Business Today 25th March 2018 | Page 4

FROM THE EDITOR http :// www . businesstoday . in

Banking on Fintech

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ver the past year and a half , the Indian banking system – especially the public sector banking bit – has been in the news for all the wrong reasons . The non-performing assets ( NPAs ) of many public sector banks ( PSBs ) have been rising inexorably . At the end of September 2017 , the public sector bank NPAs stood at `7.34 lakh crore while private sector bank NPAs had touched `1.03 lakh crore . As many of the NPAs headed to the National Companies Law Tribunal ( NCLT ) for resolution under the Insolvency and Bankruptcy Code ( IBC ), it was apparent that banks would need to take steep haircuts on their loans , and would get back a fraction of what they were owed at the end of the resolution process .

In February this year , the Nirav Modi affair also burst into light after Punjab National Bank complained about fraudulent Letters of Undertaking ( LoUs ) of $ 1.77 billion , since raised to $ 1.97 billion . The exact amount that the bank is going to lose because of Nirav Modi ’ s firms ( and the companies run by his uncle Mehul Choksi ) is yet to be clear . Since then , a number of other NPA scams have hit the headlines – including the Rotomac NPAs ( based on the complaint of Bank of Baroda ) and the Simbhaoli Sugar case ( based on a complaint by Oriental Bank of Commerce ). And more scams seem to be lurking in the balance sheets of many banks , just waiting to be unearthed . Finance Secretary Rajiv Kumar has given the PSBs 15 days for taking pre-emptive action for identifying gaps that allows for scams . The finance ministry is reportedly planning to consolidate overseas branches of PSBs .

These steps are unlikely to be enough . There have been calls for privatisation of all PSBs barring SBI . But the finance minister has already ruled that out as an option . So , the clean-up needs to be done using other means . I think the Reserve Bank of India is already quite a strict regulator , and has prescribed stringent norms for banks . But I think the government , as the majority owner of the PSBs , also needs to understand that it should take drastic steps to clean up the problems . First , it has to look at the entire issue of staffing – from choosing the top management correctly , to giving them enough of a free hand and long tenure to do their job properly , to figuring out how to induct high-quality people at every level – junior , mid and senior – and equally , firing the incompetent ones . Also , once that is done , it needs to protect the bank managements from political pressure .

Meanwhile , this is also our Best Banks special issue where we highlight the stories of the best in the banking system . This year , we have introduced a new category – financial tech . While a number of fintech companies have shot into prominence in the past few years , I believe the journey is only starting . And in the next few years , the entire banking industry will be revolutionised by the march of the fintechs . prosenjit . datta @ intoday . com @ ProsaicView

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Vol . 27 , No . 6 , for the fortnight March 12-25 , 2018 . Released on March 12 , 2018 .

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