The year 2016 was a turbulent and path-bearer one for the banks, stock markets and NBFCs (Non-Banking Financial Institutions). First the Brexit announcement in the middle of the year and then the dual co-incidence of Donald Trump’s victory followed by Prime Minister Narendra Modi’s demonetization scheme – have affected the banking industry to a certain extent for sure.
In November, once the Demonetisation decision of the old notes of higher denominations of 500 and 1000 INR was announced, people immediately went frenzy. The banks were instantly flooded with the currency notes of 500 and 1000 INR as both currency notes ceased to remain a legal tender anymore.
These two notes constituted around 85% of the nation’s currency in circulation, so after the demonetization decision, a nation-wide cash crunch situation ensued. It was further aggravated due to long queues at banks branches and ATMs followed by the limit on cash withdrawals from bank accounts.
Banks are overburdened with liquid cash now and they have to put them for investment purposes and productive uses. Some major banking trends are ready to take place in the coming days. However, the scene will actually become crystal clear only after the union budget 2017.
Upcoming Banking Trends 2017
- Entry of Payment Banks: Many new banks are expected to launch in the coming year. Around 10 small finance banks and eight payment banks will be launched very soon in 2017. Airtel Payments bank has already started its operation in Rajasthan, and it will soon begin its nation-wide operation too. Currently, it offers 7.25% interest rate on saving accounts (against normal 4% offered by other banks).
- More Loans and Advances: With the banks obtaining an enormous pool of surplus money in the form of deposits, there is no doubt that the New Year will see a sharp rise in loans and advances by the private and public sector banks. Though private sector banks are more liberal towards offering loans, but after demonetization, public sector banks will also start giving more loans to customers with fewer paper works, formalities and processing time.
- Promotion of Electronic wallets: For transaction purposes, people will now get their electronic wallets linked to bank accounts for smoother transactions. Mobile apps and e-wallets like paytm and freecharge will get a massive boost in 2017. People will keep lesser cash in their pockets and may pay more via paytm and other apps.
- The Merger of SBI and associates: Next year, India’s largest bank – the SBI (State Bank of India) and its five associates might merge for easier banking operation and more flexibility. This will empower the SBI and its associates to take greater risk and offer more loans to customers.
- Changing Trends in Microfinance Industry: India’s Rs. 60,000 plus microfinance industry will get a complete makeover soon. These micro financial institutions mostly do their transactions on a cash basis but after the Modi’s demonetisaion announcement they will move towards cheque and bank transfer for transaction purposes. Advancement of loans and their repayments are also expected to go paperless. MFIs are shifting towards offering payment via mobile apps and bank transfer. This will keep the customers in the loop and prevent further bad debt and cheating.
Though people are expected to be largely benefitted by such expected banking trends in 2017, but only the time will reveal the actual benefits of these banking trends for customers in reality.