BANKING STRUCTURE IN

INDIA
 Introduction to the Report

The structure of the banking system of India can be broadly divided into scheduled banks, non-scheduled banks and

development banks. Banks that are included in the second schedule of the Reserve Bank of India Act, 1934 are considered to be
scheduled banks.
Reserve Bank of India is the central bank of the country and regulates the banking system of India. The structure of the banking
system of India can be broadly divided into scheduled banks, non-scheduled banks and development banks.
Banks that are included in the second schedule of the Reserve Bank of India Act, 1934 are considered to be scheduled banks. 
All scheduled banks enjoy the following facilities:
Such a bank becomes eligible for debts/loans on bank rate from the RBI
Such a bank automatically acquires the membership of a clearing house.
All banks which are not included in the second section of the Reserve Bank of India Act, 1934 are Non-scheduled Banks. They
are not eligible to borrow from the RBI for normal banking purposes except for emergencies.
Scheduled banks are further divided into commercial and cooperative banks.
Scheduled, Non-Scheduled Banks and Development Banks.
Commercial Banks
The institutions that accept deposits from the general public and advance loans with the purpose of earning profits are known
as Commercial Banks.
Commercial banks can be broadly divided into public sector, private sector, foreign banks and RRBs.
 In Public Sector Banks the majority stake is held by the government. After the recent amalgamation of smaller banks with larger
banks, there are 12 public sector banks in India as of now. An example of Public Sector Bank is State Bank of India.
Private Sector Banks are banks where the major stakes in the equity are owned by private stakeholders or business houses. A few
major private sector banks in India are HDFC Bank, Kotak Mahindra Bank, ICICI Bank etc.
A Foreign Bank is a bank that has its headquarters outside the country but runs its offices as a private entity at any other location
outside the country. Such banks are under an obligation to operate under the regulations provided by the central bank of the
country as well as the rule prescribed by the parent organization located outside India. An example of Foreign Bank in India is
City Bank.
 
 About the Bank

•Banking in India in the modern sense originated in the last decades of the 18th century. The first banks were Bank of Hindustan (1770- 1829) and
The General Bank of India, established 1786 and since defunct. The largest bank, and the oldest still in existence, is the State Bank of India, which
originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal.
•This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established
under charters from the British East India Company.
•The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955.
•For many years the presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935.
 History of Banks

The banking sector development can be divided into three phases:

Phase I: The Early Phase which lasted from 1770 to 1969
Phase II: The Nationalization Phase which lasted from 1969 to 1991
Phase III: The Liberalization or the Banking Sector Reforms Phase which began in 1991 and continues to flourish till date

Pre Independence Period (1786-1947)

The first bank of India was the “Bank of Hindustan”, established in 1770 and located in the then, Indian capital, Calcutta. However, this bank
failed to work and ceased operations in 1832.
During the Pre Independence period over 600 banks had been registered in the country but only a few managed to survive. Following the
path of Bank of Hindustan, various other banks were established in India. They were:
● The General Bank of India (1786-1791)
● Oudh Commercial Bank (1881-1958)
● Bank of Bengal (1809)
● Bank of Bombay (1840)
● Bank of Madras (1843)
During the British rule in India, The East India Company had established three banks: Bank of Bengal, Bank of Bombay and Bank of Madras
and called them the Presidential Banks. These three banks were later merged into one single bank in 1921 which was called the “Imperial
Bank of India.” The Imperial Bank of India was later nationalized in 1955 and was named The State Bank of India, which is currently the
largest Public sector Bank.
If we talk of the reasons as to why many major banks failed to survive during the during the pre independence period, following
conclusions can be drawn:
Indian account holders had become fraud prone
● Lack of machines and technology
● Human errors & time consuming
● Less facilities
● Lack of proper management skills

Post Independence Period (1947-1991)

At the time, when India got independence, all the major banks of the country were led privately which was a cause of concern as
the people belonging to rural areas were still dependent on money lenders for financial assistance
With an aim to solve this problem, the then Government decided to nationalize the Banks. These banks were nationalized under
the Banking Regulation Act, 1949 and the Reserve Bank of India was nationalized in 1949.
the formation of State Bank of India in 1955 and other 14 banks were nationalized between the time duration of 1969 to 1991.
These were the banks whose national deposits were more than 50 cores.
Given below is the list of these 14 Banks nationalized in 1969:
1. Allahabad Bank
2. Bank of India
3. Bank of Baroda
4. Bank of Maharashtra
5. Central Bank of India
6. Canara Bank
7 . Dena Bank
7. Indian Overseas Bank
8. Indian Bank
9. Punjab National Bank
10. Syndicate Bank
11. Union Bank of India
Liberalization Period (1991-Till Date)
Once the banks were established in the country, regular monitoring and regulations need to be followed to continue the profits provided by the
banking sector. The last phase or the ongoing phase of the banking sector development plays a very important role
To provide stability and profitability to the Nationalized Public sector Banks, the Government decided to set up a committee under the leadership
of Shri. M Narasimham to manage the various reforms in the Indian banking industry.
The biggest development was the introduction of Private sector banks in India. RBI gave license to 10 Private sector banks to establish
themselves in the country. These banks included:
1. Global Trust Bank
2. 2. ICICI Bank
3. 3. HDFC Bank
4. 4. Axis Bank
5. 5. Bank of Punjab
6. 6. IndusInd Bank
7. 7. Centurion Bank
8. 8. IDBI Bank
9. 9. Times Bank
10. 10. Development Credit Bank

The other measures taken include:

● Setting up of branches of the various Foreign Banks in India
● No more nationalization of Banks could be done
● The committee announced that RBI and Government would treat both public and private sector banks equally
● Any Foreign Bank could start joint ventures with Indian Banks
● Payments banks were introduced with the development in the field of banking and technology
● Small Finance Banks were allowed to set their branches across India
● A major part of Indian banking moved online with internet banking and apps available for fund transfer

Thus, the history of banking in India shows that with time and the needs of people, major developments have been done in the banking sector
with an aim to prosper it.
 Products of Bank

The banking industry handles finances in a country including cash and credit. Banks are the institutional bodies
that accept deposits and grant credit to the entities and play a major role in maintaining the economic stature of a
country. Given their importance in the economy, banks are kept under strict regulation in most of the countries. In
India, the Reserve Bank of India (RBI) is the apex banking institution that regulates the monetary policy in the
country.
 Services of Banks

•Consider a few services offered by the banks.

•Payment and Remittance Services
•Overdraft
•Currency Exchange
•Consultancy
•Online Banking
•Mobile Banking
•Home Banking
•Credit and Debit Cards
•Advancements of loans.
•Cheque payments.
•Discounting on bills of exchange.
•Collecting and paying the credit instruments.
•Guarantee by banks.
•Consultancy.
•Credit cards.
•Funds remittance.
•Check/Cheque Payment.
•Collection and Payment Of Credit Instruments.
•Foreign Currency Exchange.
•Bank Guarantee.
 Primary Data

Primary data is also known as first hand data which is collected by researcher. The main tools which used collected the data was
investigation and observation.
Raw data, also known as primary data, are data (e.g., numbers, instrument readings, figures, etc.) collected from a source. In
the context of examinations, the raw data might be described as a raw score.
If a scientist sets up a computerized thermometer which records the temperature of a chemical mixture in a test tube every
minute, the list of temperature readings for every minute, as printed out on a spreadsheet or viewed on a computer screen are
"raw data". Raw data have not been subjected to processing, "cleaning" by researchers to remove outliers, obvious instrument
reading errors or data entry errors, or any analysis (e.g., determining central tendency aspects such as the average or median
 result). As well, raw data have not been subject to any other manipulation by a software program or a human researcher, analyst
or technician. They are also referred to as primary data. Raw data is a relative term (see data), because even once raw data have
been "cleaned" and processed by one team of researchers, another team may consider these processed data to be "raw data" for
another stage of research. Raw data can be inputted to a computer program or used in manual procedures such as analyzing 
statistics from a survey. The term "raw data" can refer to the binary data on electronic storage devices, such as hard disk drives
(also referred to as "low-level data").
 Secondary Data

Secondary data refers to data that is collected by someone other than the primary user. Common sources of secondary data for social science
 include censuses, information collected by government departments, organizational records and data that was originally collected for other
research purposes. Primary data, by contrast, are collected by the investigator conducting the research.
Secondary data analysis can save time that would otherwise be spent collecting data and, particularly in the case of quantitative data, can
provide larger and higher-qualitydatabases that would be unfeasible for any individual researcher to collect on their own. In addition, analysts
of social and economic change consider secondary data essential, since it is impossible to conduct a new survey that can adequately capture
past change and/or developments. However, secondary data analysis can be less useful in marketing research, as data may be outdated or
inaccurate.
Sources of secondary data
•information collected through censuses or government departments like housing, social security, electoral statistics, tax records
•internet searches or libraries
•GPS, remote sensing
•km progress reports
 Data Analysis

Table of Contents:

•Executive Summary
•Advantage India
•Market Overview
•Recent Trends and Strategies
•Growth Drivers and Opportunities
•Key Industry Contacts
•Appendix

1
Executive summary

Higher ATM
penetration
• As of October 2020, the total
number of ATMs in India increased
to 209,881.

Growing lending
and deposit

• Total lending has increased at a

CAGR of 10.94% during FY07-
19 and total deposits have
increased by 17.21% in FY19
and is poised for further growth
due to demand for housing and
personal finance
Rising rural
penetration
• In 2020, 43 regional rural banks were
operational in the country.
• RBI has allowed regional rural banks
with net worth of at least US$
15.28 million to launch internet banking
facilities.

1
Advantage India
1 Robust demand
► Increase in working population and
growing disposable incomes will
raise demand for banking & related
services.
► Housing and personal finance are
expected to remain key demand
drivers.
► Rural banking is expected to witness
growth in the future.
2 Business fundamentals
► Rising free income improving the
revenue mix of banks.
► High net interest margins along with
low NPA levels ensure healthy
business fundamentals.
1
4 Innovation in services
► Mobile, internet banking and
extension of facilities at ATM
stations to improve operational
efficiency
► Vast un-banked population highlights
scope for innovation in delivery.
1 4
ADVANTAGE
INDIA
2 3 3 Policy support
►Wide policy support in the form of
private sector participation and
liquidity infusion.
► Healthy regulatory oversight and
credible monetary policy by the
Reserve Bank of India (RBI) have
lent strength and stability to the
country’s banking sector.
Evolution of the Indian banking sector

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

Closed  RBI was  Imperial Bank  Nationalisation of  In 2003, Kotak  Asper Union
market. established as the expanded its 14 large Mahindra Budget 2019-20,
provision coverage
State owned central bank of network to 480 commercial banks Finance Ltd
Imperial Bank of received a ratio of banks
country. branches. in 1969 & six
India was the banking license reached highest in
 Quasi central  In order to increase more banks in
only bank from RBI and 7 years.
banking role of penetration in rural 1980.
existing. became the first  According to the
Imperial Bank areas, Imperial  Entry of private
NBFC to be RBI, India’s foreign
came to an end. Bank was players such as
converted into a exchange reserves
converted into ICICI
bank. reached US$
State Bank of India. intensifying the
585.32 billion as of
competition.
January 1, 2021.
 Gradual technology
upgradation in
PSU banks.

1
The structure of Indian banking sector

Reserve Bank of India

Banks Financial institutions

Scheduled commercial banks Cooperative credit

(SCBs) (as of October 2020) institutions

All-India financial
Public sector banks (12)
institutions

Private sector banks (22) State-level institutions

Foreign banks (46) Other institutions

Regional Rural Banks

(RRB) (56)

Urban cooperative banks

(1,485)

Rural cooperative banks

(96,000)

1
Indian banking sector has grown at a healthy pace…(1/2)

Growth in bank credit (US$ billion)

 Credit off-take has been surging ahead over the past decade, aided
by strong economic growth, rising disposable incomes, increasing
CAGR 3.75%
consumerism and easier access to credit. 2,000

 During FY16-FY20, bank credit grew at a CAGR of 3.57%. As of 1,800

1,866.22
FY20, total credit extended surged to US$ 1,698.97 billion.

1,781.12

1,698.97
1,600
 Demand has grown for both corporate and retail loans. Services,

1,599.34
real estate. Consumer durables and agriculture allied sectors have led 1,400

1,466.47

1,442.56
the growth in credit.
1,200
According to the RBI, bank credit and deposits stood at Rs. 105.49
trillion (US$ 1.44 trillion) and Rs. 144.82 trillion (US$ 1.98 trillion), 1,000
respectively, as of December 18, 2020.
Credit to non-food industries stood at Rs. 104.56 trillion (US$ 1.42 800
trillion) as of December 18, 2020.
600

400

200

FY16

FY17

FY20

FY21*
FY18

FY19
16
Indian banking sector has grown at a healthy pace…(2/2)

 Access to banking system has also improved over the years due to Growth in deposits (US$ billion)
persistent effort from Government to promote banking technology
and promote expansion in unbanked and non-metropolitan regions CAGR 13.93%
2,000
 At the same time, India’s banking sector has remained stable despite

1,980.24
1,936.29
global upheavals, thereby retaining public confidence over the years. 1,800
 Strong growth in savings amid rising disposable income levels are
the major factors influencing deposit growth. 1,600

1,400

1,400.03
 Bank accounts opened under the Government’s flagship financial

1,347.18
1,200
inclusion drive Pradhan Mantri Jan Dhan Yojana (PMJDY) reached

1,180.19
40.05 crore and deposits in Jan Dhan bank accounts stood at more

1,149.19
1,000
than Rs. 1.30 lakh crore (US$ 18.44 billion).
 Opportunity: 800

• Significant growth possible in private sector lending as credit 600

disbursal by private sector banks is expected to increase.
• Market share of private banks in advances is expected to increase 400

FY16

FY19

FY20

FY21*
FY17

FY18
from 27.7% in 2017-18 to nearly 35% in 2019-20.

17
Asset's base continues to expand

 In FY17-FY20, bank assets across sectors increased. Total assets Total Banking sector assets (US$ billion)
across the banking sector (including public, private sector and
foreign banks) increased to US$ 2.52 trillion in FY20. 1,800
 In FY20, total assets in the public and private banking sectors were
1,600
US$ 1,529.72 billion and US$ 814.42 billion, respectively.

1,557.00

1,529.72
 Assets of public sector banks accounted for 60.62% of the total 1,400

1,454.13
banking assets (including public, private sector and foreign banks). 1,200

1,000

800

814.42
758.04
721.34
600

179.35
400

151.20
135.30
200

0
FY18 FY19 FY20

Public Sector Private Sector Foreign Banks

18
Interest income has seen robust growth

•Public sector banks accounted for over 58% interest income in Interest income growth in Indian banking sector (US$ billion)
FY20
•Interest income of public banks reached US$ 101.60 billion in
120.00
FY20.
•In FY20, interest income in the private banking sector reached US$
63.64 billion, whereas those of foreign banks stood at US$ 9.45 100.00

105.6
102.7

102.5

101.6
billion

98.0
80.00

60.00

63.6
56.3
47.4
40.00

43.3
36.8
20.00

9.5
7.8

7.8

8.0
8.0
0.00
FY16 FY17 FY18 FY19 FY20

Private Sector Public Sector Foreign Banks

19
Growth in ‘other income’ also on a positive trend

•Public sector banks accounted for about 50.9% of ‘Other income’ growth in Indian banking sector (US$ billion)
other income
•‘Other income’ for public sector banks stood at US$ 20.00
16.75 billion in FY20.
•In FY20, ‘other income’ in the private banking sector 18.00 16.00
was US$ 13.83 billion and in foreign banks was US$

17.66

16.75
2.35 billion

16.42
14.00

13.83
13.45
12.00

10.00

10.51
10.37
9.85
8.00

6.00

4.00

2.00

2.35
2.46

2.04

2.04
0.00
FY17 FY18 FY19 FY20

Public Sector Private Sector Foreign Banks

20
Uptrend in investment deposit ratio and loan-to-deposit ratio

Investment Deposit Ratio (%) Credit Deposit Ratio (%)

70.0
100.00
65.9
60.0 63.05
63.02
80.00 88.3 88.1
86.9
50.0
75.1
70.8 69.4 71.7
69.0 68.3
40.0 60.00 67.6 66.5 66.2 68.2
62.6

30.0 33.79 33.83 32.54 30.97 40.00

31.84 32.35

20.0
20.00
10.0
0.0
0.0 0.00
FY18 FY19 FY20 FY18 FY19 FY20
Public Sector Private Sector Foreign Sector SBI & its associates Nationalised Bank Public 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 asset than nationalized and public banks. This has prompted most of the
foreign banks to start their operations in India.

21
Notable trends in the banking industry sector … (1/3)

1
Improved risk management practices
 Indian banks are increasingly focussed 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 had a deadline of March 31, 2019.

2
Technological innovations
• As of October 2020, the total number of ATMs in India increased to 209,881.
• By 2022, digital assistants, social media and third-party channels are projected to act as primary channels for banking.

3
Diversification of revenue stream
 Total lending has increased at a CAGR of 10.94% during FY07-19 and total deposits have increased by 17.21% in FY19 and is poised for
further growth due to demand for housing and personal finance.

4
Demonetization
 The effects of demonetisation are also visible in the fact that bank credit plunged by 0.8% from November 8 to November 25, 2016, as US$ 9.85
billion were paid by defaulters.

22
Notable trends in the banking industry sector … (2/3)

5
Focus on financial inclusion
 Ministry of Finance, Government of India, launched the Financial Inclusion Index. This index will measure access, usage and quality to financial
services.
 Department of Financial Services (DFS), Ministry of Finance and National Informatics Centre (NIC), launched Jan Dhan Darshak as a part of
financial inclusion initiative. It is a mobile app to help people locate financial services in India.

6
Derivatives and risk management products
• The increasingly dynamic business scenario & financial sophistication has increased the need for customized exotic financial products.
• Banks are developing innovative financial products & advanced risk management methods to capture the market share

7
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,

8
Demonetization
 The effects of demonetisation are also visible in the fact that bank credit plunged by 0.8% from November 8 to November 25, 2016, as US$ 9.85
billion were paid by defaulters.

23
Notable trends in the banking industry sector … (3/3)

9
Focus on Jan Dhan Yojana
 The Government of India made Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme an open-ended scheme and also added more incentives.
 Key objective of PMJDY is to increase the accessibility of financial services such as bank accounts, insurance, pension, credit facilities, etc.
mostly to the low-income groups.
 As of December 30, 2020, bank accounts opened under PMJDY reached 41.58 crore and deposits in Jan Dhan bank accounts stood at
more than Rs. 1.35 lakh crore (US$ 18.46 billion).

10
Wide usability of RTGS, NEFT and IMPS
• 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
• The number of transactions through Immediate Payment Service (IMPS) increased to 355.69 million in volume and amounted to Rs. 2.92 trillion (US$ 39.98
billion) in value in December 2020..

11
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.

24
Notable trends in the banking industry sector … (4/4)

 Digital influence in the Indian banking sector has been growing India’s Digital Lending Forecast (US$ billion)
faster due to the rising digital footprint
 India’s digital lending stood at US$ 110 billion in FY19 400
 Digital lending to micro, small and medium enterprises (MSMEs)
in India is expected to reach US$ 100 billion by 2023. 350

350
 In December 2020, in response to the RBI’s cautionary message,
300
the Digital Lenders’ Association issued a revised code of conduct
for digital lending..

270
250

200

200
150

150
100

110
75
50

58
46
0

FY17

FY18

FY19
FY16

FY21F

FY22F

FY23F
FY20E
25
Mobile banking to provide a cost-effective solution … (1/2)

Soaring rural tele-density opens avenue of mobile banking (in%)

Banking penetration in rural India picking pace
70

 Of 600,000 village habitations in India, only 5% have a 60

commercial bank branch.
 By October 2020, the number of outstanding debit and credit 59.5 58.21
50 56.66
42.7
cards were 874.16 million and 59.41 million, respectively. 50.3
37.5 46.1 48.3
40
 51.4% of nearly 89.3 million farm households do not have 39.9
access to any credit, either from institutional or no 30
institutional sources.
20
 Agriculture requires timely credit to enable smooth
10
functioning. However, only one-eighth of farm households
avail bank credit 0
2011 2012 2013 2014 2015 2016 2017 2018 2019
 Local money-lending practices involve interest rates well
above 30% therefore making bank credit a compelling
alternative  Teledensity in rural India soared at a CAGR of ~5.65% between
2011 and 2019.
 Banks, telecom providers and RBI are making efforts to make
roads into the un-banked rural India through mobile banking
solutions.
 Rural tale density reached 58.94% in 2020*.

20
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 cell phones. The growth of mobile banking
could impact the banking sector significantly.
Mobile
 Mobile banking is especially critical for countries like India as it rémittences
Mobile
promises to provide an opportunity to provide banking facilities to
recharge
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 Rs. 50,000 (US$ 745.82)
and allowed banks to set their own limits Mobile banking Mobile
(fund transfers,
 In December 2020, Unified Payments Interface (UPI) recorded commerce
etc.)
2.23 billion transactions worth Rs. 4.16 lakh core (US$ 56.95
billion).
 On November 6, 2020, WhatsApp started UPI payments service in
Payment
India on receiving the National Payments Corporation of India of bills
(NPCI) approval to ‘Go Live’ on UPI in a graded manner.

27
Strategies adopted
1 Increased use of
technology
• As per Union Budget 2019-20, the
Government proposed a fully automated
GST refund module and an electronic
invoice system to eliminate the need for
a separate e-way bill.
2 Cross-selling
• 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.
3 Capture latent
demand
• Expansion in unbanked rural
regions helps banks to garner
deposits.
• Increasing tale-density and
support of regulators have aided
rural expansion.
28
6 Privatise Public
Sector Banks (PSU)
On 22nd August 2020, the Government of
India announced that it may privatise four
public sector banks namely—Punjab & Sind
1 6 Bank, Bank of Maharashtra, UCO Bank and
IDBI Bank
5 Merger Execution
• In March 2020, the Government of
2 5 India merged ten public sector banks
into four banks to drive credit
growth, lift the slowing economy
and boost the government’s target of
a $5-trillion economy by 2024
3 4
4 Overseas expansion
• Although at a nascent stage, private & public
banks are gradually expanding operations
overseas.
• Internationally, banks target India-based
customers and investors settled abroad.
Growth drivers of Indian banking sector
1 Economic and
demographic drivers
• Favorable demographics and rising income levels
• India ranks among the top 7 economies with a GDP of
US$ 2,73 trillion in 2018
• The sector will benefit from structural economic
stability and continued credibility of Monetary Policy.
2 Policy support
•The Government passed the Banking
Regulation (Amendment) Bill 2017 to
empower RBI to deal with NPAs in
the banking sector
•The Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2017 Bill 2 5
was passed by Rajya Sabha to
strengthen the banking sector (as of
Jan 2018).
3 Infrastructure
financing
• India currently spends 6% of GDP on
infrastructure; NITI Aayog expects this
fraction to grow going ahead.
• As per Union Budget 2019-20, investment
driven growth requires access to low-cost
capital, which requires an investment of
Rs. 20 lakh cores (US$ 300 billion) every
year.
29
6 Government initiatives
• Government has smoothly carried out consolidation,
reducing the number of public sector banks by eight.
• The Government of India will invest Rs. 48,239 crore
(US$ 6.78 billion) in 12 public sector banks in FY20
to help maintain regulatory capital requirements and
financial growth in India.
• The Government of India will invest Rs. 5,042 crore
1 6 (US$ 730.88 million) in Bank of Baroda post its
merger with two other public sector lenders, Dena
Bank and Vijaya Bank
5 Common Service
Center (CSC)
• The Government of India plans to
allow Common Service Centers
(CSC) to offer banking services. CSC
will offer free internet through Bharat
Net until March 2020.
4 4 Pradhan Mantri
3
Vaya Vandana Yojna
•The scheme was launched on March 28,
2018 to provide social security to elderly
people by providing Rs. 10,000 (US$ 155)
pension per month. The scheme has
subscription limit until March 2020. The
scheme has investment limit of Rs. 15 lakh
(US$ 23,274).
Strong economic growth to propel banking sector expansion

India’s working age population (in million) and GDP per capita
 Rising per capita income will lead to increase in the fraction of the
current (US$ )
Indian population that uses banking services.
 Population in 15-64 age group is expected to grow strongly going 2,500
ahead, giving further push to the number of customers in the
banking sector.
 As per Economic Survey 2018-19, working age population will 2,000

grow by 9.7 million per year during 2021-31 and 4.2 million per 1,939.61
year during 2031-41.
1,500 1,606.04
1,461.67

1,000

860.13 886.92
802.01

500

0
2011 2015 2017

Population GDP-RHS

30
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)
3,500 CAGR 3.6%
500 CAGR 9.94%

450 3,000 3,229

465.64
433.97
400

418.21
2,500
350 2,667
375.42
340.29

300 2,000
2,167
250 1,875
1,500
200

150 1,000

100
500
50

0 0
FY16 FY17 FY18** FY19*** FY20* 2010 2015 2020 2025

•The real annual disposable household income in rural India is forecast to grow at a CAGR of 3.6% over the next 15 years
•Gross Value Added by agriculture, forestry and fishing is estimated at Rs. 32.54 trillion (US$ 465.64 billion) in FY20*.
•Rising incomes are expected to enhance the need for banking services in rural areas, and therefore, drive growth of the sector.
Programmers like MNREGA have helped in increasing rural income, which was further aided by the recent Jan Dhan Yojana.

31
Housing and personal finance have been key drivers … (1/2)

 Rapid urbanization, decreasing household size & easier availability Growth in credit to housing finances (US$ billion)
of home loans has been driving demand for housing.
 Personal finance, including housing finance, provide an essential 200

cushion against volatility in corporate loans. 180

188.68
 Housing units worth Rs. 45 lakh (US$ 63,107) will rise on account
160
of additional Rs. 1.5 lakh (US$ 2,103) tax deduction.

165.99
 The recent improvement in property value have reduced the ratio of

151.21
140
loan to collateral value.

133.10
120
 Credit to housing sector increased at a CAGR of 13.4% during

114.10
FY16- FY20, wherein, value of credit to housing sector increased 100
from to US$ 114.10 billion in FY16 to US$ 188.68 billion in FY20.
80
 Demand in the low & mid-income segment exceeds supply three- to
four-fold. This has propelled the demand for housing loan in the last 60

few years.
40

20

FY17

FY18

FY20
FY16

FY19
32
Housing and personal finance have been key drivers … (2/2)

 Growth in disposable income has been encouraging households to Growth in personal finance excluding housing (US$ billion)
raise their standard of living and boost demand for personal credit.
160
 Credit under the personal finance segment (excluding housing) rose
at a CAGR of 15.46% during FY16-FY19 and stood at US$ 151.75

151.75
140

144.90
billion in FY19.
 Unlike some other emerging markets, credit-induced consumption is 120

still less in India.

111.60
100

98.60
80

60

40

20

FY17

FY18

FY19
FY16

33
Schemes by government
1 Pradhan Mantri Suraksha
Bima Yojana
•This scheme is mainly for accidental
death insurance cover for up to Rs. 2
lakh (US$ 2,983.29).
•Premium: Rs. 12 (US$ 0.18) per
annum
•Risk Coverage: For accidental death
and full disability - Rs. 2 lakh (US$
2,983.29) and for partial disability -
Rs. 1 lakh (US$ 1,491.65).
•Gross enrolment under the scheme
reached 154 million in FY19.
2 Pradhan Mantri Jeevan Jyoti
Bima Yojana
• This scheme aims to provide life insurance
cover
• Premium: Rs. 330 (US$ 4.92) per annum.
It will be auto-debited in one installment
• Risk Coverage: Rs. 2 lakh (US$ 2,983.29)
in case of death for any reason.
• Gross enrolment under the scheme reached
59 million in FY19..
5 Capital Infusion Scheme
• Approved extension of Rs. 343 crore (US$
51.16 million) to be infused for three years
until FY20 in regional rural banks (RRBs),
5 which will strengthen their lending capacity.
1
4 Pradhan Mantri Jan Dhan
Yojana
•Bank accounts opened under PMJDY reached
40.05 crore and deposits in Jan Dhan bank
accounts stood at more than Rs. 1.30 lakh
2 4 crore (US$ 18.44 billion).
•Under the scheme, each & every citizen will
be enrolled in a bank for opening a Zero
balance account.
3 •Each person getting into this scheme will get
Rs. 30,000 (US$ 447.49) life cover while
opening the account
•Overdraft limit under such account is Rs.
3 Atal Pension Yojana
5,000 (US$ 74.58)
• Under the scheme, subscribers would receive fixed
pension up to Rs. 5,000 (US$ 74.58) at the age of 60
years (depending on their contributions).
• The central Government will also co-contribute 50%
of the subscriber's contribution or Rs. 1,000 (US$
14.92) per annum, whichever is lower, to each
eligible subscriber account, for a period of 5 years.
Increasing M&A and investment activities (1/3)

1 The consolidated M&A activities are driven by NBFC and banking sector.

2 In 2019, banking and financial services witnessed 32 M&A activities worth US4 1.72 billion.

sector banks.

4 The Government approved the amalgamation scheme for Bank of Baroda, Vijaya Bank and Dena Bank, the
commencement of which started from April 01, 2019.

5 The total equity funding of microfinance sector grew at the rate of 42 y-o-y to Rs. 14,206 crore (US$

2.03 billion) in 2018-19.

35
Increasing M&A and investment activities (2/3)

6 The total equity funding of microfinance sector grew at the rate of 42 y-o-y to Rs. 14,206 crore (US$

2.03 billion) in 2018-19.

In August 2019, the Government announced major mergers of public sector banks. United Bank of India and
7 Oriental Bank of Commerce merged with Punjab National Bank; Allahabad Bank merged with Indian Bank; and
Andhra Bank and Corporation Bank merged with Union Bank of India.

8 In March 2020, State Bank of India (SBI), India’s largest lender, raised US$ 100 million in green bonds through
private placement.

9 In April 2020, Axis Bank acquired additional 29% stake in Max Life Insurance.

10 In August 2020, the Chinese Central Bank People’s Bank of China acquired a 0.0065% stake in ICICI

Bank for Rs. 15,000 crore (US$ 2,127.9 million).

36
Increasing M&A and investment activities (3/3)

In October 2020, HDFC Bank and Apollo Hospitals partnered to launch the ‘HealthyLife Programme’, a holistic

11 healthcare solution that makes healthy living accessible and affordable on Apollo’s digital platform.

37
Key Industry Contacts

Agency Contact Information

World Trade Centre, 6th Floor

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

38
Glossary

 ATM: Automated Teller Machines

 CAGR: Compound Annual Growth Rate

 FY: Indian Financial Year (April to March)

 GDP: Gross Domestic Product

 Rs.: 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

39
Exchange rates

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

Year Rs. Equivalent of one US$ Year Rs. Equivalent of one US$
2004-05 44.95 2005 44.11
2005-06 44.28 2006 45.33
2006-07 45.29 2007 41.29
2007-08 40.24 2008 43.42
2008-09 45.91 2009 48.35
2009-10 47.42 2010 45.74
2010-11 45.58 2011 46.67
2011-12 47.95 2012 53.49
2012-13 54.45 2013 58.63
2013-14 60.50 2014 61.03
2014-15 61.15 2015 64.15
2015-16 65.46 2016 67.21
2016-17 67.09 2017 65.12
2017-18 64.45 2018 68.36
2018-19 69.89 2019 69.89
2019-20 70.49 2020 74.18
2020-21 73.51 2021* 73.25

40
 Conclusion

Today the banking sector in India is fairly mature in terms of supply, product range and reach. The world economy witnessed that a large
number of banks have been failed. In this government of India play a vital role through implementation of the recommendations made by
various committees? The role of banks is not only directly important, but also it is very needful in the precise conduct of the programs
projected by government. So that it may revolutionize in the provision of loans from time to time. A growing economy like India requires a
right blend of risk capital and long term resources for corporate to choose an appropriate mix of debt and equity. After researching banking
sector researcher found that different problems are increasing to banking sector because of the money market has always down.
 Suggestions

It is widely held that the indigenous banking system should be reformed and made an adjunct of the organized banking system rather than
replaced totally by commercial banks. Despite the sharp growth of the latter and emphasis on larger bank credit to the weaker sections of the
community, the banks have not been able to meet adequately the credit needs of the small borrower, owing mainly to the relatively high cost of
servicing small loans, high risk, and the high demand pressures for bank credit from the large organized sector of industry’ and trade.
In the circumstances, the indigenous bankers, with their prompt and flexible credit and informal methods of operation, have also been able to
flourish by making credit available to the small productive sector not fully catered to by commercial banks.
 Bibliography

www.wikipedia.org

https://commercemates.com