Banking Ppt 2011

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PREPLACEMENT TRAINING - 2011 Dr. K. Sriharsh a Reddy Professor & Head Department of Business Management, MIPGS Saidabad, Hyderabad.

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    PREPLACEMENT TRAINING - 2011

    Dr. K. Sriharsha ReddyProfessor & Head

    Department of Business Management,MIPGS

    Saidabad, Hyderabad.

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    Evolution and progress ofIndian banking

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    As at the end of March 2007: 20 nationalized banks, 8 SBI banks, 17 old privatesector banks, 8 new private sector banks, 29 foreign banks, 96 regional ruralbanks.

    STRUCTURE OF BANKING IN INDIA

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    Back drop of reforms since 1991

    In the beginning of 1990, the social banking goals setfor the banking industry made most of the public sectorbanks unprofitable.

    Reasons for poor performance of banks

    (1) high cash reserve ratios and statutory liquidityrequirements(2) low yields on government bonds (as compared withthose on commercial advances);(3) directed and concessional lending;

    (4) administered interest rates; and(5) lack of competition.

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    Summary of banking sectorreforms since 1991

    First, the CRR declined from 15% in 1991 to 5.0% in2006. The SLR also declined, from 38.5% in 1991 to25% in 1997, remaining at this level until today .

    Decline in the CRR and SLR increased banks flexibility

    in allocating credit and improved their profitability.

    Second, interest rates became flexible as to almost allterm deposits rates and lending rates on advances inexcess of Rs200,000.

    Interest rate deregulations have encouraged banks toimprove their cost efficiency and diversify their businessinto non-traditional areas.

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    Third, reform in priority sector lendingmainly through the expansion of coverageand interest rate decontrols on advancesin excess of Rs200,000 helped banks tomitigate the negative impact arising fromsuch policy loans.

    Fourth, entry barriers were reduced forprivate sector and foreign banks. Theentry of new banks has increasedcompetition. Public sector banks wereallowed to rationalize some branches,while branch licensing was removed.

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    Fifth, various prudential norms and moreappropriate accounting standards wereintroduced.

    Better accounting standards haverevealed some of the true status of NPAproblems of public sector banks.

    This enabled the Government to imposeappropriate policies to deal with NPAproblems.

    Sixth, the Government recapitalizednationalized banks and public sectorbanks have been partially privatized.

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    Return on Assets (ROA)

    -4

    -3

    -2

    -1

    0

    1

    2

    3

    1992

    1994

    1996

    1998

    2000

    2002

    2004

    2006

    2008

    SBG

    NB

    PBFB

    ASCB

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    Net Interest Margin (NIM)

    0

    0.5

    1

    1.5

    2

    2.5

    3

    3.5

    4

    4.5

    5

    1992

    1994

    1996

    1998

    2000

    2002

    2004

    2006

    2008

    SBG

    NB

    PB

    FB

    ASCB

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    Operating Cost Ratio (OCR)

    0

    2

    4

    6

    8

    10

    12

    1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    SBIG

    NB

    PB

    FB

    SCB

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    Growth of assets in Indian banking

    58238 292770

    1152604

    2875520

    5241331

    0

    1000000

    2000000

    3000000

    4000000

    5000000

    6000000

    1980 1990 2000 2006 2009

    Assets in Rs Crs

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    Asset Structure of IndianCommercial Banking System

    31.2

    59.1

    4.9 3.8

    33.2

    55.7

    3.3 5.4

    29.1

    48.1

    6.7

    5.1 7.1

    24

    46

    5.2

    14.6

    6.9

    0

    10

    20

    30

    40

    50

    60

    1980 1990 2000 2006

    SBI

    NB

    OPB

    NPB

    FB

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    Bank group wise deposits of Scheduled CommercialBanks to Total Deposits in percentages

    27.4

    64.4

    2.95.3

    29.3

    63.2

    2.94.6

    28.1

    63.6

    4.43.9

    27.8

    58.2

    6.97.2

    28.5

    53.4

    5.5

    12.6

    27.6

    50.7

    4.7

    17

    25.1

    51.7

    4.5

    18.5

    0

    10

    20

    30

    40

    50

    60

    70

    1980 1985 1990 1995 2000 2005 2006

    SBI & itsAssociates

    Nationalized

    Foreign

    Domestic

    private

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    Bank group wise share of advances of scheduledCommercial banks to Total advances in percentages

    0

    10

    20

    30

    40

    50

    60

    70

    1980 1990 2000 2002 2004 2006

    SBI & its AssociatesNationalized

    Foreign

    Domestic private

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    NPA s of Scheduled Commercial Banks aspercent of Net Advances (Bank Group-wise)

    0

    1

    2

    3

    4

    5

    6

    7

    8

    9

    1998 2001 2003 2005 2007 2009

    PSBFB

    DPB

    ASCB

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    7830715197>10

    1---1-8-10

    ------4-8

    ------< 42008-

    09

    421681242>10

    331217768-10

    93-33-4-8

    8--35-< 41995-

    1996

    SCBFBNPBOPBNBSBGBankGroup

    Year

    Distribution of Scheduled Commercial Banks by CRAR