Date:January 22, 2011
Speaker Profile :
GM, IDBI BANK, Head Office, Mumbai
Speaking to the students of KIIT School of Management on, “The Changing Frontiers of Finance” Mr. A Khandual, GM of IDBI Bank spoke about the evolution of Indian banking system. He gave a brief overview of Pre-Independence era banking, Nationalisation of banks in 1969 &1980, and the Liberalisation policy of 1990’s.
Speaking about the changing face of Indian banks, he said that post-1990s, deregulation, advances in technology, the expansion and globalization of financial markets impacted Indian banks dramatically. Banks’ new competitive strategies are having a pronounced effect on products and processes. In the past, many banks thought of themselves as delivering a set of specific, largely unrelated products to different sets of customers. But, in response to the changing environment, banks today are pursuing strategies that aim to strengthen their ability to perform various financial functions – business planning for their retail customers, raising capital for the mid-market segment, tax-related services, selling mutual funds and insurance, among other things. The ability to perform such functions increasingly means offering a range of complementary or in some cases substitute products and services to the same customer.
He showcased the Changing Face of Indian banking, some of the significant changes discussed were:
|Sellers Market||Buyers Market|
|Localized Market||Globalised Market|
|Commercial Orientation||Developmental Orientation|
|Traditional Technology||High based banking|
|Conventional Product Mix||Customized Product Mix|
|Security based lending||Purpose & Viability based lending|
|Statutory Regulation||Prudential Regulation|
Mr. Khandual explained each point in detail so that the students can understand how Banks have no longer restricted themselves to traditional banking activities, but explored newer avenues to increase business and capture new markets.
Formation of Development Banks in India:
Mr. Khandual further discussed the premise of coming up of Development banks. Development banks were set up in India at various points of time starting from the late 1940s to cater to the medium to long term financing requirements of industry as the capital market in India had not developed sufficiently.
In order to perform their role, Development Banks extended funds in the shape of Long Term Operations (LTO) Fund of the Reserve bank of India and government guaranteed bonds. Funds from these sources were not only available at concessional rates, but also on a long term basis with their maturity period ranging from 10-15 years.
He Listed the Functions of Development Bank:
- Increase loans and equity investments for their monetary and social development.
- Provides technical help for the planning and implementation of development projects and programs and for advisory services.
- Promotes and facilitates speculation of public and private capital for growth and development.
- Responds to requests for assistance in coordinating growth policies.
Mr. Khandual also spoke about specialty banking sector services like:
- Asset Transformation
- Information Cost Advantage
- Superior Liquidity
- Transaction cost service
- Maturity Intermediation
- Money supply transmission
- Credit Allocation
- Intergenerational Wealth Transfers
- Payment Service (RTGS)
Mr. Khandual had a piece of advice for the students. He said, “KIIT University is an excellent forum having amazing infrastructure and distinguished faculties which is no less than the IIM’s. It’s just the students out here who have to realise the opportunities and keep pace with the changes happening in the industry.”