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Time to Trash Outdated

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Practices undertaken by our country’s financial sector are highly conservative which make it difficult for an economy to use available resources for the benefit of other sectors, believes K Shivaji

K Shivaji

K Shivaji
Principal Secretary, Finance (Expenditure), Government of Maharashtra

Post 1991, India’s growth has accelerated; our GDP, excluding China, is still quite superior to many other countries. Entire globe is now inching towards China and India. Thus, there are several factors contributing in terms of global trade, global economy, global finance, but still a large number of people are complaining that they are not getting any good opportunity.

Normally, when we take a good look around our environment, we find that there are very few people who make things happen. There are people who are aware what is happening around them as far as government policies are concerned. However, a large part of population is simply oblivious of the happenings around them. The technology has made the whole world flat. Transactions worth billions of dollars are getting transferred from one part of the globe to the other in seconds at the click of the mouse. In India, we have labour arbitraries, cost advantages, abundance of brain power and ready-to-use talent in every corner of the country. But still we are not able to use these benefits to our advantage.

Traditionally, our observation is that our financial sector works more on the known circles. Only when a person is assured that you are trustworthy, he will lend you the money. But when it comes to depositing, no one is interested in assisting that person in the procedure. Our financial sector is interested in a known area which is deemed as highly conservative. We have not devised our own concepts and as a result we can venture in an unknown area only when we are optimistic, which is missing from the scenario. Strategically, these institutional psyche needs to be trashed to bring about a change in the overall regime.

Banks are like any other institutions in India who have been surrounded by fierce competition. The financial space needs to bring in more competition which will improve not only the performance of the employees but also quality of services. The urge to overreach will automatically get generated. Still, large numbers of people are not coming under financial area and thus we need to reach to people living in remote areas.

Traditionally, many of the banks, especially nationalised banks, did not face any kind of competition. They had very simple nationalised products and did not sync their system with any new diversified products and innovations. Similar psyche is now being followed around that immediately needs to be abolished from the entire system.

Simple activities like deposit banking, withdrawal through ATMs, cash transfers are not taking place smoothly. In villages, people, instead of depositing money in banks, are saving their cash in household utensils. So that practice has to change by making process easy for people living in remote areas.

Financial inclusion, IT and accounts work best in numbers, but till now the extent to which IT should have undertaken the financial sector is still low. This is a crucial issue that needs to be taken care of as the contribution of IT in transforming some other industries has been proved to be a game changer.

The next issue is the absence of inter-bank transaction portability. Synergy will increase if the transactions become bank neutral. Mobile banking is another topic to be focused upon. This section is so successful in India that we should piggybank on mobile. Fortunately, RBI has come with differentiated banking license regime and we should take at least one part of the banking sector to benefit the rural areas. Unless the business model for financial institution is bottom driven, retail based, technology reliant, the dream to reach out majority of people would still be far away.

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