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Usha Thorat: banks must reverse investment trend

Special Correspondent
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‘People are opting for property, gold'

Expert advice: Former Deputy Governor of Reserve Bank of India Usha Thorat at a function organised by Fisat Business School in Kochi on Friday. — Photo: Vipin Chandran
Expert advice: Former Deputy Governor of Reserve Bank of India Usha Thorat at a function organised by Fisat Business School in Kochi on Friday. — Photo: Vipin Chandran

Former Deputy Governor of Reserve Bank of India (RBI) Usha Thorat has said that people are being lured from financial savings to property and gold. Banks will have to penetrate more areas to reverse the trend.

She was delivering a lecture on ‘Banking challenges for the next decade,' organised by Fisat Business School, here, on Friday.

Ms. Thorat said banks would have a greater role in providing resources for financial needs for economic growth.

Banks would need to use information technology, manage capital, and develop risk-management systems. They would also have to develop skills and capacities through appropriate human resource policy initiatives.

The ability to garner capital, maintain and manage it, and ensuring returns on equity would be a major challenge for banks. Small businesses, small and marginal farmers, affordable housing, and health needs would be among the segments banks would need to focus on through financial inclusion.

Focus on SME

Small and medium enterprises (SME) required the greatest attention of banks. It should be remembered that large clients had the option of going abroad to seek loans. Banks, in fact, would have to do more than extending credit to the SME sector.

Highlighting the need for unconventional risk-mitigating products, Ms. Thorat said banks required data on borrowers to manage their portfolio effectively.

The credit guarantee scheme had become user-friendly. Similar products would be required for small farmers, she said. There were huge challenges in extending credit for infrastructure as banks were bound by norms in this regard.

Referring to globalisation in banking, she said Indian banks should increase their global footprint. They would face greater competition from overseas banks and new ones. She said banks should nurture long-term goals such as investing in technology. They should not merely look at the quarterly results.

For better skills

On the human resource front, banks needed to raise skills, upgrade, and build capacity. A big vacuum at the senior level would have serious repercussions on bank affairs. A large part of the top management cadre was due for retirement in the next five years. Most banks were on a massive recruitment drive, and managements should focus on acquiring new skills to manage future challenges.

P.V. Mathew, chairman, governing body of Fisat; K.V. Sundaresan, Principal, Fisat; P.A. Mathew, Director, Fisat; and Shyam Srinivasan, Managing Director, Federal Bank, were present.

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