A.

SECTOR INFORMATION
1.Introduction
A bank is a budgetary middle person and Money maker that makes Money by loaning cash to a
borrower. Loaning exercises can be performed straightforwardly by giving credit or by
implication through capital market. Capital market are monetary market for the purchasing and
offering of long haul obligation or value supported securities. These business sectors channel
the abundance of savers to the individuals who can put it to long haul beneficial utilize, for
example, organizations or governments influencing bug-to term speculations. Monetary
controllers, for example, the Securities and Exchange Board of India (SEBI) or U.S. Securities and
Exchange Commission (SEC), direct the capital market in their wards to ensure financial
specialists against extortion, among different obligations. Because of the significance in the
monetary framework and impact on national economies, banks are very directed in perch of
nations either by National Government or Central Bank.

Fig- Pie chart showing Sectorial distribution worldwide consisting of Contribution of Banking

sector i.e. 5.6%

2.Banking in India

Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors. For the past three
decades India's banking system has several outstanding achievements to its credit. The most
striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in
India. In fact, Indian banking system has reached even to the remote corners of the country. This
is one of the main reasons of India's growth process.

2.1 HISTORY:
The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:

 PHASE I - Early phase from 1786 to 1969 of Indian Banks

 PHASE II - Nationalization of Indian Banks and up to 1991
 PHASE III - Indian Financial & Banking Sector Reforms after 1991.
PHASE I:
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders banks, mostly Europeans shareholders. During the first phase the growth
was very slow and banks also experienced periodic failures between 1913 and 1948. There were
approximately 1100 banks, mostly small. To streamline the functioning and activities of
commercial banks, the Government of India came up with The Banking Companies Act, 1949
which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No.
23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of
banking in India as the Central Banking Authority. During those day’s public has lesser
confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings
bank facility provided by the Postal department was comparatively safer. Moreover, funds were
largely given to the traders.

PHASE II:
Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially
in rural and semi-urban areas. Second phase of nationalization Indian Banking Sector Reform
was carried out in 1980 with seven more banks. This step brought 80% of the banking segment
in India under Government ownership.
The following are the steps taken by the Government of India to Regulate Banking Institutions in
the Country:

 1949: Enactment of Banking Regulation Act.

 1955: Nationalization of State Bank of India.
 1959: Nationalization of SBI subsidiaries.
 1961: Insurance cover extended to deposits.
 1969: Nationalization of 14 major banks.
 1971: Creation of credit guarantee corporation.
 1975: Creation of regional rural banks.
  1980: Nationalization of seven banks with deposits over 200 crore.
After the nationalization of banks, the branches of the public sector bank India raised to
approximately 800% in deposits and advances took a huge jump by 11,000%.Banking in the
sunshine of Government ownership gave the public implicit faith and immense confidence about
the sustainability of these institutions.

PHASE III
This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his
name which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and net banking is introduced. The entire
system became more convenient and swift. The financial system of India has shown a great deal
of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as
other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the
foreign reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure.

Fig: Pie Chart showing Market share/GDP contribution of sectors in India including
the contribution of Financial services
v3. Growth of Banking Sector

The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49 foreign
banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative
banks, in addition to cooperative credit institutions (FY17 data).  In FY07-18, total lending
increased at a CAGR of 10.94 per cent and total deposits increased at a CAGR of 11.66 per cent.
India’s retail credit market is the fourth largest in the emerging countries. It increased to US$
281 billion on December 2017 from US$ 181 billion on December 2014.

3.1 Investments/developments

Key investments and developments in India’s banking industry include:

 As of September 2018, the Government of India launched India Post Payments Bank
(IPPB) and has opened branches across 650 districts to achieve the objective of financial
inclusion.
 The total value of mergers and acquisition during 2017 in NBFC diversified financial
services and banking was US$ 2,564 billion, US$ 103 million and US$ 79 million
respectively @.
 The biggest merger deal of FY17 was in the microfinance segment of IndusInd Bank
Limited and Bharat Financial Inclusion Limited of US$ 2.4 billion @.
 In May 2018, total equity funding's of microfinance sector grew at the rate of 39.88 to Rs
96.31 billion (Rs 4.49 billion) in 2017-18 from Rs 68.85 billion (US$ 1.03 billion).
 Banks and financial institutions disbursed about of Rs 35,759 crore
to microfinance institutions in FY19, representing a growth of 63 per cent over FY18,
according to a report by MFIN (Microfinance Institutions Network),and the total
equity grew by 42 per cent during the same period to Rs 14,206 crore
 Growth in deposits over the past few years US$ (million)
2000 1866.22
CAGR 11.66% 1781.15
1800
1603.23
1600 1459.051466.46
1314.32
1400 1267.611287.9
1182.45
1200
961.83
1000 854.28
807.63
800
576
600

400

200

0
FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19
 Interest income growth in Indian Banking sector US$(million)
120 110.74
103.4 102.17 102.88 105.55
102.66 102.5
100

80

Private Sector
60
Public
47.4 Sector
43.3
Foreign Banks
36.84
40 34.12
28.7 30.65 31.38

20
2500 7.68 7.78 7.6 8.26 7.77 7.97 7.8
2255.25
0
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18
2000 1878.4
1775.5

1406.5
1500
1238.5
1102.2

1000
Net Profit
860.7
US$(million)
621.8
486.6
500

0
FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17
CAGR 21.13%