Banking Sector and

Opportunities in India
 Indian economy - Strong
fundamentals

Forex
reserves
 US$ 90 billion
Exports
 US$ 50
billion in
GDP growth
FY2003
 Tenyear
average of
6.0%

2
 Indian economy - Strong
fundamentals

Interest
rates
 6.5% decline
in last five
Short
years
term debt
 0.8% of GDP
External debt
 20% of GDP

3
 Large inflows of foreign
currency
Gross forex inflows (US$ billion)
100 95.2
79.4 3
75 4
67.1
58.2 3
50 5

25 25.6
0
-
~
~

1990-91 1997-98 1999-00 2001-02 2002-03

M erc handize expo rts Services expo rts NRI remittanc es etc

Source: Economic Survey 2002-2003, Ministry of Finance;

RBI

4
 A decade of change and
evolution…
Pre-reform The 1990s Today
 Liberalisati
 Extensive on  Resilient
regulation  Globalisati industry
Indian
 Focus on on  Buoyant
economy
industrial  Structural services
sector  Opening
change – sector
up of
services  Diversified
 Highly various
financial
segmented sub-
Financial groups
 Public sectors
sector  Globally
sector  Private
benchmark
dominance sector
ed
participati
..financial sector on
mirroring
macro-economic change
5
 The banking sector today
Depth Diversification
 Countrywide
coverage  Emergence of
 Large number of integrated players
players  Diversifying capital
 Increasingly deployment
sophisticated  Leveraging synergies
financial markets
Technology Regulation
 Increasing use of  Robust regulatory
technology in system aligned to
operations international
 Poised to expand and standards
deepen technology  Efficient monetary
usage management

6
 Sector snapshot

Total

Totalassets
assetsof
ofUS$
US$335
335billion
billion
Size
Total deposits of US$ 279 billion

Total deposits of US$ 279 billion

Over

Over290
290scheduled
scheduledbanks
banks
Public sector: 27

Public sector: 27
Number of Private

Privatesector:
sector:new
new––9;
9;old
old ––24
24
banks Foreign: 37

Foreign: 37
Over

Over190
190regional
regionalrural
ruralbanks
banks
Over

Over66,000
66,000branches
branches
 Public sector:46,000
 Public sector: 46,000
Branch Private

Privatesector:
sector:5,500
5,500
network Foreign:

Foreign:190
190
Regional

Regionalrural:
rural:14,400
14,400

7
 A new orientation among
banks…
Traditional/ public sector
 Meet private
New/ customers’
sector
 Sell products needs
 Product research:
 Customer research:
what will sell? what does the
customer want?
 Product sales and
profitability targets
 Customer segment
sales and
 Product specialist
profitability targets
groups
 Customer owners
 Introduce new
offerings every few
 Customer specific
years/months new offerings every
week/day
 “Branch banking”
 Customer
 Focus - customer
convenience
acquisition
 Deepen
relationships

8
 Changing profile of corporate
banking…
 Change in corporate focus - improving efficiency
 Better asset utilisation and financial management
 Limited new capacity creation
 Increasing disintermediation in top tier segment
 However, several opportunities for banks
 Technology-driven fee-based services
 Treasury and risk management products
 Facilitating resource raising by corporates through
syndication, securitisation and market-making
 New approach to SME lending
 Sophisticated banking services
 Scientific portfolio construction and management

9
 Financial services potential:
insurance
16.0%
14.0% 14.2
12.0% %
12.1 Premium as a % of GDP
10.0% %
8.0% 9.0%
6.0%
4.0%
5.2%
2.0%
2.9% 2.7%
0.0% 2.2%
United South United Malaysia Thailand India China
Kingdom Korea States

Life insurance General insurance

Source: Swiss Re, Economic Research & Consulting (June 2002)

…the opening up of the sector provides

a major opportunity for financial
services
10
players
 In summary
 The reform and liberalisation process has
transformed the Indian economy
 Structural shift with service sector growth
 Immensepotential to leverage technology
and knowledge capital
 Improved competitiveness in
manufacturing after intermediate period of
restructuring & rationalisation
 Growing international linkages
 Exports,
manufacturing and distribution
overseas
 India as a manufacturing base
 Globallybenchmarked businesses, capable
of competing internationally
11
 In summary (contd).
 The banking sector has achieved
significant success in addressing legacy
concerns
 Resolution of asset quality concerns
through recovery, restructuring and
provisioning
 Focus on technology and customer
orientation
 The economic transformation provides
major opportunities for the banking
sector
 Retailfinance – credit and banking
services
 Corporate finance - banking services and
12
 Thank you

13