The Indian banking system has always been in debate for its terrific performance. Whether it is beating all the odds and becoming the “world’s fastest-growing economy” or remarks from international bodies such as the International Monetary Fund (IMF) that say “India has zero probability of recession in 2023”, the success story of Prime Minister Mr Narendar Modi is truly incredible. Most importantly, this makes India the only such country on the list to have it all.
However, not everything is roses when speaking of the international economy. Things look grim when it comes to comparing the Western and the European counterparts, including the likes of the economic giant — The United States of America. Both data and experts’ opinions suggest a major breakdown of the economic cycle, hinting at bad days ahead for the US.
And this prompts us to dissect the internal working of the BFSI in the US and how it stacks against that of India.
Here’s the complete breakdown.
Key Similarities and Differences of BFSI Sectors in India and the US
The subtle differences between BFSI companies operating in India and the US are starkly evident. However, before diving deep into the details, here are some common traits in both geographies.
- Regulatory framework: Both countries have strong regulatory bodies overseeing the BFSI sector, such as the Reserve Bank of India (RBI) and the Federal Reserve System in the US. These bodies help ensure financial stability, protect consumers, and prevent fraudulent activities.
- Technology adoption: Both India and the US have been quick to adopt technology to improve the efficiency and accessibility of BFSI services. Digital banking, India’s biggest success — UPI, online payments, and mobile banking are increasingly popular in both countries.
- Importance of customer service: Customer service is a key aspect of BFSI operations in both India and the US. Banks and financial institutions in both countries strive to provide personalized services to their customers and ensure that their needs are met.
- Role in economic growth: The BFSI sector plays a crucial role in driving economic growth in both India and the US. Banks and financial institutions provide the necessary capital and financing for businesses and individuals, creating jobs and driving economic growth.
- Innovation and competition: There is a strong culture of innovation and competition in both the Indian and US BFSI sectors. Banks and financial institutions in both countries strive to develop new products and services, improve operational efficiency, and stay ahead of their competitors.
Next, here are some major differences seen across geographies.
- Market size and diversity: The US BFSI sector is much larger and more diverse than the Indian BFSI sector. The US has a larger population and a more developed economy, leading to a larger demand for financial services.
- Regulatory environment: The regulatory environment in the US is generally considered to be more complex and stringent compared to India. The US BFSI sector is governed by several federal agencies, such as the Federal Reserve System, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), as well as state-level regulators. In contrast, the Indian BFSI sector is primarily regulated by the Reserve Bank of India (RBI).
- Digital adoption: While both India and the US have adopted technology to improve their BFSI services, the pace of digital adoption has been faster in the US. Digital payments and mobile banking are more widespread in the US compared to India.
- Branch network: Indian banks have a much larger branch network compared to their US counterparts. This is due to the lower level of digital adoption and the need to serve a larger population in India.
- Types of financial services: The types of financial services offered by banks and financial institutions in India and the US also differ. For example, the US has a more mature credit card market, while India has a larger market for microfinance and small business loans.
- Financial inclusion: Financial inclusion is a bigger challenge in India compared to the US. In India, a large portion of the population does not have access to basic banking services, whereas, in the US, the focus is on improving access to credit and reducing income inequality.
So, Where Does India Inc. Stand?
The next natural question that arises is, so where does India Inc. stand in the whole scenario and what does it has to offer or lose in the present suppressing economic times?
Here are two recent pieces of news by a national daily that aptly describes the present scenario and how gracefully India strides the global economic waves of the recession.
State-run banks such as the SBI benefited from the turmoils in US banks and rose 4 spots higher from its previous position of 30 while HDFC banks, India’s most valuable bank, maintained its position at 13.
The RBI Governor, Mr ShaktiKanta Das affirmed to the world that the Indian Banking System is well aware of economic developments globally and that the country was insulated from any sort of negative influences from developments in the US and Switzerland.
This affirms that the Indian BFSI is in good hands.
Trends and Future of BFSI in India and the US
In its report for 2023, Deloitte rules out major activities that remained crucial from a global standpoint. However, the same rules apply effectively to the current economic conditions of the US as well as India and hence could not be ignored.
However, ongoing socio-economic conditions, such as the Russian-Ukrain war, the emergence of AI, and a myriad of others highlight good governance for sustainable growth as the major concern of economies globally.
Here are some of the key topics around the same:
- Demand for better data governance and reporting
- Cyber and IT threats
- Bank-secrecy Act/ Anti-money laundering schemes and sanctions
- Consumer protection and financial inclusion