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Indian Banks Do Social Banking Interview with Trishna Guha, Executive Director, Dena Bank

What is your assessment of the current situation in the banking industry in India?
The Indian banking sector has displayed a high level of resilience in the face of high domestic inflation, rupee depreciation and fiscal uncertainty in the US and Europe. Economic slowdown likely to impact the demand for credit .Amidst this economic scenario, the key chal¬lenge for the Indian banking system contin¬ues in improving their operational efficiency and implement prudent risk management practices.

The scheduled commercial banks’ (SCBs) overall credit grew at a slower pace @ 8.47% as of Feb 07, 2014 over March 13 as against 10.6% during the same period about a year ago. During the corresponding period, Dena Bank registered credit growth of 7.39% against the previous year growth of 6.09%.

How do you view the Indian Banking sector’s significant progress since nationalization?
The nationalization of commercial banks was a turning point in the Indian banking system. Challenging feature of the pre-nationalization banking policy was the negligible share of agricultural sector in bank credit as well as low share of other non-industrial sectors. After nationalization there was a shift of emphasis from industry to agriculture. The share of agricultural credit in total non-food credit rose sharply from 2 per cent before nationalization to approx. 9 per cent in 2013.

A remarkable expansion in the banking and financial system has been witnessed. The biggest achievement of nationalization was:
The reallocation of sectoral credit in favor of agriculture, small industries and exports which formed the core of the priority sector.
The country witnessed rapid expansion in bank branches, even in rural areas. Branch expansion programme led to mobilization of savings from all parts of the country. Bank branches has increased from approx. 10,000 in 1969 to approx. 109,000 in 2013, that is around 10% growth in total number of branches.
Nationalized banks were able to pay attention to the credit needs of weaker sections, artisans and self-employed.

Where does Indian banking sector stand compared to the international Banking sector?
Indian Banking system is operating and evolving in today’s turbulent economic and financial environment. There is a difference in capital structure, delivery system customer profile and behavior etc. In India branch banking is a way to connect to customer and to serve them directly, i.e.  Indian Banks do social banking however, in foreign; there is a cost to customer for visiting branch.

Technology usage is another area that creates difference between global banking sector and Indian banking sector. Indian Banking is yet to incorporate advance technology whereas Internationally, Banking has become totally digital.

Which are thrust areas for Banking Sector in India?
Primary thrust areas covers:
Priority Sector:- which mainly covers financing of MSEs, Agriculture  and Direct Retails Advances where yields are high. As per RBI guidelines 40% Target is must for every Public Sector Bank which itself is a big challenge considering early indication of weak monsoon this year, affecting our Agriculture base.
CASA:- With shrinking NIMs, mobilization of Low cost deposits is a real challenge for all Banks. Banks haveto look out for new avenues for CASA generation as recent trends shows financial savings (including House hold, Corporate and Government savings) has halved from high of 26% as of FY08 to 15% FY 13.
Banking on IT products:- With advan-cement of technology post CBS era it is high time to make customer use IT products like Mobile Banking, Internet Banking, I-pad Banking etc. So that within few years these alternate channels will become Main Stream delivery channels as a result there will be less pressure on Branches including lowering of transaction cost.

What is key issues facing Indian Banking Sector today?
Indian banks have a lot of things going against them currently, from a slowing economy and rising loan defaults to allegations of money laundering.
The asset quality of banks has been deteriorating for the past two years as economic growth slipped to its lowest level in a decade while inflation and interest rates remained high. Gross bad loans have spiked to nearly four per cent of total lending from 2.36 per cent three years ago.  The Reserve Bank of India estimates gross bad loans to touch 4.5 per cent by the end of the current fiscal year.
The deteriorating asset quality is putting tremendous pressure on banks’ capital base. The Basel-III regulations require banks to set aside more capital for absorbing future liquidity shocks or any risk arising in the financial system. According to the RBI, Indian banks are likely to raise Rs 2.7 trillion of tier-I equity capital in the next five years.
Human Resource is another area of concern, with nearly 20% of the staff at these banks expected to retire by 2015 further it prompted the Reserve Bank of India to call the 10 years to 2020 as the decade of retirement. This resulted in a dramatic reduction in the skilled manpower, particularly at senior level. There is a Realization that skill development is extremely important for staff retention as well as the quality of manpower, and major emphasis is laid on system of continuous professional learning. Revamping of training processes and further emphasis is being laid on hard as well as soft skills.

How do you look at the future of Indian banking sector?
Technology Transformation: Innovations such as automatic bill payment, cash transfers through mobile phones and online banking have ensured that customers no longer have to make pilgrimages to bank branches. Passbook entries have been replaced by hassle-free e-statements; ATMs facilitate easy withdrawals and payments.
At present, over 70% of the market lies with the public sector banks but the government is now geared up to open the sector to more foreign players while setting up new private banks in the country which would help in bringing more people under the banking net.
What will be the Future strategy of Dena Bank?

Dena Bank aims to cross business mix of Rs. 4 lac Crore by March’17. For achievement of this, strategy is very clear and simple and is stated as under:
Dena Bank aims to tap young generation as they will be major source of CASA in days to come and further cross-selling the retail products.
Dena Bank will focus on cost-effective technology-driven banking.
Dena Bank will be Expanding more in unbanked untapped rural and semi-urban area, where, people are in banking needs
With improvement in technology and expansion drive, Customer service holds the key for growth, prime focus will be on improving the customer service as this is the only gateway for mobilizing good business.

What would you advice your customer to be the best way to manage money?
Customers are the most important part of any business, so ability to deliver services the way customers want, plays a pivotal role in growth of the business. Banks work is to manage money of the customer in a very efficient and productive manner, and safe banking is also becomes a part of this.

Various avenues are available for the customer with variation in liquidity, safety and return on investment .Accordingly , customers should park their money based upon their risk taking capacity and after  assessing the return on investment. In this connection, Nationalized Banks offer a variety of products that suits the requirement of the customer giving safety of the amount invested with ample liquidity.

What are you doing about improvement of Service of your Dena Bank?
Apart from taking the steps of reaching to the door step of the customer by expanding the network of the branches , bank has made a good  advancement in e-banking and to provide customers 24hours services separate,  E-lobbies are opened wherein customer can drop  in at any time and can do banking on their own.

Dena SMS service wherein information for each and every transaction is sent to the customers. Thus keeping customers well-informed.

For improvement in customer service Dena Bank has started Dena Help Services, it is a SMS based service where customer can register their grievances with the Bank and get solution.

How do you see the banking industry in the year 2020?
With the advancement in Retail Banking scenario in the last decade it is expected that the Retail Banking industry will grow at an average rate of over 20 percent during the next decade.
Next decade would witness banks experimenting with different low cost business models, smaller cost effective branches and new use of technology to serve household segment with lower annual income as this will constitute the largest group of customer base in coming years.
India has a very low penetration of branches and ATMs as compared to some of the other developed and developing nations It is evident that the bank branches and ATMs are by far the most popular channels hence it is estimated that around 2020, we would see Branches increase by approx. 50,000  and 2,00,000 additional ATMs.
Mobile banking to see huge growth and will redefine transaction banking. The penetration of internet and broad band access in India has been low so far. However, with the advancement in the Mobile based communications with the access of mobile phones by the rural folks of India, the access to banking facilities could completely get revolutionized over the next decade.

Priority sector targets have not met in many cases….what is reason behind it?
As it is seen that Banking and economy are correlated, if economy grows the Banking industry also registers growth. Looking at the third quarter indicative figures it is observed that GDP growth is slowed to 4.7%. Major dip is observed in manufacturing sector creating pressure on demand side resulting in lower credit off take compared to previous year; thereby shortfall is seen in the achievement of Priority sector targets.

In this fiscal, damage to kharif crop due to weather conditions led to lower agriculture growth, heavy rain fall over parts of the country in October 2013 caused some damage to standing kharif crop and contributed to a moderation in agriculture growth.

What about recent initiatives of Dena Bank?
To boost our CASA and Retail Term Deposit, Bank have launched Quality CASA Campaign which primarily focused on mobilizing high value CASA deposit.

As regards to Retail Term Deposit, special scheme of DENA 444 which offers higher rate of interest of  9.15% p.a. for all retail term deposit is launched primarily to attract retail customers.

Further, we have modified our premium savings and current Deposit Product by lowering quarterly Average balance and passing the benefit of 100% service charge waiver to the customer, this will help our branches to garner CASA Deposit, which is very essential in the era of shrinking NIMs.

On Credit front vehicle loan carnival was launched from November’13 till January’14, to give special thrust on priority sector. The campaign focused mainly on Agriculture vehicles, Tractors etc.

Any Comments on Government policy?
No comments are offered.

Have you any observation on any other issue?

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