''Opportunities in Indian Banking Sector'' - provides extensive research and rational analysis on the Indian banking industry. This report has been made to help clients to evaluate the opportunities, challenges and driving forces critical to the growth of banking industry in India.
The forecast given in this report is not based on a complex economic model but is intended as a rough guide to the direction in which the market is likely to move. The future projection is done on the basis of the current market scenario, past trends, and rules and regulations laid by the regulator and supervisor of the financial system, Reserve Bank of India (RBI).
The report provides detailed overview of the Indian banking industry by contemplating and analyzing various parameters like assets size, and income level. It helps clients to understand various products available in the Indian banking industry and their future scope.
The future forecast discusses the future prospects of different arms of banking industry including rural banking, bancassurance, financial cards, mobile banking, role of technology in rural banking, pension funds, and the future course of action and strategies for pension fund industry to be taken at macro level.
Key Findings of the Report
- Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to 2006-07.
- Rural and semi-urban India is expected to account for 58.33% of the insurance sector by 2010.
- In terms of ownership, debit cards are more in number than credit cards but in terms of transactions, credit cards are used more than debit cards.
- The ATM outlets in India increased at a CAGR of 28.09% from March 2006 to March 2007.
- Rural and semi-urban centers account for 66% of total bank branches.
- Indian Mutual Fund industry witnessed a growth of 49.88% from May 2006 to May 2007, and higher growth is recorded in closed ended schemes at 215.61%.
- Increasing number of millionaires in India is increasing the scope of Wealth Management Services.
- Bankable households in India are anticipated to grow at a CAGR of 28.10% during 2007-2011.
- Investment by banking sector in Information Technology is expected to increase at 18% in 2007 from last year.
Key Issues & Facts Analyzed in the Report
- Market analysis of different product segments in the banking industry.
- Evaluation of current market trends.
- Basel II Accord and capital requirement by Indian Banking Industry.
- Role of technology in banking industry.
- Pension fund industry in India.
- Urban Vs rural banking in terms of deposit, branches, and credit and future outlook of rural banking.
- Drivers and constraints for credit and debit cards industry in India.
- Analysis of various challenges and opportunities for the industry.
Key Players Analyzed
This section covers the key facts about the major players (including Public, Private, and Foreign sector) in the Indian banking industry, including Bank of Baroda, State Bank of India, Canara Bank, Punjab National Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Citibank, Standard Chartered Bank, HSBC Bank, ABN AMRO Bank, American Express, etc.
Research Methodology Used
Information Sources
Information has been sourced from books, newspapers, trade journals, and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to more than 3000 paid databases.
Analysis Method
The analysis methods include ratio analysis, historical trend analysis, linear regression analysis using software tools, judgmental forecasting, and cause and effect analysis.'
Indian Banking Sector in Current Financial Crisis
: The Indian banking industry has developed the capacity to absorb turmoils, says Sitanshu Swain
Despite suffering the heaviest correction in the fourth quarter, Indian banking has topped the charts in value creation in FY 2007-08 among all major economies, says the latest report of Boston Consulting Group titled "Managing Shareholder Value in Turbulent Times".
Reeling out vital statistics, the report says overall, the global banking sector's average total shareholder return (TSR) plummeted by 93% in 2007, to 1.7%, and was well below the 15.2% average TSR of all industries.
Globally, the sector's market capitalisation increased by a mere 2.4 % to $8.3 trillion-a stark change from 2006, when market cap grew by 31%. Since the end of 2007, shareholder returns in the banking industry, in general, have deteriorated rapidly: in less than three months, the sector's market cap has dropped by more than 15%, to $7 trillion from $8.3 trillion.
The report, which has claimed to analyse a sample of banks representing more than 75% of total banking market capitalisation, shows that 2007 was a year with two halves.
In the first half of 2007, the sector's market capitalisation grew by 5.7 %.
In the second half, as the crisis became more widespread, banks lost $269 billion in market value.
A gaping performance divide separated ten major developed markets from the rest of the banking world. Banking total shareholder returns (TSRs) in these developed markets fell to an average of about -13%, while the average TSR outside these markets was about 27%. Emerging markets, in particular, avoided much of the turmoil and provided a counterweight to the weak performance of western and Japanese banks.
"Even among the BRIC countries, the Indian banking sector outshone everyone else in 2007 in value creation," said Saurabh Tripathi, partner and director at the Boston Consulting Group. "This is despite the heaviest correction in Q1 of 2008."
Also the banking and non-banking financial services (NBFS) gave consistent returns, beating the market across all-time horizons over the last 5 years. Axis Bank and BoI were the toppers among banks in consistent value creation over all 3 horizons (1, 3, and 5 years), says the report.
The large equity issuances by several banks have improved their loss absorption capabilities and hence their resilience to negotiate downside risks, says Fitch.
The non-performing assets ratios will mostly rise from their historic lows but not to alarming levels.
Individual ratings of most banks are still relatively low so downside risk is limited and outlook is mostly stable, explains the rating agency.
Improving credit culture and risk management systems, improving creditors' rights has also improved prudential regulations and more proactive supervision, says Fitch.
The earnings of Indian banks remain largely net interest income (NII) driven although fee income is rising.
Though net interest margin (NIM) has been under pressure; banks with a larger proportion of low-cost deposits have been less affected
A severe fall in property prices - although unlikely - could affect the banks' residential (13% of loans) and commercial property lending (4% of loans) portfolio. Also, the larger private banks may increase market share at the expense of government banks and consolidation in the longer term may enhance Indian banks' performance and operational efficiencies, says Fitch.
Despite volatility in rates and uncertain atmosphere, the credit offtake in the first two months of this fiscal has been better, OP Bhatt, chairman, State Bank of India (SBI) points out. "Credit offtake will not go down very much. We expect a 20% credit growth this fiscal. Even then, the growth rate would be far lower as compared to the nearly 30% credit growth clocked in the previous year," he says.
KV Kamath, managing director and CEO, ICICI Bank said he too does not expect a further slowdown in the growth of his bank's retail portfolio. "Retail growth has already slowed down and I don't see it slowing down further, he said."
However, strong corporate profitability and comfortable liquidity conditions have lessened the pressure on the banking industry, which was witnessing a sluggish growth in the past few months, Kamath observes. "Liquidity is comfortable, credit offtake has moderated. The good news is that corporate profitability is strong and liquidity is comfortable."
However, another international rating agency Moody's says although evidence over recent years had shown that the robust growth in retail loans had been sustained, these credits experienced a significant slowdown in growth to 29.9% in FY 2007 from 40.9% in FY 2006.
These retail loans have yet to be fully tested in a negative credit cycle. The high growth rates in recent years, pointing to a credit boom environment, may give rise to some concerns with regard to the quality of retail loans amid unfavourable economic conditions.
Moody's believes that certain banks may not have the comprehensive credit scoring and monitoring systems and tools in place for closely screening retail loans despite the unprecedented growth they experienced. This could leave them in a difficult position if delinquency rates were to rise substantially, a scenario we have observed in other retail booming emerging markets in Asia in the past.
"We hold a positive view on the increasing role that banks other than PSBs will be playing in the Indian market in the years to come. Increased competition will eventually translate into a more efficient and transparent banking system. All banks will ultimately be forced to adopt the new products, rigorous credit culture, and sophisticated management information systems (MIS) that foreign and private sector banks are fostering," says Moody's.
Looking ahead over the medium to longer term, the larger PSBs will eventually be in a position to offer better quality of service and a wider product range to their customers, putting them on a more equal footing with their private sector and foreign counterparts. In addition, PSBs will also improve their revenue-earning capacity through increased non-interest income from services such as cash management, which are increasingly being required by large corporates, observed Moody's.
"While, PSU banks cannot have same multiples as private banks, appropriate changes in the business model, HR practices, technology usage, and a few other initiatives can increase the multiple to industry average levels," says BCG's
Tripathy.
Talking about the employee status, BCG pointed out that the compounded annual growth rate of employees in state-run banks between 2004 and 2007 stood negative at 1% while assets growth was 17%.
"These banks have done well in terms of their assets, branch presence, and have also ventured into newer businesses, however, the employee growth was negative. HR practices need to change. From 2009 onwards, state-run banks need to add 60,000-70,000 employees every year or else they will lose market share," Tripathi added. Meanwhile, the growth of employees in new generation private sector banks has been 80%, on a much smaller base, during 2004-07, the report said.
BCG advocated for a drastic improvement in the number of bank branches as the growth of bank branches has been at a very low rate of 2%, between 2001-07. Currently, the country has 57,829 branches as of end of 2007.
Clearly, with or without all the current turbulence, a much larger growth opportunity is awaiting the Indian banking industry.
Indian Banking Sector
Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865.
By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers.
Nationalisation:
By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill, and it received the presidential approval on 9th August, 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the GOI controlled around 91% of the banking business of India.
After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
Liberalisation:
In the early 1990s the then Narasimha Rao government embarked on a policy of liberalisation and gave licences to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as UTI Bank(now re-named as Axis Bank) (the first of such new generation banks to be set up), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, kickstarted the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more.
Current Situation:
Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them.
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
SB Preperation Kit-2
[Things to learn:
1: Reasons for Banking stability in India & Reasons for the Current Economic Crisis:
So, candidates have to go deeply and find out the reasons of sound banking industry in India as well as the reasons for this currently going crisis. source:SB INT PREPERATION]
Things to ponder:
1: The Banking sector
Indian Banking Sector
2: Points regarding the Indian Banking Industry .
Indian Banking Sector in Current Financial Crisis
3: About the sector in which they wants to enter and why?.
Opportunities in Indian Banking Sector
The Indian banking industry is currently termed as strong, having weathered the global economic slowdown and showing good numbers with strong support flowing in from the Reserve Bank of India (RBI) measures.
Banking, financial services and insurance (BFSI), together account for 38 per cent of India’s outsourcing industry (worth US$ 47.8 billion in 2007). According to a report by McKinsey and NASSCOM, India has the potential to process 30 per cent of the banking transactions in the US by the year 2010. Outsourcing by the BFSI to India is expected to grow at an annual rate of 30–35 per cent.
Furthermore, a report “Opportunities in Indian Banking Sector”, by market research company, RNCOS, forecasts that the Indian banking sector will grow at a healthy compound annual growth rate (CAGR) of around 23.3 per cent till 2011.
According to a study by Dun & Bradstreet (an international research body)—”India’s Top Banks 2008″—there has been a significant growth in the banking infrastructure. Taking into account all banks in India, there are overall 56,640 branches or offices, 893,356 employees and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of all ATMs.
According to the RBI, Indian financial markets have generally remained orderly during 2008-09. In view of the tight liquidity conditions in the domestic money markets in September 2008, the Reserve Bank announced a series of measures beginning September 16, 2008. Thus, the average call rate which was at 10.52 per cent declined to 7.57 per cent in November 2008 under the impact of these measures.
Measures aimed at expanding the rupee liquidity, included significant reduction in the cash reserve ratio (CRR), reduction of the statutory liquidity ratio (SLR), opening a special repo window under the liquidity adjustment facility (LAF) for banks for on-lending to the non-banking financial companies (NBFCs), housing finance companies (HFCs) and mutual funds (MFs), and extending a special refinance facility, which banks could access without any collateral.
1: Reasons for Banking stability in India & Reasons for the Current Economic Crisis:
So, candidates have to go deeply and find out the reasons of sound banking industry in India as well as the reasons for this currently going crisis. source:SB INT PREPERATION]
Things to ponder:
1: The Banking sector
Indian Banking Sector
2: Points regarding the Indian Banking Industry .
Indian Banking Sector in Current Financial Crisis
3: About the sector in which they wants to enter and why?.
Opportunities in Indian Banking Sector
The Indian banking industry is currently termed as strong, having weathered the global economic slowdown and showing good numbers with strong support flowing in from the Reserve Bank of India (RBI) measures.
Banking, financial services and insurance (BFSI), together account for 38 per cent of India’s outsourcing industry (worth US$ 47.8 billion in 2007). According to a report by McKinsey and NASSCOM, India has the potential to process 30 per cent of the banking transactions in the US by the year 2010. Outsourcing by the BFSI to India is expected to grow at an annual rate of 30–35 per cent.
Furthermore, a report “Opportunities in Indian Banking Sector”, by market research company, RNCOS, forecasts that the Indian banking sector will grow at a healthy compound annual growth rate (CAGR) of around 23.3 per cent till 2011.
According to a study by Dun & Bradstreet (an international research body)—”India’s Top Banks 2008″—there has been a significant growth in the banking infrastructure. Taking into account all banks in India, there are overall 56,640 branches or offices, 893,356 employees and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of all ATMs.
According to the RBI, Indian financial markets have generally remained orderly during 2008-09. In view of the tight liquidity conditions in the domestic money markets in September 2008, the Reserve Bank announced a series of measures beginning September 16, 2008. Thus, the average call rate which was at 10.52 per cent declined to 7.57 per cent in November 2008 under the impact of these measures.
Measures aimed at expanding the rupee liquidity, included significant reduction in the cash reserve ratio (CRR), reduction of the statutory liquidity ratio (SLR), opening a special repo window under the liquidity adjustment facility (LAF) for banks for on-lending to the non-banking financial companies (NBFCs), housing finance companies (HFCs) and mutual funds (MFs), and extending a special refinance facility, which banks could access without any collateral.
SB Preperation Kit-1
Key Features of Interim Budget 2009-2010
INTRODUCTION
The Gross Domestic Product increased by 7.5 per cent, 9.5 per cent, 9.7 percent and 9 per cent in the first four years from fiscal year 2004-05 to 2007-08 recording a sustained growth of over 9 per cent for three consecutive years for the first time.
The growth drivers for the period were agriculture, services, manufacturing along with trade and construction.Fiscal deficit down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08.
The domestic investment rate as a proportion of GDP increased from 27.6 per cent in 2003-04 to 39 per cent in 2007-08. Gross Domestic savings rate shot up from 29.8 per cent to 37.7 per cent during this period. The Gross capital formation in agriculture as a proportion of agriculture GDP increased from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08.The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in 2007-08.
Annual growth rate of agriculture rose to 3.7 per cent during 2003-04 to 2007-08. The food grain production recorded an increase of 10 million tonnes each year during this period and touched an all time high of 230 million tonnes in 2007-08.
While manufacturing sector recorded growth of 9.5 per cent per annum in the period 2004-05 to 2007-08, communication and construction sectors grew at the rate of 26 per cent and 13.5 per cent per annum respectively.
Exports grew at an annual average growth rate of 26.4 per cent in US dollar terms in the period 2004-05 to 2007-08. Foreign trade increased from 23.7 per cent of GDP in 2003-04 to 35.5 per cent in 2007-08.
OUTLOOK FOR THE YEAR 2008-09
Despite the global financial crisis which began in 2007 impacting most emerging market economies, 7.1 per cent rate of GDP growth in the current year makes India the second fastest growing economy in the world.
Fallout of global slowdown on Indian economy were countered with fiscal stimulus packages announced on December 7, 2008 and January 2, 2009 providing tax relief to boost demand and increasing expenditure on public projects.
Government accorded approval to 37 infrastructure projects worth Rs.70,000 crore from August, 2008 to January, 2009 alone.
Under PPP mode, 54 Central Sector infrastructure projects with a project cost of Rs.67,700 crore given in-principal or final approval and 23 projects amounting to Rs.27,900 crore approved for viability gap funding in 2008-09.
India Infrastructure Finance Company Ltd. (IIFCL) to refinance upto 60 per cent of commercial bank loans for PPP projects involving total investment of Rs.1,00,000 crore in infrastructure over the next eighteen months.
In addition to RBI taking number of monetary easing and liquidity enhancing measures such as reduction in cash reserve ratio, statutory liquidity ratio and key policy rates, Government has taken specific measures which include extension of export credit for labour intensive exports, improving pre and post shipment credit
availability, additional allocations for refund of Terminal Excise Duty/CST and export incentive schemes besides removal of export duty and export ban on certain items. A Committee of Secretaries set up to address procedural problems faced by exporters.
Record US$ 32.4 billion FDI received in 2007-08 and notwithstanding financial uncertainty and slowdown, FDI inflows during April-November, 2008 were US$ 23.3 billion recording a growth of 45 per cent over the same period in 2007.
FRBM targets for the current year and for fiscal 2009-10 relaxed to provide much needed demand boost. However, medium term objective is to revert to fiscal consolidation at the earliest.
INITIATIVES AND ACHIEVEMENT
Agriculture
Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09. Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000 crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.
Agriculture credit disbursement increased three times from Rs.87,000 crore in 2003-04 to about Rs.2,50,000 crore in 2007-08.
To strengthen short-term cooperative credit structure, revival package in 25 states involving financial assistance of about Rs.13,500 crore is being implemented.
Interest subvention to be continued in 2009-10 to ensure that farmers get short term crop loans upto Rs.3 lakh at 7 per cent per annum.
The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore covers 3.6 crore farmers.
Despite higher procurement cost and higher international prices during the last 5 years, the central issue prices under Targeted Public Distribution System (TPDS) maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line (APL) category.
Minimum Support Price (MSP) for common variety of paddy increased from Rs.550 per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for the year 2009.
Rural Development
The corpus of Rural Infrastructure Development Fund (RIDF) increased from Rs.5,500 crore in 2003-04 to Rs.14,000 crore for the year 2008-09. A separate window for rural roads created with a corpus of Rs.4,000 crore for each of the last three years.
As against 60 lakh houses to be constructed under Indira Awaas Yojana by 2008-09, 60 lakh twelve thousand houses constructed between 2005-06 to December, 2008.
Panchayat Empowerment and Accountability Scheme (PEAIS) proposed to be expanded. ‘Project Arrow’ to provide new technology enabled services through post offices to common man and support effective implementation of social sector schemes like NREGS, while promoting financial inclusion.
Education
Major initiatives including a new Centrally Sponsored Scheme launched to universalize education at secondary stage in the year 2008-09.
Outlay on Higher Education increased 9 fold in the Eleventh Five Year Plan. Ordinance promulgated for establishing 15 Central Universities. In addition to 6 new Indian Institutes of Technology (IITs) in Bihar, Andhra Pradesh, Rajasthan, Orissa, Punjab and Gujrat which started functioning in 2008-09, two more IITs in Madhya Pradesh and Himachal Pradesh are expected to commence their academic session in 2009-10. 5 Indian Institute of Science Education and Research (IISER) announced earlier have become functional. 2 new schools of Planning and Architecture at Vijayawada and Bhopal have started functioning. Teaching is expected to commence from academic year 2009-10 in four out of six new Indian Institute of Management
proposed for the Eleventh Plan in Haryana, Rajasthan, Jharkhand and Tamil Nadu.
Due to revision in Educational Loan Scheme by the Government number of beneficiaries increased from 3.19 lakh to 14.09 lakh and amount of loan outstanding increased from Rs.4,500 crore as on March, 31, 2004 to Rs.24,260 crore as on September 30, 2008.
500 ITIs upgraded into centers of excellence. National Skill Development Corporation created in July, 2008 with initial corpus of Rs. 1,000 crore. Social Sector Authorised capital of National Safai Karamchari Finance and Development Corporation (NSKFDC) is being raised from Rs.200 crore to Rs.300 crore.
Scope of the pre-metric scholarship for children of those engaged in unclean occupations expanded and rates of scholarship doubled in 2008-09. Annual ad-hoc grant increased by about 50 per cent as compared to earlier rates.
Rashtriya Mahila Kosh to be strengthened by enhancing its authorized capital. ‘Priyadarsini Project’ a rural women’s employment and livelihood programme will be implemented as pilot in the district of Madhubani and Sitamarhi in Bihar and Shravasti, Bahraich, Rai Bareli and Sultanpur in Uttar Pradesh.146 lakh persons benefited under Indira Gandhi National Old Age Pension Scheme in the current financial year.
Two new schemes – ‘Indira Gandhi National Widow Pension Scheme’ to provide pension of Rs.200 to widows between age groups of 40-64 years and ‘Indira Gandhi National Disability Pension Scheme’ to provide pension for severely disabled persons.
Widows in the age group of 18-40 years to be given priority in admission to ITIs, Women ITIs and National/Regional ITIs for women. Government to bear cost of their training and provide stipend of Rs.500 per month.
22 States and Union Territories initiated process to implement Rashtriya Swasthya Bima Yojana for BPL familities in the unorganised sector and 60 lakh thirty two thousand persons covered for death and disability under ‘Aam Admni’ Bima Yojana (AABY).
Public Sector Enterprises
Turnover of Central Public Sector Enterprises increased from Rs.5,87,000 crore in 2003-04 to Rs.10,81,000 crore in 2007-08 and profits grew from Rs.53,000 crore to Rs.91,000 crore. While number of loss making enterprises came down from 73
in 2003-04 to 55 in 2007-08, number of profit making enterprises has gone up from 143 to 158 during the same period.Government approved implementation of Guidelines on Corporate Governance in
Central Public Sector Enterprises (CPSEs) in June, 2007.Corpus of National Investment Fund created out of disinvestment proceeds from Central PSUs stood at Rs.1,815 crore as on December 31, 2008.
Financial Sector Reforms
NPAs of Public Sector Banks declined from 7.8 per cent on March 31, 2004 to 2.3 per cent on March 31, 2008.
As a result of initiating process of amalgamation and recapitalization of Regional Rural Banks (RRBs) with negative net worth, 196 RRBs merged into 85 RRBs. The Government has contributed Rs.652 crore for capitalization of RRBs upto December 31, 2008.
Number of reforms undertaken in the last four years to deepen and widen the securities markets and strengthen the regulatory mechanisms for these markets. The Companies Bill, 2008, undertaking comprehensive revision of Companies Act, 1956 to enable adoption of internationally accepted best practices, has been introduced in the Parliament.
Tax Effort
Comprehensive reforms of tax system both direct and the indirect tax system have enabled the tax administration to enhance its functional efficiency and provide better tax payer services leading to increased compliance. Rates of Union Excise Duties and Service Tax rationalized for eventual shift to the Goods and Service Tax on 1st April, 2010.
109 marine vessels sanctioned for the Customs Department to prevent movements of contraband goods across the country’s sea borders.
Administrative Reforms
The enactment of the Right to Information Act at the Centre and in many States ushering in greater accountability of the public servants.
Recommendations of the Sixth Central Pay Commission approved by the Government has benefited over 45 lakh Central Government employees including Defence Forces and Para-Military forces and over 38 lakh pensioners.
REVISED ESTIMATES
The total expenditure at Rs.7,50,884 crore in B.E. 2008-09 revised to Rs.9,00,953 crore in R.E. 2008-09 showing an increase of Rs.1,50,069 crore. Plan Expenditure gone up from Rs.2,43,386 crore in B.E. 2008-09 to Rs.2,82,957 crore in R.E. 2008-09.
Non-Plan expenditure increased by Rs.1,10,498 crore in R.E. 2008-09 over B.E.2008-09. Revised Estimate 2008-09 for Non-Tax Revenues increased from Rs.95,785 crore in Budget Estimate 2008-09 to Rs.96,203 crore.
Revised Estimates of gross tax collection projected at Rs.6,27,949 crore as against B.E. 2008-09 of Rs.6,87,715 crore, primarily due to pro-active fiscal measures initiated to counter the impact of global slowdown on the Indian economy.
Revised Revenue deficit to be at Rs.2,41,273 crore (4.4 per cent of GDP) as against budgeted figure of Rs.55,184 crore (1 per cent of GDP).Fiscal deficit to go up from Rs.1,33,287 crore (2.5 per cent of GDP) in B.E.2008-09 to Rs.3,26,515 crore (6 per cent of GDP).
BUDGET ESTIMATES
Total expenditure for fiscal 2009-10 estimated at Rs.9,53,231 crore. Plan expenditure estimated at Rs.2,85,149 crore and Non-Plan expenditure at Rs.6,68,082 crore.
Budgetary support in Plan B.E. 2009-10 in comparison to B.E. 2008-09 increased for Department of Rural Development, Department of Road Transport & Highways, Railways, Ministry of Power, Department of Industrial Policy and Promotion and Department of Information Technology to meet the requirements of rural and infrastructure development along with higher allocation for Ministry of Youth Affairs & Sports and Ministry of Culture to ensure adequate resources for hosting of the Commonwealth Games. Allocations to flagship programme which directly impact ‘Aam Aadmi’ fully protected.
Rs.30,100 crore allocated for National Rural Employment Guarantee Scheme for the year 2009-10. In 2008-09 employment of 138.76 crore person days covering 3.51 crore household already generated.
About 98 per cent habitations covered by primary schools under Sarva Shiksha Abhiyan. Allocation for this programme increased by 571 per cent between 2003-04 and 2008-09. Allocation of Rs.13,100 crore proposed for 2009-10.
Rs.8,000 crore allocated for Mid-day Meals Scheme for the year 2009-10. Allocation of Rs.6,705 crore proposed for Integrated Child Development Scheme (ICDS) for the year 2009-10. New WHO child growth standards adopted for monitoring growth of children under ICDS.
386 projects amounting to Rs.39,000 crore sanctioned till December 31, 2008 under Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Allocation of Rs.11,842 crore proposed for the year 2009-10.
Rs.7,400 crore allocated for Rajiv Gandhi Rural Drinking Water Mission, Rs.1,200 crore for Rural Sanitation Programme, Rs.12,070 crore for National Rural Health Mission, Rs.40,900 crore allocated for Bharat Nirman for the year 2009-10.
A provision of Rs.100 crore in the Annual Plan 2009-10 made for UniqueIdentification Authority of India.
RIDF-XV proposed with a corpus of Rs.14,000 crore. Separate window for rural roads to continue with a corpus of Rs.4,000 crore.
Interest subvention of 2 per cent on pre and post shipment credit for certain employment oriented sectors i.e. Textiles (including handlooms & handicrafts), Carpets, Leather, Gem & Jewellery, Marine products and SMEs extended beyond March 31, 2009 till September 30, 2009 involving an additional financial outgo of
Rs.500 crore.
Government to recapitalize the public sector banks over the next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent. Allocation for Defence increased to Rs.1,41,703 crore which includes Rs.54,824 for Capital Expenditure.
Major subsidies including food, fertilizer and petroleum estimated at Rs.95,579 Crore. For the fiscal 2009-10, with Centre’s net tax revenue estimated at Rs.5,00,096 crore and Revenue expenditure at Rs.8,48,085 crore, revenue deficit is estimated at 4 per cent of GDP and fiscal deficit at 5.5 per cent of GDP.
INTRODUCTION
The Gross Domestic Product increased by 7.5 per cent, 9.5 per cent, 9.7 percent and 9 per cent in the first four years from fiscal year 2004-05 to 2007-08 recording a sustained growth of over 9 per cent for three consecutive years for the first time.
The growth drivers for the period were agriculture, services, manufacturing along with trade and construction.Fiscal deficit down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08.
The domestic investment rate as a proportion of GDP increased from 27.6 per cent in 2003-04 to 39 per cent in 2007-08. Gross Domestic savings rate shot up from 29.8 per cent to 37.7 per cent during this period. The Gross capital formation in agriculture as a proportion of agriculture GDP increased from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08.The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in 2007-08.
Annual growth rate of agriculture rose to 3.7 per cent during 2003-04 to 2007-08. The food grain production recorded an increase of 10 million tonnes each year during this period and touched an all time high of 230 million tonnes in 2007-08.
While manufacturing sector recorded growth of 9.5 per cent per annum in the period 2004-05 to 2007-08, communication and construction sectors grew at the rate of 26 per cent and 13.5 per cent per annum respectively.
Exports grew at an annual average growth rate of 26.4 per cent in US dollar terms in the period 2004-05 to 2007-08. Foreign trade increased from 23.7 per cent of GDP in 2003-04 to 35.5 per cent in 2007-08.
OUTLOOK FOR THE YEAR 2008-09
Despite the global financial crisis which began in 2007 impacting most emerging market economies, 7.1 per cent rate of GDP growth in the current year makes India the second fastest growing economy in the world.
Fallout of global slowdown on Indian economy were countered with fiscal stimulus packages announced on December 7, 2008 and January 2, 2009 providing tax relief to boost demand and increasing expenditure on public projects.
Government accorded approval to 37 infrastructure projects worth Rs.70,000 crore from August, 2008 to January, 2009 alone.
Under PPP mode, 54 Central Sector infrastructure projects with a project cost of Rs.67,700 crore given in-principal or final approval and 23 projects amounting to Rs.27,900 crore approved for viability gap funding in 2008-09.
India Infrastructure Finance Company Ltd. (IIFCL) to refinance upto 60 per cent of commercial bank loans for PPP projects involving total investment of Rs.1,00,000 crore in infrastructure over the next eighteen months.
In addition to RBI taking number of monetary easing and liquidity enhancing measures such as reduction in cash reserve ratio, statutory liquidity ratio and key policy rates, Government has taken specific measures which include extension of export credit for labour intensive exports, improving pre and post shipment credit
availability, additional allocations for refund of Terminal Excise Duty/CST and export incentive schemes besides removal of export duty and export ban on certain items. A Committee of Secretaries set up to address procedural problems faced by exporters.
Record US$ 32.4 billion FDI received in 2007-08 and notwithstanding financial uncertainty and slowdown, FDI inflows during April-November, 2008 were US$ 23.3 billion recording a growth of 45 per cent over the same period in 2007.
FRBM targets for the current year and for fiscal 2009-10 relaxed to provide much needed demand boost. However, medium term objective is to revert to fiscal consolidation at the earliest.
INITIATIVES AND ACHIEVEMENT
Agriculture
Plan allocation for agriculture increased by 300 per cent from 2003-04 to 2008-09. Rashtriya Krishi Vikas Yojna launched in 2007-08 with an outlay of Rs.25,000 crore to increase growth rate of agriculture and allied sector to 4 per cent per annum during Eleventh Plan period.
Agriculture credit disbursement increased three times from Rs.87,000 crore in 2003-04 to about Rs.2,50,000 crore in 2007-08.
To strengthen short-term cooperative credit structure, revival package in 25 states involving financial assistance of about Rs.13,500 crore is being implemented.
Interest subvention to be continued in 2009-10 to ensure that farmers get short term crop loans upto Rs.3 lakh at 7 per cent per annum.
The Agricultural Debt Waiver and Debt Relief Scheme, 2008 was implemented by June 30, 2008 as scheduled. Debt waiver/debt relief amounting to Rs.65,300 crore covers 3.6 crore farmers.
Despite higher procurement cost and higher international prices during the last 5 years, the central issue prices under Targeted Public Distribution System (TPDS) maintained at July, 2000 level in case of Below Poverty Line (BPL) and Antyodaya Anna Yojana (AAY) categories and at July, 2002 levels for Above Poverty Line (APL) category.
Minimum Support Price (MSP) for common variety of paddy increased from Rs.550 per quintal in 2003-04 to Rs.900 per quintal for the crop year 2008-09. In case of wheat, increase was from Rs.630 per quintal in 2003-04 to Rs.1080 per quintal for the year 2009.
Rural Development
The corpus of Rural Infrastructure Development Fund (RIDF) increased from Rs.5,500 crore in 2003-04 to Rs.14,000 crore for the year 2008-09. A separate window for rural roads created with a corpus of Rs.4,000 crore for each of the last three years.
As against 60 lakh houses to be constructed under Indira Awaas Yojana by 2008-09, 60 lakh twelve thousand houses constructed between 2005-06 to December, 2008.
Panchayat Empowerment and Accountability Scheme (PEAIS) proposed to be expanded. ‘Project Arrow’ to provide new technology enabled services through post offices to common man and support effective implementation of social sector schemes like NREGS, while promoting financial inclusion.
Education
Major initiatives including a new Centrally Sponsored Scheme launched to universalize education at secondary stage in the year 2008-09.
Outlay on Higher Education increased 9 fold in the Eleventh Five Year Plan. Ordinance promulgated for establishing 15 Central Universities. In addition to 6 new Indian Institutes of Technology (IITs) in Bihar, Andhra Pradesh, Rajasthan, Orissa, Punjab and Gujrat which started functioning in 2008-09, two more IITs in Madhya Pradesh and Himachal Pradesh are expected to commence their academic session in 2009-10. 5 Indian Institute of Science Education and Research (IISER) announced earlier have become functional. 2 new schools of Planning and Architecture at Vijayawada and Bhopal have started functioning. Teaching is expected to commence from academic year 2009-10 in four out of six new Indian Institute of Management
proposed for the Eleventh Plan in Haryana, Rajasthan, Jharkhand and Tamil Nadu.
Due to revision in Educational Loan Scheme by the Government number of beneficiaries increased from 3.19 lakh to 14.09 lakh and amount of loan outstanding increased from Rs.4,500 crore as on March, 31, 2004 to Rs.24,260 crore as on September 30, 2008.
500 ITIs upgraded into centers of excellence. National Skill Development Corporation created in July, 2008 with initial corpus of Rs. 1,000 crore. Social Sector Authorised capital of National Safai Karamchari Finance and Development Corporation (NSKFDC) is being raised from Rs.200 crore to Rs.300 crore.
Scope of the pre-metric scholarship for children of those engaged in unclean occupations expanded and rates of scholarship doubled in 2008-09. Annual ad-hoc grant increased by about 50 per cent as compared to earlier rates.
Rashtriya Mahila Kosh to be strengthened by enhancing its authorized capital. ‘Priyadarsini Project’ a rural women’s employment and livelihood programme will be implemented as pilot in the district of Madhubani and Sitamarhi in Bihar and Shravasti, Bahraich, Rai Bareli and Sultanpur in Uttar Pradesh.146 lakh persons benefited under Indira Gandhi National Old Age Pension Scheme in the current financial year.
Two new schemes – ‘Indira Gandhi National Widow Pension Scheme’ to provide pension of Rs.200 to widows between age groups of 40-64 years and ‘Indira Gandhi National Disability Pension Scheme’ to provide pension for severely disabled persons.
Widows in the age group of 18-40 years to be given priority in admission to ITIs, Women ITIs and National/Regional ITIs for women. Government to bear cost of their training and provide stipend of Rs.500 per month.
22 States and Union Territories initiated process to implement Rashtriya Swasthya Bima Yojana for BPL familities in the unorganised sector and 60 lakh thirty two thousand persons covered for death and disability under ‘Aam Admni’ Bima Yojana (AABY).
Public Sector Enterprises
Turnover of Central Public Sector Enterprises increased from Rs.5,87,000 crore in 2003-04 to Rs.10,81,000 crore in 2007-08 and profits grew from Rs.53,000 crore to Rs.91,000 crore. While number of loss making enterprises came down from 73
in 2003-04 to 55 in 2007-08, number of profit making enterprises has gone up from 143 to 158 during the same period.Government approved implementation of Guidelines on Corporate Governance in
Central Public Sector Enterprises (CPSEs) in June, 2007.Corpus of National Investment Fund created out of disinvestment proceeds from Central PSUs stood at Rs.1,815 crore as on December 31, 2008.
Financial Sector Reforms
NPAs of Public Sector Banks declined from 7.8 per cent on March 31, 2004 to 2.3 per cent on March 31, 2008.
As a result of initiating process of amalgamation and recapitalization of Regional Rural Banks (RRBs) with negative net worth, 196 RRBs merged into 85 RRBs. The Government has contributed Rs.652 crore for capitalization of RRBs upto December 31, 2008.
Number of reforms undertaken in the last four years to deepen and widen the securities markets and strengthen the regulatory mechanisms for these markets. The Companies Bill, 2008, undertaking comprehensive revision of Companies Act, 1956 to enable adoption of internationally accepted best practices, has been introduced in the Parliament.
Tax Effort
Comprehensive reforms of tax system both direct and the indirect tax system have enabled the tax administration to enhance its functional efficiency and provide better tax payer services leading to increased compliance. Rates of Union Excise Duties and Service Tax rationalized for eventual shift to the Goods and Service Tax on 1st April, 2010.
109 marine vessels sanctioned for the Customs Department to prevent movements of contraband goods across the country’s sea borders.
Administrative Reforms
The enactment of the Right to Information Act at the Centre and in many States ushering in greater accountability of the public servants.
Recommendations of the Sixth Central Pay Commission approved by the Government has benefited over 45 lakh Central Government employees including Defence Forces and Para-Military forces and over 38 lakh pensioners.
REVISED ESTIMATES
The total expenditure at Rs.7,50,884 crore in B.E. 2008-09 revised to Rs.9,00,953 crore in R.E. 2008-09 showing an increase of Rs.1,50,069 crore. Plan Expenditure gone up from Rs.2,43,386 crore in B.E. 2008-09 to Rs.2,82,957 crore in R.E. 2008-09.
Non-Plan expenditure increased by Rs.1,10,498 crore in R.E. 2008-09 over B.E.2008-09. Revised Estimate 2008-09 for Non-Tax Revenues increased from Rs.95,785 crore in Budget Estimate 2008-09 to Rs.96,203 crore.
Revised Estimates of gross tax collection projected at Rs.6,27,949 crore as against B.E. 2008-09 of Rs.6,87,715 crore, primarily due to pro-active fiscal measures initiated to counter the impact of global slowdown on the Indian economy.
Revised Revenue deficit to be at Rs.2,41,273 crore (4.4 per cent of GDP) as against budgeted figure of Rs.55,184 crore (1 per cent of GDP).Fiscal deficit to go up from Rs.1,33,287 crore (2.5 per cent of GDP) in B.E.2008-09 to Rs.3,26,515 crore (6 per cent of GDP).
BUDGET ESTIMATES
Total expenditure for fiscal 2009-10 estimated at Rs.9,53,231 crore. Plan expenditure estimated at Rs.2,85,149 crore and Non-Plan expenditure at Rs.6,68,082 crore.
Budgetary support in Plan B.E. 2009-10 in comparison to B.E. 2008-09 increased for Department of Rural Development, Department of Road Transport & Highways, Railways, Ministry of Power, Department of Industrial Policy and Promotion and Department of Information Technology to meet the requirements of rural and infrastructure development along with higher allocation for Ministry of Youth Affairs & Sports and Ministry of Culture to ensure adequate resources for hosting of the Commonwealth Games. Allocations to flagship programme which directly impact ‘Aam Aadmi’ fully protected.
Rs.30,100 crore allocated for National Rural Employment Guarantee Scheme for the year 2009-10. In 2008-09 employment of 138.76 crore person days covering 3.51 crore household already generated.
About 98 per cent habitations covered by primary schools under Sarva Shiksha Abhiyan. Allocation for this programme increased by 571 per cent between 2003-04 and 2008-09. Allocation of Rs.13,100 crore proposed for 2009-10.
Rs.8,000 crore allocated for Mid-day Meals Scheme for the year 2009-10. Allocation of Rs.6,705 crore proposed for Integrated Child Development Scheme (ICDS) for the year 2009-10. New WHO child growth standards adopted for monitoring growth of children under ICDS.
386 projects amounting to Rs.39,000 crore sanctioned till December 31, 2008 under Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Allocation of Rs.11,842 crore proposed for the year 2009-10.
Rs.7,400 crore allocated for Rajiv Gandhi Rural Drinking Water Mission, Rs.1,200 crore for Rural Sanitation Programme, Rs.12,070 crore for National Rural Health Mission, Rs.40,900 crore allocated for Bharat Nirman for the year 2009-10.
A provision of Rs.100 crore in the Annual Plan 2009-10 made for UniqueIdentification Authority of India.
RIDF-XV proposed with a corpus of Rs.14,000 crore. Separate window for rural roads to continue with a corpus of Rs.4,000 crore.
Interest subvention of 2 per cent on pre and post shipment credit for certain employment oriented sectors i.e. Textiles (including handlooms & handicrafts), Carpets, Leather, Gem & Jewellery, Marine products and SMEs extended beyond March 31, 2009 till September 30, 2009 involving an additional financial outgo of
Rs.500 crore.
Government to recapitalize the public sector banks over the next two years to enable them to maintain Capital to Risk Weighted Assets Ratio (CRAR) of 12 per cent. Allocation for Defence increased to Rs.1,41,703 crore which includes Rs.54,824 for Capital Expenditure.
Major subsidies including food, fertilizer and petroleum estimated at Rs.95,579 Crore. For the fiscal 2009-10, with Centre’s net tax revenue estimated at Rs.5,00,096 crore and Revenue expenditure at Rs.8,48,085 crore, revenue deficit is estimated at 4 per cent of GDP and fiscal deficit at 5.5 per cent of GDP.
SB Int Preperation
SB is one of the government banks. SB invited applications. SB is not conducting any test and simply short listing on the basis of marks you obtained in the qualifying examinations.
The second round is more of tough and would be full of brain storming session. Questions that all candidates are seeking is that what would be interview based on.
Some few Question Categories that are expected to be dealt with:
1: In this time of Global recession, how Indian banking industry is doing sound functioning?
2: Big Banks in USA that had 100 years of history collapsed but Indian Banking system is running smoothly. Why?
3: Can you do a critical analysis for this?[Facts, figures and knowledge of banking fundamentals can do this]
4: Questions that cover the current scenario of economy would be asked in interview heavily.
5: The current crises in economy have a long run impact on banking industry. How India is tacking this crisis? What is the role of banks and how they are performing in particular this phase of economy?
6: This is only one face of the interview. Rest of things would be asked from your subject in whom you graduated. If candidate is from engineering background, then the questions on the role of candidate can play in banking industry. Why the switch is and what candidate would do here as he would be new to this industry?
Things to learn:
1: Reasons for Banking stability in India & Reasons for the Current Economic Crisis:
So, candidates have to go deeply and find out the reasons of sound banking industry in India as well as the reasons for this currently going crisis.
2: Banks wants the candidates that have good understanding of external environment and know how to take measure that would be good for banks.
3: Economics of Banking.
4: Candidate must have thorough Knowledge of stimulus packages provided by Indian Government .How they are affecting & improving the situation? Lots of questions can be asked on the economy as a topic.
So, Candidate has to give proper justification for these questions. There is no right or wrong answer, but what matters is how confident enough for the replies you made. Candidates have to show that he has interest in banking industry.
The second round is more of tough and would be full of brain storming session. Questions that all candidates are seeking is that what would be interview based on.
Some few Question Categories that are expected to be dealt with:
1: In this time of Global recession, how Indian banking industry is doing sound functioning?
2: Big Banks in USA that had 100 years of history collapsed but Indian Banking system is running smoothly. Why?
3: Can you do a critical analysis for this?[Facts, figures and knowledge of banking fundamentals can do this]
4: Questions that cover the current scenario of economy would be asked in interview heavily.
5: The current crises in economy have a long run impact on banking industry. How India is tacking this crisis? What is the role of banks and how they are performing in particular this phase of economy?
6: This is only one face of the interview. Rest of things would be asked from your subject in whom you graduated. If candidate is from engineering background, then the questions on the role of candidate can play in banking industry. Why the switch is and what candidate would do here as he would be new to this industry?
Things to learn:
1: Reasons for Banking stability in India & Reasons for the Current Economic Crisis:
So, candidates have to go deeply and find out the reasons of sound banking industry in India as well as the reasons for this currently going crisis.
2: Banks wants the candidates that have good understanding of external environment and know how to take measure that would be good for banks.
3: Economics of Banking.
4: Candidate must have thorough Knowledge of stimulus packages provided by Indian Government .How they are affecting & improving the situation? Lots of questions can be asked on the economy as a topic.
So, Candidate has to give proper justification for these questions. There is no right or wrong answer, but what matters is how confident enough for the replies you made. Candidates have to show that he has interest in banking industry.
Subscribe to:
Posts (Atom)