KOLKATA: Universal banks need to explore partnerships with entities such as payments banks, small finance banks and FinTech startups to achieve a more financially included society, said YES BankBSE 0.22 % Managing Director Rana Kapoor, while he warned banks against strategies of trying out indigenous solutions.
“The mantra is to collaborate, not compete,” said Kapoor Monday at the third of Global Business Summit, in collaboration with YES Bank.
“Banks need to be smart enough to realise that given the rapid pace of innovation overall, all innovation cannot be done within their organizations. There will often be nimbler, smaller start-ups creating path-breaking solutions addressing a particular market problem,” he said.
He said that traditional banks have so far viewed FinTech companies as competition. “I strongly believe that ‘collaboration’ is the way forward and it is important to build alliances, relationships & technologies to spur what I like to call as the ART (alliances, relationships & technologies) of Digital banking.
Digital transactions are expected to grow three times to Rs 2500 crore from Rs 800-1000 crore over next few years with a lot of innovation & disruption in this area.
Kapoor predicted that the economy with its strong macroeconomic fundamentals, low interest rates and digital innovations is slated to experience the beginning of an upswing in corporate business cycle over next one-two years.
The downturn in business cycle reached its trough in 2015, with nearly 40% of corporate debt being owned by companies with an interest coverage ratio of one, many of them in the infra & metals space.
He said lower lending rates would revive demand for both consumption & investments, coupled with recovery in global commodity prices in 12-months.
Reserve Bank of India lowered the repo rate, which signals the direction of interest rates, by 175 basis points since January 2015. The repo rate was cut last on October 4, 2016, when the RBI had reduced it by 25 bps to 6.25%
Kapoor also said that focus on public investments would drive ‘crowding in’ impact and the goods and services tax from July is expected to enhance productivity gains
He said that India’s improved macro-economic stability (low inflation & fiscal prudence) and better governance regime that has leaned away from unaffordable populism are going to boost growth prospects.