#bankingoperation

The banking sector needs to strengthen corporate governance and risk management practices to deal with the uncertainties created by the coronavirus pandemic, the Reserve Bank said on Tuesday.

With rapid technological advancements in the digital payments landscape and emergence of new entrants across the FinTech ecosystem, banks would also be required to prioritise upgrading their IT infrastructure and improving customer services, together with strengthening their cybersecurity.

"Banks would need to strengthen their corporate governance practices and risk management strategies to build resilience in an increasingly dynamic and uncertain economic environment," the RBI said in its report on 'Trend and Progress of Banking in India 2020-21'.

It further said although credit offtake by banks remained subdued in an environment of risk aversion and muted demand conditions during 2020-21, a pick up has started in the second quarter of 2021-22, with the economy emerging out of the shadows of the second wave of COVID-19.

"Going forward, revival in bank balance sheets hinges around overall economic growth which is contingent on progress on the pandemic front," it said.

However, banks would need to further bolster their capital positions to absorb potential slippages as well as to sustain the credit flow.

In a nutshell, the report said, "the Indian financial sector is standing at crossroads: while the immediate impact of the fallout of COVID-19 will dominate the short-term, larger challenges relating to climate change and technological innovations will need a carefully crafted strategy".

The Reserve Bank emphasised it will endeavour to ensure a safe, sound and competitive financial system through its regulatory and supervisory initiatives.

During 2020-21, the consolidated balance sheet of scheduled commercial banks (SCBs) expanded in size, notwithstanding the pandemic and the resultant contraction in economic activity.

In 2021-22 so far, nascent signs of recovery are visible in credit growth. Deposits grew by 10.1 per cent at end-September 2021 as compared with 11 per cent a year ago, the report said.

"SCBs' gross non-performing assets (GNPA) ratio declined from 8.2 per cent at end-March 2020 to 7.3 per cent at end-March 2021 and further to 6.9 per cent at end-September 2021," the report said.

On recapitalisation requirements after COVID-19, the RBI said that based on the capital position as of September 30, 2021, all public and private sector banks maintained the capital conservation buffer (CCB) well over 2.5 per cent.

"Going forward, however, banks would need a higher capital cushion to deal with challenges on account of the ongoing stress experienced by borrowers as well as to meet the economy's potential credit requirements," it said.

The apex bank also stressed that concerted strategies for timely capital infusion need to be carried forward by the banks.

HDFC Bank has tied up with India Post Payments Bank (IPPB) to offer its banking services to the unbanked and underserved segments in semi-urban and rural areas.

A memorandum of understanding was signed between HDFC Bank and IPPB to cater to the majority of over 4.7 crore customer base of IPPB.

About 90 per cent of IPPB customers reside in rural areas, which may benefit from this tie-up.

HDFC Bank said the strategic alliance will enable IPPB to provide affordable and diversified offerings, including access to finance, to its customers through its innovative Doorstep Banking Service.

With nearly 2,00,000 postal service providers (Postmen and Gramin Dak Sevaks) equipped with micro ATMs and biometric devices, IPPB caters to the needs and requirements of various customer segments.

With this partnership, HDFC Bank aims to further strengthen its financial inclusion drive by leveraging the robust and extensive distribution network of IPPB's 650 branches and over 136,000 banking access points across India, the bank said on Monday.

"By bringing banking at the doorsteps of customers, IPPB is steadily transforming and reshaping the financial inclusion landscape across the country.

Our endeavour is to build a unified platform offering various citizen-centric services, including credit, at the doorstep by leveraging digital technologies and alternate data sources in collaboration with lending partners," J Venkatramu, Managing Director and CEO, India Post Payments Bank, said.

Smita Bhagat, Country Head GIB, CSC, e-Commerce, Start-ups and Inclusive Banking Initiatives Group, HDFC Bank, said the bank has been championing the cause of financial inclusion through several initiatives and this partnership is one more step in that direction.

"This alliance will allow us to take our best-in-class products and services to millions of IPPB customers in the remotest corners of India," Bhagat said.

The private sector lender said it is a significant tie-up for HDFC Bank as it will help expand its customer outreach to the last mile.

Banking operations in West Bengal were severely affected for the second consecutive day on Friday as lakhs of employees and officers of public sector lenders continued their nationwide strike to protest against the Centre's move to privatise government-owned banks, officials said.

Shutters of around 8,590 bank branches and most ATMs in the state were down during the day as the United Forum of Bank Union (UFBU), an umbrella body of nine associations, observed the two-day strike from December 16.

"We got an overwhelming response to the strike call on the second day as almost all staffers participated in the programme. We will carry out more such agitations in future if the government goes ahead with the bank privatisation bill," an official of the UFBU said.

In the Union Budget for 2021-22 presented in February, Finance Minister Nirmala Sitharaman had proposed to take up privatisation of two public sector banks.

To facilitate it, the government has listed the Banking Laws (Amendment) Bill, 2021, for introduction and passage during the current session of Parliament.

"Besides the two-day strike, a series of protest programmes will be held if the government does not withdraw the bill," All India Bank Officers Confederation general secretary Sanjay Das said.

He also stated the government's decision to privatise PSBs will adversely impact the country's economy, priority sector lending and credit flow to self-help groups and rural entrepreneurs.