Banking Ppt 2011

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PREPLACEMENT TRAINING - 2011

Dr. K. Sriharsha ReddyProfessor & Head

Department of Business Management,MIPGS

Saidabad, Hyderabad.



Evolution and progress ofIndian banking



As at the end of March 2007: 20 nationalized banks, 8 SBI banks, 17 old privatesector banks, 8 new private sector banks, 29 foreign banks, 96 regional ruralbanks.

STRUCTURE OF BANKING IN INDIA



Back drop of reforms since 1991

• In the beginning of 1990, the social banking goals setfor the banking industry made most of the public sectorbanks unprofitable.

• Reasons for poor performance of banks

(1) high cash reserve ratios and statutory liquidityrequirements(2) low yields on government bonds (as compared withthose on commercial advances);(3) directed and concessional lending;

(4) administered interest rates; and(5) lack of competition.



Summary of banking sectorreforms since 1991 …

• First, the CRR declined from 15% in 1991 to 5.0% in2006. The SLR also declined, from 38.5% in 1991 to25% in 1997, remaining at this level until today .

• Decline in the CRR and SLR increased banks flexibility

in allocating credit and improved their profitability.

• Second, interest rates became flexible as to almost allterm deposits rates and lending rates on advances inexcess of Rs200,000.

• Interest rate deregulations have encouraged banks toimprove their cost efficiency and diversify their businessinto non-traditional areas.



• Third, reform in priority sector lendingmainly through the expansion of coverageand interest rate decontrols on advancesin excess of Rs200,000 helped banks tomitigate the negative impact arising fromsuch policy loans.

• Fourth, entry barriers were reduced forprivate sector and foreign banks. Theentry of new banks has increasedcompetition. Public sector banks wereallowed to rationalize some branches,while branch licensing was removed.



• Fifth, various prudential norms and moreappropriate accounting standards wereintroduced.

• Better accounting standards haverevealed some of the true status of NPAproblems of public sector banks.

• This enabled the Government to imposeappropriate policies to deal with NPAproblems.

• Sixth, the Government recapitalizednationalized banks and public sectorbanks have been partially privatized.



Return on Assets (ROA)

-4

-3

-2

-1

0

1

2

3

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

SBG

NB

PBFB

ASCB



Net Interest Margin (NIM)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

SBG

NB

PB

FB

ASCB



Operating Cost Ratio (OCR)

0

2

4

6

8

10

12

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

SBIG

NB

PB

FB

SCB



Growth of assets in Indian banking

58238 292770

1152604

2875520

5241331

0

1000000

2000000

3000000

4000000

5000000

6000000

1980 1990 2000 2006 2009

Assets in Rs Crs



Asset Structure of IndianCommercial Banking System

31.2

59.1

4.9 3.8

33.2

55.7

3.3 5.4

29.1

48.1

6.7

5.1 7.1

24

46

5.2

14.6

6.9

0

10

20

30

40

50

60

1980 1990 2000 2006

SBI

NB

OPB

NPB

FB



Bank group wise deposits of Scheduled CommercialBanks to Total Deposits in percentages

27.4

64.4

2.95.3

29.3

63.2

2.94.6

28.1

63.6

4.43.9

27.8

58.2

6.97.2

28.5

53.4

5.5

12.6

27.6

50.7

4.7

17

25.1

51.7

4.5

18.5

0

10

20

30

40

50

60

70

1980 1985 1990 1995 2000 2005 2006

SBI & itsAssociates

Nationalized

Foreign

Domestic

private



Bank group wise share of advances of scheduledCommercial banks to Total advances in percentages

0

10

20

30

40

50

60

70

1980 1990 2000 2002 2004 2006

SBI & its AssociatesNationalized

Foreign

Domestic private



NPA s of Scheduled Commercial Banks aspercent of Net Advances (Bank Group-wise)

0

1

2

3

4

5

6

7

8

9

1998 2001 2003 2005 2007 2009

PSBFB

DPB

ASCB



7830715197>10

1---1-8-10

------4-8

------< 42008-

09

421681242>10

331217768-10

93-33-4-8

8--35-< 41995-

1996

SCBFBNPBOPBNBSBGBankGroup

Year

Distribution of Scheduled Commercial Banks by CRAR

Banking Ppt 2011

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