From Retirement to Re-attirement

The Economic Impact of Re-engaging Former Banking Professionals

A large number of banking professionals are retiring every year in India, leading to the average age among the eight lakh public sector bankers to drop. Retirement can have a significant economic impact, such as reduced consumption spending and a rise in the non-productive workforce. A research study shows that 62% of retired bankers are not gainfully employed. 

These retired professionals, many of whom have more than 35 years of experience, have extensive knowledge of financial products, risk management, client relationships and customer management. This makes them suitable for professional engagement with businesses in an advisory capacity.

India is one of the top-performing major global economies, and businesses are in growth mode. According to Moody's Ratings, capital requirements will remain high for Indian companies as they expand their capacities to cater to strong consumption growth at a time when capacity utilisations remain high. Although large enterprises have access to multiple sources of capital, such as equity, debt and bonds, Micro, Small, and Medium Enterprises (MSME) primarily depend on debt for their capital needs. MSMEs are an integral part of the Indian economy, contributing 62% to the country's employment.  However, MSMEs, small businesses and startups face significant challenges in accessing capital through formal channels.

This is where the expertise of a retired banker comes in.

Capital Access Challenges for MSMEs and Small Businesses

MSMEs and small businesses face challenges in accessing credits from the formal system for the following reasons.

· Lack of Access to Advisory Services: Many MSME owners lack a strong understanding of financial concepts and lending procedures, and they don’t have access to advisors, preventing them from effectively leveraging the formal channels to receive capital.

· Lack of Credit History: A lack of credit history due to the absence of an established financial track record is a major obstacle for MSMEs in getting debt capital from banks and financial institutions. 

· Collateral Requirements: Banks and financial institutions require loan collateral, which is a challenge for MSMEs with limited resources.

· Insufficient Knowledge of Government Schemes: MSMEs miss out on capital and financial support for business expansion, without the right guidance on available schemes.

Mutually Beneficial Opportunities for Retired Bankers and Corporates 

However, MSMEs have a golden opportunity. They can leverage the knowledge and experience of retired banking professionals to overcome the challenges of raising capital. The situation also presents an opportunity for former banking professionals to use their expertise to gain employment after retirement. It offers bankers well-respected and dignified post-retirement engagements as independent consultants and helps them reclaim a sense of identity. The engagement and networking opportunities with fellow bankers within the community are other advantages.

Some corporates may not have in-house financial expertise to use innovative financial products to meet their capital needs. They can leverage the expertise of former bankers with specialised financial knowledge without the hassle of onboarding full-time employees.

Technology Drives Former Bankers’ Engagement with Industry

MSMEs and small businesses are spread across India, some being far away from major Indian cities where advisory service providers are located. However, technology can help bridge this distance and facilitate mutually beneficial relationships between bankers and MSMEs. Aggregator platforms can address the challenge of the geographical divide by connecting seasoned bankers with businesses. Such platforms help creditworthy MSMEs, startups and small businesses raise capital cost-effectively while offering new earning opportunities for retired bankers.

New-age digital platforms not only connect service providers and industry players but also leverage technological advancements such as Artificial Intelligence (AI) and Machine Learning (ML). AI/ML technologies enable the matching of requirements with talent, helping businesses address their specific challenges.

AI-powered Innovations Transforming Credit Scoring

A key challenge for banks and financial institutions in assessing the creditworthiness of MSMEs and small businesses is limited information on financial reports and owners' credibility, which hinders the evaluation process of a company's credit risk. Additionally, financial data providers such as Moody's cover only top businesses and large corporations, hindering a financial institution’s ability to assess MSMEs' credit risk.

In addition to bridging the distance between former bankers and MSMEs, financial platform providers also help in bridging the information gap between MSMEs and financial institutions. Fintech aggregator platforms efficiently collect data about MSMEs from diverse sources and leverage AI to analyse large datasets in real-time to extract valuable insights and patterns for evaluating credit risks. AI-driven risk intelligence also helps minimize the time and effort required for due diligence of MSMEs.

Fintechs are helping MSMEs obtain strategic advisory services from seasoned bankers, enabling them to access capital from the most cost-effective channels. These service providers are also devising ways to create a more inclusive approach to extending credit to MSMEs by evaluating unconventional metrics using innovative technologies. Aggregator platforms are not only helping MSMEs get advice but also facilitating loan disbursal from financial institutions, which enables them to expand their businesses and contribute to economic growth. Additionally, they are enabling qualified professionals such as retired bankers to earn an income. Bringing retired professionals back to the workforce will have a larger impact, driving consumer spending and creating a multiplier effect on the economy.

By Rajat Chopra, Founder & CEO, BankersKlub