Bolstered by a robust economy, India’s banking sector is gearing up for a profitable
year ahead. PSB profits are estimated to touch Rs. 1.5 lakh crore in FY24, almost 50%
higher than last year as per industry estimates. However, global headwinds
necessitate vigilant risk management and future-ready collection strategies.

Navigating Emerging Risks with Agility

While NPAs have moderated over the past few years, new complexities like model
risk, cyber fraud and contagion effect require specialised mitigation capabilities.
Banks need to embrace predictive systems leveraging alternative data sources to
spot early warning signals and identify high-risk exposures early.

Platforms integrating robust statistical models, AI/ML algorithms crunching vast data
sets can enable dynamic risk assessment of credit, fraud, market movements etc.
Scenario analysis by simulating events like climate disruptions or viral outbreaks is
also pivotal.

Upgrading cybersecurity infrastructure has become paramount given the surge in
digital frauds. RBI’s heightened scrutiny of risk preparedness across the financial
sector is warranted. Banks must deploy smart surveillance systems, conduct
penetration testing and strengthen employee training.

Reimagining Collections with Personalization and Empathy

While write-offs around Rs. 10 lakh crore in the past 5 years highlight the need for
progressive collections strategies, the regulatory push towards customer-centricity
is also driving change.

Banks are moving towards hyper-personalized solutions aligned to individual usage
patterns powered by analytics. Dedicated relationship teams now manage
high-value customers. Digitization enables multi-channel outreach including digital
communication channels like WhatsApp.

Identifying early delinquency signals is enabling customized treatments. Borrowers
facing temporary hardships can get flexible restructuring options, aligned to specific
reasons for non-payment. The focus is on remediation and sustaining credit
availability.

Training programs focused on negotiations, emotional intelligence and conduct are
arming collections agents with skills to handle diverse scenarios with sensitivity.
Outreach strategies balance commercial objectives with fair treatment of vulnerable
segments.

The Pivotal Role of Technology and Culture

To thrive amidst the winds of change, banks must harness the power of data,
automation and human connections in prudent ways. Integrating Regtech solutions
will bolster compliance as regulations evolve. Emerging technologies like IoT,
blockchain and open banking also hold immense potential to drive efficiency,
security and transparency.

The trends for 2024 suggest a banking sector that is more agile, technologically
adept, and customer-focused than ever before. As banks and NBFCs adapt to these
trends, we are likely to see a more efficient and effective approach to managing risks
and collections, leading to a more resilient and responsive banking ecosystem.