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Indian Banking Industry Analysis

March, 2020

The Indian banking system consists of 20 public sector banks, 22 private sector banks, 44 foreign banks, 44 regional rural banks, 1,542 urban cooperative banks and 94,384 rural cooperative banks in addition to cooperative credit institutions. As on January 31, 2020, the total number of ATMs in India increased to 210,263 and is further expected to increase to 407,000 by 2021.

Asset of public sector banks stood at Rs 72.59 lakh crore (US$ 1,038.76 billion) in FY19. According to Reserve Bank of India (RBI), India’s foreign exchange reserve stood at approximately US$ 490.04 billion as on May 22, 2020.

During FY16-FY20, credit off-take grew at a CAGR of 13.93 per cent. As of FY20, total credit extended surged to US$ 1,936.29 billion.

During FY16–FY20, deposits grew at a CAGR of 6.81 per cent and reached US$ 1.90 trillion by FY20. Credit to non-food industries increased 3.3 per cent y-o-y, reaching Rs 89.1 billion (US$ 1.26 trillion) on February 28, 2020 and Rs 100.80 lakh crore (US$ 1.42 trillion) on March 13, 2020.

Indian banks are increasingly focusing on adopting integrated approach to risk management. The NPAs (Non-Performing Assets) of commercial banks has recorded a recovery of Rs 400,000 crore (US$ 57.23 billion) in FY19, which is highest in the last four years.

As per Union Budget 2019-20, investment-driven growth required access to low cost capital, and this would require investment of Rs 20 lakh crore (US$ 286.16 billion) every year.

RBI has decided to set up Public Credit Registry (PCR), an extensive database of credit information, accessible to all stakeholders. The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 Bill has been passed and is expected to strengthen the banking sector. Total equity funding of microfinance sector grew 42 per cent y-o-y to Rs 14,206 crore (US$ 2.03 billion) in 2018-19.

Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) increased to Rs 1.28 lakh crore (US$ 18.16 billion) during the week ended April 8, 2020. As of November 2019, there were a total of 19 million subscribers under Atal Pension Yojna.

Rising income is expected to enhance the need for banking services in rural areas, and therefore, drive the growth of the sector.

The digital payments revolution will trigger massive changes in the way credit is disbursed in India. Debit cards have radically replaced credit cards as the preferred payment mode in India after demonetisation. Transactions through Unified Payments Interface (UPI) stood at 1.23 billion in May 2020, valued at Rs 2.18 lakh crore (US$ 30.97 billion).

As per Union Budget 2019-20, the Government proposed a fully automated GST refund module and an electronic invoice system to eliminate the need for a separate e-way bill.