Snapshot

Banking for $1.37 bn

Total Banking Assets of $2.16 Tn in FY21 with a CAGR was at 2.25%

Number of offline and online ATMs: ~214,000

Number of bank branches: ~158,400

Total Deposits: ~$ 1.6 Tn

Historically Indian banking has benefited from high savings rates and growth in savings as well as disposable income growth

The Banking industry in India has historically been one of the most stable systems globally, despite global upheavals. The government has consistently strived to promote financial inclusion through various initiatives targeted to bring the country’sunderbanked population under the banking gamut.

Personal Loan Origination to grow at 27% CAGR (FY21-26); Digital Lending to grow at ~48% CAGR

The Government of India has been supportive of the banking sector in the country especially on the financial inclusion agenda. A flagship program, the Pradhan Mantri Jan Dhan Yojana (PMJDY), was launched in August 2014 which aims to provide universal banking services to the unbanked by setting up bank accounts for them and issuing payment cards to all. Meanwhile, to respond to the impact of COVID-19, the government implemented various policies in order to aid the banking sector.  

As a part of the Digital India initiative, the Govt. mandated an open API policy, known as India Stack, giving third-party providers access to the proprietary software for five key programs: Aadhaar (the Government’s biometric identity database), e–KYC, e–signing, privacy-protected data sharing and the UPI 

For further information, please refer the FDI policy

  • Public sector banks

  • Private sector banks (PSUs)

  • Small Finance Bank

  • Foreign banks

  • Regional rural banks

India set to become the third-largest domestic banking sector by 2050 

Number of Jan Dhan Yojana Bank accounts are over 450 Million 

Industry Scenario

Bank accounts opened under GoI Pradhan Mantri Jan Dhan Yojana are over 450 Mn with deposits of ~$21.5 Bn in beneficiary accounts 

Investments stood as the 2nd largest component in the assets side of the total banks’ balance sheets after loans and advances, driven primarily by Government securities. As of 2020, the capital adequacy amongst Indian banks remained above regulatory requirements with RBI also further relaxing the leverage ratio for banks to boost lending.  

RBI has taken steps to enable mobile payments key enablers to growth, by removing the transaction limit of $745 and allowing banks to set their own limits. Recovery of stressed assets improved during 2019-20 through the IBC, 2016 and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act, 2002.  

The Top 5 banks in India banking assets are ~$ 1.3 Tn: State Bank of India, ICICI Bank, Punjab National Bank, Bank of Baroda, and Bank of India 

On an y/y basis, loans and advances were up by 6% in Q1 FY2022 suggesting a generally better lending activity compared to Q1 FY2021 which was at the height of the pandemic  

Total Loans and Deposits are projected to grow at CAGRs of 8.77% and 8.48% respectively from 2020-2025 with Total Loans expected at ~ $ 4 Tn by 2025 and Deposits at $3.7 Tn 

Gross bank credit by commercial banks was up by 6.7% in August 2021, after expanding by 5.6% in 2020/21, and 6.8% in 2019/20. 

Lending to industry growing by 2.3% and to services up by 3.5%. Credit to infrastructure—a major segment of industrial credit—rose by 5.9%. (FY 2021) 

Industries make up about 30% of the commercial banks' loan book, followed by personal loans (29%) and the services sector (27%) (June 2021) 

Citibank (US) is the largest foreign-owned lender in India, followed by HSBC (UK), Standard Chartered (UK) and Deutsche Bank (Germany). In recent years, Singapore's DBS has been aggressive in expanding its presence in India. 

GROWTH DRIVERS

  • Large consumption market

    India will become the 3rd largest consumer economy by 2030, driven by a young population comprising 65% population below the age of 35 years

  • Rural Digitization

    Digital adoption continues to be propelled by rural India – clocking an 8% YoY growth to 333 Mn internet users (37% of rural population). Rural consumption accounts for 45% of all data consumption in India. Now there are 7 Rural Internet Subscriber, for every 10 Urban Internet Subscribers.

  • Number of Smartphone Users

    India already has the 2nd highest number of smartphone users globally, and is the 2nd largest Internet user market

  • Digital Push

    Mobile banking internet banking, neo-banking and rise in digital products and solutions by private and Government of India support: 93% digital payments (by volume) done via mobile (2021) and over 1 Bn cards are in circulation

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FAQs

Frequently
Asked Questions

What are some of the Government banking schemes?

Some of the important Government initiatives undertaken in the banking sector in India are:
•    Pradhan Mantri Jan Dhan Yojana (PMJDY)
•    Pradhan Mantri Suraksha Bima Yojana (PMSBY)
•    Pradhan Mantri Mudra Yojana
•    Atal Pension Yojana (APY)
•    Stand-Up India Scheme
•    Pradhan Mantri  Vaya Vandana Yojana
•    Public Provident Fund
•    Senior Citizens Sacings Scheme
•    Sukanya Samriddhi Account
 

For more information, click here.

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How can one commence a banking business in India?

Any entity desiring to carry on banking business in India are required to obtain a licence from the Reserve Bank of India. 'Banking business', as per Section 6 of the Banking Regulation Act, refers to acceptance of public deposits for the purpose of lending or investment, which would be repayable and capable of withdrawal, and includes guarantee and indemnity business, discounting, dealing in negotiable instruments, underwriting, participating or managing of any issue, and other incidental activities.

For more information, please visit the RBI website here.

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Can banking activities be undertaken at GIFT-IFSC?

Yes, a banking entity (both Indian and Foreign banks) can operate as IFSC Banking Unit (IBU) after getting a license from IFSCA. 


For more information, please read the IFSCA (Banking) Regulations 2020 available here
 

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Where can one find information related to the Banking sector in India?

Information related to the banking sector of India (rules, regulations, guidelines, statistics etc) are available on the RBI website here and on the Department of Financial Services, Government of India website here.

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What are the different kinds of banks included under the banking sector in India?

Banks in India can be broadly categorised in 2 categories: commercial banks and cooperative banks.

Commercial banks include: government-owned banks or public-sector banks (PSBs), private banks, branches or subsidiaries of foreign banks, small finance banks (scheduled commercial banks), and regional rural banks, which provide credit facilities for agricultural purposes to rural areas. 

Cooperative banks are divided into 2 categories: urban cooperative banks; and state cooperative banks that provide financing services to small borrowers.
 
The RBI has recently introduced payments banks to provide basic banking and remittance related facilities and accept small deposits.

Since there are different categories of banks set up for different purposes, there are various statutes and regulations made under these statutes that govern and regulate banks set up for specific purposes. For more information, please visit the RBI website here .
 

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