Even though recession has been a buried past, a refresher on how the Indian banking industry survived one of the biggest financial crisis clears any doubt regarding the Indian financial system. On that note, CareerBuilder India lists four mega-trends in the Banking industry that are targeted at firmly cementing a positive image for the times to come.
The growth in Indian Banking industry since the past one decade has been phenomenal. The Reserve Bank of India has quoted that, “Despite increasing risks both in domestic and global macroeconomic conditions, the financial system of India remains robust. However, the concern over evolving global risks and domestic factors still looms large”. Openness to change and robust policies have cushioned the banking industry against any major downfall that could have left it insolvent. The following 4 mega trends that will impact the banking industry in India are mentioned as follows:
1. Automation: If we go back to the initial times, the Indian banking system was nothing but a system of depositing and withdrawing cash. With economic concepts like liquidity, inflation, demand, supply, near money etc., began an era of semi-automation and automation. With banks being heavily injected with financial capital, it became extremely challenging for the employees to count the cash, allocate it, and disperse it too. Then there were issues like credit risk control, Know Your Customer (KYC) etc. Automation promised a helping hand at that time. Today, it is the synonym for efficiency in the financial system.
2. Categorization/Differentiation: What Michael Porter’s SWOT analysis that brings out the entry and exit threats, as well as new entrant’s opportunities in the industry, holds true till date. Indeed the Indian Banking system is extremely unattractive without the smart bifurcation and differentiation that it practices. A good portfolio mix in the industry that comprises structures like NBFCs, private banks, public banks, microfinancing options etc., makes the banking system robust. Differentiation in the industry is crucial because product variation is extremely difficult and the licensing requirements are tight. Growing rivalry and threats of new substitutes like securities and T-bills boost the requirement of differentiation.
3. Growth Drivers: The Government of India in tandem with the RBI encourages concepts like financial inclusions, Wealth Management, and Technology Innovation, in the best interest of the people of India. The supportive measures that the regulating authorities are taking towards making banking one of the key players in the Indian economy is indicative of a bright future of the banking industry.
4. Innovation: From rural banking to plastic money to ATMs to Mobile Banking – and more – the Indian banking system has witnessed a sea of change. And, it continues to embrace innovation like it is a support system, essential for survival. It is estimated that the transactions made via mobile technology will exceed INR 30 crores in India, in 2015.
A new wave of change is waiting to ride over the Indian Banking system (2014-2015). Mergers and Acquisitions in the industry will be shaping up new entities in the coming years. Scaling up operations will require distribution networks to integrate with the banks. Since acquiring a license will become an ordeal, new entrants will have to resort to M&A to operate in the market. All in all, despite a few sore spots, the Banking industry will continue to shine in 2013.
IMAGE COURTESY: MASHABLE