Abstract
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, CARE Research feels that the excellent performance seen
in last five years ended FY08 will be difficult to repeat in coming years.
CARE Research expects 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
Executive Summary
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 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
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