Indian banks are in better financial shape than their global peers due to higher interest rates in India. While global banks like Citibank suffered losses of $18 billion from bad mortgage debt during the subprime crisis, Indian banks like ICICI faced smaller losses of $264 million due to depreciating securities. Indian banks prefer foreign direct investment over foreign institutional investment since FDI provides management interest and easier market entry for foreign companies compared to speculative foreign investments.

1. Are indian banks in better shape than their global peers?

2. High profits Hike in lending rates Hike in deposit rates Effect of lending rates Increased bank’s earning due to higher interest on loans Impact of deposit rates Recognized at the time of maturity Indian banks vs. Global banks

4. Brief Comparison

6. Impact of subprime crisis Bank’s losses from: Non-payment by corporates especially SMEs. Share market badly affected ICICI lost 13.76% to end at Rs. 757.40. HDFC faced change of -15.81% Switching over to retail banking from investment banking. High cut in CRR of 100 points Retail sector badly affected Inflation lowered.

7. Market Condition HDFC Bank ICICI Bank

8. …contd… AXIS Bank CITIGROUP

9. Subprime Crisis – A Comparison ICICI Bank Citibank Loss of $264m. Due to depreciation in the value of securities it bought in the international markets Made additional $70m provisioning for losses ICICI face market change of -31.36% Loss of $18bn. Due to bad mortgage debt. Cut in dividend to 41% i.e. from 54 cents to 32 per share. Job cutting to 20,000 Revenues fell 70% from a year earlier to $7.2bn

10. FDI vs. FII Indian Banks Global Banks FII is good rather FDI FII also known as speculators or fair weather friends. FII inflows are called hot money Benefits: Reduced cost of capital Stability to balance of payments Improving market efficiency Strengthening corporate governance Preferring FDI to FII Got management interest (10% of voting stock in a company) Easy tool to enter a economy. Huge returns from developing countries like India.

11. Conclusion Comparing oranges with apples

12. Ratio

13. Thank You