The Future of Bank

A healthy banking system is essential for any economy striving to achieve good growth and yet remain stable in an increasingly global business environment. The Indian bankingsystem has witnessed a series of reforms in the past, like deregulation of interest rates, dilution of government stake in PSBs, and increased participationof private sector banks. It has also undergone rapid changes, reflecting a number of underlying developments. This trend has created new competitive threats as well as new opportunities. This paper aims to foresee major future banking trends, based on these past and current movements in the market.

Given the competitive market, banking will (and to a great extent already has) become a process of choice and convenience. The future of banking would be in terms of integration. This is already becoming a reality with new-age banks such as YES Bank, and others too adopting a single-PIN. Geography will no longer be an inhibitor. Technology will prove to be the differentiator in the short-term but the dynamic environment will soon lead to its saturation and what will ultimately be the key to success will be a better relationship management. OVERVIEW.

If one were to say that the futureof banking in India is bright, it would be a gross understatement. With the growing competition and convergence of services, the customers (you and I) stand only to benefit more to say the least. At the same time, emergence of amultitude of complex financial instruments is foreseen in the near future (the trend is visible inthe current scenario too) which is bound to confuse the customer more than ever unless she spends hours (maybe days) to understand the same. Hence, I see a growing trend towards theimportance of relationship managers.

The success (or failure) of any bank would depend not only on tapping the untapped customer base (from other departments of the same bank, customers of related similar institutions or those of the competitors) but also on the effectiveness in retaining the existing base. India has witness to a sea change in the way banking is done in the past more than two decades. Since 1991, the Reserve Bank of India (RBI) took steps to reform the Indian banking system at a measured pace so that growth could be achieved without exposure to any macro-environment and systemic risks. Some of these initiatives were deregulation of interest rates.