Indian Banks Reform Agenda: A Complete Insight

Public Sector Banks in India play a vital role in building the country’s economy. Hence, it is mandatory to incorporate reforms now and then to ensure the smooth functioning of the PSBs and for the betterment of the economical structure of the country.

The Banks Reform agenda helps improve the sustainability of the Public Sector Banks and helps rule out bad debts. The importance of the bank’s reform plan cannot be denied to maintain the stability of the Indian economy.

The PSB’s reforms in India are done through EASE reforms. EASE stands for Enhances Access and Service Excellence. EASE’s logo says they aspire for a Clean and Smart Banking system in India.

The Indian Government and the PSBs united to launch the EASE Agenda in January 2018. The Indian Banks’ Association had commissioned the EASE Agenda. The Boston Consulting Group was privileged to author the EASE Agenda in January 2018.

What are the strategies adopted by the Indian Government to change the banking system in the country?

The Indian Government has adopted the four R’s strategy to improve the functioning of the PSBs, and they have succeeded in achieving progress since March 2015.

The four R’s strategy is as follows- Recognise, Resolve, Recapitalise, and Reform. The four R’s strategy has helped in several ways in maintaining the stability and sanctity of the PSBs in India.

They have recognized NPAs transparently, which has helped the PSBs to reduce their SRA from 7% to 0.5%. They have also resolved and recovered value from stressed assets, which has led to the recovery of INR 2.87 lakh crore.

The idea of capitalizing PSBs has strengthened the capital base by INR 3.19 lakh crore. The reforms incorporated in PSBs have done great for the banks and the country.

The reforms have:

  • It has instilled transparency and accountability in the broader financial system.
  • It has improved the governance of PSBs.
  • It has enhanced prudential lending.
  • It has improved risk management in PSBs.
  • It has helped in the incorporation of technology-driven checks and controls.
  • It has also incorporated Smart Banking into Digital Lending and Digital Infrastructure.

What is the foundation of EASE?

The foundation of EASE reforms is on strong grounds of Clean and Smart Banking.

Clean Banking refers to,

  • Clean credit.
  • Leveraging data.
  • Ensuring accountability.
  • Action against defaults.
  • NPA recovery.

Smart Banking refers to,

  • Speedy banking system.
  • Multi-channel reach of banks.
  • Accessible and affordable.
  • Responsive banking.
  • Technologically enhanced.

What are the salient features of the EASE Reforms Index?

The salient features of the EASE Reforms Index are as follows,

  • The EASE Reform Index is used for the continuous measurement and objective assessment of the progress of reforms.
  • The index helps with quantified evaluation, ranking, inter-bank comparison, bank-specific scorecards, and benchmarks.
  • The index has also introduced a robust design methodology, which includes the involvement of senior PSB executives.
  • The index also led to high ownership as Action Points defined by PSBs, 20% weight in the evaluation of the Whole-Time Directors reporting to the CEO.
  • The index also helped introduce self-assessment mechanisms using the transparent and objective methodology for a higher scope of improvement.
  • The index has helped to share and replicate the best practices across different PSBs.

What is the outcome of Clean and Smart Banking Reform?

The outcomes of clean and smart banking reform have been very fruitful. They have established great stability and sustainability in the PSBs.

The fruitful outcomes of clean and smart banking reforms are,

  • It has improved the lending processes in all 21 PSBs. It has also identified gaps and addressed them.
  • It has minimized PSB’s share in consortiums to 10%, which has led to smaller and more efficient consortiums.
  • Now, PSBs check 5-6 independent data sources for huge credit appraisals.
  • It has ensured 100% segregation of pre and post-sanction roles concerning large loans.
  • It has led to the proactive checks of 650+ high-value NPA accounts for wilful default, and necessary actions have also been initiated.
  • A dedicated SAMV has been operationally used in all PSBs.
  • Huge amounts of recovery have been made from the NPA.
  • There is a 25% reduction in TAT for retail loan processing in just six months.
  • After the reforms, the PSBs offer approximately 20 services via home and mobile-based channels. There is an 80% increase in year-on-year transactions. The Bank Mitras offer 18 branch equivalent services.
  • Around 96% of villages have been identified without banking outlets and have been provided with outlets within a 5km range of the above villages.
  • 34.4 crore PMJDY accounts opened since FY15.
  • Today 77% of ATMs have built-in functionalities to suit differently-abled customers.
  • The responsiveness of PSBs has increased as 87% of customers of large PSBs can speak in their regional languages with call centers.
  • The customer satisfaction survey revealed that 19 PSBs scored 8/10.
  • The grievance redressal TAT is reduced to approximately seven days.
  • Around 1.12 lakh loans have been sanctioned through PSB loans in 59 minutes.
  • The bills discounted on TReDS constitute 11% of total bills discounted by PSBs.

The reforms over the years have improved the banking system in many ways and paved the way for more innovation and technology-driven services in the future.

The banking sector was one of the most underdeveloped in the past decades. The incorporation of EASE reforms has shaped the better future of banking in India. It has also improved the economy of the country in many ways.

The concepts of Digital India were looking impossible a few years back, but slowly, everything fell into place. As the reforms are being implemented strategically, financial stability is being established slowly.

The PSBs hold a major responsibility in India to establish financial health, discipline, and stability. Hence, the EASE reforms agenda holds a bright future ahead to shape the banking system correctly.

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