2011 best banks
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2011 best banks Document Transcript

  • 1. Indias Best Banks 2011Bank of Baroda tops the BT-KPMG Best Banks Survey of 2011Anand Adhikari Edition: Nov 27, 2011 Share96STORY TOOLSChange font sizePrint this storyE-Mail this storyCommentRELATEDBank of Baroda top the best banks listIndusInd ranked best mid-sized bankThe other 9 best banksFull list of the best banks 2011 rankingsBanks have lot to do within the economyServing rural customers good biz for banks Downgrade! Downgrade! Like a flu spreading likeIN NUMBERS wildfire from the US to Europe to Asia, the D word isList of Best Banks in India sending shivers down the spines of pinstriped bankers around the world. In just over a month, the big threeglobal ratings agencies have set the alarm bells ringing. Standard & Poors, or S&P,lowered the ratings of close to a dozen Spanish financial institutions, including the countrystwo biggest banks - Banco Santander and Banco Bilbao Vizcaya Argentaria. Moodyspainted Russias banking system with a negative bias from stable, and also downgradedBank of Americas long-term rating by two notches. And Fitch Ratings declared a negativeoutlook on Italys five largest banks.In fact, even France-based BNP Paribas, the worlds largest bank in term of assets at $2.72trillion, joined the downgrade bash this October when S&P cut its rating by a notch. Thethreat of downgrade is also looming large over marquee names such as Morgan Stanley,
  • 2. Goldman Sachs and JPMorgan.The WinnersBEST LARGE BANKBank of BarodaBEST MID-SIZED BANKIndusInd BankBEST SMALL BANKJPMorgan ChaseMOST CONSISTENT LARGE BANKAxis BankGROWTH, QUALITY OF ASSETS (LARGEBANKS)YES BankPRODUCTIVITY & EFFICIENCY (LARGEBANKS)IDBI BankGROWTH (MID-SIZED BANKS)Dhanlaxmi BankQUALITY OF ASSETS (MID-SIZED BANKS)Karur Vysya BankPRODUCTIVITY & EFFICIENCY (MID-SIZEDBANKS)City Union BankPRODUCTIVITY & EFFICIENCY (SMALLBANKS)JPMorgan ChaseGROWTH, QUALITY OF ASSETS (SMALLBANKS)
  • 3. Mizuho Corporate Bank More from Special Videos | Pics | FeaturesQUALITY OF ASSETS (SMALL BANKS) After the subprime lending fiasco,Bank of America banks find themselves in another quagmire - the euro debt crisis andslowdown in credit demand. Only Chinese banks are sitting pretty - ICBC and ChinaConstruction Bank are today the worlds largest in terms of market cap - though Hong Kongbanks with high exposure to the mainland are looking more vulnerable.In India, the countrys largest bank, State Bank of India, or SBI, came under Moodysscanner, which downgraded its perpetual bond ratings by a notch. The downgrade indicatesthat Indias banking sector is not in the best of health. There are growing concerns ondeteriorating asset quality, capital challenges and issues such as financial inclusion as 50per cent of the Indian population has no banking access.Lets take the capital challenges first. There is an estimate that Indian banks will requiremore than Rs 10 trillion (one trillion equals 100,000 crore) over the next 10 years to fundgrowth requirements. Thats a tall order, especially for public sector banks - which control75 per cent of the Indian banking system - where the government is a reluctant partnerwhen it comes to pumping in capital. In an interview with BT a few hours after announcingthe 13th interest rate hike in the past one and a half years, Reserve Bank of India, or RBI,Governor D. Subbarao said that India, being a rapidly transforming economy, will requiremore credit than it did in the past. "The capital requirements of banks are going to be morethan we would project from previous history," he said.The government is also mulling a holding structure for PSU banks - that saves them fromdiluting its stake - for allowing them to raise capital. On the asset quality front,nonperforming assets, or NPAs, are creating a headache with gross NPA figures closing inon Rs 1 trillion (see In Default Mode, page 84). In this challenging environment, banks haveto make efficient use of capital, write good quality assets, reward shareholders, and play anintegral role in Indias economic development.It is in this context that the 2011 edition of the Business Today-KPMG Best Banks studywas conducted. And not surprisingly, the study has thrown up some, um, surprises. Privatesector major HDFC Bank was the undisputed leader in the BT-KPMG study from 2003 to2008, but when it pounced on Centurion Bank to acquire size, it lost out on manyperformance parameters and the top slot. A public sector bank - Bank of India - rose to thetop in 2009 when the global financial meltdown affected many a bank in the country. A yearlater, Axis Bank came out tops.MUST SEE: Winners in picturesThis year, the countrys fifth largest bank, Bank of Baroda, has galloped like a dark horseto the peak. The banks rise is made unique by the fact that it did not top in any of the 27parameters in its group, yet emerged overall winner. Another surprise winner is theHindujas owned IndusInd Bank in the mid-sized category .
  • 4. IndusInds rise to the top is a shot in the arm for corporate houses eyeing the fast-growingbanking sector, including the Tatas, Reliance, Birla and Mahindra. Romesh Sobti, ManagingDirector and CEO of IndusInd Bank, says: "A countrys GDP funnels through the bankingsystem. Indias growth story will require many more banks to meet its credit needs." ChandaKochhar, Managing Director & CEO of ICICI Bank, says Indias economic fundamentalsshould enable it to average eight per cent real GDP growth over the next several years. Tosupport this, bank credit would need to grow by about 2.5 times, or 20 per cent, annually.This means the current non-food credit of about Rs 40 trillion will grow to about Rs 200trillion by 2020. "This is the kind of scale we have to be ready for if banks are to play therole they need to play in this growing economy," she says. "I believe these are conservativeestimates; we are basing this projection on Indias growth in absolute terms as well asrelative to other markets."The aspiration is not just size. It is a robust, innovative banking system: Chanda KochharIt is no secret that there is ample growth potential. Even as manyargue that metros and urban centres are saturated, there is a strongview that both will remain twin tracks of future growth. Today, moreand more customers in urban and metro markets are moving towardInternet banking, ATMs and mobile banking. "This self-directedpopulation is growing faster than the normal channel," says RajivSabharwal, Executive Director at ICICI Bank. But the bigger marketwould undoubtedly be the hinterland or the unbanked areas, where the competition isalready building up.Does that mean Indias banks will also have to bulk up? "Size and scale are important, butwe should not forget that Indian banking has done remarkably well despite difficult globalconditions," says M.D. Mallya, Chairman of Bank of Baroda. In fact, when it comes totransactions, SBI claims to be the biggest bank in the world. "We have 250 million accountsand about 170 million customers," says SBIs Managing Director A. Krishna Kumar. "Wehave about 40-45 million transactions daily. The peak was 52 million in March this year."But these transaction values, when converted into dollars, remain insignificant.
  • 5. We have about 40-45 million transactions daily. The peak was 52 million in March: A. Krishna Kumar But at a time when central bankers and governments around the world are striving toensure that banks dont become too big to fail, size is certainly going to take a back seat."The aspiration is not just size," says ICICI Banks Kochhar. "It is a robust, innovativebanking system that effectively meets the growth needs of all segments of the Indianeconomy."Ergo, size should be seen together with growth, productivity, efficiency, quality of earningsand capital adequacy. How well Indian banks are doing on this front is what the BT-KPMGstudy captures every year. .Classified bank :-ndian banks can be broadly classified into public sector banks (those banks in which the Government of India holds astake), private banks (government doe not have a stake in these banks; they may be publicly listed and traded onstock exchanges) and foreign banks.Bank Fixed DepositsBank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit Account, a certain sum of money isdeposited in the bank for a specified time period with a fixed rate of interest. The rate of interest for Bank FixedDeposits depends on the maturity period. It is higher in case of longer maturity period. There is great flexibility inmaturity period and it ranges from 15days to 5 years.Current AccountCurrent Account is primarily meant for businessmen, firms, companies, public enterprises etc. that have numerousdaily banking transactions. Current Accounts are cheque operated accounts meant neither for the purpose of earninginterest nor for the purpose of savings but only for convenience of business hence they are non-interest bearingaccounts
  • 6. Demat AccountDemat refers to a dematerialised account. Demat account is just like a bank account where actual money is replacedby shares. Just as a bank account is required if we want to save money or make cheque payments, we need to opena demat account in order to buy or sell shares.Recurring Bank DepositsUnder a Recurring Deposit account (RD account), a specific amount is invested in bank on monthly basis for a fixedrate of return. The deposit has a fixed tenure, at the end of which the principal sum as well as the interest earnedduring that period is returned to the investor.Reserve Bank of IndiaThe Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank ofIndia Act, 1934. Though initially RBI was privately owned, it was nationalized in 1949. Its central office is in Mumbaiwhere the Governor of RBI sits.Savings Bank AccountSavings Bank Accounts are meant to promote the habit of saving among the citizens while allowing them to use theirfunds when required. The main advantage of Savings Bank Account is its high liquidity and safety.Senior Citizen Saving Scheme 2004The Senior Citizen Saving Scheme 2004 had been introduced by the Government of India for the benefit of seniorcitizens who have crossed the age of 60 years. However, under some circumstances the people above 55 years ofage are also eligible to enjoy the benefits of this scheme.Foreign Banks in IndiaForeign banks have brought latest technology and latest banking practices in India. They have helped made IndianBanking system more competitive and efficient. Government has come up with a road map for expansion of foreignbanks in India.Nationalised BanksNationalised banks dominate the banking system in India. The history of nationalised banks in India dates back tomid-20th century, when Imperial Bank of India was nationalised (under the SBI Act of 1955) and re-christened asState Bank of India (SBI) in July 1955.Private Banks in IndiaInitially all the banks in India were private banks, which were founded in the pre-independence era to cater to thebanking needs of the people. In 1921, three major banks i.e. Banks of Bengal, Bank of Bombay, and Bank of Madras,merged to form Imperial Bank of India.