The 2040 Banker Podcast by Refo | Episode 1 - with Rajeev Uberoi
Tune in for this conversation and more, including the huge impact of Globalization in Indian markets.
Listen on Spotify
Listen on Apple Podcasts
Having spent about 4 decades in Banking, Rajeev Uberoi is a well known banking personality. Starting with his stint at RBI, he went on to many of the largest multinational banks (ANZ, Standard Chartered, Citibank). Having spent some time at IDFC bank, now he is a board member of several banking and finance companies.
“For any economy, banking plays the pivotal role of not only a catalyst, but a driver of the economy.” says Rajeev. “Today, if you take out some empirical evidence, you will find that the growth in these economies can be attributed to at least 30-40 basis points on the banking sector.”
We discuss how the banking landscape has evolved during the course of Rajeev’s career. Historically how it has evolved, what is the current scenario, and as we move forward, what all do we need to look out for.
“I think in the next two years, I see the banking industry growing pretty fast in the areas of rural and SME, because it is government driven.” Rajeev said, as he discusses the future opportunities.
“So one thing I see is that the banks will be more looking at the help from the fintechs to upgrade their own solutions. Ultimately, the core banking solution has a finite life.. It has to upgrade itself, not because it wants to, but because the next door neighbor has got a much better solution.”
Want to suggest a topic for a future episode? Send ua a mail at info@refo.dev - we’d love to hear from you.
Transcript:
00:00
Thank you, Rajiv, for coming on our podcast. This podcast iscalled The 2040 Banker. And the idea is that we want to invite a lot of bankersand talk about what has changed in the last one or two decades, how theindustry has evolved, and also talk about what do you foresee in the decade tocome about banking. So as a banker, if I want to stay relevant and competitive,
00:29
what all i should be doing now so that's the podcast andwhen we were actually doing the list of people who we want to invite onto thepodcast we were very excited to see your background and we wanted to bring youand that's why we requested time with you so overall you spent about fourdecades in banking that's what we know you started a career with state bank ofindia which is a government entity from there you moved on to government ofmadhya pradesh and then you joined
00:57
Reserve Bank of India for 14 years. That's the Indianregulator. And post that, you went to a few multinational banks like ANZ,Stanchard, Citibank, and then spent a lot of time back in IDFC Bank. And postIDFC, now today you serve on the board of several companies. So that's a quickbackground for the viewers. So we really look forward to learning a lot fromyou based on your experience. And as a first question,
01:27
that I want to ask you is around why actually banking is soimportant. And I'll quote Warren Buffet here. I was actually listening to oneof the video recently and Warren Buffet actually quoted that US is a lot betterbecause Jamie Dimon is running JP Morgan. So Jamie Dimon is the CEO of JPMorgan.
01:53
How can somebody say such a statement that US is better offbecause somebody is earning a bank, the largest bank in US? Why is it? So whybanking is so important today? And is this overall hype really justified? Soreally we can get started on that. Well, first, you know, at the outset, Iwould like to say there's a very apt topic to discuss.
02:20
Anitin, thank you very much for inviting me to share withyou my banking journey, because I think I've seen a lot of changes in thebanking industry. But coming quickly to the point which you have made, WarrenBuffet was absolutely right in saying that the banking industry is veryimportant for any economy to grow and flourish.
02:42
He may have taken example of Jimmy Diamond because he'srunning the biggest bank. But the fact remains that if you look at thecountries who have successfully become a developed country or have done goodthings, the banking industry has played a very pivotal role. Beat it. England,they started the banking industry even before that. Even historically in India,the banking, even in Mohanjadaro time, was there.
03:12
which made the trade and commerce. Coming back to thequestion pertaining to our own country, I think in the last two, three decades,one of the reasons why the country has been able to grow so fast, because ithad a very stable and a well-oiled banking system. Now, Jamie Dimon is one partof it, but I think the credit can be given to the regulators who have ensuredthat the banking system is strong enough to meet the needs of the economy.Having said that,
03:41
One wrong action, one bank failure just nosedives the publicperception and public confidence in the banking industry. And then it's verydifficult to revive. Coming to the most important point that what is the roleof banking in the economy of a country and in life of people? So for anyeconomy of the country, banking plays the pivotal role of not a catalyst, but adriver.
04:10
of the economy. Today, if you look at it, whether it isagriculture, whether it is industry, or it is services, everywhere the role ofbanking has been tremendous. Apart from that, if you take out some empiricalevidence, you will find that the growth in these economies can be attributed byat least 30 to 40 basis point on the banking sector.
04:40
Just think of a situation that if the banking sector was notthere, how many of us could have got a pizza at home? Walking to a place 3kilometers to buy a pizza would not be a great idea. So banking plays a veryimportant role and there is empirical evidence available which says that if thegrowth of the economy, GDP growth is X percent, let's put the number 7 percent,then the financial sector…
05:07
should be at least two and a half, three times in itsgrowth. Which means that if India is projecting a growth of 7%, the bankingsector or the financial sector would grow at least at 20%. Is that globallytrue or is it only for India? No, it's globally true. There's an empiricalevidence which they say that when a country grew by 5%, what percentage growthwas there in the financial sector? Got it.
05:35
So which basically sees that it plays the role of amultiplier. 5% growth multiplied by 3 will give 15% growth in the economy.Correct. So that is the reason why financial sector is so important for growthof an economy and keeping an agile and a robust financial sector is almost aprecondition for takeoff of an economy. So from your example, is it correct ifI say that?
06:04
in the next one decade, most of the banks in India canexpect a 22-25% growth? Averages are different. When I say it is from 2.5% to3%, which means some banks will have only 2%, some will have 3%. So averagewill be 2.5%. So if the economy is slated to grow at 7%, then most of thebanks…
06:27
will at least have a double-digit growth, could be 14-15%.And there could be an outlier who has 22% growth. Understood. Great, sir. Ithink that's a great start to kick off our discussion today. Now I want to go abit in the past, right? So let's start about, let's say, a decade or a coupleof decades. Let's go back in time and try to understand what was some of the...
06:55
major developments that you can recall during yourexperience that you saw. It could be anything with respect to regulations thatcame in that actually changed the banking for the good. Or it could be aroundtechnological advancements that you saw, which made a huge impact. Maybe youcan cover as much as the last couple of decades or as much as you like. So,Nitin, the watershed in the banking industry was 1969.
07:23
when 13 large nationalized banks were taken over by thegovernment. Now, the reason for that was, that's what we read and understand,that from a class banking, which they were pursuing for the limited few, theywanted to take it to mass banking. And that was a watershed, and it reallychanged the landscape of Indian banking industry. And that made banks to godeeper into the hinterland.
07:50
Rather than be only in the urban, not even urban, they usedto call it that time, port cities. That was one change. And subsequently, mostof the banks were given an opportunity to grow and they grew very fast. Andthat changed the landscape both from the point of view of banking industry andthe consumer. There was a time when entering into a bank was a no-no for acommon man.
08:18
So that was one landmark or a watershed. The second one waswhen the focus of the banking industry was moved from industrial financing torural financing. I think that made a huge change, though it had its own pointsof pain because they didn't have the delivery system to do it. But it tooktime. And today you can see that even the rural sector, which was totallyuncatered by the banking industry, is providing enough credit to those people.
08:47
The third, it also helped in developing the saving habit ofthe people. Capital creation was important. And I think that was the oneparticular thing which comes to my mind that how banking has changed thescenario in the country and how positivity has done it. Having said that, thebanking which was done in the post-nationalization or maybe a decade after thatwas more of a lazy banking.
09:14
When I say lazy banking, as they call it, it is 9 to 5banking. Which means that you lend at 9% and borrow at 5% and take 4% and doit. Which has now changed. Today, the bankers are expected to take higherrisks. Both credit, market, equity, all kind of risk. And it has become verydynamic. And if you see the banking…
09:38
in India today, they are comparable to any other bankingglobally. So, that was another change which happened. The next change whichhappened was in 1991, after the liberalization, when new banks were givinglicenses. By that time, it had reached the stage that 70% of the bankingindustry was owned by the state.
10:00
So, there was some element of laxity there that, okay,government owns us. Why should we do it? There is no competition. But with thecoming of the new licensed banks, they became competitive. And they came withnew ideas, more efficiency, more customer service, productivity. So, that wasanother watershed which happened in 91. And it took almost 10 to 15 years forthese banks to really find their feet. And started giving competition to the...
10:29
well-established Indian banks. We had some foreign banks,but they were minuscule. Not even 1.5 to 2% of the total banking was done bythe foreign banks. Though they were very large in number. But they were only inBombay, Delhi, Kalkara, Matras, basically catering to their parent or homecountry customers. So that was another big change. And then soon it realizedthat the other banks, which were the nationalized banks, old banks, they had totighten their belts.
10:57
and bring them up to speed to compete with the new bankswhich had come up. Then the next change was happened in 2000, when the bankingwas bit by the technology bug. Though the new banks were coming on technology,but it had not taken off so much. And if my memory serves me right, it wasRangarajan Committee report, which was in 97 or 98, which gave a roadmap to thebanks how to...
11:25
make themselves competitive on the technology front. Andthat changed the whole scene where the banking, which was lazy banking,ledgers, this and that, moved over to technology. And the private banks didfaster. And the public bank had to do it because they had to be relevant in thespace. Sorry to interrupt, but what exactly came in as a technology change?
11:47
around 2000 what was asked by the regulator see one was ifyou remember 2000 we had this problem with the technology where at midnight of2000 oh yeah that one yeah so that was one reason why we wanted y2k the secondwas that the government of india and reserve bank of india felt that if we haveto be competitive globally we should have our banks on technology solutions gotit
12:11
And that was the first time. The core banking wasintroduced. And that time core banking was limited to Citibank which had onlyfour branches in India. And they had to connect it. Maybe ANZ had somebranches. But that became the starting. But when the new banks came on theplatform, they came with the core banking solution. And that made a big changein the whole thing. So anybody who started at that time always had a corebanking system in place right from the beginning. That was the condition. Okay.
12:39
bank license was given only when you had a core bankingsolution got it understood so yeah so you can continue i think you were talkingabout that that was the growth and then what happened was that over a period oftime the demand for banking was in multiples whether it was agriculture sectorwhether it was industries small scale industries uh services in services thetechnology become a very important part because it was
13:07
touching so many people. And that is how the bankingindustry started growing and came to a place where technology became the mostimportant part in a banking apart from garnering deposits or lending. So thatwas the point which I would say is a watershed in the...
13:27
a trajectory growth of the banking industry but what aftercore banking anything else that you notice one of course core banking is onebig moment that i can understand now but beyond core banking what else thenmade made a change see core banking was basically a banking solution for thebank yeah they wanted to reduce the degree correct of their employees incalculating interest on their deposits but
13:55
That led to another change wherein the customer said, whatis there for me? I still have to come to the branch. I still have to stand in aqueue. Your data gives you access. But for me, it's the same. So it changedinto the second stage where they said, why can't we have the banking facilityavailable closer to a person's house? You can't open a branch everywhere. SoATMs came.
14:20
So, ATM could be next door in your house and you could goand transact, at least take out the money and then you could deposit the money.All those started. Then when the technology globally came upon and the laptopsand all came, then they said, okay, why can't the banks give the information onthe laptop of a person? Correct. So, you started the internet banking.
14:48
It's basically an evolution. It went to internet banking.When the mobile came, why not mobile banking? So it was a demand-led growth oftechnology in the marketplace. And when this started going, I still verydistinctly remember that there was a time when the clearinghouse, becauseultimately a bank also has to clear the checks. It used to be manual. Peopleused to carry the checks and take it to a place and exchange there and comeback and do that.
15:16
And it was, I think, in 1987 or 88, they came with theautomated clearing processing. And from there today, we don't even haveautomated clearing processes. We have got check truncation process, where youjust have to scan a check and the money comes. And this is how the evolutiontook place and the technological focus or the technology.
15:42
kept in pace with the growing demands and needs of both thebanks and the customers now for example if you have to look at payment systemsnow payment systems are very important because i cannot transact without havingusing payment systems right so initially the payment system was cash i withdrewcash bought my vegetables and came back
16:03
Then they said, okay, but to certain places you can use yourcredit card. So credit card came into operation, which is also technologydriven. Then the credit card became, you know, very expensive or all thecustomers were not there or all the vendors were not using it, all that. Thencame the third stage, we said, why not we have a UPI? And that is anotherwatershed.
16:24
When the UPI came, NPCI was put in place, the mandate was tofind out how the customer can be best served by the various multiple serviceproviders, vendors. Then it evolved. And today you see that UPI is thebest game in this, not in this country, but globally. Correct. We are sellingUPI technology to globally. I'm not talking of Africa, even for developingcountries. They are all lining and looking towards us to provide them with thesolutions. Correct. So I think what I could actually see as a trend, right? Soyou started with the thing that earlier, most of the common man was not evengiven an access to the bank, right? So this is how it started.
17:06
But then in terms of changes, in terms of technologicalchanges, it first came in on the back office, wherein we were looking atmanaging the bank in a better manner. But then more and more as we progressfurther in the current century, the customer started becoming more and moredemanding. Customer started becoming the first priority. So a lot of changes,like you mentioned, around checks or ATMs, then laptop, mobile banking, andthen even UPI.
17:34
credit cards are all revolving around customers. Absolutely.But at the same time, we continue to evolve our back-end office operations aswell. Maybe not at the same speed at which we are moving the front officeoperations like customer-related technology. But that's the trend that I couldactually understand from whatever you explained. So I also want to link it backto your experience. And I want to contrast here. So you work with publicsector.
18:02
Then you also worked with private sector. What are some ofthe key differences or key changes you could see? So, for example, when youwent from one government bank to a private bank and then also joined agovernment bank back, what kind of differences you could actually observe inthe approach or the way things were happening there? See, you can put it innumber of buckets. But the key things I would like to say is that the decisionmaking in a private sector bank is much faster compared to a...
18:31
bsu bank and why is that the reason is because there is avery well defined chain of how a particular decision to be taken and i can sayas far as technology and banking is concerned there was also some kind ofreservation risk averseness if we do this how will i balance my books in theevening today i know how to do it but tomorrow i put this technology i won'teven know what is happening and second is the people
19:00
The people who were historically coming from a, you know,ledger-based banking, for them, they didn't understand what they will do whenthe, you know, evening you get the balance sheet. They didn't believe it. Andtraining them was the most difficult thing. Today, you don't find that becauseeveryone who's coming from the university is savvy with the technology and heknows his Excel sheet and he knows his things. But that time, you know, it wasvery difficult. So, that was an inbuilt resistance. That was the second one.
19:30
And the third one was that finances was a big problem forthem also because they wanted to grow in lending, not putting technologicalsolution and not realizing that if they have a technological solution, it willgive a flip to their lending and deposit taking things. So these were the threevery stark differences in private and public sector, which could have changedalso in time. Because once upon a time, you know, private sector banks wereconsidered to be great honchos.
19:58
Today, if you ask me, State Bank of India's solutions areequally good. And people are equally good. Though the risk remains there thatState Bank of India has got a very wide scope of people. Starting from verysavvy people at one end and people who are still serving the industry at a verybasic level and they may not be so well versed. So that's basically thedifference I found between the two.
20:24
parts of the industry. But I would totally agree with you onthe fact that what I have personally experienced the last four or five years,especially, there's a huge push by public sector banks right now on technology.And they are currently using best of the best in terms of the technology. Theyare not behind anyway from the private sector banks when it comes to launchinga consumer-facing application. And also in terms of...
20:50
I recently saw an ad in the newspaper from State Bank ofIndia itself about, I think, a loan under 30 seconds journey that they havelaunched for their customers. But this is again, I think, coming back to thesame point that there has been a lot of shift that we have seen betweenpublic-private, what used to be a decade ago, and where we are right now. Andon that, I also want to take your view on the globalization aspect, right? Doyou think...
21:19
especially in the Indian banking context, was there acontribution from the globalization aspect? So, for example, banks likeCitibank and then there were several others like who came into India, Stanchartand all. In the last couple of decades, what was their contribution to theIndian banking ecosystem? See, it will be not very charitable if I say thatthey changed the Indian banking system. They certainly came with the new ideasand more so for making money.
21:49
But we have to give the devil his view that it was Citibankwho started the retail culture. No one knew how to borrow for your card. Andthey burnt their fingers and they did it. It was Citibank who started the ATMs.It was Standard Chartered or ANZ which started the cards. It was StandardChartered who had technological solutions available at their branches. Whateverthey were worth it. Very rudimentary.
22:16
But it was different. So they played their own role on thecustomer-facing side. But they played a huge role in offering global productsin India. We were not aware of the products which were being sold in otherdeveloped countries. Second, they were instrumental in trade across borders,which they helped.
22:39
We had State Bank of India was the only bank, maybe Bank ofBaroda and Bank of India who had branches overseas. So if they had to do with acorrespondent bank, the cost was very high. So slowly it started growing andthey helped in that. Last but not the least, they were also instrumental indeveloping the treasuries of this country. Generally, you know, our treasury, Imean, some people may not remember earlier.
23:07
the government securities, there was no mark to market. On29th of March, Reserve Bank of India gave a rate and then you had to calculateyour profits. That requires technology. Similarly, rupee dollar exchange rate,we had no benchmark. From where do you get the two-way code for them? Soall that was facilitated by the foreign banks. And that was slowly imbibed bythe private sector banks and the foreign banks. And they had. State Bank ofIndia, it ran the country's treasury and do whatever it had to do. But a smallbank, let's say Bank of Maharashtra, which had very limited resources andtreasury, it had to take the cue from the big honchos.
23:55
So, that was another positive role played by them. Products,as I mentioned to you, in trade, commerce, and in the earlier 25 or 7 or 10,when India started going outward, then many of these banks helped inacquisition. Whether it was Chorus. whether it was Jaguar, so many Indiastarted going out. And today also India is looking at various acquisitionsoverseas. And these banks play an important role because they are the domesticbanks of that. Correct. So, and to your point, when you mentioned about Citibankand Stanchard, I can actually relate to it. Because I still remember the firsttime I went to an ATM, it was Citibank ATM. I went with my father and weactually took out cash. That was quite a...
24:44
And then first time experience for us. And similarly, myfirst credit card was a Stanchard card about 18 years back. So I think in thatterm, you are actually right that or maybe I think we were more exposed tothose kind of banks, but we could actually see these two brands veryprominently when it came to technology at that point in time.
25:05
When technology is changing around banking and all, and wesaw a lot of changes recently, in the last five years especially, we have seenso much of action around fintech especially, right? So two things I want tounderstand from you on the fintech aspect. The first one is when everything ismoving at such a fast pace, everybody's trying to deliver the best-in-classcustomer experience, how can the regulator be up to the speed?
25:32
to this technological revolution? Would they always be justcatching up or playing some kind of catch-up game on this? Or what is yoursense on this? How can the regulator play a part in innovation at the same timefueling better customer experience through banks? Nitin, I would say that thisis an age-old observation about people, about the regulators not catching up.It was in 2008.
26:00
When all that happened, they said that the regulator isalways behind the curve. Maybe true. Ultimately, he's only regulating thingsand he can't catch everyone who's doing wrong. It's like a police station. Ifthe police station SHO is very strict, then the number of decoities or numberof wrong things will be less. And if he's lax, then every third man can say, Ican get away with it.
26:24
Similarly, the regulator ensures that the financial systemof the country is stable and has the acceptability of the people and not risktheir money. But having come to the second part, whether core banking, who wasthe leader? RBI only told them to be the leader. But they couldn't push credittruncation. RBI did it. Allowing ATMs. RBI did it.
26:53
having NBFCs and the fintechs around. Today, we are afintech capital of the world. It was not done without the blessings of RBI. Buttoday, you have a separate entity of RBI, which is the Sandbox, where it isallowing all the fintechs to come and showcase what they are doing and get apre-approval for them and go ahead.
27:14
Rather than people creating their own soft solutions andtrying to roll it out, which actually may be not in the interest of the personor the company which is using it and the users. So, from that point of view,the regulator has to be little cautious, pussy-footed and doing things afterunderstanding because it is protecting the hard-earned money of the depositor.So, I would strongly feel that yes,
27:44
Regulator can't be everywhere, but it can create policiesand environment to take the fintech company in the right direction for theinterest of the country, economy, banks, and the consumers. Ultimately, that'sthe whole objective we have. And that's what is a typical case of our UPI,where we have mastered it.
28:07
Maybe it was, you know, we took advantage of the situationswhich were not so good. Like when we had the demonetization or we had theCOVID. That was the time when the flip was given to them. And we couldn't eventhink that how will he survive without a note. And we all did. And I'm suresomebody in Reserve Bank or somebody in the government had that vision. But for140 crore people, that vision has to be shared and taken in the rightdirection. I'm sure. So, and the other side of it.
28:37
And I remember you were talking before our discussion abouthow NBSs became regulated. Similar to that, today, a lot of fintechs are out ofthe purview of RBI, right? But where do you see this actually going? Becauseend of the day, the role of the regulator is to keep everything kosher and asper the norms in the best interest of the consumer.
29:05
But at the same time, fintechs continue to work with banksto create better products for the consumers. And back in the days when we sawabout NBFCs, do you see a similar story panning out with fintechs in the comingdays? See, ultimately, a regulator also has its own limitations in the form ofpeople. It can only give directions and then, you know, look them from thepoint of view. But having said that,
29:33
The framework which the regulator has created where thebanks are the licensed entities. And then there are NBFCs who are also licensedentities. And beyond that, they have said that if you are supporting, givingvalue to these licensed entities, then you are a RE.
29:53
Which means indirectly you are a regulated entity andReserve Bank of India has the right to go and look at the risk management,technology and other aspects which you are doing. So that's an indirect way ofhaving a… not a detailed one, but overlooking onsite on the people who areinstrumental in helping or facilitating the financial sector. Now, is this aright way of doing it? I don't know. But I think what I have seen the last40 years, it's a very efficient way of doing it. And what they are saying is thatI can go and look at the bank. I can go and look at the NBFC. Now, there also,there were so many NBFCs. They are put in three categories. If they're topcategory, we'll see it more often that way. So, they control those regulatedentities or those licensed entities and ensure that whichever are the regulatedentities or fintech providers, they are…
30:51
behaving in the manner Reserve Bank would like to do throughtheir licensed entities. That's the best way to do it. It's like a principalappointing a monitor in the class. He's not looking at it, but the monitor isensuring that everyone is behaving the way he's supposed to behave. So let'stalk about what is there to come in the coming decade. So what do you think orwhat do you foresee would be some of the key elements that would be comingtowards the banking?
31:20
industry in the next one decade or to be more precise by2040 if somebody a banker wants to stay competitive and relevant what are someof the key things that they should start preparing now or if you let's say ifyou're talking to a CEO of a bank what would be your advice to them right nowhow should they start preparing for the next 10 years very difficult questionespecially when it is a you know gazing into the future and it's very difficultto give any
31:50
pointed out things. But I can attempt to give you myperspective. But I have to say with a pinch of salt that the way the industry,the way the financial sector, the way the economy is growing, it isunbelievable, unheard of. One could never think in my younger days that Indiawould be the fourth largest economy of the world and we're knocking at beingthe second or third. One could never see.
32:15
The banking kind of banking which is being done today, donethat time. So with that thing in mind, what I see now, I would put it in aboutthree boxes. The first box is what I see in the next two years. Then in thenext 10 years. And beyond 10 years, you know, to quote unquote Karl Marx, inthe long run, all of us are dead. So we can always leave it to the people tojudge and see what happens. I think in the next two years,
32:44
I see the banking industry growing pretty fast in the areasof rural and SME because it is government driven. And for that, it will requirea huge amount of technological solutions which can only be provided by thefintech companies or by the fintech companies who are able to partner with thebanks. And extreme case, allow their solutions
33:13
to talk to the core banking solution of the banks.Ultimately, if you have a seamless solution, that's the best. So, one thing Isee that, that the banks will be more looking at the help from the financialsector of fintech area to help them. Not only to help them, but also to upgradetheir own solutions. Ultimately, core banking solution has a finite life and avolume. Beyond that, it has to upgrade itself.
33:43
Not because it wants to, because the next door neighbor hasgot a much better solution and he has to be competitive with him. So, therewould be a huge amount of focus by the banks, which was front-ended now, butwill have to go to back-end. For example, storage. I mean, the amount of…everyone says cloud, but cloud also has a limitation. Now, India today has only3% of the global storage.
34:12
of data churned. And we churn about 9 to 10% of the globaldata. Where would it go? Who will give that facility? So that is going to beone challenge where the technology will have to find a solution for the backend also. And solutions for that. The second area which I find is that alongwith this, and sorry for being little cautious, there is a huge amount ofpotential losses to the depositor.
34:41
investor and the banks which in loose term we call as fraudsso we'll have to do a lot of you know effort to ensure which could be puttingtechnological solutions like in reserve bank of india said key two-wayauthentication and now they are coming with the third one where you either youknow your retina could be there or something so all those things are evolutioni didn't tell you that these are humongous changes
35:08
We didn't even know where the credit card is being used.Today, all of us know where we have used. So, that is the technology. I thinkthe storage is one. The third one, which I find is going to be a huge challengefor the banks, is the new Act on Data Protection. DPDP. DPDP.
35:30
That is because we are not used to it. We don't even know.We don't even know what the value of data is, how it has to be stored, how itcan be misused. So that is going to be a big challenge for the banks in theyears to come. And last one, which I personally feel is going to become a hugechallenge was, is that the customer is going to be more hungry. And the bankerwill have to provide him the services. But it may not have the wherewithal.
36:00
of technology and people to do that. Correct. And we have aclassic case of one Southeast Asian bank, which was called the darling of thebanking industry in technology. And today we look back and they say, I thinkthey have bungled up. Three regulators have penalized them. Now, you know,holding queue on the side of the bankers. I mean, as a CEO, what do I know thatwhat is happening in that particular thing and what KYC has done or not?
36:29
But you have not put the processes in place, which has ledto a situation where the regulator had to reprimand you. So these are the fourthings I see in the next two years, how the banking industry is going to facethe challenges. Then coming to the next part, this was more on the structuralfront. On the business front, there is again going to be a challenge because aswe speak, the deposits are not coming.
36:55
Our capital markets are booming and banks are not gettingthe money deposits. If they are not getting the deposits, then they are notable to lend. If they are not able to lend, how will the growth happen in thecountry? Somebody can say that the capital markets will give the money. Butthat's a far cry. As of today, the model is that the banks give money to theindustry to invest. And in turn, the growth of the country happens. So that isgoing to be a big challenge.
37:21
The third one, or the mid-long term, is that bankingindustry will have to consolidate at some point in time. Which has beenhappening. But why is that the case? Why it should happen? The reason isbecause it may not be viable for a road to have six banks. That's why in thelast five years, there are more than half a dozen PSU banks which have beenmerged.
37:49
And if you look at private sector also, there is a weakbank, he has to merge. So, that is also one of the things which I foresee, thatthe banking industry will have to consolidate to become more efficient, bothcost-wise and customer service-wise. So, medium term and long term, this is thetwo things I am seeing.
38:10
And if you're looking at next 20 years, I think in the next20 years, the banking industry will look totally different from what you'relooking at now. It is like telling you that 30 years ago, we had a branch whereyou would open at 10.30 and somebody cleaned the tables and then had chai andthen people came and took the money. And today, it's not that. Maybe 20 yearslater, which you are already seeing it, that 50% of the people who are bankingwill not even enter a bank. They will do it at home.
38:40
Many of us are cohort. And I am sure the millennials aremuch better off. They have not seen the bank. They don't need to. That willrequire a different mindset for the bank also. That if there are no footfalls,does this model work? We still have a brick and mortar model. But is it becomeinefficient? Or unproductive? Or there is something better than that? So theseare the 3, 4, 5 things I see. How the banking… And then…
39:08
globalization is another problem with that happening youwill have to bring yourself up to speed to the global standards and the lastthing which is my personal view i think manpower is the most important thingand a skilled manpower yeah and a manpower which is fit for purpose so manpowerwe have skills we are trying to develop it takes time but are they fit forpurpose is a question mark
39:38
So if there is a sea change in the banking industry, therehas to be corresponding change in both technology and the manpower to managethat change. Otherwise, you give a Jaguar to a person who doesn't drive. Hewill polish it and keep it. But what's the use? Sure. I think these are greatpoints. Actually, I was thinking I'll summarize it. But somewhere I just losttrack of because there were so many good points around it. So for the viewers,maybe we'll just try to summarize it some way and share it.
40:08
with them on some channel but since you talked about theskill skill set that would be required right for the next generation of ouryouth who are let's say graduating right now or would be graduating in next 10years in terms of skill set what specific thing might be required if they aregetting into the banking industry and how would it be different so when you gotinto banking back in 1980s
40:36
versus now, what kind of radically different skill setscurrently are required? And maybe if you think what hasn't changed at all fromthen to today? See, I've been out of the banking industry for three, fouryears, so I wouldn't be able to give you the current thing. But what has notchanged the framework which was created 30 years ago for organizational bank,organization of the bank? Okay.
41:03
Now, that framework still continues that if you have got 18branches, there has to be regional manager. If there are five regionalmanagers. Now, that is maybe not required because you have technology. But themindset is that the regional manager, when she wants information, tells thebranch manager. Why can't you open your laptop and find out it is there? He'snot going to give you something more. That's the mindset change. Now, that's onthe people who are in the bank. For the new people who are looking banking asan industry,
41:31
I think the historical way of joining a bank at a clericallevel or at the probationary officer level is no longer as attractive. Becausepeople who have ambition, they will say, after that what? So, there has to benow change in a recruitment of the banking industry which is more specialized.Today, I am sorry to say, the…
41:58
If I can use the word, the stock of bankers who are riskmanagers per se is very small. RBI has been telling everyone, please developyour risk capabilities. Earlier, there was certification for risk managers andall those. Today, it's not required because it is automated. For a credit card,you don't need a risk manager. For a car loan, you need a risk manager.
42:26
Now, you have to develop that category of people who look atit as a specialist. Now, which bank ever thought that they need to have a chiefrisk officer? Only 10 years ago, they said you have to do it. Which bankthought they need a CTO? No one thought.
42:46
Now, you may come with a situation where banks are told, weneed a data management officer also. So, those are the new areas we are openingup. And banks will have to come up to speed to get specialists in those people.Rather than saying, Rajiv, now you are the GM. Now you become GM fraudmanagement. Or something like…
43:11
So I think that is something which has changed. And thebanking sector, you know, I remember when I was, I don't know what, 10 yearsago, the average age of PSU banks was 58. I mean, who's going to lead the bank?And there was a huge vacuum in public sector banks where they had to reduce thepromotion to EDs from 56 to 52 or whatever it is. But they have to do their HRmanagement to ensure that people come in place.
43:40
And one of the points that you mentioned that maybe we needmore risk managers in the bank. That's one part. Maybe technology people. Cantechnology actually replace them? 10 years down the line, can technology managemost of that? Do you think so? No, it can't. Risk is a risk. Because therisk of a bank only you can know. You can have parameters and measure it. Butyou cannot say now the technology. Otherwise, if technology could manage therisk, then we don't need human beings. You put in the details and the moneywill come out. Somebody has done it. And one thing which I also feel needs aspecialized people is cybersecurity. No one is talking about it also in India.There is a huge, huge risk which we are sitting on the cybersecurity.
44:21
So these are the areas which are the specialized areas forwhich there should be a huge demand in the banking industry and carders shouldbe built rather than feel sorry at a later date. Sounds good. So Rajiv, I thinkthat's what we wanted to cover today. It was very insightful talking to you andall the topics, especially on the last part where you mentioned what is thereto come in the next one or two decades. I think it would be very valuable forour viewers if they just...
44:48
go through those points and try to identify what could beopportunity areas whether somebody who is just getting into a banking job howshould they shape up their career somebody who's who let's say wants to becomethe cto or just become the cto of the bank what are some of the things thatthey need to plan similarly for a ceo i think a lot of those points would bevery insightful and valuable any parting thoughts you want to give to thepeople who are watching the podcast right now
45:17
Well, having been in the banking industry for four decades,I love it and I wanted to flourish it. And all of you have to make yourself upto speed and good enough to take this to further heights. Because this is onearea, one industry, which is not dedicated to itself, but dedicated to allother industries to grow. And we can be the engine of growth of the economy.And I think please play our roles well and be happy and satisfied.
45:47
Great. Thank you so much, Rajiv, for coming on the podcast.Thank you for giving me this opportunity.