BANKING

For updated information, please visit www.ibef.org February 2018

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

Case Studies…….……….......……………32

Key Industry Organizations....…………….37

Useful Information……….......…………….39
 EXECUTIVE SUMMARY

Robust asset growth  Value of public sector bank assets increased to US$ 1.52 trillion in FY17 from US$ 1.34 billion in FY16.

 Total lending has increased at a CAGR of 12.38 per cent during FY07-17 and total deposits has increased at
Growing lending and
a CAGR of 10.08 per cent, during FY07-17 and are further poised for growth, backed by demand for housing
deposit and personal finance

 As of December 2017, total number of ATMs in India increased to 207,036 and is further expected to increase
Higher ATM penetration
to 407,000 by 2021.

 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.
Rising rural penetration  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.

Notes: ATM - Automated Teller Machine, FIP – Financial Inclusion Plan, RBI – Reserve Bank of India
Source: India Banking Association, Reserve Bank of India, Aranca Research

3 Banking For updated information, please visit www.ibef.org

 Banking

ADVANTAGE INDIA
 ADVANTAGE INDIA

 Increase in working population &  Mobile, Internet banking & extension of

growing disposable incomes will raise facilities at ATM stations to improve
demand for banking & related services operational efficiency

 Housing & personal finance are  Vast un-banked population highlights

expected to remain key demand scope for innovation in delivery
drivers

 Rural banking is expected to witness

growth in the future

ADVANTAGE
INDIA

 Rising fee incomes improving the  Wide policy support in the form of
revenue mix of banks private sector participation & liquidity
infusion
 High net interest margins, along with
low NPA levels, ensure healthy  Healthy regulatory oversight & credible
business fundamentals Monetary Policy by the Reserve Bank
of India (RBI) have lent strength &
stability to the country’s banking sector

Note: NPA – Non Performing Assets, FY171 - Till 29th December 2016
Source: IBA report titled “Being five-star in productivity - Roadmap for excellence in Indian banking”; Aranca Research

5 Banking For updated information, please visit www.ibef.org

 Banking

MARKET OVERVIEW
AND TRENDS
 EVOLUTION OF THE INDIAN BANKING SECTOR

 Imperial Bank expanded its
network to 480 branches
 In order to increase penetration
 Closed market in rural areas, Imperial Bank
 State-owned Imperial Bank of was converted into State Bank
India was the only bank existing 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.

2000 2016
1921 1935 1936-1955 1956-2000
onwards onwards

 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 2, 2018, India
recorded foreign exchange reserves of
approximately US$ 421.915 billion.

Note: RBI - Reserve Bank of India, FDI – Foreign Direct Investment, LIC – Life Insurance Corporation
Source: Indian Bank’s Association, Aranca Research, BMI

7 Banking For updated information, please visit www.ibef.org

 THE STRUCTURE OF INDIAN BANKING SECTOR

Reserve Bank of India

Banks Financial Institutions

Scheduled Commercial Banks

Cooperative credit institutions
(SCBs)

Public sector banks (27) All-India financial institutions

Private sector banks (21) State-level institutions

Foreign banks (45)2 Other institutions

Regional Rural Banks (RRB)

(56)

Urban cooperative banks

(1,589)1

Rural cooperative credit

institutions (93,550)

Note: Data on number of banks belongs to FY15 1 - Indicates data for FY14 2 - Indicates data for FY16
Source: Reserve Bank of India’s ‘Report on Trend and Progress of Banking in India’, Aranca Research

8 Banking For updated information, please visit www.ibef.org

 INDIAN BANKING SECTOR HAS GROWN AT A
HEALTHY PACE…(1/2)

 Credit off-take has been surging ahead over the past decade, aided GrowthVisakhapatnam
in credit off-takeport
overtraffic
past (million
few years
tonnes)
(US$ billion)
by strong economic growth, rising disposable incomes, increasing
consumerism & easier access to credit
1400
CAGR 11.08%
 As of Q2 FY18, total credit extended surged to US$ 1,241.55 billion.

 Credit to non-food industries increased by 6.1 per cent reaching US$ 1200

1242
1224
1,114.80 billion in September 2017 from US$ 1,050.8 billion during
the previous financial year.
1000

1016
 Demand has grown for both corporate & retail loans; particularly the

994
984

983
969
services, real estate, consumer durables & agriculture allied sectors

864
have led the growth in credit. 800

 The digital payments revolution will trigger massive changes in the

684
way credit is disbursed in India.^ 600

602
587
400

428
200

FY18*
FY 07

FY 08

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 17
Note: CAGR - Compounded Annual Growth Rate, * - FY18 data upto September 2017, ^ - according to Mr Amitabh Kant, CEO of NITI Aayog
Source: Reserve Bank of India (RBI), Aranca Research;

9 Banking For updated information, please visit www.ibef.org

 INDIAN BANKING SECTOR HAS GROWN AT A
HEALTHY PACE…(2/2)

 During FY06–17, deposits grew at a CAGR of 11.71 per cent and GrowthVisakhapatnam
in deposits over
port
thetraffic
past few
(million
yearstonnes)
(US$ billion)
reached US$ 1.6 trillion by FY17. Deposits at the end of Q2 FY18
stood at US$ 1.695 trillion.
1,800
CAGR 11.71%
 Strong growth in savings amid rising disposable income levels are

1,695
the major factors influencing deposit growth. 1,600

1,603
 Access to banking system has also improved over the years due to

1,476
1,400

1,456
persistent government efforts to promote banking-technology and

1,332
promote expansion in unbanked and non-metropolitan regions.

1,317

1,298
1,200
 At the same time India’s banking sector has remained stable despite

1,190
global upheavals, thereby retaining public confidence over the years. 1,000

970
 Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY), have
800

853
also increased. Rs 74,534.79 crore (US$ 11.51 billion) were

802
deposited and 310.7 million accounts were opened in India.^
600

576
400

200

FY18*
FY 07

FY 08

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 17
Note: CAGR - Compounded Annual Growth Rate, * - FY18 data upto September 2017, ^ - as of February 7, 2018
Source: Reserve Bank of India (RBI), Aranca Research;

10 Banking For updated information, please visit www.ibef.org

 ASSETS BASE CONTINUES TO EXPAND

 Total banking sector assets have increased at a CAGR of 8.83 per Visakhapatnam
Total Banking sector
port traffic
assets(million
(US$ billion)
tonnes)
cent to US$ 2.202 trillion during FY13–17

 FY13-17 saw growth in assets of banks across sectors 1600 2500.0

 Assets of public sector banks, which account for more than 70 per

1518.46
cent of the total banking assets, grew at a CAGR of 7.43 per cent 1400

1421.4
2000.0

1347.9
 Private sector expanded at an CAGR of 14.44 per cent, while foreign

1305
1200
banks posted a growth of 4.69 per cent

1140.2
 Corporate demand for bank loans have grown due to continued 1000
1500.0
infrastructure investments and due to other policy decisions such as
reducing oil subsidies, issuing of telecom spectrum licenses & the 800
proposed abolition of penalty on loan prepayment 1000.0
600

558.92
488.1
400

415.1
500.0

369.9

123.5

121.1
122.6
104.5
325.9

125.52
200

0 0.0
FY13 FY14 FY15 FY16 FY17

Public Sector Private Sector

Foreign Banks Total Asset-RHS

Notes: CAGR - Compounded Annual Growth Rate, FDI – Foreign Direct Investments
Source: Reserve Bank of India (RBI), Aranca Research, Indian Banks Association;

11 Banking For updated information, please visit www.ibef.org

 INTEREST INCOME HAS SEEN ROBUST GROWTH

 Public sector banks account for over 67.31 per cent of interest Interest income
Visakhapatnam
growth inport
Indian
traffic
banking
(million
sector
tonnes)
(US$ billion)
income in the sector in FY17

 They lead the pack in interest income growth with a CAGR of 7.86 120
per cent over FY09-17

110.74
 Overall, the interest income for the sector has grown at 8.46 per cent

105.55
100

103.4

102.88

102.66
102.17
CAGR during FY9-17

 Interest income of Public Banks was witnessed to be US$ 105.55

billion in FY17 80

76.4
67.1
60

57.6
40

43.3
36.84
34.12
31.38
30.65
28.7
20

20.2
18.2
17.9

7.97
7.68

7.78

7.77
8.26
5.8

5.9
6.4

7.6
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Private Sector Public Sector Foreign Banks

Note: CAGR - Compound Annual Growth Rate

Source: Reserve Bank of India, IBA (Indian Banks Association), Aranca Research

12 Banking For updated information, please visit www.ibef.org

 GROWTH IN ‘OTHER INCOME’ ALSO ON A POSITIVE
TREND

 Public sector banks account for about 58.93 per cent of income other ‘Other income’ growth inport
Visakhapatnam Indian banking
traffic sector
(million tonnes)
(US$ billion)
than from interest (‘other income’)

 ‘Other income’ for public sector banks has risen at a CAGR of 8.94 20
per cent during FY09-17
18
 ‘Other income’ for public sector banks stood at US$ 17.66 billion in

17.66
FY17. 16

 Overall, ‘other income’ for the sector has risen at 8.42 per cent 14
CAGR during FY09-17.
12

12.39

12.35
10

10.8
10.7

10.5
10.2

10

9.85
8.9
8

7.4
6

6.7
5.9
5.5
5.3
4

4.3

4.3
3.7
3.1
2

1.86

2.46
2.4
2.3

2.3

2.2
2.1

2.1
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Public Sector Private Sector Foreign Banks

Notes: CAGR - Compound Annual Growth Rate,

Source: Indian Bank’s Association, Aranca Research, BMI

13 Banking For updated information, please visit www.ibef.org

 RETURN ON ASSETS AND LOAN-TO-DEPOSIT RATIO
SHOWING AN UPTREND

Return on assets Loan-to-deposit ratio

2.5 100
2.0

91.51

90.3
1.98

86.54
86.36
80

1.84

85.57
1.82

85.22
1.5

84.37
82.99
1.7

82.6
82.28

82.21
82.07
81.99

81.9

80.8

79.25
1.5

77.85

77.42

76.12
1.37

1.35

75.14
75.14

74.63
74.29
1.29

1.0

73.79

73.43

72.29
70.85
1.11

68.78
1.03

1.02

66.93
60
0.88
0.85
0.86

0.86
0.68
0.73

0.59

0.63

63.55
0.5

0.6
0.47
0.42

0.42
0.36
0.44
0.0

-0.49
40

-0.13
-0.47
-0.2
-0.5

-1.53
-1.0
20
-1.5
-2.0 0
FY12 FY13 FY14 FY15 FY16 FY17 FY12 FY13 FY14 FY15 FY16 FY17

SBI & its associates Nationalised Bank Public Sector

SBI & its associates Nationalised Bank Public Sector
Private Sector Foreign Sector Private Sector Foreign Sector

 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

Note: Data for Return on Assets and Loan to Deposit Ratio is in percentage
Source: Reserve Bank of India (RBI), Aranca Research

14 Banking For updated information, please visit www.ibef.org

 NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR … (1/3)
Improved risk management practices
 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
Note: ^ - according to a report by FIS
Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research
15 Banking
Diversification of revenue stream
 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
For updated information, please visit www.ibef.org
Technological innovations
 As of December 2017, total number of
ATMs in India increased to 207,036 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). ^
 NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR … (2/3)
Focus on financial inclusion
 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
Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research
16 Banking
Derivatives and risk
management products
 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.
Consolidation
 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
For updated information, please visit www.ibef.org
Demonetisation
 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 December 2017, debit cards
garnered a share of 87.81 per
cent of the total card spending.
 NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR … (3/3)
Focus towards Jan Dhan Yojana
 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 74,534.79
crore (US$ 11.51 billion) were deposited
and 310.7 million accounts were opened in
India.^
 234.4 million ‘Rupay’ debit cards were
issued to users.^
Note: ^ - as of February 7, 2018
Source: Indian Bank's Association, Indian Banking Sector 2020, Pradhanmantri Jan Dhan Yojna, Business India, Aranca Research
17 Banking
Wide usability of RTGS and NEFT
 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
For updated information, please visit www.ibef.org
Know Your Client
 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
 Banking

PORTERS FIVE
FORCES ANALYSIS
 Porter’s Five Forces Framework Analysis

Threat of Substitutes

 For deposit substitutes include

investment in gold, real estate,
equity etc.
 For advances substitutes include,
bonds, IPO/FPO1, etc.

Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers

 Largely, customers prefer banks for
its reliability
 Gradually, customers have hedged
inflation by investing in other
riskier avenues
 At present public sector banks, led by  Nascent debt market & volatile stock
SBI & associates, control 77.3 per market, are less opted
cent of the banking sector  Banks are an indispensible source of
 Rivalry is much aggressive in fund in India
metropolitan areas
 Issuing of new licenses will increase
competitive rivalry in rural areas over
medium to long term

Threat of New Entrants

 High entry barriers, as RBI & Central

Bank control the issuance of licenses
Positive Impact  New licenses may reduce market-
Neutral Impact share of public banks

Negative Impact

Source: Aranca Research

19 Banking For updated information, please visit www.ibef.org

 Banking

STRATEGIES
ADOPTED
 STRATEGIES ADOPTED

 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.
Increased use of
 Banks protect margins by promoting usage of efficient technologies like mobile & internet banking
technology
 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.

 Major banks tend to increase income by cross-selling products to their existing customers
Cross-selling
 Foreign banks have been able to grow business, despite a much lower customer coverage

 Expansion in unbanked rural regions helps banks to garner deposits

Capture latent demand
 Increasing tele-density and support of regulators have aided rural expansion

 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.
Overseas expansion
 Although at a nascent stage, private & public banks are gradually expanding operations overseas

 Internationally, banks target India-based customers & investors, settled abroad

Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research

21 Banking For updated information, please visit www.ibef.org

 Banking

GROWTH DRIVERS
AND OPPORTUNITIES
 RISING RURAL INCOME PUSHING UP DEMAND FOR
BANKING

GDP of agriculture, forestry and fishing sector, at current

Real Disposable household income in rural India (US$)
prices (US$ billion)
400 CAGR 12.71 % 3500 CAGR 3.6%

350

369.25
3000 3229

300
2500 2667
250

259.46
2000

245.04
2167
200
1875
1500
150
160.8
157.35
141.77

140.71
139.39

132.71

100 1000

50 500

0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 2010 2015 2020 2025

 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.

Note: CAGR – Compounded Annual Growth Rate, FY161 – Provisional Estimates; MNREGA: Mahatma Gandhi National Rural Employment Guarantee Act
Source: McKinsey estimates, Ministry of Agriculture, Aranca Research

23 Banking For updated information, please visit www.ibef.org

 MOBILE BANKING TO PROVIDE A COST EFFECTIVE
SOLUTION … (1/2)

Soaring rural tele-density opens avenue of mobile banking

Banking penetration in rural India picking pace
(Million Units)

 Of the 600000 village habitations in India only 5 per cent have 60

a commercial bank branch 56.35
50
 Only 40 per cent of the adult population has bank accounts 50.3
48.3
40 46.1
 Debit card holders constitute only 13 per cent of the 42.7
population & only 2 per cent have a credit card 39.9
30 37.5
 51.4 per cent of nearly 89.3 million farm households do not
have access to any credit either from institutional or non- 20 24.3
institutional sources
10 15.2
 Only 13 per cent of farm households are availing loans from 9.2
the banks in the income bracket of < US$ 1000 0.4
0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

 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
2017
 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

Source: TRAI, Aranca Research

24 Banking For updated information, please visit www.ibef.org

 MOBILE BANKING TO PROVIDE A COST EFFECTIVE
SOLUTION … (2/2)

Robust asset growth

 Mobile banking allows customers to avail banking services on the

move through their mobile phones. The growth of mobile banking Mobile
could impact the banking sector significantly remittances Mobile
 Mobile banking across the world is still at a primitive stage with commerce
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 Mobile
recently removed the transaction limit of INR50,000 & allowed recharge
Payment of
banks to set their own limits bills
 In adoption of mobile banking, India holds 4th rank across the
globe.

 The number of mobile wallet transactions in India stood at 187

Mobile banking (fund
million with a value of Rs 9,388 crore (US$ 1.45 billion) in transfers, etc.)
November 2017.

Source: PWC, ‘Searching for new frontiers of growth’, Aranca Research

25 Banking For updated information, please visit www.ibef.org

 GROWTH DRIVERS OF INDIAN BANKING SECTOR
Economic and demographic
drivers
 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
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.
26 Banking
Policy support
 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.
Infrastructure financing
 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) .
For updated information, please visit www.ibef.org
Government initiatives
 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
 SCHEMES BY GOVERNMENT

Pradhan Mantri Suraksha Pradhan Mantri Jeevan Jyoti Pradhan Mantri Jan Dhan
Atal Pension Yojana
Bima Yojana Bima Yojana Yojana

 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 133.34
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 52.719
million.^
 Under the scheme,  310.7 million accounts were
subscribers would receive opened.*
the fixed pension of Rs
 Under the scheme, each &
1,000, 2,000, 3,000, 4,000
every citizen will be enrolled
or 5,000 at the age of 60
in a bank for opening a Zero
years (depending on their
balance account.
contributions).
 Each person getting into this
 The Central Government
scheme will get an Rs.
will also co-contribute 50
30000 life cover with
per cent of the subscriber's
opening of the account
contribution or Rs 1,000 per
annum, whichever is lower,  Overdraft limit under such
to each eligible subscriber accounts is Rs.5000
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.

Note: PFRDA – Pension Fund Regulatory and Development Authority of India, ^ - as of February 5, 2018, * - as of February 12, 2018, # - as of February 2018.
Source: News Articles, Pradhanmantri Jan Dhan Yojna, PMO, Aranca Research

27 Banking For updated information, please visit www.ibef.org

 HOUSING AND PERSONAL FINANCE HAVE BEEN KEY
DRIVERS … (1/2)

 Rapid urbanisation, decreasing household size & easier availability Growth

Visakhapatnam
in credit to housing
port traffic
finances
(million(US$
tonnes)
billion)
of home loans has been driving demand for housing

 Personal finance, including housing finance provide an essential 140

cushion against volatility in corporate loans

133.1
 The recent improvement in property value have reduced the ratio of
120
loan to collateral value

114.1
 Credit to housing sector increased at a CAGR of 11.96 per cent
100

102.9
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

89.7
FY17. 80

84.1
 Demand in the low & mid-income segments exceeds supply

76.4

74.8
3 to 4 fold

66.9
60
 This has propelled demand for housing loan in the last few years

53.9
40

20

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

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,
Source: Reserve Bank of India (RBI), Aranca Research

28 Banking For updated information, please visit www.ibef.org

 HOUSING AND PERSONAL FINANCE HAVE BEEN KEY
DRIVERS … (2/2)

 Growth in disposable income has been encouraging households to Growth

Visakhapatnam
in personalport
finance
traffic
(excluding
(million tonnes)
housing)
raise their standard of living & boost demand for personal credit

 Credit under the personal finance segment (excluding housing) rose 120
at a CAGR of 6.87 per cent during FY09–FY17, and stood at US$
111.61 billion in FY17

111.61
 Unlike some other emerging markets, credit-induced consumption is 100

98.6
still less in India

88.1
80

82.3
81.2
74.9

73.3
60

63.3
54.7
40

20

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

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,
Source: Reserve Bank of India (RBI), Aranca Research

29 Banking For updated information, please visit www.ibef.org

 STRONG ECONOMIC GROWTH TO PROPEL BANKING
SECTOR EXPANSION … (1/2)

 Rising per capita income will lead to increase in the fraction of the India’s working age population (in million) and GDP per capita
Visakhapatnam port traffic (million tonnes)
Indian population that uses banking services (US$ )

 Population in 15-64 age group is expected to grow strongly going 2500

ahead, giving further push to the number of customers in banking
sector
2302.5
2000

1702.1
1500
1552.5

1000

825 839
780
500

0
2011 2015 2019

Population GDP-RHS

Note: E - Expected, F - Forecasted, GDP - Gross Domestic Product

Source: World Bank, IMF, Aranca Research

30 Banking For updated information, please visit www.ibef.org

 STRONG ECONOMIC GROWTH TO PROPEL BANKING
SECTOR EXPANSION … (2/2)

 Strong GDP growth will facilitate banking sector expansion Visakhapatnam

Total bank
port
loans
traffic
(US$(million
billion)tonnes)
 Total banking sector credit increased at a CAGR of 3.86 per cent
during FY11 to FY17 to US$ 1,124.8 billion in FY17 1,200.0
 The sector will also benefit from economic stability & credibility of the

1,124.8
monetary policy
1,000.0

1,025.9

1,015.9
999.4
991.0
916.0
896.0
800.0

600.0

400.0

200.0

-
FY11 FY12 FY13 FY14 FY15 FY16 FY17

Note: CAGR - Compound Annual Growth Rate

Source: Reserve Bank of India, Business Monitor International Ltd (BMI), Aranca Research

31 Banking For updated information, please visit www.ibef.org

 Banking

CASE STUDIES
 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: HDFC BANK … (1/2)

 HDFC Bank Visakhapatnam

Net profit
portUS$
traffic
(millions)
(million tonnes)
• Established in 1994, HDFC Bank is the 2nd largest private sector
bank in India. HDFC was amongst the 1st to receive an 'in 2500.00
CAGR 21.13%
principle' approval from the RBI to set up a bank in the private
sector

2255.25
• Divisions – Retail banking, Wholesale banking and Treasury 2000.00
operations

1878.40
• Size – Number of branches & extensions (FY17): 4,715

1775.10
• Number of ATMs: (FY17) 12,260 1500.00

1406.50
• Number of Employees (FY17): 84,325

1238.50
• Total Assets (FY17): US$ 133.89. billion

1102.20
1000.00
 Recognition:

860.70
• In 2017, HDFC Bank was awarded ‘Best Bank of the Year’ by

621.80
Business India 19th Best Bank survey 500.00

486.60
• In 2017, HDFC Bank was awarded ‘Best Private Sector Bank’ by
Dun & Bradstreet Banking Awards 2017.
0.00
• In 2017, HDFC Bank was a part of Forbes' List of 5 Companies

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 17
that have shaped Asia, And the World

33 Banking For updated information, please visit www.ibef.org

 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: HDFC BANK … (2/2)

Income break-up (FY17) Advances and deposits (US$ billion)

120

100

99.76
86
85.95
80

79
75
27% Net Interest Income
60

61
61
55
Other Income

53

50
46
40

44
42
73%

35
35
31
27
20

21
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Advances Deposits

Source: Company Annual Reports, Aranca Research

34 Banking For updated information, please visit www.ibef.org

 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: STATE BANK OF INDIA … (1/2)
 State Bank of India

• Established in 1955, State Bank of India is the largest public Visakhapatnam

Net Profit
port( US$
traffic
Billions)
(million tonnes)
sector bank in India. The Net Interest Income of State Bank of
India in FY16, was US$ 9.5 billion. 3.0
• Divisions – Treasury, retail banking, corporate/wholesale banking
& other banking businesses
2.5 2.6
• Size – Number of branches & extensions (FY17): 24,017 2.5

• Number of ATMs( FY17): Over 59,263 2.2

2.0
• Number of Employees (FY17): 209,572 2.0
1.9
• Total Assets (FY17): US$ 365.43 billion 1.8 1.8
1.5 1.6
• SBI is planning Initial Public Offers (IPOs) of two regional rural 1.5
banks (RRBs), namely Andhra Pradesh Grameena Vikas Bank
and Saurashtra Gramin Bank by 2018, in order to create value 1.0
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 0.5

states of Gujarat, Rajasthan and Madhya Pradesh on a pilot

basis, and based on the success in these states, it will launch the
0.0
same across India. FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
 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.
35 Banking For updated information, please visit www.ibef.org
 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: STATE BANK OF INDIA … (2/2)

Income break-up (FY17) Advances and deposits (US$ billion)

350

316.9
300

264.4
250

261.6

243.5
231.3

223.6
222.6

221.5
36%

215.7
Net Interest Income 200

204.7

200.7
192.5
185.1
169.6
165.9
150

160.8
Other Income
64%

133.3
117.6
100

50

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Advances Deposits

36 Banking For updated information, please visit www.ibef.org

 Banking

KEY INDUSTRY
ORGANISATIONS
 INDUSTRY ORGANISATIONS

Indian Banks' Association

World Trade Centre, 6th Floor

Centre 1 Building,
World Trade Centre Complex,
Cuff Parade, Mumbai - 400 005, India
E-mail: webmaster@iba.org.in

38 Banking For updated information, please visit www.ibef.org

 Banking

USEFUL
INFORMATION
 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

40 Banking For updated information, please visit www.ibef.org

 EXCHANGE RATES

Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)

Year INR INR Equivalent of one US$ Year INR Equivalent of one US$
2004–05 44.81 2005 43.98
2005–06 44.14
2006 45.18
2006–07 45.14
2007 41.34
2007–08 40.27
2008–09 46.14 2008 43.62

2009–10 47.42 2009 48.42

2010–11 45.62
2010 45.72
2011–12 46.88
2011 46.85
2012–13 54.31
2013–14 60.28 2012 53.46

2014-15 61.06 2013 58.44

2015-16 65.46 2014 61.03
2016-17 67.09
2015 64.15
Q1 2017-18 64.46
2016 67.21
Q2 2017-18 64.29
Q3 2017-18 64.74 2017 65.12

Source: Reserve bank of India, Average for the year

41 Banking For updated information, please visit www.ibef.org

 DISCLAIMER

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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
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Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do
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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
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42 Banking For updated information, please visit www.ibef.org