Virendra Pandit
New Delhi: Amid global uncertainties, as the Indian economy gains momentum, its next phase of growth will be driven by the banking industry and capital markets, according to KV Kamath, veteran banker and Independent Director and Non-Executive Chairman, Jio Financial Services.
At an event, he said, “As economic growth gains momentum, the first industry to bulk up and grow is banking. In India, it will be banks along with capital market players,” the media reported him as saying on Wednesday.
India’s financial ecosystem, including banks, capital markets, mutual funds, insurance and pensions, has evolved to give consumers greater choice. “Technology has made things seamless. Your financial savings can now move into various forms, say investments, back to saving… back to consumption… in a seamless manner,” he said.
Kamath said the Indian financial landscape is witnessing a structural shift as consumers now use technology to deploy their savings more efficiently. “A layman now knows how to deploy savings into products which give the highest return,” he said.
Other structural enablers, such as a well-established pension system, insurance and mutual funds, have created a “parallel capital market” that offers customers a range of choices. “The consumer has choice and technology has a seamless movement from one market to the other,” he said.
Kamath said that banks should reassess their core operating models in light of these shifts, and increasingly focus on the “retail segment.”
“You will see banks increasingly looking to the retail customer,” he said, adding that every financial player must understand which customer segment they are catering to, and adapt accordingly.
However, he emphasized that non-banking finance companies (NBFCs) cannot compete on the same scale as banks. Financial technology companies, or fintechs, being non-deposit-taking entities, also “naturally cannot compete with banks in India.”
Kamath said while Indian banks are investing too much, they are not investing in the “right technology.”
“Banks will have to reinvent themselves in the bargain. Reinvention is not a difficult task with technology available today. They can reinvent themselves pretty quickly. The question is, will they, and how quickly,” he said.
On digital safety, Kamath said both banks and customers must remain alert. “Scamster takes advantage of an imperfection. In the digital world today, we will have to be vigilant all the time. The bank will have to be vigilant, and we as customers will have to be vigilant because we do not know when or what type of new scam could occur.”