INDUSTRY

A PR I L 2 0 1 2

INDIAN BANKING

The Indian banking sector has emerged as one of the strongest drivers of Indias economic growth. The Indian banking industry (US$ 1.22 tri ion! has made outstanding advancement in ast few years" even during the times when the rest of the wor d was strugg ing with financia me tdown. India#s economic deve o$ment and financia sector ibera i%ation have ed to a transformation of the Indian banking sector over the $ast two decades. Today Indian &anking is at the crossroads of an invisib e revo ution. The sector has undergone significant deve o$ments and investments in the recent $ast. 'ost of banks $rovide various services such as 'obi e banking" S'S &anking" (et banking and )T's to their c ients. Indian banks" the dominant financia intermediaries in India" have made high*+ua ity $rogress over the ast five years" as is evident from severa factors" inc uding annua credit growth" $rofitabi ity" and trend in gross non* $erforming assets ((,)s!. -hi e annua rate of credit growth c ocked 2./ during the ast five years" $rofitabi ity (average 0eturn on (et -orth! was maintained at around 11/ during the same $eriod" whi e gross (,)s fe from .../ as on 'arch .1" 2223 to 2../ as on 'arch .1" 2211.

The Indian banking sector is a mi4ture of $ub ic" $rivate and foreign ownershi$s. The be ow tab e high ights to$ 12 banks which contributed 15/ share of the tota credit as on 'arch .1" 2211. The State bank of India has recorded highest market share. The (et Interest 'argin of 6789 &anks is :.2/ which is highest among others. Name of Bank Credi t Portfolio R!"Bn# ;13; $ %ar 2:21 225; 213: 21.1 2121 1322 11;1 1:2: 12<; %arket S&are '# 15 3 1 1 1 1 : : . . NI% '# %ar(11 2.< ..1 2.5 2.. 2.1 2.3 :.2 1.5 ..1 2.; Tier I Ca)ital '# ( %ar 2011 ;.5 5.: 12.2 1..2 5.. 12.< 12.2 5.1 <.: 3.: R*N+ '# %ar ( 11 1. 2: 2: 12 1; 23 1; 13 1< 15 Gro! ! NPA '# ( %ar 11 ... 1.5 1.: :.1 2.2 1.1 1.1 1.5 1.1 2.2

State &ank of India ,un=ab (ationa &ank &ank of &aroda I9I9I &ank &ank of India 9anara &ank 6789 &ank I7&I &ank )4is &ank 9entra bank of India

Source > )nnua 0e$ort" I90)

Source> 0&I" )ranca 0esearch

NPA (%)
1.11 1.12 1.21 1.22 2.<1 2.<2 1.22 1.21 1.22 2.<; 1.12

The 9redit off*take has increased at a 9)?0 of 1<.< / over 8@ 23* 11. The 7e$osits have grown at a 9)?0 of 15.2/ over 8@ 23*11 on account of strong growth in saving account. The net (,) has increased from 1/ in 8@ 2225 to 1.12/ in 8@ 12. The 6igh interest rates and ower economic growth has im$acted the re$ayment ca$acities of borrowers and hence $ushing u$ the (,)s of banks. The net (,) dece erated from 1.12/ in 8@ 12 to 2.<;/ in 8@ 11.

222;

2225

222<

2212

2211

Indian banks en=oyed higher eve s of money su$$ y" credit and de$osits as a $ercentage of ?7, in 8@11 as com$ared to that in 8@12 showing im$roved maturity in the financia sector. 9redit growth remained high in the first ha f of 8@11 on account of increased demand from industry and the service sector. ,ersona oans grew significant y by 1;/ during 2212*11 as com$ared with :.1/ during the $revious year.

Source>0&I

,IST*RY
) though some form of banking" main y of the money* ending ty$e" has been in e4istence in India since ancient times" it was on y over a century ago that $ro$er banking began. The first bank in India" though conservative" was estab ished in 1;53. 8rom 1;53 ti today" the =ourney of Indian &anking System can be segregated into three distinct $hases. They are as mentioned be ow>

A Bar y $hase from 1;53 to 1<3< of Indian &anks A (ationa i%ation of Indian &anks and u$ to 1<<1 $rior to Indian banking sector 0eforms A (ew $hase of Indian &anking System with the advent of Indian 8inancia C &anking Sector 0eforms after 1<<1 The banking industry has moved gradua y from a regu ated environment to a deregu ated market economy. The market deve o$ments kind ed by ibera i%ation and g oba i%ation have resu ted in changes in the intermediation ro e of banks. The $ace of transformation has been more significant in recent times with techno ogy acting as a cata yst. -hi e the banking system has done fair y we in ad=usting to the new market dynamics" greater cha enges ie ahead.

STRUCTU
RThe 0eserve &ank of India" the nations centra bank" began o$erations on )$ri 21" 1<.1. It was estab ished with the ob=ective of ensuring monetary stabi ity and o$erating the currency and credit system of the country to its advantage.

0&I

Schedu ed

Unschedu ed

9ommercia

9oo$erative

,ub ic 00&

,rivate

8oreign

0ura

Urban

In India" the banks are being segregated in different grou$s. Bach grou$ has their own benefits" own dedicated target markets" imitations in o$erating in India. The commercia banking structure in India consists of Schedu ed 9ommercia &anks and Unschedu ed &anks. Schedu ed commercia &anks constitute those banks which have been inc uded in the Second Schedu e of 0eserve &ank of India (0&I! )ct" 1<.:. 8or the $ur$ose of assessment of $erformance of banks" the 0eserve &ank of India categorise them as $ub ic sector banks" o d $rivate sector banks" new $rivate sector banks and foreign banks.

BUSIN-SS DI.ISI*N
Retail /ankin 0

Retail /ankin0 ( Doans to Individua s ()uto oan" 6ousing Doan" Bducation Doan and other $ersona oan! or sma businesses. +&ole!ale /ankin0 $ Doans to 'id and Darge cor$orate (-orking 9a$ita oans" ,ro=ect finance" Term oans" Dease 8inance! Trea!1r3 *)eration! $ Investment in B+uity" 7erivates" 9ommodities" 'utua 8unds" &onds" Trading and 8ore4 o$erations *t&er Bankin0 B1!ine!!e! $ &anking" Deasing business" 6ire Syndication services etc. 'erchant $urchase"

+&ole!al e /ankin0

B1!ine! ! Di2i!io n

*t&er Bankin0 B1!ine!! e!

Trea!1r 3 *)eration !

S+*T ANALYSIS
STR-NGT ,S Ea uab e contributor to ?7, 0egu atory environment ?overnment Su$$ort *PP*RTUNITI-S 'odern Techno ogy Unta$$ed 0ura 'arket ? oba i%ation +-AKN-SS -S Increasing (,) Dow $enetration Dack of $roduct differentiation T,R-AT S Unorgani%ed money ending market 9ustomer dissatisfaction 0ise of mono$o istic structures

P*RT-R4S
%*D-L

5I.- 5*RC-S

&anking is main y a c ient oriented business. ) high*+ua ity of services to the c ient is crucia for the growth and stabi ity of any bank. ) wider distribution and access of financia services he $s both consumers and $roducers to raise their we fare and $roductivity. Such access is es$ecia y $owerfu for the $oor as it $rovides them o$$ortunities to bui d savings" make investments" avai credit" and more im$ortant" insure themse ves against income shocks and emergencies. To survive in an increasing y com$etitive environment" bank need to come u$ with various faci ities ike Internet banking" mobi e banking etc. -ith the onset of mobi e banking" the industry finds itse f at the thresho d of the ne4t ma=or techno ogica ea$.

T&reat of Ne6 -ntrant! (Dow!

Buyer Power ( ,i0& bargaining $ower of customers on account of banks renders uniform services to the c ients. (ow a days a most a banks wou d ike to $rovide re+uisite information very easi y by way to Internet" 'obi e banking to the c ients Supplier Power( Lo6 bargaining $ower of su$$ iers on account of 0&I regu atory benchmarks. &anks have to meet numerous regu atory standards created by 0&I Competitive Rivalry( ,i0& com$etition of account of number of $rominent $ub ic" $rivate" foreign a ong w i t h c o o $ e r a t i v e b a n k s

B 1 3 e r P

C R (

S P (

o 6 e r ( 6 i g h !

A2a a/il 3o S1/

t1te

( 6 i g h !

Avai labil ity of Sub stitu tes ( ,i0& men ace from subs titute s ike (&8 9s" 'utu a fund s" ?ov ern ment secu rities and T* bi s Thr eat of new entr ants * Lo6 thre at of new entr ants on acco unt of bank ing regu ation s.

&efore setting u$ of a new

bank" it is essentia to take the consent of 0&I.

P
R 5 * R % A N C The em$irica studies have found a strong re ationshi$ between economic growth and financia deve o$ment. 8inance $ ays an im$ortant ro e in the economic growth. The charts de$ict the $erformance of &anke4 in ast 12 year and 0e ative $erformance of &SB &anke4 C &SB Sense4 in 2212*11. The $erformance of &anke4 acce erated during the $eriod 'arch 2222 to 'arch 2225. The $erformance of banke4 dece erated during 'arch 2225 F 'arch 222< but thereafter it has shown increasing trend ti 'arch 2211. The four*month $eriod ((ovember 2212* 8ebruary 2211! was marked by a consistent dec ine in a the indices caused by a number of g oba and domestic deve o$ments. The Sense4 dec ined by 12.:/" whi e the &anke4 Inde4 dec ined by 1 5 . . / . Some of the g oba factors" such as increase in crude oi $rices and high commodity $rices contributed to inf ation in the domestic economy. 6igh inf ation cou$ ed with ow growth rate in the Inde4 of Industria ,roduction (II,! and tightening interest rates has caused some concerns over the short*term economic

growth" hitting the stocks in a the sectors" $articu ar y those in the financia services sector.

Source> 0&I

In recent years" 7e$osit" which constitutes ;5 $er cent of tota iabi ities of the banking sector has registered higher growth. The higher growth in de$osits emanated main y from term de$osits. The acce erated growth in term de$osit cou d be as a resu t of higher interest rate environment. The 7e$osit and &orrowings chart de$icts that the de$endence of foreign banks and new $rivate sector banks on borrowings was re ative y high as com$ared with other bank grou$s. Con!olidated Balan7e S&eet of SCB at t&e end of %ar 2011 R!" Crore# Parti71lar! 7e$osits 9ash and &a . with 0&I Investments Doans and )dvances P1/li7 :.";2"<51 Se7tor ."12".;< 1."25"1.: .."21"3.2 Pri2ate 12"22";1< Se7tor 53"111 :"22"222 ;"<;"1.: 5orei0n 2":2"35< 22"2<. 1"31":<< 1"<1"1.<

Source> &GS of 0es$ective &anks (Inc ude 23 ,ub ic Sector" 21 ,rivate Sector C .3 8oreign &anks!

122 122 52 ' 32 :2 22

Composition of Deposits (2010-11)

2:"0

122 122

Deposits and Borrowings (2010-11)

>"; 8";

89"1 9<":

92";

52 32 :2

1<"1 1:"=

) s

/ :2"< :;"; <>": 9="0 o f t

<;"= ;8"2

>2"0

;>";

22

2 ,S&s 8&s 9)S) H,0&s (,0&s

2 ,S&s 8&s H,0&s 7e$osits (,0&s

Term 7e$osits

&orrowings

Source> 0&I I,ub ic Sector &anks (,S&s!" H d ,rivate Sector &anks (H,0&s!" (ew ,rivate Sector &anks ((,0&s!" 8oreign &anks (8&s!J

The other vita factors which determine the $rofitabi ity of banking sectors are net interest margin ((I'!" o$erating e4$enses and other income. (et Interest 'argin ((I'! is used to assess efficiency of the banking

sector. In India" during the ast one decade" (I' was in the range 2.1 $er cent to ..1 $er cent. The (I' of the Indian banking sector continues to be higher than some of the emerging market economies of the wor d.

%o2ement in

%o2ement! in *)eratin0 -?)en!e! @ *t&er

Source> 0&I

The asset +ua ity of Indian banks has im$roved dramatica y over the $ast 11 years. The gross (,) has reduced from 11.;/ in 'arch 1<<; to 2.21 / in 'arch 2211. The im$rovement in asset +ua ity was visib e in $rivate sector banks and foreign banks. The asset +ua ity of ,ub ic sector banks witnessed deterioration in 2212*11 owing to deterioration in asset +ua ity of the S&I grou$. )gricu tura sector contributed :: $er cent of the tota incrementa (,)s of domestic banks in 2212* 11. Trend! in Gro!! Non(Performin0 A!!et!

NPAs recovered as % of previous ear!s gross NPAs

;2

31 32 11
Source> 0&I

33.1 11.3 13.1

13.5

'

12 2225 222< 2212 2211

Source> 0&I

Capital to Risk Weighted Assets Ratio

The Ca)ital to Ri!k +ei0&ted A!!et! Ratio 90)0! of a bank grou$s under &ase I remained we above the sti$u ated regu atory norm of < $er cent in 2212*11. )mong the bank grou$s" foreign banks registered the highest 90)0 in 2212*11. To im$rove the ca$ita ade+uacy of the $ub ic sector banks" government infuse cor$us so that ,SU banks can be in a $osition to com$ete with the other key $ ayers. The 0eturn on )ssets (0H)! of foreign bank is high com$ared to $rivate and $ub ic banks during the $eriod 2223*2; to 2212* 2211.

GL*BAL

BANKING TR-NDS The ? oba financia crisis makes significant changes in the o$erating framework of banks. The $erformance of banks im$roves owing to strong ending growth and ow credit osses. The $resent g oba macro*economic situation is differentiated by an unba anced economic recovery across advanced and emerging economies" high eve s of unem$ oyment" inf ationary $ressures" and e evated eve s of government debt. The 0eturn on )ssets (0o)!" an indicator of banking systems $rofitabi ity and soundness showed a moderate increase in the US and 8rance in 2212. The 0o) of US banks turned $ositive by 2212 after staying in the negative %one in 2225 and 222<K it showed a further increase in 2211. The 0o) of Indian banks showed a modest rise between 2225 and 2212. Ret1rn on A!!et! R*A# of Bank! Sele7t -7onomie! Bank Sto7k Indi7e! in

Capital to Risk Weighted Assets Ratio

SourceFI'8"LU$to the $eriod ending 'ar 11" M (ot )vai ab e Source> 0euters" 7ataStream

K-Y PLAY-RS
PUBLIC S-CT*R State Bank of India SBI# State &ank of India is the argest banking and financia services com$any in India. In addition to the banking services" the &ank through their subsidiaries" $rovides a range of financia services" which inc ude ife insurance" merchant banking" mutua funds" credit card" factoring" security trading" $ension fund management and $rimary dea ershi$ in the money market. The State &ank ?rou$" with over 13"222 branches" has the argest banking branch network in India. The bank has 1.1 overseas offices s$read over .2 countries. The bank offers convenience of over 21222 )T's in India. The bank has recorded tremendous growth in (et Interest Income. The (et Interest Income has registered a growth of .;.:1/ from 0s.2."3;1.:: crores in 222<*12 to 0s. .2"123.:1 crores in 2212*11on account of growth in interest income on advances and investments. The tota assets of the bank increased by 13.1;/ from 0s.12"1.":1..;. crores at the end of 'arch 2212 to 0s. 12"2.";.3.22 crores as at end 'arch 2211. 5inan7ial ,i0&li0&t! Crore# Parti71lar! 7e$osits Investments )dvances Interest Income Interest B4$enses (et ,rofit R!" %ar(11 <..<.2.51 2<1322.1; ;13;1<.:1 51.<:..3 :553;.<3 523:.12 %ar(10 52:113.2. 2<1;51.22 3.1<1:.11 ;2<<..<2 :;.22.:5 <133.21 %ar(0= %ar(0: %ar(0>

;:22;..1. 1.;:2..<: :.1121.2< 2;1<1..<3 15<121.2; 1:<1:5.55 1:212..22 :13;35.22 ..;..3.:< 3.;55.:. :2<11.2< <121.2. :5<12..1 .1<2<.25 3;2<.12 .;2:2... 2215:.1. :1:1..1

Ke3 Ratio '# Parti71lar! 9redit*7e$osit Investment G 7e$osit Interest B4$ended G Interest Barned Interest Income G Tota 8unds Interest B4$ended G Tota 8unds (et Interest Income G Tota 8unds H$erating B4$enses G Tota 8unds (et ,rofit G Tota funds 0H(%ar(11 ;<.< .:.2. 32.2: ;.1: :.2< 2.51 2.22 2.;. 12.32 %ar(10 ;1.<3 .3.<5 33.33 ;.2. :.3< 2..: 2.21 2.<1 1:.5 %ar(0= ;:.<; .3..5 3;.25 ;.13 1.2< 2.:; 1.53 1.25 1;.21 %ar(0: ;;.11 .:.51 31.2. ;.3 :.<1 2.3: 2.2; 1.2: 13.;1 %ar(0> ;..:3 .5.22 1<.1; ;.22 :.15 2.5: 2..1 2.53 11.:1

Source> 9 ine

Source> )nnua 0e$ort

Peer Com)ari!on %ar7& 2011# Parti71lar! (et ,rofit (II Tota )ssets B,S 9B,S ,B &E 0H(- (/!
Source> 9 ine

State Bank of India :B2<9";2 :1B8=9"8< 1B228B>8<"20 12<"2> 191":> 21"=2 1B028"90 12"<2

P1nAa/ National Bank :":...12 23"<53.:5 .;5".21.21 1.3..; 1::.:1 5.<1 3.2.:< 2:.:1

Canara Bank :"221.5< 2."23:.22 ..3"2;5.;3 5<.2; <2.:< ;.2. :21.22 23.:2

Bank of Baroda :"2:1.35 21"551.<2 .15".<;.15 121..2 111.:< <.11 1.:.:. 2..12

P1nAa/ National Bank PNB# ,un=ab (ationa &ank is one of the big four banks of India. ,(& is ranked as the 2nd argest bank in the country after S&I in terms of branch network" business and many other $arameters. They are recogni%ed as the bank offering highest eve s of customer satisfaction in 7e hi and 9hennai. The bank has a wide network of 115< branches which com$rise of 22:; 0ura " 111: Semi Urban" 1111 Urban and 5;; 'etro$o itan branches at the end of 'arch 2211.

7uring 8@ 2212*11" with .<.13/ share of 9)S) to domestic de$osits" the &ank achieved a net $rofit of 0s ::.. crore. &ank has a strong ca$ita base with ca$ita ade+uacy ratio of 12.:2/ as on 'ar11 as $er &ase II with Tier I and Tier II ca$ita ratio at 5.::/ and ..<5/ res$ective y. )s on 'arch11" the &ank has the ?ross and (et (,) ratio of 1.;</ and 2.51/ res$ective y. The &ank#s tota de$osits amounted to 0s ." 12"5<< crore at the end of 'arch# 2211" showing an abso ute accretion of 0s. 3."13< crore and a growth of 21.1/ over $revious year. 0atio of ?ross (,)s to ?ross )dvances stood at 1.;</ at the end of 'arch# 2211" whi e the ratio of (et (,)s to (et )dvances was 2.51/.

Canara Bank 9anara &ank with head+uarter in &anga ore o$erates in four segments" name y treasury o$erations" retai banking o$erations" who esa e banking o$erations and other banking o$erations. The bank has a branch network of .21; inc uding : overseas branches as on 'arch .1" 2211. The (et $rofit recorded a ...21/ growth of 0s. :223 crore in 8@ 11 com$ared with 0s..221 crore in 8@ 12. The Tota 7e$osits registered a growth of 21../ to reach 0s.2<.<;. crore as at 'arch 2211 com$ared to 0s.2.:311 crore a year ago. The 9ost of 7e$osits has decreased from 3.12 in 8@ 12 to 1.52 in 8@ 11. The 9)S) de$osits grew by 21.5/ to reach 0s. 5.11; crore as at 'arch 2211. The net interest margin has im$roved by .2 b$s from 2.52 in 8@ 12 to ..12 in 8@ 11.

"#A (%)
1.12 1.23 1..2

1.:2

:22"22 2 .22"22 2 2.12

Deposits and Advances

2<."<;. 2.:"311 222"222 122"222

1.22

2.22

222< 2211

2212

153"5< " . s $ C

1.5"21 < 222< 7e$osits

13<"..1 2212 )dvances

212":3; 2211

Net NPA as % Net Advances

1.12 1.11 1.12 1.2< 1.25 1.2; 1.23 1.23 1.2< 1.11

13.22 11.12 11.22 1:.12 1:.22 1..12 1..22 12.12 12.22

CA" (%)
11..5 1:.12 1..:. 1 . 2 2

Source> )nnua 0e$ort PRI.A TS-CT *R

B I9I9I &ank Dtd is the secon d arges t $rivat e sector bank in India by marke t ca$ita i%atio n. They are a $ub ic y he d banki ng com$ any engag ed in $rovid ing a wide range

od a 5 " 2 2 . ) T ' s i n I n d i a " a n d h a s a $ r e s e n c e i n 1 < c o u n t r i e

s " i n c

u di ng In di a. The net $rofit for fisca 2211 was 0s. 1111..5 crore" re$resenting a 25/ increase over the $revious year because of decrease in $rovisions and contingencies. The net interest income has increased by 11/ from 0s. 511: crore in fisca 2212 to 0s. <21; crore in fisca 2211. The tota advances grew by 1<.:/ in fisca 2211 on account of strong growth in domestic cor$orate advances. The return on assets im$roved substantia y to 1..:/ in fisca 2211 from 1.1./ in the $revious year. The tota de$osits have increased by 11.;/ from 0s. 222213.32 crore at 'arch .1" 2212 to 0s. 221322.11 crore at 'arch .1" 2211. The $ro$ortion of current and savings account de$osits in tota de$osits had increased from 25.;/ at 'arch .1" 222< to :1.1/ at 'arch .1" 2211. The net non* $erforming asset ratio has reduced from 1.5;/ at 'arch .1" 2212 to 2.<:/ at 'arch .1" 2211. The ca$ita ade+uacy $osition continued to be very strong" with tota ca$ita ade+uacy of 1<.1/ and Tier*1 ca$ita ade+uacy of 1..2/. Parti71lar!

S o u r c e > 9 i n e

Net %nterest %ncome

Deposits and Advances

12" 222 .22 5"22 2.22 3"22 2.22 :"22 221 2.22 1 221 2"22 2 2.22 222 < * 222 5 222 ;
" s $ C

" s $ C

2211 2212 222< 2225 222; 7e$osit s )dvanc es

Ca pit a& Ad e' ua c "at io (%)

1=" 1 1>" < 1=" 9 1=" ;

2.1 2 1.1 1 2.1 2

;" < ;" : ;" 9 <" 8

&ase

Net NPA "atio (%)

222< 2212 2211

9 ) 0 w a s 1 2 . 2 / a s o n ' a r c h . 1 " 2 2 1 1 . The tota de$osits have increased by 2:.3/ at 0s. 225153 crore and the tota advances were increased by 2;/ to 0s. 11<<5. crore over 'arch .1" 2212. The (et interest income grew by 21.;/ main y on account of acce eration in oan growth. The $ro$ortion of core current and savings de$osits (9)S)! to tota de$osits continued to be hea thy at 11/ as on 'arch .1" 2211.
. 2 2 2 1 2 2

Source> )nnua 0e$ort ,D5C Bank 6789 &ank Dtd is a ma=or Indian financia services com$any based in 'umbai. The &ank has an enviab e network of 1<53 branches in <<3 Indian cities and 1:;1 )T's during the year 2212*11. The com$any has recorded an increase of ../ in net $rofit for 8@ 2211 of 0s. .<23 crore over the $revious year. The 9a$ita )de+uacy 0atio (9)0! stood at 13.2/ as against the regu atory minimum of < . 2 / . H f t h i s " T i e r I

32 12 :: :2

CA(A "atio (%)

1 2

1.

1.52 1.32 1.:2 1.22 222 1.22 < 221 2 221 1 222< 2212 2211

Net %nterest )argin (%)

1 : . :.22 :.21 :..1

Capita& Ade'uac "atio

Tier 1 1<"9;' 1>"99' 1;"82' Tier 2 1<"22'

8"=;'

12";0'
2 1

8"><' 9"1:' 8"==' 11";<' 18"2<' 12"28'

2 2 1 2 2 2 1 1 2 2 1 2 2 2 1 1 & a s e I & a s e I I

2 2 2 < 2 2 1 2 2 2 1 1

Source> )nnua 0e$ort A )NIS &ank is one of the fastest ? growing banks in $rivate sector. i The bank o$erates in four ! segments" name y treasury" retai B banking" cor$orateG who esa e a n banking and other banking k business. The bank has a very wide network of around 1.<2 branches and 3"2;2 )T's.

The net $rofits have grown at a 9)?0 of :;.12/ during ast 1 years. The bank re$orted a net $rofit of 0s. .".55.:< crores for the year ended 'arch .1" 2211 over the net $rofit of 0s. 2"11:.1. crores in the $revious year. The (et Interest Income increased by .1.1:/ to 0s. 3"132.<< crores in 8@ 11 from 0s. 1"22:.:< crores in 8@ 12. The bank maintain a hea thy asset*+ua ity with a ratio of ?ross (,)s to gross customer assets of 1.21/ com$ared to 1.1./ in $revious year and a (et (,) ratio of 2.23/ com$ared to 2..3/ in 8@ 12. The de$osit and advances has increased by ...<./ and .3.:5/ res$ective y. The 9a$ita )de+uacy 0atio under &ase II stood at 12.31/ in 8@ 11 against 11.52/ in 8@ 12.

)
1 . . . . ..;1

1.2 :

"eturn on Assets (%)

..3 1

2 2 2 5 2 2 2 < 2 2 1 2 2 2 1 1

2225 222< 2212 2211

Cost of *unds (%)

Dep osit s and Adv anc es

3. 2 2 3. 1 2 2 2 2 5 2 2 2 < 2 2 1 2 2 2 1 1

1 . R ! " 222; 222< 2211 2225 2212

7e $o sit s )d va nc es

C*NCRN Indian economy is one of the fastest growing economies of the wor d. The economy with its varied geogra$hy and demogra$hy has s$ecific re+uirements in order to traverse to the ne4t orbit and attain its fu $otentia . &anks enab e to co$e with finance re+uirement for few industries such as Infrastructure" 6ousing" 0ea Bstate etc. Indias infrastructura financing needs are not on y huge but a so vita . Traditiona y banks have been the ma=or source of infrastructure financing and their e4$osure to infrastructure is a ready high at 1; $er cent. There are severa ma=or concerns which are noted be ow. Inten!if3in0 7om)etition Indian banking industry has undergone +ua itative changes due to banking sector reforms. Indian banking sector" which is dominated by state*contro ed banks" has been facing formidab e cha enges. 7ue to this new emerging com$etition" Indian banks" es$ecia y ,S&s" are trying their best to im$rove their $erformance and $re$aring to com$ete in the emerging g oba market. (ew $rivate sector banks and foreign banks have more customer*centric $o icies" high +ua ity services" new attractive schemes and com$uteri%ed branches. ) these services attracted more and more customers to their banks. In this conte4t" there is a need to e4amine the efficiency of $ub ic sector banks o$erating in India. 'ain y" com$etition can intensify and banks wi become more efficient. The transaction cost of customers cou d come down and a bank which is efficient" nimb e and customer focused wou d a ways be ab e to do better than others. )s a resu t of g oba i%ation" many new banks have entered the Indian banking industry" further intensifying the com$etition. In7rea!in0 NPA The asset +ua ity of banks is one of the most im$ortant indicators of their financia hea th. It a so ref ects the efficacy of banks credit risk management and the recovery environment. The Indian banks have shown very good $erformance as far as the financia o$erations are concerned. &ut (on*$erforming )ssets ((,)! has caused some concerns. 7es$ite write*offs" gross (,)s have continued to rise significant y. The new accretion to (,)s has been much faster than the reduction in e4isting (,)s due to ower eve s of u$gradation and recoveries. To im$rove the banks abi ity to manage their non*$erforming assets ((,)s! and restructured accounts in an effective manner and considering that a most a branches of banks have been fu y com$uteri%ed" the 0eserve bank of India in its 'onetary ,o icy Statement 2212*1. $ro$osed the fo owing measures> To mandate banks to $ut in $ ace a robust mechanism for ear y detection of signs of distress" and measures" inc uding $rom$t restructuring in the case of a viab e accounts wherever re+uired" with a view to $reserving the economic va ue of such accountsK and To mandate banks to have $ro$er system generated segmentFwise data on their (,) accounts" write* offs" com$romise sett ements" recovery and restructured accounts. 7es$ite these concerns" it is $ro=ected that the Indian banking industry wi grow through ea$s and bounds ooking at the huge growth $otentia of Indian economy. 6igh $o$u ation base of India" rising dis$osab e income" etc. wi drive the growth of Indian banking industry in the ong*term.

BUDG-T 2012( 18 The financia market $erformance is often considered as a barometer of the economy. The &anking system is the dominant ife* ine of the financia market. The budget 2212*1. was arge y $ositive for the banking sector. Though no ma=or announcements were made" the 8inance 'inister target to reduce fisca deficit wi indirect y benefit the sector as it wi ead to reduced inf ation which in turn wi ead to a reduction in $o icy rates. &udget 2212 F 1. has $ro$osed that individua ta4 $ayers be a owed ta4 deductions of u$ to 0s 12"222 on interests that they earn from their saving de$osits. This $ro$osa may give some boost to current and savings accounts (9)S)! de$osits. )ny increase in these de$osits wi $ositive y im$act the net interest margins of banks. The other ma=or announcement is to set aside 0s 11"555 crore for reca$ita i%ation of $ub ic sector bank and the target for agricu tura credit raised by 0s. 1"22"222 crore to 0s. 1";1"222 crore. P-ST ANALYSIS

,o itica * 'onetary ,o icy * 0egu atory framework

Bconomic

Socia

Techno ogic a *Internet banking *'obi e banking *)T'

P*LITICAL ANALYSIS %*N-TARY P*LICY 'onetary $o icy becomes more restrictive over the $ast years. Inf ation has remained a $o icy headache for the government and the centra bank for the $ast two years. Inf ation was a $rimary concern among the $o icy makers during 2212*11. Inf ation" which remained at e evated eve s for a arge $art of 8@11" was arge y driven by food and fue items and ater on transmitted to manufacturing $roducts to become a genera $henomenon. The average inf ation rate in India was ;.<</ between 1<3< and 2212.

The 0eserve &ank of India (0&I! in its annua monetary $o icy for 2212*1. on 'arch 1;" 2212 s ashed the $o icy rates by 12 basis $oints. The re$o rate at which banks borrow money from the 0&I now stands at 5/ from 5.12/ ear ier. Simi ar y" the reverse re$o rate at which 0&I borrows money from banks is now at ;/ from ;.12/ ear ier. The cash reserve ratio (900! was eft unchanged at :.;1/.

The 0eserve &ank of India reduced the 9ash 0eserve 0atio (900! by ;1 basis $oints from 1.1/ to :.;1 / with effect from 'arch 12" 2212. This reduction wi in=ect around 0s.:5"222 crore of $rimary i+uidity into the banking system to ensure smooth f ow of credit to $roductive sectors of the economy. Bar ier" 0&I in its third +uarter review in Oanuary 2212 reduced the 900 by 12 basis $oints from 3/ to 1.1/ in=ecting a i+uidity of 0s..1"122 crore into the banking system to mitigate the tight i+uidity conditions" which was the first move in the 900 since it was increased to 3/ in )$ri 2212.

R-GULATI*N The e4$ected integration of various intermediaries in the financia system wou d re+uire a strong regu atory framework. It wou d a so re+uire a number of egis ative changes to enab e the banking system to remain contem$orary and com$etitive. -C*N*%IC ANALYSIS The Indian economy has recorded remarkab e growth over the $ast decade. India#s economic growth is e4$ected to robust in 2212 and 221.. The Internationa 'onetary 8und (I'8! has $ared Indias economic growth $ro=ection to 3.</ in 2212 from its Oanuary estimate of ;/" the on y emerging economy for which it has done so. &anks $rovide ca$ita formation to various sectors which direct y he $ in the growth of Indian economy.

S*CIAL ANALYSIS Indian banking system has been $rogressing ra$id y. There are am$ e o$$ortunities for the banks to cover unta$$ed rura market. @et" banking faci ities are not avai ab e in many rura areas. 'any farmers are taking oan from money ender at a very high rate of interest. Sma *sca e industries wou d remain im$ortant for banks. 9hanges cou d be e4$ected in near future for unorganised sectors.

T-C,N*L*GICAL ANALYSIS In recent time" Indian banking industry has been consistent y working towards the deve o$ment of techno ogica changes and its usage in the banking o$erations for the im$rovement of their efficiency. -ith the a$$ ication of new and im$roved techno ogies banks e4$ected to reduce costs" time and give customer satisfaction. 9ore banking has changed the face of banking by offering va ue added services. 9ore banking a$$ ications he $s to $rovide com$ ete front and backend automation of banks. Techno ogica deve o$ments wou d render f ow of information and data faster eading to faster a$$raisa and decision*making. This wou d enab e banks to make credit management more effective" besides eading to an a$$reciab e reduction in transaction cost. Internet /ankin0 or banking via the Internet can be considered a remarkab e deve o$ment in the banking sector. The abi ity to carry out banking transactions through the Internet has em$owered customers to e4ecute their financia transactions within the comfort of their homes and offices. In todays busy wor d" when $eo$ e do not have much time even for $ersona work" Internet banking a$$ears as a boon. Internet &anking he $ed give the customer#s anytime access to their banks. &ut for Internet banking there is a re+uirement of a ,9 G Da$to$ with an Internet connection. 'obi e usage has seen an e4$ osive growth in economies ike India. India has reached 5<..5: mi ion mobi e subscriber mark (Source> T0)I" 7ec 2211! for a $o$u ation of 1.21 bi ion. -ith %o/ile Bankin0" customer can check their account ba ance" transfer funds 2: 4 ;" bi s $ayments" booking of bus G f ight tickets" recharge $re$aid mobi e and do a ot more effort ess y and secure y. &anking through ce $hone benefits the banks too. It cuts down on the cost of te e*banking and is more economica . AT% ()utomated Te er 'achine! is e ectronic machine" which is o$erated by a customer himse f to de$osit or to withdraw cash from bank. )T's reduce the work $ressure on bank#s staff and avoid +ueues in bank $remises. )T's are of great he $ to trave ers. They need not carry arge amount of cash with them. They can withdraw cash from any city or state" across the country and even from outside the country with the he $ of )T'. C*NCLUSI *N The financia sector reforms have brought about significant im$rovements in the financia strength and the com$etitiveness of the Indian banking system. The $rudentia norms" accounting and disc osure standards" risk management $ractices" etc are kee$ing $ace with g oba standards" making the banking system resi ient to g oba shocks. In the recent $ast" the Indian banking sector has undergone significant deve o$ments and investments. In this sector" there are huge o$$ortunities and numerous cha enges. 'oney aundering is a growing menace and it not on y $oses serious threat to the stabi ity and integrity of the financia system but a so to the sovereignty and safety of nations wor dwide. In the coming days" cha enges before banks wou d $rimari y ie in saving themse ves from the growing threat of money aundering.