The banking system remains, as always, the most dominant segment of the financial sector. Indian banks continue to build on their strengths under the regulator's watchful eye and hence, have emerged stronger.

In the annual international ranking conducted by UK-based Brand Finance Plc, 18 Indian banks have been included in the Brand Finance® Global Banking 500. In fact, State Bank of India (SBI), which is the first Indian bank to be ranked among the Top 50 banks in the world, has improved its position from 36th to 34th, as per the Brand Finance study released on February 1, 2011. The brand value of SBI has enhanced to US$ 1.12 billion. ICICI Bank, the only other Indian bank in the top 100 club has improved its position with a brand value of US$ 2.5 billion. Indian banks contributed 1.7 per cent to the total global brand value at US$ 14.74 billion and grew by 19 per cent in 2011, according to the study.

Nationalised banks, as a group, accounted for 51.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 22.5 per cent, according to Reserve Bank of India's (RBI) 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: September 2010'. The share of New private sector banks, Old private sector banks, Foreign banks and Regional Rural banks in aggregate deposits was 13.5 per cent, 4.5 per cent, 5.2 per cent and 3.1 per cent respectively.

With respect to gross bank credit also, nationalised banks hold the highest share of 50.9 per cent in the total bank credit, with SBI and its associates at 23.1 per cent and New Private sector banks at 13.7 per cent. Foreign banks, Old private sector banks and Regional Rural banks held relatively lower shares in the total bank credit with 5.2 per cent, 4.5 per cent and 2.5 per cent respectively.

The report also found that scheduled commercial bank offices (with deposits of US$ 2.25 or more) accounted for 66.2 per cent of the bank offices, 96.6 per cent in terms of aggregate deposits and 93.8 per cent in total bank credit.

Bank loans registered a growth of 21.38 per cent in 2010-11, while deposit growth stood at 15.84 per cent, according to data released by RBI. Analysts and bankers said a growth rate of 18 per cent in deposits and 20 per cent in credit should be sustainable for banks in 2011-12.

India's foreign exchange reserves stood at US$ 308.2 billion as on April 8, 2011, according to the data in the weekly statistical supplement released by RBI.

Indians who live and work abroad have remitted US$ 55 billion in 2010 as compared to US$ 49.6 billion in 2009 and have topped the world list in sending money back home, according to World Bank's Migration and Remittances Factbook 2011. With online money transfer services provided by many banks becoming popular, remitting money from any corner of the world is no more a problem.

Major Developments

Hindustan Unilever Limited (HUL) has tied up with State Bank of India (SBI) to start a pilot project to promote financial inclusion in rural markets in Maharashtra and Karnataka, through HUL's 'Shakti Ammas', a network of self-help groups to open bank accounts for people. Currently, around 100 accounts have been opened with their help and the project will be launched nationally by end of April 2012.

The government has infused US$ 392.25 million into Oriental Bank of Commerce (OBC). This will increase the government‟s shareholding in the Delhi-based bank from 51.09 per cent to 58 per cent.

C-Edge, a joint venture of the country's largest bank SBI with Tata Consultancy Services (TCS), is getting „anywhere anytime banking services‟ to rural customers. By spending just a fraction of stipulated costs, they are making the technology available to rural banks and small cooperative banks. As many as 4,200 branches of 52 regional rural banks and cooperative banks have managed to go live on a core banking platform without any major investment. These entities include a seven branch bank in Nagaland and a 20 branch lender in Jammu & Kashmir.

Exim Bank of India has signed two separate line of credit (LOC) agreements with Tanzania and Mozambique so as to further strengthen the financial linkages with the two African countries.

Government Initiatives

The Securities and Exchange Board of India (Sebi) will address the concerns of RBI about the high share of portfolio funds in overall capital inflows as they are prone to sudden stops and reversals, while framing the guidelines for

allowing foreign individual investors to invest directly in registered mutual funds. The guidelines, which will be in place by mid-May 2011, will also ensure that the subscription process is as simple as possible.

The government would provide an additional US$ 1.35 billion capital to state-owned banks in financial year 2011-12 to help them maintain at least 8 per cent capital adequacy ratio in Tier-I level, said the Union Finance Minister, Shri Pranab Mukherjee while presenting the Union Budget for 2011-12 (April-March) at the lower house of the Parliament.

He has also allowed fund houses to tap foreign nationals for investing in equity schemes. “To liberalise the portfolio investment route, it has been decided to permit Sebi-registered mutual funds to accept subscriptions from foreign investors who meet the KYC (Know Your Customer) requirements for equity schemes,” said Shri Mukherjee while presenting the Budget in Parliament. This would enable Indian mutual funds to have a direct access to foreign investors and widen the class of foreign investors in the Indian equity market, he added.

The government presented the Banking Laws (Amendment) Bill 2011 in the Lok Sabha. The bill proposed the following amendments among other recommendations in the existing Banking Law.

To raise the voting rights of shareholders of nationalised banks to 10 per cent from the existing 1 per cent. For private sector banks, the voting rights would be proportionate with investors‟ shareholding.

To remove the voting right restriction of 10 per cent for private sector banks in the total voting rights of all the shareholders of the banking company.

To give powers to nationalised banks to issue two additional instruments bonus shares and rights issues to be able to get funds from capital market to expand the banking business.

To grant powers to RBI to impose such conditions as it deems necessary while granting such approval for acquisition of 5 per cent or more share capital of a banking company if it considers necessary.

To confer power on the RBI to call for information and returns from associate enterprises of banking companies and also to inspect the same.