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Digital brought welcome change in banking in India: RBI Deputy Governor

RBI Deputy Governor, NS Vishwanathan was speaking at FIBAC 2017, the annual conference on finance and banking in India, organised by FICCI and Indian Banks’ Association

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Control of data is going to give human beings the power of divinity. The intersection of information technology, bio-genetics, artificial intelligence and nanotechnology is revolutionising the world at breakneck speed, and mankind may not be able to apply the brakes on it. Digital brought a welcome change to the way of banking in India. The growth in digital has increased in recent times because of several policy changes and an enabling environment, Reserve Bank of India Deputy Governor, NS Vishwanathan said in Mumbai on Monday.

Vishwanathan was speaking at FIBAC 2017, the annual conference on finance and banking in India, organised by Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Banks’ Association.

“In India, the environment is so conducive to digital adoption that one could say the country is in a very sweet spot in this area.” This advantage, Vishwanathan felt, can help India leapfrog over the developed countries. In the future, digital services will facilitate business even further with the introduction of a public credit registry. He went on to describe how digital will impact the banking and financial services industry.

The senior RBI official said, the relevance of banks’ ‘brick and mortar’ branches is diminishing. Transactions are carried out digitally, and activities have become less labour intensive with centralised processing and KYC. Branches are now being replaced with banking outlets as the point of customer services. Payment banks now act as banking channels of regular banks. Their entry can revolutionise banking services. Many institutions now combine to provide financial services to the customer. The need for intermediation has reduced. Fintechs provide C-2-C services without the bank being an aggregator. Customers now have a range of choices through the click of a mouse. “What took hours now takes a few moments”, he added.

Jatinderbir Singh, Chairman and Managing Director, Punjab & Sind Bank, on the occasion said that initially banks adopted computerisation with apprehension but today they have embraced it totally. They use technology extensively to improve the ease of business, speed and accuracy. The recent years saw several innovations in the digital payments space. UPI recently crossed 1 billion transactions. Technology also plays a big role in financial inclusion. “Innovations are taking place so fast that it is difficult to keep pace,” he said. The key differentiator, he felt, will be customer service.

Singh also drew on his experience of serving clients in rural areas. “The needs of segments of society are diverse,” he said, describing PNB’s model of using ‘bank mitras’ to reach out to local communities. Bank mitras have had success in training rural customers in digital methods of banking.

Speaking about his own bank, CS Ghosh, MD and CEO, Bandhan Bank said, “We are high touch, but technology is helping us grow. Bandhan Bank relies on both touch and technology to reach out to 1.2 crore customers on a weekly basis. High touch cannot be replaced by technology, but can go together with it.” He disclosed that banks were focussing on the MSME segment because the corporate sector is not doing well. His bank has been disbursing enterprise loans to small players. But there are issues with the amount of paperwork still needed, and the difficulty of rural customers to use technology. This is where the high touch model becomes useful.

Through his presentation, Saurabh Tripathi, Senior Partner and Director, Boston Consulting Group (BCG), pointed out that India ranks within the first 30 countries in the world in getting credit. “Indian banking is the pride of the nation; it has achieved what many people will find difficult to achieve,” he said, alluding to the herculean task of opening of millions of accounts. He pointed out that other countries are surprised by what is happening in India. The heights that Indian banking has scaled are not possible even in countries like Singapore and the US.

Responding to where corporate banks would be heading over the next five to ten years, Zarin Daruwala, CEO – India, Standard Chartered Bank felt that banks would need to re-look at what skill sets are needed. “Clients want to lock into fixed rate instruments.” Corporates look at the bond market from that point of view, she said. Mutual fund liquidity is also creating a vibrant bond market. RMs will need to do acquisition, and be “much more nimble in how they do things.”

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