Unity banks face enormous challenges both internally as well as externally. Internal challenges include issues related to the ownership. Unity banks lack autonomy, which shapes their destiny. Furthermore, union banks reflect politics rather than economic obsessions. Unity banks cannot hire employees at market salaries, which impose constraints on the banks in terms of their nature of oversight . The nature of oversight of unity banks prevents them from operating in a manner that values the concept of time as a competitive factor. On the other hand, the external challenges are severe. The business model implemented by unity banks is under stress due to the rapid and continuous changes occurring in the market . On the corporate side, the lending process of unity banks is under a great margin pressure due to a sharp speed of change in the market.
One of the major challenges faced by the unity banks is customer acquisition. Among the existing customers, even the most profitable customers with high-liability balances are unable to gain profits for the banks due to better services and products offered by the competitors. Unity banks are still beginners in terms of meeting the global standards and the world views these banks as a prey rather than a predator. Moreover, policy infirmities result in unfortunate consequences. Some of the common problems faced by unity banks also include lack of proper management, lack of trained staff and lack of experience . In term of management, frequent changes in the decisions of the board have resulted in an uneven management of unity banks in spite of having the best experts in the high-level positions. Even though the banks are trying to provide necessary skills to the existing employees by offering training in various areas related to the banking sector, most of the employees migrate to the competitors for more salaries .
Most of the unity banks hire inexperienced staff as they work for lesser wages when compared to experienced employees. Hiring experienced staff is not beneficial for unity banks due to lesser profits obtained by them. Unity banks have also been facing issues related to identifying creditworthy customers. The creation of money is another issue faced by the unity banks, which creates confusion as the money freezes up and stalls the business . Unity banks are highly open to international competition and subject to domestic restructuring. During the process of restructuring, unity banks have higher chances of facing huge losses, which greatly impact the small businesses. Furthermore, falling interest rates adversely impact unity banks in terms of net interest margins. Since most of the unity banks have more number of branches in the backward and rural areas, it is not feasible in a socio-economic sense to either close or sell the banks .
One of the best solutions to resolve the problems faced by unity banks is to enable flexibility in terms of rigidities of unity bank ownership. It is essential to build in-built flexibility structures and strengthen the efficiency of public ownership. Another possible solution is the establishment of a genuine board management and worker motivation in order to cope up with the paradigm shifts occurring in the banking industry . The critical element of success for unity banks is the government paying significant attention to the major tasks undertaken by unity banks. Setting up advisory boards in key areas of the banking process is also beneficial in solving the problems faced by unity banks. Improving the public policy contributes to an efficient transitional path of the banking system implemented by Unity banks and helps to move from a regulated focus to a more liberalized regime. It is equally important that unity banks take proper action to resolve the issues related to lending rate stipulations, evolution of a credit system and many others .
Unity banks should also pay close attention to resolving the conflicts of interests among various stakeholders. In doing so, banks should enforce corporate governance, consolidation of accounts, transparency and risk management strategies in their operations. They should resolve the complexities of unity banks, especially in rural areas. It would be profitable if unity banks make serious efforts in improving the financing of priority sector. They should make use of their core strengths to make the best of new opportunities before the banks. It is necessary that unity banks reorient their business strategies to meet the challenges of the buyer market, which changes rapidly. Unity banks should focus on market positioning, cost of intermediation and service delivery in order to determine their efficiency in the competitive banking industry . Capital adequacy constitutes an important part of supervision of Unity Banks. Implementation of sophisticated information technology infrastructure and human expertise is another best solution that helps to resolve the challenges faced by Unity banks.
Chaston, I. (2012). Public Sector Reformation: Values-driven Solutions to Fiscal Constraint. New York, NY: Palgrave Macmillan.
Sprague, I. H. (2000). Bailout: An Insider's Account of Bank Failures and Rescues. New York, NY: Beard Books.
Thompson, M. (2010). Banking and Finance. New York, NY: Academic Foundation.