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India Banking Industry Report - 2015

  • April 2015
  • 36 pages
  • Emerging Markets Direct Media Holdings
Report ID: 3307085

Summary

Table of Contents

This report profiles India's banking industry, discussing market trends through 2014 and outlook for 2015 and beyond. The report also highlights leading players in the sector including State Bank of India, HDFC Bank and ICICI Bank



The Indian banking industry saw a period of consistent growth during the last decade, with a consistent rise in the number of reporting offices, along with banks and their customers embracing robust systems and processes. With the Reserve Bank of India stressing the policy of financial inclusion, there has been a renewed emphasis on rural expansion.



The sector saw a story of two conflicting sides during 2014. On one hand, were the private sector banks which recorded a stable performance yet again in terms of profitability and asset quality; while on the other hand, were the public sector banks which continued their struggle with bad loans, declining margins and profitability woes. Industrial slowdown and sticky consumer price inflation created a hostile environment for the country's banking sector during the first half of 2014. As a result, the Reserve Bank of India (RBI) did not cut the benchmark policy rates during the year. Although private banks were not much affected, most banks in the public sector felt the heat. The cost of servicing debt rose, leading to an increase in bad loans in the rate sensitive sectors. As a result, the profitability of nationalised players also suffered.



However, going forward in 2015, the economic fundamentals of the country might turn for the better. The recent decline in inflation to record low levels is expected to bring some recovery in the sector. The lower inflation might also induce rate cuts by RBI. The long-term outlook for the Indian banking sector is also stable backed by sound regulatory structure. Rising per capita income, growing urbanization and consistent economic growth will drive the growth of this sector in the years to come.



Key Points:



o During 2007-14, the total assets of scheduled commercial banks grew at a CAGR of 17.5%. Public sector banks led by State Bank of India and its associates dominated the Indian banking system in terms of asset size, accounting for 72% of the total assets.



o Total credit disbursed by scheduled commercial banks grew at a CAGR of 19% during 2003-14, while total deposits of scheduled commercial banks grew at a CAGR of 17% during 2003-13.



o The asset quality of scheduled commercial banks, particularly public sector banks, has deteriorated during the last two years. A steep rise in interest rates together with industrial contraction led to a sharp increase in non-performing assets. Gross NPA ratio of SCBs grew from 3.4% in FY13 to 4.1% in FY14.



o Gross bank credit grew by 9.6% y/y in December 2014 compared to 14.5% y/y in December 2013. This was also lower than the long term credit growth trend.

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