Indian Banking Industry Report - Banking Sector Research & Analysis in India - Equitymaster
X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Banking Sector Analysis Report 

[Key Points | Financial Year '18 | Prospects | Sector Do's and dont's]

  • The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49 foreign banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative banks, in addition to cooperative credit institutions.
  • As of Q1 FY19, total credit extended by commercial banks surged to Rs 86,976.2 billion (US$ 1,297.4 billion) and deposits grew to Rs 115,070.3 billion (US$ 1,716.4 billion).
  • Indian banks are increasingly focusing on adopting integrated approach to risk management. Banks have already embraced the international banking supervision accord of Basel II, and majority of the banks already meet capital requirements of Basel III, which has a deadline of 31 March 2019.
  • Reserve Bank of India (RBI) has decided to set up Public Credit Registry (PCR) an extensive database of credit information which is accessible to all stakeholders. The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 Bill has been passed and is expected to strengthen the banking sector.
  • Credit off-take has been surging ahead over the past decade, aided by strong economic growth, rising disposable incomes, increasing consumerism & easier access to credit.
  • During FY07-18, credit off-take grew at a CAGR of 11%. As of Q1 FY19, total credit extended surged to Rs 86,976 billion (US$ 1,297.4 billion).
  • Demand has grown for both corporate & retail loans; particularly the services, real estate, consumer durables & agriculture allied sectors have led the growth in credit.
  • Total banking sector assets (including public and private sector banks) have increased at a CAGR of 6% to US$ 2.2 trillion during FY13–18. FY13-18 saw growth in assets of banks across sectors.

How to Research the Banking Sector (Key Points)

  • Supply
  • Liquidity is controlled by the Reserve Bank of India (RBI).
  • Demand
  • Rising incomes are expected to enhance the need for banking services in rural areas and therefore drive the growth of the sector.
  • Barriers to entry
  • Licensing requirement, investment in technology and branch network, capital and regulatory requirements.
  • Bargaining power of suppliers
  • Largely, customers prefer banks for its reliability. Gradually, customers have hedged inflation by investing in other riskier avenues.
  • Bargaining power of customers
  • For good creditworthy borrowers bargaining power is high due to the availability of large number of banks.
  • Competition
  • High - There are public sector banks, private sector and foreign banks along with non-banking finance companies competing in similar business segments. Additionally, the RBI has approved for small finance banks and payment banks which will further increase competition in the industry.

top ↑

Financial Year '18

  • Public sector banks account for over 68.3% of interest income in the sector in FY18.
  • They lead the pack in interest income growth with a CAGR of 6.6% over FY09-18. Overall, the interest income for the sector (including public and private sector banks) has grown at 6.9% CAGR during FY09-18.
  • Total lending has increased at a CAGR of 10.9% during FY07-18 and total deposits has increased at a CAGR of 11.6%, during FY07-18 & are further poised for growth, backed by demand for housing and personal finance.
  • India's retail credit market is the fourth largest in the emerging countries. It increased to US$ 281 billion on December 2017 (FY18) from US$ 181 billion on December 2014.
  • The digital payments system in India has evolved the most among 25 countries, including UK, China and Japan, with the IMPS being the only system at level 5 in the Faster Payments Innovation Index (FPII). India stepped up to 28th position on the government's adoption of e-payments ranking in 2018.
  • Digital influence in the Indian banking sector has been growing faster due to the rising digital footprint. India’s digital lending stood at US$ 75 billion in FY18.

top ↑

Prospects

  • Favorable demographics and rising income levels. India ranks among the top six economies with a GDP of US$ 2,597 in 2017 and economy is forecasted to grow at 7.3% in 2018. The sector will benefit from structural economic stability and continued credibility of Monetary Policy.
  • Increase in working population & growing disposable incomes will raise demand for banking & related services. Housing & personal finance are expected to remain key demand drivers. Rural banking is expected to witness growth in the future.
  • Rising fee incomes improving the revenue mix of banks. High net interest margins, along with low NPA levels, ensure healthy business fundamentals.
  • Wide policy support in the form of private sector participation & liquidity infusion. Healthy regulatory oversight & credible Monetary Policy by the Reserve Bank of India (RBI) have lent strength & stability to the country’s banking sector.
  • As of August 2018, total number of ATMs in India increased to 213,004 and is further expected to increase to 407,000 ATMs in 2021.
  • With entry of foreign banks, competition in the Indian banking sector has intensified. Banks are increasingly looking at consolidation to derive greater benefits such as enhanced synergy, cost take-outs from economies of scale, organizational efficiency & diversification of risks.

top ↑

Related Links for Banking Sector
Quarterly Results | Sector Quote | Over The Years

Views on News

Bandhan Bank IPO: A Microlender Turned Profitable Bank (IPO)

Mar 12, 2018

Is the IPO of one of India's newest private sector bank, Bandhan Bank, worth applying for?

SBI: Pushed in Red on Increased Slippages and Higher Credit Costs (Quarterly Results Update - Detailed)

Feb 21, 2018

SBI posts loss on elevated bad loans and higher provisioning requirements.

IDFC Bank: One-Off Trading Loss, Expansion Pull Down Profits (Quarterly Results Update - Detailed)

Feb 8, 2018

IDFC Bank's profits hit by trading loss and higher investments to build network.

Should You Take SBI Chief's Advice and Load up on SBI Shares? (The 5 Minute Wrapup)

Jul 6, 2017

Does the stock score on the value versus price equation?

Why We Skipped This 70% Gainer (The 5 Minute Wrapup)

May 18, 2017

Underreporting of bad loans by some private sector banks casts a cloud over the sector's clean image so far.

More Views on News

Most Popular

Stocks that Could Be Out of Reach Post Elections(The 5 Minute Wrapup)

Apr 9, 2019

It's a matter of time before the stocks catch the fancy of the markets and big investors.

3 Indian Stocks with Amazon-Like Potential(Profit Hunter)

Apr 10, 2019

We have identified 3 stocks with huge wealth building potential which meet our 'Click of a Button' criteria.

This Company is Making a Big Comeback and You Can Now Profit from Its Example(The 5 Minute Wrapup)

Apr 10, 2019

How Dell got its mojo back.

This is Why the Stock of Jubilant FoodWorks Went Up 1,160%(The 5 Minute Wrapup)

Apr 12, 2019

This critical business strategy has enabled companies to scale their operations faster.

Pocketing Massive Gains with HDFC And HDFC Bank(Profit Hunter)

Apr 12, 2019

Here's how one could have generated gains of Rs 59,250 in 10 days by trading HDFC and HDFC Bank with a capital of Rs 4 lakh.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE BANKEX


Apr 18, 2019 (Close)

S&P BSE BANKEX 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS