INDIAN BANKING-II

Back to growth trajectory

DURING the past year and a half, financial stability has occupied a centre stage in policy circles in the wake of ongoing global financial crisis with wide ramifications. The initial impact of global financial contagion in India, however, has been limited for a variety of reasons. However, some impact has been felt through the credit, equity and the foreign exchange markets.

The financial sector in India is sound and healthy. The banking and non-banking institutions are performing in a competitive environment and their regulatory framework is now aligned with the international best practices.

Domestic financial markets conditions in general remained orderly during 2007-08, barring a brief spell of volatility in the call money market and occasional bouts of volatility in the equity market during the second-half of August 2007, second-half of December 2007 and beginning of the second week of January 2008. Yields in the Government securities market softened during the large part of the year.

The movements in the yields tracked the monetary policy measures. The Indian rupee exhibited two-way movement during 2007-08, and subsequently set on a depreciating trend  beginning July 2008. While non-banking finance companies are the major issuers of commercial papers (CPs), mutual funds (MFs) are major investors in CPs. The redemption pressure faced by MFs since September 2008 adversely affected liquidity conditions in the money market, which had a spill-over impact on the CP market.

Indian depositors enjoy a high degree of protection. About 93 per cent of deposit accounts and 61 per cent of total assessable deposits were fully protected at end-March 2008. The adverse global developments have led to moderation of growth in the industrial and services sectors in the first-half of 2008-09. In recent weeks, the impact on liquidity and credit has also been felt.

Inflation, in terms of the WPI, softened steadily since August 9, 2008. Globally, pressures from commodity prices, including crude, appear to be abating. The moderation in key global commodity prices, if sustained, would further reduce inflationary pressures.  

Deployment of Gross Bank  Credit  in Industries (2005-2006 to 2007-08)
(In Rs. crore)

INDUSTRY	Outstanding as on			Absolute variation
	March 31, 2006	March 31, 2007	March 31, 2008	2006-07	2007-08
Mining & Quarrying incl. Coal	4146	7704	10616	3558	2912
Food Processing	30946	39999	50221	9053	10222
a) Sugar	8776	11551	16726	2775	5175
b) Edible Oils & Vabaspati	5077	6111	7191	1034	1080
c) Tea	1851	2340	2334	489	-6
d) Others	15243	19997	23970	4754	3973
Beverage & Tobacco	4002	4774	5641	772	867
Textiles	58472	78971	95935	20499	16994
a) Cotton Textiles	29781	38051	47337	8270	9286
b) Jute Textiles	1053	967	1055	-86	88
c) Man Made Textiles	3062	4178	4681	1116	503
d) Other Textiles	24577	35775	42862	11198	7087
Leather & Leather Products	4486	4774	5750	288	976
Wood & Wood Products	1497	2887	3060	1390	173
Paper & Paper Products	9148	11588	13622	2440	2034
Petroleum, Coal Products & Nuclear Fuels	25150	35886	41738	10736	5852
Chemicals & Chemical Products	48638	55774	64391	7136	8617
a) Fertilizer	10569	9837	9251	-732	-586
b) Drugs & Pharma	16273	18584	23286	2311	4702
c) Petrochemicals	6965	8316	9516	1351	1200
d) Others	14830	19037	22338	4207	3301
Rubber, Plastic * their Products	7250	9250	10410	2000	1160
Glass & Glassware	1817	2564	2759	747	195
Cement & Cement Products	7799	9389	14210	1590	4821
Basic Metals & Metal Products	65896	83870	104719	17974	20849
a) Iron & Steel	50991	63877	80790	12886	16913
b) Other metal and metal products	14905	19993	23929	5088	3936
All Engineering	34878	44026	52442	9148	8416
a) Electronics	11004	13511	16024	2507	2513
b) Others	23875	30515	36418	6640	5903
Vehicles, Vehicle Parts & transport Equipments	18628	20922	29152	2294	8230
Gems & Jewellery	20559	23850	24995	3291	1145
Construction	13303	19970	28298	6667	8328
Infrastructure	112853	142975	202296	30122	59321
a) Power	60157	72816	93899	12659	21083
b) Telecom	18455	19446	37121	991	17675
c) Roads & Ports	19695	24941	32990	5246	8049
d) Other Infrastructure	14546	25772	38286	11226	12514
Other Industries	80975	98161	111645	17186	13484
Total Industry (Small, Medium & Large)	550444	697334	871900	146890	174566

Shareholding pattern of scheduled commercial banks
(at the end of March 2008)

Banks	Total Govt. and RBI Resident	Financial Institutions Resident	Financial Institutions Non-resident	Other Corporates Resident	Other Corporates Non-resident	Total individual resident	Total Individual non-resident	Total resident	Total Non-resident
Nationalized
Allahabad Bank	55.2	9.6	18.5	2.9	-	13.7	0.1	81.4	18.6
Andhra Bank	51.6	12.7	19.3	3.2	-	13.2	0.1	80.6	19.4
Bank of Baroda	53.8	18.0	-	1.2	19.8	6.5	0.6	79.6	20.4
Bank of India	64.5	11.8	15.1	1.3	0.1	6.7	0.6	84.2	15.8
Bank of Maharashtra	76.8	5.7	8.1	0.9	-	8.5	0.1	91.8	8.2
Canara Bank	73.2	5.8	14.0	1.2	-	5.8	-	86.0	14.0
Central Bank of India	80.2	6.9	5.4	1.1	-	6.3	0.1	94.5	5.5
Corporation Bank	57.2	29.4	10.2	0.4	0.2	2.6	-	89.6	10.4
Dena Bank	51.2	8.5	-	6.6	-	20.9	12.8	87.2	12.8
IDBI Bank Ltd	52.7	23.8	-	7.0	-	16.5	-	100.0	-
Indian Bank	80.0	2.5	13.8	0.4	-	3.1	0.1	86.1	14.0
Indian Overseas Bank	61.2	6.6	18.3	1.1	-	12.1	0.7	81.0	19.0
Oriental Bank of Commerce	51.1	20.7	18.1	4.7	-	5.3	-	81.9	18.1
Punjab and Sind Bank	100.0	-	-	-	-	-	-	100.0	-
Punjab National Bank	57.8	16.6	20.0	0.8	-	4.7	-	79.9	20.1
Syndicate Bank	66.5	6.7	12.4	1.8	-	12.7	-	87.6	12.4
UCO Bank	75.0	5.2	-	4.1	0.7	14.7	0.3	98.9	1.1
Union Bank of India	55.4	12.0	19.5	1.5	-	11.6	-	80.5	19.5
United Bank of India	100.0	-	-	-	-	-	-	100.0	-
Vijaya Bank	53.9	8.2	14.9	3.2	-	19.4	0.5	84.6	15.4
State Bank Group
State Bank of Bikaner & Jaipur	-	75.3	-	4.6	2.4	14.7	3.0	94.6	5.4
State Bank of Hyderabad	-	100.0	-	-	-	-	-	100.0	-
State Bank of India	59.7	11.5	19.6	3.4	-	5.8	0.1	80.4	19.6
State Bank of Indore	-	98.1	-	0.7	-	1.2	-	100.0	-
State Bank of Mysore	-	94.0	-	0.3	-	5.6	-	100.0	-
State Bank of Patiala	-	100.0	-	-	-	-	-	100.0	-
State Bank of Saurashtra	-	-	-	-	-	100.0	-	100.0	-
State Bank of Travancore	1.1	76.1	2.8	3.6	-	12.6	3.8	93.4	6.6
Old Private Sector
Bank of Rajasthan	-	3.9	15.6	65.3	-	15.0	0.2	84.2	15.8
Catholic Syrian Bank	-	-	-	3.6	13.9	65.2	17.4	68.8	31.2
City Union Bank	-	9.1	11.3	20.3	8.6	50.2	0.5	79.6	20.4
Dhanalakshmi Bank	-	2.1	23.3	11.7	-	59.1	3.8	72.9	27.1
Federal Bank	-	18.2	53.1	3.6	5.0	20.1	-	41.9	58.1
ING Vysya Bank	-	15.7	22.8	2.5	43.9	10.6	4.5	28.8	71.2
J& K Bank	53.2	2.3	33.6	1.2	-	9.4	0.4	66.1	33.9
Karnataka Bank	-	45.8	-	8.8	-	45.2	0.3	99.7	0.3
Karur Vysya Bank	-	5.3	21.9	13.6	-	55.7	3.4	74.7	25.3
Lakshmi Vilas Bank	-	12.1	-	24.8	2.7	60.3	0.2	97.1	2.9
Nainital Bank	-	98.4	-	-	-	1.6	-	100.0	-
Ratnakar Bank	-	2.1	-	10.8	19.9	59.7	7.4	72.7	27.3
SBI Commercial & International Bank	-	100.0	-	-	-	-	-	100.0	-
South Indian Bank	-	8.6	45.8	8.3	4.8	29.9	2.5	46.8	53.2
Tamilnad Mercantile Bank	-	0.1	-	24.7	16.5	58.3	0.4	83.1	16.9
New Private Sector
Axis Bank Ltd	-	50.8	37.5	5.3	1.4	4.8	0.1	60.9	39.1
Centurion Bank of Punjab	-	0.1	27.8	17.9	36.7	15.5	2.1	33.5	66.5
Development Credit Bank	-	2.3	-	12.2	64.6	20.0	1.0	34.5	65.5
HDFC Bank	-	7.5	-	32.1	49.1	11.1	0.2	50.7	49.3
ICICI Bank	-	6.4	69.4	16.6	-	7.2	0.4	30.2	69.8
IndusInd Bank	-	2.7	19.0	17.9	39.8	17.3	3.2	38.0	62.1
Kotak Mahindra Bank	-	4.4	26.2	7.7	0.6	60.4	0.7	72.4	27.6
Yes Bank Ltd	-	0.7	40.9	17.0	13.5	26.5	1.5	44.2	55.9
SOURCE: Reserve Bank of India

While equity prices have since corrected by around 56.1 per cent (as on December 8, 2008) from the peak level, real estate prices continue at their elevated levels, although some reports do suggest some softening of prices in   some parts of the country in recent months. In view of the risks posed by accelerated exposures to the real estate sector, the central banking authority has initiated several regulatory measures.

RBI has been closely following the developments in the international financial regulation and supervision. In the Annual Policy Statement for 2008- 09 released in April 2008, the Reserve Bank indicated its status vis-à-vis the action plan devised by the Financial Stability Forum for implementation by the countries affected by the recent financial turbulence.

Following the unfolding of events since September 2008 reflected in the form of portfolio outflows by FIIs, sharp decline in the stock markets, lack of liquidity in the market with the inter-bank rates soaring to high levels and depreciating rupee, the Reserve Bank stepped in to restore public confidence by putting in place immediate corrective measures during mid-September and December 6, 2008. 

The Indian central banking authority hopes that the country, with its strong drivers of growth, may escape the worst consequences of the global financial crisis and hopes that once the global situation is stabilized, and calm and confidence are restored, India would return to the high growth trajectory.

Bank-wise Non-Performing Assets (NPAs) of Scheduled Commercial Banks

(As on Mmarch 31, 2008)

*India’s fiscal year is April to March
SOURCE: Reserve Bank of India release
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Updated December 2008

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