“Sunny with a Chance of Clouds”
By Mark P. Dangelo
Also published at the National Mortgage Bankers Association
Approaching the Next Decade
As 2010 approaches, the domestic market for Indian banking and capital markets is poised for a resumption of very strong growth. With GDP estimated to grow at 6% to 8% this year reaching nearly $1 trillion USD, it is an economy that has an increasingly educated population seeking enlarged global recognition. The last two years have spared the Indian public and private sector banks much of the chaos of their Western peers, due to their underlying social mission supported by durable supervisory oversight.
Consumer credit, loan products, and retail banking are all ready to once again resume their hyper-growth – albeit using very different banking models, measurements, and performance criteria. With a population of over 1 billion, the potential for market penetration of consumer financial products is not lost on public and private bankers both domestically and foreign.
While prohibiting much of the global derivative exposures, agencies and their regulators have a growing burden of non-performing debt that was based on social charters designed for a world of 50 years ago. Moreover, the next decade of Indian banking and capital markets presents new domestic challenges that have analogies within the Western banks – but a process and infrastructure capability that is still limited in sophistication.
Lingering risks with domestic credit portfolios, unsecured lending, commercial quality, and newly introduced product implications may expose weaknesses with internal systems and the underlying data needed for accurate decision making. Banking and technology investments and infrastructure are poised to amplify the consumer potential and market demands.
So, while the prospects are good for increased consumer deposits (> 20%) and support of domestic investments, banking and capital market consumer expectations will demand the highest operating standards for public and private firms – and the regulators that oversee their integrity.
A “Knee-of-the-Curve” Transformation
The lessons learned from the global recession of 2007—2009 are many. Yet, there are several key banking and capital market realities and emerging trends that must be enhanced within many of the public and private domestic banking organizations.
· End-to-end performance management across products and operations,
· Comprehensive and adaptable risk management balanced against social responsibilities,
· Adhere to the “letter” of regulatory compliance – and the spirit of its intent,
· Market, securitized, and portfolioed credit instrument quality against global markets,
· Cross-border M&A’s and the need for greater participation in global financial products,
· Consumer behaviors, rising educational standards, and shifting global wealth, and
· Adoption of consumer credit standards, infrastructure, and governance.
Underpinning the aforementioned directions are data and the analytics needed to determine success. The delivery of meaningful and correlated strategies and information will present difficulties for Indian internal teams to create from scratch – time to create, cost of delivery, and accuracy of integration. India is a set of regional markets poised for meteoric growth in the next decade. The ability to leverage the lessons learned, while avoiding the pitfalls of others, may determine if they become an Asian banking leader in just a few short years.