Keep your eyes peeled for these 5 financial trends in 2016
The world of finance has had to keep up with the quickly developing times in the recent years and 2016 will continue to witness major developments in the financial sector. Experts predict that we should see a number of financing trends in 2016 with different banking models such as small finance banks and payment banks. Also, already existing banks will try and catch up with these newer models and the new financial technology being released.
- The rise of payment banksBetween 2016 and 2017, you can expect to see the introduction of eleven new payment banks. These new banks expect to reach a wider range of customers through their mobile banking services rather than traditional banking. Keep an eye out for their strategies that aim to convert their customers to consumers of their financial products. You must also watch out for the deposit rates these banks offer. The rates can be high and could possibly disrupt the semi-urban and rural market for lenders in the area. Transaction volumes will be less at first but promise profitability under pressure.
- Small finance banks to dominateThis year will also see the rise of 10 new small finance banks. Most of these banks that have received their license are microfinance firms who are looking to become lenders while collecting a deposit. The problem these organisations must overcome is to raise their funds from local markets and to reduce their foreign holdings by about 49% to keep up with the rules put down by the Reserve Bank of India. One of the finance trends in 2016 that you can expect to see are some public offerings from these banks at first, but once they launch they will compete with payment banks for deposits and traditional banks for loans.
- Deposit warsIn India, the deposit market hasn’t changed very much. Most banks have offered a regular 4% on savings deposits and stuck to the same even after this deregulation in 2011. Some people think that payment banks can change this, while other speculate that these organisations will not be able to make a large enough profit to offer higher deposit rates. Another financial trend to watch for in 2016 will be to see if the government will be more flexible with rates that are offered on smaller saving methods. This could also make fixed deposit rates fall faster, thereby improving the monetary transition in the country.
- Debt reconstructing Banks have become more aggressive with their policies, especially while dealing with companies defaulting on repayments, thanks to the Reserve Bank of India’s Strategic Debt Reconstructing (SDR) that was introduced in June 2015. SDR has been invoked on at least nine companies already. This will be one of top finance trends in India where the year is bound to see banks finding suitable buyers for the majority of the equity converted from debt from these 9 companies.
- Clean up of bank balance sheetBanks have been taking the lead in selling stressed assets in the economy after the stressed asset scenario began stabilizing in the country. With this, banking regulators predict that the problem of non-performing assets should be tackled by March 2017. The RBI has provided banks with numerous tools which will monitor assets to ensure there is no misuse.
The New Year is a critical time for new banking models and traditional ones as well. You will be able to see a number of new developments in this New Year, but keep an eye out to see what scenario will suit your financial situation.