Banking industry intro

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  • 1.Report on Trend and Progress of Banking in India for the year endedJune 30, 2011 submitted to the Central Government in terms ofSection 36(2) of the Banking Regulation Act, 1949REPORT ON TREND AND PROGRESSOF BANKING IN INDIA 2010-11 RESERVE BANK OF INDIA

2. Sale Price:In India ` 200 (Normal) ` 240 (Inclusive of Postal Charges) ` 150 (Concessional at Counter) ` 190 (Concessional Including Postage)Abroad US$ 22(Inclusive of Air Mail Courier Charges) Reserve Bank of India 2011All rights reserved. Reproduction is permitted provided an acknowledgement of the source is made.Published by Mohua Roy for the Reserve Bank of India, Mumbai 400 001 and designed and printed by herat Jayant Printery, 352/54, Murlidhar Compound, Girgaum Road, Mumbai - 400 002. 3. ContentsSr.No.ParticularsPage No.Chapter I : Perspectives on the Indian Banking Sector ............................................... 1. Introduction ................................................................................................... 1 2. Forces Shaping the Environment ..................................................................... 2 3. Strategic and Operational Responses ...............................................................3 4. Challenges ..................................................................................................... 5 5. The Way Forward ...........................................................................................8Chapter II : Global Banking Developments ................................................................. 1. Introduction ...................................................................................................10 2. Global Banking Trends ................................................................................... 11 3. Banking Trends in Select Regions and Countries .............................................. 19 4. An Analysis of the Performance of Top 100 Global Banks .................................. 22 5. Global Policy Reforms ..................................................................................... 25 6. Conclusions ................................................................................................... 29Chapter III : Policy Environment .............................................................................. 1. Introduction ...................................................................................................31 2. Monetary Policy ..............................................................................................32 3. Credit Delivery ................................................................................................33 4. Financial Inclusion ......................................................................................... 36 5. Prudential Regulatory Policy ............................................................................ 38 6. Supervisory Policy .......................................................................................... 42 7. Regional Rural Banks .....................................................................................45 8. Cooperative Banks ..........................................................................................46 9. Non-Banking Financial Companies ..................................................................4910. Customer Service in Banks ............................................................................. 5111. Financial Markets ........................................................................................... 5212. Payment and Settlement System ..................................................................... 5413. Technological Developments ............................................................................ 5514. Banking Sector Legislation .............................................................................. 5615. Conclusions ................................................................................................... 57Chapter IV: Operations and Performance of Commercial Banks ................................... 1. Introduction ...................................................................................................59 2. Balance Sheet Operations of Scheduled Commercial Banks .............................. 60 3. Financial Performance of Scheduled Commercial Banks ................................... 69 4. Soundness Indicators .....................................................................................73 v 4. Sr.No.ParticularsPage No. 5. Sectoral Deployment of Bank Credit .................................................................83 6. Operations of Scheduled Commercial Banks in Capital Market .......................... 87 7. Shareholding Pattern in Scheduled Commercial Banks .....................................88 8. Foreign Banks Operations in India and Overseas Operations of Indian Banks ...90 9. Technological Developments in Scheduled Commercial Banks ...........................90 10.Customer Service ............................................................................................ 92 11.Financial Inclusion ......................................................................................... 93 12.Regional Rural Banks ..................................................................................... 100 13.Local Area Banks ............................................................................................100 14.Conclusions ...................................................................................................101Chapter V - Developments in Cooperative Banking 1. Introduction ................................................................................................... 105 2. Urban Cooperative Banks ...............................................................................107 3. Rural Cooperatives ......................................................................................... 116 4. Role of NABARD in Reviving the Rural Cooperatives .........................................125 5. Conclusions ...................................................................................................130Chapter VI: Non-Banking Financial Institutions 1. Introduction ................................................................................................... 131 2. Financial Institutions ......................................................................................132 3. Non-Banking Financial Companies .................................................................. 136 4. Primary Dealers .............................................................................................. 150 5. Conclusions ...................................................................................................153 vi 5. List of BoxesBox No.Particulars Page No.II.1European Banks Exposure to Euro Area Sovereign Debt ................................ 22II.2Key Objectives and Features of the Basel III Framework .................................27II.3Counter-Cyclical Capital Buffer: Concept and Working ...................................28III.1 Monitoring Interest Rate Sensitivity based on Duration Gap Analysis ............. 46III.2 Report of the Committee on Customer Service in Banks .................................52III.3 Recommendations of the Working Group on Securing Card PresentTransactions .................................................................................................. 55IV.1Asset Liability Mismatches (ALM) in the Indian Banking Sector: The Extent andPersistence ....................................................................................................68IV.2Profitability versus Risks: An Analysis of Off-Balance Sheet Exposures in theIndian Banking Sector ................................................................................... 70IV.3Net Interest Margin of the Indian Banking Sector: Efficiency versusProfitability ....................................................................................................73IV.4Impact of Restructuring of Advances on the Asset Quality of theBanking Sector .............................................................................................. 79IV.5Robust Credit Growth and Credit Booms An Analysis of theIndian Banking Sector ................................................................................... 82V.1 Merger and Amalgamation of Urban Cooperative Banks ................................. 108V.2 Soundness of StCBs ....................................................................................... 121V.3 Role of Rural Cooperatives in Financial Inclusion Some Emerging Issues ..... 126VI.1Inter-connectedness of NBFCs and Banks in India .........................................138VI.2Credit Rating of NBFCs Practices and Prospects ..........................................140VI.3Recommandations of the Working Group on the Issues andConcerns in the NBFC Sector .........................................................................151vii 6. List of TablesTable No. Particulars Page No.II.1Return on Assets of Banks for Select Economies ............................................12II.2Growth in International Assets and Liabilities of Banks .................................. 14II.3Capital to Risk-Weighted Assets Ratio of Banks in Select Economies ..............15II.4Rank Correlation Coefficients for Top Global Banks between 2009 and 2010 ..23III.1 Compensation under Agriculture Debt Waiver and Debt Relief Scheme ...........36IV.1Consolidated Balance Sheet of Scheduled Commercial Banks ......................... 61IV.2Growth in Balance Sheet of Scheduled Commercial Banks .............................62IV.3Non-SLR Investments of Scheduled Commercial Banks .................................. 64IV.4International Liabilities of Banks By Type ....................................................65IV