Future Challenges of Investment Banking in India

What is Investment Banking?

It can be simply understood as an explicit wing of banking functionality that assists enterprises or individuals in generating capital and providing financial consulting. They act as mediators between those issuing securities and those investing. Specifically, the newly set organizations can be greatly benefitted through the investment banking model.   

Investment Banking

Industry coverage and those meant for financial product segments are the two major investment banking types. Industry coverage wings are formed to have distinct groups within the same bank, each carrying an adequate experience in the particular industries or the market domains.

These groups put their effort towards developing or establishing better client networks with organizations among different industries providing financial aid, as well as addressing equity-related aspects. Functionalities of Bulge Bracket banks like JP Morgan Chase, and Elite Boutique banks are perfect investment banking examples.  

1. The Challenges of Transforming Regulatory Modifications

Investment banking firms in India are facing challenges in terms of dealing with transforming regulatory changes. Things have also changed the way banking bodies operate in the nation. On the other hand, the fresh rules have brought most of the prime functionalities of the investment banking under rigorous process check.

Be it about risk management, administration, trading, or fulfillment, Investment banking in India is going through challenges in various forms. It is suggested that the banks should understand the effectiveness of the different rules assigned and interpret if needed. Most importantly, they should have the perfect assessment of their present state.

Ultimately, they have to decide on what should be included or kept and what should be excluded. Investment banks in India are said to be investing too much in an attempt to stay at the safer side. However, it is obvious to put forth the challenges of increasing productivity.

2. Addressing the Challenge of  Lowered Equity Rate

Different investment banking types, as mentioned above, are all abided by or have to follow a certain set of rules. It also takes the aspect of expenses as well as meeting the regulatory needs. Also, there remains the compliance associated with technology as well. Anyway, the overall equity return has indeed dropped. Hence, it is suggested that investment banking functions should be regulated in such a way that the capital cost is ensured to get recovered.

One of the major challenges for the investment banking firms in India is the significant hike at the expense of the infrastructure. To be specific, a noteworthy percent in this context is spent in the form of regulatory and technology affairs. It is thus recommended that investment banking products should be planned and launched in a strategic way to ensure a greater profit or to cover-up the expenses.

To make the investment banking services productive, profitable, or free of challenges, it is highly essential to keep the IT expenses and other regulatory expenses under control. The best advantage of this would be that the banks will be able to provide the kind of return the way those who are investing are aiming for. While addressing the investment banking operations, there should be a certain amount of budget meant for creative aspects aiming to generate greater profits, as well as those for minimizing the expenses. 

3. Real-time Analysis and Challenge of Risk Management

Through the course of risk management analysis, some finance experts recommend analyzing eligibility for investment bankers in India. However, instead of attempting to modify or change the entire infrastructure, it would be wiser to address the challenge of trades with a greater margin.

Risk Management

Needless to say, there is huge greed towards trades involving greater profit. Offering greater profit for the trades confines banks within the lower margin financial models. Instead of getting too liberal in its way of offering profit margin, the best recommendation for the banks would be to take real-time analytics into account.

This would help the growth of investment banking in India in terms of addressing or enhancing their risk handling ability. Well, it is equally important, though, to remove the old or outdated models; those ultimately restrict the growth rate. 

4. Maintaining Transparency

Be it about the investment banks or those of traditional forms, the challenges of any bank can be addressed with a greater customer base. In a scenario where most people don’t understand how to get into investment banking in India, one should not expect much; rather should be accomplished about whatever achieved.

Most importantly, there should be proper transparency maintained within and out. There is no meaning of optimizing technology and process without maintaining the transparency within the procedure. Investment banking roles towards providing the ground level coverage is massive, specifically with a transforming banking arena.

Moreover, each step of the trades should provide complete transparency on who took action, the mode of the same, and the timing. In this context, there should be a uniform technology platform or architect available. It is simply impossible to expect the same in a scenario of disconnected and baffling IT model. However, the contemporary cloud computing revolution has indeed generated a lot of hope.

5. Challenges of Regulatory Deadlines

The scope of investment banking in India is indeed huge. But, as discussed, it is true at the same time that there is no scarcity of challenges either. One of the prime challenges that banks are dealing with is meeting the regulatory deadlines. The main reason behind this is said to be the confines of the technology they have to deal with.

It won’t be too difficult to understand this aspect upon observing the structure of investment banking in India. Also, the level of investment associated is comparatively huge as well. In short, the entire process is in search of a proper creative model to address the challenges of such. 

6. Automation Testing

The scope of investment banking in India has always been encouraging. Upon going through the history of investment banking in India, the same things have been stated. However, the level of advancement is indeed not as expected. It has advanced, but as discussed above, there is no shortage of challenges as well. Any kind of challenge could be addressed by improving the productivity level.

And, in an era of technology, automation is considered the most effective and critical way of advancing or staying ahead of the competitors. To be specific, automated testing has moreover appeared like the need of the hour. One may claim that through the course of evolution of investment banking in India, greater application of automated testing is not something impossible.

However, it should be implemented immediately and effectively, keeping the challenges of various kinds in mind. The investment banks that are aiming to stay ahead of the competitors should look for or invest in the technologies of such. With the present form of rigid, old-fashioned infrastructure, one should not expect much. Most importantly, it should be addressed as immediately as possible.  

7. Maintaining Overall Flexibility in the System

Everyone talks about risk management and better practical analysis. However, there should be proper resource management to ensure that better trade volume is maintained. In this regard, flexibility in the overall system is highly essential. In simple terms, the banks should possess the flexibility of controlling the trading volume as desired.

As stated above, automation of processes is highly important to ensure that effectiveness is maintained to cover-up the expenses and get enabled to deliver better profit. Not just the investment banks on the whole, but the individual banks should emphasize this matter to enjoy competitive benefits over the others. The future of investment banking in India is hugely dependent upon the thorough regulation of policies to maintain flexibility.

It is here to note that it is also possible to have a proper measurement of the level of computation one needs throughout the entire day. In accordance, the technology set-up can be established. Starting from process optimization to making things cost-effective, everything could be streamlined through the strategies of such.

8. Security Challenges

Investment banking should not be distinguished too much from traditional banking from an operational point of view. As the entire banking industry or ecosystem is expected to get transformed from technological perspectives, similar things can be expected in the case of investment banking as well. Hence, just like the mainstream banks, investment banks are also obvious to confront similar challenges.

To be specific, the compatibility issues should be immediately addressed as hackers often aim at the vulnerabilities of such. At the same time, having proper arrangements for avoiding the threats of such, it is equally important to have a reliable arrangement for the safety of data as well. The concerned IT agency in-charge specifically should take responsibility for assuring the utmost complacency to the clients.

Apart from all these, the investment banking sector should not ignore the creative aspects like blockchain technology. Blockchain technology can benefit investment banks incredibly in terms of minimizing their infrastructure expenses. It’s a proven method; being specific about the Indian scenario, there is every reason for it to be a successful concept.  

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