GLOBAL MELTDOWN AND ITS IMPACT ON RETAIL BANKING IN INDIA -BY PROF.

CHOWDARI PRASAD, PROFESSOR, TAPMI, MANIPAL

Reasons for growth of Retail Banking in India

1. 2. 3. 4. 5. 6. 7. Introduction of Technology Increased competition among Banks Opening of New Gen of Private Banks Inviting of more Foreign Banks after WTO Focus on Productivity and Profitability Deregulation of Interest Rates Absence of Directed Lending
Global Meltdown n Retail Banking 2

MIM FinFest 2009

Reasons for Retail Banking

8.Drive to bring down Non Performing Assets 9.Tilt towards consumer and life style spending 10.Innovation of new products and services 11.Implementation of Pru-Norms, ALM, RM 12.Closure / Re-locating of Loss-making brs 13.VRS of surplus staff and Sales orientation 14.Corporates sourcing funds from non-Banking

MIM FinFest 2009

Global Meltdown n Retail Banking

Reasons for Retail Banking

15. Revival of Mutual Fund Market 16. Revitalising of Stock Market 17. Increase in Life Expectancy - health care 18. Increasing contribution to GDP from Services Sector 19. Change in Govt policy of FDI in Banking 20. Thrust on Infrastructure Devment by GOI 21. Opening up of Insurance Sector
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Personal Loans : Growth in 5 years (A/cs in

Mns and Amt is Rs 000s Crs : CMIE Data) A/cs Amt o/s Mar 1997 Mar 1997 A/cs Mar 2002 Amt o/s Mar 2002

Details Total Loans

P Ls

55.6
11.4

284.4
28.0

56.4
17.6

656.0
82.5

Cons Ln
Hsg Lns Others
MIM FinFest 2009

0.8
1.0 9.6

0.9
7.9 19.2
Global Meltdown n Retail Banking

1.2
1.8 14.6

3.2
32.8 46.5
5

Retail Portfolio Status as on 31st March 2004 (RBI Data)

S No
1

Retail Loan Particulars

Housing Loans

Amt o/s in % Gross Rs Crs NPAs

89,449 1.9

% Net NPAs
1.4

2
3 4

Consumer Loans
Credit Card dues Other Per Loans

6,256
6,167 87,170

6.6
6.3 2.6

4.0
2.4 1.6

5
6

Total Retail Loans

Total Loans
MIM FinFest 2009

1,89,041
8,59,092
Global Meltdown n Retail Banking

2.5
7.4

1.6
2.8
6

Retail lending takes the lead ! (Ref: IIBF News dt Nov 30, 2004)
Advs (Rs Cr)
Retail Loans
of which Housing

Variation 2003-04 Variation 02-03

41,811
15,394 1,055 2,675 19

26,188
12,308 -111 4,399 242

Cons Durables NBFCs Shares, Bonds..

Real Estate ..
Other Personal

-317
7,260

502
2,687

Against FDs
Tourism
MIM FinFest 2009

3,638
841
Global Meltdown n Retail Banking

1,458
266
7

Retail Portfolio of Banks

(Amt in Rs Crs) T&P OF BKG IN INDIA 2005
S No Item March 2004 March 2005 %Variation

01 Housing Loans
02 Consumer Loans 03 Credit Card Dues 04 Other Per. Loans

89,449
6,256 6,167 87,170

1,34,653
3,810 8,405 1,20,120

50.5
-39.1 36.3 37.8

05 Total Retail Lns

06 Total Loans

1,89,041

2,66,988

41.2
27.9
8

8,64,271 11,05,725
Global Meltdown n Retail Banking

07 % of (5) out of (6)

MIM FinFest 2009

21.9

24.1

Personal Loans
Particulars Retail Loans Housing Oct 2006 3,98,055

Rs in Crs May 2007 4,55,439

Dec 2006 4,27,909

2,09,468 33,744
11,870 12,692 9,291 1,20,990

2,17,829 35,764
11,913 13,399 8,558 1,40446

2,30,751 39,092
14,221 15,438 8,831 1,47,106
9

Agst FDs
Cr Cards Education Con Durble Others
MIM FinFest 2009

Global Meltdown n Retail Banking

Share of Select Instruments in Financial Savings

(Source: RBI) Instruments Currency 2005-06 8.7 2006-07 8.6

Bank Deposits
Equities / Debentures Mutual Funds Small Savings Life Insurance PF & Pension Funds
MIM FinFest 2009

46.2
1.3 3.6 12.2 13.4 10.5

55.7
1.4 4.8 4.9 14.6 9.2
10

Global Meltdown n Retail Banking

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And now,
Credit Cards Mutual Funds Sale of Gold Home Equity Loans Reverse Mortgage Loans Insurance Products Micro Finance Finance to SMEs
MIM FinFest 2009

Payment of Utility Bills Auto-Sweep Rail Ticket Reservations ECS, EFT, ATMs Core Banking Facility Demat Accounts Internet Banking Mobile/SMS Banking Wealth Management
14

Global Meltdown n Retail Banking

Retail Portfolio of Banks

(Amt in Rs Crs) T&P OF BKG IN INDIA 2008
S No Item March 2007 March 2008 %Varn

01 Housing Loans 02 Consumer Loans 03 Credit Card Dues 04 Auto Loans 05 Other Per. Loans 06 Total Retail Loans

2,24,481 7,296 18,317 82,562 1,55,204 4,87,860

2,52,932 4,802 27,437 87,998 1,97,879 5,71,048

12.7 -34.2 49.8 6.6 27.5 17.1

07 Total Loans

18,93,775 23,32,490
24.5

23.2
15

08 FinFest 2009 (6) out of (7) Meltdown n Retail Banking 25.8 MIM % of Global

No revival in Credit demand (BS 8/8/2009) Bank credit grew at unprecedented rates during the 5 years upto 2008 So also Indias GDP Overall credit grew at 27 per cent Retail advances grew at 32 per cent Credit growth declines in 2009 : 18% Expected to grow at 12-14% in 2010 (CRISIL)
MIM FinFest 2009 Global Meltdown n Retail Banking 16

Retail Business Downtrend in Q1 of 2009 : BL dt August 09, 2009 (Rs Cr)

Some Public Sector Banks 1. State Bank of India 2. Punjab National Bank Profit from Retail : 1,039 - 1,034 701 Total Profits : Rs. 10,540 4,116 1,740

3. Bank of Baroda
4. Canara Bank 5. Bank of India 6. Union Bank 7. IDBI Bank 8. Corporation Bank
MIM FinFest 2009

198
372 215 270 42 275
Global Meltdown n Retail Banking

1,520
1,001 870 597 196 500
17

Some Private Sector Banks

Private Sector Banks ICICI BANK HDFC BANK Retail Profit / Loss - Rs in Crores -437 144 Total Profit / Loss - Rs in Crores 1,205 860

AXIS BANK
KOTAK BANK TOTAL
MIM FinFest 2009

-49
-19 -361
Global Meltdown n Retail Banking

861
127 3,053
18

Retail Segment share in profits slips to 10% for top 8 Banks

SBI, the leader posted highest loss in Retail Profits from retail down from 69% last year Profits recorded from treasury and corporate Both SBI and ICICI recorded losses in retail Retail depositors paid high interest rates Defaults in retail portfolio loans increasing Lending avenues in corporate & retail slipping Substantial drop in fee income in distribution
Global Meltdown n Retail Banking 19

MIM FinFest 2009

BS 8/8/2009 contdCRISIL
Sharp decline expected in retail advances Growth in retail credit slowed sharply to around 4 per cent in 2008-09 from a peak of 42 per cent in 2004-05 Expected to revive, marginally, to 8 per cent in 2009-10 and to 13 per cent in 2010-11 Housing Loans, Auto Loans weak demand Sharp raise in delinquencies and recovery
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Thanks for your attention

Questions Please? Prof Chowdari Prasad TAPMI, Manipal Off: 0820-2701045 Mobile: 09242124642 Email: chowdarip@tapmi.edu.in
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