Attending a customers’ meet of a public sector bank in Kolkata and listening to the praise that bank customers showered upon the branch manager and his team aroused in me the thought that in the era of rapid digitization, people still want the emotional human touch. Bank officials maintain individual contacts with customers and offer quick banking solutions to their problems. Senior citizens are particularly elated, and feel comfortable and confident that their hard earned money is in safe hands. The relationship between man and money is inseparable.

It is a psychological bond. Man needs to touch money, the medium of exchange, to thrive. It is a daily need. Since the family matters, money matters too. Money of individuals when put into the market has exchange value which helps them to procure food and luxury goods. But when the same money is parked in banks as savings, it grows. Money grows over time and becomes wealth in the hands of the individuals. People in India have the idea and habit of saving. Saving for a particular purpose, say for purchase of a land or a building after retirement, is a traditional idea. This saving is useful when the future is predictable. But saving money without any specific purpose is the call of the day. It is more meaningful to save for saving’s sake in the world of uncertainty. Future issues like health, retirements and a child’s marriage compel us to save.

Savings depend upon the habits of spending. More the money that is spent less is the money saved. One can spend less if he or she desires less; if a limit is put on greed. Here comes the question of an individual’s culture, philosophy, value, ethics that guide him or her with decisions. A simple lifestyle does not require more spending money. Different people react differently to money. The person who grew up in poverty sees money as a life saver, respects it and spends judiciously. One day he can become a man of wealth even if he had no financial education. On the other hand, a child of an affluent family, who does not attach an emotional value to money, or is not psychologically attached to it, or behaves differently, and may one day face financial distress.

Poverty is a better teacher than wealth. There are many instances in India where small but regular savings of one individual turns into great wealth to build a charitable hospital or an educational institution. Thus, money behaves according to the ideals, goals, values and ethics of individuals. Money in banks, many believe, follows the rules and laws of the nation and behaves according to the mathematical formula of compound interest. But psychologist Morgan Housel propagates in his book ‘The Psychology of Money’ that ‘financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know. I call this soft skill the psychology of money. …. soft skills are more important than the technical side of money.’

What can money bring? Accumulated money creates wealth to procure a tangible asset. But money also brings intangible assets in one’s life through increased happiness and control over time. He or she may not have to struggle anymore to earn handsome money but can spend time on a meaningful life if he or she has sufficient savings. Or can think of an early retirement. ‘People feel like they’re in control – in the driver’s seat’ [‘The Psychology of Money’]. Money has incredible returns – ‘Money to buy time and option has a lifestyle benefit few luxury goods can compete with.’ Sometimes people want to spend money that they don’t have.

They want to be happy with material possessions and ask banks for personal, home and car loans. A high amount of debt with illiquid assets may result in financial disaster for the borrower. Indian religions and the ethical system do not encourage one to borrow; rather they advise not to borrow at all. But the human mind often works on the influence of the external world. Speculation is another aspect that is discouraged by Indian culture and philosophy. It is an inherent attribute. That is the reason that most Indians prefer savings over investments. They rely more on banking institutions than on the stock market.

The thinking is that hard earned money must not be allowed to be eroded by stock market volatility. The risk associated with high returns is not preferred. They cannot afford it. Banks can offer certainty, security, and offer a modest return at low risk. It is because of this confidence and trust that common people put in the Indian banking system that the financial market in India is sailing high. Citizens park their savings in banks as deposits. The banking sector in India now performs well. Reports suggest Indian banks are well capitalized, and able to absorb any macroeconomic shock. There is overall asset quality improvement in respect of personal loans. Stressed assets have declined over the years. The Financial Stability Report of the RBI published in June 2023 states that the gross NPA of banks fell to 3.9 per cent in March 2023 a record low in 10 years.

Total bank deposits in India were Rs 187 lakh crore on 2 June 2023, up from Rs 150 lakh crore in March 2021. So there is rapid growth in bank deposits. It may cross Rs 200 lakh crore in near future due to deposit of Rs 2,000 notes. The Pradhan Mantri Jan Dhan Yojana (PMJDY) has brought more than 50 crore people into the banking system in nine years. Out of 50.34 crore PMJDY accounts opened, 27.95 crore i.e. 56 per cent are by women.

The present financial inclusion programme aims to ensure bare minimum access to savings bank accounts without frills to all. This implies contribution of the marginalized or economically weaker sections of society to the economic activities of the country. These accounts altogether account for deposits of little more than Rs 2 lakh crore indicating average balance of about Rs 4,000 in each account. These people, like other citizens of India, now have access to financial services like savings and deposit accounts, insurance and credit facilities at affordable cost. The younger generations show interest in web-based solutions to their requirements.

They are more concerned with the technology rather than with solutions offered by bank staff. They rely more on data, information and comparison of facilities available on technology platforms between banks. Non availability of such services might cause discomfort to them. This puts pressure on banks to adapt to more and more technological advancements.

These are the challenges for short term resilience and long term innovations for future growth profitability. Banks should foster highly differentiated customer relationships with a strong focus on establishing deep emotional connections. They can offer customized solutions to each customer with the use of advanced analytics. Banks can also widen their customer base with advanced technology and innovative products. Thus they can add value to the economy and improve an individual’s personal finances.

(The writer is a cost accountant working with a state power utility as General Manager Finance and Accounts. The views expressed are personal.)