Gyan Sangam: A Step Toward New Banking Paradigm
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The document outlines recommendations from McKinsey & Company for strengthening public sector banks in India. It proposes that smaller public sector banks differentiate their strategic focus and build specialized capabilities. It also recommends that the banks invest in developing employee skills, digitizing processes, strengthening risk management, and expanding partnerships. Additionally, the document lists a 7-point reform agenda for the government, including establishing an independent Bank Board Bureau and Bank Investment Company to reduce government ownership of public sector banks over time.
Gyan Sangam: A Step Toward New Banking Paradigm
- 1. January 2015 Summary of recommendations
- 2. Department of Financial Services | Knowledge Partner: McKinsey & Company | 1 Annexure A Synthesis of discussions Commitment from PSU banks 1 Differentiate strategic focus Re-orient portfolios for small PSU banks to differentiate, focus on specific niches to build capabilities and to optimise capital 2 Build people capabilities Invest in capability building and culture change Introduce effective performance management systems and incentives 3 Technology enabled transformation Digitise top 30 processes Deepen mobile banking penetration Big data and analytics 4 Strengthen risk management Establish rule based underwriting for retail and SME, create early warning signals and multi-channel collections architecture Move towards risk based pricing (RAROC) Create/strengthen credit bureau (rural, SME, corporate) 5 Introduce and strengthen partners/non-bank channels Provide infrastructure support (AEPS and Rupay enablement) and better manage BCs Explore new partnerships to reach the financially excluded
- 3. Department of Financial Services | Knowledge Partner: McKinsey & Company | 2 Annexure B Synthesis of discussions 7 point reform agenda for the Government Move from state owned to state linked Adopt Nayak committee report: Establish Bank Board Bureau comprising professionals and eminent bankers to appoint and empower individual bank boards Set-up Bank Investment Company; transfer government investment in banks to BIC; overtime reduce government ownership to <51% Fully empower banks on HR decisions recruitment, consequence management and compensation Create an environment to protect right decisions and minimize interference: Minimize CVC/CAG/CBI/RTI related issues Strengthen and ensure implementation of legal framework - DRT/SARFASEI/willful defaulters Strengthen and simplify processes for credit insurance (e.g., CGTMSE, housing) Eliminate market distortions: debt waivers, interest rate caps (agri loans <Rs 3 lakh) Enabling infrastructure for Digital Banking under Digital India 1 2 3 4 5 7 6
- 4. Department of Financial Services | Knowledge Partner: McKinsey & Company | 3 Move from State owned to State Linked Create Bank Bureau Bank Bureau to support creation of independent high performing boards which drive - Differentiated strategy - Capital raising - M&A strategy - HR strategy Over time transition into Bank Investment Company B C A