Question

Discuss changes that have occured in commercial banking since 2014. For example, technology, Mergers, or general trends.

Answer 1

The question is about changes that have occured in commercial banking since 2014

The global financial crisis has bought many changes to the post-crisis environment and framework that have eventually bought changes to the banking sector.

The banks have evolved into a more strong risk managing and monitoring institution checking their internal system as well as the international macro economics as a whole. They now have more resilience and have stringent regulations regarding liquidity, resolution decisions and recovery. In global economy the share of banking in terms of GDP has come down significantly in global economies like US, UK, FRANCE etc.

There is now a big structural reform in the banking sector as a whole with changing in the lending pattern to capital markets, real economies. There is review across the commercial banking sector as to what is the optimal size of the banking system considering the size of economy, current banking scenario of the respective country, banking laws and various international market factors.

In Most Banks, their operations, balance sheets and economy has dampened due to the huge provision of bad loans or we can say the NPA namely Non Performing Assets in the system by corporate that are unable to complete their projects due to economics or institutional factors. There are various factors influencing this also like the legal system into recovery of loans, thus delaying recovery and various political influences and interference into hiring of banking officials and financing by banks into unfruitful projects or government schemes resulting into more NPAs and reduced efficiency of banks.

Though all this has happened in due course of time after 2014 there are huge upliftment and boosting programs/ schemes/ packages introduced by governments and central banks for growth and better functioning of banks.

Technology : The banking sector has gone a huge reform by inclusion of technology into operations. The banks have simplified payments through digital modes by introduction of Unified Payment Interface (UPI) through which a payment or receipt of payment can be done in a matter of few seconds through dedicated (VPA) Virtual Payment Address and pass code.

All major banks have now rolled out their Applications for mobiles on major platforms like Android, iOS, Windows etc on which by using the banks application a customer can use all the basic services of banking like

i) Check Bank Statements

ii) Money Transfer (NEFT, IMPS, RTGS etc)

iii) Application for various added services like Loans, Insurances, Credit Cards etc.

iv) Investment into securities like shares and mutual funds etc.

v) Complaint, feedback and grievance redressal.

vi) Online shopping, recharges, bill payments and point redeeming etc.

This has significantly helped in enlightening the customers about the banking products and services, thus, reducing the footfalls into the bank branches and increased efficiency and increased interaction.

For businesses inclusion of technology has made easy identification of customers and their credit profile for better and easy credit facilities through credit/debit cards or directly through bank accounts via net banking or mobile banking. Acceptance of payments through POS machines, Online bill desks and better security for data management and payment processing of customers thus building trust and a more legit, scanned and regularised economy.

Mergers : There are various mergers that have happened after 2014 in the commercial banking like

i) Kotak Mahindra Bank and ING Vyasa Bank (2014)

ii) State Bank of India and all 5 associate banks of SBI (2017)

iii) SBI and Bhartiya Mahila Bank (2017)

iv) Bank Of Baroda and Vijaya and Dena Bank (2019)

v) Old National Bank and United Bank & Trust (2014)

vi) Huntington Bancshares and FirstMerit Bank (2016)

vii) Key Bank and First Niagara Financial (2016)

and much more at present and future are to be undertaken.

These type of mergers help the banks in increasing and scaling up their role in banking and increasing their share in the economy and accumulation of large customer base.

The banks get empowered to accomplish the shortcomings in terms of technology, manpower, outreach and products offered causing increased profitability and sharing of knowledge.

Thus helping in efficiency and better targeting in operations, minimized risk factors and better market presence.

These changes are key in shaping the new age banking which is now more driven by better products and their marketing instead of physical services. Better investment management and mergers have played a key role in uplifting the economy and making available more customised and accessible services.