Synopsis
Indian Banking sector is dominated by Public sector banks (PSBs) which accounted for 72.6% of total advances for all SCBs as on 31st March 2008. PSBs have rapidly expanded their foot prints after nationalisation of banks in India in 1969 and further in 1980. Although there is a restrictive entry/expansion for private and foreign banks in India, these banks have increased their presence and business over last 5 years.
Peculiar characteristic of Indian banks unlike their western counterparts such as high share of household savings in deposits (57.4% of total deposits), adequate capitalisation, stricter regulations and lower leverage makes them less prone to financial crisis, as was seen in the western world in mid FY09.
The Scheduled Commercial Banks (SCBs) in India have shown an impressive growth from FY04 to the mid of FY09. Total deposits, advances and net profit grew at CAGR of 19.6%, 27.4% and 20.2% respectively from FY03 to FY08. Banking sector recorded credit growth of 33.3% in FY05 which was highest in last 2 and half decades and credit growth in excess of 30% for three consecutive years from FY04 to FY07, which is best in the banking industry so far. Increase in economic activity and robust primary and secondary markets during this period have helped the banks to garner larger increase in their fee based incomes.
A significant improvement in recovering the NPAs, lowest ever increase in new NPAs combined with a sharp increase in gross advances for SCBs translated into the best asset quality ratio for banking sector in last two decades. Gross NPAs to gross advances ratio for SCBs decreased from the high of 14% in FY2000 to 2.3% in FY08.
With in the group of banks, foreign and private sector banks grew at higher rate than the industry from FY03 to FY08 primarily because of lower base effect and rapid expansion undertaken by these banks. In FY09, overall growth in credit and deposits was led by PSBs. However, growth of private and foreign banks was significantly lower in FY09 due to their high exposure to stressed sectors and problem at parent level for foreign banks.
Unsecured bank credit has risen over the years and stood at 23.3% of bank credit in FY08 as compared to just 10.9% in FY2000. Lending to sensitive sector has also grown at CAGR of 46.1% from FY05 to FY08. In the backdrop of the economic downturn, we feel that the excellent performance seen in last five years ended FY08 will be difficult to repeat in coming years.
We expect that with the downturn in the economy, credit and deposit growth will moderate in coming years. Credit growth will be led by spending on the infrastructure while retail
credit will show a moderate growth. Margin pressures due to lag effect of rate cuts between interest rate on deposits and advances, lower treasury gains and core fee income and increasing in provisions for NPAs is likely to put pressure in the bottom line of the banks.
Going forward, PSBs' which are close to the required lower level of government stake and have concentrated presence in particular region are likely to consider its merger with other PSB as an important option if they want to sustain the growth seen in past.
Table of Contents
1 History of Banking Sector in India
1.1 History of SBI and Associates
1.2 History of Other (Nationalised, Private and Foreign) Banks
1.2.1 Pre Independence (1840 to 1947)
1.2.2 Post Independence to Nationalisation (1947 to 1969)
1.2.3 Nationalisation to Liberalisation (1969 to 1991)
1.2.4 Liberalisation to current date (1991 to 2008)
1.3 Various Banking Groups
1.4 Regional Distribution of Branches
2 Role of Reserve Bank of India
2.1 RBI monetary and Credit Policy
2.2 Development in FY09 and role of RBI
2.3 Liquidity Adjustment Facility (LAF)
2.4 Cash Reserve Ratio (CRR)
3 Deposits
3.1 Sources of Funds for Banks
3.2 Distribution of Deposits of Banks
3.2.1 Distribution of Deposits by population
3.2.2 Distribution of Deposits by Ownership
3.3 Deposits mobilisation from household Sector
3.4 Type of Deposits
3.4.1 CASA Deposits
3.4.2 Term Deposits
3.5 Bank Group-wise Deposits Performance
3.5.1 SBI and Associates
3.5.2 Nationalised Banks
3.5.3 Private Sector Banks
3.5.4 Foreign Banks
4 Advances
4.1 Total Advances and growth for SCBs
4.2 Credit offtake in FY09
4.3 Sectoral Bank Credit
4.4 Retail loans
4.5 Lending to Sensitive Sector
4.6 Priority Sector lending
4.6.1 Priority Sector Lending for PSU and Private Banks
4.6.2 Priority Sector Lending for Foreign Banks
4.7 Bank Group-wise Performance
4.7.1 SBI and Associates
4.7.2 Nationalised Banks
4.7.3 Private Sector Banks
4.7.4 Foreign Banks
4.8 Bank group-wise deposit and advance maturity matching
5 Investments
5.1 SLR Investments
5.2 Non SLR Investments
5.3 Bank group-wise Credit and Investment to deposit ratios
6 Total Income
6.1 Interest on Advances and Investments
6.2 Other Income
6.2.1 Core Fee Income
6.2.2 Non-fee Income
7 Total Expenses
7.1 Operating Expenses
7.1.1 Staff Cost
7.1.2 Non-staff Cost
8 Spread and Net Interest Margin
8.1 Spread for SCBs
8.2 Bank Group-Wise Performance
9 Profitability
9.1 Profitability for SCBs
9.2 Bank Group-Wise Performance
9.2.1 SBI and Associates
9.2.2 Nationalised Banks
9.2.3 Private Sector Banks
9.2.4 Foreign Banks
10 Non-Performing Assets (NPAs)
10.1 Trend in NPAs for SCBs
10.2 NPAs, Provisions and write back for banking groups
10.3 Sector-wise NPA Break-up
10.4 Recovery of NPAs
10.5 Bank Group-wise Performance
10.5.1 PSU Banks
10.5.2 Old Private Sector Banks
10.5.3 New Private Sector Banks
10.5.4 Foreign Banks
11 Capital Adequacy Ratio (CAR)
12 Consolidation: Is it imminent for the Indian banking sector??
13 FY09 Result Analysis
14 Outlook on Indian Banking Industry
14.1 Advances
14.2 Deposits
14.3 Investments
14.4 Core Fee Income
14.5 Net Interest Margins (NIMs)
14.6 Non-Performing Assets (NPAs) and Provisioning
14.6.1 Restructuring of Assets
14.7 Profitability
15 Statistics on Banks from FY04 to FY08
15.1 No. of Branches of banks
15.2 Total Business for banks
15.3 Net Profit for the banks
15.4 Net interest Margins for the banks
15.5 Return on Asset for the banks
15.6 Return on Equity for the banks
15.7 CASA for the banks
15.8 Core spread for the banks
15.9 Capital Adequacy Ratio for the banks
15.10 Tier 1 Capital Adequacy Ratio for the banks
15.11 Ratio of Gross NPAs to Gross Advances for the banks
15.12 Ratio of Net NPAs to Net Advances for the banks
15.13 Ratio of Unsecured advances to total advances for the banks
15.14 3 Year (FY05 to FY08) CAGR in total advances
15.15 3 Year (FY05 to FY08) CAGR in total deposits
15.16 3 Year (FY05 to FY08) CAGR in Net profit
15.17 Business per Branch for the banks
15.18 Profit per Branch for the banks
15.19 Profit per employee for the banks
16 Players
16.1 Axis Bank
16.2 Bank of Baroda
16.3 Bank of india
16.4 Canara Bank
16.5 Central Bank of india
16.6 HDFC Bank
16.7 ICICI Bank
16.8 IDBI Bank
16.9 State bank of India
16.10 Syndicate Bank
16.11 Union Bank of India
