challenges in banking sector

[ashishmeshram1985]

Challenges facing Banking industry in India
The banking industry in India is undergoing a major transformation due to
changes in economic conditions and continuous deregulation. These multiple
changes happening one after other has a ripple effect on a bank (Refer fig. 2.1)
trying to graduate from completely regulated sellers market to completed
deregulated customers market.
· Deregulation: This continuous deregulation has made the Banking market
extremely competitive with greater autonomy, operational flexibility, and
decontrolled interest rate and liberalized norms for foreign exchange. The
deregulation of the industry coupled with decontrol in interest rates has led to
entry of a number of players in the banking industry. At the same time
reduced corporate credit off take thanks to sluggish economy has resulted in
large number of competitors battling for the same pie.
· New rules: As a result, the market place has been redefined with new rules
of the game. Banks are transforming to universal banking, adding new
channels with lucrative pricing and freebees to offer. Natural fall out of this
New
Players
New
channels
Squeezed
spreads
Demanding
customers
Better
service
Matching
skills
Heightened
Competition
New rules
of the game
Pressure on
Efficiency
Missed
opportunities
Need
For new
orientation
Diffused
Customer loyalty
Deregulation
Retail thrust
Pricing
Value added service
Aligned mindset
Cont. skill building
Bank
Challenges Facing Indian Banking Industry
Figure 2.1
has led to a series of innovative product offerings catering to various
customer segments, specifically retail credit.
· Efficiency: This in turn has made it necessary to look for efficiencies in the
business. Banks need to access low cost funds and simultaneously improve
the efficiency. The banks are facing pricing pressure, squeeze on spread and
have to give thrust on retail assets
· Diffused Customer loyalty: This will definitely impact Customer preferences,
as they are bound to react to the value added offerings. Customers have
become demanding and the loyalties are diffused. There are multiple choices,
the wallet share is reduced per bank with demand on flexibility and
customization. Given the relatively low switching costs; customer retention
calls for customized service and hassle free, flawless service delivery.
· Misaligned mindset: These changes are creating challenges, as employees
are made to adapt to changing conditions. There is resistance to change from
employees and the Seller market mindset is yet to be changed coupled with
Fear of uncertainty and Control orientation. Acceptance of technology is
slowly creeping in but the utilization is not maximised.
· Competency Gap: Placing the right skill at the right place will determine
success. The competency gap needs to be addressed simultaneously
otherwise there will be missed opportunities. The focus of people will be on
doing work but not providing solutions, on escalating problems rather than
solving them and on disposing customers instead of using the opportunity to
cross sell.
Strategic options with banks to cope with the challenges
Leading players in the industry have embarked on a series of strategic and
tactical initiatives to sustain leadership. The major initiatives include:
· Investing in state of the art technology as the back bone of to ensure reliable
service delivery
· Leveraging the branch network and sales structure to mobilize low cost
current and savings deposits
· Making aggressive forays in the retail advances segment of home and
personal loans
· Implementing organization wide initiatives involving people, process and
technology to reduce the fixed costs and the cost per transaction
· Focusing on fee based income to compensate for squeezed spread, (e.g.
CMS, trade services)
· Innovating Products to capture customer ‘mind share’ to begin with and later
the wallet share
· Improving the asset quality as per Basel II norms
Transformation initiatives needed for banks
Tech
Npreowd ucts support
Right
sizing
Flexible
structure.
Change
mgt
New
mindset
Reliable
process
Cost
efficiency
Matching
skills
Pressure on
efficiency
New rules of
the game
Heightened
competition
Resistance to
change
Diffused
Customer
loyalty
Banks would require a holistic approach to continuously
address all the challenges
The ECS value proposition for helping banks in their transformation agenda
We at ECS Limited have vast experience in partnering with leading players in
banking for addressing these challenges in a holistic manner. Our expertise is
reflected in our product offerings for addressing the key challenges. A select few
are outlined below:
· Strategy
o Sales & Marketing strategy for both retail & wholesale banking
o Expanding geographies
· Brand
o Understanding the values of the brand
Figure 2.2
o Repositioning the brand to communicate the values
· Organization restructuring
o Re organization of the bank in line with the strategic thrust
· Re engineering of the key business processes
o Redesign of Sales processes to increase conversion ratio
o Six Sigma process improvements for branch channel, Call Center &
back office processes
o Centralization of branch operations and deferred processes to free up
resources
· Cost efficiency
o Reduction in Total cost of acquisition
o Reduction in Transaction costs
o Reduction in fixed and overheads cost
· Right sizing and matching of skills
o Manpower modeling for branch & back office at various volume
scenarios
o Productivity improvement for sales & service functions
o Competency Assessment & profiling
· Creating a high performing organization
o Define new roles & responsibilities, KRA
o Assessing competencies of people across levels and match the
position with the skill set
o Designing and implementing a new PMS for restructured organization
· Change management & creating a new mind set
o Developing critical mass of champions and drive ‘Change’ across the
organization to move from conventional banking to new age banking

[srkau]

i knww..completely agree. but i think banks are cool

[ahmed khan]

THANK YOU FOR THE INFORMATION..i hope this information will help me for my class project..

do u have any project on distribution managment, if u have any please send me on

Regards
Ahmed Khan
MBA Student

[narimeti]

thank u................................................. .........................................

[honeyplus]

hi
i am doing mba finance and my graduation is in BCA
so wat are the future possiblities for me in the financial sector
thanks

[suneel2005]

Thanks for this details
these are very use full
i want an project of any company which was in public data like faced some allegations in latest news and my sir asked us to suggest and prepare some suggestions so that the company will over come of the allegations


Thanks a lot

[suneel2005]

hanks for this details
these are very use full
i want an project of any company which was in public data like faced some allegations in latest news and my sir asked us to suggest and prepare some suggestions so that the company will over come of the allegations
My mail id is

[kiranjas]

thanks for the help.it was of great help