Sutanu Guru looks at how "emerging" economies are dismantling the American dominated global financial architecture In 1944, America officially replaced Britain as the global financial superpower at Bretton Woods when the formalities to launch the World Bank and the International Monetary Fund were finalized. This week, that monopoly of Western powers will get another jolt when finance ministers of the five BRICS (Brazil, Russia, India, China and South Africa) countries along with their central bank heads will complete all formalities to launch the New Development Bank. Earlier christened as the BRICS Bank, the new name is designed to expand the ambit of the bank to other nations. One of the best known Indian bankers, K.V. Kamath is the designated head of NDB. This comes just a week or so after a glittering ceremony in Beijing where 49 nations joined China to announce the launch of the Asian Infrastructure Investment Bank. China will provide 30% of the paid up capital of $100 billion and control 26.6% of the vote with a clear veto power. India will be the second largest shareholder in AIIB with a stake of 8.52%. Incidentally, both USA and Japan are not members of the AIIB. And by definition, the G-7 nations cannot be members of BRICS. For decades, there has been a clamor from "emerging" nations to end the virtual stranglehold of traditional global powers over global institutions. For example, there have been persistent calls to reform the United Nations and add more countries as permanent members of the currently five-member UN Security Council. Simultaneously, there have been demands to ease the complete dominance of financial institutions like IMF, World Bank and Asian Development Bank by the G-7 nations. For more than two decades, there has been talk without any substantive change on the ground. But the recent launch of two brand new global financial institutions in the form of AIIB and NDB indicate that emerging economies are no longer willing to wait for crumbs from the traditional powers. This has been articulated clearly in an interview given to the newspaper Mint by Malose W Mogale, the deputy High Commissioner of South Africa to India when he said, "Our argument is that the world can't remain the same after 70 years...The West has realized that if they don't change, there will be an alternative". Geopolitical considerations aside, it is the financial implications that will have resonance. Under what is now famous (or notorious) as the Washington Consensus, institutions like IMF and World Bank have been accused of trying to impose their own version of capitalism on countries while providing financial assistance. More often than not, it has led to economic mayhem and financial ruin for local populations. In unusual gestures of mea culpa, both the IMF and the World Bank have admitted in recent times that their priorities were perhaps skewed. The AIIB and the NDB promise to provide financial assistance to countries in a manner that suits their infrastructure needs and long term goals rather than imposing uniform conditions on everyone. As the latest fiasco in Greece shows, going to the IMF with a hat in hand means adopting "austerity" measures that might lead local populations to revolt. Sure, the dominance of the western powers is not going to vanish. Definitely not in the near future. But the monopoly that was established by America and the Second World War allies at Bretton Woods in 1944 is gone. That is definitely good news.
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It’s a subject that’s infrequently highlighted: the quality of manpower and ‘capacity building’ – be it in banking or other parts of India Inc. It’s of a particular import to banks, but given the state-run nature of the industry, the issue gets conflated: unions, pay and lateral recruitment. Reserve Bank of India’s deputy governor R. Gandhi correctly observes that “finance is primarily a knowledge-oriented activity. The chief capital and inputs required for this sector all relate to ‘information’ and knowledge’… the paradigm changes (in the sector) has very wide ramifications; the sector is highly interconnected; happenings in this sector has high visibility”. With 72 per cent of assets under them, state-run banks have witnessed a number of younger officers at top levels over a short period of time. “While this can bring fresh perspectives, it is also a fact that given the strategic importance of leadership at the top, it is important to understand the training requirements and fulfil the same,” notes Gandhi. Cynics may say the realisation has been late in coming, but then, it’s better late than never.— Raghu MohanA Move In The Right DirectionIt is well known that there is no consistency in the structure, power and functioning of the regulatory bodies in key infrastructure sectors. While the port sector regulator’s only job is to set tariffs, his counterparts in the electricity sector have much wider powers of rule-making, licensing, power market development, imposing penalties, etc. The telecom sector regulator is tasked with promoting competition. The tenure of regulators varies from 3 to 5 years; there are different terms and conditions for reappointment of members of regulatory commissions and appellate tribunals. Some sectors like electricity and telecom have appellate tribunals, whereas others like port do not have such tribunals. Even the degree of independence of regulators varies from sector to sector. Some level of parity or uniformity is required across all such regulators. Hence, the government move to revive the Regulatory Reforms Bill, 2013, to look at these aspects, should be welcomed. An overarching law to bring uniformity to India’s regulatory architecture is the need of the hour.— Joe C. MathewNot So Wise DecisionThe market regulator’s decision to ease the listing norms for startups is tilted heavily in favour of such companies. Not only will a lot of home-grown startups be tempted to raise money from the Indian market over the next year, the move is also likely to stop their flight to foreign markets. But SEBI’s decision to allow startups to disclose less in their draft red herring prospectus puts investors at a great deal of risk. Here’s why: Through 2008, 2009 and 2010, of the IPOs that listed, 81 per cent, 50 per cent and 82 per cent of them, respectively, gave negative returns within a year. In 2014, things improved slightly due to the stricter disclosure norms brought in by SEBI. However, with the latest relaxation of disclosure norms, the percentage of IPOs giving negative returns may begin to soar once again.— Neeraj ThakurCan't Blame Banks AnymoreThe Reserve Bank of India’s Financial Stability Report says that stress tests at end-March 2015 suggests that the current deterioration in banks’ asset quality may continue for a few quarters. That state-run banks, in particular, may have to provide more for bad-loans to meet the ‘expected losses’ if the macroeconomic environment deteriorates. Stress tests have revealed that shocks to the infrastructure sector, mainly power and transport sub-sectors, would significantly impact the system. Before you blame banks over poor credit appraisal, the truth is that policy paralysis is the biggest driver of the bad-loan mess. Next is the political patronage extended to the bigger defaulters. Think about it: why is that the bulk of bad-loans are in the bellies of state-run banks? It’s because they are forced to be all things to all companies; it’s due to factors outside!— Raghu MohanTo An Inordinate DegreeWere college degrees to be any guarantee of the effective handling of a ministerial portfolio, life would have been much easier. The fuss over ministers misrepresenting their educational backgrounds is valid up to a point. But the inordinate attention being given to the degrees of Jitender Singh Tomar and Smriti Irani is outlandish because there is so much else politicians falsify. It is strange that we give less importance to the fact that politicians have uncountable police sentences and prison time on their records compared to their degrees. Certainly, they have no ‘moral right’ to falsify those, but the more serious issue is that of having no moral right to be corrupt or criminal. Surely, the time to have minutely examined educational qualifications is before not after individuals take up portfolios and positions of power.— Mala BhargavaMonsoon MantraThe Indian Meteorological Department (IMD) has forecast a deficient rainfall during July-August and advised the agriculture ministry to keep a contingency plan ready. In contrast, India’s lone private weather forecasting company Skymet Weather Services has predicted a normal rainfall. Incidentally, IMD’s projection of insufficient rainfall in June was proved wrong; in fact, the rainfall was 20 per cent above the forecast. Skymet claims that it has fared better than IMD in predicting rainfall ever since it began operations three years ago. We will soon know which is better. But right now, the smart thing for the farmers and the government to do is to be prepared for the worse. As for IMD, if there is something it can learn from Skymet, it should be open enough to do that.— Joe C. MathewModi Shows The Way Once AgainThat Prime Minister Modi is eminently fond of selfies has been evident from the start, but recently he put the hobby to good use by creating a hashtag for a Twitter campaign in support of safety and education for young girls, represented by the government’s Beti Bachao, Beti Padao slogan. The SelfieWithDaughter was quite a hit and led to a surge of photographs of parents with their daughters including from the sarpanch of a village in Haryana. Although many grumbled that the PM should become a social media manager, it is for the first time that the country has actually seen a top leader take steps to communicate with citizens in their style. Sadly, the Twitter campaign was marred, partly by the PM’s own supporters, called Modi Bhakts on the network. A defiant remark by CPM member Kavita Krishnan and abusive reaction by actor Alok Nath unleashed a flood of unsavoury tweets that completely detracted from the original aim of the campaign. The PM also received much flak for staying silent on other matters, but left to itself, the SelfieWithDaughter was a warm campaign, even if just a drop in the ocean.— Mala Bhargava(This story was published in BW | Businessworld Issue Dated 27-07-2015)
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The science of customer relationships is simple - the value you get is proportionate to the value you give, says Sanjay GuptaCustomer loyalty within the banking industry is dipping the world over. And with cutthroat competition, banks are finding it even more difficult to retain clientele. Banks need to rethink their service strategy as this will not only help ensure quality customer experience, but also positively affect its bottom line. By anticipating and addressing customer needs before they can become inbound contact center expenses, banks will be able to increase customer retention and loyalty as well as boosts agent retention and job satisfaction.Proactive customer care enables banking players to delight customers with convenient, useful information at their moment of greatest need and meet the challenge of striking the right balance between containing costs and delivering value through a highly differentiated customer experience. Here are four reasons why this strategy makes good business sense.1. Customers Repay Proactive Service with Greater Loyalty and Long-Term ValueThe science of customer relationships is simple - the value you get is proportionate to the value you give. To achieve and maintain this harmony, banks today must establish a dialogue with customers that demonstrate awareness of their needs and respect for their communication preferences. The more contact made with a customer, the "stickier" they become. When customers are consistently given valuable information, this stickiness can form a durable bond of loyalty.A few banking players are already looking at new ways to measure their customers' long-term value or profitability. Lifetime value is based on the profit earned from a customer over the total lifespan of an active account. Exceeding customers' support demands maximizes their longevity and, as a result, helps increase value. For example, it may take 30 seconds to reach out to a customer to satisfy a need with differentiated service. If that time costs $1 million a year, it can yield twice that amount in new or continued business, as well as word-of-mouth referrals to new customers.2. Winning New Customers Cost More than Retaining Existing CustomersHere's where proactive customer care can put a real dent in customer churn. What if banking contact center representatives proactively engaged customers to advise them in advance when their loan's EMIs are due? Or inform them about more appropriate savings schemes based on their earnings? Although customers might switch to other schemes, the value of up-selling or cross-selling to already existing customers is easy to measure.3. Contact Center Efficiency Improves with Reduced Call Volume and Automated OutreachBy evaluating current business processes for customer service patterns, banks can preempt interactions and reduce inbound contact volume by proactively reaching out to customers to report on progress. The convenience delivered through this process creates more positive customer experience that helps build loyalty, and with fully automated transactions can also help save costs.4. Agent Job Satisfaction and Retention Increase, Reducing Turnover CostsIt is common knowledge that the customer service representative's job is traditionally marked by rapid burnout and high turnover. According to recruitment firm Spherion, the turnover of one job costs a company an average of 1.5 times the employee's annual salary when separation costs, overtime payments to temporary workers, loss of productivity and replacement costs are factored.The though behind personalised, live interactions with proactive care agents is to humanize the customer experience as well as the agent's interaction experience. By providing useful information to preempt or resolve issues, agents develop more meaningful relationships with customers. This exchange leads to a win-win situation that provides a more satisfying work experience for agents and influences job satisfaction. This in turn leads to lower employee turnover for the bank while strengthening customer relationships.The Difference is Relevant ValueThe real value of proactive customer care is in building and maintaining a healthy bottom line over a longer time frame through ongoing and elevated focus on the experience. Proactively delivered, customer care allows a bank to provide differentiated, high-touch services that reinforce the brand's identity and customer value proposition. Even if these services cost more, it is a known fact that customers are willing to pay more for higher perceived value in any economy and appreciate being consistently treated like valued clients. In a nutshell, it is the differentiated service that can pay real dividends.The author is Managing Director, South Asia and Middle East, Aspect Software
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BankBazaar.com, a financial marketplace, raised Rs 375 crore in Series C round of funding led by Amazon with participation from Fidelity Growth Partners and Mousse Partners. Existing investors Sequoia Capital and Walden International also participated in the Series C funding round. "With the rapidly evolving online consumer segment across categories, we have seen great demand for this platform. We are currently looking to expand the category as we reinvest all earnings in growing the business intelligently," said Adhil Shetty, Chief Executive Officer, BankBazaar.com The funds will be primarily deployed towards technology integration, hiring and strengthening partner relationships and to creating a truly phenomenal end-to-end customer experience in order to grow in the online financial services category as a market leader. The company will also invest to upscale its marketing and branding effort to reach out to a larger number of consumers and create a house-hold financial services brand in India. BankBazaar is also investing in mobile App. The App delivers a more customized, stable and seamless experience to the consumer. The BankBazaar App, available on both the Android & iOS platforms, not only helps consumers get financial products with ease, but also educates them and helps them manage their finances better. "With this fund raise, BankBazaar plans to innovate even more to provide the best and fastest experience for consumers", said Gautam Mago, Managing Director, Sequoia Capital. Since the last round of funding, BankBazaar's business model has evolved. The number of transactions on the platform have grown five times since then. The company is actively expanding its product portfolio and depth of its partnerships in each product line. The company is also focusing on made-for-mobile web service and mobile platforms in order to enable larger connect with the audience. Presently, 40 per cent of the users connect to BankBazaar through smartphones. Additionally, online loan applications across home, personal and auto loans are growing by 90 per cent, compared to 15 per cent growth in offline.
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Dena Bank has cut interest rates to 10.5%, reports Haider Ali KhanDena Bank launched Vehicle Carnival from 1st July 2015 till 31st August 2015 for their customers from JVPD Mumbai on Wednesday. During this period loan will be sanctioned at affordable rates with reduced processing fee. “Dena Bank has set an ambitious target of twenty three thousand vehicles all over India during this period. Customers across India can avail this offer. And if we find the entire necessary documents ready then the loan will be processed within two days” said R.K Takkar, executive director of Dena Bank. He also informed that the interest rates have been reduced from 11.5 per cent to 10.5 per cent and women customer will be charged with 10.4 per cent.
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India has the third largest internet user base in the world, after the US and China, and the country is likely to surpass the US by 2015, says Richard CandayIndia israpidly migrating towards atruly digital economy where businesses must reinvent their delivery channels to provide value to their customers. This phenomenon of digital transformation has impacted the baking and financial sector in a big way. An increasing number of customers are choosing to make their payments online through their computer screens or mobile devices. This stage of connectivity is driving digital payments transformation - the migration of cash payments and plastic card payments to payments made over digital channels, either from digital wallets or through new digital payment mechanisms.RBI Initiatives For A Cashless EconomyIn 2012, RBI proactively envisioned and encouraged electronic payment systems for ushering in a less-cash society in India and to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards. The overall regulatory policy stance was oriented towards promoting a less cash/less paper society, the "green" initiative.Since then, according to a report by IAMAI & PCI, digital payments in India was expected to touch Rs 1.2 trillion by December 2014, a 40 per cent increase from Rs 85,800 crore in 2013, driven by growing internet penetration, growth in e-commerce and the ease of online payments adopted by the tech-savvy populace of India. The market for payments made through digital medium has grown at a CAGR of 10 per cent in between 2010 - 2013.According to latest reports by industry analyst PWC, India has the third largest internet user base in the world, after the US and China, and the country is likely to surpass the US by 2015. More significantly, approximately 74 per cent of Indians own a mobile phone, and prefer the mobile medium of internet access. By 2020 the number of smartphone users are expected to equal the number of active bank accounts in the country.The rising digital economy presents a tremendous business opportunity for banks to tap in to, and private banks are rising to the occasion. In a multi-channel ecosystem, the ability to engage thecustomer through the most relevantchannels has become key to predicting customer behaviour, maximising customer value, and as a result, creating newer and deeper revenue streams forbanks.Reserve Bank of India (RBI) mobile banking data for the month of May 2015 reveals that the top five private sector banks have conducted transactions of close to Rs 1.4 lakh crore, almost four times that of those conducted by the top five public sector banks, based on total value.Challenges GaloreIndustry players have been quick to seize the digital opportunity, with many banks launching their own payment applications that integrate big data analytics with the mobile interface. E-commerce players like Flipkart and Snapdeal have their own payment gateways, and the digital wallets industry is replete with entrants like Apple Pay, Google Wallet, Samsung Pay, Mobikwik, Paytm, etc.As opportunities flourish, a successful digital transformation by banks will require execution excellence, controlled risk-taking, innovative distribution and careful customer relationship management. More importantly, however, it will demand solid understanding of the facets that truly distinguish this market from others and a genuine openness to innovation and building strategic alliances. The world of digital payments is fast evolving and industry stakeholders must take concrete strategic steps to position themselves strongly within it.The author is Associate Vice President - Corporate Affairs at Electronic Payment And Services Pvt Ltd
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It’s always better to lock in funds at current rates to benefit out of the falling interest rates, says Sunil Dhawan At a time when RBI is cutting policy rates thus pushing banks to reduce their base rate which subsequently brings down the fixed deposit rates, there comes the news about bank offering a high interest rate on select deposits. Axis Bank, India’s third largest private sector bank has launched “Fixed Deposit Plus”, a Fixed Deposit scheme which offers a higher rate of return on their fixed deposit compared to regular fixed deposit rates. Few months back, RBI had allowed banks to offer differential treatment to their deposits based on whether they can be withdrawn. If deposits are not allowed to be withdrawn by deposit holders, banks may offer higher rate compared to those deposits which can be prematurely withdrawn. Features: The minimum amount of deposit has been kept at Rs 15 lakh and the duration of the deposit has been kept in between 1 year to less than 2 years. There is, however, no premature withdrawal faculty and amount gets locked –up till maturity. The interest rate on such deposit is 0.1 per cent higher than regular deposits. AXIS Bank currently offers 8.2 per cent on deposits of 1 year to less than 2 years, hence on Fixed Deposit Plus, the rate would be 8.3 per cent. One may open a short term deposit of say 6 months. Interest can be had on monthly or quarterly basis. Presently in banking industry, differential interest rate is offered for deposits based on the amount of deposit. Different banks have their own limits. Few may offer a specific rate for amount up to Rs 1 crore, while others may put it at Rs 3 crore or Rs 5 crore. However, all such deposits can be withdrawn prematurely. On premature withdrawals, there could be a penalty imposed by bank. In case of premature withdrawal, banks typically charge penalty by considering interest rate of 1 percent below the rate prevailing as on the date of deposit. What to do: The interest rates are on the way down. It’s always better to lock in funds at current rates to benefit out of the falling interest rates. Axis bank offer may well see other banks launching similar product with maybe better deal. Such differential interest rate deposits helps in case an investor has surplus funds to be deployed for a short duration of say 3-6-7 months. While most banks would be offering similar rates on shorter duration, getting a marginal higher rate helps. However, make sure you don’t need those funds before that date as premature withdrawal is strictly not allowed.
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India is drawing up a comprehensive package to help state-run banks, Minister of State for Finance Minister Jayant Sinha said on Wednesday, as part of efforts to nurse them back to health and improve the flow of credit to industry. State lenders, which dominate India's banking system, were hit hard by a surge in bad loans after a slowdown in economic growth following the 2008 global financial crisis. Stress tests carried out by the Reserve Bank of India (RBI) showed that gross non-performing assets (NPAs) as a ratio of total loans could rise to 4.8 percent by September from 4.6 percent in March, before dipping to 4.7 percent by March 2016. The last week blamed rising bad loans for making lenders reluctant to pass on cuts in interest rates to borrowers and approve new loans. "NPAs are simply a symptom of the underlying issues that need to be resolved," Sinha told a gathering of private equity investors. "We are preparing a comprehensive package which we will bring out shortly." As part of the package, New Delhi is trying to improve corporate governance and strengthen management at state-run banks, Sinha said. It is also overhauling annual targets for public sector lenders to increase the focus on efficiency. The government has also agreed to inject about $3 billion into the banks this fiscal year and could double that amount next year to shore up their capital. But private analysts reckon the banks need much more. Ratings agency Fitch estimates Indian lenders need more than $200 billion to prepare for the full implementation of new international capital adequacy rules in the next four years. Sinha said he would meet banks over the next two days in Bangalore to fine-tune their capital-raising plans. "We are trying to understand exactly what's their capital requirement going to be in the next one to three years," he said. "We are there to support and provide them the capital." (Reuters)
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