Number crunching

The Banking and Investment Sectors in India are looking the most promising in the current times, when the economic growth is picking up pace and the investment cycle is on the way to recovery. Banks are fast appropriating almost every aspect of the consumer’s financial requirements as apparent through ATMs, telephone banking, online banking and web based products, and cross selling of financial products such as credit cards, mutual funds and insurance policies. Technological breakthroughs in terms of banking operations and customer relationship, as well as restructuring initiatives carried out by a lot of Public Sector banks, have contributed to the increased activity and talent flow.

Indian Financial Institutions (FIs) are now taking up the challenge from their foreign counterparts; this is evident as you browse through most of the private banks today and realize that they were originally FI’s (ex. ICICI, IDBI, UTI).They are being transformed to becoming what’s globally known as the ‘universal banks’.

Financial institutions realize that gone are the days where competing on price and product innovation kept them ahead. They need to innovate on traditional products beyond pricing, and explore new areas like wealth management, consumer finance, and bancassurance. To drive these products, heavy investments are needed in people, channels, technology and processes for a competitive edge.

Needless to say, the need of the sector is more contemporary domain knowledge and varied experience fields in the banking/finance field. What is also increasingly becoming a criterion, as more and more banks and their products become consumer brands (from SBI Life to ICICI Prudential), is astute market sensitivity and innovative thinking – more or less bastions of the IT sector.


Basel-II norms – A Challenge for the banking sector

Much like their global counterparts, Indian banks are well behind schedule for the implementation of Basel II. More than half of the MNC banks are still busy with pre-studies on internal capital assessment processes and disclosures on capital, risk exposures and risk assessment processes. The key obstacles are lack of data for operational risk assessment, high information technology needs and the cost of compliance.

Apart from credit risk, the Basel II norms stipulate capital allocation for market risk and operational risk. Market risk is being currently captured through the requirement of creation of investment fluctuation reserve, while setting aside capital for operational risk is a new addition.

Consolidation in Banking Sector

Repeated mentions by Finance Minister P Chidambaram have sparked of the debate for the need for consolidation in the banking sector. Executive Access analyses the pros and cons of the propositions and lays down the roadblocks and challenges.

Consolidation in banking would provide more security and stability to the financial system as we do have weak banks that are a threat to the system which need to be addressed. Consolidation may also result in better valuations for Indian Banks. Public sector banks are rated at a multiple of three to four times as opposed to eight or nine which could be typical for the private sector or 10 to 15 which is typical elsewhere. Consolidation would enable the Indian banks to marshal large amounts of cash and offer better solutions to the customers along with improving their bottomlines by cutting down their cost of operations.

There would be challenges in terms of branch network, people and technology. It is essential that banks get the right sequence of the three as part of consolidation process.

While consolidation may be purely a decision of the government in case of nationalised banks, for other banks, commercial considerations will matter.

Scope of the Practice:

The Banking and Financial Services Practice specializes in top level executive searches for following industry sectors:

• Corporate & Investment Banking: Corporate Lending, Syndications, Corporate, Asset & Structured Finance, Leasing, Real Estate Capital Markets, Investor Relations and Bonds
  
  
• Consumer & Commercial Banking: Retail & Consumer Finance, Private Equity, Venture Capital and Private Placements
  
  
• Private banking : Private Clients & Wealth Management
  
  
• Management, Mutual & Pension Funds, Trust & Trust Management
  
  
• Transaction and Operational Services: Brokerage, Securities & Bond Trading, Derivative & Operational Products
  
  
• Private Equity
  
  
• Corporate Finance - M&A and Leveraged Finance
  
  
• Real Estate Finance