50% of digital customers ready to shift to new banks

With the entry of new banks into the banking system, existing banks fear losing their most digital savvy customers to the new ones.

"Fifty per cent of digital banking customers willing to consider new banks, created out of the existing wallets, which will serve them mostly online," said a survey report by BCG (Boston consultant group).

It also said that over 35 per cent of customers who have internet access but do not use digital bank from their banks have expressed willingness to consider wallets transformed into banks.

According to BCG report, digital banking is poised to grow at 20-25 per cent in the next five years.

The report surveyed over 3,600 customers with data from 36 banks, highlights that the rapid adoption of internet banking lags behind online shopping by two years.

At present, we have about 61 million online banking customers in India and this is set to grow at 23 per cent to reach about 173 million by 2020.

If lessons are taken from online shopping, online banking can be accelerated from 23 per cent to 31 per cent over the next 5 years.

The BCG report also pointed out that though the Prime Minister's Jan Dhan Scheme has led to a 27 per cent increase in accounts in a single year, it did not have satisfactory activation of their debit cards.

Retail NPAs rise

Amidst all this, it further said, that bad debts gave been a stubborn problem; after many years of decline, NPAs have shown an alarming uptick in retail lending.

"It is a topic that merits the attention of banks with great urgency...The capabilities required to contain bad debt in retail are substantially different from commercial credit. The number of accounts is large, the amounts are small, rapid action is critical...,"BCG report noted.

ICICI Bank chief Chanda Kocchar, however, pointed out that the NPAs on the retail side are very low and we needn't be alarmed if it normalises (picks up) a little.

"In India, retail lending is income oriented and not asset oriented unlike in the west...as long as that approach remains constant, NPA levels will not be a problem," Kochhar said.

Arundhati Bhattacharya, Chairman of State Bank of India, agreed that competition can lead few banks into some relaxation on the underwriting norms...but so far, we are not seeing any big concerns and that the small uptick "may be an aberration".