banking and beyond

8/10/2019 Banking and Beyond

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P R E S E N T E D B Y

BOBIN Y

S1 MBA

FINANCIAL INCLUSION:New challengesto the indian finanacial system


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Financial Inclusion

Financial inclusion is about credible access toappropriate financial products and services needed

by vulnerable groups such as weaker sections and

low income groups at an affordable cost in a fairand transparent manner from mainstreaminstitutional players . Without being inclusive,financial and economic stability cannot be

sustainable


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Capital

First issue staring in the face of banking industry iscapital. Even though reasonably well capitalized today,

banks will be facing the challenge of growing theirbusiness due to capital constraints. Indias financialsystem is better at capital allocation than most of the

emerging market players. It has some high performingbanks, very low stock of gross non-performing loans ofabout 2.5% and deep and liquid equity markets thatefficiently discover price in stocks of globally competitivecompanies in BPO, IT, R&D, pharmaceuticals,

automobiles, telecom and hospitality space. Still one ofthe challenges will be capital raising by corporate sectorsbut not at the expense of agriculture, small industriesand business.


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Liquidity Management

Traditionally, capital adequacy requirements havebeen imposed to ensure solvency. However, that isnot the only issue. The next issue that will continueto engage substantial management attention is themanagement of liquidity.


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IFRS Implementation

The third issue that is going to cast a spell over thefinancial sector players is the compliance with IFRSor International Financial Reporting Standards.Globalization of financial markets has meant anincreased focus on international standards inaccounting and has intensified efforts towards asingle set of high quality, globally acceptable set of

accounting standards.


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Technological advancement enables a broader andinclusive banking sector and in the process, is a keydriver for the sustained and and inclusive growth of theeconomy. Technology by itself is not a panacea. .

Optimum leveraging of technology would critically hingeupon the following:

a. Skilled resources

b. Supportive HR policy

c. Appropriate IT governance structure d. Effective business continuity plan.

Inclusive growth of the economy.


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Risk Management

Issue of risk management in banks and financialinstitutions would, however, continue to be at thecentre of an ongoing search for the right policyprescription


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Risks and Rewards

Next important issue that warrants a really carefulconsideration is the issue of executivecompensation..


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Challenges Before The Banks

The financial system is growing to be highlycomplex and opaque.

The financial system has a propensity to become

over-leveraged and heavily interconnected, leadingto massive deleveraging and easily availablepropagation channels, both domestically andglobally.


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liquidity risks, both the funding risks incurred byinstitutions and the associated market liquidity risks

of assets, are often much higher than recognized.

The financial system has a propensity to becomeover-leveraged and heavily interconnected.


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How do regulators meet the above challenges?

Central banks must take a long-term view of theeconomy and craft appropriate policy responses.

While progress on macro and micro-prudential

regulations will be the key for moving forward, somework is still needed from the regulators in providingguidance to the market in instituting a mechanism inthe area of managing not only several known

unknowns but also a number of unknownunknowns.


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With the benefit of hindsight, low nominal interestrates, abundant liquidity and a favourablemacroeconomic environment encouraged the privatesector to take on ever-increasing risks.


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THANK YOU

banking and beyond

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