Open banking & AI major disruptors — can empower banks if utilised fully, say banking experts

"Digital transformation is all over, it is written all over the country and all over the banking sector. And also in terms of the innovations that is coming across in payments, whether it is UPI, UPI lite, or anything else that is happening from a fintech ecosystem, etc. all are leading to in terms of how the disruptive technologies can help the banks to further strengthen and grow."

"...usage of I would say, again, disrupt through technology, a lot of things through data, and data on data on data, right, and now Gen AI, multiple things that is coming up, and which can be used for the banks," she added.

J Venkatramu, MD & CEO of India Post Payments Bank, emphasised the value created through collaboration between fintech and traditional banks. He highlighted the advantages of fintechs having a stake in the technology game, contributing to market disruption and improved consumer experiences. Venkatramu stressed the need for a systematic digital infrastructure, citing the success of initiatives like Jan Dhan in creating a scalable and 100% digital ecosystem, which can pave the way for future growth.

"...costs of service delivery, especially when it comes to credit is very, very high. How can we reduce that cost by utilisation of technology by utilisation of data. I think there's a whole lot of activity which is required and more importantly, it requires collaboration of various players, not only traditional banks, maybe even non-traditional players. We have seen in case of UPI, how it led to phenomenal success where a combination of both traditional and non-traditional players joining hands, and today, we are seeing success in front of us," he added.

Govind Singh, Managing Director & CEO of Utkarsh Small Finance Bank, acknowledged the significant impact of technology adoption in rural India, particularly in the increased usage of UPI and QR codes. He noted that while technology has been instrumental in overcoming challenges related to operating costs in rural areas, there are still hurdles to address.

"The biggest challenge for rural economy has been the operating costs, which all of us talk about that part, because the ticket size being low, the distances being high, longer it becomes at time challenging the economy, this technology part is playing a very big role in that and we have seen that happening," he said.

Ashwini Kumar Tewari, Managing Director of SBI discussed the opportunity for urban financial inclusion due to rapid urbanisation in India. He emphasised the need to cater to the growing population of individuals with higher earnings, focusing on innovative models such as BC (Business Correspondent) or MFI (Microfinance Institution).

"India is urbanising at a very fast pace and apart from the urban infrastructure, which is a separate category where a lot of opportunity exists but I think we need to take into account the more and more people coming to cities, and these are people with slightly higher earnings, just that they are not your typical salaried class employees in a in a good company and we how do we take care of those, whether through a BC model or through MFI model, that is something we need to work out. So that's another big opportunity, which probably has to be leveraged," Tewari said.

"..things like sustainability, climate risk, those are some things that Indian banks haven't paid much attention so far so that is one theme. And of course, the other themes are around ECL and all which separate topics," he added.

On the other hand, the Chairperson of PwC in India, Sanjeev Krishan said that the current loan portfolio could pose a challenge to the banking industry. He highlighted the need for the Indian economy to maintain a stable trajectory as the rising credit cost has started to affect consumers, and so, consumer companies are grappling with reduced demand.

"...I am also slightly concerned when we look at the way banks have grown their balance sheets and lot of it is actually driven by the retail loan. The economy needs to continue to be in good state, and there are certainly areas that were identified... which could challenge the economy... and because of the composition of loan portfolio, that could be a challenge that they may face," he said.

Prashant Kumar, MD & CEO, YES Bank highlighted the importance of expanding credit coverage in rural areas and building institutional capabilities to handle credit growth effectively. He said, "in the rural areas, in the past few years, we have been able to do successfully in terms of opening the liability accounts, making the transactions available, very conveniently, but I think the next phase is how we can cover from credit perspective. So I think very large population today is not covered and I there I think all of us are seeing the opportunity.

"But the important part is first we need to build the capabilities within the institution to handle that kind of credit and then go for it. When we are talking about going forward, there may be some risk, there may be some roadblocks. I think those issues would be there where we go for those kinds of credit opportunities without building adequate safeguards. So I think anybody who works towards this, build a digital solutions, lower down the operating costs, then there is a huge opportunity," he added.