Navigating the changing landscape: Banking sector's future, opportunities, and challenges explored

Under the guidance of Shereen Bhan, Managing Editor of CNBC-TV18, the finance roundtable featured esteemed personalities - Zarin Daruwala, Cluster CEO — India & SA, Standard Chartered Bank; Govind Singh, MD & CEO, Utkarsh Small Finance Bank; Rajiv Sabharwal, Tata Capital; Ashwini Kumar Tewari, MD, State Bank of India; Prashant Kumar, YES Bank; J Venkatramu, India Post Payments Bank; Kaushik Shaparia, CEO, Deutsche Bank India; Sanjeev Krishan, Chairperson, PwC in India and Gayathri Parthasarathy, Lead - FS Sector, PwC India.

Shereen Bhan initiated a poll, focusing on the recent monetary policy announcement by the Reserve Bank of India. As the MPC (Monetary Policy Committee) delivered its verdict, leaving the rates and stance unchanged, the question arose: Will we witness a rate cut in the upcoming calendar year or the financial year? The show of hands from the distinguished participants sought to capture their collective sentiment and set the tone for the engaging discourse that ensued.

When asked about the expectations for FY24 and the longer-term outlook over the next five years, Sabharwal said that the country will see 6.75% growth this fiscal year. He expects 7.5% growth in the long term. He further emphasises that credit will be a key driver of growth for the Indian economy and the need for banks and NBFCs to collaborate in ensuring the availability of credit at the grassroots level.

Ashwini Kumar Tewari stressed the importance of banks forging extensive collaborations with fintech companies, highlighting their agility and promptness in addressing customer requirements. “We are collaborating with a few fintechs in various aspects. We no longer talk about them as fintechs, they are like partners to us, which should have been the original idea and collaboration I see happening on a very large scale,” he added.

Sanjeev Krishan observed fintech infusion bringing youthfulness to banks. “I think we should celebrate it, including things like more recently CBDC. These are huge enablers for us.”

When asked about partnerships between banks and fintechs, Prashant Kumar said, “we are almost contributing 40% to UPI, and UPI transactions are touching almost 10 billion a month and we are talking about 1 billion every day in the next three years. So I think this kind of partnership has actually helped both of them. And I think everybody has seen that it's not about each other, it's about how we can add value to the customer.”

Further, banking experts shared their opinion on key disruptors that could empower banks and fuel operational strength and growth. Gayathri Parthasarathy identified open banking and Generative AI as major disruptors shaping the banking sector's growth. She added, “Digital transformation is written all over the country and the banking sector. And also in terms of the innovations that are coming across in payments, whether it is UPI, UPI lite, or fintech ecosystem, all are leading to in terms of how the disruptive technologies can help the banks to further strengthen and grow.” Recognizing the fast-changing landscape of technology, customer expectations, and regulations, she also highlighted the importance of talent development and upskilling in the banking sector.

J Venkatramu underscored the importance of a systematic digital infrastructure, citing the success of initiatives like Jan Dhan in creating a scalable and fully digital ecosystem for future growth.

Govind Singh, MD & CEO of Utkarsh Small Finance Bank, recognized the transformative role of technology in rural India, citing the widespread adoption of UPI and QR codes.

Sanjeev Krishan emphasised the importance of maintaining a stable trajectory for the Indian economy. He identified the composition of the current loan portfolio as a potential challenge for the banking industry, with rising credit costs impacting consumers and leading to reduced demand for consumer companies. "I am also slightly concerned when we look at the way banks have grown their balance sheets and a lot of it is actually driven by the retail loans. The economy needs to continue to be in good stead. And because of the composition of the loan portfolio, that could be a challenge that they may face,” he added.

Zarin Daruwala explored the versatile applications of CBDC, like the Digital Rupee, in areas like Direct Benefit Transfer (DBT) and niche requirements. She emphasised its targeted use and customizable features, distinguishing it from UPI.

Ashwini Kumar Tewari highlighted the potential of the Digital Rupee as a backup for UPI in ensuring national security. “Something happens to UPI, we have the CBDC. So I think we should also encourage it so that it also comes up as a viable payment mechanism which is kind of a default vis-à-vis the UPI, so that's something I think we have not considered so far,” he said.

Tewari feels that climate finance presents significant opportunities, with interim targets and long-term goals set by India. The opportunity in climate finance till 2030 is estimated to be around Rs 30 lakh crore. This offers the potential to double the loan book of banks, including capturing opportunities in EVs, battery technologies, renewable energy, and other related sectors like battery manufacturing and pumped hydro. According to him, leveraging this opportunity is crucial not only for banks' growth but also for fulfilling national commitments and contributing to the planet's well-being.

The insightful discussions on the future of India's banking sector have shed light on the necessary steps to unlock its true potential. Recognizing the heterogeneity of the market, customization, personalization, and digitization have emerged as crucial challenges to address. The responsibility now lies with the participants to invest their resources and expertise in tackling these challenges head-on.

Looking ahead, the CEO Dialogues will continue its mission of fostering meaningful dialogue by hosting panel discussions on other pivotal sectors such as Manufacturing and Health Industries. These discussions will further contribute to a comprehensive examination of India's dynamic business landscape.