India's Leading BFSI Companies 2016
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India’s Leading BFSI Companies 2016
India’s Leading BFSI Companies 2016
India’s Leading BFSI Companies 2016 Published in India by Dun & Bradstreet Information Services India Pvt Ltd.
Registered Office ICC Chambers, Saki Vihar Road, Powai, Mumbai - 400072. CIN: U74140MH1997PTC107813 Tel: +91 22 6676 5555, 2857 4190 / 92 / 94 Fax: +91 22 2857 2060 Email: DNB_India-corporatepublication@DNB.com URL: www.dnb.co.in New Delhi Office 1 st Floor, Administrative Building, Block ‘E’, NSIC - Technical Services Center, Okhla Industrial Estate Phase - III, New Delhi - 110020. Tel: +91 11 4149 7900 / 01 Fax: +91 11 4149 7902
Kolkata Office 166B, S. P. Mukherjee Road, Merlin Links, Unit 3E, 3 rd Floor, Kolkata - 700026.
Chennai Office New No: 28, Old No: 195, 1 st Floor, North Usman Road, T. Nagar, Chennai - 600017. Tel: +91 44 2814 2265 / 75 Fax: +91 44 2814 2285
Tel: +91 33 2465 0204 Fax: +91 33 2465 0205
Bengaluru Office No. 7/2 Gajanana Towers, 1 st Floor, Annaswamy Mudaliar Street, Opp. Ulsoor Lake,
Hyderabad Office 504, 5 th Floor,
Ahmedabad Office 801 - 8 th Floor, Shapath V, Opp. Karnavati Club, S. G. Highway Ahmedabad – 380054. Tel: +91 79 6616 8058 / 59 Fax: +91 79 6616 8064
Babukhan’s Millennium Centre, 6-3-1099 / 1100, Somajiguda, Hyderabad - 500082. Tel: +91 40 6662 4102, 6651 4102 Fax: +91 40 6661 9358
Bengaluru - 560042. Tel: +91 80 4250 3500 Fax: +91 80 4350 3540
Naina Acharya, Rohit Singh, Yogesh Jambhale, Mihir Shah
Swatti Mathur, Aakanksha Sawant, Christopher Dsouza, Rohit Pawar, Amol Lad
Sales Head Sales Team
Suhail Aboli, Asha Nair, Tanya Bedi, Apoorwa Tyagi, Nittin Maheshwari, Sunena Jain, Sapna Mishra, Nehal Khosla, Aloka Chatterjea, Sindhu Ravi, Ajith Alex George, Girish Menon, Sandeep Parakkal Nadeem Kazi, Prem Kumar, Ankur Singh, Sumit Sakhrani, Rajesh Gupta, Parth Desai, Parmeshwar More
Mohan Chilvery, Tushar Awate, Aditya Salvi, Sonal Gangnaik, Shilpa Chandolikar
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India’s Leading BFSI Companies 2016 8 th Edition ISBN 978-93-82060-88-8
Contents Preface.................................................................................................................. I Foreword............................................................................................................. III Executive Summary..............................................................................................V Methodology. ....................................................................................................VII Definitions & Calculations................................................................................... IX Sector Overview Banks..........................................................................................................XV NBFCs & FIs.............................................................................................. XXV Securities Market. ................................................................................. XXXV Mutual Funds. .......................................................................................... XLV Insurance .................................................................................................. LIII Interviews . ............................................................................................. I - 1 - I - 5 Listing ..................................................................................................... L-1 - L-10 Profiles Banks.......................................................................................................1-30 NBFCs / FIs / Financial Services. ............................................................33-71 Broking. .................................................................................................73-82 Asset Management Companies.............................................................85-97 Life Insurance. ...................................................................................101-114 Non-Life Insurance. ...........................................................................117-132 Abbreviation. ............................................................................................135-140 Index. ........................................................................................................143-147
Dun & Bradstreet India is pleased to present the 2016 edition of its premier publication – ‘ India’s Leading BFSI Companies 2016 ’. This publication intends to provide useful and comprehensive information on the Indian BFSI (banking, financial services, and insurance) sector as well as highlights the recent developments and key trends shaping the sector. The key feature of the 2016 issue, gives a glimpse of the underlying opportunities in the financial sector as well as possible means for taking advantage of these opportunities. The BFSI sector in India is diverse and contributes significantly to the growth of the economy. However, the sector still largely remains untapped with key segments of the sector such as banking which is largely underserved. The bank account penetration in India is still low as compared to other developing countries. The life insurance penetration in India stood at merely 3.3% of GDP as compared to around 7.3% of the US. Further, less than 5% of the Indian household’s savings are invested in share & debentures.
There lies immense opportunity to cover the huge untapped market of the BFSI sector. E-commerce which has changed the way business is conducted across the world and is expected to be one of the drivers for the growth of this sector. The ease and convenience to buying a financial product online has revolutionised the manner in which products are sold across the world. A plethora of financial products are being sold and delivered using the electronic platform to millions of customer in India. The increasing adoption of e-commerce in the near future will bring about a big change in the way the industry conducts its business and engages with its customers. The companies in the banking and financial services are also increasingly investing in e-commerce to lower the cost of transaction and bring higher efficiency and greater reach. Various regulatory bodies are initiating a host of measures for the growth of e-commerce in the financial sector. The Reserve Bank of India is considering ways to link the e-commerce platform to the banking sector, similar to linking mobile phone operators to the banking system through the ‘soon-to-be launched payment banks. The IRDA has formed two committees to explore and suggest ways to promote e-commerce in the insurance sector in order to increase penetration and bring about financial inclusion. With the positive impact of technology on the business models and emerging growth opportunities, the future of the BFSI sector looks buoyant and moving towards robust growth. The publication provides an in-depth analysis of the BFSI sector in India and showcases profiles of leading players in the banking, NBFC, mutual fund, broking and insurance sectors. We, at Dun & Bradstreet are extremely optimistic about the progress of this sector and will continue to track it and aim to facilitate informed business decisions. I hope you will enjoy reading ‘ India’s Leading BFSI Companies 2016 ’ and look forward to your suggestions.
Kaushal Sampat President & Managing Director - India Dun & Bradstreet
Dun and Bradstreet India is pleased to announce the launch of the eighth edition in the series of the publication on the Indian banking, financial services, and insurance (BFSI) sector ‘ India’s Leading BFSI Companies 2016 ’. The publication features 310 leading companies in the BFSI industry across various segments namely banks, insurance, NBFCs, broking andmutual funds. The publication highlights their financial performance, business operations and developments during FY15. The BFSI sector in India has largely remained under penetrated as compared to other countries offering immense opportunities for growing. The Government of India is taking various measures to promote the financial inclusion. The government’s Pradhan Mantri JanDhan Yojana to ensure access to various financial services, need based credit, insurance and pension facility for every household has resulted in opening of 208.7 million bank accounts (as on Feb 15, 2016) - a strong indication about the potential of BFSI sector. The
Government has also taken initiatives to promote the growth of insurance sector by increasing stake of foreign investors to 49 percentage equity investment in insurance companies and launch of schemes like Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana. To strengthen the NBFC sector, RBI has proposed to put in place a regulatory framework to allow a NBFC with new features which could act as account aggregator (NBFC-AA). This will provide a technology enabled solution that will enable investors to check and monitor the position of all their financial assets across different institutions on a common platform. To further develop the Indian banking system and to create niche banking in India, the Reserve Bank of India has granted in-principle approval to 11 applicants to set up payment banks in India and 10 applicants to set up small banks in India. Moreover, the Government of India’s launch of the ‘Digital India’ program is also expected to offer enormous benefits to the Indian financial sector. More insights on various sectors are available in the publication for your reference. The progress of the financial sector is crucial to India’s economic growth. Financial reforms instituted over the past two decades have played a crucial role in ensuring consistent growth of the sector. The publication ‘ India’s Leading BFSI Companies 2016 ’ showcases the performance of India’s leading BFSI sector companies. Further, given Dun & Bradstreet’s extensive market reach and global footprint, companies featuring in this publication would benefit from the attention of global leaders in the financial markets. This publication, besides providing a comprehensive macro view on important developments in the BFSI sector, would also serve as a ready reference document to gain a deeper understanding about the leading companies in India’s BFSI sector. We hope you enjoy reading the publication, ‘ India’s Leading BFSI Companies 2016 ’ and aspire to continue to provide you with well-researched and reliable information on the BFSI industry in the future. We look forward to receiving your valuable feedback and suggestions.
Pawan Bindal Director Dun & Bradstreet India
Dun & Bradstreet, the world’s leading provider of business information, knowledge, and insight, has been tracking the BFSI sector for the past seven years through its publication titled ‘ India’s Leading BFSI Companies ’. The eighth edition of Dun & Bradstreet’s core intellectual property ‘ India’s Leading BFSI Companies 2016 ’ highlights the contribution of key stakeholders of the BFSI sector across India and the growth of the sector. Further, it identifies the key challenges, faced by stakeholders, and key trends influencing the BFSI sector. The publication profiles the leading players of the BFSI sector with an annual total income of ` 250 million and above in FY15. Accordingly, the publication profiles 310 companies – comprising 83 banks, 120 non-banking financial companies, 51 insurance companies, 29 asset management companies, and 27 broking companies.
Each year, the ‘ India’s Leading BFSI Companies ’ publication is associated with a theme. In this context, the theme for this year’s edition is ‘ Exploring the Underlying Opportunities in the Financial Services Sector ’. There is a huge untapped market which offers enormous opportunities. With continual technological changes the sector is already witnessing disruptive innovations and BFSI players will have to rethink their business models and adopt innovative delivery channels to respond to the needs of increasingly demanding digital customer. Following are some of the key highlights in this publication: • As on 2014, India ranked 11th among 88 countries in the life insurance business and 20th in global non-life insurance markets. In terms of premium volume, the country is the fifteenth largest insurance market in the world. During Mar-Sep 2015, foreign direct investment in the insurance sector stood at US$ 341 million displaying a stupendous growth of 152% compared to the same period last year • The asset base of mutual fund industry surged nearly ` 3 trillion in FY15, crossing the ` 10 trillion benchmark. The country’s fund houses together saw a growth of 33.2% in AUM to end the year FY15 at ` 10.8 trillion. The first three quarters of FY16 witnessed AUM reaching almost ` 13 trillion, showcasing a strong growth of 21.3% in Dec 2015 as compared to Dec-14 • The aggregate trading turnover of the cash segment on both exchanges taken together remained largely unchanged during FY11-15, having increased marginally from ` 46.8 trillion in FY11 to ` 51.8 trillion in FY15. On the other hand, trading in the derivatives segment has seen a manifold growth over the last five years. The aggregate trading turnover (derivatives) on both exchanges taken together grew from ` 292.5 trillion in FY11 to ` 759.7 trillion in FY15 • Deteriorating asset quality has emerged to be a major concern for the domestic banking industry. The gross non- performing advances (GNPAs) of all SCBs as a percentage of gross advances grew to 4.6% in March 2015 from 4.1% in March 2014. The net non-performing advances (NNPAs) as a percentage of the total net advances for all SCBs grew from 2.2% as on Mar 2014 to 2.5% as on Mar 2015 • As at the end of FY15, balance sheet size of NBFC-D stood at ` 1,925 billion registering a marginal increase of around 2% y-o-y. The balance sheet size of NBFCs-ND-SI grew considerably by 15.9% y-o-y and stood at ` 14,166 billion as at end-Mar 2015 Digital transformation is expected to catalyze the expansion and growth of the BFSI sector. The BFSI sector in India will continue to undergo rapid change and the vision of complete digitization will soon become a reality in the years to come. Dun & Bradstreet will endeavor to keep track of various developments in this sector to make this publication a ready reference tool.
Naina R Acharya Deputy Leader - Operations Economic Analysis Group Dun & Bradstreet India
For the purpose of the publication, ‘ India’s Leading BFSI Companies 2016 ’, the BFSI sector has been divided into four key segments, viz; banking - only scheduled commercial banks (SCBs) based on the RBI enumeration of SCBs as on Mar 2014; companies providing financial services falling under NIC Codes 64, 65 & 66; asset management companies as registered with Association of Mutual Funds in India (AMFI); and insurance companies that are registered with Insurance Regulatory and Development Authority (IRDA), in accordance with the Insurance Act, 1938. Adequate measures are undertaken, such as an advertisement in the ‘All India’ edition of a prominent business daily, to ensure that the publication covers most companies from the BFSI sector from across the country. In addition, emails and social networking was also entailed for reaching out to Dun & Bradstreet India’s in-house database and companies registered with the respective regulatory bodies and industry associations. To ensure that all the information contained in this publication is verified and authenticated, companies that have not responded with financials statements, and/or their information is not available in public domain are excluded. In addition, if the annual reports of companies are not available to Dun & Bradstreet at the time of compiling this publication, then those companies have also been excluded. As a basic selection criterion, companies with a standalone total income of ` 250 mn and above in FY15 are featured in this publication. Further, subsidiaries and associate companies satisfying the eligibility criteria have also been featured. We have also considered additional exclusion criteria of the corporate governance record (with a focus on NBFCs, FIs, Financial Services & Broking Companies) while compiling this publication to arrive at the final list of ‘ India’s Leading BFSI Companies 2016 ’. Audited Financial statements considered were for the period July 31, 2014 and June 30, 2015 have been used as the source of information for this publication. The various financial computations are based on Dun & Bradstreet’s methodology and have been explicitly explained in the ‘Definitions and Calculations’ section. For companies where the published financial statement is for a period other than 12 months, the financials are annualized for the sole purpose of shortlisting and profiling. In general, all information used in the publication is from publically available sources. Financials of the companies have been sourced from Annual Reports or Financial Statements or regulatory authority (IRDA, RBI, and AMFI). In case of certain subsidiaries, financials have been procured from annual reports of their respective parent companies. Information pertaining to SCBs has been primarily sourced and compiled from RBI, annual reports (ARs) and Websites of banks. Information related to financials and infrastructure of the banks has been taken purely from various publications provided by the RBI and pertains to March 2015. The information pertaining to financial services companies, insurers and AMCs have been sourced and compiled from • Questionnaires circulated and administered by Dun & Bradstreet India; • Data provided by the respective regulatory authority (IRDA and AMFI) through its Websites and various publications; • Data available from respective companies’ Website and ARs/Financial statements, draft red herring prospectuses; • Government of India websites such as Reserve Bank of India, Securities and Exchange Board of India, Economic Survey, Central Statistical Organisation, Planning Commission, etc. The total income pertaining to insurance companies has been calculated by taking financials from the annual reports and public disclosures of respective insurers. Other financial information pertaining to insurers has been taken from IRDA’s FY15 AR. The Quarter Ended AAUM pertaining to AMCs has been consideredfrom AMFI newsletters while other financial information is taken from their respective ARs/financial statements. The financial information for financial services companies, NBFCs, FIs, broking companies have been taken from ARs/Financial Statements. A standardized format has been used for reporting the information aboutthe companies. The editorial team would appreciate if readers would keep Dun & Bradstreet India regularly updated regarding any changes in their companies, as and when it occurs. Each company featured in the publication has been allotted a unique identification number (D-U- N-S® - Data Universal Numbering System). This will help readers locate and obtain full-fledged informative reports on these companies from the Dun & Bradstreet India database. The editorial team is confident that ‘ India’s Leading BFSI Companies 2016 ’ will prove a useful reference tool for information on the BFSI sector. We would be pleased to receive your invaluable feedback and suggestions, which we can incorporate in the next edition. Your satisfaction remains our goal in Dun & Bradstreet India’s journey towards excellence.
Definitions & Calculations
Calculations • Total Advances = Bills purchased & discounted (Short term) + Cash credits, overdrafts & loans (Short term) + Term loans • Total Deposits = Demand Deposits + Savings Bank Deposit + Term Deposits • Total Business = Total Deposits + Total Advances
• Net Profit Margin (NPM) = Net Profit/Total Income*100 • Total First Year Premiums (FYP) = FYP + Single Premiums
• Total Income for Insurance companies = Premiums earned - net (policy holder’s account) + Income from Investments (policy holder’s account) + other income (policy holder’s account) + income from investments (shareholders account) + other income and miscellaneous receipts (shareholders account) Data Sources • Total Income for banks taken as per RBI and for other companies as per the ARs/Financial Statements/Public Disclosures • Net Profit/Loss for banks taken as per RBI and for other companies as per the ARs (except for Insurance companies) • Total Deposits, Total Advances, CRAR - Basel III and Net NPA/Net Advances Ratio for banks taken as per RBI • AAUM (Quarter Ended) of asset management companies taken from AMFI as per data disclosed by the AMCs • Total Premium Earned, Share of Linked Premiums / Total Premiums, AUM and Solvency Ratio of Life Insurance companies taken as per the data from IRDA AR 2014-15 • AUM, Solvency Ratio and Incurred Claims Ratio of Non-life insurance companies taken as per the data from IRDA AR 2014-15 • Net Premiums Earned of Non-life insurance companies taken as per ARs/Financial Statements/Public Disclosures LP Loss to Profit LL Loss to Loss PL Profit to Loss N.A Not Available
Global Banking Scenario The global financial crisis of 2008 exposed the weakness in the global financial system. Since the crisis, tighter regulations on banks, both general and specific to their international operations, combined with a need to clean up balance sheets have induced banks to cut back their international lending. International banks, especially European banks have reduced their cross-border lending (direct lending to non-affiliated entities in other countries) and shifted their focus more on multinational banking with more local and locally funded operations. During the global financial crisis, a number of banks in many countries either failed or received taxpayer-funded bailouts. Thus to prevent this type of global situation further in the future, a series of significant regulatory changes to the international banking sector were introduced. These regulatory changes are made to help manage systemic risk by strengthening capital, liquidity and leverage requirements for all banks. As a part of regulatory change, Basel III, a framework which sets out global regulatory rules for bank capital and liquidity was developed and agreed by The Basel Committee on Banking Supervision. Subsequently, the phase-in of Basel III capital rules began in 2013. While these rules are being set internationally, the pace of domestic implementation of these is not consistent around the world but most likely these will come in place globally by 2019. • Basel III Capital rules Under this rule, the banks are required to hold capital equal to at least 10.5% of their total risk-weighted assets by 2019. The global systemically important banks (G-SIBs) and domestic systemically important banks (D-SIBs) are required to hold additional capital as failure of any from these set of banks can have a significant impact on global and domestic economies. • Basel III Liquidity rules These rules are set to ensure that banks have sufficient, high-quality liquid assets to withstand a period of economic stress. The Basel Committee has developed two minimum rules for liquidity which includes the Liquidity Coverage Ratio (LCR) having a 30-day horizon
and the Net Stable Funding Ratio (NSFR) having a time horizon of one year. LCR requirements will be phased in between 2015 and 2019 while NSFR will be phased out by 2018. Over 90% of the banks worldwide achieve capital ratio target of 7% Banks worldwide went on an overdrive boosting their capital ratios, eventually outpacing the targets implied in the Basel III phase-in arrangements. As per the study conducted by Basel Committee on Banking Supervision, all the 97 banks in the large internationally active banks group (banks having Tier 1 capital of more than Euro 3 bn) displayed a Common Equity Tier 1 (CET1) ratio under Basel III above both the 4.5% minimum capital requirement and the 7% target ratio (the minimum capital requirement plus the capital conservation buffer). By June 30 2014, large internationally active banks, as a group, increased the average ratio of their CET1 capital to risk weighed assets (RWAs) to 10.8% from9.5% as on June 30 2013. Of the 114 banks in the other banks group, 99% reported a CET1 ratio equal to or higher than 4.5%; while 93% also achieved the target of 7%. Other banks, as a group also reached the same average capital ratio levels of 11.2%as on Jun 31 2014 as compared to 9.1% as on June 31 2013. Themajor growth driver for the steady improvements in the regulatory capital positions of both advanced economy and emerging market economies is the higher profits. Retained earnings were one of the major contributing factors for 45% increase in large internationally active banks’ CET1 capital between mid-2011 and mid-2014. Increased capital coupled with declining risk-weighted assets has helped the CET1 regulatory ratios increase from 7.1% to 10.8% over the same period. Continued policy improvements and economic reforms coupled with greater efforts by the banks to strengthen their capital position have led to the improvement in capital adequacy levels in various economies. Banks in few of the advanced economies like UK, Canada and Germany exhibited decline in their capital adequacy levels. Most of the Emerging market and developing economies including India, China and Brazil with the exception of Russia exhibited increase in their capital adequacy levels.
NPAs on the rise in Euro zone With the economy bouncing back after the crisis in few advanced countries, the asset quality of advanced economies like the US, UK has improved over the period of last four years. However, banks in the Euro Zone remain burdened by the large and growing stock of non-performing assets (NPAs), which are largely the outcome of corporate debt overhang and the economic slowdown. Asset quality continued to deteriorate in the euro area as a whole in 2014 with total non-performing loans standing at more than €900 billion. Furthermore, the stock of non-performing loans in the euro area is unevenly distributed, with about two-thirds located in six euro area countries viz Cyprus, Greece, Ireland, Italy, Portugal and Slovenia. By the end of 2014, these six euro area countries witnessed the soaring of their NPAs-to-total loans ratio to very high levels, even to the extent of 10% or more. The situation was the worst in Cyprus with over 45% of its loans marked as NPAs followed by Greece, with almost one-thirds (34.3%) of its total loans marked as NPAs. Ireland (18.7%), Slovenia (11.7%), Cyprus (16.6%), Italy (17.3%) and Portugal (11.2%) also witnessed NPAs levels of more than 10%. On the other hand, banks in the US and UK made steady progress in managing their NPAs. The US banking sector posted steady declines in the aggregate NPA ratio, which fell to 2% by 2014 from 4.4% in 2010. The UK’s banking sector also posted declines in the aggregate NPA ratio from 4% in 2010 to 2.7% in 2014. Among the BRICS nation, the aggregate NPA ratio of South Africa banking decreased from 3.6% in 2013 to 3.3% in 2014 and Brazil’s NPA ratio remained at the same level at 2.9%. Other BRICS nations including India, China and Russia demonstrated increase in their NPAs with their NPA ratio increasing from 4%, 1% and 6% in 2013 to 4.3%, 1.1% and 6.7% in 2014 respectively.
Among the BRICS nation, the aggregate capital adequacy ratio of Russia decreased from 13.5% in 2013 to 12.5% in 2014 on account of increasing NPAs from6% in 2013 to 6.7% in 2014. Other BRICS nations including India, China, Brazil and South Africa demonstrated increase in their capital adequacy ratio from12.3%, 12.2%, 16.1% and 12.3% in 2013 to 12.5%, 12.4%, 16.7% and 12.5% in 2014 respectively.
Ratio of bank regulatory capital to risk weighted assets (%) Country
2010 2011 2012 2013 2014 Advanced Economies
11.6 15.6 13.3
11.8 15.9 13.8 15.7 14.7
12.1 16.2 14.2 17.1 14.5
11.8 14.3 15.2 19.6 14.4 13.3 13.5 13.7 13.3 20.5 12.3 12.2 13.5 16.1 12.3
12.4 14.2 15.6 16.6 14.4
United Kingdom 15.9
11.9 12.3 12.1 10.3 14.5 15.2 12.2 18.1 16.9 15.2
13.4 12.6 19.2 13.1 13.3 13.7 16.4 13.1
India China Russia Brazil
13.1 12.7 14.7 16.3 13.1
12.5 12.4 12.5 16.7 12.5
Source: FSI Tables, April 2014 Database, IMF Note: Data available for India, China, Russia, Spain, Brazil, Australia and Canada pertain to the year ended December; For United States, Greece, Ireland and Japan it pertains to year ended September; For United Kingdom, Italy and Portugal, it pertains to the year ended June and For South Africa, it pertains to the year ended January for the respective years Return on Assets remain stable in most of the economies The Return on Assets (RoA), an indicator of banking system’s profitability showed a mixed trend across the economies. Among advanced economies, few economies like the US and UK displayed deterioration in RoA while other economies like Australia, Canada and Japan demonstrated a stable to modest growth in their RoA. Among the Euro Zone, economies like Greece, Portugal and Slovenia has reported negative return on assets due to impact on profitability driven by weak economic activities. Amongst the BRICS countries, all economies except Russia have shown stable RoA in 2014. Russia has reported sharp decline in RoA in 2014 as compared to 2013 due to increase in NPA (increased from 6% in 2013 to 6.7% in 2014) and reduction in profitability.
weak, government revenues of the countries whose GDP is dependent on commodities is likely to remain subdued. Despite comparatively lowpublic debt levels, amore cautious attitude towards sovereign borrowing should be adopted by many developing countries. Higher benchmark interest rates, volatile exchange rate and any change in appetite of investor to invest in emerging markets may hamper the ability of developing countries to refinance ww Indian Banking industry Overview on Indian Banking Industry The Indian banking industry plays a key role in the economic development and growth of the country and is the most dominant segment of the financial sector. The Indian banking sector comprises of different types of institutions catering to the diverse banking needs of different sectors of the economy. Banks operational in India can be broadly classified as commercial and co-operative banks. Commercial banks constitute the largest segment of the banking system. Trends in the Banking Industry for the past 3 years • Total credit off-take of all scheduled commercial banks (SCBs) increased at a compound annual growth rate (CAGR) of 12% during FY12-FY15 to reach ` 65,364.20 bn as on Mar 2015 • Total deposits of all SCBs increased at a CAGR of 13% during FY12-FY15 to reach ` 85,332.9 bn as on Mar 2015 • The share of deposits-GDP (at current 2011-12 prices) rose from 66.9% in FY12 to 68% in FY15 • Bank Credit to GDP (at current 2011-12 prices) stood at approximately 52% during FY12-FY15 Key Factors that impacted the performance of the banking industry • FY15 was characterised by slight improvement in economic growth with Gross Domestic Product (GDP) at constant prices (2011-12) recording 7.3% growth as per CSO, MOSPI against 6.9% recorded in FY14 • High inflation over the past few years has been one of themajor concerns for the economy. The Reserve Bank of India (RBI) had targeted to keep CPI below 8% by Jan 2015 and below 6% by Jan 2016. The Reserve Bank of India (RBI) adopted the new CPI (combined) as the key measure of inflation, maintained its disinflationary policy stance and was able to bring Consumer Price Index (CPI) down to 5.25% for Mar 2015 as compared to 8.31% in Mar 2014
Ratio of Non-Performing Loans to Total Loans (%) Country
2010 2011 2012 2013 2014 Advanced Economies
2.1 1.2 2.5
1.8 0.7 2.4 3.6 3.3
1.5 0.6 2.3 3.1 2.5
1.1 0.5 1.9 2.7
31.9 16.5 10.6 25.7
34.3 17.3 11.2 18.7
India China Russia Brazil
2.4 1.1 8.2 3.1 5.8
4 1 6
4.3 1.1 6.7 2.9 3.3
6.6 3.5 4.7
Source: FSI Tables, April 2014 Database, IMF Note: Data available for India, China, Russia, Spain, Brazil, Australia and Canada pertain to the year ended December; For United States, Greece, Ireland and Japan it pertains to year ended September; For United Kingdom, Italy and Portugal, it pertains to the year ended June and For South Africa, it pertains to the year ended January for the respective years The Way Forward In advanced economies, to support the economic growth and to bring inflation to the target level, accommodative monetary policy needs to be continued. The countries where fiscal position is in control should increase the investment in infrastructure and the countries with high public debt should balance between fiscal management and improving the economic activity. The Euro zone is recovering but the recovery is turning out to be weaker than expected. The investments are still well below pre-crisis levels and high unemployment, large debt burdens; higher real interest rates in stressed economies, weak banks and contracting credit are continuously posing obstacles to the resurgence of domestic demand. The Euro Zone also requires the repairing of bank balance sheets with implementation of a mechanism which can facilitate credit flowing across the borders and reducing financial fragmentation. In emerging market and developing, budget deficits and public debt levels are generally lower than in developed economies. As commodity prices are expected to remain
• The RBI revised its liquidity management framework from Sep 5, 2014, with more frequent 14-day term repos and daily overnight variable rate repo operations, to ensure flexibility, transparency and predictability in liquidity management operations • With the pick-up in economic growth, Index of Industrial Production (IIP) grew from a decline of 0.1% during FY14 to 2.8% in FY15 due to decline in inflation and improvement in business sentiments • During FY15, banks reduced deposit rates on various maturities driven by decline in inflation. Deposit rate for more than one year maturity dropped from 8.00%- 9.25% in FY14 to 8.00%-8.75% in FY15 • Base rate remained steady at 10.00%-10.25% during FY15 • The RBI reduced repo rate by 50 bps (25 bps each) since Jan 2015 from 8% to 7.5% as on Mar 2015 to improve credit off-take in the system • SLR was reduced by 50 bps in Q4 FY15 from 22.0% to 21.5% Credit and deposit growth continued to remain sluggish The growth in aggregate deposits moderated to 11.4% in FY15 from 14.1% in FY14 due to lower deposit mobilization as well as base effect i.e. high accretion to NRI deposits owing to fresh foreign currency non-resident account (banks) (FCNR (B)) deposits mobilized under the swap scheme during Sep to Nov 2013 to tide over the external financing requirements. Further, during FY15, banks reduced deposit rates on various maturities which impacted the growth of aggregate deposits. Similarly, growth of overall bank credit also decelerated in FY15. The increase in nonperforming assets (NPAs) and corporate debt restructuring emerged to be major concerns for the economy during 2015. The corporate sector’s preference for raising finances through issuance of commercial papers (CP) and external commercial borrowings (ECBs) also seemed to have impacted the credit off-take growth. Consequently, growth in credit off-take of all SCBs decelerated to nearly 9.5% in FY15 from 13.9% in FY14. Increase in risk aversion due to deterioration in asset quality and availability of alternative sources of funds resulted in moderation in credit off-take.
Trends in Credit-off take and Deposits Growth (y-o-y)
Source: RBI and Dun & Bradstreet Research
CRAR (Basel III) for all SCBs stood at a comfortable level of 13% during FY15 The RBI implemented the Basel-III capital regulation to enhance SCBs’ ability to absorb shocks from financial and economic stress. The RBI extended the end date for full implementation to Mar 31, 2019. The regulatory requirement for capital to risk-weighted assets ratio (CRAR) Basel III stood at 9% for FY15. The CRAR of SCBs though met the regulatory requirement, declined marginally to 12.9% in Mar 2015 from 13.02% in Mar 2014. Public sector banks (PSBs) recorded the lowest CRAR among all bank-groups. Moving ahead the banking industry, especially PSBs will require substantial capital to meet regulatory requirements with respect to additional capital buffers. Asset quality of all SCBs continued to deteriorate Deteriorating asset quality has emerged to be a major concern for the domestic banking industry. The gross non- performing advances (GNPAs) of all SCBs as a percentage of gross advances grew to 4.6% in Mar 2015 from 4.1% in Mar 2014. The net non-performing advances (NNPAs) as a percentage of the total net advances for all SCBs grew from 2.2% as on Mar 2014 to 2.5% as on Mar 2015.
Focus on Financial Inclusion to continue to improve banking accessibility in rural areas The RBI has advised domestic banks to adopt a structured approach to financial inclusion (FI) through preparation of board approved FIPs. Thefirst phaseof FIPswas implemented over 2010-13. Banks were advised to prepare fresh three- year FIPs for 2013-16 with the focus on enhancing the volume of transactions in the large number of accounts opened. The launch of the FIP has aided in growth of banking outlets in villages, grant of credit and deployment of ATMs in rural areas. Several policies have been implemented to promote financial inclusion such as the launch of the ‘PradhanMantri Jan Dhan Yojana’ (PMJDY) in Aug 2014 and the ‘RuPay Card’ - a ‘payment’ solution. The Yojana envisions universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit and insurance. PMJDY’s benefits include a RuPay debit card, 1 lakh accident insurance cover and an additional ` 30,000 life insurance cover. It is a platform for Direct Benefits Transfer (DBT) which will help plug leakages in subsidies. As on Jan 2015, 123.1 mn bank accounts have been opened under PMJDY, of which 73.6 mn are in rural areas and 49.5 mn in urban areas. Under the PMJDY, 67.5% of the accounts as on Jan 2015 are with zero balance. The total number of banking outlets, opening of BSBDAs and small credits have grown significantly during FY15 due to PMJDY.
GNPA ratio (%)
Source: RBI and Dun & Bradstreet Research
Continued pressure on profitability of SCBs eased during FY15 Net Interest Income (NII) recorded decelerated growth of 9.3% in FY15 as compared to 11.7% in FY14. The share of NII to total operating income (TOI) of all SCBs dropped to 69.5% in FY15 from 71.1% in FY14.
Trends in net profit growth y-o-y
Source: RBI and Dun & Bradstreet Research
Net profit growth which was showing a downward trend since FY11 improved significantly in FY15. Net profit recorded significant growth of 11.4% during FY15 compared to a decline of 14.1% during FY14. Some significant factors attributing to this growth included the impact of base effect, increase in treasury gains andwrite back of excess provisions held in investment portfolio.
Progress on financial inclusion by banks
Year Ended March 10
Year Ended March 14
Year Ended March 15
Progess April 14 - March 15
Banking Outlets In Villages - Branches Banking Outlets In Villages - BCs Banking Outlets In Villages - Other Modes Banking Outlets In Villages - Total Urban Locations covered through BCs BSBDA-Through Branches (Number) BSBDA-Through Branches (Amount)
60.2 44.3 13.3 10.7 73.5 55.0
126.0 273.3 116.9
210.2 363.7 187.8
84.2 90.4 70.9 35.6
BSBDA-Through BCs (Number) BSBDA-Through BCs (Amount)
BSBDA-Total (Numbers) BSBDA-Total (Amount)
OD facility availed in BSBDAs (Number) OD facility availed in BSBDAs (Amount)
1.7 3.9 2.6
KCCs - Total (Number) KCCs - Total (Amount) GCCs - Total (Number) GCCs - Total (Amout)
204.7 477.0 859.8
ICT A/Cs-BC-Total Transaction (Number) ICT A/Cs-BC-Total Transaction (Amount)
Banks recorded maximum addition of ATMs and offices in rural areas for inclusive growth in FY15 Banks are increasingly adding branches and ATMs in rural areas to tap these markets and for inclusive growth. Total number of ATMs in India has grown to 181,252 as on Mar 2015 from 74,505 as on Mar 2011. As on Mar 2015, ATMs of all SCBs in rural and semi urban areas accounted for 44% share of the total ATMs in the country compared to 41.6% as on Mar 2014. In addition of all the ATMs that were opened in FY15, around 39% were in rural areas and 24% in semi- urban areas. Total number of bank offices in India has grown to 125,863 as onMar 2015 from 89,110 as onMar 2011. Offices in rural areas formed the largest share of 38% in FY15 along with the highest addition in the branch network during FY15, both in absolute and percentage terms in rural areas. Penetration of electronic payment modes is on the rise The RBI enacted Payment and Settlement Systems Act 2007 (PSS Act) to provide sound legal basis for the regulation and supervision of payment systems in India. To make the PSS Act more effective, amendments to provide finality to the determination of the payment obligations and settlement instructions between a central counter party (the system provider) and systemparticipants in the event of insolvency,
dissolution, or winding up of a central counter party have been added. The Payment and Settlement Systems (Amendment) Bill 2014 has been passed by the Lok Sabha in the winter Session of 2014 and was passed by the Rajya Sabha in Apr 2015. The RBI to promote electronic payments in the country has continued its efforts in making the payment systems safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards. Various initiatives for infrastructure enhancements have been undertaken including implementation of Trade Receivables and Discounting System and the Bharat Bill Payment System. The continued trend of greater acceptance in electronic payments over paper cheques was also seen during FY15. Nearly 90% of the total settlement volumes have been carried out through retail electronic modes as on Aug 2014. Transactions through RTGS have grown 14.4% and 2.7%, in volume and value terms respectively in FY15. Retail electronic segment saw growth of 52.25% in volume and 36.59% in value during FY15. NEFT volumes and values rose 40.3% and 36.58% respectively, during FY15. Debit card usage has registered a growth of 16.36% in volume whereas credit card witnessed growth of 20.97% in FY15.
Distribution of settlement systems (Percentage share in total by value) Distribution of settlement systems (Percentage share in total by volume)
Source: RBI and Dun & Bradstreet Research
The Road Ahead Economic growth, infrastructure investments, financial inclusion, favourable demography & rising income levels (which will lead to increased demand for banking services), rapid urbanisation, policy support, technological innovation and digitisation are expected to drive growth in the banking sector. Digitisation is a focus area for the Government and leveraging various digital technologies such as SMAC (Social, Mobile, Analytics and Cloud) capabilities will facilitate banks in reaching out to new customers, enhancing customer experience, gaining insights into customer behaviour and improving revenue generation & operational efficiency. Growing internet, mobile banking and technology led distributionmodels is expected towiden reach, reduce costs, protect margins and promote growth for banks. Further, some of the key reformmeasures such as licensing of payment and small bank, change in the norms of recapitalization of PSBs etc. taken towards improvement in corporate governance and financial inclusion are expected to positively impact the banking industry. With government initiatives like PMJDY and the MUDRA Bank, as well as increased adoption of technology, new processes such as direct benefits transfers, enhanced inclusive growth is expected. A vast un-banked population offers potential for growth and scope for innovation in deliverymodels. To bring rural population under the banking ambit, the Government of India and RBI have prioritized financial inclusion. SCBs are expanding their branch network to tap rural areas for further business opportunities. Rural banking is expected to grow further moving ahead.
In volume terms, the no. of transactions handled through RTGS has increased to 92.78 mn during FY15 from 81.1 mn in FY14. In value terms, RTGS transactions have increased from ` 905 tn in FY14 to ` 929 tn in FY15. Under the retail electronic payments the volume handled grew from1,108.32 mn during FY14 to 1,687 mn during FY15. Similarly, in value terms also, it has increased to ` 65 tn from ` 48 tn. Further, the use of internet, social media and smart phones for banking has been on the rise on account of growing internet and mobile penetration. During FY15, mobile banking services executed 172 mn transactions valued at ` 1,035 bn, registering y-o-y growth of 82% in volume and 362% in value. Despite the high mobile density in the country, there exists immense potential for leveraging the mobile technology to offer banking services.
Non-Banking Financial Companies
Key Highlights • The total number of NBFCs registered with the RBI stood at to 11,781 which includes 212 NBFCs-D companies and 11,569 NBFCs-ND companies as on end-Sep 2015. • Share of NBFC assets as a percentage of scheduled commercial banks’ assets has increased from 7% in 1998 to 14.8% in March 2015. • Borrowings from banks and FIs accounted for 46.4% and debentures accounted for 33.4% of the total borrowings of NBFCs-D in FY15. In case of NBFCs-ND- SI, debentures accounted for 48.7% and borrowings from banks and FIs accounted for 24.9% of the total borrowings. • In FY15, the aggregated balance sheet of the NBFC sector expanded by 16.8% y-o-y to ` 14,565 bn and 14.2% y-o-y in Sep 2015 as compared to Mar 2015. • As at the end of FY14 balance sheet size of NBFC-D stood at ` 1,925 bn registering a marginal increase of around 2% y-o-y. The balance sheet size of NBFCs-ND-SI grew considerably by 15.9% y-o-y and stood at ` 14,166 bn as at end-Mar 2015. • The aggregate total income of the NBFC sector expanded by 15.7% y-o-y to ` 1,676 bn in FY15 and net profit to total income increased from 18.3% in FY14 to 18.8% in FY15. • During FY15, total income of NBFCs-D grew by 13.4% to ` 246 bn while their net profit declined substantially by 35% to ` 28 bn. NBFCs-ND-SI, on the other hand showed an improved performance and their total income and net profit increased 15.6% and 15.8% respectively to stand at ` 1,601 bn and ` 297 bn respectively in FY15. • CRAR of the NBFCs-ND-SI slipped from 27.8% as of Sep 2014 to 27.3% as of Mar 2015 and to 23.8% as of Sep 2015. • Gross NPAs as percent of credit deployed of NBFC sector rose to 4.1% as on end-Mar 2015 from 3.9% as on end-Mar 2014. The asset quality of the NBFCs-D and NBFCs-ND-SI deteriorated from the past year’s level. During FY15, gross NPA to gross advances of NBFC-D increased to 3.5% as against 3.1% in FY14. At the same time, net NPAs to net advances also increased to 1.1% compared to 1% in FY14. In case of NBFC-ND-SI, net NPA ratio increased from 2.5% in FY14 to 2.6% in FY15.
The number of NBFCs registered with the RBI continues to decline led by consolidation in the sector The total number of NBFCs registered with the RBI declined marginally to 11,781 as on end-Sep 2015 from 11,842 as on end-Mar 2015and12,029as onend-Mar 2014. This reduction in numbers is largely due to consolidation in industry and cancellation of Certificates of Registration (CoR). Of the total 11,781 NBFCs, 212 were deposit-accepting (NBFCs-D) and 11,569 were non-deposit accepting (NBFCs-ND). Since Nov 2014, NBFCs-ND with assets of ` 5 bn and above have been classified as systemically important non-deposit accepting NBFCs (NBFCs-ND-SI). During the periodMar - Sep 2015, 10more companies came under the category of NBFCs-ND-SI taking the total count to 210 as on Sep 2015.
Distribution of NBFCs registered with RBI
As on Mar 2014
Category AS on Sep 2015 As on Mar 2015
Source: RBI and Dun & Bradstreet Research Note: NA denotes not available
Share of NBFC assets as a percentage of scheduled commercial banks’ assets has increased from 7% in 1998 to 14.8% in March 2015. However, share of NBFC deposits as a percentage of scheduled commercial banks’ deposits has come down from 3.34% in March 1997 to 0.30% in March 2015. The non-banking financial sector is witnessing consolidation as the number of NBFCs operating in the economy is declining. A Committee on Comprehensive Financial Services for Small Business and Low Income Households which was set up by RBI also came up with the recommendation of consolidation of multiple NBFC definitions into two categories viz. (i) core investment companies and (ii) all other NBFCs along with activity based regulations.
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