
9. •
Corporate houses: Corporate houses benefit
from prior experience in financial services,
availability of capital, experienced and trained
manpower, updated IT and other infrastructure assets, and acceptability in urban areas
(which is vital in the initial stages of setting up
a bank). However, RBI norms on financial inclusion, rural banking and priority sector lending
may involve substantial expenditures, which in
turn would put pressure on the parent entities’
balance sheet. For a corporate, this may not
be an ideal situation, as there are too many
stakeholders to answer to. Corporate houses
can also suffer from adverse corporate governance issues, including ongoing investigations
from regulatory agencies and unflattering
media reports.
•
•
Broking houses/capital market entities:
Most of the advantages – as well as the
challenges – that a corporate entity is likely
to face are also applicable to broking houses.
Such institutions are at an additional disadvantage due to the RBI guideline, which states
that “promoter/promoter groups should not
potentially put the bank and the banking
system at risk on account of group activities
such as those which are speculative in nature
or subject to high asset price volatility.”
IT and Related Infrastructure Challenges
•
Microfinance institutions and other NBFCs:
The business model of MFIs in India makes
them ideal vehicles for achieving the RBI’s
objective of financial inclusion. Such entities
are concentrated in rural areas, and provide
loans where banks are unable or unwilling to do
so. Their network in unbanked areas and their
customer base can help them reach the targets
of opening rural branches and financial inclusion. The kind of loans they offer can also go a
long way in meeting PSL requirements. On the
flip side, such entities can be hampered by low
profitability and inferior asset quality (most of
their loan portfolio is unsecured). NBFCs such
as Muthoot Finance (4,200 outlets, of which
60% are in tier II, II and IV cities) and Shriram
Capital can benefit from their rural reach and
lending, as well as from a client base that can
be tapped for banking services. However, applicants whose other group activities are “subject
to high asset price volatility” (e.g., gold loans
in the case of Muthoot Finance) may not be
encouraged by RBI.
cognizant 20-20 insights
Others: This group includes entities such
as UAE Exchange, which is in the business
of forex remittances; INMACS Management
Services, which is a management advisory
firm; SMART Global Ventures (promoted by
the BK Modi Group); and Value Industries Ltd.
(promoted by the Videocon Group). With the
exception of UAE Exchange, which offers financial services with approximately 700 branches
worldwide and approximately 350 in India, the
other entities have no experience or expertise
in banking or the financial services industry.
They may make the going tough on almost all
RBI-prescribed guidelines for new bank license
applicants. Apart from rural banking and PSL
norms, these institutions will have difficulty
meeting the RBI’s ”fit and proper” criteria.
Banking nowadays is associated with terms
like “Anywhere Banking,” “24x7 Banking,”
“multi-channel banking” and “Internet/mobile
banking.” These terms reflect the minimum that
customers have come to expect from their banks.
In many cases, the availability of such facilities
helps a customer decide on the bank they should
do business with. Likewise, the automation of
banking processes and services has resulted
in a prodigious increase in the number of bank
branches, customers and products offered. This
has caused an increase in the volume of financial
and non-financial transactions that are carried
out. Such transactions need to be captured, verified, recorded and reported.
For all these activities, a robust and adaptable IT
environment is extremely important. The development and maintenance of the IT Infrastructure
and related components (e.g. ATM services, card
management) should be among the top priorities for any new bank. RBI expects new banks to
take the lead in bringing technology innovations
to banking, and wants new banks to operate on a
CBS platform from the beginning. Following are
some of the IT and related challenges that new
banks will encounter:
CBS implementation — As stated above, RBI
expects every new bank to run on a CBS platform from the start. New banks need to look
at a CBS that is comprehensive, integrated,
scalable and configurable, and can provide
support for internal and regulatory reporting
9
10. functions. A CBS platform should also enable
smooth migration from legacy systems, when
needed.
Maintenance and enhancement — New banks
need to look for CBS vendors that have a
good track record of implementation, support and maintenance. At the same time, the
institution’s SOA (service oriented architecture) should offer the capability to adapt to a
changing business environment, with minimal
vendor dependency.
ADF and other implementations — New banks
will also have to be ADF-compliant. These institutions may have an advantage over existing
banks in this case, given that they can have
their CBS incorporate automated data flow.
The other option would be to automate reports
using ADF products available on the market. However, this involves another product
implementation, and is not an ideal situation
for a new bank, which would still have to deal
with issues relating to CBS implementation/
migration from existing systems.
ATM network and card management — In
accordance with RBI’s expectation that new
banks provide modern IT and infrastructure
facilities, these banks will need to set up and
maintain an ATM network and card management system. These activities can be “inhouse” or diverted to a separate subsidiary.
Banks can also look at “white label” ATMs if
their existing business models do not permit
them to set up their own ATM network. This
is challenging, given that ATM networks would
be required to cover rural and unbanked areas,
where ATM servicing and availability of power
and connectivity may be an issue.
Multi-channel banking — In the initial stages,
new banks may not have a strong branch network or a presence in all geographical locations. To compensate for this, banks would
need to offer access to banking services
through multiple channels, such as online
banking, phone banking and mobile banking.
Opportunities for Consulting Firms
New bank licensing promises several opportunities for consulting firms in areas like business
process modeling and RBI regulatory reporting.
Opportunities in Business Process Consulting
Business Process consulting firms can apply their
experience and expertise in industry best practices, and help new banks develop business processes that are well suited to the business model
of the bank. For example, a bank that intends to
Opportunities for Consulting Firms
Test and rollout – SIT,
migration testing,
deployment and
”go-live”
Design – Define
and design
interface and
integration
Initiation and
architecture,
analysis – “As-Is”
data mapping
analysis, product
walk-through
Product
evaluation
Figure 11
cognizant 20-20 insights
10
Development –
CBS customization
and configuration,
interface development,
test scripts creation
11. offer only retail or only corporate banking services can make use of process flows designed
specifically for those services. These processes
can then be documented for future use and referenced for updating when required.
Opportunities in Core Banking Product
Selection
With so many core banking solutions on the
market, and given banks’ unique requirements,
selecting a core banking product becomes a
critical task for banks and a key standalone
opportunity for consulting firms (see Figure 11,
previous page). Consultants with expertise in core
banking product selection will have to analyze
certain aspects while evaluating and suggesting
a core banking product:
The success of this activity can lead to core
banking implementation opportunities as well.
Opportunities in Core Banking Implementation
Considering that new banks will need to set up a
branch within 18 months of getting a license, any
core banking implementation will need to “go
live” in approximately two years (if one includes
the six-month lead time in applying for and
obtaining a license). Considering the time frame,
the multiple tasks and the interdependence and
involvement of various stakeholders in any CBS
implementation, there is significant scope for
consulting firms acting as Systems Integrators
(SIs). Through an SI, the new banks will be able to
maintain a single point of contact and communication for multiple vendors and different groups
within the bank. An experienced SI also brings
the domain and process expertise required to
understand the functions of various dependent
and independent banking processes.
•
Target operating model.
•
Size and scope of operations.
•
Expected transaction volumes.
•
Opportunities in Automated Data Flow (ADF):
Consulting and Implementation
Viability of using an “off-the-shelf” product.
•
Customizations required and costs involved.
Background:
Banks
operating
in
India
are required to submit a set of returns (reports)
to RBI at varying frequencies. These reports
are used by the regulator to analyze a bank’s
financial health and other requirements concerning regulatory compliance. RBI also uses
some statistical reports for macroeconomic
• Implementation,
maintenance and upgrade
costs.
Four Stages to Achieve ADF
Data Acquisition
• Data captured from
source systems
• Manual Data
migrated to some
other system
Data Integration
& Storage
• Data extracted
and integrated as
required in returns
• Data flows into
CDR*/Data
Warehouse
Data Conversion
& Validation
• Data converted
into RBI prescribed
format
• Data validation,
variance analysis,
reconciliation, etc.
Figure 12
cognizant 20-20 insights
11
Data Submission
• Secure file uploaded
in STP mode
• Returns submitted
automatically at
pre-defined
frequencies
12. analysis. The quality of the data being reported is
therefore very important.
The Reserve Bank of India had observed that
since most reports were being prepared manually by the banks – opening the potential for data
manipulation and incorrect reporting. RBI therefore initiated its Automated Data Flow program to
ensure the submission of clean data from banks’
systems to RBI, with no manual intervention.
Common end state: The Reserve Bank of India
expects banks to use their CBS system capabilities
for automated data flow. However, since different
banks are at different stages of maturity regarding their IT systems and processes, this may not
be possible for all existing banks. As a result, RBI
has not defined any particular approach that
banks need to follow for ADF implementation.
However, it has defined the common end state,
which is complete automation of report submission without any manual intervention. According
to RBI, this can be achieved in four stages (see
Figure 12, previous page).
For IT and consulting firms, standalone ADF consulting and implementation offers significant
opportunities. A solution providing end-to-end
ADF implementation can be promoted not only to
the new banks, but also to existing banks that are
yet to implement ADF.
Conclusion
The beneficiaries of this latest round of issuing
new banking licenses are likely to be declared by
March 2014. However, the stringent guidelines
issued by RBI, including fulfillment of the “Fit
and Proper” criteria, mean that eligible applicants will also find it difficult to obtain licenses.
According to media reports, six to eight banking
licenses are likely to be issued during this time
period. Whatever the final number, new entrants
will most likely find it an uphill task to set up and
run a bank, considering the challenges they are
likely to face, the market and regulatory environment in which they are expected to operate and
the existing level of competition. However, these
issues could also translate into opportunities for
consulting firms and other service providers.
Consulting firms with experience and expertise in
core banking implementation are likely to benefit
the most. Firms acting as systems integrators can
offer their domain and process expertise, which
would be a value proposition for new banks. Not
only would a qualified SI be able to define and target the required business processes at the beginning of an engagement; it would also be in compliance with the RBI guidelines for implementing
core banking solutions from day one. These consulting firms can also offer ADF consulting and
implementation services to these new banks –
adding even more value.
References
•
•
•
•
•
•
•
•
•
•
www.rbi.org.in
www.crisil.com
www.financialservices.gov.in
www.worldbank.org
www.moneycontrol.com
www.indiapost.gov.in
www.sbi.co.in
www.wikipedia.org
“Guidelines for Licensing of New Banks in the Private Sector.” Reserve Bank of India. February, 2013.
”Guidelines on Entry of New Private Sector Banks.” Reserve Bank of India. January, 1993.
cognizant 20-20 insights
12
13. •
•
•
•
”Guidelines on Entry of New Banks in the Private Sector.” Reserve Bank of India. Januray, 2001.
•
“An Overview on Financial Inclusion.” Department of Financial Services, MoF, GoI.
“A Profile of Banks – 2011-12.” Reserve Bank of India, Department of Economic and Policy Research.
KPMG Report. “Indian Banks: Performance Benchmarking Report FY12 Results.”
“RBI Discloses the Names of Applicants for New Bank Licences in the Private sector.” Reserve Bank
of India press release, July, 2013.
Footnotes
http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2260
1
http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=22965
2
http://rbi.org.in/scripts/bs_viewcontent.aspx?Id=2651
3
http://www.business-standard.com/article/finance/new-bank-licences-tough-obstacle-ahead-saysfitch-113070401138_1.html
http://www.hindustantimes.com/business-news/BusinessBankingInsurance/Banking-on-new-licences/
Article1-1086029.aspx
4
http://financialservices.gov.in/banking/Overviewofefforts.pdf
http://qz.com/99947/new-bank-licenses-up-for-grabs-in-india-present-enormous-opportunity-andhuge-risk/#
5
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BPS100112FL.pdf
6
http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2260
7
http://data.worldbank.org/indicator/FB.CBK.BRCH.P5
8
http://www.pib.nic.in/newsite/erelease.aspx?relid=83904
9
http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2260
10
http://www.indiapost.gov.in/Our_Network.aspx
11
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13