Banking On The Future Vision.docx

Banking on the Future Vision RANDHIR KUMAR DAS [email protected] Karnal Institute of Technology and Management MONIKA RANI Asst. Prof. (MBA dept.) [email protected] Karnal Institute of Technology and Management

Abstract: Banking can be defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.

However, with the passage of time, the activities covered by banking business have

widened and now various other services are also offered by banks. The banking services these days include issuance of debit and credit cards, providing safe custody of valuable items, lockers, ATM services and online transfer of funds across the country / world. The Bank recognises that a new economy, a new world and new demographics demand a new financial system. The new finance will develop for the new economy, not in isolation from it. In this research we will study in detail what is Banking, How banking helps in economic growth and what are the challenges faced by banking sector and suggestion to outcomes from that problem. The information required for study has been collected from only secondary sources has been followed full paper. The banking sector have had greater impact on economies and social aspect of Nation.

Keywords: Fintech, IT(Information Technology).

Objective: 1. To know about present and future vision of banking 2. Impact of IT in banking industry of India 3. Challenges faced by Banking 4. Suggestion for Improvement in Banking Sector by future vision

INTRODUCTION: An establishment authorized by government to accept deposits, Pay interests, clear cheques, make loans, act as intermediary in financial transaction, and provides other financial services to its customer. The significance of an financial system is widely accepted not only in India, but has become a policy priority in many countries. Financial access can really boost the financial condition and standards of life of the poor and the disadvantaged. So, RBI has been constantly encouraging the banking sector to develop the banking network both through setting up of new branches, installation of new ATMs, implementation of EBT and also through BC model by leveraging upon the information and communication technology (ICT). As many of the villages are not getting facility of financial institution BCs are considered as practical solution to extend basic banking services.

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investors, and stronger and more complex links between banks and capital markets, led to growing

uncertainties about the long-term profitability of many of the prevailing banking models and underlying strategies. RESEARCH METHODOLOGY: The present paper is primarily based on secondary data. Present study focus on vision of the banking in future. Secondary data are collected from various websites, government publications, journals and other publications like research articles published in journal available. Research is descriptive in nature. ORIGIN OF BANKING: The word ‘bank’ is used in the sense of a commercial bank. It is of Germanic origin though some persons trace its origin to the French word ‘Banqui’ and the Italian word ‘Banca’. here was no such word as ‘banking’ before 1640, although the practice of safekeeping and savings flourished in the temple of Babylon as early as 2000 B.C. The first bank called the ‘Bank of Venice’ was established in Venice, Italy in 1157 to finance the monarch in his wars. The bankers of Lombardy were famous in England. But modern banking began with the English goldsmiths only after 1640. The first bank in India was the ‘Bank of Hindustan’ started in 1770 by Alexander & Co., an English agency house in Calcutta which failed in 1782 with the closure of the agency house. But the first bank in the modern sense was established in the Bengal Presidency as the Bank of Bengal in 1806. Bank After independence: 1. In 1955, the Imperial Bank of India was nationalised and was given the name “State Bank of India”. It was established under State Bank of India Act, 1955. 2. In 1960, RBI was empowered to force the compulsory merger of the weak banks with the strong ones. This led to reduction in the number of banks from 566 in 1951 to about 89 in 1969. 3. On July 19, 1969, 14 major banks were nationalised. 4. In 1980, another six banks were nationalised, and thus raising the number of nationalized banks to 20. 5. On the suggestions of Narsimham Committee, the Banking Regulation Act was amended in 1993 and thus the gates for the new private sector banks were opened.

Future Vision of Banking: What will the branch of the future look like? We live in a world enabled by technology like never before. (By the time you get done reading this paragraph, Google will log approximately 1 million searches.) Life moves fast. And consumers’ expectations move even faster. Today’s consumers seek the same speed, ease and convenience from financial services that they do in every other aspect of their lives. No longer will they wait in long lines or take days to receive a new debit card. They want immediate service and an intuitive process resembling how they would order coffee or check the weather. Although digitally savvy, many consumers still see the physical branch as highly relevant and a vital component of their financial lives. They want a brick-and-mortar experience that merges with technology—and fits effortlessly into how they live and manage their money. Fiserv’s recent “Expectations & Experiences: Household Finances” survey explored the channels and methods consumers prefer when they execute financial transactions today—and how these behaviors set future expectations. The results indicate a need for a branch transformation strategy that blends human interaction with a digital, interconnected environment. While digital and self-service channels enjoy a greater frequency of use, physical braches will not disappear anytime soon. More consumers (39 percent) prefer in-person interaction to online contact (36 percent) as their primary avenue when they engage with a financial institution. Perhaps surprisingly, in-person branch interaction is a multi-generational aspiration. Not unexpectedly, seniors (63 percent) and boomers (45 percent) are most likely to visit a branch, perhaps due to potential unfamiliarity with emerging technology and comfort with tried-and-true routines. But a significant number of early (25 percent) and late (24 percent) millennials also prefer in-person experiences. Specifically, these younger consumers are most likely to find financial management burdensome and require expert guidance as they plan for their first homes, cars and families. Regardless of age, channel or need, consumers expect speed, security and personalization. By embracing new technologies without alienating loyal customers, financial institutions can create

a contemporary, welcoming environment. For instance, tellers can leave their desks and greet customers or members as they enter the branch, with a tablet in hand to quickly and accurately address their needs.

Features of Banking: 1. Dealing In Money 2. Acceptance Of Money Deposits 3. Payment And Withdraws Money 4. Individual Or Companies 5. Various Branches 6. Function Increasing Rapidly 7. Business In Banking Sector 8. Identification 9. Facilities Of Advance Money

Purpose of Banking: 1. Keep money safe for customers 2. Offer customers interest on deposits, helping to protect against money losing value against inflation. 3. Lending money to firms, customers and homebuyers. 4. Offering financial advice and related financial services, such as insurance.

Objectives of Bank: 1. To offer a wide variety of services to individual and business customers. 2. To collect payments including fees, charges and interest on the products and services provided to customers for the purpose of generating profits for shareholders. 3. Commercial banks typically offer a robust suite of services in an attempt to be able to serve all the financial needs of each customer. This results in the opportunity to maximize revenues from each customer. For example, a customer who has checking and saving accounts, loans, and credit cards for personal and business use at one bank generates revenues through numerous channels. Revenues can be increased further if the customer also buys stocks and bonds through a bank’s brokerage arm. 4. To make growth of the economy by providing Finance.

Structure of Organised Indian Banking System: The organised banking system in India can be classified as given below:

1. Reserve Bank of India (RBI): The country had no central bank prior to the establishment of the RBI. The RBI is the supreme monetary and banking authority in the country and controls the banking system in India. It is called the Reserve Bank’ as it keeps the reserves of all commercial banks. 2. Commercial Banks: Commercial banks mobilise savings of general public and make them available to large and small industrial and trading units mainly for working capital requirements. Commercial banks in India are largely Indian-public sector and private sector with a few foreign banks. The public sector banks account for more than 92 percent of the entire

banking business in India—occupying a dominant position in the commercial banking. The State Bank of India and its 7 associate banks along with another 19 banks are the public sector banks.

3. Scheduled and Non-Scheduled Banks: The scheduled banks are those which are enshrined in the second schedule of the RBI Act, 1934. These banks have a paid-up capital and reserves of an aggregate value of not less than Rs. 5 lakhs, hey have to satisfy the RBI that their affairs are carried out in the interest of their depositors. All commercial banks (Indian and foreign), regional rural banks, and state cooperative banks are scheduled banks. Non- scheduled banks are those which are not included in the second schedule of the RBI Act, 1934. At present these are only three such banks in the country.

4. Regional Rural Banks: The Regional Rural Banks (RRBs) the newest form of banks, came into existence in the middle of 1970s (sponsored by individual nationalised commercial banks) with the objective of developing rural economy by providing credit and deposit facilities for agriculture and other productive activities of al kinds in rural areas. The emphasis is on providing such facilities to small and marginal farmers, agricultural labourers, rural artisans and other small entrepreneurs in rural areas.

5. Cooperative Banks: Cooperative banks are so-called because they are organised under the provisions of the Cooperative Credit Societies Act of the states. The major beneficiary of the Cooperative Banking is the agricultural sector in particular and the rural sector in general.

The cooperative credit institutions operating in the country are mainly of two kinds: agricultural (dominant) and non-agricultural. There are two separate cooperative agencies for the provision of agricultural credit: one for short and medium-term credit, and the other for long-term credit. The former has three tier and federal structure. At the apex is the State Co-operative Bank (SCB) (cooperation being a state subject in India), at the intermediate (district) level are the Central Cooperative Banks (CCBs) and at the village level are Primary Agricultural Credit Societies (PACs). Long-term agriculture credit is provided by the Land Development Banks. The funds of the RBI meant for the agriculture sector actually pass through SCBs and CCBs. Originally based in rural sector, the cooperative credit movement has now spread to urban areas also and there are many urban cooperative banks coming under SCBs. Challenges Faced by Banking Sector: 1) Not making enough money: Despite all of the headlines about banking profitability, banks and financial institutions still are not making enough return on investment, or the return on equity, that shareholders require.

2) Increasing competition from financial technology companies: Financial technology (FinTech) companies are usually start-up companies based on using software to provide financial services. The increasing popularity of FinTech companies is disrupting the way traditional banking has been done. This creates a big challenge for traditional banks because they are not able to adjust quickly to the changes – not just in technology, but also in operations, culture, and other facets of the industry.

3) Regulatory pressure: Regulatory requirements continue to increase, and banks need to spend a large part of their discretionary budget on being compliant, and on building systems and processes to keep up with the escalating requirements.

4) Crisis in Management: Public-sector banks are seeing more employees retire these days. So, younger employees are replacing the elder, more-experienced employees. This,

however, happens at junior levels. As a result, there would be a virtual vacuum at the middle and senior level. The absence of middle management could lead to adverse impact on banks' decision making process.

5) Ch an gi n g Con su mer Dyn a mi cs : But, what are those challenges? You’ve heard of many of the banking trends of 2018 already. Some of them include providing a multi-channel experience for the consumer and providing more on-the-go services. One survey found that 61% of organizations will need to put more focus on removing friction from the customer’s journey as a leading concern. And, then there are the changes coming fro m within. There’s undoubtedly more competition in this sector than previously. And, cost pressures will continue to put pressure on banks to find more affordable ways to accomplish tasks, often with fewer labor hours spent. Reducing risks on investments in an increasingly volatile world will not be easy. Look beyond, this, though, to see the other changes playing out. These are three key challenges banks will face in 2018. Whether or not your bank is ready depends on your ability to innovate, customize, and integrate any of these key areas of focus. 6 ) I mp rovi n g Con su mer Re ten ti on : One of the key concerns for any bank is maintaining customers. One challenge that banks will need to overcome, then, is remaining relevant as new challenger banks begin to rise. The best way to be able to overcome this challenge is to provide the most innovative and hands-on service to customers. Even the Millennial will remain with the bank that meets their needs and is always available to them. This will include creating that frictionless environment that consumers need. To achieve this, banks will need to employ more artificial intelligence in their customer-sided efforts. For example, the use of AI chatbots that can interact with and provide information to consumers immediately – even in the middle of the night – will be a key factor towards success. It also means

utilizing touchpoints that most banks are unfamiliar with such as Facebook. It’s possible, for example, to connect with would -be customers or current customers through Facebook chatbots, solving their problems instantly. 7 ) Provi d i n g S u p p ort an d Fi n an ci al Gu i d an ce w i th Vi rtu al Assi stan ce : Virtual assistance will be important for most banks, including those who are working to develop a mobile platform. Some banks are working to develop an intelligent virtual assistant. These assistants can work much like a chatbot in that they can answer questions. But they can also help consumers to avoid problems. For example, some can help to anticipate the future needs of the customer. This can help the customer to move closer to achieving financial goals. This type of smart interaction can only happen with a well -defined and integrated platform. Today’s bank still is an investment powerhouse and the demand to earn more with less risk is growing. One of the ways banks can do this is by having more predictive and analytical tools at their fingertips. Being able to predict the needs of customers, investment strategies, and even in -house needs will help empower banks to do more with less. At the same time, banks are turning to more digital tools to give them insight into the decisions they make. Consumers looking for a startup loan, for example, don’t want to wait days for an answer. With this type of high-powered artificial intelligence avail able to them, they can gather data and use it to make decisions based on risks immediately.

Suggestion for Improvement in Banking Sector by future vision: 1) Reduce the cost: The financial institution can reduce there cost by applying different techniques of modern technology. So that financial institution can get benefit on there investment, return on equity , etc.

2) Updating with Modern Technology: Banks can improve there performance in future by updating regularly with the modern technology. As the world is growing on the basis of technology it will be the better way to compete with growing world.

3) Proper Retention of Management: As the modern vacancies are getting filled by younger employees there may be the gap between upper level management and lower level, so proper retention of the employees must be there to make a good communication in banking industry.

4) All Processes Go Digital: Before we get to mobile we have to eliminate pesky, pesky paper and other remnants of the Dark Ages, which is why some respondents claimed we will have moved entirely onto electronics in the next five years. Wrote one banker, “Branches will be obsolete or will co-exist with partnerships such as coffee shops, etc.,” while another stressed increasing “digital” evolution to come. A third expected that there would be “very limited branches, more conversational. Block chain, internet of things and wearables will be driving bank interactions. 95% [of] transactions [will be] digital. In 2020, we will see the beginning of the end of car ownership.”

5) Better control on Security: In future mostly all the works will get done electronically, so there must be the powerful control on security. As in recent days many frauds are happening can get control by better security system.

6) Staff Shrinks, and Shifts to IT: Some bankers predicted that the rise of technology would led to less staff in finance — unless they happen to do a particular job, like this one respondent who wrote, “Only 20% of current staff levels [will remain], but [banks will employ] twice the number of IT staff. Traditional banks will lose their direct channels to specialist channel providers.”

7) Opening More branches at undeveloped area: Financial institution are seeing to open more possible branches at undeveloped area in future, so that the undeveloped area will also get developed.

8) Providing Sufficient loan: The study found that the loan requirement is much more than the supply and the principles to provide loan should be fair and fast so that needy person can perform there task.

9) Banks Absorb Fintech Startups: One respondent was skeptical that current startup culture would still be around, noting that there will be “very few large scale startups. Most will be acquired and assimilated into the larger ecosystem.” He didn’t elaborate as to why, but we might suggest funding drying up, regulations increasing, or greater synergies developing between fintech companies and innovative banks.

10) Unless the Regulators Kill Small Banks: And some respondents thought exactly the opposite, like this banker who noted the importance of regulation: “Technology is moving exponentially at this point and not linear, so it’s hard to predict. But community banking will drastically decline … unless the government regulates fintech harsher.” Regulation (or lack thereof) was seen here as protecting fintech startups and hurting community banks.

Conclusion: For achieving complete mission and growth of future vision on banking Government, and the implementing agencies will have to put their minds and hearts together so that the banking institution can be taken forward. There should be updated technology to compete with banking world, and also the banking existence should be according to modern days .Thus, banking is a big road of existence with technology which needs to travel to make it completely successful. Miles to go before we reach the set goals but the ball is set in motion!

Refrences: A. Journals: 1) Journals on Banking 2) Magazines of Banking B. Websites 1) www.google.com 2) www.wikipedia.com C. https://www.researchgate.net/publication/5014436_Visions_about_the_Future_of_Banki ng D. https://www.bai.org/banking-strategies/article-detail/a-2020-vision-creating-the-bankbranch-of-the-future-instantly E. https://bankinnovation.net/2016/10/10-ways-banking-will-be-different-in-2020/