PRACTICE OPPORTUNITIES IN BANKING AND FINANCE

1. PRELIMINARY

 Changing dynamics of business environment in the context of financial management

 Polarization of clients in terms of size, business practises and profile

 Corresponding polarization of business advisor and consulting practice specifically with focus on finance function.

 SME Segment offers significant opportunities for small and mid sized firms to really focus upon.

2. CHANGING SCENARIO OF INDIAN BANKING

End of the era of DFIs long back, with banks now emerging as one step solution for all types of finance needs

RBI is progressively tightening the norms of income recognition, asset classification and capital adequacy.

Conventional PSU banks finding it increasingly difficult to contain the NPAs, provide for adequate capital for growth, manage the employee productivity and still remain profitable and growth oriented. However, only PSU banks have the mind-set of giving long term finance for industrial as well as infrastructure projects.

 The new generation private sector banks/foreign banks have much higher productivity per employee and much better capital adequacy & profitability ratios, but are significantly focused on high quality credit with a short term perspective

 A paradoxical situation is emerging – with a prolonged recessionary cycle particularly in infra segment and industrial segment in general creating problems for the banks which are compounded by further tightening of the norms by RBI.

 End result; banks have become extremely cautious and selective in taking up new business funding needs.

3. CAPITAL MARKET SCENARIO

If India has to grow at 7% GDP growth it would imply a huge requirement of incremental funds for Industry and Infra segment growth

It would imply in turn a massive credit requirement from Indian banking system which would need a huge inflow of additional equity into banks.

As per rough estimates it would mean a fresh credit expansion of at least 20-25 billion $ per year from banking system which would imply at least a 3 billion USD of equity infusion p.a. from capital markets/government.

 Since government is severely constrained in funding additional equity of banks it would imply heavy reliance on the primary market offerings.

 Primary markets were virtually dead since last few years. However, only in the current fiscal there is some activity seen and still the total primary market offerings line up for the current fiscal are a little under 2 billion USD and not a single bank IPO/FPO on cards

 End result; an extremely challenging situation for banks as well as industry for raising adequate resources to fund the growth.

4. THE FRESH APPROACH

 The conventional role as pure financial intermediaries and external advisors is undergoing a sea change

 The emerging scenario represents an opportunity as well as a challenge for CA professionals, demanding a much higher service level offering based on a deep understanding of the client, their industry and operating parameters, environmental limitations, changing risk profile and their ever changing dynamics of finance management.

 It calls for a Relationship based collaborative approach, as against transaction based approach.

5. THE OPPORTUNITY LANDSCAPE FOR PRACTICE

A. AUDIT AND ASSURANCE

 Statutory Audits

 Stock Audits

 Investigative and forensic Audits

 Concurrent Audits/Revenue Audits

B. FINANCIAL ADVISORY SERVICES

 Project Finance

 Working Capital Management

 Restructuring/Rehabilitation of SICK Companies.