Jayendra Nayak has been Managing Director and Country Head,
Morgan Stanley India, since April 2010. Prior to joining Morgan Stanley, he was
Chairman and CEO of Axis Bank from 2000 to 2009. During this period, Axis Bank transformed
from being a purely domestic bank with less than 50 branches to creating an
emerging Asian footprint with over 800 branches including in Singapore, Hong
Kong and Dubai. Earlier in his career, Mr. Nayak worked for the Government of
India. Between 1990 to1995, when India embarked on economic reform, he was part
of the Ministry of Finance, Government of India. He has an MA and a PhD in
Economics from Cambridge University, UK.
He started out by describing the change in the Indian
banking sector over the last 15 years. Most notable has been the entry of
private sector players which have captured a large chunk of the market in a
short amount of time. He also tied the growth of the sector to the growth of
the economy. For both the developing economies of India and China, the ratio of
non-working to working people has steadily decreased. In line with this
decrease, the savings rate has steadily increased. China, in particular, has
been quick to take advantage of this fact. He pointed out that this phenomenon
has occurred due to changing demographics of both countries. As a result, India
can look forward to enjoying this for another 25 years while China will have to
start facing the inevitable downward slope.
Coming to innovation, he segregated it into 3 types of
innovation
- Product innovation
- Process Redesign
- Distribution Efficiencies
He highlighted the fact that Indian banking products are
less complex in comparison to developed markets. He then went on to talk about
the need for innovation in new products which should be propelled by the shifts
in the sector towards securitized products, bond trading and fixed income
derivatives and project finance. He also touched upon principle based
regulation and regulatory oversight to cap systemic risks
Coming to the innovation in process redesign, he noted that Indian
companies have fared well in this regard. He emphasized on the connection
between regulation and innovation. In India, regulation is generally
conservative to new product innovation while fairly liberal on process and
distribution innovation. In India, the market is structurally under penetrated
which can be a good thing as it provides an imperative for growth. Assets will
continue to shift towards the private sector in the coming years. He also put
forth the point that centralization in public sector is less than that of the
private sector.
Finally, he talked about the new trends in distribution
efficiencies such as relationship managers for the mass affluent. The private
sector has also appointed or outsourced a low cost sales force to target the
masses for simple products like issue of credit cards, debit cards and cash
management. He noted that the public sector in India has been very reluctant to
outsource while the foreign banks in India have no interest in the mass sector
at all.
With this, he concluded a very interesting and informative
session. The floor was opened for questions, prompting interesting discussions
on consumer mentalities and the future of the banking sector.
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