Sector overview

Industry fast facts

Forecast: According to RBI, bank credit stood at INR 116.8 lakh crore on 31st
December 2021. India to be third largest domestic banking sector by 2050. Total
banking assets are expected to exceed USD 2.85 billion in 2025 0.29% CAGR
Banking Credit growth (FY16-FY21)
In FY18-FY21, bank assets across sectors During FY16-FY21, bank credit
increased. Total assets across the banking increased at a CAGR of 0.29%. As
sector (including public and private sector of FY21, total credit extended 12.38% CAGR
banks) increased to USD 2.48 trillion in surgesurged to USD 1,487.60 Deposit growth
FY211 billion (FY16-FY21)
In FY21, interest income of
Other income for public sector banks and
public banks reached USD 96.60
private sector banks stood at USD 17.05
billion and interest income in the 213,145
billion and USD 12.87 billion, respectively
private banking sector reached Number of ATMs in India
USD 61.70 billion. (September 2021)

4.62 billion
Transactions through
Unified Payments Interface (Jan
2022)
 Key industry segment - Public Sector Bank

Number of banks 12

Current scenario:
In FY22, Net profit by a collective profit of 12 state-owned banks of INR 66,539 crore with an increase of 110% over INR
31,816 crore in FY21.

Improved profitability after amalgamation of 10 state-owned banks and growth segments like retail loans are some
other reasons

Key players with market cap (in Crore):

State Bank of India- 3,97,189.84
Bank of Baroda- 51,532.62
Canara Bank- 35,756.51
Punjab National Bank- 33,088.10

Future growth:
India Ratings and Research has upgraded the outlook on public sector banks (PSBs) from “negative” to “stable” for FY22.
The regulatory changes led to an improvement in PSB

Outlook on PSBs considers continued government support through large capital infusions (INR 2.8 lakh crore over FY18-
FY21 and further INR 0.2 lakh crore provisioned for FY22).
 Key industry segment - Private Sector Banks
Number of banks: 22

Current scenario:
In September 2021, private banks contributed about 38% of the industry’s total credit, up by over 10 % points in
five years.

In FY21, private sector reported a net profit of over INR 91,000 crore, 29% higher than previous year of INR
70,435 crore.

Key players with market cap (in Crore):

ICICI Bank- 4,76,235.19
HDFC Bank- 7,33,030.47
Axis Bank- 1,98,375.94
Kotak Mahindra- 3,44,145.09

Future growth
As per the India Ratings & Research (Ind-Ra), private sector has a stable outlook.
However, the old private sector banks could face challenges on asset quality

For FY23, the India Ratings and Research expects stressed assets in retail to decline to 4.9% on account of recoveries
 Key industry segment - Foreign Banks
Number of banks: 44

Current scenario:
According to the RBI, India’s foreign exchange reserves reached USD 630.19 billion as of February 18, 2022.
In FY21, assets of foreign sector banks accounted for USD 169.53 billion, interest income reached at USD 8.6 billion, and
other income growth was at USD 2.43 billion.
In FY21, investment deposit ratio stood at 60.92% and credit deposit ratio stood at 54.5%.

Key players with market cap (in USD Billion):

Citi Bank- 92.65
Standard Chartered Bank- 21.34
HSBC Bank– 125.89
Deutsche Bank - 20.62

Future growth:
The percentage of advances has consistently decreased from 6.55% in 2005 to 4.15% in 2020.
More number of exists of foreign banks from the Indian market due to stringent regulatory rules
However, foreign banks have been able to grow business despite a much lower customer coverage, the
increased presence of foreign banks such as DBS, and US-based Oaktree, which came close to save DHFL
can improve the reaffirmation from international lenders.
 Growth drivers

Increasing working population and income:

Rising per capita income
High demand from rural households is attributable

Increasing demand for housing finance

Rapid urbanisation, decreasing household size and easier availability of home loans has been driving demand
for housing finance
India’s housing finance companies' portfolio is estimated to be at INR 11 lakh crore as of June 30, 2021

Supportive government policies

The Government of India made the Pradhan Mantri Jan Dhan Yojana (PMJDY) plan open-ended and added more
incentives to increase access to financial services
The Finance Ministry announced plans to inject INR 14,500 crore into public sector banks in the fourth quarter of FY21

Increasing adoption of Digital lending

India is the world's largest market for Android-based mobile lending apps, accounting for 82% of all online lenders
worldwide.
India’s digital lending stood at USD 110 billion in FY19 and is estimated to reach USD 350 billion by FY231
Digital lending to micro, small and medium enterprises (MSMEs) in India is expected to reach USD 100 billion by 2023
India's BNPL industry has seen a 45-fold increase in transactions in last 2 years
Key industry trends

Growing adoption of Growing adoption of technology Rising industry consolidation

RTGS,NEFT and IMPS HDFC Bank and SBI have In 2019, the Indian banking
Securities Exchange launched AI-enabled chatbots and financial services industry
Board of India (SEBI) to assist customers in banking recorded 32 M&A deals worth
has included NEFT tasks and attend to online USD 1.72 billion
and RTGS payment queries In October 2021, Indian
system to the existing The total digital transaction volume Bank announced that it has
list of methods that a stood at 4,371 crores in FY 20-21 acquired a 13.27% stake in
company can use for RBI has taken several steps to the proposed National
payment of dividend enable mobile payments; the Asset Reconstruction
or other cash benefits central bank has removed the Company Ltd. (NARCL)
to their shareholders transaction limit of INR 50,000 In November 2021, Kotak
and investors (USD 745.82) and allowed banks Mahindra Bank announced
The number of to set their own limit that it has completed the
transactions through National Payments Corporation acquisition of a 9.98% stake
immediate payment of India (NPCI) has plans to in KF in Technologies for
service (IMPS) reached launch UPI lite to provide offline INR 310 crore (USD 41.62
430.67 million and UPI services million)
amounted to INR. 3.70
trillion in October 2021.
 Key challenges

Fraud:
The 12 PSBs (Public Sector Banks) had reported frauds worth INR 81,921.54 crore in preceding fiscal 2020-21,
reported by RBI. The highest amount of INR 9,528.95 crore was reported by the city-based Punjab National Bank
(PNB), involving 431 such incidents

The rise in the Non-Performing Assets:

According to the RBI financial stability report, the share of large borrowers in gross NPAs is 62.1% up till September 2021

Differential treatment of foreign banks with respect to domestic banks:

Due to structural imbalances in the financial system, some foreign banks are exiting the Indian market.

Cyber attacks:
Banks are increasingly undergoing digital transformation and adopting technologies to enhance their services
online. However, this exposes them to cyber attacks which can potentially threaten data privacy of
confidential customer information. Over 2.9 lakh cyber security incidents related to digital banking were
reported in 2020