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International Journal of Business and Management Tomorrow Vol. 2 No. 7

ISSN:2249-9962 July|2012 www.ijbmt.com Page |1

Growth of Commercial Banks in IndiaDr. Sandeep Kaur, Department of Economics, Punjabi University, Patiala

AbstractIn the light of liberalization, privatization and globalization a lot of challenges were faced by the commercialbanks. After the nationalization and till the early 1990s, the main thrust of banking operations was on socialbanking and accordingly the emphasis was placed on enhancing the branch network in rural and semi-urban

areas. The present paper seeks to analyse the growth, development and challenges of commercial banks in India,which have been occurring in the wake of banking sector reforms in India. The analysis brings into light that inthe post-nationalisation period, the proportions of rural areas in total number of bank branches as well as incredit deployment and deposit mobilisation have been declined. On the other hand, the metropolitan areas

registered a high increase in their percentage share in total expansion, credit deployment and depositmobilization. Therefore in the post-nationalisation era, the performance of the banking system with respect tobranch expansion in the rural and hitherto unbanked areas, mobilisation of deposits, deployment of credit,population coverage and so on has indeed been creditable and perhaps has no parallel in the annals of bankingelsewhere. In order to analyse the growth of banking activities i.e. branch expansion, deposit mobilisation andcredit deployment, annual compound growth rate have been calculated.

Keywords: Branch Expansion, Commercial Banks, Credit Deployment, Deposit Mobilisation, Post-Nationalisation Period.

1. Review of LiteratureBhatia (1978) attempted to analyse the economic performance of Indian banking system as reflected in its

output, price and profitability over the period 1950-68. The main findings of this study are: (i) the profit

performance of Indian banking system during the period 1950-68 has been satisfactory; (ii) the structure ofbanking system (represented by the number of bank offices and the deposit concentration ratio) during theperiod has an insignificant effect on its performance.


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Vashist (1987), in his doctoral work, evaluated the performance of PSBs with regard to six indicators, i.e.,branch expansion, deposits, credit, priority sector advances, differential rate of interest, advances and net profits,

over the period 1971-83. The study has ranked Indian Overseas Bank at the top and Dena Bank at the bottom.To improve the performance of commercial banks, the study has suggested development of marketing strategyfor deposit mobilisation, profit planning and strengths, weaknesses, opportunities and threats analysis in banks.

Marugesan and Rao (1991) analysed the performance of Public Sector banks in the context of (i) productivityand growth, (ii) social objectives, and (iii) profitability ratios over the period 1973-86. The major conclusions of

the study are (i) the performance in terms of deposit mobilization, opening of branches and deployment ofadvances during the study period has been impressive, (ii) both operating expenditure and establishmentexpenditure have declined during this period indicating an efficient management of banking activities, (iii)deposit-credit ratio in rural areas has increased, (iv) public sector banks have not performed better in terms ofprofitability, and (v) gross and net profits have also declined.

Kulkarni (2000) and Kohli (2001) have discussed the various aspects such as manual banking to computerisedbanking, stage of automation in nationalised banks, new private sector Indian banks and foreign banks. Kohlihas found out that the advancement in computing and telecommunications has revolutionised the financialindustry, and banking on the net is fast catching on. As e-commerce gets transformed into m-commerce with theincreasing use of technologies, banking business is in for a major overhaul.

Das and Ghosh (2006) investigated the performance of Indian commercial banking sector during the post-reform period. They have evaluated several efficiency estimates of individual banks using non-parametric data

envelopment analysis. They have employed three different approaches, viz. intermediation approach, value-added approach and operating approach in defining inputs and outputs of banks.

Mahesh and Rajeev (2006) have attempted to measure the deposit efficiency of Indian commercial banks byusing stochastic frontier technique for the period 1985-2004. The results show that, on an average, Indiancommercial banks are around 75 per cent efficient in producing deposits compared to the best performing bankswithin the sample. Public sector banks as a group rank first in the deposit efficiency measures. Deregulation and

resulting competition amongst the banks have significant impact on the deposit efficiency of Indian commercialbanks.

2. Scope of the StudyKeeping in view the scope of the study, it has been decided to include all scheduled commercial banks in Indiaincluding the foreign banks operating in India. Therefore, the present study is confined to public sector bankscomprising the State Bank of India (SBI) and its seven associatescollectively termed as the SBI Group andthe nationalised banks. The study would cover a period from 1969 to 2006. It is an appropriate time to assess theimpact of financial sector reforms, during which there has been substantial transformation of the whole financial

system, on various banking operations in different population groups viz. rural, semi-urban, urban andmetropolitan areas.

3. Objectives of the StudyAfter the initiation of the financial sector reforms, changes in the functioning of the banking sector has becomemore defined and substantial. This is obviously getting reflected in the pattern of branch expansion, depositmobilization and credit allocations across various sectors and regions. It will be an interesting study to checkthe predictability, rationality and the compatibility of these changes with the changing dynamics of the

economy. Therefore, in the present paper these aspects will be tested empirically.

4. Research MethodologyThe present research work is based on the secondary data only. The secondary data has been collected chieflyfrom the various RBI Bulletins, Statistical Tables relating to Banks in India, Trend and Progress Reports of

Banking in India, Annual Reports of Commercial Banks, Banking Reports on Currency and Finance, BankingStatisticsBasic Statistical Returns (all brought out by the Reserve Bank of India, Mumbai). In order to analysethe growth of banking activities i.e. branch expansion, deposit mobilisation and credit deployment, in variouspopulation groups, annual compound growth rate have been calculated as follows:

CGR = (Present figure Past figure) 1/n - 1

Where, n = number of time periods.


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5. IntroductionBanking industry is the blood vascular system of our economy. It has a positive role to play in the economicdevelopment of the country as repositories of peoples savings and purveyors of credit, especially as the successof economic development depends on the mobilisation of resources and their investment in an appropriate

manner. Till 1991, the banking industry as a whole had given emphasis on deposit mobilisation, creditdeployment and branch expansion. The rapid growth of banks, especially since nationalisation of majorcommercial banks in 1969, brought in both quantitative and qualitative changes in their functioning and also

approach towards socio-economic development of the country. The banking industry has become a catalyst forgrowth and development. In the present study, an attempt has been made to study the growth of commercialbanks in India since nationalisation in terms of certain major indicators.

5.1 Branch NetworkThe social control over banking and the policies associated with bank nationalisation had infused a centrifugaltendency to the spread of banking so as to prevent its concentration in urban and well-developed regions. Withthe financial sector reforms initiated in the mid-1990s and with the freedom given to scheduled commercialbanks to operate in a liberalised environment, a centripetal tendency has been in vogue whereby banks

operations have been increasingly attracted by those sectors and regions which are relatively well-endowed andrich.

As is widely known, the bulk of the territorial spread of branch network, particularly in rural areas and

underdeveloped regions, took place prior to the 1990s. Though the reform process of the 1990s did not preventthe banks from expanding rural branch network and in fact, the Narasimham Committee did specificallyemphasise the importance of rural institutions and branch banking, in reality quite the contrary has happened.

The spread of bank branches has tended to concentrate in urban and metropolitan centres during liberalizationperiod.

Until banking reforms the RBI, as a policy, enforced slow down in branch expansion in metropolitan areas. Onthe other hand, steady increases particularly in the number of rural branches were encouraged on theconsideration that the scheduled commercial banks had a role to play in branch banking in the process ofinstitutionalisation of rural savings. The comparative position of the expansion of the bank branches in different

population groups is shown in Table 1.

The rural branches of scheduled commercial banks have increased from 17.6 per cent in June 1969 to 56.9 per

cent in March 1991. After this, the percentage of rural branches has continuously decreased and it has become43.2 per cent in March 2006. The fall in the rural branches has been due to the policy changes introduced duringnineties. In the decade that followed 1990 (reform period), it was felt that haphazard growth should be containedand there should be qualitative network in branch banking. The Narasimham Committee-I recommended thatbranch licensing be abolished, and the matter of opening and closing branches may be left to commercialjudgment of individual banks. However, this recommendation was partly implemented. Although branchlicensing has not been abolished, greater operational freedom has been given to individual banks to open certain

specialized branches as well as expending branches in a more systematic way in its geographical spread.

Of late, the banking system has been increasingly looking towards technology-based delivery channels and

progressive reduction of physical branches to the extent possible. However, banks were allowed to convert theirnon-viable rural branches into satellite offices on certain conditions. Moreover, in November 1998, RBI hadallowed banks to close down or merge loss making branches in certain specific areas. Five years old branches

could be considered for closure if these were incurring losses for 3 consecutive years. The closing down ofbranch would be considered only when it is found to be posing a threat to the banks property or the lives of itsemployees. Although it had been stated that if the branch was located in an area where no other bank isavailable, even the loss making branch would not be closed, but the scheduled commercial banks had chosen the

easy option of stopping any such rural expansion. Due to all these reasons, the percentage of rural branches hasdeclined and the percentages of semi-urban, urban and metropolitan branches have increased. While thepercentage of urban branches has increased from 14.3 per cent in March 1991 to 17.9 per cent in March 2006,this figure has increased from 10.0 per cent to 17.0 per cent for metropolitan areas during the same period.

Before March 1991, the number of urban and metropolitan branches has decreased as shown in Table 4.1. Therehas also been slight rise in the number of semi-urban branches. The number of semi-urban branches rose from18.7 per cent in March 1991 to 21.9 per cent in March 2006.

The analysis of the annual trend growth rates depicts that growth of the share of rural branches in total branches

has increased by an impressive figure of 6.67 per cent from 1969 to 1980 but this figure is as low as -1.99 percent for the period 1991-06. On the other hand, during the period 1969-80, growth rate share of the urban and


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metropolitan area in total commercial branches has declined by -2.26 per cent and -2.80 per cent respectively,but these figures have risen by 1.36 and 4.01 per cent respectively during the period 1991-00. The growth rate of

the share of semi-urban branches has been negative for the two periods, i.e., 1969-1980 and 1981-90. However,the annual trend growth rate has been positive for the next two decades.

Thus, the overall analysis of the table provides that relative share of rural branches in the total branch network

has gone up significantly (25.6 per cent) during the period 1969-2006, while the relative share of othercategories, viz. semi-urban, urban and metropolitan branches has declined during the same period. However, it

is important to note that the share of rural branches has declined, and the share of urban and metropolitanbranches has increased during the post-liberalization period.

The percentage distribution of number of branches of scheduled commercial banks according to bank group isshown in Table 2. The share of nationalised commercial banks in the total branches of commercial banks have

increased from 50.6 per cent on the eve of nationalisation to 55.8 per cent at the end of June 1980 and declinedto 49.8 per cent at the end of March 2006. In the case of SBI group, the percentage share of branches hasdeclined from 30.9 per cent on the eve of nationalisation to 19.8 per cent at the end of March 2006. A glance atthe growth of the percentage share of Regional Rural Banks provides that the figure has fallen after 1991, i.e.,after the introduction of new economic policy. The percentage share of other scheduled commercial banks hasincreased from 18.5 per cent in June 1969 to per cent in June 1979, and then declined to 9.4 per cent at the end

of March 2006. Annual trend growth rate of the share of the regional rural banks in total is 1.64 per cent whichis higher as compared to growth rates of other banks during the period under study.

Hence, it is apparent from Table 2 that the share of number of branches of SBI group and its associates, andnationalised banks has been slow since 1991. There has been a positive growth in these figures in the decade ofnineties but it has fallen during the six years of next decade. The share of other scheduled commercial banks hasrisen continuously after the introduction of financial sector reforms. Also looking at the aggregate position, for

nationalised banks the percentage of branches has decreased only by 0.8 per cent, while for state bank groupsand other scheduled commercial banks the proportion of branches has decreased by 11.1 per cent and 9.1 percent respectively over the period 1969-2006. Whereas for regional rural banks the proportion of the branches

has increased by 12.4 per cent during the period 1980-2006 and for foreign banks this share has increasedslightly by 0.1 per cent during the period 1990-2006.

5.2 Bank Credit

5.2.1 Population Group-wise Share of Bank CreditBank credit has a dynamic role to play in the regions and sectors, such as self-employed production units, small

farmers and small-scale enterprises, as their growth and survival, depend on external finance. It is not only thatthe rural branch network has stagnated but the relative sizes of rural deposits and credit have also receded, andabove all, the extent of credit deployed from out of deposits mobilised in rural areas has rapidly fallen. Because

of the changes in the classification of centres as per the population census data from time to time, thecomparability of banking data by population groups has been affected. However, the data presented in Table 3shows that the share of rural as well as semi-urban and urban branches in aggregate credit has declined innineties.

The table indicates that during June 1969, the share of rural centres in total credit has been 1.5 per cent whichrose to 15.4 per cent during June 1990. It might be due to the introduction of Jawahar Rozgar Yojana (JRY),

Jawahar Gram Samridhi Yojana (JGSY), and alike employment schemes; and implementation of various rural

centric development projects. But from March 1990 onwards, there has been a continuous decline in the share ofrural centres. The same trend has been found in the case of semi-urban and urban sector commercial banks. Thegrowth rate analysis of the share of different sectors shows that the share of rural sector commercial banks has

been as high as 14.95 per cent during the period 1969-1980. However, it slipped to 3.81 during the next decade.It is important to note that growth rate has fallen to negative during nineties and early twenties. Same trend hasbeen found in the case of semi-urban and urban sector but with a little difference.

The metropolitan branches of commercial banks have shown a different trend. Their share in total credit hasbeen increasing after liberalization period. Therefore, it is important to note that during nineties and earlytwenties their trend growth rate has been positive and the highest as compared to branches in rural, semi-urban

and urban areas.

The analysis of the table brings out that rural, semi-urban and urban areas remained neglected during the

liberalization period at the cost of metropolitan areas so far the deployment of total credit by scheduledcommercial banks is concerned. This is a matter of great concern as the rural, semi-urban and urban areas arehighly important for an equitable and balanced regional development.


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5.2.2 Bank Group-wise Share of Bank CreditBank group-wise distribution of credit of scheduled commercial banks is shown in Table 4. The table indicates

that although the share of nationalised banks in total credit of scheduled commercial banks has been the highestfrom 1969 to 2006, but a falling trend is seen particularly during the liberalization period. While the share ofother scheduled commercial banks in total credit of scheduled commercial banks has increased afterliberalization period from its minimum figure of 3.7 per cent during 1990 to 20.0 per cent in 2006. The growth

rate of the share of the credit of other scheduled commercial banks is the highest in nineties and early twenties.During the entire period, i.e., from 1981 to 2006, the share of Regional Rural Banks (RRBs) has grown at the

rate of 2.54 per cent which is the highest as compared to other bank groups for the same period. This may bedue to the fact that the Regional Rural Banks have been established with the aim to take the banking services tothe doorsteps of rural masses especially in remote rural areas where they have no access to such services. Thecommercial banks could not meet the entire credit needs of the rural mass due to the lack of sufficient funds, co-operatives, and interest in rural credit field. This has created a wide gap in the rural credit scenario of the

country. The Narasimham Committee in its report suggested for setting up new banking institutions which mustbe regionally-based, rural-oriented and owned by the Government. Accepting the recommendations of theNarasimham Committee the President of India promulgated the Regional Rural Banks Ordinance onSeptember 26, 1975. This was later replaced by the RRBs Act, 1976 and was deemed to have come into force on26

thSeptember, 1975.

5.2.3 Credit Allocation Occupation-wiseThe sectoral pattern of bank credit distribution underwent a significant transformation after the nationalizationof banks. In this respect, broadly three distinct phases are discernible: (i) till the end of the nineties, there has

been steady improvement in the share of agriculture in total bank credit which happened at the cost of industryshare; (ii) the decade of the nineties has seen a reversal of the trend. The agriculture share has seen a steepdecline in it with the industry share remaining generally static and with the services sector including tradegaining in importance; and (iii) the latest phase after 2000 in which the banks have aggressively moved in

favour of retail loans in the form of personal loans for housing, consumer durables and other personalrequirements; in this phase the share of agriculture has made a fractional recovery even as the industry share hascontinued to fall.

The sector-wise distribution of bank credit has been shown in Table 5. Agricultural sector is of great importanceboth from the economic and social perspective but only 9.02 per cent of total credit outstanding has gone to thissector in 1972. With the adoption of 20-point Programme in July 1975 and priority sector lending in the

eighties, the credit flow to this sector reported a continuous increase. By June 1989 as much as 17.34 per cent oftotal credit allocation has gone to agriculture credit allocation has gone to agriculture sector. From this yearonwards, particularly in nineties, there has been continuous decline in credit flow to agriculture sector. By

March 2001, agriculture sector is appropriating only 9.61 per cent of total credit outstanding. This smallpercentage showing a decline might be due to the fact that 60 per cent of the agriculture credit needs are cateredby the unorganised financial sector. Not only this, the recommendation made by Narasimham Committee toreduce the target of priority sector lending might have affected the decision of banks to lend more to agriculturesector. This is a matter of grave concern. However, the credit flow to agriculture sector started improving after2001 and it was 11.41 per cent of the total credit allocation in 2006. The trend growth rate has been quite higher

during the period 1972-80 as compared to other periods. In June 1972, as much as 61.15 per cent of total creditoutstanding has been accounted by the industrial sector. However, from this year onwards, credit flow to thissector started declining and it reached at the lowest figure of 37.40 per cent in 2006. The reasons might be thatsince financial sector reforms, capital adequacy norm and risk weighted portfolio management compelled banks

to stay away from small borrowers, and go in favour of medium and large size industries to increase theprofitability. Transport sector suffered the most as far as credit allocation is concerned. It can be observed fromthe table that its share in the total credit outstanding has increased from 1.58 per cent in 1972 and reached at the

highest figure of 5.45 per cent in 1983. Since onwards, there has been a continuous decline in credit flow totransport sector and it touched the figure of 1.57 per cent in 2006. If we look at the growth of the percentageshare of transport sector, it is clear that during the period 1972-80 it has achieved the highest growth rate of14.46 per cent and there has been a continuous fall in the growth percentage after this period.

The role played by trade and transport component has been vital for the improvement of economy particularlyafter liberalization. India, being an underdeveloped economy, there is need to do more for the development of

this sector. For this, institutional credit allocation to this sector becomes all the more important. But it has beenobserved that the share of trade and transport in total credit outstanding has fallen alarmingly not only during thenineties but even onwards. This fall might compel this sector to go for comparatively expensive credit from

unorganised sector. Personal loans, and professional and other services in total credit outstanding saw acontinuous rise during the last decade. Their share in the total credit outstanding has increased drastically from3.43 per cent and 1.52 per cent to the highest level of 23.33 per cent and 5.41 per cent respectively during the


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period under study. However, the highest growth rate in shares of respective sectors in total credit outstandinghas been achieved by personal loans, i.e., 6.19 per cent during the period under study. As the economy grows,

personal and professional services in particular find an expansion in their share in the total national income. It isobvious that it should get reflected in the credit allocation pattern and it has been observed in the predicted line.Thus, credit allocation in this sector is progressive over the period.

Trade is also another significant component of the services sector vis--vis economy. This component of theservices sector affects exponentially the national income, but credit allocation pattern in this sector is showing a

similar trend as in the case of transport sector. The annual growth rate is 6.79 per cent for the period 1972-80and decreased to -10.03 per cent during 2001-06, which is the lowest figure as compared to other sectors in thisdecade.

Thus, on the whole, the position that emerges from Table 5 is that the sector-wise credit allocations by

commercial banks have shown a mixed trend. Some of the sectors like personal loans, professional and otherservices, and agriculture have captured a major portion of scheduled commercial banks credit allocation,whereas the sectors like industry, trade and transport have shown a decline in their share. It has also beenobserved that the long-term government policies are the guiding principle rather than short-term economicrequirements in the scheduled commercial banks credit outstanding.

5.3 Deposit Mobilisation

The commercial banks have emerged as one of the major financial intermediaries in the country to mobilise thecommunitys financial savings. Sustained efforts have been made by commercial banks to induce people to keepa part of their savings as bank deposits. Deposits mobilised by the banks are utilised for: (i) loans and advances,(ii) investments in government and other approved securities in fulfilment of the liquidity stipulations, and (iii)investment in commercial papers, shares, debentures, etc. up to a stipulated ceiling. There has been a substantial

increase in the deposits of scheduled commercial banks during the post-nationalization period.

5.3.1 Population Group-wise Share of Bank DepositsTable 6 shows the distribution of deposits of scheduled commercial banks according to population group since1969. The share of metropolitan population in total deposits has been the highest followed by urban and semi-urban for all the years under study. The share of rural population has been the lowest. It is important to note thatthe share of metropolitan and rural population in total deposits has increased during the years 1969 to 2006 at

the cost of urban and semi-urban population. A close look at the trend growth rates of the shares indicates that

the share of metropolitan population in the total deposits of commercial banks has increased tremendouslyduring the liberalization period, while the share of rural population increased positively during the pre-

liberalization period. It might be due to the fact that the branches of commercial banks have grown at the rate of30 per cent per annum during the period 1970-90. The branch expansion in the rural areas has witnessed a slowdown during the reform period.

5.3.2 Bank Group-wise Share of Bank DepositsTable 7 carries the data showing the bank group-wise distribution of deposits of the scheduled commercialbanks. The analysis of bank group-wise share in deposits of scheduled commercial banks depicts that

nationalised bank group has contributed more than 50 per cent in the total deposits mobilised by all scheduledcommercial banks till the year 2003, after which it has fallen though marginally. However, after reaching at thehighest figure of 61.9 per cent during June 1990, there has been a sharp fall of 13.4 per cent from June 1990 to

March 2006. The share of deposits of State Bank group remained more or less constant during the 36-year

period constituting a little more than one-fourth of the total deposits by all scheduled commercial banks. StateBank group is successful in holding on to its percentage share deposits in total deposits of all scheduledcommercial banks.

However, nationalised bank group is seen to be losing its share in total deposits. The share of foreign bankgroup in total deposits has shown an increasing trend till March 1997 after which it started falling. In the case of

other scheduled commercial banks, their share has gone up from 4.4 per cent in 1990 to 19.4 per cent in 2006.This shows that other scheduled commercial banks have taken a head start in the deposit mobilisation after theliberalization measures adopted with regard to entry of new private sector banks in 1993. That is why, theannual compound growth rate of the share of other scheduled commercial banks in total deposits has been

higher during 1991-00 and 2001-06 with the respective percentage of 12.85 and 7.92 as compared to other bankgroups.


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6. SuggestionsBased on the findings of the study several suggestions are made for improving commercial banks overallperformance. The commercial banks need to focus on the following suggestions:

Banks must continue to pay adequate attention to deposits and credit as they constitute the core of bankingactivity and a substantial portion of income and expenditure is associated with them. So far as deposits are

concerned, it is safe area of business expect for few stray instances of operational risks like human errors,frauds and forgeries. Credit is the real activity that should be managed to generate profits by keeping three

cardinal principles of investment in mind Liquidity, Solvency and Profitability. Without adversely affecting the quality of services, the banks should device the strategies to cut down and

control the costs. The cost should be kept at a minimum possible level. A cautious approach to the branchexpansion policy, reducing the level of establishment expenses, optimum use technology that minimizes the

costs, etc.

Another area, which requires urgent attention, is improving staff productivity particularly in public sectorbanks. There is need to downsize staff to cut high cost of staff expenses. It is also necessary to redistributestaff to strengthen the neglected areas of marketing

7. ConclusionIt is clear from the above discussion that the banking industry in India has made a remarkable and creditable

progress particularly with respect to branch network, deposit mobilisation and credit deployment. The publicsector banks have a large network of branches as compared to other bank groups. On an aggregate basis,commercial banks credit allocation to rural, semi-urban and urban region witnessed a consistent fall, whereasmetropolitan region witnessed an increase in their share of the total credit allocation in the nineties. The publicsector banks continued to play a very prominent role in both deposit mobilisation and credit disbursal even afterthe implementation of reforms since 1991. They contributed about 75 per cent of their total deposits mobilised

and total credit advanced by all scheduled commercial banks. However, the entry of domestic private sectorbanks has been altering this trend to some extent since the late nineties. In fact, it is important to keep in mindthat excessive competition may create an unstable banking environment, while insufficient competition maybreed inefficiency or reduce credit access for the needy borrowers.

Dr. Sandeep Kaur,Department of Economics,

Punjabi University, Patiala

References

Bhatia, R.C. (1978). Banking Structure and Performance: A Case Study, Unpublished Doctoral Dissertation. West Virginia University(USA).

Das, A. & Ghosh, S. (2006). Financial Deregulation and Efficiency: An Empirical Analysis of Indian Banks during the Post-reformPeriod. Review of Financial Economics, Vol. XV, pp. 193-221.

Kohli, S.S. (2001), Indian Banking Industry: Emerging Challenges. IBA Bulletin, Vol. XXIII, No. 3, March, pp. 437-448. Kulkarni, R.V. (2000). Changing Face of Banking from Brick and Mortar Banking to E-banking. IBA Bulletin, Vol. XXII, No. 1,

January, p.8.

Mahesh, H.P. & Rajeev, M. (2006). Banking on Deposit Mobilisation: Efficiency Pursuits of Indian Commercial Banks. The IndianEconomic Journal, Vol.54, No. 3, October-December.

Marugesan, B. & Rao, C. (1991). Production, Profitability and Social Objectives in Public Sector Commercial Banks in India. Journalof the Indian Institute of Bankers, Vol.67, No. 3, pp. 100-102.

Vashist, A.K. (1987). Performance Appraisal of Commercial Banks in India. Ph.D. Thesis, Department of Commerce, H.P. University,Shimla.

Table 1: Percentage Distribution of Number of Branches of Scheduled Commercial Banks According to Population Group

(in per cent)

Year Rural Semi-urban Urban Metropolitan Total

Jun-1969 17.6 40.8 23.3 18.3 100.00

Jun-1972 36.0 31.4 18.0 14.6 100.00

Jun-1973 36.0 31.0 18.1 14.9 100.00

Jun-1974 36.1 30.5 18.3 15.1 100.00

Jun-1975 35.6 30.4 18.8 15.2 100.00

Jun-1976 35.4 30.7 19.0 14.9 100.00

Jun-1977 37.2 30.0 18.7 14.1 100.00

Jun-1978 41.3 27.8 17.5 13.4 100.00

Jun-1979 43.3 26.8 16.8 13.1 100.00Jun-1980 45.7 25.6 16.3 12.4 100.00

Jun-1981 48.0 24.5 15.7 11.8 100.00


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Jun-1982 50.5 23.0 15.0 11.4 100.00

Jun-1983 50.9 23.0 15.1 11.0 100.00

Jun-1984 53.7 20.4 15.1 10.8 100.00

Jun-1985 54.3 20.3 15.0 10.4 100.00

Jun-1986 54.6 19.8 15.0 10.5 100.00

Jun-1987 54.7 19.7 15.1 10.5 100.00

Jun-1988 54.6 20.1 14.9 10.4 100.00

Jun-1989 55.7 19.3 14.7 10.3 100.00

Jun-1990 56.5 19.0 14.4 10.1 100.00

Mar-1991 56.9 18.7 14.3 10.0 100.00Mar -1992 56.8 18.7 14.5 10.0 100.00

Mar -1993 56.3 18.6 14.9 10.1 100.00

Mar -1994 55.9 19.0 15.0 10.1 100.00

Mar -1995 51.7 21.2 15.0 12.1 100.00

Mar -1996 51.2 21.3 15.2 12.3 100.00

Mar -1997 50.5 21.4 15.5 12.6 100.00

Mar -1998 49.9 21.5 15.7 12.9 100.00

Mar -1999 49.2 21.5 16.1 13.2 100.00

Mar -2000 48.7 21.7 16.2 13.4 100.00

Mar2001 48.3 21.8 16.3 13.6 100.00

Mar2002 47.8 21.9 16.6 13.7 100.00

Mar2003 47.4 22.1 19.8 13.7 100.00

Mar2004 46.8 22.2 17.0 14.0 100.00

Mar2005 45.7 22.3 17.6 14.4 100.00

Mar -2006 43.2 21.9 17.9 17.0 100.00

Annual Trend Growth Rate

1969-80 6.67 -3.34 -2.26 -2.80

1981-90 1.57 -2.58 -0.59 -1.48

1991-00 -1.99 2.08 1.36 4.01

2001-06 -1.99 0.23 1.41 3.74

Total 1.17 -1.25 -0.33 -0.20

Source: Basic Statistical Returns of Scheduled Commercial Banks in India, Various issues, Published by RBI, Mumbai.Note: Rural Centres: Places with population over 10,000

Semi-urban CentresPlaces with population over 10,000 and up to 1, 00,000

Urban Centres: Places with population over 1, 00,000 and up to 10, 00,000

Metropolitan Centres: Places with Population over 10, 00,000

2: Percentage Distribution of Number of Offices of Scheduled Commercial Banks According to Bank Group (in percent)

Year NationalisedBanks

tate Bank of India anits Associates

Regional RuralBanks

ForeignBanks

Other ScheduledCommercial Banks

All ScheduledCommercial Banks

Jun-1969 50.6 30.9 - - 18.5 100.00

Jun-1972 53.2 29.2 - - 17.6 100.00

Jun-1973 53.2 29.1 - - 17.7 100.00

Jun-1974 53.6 28.1 - - 18.3 100.00

Jun-1975 53.1 28.0 - - 18.9 100.00

Jun-1976 52.3 27.4 - - 20.3 100.00

Jun-1977 50.8 25.9 - - 23.3 100.00

Jun-1978 49.2 25.1 - - 25.7 100.00

Jun-1979 48.3 24.5 - - 27.2 100.00

Jun-1980 55.8 23.9 8.4 - 11.9 100.00

Jun-1981 54.7 23.1 10.6 - 11.7 100.00

Jun-1982 53.2 22.1 13.6 - 11.1 100.00

Jun-1983 51.9 21.6 15.8 - 10.6 100.00

Jun-1984 49.5 21.4 19.0 - 10.1 100.00

Jun-1985 47.6 20.1 23.1 - 9.2 100.00

Jun-1986 48.0 20.0 23.6 - 8.4 100.00

Jun-1987 48.2 19.8 23.9 - 8.1 100.00

Jun-1988 48.3 19.7 24.1 - 7.9 100.00

Jun-1989 48.3 19.8 24.2 - 7.7 100.00

Jun-1990 49.2 20.0 24.0 0.2 6.5 100.00

Mar-1991 49.6 19.9 23.8 0.2 6.4 100.00

Mar -1992 49.6 20.0 23.7 0.2 6.4 100.00

Mar -1993 49.7 20.1 23.5 0.2 6.4 100.00

Mar -1994 49.7 20.2 23.2 0.2 6.6 100.00

Mar -1995 49.9 20.3 23.0 0.2 6.6 100.00

Mar -1996 49.9 20.2 22.8 0.3 6.8 100.00

Mar -1997 49.9 20.2 22.5 0.3 7.1 100.00

Mar -1998 50.0 20.1 22.2 0.3 7.4 100.00

Mar -1999 50.1 20.0 22.0 0.3 7.6 100.00

Mar -2000 50.1 20.1 21.8 0.3 7.7 100.00Mar2001 50.1 20.1 21.7 0.3 7.8 100.00

Mar2002 49.8 20.1 21.6 0.3 8.2 100.00


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Mar2003 49.9 20.1 21.6 0.3 8.1 100.00

Mar2004 49.9 20.0 21.4 0.3 8.5 100.00

Mar2005 49.8 19.8 20.9 0.3 9.1 100.00

Mar -2006 49.8 19.8 20.6 0.3 9.4 100.00


1969-1980 -0.13 -2.40 - - 0.89

1981-1990 -1.24 -1.66 8.99 - -5.92

1991-2000 0.12 0.05 -1.02 6.33 2.35

2001-2006 -0.08 -0.36 -1.05 - 3.77

Total -0.16 -1.12 1.64 3.33* -3.16Source: Compiled from various issues of Basic Statistical Returns of Scheduled

Commercial Banks in India, Published by RBI, Mumbai.Note:(i) Where the data was not available or found to be negligible for a certain

period of this study has been highlighted with a - in the

respective columns.(ii) The figures with a * Indicate the growth rate of the period 1990 -2006

in respect of foreign banks.

Table 3: Percentage Distribution of Credit of Scheduled Commercial Banks According to Population Group (in per cent)


Jun-1969 1.5 11.3 20.0 67.2 100.00

Jun-1972 4.6 14.0 21.2 60.2 100.00

Jun-1973 4.8 14.3 22.4 58.4 100.00

Jun-1974 5.3 14.7 22.9 57.1 100.00Jun-1975 5.9 15.1 24.0 55.0 100.00

Jun-1976 5.8 13.3 21.8 59.1 100.00

Jun-1977 6.5 13.8 22.4 57.4 100.00

Jun-1978 7.5 15.1 22.5 55.0 100.00

Jun-1979 8.4 15.6 22.7 53.3 100.00

Jun-1980 9.7 16.2 22.6 51.6 100.00

Jun-1981 11.4 17.4 22.8 48.4 100.00

Jun-1982 12.1 17.2 22.4 48.2 100.00

Jun-1983 12.3 17.7 21.7 48.2 100.00

Jun-1984 14.8 16.4 23.5 45.3 100.00

Jun-1985 13.8 17.5 22.4 46.4 100.00

Jun-1986 14.7 17.6 22.3 45.4 100.00

Jun-1987 15.1 17.7 22.8 44.4 100.00

Jun-1988 15.8 18.4 22.5 43.2 100.00

Jun-1989 16.3 17.3 23.0 43.5 100.00Jun-1990 15.4 17.1 22.6 44.8 100.00

Mar-1991 15.0 16.3 22.4 46.3 100.00

Mar -1992 15.1 15.8 21.7 47.4 100.00

Mar -1993 14.1 14.5 20.3 51.1 100.00

Mar -1994 14.0 14.0 20.4 51.6 100.00

Mar -1995 11.9 13.5 18.6 56.0 100.00

Mar -1996 11.4 13.1 17.7 57.8 100.00

Mar -1997 11.4 13.1 17.6 57.9 100.00

Mar -1998 11.4 12.8 17.6 58.2 100.00

Mar -1999 11.0 12.7 17.8 58.5 100.00

Mar -2000 10.6 12.2 17.2 60.0 100.00

Mar2001 10.2 11.5 17.4 61.0 100.00

Mar2002 10.2 11.2 16.5 62.1 100.00

Mar2003 10.2 11.3 16.4 62.1 100.00

Mar2004 9.7 11.4 17.1 61.9 100.00

Mar2005 9.5 11.3 16.4 62.7 100.00

Mar -2006 8.3 10.0 16.2 65.4 100.00


1969-80 14.95 2.38 0.89 -1.94

1981-90 3.81 0.19 0.12 -1.23

1991-00 -4.19 -2.98 -2.97 2.97

2001-06 -3.63 -1.88 -0.95 1.07

Total 2.43 -0.19 -0.98 0.26

Source: Compiled from various issues of Basic Statistical Returns of Scheduled Commercial Banks in India, Published by RBI, Mumbai.

Note: Rural Centres: Places with Population up to 10,000

Semi-Urban Centres: Places with Population over 10,000 and up to 1,00,000

Urban Centres: Places with Population over 1,00,000 and up to 10,00,000

Metropolitan Centres: Places with Population over 10,00,000.


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Table 4: Distribution of Credit of Scheduled Commercial Banks According to Bank Group (in per cent)

Year Nationalised

Banks

State Bank of India and

its Associates

Regional Rural

Banks

Foreign

Banks

Other Scheduled

Commercial Banks

All Scheduled

Commercial Banks

Jun-1969 50.8 33.3 - - 15.9 100.00

Jun-1972 54.1 29.4 - - 16.5 100.00

Jun-1973 55.1 30.0 - - 14.9 100.00

Jun-1974 55.9 29.5 - - 14.7 100.00

Jun-1975 55.6 29.7 - - 14.7 100.00

Jun-1976 58.1 28.6 - - 13.4 100.00

Jun-1977 56.2 30.0 - - 13.8 100.00Jun-1978 54.6 30.3 - - 15.1 100.00

Jun-1979 53.0 31.4 - - 15.6 100.00

Jun-1980 58.4 32.0 0.8 - 8.7 100.00

Jun-1981 59.1 31.0 1.2 - 8.7 100.00

Jun-1982 59.3 30.4 1.5 - 8.8 100.00

Jun-1983 58.5 31.2 1.7 - 8.6 100.00

Jun-1984 57.4 30.7 2.3 - 9.6 100.00

Jun-1985 57.9 31.2 2.3 - 8.6 100.00

Jun-1986 59.6 29.1 2.7 - 8.6 100.00

Jun-1987 60.3 27.3 3.1 - 9.3 100.00

Jun-1988 59.9 27.4 3.4 - 9.4 100.00

Jun-1989 60.1 27.0 3.3 - 9.6 100.00

Jun-1990 59.6 27.2 3.2 6.2 3.7 100.00

Mar-1991 57.5 28.0 3.0 7.5 4.0 100.00

Mar -1992 55.9 27.4 3.1 9.2 4.3 100.00Mar -1993 54.3 30.8 2.8 7.4 4.6 100.00

Mar -1994 52.7 32.5 2.9 6.5 5.4 100.00

Mar -1995 53.4 29.2 2.9 7.6 6.9 100.00

Mar -1996 51.1 29.1 2.9 9.0 7.9 100.00

Mar -1997 48.9 29.2 3.1 9.3 9.5 100.00

Mar -1998 48.7 28.6 3.1 9.0 10.6 100.00

Mar -1999 49.2 28.1 3.0 8.2 11.5 100.00

Mar -2000 48.7 27.6 2.9 8.4 12.4 100.00

Mar2001 48.6 26.8 3.0 8.4 13.2 100.00

Mar2002 47.3 25.0 2.9 7.3 17.5 100.00

Mar2003 46.8 24.1 3.0 7.1 19.0 100.00

Mar2004 46.4 23.7 3.0 7.2 19.8 100.00

Mar2005 47.8 23.1 2.8 6.6 19.7 100.00

Mar -2006 47.9 23.1 2.4 6.6 20.0 100.00


1969-80 0.70 -0.9 - - -3.07

1981-90 0.28 -1.85 12.11 - -4.00

1991-00 -1.92 -0.39 0.11 1.49 15.68

2001-06 -1.14 -2.81 -3.43 -4.18 7.32

Total -0.52 -0.63 2.54 0.38* -0.19

Source: Compiled from various issues of Basic Statistical Returns of Scheduled Commercial Banks in India, Published by RBI,

Mumbai.

Note:(i) Where the data was not available or found to be negligible for a certain


respective columns.

(ii) The figures with a * Indicate the growth rate of the period 1990 -2006 in

respect of foreign banks.

Table 5: Outstanding Credit of Scheduled Commercial Banks According to Occupation (in per cent)

Year Agricultural Industry Transport Operators Professional and Other Services Personal Loans Trade-1969 - - - - -

-1970 - - - - -

-1971 - - - - -

-1972 9.02 61.15 1.58 1.52 3.43 14.85

Jun-1973 9.02 57.38 1.78 1.65 3.22 18.57

Jun-1974 8.86 59.13 1.85 1.71 3.61 17.45

Jun-1975 10.75 58.39 2.29 1.83 3.54 16.64

Jun-1976 10.39 50.37 2.54 1.68 3.04 26.67

Jun-1977 10.39 47.94 2.69 1.90 2.98 28.44

Jun-1978 12.28 47.68 3.60 1.98 3.04 26.29

Jun-1979 13.15 46.77 4.27 2.04 3.15 25.38

Jun-1980 14.79 48.03 4.28 2.21 3.28 22.44

Jun-1981 16.72 49.13 4.89 2.29 3.45 17.93

Jun-1982 17.15 47.34 5.14 2.26 3.91 18.50

Jun-1983 16.52 47.50 5.45 2.41 3.52 18.61

Jun-1984 17.66 42.33 5.21 2.87 3.27 21.69

Jun-1985 17.64 41.32 4.79 3.07 3.34 23.37


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Jun-1986 17.39 42.66 4.63 3.34 3.74 21.25

Jun-1987 17.29 44.46 4.01 3.57 4.17 18.75

Jun-1988 17.55 46.63 3.87 3.72 5.19 14.65

Jun-1989 17.34 47.32 3.39 3.71 4.96 13.90

Jun-1990 15.93 48.74 3.15 2.96 6.42 13.88

Mar-1991 14.95 47.57 2.93 2.95 7.72 14.73

Mar -1992 14.80 47.70 2.61 2.84 8.18 14.26

Mar -1993 13.57 48.60 2.30 2.64 8.32 15.30

Mar -1994 13.00 48.14 2.57 2.66 8.62 15.78

Mar -1995 11.82 45.61 1.87 2.33 8.95 17.12Mar -1996 11.31 48.00 1.79 3.55 9.27 13.87

Mar -1997 11.12 49.34 1.82 3.14 9.95 13.16

Mar -1998 10.68 48.82 1.96 3.46 10.53 13.88

Mar -1999 10.69 49.14 1.84 3.28 10.35 13.67

Mar -2000 09.92 46.47 1.75 3.18 11.22 15.56

Mar2001 09.61 43.91 1.62 3.57 12.25 16.63

Mar2002 09.76 41.41 1.42 4.22 12.58 15.38

Mar2003 10.04 40.98 1.24 4.49 15.07 13.76

Mar2004 10.93 38.03 1.27 4.99 20.34 11.52

Mar2005 10.79 38.77 1.19 4.80 22.21 11.25

Mar -2006 11.41 37.40 1.57 5.41 23.33 9.92


1972-80 6.41 -3.61 14.46 4.19 -1.26 6.79

1981-90 -0.08 0.01 -5.54 5.41 6.27 -3.59

1991-00 -4.54 0.09 -5.29 2.43 4.12 -0.63

2001-06 3.61 -3.02 -1.88 7.62 16.10 -10.03

Total -0.33 -0.77 -2.45 2.96 6.19 -1.77

Source: Compiled from various issues of Report on Trend and Progress of

Banking in India, Published by RBI, Mumbai.

Note: Where the data was not available or found to be negligible for a certain


respective columns.

Table 6: Distribution of Deposits of Scheduled Commercial Banks According to Population Group (in per cent)


Jun-1969 3.1 22.0 25.9 49.0 100.00

Jun-1972 6.5 22.4 25.0 46.2 100.00

Jun-1973 7.1 23.3 25.4 44.2 100.00

Jun-1974 7.8 22.7 24.8 44.8 100.00

Jun-1975 8.1 22.2 24.6 45.0 100.00Jun-1976 8.7 22.6 24.9 43.9 100.00

Jun-1977 9.0 22.3 24.8 43.8 100.00

Jun-1978 9.9 22.4 25.1 42.6 100.00

Jun-1979 10.6 22.5 24.9 42.0 100.00

Jun-1980 11.9 23.0 25.3 39.8 100.00

Jun-1981 13.0 23.2 24.7 39.1 100.00

Jun-1982 13.8 22.9 25.0 38.3 100.00

Jun-1983 14.1 23.5 24.9 37.5 100.00

Jun-1984 14.4 20.7 26.0 38.9 100.00

Jun-1985 13.4 21.5 26.3 38.8 100.00

Jun-1986 13.9 21.2 25.7 39.3 100.00

Jun-1987 14.3 21.3 26.0 38.4 100.00

Jun-1988 15.1 21.7 25.6 37.7 100.00

Jun-1989 15.0 21.4 25.1 38.6 100.00

Jun-1990 15.3 21.2 24.7 38.9 100.00

Mar-1991 15.5 20.7 24.5 39.4 100.00

Mar -1992 15.1 19.6 23.3 42.0 100.00

Mar -1993 15.0 19.4 23.2 42.4 100.00

Mar -1994 15.2 19.5 22.9 42.4 100.00

Mar -1995 13.7 18.8 22.2 45.3 100.00

Mar -1996 14.4 19.5 22.4 43.7 100.00

Mar -1997 14.7 19.6 22.5 43.2 100.00

Mar -1998 14.5 19.4 22.6 43.5 100.00

Mar -1999 14.7 19.5 22.9 42.9 100.00

Mar -2000 14.7 19.7 23.0 42.6 100.00

Mar2001 14.7 19.6 22.9 42.8 100.00

Mar2002 14.2 19.1 22.8 43.9 100.00

Mar2003 13.8 18.9 22.8 44.5 100.00

Mar2004 12.9 17.7 21.9 47.5 100.00

Mar2005 12.2 16.9 21.5 49.4 100.00

Mar -2006 10.8 14.5 20.6 54.1 100.00Annual Trend Growth Rate

1969-80 10.83 0.14 -0.20 -1.54


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1981-90 1.47 -0.97 0.08 0.01

1991-00 -0.53 -0.26 -0.52 0.61

2001-06 -5.73 -5.39 -2.11 4.65

Total 2.13 -0.82 -0.48 0.17

Source: Compiled from Basic Statistical Returns of Commercial Banks, Various

issues, Published by RBI, Mumbai.Note: Rural Centres: Places with population up to 10,000.

Semi-Urban Centres: Places with population over 10,000 and up to

1,00,000.

Urban Centres: Places with population over 1,00,000 and up to

10,00,000.

Metropolit.an Centres: Places with population over 10,00,000.

Table 7: Distribution of Deposits of Scheduled Commercial Banks According to Bank Group(in per cent)

Year Nationalised

Banks

State Bank of India

and its Associates

Regional Rural

Banks

Foreign

Banks

Other Scheduled

Commercial Banks

All Scheduled

Commercial Banks

Jun-1969 56.5 27.0 - - 16.5 100.00

Jun-1972 56.8 27.1 - - 16.1 100.00

Jun-1973 56.1 27.9 - - 16.0 100.00

Jun-1974 56.2 27.9 - - 15.9 100.00

Jun-1975 55.7 28.4 - - 15.9 100.00

Jun-1976 55.7 28.8 - - 15.5 100.00

Jun-1977 55.4 29.3 - - 15.3 100.00

Jun-1978 56.0 28.3 - - 15.7 100.00

Jun-1979 55.3 28.8 - - 16.0 100.00Jun-1980 62.3 28.5 0.5 - 8.7 100.00

Jun-1981 62.9 27.9 0.6 - 8.5 100.00

Jun-1982 62.6 28.2 0.8 - 8.4 100.00

Jun-1983 61.9 28.8 1.0 - 8.3 100.00

Jun-1984 61.9 28.5 1.2 - 8.5 100.00

Jun-1985 61.4 28.8 1.4 - 8.4 100.00

Jun-1986 61.5 28.7 1.5 - 8.2 100.00

Jun-1987 62.2 28.0 1.8 - 8.1 100.00

Jun-1988 61.5 28.5 1.9 - 8.0 100.00

Jun-1989 61.4 27.6 2.1 - 9.0 100.00

Jun-1990 61.9 26.6 2.3 5.0 4.4 100.00

Mar-1991 61.0 26.6 2.4 5.7 4.4 100.00

Mar -1992 58.9 27.0 2.5 6.9 4.7 100.00

Mar -1993 58.3 26.8 2.5 7.5 4.9 100.00

Mar -1994 57.1 26.8 2.8 7.8 5.5 100.00Mar -1995 57.3 25.3 3.0 7.5 6.9 100.00

Mar -1996 56.1 26.1 3.2 7.1 7.5 100.00

Mar -1997 55.3 25.0 3.5 7.1 9.1 100.00

Mar -1998 54.7 24.4 3.7 6.9 10.3 100.00

Mar -1999 54.7 24.6 3.8 6.2 10.7 100.00

Mar -2000 53.9 24.7 3.9 5.7 11.8 100.00

Mar2001 53.5 24.9 4.0 5.3 12.3 100.00

Mar2002 51.0 24.1 3.9 5.0 16.0 100.00

Mar2003 50.7 24.0 3.9 4.5 16.9 100.00

Mar2004 49.8 23.9 3.7 4.8 17.8 100.00

Mar2005 49.9 24.3 3.5 4.4 17.9 100.00

Mar -2006 48.5 23.3 3.4 5.3 19.4 100.00


1969-80 0.31 0.63 - - -3.04

1981-90 -0.18 0.42 15.20 - -3.45

1991-00 -1.25 -1.18 6.24 -0.90 12.85

2001-06 -1.63 -0.88 -3.34 -0.91 7.92

Total -0.35 -0.54 7.18 -2.29* -0.47

Source: Compiled from various issues of Basic Statistical Return Commercial Banks, Published by RBI, Mumbai.

Note: (i) Where the data was not available or found to be negligible for a certain period of this study has been highlighted with a -

in the respective columns.

(ii) The figures with a * Indicate the growth rate of the foreign banks in the period 1990-2006.

with the respective percentages of 12.85 and 7.92 as compared to other bank groups.

performance appr comm bank

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