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Snapshot
Resilient and well capitalised banking system
The Banking industry in India has historically been one of the most stable systems globally, despite global upheavals.
Historically Indian banking has benefited from high savings rates and growth in savings as well as disposable income growth.
- Number of offline and online ATMs – 252,000 (as on March 2022)
- Total bank branches: ~123,000
- Total Deposits – $ 2 Tn
The Banking industry in India has historically been one of the most stable systems globally, despite global upheavals. The health of the Indian banking system is robust, fortified by a multi-year low non-performing loans and adequate level of capital and liquidity buffers.
The population covered with bank accounts increased from 53% in FY 16 to 78% in FY 21. For the first time, the Gross Non-Performing Asset (GNPA) of SCBs has decreased to a 7-year low of 5% in Sep’22, and the Net NPA has declined to a 10-year low of 1.3%. SCBs’ GNPA ratio continued its downtrend and fell to a 10-year low of 3.9% in March 2023.
There are more than 1.6 lakh bank branches translating to approximately 15 branches per 1 lakh of population. This is further complemented by a network of 2.17 lakh ATMs, out of which 47% are in rural and semi-urban areas. Banking services have been made accessible to every village within a 5 km radius in 25 states and 7 Union Territories covering 99.94% of villages
Key Budget 2023 announcements
- Simplification of KYC process: The KYC process will be simplified adopting a ‘risk-based’ instead of ‘one size fits all’ approach
- Entity Digilocker: to be set up for use by MSMEs, large business and charitable trusts. This will be towards storing and sharing documents online securely, with various authorities, regulators, banks and other business entities
- Credit Guarantee for MSMEs: the revamped credit guarantee scheme will take effect from 1st April 2023 through infusion of INR 9,000 crore in the corpus
- National Financial Information Registry: Proposed to serve as the central repository of financial and ancillary information
- GIFT-IFSC: Permitting acquisition financing by IFSC Banking Units of foreign banks; Establishing a subsidiary of EXIM Bank for trade re-financing
- Improving Governance and Investor Protection in Banking Sector
- Azadi Ka Amrit Mahotsav Mahila Samman Bachat Patra: One-time new small savings scheme, Mahila Samman Savings Certificate, to be made available for a 2 year period up to March 2025
- Senior Citizen Savings Scheme
For further information, please refer the FDI policy
- Mn
Number of ATMs (including Micro ATMs)
- $ Tn
Total Deposits (Approx)
No. of Schedule Commercial Banks
- $ Tn
Bank Credit SCBs (FY 23)
In 2023, more than 80% of the population has a bank account in comparison to 17% in 2009
Number of Jan Dhan Yojana Bank accounts are over 490 Mn, with deposits of more than $ 24.2 Bn (2023)
- Industry Scenario
- FOREIGN INVESTMENT
- INDUSTRY TRENDS
- POLICIES & SCHEMES
Industry Scenario
The consolidated balance sheet of SCBs registered double digit growth in FY 22, after a gap of 7 years
- The credit growth to the MSME sector has been remarkably high, over 30.6% (on avg. during Jan-Nov 2022) supported by the extended Emergency Credit Linked Guarantee Scheme (ECLGS) of the Union government
- The share of MSMEs in gross credit offtake to the industry rose from 17.7 % (January 2020) to 23.7% (November 2022)
- At the end of FY23, the banking sector reported deposits of ~$2.2 TN and loans of ~$1.67 TN, leading to a credit-deposit ratio of 75.8% (highest in the past three years)
- Scheduled commercial banks (SCBs) reported a robust credit growth of 15.4% in FY23 (11 year high) compared to 9.7% in FY22. The growth was powered by personal loans, loans to the services sector, and agriculture and allied activities. Personal loans registered a growth of 20.6% in FY23 as compared to 12.6% in the year-ago period, primarily driven by housing loans.
- New bank branches opened by SCBs increased by 4.6% during FY 22. The growth was led by new branches opened in Tier 4, Tier 5 and Tier 6 centres
NBFCs
- The growing importance of the NBFC sector in the Indian financial system is reflected in the consistent rise of NBFCs’ credit as a proportion to GDP
- NBFCs continued to deploy the largest quantum of credit from their balance sheets to the industrial sector, followed by retail, services, and agriculture
- The continuous improvement in asset quality is seen in the declining GNPA ratio of NBFCs from the peak of 7.2% in June 2021 to 5.9% in September 2022. The personal loans portfolio of NBFCs grew the most during the last four-year period {compound annual growth rate (CAGR) being more than 30 per cent} resulting in increase of its share in total loan portfolio to 31.2% in March 2023
- Micro finance institutions (NBFC-MFIs) have maintained robust credit growth over the past two years (with a CAGR 27.6%) (Mar’23)
Key Government & Regulatory Initiatives
- Pradhan Mantri Jan Dhan Yojana: The world’s largest financial inclusion initiative, “Jan Dhan Yojna”, has helped in new bank account enrolment of 486+ Mn beneficiaries, with 265+ Mn being women
- Scheme for Setting up of Wholly Owned Subsidiaries (WOS) by foreign banks in India: In 2013, the RBI published guidelines for setting up of WOS by foreign banks in India to promote foreign investments into the sector
- Introduction of Kisan Credit Card (KCC) loans in a fully digital and hassle-free manner
- Aadhaar e-KYC authentication for NBFC/Non-Banking entities: All NBFCs, payment system providers and payment system participants can now obtain Aadhaar Authentication Licence (KUA/sub-KUA)
- Establishment of Digital Banking units: In 2022, 75 DBUs were announced in 75 districts of the country to commemorate 75 years of India’s independence
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
Industrial Land Bank Portal
GIS - based map displaying available infrastructure for setting up business operations in the state.
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