On Episode 903 of The Core Report, financial journalist Govindraj Ethiraj speaks to Pratik Shah, Partner & National Leader - Financial Services at EY India, in an excerpt from our Special Edition.

SHOW NOTES

(00:00) Stories of the Day

(01:09) More Foreign Capital Returns As Global Funds Buy India Bonds As Macro Signals Ease.

(04:41) India Exports More To Other Countries Than The US Compared To The Pre-Tariff Period.

(06:57) Steel Giants Say India Is The Next Big Investment Opportunity

(08:18) India Could Face A Problem Of Plenty On NRI Deposits

(11:31) Cumulative Under-Recovery On Petrol, Diesel And LPG During March–May 2026 Is Estimated At Approximately Rs 1 Lakh Crore, Says A Crisil Note

(12:31) Why Only 25% Of India’s Users Rate Their Banking Experience As Good

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Wednesday, the 17th of June and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital on most days but currently in transit right now.

Our top stories and themes…

More foreign capital returns as global funds buy India bonds as macro signals ease.

India exports more to other countries than the United States compared to pre-tariff periods amidst sharp shifts in India's trading matrix.

India could face a problem of plenty on NRI deposits.

Steel giants say India is the next big investment opportunity.

Why only 25% of India's users rate their banking experience as good?

And the big bill, cumulative under-recovery on petrol, diesel and LPG for the three months from March to May this year, is estimated at about 1 lakh crore rupees.

Markets, Oil, The Rupee and Gold

A few macro signs are suggesting a return of confidence both from within and outside. Global funds are loading up on India bonds hitting a 15-month high in the process, according to a Bloomberg report, adding that foreign investors bought over $1.5 billion of index-eligible bonds on Monday, which was their biggest ever one-day purchase. Much of this is obviously linked to the interim US-Iran peace agreement, which has showed a pathway to resumption of crude oil supplies through the state of Hormuz.

The month's inflows are already on track for their strongest showing since March last year, according to that report. Interestingly, foreign investors have also returned to Chinese sovereign bonds. In May, for the first time in over a year, drawn by the market's resilience after a brutal sell-off hit global debt, according to Bloomberg, global holdings of Chinese interbank bonds rose by about $13.3 billion in May, marking the first increase since April 25, according to data from the People's Bank of China.

Separate data from the China Central Depository and Carrying Company showed that foreign positions in Chinese government bonds also rose sharply in May the most since December 2023. On Tuesday, the markets continued with renewed energy, quite literally, though it's interesting that the world's, including astute Indian investor attention, is on the SpaceX stock trading on Wall Street. If you really want to know what frenzy looks like, this is it.

SpaceX shares were up 10% on Tuesday, as Elon Musk's rocket builder continued its meteoric rise following a record-breaking IPO on Friday. Stocks popped in pre-market trading following a 20% jump in its first full day of after a blockbuster debut, according to CNBC. Musk, who is also CEO of SpaceX, said on Sunday that the company might be able to touch a trillion dollars of revenue in 2030.

You might ask what is that or how does it contrast to where things are today? Well, current revenue for SpaceX is just $18.7 billion, that's $18.7 billion for 2025, for which it had a net loss of about $5 billion and it's already lost about $4.28 billion in the first quarter of this year. So where could the revenue numbers go? Well, we don't know, but where could the stock go clearly upwards. And the markets continued their winning session for the third consecutive day and the Sensex rose 544 points to close at 76,808.

The Nifty 50 was up 135 points to 23,995. The Nifty mid-cap and small-cap were also up 0.41 and 0.42% each. And the rupee also extended gains for the third consecutive day, closing at Rs 94.56 against the dollar, even as traders looked at how the Iran-U.S. peace deal would evolve.

So oil prices are falling and continue to. They fell to a fresh three-month low on Tuesday as markets explored and weighed the prospect of supplies resuming through the state of And also another factor to consider is weaker physical demand. And then there are not too many details on the preliminary deal to end the war, according to Reuters.

Brent crude futures were down For the First time since March crude oil was below $80 per barrel. We have reported in recent weeks that the foreign portfolio sell-off that India has been seeing in the last two years has also been experienced by other countries like Indonesia, Philippines, and South Korea, though the intensity has differed. But on the other hand, a record depreciation of the rupee which has been caused by these outflows has helped push up both goods and services exports.

A note from Elara Securities has said, though acknowledging that the forex weakness coupled with elevated energy prices have put pressure on India's import bills. Interestingly, the report says that as per latest data, India now exports more to other countries than to the U.S. compared to the pre-tariff period, that's January 2025. On the oil imports side, geographical diversification was visible as Russia and Oman increased their presence in India's import basket, while Saudi Arabia and the United Arab Emirates saw their share go down.

Overall exports from India rose 16% year-on-year to about $82 billion, with goods exports rising 18% year-on-year to about $5.2 billion, which is the highest. India's overall exports rose by 16% annually to about $82 billion, with goods exports rising 18% annually to $45.2 billion, which is the highest on record. Imports have also been rising about 20% year-on-year to $73.4 billion.

All of this has led to the goods trade deficit widening from $22 billion to about $28 billion. Interestingly, in May, India's goods exports to other countries excluding the United States were up 37% compared to the pre-tariff period versus a 4% growth in exports to the U.S. So you can see the diversification that's now happening and accelerating. Note that India's exports to the U.S. are down 13% in May 26 from March 25, which was a level of $10.1 billion when U.S. importers were advancing purchases before the Liberation Day tariffs hit.

Meanwhile, India's silver imports have fallen 87% in May from a year earlier to their lowest level in more than three years, according to government data on Monday after the government tightened curbs on imports of nearly all forms of silver as well. India meets more than 80% of its silver demand through overseas purchases. Speaking of gold and silver, gold and silver investors may need to brace for short-term volatility, but the long-term case for owning those precious metals remains intact, according to a Tata Mutual Fund June 26 outlook reported by Business Standard.

They expect gold prices to consolidate in the near term amidst mixed macroeconomic signals, including expectations of higher interest rates, a stronger U.S. dollar, and elevated bond yields. However, it remains bullish on gold over the medium to long term and advises investors to adopt a staggered approach to investing rather than making lump-sum allocations.

Will Big Steel Companies Invest more In India over China?

Metals and mining giants BHP Group and Rio Tinto PLC are looking increasingly to India as the next big growth engine for global steelmaking, underscoring how the world's biggest iron ore suppliers are preparing for a life and future beyond China, according to a Bloomberg report.

It quoted senior commercial executives from both mining companies, saying that rising demand and addition of new capacity in India could help offset slowing growth in China, which has dominated global steel markets for more than two decades. BHP's Group sales and marketing officer speaking at a conference in Singapore said that he was in India recently and all their customers are doubling capacity. He said it's happening and it's real, according to the Bloomberg report.

India is emerging as the steel industry's most important growth market as China's property-led expansion slows down. India's production target is 500 million tonnes by 2047, that's more than three times the current output of 165 million tonnes of raw steel made last year. In contrast, China produces 961 million tonnes.

India's per capita steel consumption is of course lower than China, but then rapid urbanisation and very high infrastructure spend by the government are expected to drive a long-term demand growth trajectory, creating opportunities, of course, for the global mining giants that we just spoke of.

What are some Recent Views on the new FCNR Scheme?

There's been a lot of discussion on the new FCNR scheme to attract NRI dollars, so let's look at a few views that have emerged. A note from Axis Bank says total inflows from the FCNR segment could be between $50 billion and $190 billion, depending on one, the base pool, that's five to ten billion dollars, and two, the leverage used, that's 9x to 19x, because people can leverage, they can only put down a little amount of money and deposit a much higher amount via their banks internationally.

The note, which essentially argues in favour of the move to European NRI dollars, also says that India could well face a problem of plenty, given how oil prices are easing off, and thus also the rupee, which is now stronger. Before I dwell further on the Axis Bank report, economist Ajit Ranade in a column in Mint has pointed out that the entire move by the Reserve Bank is not a panic button, but it's calibrated and not chaotic, but it is still a playbook for the next few months and not an external sector strategy, he writes. As a backdrop, the Reserve Bank's package unveiled in recent weeks includes banks being encouraged to mobilise three to five-year foreign currency non-resident deposits, with the Reserve Bank absorbing the hedging cost.

Public sector firms have been nudged to raise foreign loans with concessional swap support, and foreign investors in government securities have been offered a wider route and lighter taxes, which goes back to the point that we started with, and export proceeds must be brought home faster. But according to Ranade, the Reserve Bank of India measures also carry a fiscal hazard. When the central bank bears hedging costs, it affects the Reserve Bank's balance sheet and thus the public exchequer.

In effect, the taxpayer provides rupee depreciation insurance to a small set of forex depositors, banks, or public sector borrowers. That, he says, may be defensible in a genuine emergency, but it cannot be routine, else we revert to an old habit of subsidising foreign borrowing, except with more sophisticated plumbing. He also points out that the protection against rupee depreciation leads to moral hazard as it incentivises staying unhedged.

Not to forget, he says, the possibility of round-tripping domestic money coming back as dollar deposits. Now back to the Axis report, it says that the Reserve Bank of India offered to bear the full hedging cost on eligible FCNRB deposits, effectively a subsidy of 3% per annum, in their view can drive inflows of about $100 billion. It also references the similar 2013 effort to draw in NRI funds, to say most of this would reverse three to five years later, but this is a feature, not a bug, with low external debt liabilities.

Anxiety in the forex markets was due to dollar liquidity, not solvency. Though, on the other hand, with oil prices falling, the Reserve Bank could face a problem of plenty. So, Axis Bank says that they expect it to cut its forward short book and handle the liquidity challenges of the rest via CRR hikes and open market operation sales.

It also argues that inflows in such a scheme aren't organic, that NRIs don't reallocate more savings to this scheme. Instead, the surge is driven by the subsidy making it attractive to use leverage. So, it does reiterate that while total flows could range between $50 and $190 billion, what they expect is about $100 billion.

It also adds that India's external debt liabilities are currently low, and that allows raising debt to quench anxiety in the forex markets using solvency to address a liquidity issue.

What is India’s Under-recovery bill for Petrol, Diesel and LNG for March to May?

Brent crude oil prices have already dropped by about 20% from recent highs, while LNG benchmarks, that's liquefied natural gas, have also softened. This, along with the recent hike in retail fuel prices and the cut in excise duty, has largely neutralised underrecoveries on automobile fuels, easing pressure on petrol and diesel marketing margins, according to a note from Crisil Ratings.

The cumulative underrecovery on petrol, diesel, and liquefied petroleum gas during March to May 2026, if this is the bill that you are looking to understand, is estimated, according to them, that's Crisil, at about 1 lakh crore rupees or 100,000 crore rupees. If the Indian crude basket remains below $90 per barrel, underrecoveries are unlikely to increase materially from current levels, it says. Lower crude prices will reduce both fuel-driven inflationary pressures and India's energy import bill.

But of course, while the risk of prolonged supply disruption has eased, it may take several months for crude oil and LNG markets to fully normalise.

What are the Findings of the recent EY report on Banking Customer Service?

A new report from Ernst & Young, or EY, says only one in four banking customers on average rate their overall experience as excellent across channels, while 89% expect seamless unified service and faster dispute resolution. The report, titled Customer Experience Reimagined for Indian Banking in 2026, is based on a survey of over 2,000 banking customers across segments conducted by EY.

Now, the findings are illustrative not just for bankings, but I would think a lot of consumer-facing businesses, because it does point out how, while banks have improved access and onboarding significantly, consistency in service delivery, dispute resolution, and customer confidence have lagged. So what do these findings signal in terms of how banks are operating and where friction is building in the system amidst all the AI-led operating models, chatbots, trust, and service design? I spoke with Pratik Shah, National Financial Services Leader of EY India, who worked on this report, and I began by asking him why service levels, or why almost 75% of customers, were relatively disappointed.

INTERVIEW TRANSCRIPT

Govindraj Ethiraj: Why do you say that it's changed in the last two, three years and not before that?

Pratik Shah: As India, we were very used to standing in queues everywhere. Swiggy, Zomato and everything else changed our expectations, you know, in terms of swiping. So right from finding a partner on a dating app to a passport, everything has moved significantly in terms of experience and the friction has sort of gone away.

No difference in terms of banking and that's how the new generation consumes services and financial services. So I think that's been the big trigger with Instagram and everything coming in, that banking has to be as easy as using any other application.

Govindraj Ethiraj: And conversely, you're saying that new products or product differentiation itself is no longer the key attraction. So why is that? And why is anyone or no one able to hold on to a new product or for too long, perhaps?

Pratik Shah: Yeah, I think that is something that can be replicated very easily. So if I have to give loyalty points or have to come up with a credit card or a saving account, a lot of that can be replicated. What cannot be replicated is as an overall experience, how do I feel when I call your call centre or I walk into the branch or when I use your mobile app or when I have a complaint?

And that's where the customer experience comes in, whether am I wanted as a customer and am I getting the service at the speed that I'm expected to? And every persona is very different. So as a bank, am I geared up for that?

That's really the key difference that helps in not only attracting, but more importantly, retaining the customer through their lifecycle.

Govindraj Ethiraj: Right. So I'm going to come to the data findings of your survey. But how do you define customer experience today?

And how does that also change depending on demographics?

Pratik Shah: So customer experience is how a customer really feels through several and all their interactions within the bank across all channels. So this could be web, mobile, call centre, chat bot, all of that. And that really defines customer experience.

The framework that we've built is really around what we call as an Excel framework. It is the level of empathy, the kind of execution, the quality of convenience that the customer is feeling, the quality of empowerment that the customer is given, and how much are you listening to the customer. So I think if you take those five blocks, that's really a sum and substance of how a customer experience sort of pans out.

Govindraj Ethiraj: And what in your sense, I mean, I know there's a survey as well, but what is your understanding of where banks typically rank on this scale today?

Pratik Shah: So obviously, it is varied across a whole bunch of organisations. There are private sector banks, there are public sector banks, there are certain banks, where customer obsession is part of their DNA and stated objective, strategic objective top down. And in some places, it is not as pronounced as we would like it to be.

But you know, in a market where every bank is worried about CASA and the deposit balances, I'm seeing at least across the industry growing realisation that a total relationship value of a customer, NPS or the customer experience becomes a big factor for the customer to sort of stay alongside you. So I think the industry is nuanced, but there is an awareness that is kicking in in terms of how do you sort of treat your customer.

Govindraj Ethiraj: Right. But in a digital world, or increasingly digital world, though, there's an analogue part and we'll come to that too. Why is it that or how is it that all digital experiences are not the same?

Or at least I would assume that they become very similar very soon. Exactly how you talked about product matching.

Pratik Shah: So I think again, I've seen different organisations look at digital experiences very, very differently. There are some organisations who I've seen, they try to digitise what they were doing. And there are some organisation who think completely very different in terms of a customer experience.

So for example, if I take a retail example, you know, if you were to go to a shop and buy a shirt, you know, a flip card would tell you, you know, here are and let's say you want a white shirt, you would go there are a bunch of menu options, you will seek you will select you will sort, you will find a white shirt. And there could be an app that where you could just go and have a conversation, I want a white shirt. And the conversation would tell you as if you are buying in a store.

So similarly, I think a lot of organisations have made customer onboarding customer servicing so seamless, that you know, there is a target that can I do this in three clicks, four clicks, rather than endless number of clicks. And I think that makes a big difference in between, you know, where I get tired and leave the journey and say this doesn't make sense. And where I feel Oh, this is fun.

Maybe this is easy for me to do it rather than wasting a day and going to the branch. Nobody has time today to save a day from an office and go to a branch just to fill some form. So I think that's where again, there is a lot of dichotomy in the industry, where the winners and losers are the quality of digital journeys, or the way you know, the experience sort of for the customer sort of pans out.

Govindraj Ethiraj: Right. But also, once you open a bank account, do you leave that bank or you close a bank account, which is not an easy thing in this country, because you've had a bad customer journey or customer experience.

Pratik Shah: So true. And again, like, today, if I ask our kids, you know, they'll date one, and then they might date somebody else and so on. Because, you know, this generation is very different.

Same thing applies for, you know, we used to all have Facebook, and I think a lot of us are away from Facebook using Instagram and might after a few years, we might use something else. So our loyalty and the different generations, their loyalty towards banking relationships have changed significantly, provided we are relevant, empathetic and doing something that makes a lot of sense for them. So the great journey is not just around onboarding.

Great experience is beyond onboarding. How are you sort of looking at the customer? Are you very personalised to the customer for their banking needs?

Or rather, you know, like, let's say, for example, I have got 10 lakhs in my account, and then I get a call or a message saying, Sir, do you want a 2 lakh rupee personal loan? Doesn't make sense. The ideal communication should have been, Sir, you've been accumulating a lot of money into your account.

Are you looking to buy some asset? Let's say a car, let's say a house. And can we help you with that?

That's where personalisation comes in. Let's say my card is lost and I call, do I get the right empathy rather than saying I made you wait in a queue for because that's the most urgent thing. So it should be prioritised.

So I think a lot of that experience makes the customer stay with you through the entire banking journey.

Govindraj Ethiraj: So now your survey says that only one in four customers on an average rate, their overall experience is excellent, which means that actually three in four are facing poor service or insufficient service. So why are banks failing there?

Pratik Shah: So I think the positive side is there is a good headroom from an improvement standpoint. I think the struggle is the moment this becomes a front and centre of a business growth exercise rather than compliance exercise, this will change the game dramatically. And every time you sort of customer sort of looks at it, they look at it only from their perspective in terms of saying, am I getting value from the banking relationship?

I think the reason a lot of banks struggle is this does not get as much importance as a product sale gets. Whereas in our view, a customer experience and a product sale and the ongoing service go hand in hand. So say, for example, I have a fantastic experience at getting a home loan, but I'm struggling to get my documents back after the closure or I'm going to put through several calls and people to say, oh, you can't foreclose a home loan.

There are X number of charges that were not communicated to you much earlier. I think that's where the experience starts getting sour. So how do you look at the end to end life cycle?

How do you look at all the pain points, not just when somebody is walking into the house, but also when somebody is in the house or while exiting the house, makes it very wholesome. And trust me, there are fewer organisations that are now focussing on the end to end story rather than just saying, OK, let's make the house look all great when the customer is walking in, but then let's not worry about once the customer is in.

Govindraj Ethiraj: The example of a home loan and the closure of it and the retrieval of documents, which is a nightmare for most people. So which also links to the point you made earlier about empathy. And this is the first time I'm hearing this term in this context.

So how did you pick that term and what is it that you found that made you say that? And the second part of the question really is that what can we expect banks or banking, the banking system to realistically do something in order to address the empathetic gap?

Pratik Shah: I think we interviewed about 2000 odd folks across urban, semi-urban, rural, and empathy was something that came right across all the odd conversations that we had. And the empathy is table stakes for any customer that is walking in, because, you know, this is anything that involves financial transaction, but a relationship with the bank, you know, and we say this is a bank I've been associated for many years. Ultimately, it cannot boil down to few transactions or few dollars in the account or outside the account.

It boils down to the relationship. Now, in a digital world where earlier I didn't have an issue in terms of going and spending half a day at a bank branch and knowing the branch manager and spending all the time, empathy was inbuilt at that point in time. Today, the world has changed.

Branch managers and the relationship manager are tried faster than anything else. You know, there is enough attrition in the industry. So now where does the collective brain of that customer reside?

The collective brain of knowledge of that customer relies in banks' information system. You know, the banks use this world called customer 360, where they know about me, my wife, my family, you know, everything around me resides in that customer 360. So when a relationship manager or any branch manager talks to me, do they know me enough?

Have they gone into their database and understood what does Pratik Shah and his entire relationship mean and therefore had that empathetic and contextual conversation? And I think that's where, you know, the difference is in terms of how you are treated.

Govindraj Ethiraj: But you're saying this is where people should go. The banking system should go.

Pratik Shah: That's right. I think there are organisations that are making steps in that direction.

Govindraj Ethiraj: So they recognise this as a gap.

Pratik Shah: They recognise this as a gap. It involves a lot of focus in terms of building the right kind of data around the customer, building the right kind of platforms where you can actually assimilate a lot of that information. And banks are going in that direction where they are saying every interaction that I've had on a chatbot or a WhatsApp or a mobile or even a customer complaint.

How can all that structured and unstructured data be assimilated together and pieced in? And now with account aggregator, you actually have my bank statements. So, you know, through consent, if I'm spending money on GMAT, that means, you know, my son is probably preparing for MBA exams or if I'm spending money on a vacation, you have that information.

How do you use it to have a very personalised communication with me? I think that's where a lot of investments currently is being made. But there is a significant room out there.

And if you are an Ironman fan, you know, the world is not far where each one of us will have a financial Jarvis, a Jarvis who will know a lot more about us, our financial health. And banks have a big role to play over there, quite honestly.

How is Foxcorp expanding its Streaming Presence?

Foxcorp, the media giant, on buying streaming and smart TV company Roku for $22 billion in a cash-in-stock transaction.

Fox already has Fox Nation, a Fox News offshoot streaming service, which it launched about 8 years ago and also launched a fuller company-wide streaming offering called Fox One last year. The deal with Roku, which has a 28% market share according to one estimate from Parks Associates, quoted by the Washington Post, which is the largest of any company, will let Fox compete head-on with the big names in streaming and Hollywood. The stock price of Fox fell 15% on Monday following the deal's announcement.

But of course, the deal will plunge, as the Washington Post says, deeper into the streaming wars as a major player in free ad supported streaming at a time when large streamers like Netflix, Disney Plus, and Hulu have pivoted away from offering only subscription plans and have begun providing ad-supported subscription options. In a statement on Monday, Fox Executive Chair and CEO Lachlan Murdoch called the deal a defining moment for the company and a logical move after a decade of focussing on streaming. Roku's Chairman and CEO Anthony Wood said Roku reaches 100 million households around the world and the sale to Fox would help them accelerate their vision, scale faster, and innovate more aggressively.

Fox Corp houses the Fox Broadcast Network, cable news, and conservative opinion television station Fox News, and companion cable channel Fox Business. It's also a major rights holder for sports, including NFL, MLB, and Big Ten college sports, according to the Washington Post.

Why has the UK banned Social media for Teens Under 16?

A social media ban for under-16s has been announced by the British government and will be introduced early next year.

The government is also considering an overnight curfew and measures to stop infinite scrolling for under-18s, according to a report in the BBC which quoted British Prime Minister Keir Starmer saying that keeping children off social media is the best way to keep them safe online. The ban will cover platforms like Snapchat, TikTok, YouTube, Instagram, Facebook, and X, the government said. Features including live streaming and strangers being able to contact children will also be restricted.

The government did say it does not intend to include messaging services like WhatsApp and Signal in this ban.