The digital platform, with mobile-banking at the centrestage, is expected to generate 20% of Indian banks’ profits by FY20. With 20% of the country’s population in the 15-24 age group, the banking landscape is poised for a paradigm shift over the next five years. CLSA, which has an overweight rating on Indian banks, says it expects ICICI Bank and IndusInd Bank to lead the pack in embracing digital banking, and, thus, are its top picks.
“Digital platforms will be highly relevant to banks and we expect $400-500 billion of their balance sheets to be driven through these channels, generating 20% of profits by FY20,” says the report, co-authored by Aashish Agarwal, Prakhar Sharma and Akshat Agarwal.
At 12%, India’s smartphone penetration is significantly lower than most markets in Asia. This is expected rise four-fold to 40% by 2020. The research and broking house expects mobile-banking users to rise six-fold to 250 million by March 2020, accounting to roughly 50% of smartphone users. It also sees a huge opportunity from investment in social, mobility, analytics and cloud (Smac) initiatives, which will help banks connect with customers.
Mobile-banking platforms are relatively new to India and currently we have just about 36 million mobile subscribers using this platform, compared to an estimated 500 million bank accounts, 931 million mobile phone users and 117 million smartphone users,” says the report.
“Over FY14-20, we estimate that the banking sector’s credit and deposits will enjoy a 16% CAGR and the digitally-driven business (loans and deposits) will be as much as $400-500 billion. On the lending side, we believe that digital platforms will drive 6% of lending ($180 billion) by March 2020 and will be most relevant to retail and rural loans.”
