Finance and banking are closely related fields that deal with the management of money, assets, and financial transactions. The industry is complex and continually evolving, with professionals specializing in various areas to provide efficient financial services and support economic growth.
In a recent speech at an AI summit in Switzerland, IMF's Gita Gopinath warned that the full disruptive effects of AI on the economy may not be apparent until a downturn, potentially leading to a crisis. She highlighted AI's potential to exacerbate recessions, posing risks in labor markets, financial markets, and supply chains. Gopinath recommended enhanced regulation, investment in human capital, robust AI models, and collaborative international efforts to mitigate these risks.
The increasing demand for convenient, secure, and rapid transactions has driven the widespread adoption of digital payments such as card payments and e-wallets. Two-thirds of adults globally are now engaging in digital payments, with significant growth in developing nations, particularly in Africa and Asia. Despite the benefits, challenges such as privacy concerns, cybersecurity risks, and exclusion of vulnerable populations need to be addressed for a smooth transition to a digital economy.
Before the 1990s, the year-end closing ceremony at banks in India held considerable importance, requiring extensive manual effort. The meticulous tasks of calculating interests, balancing accounts, and concluding the financial year not only fostered a festive ambience but also strengthened the bonds among employees. Despite the challenges of manual banking and occasional tensions among union leaders, the camaraderie and collective commitment are nostalgically cherished. While technological advancements have phased out these traditions, the spirit of those year-end festivities endures in the memories of those who were part of that era.
In the era of digital transactions, the capacity of different payment systems to interoperate, that is, work together seamlessly, is essential for the success of instant payments. The lack of interoperability creates barriers to the growth of digital transactions. The Indian platform UPI exemplifies interoperability, with users able to send and receive payments across different UPI apps. Beyond fostering competition and innovation, this interoperability supports cross-border transactions and boosts financial inclusion. Despite challenges varying from technical complexity to regulatory restrictions, stakeholders can adopt common standards, use APIs, and heighten security to attain interoperability for instant payments.
In 1985, Hari Prasad joined a bank in Meerut and was instructed to double his department's deposits. Prompted by a peon's comment about sex workers always having money, Hari proposed to open bank accounts for this marginalized community. Despite initial resistance, the idea was successful, quickly doubling the bank’s deposits. This innovative approach proved controversial but ultimately led to financial inclusion for a typically excluded group, earning Hari the respect and support of both his colleagues and local community during a time when financial inclusion was in its early stages in India.
The Trade Bank of Iraq (TBI) transformed the country's banking sector through the adoption of a centralized core banking system in 2010, despite political instability and infrastructural challenges. The system, implemented in partnership with London-based Misys, revolutionized daily banking operations, such as deposit management, trade finance, and financial record keeping. The initiative marked a significant milestone for Iraq's banking, facilitating financial inclusion and digital innovation, and set new standards for efficiency and accessibility in the sector.
Central Bank Digital Currency (CBDC) is the latest buzzword in the world of finance and banking. The Indian government has taken a major step towards digitization by launching a CBDC wallet. This move is expected to revolutionize the way financial transactions are conducted in the country. While there are some challenges associated with using digital currencies, the benefits outweigh the risks. As India moves towards a more digital economy, it is imperative that we embrace new technologies such as CBDCs to ensure greater financial inclusion and security.
The Indian rupee (INR) is gaining international acceptance, with 18 countries agreeing to trade in INR, and the UAE considering settling trade in rupee-dirham. Trading in INR offers benefits such as reduced exposure to exchange rate fluctuations, lower transaction costs, and enhanced economic sovereignty for India. While India aims for international currency status, challenges remain, including exchange rate volatility and capital flow restrictions. Despite challenges, INR's growing international use enhances India's economic influence and stability.
Credit Suisse was once one of the world's leading banks, with a reputation for innovation and excellence. But in March 2023, it shocked the financial world by announcing that it had run out of cash and was being taken over by its rival UBS. How did this happen? And what can other banks learn from its demise? Credit Suisse's collapse is a cautionary tale for all banks that want to survive and thrive in the post-pandemic era. They need to be agile, customer-centric, and responsible if they want to avoid becoming obsolete or irrelevant.
Silicon Valley Bank (SVB) was a well-capitalized institution seeking to raise some funds. Within 48 hours, a panic induced by the very venture capital community that SVB had served and nurtured ended the bank’s 40-year run. While relatively unknown outside of Silicon Valley, SVB was among the top 20 American commercial banks, with US$209 billion in total assets at the end of last year. Faced with higher interest rates, loss of IPOs, and a funding drought, SVB’s clients began pulling money out of the bank. Lenders somewhat similar to SVB are in an unfortunate situation. A failure to protect deposits over $250,000 could cause a loss of faith in other mid-sized banks. Analysts said SVB’s collapse is unlikely to set off the kind of domino effect that gripped the banking industry during the financial crisis.
Indrosphere 