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Banking and Securities

Over the last decade, Indian banking industry has grown manifold, with total assets increasing more than five times to reach US$1.3 trillion; total credits and deposits growing consistently at ~20% to reach US$0.8 trillion and US$1.1 trillion respectively and number of bank branches reaching ~93,000. Additionally, the Banking sector has also emerged largely unscathed from global financial crisis of 2008 – supported by strong macro-economic growth, low default ratio, absence of complex financial products, regular intervention by central bank and proactive adjustment of monetary policy.

As the Indian Banking sector prepares for another decade of high growth, emerging global and local market forces are expected to present both, opportunities as well as challenges in the near to  medium term:

  • Growth challenges among corporate clients resulting from  crises in Europe, uncertainty in the Middle East, inflationary pressures in the domestic markets and an overall moderation of credit offtake
  • Increase in competition due to entry of new domestic and foreign players
  • Evolving regulations and implementation of Basel III norms
  • Government focus on financial inclusion to bring basic banking services to unbanked population of the country
  • Rise in income levels and Government push for infrastructure development translating into high demand for financing
  • Demographic change and income growth leading to change in customer requirements and preferences
  • Rapid innovation in technology leading to newer ways of delivering banking services to customers

To remain competitive and profitable in this rapidly growing market place, market participants needs to consider the following:

  • Proactive monitoring of potential non-performing assets and sourcing fresh capital to grow the asset base as well as meet regulatory requirements
  • Investments in technology and making it an integral part of the business model – to develop new products and new channels
  • Expand network and build an efficient operating model to target and service wider customer base
  • Develop market entry strategy for new markets, new geographies and new lines of business - including gold loans, wealth management, asset management, broking etc.
    • Explore alliances and collaboration with domestic and international players to target new markets, customer segments and expand product portfolio
    • Develop prudent risk management practices

With our deep understanding of the banking industry gained over years of working with clients in this sector, we are adequately positioned to help you in this evolving and challenging business environment. Our dedicated professionals with cross-functional experience provide a range of services tailored to your needs; from tax and regulatory advisory, to business transformation focusing on strategy, operations, human capital, enterprise applications, outsourcing and technology integration. We work with our global offices to bring global experience and insights to our clients in India.

Thoughtware

     

Navigating the risk based supervision process: The move towards risk based supervision is a step in the right direction for the banking industry. However, challenges abound both for the supervisor and the banks as the industry grapples with wide-ranging issues.This document explains the revamped supervision process and provides a perspective on the holistic approach banks can take to integrate the supervisory process with the internal control systems and internal capital adequacy assessment processes.

     
 

RBI Guidelines for New Private Banks | Opportunities and Challenges

RBI Guidelines for New Private Banks | Consideration for new entrants

RBI has released the Guidelines for “Licensing of New Banks in the Private Sector” on February 22, 2013.  As a part of the guidelines, RBI has provided several parameters related to minimum capital requirement, corporate structure, ownership and governance, foreign shareholding, eligible promoters, specific provisions for NBFCs, business model considerations, etc.  

This document summarizes the key tenets proposed in the guidelines and provides Deloitte view on implications and observations of these guidelines for banking sector aspirants.

     
  Catalyzing Inclusive Growth in the North: Role of Financial Services & Institutions In this report, we start with an overview on North India identifying diversities and opportunities for financial inclusion, followed by an in-depth perspective on the role of financial services and institutions in capturing the growth opportunities offered by the un-banked and the underbanked customer segments as well as some of the tactical and operational considerations.  We also share our perspective on four distinct aspects of financial inclusion covering - unique challenges and opportunities in urban and rural India, role of technology in promoting financial inclusion, innovation in insurance and lastly partnerships between Government and key stakeholders in expanding financial inclusion.
     
  Banking and Securities Outlook 2012: There is a significant overhang of uncertainty that is impacting the banking and securities marketplace are - European sovereign debt, U.S. housing market and unemployment, U.S. political stalemate and election cycle, Regulatory evolution. This report discusses in length the challenges and outlook for banking and securities industry for 2012. To find out more, please click here.
   

 

  D'conomic: India Economic Outlook, August, 2011: D’conomic outlook is a quarterly report focusing on the global and Indian economic scenario. Packed with interesting data, the report focuses on the performance of the Indian economy; the global trends and recent developments in the areas of trade, stock, and the employment market; latest happenings in various Indian industries - manufacturing, energy and resources, financial services, consumer business and transportation and technology media and telecom. As a special feature, we have covered the current US debt crisis -  what is expected ahead for the world in general and India in particular.

 

 

 

  Presence of Foreign Banks in India: RBI has issued a discussion paper in 2011 on the presence of foreign banks in India. The RBI paper seems to make a compelling case for Wholly Owned Subsidiary form of presence for foreign banks. This document presents the pros and cons of the existing model and the proposed framework.RBI has issued a discussion paper in 2011 on the presence of foreign banks in India. The RBI paper seems to make a compelling case for Wholly Owned Subsidiary form of presence for foreign banks. This document presents the pros and cons of the existing model and the proposed framework.
     
 

Analytics in banking: Taking a fresh look at your challenges: The banking sector is rife with change and uncertainty. How will changes in banking laws and regulations affect profitability? What should be the framework of stress scenarios, including specific regulatory scenarios and guidelines? What is needed to correctly measure each business line’s different risk characteristics? Where can banks more effectively apply better customer models to reduce losses and focus growth? These questions are fraught with ambiguity and there are no easy answers.

It is difficult to understand the current complex environment, much less to predict the future with any degree of confidence. Banks need more in depth information to answer these and identify additional questions to effectively manage risk and drive risk-adjusted performance. Leveraging business analytics may help turn data into information that can provide these answers.

   

 

 

Impact of Global Financial Crisis: Role of Asset Reconstruction: The sub-prime crisis and its consequent effects on the global economy saw some of the established financial institutions getting consumed in the turmoil that ensured; many others have been pushed to the brink.

The crisis itself is a manifestation of aggressive lending with inadequate appraisals, lax regulatory supervision and questionable credit ratings of complex instruments. Nationalisation of institutions – a thought inconceivable a couple years back – is turning out to be an attractive option for institutions grappling for survival. The crisis originating in the US has now spread across the integrated financial world engulfing countries and sectors that have little to do with the root causes.

The economic indicators are gloomy as the recessionary phase sets in and market indices have reduced investors’ wealth across the globe by a whopping US$ 50 trillion.

   

 

  Exchanges: Providing services of organised markets: Over the years, Asset exchanges have evolved in multiple dimensions in terms of the assets traded, governance structure and trading mechanism. This multidimensional evolution of exchanges has been around a single business motive and that is to constantly beat the transaction cost of trading outside the exchange. Exchanges by providing an organized trading venue reduce the cost of transaction, which the investors would have otherwise incurred in the absence of the exchange.
The structure of the exchange business stands on four basic pillars:
1. Market Design and Market microstructure
2. Technology
3. Governance
4. Supervision and Compliance
In this document, we discuss each of these pillars in terms of their evolutions, challenges and the future trends.
     
 

Winning in Wealth Management: Wealth managers now must deal with a short- to mid-term profitability trap, which seriously challenges the entire industry. Our research will show that clear winners and losers will emerge.

This report investigates the root causes of the unprecedented decrease in Swiss-based wealth managers’ profitability and explores differences in profitability and key characteristics among individual wealth management providers. Our research concludes with the perspectives on how to build and operate a profitable wealth management institution.

     
 

Achieving Profitable Growth in Wealth Management: Wealth management is back and firms are winning clients and assets at an accelerating rate. However, many wealth managers, while enjoying momentum at the top-line, continue to struggle with profitability and the ability to scale efficiently. Now, amid declining asset prices, some clients are looking to invest in more conservative products, such as fixed income or cash-related assets, which are often less profitable to wealth managers.

These factors shine a new light on an old problem; despite a growing market, for most wealth managers, operating expenses have outpaced top line growth for the past several years. This paper provides insight to wealth managers on:

  • Major drivers of cost and possible reasons for variances
  • A cost management framework that addresses data collection and analysis
  • Taking action: cost reduction tools to consider

 

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