Taking lessons from the recent scam, bank executives say there is a need for robust processes to avoid frauds.
A senior Union Bank of India executive said failure of a system in the bank could lead to collateral damage. "The scam is a lesson for us. We will have to improve our oversight of those engaged in client relationships while doing this business," the executive added. The bank is yet to identify a partner for its wealth management business foray.
"Oversight on relationship managers and control (trail) over money flow are definitely important. Along with it, client education for scrutiny of details and investments is a must. This will ensure higher involvement and a check on advisors," said a senior SBI executive dealing with new business.
At present, the bank's executives stop at recommendations to affluent clients. SBI is, however, mulling a separate company for private banking to manage the wealth of rich Indians.
The country's largest bank has strong recall value in the mass affluent segment. It also has a deep banking relationship with the rapidly growing number of small and medium-size enterprises.
Another government bank, Bank of India, had expressed eagerness to enter the wealth management space. Said a senior executive: "One thing is clear, that the wealth management division will need to have a strong control system to prevent fraud."
He said the bank had been looking at plans to enter wealth management. But it would first like to get its asset management business off the ground.
PSBs have been looking to enter the wealth space to make sure their well-off customers stayed with them and not move away to private banks that offered services such as those of a relationship manager. Also, this adds to their fee-based income. The biggest advantage for these players is ability to cross-sell.