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April, 2012


With India experiencing a cycle of growth, the Rs 64 trillion (US$ 1.25 trillion)-Indian Banking industry is poised to grow exponentially as the sector reflects the health of an economy. Indian banks have proved their mettle time and again as their regulations align with international standards, while they remain conventional in their approach. The Reserve Bank of India (RBI), the regulator, continuously monitors the macroeconomic environment to formulate its policies and directions.

According to the world's largest rating agency, Standard & Poor (S&P)'s Ratings Services, India's banking system has a high level of stable, core customer deposits supported by the system's good franchise, extensive branch networks, and large, yet growing, domestic savings.

In fact, the next three decades are highly crucial and opportunity-oriented for the Indian banking industry, which is primarily driven by demographics and reforms, said Mr M V Nair, Former CMD, Union Bank.

Key Statistics

According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks', September 2011, Nationalised Banks, as a group, accounted for 52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.8 per cent. The share of New private sector banks, Old private sector banks, Foreign banks and Regional Rural banks in aggregate deposits was 13.7 per cent, 4.8 per cent, 4.6 per cent and 2.9 per cent, respectively.

With respect to gross bank credit also, nationalised banks hold the highest share of 51.6 per cent in the total bank credit, with SBI and its associates at 22.1 per cent and New Private sector banks at 13.8 per cent. Foreign banks, Old private sector banks and Regional Rural banks held a share of 5.2 per cent, 4.8 per cent and 2.5 per cent, respectively.

  • Another statement released by the RBI stated that bank deposits grew 13.4 per cent to Rs 60.72 trillion (US$ 1.19 trillion) in the fiscal 2011-12 (the year to March 23, 2011), while loans and advances grew 17.08 per cent to Rs 47.54 trillion (US$ 930 billion).
  • The RBI data reveals that India Inc raised US$ 2.7 billion through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) in January 2012.
  • Owing to a rise in core foreign currency assets (FCAs), India's foreign exchange reserves increased by US$ 862 million to US$ 294.82 billion for the week ended March 16, 2012.

Indian Banking Sector: Recent Developments The Indian banking sector has come a long way from serving through traditional approach to the online genre. According to a survey by online survey company Ipsos, 57 per cent of Indians prefer to use the Internet for banking and other financial holdings rather than shopping online. Things have been made much easier by eliminating hefty paper processes and introducing customer-friendly online banking facility with robust security features. Such changes have not only facilitated access to several banking products, but have also improved customer loyalty and money transfer mechanism.

Transactions in mobile banking are also on an upsurge as more than 2,800,000 transactions (worth about Rs 196.12 crore [US$ 38.37 million]) were conducted during February 2012. The figure indicated a 300 per cent increase in terms of volume and over 200 per cent increase in terms of value.

At present, the RBI has allowed 65 banks to conduct mobile banking out of which 47 banks have commenced offering these services.

National Australia Bank has recently opened its branch in Mumbai, India. The bank would not only support existing institutional corporate and business banking customers operating or trading with India but would also act as a mediator for Indian clients who want to expand or invest in Australia or New Zealand.

Meanwhile, Development Bank of Singapore has expressed its keenness to operate as a wholly-owned subsidiary (WoS) in India, while it infused Rs 500 crore (US$ 97.82 million) into its local branch operations. The entity is committed to establish a universal banking franchise in India and looking forward to become a WoS to achieve the same.

HDFC Bank is planning to set up kiosks that would allow employees to apply for loans without stepping out of their offices. Initially the kiosks would be set up in offices of the companies that already have a banking relationship with HDFC. The bank would set up 1,500 priority desks across 500 companies in nine cities by August 2012.