BANKING

For updated information, please visit www.ibef.org July 2017

Table of Content

Executive Summary...3

Advantage India......4

Market Overview and Trends...6

Porters Five Forces Analysis......18

Strategies Adopted...20

Growth Drivers and Opportunities.............28

Case Studies........32

Key Industry Organizations.....37

Useful Information........39
 EXECUTIVE SUMMARY

In FY16, value of public sector bank assets stood at US$ 1.4 trillion. Total Indian asset market size is
Robust asset growth
expected to reach US$ 1.97 trillion in FY17

Total lending has increased at a CAGR of 12.38 per cent during FY07-17 and total deposits has increased at
Growing lending and
a CAGR of 10.08 per cent, during FY07-17 & are further poised for growth, backed by demand for housing
deposit and personal finance

As of February 2017, total number of ATMs in India increased to 207,402 and is further expected to double
Higher ATM penetration over next few years, thereby leading to increase in the number of ATMs per million people in India from 105 in
2012, to about 300 by 2017.

As of March 2016, 56 regional rural banks are functioning in the country.

Under 1st phase of FIP (2010-13), 74,000 villages, with population exceeding 2,000 people, were covered
with 2,493 banking outlets.
Rising rural penetration RBI has allowed, regional rural banks with net worth of at least US$ 15.28 million to launch internet banking
facilities.

As of February 2017, Airtel payments bank opens over 1 lac accounts in UP, of which 60 per cent have been
opened in rural areas.

Notes: ATM - Automated Teller Machine, FIP Financial Inclusion Plan, RBI Reserve Bank of India
Source: India Banking Association, Reserve Bank of India, Aranca Research

3 Banking For updated information, please visit www.ibef.org

 Banking

ADVANTAGE INDIA
 ADVANTAGE INDIA

Increase in working population & Mobile, Internet banking & extension of

growing disposable incomes will raise facilities at ATM stations to improve
demand for banking & related services operational efficiency

Housing & personal finance are Vast un-banked population highlights

expected to remain key demand scope for innovation in delivery
drivers

Rural banking is expected to witness

growth in the future

ADVANTAGE
INDIA

Rising fee incomes improving the Wide policy support in the form of
revenue mix of banks private sector participation & liquidity
infusion
High net interest margins, along with
low NPA levels, ensure healthy Healthy regulatory oversight & credible
business fundamentals Monetary Policy by the Reserve Bank
of India (RBI) have lent strength &
stability to the countrys banking sector

Note: NPA Non Performing Assets, FY171 - Till 29th December 2016
Source: IBA report titled Being five-star in productivity - Roadmap for excellence in Indian banking; Aranca Research

5 Banking For updated information, please visit www.ibef.org

 Banking

MARKET OVERVIEW
AND TRENDS
 EVOLUTION OF THE INDIAN BANKING SECTOR
Closed market
State-owned Imperial Bank of
India was the only bank existing
1921 1935
RBI was established as the central bank of
country
Quasi central banking role of Imperial
Bank came to an end
Note: RBI - Reserve Bank of India, FDI Foreign Direct Investment, LIC Life Insurance Corporation
Source: Indian Banks Association, Aranca Research, BMI
7 Banking
Imperial Bank expanded its
network to 480 branches
In order to increase penetration
in rural areas, Imperial Bank
was converted into State Bank
of India
1936-1955 1956-2000
Nationalisation of 14 large commercial banks in
1969 & 6 more banks in 1980
Entry of private players such as ICICI
intensifying the competition
Gradual technology upgradation in PSU banks
For updated information, please visit www.ibef.org
As per RBI, in February 2017, India recorded highest
foreign exchange reserves of approximately US$
363.14 billion.
Also, the countrys foreign exchange reserves, further
increased to US$ 363.12 billion.
In May 2016, RBI allowed foreign banks to invest in
local private lenders & supranational institutions like
LIC, up to a limit of 10 per cent.
2000 2016
onwards onwards
NABARD sanctioned US$ 2.84 billion loan
to National Water Development Agency for 50
irrigation projects in October 2016.
SBI launched special finance scheme Hope
Loans, where customers can avail credit
facility at lower rates & added benefit
of reduced interest rates due to the reduction
in the Marginal Cost of Lending Rate
 THE STRUCTURE OF INDIAN BANKING SECTOR

Reserve Bank of India

Banks Financial Institutions

Scheduled Commercial Banks

Cooperative credit institutions
(SCBs)

Public sector banks (27) All-India financial institutions

Private sector banks (21) State-level institutions

Foreign banks (45)2 Other institutions

Regional Rural Banks (RRB)

(56)

Urban cooperative banks

(1,589)1

Rural cooperative credit

institutions (93,550)

Note: Data on number of banks belongs to FY15 1 - Indicates data for FY14 2 - Indicates data for FY16
Source: Reserve Bank of Indias Report on Trend and Progress of Banking in India, Aranca Research

8 Banking For updated information, please visit www.ibef.org

 INDIAN BANKING SECTOR HAS GROWN AT A
HEALTHY PACE(1/2)

Credit off-take has been surging ahead over the past decade, aided GrowthVisakhapatnam
in credit off-takeport
overtraffic
past (million
few years
tonnes)
(US$ billion)
by strong economic growth, rising disposable incomes, increasing
consumerism & easier access to credit
1400.00
CAGR 12.38%
As of March 2017, total credit extended surged to US$ 1,223.81
billion.
1200.00

1223.81
Credit to non-food industries increased by 9.06 per cent reaching to
US$ 1000 billion in March FY16, from US$ 983 billion during the
1000.00
previous financial year.

1016.00
994.00
984.00

983.00
969.00
Demand has grown for both corporate & retail loans; particularly the

864.00
services, real estate, consumer durables & agriculture allied sectors 800.00

have led the growth in credit.

684.00
As of November 2016, the outstanding credit to Non-banking 600.00

602.00
587.00
Finance Companies (NBFCs) stood at US$ 55.27 billion, growing at
a rate of 25 per cent on Y-o-Y basis. Bank credit granted to NBFCs 400.00

428.00
has touched the highest in 3 years.

200.00

0.00

FY 07

FY 08

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 17
Note: CAGR - Compounded Annual Growth Rate, FY17 1 - Till December 29, 2016
Source: Reserve Bank of India (RBI), Aranca Research;

9 Banking For updated information, please visit www.ibef.org

 INDIAN BANKING SECTOR HAS GROWN AT A
HEALTHY PACE(2/2)

During FY0617, deposits grew at a CAGR of 12.03 per cent and GrowthVisakhapatnam
in deposits over
port
thetraffic
past few
(million
yearstonnes)
(US$ billion)
reached 1.54 trillion by FY171.

Strong growth in savings amid rising disposable income levels are 1,800
CAGR 10.08%
the major factors influencing deposit growth.
1,600
Access to banking system has also improved over the years due to

1,541
persistent government efforts to promote banking-technology and

1,479
1,400

1,466
promote expansion in unbanked and non-metropolitan regions.

1,349
1,342

1,313
At the same time Indias banking sector has remained stable despite 1,200
global upheavals, thereby retaining public confidence over the years.

1,174
1,000
Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY), have

977
also increased. As on November 9, 2016, US$ 6,971.68 million were
800

857
deposited, while 255.1 million accounts were opened.

819
600

597
400

200

FY 07

FY 08

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 17
Note: CAGR - Compounded Annual Growth Rate, FY171 - Till December 29, 2016
Source: Reserve Bank of India (RBI), Aranca Research;

10 Banking For updated information, please visit www.ibef.org

 ASSETS BASE CONTINUES TO EXPAND

Total banking sector assets have increased at a CAGR of 7.61 per Visakhapatnam
Total Banking sector
port traffic
assets(million
(US$ billion)
tonnes)
cent to US$ 1.957 trillion during FY1316

FY13-16 saw growth in assets of banks across sectors 1600 2500.0

Assets of public sector banks, which account for more than 70 per
cent of the total banking assets, grew at a CAGR of 5 per cent 1400

1421.4
2000.0

1347.9
Private sector expanded at an CAGR of 13 per cent, while foreign

1305
1200 1960.0 1957.0
banks posted a growth of 14 per cent
1797.6

1140.2
Corporate demand for bank loans have grown due to continued 1000
1570.5 1500.0
infrastructure investments and due to other policy decisions such as
reducing oil subsidies, issuing of telecom spectrum licenses & the 800
proposed abolition of penalty on loan prepayment 1000.0
600
Total assets of Public Sector Banks amounted to US$ 1957.03 billion
in FY16

488.1
400

415.1
500.0

369.9

123.5

121.1
122.6
104.5
325.9
200

0 0.0
FY13 FY14 FY15 FY16

Public Sector Private Sector

Foreign Banks Total Asset-RHS

Notes: CAGR - Compounded Annual Growth Rate, FDI Foreign Direct Investments, FY16 data is only available for Public Sector Banks
Source: Reserve Bank of India (RBI), Aranca Research, Indian Banks Association;

11 Banking For updated information, please visit www.ibef.org

 INTEREST INCOME HAS SEEN ROBUST GROWTH

Public sector banks account for over 71.72 per cent of interest Interest income
Visakhapatnam
growth inport
Indian
traffic
banking
(million
sector
tonnes)
(US$ billion)
income in the sector in FY16

They lead the pack in interest income growth with a CAGR of 7.88 120
per cent over FY09-17

110.74
Overall, the interest income for the sector has grown at per cent
100

103.4

102.88

102.66
102.17
CAGR during FY9-16

Interest income of Public Banks was witnessed to be US$ 105.70

billion in FY17 80

76.4
67.1
60

57.6
40

36.84
34.12
31.38
30.65
28.7
20

20.2
18.2
17.9

7.68

7.78

7.77
8.26
5.8

5.9
6.4

7.6
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Private Sector Public Sector Foreign Banks

Note: CAGR - Compound Annual Growth Rate

Source: Reserve Bank of India, IBA (Indian Banks Association), Aranca Research

12 Banking For updated information, please visit www.ibef.org

 GROWTH IN OTHER INCOME ALSO ON A POSITIVE
TREND

Public sector banks account for about 58.28 per cent of income other Other income growth inport
Visakhapatnam Indian banking
traffic sector
(million tonnes)
(US$ billion)
than from interest (other income)

Other income for public sector banks has risen at a CAGR of 8.87 14
per cent during FY09-16

Other income for public sector banks stood at US$ 17.57 billion in 12

12.39

12.35
FY17.

10.8
10.7
Overall, other income for the sector has risen at 4.47 per cent 10

10.5
10.2

10
CAGR during FY09-16

8.9
8

7.4
6.7
6

5.9
5.5
5.3
4

4.3

4.3
3.7
3.1
2

2.4
2.3

2.3

2.2
2.1

2.1

1.86
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Public Sector Private Sector Foreign Banks

Notes: CAGR - Compound Annual Growth Rate,

Source: Indian Banks Association, Aranca Research, BMI

13 Banking For updated information, please visit www.ibef.org

 RETURN ON ASSETS AND LOAN-TO-DEPOSIT RATIO
SHOWING AN UPTREND

Return on assets Healthy net interest margins (FY17)

2.5 100

2.0

91.51

86.36
80

85.57
1.98

85.22

84.37
82.99

82.6
82.28

82.02
81.99

81.9
1.84
1.82

79.05
1.5

77.85
1.7

77.61
77.42
75.14
75.14

75
74.29

73.79

73.43
1.5
1.37

1.35
1.29

1.0 60
1.11

1.03
0.88

0.86

0.86
0.85

0.73

0.5
0.68

0.59

0.63
0.47
0.42

0.42
0.36
0.44
40
0.0

32.72
-0.49
-0.2
20

25
24.54
-0.5

-1.0 0
FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16

SBI & its associates Nationalised Bank Public Sector

SBI & its associates Nationalised Bank Public Sector
Private Sector Foreign Sector Private Sector Foreign Sector

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 & public banks
This has prompted most of the foreign banks to start their operations in India

Note: Data for Return on Assets and Loan to Deposit Ratio is in percentage
Source: Reserve Bank of India (RBI), Aranca Research

14 Banking For updated information, please visit www.ibef.org

 NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR (1/3)

Improved risk management practices Diversification of revenue stream Technological innovations

Indian banks are increasingly focusing on Total lending has increased at a CAGR of As of February 2017, total number of ATMs
adopting integrated approach to risk 12.38 per cent during FY07-17 and total in India increased to 207,402 & is further
management deposits has increased at a CAGR of 10.08 expected to double over next few years,
per cent, during FY07-17 & are further thereby leading to increase in the number
Banks have already embraced the
poised for growth, backed by demand for of ATMs per million people in India from
international banking supervision accord of
housing and personal finance 105 in 2012, to about 300 by 2017.
Basel II.; interestingly, according to RBI,
majority of the banks already meet capital
requirements of Basel III, which has a
deadline of 31 March 2019

Most of the banks have put in place the

framework for asset-liability match, credit &
derivatives risk management

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

15 Banking For updated information, please visit www.ibef.org

 NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR (2/3)
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.
According to RBI, 490,000
unbanked villages were
identified & allotted to banks
for coverage under second
phase of Pradhan Mantri Jan
Dhan Yojna
Source: Indian Bank's Association, Indian Banking Sector 2020, Aranca Research
16 Banking
Derivatives and risk
management products
The increasingly dynamic
business scenario & financial
sophistication has increased
the need for customised exotic
financial products
Banks are developing
innovative financial products &
advanced risk management
methods to capture the market
share
Bank of Maharashtra tied up
with Cigna TTK, to market their
insurance products across
India.
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 &
diversification of risks
For updated information, please visit www.ibef.org
Demonetization
RBI Deputy Governor, said
that since demonetisation the
Central Bank has collected
over US$ 185.81 billion in
demonetized notes from
various bank branches
The effects of demonetization
are also visible in the fact that
bank credit plunged by 0.8 per
cent from November 8 to
November 25, as US$ 9.85
billion were paid by defaulters.
As per RBI, a total of US$
125.53 billion was deposited in
banks till November 27, 2016
As of March 2017, debit cards
have radically replaced credit
cards as the preferred
payment mode in India, after
demonetization. As of October
2016, debit cards garnered a
share of 42 per cent of the total
card spending, which
increased to 60 per cent, post
demonetization.
 NOTABLE TRENDS IN THE BANKING INDUSTRY
SECTOR (3/3)
Focus towards Jan Dhan Yojana
Key objective of Pradhan Mantri Jan Dhan
Yojana (PMJDY) is to increase the
accessibility of financial services such as
bank accounts, insurance, pension, credit
facilities, etc. mostly to the low income
groups.
Under the Jan Dhan Yojana, as on April 5,
2017, 282.3 million new accounts were
opened & around US$ 9,515.30 million
were deposited with the banks under this
scheme.
As on November 9, 2016, 194.4 million
Rupay debit cards were issued to users
Source: Indian Bank's Association, Indian Banking Sector 2020, Pradhanmantri Jan Dhan Yojna, Business India, Aranca Research
17 Banking
Wide usability of RTGS and 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 & 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
& investors
For updated information, please visit www.ibef.org
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
 Banking

PORTERS FIVE
FORCES ANALYSIS
 Porters Five Forces Framework Analysis

Threat of Substitutes

For deposit substitutes include

investment in gold, real estate,
equity etc.
For advances substitutes include,
bonds, IPO/FPO1, etc.

Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers

Largely, customers prefer banks for
its reliability
Gradually, customers have hedged
inflation by investing in other
riskier avenues
At present public sector banks, led by Nascent debt market & volatile stock
SBI & associates, control 77.3 per market, are less opted
cent of the banking sector Banks are an indispensible source of
Rivalry is much aggressive in fund in India
metropolitan areas
Issuing of new licenses will increase
competitive rivalry in rural areas over
medium to long term

Threat of New Entrants

High entry barriers, as RBI & Central

Bank control the issuance of licenses
Positive Impact New licenses may reduce market-
Neutral Impact share of public banks

Negative Impact

Source: Aranca Research

19 Banking For updated information, please visit www.ibef.org

 Banking

STRATEGIES
ADOPTED
 STRATEGIES ADOPTED

In March 2016, ICICI Bank launched Host Card Emulation (HCE) for its debit & credit card holders, to make
contactless payments at stores by waving their phones across NFC enabled machines.

Similarly State Bank of India unveiled SBI Mingle, as social media banking platform for Twitter &
Facebook users.
Increased use of
Banks protect margins by promoting usage of efficient technologies like mobile & internet banking
technology
State Bank of India is planning to launch SBI Digi Bank, where end to end digitalisation of all products and
services would take place.

As of February 2017, Microsoft Corp. is planning to launch Skype with Aadhaar authentication to allow
access to bank accounts using webcams.

Major banks tend to increase income by cross-selling products to their existing customers
Cross-selling
Foreign banks have been able to grow business, despite a much lower customer coverage

Expansion in unbanked rural regions helps banks to garner deposits

Capture latent demand
Increasing tele-density & support of regulators have aided rural expansion

In 2015, IDBI announced its plan for overseas expansion & development finance institution & government
will hold 51 per cent equity in new entity.
Overseas expansion
Although at a nascent stage, private & public banks are gradually expanding operations overseas

Internationally, banks target India-based customers & investors, settled abroad

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

21 Banking For updated information, please visit www.ibef.org

 Banking

GROWTH DRIVERS
AND OPPORTUNITIES
 RISING RURAL INCOME PUSHING UP DEMAND FOR
BANKING

GDP of agriculture, forestry and fishing sector, at current

Real Disposable household income in rural India (US$)
prices (US$ billion)
400 CAGR 12.71 % 3500 CAGR 3.6%

350

369.25
3000 3229

300
2500 2667
250

259.46
2000

245.04
2167
200
1875
1500
150
160.8
157.35
141.77

140.71
139.39

132.71

100 1000

50 500

0 0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 2010 2015 2020 2025

The real annual disposable household income in rural India is forecasted to grow at a CAGR of 3.6 per cent over the next 15 years
The Indian agriculture, forestry & fishing sector has grown at a fast pace, clocking a CAGR of 8.13 per cent over FY09-FY16
Rising incomes are expected to enhance the need for banking services in rural areas & therefore drive growth of the sector. Programmes like
MNREGA have helped in increasing rural income, which was further aided by the recent Jan Dhan Yojana.

Note: CAGR Compounded Annual Growth Rate, FY161 Provisional Estimates; MNREGA: Mahatma Gandhi National Rural Employment Guarantee Act
Source: McKinsey estimates, Ministry of Agriculture, Aranca Research

23 Banking For updated information, please visit www.ibef.org

 MOBILE BANKING TO PROVIDE A COST EFFECTIVE
SOLUTION (1/2)

Soaring rural tele-density opens avenue of mobile banking

Banking penetration in rural India picking pace
(Million Units)

Of the 600000 village habitations in India only 5 per cent have 60

a commercial bank branch 56.35
50
Only 40 per cent of the adult population has bank accounts 50.3
48.3
40 46.1
Debit card holders constitute only 13 per cent of the 42.7
population & only 2 per cent have a credit card 39.9
30 37.5
51.4 per cent of nearly 89.3 million farm households do not
have access to any credit either from institutional or non- 20 24.3
institutional sources
10 15.2
Only 13 per cent of farm households are availing loans from 9.2
the banks in the income bracket of < US$ 1000 0.4
0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

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
2017
Tele-density in rural India soared at a CAGR of nearly 71 per cent
during 2007 to 20161.
Banks, telecom providers & RBI are making efforts to make
inroads into the un-banked rural India through mobile banking
solutions

1 Indicates as on January 2016

Source: TRAI, Aranca Research

24 Banking For updated information, please visit www.ibef.org

 MOBILE BANKING TO PROVIDE A COST EFFECTIVE
SOLUTION (2/2)

Robust asset growth

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
Mobile banking across the world is still at a primitive stage with remittances Mobile
countries like China, India & UAE taking the lead commerce

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 & allowed Mobile
banks to set their own limits recharge
Payment of
In adoption of mobile banking, India holds 4th rank across the bills
globe.

Mobile banking transactions in India will cross 340 million by 2015

& would result in cost savings of approximately INR11billion (US$
230 million) Mobile banking (fund
transfers, etc.)
The aggregate mobile wallet transactions value in India, in 2015-
16 is INR 205.8 billion (US$3.06 billion)

Source: PWC, Searching for new frontiers of growth, Aranca Research

25 Banking For updated information, please visit www.ibef.org

 GROWTH DRIVERS OF INDIAN BANKING SECTOR
Economic and demographic
drivers
Favourable demographics
and rising income levels
Strong GDP growth (CAGR
of 7 per cent expected over
201217) to facilitate
banking sector expansion
The sector will benefit from
structural economic stability
and continued credibility of
Monetary Policy
Notes: GDP - Gross Domestic Product, KYC - Know Your Customer, RBI - Reserve Bank of India, ATM - Automated Teller Machine Bps: Basis Points
26 Banking
Policy support
Simplification of KYC
norms, introduction of no-
frills accounts & Kisan
Credit Cards to increase
rural banking penetration
RBI is considering giving
more licenses to private
sector players to increase
banking penetration
The Goods & Services Tax
(GST) will improve state
finances by the Reserve
Bank of India, and
estimated a higher-than-
expected average deficit at
3.4% of GDP during FY17.
Infrastructure financing
India currently spends 6 per
cent of GDP on
infrastructure; NITI Aayog
expects this fraction to grow
going ahead
Banking sector is expected
to finance part of the US$ 1
trillion infrastructure
investments in the 12th Five
Year Plan, opening a huge
opportunity for the sector
For updated information, please visit www.ibef.org
Technological innovation
Technological innovation
will not only help to improve
products and services but
also to reach out to the
masses in cost effective
way
Use of alternate channels
like ATM, internet & mobile
hold significant potential in
India
Now cloud technology &
analytics also gaining
ground
 NEW SCHEMES BY GOVERNMENT
Pradhan Mantri Suraksha
Bima Yojana
This scheme is mainly for
accidental death insurance
cover for up to Rs. 2 lakh.
Premium: Rs. 12 per
annum.
Risk Coverage: For
accidental death and full
disability - Rs. 2 lakh and for
partial disability Rs. 1
lakh.
Source: News Articles, Pradhanmantri Jan Dhan Yojna, PMO, Aranca Research
27 Banking
Pradhan Mantri Jeevan Jyoti
Bima Yojana
This scheme aims to
provide life insurance cover.
Premium: Rs. 330 per
annum. It will be auto-
debited in one instalment.
Risk Coverage: Rs. 2 lakh
in case of death for any
reason.
As of FY16, almost 29.8
million Pradhan Mantri
Jeevan Jyoti Bima Policies
have been done in India
Pradhan Mantri Jan Dhan
Atal Pension Yojana
Yojana
Under the scheme, As on April 5, 2017, 282.3
subscribers would receive million accounts were
the fixed pension of Rs. opened in India.
1,000, 2,000, 3,000, 4,000
Under the scheme, each &
or 5,000 at the age of 60
every citizen will be enrolled
years (depending on their
in a bank for opening a Zero
contributions).
balance account.
The Central Government
Each person getting into this
will also co-contribute 50
scheme will get an Rs.
per cent of the subscriber's
30000 life cover with
contribution or Rs. 1,000 per
opening of the account
annum, whichever is lower,
to each eligible subscriber Overdraft limit under such
account, for a period of 5 accounts is Rs.5000
years
For updated information, please visit www.ibef.org
 HOUSING AND PERSONAL FINANCE HAVE BEEN KEY
DRIVERS (1/2)

Rapid urbanisation, decreasing household size & easier availability Growth

Visakhapatnam
in credit to housing
port traffic
finances
(million(US$
tonnes)
billion)
of home loans has been driving demand for housing

Personal finance, including housing finance provide an essential 140

cushion against volatility in corporate loans

133.1
The recent improvement in property value have reduced the ratio of
120
loan to collateral value

114.1
Credit to housing sector increased at a CAGR of 9.87 per cent during
100

102.9
FY09FY171, wherein, value of credit to housing sector increased
from to US$ 114.1 billion in FY16 to US$ 114.5 billion in FY171.

89.7
Demand in the low & mid-income segments exceeds supply 80

84.1
76.4
3 to 4 fold

74.8
66.9
This has propelled demand for housing loan in the last few years 60

53.9
40

20

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Notes: CAGR - Compound Annual Growth Rate, FY13: Data as on 22 March 2013, FY14: Data as on 21 March 2014, FY15: Data as on 20 March 2015, FY16: Data as on 18 March 2016,
FY17 1: Data as on 27 May 2016
Source: Reserve Bank of India (RBI), Aranca Research

28 Banking For updated information, please visit www.ibef.org

 HOUSING AND PERSONAL FINANCE HAVE BEEN KEY
DRIVERS (2/2)

Growth in disposable income has been encouraging households to Growth

Visakhapatnam
in personalport
finance
traffic
(excluding
(million tonnes)
housing)
raise their standard of living & boost demand for personal credit

Credit under the personal finance segment (excluding housing) rose 120
at a CAGR of 7.57 per cent during FY09FY17, and stood at US$ 98
billion in FY17

111.61
Unlike some other emerging markets, credit-induced consumption is 100

98.6
still less in India

88.1
80

82.3
81.2
74.9

73.3
60

63.3
54.7
40

20

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Note: CAGR - Compound Annual Growth Rate FY13: Data as on 22 March 2013, FY14: Data as on 21 March 2014, FY15: Data as on 20 March 2015, FY16: Data as on 18 March 2016,
FY17 1: Data as on 27 May 2016, Value for FY17 declining due to exchange rate fluctuation
Source: Reserve Bank of India (RBI), Aranca Research

29 Banking For updated information, please visit www.ibef.org

 STRONG ECONOMIC GROWTH TO PROPEL BANKING
SECTOR EXPANSION (1/2)

Rising per capita income will lead to increase in the fraction of the Indias working age population (in million) and GDP per capita
Visakhapatnam port traffic (million tonnes)
Indian population that uses banking services (US$ )

Population in 15-64 age group is expected to grow strongly going 2500

ahead, giving further push to the number of customers in banking
sector
2302.5
2000

1702.1
1500
1552.5

1000

825 839
780
500

0
2011 2015 2019

Population GDP-RHS

Note: E - Expected, F - Forecasted, GDP - Gross Domestic Product

Source: World Bank, IMF, Aranca Research

30 Banking For updated information, please visit www.ibef.org

 STRONG ECONOMIC GROWTH TO PROPEL BANKING
SECTOR EXPANSION (2/2)

Strong GDP growth will facilitate banking sector expansion Total loans: Growth forecast over 2011-17
Visakhapatnam port traffic (million tonnes)
(US$ billion)
Total banking sector credit is expected to increase at a CAGR of 1.7
per cent during FY11 to FY17 to US$ 990.61 billion in FY17 1050
During FY16, US$ 1 trillion was the total value of bank loans in India

1025.9
The sector will also benefit from economic stability & credibility of the

1015.9
monetary policy 1000

999.4
991

990.61
950

916
900

896
850

800
FY11 FY12 FY13 FY14 FY15 FY16 FY17

Note: CAGR - Compound Annual Growth Rate; FY17 1: Data as on 27 July 2016
Source: Reserve Bank of India, Business Monitor International Ltd (BMI), Aranca Research

31 Banking For updated information, please visit www.ibef.org

 Banking

CASE STUDIES
 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: HDFC BANK (1/2)

HDFC Bank Visakhapatnam

Net profit
portUS$
traffic
(millions)
(million tonnes)
Established in 1994, HDFC Bank is the 2nd largest private sector
bank in India. HDFC was amongst the 1st to receive an 'in 2500.00
CAGR 21.13%
principle' approval from the RBI to set up a bank in the private
sector

2255.25
Divisions Retail banking, Wholesale banking and Treasury 2000.00
operations

1878.40
Size Number of branches & extensions (FY17): 4,715

1775.10
Number of ATMs: (FY17) 12,260 1500.00

1406.50
Number of Employees (FY17): 84,325

1238.50
Total Assets (FY17): US$ 133.89. billion

1102.20
1000.00
Recognition:

860.70
In 2016, HDFC bank was awarded Indias Most Valuable Brand

621.80
for the third consecutive year. 500.00

486.60
In 2016, HDFC received Bank of the Year award by Outlook
Money.
0.00

FY 09

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 17
33 Banking For updated information, please visit www.ibef.org
 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: HDFC BANK (2/2)

Income break-up (FY17) Advances and deposits (US$ billion)

120

100

99.76
86
85.95
80

79
75
27% Net Interest Income
60

61
61
55
Other Income

53

50
46
40

44
42
73%

35
35
31
27
20

21
0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Advances Deposits

Source: Company Annual Reports, Aranca Research

34 Banking For updated information, please visit www.ibef.org

 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: STATE BANK OF INDIA (1/2)

State Bank of India Visakhapatnam

Net Profit
port( US$
traffic
Billions)
(million tonnes)
Established in 1955, State Bank of India is the largest public
sector bank in India. The Net Interest Income of State Bank of
3.0
India in FY16, was US$ 9.5 billion.

Divisions Treasury, retail banking, corporate/wholesale banking

& other banking businesses 2.5 2.6
2.5
Size Number of branches & extensions (FY17): 24,017
2.2
Number of ATMs( FY17): Over 59,263 2.0
2.0
Number of Employees (FY17): 209,572 1.9
1.8 1.8
Total Assets (FY17): US$ 365.43 billion 1.5 1.6
1.5
Recognition

In FY17, SBI was selected as Indias Best Bank by Financial 1.0

Express.

During the same year, SBI was also awarded Helen Keller
0.5
Award 2016 award for commitment towards promoting equal
employment opportunities.

SBI is undergoing a rebranding exercise and has merged with 5 0.0

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
associate banks to retain the old customers and to concentrate on
Net Profit
young client base.

35 Banking For updated information, please visit www.ibef.org

 SUCCESS STORIES IN THE INDIAN BANKING
SECTOR: STATE BANK OF INDIA (2/2)

Income break-up (FY17) Advances and deposits (US$ billion)

350

316.9
300

264.4
250

261.6

243.5
231.3

223.6
222.6

221.5

215.7
Net Interest Income 200

204.7

200.7
36%

192.5
185.1
169.6
165.9
150

160.8
Other Income

133.3
64%

117.6
100

50

0
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Advances Deposits

36 Banking For updated information, please visit www.ibef.org

 Banking

KEY INDUSTRY
ORGANISATIONS
 INDUSTRY ORGANISATIONS

Indian Banks' Association

World Trade Centre, 6th Floor

Centre 1 Building,
World Trade Centre Complex,
Cuff Parade, Mumbai - 400 005, India
E-mail: webmaster@iba.org.in

38 Banking For updated information, please visit www.ibef.org

 Banking

USEFUL
INFORMATION
 GLOSSARY

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

US$ : US Dollar

Wherever applicable, numbers have been rounded off to the nearest whole number

40 Banking For updated information, please visit www.ibef.org

 EXCHANGE RATES

Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)

Year INR Equivalent of one US$ Year INR Equivalent of one US$

200405 44.81 2005 43.98

200506 44.14 2006 45.18

200607 45.14 2007 41.34
200708 40.27
2008 43.62
200809 46.14
2009 48.42
200910 47.42
2010 45.72
201011 45.62
2011 46.85
201112 46.88
2012 53.46
201213 54.31
2013 58.44
201314 60.28

2014-15 61.06 2014 61.03

2015-16 65.46 2015 64.15

2016-17 67.09 2016 67.21

41 Banking For updated information, please visit www.ibef.org

 DISCLAIMER

India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation
with IBEF.

All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced,
wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or
incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval
of IBEF.

This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the
information is accurate to the best of Aranca and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a
substitute for professional advice.

Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do
they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation.

Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any
reliance placed or guidance taken from any portion of this presentation.

42 Banking For updated information, please visit www.ibef.org