Ethics in Banking Essay
1345 WordsOct 19th, 20106 Pages
Banking ethics are the moral or ethical principles that certain banks choose to abide by. There is not a universal code of ethical conduct, but the banks that vaunt their ethical credentials evaluate the ethical standing of potential investors and partners. Also, these banks choose the companies that they in turn invest in with their ethical policy in mind. The number of ethical questions that the banking industry faces are many and multifaceted. Full service relationships with customers are a thing of the past while profitability, and its byproduct corporate greed, has become the main goal. Banking ethics and profitability are not mutually exclusive, but being an ethical bank does sometimes mean that they maintain their moral rigor…show more content…
Can we blame the retail branch employees or even the retail banking industry? This change in mentality is just merely an adaptation necessary for survival, which can be explained as “survival of the fittest”. In order to survive banks have been required to change from traditional money handlers to aggressive sales oriented employees.
The increase in competitiveness among all banks has ballooned so much that these banks are willing to do anything to retain or add a new customer. The strategy of putting customers in high pressure sales situations is not unethical. However, the line is drawn when branch employees are told to sell a certain product so the branch will meet its monthly/quarterly goal. With this type of leadership, you are enabling employees to sell products to customers that they most likely did not need in the first place and may not be qualified for. These unethical tendencies led customers to believe that they needed a product that was only sold for the company’s benefit. These situations only confirm that the banking industry is putting their profit interests above the well-being of the customers that they provide services for.
When the bank is acting in their own self interest they are taking on an egoistic role. They have an excessive sense of self importance. An egoist will put profit at the top of the list of importance and that is exactly what the banks
Sound and strong financial infrastructure is one of the basic foundation stone for the development of any economy. Banks play an important role in financing the economic needs of the country. They form the core of a nation’s financial system, performing the vital function of financial intermediation and act as a link between the savers and the borrowers. The more efficient a financial system is in resource generation and in its allocation, the greater is its contribution to economic growth (Mohan, 2005). It helps in risk mitigation, innovations and improved profitability. The productivity and efficiency of banks, thus, critically impacts the productivity and efficiency of all economic activity and is a matter of concern for policy makers and economy watcher. Academicians and Researchers have recognized that the measurement of productivity in banking is necessary to improve the financial soundness of banks and is crucial for the well being of the whole economy. Therefore, investigation and measurement of efficiency and productivity in the banking sector assumes high importance and have always been areas of interest for economic research.
In simple words, the productivity is often defined as the output per unit of input employed. The concept of productivity is difficult to be applied in those industries where output cannot be measured easily like service industry. Banking is a service industry engaged in providing a wide array of services like acceptance of deposits, extension of credit, remittance of funds, collection of agency, conduct of foreign exchange business, providing a safe custody and so on. It is difficult task to measure productivity in a multi product industry like banking. (DR. ROSHAN LAL ** DR. RAJNI SALUJA 2013). The various products are accounts, drafts, exchange remittances, cheques, travellers cheques, credit cards, debit cards, services for guarantees, various kinds of loans like housing loan, education loan, car loan etc. Identification and measurement of output in banking is very difficult exercise as it is not possible to bring various services to measure output. However, banking being an important economic activity cannot afford to lose sight of the concept of productivity. Application of the concept in the Indian banking industry becomes all the more difficult, as it gets associated with such diverse aspects like operational cost effectiveness, profitability, customer services, priority sector lending, mobilization of deposits, deployment of credit in rural and backward regions. The difficulty is not in applying the broader concept of productivity as ratio of output and input, but is in measuring output in the form of services.
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