Banking & NBFCs

Industry Breakdown
 Industry Size
Banking and lending have been one of the high-
growth and prominent sectors in the Indian
economy. Though it is still dominated by public
sector banks, we do see industry growth being
driven by private banks and lenders.
Key Industry Trends
PSB Consolidation: Public sector banks have
been undergoing a consolidation spree. The
Govt. has been merging weak banks with
stronger ones based on IT compatibility, synergy
in terms of geographies, asset classes served,
etc.
Focus on Retail Assets: Due to the higher
incidence of NPAs in corporate loan assets,
banks (and lenders in general) are trying to
increase their exposure to retail assets such as
personal loans, home loans, car loans, etc.,
which have a lower risk but higher return.
NBCs: Non-banking finance companies, which
have boosted lending growth in India over the
last decade, are likely to see subdued growth
due to the reluctance of banks to fund NBCs.
Banks have surplus liquidity, but it is the
riskiness of NBC assets and loan defaults by
NBCs which have contributed to this industry-
wide issue
Venture Debt: Start-ups, which find it difficult to
borrow from banks, are increasingly raising funds
from venture debt funds such as InnoVen,
Alteria, Trifecta, etc.
Digital Banks and Payments: The prevalence of
more digital transactions have eroded the need
for cash for daily use, leading to the proliferation
of online banks that offer higher savings account
interest rates and comparable services
 Jargon
NPA: Non-performing assets are loans which
have remained unpaid for more than 90 or
180 days
CRAR: Credit to risk-weighted assets ratio is
basically what proportion of a lender's
assets (loans, investments, cash, etc.) are
financed by equity and preference capital
CASA: Current account and savings account
- the ratio of total deposits of a bank held
in the form of current account and savings
account; since these deposits are cheaper,
the higher the better
Key Calculations
Net Interest Margin
Interest earned - Interest expended
Average loan assets

Net NPA
Gross NPA -Provision for loan assets

Return on Assets
Profit after tax
Average total assets