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 government has consistently strived to promote financial inclusion through various initiatives targeted to bring the country’s underbanked 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.
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
- $ Tn
Total assets across the Banking sector (FY 22)
Number of ATMs & CRMs
- $ Tn
Total Deposits (Approx)
No. of Schedule Commercial Banks
- $ Tn
Gross Bank Credit (as on March’22)
India set to become the third largest Domestic Banking sector by 2050.
Number of Jan Dhan Yojana Bank accounts are over 450 Mn. Jan Dhan Deposits grew by 20% YoY in Jul'22
- Industry Scenario
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- INDUSTRY TRENDS
- POLICIES & SCHEMES
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)
- Growth in personal loans remained steady during FY 22 and accounted for over 30% of incremental lending by PSBs and PVBs. In personal loan sector, housing loans, credit card receivables and vehicle/ auto loans recorded double digit growth
- The Incremental Credit-Deposit ratio rose sharply both on an annual (122%, YoY) and half-yearly basis (172.5%; September 2022 over March 2022). The accumulation of deposits in the past few years has enabled banks to fund the growing credit demand. The well-capitalised banking system with a low NPA ratio and more robust corporate sector fundamentals will continue to enhance the flow of bank credit into productive investment opportunities
- 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
- 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 as well as in relation to credit extended by SCBs
- 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 capital position of NBFCs also remains robust, with a Capital to Risk Assets Ratio of 27.4% (Sept’22)
- NBFCs continued to deploy the largest quantum of credit from their balance sheets to the industrial sector, followed by retail, services, and agriculture
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
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
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
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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