india : banking sector report_august 2013

Robust asset growth • Total Indian banking sector assets has reached USD1.5 trillion in FY12 from USD1.3

trillion in FY10, with 73 per cent of it being accounted by the public sector

Growing lending and

deposit

• Total lending and deposits have increased at CAGR of 22.8 per cent and 21.2 per cent,

respectively, during FY06-13 and are further poised for growth, backed by demand for

housing and personal finance

Higher ATM penetration • Total number of ATMs in India have increased to 1,04,500 in 2012 and is further expected

double over the next two years, thereby taking the number of ATMs per million population

from 85, at present, to about 170

Rising rural penetration • With the help of Financial Inclusion Plan (FY10-13), the banking connectivity in India

increased more than threefold to 211,234 villages in 2013 from 67,694, at the beginning of

the plan period

Source: Planning Commission, Aranca Research

ATM - Automated Teller Machine

• The engineering sector is delicensed; 100 per cent FDI is allowed in the sector

• Due to policy support, there was cumulative FDI of USD14.0 billion into the sector over April 2000 – February 2012, making up 8.6 per cent of total FDI into the country in that period

Growing demand

Source: IBA report titled “Being five-star in productivity - Roadmap for excellence in Indian banking”; Aranca Research;

Notes: NPA – Non Performing Assets

Robust demand

• Increase in working population and growing disposable incomes will raise demand for banking and related services

• Housing and personal finance are expected to remain key demand drivers

• Rural banking is expected to witness growth in the future

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

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

Business fundamentals

• Rising fee incomes improving the revenue mix of banks

• High net interest margins, along with low NPA levels, ensure healthy business fundamentals

FY12

Total asset

size:

USD1.5

trillion

FY25E

Total asset

size:

USD28.5

trillion

Advantage

India

Source: Indian Bank’s Association, Aranca Research, BMI

Notes: RBI - Reserve Bank of India, FDI – Foreign Direct Investment

Note: The data on number of banks belongs to FY11

• Closed market

• State-owned

Imperial Bank of

India was the only

bank existing

• RBI was established

as the central bank

of country

• Quasi central

banking role of

Imperial Bank came

to an end

• Imperial Bank

expanded its

network to 480

branches

• In order to increase

penetration in rural

areas, Imperial

Bank was

converted into

State Bank of India

• Nationalisation of

14 large

commercial banks

in 1969 and 6

more banks in

1980

• Entry of private

players such as

ICICI intensifying

the competition

• Gradual

technology

upgradation in

PSU banks

1921

1935

1936 -1955

1956-2000

2000 onwards

• Number of banks

increased to 27

public sector

banks, 22 private

sector banks and

41 foreign banks

• Advent of mobile

and internet

banking

• Growing FDI in

the Indian

banking sector

Reserve Bank of India

Banks Financial Institutions

Scheduled Commercial Banks (SCBs)

Cooperative credit institutions

Public sector banks (27)

Private sector banks (22)

Foreign banks (41)

Regional Rural Banks (RRB) (62)

Urban cooperative banks (1,674)

Rural cooperative credit institutions (96,751)

All-India financial institutions

State-level institutions

Other institutions

Source: RBI - Reserve Bank of India, Aranca Research

Note: The data on number of banks belongs to FY12

Growth in credit off-take over past few years

(USD billion)

Source: Reserve Bank of India (RBI), Aranca Research;

Note: CAGR - Compounded Annual Growth Rate.

Note: FY14* - RBI’s growth estimates

** Growth and CAGR is in terms of Indian rupee

Credit off-take has been surging ahead over the past

decade, aided by strong economic growth, rising disposable

incomes, increasing consumerism and easier access to

credit

During FY06–13, credit off-take expanded at a CAGR** of

22.8 per cent to USD991 billion

Total credit off-take is estimated to grow to USD1,140 billion

in FY14

Demand has grown for both corporate and retail loans

352

495

610 552

742 896

916 991

1,140

0%

5%

10%

15%

20%

25%

30%

0

200

400

600

800

1,000

1,200

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14*

Amount (USD billion) Growth- RHS (%)

Growth in deposits over the past few years

(USD billion)


Note: CAGR - Compounded Annual Growth Rate

Note: FY14*- RBI’s growth estimates

** Growth and CAGR is in terms of Indian rupee

Deposits have grown at a CAGR** of 21.2 per cent during

FY06–13; in FY13 total deposits stood at USD1,274.3 billion

Total deposits are estimated to grow to USD1,452.7 billion

in FY14

Deposit growth has been mainly driven by strong growth in

savings amid rising disposable income levels

Access to the banking system has also improved over the

years due to persistent government efforts; at the same time

India’s banking sector has remained stable despite global

upheavals, thereby retaining public confidence over the

years

489

665

822 763

1,030

1,182 1,170 1,274

1,453

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14*

Total Banking sector assets (USD billion)


Note: CAGR - Compounded Annual Growth Rate

*Growth and CAGR is in terms of Indian rupee

Total banking sector assets have increased at a CAGR* of

8.2 per cent to USD1.5 trillion during FY10–12

FY10–12 saw growth in assets of banks across sectors

Assets of public sector banks, which account for 73

per cent of the total banking asset, grew at an

average of 7.5 per cent

Private sector expanded at an CAGR* of 11.3 per

cent, while foreign banks posted a growth of 6.7 per

cent

1,290

1,336

1,510

1,150

1,250

1,350

1,450

1,550

0

300

600

900

1,200

FY10 FY11 FY12

Foreign banks Private banks

Public Banks Total Assets -RHS

Growth in money supply over past few years

(USD billion)

Source: Department of Industrial Policy and Promotion, Working group for 12th Five year plan, Aranca Research

Notes: CAGR* - Compound Annual Growth Rate, CAGR is calculated in Indian rupee term Narrow money (M1)

is as defined by sum of currency with public and Deposit money of the public

M2 is the sum of Narrow money and Post office saving deposit

M3 refers to sum of M2 and Time deposit with banks

Total money supply increased at a CAGR* of 13.9 per cent

to USD1.5 trillion during FY06–13

Narrow money supply (M1) rose at a CAGR* of 12.5 per

cent while its components currency with public and Deposit

money of the public grew at a CAGR of 15.7 and 8.8 per

cent during FY06–13

Board money supply (M2) increased at a CAGR* of 12.5 per

cent to USD348.1 billion during FY06-13

Money supply (M3) grew at a CAGR* of 17.4 per cent to

USD1.5 trillion during FY06-13

Time deposits with banks have shown highest average

growth of 19.2 per cent to USD1.2 trillion during FY06–13

0

300

600

900

1,200

1,500

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Currency with the public Deposit Money of the Public

Time Deposits with Banks Total Post Office Deposits

616

824

1,010 932

1,252

1,443 1,425 1,539

Interest income growth in Indian banking sector

(USD billion)

Source: Indian Bank’s Association, Aranca Research

Notes: CAGR* - Compound Annual Growth Rate,

CAGR is calculated in Indian rupee term

Public sector banks account for over 73 per cent of interest

income in the sector

They lead the pack in interest income growth with a

CAGR* of 21.1 per cent over FY09-12

Overall, the interest income for the sector has grown at 19

per cent CAGR* during FY09-12 56.9

63.8

76.3

101.0

17.7 17.3 20.2 27.9

6.3 5.5 5.9 7.6

FY09 FY10 FY11 FY12

Public Banks Private Banks Foreign Banks

Net Interest Margins growth (FY12)


Net Interest Margin (NIM) for scheduled commercial banks stood at 2.9 per cent in FY12, up from 2.6 per cent in FY08

Foreign banks, State Bank of India & its associates as well as private sector banks posted higher NIM at 4.0, 3.2 and 3.1

per cent, respectively in FY12

Net Interest Margin across sector (FY12)

3.2%

2.6%

2.8% 3.1%

4.0%

2.9%

SBI & itsassociate

Nationalisedbanks

Public sectorbanks

Privatesector banks

Foreignbanks

Scheduledcommercial

bank

2.58%

2.63%

2.54%

2.91% 2.90%

FY08 FY09 FY10 FY11 FY12

Average

Healthy net interest margins (FY12)

Source: Company Reports, Aranca Research

Note: HDFC – Housing Development Finance Corporation,

ICICI – Industrial Credit and Investment Corporation of India,

SBI – State Bank of India

Indian banking sector enjoys healthy net interest margins

(NIM) compared with global peers

HDFC leads the large banks with a NIM of over 4 per cent

Prominent Chinese banks have NIM’s between 2-3 per

cent, significantly lower than Indian peers

Despite virtually zero cost funds, the banks in the US have

NIM’s comparable to Indian peers

4.22%

2.73%

3.85% 3.59%

HDFC ICICI SBI Axis

‘Other income’ growth in Indian banking sector

(USD billion)




Public sector banks account for about 59 per cent of income

other than from interest (‘other income’)

‘Other income’ for public sector banks has risen at a

CAGR* of 5.7 per cent during FY09-12

Overall, ‘other income’ for the sector has risen at 4.5 per

cent CAGR* during FY09-12

8.9

10.2 10.0 10.5

3.7 4.3 4.3

5.1

3.1 2.1

2.3 2.3

FY09 FY10 FY11 FY12

Public Banks Private Banks Foreign Banks

Gross NPAs to Gross Advances (FY12)

Source: Reserve Bank of India (RBI), Aranca Research

Despite the global financial crisis, net non-performing assets (NPA) of Indian banking sector have declined over the past

few years

Although net NPA levels increased to 1.28 per cent in FY12 from 0.97 per cent in FY11, it is relatively stable

Privates sector banks maintained lowest gross non-performing assets to gross advances at 2.08 per cent in FY12

NPA levels over the year

3.17%

2.08%

2.68%

Public sector banks Private sector banks Foreign banks

1.02% 1.00%

1.05%

1.12%

0.97%

1.28%

FY07 FY08 FY09 FY10 FY11 FY12

Return on assets


Loan-to-Deposit ratio for banks across sectors has increased over the years

Private and foreign banks have posted high return on assets than nationalised and public banks

Loan-to-Deposit ratio

91

%

10

0%

97

%

12

8%

12

6%

79

% 1

03

%

96

%

14

3%

17

5%

89

%

88

%

88

%

15

3%

17

6%

SBI & itsassociate

Nationalisedbanks

Public banks Private banks Foreign banks

FY10 FY11 FY12

77

%

71

%

73

%

77

%

70

%

80

%

74

%

76

%

80

%

81

%

82

%

76

%

78

%

82

%

83

%

SBI & itsassociate

Nationalisedbanks


FY10 FY11 FY12

Market share of bank groups by deposits

Source: IBA statistics, Aranca Research

Share of public sector banks in total deposits have also

declined from 78.2 per cent in FY05 to 77.5 per cent in

FY12

This is largely due to the fact that private banks are rapidly

capturing share in savings deposit

78.2% 77.5%

17.1% 18.2%

4.7% 4.3%

FY05 FY12


Improved risk

management practices

• Indian banks are increasingly focusing 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

• Most of the banks have put in place the framework for asset-liability match, credit and

derivatives risk management

Diversification of

revenue stream

• Banks are laying emphasis on diversifying the source of revenue stream to protect

themselves from interest rate cycle and its impact on interest income

• Focusing on increasing fee and fund based income by launching plethora of new asset

management, wealth management and treasury products

Technological

innovations

• Indian banks, including public sector banks are aggressively improving their technology

infrastructure to enhance customer experience and gain competitive advantage

• Internet and mobile banking is gaining rapid foothold

• Customer Relationship Management (CRM) and data warehousing will drive the next

wave of technology in banks

Source: Indian Bank's Association, Indian Banking sector 2020, Aranca Research

Focus on financial

inclusion

• RBI has emphasised the need to focus on spreading the reach of banking services to the

un-banked population of India

• Indian banks are expanding their branch network in the rural areas to capture the new

business opportunity

Derivatives and risk

management products

• The increasingly dynamic business scenario and financial sophistication has increased the

need for customised exotic financial products

• Banks are developing Innovative financial products and advanced risk management

methods to capture the market share

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, organisational efficiency, and

diversification of risks

Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research

Increasing focus on

Woman Banking

• Total lending by public sector banks to self-employed women touched USD43 billion in

FY12 from USD31 billion in FY10

• In July 2012, RBI extended lending to individual women up to USD965 under the weaker

section

Wide usability of RTGS

and NEFT

• 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 and 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 and investors

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

• The KYC policy is now mandatory for opening an account or any making any investment

such as mutual funds

Source: Indian Bank's Association, Indian Banking Sector 2020, Business India Aranca Research

Source: PWC, ‘Searching for new frontiers of growth’, Aranca Research

• In the last few years, technology is being

increasingly used by Indian banks

• Banks are using technology at various levels

such as, back-office processing, convergence

of delivery channels, IT-enabled business

process reengineering as well as

communication with customers

• Indian banks currently devote around 15 per

cent of total spending on technology

• Spending on technology is expected to

increase at an annual rate of 14.2 per cent

• Banks in the country are set to benefit further

as they move ahead in implementing additional

technological advancements

• Technology has allowed banks to increase their

scale rapidly and manage increased business

and transactions volume with lesser man power

and reduced costs (at the operational level)

• Digital analytics is providing deeper insights

into customer needs and enabling banks to

offer highly targeted products and services; this

is likely to pick up pace in the coming years

• New channel-integration technologies are

enabling a more seamless end-to-end

experience for banking customers

• Offering new opportunities to engage and

interact with customers and thereby build

relationship and grow revenues; social media

has a crucial role to play in this

Increasing usage of technology

Growth in ATMs




The wide scope and ease of online banking has led to a

paradigm shift from traditional branch banking to net

banking

The total number of people using net banking has increased

to 7 per cent in 2012

Extensions for facilities such as fund transfer, account

maintenance and bill payment at ATM stations have

reduced branch banking footfall

ATMs in India have increased to 1,04,500 in 2012 and are

further expected to double over the next two years

The increase would take the number of ATMs per million

population from the current 85 to about 170

16,750 21,509

27,088

34,789 43,651

60,153

74,743

104,500

2005 2006 2007 2008 2009 2010 2011 2012*

CAGR: 29.9%

• Deposit of cash

• Withdrawal of

cash

• Mini-statement

• Balance Inquiry

• Coupon

Dispensing

• Fulfilling request

from customers

• Account transfer

• Touch screen

menus

• Bill payment

• Mobile recharging

1988-1994

1995-1999

2001-2004

2004-2006

2007 onwards

• Check deposit

with scanning

• Customised

ATMs


Notes: GDP - Gross Domestic Product, KYC - Know Your Customer,

RBI - Reserve Bank of India, ATM - Automated Teller Machine

Economic and

demographic drivers Policy support Infrastructure financing Technological innovation

• Favourable

demographics and rising

income levels

• Strong GDP growth

(CAGR of 7.0 per cent

expected over 2012–17)

to facilitate banking

sector expansion

• The sector will benefit

from structural economic

stability and continued

credibility of Monetary

Policy

• Extension of interest

subsidy to low cost home

buyers

• Simplification of KYC

norms, introduction of no-

frills accounts and Kisan

Credit Cards to increase

rural banking penetration

• RBI is considering giving

more licenses to private

sector players to

increase banking

penetration

• India currently spends 6

per cent of GDP on

infrastructure; Planning

Commission expects this

fraction to grow going

ahead

• Banking sector is

expected to finance part

of the USD1 trillion

infrastructure

investments in the 12th

Five Year Plan, opening

a huge opportunity for the

sector

• Technological innovation

will not only help to

improve products and

services but also to reach

out to the masses in cost

effective way

• Use of alternate channels

like ATM, internet and

mobile hold significant

potential in India

64.9

53.9

66.9

76.4 74.8

81.0

FY08 FY09 FY10 FY11 FY12 FY13**

Growth in credit to housing finances (USD billion)


Note: * CAGR - Compound Annual Growth Rate,

CAGR* - is calculated in INR terms

FY13**: Data till February 2013

Rapid urbanisation, decreasing household size and easier

availability of home loans has been driving demand for

housing

Credit to housing sector increased at a CAGR* of 11.1 per

cent during FY08–13

As of February 2013, credit to housing sector was at

USD81.0 billion compared to USD76.0 billion a year ago

Demand in the low- and mid-income segments exceeds

supply three- to four-fold

This has propelled demand for housing loan in the last few

years

CAGR: 11.1%

65.2

54.7

63.3

74.9 73.3

79.0

FY08 FY09 FY10 FY11 FY12 FY13**

Growth in personal finance (excluding housing)


Note: *CAGR - Compound Annual Growth Rate,



Growth in disposable income has been encouraging

households to raise their standard of living and boost

demand for personal credit

Credit under the personal finance segment (excluding

housing) rose at a CAGR of 10.8 per cent during FY08–13

Unlike some other emerging markets, credit-induced

consumption is still less in India

CAGR*: 10.8%

India’s working age population and GDP per capita

(USD)

Source: World Bank, IMF, Aranca Research

Note: E - Expected, F - Forecasted, GDP - Gross Domestic Product

Rising per capita income will lead to increase in the fraction

of the Indian population that uses banking services

Population in 25-60 age group is expected to grow strongly

going ahead, giving further push to the number of

customers in banking sector

0

500

1,000

1,500

2,000

2,500

0

100

200

300

400

500

600

700

2001 2006 2011E 2016FPopulation (Million) GDP per capita - RHS (USD)

Total loans: growth forecast over 2011-17

(USD billion)

Source: Reserve Bank of India, Business Monitor

International Ltd (BMI), Aranca Research

Note: *CAGR - Compound Annual Growth Rate


India’s GDP is forecasted to expand at a healthy CAGR* of

7.0 per cent during 2012-17 to USD2,735.7 billion

Strong GDP growth will facilitate banking sector expansion

Total banking sector credit is expected to increase at a

CAGR* of 18.1 per cent to USD2.4 trillion by 2017

The sector will also benefit from economic stability and

credibility of Monetary Policy 896

2,435

75

432

326

315

371

2011 2012 2013 2014F 2015F 2016F 2017F

Loan/GDP vs. GDP per-capita in select countries

Source: World Bank Financial Access report 2010, IMF,

Aranca Research

Despite healthy growth over the past few years, the Indian

banking sector is relatively underpenetrated

Loans-to-GDP ratio is low (62 per cent) relative to many of

its emerging markets peers as well as developed

economies such as the US and UK

Estonia

Bulgaria Hungary

Czech Republic

Poland Turkey

Vietnam

India

China

Germany

UK

US

0%

50%

100%

150%

200%

250%

300%

350%

0 10,000 20,000 30,000 40,000 50,000 60,000

Total loans / GDP

Per-capita GDP (USD)

Size of the bubble represents GDP per capita

747

839 1,065

1,626 1,661

2,063 2,022

2,182 2,403

2,923

3,969

India SouthAfrica

Brazil Poland Turkey Malaysia US Ireland Austria UK Belgium

Banking penetration (deposits/

'000 adults) in India is lower than

a number of peers in Emerging

countries

Advanced economies

Deposit accounts per 1,000 adults

Source: World Bank Financial Access Report 2010, IMF, Aranca Research

Limited banking penetration in India is also evident from low branch per 100,000 adults ratio

Branch per 100,000 adults in India stands at 747 compared to 1,065 for Brazil and 2,063 for Malaysia

Bank deposit accounts per 1000 adults in India stands at 953.1 compared to 1,032.7 in Brazil and 1,642.2 in Malaysia

HDFC Bank

• Established in 1994, HDFC Bank is the second largest

private sector bank in India. HDFC was amongst the first

to receive an 'in principle' approval from the RBI to set

up a bank in the private sector

• Divisions – Retail banking, Wholesale banking and

Treasury operations

• Size – Number of branches and extensions: 3,062*

• Number of ATMs: 10,743*

• Number of employees: 66,076 as on March 31,

2012

• Total assets: USD73.5 billion*

• Recognition –

• Best Retail Bank in India (Asian Banker:2012)

• Best Performing Bank – Private (CNBC

TV18:2011)

Net profit USD (millions)

Source: Company Annual Reports, Aranca Research

Note: * - As on March 2013

Note: * CAGR - Compound Annual Growth Rate,

CAGR*: is calculated in INR terms


237.8

331.3 467.7

614.3

818.0

1,076.5

1,235.8

FY07 FY08 FY09 FY10 FY11 FY12 FY13

CAGR: 31.6%

Income break-up (FY13) Advances and deposits (USD billion)


10 13

21

26

33

41 44

14

21

30

35

43

51 54


Advances Deposits

70%

30% Net InterestIncome

Other Income

147.6 264.1

452.7 485.4

753.0

936.4

998.0


Axis Bank

• Established in 1994, Axis Bank is the third largest private

sector bank in India. The bank is capitalised to the extent

of USD86.0 million with the public holding at 54.1 per

cent as on 31st March, 2012

• Divisions – Treasury, retail banking, corporate/wholesale

banking and other banking business

• Size – Number of branches and extensions: 1,947*

• Number of ATMs: 11,245*

• Number of employees : 31,738 as on March

31,2012

• Total assets: USD63 billion*

• Recognition –

• Most Productive Private Sector Bank award

(FIBAC:2011)

• 3rd strongest bank in Asia Pacific region (Asian

Banker: 2011)

Net profit USD (Millions)


Note: FIBAC - FICCI and Indian Banks’ Association Conference

* - As on December 2012

CAGR: 37.5%

Income break-up (FY13) Advances and deposits (USD billion)


60%

34%

6%

Net Interest income

Fee Income

Other Income

8

12 17

22

30

35

46

12

18

24

29

39

46

36


Advances Deposits

1.6

2.2

2.4 2.5 2.3

3.2

2.0

FY07 FY08 FY09 FY10 FY11 FY12 9M '13

State Bank of India

• Established in 1955, State Bank of India is the largest

public sector bank in India. The bank is capitalised to the

extent of USD129.3 million with the government holding

of 62.31 per cent as on May 2013

• Divisions – Treasury, retail banking, corporate/wholesale

banking and other banking businesses

• Size – Number of branches and extensions : 15,003**

• Number of ATMs : 61,500*

• Total Assets: USD257.3 billion*

• Recognition –

• SBI ranked 29th amongst the most reputed

company in the world in 2009 rankings

Net profit (USD billions)

Source: Company Annual Reports, moneycontrol.com,

Forbes, Aranca Research

Note: *CAGR - Compound Annual Growth Rate,


** - As on December 2012

CAGR: 15.1%

Income break-up (9M ‘13) Advances and deposits (USD billion)


89%

11%

Net Interest Income

Other Income

112

151 148

192

224 231

160 142

188 195

242 276 273

184

FY07 FY08 FY09 FY10 FY11 FY12 9M'13

Advances Deposits


The RBI has aimed to provide banking services through a banking branch in every village having a population of more

than 2000

Financial inclusion has permitted banks to utilise the services of non-governmental organisations (NGOs), micro-finance

institutions (other than Non-Banking Financial Companies) and other civil society organisations as intermediaries in

providing financial and banking services to all sections of the society, mainly the weaker sections and lower income groups

The Financial Inclusion Plan (2010–13) has increased the penetration of banking services in rural areas

Banking connectivity

Business Correspondents

Basic Savings Bank

Deposit Accounts

(BSBDA)

Kissan Credit Cards and

General Credit Cards

outstanding

• Increased more than threefold from 67,694 villages, at the beginning of the plan period, to

211,234 by December 2012

• Numbers of Business Correspondents have increased from 34,532 in March 2010 to

152,328 in December 2012

• Total number of BSBDA have gone up from 73.45 million in 2010 to 171.43 million by 2012

• Kissan Credit Cards outstanding have gone up from 24.3 million in 2010 to 31.7 million by

2012, while General Credit Cards outstanding have gone up from 1.4 million to 3.1 million

during the same period

GDP of agriculture, forestry & fishing

sector, at current prices (USD Billion)

Source: McKinsey estimates, Aranca Research

Notes: CAGR – Compounded Annual Growth Rate, QE – Quick Estimate, RE – Revised Estimate

The real annual disposable household income in rural India is forecasted to grow at CAGR of 3.6 per cent over the next 15

years

The Indian agriculture, forestry & fishing sector has grown at a fast pace, clocking a CAGR of 14.2 per cent over the past

seven years

Rising incomes are expected to enhance the need for banking services in rural areas and therefore drive the growth of the

sector

Real disposable household income in rural

India (USD)

133 151

174 194

225

265

295

FY06 FY07 FY08 FY09 FY10 FY11QE

FY12RE

1,875 2,167

2,667

3,229

2010 2015 2020 2025

CAGR: 14.2% CAGR: 3.6%

Banking penetration in rural India picking pace

• Of the 600,000 village habitations in India only 5 per cent

have a commercial bank branch

• Only 40 per cent of the adult population has bank

accounts

• Debit card holders constitute only 13 per cent of the

population and only 2 per cent have a credit card

• 51.4 per cent of nearly 89.3 million farm households do

not have access to any credit either from institutional or

non-institutional sources

• Only 13 per cent of farm households are availing loans

from the banks in the income bracket of < USD1000

Soaring rural teledensity opens avenue of mobile

banking

Source: TRAI, Aranca Research

Note: * Indicates as on February 2013

Agriculture requires timely credit to enable smooth

functioning. However, only one-eighth of farm households

avail bank credit

Local money-lending practices involve interest rates well

above 30 per cent, therefore making bank credit a

compelling alternative

Tele-density in rural India soared to nearly 40.8 per

cent in February 2013 from less than 1 per cent in 2007

Banks, telecom providers and RBI are making efforts to

make inroads into the un-banked rural India through

mobile banking solutions

0.4 9.2

15.2

24.3

37.5 39.9

40.8

2007 2008 2009 2010 2011 2012 2013*

Rural Teledensity

Evolution of mobile banking

• Mobile banking allows customers to avail banking

services on the move through their mobile phones. The

growth of mobile banking could impact the banking

sector significantly

• Mobile banking across the world is still at a primitive

stage with countries like China, India and UAE taking the

lead

• Mobile banking is especially critical for countries like

India, as it promises to provide an opportunity to provide

banking facilities to 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 INR50,000 and allowed banks to set their own limits

• Mobile banking transactions in India will cross 340

million by 2015 and would result in cost savings of

approximately INR11 billion (USD230 million)

Source: PWC, ‘Searching for new frontiers of growth’, Aranca Research

Mobile

commerce

Payment of

bills

Mobile banking

(fund transfers,

etc.)

Mobile

recharge

Mobile

remittances

Indian Banks' Association

World Trade Centre, 6th Floor

Centre 1 Building,

World Trade Centre Complex,

Cuff Parade, Mumbai - 400 005

India

E-mail: [email protected]

ATM: Automated Teller Machines

CAGR: Compound Annual Growth Rate

FY: Indian financial year (April to March)

GDP: Gross Domestic Product

INR: Indian rupee

KYC: Know Your Customer

NIM: Net interest margin

NPA: Non-performing assets

RBI: Reserve Bank of India

USD: US Dollar

Wherever applicable, numbers have been rounded off to the nearest whole number

Year INR equivalent of one USD

2004-05 44.95

2005-06 44.28

2006-07 45.28

2007-08 40.24

2008-09 45.91

2009-10 47.41

2010-11 45.57

2011-12 47.94

2012-13 54.31

Exchange Rates (Fiscal Year)

Year INR equivalent of one USD

2005 45.55

2006 44.34

2007 39.45

2008 49.21

2009 46.76

2010 45.32

2011 45.64

2012 54.69

2013 54.45

Exchange Rates (Calendar Year)

Average for the year

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india : banking sector report_august 2013

Economy & Finance

private sector banks

public sector banks

number of banks

psu banks

rbi reserve bank of

reserve bank of india

engineering sector

cent of total fdi