IMPACT OF LIBERALIZATION ON BUSINESS DEVELOPMENT

Objective
To have an appreciation of financial liberalization that is taking place and trends in banking traditional Vs modern banking structure, trends and challenges, use of technology, new technology and products, need for new mindset

Objective of session
That of understanding the changes that have taken place and that are underway Change is the only constant in our lives- how these changes have affected our economic well being and our work life. Technology has been the main driver and with advances in technology more changes will take place. Such changes and the pace at which the changes are taking place the old ways of working and the structure in which we operated have been replaced with new methods and structures. The mind has to adopt to accept the changes and to learn new skills and these stresses pose difficult challenges. We have to learn to grow with the times and the changes that are inevitable going forward.

Financial Liberalization
Financial liberalization summarizes the changes that are taking place in the economic scene. It means loosening the tight regulations that constrained the introduction of innovations that would improve the economic wealth and choices people had.

Ambit of Financial liberalization

Permitting actions that were earlier barred- such as deregulation of interest rates, pricing of shares in a new issue, easier conversion of currency from one form to another, greater freedom to trade- to import and export, allowing foreign investment, removal of licence-quota regime that promotes corruption and waste of resources, promoting an environment more conducive to industry, trade , agriculture , services etc, in short, for carrying out economic and investment activity so as to maximize economic value All these come under the ambit or scope of financial liberalization.

Liberalization and Regulation

WTO is World Trade Organization that promotes liberalization of trade in goods and services among member countries. WTO works towards a general agreement among member countries for removal of trade and investment barriers in all areas. Financial services also come under their scope. Financial liberalization does not mean No regulation. On the other hand, regulation and supervision may be tighter as the range of activities and the freedom of choice is much more.

A few measures of liberalization

A few examples of the financial liberalization measures that have taken place in India1) the freeing of interest rates on deposits and advances over Rs 2 lacs 2) import of gold 3) liberal remittance facilities to other countries up to USD 50 K per annum 4) liberal exim policy that restricts imports of only a few items 5) abolition of controller of capital and free pricing of shares in a public issue 6)liberal foreign direct investment and foreign institutional investment (portfolio flows) 7) rationalization of duties and tax structure and several others.

Trends in Banking
The trend in banking is that banking is becoming increasingly technology driven. The tellers of the old bank (cashiers) are being increasingly replaced by Automated Teller Machines. Use of On line banking is increasing where banking transactions -funds transfer, payment of bills, investments etc- are done through computer from home or office and the visit to bank is minimal for carrying out transactions. Phone banking/ mobile banking are very convenient ways for doing ordinary and most required services for the majority of customers. Banking has become less structured and open. Awareness of banking has increased tremendously. Banks nowadays provide more servicesbancassurance, sale of units of mutual funds, credit cards etc.

Trends
Indian banking has placed more emphasis on retail banking in the recent past ; till a few years ago, corporate banking providing loans and services to corporate and large business entities was the preferred segment. However, the corporate banking has provided an impetus for new products such as cash management, on line submission of letter of credit applications, on line transfer of funds etc. Further, the corporate banking segment has been the main stay for derivative market development. Retail banking is driven by technology and banking trend is driven by retail banking. The trends indicate a strong bias towards retail banking without losing focus on corporate banking as corporate banking forms bulk of the assets- it is high volume low margin business.

Trends
Structure of banks has changed to reflect the business segments- corporate baking- trade finance, treasury, retail or personal banking, government business, and other services. The structure has become more flat and authority more diffused so as to expedite decisions and improve customer satisfaction. Banks have more open plan offices. Banks encourage customers to use ATMs and on line banking so as to reduce the pressure on branches for routine operations. Electronic Payments are growing by more than 20% year on year. Risk awareness and the role of risk management in bank management have increased tremendously.

Role of Technology
The transformation in banking during the past one decade would not have been possible with out the adoption of technology. Technology has driven banking and in turn the requirements of banking have promoted innovation in technology. Risk management is essential for managing the credit and investment portfolios. But for the computing power and the software development, most treasury products would not be available especially in respect of derivatives. Communications, data analysis and information flow are essential for trading in markets. Advances in telecommunication have been instrumental in the tremendous increase in trading in various markets. It is impossible to think of todays banking with out attributing the trends in banking to the impact of technology.

New Products
New products that are available now as compared to the scene about 10 years ago Deposit products- sweep account, flexi deposits advances Retail loans, with fixed and floating rates, step up installments, Advances related to money market rates, Treasury Products- interest rate swaps, currency swaps options, forward rate agreements bonds with different characteristics, Remittances and Payments- ECS, RTGS Credit cards, and so on. The new products and their features require that the bank staff are aware of the product features and the sale staff should be able to understand the product design and the advantages

New Mind Set

In the earlier days, banking was manual and the essential requirements were good handwriting, ability to do basic arithmetic operations fast, count cash, and balance the books. Banking services were limited in scope and the demands on the staff were less. Competition was less intense and walk in business was adequate. The scenario has undergone tremendous change. Intense competition and total computerization with a customer being a customer of the bank rather than the customer of a branch and anytime anywhere banking have become the norm at least for the urban customer.

Change in Business Process

Sales have assumed greater importance as customer acquisition and retention are very important for business growth. Staff requires attuning themselves to working with computers, analyzing data and understanding product features. The new mind set is to be more comfortable with technology, be customer centric and be ready for fresh challenges. The old hierarchy has given way to a more flat and more diffused power structure with shared responsibilities.

Need of today
The success of an employee will depend to a great extent on how he is able to adapt to the new environment and changes his mindset to accept that the changes are essential for growth and accordingly he should acquire more skills. Skill retraining is likely to be a major factor in retaining staff.