The document analyzes the banking sector in India and identifies several major challenges: (1) deteriorating asset quality and rising non-performing assets, (2) the need for banks to raise an additional 5 lakh crore in the next 5 years to meet new capital standards under Basel III, and (3) increased competition from many players offering similar services. However, the document also notes some positive factors for the sector including an uptick in credit and deposit growth, the financial inclusion program expanding banking access, and growing mobile banking services.

1. SAPM Project
Banking Sector Analysis
By
P132004
P132019
P132021
P132028
P132033
P132043
P132045
Amit Kumar Jain
Prashil Tekade
Purva Shrivastava
Ritika Gupta
Sayan Banerjee
Vipul Srivastava
Yashpal Raghav

2. Economic Analysis
• GDP Growth Slowest In Four Years; Sinks To
4.4% in Q1
• Q1 (2013-14)=4.4% vs Q1 (2012-13)=4.8%

8. Rupee Valuation
Rupee Depreciation

9. Industry Analysis

10. Major Challenges
• Deteriorating Asset Quality
– Deteriorating NPA’s
• Basel-III Implementation:
– Will be in force from 31st March 2018
– As Per RBI domestic bank need a common Tier –I Capital (Core Capital) :• 5.5% of Risk Weighted Asset (RWAs)
• 2.5% capital conservation buffer (CCB)
– Additional 5 lakh Crore in next 5year
• 1.75laks Crore of above in form of equity capital, this means we government need to put
money in equity of around 70k-100k
– As per S&P forecast Domestic bank need to raid 2.6Lakh crore to meet new
capital standards.
• Increased Competition:
– Large no of players and homogenous service, competition is very high
– Demand for cutting edge technology to increase operation efficiency.

11. Positive for Sectors
• Uptick in Credit and Deposit growth

12. Positive for Sectors
• Financial Inclusion Program:
– 40% of Indian does not have access to any kind of
banking services
– RBI mandated for the banks to open 25%
branches in rural area and 40% credit to priority
sector
– Numbers of rural branches have crossed 31,000 in
number

13. Positive for Sectors
• Mobile banking, next major technological leap
– As per RBI, As of March 2013, 55 banks with a
customer base of around 23mn were providing Mobile
Banking Service in India compared to 49 banks and
13million as of March 2012
– The regulatory relaxations in the transaction limits on
Mobile Banking and for transactions ,has resulted in
over 53 billion Transactions aggregating Rs 60 billion
being processed during 2012-13

14. RECENT DEVELOPMENTS
• RBI tightens loan restructuring norms; raises provision to
5% from June 1 from 2%
• RBI relaxes branch opening norms for banks
– RBI has relaxed its norms for banks to open branches in Tier I
cities to push financial inclusion, i.e., the process of spreading
banking services to unbanked areas. Now banks can open
branches in such centers without its prior permission.
• RBI eased rules to avail Swap Facility on Foreign Currency
Borrowings
– RBI lowered the three-year minimum maturity requirement to
avail the swap facility for banks foreign currency borrowings to
one year.
– However, RBI has allowed this facility up to 3 years.

15. Effective Date
29-10-2013
07-10-2013
20-09-2013
15-07-2013
03-05-2013
19-03-2013
09-02-2013
29-01-2013
03-11-2012
22-09-2012
11-08-2012
17-04-2012
10-03-2012
13-02-2012
28-01-2012
25-10-2011
16-09-2011
26-07-2011
16-06-2011
03-05-2011
17-03-2011
25-01-2011
18-12-2010
02-11-2010
16-09-2010
Bank
Rate
8.75
9.00
9.50
10.25
8.25
8.50
8.75
9.00
9.50
-
Fix Range LAF Rates
Repo
Reverse
7.75
7.50
7.25
7.50
7.75
8.00
8.50
8.25
8.00
7.50
7.25
6.75
6.50
6.25
6.00
6.75
6.50
6.25
6.50
6.75
7.00
7.50
7.25
7.00
6.50
6.25
5.75
5.50
5.25
5.00
Cash Reserve
Ratio
4.00
4.25
4.50
4.75
5.50
-
Marginal
Statutory
Standing
Liquidity Ratio
Facility
8.75
9.00
9.50
10.25
8.25
8.50
8.75
23.00
9.00
9.50
9.25
9.00
8.50
8.25
24.00
-

16. Price To Earning
30
25
20
15
P/E
Expon. (P/E)
10
5
0
10-Nov-03
10-Nov-04
10-Nov-05
10-Nov-06
10-Nov-07
10-Nov-08
10-Nov-09
10-Nov-10
10-Nov-11
10-Nov-12

17. Price to Book Ratio
6
5
4
3
P/B
Expon. (P/B)
2
1
0
10-Nov-03
10-Nov-04
10-Nov-05
10-Nov-06
10-Nov-07
10-Nov-08
10-Nov-09
10-Nov-10
10-Nov-11
10-Nov-12

18. Dividend Yield
3.5
3
2.5
2
Div Yield
Expon. (Div Yie
1.5
1
0.5
0
10-Nov-03
10-Nov-04
10-Nov-05
10-Nov-06
10-Nov-07
10-Nov-08
10-Nov-09
10-Nov-10
10-Nov-11
10-Nov-12

19. Price Analysis of Bank Index

20. •Thank You