The banking industry is the center of the growth of any country. When it is democratized, it becomes a financial engine that can upload the masses on a large scale. The Indian bank industry is currently at a big crossroads.
The company is struggling to reconnect himself in the face of rapidly expanding FinTech companies have rapidly acquired undeveloped customer segments. According to PWC’s survey, the number and amount of loans implemented by FinTech companies from 2021 to FY2024 increased by 46% in CAGR, respectively. This growth was promoted by FinTech companies utilizing technology to expand their reach, streamlined operations through automation, and strengthened access to credit. These companies provide a wide range of loan products that meet the diverse needs of borrower, especially small -scale borrowers, and enables financial wrapping.
In addition, bankers are encouraging their products to review their products, as consumers have increased their interest in financial products that have exceeded traditional time deposits and time deposits. Investors have increased their preferences in high -yields such as shares and investment trusts than bank deposits, which has a decline in bank deposits in Indian household financial assets. According to RBI’s data, the ratio of bank deposits in household financial assets fell from 56.3 % in FY2011 to 44.2 % in FY2014.
If you look at the RBI data in detail, you can see that while time deposits have increased by 13.1% in the first half of FY2015, the current account (CASA) deposits have increased only 6.5%. It is highly likely that bank costs will increase due to a decrease in CASA in deposit configuration. Despite the fact that the currency owned by the household has reached the tremendous amount of 32.4 billion rupees (32.4 trillion rupees) as of March 2024, unprofunned in the Indian family. It highlights the struggle of a bank system that tries to utilize the deposit potential. Due to low deposits, the profitability and resilience of the banking system are compressed, and funding costs are increasing.
Banks, which are facing companies that are developing a large amount of financial business models, especially on climate change, are evaluating these businesses and actually financing costs. I am struggling to determine accurately and evaluate the accompanying risks. project.
Expectations from the union budget of 2025
In order to encourage banks to cooperate with fintech and emerging companies, we will introduce tax incentives, especially in the banking industry, and tax incentives for innovation. This promotes the creation of new products, services, and business models, promoting the spread of banks and financial services while promoting the normalization of the Indian economy.
Stiged the income tax rate for the interest of bank deposits and turn your household savings to bank deposits. In addition, raising the limit of deposit insurance from 500,000 to 1 million lupators per deposit will increase deposit safety, which will increase the appeal of households.
In order to respond to destructive ideas in fields such as climate change and expensive funding needs for projects, the government has a priority sector loan (PSL) for projects that focus on climate adaptation and relief of climate risk through RBI. You will be able to give your position. This collaboration will not only help you achieve the sustainable goal of the country, but will also promote employment opportunities related to these investments. The principle of adjusting PSL frameworks to meet new funding needs is new technology (AI, GENAI, etc.), digital infrastructure, healthcare, and other important sectors. Also can also be expanded.
Credit is the economic driving force that drives India on the way to Vixit Barrat. In order for a bank to continue to involve this credit -led growth story, it is necessary to reconsider how to design, develop and provide customers with customers. The government should actively use the budget as a foundation for providing such support, as banks will definitely need support as banks will surely need support.
Vivec Prasado is a partner and leader in the PWC India market category.
