What is wrong with our Banks?
A few days ago our TV channels suddenly cut off from political turmoil in Kerala and flashed up a fraud in Bank ATM. The whole city was preplexed as the Police could not crack the case initially. After some days another news comes around that a robbery attempt was made ina Bank where the robber tried to get away with a computer hard disk instead of any money.
Then another fraud was unearthed in the same branch when a employee canvassed a customer for investing in mutual funds. The customer agreed for a huge amount and in the end the employee got away with the money. It is a common recurrence now, as the fraudsters have realized there is a gaping hole in our security systems. As a result fraudsters get away with easy money as the common man see their life saving getting washed off in a jiffy.
Now is there a serious study for analysing the reasons of increase in frauds. Or are we looking into quick fix solutions?
Compromise of security in favour of numbers: Sometime ago the Government launched it's flagship programme of cheap bank account for the common man. There was also a freebie of accidental insurance that came along with the plan. Soon the pressure came in Finance ministry to mop up maximum numbers. The bank officials had no option but to throw up caution in wind to rake in maximum accounts. Now this model of running a business has precolated down venomously and engulfed every form of Banking. The huge asking numbers force the officials to compromise security unintentionally.
Unscientific implementation of Technology: We Indians are so bad in innovating things. We still find it blissful to talk about inventing zeroes and nothing significant afterwards. The Banks in India were not at all into implementation of Core Banking Solutions and then one fine morning decided to adopt technology. The bank heads were very good in credit, forex, interest rates etc. But they weren't very good at technology. This resulted into huge wastage of money and in some cases Banks were nearly grounded into closure.
Unprincipled outsourcing: We are really good in implementing western ideas of management, but in a rather brash way. One such killer idea was outsourcing. Outsourcing is a concept, which in its essence is good. But implementation without studying risks involved can turn the whole concept that can destroy your organization. If we take the case of ATMs as an example, the whole operation has been outsourced for the purpose of better utilization of resources. Now the idea of outsourcing is good. But then opening more units than you can manage, without any proper mechanism to monitor can in turn lead into an avalanche of problems.
Another perfect example is when the governor of RBI commented that IT solution couldn't actually cut the cost for Banks. Now this is true when you look into SLAs the Banks entered into with IT companies. Even a small change is charged heavily and major IT operations are supported by frsh hands from college. In the race to cut costs the security became the convenient sacrificial lamb.
A serious risk no one is bothering to look into is Bank merger. Now creating a monster Bank is a great idea. But as the size of monster increease, so does its weaknesses and potential risks. Have the Bank bosses set up necessary mechanism to counter the risk?