FICCI & IBA Banking Conference (FIBAC 2013)
CORPORATE/BANKING & FINANCE
FIBAC 2013
The annual FICCI & IBA Banking Conference
(FIBAC 2013) is being organized in Mumbai on 13th - 14th August
on the theme “Productivity
excellence in Indian banking”. The Boston
Consulting Group (BCG), the knowledge partner for FIBAC 2013, has prepared a
report titled "Consistency, Quality and Resilience: The Next Frontier for
Productivity Excellence". This
report has been prepared with extensive research including surveys, conducted
jointly with FICCI and IBA, of over 500 corporate customers and analysis of data
obtained from 38 of the largest banks in the country.
Salient points of the FIBAC
2013 report:
·
A big thumbs up for Indian banks from their
corporate clients
o
At 21%, the advocacy score is among the best
seen globally
o
High appreciation for quality or relationship
management, branch distribution and flexibility
·
Industry feedback to banks: Improve operations and IT; Innovation is
biggest weakness
o
Improvement needed in operations quality viz. turnaround
time, exception handling, innovation, customization. Innovation rated as the biggest weakness of
Indian banks.
o
At 2% of revenue, IT expenditure of Indian
banks is among lowest in the world
o
For every 1 customer facing person, Indian
banks have 1.2 non customer facing persons.
This should be less than half of this level (i.e. for every customer
facing person, less than 0.5 non customer facing person).
·
Lenders do not get lion's share of wallet;
transaction bank does
o
The primary banks for corporate is the one who
provides the main current account
o
Public sector is primary lender; it is not a
primary transaction bank
·
Public sector has disproportionate exposure to
traditional capital intensive industries
·
Gold based lending by banks could help double the
agriculture credit in India profitably
o
Rs 4.2 trillion of additional credit possible in
direct agri lending using gold as collateral
·
Banks paying heavy price for ignoring
information analytics and IT based credit management
o
Banks sit on massive data regarding customer
transactions in core banking systems. This can be leveraged for early warning
systems
o
In India, surrogate information has to be also
used
o
Banks need to build in-house capability in
credit scoring and early warning systems – not rely on externally purchased
models
o
Information bureau has played a role in steady
reduction in retail lending NPA. More aggressive adoption of credit bureau
needed in MSME, agriculture and retail banking.
·
Restructuring of corporate debt (CDR mechanism)
needs a major revamp
o
Banks need capability to do deeper strategic
due diligence of problem accounts to locate tough management actions needed for
turn around
o
Need oversight mechanism to ensure management
follows through on tough decisions in operational turn around
·
Despite introduction of digital channels,
Indian bank branches are 10% more cluttered in 2013 compared to 2011
o
Number
of cash transactions per day per branch has gone up for all type of banks
o
Banks need a fresh look at branch formats with
more self–service and new technology based formats
o
Digital adoption needs greater push as banks
move into semi urban and rural areas
·
Electronic Point of Sale (POS) transactions a
major weakness of Indian banking
o
Share of POS transactions in total digital transactions
remained flat between 2011 and 2013
o
Public sector has virtually abdicated its role
in extension of card acceptance in merchant establishments. Penetration of POS acceptance very low in
India
o
Banks need to take advantage of new technology
and services from National Payment Corporation of India (NPCI) like RuPay and
IMPS
·
Small businesses not adopting digital enough
o
For Current Accounts holders, number of digital
transactions were only 21% of total transactions as against industry average of
62%
o
In private sector banks, the number of cash and
cheque transactions per Current Account increased between 20011 and 2013
·
Private Sector hit a plateau in digital
adoption; PSU banks did 4 times better between FY '11 and FY '13
o
15% improvement in digital adoption in private
sector banks as against 60% for public sector banks between 2011 and 2013
o
Digital adoption defined as ratio of digital
transactions to non digital transactions (cash and cheque)
o
Digital adoption ratio in Private banks up to
2.3 in 2013 from 2 in 2011; PSU banks up to 1.6 in 2013 from 1 in 2011
o
Private sector banks need fresh thinking to
move the needle in digital
·
The report expects Business Correspondent (BC)
per branch to reach 10 by 2020 from 0.9
today
o
Public Sector has a
strong lead in BC channel
o
The "New" New banks, coming in with
better technology, expected to take the lead in rapidly expanding their BC
network
·
Public Sector bank reform needs urgent
attention
o
New bank licensees would put enormous
competitive pressure and accelerate erosion of market share and profitability.
We have a 3 year window.
o
Current massive hiring pattern would create
complex challenges in next decade especially compounded if growth rate slows
o
Talent shortage is a critical issue. Banks need
lateral induction of talent.
o
Outsourcing should be evaluated for noncore
functions
Mr K R Kamath, Chairman, Indian Banks'
Association (IBA) and Chairman and Managing Director, Punjab National Bank
(PNB)speaking
on the occasion of curtain raiser for the event said that "These are
interesting times for Indian banking industry.
We have significant challenges and lots of exciting opportunities. Indian banking industry will come out
stronger through this phase of its evolution". Mrs V R Iyer, Chairperson of FICCI’s
Banking and Financial Institutions Committee and Chairperson and
Managing Director of Bank of India said on the occasion that "Indian
corporate clients have given a strong positive endorsement to Indian banks and
have highlighted issues on operations and technology that we need to look at
carefully". In a first of its kind,
FICCI had facilitated the survey of over 500 of its members to get a structured
feedback on Indian banks and identify areas of improvement. Speaking on the occasion, Saurabh
Tripathi, Partner & Director, BCG, mentioned that "Contrary to
widespread negative sentiments, our research found many reasons to cheer the
achievements of banking industry".
Indian banking industry has improved digital adoption, reduced reliance
on wholesale debt, decreased its leverage, and maintained cost income ratio at
about 45% which is among the best in the world.
About the
organizers:
Federation
of Indian Chambers of Commerce and Industry (FICCI), established in 1927, is
India’s largest and oldest apex chamber with an indirect membership of over 2,50,000 companies, from various regional
chambers of commerce, from the corporate sector, both private and public,
including SMEs and MNCs. FICCI works
closely with Central and State governments and regulatory bodies for policy
change and is the voice of India’s business and industry. For more information
please visit www.ficci.com.
Indian
Banks’ Association (IBA) is the premier service organization of the banking
industry in India. Its members comprise of almost all the Public, Private,
Urban co–operative and Foreign banks having offices in India, developmental
financial institutions, federations, merchant banks, housing finance
corporations, asset reconstruction companies and other financial institutions.
The
Boston Consulting Group (BCG) is a global management consulting firm and the
world’s leading advisor on business strategy. We partner with clients from the
private, public, and not–for–profit sectors in all regions to identify their
highest–value opportunities, address their most critical challenges, and
transform their enterprises. Our customized approach combines deep insight into
the dynamics of companies and markets with close collaboration at all levels of
the client organization.
This ensures that our
clients achieve sustainable competitive advantage, build more capable
organizations, and secure lasting results. Founded in 1963, BCG is a private
company with 77 offices in 42 countries. For more information, please visit www.bcg.com.
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