I, uh I am delighted to have M Rajan and MTI Karam on this panel. Thank you so much for coming through and then, uh, having us helping us discuss the theme of this event, which is accelerating the banking potential. Uh, before we start on some of the more specific questions I wanted to ask each of you, Uh, what is to your mind, the potential that we're talking about? What has it been achieved? What can it achieve in the future? What are we talking about when we talking about the banking system first, Mr Karam. Hi. Thank you. And thank you for inviting me here. I think if I were to talk about the potential, I'd say the potential is India. 100 and 30 to 140 crow people. 60% of them less than 30 years. You still haven't seen them fully coming into the banking sector. Right? And they are aspirational. They will consume. They want to do things differently, Right? Second, there are many India. You have the, uh, Metro India who's been there, done that and think differently. The urban India, the rural India, the semi urban India, I think If you go across India tier two tier three cities, there's so much hope. There's so much entrepreneurship. There is so much, uh, you know, aspiration. So I if I were to say the opportunity is India. If you see the last two years, our economic growth perhaps stands out in the world. This is supposed to be India's decade from one trillion to five trillion GDP. If that happens, I can say banking will be at the centre of it because, as your colleague said, it is very closely linked to the economy. And I think whether it's individuals or non individuals, the opportunity is immense. It's really where do you want to do? What do you want to do and how do you want to leverage this opportunity? Can't agree more? I think you know, we will get to five trillion. It's just a question of time and we will get to 10 trillion. Uh, and what that will mean is that affluence will continue to percolate downwards. People will use more digital people will move from the informal sector to the formal sector, which means that the ability to bank these people only will improve. We we've done tremendous work on payments. You know, Shanti mentioned that, um but it might surprise many of you that even today, only 2% 2 to 3% of our population has credit cards. The equivalent number in China would be 40 45% in Brazil would be something like 25 to 30%. Now, one could argue that the form factor of, uh of of that plastic credit card could be different. But fundamentally, the ability of us being able to provide credit for transactions credit for relatively lower value transactions, et cetera, is tremendous. And and I think that is only going to continue to grow. I am very, very excited about the M SME sector and I. I do believe that the next decade is what retail was for in the previous decade. You saw in the previous decade the building out of infrastructure which helped detail lending. Which means that you know, you got a which made it simple to identify you. Uh, you got mobile. Which means that it was easy for me to deliver these financial product to you at a click of a button. You got credit bureaus. So therefore the understanding of the fact that you have a credit assessment which is available publicly, and therefore, if you screw up on that, you will not get a loan again. In short, that credit discipline, you know, came about. And finally, data and banks that were able to convert data into insights and deliver that to customers you know through mobile, for example have been able to build strong portfolios on the retail side. And and it's very interesting to see every year for the last 10 years we've been talking about the retail credit cycle, right and we've had some conversations, you know, when is it going to get worse? What's going? But this has been a cycle that's played out for 10 years, except for that brief period in Covid and and even after 10 years, if you look at the the the China Cycle versus us, we are still 10 years behind them. And so therefore, the runway for growth for us on retail assets will continue to be very strong. And, you know, today most of the lending that we do is really a A, which means that 725 7 30 credit scores and beyond. It will perate lower. It may not be with banks, but there will be other entities who will come in as well. SME will continue to grow very strongly because of the fact that earlier they were we were, in a sense, data dark about many of these entities. Now we are seeing so much more data because of formalisation, and I think that is going to drive the M SME sector. As we go forward, people will move from the money lender to banks and finally, rural and semi urban huge opportunities there. And so therefore, I do believe that the next 10, 15, 20 years is a great time to be a banker in India. Fair enough. Let me break this up into all the beats that you've mentioned. Uh, ma'am, you mentioned, uh, the potential in terms of the population, there's a huge unbanked population, uh, which will eventually And that's something that you also mentioned that this will eventually get banked and that opens up doors for, uh, you know, fresh growth. Uh uh. But even today, even with the bankable sort of population that we have, it's not like all of them are are great for banks, right? I mean, you're obviously selective in the kind of people that you want to lend to. Uh, I, I want to know What is this? What? What is the true, uh, you know, ratio or or any kind of idea of how many people actually will be good enough for a for a bank to chase? Because I don't know if if it is limited or is it Is it like, as big as the population of the country? I think, uh, one point that Raji mentioned, which I want to use as here see, traditionally, when bank lent, they did not have access to different kinds of data about a person. Let's talk about retail, individual or even business customers. They used to rely on a, you know, score which was put out. But today, if you look at the amount of data that's available, whether it's a social data, whether it's transactional data behavioural data, in addition to credit data, right, the signs that you can apply to this data and thus the ability to lend has gone up manyfold and we will have to do experiments right on different cohorts. The beauty is today. You can do experiments on different cohorts and pull back if you see the trends being different. Second, if the economy grows, there will be a trickle down effect on people's per capita income and the credit quality. If you see today people who come into the banking segment thanks to all the digital platforms, almost 40% of them are NTC new to credit now. Five years ago, you would not know how to lend to new to credit. But today you can apply a certain data science and new to credit. They will build their credit scores over a period of time, and younger population will want credit. If you look at the debt to a household debt to GDP ratio of India, despite a growth in the last decade in retail credit, it's next to nothing. It's very small as compared to the other countries. So there are two things. There is ability for people to consume more debt. More people are coming into the workforce because of being younger. They are new to credit. They will build their credit profile. So I think opportunities are immense. Data is changing that deliver through digital platform is changing that and the trickle down effect of the economy. Now, if you look at these small businesses, you know, sole proprietors are not even getting into the large entrepreneurship. Is there everywhere, right? Some will win. Some won't win. But as you get into the middle stage, you're finding a lot of opportunities. They're all growing. They're investing their growth. So I think it's the the The landscape has changed data and digital has changed the opportunity, and banks will use this to leverage and India's household to, you know, debt to GDP is still low. I think, uh, if I can just add to add to that if you look at the way the government has constructed data in both China and the US data is dominated by the private sector, and so therefore you are you are only able to build on the back of you know what they are able to do. But in India we have democratised data and you know the next level of that. And in that sense, it is, you know, things like a which is now publicly available. I can ping a to, you know, to figure you out and your picture, etcetera. The next level is really account aggregators, right? You may not be a customer of access bank, but if you have a bank account and you you are providing consent to me, I now know know you a little better because you give me consent to see what transactions you're doing with another bank. That's stage one of the account, aggregator. Over a period of time, you will see you will be able you will provide consent to your mutual fund account your insurance account, your utility accounts, right, and therefore the ability of banks to be able to, uh, to underwrite a wider spectrum of customers is only going to continue to increase right today because I know a certain set of customers. I'm able to underwrite them. But this number is only going to continue to widen as we go forward. Then there is the issue of, you know, pricing for risk. Um, you know, based on this data, you know, Shanti mentioned we will run multiple experiments in terms of pricing. Uh, what, and and you know, some we will get right, some will get wrong, but that's the, you know, test and learn that, you know, all of us will will go through. And then there is there is 11 next level or the level after that, which perhaps the banks will not go after. But there will be there will be other Inter Who will go after that? Uh, you know, will price differently. Uh, will be will perhaps have to build out a better understanding of how to understand those laws. I would call subprime credits, and those in turn will will come into the banking sector into into the formal sector and then perhaps graduate to the banking sector. Nobody wants to borrow at 24%. Everybody wants to borrow at 89 10% right? But that's a journey. And I think that that evolution will also play out As we go forward. I want to ask you a little bit about what happened over the last decade or so. You know, private banks such as yourselves. You have this away that market share from your public sector peers. They were saddled with some of their own problems. But this growth that has been seen within the private banking sector has been tremendous. I don't know what other word to use. Is this a sustainable sort of growth rate? Definitely. And the reason I'm saying is the whole pie is growing. See, if the economy was stagnant and there was no job, there is no growth. Then you talk about how do you gain marketing? But the whole banking pie is growing because of the economic growth. Private sector banks have been at the forefront of making sure that the technology changes are incorporated on the digital platforms, mobile net, et cetera, and products and service. I think the market is large enough for almost everybody. And I, I think if you look at today, you have private sector banks, public sector banks, fintech Raji talked about who sort of take a certain level of this thing. And you have all kinds of financial services player. Now all of them are growing because the whole base and pie is growing. Yes, it will be competitive, but the whole business is about customer acquisition, you know, value proposition service, giving them a great experience on your technology platforms, and those who are able to stitch all of this together will win. But even others will have a lot of opportunity. I think India is under penetrated in financial services and that is absolutely a fact. If you see over the next 10 years, I think you will see many corners of India being accessed and banks will be at the centre of it. Thank you for calling this growth tremendous. But both both our institutions are still relatively young and more importantly, relatively small. I mean access bank. We have a 5% market share on deposits and a 6% market share on assets. Um so while as Shanti said, the pie will grow, we would like to believe that private sector banks still are a relative. I mean, as a as a consolidated entity, you know, close to 35% or so, but I think each of the entities are still, you know, relatively small in the larger scheme of things. So I do believe that private sector banks will continue to gain market share and you know, in that sense, a private sector. But individual private sector banks still are relatively small in the larger scheme of things. But I think more importantly as we think about think of ourselves as a you know a $5 trillion or $10 trillion economy. It is an absolute imperative that we have a healthy public sector system as well, and I think everything that the government has done over the last five years, we are beginning to see that play out. You know, it's not just the private sector banks who have benefited from this turnaround in the banking system. Each of these each of the public sector entities are also delivering record profits, which I think is all very, very healthy. From an Indian economic perspective. I just want to add one thing and this is about the public. Look at the way they have reinvented themselves. If you look at the top few banks, they're all at the forefront of technology. They have made sure that they are, you know, incorporating various different practises. They've all capitalised themselves, revitalised their balance sheets and poised. So I think it's been a great run and I think the banking sector needs all of these different kinds of players for the opportunities that will emerge as we move towards a five trillion and 10 trillion OK, this was an engine that was closed for some time the public sector banking system. Right? But now you've got down all the repairs and it's back on the road. Do you feel? But then, because of the size because of the reach, they pose a greater competition to you than some of the other private banks that that you are competing with already. So I'll repeat what Raji said. If you look at the market share of most of the private sector banks, they are still small. So the ability to grow and leverage the opportunity is there. And it's tremendous. OK, second today, distribution actually is very different. Digital has made the world flat and you can reach anybody. You are sitting anywhere through technology. Yeah, so when you look at today, for example, savings accounts being open, you download an app. You open a savings account. In the good old days, you had to go reach and then open. So I think technology is making the reach and the distribution factor a very different strategy, right? It's no longer the only advantage. You have to stitch a whole proposition around it, and banks will find their own balance between physical and digital. So I'm very fond of saying banking was physical 10 years ago. In the last 56 years, it went fidget, physical enabled by digital. Now we are moving to digital digital, enabled by physical. So you will need the physical presence because banking is based on trust. But what will be the balance? What will be the ratio? Different banks will have different strategies. The banking system is getting consolidated. Um, if you look at credit cards, the Big four or five banks dominate 70% of that incremental deposits, incremental assets and so on and so forth. So I think the consolidation phase, um, has well and truly begun in in Indian banking, and you certainly need to You need to stay relevant in that in that perspective, gaining market share. All of us have to fight every day to get that nobody nobody is sitting to giving to giving it away. It's my peer. Private sector banks are competition. The public sector banks are competition. We are in a technology super and so therefore we will see disruptions coming and hitting us from spaces that we did not even know existed
