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Changes in current account rules helped private banks increase penetration in cash management space: Survey

Changes in current account norms helped HDFC Bank, ICICI, Axis and others increase their market penetration in cash management space in the last two years, a survey said on Wednesday.

“India’s private sector banks got a major boost from the RBI’s 2020 circular establishing new rules on current accounts — effectively ensuring a minimum size relationship that corporates have with their bank, which strengthened the competitive advantage of large corporate lenders,” the survey by Greenwich, an arm of Crisil Ratings, said.

Aided by that tailwind, the market penetration of large private sector banks, including HDFC Bank, Axis Bank and ICICI Bank, for domestic cash management has climbed from 35 per cent in 2020 to 40 per cent in 2022, it said.

The entity surveyed 656 and 453 respondents in 2020, and 518 and 311 in 2022 for domestic cash management and international cash management, respectively. ‘Market penetration’ is calculated based on the number of citations for each service and each segment in the Coalition Greenwich 2022 India Corporate Banking Study, it explained.

In the international cash management space, the same tailwinds have helped large foreign banks like Citi, HSBC and Standard Chartered Bank increase market penetration from 58 per cent in 2020 to 65 per cent in 2022, it said.

The survey, however, said that it is not the benefit of favourable regulations alone that have helped the lenders and pointed to private banks’ innovative digital offerings in the last few years as being a helping factor.

The survey also came up with rankings on large corporate banking for lenders, which showed public sector State Bank of India leading the category, followed by ICICI Bank and HDFC Bank.

HDFC Bank was at the top in middle market banking penetration followed by ICICI Bank and Axis Bank, among the local lenders.
As the Indian corporates embark on a new cycle of capital expenditures in preparation of expected opportunities for growth, they are looking for new ways to optimise working capital management and maximise cash flows, the survey said.

The survey revealed that a majority of Indian corporates are sanguine about near-term outlooks for their businesses but remain “somewhat cautious” about uncertainties currently unfolding in the post-Covid marketplace.

The Environmental, Social and Governance (ESG) goal was identified as a critical opportunity for Indian banks to deepen relationships with corporate clients and make a positive impact by helping large and mid-size companies implement the frameworks, it said.

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