Global Challenges In Banking

INTRODUCTIONcover that cost.o Increased capacity due to a new
Financial Sector reforms initiated in the country as atechnology could result excess capacity in the
part of the economic reforms since the year 1991,financial institution.o Another problem banks face with
has brought about revolution in the structure ofimplementation of latest technology is integration of
banking environment. While deregulation has openedexisting system with the new one.o Banks could face
up new opportunities for banks, liberalization hascost overrun or cost control problems.o Innovative
intensified competition in the banking industry bytechnology has brought new risks like daylight
opening the market to new foreign and privateoverdraft risk
sector banks. Declining interest rates and reducedINNOVATIONS IN HOUSING LOANS
lending margins have thrown up new challenges toHousing loans are one of the products that banks are
banks, particularly public sector banks .Banksneed toconcentrating more. The booming housing loans
equip themselves sufficiently to operate in such amarket positively affects many industries. So to
competitive environment .provide impetus to any economy, booming housing
GLOBAL CHALLENGES IN BANKINGmarket is vital. Banks benefit from higher security
1. Enhancement of customer service.,low risk weights and reasonable margins.
2. Innovations in technology.RISK MANAGEMENT
3. Improvement of risk management systems.Globalisation and liberalization are forcing banks to
4. Diversifying products.take more risk to compete effectively in the global
Globalisation challenges are not restricted only tomarket place. One of the important risks is
global banks. Banks in India also need to face them.compliance risk. It is the risk to comply with laws,
Overcoming these challenges makes them morerules and standards such as market conduct, treating
competitive and will also equip them to launchcustomers fairly, etc. To mitigate this risk, banks
themselves as global players.should develop compliance culture in their organization.
COMPETITIONIt is not only the duty of compliance specialists, but
Globalisation has brought fierce competition frombanks can also manage compliance risk by putting in
international banks. In order to compete with newplace compliance functions that are in consistence
entrants effectively commercial banks need towith compliance principles.
posses strong balance sheets which indicate the realLiquidity risk arises when banks unable to meet their
strength of the bank. The entry of new privateobligations when they become due. To manage the
sector banks and foreign banks equipped with latestmismatch of assets and liabilities, banks should
technology and technology -driven product lines haveanalyse the accounting data both on static as well as
really sensitized the ordinary customers of thedynamic basis. Deposits of higher value are the most
banking services to the need for quality in terms ofimportant item to be monitored regularly, as sudden
innovative products as well as delivery processwithdrawal of these deposits might cause liquidity
These banks are aggressively targeting the retailproblem for the bank. Also incentives to these
business and consequently grabbing the market sharedeposits in the time of falling interest rates could
of public sector banks.create strain on liquidity.
ELECTRONIC BANKINGINNOVATIONS IN CUSTOMER SERVICES
In the future, banking will be driven more ofSatisfied customer is the best guarantee for stability
technology and telecommunication systems. Aided byof the organization in the long-run. Banks can satisfy
improved telecommunication and technology, Publictheir customers only by providing customised, cost
sector banks have made rapid strides in producteffective and timely services .With the help of
innovation and delivery, thereby improving quality oftechnology banks are able to provide plethora of
customer service. Technological changes haveproducts and services to their customers which suit
brought about paradigm shift in the process today'sthem. Major services provided by the Indian banks
banking may be redefined as 'Triple A.'that are of international standards are Any time
banking-anytime anywhere, anyhow banking .Internetbanking, Anywhere banking, Global ATM and Credit
banking will enable three profit centres, namelyCards, Internet banking facility etc.
treasury, corporate banking and retail banking, toCONCLUSION
launch new products and provide quality service to aGiven the new environment, Indian banks can't
wider customer base.remain unaffected by the changes round and
TECHNOLOGYchallenges before them. Therefore Indian banks need
With the help of innovative information technology,to restructure themselves. The following practices
banks are able to reduce the transaction cost andneed to be adopted on urgent basis;o Greater
handle a large number of transaction in no time. Nowprofessionalism.o Greater emphasis on diversification
banks can provide customized products easily andand sources non interest income.o Consultancy
customers could access many services throughservices.o Equipping themselves to operate in the
internet by sitting at home. To provide betterderegulated environment.o Necessary changes in the
services to their customers, banks are embracinglegal stipulations.o Cost management.o Bench marking
Customer Relationship Management [CRM] facilitatedof service standards to improve productivity and
by the availability of conductive technology.Proficiency.o A self- regulatory organization to
Innovation is technology is also helping banks to crossmonitor the activities of banking
sell the products of insurance and securities firms,With the increasing levels of Globalisation
which are swelling their fee-based income in the totalLiberalisation, Privatisation and new reforms of the
income.Indian banking sector, competition will intensify
Innovative technology not only brings benefits, butfurther. Therefore, the banks who understand the
risks too. Major impediments and risks associatedmarket dynamics, perceive threats, anticipate
with the implementation of innovative technologyvolatility, show high degree of professionalism and
are;o Cost associated with adoption of newdynamism in their functioning and respond promptly
technology might not bring cash flows required toto the market needs would survive and prosper.