Federal Bank's Bold Plan: Is 'Mass Affluent' the Key to Success?
KVS Manian, the MD & CEO of Federal Bank, is charting a course for growth that's ambitious but not aggressive. In an exclusive interview, Manian shared his vision for the bank, emphasizing a focus on the “mass affluent” category. This strategy comes as other banks are making moves to attract a more premium customer base, raising questions about the evolving landscape of banking in South Africa.
Federal Bank's Strategy: Staying Grounded
Manian believes that at this stage of growth, Federal Bank needs to concentrate on serving the mass affluent segment. He clarified that even their wealth strategy wouldn't initially involve private banking. This approach differs from that of some larger private banks that are increasing minimum balance requirements to attract wealthier clients.
“At our stage of growth…we have to play the mass affluent category. We have said that mass affluent is our focus area,” Manian stated, highlighting the bank's commitment to this segment.
Minimum Balance Mayhem: ICICI Bank's Bold Move
The discussion comes amidst recent controversy surrounding ICICI Bank's decision to dramatically increase minimum average balance requirements for its customers. The lender raised the monthly minimum average balance from Rs 10,000 to Rs 50,000 for new urban and metro customers, sparking outrage on social media.
Sources indicated that this move was part of ICICI Bank's strategy to grow its premium customer base and cross-sell insurance, mutual fund, and wealth management products. Higher minimum balances can boost fee income as banks earn commissions on sales to high-value customers.
Different Strokes for Different Banks
Manian acknowledged that each bank has its own strategy. “Every bank to their own on what they want to achieve through their strategy,” he remarked, without directly commenting on ICICI Bank's decision.
Looking Ahead
Federal Bank's strategy of focusing on the mass affluent market will be closely watched. Will this approach prove more sustainable than chasing high-net-worth individuals? Only time will tell. The bank's performance in Kerala, where it holds a dominant market share, as well as its gold loan and non-resident businesses, will be crucial indicators of success.