The forces of globalization and liberalization, unleashed over a decade back, are finally fetching results. The Indian banks, which were previously overwhelmed by the challenges of the twin forces, are now reaping the benefits thanks to the change in their mindset-they have turned profit seekers and have begun laying increased emphasis on improving their competitiveness. The latest annual report published by Indian Banks' Association reveals that the private banks of the country have successfully increased profitability by 41.9% from Rs. 3,533 cr in 2005 to Rs. 5,014 cr in 2006, as they have brought down the value of Non-Performing Assets (NPAs) by 23.3% from Rs. 4,094 cr to Rs. 3,141 cr. Apart from the rural credit, which increased by over 25% (combining all rural, commercial and cooperative sectors) this year, there has been a marked advancement in almost all key areas viz. profitability, capital adequacy, asset quality, as well as in paying greater attention to risk management.
Today, the trend has completely shifted from the seller's market to buyer's market where customer is treated as the king. Apart from core banking products, banks are now focusing on other areas like private banking, wealth management, cross-selling of financial products, etc. Thanks to the surging retail industry that is expected to grow more than twofold from the present US$6.4 bn to US$16.5 bn by 2010, it is drawing the bankers' attention towards retail business. While the home loan rate is hovering at 9-9.5% now as against 6.5% of 2005, the car loan market is projected to grow to Rs. 305 bn in 2006-07.
The cross-selling strategy is gaining momentum too, as banks are tying up with car manufacturers and retail shops, and looking forward to engaging more Direct Selling Agents (DSAs), who usually provide service at the customer's own convenience. In recent times, bancassurance (sale of insurance products through banks) has simply outshined other alternative channels of distribution with a share of almost 25-30% of the premium income amongst the private players. Moreover, there is immense potential in India, as only 4,500-5,000 bank branches are currently distributing insurance among 65,000 plus branches spread across the country. The secret of their performance lies in "personalized service". As Rajiv Sethi of ICICI Bank explains, "when it comes to service, we offer `doorstep' completion of formalities and other incidentals as per the demands of the trade today." The aggressive spree of these private banks to expand their already diversified portfolio has made them roll out good amounts of money into their wealth management businesses, as Pradeep Dokania, Executive Vice-President, DSP Merrill Lynch, sketches the potential: "In India, wealth management is evolving into a business now. The markets have become more complex and people need somebody to guide them because the age of guaranteed returns is gone. Now people are too busy and want their wealth to be managed prudentially and professionally". The ultimate goal is to transform banks into a one-stop shop for all financial products, so that customers do not have to rush from pillar to post for each of their requirements, and banks can thus have a steady customer base. Apart from placing special focus on High Net Income (HNI) customers, banks have markedly improved their customer service and are hiring experts to take care of this area that has been neglected so far. |
