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HYDERABAD, Jan. 7

THE retail financial services market with a potential $15 billion for the year 2003 is expected to be a key driver to the Indian economy, even as the Indian banks can look forward to a phase of rapid settlement of non-performing assets (NPAs), the Managing Director & Chief Executive Officer (CEO) of ICICI Bank Ltd, Mr K.V. Kamath, said here.

Home loans, consumer loans and several other retail products offered by the banks have seen a surge due to the lower interest rates and the consumer willingness. For example, the average age of a home buyer has dropped from 45 to 30 years in the last three years as interest rates have nose-dived from 14 per cent to 9 per cent now, Mr Kamath, said at a special session on `Managing the Country's money-Prudence not Miracles', in the ongoing Partnership Summit here.

"Though the slowdown in the industrial investments have had its impact, we are confident of an industrial resurgence in the next two years. As for the banking sector, it is upbeat and going forward," the ICICI Bank chief said.

With the Securitisation Ordinance in place, the resolution of NPAs , which is of the order of Rs 1,00,000 crore, is set to pick up quickly in the next few months.

Already, people are coming to negotiate with the banks to settle their NPAs, Mr Kamath said.

With the introduction of technology, the banking sector is witnessing a new trend. The Indian customer has started behaving like his western counterpart, transacting business more through impersonal means using ATMs, Internet, telephone and other technology-driven facilities than physical visits to the banks.

"In ICICI Bank itself, we have seen 70 per cent of customer interface through such means and just 30 per cent of customers are coming to banks for transactions," he said. While one in four customers of ICICI Bank was using online methods, 10 per cent were using Internet banking. Those Indian banks which saw this trend and responded had a sound growth path ahead, Mr Kamath said.

Mr Howard Davies, Chairman of the Financial Services Authority, UK, in his address said tough times seem to be ahead for the world equity and financial markets with the shadow of war hanging over the world.

The pricking of the dotcom bubble, the crisis of confidence among investors and no recovery in the corporate and capital markets during the last three difficult years across the developed world had made the going tough. The developing world had their own problems, though the BSE had been one of the top performers among the bourses during 2002, Mr Davies said.

He felt an integrated regulatory approach to ensure financial discipline, good corporate governance and regulation of capital markets made lot of sense in the prevailing environment, which the RBI, SEBI and IRDA the major regulators in India would agree.

Mr. T.N. Srinivasan of Yale University's Economics Department said in his presentation that a social-political consensus on reforms, especially in labour & banking sectors and the exit of Government's role from areas, where the private sector can do well such as in hotels was necessary for achieving a higher growth rate.

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