the indian banking industry[1]
TRANSCRIPT
-
8/2/2019 The Indian Banking Industry[1]
1/26
ANALYSIS OF BANKING INDUSTRY IN INDIA:
A GLIMPSE OF NPA IN PUBLIC SECTOR BANKS
Presented by Jacqueline Lobo (PGP-EX)Under the guidance of Dr. Deepak Tandon, Professor, LBSIM-
New Delhi
-
8/2/2019 The Indian Banking Industry[1]
2/26
INDEX
SECTION I- Introduction to Banking Industry in India
Review of literature
Objective and methodology of the
Introduction to the public and private sector
Non performing assets and its classification
Reason for NPAs in Banks
NPA- Cause of concern in Indian Banking Industry
What are banks doing wrong?
SWOT analysis of Banking Sector
SECTION II- Introduction to Indian bank
Success story of Indian Bank
Recommendations
-
8/2/2019 The Indian Banking Industry[1]
3/26
GENERAL BANKING SCENARIO
-
8/2/2019 The Indian Banking Industry[1]
4/26
-
8/2/2019 The Indian Banking Industry[1]
5/26
-
8/2/2019 The Indian Banking Industry[1]
6/26
-
8/2/2019 The Indian Banking Industry[1]
7/26
-
8/2/2019 The Indian Banking Industry[1]
8/26
Glimpse of NPA in publicsector banks in India
-
8/2/2019 The Indian Banking Industry[1]
9/26
OBJECTIVES OF THE STUDY
This study focuses on the following major objectives:
To analyze relationship between Net N.P.A. as % of Net
Advances priority sector and non-priority sector lending bypublic sector banks in India.
To conceptualize NPAs and their impact on the liquidity ofbanks.
To analyze the factors attributable to NPAs in public sectorbanks.
-
8/2/2019 The Indian Banking Industry[1]
10/26
INTRODUCTION TO THE PUBLIC ANDPRIVATE SECTOR
-
8/2/2019 The Indian Banking Industry[1]
11/26
ON ASSET QUALITY, PSBS REPORT SOME
DETERIORATION WHILE PRIVATE BANKS SHOW
IMPROVEMENT:
SCBs FY06 FY07 FY08 FY09 FY10 FY11
Gross NPAs (%) 3.3 2.5 2.3 2.3 2.4 2.3
Net NPAs (%) 1.2 1 1 1.1 1.1 0.9
Fresh NPA Generation Rate (%) 2 1.7 1.8 2.1 2.2 2
Net NPAs/Net Worth (%) 10.1 9.2 7.8 8.6 9.1 10
PSBs FY06 FY07 FY08 FY09 FY10 FY11
Gross NPA (%) 3.6 2.7 2.2 2 2.2 2.3
Net NPA (%) 1.3 1.1 1 0.9 1.1 1.1
Net NPAs/Net Worth (%) 13.1 12.1 11.2 11.4 13.5 13.4
Private Banks FY06 FY07 FY08 FY09 FY10 FY11
Gross NPA (%) 2.1 2.1 2.4 2.9 2.7 2.3
Net NPA (%) 0.9 0.9 1.1 1.3 1 0.6
Net NPAs/Net Worth (%) 6.3 7.8 6.1 7.5 5.3 3.2
-
8/2/2019 The Indian Banking Industry[1]
12/26
ASSET QUALITY RELATED
CHALLENGES AHEAD
1. Spill-over from restructuring window not over yet
2. Exposure to State utilities remains an area of concern
3. Credit loss from exposure to micro lending institutions in APlikely
-
8/2/2019 The Indian Banking Industry[1]
13/26
NON-PERFORMING ASSETS
Non Performing Asset means a loan or an account of borrower,which has been classified by a bank or financial institution assub-standard, doubtful or loss asset, in accordance with thedirections or guidelines relating to asset classification issued byRBI.
Earlier assets were declared as NPA after completion of theperiod for the payment of total amount of loan and 30 daysgrace.
In present scenario assets are declared as NPA if none of theinstallment is paid till 180 days i.e. six months in respect of aterm loan.
-
8/2/2019 The Indian Banking Industry[1]
14/26
CLASSIFICATION OF NPA
Banks classify their assets into the following broad groups, viz.
1. Standard Assets
2. Sub-standard Assets
3. Doubtful Assets
4. Loss Assets
-
8/2/2019 The Indian Banking Industry[1]
15/26
NPA - CAUSE OF CONCERN FOR INDIAN ECONOMY!
-
8/2/2019 The Indian Banking Industry[1]
16/26
WHAT ARE THE BANKS DOING WRONG?
-
8/2/2019 The Indian Banking Industry[1]
17/26
SWOT ANALYSIS OF BANKING SECTOR
Strenths
-
8/2/2019 The Indian Banking Industry[1]
18/26
-
8/2/2019 The Indian Banking Industry[1]
19/26
Section IIA CASE ANALYSIS OF INDIAN BANK
-
8/2/2019 The Indian Banking Industry[1]
20/26
0.000 2.000 4.000 6.000 8.000 10.000 12.000 14.000
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab and Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
IDBI Bank Ltd.
State Bank Group
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Percentage of NPA to advances
Percentage of NPA to advances
-
8/2/2019 The Indian Banking Industry[1]
21/26
0
10
20
30
40
50
60
70
80
90
Priority Sector NPAs
Non-Priority Sector NPAs
-
8/2/2019 The Indian Banking Industry[1]
22/26
COMPARING AN APPLE TO AN APPLE:
The Public sector banks in India of are different sizes and have been in existence for
different number of years. Since Indian bank has total advances of only $75,249.91
compared to an average of $113,404.25 of other public banks a comparison has been
made to compare it to a similar bank. In this case Indian Bank has been compared to
State Bank of Travancore.
State Bank of Travancore (SBT) was originally established as Travancore Bank Ltd. in1945 sponsored by the erstwhile princely state of Travancore. Under a special statute of
the Indian Parliament (SBI subsidiary Banks Act 1959) it was made an Associate of the
State Bank of India and a member of the State Bank Group, the largest banking group in
India.
The total advances of State Bank of Travancore (SBT) for FY 2010-2011 was Rs. 46,044 asopposed to Indian bank, which had total advances of Rs. 75,249.91 in the same year. The
Net N.P.A. as % of Net Advances State Bank of Travancore is 1.814% and that of Indian
Bank 0.957%.
-
8/2/2019 The Indian Banking Industry[1]
23/26
THE SUCCESS STORY OF INDIAN BANK
Operating profit increased to Rs.3291.7 crore as against Rs.2747.4 crore for 2009-10 registeringa growth of 19.8 per cent.
Net profit for 2010-11 crossed the Rs.1700 crore mark and was at Rs.1714.1 crore as comparedto Rs.1555 crore for 2009-10, showing a growth of 10.2 per cent.
Net Interest Margin improved to 3.75 per cent from 3.55 per cent.
Return on average assets was at 1.53 per cent.
Capital Adequacy Ratio was at 13.56 per cent as compared to 12.71 per cent as of March 2010.
Return on Net worth for 2010-11 was at 21.50 per cent.
Earnings per share was at Rs.38.79 and Book value per share was Rs.184.44.
-
8/2/2019 The Indian Banking Industry[1]
24/26
THE SUCCESS STORY OF INDIAN BANK
Global Business of the Bank crossed Rs.180,000 crore during the year and was at Rs.181,530crore, registering a growth of 20.3 per cent.
Total Deposits grew by Rs.17,576 crore to Rs.105,804 crore, a growth of 19.9 per cent for theyear 2010-11.
Gross Advances were at Rs.75,726 crore, registering an increase of Rs.13,068 crore (20.9 percent) as on 31.3.2011. Overall Credit Deposit ratio was at 71.6 per cent.
Priority Sector Advances at Rs.25,969 crore, grew by Rs.4304 crore (19.9 per cent).
Agriculture Credit grew by Rs.1904 crore (20.8 per cent) to Rs.11,048 crore and accounted for
18.57 per cent of Adjusted Net Bank Credit.
Under Financial Inclusion project, a total of 1.53 lakh No-Frill accounts have been opened.
-
8/2/2019 The Indian Banking Industry[1]
25/26
Prime Financial Indicators of Indian Bank as onMarch2011
Interest
Income /
WorkingFunds
Non-
Interest
Income /
WorkingFunds
Operating
Profit /
WorkingFunds
Return on
AssetsBusiness
per
Employee
Profit per
Employee
12.39 1.56 4.35 1.53% 929.76% 8.88%
-
8/2/2019 The Indian Banking Industry[1]
26/26
RECOMMENDATIONS