While the jury is still out on sustainability of impact that demonetisation has created, we believe it is important to recognise some critical trends that will influence the strategies of financial services players in the coming quarters – i) Excess liquidity in banks, ii) Slowdown in consumption resulting in slower credit demand, iii) Asset value deterioration esp. in real estate and, iv) Faster take up of digital payments.
We believe that the agenda outlined for Indian banks in Oliver Wyman’s report “Indian banks: tacking into the wind” has only been accelerated, with demonetisation acting as a catalyst. It has also necessitated that banks undertake significant further steps to retain and improve their competitive positioning under the evolving business environment, esp. around strategic focus on liabilities, building advisory proposition for masses, adopting digital for financial inclusion and leveraging “new” data.
The winners in this environment will be differentiated by the pace of implementing strategic, transformative initiatives in order to position themselves favourably for the winds of change sweeping through the industry.