Q 1.

   Analyze the scenario for banking industry in India keeping in mind its

market size and growth rates. Also identify the industry’s global

driving forces, and the current toxic assets that global banks are

carrying world over.

A 1. India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of
existing financial services firms and new entities entering the market. The sector comprises commercial banks,
insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other
smaller financial entities. The banking regulator has allowed new entities such as payment banks to be created
recently, thereby adding to the type of entities operating in the sector. However, financial sector in India is
predominantly a banking sector with commercial banks accounting for more than 64 per cent of the total assets held
by the financial system.

Market Size

The Axis Bank has developed a branch network which is built on customer‐convenience and service,
helping it particularly in the acquisition of low‐cost retail deposits, retail assets, lending to
agriculture, SME and mid‐corporates and facilitating the cross‐selling of third‐party
products. During 2007‐08, 143 new branches were added to the Bank's network, taking
the number of branches to 651. This includes 33 extension counters that have been
upgraded to branches. As on March 31, 2008, the Bank had a network of 651 branches
and 20 extension counters as against 508 branches and 53 extension counters a year
earlier. Out of the 651 branches, 158 branches are in semi‐urban and rural areas. With
the opening of these offices, the geographical reach of the Bank extends to 29 States
and 3 Union Territories covering 405 centers. The Bank has accounted for
about 80 percent of funds lent by the bank till year 2002. In 1999 the bank’s net NPAs to advances ratio
jumped to 6.3% in FY99 from 3.7% in FY97. Also, when the industrial activity slows down, corporate loans
are the first to get hit. This ratio jumped to and was reflected from a marginal 17% growth in the bank’s total
advances in FY02 from a CAGR of 44% in the last four years. The ratio jumped to 6.3% in FY99 from 3.7% in F
FY97. This was reflected from a marginal 17% growth in the bank’s total advances in FY02 from a CAGR of 44%
in the last four years. The number of branches increased to 450 from just 35 in FY99. With 95 extension counters
and 1,890+ ATMs, the bank was spread across 248 locations in the country. On the technology integration front
too, the bank speeded up the efforts.

Growth rates :