India’s Leading BFSI and FinTech Companies 2023

India’s Leading BFSI and FinTech Companies 2023 | 11 [ INDIAN BANKING SECTOR OVERVIEW ] In FY22, the reduction in NPAs was primarily contributed by written- off loans in the case of public sector banks, while upgradation of loans was the primary driver for asset quality improvement for private banks. NPAs to priority sector accounts for ~40% of total NPA; of which agriculture and MSMEs accounts for 43% and 41% respectively. KEY TRENDS Technology trends: Technology such as Application programming interface (APIs), Cloud hosting a n d c omp u t i n g , a r t i f i c i a l intelligence, machine learning, robotic process automation, and analytics have greatly improved and supported the delivery and servicing of lending products to the end customers. Banks have been investing heavily to take advantages of these technologies. T r anspa r ency a round da t a usage: To engage with micro- segments, it is necessary for hyper- personalization. Banks collects and analyze large quantities of customer data. Cybersecurity incidents within financial services sec tor i n I nd i a have made customers anxious about how the banks are handling their data. To prevent distrust, banks are making efforts to be transparent with customer KEY CHALLENGES Slowing global economic growth: World Bank has reduced global growth to 1.7% for 2023 from its previous projection of 3.0% led by weaker growth in all the world’s top economies – The US, Europe and China. The slowing growth is expected to reduce investments in services and industries sector which can impact asset quality of Indian banking system. Cybe r s e c u r i t y cha l l enge s : Between 2018 and 2022, Indian banks recorded 248 successful data breaches by hackers and cr iminal s . Digi tal i sat ion and ubiquitous banking services have accelerated the growth of threats against the banking sector. About 20%of reportedevents concerning threats to digital banking mostly comprised selling, buying, and bypass ing access to var ious digital payment systems, banking accounts, and digital wallet Underwr i t ing chal lenges for MSMEs: There are wide credit gap amongMSMEs which sizeable size of 63 million units and providing 111 million jobs. MSMEs face funding gap of ~250 billion USD in funding as perWorld Bank and IMF estimates which severely hampers economic growth. OUTLOOK Green financing: Decarbonization and digitalization are emerging megatrends which is propelling corporates to undertake structural changes to alter their traditional business models. Banking industry in India have gradually stepped up their engagement for transition towards low-carbon economy. Companies are launching new products such as sustainability linked bonds and loans Privatization of Public sector banks: In the Union Budget FY22, government intent to take up privatization of two public sector banks and approval of a policy of strategic divestment of public sector enterprises was announced. It is widely viewed as key area of pending reforms in India Hyper-personal ized banking: Indian banks are gradually moving towards hyper -personal i zed banking with use of technology and analytics to tailor products and services to meet specific needs and goals of individual users. Dun & Bra street