INDIA BANKING

Towards a High- Performing Sector

MUNISH
MAHAJAN
PRIYANKA JOEL
RAJ KUMAR
Objectives
Evolution of banking in India
Banking as a Whole
Future of Banking
Green Banking
Evolutionary Phases
Indigenous Reign
Direct Intervention of
the State
Liberalization
Transition
Entry of Foreign
Banks
Phase I: Indigenous banks
Vedas and the Manusmriti:
Kautalya and Manu
recommended 15 per cent
interest per annum on capital.
Sahukar came into existence
lending money at exorbitant
rates.
Mostly poor borrowers use to
surrender their properties.
British rule almost wiped out
these tribes by bringing
European Banks from urban
They moved to villages. They
survive even today.
Phase II: Direct Intervention
Government Interventions began
in 1930s
The Reserve Bank which is the
Central Bank was created in
1935 by passing RBI Act 1934.
The RBI is the sole authority for
◦ issuing bank notes and
◦ the supervisory body for banking
operations in India .
◦ Supervising exchange control and
banking regulations, and
◦ administers the government's
monetary policy.
◦ granting licenses for new bank
branches.
 Intervention: Nationalization
In the wake of the Swadeshi
Movement, a number of banks
with Indian management were
established in the country namely,
◦ Punjab National Bank Ltd, Bank of
India Ltd, Canara Bank Ltd, Indian
Bank Ltd, the Bank of Baroda Ltd,
the Central Bank of India Ltd.
In 1955, Govt. nationalized
Imperial Bank of India with
extensive banking facilities on a
large scale especially in rural and
semi-urban areas.
It formed State Bank of India to
act as the principal agent of RBI
and to handle banking transactions
 Intervention: Nationalization
On July 19, 1969, 14 major
banks nationalized and
in 15th April 1980 six more
commercial
80% of the banking segment
in India under Government
ownership in 1990.
the branches of the public
sector bank India rose to
approximately 800% in
deposits and advances took
a huge jump by 11,000%.
Phase III - Liberalization
 Constitution of Narasimham
committee and its report on Banking
reforms in 1991.
 It covered the areas of interest rate
deregulation & directed credit rules,
 Statutory preemptions and entry
deregulation for both domestic and
foreign banks.
 Lowering of the CRR and SLR
 Interest rate liberalization
 Do away with Entry barriers. By
March 2004, the new private sector
banks and the foreign banks share
shared almost 20% of total assets
 Prudential Norms act against NPAs
 Phase IV: Transition
Most Indian banks lagging behind
the areas of customer funds transfer
and clearing systems.
Over-staffed and not able to compete
with new generation private banks
While these new banks and foreign
banks still face restrictions in their
activities.
New banks are well-capitalized,
Use modern equipment and
Attract high-caliber employees.
Indian banks were given time to
Indian Banks to strengthen their
balance sheets, consolidate and
overall become more robust, so that
they could compete.
Phase V: Entry of Foreign Banks
Two of domestic banks in India have
turned like Foreign Banks. About 74
per cent of holdings of ICICI and
HDFC bank are in the hands of
foreigners.
Phase II of roadmap foreign banks
may be permitted to have overall
investment of 74 per cent in the
private banks of India in April 2009
New banks to be in India
◦ Royal Bank of Scotland
◦ Switzerland's UBS
◦ US-based GE Capital
◦ Credit Suisse Group
◦ Industrial and Commercial Bank of China
Areas of Concentration are Risk
Management, customizing the
products and Value creation.
BANKING as a WHOLE
Types Of Banks
SECTOR SNAPSHOT

 Total assets of US$ 850 billion

SIZE Total assets of US$ 850 billion

 Over 96 scheduled banks

Over 96 scheduled banks
Number  Public sector: 27
Public sector: 27
Of  Private sector: new – 31
Private sector: new – 31
 Foreign: 38
Banks Foreign: 38
 Over 190 regional rural banks
Over 190 regional rural banks

 Over 66,000 branches

Over 66,000 branches
Branches  Public sector: 46,000
Public sector: 46,000
 Private sector: 5,500
network Private sector: 5,500
 Foreign: 190
Foreign: 190
 Regional rural: 14,400
Regional rural: 14,400
 A new orientation among banks…
Traditional/ Public New/ Private
 Sell products
 Product research: what
will sell?
 Product sales and
profitability targets
 Product specialist groups
 Introduce new offerings
every few years/months
 “Branch banking”
 Focus - customer
acquisition
 Meet customers’ needs
 Customer research: what
does the customer want?
 Customer segment sales
and profitability targets
 Customer owners
 Customer specific new
offerings every week/day
 Customer convenience
 Deepen relationships
Growth of Banking Assets
Advancement in Banking Technology

E-Banking

Internet Banking
ATM
Debit Card
Credit Cards
Phone banking
Microwave banking
MAJOR DEVELOPMENTS
The Monetary Authority of Singapore (MAS) has provided qualified full
banking (QFB) privileges to ICICI Bank for its branch operations in
Singapore. Currently, only SBI had QFB privileges in country.
The Indian operations of Standard Chartered reported a profit of above
US$ 1 billion for the first time. The bank posted a profit before tax
(PAT) of US$ 1.06 billion in the calendar year 2009, as compared to
US$ 891 million in 2008.
Punjab National Bank (PNB) plans to expand its international operations
by foraying into Indonesia and South Africa. The bank is also planning
to increase its share in the international business operations to 7 per cent
in the next three years.
The State Bank of India (SBI) has posted a net profit of US$ 1.56 billion
for the nine months ended December 2009, up 14.43 per cent from US$
175.4 million posted in the nine months ended December 2008.
Government Initiatives
The government plans to invest US$ 3.63 billion into public sector banks to aid
them for maintaining their capital adequacy ration (CAR),

US$ 2.1 billion would be used for recapitalization of the public sector banks during
April-June 2010 and US$ 1.5 billion will be invested during the rest of 2010-11.

Without the prior approval of RBI, Indian companies may borrow up to US$ 500
million in a year.

RBI also allowed domestic scheduled commercial banks to open up their

branches in Tier III to Tier VI regions that have population of up to 49,999
without the prior permission of the central bank.

In its platinum jubilee year, the RBI, the central bank of the country, in a
notification issued on June 25, 2009, said that banks should link more
branches to the National Electronic Clearing Service (NECS)
KEY FACTS OF BANKING SECTOR
 RBI has the tenth largest gold reserves in the world after spending
US$ 6.7 billion towards the purchase of 200 metric tonnes of gold
from the International Monetary Fund.
 State Bank of India (SBI) has become the first Indian bank to be
ranked among the Top 50 banks in the world.
 ICICI Bank also made it to the Top 100 list with a brand value of
US$ 2.2 billion. The total brand value of the 20 Indian banks
featured in the list stood at US$ 13 billion.
 Bank credit in the 15 days up to January 29, 2010 rose by US$ 4.32
billion, pointing to a revival in credit growth. This is the highest
year-on-year growth recorded since August 14, 2009.
 The confidence of non-resident Indians (NRIs) in the Indian
economy is reviving again. NRI fund inflows increased since April
2009 and touched US$ 47.8 billion on March 2010.
Defining the Future of Banking
 IBM’s strategic research unit, the Institute for Business Value,
recently released a study called Banking 2015: Defining the Future
of Banking.
 Worldwide, total financial services revenue is predicted to
experience compound annual growth of 7.1 percent between 2000
and 2015, from $2 trillion to $5.6 trillion. In the Asia-Pacific
region, IBM predicts a growth rate of about 7.6 percent.
 According to the survey, the five key trends that will determine
market success in 2015 are customers taking control, niche
competitors, a new workforce, regulated transparency and sharp
focus on technology
 Keeping with the future trends, the study identifies a number of
value-added options for products and market innovation. These are
mortgages, RFID, service packaging and customer integration.
Green Banking Initiatives
 Indus Ind Bank inaugurated Mumbai's first solar-powered ATM as part of
its "Green Office Project" campaign titled "Hum aur Hariyali
 State Bank of India (SBI), as part of its green banking policy, plans to set
up captive windmills to generate 15 Mw of power in Tamil Nadu,
Maharashtra and Gujarat.
 Energy efficiency is another key focus of banks, with an estimated market
worth more than $15 billion by 2015 in India. IDBI Bank, for instance, has
an exclusive team working on clean development mechanism (CDM)
advisory services. It also implemented a refinance scheme for energy
saving projects for micro, small and medium enterprises sector
 The new Green Home Loan Scheme from SBI, for instance, will support
environmentally-friendly residential projects and offer various concessions.
A 5 per cent concession in margin, 0.25 per cent concession in interest
rate .
Bibliography …
www.google.com
www.findarticle.com
www.worldjute.com
www.wikipedia.org
www.wholebanking.com
www.economywatch.com
www.bankingindiaupdate.com
Why was the Indian
banking sector secure
from recession ?????
“BANKING WAS CONCIEVED IN

INQUITY AND BORN IN SIN”