Banks would be more focused on SME and retail clients: RBI Deputy Governor
Updated: Oct 07, 2015 05:01:08pm
Mumbai, Oct 7 (KNN) With the gradual widening and deepening of our financial markets, it is expected that banks would be more focused on SME and retail clients while leaving the long-term financing to other players more suited to the task, S S Mundra, Deputy Governor, Reserve Bank of India (RBI) has said.
Speaking upon the challenges faced by the banking system apart from asset quality challenges faced by them, he said, “other key challenges that the system faces are on capital and human resources front. In fact, part of the asset quality problem is also attributable to poor underwriting skillset of the bank staff for credit appraisal of large projects at the head office level and for lending to retail and SMEs at operating unit level.”
He said this while addressing the Global Banking Conference organized by the ‘Mint’ at Singapore on October 2 on ‘Indian Banking Sector- A Regulatory Perspective’.
“It may be useful in such small ticket loans for the credit decisions to be centrally processed and technology-based credit scoring models to be used for making the lending decisions,” he said.
A similar problem is also observed in meeting the KYC/AML rigor in the banks. Not only is there a general lack of sensitivity about KYC/AML compliance needs, the adherence to laid down norms at the field level is often sidestepped on account of lack of skillsets, time or performance pressure.
“My sense is that a centralized, technology supported surveillance system would perhaps serve better for ensuring compliance to KYC/AML norms,” he said.
He said that the landscape in which the banks are operating is changing rapidly. “Some of these changes which have direct implications and opportunities for banking system are - Inclusion of a large number of new customers within the formal financial system; Rising levels of literacy; Growing middle class and increasing income levels; Growing urbanization; Increased digitalization; and Thrust on finance to the MSME sector.
With the gradual widening and deepening of our financial markets, it is expected that banks would be more focused on SME and retail clients while leaving the long-term financing to other players more suited to the task, he said.
Enhanced disposable incomes would widen wealth management advisory and services. In keeping with the global trends, corporates may move to raising resources directly from the market but they would still need other financial solutions, which banks would provide. Technology is both a disruptor as well as an enabler and banks would need to leverage it to their advantage.
“The impact of disruptive technology is already evident in the form of competition from non-banks such as e-commerce companies, P2P lenders, Crowd funding, which is likely to only intensify going forward,” Mundra added. (KNN Bureau)
Speaking upon the challenges faced by the banking system apart from asset quality challenges faced by them, he said, “other key challenges that the system faces are on capital and human resources front. In fact, part of the asset quality problem is also attributable to poor underwriting skillset of the bank staff for credit appraisal of large projects at the head office level and for lending to retail and SMEs at operating unit level.”
He said this while addressing the Global Banking Conference organized by the ‘Mint’ at Singapore on October 2 on ‘Indian Banking Sector- A Regulatory Perspective’.
“It may be useful in such small ticket loans for the credit decisions to be centrally processed and technology-based credit scoring models to be used for making the lending decisions,” he said.
A similar problem is also observed in meeting the KYC/AML rigor in the banks. Not only is there a general lack of sensitivity about KYC/AML compliance needs, the adherence to laid down norms at the field level is often sidestepped on account of lack of skillsets, time or performance pressure.
“My sense is that a centralized, technology supported surveillance system would perhaps serve better for ensuring compliance to KYC/AML norms,” he said.
He said that the landscape in which the banks are operating is changing rapidly. “Some of these changes which have direct implications and opportunities for banking system are - Inclusion of a large number of new customers within the formal financial system; Rising levels of literacy; Growing middle class and increasing income levels; Growing urbanization; Increased digitalization; and Thrust on finance to the MSME sector.
With the gradual widening and deepening of our financial markets, it is expected that banks would be more focused on SME and retail clients while leaving the long-term financing to other players more suited to the task, he said.
Enhanced disposable incomes would widen wealth management advisory and services. In keeping with the global trends, corporates may move to raising resources directly from the market but they would still need other financial solutions, which banks would provide. Technology is both a disruptor as well as an enabler and banks would need to leverage it to their advantage.
“The impact of disruptive technology is already evident in the form of competition from non-banks such as e-commerce companies, P2P lenders, Crowd funding, which is likely to only intensify going forward,” Mundra added. (KNN Bureau)
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