opportunity assessment in the indian bfsi · pdf filebanks include sbi and its subsidiaries,...
TRANSCRIPT
Sample Deliverable
Opportunity Assessment in the Indian BFSI Sector
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 2
BFSI
BANKS INSURANCE CAPITAL MARKET
Commercial Banks: Include scheduled and non-
scheduled commercial banks, which are regulated
under Banking Regulation Act, 1949.Scheduled
Banks include SBI and its subsidiaries, all
nationalised banks, regional rural banks, foreign
banks, private banks and some co-operative banks.
Non-scheduled banks have reserve capital less than
5 lakh and are not entitled to borrow from RBI for
normal banking purposes
Non-Banking Financial Company (NBFC) is a
company registered under the Companies Act, 1956
engaged in the business of loans and advances,
acquisition of shares/stocks/ bonds/
debentures/securities issued by Government or local
authority or other marketable securities of a like
nature, leasing, hire-purchase, insurance business,
chit business
Life Insurance: Protection against the loss of income
that would result if the insured passed away
Non- Life Insurance: There are different forms of
general insurance, including for fire, marine, motor,
accident, etc. Non-Life insurance also covers
personal insurance (such as Accident and Health
Insurance insurance); liability insurance (which covers
legal liabilities); in case of a burglary, or for property,
etc.
Mutual Funds: Pool of funds collected from many
investors for the purpose of investing in securities
such as stocks, bonds, money market instruments
and similar assets. These include Debt, Equity, Liquid
and hybrid Mutual funds
Wealth Management: A combination of services are
provided to the customer for a fee. The Professional
services include financial/ investment advice,
accounting/tax services, retirement planning and
legal/estate planning
DE
FIN
ITIO
NS
INR CRORE 2010 2015 2020F CAGR 2010-15 CAGR 2015-20F # of Players Margin
Scheduled Commercial
Bank Advancesxxx xxx Not Available xx% Not Available xx xx% (NIM)
NBFC Advances xxx xxx 2,900,000 xx% xx% xx xx% (NIM)
Insurance Premium xxx xxx 879,000 xx% xx%
Life - xx
Non-Life – xx
Reinsurance-xx
Life – xx%
Non-Life – xx%
Mutual Funds AUM xxx xxx 2,551,000 xx% xx% 44 (registered) Not Available
Key Segments, Market Size and Growth
Sample – Disguised and Abridged
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Risks for the banking sector increased during the half year ended Sep’15 due to deteriorating asset quality, lower soundness and sluggish profitability
KPIs
Banking- Net Interest Margin
The NIMs of SCBs, especially PSBs and foreign
banks, have been showing a declining trend in
recent years
xx%
xx%
xx%
xx%
2.5%
2.6%
2.7%
2.8%
2.9%
3.0%
2012 2013 2014 2015
(NIM)
Banking- Gross NPA
As per RBI, Gross NPA ratio would reach xx% by Sept’16 from xx% in Sept’15,
and xx% by March 2017, if macroeconomic conditions deteriorate
Banking- SCBs Deposits and Advances
Credit growth of xx% (y/y) and deposit growth of xx% (y/y) in
Mar’15. Slow growth of banking sector due to subdued
performance of PSBs
Insurance- Penetration
In the last 10 years, the penetration of non-life insurance sector
in the country remained steady in the range of xx% - xx%. The
life insurance penetration has exhibited a declining trend since
2009, reaching xx% in 2014
xx%
xx%xx%
xx%
xx%
xx%xx%
xx%xx% xx%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2011 2012 2013 2014 2015Public Sector Private Sector
(INR Thousand Cr. )
xxxx
xxxx
xx
xxxx
xxxx
xx
0
5,000
10,000
2011 2012 2013 2014 2015Advances Deposits
(Premium/GDP)
(%)
xx% xx% xx%xx%
xx% xx% xx% xx%
xx% xx% xx%
xx%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2011 2012 2013 2014
Life Non-Life Industry
KPIs
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 4
Xx%
Xx%
X%X%
X%
X%X%
Xx%
HDFC PFCREC LIC HousingIDFC Shriram TransportIndiabulls Housing Others
Market Structure and Players (1/2)
SCBs
xx%
x%
x%x%x%
x%
xx%
State Bank of India & its associatesBank of BarodaBank of IndiaPunjab National BankCanara BankUnion Bank of IndiaOthers
xx%
xx%
xx%x%x%
x%x%
xx%
ICICI BankHDFC BankAxis BankYes BankIndusind BankStandard Chartered BankKotak Mahindra BankOthers
PUBLIC PRIVATE Scheduled Commercial Banks
• Public and Private banks constitute approximately xx% and xx% of total advances, respectively
• In public banks, the top 5 players account for xx% of total advances, while in private, the top 3
players account for xx% of advances
• In 2015, the average NIM for Indian private banks was xx%, while it was xx% for public banks
• RBI granted “in-principle” license to two players for universal banks in Apr’14 , and to 11 players
for payment banks in Aug’15
o Universal banks: IDFC and Bandhan
o Payment banks: Aditya Birla Nuvo, Fino Paytech, National Securities Depository, Reliance
Industries, Dilip Shanghvi, Tech Mahindra, Vodafone M-pesa, Airtel M Commerce, Department
of Posts, Vijay Shekhar Sharma, Cholamandalam Distribution
TOP PLAYERSCOMPOSITION OF
ADVANCES
NBFC
• Top 3 NBFCs including HDFC, PFC, REC account for xx% of the market
• Leading NBFCs like Bajaj Finance, Shriram Transport, etc., are consistently growing and are
expected to become larger than most of the Tier-II and Tier-III banks
• Emerging Player:
• Small Finance Banks: RBI granted “in-principle” license to ten players for small
finance banks in Sept’15.These include Au Financiers, Capital Local Area Bank, Disha
Microfin, Equitas Holdings, ESAF Microfinance and Investments , Janalakshmi
Financial Services, RGVN (North East) Microfinance, Suryoday Micro Finance, Ujjivan
Financial Services, Utkarsh Micro Finance
• Agriculture NBFC: Agricultural marketing and Warehousing companies like Star
Agriwarehousing, Shree Shubham Logistics, etc., have started their NBFCs to provide
financial assistance to farmers and farm-related businesses
BANKING
NBFC
xx%
xx%
x%
x%
x%
x%
x%x%
x%
x%
Infrastructure Comm. Vehicle
Corporate Loans Gold Loans
Mortgage/Housing Cars
Construction Equipment Capital Market
Unsecured Retail Others
*Market size as on Mar’15 based on total advances
Mar’15 Mar’15
Mar’15 2013
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 5
xx%
x%
x%
X%x%
x%xx%
LIC ICICI Prudential
HDFC Standard SBI Life
Max Life Bajaj Allianz
Others
xx%
xx%
x%
xx%X%
X%
xx%
National New India
Oriental United
ICICI Lombard Bajaj Alliance
Others
LIFE LIFE INSURANCE PREMIUM
Life
• In 2015, the life insurance sector had one public (LIC) and 23 private players, with xx% and xx%
market share respectively
• Top 6 players account for xx% of the total market; ICICI Prudential and HDFC Standard are the top
private players
• Life insurers’ premium declined during 2010-13; it started to pick up again in 2014. The overall
industry premium growth was xx% in 2014-15 (xx% for private and xx% for LIC)
• During 2014-15, LIC issued 200 lakh new policies (decline of xx% vs. previous year) and private
life insurers issued 57 lakh new policies (decline of 10% vs. previous year)
• Life insurance industry recorded net profit margin of xx% in 2014-15. Net profit margin for LIC and
was 0.x% and private players was xx%
NON- LIFE INSURANCE PREMIUMNON-LIFE
xxxx xxxx xxxx
xxxxxxxx
0
500
1000
1500
2000
2500
3000
3500
FY2011 FY2012 FY2013 FY2014 FY2015
INR
Hu
nd
red
Cro
re
LIC
Private Insurer
Life Insurance Industry
xxx
xxx
xxx
xxxxxx
0
200
400
600
800
1000
FY2011 FY2012 FY2013 FY2014 FY2015
INR
Hu
nd
red
Cro
re
Non-Life Insurance Industry
Public insurer
Specialised insurer
Private insurer
Standalone health insurer
Mar’15 Mar’15
Mar’15 Mar’15
Non-Life
• As of 2015, the non- life insurance market has six public and 22 private players, with 56% and 44%
market share respectively
• Among the six public players, four companies have multi-line operations and two are into
specialised insurance (ECGC for export credit insurance and AIC for crop insurance). Of the 22
private sector insurers, five operate exclusively in the health segment
• Top 6 players account for xx% market share; New India Insurance is the market leader (xx% share)
and ICICI Lombard is the biggest private sector player
• Non-life insurance premium has been growing since 2010 at an average rate of xx%. The overall
industry premium growth was x% in 2014-15 (xx% for private and xx% for public)
• Segment-wise premium for non-life is driven by Motor insurance with xx% market share, followed
by health, which accounts for xx%. Fire accounts for xx%, Marine forx% and others for xx%
• During 2014-15, non-life insurers underwrote 1183 lakh policies (increase of xx% vs. previous
year). Public sector insurer recorded xx% increase and private players registered 19% increase in
number of policies issued over previous year
• Non-life insurance industry reported net profit margin of xx% during 2014-15. The public sector
insurers reported a net profit margin of x%, with all six players recording profit. The private sector
insurers recorded net profit margin of xx%
Reinsurance
• General Insurance Corporation is the sole national reinsurer, providing reinsurance to the direct
general insurance companies in India. During 2014-15, net premium recorded by GIC increased by
4.9% to INR 13857 Cr
INSURANCE
Market Structure and Players (2/2)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 6
CONSIDEREXPLOREMONITOR
PARK
Re
leva
nc
e(E
xte
nt
of
imp
act
on
in
du
str
y,
cli
en
t)
Imminence(Timeframe for Impact)
• Rising NPAs causing stress
• RBI moving towards a forward looking
framework
• Debt restructuring under strategic debt
restructuring scheme
• Non-performing asset sale by banks to asset
reconstruction companies (ARCs)
• Evolution and growth in cyber crime
• Launch of payment banks
• Boom in NBFCs
• Growth in wealth management driven by
rising high net worth individuals (HNWIs)
• Analytics in decision making
• Shift towards data driven society
• Move toward a capitalistic society with a
broader safety net
Hig
hM
ed
ium
Lo
w
CurrentTwo years and afterFour years and after
• Consolidation in banking sector to tackle
challenges and growth
• Adoption of international solvency norms in
insurance sector
• Development of bond market
• Biometric for payment authentication
• Rob advisors
• Crypto currency and block chain technology
• Insurance kiosks for on-the-spot Insurance• Development of Insurance Marketing Firms
(IMFs)
Trends Impacting BFSI Sector
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 7
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• The gross NPA for the banking industry
stood at xx% (INR 3 lakh crore) as on
Mar’15 vs. xx% in the previous year. Nearly
xx% of the total loans given by banks are
estimated to be in the stressed (NPAs and
restructured loans) assets category
• The growth in NPAs is driven by
stalled/delayed infrastructure projects,
lapses in pre-sanction and post-sanction
monitoring process, frauds related to
diversion of funds, economic slowdown,
lack of policy on action against wilful
defaulters. Wilful defaulters owe PSBs INR
64,335 crore, which constitutes about xx%
of total NPAs
• Banks have been resorting to restructuring
to avoid classification of accounts as
NPAs; these are also turning bad. Around
xx% of the loans restructured during 2011-
14 have turned bad
Audit
Forensics
• Companies such as Deloitte, PwC,
KPMG, EY and Alvarez & Marsal are
helping banks in investigating NPA
cases by conducting forensic audits
• In Mar’16, EY launched NPAccurate,
an automated tool to help banks
assess the level of clean up required
by the deadline of 31 March 2017.
The tool enables banks to identify
vulnerabilities and inconsistencies in
loan portfolios through
comprehensive dashboards
• Government has roped in McKinsey
to aid bankers in formulating their
strategies to reform the banking
sector
• RBI has directed banks to declare all bad
loans on their books by Mar’17. From Apr’16,
all restructured assets are to be treated and
provisioned at par with the NPA accounts as
per RBI
• Bankruptcy Law passed by Rajya Sabha in
May’16. It will enable banks to take quick
action on accounts in the early stages of
default, also maximising recovery amount
• Amendment to SARFESI Act - Government
proposes to allow sponsors of ARCs to hold
up to 100% stake in companies and even
allow non-institutional investors to invest in
securitization receipts
• Amendment to DRT Act to create debt
recovery tribunal online courts
• Action against wilful defaulters – Standing
Committee on Finance suggested banks to
make names of their top xx willful defaulters
public
• Flexible refinancing structure (5:25 scheme)
for projects characterised by long gestation
periods like infrastructure projects
• Recapitalisation: Capital infusion of INR
25,000 Cr by GoI in PSUs during 2016-17,
followed by further INR 10,000 Cr during
both 2017-18 and 2018-19
• Forensic Audits by banks of all restructured
loans that have turned bad as well as wilful
defaults
Trend 1: Rising NPA, a stress on the banking sector
Trends to Consider (1/7)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 8
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• Rising NPAs are causing significant
stress in the banking system;
therefore, RBI and banks are now
moving towards a forward looking
framework
• The gross NPA for the banking
industry stood at xx% (INR 3 lakh
crore) as on Mar’15 vs. xx% in
previous year. Nearly xxx% of the
total loans given by banks are
estimated to be in the stressed
(NPAs and restructured loans)
assets category
Audit
Management Consulting
Digital & Analytics
ERP & Tech Enablement
Forensics
• Proactive services expected from
forensic audit firms - Deloitte,
PwC, KPMG, EY and Alvarez &
Marsal are seeing a surge in
demand from lenders for probing the
accounts that are yet to default but
may have begun to show some early
signs of trouble. Earlier, banks use
to employ these services once the
company had defaulted on
repayment of a loan
• EY launched NPAccurate in Mar'16
– an automated tool, which allows
banks to assess the level of clean up
required by the deadline of 31 March
2017. The tool would enable banks
to identify vulnerabilities and
inconsistencies in loan portfolios
through comprehensive dashboards
• RBI
• RBI plans to conduct forensic audits of top 10
defaulters to check if lenders followed established
practices and processes when sanctioning those
loans, and to plug in gaps in supervision process
• Empowered Committee to be set up at three levels
- RBI, banks and borrower level - to continuously
monitor large loan portfolios. These committees
may be mandated to submit periodical reports on
their findings to the central government and
Parliament
• Transparency in the appointment process for top
management positions in the PSBs
• RBI is setting up its IT subsidiary arm that will aid in
effectively monitoring and supervising internet-
based services offered by banks
• Finance Standing Committee suggested a six-
month timeline for resolution of CDR cases; these
currently get stretched over years
• Banks
• Banks might conduct forensic audits at frequent
intervals for advances over a threshold amount,
besides annual forensic audits of all bank loans
• Improved procedure for supervision and monitoring
of loan accounts; hiring industry specialists to
revamp valuation and strengthen pre-sanction and
post-sanction loan monitoring process
Trend 2: RBI and banks moving towards a forward looking framework
Trends to Consider (2/7)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 9
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• Rise in restructuring of debt, with
relaxation in RBI norms to revitalise
distressed assets in the economy
• Strategic Debt Restructuring -
Formation of a joint lenders forum
(JLF) by consortium of lenders
• JLF can convert part of their loan in an
ailing company into equity, with the
consortium owning at least xx% stake
• The loans restructured under the
scheme will not be treated as NPA for
18 months, providing significant
relaxation to banks. However, banks
need to sell off these projects after 18
months to a new promoter
• The scheme gives lenders the powers
to turnaround the ailing company,
make it financially viable and recover
their dues by selling the firm to a new
promoter
Forensics/ Risk Consulting
Turnaround Strategy
HR Consulting
Valuation
Not Available• Currently banks use existing
management to run the company,
but with greater external monitoring
and oversight
• Some of the companies that have
resorted to SDR include Gammon
India, IVRCL, Electrosteel Steels,
Monnet Ispat
• Challenges –
o 18-months window for lenders is a
short time period to find a new
lender
o SDR rules do not explicitly provide
for a partial stake sale and banks
have to sell their entire stake in the
company to the new buyer
o New promoter may have to delist
the company, if it acquires more
than xx% stake
Trend 3: Debt restructuring under the Strategic Debt Restructuring Scheme
Trends to Consider (3/7)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 10
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• Sale to ARCs has slowed down because
of the new norms implemented in Aug’14,
as per which ARCs have to pay xx% of the
net value of the asset upfront (vs. x%
earlier)
• In budget 2016-17, government has
proposed revision of norms governing ARC,
which will aid banks resolve their NPAs:
o Allow sponsors of ARCs to hold up to
100% stake in companies. This would
allow ARCs to become majority-owned
subsidiaries of their sponsor institution,
which will provide for higher and cheaper
capital
o Allow non-institutional investors to invest
in securitisation receipts, which will make
the market for receipts more liquid
• ARCs will now be allowed to extend the
duration of the security receipts beyond
eight years to the duration of the BIFR, CDR
or JLF programme
Forensics/ Risk Consulting
Valuation
Due Diligence
Procurement Services
• Banks are conducting due diligence
and forensic audits of buyers through
consulting firms
• In order to prevent banks from
selling off bad loans to their own
ARC, RBI is likely to impose
stringent checks on banks intending
to float their ARCs
• RBI has warned banks to keep a
check on buyer of assets, as
promoters of companies that have
defaulted may use shell companies
to buy back their own assets at a
lower price
Trend 4: NPA sale by banks to ARCs
Trends to Consider (4/7)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 11
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• Cyber crime has been increasing
at an alarming rate in India. The
number of cyber cases reported
under the IT Act have increased by
xx% in 2014 vs. 2013. As per
KPMG survey, BFSI is the top
sector for cyber crime cases
• Cyber attacks are becoming more
sophisticated. Identity theft in India
account for maximum fraud cases
in BFSI as per Experian (xx%
cases in Q1 2015)
• Growth and sophistication in cyber
crime in BFSI is being driven by :
o Rising penetration of smart
phones
o Growth in mobile banking in
India; the segment is expected
to grow from xx% in 2015 to
xx% by 2022, with the value
increasing 200 times to USD 3.5
trillion
o Rise in social media
o Advanced tools being used by
fraudsters to counter robust IT
infrastructure of organisations
Forensics
IT Advisory/ Cyber Security
• PwC India and NIIT University have
entered a strategic partnership to
introduce a two-year post graduate
programme in cyber security from
July 2016
• PwC India and Google are to launch
an analytics and algorithm-based
product for Indian companies
(including startups) to provide cyber
security. The product will be able to
detect, analyse and stop possible
cyber attacks from cyber criminals
• KPMG launched CyberKare - a cyber
security app that empowers senior
management to self-assess cyber
threats and gauge current level of
preparedness to combat it
• Conduct cyber crime management
workshops for banking personnel
Banks
• Banks have taken initiatives to spread
awareness and caution amongst
customers and internal employees
about information security. Banks
have set up strong internal teams to
handle internal security concerns
• Software tools like Data Leakage
Prevention (DLP), etc., provide deep
visibility into operations and help to
quickly detect a security breach
• Data Analytics to trigger a warning
whenever there is an exception in
customer behaviour pattern
RBI
• RBI has set up Institute for
Development and Research in
Banking Technology (IDRBT), with
dedicated research centres like
Centre for Mobile banking, Analytics,
Cyber Security, Cloud Computing, etc.
• RBI is setting up its IT subsidiary arm
that will aid in effectively monitoring
and supervising internet-based
services offered by banks
Trend 5: Evolution and growth in cyber crime
Trends to Consider (5/7)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 12
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• Financial Inclusion – Currently,
about xx% of population does not
use banking facilities. The
government initiative for financial
inclusion aims to provide 1) small
savings accounts and 2)
payments/remittance services to
migrant labour workforce, low
income households, small
businesses, unorganised sector
entities and other users
• In Aug’2015, RBI gave "in-
principle" licenses to 11 entities to
launch payments banks. The
license is valid for 18 months,
within which the entities must fulfil
the requirements specified by RBI
Management Consulting
HR Consulting
ERP & Tech Enablement
IT Advisory
• Shinjini Kumar, a former central
banker and senior executive at PwC,
has been hired as the CEO of the
payments bank launched by Paytm's
founder Vijay Shekhar Sharma in
Feb'16
• The payment bank licenses have
been given to Aditya Birla Nuvo,
Airtel M Commerce Services,
Cholamandalam Distribution
Services, Department of Posts, FINO
PayTech, National Securities
Depository, Reliance Industries, Dilip
Shantilal Shanghvi Sun
Pharmaceuticals, Vijay Shekhar
Sharma Paytm, Tech Mahindra and
Vodafone M-Pesa
• Hiring of senior executives for setting
up payment banks - Payment bank
license holders are facing a
challenge in getting the right kind of
talent for an industry, which does not
have any precedent in India. So,
they are turning to expats who have
the experience of working in large
corporations in the US or Singapore
• Hiring of Agents - Agents remain the
physical backbone and face of
mobile money to digitise and
disburse cash, representing more
than xx% of the cash-in and cash-out
footprint. Globally, an average of
xx% of the top-10 providers’
revenues are spent on agent
commissions
Trend 6: Launch of payment banks
Trends to Consider (6/7)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 13
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• NBFCs credit share in India’s GDP rose
from xx% to xx% between 2005 and 2015.
However, their credit penetration is still low
as compared to other economies like
Thailand and Malaysia at xx%
respectively, and China at xx%. NBFC
credit is expected to grow at a CAGR of
xx%- xx% in 2016-2020, and credit
penetration is expected to reach xx%-xx%
of GDP
• Few factors that will drive NBFC growth
are:
o High credit demand fuelled by a
massive self employed population that
is underserved by banks due to
inadequate income proof and parallel
economy. As per the PM of India, there
are 5.77 crore small businesses, of
which most are proprietorship
businesses, employing 12 Cr Indianso Limited reach of commercial banks in
rural areaso Average household income is expected
to rise from INR 2.9 lakhs to INR 5.1
lakhs p.a from 2010 to 2020 o Significant rise in consumption in
smaller towns and rural areas by 2020;
this provides significant opportunity to
NBFCs as they are focused on smaller
towns as their home markets
Management Consulting
IT Advisory
Fin. & Acc. Advisory
Audit
ERP & Tech. Enablement
Not Available• Capital First, a retail lending
NBFC, supports the growth of
MSMEs in India. Its retail AUM has
increased 135 times and no. of
customers financed has risen from
13,163 to 19,20,519 from 2010 to
2015
• Two former executives of
Deutsche Bank plan to set up an
NBFC in India, backed by Japan’s
SoftBank Group. The proposed
NBFC will be looking at lending to
SMEs and will look at a largely
online business model with sparse
brick and mortar presence
• In Nov 2014, former chief
executive of Citigroup, Vikram
Pandit, announced an investment
of INR 540 Cr in JM Financial Ltd’s
real estate financing business, in
exchange for xx% equity
Trend 7: Boom in NBFCs
Trends to Consider (7/7)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 14
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
• The government plans to identify 6-10
PSBs that will drive consolidation and
act as Anchor Banks. Large lenders
like State Bank of India (SBI), Bank of
Baroda (BoB), Punjab National Bank
(PNB) and Canara Bank could
become the anchor banks
• The factors that will drive
consolidation, especially in PSBs are:
o Rising NPA creating a need for
capital infusion
o Increased capital requirement with
implementation of Basel-III in 2019.
. PSBs would need about INR1.02
trillion to comply with Basel III
requirements between FY 2015 -18
o To be globally competitive and to
expand internationally, Indian
banks will need to consolidate to
increase their balance sheet size.
Currently, none of the Indian banks
rank amongst the global top 50
banks
Audit
Tax
CF & Deal Advisory
Governance Risk &
Compliance Services
ERP & Tech. Enablement
Management Consulting
HR Consulting
Forensics
Fin. & Acc. Advisory
• Government has roped in McKinsey
to aid bankers in formulating their
strategies to reform the banking
sector
• HR and Technology integration will be
the key challenges in the process
• RBI plans to set up a committee to
find comparable working conditions
within PSBs, which in turn can be
merged into single entity
Trend 8: Consolidation in banking sector to tackle challenges and growth
Trends to Consider (1/3)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 15
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
Adoption of international Solvency-II norms
for implementing risk-based capital
• Solvency-II norms - EU-wide insurance
regulatory regime focused on risk in
context of quantitative requirements,
governance, transparency and disclosure
• Benefits - The insurance companies
would be able to manage their capital
more efficiently. Further, global adoption
of Solvency-II would create a level-
playing field across markets
• Solvency-II in India will take 3-5 years
to be implemented as some players are
not yet ready for a solvency
mechanism based solely on risk
• Challenge - High cost of
implementation and compliance
Trend 9: Adoption of international solvency norms in insurance sector
Audit
Governance Risk &
Compliance Services/ Risk
Consulting
Management Consulting
Fin. & Acc. Advisory
Not Available
Trends to Consider (2/3)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 16
Key Trends and Drivers Buy Side Sell SideService Area
Opportunities
Tax
Fin. & Acc. Advisory
Family Business Services
• The industry is dominated by
private players, including Kotak,
ICICI, IIFL and Karvy, among
others
• In Jan’16, SBI became the first
PSB to launch wealth management
services for HNIs
• Amongst the HNWIs in India, xx%
are willing to pay for customised
services, while xx% prefer to work
with a single firm
Trend 10: Growth in wealth management driven by rising HNWIs
xxxx xxx xxx
xxx
xxx
2010-11 2011-12 2012-13 2013-14 2014-15(E)
2019-20(P)
Growth of Ultra High Net Worth Individuals in India
Combined Net Worth ofHNIs (INR trillion)
HNWI
62,000 81,000100,90
0
117,00
0
137,10
0
348,00
0
• Wealth management industry is expected to
grow exponentially, due to improving
economic outlook and a relatively young and
increasing population of HNI
Trends to Consider (3/3)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 17
SUB-SEGMENT TYPE OF DRIVER
Banking InsuranceCapital
MarketREG. MARKET TECH. OTHERS
IMPLEMENTATION OF BASEL-III CAPITAL REGULATIONS BY MARCH’19
Basel-III aims to plug the loopholes present in Basel-II and recommends better
mechanism for risk and liquidity management. As per Basel-III, banks will have to
maintain a core capital ratio of 8% and a total capital adequacy ratio of 11.5% against
the current 9%
RISE IN MOBILE AND INTERNET BASED TRANSACTION
Number of mobile phones in India stood at 1bn as on 31 January 2016 (20% smart
phones), reflecting about 78% penetration in the country. The share of mobile banking is
expected to rise from 0.1% in 2015 to 10% by 2022. Growth in e-commerce industry is
driving mobile-based transactions. As per Snapdeal’s chief product officer, “Snapdeal
has seen robust traffic via m-commerce, with over 75% orders coming through the
mobile.”
FINANCIAL INCLUSION
The Pradhan Mantri Jan-Dhan Yojana (PMJDY), a National Mission for financial
inclusion of all households in the country. The plan envisages universal access to
banking facilities, with at least one basic banking account for every household, financial
literacy, access to credit, insurance and pension facility. As on 9 December 2015, 195.2
million accounts have been opened and 166.7 million RuPay debit cards have been
issued under PMJDY
CHANGING CUSTOMER PROFILE
Since 2013, there has been a shift in customer base, with digital natives fast
outnumbering the traditional customers. By 2020, digital natives will form the majority
segment of customers, changing the industry ecosystem with increased focus on
customised solutions and analytics based decision making
A SHIFT IN CYBERCRIMINALS’ FOCUS
Cybercriminals are becoming less interested in mass malicious attacks on users,
preferring fewer, more targeted attacks. Instead of attacking end users, they pursue
organisations that work with financial information and payment tools
Disruptor Inhibitor Driver
Overarching Drivers, Challenges and Disruptors (1/3)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 18
SUB-SEGMENT TYPE OF DRIVER
Banking InsuranceCapital
MarketREG. MARKET TECH. OTHERS
CHANGES IN HIRING PROCESS OF TOP MANAGEMENT IN PSBs
Under the Government mission “Indradhanush” to revamp PSBs, certain steps have
been introduced to ensure transparency and professionalism in the hiring process for
senior management. The post of Chairman and Managing Director in PSBs has been
split into (a) MD and CEO, and (b) Non-Executive Chairman. Private sector candidates
are allowed to apply for the position of MD & CEO of the five top banks, i.e., Punjab
National Bank, BoB, Bank of India, IDBI Bank and Canara Bank. Three stage screening
is to be conducted for the MD’s position, leading upto final interviews with three different
panels. For the remaining PSBs, hiring will be conducted from the pool of executive
directors of the PSBs
BIOMETRIC FOR PAYMENT AUTHENTICATION
RBI plans to use Aadhaar data like fingerprints for second factor payment authentication.
Biometrics authentication & identification market in India is expected to grow from USD
823 MN in 2014 to USD 2 BN in 2020
DEVELOPMENT OF BOND MARKET IN INDIA
To support economic development, provide an alternative source of finance, and
supplement the banking system to meet the requirements of the corporate sector to raise
funds for long-term investment, the GoI, RBI and SEBI have taken several steps in the
recent past to develop a robust corporate bond market. Total corporate bond issuance
has increased xx% from INR 2,709 BN in 2010-11 to INR 4,789 BN in 2014-15. During
2014-15, turnover in the corporate bond market increased by xx%(y/y) to INR10,913 BN
ROBO ADVISORS
Online wealth management services that provide automated, algorithm-based advice,
without human intervention. These are low cost; have easy interface; are convenient to
use; and have limited bias and subjectivity
Disruptor Inhibitor Driver
Overarching Drivers, Challenges and Disruptors (2/3)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 19
SUB-SEGMENT TYPE OF DRIVER
Banking InsuranceCapital
MarketREG. MARKET TECH. OTHERS
DEVELOPMENT OF INSURANCE MARKET FIRMS (IMFs)
Increase insurance penetration and boost cross-selling of financial products; one-stop-
shop for all financial needs of a customer. According to IRDAI, insurance marketing firms
can solicit or procure insurance products, undertake insurance service activities, and
distribute other financial products like mutual funds. IRDAI has granted license to four
such firms
INSURANCE KIOSKS FOR ON-THE-SPOT INSURANCE
US auto insurance major installed “Direct on-the-spot kiosks” at public places with
transactional capabilities. These kiosks allow customers to scan their driver’s license in
order to obtain quotes and walk away fully insured in less than five minutes. However, in
India this will take time as a pre-requisite for implementing this is digitalisation of licenses
CRYPTO CURRENCIES AND BLOCK CHAIN TECHNOLOGY
Crypto currency is a medium of exchange created and stored electronically. It uses
encryption techniques to control the creation of monetary units and to verify the transfer
of fund (example, Bitcoin). Block chain technology has the potential to provide a real-
time, cost-effective, and secure settlement model that is global and decentralised. It will
significantly redefine the role of market players like exchanges, banks, etc.
ANALYTICS IN DECISION MAKING
Providing customisation in banking using analytics. By leveraging Big Data technologies,
banks can utilise data to draw insights in real time and act on these insights speedily.
Analytics can be used to proactively detect fraud at an early stage in an insurance
lifecycle. This will help reduce the overall cost of fraud detection and improve the overall
ROI of insurance fraud solutions
Disruptor Inhibitor Driver
Overarching Drivers, Challenges and Disruptors (3/3)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 20
xx% of the total loans are in the
stressed assets category. As on
March 2015, gross NPAs stood at
xx% as compared to xx% in previous
year
Capital infusion of INR 25,000 Cr by
the GoI in PSUs during 2016-17. INR
10,000 Cr each would be infused in
2017-18 and 2018-19
RISING NPAs CAUSING STRESS -
RECAPITALISATION MEASURES
TAKEN
CONSOLIDATION – THE WAY FORWARD
INR 77 lakh crore - Asset size of PSBs
EVOLUTION AND GROWTH IN CYBER
CRIME
In June 2014, rate of loss from
cybercrime in India was 0.xx% of
GDP vs. 0.xx% for the US.
Cyber crimes costed India INR
188,200 Cr in 2014-15
SHIFTING TOWARDS A SOCIETY
WITH A BROADER SAFETY NET
The total viable & addressable debt
demand in MSME sector is INR 26
lakh crore, of which immediately
addressable is INR 9.9 lakh crore
BOOM IN NBFCs
As on Dec 2015, 19.5 crore
accounts have been opened and
16.7 crore RuPay debit cards have
been issued under PMJDY
M-BANKING GAINING TRACTION
The share of mobile banking in
India may rise to xx% in seven
years from the current 0.x%, with
the value increasing 200 times to
INR 228.4 lakh crore
0 217
140
230
0% x%x%
xx%
xx%
0%
5%
10%
15%
20%
25%
30%
35%
40%
FY12 FY13 FY14 FY15 9M16
0
50
100
150
200
250
RuPay Cards (mn) Market Share
Key Addressable Trends (1/2)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 21
Robo-advisers were managing
assets worth INR 116,000 Cr in
December 2014, a xx% increase in
just few months (since July 2014)
ROBO-ADVISORS TO CHANGE THE
MARKET DYNAMICS
LAUNCH OF PAYMENT BANKS
India’s payments market was estimated at
INR 946 lakh crore in 2015 (excluding
inter-bank clearing and CCIL)
BIOMETRIC FOR PAYMENT
AUTHENTICATION
DEVELOPMENT OF BOND MARKET
The combined wealth of HNWI's in
India in 2014 was estimated to be
around INR 42.4 lakh crore
HNWIs DRIVING GROWTH IN
WEALTH MANAGEMENT
During 2014-15, turnover in the corporate bond
market increased by xx% to INR 10.9 lakh
crore
ADVENT OF CRYPTO CURRENCIES
AND BLOCK CHAIN TECHNOLOGY
Current market capitalisation, in
2016, of Bitcoin is around INR
39,150 Cr
xxxx
xxxx
2014 2020
India Biometrics Authentication &
Identification Market
(INR Cr)
USD to INR2015-16 2014-15 2013-14 2012-13 2011-2012
65.26 61.05 60.29 54.32 48.15
Key Addressable Trends (2/2)
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 22
Monitor
ExploreConsider to
Invest
Monitor Explore
Park
Rele
va
nc
e
((E
xte
nt
of
imp
act
on
clien
ts)
Hig
hM
ediu
mLow
Two years + CurrentFour years +
Imminence
(Timeframe for Impact)
LEGEND
• Consider to Invest: Existing trends that offer opportunities that are definite
• Explore: Trends that are witnessing developments in the ecosystem and
are likely to offer opportunities
• Monitor: Trends that are still picking up traction but may offer considerable
opportunity later
• Park: Trends that appear to be low in relevance (not considered in this
report)
NOTE: Only Consider, Explore and Disruptors will be highlighted in the deck
Relevance Low Medium High
Implications
for Clients
Not the most
pressing challenge
or trend, and not
likely to have major
impact on the
industry ecosystem
Implications are
moderate and need
to be addressed in
the short to
medium term
Implications are
severe and will
have a major
impact on the
industry ecosystem
Impact on
ABC
Not very likely to
have any
significant impact
on the ABC
business / service
lines
Tactical: One time
support for a short
duration; medium
to high potential of
influencing ABC
businesses
Strategic: Ongoing
support to clients;
high potential of
affecting the ABC
businesses
Imminence
Timeframe of
ImpactFour year onward Two year onward Current
X & Y AXIS
Appendix: Relevance-Imminence framework
Sample – Disguised and Abridged
© RocSearch Limited. All rights reserved 23
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