BANK’S BUSINESS; Few Suggestions. Part…..3.

In part 1(BANK’S BUSINESS; Few Suggestions. PART….1) and 2(BANK’S BUSINESS; Few Suggestions. Part….2) of the blog, different suggestions were put forth for the banks for improving the health of their institutions. Three remaining suggestions are discussed here under:-

  • Creating different layers of income

Banks shouldn’t depend on only one type of income i.e from interest on loans and advances. They have now many other fields available for creating different layers of income such as (1) Bank insurance (2) Selling of mutual funds (3) Trading of shares          (4) Providing Depository services to clients(financial services for clients) (5) Making treasury operations more efficient (6) Better cash management (7) Providing fee-based services to various Govt. departments, institutions and Corporates for collection taxes, fees or their bills (9) Providing cash management services to big religious trusts, Corporates, railways, airlines, and metros etc.(10) Providing consultancy services for different activities (11) Providing non-fund based facilities such as letter of credits and bank guarantees (12) Acting as bankers to The Issue and underwriting the Issue of shares etc. etc.

Earning income is important but plugging its leakages by exercising effective control over all types of capital and revenue expenditures too is very important. ‘Spend where necessary but strictly avoid wastage’ is a mantra for an efficient control system on revenues.

All these services are very lucrative but require properly trained and dedicated manpower to handle these portfolios.

  • Training and upgrading of knowledge.  

Providing proper training and upgrading of knowledge of the staff at the operational levels is very necessary. It is generally observed that the staff doesn’t take the training seriously and consider deputation to training as a pleasure tour on paid holidays. This concept/notion is very dangerous. Providing training to staff is a very expensive exercise and in addition to heavy expenses, it takes a toll on the quality of services which get affected during the absence of the concerned staff from their active duties. We all know that it is only the men in the armed forces who take their training very seriously because they are aware of the fact that they would be the first to suffer the consequences of not taking the training seriously.

Both these aspects of heavy expenses and non serious attitude towards training can be taken care of by following the ‘DEEP SE DEEP’ model of providing training. There is no dearth of prime training institutions in the country and abroad. A few intelligent officers from the senior scales can be deputed for training to a particular institute for training in a particular field with a clear understanding and instructions that they will follow the schedule of training very seriously, have discussions with the experts who provide training in order to remove doubt if any and come well prepared to impart the same training to other fellows in the bank on their return. These officers so trained be required to impart training to other staff members in batches at the bank’s own offices/Premise/training centres in the evening for a few hours. The staff so trained will have to follow the same routine of providing training to other staff and so on. This model will save expenses, make the trainees accountable and experts, and create in-house expertise in many fields of activities. This will also create a lasting bonding amongst various cadres of staff as well as a sense of belonging for the institution. Bank’s training centres can be made self-sustaining and income generation  units by providing training to staff of other banks in specialised fields at a suitable cost/fees.

  • Customer meets with higher level executives.

A good leader is a good listener. People want to be listened to. They feel relieved and delighted once they are listened to. They feel that they are cared for and are important. Bank’s top brass should therefore not ignore this aspect of public feeling at any cost and shouldn’t feel shy of holding customer meets and face criticism if any with a good spirit. This creates long lasting bonds with clients as they feel that they are important. Any cutoff from the masses is suicidal for the banks. Banks, therefore, need to remain in touch with their customers, listen to them and implement the good suggestion forwarded by them.

BANK’S BUSINESS; Few Suggestions. PART….1

Banks these days are under tremendous pressure for mobilizing resources as well as for credit dispensation in social as well as in other financial sectors. A very simple definition of banking is, ‘ TAKING MONEY, GIVING MONEY AND MAKING MONEY’. Banks don’t have their own funds. They take it from the public, lend again to the public, and in the process make money for themselves. They have to ensure that the procedure of running the bank is safe, secured, and a win-win situation for all the stakeholders. Seven things are very important for the banks to run their business in a secure, profitable, and growth-oriented manner;-

  1. A sound resource base.
  2. A proper credit dispensation under well-trained staff (Bank’s NPAs. Causes and Remedies). in a  secured, lucrative, and risk-free market.
  3. A robust follow-up and effective recovery. management system. Management of NPAs -Some recovery techniques.
  4. An intelligent inspection and supervision control DEFECTS IN BANK AUDITS AND INSPECTIONS system.
  5. Non banking/para-banking activities for creating different layers of income.
  6. A systematic system for training and skill development of staff.
  7. Regular contact with the client/public and listening/understanding and appreciating their point of view for a better brand building.

For creating resources Banks try to attract deposits from the public by tailoring different products suiting the capacity, requirement, and affordability of the public. Various products are made by the banks with an eye on a particular segment of society. Fixed deposits with different maturities for those who can afford to deposit fixed sums for a fixed period of time. Monthly deposits for those who can’t afford a fixed sum but can spare a comparatively lesser amount every month. Schemes for pensioners, senior citizens, Students, girl child, salaried class, industrial workers etc. etc. Current accounts for the business and trading community. Saving accounts for general savings etc. etc.

Although scores of schemes for resource mobilisation are launched by the controlling offices yet at the operating level only a few traditional schemes are given preference and the rest find a very little attention, with the result that many target groups remain untapped. Operational level, therefore, needs to focus on all the schemes and try to sell all the products available in their kitty. They should fix scheme/products wise targets of all the products launched by the bank. Staff members should be assigned individual targets of all such schemes and the controlling office should keep an eye on such programmes and encourage staff in meeting their targets

There are some very attractive schemes especially for salaried persons, professionals, self-employed, students, and even the business people who can accumulate wealth by taking benefit of monthly deposit schemes which unlike the saving bank account which has a very low rate of return. These schemes have yields available for the term/fixed deposit. Even the last few installments in such accounts attract the higher rate of interest equivalent to that of fixed deposits. For example, if a normal branch by its concerted efforts opens 1000 such accounts in a year with an average monthly deposit of Rs.5000 per month will mobilise 6 crores of rupees in one year. The figure will go up to 18 crores in 2nd year if another 1000 accounts are added in that year, If the same momentum of opening 1000 account with an average of Rupees 5000 per month is maintained for five years, the deposit growth would go to 36 crores in the third year, Rs.60 crores for the 4th and Rs 90 crores for the 5th year. A normal bank with say 1500 very effective branches will this way mobilize resources to the tune of Rs.135000 crores in just five years. Is not this growth pattern most attractive? and does this not deserve to be paid very focussed attention at all operating levels?.

For the promotion of all such schemes, all that is needed is awareness amongst the staff which further to be spread amongst the public by organizing awareness camps, special deposit mobilization fortnights with individual targets for all the staff members who have to work as a team. Rewards and appreciation letters can be offered to the staff for exceeding their targets as well as for topping in their district. or zone or in the bank as a whole.

Newspaper or other paid media advertisements are a costly affair and the public doesn’t pay much heed to such advertisements. It is advisable to distribute printed pamphlets to the public during awareness camps, through the services of newspaper vendors and also by talking to walk-in customers. A WORD OF MOUTH IS MORE EFFECTIVE THAN A WRITTEN PASSAGE.

One thing lacking in the modern time branches is proper visibility of the products in the shelf of the banks for its clients/public and the rates at which these are available. We presume that the client or the public knows everything but the fact remains that the sale persons at the counters themselves are not aware of the products available in their stores and their attractive features themselves. This needs serious remedial action by the main leadership of the banks………….(To be continued in part 2)










Banks are the true agents of development of any economy. They have played a vital role in the overall development of economies world over. Although overall development did happen but the spread of the same is not even all along, which has resulted in uneven income in different sectors and areas. The distribution of credit, therefore, needs to be rationalized in such a manner that the benefits of the same reach out to all across the areas as well as sectors and activities.

Banks have always shied away from lending in rural and undeveloped or underdeveloped areas and sectors despite a lot of directions from the regulators as well as from the state. This is due to the fear of losing money because of the nonviability of the proposed units and schemes in these areas. Lack of proper infrastructure in rural and underdeveloped areas is mainly responsible for the poor growth of the economy in these areas. The prime reason for poor lending in such areas is lack of infrastructure which makes the projects and schemes less viable and hence does not attract bank’s attention.

Now that lot of infrastructure has reached the rural and less developed areas. There are better power availability and better road connectivity, transport, and markets in the rural areas though not as better as in the cities but there is a great push to provide more and improve the existing facilities in these areas. Banks too have opened their units in these areas. The only problem is that banks are mobilizing resources from these areas and passing on the main part of the same for investment in other areas or to their controlling offices for deployment elsewhere. The required purpose of opening branches in such areas, therefore, gets defeated by siphoning out the resources from underprivileged areas to the better-privileged areas thereby further widening the gap of development in different areas. In order to ensure the equal level of development across all the regions, the norms for the calculation of credit-deposit (CD) ratio need to be redrawn/modified. Following suggestive measure may be of help to plug the loopholes in the system:

  1. To start with block should be considered as a unit.  For the calculation of CD ratio, all branches of different banks operating in a block be made to meet the mandatory CD ratio of 60% individually. Only that part of credit which has been utilized within the limits of the block should be taken for the calculation of CD ratio for the block. These ratios should be monitored at the Block level. The block-wise unit size may be carried over to Panchayat level after some time.
  2. Branches of a bank who in order to meet the requirements of CD ratio exceed the limits of the block and deploy funds in other blocks, or for the units in urban areas or industrial areas in other blocks. All such branches of banks should be imposed with a penalty of 1% on the interest earned on the amount of loan allowed in areas beyond their block and 2% on the interest of the part of finance in urban or an industrial area in other blocks.
  3. In order to encourage branches in the metro, urban, and semi-urban areas to fund units in rural and underdeveloped areas an incentive of 2% be offered provided 80% employment in such units is given to the locals of the block in which such financing is done.
  4. Foreign banks who have branches in metros only should also be made to contribute to the development of underdeveloped areas and sectors as per the rules of engagement with them. The Incentives proposed above may also be provided to such banks also.
  5. The amount of penalty and incentives stated above to be routed through a special fund which may be called ‘ Level Development Fund’ (LDF). This fund may be maintained by the coordinator of the State level bankers committee of the concerned state. Any shortfall at any time in this fund to be made good by the concerned state govt. The incentive to be provided or penalty to be imposed be calculated quarterly basis on the figures of 15th of the last month of each quarter in order to avoid artificial fluctuations on account of any window dressing to which the banks generally resort to in order to show better figures in the balance sheets on the  closing date of the respective quarter.
  6. In the case of consortium financing, the amount financed by the respective member banks of the consortium will be treated as financing in the block in which the unit so financed is located and not the block in which the financing branch is working and the penalty would accordingly be levied.  The location of the unit is to be considered and not the location of the controlling or administrative office of the unit.
  7. In case of income or commission earned out of nonfund based business such as a letter of credit or guarantees of any type, the penalty and incentive of 1 or 2% as the case may be, will be imposed under the similar circumstances of exceeding or entering in the jurisdiction of the block as discussed above.
  8. Penalty once charged is to be nonrefundable and no claim of any type to be entertained on any pretext such as the account becoming an NPA for any reasons.
  9. Any shortfall in the amount required to meet the mandatory requirement of meeting 60% CD ratio by any branch of a bank in a block to be kept in RIDF with NABARD at the prescribed rates.
  10. Branches of the banks in any block may divert funds after meeting the mandatory CD ratio of 60% in the block in which they are functioning for deployment anywhere as per their choice. However, in case they exceed CD ratio for financing within the block where they are functioning, they shall be given an incentive on the interest on the additional amount at 1%.

The CD ratio should be ensured to be maintained at the mandatory level by each branch of a bank block-wise, and by the respective banks district-wise, region wise, and state-wise. Inter-region and inter-state financing to be excluded for the purpose of calculating respective CD ratios. Suitable penalty as proposed above to be imposed on such lending. This would discourage flight of resources from the concerned areas to the other areas and ensure a level development of all areas and sectors.

In the present as well as during the future times the lucrative market for financing is in the rural areas as there is a lot of money and market in that sector.


Banks at present are under tremendous stress because of ever-rising nonperforming assets (NPAs) and huge frauds which have taken a big toll on their profits, thus resulting into deterioration in their balance sheets as well as the brand image in the eyes of the public. Under these testing times, Banks are facing huge challenges which need to be faced with courage, maturity, dedication, hard work and tact. The challenges at present are enumerated as under:-

  1. The health of the Banks:-  The mounting NPAs, losses due to big frauds and continuous increase in operating expenses due to periodic increase in various types of variable costs such as salary, fuel, rent, and boarding lodging expenses are a big challenge for the banks to meet. These are a serious threat to the overall health of the banks. Concerned with this trend The Indian Banks Association (IBA) has offered a shockingly meager increase of only 2% to the bankers during the negotiations for the revision of their salary. This may be a cruel joke with the bankers but it speaks volumes about the health of the banks.
  2. Keeping the flock together:- Under the stress on resources, the workers get demoralized and start losing interest in the institution. Some may try to change job or search for the greener pastures. Only a team with high moral and a deep sense of belonging (A SENSE OF BELONGING)can keep the institution strong. This challenge needs a good and inspiring leadership at the top who could keep the flock together by providing guidance, hope, and good future to the stakeholders.
  3. Maintaining a sustainable growth:- With the graphs showing downwards trends, it is becoming difficult to manage growth in face of the tough national and international competition. All high-value proposals of multinational companies are taken by foreign banks who provide them credit at very cheaper rates because their cost of funds is very low. They can afford to give loans at thinner spreads and still make handsome profits because of high volumes and low cost of transactions. Because of reduced interests on deposits, the depositors are not attracted towards banks as in some cases, the net interest income after payment of income tax doesn’t cover the cost of inflation. Added to this is the fear in minds of the depositors about the introduction of a new law about bail-in in the banking sector, which though has been put on the back burners but people still have a fear in mind that the ghost may reappear at any time. They ponzy schemes and the crypto currencies like the Bitcoins have taken a big toll on the deposits of the banks. In view of stress on resources,  the banks are unable to fund large proposals.
  4. In-cumbersome procedures:-The age-old procedures of processing proposals with a lot of paperwork especially for the small traders and businesses and other small loans, discourage the perspective loanees from coming forward. Although some progress has been made in simplifying the procedure yet a lot needs to be done in order to attract customers.
  5. Comparatively Smaller unit size and strength of Banks:- Barring very few banks like State bank of India, the size, strength, capital base, and technological exposure of our banks is no match with the foreign banks. With the globalization and the world becoming a global village, our banks have to compete with the foreign banks. This is not possible unless we match their strength as well as the cost of operations.
  6. Diminishing of the physical interface:- With the introduction of technology in the banks, there is less interface with the customers as most of the transactions are done through the internet, mobile, or online banking, as is done in the foreign countries. Our culture, traditions, and behavior are different from theirs. Face to face interaction has an element of emotion to which we are used to, and the absence of which creates dryness in the relationship. With the increased size of business as well as the number of customers, it may be difficult to keep interface contact with them.
  7. Replacing the outdated technological infrastructure:- In order to match the competitors, the technological infrastructure needs to be updated or replaced with the more sophisticated and efficient one. This may not be economically feasible for the weak banks but in the face of competition and to ensure sustainable growth it becomes imperative to go for it. To stay in the market, an appreciable increase in the volume of business can only take care of the cost factor involved in the upgrading of electronic infrastructure. Only big volumes can reduce the cost of the transaction. The recent case of heavy costs incurred by banks while replacing the currency note holding trays of lakhs of ATMs, when the Govt. introduced new currency notes in place of old notes of different denominations is a live example of updating technology under compulsion in order to stay active in the market.
  8. Strengthening of internal controls:- In view of the rising NPAs and incidences of frauds, the strengthening of internal controls (DEFECTS IN BANK AUDITS AND INSPECTIONS) at any cost has become very urgent. The recovery of NPAs and strengthening of internal controls, management audit, effective inspections and audits of all operational activities, and forensic audits may add costs to the already burdened banks but there is no escape and must be activated in a mission mode in order to regain the public confidence.
  9. Skill building and succession planning:- Advance training in specialized fields and skill upgrading of staff is need of the hour. Gone are the days when banking was every body’s job and bankers used to be a jack of all trades but masters of none. Now with a lot of advancement in the banking field, new innovative ideas are the order of the day in order to beat the competition and the challenges. Value addition to banking products with fine packing and branding which may suit the tastes, requirements, and choices of the customers have to be tailored in order to stay ahead in the competitive atmosphere. A robust and sustainable succession planning must be done at least for the next two decades and which may be reviewed and upgraded periodically.
  10. Setting up an advisory for the clients and brand building:- The Brand building is a long and continuous process. Successful leaders have built successful Brands which have resulted in heavy returns for their businesses. A product can be easily copied by anyone but a brand can’t be copied. Banks need to attract more clients by providing them with the products suitable to their requirements and choice. The markets and businesses now are not protected against competition from across the international borders especially after the signing of the world trade agreement. Now only the strongest,  the fittest, and those who can afford to adopt a change can survive; others are bound to vanish from the scene. Under such circumstances, banks are bound to suffer losses as their products are exposed to greater risks. This is one of the reasons for a spurt in the level of NPAs of banks in the last few years.                                                                                                                                           THIS IS A BIG CHALLENGE FOR THE BANKS AND FOR MEETING THE SAME BANKS NEED TO PROVIDE EXPERT ADVICE TO THEIR CLIENTS AND FIND SOLUTIONS FOR THEIR SURVIVAL. BANKS NEED TO ESTABLISH ADVISORY WITH EXPERTS WHO COULD PROVIDE SOLUTIONS TO THEIR CLIENTS FOR SURVIVAL. The upcoming of big Malls, online shopping through big international giants like AMAZON, ALIBABA, FLIPKART, SNAPDEAL etc have adversely affected the retail market in the country. In order to compete with these big sharks, the retailers have to come up with a matching model of business in the market. Banks have to come up with new innovative models for their clients in their own interests.
  11. Retaining the existing clients:- In view of the tough competition in the sector, banks have a big challenge ahead in retaining the existing clients not speak of adding more to their kitty. The clients have various options and opportunities available to them, so the banks need to ensure that none of the good clients slips out of their grip. Gone are the days when there used to be a customer loyalty and attachment with their banks. Now the customers change banks more often than their vehicles. A regular contact with the customer/ holding customer meets by higher executives whose words and decisions matter need to be organized in order to create more confidence and bonding with the customers. Good leaders are good listeners and people love to be listened to. Promoting and advertising of banks products is very necessary. One of the cheapest ways to promote and advertise banks products is to feed their salient features as caller tunes into thousands of the mobile phones of staff members. In addition to products, the caller tune can be made to contain a mission or a brand promoting song. 

Good leaders have the tact and the wisdom to convert their weaknesses into their strengths and challenges into opportunities. All that is required is a strong will, dedication, a deep sense of belonging to the institution, and a good team of dedicated staff.

OPPORTUNITIES:- While there are big challenges, there exist equal opportunities also. Some of the opportunities available to banks are…..

  1. Big market and big population:- The size of the market is fast increasing and in order to meet the requirements of the second largest population of the world, which is increasing by 20 million souls every year, ample opportunities are becoming available  to the banks to finance in all sectors, may it be agriculture, horticulture and allied, industry and manufacturing, trade and services, infrastructure, mining, shipping, transport, power, tourism and so on. In addition to this, banks have the opportunities to go for business beyond the international boundaries as the entire world is open to them for doing business. All that is required is strength and will.
  2.  The country still not fully developed:- The country is still not fully developed and there is a lot of scope for investment in almost all sectors of the economy. Still, we are calling for FDI in various fields for economic development. Banks need to enlarge their capital and size to substitute the FDI. There is no dearth of opportunities, banks need to redraw their working models suiting the economic activity and matching the foreign banks.
  3.  Advisory services:- With the advent of an open economy, there is a need to change business models in almost all sectors. Banks can provide services for providing training to clients in order to take up new business models and earn some fees and attract customers. This is already being done on a small scale by banks and govt. like some awareness programs for artisans, farmers, and agriculturists etc. EDP(entrepreneurship development programs) are conducted by EDI in the country where banks can participate and attract young budding entrepreneurs.

Money blocked in NPAs and loss assets:- There is a lot of money blocked in NPAs and loss assets on account of money lost in frauds and for which banks have already made provisions out of their incomes. These block of funds are in a way HARD AND A LITTLE TOUGH MINES of reserves for the banks. Any recovery from these heads adds to the income and overall health of the banks. These reserves must be tapped by effective recovery techniques (Management of NPAs -Some recovery techniques.) and maximum effort needs to be made to address further slippage to this category. (Bank’s NPAs. Causes and Remedies.)

Rod and reward:- Banks must not spare the rod wherever required and should not become a miser while promoting the talent and rewarding the performers.

Challenges make one more strong. Challenges provide an opportunity to face hard situations and increase one’s self-confidence. They provide an opportunity to prove your will and strength. A nation becomes strong only when it faces challenges and so are the banks. Banks have to take these challenges in the right perspective which ultimately will change their fate.