Career Opportunities in Banking

Banking in India

After close to two decades of Indian economy’s liberalization and on the verge of WTO
accord of 2009 (which is expected to transform the canvas of Indian banking to new
dimensions in newer colours), the Indian financial system has come a long way from
what banking used to be in pre-1991 and what it is today. Despite the recent credit crisis
affecting major banks across the world, a banking career continues to remain lucrative
not only in terms of remunerations but also in terms of a relatively faster career
progress, though the career progress in IT cannot be matched. But I have witnessed guys
who started off with IT as a career and now are too keen to get into finance and banking
which I think justifies the kind of career growth that a bank offers with the dymanic
transformation lying ahead in India.

A career in finance per se covers a wide scope ranging from traditional careers in
corporate finance, banking, insurance to emerging (in India) careers in Investment
advisors/analysts, private equity (not all of it is finance though), venture capitalism,
bankassurance, securitization etc. This paper covers a career in banking including both
the traditional and emerging banking avenues and the views will be largely confined to
the Indian landscape.

Banking in India was introduced in fragmented forms owing mainly to disintegrated

nationhood we had before 1947. Along with the credit of unifying India the British also
earn the credit of giving India large banks that in some sense unified the economy of
India as one nation in matters of common currency, wider trade etc. Presidency banks of
(erstwhile) Bombay, Bengal and Madras were such banks that primarily catered to
British. However, these banks encouraged native Indians to set up their own banks and
India saw birth of banks like Bank of Baroda, Punjab National Bank, Karur Vysya Bank,
Canara Bank etc. which catered to business needs of common Indian folks. The three
Presidency banks were amalgamated to form Imperial Bank of India which later became
State Bank of India, the largest bank in India.

Careers in A Full Service Bank

A full service bank by its organizational set up offers wider career progression as it
allows one to opt for either specializing in one kind of service or move across different
services/departments. A full service bank implies a bank that specializes in giving all
kinds of financial services besides the core banking activities of accepting deposits &
giving loans and these other financial services include structured finance, securitization,
project finance, treasury & investment services, financial advisory services etc. There are
a lot many areas today that are handled by banking sector and thus the sector has high
capacity to generate employment and given the Indian scenario of dynamic financial
services sector the job opportunities continue to be bright despite recent setbacks.

Before we cover the various opportunities activity-wise in a full service bank, it is

pertinent to note that a career in banking does not actually demand a specific academic
background. However, a fast track growth after one gets into the bank does demand
certain qualities which would be clear as we talk about the various activities. These
qualities can be acquired on the job.

Just like any business a bank too has its business split into assets and liabilities. But the
exciting fact is that both assets and liabilities offer very different and exciting career
options. The bank career is actually a mesh of products and activities with high level of
overlap. We therefore, have two options on how to go forward; we can either talk about
each item in liabilities and assets (i.e. products) and related careers in them or we can
talk about different services that a bank gives and look at career opportunities therein.
Lets opt for the later one because as a banker one should be very well conversant with all
aspects of bank’s balance sheet especially the one of the department/service one works
in (and this is the quality # 1 we just talked about).

Commercial Banking. Commercial Banking in India can easily be classified to be the

broadest activity of any full service bank. Commercial Banking activity of any bank will
involve the following activities:

a. Cater to small and medium business for their requirements of funding. This
covers providing loans to small & medium business like shops, factories, new
business ventures for their day to day operations. Please note that definition of
“small” and “medium” in Small & Medium Enterprises (SME) will differ from
bank to bank and will depend on the size, capacity and appetite of the bank itself.
The level of awareness of finance and requirement of this segment is relatively
low hence the banks offer them standard product like Cash Credit, Overdraft etc.;

b. Trade finance. This includes financing both domestic and foreign trade of
businesses. Banks have certain standardized products like Letters of Credit, Bill
financing and structured products like buyers’ credit, suppliers’ credit etc.

c. While the above two are the assets of the commercial banking, on the liability
side banks accept deposits from businesses (representing their surplus funds),
give them services of current accounts, corporate credit cards, Cash management
etc.

Corporate Banking. With almost the same services as for commercial banks, this
service caters to the corporate segment of India Inc. Since the clients here have higher
awareness of finance the banking products contain more of structured products than
plain vanilla/standard products. The underlying logic and requirements are always
same but the delivery of finance/service is different. From the bank’s perspective too,
since large clients seek finer pricing the bank tries to structure its product such that the
cost reduces. Some products for corporate clients that the banks offer are:

a. Revolving loans. Loans that are for small period (say 6 months) and may not
necessarily be for the day to day operations.

b. M & A finance. With growing corporate appetite for inorganic growth across the
globe, banks assist in financing their acquisitions. There could be any number of
products to help the corporate M&A;

c. Fund management across the globe. With corporate presence growing beyond
boundaries, this business gives the service of managing clients funds in different
countries. However, this service can be best given by a bank that has wide
international presence.

d. Project Finance. Though project finance is generally a completely different

vertical in a bank but because it caters to corporate clients, we can talk about it
here in brief. Big businesses undertake large projects like mining, setting up a
petro plant etc. Financing of the same is undertaken by project finance
department. The reason it is almost always a different department because this is
a specialized financing requiring certain skill sets which we will talk about later.

Consumer Banking. This could probably be the fastest growing segment in the
Indian banking today. This function caters to people like you and me. It tries to identify
needs of individuals and fulfills them with attractive products. The tremendous growth
of this segment has brought banking out of the traditional image of a secluded
specialized business to something that is omnipresent. The elderly around us will tell us
that around 20 years back there were hardly any bank advertisements, bank loans for
household goods were unheard of. We have come to a time when the banking services
have been commoditized.

This is one area of banking that holds high prospects of fast growth banking career and
it needs the skills of selling given the increasing per capita incomes in India, increasing
aspirations of Indian middle class, global integration of Indian consumers, opening of
market for a deluge of consumer goods and above all the demographic dividend of India.
The products of this area range from loans for house to loan for a bicycle, credit cards on
the asset side and deposit products (savings, fixed, recurring, flexi etc), debit cards on
the liability side.

Consumer banking is also further divided into mass banking and class banking. This
divides the customers into two parts depending upon their networth. Needless to say,
the class banking customers receive a very sophisticated service. One growing
service/product for class customers is wealth management where banks manage the
wealth of the customer i.e. take care of his/her portfolio.

Treasury. Banks have from the beginning been entrusted with the function of treasury
by their promoters, patrons, and/or countries. This is another area that requires specific
skill sets the prime among them being good at numbers. This area of a bank is the most
sought after not only because of the glamour in form of huge profits (that means huge
bonuses!) but also because of the excitement of being on one’s toes all through the day
while dabbling with bank’s/client’s monies in the markets. The treasury activity of a
bank can be divided into two:

i. Proprietary treasury activities. This part caters to bank’s own investment.

Like any business, a bank too has temporary surplus funds and needs to
invest them to make a return. This area handles the bank’s surplus funds
and invests them in different markets like equities, debt, forex,
commodities, derivatives etc.

ii. Merchant treasury activities. This part caters to giving the corporate, SME,
consumer (class banking consumer) clients services of treasury that is
helping them in their investments/businesses. A client may have surplus
funds and would like to invest them in markets. The bank offers its
services in doing so for the client. Further the bank also helps clients in
their businesses in form of arranging foreign exchange, hedging market
exposures etc.

While the above describes the functions of the treasury, it is pertinent to note that
treasury itself is divided into different parts depending upon the market. We have the
following very common departments within the treasury:

1. Domestic treasury. As the name suggest it covers the Indian markets. It will
further have divisions like equities desk, debt desk, derivatives desk,
securitization desk etc.

2. Forex. This covers banks activities (proprietary and merchant) in foreign

exchange. It will have various desks depending upon currencies (USD, GBP, EUR
etc), jobs (currency swaps, forwards etc)

3. Some banks may have a separate section for derivatives.

Commodities. This is relatively new area for the banks and the regulations for banks
participation in commodities is not fully liberalized. Therefore it holds promise as and
when it opens up for the banks.
Investment Banking. This arm of the bank is more of an advisory service giving
department. It gives its clients advice largely on their inorganic growth plans, new
business avenues, arranging for funds, deployment of funds etc. This again is specialized
area of bank and requires specific skill sets.

Project Finance. Since this is almost always a separate department it merits an

exclusive mention. Though the services of project finance department are for its
corporate (and growing SME) clients it is kept different from Corporate banking
department because it needs high level of specialization. Since the projects are large like
a petro plant it is prudent that the bank should study its feasibility and viability from all
angles and this requires the banker to have knowledge and experience of setting up a
petro plant (no we don’t mean a first hand experience but an experience of already
having done such financing). Therefore most of the banks generally groom the fresh
joinees who join in the project finance department and expose them to specific projects
for example one new joinee may be exposed to banks financing of all petro projects,
another one on large ship building projects etc. Senior guys in project finance are
veterans on financing of certain projects.

Development banking. Though not part of commercial banking, development

banking is undertaken by special institutions like IDBI, IFCI, IFC etc. Why we mention
it here is because this function is gradually being taken up by commercial banks. A clear
difference between commercial banks and development banks (which is now fading
away) is that commercial banks give finance for short term (one year) and development
banks give finance for long term (sometimes more than 10 years). Thus a development
bank is akin to project finance department of a commercial bank though with finer and
higher skills.

Private Equity/Venture Capital finance. Banks are slowly getting into these
functions too. PE/VC deal with providing finance to businesses that needs finance but
cannot afford burden of interest on their books. PE/VCs give them finance in form of
equity and seek returns at later stage in form of huge dividends, exit at higher price
(through IPO or stake sale). The primary difference between PE and VC is that while VC
finances start ups a PE finances established businesses (and sometimes businesses that
hold promise but are not running profitably). It is a growing segment in itself and as
part of a bank it holds good promise for a banking career.

Financial Inclusion. This mayn’t be a department in any bank but is one area that all
banks (nationalized, private and foreign) in India are looking at very keenly. India
continues to be an agrarian country (and we should be proud of it) so most of our
population lives in villages/rural areas. Though nationalized banks have good reach in
villages (that too on RBI’s stringent policies), a large portion of rural populace has not
access to banks (a significant portion of urban populace too has no access to banks).
Financial inclusion involves making sure that banking services reach such people – now
while that may sound a social objective, it is a reasonable question to ask that what is in
it for a bank and what sort of career one can look for in it. The bank will get more
customers on both liabilities and assets side and will grow in business as the business of
such people grows. As for the career, though the glamour quotient may shy away from it,
in my opinion it is a very satisfying one. Mohammad Yunus could be the role model for
one aspiring for this and the ultimate achievement – a Nobel Prize!

Insurance. With regulations modified to allow banks to take up insurance business

(not directly though), the career in banking cannot be summarized without talking
about insurance. It is again a specialized skilled career holding huge opportunities in
India where insurance penetration is among the lowest. It is further divided into life
insurance and general insurance (everything other than life).

It’d be worthwhile if aspirants for a career in banking can go for JAIIB and CAIIB exams
conducted by IIBF (Indian Institute of Banking and Finance). It gives a wide and deep
insight into banking and finance.

Wishing you a fulfilling career in banking!