Indian corporate banking industry operating in high-pressure environment, survey calls for immediate action

New Delhi: The Indian corporate banking industry is operating in a high-pressure environment, a survey by Boston Consulting Group and SWIFT India has found.

“On one hand, banks are facing mounting challenges from growing corporate NPAs, bans on LOUs/ MOUs and increasing cyber and fraud risks while on the other hand, increasingly sophisticated customers are demanding digital and customized experiences at every point of the journey. Corporate clients in India are not satisfied with the current offerings from their bankers. This calls for an immediate and urgent action by banks,” the survey said.

The report said that globally too, corporate banking is going through a turbulent phase. “Corporate lending margins are reducing, borrowing is shifting towards capital markets, corporate clients are demanding greater digital experience, fintechs are posing as formidable alternatives and frauds are becoming commonplace,” it added.

The report lays down seven key themes which are very critical for winning in corporate banking in India:

•     Offer industry specific solutions: Different sectors have very different product requirements – banks will need to shift from classical sales push to advisory models centered on client needs and experience
•     Reboot corporate RM model: Next-Gen RM model requires an overhaul in mindset towards advisory relationships and business deepening, and equipping RMs with technology.
•     Unlock full potential of pricing: Moving from a cost-plus to a market based pricing model can help banks improve realization significantly.
•     Digitize end-to-end corporate customer journeys: Digitization of customer journeys can result in massive reduction in turnaround times, coupled with cost reduction and improvement in operational risk
•     Fully exploit power of analytics: Leveraging analytics across the entire spectrum of wholesale banking use cases, including planning, sales, risk, pricing, servicing and loyalty management
•     Innovative ways of doing credit: Leveraging digital, analytics and automated tools for underwriting and early warning systems can result in faster decision making, quicker default detection and lower cost of monitoring
•     Organization enablement against security breaches: Banks need to establish clear policies and processes, and focus on integrating security and compliance into how people think

Execution of the above agenda can deliver multi-fold value to banks – in the form of 30-40 percent increase in revenues and 15-20 percent reduction in costs, resulting in 0.5 percent-0.7 percent improvement in ROA.

Speaking about the key takeaways of the report, Saurabh Tripathi, Senior Partner and Director at BCG and the co-author of the report says, “Corporate banks will have to re-design their products and processes by putting the customer at centre of the design."