Central Bank and Monetary Authority Reserve Bank of India Apex Banking Institutions IDBINABARDEXIM...
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Transcript of Central Bank and Monetary Authority Reserve Bank of India Apex Banking Institutions IDBINABARDEXIM...
Central Bank and Monetary Authority
Reserve Bank of India
Apex Banking Institutions
IDBI NABARD EXIM BANK IIBI NATIONAL HOUSING BANK
SIDBIBanking Institutions
Commercial Banks Regional Rural Banks Co-operative Banks
Public Sector Private Sector
State Bank Group
Nationalised Banks
Subsidiary Companies
SBI Subsidiary Banks
SubsidiaryCompanies
Indian Foreign
Old Banks
NewBanks
Local AreaBanks
State Co-operativeBanks
Central & DistrictCo-operative Banks
Primary Credit Societies
Development Banks
Industrial Development Banks Land Development Banks
All India
IFCI ICICI
Subsidiary Companies
State Level
SFC SIDC
State Level Land Development Banks
Primary Land Development Banks
-0.5
0
0.5
1
1.5
2
1995-96 1996-97 1997-98 1998-99 1999-2000
TRENDS IN BANKS PROFITABILITY ( NET PROFITS AS % OF TOTAL ASSETS)
Public Sector Banks Old Private Sector BanksNew Private Sector Banks Foreign BanksAll Scheduled Commercial Banks
0
10
20
30
40
50
1995-96 1996-97 1997-98 1998-99 1999-2000
SHARE OF PRIORITY SECTOR ADVANCES (IN %)
Public Sector Banks Private Sector BanksForeign Banks
0
5
10
15
20
25
1995-96 1996-97 1997-98 1998-99 1999-2000
SHARE OF WAGES IN EXPENDITURE (IN %)
Public Sector Banks Old Private Sector BanksNew Private Sector Banks Foreign BanksAll Scheduled Commercial Banks
0
1
2
3
4
5
1995-96 1996-97 1997-98 1998-99 1999-2000
INTEREST RATE SPREAD % OF TOTAL ASSETS
Public Sector Banks Old Private Sector BanksNew Private Sector Banks Foreign BanksAll Scheduled Commercial Banks
00.51
1.52
2.53
3.54
1995-96 1996-97 1997-98 1998-99 1999-2000
INTERMEDIATION COSTS (IN %)
Public Sector Banks Old Private Sector BanksNew Private Sector Banks Foreign BanksSCBs
CONCLUDING OBSERVATIONS
Challenge to the Public Sector Banks to Retain their shareStiff Competition by New Private Sector Banks to the Foreign BanksFocus primarily on ProfitabilityInterest Rate Spread has declined in case of Public & Private Sector BanksPublic Sector has brought a reduction in the Wage Component
OFF-BALANCE SHEET ACTIVITIES
Loan CommitmentsGuaranteesSwap & Hedging TransactionsInvestment Banking Activities
RISKS OF OBS ACTIVITIES
Operational risksFunding RisksPosition RisksCredit Risks
ROUND UP
SBI edges up position NABARD plans to enter retail banking Commercial Banks beef up Tier- II Capital NPA’s of 27 PSBs Rise
GROSS NPA's OF PUBLIC SECTOR BANKS % OF GROSS ADVANCES
12.4
24.8
0
5
10
15
20
25
30
1993 1994 1995 1996 1997 1998 1999 2000 2001
NPA's
1991-92 2000-01
Competition
Income Recognition & Capital Adequacy Norms
Prudential Regulations
Interest Deregulation
Transparency in Balance Sheets
Changing Mindsets
Recourse to Market
Provisions
Risk Management
Asset / Liability Management
New Content in Corporate Planning
LIKELY CHALLENGES FACING BANKS
BANKING SECTORIntroduction to Banking
BANKING (% PENETRATION )
PUBLIC SECTOR BANK
70%
PRIVATE BANK 22 %
FOREIGN BANK8%
TRADITIONAL BANKING SECTOR
• Highly segmented market• Limited competition• Less alternative products offered• Minimal use of technology• Preponderance of Brick & Mortar• Controlled foreign exchange regime• Highly regulated financial sector
REFORM MEASURES
Direct access to Capital MarketBetter transparency through disclosurePrudential accounting normsDeregulation of Interest Rate
• Bank Rate lowered by 50 basis point from 7% to 6.5%• CRR slashed in two stages from 7.5% to 5.5% ( Reduction by 200 basis points )
• Interest on CRR Balances with RBI raised to 6.5% from 6%
The result
Rs 8000 crore unlocks
FALL IN CRR
MORE MONEY
WITH BANKS TO
LEND
LENDING ACTIVITY
INVESTMENTOUTPUT
ECONOMIC GROWTH
LOOPHOLES
• Excess staff in PSB• Low technology penetration• High NPA’s• Less No. of products under one roof• Large No. of unprofitable branches
PARADIGM SHIFT • One stop service to customer
• Technology & I.T. penetration
• From “ Brick & Mortar ” to
“ Click & Mortar ”
• Emerging trend of Universal Banking
UNIVERSAL BANKING
UNIVERSAL BANK
TERM LENDING WORKING CAPITAL
MORTGAGE
INSURANCE CAPITAL MARKET
LEADING BANKSPrivate SectorIndian Banks
ICICI Bank HDFC Bank Indusind Bank GTB UTI Bank Centurion Bank Vyasa Bank Federal Bank
etc….
Private Sector Foreign Banks
Citibank Stanchart HSBC Bank of Baroda ABN Amro AM-EX
etc….
TECHNOLOGY IMPACT
• Save in time• Save in cost• Save in Paper work• Increase in efficiency• Increase in service• Increase in transparency
Role of Commercial Banks
• Financial Interface• Facilitating Payments Mechanism• Providing Financial Services• Other Misc. Services
CHALLENGES• Financial Disintermediation• Competitions from Mutual Funds• Deregulation of Interest Rate• Declining Spread• Burden of NPA’s• Issuing Capital Adequacy Norms• Asset / Liability Management• Technology & Computerisation• Disclosure & Financial Transparency• VRS• Increased Accountability
STRATEGIES• Retail Banking Initiatives• Multiple Delivery Channels• “ Anytime & Anywhere Banking ”• Focus on fee based income• Better Asset / Liability Management• Proper Risk Management• Supervision of Loans & Check on NPA’s• Financial Services Supermarket• Customer Orientation Approach• Better Corporate Governance