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Risk management is not something new. Every employee joining a bank starts learning about the risk inherent in banking operations from day one. However, of late, the risk has increased substantially due to various factors narrated below:
Globalization: Despite opposition to it, globalization has come to stay. Trade barriers have reduced considerably. Capital movement has also been liberalized to a large extent.
Deregulation: Interest rates have been deregulated. Exchange rate of rupee is market determined, though RBI often intervenes to keep its value low.
Competition: Competition has multiplied. The new generation private sector banks are giving a stiff competition to public sector banks. Moreover, the process of disintermediation has also affected the public sector banks adversely.
Technology: Rapid growth of technology has many benefits. Unfortunately, public sector banks are yet to leverage their recently acquired strength in this area. In the meanwhile, risk relating to technology has increased substantially.
Manpower: Public sector banks are handicapped by age profile and low technical skills of their employees. |
