New Delhi: Banking sector growth in the major emerging economies of the world would outstrip that in the developed nations before 2050 and India is pegged to take the third place as a banking hub after China and the US by 2040, a report says.
The banking sector will grow significantly faster than GDP in the E7 group of emerging economies, consisting China, India, Brazil, Russia, Indonesia, Mexico and Turkey, according to a projection by accounting firm PricewaterhouseCoopers.
Total profits from domestic banking in the E7 could be around half those in the G7 - US, Japan, Germany, UK, France, Italy and Canada - by 2050 and larger than in the G7 before 2050, the firm said in its report titled ‘Banking in 2050: How big will the emerging markets get?´
India can rise from relatively low levels today to emerge as the third largest domestic banking market in the world by 2040 and in the long run it could grow faster than China, the report said.
“While China will continue to grow somewhat faster than India over the next 5-10 years but, after that, Chinese growth will be held back by its rapidly ageing population and diminishing returns to its investment-led strategy,” PwC Executive Director Jairaj Purandare said.
The new report also forecasts that the domestic credit in India would grow to $23 trillion in 2050 from $0.4 trillion in 2004, driven by growing middle class in cities and private banks gaining market share in the state run dominant industry.
The report examines the possible changes in the scale of the banking sector till 2050 and highlights the pace of change along with challenges for banks world over.
The projections in the report are based on an analysis of developments in G7 and E7 since 1950s.
The PwC report said the E7 banking markets would become more important than ever before in the global banking sector and those institutions which do not develop strong positions in these markets would find it difficult to maintain a healthy growth rate in assets and profits.
Continued high levels of deal activity in the E7 markets is expected, although with normal short-to-medium-term cyclical variations over time.
Mergers and acquisitions would take place in the sector with local banks acquiring one another, foreign banks entering the E7 markets and vice-versa, the report said.
The E7 markets are relatively at high risk, which could be mitigated by making long-term investments in a broad portfolio of emerging banking markets, PwC said in the report.