Banking Sector in India
BANKING SECTOR IN INDIA
As per the Reserve Bank of India (RBI), India’s banking
sector is sufficiently capitalised and well-regulated. The financial
and economic conditions in the country are far superior to any other
country in the world. Credit, market and liquidity risk studies
suggest that Indian banks are generally resilient and have withstood
the global downturn well.
Indian banking industry has recently witnessed the roll out of
innovative banking models like payments and small finance banks.
RBI’s new measures may go a long way in helping the restructuring of
the domestic banking industry.
The digital payments system in India has evolved the most among 25
countries with India’s Immediate Payment Service (IMPS) being the
only system at level five in the Faster Payments Innovation
Index.
The Indian banking system consists of 12 public sector banks, 22
private sector banks, 46 foreign banks, 56 regional rural banks,
1485 urban cooperative banks and 96,000 rural cooperative banks in
addition to cooperative credit institutions As of November 2020,
the total number of ATMs in India increased to 209,282.
Asset of public sector banks stood at Rs. 107.83 lakh crore in
FY20.
During FY16-FY20, bank credit grew at a CAGR of 3.57%. As of FY20,
total credit extended surged to US$ 1,698.97 billion. During
FY16-FY20, deposits grew at a CAGR of 13.93% and reached US$ 1.93
trillion by FY20.
According to the RBI, bank credit and deposits stood at Rs. 108
trillion and Rs. 149.6 trillion, respectively, as of March 12,
2021.
Credit to non-food industries stood at Rs. 107.3 trillion, as of
March 12, 2021. Non-food industries grew at 5.7% in January 2021 as
against an increase of 8.5% in January 2020.
As per Union Budget 2021-22, the government will disinvest IDBI
Bank and privatize two public sector banks. As per Union Budget
2019-20, the Government proposed fully automated GST refund module
and an electronic invoice system that will eliminate the need for a
separate e-way bill.
Government smoothly carried out consolidation, reducing the number
of Public Sector Banks by eight. As of September 2018, the
Government of India made Pradhan Mantri Jan Dhan Yojana (PMJDY)
scheme an open-ended scheme and added more incentives.
The Government of India planned to inject Rs. 42,000 crore in
public sector banks by March. In December 2020, in response to the
RBI’s cautionary message, the Digital Lenders’ Association issued a
revised code of conduct for digital lending.
As of February 27, 2021, the number of bank accounts opened under
the government’s flagship financial inclusion drive ‘Pradhan
Mantri Jan Dhan Yojana (PMJDY)’ reached 41.93 crore and deposits
in Jan Dhan bank accounts stood at more than Rs. 1.70 lakh
crore.
On November 6, 2020,
WhatsApp started UPI payments service in India on
receiving the National Payments Corporation of India (NPCI) approval
to ‘Go Live’ on UPI in a graded manner.
In October 2020, HDFC Bank and Apollo Hospitals partnered to
launch the ‘HealthyLife Programme’, a holistic healthcare
solution that makes healthy living accessible and affordable on
Apollo’s digital platform. In 2019,
banking and financial services witnessed 32 M&A (merger and
acquisition) activities worth US$ 1.72 billion.
According to the market research HDFC Bank has been ranked
India's No. 1 Bank in Forbes world's Best bank report. It has
88,253 permanent employees as of 31 March 2018 and has a presence in
Bahrain, Hong Kong and Dubai. HDFC Bank is India's largest
private sector lender by assets.
In March 2020, State Bank of India (SBI), India’s largest lender,
raised US$ 100 million in green bonds through private placement.
In February 2020, the Cabinet Committee on Economic Affairs gave
its approval for continuation of the process of recapitalization of
Regional Rural Banks (RRBs) by providing minimum regulatory capital
to RRBs for another year beyond 2019-20 - till 2020-21 to those RRBs
which are unable to maintain minimum Capital to Risk weighted Assets
Ratio (CRAR) of 9% as per the regulatory norms prescribed by
RBI.
The NPAs (Non-Performing Assets) of commercial banks recorded a
recovery of Rs. 400,000 crore in the last four years including
record recovery of Rs. 156,746 crore in FY19.
In March 2021, Unified Payments Interface (UPI) recorded 2.73
billion transactions worth Rs. 5 lakh crore. According to the RBI,
India’s foreign exchange reserve reached US$ 574.82 billion as of
November 27, 2020.
To improve infrastructure in villages, 204,000 point of sale
terminals have been sanctioned from the Financial Inclusion Fund by
National Bank for Agriculture & Rural Development (NABARD).
The number of transactions through immediate payment service (IMPS)
increased to 346.55 million in volume and amounted to Rs. 2.88
trillion in value in January 2021.
Enhanced spending on infrastructure, speedy implementation of
projects and continuation of reforms are expected to provide further
impetus to growth in the banking sector. All these factors suggest
that India’s banking sector is poised for a robust growth as rapidly
growing businesses will turn to banks for their credit needs.
Also, the advancement in technology has brought mobile and internet
banking services to the fore. The banking sector is laying greater
emphasis on providing improved services to their clients and
upgrading their technology infrastructure to enhance customer’s
overall experience as well as give banks a competitive edge.
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