There is a growing need for banking facilities due to nationwide growth, international trade and industrial liberalisation which have all contributed to changes in the banking environment. Banks now offer a wide range of other services such as exchanging foreign currency, advising on investments and insurance and acting as executors and trustees besides the regular banking operations.
In recent years there has also been considerable change in the functioning of bank. There has been an increase in the amount of technology used by banks, e.g, some banks use cash dispensers and offer twenty four hours cash withdrawal facility, instant account details and money transfer through computer network. There is much more competition in the banking sector. Services have to be sold in ways never done previously.
From the regular banking operation, termed as ‘house keeping’, balancing of books and reconciliations of inter branch and intra branch entries of simple money transactions, commercial banks are diversifying their priorities.
New financial institutions like merchant banks, leasing companies, mutual funds and venture capital companies have come into existence. Commercial banks too have joined the hub of capital market activity. Hence there has been a transformation in the services offered by banks and this has led to considerable change in the type of manpower recruited. Employment avenues in quasi financial institutions have shot up. However, with demand on profit, in the banking industry, particularly in the international banking sector the total concept of seniority and promotion has been given a go-by and competence among juniors is recognised. ‘Smartest’ people matter and aggressive banking has taken over. With such professionalism pay scales have gone up and the number of employees has gone down. Banks have set right their organisational structure for efficient services.
Computers have taken over and recruitment pattern has been favorable to more technical manpower. Management graduates, Chartered Accountants, Chartered Financial Analysts are hence in greater demand in the banking sector. Presently, emphasis is on specialisation and diversification. The field of capital markets requires professional expertise.
To cater to the needs of a growing industry for marketing its shares and debentures public sector banks and financial institutions have started their own Merchant Banking divisions. Many industrial houses too have started their own Merchant Banking companies, acting as lead managers for public issues of shares and debentures, e.g., Times Guarantee, Tata Finance, etc.
Large share broking firms have also taken on the functions of finance and investment companies and acted as managers for the issue of shares and also as underwriters during public issues.
Corporate and merchant banking
Corporate and Merchant Banking are business related activities. Corporate Banking incorporates corporate finance i.e. credit risk assessment and technical aspects such as raising capital, business mergers and acquisitions and all banking activities related to large organisations. Merchant banking implies investment management e.g. management of trusts, securities, mutual and pension funds, public issue management and international funds.
Merchant banking
An up and coming segment, merchant banking implies investment management : management of mutual funds, public issues, trusts, securities, international funds and other such instruments. Merchant Banking involves offering advisory services to corporate clients on capital structure decisions, public issue management, underwriting, raising funds through public issues and from overseas markets, project appraisals besides mergers and acquisitions. With mergers and acquisitions and joint ventures and alliances being formalised by corporates for the sake of expansion, opportunities for merchant bankers have grown.
Investment banking
Banking activities are associated with financial activities such as securities underwriting, markets and arranging mergers, acquisitions and restructuring. Investment Bankers work in retail banking , with corporate clients and institutional banking. The Investment Banks hold large financial assets as they manage dealer activities and in trading and distribution of securities. Investment banks trading division incorporates the activities of Brokers /dealers of secondary markets. The function is advisory and the bank supports financial activities through lending to customers using securities as collateral or for repurchase agreements where in they use their own securities. Investment Banking is fund based and not only fee based. Merchant Banking on the other hand is fee based.
The world's top six Investment banking houses manage the major portion of new issue investment -grade securities and are referred to as special bracket firms: Soloman Brothers, First Boston, Godman Sachs, Morgan Stanley, Merrill Lynch, Shearson Lehmon Brothers. In India some of the top Investment Bankers are DSP Merill Lynch, PNB Capital Services, GE Caps, IFCI Financial Services, IDBI capital Markets, SBI Capital & JM Financial and Investment.
The role of Investment Banks is to participate in direct markets by bringing financial claims for sale. They operate to help businesses and governments sell their new security issues whether debt or equity in the primary market to finance capital expenditures. Once the securities are sold investment bankers make secondary markets for securities as brokers and dealers. They are largely doing underwriting business. Investment banking can be carried on as part of the normal range of business activities. In India ICICI can be regarded as an investment banking.
Treasury and forex function
With the increase in forex flow in the country and the increasing reliance of corporates on the international market in sourcing their fund requirements, the treasury and forex functions are becoming increasingly important.
Since fund management is an important determinant of success of any business, treasury management has become a very important finance function. Knowledge of global money markets and financial instruments such as deposit certificates, treasury bills, forecasting, financial management and manipulation, source evaluation and cost of domestic and foreign currency funds has become critical for managing the treasury profit centre. Treasury and risk management ensures cost effectiveness in planning strategies in this era of deregulation.
Forex marketing technically is an interbank activity. The job entails two major responsibilities- assessing various markets e.g stock or money markets on behalf of the bank and customer desk to advise corporates or other banks who require foreign currency. The job entails checking on current prices, keeping abreast with policies of the regulatory bodies, analysing past trends for making predictions and bids for forex trading. The task is affected by the high volatility of the markets and involves taking risks .
Financial derivatives such as futures, swaps, and other modern tools of risk management are affected by the currency values, interest rates , share index and commodities. The deregulation of interest and exchange rates has significantly increased the risk for businesses. To ensure competent management corporates employ professionals qualified to manage treasury and forex functions. With high volatility in exchange rates banks need to monitor their asset and liability gap.
Nature of Work
Managers
Bank managers have the responsibility for running the branch, managing their staff and for generating profits. Banks have to compete with other banks and with other financial institutions. A good service increases business and generates profits. Hence managers are required to know their region well, the type of customers they are catering to and the services they will require. They have a good knowledge of all the services the bank can offer such as personal loan schemes, saving schemes, etc. to be able to advise customers appropriately. Managers have to motivate their staff so that they give the customers the best possible service.
Managers spend time in seeing customers, e.g., for personal or business loans, meeting the chief executive of a large company e.g. who wishes to increase his borrowing or he could be involved in giving his customer safe investment advice. Managers are also responsible for taking decisions regarding credit to customers by analysing the risk and ensuring that the money is repaid. They spend time out of the office viewing properties that they have taken as security for a loan, or visiting factories and businesses to see new equipment in operation, purchased from bank loan.
Staff in banks
Both men and women work in banks, keeping records of business, personnel accounts, instalment loans, mortgages or the bank’s own accounts, and providing customer services such as payrolls and inventory accounting. These are the regular jobs of bank clerks. Typists, secretaries, file clerks, custodians, messengers, receptionists and safe deposit attendants complete the staff in the banks. In larger banks each employee specializes in one job. In smaller institutions responsibilities may not be too specific. For example, a transit clerk might fill in for a teller in rush hours or vacations, and a messenger might take collections, be responsible for school savings, send out collection letters to other banks, and help post interest in savings account passbooks.
Staff recruited through selection tests are trained in various operational divisions of the banks. These are bank operations, the consumer credit department, commercial and industrial loans, security analysts other trust departments, market research, public relations and customers services, or may be trained as bank tellers, transit clerks, book-keepers and other bank work.
Among the new fields in banking are those in connection with lease-financing e.g. of heavy machinery and equipment for business, services such as helping business customers with payroll and tax accounting, inventory control, and with other financial matters for which the bank has trained people. Banks have to constantly increase and sell services for competitive reasons, and there is a growing field in banking for people who can do market research and plan business extension programs.
Professionals with banks
Lawyers, engineers, agriculturists, language specialists all work in banks and there are others too. Lawyers in banks advise on laws and regulations affecting the operations of the institution. Large banks have engineers to work with industries and businesses. In the bank, people with electronic engineering training are more in demand for planning, programming and maintaining computers and other electronic equipment. Banks may employ chemists, home economists, textile experts, teachers, personnel experts and even social scientists, depending upon the communities and customers they serve. Another very rapidly growing field for bank employment, available for both men and women trained in modern methods of agriculture is agri-banking.
Work Environment
Branch managers work in branch offices which can vary in size from a small branch with limited staff, to large branches with many on the staff. They spend time visiting customers at their offices, factories or farms and visiting large client companies. Other staff also keep moving from branch to branch on transfer and may have to change specific tasks in the same branch.
Work environment of banks located in large cities is comparable to a corporate office. Multinational banks have an elitist style both in work and conveniences.
Personal Characteristics
It should be observed that most of the same aptitudes, interests, and educational qualifications useful in banking are also utilized in other financial institutions such as bank clearing house associations, insurance companies, savings and loan associations, credit unions, instalment loan companies, investment and mortgage houses, financial and fiscal departments of corporations, and in such government institutions as Reserve Bank, Insurance Corporation and the Export-Import Bank.
Persons joining as officers should be able to lead their teams, manage and motivate staff. Communication skills in speech and writing are vital for their contact with customers and management of their staff. Managing staff need integrity and honesty in all their dealings with money, customers and staff. Integrity means more than merely being honest when handling the bank’s money. Frequently, employees in banks take part in confidential transactions that should be discussed only with the customer or the appropriate bank officer. Welfare of the customer and the bank might be adversely affected if the details of such a transaction were known outside the bank. They need to project a business like image. Foreign exchange transactions need an analytical, quick and mature mind. Numeracy is also important as this work involves figures.
Good personal habits such as neatness, promptness and other traits indicative of a well-organised mind and well-rounded personality are valuable personal qualities of a banker. Neatness in appearance and in work are important in a bank, not only because the bank is judged by the appearance of its employees but also because in the bank, records must be maintained accurately and neatly.
