CHALLENGES

CONFRONTING
INDIAN BANKING
INDUSTRY
Arundhati Bhattacharya, State Bank of
Jan, 2010
India
Challenges Confronting
Indian Banking Industry

Background

Challenges

Way Forward
 Avg. Annual GDP Growth%

10

7.54
8

6
6

4 3.5

2
1

0
1900-1950 1951-1980 1981-2002 2003-2009
Population - Bane or
Boon?
Population Pyramid

Source: National Commission on Population

Rise in Literacy Levels
1 Urban India will add over 80mn Share of aggregate
1
households to the middle class by 2025 consumption

driving retail banking growth

The Indian demographic composition is changing Resulting in massive growth in middle
class households
%, millions of households
HH income brackets Millions of households
Rs. ‘000, 2000
100% = 62 83 114
1 2 3 87
4 6 Global (>1,000)
10
26 Strivers (500–1000)

53

66 47
+80
51 Seekers (200–500)

32
Aspirers (90–200)
21 12 7
9 5 Deprived (<90)

2005 2015 2025

2005 2015 2025
18% 42% 60%

Note: Figures are rounded to the nearest integer and may not add up to 100%
Income levels in 2009 are 1.6 times that in 2000

SOURCE: McKinsey Global Institute

Challenges Confronting
Indian Banking

Background

Challenges

Way Forward
 HIERARCHY OF
CHALLENGES
ESTEEM
SOCIETAL NEEDS
SOCIETAL
DEMOGRAPHIC NEEDS
ALM, CHANGE EXPANSION
MANAGEMENT NEEDS
GROWTH STRATEGY, MARKET
SHARE, TOPLINE &
GROWTH
BOTTOMLINE
PRODUCT INNOVATION, MARKETING NEEDS
& SELLING
RISK MANAGEMENT, AUDIT, CONTROL, SAFETY
OVERSIGHT NEEDS
REGULATORY COMPLIANCE
PEOPLE BASIC
TECHNOLOGY NEED
S
 PEOPLE CHALLENGES

ATTRACTING
TALENT AGE PROFILE
 TRAINING QUALITY OF
 SKILLING
LIFE
 RESKILLING CONFLICT

MANAGEMENT
SPECIALIZATION
 RETENTION
 TECHNOLOGY
CHALLENGES
COST, OBSOLESCENCE,PROTOCOL/
ADAPTIBILITY/COMPATIBILITY,EXRENA
L VS, INTERNAL OWNERSHIP,
CLEAN/GREEN CHALLENGE

ADAPTIBILTY TO CUSTOMER
PREFERENCE, STAFF TRAINING,
CUSTOMER SUPPORT, EXTRENAL
USER SUPPORT

NEED FOR STP, INTEGRATION OF

VERTICALS, CRM, DATA WAREHOUSING,
MIS, ANALYTICS
SAFETY CHALLENGES
GROWTH CHALLENGES
GROWTH
NEEDS
INNOVATION
BUT RISK
MITIGATION
REQD

GROWTH
WITHOUT
CONTROL IS
DISASTROUS
VIZ NPA
MGMT
GROWTH CHALLENGES
 EXPANSION
CHALLENGES
 ALM Challenges
 Finding Growth Capital
 Shape of liability Mix
 Structure of Assets
 Managing Regulatory preemptions

 Change Management Challenges

 Resistence
 Processes
SOCIETAL & ESTEEM
CHALLENGES
Challenges Confronting
Indian Banking

Background

Challenges

Way Forward
 Way Forward - TO SUSTAIN
LEADERSHIP
INITIATIVES BY MAJOR PLAYERS:
 Shaping a superior industry structure in a phased manner
through “ managed consolidation” and enabling “ capital
availability”
 Improve corporate governance primarily by increasing board
independence and accountability
 Transiting from capital adequacy to CAPITAL EFFICIENCY
 Improving the asset quality as per Basel II norms
 Compensating squeezed spread by focusing on fee based
income
 Investing in state of art technology as the backbone to ensure
reliable service delivery
 Leveraging the branch network and sales structure to mobilize
low cost deposits
 Way Forward - TO SUSTAIN
LEADERSHIP
 Aggressive forays in the retail segment
 Innovative product offerings to capture “MIND SHARE”
and later the “ WALLET SHARE”
 Implementing organization wide initiatives involving
people, process and technology to reduce fixed &
transaction costs
 Focus strongly on “ social development” – creating
enablers for providing banking services to lower income
and rural markets
 Accelerate creation of world class supporting
infrastructure like PAYMENT SYSTEMS, ARCs, CREDIT
BUREAUS, BACK OFFICE UTILITIES to help focus on CORE
ACTIVITIES
 Enable labour REFORMs focusing on enriching human
capital
 THANK
YOU
Jan, 2010 A. Bhattacharya, State Bank of India