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Changing Profile of Household Sector Credit and Deposits in Indian Banking System

-Deepak Mathur

November 30, 2010

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Indian Banking System

• Commercial & Co-operative banks• Commercial – 90 % of system’s assets• 170 commercial banks (166 scheduled)• 85, 000 branches, 45,000 ATMs• 35,000 centres out of 675,000 habitats• 660 mn deposit and 110 mn credit accounts• Deposits: Rs. 48 trillion• Credit : Rs. 35 trillion• Employment :1 million

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Basic Statistical Returns

• Statutory and non-statutory returns• Basic Statistical Return (BSR) system• Deposits, Credit, Employment, Investments• BSR-1: Credit (annual, branch level)

– Two parts– Large accounts: Account level data on several

characteristics– Small accounts-Branch level purpose-wise data– Survey of small loan accounts

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• BSR-2 Deposits (annual, branch level)– Broad ownership, Type of deposits– Term deposits- maturity, Interest rate

• BSR-4 (sample survey, annual, branch level)-

Composition and ownership pattern of deposits– Economic sectors- Government, Private Corporate, Financial,

Household and Foreign Sectors, Detailed sub sectors– Type of deposits-Current/Savings/Term

• Other returns: Investments, Debits to Deposit and Credit accounts, etc.

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• BSR-4 : Survey of ownership pf deposits– Annual, Sample survey, Branch level data– Stratified sampling-State/UT, Population

group, Bank group; Size (deposits)– Ratio Estimator– Type of Deposit account– Economic Sectors

• Household sector saving estimation

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• Household sector data– Credit and Deposits– Individuals accounts

• Males, Females• Singly or jointly with other individuals

and– Unincorporated bodies

• Partnerships, Proprietary concerns• Trusts, associations, clubs, etc.

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Household sector-Credit and Deposits

1991-2009– Deposits-High growth rates

• 16.2 % (1991-2009), 17.3 % 2001-09• Though lower than overall deposit growth• Largest constituent of depositor base• Share 80.5 % in 1991, 67.2 % in 2001

About 58 % in recent years• Individuals 90 % in 1991 and 80 % in 2009

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1991-2009– Credit-High growth rates

• 16.6 % (1991-2009), 21.5 % 2001-09• Though lower than overall credit growth• A major constituent of borrower base• Share 56.3 % in 1991, 47 % in 2006-07,

44 % in 2008 and 39 % in 2009• Number of accounts

1991: 59 mn (62 mn total)2009: 104 mn (110 mn total)

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1991-2009– Credit-Deposit Ratio– Household sector-consistently lower– Household sector

• 1991: 43 %, 2006-07: 57-59 %, 2009: 47 %

– Total credit• 1991: 62 %, 2006-07: 70-72% %, 2009: 71 %

– Differential 13 -20 percentage points

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Household sector-Credit- Purpose

• Personal loans (Housing, Consumer durables, vehicles, others)

• All other loans- productive sectors• Share of Personal loans in total credit

Number of accounts : 1991-27 %, 2009- 65 %

Amount outstanding : 1991-13 %, 2009- 43 %• Personal loans Growth

1991-2009 : 25.5 %, 2001-09: 39.5 %

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Household sector-Credit- Purpose

• Large accounts (1996-2009)– Agriculture : 10 %– Industry : 1996-2001: 35 %, 2006-09: 20 %– Trade : 10 %, Professionals : 10%– Housing: 1996: 6 %,2006-09: 25 %

• Small accounts (2001-06)– Agriculture : 30 %– Industry : 4 %– Personal loans : 40 %

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Household sector-Credit-Cost, Size

• Weighted average interest rate• Large accounts (1996-2009)

– In alignment with overall rate for all sectors– No direct relationship– 60 to 80 bps difference

• Small accounts (2004-06)– Housing loans and Agriculture loans at lower rates

• Average size of loan amount Household sector loans average about 34 % of all loan accounts average amount

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Household sector-Credit- Type of account

• Short term accounts: Cash credits, overdrafts and demand loans

• Long term loans : Medium term loans and long term loans

• Increase in Long term accounts– Number : 1996 : 69 % 2009 : 77 %– Amount : 1996 : 42 % 2009 : 67 %

• Personal loans – term loans

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Household sector-Deposits-Type of account

Type of account• Demand deposits: Current and savings

deposits, Term deposits: Fixed maturity• Term deposits : major share, though declining

– 1991: 61 %, 2006 : 51 %, 2009: 58%– Individuals sub-sector similar trend

• Household sector: recent years higher proportion in CASA deposits

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Household sector-Term deposits-Maturity

Maturity of term deposits• Data for individuals sub-sector• Original maturity. Maturity brackets:

<1 year, 1-3 years and > 3 years. • Two-thirds of deposits below 3 years maturity.• Share of maturity below 1 year declined.• Average maturity: about 2.4 years (1996-2009)

(for all sectors: Higher 1.9 years in 2009)

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Summary observations

Household sector 1991-2009

• Consistently high growth in deposits and credit, though lower than overall

• Major share in banking system– Deposits : 58 % (79 % of which individuals)– Credit : 39 %– Credit-Deposit Ratio : 47 %

• Net saver-provider of funds

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• Personal Loans-High and rising share– 65 % accounts, 43 % amount– Housing loans : 56 % of personal loans

• Industry-declining share : 20 %,

• Agriculture : 10 %, Other services: 10 %

• Cost of credit: Similar to all loans

• Size per account : one-third of total credit

• Long term loans-Increasing share

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• Deposits– 44 % of current deposits with banks, 85 %

of savings deposits, 52 % of term deposits– Decline in share of term deposits in total

deposits. Higher proportion of current and savings deposits.

– Term deposits average maturity higher compared to all sectors.

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Economy & Finance