CURRENT AFFAIRS : BANKING & FINANCE
Reserve Bank of India Study Shows Private Banks at the Forefront of Artificial Intelligence Adoption
- Artificial Intelligence (AI) adoption in India is gaining momentum, particularly among private banks, with asset size and CRAR (Capital to Risk Weighted Assets Ratio) being key factors influencing the rate of adoption.
- The size and financial health of a bank, measured by CRAR, positively influence the bank’s focus on AI. Larger banks benefit from economies of scale and have more investment capacity for AI technologies.
Key Highlights :
- Text Mining Study (2015-16 to 2022-23): A text mining analysis of Indian banks’ annual reports from 2015-16 to 2022-23 shows a significant increase in AI emphasis across both private and public sector banks.
- However, the rate of AI adoption is faster for private banks.
- AI Adoption Challenges for Smaller Banks: Smaller banks face difficulties in adopting AI due to higher fixed costs and lack of economies of scale, making AI adoption relatively more challenging.
- Capital Adequacy and AI Adoption: Banks with higher CRAR are better positioned to invest in AI, as they have adequate capital buffers and confidence to pursue AI solutions.
- Increase in AI-Related Keywords: The usage of AI-related keywords in private banks’ annual reports increased by six-fold in 2022-23 compared to 2015-16.
- For public sector banks (PSBs), the emphasis on AI increased more than three-fold during the same period.
- Technologies Employed by Banks: Major technologies being employed include cloud computing, big data, automation, and data analytics, with increasing focus on newer AI technologies like Robotic Process Automation (RPA), Internet of Things (IoT), and Natural Language Processing (NLP).
Department of Financial Services Revamps Middle Management Structure in Nationalised Banks
- The Department of Financial Services (DFS) in the Finance Ministry announced a major revamp of the middle level management structure in nationalised banks.
- This restructuring aims to significantly increase promotion opportunities for employees at the Chief Manager (Scale IV) and above levels.
- Through the latest revamp of the middle management structure, the Finance Ministry has sought to level the playing field among public sector banks (PSBs) and sort out the employee level promotion discrepancies that had crept in, post the mega consolidation exercise leading to 11 PSBs in the country.
Key Highlights :
- New Framework: The new framework introduces a substantial increase in the number of Chief General Managers (CGMs), General Managers (GMs), Deputy General Managers (DGMs), and Assistant General Managers (AGMs) across the 12 nationalized banks.
- Executive Posts Based on Business Mix: The number of executive posts (CGM/GM/DGM/AGM) will be determined based on the banks’ business mix as of March 31, 2023.
- CGM Post Availability: Under the revamped guidelines, the post of CGM (scale VIII) would henceforth be available in all the nationalised banks, below Board level, irrespective of the business mix.
- Categories Based on Business Mix: Nationalized banks are categorized based on their business mix:
- Category A: Business Mix of less than ₹10 lakh crore.
- Category B: Business Mix of ₹10 lakh crore and above.
- CGM Distribution:
- Up to ₹4 lakh crore: 4 CGMs
- ₹4 lakh crore to ₹10 lakh crore: 8 CGMs
- Over ₹10 lakh crore: Minimum 10 CGMs, plus 1 additional CGM for each ₹1 lakh crore increase in business mix.
- Corporate Office Placement: At least 50% of CGMs must be placed at corporate offices for Category A banks.
- Ratios of Executives:CGM ratio is set at 1:4 for all categories of nationalized banks.
- GM:DGM ratio is 1:3:9.
- Review Timeline: The methodology for computing CGM positions may be reviewed by DFS in FY27-28, based on the banks’ business mix as of March 31, 2027.
- Concerns About Saturation: A former chairman of a public sector bank expressed that despite the increase in middle management posts, the “saturation issue” may still persist.
