PSBs to launch new schemes to support startups, gig workers under new reform set for FY26 launch

New Delhi: Public sector banks (PSBs) will soon launch financial schemes targeted at start-up founders and gig workers while finalizing new credit appraisal mechanisms to build credit -resilient banking.

The aim is to empower start-up founders and gig workers with products that are tailor made to support their entrepreneurial spirit which often fails to get encouragement through funding.

According to two people aware of the development, the department of financial services in the finance ministry has asked banks to devise a strategy to support and empower emerging segments such as start-ups and gig workers as part of the EASE 8.0 or Enhanced Access and Service Excellence reforms agenda.

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They have been asked to focus on risk assessment and building financial and credit risk resilience, NPA management, financial inclusion, customer experience transformation, digital transformation (business process re-engineering) and innovation through reimagined business models and use of artificial intelligence.

The new version of the EASE common reform agenda for PSBs, which would be launched for implementation in the next fiscal year. It will be called EASE - Rise (risk & resilience, innovation, social economic impact, innovation), the first person quoted above said.

EASE - Rise would also require PSBs to modernize and renew their technology, improve, and strengthen data quality and privacy and pursue lean banking models through branch optimization and other cost optimization measures.

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PSBs would also organize incubator support programmes to connect startup founders with incubators that could help in scaling ventures.

The business process re-engineering goals will require banks to digitize internal and external workflows next year while banks would also encourage banking through new age channels such as mobile banking and frontline digital assurance assets.

Queries sent to the finance ministry remained unanswered till press time.

“The PSBs have been on a continuous improvement journey under the EASE framework. While a lot of progress has happened in prudent lending practices, risk management primarily from a credit risk perspective, but more needs to be done in the domains of governance within the a focus on risk culture, compliance culture and audit culture. On technology , more needs to be done from a third-party risk management standpoint especially at a framework level given that a lot of focus today is on vendor audits without the much-needed holistic view. We do believe that the PSBs have made good progress on data driven banking, but hyper personalisation of experience is a journey that they still have achieved only in pockets.,” said Vivek Iyer, Partner and Financial Services Risk Leader, Grant Thornton Bharat.

Towards responsive, responsible

The EASE reforms started off in FY19 with the idea of making PSBs responsive and responsible. The next year - EASE 2.0 focused on clean and smart banking. The third version of reforms in FY21 required PSBS to strengthen their technology platforms to allow for smart tech banking. The next three reform initiatives upto FY24 focused on simplified and collaborative banking; data driven, integrated and inclusive banking; and customer friendly banking. Customer delight and resilient banking is the focus of EASE 7.0 reform agenda in the current financial year.

“EASE reforms mandate the strategic outcomes expected and measured for. There is no handholding on the path to realize the outcomes. So, consistency amongst banks and efficiencies that could be realized through best practice sharing are not fully leveraged. Moreover, banks should provide more focus around data quality, governance, data models, data dictionary, PII, data pipelines, data lakes and warehouses and automated / statutory reporting including IBA reporting for better transparency. Moreover, PSBs should also be segmented into large, mid, and small banks. Segmentation can make benchmarking more real, options to have a mentor bank collaborating with member banks of the segment to solve their common challenges and will motivate banks to aspire, grow and upgrade,” said Aarthy Rangarajan, Partner – Financial Services Consulting, EY India.

The bank reforms are governed by the EASE Steering committee of the Indian Banks Association. It aims to bring an exhaustive and all-inclusive revamping and enhancing the capabilities of PSBs to meet the changing demands of the banking landscape. It also offers a common platform for all mid-size and large banks to establish and reinforce industry`s best practices resulting in better services and improved experience for the customers of PSBs at large.

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