Opportunity Assessment in the Indian BFSI · PDF fileBanks include SBI and its subsidiaries, all ... Banking- Gross NPA As per RBI, ... loan portfolios through

Sample Deliverable

Opportunity Assessment in the Indian BFSI Sector

Sample – Disguised and Abridged

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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



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



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



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)



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



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)




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





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





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





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





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


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





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


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





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


HR Consulting

Forensics


• 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





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



Not Available





Opportunities

Tax


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




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)






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








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





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)



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)



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



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