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Indian Banking 2020 Making the Decade s Promise Come True

Next decade bodes well for the banks. Sustained economic growth of 8% Rising savings rate in economyOnly large economy with reducing dependency ratioWidespread adoption of mobile telephone and penetration of 3GHuge investment in infrastructureRapidly globalizing Indian corporate. Ten major trends.

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Indian Banking 2020 Making the Decade s Promise Come True

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    2. Next decade bodes well for the banks Sustained economic growth of 8% + Rising savings rate in economy Only large economy with reducing dependency ratio Widespread adoption of mobile telephone and penetration of 3G Huge investment in infrastructure Rapidly globalizing Indian corporate

    3. Ten major trends 1. Retail banking to get a boost; mortgages to cross Rs 40 Tn 2. 10X growth in wealth management 3. "Next billion" segment to be large; Will demand low cost banking 4. Branches to grow 2X; ATMs 5X (3-4 times more additions than last decade) 5. Mobile banking will come of age 6. CRM and data warehousing will define next wave of technology 7. Margins under pressure on both retail and corporate 8. New models to serve SME 9. Investment banking to grow 10X 10. Infrastructure will cross Rs 45 Tn; Will need better risk management

    4. Two critical challenges 1. Meet nation's expectations on financial inclusion 2. Public sector to address its HR challenge

    5. Demographic dividend for retail – opportunity at the extremes of spectrum

    6. Second wind for retail lending – mortgages to cross Rs 40 trillion

    7. 50,000 more branches, 175,000 more ATMs

    8. Industry will need to evolve low cost models

    11. 250-300M mobile internet users by 2020

    12. Major adoption of CRM to reduce costs

    13. SME continue to be most underserved

    14. "New" expectations from banks

    15. New models and skills required in corporate banking Pressure on margins; need for fee income Savings account rate deregulation Deepening of whole sale debt markets Renewed attention to SME business for growth and profitability Low cost model; better risk management Investment banking to see more than 10X growth Provide fee income to banks Support corporate in international forays, M&A, capital market access Large exposure to Infrastructure will need better risk management About half of Rs 45 Tn to be on banks' books Affordable given high savings rate expectations But banks' risk management will be put to severe test

    16. Two critical challenges 1. Meet nation's expectations on financial inclusion 2. Public sector to address its HR challenge

    18. Commercial bank models are not effective in rural low ticket business

    19. “No frilling” will not work

    20. Need "ring–fenced" businesses

    21. NBFC will thrive in niche areas Infrastructure finance Asset based lending to SME Rural / small ticket finance Housing

    22. NABARD needs to be supported for rural infrastructure development Financial inclusion is not sufficient for inclusive growth Need to accelerate rural infrastructure investment Rural infrastructure faces market failure challenges; there is no "profitable" way to do it Need a dedicate agency with government support to fund quality rural infrastructure at accelerated pace

    24. Complex problem

    25. Revenue productivity is now comparable

    26. Public sector HR issue has reached tipping point

    27. Talent Induction is unsustainable

    28. Yawning generation gap

    29. Need a balanced programme

    30. Bankers' expectations differ

    31. Key imperatives for government Deepen the wholesale debt market with top priority Enhance economic viability of financial inclusion Continued emphasis on co-operative banks revitalization Enable NABARD to play a crucial role in rural infrastructure development Spur HR transformation in Public Sector Banks

    32. Key questions for discussion Why do public and private sector perceptions differ on key strategic trends? Pressure on NIM, importance of international presence, scale Is the industry ready to innovate low cost solutions for retail, SME? Is the industry ready for assisting corporate international aspirations? Why are banks diffident about profitable inclusive banking solutions? Is there sufficient will to make fundamental changes in PSB HR?

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