For updated information, please visit www.ibef.org March 2018
BANKING
Table of Content
Executive Summary……………….….…….3
Advantage India…………………..….……...4
Market Overview and Trends……….……..6
Porters Five Forces Analysis.….…..……..18
Strategies Adopted……………...…………20
Growth Drivers and Opportunities.............28
Key Industry Organizations....…………….37
Case Studies…….……….......……………32
Useful Information……….......…………….39
For updated information, please visit www.ibef.org Banking 3
EXECUTIVE SUMMARY
Value of public sector bank assets increased to US$ 1.52 trillion in FY17 from US$ 1.34 billion in FY16. Robust asset growth
Source: India Banking Association, Reserve Bank of India, Aranca Research
Total lending has increased at a CAGR of 12.38 per cent during FY07-17 and total deposits has increased at
a CAGR of 10.08 per cent, during FY07-17 and are further poised for growth, backed by demand for housing
and personal finance
Growing lending and
deposit
As of January 2018, total number of ATMs in India increased to 207,194 and is further expected to increase to
407,000 by 2021. Higher ATM penetration
As of June 2017, 56 regional rural banks are functioning in the country.
Under 2nd phase of FIP (2013-16), 452,151 villages, with population less than 2,000 people, were covered as
on June 30, 2016.
RBI has allowed, regional rural banks with net worth of at least US$ 15.28 million to launch internet banking
facilities.
As of February 2017, Airtel payments bank opens over 1 lac accounts in UP, of which 60 per cent have been
opened in rural areas.
Rising rural penetration
Notes: ATM - Automated Teller Machine, FIP – Financial Inclusion Plan, RBI – Reserve Bank of India
Banking
ADVANTAGE INDIA
For updated information, please visit www.ibef.org Banking 5
ADVANTAGE INDIA
Increase in working population &
growing disposable incomes will raise
demand for banking & related services
Housing & personal finance are
expected to remain key demand
drivers
Rural banking is expected to witness
growth in the future
Mobile, Internet banking & extension of
facilities at ATM stations to improve
operational efficiency
Vast un-banked population highlights
scope for innovation in delivery
Rising fee incomes improving the
revenue mix of banks
High net interest margins, along with
low NPA levels, ensure healthy
business fundamentals
Wide policy support in the form of
private sector participation & liquidity
infusion
Healthy regulatory oversight & credible
Monetary Policy by the Reserve Bank
of India (RBI) have lent strength &
stability to the country’s banking sector
ADVANTAGE
INDIA
Source: IBA report titled “Being five-star in productivity - Roadmap for excellence in Indian banking”; Aranca Research
Note: NPA – Non Performing Assets, FY171 - Till 29th December 2016
Banking
MARKET OVERVIEW
AND TRENDS
For updated information, please visit www.ibef.org Banking 7
EVOLUTION OF THE INDIAN BANKING SECTOR
Source: Indian Bank’s Association, Aranca Research, BMI
Note: RBI - Reserve Bank of India, FDI – Foreign Direct Investment, LIC – Life Insurance Corporation
Closed market
State-owned Imperial Bank of
India was the only bank existing
Imperial Bank expanded its
network to 480 branches
In order to increase penetration
in rural areas, Imperial Bank
was converted into State Bank
of India
In 2003, Kotak Mahindra Finance Ltd received a
banking license from RBI and became the first NBFC to
be converted into a bank.
In 2009, the government removed the Banking Cash
Transaction Tax which had been introduced in 2005.
RBI was established as the central bank of
country
Quasi central banking role of Imperial
Bank came to an end
Nationalisation of 14 large commercial banks in
1969 & 6 more banks in 1980
Entry of private players such as ICICI
intensifying the competition
Gradual technology upgradation in PSU banks
NABARD sanctioned US$ 2.84 billion loan
to National Water Development Agency for 50
irrigation projects in October 2016.
As per RBI, as of February 23, 2018, India
recorded foreign exchange reserves of
approximately US$ 420.591 billion.
1921 1935 1956-2000 1936-1955 2016
onwards
2000
onwards
For updated information, please visit www.ibef.org Banking 8
THE STRUCTURE OF INDIAN BANKING SECTOR
Reserve Bank of India
Cooperative credit institutions
Public sector banks (27)
Private sector banks (21)
Foreign banks (45)2
Regional Rural Banks (RRB)
(56)
State-level institutions
Other institutions
Urban cooperative banks
(1,589)1
Rural cooperative credit
institutions (93,550)
Source: Reserve Bank of India’s ‘Report on Trend and Progress of Banking in India’, Aranca Research
Note: Data on number of banks belongs to FY15 1 - Indicates data for FY14 2 - Indicates data for FY16
All-India financial institutions
Scheduled Commercial Banks
(SCBs)
Banks Financial Institutions
For updated information, please visit www.ibef.org Banking 9
INDIAN BANKING SECTOR HAS GROWN AT A
HEALTHY PACE…(1/2)
42
8
58
7
60
2 68
4
86
4
98
4
96
9
99
4
98
3
10
16
12
24
12
82
0
200
400
600
800
1000
1200
1400
FY
07
FY
08
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
FY
16
FY
17
FY
18*
Source: Reserve Bank of India (RBI), Aranca Research;
Note: CAGR - Compounded Annual Growth Rate, * - FY18 data upto September 2017, ^ - according to Mr Amitabh Kant, CEO of NITI Aayog
Credit off-take has been surging ahead over the past decade, aided
by strong economic growth, rising disposable incomes, increasing
consumerism & easier access to credit
As of Q3 FY18, total credit extended surged to US$ 1,282.3 billion.
Credit to non-food industries increased by 9.53 per cent reaching
US$ 1,120.42 billion in January 2018 from US$ 1,022.98 billion
during the previous financial year.
Demand has grown for both corporate & retail loans; particularly the
services, real estate, consumer durables & agriculture allied sectors
have led the growth in credit.
The digital payments revolution will trigger massive changes in the
way credit is disbursed in India.^
Visakhapatnam port traffic (million tonnes) Growth in credit off-take over past few years (US$ billion)
CAGR 11.08%
For updated information, please visit www.ibef.org Banking 10
INDIAN BANKING SECTOR HAS GROWN AT A
HEALTHY PACE…(2/2)
57
6
80
2
85
3 9
70
1,1
90
1,3
17
1,2
98
1,3
32
1,4
56
1,4
76
1,6
03
1,7
08
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
FY
07
FY
08
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
FY
16
FY
17
FY
18*
Source: Reserve Bank of India (RBI), Aranca Research;
Note: CAGR - Compounded Annual Growth Rate, * - FY18 data upto September 2017, ^ - as of March 7, 2018
During FY06–17, deposits grew at a CAGR of 11.71 per cent and
reached US$ 1.6 trillion by FY17. Deposits at the end of Q3 FY18
stood at US$ 1.708 trillion.
Strong growth in savings amid rising disposable income levels are
the major factors influencing deposit growth.
Access to banking system has also improved over the years due to
persistent government efforts to promote banking-technology and
promote expansion in unbanked and non-metropolitan regions.
At the same time India’s banking sector has remained stable despite
global upheavals, thereby retaining public confidence over the years.
Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY), have
also increased. Rs 76,116.88 crore (US$ 11.76 billion) were
deposited and 313.1 million accounts were opened in India.^
Visakhapatnam port traffic (million tonnes) Growth in deposits over the past few years (US$ billion)
CAGR 11.71%
For updated information, please visit www.ibef.org Banking 11
ASSETS BASE CONTINUES TO EXPAND
11
40
.2 1
30
5
14
21
.4
13
47
.9
15
18
.46
32
5.9
36
9.9
41
5.1
48
8.1
55
8.9
2
10
4.5
12
2.6
12
3.5
12
1.1
12
5.5
2
0.0
500.0
1000.0
1500.0
2000.0
2500.0
0
200
400
600
800
1000
1200
1400
1600
FY13 FY14 FY15 FY16 FY17
Public Sector Private Sector
Foreign Banks Total Asset-RHS
Source: Reserve Bank of India (RBI), Aranca Research, Indian Banks Association;
Notes: CAGR - Compounded Annual Growth Rate, FDI – Foreign Direct Investments
Total banking sector assets have increased at a CAGR of 8.83 per
cent to US$ 2.202 trillion during FY13–17
FY13-17 saw growth in assets of banks across sectors
Assets of public sector banks, which account for more than 70 per
cent of the total banking assets, grew at a CAGR of 7.43 per cent
Private sector expanded at an CAGR of 14.44 per cent, while foreign
banks posted a growth of 4.69 per cent
Corporate demand for bank loans have grown due to continued
infrastructure investments and due to other policy decisions such as
reducing oil subsidies, issuing of telecom spectrum licenses & the
proposed abolition of penalty on loan prepayment
Visakhapatnam port traffic (million tonnes) Total Banking sector assets (US$ billion)
For updated information, please visit www.ibef.org Banking 12
INTEREST INCOME HAS SEEN ROBUST GROWTH
57
.6 6
7.1
76
.4
10
3.4
10
2.1
7
10
2.8
8
11
0.7
4
10
2.6
6
10
5.5
5
17
.9
18
.2
20
.2 28
.7
30
.65
31
.38
34
.12
36
.84
43
.3
6.4
5.8
5.9
7.6
8
7.7
8
7.6
8.2
6
7.7
7
7.9
7
0
20
40
60
80
100
120
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Private Sector Public Sector Foreign Banks
Source: Reserve Bank of India, IBA (Indian Banks Association), Aranca Research
Note: CAGR - Compound Annual Growth Rate
Public sector banks account for over 67.31 per cent of interest
income in the sector in FY17
They lead the pack in interest income growth with a CAGR of 7.86
per cent over FY09-17
Overall, the interest income for the sector has grown at 8.46 per cent
CAGR during FY9-17
Interest income of Public Banks was witnessed to be US$ 105.55
billion in FY17
Visakhapatnam port traffic (million tonnes) Interest income growth in Indian banking sector (US$ billion)
For updated information, please visit www.ibef.org Banking 13
GROWTH IN ‘OTHER INCOME’ ALSO ON A POSITIVE
TREND
8.9
10
.2
10
10
.7
10
.5
10
.8 12
.39
12
.35
17
.66
3.7
4.3
4.3
5.3
5.5
5.9
6.7
7.4
9.8
5
3.1
2.1
2.3
2.3
2.1
2.2
2.4
1.8
6
2.4
6
0
2
4
6
8
10
12
14
16
18
20
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Public Sector Private Sector Foreign Banks
Source: Indian Bank’s Association, Aranca Research, BMI
Notes: CAGR - Compound Annual Growth Rate,
Public sector banks account for about 58.93 per cent of income other
than from interest (‘other income’)
‘Other income’ for public sector banks has risen at a CAGR of 8.94
per cent during FY09-17
‘Other income’ for public sector banks stood at US$ 17.66 billion in
FY17.
Overall, ‘other income’ for the sector has risen at 8.42 per cent
CAGR during FY09-17.
Visakhapatnam port traffic (million tonnes) ‘Other income’ growth in Indian banking sector (US$ billion)
For updated information, please visit www.ibef.org Banking 14
RETURN ON ASSETS AND LOAN-TO-DEPOSIT RATIO
SHOWING AN UPTREND
81
.99
85
.22
85
.57
82
.07
82
.21
72
.29
75
.14
74
.29
73
.79
73
.43
70
.85
66
.93
75
.14
77
.85
77
.42
76
.12
74
.63
68
.78
82
.28
81
.9
84
.37
86
.36
90
.3
86
.54
82
.99
91
.51
82
.6
80
.8
79
.25
63
.55
0
20
40
60
80
100
FY12 FY13 FY14 FY15 FY16 FY17
SBI & its associates Nationalised Bank Public Sector
Private Sector Foreign Sector
0.8
8
0.8
6
0.5
9
0.6
3
0.4
2
-1.5
3
0.8
5
0.6
8
0.4
2
0.3
6
-0.4
9
-0.1
3
0.8
6
0.7
3
0.4
7
0.4
4
-0.2
-0.4
7
1.3
7
1.2
9
1.1
1
1.0
3 1
.5
1.0
2
1.9
8
1.8
2
1.3
5 1.7
1.8
4
0.6
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
FY12 FY13 FY14 FY15 FY16 FY17
SBI & its associates Nationalised Bank Public Sector
Private Sector Foreign Sector
Source: Reserve Bank of India (RBI), Aranca Research
Note: Data for Return on Assets and Loan to Deposit Ratio is in percentage
Return on assets Loan-to-deposit ratio
Loan-to-Deposit ratio for banks across sectors has increased over the years
Private and foreign banks have posted high return on assets than nationalised & public banks
This has prompted most of the foreign banks to start their operations in India
For updated information, please visit www.ibef.org Banking 15
NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR … (1/3)
Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research
Indian banks are increasingly focusing on
adopting integrated approach to risk
management
Banks have already embraced the
international banking supervision accord of
Basel II.; interestingly, according to RBI,
majority of the banks already meet capital
requirements of Basel III, which has a
deadline of 31 March 2019
Most of the banks have put in place the
framework for asset-liability match, credit &
derivatives risk management
Improved risk management practices
Total lending has increased at a CAGR of
12.38 per cent during FY07-17 and total
deposits has increased at a CAGR of 10.08
per cent, during FY07-17 & are further
poised for growth, backed by demand for
housing and personal finance
Diversification of revenue stream
As of January 2018, total number of ATMs
in India increased to 207,194 and is further
expected to increase to 407,000 ATMs in
2021 .
The digital payments system in India has
evolved the most among 25 countries,
including UK, China and Japan, with the
IMPS being the only system at level 5 in
the Faster Payments Innovation Index
(FPII). ^
Technological innovations
Note: ^ - according to a report by FIS
For updated information, please visit www.ibef.org Banking 16
NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR … (2/3)
RBI has emphasised the need
to focus on spreading the
reach of banking services to
the un-banked population of
India
Indian banks are expanding
their branch network in the
rural areas to capture the new
business opportunity.
According to RBI, Under 2nd
phase of Financial Inclusion
Plan (2013-16), 452,151
villages, with population less
than 2,000 people, were
covered as on June 30, 2016
Focus on financial inclusion
The increasingly dynamic
business scenario & financial
sophistication has increased
the need for customised exotic
financial products
Banks are developing
innovative financial products &
advanced risk management
methods to capture the market
share
Bank of Maharashtra tied up
with Cigna TTK, to market their
insurance products across
India.
Derivatives and risk
management products
With entry of foreign banks,
competition in the Indian
banking sector has intensified
Banks are increasingly looking
at consolidation to derive
greater benefits such as
enhanced synergy, cost take-
outs from economies of scale,
organisational efficiency &
diversification of risks
Consolidation
The effects of demonetisation
are also visible in the fact that
bank credit plunged by 0.8 per
cent from November 8 to
November 25, as US$ 9.85
billion were paid by defaulters.
As per RBI, a total of US$
237.17 billion was deposited in
banks till August 30, 2017.
Debit cards have radically
replaced credit cards as the
preferred payment mode in
India, after demonetisation. As
of January 2018, debit cards
garnered a share of 87.62 per
cent of the total card spending.
Demonetisation
Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research
For updated information, please visit www.ibef.org Banking 17
NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR … (3/3)
Key objective of Pradhan Mantri Jan Dhan
Yojana (PMJDY) is to increase the
accessibility of financial services such as
bank accounts, insurance, pension, credit
facilities, etc. mostly to the low income
groups.
Under the Jan Dhan Yojana, Rs 76,116.88
crore (US$ 11.76 billion) were deposited
and 313.1 million accounts were opened in
India.^
236.0 million ‘Rupay’ debit cards were
issued to users.^
Focus towards Jan Dhan Yojana
Real Time Gross Settlement (RTGS) and
National Electronic Funds Transfer (NEFT)
are being implemented by Indian banks for
fund transaction
Securities Exchange Board of India (SEBI)
has included NEFT & RTGS payment
system to the existing list of methods that a
company can use for payment of dividend
or other cash benefits to their shareholders
& investors
Wide usability of RTGS and NEFT
RBI mandated the Know Your Customer
(KYC) Standards, wherein all banks are
required to put in place a comprehensive
policy framework in order to avoid money
laundering activities
The KYC policy is now mandatory for
opening an account or making any
investment such as mutual funds
Know Your Client
Source: Indian Bank's Association, Indian Banking Sector 2020, Pradhanmantri Jan Dhan Yojna, Business India, Aranca Research
Note: ^ - as of March 7, 2018
Banking
PORTERS FIVE
FORCES ANALYSIS
For updated information, please visit www.ibef.org Banking 19
Porter’s Five Forces Framework Analysis
Largely, customers prefer banks for
its reliability
Gradually, customers have hedged
inflation by investing in other
riskier avenues
Bargaining Power of Suppliers
For deposit substitutes include
investment in gold, real estate,
equity etc.
For advances substitutes include,
bonds, IPO/FPO1, etc.
Threat of Substitutes
At present public sector banks, led by
SBI & associates, control 77.3 per
cent of the banking sector
Rivalry is much aggressive in
metropolitan areas
Issuing of new licenses will increase
competitive rivalry in rural areas over
medium to long term
Competitive Rivalry
High entry barriers, as RBI & Central
Bank control the issuance of licenses
New licenses may reduce market-
share of public banks
Threat of New Entrants
Nascent debt market & volatile stock
market, are less opted
Banks are an indispensible source of
fund in India
Bargaining Power of Buyers
Positive Impact
Neutral Impact
Negative Impact
Source: Aranca Research
Banking
STRATEGIES
ADOPTED
For updated information, please visit www.ibef.org Banking 21
STRATEGIES ADOPTED
Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research
In March 2016, ICICI Bank launched Host Card Emulation (HCE) for its debit & credit card holders, to make
contactless payments at stores by waving their phones across NFC enabled machines.
Similarly State Bank of India unveiled ‘SBI Mingle’, as social media banking platform for Twitter &
Facebook users.
Banks protect margins by promoting usage of efficient technologies like mobile & internet banking
State Bank of India has created SBI Digi Bank, which has a financial superstore, an online market place
and a digital bank for end to end digitisation for all products and services.
As of July 2017, Microsoft Corp. launched Skype with Aadhaar authentication to allow access to bank
accounts using webcams.
Increased use of
technology
Major banks tend to increase income by cross-selling products to their existing customers
Foreign banks have been able to grow business, despite a much lower customer coverage Cross-selling
Expansion in unbanked rural regions helps banks to garner deposits
Increasing tele-density and support of regulators have aided rural expansion Capture latent demand
As of November 2017, State Bank of India (SBI) is planning to set up more branches in Nepal and re-enter
Vietnam under its three-year aim of growing its international operations to 15 per cent of its total
business.
Although at a nascent stage, private & public banks are gradually expanding operations overseas
Internationally, banks target India-based customers & investors, settled abroad
Overseas expansion
Banking
GROWTH DRIVERS
AND OPPORTUNITIES
For updated information, please visit www.ibef.org Banking 23
RISING RURAL INCOME PUSHING UP DEMAND FOR
BANKING
1875
2167
2667
3229
0
500
1000
1500
2000
2500
3000
3500
2010 2015 2020 2025
CAGR 3.6%
14
1.7
7
13
9.3
9
15
7.3
5
16
0.8
14
0.7
1
13
2.7
1
25
9.4
6
24
5.0
4
36
9.2
5
0
50
100
150
200
250
300
350
400
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
CAGR 12.71 %
Source: McKinsey estimates, Ministry of Agriculture, Aranca Research
Note: CAGR – Compounded Annual Growth Rate, FY161 – Provisional Estimates; MNREGA: Mahatma Gandhi National Rural Employment Guarantee Act
GDP of agriculture, forestry and fishing sector, at current
prices (US$ billion) Real Disposable household income in rural India (US$)
The real annual disposable household income in rural India is forecasted to grow at a CAGR of 3.6 per cent over the next 15 years
The Indian agriculture, forestry & fishing sector has grown at a fast pace, clocking a CAGR of 12.71 per cent over FY09-FY17
Rising incomes are expected to enhance the need for banking services in rural areas & therefore drive growth of the sector. Programmes like
MNREGA have helped in increasing rural income, which was further aided by the recent Jan Dhan Yojana.
For updated information, please visit www.ibef.org Banking 24
MOBILE BANKING TO PROVIDE A COST EFFECTIVE
SOLUTION … (1/2)
0.4
9.2 15.2
24.3
37.5
39.9 42.7
46.1 48.3
50.3
56.35
0
10
20
30
40
50
60
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
Source: TRAI, Aranca Research
Banking penetration in rural India picking pace Soaring rural tele-density opens avenue of mobile banking
(Million Units)
Tele-density in rural India soared at a CAGR of nearly 64 per cent
during 2007 to 2017.
Banks, telecom providers & RBI are making efforts to make
inroads into the un-banked rural India through mobile banking
solutions
Of the 600000 village habitations in India only 5 per cent have
a commercial bank branch
Only 40 per cent of the adult population has bank accounts
Debit card holders constitute only 13 per cent of the
population & only 2 per cent have a credit card
51.4 per cent of nearly 89.3 million farm households do not
have access to any credit either from institutional or non-
institutional sources
Only 13 per cent of farm households are availing loans from
the banks in the income bracket of < US$ 1000
Agriculture requires timely credit to enable smooth
functioning. However, only one-eighth of farm households
avail bank credit
Local money-lending practices involve interest rates well
above 30 per cent therefore making bank credit a compelling
alternative
For updated information, please visit www.ibef.org Banking 25
MOBILE BANKING TO PROVIDE A COST EFFECTIVE
SOLUTION … (2/2)
Mobile
commerce
Payment of
bills
Mobile banking (fund
transfers, etc.)
Mobile
recharge
Mobile
remittances
Source: PWC, ‘Searching for new frontiers of growth’, Aranca Research
Robust asset growth
Mobile banking allows customers to avail banking services on the
move through their mobile phones. The growth of mobile banking
could impact the banking sector significantly
Mobile banking across the world is still at a primitive stage with
countries like China, India & UAE taking the lead
Mobile banking is especially critical for countries like India, as it
promises to provide an opportunity to provide banking facilities to a
previously under-banked market
RBI has taken several steps to enable mobile payments, which
forms an important part of mobile banking; the central bank has
recently removed the transaction limit of INR50,000 & allowed
banks to set their own limits
In adoption of mobile banking, India holds 4th rank across the
globe.
The number of mobile wallet transactions in India stood at 187
million with a value of Rs 9,388 crore (US$ 1.45 billion) in
November 2017.
For updated information, please visit www.ibef.org Banking 26
GROWTH DRIVERS OF INDIAN BANKING SECTOR
Favourable demographics
and rising income levels
Strong GDP growth (CAGR
of 7 per cent expected over
2012–17) to facilitate
banking sector expansion
The sector will benefit from
structural economic stability
and continued credibility of
Monetary Policy
The government passed the
Banking Regulation
(Amendment) Bill 2017,
which will empower RBI to
deal with NPAs in the
banking sector.
The Insolvency and
Bankruptcy Code
(Amendment) Ordinance,
2017 Bill has been passed
by Rajya Sabha and is
expected to strengthen the
banking sector.^
Under the Union Budget
2018-19, the government
has allocated Rs 3 trillion
(US$ 46.34 billion) towards
the Mudra Scheme and Rs
3,794 crore (US$ 586.04
million) towards credit
support, capital and interest
subsidy to MSMEs.
Policy support
India currently spends 6 per
cent of GDP on
infrastructure; NITI Aayog
expects this fraction to grow
going ahead
As per the Union Budget
2018-19, the Indian
infrastructure sector
requires an investment of
Rs 50 lakh crore (US$
772.32 billion) .
Infrastructure financing
A new portal named
'Udyami Mitra' has been
launched by the Small
Industries Development
Bank of India (SIDBI) with
the aim of improving credit
availability to Micro, Small
and Medium Enterprises'
(MSMEs).*
As on January 4, 2018, the
Lok Sabha has approved
recapitalisation bonds worth
Rs 80,000 crore (US$ 12.62
billion) for public sector
banks, which will be
accompanied by a series of
reforms.
Simplification of KYC
norms, introduction of no-
frills accounts & Kisan
Credit Cards to increase
rural banking penetration
Economic and demographic
drivers Government initiatives
Notes: GDP - Gross Domestic Product, KYC - Know Your Customer, RBI - Reserve Bank of India, ATM - Automated Teller Machine Bps: Basis Points, NPA – non-performing assets, ^ - as
of January 3, 2018, * - as on December 27, 2017, MSMEs – micro, small and medium enterprises.
For updated information, please visit www.ibef.org Banking 27
SCHEMES BY GOVERNMENT
This scheme is mainly for
accidental death insurance
cover for up to Rs. 2 lakh.
Premium: Rs. 12 per
annum.
Risk Coverage: For
accidental death and full
disability - Rs. 2 lakh and for
partial disability – Rs. 1
lakh.
Gross enrolment under the
scheme reached 134.127
million.^
This scheme aims to
provide life insurance cover.
Premium: Rs. 330 per
annum. It will be auto-
debited in one instalment.
Risk Coverage: Rs. 2 lakh
in case of death for any
reason.
Gross enrolment under the
scheme reached 53.021
million.^
Pradhan Mantri Jeevan Jyoti
Bima Yojana
Under the scheme,
subscribers would receive
the fixed pension of Rs
1,000, 2,000, 3,000, 4,000
or 5,000 at the age of 60
years (depending on their
contributions).
The Central Government
will also co-contribute 50
per cent of the subscriber's
contribution or Rs 1,000 per
annum, whichever is lower,
to each eligible subscriber
account, for a period of 5
years.
8.6 million enrolments#
have been made under this
scheme since its launch and
the PFRDA is targeting 10
million accounts by March
2018.
Atal Pension Yojana
313.1 million accounts were
opened.*
Under the scheme, each &
every citizen will be enrolled
in a bank for opening a Zero
balance account.
Each person getting into this
scheme will get an Rs.
30000 life cover with
opening of the account
Overdraft limit under such
accounts is Rs.5000
Pradhan Mantri Suraksha
Bima Yojana
Pradhan Mantri Jan Dhan
Yojana
Source: News Articles, Pradhanmantri Jan Dhan Yojna, PMO, Aranca Research
Note: PFRDA – Pension Fund Regulatory and Development Authority of India, ^ - as of March 5, 2018, * - as of March 03, 2018, # - as of February 2018.
For updated information, please visit www.ibef.org Banking 28
HOUSING AND PERSONAL FINANCE HAVE BEEN KEY
DRIVERS … (1/2)
53
.9
66
.9 7
6.4
74
.8 84
.1
89
.7 1
02
.9 11
4.1
13
3.1
0
20
40
60
80
100
120
140
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Source: Reserve Bank of India (RBI), Aranca Research
Notes: CAGR - Compound Annual Growth Rate, FY13: Data as on 22 March 2013, FY14: Data as on 21 March 2014, FY15: Data as on 20 March 2015, FY16: Data as on 18 March 2016,
Rapid urbanisation, decreasing household size & easier availability
of home loans has been driving demand for housing
Personal finance, including housing finance provide an essential
cushion against volatility in corporate loans
The recent improvement in property value have reduced the ratio of
loan to collateral value
Credit to housing sector increased at a CAGR of 11.96 per cent
during FY09–FY17, wherein, value of credit to housing sector
increased from to US$ 114.1 billion in FY16 to US$ 133.1 billion in
FY17.
Demand in the low & mid-income segments exceeds supply
3 to 4 fold
This has propelled demand for housing loan in the last few years
Visakhapatnam port traffic (million tonnes) Growth in credit to housing finances (US$ billion)
For updated information, please visit www.ibef.org Banking 29
HOUSING AND PERSONAL FINANCE HAVE BEEN KEY
DRIVERS … (2/2)
54
.7 6
3.3
74
.9
73
.3 81
.2
82
.3
88
.1
98
.6 1
11
.61
0
20
40
60
80
100
120
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Source: Reserve Bank of India (RBI), Aranca Research
Note: CAGR - Compound Annual Growth Rate FY13: Data as on 22 March 2013, FY14: Data as on 21 March 2014, FY15: Data as on 20 March 2015, FY16: Data as on 18 March 2016,
Growth in disposable income has been encouraging households to
raise their standard of living & boost demand for personal credit
Credit under the personal finance segment (excluding housing) rose
at a CAGR of 6.87 per cent during FY09–FY17, and stood at US$
111.61 billion in FY17
Unlike some other emerging markets, credit-induced consumption is
still less in India
Visakhapatnam port traffic (million tonnes)
Growth in personal finance (excluding housing)
For updated information, please visit www.ibef.org Banking 30
STRONG ECONOMIC GROWTH TO PROPEL BANKING
SECTOR EXPANSION … (1/2)
780 825 839
1552.5
1702.1
2302.5
0
500
1000
1500
2000
2500
2011 2015 2019
Population GDP-RHS
Source: World Bank, IMF, Aranca Research
Note: E - Expected, F - Forecasted, GDP - Gross Domestic Product
Rising per capita income will lead to increase in the fraction of the
Indian population that uses banking services
Population in 15-64 age group is expected to grow strongly going
ahead, giving further push to the number of customers in banking
sector
Visakhapatnam port traffic (million tonnes) India’s working age population (in million) and GDP per capita
(US$ )
For updated information, please visit www.ibef.org Banking 31
STRONG ECONOMIC GROWTH TO PROPEL BANKING
SECTOR EXPANSION … (2/2)
89
6.0
91
6.0
99
1.0
1,0
25
.9
99
9.4
1,0
15
.9
1,1
24
.8
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
FY11 FY12 FY13 FY14 FY15 FY16 FY17
Source: Reserve Bank of India, Business Monitor International Ltd (BMI), Aranca Research
Note: CAGR - Compound Annual Growth Rate
Strong GDP growth will facilitate banking sector expansion
Total banking sector credit increased at a CAGR of 3.86 per cent
during FY11 to FY17 to US$ 1,124.8 billion in FY17
The sector will also benefit from economic stability & credibility of the
monetary policy
Visakhapatnam port traffic (million tonnes) Total bank loans (US$ billion)
Banking
CASE STUDIES
For updated information, please visit www.ibef.org Banking 33
SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: HDFC BANK … (1/2)
48
6.6
0
62
1.8
0 86
0.7
0
11
02
.20
12
38
.50
14
06
.50
17
75
.10
18
78
.40
22
55
.25
0.00
500.00
1000.00
1500.00
2000.00
2500.00
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
FY
16
FY
17
HDFC Bank
• Established in 1994, HDFC Bank is the 2nd largest private sector
bank in India. HDFC was amongst the 1st to receive an 'in
principle' approval from the RBI to set up a bank in the private
sector
• Divisions – Retail banking, Wholesale banking and Treasury
operations
• Size – Number of branches & extensions (FY17): 4,715
• Number of ATMs: (FY17) 12,260
• Number of Employees (FY17): 84,325
• Total Assets (FY17): US$ 133.89. billion
Recognition:
• In 2017, HDFC Bank was awarded ‘Best Bank of the Year’ by
Business India 19th Best Bank survey
• In 2017, HDFC Bank was awarded ‘Best Private Sector Bank’ by
Dun & Bradstreet Banking Awards 2017.
• In 2017, HDFC Bank was a part of Forbes' List of 5 Companies
that have shaped Asia, And the World
Visakhapatnam port traffic (million tonnes) Net profit US$ (millions)
CAGR 21.13%
For updated information, please visit www.ibef.org Banking 34
SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: HDFC BANK … (2/2)
21
27
35
42
44
50
61
79
85
.95
31
35
46
53
55
61
75
86
99
.76
0
20
40
60
80
100
120
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Advances Deposits
73%
27% Net Interest Income
Other Income
Source: Company Annual Reports, Aranca Research
Income break-up (FY17)
Advances and deposits (US$ billion)
For updated information, please visit www.ibef.org Banking 35
SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: STATE BANK OF INDIA … (1/2)
2.0 1.9
1.8
2.5 2.6
1.8
2.2
1.5 1.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
State Bank of India
• Established in 1955, State Bank of India is the largest public
sector bank in India. The Net Interest Income of State Bank of
India in FY16, was US$ 9.5 billion.
• Divisions – Treasury, retail banking, corporate/wholesale banking
& other banking businesses
• Size – Number of branches & extensions (FY17): 24,017
• Number of ATMs( FY17): Over 59,263
• Number of Employees (FY17): 209,572
• Total Assets (FY17): US$ 365.43 billion
• SBI is planning Initial Public Offers (IPOs) of two regional rural
banks (RRBs), namely Andhra Pradesh Grameena Vikas Bank
and Saurashtra Gramin Bank by 2018, in order to create value
and to increase efficiency.
• In January 2018, SBI has launched credit cards for farmers, via
its subsidiary SBI Cards & Payments Services Pvt Ltd, in the
states of Gujarat, Rajasthan and Madhya Pradesh on a pilot
basis, and based on the success in these states, it will launch the
same across India.
Recognition
• In FY17, SBI was selected as “India’s Best Bank” by Financial
Express.
• During the same year, SBI was also awarded “Helen Keller
Award 2016 award for commitment towards promoting equal
employment opportunities.
Visakhapatnam port traffic (million tonnes) Net Profit ( US$ Billions)
For updated information, please visit www.ibef.org Banking 36
SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: STATE BANK OF INDIA … (2/2)
11
7.6
13
3.3
16
5.9
18
5.1
19
2.5
20
0.7
21
5.7
22
3.6
24
3.5
16
0.8
16
9.6
20
4.7
22
2.6
22
1.5
23
1.3
26
1.6
26
4.4
31
6.9
0
50
100
150
200
250
300
350
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Advances Deposits
64%
36% Net Interest Income
Other Income
Income break-up (FY17)
Advances and deposits (US$ billion)
Banking
KEY INDUSTRY
ORGANISATIONS
For updated information, please visit www.ibef.org Banking 38
INDUSTRY ORGANISATIONS
World Trade Centre, 6th Floor
Centre 1 Building,
World Trade Centre Complex,
Cuff Parade, Mumbai - 400 005, India
E-mail: [email protected]
Indian Banks' Association
Banking
USEFUL
INFORMATION
For updated information, please visit www.ibef.org Banking 40
GLOSSARY
ATM: Automated Teller Machines
CAGR: Compound Annual Growth Rate
FY: Indian Financial Year (April to March)
GDP: Gross Domestic Product
INR: Indian Rupee
KYC: Know Your Customer
NIM: Net Interest Margin
NPA: Non-Performing Assets
RBI: Reserve Bank of India
US$ : US Dollar
Wherever applicable, numbers have been rounded off to the nearest whole number
For updated information, please visit www.ibef.org Banking 41
EXCHANGE RATES
Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)
Year INR INR Equivalent of one US$
2004–05 44.81
2005–06 44.14
2006–07 45.14
2007–08 40.27
2008–09 46.14
2009–10 47.42
2010–11 45.62
2011–12 46.88
2012–13 54.31
2013–14 60.28
2014-15 61.06
2015-16 65.46
2016-17 67.09
Q1 2017-18 64.46
Q2 2017-18 64.29
Q3 2017-18 64.74
Year INR Equivalent of one US$
2005 43.98
2006 45.18
2007 41.34
2008 43.62
2009 48.42
2010 45.72
2011 46.85
2012 53.46
2013 58.44
2014 61.03
2015 64.15
2016 67.21
2017 65.12
Source: Reserve bank of India, Average for the year
For updated information, please visit www.ibef.org Banking 42
DISCLAIMER
India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation
with IBEF.
All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced,
wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or
incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval
of IBEF.
This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the
information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a
substitute for professional advice.
Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do
they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation.
Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any
reliance placed or guidance taken from any portion of this presentation.