How BoB is building out its wealth management business

For nationalized banks, wealth management has traditionally not been a focus. India’s second largest state-owned Bank of Baroda (BoB), after the trail of State Bank of India (SBI), is taking a major step forward in wealth management.

Over the past year, Virendra Somvanshi, a former Citi and ex-Motilal Oswal private banker, has been working with McKinsey as a consulting partner to design the bank’s premium banking offering ‘Baroda Radiance’. The product seeks to take advantage of the bank’s large captive customer base and wide distribution. The Bank has already appointed 300 Relationship Managers as lateral hires from the Banking Industry.

Initially, BoB outsourced its wealth management to Fisdom, a fintech company, but is now keen to build an in-house wealth management business with an ‘in-house fintech’ division.

BoB has 15 crore accounts out of which about 8.5 crore are Jan Dhan accounts. Out of this universe, Somvanshi treats customers as above Total Relationship Value (TRV) 30 lakh as their target user base – which works out to around 250,000 customers – for whom the bank has created an enhanced value proposition. The bank’s wealth management offering has investment properties under the management of 28,000 crore and is expected to reach approx. 1,000 crore in life insurance premiums in this financial year. Somvanshi expects rapid growth in this customer base.

Of these 250,000 accounts, about 50% are located in the top 30 cities in India. For clients located outside the top 30 cities, BoB has set up a Virtual Relationship Management Center – staffed with Virtual RMs that will meet the wealth management and banking needs of its affluent clients in a completely digital manner.

BoB has traditionally had a high concentration in Gujarat, Uttar Pradesh and Rajasthan, but with the merger of Dena and Vijaya Bank with itself, it now has a high presence in the south as well. To cater to the Non Resident Indians (NRIs), Somvanshi has a team of Relationship Managers including Virtual RM. “We provide free airport pick-up service to NRI customers on their return to India. It’s a small gesture, but it shows that we care. We are also looking to provide NRI products at GIFT City IFSC where there are certain tax benefits.” BoB’s mobile banking platform, called ‘Bob World’, will soon reach the 20 million subscriber mark, and this Will also help to grow money management business virtually.

BoB is in the early stages, but if it is successful, Somvanshi’s initiatives in wealth management could set a model for other PSUs to follow.

Nevertheless, there is a risk. Traditionally, nationalized banks have had a large presence in small towns with low levels of financial sophistication and financial literacy. There is a risk of misselling financial products by relationship managers, especially insurance to the financially weak.

To prevent this, Somvanshi says, there are strong internal checks and balances such as an investment advisor with an RM for portfolio management service (PMS) discussions, certification and profiling of clients. However, the bank will have to keep a close watch on this experiment.