should not be subsidizing the provision of banking services to the rich. besides, an effective pricing framework can assist in building up balance sheet strength by encouraging good business and shedding bad business. however, for all this, banks need to develop the ability to identify risks and to build them into their pricing frameworks. in order to improve productivity and efficiency, banks need to be given more flexibility in operational matters, particularly in manpower practices. in fact, i strongly believe that hr practices at banks, particularly psbs, need to undergo significant change in areas such as manpower planning, job description, performance appraisal, promotion and placement policies, performance based compensation practices, etc. attaining greater productivity and efficiency requires not just the right technology, systems and processes, but also the manpower with the right skills and attitude, demonstrating the necessary flexibility and adaptability to be able to keep pace with the changing times. greater emphasis has also to be laid on productivity in terms of per branch and per employee performance. lastly, but most importantly, there is an urgent need for improved governance and greater accountability across all levels of management and administration. the change in corporate culture and the move towards true productivity and efficiency needs to be led by managements in their respective organizations. the pace and direction of these changes will be determined by the passion demonstrated by the management in pursuing this change. banks have a great opportunity 32. the theme of the conference alludes to the paradigms of the next frontier of productivity excellence. to me, there are three major ingredients that contribute to productivity excellence, viz. technology, processes and people. i believe that significant opportunities lie ahead for our banks to leverage on these three components to attain true banking productivity and efficiency i. e. both operational and allocational. on the technology front, our banks have already implemented certain basic technology and are all on cbs. they are, of late, also making efforts to incorporate new technology mediums in their delivery channels. on the technology front, banks have the opportunity to perfect their technology based delivery models so as to significantly reduce costs and improve penetration of banking services. 33. on the processes front, as i had mentioned earlier, the opportunity for banks is to carry out large scale business processes and structure reengineering in order to reap the full benefits of technology. here, i would emphasize the need for changing transactional processes, business delivery models and use of customer relationship management ( crm ) tools to bolster efforts towards productivity and efficiency.

34. on the people front, the opportunity lies in the form of large scale retirement of bank employees that is to happen in this decade. the consequent change in manpower profile bis central bankers ’ speeches provides a unique opportunity for banks to right - size and right - skill their organizations in line with the demands of fostering greater productivity and efficiency. conclusion 35. the indian banking system has seen important productivity improvements over the last two decades with the psbs, in particular, bridging the gap with new private banks and foreign banks. however, the pace of progress has declined, largely due to lack of desired impetus. we continue to lag behind several other countries on various productivity parameters. our banks have to strive towards closing this gap. 36. banks ’ gains in operational efficiency have, however, come at the cost of their allocational efficiency. the improved operational efficiency has been a result of technological progress and structural changes in balance sheet towards more wholesale business. the operational efficiency gains, though profitable for the banks, have not had the desired beneficial impact on the society as a whole, particularly the rural areas, individuals and small businesses. i would say that the vulnerability of the banking system has increased on account of the imbalances arising from growth in operational efficiency without commensurate rise in allocational efficiency. let me add that both reserve bank of india and government of india have already initiated several corrective measures to reverse this trend by actively promoting the programme of financial inclusion. the correction process needs to be expedited further with greater zeal and vigor. 37. banks have to ensure that they attain greater allocational efficiency by extending access to financial services to the unbanked masses and providing the excluded poor the opportunity to leverage the financial system to improve their economic condition. true productivity of the banking system can be judged not just by the positive impact on banks ’ own financials but by the impact it has on the lives of ordinary citizens. i hope the indian banking system rises up to the challenge of attaining productivity and efficiency in its true sense and thereby contributes to the economic growth and prosperity of the nation. 38. i once again thank ficci and iba for inviting me to fibac 2013 and providing me the opportunity to share my thoughts on this important subject. i observe that several of the issues raised by me here also find resonance in the report presented by bcg today and that they will be deliberated over the two days of the conference. i wish the conference all success.