State-owned banks must redesign their business models so as to become more customer-centric, says a Boston Consulting Group (BCG) report. The report, titled ?Value creation in Indian banking–tale of business model discount?, says state-owned banks will have to create a performance culture, with well-developed performance management systems and role specialisation.
Although Indian banks top the charts in long term value creation, they still fail to make it to the top of the global pecking order of market capitalisation, the report notes. This is because value creation by Indian financial services is delivered from a small base, it says, adding that public sector banks suffer from a business model discount vis-a-vis their private sector counterparts.
Talking to FE about the report, Saurabh Tripathi, partner and director, BCG said that the time is right for the management of government as well as private sector banks to take initiatives.
The report has charted out a three-point action plan for the financial services sector.
Suggestions in the plan include encouraging government owned banks to change their business models while remaining under government ownership, creating robust corporate governance structure by strengthening boards and providing adequate representation for minority shareholders and finally, facilitating consolidation in the sector so as to create large banks that can compete on regional and eventually global scale.
?For the management of public sector banks, we have to develop a seven point action agenda,? says the report.
It includes augmenting the vocabulary of performance, paradigm shift in organisation design, addressing gaps in manpower, getting the most out of technology investments, preparing to earn higher fee income, creating an advantaged distribution network and systematically engaging the staff in organisational transformation.
Apart from these suggestions, the report advises new private sector banks to continue to focus on capital efficiency growth. It asks broking and distribution-oriented companies to diversify their business portfolio and seek consolidation. Old private sector banks must focus sharply on realising value creation. Also, NBFCs need thrive in niches that are either inaccessible or unattractive for commercial banks, says the report.
