The last year of the decade is ending with dramatic changes in the banking sector. From the amalgamation of banks to the liquidity crisis, and low credit demand to the gigantic defaults.
Bankers went through many changes and challenges. Will the situation change in 2020? Will banks turnaround in 2020? What will drive the Indian banks in 2020? How will be the Banking jobs in 2020 be? What will be the opportunities and challenges for banks in 2020?
Here is what ETBFSI has discovered.
According to Chinese Zodiac, 2020 is an interesting number and bankers are hoping that it will be a special year because they have taken the toughest decisions last year, and the result is awaited in 2020. Whether it is keeping high provisions, controlling liquidity, not taking any exposure in NBFCs, or adopting new technologies.
2018-19 was the year of hope and FY21 will be a year of happiness, said Rajnish Kumar two years back. In a recent interview with ETBFSI, Rajkiran Rai, MD&CEO of Union Bank CMD said, “2020 will be positive. We have already hit the bottom.”
1. Rise of Credit Growth —
According to a BCG report, retail banking will grow rapidly in 2020. Mortgages to grow fast and will cross Rs 40 trillion by 2020. But currently, the credit demand is low on both corporate and retail sides. RBI has assured that India’s financial system is stable despite weak growth and projected that demand will rise in 2020. But according to ratings agency ICRA, the credit growth in 2020 will be 50 years low. Major sectors such as auto, real estate are down and banks took cautious calls by preserving the liquidity. What gives hope in 2020 is that the government’s affordable housing scheme, reduction in corporate tax, GST tax revision, RBI’s 134 bps rate reduction and finance ministry’s push to empower bankers. This will certainly help to boost credit growth.
2. Recovery from Bad Loans:
IBC & NCLT — Bankers will carry the baggage of bad loans in 2020 as well. IBC has made debtor responsible and bankers are feeling strong like never before. Despite being a special law and deadline to close the cases, resolution is not easy. Currently, as per NCLT data, more than 10 thousand cases under IBC are pending before NCLT.The backlog of NCLT will continue in 2020 as well. In a lighter note, Rajnish Kumar of SBI once said, that every morning he prays to god to resolve the three large accounts that are stuck at NCLT. Kumar was referring to — Essar Steel, Bhushan Power & Steel, and Alok Industries — where SBI is expected to recover Rs 16000 crore. If there are more defaults, more cases will be filed in NCLT and Banks will not have any other option but to wait and pray for the resolution.
Merger execution and stake reduction — Amalgamation of PSBs was one of the bold decisions that the government took in 2019. They merged 10 banks into 4 and the total number of PSBs reduced from 27 to 12. Financial experts have supported the idea of merging banks but the question is how will they execute? The government has recapitalised banks but the change in management, infrastructural issues, transfer of senior officers are still in the process. Also, the government is very slow in recruiting the heads of the PSB’s. What is more important to see in 2020 is how the execution of the merged banks pan out. What will also drive the PSBs in 2020 is whether the government reduces its holding in PSBs to 51%.
4. Private banks:
Building business — Private banks, too, went through challenging times. Major private banks such as ICICI Bank, Axis Bank, and Yes bank went through a big reshuffle. All three banks got new CEOs. Also, the CEO of HDFC is going to retire in 2020. Every private bank has a different story. In 2020, it is crucial to see how do they deal with the NPAs, raise funds and generate credit demand. The major challenge for the new management in the banks is to make a sustainable and profitable business.
5. Improving Customer Service —
For bankers asset story is painful, hence they are focussing more on deposits. In 2020 bankers will have to find innovative ways to attract customers and more importantly improve their customer service. Bankers are already using fancy words such as, ‘customer delight’, ‘customer experience’ to attract customers, better they adopt the same.Customers expect banking should be as seamless as booking a cab on Uber and ordering food on Swiggy. Most of the banks are trying hard to build innovative UI and UX for their mobile apps. In 2020, retail banking will be driven by customer service.
6. Innovations in 2020 —
Banking and the financial sector is the flag bearer of tech innovation. From payment transfer to obtaining the loans is quite easy on mobile apps today. In 2020, tech innovation in banking will significantly focus on voice and video banking. Currently, bots are being used to serve the customers but they are still not up to the mark. Experts believe most of the technologies will mature in 2020. Especially on the technology front, Open API will be well accepted in the banking sector in 2020. Also, Data and Analytics, Artificial Intelligence,Cognitive Technology,Blockchain Technology, Robotics Process Automation will be widely accepted by banks and financial institutions.
7. Collaboration and partnerships —
FinTechs made a big difference in banking and finance space. Initially, there was a fear that FinTechs will eat banks’ lunch. But gradually FinTechs have began partnering with banks. Almost all the banks have partnered with FinTechs. FinTechs are bringing in the innovation that banks couldn’t. In 2020 banks will collaborate and partner with market forces starting from FinTechs to E-commerce players for different segments of their businesses.
8. Regulations —
RBI has already issued guidelines for regulatory Sandbox and ‘on tap license’ and payments. In 2020, new companies will enter payment, small finance bank, and FinTech space. Regulators’ agenda is last-mile connectivity and financial inclusion. Considering the Fraud at PMC bank, RBI has also decided to keep a watch on UCBs. Europe’ challenger bank model and Neo banks like Xinja and N26 are rising. RBI may think about it.
9. Cybersecurity —
One of the major worries for any bank is cybersecurity. After Cosmos Bank lost Rs 90 crore in a cyber attack, all have become more watchful. According to survey, every minute some 100 people are hacked globally. Hackers are using the most innovative tools to attract customers. In 2020, the biggest challenge for banks is to protect themselves and their customers from cyber frauds.
10. Banking Jobs —
Job market is hit by the economic slowdown largely but jobs in the banking sector will remain intact. In 2020 thousands of PSB employees will retire and new positions will be opened up. Also, private banks such as Axis bank, HDFC bank are expanding aggressively and will have new positions to fill up. Along with the routine positions, banks are also hiring aggressively for data scientists, AI engineers, RPA experts, etc.