Professional Documents
Culture Documents
Contents
Summary
Part A: Core business to drive profitability
The net profitability margin Executive summary 1
(NPM) of banks will rise from Business 9
1.36 per cent in end-March Interest rate outlook and yields 37
2003 to 1.45 per cent by March Profit and loss account 49
2006, despite a continuing Profitability 57
decline in spreads, on account
of the cost-control measures Part B: State of the industry
they have adopted. The Overview 61
business of the industry is Business 67
expected to grow by 14.2 per Spreads & net profitability margin 89
cent CAGR between 2003-04 Profit and loss account 99
and 2005-06, led by continued Other income 103
growth in retail finance, recovery Operating expenses 109
in commercial credit and growth Important ratios 121
in agricultural credit. Asset
quality will also improve, with Part C: Industry statistics
net NPAs expected to touch 2.54 Industry structure 123
per cent by 2005-06. Interest Financial system in India 129
rates have started to harden Industry performance (tables) 137
during 2004-05, which will Industry performance (graphs) 161
dramatically reduce un-booked Player profiles 173
profits from the investment
portfolio.
Part D: Annexure 289
Contact details
Analyst: Yatin Gupte Head of Research: Rajnish Rastogi Client Servicing
(ygupte@crisinfac.com) (rrastogi@crisinfac.com) (clientservicing@crisinfac.com),
022-56913561
Opinion
Sections
Executive summary 1
- Net profitability margin expected to rise 1
- Business to grow by 14.2 per cent CAGR in 2003-04 to 2005-06 2
- Asset quality of banks to improve 4
- Interest rates to harden from 2004-05 6
- Unbooked profits on investments to reduce dramatically 7
- Key ratios: Return on assets to be under pressure due to slow
growth in fee-based income 7
- Challenges faced by banks in an increasing interest rate scenario 8
1.0 Business 9
- Business of scheduled commercial banks to grow at 14.2 per cent 9
- Sources of funds: Deposits 10
- Borrowings to grow at 7.1 per cent CAGR 16
- Equity capital & reserve and surplus 17
- Capital adequacy ratio 19
- Advances 20
- With the improvement of credit offtake, credit deposit ratio to
touch 62% by 2005-06 29
- Increasing credit deposit ratio to slow down the growth rate
of investments 29
- Asset quality 30
- Cash in hand and balances with RBI grew at a CAGR of 4.1
per cent from 1997-98 to 2002-03 35
2.0 Interest rate outlook and yields 37
- Interest rates to harden in 2004-05 37
- Yields and cost of scheduled commercial banks 41
- Yield on investments 43
3.0 Profit and loss account 49
- Interest earned 49
- Interest expended 50
- Fee-based income: Core and non-core 51
- Profit on sale of investments 52
- Operating expenses to grow 8.8 per cent 54
- Provision & contingencies 55
4.0 Profitability 57
- Net profitability margin highly susceptible to changes in
operating expenses 57
- Other key ratios 58
Continued...
Boxes
1.0 Business
01 Alternative investment products 15
02 Movement & stock of foodgrains at FCI 22
03 Impact on the spreads of interest rate reduction on FCI credit 23
04 Corporate Debt Restructuring Mechanism (CDR) 32
05 Sector-wise NPA of scheduled commercial banks 33
06 Recent guidelines issued by RBI pertaining to CRR 36
4.0 Profitability
01 Net profitability margin 58
Figures
Executive summary
01 Business of scheduled commercial banks 2
02 Non-food credit 3
03 Asset quality 4
04 Non-performing assets 5
05 Average yield on G-Sec 7
1.0 Business
01 Proportion of different sources of funds of SCBs 10
02 Interest rate on deposits vs growth in term deposits 12
03 Ownership of savings deposits 13
04 Ownership of deposits within the household sector - 2002 13
05 Growth in saving deposits 13
06 Ownership of current deposits with SCB 14
07 Ownership of deposits within the household sector - 2002 14
08 Growth in borrowings 16
09 Growth in borrowings (excluding ICICI Bank) 16
10 CRAR of top six banks 19
11 Food credit 20
12 Agricultural credit 24
13 Retail credit 25
14 Operating rates 27
15 Credit deposit ratio 29
16 Investment-deposit ratio 30
continued...
Figures
17 Asset quality 30
18 Incremental NPA provision 34
19 Comparison of CRR with proportion of cash in hand with T&DL 35
4.0 Profitability
01 Spreads & NPM 58
Tables
Executive summary
01 Net profitability margin (NPM) 1
02 Key ratios 7
1.0 Business
01 Business of scheduled commercial banks in India 9
02 Sources of funds of scheduled commercial banks 10
03 Deposits of scheduled commercial banks from 1999-00 to 2005-06 11
04 Share of deposits 11
05 Proportion of different categories of deposits in the incremental deposits 11
06 Growth of deposits 11
07 Share of different investment alternatives in incremental investible funds 15
08 Equity and reserve surplus 17
09 Distributions of scheduled commercial banks by CRAR 18
10 Assets of the scheduled commercial banks 20
11 Food and non-food credit of scheduled commercial banks 20
12 Movement - food grains by FCI (provisional) 22
13 Stock in Central pool as on 30/06/2004 22
14 Impact on yield on advances 23
15 Non-food credit growth 24
16 Projected investments 27
17 NPAs of scheduled commercial banks 31
18 Progress under CDR Scheme 33
19 Sector-wise composition of NPAs of public sector banks (1999-2003) 33
20 Impact of CRR rate reduction on yields 36
continued...
Tables
2.0 Interest rate outlook and yields
01 Average yields of government securities 37
02 Projected interest rates of government securities 37
03 Fiscal deficit and market borrowing 38
04 Tax revenues and industrial growth 39
05 Yields & costs of scheduled commercial banks 41
06 Maturity profile of loans and advances of scheduled commercial banks 42
07 Maturity profile of investments of scheduled commercial banks 43
08 Maturity profile of term deposits of scheduled commercial banks 45
09 Maturity profile of borrowings of scheduled commercial banks 47
10 Average cost of borrowings of scheduled commercial banks 47
4.0 Profitability
01 Net profitability margin (NPM) 57
02 Key ratios 58
03 Projected profit and loss account of the scheduled commercial banks 59
04 Projected balance sheet of all scheduled commercial banks 60
In the banking industry, business is defined as the sum of the deposits and advances as on
a particular date.
CRIS INFAC estimates that the business of scheduled commercial banks will grow from Rs 21,644
billion in 2002-03 to Rs 32,229 billion by 2005-06 at a CAGR of 14.2 per cent, led by continued
growth in retail finance, gradual recovery in commercial credit, pick-up in agriculture credit and
growth in deposits.
During 2003-04 to 2005-06, their advances will grow by 17.4 per cent on the back of growth
in retail finance, and commercial and agriculture credit. Deposits are expected to grow by 12.4
per cent CAGR.
From 2000-01 to 2002-03, the business of the scheduled commercial banks grew by 16.0 per
cent (14.5 per cent) CAGR.
The 14.5 per cent CAGR growth in business was mainly driven by a 16 per cent CAGR growth
in advances (excluding ICICI Bank). Due to the slowdown in industrial growth, many corporates
restructured themselves to survive; hence, credit offtake was low. With reduced avenues for investment
of surplus funds, banks turned to retail financing. The retail finance portfolio grew by around
27 per cent during the same period.
Due to the merger of ICICI Ltd with ICICI Bank on March 30, 2002, all the growth figures
for scheduled commercial banks (SCBs) for the period 1999-00 to 2002-03 are distorted. Hence,
for a better comparison, we have calculated the growth figures excluding ICICI Bank, which
are indicated in brackets throughout this Annual Review.
Borrowings Borrowings
4 6
Deposits Deposits
88 88
CRIS INFAC expects the deposits of all scheduled banks to grow from a level of Rs 14,045
billion as of March 2003 to Rs 19,929 billion as of March 2006 at a CAGR of 12.4 per cent.
This will be driven by a growth of 8.5 per cent, 16.2 per cent and 11.7 per cent in demand
deposits, savings deposits and term deposits, respectively.
Time and demand deposits of all scheduled commercial banks have been growing a CAGR of
14.6 per cent (13.7 per cent) during 2000-01 to 2002-03, driven primarily by the growth in
term deposits and savings deposits, which grew by a CAGR of 13.8 per cent and 16.7 per
cent (excluding ICICI Bank), respectively.
The proportion of term deposits in the total deposit mix has increased from 64 per cent in
1991-92 to around 66 per cent in 2002-03.
On an incremental deposit basis, the proportion of term deposits dropped from 70 per cent
in 1998-99 to 61 per cent in 2002-03 due to falling interest rates. In the next 3 years, the
proportion of term deposits is likely to go up, albeit at a slow rate, due to the expected
rise in the interest rates and the introduction of technology-driven products.
From 2000-2003, term deposits recorded a growth of 15.1 per cent (13.8 per cent) CAGR on
account of their perceived safety, in comparison to other investment instruments like equity and
mutual funds.
Term deposits have shown a strong correlation with the interest rates of deposits, with the
coefficient of correlation at 0.82. For the purpose of our study, we have considered the interest
rates offered on deposits with a 3-5 year tenure. CRIS INFAC believes that the interest rate
offered on term deposits (3-5 year tenure) will rise from 5.25 per cent in 2003-04 to 6.15
per cent in 2004-05 (an increase of 90 bps) and go up further by 35 bps to 6.50 per cent
in 2005-06. This will result in term deposits growing at 11.37 per cent, 12.61 per cent and
13.19 per cent in 2003-04, 2004-05 and 2005-06, respectively.
13.0 25.0
12.0
20.0
11.0
10.0
15.0
9.0
10.0
8.0
7.0
5.0
6.0
5.0 -
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04E 2004-05P 2005-06P
Interest rates on deposits (3-5 years maturity) growth in term deposits (%)
Where, y = growth rate of term deposits, x = interest rate on deposits (3 - 5 years maturity).
Savings deposits accounted for nearly 23 per cent of the total deposit base of scheduled commercial
banks in India as on March 31, 2003.
Proprietary and
Partnership
1
Individuals Religious
90 Institutions
1
Others(not
elsewhere
classified)
Household 5
88
Source: RBI and CRIS INFAC Research Source: RBI and CRIS INFAC Research
As on the last reporting Friday of March 2002, nearly 88 per cent of the total savings deposits
of scheduled commercial banks were owned by the household sector. Of these around 90 per
cent were owned by individuals. About 79 per cent of the savings deposits are owned by
individuals and are, hence, considered as a stable source of funds.
17.00
13.00
9.00
5.00
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 P 2004-05 P 2005-06 P
During 2000-01 to 2003-04, savings deposits registered a CAGR of 17.1 per cent (16.7 per
cent). The year-on-year growth in savings deposits has remained more or less stable at 16-
17 per cent. This is primarily because Indians are generally inclined to save more, and growth
in savings deposits is not very much driven by interest rate movement.
Given the stable nature of these deposits and the ‘save more' mindset of the Indian public,
CRIS INFAC expects the growth in savings deposits to be stable at 16.0-16.5 per cent CAGR
during 2003-04 to 2005-06.
Firms maintain demand deposits to meet their day-to-day cash requirements. With the advent
of new technology-driven products such as electronic fund transfers, Real Time Gross Settlements
(RTGS) and Cash Management Systems (CMS), the clearing cycle has shortened. RTGS and CMS
allow quick transfer of funds to and from any part of the country. This will encourage corporates/
firms to reduce their balances in demand deposits, and probably slow down their growth. Further,
customer-friendly products that are introduced by banks with the aid of technology (swipe-in
and swipe-out) will divert some portion of demand deposits towards fixed deposits.
During 2000-01 to 2003-04, demand deposits have grown by a CAGR of 8.4 per cent (8.1
per cent) from Rs 1,308.6 billion as of March 2000 to Rs 1,668.1 billion as of March 2003.
Demand deposits are the most volatile component of the deposits that banks have, and their
year-on-year growth has shown an uneven trend over a 10-year period. During the last few
years, a declining trend has been observed on account of the downturn in the industry.
Ownership of current deposits with SCB Ownership of deposits within the household
Figure 6 sector - 2002 Figure 7
Household
Corporate Proprietary and
47
sector Partnership
16 33
Foreign
3 Other
Trusts
Associations individuals
Clubs etc. 20
Govt.
18 3
Source: RBI and CRIS INFAC Research Source: RBI and CRIS INFAC Research
As on the last reporting Friday of March 2002, the corporate and the financial sectors together
owned 32 per cent of the current deposits of scheduled commercial banks. Further, 47 per
cent of the total current deposits were owned by the household sector, of which around 66
per cent were owned by traders and partnership firms together. Thus, close to 63 per cent
of the demand deposits are owned by the business class, and are hence treated as the most
volatile component of deposits.
Overview
Besides term deposits, investors have the option of investing in insurance, small savings schemes, mutual funds and the
like. While the share of small savings schemes in total investments has remained more or less stable, the share of
insurance and mutual funds in the total pie is increasing. This has led to a drop in the share of the bank liability product
(term deposits + savings deposits) from 68 per cent in 1998-99 to 57 per cent in 2002-03. But, going forward, we expect
it to increase marginally to 58 per cent by 2005-06. The following table indicates the share of various investment alternatives
in the incremental inflows of investible money in the economy.
Insurance sector
The life insurance sector, which was earlier a monopoly of the Life Insurance Corporation of India (LIC), was opened up
to the private sector in 1999-2000. From 1996-97 to 2002-03, the total insurance premium increased by a CAGR of 22.8
per cent from Rs 162 billion to Rs 557.3 billion in 2002-03.
However, during 2000-01 to 2001-02, the removal of assured returns schemes across insurance products of the Life
Insurance Corporation of India has resulted in their becoming less attractive to investors. Since LIC still accounts for a
significant portion of the life insurance market, the drop in its growth will result in a marginal decline in the growth rate of
insurance premiums. CRIS INFAC expects insurance premiums to grow at a CAGR of 8.04 per cent from 2002-03 to 2005-
06.
During 2000-01 to 2002-03, borrowings of scheduled commercial banks grew by 22.9 per cent
(5.4 per cent) CAGR.
20.2
80.0 20.0
15.0
11.2
60.0
10.0
9.0
8.0
10.0
6.9
40.0
21.1
-8.9
5.0
11.8
20.0
9.7
3.6
8.3
-18.3
0.0
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
0.0
1999-2000
2000-01
2001-02
2002-03
2003-04 F
2004-05 F
2005-06 F
-5.0
-20.0
-10.0
-40.0
-15.0
Source: RBI and CRIS INFAC Research Source: RBI and CRIS INFAC Research
In 2002-03, the borrowings of scheduled commercial banks recorded a negative growth rate of
18 per cent, primarily on account of:
ICICI Bank replacing its high cost borrowings (of the erstwhile ICICI Limited) with term and savings
account deposits.
Excess liquidity prevailing in the system and lesser opportunity to invest the available funds.
Banks taking advantage of reduced interest rates to prune their high-cost debt portfolio.
CRIS INFAC estimates a marginal growth in borrowings in 2003-04. The liquidity position was
comfortable throughout 2003-04, hence the demand for borrowings is expected to be low. Further,
we also expect ICICI Bank to continue replacing its high cost borrowings with low cost deposits,
but at a slower pace. However, as the demand for credit gradually increases, the demand for
borrowings would increase, which will push up the growth in borrowings to 9 per cent in 2004-
05 and 10 per cent in 2005-06
Another source of funds for the banking sector is the equity capital. In the last 10 years, the
total equity capital raised by banks has gone up, although it is not the main source of funds
for banks. With stricter capital adequacy norms and the growing loan book size, banks will need
to infuse more capital to maintain a healthy capital adequacy ratio. Many of the public sector
banks have reduced the government stake by raising equity from the market. In 2002-03, the
total amount raised by public sector banks through equity was approximately Rs 7.7 billion. In
2003-04, public sector banks are estimated to raise nearly Rs 6.0 billion. Hence, in order to
maintain a healthy capital adequacy ratio, going forward, banks will embark on infusing more
equity capital. CRIS INFAC estimates equity capital to grow at CAGR of 2.5 per cent in the
next year.
The retained earnings of banks have grown at a CAGR of 20.5 per cent from 1999-00 to 2002-
03. This was primarily on account of the over 31.2 per cent CAGR growth in net profits in
the same period. CRIS INFAC expects profits after tax to grow at a CAGR of 10.3 per cent
during 2003-04 to 2005-06 and the dividend payout ratio to be at 18.5 per cent. We also
expect addition to the reserves through an increase in share premium, which is expected to
grow in line with the projected growth in the equity capital. CRIS INFAC expects retained earnings
to grow at a CAGR of 18.8 per cent in the next 3 years, based on the above factors.
As of March 2003, all scheduled commercial banks, except two banks, had their CRAR above
the stipulated norms. Between March 2002 and March 2003, we see a marked improvement
in the nationalised banks, with all banks having capital adequacy above the stipulated norm of
9 per cent. This can be attributed to the increase in profitability and the fresh capital raised
by many banks. With the likely implementation of new Capital Accord (Basel II), many banks,
especially those having a global presence, have been holding capital in excess of the stipulated
norm.
13.5
13.5
14.0
13.4
13.1
13.0
12.8
12.8
12.7
12.2
12.0
12.0
11.7
11.6
11.4
12.0
11.3
11.1
11.1
11.1
10.7
10.7
10.4
10.2
10.0
8.0
Bank Of Baroda Bank Of India H D F C Bank Ltd. ICICI Bank Ltd Punjab National State Bank Of
Bank India
From the sample of six banks listed above, we see that the capital adequacy ratio of all banks,
except ICICI Bank, has improved. The capital adequacy ratio of PSBs has shown a significant
improvement in comparison to that of the new private sector banks. This is on account of
the aggressive lending strategy of new private sector banks in comparison to the aggressive
capital raising strategy of the public sector banks.
CRIS INFAC expects advances to grow faster than deposits. With the expected increase in credit
demand, banks will prefer to increase their loan portfolio instead of investments. This will result
in banks shifting their focus from investments towards advances. This shift from the risk free
assets to risky assets and the impending implementation of the new Basel accord, which is
expected to increase the risk weights of the assets, would require banks to raise capital to
maintain CAR above the stipulated norm.
500
400
300
200
100
0
1999-2000 2000-01 2001-02 2002-03 2003-04E 2004-05P 2005-06P
CRIS INFAC believes food credit will show a negative CAGR of 2.45 per cent during 2003-
04 to 2005-06. In sharp contrast to the accelerated growth witnessed in 2001-02, food credit
declined steeply by 26.2 per cent in 2003-04 after declining by 8.3 per cent in 2002-03. The
steep decline in food credit was on account of lower procurement and higher offtake of food
grains from the public distribution system.
The government has emphasised the need to improve the functioning of the public distribution
system. This, coupled with the drop in the stock levels of FCI due to higher offtake of foodgrains
through the public distribution system in earlier years, should increase the FCI's procurement
in 2004-05. However, its procurement is likely to be influenced by the availability of storage
capacity at its various godowns. FCI has over 23 million tonnes (owned & hired) of storage
capacity in over 1,700 godowns all over India.
Higher procurement will lead to increased credit. However, recently, the Central government permitted
FCI to raise money from the market to the tune of Rs 50 billion. Though banks can subscribe
to these bonds, they will have to compete with other market players, which will reduce their
food credit exposure.
During the last quarter of 2003-04, banks had reduced the interest rate charged on the food
credit by about 150 bps from a level of 10.95 per cent, which will have an impact of about
6.23 basis points (annualised) on the yield on advances. Further, if FCI decides to raise Rs
50 billion of its requirement from the market, the yield on advances would face a further impact
of 2.28 basis points (annualised).
CRIS INFAC expects food credit to grow at a rate of 17 per cent in 2004-05 but taper to
7 per cent in subsequent years.
The total foodgrain stocks in the Central grain pool were estimated at around 29.9 million tonnes in the beginning of July.
This comprised 19.15 million tonnes of wheat and 10.76 million tonnes of rice. The stock in the central pool as on June 30,
2004, is above the buffer stock norms
A food ministry sponsored study has concluded that the foodgrain requirement of the public distribution system and
welfare schemes can be met with lower grain procurement and stockholding than at present
The total outstanding food credit as in March 2003 was Rs 495 billion, which amounted to 9 per cent of the outstanding
loans and advances of public sector banks as on March 31, 2003. Banks were earning a yield 10.95 per cent on their FCI
exposure till December 2003-quarter end.
The rate of 10.95 per cent is based on the prime lending rate (PLR) of five large public sector banks: State Bank of India,
Punjab National Bank, Canara Bank, Bank of Baroda and Bank of India. During 2001-02 to 2002-03, the range of decline
of the average PLR of these public sector banks at 125 bps (12 to 10.75 per cent) has been much lower than the decline
on the 10-year Government of India (GOI) securities, which has fallen by around 400 bps (April 2001 to March 2003)
During the last quarter of 2003-04, banks agreed to reduce their lending rate to FCI by 150 bps to 9.45 per cent.
Recently, the Centre allowed FCI to borrow up to Rs 50 billion from the bond market, which would reduce the banks’
exposure to FCI, as they would compete with other players in the open market. Till date, FCI has not raised any loans from
the market.
We have tried to calculate the impact of these significant developments on the yield on advances
The impact of the reduction in the interest rate works out to 6.23 basis (annualised). If FCI were to access the bond
market, banks can subscribe to these bonds, but would earn a low yield, because we believe the pricing of the paper would
be at par with GOI paper of a similar duration., as the market borrowings would be backed with a GOI guarantee.
Assuming an average G-Sec yield of 5.10 per cent during 2004-05 for 2-year paper, the impact on the spreads of banks
is estimated to be 2.28 basis points (annualised).
We have not factored in these developments in our projections. The total impact of the above-mentioned developments on
the yield on carry business and spreads is estimated at around 8.5 basis points.
CRIS INFAC estimates that non-food credit will grow at a CAGR of 18.6 per cent during 2003-
04 to 2005-06, driven by the continued growth in retail finance and the expected pick-up in
agricultural and industrial credit.
During 2000-01 to 2003-04, non-food credit recorded a CAGR of 18.2 per cent, primarily due
to increased demand for retail credit, which grew at a CAGR of 27 per cent during the same
period.
1400 1281
1200
1025
1000
854
800 711
591
600 504
433
400
200
0
1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04P 2004-05P 2005-06P
CRIS INFAC expects agriculture credit to grow from Rs 854 billion (March 2003 end) to Rs
1,601 billion (March 2006 end) at a CAGR of 23.31 per cent, driven by the government's emphasis
on improving credit delivery to the agriculture sector.
During 1999-2000 to 2002-03, agriculture credit recorded a CAGR of 19.2 per cent from Rs
504.3 billion as of end-March 2000 to Rs 853.8 billion as of end-March 2003. The growth in
agriculture credit has been steady, due to low penetration of agricultural credit in the rural areas
and uneven agriculture output over the years.
The government has laid emphasis on improving the credit delivery to the agriculture sector
and thus improving agriculture production in the country. The Ministry of Finance has advised
all banks to increase their agriculture credit by 30 per cent over the next 3 years, from 2004-
05 to 2007-08. Further, several measures have been initiated, like increasing the credit limit
of the kisan credit card scheme, special agricultural credit plans, etc. The Reserve Bank of India
has directed banks to restructure / reschedule the overdue agriculture loans, waive margin money
requirement for agricultural loans up to Rs 50,000, etc.
Agriculture credit had been growing between 17-18 per cent during the last few years. Several
banks have started restructuring their operations to meet the targeted agricultural growth. Banks
have set up strategic business unit to cater to the agriculture credit demand. However, we feel
the projected growth rate of 30 per cent to be optimistic. CRIS INFAC expects the growth
in agricultural advances to be around 23 per cent CAGR during the 2002-03 to 2005-06.
2500
2136
2000
1582
1500
1051
1000 825
659
516
500 408
0
1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04P 2004-05P 2005-06P
The projected growth in the outstanding retail finance in the next 3 years would be mainly
driven by the following factors.
Continued growth expected in housing finance, and cars and commercial vehicles finance.
Increasing market share of banks vis-à-vis NBFCs in the retail finance pie.
Increasing tenures of the loans.
During 2000-01 to 2002-03, the retail finance portfolio of banks has grown at a CAGR of 27
per cent from Rs 516.4 billion to Rs 1,051.4 billion. This steady growth in retail finance portfolio
was mainly on account of the following factors:
Focus of large public and private sector banks on disbursements to the household sector for housing
loans, commercial vehicles, cars and two wheelers
Increasing penetration of banks vis-à-vis NBFCs.
Lower interest rates, contributing to increase in demand, and rising tenure of car, housing and commercial
vehicle portfolio.
We expect outstanding housing finance, which constitutes almost 52 per cent of the total retail
finance, to grow at a CAGR of 40 per cent, while the outstanding car finance and commercial
vehicle finance will grow at a CAGR of 35 per cent each, during 2003-04 to 2005-06. Car
finance constitutes nearly 24 per cent of the retail finance portfolio.
Banks, with their low cost funds advantage, will continue to dominate the retail finance market
and CRIS INFAC expects banks to increase their market share in the retail finance market.
Other commercial credit to grow at 13.3 per cent CAGR, driven by gradual pick-up in industrial credit
Other commercial credit consists of the credit availed by large, medium and small-scale industries
covering various sectors.
CRIS INFAC estimates other commercial credit segment to grow from Rs 5,199.5 billion as of
end-March 2003 to Rs 7,570.0 billion as at March 2006 at a CAGR of 13.3 per cent, led by
the gradual upturn in the investment cycle in the manufacturing sector and a sustained growth
in the service sector.
Upturn in the investment cycle to boost credit from the manufacturing sector
The manufacturing sector has not seen any major capacities being set up in the last 3 years.
Consequently, many industries are reaching nearly full capacity utilisation levels. The present capacities
are not sufficient to meet the expected growth in demand in various industries, which has increased
the operating rates. Hence we expect capacity additions across all manufacturing sectors, which
in turn would increase the demand for credit.
65 75
60 70
55 65
50 60
1998-99 2000-01 2002-03 2004-05 2006-07 1998-99 2000-01 2002-03 2004-05 2006-07
Note
The operating rates projected for the period 2003-04 to 2007-08 are without considering any capacity built up.
Source: CRIS INFAC
A CRIS INFAC industry study has identified eight industries, which are listed above, where significant
capital expenditure is projected. During 1998-99 to 2002-03, these sectors have made investment
to the tune of Rs 776.39 billion. During the next 5-year period, these eight industries are projected
to make investment to the tune of Rs 1,939 billion, which is 2.5 times the investments made
by these industries in the last 5 years. Based on our study, these eight sectors account for
almost 67 per cent of the total manufacturing sector (based on the capital expenditure), which
gives a total capital expenditure requirement for the entire manufacturing sector of Rs 2,908.5
billion. Out of a capital expenditure of Rs 2,908.50 billion, almost Rs 349 billion would have
taken place in 2003-04, while Rs 494 billion will occur in 2004-05 and Rs 756 billion in 2005-
06.
We estimate a total debt requirement of Rs 803.4 billion, to fund the capex requirement of
the first 3 years (2003-04 to 2005-06). Of this, banks are expected to fund to the tune of
Rs 281.2 billion, in the form of term loan.
CRIS INFAC, based on its study, expects the net sales of the manufacturing sector to grow
at CAGR of 13.5 per cent between 2003-04 and 2005-06. Increase in sales would result in
higher working capital requirement. But, due to better working capital management by corporates,
we expect a marginal drop in the working capital requirements of the industry.
The ratio of working capital gap to net sales has been showing an increasing trend. We believe
this was due to companies changing their debt mix more towards short term to take advantage
for the falling interest rates. But as the interest rates harden, firms would resort to long-term
loans to lock their exposure at lower interest rates.
Telecom, and hotel & tourism sectors constitute 45-50 per cent of the entire service sector
in terms of bank finance (both short term and long term). As per our telecom industry study,
the external funding requirement for the industry is almost Rs 414 billion during 2003-04 to
2005-06, of which, it is estimated that banks will fund Rs 145 billion in the form of term
loans and working capital.
As per CRIS INFAC's hotel industry study, we expect capital expenditure of Rs 31.20 billion
during 2003-04 to 2007-08. Our analysis indicate that almost 80 per cent of the investment
in the hotel industry is expected to place in the first 3 years (2003-04 to 2005-06). Analysing
the funding pattern in the hotel industry, we expect banks to fund Rs 8.39 billion. With the
expected revival of the hotel industry, and in view of new capacities, we expect the working
capital requirement of the industry to grow from an average 23 per cent of sales to 26 per
cent of sales over the 3-year period (2003-04 to 2005-06). The incremental net disbursement
of working capital in the sector for 2003-05 to 2005-06 is estimated at Rs 19.37 billion.
As mentioned earlier, hotel & tourism and telecom industry represent almost 45-50 per cent
of the entire service sector. Hence, based on our estimate the incremental gross funding of
banks to the service sector in next 3 years (2003-04 to 2005-06) is Rs 407 billion.
62
60
59
55 55
54
53
50
50
49
49
48
45
40
1998 1999 2000 2001 2002 2003 2004 E 2005 P 2006 P
With industrial recession, and the resultant low demand for credit, the credit-deposit ratio had
been as low as 48 per cent in 1999, but with the gradual recovery in the commercial credit
and continued growth in the retail credit, we estimate total advance to grow at 17.4 per cent
CAGR during 2003-04 to 2005-06. During the same period, total deposits will increase by 12.4
per cent. This would push up the credit deposit ratio to 62 per cent by end-March 2006,
tightening the liquidity of the banking system.
Increasing credit deposit ratio to slow down the growth rate of investments
CRIS INFAC estimates the investments portfolio of banks to grow at CAGR of 8.8 per cent
during 2003-04 to 2005-06.
With low credit offtake, banks had no avenues to deploy funds. Hence they parked them in
investments, both SLR and Non-SLR, or were holding on cash. The investment to deposit ratio
grew from 42 per cent in 1998 to 51 per cent in 2003 and is estimated to have been 50.5
per cent in 2004.
Going forward, with the expected increase in demand for commercial credit, banks would prefer
lending to the industrial sector than invest in government securities, as the former yields higher
returns. Further, to meet the demand for commercial credit, banks would prune their investment
portfolio.
With the estimated slow down in investments, the investment-deposit ratio is expected to taper
to 46 per cent by March 2006.
51
51
50
48
48
46 46
45
45
43
42
40
35
30
1998 1999 2000 2001 2002 2003 2004 E 2005 P 2006 P
Asset quality
100
95
90
(per cent)
85
80
75
1999 2000 2001 2002 2003 2004 E 2005 P 2006 P
CRIS INFAC estimates that by March 2006 the gross NPA will come down to 5.82 per cent
as against as 8.84 per cent as of March 2003, while net NPA will drop to 2.54 per cent from
4.42 per cent during the same period.
At the gross level, the gross NPAs, which stood at Rs 687.80 billion as on March 31, 2003,
are expected to have fallen to Rs 669.15 billion as on March 31, 2004, but would rise thereafter
to Rs 710.56 billion as in March 2006, with the growth in advances.
CRIS INFAC estimates that gross NPAs will fall further to 5.84 per cent by end-March 2006.
The prime drivers are expected to be:
Credit administration: Improved credit management, by improving the process of credit appraisals,
providing extensive training staff members undertaking appraisals, putting in place an effective system
of post disbursement monitoring of accounts.
Risk management: Increased focus on the improving risk management, with the aid of information
technology.
Improving corporate performance: Since March 2003, the corporate sector performance has improved
significantly, and we expect it to continue improving its profitability in the current industrial upturn,
which will help improve the risk profile of loans given to the industrial sector.
Legal remedies: Banks would continue to take recourse to legal remedies such as DRT and SARFEASI, to
pressurise defaulters to clear the overdues.
The gross NPA of the scheduled commercial banks have fallen from 12.8 per cent as of end-
March 2000 to 8.8 per cent as of end-March 2003, while net NPAs had fallen from 6.8 per
cent to 4.4 per cent during the same period. The primary drivers for the improvement are:
Higher provisions: The falling interest rate and corresponding increase in profit on sale of investments
provided banks enough room to increase their provisioning / write off of bad loans while maintaining
profit growth.
Regulatory measures: Regulators introduced various measures, such as One Time Settlement Scheme(OTS),
Corporate Debt Restructuring (CDR) etc, which allowed banks to restructure the bad loans or settle the
bad loans at a discount. It also prevented potential NPAs from becoming NPAs.
Legal reforms: Reforms in the legal systems, in the form of strengthening the Debt Recovery Tribunal
(DRT) and enactment of the Securities and Reconstruction of Financial Assets and Enforcement of Security
Interest (SARFAESI) Act, 2002, enabling banks to pressurise the defaulters to clear the overdues, and thus
clean their balance sheet.
Best practices: Banks started adopting best practices, and building strong credit risk management to
improve their loan portfolio
CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES
31
Corporate Debt Restructuring Mechanism (CDR) Box 4
Objective:
The objective of CDR is to ensure a timely and transparent mechanism for restructuring the corporate debts of viable
entities, outside the purview of BIFR, DRTs and other legal proceedings, for all concerned.
Structure:
CDR will have a three-tier structure consisting of:
(a) (a) CDR Standing Forum and its core group - CDR standing forum is a self empowered body, which lays
down policies and guidelines, guides and monitors the progress of corporate debt restructuring. A CDR core
group is carved out of the CDR standing forum to assist the standing forum in convening meetings and taking
decision relating to policy, on behalf of the standing forum. The core group will consists of chief executives of IDBI,
ICICI Bank, SBI, Bank of Baroda, Bank of India, Punjab National Bank, Indian Banks Association and a representative
of the Reserve Bank of India.
(b) CDR Empowered Group - The individual cases of corporate debt restructuring shall be decided by the CDR
Empowered Group, consisting of ED level representatives of IDBI, ICICI Bank and SBI as standing members, in
addition to ED level representatives of financial institutions and banks who have an exposure to the concerned
company. The level of representations of banks/ financial institutions on the CDR Empowered Group should be at
a sufficiently senior level to ensure that concerned banks/ FI abide by the necessary commitments including
sacrifices, made towards debt restructuring.
After the Empowered Group decides that restructuring of the company is prima-facie feasible and the enterprise
is potentially viable in terms of the policies and guidelines evolved by the standing forum, the detailed restructuring
package will be worked out by the CDR cell in conjunction will the lead institution. The empowered group has to
examine the viability and rehabilitation potential of the company and approve the restructuring package within a
specified time frame of 90 days or at best 180 days.
The decision of the CDR Empowered group shall be final. If restructuring is not found viable, the creditors would
then be free to take necessary steps for immediate recovery of dues and / or liquidation or winding up of the
company, collectively or individually.
(c) The CDR cell: The CDR Standing Forum and the CDR Empowered Group will be assisted by the CDR cell in all
their functions. The CDR cell will make the initial scrutiny of the proposal received from borrowers/ lenders. If the
rehabilitation is prima facie feasible, the CDR cell will proceed to prepare a detailed rehabilitation plan with the help
of lenders and experts, if necessary.
Continued...
As on June 30, 2003, out of 57,915 cases (involving Rs 822.66 billion) filed by banks to the DRTs, 22,163 cases (involving
Rs 196.33 billion) have been adjudicated and the amount recovered so far stood at Rs 57.87 billion.
While the gross NPA (as a percentage of advances) is falling in all the sectors, it is highest under the priority sector, with
a drop of almost 10 percentage points. The NPAs under the public sector are the lowest, essentially due to the government
backing. The NPAs are the highest under the priority sector because of the industries and sectors to which advance are
given. Priority sector is more of directed lending, which puts pressure on the banks to meet the required target, which
leads to some lapse in the credit assessment of the proposal. But, over the years, banks have improved their systems
and, also with the restructuring of bad loans, NPAs are witnessing a declining trend.
Since banks would have already made additional provisions in the previous years, the incremental
provision are expected to be relatively smaller. Moreover, we expect banks to further strengthen
their credit management, leading to an up gradation in the existing NPAs. This would lead to
a reduction in the provision requirements for provision for NPAs' due to write back of the excess
provisions made in the earlier years. These factors would reduce the provision for NPA charged
to the P&L, from Rs 178 billion in FY 2004, to Rs 159 billion for 2004-05 and Rs 135 billion
for 2005-06.
178
160
159
135
132
120
80
40
0
2003 2004 P 2005 P 2006 P
We do not expect the growth in agricultural credit to affect the NPA loans (declared/book)
of the banks' assets, because of the following:
Agriculture credit accounts for only 12 per cent of the total advances.
Lenient norms for recognising NPA in the agriculture sector.
Restructuring of old agricultural loans, as per the RBI's recent directives.
Strategic business units (SBUs) set up by several banks, to cater to the agricultural credit demand. This
focus approach would also help in better monitoring of these advances.
Announcements made by banks to recruit agriculture specialist, for the agricultural credit division.
CRIS INFAC expects the actual NPAs on the books of banks to be higher than the declared
NPAs (book NPAs) on account of the following:
The RBI has raised the CRR levels from 4.5 per cent to 5.0 per cent in two stages. The
hike in the CRR would increase the cash and bank balance. But, the RBI initiated measure
is more from keeping the inflation under check, and as the inflation pressure subsides, the CRR
would be reduced. The RBI has retained its medium term objective of gradually lowering the
CRR to 3 per cent. The CRR reduction is part of the RBI's endeavour to make available more
resources with bank to lend. CRIS INFAC expects the cash in hand and balances with the RBI
to growth at a small rate of 5.8 per cent, as per the historical trend.
11.00
10.00
9.00
8.00
7.00
6.00
5.00
4.00
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Cash in hand and balance with RBI as a percentage of T &DL CRR ratio
The Reserve Bank of India has recently increased CRR of schedule commercial banks, by 50 basis points of their net
demand and time liabilities, in two stages, effective from fortnight beginning from September 18, 2004 and October 2, 2004
to 4.75 per cent and 5.0 per cent respectively.
Further, with effect from the fortnight beginning September 18, 2004, banks will be paid interest at the rate of 3.5 per cent
per annum on their eligible cash balances maintained with RBI under CRR requirement as against the current practice of
payment of interest at the Bank rate (6.0 per cent per annum).
With the reduction in the rate of interest offered on the CRR deposits, we expect the banks to take an additional hit of 2
basis points (annualised) on their spreads.
Rising inflation and the gradual increase in credit demand has led to a hardening of interest
rates. Banks have started moving to the short end of the curve with the rise in interest rates.
As per CCER estimates, interest rates for corporate are expected to go up by an additional
40-50 bps over the corresponding G-Sec yield.
With the changing rupee-dollar parity and the increase in forward premiums, foreign currency
borrowings are likely to become costlier, which will slow down the growth in external commercial
borrowings. The inflows from non-resident Indians (NRIs) and foreign institutional investors (FIIs)
are also likely to be affected, with the expected recovery in the US economy and the corresponding
increase in the interest rate.
Recently, the RBI increased the limit of borrowings under the Market Stabilisation Scheme (MSS)
from Rs 600 billion to Rs 800 billion; thus, an additional liquidity of Rs 200 billion would be
absorbed from the banking system. Moreover, the 50 bps increase in the CRR limit in two
stages is estimated to absorb another Rs 80 billion from the system.
These factors are expected to put pressure on the liquidity in the system.
Credit growth
As explained in the previous chapter, non-food credit is estimated to grow at 18.56 per cent
during 2003-04 to 2005-06, with the credit deposit ratio likely to touch 62 per cent by end-
March 2006.
Fiscal deficit
With the expected increase in the fiscal deficit, CCER estimates the government's market borrowings
to rise by Rs 136.35 billion, which will push the interest rate up.
The budget assumes a nominal GDP growth of 12.7 per cent for 2004-05. Assuming an inflation of 5.0-5.5 per cent, this
translates into a high real growth of about 7.2-7.7 per cent. As per CCER's assessment, sustaining such a high growth
over a strong base of 8.2 per cent growth in the previous year is unlikely. CCER expect real GDP growth of only 6.0-6.5
per cent even if the monsoons are normal.
The central government has assumed a growth of 24.6 per cent in its gross tax revenues in 2004-05, over a high growth
of 17.9 per cent in 2003-04. This translates into an increase in the tax/GDP ratio to 10.2 per cent in 2004-05 from 9.2 per
cent in 2003-04. According to CCER, this projected growth in revenues is optimistic.
The table below documents the expected shortfall in gross tax revenues under alternate assumptions of industrial growth.
The estimates of gross tax revenues have been computed using the ratio of tax collections to nominal industrial GDP
observed during 2003-04.
If the tax/industrial GDP ratio of 2003-04 is assumed to hold in the current fiscal, we get a significant revenue shortfall,
ranging from Rs 244.71 billion to Rs 303.36 billion. This is likely to be an overestimate of the shortfall because of some
changes in the tax regime and imposition of new taxes. Even if we optimistically assume the benefits from new taxes and
efficiency improvement in tax collections at Rs 100 billion, we end up with a shortfall of about Rs 200 billion under a realistic
assumption for industrial growth. The Budget is thus relying upon the recovery of large arrears in direct and indirect taxes
to meet the revenue targets. This expected revenue shortfall would increase the fiscal deficit to 5 per cent of the GDP from
a projected 4.4 per cent of the GDP.
CCER estimates that average inflation will be about 6.0-6.5 per cent in 2004-05. Surging international
crude oil prices, the rainfall deficiency in some parts of the country and rising metal prices
will all exert upward pressure on inflation. Basic metals, alloys and metal products remained
the major contributor to the overall manufacturing inflation during the first quarter of 2004-05.
High domestic and international coal prices and higher iron ore prices have put an additional
upward pressure on steel prices (which is a major constituent of basic metals group).
But global commodity prices are expected to soften. In addition, the government has reduced
the excise and customs duties on commodities like oil, metals and sugar, which will result in
lower prices. Moreover, the base effect will come to play from September onwards, softening
the rate of inflation to some extent.
9.00
8.00
6.0
7.00
6.00
5.0
5.00
4.00
4.0 3.00
2.00
1.00
3.0
0.00
06/01/2001
06/04/2001
06/07/2001
06/10/2001
06/01/2002
06/04/2002
06/07/2002
06/10/2002
06/01/2003
06/04/2003
06/07/2003
06/10/2003
06/01/2004
06/04/2004
06/07/2004
2.0
2001-02 2002-03 2003-04 2004-05 E 2005-06 E
In 2003-04, average inflation was high at around 5.5 per cent, compared to 3.4 per cent in
2002-03 and 3.6 per cent in 2001-02. This was largely due to the rising inflationary trends
in the second half of the financial year, largely due to rising manufacturing sector prices.
Taking all these factors into consideration, CCER has forecast the average inflation for 2004-
05 to be in the range of 6.0-6.5 per cent and nearly 5.0-5.5 per cent in 2005-06.
For more details on inflation, please refer to CRISIL's EcoView of August 2004.
Spreads
Spreads are defined as the difference between the yield on carry business and the cost of
borrowings. (The yield on carry business is the ratio of the total interest earned to the average
funds deployed in the carry business. Carry business is the total funds deployed, excluding investments
in shares, subsidiaries and others.) Generally, in an increasing interest rate regime, both yields
and costs go up; conversely, in a declining interest rate scenario, both yields and costs go down.
However, in a declining interest rate regime, the rate of decline in yields is faster than the
rate of decline in costs. The converse is also true in a rising interest rate regime.
We expect the interest rates to go up from 2004-05. The yield on carry business is mainly
driven by the yield on investments and the yield on advances. Going forward, we expect the
yield on investments to fall, despite an increase in the rate of interest, as securities are still
being re-priced from historically higher interest rates to the relatively lower rates that are prevalent
now. This is putting pressure on the yield on carry business and, in turn, on spreads. The
spreads of the scheduled commercial banks have fallen from 3.19 per cent in 1998-99 to 2.89
per cent in 2002-03. They are expected to fall by an additional 0.17 percentage points to
reach a level of 2.72 per cent in 2005-06.
As has been explained in earlier sections, the developments pertaining to FCI would reduce
the spreads for 2004-05 by 8.5 basis points (annualised) from an estimated 2.80 per cent to
2.72 per cent and the reduction of the interest rate offered on CRR deposits will further reduce
the spreads by 2 bps (annualised) from 2.72 per cent to 2.70 per cent. We have not factored
these developments in our projections. Hence, the combined effected of these developments
is estimated to around 10 bps.
Banks have predominantly been providers of working capital finance to the industry, which is
reviewed and renewed every year and hence classified in the 'less-than-1-year' maturity bucket.
This is indicated by a steady percentage of advances, approximately 40 per cent, being classified
in the 'less-than-1-year' maturity bucket. With the merger of ICICI Ltd with ICICI Bank, the
advances classified under the 'above-5-year' maturity bucket have increased from 9.7 per cent
in 1999-00 to 14.1 per cent in 2001-02. Moreover, banks have started focusing on retail finance,
which has also influenced the increase in the share of advances classified under various buckets
above 1 year. The retail finance loans are generally in the nature of term loans, which have
tenures of more than 3 years.
12.3
11.7
12.0
11.5
11.4 10.2
10.0 10.6
10.1 9.9
9.4 9.3 9.7
8.0
7.5
6.2 6.1
6.0
4.8
5.3
4.0
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 P 2005-06 P
E: Expected; P: Projected
Source: CRIS INFAC
Over the period 1999-2000 to 2002-2003, the yield on advances had fallen continuously with
the general fall in the interest rates. Yield on advances dropped from 11.7 per cent in 1999-
00 to 9.9 per cent in 2002-03, while the yield on the 3-year benchmark G-Sec dropped from
10.6 per cent in 1999-00 to 6.2 per cent in 2002-03. As per our study of the maturity profile
of loans and advances, it is estimated that in any particular year, that year's disbursements accounted
for about 48-50 per cent of the outstanding loans and advance portfolio. This indicated that
every year approximately 50-52 per cent of the bank's loan yielded a higher rate of interest
than the interest rates prevailing in that year. Further, the banks had not reduced their lending
rate in line with drop in the interest rates. These factors led to a slower drop in the yield
on advances vis-à-vis costs.
With the continuing slide of the interest rate during 2003-04, we estimate the yield on advances
to have declined to 9.4 per cent. The 3-year G-Sec yield is estimated to have dropped to
its lowest level of 4.8 per cent in 2003-04. With the hardening of interest rates during 2004-
05, banks are expected to start hiking the interest rate on the incremental advances, both fixed
and floating, which would help in increasing the yields on advances. But, we expect the yield
on advances to drop marginally to its lowest level of 9.3 per cent in 2004-05 before rising
to 9.7 per cent in 2005-06, in spite of the increase in the interest rate, because part of the
portfolio earning a higher yield (contracted at higher rates compared to prevailing rates) is getting
re-priced at a comparatively lower rate of interest. However, in the subsequent years, as more
advances get re-priced at higher interest rates, the yield on advances will go up.
Yield on investments
Maturity profile of investments
The above table indicates that almost two-thirds of the investment portfolio is more than 3
years.
14.0
12.0 11.8
12.0 11.3
10.7
11.7 9.8
10.9 10.3
10.0
8.5
8.1
8.0 7.8
7.7 6.4
6.5
6.0
4.9
5.6
4.0
2.0
0.0
1999 2000 2001 2002 2003 2004 E 2005 P 2006 P
E: Expected; P: Projected
Source: CRIS INFAC
The above graph compares the relationship between the average yield earned by the banks
on their investment portfolio vis-à-vis the movement of the yield on the 5-year government
securities. Based on the average duration of the loans and advances portfolio of scheduled commercial
banks, we feel that the 5-year G-Sec paper is representative of the general interest rate scenario.
Assuming the maturity profile of investments to remain the same, CRIS INFAC estimates the
yield on investments to have fallen sharply to 8.5 per cent during 2003-04 from 9.8 per cent
in 2002-2003. However, in the subsequent years, the decline would be marginal in comparison
to the fall in 2004-05, as the incremental investments would get invested at higher yields.
As per the maturity profile of investments as in March 2003, approximately 30 per cent of
the outstanding investments portfolio is getting re-priced every year at the prevailing interest
rates.
Till the mid-1990s, interest rates were very high and stable. But then the interest rate started
falling. However, as only 30 per cent of the outstanding investments are re-priced every year,
only incremental investments are at new rates, hence the impact of falling interest rates would
come with a lag effect. The average yield of the benchmark 10-year G-Sec, which was quoting
12.04 per cent in 1997-98, fell to 5.31 per cent in 2002-03.
The interest rates have started to rise from such low levels. But the securities are still being
re-priced from higher interest rates to comparatively lower interest rates, hence the yield would
continue to fall. However, the net yield, although it will continue to decline, will drop less
significantly in 2005-06, due to a combination of factors: the reduction in the percentage of
securities being re-priced at comparatively lower rates, and some short end securities being re
priced at higher interest rate. Hence, the yield will continue to fall until a substantial portion
of the old investments is re-priced at higher rates. Beyond that, the yield will start increasing
if the interest rates continue to rise.
CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES
44
However, with rising interest rates, banks will try to reduce the duration of the investment portfolio
by moving to the short end of the curve to avoid losses driven by higher interest rates.
Interest cost
The average interest cost of the scheduled commercial banks dropped to 6.63 per cent in March
2003 from 7.96 per cent in March 1999. The drop in the interest cost has been on account
of the drop in both the cost of deposits and the cost of borrowings. CRIS INFAC estimates
that interest cost will fall to 5.84 per cent in March 2006, after touching a low of 5.67 per
cent in March 2005. The drop in the interest cost will be less than that on the yield on carry
business, primarily because of slower drop in the cost of deposits.
Cost of deposits
Maturity profile of term deposits
The maturity profile of term deposits is likely to remain stable, with around 36 per cent of
the portfolio expected to mature every year.
With interest rates moving southwards, banks had reduced the interest rates offered on term
deposits and also reduced the spreads between the interest rate offered on the long tenure
and short tenure deposits, which led to an increase in the share of deposits classified under
up to 2-year maturity bucket.
Going forward, in spite of the expected jump in the interest rate, banks will desist from making
an immediate upward revision in the interest rate in the near future. But as the liquidity pressure
mounts, they will start increasing the spread between the long tenure and short tenure deposit
rates, which is likely to have impact on term deposits and, thereby, on its maturity profile.
12.0
11.2
11.0 10.5
10.0
10.0
9.0
8.0
8.0 7.7
7.4
7.0 7.4 6.5
7.1
5.8 5.8
6.0 5.6
6.1
5.8
5.0
5.1
4.7
4.0
1999 2000 2001 2002 2003 2004 E 2005 P 2006 P
E: Expected; P: Projected
Source: CRIS INFAC
The above graph compares the relationship between the average interest cost the banks pay
on their deposits portfolio vis-à-vis the movement of the yield on the 2-year government securities.
Based on the average duration of the deposits portfolio of the scheduled commercial banks,
we feel the 2-year G-Sec paper is representative of the general interest rate scenario.
Term deposits constitute around 65 per cent of total deposits. Further, as per the maturity profile
of term deposits as on March 31, 2003, approximately 42 per cent of the outstanding deposits
were re-priced. We do not expect any material change in the maturity pattern during 2003-
04 to 2005-06. Only 30 per cent of the term deposits outstanding as on March 31, 2003 are
maturing after 3 years and, hence, would get re-priced then, by when interest rates will already
be high; the remaining 70 per cent would have re-priced much earlier.
The yield on deposits had been falling consistently in line with the decline in the interest rates,
but the drop is not as steep as that observed in government securities, indicating that deposits
are generally showing a low elasticity to interest rates. The average cost of deposits had dropped
from 8.0 per cent in 1998-99 to 6.5 per cent in 2002-03, while the yield on the 2-year benchmark
G-Sec dropped from 11.2 per cent in 1998-99 to 6.5 per cent in 2002-03. We expect the
average cost of deposits to fall further to 5.8 per cent in 2003-04, as compared to 6.5 per
cent in 2002-03. The benefit of the drop in interest rate has been coming with a lag effect,
driven by the maturity profile of the deposits.
The other components of deposits, both savings account (interest rate on the same are administered)
and current account, are not very sensitive to the interest rate movement.
CRIS INFAC expects the cost of deposits to drop further in 2003-04 and 2004-05 to 5.8 per
cent and 5.6 per cent, respectively. It will then rise marginally to 5.8 per cent in 2005-06
Cost of borrowings
Maturity profile of borrowings
Most of the borrowings raised by the banks are for the purpose of tying up the short-term
liquidity mismatches and are, hence, generally of a short-term nature. The above table validates
this; almost 67-70 per cent of the borrowings of the scheduled commercial banks are classified
in the less than 1-year maturity bucket. Essentially, almost 70 per cent of the outstanding borrowings
of the bank are re-priced at the prevailing interest rate.
With such a maturity profile, the banks are likely to take a hit in a rising interest rate scenario.
But borrowings constitute only 5 to 6 per cent of the total liability, hence there will not be
any appreciable impact.
Keeping in view the main purpose for which borrowings are raised, CRIS INFAC expects the
same maturity profile to continue during 2003-04 to 2005-06.
We expect the cost of borrowings to fall in sharply in 2003-04 (inclusive of ICICI Bank) to
9.8 per cent from 11.1 per cent in 2002-03, It is expected to drop further to 9.6 per cent
in 2004-05, but then go up to 9.8 per cent in 2005-06.
The impact of the rise in interest rates is seen to be faster in the case of borrowings.
Interest earned 1,034.4 1,195.7 1,321.7 1,458.8 1,507.6 1,650.5 1,895.0 12.1 9.9 9.1
Interest/discount on advances/bills 489.2 570.9 613.3 707.0 764.1 889.2 1,098.8 13.1 10.0 15.8
Income on investments 454.7 519.9 590.1 640.6 638.1 662.3 691.9 12.1 10.7 2.6
Other income 160.9 173.7 244.3 320.1 372.7 311.2 293.9 25.8 24.4 -2.8
Total income 1,195.3 1,369.4 1,565.9 1,778.9 1,880.4 1,961.7 2,188.9 14.2 12.1 7.2
Interest expended 718.8 811.2 908.5 969.2 955.5 1,026.0 1,187.3 10.5 7.7 7.0
Gross profit 476.5 558.2 657.5 809.7 924.9 935.7 1,001.6 19.3 7.3
Operating profit 190.1 204.8 305.9 413.2 487.4 462.2 491.6 29.5 6.0
Net profit 78.0 71.0 121.9 176.3 191.7 189.2 236.4 31.2 10.3
Net profit margins (per cent) 1.8 1.6 2.0 2.4 2.5 2.0 1.8
(incldg profit on sale of inv)
P: Projected
1
Excluding ICICI Bank
Source: RBI & CRIS INFAC Estimates
Interest earned
CRIS INFAC estimates the total interest income to grow at a CAGR of 9.1 per cent during
2003-04 to 2005-06, with interest on advances expected to grow at a CAGR of 15.8 per cent.
Between 2000-01 and 2002-03, the total interest income grew at a CAGR of 12.1 per cent
(9.9 per cent), primarily led by 13.1 per cent (10.0 per cent) CAGR in the interest on advances.
During the period 2000-01 to 2002-03, although advances grew by a CAGR of 18.6 per cent,
the interest income on advances grew at a much lower figure of 13.1 per cent CAGR. This
was due to general fall in the interest rates (yield on loans and advances dropped from 11.7
per cent in 1999-2000 to 9.9 per cent in 2002-03).
The 13.1 per cent growth during 2000-01 to 2002-03 was led by a strong growth in the outstanding
retail credit, which grew by around 28 per cent CAGR in the same period. During 2003-04
to 2005-06, advances are expected to grow by a CAGR of 17.4 per cent, while the interest
on the loans and advances is estimated to grow at 15.8 per cent CAGR. The yield on loans
and advances is expected to drop marginally from 9.9 per cent for 2002-03 to 9.7 per cent
for 2005-06.
From 2000-01 to 2002-03, the interest on investment grew by 12.1 per cent (10.7 per cent),
though the investments recorded a growth of 19 per cent CAGR. This is due to general drop
in the interest rates. (The yield on investments dropped to 9.8 per cent by March 2003 from
11.8 per cent as of end-March 2000.)
Interest expended
Total interest expended is expected to grow at a CAGR of 7.2 per cent from 2003-04 to
2005-06, with interest on deposits expected to grow at 8.1 per cent, while the other interest
component is expected to show a negative growth rate of 2.3 per cent.
Interest on deposits
CRIS INFAC expects total time and demand deposits to grow at 12.4 per cent CAGR during
2003-04 to 2005-06, while the interest on deposits is seen growing by only 8.1 per cent CAGR
during the same period. The cost of deposits is expected to drop to 5.8 per cent by March
2006, from 6.5 per cent at March 2003.
During 2000-01 to 2002-03, the interest on deposits grew at a rate of 8.8 per cent, though
the deposits grew by 14.6 per cent. This is primarily due to the fall in the cost of deposits
in line with the prevailing soft interest rate scenario. The cost of deposits dropped from 7.7
per cent as of March 2000 to 6.5 per cent as of March 2003.
Interest on borrowings
From 2000-01 to 2002-03, the interest on borrowings recorded a CAGR of 27.4 per cent, although
borrowings grew at a CAGR of 22.9 per cent. The cost of borrowings dropped from 11.7 per
cent as of March 2000 to 11.1 per cent as of March 2003.
The interest on borrowings is expected to show a negative growth of 2.3 per cent during 2003-
04 to 2005-06.
Non-interest income is a source of incremental revenues for banks and helps in maintaining a
stable bottomline, as it is not sensitive to interest rates and is, hence, less volatile.
Banks generate fee-based income through the issuance of guarantees, letters of credit, drafts etc,
and by other income in the form of exchange profits, processing fees, income from demat activity,
income credit cards, and other routine banking business.
Banks have started acting as corporate agents of various mutual funds and insurance companies
by distributing their products through their branch networks. This gives them an opportunity to
earn other income in the form of commissions. Further, banks are also contemplating foraying
into activities such as advising clients on fund management and other value-added services. This
will give them an opportunity to generate fee-based income in the form of commission and
brokerage
Another component of other income is profit on sale of investments. But with interest rates
hardening, the profit from sale of investments will come down.
CRIS INFAC expects non-interest income (excluding profit on sale of investments) to grow at
CAGR of 13.0 per cent, driven by the greater thrust of banks on core fee-based income. The
drastic fall that is expected in profits on sale of investments will take its toll on total other
income, which is expected to a show a negative CAGR of 7 per cent during 2003-04 to 2005-
06.
52
Unbooked profit on investments to reduce dramatically
As of March 2004, banks had unbooked profits of Rs 754.25 billion on their investment portfolio
of government securities (which stood at Rs 6,532.4 billion). In 2004-05, we expect banks to
book profits to the tune of 10 per cent of the unbooked profits. CRIS INFAC expects the
yield on 5 year G-sec to rise by 165 bps to 6.67 per cent by the end of March 2006 from
a level of 5.02 per cent as of March 2004. By this time, the investment book of SCBs is
expected to rise by Rs 1,182 billion to Rs 7,715 billion.
In recent times, the Reserve Bank of India (RBI) has been increasingly issuing floating rate
long dated securities as part of the government of India's (GOI) borrowing programme. Between
April 1, 2004 and September 10, 2004, the RBI raised Rs 540 billion through long dated GOI
securities, of which approximately Rs 220 billion, nearly 40 per cent of the total debt raised,
was through floating rate securities. Going forward, we expect this ratio to increase further. CRIS
INFAC estimates that 50 per cent of RBI's borrowing during the financial year 2004-05 will be
through floating rate government securities. This ratio is expected to rise further to 80 per cent
in 2005-06. The floating rate bonds are generally priced as a 1-year security, hence the movement
in the interest rate would have a lesser impact on the value of the security.
Consequently, we expect the unbooked profit of the investment portfolio to provide a cushion
of a further 83 basis points increase in interest rates, beyond the level prevailing by end of
March 2006 (6.67 per cent). Thus, banks' investment portfolio can sustain an interest rate rise
of 7.5 per cent on the 5 year G-Sec, which works out an increase of 248 basis points from
an interest rate of 5.02 per cent prevailing in March 2004.
A recent notification from the RBI regarding classification of the investment portfolio of banks allows the latter to exceed
the present limit of 25 per cent of total investments under the held-to-maturity (HTM) category provided the excess
comprises only of statutory liquid ratio (SLR) securities, and the total SLR securities held in the HTM category is not more
than 25 per cent of their demand and time liabilities (DTL).
Earlier, banks were allowed to shift SLR securities to the HTM category once in an accounting year. Under the new
notification, banks will be allowed to shift SLR securities to the HTM category one more time (in addition to the one already
allowed) any time during the current accounting year. Such shifting has to be done at the lower of the acquisition cost/ book
value/market value on the date of transfer. The bank should fully provide for the depreciation, if any, on such a transfer.
No fresh non-SLR securities are permitted to be included under the HTM category, while those already held as a part of
the HTM category will continue.
CRIS INFAC is of the view that this notification will help banks in reducing the negative impact of the rise in interest rates
on their investment portfolio and help them postponing booking losses against the valuation of the portfolio. This step
would have a positive impact on the bank's profit & loss account.
Since 1998, the number of employees in scheduled commercial banks has fallen by 12 per
cent. During the same period, there has been a rapid improvement in the productivity in the
banking system. This is evident from the steep increase in the business per employee, which
stood at Rs 21.2 million in 2002 compared to Rs 9.8 million in 1998.
During 2000-01, 26 out of the 27 public sector banks (PSBs) had introduced voluntary retirement
schemes. RBI had permitted PSBs to amortise VRS-related expenditure over a period of 5 years.
As on March 31, 2003, the total cost of the scheme amounted to Rs 123 billion, and the
balance of unamortised amount was Rs 69.47 billion as on March 31, 2003, to be amortised
over 2-3 years.
From 2000-01 to 2003-04, staff costs grew by 8.89 per cent, but the staff cost net of VRS
recorded a CAGR of 5.5 per cent. During this period, the business of the scheduled commercial
banks grew at a CAGR of 16 per cent.
With greater automation, the productivity can improve further. CRIS INFAC expects the staff
cost to grow at a CAGR of 6.78 per cent from 2003-04 to 2005-06.
Printing and stationery, advertisement, postage and depreciation are the main drivers of growth
in other expenses. Banks are aggressively advertising their products through various channels of
communication, which will increase its outgo on this head. Moreover, with increasing automation
in banking operations, and the usage of ATMs and Internet as channels for distribution of products,
the charge on account of depreciation and rent is also likely to go up.
Over the years, due to the pressure on spreads, banks had controlled costs by rationalising operations.
Additionally, they will have to focus on operating expenses in order to maintain their profitability.
Provision and contingencies can be broadly divided into three categories: Provision for NPA and
standard assets, provision for taxation, and other provisions.
In the past 3 years, banks have increased their provisioning for non-performing assets. Although
improving their loan portfolio was one of the key motives, the falling interest rate scenario
and the corresponding increase in profit on sale of investments were key factors that led to
this. CRIS INFAC estimates that banks will make higher provision for NPAs in 2003-04, but
the same will decline in the subsequent years. As the banks have already made additional provisions
in the earlier years, the incremental provisions come down in the subsequent years. Further,
we also expect an improvement in the asset quality due to the strengthening of the credit
management system in banks. This will further reduce the provision requirements with the reversal
of excess provisions.
As per norms, the banks have to make a provision of 0.25 per cent on standard assets. We
believe that the provision for standard assets will grow at 13.3 per cent per over the next
3 years, with the expected improvement in the asset quality and rising share of standard assets
in the total advances.
Although spreads will decline, CRIS INFAC is of the opinion that the net profitability margins
(NPM) of scheduled commercial banks will go up from 1.36 per cent in March 2003 to 1.45
per cent by March 2006. Going forward, we expect banks to continue to rein in their costs
and bring the operating cost ratio (operating expenses/average funds deployed) down to 2.28
per cent by March 2006.
With spreads still under pressure, we expect banks to retain their focus on curbing operating
costs by streamlining and restructuring the operational processes, which will further reduce the
operating expense cost ratio to 2.28 per cent in 2005-06, from 2.53 per cent in 2003-04.
The net profitability margin of scheduled commercial banks has remained flat at 1.36 per cent
from 1998-99 to 2002-03, despite a decline in the contribution of core fee-based income (this
is actually a ratio - core fee-based income/average funds deployed) to the NPM from 97 per
cent in 1998-99 to 74 per cent in 2002-03. This has been due to the banks' focus on controlling
their operating expenses, which has led to a drop in the operating expense ratio from 3.15
per cent in 1998-99 to 2.53 per cent in 2002-03. As remarked earlier, we expect the NPM
to increase to 1.45 per cent in 2005-06, as banks continue their focus on controlling operating
costs, which will reduce the operating expense ratio to 2.28 per cent by 2005-06. However,
the stable core-fee based income ratio will restrict the rise in NPM to some extent. Fee-based
income is a high margin revenue stream and provides stability to the bottomline due to its
insensitivity to interest rate movement.
Although the share of core fee-based income in NPM shrank to 74 per cent in 2002-03, from
89 per cent in 2000-01, it still remains a major contributor. In future, we expect this declining
trend to continue, reducing the share of core-fee based income from 73 per cent in end-March
2004 to 69 per cent by end-March 2006. Although the share of core fee-based income is expected
to fall, it will still help banks to maintain a steady bottomline as it is insensitive to interest
rate changes and forms a large component of the NPM.
CRISIL uses the net profitability margin (NPM) to measure the profitability of a lending business. In CRISIL’s opinion, the
measure of profitability for a lending business should capture its ability to generate income by deploying borrowed funds.
While such a measure should capture the cost of operations and core non-fund income of the business, it should not be
influenced by the returns from the business funded by equity capital. In parametric definition, NPM is equivalent to the yield
on the fund-based business less the cost of borrowings plus non-fund (fee) income less operating expenses.
3.00
2.50
2.00
1.50
1.00
1999 2000 2001 2002 2003 2004 P 2005 P 2006 P
The ongoing thrust of banks on controlling costs will lead to a drop in the cost-to-income ratio
(without profit on sale of investments) during 2003-04 to 2005-06. The cost-to-income ratio (with
profit on sale of investment) is estimated to increase due to the expected fall in the treasury
profits.
Projected profit and loss account of the scheduled commercial banks Table 3
(Rs billion) 1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 P 2005-06 P
Interest earned 1,034 1,196 1,322 1,459 1,508 1,651 1,895
Interest/discount on advances/bills 489 571 613 707 764 889 1,099
Income on Investments 455 520 590 641 638 662 692
Other income 161 174 244 320 373 295 258
Commission exchange and brokerage 83 89 93 107 127 138 149
Net profit/ (loss) on sale of investments 30 32 94 143 160 60 0
Others 48 53 57 71 86 98 110
Total income 1,195 1,369 1,566 1,779 1,880 1,946 2,153
Interest expended 719 811 908 969 955 1,026 1,187
Interest on deposits 664 744 835 856 865 932 1,082
Other interest 55 67 73 113 91 94 105
Gross profit 477 558 657 810 925 920 966
Operating expenses 286 353 352 397 437 474 510
Operating profit 190 205 306 413 487 446 456
Provisions and contingencies 112 134 184 237 296 270 248
Provision for NPA n.a. n.a. n.a. 132 178 159 135
Provision for tax n.a. n.a. n.a. 85 97 89 91
Provision for standard assets n.a. n.a. n.a. 3 3 4 5
Other provisions n.a. n.a. n.a. 17 17 17 17
Net profit 78 71 122 176 192 177 208
n.a.: Not available, P: Projected
Source: RBI and CRIS INFAC estimates
Assets
Cash and balances with RBI 869 863 899 891 943 998 1,056
Balances with bank and money call and 961 1,246 1,385 900 976 1,121 1,289
short notice
Investments 4,216 5,007 5,975 7,100 7,934 8,484 9,150
Advances 4,559 5,407 6,635 7,599 8,703 10,372 12,300
Fixed assets 155 163 202 203 205 207 210
Other assets 765 759 827 890 897 905 914
Total assets 11,525 13,446 15,923 17,585 19,658 22,087 24,919
P: Projected
Source: RBI and CRIS INFAC Estimates
1.0 Overview 61
- Spreads 61
- Net profitability margin (NPM) 62
- Outlook 63
- Business 64
- Investments 65
- Asset quality 66
- Overall assessment 67
2.0 Business 69
- Other scheduled commercial banks clocked the highest growth 69
- Advances 71
- Deposits 76
- Investments 79
- Non-performing assets 82
3.0 Spreads & net profitability margin 89
- Spreads 89
- Net profitability margin (NPM) 94
4.0 Profit and loss account 99
- Total interest income 99
- Interest expended 101
5.0 Other income 103
- Other income (excluding profit on sale of investment) as
per cent of total income 103
- Profit on sale of investment 106
6.0 Operating expenses 109
- Staff cost 109
- Other operating expenses (Operating expenses excluding staff cost) 113
- Cost-income ratio 115
7.0 Important ratios 121
- Credit-deposit ratio 122
Continued...
Figures
1.0 Overview
01 Net profitability margin 62
02 Group-wise business of banks 1998 to 2003 64
03 Group-wise SLR Securities to NTDL 65
2.0 Business
01 Group-wise business of banks 1998 to 2003 69
02 Share of bank groups 71
03 Advances of OSCBs 72
04 Advances of OSCBs (Ex ICICI Bank) 72
05 Advances of nationalised banks 72
06 Advances of SBI Group 73
07 Foreign banks - outstanding advances 74
08 Break-up of deposits - OSCBs 76
09 Total deposits - OSCBs 76
10 Deposits break-up - SBI & associates 77
11 Total deposits - SBI & associates 77
12 Break-up of deposits - Nationalised banks 78
13 Total deposits - Nationalised banks 78
14 Break-up of deposits - Foreign banks 78
15 Total deposits - Foreign banks 78
16 Statutory liquidity ratio - excluding gold 80
17 Group-wise SLR Securities to NTDL 80
continued...
Tables
1.0 Overview
01 Spreads 61
2.0 Business
01 Advances to the priority sector by public sector banks 75
02 Advances to the priority sector by private sector banks 75
03 Advances to the priority sector by foreign banks 75
04 SBI & associates 83
05 Nationalised banks 84
06 Other SCBs 85
07 Other SCBs (net of ICICI Bank) 85
08 Foreign banks 86
continued...
Tables
Spreads
Spreads Table 1
1999 2000 2001 2002 2003
SBI and assoc 3.01 2.87 2.81 2.52 2.58
Nationalised banks 3.27 3.08 3.32 3.11 3.29
OSCBs 2.60 2.73 2.78 2.01 2.00
Foreign banks 3.74 4.08 4.03 3.30 3.35
Source: CRIS INFAC
During 1998-99 to 2002-03, only the spreads of nationalised banks improved (by 2 basis points);
spreads declined in all other categories. In 2002-03, foreign banks had the highest spreads, while
other scheduled commercial banks (OSCBs) had the lowest spreads.
The primary reason for the drop in the spreads was the faster decline in the yield on the
carry business vis-à-vis interest cost, due to the decline in interest rates. As indicated in the
earlier section, the yield on carry business is mainly influenced by the yield on advances and
the yield on investments.
Vis-à-vis other banks, public sector banks (nationalised banks and the SBI Group), because of
their historically higher exposure to long tenure securities, have seen a slower drop in the yield
on investments. Private sector banks (other scheduled commercial banks) and foreign banks have
comparatively lesser exposure to long tenure securities, which increases their re-pricing ratio.
Foreign banks recorded the highest drop in the yield on advances. These banks have a strong
presence in trade finance and foreign currency lending. Trade finance advances are generally
for the short term and hence get re-priced at a faster rate. The foreign currency loans also
get re-priced as they carry a floating rate of interest. These factors pulled down the yield on
advances for these banks at a faster rate. However, with hardening interest rates, the yield on
advances will also rise.
The decline in interest rates also resulted in a drop in the cost of deposits and, in turn, in
the interest cost. But, as explained in the earlier section, because of the low elasticity of cost
of deposits to interest rate movement, the drop in the cost of deposits was not steep. Foreign
banks recorded the highest drop in the cost of deposits on account of the increased proportion
of demand deposits in the low cost deposits (low cost deposits are made up of demand deposits
and savings deposits), lower reliance on deposits and funding support from their parent companies.
With the hardening of interest rates, we believe that the foreign banks' loans would get re-
priced at a faster rate, but the expected drop in the yield on the investments would restrict
the rise in the yield on carry business. But since they continue to have the lowest cost of
deposits, they will be able to maintain spreads.
The spreads of public sector banks are expected to be under pressure during 2003-04 to 2005-
06, as the continued drop in the yield on investments will restrict the rise in the yield on
CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES
61
carry business. Despite the hardening interest rates, their yield on investments will continue to
fall on account of higher exposure to long tenure securities. The securities would get re-priced
from historical higher yields to lower yields, which will lower the yield on investments. Hardening
interest rates will increase the cost of deposits (albeit at a steeper rate) and cost of borrowings.
The spreads of private sector banks are also expected to reduce during 2003-04 to 2005-06,
due to the expected fall in the yield on investments. The yield on advances is expected to
improve with the gradual increase in demand from commercial credit. As ICICI Bank continues
to replace its high cost borrowings with low cost deposits, the interest cost is expected to
reduce, which will restrict the drop in spreads.
3.5
3.0
2.5
2.0
1.5
1.0
0.5
1999 2000 2001 2002 2003
SBI & assoc Nat banks OSCBs Foreign banks All SCBs
All segments, except OSCBs, either improved their NPM or at least maintained it during 1998-
99 to 2002-03. In 2002-03, foreign banks had the highest NPM of 2.5 per cent, followed by
the public sector banks with a NPM of 2.4 per cent. OSCBs had the lowest NPM of 0.79 per
cent in 2002-03.
Despite the decline in spreads and a reduction in the contribution of core fee income to the
NPM (measured as a proportion of core fee income ratio to the NPM) there has been an improvement
in NPM. This has been on account of cost control measures adopted by the banks, especially
the public sector banks, which led to drop in the operating cost ratio (operating expenses as
a per cent of average funds deployed). Contrary to the industry trend, other scheduled commercial
banks witnessed a jump in the contribution of core fee income ratio to NPM.
Public sector banks had introduced voluntary retirement schemes (VRS), which helped them to
reduce manpower cost and increase productivity. This helped the segment in improving the operating
expense ratio. Foreign banks have the highest operating expense ratio amongst all the bank
groups because of their higher wage structure and investments in technology and infrastructure.
But high spreads and support from core fee income help them in sustaining high costs. Private
Foreign banks had the highest core fee income ratio, on account of their strong presence in
trade finance, correspondent banking services, treasury management and cash management services.
This provides them with an opportunity to earn fee income without taking high exposure.
Public sector banks had one of the lowest core fee income ratios, because they were not quick
off the blocks in venturing into new business areas to generate fee income; besides, a high
average funds base led to a low core fee income ratio. Of the public sector banks, nationalised
banks had the lowest core fee income ratio during 2002-03.
Private banks (OSCBs), especially the new private sector banks, were amongst the first to foray
into new business areas like credit cards, depository services and third party distribution, which
helped them in generating fee income.
Outlook
CRIS INFAC is of the view that since spreads are under pressure all banks will have to concentrate
on controlling their operating expenses and find new ways of generating fee income.
Since manpower accounts for more than 70 per cent of the operating expense for the public
sector banks, they need to control their staff cost by either increasing productivity or controlling
cost. However, with public sector banks investing in technology and introducing new product
delivery platforms, their other operating expenses are estimated to rise. The operating expense
ratio may come under pressure in the short run, but it will fall as the benefits of investment
in technology begin to accrue. However, in the short run, the pressure on the operating expense
ratio will be reduced due to the expected demand for credit from the commercial sector. We
expect the core fee income ratio to continue to decline because of increased competition. CRIS
INFAC expects the NPM to be marginally under pressure in the next year, but improve afterwards,
with increasing spreads and savings in operating expenses.
Other scheduled commercial banks, especially the new private sector banks, are expanding their
operations and are in their growth stage. Hence their operating expenses will increase, and the
benefits of their investment will accrue, albeit only after a while. Till then the operating expense
ratio may either remain stable or increase marginally, which can put pressure on the NPM. The
core fee income ratio will continue to fall, but a slower pace, because of the increase in lending
to the commercial sector and also due to the forays into new business activities.
Foreign banks will continue have a high NPM on account of higher spreads and a high core
fee income ratio. But as competition intensifies in areas where they are strong, their spreads
and core fee income will reduce. Hence, we are of the view that foreign banks will have
to control their operating expenses.
7000
6000
5000
4000
3000
2000
1000
0
SBI & ass Nat banks Other SCBs Foreign banks
The business of other scheduled commercial banks (OSCBs) grew at 22 per cent (16 per cent)
CAGR from 1999-00 to 2002-03, the highest amongst all the bank segments, driven by the
strong growth in advances. The growth in advances was mainly driven by the growth in the
retail credit. The business of the foreign banks grew by 12.7 per cent CAGR, which is lower
than the industry average and also the lowest amongst all the bank groups. Both advances and
deposits grew at a comparatively slower pace, in comparison to the peer groups.
For all bank groups, except for the SBI Group, business growth had been primarily driven by
the higher growth in advances. The deposits of the SBI Group grew at 15.1 per cent CAGR,
in comparison to a 13.6 per cent CAGR growth in advances.
The business of nationalised banks increased by 14.2 per cent CAGR during 1999-00 to 2002-
03, driven by a 17.3 per cent CAGR growth in advances. The growth in advances was driven
by the increase in commercial credit, which is contrary to what was witnessed in OSCBs.
The share of OSCBs in the business increased from 13 per cent in 1999-00 to 16 per cent
in 2002-03, due to their aggressive expansion strategy.
The low cost deposit ratio was the highest in public sector banks and the lowest in OSCBs.
However, during 1997-98 to 2002-03, the low cost deposit ratio went up for the private sector
banks, while it fell for public sector banks, especially the SBI Group. Foreign banks had the
highest proportion of demand deposits in the low cost deposits (no interest is paid on demand
deposits), which contributed towards the lower cost of deposits.
45.0
40.0
35.0
30.0
25.0
20.0
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
All bank groups increased their exposure to SLR securities, mainly during 2002-03, due to the
slowdown in credit offtake. While this high exposure helped almost all the groups in booking
healthy profits during a period of soft interest rates, it can lead to losses during a period of
hardening interest rates (due to the mark-to-market valuation of the investment portfolio).
The SBI Group continuously increased its exposure to SLR securities during 1998-99 to 2002-
03 and has the highest SLR ratio (government and approved securities as a percentage of net
time and demand liabilities). With the expect hardening of interest rates, the SBI Group will
suffer losses on account of the valuation of these securities (as the portfolio carries a higher
proportion of securities purchased during the last 2 years). However, on account of its high
exposure towards SLR securities, we believe that the portfolio will carry sufficient unbooked profits
to provide a cushion against rising interest rates. Nationalised banks, unlike the SBI Group, had
a stable SLR ratio during 1998-99 to 2001-02, but the ratio increased in 2002-03 (to take advantage
of the soft interest scenario and book high treasury gains). CRIS INFAC believes that the investment
portfolio of nationalised banks will have unbooked profits (although it may be far lower than
that of the SBI Group) to protect them against rising interest rates. Hence, of the two public
sector bank groups, nationalised banks will have higher losses from the valuation of the investment
portfolio and sale of investments.
Private sector banks and foreign banks maintained the SLR ratio in the range of 26-27 per cent
during 1998-99 to 2001-02, but increased their exposure during 2002-03, when the acquisition
cost of the securities was high (because of low interest rates). However, with the hardening
interest rates, the losses from the valuation of investments or sale of investments would be
high. Further, because of this group's comparatively low exposure to securities, especially high
tenure ones, we expect that unbooked profits in the investment portfolio will be only marginal,
which will not provide much resistance against increasing interest rates and is likely to result
in the booking of high treasury losses.
Asset quality
Based on our study of the gross and net NPA ratios of various bank groups, we found that
there was a marked improvement in the declared asset quality of the nationalised banks and
the SBI Group, while it was only marginally better for OSCBs and foreign banks.
The marked improvement in the case of public sector banks (nationalised and SBI Group) has
been primarily due to higher provisions and write-offs. These banks recorded a healthy growth
in the profit from sale of investments, which helped them in writing off bad loans and also
making excess/additional provisions towards NPAs. However, the improvement observed in the
case of SBI Group was more at the gross NPA level, whereas in the case of the other three
groups, the improvement was more at the net NPA level. This indicates that the SBI Group
improved its credit management to improve asset quality, while other bank groups increased
their provisioning cover.
A comparison of the share of gross NPA ratios and net NPA ratios of the various bank groups
to the industry average, during the period 1999-00 to 2002-03, revealed that the SBI Group
had increased its asset quality both at the gross level and the net level. There was a slight
deterioration in the asset quality of the nationalised banks at the gross level, but there was
an improvement at the net NPA level, due to higher provisioning cover. Foreign banks witnessed
a marginal deterioration in the asset quality at both gross and net levels, but more at the net
level due to the decrease in the provisioning cover.
In case of other scheduled commercial banks, excluding ICICI Bank, the asset quality worsened
at the gross level, but remained stable at the net NPA level on account of the higher NPA
provision. Aggressive lending polices adopted by the private sector banks led to a worsening
of the asset quality at the gross levels, but they were able to maintain the net NPA ratios
with higher provisions. Including ICICI Bank, the asset quality worsened at both levels; gross
and net.
Other scheduled commercial banks, especially the new private sector banks, are aggressively increasing
the loan book by compromising a little on the asset quality. But the group is making higher
provisions in maintaining a stable net NPA.
Nationalised banks and the SBI Group are concentrating more on improving the asset quality.
While nationalised banks are focussing on improvement at the net levels, the SBI Group is concentrating
on improvement at the gross levels. Both groups had reduced the provisioning covers.
The healthy growth in treasury profits helped banks in increasing their provision cover, but there
will not be much leeway in future to make higher provisions towards NPAs due to the expected
fall in treasury profits. Hence banks need to improve their credit management to improve their
asset quality
Public sector banks (State Bank of India & associates, & nationalised banks)
These banks need to rein in their operating costs by controlling manpower costs and rationalising
operations. Investments in technology may result in surplus staff, which can affect productivity
(if the excess manpower is not utilised properly). The gradual increase in commercial sector
credit will enable a healthy growth in advances. Public sector banks need to reduce their exposure
to investments by focusing on the core activity of lending. Moreover, these banks have started
focusing on retail finance, which will contribute to the growth in advances, which will help in
improving the yield on carry business, and thus spreads. In addition, they need to strengthen
their interest rate risk management and credit risk management. We believe that the structure
of pricing of loans needs to be reviewed. We also expect the asset quality of the public sector
banks to improve on account of the expected improvement in credit management.
But PSBs need to improve and be aggressive in their communication and business strategies
to garner more customers, if they want to attain mass in the retail finance segment.
7000
6000
5000
4000
3000
2000
1000
0
SBI & ass. Nat banks Other SCBs Foreign banks
The business of all scheduled commercial banks grew at 16 per cent (14.5 per cent) CAGR
from 1999-00 to 2002-03.
During the same period, the business of other scheduled commercial banks (OSCBs) grew at
22 per cent (16 per cent) CAGR, the highest amongst all the bank segments, driven by a
strong growth in advances. The business of foreign banks grew by 12.7 per cent CAGR, which
is lower than the industry average and is also the lowest amongst all the bank groups. Both
advances and deposits of foreign banks grew at a comparatively slower pace, in comparison
with the other groups.
For all the groups, except the SBI Group, business growth was primarily on the back of the
higher growth in advances. The deposits of the SBI Group grew at 15.1 per cent CAGR, in
comparison to a 13.6 per cent CAGR growth in advances.
Due to the merger of ICICI Ltd with ICICI Bank on March 30, 2002, the growth figures
for the scheduled commercial banks (SCBs) for the period under consideration are slightly
misleading. Hence, for a better comparison, we have also calculated the growth figures excluding
ICICI Bank, which are indicated in brackets.
While the share of advances in funds deployed has gone up from 44.4 per cent (45.3 per
cent) in 1998-99 to 50.7 per cent (47.8 per cent) in 2002-03, the share of investments increased
from 37.8 per cent (37.4 per cent) in 1998-99 to 39.2 per cent (40.3 per cent) in 2002-
03. The growth in advances was primarily driven by the focus on retail credit, especially by
new private sector banks.
Nationalised banks
The business grew at a 14.2 per cent CAGR from Rs 7,041 billion in March 2000 to Rs 10,485
billion in March 2003, driven by a 17.3 per cent CAGR growth in advances. Deposits grew
at a slower rate of 12.7 per cent CAGR.
The share of advances in funds deployed increased from 42.4 per cent in 1998-99 to 48 per
cent in 2002-03, while the share of investment in funds deployed increased from 40.6 per cent
in 1998-99 to 43 per cent in 2002-03.
Foreign banks
Foreign banks clocked the lowest growth in business amongst various bank categories, at a CAGR
of 12.7 per cent during 1999-00 to 2002-03. The business grew from Rs 849 billion in March
2000 to Rs 1215 billion in March 2003, driven by 13.6 per cent CAGR growth in advances.
Deposits grew at a slower rate of 12.0 per cent CAGR.
The share of advances in the funds deployed increased from 42.6 per cent in 1998-99 to 50.2
per cent in 2002-03, while the share of investments in the funds deployed went up from 38.0
per cent in 1998-99 to 39.3 per cent in 2002-03.
Though the share of nationalised banks in the total business of scheduled commercial banks
is reducing, it is still approximately 50 per cent. The share of other scheduled commercial banks
has increased from 13 per cent in 1999-00 to 16 per cent in 2002-03, due to the aggressive
growth strategy adopted by them.
Advances
Overview
OSCBs recorded the highest growth in advances amongst all the bank groups, while the foreign
banks, along with the SBI Group, recorded the lowest growth. For OSCBs, the high growth was
due to the focus on retail credit. The advances of OSCBs grew at 35.2 per cent (17.5 per
cent) CAGR during 1999-00 to 2002-03. The advances of nationalised banks also recorded a
healthy growth of 17.2 per cent CAGR, driven by the growth in commercial credit and agriculture
credit.
For foreign banks and nationalised banks, the growth of advances was lower than that of the
industry. Increased competition from new private sector banks, coupled with low credit demand
from the large corporates, slowed down the growth of advances of foreign banks.
For the SBI Group, the growth of advances was low on account of a less aggressive lending
strategy and greater competition.
A study of the composition of loans and advances indicates that the SBI Group and nationalised
banks have, over the years, been providers of working capital finance to the industry. Going
forward, with the increasing focus of these groups on retail credit, the proportion of term loans
in working capital is expected to rise further.
140,000 80,000
120,000 70,000
60,000
100,000
50,000
80,000
40,000
60,000
30,000
40,000
20,000
20,000
10,000
0
0
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
Term loans Short term/working capital loans Term loans Short term/ working capital loans
The term loan of OSCBs grew at 75 per cent (34 per cent) CAGR from Rs 164 billion (Rs
161 billion) in 1999-00 to Rs 882.03 billion (Rs 385 billion) in 2002-03 on account of the
enhanced focus on retail credit. Because of lower demand for credit from the commercial sector,
working capital finance grew at a slower rate of 8 per cent (8.4 per cent) CAGR between
1999-00 and 2002-03.
The share of term loans in total advances increased from 29 per cent (31 per cent) in 1999-
00 to 64 per cent (46 per cent) in 2002-03.
Nationalised banks
The advances of nationalised banks also grew faster than that of the industry. Advances grew
by 17.3 per cent CAGR from Rs 2,231 billion in 1999-00 to Rs 3,601 billion in 2002-03, on
the back of a steady growth in both commercial and agricultural credit. As per our retail finance
study, nationalised banks were slow to shift their focus towards retail finance in the initial years.
However, many nationalised banks have now announced plans to focus on the retail finance
portfolio.
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
The share of term loans increased from about 37 per cent in 1999-00 to 39 per cent in 2002-
03. With the slowdown in industrial activity there was less demand for working capital loans,
which resulted in an increase in the share of term loans in total advances.
In the same period, the SBI Group's advances grew from Rs 1,290 billion in 1999-00 to Rs
1,892 billion in 2002-03, at a CAGR of 13.6 per cent. This lower-than-industry growth in advances
was on account of the lower growth in commercial credit. The group is also facing competition
from the new private sector banks and nationalised banks. Although the group was not aggressive
in retail finance earlier, SBI has now announced plans to increase its focus on retail finance.
(SBI plans to have 60 branches totally dedicated towards retail lending.) These measures, coupled
with the expected recovery in the commercial credit, will help the group in posting a healthy
growth in advances.
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
Term loans of the group grew at 22 per cent CAGR from Rs 420 billion in 1999-00 to Rs
741 billion in 2002-03. The working capital loans grew at 11 per cent CAGR to Rs 1,151 billion
in 2002-03 from Rs 871 billion in 1999-00.
The share of term loans in total advances increased from 33 per cent in 1999-00 to 39 per
cent in 2002-03. The increase in the share of term loans has been in line with the industry.
The slow growth in working capital loans led to an increase in the share of term loans.
(Rs/crores)
60,000
50,000
40,000
30,000
20,000
10,000
0
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
Among the scheduled commercial banks, foreign banks are the only group in which the term
loans have recorded a lower CAGR than the short term/working capital loans. Term loans grew
from Rs 173.9 billion in 1999-00 to Rs 249.7 billion in 2002-03 at a rate of 12.8 per cent
CAGR, while working capital finance grew from Rs 182 billion in 1999-00 to Rs 272 billion
in 2002-03 at rate of 14.3 per cent CAGR. Foreign banks, because of their worldwide network,
are strong in trade finance; especially export finance and cash management systems, where the
lending is of short duration. These activities drove the growth in working capital credit. The
low demand for corporate credit, coupled with the limited presence of foreign banks in retail
finance, restricted the growth in the term loans. Only a few of the foreign banks are aggressive
in retail finance.
In addition, foreign banks have a strong presence in foreign currency loans - FCNR (B) term
loans or ECBs - which are generally of 3-5 years tenure and are classified under term loans.
This contributes to a higher proportion of term loans in advances vis-à-vis that of public sector
banks. The lower growth in the term loans vis-à-vis working capital finance led to the a drop
in the share of term loans.
Public sector banks (State Bank of India & associates, and nationalised banks)
The outstanding priority sector advances of PSBs increased by 18.6 per cent during 2002-03.
As on the last reporting Friday in March 2003, the priority sector lending constituted 42.5 per
cent of the net bank credit. Funding to agriculture and self-help groups helped the public sector
banks in achieving the target.
Foreign banks
As on the last reporting Friday of March 2003, priority sector lending constituted 33.9 per cent
of the net bank credit. Foreign banks have maintained the priority sector ratio at a level of
33.5-34 per cent.
All the bank groups had met their overall priority sector lending targets.
Summary
OSCBs recorded the highest growth in deposits amongst all the bank groups. During 1999-00
to 2002-03, deposits grew at 22 per cent (15.2 per cent) CAGR, followed by the SBI Group,
whose deposits grew at 15.1 per cent CAGR. The 12 per cent CAGR growth in deposits of
foreign banks was the lowest amongst all the bank groups.
The strong growth in deposits of OSCBs was due to the aggressive growth strategies adopted
by the new private sector banks.
The SBI Group's extensive branch expansion enabled it to achieve a healthy growth in term
deposits. However, for foreign banks, their limited branch network acted as a hindrance in the
growth of deposits. Moreover, foreign banks also offered lower interest rates on term deposits.
Of the three categories of deposits, savings deposits recorded the highest growth in all the
bank groups. The growth was the highest for OSCBs on the back of a relatively lower base
and the aggressive marketing strategy they adopted.
Nationalised banks and the SBI Group have the highest low cost deposit ratios (the proportion
of demand deposits and savings deposits to total deposits) among all bank groups. As of March
2003, the low cost deposit ratio was nearly 37 per cent for the SBI Group, while it was approximately
36 per cent for nationalised banks. Though OSCBs have the lowest low cost deposit ratio, they
are giving tough competition to the nationalised banks and the SBI Group by increasing their
market share in low cost deposits. Among all the groups, foreign banks have the highest composition
of demand deposits in low cost deposits.
2500
90%
2000
80%
1500
70%
1000
60%
500
50%
1998 1999 2000 2001 2002 2003
0
Term deposits Savings deposits Demand deposits 1998 1999 2000 2001 2002 2003
Low cost deposits (demand and saving deposits) constituted 24 per cent of the total deposits,
which is the lowest amongst all the scheduled commercial banks. OSCBs do not have a wide
network of branches that provide support in garnering more low cost deposits. Moreover, the
technology-driven customised products introduced by the new private sector banks allow customers
to switch between savings and term deposits.
Deposits break-up - SBI & associates Figure 10 Total deposits - SBI & associates Figure 11
100% (Rs/billion)
4500
90% 4000
3500
80% 3000
2500
70%
2000
1500
60%
1000
50% 500
1998 1999 2000 2001 2002 2003
0
Term deposits Savings deposits Demand deposits 1998 1999 2000 2001 2002 2003
The total deposits of the SBI Group grew from Rs 2,563 billion in 1999-00 to Rs 3,910 billion
in 2002-03 at a rate of 15.1 per cent, while the industry grew at a rate of 14.6 per cent
(13.7 per cent). The SBI Group's wide branch network helped it to achieve a healthy growth
in deposits. The India Millennium Deposit (IMD) also spurred the growth in deposits. SBI mobilised
deposits worth Rs 257 billion through the IMD scheme.
Low cost deposits constitute 37 per cent of the total deposits as of March 2003, which is the
highest amongst all scheduled commercial banks. The group's wide branch network helped it
in maintaining the low cost deposit ratio at a high level. However, the share of low cost deposits
in the total deposits fell from 42.6 per cent in 1997-98 to 37.0 per cent in 2002-03, due
to the increase in competition.
Break-up of deposits - Nationalised banks Figure 12 Total deposits - Nationalised banks Figure 13
100% (Rs/billion)
8000
90% 7000
6000
80%
5000
70% 4000
3000
60%
2000
50% 1000
1998 1999 2000 2001 2002 2003
0
Term deposits Savings deposits Demand deposits 1998 1999 2000 2001 2002 2003
The total deposits of nationalised banks grew at 12.7 per cent CAGR, which was lower than
that of the industry (all scheduled commercial banks). Total deposits grew from Rs 4,810 billion
in 1999-00 to Rs 6,884 billion in 2002-03 on account of the low interest rates offered by the
group on term deposits. Further, nationalised banks are facing stiff competition from the new
private sector banks, who have capitalised on their technological edge and better service and
increased their market share.
Low cost deposits constituted 36 per cent of the total deposits. The share of term deposits
had been stable at 36 per cent during 1999-00 to 2002-03. The term deposits of nationalised
banks grew at 12.5 per cent CAGR during 1999-00 to 2002-03, which is lower than the industry
average of 15.1 per cent (13.8 per cent).
Foreign banks
Break-up of deposits - Foreign banks Figure 14 Total deposits - Foreign banks Figure 15
100% (Rs/billion)
800
90% 700
600
80%
500
70% 400
300
60%
200
50% 100
1998 1999 2000 2001 2002 2003
0
Term deposits Saving deposits Demand deposits 1998 1999 2000 2001 2002 2003
The share of low cost deposits in total deposits increased from 31.5 per cent in 1999-00 to
33.8 per cent in 2002-03. Within low cost deposits, demand deposits have a higher share as
foreign banks generally prefer to cater to corporate clients who maintain current account deposits,
and also because they are strong in the cash management system. Generally foreign banks rely
less on deposits to meet their funding needs. The funding requirements are met through the
support of their parent organisations or by raising borrowings. Deposits constitute only about
70-75 per cent of the borrowed funds for foreign banks, while they constitute more than 95
per cent of the borrowed funds for public sector banks.
Savings deposits of foreign banks grew at 23 per cent CAGR from a lower deposit base of
Rs 49 billion in 1999-00 to Rs 90 billion in 2002-03. Foreign banks generally cater to high
net worth individuals (HNIs) and NRI deposits. Further, only very few banks - such as HSBC,
Standard Chartered Bank, Citibank and ABN Amro - are into the retail banking business. Many
banks had hived off their retail business are concentrating on the institutional business. But of
late, foreign banks (those who are active in the retail business) are also, with the aid of technology,
luring customers to maintain low cost deposits with them. Of late a few foreign banks have
started increasing their branch network, which is helping them in increasing their savings deposits.
The lower deposit base, especially term loans, and their focus on HNIs and NRIs help them
to keep the low cost deposit ratio at a very high level.
Investments
Under section 24 (b) of the Banking Regulation Act, 1949, every bank is required to maintain,
at the close of business every day, a minimum proportion of its net demand and time liabilities
(NDTL) as liquid assets in the form of cash and gold and un-encumbered approved securities.
The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio
(SLR). In 1997-98, the Reserve Bank of India fixed the SLR to be maintained on all the demand
and time liabilities, including inter-bank borrowings, at 25 per cent, which is applicable till date.
Banks hold a major portion of their investments in government securities and other approved
securities. The proportion of government securities, along with the approved securities, to the
net demand and time liabilities has been over 30 per cent during 1997-98 to 2002-03 for all
SCBs as a whole.
45.0
35.00
40.0
35.0
30.00
30.0
25.00 25.0
20.0
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
20.00
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 SBI & associates Natonalised banks
Other SCBs Other SCBs (ex ICICI Bank)
GSEC + Other approved SLR requirement Foreign banks SLR requirement
Public sector banks (nationalised banks and SBI Group) had been investing in SLR securities
well above the RBI stipulated norm, vis-à-vis other scheduled commercial banks and the foreign
banks. The SLR ratio (SLR securities to net time and demand liabilities) of OSCBs and foreign
banks has been marginally above the stipulated norm during 1997-98 to 2000-01, indicating that
they utilised their funds better. However, during 2002-03, with low demand for credit from the
commercial sector and excess liquidity in the system, banks in all the groups had increased
their exposure to the SLR securities.
This increased exposure helped many banks in booking huge treasury profits during the soft
interest rate scenario that prevailed then. But, with the hardening of interest rates, this high
exposure could impact their bottom line. Further, there will be a drop in the yield on investments
as the re-pricing would be from a historically higher interest rate to current lower yields. The
higher the exposure, the higher would be the loss on valuation of the investments.
Of the bank groups, the highest exposure to SLR investments was by the SBI Group (48 per
cent of NTDL) followed by nationalised banks (36 per cent of NTDL) in 2002-03. OSCBs had
the lowest exposure of 30 per cent of NTDL in 2002-03.
Though the SBI Group has the highest exposure to SLR securities (as a per cent of net demand
and time liabilities), we believe that the unbooked profit of the investment portfolio will offer
a sufficient cushion against losses arising from the increase in interest rates.
The investment portfolio of nationalised banks is also expected to have some cushion (on account
of their historically higher exposure towards SLR securities), although it will be significantly lower
than that of the SBI Group. Hence the impact would be more in the form of a drop in the
yield on investments.
Other scheduled commercial banks and foreign banks have a comparatively lower exposure to
SLR securities, which should lead to a comparatively lower loss from the valuation of investment
portfolio. However, we believe that their investment portfolio does not carry significant unbooked
profits to mitigate the impact of the interest rate rise and its resultant impact on the bottomline.
Further, we also expect the yield on investments to come down.
During the period of falling interest rates, the group was continuously increasing its exposure
to SLR securities. Such a high exposure would have led to an increase the acquisition cost of
investments (cost of acquisition of the securities is inversely related to yield on the security).,
In an increasing the interest rate scenario, such a high exposure will have a negative impact
on the profit and loss account, both in the form of treasury losses (losses from mark-to-market
valuation of the investment portfolio) and the drop in the yield on investments. We believe
the outstanding portfolio as of March 2003 would include a high proportion of securities purchased
during the last 3 years, whose cost of acquisition would have been high. Hence, in a hardening
interest the group is expected to book treasury losses on account of mark-to mark valuation
of securities.
But, as noted earlier, we believe that the portfolio will have sufficient unbooked profits to cushion
the impact of the interest rate rise and the drop in the yield on investments.
Nationalised banks
Nationalised banks maintained a stable exposure to SLR investments at 32-33 per cent of the
net time & demand deposits during 1997-98 to 2001-02. But with low demand for credit from
the commercial sectors during 2002-03, they increased the exposure to SLR securities to approximately
36 per cent.
During 2002-03, interest rates were very low and almost touched rock bottom in 2003-04. This
is likely to have increased the cost of acquisition of the investments. Further this would also
increase the proportion of these securities in the total outstanding investment portfolio. Hence,
with hardening of interest rates, nationalised banks are likely to face heavy losses on account
of mark-to-market valuations. Further, we also expect a drop in the yield on investments.
Nationalised banks, due to their historically high exposure to SLR securities, will have some cushion
to withstand the impact of the rise in the interest rates and be able to reduce the losses
from treasury operations, although this cushion will be lower than that of the SBI Group.
Foreign banks
The exposure of foreign banks in SLR securities was maintained at 27 per cent of the net
time and demand deposits during 1997-98 to 2000-01, but in 2001-02, the ratio dropped to
24 per cent. During 2002-03, with low credit offtake, foreign banks significantly increased its
exposure towards SLR securities. The proportion of SLR securities to net time and demand deposits
touched 34 per cent in 2002-03. As explained earlier, the interest rates being low during 2002-
03, the cost of acquisition of the investments is likely to be high. As the outstanding investment
portfolio would have high proportion of securities acquired recently, it will increase the overall
cost of the portfolio. With the hardening of interest rates, foreign banks are likely to see a
negative impact on their bottomline on account of the reduced yield on investments and also
suffer losses on account of valuation of the portfolio.
We expect the impact to be two fold: one by way of dropping the yield on investments
and second by way of losses on valuation of the investment portfolio. We believe the investment
portfolio of OSCBs will not have any cushion to bear the impact of the hardening of interest
rates, and that their bottomline will get impacted due to losses on account of investment portfolio.
Non-performing assets
The Indian banking industry had always been plagued with the problem of high levels of non
performing assets, which can be attributed to factors like archaic policies, industrial inefficiency,
lack of adequate legal recourse to the lenders, wilful defaulters etc.
Based on the study of the gross and net NPA ratios of various bank groups, we find that
there has been a marked improvement in the declared asset quality of the nationalised banks
and the SBI Group, while there has been only a marginal improvement in the case of OSCBs
and foreign banks.
The marked improvement seen in the case of public sector banks (nationalised and SBI Group)
was primarily due to higher provisions and write-offs. These banks accounted a healthy growth
in the profit from sale of investments, which helped them in writing off bad loans and also
making excess/additional provisions towards NPAs. Both the SBI Group and nationalised banks
recorded a growth of 73 per cent CAGR and 54.5 per cent CAGR, respectively, in the profits
from the sale of investments.
The improvement observed in the case of the SBI Group has been more at the gross NPA
level, whereas in the case of the other three groups, the improvement is more at the net
NPA level. During 1999-00 to 2002-03, the provision cover for the SBI Group reduced by more
than 100 bps, while it went up in the case of other bank groups. An improvement in the
gross NPA generally indicates an improvement in the bank's systems and procedures, whereas
an improvement in the net NPA indicates that the bank's balance sheet has the strength to
sustain higher provisions.
A comparison of the share of gross NPA ratios and net NPA ratio of the various groups to
the industry average, during 1999-00 to 2002-03, reveals that the SBI Group has increased its
asset quality both at the gross level and the net level. There has been a slight deterioration
in the asset quality of the nationalised banks at the gross level, but it has improved at the
net NPA level on account of higher provision cover. Foreign banks witnessed a marginal deterioration
in the asset quality at both gross and net levels, but more at the net level, on account of
the decrease in the provision cover.
In case of other scheduled commercial banks, excluding ICICI Bank, the asset quality at the
gross level worsened, but remained stable at the net NPA level, on account of higher NPA
provisions. Aggressive lending polices adopted by the private sector banks led to worsening of
CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES
82
the asset quality at the gross level, but, with higher provisions, they were able to maintain
the net NPA ratios. Including ICICI Bank, the asset quality has worsened at both levels, gross
and net.
Take away
Other scheduled commercial banks, especially the new private sector banks are aggressively increasing
the size of their loan book, by compromising a little on the asset quality. But the group is
making higher provisions in maintaining a stable net NPA.
Nationalised banks and SBI Group are concentrating more on improving the asset quality. While
nationalised banks are concentrating on an improvement in the net levels, the SBI Group is
concentrating on an improvement at the gross levels. They had reduced the provision cover.
The gross NPAs of the SBI Group declined from 14.08 per cent in 1999-2000 to 8.68 per
cent in 2002-03 because the write offs/recoveries in the last 4 years were higher than the
additions to gross NPAs, indicating an improvement in the NPA management systems over the
last few years.
In 2002-03, the additions to gross NPAs were Rs 5,791 crore while the deletion from gross
NPAs was Rs 8,198 crore.
Net NPAs declined in line with the drop in the gross advances. During 1999-00 to 2002-03,
the ratio of net NPAs to net advances declined from 6.77 per cent in 1999-2000 to 4.12 per
cent in 2002-03. During the same period, there was a drop in the NPA provision cover for
the group as a whole, from 55.7 per cent in 1999-00 to 54.3 per cent in 2002-03, indicating
a lower provision towards non-performing loans. This may be on account of the higher reversal
of provisions for NPA due to the write-off and restructuring of NPAs.
The share of SBI Group in gross advances of all scheduled commercial banks declined from
29.6 per cent in 1999-2000 to 25.3 per cent in 2002-03 while the share of gross NPAs has
also declined at a faster rate from 32.8 per cent in 1999-00 to about 24.9 per cent in 2002-
03. The ratio of share of gross NPAs of the SBI Group to all SCBs to the share of gross
advances reduced from 1.11 per cent in 1999-00 to 0.98 per cent in 2002-03.
CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES
83
The share of SBI Group in net advances of all scheduled commercial banks declined from 29.10
per cent in 1999-2000 to 25.59 per cent in 2002-03 while the share of net NPAs declined
from 29.8 per cent to about 23.0 per cent. The ratio of share of net NPAs of the SBI Group
to all SCBs to the share of net advances reduced from 1.02 per cent in 1999-00 to 0.90 per
cent in 2002-03.
The above ratios indicate improvement in the assets quality of the group, with more emphasis
on an improvement in gross NPAs.
Nationalised banks
The ratios of gross NPAs to gross advances declined from 13.91 per cent in 1999-2000 to 9.72
per cent in 2002-03, on account of recovery and write-offs of sticky assets. During 1999-00
to 2002-03, the gross NPAs increased from Rs 33,260 crore in 1999-00 to Rs 36,849 crore in
2002-03.
The provisioning cover increased from 43.93 per cent in 1999-2000 to 50.93 per cent in 2002-
03, which led to a drop in the net NPA ratio to 4.77 per cent in 2002-03 from 7.8 per
cent in 1999-00. The huge profits from the sale of investment made by the nationalised banks,
especially in 2001-02 and 2002-03, enabled them to increase their provisioning cover.
The share of the nationalised banks in total gross advances of all scheduled commercial banks
has declined from 50.5 per cent in 1999-2000 to 48.8 per cent in 2002-03; however, the proportion
of gross NPAs of nationalised banks to gross NPAs of the all scheduled commercial banks declined
at a marginally slower rate from 55.2 per cent to 53.8 per cent. But this improvement is not
that significant when compared to the industry. The ratio of the nationalised banks' share of
gross NPA to the gross advances of all SCBs, has remained stable at 1.1 per cent between
1999-98 and 2002-03, indicating a stable reported asset quality of the group. The credit management
of the group needs to be improved to arrest the further rise in the NPAs.
But on comparing the group's performance with the industry on a net NPA level, we find that
the share of net advances of the nationalised banks has declined from 50.30 per cent in 1999-
The private banks have seen their gross NPAs grow at a CAGR of 36.46 per cent (14.16 per
cent) during 1999-2000 to 2002-03.The proportion of gross NPAs to gross advances declined
from 8.17 (8.28 per cent) per cent to 8.08 per cent (7.71 per cent) during 1999-00 and 2002-
03, which is a marginal improvement in comparison to that of the nationalised banks and the
SBI Group. A significant increase in the gross NPA level in 2001-02 and 2002-03 is due to
the merger of ICICI Ltd with ICICI Bank.
The marginal improvement witnessed in the gross NPAs, when compared to the industry performance,
reveal a different picture altogether. The proportion of gross advances of the private banks in
total net advances of all scheduled commercial banks increased from 12 per cent (11.6 per
cent) in 1999-00 to 18.8 per cent (12.2 per cent) on 2002-03, while the proportion of gross
NPAs of the private banks in the total net NPAs increased from 7.7 per cent (7.5 per cent)
to 17.2 per cent (9.9 per cent). The ratio of the shares of gross NPAs to gross advances increased
substantially from 0.64 in 1999-00 to 0.92 in 2002-03. The new private sector banks have been
aggressive in their lending and have hence seen an increase in the gross NPAs. The group's
share in the advances also went up substantially. Of all the bank groups, the private sector
banks' performance as regards NPAs has been miserable. The group needs to tighten credit management
policies to keep the NPAs under control.
The proportion of net advances of private banks in the total net advances of all scheduled
commercial banks increased from 12.57 per cent (11.52 per cent) in 1999-00 to 18.63 per
cent (11.95 per cent) in 2002-03, while the proportion of net NPAs of the private banks in
the total net NPAs increased from 9.59 per cent (9.40 per cent) to 17.93 (9.64) per cent.
The ratio of the share of net NPAs to the share of net advances has also increased 0.76 per
cent (0.82 per cent) in 1999-00 to 0.96 per cent (0.81 per cent) in 2002-03. In spite of
the significant increase in the proportion of gross NPAs, we do not see a similar rise in the
proportion of net NPA, which has been on account of higher provisions towards NPA. The group
has been resorting to higher provisions to maintain a stable net NPA. Excluding ICICI Bank,
the ratio of shares of net NPA to net advances has been stable between 1999-00 and 2002-
03.
Foreign banks
The share of foreign banks in gross advances of all scheduled commercial banks declined from
8.0 per cent in 1999-2000 to 7.2 per cent in 2002-03, and the share of net NPAs also declined
from 8.03 per cent in 1999-00 to 7.06 per cent in 2002-03. The share of gross NPAs in all
SCBs declined from 4.37 per cent in 1999-00 to 4.24 per cent with the decline in the share
of gross NPAs. However, the share of net NPAs increased from 2.58 per cent to 2.85 per
cent on account of lower provision cover. The drop in the share of gross NPAs in not in
line with the drop in the share of gross advances, indicating a decline in the incremental asset
quality.
The share of foreign banks in net advances of all scheduled commercial banks declined from
8.03 per cent in 1999-2000 to 7.06 per cent in 2002-03; the share of gross NPAs also declined
during this period. However the share of net NPAs grew from 2.58 per cent in 1999-00 to
2.85 per cent in 2002-03 on account of lower provisioning. The ratio of the group's share in
the net NPAs to the share of net advances increased to 0.40 per cent in 2002-03 from 0.32
per cent in 1999-00.
The performance of the group, when compared to the industry, indicates a decline in the asset
quality. The ratio of the share of gross NPA to gross advances increased from 0.55 per cent
in 1999-00 to 0.59 per cent in 2002-03, while the ratio of shares of net NPA to net advances
increased from 0.32 per cent in 1999-00 to 0.40 per cent in 2002-03.
Spreads
The spreads of all bank groups, except nationalised banks, dropped during 1998-99 to 2002-
03. In the case of nationalised banks, spreads improved by 2 basis points (bps) during the
same period. Other scheduled commercial banks (OSCBs) witnessed the steepest decline in spreads.
On an absolute level, foreign banks, with a spread of 3.35 per cent, were the leaders in 2002-
03, followed by nationalised banks with a spread of 3.29 per cent.
The primary reason for the drop in the spreads, across categories, was the sharper decline in
the yield on carry business in comparison to the interest cost. As interest rates declined, the
yield on advances and the yield on investments both fell faster than the cost of deposits, which
mounted pressure on spreads. Compared to other segments, the decline in the yield on investments
was higher in the case of OSCBs and foreign banks.
Foreign banks
Spreads
Foreign banks had the highest spreads in 1998-99, but they declined to 3.35 per cent in 2002-
03 due to the higher drop in the yield on carry business. Despite this, foreign banks had the
highest spreads among all bank groups.
Moreover, foreign banks generally lend foreign currency loans and ECBs, which carry a floating
rate of interest. With the drop in the global interest rate, the yield on advances suffered. Further,
foreign banks also started facing competition from the new private sector banks, forcing them
to reduce the rate of interest. With the hardening of interest rates, the yield on advances is
expected to improve.
Foreign banks have very little exposure to long tenure securities, and the re-pricing of securities
they hold is faster than that of other bank groups, which resulted in a drop in the yield on
investments. But, in 2002-03, these banks increased their exposure to SLR securities, when the
CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES
90
acquisition cost of these securities was high. With the hardening of interest rates, this group
will suffer from the drop in the yield on investments and also the losses arising from the mark-
to-market valuation of the securities.
Interest cost
The interest cost dropped by 342 bps from 8.76 per cent in 1998-99 to 5.34 per cent in
2002-03, driven by a 370 bps drop in the cost of deposits, which fell from 9.01 per cent
in 1998-99 to 5.31 per cent in 2002-03.
Historically, the reliance of foreign banks on deposits has been lesser than that of the other
bank groups. The interest rates that they offer on deposits are also lower than that offered
by public sector banks. This, coupled with the increased share of low cost deposits, has helped
them to achieve the highest drop in the cost of deposits during 1998-99 and 2002-03. Although
the low cost deposit ratio of foreign banks is lesser than that of the public sector banks, the
proportion of demand deposits in low cost deposits is higher than that of the public sector
banks, which supported the drop in the cost of deposits.
Borrowings constitute 25-30 per cent of the borrowed funds of the foreign banks. Borrowings
are generally of short duration, hence the drop in the cost of borrowings has been in line
with the general drop in the interest rates. Moreover, foreign banks also get funding support
from their parent companies at a very low cost, and sometimes even free of cost.
Nationalised banks
Spreads
The spreads of nationalised banks increased marginally by 2 bps from 3.27 per cent in 1998-
99 to 3.29 per cent in 2002-03, driven by a 133 bps drop in the interest cost.
The yield on carry business dropped by 131 bps to 9.61 per cent in 2002-03, on account
of the slower drop in the yield on investments.
The drop in the yield on advances was in line with the industry.
Across all categories, the lowest drop in the yield on investment was witnessed in case of nationalised
banks. This is due to the high exposure to long tenure securities, which lowered the re-pricing
ratio, and also because the group maintained a steady SLR.
Interest cost
The cost of deposits of nationalised banks dropped by 143 bps from 7.64 per cent in 1998-
99 to 6.21 per cent in 2002-03. Nationalised banks were quick to respond to the declining
interest rates by revising downwards the interest rate on term deposits. Nationalised banks have
one of the highest low cost deposit ratio of 36 per cent (next only to 37 per cent of the
SBI Group). This helped banks in this category in lowering the cost of deposits.
In 1998-99, this group enjoyed a higher yield on investments, compared to the nationalised
banks, but in 2002-03, the yield on investments fell below that of the nationalised banks. We
believe that this occurred due to the SBI Group's increasing exposure to SLR securities during
1998-99 to 2002-03, with the proportion of SLR securities to NTDL touching 46 per cent during
2002-03. With falling interest rates, every successive years' exposure to SLR securities was at
a higher acquisition cost, which pulled down the yield. Further, the group had also booked healthy
treasury profits by selling high-yield securities, which may have also contributed to the drop
in the yield.
In the case of the nationalised banks, the yield on investments was steady at 11.4-11.7 per
cent during 1998-99 to 2001-02, but dropped to 10.2 per cent in 2002-03 when the group
increased its exposure to SLR securities, with the SLR touching 36 per cent. Though nationalised
banks also booked healthy profits on investments, the growth in treasury profits was less than
that of the SBI Group.
The yield on investments is higher than the yield on advances, which may be on account of
the group's historically higher exposure to higher tenure government securities.
The SBI Group has also shown a trend similar to that witnessed in the nationalised banks, with
approximately 50 per cent of the loans and advances classified under 'more than 1 year' maturity
bucket, and approximately 70 per cent of the investments being classified under 'more than
1 year' maturity buckets.
The drop in the yield on advances has been in line with the industry. The 228 bps drop
in the yield on advances has been the lowest amongst all the bank groups. For the SBI Group,
the yield on advances in 2002-03 was lower than that of the nationalised banks, due to the
lower lending rates that it offered on advances.
Interest cost
The interest cost declined by 133 bps from 7.66 per cent in 1998-99 to 6.33 per cent in
2002-03, with the cost of deposits dropping from 7.64 per cent in 1998-99 to 6.21 per cent
in 2002-03.
For this group, the proportion of low cost deposits to total deposits dropped to 37 per cent
in 2002-03 from 43 per cent in 1997-98, but the ratio was still the highest amongst all the
Further, the drop in the interest cost was restricted due to the higher interest obligation (on
account of Resurgent India Bonds and India Millennium Deposits). The outstanding deposits under
RIB/IMD stood at Rs 437.3 billion as on March 31, 2003, in the books of SBI. Excluding RIB/
IMD, the cost of deposits for SBI fell from 8.05 per cent in 1998-99 to 6.43 per cent in
2002-03.
Borrowings are generally raised to meet mismatches in short-term liquidity and are a very small
proportion of the banks' total borrowings. The change in the cost of borrowing has a minor
impact on the interest cost
The yield on advances dropped to 10.9 per cent (10.2 per cent) in 2002-03 from 13.6 per
cent (13.47 per cent) in 1997-98, while the yield on investments shrank to 9.0 per cent (9.38
per cent) in 2002-03 from 12.2 per cent (12.3 per cent) in 1997.98. The higher fall in the
yield on investments was due to the group's lower exposure to high coupon securities. Further,
based on a study of the maturity profile of a sample set of private sector banks, we find
that, for this group, the re-pricing of securities took place at a faster rate as compared to the
public sector banks. Securities maturing within 1 year were 38 per cent in case of the sample
private sector banks, while it was 10 per cent and 20 per cent in the case of a sample set
of nationalised banks and SBI group, respectively.
The drop in the yield on advances was due to the aggressive lending strategy adopted by
the group, especially the new private sector banks. Further, the drop has been in line with
the industry.
Interest cost
The interest cost increased from 9.42 per cent (9.43 per cent) in 1998-99 to 7.73 per cent
(6.76 per cent) in 2002-03, with cost of deposits dropping by 269 bps (262 bps) from 9.31
per cent (9.35 per cent) in 1998-99 to 6.62 per cent (6.73 per cent) in 2002-03.
Many OSCBs, especially the old private sector banks, offer a high rate of interest on term deposits,
as compared to the public sector banks (nationalised banks and SBI Group). The low cost of
deposits, 24 per cent in 2002-03, was the lowest amongst all bank groups. Moreover, the technology-
driven products introduced by many private sector banks (OSCBs) allow customers to switch
between term and savings accounts; this increases the liability of term deposits. These factors
contribute to the higher cost of deposits.
The cost of borrowings dropped from a high of 15.23 per cent (14.57 per cent) in 1999-
00 to 12.55 per cent (9.45 per cent) in 2002-03 after touching a low of 3.3 per cent (12.03
per cent) in 2001-02. This sudden spike was because of the merger of ICICI Ltd with ICICI
Bank. ICICI Ltd's high cost deposits were merged with the banking system, which led to a
sudden surge in the interest cost. With the ICICI Bank's focus on replacing its high cost borrowings
with low cost of deposits, there will be a drop in the cost of borrowings and a reduction
in the share of borrowings in total borrowings.
Foreign banks
The NPM improved marginally to 2.55 per cent in 2002-03, from 2.43 per cent in 1998-99,
despite the fall in the spreads. The operating expense ratio dropped by 90 bps to 3.1 per
cent in 2002-03 from 4.05 per cent in 1998-99. However, the entire benefit could not be passed
on to the NPM due to the drop in the core fee income ratio (also called core fee-based income
ratio, which is core fee income as a percentage of average funds deployed), which dropped
by 39 bps to reach 2.35 per cent by 2002-03 from 2.74 per cent in 1998-99.
In spite of the sharpest decline (in percentage points) in the operating expense ratio (operating
expense as a percentage of average funds deployed), foreign banks still continue to have a
very high operating expense ratio amongst all bank groups. The high operating cost is on account
of the heavy investments in infrastructure and technology, and staff cost.
Though the ratio had been declining, foreign banks continued to enjoy the highest core fee
income ratio amongst all the banking groups. Foreign banks lend foreign currency loans, and
the syndication charges/processing charges recovered are high. They are also strong in trade finance
and correspondent-banking services, where they earn fee-based income without taking exposure.
This leads to a high core fee income ratio. The ratio of core fee income ratio to NPM dropped
by 20 percentage points between 1998-99 and 2002-03, to 92 per cent in 2002-03, in line
with the industry trend, yet it was a major factor in keeping the NPM stable.
Greater spreads and high core fee based income help foreign banks in managing higher operating
expenses and, thus, have a high NPM. The foreign banks' NPM of 2.55 per cent in 2002-
03 was the highest amongst all scheduled commercial banks.
But as more private sector banks venture into areas where foreign banks are strong, competition
will increase, which will exert pressure on spreads and core fee income. Foreign banks will
thus need to control to their operating costs to have a stable NPM.
Nationalised banks
Despite stable spreads, the NPM of nationalised banks improved by 22 bps (the highest amongst
all bank groups) to 1.42 per cent in 2002-03 from 1.20 per cent in 1998-99. This can be
attributed to the savings in operating expenses. The operating expense ratio dropped to 2.6
per cent in 2002-03 from 3.1 per cent in 1998-99, after touching a high of 3.15 per cent
in 2000-01. The sudden spike was on account of the voluntary retirement schemes (VRS) introduced
by nationalised banks. The savings in manpower could be seen through 2001-02 and 2002-03,
when the operating expenses ratio started declining to reach 2.62 per cent in 2002-03.
However, the drop in the core fee-based income ratio restricted the increase in the NPM to
1.4 per cent. The ratio of core fee-based income to the average funds deployed had declined
to 0.7 per cent in 2002-03 from 1.0 per cent in 1998-99, thereby reducing its contribution
to the NPM to 53 per cent in 2002-03 from 0.83 per cent in 1998-99.
Going forward, with the pressure on spreads as the yield on investments drop, the group needs
to concentrate on increasing its core fee-based income and control operating expenses to maintain
the growth in NPM. With staff cost accounting for more than 70 per cent of the operating
expenses, the group needs to utilise manpower efficiently and improve productivity.
To compete with the more aggressive private sector banks, the group will have to invest in
technology, which will also increase the operating expense ratio and render some staff as excess.
This can pull down the productivity.
The NPM declined by just 9 bps to 1.35 per cent in 2002-03 from 1.44 per cent in 1998-
99, despite the 43 bps decline in spreads and the fall in the contribution of core fee-based
income from more than 100 per cent (115 per cent) in 1998-99 to 82 per cent in 2002-
03. This has been on account the SBI Group's focus on controlling operating expenses. The
operating expense ratio declined by 89 bps from 3.23 per cent in 1998-99 to 2.34 per cent
in 2002-03. During 2000-01, the operating expense ratio increased to 3.13 per cent from 2.89
per cent in 1999-00, because of impact of voluntary retirement scheme introduced by the group.
The operating expense ratio of 2.34 per cent during 2002-03 is lower than that of the nationalised
banks.
The core fee income ratio declined by 55 bps from 1.66 per cent in 1998-99 to 1.11 per
cent in 2002-03, in line with the industry trend. Although the share of core fee income shrank
to 82 per cent in 2002-03, it still remains the major contributor to the NPM.
The core fee income ratio at 1.11 per cent is better than that of nationalised banks and other
scheduled commercial banks.
Staff cost accounts for than 70 per cent of the operating expense, hence, with increasing pressure
on the spreads, the group will have to control staff cost and improve productivity to maintain
a stable NPM. The group has planned investments in technology to compete effectively with
other players. This is likely to result in excess manpower, which need to be utilised effectively
so that overall productivity can be improved. Along with controlling operating costs, the SBI
Group also need to continue its focus on increasing core fee income, so that NPM is stable.
With the drop in spreads, the NPM declined to 0.8 per cent (1.21 per cent) in 2002-03 from
1.4 per cent (1.26 per cent) in 1998-99. Further, the core fee income ratio declined by 20
bps (27 bps) from 1.24 per cent (1.22 per cent) in 1998-99 to 1.04 per cent (0.95 per cent)
in 2002-03. However, the drop was restricted due to the marginal savings in the operating expenses
ratio. The operating expenses ratio dropped to 2.25 per cent (2.33 per cent) in 2002-03 from
2.49 per cent (2.25 per cent) in 1998-99. But the operating expense ratio increased from 2.17
per cent (2.17 per cent) in 2000-01 to 2.25 per cent (2.33 per cent) in 2002-03 due to
the aggressive branch expansion undertaken by this group, especially the new private sector
banks - HDFC Bank, UTI Bank, ICICI Bank, IDBI Bank, Kotak Mahindra Bank etc. Many of
the private sector banks are still in the growth stage and expanding their reach (new private
sector banks), or are in the technology upgradation mode, the benefits of which are expected
to accrue to them in later years.
Contrary to the industry trend, the contribution of the core-fee income ratio to the NPM increased
from 0.91 per cent (0.97 per cent) in 1998-99 to 1.32 per cent (0.78 per cent) in 2002-
03. New private sector banks, especially ICICI Bank, have been pioneers in venturing into new
business segments, which has helped them in generating higher fee-based income. ICICI Bank
was among the first to venture into credit cards, providing depository services, third-party business
(acting as corporate agents for distribution of mutual fund and insurance products of the leading
mutual fund and insurance companies) and private banking services to their clients. Further, the
huge thrust on retail credit also helped in the generation of fee-based income, in the form
of processing fees.
Since most of the banks in this group are in a growth phase, we believe that it will take
some time for the operating expense ratio to stabilise. With spreads under pressure and operating
expense ratio expected to increase, the group needs to increase its focus on improving the
core fee income by venturing into new business areas.
Other scheduled commercial banks (OSCBs) recorded the highest growth in total interest income
amongst all bank groups. The total interest income of OSCBs grew at a CAGR of 25.34 per
cent (14.51 per cent) between 1997-98 and 2002-03, driven by a 24.54 per cent (11.87 per
cent) CAGR growth in income from advances and 26.46 per cent (17.88 per cent) CAGR growth
in income from investments. Between 1998-99 and 2002-03, the yield on advances declined
by 264 (332) basis points, while the yield on investments declined by 325 (293) basis points.
Advances grew by 31.18 per cent (19.72 per cent ) CAGR while investments went up by
32.0 per cent (22.7 per cent ) CAGR between 1998-99 and 2002-03.
During 1998-99 to 2002-03, the total interest income of the SBI Group grew at a CAGR of
14 per cent, with income from advances, income from investments, and income from RBI &
inter-bank funds growing at a CAGR of 8.6 per cent, 18.6 per cent and 34.3 per cent, respectively.
The low growth in income from advances was mainly on account of falling interest rates (the
yield on advances declined from 11.32 per cent to 9.04 per cent), coupled with poor credit
offtake.
Nationalised banks
Interest income grew at 11.87 per cent CAGR during 1997-98 to 2002-03, driven by a 12.5
per cent CAGR growth in income on investments. During the period under consideration advances
grew at a CAGR of 17.28 per cent, while investments grew by a CAGR of 15.86 per cent.
However, the interest on advances grew by only 12.1 per cent CAGR in comparison with a
12.5 per cent CAGR growth in the income on investments. This was primarily because, between
1998-99 and 2002-03, the decline in the yield on advances (237 basis points) was greater than
the fall in the yield on investments (153 basis points), which offset the growth in the advances
portfolio. The yield on advances is linked to the decline in the PLR (which dropped rapidly
during 1998-2003) while the yield on investments depends on the composition of securities in
the investment portfolio of the bank. Several nationalised banks carried high coupon securities
in their portfolio.
Foreign banks
The total interest income of foreign banks grew at a CAGR of 5.74 per cent between 1997-
98 and 2002-03, the lowest growth rate among all categories. Income from advances grew at
a CAGR of 4.83 per cent and income from investments grew at a CAGR of 9.59 per cent.
Advances grew at a CAGR of 12.2 per cent during the same period while investments grew
at a CAGR of 17.3 per cent. Between 1998-99 and 2002-03, the yield on advances declined
by 428 basis points while the yield on investments fell by 394 basis points.
The total interest expended grew at a CAGR of 25.8 per cent (12.93 per cent) between 1997-
98 and 2002-03. The interest on deposits and interest on RBI/interbank borrowings grew at a
CAGR of 17.70 per cent (13.26 per cent) and 19.80 per cent (9.75 per cent) respectively.
The steep growth in the ‘others' category was because ICICI Bank classified Rs 5,280 crore
of interest on borrowings of the erstwhile ICICI as other interest expense.
During 1997-98 and 2002-03, total interest expended grew at a CAGR of 14.37 per cent, driven
by a 15.21 per cent CAGR growth in interest on deposits. For SBI and associates, the cost
of deposits had been higher than the average cost of deposits for all scheduled commercial
banks due to the higher interest obligation (on account of Resurgent India Bonds and India
Millennium Deposits). With excess liquidity and low demand for credit the borrowings of the
bank group came down, which in turn led to a drop in the interest on RBI/ inter-bank borrowings.
Nationalised banks
Foreign banks
Between 1997-98 and 2002-03, the total interest expended grew at a CAGR of 3.7 per cent
while the interest on deposits grew at a CAGR of 1.3 per cent. However, during the same
period, the interest on RBI/ inter bank borrowings grew at a CAGR of 13.6 per cent as the
share of borrowings in the total liabilities went up from 15 per cent to 20 per cent.
While the domestic banks focus on mobilising deposits to meet their funding requirements, foreign
banks (on account of the restricted branch network) have a higher proportion of borrowings
in their total borrowed funds vis-à-vis their domestic peers. This higher proportion of borrowings
of foreign banks has resulted in an increase in their interest on borrowings.
Besides interest income, banks also earn fee income from services such as issuing letters of
credit, providing bank guarantees, bill collection, and cash management services, for which they
charge commission or brokerage, income in the form of draft charges and bank charges. These
sources of income together constitute the "other income" of a bank. Banks also earn income
by way of profits on the sale of their investments, which is also classified as other income.
Other income can be divided into two broad categories: core fee income, and other income.
Core fee income is the income generated from the banks' core activities such as mobilising
deposits, lending and other normal banking services. Income from other allied activities like credit
cards, depository services and third-party distribution are also classified under core fee income.
On the other hand, the profits on sale of investments, fixed assets and other miscellaneous
income are classified as other income. Since these are not regular sources of income, banks
need to concentrate on core fee income to maintain stable profitability.
Other income (excluding profit on sale of investment) as per cent of total income
Other income (ex treasury profits) as per cent of total income Table 1
(per cent) 1998 1999 2000 2001 2002 2003
SBI and assoc 14.0 14.1 12.9 11.8 11.2 10.9
Nationalised banks 9.7 9.5 9.0 8.5 7.9 7.8
OSCBs 10.6 10.8 10.4 10.0 8.6 10.2
Foreign banks 18.3 18.2 18.6 18.0 17.2 21.4
All SCBs 11.7 11.6 11.0 10.4 9.6 10.0
Source: CRIS INFAC
During 1997-98 to 2002-03, the share of other income (excluding profit on sale of investment)
in total income has decreased for all the categories, except foreign banks. To a certain extent,
this decline is the result of an increase in the total income on account of an increase in the
profit on sale of investments.
SBI and associates 33.9 39.7 41.3 43.1 46.3 49.6 7.9
Nationalised banks 36.8 41.3 44.3 47.3 48.9 52.8 7.5
OSCBs 8.6 10.6 12.5 14.5 15.7 27.0 25.6
Foreign banks 15.7 17.4 18.3 20.8 21.1 24.4 9.2
All SCBs 96.0 110.1 117.8 127.2 133.9 156.4 10.3
Source: CRIS INFAC
Foreign banks
Foreign banks have the highest proportion of other income (other income excluding the profit
on sale of investment) to the total income amongst all categories. The share of other income
in total income increased from 18.3 per cent in 1997-98 to 21.4 per cent in 2002-03. During
1997-98 to 2001-02, the proportion of other income (excluding profit on sale of investments)
in total income had been stable between 17 per cent and 18 per cent, but it jumped to
21.4 per cent in 2002-03, driven by an impressive 24 per cent growth in the profit from exchange
transactions. Moreover, interest income recorded a negative growth of 7.6 per cent during the
same period due to low credit offtake.
The core fee income of foreign banks grew at 9 per cent CAGR during 1997-98 to 2002-
03, driven by the 11 per cent CAGR growth in profit on exchange transactions. Foreign banks,
due to their global presence, are strong players in foreign exchange transactions and trade finance
transactions. Further, the syndication fee/processing fee on foreign currency lending, in which
they are strong, help foreign banks in increasing their fee-based income. However, restrictive
branch networks hampers their fee income in the form of commission and exchange income.
During 1997-98 to 2002-03, commission exchange and brokerage grew at 8.4 per cent CAGR,
while miscellaneous income went up from Rs 1.8 billion in 1997-98 to Rs 7.34 billion in 2002-
03, a growth of 31 per cent CAGR. The growth in commission exchange and brokerage is
on account the SBI Group's wide branch network.
The growth of the SBI Group's other income is lower than that of OSCBs on account of the
following factors.
Higher base effect
Its late entry into other areas that generate fee-based income
Other scheduled commercial banks recorded the highest growth in core fee income amongst
all the scheduled commercial banks. During 1997-98 to 2002-03, core fee income of OSCBs
grew by 25.6 per cent (13.8 per cent) CAGR, driven by a 30 per cent (18 per cent) CAGR
growth in commission, exchange and brokerage and a 32 per cent (10 per cent) CAGR growth
in other miscellaneous income.
We believe that the new private sector banks will continue to explore new avenues to increase
other income, which will enable them to diversify their revenue stream and also provide stability
to their bottomline.
Nationalised banks
The share of other income in the total income of nationalised banks dropped from 9.7 per
cent in 1997-98 to 7.8 per cent in 2002-03 due to higher growth in the profit on sale of
investments.
Other income (excluding profit on sale of investments) grew at 8 per cent CAGR during 1997-
98 to 2002-03, driven by an 8 per cent CAGR growth in commission, exchange and brokerage
and a 15 per cent CAGR growth in miscellaneous income.
During 1997-98 to 2002-03, total income grew at 13.2 per cent CAGR, with interest income
growing at 11.9 per cent CAGR.
In the case of nationalised banks, the trend that is observed is similar to that seen in the
SBI Group, i.e., growth was slower because nationalised banks were slow in foraying into different
areas to diversify their revenue stream.
SBI and associates 1.7 0.9 4.5 7.0 10.2 26.7 72.6
Nationalised banks 8.1 4.8 14.9 16.8 48.1 70.8 54.5
OSCBs 5.6 2.1 8.1 4.4 24.9 40.0 48.0
Foreign banks 3.3 1.0 2.3 3.5 10.3 5.1 9.5
All SCBs 18.7 8.7 29.9 31.7 94.2 142.6 50.2
Source: CRIS INFAC
Nationalised banks
Nationalised banks had recorded the highest increase in the share of profit on sale of investments
in the total income; it went up from a mere 1.9 per cent in 1997-98 to 8.9 per cent in
2002-03. The high exposure of nationalised banks to high coupon securities gave them an opportunity
to book healthy profits during the soft interest rates scenario prevalent then.
Our study of the maturity profile of investments of a sample set of banks falling within this
group reveals that approximately 65 per cent of the securities are classified in 'over the 3-
year' maturity bucket. (In a hardening interest rate scenario, however, the profit on sale of investments
will come down).
With their strong core business, the SBI Group had, over the years, relied less on other income
including profit on sale of investments. The soft interest rate scenario and the high exposure
to high coupon SLR helped the group to post a healthy growth in the profit on sale of investments
and thus increase the share of treasury profits in total income.
Foreign banks
Foreign banks had registered a marginal increase in the share of profit on sale of investments
in the total income during the period under review. The share rose from 3.7 per cent in 1997-
98 to 4.2 per cent in 2002-03.
Foreign banks recorded the lowest growth of 10 per cent CAGR in the profit on sale of investments
during 1997-98 to 2002-03. Since foreign banks had comparatively lesser exposure to high coupon
securities, the profit on sale of investments was less. Our study of the maturity profile of investment
as of March 31, 2003, of a sample set of foreign banks, reveals that 43 per cent of the securities
are classified in the 'up to 1 year' maturity bucket.
Lower profit on sale of investments led to a marginal growth in the share of profit on sale
of investments in total income. Also, the higher growth in other income (excluding profit on
sale of investments) in comparison to profit on sale of investments slowed down the increase
the share of profit on sale of investments in total income.
With the estimated loss on sale of investments, this share is expected to drop.
The staff cost accounts for a major portion of the operating expense for all the bank groups,
particularly so in the case of public sector banks. Hence, all the players need to control their
manpower costs to control their operating expenses.
We have made an attempt to analyse the performance of the various categories in two areas:
staff cost, and other operating expenses (i.e., operating expenses excluding staff cost).
Staff cost
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
SBI & associates Natonalised banks Other SCBs Foreign banks All SCBs
The proportion of staff cost in the total operating cost has, however, declined from about 75
per cent in 1997-98 to about 71 per cent in 2002-03, due to a reduction in the number of
employees from about 308,817 in 1997-98 to 282,923 in 2002-03, coupled with an increase
in the non-staff operating expenses (which grew at 14.1 per cent CAGR during the same period).
The reduction in the staff strength is on account of the voluntary retirement schemes (VRS)
launched by the group. The technology upgradation drive, along with the focus on computerisation
of all branches, had contributed to the growth in non-staff expenditure, along with expenses
on advertising and sales etc.
315,000 325,000
VRS
305,000 275,000
295,000 225,000
285,000 175,000
275,000 125,000
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Nationalised banks
The nationalised banks recorded a CAGR of 10.42 per cent in the staff cost between 1997-
98 and 2002-03. The number of employees declined from 570,595 in 1997-98 to 472,514 in
2002-03, leading to a higher growth in the cost per employee. However, the staff cost as a
percentage of total operating expenses reduced to 70.7 per cent for 2002-03 from 74 per cent
in 1999-00 on account of VRS schemes and improved efficiencies.
Akin to what was observed in the SBI Group, the legacy of heavy staff recruitment in the
earlier years in this group has contributed to the higher share of staff cost. Moreover, lesser
dependence on the technology and a wide branch network forced these banks to recruit more
staff.
Although, in 1997-98, the nationalised banks' cost per employee of Rs 0.139 million was lesser
than that of the SBI Group, in 2002-03 it was higher than that of the latter, at Rs 0.276
million. This is despite the sharper drop in the number of employees. The staff cost of nationalised
banks grew at 10.4 per cent CAGR during 1997-98 to 2002-03, possibly on account of the
difference in the wage agreement for the two groups and also due to higher proportion of
management staff in the total staff strength vis-à-vis the SBI group.
600,000 325,000
550,000 275,000
VRS
500,000 225,000
450,000 175,000
400,000 125,000
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
The staff cost grew at a CAGR of 19.90 per cent between 1997-98 and 2002-03 while the
cost per employee grew at a CAGR of 18.33 per cent from Rs 0.14 million in 1997-98 to
0.32 million in 2002-03. The private sector banks have been expanding aggressively and are
still growing, hence their staff strength has gone up from about 61,700 in 1997-98 to about
66,000 in 2002-03.
The cost of per employee for this group is higher than that of public sector banks, because
of the higher salary structure. But the staff cost accounts for just 36 per cent of the total
operating expense in comparison to 70-71 per cent observed in public sector banks. The branch
network of new private sector banks is not as large as that of public sector banks. In addition,
they have made massive investments in technology, which reduces their staff requirements. An
ATM is manned by just one person and performs numerous basic banking operations. OSCBs
make use of the DSA channel to source clients.
Since their inception, the operations of OSCBs, especially the new private sector banks, are heavily
technology-driven, hence the staff strength of these banks is not as high as that of public sector
banks.
80,000 375,000
70,000
275,000
65,000
225,000
60,000
175,000
55,000
50,000 125,000
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Foreign banks
Many multinational banks have set up their operations in India. Today there are about 38 foreign
banks operating in India. Foreign banks have seen the proportion of operating expenses in the
total expenses rise from about 24 per cent in 1997-98 to about 32 per cant in 2002-03.
Foreign banks have the lowest proportion of staff cost in total operating expenses among all scheduled commercial
banks
The proportion of staff costs in the operating expenses has remained stable at almost 32 per
cent during 1997-98 to 2002-03. This is much lower than the average for all scheduled commercial
banks as foreign banks spend huge amounts on non-staff expenses like technology, advertising,
sales and marketing, apart from the expenses on employees.
Between 1997-98 and 2001-02, the staff cost of foreign banks grew at 16 per cent CAGR
while the cost per employee grew at a CAGR of about 19 per cent (from Rs 0.4 million
in 1997-98 to Rs 0.8 million in 2001-02). The number of employees has declined from 15,354
in 1997-98 to 13,827 in 2001-02. During the same period, foreign banks recorded the highest
CAGR in the cost per employee among all the scheduled commercial banks, .
In terms of cost per employee, the wide gap between foreign banks and other bank groups
can be attributed to the following factors:
Higher wage structure, as compared to the other bank groups.
Drop in the staff strength.
High investments in technology and infrastructure, which helps in reducing human intervention in routine
banking operations.
Low branch network, which reduces the need for high staff strength.
Higher spreads and other income, which aid banks in sustaining high staff cost.
16,000 850,000
15,000
750,000
14,000
650,000
13,000
550,000
12,000
450,000
11,000
10,000 350,000
1997-98 1998-99 1999-2000 2000-01 2001-02
In terms of expense heads, repairs and maintenance recorded the highest growth with a growth
of 51 per cent CAGR during 1997-98 to 2002-03. This may be on account of the renovations
carried out on the existing branch to meet client aspirations, and an increase in the maintenance
contracts entered into by the banks.
‘Depreciation', which constitutes a significant portion of operating expense, has grown at 35 per
cent (20 per cent) CAGR during the period under review. The proportion of depreciation in
the operating expenses has increased from 13.35 per cent to about 18 per cent during the
above period, on account of the greater investment in technology. As the private sector continues
to grow and expand its network the proportion of depreciation is expected to increase.
Along with depreciation, advertisement, printing & stationery and postage & telephone charges
have also recorded a substantial growth on account of the aggressive communication and promotion
strategy that players have adopted.
The other operating expense ratio increased at 14 per cent CAGR during 1997-98 to 2002-
03, driven by a 25 per cent CAGR growth in depreciation, 17 per cent growth in the advertisement
and 7 per cent CAGR growth in printing and stationery.
A comparison between the other operating expenses of SBI Group and OSCBs reveals that the
former are not aggressive in marketing and communications. To put the figures in perspective,
the total advertisement and publicity expense for the SBI Group in 2002-03 was Rs 0.42 billion
(a growth of 8 per cent CAGR), while it was Rs 1.36 billion for OSCBs. Similarly, postage,
telegram and telephone expenses for the SBI group in 2002-03 was Rs 0.81 billion, while it
was Rs 2.62 billion for OSCBs. This is probably because the OSCBs generally focus on retail
finance, while the SBI Group's focus was on wholesale lending.
With the SBI Group planning to focus on retail finance too, these expenses are expected to
increase further.
Nationalised banks
Nationalised banks, with the largest network of 33,942 offices, have the highest operating expenses
among the scheduled commercial banks. During 1997-98 to 2002-03, the number of offices of
nationalised banks as a proportion of offices of all scheduled commercial banks had remained
almost constant at 50 per cent, but the proportion of operating expenses of the nationalised
banks in operating expenses of all scheduled commercial banks has declined from about 51
per cent to about 47 per cent. The aggressive expansion by the new private sector banks
has resulted in a significant increase in the operating expenses for private banks, leading to
a decline in the nationalised banks' share in total operating expenses.
The other operating expense has increased at a CAGR of 11.9 per cent during 1997-98 to
2002-03, driven by a 20 per cent CAGR growth in depreciation, a 15 per cent CAGR growth
in auditors fees and a 14 per cent CAGR growth in advertisement and publicity.
The 20 per cent CAGR growth in depreciation is on account of the expenditure on technological
upgradation of offices and branch expansion. The number of offices went up from 33,263 in
1997-98 to 33,942 in 2002-03.
With banks in this group increasing their focus on retail finance and also venturing into other
areas for diversifying their income, their other operating expenses are expected to increase.
Foreign banks
High proportion of selling cost/ professional fees
Other operating expenditure (total operating expenses less staff cost) grew at 11 per cent CAGR
between 1997-98 and 2002-03, driven by a 21 per cent CAGR growth in law charges, a 12
per cent CAGR growth in depreciation and a 10 per cent CAGR growth in repairs and maintenance.
Foreign banks recorded the lowest growth in the other operating expenses amongst all scheduled
commercial banks. CRIS INFAC believes that foreign banks are not in an aggressive expansion
mode, compared to OSCBs, and have the necessary technology in place. The operations of the
foreign banks have also stabilised. These factors could lead to a comparatively lower growth
in operating expenses.
Among all scheduled commercial bank groups, the proportion of other operating expenditure in
total operating expenses is the highest for this group, indicating a heavy investment in infrastructure.
Vis-à-vis other bank categories, depreciation, for banks in this group, has grown at a slower
pace as these banks already have a technology platform and continue to get support from their
parent organisations.
Foreign banks also invest heavily in advertising and postage and telephone to reach out to
the customers.
Cost-income ratio
State Bank of India and Associates
Marginal improvement in the operating efficiency
The cost income ratio for SBI and its associates declined from about 57 per cent in 1997-
98 to about 48 per cent in 2002-03. However, when we exclude the profit on sale of investments
from the net income and recalculate the cost income ratio, there was a decline of only about
2.8 percentage points.
There was a marginal improvement in the operating efficiency of the group during this period.
65
60
55
50
45
40
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Cost income ratio with profit on sale of investments Cost income ratio without profit on sale of investments
From the above graph, we observe that the cost-income ratio jumped in 2000-01 to 65.2 per
cent from 58.6 per cent in 1999-00 and again slipped to 52.1 per cent in 2001-02, primarily
on account of the VRS launched by the group in 2000-01. Further, the healthy growth in the
profit on sale of investment, coupled with savings in staff cost from VRS, helped bring down
the cost-income ratio.
Excluding profit on sale of investments, the cost-income ratio remained almost stable in 2002-
03, on account of slower growth in interest income and other income Low credit demand and
declining interest rates restricted the growth in interest income. Further, operating expenses also
went up mainly due to the growth in the staff cost (on account of higher contribution towards
retirement benefits) and higher depreciation charges.
Nationalised banks
Highest improvement in efficiencies, cost-income ratio declines by 800 basis points (excluding the profit on sale of
investments)
Nationalised banks recorded the maximum improvement in operating efficiencies among all scheduled
commercial banks between 1997-98 and 2002-03.
The cost-income ratio of the nationalised banks (including profit on sale of investments) declined
from about 67 per cent in 1997-98 to about 50 per in 2002-03. Apart from the improvement
in operating efficiency, the huge profits from the sale of investments contributed to this sharp
decline. The savings in staff cost has also helped the group to improve operating expenses.
However, the cost-income ratio, when calculated after excluding the profit on sale of investments,
declined from about 70 per cent in 1997-98 to about 62 per cent in 2002-03. With the expected
increase in productivity, this ratio is expected to decline further.
75
70
65
60
55
50
45
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Cost income ratio with profit on sale of investments Cost income ratio without profit on sale of investments
The above graph depicts a rise in the cost-income ratio in 2000-01 and then a sudden decline,
from a high of 68.2 per cent in 2000-01 to 50 per cent in 2002-03. The rise was due to
a charge arising due to VRS. Savings in staff cost, coupled with increased profit on sale of
investments, helped in achieving a decline in the cost-income ratio.
In 2002-03, however, despite the steep decline, the cost-income ratio, with and without profit
on sale of investments, was still higher than the SBI Group. This is on account of historically
higher operating costs and higher operational inefficiencies. Many branches of nationalised banks
were reporting losses. But a comparison of the improvement in the ratios of both these sectors
shows that nationalised banks recorded greater improvement, on account of higher efficiency and
cost-control initiatives.
The cost-income ratio (including the profit on sale of investments) of private sector banks recorded
a decline of 3.70 percentage points from 48.75 per cent in 1997-98 to 45.05 per cent in
2002-03. However, if the profit on sale of investments is excluded while calculating the cost-
income ratio, there was an increase in the cost-income ratio from about 58 per cent (58 per
cent) in 1997-98 to about 65 per cent (63 per cent) in 2002-03.
65
60
55
50
45
40
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Cost income ratio with profit on sale of investments Cost income ratio without profit on sale of investments
The cost-income ratio (without profit on sale of investment) of 65 per cent for the group for
the period 2002-03 is the highest amongst all the bank groups. As the new private sector banks
expanded their operations, the operating cost went up. This, coupled with the aggressive lending
methods adopted by the big players, increased the pressure on spreads of banks in this category.
With many banks still expanding their operations we expect this ratio to keep rising for the
next 2 years.
Foreign banks
Lower growth in net total income increases cost income ratio of most efficient bank group
Among all the scheduled commercial banks, foreign banks have the lowest cost-income ratio,
indicating high operating efficiencies.
Between 1997-98 and 2003-03, the net total income of foreign banks recorded a CAGR of 9.33
per cent, while the operating expenses posted a CAGR of 11.05 per cent.
Consequently, the cost-income ratio for foreign banks (including profit on sale of investments)
increased from 43.15 per cent in 1997-98 to 46.66 per cent in 2002-03. When the profit on
sale of investments is excluded, the cost-income ratio increases from about 46 per cent in 1997-
98 to about 50 per cent in 2002-03.
Foreign banks were able to maintain healthy spreads and, hence, have been able to sustain
a high operating cost. Further, their core-fee income ratio is also the highest amongst all bank
groups, which helps them to have the lowest cost-income ratio amongst all categories.
With foreign banks now aggressively competing with public sector and private banks, banks need
to maintain their low cost-income ratio by controlling costs, for a stable NPM.
55
50
45
40
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Cost income ratio with profit on sale of investments Cost income ratio without profit on sale of investments
However, during 2002-03, the cost-income ratio fell steeply because of the increase in other
income, coupled with lesser operating expenses, mainly driven by savings in staff expenses.
Foreign banks continue to have high productivity ratios, both in terms of business and operating
profits. The business per employee doubled between 1998-99 and 2001-02, and the operating
profit per employee also doubled. Foreign banks are way ahead of other players in terms of
productivity. This has been achieved by higher spreads and greater reliance on technology.
In terms of productivity ratios, the performance of other scheduled commercial banks (OSCBs)
has also been impressive. The business per employee has doubled, while the operating profit
per employee has almost tripled during the period under consideration. Productivity will improve
further due to the aggressive strategy being adopted by new private sector banks.
On the other hand, productivity growth has been lower in public sector banks because a high
staff base.
65.0 55.0
60.0
50.0
55.0
50.0 45.0
45.0
40.0
40.0
35.0 35.0
1998 1999 2000 2001 2002 2003 1998 1999 2000 2001 2002 2003
SBI and Assoc Nationalised Banks SBI and Assoc Nationalised Banks
OSCB Foreign Banks OSCB Foreign Banks
All SCB All SCB
The movement in the credit-deposit ratio has been in line with the industry. The ratio has
gone up for all the bank groups, except the SBI Group, which has witnessed a drop. For
foreign banks, the credit-deposit ratio is high because of the low deposit base. The share of
borrowings in the total liabilities is higher for foreign banks in comparison with the other bank
groups.
Due to the low credit offtake, banks had parked their funds in investments, which drove the
growth in the investment-deposit ratio. For almost all banks, the growth in the investment-deposit
ratio has been steep in comparison to the rise in the credit-deposit ratio.
Charts
1.0 Industry structure
01 Evolution: Indian banking 125
02 Banks and DFIs: Important activities 126
Figures
4.0 Industry performance
01 SCBs: Profits 161
02 SCBs: NIM 161
03 SCBs: Segment-wise NIM 162
04 Advances, IIP and imports: Growth 162
05 SCBs: Advances 162
06 IIP and credit: Growth 163
07 Advances: Average yields 163
08 Outstanding loans and advances: Break-up by interest rates 163
09 SCBs: Investments 164
10 PSU banks: Number of banks achieving CRAR 164
11 Gross NPAs and net NPAs 164
12 Investment and advances: Average yield 165
13 SCBs: Other income to total income 165
14 M3 and deposits 165
15 M3 and reserve money: Growth 166
16 Deposits: Demand, savings and time deposits (excl RRBs) 166
17 Incremental deposits: Break-up by deposit type (excl RRBs) 166
Continued...
Figures
Tables
1.0 Industry structure
01 Scheduled commercial banks: Progress since 1950 123
02 Financial markets: Total assets 124
03 Indian banking system: Key financials 124
04 Financial institutions: Financial performance 126
05 Financial institutions: Liabilities and assets 127
Continued...
Tables
continued...
Tables
10 State Bank of Travancore 215
11 ICICI Bank 220
12 HDFC Bank 225
13 IndusInd Bank 230
14 Global Trust Bank 234
15 The Federal Bank Ltd 239
16 Bank of Rajasthan 244
17 Citibank 249
18 HongKong Bank 254
19 Standard Chartered Bank 259
20 State Bank of Bikaner & Jaipur 264
21 UTI Bank Ltd 269
22 The South Indian Bank Ltd 274
23 The Jammu & Kashmir Bank Ltd 279
24 The Karnataka Bank Ltd 284
127
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2.0
Financial system in India
Ministry of Finance
IDFC: Infrastructure Development Finance Corporation of India PFC: Power Finance Corporation
IFCI: Industrial Finance Corporation of India NABARD: National Agricultural Bank for Reconstruction & Development
IIBI: Industrial Investment Bank of India SFC: State Finance Corporation
TFCI: Tourism Finance Corp of India SIDC: State Industrial Development Corporation
EXIM: Export Import Bank of India FII: Foreign Institutional Investor
129
Source: CRIS INFAC
Household sector savings in financial and physical assets Table 1
(Rs crore) 1997-98 1998-99 1999-2000 2000-01 2001-02 P 2002-03 E
GDP at market prices 1,522,547 1,740,985 1,936,831 2,089,499 2,282,143 2,469,564
Gross domestic savings 352,178 374,659 468,681 495,986 535,185 597,697
Percentage of GDP 23.1 21.5 24.2 23.7 23.5 24.2
Household savings 268,437 326,802 404,401 458,215 519,040 559,258
Percentage of GDP 17.6 18.8 20.9 21.9 22.7 22.6
- Financial assets (net) 146,777 180,346 205,743 222,721 254,304 254,407
Percentage of GDP 9.6 10.4 10.6 10.7 11.1 10.3
- Physical assets 121,660 146,456 198,658 235,494 264,736 304,851
Percentage of GDP 8.0 8.4 10.3 11.3 11.6 12.3
Private corporate sector 63,486 65,026 84,329 86,142 78,849 84,169
Percentage of GDP 4.2 3.7 4.4 4.1 3.5 3.4
Public sector 20,255 -17,169 -20,049 -48,371 -62,704 -45,730
Percentage of GDP 1.3 -1.0 -1.0 -2.3 -2.7 -1.9
P: Provisional; E: Estimate
Source: Handbook of Statistics on the Indian Economy, 2002
Units of UTI 5.8 13.3 7.0 4.3 2.7 0.2 2.4 0.3 0.9 0.8 -0.4 -0.6 -0.5 -0.4
131
Banks and financial institutions: Financial assets Table 3
(Rs crore) As at the end of March
1990-91 1997-98 1998-99 1999-00 2000-01 P 2001-02 P 2002-03 P
I. Banks 2,32,786 6,54,406 7,61,326 8,88,781 10,50,276 12,69,034 14,44,993
Scheduled commercial banks 2,22,613 6,28,332 7,26,129 8,51,100 10,09,150 12,23,008 13,98,967
Non-scheduled commercial banks 77 - - - - - -
Total commercial banks 2,22,690 6,28,332 7,26,129 851,100 10,09,150 12,23,008 1398967
State co-operative banks 10,096 26,074 35,197 37,681 41,126 46,026 46,026
II. Financial institutions 1,27,975 4,00,418 4,60,758 522,079 5,75,346 5,54,393 567,296
1
Term-lending institutions (All-India) 57,372 1,74,980 2,05,817 2,22,790 2,40,530 1,70,247 182,223
2
State-level institutions 10,049 21,203 21,629 24,518 24,992 25,012 25,012
3
Investment institutions 58,566 1,97,321 2,27,023 2,67,817 3,01,870 350,538 350,538
4
Other institutions 1,988 6,914 6,289 6,954 7,954 8,596 9,523
Total 3,60,761 10,54,824 12,22,084 14,10,860 16,25,622 18,23,427 2,012,289
P: Provisional
1
Term-lending institutions include IDBI, NABARD, ICICI, IFCI, EXIM Bank, IIBI, NHB, IDFC, and SIDBI. From the end of March
2002 the data does not include ICICI, as it was merged with ICICI Bank.
2
Includes SFCs and SIDCs
3
Includes UTI, LIC, and GIC and its former subsidiaries
4
Includes DICGC and ECGC
Source: Trends and Progress of Banking in India, 2003
Scheduled commercial banks 90 54,275 1,975,020 1,575,145 183,767 22,273 3.05 n.a. n.a. 2003-04
Regional rural banks 196 14,777 63,614 48,346 5,931 524 3.10 n.a. n.a. 2002-03
Financial institutions 9 n.a. 183,751 20,144 15,882 1,693 0.70 n.a. n.a. 2002-03
NBFCs (excl RNBCs) 905 n.a. 39,832 5,933 5,357 -212 n.a. n.a. n.a. 2001-02
RNBCs 5 n.a. 18,458 12,889 n.a. n.a. n.a. n.a. n.a. 2001-02
n.a.: Not available
Source: Trends and Progress of Banking in India, 2003
133
Mutual funds vis-à-vis bank deposits Table 6
(Rs crore) Net assets of Bank deposits Mutual funds to bank
mutual fund (excl RRBs) deposits (per cent)
1991-92 37,973 264,991 14.3
1992-93 47,734 299,602 15.9
1993-94 62,430 349,345 17.9
1994-95 72,967 403,403 18.1
1995-96 74,315 457,639 16.2
1996-97 70,197 537,557 13.1
1997-98 58,918 643,743 9.2
1998-99 70,624 766,814 9.2
1999-2000 103,453 896,728 11.5
2000-01 90,587 1,055,233 8.6
2001-02 100,594 1,205,930 8.3
1
2002-03 109,299 1,355,880 8.1
2003-04 139,616 1,575,140 8.9
1
Mutual funds: The 2002-03 figure includes Rs 29,835 crore assets under management
of the Specified Undertaking of the Unit Trust of India
Source: Report on Trend and Progress of Banking in India and AMFI
138
(per cent) 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Tier I Tier II Total Tier I Tier II Total Tier I Tier II Total Tier I Tier II Total Tier I Tier II Total
Public sector banks
State Bank of India 11.6 12.2 14.6 12.5 8.3 3.2 11.5 8.6 4.2 12.8 9.2 4.1 13.4 8.8 4.7 13.5 8.3 5.2 13.5
State Bank of Patiala 9.5 11.3 13.2 12.5 10.8 1.8 12.6 10.7 1.7 12.4 10.0 2.6 12.6 10.4 3.2 13.6 9.9 3.7 13.6
State Bank of Hyderabad 9.9 10.8 10.8 10.7 9.3 1.6 10.9 9.6 2.7 12.3 9.5 4.2 13.7 9.8 5.0 14.8 8.4 5.9 14.3
State Bank of Travancore 9.4 8.2 11.5 10.3 7.5 3.6 11.1 7.7 4.1 11.8 7.8 4.8 12.5 6.8 4.5 11.3 6.2 5.1 11.4
State Bank of Bikaner & Jaipu 9.3 8.8 10.7 12.3 11.1 1.3 12.4 11.6 0.8 12.4 10.9 1.4 12.3 10.5 2.6 13.1 9.0 3.9 12.9
State Bank of Mysore 8.8 10.8 11.6 10.2 7.4 4.1 11.5 6.8 4.4 11.2 6.7 5.1 11.8 7.2 4.4 11.6 7.2 4.4 11.5
State Bank of Saurashtra 12.4 12.1 18.1 14.4 14.1 0.4 14.5 13.7 0.2 13.9 12.1 1.1 13.2 11.7 2.0 13.7 11.0 3.5 14.5
State Bank of Indore 8.8 9.3 9.8 12.4 8.6 2.7 11.3 9.1 3.6 12.7 8.2 4.6 12.8 9.4 3.7 13.1 8.3 4.1 12.4
Allahabad Bank 10.8 11.0 11.6 10.4 7.1 4.4 11.5 6.7 3.8 10.5 6.2 4.4 10.6 6.4 4.8 11.2 6.3 6.3 12.5
Andhra Bank 5.1 12.1 12.4 11.0 10.0 3.4 13.4 9.8 3.6 13.4 8.8 3.8 12.6 8.2 5.4 13.6 8.2 5.5 13.7
Bank of Baroda 11.2 11.8 12.1 13.3 8.9 3.2 12.1 8.5 4.3 12.8 7.6 3.8 11.3 8.1 4.6 12.7 8.5 5.4 13.9
Bank of India 8.4 10.3 9.1 10.6 6.9 3.7 10.6 7.6 4.6 12.2 6.4 4.3 10.7 7.6 4.5 12.0 7.5 5.5 13.0
Bank of Maharashtra 8.5 9.1 10.9 9.8 6.9 4.8 11.7 6.4 4.3 10.6 6.6 4.6 11.2 5.9 5.9 11.8 7.0 4.9 11.9
Canara Bank 10.4 10.2 9.5 11.0 7.8 1.9 9.6 7.3 2.5 9.8 8.1 3.8 11.9 7.9 4.7 12.5 7.8 7.8 15.6
Central Bank of India 2.6 9.4 10.4 11.9 6.7 4.5 11.2 5.7 4.3 10.0 5.2 4.4 9.6 5.7 4.9 10.5 6.2 6.2 12.4
Corporation Bank 11.3 11.3 16.9 13.2 12.7 0.1 12.8 13.0 0.3 13.3 16.8 1.1 17.9 17.3 1.2 18.5 16.5 3.6 20.1
Dena Bank 8.3 10.8 11.9 11.1 7.1 4.6 11.6 4.4 3.4 7.7 4.4 3.3 7.6 5.3 4.0 9.3 5.2 4.3 9.5
Indian Bank - ve -18.8 1.4 - ve - ve - - ve - ve - - ve 0.9 0.9 1.7 7.5 3.3 10.9 7.7 5.2 12.8
Indian Overseas Bank 6.0 10.1 9.3 10.2 5.2 4.0 9.2 5.8 4.4 10.2 6.2 4.7 10.8 5.8 5.5 11.3 6.7 5.8 12.5
Oriental Bank of Commerce 17.0 17.5 15.3 14.1 12.5 0.2 12.7 11.5 0.4 11.8 9.6 1.4 11.0 10.7 3.3 14.0 9.9 4.6 14.5
Punjab and Sind Bank 5.5 9.2 11.4 10.9 7.5 4.1 11.6 6.9 4.6 11.4 6.4 4.3 10.7 6.1 4.3 10.4 6.4 4.7 11.1
Punjab National Bank 8.2 9.2 8.8 10.8 6.7 3.6 10.3 6.8 3.4 10.2 6.3 4.4 10.7 7.1 4.9 12.0 7.0 6.1 13.1
Syndicate Bank 8.4 8.8 10.5 9.6 7.2 4.2 11.5 7.9 3.8 11.7 8.5 3.7 12.1 7.7 3.3 11.0 6.8 4.7 11.5
UCO Bank 7.8 3.2 9.1 9.6 6.6 2.6 9.2 5.4 3.7 9.1 4.9 4.8 9.6 5.2 4.9 10.0 6.1 5.8 11.9
Union Bank of India 9.5 10.5 10.9 10.1 6.7 4.8 11.4 6.2 4.7 10.9 6.2 4.9 11.1 6.9 5.6 12.4 6.5 5.9 12.3
United Bank of India 3.5 8.2 8.4 9.6 8.2 1.4 9.6 7.0 3.4 10.4 8.8 3.2 12.0 12.6 2.5 15.2 15.0 2.0 17.0
Vijaya Bank 0.0 11.5 10.3 10.0 6.0 4.6 10.6 8.0 3.5 11.5 8.9 3.4 12.3 7.4 5.2 12.7 8.4 5.7 14.1
Continued...
(per cent) 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Tier I Tier II Total Tier I Tier II Total Tier I Tier II Total Tier I Tier II Total Tier I Tier II Total
Old private sector banks
Bank of Rajasthan 11.1 10.1 5.5 0.8 5.1 0.6 5.7 8.9 1.7 10.6 10.0 2.1 12.1 8.9 2.4 11.3 8.35 2.83 11.18
Karur Vysya Bank 10.9 12.8 14.5 14.5 14.5 0.7 15.2 15.1 0.4 15.6 15.6 1.3 16.9 14.9 2.1 17.0 15.1 2.01 17.11
Federal Bank 8.4 9.2 9.4 10.3 7.7 3.6 11.3 7.7 2.6 10.3 7.0 3.7 10.6 6.7 4.6 11.2 6.26 5.22 11.48
Vysya Bank 11.9 14.2 12.5 10.6 8.2 4.0 12.2 8.4 3.6 12.1 8.0 3.6 11.6 6.6 3.2 9.8 n.a. n.a. n.a.
United Western Bank 10.7 10.2 9.9 11.6 8.6 3.4 11.9 6.6 3.0 9.6 7.0 2.8 9.8 6.4 3.8 10.2 5.33 4.8 10.13
New private sector banks
Centurion Bank 2.6 1.6 4.2 1.1 0.9 2.0 3.08 4.41 7.5
Global Trust Bank 9.4 10.2 10.3 12.0 9.9 3.8 13.7 8.8 3.9 12.7 7.4 3.8 11.2 0.0 0.0 0.0 0.0 0.0 0.0
HDFC Bank 23.5 13.5 13.9 11.9 9.6 2.6 12.2 8.7 2.4 11.1 10.8 3.1 13.9 9.5 1.6 11.1 8.03 3.63 11.7
ICICI Bank 17.5 13.0 13.5 11.1 17.4 2.2 19.6 10.4 1.2 11.6 7.5 4.0 11.4 7.1 4.1 11.1 6.09 4.27 10.4
139
Public sector banks: Capital adequacy ratio Table 4
Number of banks 0-4 4-8 8-10 Over 10 Total
per cent per cent per cent per cent
1993-94 11 8 4 4 27
1994-95 3 11 8 5 27
1995-96 5 3 13 6 27
1996-97 2 0 9 16 27
1997-98 1 0 7 19 27
1998-99 1 0 4 22 27
1 2
1999-2000 1 0 4 22 27
1 2
2000-01 1 1 2 23 27
1 2
2001-02 1 1 2 23 27
1 2
2002-03 0 1 1 25 27
2003-04 0 0 1 26 27
1
4-9 per cent
2
9-10 per cent
Source: IBA' Performance Highlights of Public, Private & Foreign Banks in India
141
Public sector banks: Writing down of capital base Table 8
(Rs crore) 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Allahabad Bank - - 532 - - - - - -
Andhra Bank - - - - 243 - 48 - 50
Bank of India - 1,370 - - - - - - -
Bank of Maharashtra - - - - 418 - - - -
Canara Bank - - - 507 - - - - 277
Central Bank of India - - - - - - - 681 -
Dena Bank - 136 - - - - - - -
Indian Overseas Bank - - 1,000 - - - - - -
Punjab and Sind Bank - - - - 462 - - - -
Punjab National Bank 425 - - - - - - - -
Syndicate Bank - - - - 943 - - - -
UCO Bank - - - - - - - - 1,665
Union Bank - - - - - - - - 58
Vijaya Bank - - - - - 297 - - -
Total 425 1,506 1,532 507 2,067 297 48 681 2,050
Source: RBI's Report on Trend and Progress of Banking in India
148
(per cent) Incremental ratio of gross NPAs to Incremental ratio of net NPAs to
Gross advances Total assets Net advances Total assets
1999-2000 2000-01 2001-02 2002-03 1999-2000 2000-01 2001-02 2002-03 1999-2000 2000-01 2001-02 2002-03 1999-2000 2000-01 2001-02 2002-03
Scheduled 2.2 4.2 5.8 -2.2 1.1 1.8 3.0 -1.3 2.7 2.9 2.6 -2.9 1.3 1.3 1.3 -1.7
commercial banks
- Public sector banks 2.4 2.8 2.7 -3.5 1.1 1.3 1.4 -1.8 3.6 2.9 0.0 -4.4 1.6 1.3 0.0 -2.3
- Nationalised banks 0.6 2.2 5.0 0.3 0.3 1.3 3.4 0.1 4.8 2.7 0.9 -4.1 2.3 1.5 0.6 -2.1
- State Bank Group 5.3 3.8 -6.4 -11.0 2.2 1.2 -1.9 -5.6 1.6 3.2 -3.5 -4.8 0.7 1.0 -1.1 -2.6
- Old private sector banks 0.5 14.0 11.7 -3.9 0.4 5.3 5.8 -2.4 0.8 9.2 5.6 -3.8 0.8 3.3 2.8 -2.3
- New private sector banks 0.9 7.8 11.4 2.1 0.4 3.4 5.4 2.4 0.3 3.7 6.2 3.1 0.1 1.5 2.9 2.7
- Foreign banks in India 4.0 5.7 -7.3 2.9 4.1 2.4 -3.4 3.3 -0.2 -0.7 2.4 -0.1 -0.2 -0.3 1.2 -0.1
Source: RBI's Report on Trend and Progress of Banking in India 2002-03
Operating profit / average assets per cent 1.9 2.4 2.8 4.8 0.1 3.2 1.9 4.4
Return on assets per cent 1.4 1.4 1.3 2.1 -3.0 1.3 0.8 2.0
Net interest margin per cent 1.6 3.7 2.6 2.5 3.7 3.2 3.1 4.3
Capital adequacy
CRAR- Total per cent 6.1 8.0 6.4 8.9 3.1 5.8 7.7 14.6
CRAR- Tier-I per cent 4.3 3.6 4.8 3.8 4.4 4.5 4.9 0.6
Asset quality
Net NPA Rs crore n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs / net advances per cent n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Net NPA / net worth per cent n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Productivity 1
Business per employee Rs lakhs 955.52 712.40 1032.70 1482.01 438.99 712.83 465.18 274.75
Profit per employee Rs lakhs 13.00 14.51 17.54 34.46 2.30 11.02 9.41 24.62
Deposits per branch Rs crore 108.0 96.9 121.2 162.2 47.2 62.2 33.5 64.2
Valuation
Book value Rs 130 95 49 36 1 29 23 102
Stock price Rs 217 304 93 30 12 37 24 284
Market capitalisation Rs crore 13395 8659 2158 658 654 795 248 1694
Price / book value times 1.67 3.22 1.90 0.82 10.62 1.29 1.02 2.79
Deposits / market capitalisation times 5.08 3.51 9.71 17.02 4.63 12.64 16.66 2.63
EPS Rs 26.56 17.89 12.02 11.90 -1.85 6.18 3.53 13.23
Current PE times 8.18 17.00 7.75 2.51 -6.22 6.00 6.71 21.51
n.a.: Not available
1
For the year 2002-03
Source: IBA's Performance Highlights of Private Sector Banks
1
Branches nos 454 371 420 360 231 391
1
Number of employees nos 7,112 4,969 6,217 4,320 3,275 3,550
Total income Rs crore 1,823 1,287 1,490 1,119 596 915
Operating profit Rs crore 628 262 437 330 133 242
Net profit Rs crore 406 59 136 133 31 84
Total assets Rs crore 21206 13198 15114 10577 7139 9254
Advances Rs crore 9285 7047 7701 4668 3744 4197
Investments Rs crore 8451 4085 5507 4879 2413 3962
Deposits Rs crore 18661 10478 13477 9407 6430 8280
Paid-up equity capital Rs crore 48 23 22 40 30 36
Net worth Rs crore 1,594 747 649 698 304 395
Income / average assets per cent 9.6 10.4 10.9 11.3 9.1 10.8
Interest earned / average assets per cent 8.0 7.5 8.7 8.6 7.1 8.1
Other income / average assets per cent 1.6 2.9 2.2 2.7 2.0 2.8
Expenditure / average assets per cent 6.3 8.3 7.7 8.0 7.1 8.0
Interest expended / average assets per cent 4.7 5.5 5.6 6.4 5.2 5.7
Operating expenses / average assets per cent 1.5 2.8 2.1 1.6 1.9 2.3
Provisions and contingencies / per cent 1.2 1.6 2.2 2.0 1.6 1.9
average assets
Operating profit / average assets per cent 3.3 2.1 3.2 3.3 2.0 2.9
Return on assets per cent 2.1 0.5 1.0 1.3 0.5 1.0
Net interest margin per cent 3.3 2.0 3.1 2.2 1.9 2.4
Capital adequacy
CRAR- Total per cent 13.0 6.1 6.3 10.5 5.3 5.8
CRAR- Tier-I per cent 3.9 4.9 5.2 2.6 4.8 5.5
Asset quality
Net NPA Rs crore n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs / net advances per cent n.a. n.a. n.a. n.a. n.a. n.a.
Net NPA / net worth per cent n.a. n.a. n.a. n.a. n.a. n.a.
Productivity1
Business per employee Rs lakhs 287.00 242.42 270.00 275.32 242.00 265.00
Profit per employee Rs lakhs 5.00 1.69 1.69 2.55 0.83 2.04
Deposits per branch Rs crore 32.3 24.8 26.1 23.0 23.3 17.5
Valuation
Book value Rs 329 277 293 173 94 110
Stock price Rs 296 363 201 92 29 61
Market capitalisation Rs crore 1,436 na 446 371 86 219
Price / book value times 0.9 1.3 0.7 0.5 0.3 0.6
Deposits / market capitalisation times 13 na 30 25 75 38
EPS Rs 83.8 25.4 61.5 32.9 10.4 23.6
Current PE times 3.5 14.3 3.3 2.8 2.8 2.6
Continued...
1
Branches nos 214 336 59 n.a. n.a.
1
Number of employees nos 2,833 4,207 1,327 n.a. n.a.
Total income Rs crore 722 680 441 606 476
Operating profit Rs crore 215 185 54 170 123
Net profit Rs crore 161 69 17 81 56
Total assets Rs crore 7107 8455 5393 5089 4307
Advances Rs crore 4023 2432 2440 2114 1898
Investments Rs crore 2173 4353 2084 2354 1819
Deposits Rs crore 5911 7406 4474 4404 3880
Paid-up equity capital Rs crore 18 108 39 28 11
Net worth Rs crore 712 329 290 224 194
Income / average assets per cent 10.9 9.3 9.0 12.3 11.7
Interest earned / average assets per cent 9.7 6.9 7.2 11.0 8.7
Other income / average assets per cent 1.1 2.4 1.8 1.4 2.9
Expenditure / average assets per cent 7.6 6.8 7.9 8.9 8.6
Interest expended / average assets per cent 5.3 4.3 5.2 6.6 5.8
Operating expenses / average assets per cent 2.4 2.5 2.7 2.3 2.9
Provisions and contingencies / per cent 0.8 1.6 0.7 1.8 1.6
average assets
Operating profit / average assets per cent 3.2 2.5 1.1 3.5 3.0
Return on assets per cent 2.4 0.9 0.4 1.6 1.4
Net interest margin per cent 4.5 2.6 2.0 4.4 3.0
Capital adequacy
CRAR- Total per cent 15.1 8.4 8.9 17.4 7.0
CRAR- Tier-I per cent 2.0 2.8 5.4 3.7 4.3
Asset quality
Net NPA Rs crore n.a. n.a. n.a. n.a. n.a.
Net NPAs / net advances per cent n.a. n.a. n.a. n.a. n.a.
Net NPA / net worth per cent n.a. n.a. n.a. n.a. n.a.
Productivity1
Business per employee Rs lakhs 288.00 164.64 463.00 270.83 164.94
Profit per employee Rs lakhs 4.41 1.63 2.60 2.88 1.57
Deposits per branch Rs crore 23.9 15.8 62.0 2.5 1.2
Valuation
Book value Rs 1,187 29 n.a. n.a. n.a.
Stock price Rs 283 30 n.a. n.a. n.a.
Market capitalisation Rs crore 170 321 n.a. n.a. n.a.
Price / book value times 0.2 1.0 n.a. n.a. n.a.
Deposits / market capitalisation times 35 23 n.a. n.a. n.a.
EPS Rs 268.4 6.4 n.a. n.a. n.a.
Current PE times 1.1 4.7 n.a. n.a. n.a.
continued...
1
Branches nos 216 80 123 184 159
1
Number of employees nos 1,983 1,029 1,408 2,026 1,305
Total income Rs crore 373 230 343 165 249
Operating profit Rs crore 91 57 118 28 67
Net profit Rs crore 41 35 57 12 17
Total assets Rs crore 3821 8455 3191 1992 2445
Advances Rs crore 2039 1392 1547 648 1139
Investments Rs crore 1338 936 1279 1080 895
Deposits Rs crore 3296 2472 2847 1859 2156
Paid-up equity capital Rs crore 12 16 24 22 32
Net worth Rs crore 227 127 203 86 134
Income / average assets per cent 10.6 4.2 11.8 8.7 11.0
Interest earned / average assets per cent 8.1 3.6 9.5 7.1 8.4
Other income / average assets per cent 2.5 0.6 2.3 1.6 2.6
Expenditure / average assets per cent 8.0 3.2 7.7 7.2 8.0
Interest expended / average assets per cent 5.8 2.1 6.2 4.3 5.3
Operating expenses / average assets per cent 2.3 1.1 1.5 2.9 2.7
Provisions and contingencies / per cent 1.4 0.4 2.1 0.8 2.2
average assets
Operating profit / average assets per cent 2.6 1.0 4.0 1.5 2.9
Return on assets per cent 1.2 0.6 2.0 0.6 0.8
Net interest margin per cent 2.4 1.6 3.3 2.8 3.0
Capital adequacy
CRAR- Total per cent 8.5 9.8 10.7 11.0 8.6
CRAR- Tier-I per cent 5.3 6.5 2.6 2.7 4.9
Asset quality
Net NPA Rs crore n.a. n.a. n.a. n.a. n.a.
Net NPAs / net advances per cent n.a. n.a. n.a. n.a. n.a.
Net NPA / net worth per cent n.a. n.a. n.a. n.a. n.a.
Productivity1
Business per employee Rs lakhs 228.00 317.00 230.05 91.31 222.06
Profit per employee Rs lakhs 1.72 2.77 2.37 0.59 1.15
Deposits per branch Rs crore 12.8 26.9 18.8 9.1 11.6
Valuation
Book value Rs n.a. n.a. 85 n.a. n.a.
Stock price Rs n.a. n.a. 58 n.a. n.a.
Market capitalisation Rs crore n.a. n.a. 138 n.a. n.a.
Price / book value times n.a. n.a. 0.7 n.a. n.a.
Deposits / market capitalisation times n.a. n.a. 21 n.a. n.a.
EPS Rs n.a. n.a. 23.8 n.a. n.a.
Current PE times n.a. n.a. 2.4 n.a. n.a.
continued...
1
Branches nos n.a. 59 71 2 29
1
Number of employees nos n.a. 646 531 111 240
Total income Rs crore 235 83 77 60 23
Operating profit Rs crore 48 21 14 26 2
Net profit Rs crore 26 12 8 18 1
Total assets Rs crore 2605 854 815 489 222
Advances Rs crore 1118 236 346 121 97
Investments Rs crore 1047 410 258 143 78
Deposits Rs crore 2311 759 715 373 208
Paid-up equity capital Rs crore 57 15 18 100 2
Net worth Rs crore 137 67 54 100 11
Income / average assets per cent 10.5 10.2 9.9 11.1 10.8
Interest earned / average assets per cent 7.5 8.6 8.4 7.3 8.7
Other income / average assets per cent 3.1 1.6 1.5 3.8 2.1
Expenditure / average assets per cent 8.3 7.7 8.1 6.3 9.9
Interest expended / average assets per cent 5.9 4.6 5.5 4.8 7.5
Operating expenses / average assets per cent 2.4 3.1 2.6 1.5 2.4
Provisions and contingencies / per cent 1.0 1.0 0.7 1.5 0.3
average assets
Operating profit / average assets per cent 2.2 2.5 1.8 4.8 0.9
Return on assets per cent 1.2 1.5 1.1 3.3 0.6
Net interest margin per cent 1.5 4.1 2.9 2.5 1.2
Capital adequacy
CRAR- Total per cent 10.1 14.3 13.5 28.8 7.9
CRAR- Tier-I per cent 6.5 4.3 3.1 1.7 4.1
Asset quality
Net NPA Rs crore n.a. n.a. n.a. n.a. n.a.
Net NPAs / net advances per cent n.a. n.a. n.a. n.a. n.a.
Net NPA / net worth per cent n.a. n.a. n.a. n.a. n.a.
Productivity1
Business per employee Rs lakhs 264.17 115.38 179.73 621.78 126.52
Profit per employee Rs lakhs 2.36 1.17 1.81 -7.71 1.39
Deposits per branch Rs crore 1.8 11.3 9.0 247.2 -
Valuation
Book value Rs n.a. n.a. n.a. n.a. n.a.
Stock price Rs n.a. n.a. n.a. n.a. n.a.
Market capitalisation Rs crore n.a. n.a. n.a. n.a. n.a.
Price / book value times n.a. n.a. n.a. n.a. n.a.
Deposits / market capitalisation times n.a. n.a. n.a. n.a. n.a.
EPS Rs n.a. n.a. n.a. n.a. n.a.
Current PE times n.a. n.a. n.a. n.a. n.a.
n.a.: Not available
1
For the year 2002-03
Source: Performance Highlights of Private Sector Bank
Continued...
(per cent) Net Gross Net NPA Total Wage Net Operating Spread
worth NPA income bill profit profit
Scheduled commercial banks 116,558 n.a. n.a. 183,767 26,195 22,273 52,673 56,461
Share of total (per cent)
Public sector banks 67.96 n.a. n.a. 74.88 85.59 74.29 74.95 77.45
- Nationalised banks 44.16 n.a. n.a. 46.64 53.70 49.07 47.68 49.89
- State Bank Group 23.80 n.a. n.a. 28.24 31.89 25.22 27.27 27.56
Other Scheduled Commercial banks 19.30 n.a. n.a. 18.04 9.83 15.64 15.59 14.19
Foreign banks in India 12.74 n.a. n.a. 7.08 4.58 10.07 9.47 8.36
n.a.: Not available
1
Figures for the year 2002-03
Source: CRIS INFAC
50,000
40,000
30,000
20,000
10,000
-10,000
1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003-
92 93 94 95 96 97 98 99 2000 01 02 03 04
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003-
92 93 94 95 96 97 98 99 2000 01 02 03 04
1
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04
2000
25
20
15
10
0
1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04
2000
-5
2003-04
2002-03
2001-02
2000-01
1999-2000
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
30
25
20
15
10
0
Apr-95 Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04
IIP Credit
16
14
12
10
6
1992-93 1994-95 1996-97 1998-99 2000-01 2002-03
30
25
20
15
10
0
<6 6-9 10-11 12-13 14-<15 15- <16 16 - <17 17 - <18 18 - 19 20>
600,000
500,000
400,000
300,000
200,000
100,000
0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
30
25
20
15
10
0
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04
2000
Source: IBA’ Performance Highlights of Public, Private & Foreign Banks in India
19
17
15
13
11
3
1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Source: RBI
18
16
14
12
10
6
1992-93 1994-95 1996-97 1998-99 2000-01 2002-03
22
20
18
16
14
12
10
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
Total deposits M3
25
20
15
10
0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
70
60
50
40
30
20
10
0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
100
80
60
40
20
0
1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04
2000
20
15
10
0
1992-93 1994-95 1996-97 1998-99 2000-01 2002-03
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002-
92 93 94 95 96 97 98 99 2000 01 02 03
4
1992-93 1994-95 1996-97 1998-99 2000-01 2002-03
40
35
30
25
20
15
10
0
<6 6-8 8-9 9-10 10-11 11-12 12-13 > 13
100
80
60
40
20
0
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
(per cent)
40
30
20
10
-10
-20
1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
40,000
30,000
20,000
10,000
0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1992-93 1994-95 1996-97 1998-99 2000-01 2002-03
32
30
28
26
24
22
20
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
4.4
4.0
3.6
3.2
2.8
2.4
2.0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
India USA Germany UK France Italy Spain Canada Sweden Japan
52,000
51,000
50,000
49,000
48,000
47,000
46,000
45,000
1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002-
92 93 94 95 96 97 98 99 2000 01 02 03
980,000
960,000
940,000
920,000
900,000
880,000
860,000
840,000
820,000
800,000
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
(per cent)
14.0
13.0
12.0
11.0
10.0
9.0
1992-93 1994-95 1996-97 1998-99 2000-01
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04
Continued...
(per cent) New private sector banks Old private sector banks Foreign banks
ICICI HDFC IndusInd South Federal Bank of Citibank HongKong Standard
Bank Bank Indian Bank Rajasthan Bank Chartered
Bank Bank
Average assets (Rs crore) 125,229 42,307 9,318 8,441 13,658 7,292 27,418 23,133 31,829
Branches (nos) 413 312 69 410 432 354 20 38 66
Employees (nos) 13,609 5,673 n.a. 3,534 6,363 n.a. n.a. n.a. n.a.
1
Interest earned 7.1 6.0 10.6 8.1 8.7 6.9 8.3 6.1 7.9
1
Other income 2.4 1.1 3.7 2.8 2.2 2.4 3.2 3.0 2.2
1
Interest expended 5.6 2.9 7.2 5.7 5.6 4.3 3.4 3.1 3.4
1
Operating expenses 2.1 1.9 2.3 2.3 2.1 2.5 3.7 2.7 2.4
1
Provisions (excluding taxes) 0.4 0.7 1.9 0.9 1.7 1.2 1.0 0.9 1.7
1
Profit before taxes 1.3 3.9 5.5 1.0 1.0 0.9 2.1 1.7 1.8
1
Provision for taxes 0.2 0.5 0.1 0.9 0.5 0.4 1.5 0.8 0.8
1
Profit after taxes 1.1 3.4 5.4 0.1 0.4 0.6 0.6 0.9 1.0
Gross NPA (Rs crore) 3,048 336 259 328 601 237 393 419 482
Net NPA (Rs crore) 2,037 28 212 190 223 73 214 68 84
Quality of assets
Net NPAs to advances 2.2 0.2 2.7 4.6 2.9 3.0 1.4 0.7 0.5
Capital adequacy 10.4 11.7 12.8 11.3 11.5 11.2 11.1 14.5 10.9
Profitability
Net Profitability Margin 0.43 3.12 1.45 0.32 1.60 3.81 4.15 2.42 4.66
Spreads 1.40 4.24 2.70 2.21 3.00 3.45 5.06 3.08 5.42
Average cost of deposits 5.20 3.93 5.05 6.15 5.92 4.86 4.16 3.45 3.77
Average yield on investments 6.22 8.10 8.00 8.88 8.68 8.04 7.75 6.58 6.77
Average yield on advances 10.53 7.52 10.59 9.17 10.26 8.48 9.93 8.40 10.47
Growth
Growth in advances 16.5 51.0 46.1 16.2 23.9 9.5 20.8 17.4 23.8
Growth in deposits 41.4 35.9 30.3 20.7 23.1 39.8 15.3 27.1 10.8
Growth in investments 20.5 43.8 56.7 32.1 21.0 64.7 -4.9 26.7 -1.4
Productivity
Employee per branch (nos) 33 18 n.a. 9 15 n.a. n.a. n.a. n.a.
Assets per branch (Rs crore) 303.2 135.6 135.0 20.6 31.6 20.6 1370.9 608.8 482.3
Assets per employee (Rs crore) 9.2 7.5 n.a. 2.4 2.1 n.a. n.a. n.a. n.a.
1
as per cent of average assets
n.a. - not available
Source: CRIS INFAC
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 20002-03 2003-04
Priority sector 16,945 19,523 23,090 25,878 30,153 31,591 35,112 42,706
Public sector 10,064 12,088 13,465 9,490 20,271 21,990 24,783 25,875
Banks 225 785 470 361 442 185 86 2,277
Others 27,788 31,744 34,234 49,808 48,372 53,764 63,869 71,169
Total domestic advances 55,022 64,140 71,259 85,537 99,239 107,530 123,850 142,026
Advances outside India 7,211 10,097 11,101 12,564 14,351 13,276 13,909 15,907
Total 62,233 74,237 82,360 98,102 113,590 120,806 137,758 157,934
Investments
Investments outside India 1,115 2,221 2,690 3,200 3,961 4,669 4,462 3,992
Investments in India
- Government securities 33,973 39,025 51,568 67,747 96,127 117,029 143,727 157,738
- Other approved securities 7,472 7,158 6,464 5,914 5,705 5,220 4,527 4,194
- Shares 514 694 1,014 1,155 984 950 993 902
- Debentures 2,858 4,132 6,658 9,820 11,111 12794.04 16,166 15,875
- Subsidiaries 874 987 1,043 1,111 1,173 1,186 1,189 1,436
- Others 22 765 1,849 2,932 3,815 3,293 1,283 1,539
Total 45,713 52,761 68,596 88,679 118,916 140,473 167,886 181,684
Total investm ents 46,828 54,982 71,287 91,879 122,876 145,142 172,348 185,676
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 14,065 15,246 15,875 15,486 13,506
Additions n.a. n.a. n.a. 3,681 4,352 4,170 4,889 5,721
Reductions n.a. n.a. n.a. 2,500 3,724 4,559 6,668 6,560
Closing balance n.a. n.a. n.a. 15,246 15,875 15,486 13,506 12,667
Net NPA-Closing balance n.a. n.a. n.a. 6,284 6,856 6,810 6,183 5,442
Profit and loss statement
Interest earned
Interest discount on advances and bills 8,137 7,829 8,581 9,554 11,143 11,063 11,229 11,267
Income on investments 5,521 6,392 7,585 9,506 11,230 14,272 15,258 15,716
Interest on balances with RBI 722 632 1,101 1,573 1,703 3,055 3,274 2,499
Others 570 1,027 1,840 1,567 1,927 1,420 1,327 978
Total 14,950 15,879 19,108 22,201 26,003 29,810 31,087 30,460
Other income
Commission exchange and brokerage 1,805 2,038 2,379 2,567 2,632 2,817 2,977 3,121
Profit on sale of investments 26 117 73 269 477 352 1,695 3,073
Loss on sale of investments 0 0 0 0 0 0 0 0
Profit on sale of fixed assets 0 0 0 0 0 15 0 0
Loss on revaluation of investments 0 0 -1 1 0 -19 -5 -1
Profit on forex transactions 699 505 569 329 304 408 464 503
Income from subsidiaries 40 50 62 65 77 103 137 161
Lease Income 0 0 0 0 0 267 221 172
Miscellaneous income 73 110 203 338 528 234 252 582
Total 2,643 2,820 3,285 3,569 4,018 4,174 5,740 7,612
Total income 17,593 18,699 22,392 25,770 30,021 33,985 36,827 38,073
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 20002-03 2003-04
Interest expended
Interest on deposits 8,301 9,586 12,197 14,397 16,643 19,554 20,174 18,123
Interest on RBI 482 481 474 557 521 364 195 161
Others 808 406 373 319 591 810 740 990
Total 9,591 10,473 13,044 15,273 17,756 20,729 21,109 19,274
Operating expenses
Salaries 3,323 3,558 4,140 4,478 6,012 5153 5689 6448
Others 1,281 1,163 1,756 1,818 2,287 1,633 1,760 2,099
Depreciation 0 0 0 0 0 425 494 698
Total 4,604 4,721 5,897 6,296 8,299 7,211 7,942 9,245
Provisions and contingencies 2,048 1,644 2,424 2,151 2,363 4,013 5,870 6,213
Total expenses including provisions 16,243 16,838 21,365 23,719 28,417 31,952 34,922 34,732
Profit for the year 1,350 1,861 1,027 2,051 1,604 2,032 1,905 3,341
Profits inclusive of provisions 3,398 3,505 3,451 4,202 3,967 6,045 7,775 9,553
Contingent liabilities
Claims against banks 209 247 324 331 245 391 451 764
Liability for partly paid investments 15 8 6 6 69 9 44 67
Liability for outstanding forex contracts 14,138 32,005 38,518 49,065 48,157 53,447 52,326 58,720
Guarantees
- In India 10,736 9,283 9,251 9,036 8,706 11,726 9,249 11,012
- Outside India 2,705 5,211 6,033 5,763 6,175 3,369 5,771 5,195
Acceptances and endorsements 11,742 10,830 9,786 12,942 12,895 12,591 15,868 21,119
Others 2,854 2,370 2,497 5,239 7,422 20,679 22,398 15,015
Total 42,399 59,954 66,415 82,383 83,669 102,213 106,106 111,892
Provisions and contingencies
Provison for doubtful debts 833 1,300 1,423 1,264 1,470 2,153 2,592 3694
Provision for wealth tax and interest tax 205 127 140 161 0 0 0 45
Provision for depreciation on investments 4 -964 15 -538 -116 198 420 508
Provision for income tax 925 1,001 383 979 971 1,603 2,149 1,566
Others 81 180 463 285 37 58 709 400
Total 2,048 1,644 2,423 2,151 2,363 4,013 5,870 6,213
Financial analysis
Growth in deposits (per cent)
Overall 15 18 29 16 23 11 9 8
Demand 14 8 10 18 11 11 5 6
Savings 13 22 18 21 15 18 17 21
Term 16 21 40 15 30 11 8 2
Share of deposits (per cent)
Demand 23 21 18 18 17 16 15 16
Savings 22 22 20 21 20 21 22 25
Term 55 57 62 61 64 64 63 59
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 20002-03 2003-04
Profitability (per cent)
Return on assets 0.9 1.1 0.5 0.8 0.6 0.6 0.5 0.9
Return on equity 20.1 21.2 10.3 18.2 12.5 14.2 11.8 17.8
Gearing (times) 18.6 17.7 20.4 20.5 22.4 21.9 20.8 19.2
Staff costs to operating expenses 72.2 75.4 70.2 71.1 72.4 71.5 71.6 69.7
Non-fund income to total income 15.0 15.1 14.7 13.9 13.4 12.3 15.6 20.0
Operating expenses to total income 26.2 25.2 26.3 24.4 27.6 21.2 21.6 24.3
Operating expenses to deposits 4.2 3.6 3.5 3.2 3.4 2.7 2.7 2.9
Earning per share (Rs) 25.7 35.4 19.5 39.0 30.5 38.6 36.2 63.5
Cost to income ratio 57.5 57.4 63.1 60.0 67.7 54.4 50.5 49.2
Cost to income ratio (w/o profit on invest) 57.7 58.2 63.6 61.5 70.4 55.9 56.6 58.8
Financial management (per cent)
Interest cost n.a. 7.64 7.74 7.53 7.34 7.39 6.88 5.78
Average cost of deposits 8.0 7.9 8.1 7.9 7.6 7.6 7.1 5.9
Average cost of borrowings 13.2 11.8 9.9 9.5 11.1 11.7 10.0 10.1
Yield on carry business n.a. 10.90 10.69 10.35 10.08 9.81 9.31 8.38
Average yield on investments 12.2 12.6 12.0 11.7 10.5 10.6 9.6 8.8
Average yield on advances 13.3 11.5 11.0 10.6 10.5 9.4 8.7 7.6
Spreads n.a. 3.25 2.95 2.82 2.74 2.41 2.42 2.61
Operating expenses to AFD n.a. 3.2 3.2 2.8 3.1 2.3 2.3 2.5
Core fee income to AFD n.a. 1.7 1.7 1.4 1.2 1.1 1.0 1.1
Net Profitability Margin n.a. 1.8 1.4 1.4 0.8 1.2 1.1 1.2
Deposits to borrowings (times) 10.6 16.1 17.5 19.9 22.0 25.6 30.4 27.0
Capital adequacy 12.2 14.6 12.5 11.5 12.8 13.4 13.5 13.5
Provisions as a percentage of profit before 60.3 46.9 70.2 51.2 59.6 66.4 75.5 65.0
provisions
Provisions as a percentage of networth 30.5 18.7 24.2 19.1 18.5 26.4 34.1 30.7
Liquidity (per cent)
Credit-deposit ratio 56 57 49 50 47 44.7 46.5 49.6
Incremental C/D ratio 17 59 21 57 34 26.0 66.3 89.7
Borrowings to total deposits 6 6 5 5 4 3 3 4
Cash-deposit ratio 0 0 0 0 0 0 0 0
Investment-deposit ratio 42 42 42 47 51 54 58 58
Incremental I/D ratio 21 40 43 74 67 80 106 59
Reserves as a percentage of net worth 93 95 95 96 96 97 97 97
Growth (per cent)
Advances 4 19 11 19 16 6 14 15
Deposits 15 18 29 16 23 11 9 8
Investments 7 17 30 29 34 18 19 8
Salaries cost n.a. 7 16 8 34 -14 10 13
Commission and fee 2 13 17 8 3 7 6 5
Interest income 15 6 20 16 17 15 4 -2
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 20002-03 2003-04
Others
Branches (nos) 8,888 8,925 8,982 9,043 9,078 9085 9081 9093
Advances per branch (Rs crore) 7.00 8.32 9.17 10.85 12.51 13.30 15.17 17.37
Operating expenses per branch (Rs crore) 0.52 0.53 0.66 0.70 0.91 0.79 0.87 1.02
Employees (nos) 236,204 239,649 237,504 233,433 212,649 209462 208998 207039
Income per employee (Rs crore) 0.07 0.08 0.09 0.11 0.14 0.16 0.18 0.18
Income/employee expenses (times) 5.29 5.26 5.41 5.76 4.99 6.60 6.47 5.90
Total income (per cent)
Interest 85 85 85 86 87 88 84 80
Forex 4 3 3 1 1 1 1 1
Commission and brokerage 10 11 11 10 9 8 8 8
Share of advances (per cent)
Priority 27 26 28 26 27 26 25 27
Public 16 16 16 10 18 18 18 16
Inter-bank 0 1 1 0 0 0 0 1
Others 45 43 42 51 43 45 46 45
Abroad 12 14 13 13 13 11 10 10
Share of advances (per cent)
Bills 11 11 9 9 11 10 9 9
Cash credits 62 59 56 56 54 53 50 44
Term loans 27 31 35 35 35 37 41 47
Share of advances (per cent)
Secured 86 85 84 85 80 82 80 76
Government guaranteed 13 12 10 9 8 5 7 8
Unsecured 3 3 3 4 4 13 14 17
Share of investments (per cent)
Government securities 73 71 72 74 78 81 83 85
Other approved securities 16 13 9 6 5 4 3 2
Shares and debentures 1 1 1 1 1 1 1 0
Debentures 6 8 9 11 9 9 9 9
Subsidiaries 2 2 1 1 1 1 1 1
Others 0 1 3 3 3 2 1 1
Gross NPAs (per cent) 16.0 14.1 n.a. 14.3 12.9 n.a. n.a. n.a.
Net NPAs (per cent) 7.3 6.1 7.2 6.4 6.0 5.6 4.5 3.5
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 13,653 17,052 19,031 22,660 23,920 28,326 29,113 28,501
Government guarantee 613 815 329 585 785 1,581 1,777 2,802
Unsecured 2,266 1,937 1,732 1,148 2,716 3,756 4,459 4,298
Total 16,532 19,803 21,092 24,393 27,421 33,663 35,348 35,601
Priority sector 4,921 5,739 6,057 6,592 6,660 7,677 9176.21 9,925
Public sector 1,582 2,689 2,785 2,670 3,400 5,785 5,160 3,577
Banks 18 20 9 84 398 503 530 466
Others 7,897 8,952 9,358 12,063 12,970 14,152 14,049 15,228
Total 14,418 17,401 18,209 21,409 23,429 28,116 28,914 29,197
Advances outside India 2,114 2,402 2,882 2,984 3,992 5,547 6,434 6,404
Total 16,532 19,803 21,092 24,393 27,421 33,664 35,348 35,601
Investments
Investments outside India 511 610 908 1,172 1,395 1,946 1,802 1,963
Investments in India
- Government securities 6,843 8,342 9,719 11,052 11,610 14,327 21,348 27,372
- Other approved securities 1,845 1,778 1,717 1,736 1,648 1,596 1,460 1,396
- Shares 225 235 222 249 299 332 412 517
- Debentures 1,268 1,921 2,553 2,866 3,300 3,834 4,400 4510
- Subsidiaries/JV 102 152 174 187 155 215 236 255
- Others 134 321 611 1,275 1,450 1,582 520 2,007
Total 10,417 12,749 14,997 17,385 18,463 21,887 28,377 36,056
Total investments 10,928 13,359 15,905 18,556 19,857 23,833 30,179 38,019
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 3,686 3,897 4186 4489 4168
Additions n.a. n.a. n.a. 829 1,124 1035 717 1078
Reductions n.a. n.a. n.a. 617 836 731 1039 1266
Closing balance n.a. n.a. n.a. 3,897 4,186 4489 4168 3980
Net NPA-Closing balance n.a. n.a. n.a. 1,686 1,851 1913 1700 1761
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 2,237 2,235 2,385 2,591 2,938 3,060 3,066 2,800
Income on investments 1,149 1,510 1,744 1,993 2,151 2,368 2,703 2,932
Interest on balances with RBI 324 408 558 493 613 429 230 197
Others 52 18 135 143 55 99 98 217
Total 3,762 4,171 4,821 5,220 5,757 5,956 6,098 6,146
Other income
Commission exchange and brokerage 244 235 247 280 298 305 344 344
Profit on sale of investments 14 71 33 86 102 415 631 1018
Loss on sale of investments 0 -2 0 0 0 0 0
Profit on sale of fixed assets 1 0 0 0 -13 1 0 1
Profit/Loss on revaluation of investments 0 0 0 0 62 0 0 0
Profit on forex transactions 85 136 142 131 134 117 138 170
Income from investments 4 5 3 4 1 5 6 11
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 111 98 154 140 170 149 141 176
Total 459 543 578 641 755 993 1,262 1,720
Total income 4,221 4,714 5,400 5,862 6,512 6,949 7,359 7,866
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 2,374 2,676 3,079 3,251 3,581 3,848 3,775 3,365
Interest on RBI/Inter bank 21 44 69 80 75 72 65 49
Others 157 118 100 175 163 156 154 162
Total 2,552 2,838 3,248 3,507 3,820 4,076 3,994 3,575
Operating expenses
Salaries 606 652 845 896 1,146 1,056 1,129 1,253
Others 254 383 321 354 385 416 431 477
Depreciation 32 35 41 52 77 91 89 76
Total 892 1,071 1,207 1,303 1,608 1,563 1,648 1,805
Provisions and contingencies 500 347 572 549 780 763 944 1,518
Total expenses including provisions 3,944 4,255 4,978 5,359 6,189 6,403 6,586 6,899
Profit for the year 277 459 421 503 323 546 773 967
Profits inclusive of provisions 777 806 945 1,052 1,085 1,309 1,717 2,485
Contingent liabilities
Claims against banks 389 487 265 153 238 152 343 828
Liability for partly paid investments 9 0 0 0 0 1 0 0
Liability for outstanding forex contracts 4,327 6,600 7,621 7,518 13,313 8,875 17,616 22,309
Guarantees
- In India 2,317 2,857 2,337 2,126 2,007 3,261 2,060 2,156
- Outside India 1,022 785 848 1,199 1,443 1,425 1,202
Acceptances and endorsements 1,775 2,091 1,796 1,740 2,122 1,986 2,527 2,754
Others 348 298 347 568 596 641 448 1,069
Total 10,187 13,118 13,215 13,304 19,720 14,916 24,419 30,318
Provisions and contingencies
Provison for NPAs/Stadard assets 298 323 361 342 509 482 464 968
Depreciation in values of investments 87 -245 15 -33 58 -14 1 -101
Provision for taxation 52 258 147 240 185 250 398 566
Other Provisions 63 12 49 0 27 45 81 86
Total 500 347 572 549 780 763 944 1,518
Financial analysis
Growth in deposits (per cent)
Overall 13 22 14 15 5 14 8 10
Demand 12 12 12 5 2 12 -5 12
Savings 14 21 17 19 12 15 17 20
Term 13 24 14 15 4 15 6 6
Share of deposits (per cent)
Demand 13 12 12 11 10 10 9 9
Savings 20 20 20 21 23 23 25 27
Term 67 68 68 68 67 67 66 64
Share of deposits (per cent)
Domestic 87 86 87 88 89 88 89 88
Abroad 13 14 13 12 11 12 11 12
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profitability (per cent)
Return on assets 0.8 1.1 0.9 0.9 0.5 0.8 1.0 1.2
Return on equity 14.9 19.7 15.2 16.4 9.8 15.2 18.8 20.3
Gearing (times) 17.9 16.2 17.0 17.1 17.9 17.5 16.4 15.6
Staff costs to operating expenses 70.5 63.0 72.5 71.7 74.9 67.6 68.5 69.4
Non-fund income to total income 10.9 11.5 10.7 10.9 11.6 14.3 17.1 21.9
Operating expenses to total income 20.4 22.0 21.6 21.3 23.5 22.5 22.4 22.9
Operating expenses to deposits 2.7 2.6 2.6 2.4 2.8 2.5 2.5 2.5
Earning per share (Rs) 10.9 15.7 14.3 17.1 11.0 18.5 26.3 32.8
Cost to income ratio 53.4 57.1 56.1 55.3 59.7 54.4 49.0 42.1
Cost to income ratio (w/o profit on invest) 53.9 59.3 56.9 57.4 62.0 63.6 60.3 55.2
Financial management (per cent)
Interest cost 7.68 7.51 7.12 7.06 6.84 6.06 4.99
Average cost of deposits 7.8 7.5 7.4 6.8 6.8 6.6 5.9 4.8
Average cost of borrowings 23.2 40.2 35.3 53.3 33.7 28.0 33.2 28.1
Yield on carry business 10.91 10.79 10.48 10.57 10.03 9.26 8.45
Average yield on investments 11.2 12.4 11.9 11.6 11.2 10.8 10.0 8.6
Average yield on advances 13.7 12.3 11.7 11.4 11.3 7.8 7.8 8.3
Spreads 3.23 3.28 3.36 3.51 3.18 3.20 3.45
Operating expenses to AFD 2.72 2.61 2.50 2.79 2.48 2.38 2.36
Core fee income to AFD 1.07 1.01 0.92 0.90 0.79 0.80 0.79
Net Profitability Margin 1.57 1.68 1.79 1.61 1.49 1.62 1.88
Deposits to borrowings (times) 39.4 88.5 87.6 100.1 74.4 71.1 97.3 92.9
Capital adequacy 11.8 12.1 13.3 12.1 12.8 11.3 12.7 13.9
Provisions as a percentage of profit before 64.4 43.1 55.4 52.2 70.2 58.3 55.0 61.1
provisions
Provisions as a percentage of networth 25.2 13.0 18.1 17.0 22.7 19.9 21.5 29.6
Liquidity (per cent)
Credit-deposit ratio 51 51 47 48 51 54 53 49
Incremental C/D ratio 14 47 23 49 113 80 36 4
Borrowings to total deposits 1 1 1 1 2 1 1 1
Cash-deposit ratio 1 1 1 1 1 4 5 4
Investment-deposit ratio 34 34 36 36 37 39 45 52
Incremental I/D ratio 35 35 46 40 49 51 137 120
Reserves as a percentage of net worth 87 89 90 91 91 92 93 94
Growth (per cent)
Advances 3 20 7 16 12 23 5 1
Deposits 13 22 14 15 5 14 8 10
Investments 14 22 19 17 7 20 27 26
Salaries cost 10 8 30 6 28 -8 7 11
Commission and fee -28 -4 5 13 6 3 13 0
Interest income 7 11 16 8 10 3 2 1
Others
Branches (nos) 2,493 2,522 2,573 2,652 2,669 2,679 2,753 2,730
Advances per branch (Rs crore) 6.63 7.85 8.20 9.20 10.27 12.57 12.84 13.04
Operating expenses per branch (Rs crore) 0.36 0.42 0.47 0.49 0.60 0.58 0.60 0.66
Employees (nos) 45,759 45,935 46,187 47,054 46,360 38,899 40,313 39,803
Income per employee (Rs crore) 0.09 0.10 0.12 0.12 0.14 0.18 0.18 0.20
Income/employee expenses (times) 6.97 7.23 6.39 6.54 5.68 6.58 6.52 6.28
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 89 88 89 89 88 86 83 78
Forex 2 3 3 2 2 2 2 2
Commission and brokerage 6 5 5 5 5 6 9 13
Share of advances (per cent)
Priority 30 29 29 27 24 23 26 28
Public 10 14 13 11 12 17 15 10
Inter bank 0 0 0 0 1 1 1 1
Others 48 45 44 49 47 42 40 43
Abroad 13 12 14 12 15 16 18 18
Share of advances (per cent)
Bills 8 7 6 6 6 6 7 7
Cash credit 68 68 62 61 61 58 55 52
Term loans 24 25 31 33 34 36 38 41
Share of advances (per cent)
Secured 83 86 90 93 87 84 82 80
Government guarantee 4 4 2 2 3 5 5 8
Unsecured 14 10 8 5 10 11 13 12
Share of investments (per cent)
Government securities 66 65 65 64 63 60 75 76
Other approved 18 14 11 10 9 7 5 4
Shares 2 2 1 1 2 1 1 1
Debentures 12 14 16 15 17 16 15 12
Subsidiary 1 1 1 1 1 1 1 1
Others 1 3 4 7 8 7 2 6
Outside India 0.05 0.05 0.06 0.06 0.07 0.08 0.06 0.05
Gross NPAs (per cent) 17.2 14.6 16.0 14.7 14.1 n.a. n.a. n.a.
Net NPAs (per cent) 8.9 6.6 7.7 7.0 6.8 5.0 3.7 3.0
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 13,898 15,979 17,975 18,833 23,112 25,388 27,597 31,436
Government guarantee 2,604 2,257 2,051 2,930 4,327 6,063 6,187 6,048
Unsecured 1,835 3,784 4,301 3,468 4,384 6,860 8,849 8,372
Total 18,337 22,021 24,327 25,231 31,823 38,311 42,633 45,856
Priority sector 4,746 5,761 6,272 6,593 7,599 9,181 11,534 12,873
Public sector 1,192 2,195 2,228 2,589 3,390 4,661 4,812 5,505
Banks 44 104 1 6 7 6 234 6
Others 7,917 8,578 9,669 9,909 12,663 14,683 14,827 16,635
Total 13,899 16,637 18,171 19,098 23,660 28,531 31,407 35,019
Advances outside India 4,438 5,383 6,156 6,133 8,163 9,779 11,226 10,837
Total 18,337 22,021 24,327 25,231 31,823 38,311 42,633 45,856
Investments
Investments outside India 1,518 2,205 2,707 2,816 3,338 5,337 6318.4 4,580
Investments in India
- Government securities 7,052 7,929 1,089 10,640 11,859 13,536 14,843 17,583
- Other approved securities 1,296 1,277 1,204 1,138 1,136 992 926 868
- Shares 299 267 289 173 231 182 179
- Debentures 770 1,205 1,517 1,517 1,401 1,668 1,845 2,783
- Subsidiaries 21 21 21 76 171 173 181 173
- Others 14 94 83 190 147 146 140 998
Total 9,153 10,825 4,181 13,850 14,887 16,747 18,116 22,583
Total investments 10,671 13,030 6,889 16,666 18,225 22,084 24,435 27,163
Movement in NPA
Gross NPAs
Opening balance n.a. n.a. n.a. 3,032 3,464 3434 3772 3804
Additions n.a. n.a. n.a. 1,304 911 1355 1226 1204
Reductions n.a. n.a. n.a. 872 941 1067 1144 1274
Closing balance n.a. n.a. n.a. 3,464 3,434 3722 3804 3734
Net NPA-Closing balance n.a. n.a. n.a. 2,206 2,138 2304 2286 2062
Profit and loss statement
Interest earned
Interest/discount on advances/bills 2,234 2,461 2,627 2,750 3,129 3,293 3,563 3,309
Income on investments 1,096 1,264 1,513 1,673 1,806 1,919 2,023 2,072
Interest on balances with RBI 141 174 164 187 358 349 262 219
Others 42 37 287 128 25 48 80 196
Total 3,513 3,936 4,591 4,737 5,317 5,609 5,928 5,796
Other income
Commission exchange and brokerage 255 272 284 293 324 324 359 376
Profit on sale of investments 10 56 8 167 196 427 858 946
Loss on sale of investments
Profit on sale of land, buildings 0 32 1 0 0 0 26 11
Loss on revaluation of investments
Profit on forex transactions 74 110 120 112 105 124 142 213
Income from subsidiaries 3 0 1 2 2 2 48 18
Lease income 0 0 0 0 0
Miscellaneous income 148 111 160 212 235 226 236 229
Total 490 580 574 786 862 1,103 1,668 1,792
Total income 4,003 4,516 5,164 5,522 6,179 6,712 7,596 7,588
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 2,231 2,469 2,900 3,062 3,216 3,314 3,413 3,087
Interest on RBI 140 182 280 310 344 316 326 316
Others 2 0 0 71 103 138 153 192
Total 2,373 2,651 3,181 3,443 3,663 3,769 3,892 3,594
Operating expenses
Salaries 714 770 924 999 1,339 1,087 1,126 1,172
Others 289 330 288 336 343 370 436 491
Depreciation 48 67 67 61 74 68.23 87 88
Total 1,051 1,167 1,279 1,396 1,744 1,531 1,649 1,752
Provisions and contingencies 219 333 504 510 520 903 1,179 1,234
Total expenses including provisions 3,643 4,151 4,963 5,350 5,927 6,203 6,720 6,580
Profit for the year 360 365 201 173 252 509 876 1,008
Profits inclusive of provisions 579 697 705 683 772 1,412 2,055 2,242
Contingent liabilities
Claims against banks 7 13 19 25 24 612 417 184
Liability for partly paid investments 8 1 0 0 0 0 0 0
Liability for outstanding forex contracts 11,676 18,032 14,164 17,738 30,788 36,954 34,162 41,738
Guarantees
- In India 1,916 1,793 1,767 2,276 2,440 2,818 2,987 3,211
- Outside India 294 695 788 406 404 517 747 916
Acceptances and endorsements 2,995 2,777 2,428 2,309 2,904 2,826 3,633 3,797
Others 1,298 1,500 2,553 3,401 4,984 7,254 10,228 15,877
Total 18,194 24,811 21,720 26,156 41,545 50,981 52,174 65,723
Provisions and Contingencies
Provison for NPAs 4 316 352 386 351 642 682 634
Depreciation in values of investments 98 -122 0 -43 67 0 25 42
Provision for taxation 115 116 110 77 66 191 338 399
Other Provisions 2 22 42 90 36 136 347 433
Total 219 333 504 510 520 903 1,179 1,234
Financial analysis
Growth in deposits (per cent)
Overall 16 23 13 7 8 16 7 11
Demand 29 -5 12 10 11 15 9 11
Savings 11 19 17 -1 -5 19 0 8
Term 15 32 13 7 8 16 7 11
Share of deposits (per cent)
Demand 17 13 13 13 11 12 8 8
Savings 19 19 24 26 26 26 28 30
Term 64 68 67 66 67 66 68 66
Share of deposits (per cent)
Domestic 82 80 79 81 83 82 84 84
Abroad 18 20 21 19 17 18 16 16
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profitability (per cent)
Return on assets 1.0 0.9 0.4 0.3 0.4 0.8 1.2 1.3
Return on equity 22.5 17.1 8.5 7.0 9.7 18.4 27.5 26.7
Gearing (times) 18.6 19.0 21.4 21.3 21.2 23.5 20.5 20.2
Staff costs to operating expenses 67.9 66.0 72.2 71.6 76.8 71.0 68.3 66.9
Non-fund income to total income 12.2 12.8 11.1 14.2 13.9 16.4 22.0 23.6
Operating expenses to total income 26.3 25.9 24.8 25.3 28.2 22.8 21.7 23.1
Operating expenses to deposits 3.3 3.0 2.9 2.9 3.4 2.6 2.6 2.5
Earning per share (Rs) 6.0 5.7 3.1 2.7 3.9 10.4 18.0 20.7
Cost to income ratio 64.5 62.6 64.5 67.2 69.3 52.0 44.5 43.9
Cost to income ratio (w/o profit on invest) 64.9 64.5 64.7 73.0 75.2 60.8 57.9 57.5
Financial management (per cent)
Interest cost 6.96 7.05 6.97 6.98 6.37 5.86 4.95
Average cost of deposits 7.5 6.9 6.9 6.6 6.5 6.0 5.5 4.6
Average cost of borrowings 9.0 12.1 12.4 15.7 24.3 17.7 13.0 11.9
Yield on carry business 10.76 10.60 9.99 10.63 9.86 9.24 8.11
Average yield on investments 10.8 10.7 10.7 10.5 10.4 9.5 8.7 8.0
Average yield on advances 13.2 12.2 11.3 11.1 11.0 9.4 8.8 7.5
Spreads 3.80 3.56 3.02 3.65 3.49 3.38 3.17
Operating expenses to AFD 3.02 2.77 2.76 3.25 2.48 2.34 2.25
Core fee income to AFD 1.13 1.05 1.01 1.02 0.91 0.88 0.90
Net Profitability Margin 1.91 1.83 1.27 1.41 1.92 1.92 1.82
Deposits to borrowings (times) 18.8 23.7 18.5 19.0 27.1 21.6 16.8 15.8
Capital adequacy 10.2 9.1 10.6 10.6 12.2 12.23 12.02 13.01
Provisions as a percentage of profit before 37.8 47.7 71.5 74.7 67.4 64.0 57.4 55.0
provisions
Provisions as a percentage of networth 13.7 15.6 21.3 20.7 20.0 32.7 36.9 32.7
Liquidity (per cent)
Credit deposit ratio 57 56 55 53 62 64 67 65
Incremental C/D ratio 62 50 45 27 168 81 99 47
Borrowings to total deposits 5 4 7 4 3 6 6 6
Cash deposit ratio 1 1 0 0 0 0 0 0
Investment-deposit ratio 33 33 34 35 35 37 38 38
Incremental I/D ratio 24 32 44 42 40 48 54 40
Reserves as a percentage of net worth 69 72 73 75 76 83 86 88
Growth (per cent)
Advances 18 20 10 4 26 20 11 8
Deposits 16 23 13 7 8 16 7 11
Investments 11 22 17 9 9 21 11 11
Salaries cost 9 8 20 8 34 -19 4 4
Commission and fee 8 7 4 3 11 0 11 5
Interest income 22 12 17 3 12 5 6 -2
Others
Branches (number) 2,475 2,495 2,515 2,532 2,534 2548 2559 2562
Advances per branch (Rs crore) 7.41 8.83 9.67 9.96 12.56 15.04 16.66 17.90
Operating expenses/branch (Rs crore) 0.42 0.47 0.51 0.55 0.69 0.60 0.64 0.68
Employees (number) 53,295 52,518 53,047 52,428 44,052 43420 43141 42977
Income per employee (Rs crore) 0.08 0.09 0.10 0.11 0.14 0.15 0.18 0.18
Income/employee expenses (times) 5.61 5.86 5.59 5.53 4.61 6.18 6.75 6.47
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 88 87 89 86 86 84 78 76
forex 2 2 2 2 2 2 2 3
Commission and brokerage 0 1 0 3 3 6 11 12
Share of advances (per cent)
Priority 26 26 26 26 24 24 27 28
Public 7 10 9 10 11 12 11 12
Inter-bank 0 0 0 0 0 0 1 0
Others 43 39 40 39 40 38 35 36
Abroad 24 24 25 24 26 26 26 24
Share of advances (per cent)
Bills 10 8 7 7 8 9 9 9
Cash credit 71 62 55 53 51 50 56 52
Term loans 19 30 38 40 40 41 35 39
Share of advances (per cent)
Secured 76 73 74 75 73 66 65 69
Government guarantee 14 10 8 12 14 16 15 13
Unsecured 10 17 18 14 14 18 21 18
Share of investments (per cent)
Government securities 66 61 16 64 65 61 61 65
Other approved securities 12 10 17 7 6 4 4 3
Shares 0 2 4 2 1 1 1 1
Debentures 7 9 22 9 8 8 8 10
Subsidiary 0 0 0 0 1 1 1 1
Others 0 1 1 1 1 1 1 4
Outside India 14 17 39 17 18 24 26 17
Gross NPAs (per cent) 11.8 11.6 n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs (per cent) 6.9 7.3 7.3 8.6 6.7 6.7 5.4 4.5
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 12,233 13,921 15,832 18,062 21,379 21826 32178 38654
Government guarantee 1,187 1,417 1,594 2,359 1,965 6311 2579 2366
Unsecured 993 1,487 2,104 2,127 4,487 4989 5715 6619
Total 14,413 16,825 19,530 22,547 27,832 33,127 40,472 47,639
Priority sector 5,267 6,006 6,271 6,807 8,069 9288 12170 16152
Public sector 1,344 1,721 2,911 4,702 6,205 7375 7592 7774
Banks 25 123 96 95 98 138 450 511
Others 7,586 8,655 9,795 11,511 12,997 15610 19694 22690
Total 14,222 16,505 19,071 23,115 27,369 32,411 39,906 47,127
Advances outside India 191 319 459 432 463 716 566 512
Total 14,413 16,825 19,530 23,547 27,832 33,127 40,472 47,639
Investments
Investments outside India 77 91 300 402 499 527 520 547
Investments in India
- Government securities 6,824 9,394 9,955 11,775 14,449 16572 23307 28133
- Other approved securities 1,827 1,809 1,683 1,627 1,549 1246 865 878
- Shares 133 204 246 256 200 236 221 236
- Debentures 2,636 3,600 3,978 4,940 4,390 4215 4975 4926
- Subsidiaries/JV 132 138 134 135 132 132 132 132
- Others 651 795 1,059 889 226 292 438 941
Total 12,203 15,940 17,056 19,621 20,946 22,693 29,938 35,246
Total investments 12,280 16,031 17,356 20,023 21,445 23,220 30,458 35,793
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 2,100 2,334 2150 2112 2475
Additions n.a. n.a. n.a. 750 793 652 1228 1890
Reductions n.a. n.a. n.a. 835 884 690 865 1238
Closing balance n.a. n.a. n.a. 2,015 2,243 2112 2475 3127
Net NPA-Closing balance n.a. n.a. n.a. 1,244 1,346 1,288 1,454 1,378
Profit and loss statement
Interest earned
Interest/discount on advances/bills 1,972 2,015 2,283 2,488 2,920 3130 3591 3818
Income on investments 1,220 1,527 2,070 2,042 2,234 2497 2686 2994
Interest on balances with RBI 215 258 303 321 463 708 414 143
Others 7 24 0 1 0 36 0 52
Total 3,414 3,824 4,657 4,852 5,618 6,371 6,692 7,007
Other income
Commission exchange and brokerage 246 254 297 320 323 322 360 381
Profit on sale of investments 22 100 61 133 201 663 640 1207
Loss on sale of investments
Profit on sale of fixed assets 0 0 1 1 1 1 1 0
Loss on revaluation of investments 0 0 0 0 0 0 0 0
Profit on forex transactions 81 92 92 97 124 129 133 152
Income from Investments 9 5 32 52 30 0 53 46
Lease Income
Miscellaneous income 96 156 179 234 239 313 291 288
Total 455 608 663 836 918 1,429 1,478 2,073
Total income 3,869 4,432 5,319 5,687 6,536 7,799 8,170 9,080
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 2,148 2,604 2,993 3,234 3,575 4350 4224 4121
Interest on RBI /inter bank 54 20 13 19 29 22 9 13
Others 76 124 124 162 132 178 191 189
Total 2,278 2,748 3,131 3,414 3,735 4,550 4,424 4,324
Operating expenses
Salaries 641 691 880 951 1,253 1123 1162 1273
Others 251 268 296 323 351 377 477 510
Depreciation 45 51 55 75 66 93 109 114
Total 937 1,010 1,231 1,350 1,670 1,593 1,748 1,897
Provisions and contingencies 507 469 732 687 846 915 978 1,521
Total expenses including provisions 3,721 4,228 5,094 5,451 6,251 7,058 7,150 7,741
Profit for the year 147 204 225 236 285 741 1,020 1,339
Profits inclusive of provisions 654 674 957 923 1,131 1,656 1,999 2,860
Contingent liabilities
Claims against banks 150 199 483 730 688 0 597 627
Liability for partly paid investments 5 0 0 0 0 0 0 0
Liability for outstanding forex contracts 8,196 10,632 8,505 14,800 27,515 26895 39686 36109
Guarantees
- in India 3,401 3,394 3,645 4,145 4,425 5413 7019 9422
- outside India 22 21 10 40 34 59 76 81
Acceptances and endorsements 1,945 1,893 1,877 2,498 2,471 2954 3790 6198
Others 373 338 299 225 69 704 9 3
Total 14,091 16,477 14,820 22,438 35,202 36,024 51,177 52,441
Provisions and contingencies
Provision for NPAs 260 398 506 466 409 386 476 1239
Depreciation on investments -25 -90 0 0 8 13 18 18
Taxation 124 80 100 121 191 310 300 330
Contingencies 148 82 126 100 239 207 184 -66
Total 507 470 732 687 846 915 978 1,521
Financial analysis
Growth in deposits (per cent)
Overall 20 21 10 14 23 8 13 20
Demand 20 10 -6 20 10 -9 10 10
Savings 16 20 18 17 15 13 19 19
Term 21 25 12 12 29 10 11 22
Share of deposits (per cent)
Demand 18 17 14 15 13 11 11 10
Savings 21 21 23 23 22 23 24 24
Term 60 62 63 62 65 66 65 66
Share of deposits (per cent)
Domestic 97 97 97 97 98 98 98 98
Abroad 3 3 3 3 2 2 2 2
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profitability (per cent)
Return on assets 0.4 0.5 0.5 0.5 0.5 1.1 1.3 1.5
Return on equity 7.4 9.4 9.5 9.4 10.5 23.6 26.8 28.5
Gearing (times) 16.4 17.7 18.9 20.0 22.6 19.8 18.8 18.0
Staff costs to operating expenses 71.9 68.4 71.5 70.5 75.1 70.5 66.5 67.1
Non-fund income to total income 11.8 13.7 12.5 14.7 14.0 18.3 18.1 22.8
Operating expenses to total income 23.1 22.8 23.1 23.7 25.5 20.4 21.4 20.9
Operating expenses to deposits 2.8 2.7 2.9 2.8 2.8 2.5 2.4 2.2
Earning per share (Rs) 3.0 3.5 3.9 4.1 4.9 12.8 24.9 32.7
Cost to income ratio 58.9 60.0 56.3 59.4 59.6 49.0 46.7 39.9
Cost to income ratio (w/o profit on invest) 59.7 63.8 57.9 63.1 64.2 61.6 56.3 53.4
Financial management (per cent)
Interest cost - 7.56 7.48 7.29 6.74 7.20 6.36 5.32
Average cost of deposits 7.4 7.5 7.5 7.2 6.7 7.1 6.2 5.2
Average cost of borrowings 12.8 30.2 14.6 13.3 11.5 23.0 110.6 47.8
Yield on carry business - 10.63 11.27 10.46 10.14 9.87 9.23 8.20
Average yield on investments 10.6 10.8 12.4 10.9 10.8 11.2 10.0 9.0
Average yield on advances 14.3 12.9 12.6 11.6 11.4 10.3 9.8 8.7
Spreads - 3.06 3.78 3.17 3.40 2.68 2.88 2.88
Operating expenses to AFD - 2.72 2.88 2.81 2.94 2.43 2.37 2.18
Core fee income to AFD - 1.14 1.12 1.11 1.00 0.93 0.87 0.78
Net Profitability Margin - 1.48 2.02 1.47 1.46 1.18 1.37 1.47
Deposits to borrowings (times) 28.4 72.6 42.5 33.2 38.4 71.0 376.9 186.7
Capital adequacy 10.2 9.5 11.0 9.6 9.8 11.88 12.5 12.66
Provisions as a percentage of profit before 77.5 69.7 76.5 74.4 74.8 55.2 49.0 53.2
provisions
Provisions as a percentage of networth 24.7 20.4 30.4 26.5 30.1 26.4 23.6 29.0
Liquidity (per cent)
Credit-deposit ratio 46 44 47 49 47 52 56 55
Incremental C/D ratio 25 37 69 66 39 107 91 50
Borrowings to total deposits 1 1 3 3 2 0 0 1
Cash-deposit ratio 1 1 1 1 1 1 1 1
Investment-deposit ratio 39 42 41 42 36 36 42 41
Incremental I/D ratio n.a. 57 34 44 13 36 90 37
Reserves as a percentage of net worth 76 75 76 78 79 83 90 92
Growth (per cent)
Advances 10 17 16 21 18 19 22 18
Deposits 20 21 10 14 23 8 13 20
Investments 15 31 8 15 7 8 31 18
Salaries cost n.a. 8 27 8 32 -10 4 10
Commission and fee 0 3 17 8 1 0 12 6
Interest income 16 12 22 4 16 13 5 5
Others
Branches (nos) 2,262 2,312 2,379 2,397 2,405 2409 2424 2469
Advances per branch (Rs crore) 6.37 7.28 8.21 9.82 11.57 13.75 16.70 19.29
Operating expenses per branch (Rs crore) 0.41 0.44 0.52 0.56 0.69 0.66 0.72 0.77
Employees (nos) 54,316 54,703 55,097 55,363 48,257 47796 47566 47796
Income per employee (Rs crore) 0.07 0.08 0.10 0.10 0.14 0.16 0.17 0.19
Income/employee expenses (times) 6.04 6.41 6.05 5.98 5.22 6.95 7.03 7.13
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 88 86 88 85 86 82 82 77
Forex 2 2 2 2 2 2 2 2
Commission and brokerage 6 6 6 6 5 4 4 4
Share of advances (per cent)
Priority 37 36 32 29 29 28 30 34
Public 9 10 15 20 22 22 19 16
Inter-bank 0 1 0 0 0 0 1 1
Others 53 51 50 49 47 47 49 48
Abroad 1 2 2 2 2 2 1 1
Share of advances (per cent)
Bills 13 9 12 12 9 9 9 9
Cash credit 61 65 58 55 60 60 58 51
Term loans 26 26 30 33 31 31 33 40
Share of advances (per cent)
Secured 85 83 81 80 77 66 80 81
Government guarantee 8 8 8 10 7 19 6 5
Unsecured 7 9 11 9 16 15 14 14
Share of investments (per cent)
Government securities 56 59 57 59 67 71 77 79
Other approved securities 15 11 10 8 7 5 3 2
Shares and debentures 1 1 1 1 1 1 1 1
Debentures 21 22 23 25 20 18 16 14
Subsidiary 1 1 1 1 1 1 0 0
Others 5 5 6 4 1 1 1 3
Outside India 1 1 2 2 2 2 2 2
Gross NPAs (per cent) 20.3 18.7 n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs (per cent) 9.3 7.5 7.1 5.3 4.8 3.9 3.6 2.9
n.a.: Not available
Source: CRIS INFAC
Bills payable 838 878 632 706 745 866 948 1,396
Interest accrued 201 459 696 319 374 453 493 462
Others (including provisions) 1,259 1,201 1,629 2,352 2,796 3,617 4,238 5,883
Total 2,549 2,676 3,419 3,710 4,032 5,002 5,713 8,114
Balance with RBI 3,359 4,590 4,678 5,049 4,920 4,371 5,940 6,043
Cash in hand 295 310 338 428 445 578 629 700
Advances
Bills purchases and discounted 1,378 1,364 1,490 1,903 2,427 2,460 2,879 2,803
Cash credit and overdraft 8,894 9,845 10,824 12,686 15,730 18,748 20,901 21,812
Term loans 3,795 4,833 6,734 7,983 9,872 13,431 16,448 22,609
Total 14,067 16,042 19,047 22,572 28,029 34,639 40,228 47,225
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 13,306 14,991 18,336 21,634 26,503 32,601 36,714 42,123
Government guarantee 618 919 458 335 387 493 662 364
Unsecured 143 132 254 602 1,139 1,275 2,852 4,737
Total 14,067 16,042 19,047 22,572 28,029 34,369 40,228 47,225
Priority sector 4,380 5,275 6,595 8,323 10,857 13,441 16,034 20,735
Public sector 1,495 1,745 2,417 3,065 4,408 6,225 6,860 6,519
Banks 52 12 12 10 28 237 237 205
Others 8,140 9,010 10,023 11,173 12,736 14,466 17,097 19,766
Total 14,067 16,042 19,047 22,572 28,029 34,369 40,228 47,225
Advances outside India 0 0 0 0 0 0 0 0
Total 14,067 16,042 19,047 22,572 28,029 34,369 40,228 47,225
Investments
Investments outside India 0 0 9 9 9 10 9 9
Investments in India
- Government securities 8,974 10,106 12,326 16,089 18,437 19,304 25,338 33,069
- Other approved securities 2,886 3,041 2,827 2,624 2,501 2,459 2,409 2,343
- Shares 62 99 364 325 257 344 270 267
- Debentures 1,623 2,317 2,698 2,651 3,306 5,383 5,458 5,766
- Subsidiaries/JV 149 189 227 254 213 212 220 206
- Others 282 154 122 146 406 495 326 465
Total 13,976 15,906 18,564 22,090 25,120 28,197 34,021 42,116
Total investments 13,976 15,906 18,573 22,099 25,128 28,207 34,030 42,125
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 2,832 3,127 3460 4140 4980
Additions n.a. n.a. n.a. 868 865 1180 1546 1044
Reductions n.a. n.a. n.a. 574 531 500 706 1354
Closing balance n.a. n.a. n.a. 3,127 3,460 4140 4980 4670
Net NPA-Closing balance n.a. n.a. n.a. 1,917 1,871 1810 1527 449
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 1,954 1,961 2,182 2,514 2,824 3,318 3,712 3,876
Income on investments 1,525 1,821 1,976 2,417 2,742 3,003 3,298 3,681
Interest on balances with RBI 169 164 182 172 152 228 179 113
Others 6 46 108 52 146 99 296 110
Total 3,654 3,992 4,448 5,155 5,863 6,648 7,485 7,780
Other income
Commission exchange and brokerage 248 280 328 382 419 434 480 552
Profit on sale of investments 35 237 79 215 242 447 677 1,265
Loss on sale of investments 0 0 0 0 0 -9 -5 -29
Profit on sale of fixed assets 0 1 1 1 0 0 0 0
Loss on revaluation of investments 0 0 0 0 -26 -58 -70 -118
Profit on forex transactions 73 62 74 76 94 92 95 106
Income from investments 7 25 15 20 3 28 24 30
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 106 32 48 34 45 43 49 60
Total 469 637 545 728 778 978 1,250 1,867
Total income 4,123 4,629 4,993 5,882 6,642 7,625 8,735 9,647
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 2,343 2,540 2,677 3,367 3,609 4122 4,163 3,926
Interest on RBI/inter bank 6 3 12 29 39 48 8 13
Others 90 156 106 142 176 183 191 215
Total 2,439 2,699 2,795 3,538 3,825 4,353 4,361 4,155
Operating expenses
Salaries 811 871 1,069 1,184 1,459 1,316 1,476 1,654
Others 224 222 267 297 338 398 469 535
Depreciation 29 35 40 43 75 85 129 181
Total 1,064 1,128 1,376 1,524 1,872 1,799 2,074 2,371
Provisions and contingencies 382 324 449 412 482 911 1,475 2,012
Total expenses including provisions 3,885 4,151 4,621 5,474 6,178 7,063 7,910 8,538
Profit for the year 238 478 372 408 464 562 825 1,109
Profits inclusive of provisions 620 802 821 820 945 1,473 2,300 3,121
Contingent liabilities
Claims against banks 714 895 831 929 585 558 195 252
Liability for partly paid investments 1 1 1 0 0 0 0 0
Liability for outstanding forex contracts 2,131 3,628 3,190 3,942 12,619 16431 16,364 19,543
Guarantees
- In India 1,784 2,133 2,075 1,947 2,119 2616 3,151 3,995
- Outside India 336 583 535 613 431 449 382 1,131
Acceptances and endorsements 1,594 1,634 1,692 1,978 2,441 2807 3,376 7,168
Others 96 131 130 155 13 21 102 140
Total 6,656 9,005 8,454 9,564 18,208 22,885 23,571 32,230
Provisions and contingencies
Provison for NPAs 194 337 240 249 341 631 833 1194
Depreciation in values of investments 0 -333 0 -8 20 -35 133 -31
Provision for taxation 123 276 159 124 111 199 341 661
Other Provisions 65 44 51 47 10 116 168 188
Total 382 324 449 412 482 911 1,475 2,012
Financial analysis
Growth in deposits (per cent)
Overall 14 14 16 16 18 14 18 16
Demand 5 15 28 12 16 7 46 0
Savings 14 23 18 16 17 17 18 19
Term 15 10 12 18 20 14 13 18
Share of deposits (per cent)
Demand 11 11 12 11 11 11 13 11
Savings 31 33 34 33 33 34 34 35
Term 59 56 55 55 56 56 53 54
Share of deposits (per cent)
Domestic 100 100 100 100 100 100 100 100
Abroad 0 0 0 0 0 0 0 0
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profitability (per cent)
Return on assets 0.7 1.3 0.9 0.8 0.8 0.8 1.0 1.2
Return on equity 19.0 31.9 20.8 19.4 18.8 18.6 22.3 24.5
Gearing (times) 25.1 23.0 23.0 22.8 22.8 20.6 20.4 19.4
Staff costs to operating expenses 78.4 77.2 77.7 77.7 78.0 73.2 71.2 69.8
Non-fund income to total income 11.4 13.8 10.9 12.4 11.7 12.8 14.3 19.4
Operating expenses to total income 25.1 24.4 27.6 25.9 28.2 23.6 23.7 24.6
Operating expenses to deposits 3.4 3.2 3.4 3.2 3.3 2.8 2.7 2.7
Earning per share (Rs) 6.8 22.5 17.5 19.2 21.8 14.9 31.1 41.8
Cost to income ratio 63.2 58.4 62.6 65.0 66.4 55.0 47.4 43.2
Cost to income ratio (w/o profit on invest) 64.5 66.6 64.9 71.6 72.7 63.7 56.1 56.1
Financial management (per cent)
Interest cost n.a. 7.90 7.17 7.82 7.19 7.08 6.11 4.95
Average cost of deposits 8.1 7.7 7.0 7.6 7.0 6.9 5.9 4.8
Average cost of borrowings 11.5 52.1 51.3 39.9 32.3 42.7 37.1 23.4
Yield on carry business n.a. 11.55 11.16 11.10 10.81 10.53 10.02 8.71
Average yield on investments 11.8 12.2 11.5 11.9 11.6 11.3 10.6 9.7
Average yield on advances 14.6 13.0 12.4 12.1 11.2 10.6 9.9 8.9
Spreads n.a. 3.65 3.99 3.27 3.62 3.45 3.91 3.76
Operating expenses to AFD n.a. 3.22 3.40 3.23 3.40 2.81 2.74 2.63
Core fee income to AFD n.a. 1.02 1.05 1.01 0.97 0.85 0.79 0.76
Net Profitability Margin n.a. 1.45 1.64 1.05 1.19 1.50 1.96 1.89
Deposits to borrowings (times) 34.8 108.2 164.2 102.6 77.6 111.2 130.7 83.9
Capital adequacy 9.2 8.8 10.8 10.3 10.2 10.7 12.0 13.1
Provisions as a percentage of profit before 61.6 40.4 54.7 50.2 50.9 61.9 64.1 64.5
provisions
Provisions as a percentage of networth 28.5 19.6 23.3 18.1 18.0 27.0 36.6 40.1
Liquidity (per cent)
Credit-deposit ratio 46 46 47 48 50 54 53 54
Incremental credit deposit ratio 38 45 54 53 63 79 50 58
Borrowings to total deposits 1 1 0 1 1 1 1 1
Cash-deposit ratio 1 1 1 1 1 1 1 1
Investment-deposit ratio 45 45 46 47 45 44 45 48
Incemental I/D ratio 55 44 48 53 35 39 50 67
Reserves as a percentage of net worth 74 87 89 91 92 89 93 95
Growth (per cent)
Advances 11 14 19 19 24 23 17 17
Deposits 14 14 16 16 18 14 18 16
Investments 17 14 17 19 14 12 21 24
Salaries cost 7 7 23 11 23 -10 12 12
Commission and fee 19 13 17 16 10 3 11 15
Interest income 15 9 11 16 14 13 13 4
Others
Branches (nos) 3,765 3,793 3,822 3,853 3,879 3,857 4,037 4,022
Advances per branch (Rs crore) 3.74 4.23 4.98 5.86 7.23 8.91 9.96 11.74
Operating expenses per branch (Rs crore) 0.28 0.30 0.36 0.40 0.48 0.47 0.51 0.59
Employees (nos) 67,616 66,599 65,705 64,733 58,309 57,859 58,981 58,839
Income per employee (Rs crore) 0.06 0.07 0.08 0.09 0.11 0.13 0.15 0.16
Income/employee expenses (times) 5.08 5.31 4.67 4.97 4.55 5.79 5.92 5.83
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 89 86 89 88 88 87 86 81
Forex 2 1 1 1 1 1 1 1
Commission, brokerage 6 6 7 6 6 6 5 6
Share of advances (per cent)
Priority 31 33 35 37 39 39 40 44
Public 11 11 13 14 16 18 17 14
Inter bank 0 0 0 0 0 1 1 0
Others 58 56 53 49 45 42 42 42
Abroad 0 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 10 9 8 8 9 7 7 6
Cash credit 63 61 57 56 56 54 52 46
Term loans 27 30 35 35 35 39 41 48
Share of advances (per cent)
Secured 95 93 96 96 95 95 91 89
Government guarantee 4 6 2 1 1 1 2 1
Unsecured 1 1 1 3 4 4 7 10
Share of investments (per cent)
Government securities 64 64 66 73 73 68 74 79
Other approved securities 21 19 15 12 10 9 7 6
Shares 0 1 2 1 1 1 1 1
Debentures 12 15 15 12 13 19 16 14
Subsidiary 1 1 1 1 1 1 1 0
Others 2 1 1 1 2 2 1 1
Outside India 0 0 0 0 0 0 0 0
Gross NPAs (per cent) 16.3 14.5 n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs (per cent) 10.4 9.6 9.0 8.5 6.7 5.3 3.9 1.0
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 4,194 5,448 6,596 7,645 8,946 10,483 12,089 14,942
Government guarantee 593 787 963 1,305 1,533 2,207 1,929 1,563
Unsecured 99 83 148 375 597 1,468 1,660 3,175
Total 4,886 6,318 7,708 9,326 11,076 14,158 15,677 19,681
Priority sector 1,958 2,474 3,061 3,702 4,293 5,455 6,028 7,488
Public sector 244 325 336 536 661 879 1,471 3,241
Banks 24 31 29 0 25 30 3 1
Others 2,660 3,488 4,281 5,088 6,098 7,794 8,175 8,950
Total 4,886 6,318 7,708 9,326 11,076 14,158 15,677 19,681
Advances outside India 0 0 0 0 0 0 0 0
Total 4,886 6,318 7,708 9,326 11,076 14,158 15,677 19,681
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 2,760 2,965 4,069 6,564 7,363 8,552 10,157 12,451
- Other approved securities 439 444 498 472 499 498 491 459
- Shares 21 127 176 252 159 143 133 124
- Debentures 1,124 2,323 2,990 4,069 3,904 4,183 3,732 3,546
- Subsidiaries/JV 0 0 0 0 0 0 0 0
- Others 44 98 105 204 374 322 267 214
Total 4,388 5,957 7,839 11,560 12,298 13,698 14,781 16,794
Total investments 4,388 5,957 7,839 11,560 12,298 13,698 14,781 16,794
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 498 528 586 952 1146
Additions n.a. n.a. n.a. 237 446 601 630 527
Reductions n.a. n.a. n.a. 207 388 235 435 462
Closing balances n.a. n.a. n.a. 528 586 952 1146 1211
Net NPA-Closing balance n.a. n.a. n.a. 336 397 436 225 0
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 708 739 933 1,011 1,203 1,416 1,536 1,591
Income on investments 494 669 847 1,367 1,441 1,546 1,613 1,633
Interest on balances with RBI 36 43 70 79 94 81 88 71
Others 13 7 23 2 21 6 68 5
Total 1,251 1,458 1,873 2,458 2,759 3,049 3,304 3,301
Other income
Commission exchange and brokerage 66 72 82 96 96 102 106 114
Profit on sale of investments 2 15 23 58 99 316 393 511
Loss on sale of investments 0 0 0 0 -4 -5 -20 -7
Profit on sale of fixed assets 0 0 0 0 1 0 0 0
Loss on revaluation of investments 0 0 0 0 -10 -28 -26 -5
Profit on forex transactions 29 33 36 34 38 39 47 59
Income from Investments 1 5 14 19 16 9 10 0
Lease income 0 0 0 0 0 0
Miscellaneous income 6 14 18 15 31 41 32 50
Total 104 138 174 221 268 474 541 722
Total income 1,355 1,596 2,046 2,679 3,027 3,523 3,845 4,022
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 782 939 1,270 1,718 1,937 2,030 2,032 1,786
Interest on RBI /inter bank 7 11 10 15 12 10 3 6
Others 12 9 9 12 20 29 55 53
Total 801 959 1,290 1,745 1,968 2,068 2,090 1,845
Operating expenses
Salaries 154 185 217 231 315 288 348 366
Others 87 98 127 155 168 162 152 177
Depreciation 12 17 26 42 41 39 42 50
Total 253 301 371 428 524 490 541 594
Provisions and contingencies 121 127 156 227 331 597 706 847
Total expenses including provisions 1,175 1,386 1,816 2,401 2,824 1,086 1,247 1,441
Profit for the year 180 210 230 279 203 2,437 2,598 2,581
Profits inclusive of provisions 301 337 386 506 534 3,033 3,304 3,428
Contingent liabilities
Claims against banks 72 100 177 200 259 198 280 147
Liability for partly paid investments 1 1 8 0 0 0 0 0
Liability for outstanding forex contracts 253 562 537 599 594 1,020 1,015 2711
Guarantees
- In India 774 1,041 852 949 1,029 1,249 1,478 1844
- Outside India 7 25 20 24 28 48 64 76
Acceptances and endorsements 292 271 354 406 428 464 489 1746
Others 21 17 16 12 14 12 5 2
Total 1,420 2,017 1,963 2,189 2,352 2,990 3,331 6,525
Provisions and contingencies
Provison for NPAs 52 77 101 127 274 139 328 89
Depreciation in values of investments 2 4 0 0 -30 16 -6 0
Provision for taxation 66 46 52 60 79 249 279 460
Other Provisions 0 0 3 40 9 193 105 298
Total 120 127 156 227 331 597 706 847
Financial analysis
Growth in deposits (per cent)
Overall 15 30 29 31 12 15 5 20
Demand 18 13 11 23 10 11 19 13
Savings 18 25 23 23 16 14 19 23
Term 14 34 33 35 11 16 0 20
Share of deposits (per cent)
Demand 12 11 9 9 8 8 9 9
Savings 19 19 18 17 17 17 19 20
Term 69 71 73 75 74 75 71 71
Share of deposits (per cent)
Domestic 100 100 100 100 100 100 100 100
Abroad 0 0 0 0 0 0 0 0
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profitability (per cent)
Return on assets 1.6 1.6 1.4 1.3 0.8 8 8 7
Return on equity 20.4 20.8 19.9 20.9 13.6 154 139 108
Gearing (times) 11.3 12.7 14.3 16.2 16.5 19 15 14
Staff costs to operating expenses 61 62 58 54 60 59 64 62
Non-fund income to total income 8 9 8 8 9 13 14 18
Operating expenses to total income 19 19 18 16 17 14 14 15
Operating expenses to deposits 3 2 2 2 2 2 2 2
Earning per share (Rs) 9.3 10.9 12.0 14.5 10.5 126.6 134.9 134.1
Cost to income ratio 45.7 47.1 49.0 45.8 49.5 33.7 30.8 27.3
Cost to income ratio (w/o profit on invest) 45.8 48.2 50.5 48.9 54.6 43.0 39.7 35.7
Financial management (per cent)
Interest cost n.a. 8.14 8.51 8.77 8.24 7.58 6.89 5.42
Average cost of deposits 8.3 8.1 8.5 8.8 8.3 7.6 7.0 5.5
Average cost of borrowings n.a. 19.4 18.9 8.7 8.4 7.3 5.8 5.2
Yield on carry business n.a. 11.71 11.85 12.07 11.36 10.85 10.44 9.13
Average yield on investments 12.4 12.9 12.3 14.1 12.1 12 11 10
Average yield on advances 14.8 13.2 13.3 11.9 11.8 11 10 9
Spreads n.a. 3.57 3.34 3.30 3.12 3.27 3.55 3.71
Operating expenses to AFD n.a. 2.39 2.31 2.07 2.12 1.71 1.69 1.63
Core fee income to AFD n.a. 0.89 0.79 0.66 0.61 0.56 0.53 0.54
Net Profitability Margin n.a. 2.07 1.83 1.90 1.61 2.12 2.39 2.63
Deposits to borrowings (times) 27.5 111.9 143.9 62.5 63.1 50.9 29.4 28.9
Capital adequacy 17.5 15.3 14.1 12.7 11.8 11.0 14.5 14.0
Provisions as a percentage of profit before 40.2 37.8 40.4 44.9 62.0 19.7 21.4 24.7
provisions
Provisions as a percentage of networth 12.9 11.8 12.7 15.9 21.4 36.8 33.5 31.6
Liquidity (per cent)
Credit-deposit ratio 49 48 46 42 45 50 53 55
Incremental credit deposit ratio 16 48 37 31 68 81 115 68
Borrowings to total deposits 1 1 1 2 1 3 4 3
Cash-deposit ratio 10 1 1 1 1 8 6 7
Investment-deposit ratio 44 46 47 52 50 48 50 47
Incemental I/D ratio n.a. 52 50 70 29 37 82 34
Reserves as a percentage of net worth 80 82 84 87 88 88 91 93
Growth (per cent)
Advances 5 29 22 21 19 28 11 26
Deposits 15 30 29 31 12 15 5 20
Investments 22 36 32 47 6 11 8 14
Salaries cost 9 20 17 7 36 -8 21 5
Commission and fee 1 9 14 17 0 6 4 7
Interest income 22 17 28 31 12 11 8 0
Others
Branches (nos) 755 841 899 915 932 967 989 1013
Advances per branch (Rs crore) 6.47 7.51 8.57 10.19 11.88 15 16 19
Operating expenses per branch (Rs crore) 0.34 0.36 0.41 0.47 0.56 0.51 0.55 0.59
Employees (nos) 13,580 14,238 14,447 14,398 13,588 13589 13507 13602
Income per employee (Rs crore) 0.10 0.11 0.14 0.19 0.22 0.26 0.28 0.30
Income/employee expenses (times) 8.80 8.63 9.44 11.58 9.60 12.21 11.06 10.98
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 92 91 92 92 91 87 86 82
Forex 2 2 2 1 1 1 1 1
Commission, brokerage 5 5 4 4 3 3 3 3
Share of advances (per cent)
Priority 40 39 40 40 39 39 38 38
Public 5 5 4 6 6 6 9 16
Inter bank 0 0 0 0 0 0 0 0
Others 54 55 56 55 55 55 52 45
Abroad 0 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 9 10 10 7 6 5 6 4
Cash credit 61 62 60 59 61 42 45 54
Term loans 30 29 30 33 33 42 45 54
Share of advances (per cent)
Secured 86 86 86 82 81 74 77 76
Government guarantee 12 12 12 14 14 16 12 8
Unsecured 2 1 2 4 5 10 11 16
Share of advances (per cent)
Government securities 63 50 52 57 60 62 69 74
Other approved securities 10 7 6 4 4 4 3 3
Shares 0 2 2 2 1 1 1 1
Debentures 26 39 38 35 32 31 25 21
Subsidiary 0 0 0 0 0 0 0 0
Others 1 2 1 2 3 2 2 1
Outside India 0 0 0 0 0 0 0 0
Gross NPAs (per cent) 7.4 6.2 n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs (per cent) 5.6 4.5 4.5 3.8 3.6 3.2 1.4 0.0
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 3,157 4,324 5,282 5,981 5,915 7,079 7,342 8,188
Government guarantee 587 758 948 952 899 163 461 527
Unsecured 300 65 164 185 188 281 633 697
Total 4,044 5,147 6,395 7,118 7,002 7,523 8,436 9,412
Priority sector 1,629 2,183 2,669 2,855 2,739 2,828 3,167 3,815
Public sector 306 460 496 743 852 1,360 1,408 1,497
Banks 4 12 2 28 49 0 0 0
Others 2,105 2,492 3,227 3,492 3,362 3,334 3,861 4,100
Total 4,044 5,147 6,395 7,118 7,002 7,523 8,436 9,412
Advances outside India 0 0 0 0 0 0 0 0
Total Advances 4,044 5,147 6,395 7,118 7,002 7,523 8,436 9,412
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 2,503 2,976 3,409 4,313 4,285 5,256 5,979 7,601
- Other approved securities 343 344 605 287 276 294 315 298
- Shares 35 58 43 59 120 127 145 113
- Debentures 697 1,202 1,523 2,161 2,049 1,909 1,800 1,503
- Subsidiaries/JV 10 16 19 22 22 22 22 22
- Others 131 6 47 64 64 39 239 200
Total 3,719 4,601 5,646 6,906 6,816 7,648 8,500 9,736
Total Investments 3,719 4,601 5,646 6,906 6,816 7,648 8,500 9,736
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 858 1400 1928 1996 1617
Additions n.a. n.a. n.a. 785 788 496 294 459
Reductions n.a. n.a. n.a. 244 259 428 673 591
Closing balance n.a. n.a. n.a. 1,400 1,928 1966 1617 1484
Net NPA-Closing balance n.a. n.a. n.a. 983 1,280 1,227 997 884
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 580 678 799 832 839 810 872 817
Income on investments 406 512 641 715 816 825 836 868
Interest on balances with RBI 27 24 44 32 39 59 45 45
Others 1 3 8 8 22 15 18 6
Total 1,014 1,216 1,492 1,587 1,716 1,708 1,772 1,735
Other income
Commission exchange and brokerage 59 71 71 86 84 78 77 82
Profit on sale of investments 11 61 16 74 37 202 240 443
Loss on sale of investments -5 0 0 0 0 0 0 -2
Profit on sale of fixed assets 0 0 0 0 0 0 0 0
Loss on revaluation of investments 0 0 0 0 0 0 0 0
Profit on forex transactions 19 19 35 20 16 16 19 24
Income from Investments 0 0 0 0 3 4 15 9
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 27 34 30 32 59 53 86 61
Total 111 184 153 212 199 353 437 617
Total income 1,125 1,400 1,645 1,799 1,916 2,062 2,209 2,353
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 579 735 958 1,043 1,139 1,166 1,125 1,071
Interest on RBI /Inter-bank 14 3 10 29 28 21 3 3
Others 47 52 83 98 100 79 76 69
Total 640 790 1,051 1,169 1,267 1,266 1,204 1,143
Operating expenses
Salaries 212 245 276 293 434 323 366 339
Others 71 82 88 101 124 90 89 105
Depreciation 8 10 14 18 21 24 28 28
Total 291 337 378 411 580 437 483 472
Provisions and contingencies 121 169 106 156 334 324 380 480
Total expenses including provisions 1,052 1,296 1,535 1,736 2,182 2,026 2,067 2,095
Profit for the year 73 105 110 63 -266 35 142 258
Profits inclusive of provisions 194 274 216 219 68 359 522 738
Contingent liabilities
Claims against banks 14 84 70 54 101 68 127 157
Liability for partly paid investments 11 0 0 0 0 0 0 0
Liability for outstanding forex contracts 408 480 715 1,369 3,014 573 1,180 3,548
Guarantees
- In India 725 740 808 619 783 1,052 1,035 1,188
- Outside India 0 0 0 0
Acceptances and endorsements 691 753 728 798 512 507 662 875
Others 137 165 180 146 524 59 147 71
Total 1,986 2,223 2,501 2,986 4,933 2,259 3,151 5,840
Provisions and contingencies
Provision for NPAs 68 141 93 166 290 316 270 206
Provision for depreciation in the value of inves 0 0 8 -38 41 5 9 0
Provision towards income tax 17 24 5 25 0 19 50 121
Others 36 4 1 3 3 -16 51 153
Total 121 169 106 156 334 324 380 480
Financial analysis
Growth in deposits (per cent)
Overall 21 29 17 13 10 5 7 11
Demand 26 -2 11 31 2 3 1 14
Savings 14 14 17 15 18 10 11 17
Term 24 43 17 9 8 4 7 8
Share of deposits (per cent)
Demand 14 11 10 12 11 11 10 11
Savings 28 25 25 25 27 28 29 31
Term 58 65 65 63 62 61 60 58
Share of deposits (per cent)
Domestic 100 100 100 100 100 100 100 100
Abroad 0 0 0 0 0 0 0 0
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profitability (per cent)
Return on assets 0.8 1.0 0.8 0.4 -1.5 0.2 0.7 1.2
Return on equity 18.7 20.0 17.8 8.3 -33.1 4.0 14.4 25.1
Gearing (times) 18.3 21.5 20.3 19.4 21.9 18.3 19.2 20.0
Staff costs to operating expenses 72.9 72.6 73.0 71.2 74.9 73.9 75.7 71.8
Non-fund income to total income 9.9 13.1 9.3 11.8 10.4 17.1 19.8 26.2
Operating expenses to total income 25.9 24.1 23.0 22.9 30.3 21.2 21.9 20.0
Operating expenses to deposits 3.7 3.3 3.2 3.1 4.0 2.8 2.9 2.6
Earning per share (Rs) 3.5 5.1 5.3 3.0 -12.9 1.7 6.9 12.5
Cost to income ratio 60.0 55.2 63.6 65.3 89.5 54.8 48.1 39.0
Cost to income ratio (w/o profit on invest) 61.4 61.3 65.4 74.0 94.9 73.4 63.2 61.5
Financial management (per cent)
Interest cost n.a. 8.38 9.03 8.66 8.58 8.12 7.32 6.38
Average cost of deposits 8.1 8.2 8.7 8.3 8.2 7.8 7.1 6.1
Average cost of borrowings 16.7 38.0 24.3 18.8 22.6 30.9 32.2 26.9
Yield on carry business n.a. 11.99 11.81 10.88 10.97 10.56 10.27 9.08
Average yield on investments 12.5 12.3 12.5 11.4 11.9 11.4 10.4 9.5
Average yield on advances 15.6 14.7 13.8 12.3 11.9 11.1 10.9 9.2
Spreads n.a. 3.62 2.78 2.22 2.39 2.44 2.96 2.69
Operating expenses to AFD n.a. 3.28 2.97 2.79 3.66 2.67 2.75 2.42
Core fee income to AFD n.a. 1.04 0.95 0.83 0.82 0.74 0.79 0.70
Net Profitability Margin n.a. 1.38 0.76 0.25 -0.46 0.51 1.00 0.97
Deposits to borrowings (times) 19.6 62.0 28.7 18.7 24.6 46.5 64.4 64.9
Capital adequacy 10.8 11.9 11.1 11.6 7.7 7.6 6.0 9.5
Provisions as a percentage of profit before 62.4 61.6 49.0 71.2 490.2 90.1 72.7 65.0
provisions
Provisions as a percentage of networth 24.1 30.9 15.2 18.8 42.8 33.2 38.0 45.5
Liquidity (per cent)
Credit-deposit ratio 51 51 54 54 48 49 51 51
Incremental C/D ratio 46 49 74 48 -9 67 80 53
Borrowings to total deposits 1 2 5 6 3 2 1 2
Cash-deposit ratio 1 1 1 1 1 1 1 1
Investment-deposit ratio 47 45 48 52 47 50 52 53
Incemental I/D ratio n.a. 39 62 85 -8 106 75 67
Reserves as a percentage of net worth 59 62 70 75 74 79 79 80
Growth (per cent)
Advances 19 27 24 11 -2 7 12 12
Deposits 21 29 17 13 10 5 7 11
Investments 35 24 23 22 -1 12 11 15
Salaries cost 14 15 13 6 48 -26 13 -7
Commission and fee -2 20 0 21 -2 -7 -1 6
Interest income 24 20 23 6 8 0 4 -2
Others
Branches (nos) 1,143 1,156 1,166 1,170 1,175 1,135 1,135 1,130
Advances per branch (Rs crore) 3.54 4.45 5.49 6.08 5.96 6.63 7.43 8.33
Operating expenses per branch (Rs crore) 0.25 0.29 0.32 0.35 0.49 0.38 0.43 0.42
Employees (nos) 15,610 15,109 14,881 14,412 10,947 10,700 10,553 10,957
Income per employee (Rs crore) 0.07 0.09 0.11 0.12 0.17 0.19 0.21 0.21
Income/employee expenses (times) 5.31 5.72 5.97 6.14 4.41 6.39 6.04 6.95
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 90 87 91 88 90 83 80 74
Forex 2 1 2 1 1 1 1 1
Commission and brokerage 5 5 4 5 4 4 4 3
Share of advances (per cent)
Priority 40 42 42 40 39 38 38 41
Public 8 9 8 10 12 18 17 16
Inter-bank 0 0 0 0 1 0 0 0
Others 52 48 50 49 48 44 46 44
Abroad 0 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 12 11 9 9 8 7 8 7
Cash credit 55 54 54 56 49 48 48 39
Term loans 33 34 38 35 44 45 44 53
Share of advances (per cent)
Secured 78 84 83 84 84 94 87 87
Government guarantee 15 15 15 13 13 2 5 6
Unsecured 7 1 3 3 3 4 8 7
Share of investments (per cent)
Government securities 67 65 60 62 63 69 70 78
Other approved securities 9 7 11 4 4 4 4 3
Shares 1 1 1 1 2 2 2 1
Debentures 19 26 27 31 30 25 21 15
Subsidiary 0 0 0 0 0 0 0 0
Others 4 0 1 1 1 1 3 2
Outside India 0 0 0 0 0 0 0 0
Gross NPAs (per cent) 15.1 13.7 n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs (per cent) 9.4 8.3 7.7 13.5 18.4 16.3 11.8 9.4
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 2,281 3,196 4,606 5,733 7,145 7,221 9,895 11,549
Government guarantee 448 477 621 919 328 1,476 392 530
Unsecured 286 630 1,060 1,126 1,194 2,290 1,742 1,811
Total 3,015 4,303 6,286 7,777 8,666 10,987 12,029 13,890
Priority sector 952 1,257 1,873 2,257 2,869 3,052 3,970 4,979
Public sector 412 431 588 1,628 1,576 2,938 2,095 1,123
Banks 4 2 90 22 0 31 232 230
Others 1,647 2,613 3,736 3,870 4,221 4,967 5,731 7,557
Total 3,015 4,303 6,286 7,777 8,666 10,987 12,029 13,890
Advances outside India 0 0 0 0 0 0 0 0
Total 3,015 4,303 6,286 7,777 8,666 10,987 12,029 13,890
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 1,713 2,114 2,945 3,700 4,612 5,866 8,346 8,671
- Other approved securities 338 351 335 321 307 243 188 181
- Shares 38 81 72 84 44 55 55 59
- Debentures 675 1,065 1,605 1,501 1,532 1,658 1,788 1,542
- Subsidiaries/JV 0 3 10 85 88 115 115 115
- Others 523 540 543 271 278 120 179 117
Total 3,287 4,154 5,511 5,962 6,860 8,057 10,670 10,685
Total investments 3,287 4,154 5,511 5,962 6,860 8,057 10,670 10,685
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. n.a. 433 485 587 657
Additions n.a. n.a. n.a. n.a. 136 246 177 162
Reductions n.a. n.a. n.a. n.a. 85 143 107 227
Closing balance n.a. n.a. n.a. n.a. 485 587 657 722
Net NPA-Closing balance n.a. n.a. n.a. n.a. 171 253 198 250
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 403 427 608 806 934 997 1,020 991
Income on investments 366 522 634 689 744 824 965 1,094
Interest on balances with RBI 40 48 93 94 94 91 65 44
Others 20 30 20 15 33 34 52 73
Total 829 1,028 1,356 1,604 1,805 1,946 2,103 2,201
Other income
Commission exchange and brokerage 73 95 125 130 131 124 117 131
Profit on sale of investments 2 1 11 58 67 135 266 224
Loss on sale of investments 0 0 0 0 0 0 0 0
Profit on sale of fixed assets 0 2 0 0 0 0 1
Loss on revaluation of investments 0 0 0 0 0 0 0 0
Profit on forex transactions 13 22 29 35 37 53 40 27
Income from investments 0 0 0 9 11 18 37 33
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 23 26 31 39 47 52 71 101
Total 111 144 198 271 292 382 532 517
Total income 940 1,171 1,555 1,875 2,097 2,328 2,634 2,718
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 493 623 961 1,116 1,184 1,285 1,270 1,190
Interest on RBI /Inter-bank 2 3 6 17 20 19 16 18
Others 16 13 11 13 20 17 24 29
Total 511 639 978 1,146 1,223 1,320 1,310 1,237
Operating expenses
Salaries 114 129 165 177 200 214 256 284
Others 57 86 87 105 120 269 344 229
Depreciation 12 15 18 22 22 32 49 60
Total 183 230 271 304 341 515 648 574
Provisions and contingencies 121 136 114 193 270 315 437 403
Total expenses including provisions 815 1,005 1,363 1,643 1,835 2,150 2,395 2,214
Profit for the year 125 167 192 232 262 177 239 505
Profits inclusive of provisions 246 303 306 425 532 492 675 908
Contingent liabilities
Claims against the banks 13 36 49 45 50 50 39 44
Liability for partly paid investments 10 0 19 0 0 0 0 0
Liability for outstanding forex contracts 1,261 2,100 1,654 2,066 3,832 2665 4485 4,267
Guarantees
- In India 365 564 813 831 994 0 0 1,548
- Outside India 7 13 21 34 23 0 0 62
Acceptances and endorsements 262 259 293 411 443 466 668 1,353
Others 20 14 20 10 23 27 18 46
Total 1,938 2,987 2,870 3,397 5,364 3,208 5,211 7,320
Provisions and contingencies
Provision for NPAs 35 47 46 70 99 129 174 106
Provision for depreciation in the value of inves 2 3 0 8 29 23 42 12
Provision towards income tax 83 85 67 105 135 152 211 267
Others 2 1 9 8 0 0 0
Total 120 136 114 193 270 315 437 403
Financial analysis
Growth in deposits (per cent)
Overall 16 40 35 13 16 14 15 7
Demand 23 -2 14 16 12 8 26 22
Savings 20 20 22 22 15 16 26 32
Term 13 61 42 11 17 15 11 -1
Share of deposits (per cent)
Demand 22 15 13 13 13 12 13 15
Savings 16 14 13 14 14 14 15 19
Term 62 70 74 73 74 74 71 66
Share of deposits (per cent)
Domestic 100 100 100 100 100 100 100 100
Abroad 0 0 0 0 0 0 0 0
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profitability (per cent)
Return on assets 1.7 1.7 1.5 1.5 1.4 0.8 1.0 1.8
Return on equity 34.4 26.7 21.1 21.9 21.0 10.5 10.8 19.6
Gearing (times) 19.4 12.2 14.4 13.6 13.6 10.5 10.1 9.5
Staff costs to operating expenses 62.3 56.1 60.9 58.3 58.6 41.5 39.5 49.6
Non-fund income to total income 11.8 12.3 12.8 14.4 13.9 16.4 20.2 19.0
Operating expenses to total income 19.5 19.6 17.4 16.2 16.3 22.1 24.6 21.1
Operating expenses to deposits 2.7 2.5 2.1 2.1 2.1 2.7 3.0 2.5
Earning per share (Rs) 15.2 13.9 16.0 19.4 21.8 12.4 16.7 35.2
Cost to income ratio 42.7 43.1 46.9 41.7 39.1 51.1 49.0 38.7
Cost to income ratio (w/o profit on invest) 42.9 43.2 47.9 45.3 42.3 59.0 61.3 45.6
Financial management (per cent)
Interest cost n.a. 7.47 8.48 8.12 7.47 6.82 5.93 5.10
Average cost of deposits 7.9 7.8 8.8 8.3 7.7 7.2 6.2 5.3
Average cost of borrowings 6.9 9.5 12.6 12.3 8.8 3.5 3.6 5.4
Yield on carry business n.a. 11.99 11.49 10.99 10.65 9.63 8.97 8.48
Average yield on investments 13.5 14.0 13.1 12.0 11.6 11.0 10.3 10.2
Average yield on advances 14.8 11.7 11.5 11.5 11.4 10.1 8.9 7.6
Spreads n.a. 4.52 3.01 2.87 3.18 2.81 3.04 3.38
Operating expenses to AFD n.a. 2.51 2.18 2.01 1.97 2.51 2.73 2.18
Core fee income to AFD n.a. 1.42 1.36 1.22 1.10 0.99 0.81 0.80
Net Profitability Margin n.a. 3.43 2.20 2.09 2.31 1.29 1.12 1.99
Deposits to borrowings (times) 23.6 46.9 81.9 54.5 34.6 17.6 18.3 25.9
Capital adequacy 11.3 16.9 13.2 12.8 13.3 17.9 18.5 20.1
Provisions as a percentage of profit before 49.2 44.9 37.3 45.3 50.8 64 65 44
provisions
Provisions as a percentage of networth 30.3 16.0 11.7 16.8 20.0 15.4 18.4 14.6
Liquidity (per cent)
Credit-deposit ratio 45 46 50 54 52 58 55 60
Incremental C/D ratio 61 48 61 89 39 98 37 127
Borrowings to total deposits 4 1 2 2 4 8 4 4
Cash-deposit ratio 1 1 1 1 1 1 1 1
Investment-deposit ratio 49 44 44 42 41 43 49 46
Incemental I/D ratio n.a. 32 42 27 39 51 93 1
Reserves as a percentage of net worth 80 86 88 90 91 93 94 95
Growth (per cent)
Advances 23 43 46 24 11 27 9 15
Deposits 16 40 35 13 16 14 15 7
Investments 54 26 33 8 15 17 32 0
Salaries cost 21 13 28 7 13 7 20 11
Commission and fee 20 30 31 4 0 -5 -5 12
Interest income 24 24 32 18 12 8 8 5
Others
Branches (nos) 507 581 617 648 652 659 684 717
Advances per branch (Rs crore) 5.95 7.41 10.19 12.00 13.29 17 18 19
Operating expenses per branch (Rs crore) 0.36 0.40 0.44 0.47 0.52 0.78 0.95 0.80
Employees (nos) 9,379 9,615 10,182 10,587 10,837 10801 10729 10734
Income per employee (Rs crore) 0.10 0.12 0.15 0.18 0.19 0.22 0.25 0.25
Income/employee expenses (times) 8.25 9.09 9.43 10.58 10.48 10.88 10.29 9.56
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 88 88 87 86 86 84 80 81
Forex 1 2 2 2 2 2 2 1
Commission and brokerage 8 8 8 7 6 5 4 5
Share of advances (per cent)
Priority 32 29 30 29 33 28 33 36
Public 14 10 9 21 18 27 17 8
Inter-bank 0 0 1 0 0 0 2 2
Others 55 61 59 50 49 45 48 54
Abroad 0 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 9 13 7 6 7 6 7 8
Cash credit 54 51 46 39 48 53 50 43
Term loans 37 36 47 55 45 41 43 49
Share of advances (per cent)
Secured 76 74 73 74 82 66 82 83
Govt. guarantee 15 11 10 12 4 13 3 4
Unsecured 9 15 17 14 14 21 14 13
Share of investments (per cent)
Government securities 52 51 53 62 67 73 78 81
Other approved securities 10 8 6 5 4 3 2 2
Shares and debentures 1 2 1 1 1 1 1 1
Debentures 21 26 29 25 22 21 17 14
Subsidiary 0 0 0 1 1 1 1 1
Others 16 13 10 5 4 1 2 1
Outside India 0 0 0 0 0 0 0 0
Gross NPAs (per cent) 9.9 7.6 n.a. n.a. n.a. n.a. n.a. n.a.
Net NPAs (per cent) 3.6 2.9 2.0 1.9 2.0 2.31 1.65 1.8
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 20002-03 2003-04
Priority sector 1,209 1,302 1,409 1,705 2,016 2260 3081 4143
Public sector 538 618 677 962 1,313 1732 1248 1570
Banks 0 2 0 7 2 1 28 131
Others 1,777 2,078 1,965 2,457 2,648 3442 4813 5288
Total 3,525 4,001 4,051 5,131 5,978 7436 9171 11132
Advances outside India 134 0 0 0 0 0 0 0
Total 3,659 4,001 4,051 5,131 5,978 7436 9171 11132
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 2,133 2,711 3,824 4,185 4,818 5815 7445 10145
- Other approved securities 291 293 259 237 212 186 162 153
- Shares 183 231 370 30 36 34 36
- Debentures 143 158 200 336 348 288 358 419
- Subsidiaries/JV 0 0 0 0 0 0 0 0
- Others 59 114 70 79 45 48 40 24
Total 2,626 3,459 4,584 5,207 5,453 6,372 8,039 10,778
Total investments 2,626 3,459 4,584 5,207 5,453 6,372 8,039 10,778
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 886 474 758 728 635
Additions n.a. n.a. n.a. 244 256 205 133 257
Reductions n.a. n.a. n.a. 318 309 235 225 230
Closing balance n.a. n.a. n.a. 811 758 718 635 662
Net NPA-Closing balance n.a. n.a. n.a. 452 496 425 280 154
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 600 553 475 515 621 683 790 868
Income on investments 269 372 470 560 611 680 725 828
Interest on balances with RBI 21 19 18 23 19 41 51 31
Others 19 38 56 61 64 50 18 13
Total 909 982 1,019 1,160 1,315 1,454 1,584 1,740
Other income
Commission exchange and brokerage 88 93 111 129 123 118 132 141
Profit on sale of investments 1 14 6 25 30 75 130 269
Loss on sale of investments 0 0 0 0 0 0 0 0
Profit on sale of fixed assets 0 0 0 0 0 1 0 1
Loss on revaluation of investments 0 0 0 0 0 0 0 0
Profit on forex transactions 32 34 25 28 26 25 26 37
Income from investments 0 0 0 5 5 5 5 5
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 3 7 10 7 10 7 7 17
Total 124 149 153 195 194 230 300 470
Total income 1,033 1,130 1,172 1,354 1,509 1,684 1,885 2,210
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 604 659 724 823 859 958 1002 996
Interest on RBI /Inter-bank 18 22 26 25 36 2 2 1
Others 39 33 31 30 25 70 57 60
Total 661 714 781 878 920 1,029 1,062 1,057
Operating expenses
Salaries 167 152 173 221 277 245 269 317
Others 47 58 67 73 69 55 59 68
Depreciation 7 8 0 0 14 17 20 34
Total 221 217 240 294 359 317 348 419
Provisions and contingencies 110 137 107 116 133 200 284 456
Total expenses including provisions 993 1,067 1,129 1,288 1,412 1,412 1,412 1,412
Profit for the year 40 63 43 66 97 97 97 97
Profits inclusive of provisions 151 200 150 182 230 230 230 230
Contingent liabilities
Claims against banks 17 18 24 27 42 47 13 1
Liability for partly paid investments 1 0 0 0 0 0 0 0
Liability for outstanding forex contracts 395 476 798 1,941 2937 4,252 7,279 10,061
Guarantees
- In India 471 395 387 382 380 352 462 677
- Outside India 9 18 20 3 3 9 1 3
Acceptances and endorsements 371 252 288 310 347 314 421 544
Others 150 151 231 214 261 133 316 112
Total 1,413 1,310 1,747 2,878 3,969 5,107 8,493 11,398
Provisions and contingencies
Provision for NPAs 61 138 109 84 94 143 160 262
Provision for depreciation in the value of inves 15 -69 -6 -4 9 4 9 5
Provision towards income tax 34 67 14 38 25 47 101 143
Others 0 33 -62 22 -8 7 14 46
Total 110 137 107 116 133 200 284 456
Financial analysis
Growth in deposits (per cent)
Overall 19 16 16 18 14 16 18 24
Demand 38 32 -4 12 19 -2 -9 35
Savings 7 21 26 17 14 16 25 23
Term 21 11 16 19 13 19 20 23
Share of deposits (per cent)
Demand 11 13 11 10 11 9 7 8
Savings 20 21 23 23 23 23 24 24
Term 68 66 66 67 66 68 69 68
continued...
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 88 87 87 86 87 86 84 79
Forex 3 3 2 2 2 2 1 2
Commission, brokerage 8 8 9 10 8 7 7 6
Share of advances (per cent)
Priority 33 33 35 33 34 30 34 37
Public 15 15 17 19 22 23 14 14
Inter bank 0 0 0 0 0 0 0 1
Others 49 52 49 48 44 46 52 48
Abroad 4 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 7 9 10 8 11 7 9 11
Cash credit 72 71 68 66 65 66 57 51
Term loans 22 21 22 26 24 27 34 38
Share of advances (per cent)
Secured 89 88 86 81 78 67 79 79
Govt. guarantee 8 7 8 11 9 16 8 8
Unsecured 3 5 6 9 14 18 13 13
Share of investments (per cent)
Government securities 81 78 83 80 88 91 93 94
Other approved securities 11 8 6 5 4 3 2 1
Shares 0 5 5 7 1 1 0 0
Debentures 5 5 4 6 6 5 4 4
Subsidiary 0 0 0 0 0 0 0 0
Others 2 3 2 2 1 1 0 0
Net NPAs (per cent) 8.8 12.2 10.8 8.6 7.8 5.7 3.1 1.4
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 771 1,057 1,825 2,806 4,947 44,604 50,068 56,801
Government guarantee 0 6 58 98 449 1,029 1,700 615
Unsecured 27 64 227 753 1,635 1,401 1,511 4,679
Total 798 1,128 2,110 3,657 7,031 47,035 53,279 62,096
Priority sector 219 329 478 497 1,185 1,986 8,938 14,531
Public sector 0 0 4 104 844 4,356 1,897 707
Banks 15 0 0 15 91 179 101 43
Others 564 799 1,628 3,040 4,912 40,451 42,289 45,751
Total 798 1,128 2,110 3,657 7,031 46,973 53,226 61,032
Advances outside India 0 0 0 0 0 62 54 1,064
Total 798 1,128 2,110 3,657 7,031 47,035 53,279 62,096
Investments
Investments outside India 0 0 0 0 8 12 9 361
Investments in India
- Government securities 313 705 1,527 2,815 4,070 22,722 25,549 29,888
- Other approved securities 0 0 0 0 41 70 34 30
- Shares 10 47 138 161 125 1,909 1,642 1,684
- Debentures 69 217 667 1,137 3,070 6,436 5,690 5,549
- Subsidiaries/JV 0 0 0 0 0 607 781 1,104
- Others 42 55 529 304 872 4,134 1,758 4,127
Total 435 1,023 2,861 4,417 8,179 35,879 35,454 42,382
Total investments 435 1,023 2,861 4,417 8,187 35,891 35,462 42,743
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 101 95 409 5013 5027
Additions n.a. n.a. n.a. 68 128 4877 1194 1419
Additions -from Bank of Mathura n.a. n.a. n.a. 0 238 0 0 0
Reductions n.a. n.a. n.a. 75 51 274 1179 3399
Closing balances n.a. n.a. n.a. 95 409 5013 5027 3048
Net NPA-Closing balance n.a. n.a. 60 56 154 2720 3151 2037
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 134 143 226 348 571 772 6,016 6,074
Income on investments 55 81 208 410 556 1,234 2,910 2,432
Interest on balances with RBI 3 32 109 95 109 123 236 211
Others 3 4 0 1 7 24 206 178
Total 195 260 544 853 1,242 2,152 9,368 8,894
Other income
Commission exchange and brokerage 15 25 37 67 140 230 792 1,072
Profit on sale of investments 11 35 12 101 19 306 492 1,221
Profit on sale of fixed assets 0 0 0 0 0 0 -7 0
Profit on revaluation of investments 2 1 0 0 14 -15 0 0
Profit on forex transactions 9 17 34 22 42 37 10 193
Income from investments 0 0 0 0 0 0 109 0
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 6 7 5 4 6 17 570 579
Total 43 85 89 194 220 574 1,968 3,065
Total income 238 345 633 1,047 1,462 2,726 11,336 11,959
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 97 162 372 581 725 1,389 2,480 3,023
Interest on RBI /Inter-bank 5 10 20 24 32 48 183 229
Others 27 15 33 63 80 122 5,281 3,763
Total 129 187 426 667 838 1,559 7,944 7,015
Operating expenses
Salaries 6 12 18 36 52 147 403 546
Others 26 31 47 92 246 423 1,417 1,764
Depreciation 8 14 18 25 36 53 191 261
Total 40 58 83 153 334 623 2,012 2,571
Provisions and contingencies 28 50 61 121 129 287 1,365 735
Total expenses including provisions 198 295 569 941 1,301 2,468 11,321 10,322
Profit for the year 40 50 64 105 161 258 15 1,637
Profits inclusive of provisions 68 101 125 227 290 545 1,380 2,373
Contingent liabilities
Claims against banks 0 1 0 25 55 1,023 2,025 2,502
Liability for partly paid investments 1 0 4 0 34 262 180 124
Liability for outstanding forex contracts 1,047 2,353 3,967 7,355 8,847 15,255 25,103 55,704
Guarantees
in India 186 265 463 756 1,346 9,352 10,635 12,029
outside India 0 0 0 0 0 0 0 0
Liability on account of outstanding derivative 0 0 0 0 0 0 0 0
Acceptances, endorsements 251 287 559 849 1,287 1,739 4,325 6,514
Currency swaps 0 0 0 766 871 2,041 2,901 4,448
Others 11 2 22 29 271 11,817 44,268 121,620
Total 1,496 2,907 5,014 9,780 12,711 41,488 89,438 202,942
Provisions and contingencies
Provision for NPAs 2 14 32 76 64 274 1321 384
Provision for depreciation 5 14 -5 13 -6 -16 309 -10
Provision towards income tax 17 23 34 33 65 121 -426 265
Other provisions 4 0 0 0 7 -93 160 96
Total 28 50 61 121 129 287 1,365 735
Financial analysis
Growth in deposits (per cent)
Overall 85 95 131 62 66 96 50 41
Demand 69 15 59 175 65 65 35 97
Savings 168 109 119 135 253 33 52 121
Term 87 120 144 47 53 126 52 29
Share of deposits (per cent)
Demand 23 14 9 16 16 9 8 11
Savings 4 4 4 5 11 8 8 12
Term 73 82 87 79 73 84 84 77
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Financial parameters
Profitability (per cent)
Return on assets 2.7 2.0 1.2 1.1 1.0 0.4 0.0 1.4
Return on net worth 23.7 22.4 22.2 14.4 13.1 6.5 0.2 20.9
Gearing (times) 8.8 11.3 21.6 9.5 14.0 14.8 13.7 14.0
Staff costs to operating expenses 15.2 21.3 22.0 23.7 15.5 23.6 20.0 21.2
Non-fund income to total income 14.2 8.1 5.8 1.8 2.7 3.0 29.0 18.9
Operating expenses to total income 95.0 67.7 92.8 79.0 151.9 108.4 102.2 83.9
Operating expenses to deposits 3.0 2.2 1.4 1.6 2.0 1.9 4.2 3.8
Earning per share (Rs) 2.7 3.0 3.9 5.4 7.3 2.7 0.2 17.0
Cost to income ratio 37.4 36.4 39.8 40.3 53.5 53.3 59.3 52.0
Cost to income ratio (w/o profit on invest) 41.9 46.9 42.4 55.0 55.2 72.2 69.4 69.1
Financial management (per cent)
Interest cost n.a. 8.4 9.1 7.9 5.9 3.1 9.6 7.6
Average cost of deposits 9.4 8.1 8.5 7.3 5.5 5.7 6.2 5.2
Average cost of borrowings 21.4 17.3 27.4 25.0 14.7 0.7 13.1 12.3
Yield on carry business n.a. 11.6 12.3 10.1 8.6 4.0 10.4 9.0
Average yield on investments 15.7 11.1 10.7 11.3 8.8 5.6 8.2 6.2
Average yield on advances 18.5 14.9 14.0 12.1 10.7 2.9 12.0 10.5
Spreads n.a. 3.2 3.1 2.2 2.7 0.9 0.8 1.4
Operating expenses to AFD n.a. 2.49 1.72 1.69 2.21 1.09 2.11 2.47
Core fee income to AFD n.a. 1.97 1.54 1.01 1.22 0.48 1.14 1.49
Net Profitability Margin n.a. 2.7 3.0 1.5 1.7 0.3 -0.2 0.43
Deposits to borrowings (times) 6.9 13.9 22.2 23.1 17.2 1.0 1.0 1.8
Capital adequacy 13.0 13.5 11.1 19.6 11.6 11.4 11.1 10.4
Provisions as a percentage of profit before 40.7 50.0 49.0 53.5 44.5 52.6 98.9 31.0
provisions
Provisions as a percentage of networth 15.2 18.8 19.9 10.6 9.8 4.3 18.7 8.8
Liquidity (per cent)
Credit-deposit ratio 59 43 35 37 43 147 111 91
Incremental C/D ratio 24 26 29 41 52 255 39 44
Borrowings to total deposits 7 7 3 5 6 153 71 45
Cash-deposit ratio 0 0 0 0 1 1 1 1
Investment-deposit ratio 32 39 47 45 50 112 74 63
Incemental I/D ratio 46 53 41 58 176 -3 37
Reserves as a percentage of net worth 18 38 46 83 83 85 87 88
Growth (per cent)
Advances 23 41 87 73 92 569 13 17
Deposits 85 95 131 62 66 96 50 41
Investments 66 135 180 54 85 338 -1 21
Salaries cost 38 99 48 100 42 185 174 35
Commission and fee 58 69 49 79 108 65 245 35
Interest income 68 33 110 57 46 73 335 -5
Others
Branches (nos) 22 33 55 81 389 358 446 413
Advances per branch (Rs crore) 36.27 34.18 38.37 45.15 18.08 131.38 119.46 150.35
Operating expenses per branch (Rs crore) 1.84 1.75 1.50 1.89 0.86 1.74 4.51 6.23
Employees (nos) 445 603 889 1,344 4,491 7,726 10,617 13,609
Income per employee (Rs crore) 0.53 0.57 0.71 0.78 0.33 0.35 1.07 0.88
Income/employee expenses (times) 38.52 28.12 34.83 28.78 28.28 18.52 28.13 21.90
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 82 75 86 81 85 79 83 74
Forex 4 5 5 2 3 1 1 2
Commission and brokerage 6 7 6 6 10 8 7 9
Share of advances (per cent)
Priority 27 29 23 14 17 4 17 23
Public 0 0 0 3 12 9 4 1
Inter bank 2 0 0 0 1 0 0 0
Others 71 71 77 83 70 86 79 74
Abroad 0 0 0 0 0 0 0 2
Share of advances (per cent)
Bills 10 12 22 19 15 4 1 2
Cash credit 79 75 66 70 71 5 6 10
Term loans 11 13 13 10 14 91 93 88
Share of advances (per cent)
Secured 97 94 87 77 70 95 94 91
Government guaranteed 0 1 3 3 6 2 3 1
Unsecured 3 6 11 21 23 3 3 8
Share of investments (per cent)
Government securities 72 69 53 64 50 63 72 70
Other approved securities 0 0 0 0 1 0 0 0
Shares 2 5 5 4 2 5 5 4
Debentures 16 21 23 26 38 18 16 13
Subsidiary 0 0 0 0 0 2 2 3
Others 10 5 18 7 11 12 5 10
Outside India 0 0 0 0 0 0 0 1
Net NPAs (per cent) 1.7 1.1 1.8 1.1 1.4 5.5 5.2 2.2
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 359 535 753 2,958 3,944 6186 9991 15277
Government guarantee 87 78 122 199 10 51 94 117
Unsecured 129 229 525 205 683 577 1670 2351
Total 575 842 1,401 3,362 4,637 6,814 11,755 17,745
Priority sector 130 126 199 586 668 732 1,422 2,498
Public sector 73 7 26 12 505 911 852 335
Banks 0 121 108 169 447 188 22 11
Others 372 588 1,067 2,595 3,017 4,982 9,459 14,900
Total 575 842 1,401 3,362 4,637 6,814 11,755 17,745
Advances outside India 0 0 0 0 0 0 0 0
Total 575 842 1,401 3,362 4,637 6,814 11,755 17,745
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 365 573 868 3,217 3,413 5,295 6,356 11,531
- Other approved securities 9 0 0 12 12 12 12 7
- Shares 0 22 147 257 197 145 108 107
- Debentures 310 482 859 1,866 2,578 4,268 4,167 4,045
- Subsidiaries/JV 0 0 0 0 1 1 2 2
- Others 46 45 31 396 944 2,283 2,743 3,566
Total 730 1,121 1,904 5,748 7,145 12,004 13,388 19,257
Total investments 730 1,121 1,904 5,748 7,145 12,004 13,388 19,257
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 39 122 147 223 265
Additions n.a. n.a. n.a. 48 40 91 106 119
Additions due to amalgmation n.a. n.a. n.a. 62 0 0 0 0
Reductions n.a. n.a. n.a. 27 15 15 64 37
Closing balance n.a. n.a. n.a. 122 147 223 265 336
Net NPA-Closing balance n.a. n.a. n.a. 37 21 34 43 28
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 92 118 143 267 493 624 777 1,109
Income on investments 62 104 182 367 636 864 1,113 1,322
Interest on balances with RBI 0 19 50 46 131 214 120 111
Others 8 1 0 0 0 1 3 7
Total 162 241 376 680 1,259 1,703 2,014 2,549
Other income
Commission exchange and brokerage 21 30 41 83 134 164 236 320
Profit on sale of investments 5 21 15 21 12 104 132 38
Loss on sale of investments 0 0 0 0 -1 0 0 0
Profit on sale of fixed assets 0 0 0 0 0 -1 1 0
Loss on revaluation of investments 0 0 0 0 0 0 -2 -11
Profit on forex transactions 6 11 12 21 40 39 45 74
Income from investments 0 0 0 0 0 0 0 0
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 0 0 0 0 1 27 53 59
Total 32 62 68 125 186 333 466 480
Total income 193 303 444 805 1,445 2,036 2,479 3,029
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 71 104 176 287 639 916 1,063 1,038
Interest on RBI /inter-bank 16 32 40 65 95 133 103 144
Others 0 2 13 23 20 25 25 29
Total 87 138 229 374 754 1,074 1,192 1,211
Operating expenses
Salaries 10 15 22 49 78 109 152 204
Others 26 37 52 96 178 240 334 480
Depreciation 6 11 15 26 54 69 106 126
Total 42 63 89 171 310 418 592 810
Provisions and contingencies 23 39 44 140 172 247 323 498
Total expenses including provisions 153 240 362 685 1,235 1,739 2,106 2,519
Profit for the year 41 63 82 120 210 297 373 510
Profits inclusive of provisions 64 103 126 260 382 545 695 1,008
Contingent liabilities
Claims against banks 0 0 4 2 2 2 51 99
Liability for partly paid investments 0 0 0 0 0 0 0 0
Liability for outstanding forex contracts 3,736 3,489 5,471 7,858 8,677 11,985 19,773 39,444
Guarantees
- In India 507 1,024 1,056 1,593 1,741 1,695 1,425 1,642
outside Inida 0 0 0 0 0 0 0 0
Liability on account of outstanding derivative 182 423 445 980 2,952 5,303 18,605 38,940
Acceptances, endorsements 686 837 1,066 956 1,172 944 1,172 1,892
Currency Swaps
Others 190 156 380 245 468 399 535 100
Total 5,302 5,928 8,422 11,633 15,011 20,328 41,560 82,117
Provisions and contingencies
Provision for NPAs 4 7 8 54 53 86 88 178
Provision for depreciation in the value of inves 2 1 1 6 13 19 50 93
Provision towards income tax 18 31 35 75 105 128 184 210
Others 0 0 0 5 0 14 0 17
Total 23 39 44 139 172 247 323 498
Financial analysis
Growth in deposits (per cent)
Overall 87 71 33 189 38 51 27 36
Demand 80 65 46 183 3 48 17 78
Savings 297 158 95 225 69 55 58 67
Term 82 67 18 185 53 52 22 8
Share of deposits (per cent)
Demand 32 31 34 33 24 24 22 29
Savings 5 8 12 13 16 17 21 26
Term 63 61 54 54 59 59 57 45
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Financial parameters
Profitability (per cent)
Return on assets 2.9 2.7 2.3 1.5 1.5 1.5 1.4 1.4
Return on equity 17.4 23.9 26.4 21.7 24.9 20.7 17.7 20.6
Gearing (times) 6.4 8.9 11.8 14.2 15.9 11.2 12.5 14.7
Staff costs to operating expenses 24.2 23.7 24.8 28.3 25.2 26.1 25.7 25.2
Non-fund income to total income 16.3 20.5 15.3 15.6 12.8 16.4 18.8 15.9
Operating expenses to total income 21.8 20.7 20.0 21.3 21.4 20.5 23.9 26.7
Operating expenses to deposits 3.3 2.9 3.0 2.0 2.7 2.4 2.6 2.7
Earning per share (Rs) 2.0 3.2 4.1 4.7 8.3 10.6 13.2 17.9
Cost to income ratio 39.7 37.9 41.3 39.8 44.8 43.4 46.0 44.5
Cost to income ratio (w/o profit on invest) 41.5 43.5 44.4 41.8 45.5 48.7 51.3 45.5
Financial management (per cent)
Interest cost n.a. 7.22 7.75 5.41 6.38 6.36 5.22 3.93
Average cost of deposits 7.2 6.0 6.9 5.1 6.4 6.2 5.3 3.9
Average cost of borrowings 13.1 26.5 21.2 9.3 8.6 10.4 6.6 7.9
Yield on carry business n.a. 12.16 12.32 9.89 10.80 10.29 8.89 8.16
Average yield on investments 11.9 11.2 12.0 9.6 9.9 9.0 8.8 8.1
Average yield on advances 19.5 16.6 12.8 11.2 12.3 10.9 8.4 7.5
Spreads n.a. 4.95 4.57 4.48 4.42 3.93 3.67 4.24
Operating expenses to AFD n.a. 3.08 2.80 2.35 2.46 2.28 2.34 2.35
Core fee income to AFD n.a. 2.02 1.67 1.43 1.39 1.18 1.22 1.23
Net Profitability Margin n.a. 3.89 3.44 3.56 3.34 2.83 2.54 3.12
Deposits to borrowings (times) 8.0 13.7 10.2 6.0 7.5 9.6 10.2 12.0
Capital adequacy 13.5 13.9 11.9 12.2 11.9 13.9 11.1 11.7
Provisions as a percentage of profit before 36.7 38.4 34.7 53.8 44.9 45.4 46.4 49.4
provisions
Provisions as a percentage of networth 9.6 13.8 12.9 18.2 18.6 12.7 14.3 18.5
Liquidity (per cent)
Credit-deposit ratio 45 38 48 40 40 39 53 58
Incremental C/D ratio 35 29 77 36 39 36 105 75
Borrowings to total deposits 16 2 15 19 12 10 9 8
Cash-deposit ratio 0 1 1 0 0 1 1 1
Investment-deposit ratio 57 51 65 68 61 68 60 63
Incemental I/D ratio n.a. 43 108 70 43 81 29 73
Reserves as a percentage of net worth 18 30 41 66 72 86 87 89
Growth (per cent)
Advances 56 46 66 140 38 47 73 51
Deposits 87 71 33 189 38 51 27 36
Investments 132 54 70 202 24 68 12 44
Salaries cost 118 46 49 120 61 40 39 34
Commission and fee 188 45 34 103 61 23 44 36
Interest income 41 49 56 81 85 35 18 27
Others
Branches (nos) 15 33 57 111 131 171 231 312
Advances per branch (Rs crore) 38.35 25.51 24.57 30.29 35.39 39.85 50.89 56.87
Operating expenses per branch (Rs crore) 2.81 1.90 1.56 1.54 2.36 2.44 2.56 2.60
Employees (nos) 514 660 984 1,992 2,751 3742 4,791 5,673
Income per employee (Rs crore) 0.38 0.46 0.45 0.40 0.53 0.54 0.52 0.53
Income/employee expenses (times) 18.97 20.39 20.13 16.59 18.53 18.64 16.32 14.84
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 84 80 85 84 87 84 81 84
Forex 3 4 3 3 3 2 2 2
Commission, brokerage 11 10 9 10 9 8 10 11
Share of advances (per cent)
Priority 23 15 14 17 14 11 12 14
Public 13 1 2 0 11 13 7 2
Inter bank 0 14 8 5 10 3 0 0
Others 65 70 76 77 65 73 80 84
Abroad 0 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 8 33 21 17 15 19 22 18
Cash credit 39 28 36 44 30 26 22 21
Term loans 53 39 43 39 55 55 56 61
Share of advances (per cent)
Secured 62 64 54 88 85 91 85 86
Govt. guarantee 15 9 9 6 0 1 1 1
Unsecured 22 27 38 6 15 8 14 13
Share of investments (per cent)
Government securities 50 51 46 56 48 44 47 60
Other approved securities 1 0 0 0 0 0 0 0
Shares 0 2 8 4 3 1 1 1
Debentures 42 43 45 32 36 36 31 21
Subsidiary 0 0 0 0 0 0 0 0
Others 6 4 2 7 13 19 20 19
Net NPAs (per cent) 0.0 1.4 1.3 0.8 0.3 0.5 0.4 0.2
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 1,682 2,137 2,251 3,196 3,321 4438 3711 6552
Government guarantee 25 141 219 180 171 504 1047 371
Unsecured 221 172 192 302 744 632 589 889
Total 1,928 2,451 2,662 3,677 4,237 5574 5348 7812
Priority sector 488 584 654 742 705 948 1000 2515
Public sector 20 25 27 164 640 930 764 869
Banks 25 0 68 167 463 463 932 437
Others 1,395 1,842 1,914 2,605 2,429 3233 2652 3991
Total 1,928 2,451 2,662 3,677 4,237 5574 5348 7812
Advances outside India 0 0 0 0 0 0 0 0
Total 1,928 2,451 2,662 3,677 4,237 5574 5348 7812
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 725 1,264 1,497 2,088 1,827 1954 2020 3770
- Other approved securities 17 26 26 26 26 26 26 23
- Shares 9 17 22 8 3 9 11
- Debentures 272 382 533 569 605 482 415 164
- Subsidiaries/JV 0 0 0 0 0 0 1 3
- Others 41 14 21 26 29 19 65 0
Total 1,055 1,696 2,095 2,732 2,494 2485 2535 3972
Total investments 1,055 1,696 2,095 2,732 2,494 2485 2535 3972
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 224 265 262 417 266
Additions n.a. n.a. n.a. 132 145 366 209 498
Reductions n.a. n.a. n.a. 91 148 212 360 505
Closing balances n.a. n.a. n.a. 265 262 417 266 259
Net NPA-Closing balance n.a. n.a. n.a. 220 223 367 227 212
Profit and loss statement
Interest earned
Interest/Discount on advances/ 302 343 352 325 372 428 467 697
Income on investments 101 191 216 284 327 255 244 260
Interest on balances with RBI 7 14 26 29 30 27 31 28
Others 0 2 0 0 0 0 0 0
Total 409 551 594 637 729 710 743 986
Other income
Commission exchange and brokerage 31 36 35 33 33 26 23 21
Profit on sale of investments 11 85 3 66 25 121 193 227
Profit on sale of fixed assets 0 0 0 0 0 0 0 -6
Loss on revaluation of investments 0 0 0 8 0 0 0
Profit on forex transactions 11 10 15 10 13 14 14 11
Income from investments 0 0 0 0 0 0 0 0
Miscellaneous income 28 24 29 36 38 24 28 92
Total 82 155 83 144 117 184 258 345
Total income 491 706 676 782 845 894 1001 1331
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interests expended
Interest on deposits 230 370 430 446 508 470 511 500
Interest on RBI /Inter-bank 11 16 15 29 26 29 11 93
Others 69 43 34 25 36 48 37 76
Total 310 429 479 501 569 547 558 669
Operating expenses
Salaries 4 7 11 12 13 20 28 50
Others 39 52 55 57 62 54 64 130
Depreciation 13 17 21 22 28 21 25 37
Total 56 76 87 90 103 95 118 217
Provisions and contingencies 52 110 74 135 132 202 234 183
Total expenses including provisions 418 615 640 726 805 844 911 1069
Profit for the year 73 91 37 56 41 51 90 262
Profits inclusive of provisions 125 201 110 190 173 252 324 445
Provisions and contingencies
Provisions for non-performing assets 7 9 25 92 111 162 230 161
Provision towards Income/Interest tax 30 35 10 6 15 27 5 9
Net Provision for depreciation on investments 14 23 -2 21 -2 8 0 -3
Others 0 42 41 16 8 4 0 16
Total 52 110 74 135 132 202 234 183
Financial analysis
Share of deposits (per cent)
Demand 7 8 11 13 9 11 10 8
Savings 1 1 2 2 2 2 3 4
Term 92 91 87 85 89 87 88 89
Financial parameters
Profitability (per cent)
Return on assets 2.7 2.1 0.7 0.8 0.5 0.5 0.9 2.1
Return on equity 28.7 23.0 7.1 10.5 7.5 9.2 15.5 37.4
Gearing (times) 11.7 8.8 10.6 14.0 14.9 17.2 15.4 17.8
Staff costs to operating expenses 7.5 9.9 12.9 13.3 13.0 21.4 24.0 23.2
Non-fund income to total income 16.7 21.9 12.2 18.5 13.8 20.6 25.8 25.9
Operating expenses to total income 11.4 10.7 12.9 11.5 12.2 10.6 11.8 16.3
Operating expenses to deposits 1.8 1.8 1.7 1.4 1.4 1.1 1.4 1.9
Earning per share (Rs) 6.1 5.8 2.3 3.5 2.5 3.2 4.1 9.0
Cost to income ratio 31.0 27.4 44.1 32.1 37.4 27.3 26.7 32.8
Cost to income ratio (w/o profit on invest) 33.0 39.5 44.8 42.0 41.0 41.8 47.3 49.9
Financial management (per cent)
Interest cost n.a. 11.3 9.7 7.9 7.7 6.4 6.1 5.9
Average cost of deposits 10.2 10.1 9.2 7.7 7.4 6.0 6.0 5.1
Average cost of borrowings 71.9 89.3 21.0 11.4 12.8 12.2 8.7 13.3
Yield on carry business n.a. 13.7 11.4 9.7 9.4 8.1 8.0 8.6
Average yield on investments 14.3 13.9 11.4 11.8 12.5 10.2 9.7 8.0
Average yield on advances 19.8 15.7 13.8 10.2 9.4 8.7 8.6 10.6
Spreads n.a. 2.4 1.7 1.8 1.7 1.6 1.9 2.7
Operating expenses to AFD n.a. 1.9 1.7 1.4 1.3 1.1 1.3 1.9
Core fee income to AFD n.a. 1.4 1.3 0.9 0.8 0.6 0.6 0.7
Net Profitability Margin n.a. 2.0 1.3 1.4 1.3 1.2 1.2 1.4
Deposits to borrowings (times) 45.2 68.3 12.4 11.9 17.4 9.8 36.3 4.8
Capital adequacy 12.9 17.9 15.2 13.2 15.0 12.51 12.13 12.75
Provisions as a percentage of profit before 41.3 54.7 66.7 70.8 76.5 79.9 72.2 41.1
provisions
Provisions as a percentage of networth 18.5 21.5 13.9 25.3 24.3 35.9 38.9 22.8
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Liquidity (per cent)
Credit-deposit ratio 62 57 53 56 59 66 62 70
Borrowings to total deposits 2 1 8 8 6 10 3 21
Cash-deposit ratio 0.07 0.09 0.15 0.15 0.14 0.23 0.24 0.21
Investment-deposit ratio 34 40 42 42 35 30 29 35
Reserves as a percentage of net worth 57 69 70 70 71 72 64 64
Growth (per cent)
Advances n.a. 27 9 38 15 32 -4 46
Deposits n.a. 38 17 30 10 17 2 30
Investments n.a. 61 24 30 -9 0 2 57
Commission and fee n.a. 13 -1 -7 1 -20 -11 -10
Interest income n.a. 35 8 7 14 -3 5 33
Others
Branches (nos) 18 21 26 27 32 40 53 61
Advances per branch (Rs crore) 107.09 116.70 102.39 136.19 132.40 139.36 100.90 128.07
Operating expenses per branch (Rs crore) 3.12 3.61 3.35 3.34 3.22 2.37 2.22 3.56
Employees (nos) 251 351 508 513 581 738 941 n.a.
Income per employee (Rs crore) 1.96 2.01 1.33 1.52 1.45 1.21 1.06 n.a.
Income/employee expenses (times) 116.11 94.48 60.02 65.31 63.12 44.08 35.40 26.43
Total income (per cent)
Interest 83 78 88 82 86 79 74 74
Forex 2 1 2 1 2 2 1 1
Securities transaction 2 12 0 8 3 14 19 17
Commission and brokerage 6 5 5 4 4 3 2 2
Share of advances (per cent)
Priority 25 24 25 20 17 17 19 32
Public 1 1 1 4 15 17 14 11
Inter bank 1 0 3 5 11 8 17 6
Others 72 75 72 71 57 58 50 51
Abroad 0 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 5 13 17 15 21 24 19 8
Cash credit 86 74 65 64 58 59 57 41
Term loans 9 13 18 21 21 16 24 51
Share of investments (per cent)
Government securities 69 75 71 76 73 79 80 95
Other approved securities 2 2 1 1 1 1 1 1
Shares 0 1 1 1 0 0 0 0
Debentures 26 23 25 21 24 19 16 4
Subsidiary 0 0 0 0 0 0 0 0
Others 4 1 1 1 1 1 3 0
Outside India 0 0 0 0 0 0 0 0
Net NPAs (per cent) 2.1 4.0 7.2 6.0 5.3 6.6 4.3 2.7
n.a.: Not available
Source: CRIS INFAC
Continued...
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 251 303 409 444 634 579 480 382
Interest on RBI /Inter bank 36 14 15 26 17 15 1 1
Others 3 6 15 38 46 42 36 53
Total 290 323 438 507 697 636 517 435
Operating expenses
Salaries 6 9 13 18 30 36 42 37
Others 28 35 44 64 88 83 90 87
Depreciation 20 27 38 42 46 51 45 35
Total 53 71 95 124 164 170 177 159
Provisions and contingencies 46 47 34 139 120 108 309 734
Total expenses including provisions 390 441 567 770 982 913 1,004 1,328
Profit for the year 57 80 71 109 80 36 -273 -812
Profits inclusive of provisions 104 127 105 248 200 144 36 -79
Provisions and contingencies
Provison for NPAs n.a. 20 8 93 81 159 118 440
Depreciation in values of investments n.a. 6 5 0 27 25 81 164
Provision for taxation n.a. 22 15 40 11 -75 0 25
Other Provisions n.a. 0 5 6 2 -1 111 104
Total n.a. 47 34 139 120 108 309 734
Financial analysis
Growth in deposits (per cent)
Overall 72 44 25 51 25 -17 7 -8
Demand 17 23 78 123 -26 5 15 29
Savings 95 108 161 138 38 18 14 31
Term 79 45 19 41 32 -21 6 -16
Share of deposits (per cent)
Demand 8 7 9 14 8 10 11 15
Savings 1 1 3 5 5 7 8 11
Term 91 92 88 82 87 82 81 74
Financial parameters (per cent)
Profitability (per cent)
Return of assets 2.4 2.5 1.6 1.7 0.9 0.4 -3.6 -10.9
Return on equity 35.3 37.7 26.6 26.5 14.3 7.4 -82.4 -303.8
Gearing (times) 13.4 14.6 16.9 13.3 15.1 17.5 27.7 25.9
Staff costs to operating expenses 18.5 20.1 23.1 22.1 25.8 30.1 31.7 30.1
Non-fund income to total income 20.2 24.4 22.9 26.5 15.5 24.1 26.2 31.3
Operating expenses to total income 7.6 8.5 8.9 9.3 11.1 12.5 18.1 24.0
Operating expenses to deposits 1.5 1.3 1.4 1.3 1.5 1.8 1.9 1.9
Earning per share (Rs) 5.5 7.7 6.8 9.0 6.6 3.0 -22.5 -66.9
Cost to income ratio 33.9 35.9 47.5 33.3 45.0 54.1 82.9 198.4
Cost to income ratio (w/o profit on invest) 36.1 45.1 57.8 39.7 48.6 82.9 160.8 686.1
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Financial management (per cent)
Interest cost 11.2 11.0 9.0 9.2 8.5 7.6 6.4
Average cost of deposits 13.9 10.9 11.1 8.6 9.1 8.2 7.2 5.7
Average cost of borrowings 10.1 31.5 11.3 14.4 12.7 17.2 82.0 303.4
Yield on carry business 13.7 12.3 11.3 11.6 9.5 8.2 5.9
Average yield on investments 13.5 12.4 11.5 10.1 11.1 9.2 7.7 4.1
Average yield on advances 20.1 16.7 15.1 14.3 13.4 11.1 10.2 8.8
Spreads 2.4 1.3 2.3 2.4 1.0 0.6 -0.5
Operating expenses to AFD 2.5 2.4 2.1 2.1 2.2 2.7 2.6
Core fee income to AFD 2.6 1.9 2.4 1.3 1.0 1.1 1.3
Net Profitability Margin 2.5 0.8 2.6 1.6 -0.2 -1.0 -1.9
Deposits to borrowings (times) 4.7 43.8 14.2 11.7 14.0 21.4 147.4 376.8
Capital adequacy 10.2 10.3 12.0 13.7 12.7 11.21 0 0
Provisions as a percentage of profit before 44.7 36.9 32.2 56.2 60.1 74.8 848.4 -931.0
provisions
Provisions as a percentage of networth 25.3 19.4 11.6 26.4 20.5 27.3 115.6 274.5
Liquidity (per cent)
Credit-deposit ratio 64 53 52 52 53 47 47 35
Incremental C/D ratio 9 29 45 52 58 83 51 197
Borrowings to total deposits 4 1 12 6 8 1 0 0
Cash-deposit ratio 0.19 0.16 0.18 0.15 0.28 0.75 1.28 1.34
Investment-deposit ratio 29 37 48 47 50 45 36 33
Incremental I/D ratio 33 55 92 46 61 75 -84 73
Reserves as a percentage of net worth 43 57 64 77 79 69 55 55
Growth (per cent)
Advances 6 20 21 52 28 -26 8 -31
Deposits 72 44 25 51 25 -17 7 -8
Investments 90 84 61 49 32 -25 -14 -15
Commission and fee 12 -12 -21 16 16 8 -6 0
Interest income 109 10 25 32 39 -20 -25 -34
Others
Branches (nos) 22 40 63 74 79 84 87
Advances per branch (Rs crore) 66.48 43.90 33.63 43.39 51.89 36.10 37.66 #DIV/0!
Operating expenses per branch (Rs crore) 2.43 1.78 1.50 1.67 2.08 2.02 2.04 #DIV/0!
Employees (nos) 429 532 748 939 1,173 1,147 1,314
Income per employee (Rs crore) 1.04 0.98 0.85 0.94 0.90 0.83 0.56 #DIV/0!
Income/employee expenses (times) 71.40 58.68 48.45 48.51 34.87 26.64 17.39 13.84
Total income (per cent)
Interest 80 76 77 74 85 76 74 69
Forex 4 4 3 2 2 1 2 4
Commission, brokerage 10 8 5 4 4 5 6 8
Share of advances (per cent)
Priority 31 32 24 22 19 22 26 28
Public 1 2 0 0 1 0 0 0
Inter bank 0 0 0 0 1 0 0 0
Others 68 67 76 78 79 78 73 72
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Share of advances (per cent)
Bills 32 24 24 19 16 16 13 13
Cash credit 56 52 50 57 52 46 33 31
Term loans 12 24 26 25 32 39 54 56
Share of advances (per cent)
Secured 82 83 89 96 84 87 84 90
Government guarantee 13 13 8 3 0 0 3 1
Unsecured 5 4 3 1 15 13 13 9
Share of investments (per cent)
Government securities 94 66 55 59 59 65 75 73
Other approved securities 1 0 0 0 0 0 0 0
Shares and debentures 5 32 44 39 40 34 24 27
Subsidiary
Others 0 0 1 1 2 0 0 0
Gross NPAs (per cent) 3.7 2.1 n.a n.a n.a n.a n.a n.a
Net NPAs (per cent) 2.4 1.4 2.2 0.9 3.8 9.2 19.8 28.0
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 2,317 2,474 2,857 3,286 3,791 4,168 4,988 6007
Government guarantee 295 1,114 915 622 694 709 732 837
Unsecured 387 333 456 128 369 312 498 857
Total 2,999 3,921 4,228 4,036 4,854 5,189 6,218 7,701
Priority sector 697 943 1,228 1430 1,565 1,657 1,952 2412
Public sector 57 95 175 160 146 303 226 220
Banks 287 100 0 0 1 5 0 0
Others 1,959 2,783 2,825 2,446 3,142 3,224 4,040 5068
Total 2,999 3,921 4,228 4,036 4,854 5,189 6,218 7,701
Advances outside India 0 0 0 0 0 0 0 0
Total 2,999 3,921 4,228 4,036 4,854 5,189 6,218 7,701
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 986 1,535 1,732 1,776 1,883 2,625 3,456 4455
- Other approved securities 75 78 75 66 61 55 51 31
- Shares 125 140 126 112 82 83 88
- Debentures 362 602 626 662 977 991 926 851
- Subsidiaries/JV 15 15 15 15 1 1 1 1
- Others 18 12 15 21 2 2 35 82
Total 1,456 2,366 2,602 2,666 3,035 3,756 4,552 5,507
Total investments 1,456 2,366 2,602 2,666 3,035 3,756 4,552 5,507
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 479 490 642 638 528
Additions n.a. n.a. n.a. 153 314 191 117 218
Reductions n.a. n.a. n.a. 142 163 195 227 145
Closing balance n.a. n.a. n.a. 490 642 638 528 601
Net NPA-Closing balance n.a. n.a. n.a. 345 489 446 308 223
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 385 428 505 529 561 636 660 714
Income on investments 151 239 324 318 336 385 423 437
Interest on balances with RBI 46 31 27 21 13 20 28 30
Others 7 4 3 13 9 1 1 11
Total 588 702 859 882 919 1,042 1,111 1,192
Other income
Commission exchange and brokerage 22 27 38 48 45 45 50 59
Profit on sale of investments 6 33 28 34 20 131 144 174
Loss on sale of investments 0 0 0 0 0 0 0 0
Profit on sale of fixed assets 0 -1 0 0 0 0 0 0
Loss on revaluation of investments 0 0 0 0 2 -4 -8 -1
Profit on forex transactions 13 11 15 15 13 13 17 19
Income from investments 3 5 10 7 16 7 6 4
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 28 17 22 28 29 29 26 42
Total 72 93 113 132 125 220 234 298
Total income 659 794 972 1,014 1,044 1,263 1,346 1,490
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 456 536 742 629 613 705 729 723
Interest on RBI/inter bank 4 11 6 14 20 11 4 2
Others 13 17 24 59 48 51 39 46
Total 472 564 772 701 682 766 772 770
Operating expenses
Salaries 67 79 93 118 111 121 139 178
Others 26 40 39 42 46 52 63 81
Depreciation 19 19 20 18 18 18 19 24
Total 113 138 151 177 175 191 222 283
Provisions and contingencies 28 42 47 89 126 223 246 300
Total expenses including provisions 613 744 970 968 983 1,181 1,241 1,354
Profit for the year 46 50 3 46 61 82 105 136
Profits inclusive of provisions 74 93 49 136 187 305 351 437
Contingent liabilities
Claims against banks 7 12 66 53 105 67 132 77
Liability for partly paid investments 0 0 0 0 0 0 0 0
Liability for outstanding forex contracts 1494 2553 890 1,056 2,871 2650 3,906 4199
Guarantees 0
- In India 152 154 184 226 270 286 377 400
- Outside India 8 5 0 0 5 0 0 0
Liability on account of outstanding derivative 0 0 0 0 0 0 0 0
Acceptances and endorsements 128 133 189 211 229 304 349 534
Currency Swaps
Others 19 27 34 41 33 24 17 9
Total 1,808 2,883 1,364 1,588 3,512 3,332 4,782 5,220
Provisions and contingencies
Provison for NPAs 16 38 39 72 102 154 160 208
Depreciation in values of investments 2 2 -23 0 0 20 9 5
Provision for taxation 2 3 0 8 23 44 71 75
Other Provisions 9 0 31 9 1 5 6 13
Total 28 42 47 89 126 223 246 300
Financial analysis
Growth in deposits (per cent)
Overall 25 40 6 -5 19 16 23 23
Demand -8 23 32 1 50 3 -13 19
Savings 13 14 28 18 15 17 29 40
Term 30 45 1 -9 17 17 26 20
Share of deposits (per cent)
Demand 6 5 6 7 9 8 5 5
Savings 13 10 12 15 15 15 16 18
Term 82 85 81 78 77 77 79 77
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Total income (per cent)
Interest 89 88 88 87 88 83 83 80
Forex 2 1 2 2 1 1 1 1
Commission, brokerage 3 3 4 5 4 4 4 4
Share of advances (per cent)
Priority 23 24 29 35 32 32 31 31
Public 2 2 4 4 3 6 4 3
Inter bank 10 3 0 0 0 0 0 0
Others 65 71 67 61 65 62 65 66
Abroad 0 0 0 0 0 0 0 0
Share of advances (per cent)
Bills 32 36 31 17 18 17 15 15
Cash credit 49 44 46 53 51 51 46 46
Term loans 20 20 24 30 32 33 39 40
Share of advances (per cent)
Secured 77 63 68 81 78 80 80 78
Government guarantee 10 28 22 15 14 14 12 11
Unsecured 13 8 11 3 8 6 8 11
Share of investments (per cent)
Government securities 68 65 67 67 62 70 76 81
Other approved securities 5 3 3 2 2 1 1 1
Shares 0 5 5 5 4 2 2 2
Debentures 25 25 24 25 32 26 20 15
Subsidiary 1 1 1 1 0 0 0 0
Others 1 0 1 1 0 0 1 1
Net NPAs (per cent) 4.9 5.3 7.5 8.6 10.1 8.6 5.0 2.9
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Priority sector 551 490 532 506 517 560 496 782
Public sector 139 182 192 203 276 293 252 209
Banks 3 1 2 19 0 0 0 1
Others 805 808 762 1,000 1,073 1102 1474 1440
Total 1,498 1,480 1,487 1,728 1,867 1956 2,221 2,432
Investments in India
Government securities 606 629 708 806 846 1177 1885 3614
Other approved securities 240 237 230 223 216 210 203 166
Shares 8 4 5 10 10 13 33
Debentures 166 112 122 163 282 336 370 327
Subsidiaries/JV 8 3 4 4 4 4 0 0
Others 91 100 21 44 210 146 172 213
Total 1,110 1,089 1,090 1,245 1,569 1,884 2,643 4,353
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 360 363 357 333 266
Additions n.a. n.a. n.a. 55 50 85 40 70
Reductions n.a. n.a. n.a. 52 56 108 107 99
Closing balance n.a. n.a. n.a. 363 357 333 266 237
Net NPA-Closing balance n.a. n.a. n.a. 170 n.a. 173 151 73
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 217 198 182 204 220 220 212 197
Income on investments 125 136 131 150 178 190 232 281
Interest on balances with RBI 19 16 25 26 33 39 22 24
Others 4 0 12 19 12 4 7 0
Total 365 350 350 400 442 453 473 503
Other income
Commission exchange and brokerage 20 23 20 23 24 20 23 22
Profit on sale of investments 0 1 3 9 10 57 84 128
Loss on sale of investments -1 0 0 0 0 0 0 0
Profit on sale of fixed assets 0 0 1 0 0 0 0 0
Loss on revaluation of investments 0 0 0 0 0 0 0 0
Profit on forex transactions 5 5 5 3 3 4 5 5
Income from investments 0 0 0 0 0 0 0 0
Miscellaneous income 18 16 16 17 19 17 15 22
Total 43 45 44 53 56 97 126 177
Total income 408 396 394 453 499 550 599 680
Interests expended
Interest on deposits 262 265 282 303 307 320 287 309
Interest on RBI /Inter-bank 2 4 4 3 0 0 2 1
Others 2 0 0 0 2 3 3 3
Total 266 269 286 306 309 323 292 313
Operating expenses
Salaries 53 62 82 90 87 94 104 116
Others 23 24 26 26 33 40 46 53
Depreciation 13 12 12 12 12 11 9 12
Total 89 98 119 129 132 145 159 182
Provisions and contingencies 45 117 56 6 25 41 80 116
Total expenses including provisions 400 484 461 441 467 510 531 611
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Profit for the year 8 -88 -67 12 32 40 68 69
Profits inclusive of provisions 53 29 -11 18 58 81 149 185
Contingent Liabilities
Claims against the banks 6 5 12 62 78 0 0 0
Liability for partly paid investments 10 0 0 0 0 0 0 0
Liability for outstanding forex contracts 165 250 192 189 92 266 141 316
Guarantees
- In India 116 171 135 169 92 101 170 181
- Outside India 0 0 0 0 0 0 0 0
Acceptances and endorsements 153 127 123 103 82 122 138 98
Others 56 73 102 55 31 98 94 96
Total 505 626 563 579 376 586 544 690
Provisions and contingencies
Provision for Non-performing assets 33 94 55 8 22 22 31 22
Depreciation in value of investments 2 14 0 0 -1 3 0 0
Income-tax 9 7 0 -1 1 14 42 28
Others 0 1 2 -1 3 3 7 66
Total 45 117 56 6 25 41 80 116
Financial analysis
Growth in deposits (per cent)
Overall 17 -4 6 9 9 12 34 40
Demand -10 -8 11 15 10 11 10 12
Savings 12 17 21 12 14 19 14 18
Term 29 -7 0 5 7 10 50 54
Share of deposits (per cent)
Demand 18 17 18 19 19 19 16 13
Savings 15 18 21 22 22 24 20 17
Term 67 65 61 59 58 57 64 70
Financial parameters (per cent)
Profitability (per cent)
Return on assets 0.2 -2.6 -1.9 0.3 0.8 0.9 1.3 0.9
Return on equity 4.3 -46.5 -35.5 5.4 14.8 19.6 26.4 22.5
Gearing (times) 17.2 16.9 18.6 15.1 23.3 19.6 20.5 24.7
Staff costs to operating expenses 59.8 63.0 68.5 70.3 65.7 64.8 65.4 64.0
Non-fund income to total income 10.5 11.5 11.2 11.8 11.3 17.7 21.1 26.0
Operating expenses to total income 21.8 24.7 30.2 28.4 26.4 26.4 26.5 26.7
Operating expenses to deposits 3.0 3.5 4.0 4.0 3.7 3.7 3.0 2.5
Earning per share (Rs) 4.4 -49.0 -37.4 1.9 3.2 4.0 6.5 6.4
Cost to income ratio 62.9 77.2 110.2 87.5 69.6 64.1 51.6 49.5
Cost to income ratio (w/o profit on invest) 62.9 77.7 112.9 93.5 73.6 85.4 71.0 76.0
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Financial management (per cent)
Interest cost n.a. 9.08 9.57 9.58 8.91 8.45 6.20 3.95
Average cost of deposits 9.6 9.2 9.7 9.7 9.1 8.5 6.2 4.9
Average cost of borrowings 4.2 10.8 12.2 10.3 10.8 14.6 19.2 4.5
Yield on carry business n.a. 11.46 11.35 11.89 11.83 10.89 9.37 7.39
Average yield on investments 12.5 12.4 12.0 12.8 12.6 12.7 10.2 8.0
Average yield on advances 15.2 13.3 12.3 12.7 12.2 11.5 10.1 8.5
Spreads n.a. 2.38 1.79 2.31 2.91 2.44 3.18 3.45
Operating expenses to AFD n.a. 3.09 3.78 3.78 3.40 3.34 3.04 2.59
Core fee income to AFD n.a. 1.14 1.04 1.03 0.95 0.75 0.67 0.54
Net Profitability Margin n.a. 0.43 -0.96 -0.45 0.46 -0.15 0.81 1.40
Deposits to borrowings (times) 29.0 80.4 84.7 115.6 155.8 156.6 196.3 65.6
Capital adequacy 10.1 5.5 0.8 5.7 10.6 12.07 11.29 11.18
Provisions as a percentage of profit before 84.9 404.8 -507.7 34.3 44.2 50.5 53.9 62.7
provisions
Provisions as a percentage of networth 23.9 61.3 30.0 2.5 14.3 17.6 28.1 35.3
Liquidity (per cent)
Credit-deposit ratio 51 52 50 53 53 49 42 33
Incremental credit deposit ratio 32 16 5 94 48 21 20 10
Borrowings to total deposits 1 1 1 1 1 1 0 2
Cash-deposit ratio 2 1 1 2 1 1 1 1
Investment-deposit ratio 38 39 37 38 44 48 50 59
Incremental I/D ratio 51 19 0 60 111 74 57 81
Reserves as a percentage of net worth 90 91 90 76 44 57 63 67
Growth (per cent)
Advances 10 -1 0 16 8 5 14 9
Deposits 17 -4 6 9 9 12 34 40
Investments 25 -2 0 14 26 20 40 65
Commission and fee -6 14 -14 16 4 -17 13 -2
Interest income 25 -4 0 14 11 2 4 6
Others
Branches (nos) 298 302 306 310 309 314 336 354
Advances per branch (Rs crore) 5.03 4.90 4.86 5.58 6.04 6.23 6.61 6.87
Operating expenses per branch (Rs crore) 0.30 0.32 0.39 0.41 0.43 0.46 0.47 0.51
Employees (nos) 4,472 4,388 4,378 4,344 4,288 4282 4207 n.a.
Income per employee (Rs crore) 0.09 0.09 0.09 0.10 0.12 0.13 0.14 n.a.
Income/employee expenses (times) 7.67 6.43 4.83 5.01 5.76 5.85 5.77 5.85
Total income (per cent)
Interest 90 89 89 88 89 82 79 74
Forex 1 1 1 1 1 1 3 3
Commission and brokerage 5 6 5 5 5 4 4 3
Share of advances (per cent)
Priority 37 33 36 29 28 29 22 32
Public 9 12 13 12 15 15 11 9
Inter-bank 0 0 0 1 0 0 0 0
Others 54 55 51 58 57 56 66 59
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Bills 11 11 12 11 12 9 10 7
Cash credit 57 60 54 57 57 55 47 47
Term loans 32 30 34 31 31 36 43 47
Share of advances (per cent)
Secured 77 80 80 80 75 77 75 80
Government guarantee 12 12 12 13 19 14 14 13
Unsecured 10 9 8 7 5 9 12 7
Share of investments (per cent)
Government securities 55 58 65 65 54 63 71 83
Other approved securities 22 22 21 18 14 11 8 4
Shares 0 1 0 0 1 1 0 1
Debentures 15 10 11 13 18 18 14 8
Others 8 9 2 4 13 8 7 5
Subsidiaries/JV 1 0 0 0 0 0 0 0
Net NPAs (per cent) 8.5 9.1 9.5 9.7 12.0 8.9 6.8 3.0
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 2,180 2,778 2,472 3,021 4,395 5166 6045 8611
Government guarantee 15 0 330 0 0 2213 2130 14
Unsecured 1,789 1,989 2,197 3,599 4,878 4006 4454 6634
Total 3,984 4,767 5,000 6,620 9,273 11385 12629 15259
Priority sector 529 544 760 1,240 1,926 2497 2684 3435
Public sector 27 8 8 44 146 418 94 102
Banks 0 0 0 0 91 0 47 121
Others 3,428 4,215 4,232 5,336 7,110 8471 9804 11601
Total 3,984 4,767 5,000 6,620 9,273 11,385 12,629 15,259
Advances outside India 0 0 0 0 0 0 0 0
Total 3,984 4,767 5,000 6,620 9,273 11,385 12,629 15,259
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India
- Government securities 1,809 2,107 2,787 3,271 4,585 4814 5663 5288
- Other approved securities 36 36 48 34 19 17 17 15
- Shares 0 0 0 3 3 4 4 4
- Debentures 345 320 860 849 950 1172 1281 1363
- Subsidiaries/JV 0 0 0 0 0 0 0 0
- Others 138 94 79 74 46 0 72 19
Total 2,328 2,557 3,774 4,230 5,603 6,007 7,036 6,690
Total investments 2,328 2,557 3,774 4,230 5,603 6,007 7,036 6,690
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 152 121 127 107 248
Additions n.a. n.a. n.a. 8 24 48 187 205
Reductions n.a. n.a. n.a. 39 18 68 46 60
Closing balance n.a. n.a. n.a. 120 127 107 248 393
Net NPA-Closing balance n.a. n.a. n.a. 70 65 65 147 214
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 729 786 823 911 1,124 1313 1361 1385
Income on investments 281 299 408 494 501 511 503 749
Interest on balances with RBI 97 100 104 72 123 87 106 143
Others 13 2 10 12 3 0 10 3
Total 1,120 1,187 1,345 1,489 1,750 1910 1979 2280
Other income
Commission exchange and brokerage 276 299 323 302 343 338 401 462
Profit on sale of investments 30 68 97 14 96 303 143 93
Loss on sale of investments 0 0 0 0 0 0 0 0
Profit on sale of fixed assets -1 -1 -3 2 -2 0
Loss on revaluation of investments 0 0 0 0 0 0 0 0
Profit on forex transactions 44 48 107 68 80 129 199 304
Income from investments 0 0 0 0 0 0 0 0
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 3 6 0 6 6 30 14 28
Total 353 420 526 388 522 803 756 887
Total income 1,473 1,607 1,871 1,877 2,272 2713 2735 3167
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 534 552 808 704 770 921 886 794
Interest on RBI /Inter-bank 37 89 81 93 132 140 102 87
Others 90 72 17 49 76 41 42 42
Total 661 713 907 846 979 1103 1030 924
Operating expenses
Salaries 73 78 101 106 139 163 189 252
Others 275 303 305 339 395 533 581 684
Depreciation 21 32 45 55 67 62 67 74
Total 369 414 452 500 601 757 837 1010
Provisions and contingencies 388 361 396 280 408 527 477 662
Total expenses including provisions 1,418 1,488 1,754 1,626 1,987 2,388 2,344 2,595
Profit for the year 55 119 117 251 285 325 392 572
Profits inclusive of provisions 443 481 513 531 693 853 868 1,233
Contingent liabilities
Claims against banks 112 2 2 2 15 0 0 0
Liability for partly paid investments 0 0 0 0 0 0 0 0
Liability for outstanding forex contracts 11,001 27,887 27,031 30,903 43,566 60858 69753 130413
Guarantees 0 0
- In India 471 476 536 573 884 1558 1753 2372
- Outside India 178 223 113 44 783 351 130 82
Acceptances and endorsements 938 1,168 1,344 1,063 1,357 996 1284 1251
Others 6 139 168 575 440 9957 15268 1249
Total 12,706 29,894 29,194 33,159 47,045 73,720 88,188 135,369
Provisions and contingencies
Provisions for non-performing assets 47 84 117 87 77 79 137 165
Provision towards Income/Interest tax 329 248 294 231 345 448 350 399
Net Provision for depreciation on investments 12 30 -16 -38 -14 0 0 1029
Others 0 0 0 0 0 0 -10 -9
Total 388 361 395 280 408 527 477 662
Financial analysis
Growth in deposits (per cent)
Overall 6 5 25 8 38 8 16 15
Demand 70 -14 50 24 22 7 19 65
Savings 10 -2 48 72 43 90 43 52
Term -3 10 19 1 42 2 12 -7
Share of deposits (per cent)
Demand 20 17 20 23 20 20 20 29
Savings 3 3 4 6 6 11 13 17
Term 76 80 76 71 74 69 67 54
Financial parameters
Profitability (per cent)
Return on assets 0.6 1.2 1.0 1.9 1.7 1.6 1.7 2.1
Return on equity 5.3 10.4 9.9 20.8 19.7 19.5 20.3 23.7
Gearing (times) 8.2 8.1 10.6 10.3 11.3 11.4 10.9 10.0
Staff costs to operating expenses 19.8 18.9 22.4 21.2 23.2 21.5 22.5 25.0
Operating expenses to total income 24.0 26.1 28.1 20.7 23.0 29.6 27.6 28.0
Operating expenses to deposits 25.1 25.7 24.1 26.6 26.5 27.9 30.6 31.9
Operating expenses to deposits 5.1 5.5 4.8 4.9 4.3 5.0 4.7 4.9
Cost to income ratio 45.47 46.26 46.84 48.51 46.45 47.04 49.10 45.01
Cost to income ratio (w/o profit on invest) 47.21 50.04 52.10 49.18 50.19 57.96 53.61 46.96
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Financial management (per cent)
Iinterest cost n.a. 8.30 8.91 7.21 6.69 6.16 5.07 3.96
Average cost of deposits 7.6 7.5 9.5 7.2 6.3 6.3 5.4 4.2
Average cost of borrowings 16.0 17.0 7.4 9.3 9.7 6.4 4.5 3.8
Yield on carry business n.a. 13.02 12.66 12.28 11.40 10.02 9.11 9.02
Average yield on investments 9.7 9.1 9.6 10.7 8.2 6.7 5.5 7.8
Average yield on advances 19.5 18.0 16.8 15.7 14.1 12.7 11.3 9.9
Spreads n.a. 4.72 3.75 5.07 4.70 3.87 4.03 5.06
Operating expenses to AFD n.a. 4.48 4.22 4.10 3.90 3.97 3.84 3.99
Core fee income to AFD n.a. 3.79 4.01 3.05 2.76 2.53 2.79 3.08
Net Profitability Margin n.a. 4.03 3.55 4.02 3.57 2.42 2.98 4.15
Deposits to borrowings (times) 8.8 7.8 6.3 6.5 5.7 5.1 5.1 5.5
Capital adequacy 9.5 8.6 10.0 10.6 11.2 11.04 11.3 11.11
Provisions as a percentage of profit before 87.6 75.2 77.3 52.7 58.8 61.8 54.9 53.7
provisions
Provisions as a percentage of networth 36.2 29.8 35.0 21.8 25.3 30.4 22.4 24.5
Liquidity (per cent)
Credit-deposit ratio 55 63 53 65 66 75 71 75
Incremental C/D ratio 118 225 12 211 69 177 50 97
Borrowings to total deposits 9 17 15 16 19 20 19 17
Cash-deposit ratio 0 0 0 0 0 0 0 0
Investment-deposit ratio 32 34 40 41 40 39 40 33
Growth (per cent)
Advances 15 20 5 32 40 23 11 21
Deposits 6 5 25 8 38 8 16 15
Investments 1 10 48 12 32 7 17 -5
Salaries cost 40 7 30 5 31 17 16 34
Commission and fee 27 8 8 -7 14 -2 19 15
Interest income 27 6 13 11 18 9 4 15
Others
Branches (nos) 6 7 8 11 15 18 20 20
Advances per branch (Rs crore) 664.00 680.97 624.94 601.83 618.19 632.51 631.43 762.96
Operating expenses per branch (Rs crore) 61.50 59.10 56.46 45.47 40.07 42.08 41.87 50.48
Employees (nos) 1,479 1,537 1,537 1,308 1,476 1470 1614 n.a.
Income per employee (Rs crore) 1.00 1.05 1.22 1.43 1.54 1.85 1.69 n.a.
Income/employee expenses (times) 20.17 20.55 18.46 17.71 16.32 16.69 14.49 12.56
Total income (per cent)
Interest 76 74 72 79 77 70 72 72
Forex 3 3 6 4 4 5 7 10
Commission and brokerage 19 19 17 16 15 12 15 15
Share of advances (per cent)
Priority 13 11 15 19 21 22 21 23
Public 1 0 0 1 2 4 1 1
Inter bank 86 88 85 81 77 74 78 76
Others 86 88 85 81 77 74 78 76
Abroad 0 0 0 0 0 0 0 0
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Share of advances (per cent)
Bills 5 4 5 10 11 10 9 8
Cash credit 15 15 31 25 22 23 23 24
Term loans 81 81 64 65 66 67 69 68
Share of advances (per cent)
Secured 55 58 49 46 47 45 48 56
Govt. guarantee 0 0 7 0 0 19 17 0
Unsecured 45 42 44 54 53 35 35 43
Share of investments (per cent)
Government securities 78 82 74 77 82 80 80 79
Other approved securities 2 1 1 1 0 0 0 0
Shares 0 0 0 0 0 0 0 0
Debentures 15 13 23 20 17 20 18 20
Subsidiary 0 0 0 0 0 0 0 0
Others 6 4 2 2 1 0 1 0
Net NPAs (per cent) 0.6 0.6 2.1 1.1 0.7 0.4 1.2 1.4
n.a.: Not available
Source: CRIS INFAC
Continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Secured 1,820 2,118 2,167 2,664 3,841 4945 5243 5962
Government guarantee 187 177 324 486 761 1064 852 654
Unsecured 212 514 304 1,153 1,644 1827 2107 3012
Total 2,219 2,808 2,795 4,302 6,246 7,836 8,202 9,628
Priority sector 537 581 683 776 1,253 1276 1305 1417
Public sector 1 0 0 0 233 274 30 0
Banks 0 0 0 0 0 73 6 5
Others 1,681 2,227 2,112 3,526 4,760 6212 6862 8206
Total 2,219 2,808 2,795 4,302 6,246 7,836 8,202 9,628
Advances outside India 0 0 0 0 0 0 0 0
Total 2,219 2,808 2,795 4,302 6,246 7,836 8,202 9,628
Investments
Investments outside India 0 0 0 0 0 0 0 0
Investments in India 0
- Government securities 1,268 1,663 2,104 2,866 3,556 4453 7147 8833
- Other approved securities 81 63 63 80 80 79 74 66
- Shares 4 1 0 3 3 4 4 4
- Debentures 256 435 1,191 1,723 1,994 1734 1606 1470
- Subsidiaries/JV 0 0 0 0 0 0 0 0
- Others 251 59 104 246 159 5 38 23
Total 1,860 2,221 3,462 4,918 5,792 6,274 8,870 10,395
Total investments 1,860 2,221 3,462 4,918 5,792 6,274 8,870 10,395
Movement in NPA
Gross NPA
Opening balance n.a. n.a. n.a. 253 441 440 447 435
Additions n.a. n.a. n.a. 231 97 335 203 178
Reductions n.a. n.a. n.a. 43 98 329 214 194
Closing balance n.a. n.a. n.a. 441 440 447 435 419
Net NPA-Closing balance n.a. n.a. n.a. 45 60 60 85 68
Profit and loss statement
Interest earned
Interest/Discount on advances/bills 372 342 369 399 603 711 770 749
Income on investments 198 224 323 524 630 728 665 634
Interest on balances with RBI 26 63 69 68 86 58 37 24
Others 1 1 2 2 2 2 8 6
Total 597 630 763 993 1,320 1,499 1,480 1,414
Other income
Commission exchange and brokerage 85 97 102 123 176 196 213 262
Profit on sale of investments 1 20 10 43 79 96 89 153
Loss on sale of investments -1 0 0 0 0 0 0 0
Profit on sale of fixed assets 0 0 0 0 -1 0 3
Loss on revaluation of investments 0 0 0 0 0 0 0
Profit on forex transactions 51 83 76 74 95 99 109 179
Income from investments 0 0 0 0 0 0 0 0
Lease income 0 0 0 0 0 0 0 0
Miscellaneous income 4 2 2 15 46 89 72 108
Total 141 202 191 256 396 478 482 705
Total income 738 832 954 1,248 1,716 1,978 1,962 2,119
continued...
(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Interest expended
Interest on deposits 378 366 460 532 656 695 598 502
Interest on RBI /Inter-bank 6 13 55 95 166 275 253 190
Others 1 0 0 17 26 26 27 30
Total 385 379 516 645 848 997 878 723
Operating expenses
Salaries 56 72 98 101 148 155 234 231
Others 84 105 134 165 217 286 313 334
Depreciation 22 24 26 32 49 62 67 59
Total 163 201 258 298 415 502 614 624
Provisions and contingencies 101 180 127 183 252 312 319 378
Total expenses including provisions 649 760 900 1,126 1,515 1,811 1,812 1,726
Profit for the year 88 73 54 122 201 167 150 394
Profits inclusive of provisions 190 252 181 305 452 478 470 772
Contingent liabilities
Claims against the banks
Currency Options
Single Currency Interest Rate swaps
Liability for outstanding forex contracts n.a. n.a. 27,571 30,050 41,511 60,190 93,434 131483
Guarantees
- In India n.a. n.a. 966 1,119 1,379 1,417 1,274 1521
- Outside India n.a. n.a. 195 82 75 186 521 961
Acceptances, endorsements n.a. n.a. 756 922 1,515 1,282 2,619 2957
Others n.a. n.a. 121 2,757 406 411 409 247
Total n.a. n.a. 29,609 34,930 44,886 63,486 98,256 137,169
Provisions and contingencies
Provison for bad and doubtful debts 15 44 43 32 15 0 0 0
Provision for taxation 105 121 84 147 230 184 173 178
Net Provision for depreciation on investments -20 8 0 4 0 0 0 46
Others 1 6 0 0 6 128 146 154
Total 101 135 84 151 252 312 319 378
Financial analysis
Growth in deposits (per cent)
Overall 18 21 16 37 14 24 4 27
Demand 44 2 8 29 1 21 6 110
Savings 16 10 33 36 23 23 26 39
Term 10 32 16 40 15 25 -1 3
Share of deposits (per cent)
Demand 25 21 20 18 16 16 16 27
Savings 13 12 14 13 15 14 18 19
Term 62 67 67 68 69 69 66 54
Financial parameters
Profitability (per cent)
Return on assets 1.2 1.1 0.6 1.1 1.4 1.0 0.8 1.7
Return on equity 12.3 9.0 6.6 15.1 20.8 14.3 8.5 16.6
Gearing (times) 6.5 7.8 10.8 14.1 13.3 14.5 8.1 9.3
Staff costs to operating expenses 34.5 36.0 37.9 33.9 35.7 30.8 38.1 37.1
Non-fund income to total income 19.1 24.3 20.0 20.5 23.1 24.2 24.6 33.3
Operating expenses to total income 22.1 24.1 27.0 23.9 24.2 25.4 31.3 29.5
Operating expenses to deposits 3.6 3.7 4.0 3.4 4.2 4.1 4.8 3.8
Cost to income ratio 46.22 44.35 58.79 49.40 47.86 51.23 56.67 44.70
Cost to income ratio (w/o profit on invest) 46.35 46.41 60.21 53.21 52.68 56.79 61.75 50.20
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(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Financial management (per cent)
Interest cost 7.08 7.50 6.88 6.92 6.66 5.35 4.05
Average cost of deposits 9.0 7.3 7.7 7.0 7.0 6.2 4.8 3.5
Average cost of borrowings 4.7 6.5 7.3 7.4 7.4 8.7 8.2 7.7
Yield on carry business 11.59 10.72 10.42 10.48 9.51 8.31 7.13
Average yield on investments 11.9 11.0 11.4 12.5 11.8 12.1 8.8 6.6
Average yield on advances 17.1 13.6 13.2 11.2 11.4 10.1 9.6 8.4
Spreads 4.51 3.22 3.55 3.56 2.84 2.96 3.08
Operating expenses to AFD 3.59 3.58 3.08 3.24 3.17 3.44 3.14
Core fee income to AFD 3.23 2.49 2.11 2.29 2.14 2.00 2.49
Net Profitability Margin 4.15 2.13 2.58 2.61 1.82 1.52 2.43
Deposits to borrowings (times) 27.9 24.2 7.8 5.0 3.6 3.2 3.7 5.1
Capital adequacy 11.9 9.8 9.3 10.3 12.4 11.04 11.3 14.54
Provisions as a percentage of profit before 53.4 71.2 70.3 60.0 55.6 65.2 68.0 49.0
provisions
Provisions as a percentage of networth 13 21 16 22 23 25 14 15
Liquidity (per cent)
Credit-deposit ratio 49 51 44 49 63 63 64 59
Incremental C/D ratio 11 61 -2 64 162 67 80 41
Borrowings to total deposits 0 7 18 22 33 30 25 16
Cash-deposit ratio 0 0 0 0 0 0 1 0
Investment-deposit ratio 41 40 54 56 58 51 69 64
Growth (per cent)
Advances 3 27 0 54 45 25 5 17
Deposits 18 21 16 37 14 24 4 27
Investments -13 0 23 76 35 0 13 27
Salaries cost 6 28 35 3 47 4 52 -1
Commission and fee 36 13 6 20 43 11 8 23
Interest income 12 6 21 30 33 14 -1 -4
Others
Branches (nos) 21 21 25 26 28 30 33 38
Advances per branch (Rs crore) 105.68 133.73 111.79 165.48 223.07 261.19 248.55 253.37
Operating expenses per branch (Rs crore) 8 10 10 11 15 17 19 16
Employees (nos) 2,357 2,512 2,723 2,780 3,023 3355 3339 n.a.
Income per employee (Rs crore) 0.31 0.33 0.35 0.45 0.57 0.59 0.59 n.a.
Income/employee expenses (times) 13.11 11.53 9.76 12.36 11.56 12.79 8.38 9.16
Total income (per cent)
Interest 81 76 80 80 77 76 75 67
Forex 7 10 8 6 6 5 6 8
Commission, brokerage 12 12 11 10 10 10 11 12
Share of advances (per cent)
Priority 24 21 24 18 20 16 16 15
Public 0 0 0 0 4 3 0 0
Inter bank 0 0 0 0 0 1 0 0
Others 76 79 76 82 76 79 84 85
Abroad 0 0 0 0 0 0 0 0
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(Rs crore) 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Share of advances (per cent)
Bills 14 10 10 16 12 15 15 10
Cash credit 25 40 28 14 27 41 48 49
Term loans 61 49 62 70 61 44 37 41
Share of advances (per cent)
Secured 82 75 78 62 61 63 64 62
Govt. guarantee 8 6 12 11 12 14 10 7
Unsecured 10 18 11 27 26 23 26 31
Share of investments (per cent)
Government securities 68 75 61 58 61 71 81 85
Other approved securities 4 3 2 2 1 1 1 1
Shares 0 0 0 0 0 0 0 0
Debentures 14 20 34 35 34 28 18 14
Subsidiary 0 0 0 0 0 0 0 0
Others 13 3 3 5 3 0 0 0
Net NPAs (per cent) 1.8 2.0 0.9 1.0 1.0 2.3 1.0 0.7
n.a.: Not available
Source: CRIS INFAC
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Interest cost: The ratio of total interest paid to average borrowed funds.
Yield on carry business: Defined as the total interest cost upon the average funds in carry
business.
Funds in carry business: Funds deployed less investment in shares, investments in subsidiaries
and joint ventures and other miscellaneous investments; invested within India and outside India.
Funds deployed: The funds deployed is defined as the total asset of the bank excluding fixed
assets and other assets.
Spreads: Spreads are defined as the difference between the yield on carry business less interest
cost.
Net profitability margin (NPM): NPM is defined as spreads add core fee income ratio less
operating expense ratio.
Operating expense ratio: The ratio of total operating expense to the average funds deployed.
Core fee income ratio (or core fee-based income ratio): The ratio of the core fee income
to the average funds deployed.
Core fee income (or core fee-based income): Core fee income is total other income excluding
profit on sale of investments, sale of fixed assets and 50 per cent of the miscellaneous income.
Other income: Other income includes income from profit on sale of investments, profit on
sale of assets and half of the miscellaneous income.
Cost-income ratio: Cost-income ratio is the ratio of total operating expenses to the difference
of total income and interest expended.
Cost-income ratio (without profit on sale of investment): Cost-income ratio, when calculated
without considering profit of sale of investments in the net income.
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Net interest income (NII): The difference between the total interest income and total interest
expended.
Net interest margin (NIM): The ratio of net interest income to average total assets.
Operating profit per employee: The ratio of operating profit (i.e., profit before provisioning
and tax) to the total number of employees as at end-March.
Business: Business is defined as the summation of the advances and deposits for the bank.
Current deposits: Current deposits are those maintained by business class to meet the short-
term contingencies. No interest is payable on current deposits.
Savings deposits: Savings deposits are the deposits maintained by the households. RBI administers
the interest rate offered on these deposits.
Term deposits: These are also knows as fixed deposits or time deposits and are generally
payable at the end of a fixed period.
Low cost deposits: Demand deposits and saving deposits together form low cost deposits
Low cost deposit ratio: The ratio of low cost deposits to the total deposits is termed as
low cost deposit ratio.
Food credit: Food credit is the loan/advance given by the banks to the FCI for procurement
of food from the open market to be distributed through public distribution system
Non-food credit: Non-food credit is the total credit excluding food credit.
Capital adequacy ratio: is the ratio of total risk weighted assets of the bank to the eligible
capital. Minimum stipulated norm is 9 per cent.
Statutory liquidity ratio: Under section 24 (b) of the Banking Regulation Act, 1949, every
bank is required to maintain, at the close of business every day, a minimum proportion of
its net demand and time liabilities (NDTL) as liquid assets in the form of cash and gold and
un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is
known as Statutory Liquidity Ratio (SLR).
Gross NPAs: Total of the non-performing assets, before making any provisions.
Net NPAs: Non-performing assets net of provisions and amount collected from the NPAs and
kept in suspense.
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Return on assets: The ratio of profit after tax to average total assets (includes fixed assets
and other assets)
Cost per employee: The ratio of total wage cost for the bank to total number of employees
as at end-March.