With per capita incomes rising and the affluent among the rural population growing, the Indian private banking AUM ( assets under management) has grown by 25 per cent in the last three years. An expectation that this growth would continue to hold up presents a good opportunity for banks to tap into this space. That said, the future is not without challenges.
Presenting the findings of a McKinsey survey in this regard, Mr Ramnath Balasubramanian, Associate Partner said that Indian banks have not been able to make a dent into private banking in a manner expected to as they have “high cost margins and low revenue margins” in this line of business. In a session on “Capturing High Networth opportunity”, Mr Ramnath put forth four key questions for discussion to a panel of bankers on the way forward.
Two questions predictably focused on the customer - What is the best way to acquire private banking customers? And, how could banks segment them? Providing viable but low-cost customer acquisition models, Mr Sandeep Das, MD and Head-India, Standard Chartered Bank suggested leveraging on analytics, watching credit card and mortgage patterns, using third party and client referrals and entering into strategic tie-ups with business groups to help banks build a strong customer base.
Considering the shift in the kind of customers accessing private banking – from the earlier ‘business class’ to the ‘salaried class’ now – Mr Vikram Kaushal, President and country head, wealth management, Yes Bank, brought to light the need to segment customers based on their needs and the kind of relationship they want. “Rather than being product-centric’, banks must be customer centric “, he said.
However, the panel also recognized the need to diversify the product offerings from the plain vanilla equity and debt options being provided at the moment. For example, India does not have a vibrant corporate bond market for retail, foreign exchange markets, hedge funds or alternative investments avenues.
“A far more comprehensive product platform could add more value to the customer and in the end address the question of profitability by helping banks increase the charges too”, felt Mr Atul Singh, MD and head of global wealth management, Merill Lynch. In fact, widening the product platform and improving banks’ productivity on the private business side were the other two questions posed by McKinsey.
Rounding off the discussion, Mr Tashwinder Singh, MD –Global Market Manager Citi Private Banking pointed out that productivity of the talent boiled down to the quality of the talent that the bank has. He said that, Indian banks could make deeper inroads into the private banking space if they have relationship managers with competence and knowledge about the markets, with an understanding about the client’s operating business and with longevity in the organization.