Till about a decade ago most banks in India offered only traditional banking products-opening savings /current accounts and fixed deposits, loans, credit lines etc. Major part of the revenue was from the spread between the rate of interest offered on deposits from customers (funds borrowed) and the rate of interest charged on loans (funds lent).
Going beyond just transaction oriented banking –
Greater competition in the form of new private sector banks being formed, foreign banks opening branches in India, dwindling interest income and increased customer expectations made it necessary for banks to go beyond just transaction oriented banking and look at other sources of revenue .This resulted in banking foraying in to selling third party products like mutual funds ,insurance , bonds etc and slowly graduating to relationship oriented banking to private banking to wealth management and then to financial planning.
Today most of the private and foreign sector banks, and even the public sector ones are setting up dedicated financial planning outfits complete with qualified professional planners, a strong research team, customer service staff, and the other infrastructure. Banks are also focusing on training their existing manpower for developing the required skills in financial planning. One such initiative has been the IIBF (Indian Institute of Banking and Finance) collaborating with FPSB (Financial Planning Standards Board) in India to develop a specialized postgraduate diploma course in financial advising aimed at bankers.
The future potential-
The world wealth report 2011 by Capgemini and Merrill Lynch Global Wealth Management says –
- Globally, HNWIs’ financial wealth grew 9.7% in 2010 to reach US$42.7 trillion, surpassing the 2007 pre-crisis peak.
- The population of HNWIs in Asia-Pacific, at 3.3 million individuals, is now the second-largest in the world.
- India’s HNWI population entered the Top 12 for the first time.
Inspite of the growing population of high net worth individuals, the market for investment products in India is unorganized and largely broker driven, with a large chunk of the wealth in the country being managed by hundreds of small time agents and brokers. This puts the banks, with their wide branch networks and huge existing customer base, in a very favourable position to go out and tap this wealth.