After Resisting The Global Financial Crisis almost Unhurt, expectations are high from The Indian Banking Sector to help India achieve a Double Digit growth rate. But with The Industry still struggling to achieve a Good Penetration rate, The Question remains, Can it live up to The Mark?
Banking is understood in common parlance as a field that begins and ends with numbers. To begin with, we take a look at a few startling facts about the Indian banking sector:
Total assets of the Indian banking industry jumped by more than five times to $1.25 trillion in the last decade from $250 billion in 2001.
Total business of Indian banks has grown over threefold from $516.7 billion in 2004 to $1.72 trillion in 2010.
Total income of all scheduled commercial banks of India has risen from Rs.1.51 trillion in 2001 to Rs.4.94 trillion in 2010.
The BSE Bankex has climbed by 970% up since the beginning of 2002 as compared to 445% by the benchmark BSE Sensex.
A commendable performance indeed. But the question remains, more so for the fact that the country aims to remain as one of the fastest growing economies in the world, has the growth been satisfactory? The answer, considering that out of the 600,000 habitations in the country, only 5% have a commercial bank branch and just 40% of the total population across the country has bank accounts, is a certain no. And this, in essence, means that the development of the country’s banking sector needs to be taken forward in a much bigger way to serve the larger needs of financial inclusion through expansion of banking services. But are the banks in the country prepared to take up the challenge?
Considering the journey of the industry from the pre-liberalisation decade, Indian banks have come a long way from virtual nobodies to creating one of the strongest banking industries in the world, which managed to weather the last global recession almost unhurt. Factually, cumulative capital and reserves of banks in India that stood at $95 million, $4.1 million and $4.5 million for public sector, private sector and foreign banks respectively in 1980, now stand at $53.5 billion, $26.6 billion and $15.3 billion respectively. However, during most of these 30 years, the growth story was driven by various factors; from industrial funding to infrastructure funding. But the last decade has seen Indian banks really banking on retail banking to boost their bottomlines.
In fact, banks, in both the public and private sector, have moved beyond the traditional boundaries of what can be called plain vanilla banking, and have started exploring other lucrative areas like wealth management, private banking, credit cards, investment advisory services et al. Moreover, considering the initiatives, the cumulative profit of Indian banks is expected to double to over $40 billion in 2015; adding muscle to the sector to expand into the hinterlands. Interestingly, a majority of this growth is expected to come from the retail banking segment. But then, why is retail banking drawing so much of attention now?
As reports suggest, with a saving rate of 32.4% of their income, Indian households are among the biggest savers in the world. And the irony is that 53% of these households are still without any banking assistance. While this is a problem from the country’s perspective, it’s a golden opportunity for bankers. And no bank operating in the country wants to miss on it. So currently, every bank is busy in boosting their retail banking operations. But it’s not a trend very peculiar to India; the global trend is also moving in favour of retail banking. As Andy Mcguire, Senior Partner and Managing Director (London Office), The Boston Consulting Group (BCG) reiterates, “The retail banking industry was battered by the global financial crisis. But in many markets, its resilience has helped to enable a turning of the tide that began in 2009 and continued into 2010. Overall, retail banking is on track to resume its stature as a reliable and profitable backbone for universal banking.”
Banking is understood in common parlance as a field that begins and ends with numbers. To begin with, we take a look at a few startling facts about the Indian banking sector:
Total assets of the Indian banking industry jumped by more than five times to $1.25 trillion in the last decade from $250 billion in 2001.
Total business of Indian banks has grown over threefold from $516.7 billion in 2004 to $1.72 trillion in 2010.
Total income of all scheduled commercial banks of India has risen from Rs.1.51 trillion in 2001 to Rs.4.94 trillion in 2010.
The BSE Bankex has climbed by 970% up since the beginning of 2002 as compared to 445% by the benchmark BSE Sensex.
A commendable performance indeed. But the question remains, more so for the fact that the country aims to remain as one of the fastest growing economies in the world, has the growth been satisfactory? The answer, considering that out of the 600,000 habitations in the country, only 5% have a commercial bank branch and just 40% of the total population across the country has bank accounts, is a certain no. And this, in essence, means that the development of the country’s banking sector needs to be taken forward in a much bigger way to serve the larger needs of financial inclusion through expansion of banking services. But are the banks in the country prepared to take up the challenge?
Considering the journey of the industry from the pre-liberalisation decade, Indian banks have come a long way from virtual nobodies to creating one of the strongest banking industries in the world, which managed to weather the last global recession almost unhurt. Factually, cumulative capital and reserves of banks in India that stood at $95 million, $4.1 million and $4.5 million for public sector, private sector and foreign banks respectively in 1980, now stand at $53.5 billion, $26.6 billion and $15.3 billion respectively. However, during most of these 30 years, the growth story was driven by various factors; from industrial funding to infrastructure funding. But the last decade has seen Indian banks really banking on retail banking to boost their bottomlines.
In fact, banks, in both the public and private sector, have moved beyond the traditional boundaries of what can be called plain vanilla banking, and have started exploring other lucrative areas like wealth management, private banking, credit cards, investment advisory services et al. Moreover, considering the initiatives, the cumulative profit of Indian banks is expected to double to over $40 billion in 2015; adding muscle to the sector to expand into the hinterlands. Interestingly, a majority of this growth is expected to come from the retail banking segment. But then, why is retail banking drawing so much of attention now?
As reports suggest, with a saving rate of 32.4% of their income, Indian households are among the biggest savers in the world. And the irony is that 53% of these households are still without any banking assistance. While this is a problem from the country’s perspective, it’s a golden opportunity for bankers. And no bank operating in the country wants to miss on it. So currently, every bank is busy in boosting their retail banking operations. But it’s not a trend very peculiar to India; the global trend is also moving in favour of retail banking. As Andy Mcguire, Senior Partner and Managing Director (London Office), The Boston Consulting Group (BCG) reiterates, “The retail banking industry was battered by the global financial crisis. But in many markets, its resilience has helped to enable a turning of the tide that began in 2009 and continued into 2010. Overall, retail banking is on track to resume its stature as a reliable and profitable backbone for universal banking.”
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
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Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
