A new dawn for banking

-Kamal Baruah
It was on this day, July 1, 1955 the Imperial Bank of India was reconstituted by an Act of Parliament to create State Bank of India to perform the functions of a commercial bank. This marked begin of a new era of banking in India. SBI is now India’s largest bank and a Fortune 500 company, SBI outshines all others, in serving the economically weaker sections of society and providing equal opportunity with its vast branch network and latest technology platform. Its designed products and various services cater to all customers’ needs. Its business is more than banking because it touches the lives of people anywhere in many ways.
The basics of banking is to accept deposits and make loans thus gain a profit from the difference between interest rates paid and charged to depositors and borrowers respectively. Banks have played a significant role in the financial system of a country. Good customer service is the heart of banking service delivery. The effective strategy of delivering quality service has now shifted to technology (app based) driven orientation for superior services. The emerging of private/foreign banks enhanced the expectations of customers. The data revolution becomes crucial today as customers want swift/high speed transactions due to time constraints. Online banking is the solution for doing business at ease for Personal and Corporate level. E-challan is another service for payment/receipt of tax for Merchant Business. Online Trading and Forex helped customers in professional occupation. SBI has recently introduced Cloud Technology “Meghdoot” where a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server.
With technology moved side by side with consumers, cyber crime is on the rise. Card frauds in our country are a real concern. Card swap and card skimming technique to clone Credit/Debit card are day to day affair. ATM frauds are taking place despite advisory against ATM frauds issued from Bank/RBI to customer time to time. Fraudsters find new technique to dupe the people. Senior citizens are the most sufferers.  It happens every other day and bankers have to face difficult task to convince customers. Cardless ATM might be the solution against such illegal transaction because it has features like dynamic pin, no shoulder surfing, no card trapping, no skimming and no lost card/Pin.
After SBI merger in April 2017, following three way mergers of Bank of Baroda, Vijaya Bank and Dena Bank in 2019, PNB is likely to take control of OBC, Andhra and Allahabad Bank in the current FY.  The government now considers merging of other debt-burdened PSU banks in the future to overcome the pressure of globalization of regulation and improve ranking. Modi2.0 has set strategic plan for 9% growth however India’s economic growth is correlated highly with banking sector where bad loan at commercial banks is a great issues that amounting more than Rs 92.1 lakh crore or 11% of its advances. Also loans outstanding at shadow banks (NBFCs) stood at Rs 17.2 lakh crore, PSBs had a higher exposure to mining, iron and steel, textiles, infrastructure and aviation.
The origin of the crisis started since 2004-05, when worlds as well as Indian economy were booming. Indian firms mostly in infrastructure related areas like telecom, power, roads, aviation, steel have borrowed to avail opportunities that led an era of 9% growth in the past. With the onset of the global financial crisis in 2007-08 it slowed down. In 2016-17, it faced another problem in acquiring land and getting environmental clearances sending several projects got stalled thereby costs soared. In addition, mining and telecom were impacted by adverse court judgments and Steel by dumping from China. Companies faced all those adverse factors to repay loans to Indian banks due to depreciation of rupee that they borrowed in foreign currency.
To overcome such cumulative bad decisions of the past, RBI acted tougher norms for NPA provisioning in 2015-16 resulting PSBs started making losses.
To cover up huge provisioning of bad loans, banks in India have seen loses. It’s for the first time since 1993-94 that there is Net Loss of Rs 85,400 crore in 2017-18. At the same time, there is accelerating crisis in raising funds in the NBFC sector with flow from banks drying up. Also Rs 1 lakh crore of commercial papers (CPs) raised by these shadow banks from investors will come up for redemption very shortly. RBI now deals with stressed assets with a firm regulatory hand. As we go into 2019, NPA formation has slowed significantly and recoveries are streaming in. RBI should take emergency steps to revive lending by flooding banks with liquidity. That should mark 2019 as a bounce-back year. Prompt corrective action plan for stressed assets should come out from the regulator to protect taxpayer money.
Many opined privatisation of PSBs to this complex problem. But the country needs actions to overcome such crises. Banks have to accept losses on loan to oversee resolution plans of lead lenders. The government injected Rs 1·2 lakh crore in the past three years, but that was absorbed into losses. Insolvency and Bankruptcy Code (IBC) failed to live up to expectations as cases crossed the deadline at National Company Law Tribunal. SBI and other leading banks now put NPA fight on fast track by going auction to recover unpaid dues outside the insolvency process. But cases are yet to see the light of the day. New Delhi must take steps to ease the liquidity situation of banks for lending NBFCs. NBFC offer long term credit to trade and commerce industry for growth and development of economic sector. The regulator needs to be more proactive and watchful.
The most trusted bank in India SBI is owned by the people. It owes corporate social responsibility towards the society. The Bank is a corporate citizen, where resources and benefits derive from operating in a society and therefore owe a solemn duty to the less fortunate and under-privileged members of the same society. SBI Foundation is a non-profit subsidiary launched to undertake CSR activities for promoting growth and equality of communities.
Besides this, banks have to nurture a healthier balance sheet to carry out the responsibility of supporting economic growth of India. On 1st July SBI is celebrating 64th Bank Day. As long as the SBI is on the digital platform, customer can transact safe digital banking experience through app based revolution at 24x7 and will surely bring a sea change for greater agility, innovation and flexibility to its services.
The writer is based in Guwahati and can be reached at [email protected] or 8638739634