Banks become friends, philosophers and guides
Due to a combination of competition in the sector and regulatory measures, the whole attitude to banking has undergone a change, to everyone’s advantage.
By Archana Sarat, TNN |
Gone are the days when banks were formidable financial intermediaries that hopeful ‘up and coming’ companies hesitated to contact for fear of their lack of credibility. As global competition intensifies, domestic banks, be they commercial, private or cooperative, have been on their toes to satisfy the discerning and demanding consumers. A study by the Boston Consulting Group titled “Searching for Profitable Growth, Global Wealth 2005” points out, “Standard banking services are under significant price pressure and wealth management institutions are moving towards less visible pricing. Offering proactive tailor made advice remains a high-margin activity.” And that’s exactly what banks are doing too.
Diversification changes the role of banks
Cross border flows and introduction of new financial products have not only led to a spurt in the growth of the economy but have also altered the traditional roles played by banks. As Sanjay Nayar, CEO of Citigroup India once explained, "Consumer banking and corporate banking contributed equally to the total revenues, but about 70 per cent of the profits came from corporate business, which included investment banking activities and capital markets."
Naturally, due to this new avtar that banks have donned, the attitude of corporate clients towards banks has changed too. As Kannan, Managing Director of Franch Express Network Private Ltd. (associate concern of AFL Ltd.) states, “No longer do we consider our bank as a place to stash some excess cash or beg for loans. It is our friend, philosopher and guide. Whether it is merger planning advice, market timing decisions or a product diversification question, we turn to our bank for help and guidance.”
No customer is too small anymore
More than one-third of the industrial output and exports of India are contributed by the SMEs. The rush to capture blue chip clients has given way to a pursuit of smaller clients, which like mid cap stocks, offer more promise. This has created a level of comfort for SMEs, who are now in a position to choose which bank they would like to work with, unlike the past where they had to settle for the bank that was willing to entertain them.
Overall, it has been the western region of the country that has been the first to benefit from the changing trend. Mumbai, the financial capital of the country, is home to the RBI and a number of other trend setting banks. The region as a whole is also the headquarters for many large and small corporates, industrial hotbeds like Surat, Silvassa, Ahmedabad and numerous other industrial towns who demand better facilities in exchange for their loyalty.
Diversification changes the role of banks
Cross border flows and introduction of new financial products have not only led to a spurt in the growth of the economy but have also altered the traditional roles played by banks. As Sanjay Nayar, CEO of Citigroup India once explained, "Consumer banking and corporate banking contributed equally to the total revenues, but about 70 per cent of the profits came from corporate business, which included investment banking activities and capital markets."
Naturally, due to this new avtar that banks have donned, the attitude of corporate clients towards banks has changed too. As Kannan, Managing Director of Franch Express Network Private Ltd. (associate concern of AFL Ltd.) states, “No longer do we consider our bank as a place to stash some excess cash or beg for loans. It is our friend, philosopher and guide. Whether it is merger planning advice, market timing decisions or a product diversification question, we turn to our bank for help and guidance.”
No customer is too small anymore
More than one-third of the industrial output and exports of India are contributed by the SMEs. The rush to capture blue chip clients has given way to a pursuit of smaller clients, which like mid cap stocks, offer more promise. This has created a level of comfort for SMEs, who are now in a position to choose which bank they would like to work with, unlike the past where they had to settle for the bank that was willing to entertain them.
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Western region – the trend setterOverall, it has been the western region of the country that has been the first to benefit from the changing trend. Mumbai, the financial capital of the country, is home to the RBI and a number of other trend setting banks. The region as a whole is also the headquarters for many large and small corporates, industrial hotbeds like Surat, Silvassa, Ahmedabad and numerous other industrial towns who demand better facilities in exchange for their loyalty.
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