Banks increasingly looking towards retail customers, says K V Kamath

KV Kamath says technology is reshaping money flows, shrinking banks' fee income and pushing lenders to reinvent themselves as capital markets and fintech gain ground

Amid the rapid convergence of banking, capital markets, and fintech in India’s evolving financial ecosystem, K V Kamath, chairman and independent director, Jio Financial Services, shares his perspective with Tamal Bandyopadhyay at the Business Standard BFSI Insight Summit 2025 on how technology is reshaping money flows, impact on traditional fee income, and reducing companies’ dependence on banks. Edited excerpts:

 

There is a confluence of different financial entities — banks, NBFCs, mutual funds, and more — creating new channels for money flow. Could you explain what’s happening? 

Yes, what you observe is clearly happening. Technology has made financial systems more seamless, allowing savings to move into various forms of investments, savings, and consumption channels, and so on. The layperson in India is now asking if banks are the only structure for such activities. People are deploying their savings into investment products that provide the highest returns on a risk-adjusted, tax-adjusted basis. This shift has only gained momentum in the past four, or five years, with structural enablers like pension systems, insurance, and the mutual fund industry, playing key roles. The capital market now operates in parallel with the banking system, offering consumers more choice. 

In the Indian banking context, there are three things: The liabilities, assets, and fee income. For most of the banks, fee income has been declining. How are banks responding to this? 

The concern is not only UPI. There are things which are cutting into their fees even before UPI. It’s not only accelerated the whole process. Take, for example, you were enjoying a free float and every time a cheque went for clearance, that vanished. Then you were enjoying a free float on overnight money, and the lay customer who put the savings part of it and the government money. So now, everybody can move this, which earns you returns. The CA (current account) was 

interest-free. You can put it in an overnight fund where you will earn interest. So basically, the person who is dealing with the institution now has more options to deal with the institution, in a manner that is in his interest, and is profitable. The banks then need to figure out if this is a change required for the operating model.

 

How should banks change their core models to adapt to these changes? 

As far as large companies are concerned, they use working capital borrowings more opportunistically. As their balance sheets have become cleaner, they are able to use cash inflows for funding part of their working capital. So, corporate India’s core need for banks to provide working capital is getting leaner and leaner. Now, banks are increasingly looking towards the retail customer. They have more money, and are looking for products. I wouldn’t say that there is any serious challenge for banks. But there is a challenge in repositioning yourself, maybe reinventing yourself.

 

With the growth projections for India and a low credit-to-GDP ratio, do you think the Indian banking system will evolve to be on a par with developed countries? 

As you go towards Viksit Bharat, I am clearly of the opinion that we will actually achieve our objectives and grow at a high rate of GDP growth every year for the next 20 to 23 years. In other large economies, as a country starts growing, momentum of growth increases. The first industry to bulk up and grow in size is the banking industry. You can look at Japan 1970 to 1990, China 2000 to 2015. In India, I would think it is not only the banks, it’s the entire financial system which will grow the fastest. 

 

With corporates no longer relying heavily on banks for working capital and infrastructure loans, where does the core competence of banks lie? 

You have painted a picture which the banks will face if they don’t reinvent themselves. On the retail side, it is not that the customer doesn’t want money from you. The question is, how are you competing with the NBFCs? Because you have all the competitiveness as the bank. The NBFC sector cannot match your cost of funds. If you have the money with you, you need to figure out how it will put it to productive use. With technology as available today, you can reinvent yourself pretty quickly. 

 

Why aren’t we seeing digital banks like UK’s Revolute, Brazil’s New Bank, or China’s My Bank in India? 

The three banks are new banks; they are not established banks. They have all gone head-to-head against established banks. My Bank has 400 million customers and employs 4,000 people, and that is the scale of disruption that you can do with technology. There is nothing that prevents incumbent banks in India from reinventing themselves to become like these banks. We need to reposition ourselves to take the opportunity. In India, there is a natural barrier to competition. For an Indian bank, the cards are still with them.

 

Do you think the Indian banking system is investing enough in technology? 

Indian banks probably are investing too much. But they are not investing in the right technology. What you are investing in is the same old thing. You need to invest for today. 

 

Do you think credit scoring in India will evolve using more data? 

There is a confluence happening somewhere. There could be certain regulatory constraints, there could be data privacy constraints. One will have to operate within all these constraints. But, clearly, other metrics are being thought of. I can’t see them not being used in the next three to four years, so that your ability to lend to a customer at the appropriate price becomes clearer and easier. Your predictability on the customer’s ability to repay is based on the secondary and tertiary data. Primary data is your financial data. Secondary data and tertiary data are other data points used. Other countries use it. Within our data privacy constraints, we will have to see whether we can, or how to use it. 

 

There’s a concern that technology, including AI, benefits scamsters more than customers. Is this valid? 

Scamsters take advantage of an imperfection. We have seen this going back, when we started our credit card business. It takes a scamster only six months to overcome it. In the digital world today, we will have to be vigilant all the time.