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  • 1. Banking IndustryRecent trends and the road ahead

2. OBJECTIVES Main history of Indian Banking Industry. Past performance and trends. Major changes in recent past. Current scenario. The road ahead and challenges. 3. History and introduction to bankingindustry Originated in the last decade of the 18th century. The General Bank Of India(started-1786),HindustanBank(started -1790). Formation of RBI in1934, got nationalized in January 1949under RBI act. Nationalization: Except SBI every other bank was functioning independently. In 1969 ,14 banks got nationalized. 6 more banks got nationalized in 1980. 4. Post liberalization era: Initially 10% FDI allowed, at present 74% with some restriction. Conversion from 4-6-4 model to 8 to 8 banking(present). Adaptation of technology: Internet banking Electronic fund transfer Automatic teller machines. Core banking solutions. 5. Past performances and trends80.00 1) Non performing asset70.00 Priority sector worst performer in recent past.60.0050.00 Non priority good40.00 priority performance till 2008. non priority30.00public Public sector has been20.00 good and consistentperformer throughout.10.00 0.002 4 6 8 10 6. Profitability Despite high interest rates and high NPA and high provisioning requirement the banking sector witnessed growth Growth of investments decelerated Operating expenses grew at a higher rate Growth of other income decelerated 1. ROA moved from 1.05% to 1.10 % 2. ROE also witnessed improvements. 7. Soundness indicatorsAsset qualityPrivate sector saw a growth, whereas public sector assetquality declined due to higher NPAAgriculture contributed 44% in Higher NPALeverage RatioRemained constant at 6%Credit boomNo chances of credit boom despite higher credit growth 8. CRAR Declined owing to decline in tier2 CRAR ratio. migrating to Basel II framework, the parallel run of Basel I isalso continuing as a backstop measure. The CRAR of allbank groups under Basel I remained well above the stipulatedregulatory norm of 9 per cent in 2010-1. Under Basel II also, the CRAR of SCBs remained well abovethe required minimum in 2010-11. This implies that, in the short to medium term, SCBs are notconstrained by capital in extending credit 9. Current scenario Indian banking industry maintaining resilience whileproviding for growth opportunities. Survey by Ficci shows: Regulatory framework, economic growth and insulationfrom external market is major reason for the betterperformance. Regulatory systems of Indian banks were rated betterthan China, Brazil, Russia, UK and at par withJapan, Singapore and Hong Kong. Indias Risk management systems more advancedthan China, Brazil and Russia 10. Overview A rigorous evaluation of the health of commercialbanks, recently undertaken by the Committee onFinancial Sector Assessment (CFSA) also showsthat the commercial banks are robust and versatile. The single-factor stress tests undertaken by theCFSA divulge that the banking system can endureconsiderable shocks arising from large possiblechanges in credit quality, interest rate and liquidityconditions 11. Current challenges 12. Human resource challanges Thus, on the whole, we seethat Public SectorBanks, Private SectorBanks as well as Foreign Banks view difficulty inhiring highly qualifiedyoungsters as their biggestHR threat ahead of high staff costoverheads, poaching ofskilled quality staff and highattrition rates 13. Strong pillars 14. Continued 15. Continued 16. Continued.. 17. Global expansion 18. The road ahead. Is our banking industry ready for Basel 3 norms Are we ready for IFRS norms. Current and emerging environment offers soundbusiness opportunities to the banks. Opportunities to the new entrants. Improving efficiency. Need to review laws governing the Indian bankingsector Banking activities. Credit flow industry.