Even as global banks are exiting various businesses, HSBC is investing in a market like India across segments. In a conversation with Malini Bhupta, HSBC India’s CEO Hitendra Dave says he is looking to fortify the bank’s position as the leading bank for Indians with international interests. Excerpts:

The pandemic has had a far-reaching impact on consumer behaviour and businesses. How has banking been affected by it?

The pandemic certainly caused an unprecedented degree of disruption, with a severe impact on the global economy. It tested the resilience of business models of companies and brought into sharp focus aspects related to global supply chains and the reshaping of supply chain ecosystems. The acceleration in digital adoption was a noteworthy change across industries during the pandemic and we only see this growing in years to come. While the banking sector did get impacted, it recovered from the initial shock and has handled the subsequent waves of Covid-19 well. In fact, the financial services sector played a critical role in absorbing the impact of the pandemic on businesses through various programmes and initiatives. As we emerge from this difficult period, higher government spending on infrastructure, revival in retail demand and an uptick in economic activity will act as growth drivers for the banking industry.

With fintech becoming big, banks need to transform themselves, be it in payments, transactions or corporate banking. What is HSBC doing to take on this new set of challenges?

The emergence of fintech and start-ups in India has been a success story like few others. It has not only expanded the scope and boundaries of the financial services sector, but, importantly, complemented it and helped support its growth. While it has made the financial segment more competitive, the fruits of collaboration with fintech start-ups and new technologies have been good for the banking industry as a whole, and ultimately beneficial to the customer. We continue to partner with various fintech start-ups, particularly across the spectrum of transaction banking and retail banking, to offer more integrated solutions and cutting-edge financial products and services to our customers.

How can banks remain relevant in this environment?

Banks will continue to have a pre-eminent role to play in the emerging economic environment, spurring the growth of trade and commerce and supporting the aspirations of retail customers. While the last few years have indeed been disruptive, the need for and relevance of banking as an industry remains undiminished. As a critical component of the financial services sector, it is important for banks to recognise the changing dynamics of customer needs, adopt and leverage technology and forge a symbiotic association with aspects of the digital economy and emerging fintech companies. As a sector, I believe we’re moving in the right direction with banks playing an increasingly important role in combating climate change through their financing commitments and influencing the trajectory of economic growth globally.

Blockchain and cryptocurrencies have captured the imagination of the world at large. These have also demonstrated their use cases in the post-Covid world. How do you view them?

We’ve been big advocates and adopters of technology for creating a more efficient banking system and were the first bank in India to use the blockchain technology for a trade finance transaction. Since then, we’ve done multiple marquee transactions using blockchain platforms and are actively looking to leverage the potential of this technology to further digitalise trade.
The Finance Minister’s announcement in the recent Budget clearly paves the way for the rollout of a Central Bank Digital Currency (CBDC). While we await additional details on operational aspects like design and implementation, it will help bolster the digital economy and ensure a more efficient and cheaper currency management system.

The advantages of a CBDC are myriad. However, we must also be cognisant that it does not disrupt our well-functioning capital and credit markets. As an asset class, it will need to have a good balance of demand and supply as well as liquidity. The banking regulator in India has been instrumental in ensuring innovation in digital payments over the last decade. We’re confident that this latest move will be a calibrated journey, one that complements the existing framework of our digital economy.

Is there a place for your bank within a context which has seen global banks divest their consumer divisions?

India remains a significant market for HSBC globally. We are deeply invested in growing our retail book in India and have been at the forefront of leveraging digital capabilities and technological innovations to provide an enhanced banking experience to customers. We’re impatient for growth and recently decided to acquire L&T Investment Management (LTIM). This is an important acquisition for us and a big step towards becoming a leading asset manager in Asia Pacific, in line with our larger Asia Wealth ambitions. We’re also looking to fortify our position as the leading bank for international Indians, given our ability and network to connect those who live, work and study across our other markets back to India. With an economic revival on the cards and increasing wealth, we believe there are significant opportunities to grow our retail banking in India.

The financials of banks were expected to suffer due to pandemic. How did it pan out? Do you think the worst is over?

In our recently announced Group annual financial results, HSBC India has recorded a profit before tax of $1.11 billion and it is the fourth largest contributor to the Group’s profits. Despite the challenges of the economic environment over the past few years, we’ve continued to invest and grow across the board. From a macro-economic perspective, we’re seeing signs of a recovery — sector by sector and company by company. We’re optimistic we have put the worst behind us, and the various policy interventions by the government and the banking regulator will lead to a new trajectory of growth.