Innovation derives organization to grow, prosper & transform in sync with the changes in the environment, both internal & external. Banking is no exception to this. In fact, this sector has witnessed radical transformation of late, based on many innovations in products, processes, services, systems, business models, technology, governance & regulation. A liberalized & globalized financial infrastructure has provided had provided an additional impetus to this gigantic effort. The pervasive influence of information technology has revolutionaries banking. Transaction costs have crumbled & handling of astronomical brick & mortar structure has been rapidly yielding ground to click & order electronic banking with a plethora of new products. Banking has become boundary less & virtual with a 24*7 model. Banks who strongly rely on the merits of ‘relationship was banking’ as a time tested way of targeting & servicing clients have readily embraced Customer Relationship Management (CRM), with sharp focus on customer Continue reading
Indian Banking System
The Debt Collection Policy (Loan Recovery Policy)
The debt collection policy (recovery policy) of the bank is built around dignity and respect to customers. The Bank will not follow policies that are unduly coercive in recovery of dues from borrowers. The policy is built on courtesy, fair treatment and persuasion. The bank believes in following fair practices with regard to recovery of dues from borrowers and taking possession of security (properties / assets charged to the bank as primary or collateral security) (known as security repossession) and thereby fostering customer confidence and long-term relationship. The repayment schedule for any loan sanctioned by the Bank will be fixed taking into account the repaying capacity and cash flow pattern of the borrower. The bank will explain to the customer upfront the method of calculation of interest and how the Equated Monthly Installments (EMI) or payments through any other mode of repayment will Continue reading
Role of Information Technology (IT) in the Banking Sector
Banking environment has become highly competitive today. To be able to survive and grow in the changing market environment banks are going for the latest technologies, which is being perceived as an ‘enabling resource’ that can help in developing learner and more flexible structure that can respond quickly to the dynamics of a fast changing market scenario. It is also viewed as an instrument of cost reduction and effective communication with people and institutions associated with the banking business. The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the Banks started computerizing the branches in a limited manner. The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high powered PC’s and Services and banks went in for what was called Total Branch Automation (TBA) packages. The middle and late 90s witnessed the tornado of financial reforms, Continue reading
Innovations in Customer Services in Banking Sector
Satisfied customers are the best guarantee for the stability and growth. Customers will be satisfied only when the banks provide the customized and innovative products and services at responsible cost. This article focuses on the kind of services provided by developed countries and level of innovative services provided by Indian banks. Many innovative services are currently available from Indian banks like E-Banking, ATMs, Anywhere Banking etc., but there is a vast scope of improvement. Globalization, the buzzword, which engulfed all the nations of the world since the beginning of the last decade of the past millennium, did not leave the banking industry untouched. The opening of the world trade has brought out several changes in the global banking map. The continuing evolution of the banking and financial market has created opportunities both for providers and for users of financial products and this evolution have proven beneficial to the economy. However, Continue reading
Indian Banking Sector Reforms: Special Tribunals and Asset Reconstruction Funds
Setting up of special tribunals to speed up the process of recovery of loans and setting up of Asset Reconstruction Funds (ARFs) to take over from banks a portion of their bad and doubtful advances at a discount was one of the crucial recommendations of the Narasimham Committee. To expedite adjudication and recovery of debts due to banks and financial institutions (FIs) at the instance of the Tiwari Committee (1984), appointed by the Reserve Bank of India (RBI), the government enacted the Debt Recovery Tribunal Act, 1993 (DRT). Accordingly, DRTs and Appellate DRTs have been established at different places in the country. The act was amended in January 2000 to tackle some problems with the old act. DRTs — a compulsion One of the main factors responsible for mounting non-performing assets (NPAs) in the financial sector has been the inability of banks/FIs to enforce the security held by them on Continue reading
Different Modes of Granting Loans by Commercial Banks
The basic function of a commercial bank is to make loans and advances out of the money which is received from the public by way of deposits. The loans are particularly granted to businessmen and members of the public against personal security, gold and silver and other movable and immovable assets. Such loans and advances are given to members of the public and to the business community at a higher rate of interest than allowed by banks on various deposit accounts. The rate of interest charged on loans and advances varies depending upon the purpose, period and the mode of repayment. The difference between the rates of interest allowed on deposits and the rate charged on the loans is the main source of a commercial banks income. A loan is granted for a specific time period. Generally, commercial banks grant short-term loans. But term loans, that is, loan for more Continue reading