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Future of Investment Banking: Eye-Opening Trends and Challenges to Consider

By January 12, 2022June 17th, 2024Blog8 min read
Future of Investment Banking: Eye-Opening Trends and Challenges to Consider

India being an emerging middle-class country, it has a real opportunity for wealth management and investment management firms.

However, India’s future of investment banking is a matter of concern as it’s slowly returning to its bustling self-aftermath of this global pandemic.

The banking and finance sector are working tirelessly to make sure the country faces fewer obstacles while recovering from the great calamity.

As a matter of fact:

Public sector banks’ assets stood at Rs 72.59 lakh crore (US$ 1,038.76 billion) in FY19. During FY16–FY20, credit off-take grew at a CAGR of 13.93%.

As of FY20, total credit extended surged to US$ 1,936.29 billion. During FY16–FY20, deposits grew at a CAGR of 6.81% and reached US$ 1.90 trillion by FY20.
This is good news. Thus, we all need to focus on moving ahead. Engage yourself in knowing the future of investment banking and challenges hovering around it.

Investment Banking: In a Gist

Investment Banking (IB) is considered as a financial intermediary that fulfils a variety of services.

Investment banks are specialised in managing complex financial transactions, such as underwriting, acting as an intermediary between a securities issuer, initial public offering (IPOs), facilitating mergers and likewise.

Due to recent economic shifts, investment banking is facing many challenges like higher capital charges, digitalisation, market electronification inflexible technology, reporting, etc.

In this crisis, companies need to refine their transformation objectives and try to review their broader strategic plan. These are some of the lessons, bankers and investors have learned from the pandemic.

The key to stay ahead of the game is by implementing current trends of technology within investment banking to bring a transformation in this sector.

Read more on: Explained: What makes Corporate Finance and Investment Banking Different from each other?

In this article, we will walk you through major trends that are shaping the future of investment banking in India.

5 Investment Banking Trends

1. Regulation:

Automated and AI will take centre stage with machine learning (MI) and other essential tools. These tools are crucial to detect risks and scams, thus reducing the loss of money to banks.

Regulation drives business behaviour. Banks need to increase focus on maintaining core liquidity and leverage ratios with pressure on reducing short-term funding, holding more liquid assets and raising long-term wholesale funding while reducing leverage both on- and off-balance sheet.

In addition to this, the regulation offers lesser overheads, red-tape worries and bigger payouts on the principal amount. This growth won’t be permanent and will depend on the financial abilities of prominent banks.

2. Digitisation

Big data, interactive platforms, blockchain, augmented & virtual reality and mobile technologies have paved the way for itself in the banking sector.

Digitisation isn’t a new word here as it will help investment banks and customers to eliminate unwanted processes and intermediaries, making things easier for both the parties.

E-trading is a dominant technology in financial areas. This points towards an urgent need to reform multiple trading platforms and IT systems of investment banking.

We all know that technology tends to promote safer work environments, improve productivity and boost user experience.

3. Mobility and Security

Mobility relates to easy access of information anywhere and anytime. With the advent of technology, the security of information in the financial industry is a major concern.

Currently, there are several stringent regulations and legal policies that require investment banking companies to preserve data security which should be at the top of their checklist.

4. Workforce Shift

Technology has influenced the way every individual performs their day-to-day tasks in an investment bank. ATMs have replaced everything from transactional to analytical.

In the upcoming days, automation will also follow suit by assisting the movement of resources to a more managerial level.

It’s said that automation and AI will alter our everyday activities without compromising on providing 100% customer service. The need of the hour is to upskill yourself and take a smart approach.

5. Future Generation

The future is pretty clear. Traditional ways of investment banking will get replaced with advanced technological infrastructure and analytics.

The main focus would be the digitisation of customer experience, and AI will occupy the investment industry arena.

India has to be open to accept these changing trends and evolve to become a global leader in finance. It’s a boon to both the banking industry and even combat various socio-economic issues of the citizens.

Certain future challenges should be addressed too.

Investment bankers are putting their efforts towards developing better client networks among different industries offering financial aid and equity-related issues. Let’s know more on challenges that can be faced in investment banking.

5 Investment Banking Challenges to Consider

Challenge #1: Transforming regulatory modifications

Investment banking companies in India need to deal with regulatory changes that have impacted the way banking bodies operate. These new rules have led to a rigorous process check, in the prime functionalities of investment banking.

Investment banking is going through various difficulties; including risk management, administration, trading, and fulfilment. Banks should consider these issues and interpret the different rules after understanding the effectiveness of other regulations.

We need to conduct an assessment of the present state and try to simplify it as easy as possible.

Investment banks in India should stop staying at the safer side and make a clear decision about what should be included and excluded.

Challenge #2: Lowered equity rate

Banks are abided to follow a certain set of rules wherein you need to take the aspect of expenses and meet regulatory needs and also combat compliance associated with technology.

As the equity rates have plummeted down drastically, the functions should be regulated in a way to recover the capital cost.

The major issue in India is a significant hike in infrastructure expense. To overcome this, all investment banking products should be planned and launched in a strategic way to cover-up the expenses.

There should be a certain amount of budget for creative aspects to generate profits and reduce expenses.

Challenge #3: Maintaining Transparency

All the challenges of investment banking should be addressed with a greater customer base.

Proper transparency should be maintained inside-out on who took action, the mode and timing.

Customers should have a uniform technology platform like cloud computing to bring in more transparency.

Challenge #4: Real-time Analysis and Risk Management

Several experts have recommended analysing eligibility for investment bankers in India. You don’t need to transform or modify the whole infrastructure, but address the challenge of trades with a more significant margin.

We all know that offering greater profit for the trade confines banks within the lower margin financial models.

Here, real-time analytics comes into play.

This will facilitate the growth of investment banking by addressing their risk handling abilities and removing outdated business models that tend to restrict growth rate.

Challenge #5: Regulatory Deadlines

One of the prime challenges that banks are dealing with are meeting regulatory deadlines. One of the main reasons behind this is technological issues they need to face. We need a creative model to address this issue.

Investment banks are facing significant challenges owing to the COVID-19 impact; market democratisation, increased client sophistication, evolving financial regulations, rapid technological advances and remote working arrangements.

There are several opportunities for banks to bring in higher levels of return. To achieve this, IB needs to revamp certain business models and operational platforms and get future ready.

Recommended, Explained: What makes Corporate Finance and Investment Banking Different from each other?


In short: Data analysis is the future.


International banks are more like fintech companies using data science and artificial intelligence (AI) while dealing with their customers. This reminds us of a recent quote by India’s chief economic advisor (CEA), Krishnamurthy Venkata Subramanian.

“Indian banking sector needs to invest in technology and data analytics to figure out the right model for large corporate lending which would in turn spur investment and help the economy grow into a $5 trillion one.”

The future of Indian banks is data analytics and AI. Corporate lending should come to an end in order to avoid defaults caused by the same.

Speaking about numbers, the banking sector credit growth weakened during the first half of 2019-20 and slide down to 5.9% by March 2020. It remained muted up to early June 2020 owing to the pandemic.

Rakesh Narula & Co. & RNC Valuecon LLP collectively known as RNC is a well-known and respected name providing techno-commercial services as IRDA Licensed Category ‘A’ Insurance Surveyor & Loss Assessor and consultancy for Valuation of Property, Plant & Equipment. RNC also acts as an Independent Engineer and is a leading service provider for Techno Economic Viability Studies. Contact us today!

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