While the opportunity for growth in the banking sector is significant, this growth is not likely to be captured equally by all players, according to a McKinsey report on ‘Gateway to the defining decade’ released as part of Bancon 2011.
Even the past five years have shown a clear separation between the winners and others.
Best-in-class public sector banks show an asset growth rate that is 38 per cent higher than the median range, and large private sector banks show a growth rate that is 118 per cent higher compared to the median.
This has led to significant polarisation in the banking industry, with greater value migrating towards fewer banks.
The trend is likely to magnify over the next decade, therefore requiring banks to urgently find answers to the key questions of ‘where to compete’ and ‘how to compete’ in order to emerge among the winners in this defining decade.
Finding a granular growth strategy will lead to at least five to six Indian banks reaching the global top 100 over the next decade, the report said.
To solve the ‘where to compete’ and ‘how to compete,’ banks need to identify specific slivers of the market where growth opportunities exist.
They should also fundamentally transform their operating architecture to capture the opportunity. Banks should this while mitigating the risks and threats in the current economic environment, through superior management and greater operational excellence.