| COVER
STORY
Reforming
Philippine Banks --Katuri Nageswara rao
Philippine
banks have problems of mounting bad debts, poor credit decision
mechanism and low capital bases. There is improvement in return
on assets but not in recovery of NPAs. While banks have been
consolidating, there is still scope for further consolidation.
A large number of small banks are posing supervisory challenges
to the regulators. The banking system has taken up reforms
earnestly but the implementation appears to be slow. The central
bank encourages mergers and consolidation through tax sops
and concessions, but the government is not in a position to
recapitalize weak banks. Instead, it is inviting private equity
participation in asset management companies with promises
of tax and fee exemptions.
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BANKING
STRATEGY
Has
the M&A wave started in India? --Yash Paul Pahuja
Recent
deals in the Indian banking industry show that the M&A wave
may start in the medium term. The Government has increased
FDI limit in banks and it is expected that voting right limit
will also be increased. This will create a conducive environment
for M&A in India.
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Value
Chain in Banks --Vinay Dutta
Banks
need to know the value chain in the three stages of input,
storage and output of money. The principal objective is to
protect the deposit risk through value-added cost-efficient
products and creation of good quality investment and credit
portfolio. Banks need to stop stashing of bad money into the
system and ensure good credit management.
Ó IUP. All Rights Reserved.
BANKING
SCENARIO
Third-party
Services in Banks --Sharmistha Panda
Third-party
services which bring larger benefits to the companies that
use them, have been growing very rapidly throughout the world,
especially in India. Though this path is not simple for the
banks on the grounds of confidentiality, they are still trying
out this service. This has emerged from a fear of not wanting
to be left behind by the private and foreign banks which are
already leading the race.
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RISK
MANAGEMENT
Model
Risk Management in Banks --Srinivas Yanamandra
Banks
may choose any risk management model commensurate with its
risk appetite. But the model chosen should ensure safety and
soundness of the bank's financial position. Model Risk is
the risk that theoretical models used in pricing, trading,
hedging and estimating risk will turn out to produce misleading
results. The effect of model risk on the financial performance
of the bank can be significant. The loss arising out of the
model inaccuracy and consequent model risk can be mitigated
if the banks observe certain fundamental principles while
making use of the model.
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Operational
Risk Management Banks' concerns --GRK Murty
Pursuit
of a wide range of activities, increased competition, blurring
boundaries among financial services providers and the resulting
falling spreads, management's commitment for enterprise-wide
risk management, and banks' aggressive push into the technology
mould have only increased banks' exposure to operational risk,
calling for its focused management. The Basel II directives
for allocating capital against operational risk have further
heightened banks' interest in the operational risk.
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TECHNOLOGY
IN BANKS
RTGS
The Gate Way of Payment Settlements --R Vijaya Sree and P Maheshwar Reddy
RTGS
solution is a milestone in the saga of Indian Payment System.
It will enhance competitiveness within the system. It gears
up the banks to meet future challenges posed by the external
environment. RTGS system, if implemented with due precautions
and proper action plan, will certainly help the Indian Banking
Industry to attain global standards.
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BANKING
PRODUCT
The
Future of Plastic Money --Pramod Gupta
Use
of plastic Money is growing at an unprecedented rate in India.
lesser number of installed Point-of-sale (PoS) terminals is
the major obstacle in the growth of debt cards. Smart card
has many innovative features which may spurt the use of cards
in India. Smart card is more safe to use in electronic form
than the present form of cards.
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Private
Banking --Reeta Gupta
Private
banking is at a nascent stage in India while it is popular
in many other countries. High-net-worth individuals (HNWI)
are the major target for private bankers (PB). PB helps the
HNWI in choosing the financial instruments according to their
risk and return class. The major source of income for private
bankers is the fee from advisory and custodial services.
Ó Business India, December 8-21, 2003. Reprinted with permission.
Originally published as "At your Royal Majesty's Service".
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