Challenges of banking in current scenario

1. Cyber-crime Facing the New Wave of criminal

It is now exceptional to read about a bank robbery where criminals have
entered into a bank branch and physically taken money out of the
building. The introduction of more effective security systems, such as
bullet proof windows and barriers and closed-circuit television, means that
only the foolhardy would risk trying to steal from a branch.
Unfortunately, that does not mean that the banking sector is safe. On the
contrary, the banking sector is facing a more serious threat where the
perpetrators do not even need to physically enter the branch. The IT
systems of the banks are now the focus of determined criminals who can
transfer millions of pounds (or indeed any currency) within seconds to
different accounts and move money across jurisdictions and borders with
a few strokes of a keyboard. The full extent of the threat of cyber-crime is
only emerging and is almost certainly going to hit the headlines in 2015.
With IT systems of the larger banks under scrutiny for failures and
inadequate controls, it is open to question whether the level of security
and infrastructure will be sufficiently robust to withstand the challenge of
cyber-crime.
2. Effecting cultural change
Tracey McDermott, head of enforcement at the Financial Conduct
Authority, put it most succinctly: The cultural change we are looking for is
perhaps analogous to the shift in attitudes to drink-driving between my
parents generation and my own. For my parents and their peers,
reluctance to have a drink and get behind the wheel was mainly because
they were scared of being caught For my generation, however, drinking
and driving was presented as a moral issue. We were made to think about
whether it was right or wrong by forcing us to focus on the impact it could
have on others lives.
Whilst every chief executive of every bank has spoken of their desire to
put customers first and change the culture within their organization, no
one has explained how they intend to do this in practical terms. Will next
year be the one where that change begins? It has to be if the banking
sector is going to regain the trust of the public and their customers. My
prediction is that technology will be the driver for this cultural change
with every sale and every trade checked for the misdemeanours of the
recent past.
3. More stress testing

One of the conclusions reached after the banking crisis of 2008 is the
notion that banks need to have greater capital reserves to avoid being too
big to fail. As a consequence banks have undergone stress tests and
required to hold ever greater amounts of capital. This avoids dealing with
the more thorny issue of the inter-relationships within the global banking
community and how one bank can be intrinsically linked to a host of
others. The weakest link may yet still be capable of threatening the
stability of the worlds banks. However, for the time being the major banks
will need to comply with the current and future requirements of capital
reserves.
The full knock on effect of these requirements will come to light in 2015
particularly if the predicted growth rates for the major economies of the
world slow further.
4. Dealing with heightened regulatory scrutiny
With 2014 seeing record fines for LIBOR and FX rigging, the banking
community would like to think it has seen the last of the scandals.
Unfortunately, the one thing we can safely predict is that there will be
more regulatory investigations and issues to surface in the next year as
regulators across the globe continue to scrutinise the current and past
behaviour of banks. It is likely that 2015 will see a number of individuals
facing prosecutions for their part in the major scandals of 2014.
Banks will have to continue to invest heavily in compliance and risk
monitoring to ensure that they can deal with this increasing regulatory
scrutiny.
5. Facing another economic downturn?
As China faces more unrest in Hong Kong while its economy has been
slowing down coupled with Russias own economic woes, the outlook does
not look promising. The Western economies are struggling to meet
predicted growth rates and instability in the Middle East continues cause
concern. Nor is it clear how long the historically low interest rates and
fiscal engineering across the globe can be maintained.
How will the banks fare with a new downturn in the global economy?
Stress testing and capital requirements will complicate matters, as banks
have to step up and play their part in helping individuals and companies.
We can only hope that they are able and willing to do so.

Banking Current Affairs 2016

ICICI Bank launches NFC-based contactless mobile payment
solution Touch & Pay
With this, ICICI Bank becomes first financial institution in the country to
leverage theHost Card Emulation technique which creates virtual
cards for physical debit or credit cards of the bank.
On every payment done using this service at a merchant store, one-use
unique token will be generated by the Banks server which will be sent via
encryption to the merchant in order to ensure security of the card details.
Touch & Pay facility will be available at the end of March 2016 at more
than 60000 merchants across the country. It will be also incorporated into
the existing Pockets application of the bank.
About Near Field Communication (NFC) technology
NFC is a short-range high frequency wireless communication technology. It
basically is a set of protocols that enable two electronic devices to

establish radio data communication with each other by bringing them

closer typically, 10 cm (4 inches) from each other.
RBI inks information exchange MoU with Bank of Israel
The Reserve Bank of India (RBI) has signed a Memorandum of
Understanding (MoU) with Bank of Israel (BOI) for exchange of information
pertaining to banking supervision.
It was signed by Parvathy V Sundaram, Chief General Manager-in-Charge,
Department of Banking Supervision on behalf of RBI and Hedva Ber,
Supervisor of banks on behalf of BOI.
With this RBI has signed 32 such MoUs, 1 Letter for Supervisory Cooperation and 1 Statement of Co-operation (SoC).
By signing such MoU/SoC with supervisors of other countries, RBI is
seeking to promote greater co-operation and share supervisory
information among the authorities.

SBI granted operating licence by Myanmar

Indias largest lender State Bank of India (SBI) has been granted
preliminary approval to operate Myanmar.
SBI was granted operating licence by Myanmar Government along with
three other Asian banks. They are Bank for Investment and Development
of Vietnam, Sun Commercial Bank of Taiwan and Shinhan Bank of South
Korea.
With this, total 13 foreign banks have now been given permission to
operate inside the Myanmar so far in an attempt to attract overseas
investment to the emergent nation.
Under the earlier junta rule, Myanmars banking system was closed for
decades to outside competition. However since 2011 after end a halfcentury of harsh military rule, Myanmars semi-civilian government has
granted licenses for foreign banks to open business in the country in the
hope of reversing isolation that saw the country become one of Asias
poorest.

Banking Current Affairs 2016 SBI Launches SBI e Smart SME to offer
Ecommerce Loan
Indias largest lender State Bank of India (SBI) has launched SBI e-Smart
SME to provide a working capital loan for sellers on ecommerce platforms.
It was launched by SBI in partnership with ecommerce platform Snapdeal
in the presence of banks chairman Arundhati Bhattacharya and Snapdeal
CEO Sri Kunal Bahl. About SBI e-Smart SME
Sellers on ecommerce platforms can apply for the loan online and get
instant sanctioning of the loan with KYC documents.
In order to assess the sellers creditworthiness for loan sanctioning, the
bank will use proprietary platform data and surrogates information from
public domain.
It is exclusive and easy finance that will be made available at lowest
interest rates.
Collateral free loan will be granted upto 10 Lakh rupees under MUDRA
(Micro Units Development and Refinance Agency) scheme.
Women entrepreneurs will be given concession of 0.25% on the loans.
SBI opens Japan Desk in New Delhi
Indias largest lender State Bank of India (SBI) has launched Japan Desk,
a single window for inbound Japanese investments in India and vice-versa.
This is a first-of-its-kind initiative that seeks to facilitate Japanese
corporates looking to invest in India with banking and advisory services.
Key facts
This SBI Japan Desk will also serve as an one-point comprehensive and
reliable information support source for India-bound investments of
Japanese companies.
It will also facilitate establishment of banking relationship with Japanese
corporates and Japanese nationals and provide information on industries,
sectors etc.
In future, SBI is also planning to set up another dedicated Japan Desk at
Chennai, Tamil Nadu.
SBI Launches First Dedicated Branch For Startups SBI InCube

Indias largest lender, State Bank of India (SBI) has launched dedicated
specialized branch for start-ups called SBI InCube in Bengaluru,
Karnataka.

It was announced by BI Chairman Arundhati Bhattacharya in Bengaluru,

Karnataka.
SBI InCube

The SBI InCube branch will cater to the specific financial needs by
providing advisory services to the budding entrepreneurs under one
roof

It will assist start-ups in cash management, regulations, taxation,

mentoring, foreign exchange and remittances and other financial
services.

InCube in its current form will not fund start-ups i.e. it will not
provide loans. However it will give them loans when they turn more
mature.

It will also not help start-ups to raise funds from equity market as it
not part of banks mandate.

InCube branch in Bengaluru will be headed by an assistant general

manager and a team of three other officers.

Soon SBI will be launching these branches in Pune and National

Capital Region (NCR).

SBI Exclusif

SBI also has launched wealth management service Exclusif to

target the fast-growing affluent segment in the country.

This service will provide customers a dedicated Relationship

Manager to take care of all their banking and investment needs.

ICICI Bank partners with FINO PayTech for payments bank space
Indias largest private sector lender ICICI Bank has partnered with FINO
PayTech to foray into the payments bank space.
With this partnership, ICICI Bank joins some of the leading lenders of the
country that have partnered with payments banks. For example, Kotak
Mahindra Bank (KMB) and State Bank of India (SBI) have picked up stake
in payments banks to be floated by Bharti Group and Reliance Industries
respectively.
Key facts

FINO Paytech along with 10 other entities had received in principle

licence from the Reserve Bank of India (RBI) to start a payment
bank.

ICICI Group has purchased about 16 per cent stake in the FINO
PayTech making it one of the largest domestic shareholder.

The tie-up with ICICI Bank will help FINO to extend services which a
payments bank is not allowed to offer. It will also help it to build
some banking products and services that they cannot offer on our
own.

Presently, RBI regulations allow universal banks to invest up to 30 per

cent in payments bank. RBI regulations also mandate 51 per cent of the
equity of the payments bank should be with domestic entities.
In case of FINO PayTech it has about 70 per cent stake is with foreign
entities. Before starting payments bank business it is going to raise capital
which will help bring down foreign shareholding within prescribed limit.

Andhra Bank launches IMPS for money transfer

Andhra Bank has launched Immediate Payment Service (IMPS) at all its
branches across the country to provide inter-bank electronic fund transfer
service.
The customer-friendly service was launched by Andhra Bank in association
with the National Payments Corporation of India (NPCI).
It also supports real time instant fund transfer system for inter-bank
remittances. However the maximum caps of transaction of remittances
will 2 lakh rupees and the charges will be at the rate of Rs.5 per
transaction.
Immediate Payment Service (IMPS)

IMPS is a multi-channel, multi-dimensional inter-bank electronic fund

transfer platform that allows customers to transfer money
electronically within fraction of seconds with all the standards and
integrity maintained for security.

It is round-the-clock real time instant fund transfer system which is

not possible in National Electronic Funds Transfer (NEFT) system. It
also safest and most economical electronic fund transfer service.

Changing roles of banking in india

The following points briefly highlight the changing role of banks in India.
1. Better customer service,
2. Mobile banking facility,
3. Bank on wheels scheme,
4. Portfolio management,
5. Issue of electro-magnetic cards,
6. Universal banking,
7. Automated teller machine (ATM),
8. Internet banking,
9. Encouragement to bank amalgamation,

10.

Encouragement to personal loans,

11.

Marketing of mutual funds,

12.

Social banking, etc.

The above-mentioned points indicate the role of banks in India is

changing. Now let's discuss how banking in India is getting much better
day after day.

1. Better Customer Service

Before 1991, the overall service of banks in India was very poor. There
were very long queues (lines) to receive payment for cheques and to
depositmoney. In those days, some bank staffs were very rude to their
customers. However, all this changed remarkably after Indian economic
reforms of 1991.
Banks in India have now become very customer and service focus. Their
service has become quick, efficient and customer-friendly. This positive
change is mostly due to rising competition from new private banks and
initiation of Ombudsman Scheme by RBI.

2. Mobile Banking

Under mobile banking service, customers can easily carry out major
banking transactions by simply using their cell phones or mobiles.
Here, first a customer needs to activate this service by contacting his
bank. Generally, bank officer asks the customer to fill a simple form to
register (authorize) his mobile number. After registration, this service is
activated, and the customer is provided with a username and password.
Using secret credentials and registered phone, customer can now
comfortably and securely, find his bank balance, transfer money from his
account to another, ask for a cheque book, stop payment of a cheque, etc.
Today, almost all banks in India provide a mobile-banking service.

3. Bank on Wheels

The 'Bank on Wheels' scheme was introduced in the North-East Region of

India. Under this scheme, banking services are made accessible to people
staying in the far-flung (remote) areas of India. This scheme is a generous
attempt to serve banking needs of rural India.

4. Portfolio Management

In portfolio management, banks do all the investments work of their

clients.
Banks invest their clients' money in shares, debentures, fixed deposits,
etc. They first enter a contract with their clients and charge them a fee for
this service. Then they have the full power to invest or disinvest their
clients' money. However, they have to give safety and profit to their
clients.

5. Issue of Electro-Magnetic Cards

Banks in India have already started issuing Electro-Magnetic Cards to their

customers. These cards help to carry out cash-less transactions, make an
online purchase, avail ATM facility, book a railway ticket, etc.
Banks issue many types of electro-magnetic cards, which are as follows:
1. Credit cards help customers to spend money (loaned up to a
certain limit as previously settled by the bank) which they don't
have in hand. They get a monthly statement of their purchases and
withdrawals. Along with the transacted amount, this statement also
includes the interest and service fee. The entire amount (as

reflected in the statement of credit card) must be paid back to the

bank either fully or in installments, but before due date.
2. Debit cards help customers to spend that money which they have
saved (credited) in their individual bank accounts. They need not
carry cash but instead can use a debit card to make a purchase (for
shopping) and/or withdraw money (get cash) from an ATM. No
interest is charged on the usage of debit cards.
3. Charge cards are used to spend money up to a certain limit for a
month. At the end of the month, customer gets a statement. If he
has a sufficient balance, then he only had to pay a small fee.
However, if he doesn't have a necessary balance, he is given a
grace period (which is generally of 25 to 50 days) to repay the
money.
4. Smart cards are currently being used as an alternative to avail
public transport services. In India, this covers Railways, State
Transport and City (Local) Buses. Smart card has an integrated
circuit (IC) embedded in its plastic body. It is made as per norms
specified by ISO.
5. Kisan credit cards are used for the benefit of the rural population
of India. The Indian farmers (kisans) can use this card to buy
agricultural inputs and goods for self-consumption. These cards are
issued by both Commercial and Co-operative banks.

6. Universal Banking

In India, the concept of universal banking has gained recognition after

year 2000. The customers can get all banking and non-banking services
under one roof. Universal bank is like a super store. It offers a wide range
of services, including banking and other financial services like
insurance, merchant banking, etc.

7. Automated Teller Machine (ATM)

There are many advantages of ATM. As a result, many banks have opened
up ATM centres to offer convenience to their customers. Now banks are
operating ATM centres not only in their branches but also at public places
like airports, railway stations, hotels, etc. Some banks have joined
together and agreed upon to set up common ATM centres all over India.

8. Internet Banking

Internet banking is also called as an E-banking or net banking. Here, the

customer can do banking transactions through the medium of the internet
or world wide web (WWW). The customer need not visit the bank's branch.
Through this facility, the customer can easily inquiry about bank balance,
transfer funds, request for a cheque book, etc. Most large banks offer this
service to their tech-savvy customers.

9. Encouragement to Bank Amalgamation

Failure of banks is well-protected with the facility of amalgamation. So

depositors need not worry about their deposits. When weaker banks are
absorbed by stronger banks, it is called amalgamation of banks.

10. Encouragement to Personal Loans

Today, the purchasing power of Indian consumers has increased

dramatically because banks give them easy personal loans. Generally,
interest charged by the banks on such loans is very high. Interest is
calculated on reducing balance. Large banks offer loans up to a huge
amount like one crore. Some banks even organise Loan Mela (Fair) where
a loan is sanctioned on the spot to deserving candidates after they submit
proper documents.

11. Marketing of Mutual Funds

A mutual fund collects money from many investors and invests the money
in shares, bonds, short-term money market instruments, gold assets; etc.
Mutual funds earn income by interest and dividend or both from its
investments. It pays a dividend to subscribers. The rate of dividend
fluctuates with the income on mutual fund investments. Now banks have
started selling these funds in their own names. These funds are not
insured like other bank deposits. There are different types of funds such as
open-ended funds, closed-ended funds, growth funds, balanced funds,
income funds, etc.

12. Social Banking

The government uses the banking system to alleviate poverty and

unemployment. Many social development programmes are initiated by the
banks from time to time. The success of these programmes depends on
financial support provided by the banks. Banks supply a lot of finance to
farmers, artisans, scheduled castes (SC) and scheduled tribe (ST) families,
unemployed youth and people living below the poverty line (BPL).