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2. Highlights Total No. of Schedule Commercial Banks in India in 80 Deposits in Scheduled Commercial Banks - Rs 56,16, 432Crores ( 71 % of Indias GDP 2010-11) Credit Portfolio* of Financial Sector Entities - Rs 49 trillion(62 % of Indias GDP 2010-11) Credit Growth# 24% CAGR over Last 8 years SBI with Market Capitalization of $20 billion is ranked 49th inworld. # Source : RBI- Data as on 31 March 2011. * Source : ICRA Report Indian Banking Sector, June 20112/43 Performance of Banks in IndiaMarch 31, 2012 3. Objective : To understand the trends in Indian Banking. Methodology: Understanding the performance ofIndian banking by grouping Scheduled CommercialBanks . Scope : Cooperative banks, Developmental banks,Regional Rural Bank not included in the study. Limitation : Comparison is done only among the Banks operating in India and is based on the data up to 31 March 2011. Analysis of Investments by banks not included in study3/43 Performance of Banks in India March 31, 2012 4. Abbreviations SCBs- Schedule Commercial Banks PSBs - Public Sector Banks NBs- Nationalised Banks OPRBs - Old Private Banks NPRBs - New Private Banks FBs- Foreign Banks4/43 Performance of Banks in India March 31, 2012 5. CAMELS Framework Uniform financial institution rating system to evaluate and monitor the banks. Capital Adequacy Cushion for Operational & Abnormal Losses Asset Quality Concentration of Loans and related PartyExposure Management Operating cost per unit of money lent, Earning Return on Equity, Return on Asset, Interest Spread Liquidity Asset Liability Management Sensitivity to Market Risk Maturity of Debt InvestmentsSource D Subbarao (2010), Five Frontier Issues in Indian Banking5/43 Performance of Banks in India March 31, 2012 6. Objectives of SCBs in India Foster Financial Inclusion Contribute to GDP Growth Effectively Allocate Capital and Manage Stability Efficiently Manage Intermediation Cost Return Shareholder Value6/43 Performance of Banks in India March 31, 2012 7. Operational Statistics of SCBs In 2011 Old New Public ForeignPrivate PrivateSCB SectorBanksSectorSectorNo. of Banks 2614 73380 No. of Offices 64,4125011 6957 31676,696 No. of10,04,18 7,57,535 55,0751,63,60427,969Employee2 Business per Employee 1013.63 814.90 826.07 1559.74987.38 (in Rs Lakhs) Profit per Employee5.935.63 8.6327.59 7.00( in Rs Lakhs) Source: A Profile of Banks,2011- RBI7/43 Performance of Banks in IndiaMarch 31, 2012 8. Progress of Financial Inclusion No. Indicator 2009-10 2010-11 1 Credit-GDP53.4 54.6 2Credit-Deposit 73.6 76.5 3 Population per Bank Branch14,000 13,466 4 Population per ATM19,700 16,243 Percentage of Population 5 having deposit accounts 55.861.2 Percentage of Population 6having credit accounts9.39.9 Percentage of Population 7having debit cards 15.218.8 Percentage of Population 8having credit cards 1.531.49 Source: Operations and Performance of Commercial Banks 2010-11, RBI8/43 Performance of Banks in India March 31, 2012 9. Growth of SCBs Year 1969 1975 1980 1985 1990 1995 20002005 2011 No. of SCBs (Excluding73 74 7581 74 88 10188 80 RRBs)No. of Offices 8,262 18,575 32,412 52,638 60,515 63,817 67,339 54,063 76,993 Growth Rateof Offices( YoY 124.8274.49 62.40 14.965.46 5.52(19.72) 42.41 %) Source: RBI , publications -Statistical Tables Relating to Banks of India, 20119/43Performance of Banks in IndiaMarch 31, 2012 10. Growth of SCBs in last 5 Years All SCB Aggregates (in Rs. Crore)Item 2005-06 2006-072007-08 2008-09 2009-102010-11Capital andReserves & 1,83,181 2,19,179 3,15,488 3,67,947 4,30,161 5,09,813 SurplusGrowth Rate(19.65 43.94 16.63 16.91 18.52YoY %)Source: A Profile of Banks, RBI , 2011.10/43 Performance of Banks in India March 31, 2012 11. Growth of SCBs in last 5 Years All SCB Aggregates (in Rs. Crore) Items2005-062006-07 2007-08 2008-09 2009-102010-11 Deposits 21,64,682 26,96,937 33,20,062 40,63,201 47,46,920 56,16,432 Growth Rate (YoY 24.59 23.10 22.38 16.83 18.32 %)Investments8,66,5089,50,982 11,77,330 14,49,551 17,29,006 19,16,053 Growth Rate (YoY9.75 23.80 23.12 19.28 10.82 %) Advances 15,16,811 19,81,236 24,76,936 29,99,924 34,96,720 42,98,704 Growth Rate (YoY 30.62 25.02 21.11 16.56 22.94 %) Source: A Profile of Banks, RBI , 2011.11/43Performance of Banks in IndiaMarch 31, 2012 12. Credit and Deposits of SCBsYear19691975 1980 198519901995 200020052010 Deposits8,51,59 (in Rs. 4,646 12,545 33,377 77,075 1,73,515 3,86,859318,35,003 47,52,456Crore)Growth Rate18.00 21.62 18.22 17.62 17.39 17.09 16.60 20.96(YoY %)Credits4,54,06 (in Rs. 3,599 8,955 22,068 50,921 1,05,450 2,11,560911,50,326 34,97,054Crore)Growth Rate16.41 19.77 18.20 15.67 14.94 16.50 20.43 24.90(YoY %) Year 20032004 2005 20062007 2008 2009 20102011 CDR 575870.9 75.1 71.874.673.8 73.776.5 IDR 41.3 4547.340 35.335.535.7 36.434.1 CDR Credit Deposit Ratio. IDR Investment Deposit Ratio Source: Banking Statistics 1972-95 (Summary Tables), RBI12/43 Performance of Banks in IndiaMarch 31, 2012 13. Deposit (in percent) (as ON 31 MARCH 2011) PSBOPRB NPRB FB SCB Demand 9.389.1718.2430.29 11.43Saving24.77 18.80 24.3016.47 24.07 Term 65.86 72.03 57.4653.2464.5 Total100.00 100.00100.00100.00 100.00 Deposits 100%Term 50%SavingDeman0%dPSBOPRBNPRBFB SCBSource : RBI - Data as on 31 March 2011.13/43Performance of Banks in IndiaMarch 31, 2012 14. Deposit (in percent)(as ON 31 MARCH 2011)NewOld PrivateSchedule Public Private ForeignSector Commercial Sector SectorBankBank BankBank Demand63.89 3.77 20.9811.36 100.00 Saving80.12 3.67 13.28 2.93 100.00 Term79.49 5.25 11.72 3.54 100.00 Total100% Deposits77.86 4.70 13.15 4.29 100.0080%60% FB 40%20% NPR 0% B DemandSaving TermSource : RBI - Data as on 31 March 2011.14/43 Performance of Banks in India March 31, 2012 15. Deposit (in Rs Crores) (as ON 31 MARCH 2011)New Old PrivateSchedulePublicPrivate Foreign Sector CommercialSectorSectorBank Bank BankBank Demand4,10,109 24,222 1,34,70772,900 6,41,939 Saving10,83,00149,667 1,79,46339,650 13,51,782 Term28,79,874 1,90,2684,24,4321,28,138 36,22,712 Total 43,72,985 2,64,1577,38,6022,40,689 56,16,432 Deposits100%Term 50%SavingDemand 0%PSB OPRBNPRB FBSCBSource: A Profile of Banks, RBI, 2011.15/43Performance of Banks in IndiaMarch 31, 2012 16. Deposit & Credit by Geography (as ON 31 MARCH 2011)Per Capita Per Capita CreditDeposit ( inCredit ( in Rs) Deposit Rs)Ratio ( in %)Northern Region83,485 69,03982.7 North Eastern21,597 7,08632.8RegionEastern Region23,72712,13951.2Central Region20,174 9,55447.4Western Region1,01,94079,57278.1Southern Region 46,96344,16994.1Total ( All India) 46,321 34,80075.1 Source : RBI - Data as on 31 March 2011.16/43Performance of Banks in India March 31, 2012 17. Credit Distribution according toOccupation(as ON 31 MARCH 2011) No. of CreditAccounts as a Occupationas a percent of percent ofTotal credit Total Accounts Agriculture 11.6736.05Industry40.51 2.74Transport Operators2.56 0.81 Professional and other Services 9.133.81 Personal Loans16.7142.72 Trade9.13 5.74 Finance7.27 0.90 All Other3.02 7.24 Source: Operations and Performance of Commercial 100.00Total Bank Credit Banks 2010-11, RBI 100.0017/43 Performance of Banks in IndiaMarch 31, 2012 18. Domestic Credit Portfolio Composition of SCBs(as ON 31 MARCH 2011) Credit Portfolio As % of Total Credit Portfolio As % of TotalCredit Credit Agriculture and Allied 13 %Housing Loan 9% Activities Commercial Real3%Other Retail 7% Estate Loans Loan Loans to NBFC5%Vehicle Loan 2% Power Sector Loans 7% Other infrastructure 7% Loans Other Corporate47% Loans Source - ICRA Report Indian Banking Sector, June 201118/43 Performance of Banks in IndiaMarch 31, 2012 19. Credit Distribution over theyearsSource: Reserve Bank of India, 200919/43 Performance of Banks in India March 31, 2012 20. Composition of Earning ofSCBs(as ON 31 MARCH 2011) 2010 - 11InterestCommission, earned onExchangeInvestments and22%Brokerage8%Other non Interest income6% Interest/ Other Discount onInterest Advances/Bilincome ls 2%62% Source: A Profile of Banks,2011- RBIPerformance of Banks in20/43 India March 31, 2012 21. Composition of Expenses ofSCBs (as ON 31 MARCH 2011) Other2010-11Operating Expenses 12% Payment toandProvision for Employees17%Interest paidOther on Deposits Interest62%Expenses6% Interest paidonBorrowing3% Source: A Profile of Banks,2011- RBI21/43 Performance of Banks in India March 31, 2012 22. Cost of Fund and Return on Fund 2010-11(as ON 31 MARCH 2011) Foreign New Private Nationalise Old Private SBI GroupBank Sectord BankSectorCost of3.1 %4.3%4.8% 4.9%5.5% FundReturn on 8.1%8.4%8.2% 8.5% 9%FundSpread5% 4.2%3.4% 3.6%3.5%Source: Operations and Performance of Commercial Banks 2010-11, RBI22/43Performance of Banks in India March 31, 2012 23. Few Key Indices for SCBsAll SCB Aggregates (in %)Items 2005-062006-072007-082008-09 2009-102010-11 Cost of Funds (CoF) 4.394.82 5.80 5.96 5.094.73 Return on advancesadjusted to 3.804.12 4.12 4.53 4.194.45CoF Wages as % to total expenses20.1117.3214.0113.6014.8317.05Return on Assets 1.011.05 1.12 1.13 1.05 1.1CRAR*12.32 12.2813.0113.9814.5814.17* CRAR Capital Risk AdjustedRatioSource: A Profile of Banks, RBI Performance of Banks in23/43 India March 31, 2012 24. Financial Intermediation NIMNet InterestMargin Source: Operations and Performance of Commercial Banks 2010-11, RBI24/43 Performance of Banks in India March 31, 2012 25. Returns(as ON 31 MARCH 2011)NewOld PrivateScheduledPublicPrivate ForeignSector CommercialSectorSectorBankBank BankBankReturn0.961.12 1.51 1.741.1 on AssetReturn16.914.11 13.6210.2814.96 on EquitySource: Operations and Performance of Commercial Banks 2010-11, RBI25/43 Performance of Banks in India March 31, 2012 26. Trends in Net Profit of SCBs 4080 Growth in net Profits( %) Absolute Net Profit in Rs ,000 Return on Assets & 3060 Absolute Net2040 Profit Return on Asset 1020Growth in NetProfit Crore 0 0 Source: Trends and Progress in Indian Banking 2010-26/43 Performance of Banks in India 11, RBI March 31, 2012 27. Composition of Off-Balance SheetExposures of the Banking Sector 2010-11SBI Group Nationalise d Bank 6% Forward 86.8 %10%Exchange ContractNew SectorPrivate Bank 16 % 16Acceptan 12.5 % ceOld Sector ForeignBank Guarante 0.7 % PrivateBank67%es1%Source: Operations and Performance of Commercial Banks 2010-11, RBI March 31, 201227/43 Performance of Banks in India 28. Source: Operations and Performance of Commercial Banks 2010-11, RBI Performance of Banks in India March 31, 201228/43 29. Off Balance Sheet Exposure over the years Source: Operations and Performance of Commercial Banks 2010-29/43 Performance of Banks in India 11, RBI March 31, 2012 30. Basel Accords Basel ICredit Risk Basel IIMarket Risk, Credit Risk, Operational Risk First pillar Minimum Capital requirement Second pillar - Supervisory Review Process Third Pillar - Market Discipline Basel III Macro-prudential regulation for system wide risks30/43 Performance of Banks in India March 31, 2012 31. Core Capital Tier 1 Shareholder Equity Capital+ Disclosed Reserve Tier 2 Undisclosed Reserve Capital+ Revaluation Reserve+ General Provisions+ Hybrid Capital Instrument+ Subordinated term debt31/43 Performance of Banks in India March 31, 2012 32. Non Performing Asset - NPANet NPA = ( Gross NPA ) Balance in Interest Suspense account DICGC/ECGC claims received and heldpending adjustment Part payment received and kept in suspense account Total provisions held.32/43 Performance of Banks in India March 31, 2012 33. Capital Adequacy of SCBs(as ON 31 MARCH 2011) Basel I Basel IIBank group2010 2011 2010 2011 Public Sector12.1 11.8 13.3 13.1 Old privateSector13.8 13.3 14.9 14.6New privatesector17.3 15.5 18.0 16.9 Foreign banks18.1 17.7 17.3 17.0 ScheduleCommercial13.6 13.0 14.5 14.2BanksTier I Capital 9.49.2 10.1 10.0Tier II Capital4.13.84.44.1 Source: Operations and Performance of Commercial Banks 2010-11, RBI33/43 Performance of Banks in IndiaMarch 31, 2012 34. CRAR of Banks in DifferentCountriesSource: Financial Soundness Indicators (FSI), IMF34/43 Performance of Banks in India March 31, 2012 35. Gross NPA Ratios-Cross Country Source: World Development Indicators (WDI), World Bank35/43 Performance of Banks in India March 31, 2012 36. Gross NPAs of SCBs Source: Indian Banking 2020 , BCG36/43 Performance of Banks in IndiaMarch 31, 2012 37. Trends in the growth of Gross Advances and Gross NPAs of SCBsGrowth inGrossAdvancesGrowth inGross NPAs Source: Trends and Progress in Indian Banking 2009- 10, RBIPerformance of Banks in IndiaMarch 31, 201237/43 38. NPA Recovery 2010-11No. ofRecoverycasesAmount Amount RecoverychannelreferredinvolvedrecoveredPercenti) Lok Adalats 616,018 5,254151 2.87ii) DRTs12,87214,0923,930 27.89iii) SARFAESIAct 118,642 30,604 11,561 37.78DRTs- Debt Recovery Tribunals.SARFAESI Act - The Securitisation and Reconstructionof Financial Assets and Enforcement of Security InterestAct, 200238/43 Performance of Banks in India March 31, 2012 39. Performance Attributed to Implementation of SARFAESI Act 2002. Setting up of Credit Information Bureaus. Internal improvements such as upgrade of Technology Infrastructure. Tightening of the Appraisal and Monitoring Processes. Strengthened Prudential Norms.39/43 Performance of Banks in India March 31, 2012 40. Favorable Factors for the Banking Sector Enhanced the Payment System. Good Internal Capital Generation. Reasonably Active Capital Markets. Governmental Support Ensured Good Capitalisation for PSB. High Levels of Public Deposit. Good Economic Growth over the Last Decade.40/43 Performance of Banks in IndiaMarch 31, 2012 41. Challenges : Banking Industry Increase in Interest Rates and Deregulation of Interest Rates on Saving Deposits. Tighter monetary policy and Large government deficit. Increasing Infrastructure Loans and Increased stress in some sectors (such as, State utilities, airlines, and microfinance),. Restructured loan accounts, Unamortized pension/gratuity liabilities. Implementation of Basel III. State and Road Ahead. AnnualSource: Indian Banking System : The CurrentSurvey, 2010 FICCI41/43 Performance of Banks in IndiaMarch 31, 2012 42. Challenges ( cont.) Asset Liability Mismatch in Indian Banking Sector. Human Resource Management. Discontinuous growth. Competition from foreign banks. Demographic shifts resulting from changes in age profile and household income.42/43 Performance of Banks in IndiaMarch 31, 2012 43. References Publications from Reserve Bank of India, www.rbi.org.in ICRA Report Indian Banking Sector, June 2011 Speech D Subbarao (2010), Five Frontier Issues in IndianBanking, Speech delivered at BANCON2010, Mumbai, December. NCFM, Commercial Banking in India Module, June 2011 NCFM, Banking Sector Module, June 2011 Indian Banking 2020 , BCG43/43 Performance of Banks in IndiaMarch 31, 2012 44. Thank You
