PERFORMANCE OF COMMERCIAL BANKS IN INDIA

OBJECTIVES

• To understand the key reforms introduced in the banking sector.

• To study the impact of reforms on the financial performance of banks

• To study the financial performance of public and private sector banks

Indian Banking System can be segregated into three distinct phases they are-

Phase--I Pre-Independence Period (from 1786 to 1947)Phase-II Post-Independence pre reforms (Nationalization of Indian Banks and up to 1991 prior to Indian banking sector reforms)Phase-III Post Nationalization (from 1991to till date).

PRE-INDEPENDENCE PERIOD

Number of Banks and Deposits of Banks in India from 1870 To 1935 (Rupees in Crores)

Year end of December

No. of banks Deposits

1870 8 1263*1880 10 1543*1890 13 2861*1900 20 3427*1926 95 2151932 106 2251935 124 245

(Report on currency and finance,2006-08 vol.4)(*amt in lakhs)

Banking in India originated in the first decade of 18 century The General Bank of India, which came into existence in 1786.

POST INDEPENDENCE PRE REFORMS

Year end

Rural centres

Semi-urban centres

Urban centres

Port towns

total Population per batch

June 1969

1443 3337 1911 1496 8187 65000

Dec 1975

6807 5598 3489 2836 18730 31660

Dec 1980

15105 8122 5178 4014 32419 20481

Dec 1985

30185 9816 6578 4806 51385 14381

Dec 1990

34791 11324 8042 5595 59752 13750

Branch expansion of commercial banks from 1969 to 1990

(Source-report on currency and finance 2006-08,vol.4)

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India .

POST NATIONALIZATION

• In the early 1990s the then Narasimha Rao Government embarked on a policy of liberalizations and gave licenses to a small number of private banks, which came to be known as New Generation tech-savvy banks.

• It included banks such as UTI Bank(now re-named as Axis Bank), ICICI Bank ,HDFC Bank etc..

• This move, along with the rapid growth in the economy of India, kick started the banking sector in India, which has seen rapid growth with strong contribution from banking industry.

STRUCTURE OF BANKING IN INDIA

BANKING DURING 2001 TO 2011• RBI had issued new guidelines in January 2001 for the entry of new private sector banks • Voluntary Retirement Scheme.• The Securitization and Reconstruction of Financial Assets and Enforcement of Security

Interest (SARFAESI) Act, 2002• Know Your Customer (KYC) norms in November 2004.• Corporate Debt Restructuring Mechanism (CDRM) was developed in August 2001.• During the year 2008-09, loans to Housing Financing Companies (HFCs) were included

within the purview of priority sector loans with a maximum limit of Rs.20 lakhs per dwelling unit per family RBI also advised the banks in August 2009 to issue collateral free loans up to Rs.5 lakh for the Micro and Small Enterprises (MSE) sector.

FINANCIAL INCLUSION

Financial inclusion is expected to make significant changes in the economy , especially the rural economy , which is expected to witness a revolution in availability of financial instruments mainly because of-PMJDYgold monetization schemeMUDRA

which will operate through the banking system will also ensure regularity of flow of liquidity in households and therefore opportunities for investment.

DEPOSITSThe so called credit-to-deposit ratio has surged to 77.6% in mar 2016 from 76.5% a year earlier indicating that banks are lending a bigger portion of every Rs 100 taken as deposits.

Source-RBI reports

DIGITAL TRANSFORMATION IN BANKING

Sr. no

Type of bank Name of the bank Digital banking products and services

1 Public sector SBI In-touch, InCube (Start-up Branch), ExclusiF (Wealth Management), Buddy (Anyone, Anytime, Anywhere), SBI Quick (Missed Call Banking), SBI Online Customer Acquisition Solution (OCAS) and SBI Self Service Kiosks (Bank @ Your Service 24x7), e-Smart SME (e-Commerce Loan), e-auctions and e-CRM and SBI mingle

2 Private sector ICICI bank Rail Ticket Booking on Website (IRCTC), etc

3 Foreign bank Citi bank e-Core Banking through ATMs

4 Wallet banking paytm Online Mobile Recharging, Online Bill Payments, Online Bus Travel, Credit and Debit Card Payments, Net Banking, Mobile Wallet, etc

5 Payment bank Tech Mahindra – Mobo Money

A first of its kind “Tap N Pay”, Contactless Digital Payment Solution (Near Field Communication)

DIGITAL TRANSFORMATION IN BANKINGDigital banking products and services provided by various outfits

NON PERFORMING ASSETS

In recent years, the gross NPAs of banks have increased from 2.3% of total loans in 2008 to 4.3% in 2015 . The combined net loss of 20 public sector banks (PSB) stood at Rs 16,272.34 crore for the fourth quarter ended March 2016 as bad loans situation worsened.

EFFECTS OF BREXIT

• “As risk aversion sets in, there would be a decline in financial markets and India would see this impact along with other nations. But as trade strategies are reworked there could be potential advantages in the form of better market access for India to the EU and Britain,” Ms. Bhattacharya said in a statement.

• The decision led to a sharp fall in the domestic market as well as in the rupee following which the government and the RBI said the economy has enough “firepower” to deal with the situation.

CONCLUSION

Income is rising, but profits sputtering

Important indicators that give a snapshot of India’s banking industry

…and NPAs have risenMeanwhile , returns have flattened

But some good news :Cashless banking is on the rise

• With growing bad loans it will be a challenge for the banking sector to come out of it. we need to take lessons from foreign lands on how to resolve bad loans crisis.

• Given the focus on inclusive growth, banks are also expected to renew efforts to broaden.

• Implementation of basel III•  Stressing that cleaner balance sheets will lead to future loan growth for

banks, RBI chief Raghuram rajan said a "deep surgery" is must for the clean-up that would require an "anaesthetic" in the form of recognising NPAs on their books.

THANK YOU