banking march 2014

8/12/2019 Banking March 2014

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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

to 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

Note: ATM - Automated Teller Machine


4/44

Growing demand

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

Note: NPANon Performing Assets

Robust demand

Increase in working populationand growing disposable incomeswill raise demand for banking andrelated services

Housing and personal finance areexpected to remain key demand

drivers Rural banking is expected to

witness growth in the future

Innovation in services

Mobile, Internet banking andextension of facilities at ATMstations to improve operationalefficiency

Vast un-banked populationhighlights scope for innovation in

delivery

Policy support

Wide policy support in the form ofprivate sector participation and

liquidity infusion Healthy regulatory oversight and

credible Monetary Policy by theReserve Bank of India (RBI) havelent strength and stability to thecountrys banking sector

Business fundamentals

Rising fee incomes improving therevenue mix of banks

High net interest margins, alongwith low NPA levels, ensurehealthy business fundamentals

FY13

Total asset

size:

USD1.8

trillion

FY25E

Total asset

size:

USD28.5

trillion

Advantage

India


5/44

Source: Indian Banks Association, Aranca Research, BMI

Notes: RBI - Reserve Bank of India, FDIForeign 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 ofImperial 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 intoState Bank of India

Nationalisation of14 large

commercial banks

in 1969 and 6

more banks in

1980

Entry of private

players such as

ICICI intensifying

the competition

Gradualtechnology

upgradation in

PSU banks

1921

1935

1936 -1955

1956-2000

2000 onwards

Number of banks

increased to 26public sector

banks, 21 private

sector banks and

43 foreign banks

Advent of mobile

and internetbanking

Growing FDI in

the Indian

banking sector


6/44

Reserve Bank of India

Banks Financial Institutions

Scheduled CommercialBanks (SCBs)

Cooperative creditinstitutions

Public sector banks (26)

Private sector banks (21)

Foreign banks (43)

Regional Rural Banks (RRB)(62)

Urban cooperative banks(1,674)

Rural cooperative creditinstitutions (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


7/44

Growth in credit off-take over past few years

(USD billion)

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

Notes: CAGR - Compounded Annual Growth Rate,

FY14* - RBIs 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 FY0613, 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

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14*

Amount (USD billion) Growth- RHS (%)


8/44

Growth in deposits over the past few years

(USD billion)


Notes: CAGR - Compounded Annual Growth Rate,

FY14*- RBIs growth estimates,

** Growth and CAGR is in terms of Indian Rupee

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

FY0613; 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

Indias banking sector has remained stable despite global

upheavals, thereby retaining public confidence over the

years

489

665

822 763

1,030

1,182 1,1701,274

1,453

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14*


9/44

Total banking sector assets (USD billion)

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

Indian Banks AssociationNotes: CAGR - Compounded Annual Growth Rate,

* - Growth and CAGR is in terms of Indian Rupee

Total banking sector assets have increased at a CAGR* of

11.5 per cent to USD1.7 trillion during FY1013

FY1013 saw growth in assets of banks across sectors

Assets of public sector banks, which account for

72.7 per cent of the total banking asset, grew at an

average of 73.7 per cent

Private sector expanded at an CAGR* of 14.7 per

cent, while foreign banks posted a growth of 7.6 per

cent

1,271

1,577

1,736 1,763

1,200

1,350

1,500

1,650

1,800

0

300

600

900

1,200

1,500

FY10 FY11 FY12 FY13

Foreign Bank Private Bank

Public Bank Total Assets - RHS


10/44

Growth in money supply over past few years

(USD billion)

Source: Department of Industrial Policy and Promotion, Working group for 12 thFive Year Plan, Aranca Research

Notes: CAGR* - Compound Annual Growth Rate, CAGR is calculated in Indian Rupee term Narrow money,

FY14** - till 1st November 2013,

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 14.0 per cent

to USD1.5 trillion during FY0613

Narrow money supply (M1) rose at a CAGR* of 12.6 per

cent while its components currency with public and Deposit

money of the public grew at a CAGR of 15.7 and 8.9 per

cent during FY0613

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

cent to USD349.8 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 FY0613

621 738

10061051

1188

14341543 1549 1529

0

300

600

900

1,200

1,500

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14**

Currency with the public Deposit Money of the Public

Time Deposits with Banks Total Post off ice Deposits


11/44

Interest income growth in Indian banking sector

(USD billion)

Source: Indian Banks Association, Aranca Research Notes: CAGR* - Compound Annual Growth Rate

CAGR is calculated in Indian Rupee term

Public sector banks account for over 73.3 per cent of

interest income in the sector

They lead the pack in interest income growth with a

CAGR* of 15.7 per cent over FY09-12

Overall, the interest income for the sector has grown at 13.8

per cent CAGR* during FY09-12

57.6

67.1

76.4

89.3

17.9 18.2 20.224.7

6.4 5.8 5.9 6.7

FY09 FY10 FY11 FY12

Public Banks Private Banks Foreign Banks


12/44

Net interest margins growth (FY13)

Source: Indian Banks Association, Aranca Research

Net Interest Margin (NIM) for scheduled commercial banks stood at 3.2 per cent in FY13, 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 4.8, 2.9 and 3.2

per cent, respectively in FY13

Net interest margin across sector (FY13)

Average2.9%

2.5%

2.6%

3.2%

4.8%

1.0%

2.0%

3.0%

4.0%

5.0%

SBI & itsassociate

Nationalisedbanks

Public sectorbanks

Private sectorbanks

Foreign banks

2.58%

2.63%

2.54%

2.91% 2.90%

3.20%

FY08 FY09 FY10 FY11 FY12 FY13


13/44

Healthy Net Interest Margins (FY13)

Source: Company Reports, Aranca Research

Notes: HDFCHousing Development Finance Corporation,

* - Till September 2013ICICIIndustrial Credit and Investment Corporation of India,

SBIState Bank of India

Indian banking sector enjoys healthy Net Interest Margins

(NIMs) compared with global peers

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

Prominent Chinese banks have NIMs between 2-3 per cent,

significantly lower than Indian peers

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

NIMs comparable to Indian peers

4.5%

3.1%

3.7%3.8%

0%

1%

2%

3%

4%

5%

HDFC* ICICI SBI Axis


14/44

Other income growth in Indian banking sector

(USD billion)

Source: Indian Banks Association, Aranca Research Notes: CAGR* - Compound Annual Growth Rate,


Public sector banks account for about 59 per cent of income

other than from interest (otherincome)

Otherincomefor public sector banks has risen at a

CAGR* of 4.2 per cent during FY09-13

Overall, other income for the sector has risen at 3.5 per

cent CAGR* during FY09-13

8.9

10.2 10.0 10.510.4

3.74.3 4.3 5.1

5.5

3.1

2.12.3 2.3 2.1

FY09 FY10 FY11 FY12 FY13

Public Banks Private Banks Foreign Banks


15/44

Gross NPAs to gross advances (FY13)

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

Indian Banks Association

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

few years

Net NPA levels decreased to 1.18 per cent in FY13 from 1.28 per cent in FY12

Privates sector banks maintained lowest gross non-performing assets to gross advances at 1.84 per cent in FY13

NPA levels over the year

3.68%

1.84%

3.03%

Public sector banks Private sector banks Foreign banks

1.02%1.00%

1.05%

1.12%

0.97%

1.28%

1.18%

FY07 FY08 FY09 FY10 FY11 FY12 FY13


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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

80%

73%

76%

80%

81%

82%

75%

78%

82%

83%

85%

74%

78%

82%

92

%

SBI & itsassociate

Nationalisedbanks

Public banks Private banks Foreign banks

FY11 FY12 FY13

79% 1

03%

96%

143%

17

5%

89%

88%

88%

153% 1

76%

81%

71%

73%

129%

138%

SBI & itsassociate

Nationalisedbanks

Public banksPrivate banks Foreignbanks

FY11 FY12 FY13


17/44

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 77.3 per cent in

FY13

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

capturing share in savings deposit

78.2% 77.3%

17.1% 18.8%

4.7% 3.9%

FY05 FY13

Public banks Private banks Foreign banks


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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


19/44

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 riskmanagement 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


20/44

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 RTGSand 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 making any investment such

as mutual funds

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


21/44

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

Indian banking and securities companies will

spend USD8.51 billion on IT products and

services in 2014, an increase of nearly 9.8

percent over 2013

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 offerhighly 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


22/44

16,75021,509

27,088

34,789 43,651

60,153

74,743

104,500

126,950

0

20000

40000

60000

80000

100000

120000

2005 2006 2007 2008 2009 2010 2011 2012 2013*

Growth in ATMs

Source: IBA statistics, Reserve bank of India,

Aranca Research

Notes: CAGR - Compound Annual Growth Rate,


2013* - till Aug 2013

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 1,26,950 in 2013 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

CAGR: 28.8%


23/44

Deposit of cash

Withdrawal of

cash

Mini-statement

Balance Inquiry

Coupon

Dispensing

Fulfilling request

from customers

Account transfer

Touch screenmenus

Bill payment

Mobile recharging

1988-1994

1995-1999

2001-2004

2004-2006

2007 onwards

Check deposit with

scanning

Customised ATMs

After 5 free

transaction ATMs

charges for non-bank

customer - Rs 20 for

each cash withdrawaland Rs 9 for non-cash

transactions

Source: IBA statistics, Aranca Research


24/44

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

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

Economic and demographic

driversPolicy support Infrastructure financing Technological innovation

Favourable demographics

and rising income levels

Strong GDP growth

(CAGR of 7.0 per cent

expected over 201217)

to facilitate banking sector

expansion

The sector will benefit

from structural economicstability 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 givingmore licenses to private

sector players to increase

banking penetration

India currently spends 6

per cent of GDP on

infrastructure; PlanningCommission expects this

fraction to grow going

ahead

Banking sector is

expected to finance part

of the USD1 trillioninfrastructure investments

in the 12thFive Year Plan,

opening a hugeopportunity for the sector

Technological innovation

will not only help to

improve products andservices but also to reach

out to the masses in cost

effective way

Use of alternate channels

like ATM, internet and

mobile hold significantpotential in India


25/44

64.9

53.9

66.9

76.474.8

94.3

FY08 FY09 FY10 FY11 FY12 FY13**

Growth in credit to housing finances (USD billion)


Notes: *CAGR - Compound Annual Growth Rate,CAGR* - is calculated in INR terms

FY13** - Data till November 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 7.8 per

cent during FY0813

As of November 2013, credit to housing sector was at

USD94.0 billion compared to USD90.5 billion corresponding

to prior period

Demand in the low- and mid-income segments exceeds

supply three- to four-fold

This has propelled demand for housing loans in the last few

years

CAGR: 7.8%


26/44

65.2

54.7

63.3

74.9 73.3

86.8

FY08 FY09 FY10 FY11 FY12 FY13**

Growth in personal finance (excluding housing)


Notes: *CAGR - Compound Annual Growth Rate,

CAGR* - is calculated in INR termsFY13** - Data till November2013

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 5.9 per cent during FY0813

Unlike some other emerging markets, credit-induced

consumption is still less in India

CAGR*: 5.9 %


27/44

Indias working age population and GDP per capita

(USD)

Source: World Bank, IMF, Aranca ResearchNotes: 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 2016F

Population (Mil lion) GDP per capita - RHS (USD)


28/44

Total loans: growth forecast over 2011-17

(USD billion)

Source: Reserve Bank of India, Business Monitor

International Ltd (BMI), Aranca ResearchNotes: *CAGR - Compound Annual Growth Rate

CAGR* - is calculated in INR terms

IndiasGDP 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


29/44

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

CzechRepublic

PolandTurkey

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


30/44

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


31/44

237.8

331.3467.7

614.3

818.0

1,077.8

1,238.5


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 andTreasury operations

SizeNumber of branches and extensions: 3,062*

Number of ATMs: 10,743*

Number of employees: 69,065*

Total assets: USD73.5 billion*

Recognition

Best Retail Bank in India (Asian Banker:2012)

Best Performing BankPrivate (CNBC

TV18:2011)

Net profit USD (millions)

Source: Company Annual Reports, Aranca Research

Notes: * - As on March 2013,CAGR - Compound Annual Growth Rate,

CAGR - is calculated in INR terms

CAGR: 31.7%


32/44

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


1013

21

2633

4144

14

21

30

35

43

51 54


Advances Deposits

70%

30%

Net Interest Income

Other Income


33/44

145.5266.2

395.4

530.4

743.6

884.9

953.7


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

DivisionsTreasury, retail banking, corporate/wholesale

banking and other banking business

SizeNumber of branches and extensions: 1,947*

Number of ATMs: 11,245*

Number of employees: 37,901*

Total assets: USD63 billion*

Recognition

Most Productive Private Sector Bank award

(FIBAC:2011)

3rd strongest bank in Asia Pacific region (AsianBanker: 2011)

Net profit USD (Millions)


Notes: FIBAC - FICCI and Indian Banks Association Conference

* - As on March 2013

CAGR: 36.8%


34/44



60%

34%

6%

Net Interest income

Fee Income

Other Income

815

1822

3135 36

13

22 26

30

42

46

47


Advances Deposits


35/44

1.0

1.7

2.01.9 1.8

2.42.6


State Bank of India

Established in 1955, State Bank of India is the largest

public sector bank in India. The bank is capitalised to theextent of USD129.3 million with the government holding

of 62.31 per cent as on May 2013

DivisionsTreasury, retail banking, corporate/wholesale

banking and other banking businesses

SizeNumber of branches and extensions: 15,002

Number of ATMs: 32,752

Total Assets: USD288.4 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 ResearchNotes: CAGR - Compound Annual Growth Rate,

CAGR - is calculated in INR terms

CAGR: 17.2%


36/44


Source:Company Annual Reports, Aranca Research

84%

16%

Net Interest Income

Other Income

112

151 148

192224 231

256

142

188 195

242276 273

300


Advances Deposits


37/44


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 (201013) 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


38/44


39/44

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 donot 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 tele-density opens avenue of mobilebanking

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

0.49.2

15.2

24.3

37.539.9

40.8

2007 2008 2009 2010 2011 2012 2013*

Rural Teledensity


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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 thelead

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 340million 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.)

Mobilerecharge

Mobile

remittances


41/44

Indian Banks' Association

World Trade Centre, 6thFloor

Centre 1 Building,

World Trade Centre Complex,

Cuff Parade, Mumbai - 400 005

India

E-mail: [email protected]


42/44

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


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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* 57.72

Exchange rates (Calendar year)

Average for the year

2013* - from January to October 2013


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by Aranca in consultation with IBEF.

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