Banks - Private Sector

 

Overview

The Indian Banking system has been in existence for two centuries now and the emergence of private sector banking in India was seen after the liberalization in 1991. Since public sector banks have to succumb to political interference and are less profitable, private banking in India has seen a healthy rise in the past decade. In Q4 FY2015 itself, 11 private banks have registered a 35% rise in net profits which is very commendable when compared to PSBs. RBI has been quite liberal with private bankers through direct and indirect control. The private sector banks have lesser NPAs compared to their public sector counterparts though this factor can be reckoned by a number of theories. In fact, most private sector banks have shown some surprising immunity towards the general economic slowdown, and yet banks like ICICI have looked for turnaround consultants to repair their Balance Sheets. With a current industry market capitalization of INR 876,818 crores, the market share of national private banks is illustrated as follows.

 

 

Buy Industry Analysis

 
Domestic & Global Outlook

The quality of banking assets has received a lot of skepticism lately due to the rise in Gross Non-Performing Assets (GNPA) to 4.45% from 4.1%. Stressed assets ratio (GNPA + Restructured Standard advances) equaled 10.9% on March ‘15 which rose from 10% in March ’14. This has led to many probing questions regarding this pattern to be a temporary rise or stability in ratios, although the RBI has taken various measures to address this problem of bad loans.     

 

Many foreign banks are re-establishing themselves in India, as against the recent sluggish operations that were reluctantly held on to. This year foreign private banks such as Barclays Bank would seek wealth managers and also push their headcount up by a fifth, compared to the drop in the previous years. These wealth managers would guide millionaires on their portfolios.

The recent decrease in Bank ratios and cash reserve ratios by 25bps and a decrease of SLR from 22% to 21.50% has reckoned that demand for money has increased and thus banks have pressed capital in to the economy.

 
Future Potential

An increase in private banking in India would mean that the financial infrastructure in the country has to be developed accordingly. IDFC would commence operations from October, bringing in 25 new branches, with is BBB- rating by Fitch. ICICI bank has vigorously sought help from turnaround experts to help recover stressed loans to the tune of INR 40,000 crores as well as on other aspects such as cash management and operational efficiency. Banks must resort to strategic restructuring of their debt by converting unpaid loans to equity.  

The most important point of caution for a bank would be its financial instruments that it offers as products and the ratio maintenance it adheres to. Banks have started resorting to unhealthy practices of ever-greening by lending defaulters with additional funds so that loans do not have to be classified as non-performing. Most crisis of the world have sparked due to badly leveraged financial products that do not have mortgages of good title. There have been several scams in the past decade which have led to some distrust in private banks but the varied services they offer coupled with higher per capita income domestically have led to a sound customer base even with higher fees charged. Due to insecurities in banking administration around the world, the apex bank should exercise austerity in conducting, monitoring and controlling operations of private banks.

 

What this report contains:

  • A detailed overview of the industry

  • Structure of the industry from both, domestic and international perspectives

  • Related industries that this industry has inter-dependencies with and their understanding

  • Detailed analysis of industry segments in terms of the value and depth of corresponding market

  • Analysis & insights about the elements and critical success factors of this industry using strategic models

  • A forecast on the state of this industry in 2020, predicting the growth and movement patterns for 2016 - 2020

  • Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants

  • Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models

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