Fuelling growth

Prospects, challenges and the road ahead

The country's banking industry looks set for greater transformation. In the next 5-10 years, the sector is expected to create up to two million new jobs driven by the efforts of the RBI and the Government of India to expand financial services into rural areas.

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In this report, Fuelling Growth: Prospects, Challenges and the Road Ahead, we look at the role of banks at a time when the economy is at the crossroads, emerging from a deep slumber and ushering in a new phase of growth. While there is no denying the fact that there is a long standing and pent-up demand and, sooner or later, the economy is set for a rebound and take its rightful place in the world order, we should be mindful of the issues and problems created over the last such growth phase, the tremors of which can be felt even today. And, hence, this supports the need for continuing structural reforms.

The relentless push from the banks in the past to expand business led to a breach in their risk management systems and subsequently, increased regulatory focus on improving such systems as well as increased compliance risk and regulation costs. With economic recovery on the horizon, the demand for credit is set to witness a dramatic increase once again in the coming years and therefore, a more robust risk management would be critical in minimizing any fresh slippages or adverse movements in asset quality without deterring the impending growth.

Moreover, the banks need to exhibit that they have indeed learnt from their past mistakes and use a proactive approach to address issues related to asset quality. This would help in overall reduction of stressed and non-performing assets, enabling the banks to participate in the next phase of growth with a cleaner state. Besides, a well-defined and effective customer on-boarding process would greatly simplify and streamline the on-boarding process helping the bank from both business and well as regulatory point of view, improving its efficiency and effectiveness as well as overall customer experience.

These topics are discussed in greater detail, and some new ideas are presented in this report.

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