Overview of Banking Sector in India : : Quantitative and Qualitative Credit Control
- Banking, financial services and insurance ( BFSI ), together account for 38 per cent of India’s outsourcing industry ( worth US $47.8 billion in 2007 ).
- According to a report by McKinsey and NASSCOM, India has the potential to process 30-per cent of the banking transactions in the US by the year 2010. Outsourcing by the BFSI to India is expected to grow at an annual rate of 30-35 per cent.
- Taking into account all banks in India, there are overall 56,640 branches or offices, 893,356 employees and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of all ATMs.
- The reserve money lying with the RBI as on 21st November, 2008 as per the January 2009 bulletin, is a total amount of US $179.28 billion and RBIs credit to the commercial sector stood at US $3.65 billion.
- Further, banks in India put up strong growth and profit numbers in the October – end – December 2008 period owing to high credit growth and easing of yield on government bonds. Top Indian banks have increased their earnings by almost 40 percent year onyear for the same period.
- According to latest Reserve Bank of India ( RBI ) data, bank credit grew by 24.6 per cent year on year as of 19th December, 2008. The resulting credit growth was even better at 41 per cent during the April – end – December 2008 period. Deposits grew by 20.6 per cent as of 19th December, 2008.
Growth of Banks in India
- HDFC Bank and Axis Bank continue to remain as leaders of the private sector banks. Both the banks have maintained the advances growth and NIM. SBI, Punjab National Bank, Bank of India and Union Bank are expected to lead among PSU Banks.
- The State Bank of India is planning to open 1,000 new branches across the country to cover 100,000 villages in the coming FY 2009 – 2010, according to the bank Chairman, Mr.O.P.Bhatt.
- The bank had decided to rope in 300 new customers every year for each branch using initiatives. According to Mr. Bhatt, the bank could get a record US $5.54 billion during December 2008, the highest amount collected by any bank in the country.
- According to the latest RBI data, growth in broad money ( M3 ), year – on – year ( y – o – y ), was 19.6 per cent ( US $151.04 billion ) on 2nd January, 2009 lower than 22.6 per cent ( US $141.82 billion ) a year ago. Aggregate deposits of banks, year – on – year, expanded 20.2 per cent ( US $133.08 billion ) on 2nd January, 2009 as compared with 24.0 per cent ( US $127.49 billion ) a year ago.
- According to earlier RBI data, for the third quarter ( 26th September,2008 – 27th December, 2008 ), total bank credit was up US $21.91 billion compared with a growth of US $22.91 billion in the same period a year ago. In the preceding quarter, credit had risen by US $26.50 billion.
- RBI data for deposits shows that for the Oct – end 31sr December, 2008 period, although deposit growth has slowed to US $25.99 billion against US $33.18 billion in the April – end to September, 2008 period, it was still stronger in the 31st December quarter period, 2008, as compared to the year-ago quarter when absolute growth was US $16.37 billion.
- Net banking capital amounted to US $4.8 billion in April – September 2008 as compared with US $5.7 billion in April – September 2007. Accounting for a part of banking capital, non-resident Indian ( NRI ) deposits showed a net inflow of US $1.1 billion in April – September 2008, increasing from net outflow of US $78 million in April – September 2007.
- Lending by banks also rose more than 76 per cent to ₹ 2,80,000 crore ( US $57.26 billion ) during April – November 2008 – 2009 from the same period a year ago, according to data available with the Reserve Bank of India ( RBI ).
- The number of Automated Teller Machines ( ATMs ) has risen and the usage of ATMs has gone up substantially during the last few years. Use of other banks ATMs would also not attract any fee except when used for cash withdrawal for which the maximum charge levied was drastically brought down by 31st March, 2008. Further, all cash withdrawals from all ATMs would be free with effect from 1st April, 2009.
FDI Limit in Private Sector Bank Increased
- FDI limit in Private Sector Banks has been raised to 74 per cent under the automatic route including investment by FIIs ( Foreign Institutional Investors ).
- The aggregate foreign investment in a private bank from all sources will be allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly owned subsidiary of a foreign bank.
Entry of New Banks in the Private Sector
- As per the guidelines for licensing of new banks in the private sector issued in January 1993, revised guidelines were issued in January 2001. The main provisions / requirements are :
- Initial minimum paid-up capital shall be ₹ 200 crore; this will be raised to ₹ 300 crore within three years of commencement of business.
- Promoters’ contribution shall be a minimum of 40 per cent of the paid-up capital of the bank at any point of time; their contribution of 40 per cent shall be locked in for 5 yr from the date of licensing of the bank and excess stake above 40 percent shall be diluted after one year of bank’s operations.
- Initial capital other than promoters contribution could be raised through public issue or private placement.
- While augmenting capital to ₹ 300 crore within 3 years, promoters need to bring in at least 40 percent of the fresh capital, which will also be locked in for 5 years. The remaining portion of fresh capital could be raised through public issue or private placement.
- NRI participation in the primary equity of a new bank shall be to the maximum extent of 40 percent. In case of a foreign banking company or finance company ( including multilateral institutions ) as a technical collaborator or a co-promoter, equity participation shall be limited to 20 percent within the 40 per cent ceiling.
- No large industrial house can promote a new bank. Individual companies connected with large industrial houses can, however, contribute up to 10 per cent of the equity of a new bank, which will maintain an arms length relationship with companies in the promoter group and the individual company/ies investing in equity. No credit facilities shall be extended to them.
- NBFCs with good track record can become banks.
- A minimum capital adequacy ratio of 10 per cent shall be maintained on a continuous basis from commencement of operations.
- Priority sector lending target is 40 per cent of net bank credit, as in the case of other domestic banks; it is also necessary to open 25 per cent of the branches in rural / semi – urban areas.
Application Form Submission 16 Dec 2020 to 16 Jan 2021.