Assessment of the Indian banking sector

CHAPTER-3

THEORTICAL BACKGROUND OF THE STUDY

Introduction

The banking sector in India is on a turning tendency. It has immensely benefitted from the rush in disposable income of persons in the state. There has besides been a noticeable rush in minutess through ATMs, and besides cyberspace and nomadic banking. Consequently, the different Bankss, viz public, private and foreign Bankss have INVESTED well to increase their banking web and therefore, their client range.

The banking industry in India has the possible to go the 5th largest banking industry in the universe by 2020 and 3rd largest by 2025 harmonizing to a KPMG-CII study. Over the following decennary, the banking sector is projected to make up to two million new occupations, driven by the attempts of the RBI and the Government of India to incorporate fiscal services into rural countries. Besides, the traditional manner of operations will easy give manner to modem engineering

Market Size

The Indian banking sector is fragmented, with 46 commercial Bankss jostling for concern with tonss of foreign Bankss every bit good as rural and co-operative loaners. State Bankss control 80 per cent of the market, go forthing comparatively little portions for private challengers.

Banks have opened 7.73 crore histories under the Pradhan Mantri Jan Dhan Yojana ( PMJDY ) till November 19, harmonizing to Ms Snehlata Srivastava, Additional Secretary, Department of Financial Services, Ministry of FINANCED, Government of India. Of the 77.3 million histories, public sector Bankss have opened 62.1 million histories with a entire balance of Rs 4,946.03 crore ( US $ 802.64 million ) , and have distributed RuPay debit cards to around 43 million histories.

Entire banking sector recognition is anticipated to turn at a CAGR of 18.1 per cent to make US $ 2.4 trillion by 2017. The entire banking assets in India touched US $ 1.8 trillion in FY13 and is anticipated to traverse US $ 28.5 trillion in FY25

Investings

There have been many Investings and developments in the Indian banking sector in the past few months. Some of the recent major are:

Kotak Mahindra Bank became the first bank to acquire the permission from Reserve Bank of India ( RBI ) to put up a wholly-owned non-life insurance company.

Kotak Mahindra Bank plans to get ING Vysya Bank in an all-stock trade. The trade will do Kotak the fourth-largest private bank in the state in footings of entire concern. ING stockholders will now acquire 725 Kotak Bank portions for every 1,000 portions they hold.

Axis Bank Ltd has signed a memoranda of apprehension ( MoU ) with South Korea-based NongHyup Bank to heighten cooperation in exchequer, trade and other concerns. The MoU seeks to reenforce trade and economic relationships between South Korea and India, and will advance common development through concern cooperation

Axis Bank Ltd has raised US $ 500 million by selling five and a half twelvemonth bonds maturating in 2020 to investors across the Earth. The bank will utilize the money generated from the bond sale to run into the support demand of its foreign subdivisions and for general corporate intents. ICICI Bank Ltd has raised Yuan 600 million ( US $ 96.61 million ) by selling bonds to investors in Asia and Europe. This money will be used to FINANCED Indian companies abroad. This is the 3rd bond sale in three old ages by ICICI Bank to Raise Money in Chinese currency

Bharatiya Mahila Bank Ltd ( BMB ) has launched its cyberspace banking installation by the name BMB Smart Banking, along with its freshly designed web site. Presently, this adult females focused bank has branch web of 33 subdivisions and all of them on nucleus banking solutions with onsite ATMs.

The United Economic Forum ( UEF ) has signed a MoU with the Indian Overseas Bank ( IOB ) for Financing enterprisers from backward communities to put up concerns in Tamil Nadu. As portion of the understanding, enterprisers who

Government Enterprises

There have been a batch of developments in the Indian banking sector in the To assist Micro Small and Medium Enterprises ( MSME ) , RBI has permitted puting up of an exchange-based Trading Platform to ease funding of measures raised by such little entities to corporate and other purchasers, including authorities sections and PSUs.

The Government of India plans to cut down its interest in public sector Bankss to 52 per cent. The decrease of interest is expected to bring the authorities Rs 89,120 crore ( US $ 14.46 billion ) on the footing of the portion monetary values as on November 21, 2014.

The Government of India has cleared a proposal by HDFC Bank Ltd, to increase the foreign investing bound in the loaner while taking the position that the interest held by its parent Housing Development Finance Corp Ltd ( HDFC ) sums to abroad investing. The Foreign Investment Promotion Board ( FIPB ) has approved HDFC Bank’s proposal to increase foreign investing in the bank to 74 per cent.

The Reserve Bank of India ( RBI ) has created four verticals, which will be looked after by each of the deputy governors, as portion of organisational restructuring move.

To give a encouragement to transport edifice in the state, the Export-Import Bank of India ( Exim Bank ) is be aftering to put up a dedicated Rs 1,500 crore ( US $ 243.37 million ) fund with Government support

Road Ahead

With the promotions in engineering, Mobile and cyberspace banking services have come to the bow. Banks in India are concentrating more and more to supply better services to their clients and have besides started upgrading their engineering substructure, which can assist better client experience every bit good as give Bankss a competitory border.

Many Bankss, including the likes of HDFC, ICICI and AXIS are researching the option to establish contact-less recognition and debit cards in the market shortly. The cards, which use near field communicating ( NFC ) mechanism, will let clients to transact without holding to infix or swipe

Global growing did non retrieve as expected across most major developed and rapid-growth economic systems in 2013-14. During the twelvemonth gone by, the cardinal bankers across the Earth took decisive stairss to reconstruct assurance in markets and broader economic system. In Europe, the banking state of affairs improved in portion due to the long-run refinancing operations of the European Central Bank ( ECB ) , which helped guarantee there was plentifulness of liquidness in the system. In the US, the image was more cheerful but still assorted. And although concerns and consumers started to borrow once more, recognition growing remained lukewarm. The planetary economic environment loosely strengthened, and is expected to better further, with much of the growing impetus emanating from advanced economic systems. There was acute fiscal volatility in emerging market economic systems, and increases in the cost of capital which dampened investings and weighed on growing.

The banking sector, being the barometer of the economic system, is brooding of the macro-economic variables. While the Indian economic system is yet to catch strength, the Indian banking system continues to cover with betterment in plus quality, executing of prudent hazard direction patterns and capital adequateness.

The Reserve Bank of India ( RBI ) maintained a position quo in involvement rate since January 2014. However, despite the retail rising prices softening in recent periods, it ‘ll be a small piece before the Central Bank would choose for rate cut.

Indian banking industry, with entire plus size of Rs 81 trillion ( USD 1.34 trillion ) , is spread outing continuously but on a cautious note. The fact that the industry is plagued by bad loans, the loaners have chosen to travel slow in footings of recognition offtake. Fiscal 2014 saw a combination of assorted external and internal events that kept markets disruptive, involvement rates high and investor assurance low, ensuing in shriveling investing and GDP growing.

SupplyLiquidity is controlled by the Reserve Bank of India ( RBI ) .

DemandIndia is a turning economic system and demand for recognition is high though it could be cyclical.

Barriers to entry Licensing demand, investing in engineering and subdivision web, capital and regulative demands.

Dickering power High during periods of tight liquidness. Trade brotherhoods in public

of providers sector Bankss can be anti-reforms and orchestrate work stoppages. Depositors may put elsewhere if involvement rates fall.

Dickering power For good creditworthy borrowers dickering power is high due of usage of clients to the handiness of big figure of Bankss.

CompetitionHigh- There are public sector Bankss, private sector and foreign Bankss along with non-banking finance companies viing in similar concern

Sections. Plus the RBI is all set to publish new banking licences shortly.

ICIC Bank

TypePublic company

Bovine spongiform encephalitiss: 532174

Traded as NSE: ICICIBANK

New york stock exchange: IBN

BSE SENSEX Constituent

CNX Nifty Constituent

Industry Banking Financial Services

Founded1994

HeadquartersMumbai, Maharashtra India

Area ServedWorldwide

Key PeopleK.V. Kamash ( Chairman )

M.S. Chandakohhar ( MD & A ; CEO )

ProductsCredit cards consumer banking corporate banking finance and insurance, investing banking mortgage loans, private banking wealth direction

Gross US $ 8.255 billion

OperatingUS $ 1.934 billion

Income

ProfitUS $ 1.828 billion

Entire assetsUS $ 99 billion

Entire EquityUS $ 12.73 billion

Number of94.204

Employees

Website www.icicibank.com

HDFC Bank

“ We understand your universe ”

Type Public company

Traded asBSE: 500180

NSE: HDFCBANK NYSE: HDB

BSE SENSEX Constituent

CNX Nifty Constituent

Industry Banking, Financial services

Founded August 1994

Headquarters Mumbai, Maharashtra, India

Area servedWorldwide

Cardinal people Aditya Puri ( MD )

ProductsInvestment Banking

Investing Management

Wealth Management

State bank of India

TypePublic

Traded asNSE: SBIN

Bovine spongiform encephalitiss: 500112

LSE: SBID

BSE SENSEX Constituent

CNX Nifty Constituent

IndustryBanking, Financial Services

Founded2 June 1956, Nationalization, 1 July 1955

HeadquarterssMumbai, Maharashtra, India

Area servedWorldwide

Cardinal peopleArundhati Bhattacharya

( Chairperson )

Merchandisesconsumer banking, corporate banking, finance and insurance, investing banking, mortgage loans, private banking, private equity, nest eggs, Securities, plus direction, wealth direction, Credit cards,

Gross210736 crore ( US $ 33 billion )

Net incomecrore ( US $ 2.8 billion )

Entire assets72374839 crore ( US $ 370 billion )

Entire equity98884 crore ( US $ 16 billion )

OwnerGovernment of India

Number of222,033

Employees

MottoThe Banker to Every Indian

Websitewww.sbi.co.in

Axis Bank

Traded asBovine spongiform encephalitiss: 532215

LSE: AXBC

NSE: AXISBANK

IndustryBanking, Financial services

Founded1994 ( as UTI Bank )

HeadquarterssMumbai, Maharashtra, India*IJ

Cardinal people( Chairman )

Shikha Sharma ( MD & A ; CEO )

MerchandisesRecognition cards, consumer banking, banking, finance, investing loans, private banking, private equity, wealth direction

GrossRs. 340 billion ( US $ 5.3 billion )

OperatingRs. 94 billion ( US $ 1.5 billion )

Income

Net incomeRs. 52 billion ( US $ 820 million )

Entire assetsRs. 3.4 trillion ( US $ 53 billion )

Number of42,420

Employees

Kotak Mahindra bank

TypePublic company

Traded asBovine spongiform encephalitiss: 500247

NSE: KOTAKBANK

IndustryBanking, Financial service

Founded1985 ( as Kotak Mahindra Finance Ltd )

HeadquarterssMumbai, Republic of India

Uday Kotak ( Founder & A ; Executive Vice Chairman )

C. Jayaram ( Joint MD )

Dipak Gupta ( Joint MD )

Jaimin Bhatt ( President & A ; Group CFO )

KVS Manian ( President – Corporate & A ; Investment Banking )

Shanti Ekambaram ( President – Consumer Banking )

Narayan SA ( President – Commercial Banking )

Gaurang Shah ( President – Asset Management, International Business & A ; Insurance )

Mohan Shenoi ( President – Group Treasury & A ; Global Markets )

Arvind Kathpalia ( Group Chief Risk Officer, Risk Management )

D Kennan ( Group Head – Commercial Banking )

MerchandisesDeposit histories, Loans, Investment, Business banking solutions, Treasury and Fixed income merchandises etc.

GrossAt 109.63 billion ( US $ 1.7 billion )

Net income4c 15.69 billion ( US $ 250 million )

Websitewww.kotak.com

Yes Bank

TypePublic company

Traded asBovine spongiform encephalitiss: 532648

NSE: YESBANK

IndustryBanking & A ; fiscal services

Founded2004

LaminitisRana Kapoor and Late Ashok Kapur

HeadquarterssMumbai, India

Cardinal peopleRana Kapoor ( Managing Director & A ; CEO )

MerchandisesBanking and fiscal services121 SMEs

Gross99.8 billion ( US $ 1.6 billion )

Net Income11.7 billion ( US $ 180 million )

Entire Assetss603.6 billion ( US $ 9.5 billion )

Websitewww.yesbank.in

Bank of Baroda

TypePublic

Traded asBovine spongiform encephalitiss: 532134

IndustryBanking, Financial services

Founded20 July 1908

LaminitisMaharaja SayajiraoGaekwad

HeadquarterssHeadquarterss Vadodara ( Baroda ) , Gujarat, India

Area ServedWorldwide

Cardinal Peoples( Chairman & A ; MD )

MerchandisesRecognition cards, banking, corporate, finance and insurance, banking, mortgage, banking, private, wealth direction

GrossC346 billion ( US $ 5.4 billion )

Entire Assetss4.574 trillion ( US $ 72 billion )

Punjab national bank

Typepopulace

Traded asBovine spongiform encephalitiss: 5324161

NSE: PNB

CNX Nifty component

IndustryBanking, fiscal services

Founded19 may 1894

LaminitisLala Lajpat Rai

HeadquarterssNew Delhi, Delhi, India

Cardinal PeoplesGauri Shankar ( Executive manager with extra charge of MD & A ; CEO )

MerchandisesCreditss cards, consumer banking, corporate banking,

Finance and insurance, investing banking, mortgage, loans private banking, private equity, wealth direction

GrossRs. 47400 crore ( US $ 7.4 billion )

Net incomeINR 49.54 billion

Entire assetsin billion

OwnerGovernment of India

Number of62,392

Employees

Websitewww.pnbindia.in

Federal bank

TypePrivate

Traded asNSE: FEDERALBNK

Bovine spongiform encephalitiss: 5000469

LSE: Federal

IndustryBanking & A ; allied industries

FoundedKochi 1945

HeadquarterssFederal towers.

Aluva, kochi-683101

Area servedRepublic of India

Cardinal peopleShvam Srinivasan ( pull offing manager & A ; CEO ) , prof

Abraham Koshy ( president )

MerchandisesLoans, nest eggs,

GrossRs. 69.4 billion ( US $ 1.1 billion )

MottoYour perfect banking spouse

Websitewww.federalbank.co.in

ING Vysya Bank

TypePublic

Bovine spongiform encephalitiss: 531807

IndustryBanking, Financial Services & A ; Insurance

Founded2002 ( est. 1930 as Vysya Bank )

HeadquarterssBangalore, India

Cardinal peopleShailendra Bhandari

( CEO & A ; MD )

UdaySareen

( Deputy CEO )

ArunThiagarajan

( Chairman of the Board )

Gross5588 crore ( US $ 880 million )

Entire assets54836 crore ( US $ 8.6 billion )

Number of employeesOver 10,000

No. of Branchs: 527

No. of ATMS: 405

No. of Extension counters: 10