Q1. Which business decisions have you personally influenced that had a measurable impact on growth, portfolio quality, profitability, or customer acquisition?

There are numerous, but the one that I always find most exciting is cross-selling. Cross-selling has its own attributes. For Banks, it cements the customer with the bank and increases the customer lifecycle. It increases customer level profitability, enhances customer relationship size, and helps in becoming the primary Banker to the customer, and many more. Similarly, for customers, it has advantages such as ease of transactions, one shop for all needs, and no hassle of visiting different banks for different products/services, etc. During my career, I have been instrumental in institutionalizing the cross-selling model, where, as a bank, you attempt to become the sole Banker to the customer, and that gives you various dividends. Just to mention, like giving assets to a CA customer, opening their SB, selling them FD/RD, SIP, Credit cards, Demat and trading accounts, lumpsum investments, lockers, health insurance, vehicle insurance, term plan, life insurance, etc. As a bank, you take leverage and sell your product to existing customers, and customers also find it easy, as these financial products are nowadays a necessity for every individual. This model contributed to the top line as well as the bottom line.

Q2. What concerns you most about the current credit environment in India from a medium-term risk perspective?

In India, from a mid-term perspective, we see that the demand in retail lending is increasing. Even the Banks are now focusing more on retail lending than on corporate lending. This is good to have as it makes the book more granular with diversified risk; however, parallel to it, there is a rise in unsecured loans that include Personal Loans, Business Loans, Credit Cards, Digital loans, Consumer Durable loans, BNPL, and so many app-based lending options. Owing to high yield, it becomes lucrative for lenders also to focus on these products, but this shift is gradually putting risk and pressure on the overall lending portfolio. The embedded credit is growing rapidly. Fintech-originated bank loans, co-lending structures, API based underwriting, etc., are other structural shifts happening with the rise in the economy. In these, the originator of the loan and the risk-holder are different entities, and in this case, there can be a misalignment.

Q3. How do you see the economics of customer acquisition evolving across retail banking and wealth businesses?

In traditional banking, the acquisition was through manual efforts, physical paper form filling, processing, etc., which were strenuous and time-consuming tasks. With digitalization, the acquisition is through apps or tabs, and that has reduced the CAC in a huge manner. A few banks have come up with a DIY journey that has further simplified it. Similarly, in the wealth business, the acquisition through apps or tech platforms has reduced the cost, time, and effort. With the integration of cKYC and Aadhar-based onboarding, the CAC has come down, which is resulting in a contribution to the bottom line. India is going digital almost everywhere, and with a population born after 1980, which includes Gen Y, Gen Z, and Gen Alpha, is completely tech-savvy and well-versed with AI usage. That is enabling Banks to shift the cost burden of physical acquisition to the digital acquisitions.

Q4. Which banking functions still remain heavily dependent on human judgment despite automation efforts?

The Automation helps in quick data analysis and information processing, and enables more informed decisions. There are still a few key areas, viz., Large credit decisions, collections, recovery and distressed asset resolution, fraud investing, including the forensic audit, Field investigation, Audit and compliance, Regulatory compliance, Leadership, Risk management, etc., that, despite the automation efforts, will still need human judgment.

Q5. If you were allocating capital today, what question would you ask management that most investors are not asking, and what answer would concern you?

I would like to see the most basic data, which is Cost of Acquisition, and would like to see how it will affect profits if this increases/decreases. I would further like to understand the customer-level profitability from the acquired customers and how much is wastage/leakage. What would concern me is if I don’t get satisfactory answers and supporting data. What I have seen is that most of the investors look at the final outcome data published in the investor's presentation, but in this question, I will try to dig down and understand the Acquisition cost, wastage from it, and later on, the income generated from these acquired customers.