India
The following data have been gathered by Capgemini and are part of the World Retail Banking Report published annually in March.
Macro economic indicators (2006)
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GDP at current prices
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Rs 39771 billion
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Inhabitants
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1095.4 million
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GDP per head
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Rs. 36307
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Economic growth rate
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8.7%
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Consumer confidence indicator
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135
|
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Unemployment rate
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7.6%
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Consumer Price Index
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5.3%
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Banking staff
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895,131
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Number of branches
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58,725
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Number of ATMs
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25,000
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Households savings ratio
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32.4%
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Inflation rate
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6.1%
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Interest rate, consumer credit
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15.50%
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Interest rate, residential
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9.25%
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Interest rate on long term bonds
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8.0%
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Retail banking environment
Macroeconomic Factors
• Fear of Overheating: India faced remarkably high inflation during 2006, so RBI is in favour of tight monetary policy
• RBI Stance: Interest rate environment that supports exports and demand of investment to continue growth momentum while reinforcing price stability and anchoring inflationary expectations
• RBI Stance: Adequate liquidity to meet credit needs of economy with emphasis on credit quality
Supervisory Institutions
• Reserve Bank of India (RBI): The Central bank which is the monetary authority & regulator of financial system, issuer of currency and manager of foreign currency.
• Securities and Exchange board of India (SEBI): Regulatory body that monitors the stock market transactions and compliance thereof.
• Insurance Regulatory & Development Authority (IRDA): An insurance regulatory body to protect the interests of the policyholders.
Type and size of players
Net Banking income
• The major Indian Banks fall into three categories: Public sector (State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank), Private sector (ICICI Bank, HDFC Bank) and Foreign Banks (Citibank, Standard Chartered Bank)
Non-interest income
• RBI’s shareholding in State Bank of India (SBI) transferred to Government of India in accordance with Narasimhan Committee II’s report that RBI should not own the institutions it regulates
• Banks in India earn a significant portion (75%-85%) of their income from interest
Products
• Improved Asset Quality: Gross and Net NPA’s declined to 2.7% and 1.1% respectively in India
• Strong Growth: 41.4% growth on loans and advances
• Housing Credit: Housing comprises 52% of all retail credit and it grew at 44.35%
• Due to strong credit growth, there was marginal rise in Interest Income but significant rise in expense hence lower profit (as %) before tax & provisions. But with lower provisions, profit after tax & provisions was higher.
Trends
• Favourable Demographics: India population is considerably young and income levels are rising – this has led to higher retail banking activity
• High growth: Aggregate balance sheet of banks expanded by 18.4%
• Equity Markets: To meet the high credit demand, banks tapped equity markets
• Increasing share of international liabilities: International sources of funds in banks’ operations have increased, indicating growing integration of Indian banks with the global markets
• RBI advise on reasonable service charges: Several customer complaints regarding excessive interest and charges levied by banks – So, RBI has advised banks to establish appropriate internal principles and norms; Working Group established to study situation and suggest appropriate norms
• Basel II: Phased migration to Basel II norms beginning March 2008
