Indian Banking Sector

1. INDIA BANKING
Towards a High- Performing
Sector
 MUNISH
MAHAJAN
 PRIYANKA JOEL
 RAJ KUMAR

2. Objectives
 Evolution of banking in India
 Banking as a Whole
 Future of Banking
 Green Banking

3. Evolutionary Phases
 Indigenous Reign
 Direct Intervention
of the State
 Liberalization
 Transition
 Entry of Foreign
Banks

4. Phase I: Indigenous banks
 Vedas and the Manusmriti:
 Kautalya and Manu
recommended 15 per cent
interest per annum on
capital.
 Sahukar came into
existence lending money at
exorbitant rates.
 Mostly poor borrowers use
to surrender their
properties.
 British rule almost wiped
out these tribes by bringing
European Banks from
urban
 They moved to villages.
They survive even today.

5. Phase II: Direct Intervention
 Government Interventions
began in 1930s
 The Reserve Bank which is
the Central Bank was
created in 1935 by passing
RBI Act 1934.
 The RBI is the sole
authority for
◦ issuing bank notes and
◦ the supervisory body for
banking operations in India .
◦ Supervising exchange
control and banking
regulations, and
◦ administers the government's
monetary policy.
◦ granting licenses for new
bank branches.

6. Intervention: Nationalization
 In the wake of the Swadeshi
Movement, a number of banks
with Indian management were
established in the country
namely,
◦ Punjab National Bank Ltd, Bank
of India Ltd, Canara Bank Ltd,
Indian Bank Ltd, the Bank of
Baroda Ltd, the Central Bank of
India Ltd.
 In 1955, Govt. nationalized
Imperial Bank of India with
extensive banking facilities on
a large scale especially in
rural and semi-urban areas.
 It formed State Bank of India
to act as the principal agent of
RBI and to handle banking
transactions

7. Intervention: Nationalization
 On July 19, 1969, 14
major banks nationalized
and
 in 15th April 1980 six
more commercial
 80% of the banking
segment in India under
Government ownership
in 1990.
 the branches of the
public sector bank India
rose to approximately
800% in deposits and
advances took a huge
jump by 11,000%.

8. Phase III - Liberalization
 Constitution of Narasimham
committee and its report on
Banking reforms in 1991.
 It covered the areas of interest
rate deregulation & directed credit
rules,
 Statutory preemptions and entry
deregulation for both domestic
and foreign banks.
 Lowering of the CRR and SLR
 Interest rate liberalization
 Do away with Entry barriers. By
March 2004, the new private
sector banks and the foreign
banks share shared almost 20%
of total assets
 Prudential Norms act against
NPAs

9. Phase IV: Transition
 Most Indian banks lagging
behind the areas of customer
funds transfer and clearing
systems.
 Over-staffed and not able to
compete with new generation
private banks
 While these new banks and
foreign banks still face
restrictions in their activities.
 New banks are well-
capitalized,
 Use modern equipment and
 Attract high-caliber
employees. Indian banks were
given time to
 Indian Banks to strengthen
their balance sheets,
consolidate and overall
become more robust, so that
they could compete.

10. Phase V: Entry of Foreign
Banks
 Two of domestic banks in
India have turned like Foreign
Banks. About 74 per cent of
holdings of ICICI and HDFC
bank are in the hands of
foreigners.
 Phase II of roadmap foreign
banks may be permitted to
have overall investment of 74
per cent in the private banks
of India in April 2009
 New banks to be in India
◦ Royal Bank of Scotland
◦ Switzerland's UBS
◦ US-based GE Capital
◦ Credit Suisse Group
◦ Industrial and Commercial Bank
of China
 Areas of Concentration are
Risk Management,
customizing the products and
Value creation.

11. BANKING as a WHOLE

12. Types Of Banks

13. SECTOR SNAPSHOT
SIZE  Total assets of US$ 850 billion
 Over 96 scheduled banks
Number
 Public sector: 27
Of  Private sector: new – 31
Banks  Foreign: 38
 Over 190 regional rural banks
 Over 66,000 branches
Branches  Public sector: 46,000
network  Private sector: 5,500
 Foreign: 190
 Regional rural: 14,400

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

15. Growth of Banking Assets

16. Advancement in Banking
Technology
E-Banking
Internet Banking
ATM
Debit Card
Credit Cards
Phone banking
Microwave banking

17. MAJOR DEVELOPMENTS
 The Monetary Authority of Singapore (MAS) has provided
qualified full banking (QFB) privileges to ICICI Bank for its
branch operations in Singapore. Currently, only SBI had QFB
privileges in country.
 The Indian operations of Standard Chartered reported a profit
of above US$ 1 billion for the first time. The bank posted a
profit before tax (PAT) of US$ 1.06 billion in the calendar year
2009, as compared to US$ 891 million in 2008.
 Punjab National Bank (PNB) plans to expand its international
operations by foraying into Indonesia and South Africa. The
bank is also planning to increase its share in the international
business operations to 7 per cent in the next three years.
 The State Bank of India (SBI) has posted a net profit of US$
1.56 billion for the nine months ended December 2009, up
14.43 per cent from US$ 175.4 million posted in the nine
months ended December 2008.

18. Government Initiatives
The government plans to invest US$ 3.63 billion into public sector
banks to aid them for maintaining their capital adequacy ration (CAR),
US$ 2.1 billion would be used for recapitalization of the public sector
banks during April-June 2010 and US$ 1.5 billion will be invested
during the rest of 2010-11.
Without the prior approval of RBI, Indian companies may borrow up to
US$ 500 million in a year.
RBI also allowed domestic scheduled commercial banks to open up
their branches in Tier III to Tier VI regions that have population of up
to 49,999 without the prior permission of the central bank.
In its platinum jubilee year, the RBI, the central bank of the country, in
a notification issued on June 25, 2009, said that banks should link
more branches to the National Electronic Clearing Service (NECS)

19. KEY FACTS OF BANKING
SECTOR
 RBI has the tenth largest gold reserves in the world after
spending US$ 6.7 billion towards the purchase of 200 metric
tonnes of gold from the International Monetary Fund.
 State Bank of India (SBI) has become the first Indian bank to
be ranked among the Top 50 banks in the world.
 ICICI Bank also made it to the Top 100 list with a brand value
of US$ 2.2 billion. The total brand value of the 20 Indian
banks featured in the list stood at US$ 13 billion.
 Bank credit in the 15 days up to January 29, 2010 rose by
US$ 4.32 billion, pointing to a revival in credit growth. This is
the highest year-on-year growth recorded since August 14,
2009.
 The confidence of non-resident Indians (NRIs) in the Indian
economy is reviving again. NRI fund inflows increased since
April 2009 and touched US$ 47.8 billion on March 2010.

20. Defining the Future of
Banking
 IBM’s strategic research unit, the Institute for Business Value,
recently released a study called Banking 2015: Defining the
Future of Banking.
 Worldwide, total financial services revenue is predicted to
experience compound annual growth of 7.1 percent between
2000 and 2015, from $2 trillion to $5.6 trillion. In the Asia-
Pacific region, IBM predicts a growth rate of about 7.6
percent.
 According to the survey, the five key trends that will determine
market success in 2015 are customers taking control, niche
competitors, a new workforce, regulated transparency and
sharp focus on technology
 Keeping with the future trends, the study identifies a number
of value-added options for products and market innovation.
These are mortgages, RFID, service packaging and customer
integration.

21. Green Banking Initiatives
 Indus Ind Bank inaugurated Mumbai's first solar-powered ATM as
part of its "Green Office Project" campaign titled "Hum aur Hariyali
 State Bank of India (SBI), as part of its green banking policy, plans
to set up captive windmills to generate 15 Mw of power in Tamil
Nadu, Maharashtra and Gujarat.
 Energy efficiency is another key focus of banks, with an estimated
market worth more than $15 billion by 2015 in India. IDBI Bank, for
instance, has an exclusive team working on clean development
mechanism (CDM) advisory services. It also implemented a
refinance scheme for energy saving projects for micro, small and
medium enterprises sector
 The new Green Home Loan Scheme from SBI, for instance, will
support environmentally-friendly residential projects and offer
various concessions. A 5 per cent concession in margin, 0.25 per
cent concession in interest rate .

22. Bibliography …
www.google.com
www.findarticle.com
www.worldjute.com
www.wikipedia.org
www.wholebanking.com
www.economywatch.com
www.bankingindiaupdate.com

23. Why was the
Indian banking
sector secure from
recession ?????

24. “BANKING WAS CONCIEVED IN
INQUITY AND BORN IN SIN”