Tag: technologies

Unbundling of banking services is a reality, says MK Jain, RBI Deputy Governor

Banking & Finance

[ad_1]

Read More/Less


Unbundling of banking services is a reality, changing how banks operate and testing their adaptive capacity, according to MK Jain, Deputy Governor, Reserve Bank of India.

Jain cautioned that they might be marginalised very soon unless traditional firms adapt to new ways of doing business.

“Even as banks’ reliance on technology has grown by leaps and bounds, technology is also revolutionising the competitive landscape in the financial system.

“Entry of BigTech firms and innovative Fintech players into the traditional domain of banks has already revolutionised the way financial transactions are carried out,” the Deputy Governor said in a speech at India International Centre, New Delhi.

Jain observed that even while individual entities adapt to the new competitive landscape, it is imperative to ensure that heterogeneity is preserved at the system level.

“A homogenous financial system will be less resilient and prone to systemic crisis if the underlying economic conditions change.

“Hence, it is important that the financial system consists of entities which follow different business models even while adapting to the newer ways of doing business,” he said.

Lemon problem

The Deputy Governor underscored that reducing the incidence of ‘lemon problem’, whereby the lender cannot distinguish between the borrowers of good quality and bad quality (the lemons), is an important feature of building resilience in the financial system and improving the credit flow.

The lemon problem results in making the loan at an interest rate that reflects the average quality of the good and bad borrowers.

“The result is that high-quality borrowers will be paying a higher interest rate than they should because low-quality borrowers pay a lower interest rate than they should.

“One result of this lemons problem is that some high-quality borrowers may drop out of the market, with what would have been profitable investment projects not being undertaken,” Jain said.

The ‘lemons problem’ also impedes banks’ ability to anticipate risk build-up in lenders portfolios.

The Deputy Governor noted that borrowers are probably the first to see early signs of difficulties in their respective segments. When they do not pass on the information to their lenders, fearing that the lender may refuse new loans or tighten the conditions of existing loans, lenders’ ability to identify risks early is severely hampered.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , ,

RBL Bank to focus on branch expansion in next few years

Banking & Finance

[ad_1]

Read More/Less


Private sector RBL Bank is eyeing aggressive branch expansion over the next few years and plans to open at least 75 new branches annually.

“We have always, at the maximum, done 30 to 40 branches, except for a year or two when we did 55 to 60 branches. But now, we have agreed to do upwards of 75 branches a year for the next two-three-four years,” said Surinder Chawla, Head, Branch Banking, RBL Bank.

RBL Bank completes fund raise of ₹1,556 crore

As on December 31, 2020, the lender had about 403 branches and hopes to end this fiscal with about 425 branches.

In an interaction with BusinessLine, Chawla noted that with branches come multiple new customers and also the opportunity, therefore, to cross sell.

Explaining the strategy for the branch expansion, he said, “As a bank, we are very small right now in terms of our network, which is not even present in some capital cities of the country. So, we have a bit of a catch-up to do.”

Digital push

With the Covid-19 pandemic and lockdown, the lender has also invested significantly in digital technologies.

RBL Bank launches contactless banking initiatives

“What digital does is, first, it increases the catchment area for the branch, second, it can give a significant fillip in terms of cost save for operations, and three, in terms of acquisition, it can get a much higher number of scale of customers than what one would get only from the branches,” Chawla said.

“Adding a branch actually serves multiple purposes for our customers, it gives us liability granular, it gives us stability, it gives a fee,” he said.

RBL Bank has also been working on increasing granularity of retail deposits and retiring high-cost chunky money, he further noted.

“Our retail has been growing very well. On the retail side, we are going to end the year at about 60 per cent growth on the CASA,” he said, adding that the bank has also tided over issues emanating after the YES Bank crisis last year when there was a flight of deposits from many private banks.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,