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8/9/2019 Banking Summary Presentation
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Banking
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Important banking terminologies? CRR, Bank Rate, Repo,
Reverse Repo, BPLR, SLR,Capital Adequacy Ratio, ield,
Spread, !PAs "#o$ it is calculated%, !et Pro&t 'argins
"(o$ it is calculated%
(o$ did India manage t#e global &nancial do$nturn o)
*++-+.?
/rends in Advances, 0eposits, Investments, !PAs and
C0Rs, 1perational 23penditure and !et Pro&tability
'argin
Basel 4 !orms 5 Background and Impact
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6lobal 7inancial 'elt-do$n "*++-+.%and India
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Infation increased rom 7.7% in march 2008 to 12.8% in August 2008, highest in the preious !"# $ears. rude oi& increased c&ose to '1#0 per (arre&.
)irst&$, India *as not great&$ a+ected (ecause our )ore
eposure *ere &o*.-et parties did not a&&o* nancia& sector reorms in the
ear&ier /A goernment.
e did not a&& into su("prime crisis
But sti&& *e *ere a+ected to some etent due to increase in
crude oi& prices *hich increased the infation.
In summary, $#en t#e &nancial do$n #it, &rstpriority $as to contain in8ation9
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o reduce the infationar$ pressures, the 33 *as increased to4% during the same time a&most 8 to 10 times in 5ust !"#
months.
3epo rate *as a&so increased ($ 7# (ps to 8.# percent.
Impact o) t#ese measures
hese measures reduced the infation *hich (egan to drop rom6eptem(er 2008.
But this a&so sucked out the &iuidit$ and the credit aai&a(i&it$,inestments and gro*th *ere seere&$ a+ected
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7ISCAL S/I':L:S
3BI (egan to reduce (oth 33 and 3epo (eginning romcto(er 2008.
9I a&so announced sca& stimu&us in :ecem(er ;,2008 *hich inc&udeade home &oans (e&o* 3s. 2 mn as priorit$
sector.
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1vervie$ o) t#e Banking Sector
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(o$ t#e players are classi&ed in t#e banking industry?
)or a&& ana&$sis, (anking p&a$ers are c&assied into ? categ
u(&ic sector (anks
riate sector (anks
)oreign (anks
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1;2RALL 6R1
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'AR=2/ S(AR2S
'arket s#are o) PSBs #as increased )rom >4 in *++>-+to >> in *+@*-@4, $#iles t#e s#ares o) private and )oreignbanks #ave reduced9
*++>-+ *+@*-@4
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Analysis o) Advances
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CDE IFD36 )3 AFA-E6IF9 A:GAFD6
riorit$ sector &ending norms
-ong"term and short"term trends in adances
apita& ependiture o pro5ects assisted ($ nancia& institutions
3eason or the trends in adances
6hare o &ong"term and *orking capita& &oans
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PRI1RI/ S2C/1R L2!0I!6 !1R'She priorit$ sectors comprises o agricu&ture, sma&&"sca&e
industries @66I, education and housing.PSBs, private sector banks, )oreign banks$it# more t#an *+ branc#es 5
)or this group, !0% o the adances shou&d (eor priorit$ sector &ending.
his categor$ o (anks shou&d a&so adhere tosectora& targets *ithin the oera&& priorit$sector &ending. @&ike certain % or agricu&ture,certain % or sma&& sca&e industries etc
7oreign banks $it# less t#an *+ branc#es 5)or this group, ?2% o the adances shou&d (eor priorit$ sector.his categor$ o (anks are not su(5ected toan$ sectora& targets *ithin the oera&& priorit$
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L1!6-/2R' A!0 S(1R/-/2R'
/R2!0 I! A0;A!C2S
Advances gro$t# #as slo$ed do$n signi&cantly )rom*++-+> )or bot# public and private sector banks
IIP
!e$ loan sanctions #ave also decreased signi&cantly over
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Capital e3penditure o) proects assisted by &nancial institut
!e$ loan sanctions #ave also decreased signi&cantly overt#e past * years $it# companies postponing capitale3pansion plans
(i # i l i # # i
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R2AS1!S 71R SL1he adances gre* ($ more than ?1% in 200;"07he gro*th s&o*ed in the &ast e* $ears and especia&&$ in the
&ast 1"2 $ears, the gro*th"rate o adances has s&o*ed do*n to
1; to 18%.
redit gro*th has strong &inkages *ith the oera&& econom$
he s&o*"do*n is due to the monetar$ tightening ($ 3BI and
s&o*"do*n in the credit o+"take across man$ sectors &ike
Agricu&ture and a&&ied industries, inrastructure @ement, Iron and
6tee&, e&ecom, eti&es, =ousing, Automo(i&es and ommercia&
Gehic&es.
(ig# interest rates, sluggis# economy $ere t#e main)actors )or slo$-do$n in advances9
S#are o) long-term loans #as come do$n )rom o) t#e
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1;2RALL BR2A=-:P 17 A0;A!C2S
S#are o) long-term loans #as come do$n )rom o) t#etotal advances in *++>-+ to D n *+@*-@49
6hare o &ong"term
&oan has reduced due
to s&o*"do*n in the
econom$.
6hare o short"term
&oans is increasing due
to increase de(tor
da$s &eading to &ong
*orking capita& c$c&e.
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/2R' L1A!S A!0 S(1R/-/2R' L1A!S
)ie $ears (ack, the share o term &oans *as around #8%
and the remaining !2% *as *orking capita&.
But current&$ it is #!% and !;% respectie&$ @#?% or
term &oans, !7% or *orking capita&his is another indicator or the s&o*"do*n as the
corporates are cur(ing their inestments.
A&so corporates are &ooking at other aenues or
inestments rather than &ong"term &oans
S#are o) long-term loans )or private sector banks is D
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BR2A=-:P 17 A0;A!C2S5 P:BLIC ;S PRI;A/2 BA!=S
S#are o) long term loans )or private sector banks is D$#ile t#at o) private sector banks is *9
P:BLIC S2C/1R BA!=S PRI;A/2 S2C/1R BA!=S
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Analysis o) 0eposits
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CDE IFD36 )3 AFA-E6IF9 :D6I6
-ong"term and short"term gro*th in deposits
era&& 6hare o di+erent t$pe o deposits
Bank group *ise share o deposits
osts o deposits
0eposit gro$t# #as slo$ed do$n )rom t#e #ig# o) * in
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/R2!0S I! 02P1SI/ 6R1 to about @ in t#e last )e$ years9
02P1SI/S /R2!0S
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02P1SI/S /R2!0S
:uring the # $ear gro*th @200;"07 to 2010"11, adances
gre* at a hea&th$ rate o a(out 20%.
But it has dropped considera(&$ @to a(out 1#% (et*een
2011"12 and 201?"1!.
he main reason is due to &o* rea& interest rates and high
infation, the customers are &ooking or other inestments
@9o&d, 3ea&"estate, stock"markets, mutua& unds
S#are o) current deposits #ave come do$n
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1;2RALL S(AR2 17 0I772R2!/ /P2S 17 02P1SI/S
ear
/erm-0eposi
ts Savings 0eposits
Current0eposit
s/ota
l
200;"
07 ;!% 2?% 1?%
100
%
2012"1? ;7% 2?% 10%
100%
S#are o) current deposits #ave come do$n
S#are o) current deposits declined as corporates are
increasingly pre)erring to invest in money market instruments
suc# as liquid mutual )unds t#at oEer attractive returns over
s#ort maturities, instead o) parking money in current accounts
o) banks $#ic# earn no interest9
Cost o) deposits #ave increased )or t#e banks due to
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C1S/ 17 02P1SI/S
Cost o) deposits #ave increased )or t#e banks due toreduction in CASA and deregulation o) interest )orSavings deposits
Private and 7oreign banks #ave #ig#er CASA
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PLA2R
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PLA2R arketing e+orts o priate (anks
some priate (anks reised their saings (ank deposit
rates up*ard ater the deregu&ation o saings (ank
interest rates ($ 3BI in cto(er 2011.
)oreign (anks genera&&$ preer to cater to corporate
c&ients *ith sound cash management, *ho maintain
current deposits.
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Analysis o) Investments
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Investments
Inestments ($ (anks a&& into t*o (road categories 1.#2 1.88 1.#1 2.7? ?.42
!P' is #ig#est )or private and )oreign banks primarilybecause o) core )ee-based income
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(o$ diEerent banks )are on !P'?riate sector and )oreign (anks hae much higher core ee"(asedincome *hich enhances their prota(i&it$.
7oreign banks also #ave very #ig# spreads9 /#is is becauset#ey #ave #ig# s#are o) lo$ cost deposits "CASA%9 /#eygenerally cater to corporates $#o keep #ig#er current deposits9/#eir cost o) deposits $as about *++ bps lo$er t#an t#at o)nationaliGed banks9
Core 7ee based income include5 7ees "Commissions or
brokerage income% )or letter o) credit, providing guaranteesetc, 7ees )rom credit cards, 7ees )rom )ore3 transactionsand Pro&t on sale o) investments
In continuation o past trends, oreign (anks had the highestproportion o other income in tota& income.A g&o(a& presence has ena(&ed oreign (anks to dominate themarket or ore and trade nance transactions. 6$ndicationprocessing ees earned on oreign currenc$ &oans a&so he&psoreign (anks (oost their core ee income.n the other hand, or nationa&ised (anks, the share o other
R1A #as been reducing )or Public Sector Banks primarilydue to rising !PAs and restructured assets9
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R2/:R! 1! ASS2/S
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Basel 4 !orms
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BAC=6R1:!0Base& ? norms has (een dee&oped to aoid 2008 &ike nancia&
(reakdo*n in the uture. It is a saeguards (ackup p&an or the
(anking sector.It proides internationa&&$ accepted detai&ed guide&ines a(out
ho* much mone$ shou&d a (ank keep aside, to dea& *ith
nancia& crisis.
he o(5ectie is een i there is &ot o deau&ters, Bank shou&d
hae mone$ to gie (ack to depositors.he ma5or pro(&ems that &ed to 2008 crisis *ere
=igh de(t
-o* ua&it$ o capita& (ase
InsuKcient &iuidit$
Base& III proposes man$ ne* capita&, &eerage, and &iuidit$
standards
Implementation o) Basel 4 norms $ill be )rom
*+@4 to *+@.9 "t#oug# in India, RBI #as given a
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A3 N @ier 1 capita& ier 2 capita&@3isk *eighted assets/ier @ capital "Core capital%5>ore &iuid @or eamp&e, paid up
capita&, ree reseres, statutor$ reseres, currenc$ notes, stocks
etco/ier * capital "subordinate capital%5&ess &iuid @(ui&ding or
&and o*ned ($ the (ank, FAs, -ong"term unsecured &oans etc
Risk $eig#ted assets 5
he$ are used to ca&cu&ate a (ankOs minimum capita&
reuirements.
)or (anks, risk"*eighted assets are assets *ith specia&
risks.
)or eamp&e, a &oan secured ($ a &etter o credit *ou&d (e
*eighted as riskier than a mortgage &oan that is secured
*ith co&&atera&
A goernment (onds *ith higher rating @oer AA" are
*eighted as Jero percent, *hereas corporate &oans *ith the
=ey Basel 4 norms are #ig#er capital, #ig#er /ier @ capital andadditional equity in t#e )orm CCB
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=2 BAS2L 4 !1R'S
ase norms $ pr mar y mpact s as t ey $ ave tobring in more capital and #ence t#eir R12 $ill come do$n byabout 4++ to D++ bps9
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I'PAC/ 17 BAS2L 4 !1R'S
Banks *i&& hae to raise signicant additiona& capita& @3s. 2.7 tn oier 1 capita& to meet the ne* norms.
6Bs *i&& hae to raise 40% o it as priate (anks are haing
comorta(&e &ee&s o tier"1 capita&.
he stipu&ated norms can (e met on&$ *ith the support o the
9oernment o India @9oI through capita& inusion.
Capital e3pansion to aEect Ro2 o) PSBs
As a ma5or portion o the additiona& ier"I capita& *i&& (e raised ($
pu(&ic sector (anks in the orm o euit$, their aerage return on
euit$ @3oD is epected to a&& ($ ?00"!00 (ps
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!e$ Banking Licenses
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BAC=6R1:!03BI announced that it *i&& issue ne* (anking &icenses and
inited app&ications.
era&& it receied 2; app&ications or ne* (anking &icense.
he ne* &icenses *i&& (e issued ater a (ig gap.
Fine &icences *ere issued in 144?"4!
In the ear&$ 2000s, 2 (anks *ere gien &icences @Cotak
>ahindra Bank and Ees Bank
he app&icants inc&ude Bir&a, 3e&iance, 6hriram, India ost
etc.
3BI has so ar gien &icences to 2 entities" I:) and Bandhan
)inancia& 6erices.
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ahindra Bank < perating independent&$
Ees Bank< perating independent&$
9&o(a& rust Bank< Acuired ($ rienta& Bank o ommerce
enturion Bank< Acuired ($ =:)
Bank o un5a( < Acuired ($ =:) imes Bank< Acuired ($ =:)
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=ey !orms )or ne$ banks
>inimum apita& < 3s. #00 crores
2#% (ranches in rura& areas and un"(anked centers
!0% adances to priorit$ sector
>aintain 336-3 norms rom da$ 1
6pecic corporate goernance norms
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=ey !orms )or ne$ bankshe a(oe norms are stringent especia&&$ 2#% (ranches inrura& areas and un(anked centers asan$ FB)s do not hae (ranches in rura& areas. he$serice them through agents or ustomer re&ationship
associates
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