Technologies can help detecting frauds
One of the challenges for policy makers, especially in countries like India, is to ensure that new innovations in banking sector serve the customer by reducing the cost of financial services and enhancing the range and access to products in a manner that is safe.
This was highlighted by Reserve Bank of India Governor Shaktikanta Das at the Annual Banking Conclave of the Mint on 24 Feb 2020.
Advanced analytics and real-time monitoring of emerging cybersecurity risks will be critical in detecting potential threats and enabling pre-emptive action, he pointed out.
As the Indian banking sector is propelled forward to a higher orbit, banks would have to strive hard to remain relevant in the changed economic environment by reworking their business strategies, designing products with the customer in mind and focusing on improving the efficiency of their services.
“The possibilities are enormous. We should be seized of the issues and act in time,” he stressed.
He listed out how Artificial Intelligence (AI), Machine Learning (ML) and Big Data are becoming central to financial services innovation and can help in fraud detection, said Reserve Bank of India Governor.
These technologies can also help in identifying better ways of monitoring use of funds by borrowers, track suspicious transactions, etc. by processing large datasets, he told the
Meanwhile, the Indian banking sector is slowly turning around on the back of improvements in asset quality with enhanced resolutions through the Insolvency and Bankruptcy Code (IBC), said Das in an update.
Despite the recent decline in impaired assets and a significant improvement in provisioning, profitability of the banking sector remains fragile, he told the Annual Banking Conclave of the Mint on 24 Feb 2020.
Capital position of banks has, however, improved on account of recapitalisation of public sector banks by the Government and capital raising efforts by private sector banks.
Nevertheless, the sector continues to encounter challenges from events like those around the telecom sector, he pointed out.
Consequently, the overhang of non-performing assets (NPAs) remains relatively high which is weighing on credit growth.
Also, in view of subdued profitability and deleveraging by certain corporates, risk-averse banks have shifted their focus away from large infrastructure and industrial loans towards retail loans, Das observed.
This diversification strategy, while helpful as a risk mitigation tool, has its own limitations.
Further, sector specific pockets of stress need policy attention, added Das.
At the same time, proper due diligence and risk pricing in lending is of prime importance so that the health of the banking sector is not compromised while ensuring adequate flow of credit to productive sectors of the economy.
The banking stability indicator, as reported in RBI’s Financial Stability Report of December 20193, shows an improvement.
Timely mitigation measures like faster resolution, better recovery, etc., need to be continued to bring down the gross non-performing assets (GNPA) ratios of all scheduled commercial banks (SCBs).
While lower rate of credit growth limits the size of the denominator for measuring GNPA, risks arising out of global and domestic economic conditions and geo-political developments persist. fiinews.com
