SFBs need to strengthen their information technology infrastructure for better customer experience and cyber security resilience, the RBI noted in its report ‘Trend and Progress of Banking in India 2020-21.’
The primary cashflows of SFBs were adversely affected during the first phase of the pandemic. Even before that, structural problems have beset the sector. Many SFBs have concentration risk on both sides of their balance sheets. On the liability side, they have low CASA/retail CASA deposits and rely heavily on bulk deposits and term deposits from co-operative banks. On the asset side, the share of unsecured microfinance loans is disproportionately large. From the perspective of sound risk management, SFBs need to diversify their assets as well as their liability profiles. The governance culture in these banks needs improvement. High attrition levels, especially at the top ranks, need to be addressed, the regulator stated.
On payment banks, the report observed that given the higher incidence of fraud and complaints about their operations, PBs need to be vigilant on these fronts while addressing customer complaints efficiently. They have a large network of business correspondents, who facilitate a wide geographical reach and financial inclusion. This, however, necessitates close oversight to ensure continued public confidence in digital transactions.
The report highlighted that going forward, challenges facing PBs will include the development of technologically sound and intuitive user interfaces that attract and retain new clientele. On the other hand, the potential increase in the volume of customers necessitates diligence in terms of security and timely resolution of glitches.