Monday, March 23, 2009

To Sustain Growth, Governance and Compliance are Two Central Issues: Shyamala Gopinath

"The way to manage downturn and sustain growth in the banking and financial sector is to take advantage of the present crisis and move forward by making IT spending cost effective and revenue generating", said Smt Shyamala Gopinath, Deputy Governor - Reserve Bank of India. She was delivering her Inaugural Address at the 4th CII BANKing TECH Summit 2009 organized by the Confederation of Indian Industry (CII) in Mumbai today.

She observed that in the past considerable focus of IT spending was on customer services and products which did not extend to internal audit, back office and internal operations of the banks. There was also a marked reluctance to spend on these areas as they were not considered profit centers. She thus emphasized the need for greater IT spending by the banks on internal governance and control. Smt Gopinath further elaborated on the various initiatives taken by the RBI in converting Indian banking from brick and mortar banking to virtual banking. "There is marked improvement in various processes like fund transfers and settlement including RTGS, NFS, ATM's and others. Paper transactions still continue to be in high numbers, which also carry high risk. RBI is thus considering to shift high value clearing to electronic mode", stated Smt Gopinath. She expressed concerns of fraud; software and hardware glitches and money laundering resulting into tremendous loss. Smt Gopinath concluded by saying that response required from the IT providers would be in terms of affordability, availability, reliability, adaptability, convenience and operational comfort.

Speaking on compliance and regulatory framework was Mr G Gopalakrishna, Executive Director Reserve Bank of India who emphasized the role of internal control in banks. He said that technology could play a key role by ensuring good governance and good management practice. "IT related concerns include inadequate governance, inadequate alignment with business requirements, system failures, inadequate segregation of duties, unauthorized access, malicious activities like hacking, cost overruns and data integrity issues among others", pointed Mr Gopalakrishna.

Echoing Mrs Gopinath's thoughts, Dr K C Chakrabarty, Chairman & Managing Director, Punjab National Bank, in his address said that this was the time for the Indian banking and financial services industry to turn crisis into an opportunity and emphasized on the need to focus on inclusive growth by generating domestic demand. "It is necessary to make banking and financial products and services accessible to billions of Indian people by improving penetration. Taking products and services to masses will provide the necessary stimulus to the industry", said Dr Chakrabarty. Explaining the role of IT, he pointed that information technology and infrastructure technology are the two vital pillars which can be utilized to effectively increase access to the masses. "Though these are tough times, we must expand but cautiously. Two things to be avoided in managing downturn are complacency and inaction", highlighted Dr Chakrabarty.

While giving an overview of the Summit's objectives Mr N Chandrasekaran, Chairman - CII's BANKing TECH Summit 2009 and Chief Operating Officer & Executive Director, Tata Consultancy Services Ltd. emphasized that the key challenges that the banking and financial industry was facing today were in terms of industrial growth rates dropping, investor and consumer confidence levels decreasing, credit becoming costlier and others. He reflected on how technology can be leveraged to address these challenges and the role of technology in providing effective solutions to banks in managing downturn. "The Summit will chart roadmap for the Indian banking system to move beyond banking and venture into other sectors such as insurance and asset management", said the Speaker.

"Banks will have a new role to play and technology will have to be part of the solution", said Dr Naushad Forbes, Chairman - CII Western Region & Director, Forbes Marshall Pvt Ltd in his inaugural address. He also expressed his concerns about rising liquidity, falling interest rates and the health of industrial borrowing. He observed that in the past, economic situations had forced automation in banking and hoped that the current crisis would also lead to such innovation.

Mr Uday Shankar Roy, Managing Director & Chief Executive Officer, SBI Life Insurance Company Limited advised the review of projects undertaken during boom times. He stressed the importance of assessing the viability and profitability of such projects and only continue those which would be essential and profitable. Mr Roy also emphasized on the need of simple banking and financial products. "We don't need ultimate sophistication in times of downturn, but simple products to reach the masses", observed the Speaker.

The CII BANKing TECH Summit 2009 also witnessed the release of CII-PWC report on 'Managing Recession - Key Recommendations'. The Report recommended relying on information, focus on data quality and application driven planning and budgeting for better cost management. It also called upon the industry to invest in technology to bring the economy out of the downturn.

The CII Summit thus brought together industrial stalwarts and eminent speakers to discuss and deliberate on the role of banking and technology in banking to manage the downturn.

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