Can Tech shape the landscape of banking and finance in India?

Former RBI Deputy Governor R Gandhi today said a bank deposit will always have an element of risk attached; if an investor wants risk-free returns, then government bond is the instrument to put in money.

After releasing business journalist Tamal Bandyopadhyay’s latest book, ‘From Lehman to Demonetization’ at IIM Bangalore, Gandhi said before nationalization of banks in India, people used to prefer government bonds to bank deposits. Gandhi was discussing the so-called “bail-in” clause in the proposed Financial Resolution and Deposit Insurance (FRDI) Bill 2017, with the author after releasing the book.

Consulting Editor of Mint and an Adviser on Strategy for Bandhan Bank, Tamal Bandyopadhyay is one of the most respected business journalists in India. “The book is a record of contemporary history. A wide range of topics have been covered and analyzed well, based on data…and all this in a witty, tongue-in-cheek manner! Tamal criticizes, but offers constructive solutions as well. He gives complete information with some cryptic remarks. It is a great read, which even a layman can understand,” said R Gandhi.

The panel discussion, which preceded the book launch, focused on the challenges that lie ahead for the Indian financial system over the next 10 years. The panel comprised Prof. G Raghuram, Director, IIM Bangalore, C.B. Bhave, Former Chairman, Securities and Exchange Board of India (SEBI), Sharad Sharma, Former Managing Director, State Bank of Mysore, and Ananth Chandramouli, Managing Director, India and Middle East, Capgemini.

The panellists discussed several aspects that need to be addressed imperatively in the Indian financial system in the coming few years, including the challenge of infrastructure financing, the need for a vibrant corporate bonds and derivatives market in India, issues that need to be addressed and resolved on a priority including the exponential growth in non-performing asset, recapitalization of banks, innovative and disruptive role of fintech, crypto currencies, etc.

“If India needs to break the glass ceiling, we need to focus on infrastructure. Bringing in private involvement and adequate reforms, creating intermittent financial institutions, bringing in long term funds…these will be the challenges in the next 10 years,” said Prof. G. Raghuram, Director, IIMB.

Sharad Sharma, Former Managing Director, State Bank of Mysore, said since banks were facing a substantial NPA problem, consistency of government policies, mergers, consolidations, would be critical. “Banks need to improve risk management capabilities. More investments need to be made in the area of cyber security,” he suggested.

Observing that there was great potential in internet and mobile banking, Sharma said Data Analytics, Artificial Intelligence would gain importance. “Other than banks, NBFCs, small finance banks, fintech institutes will grow. These are tough and exciting times and next five years will see enormous changes,” he added.

Ananth Chandramouli, Managing Director, India and Middle East, Capgemini, shared his view from a technologist’s point of view. “In the next ten years, how banks and financial services improve operational efficiency, how they enhance customer satisfaction, and how new business models emerge would be crucial. In the next 4-5 years, investment and collaboration with fintech institutions will create a better financial ecosystem that will also be good for the end customer.”

C.B. Bhave, Former Chairman, Securities and Exchange Board of India (SEBI), listed the challenges: limited scope of technology in shaping the landscape of banking and finance in India, putting cost of transaction down, ability to speak in different native languages, and cybersecurity, where “more you automate, more challenges will be thrown at you.”