Report on Trend and Progress of Banking in India 2018-19

REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2018-19 भारत म� ब�िकं ग क विृ ि वं गित बं धं ी रपोट� 2018-19 भारतीय रज़व� ब�क भारत म� ब�िकं ग क विृ ि व ं गित बं धं ी रपोट� 2018-19 REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2018-19 वािम�व � भारतीय रज़व� ब�क, मंबु ई भारतीय रज़व� ब�क, शहीद भगत ि हं माग�, फोट�, मंबु ई - 400 001 के िल डॉ. नेहल . हेरवाडकर ारा कािशत �र �नके ारा जयतं ि टं री ल लपी, ��2��4, िगरगांव रोड, मरु लीधर मंिदर क�पा��ड, �ाकुर ार पो ट �िफ के पा , मंबु ई - 400 002 म� �िभकि�पत �र मिु�त � भारतीय रज़व� ब�क RESERVE BANK OF INDIAReport on Trend and Progress of Banking in India for the year ended June 30, 2019 submitted to the Central Government in terms of Section 36(2) of the Banking Regulation Act, 1949 REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2018-19 RESERVE BANK OF INDIA© Reserve Bank of India 2019 All rights reserved. Reproduction is permitted provided an acknowledgement of the source is made. Published by Dr. Snehal S. Herwadkar for the Reserve Bank of India, Mumbai 400 001 and designed and printed by her at Jayant Printery LLP. 352/54, Girgaum Road, Charni Road (E), Mumbai - 400 002.Contents Sr. No. Particulars Page No. Chapter I: Perspectives 1 Chapter II: Global Banking Developments 1. Introduction ...................................................................................................... 6 2. The Macro-Financial Environment .................................................................... 6 3. Performance of the Global Banking Sector ....................................................... 8 4. World’s Largest Banks ....................................................................................... 13 5. Global Banking Policy Developments ................................................................. 14 6. Summing up ...................................................................................................... 19 Chapter III: Policy Environment 1. Introduction ...................................................................................................... 20 2. Monetary Policy and Liquidity Management ....................................................... 20 3. Prudential Policies ............................................................................................ 23 4. Regulatory Policies ............................................................................................ 26 5. Supervisory Policies ......................................................................................... 27 6. Non-Banking Financial Companies ................................................................... 29 7. Credit Delivery and Financial Inclusion ............................................................. 32 8. Consumer Protection ......................................................................................... 34 9. Payment and Settlement Systems ...................................................................... 35 10. Overall Assessment ........................................................................................... 37 Chapter IV: Operations and Performance of Commercial Banks 1. Introduction ...................................................................................................... 38 2. Balance Sheet Analysis ...................................................................................... 38 3. Financial Performance ....................................................................................... 45 4. Soundness Indicators ........................................................................................ 47 5. Sectoral Bank Credit: Distribution and NPAs ................................................... 55 6. Operations of SCBs in the Capital Market ......................................................... 60 7. Ownership Pattern in Scheduled Commercial Banks ......................................... 60 8. Foreign Banks’ Operations in India and Overseas Operations of Indian Banks .. 61 9. Payment Systems and Scheduled Commercial Banks ........................................ 61 vSr. No. Particulars Page No. 10. Consumer Protection ......................................................................................... 62 11. Financial Inclusion ........................................................................................... 63 12. Regional Rural Banks ........................................................................................ 68 13. Local Area Banks .............................................................................................. 70 14. Small Finance Banks ......................................................................................... 70 15. Payments Banks ................................................................................................ 72 16. Overall Assessment ........................................................................................... 74 Chapter V: Developments in Co-operative Banking 1. Introduction ...................................................................................................... 76 2. Urban Co-operative Banks ................................................................................ 77 3. Rural Co-operatives ........................................................................................... 89 4. Long-term Rural Co-operatives .......................................................................... 95 5. Overall Assessment ........................................................................................... 96 Chapter VI: Non-Banking Financial Institutions 1. Introduction ...................................................................................................... 98 2. Non-Banking Financial Companies .................................................................... 99 3. All India Financial Institutions ........................................................................... 116 4. Primary Dealers ................................................................................................. 120 5. Overall Assessment ........................................................................................... 123 viList of Boxes Sr. No. Particulars Page No. II.1 Opportunities and Challenges of Green Finance ................................................. 17 III.1 Asset Quality and Profitability: Does Prudence Pay? ........................................... 24 IV.1 Threshold Bank Capital and Lending .................................................................. 47 IV.2 Is Regional Banking Penetration in India Converging? ......................................... 69 V.1 Co-operative Banks: A Cross-Country Comparison ............................................. 78 V.2 Drivers of Profitability of Scheduled Urban Co-operative Banks (SUCBs) ........... 88 VI.1 Policy Measures for NBFC Sector ........................................................................ 105 viiList of Tables Sr. No. Particulars Page No. II.1 Return on Assets ................................................................................................. 9 II.2 Capital to Risk-Weighted Assets Ratio .................................................................. 10 II.3 Non-performing Loans Ratio .............................................................................. 11 II.4 Leverage Ratio ..................................................................................................... 12 IV.1 Consolidated Balance Sheet of Scheduled Commercial Banks ............................ 39 IV.2 Flow of Financial Resources to Commercial Sector ............................................. 43 IV.3 Bank Group-wise Maturity Profile of Select Liabilities/Assets .............................. 44 IV.4 Trends in Income and Expenditure of Scheduled Commercial Banks ................. 45 IV.5 Cost of Funds and Return on Funds - Bank Group-wise ...................................... 46 IV.6 Return on Assets and Return on Equity of SCBs – Bank Group-wise .................. 46 IV.7 Component-wise Capital Adequacy of SCBs ........................................................ 48 IV.8 Trends in Non-performing Assets - Bank Group-wise ........................................ 51 IV.9 Classification of Loan Assets - Bank Group-wise ................................................. 51 IV.10 NPAs of SCBs Recovered through Various Channels ........................................... 52 IV.11 Details of Financial Assets Securitised by ARCs .................................................. 53 IV.12 Frauds in Various Banking Operations Based on the Date of Reporting .............. 54 IV.13 Frauds in Various Banking Operations Based on the Date of Occurrence ............ 54 IV.14 Sectoral Deployment of Gross Bank Credit ......................................................... 56 IV.15 Priority Sector Lending by Banks ........................................................................ 58 IV.16 Sector-wise GNPAs of Banks ............................................................................... 59 IV.17 Operations of Foreign Banks in India .................................................................. 61 IV.18 Nature of Complaints at BOs ............................................................................... 63 IV.19 Progress under Financial Inclusion Plans, All SCBs (including RRBs) ................. 64 IV.20 Tier-wise Break-up of Newly Opened Bank Branches by SCBs ............................ 65 IV.21 ATMs ................................................................................................................... 66 IV.22 Number of ATMs of SCBs at Various Centres ...................................................... 67 IV.23 Credit Flow to the MSME Sector by SCBs ........................................................... 67 viiiSr. No. Particulars Page No. IV.24 Consolidated Balance Sheet of Regional Rural Banks .......................................... 70 IV.25 Purpose-wise Outstanding Advances by RRBs ..................................................... 70 IV.26 Financial Performance of Regional Rural Banks .................................................. 71 IV.27 Profile of Local Area Banks ................................................................................. 71 IV.28 Financial Performance of Local Area Banks ........................................................ 71 IV.29 Consolidated Balance Sheet of Small Finance Banks .......................................... 72 IV.30 Purpose-wise Outstanding Advances by Small Finance Banks ............................ 72 IV.31 Financial Performance of Small Finance Banks ................................................... 72 IV.32 Consolidated Balance Sheet of Payments Banks ................................................. 73 IV.33 Financial Performance of Payments Banks ......................................................... 73 IV.34 Select Financial Ratios of Payments Banks .......................................................... 74 IV.35 Remittances through Payments Banks during 2018-19 ...................................... 74 V.1 Tier-wise Distribution of Urban Co-operative Banks ........................................... 80 V.2 Liabilities and Assets of Urban Co-operative Banks ............................................ 82 V.3 Distribution of UCBs by Size of Deposits and Advances ...................................... 83 V.4 Investments by Urban Co-operative Banks .......................................................... 83 V.5 Rating-wise Distribution of UCBs ........................................................................ 84 V.6 CRAR-wise Distribution of UCBs ......................................................................... 85 V.7 Non-performing Assets of UCBs .......................................................................... 86 V.8 Financial Performance of Scheduled and Non-scheduled Urban Co-operative Banks 87 V.9 Select Profitability Indicators of UCBs ................................................................. 87 V.10 Composition of Credit to Priority Sectors by UCBs ............................................ 89 V.11 Share in Credit Flow – Rural Co-operatives ......................................................... 89 V.12 A Profile of Rural Co-operatives .......................................................................... 90 V.13 Liabilities and Assets of State Co-operative Banks .............................................. 91 V.14 Select Balance Sheet Indicators of Scheduled State Co-operative Banks ............. 92 V.15 Financial Performance of State Co-operative Banks ............................................ 92 ixSr. No. Particulars Page No. V.16 Soundness Indicators: State Co-operative Banks ................................................ 92 V.17 Liabilities and Assets of District Central Co-operative Banks .............................. 94 V.18 Financial Performance of District Central Co-operative Banks ............................ 94 V.19 Soundness Indicators: District Central Co-operative Banks ................................ 95 VI.1 Classification of NBFCs by Activity ...................................................................... 100 VI.2 Ownership Pattern of NBFCs ............................................................................... 101 VI.3 Abridged Balance Sheet of NBFCs ....................................................................... 101 VI.4 Major Components of Liabilities and Assets of NBFCs-ND-SI by Activity ............ 102 VI.5 Major Components of Liabilities and Assets of NBFCs-D by Activity ................... 103 VI.6 Sectoral Credit Deployment by NBFCs ................................................................ 103 VI.7 Sources of Borrowings of NBFCs-ND-SI .............................................................. 104 VI.8 Financial Parameters of the NBFC Sector ............................................................ 108 VI.9 Ownership Pattern of HFCs ................................................................................. 113 VI.10 Consolidated Balance Sheet of HFCs ................................................................... 113 VI.11 Financial Ratios of HFCs ..................................................................................... 115 VI.12 Financial Assistance Sanctioned and Disbursed by AIFIs .................................... 116 VI.13 AIFIs’ Balance Sheet ............................................................................................ 117 VI.14 Resources Mobilised by AIFIs’ in 2018-19 ........................................................... 117 VI.15 Resources Raised by AIFIs’ from Money Market .................................................. 117 VI.16 Pattern of AIFIs’ Sources and Deployment of Funds ............................................ 118 VI.17 Financial Performance of AIFIs ............................................................................ 119 VI.18 AIFIs’ Select Financial Parameters ....................................................................... 120 VI.19 Performance of PDs in the Primary Market ......................................................... 121 VI.20 Performance of SPDs in the G-secs Secondary Market ........................................ 122 VI.21 Sources and Applications of SPDs’ Funds ........................................................... 122 VI.22 Financial Performance of SPDs .......................................................................... 123 VI.23 SPDs’ Financial Indicators .................................................................................. 123 xList of Charts Sr. No. Particulars Page No. II.1 The Macro Backdrop ......................................................................................... 7 II.2 Growth in Bank Credit to the Private Non-financial Sector ............................... 8 II.3 Market-based Indicators of Bank Health ........................................................... 13 II.4 Distribution of Top 100 Banks by Tier-I Capital ................................................ 14 II.5 Profitability and Asset Quality of Top 100 Banks ............................................... 14 II.6 Bank Soundness of Top 100 Banks ................................................................... 15 IV.1 Balance Sheet of SCBs ...................................................................................... 39 IV.2 Deposits and Borrowings of SCBS .................................................................... 40 IV.3 Bank Group-wise Growth in Advances .............................................................. 41 IV.4 Change in Credit Composition........................................................................... 41 IV.5 Trends in Credit Ratios ..................................................................................... 42 IV.6 Asset-Liability Gaps by Maturity Buckets .......................................................... 42 IV.7 International Liabilities and Assets of Banks ..................................................... 44 IV.8 On and Off-balance Sheet Liabilities of Banks ................................................... 45 IV.9 Provisioning and Profitability ............................................................................ 46 IV.10 Provision Coverage Ratio ................................................................................... 46 IV.11 Distribution of Capital Ratios ........................................................................... 48 IV.12 Leverage Ratio ................................................................................................... 49 IV.13 Liquidity Coverage Ratio ................................................................................... 49 IV.14 Asset Quality of Banks ...................................................................................... 50 IV.15 Stress in Large Borrowal Accounts.................................................................... 52 IV.16 Stressed Asset Sales to ARCs ............................................................................ 53 IV.17 Sectoral Distribution ......................................................................................... 55 IV.18 Sectoral NPAs of SCBs ...................................................................................... 56 IV.19 Sectoral Loans: PSBs vs PVBs .......................................................................... 57 xiSr. No. Particulars Page No. IV.20 Credit to Priority Sectors – All SCBs ................................................................. 58 IV.21 Growth in Lending to Sensitive Sectors ............................................................. 59 IV.22 Resources Raised by Banks through Private Placements ................................... 60 IV.23 Government Shareholding in Select PSBs ......................................................... 60 IV.24 Components of Payment Systems ...................................................................... 61 IV.25 Payment System Transactions: Growth ............................................................ 62 IV.26 Population Group-wise Complaints Received at BOs ......................................... 63 IV.27 Bank Group-wise Break-up of Major Complaint Types: 2018-19 ....................... 63 IV.28 Financial Inclusion amongst Poorest 40 per cent .............................................. 64 IV.29 PMJDY Accounts: Distribution and Average Balance ........................................ 65 IV.30 SCBs’ ATMs vs White-label ATMs ...................................................................... 66 IV.31 Regional Shares in Deposits, Credit and Branches ............................................ 68 IV.32 Population per Branch ..................................................................................... 68 V.1 The Structure of Co-operatives by Asset Size .................................................... 76 V.2 Number of UCBs .............................................................................................. 79 V.3 UCB Mergers (Cumulative: 2004 to 2019) ......................................................... 80 V.4 UCBs: Consolidation and Asset Size.................................................................. 80 V.5 Asset Growth of UCBs ....................................................................................... 81 V.6 Distribution of UCBs by Asset size .................................................................... 81 V.7 Deposits: UCBs versus SCBs ............................................................................ 81 V.8 Distribution of UCBs ......................................................................................... 82 V.9 Credit-Deposit and Investment-Deposit Ratio: UCBs versus SCBs .................... 84 V.10 Distribution of Number and Business of UCBs - by Rating Categories ............... 84 V.11 Distribution of UCBs by CRAR .......................................................................... 85 V.12 Non-performing Assets: UCBs versus SCBs ..................................................... 85 xiiSr. No. Particulars Page No. V.13 NPAs and PCR – UCBs....................................................................................... 86 V.14 Profitability Indicators- SUCBs versus NSUCBs ................................................ 86 V.15 Relative Contribution of Short-term versus Long-term Co-operatives ................ 89 V.16 Resource Composition: Short-term Co-operatives ............................................ 91 V.17 NPA Ratio: A Comparison .................................................................................. 93 V.18 StCBs: Regional Patterns ................................................................................... 93 V.19 Credit-Deposit Ratio: StCBs and DCCBs ........................................................... 93 V.20 DCCBs: Regional Patterns ................................................................................. 95 V.21 StCBs versus DCCBs ........................................................................................ 96 VI.1 Structure of NBFIs under the Reserve Bank’s Regulation .................................. 98 VI.2 Registrations and Cancellations of CoR of NBFCs ............................................. 100 VI.3 Distribution of NBFC Credit ............................................................................. 103 VI.4 3-month CP rates: NBFCs and non-NBFCs ........................................................ 105 VI.5 Borrowings of NBFCs-ND-SI ............................................................................. 107 VI.6 Instruments of Bank Lending to NBFCs-ND-SI ................................................. 107 VI.7 Public Deposits of NBFCs-D .............................................................................. 107 VI.8 Profitability Ratios of NBFCs ............................................................................. 108 VI.9 Profitability Indicators of NBFCs-ND-SI ............................................................ 109 VI.10 Profitability Indicators of NBFCs-D ................................................................... 109 VI.11 Asset Quality of NBFCs ..................................................................................... 109 VI.12 Classification of NBFCs Assets .......................................................................... 109 VI.13 NPAs of NBFCs-ND-SI ....................................................................................... 110 VI.14 NBFCs-ND-SI: Stressed Assets and Credit Growth by Sector ............................ 110 VI.15 Gross and Net NPA Ratios of NBFCs-D .............................................................. 111 VI.16 Capital Position of NBFCs ................................................................................ 111 xiiiSr. No. Particulars Page No. VI.17 CRAR of NBFCs by Category ............................................................................. 111 VI.18 Exposure to Sensitive Sectors ........................................................................... 112 VI.19 Credit to Housing sector by HFCs and SCBs ..................................................... 112 VI.20 Resources Mobilised by HFCs ........................................................................... 114 VI.21 Deposits of HFCs............................................................................................... 114 VI.22 Dissection of HFCs’ Deposits ............................................................................. 114 VI.23 Financial Parameters of HFCs ........................................................................... 115 VI.24 NPA Ratios of HFCs ........................................................................................... 115 VI.25 Ownership Pattern of AIFIs ............................................................................... 116 VI.26 Weighted Average Cost and Maturity of Rupee Resources Raised by AIFIs ......... 118 VI.27 Long-term PLR Structure of Select AIFIs ........................................................... 118 VI.28 AIFIs’ Financial Ratios ....................................................................................... 119 VI.29 Select Financial Parameters of AIFIs ................................................................. 120 VI.30 AIFIs’ Net NPAs ................................................................................................. 120 VI.31 AIFIs’ Assets Classification ............................................................................... 121 VI.32 Average Rate of Underwriting Commission of PDs ............................................. 121 VI.33 Capital and Risk Weighted Asset Position of SPDs ............................................ 123 xivList of Appendix Tables Sr. No. Particulars Page No. IV.1 Indian Banking Sector at a Glance ...................................................................... 125 IV.2 Off-Balance Sheet Exposure of Scheduled Commercial Banks in India ............... 126 IV.3 Kisan Credit Card Scheme: State-wise Progress .................................................. 127 IV.4 Bank Group-wise Lending to the Sensitive Sectors ............................................. 129 IV.5 Shareholding Pattern of Domestic Scheduled Commercial Banks ...................... 130 IV.6 Overseas Operations of Indian Banks .................................................................. 132 IV.7 Branches and ATMs of Scheduled Commercial Banks ........................................ 133 IV.8 Statement of Complaints Received at Banking Ombudsman Office .................... 136 IV.9 International Liabilities of Banks in India – By Type of Instruments .................... 139 IV.10 International Assets of Banks in India – By Type of Instruments ......................... 140 IV.11 Consolidated International Claims of Banks: Residual Maturity and Sector ........ 141 IV.12 Consolidated International Claims of Banks on Countries other than India ........ 142 IV.13 Progress of Microfinance Programmes ................................................................ 143 V.1 Select Financial Parameters: Scheduled UCBs .................................................... 144 V.2 Indicators of Financial Performance: Scheduled UCBs ....................................... 145 V.3 Indicators of Financial Health: State Co-operative Banks .................................... 147 V.4 Indicators of Financial Health: District Central Co-operative Banks ................... 148 V.5 Primary Agricultural Credit Societies .................................................................. 149 V.6 Indicators of Primary Agricultural Credit Societies-State-wise ............................ 150 V.7 Details of Members and Borrowers of Primary Agricultural Credit Societies ....... 152 V.8 Liabilities and Assets of State Co-operative Agriculture and Rural Development Banks ................................................................................... 153 V.9 Financial Performance of State Co-operative Agriculture and Rural Development Banks ................................................................................... 154 V.10 Asset Quality of State Co-operative Agriculture and Rural Development Banks ... 155 V.11 Financial Indicators: State Co-operative Agriculture and Rural Development Banks 156 V.12 Liabilities and Assets of Primary Co-operative Agriculture and Rural Development Banks ................................................................................... 157 xvSr. No. Particulars Page No. V.13 Financial Performance of Primary Co-operative Agriculture and Rural Development Banks ................................................................................... 158 V.14 Asset Quality of Primary Co-operative Agriculture and Rural Development Banks 159 V.15 Financial Indicators: Primary Co-operative Agriculture and Rural Developments Banks ................................................................................ 160 VI.1 Consolidated Balance Sheet of NBFCs-ND-SI ...................................................... 161 VI.2 Consolidated Balance Sheet of NBFCs-D ............................................................. 162 VI.3 Credit to Various Sectors by NBFCs .................................................................... 163 VI.4 Financial Performance of NBFCs-ND-SI .............................................................. 164 VI.5 Financial Performance of NBFCs-Deposit Taking ................................................ 165 VI.6 Financial Assistance Sanctioned and Disbursed by Financial Institutions ........... 166 VI.7 Financial Performance of Primary Dealers .......................................................... 169 VI.8 Select Financial Indicators of Primary Dealers .................................................... 171 xviList of Select Abbreviations AE Advanced Economy CCB Capital Conservation Buffer AFA Additional Factor of CCIL Clearing Corporation of India Authentication Limited AFC Asset Finance Company CDDP Committee on Deepening of Digital Payments AIFI All India Financial Institution CDS Credit Default Swap ALM Asset Liability Management CET Common Equity Tier AML/CFT Anti-Money Laundering / Combatting the Financing of CIC Core Investment Company Terrorism CIC-ND-SI Non-Deposit taking Systemically ANBC Adjusted Net Bank Credit Important - Core Investment Company AQR Asset Quality Review CIRP Corporate Insolvency Resolution ARC Asset Reconstruction Company Process ASF Available Stable Funding CISBI Central Information System for BBPOU Bharat Bill Payment Operating Banking Infrastructure Unit CMB Cash Management Bill BBPS Bharat Bill Payment System CMS Complaint Management System BC Business Correspondent CoR Certificate of Registration BCBS Basel Committee on Banking CRAR Capital to Risk-weighted Assets Supervision Ratio BFS Board for Financial Supervision CRCS Central Registrar of Co-operative BIS Bank for International Societies Settlements CRO Chief Risk Officer BO Banking Ombudsman DCCB District Central Co-operative BPLR Benchmark Prime Lending Rate Bank DDB Demand Deposit Balance bps Basis Points DICGC Deposit Insurance and Credit BSBDA Basic Savings Bank Deposit Guarantee Corporation Account DIDF Dairy Processing and CAGR Compound Annual Growth Rate Infrastructure Development Fund CAMELS Capital Adequacy, Asset Quality, DRR Debenture Redemption Reserve Management, Earnings, Liquidity and Systems and Control D-SIB Domestic Systemically Important Bank CASA Current Account and Savings Account DTH Direct-to-Home xviiECB External Commercial Borrowing ICA Inter-Creditor Agreement EME Emerging Market Economy ICT Information and Communication Technology EWS Early Warning Signal IFC International Finance EXIM Bank Export Import Bank of India Corporation FALLCR Facility to Avail Liquidity for IFR Investment Fluctuation Reserve Liquidity Coverage Ratio IGAAP Indian Generally Accepted FATF Financial Action Task Force Accounting Principles FBIL Financial Benchmarks India IMF International Monetary Fund Private Ltd. Ind-AS Indian Accounting Standard FC Financial Co-operative INDC Intended Nationally Determined FCCB Foreign Currency Convertible Contribution Bond IOSCO International Organisation of FCNR(B) Foreign Currency Non-Resident Securities Commission Bank Deposits IRS Interest Rate Swap FDI Foreign Direct Investment ISG Internal Study Group FIAC Financial Inclusion Advisory KCC Kisan Credit Card Committee KYC Know Your Customer FIP Financial Inclusion Plan LAB Local Area Bank FRA Forward Rate Agreement LC Loan Company FSB Financial Stability Board LCR Liquidity Coverage Ratio FSP Financial Service Provider LEF Large Exposure Framework GCF Green Climate Fund LEI Legal Entity Identifier GFC Global Financial Crisis LIC Life Insurance Corporation of GMM Generalized Method of Moments India GNPA Gross Non-performing Asset LR Leverage Ratio G-secs Government Securities MAMP Minimum Average Maturity Period G-SIB Global Systemically Important Bank MGC Mortgage Guarantee Company HFC Housing Finance Company MHP Minimum Holding Period HQLA High Quality Liquid Asset MMF Money Market Fund IBC Insolvency and Bankruptcy Code MOF Master Office File IC Investment Company MPC Monetary Policy Committee xviiiMSME Micro, Small and Medium NEFT National Electronic Fund Enterprise Transfer MUNFI Monitoring Universe of Non-Bank NETC National Electronic Toll Financial Intermediation Collection NABARD National Bank for Agriculture and NHB National Housing Bank Rural Development NIM Net Interest Margin NAFCUB National Federation of Urban NNPA Net Non-performing Asset Cooperative Banks and Credit NOF Net Owned Fund Societies Ltd. NOFHC Non-Operative Financial Holding NAV Net Asset Value Company NBFC Non-Banking Financial Company NPA Non-performing Asset NBFC-AA Non-Banking Financial Company - NPCI National Payments Corporation of Account Aggregator India NBFC-D Deposit-taking Non-Banking NPL Non-performing Loan Financial Company NRE Non-resident External Rupee NBFC-ICC Non-Banking Financial Company - Investment and Credit Company NSFI National Strategy for Financial NBFC-IFC Non-Banking Financial Company - Inclusion Infrastructure Finance Company NSFR Net Stable Funding Ratio NBFC-MFI Non-Banking Financial Company - NSUCB Non-scheduled Urban Micro Finance Institutions Co-operative Bank NBFC-ND Non-Deposit taking - Non- OFI Other Financial Intermediary Banking Financial Company OTC Over-the-Counter NBFC-ND-SI Non-Deposit taking Systemically PACS Primary Agricultural Credit Important Non-Banking Financial Societies Company PAT Profit After Tax NBFC-P2P Non-Banking Financial Company - Peer to Peer Lending Platform PB Payments Bank NBFI Non-Banking Financial Institution PCA Prompt Corrective Action NCCD Non-centrally Cleared Derivative PCARDB Primary Co-operative Agriculture and Rural Development Bank NCLT National Company Law Tribunal PCE Partial Credit Enhancement NCMC National Common Mobility Card PCR Provision Coverage Ratio NCUA National Credit Union Administration PD Primary Dealer NDTL Net Demand and Time Liabilities PLR Prime Lending Rate xixPMAY-G Pradhan Mantri Awas Yojana SCB Scheduled Commercial Bank Gramin SEBI Securities and Exchange Board of PMJDY Pradhan Mantri Jan Dhan Yojana India PoS Point of Sale SFB Small Finance Bank PPI Pre-paid Payment Instrument SFV Structured Finance Vehicle PSB Public Sector Bank SHG Self-Help Group PSL Priority Sector Lending SIDBI Small Industries Development PSLC Priority Sector Lending Certificate Bank of India PVB Private Sector Bank SLBC State Level Bankers’ Committee RCAP Regulatory Consistency SLR Statutory Liquidity Ratio Assessment Program SME Small and Medium Enterprise RCS Registrar of Co-operative Society RDB Rupee Denominated Bond SPD Standalone Primary Dealer RE Regulated Entity SR Security Receipt ReBIT Reserve Bank Information StCB State Co-operative Bank Technology Private Limited SUCB Scheduled Urban Co-operative RoA Return on Asset Bank RoE Return on Equity TAT Turn Around Time RP Resolution Plan T-Bill Treasury Bill RRB Regional Rural Bank TBTF Too-big-to-fail RS Regulatory Sandbox TLAC Total Loss Absorbing Capacity RSF Required Stable Funding TReDS Trade Receivables Discounting RSP Remittance Service Provider System RTGS Real Time Gross Settlement UCB Urban Co-operative Bank RWA Risk-weighted Asset UIDAI Unique Identification Authority of SARFAESI Securitisation and India Reconstruction of Financial Assets and Enforcement of UPI Unified Payments Interface Security Interests UTLBC Union Territory Level Bankers’ SBLP Self-Help Group - Bank Linkage Committee Programme WAC Weighted Average Cost SBM-G Swachh Bharat Mission Gramin WAM Weighted Average Maturity SCARDB State Co-operative Agriculture and Rural Development Bank WTO World Trade Organisation xxi PersPectives The slowdown in global and domestic growth impulses in the recent past impinged on credit demand. The asset quality, capital adequacy and profitability of scheduled commercial banks improved after a long period of stress, although challenges emerged from other areas like non-banking financial companies and co-operative banks. Going forward, issues such as resolution of stressed assets, weak corporate governance, and frauds need to be addressed to reaffirm a robust financial sector that minimises systemic risks. I.1 The ongoing implementation of Bankruptcy Code (IBC), the overhang of NPAs international regulatory reforms is building up remains. The health of the banking sector capital and liquidity buffers. The global growth hinges around a turnaround in macroeconomic slowdown has impacted bank lending world- conditions. wide even as heightened financial fragilities, I.3 Default and rating downgrades of a non- including elevated debt levels, have mutated banking financial company (NBFC) and a into pervasive risk aversion. Among emerging housing finance company (HFC) recently led market economies (EMEs), profitability of to liquidity constraints and interruptions in banks has been dented by weak loan growth their niche-centric financial intermediation. and high delinquencies. The silver lining is that although the lending I.2 Domestically too, the weakening of activities of non-deposit taking systemically growth impulses and subdued credit off-take important NBFCs (NBFCs-ND-SI) and HFCs are playing out, with sporadic credit default have somewhat moderated, their loan-loss events and incidents of frauds exacerbating provisions remain at comfortable levels. It is the reluctance to lend. This is starkly evident important to recognise that challenges faced by in the slowdown of flow of resources, both some of the NBFCs were reflective of inherent from banks and non-banks to the commercial fragilities rather than merely a liquidity crunch. sector in the first half of 2019-20. In turn, Consequently, financial markets have been this waning of confidence is weighing on discriminating between strong NBFCs and overall economic activity. This is worrisome those having perceptible weaknesses. Recent as it is taking hold at a time when the recent developments in the sector have brought improvements in asset quality and profitability greater market discipline and better performing of the banking sector are at a nascent stage and companies continue to raise funds at reasonable capital ratios of public sector banks (PSBs) costs, while those with asset-liability mismatches are shored up due to recapitalisation by the or asset quality concerns face constraints on government. Notwithstanding the enhanced market access and/ or higher borrowing costs. resolutions through the Insolvency and Concerted policy initiatives by the Reserve Bank 1Report on Trend and Progress of Banking in India 2018-19 and the government are expected to alleviate Sectoral Stress the liquidity constraints faced by these entities, I.7 Against the backdrop of subdued as they gradually regain the confidence of the profitability of corporates, their low interest financial markets and continue with normal coverage ratio and deleveraging coupled with activity. risk aversion of banks, lenders have been I.4 Against this backdrop, the rest of the shifting their focus away from large industrial chapter lays out perspectives on forces that are loans towards retail loans, as the non performing likely to shape the financial sector’s ecosystem assets (NPA) ratios of the latter have traditionally in the period ahead. been low. This diversification strategy, while helpful as a risk mitigation tool, has its own Resolution of Stressed Assets limitations: the slowdown in consumption and I.5 Effective mechanisms for faster resolution overall economic growth may affect the demand of stressed assets remain key to the revival of for and the quality of retail loans. Moreover, the banking system. The recently announced household leverage and indebtedness need to be prudential framework for stressed assets kept in focus in the context of overall financial serves as a multi-pronged strategy in this stability. The need of the hour is to kick-start regard, expanding degrees of freedom for industrial credit and use the impetus therefrom lenders while prescribing disincentives for to regenerate a virtuous cycle of capex, delayed implementation of resolution plans. investment and growth. It is expected that this framework will sustain I.8 Some sector specific pockets of stress improvements in credit culture that are in will need policy attention. Proper risk pricing motion, in conjunction with the IBC. Under the in lending is of prime importance so that the latter, traction is gathering, with an increase in health of the banking sector is not compromised total recoveries in the recent period, although while ensuring adequate credit to the productive there has been some increase in haircuts. sectors of the economy. I.6 The applicability of IBC has been expanded Recapitalisation of PSBs to cover certain categories of financial service providers (FSPs) as well, which would help I.9 The government has been infusing capital in making the law comprehensive and more in some PSBs, which has been just enough to effective. Although the time limit for resolution meet the regulatory minimum including capital under IBC has been recently extended to 330 conservation buffer (CCB). The deferment of the days, some cases are delayed beyond the limit, implementation of the last tranche of the CCB partly reflecting repeated litigations. At the same till March 31, 2020 has offered some breathing time, improvement in supportive infrastructure space to these banks. Their capacity to sustain is a sine qua non for expediting the resolution credit growth in consonance with the financing process. Even though two new benches of requirements of the economy will, however, National Company Law Tribunal (NCLT) are warrant that capital is maintained well above being set up, more benches and members are the regulatory minimum, providing these banks required. confidence to assume risk and to lend. In this 2PersPectives sense, recapitalisation would be a continuous in allocation of resources as well as on financial process. On the other hand, raising resources stability. In response, the Reserve Bank is in the through public issues or private placements has process of issuing draft guidelines on corporate been constrained, partly due to volatile market governance for regulated entities; the objective conditions. Going forward, the financial health is to align the current regulatory framework of PSBs should increasingly be assessed by their with global best practices while being mindful ability to access capital markets rather than of the context of the domestic financial system. looking at the government as a recapitaliser of Strengthening the NBFC Sector the first and last resort. I.12 In order to strengthen the liquidity Mechanism for Early Fraud Detection framework for NBFCs, a liquidity coverage ratio I.10 Frauds can occur on account of (LCR) has been introduced for all deposit-taking overlooking regulatory guidelines and/ or on NBFCs (NBFCs-D) and non-deposit taking lapses in internal risk governance, compliance, NBFCs (NBFCs-ND) with an asset size of ₹5,000 and audit functions. A number of initiatives crore and above. This measure—covering such as dedicated market intelligence units almost 87 per cent of the total NBFC sector by and increased use of data analytics are being asset size—will be implemented along a glide taken up, following the recommendations of path spanning over four years, commencing the Expert Committee set up by the Reserve from December 2020. The complex business Bank (Chairman: Shri Y H Malegam). In structure of the core investment companies addition, banks have been advised to monitor (CICs)—which were at the heart of the recent unconventional sources of information on NBFC sector challenges—is under review. a continuous basis confined not only to the Several other measures have also been initiated borrowing entity but to the group as a whole. to improve the resilience of the sector (Box VI.1). While supervisory and regulatory measures are I.13 Apart from strengthening the existing four designed to strengthen the early warning signals pillars of supervision viz., on-site examination, (EWS), the prime responsibility of identifying off-site surveillance, market intelligence and and managing fraud risks rests with the reports received from statutory auditors, a fifth respective financial institution. pillar—periodic interaction with stakeholders Corporate Governance in Regulated like statutory auditors, credit rating agencies, Entities and banks that have large exposures to NBFCs—is getting institutionalised as part I.11 The growing size and complexity of the of the supervisory process for monitoring the Indian financial system underscores the incipient build-up of risks so as to be able to significance of strengthening corporate take pre-emptive actions. governance standards in regulated entities. The recent governance failures in some financial I.14 The entry of non-traditional and digital entities have brought to the fore the impact of players in the non-banking space has added the quality of corporate governance on efficiency further complexity to the existing web of inter- 3Report on Trend and Progress of Banking in India 2018-19 linkages between sectors. While it is necessary supervision of urban co-operative banks (UCBs) to encourage innovation in delivery of financial is also being revamped while being mindful of services, especially to the unbanked strata of the evolving requirements. the society, a close watch on potential fault lines I.17 Furthermore, with a view to reducing is also important to ensure timely mitigation concentration risk in UCBs, strengthening their of risks to financial stability. The Reserve resilience and sustainability, and protecting Bank endeavours to ensure an optimal level of the interest of depositors, relevant regulatory regulation and supervision in this sector so that guidelines are being amended. Additionally, it is financially resilient and robust. to strengthen off-site supervision and early recognition of financial distress, UCBs with Regulatory Issues in Housing Finance assets of ₹500 crores and above will be Companies brought under the Central Repository of I.15 Consequent upon the transfer of regulation Information on Large Credits (CRILC) reporting of HFCs to the Reserve Bank, a review of the framework. regulatory framework applicable to them is being I.18 While the Boards of Directors of these undertaken with a view to aligning the regulatory banks oversee their functioning as a co-operative regime for HFCs and NBFCs. The focus areas are credit society, modern practices of banking are capital requirements, public deposit regulations often lacking, necessitating a clearer separation and other prudential norms. This augurs well for of these roles. In particular, lack of prudent ensuring a sound and resilient housing finance internal control mechanisms and surveillance sector. The Reserve Bank has also undertaken systems is limiting their ability to prevent swift measures to address governance concerns frauds. There is a need for an independent and and payment defaults by a prominent HFC, efficacious audit system to ensure sound health thereby facilitating faster resolution of stress in of co-operative banks. the HFC and instill confidence in stakeholders. I.19 The emergence of new players such as Co-operative Banking payments banks (PBs) and small finance banks I.16 Co-operative banks in India, which play (SFBs) poses competition to UCBs. There a crucial role in credit delivery and extending is an imperative need to adopt technology, other financial services through their geographic which will enable UCBs to provide banking and demographic outreach, have been facing services at lower costs so that they remain daunting challenges in the recent period. As dual competitive. However, adoption of technology control of the Reserve Bank and respective state also considerably increases operational risks governments or central government (in the case such as cyber security and UCBs need to have of multi-state cooperative banks) constrains a robust information technology (IT) risk timely regulatory action against weak banks, management infrastructure to mitigate the same. necessary legislative amendments are being A comprehensive cyber security framework discussed with the government. Concomitantly, following a graded approach is being developed the existing architecture of regulation and for UCBs based on their digital depth and 4PersPectives interconnectedness with the payment systems the Reserve Bank has given approval for its landscape, digital products offered by them and formation. This organisation is also expected to assessment of cyber security risks. provide IT infrastructure and capacity building facilities to UCBs, and would contribute to their I.20 The number of financially weak UCBs in strength and vibrancy. the co-operative sector has declined over the I.22 Looking ahead, vital financial indicators years due to the measures taken by the Reserve of the banking sector are gradually improving, Bank. The procedure of finding least disruptive but concerns relating to speedier resolution exit routes for weak UCBs that do not come of stressed assets, corporate governance, up with voluntary merger plans often become and frauds remain. Elevated stress in other lengthy and prolonged. Such merger plans are, segments of the financial system such as therefore, strongly encouraged to safeguard the NBFCs and co-operatives—although not large interest of depositors. enough to have systemic implications—affects I.21 UCBs cannot raise capital through public the confidence of investors. In view of the issues, limiting their ability to comply with the crucial role that the financial sector plays in regulatory requirements, even under Basel I. revitalising the economy, it is important to In view of the pressing need for an umbrella build robust banking structures, backed by organisation for the sector, which can provide sound balance sheets that minimise systemic liquidity and capital support to member banks, risks. 5II Global bankInG DEvElopMEnTs The global economy has been shedding momentum in a downturn that commenced from the first quarter of 2018 in an environment vitiated by escalation in trade tensions, elevated financial vulnerabilities, geo- political risks and associated policy uncertainties. The implementation of global regulatory reforms after the global financial crisis (GFC) has led to an increase in banks’ capital and liquidity buffers. Their efforts to reduce bad loans and strengthen balance sheets have, however, been hindered in the environment of low growth and low interest rates. Globally, policy makers have been fortifying the regulatory framework and implementing internationally accepted norms for banks. These policies may not show immediate results, but they should pay back in the medium to long run by enhancing the soundness and resilience of the global banking system. 1. Introduction institutions remained well capitalised, their profitability remains muted. II.1 The global economy has been shedding momentum in a downturn that commenced II.3 Against this backdrop, Section 2 reviews from the first quarter of 2018 in an environment the macro-financial setting in which global vitiated by escalation in trade tensions, elevated banking system is dealing with these testing challenges. The performance of the global financial vulnerabilities, geo-political risks and banking system is analysed in Section 3 followed associated policy uncertainties. Across the world by a focus on the performance of the world’s 100 and across advanced and emerging market largest banks in Section 4. The path travelled on economies (EMEs) alike, monetary policy has the global policy reforms agenda is discussed in turned accommodative in order to counter Section 5. Section 6 concludes the chapter. the slowdown and prevent it from deepening. Available fiscal space is being used to support 2. The Macro-Financial Environment demand, but with the stark recognition that II.4 Although the growth slowdown is policy space is either limited or exhausted. synchronised across more than 90 per cent II.2 Bank lending to the non-financial sector of the global economy, it is turning out to has moderated since the latter half of 2018 be more pronounced in AEs1 (Chart II.1a). across advanced economies (AEs) and EMEs Structural weaknesses in systemic economies, as heightened financial fragilities, including natural disasters, and country-specific factors elevated and rising debt levels, have purveyed have exacerbated the growing slack. In EMEs, risk aversion alongside the weakening of heightened volatility in capital flows, exchange demand. Although banks and financial rates and asset prices have marred macro- 1 International Monetary Fund (2019), ‘Transcript of International Monetary Fund Managing Director Kristalina Georgieva’s Opening Press Conference, 2019 Annual Meetings’, October 17, available at https://www.imf.org/en/News/Articles/2019/10/17/tr101719- transcript-managing-director-kristalina-georgieva-press-conference-2019-annual-meetings. 6Global bankinG Developments economic prospects as global spillovers have II.6 Though bank credit growth moderated interacted with country-specific factors in through H2:2018 and Q1:2019, some recovery some of them, including unsustainable macro- was witnessed in Q2:2019. However, the pace balances, high levels of government debt and has varied on country-specific factors, such as inflation pressures stemming from currency financial conditions and the health of bank balance depreciations despite weakening of commodity sheets. In some AEs, notably the US, pro-cyclical prices (Chart II.1b, c and d). fiscal expansion, accommodative monetary policy and supportive financial conditions have shored II.5 Taking into account these factors, the up credit expansion. By contrast, credit growth in International Monetary Fund (IMF) downgraded its forecast of global growth for 2019 to 3 per the Euro area was anaemic, reflecting deceleration cent in October 2019, the slowest pace since the in demand and fragilities in the banking sector. global financial crisis (GFC)2. The World Trade The large exposure of Euro area banks to Organisation (WTO) also lowered its projection sovereign bonds remained a major risk, although of world merchandise trade volume for 2019 to considerable cross-country heterogeneity was 1.2 per cent from 2.6 per cent projected earlier3. evident within it (Chart II.2). 2 International Monetary Fund (2019), ‘World Economic Outlook - Global Manufacturing Downturn, Rising Trade Barriers’, October. 3 World Trade Organisation (2019): ‘Trade Statistics and Outlook’, October 1, available at https://www.wto.org/english/news_e/ pres19_e/pr840_e.htm. 7Report on Trend and Progress of Banking in India 2018-19 II.7 Among EMEs, wide variations are evident, 3.1 Return on Assets with one end of the spectrum experiencing credit II.9 In an overall environment of low contraction as in Brazil on account of deleveraging profitability, US banks performed considerably of subsidised credit, high intermediation margins better than those in the Euro area and Japan. In and weak demand. In some other EMEs such as the Euro area, bank profitability was impacted Russia and India, elevated loan delinquencies by weak growth and high NPLs, although in operated as a drag on credit growth, whereas in China, policy-induced rebalancing, regulatory peripheral economies such as Portugal and tightening and deleveraging efforts are acting as Spain, there was a modest recovery due to inhibiting factors. lower loan loss provisioning. For the region as a whole, though, structural weaknesses 3. performance of the Global banking sector such as low cost-efficiency, limited revenue II.8 Progress was made albeit at varying diversification and high stocks of legacy assets speeds across jurisdictions in the application of in some jurisdictions remain as headwinds to Basel III norms. In this context, a core set of a fuller revival. Australian and Canadian banks indicators measuring profitability, asset quality, capital adequacy and leverage are reviewed in maintained better profitability than their peers this sub-section. in other AEs. 8Global bankinG Developments II.10 Among EMEs, the profitability of Indian loans (NPLs) were well provisioned for, and both banks remained muted, though recent quarters net interest income, and fee and commission indicate improvement. The profitability of income also increased. Indonesian banks turned Chinese banks also came under pressure in 2018 out to be among the most profitable among EMEs on the strength of high interest margins from asset quality issues, ongoing deleveraging, and robust credit growth. Banks in Mexico, decelerating loan growth and weak balance sheets South Africa and Brazil posted robust RoAs of small and medium-sized banks. In 2019 so far, (Table II.1). Chinese banks showed resilience as their profits bounced back. This was backed by reduction 3.2 Capital Adequacy in provisioning and was led by large banks. II.11 Capital positions have improved Profitability of Russian banks improved despite consistently across major AE banks on the back high loan delinquencies, as non-performing of implementation of Basel III norms, including Table II.1: Return on assets (per cent) advanced Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Australia 1.19 1.18 1.38 1.20 1.42 0.78 1.15 1.33 0.87 - Canada 1.13 1.11 1.10 1.11 1.04 1.02 1.11 1.15 1.03 1.07 France 0.39 0.31 0.49 0.23 0.40 0.40 0.42 0.42 0.31 0.38 Greece -9.52 -1.79 1.44 -0.97 -2.55 0.09 -0.17 -0.04 0.18 0.30 Germany 0.53 0.45 0.36 0.37 0.40 0.37 0.37 0.32 - - Italy -0.87 -0.06 -0.77 -0.20 0.26 -0.53 0.61 0.46 - 0.30 Japan 0.33 0.27 0.39 0.40 0.37 0.34 0.33 0.30 0.09 - Portugal -0.38 -0.33 -0.76 -1.34 0.16 -0.59 0.31 0.66 0.98 0.84 Spain 0.09 -1.39 0.38 0.43 0.48 0.39 0.52 0.61 0.62 0.57 United Kingdom 0.29 0.17 0.22 0.33 0.28 0.25 0.49 0.50 - - United States 0.28 0.33 0.38 0.33 0.36 0.37 0.34 0.39 0.41 0.42 Emerging Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Brazil 1.73 1.41 1.38 1.35 1.49 1.12 1.47 1.58 1.66 1.73 China, 1.28 1.28 1.27 1.23 1.10 0.98 0.92 0.90 1.02 1.00 P.R.: Mainland India 0.89 0.95 0.74 0.67 0.45 0.37 0.33 -0.01 -0.18 0.43 Indonesia 2.89 3.10 3.05 2.74 2.25 2.12 2.41 2.51 2.56 2.50 Malaysia 1.51 1.58 1.49 1.49 1.24 1.35 1.44 1.42 1.35 1.51 Mexico 1.54 1.83 2.08 1.66 1.63 1.69 2.05 2.20 2.41 2.26 Philippines 1.60 1.81 1.88 1.57 1.38 1.35 1.34 1.32 1.40 1.49 Russian Federation 2.47 2.39 1.87 0.95 0.23 1.20 1.01 1.59 - - South Africa 1.54 1.52 1.45 1.43 1.51 1.71 1.70 1.68 1.64 1.60 Turkey 2.23 2.35 2.02 1.69 1.48 1.89 2.04 1.78 1.53 1.44 note: 1. - Not available. 2. Data pertain to end-December. Data for Japan are for end-September. 3. Deep red depicts the lowest RoA whereas deep green reflects the highest RoA for a particular country during 2011-2019. source: Financial Soundness Indicators, IMF and Supervisory Returns (global operations), RBI. 9Report on Trend and Progress of Banking in India 2018-19 additional capital buffers for systemically 2018 but were lower than in other major EMEs. important entities. In countries such as Greece CRARs of banks in India improved on the back and Italy, however, the improvement in capital of capital infusion in public sector banks by position was halted by elevated levels of the Government and capital raising efforts by non-performing loans. private sector banks (Table II.2). II.12 Banks in major EMEs managed to build 3.3 Asset Quality up capital buffers, with Indonesian banks II.13 NPLs eased in most of the peripheral maintaining the highest CRARs. Chinese banks economies of the Euro-zone as the process strengthened their capital positions, particularly the small and medium sized ones. Although of deleveraging continued, mainly through stressed assets remained elevated, the capital institutional and government intervention. position of Russian banks improved during Impaired loan ratios of Greek banks remained Table II.2: Capital to Risk-Weighted assets Ratio (per cent) advanced Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Australia 11.6 11.9 11.6 12.2 13.8 13.6 14.5 14.8 14.7 - Canada 15.9 16.2 14.3 14.2 14.2 14.8 14.8 15.2 15.2 15.2 France 12.3 14.5 15.4 16.3 17.1 17.8 18.9 18.7 18.9 19 Germany 16.4 17.9 19.2 18 18.3 18.8 19.4 18.9 18.7 18.8 Greece 10.3 # 9.6 13.5 14.1 16.5 16.9 17 16 15.6 16.5 Italy 12.7 13.4 13.7 14.3 14.8 13.8 16.7 16.1 - 16.5 Japan 14.2 14.2 15.9 15.3 15.9 16.2 16.7 17 17.2 - Portugal 9.8 12.6 13.3 12.3 13.3 12.3 15.1 15.2 16 16.1 Spain 12.1 11.6 13.3 13.7 14.7 14.8 15.6 15.6 15.4 15.6 United Kingdom 15.7 17.1 19.6 17.3 19.6 20.8 20.5 21.4 - - United States 14.7 14.5 14.4 14.4 14.1 14.2 14.5 14.8 14.9 14.9 Emerging Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Brazil 16.3 16.4 16.1 16.7 16.4 17.2 18.1 18 17.8 18 China, 12.7 13.3 12.2 13.2 13.5 13.3 13.6 14.2 14.2 14.1 P.R.: Mainland India 14.2 14.2 13.9 13 13 13.3 13.7 13.8 14.3 14.1 Indonesia 16.1 17.3 19.8 18.7 21.3 22.7 23 22.9 23.3 22.5 Malaysia 17.7 17.6 14.6 15.4 16.3 16.5 17.1 17.4 18 17.4 Mexico 15.7 15.9 15.6 15.8 15 14.9 15.6 15.9 16 15.7 Philippines 17.1 17.8 17 16.1 15.3 14.5 14.4 14.9 15.2 15.3 Russian 14.7 13.7 13.5 12.5 12.7 13.1 12.1 12.2 - - Federation South Africa 15.1 15.9 15.6 14.8 14.2 15.9 16.3 16.1 16.3 16.8 Turkey 16.6 17.9 15.3 16.3 15.6 15.6 16.8 17.3 16.4 17.7 note: 1. - : Not available. 2. Data pertain to end-December. Data for Japan are for end-September. 3. # : Data pertain to end-September. 4. Data relating to India pertain to end-March and are based on Indian supervisory returns. 5. Deep red depicts the lowest CRAR whereas deep green reflects the highest CRAR for a particular country during 2011-2019. source: Financial Soundness Indicators, IMF and Supervisory Returns (domestic operations), RBI. 10Global bankinG Developments the highest in Europe despite asset sales and banks worsened further due to fragile economic write-offs. The search for yields in a low-interest conditions and sanctions. Banks in South Africa rate and low growth environment is pushing and Turkey also experienced deterioration in banks across the Euro area to increase their asset quality as financial conditions weakened. holdings of government securities, although it Various sector specific issues continued to weigh could also be inducing some degree of adverse on the asset quality of banks in India. However, selection in loan books. NPA ratio in core Euro progress in resolution of impaired assets and area economies, such as France and Germany, various measures to clean up balance sheets remained at a much lower level with declining albeit slow, is imparting a stabilising influence trend. (Table II.3). II.14 The asset quality of EME banks showed 3.4 Leverage Ratio a mixed picture, improving in Brazil and India but deteriorating in Russia, South Africa and II.15 Leverage ratio, defined as supervisory Turkey. In particular, NPL ratios of Russian Tier 1 capital divided by total exposure, aims Table II.3: non-performing loans Ratio (per cent) advanced Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Australia 2 1.7 1.4 1 0.9 1 0.9 0.9 1 - Canada 0.8 0.7 0.6 0.5 0.5 0.6 0.4 - - - France 4.3 4.3 4.5 4.2 4 3.6 3.1 2.7 2.7 2.6 Germany 3 2.9 2.7 2.3 2 1.7 1.5 1.2 - - Greece 14.4 23.3 31.9 33.8 36.6 36.3 45.6 42 42.2 40.3 Italy 11.7 13.7 16.5 18 18.1 17.1 14.4 8.4 - 8.1 Japan 2.4 2.4 2.1 1.7 1.5 1.4 1.2 1.1 1.1 - Portugal 7.5 9.7 10.6 11.9 17.5 17.2 13.3 9.4 8.9 8.3 Spain 6 7.5 9.4 8.5 6.2 5.6 4.5 3.7 3.6 3.4 United Kingdom 4 3.6 3.1 1.7 1 0.9 0.7 1.1 - - United States 3.8 3.3 2.5 1.9 1.5 1.3 1.1 0.9 0.9 0.9 Emerging Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Brazil 3.5 3.4 2.9 2.9 3.3 3.9 3.6 3.1 3.1 3.1 China, 1 1 1 1.2 1.7 1.7 1.7 1.8 1.8 1.8 P.R.: Mainland India 2.7 3.4 4 4.3 5.9 9.2 10 9.5 8.9 9.2 Indonesia 2.1 1.8 1.7 2.1 2.4 2.9 2.6 2.3 2.4 2.4 Malaysia 2.7 2 1.8 1.6 1.6 1.6 1.5 1.5 1.5 1.6 Mexico 2.1 2.4 3.2 3 2.5 2.1 2.1 2.1 2 2.1 Philippines 2.6 2.2 2.4 2 1.9 1.7 1.6 1.7 2 2 Russian 6.6 6 6 6.7 8.3 9.4 10 10.1 - - Federation South Africa 4.7 4 3.6 3.2 3.1 2.9 2.8 3.7 3.8 3.7 Turkey 2.6 2.7 2.6 2.7 3 3.1 2.8 3.7 3.8 4.1 note: 1. - Not available. 2. Data pertain to end-December. Data for Japan are for end-September. 3. Deep red depicts the highest NPL ratio whereas deep green reflects the lowest NPL ratio a particular country during 2011-2019. source: Financial Soundness Indicators, IMF and Supervisory Returns (global operations), RBI. 11Report on Trend and Progress of Banking in India 2018-19 to counteract pro-cyclicality embedded in risk- 3.5 Financial Market Indicators based capital requirements. Basel III norms II.16 Stock indices relating to US banks require a minimum leverage ratio of 3 per declined by around 18.3 per cent during 2018 cent. Since 2010 a general improvement in the followed by robust recovery of 29.4 per cent in leverage ratio has occurred across both AEs and 2019 (up to December 9). The volatility in US EMEs due to Basel III regulatory requirements. bank stock prices partly reflects ebbs and flows Uptick in the leverage ratio of banks in countries attributed to trade tensions and temporary such as Mexico and the Philippines reflected the truces and uncertainty about the global implementation of the minimum leverage ratio economic outlook4. In the Eurozone, negative (Table II.4). interest rates, subdued economic growth Table II.4: leverage Ratio (per cent) advanced Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Australia 5.3 5.1 5.1 5.2 6 6.6 6.9 6.9 6.8 - Canada 4.9 4.9 5 4.9 5.1 5.2 5.2 5.2 5.2 5.3 France 4.8 5.2 5.8 5.3 5.8 5.9 6.6 6.5 6.3 6.2 Germany 4.4 4.7 5.5 5.6 5.9 6 6.3 6.5 6.3 6.2 Greece 5.7# 5.8 7.5 8.1 10 10.7 12 10.7 10.5 11 Italy 5.4 5.4 5.4 5.9 6.2 5.5 6.6 6.3 - 6.5 Japan - - 5.6 5.5 5.6 5.5 5.4 5.5 5.4 - Portugal 5.1 6.7 6.8 6.4 7.2 6.5 7.7 7 7.5 7.4 Spain 5.9 5.8 6.8 7.2 7.4 7.8 7.6 7.6 7.5 7.5 United Kingdom 5.1 5.5 6.3 5.6 6.8 7 6.8 6.8 - - United States 12.2 12 11.8 11.7 11.7 11.6 11.7 11.7 11.8 11.9 Emerging Economies 2011 2012 2013 2014 2015 2016 2017 2018 2019:Q1 2019:Q2 Brazil 10.1 10.1 9.3 9 8.5 9.3 10 10.1 10.2 10.3 China, - - - 7.2 8.4 8.1 8.6 9.1 9 8.9 P.R.: Mainland India 6.7 7 6.9 7.1 7.2 7.2 7.4 7.5 7.5 - Indonesia 11 12.2 12.5 12.8 13.6 14.4 15.2 15.1 15.5 15.2 Malaysia 8.9 9.4 9.6 10 10.5 11 11.2 11.2 11.4 11.6 Mexico 9.9 10.6 10.4 10.8 10.4 9.9 10.4 10.7 11.1 10.7 Philippines 11.1 11.7 9.7 9.9 10 9.7 10 10.7 11 11.1 Russian 11.8 11.8 11.5 8.5 8.9 10.4 10.5 10 - - Federation South Africa 7.2 7.8 7.9 7.6 7 8.2 8.8 8.4 8.3 8.4 Turkey 11.7 12.1 10.9 11.6 11 10.7 10.7 10.8 10.4 11.3 note: 1. - : Not available. 2. Data pertain to end-December. Data for Japan are for end-September. 3. # : Data pertain to end-September. 4. Deep red depicts the lowest leverage ratio whereas deep green reflects the highest leverage ratio for a particular country during 2011-2019. source: Financial Soundness Indicators, IMF. 4 International Monetary Fund (2019), ‘Global Financial Stability Report’, October. 12Global bankinG Developments outlook, various structural issues and political 4. World’s largest banks5 uncertainty weighed on bank stock indices, II.18 The number of banks in the top 100 which lost about 30 per cent of their levels category, ranked by Tier-I capital, remained since the end of 2017. Returns on bank stocks the same across 2017 and 2018 in the AEs and in EMEs were held down by poor performance. EMEs (Chart II.4a). An increase in the share Sell-offs by portfolio investors also pulled down of assets held by banks in EMEs in 2018 was prices (Chart II.3a). driven by China, which had 18 banks in the top II.17 Credit default swap (CDS) spreads 100 list. The US increased its share in the top indicate the perceived solvency of banks and 100 banks at the cost of Sweden (Chart II.4b). their ability to refinance. Banks with lower However, the total assets of the top 100 banks and more stable CDS spreads pay lower risk witnessed a marginal decline in 2018 across premia which in turn enables cheaper and AEs and EMEs from a year ago. One bank each easier financing terms for their customers. CDS in Germany, UK, Japan and Brazil recorded spread of banks has ebbed after increasing in H2:2018. The lowest CDS spreads were reported declines in assets of more than 10 per cent. by banks located in the UK and North America. II.19 The median RoA of the top 100 banks In recent months, CDS spreads of Bank of China declined in 2018 due to a fall in both net closely tracked those of UK and North American interest income and net non-interest income. banks. Euro zone bank spreads remained Provisioning requirements declined, however, higher than those in the US and the UK due to on a marginal improvement in asset quality lower sovereign credit rating and poorer loan (Chart II.5a and b). quality. The sensitivity of CDS spreads to political uncertainty in Euro area has remained high due II.20 The capital positions of the top 100 banks to the sovereign-financial sector nexus in many remained strong, with 48 banks recording of the peripheral economies (Chart II.3b). CRARs of more than 16 per cent in 2018. At the 5 Data are drawn from the Banker Database of the Financial Times. 13Report on Trend and Progress of Banking in India 2018-19 other end of the spectrum, banks with CRARs balance sheets have, however, been hindered in less than 12 per cent declined. Another area of the environment of low growth and low interest improvement was the leverage ratio, with only rates. three banks - one each in France, Germany and II.22 Post-GFC global financial sector reforms Japan - going below 4 per cent but remaining initiatives consist of four key elements: above 3 per cent as prescribed under Basel III (i) making financial institutions more regulations (Chart II.6a and b). resilient; (ii) ending the too-big-to-fail (TBTF) 5. Global banking policy Developments phenomenon; (iii) making derivatives markets II.21 The implementation of global regulatory safer; and (iv) promoting resilient non-bank reforms after the GFC has led to an increase financial intermediation. The reforms are in banks’ capital and liquidity buffers. Their at various stages of implementation. The efforts to reduce bad loans and strengthen Financial Stability Board (FSB) evaluates their 14Global bankinG Developments effectiveness, and simultaneously develops new 5.2 Too-Big-To-Fail policies to address emerging risks to financial II.24 Implementation of the policy framework stability. Work is also underway to strengthen for too-big-to-fail banks has advanced the governance standards to reduce misconduct most for global systemically important banks risks and to assess and address the decline in (G-SIBs). However, substantial work remains to correspondent banking. be done for achieving effective resolution regimes 5.1 Building Resilient Financial Institutions and operationalising plans for systemically important banks and non-bank financial II.23 Most FSB members have adopted the institutions. Almost all G-SIB home and key host core elements of the Basel III risk-based jurisdictions have in place comprehensive bank capital rules and the leverage ratio. Significant progress has been made in the implementation resolution regimes that align with the FSB’s Key of the Liquidity Coverage Ratio (LCR) and the Attributes of Effective Resolution Regimes for Net Stable Funding Ratio (NSFR)6. However, Financial Institutions. However, implementation the latest progress report of the Basel of resolution powers and of resolution planning Committee on Banking Supervision (BCBS)7 requirements is still incomplete in several points out three areas where adoption of Basel jurisdictions. External total loss-absorbing standards is lagging across jurisdictions, capacity (TLAC) requirements have now been viz., i) securitisation framework; ii) capital finalised in all the AE G-SIB home jurisdictions requirements for equity investments in funds; (six more since 2018). However, implementation and iii) margin requirements for non-centrally of internal TLAC is less advanced and only a cleared derivatives (NCCDs)8. few jurisdictions have introduced the BCBS 6 Final guidelines on the NSFR for banks in India were published in May 2018 and the banks have to implement it from April 1, 2020. 7 Basel Committee on Banking Supervision (2018), ‘Fifteenth progress report on adoption of the Basel regulatory framework’, October 26, available at https://www.bis.org/bcbs/publ/d452.htm. 8 The adoption of securitisation framework is yet to commence in India, while the implementation of margin requirement for NCCDs is in progress. 15Report on Trend and Progress of Banking in India 2018-19 requirements on TLAC cross-holdings or in greasing the wheels of real economic activity. disclosures. However, maturity/liquidity transformations inherent in such intermediation inevitably 5.3 Making Derivatives Markets Safer involve leveraging, and liquidity mismatches II.25 Significant progress has been made in which can become a source of systemic risk. the over-the-counter (OTC) derivatives market Interconnectedness vis a vis the banking reforms. Comprehensive trade reporting system is an additional source of risk. Globally, requirements have been implemented in 23 the total financial assets of the monitoring jurisdictions (one more since 2018), although universe of non-bank financial intermediation internationally, trade reporting remains less than (MUNFI) grew by 7.0 per cent to US$184.3 truly effective. Implementation of frameworks trillion in 20179. The assets of other financial for central clearing (18 jurisdictions), intermediaries (OFIs) grew by 7.6 per cent to platform trading (13 jurisdictions) and $116.6 trillion. Structured finance vehicles margin requirements for non-centrally cleared (SFVs) expanded their balance sheets for the derivatives (16 jurisdictions) are still underway. first time since the GFC. India has implemented trade reporting and II.27 The implementation of FSB policy reforms interim capital requirements, while it has for non-bank financial intermediaries are at an shown positive changes in margin requirements early stage10. Out of 24 member jurisdictions, and platform trading in respect of OTC nine have not implemented measures for derivatives. Currently, India is fully compliant valuation, liquidity management and stable with the G-20 commitment on trade reporting net asset value (NAV) for Money Market Funds requirements. All OTC derivative trades—both (MMFs); similarly, 9 out of 24 jurisdictions inter-bank and client trades relating to interest have also not implemented measures for rate, forex and credit (Rupee Interest Rate securitisation framework. India, on the other Swap (IRS)/ Forward Rate Agreement (FRA), hand, has both the implementation measures in Forex forwards, Forex options, CDS etc.)—are place. reported to the Reserve Bank’s approved trade 5.5 Climate-related Financial Disclosures repository, i.e., the Clearing Corporation of II.28 The FSB published the second status India Ltd. (CCIL). India has also mandated the report on adoption of the recommendations of use of Legal Entity Identifier (LEI) for all non- the Task Force for Climate-related Financial individual OTC derivative trades in interest Disclosures on June 5, 2019. The report rate, forex and credit markets. observed that disclosure of climate-related 5.4 Promoting Resilient Non-bank Financial financial information has increased since 2016, Intermediation but is still insufficient for investors, especially II.26 Non-bank financial intermediation on the financial impact of climate-related issues provides a valuable alternative to bank financing on companies. 9 Financial Stability Board (2019), ‘Global Monitoring Report on Non-Bank Financial Intermediation 2018’, February 4, available at https://www.fsb.org/2019/02/global-monitoring-report-on-non-bank-financial-intermediation-2018/. 10 Financial Stability Board (2018), ‘Implementation and Effects of the G20 Financial Regulatory Reforms: Fourth Annual Report’, November 28, available at https://www.fsb.org/2018/11/implementation-and-effects-of-the-g20-financial-regulatory-reforms-fourth- annual-report/. 16Global bankinG Developments II.29 In this regard, green finance offers new 5.6 Misconduct Risks opportunities for diversification of financial II.30 In November 2018, the FSB introduced assets and enhances the ability of the financial a toolkit of measures which supervisors and system to mobilise private capital for a more firms can use to strengthen the governance sustainable low-carbon economy (Box II.1). frameworks of financial institutions by box II.1: opportunities and Challenges of Green Finance The impact of climate change on the financial system change financing. The market for green bonds has issuers manifests through various risks, inter alia, loss from more than 50 countries, including multilateral or damage to tangible assets arising from frequent institutions like the World Bank. During 2007-2018, natural disasters and financial stability implications cumulative issuances of green bonds worldwide has emanating from volatility in food prices due to erratic been US$ 521 billion, with India ranking second among weather trends, elevated credit spreads and greater EMEs in these issuances (Climate Bonds Initiative, precautionary saving. Enormous amounts of investments 2019). Green loans are another vibrant instrument, with are required to combat climate change and bring about issuances amounting to US$ 60 billion in 2018, with a transformation towards sustainable and low carbon an average maturity of over 15 years. Over 75 per cent development. As public funding alone cannot finance the of outstanding green loans were directed to renewable necessary transformation required to address climate energy and power generation companies (Institute of change, green finance is required to be harnessed for International Finance, 2019). financing environment-friendly sustainable development. Supranational institutions have been increasingly The green finance ecosystem seeks to raise financial contributing to these efforts, with the International flows from banking, micro-credit and insurance sectors Monetary Fund (IMF) already incorporating the same into as well as from public, private and not-for-profit sectors. its multilateral and bilateral surveillance. In September Central banks can use several policy tools for climate 2019, the Bank for International Settlements (BIS) change mitigation including disclosure requirements launched an open-ended US dollar denominated fund relating to all climate-related financial risks, green for central bank investments in green bonds aimed at macro-prudential regulation such as higher risk- management of their forex reserves and to support the weights for carbon-intensive sectors; differentiated deepening of the green-bond market. capital and reserve requirements for banks with higher Notwithstanding its advantages, literature provides green lending; and green credit policy instruments in no irrefutable evidence that sustainable funds out-or- the form of subsidized loan rates for priority sectors underperform conventional funds. There is also little (UN Environment, 2017). European Central Bank has evidence that costs of issuance of green bonds are lower formally identified climate-related risk as one of the key than those of conventional bonds (IMF, 2019). Studies risks facing the banking sector. It computes the impact suggest that developing universally accepted standard of climate-related changes on banks’ capital positions, and definition will improve the pricing of green bonds and, ultimately, on the supply of funds to the economy. and foster the development of green bond markets (World People’s Bank of China considers environmental factors Bank, 2018). in its monetary policy framework and financial stability assessments. The Central Bank of Brazil requires banks In the Indian context, preliminary estimates conducted to factor in environmental risks while computing capital for Paris Agreement suggest that at least US$ 2.5 trillion requirements. Similarly, upon ascertaining the energy (at 2014-15 prices) will be required for meeting its climate saving potential of the financed project, the Central Bank change actions between 2015 and 2030 (Government of of Lebanon gives exemption to commercial banks in India, 2015). India’s ambition of generating 175 gigawatts the form of lower required reserves for financing such of renewable energy by 2022 also entails massive funding. projects. As early as 2007, the Reserve Bank emphasised the Green bonds, carbon market instruments, and FinTech- need for non-financial reporting and urged financial based green funds are now at the forefront of climate institutions to adhere to sustainable development (Contd....) 17Report on Trend and Progress of Banking in India 2018-19 practices. Banks in India have been sensitized to the market, standardisation of green investment terminology, various international initiatives including the Equator consistent corporate reporting, and removing information principles11. In 2015, the Reserve Bank included lending asymmetry between investors and recipients can make to social infrastructure and small renewable energy a significant contribution in addressing some of the projects within priority sector lending targets, thereby shortcomings of the green finance market. giving a further fillip to green financing. India figures References prominently vis-à-vis its EME peers in green bonds Climate Bonds Initiative (2019), ‘Green Bonds: The State issuances (Chart 1). of the Market 2018’. As a proportion to the total bond market too, Indian Government of India (2015), ‘India’s Intended Nationally issuances of green bonds compare favourably with its Determined Contribution is Balanced and Comprehensive: peers (Chart 2). With the green bond issuances gaining Environment Minister,’ October 2, 2015, Press momentum—totalling about US$ 7.7 billion during Information Bureau Release, Ministry of Environment, 2012-2018—SEBI set out disclosure requirements for Forest and Climate Change, available at https://pib.gov. the issuance and listing of green debt securities in India in/newsite/PrintRelease.aspx?relid=128403. in May 2017. Institute of International Finance (2019), ‘Sustainable Notwithstanding this progress, the development of green Finance in Focus - Green Loans—Kickoff Time!’ May 1. finance faces many challenges, such as “greenwashing” International Monetary Fund (2019), ‘Global Financial or false claims of environmental compliance, plurality of Stability Report- Lower for Longer’, October. green loan definitions, and maturity mismatches between long-term green investment and relatively short-term UN Environment (2017), ‘On the Role of Central Banks interests of investors. Policy action is needed to establish in Enhancing Green Finance’, Inquiry Working Paper, 17/01, February. an enabling framework that promotes the green finance eco-system in India by fostering awareness through World Bank (2018), ‘The Price of Greenness: Some coordinated efforts. Deepening of corporate bond Evidence from Green Bond Markets’, September 27. increasing the accountability of senior elements of the FSB’s Misconduct Action Plan, management for misconduct within their firms. including compensation recommendations that The recommendations identify a core set of data align risk and reward better, as part of broader for the effective supervision of compensation measures to restore public trust in the financial practices. The toolkit complements other system. 11 The Equator Principles is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence and monitoring to support responsible risk decision-making. They are based on the International Finance Corporation’s (IFC) Performance Standards on Environmental and Social Sustainability. 18Global bankinG Developments 5.7 Correspondent Banking and Remittances of RSPs and compliance with international standards. II.31 Recent years have witnessed a decline in correspondent banking12 due to de-risking, 6. summing up a development impinging on the access to the II.32 Hand in hand with the growth slowdown international financial system. As the reduction that began in 2018, credit growth, being in correspondent banking relationships procyclical, has slowed down across major has a significant impact on the ability of the economies, which, in turn, has adversely affected remittance service providers (RSPs) to access bank profitability. Despite distinct improvement banking services, this in turn may drive some payment flows underground. In 2018, the in asset quality, structural weaknesses remain number of correspondent banking relationships in the banking systems in various economies and active corridors13 declined further by 3.5 across the world, although capital position has per cent and 2.0 per cent, respectively14, after been strengthened. Banks are facing increasing having declined by about 20 per cent and 10 per competition from non-traditional players, such cent, respectively, during 2012-2018. For EMEs as FinTech and BigTech firms, which are taking in which remittance flows are a key source of advantage of digital innovation. They too pose funds for households, this could have potentially a challenge to banking regulators in achieving adverse consequences on growth, financial a balance between promoting innovation and inclusion and international trade. In March applying a uniform supervisory and regulatory 2018, the FSB recommended a set of measures framework. Globally, policy makers have to address problems faced by RSPs in obtaining been fortifying the regulatory framework and access to banking services and identified a implementing internationally accepted norms variety of intertwined drivers underlying the for banks. These policies may not show termination of banking services to RSPs, immediate results, but they should pay back including low profitability, the perceived high risk of the remittance sector from the point of in the medium to long run by enhancing the view of anti-money laundering / combatting the soundness and resilience of the global banking financing of terrorism (AML/CFT), supervision system. 12 FSB defines correspondent banking as the provision of banking services by one bank (the “correspondent bank”) to another bank (the “respondent bank”). 13 Defined as country pairs that processed at least one transaction. 14 Bank for International Settlements, ‘New correspondent banking data - the decline continues’, accessible at https://www.bis.org/ cpmi/paysysinfo/corr_bank_data/corr_bank_data_commentary_1905.htm. 19III PoLIcy EnvIronMEnt During 2018-19, the Reserve Bank introduced a prudential framework for resolution of stressed assets, which aimed at ring-fencing and protecting the banking sector from the build-up of non-performing assets. The macroprudential framework was further aligned to the best international practices, while monetary policy responded to the emerging macroeconomic developments. The Reserve Bank improved governance and reporting practices of banks. Concerted efforts were undertaken to strengthen the liquidity and regulatory framework governing non-banking financial companies and also to remove the regulatory arbitrage, while catalysing liquidity flows to the sector. Modernisation of payment and settlement systems was a concomitant pursuit. 1. Introduction comprises developments in monetary policy and liquidity management. Policies for the III.1 The setting and conduct of policies for the resolution of stressed assets within the financial sector in India in 2018-19 and 2019- overarching macroprudential framework are 20 so far confronted testing challenges against covered in Section 3. Regulatory measures the backdrop of slowing global and domestic undertaken during the year are presented activity. In addition, heightened uncertainty in Section 4. Initiatives of the Reserve Bank triggered by global spillovers, geopolitical relating to banks in the supervisory realm and trade tensions, and bouts of turbulence are summarised in Section 5, while those for in financial markets clouded the outlook. In NBFCs are covered in Section 6. Measures for this environment, the policy focus turned to promoting financial inclusion, credit delivery, strengthening the prudential framework for and improving customer protection are covered resolution of stressed assets, incentivising in Sections 7 and 8, respectively. The Reserve resolution under the Insolvency and Bankruptcy Bank’s initiatives for improving access to new Code (IBC), regulatory harmonisation across age payment products in a safe and secure banks and non-banking financial companies environment are set out in Section 9. The (NBFCs), improving their financials, including chapter concludes with an overall assessment through lowering the cost of capital and in Section 10. recapitalisation of public sector bank (PSBs), and calibrating macroprudential regulations 2. Monetary Policy and Liquidity to the best international norms. Modernisation Management of payment and settlement systems was a III.3 The monetary policy committee (MPC) concomitant pursuit. of the Reserve Bank met six times during III.2 Against this backdrop, the rest of the 2018-19 and five times during 2019-20 so far chapter gives an overview of policy initiatives (April-December 2019) in accordance with its in the banking and non-banking spheres bi-monthly schedule. During this period, the in 2018-19 and 2019-20 so far. Section 2 policy repo rate was initially increased by 25 20Policy EnvironmEnt basis points each in June and August 2018 to foreign exchange buy-sell swap of US$ 5 billion head off the hardening of underlying inflation (`34,561 crore), followed up by another one of a pressures. The stance of monetary policy shifted similar amount in April 2019. from neutral to calibrated tightening in October III.5 During 2018-19, the WACR generally 2018 as elevated levels of oil prices exacerbated traded below the policy repo rate till January risks to the inflation outlook. Subsequently, with 2019 but hardened intermittently thereafter inflation outcomes surprising on the downside, and spiked at the year-end. Overall, the WACR the focus turned to slowing growth. Accordingly, remained 8 basis points (bps) below the policy the policy rate was reduced successively in rate in 2018-19 (10 bps in H1 vis-a-vis 6 bps in the next five meetings of the MPC in February, H2). April, June, August, and October 2019 as III.6 Fine-tuning operations through variable inflation ebbed and households’ expectations rate auctions were the key instrument to remained anchored. In its August 2019 meeting, manage frictional liquidity. During 2018-19, the MPC voted to reduce the policy rate by an while liquidity amounting to `6,39,900 crore unconventional 35 basis points, taking into was injected through variable rate repos of consideration weak domestic economic activity maturities ranging from overnight to 56 days in amidst a deepening global slowdown. In its addition to the regular 14-day repos, liquidity of December 2019 meeting, the MPC kept the policy `42,54,800 crore was absorbed through reverse rate unchanged. The policy stance was altered repos of maturities ranging from overnight to 14 in February 2019 from calibrated tightening to days. neutral and to accommodative from June 2019 III.7 The Reserve Bank injected daily average onwards. liquidity of `51,403 crore during April and Liquidity Management May 2019. Subsequently, however, as surplus III.4 Systemic liquidity underwent sizeable liquidity set in during June-December 2019 shifts during the period under review. While the (up to December 15, 2019), the variable rate Reserve Bank’s forex operations and currency reverse repos were conducted in addition to the expansion were the primary drivers of durable regular fixed rate reverse repos, on an average liquidity during the year, government spending absorbing `1,58,893 crore daily. In view of shaped frictional liquidity movements. the build-up of large surplus liquidity which Consistent with the stance of monetary policy, is expected to continue for some time, it was decided to conduct longer term variable rate therefore, the Reserve Bank employed various reverse repo auctions starting from November instruments at its disposal viz. fixed and 4, 2019. variable rate repo and reverse repo under the liquidity adjustment facility (LAF) and outright III.8 In order to meet durable liquidity open market operations (OMOs), to align the requirements, the Reserve Bank also conducted weighted average call rate (WACR) – the operating 27 OMO purchase operations aggregating target – with the policy repo rate. In March `2,98,500 crore during 2018-19. Durable 2019, the Reserve Bank expanded its liquidity liquidity amounting to `52,500 crore was management toolkit with the introduction of a injected during April-December 2019 (up to 21Report on Trend and Progress of Banking in India 2018-19 December 15, 2019) through the conduct of (HFCs) over and above the credit already on four OMO purchase auctions. their books. This frontloading of FALLCR of one per cent will form part of general FALLCR as Facility to Avail Liquidity for Liquidity and when the increase in FALLCR takes place Coverage Ratio as per the original schedule. Furthermore, it III.9 Earlier, the assets allowed as Level 1 High was decided to reduce the statutory liquidity Quality Liquid Assets (HQLAs)1 for the purpose ratio (SLR) by 25 bps every calendar quarter of computing the liquidity coverage ratio (LCR) commencing January 2019 until it reaches 18 of banks included, inter alia, government per cent of NDTL so as to align the SLR with the securities to the extent of 11 per cent of the LCR requirement2 . bank’s net demand and time liabilities (NDTL) External Benchmarking of Lending Rates under Facility to Avail Liquidity for Liquidity III.11 Drawing on the recommendations of Coverage Ratio (FALLCR). To enable banks to an Internal Study Group (ISG) and after due meet the LCR requirements prescribed under consultation with stakeholders, the Reserve Basel III, the Reserve Bank decided to permit Bank decided to link all new floating rate retail banks with effect from October 1, 2018 to loans and floating rate loans to micro and reckon government securities held by them small enterprises extended by banks with effect up to another 2 per cent of their NDTL, under from October 01, 2019 to one of the specified FALLCR, as Level 1 HQLA, thus increasing the external benchmarks. These benchmarks FALLCR to 13 per cent. consist of the policy repo rate, Government III.10 It was decided with effect from April 4, of India 3-months or 6-months Treasury Bill 2019, to permit banks to reckon an additional yields, or any other benchmark indicated by the 2 per cent (in four increments of 50 bps) Financial Benchmarks India Private Ltd (FBIL). government securities held by them under Banks have been given the freedom to decide the FALLCR within the mandatory SLR requirement spread over the external benchmark; however, as Level 1 HQLA for the purpose of computing the credit risk premium may be altered only LCR, in a phased manner, taking it to 15 per when borrower’s credit assessment undergoes cent of bank’s NDTL by April 1, 2020. The a substantial change. Furthermore, other second and third increases in FALLCR by 50 components of the spread, including operating bps each took effect on August 1 and December cost, can be changed only once in three years. 1, 2019, respectively. On July 5, 2019, banks Interest rates are required to be reset at least were permitted to reckon this one per cent once in three months. Existing loans and credit increase in FALLCR for computing LCR, to limits linked to the MCLR, the base rate or the the extent of incremental outstanding credit Benchmark Prime Lending Rate (BPLR) may to NBFCs and Housing Finance Companies continue till repayment or renewal. 1 The assets allowed as Level 1 High Quality Liquid Assets (HQLAs) for the purpose of computing LCR of banks include, inter alia, government securities in excess of the minimum SLR requirement and, within the mandatory SLR requirement, government securities to the extent allowed by the Reserve Bank under the Marginal Standing Facility (MSF) [presently 2 per cent of the bank’s NDTL] and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). 2 From the quarter commencing October 2019, the fourth round of reduction became effective, which brought down the SLR to 18.50 per cent of NDTL. 22Policy EnvironmEnt 3. Prudential Policies period, the asset would attract 20 per cent additional provisioning, which will be increased III.12 The Reserve Bank introduced a prudential by another 15 per cent (i.e., total additional framework for resolution of stressed assets, provisioning of 35 per cent) after 365 days from which aimed at ring-fencing and protecting the the commencement of the review period. The banking sector from build-up of non-performing framework provides incentives for application assets (NPAs) stress. It also undertook several of the Insolvency and Bankruptcy Code (IBC) measures to unclog bank lending to NBFCs. by allowing half the additional provisions to 3.1 Prudential Framework for Resolution of be reversed on filing an insolvency application. Stressed Assets The remaining additional provisions may be III.13 The instructions pertaining to the reversed upon admission of the borrower into prudential framework for resolution of stressed the IBC’s insolvency resolution process. The assets were revised on June 7, 2019 with a view new framework is applicable to SCBs, Small to provide a pre-IBC window for banks to resolve Finance Banks (SFBs), Systemically Important stressed accounts. The modified framework Non-Deposit taking NBFCs (NBFC-ND-SI) and aims at providing early recognition, reporting Deposit taking NBFCs (NBFC-D) and All India and time bound resolution of stressed assets, Term Financial Institutions. while providing strong disincentives in the form III.15 Going ahead, this framework is expected of additional provisioning for delays in initiation to induce timely recognition of stressed assets, of resolution or insolvency proceedings. Under thus helping in strengthening the financial health the modified framework, the lenders will get of the banks. Empirical evidence suggests that 30 days review period to decide on resolution the profitability of banks which delay recognition strategy once there is a default in the account. and adequate provisioning for impaired assets In cases in which a resolution plan (RP) is to is adversely affected as compared to those that be implemented, an inter-creditor agreement act in a timely manner (Box III.1). (ICA) is required to be executed by all lenders within the review period. The ICA will provide, 3.2 Deferment of Increase in Capital inter alia, that any decision agreed by lenders Conservation Buffer representing 75 per cent by value of outstanding III.16 The capital conservation buffer (CCB) is credit facilities and 60 per cent of lenders by designed to ensure that banks build up capital number will be binding upon all lenders. The buffers during normal times, which can be drawn RP is required to be implemented within 180 down as losses are incurred during a stressed days from the end of the review period. period. Currently, the CCB of banks stands at III.14 In case a viable RP in respect of a borrower 1.875 per cent of the risk-weighted assets, which is not implemented within 180 days, lenders was scheduled to increase to 2.5 per cent as on are required to make additional provisions over March 31, 2019. In view of the macroeconomic and above the provisions already held or the conditions and persisting overhang of stress in provisions required to be made as per the asset the banking sector, the implementation of the classification status of the borrower’s account. last tranche of 0.625 per cent of the CCB has After the first 180 days from the end of review been deferred to March 31, 2020. 23Report on Trend and Progress of Banking in India 2018-19 Box III.1: Asset Quality and Profitability: Does Prudence Pay? As the NPA stress started building up from 2012, some table 1: Panel Fixed Effects (FE) regression Model banks were prudent in early recognition and provisioning Dependent variable roA while others walked the imprudent path of ever-greening. It took a supervisory intervention in the form of the asset Interaction Imprudent Bank -1.037*** -0.527*** *Post (0.147) (0.166) quality review (AQR) to jolt the latter into more prudent Bank*Year No Yes behaviour. In order to assess whether the profitability Bank FE Yes Yes of imprudent banks suffered more than their prudent counterparts due to the adoption of differential policies, Year FE Yes Yes ceteris paribus, the analytical framework of difference- Observations 350 350 in-difference (diff-in-diff) regressions is used, treating the Adjusted R2 0.575 0.690 AQR as an exogenous shock. Any bank that experienced Standard errors are clustered at the bank level. an above-the-median change in the GNPA ratio after the Standard errors in parentheses * p < 0.10, ** p < 0.05, *** p < 0.01 AQR is classified as an imprudent bank, and others are classified as prudent banks3. In diff-in-diff parlance, the imprudent banks are the treatment group and the variable. An interaction term (Bank (i) × Year (t)) treating prudent ones are the control group (Chart 1a). The t (Year) as a continuous variable is included in the model, profitability of these groups is observed to have diverged to control for all the bank-specific factors which vary sharply after 2015 (Chart 1b). over time. A statistically significant η would suggest that Using annual panel data of 45 banks in private and public post-AQR, profitability differed across the two groups of sectors for the period 2011-18, the following equation is banks. estimated: The results suggest that the decline in the profitability of y = α + γ + η × D × D + β × (i × t) + ε imprudent banks relative to prudent banks in the period it i t post treatment it Where i indexes banks, t indexes time, α and γ after the policy shock is significant and varies between i t are bank and year fixed effects, D = 1for years when 0.53 per cent and 1.04 per cent4. Another implication post the AQR’s impact is expected to persist (2016-2018), is that the decline in aggregate profitability of the Indian D = 1 for imprudent banks, and is y the dependent banking sector in the post-AQR period was essentially treatment it (Contd....) 3 It is possible that some banks did not immediately recognise NPAs but did so in later years, which would imply that this classification is prone to some exclusion errors – banks which are actually imprudent are getting labelled as prudent. However, such a mis- classification will only underestimate the true impact of this NPA shock, not overestimate it. 4 The Reserve Bank revised the Prompt Corrective Action (PCA) framework in April 2017. Subsequently, five banks were placed under PCA as at end-June 2017, and another five as at end-December 2017, which restricted some of their activities. This may have had an impact on their profitability for the year 2017-18. To take into account this fact, the same regression specification for the period 2011-2017 is run which confirmed the robustness of the results. 24Policy EnvironmEnt due to the performance of the imprudent banks. From a Kulkarni, N. (2017). Creditor Rights and Allocative policy perspective, these results highlight the importance Distortions–Evidence from India. CAFRAL working paper. of correctly recognising and providing for the credit risk Miller, S. M., & Noulas, A. G. (1997). Portfolio mix and large- bank profitability in the USA. Applied Economics, 29(4), embedded in loan transactions. 505-512. references Petria, N., Capraru, B., & Ihnatov, I. (2015). Determinants Albulescu, C. T. (2015). Banks’ profitability and financial of banks’ profitability: evidence from EU 27 banking soundness indicators: A macro-level investigation in systems. Procedia Economics and Finance, 20, 518-524. emerging countries. Procedia Economics and Finance, 23, Sufian, F., & Chong, R. R. (2008). Determinants of bank 203-209. profitability in a developing economy: empirical evidence Jose, J. (2019). Asset Quality, Credit Growth and Profitability; from the Philippines. Asian Academy of Management Does Prudence Pay ? Mimeo. Journal of Accounting & Finance, 4(2). 3.3 Leverage Ratio excludes entities connected with the sovereign from the definition of the group of connected III.17 In order to mitigate risks of excessive counterparties, provided they are otherwise leverage, the Basel Committee on Banking Supervision (BCBS) designed the Basel III not connected. It also introduces economic Leverage Ratio (LR) as a simple, transparent, and interdependence as a criterion in the definition non-risk-based measure to supplement existing of connected counterparties with effect from risk-based capital adequacy requirements. LR April 1, 2020 for entities where a bank has is defined as the ratio of Tier I capital to the an exposure greater than 5 per cent of its bank’s exposure. The Reserve Bank has been eligible capital base in respect of each entity, monitoring banks against an indicative LR and mandates a look-through approach in the of 4.5 per cent for the purpose of disclosures determination of relevant counterparties in and also as the basis for parallel run by banks. case of collective investment undertakings, The final guidelines issued by the BCBS in securitisation vehicles and other structures. December 2017 prescribe a minimum of 3 Further, as a transition measure, non-centrally per cent LR requirement at all times. Keeping cleared derivatives have been kept outside the in mind financial stability and with a view to purview of LEF till March 31, 2020. Also, for moving further towards harmonisation with the purpose of LEF, Indian branches of foreign Basel III standards, the minimum LR was set at Global Systemically Important Banks (G-SIBs) 4 per cent for Domestic Systemically Important shall not be treated as G-SIBs. Furthermore, on Banks (DSIBs) and 3.5 per cent for other banks September 12, 2019 it was decided that a bank’s with effect from quarter commencing October 1, exposure limit to any single NBFC (excluding 2019. gold loan companies) would be raised to 20 3.4 Large Exposures Framework (LEF) per cent of the eligible capital base as against the earlier 15 per cent. Bank lending to NBFCs III.18 Guidelines for banks’ large exposures were revised on June 03, 2019, subsuming that are predominantly engaged in extending and superseding certain earlier provisions. In loans against gold—which is presently capped order to capture exposures and concentration at 7.5 per cent of the former’s capital funds—is risk more accurately and to align the framework allowed to go up to 12.5 per cent if it is for on- with international norm, the revised LEF lending to the infrastructure sector. 25Report on Trend and Progress of Banking in India 2018-19 3.5 Risk Weights for Exposures to NBFCs required and align the eligibility requirements with that required for other directors. III.19 Exposures to all NBFCs, excluding Core Investment Companies (CICs), will be risk- III.23 The Reserve Bank issued compensation weighted as per the ratings assigned by the rating guidelines for whole time directors, CEOs, agencies registered with SEBI and accredited by material risk takers and control function staff the Reserve Bank. This is intended to facilitate of all private sector banks (PVBs) on November the flow of credit to well-rated NBFCs and to 04, 2019 to be effective from April 1, 2020. harmonise risk weights applicable to banks’ The revised guidelines align the remuneration exposure to various categories of NBFCs standards of PVBs with the principles of under the standardised approach for credit Financial Stability Board (FSB) for sound risk management in a manner similar to that compensation practices, while not restricting of corporates under the extant regulations. overall compensation. Exposures to CICs, rated as well as unrated, will 4.2 Central Information System for Banking continue to be risk-weighted at 100 per cent. Infrastructure 3.6 Risk Weights for Consumer Credit III.24 The Reserve Bank maintains a directory of all Banking Outlets (BOs)/offices in India. III.20 Consumer credit, including personal Consistent with the needs of branch licensing loans and credit card receivables but excluding and financial inclusion, a new reporting system, educational loans, attract a higher risk weight the Central Information System for Banking of 125 per cent or higher. On a review, the Infrastructure (CISBI), has been web-deployed risk weight was reduced to 100 per cent. The to replace the legacy Master Office File (MOF) relaxation is not applicable to credit card system. The CISBI has provision to maintain receivables. complete details of banks and All India 4. regulatory Policies Financial Institutions (AIFIs) and a history of all III.21 As the regulator of the banking sector, the changes with a time stamp. Banks/AIFIs can the Reserve Bank emphasised improving also use the facility to access/ download data governance and reporting practices of banks. relating to them. All the information reported The Reserve Bank’s regulatory ambit also by banks in the past has been migrated to the extends to niche-centric lending institutions, CISBI. including NBFCs, HFCs, Payments Banks (PBs), 4.3 Amendments to the Know Your Customer SFBs and RRBs. In order to encourage further (KYC) Framework competition, the Reserve Bank recently issued III.25 KYC instructions were amended on May final guidelines for ‘on-tap’ licensing of SFBs, in 29, 2019 to align with the amendments dated the private sector. February 13, 2019 in the Aadhaar and money 4.1 Corporate Governance in Banks laundering related laws. Banks have been III.22 Guidelines on ‘fit and proper’ criteria allowed to use Aadhaar authentication or offline- for shareholder directors in the PSBs were verification only for individuals who volunteer reviewed comprehensively in August 2019. The and give specific consent for the same. Any revised guidelines enhance the due diligence proof of possession of Aadhaar number is now 26Policy EnvironmEnt added to the list of officially valid documents. without any requirement of minimum balance. Regulated entities (REs) are required to ensure These facilities include, inter alia, deposit of that the customers, who are not beneficiaries cash at bank branches as well as ATMs/CDMs, of any benefit or subsidy, redact or blackout receipt of money through any electronic channel their Aadhaar number while submitting it for or by means of cheques drawn by central/state customer due diligence. However, banks are government and agencies, providing ATM/debit required to obtain the Aadhaar number from cards, and a minimum of four withdrawals in a an individual and carry out its authentication month, including ATM withdrawals. using e-KYC authentication facility of Unique 4.6 Credit Discipline Identification Authority of India (UIDAI), in III.28 On December 5, 2018 the Reserve Bank case the individual is desirous of receiving any issued guidelines on loan system for delivery of benefit or subsidy under any scheme notified bank credit, in order to improve credit discipline under Section 7 of the Aadhaar Act, 2016. among large borrowers who are beneficiaries of 4.4 Branch Authorisation Policy for Regional working capital facility from the banking system. Rural Banks Borrowers with aggregate fund based working III.26 On May 31, 2019 the Reserve Bank capital facility of ₹150 crore and above are introduced the concept of banking outlet (BO) subject to a minimum level of ‘loan component’ for RRBs. A BO is a fixed-point service delivery of 40 per cent from April 1, 2019, which further unit, manned by either the bank’s staff or its increased to 60 per cent effective from July 1, business correspondent where services of 2019. Furthermore, a credit conversion factor acceptance of deposits, encashment of cheques/ of 20 per cent is applied to the undrawn portion cash withdrawal or lending of money are provided of cash credit or overdraft limits of these large for a minimum of four hours per day for at borrowers from April 1, 2019. least five days a week. For Tier 5 and 6 centres, 4.7 Bulk Deposits RRBs have general permission for opening BO with post facto reporting. However, RRBs III.29 On February 22, 2019 the definition would be required to obtain prior approval of of ‘bulk deposits’ was revised to provide the Reserve Bank for opening brick and mortar operational freedom to banks to raise these branches in Tier 1 to 4 centres (as per Census deposits. Under the amended definition, single 2011) subject to conditions. Furthermore, they rupee term deposits of `2 crore and above for would also be required to open at least 25 per SCBs (excluding RRBs) and SFBs have been cent of the new BOs in unbanked rural centres classified as bulk deposits. every year. 5. Supervisory Policies 4.5 Basic Savings Bank Deposit Accounts III.30 The Board for Financial Supervision III.27 In the interest of improving customer (BFS), constituted in November 1994, acts service, the Reserve Bank advised all SCBs, PBs, as an integrated supervisor for the financial SFBs, LABs and co-operative banks to offer some system covering SCBs, SFBs, PBs, CICs, AIFIs, basic minimum facilities in the Basic Savings co-operative banks, NBFCs and ARCs. During Bank Deposit (BSBD) account free of charge and July 2018 to June 2019, 10 meetings of the 27Report on Trend and Progress of Banking in India 2018-19 BFS were held. Besides prescribing the course This shored up their capital funds and also of action to be pursued in respect of institution- increased their loan loss provision to ensure specific supervisory concerns, the BFS provided that the PCA parameters were complied with. guidance on several regulatory and supervisory Noting that the CRAR, CET1, net NPA and policy issues and the framework for enforcement leverage ratios of these banks are no longer in action against regulated entities. breach of the PCA thresholds, these banks were taken out of the PCA framework on February III.31 Some of the major issues deliberated 26, 2019. upon by the BFS, inter alia, included restrictions imposed on banks under the prompt corrective III.35 Additionally, Dhanlaxmi Bank was action (PCA) framework, harmonisation of also taken out of the framework as it did not bank licensing guidelines, review of extant breach any of the PCA thresholds. Further, instructions on ownership and governance in one of the PSBs under PCA viz. Dena Bank PVBs, and recommendations made by expert was merged with a non-PCA PSB viz. Bank of committee on NPAs and frauds (Chairman: Shri Baroda. Y.H. Malegam). III.36 Currently, there are six banks (4 PSBs 5.1 Prompt Corrective Action (PCA) framework and 2 PVBs) under the PCA framework. The performance of these six banks, and the banks III.32 Prior to January 2019, there were eleven (five PSBs and one PVB) which have been taken PSBs and one PVB under the PCA framework. out of the PCA framework, are being continuously Consequent upon infusion of fresh capital by the monitored by the Reserve Bank through various central government in some of the PSBs from financial indicators. Periodic meetings with the November 2018, accompanied by improved top management of these banks are also being compliance with the PCA parameters and held. various systemic and structural improvements achieved by these banks, it was decided to 5.2 Merger of PSBs remove five PSBs out of the PCA framework. III.37 Various committees5 have recommended III.33 On January 31, 2019 Bank of India and consolidation of PSBs, given underlying benefits/ Bank of Maharashtra were taken out of this synergies. Keeping in view the potential benefits framework as they met the regulatory norms of consolidation and to take advantage of the including Capital Conservation Buffer (CCB) resulting synergies, Vijaya Bank and Dena Bank and had net NPAs of less than 6 per cent. In were merged with the Bank of Baroda with effect the case of Oriental Bank of Commerce, the from April 1, 2019 without any discrimination Government infused sufficient capital to bring among customers. the net NPA to less than 6 per cent. III.38 Furthermore, the government has III.34 Allahabad Bank and Corporation proposed an amalgamation of 10 PSBs to form Bank received capital infusion to the tune of 4 merged entities with a view to creating next ` 6,896 crore and ` 9,086 crore, respectively. generation banks with strong national and 5 Narasimham Committee (1998), Leeladhar Committee (2008) and Nayak Committee (2014). 28Policy EnvironmEnt global presence. Oriental Bank of Commerce undertook concerted efforts to strengthen the and United Bank of India are proposed to liquidity and regulatory framework governing merge with Punjab National Bank to form NBFCs and also to remove the regulatory the country’s second-largest lender. Syndicate arbitrage, while catalysing liquidity flows to the Bank and Canara Bank will merge to create sector. the fourth largest PSB. Andhra Bank and III.42 The NBFC sector has been at the forefront Corporation Bank will be merged into the Union of adopting digital innovation and fintech services Bank of India, and will form the country’s fifth through digital platforms such as peer-to-peer largest PSB. The merger of Allahabad Bank (P2P) lending. The proposed enhancement of with Indian Bank will result in strong branch exposure limit of lenders is expected to give a networks in the south, north and east of the further fillip to these platforms. country. 6.1 Strengthening Supervision over NBFCs 5.3 Change of Ownership of IDBI Bank III.43 The RBI Act, 1934 was amended through III.39 The Life Insurance Corporation of India the Finance (No. 2) Act, 2019 to enhance the (LIC) acquired 51 per cent of the total paid-up regulatory and supervisory powers of the equity share capital of the IDBI Bank during Reserve Bank over NBFCs. The amendments 2018-19. Consequently, the Reserve Bank empowered the Reserve Bank to remove the re-categorised IDBI Bank as a private sector directors; supersede the board and appoint bank for regulatory purposes with effect from administrators for NBFCs (other than January 21, 2019. government-owned NBFCs) in order to protect 5.4 Audit-related Developments the interests of depositors and creditors; III.40 The Reserve Bank has put in place a increase the quantum of penalties in case of framework to take enforcement action against non-compliance with various requirements; and audit firms by way of not approving their enabled the Reserve Bank to resolve NBFCs by appointments for a specific period to undertake amalgamation, reconstruction or splitting into statutory audit assignments for past lapses. different units or institutions. This is expected to serve as a deterrent to audit 6.2 Regulation of Housing Finance Companies firms from committing similar or other lapses (HFCs) and help in improving the quality of statutory III.44 Under the provisions of the National audit. Housing Bank (NHB) Act, 1987, the HFCs were 6. non-Banking Financial companies regulated and supervised by the NHB. Over III.41 NBFCs have faced challenges relating time, the mandate of the NHB has been widened to asset liability mismatches and overleveraging and it assumed the role of refinancer and in the recent period. In view of the important lender to the sector. Recognising the conflicting role of the sector in complementing credit aspects of the mandate, the Union Budget 2019- delivery by the banking sector, especially in last 20 proposed to return the regulatory authority mile financial intermediation and in financial over the housing finance sector from NHB to inclusion, the Reserve Bank and the Government the Reserve Bank. Henceforth, the certificate 29Report on Trend and Progress of Banking in India 2018-19 of registration to HFCs will be issued by the including stress testing and diversification of Reserve Bank, which has also been empowered funding. The framework requires maintenance to direct inspections of HFCs by the NHB and to of a liquidity buffer in terms of a LCR starting at impose penalties on the former. 50 per cent for all NBFCs-D and all NBFCs-ND with an asset size of `10,000 crore and above III.45 On November 11, 2019 the exemptions and 30 per cent for all NBFCs-ND with an asset granted to HFCs from the provisions of Chapter size of `5,000 crore and above, but less than ` IIIB (except Section 45-IA) of the RBI Act, 1934 10,000 crore, from December 1, 2020 to reach were withdrawn. 100 per cent on December 1, 2024. 6.3 Harmonisation of various NBFC Categories 6.5 Partial Credit Guarantee Scheme III.46 The evolution of the NBFC sector over III.48 In pursuance of the announcement made the years has resulted in several categories of in the Union Budget 2019-20, the Government NBFCs, based on specific asset classes/ sectors of India has rolled out a scheme offering to with different sets of regulatory prescriptions. provide a one-time partial credit guarantee for Regulations for deposit acceptance were first loss up to 10 percent to public sector banks harmonised in November 2014. On February 22, (PSBs) for purchase of high-rated pooled assets 2019 the regulations governing Asset Finance amounting to ₹1,00,000 crore from financially Companies (AFCs), Loan Companies (LCs) and sound NBFCs and HFCs. On its part, the Reserve Investment Companies (ICs) were harmonised Bank will provide required liquidity backstop to and they were merged into a new category called the banks against their excess G-sec holdings. NBFC – Investment and Credit Companies 6.6 Temporary Relaxation of Minimum (NBFC-ICCs). With this harmonisation, there Holding Period are now 11 categories of NBFCs (Section 2, Chapter VI) III.49 With several NBFCs facing difficulties in availing funds in the aftermath of default by a 6.4 Liquidity Risk Management Framework systemic NBFC, the Reserve Bank took several III.47 In order to strengthen and raise the measures to ameliorate the situation. In order standard of asset-liability management (ALM) to encourage NBFCs to securitise/assign their framework of NBFCs, including CICs, the eligible assets, the minimum holding period Reserve Bank has revised the extant guidelines (MHP) requirement for originating NBFCs was on liquidity risk management on November 4, relaxed in November 2018 in respect of loans 2019. The revised guidelines build upon the of original maturity above 5 years, subject to existing framework by specifying more granular certain conditions. The relaxation, initially maturity buckets and tolerance limits, and given for a period of six months i.e. up to May adoption of liquidity risk monitoring tools. 2019, was subsequently extended till December The guidelines recommend monitoring of 31, 2019. liquidity by using a stock approach in addition 6.7 Priority Sector Lending by NBFCs to the measurement of structural and dynamic liquidity. They also extend the principles of sound III.50 On August 13, 2019 the Reserve Bank liquidity risk management to various aspects, allowed bank credit to registered NBFCs (other 30Policy EnvironmEnt than micro finance institutions (MFIs)) for on- 6.10 Review of Household Income and lending to agriculture and micro and small Lending Limits for Non-Banking Financial enterprises (MSEs) to be treated as priority Companies-Micro Finance Institutions (NBFC- sector lending, subject to certain restrictions. MFIs) Only fresh loans sanctioned by NBFCs can III.53 Taking into consideration the important be classified as priority sector lending by the role played by NBFC-MFIs in delivering credit banks. Furthermore, on-lending by NBFCs for to those in the bottom of the economic pyramid term-lending component under agriculture and to enable them to play their assigned role will be allowed up to ₹10 lakh per borrower in a growing economy, the household income and up to ₹20 lakh per borrower to micro and limits for borrowers of NBFC-MFIs have been small enterprises. To qualify for priority sector raised from the current level of ₹1,00,000 for lending, the limit for onlending to HFCs for rural areas and ₹1,60,000 for urban/semi urban housing loans was enhanced to ₹20 lakh per areas to ₹1,25,000 and ₹2,00,000, respectively borrower as against the earlier limit of ₹10 lakh. along with increase in lending limit from 6.8 Chief Risk Officer for Large NBFCs ₹1,00,000 to ₹1,25,000 per eligible borrower effective November 8, 2019. III.51 NBFCs have significant inter-linkages with the rest of the financial sector in terms of their 6.11 Technical Specifications for all access to public funds and participation in credit participants of the Account Aggregator (AA) ecosystem intermediation. It was decided to augment their risk management practices in order to mitigate III.54 NBFC-Account Aggregator (NBFC- potential systemic risks arising out of this AA) consolidates financial information of a interconnectedness. Accordingly, Investment customer held with different financial entities, and Credit Companies, Infrastructure Finance spread across financial sector regulators Companies, Micro Finance Institutions, Factors having different IT systems and interfaces. and Infrastructure Debt Funds with an asset In order to ensure secured, duly authorized, size of more than ` 5,000 crore were required to and seamless movement of data, a set of appoint a functionally independent Chief Risk core technical specifications (framed by Officer (CRO) with clearly specified role and Reserve Bank Information Technology Private responsibilities. Limited (ReBIT)) have been prescribed for the participants of the AA ecosystem namely 6.9 Licensing as Authorised Dealer NBFC-AA, Financial Information Providers, and III.52 In order to increase accessibility and Financial Information Users. efficiency of the services extended to the 6.12 Fit and Proper Criterion for Asset members of the public for their day-to-day Reconstruction Companies (ARC) Sponsors non-trade current account transactions, the Reserve Bank allowed systemically important III.55 The Reserve Bank issued directions non-deposit taking Investment and Credit on fit and proper criteria for ARC sponsors Companies to apply for AD - Category II license, on October 25, 2018, in accordance with the effective April 16, 2019. amendment to the SARFAESI Act (Securitisation 31Report on Trend and Progress of Banking in India 2018-19 and Reconstruction of Financial Assets and 7.1 Interest Subvention Scheme for Micro, Enforcement of Securities Interest Act, 2002) Small and Medium Enterprises (MSMEs) in 2016. The directions seek to ensure that III.60 An interest subvention scheme for MSMEs sources of funds are legitimate and sustainable in both manufacturing and services sector was and that the integrity of management of the ARC introduced by the Government in 2018. This is beyond reasonable doubt. Furthermore, the scheme is aimed at increasing productivity directions mandate continuous monitoring of and providing incentives for onboarding the the fit and proper status of sponsors. GST platform, thereby helping in greater III.56 The amendment also brought ARCs formalisation of the sector, while reducing the under the definition of ‘financial institution’ and cost of credit. Interest subvention of 2 per cent was made available for GST-registered MSMEs thereby enabled one ARC to acquire financial with valid Udyog Aadhaar Number, for two years assets from other ARCs, which was hitherto starting from 2018-19. The scheme was made allowed only for the purpose of debt aggregation. available on fresh or incremental loans up to III.57 During the year, three companies were `100 lakh for loans issued by SCBs and NBFCs- given Certificate of Registration (CoR) to function ND-SIs. as ARC, and one company’s CoR was cancelled. 7.2 Interest Subsidy on Export Credit 6.13 Acquisition of financial assets by ARCs III.61 The Government of India increased the from sponsors and lenders interest subsidy on post and pre-shipment III.58 To address the concerns relating to export credit from 3 per cent to 5 per cent to transparency and price discovery in bilateral provide a boost to MSME sector exports effective transactions, ARCs have been advised to acquire from November 2, 2018. All SCBs (excluding financial assets from their lenders, sponsors RRBs), SFBs and Primary Co-operative banks or group entities through auctions which are were directed by the Reserve Bank to implement conducted in a transparent manner, on arm’s the scheme effectively. length basis and at prices determined by market 7.3 Restructuring of Advances to MSME forces. III.62 In order to facilitate meaningful 7. credit Delivery and Financial Inclusion restructuring of MSME accounts that have III.59 Creation and strengthening of efficient become stressed, a one-time restructuring of credit delivery mechanisms that ensure adequate existing loans to MSMEs that were in default but and timely delivery of financial resources to the ‘standard’ as on January 1, 2019, was permitted productive sectors of the economy has remained without an asset classification downgrade. The a policy priority. Several initiatives were aimed restructuring has to be implemented by March at the priority sector, including MSMEs, 31, 2020. The scheme was made available to agriculture and minorities. Furthermore, a MSMEs that qualify in terms of certain criteria, national strategy for financial inclusion was including a cap of `25 crore on total borrowings designed to secure greater inclusion in a time from banks and NBFCs, and being GST-registered bound and co-ordinated manner. before implementation of the restructuring 32Policy EnvironmEnt package. Additional provisioning of 5 per cent Furthermore, ECBs upto USD 750 million, is required for accounts restructured under the irrespective of the sector, which are compliant scheme. with the parameters and conditions set out in the new ECB framework, have been made 7.4 Kisan Credit Card eligible for automatic route, not requiring the III.63 The Kisan Credit Card (KCC) scheme prior approval of the Reserve Bank. The general aims at providing adequate and timely bank minimum average maturity period (MAMP) credit support under a single window with has been specified at 3 years for all ECBs, flexible and simplified procedure to the farmers irrespective of the amount, subject to certain for short-term crop loans. In the Union Budget utilisation criterion. Also, permitted end-uses 2018-19, this facility was extended, along with criterion have been changed from a positive list interest subvention, to farmers engaged in to a negative list, thereby expanding the scope of animal husbandry and fisheries for loans up to utilisation of ECB proceeds. ` 2 lakh. The interest subvention is allowed for 7.6 ECB Facility for Resolution Applicants short-term loans and is being implemented for under Corporate Insolvency Resolution Process two years, starting from 2018-19. III.66 Resolution applicants under the III.64 Keeping in view the overall increase Corporate Insolvency Resolution Process (CIRP) in agriculture input costs, it was decided on were allowed to raise ECBs from recognised February 7, 2019 to raise the limit for collateral lenders (except branches/ overseas subsidiaries free agricultural loan from `1 lakh to `1.60 of Indian banks), for repayment of rupee term lakh. loans of the target company under the approval 7.5 New Framework for External Commercial route. Borrowings (ECBs) 7.7 Rationalisation of End-use Provisions III.65 In January 2019, the Reserve Bank III.67 On July 30, 2019 end-use restrictions rationalised the frameworks for ECBs and relating to ECBs were relaxed for working capital rupee denominated bonds (RDBs) to improve requirements, general corporate purposes and the ease of doing business. Tracks I and II repayment of rupee loans. Eligible borrowers have been merged under “foreign currency were permitted to raise ECBs with an MAMP denominated ECB”, and track III and RDBs have of 10 years for working capital purposes and been merged under “rupee denominated ECB” general corporate purposes, and 7 years for under a single new ECB framework. The list of repayment of rupee loans availed domestically eligible borrowers has been expanded to include for capital expenditure. Borrowing by NBFCs all entities eligible to receive foreign direct for on-lending for these purposes was also investment (FDI), apart from other specified permitted. entities. Additionally, recognised lenders’ list was expanded to any resident of Financial III.68 ECBs can be raised for repayment of Action Task Force (FATF) or International rupee loans availed domestically for capital Organisation of Securities Commission (IOSCO) expenditure in manufacturing and infrastructure compliant country, subject to certain conditions. sectors if classified as SMA-2 or NPA, under 33Report on Trend and Progress of Banking in India 2018-19 any one-time settlement with lenders. Lender 8.1 Limiting Customer Liability for Non-Bank banks are also permitted to sell, through Authorised PPI Issuers assignment, such loans to eligible ECB lenders, III.72 Customers using pre-paid payment except foreign branches/ overseas subsidiaries instruments (PPIs) issued by banks are of Indian banks, provided the resultant ECB protected by limiting their liability towards complies with all-in-cost, MAMP and other unauthorised electronic transactions. With relevant norms of the ECB framework. effect from March 01, 2019, this facility was 7.8 National Strategy for Financial Inclusion extended to customers using non-bank issued PPIs as well. An enhanced customer grievance III.69 A national strategy for financial inclusion redressal framework was also implemented, (NSFI) for India 2019-2024 was prepared under prescribing the limits up to which a customer the aegis of the Financial Inclusion Advisory may bear liability under various scenarios like Committee. It specifies financial inclusion contributory frauds, negligence or deficiency on goals, an action plan to reach the goals and part of non-bank PPI issuer, third party breach the mechanism to measure progress. The where the deficiency lies neither with the issuer strategy envisages making formal financial nor with the customer, and scenarios in which services available, accessible, and affordable the loss is due to negligence of the customer. to all the citizens in a safe and transparent manner to support inclusive and resilient multi- 8.2 Harmonisation of Turn Around Time (TAT) stakeholder led growth. for failed transactions 7.9 Classification of Exports under Priority III.73 A large number of customer complaints Sector originate on account of unsuccessful or ‘failed’ transactions due to, inter alia, disruption of III.70 In order to boost credit to the export communication links, non-availability of cash in sector, on September 20, 2019, the Reserve ATMs and time-out of sessions, which may not Bank enhanced the sanctioned limit to be be directly assignable to the customer. Moreover, eligible under priority sector norms. The limit the process of rectification and amount of was raised from `25 crore to `40 crore per compensation to the customer for these ‘failed’ borrower. Furthermore, the existing criterion of transactions was not uniform. ‘units having turnover of up to `100 crore’ was removed. III.74 Accordingly, the Reserve Bank introduced a framework on Turn Around Time 8. consumer Protection (TAT) for resolution of customer complaints III.71 The Reserve Bank has been proactive in and compensation across all authorised ensuring that consumers served by its regulated payment systems on September 20, 2019. entities receive fair treatment and consumer This framework aims to provide prompt and rights are adequately protected. In view of the efficient customer service in all the electronic increasing number of transactions undertaken payment systems. Under the framework, the using the digital modes, especially using TAT for failed transactions and compensation payment systems operated by non-banks, the were finalised to improve consumer confidence Reserve Bank extended the customer protection and bring consistency in processing of the failed schemes to these areas as well. transactions. 34Policy EnvironmEnt 8.3 Ombudsman Scheme for Digital for promoting and increasing the use of Transactions electronic payments. The recommendations of the committee are in line with the ‘Payment III.75 With the digital mode for financial and Settlement Systems in India: Vision 2019– transactions gaining traction in the country, 2021’ released by the Reserve Bank. The core a need was felt for a dedicated, cost-free and theme of the vision document is ‘Empowering expeditious grievance redressal mechanism Exceptional (E)payment Experience’ and aims for strengthening consumer confidence in this at empowering every Indian with access to a channel. Accordingly, an ombudsman scheme bouquet of e-payment options that is secure, for digital transactions was implemented with convenient, quick and affordable. effect from January 31, 2019. The purpose of the scheme is to serve as a complaint redressal 9.1 Tokenisation of Card Transactions mechanism relating to deficiency in customer III.79 In January 2019, the Reserve Bank service in digital transactions conducted authorised card payment networks to offer through non-bank entities that are regulated by tokenisation services, irrespective of the app the Reserve Bank. provider, use case and token storage mechanism. 8.4 Internal Ombudsman for Non-Bank Pre- There is no relaxation in the additional factor of paid Payment Instruments authentication (AFA) or PIN entry requirement for authenticating the tokenised card transactions. III.76 To further strengthen the grievance Furthermore, registration for tokenisation redressal mechanism at the entity level itself, service is purely voluntary for customers and large non-bank PPI issuers were mandated to they need not pay any charges for availing this institutionalise an internal ombudsman scheme service. At present, this facility is being offered in October 2019. through mobile phones and tablets. 8.5 Ombudsman Scheme for NBFCs 9.2 Processing of e-mandate on cards and III.77 The ombudsman scheme for NBFCs was PPIs for recurring transactions initially operationalised for all NBFCs-D. In III.80 To balance convenience with safety and April 2019, the scheme was further extended protection in card transactions, the Reserve to NBFCs-ND having customer interface, with Bank issued a framework that facilitates asset size of ` 100 crore or above. cardholders (credit card, debit card, prepaid 9. Payment and Settlement Systems cards or wallets) to register their e-mandates III.78 Efficient payment systems reduce the with their bank or non-bank for recurring small cost of exchanging goods and services and are value transactions up to ` 2,000. An additional indispensable for the functioning of financial authentication aimed at validation by the issuer markets. The Reserve Bank constituted a high- is mandatory during registration, modification level committee on Deepening of Digital Payments and revocation of e-mandate, as well as during (CDDP) (Chairman: Shri Nandan Nilekani) in the first transaction. Card issuers are required January 2019. The Committee recommended to send alerts to cardholders before and after various actions to be taken by the Reserve Bank, the transaction is effected, giving the cardholder Government and other industry participants the option to withdraw the e-mandate before 35Report on Trend and Progress of Banking in India 2018-19 the transaction or at any other point of time. This system, which was already available in Furthermore, a new PPI instrument which can the National Electronic Funds Transfer (NEFT) be used only for purchase of goods and services system, provides an assurance to the remitter upto a limit of `10,000 is proposed to be that the funds have been successfully credited introduced. to the beneficiary account. 9.3 National Electronic Toll Collection 9.6 Waiver of Charges levied by the Reserve Bank in RTGS and NEFT systems III.81 National Electronic Toll Collection (NETC) is an interoperable i.e. multiple issuers- III.85 With effect from July 01, 2019 the multiple acquirers electronic toll collection Reserve Bank waived off the processing charges system which allows customers to pay the toll and time varying charges, levied by it on banks, fare using passive tags linked to their bank for outward transactions undertaken using the accounts. The Reserve Bank granted final RTGS system as also the processing charges levied by it for transactions processed in approval to the National Payments Corporation the NEFT system in order to provide an of India (NPCI) for operating the NETC system. impetus to the digital funds movement. Banks 9.4 National Common Mobility Card were advised to pass on this benefit to their III.82 The Reserve Bank allowed relaxation customers. in the requirement of additional factor of 9.7 Deepening Digital Payments Ecosystem authentication for the National Common III.86 The Reserve Bank directed all State Mobility Card (NCMC) for contactless offline and UT Level Bankers Committees (SLBCs transit payments in December 2018. This and UTLBCs) to identify one district in their was done on account of the nature of fast respective states and UTs, to make it 100 per cent checkout time for transit payments, to enhance digitally enabled within one year. It is envisaged the use of electronic payments and facilitate that a bank with a significant footprint in the interoperability across all public transport selected district will be engaged to enable every operators. individual to make or receive payments digitally 9.5 Real Time Gross Settlement System in a safe and convenient manner. III.83 In view of increasing customer demand, 9.8 Regulatory Sandbox for Financial Service the timings for customer transactions in the Providers Real Time Gross Settlement (RTGS) System III.87 Based on the recommendations of an have been extended and the RTGS system is now inter-regulatory working group and after a available from 7:00 am to 6:00 pm. The final consultative process with stakeholders, an cut-off timings for the RTGS system however, enabling framework for a regulatory sandbox remained unchanged at 7:45 pm. (RS) was introduced in August 2019. The RS III.84 The sending of positive confirmations to envisages live testing of new products or services remitters regarding the completion of the funds in a controlled/test regulatory environment transfer was implemented for customers of the for which regulators may (or may not) permit RTGS system, and banks were advised to ensure certain regulatory relaxations for the limited its operationalisation by January 15, 2019. purpose of testing. Areas that can potentially 36Policy EnvironmEnt get a thrust from the RS include microfinance, The authorisation is subject to criteria such innovative small savings and micro-insurance as merits of the proposal, capital and KYC products, remittances, mobile banking and requirements, and the interoperability among other digital payments. different retail payment systems. So far, Bharat Bill Payment Operating Unit (BBPOU), Trade III.88 On November 4, 2019 the Reserve Bank Receivables Discounting System (TReDS), and announced the opening of the first cohort under White Label ATMs (WLAs) have been offered on- the RS, with ‘retail payments’ as its theme. This is tap authorisation. expected to spur innovation in digital payments space and help in offering payment services to 10. overall Assessment the unserved and underserved segment of the III.91 The banking and non-banking sectors population. Mobile payments, including feature are emerging from a turbulent and stressful phone-based payment services; offline payment period which has hampered their functioning solutions; and contactless payments are among and impeded financial intermediation more the innovative products and services to be generally. The decision regarding mergers of the considered for inclusion under RS. PSBs announced by the government is likely to 9.9 Bharat Bill Payment System (BBPS) transform the face of the banking sector. With the emergence of stronger, well-capitalised III.89 BBPS is an interoperable platform for banks aided by cutting-edge technology and repetitive bill payments, which covered bills state-of-the-art payment systems, Indian banks of five segments viz. Direct to Home (DTH), have the potential to become global banking electricity, gas, telecom and water. During the leaders. As current liquidity strains recede and year, the Reserve Bank expanded the scope solvency is shored up, NBFCs are expected to and coverage of BBPS to include all categories regain their niche in the financial system and of billers who raise recurring bills (except expand the reach of the credit market to include prepaid recharges) as eligible participants, on a all productive agents of the economy. The voluntary basis. government and the Reserve Bank have played 9.10 ‘On-tap’ Authorisation of Payment an active role in this revival of both categories Systems of intermediaries. Going forward, the need of III.90 In order to diversify risk and to the hour is to continue the policy co-ordination encourage innovation and competition, the with a view to developing a vibrant and secure Reserve Bank issued instructions for providing banking system and a competitive and resilient ‘on tap’ authorisation to desirous entities. NBFC sector. 37IV OperatIOns and perfOrmance Of cOmmercIal Banks During 2018-19, the asset quality of scheduled commercial banks turned around after a gap of seven years. With a concomitant reduction in provisioning requirements, the banking sector returned to profitability in the first half of 2019-20, while recapitalisation helped public sector banks in shoring up their capital ratios. The Insolvency and Bankruptcy Code gained traction, enhancing resolutions. Furthermore, credit growth revival that began in 2017-18 maintained momentum into 2018-19, led by private sector banks. Notwithstanding these gains, credit growth has turned anaemic in 2019-20 while the overhang of NPAs remains high; further improvements in banking sector hinge around a reversal in macroeconomic conditions. 1. Introduction capital market interface, ownership patterns, foreign banks in India and overseas operations IV.1 The year 2018-19 marked a turnaround of Indian banks, payment system developments, taking shape in the financial performance consumer protection and financial inclusion. of India’s commercial banking sector. After Developments related to regional rural banks seven years of deterioration, the overhang of (RRBs), local area banks (LABs), small finance stressed assets declined, and fresh slippages banks (SFBs) and payments banks (PBs) are were arrested. With the concomitant reduction also analysed in Sections 12 to 15. Section 16 in provisioning requirements, bottom lines concludes the chapter by bringing together the improved modestly after prolonged stress and major issues that emerge from the analysis. the banking sector returned to profitability after 2. Balance sheet analysis a gap of two years in the first half of 2019-20. Meanwhile, recapitalisation of public sector IV.3 In 2018-19, the consolidated balance banks (PSBs) strengthened their capital base sheet of SCBs expanded at an accelerated pace and the Insolvency and Bankruptcy Code (IBC) for the first time since 2010-11, buoyed by a began to gain traction in enhancing resolutions. pick-up in deposits on the liabilities side and loans and advances on the assets side (Chart IV.2 Against this backdrop, this chapter IV.1a and b). analyses the audited balance sheets of the Indian banking sector during 2018-19 and IV.4 Although private sector banks (PVBs) 2019-20 so far, backed by information received account for less than a third of assets of SCBs, through off-site supervisory returns in Section they led the expansion in the consolidated 2. On this basis, an evaluation of the financial balance sheet of SCBs, offsetting the deceleration performance of 94 SCBs and their soundness posted by PSBs (Table IV.1). Furthermore, is presented in Sections 3 and 4. Sections 5 despite the overall improvement in banking to 11 address specific themes that assumed performance continuing during the first half of importance during the period under review 2019-20, a slowing down of bank credit growth such as the sectoral deployment of credit, has emerged as an area of concern. 38OperatiOns and perfOrmance Of cOmmercial Banks Chart IV.1: Balance Sheet of SCBs a. Select Aggregates of SCBs b. Current and Savings Account and Term Deposits * 16 30 100 nt 90 ce 14 25 80 n per 11 02 cent 2 10 5 567 000 cent wth i 68 Per 10 34 00 Per o 5 20 gr 4 10 o-Y 2 0 3 4 5 6 7 8 9 0 Y- 0 2-13 3-14 4-15 5-16 6-17 7-18 8-19 2012-1 2013-1 2014-1 2015-1 2016-1 2017-1 2018-1 1 1 1 1 1 1 1 20 20 20 20 20 20 20 ShareofTerm Deposits (RHS) Growth inAggregateDeposits Assets Deposits ShareofCASADeposits(RHS) Growth in CASADeposits Credit GNPA Ratio Growth inTerm Deposits *:Except GNPA ratio which is in per cent. Source:Annual accounts of banks and off-site returns (Global operations), RBI table IV.1: consolidated Balance sheet of scheduled commercial Banks (At end-March) (Amount in ₹crore) Item Public Sector Private Sector Foreign Small Finance All SCBs Banks Banks Banks Banks# 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 1. Capital 33,154 51,060 11,592 21,344 67,883 77,809 3,498 4,213 1,16,127 1,54,427 2. Reserves and Surplus 5,55,840 5,46,066 4,31,966 5,27,665 88,305 96,979 3,659 5,821 10,79,770 11,76,531 3. Deposits 82,62,322 84,86,215 30,13,688 37,70,013 4,94,901 5,81,857 23,094 49,178 1,17,94,005 1,28,87,262 3.1 Demand Deposits 5,43,630 5,52,461 4,37,408 5,17,356 1,43,538 1,71,907 966 1,955 11,25,543 12,43,679 3.2 Savings Bank Deposits 26,56,496 27,99,445 8,73,671 10,45,648 57,297 59,459 4,283 7,245 35,91,747 39,11,797 3.3 Term Deposits 50,62,196 51,34,309 17,02,609 22,07,008 2,94,066 3,50,491 17,845 39,978 70,76,715 77,31,786 4. Borrowings 8,47,034 7,61,612 6,88,188 7,75,324 1,27,690 1,51,367 19,398 21,367 16,82,309 17,09,670 5. Other Liabilities and Provisions 3,36,551 3,17,985 1,53,488 2,03,591 90,777 1,48,801 2,006 2,957 5,82,822 6,73,335 total liabilities/assets 1,00,34,901 1,01,62,938 42,98,921 52,97,937 8,69,556 10,56,813 51,655 83,537 1,52,55,033 1,66,01,224 1. Cash and Balances with RBI 4,48,477 4,55,974 2,40,318 2,06,654 40,017 33,657 1,519 2,328 7,30,330 6,98,613 2. Balances with Banks and Money at 3,92,213 3,59,507 1,26,056 1,75,076 73,275 91,098 3,254 4,054 5,94,797 6,29,733 Call and Short Notice 3. Investments 27,91,858 27,02,386 10,11,814 12,19,517 3,12,582 3,83,415 9,983 14,952 41,26,237 43,20,270 3.1 In Government Securities (a+b) 23,19,205 21,98,041 7,57,400 9,48,803 2,59,876 3,19,575 8,031 11,632 33,44,513 34,78,051 a) In India 22,89,822 21,67,070 7,51,458 9,30,104 2,52,063 3,05,772 8,031 11,632 33,01,375 34,14,578 b) Outside India 29,383 30,970 5,942 18,699 7,813 13,803 - - 43,138 63,473 3.2 Other Approved Securities 244 157 - - - - - - 244 157 3.3 Non-approved Securities 4,72,409 5,04,188 2,54,414 2,70,714 52,706 63,840 1,952 3,320 7,81,480 8,42,062 4. Loans and Advances 56,97,350 59,26,286 26,62,753 33,27,328 3,51,016 3,96,724 34,879 59,491 87,45,997 97,09,829 4.1 Bills Purchased and Discounted 2,34,188 1,66,381 95,125 1,17,234 74,201 76,557 0 4 4,03,515 3,60,177 4.2 Cash Credits, Overdrafts, etc. 24,14,793 24,89,272 7,86,825 9,45,461 1,44,602 1,66,037 4,022 5,948 33,50,242 36,06,719 4.3 Term Loans 30,48,368 32,70,633 17,80,803 22,64,633 1,32,212 1,54,129 30,856 53,538 49,92,240 57,42,934 5. Fixed Assets 1,10,041 1,07,318 26,293 36,142 4,509 4,426 1,031 1,251 1,41,874 1,49,137 6. Other Assets 5,94,962 6,11,466 2,31,688 3,33,221 88,157 1,47,493 990 1,461 9,15,797 10,93,641 notes: 1. -: Nil/negligible. 2. IDBI Bank Limited has been categorised as a PVB for regulatory purposes by Reserve Bank with effect from January 21, 2019. As such, in this chapter, it has been classified as a PSB in 2017-18 and as a PVB in 2018-19, unless otherwise specified. 3. #: Data pertain to six scheduled SFBs at end-March 2018 and seven scheduled SFBs at end-March 2019. 4. Components may not add up to their respective totals due to rounding-off numbers to ₹crore. 5. Detailed bank-wise data on annual accounts are collated and published in Statistical Tables Relating to Banks in India, available at https://www.dbie.rbi.org.in source: Annual accounts of respective banks, 39Report on Trend and Progress of Banking in India 2018-19 2.1 Liabilities expansion in deposit mobilisation tempered banks’ borrowing requirements, especially IV.5 Deposits, which constituted 77.6 per cent those of PSBs (Chart IV.2 c and d). of the total liabilities of SCBs at end-March 2019, recovered from a secular deceleration that set 2.2 Assets in from 2009-10, barring the demonetisation- IV.6 The revival in the growth of loans and induced spike in 2016-17. This turnaround advances – the most significant component in overcame unfavourable base effects and was the asset side of the SCBs’ balance sheet – that mainly driven by a pick-up in term deposits began in 2017-18, maintained momentum into (Chart IV.2 a). PVBs attracted a significant 2018-19 (Chart IV.3). The recognition of non- portion – 77 per cent – of this increase in term deposits1, primarily reflecting the higher performing assets (NPAs) nearing completion, interest rates offered by them (Chart IV.2 b). recapitalisation of PSBs, and the ongoing Current and savings account (CASA) deposits resolution process under the Insolvency and kept pace with term deposits and maintained Bankruptcy Code (IBC) helped in improving the their share in total deposits at 40 per cent. The credit environment. Chart IV.2: Deposits and Borrowings of SCBs a. Growth in Term Deposits–Bank Group-wise b.Weighted Average Term Deposit Rates 40 (At end-March) 7.5 nt 35 7.3 e 7.1 rc 30 6.9 pe 25 nt 6.7 wth in 2 10 5 Perce 66 6.. .35 1 ro 10 5.9 g Y 5 5.7 o- 0 5.5 Y- -5 2013 2014 2015 2016 2017 2018 2019 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 PSBs PVBs FBs PVBs FBs All SCBs PSBs All SCBs c. Growth in Borrowings d. Share of Borrowingsin Total Liabilities 100 25 nt e 80 c 20 er 60 p n 40 nt 15 h i 20 ce owt 0 Per 10 gr -20 o-Y -40 5 Y- -60 3 4 5 6 7 8 9 1 1 1 1 1 1 1 0 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2-13 3-14 4-15 5-16 6-17 7-18 8-19 1 1 1 1 1 1 1 PSBs PVBs 20 20 20 20 20 20 20 FBs All SCBs PSBs PVBs FBs All SCBs Note:IDBIBankLtdhasbeenclassifiedasaPVBin2018-19andasaPSBin2017-18.Therefore,thegrowthratesmaynotbestrictlycomparable. Source:AnnualaccountsofbanksandRBI 1 The average share of PVBs in the incremental term deposits during 2016-19 was 81 per cent vis-à-vis a 19 per cent in 2011-2015. Corresponding numbers for PSBs were 13 per cent and 77 per cent, respectively. 40OperatiOns and perfOrmance Of cOmmercial Banks IV.8 India’s credit to GDP ratio is lower than that of its emerging market peers3. The incremental credit to GDP ratio has been increasing since 2016-17 (Chart IV.5a), though the credit-GDP gap remains negative4, indicative of the potential for further financial penetration. The outstanding C-D ratio increased marginally for the second consecutive year in 2018-19. The ratio was highest for PVBs as they led the credit expansion in 2018-19 (Chart IV.5b). IV.9 Investments—the second largest component in the asset side of SCBs’ balance sheet—decelerated in 2018-19, as PSBs economised on their investments in government securities and other approved securities, IV.7 PVBs led the upturn in credit growth. reflecting the shedding of excess statutory Their share in incremental loans was 69 per liquidity ratio (SLR) investments by them to cent in 2018-19 (Chart IV.4a), commensurate accommodate the uptick in credit growth. with their share in incremental deposits2. 2.3 Flow of Funds to the Commercial Sector Consequently, their share in outstanding credit increased (Chart IV.4b). In H1:2019-20, however, IV.10 During 2018-19, credit flow from Housing credit growth has decelerated across all bank Finance Companies (HFCs), Systemically groups. Important Non-Deposit taking (NBFC-ND-SI) 2 The sharp growth is partly due to the base effect, emnating from the reclassification of IDBI Ltd. as a PVB as on January 21, 2019. However, even after accounting for this reclassification, the credit growth was led by PVBs. 3 Source: Bank for International Settlements (BIS), 2019 available at www.bis.org 4 Source: BIS, available at www.bis.org 41Report on Trend and Progress of Banking in India 2018-19 and Deposit taking NBFCs (NBFC-D) declined. 2.4 Maturity Profile of Assets and Liabilities Public issuances of debt and equity by non- IV.12 As regards the maturity profile of SCBs’ financial entities and net investment in balance sheet, the asset-liability gap in the corporate debt by LIC also exhibited a 1-3 years category increased sizeably, while similar pattern. On the contrary, a sharp it declined in the more than 5 years category rise in commercial paper issuances, higher (Chart IV.6). Although the maturity structure accommodation provided by All India Financial of liabilities for all the buckets remained Institutions (AIFIs) regulated by the Reserve broadly similar to a year ago, the share of Bank, and a pick-up in net flows from foreign loans with maturity above five years declined, sources partly compensated for the decline whereas those with maturity between 1-3 years in non-bank flows. External commercial borrowings (ECB)/ foreign currency convertible bonds (FCCB) registered net inflows for the first time in four years, partly reflecting the new ECB framework introduced by the Reserve Bank to simplify overseas borrowing norms. Foreign direct investment (FDI) flows grew at 18.9 per cent in 2018-19 (Table IV.2). IV.11 The scenario appears to have altered in the first half of 2019-20 as the total flow of resources to the commercial sector declined by 60 per cent on a year-on-year basis, largely driven by a contraction in adjusted non-food bank credit. Flows from foreign sources, in contrast, accelerated in the first half of 2019-20 as ECB norms were eased further in July 2019 (Table IV.2). 42OperatiOns and perfOrmance Of cOmmercial Banks table IV.2: flow of financial resources to commercial sector (₹crore) Source April to March April - September 2015-16 2016-17 2017-18 2018-19 2018-19 2019-20 a. adjusted non-food Bank credit (nfc) 7,75,419 4,95,224 9,16,109 12,29,977 3,65,647 -52,971 (51.5) (33.6) (42.8) (52.4) (36.8) -(13.4) i) Non-Food Credit 7,02,358 3,88,247 7,95,897 11,46,677 3,50,565 -23,344 * of which: petroleum and fertilizer credit -1,831 13,283 2,724 7,462 -6,774 -12,768 ii) Non-SLR Investment by SCBs 73,060 1,06,977 1,20,212 83,301 15,082 -29,627 * B. flow from non-banks (B1+B2) 7,30,838 9,79,207 12,24,006 11,19,328 6,27,666 4,47,006 (48.5) (66.4) (57.2) (47.6) (63.2) (113.4) B1. domestic sources 4,84,981 7,03,377 8,85,552 7,32,582 4,88,591 1,97,556 (32.2) (47.7) (41.4) (31.2) (49.2) (50.1) 1. Public issues by non-financial entities 37,783 15,503 43,826 10,565 7,029 58,462 2. Gross private placements by non-financial entities 1,13,516 2,00,243 1,46,176 1,50,451 52,961 81,505 3. Net issuance of CPs subscribed to by non-banks 31,974 86,894 -25,377 1,36,089 1,79,232 -26,809 4. Net Credit by housing finance companies 1,18,803 1,37,390 2,19,840 1,65,893 99,780 5,874 5. Total accommodation by four RBI-regulated 47,153 46,939 95,048 1,13,568 61,881 -7,989 AIFIs - NABARD, NHB, SIDBI & EXIM Bank 6. Systemically important non-deposit taking NBFCs and 98,851 1,88,748 3,68,243 1,26,006 77,547 53,862 Deposit taking NBFCs (Net of bank credit) 7. LIC’s net investment in corporate debt, infrastructure 36,900 27,661 37,797 30,011 10,162 32,651 and social sector B2. foreign sources 2,45,858 2,75,829 3,38,454 3,86,746 1,39,075 2,49,450 (16.3) (18.7) (15.8) (16.5) (14.0) (63.3) 1. External Commercial Borrowings / FCCB -38,793 -50,928 -5,129 69,629 4,070 52,119 2. ADR/GDR Issues excluding banks and financial institu- 0 0 0 0 0 0 tions 3. Short-term Credit from abroad -9,607 43,465 89,606 15,184 -23,381 13,841 $ 4. Foreign Direct Investment to India 2,94,258 2,83,292 2,53,977 3,01,932 1,58,386 1,83,490 c. total flow of resources (a+B) 15,06,257 14,74,431 21,40,115 23,49,305 9,93,312 3,94,035 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) notes: $: Up to June 2019 *: Data pertain to the period April-September 27, 2019. Figures in the parentheses represent share in total flows. source: RBI, SEBI, BSE, NSE, Merchant Banks, LIC and NHB increased sharply (Table IV.3). This indicates edged up during the year (Chart IV.7). On the that the SCBs, especially PSBs, have shifted liability side, accretions to Foreign Currency their lending strategy. Non-resident Bank deposits [FCNR(B)] and Non-resident External Rupee (NRE) accounts 2.5 International Liabilities and Assets picked-up while a build-up of NOSTRO balances, IV.13 The total international liabilities and export bills and debt securities was primarily assets of banks located in India expanded responsible for the enlargement in assets further in 2018-19. The ratio of claims to (Appendix Tables IV.9 and IV.10). India’s share liabilities declined marginally, as the latter in global cross-border aggregates remained outpaced the former. The ratio of international small – less than one per cent, as at end-March liabilities of banks to India’s total external debt 20195. 5 As per BIS data, available at https://stats.bis.org/statx/srs/table/a1?m=S. 43Report on Trend and Progress of Banking in India 2018-19 table IV.3: Bank Group-wise maturity profile of select liabilities/assets (As at end-March) (Per cent to total under each item) Liabilities/Assets PSBs PVBs FBs All SCBs# 2018 2019 2018 2019 2018 2019 2018 2019 1 2 3 4 5 6 7 8 9 I. deposits a) Up to 1 year 44.8 43.6 42.4 42.9 63.0 64.2 45.0 44.4 b) Over 1 year and up to 3 years 23.2 22.4 25.3 26.8 28.9 28.6 24.0 24.0 c) Over 3 years and up to 5 years 10.0 10.7 10.7 9.5 8.0 7.2 10.0 10.2 d) Over 5 years 22.0 23.3 21.6 20.9 0.1 0.0 20.9 21.5 II. Borrowings a) Up to 1 year 60.2 61.6 45.7 47.9 89.1 87.5 56.3 57.4 b) Over 1 year and up to 3 years 13.4 14.1 22.2 19.8 5.8 8.1 16.8 16.5 c) Over 3 years and up to 5 years 8.4 8.3 12.9 14.0 2.2 1.8 9.8 10.3 d) Over 5 years 18.0 16.0 19.2 18.3 2.8 2.6 17.1 15.7 III. loans and advances a) Up to 1 year 32.8 26.0 31.9 31.3 59.1 57.8 33.6 29.2 b) Over 1 year and up to 3 years 26.3 41.2 33.8 34.1 20.9 21.0 28.4 37.9 c) Over 3 years and up to 5 years 12.7 12.4 12.8 12.9 8.0 7.9 12.5 12.4 d) Over 5 years 28.2 20.3 21.4 21.7 12.0 13.4 25.5 20.4 IV. Investment a) Up to 1 year 17.6 17.9 50.7 49.6 81.2 82.6 30.6 32.7 b) Over 1 year and up to 3 years 13.0 13.5 16.9 16.1 12.1 10.9 13.9 14.1 c) Over 3 years and up to 5 years 13.3 13.5 8.6 8.2 2.3 2.2 11.3 11.0 d) Over 5 years 56.2 55.1 23.7 26.1 4.4 4.2 44.2 42.2 notes: 1. The sum of components may not add up to 100 due to rounding off. 2. #: Data includes SFBs. source: Annual accounts of banks IV.14 The concentration of claims of short-term claims of banks increased in 2018-19 (Appendix maturity in the total consolidated international Table IV.11). The country-composition of international claims remained broadly stable, with the United States (US) increasing its share further (Appendix Table IV.12). 2.6 Off-balance Sheet Operations IV.15 The size of contingent liabilities of all SCBs in India increased to 1.2 times of their on-balance sheet as at end-March 2019, driven primarily by an expansion in forward exchange contracts, including derivative products (Appendix Table IV.2). The composition of on and off-balance sheet liabilities across bank groups has remained stable, with FBs and PVBs having significantly higher off-balance sheet exposures than PSBs (Chart IV.8). 44OperatiOns and perfOrmance Of cOmmercial Banks table IV.4: trends in Income and expenditure of scheduled commercial Banks (Amount in ₹crore) Item 2017-18 2018-19 Amount Percentage Amount Percentage Variation Variation 1. Income 12,17,567 1.0 13,23,680 8.7 a) Interest Income 10,21,968 1.0 11,40,727 11.6 b) Other Income 1,95,598 1.2 1,82,953 -6.5 2. Expenditure 12,50,004 7.6 13,47,077 7.8 a) Interest Expended 6,53,510 -2.3 7,10,890 8.8 b) Operating Expenses 2,71,470 9.3 3,07,457 13.2 of which: Wage Bill 1,32,479 3.9 1,48,989 12.5 c) Provisions and 3,25,024 33.3 3,28,731 1.1 Contingencies 3. Operating Profit 2,92,587 1.7 3,05,333 4.4 4. Net Profit -32,438 - -23,397 - 5. Net Interest Income (NII) 3,68,458 7.5 4,29,837 16.7 (1a-2a) 6. Net Interest Margin (NII 2.5 - 2.7 - as Percentage of Average Assets) notes: 1. Data include SFBs. 3. financial performance 2. Percentage variations could be slightly different as absolute numbers have been rounded off to ₹crore. IV.16 The financial performance of SCBs in source: Annual accounts of respective banks the period under review was marked by PSBs IV.18 While the quantum of provisions reporting positive net profits after 3 years in declined for PSBs, it increased for PVBs in H1:2019-20. As provisioning requirements 2018-19, due to a rise in the latter’s NPAs6 slackened and credit growth revived modestly, (Chart IV.9). Similar movements were discernible interest income increased, even though in H1:2019-20. interest expenses picked up on account of the increase in deposit growth (Table IV.4). The net IV.19 The provision coverage ratio (PCR) interest margin as well as the spread improved of all SCBs improved to 61 per cent by end- (Table IV.5) September 2019, as PSBs’ gross NPAs declined IV.17 On the other hand, SCBs’ income from faster than the decline in their provisions non-interest sources declined, contributed and PVBs’ provisioning went up markedly by spreading of mark-to-market losses in (Chart IV.10). government security portfolios and transfer IV.20 In the case of profitability ratios as well, of funds to the investment fluctuation reserve differentials in performance of PSBs vis-a- (IFR). Apart from these factors, the muted vis PVBs were evident. For PVBs, both Return growth in off-balance sheet exposures, mainly on Assets (RoA) and Return on Equity (RoE) guarantees, and a fall in income from trading and forex transactions adversely affected the worsened in 2018-19 from the previous year, PSBs. In H1:2019-20, however, the non-interest although they were considerably better than income of SCBs has revived. those of PSBs (Table IV.6)7. In contrast, the latter 6 After accounting for the reclassification of IDBI Bank Ltd as a PVB in 2018-19. 7 Return on assets = Return on assets for the bank groups are obtained as weighted average of return on assets of individual banks in the group, weights being the proportion of total assets of the bank as percentage to total assets of all banks in the corresponding bank group and Return on equity = Net profit/Average total equity. 45Report on Trend and Progress of Banking in India 2018-19 table IV.5: cost of funds and return on funds - Bank Group-wise (Per cent) Bank Group / Year Cost of Cost of Cost of Return on Return on Return on Spread Deposits Borrowings Funds Advances Investments Funds 1 2 3 4 5 6 7 8 9 = 8-5 PSBs 2017-18 5.1 4.7 5.1 7.8 7.1 7.5 2.5 2018-19 5.0 4.8 5.0 8.1 7.2 7.8 2.8 PVBs 2017-18 4.9 6.2 5.2 9.5 6.9 8.8 3.6 2018-19 5.1 6.6 5.4 9.8 7.0 9.0 3.6 FBs 2017-18 3.9 3.0 3.7 8.1 6.6 7.4 3.7 2018-19 3.8 2.9 3.6 8.2 6.2 7.2 3.6 All SCBs 2017-18 5.0 5.3 5.1 8.3 7.0 7.9 2.8 2018-19 5.0 5.5 5.1 8.7 7.1 8.2 3.1 notes: 1. Cost of deposits = Interest paid on deposits/Average of current and previous year’s deposits. 2. Cost of borrowings = (Interest expended - Interest on deposits)/Average of current and previous year’s borrowings. 3. Cost of funds = Interest expended / (Average of current and previous year’s deposits plus borrowings) 4. Return on advances = Interest earned on advances /Average of current and previous year’s advances. 5. Return on investments = Interest earned on investments /Average of current and previous year’s investments. 6. Return on funds = (Interest earned on advances + Interest earned on investments) / (Average of current and previous year’s advances plus investments). 7. Data include SFBs. For PSBs and PVBs, data adjusted for reclassification of IDBI Bank Ltd. source: Calculated from balance sheets of respective banks table IV.6: return on assets and return on were more successful in reducing their losses, equity of scBs – Bank Group-wise (At end-March) building on the improvement in their asset quality. (Per cent) There was an overall increase in profitability in Bank Public Sector Private Sector Foreign All Scheduled Group Banks Banks Banks Commercial H1:2019-20 as interest income accelerated and Banks 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 non-interest income revived. Supervisory data RoA -0.84 -0.65 1.14 0.63 1.34 1.56 -0.15 -0.09 suggest that RoA of SCBs improved to 0.35 per RoE -14.62 -11.44 10.12 5.45 7.16 8.77 -2.81 -1.85 cent at end-September 2019. note: For PSBs and PVBs, data adjusted for reclassification of IDBI Bank Ltd. source: Annual Accounts of Banks. 46OperatiOns and perfOrmance Of cOmmercial Banks 4. soundness Indicators 4.1 Capital Adequacy IV.21 Soundness indicators are matrices IV.22 The capital to risk-weighted assets ratio that enable a comparison of financial health (CRAR) of SCBs has been improving from the across banks and time. During 2018-19 and low of 13 per cent reached in 2014-15. Evidence 2019-20 so far, there has been a gradual suggests that strengthening the capital base of improvement in capital adequacy, liquidity and banks facilitates credit expansion in a non- asset quality. linear fashion (Box IV.1) Box IV.1: threshold Bank capital and lending Well-capitalised banks are able to withstand shocks table 1: estimates of panel threshold regression without shrinking their balance sheets, especially their models with two regimes loans portfolio, while capital constrained banks are more likely to reduce lending (Cohen, 2013; Armstrong Model 1 2 3 and Ebell, 2014). High capital cost and risk aversion act as additional impediments to lending activity. Recent Dependent variable = Loan growth empirical evidence points to a non-linear relationship Threshold 13.17 13.17 13.13 between capital and lending, i.e., loan books may pick up p value= p value= p value= only after bank capital exceeds a critical threshold (Brei 0.022 0.034 0.044 et al., 2013). CRAR A fixed effect panel threshold regression using annual β (below the threshold) 1.495*** 1.395*** 1.67*** 1 data on 40 public and private sector banks for the (-0.546) (0.56) (0.562) period 2012-13 to 2018-19 suggests that the threshold β (above the threshold) 0.861* 0.816* 1.115** 2 CRAR – endogeneously determined in the model – is 13.2 (-0.476) (0.49) (0.485) per cent. This is higher than the minimum regulatory Control variables CRAR (including capital conservation buffer) of 10.875 per NIM 6.652*** 6.467*** cent at end-March 2019. Testing whether this non-linear (1.933) (1.835) relationship has more than one threshold, the hypotheses Stress (-1) -0.527** -0.784*** -0.52** of two and higher number of thresholds were rejected as (0.266) (0.268) (0.273) bootstrap p-values were not found to be significant. Deposit to loan ratio (-1) 0.130** The relationship between CRAR and loan growth was (0.059) found to be positive and significant below the threshold Liquid assets to total 0.439** as well as above the threshold, although the size of β assets (-1) (0.192) coefficients were larger below the threshold, i.e., β > Nominal GDP growth 0.78 0.992 1.659* 1 β (Table 1). Thus, additions to bank capital beyond the (0.909) (0.749) (0.902) 2 threshold have positive but declining marginal effects on Demonetisation dummy Yes No Yes lending, which is in line with empirical evidence elsewhere Merger dummy Yes No Yes (Catalán et al., 2017). These results remain robust even AQR dummy Yes No Yes after controlling for banks’ net interest margin (NIM), the share of liquid assets in total assets, deposit to loan ratio, Constant -0.331*** -0.439*** -0.208 (0.129) (0.146) (0.129) stressed assets ratio and GDP. These results suggest that for banks in India, a 13.2 per cent CRAR would be optimal R2 0.427 0.327 0.316 (Verma and Herwadkar, 2019). No. of observations 240 240 240 No. of bootstraps 500 500 500 references Armstrong, A and M. Ebell (2014): ‘Capital Constraints, Prob > F 0 0 0 Lending over the Cycle and the Precautionary Motive: A note: 1. Figures in parentheses refer to standard errors. Quantitative Exploration,’ National Institute of Economic 2. *p < 0.10, ** p < 0.05, *** p < 0.01 and Social Research, London. Brei, M., L. Gambacorta, G. von Peter (2013): ‘Rescue Cohen, B. H. (2013): ‘How Have Banks Adjusted to Packages and Bank Lending’, Journal of Banking and Higher Capital Requirements?’, BIS Quarterly Review, Finance, Vol 37, pp. 490-505. September. Catalán, M., A. Hoffmaister, and H. Cicilia (2017): ‘Bank Verma R. and S. S. Herwadkar (2019): ‘Bank Capital and Lending: An Extended Framework and Recapitalisation and Credit Growth: The Indian Case’, Evidence of Nonlinearity’, IMF Working Paper No. 17/252. MPRA Paper 97394. 47Report on Trend and Progress of Banking in India 2018-19 table IV.7: component-wise capital adequacy of scBs (As at end-March) (Amount in ₹crore) PSBs PVBs FBs SCBs 2018 2019 2018 2019 2018 2019 2018 2019 1. capital funds 6,57,750 6,38,553 5,15,690 6,01,046 1,48,701 1,69,620 13,22,141 14,09,220 i) Tier I Capital 5,26,997 5,18,963 4,47,009 5,27,007 1,40,698 1,59,211 11,14,704 12,05,181 ii) Tier II Capital 1,30,753 1,19,590 68,681 74,039 8,003 10,409 2,07,438 2,04,038 2. risk Weighted assets 56,41,360 52,32,524 31,38,270 37,39,838 7,79,937 8,74,407 95,59,566 98,46,768 3. crar (1 as % of 2) 11.7 12.2 16.4 16.1 19.1 19.4 13.8 14.3 Of which: Tier I 9.3 9.9 14.2 14.1 18.0 18.2 11.7 12.2 Tier II 2.3 2.3 2.2 2.0 1.1 1.2 2.2 2.1 source: Off-site returns (domestic operations), RBI IV.23 PSBs led the recovery in capital ratios in Furthermore, all bank groups maintained robust 2018-19. Recapitalisation to the tune of ₹90,000 Tier 1 capital ratios to comply with the capital crores in 2017-18 and ₹1,06,000 crores in 2018- conservation buffer (CCB) requirement under 19 bolstered their capital position, even as they the Basel III norms. This improvement was battled with the overhang of impaired assets. broad-based as evident in the rightward shift in PVBs and FBs remained well capitalised and the distributions of capital ratios (Chart IV.11). above the regulatory minimum of 10.875 per cent for March 2019, though the former experienced IV.25 In H1: 2019-20, SCBs’ CRAR and the Tier a marginal decline in CRAR8 in 2018-19 1 capital ratio improved further to 15.1 per cent (Table IV.7). and 13.0 per cent respectively, led by PSBs and PVBs. The Government has announced another IV.24 Notably, PSBs’ risk-weighted assets (RWAs) have contracted in the past two years, tranche of recapitalisation of ₹70,000 crores in reflective of a change in their risk profile in favour PSBs in 2019-20, which is expected to better of less risky borrowers with high credit ratings. their capital position, going forward. 8 Even after accounting for the reclassification of IDBI Bank Ltd as a PVB. 48OperatiOns and perfOrmance Of cOmmercial Banks 4.2 Leverage Ratio ratio (NSFR). While the LCR promotes short- term resilience of banks in dealing with potential IV.26 The leverage ratio (LR), defined as the liquidity disruptions lasting for 30 days, the ratio of Tier 1 capital to total exposure (including NSFR requires banks to fund their activities with off-balance sheet exposure), is calibrated to act stable sources of funding over the time horizon as a supplementary measure to the CRAR under Basel III to constrain the build-up of leverage. At extending to one year. The former has been end-March 2019, the leverage ratio of SCBs was implemented in India since January 1, 2015 and at 6.6 per cent, above the Pillar I prescription the latter – defined as the ratio of available stable of 3 per cent by the Basel Committee on funding (ASF) to required stable funding (RSF) – Banking Supervision (BCBS). All bank groups will be effective from April 1, 2020. experienced a slight decrease in their LRs in IV.28 Banks have been allowed to carve out 2018-19, mostly due to growth in total exposures Level 1 high quality liquid assets (HQLAs) from during the year; however, this trend has been within the statutory liquidity ratio (SLR) for reversed in H1: 2019-20 (Chart IV.12). The computing LCR, the limit for which is presently Reserve Bank revised the minimum leverage set at 16.5 per cent of net demand and time ratio requirements for banks, effective October liabilities (NDTL). To encourage credit flow to 1, 20199. the NBFC sector, additional carve-outs were also 4.3 Liquidity Standards prescribed. The LCR of SCBs improved further IV.27 The Basel III framework prescribes two in 2018-19 and in H1: 2019-20 and remained minimum liquidity standards, viz., the liquidity well above the Basel III requirement of 100 per coverage ratio (LCR) and the net stable funding cent (Chart IV.13). 9 Please refer Chapter III for details. 49Report on Trend and Progress of Banking in India 2018-19 Chart IV.14: Asset Quality of Banks a. GNPA Ratio b. Restructured Standard Advances to Gross Advances cent cent Per Per c. GNPA Write-offs Note:GNPA ratio is calculated using annual accounts of banks and off-site returns (global operations). Source:Annual accounts of banks and Off-site returns. 4.4 Non-performing Assets both in the GNPA and in the net NPA ratios IV.29 The GNPA ratio of all SCBs declined in (Table IV.8). The deteriorating asset quality of 2018-19 after rising for seven consecutive years PVBs in terms of the GNPA ratio is due to the (Chart IV.14 a), as recognition of bad loans neared reclassification of IDBI Bank Ltd as a private completion. Decline in the slippage ratio10 as bank effective January 21, 2019; however, after well as a reduction in outstanding GNPAs helped excluding IDBI Bank Ltd, PVBs’ GNPA ratio in improving the GNPA ratio (Chart IV.14 c and declined. Supervisory data suggest that the d). While a part of the write-offs was due to GNPA ratio of SCBs remained stable at 9.1 per ageing of the loans, recovery efforts received a cent at end-September 2019. boost from the IBC. The restructured standard IV.31 Consistent with these developments, the advances to gross advances ratio began declining proportion of standard assets in total advances after the asset quality review (AQR) in 2015 of SCBs increased in 2018-19, largely because and reached 0.55 per cent at end-March 2019 of the improved performance of PSBs. The (Chart IV.14 b). corresponding improvement in sub-standard IV.30 All bank groups recorded an improvement and doubtful assets was partly reversed by an in asset quality, with PSBs experiencing a drop increase in the loss account (Table IV.9). 50 eht fo dne eht ta sffo-etirw APNG eht ta sAPNG fo tnecrep saraey raeY eht fo gninnigeb fo dne eht ta sAPNG ni noitcudeR sAPNG fo tnecrep saraey eht raeY eht fo gninnigeb eht ta 16 9 14 8 12 7 10 6 8 5 6 4 3 4 2 2 1 0 0 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 All SCBs PSBs All SCBs PSBs PVBs FBs PVBs FBs d. Reduction in GNPAs 60 60 50 50 40 40 30 30 20 20 10 10 0 0 4 5 6 7 8 9 4 5 6 7 8 9 1 1 1 1 1 1 1 1 1 1 1 1 3- 4- 5- 6- 7- 8- 3- 4- 5- 6- 7- 8- 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 PSBs PVBs PSBs PVBs FBs All SCBs FBs All SCBs 10 Slippage ratio is defined as (Fresh accretion of NPAs during the year/Total standard assets at the beginning of the year) *100OperatiOns and perfOrmance Of cOmmercial Banks table IV.8: trends in non-performing assets - IV.32 NPAs in the larger borrowal accounts Bank Group-wise (exposure of ₹5 crore or more) had contributed (Amount in ₹crore) 91 per cent of total GNPAs in 2017-18 after the Item PSBs* PVBs^ FBs All SCBs# Reserve Bank withdrew various restructuring Gross npas schemes. In 2018-19, however, SCBs recorded Closing Balance for 8,95,601 1,29,335 13,849 10,39,679 a synchronised decline in all the special 2017-18 Opening Balance for 8,95,601 1,29,335 12,733 10,38,684 mention accounts (SMA-0, SMA-1 and SMA- 2018-19 2), restructured standard advances (RSA) Addition during the 2,16,763 90,526 6,114 3,14,449 year 2018-19 and GNPAs, attesting to the broad-based Reduction during the 1,33,844 42,748 2,557 1,79,711 improvement in asset quality. Yet, these accounts year 2018-19 Written-off during the 1,83,391 49,098 4,048 2,36,948 – which constituted 53 per cent of gross loans year 2018-19 and advances – contributed 82 per cent of GNPAs Closing Balance for 7,39,541 1,83,604 12,242 9,36,474 2018-19 at end-March 2019. Furthermore, stress in large Gross npas as per cent of Gross advances** borrowal accounts has been on the rise for both 2017-18 14.6 4.7 3.8 11.2 2018-19 11.6 5.3 3.0 9.1 PVBs and PSBs in H1: 2019-20 (Chart IV.15). net npas Closing Balance for 4,54,473 64,380 1,548 5,20,838 4.5 Recoveries 2017-18 Closing Balance for 2,85,123 67,309 2,050 3,55,076 IV.33 Recovery of stressed assets improved 2018-19 during 2018-19 propelled by resolutions under net npas as per cent of net advances 2017-18 8.0 2.4 0.4 6.0 the IBC, which contributed more than half of 2018-19 4.8 2.0 0.5 3.7 the total amount recovered. However, recovery notes: 1. *: Includes IDBI Bank Ltd for closing balance for 2017-18 rates11 yielded by major resolution mechanisms and opening balance for 2018-19. 2. ^: Includes IDBI Bank Ltd for addition, recovery, writing off (except Lok Adalats) declined in 2018-19, and closing balance for 2018-19. 3. #: Data include six scheduled SFBs at end-March 2018 and especially through the SARFAESI mechanism seven scheduled SFBs at end-March 2019. 4. **: Calculated by taking gross NPAs from annual accounts (Table IV.10). Cases referred for recovery under of respective banks and gross advances from off-site returns various mechanisms grew over 27 per cent in (global operations). source: Annual accounts of banks and off-site returns (global opera- volume and tripled in value during the year, tions), RBI table IV.9: classification of loan assets - Bank Group-wise (Amount in ₹crore) Bank Group End-March Standard Assets Sub-Standard Assets Doubtful Assets Loss Assets Amount Per cent* Amount Per cent* Amount Per cent* Amount Per cent* psBs# 2018 46,02,125 84.5 2,05,340 3.8 5,93,615 10.9 46,521 0.9 2019 50,86,874 87.8 1,37,377 2.4 5,06,492 8.7 66,239 1.1 pVBs^ 2018 24,50,552 96.0 27,203 1.1 69,978 2.7 5,243 0.2 2019 31,03,581 95.2 42,440 1.3 1,04,696 3.2 9,576 0.3 fBs 2018 3,49,475 96.2 3,831 1.1 8,364 2.3 1,635 0.5 2019 3,94,699 97.0 3,163 0.8 7,985 2.0 1,034 0.3 all scBs** 2018 74,02,152 88.1 2,36,374 2.8 6,71,957 8.0 53,398 0.6 2019 85,85,154 90.2 1,82,980 1.9 6,19,173 6.5 76,849 0.8 notes: 1. Constituent items may not add up to the total due to rounding off. 2. *: As per cent to gross advances. 3. #: Includes IDBI Bank Ltd for 2018. 4. ^: Includes IDBI Bank Ltd for 2019. 5. **: Excludes SFBs. source: Off-site returns (domestic operations), RBI 11 Defined as the amount recovered as a per cent of amount involved. 51Report on Trend and Progress of Banking in India 2018-19 leading to a pile-up of bankruptcy proceedings. had to incur lesser haircuts on account of these This highlights the need to strengthen and sales. expand the supportive infrastructure. IV.35 The share of subscriptions by banks to IV.34 As cases referred for recovery through security receipts (SRs) issued by ARCs declined legal mechanisms shot up, cleaning up of to 69.5 per cent by end-June 2019 from 79.8 balance sheets via sale of stressed assets per cent a year ago, in line with the agenda to to asset reconstruction companies (ARCs) reduce their investments in SRs and to diversify decelerated on a y-o-y basis and declined as a investor base in SRs (Table IV.11). proportion to GNPAs at the beginning of 2018- 4.6 Frauds in the Banking Sector 19 (Chart IV.16). However, the acquisition cost of ARCs as a proportion to the book value of IV.36 Frauds, especially the larger ones, tend assets increased further, indicating that banks to get reported with a lag. Thus, even though table IV.10: npas of scBs recovered through Various channels (Amount in ₹crore) Recovery Channel 2017-18 2018-19 (P) No. of cases Amount Amount Col. (4) as per No. of cases Amount Amount Col. (8) as per referred involved recovered* cent of Col. (3) referred involved recovered* cent of Col. (7) 1 2 3 4 5 6 7 8 9 Lok Adalats 33,17,897 45,728 1,811 4.0 40,80,947 53,506 2,816 5.3 DRTs 29,345 1,33,095 7,235 5.4 52,175 3,06,499 10,574 3.5 SARFAESI Act 91,330 81,879 26,380 32.2 2,48,312 2,89,073 41,876 14.5 IBC 704@ 9,929 4,926 49.6 1,135@ 1,66,600 70,819 42.5 total 34,39,276 2,70,631 40,352 14.9 43,82,569 8,15,678 1,26,085 15.5 notes: 1. P: Provisional. 2. *: Refers to the amount recovered during the given year, which could be with reference to the cases referred during the given year as well as during the earlier years. 3. DRTs: Debt Recovery Tribunals; SARFAESI Act: The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. 4. @: Cases admitted by National Company Law Tribunals (NCLTs). 5. Figures relating to IBC for 2017-18 and 2018-19 are calculated by adding quarterly numbers from IBBI newsletters. source: Off-site returns, RBI and IBBI. 52OperatiOns and perfOrmance Of cOmmercial Banks the number of cases of fraud reported by banks evaluate NPA accounts exceeding ₹50 crores as well as the amount involved spiked during from the angle of possible frauds, to supplement the earlier efforts to unearth fraudulent 2018-19, both would be trending lower if transactions. This appears to have caused the analysed on the basis of the date of occurrence sharp jump in reported frauds in 2018-19. (Table IV.12 and Table IV.13). In February 2018, IV.37 Frauds have been predominantly the government issued a framework for timely occurring in the loan portfolio, both in terms of detection, reporting and investigation relating number and value. Incidents relating to other to frauds in PSBs, which required them to areas of banking viz., card/internet, off-balance table IV.11: details of financial assets sheet and forex transactions, in terms of value, securitised by arcs have reduced (in terms of date of reporting) (Amount in ₹crore) in 2018-19 vis-à-vis the previous year. The Item Jun-16 Jun-17 Jun-18 Jun-19 modus operandi of large value frauds12 – that 1. Book Value of Assets 2,37,653 2,62,733 3,30,563 3,88,069 account for 86.4 per cent of all frauds reported Acquired during the year in terms of value – involved, 2. Security Receipt 79,020 93,918 1,20,308 1,46,409 issued by SCs/RCs inter alia, diversion of funds by borrowers 3. Security Receipts through various means, mainly via associated Subscribed to by (a) Banks 65,119 77,653 95,951 1,01,733 or shell companies; accounting irregularities; (b) SCs/RCs 11,406 14,159 20,165 27,480 manipulating financial or stock statements; (c) FIIs 326 326 505 1,735 opening current accounts with banks outside (d) Others (Qualified 2,170 1,779 3,686 15,521 Institutional Buyers) the lending consortium without a no-objection 4. Amount of Security 7,200 7,355 8,830 12,906 certificate from lenders; and devolving of Letter Receipts Completely Redeemed of Credits (LCs). 5. Security Receipts 64,117 78,312 98,118 1,14,615 Outstanding IV.38 PSBs accounted for a bulk of frauds source: Quarterly statements submitted by ARCs reported in 2018-19 – 55.4 per cent of the 12 Involving ₹50 crore or above 53Report on Trend and Progress of Banking in India 2018-19 table IV.12: frauds in Various Banking Operations Based on the date of reporting (At end-March) (Cases in number and amount in ₹crore) 2014-15 2015-16 2016-17 2017-18 2018-19 No. Amount No. Amount No. Amount No. Amount No. Amount Advances 2,251 17,122 2,125 17,368 2,322 20,561 2,525 22,558 3,606 64,548 Card/Internet 845 52 1,191 40 1,372 42 2,059 110 1,866 71 Deposits 876 437 757 809 695 903 691 457 593 148 Cash 153 43 160 22 239 37 218 40 274 56 Others 179 162 176 146 153 77 138 242 197 244 Cheques/demand drafts 254 26 234 25 235 40 207 34 189 34 Off-balance sheet 10 699 4 132 5 63 20 16,288 33 5,538 Clearing, etc accounts 29 7 17 87 27 6 37 6 24 209 Foreign exchange transactions 16 899 17 51 16 2,201 9 1,426 13 695 Non-resident accounts 22 8 8 9 11 3 6 5 3 0 Inter-branch accounts 4 0 4 10 1 1 6 1 3 0 total 4,639 19,455 4,693 18,699 5,076 23,934 5,916 41,167 6,801 71,543 notes: 1. Refers to frauds of ₹1 lakh and above. 2. The figures reported by banks & FIs are subject to change based on revisions filed by them. 3. Frauds reported in a year could have occurred several years prior to year of reporting. 4. Amounts involved reported do not reflect the amount of loss incurred. Depending on recoveries, the loss incurred gets reduced. Further, the entire amount involved is not necessarily diverted. source: RBI number of cases reported and 90.2 per cent cent and 11.2 per cent, whereas their shares in of the amount involved – mainly reflecting the the latter were 7.7 per cent and 1.3 per cent, lack of adequate internal processes, people and respectively. PSBs’ share in the value of large systems to tackle operational risks. PVBs’ and frauds was even higher at 91.6 per cent in FBs’ shares in the former stood at 30.7 per 2018-19. table IV.13: frauds in Various Banking Operations Based on the date of Occurrence (At end-March) (Cases in number and amount in ₹crore) Prior to 2014-15 2014-15 2015-16 2016-17 2017-18 2018-19 No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount Advances 6,268 87,374 1,897 18,168 1,743 14,570 1,265 9,550 1,024 8,863 632 3,634 Card/Internet 271 16 918 58 1,173 43 1,367 40 2,127 101 1,477 58 Deposits 657 935 790 214 719 600 602 665 524 294 320 45 Cash 54 21 159 36 155 20 276 41 207 38 193 40 Others 236 450 161 33 133 165 132 50 98 146 83 27 Cheques/demand drafts, etc. 92 26 272 23 235 31 217 33 199 34 104 12 Off-balance sheet 23 1,980 13 1,720 11 1,132 13 15,023 4 298 8 2,569 Clearing, etc accounts 17 15 23 79 19 4 29 7 33 5 13 205 Foreign exchange transactions 20 1,004 18 3,361 9 205 15 473 5 83 4 145 Non-resident accounts 15 16 16 3 6 0 7 1 5 4 1 0 Inter-branch accounts 5 2 2 0 4 9 4 1 2 0 1 - total 7,658 91,839 4,269 23,695 4,207 16,779 3,927 25,884 4,228 9,866 2,836 6,735 notes: 1. Refers to frauds of ₹1 lakh and above. 2. The figures reported by banks & FIs are subject to change based on revisions filed by them. 3. Data based on ‘date of occurrence’ may change for a period of time as frauds reported late but having occurred earlier would get added. For example, for frauds occurring in 2016-17, the data generated as on April 1, 2018 would be different from the one generated on April 1, 2019 because the frauds reported between April 1, 2018 and March 31, 2019 but occurred in the year 2016-17 get added in latter report. source: RBI 54OperatiOns and perfOrmance Of cOmmercial Banks 5. sectoral Bank credit: distribution and IV.41 Bank credit to industry decelerated npas in 2018-19 and in 2019-20 so far, partly tracking the slowdown in industrial production IV.39 In response to the mounting NPAs of (Table IV.14). In 2018-19, out of the 19 industry the industrial sector since 2012-13, banks sub-groups, credit accelerated only to 8 as diversified their portfolios towards services and compared with 12 in the previous year. Other retail loans (Chart IV.17 a). Within retail loans, sub-sectors such as food processing, textiles, the dominant share of housing has increased paper and paper products, petroleum and coal (Chart IV.17 b). products, gems and jewellery, and basic metals IV.40 During 2018-19, bank credit to also experienced a decline in credit flows. agriculture accelerated, mainly on the back of IV.42 The quality of banks’ industrial assets expanding the ambit of the interest subvention improved in 2018-19 and in H1:2019-20, helped scheme provided by the Government for by a decline in fresh slippages and increase in ensuring availability of credit to the sector at a recoveries through the IBC. Large industries reasonable cost and enhancement of the limit for posted the best progress in this regard (Chart collateral free agricultural loan by the Reserve IV.18 b). Notwithstanding, industrial GNPA ratio Bank; however, it has declined significantly in remained high at 17.4 per cent, constituting H1: 2019-20 (Table IV.14). Disconcertingly, the about two-thirds of total NPAs at the end of GNPA ratio in bank lending to the agriculture September 2019. sector increased in 2018-19 as well as in H1: 2019-20 (Chart IV.18 a). In fact, analysis IV.43 Services sector credit growth accelerated by the Internal Working Group (Chairman: on enhanced flows to shipping, trade, commercial Shri M. K. Jain) constituted by the Reserve real estate and NBFCs. Of the incremental non- Bank to review agricultural credit indicates that food credit expansion, NBFCs accounted for NPA levels have increased for those states that 14.6 per cent – the highest amongst the services announced farm loan waiver programmes in sub-sectors – reflecting the recent initiatives 2017-18 and in 2018-19. taken by the Reserve Bank and the Government 55Report on Trend and Progress of Banking in India 2018-19 to revive the sector. Notwithstanding some over the past eight years. In H1: 2019-20, credit moderation, retail loans grew in double digits, growth to both these sectors decelerated (Table extending the expansion that has been underway IV.14). table IV.14: sectoral deployment of Gross Bank credit (Amount in ₹crore) Outstanding as on Per cent variation (y-o-y) Sr. No & Item Mar-18 Mar-19 Sep-19 2017-18* 2018-19** 2019-20 (up to September)^ 1. agriculture & allied activities 11,93,400 13,25,824 12,06,850 7.2 11.1 -0.6 2. Industry, of which 31,29,512 33,04,940 31,74,214 6.2 5.6 0.2 2.1 Micro & Small Industries 4,18,225 4,38,392 4,33,908 8.8 4.8 -0.4 2.2 Medium 1,25,960 1,23,843 1,18,261 6.3 -1.7 -6.6 2.3 Large 24,62,576 26,24,288 25,30,553 4.6 6.6 1.8 3. services, of which 19,98,817 24,77,517 25,77,530 10.6 23.9 16.9 3.1 Trade 5,19,398 5,83,613 5,83,264 7.5 12.4 12.7 3.2 Commercial Real Estate 2,04,414 2,43,122 2,57,959 3.4 18.9 12.4 3.3 Tourism, Hotels & Restaurants 52,095 56,194 56,766 9.9 7.9 3.2 3.4 Computer Software 22,299 22,236 22,576 14.9 -0.3 -0.7 3.5 Non-Banking Financial Companies 4,53,123 6,14,922 7,09,833 31.7 35.7 30.5 4. retail loans, of which 19,42,501 23,02,173 24,64,985 20.5 18.5 18.1 4.1 Housing Loans 10,08,013 12,04,332 13,03,629 18 19.5 18.5 4.2 Consumer Durables 19,036 9,195 8,902 -11.6 -51.7 110.2 4.3 Credit Card Receivables 82,827 1,11,361 1,21,708 27.7 34.5 30.5 4.4 Auto Loans 2,38,787 2,69,672 2,75,500 27.9 12.9 8.6 4.5 Education Loans 74,883 76,210 78,237 2.7 1.8 2.4 4.6 Advances against Fixed Deposits 77,175 77,080 63,215 13.5 -0.1 -4.8 (incl. FCNR (B), etc.) 4.7 Advances to Individuals against 6,385 9,339 8,655 26.1 46.3 33.4 Shares, Bonds, etc. 4.8 Other Retail Loans 4,35,396 5,44,983 6,05,139 28.2 25.2 24.2 5. non-food credit (1- 4) 83,61,294 94,71,480 36,71,836 10.5 13.3 8.6 6. Gross Bank credit 83,99,196 95,19,554 95,57,487 10.4 13.3 8.9 *: March 2018 over March 2017. **: March 2019 over March 2018. ^: September 2019 over September 2018. source: Off-site returns (domestic operations), RBI 56OperatiOns and perfOrmance Of cOmmercial Banks IV.44 PVBs maintained double-digit credit consumer durables segments by stepping up growth in respect of all the major sectors. disbursements of housing loans, which grew at Their lending to the relatively stress-free retail over 40 per cent on a y-o-y basis in 2018-19. and services sectors grew by over 30 per cent IV.46 Supervisory data suggest that in H1:2019- in 2018-19 (Chart IV.19). PSBs’ credit to the 20, PSBs’ loan growth to services and retail services sector grew at 18.4 per cent, pulled up sectors moderated, and their agricultural and primarily by NBFCs, followed by commercial industrial lending declined. PVBs’ credit growth real estate. In contrast, PVBs exposure to decelerated to all sectors barring agriculture but services was more broad-based, even as credit remained higher than that of PSBs (Chart IV.19). to NBFCs accelerated. Prevalence of weak consumer demand and IV.45 In relation to preceding years, banks’ slowdown in economic activity seem to have retail loans moderated in 2018-19 as exposures impinged on the overall loan growth. to auto and consumer durables sectors were 5.1 Priority Sector Credit scaled back. Besides, PSBs experienced a IV.47 Priority sector credit accelerated in substantial deceleration in the housing loans category, which accounts for more than half of 2018-19, largely driven by a recovery in credit their total retail credit. PVBs, on the other hand, to agriculture and housing. The steadfast drive compensated for the tepid growth in auto and to promote affordable housing under the ambit 57Report on Trend and Progress of Banking in India 2018-19 per cent in 2017-18 to 24.9 per cent in 2018-19 Chart IV.20: Credit to Priority Sectors–All SCBs (Chart IV.20). Both PVBs and PSBs contributed 30 to this revival. 25 IV.48 All bank groups managed to achieve nt 20 the overall priority sector lending (PSL) target. e c r However, shortfalls were found in certain sub- e p n 15 targets: PSBs in micro enterprises; PVBs in h i wt small and marginal farmers; and both PVBs and o 10 r g Y FBs in non-corporate individual farmers (Table Y-o- 5 IV.15). The total trading volume of the Priority Sector Lending Certificates (PSLC) platform 0 2014 2015 2016 2017 2018 2019 – introduced in April 2016 to allow market -5 mechanism to drive priority sector lending by Priority Agriculture MSME leveraging the comparative strength of different Education Housing banks – grew by 78 per cent to ₹3,27,429 crores Source:RBI. as on March 31, 2019. Among the four PSLC of the Pradhan Mantri Awas Yojana (PMAY), categories, the highest trading was recorded coupled with the Reserve Bank’s June 2018 in the case of PSLC-General and PSLC-small initiative to expand the eligibility of housing and marginal farmer, with transaction volumes loan limits for priority sector lending enabled of ₹1,32,485 crores and ₹1,12,504 crores, a sharp jump in housing loan growth from 0.7 respectively. table IV.15: priority sector lending by Banks (As on March 31, 2019) (Amount in ₹crore) Item Target/ Public Sector Banks Private Sector Banks Foreign Banks sub-target (per cent of Amount Per cent of Amount Per cent of Amount Per cent of ANBC/OBE) outstanding ANBC/OBE outstanding ANBC/OBE outstanding ANBC/OBE 1 2 3 4 5 6 7 8 total priority sector 40 23,05,977 42.55 10,18,993 42.49 1,54,336 43.41 advances of which Total Agriculture 18 9,82,117 18.12 3,91,015 16.31 36,820 20.13 Small and Marginal 8 4,78,705 8.83 1,66,359 6.94 16,457 9.00 Farmers Non-corporate Individual 11.99 6,80,417 12.56 2,66,883 11.13 19,394 10.61 Farmers# Micro Enterprises 7.5 3,96,832 7.32 1,89,958 7.92 15,398 8.42 Weaker Sections 10 6,35,424 11.73 2,54,847 10.63 21,141 11.56 notes: 1. #: Domestic SCBs were directed to ensure that the overall lending to non-corporate farmers does not fall below the system-wide average of the last three years’ achievement. All efforts should be maintained to reach the level of 13.5 percent direct lending to the beneficiaries who earlier constituted the direct agriculture sector. The applicable system wide average figure for computing achievement under priority sector lending will be notified every year. For FY 2018-19, the applicable system wide average figure is 11.99 percent. 2. For foreign banks having less than 20 branches, the target of 40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of off-balance sheet exposure (OBE), whichever is higher, as on March 31 of the preceding year is to be achieved in a phased manner by March 2020. source: Financial Inclusion and Development Department (FIDD), RBI 58OperatiOns and perfOrmance Of cOmmercial Banks table IV.16: sector-wise Gnpas of Banks (As at end-March) (Amount in ₹crore) Bank Group Priority Sector Of which Non-priority Sector Total NPAs Agriculture Micro and Small Others Enterprises Amt. Per cent# Amt. Per cent# Amt. Per cent# Amt. Per cent# Amt. Per cent# Amt. Per cent# psBs* 2018 1,87,511 22.2 75,274 8.9 82,094 9.7 30,143 3.6 6,57,964 77.8 8,45,475 100 2019 1,97,334 27.8 95,938 13.5 73,381 10.3 28,016 3.9 5,12,774 72.2 7,10,109 100 pVBs^ 2018 18,426 18.0 7,789 7.6 8,013 7.8 2,624 2.6 83,998 82.0 1,02,424 100 2019 29,721 19.0 12,679 8.1 12,796 8.2 4,246 2.7 1,26,991 81.0 1,56,712 100 fBs 2018 1,184 8.6 78 0.6 552 4.0 554 4.0 12,645 91.4 13,830 100 2019 1,101 9.0 105 0.9 616 5.1 379 3.1 11,082 91.0 12,183 100 all scBs** 2018 2,07,120 21.5 83,141 8.6 90,659 9.4 33,321 3.5 7,54,608 78.5 9,61,728 100 2019 2,28,156 26.0 1,08,722 12.4 86,792 9.9 32,642 3.7 6,50,847 74.0 8,79,003 100 notes: 1. Amt.: – Amount; Per cent: Per cent of total NPAs. 2. *: Includes IDBI Bank Ltd for 2018. 3. ^: Includes IDBI Bank Ltd for 2019. 3. Constituent items may not add up to the total due to rounding off. 4. # Share in total NPAs. 5. **: Does not include SFBs. source: Off-site returns (domestic operations), RBI IV.49 While the priority sector accounts for against volatile market movements (Chart IV.21 approximately 36 per cent of total bank lending13, and Appendix Table IV.4). its share in total GNPAs is 26 per cent of the Chart IV.21: Growth inLending to total. Although the GNPA ratio of the priority Sensitive Sectors sector declined marginally from 7.1 per cent at 20 end-March 2018 to 6.8 per cent at end-March 2019, its share in total GNPAs increased during 15 nt the year, mainly owing to the comparatively ce r pe 10 better performance of the non-priority sector n h i (Table IV.16). wt o gr 5 5.2 Credit to Sensitive Sectors Y o- Y- IV.50 Banks’ exposure to sensitive sectors14 0 4 5 6 7 8 9 1 1 1 1 1 1 edged up to 23.5 per cent of total loans and 3- 4- 5- 6- 7- 8- 1 1 1 1 1 1 0 0 0 0 0 0 -5 2 2 2 2 2 2 advances during 2018-19. Lending to the capital markets declined in 2018-19, as banks Capital Market Real Estate Source:Annual accounts of banks. attempted to safeguard their balance sheets 13 Corresponds to 43 per cent of ANBC. 14 Sensitive sectors include capital market, real estate and commodities. 59Report on Trend and Progress of Banking in India 2018-19 6. Operations of scBs in the capital market IV.51 Against the backdrop of volatile market conditions and other uncertainties which were not conducive to raising resources from the equity market, banks did not venture into public issues. Given their financial condition, the high interest cost on debt deterred the banks from raising funds from the bond markets. There were, thus, no public issues either by PSBs or by PVBs during 2018-19 and 2019-20 (up to September 2019). Resource mobilisation through private placement of bonds too declined, both in terms of the number of issues and the amount raised. As in the previous two years, PVBs raised resources through large-sized private placements during 2018-19 (Chart IV.22 planned for PSBs in 2019-20 are likely to change a and b). the ownership structure further. Furthermore, IDBI Bank Ltd was privatised with effect from 7. Ownership pattern in scheduled January 21, 2019, consequent upon the Life commercial Banks Insurance Corporation of India (LIC) attaining 51 IV.52 At end-March 2019, the government’s per cent of the paid-up equity share capital of the shareholding in 13 PSBs increased due to bank. While the maximum foreign shareholding recapitalisation, whereas it reduced in four banks in PSBs was 11.3 per cent, four PVBs had foreign albeit marginally, and remained constant in three shareholding in excess of 50 per cent at end- (Chart IV.23). Capital infusions and mergers March 2019 (Appendix Table IV.5). 60OperatiOns and perfOrmance Of cOmmercial Banks 8. foreign Banks’ Operations in India table IV.17: Operations of foreign Banks in India and Overseas Operations of Indian Banks Period Number of Number of Foreign Banks Branches IV.53 During 2018-19, the number of branches March 2015 45 321 operated by FBs in India increased, contrary March 2016 46 325 to the trend in recent years (Table IV.17). This March 2017 44 295 March 2018 45 286 was mainly on account of opening of additional March 2019 45 299 branches by DBS Bank post its conversion note: Two foreign banks, namely SBM Bank (India) Ltd. which is a from branch to wholly owned subsidiary subsidiary of SBM Group and DBS Bank India Ltd., a subsidiary of DBS Bank are operating through wholly owned subsidiary (WOS) (WOS) mode. Indian PSBs, on the other hand, mode. They have been issued licence on December 6, 2017 and October substantially reduced their overseas presence 4, 2018, respectively and commenced operations as WOS w.e.f. from December 1, 2018 and March 1, 2019, respectively. in terms of branches, representative offices and source: RBI other offices with the objective of cost efficiency affordable through enhancing competition, through shutting down of unviable foreign optimising costs, improving convenience, and operations and rationalisation of multiple raising consumer confidence. branches in same cities or nearby places. The presence of Indian PVBs remained stable in IV.55 The real time gross settlement (RTGS) aggregate terms (Appendix Table IV.6). system continued to dominate the payment 9. payment systems and scheduled system transactions15 in terms of value. While commercial Banks the share of retail electronic clearing has been increasing in terms of value and volume, card IV.54 The core vision for the payment and payments (debit and credit cards) witnessed settlement systems in India is that of a less-cash a moderation in the latter. The paper clearing society, with an emphasis on empowering every Indian with access to a bouquet of e-payment segment declined both in value and volume options. In pursuit of this, the focus is on making terms, as has been the trend in recent years digital payments safe, secure, accessible, and (Chart IV.24). 15 Includes RTGS, paper clearing, retail electronic clearing, card payments and pre-paid payment instruments (PPIs). 61Report on Trend and Progress of Banking in India 2018-19 Chart IV.25: Payment System Transactions: Growth a. Value b. Volume nt 120 nt 140 e e c 100 c 120 r r h in pe 68 00 h in pe 1 80 00 wt wt 60 ro 40 ro 40 g g Y 20 Y 20 o- o- Y- 0 Y- 0 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- CardPayments Total CardPayments Total Retail ElectronicClearing Retail ElectronicClearing Note:Card payments include credit and debit card payments at point of sale (PoS) terminals and online. Source:RBI. IV.56 Card payments – which had decelerated IV.58 The increasing trend in complaints in 2017-18 after the demonetisation-induced received over the years is indicative of greater spike of the previous year – recovered in 2018- awareness among consumers, especially against 19; however, volumes remain lower than that the backdrop of the Reserve Bank’s campaigns of retail electronic payments, indicative of the such as ‘RBI Kehta Hai Jankar Baniye Satark changing dynamics in the payments landscape Rahiye’, and ‘Is Your Banking Complaint and consumer preferences (Chart IV.25) Unresolved?’. In spite of complaints increasing by 32,311 over the previous year, 94.03 per 10. consumer protection cent of the complaints filed were disposed of by IV.57 The Reserve Bank has been striving to Banking Ombudsman (BO) offices in 2018-19 create an enabling environment for developing a as against 96.46 per cent in the previous year. customer-centric financial system by instituting Even though non-adherence to the fair practices mechanisms for addressing information code remained the main grievance against asymmetries between providers and consumers banks, complaints relating to ATM/debit/credit of financial services, enhancing standards of cards and mobile/electronic banking grew at a disclosures and ensuring better alignment of fast pace, in step with the increasing usage of product design vis-à-vis customer requirements, these payment media (Table IV.18). while providing an efficient and effective IV.59 The share of complaints emanating from grievance redressal mechanism16. Recent urban and metropolitan areas account for more initiatives include the Complaint Management than three fourth of the total, indicating the System (CMS) which is a technology-enabled higher level of awareness regarding grievance platform to effectively support the Ombudsman redressal mechanisms among the customers framework and consumer education and in these population groups (Chart IV.26). A protection cells (CEPCs). disproportionately large share of complaints 16 Consumer Protection in a Digital Financial World – Initiatives and Beyond, Shri M K Jain, Deputy Governor, Reserve Bank of India. Speech delivered at the Annual Conference of Banking Ombudsman – 2019, Mumbai on June 21, 2019. 62OperatiOns and perfOrmance Of cOmmercial Banks table IV.18: nature of complaints at BOs 11. financial Inclusion 2016-17 2017-18 2018-19 IV.60 Since the introduction of the Pradhan Non-observance of Fair Practice Code 31,769 36,146 37,557 Mantri Jan Dhan Yojana (PMJDY) in August ATM/ Debit Cards 16,434 24,672 36,539 2014, the national financial inclusion Mobile / Electronic Banking* - 8,487 14,794 Failure to Meet Commitments 8,911 11,044 13,332 agenda has taken long strides across the Credit Cards 8,297 12,647 13,274 country in pursuit of its aim of expanding Deposit Accounts 7,190 6,719 10,844 Levy of Charges without Prior Notice 7,273 8,209 8,391 access to basic financial services to the most Loans and Advances 5,559 6,226 7,610 vulnerable sections of the population. By 2017, Pension Payments 8,506 7,833 7,066 Non-adherence to BCSBI Codes 3,699 3,962 5,981 77 per cent of the poorest 40 per cent in India Remittances 3,287 3,330 3,451 had an account with a financial institution, Para-Banking* - 579 1,115 DSAs and Recovery Agents 330 554 629 the highest amongst BRICS countries. Yet, Notes and Coins 333 1,282 480 engagement of the people with the financial Others 23,169 26,219 28,330 system remains low, as reflected in a high Out of Purview of BO Scheme 6,230 5,681 6,508 total 1,30,987 1,63,590 1,95,901 proportion of inactive accounts (Chart notes: 1. *: Fresh grounds included from July 1, 2017. IV.28). Against this backdrop, the National 2. Data pertain to July-June. source: Various offices of Banking Ombudsman Strategy for Financial Inclusion for India 2019-24, prepared under the aegis of the relating to levy of charges without prior notice Financial Inclusion Advisory Committee were filed against PVBs (45 per cent given (FIAC), incorporates the views of a range of that their share in total assets of the banking stakeholders and market players in renewing sector is 32 per cent). Similarly, almost all the drive to make formal financial services complaints relating to pensions were against accessible and affordable in a safe and PSBs (Chart IV.27). transparent manner. 63Report on Trend and Progress of Banking in India 2018-19 areas increased in 2018-19, reversing the decline in 2017-18. Moreover, the share of BCs in total banking outlets in rural areas remained around 91 per cent and the number of urban locations covered through BCs recorded more than a three-fold rise. Furthermore, accelerated growth in the number of Basic Savings Bank Deposit Accounts (BSBDAs) opened via BCs and the healthy expansion of Information and Communication Technology (ICT) based transactions driven by BCs point to their rising popularity. Going forward, capacity building and skill-upgradation programmes, such as the ‘Train the Trainers’ initiative by the Reserve Bank, are expected to boost this momentum further (Table IV.19). 11.1 Pradhan Mantri Jan Dhan Yojana IV.61 Under financial inclusion plans (FIPs) of SCBs, the number of brick-and-mortar IV.62 As stated earlier, the PMJDY has branches and banking outlets through the contributed significantly to the cause of financial business correspondent (BC) model in rural inclusion in the country. The total number of table IV.19: progress under financial Inclusion plans, all scBs (including rrBs) Sr. Particulars Year ended Year ended Year ended Y-o-Y growth in Y-o-Y growth in No. Mar-10 Mar-18 Mar-19 per cent per cent (2017-18) (2018-19) 1 Banking Outlets in Rural location - Branches 33,378 50,805 52,489 -0.1 3.3 2 Banking Outlets in Rural location - Branchless mode 34,316 5,18,742 5,44,666 -5.2 5 3 Banking outlets in Rural locations - Total 67,694 5,69,547 5,97,155 -4.8 4.8 4 Urban locations covered through BCs ($) 447 1,42,959 4,47,170 39 212.8 5 BSBDA - Through branches (No. in Lakh) 600 2,474 2,547 -2.6 3 6 BSBDA - Through branches (Amt. in Crore) 4,400 73,085 87,765 5.8 20.1 7 BSBDA - Through BCs (No. in Lakh) 130 2,888 3,195 3.1 10.6 8 BSBDA - Through BCs (Amt. in Crore) 1,100 39,056 53,195 37 36.2 9 BSBDA - Total (No. in lakh) 735 5,362 5,742 0.6 7.1 10 BSBDA - Total (Amt. in Crore) 5,500 1,12,141 1,40,960 14.8 25.7 11 OD facility availed in BSBDAs (No. in lakh) 2 58 59 -35.6 1.7 12 OD facility availed in BSBDAs (Amt. in Crore) 10 408 443 -76 8.6 13 KCC - Total (No. in Lakh) 240 464 491 0.9 5.8 14 KCC - Total (Amt. in Crore) 1,24,000 6,09,587 6,68,044 5 9.6 15 GCC - Total (No. in Lakh) 10 118 120 -9.2 1.7 16 GCC - Total (Amt. in Crore) 3,500 1,49,792 1,74,514 -29.2 16.5 17 ICT-A/Cs-BC-Total number of transactions (in Lakh) 270 14,886 21,019 28.4 41.2 18 ICT-A/Cs-BC-Total number of transactions (in Crore) 700 4,29,238 5,91,347 61.9 37.8 note: Sr. No. 1-16 consist of cumulative data from the inception. Sr. No. 17-18 consist of data from the start of corresponding financial year. $: Out of 4, 47,170 outlets, it is reported that 3, 88,868 outlets provide limited services only like remittance, or sourcing of loans, etc. source: FIP returns submitted by banks 64OperatiOns and perfOrmance Of cOmmercial Banks accounts opened under PMJDY increased to to decide their business strategy in facilitating 37.1 crores, with ₹1.02 lakh crore of deposits financial inclusion. as on September 25, 2019. Of these accounts, 59 per cent are operational in rural and semi- table IV.20: tier-wise Break-up of newly urban areas (Chart IV.29 a). Since September Opened Bank Branches by scBs 2018, more than 70 per cent of the new PMJDY Centre 2015-16 2016-17 2017-18 2018-19 accounts have been opened with PSBs. The usage Tier 1 3,247 2,336 1,581 2,114 of these accounts, however, has stagnated in the (35.7) (43.6) (40.1) (46.7) last two years as evident from the deceleration Tier 2 694 363 336 515 (7.6) (6.8) (8.5) (11.3) in average balances (Chart IV.29 b). There has Tier 3 1,192 639 567 700 been a steady increase in the number of RuPay (13.1) (11.9) (14.4) (15.4) cards issued, driven by both PSBs and PVBs. Tier 4 790 429 333 359 (8.7) (8.0) (8.4) (7.9) 11.2 New Bank Branches Tier 5 934 665 455 379 (10.3) (12.4) (11.5) (8.3) IV.63 The pace of opening of new bank Tier 6 2,223 925 666 451 branches, which had moderated in the previous (24.5) (17.2) (16.9) (10.0) total 9,080 5,357 3,938 4,518 three consecutive years, reversed in 2018-19. (100) (100) (100) (100) More than 50 per cent of the new branches were notes: 1. Tier-wise classification of centres is as follows: 'Tier 1' opened in Tier-1 and Tier-2 centres; on the other includes centres with population of 1, 00,000 and above, 'Tier 2' includes centres with population of 50,000 to 99,999, hand, the shares of Tier-5 and Tier-6 centres 'Tier 3' includes centres with population of 20,000 to 49,999, 'Tier 4' includes centres with population of 10,000 to 19,999, declined (Table IV.20). This is consistent with 'Tier 5' includes centres with population of 5,000 to 9,999, the banks’ policy of opening branches in high and 'Tier 6' includes centres with population of Less than 5000. population density areas where they are likely 2. Data exclude ‘Administrative Offices’. 3. All population figures are as per census 2011. to be more commercially viable, while relying on 4. Central Information System for Banking Infrastructure BCs to enhance their outreach in other centres. data are dynamic in nature. The data are updated based on information received from banks. The revised guidelines on rationalisation of 5. Figures in the parentheses represent proportion of the branches opened in a particular area vis-à-vis the total. branch authorisation policy introduced in source: Central Information System for Banking Infrastructure May 2017 has provided banks the autonomy (erstwhile Master Office File system) database, RBI 65Report on Trend and Progress of Banking in India 2018-19 11.3 ATMs IV.64 The total number of ATMs (on-site and off-site) operated by banks decreased during the year. This was partly compensated by growth in white label ATMs (WLAs) (Chart IV.30), boosted by policy changes introduced on March 7, 2019, to enhance the financial viability of WLAs, such as allowing their operators to source cash directly from the Reserve Bank, offer non-bank services, and advertise non-financial products in their premises. IV.65 While PVBs recorded an increase in their on-site and off-site ATMs, PSBs reduced both, with a higher rate of decline in the latter17. Notably, scheduled SFBs operated more ATMs than FBs by end-March 2019 (Table IV.21). experienced a decline in 2018-19. PVBs and FBs Despite transactions at ATMs decelerating both continue to have more ATMs concentrated in in volume and value terms, they still serve as a urban and metropolitan centres, causing the common medium for people to access cash18. skew (Table IV.22). V.66 The distributional pattern of ATMs of 11.4 Microfinance Programme SCBs remained broadly similar in 2018-19 to the previous year. However, rural and semi- IV.67 The self-help group (SHG)-bank linkage urban areas, which had recorded marginal programme (SBLP) run by the National Bank for growth in the number of ATMs in 2017-18, Agriculture and Rural Development (NABARD) table IV.21: atms Sr. Bank Group On-site ATMs Off-site ATMs Total Number of ATMs No. 2018 2019 2018 2019 2018 (3+5) 2019 (4+6) 1 2 3 4 5 6 7 8 I PSBs 82,733 78,419 63,235 57,679 1,45,968 1,36,098 II PVBs 23,829 26,197 36,316 37,143 60,145 63,340 III FBs 214 221 725 693 939 914 IV SFBs* - 1,422 - 298 - 1,720 V WLAs - - - - 15,195 19,507 VI All SCBs 1,06,776 1,06,259 1,00,276 95,813 2,07,052 2,02,072 (I to IV) VII Total (V+VI) - - - - 2,22,247 2,21,579 *: 8 scheduled SFBs as at end-March 2019. source: RBI 17 This is partly due to the reclassification of IDBI Bank as a private bank. Adjusted for IDBI bank, the PVBs showed a reduction in off-site ATMs and in the total number of ATMs, with no change among PSBs. 18 During 2018-19, the value of transactions that occurred at ATMs is 2.8 times that of PoS. 66OperatiOns and perfOrmance Of cOmmercial Banks banks are approximately five times larger than table IV.22: number of atms of scBs at Various centres those of their closest alternative model viz., Micro Finance Institutions (MFIs). The NPA ratio of the (At end-March 2019) former reduced to 5.2 per cent from 6.1 per cent Bank Group Rural Semi- Urban Metropolitan Total urban in the previous year19 (Appendix Table IV.13). 1 2 3 4 5 6 11.5 Credit to Micro, Small and Medium Public Sector 27,683 40,183 38,498 29,734 1,36,098 Banks (20.3) (29.5) (28.3) (21.8) (100.0) Enterprises (MSMEs) Private Sector 5,339 15,388 16,683 25930 63,340 Banks (8.4) (24.3) (26.3) (40.9) (100.0) IV.68 Credit growth to micro, small and medium Foreign Banks 21 18 166 709 914 enterprises (MSMEs) accelerated in 2018-19 (2.3) (2.0) (18.2) (77.6) (100.0) from the anaemic conditions that prevailed Small Finance 372 460 482 406 1,720 Banks* during 2017-18, owing to the aggressive credit (21.6) (26.7) (28.0) (23.6) (100.0) expansion by PVBs. PSBs’ share in total credit to total 33,415 56,049 55,829 56,779 2,02,072 (16.5) (27.7) (27.6) (28.1) (100.0) MSMEs decreased from 65 per cent in 2017-18 Growth over -3.1 -1.4 -2.4 -2.7 -2.3 to 58 per cent in 2018-19. Although the number previous Year of accounts of PVBs was nearly double that of notes: 1. Figures in parentheses indicate percentage share of total ATMs under each bank group. PSBs, the average amount of loans extended 2. *: 8 scheduled SFBs as at end-March 2019. source: RBI by PVBs was ₹2.75 lakhs – much lower than ₹7.79 lakhs by PSBs – indicative of the scale of has emerged as the world’s largest micro finance businesses served by the two (Table IV.23). movement through which credit facilities are extended to the poor by organising them into 11.6 Regional Banking Penetration groups and connecting them to the formal IV.69 Banking outreach in India at the sub- financial sector. SHGs’ outstanding loans with national level remains heterogeneous and tilted table IV.23: credit flow to the msme sector by scBs (No. of accounts in lakh, amount outstanding in ₹crore) 2015-16 2016-17 2017-18 2018-19 public sector Banks No. of Accounts 106.82 111.97 111.01 112.97 (24.1) (4.8) (-0.9) (1.8) Amount Outstanding 8,20,548 8,28,933 8,64,598 8,80,033 (-3.8) (1.0) (4.3) (1.8) private sector Banks No. of Accounts 96.42 119.59 148.33 205.31 (92.0) (24.0) (24.0) (38.4) Amount Outstanding 3,59,085 4,30,963 4,10,760 5,63,678 (27.5) (20.0) (-4.7) (37.2) foreign Banks No. of Accounts 1.86 2.07 2.20 2.40 (-34.4) (11.1) (6.2) (9.3) Amount Outstanding 36,374 36,503 48,881 66,939 (-1.1) (0.4) (33.9) (36.9) all scheduled commercial banks No. of Accounts 205.10 233.63 261.54 320.68 (47.4) (13.9) (12.0) (22.6) Amount Outstanding 12,16,007 12,96,399 13,24,239 15,10,651 (3.8) (6.6) (2.2) (14.1) note: Figures in the parentheses indicate y-o-y growth rates. source: Financial Inclusion and Development Department, RBI 19 NABARD Annual Report 2018-19. 67Report on Trend and Progress of Banking in India 2018-19 towards the western and southern regions them to comply with regulatory requirements even after concerted efforts to further financial and to empower them to channelise a larger inclusion in hitherto unbanked areas (Chart volume of resources for financial inclusion. IV.31). Concomitantly, the average population From 196 in 2005, the number of RRBs has served per bank branch continues to be much come down to 45 as at April 1, 2019. The target higher in eastern, central and north-eastern is to further consolidate them into 38 RRBs to regions than in other parts (Chart IV.32). minimise overhead expenses, enhance capital, Lower per capita income level and industrial and expand their area of operation. activity, coupled with inadequate availability of 12.1 Balance Sheet Analysis infrastructural facilities are some of the factors, which are correlated with insufficient regional IV.71 The consolidated balance sheet of RRBs banking penetration in the country. However, expanded during the year, fuelled by growth empirical evidence suggests that regions, which in deposits and share capital on the liabilities historically lagged behind are catching-up side and loans and advances on the assets side. (Box IV.2). Furthermore, deposits – which had decelerated sharply in the previous year from a high 12. regional rural Banks demonetisation induced base – rebounded. IV.70 Regional Rural Banks (RRBs) were Borrowings decelerated, mainly on account of formed under the RRB Act, 1976 with the a dip in funds from sponsor banks, although objective of providing credit and related lending by other sources saw a sharp increase banking facilities to small farmers, agricultural (Table IV.24). labourers, artisans, and other rural poor. In the union budget of 2019-20, ₹235 crores were IV.72 In line with their mandate, the emphasis allocated for recapitalisation of RRBs to enable of RRBs’ lending remained on the priority Chart IV.32: Population per Branch At end-June 2019 Northern Region Southern Region Western Region North Eastern Region Central Region Eastern Region 0 2000 4000 6000 8000 1000012000 Number Source:RBIand Ministry of Statistics and Programme Implementation, Government of India. 68OperatiOns and perfOrmance Of cOmmercial Banks Box IV.2: Is regional Banking penetration in India converging? Over the period 2005-16, there has been narrowing table 1: convergence within regions down of inter-regional inequalities in banking outreach. dependent Variable: Within region coefficient of Variation Although the north-eastern region had a lower base than other regions for both deposit and credit accounts, it is Deposit Accounts Credit Accounts fast catching up with other regions (Charts 1a and 1b). (2005 to 2017) (2012-17) Time -2.57*** -1.98** A fixed effects panel model with regions as panel entities Constant 5222.9*** 4039.8** and coefficient of variation within the regions as the No. of obs. 78 36 dependent variable suggests a decline in intra-regional Adjusted R2 0.92 0.97 variation in banking penetration (Table 1). Conditional β-convergence has been estimated by using annual data note: * :p < 0.05, ** :p < 0.01, *** :p < 0.001. for 32 states/ UTs for the period from 2005 to 2018 in a table 2: conditional β-convergence across India generalised method of moments (GMM) framework of the model 1 model 2 following form: (Credit Accounts) (Deposit Accounts) ∆(lnB ) = α + β (lnB ) + ρ X + γ Z + ε i,t i,t-1 i,t i,t i,t β -0.32*** -0.15*** where B is the number of credit and deposit accounts ρ 0.19*** 0.26*** per ‘000 population; X and Z represent the conditioning γ 1.34*** 0.10^ variables - lagged values of per capita income (post log- α -0.72*** -1.63*** No. of obs. 310 334 transformation) and number of factories per thousand AR (2) (p-value) 0.17 0.06 population - that control for differences in economic Sargan (p-value) 0.21 0.64 characteristics varying levels of economic development note: ^: p<0.10;* : p<0.05; **: p<0.01; *** : p<0.001. across states. A negative and significant β implies conditional convergence. source: Staff calculations. The β is found, on an average, to be negative and significant These results also highlight the crucial role of conditioning for both the equations suggesting convergence (Table 2). factors such as rise in income level of populace and States with lower base in the initial period are catching-up. industrialisation in fostering convergence amongst states. references Barro, Robert J., and Sala-i-Martin Xavier (1991): ‘Convergence across States and Regions’, Brookings Papers on Economic Activity, 1:1991, pp. 107-82. Barro, Robert J. (1999): ‘Inequality, Growth, and Investment’, NBER Working Papers 7038, Cambridge, MA: National Bureau of Economic Research. Bond, S., A. Hoeffler and Jonathan Temple (2001): ‘GMM Estimation of Empirical Growth Models’, Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford. Demirgüç-Kunt, Asli and Dorothe Singer (2017): ‘Financial Inclusion and Inclusive Growth: A Review of Recent Empirical Evidence’, World Bank Policy Research Working Paper No. 8040. 69Report on Trend and Progress of Banking in India 2018-19 table IV.24: consolidated Balance sheet of table IV.25: purpose-wise Outstanding regional rural Banks advances by rrBs (Amount in ₹crore) (Amount in ₹crore) Sr. Purpose/End-March 2018 2019P At end-March Y-o-Y Growth in No. Percent 1 2 3 4 Sr. Item 2018 2019P 2017-18 2018-19P I priority (i to v) 2,27,941 2,55,156 No. Per cent of total loans outstanding 90.4 90.9 1 Share Capital 6,437 6,721 0.6 4.4 i Agriculture 1,73,726 1,96,632 2 Reserves 25,185 26,109 9.1 3.7 ii Micro, small and medium enterprises 31,549 33,435 3 Deposits 4,00,459 4,34,445 7.7 8.5 iii Education 2,801 2,656 3.1 Current 10,223 11,124 -3.7 8.8 vi Housing 15,477 18,304 3.2 Savings 2,01,038 2,24,095 6.9 11.5 v Others 4,389 4,130 3.3 Term 1,89,198 1,99,226 9.3 5.3 II non-priority (i to vi) 24,278 25,670 4 Borrowings 57,647 58,890 11.6 2.2 Per cent of total loans outstanding 9.6 9.1 4.1 from NABARD 45,939 46,898 13.3 2.1 i Agriculture 18.3 1.2 4.2 Sponsor Bank 9,316 5,784 -1.1 -37.9 ii Micro, small and medium enterprises 261 306 4.3 Others 2,392 6,209 41.2 159.6 iii Education 46 72 5 Other Liabilities 15,234 29,633 18.8 94.5 iv Housing 2,286 2,549 total liabilities/assets 5,04,962 5,55,798 8.3 10.1 v Personal Loans 6,454 6,502 6 Cash in Hand 2,789 2,913 0 4.4 vi Others 15,213 16,239 7 Balances with RBI 15,806 17,447 5.3 10.4 total (I+II) 2,52,219 2,80,826 8 Other Bank Balances 5,607 5,469 -13.8 -2.5 notes: 1. P: Provisional 9 Investments 2,22,266 2,24,818 5.3 1.1 2. Totals may not tally on account of rounding-off of figures into 10 Loans and Advances (net) 2,37,011 2,69,372 12.1 13.7 ₹crore. 11 Fixed Assets 1,223 1,264 9.1 3.4 source: NABARD 12 Other Assets # 20,259 34,515 12.2 70.4 13. local area Banks notes: 1. #: Includes accumulated losses. 2. P Provisional. 3. Totals may not tally on account of rounding-off of figures into IV.74 The consolidated assets of the three local ₹crore. Percentage variations could be slightly different as absolute numbers have been rounded off to ₹crore. area banks (LABs) grew at 13 per cent in 2018- source: NABARD 19 up from 4.5 per cent in 2017-18. The credit- deposit ratio, on the other hand, fell from 79 per sector. Within the priority sector, agriculture cent in the previous year to 75 per cent in 2018- garnered the lion’s share – 77.1 per cent. 19 as deposits accelerated at a significantly While the balance sheet of RRBs is 3.3 per higher pace than gross advances (Table IV.27). cent that of SCBs, their agriculture lending constitutes 14.8 per cent of SCB’s lending to the Financial Performance sector (Table IV.25). IV.75 Non-interest income of LABs declined 12.2 Financial Performance in 2018-19, causing the growth in overall income to decelerate in comparison to 2017-18. IV.73 The operating profits of RRBs declined Expenditure, however, accelerated, leading to a in 2018-19, after two consecutive years of deterioration in profitability (Table IV.28). acceleration. The increase in interest income 14. small finance Banks was lacklustre vis-à-vis the acceleration in operating expenses, of which the wage bill was IV.76 Small Finance Banks (SFBs) were set up the major contributor. The asset quality of RRBs in 2016 to offer basic banking services such as has been worsening since 2015-16, leading to accepting deposits and lending to the unserved capital erosion (Table IV.26). and the under-served sections, including small 70OperatiOns and perfOrmance Of cOmmercial Banks table IV.26: financial performance of region- table IV.28: financial performance of local al rural Banks area Banks (At end- March) (Amount in ₹crore) Y-o-Y growth in Sr. Item Amount Y-o-Y growth Amount in ₹crore per cent No. in per cent 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19P 2017-18 2018-19P 1. Income (i+ii) 116 118 9.2 1.7 1 2 3 4 5 6 i. Interest income 90 97 2.9 7.6 a Income (i + ii) 41,819 43,180 6.6 3.3 ii. Other income 26 21 38.8 -19 i. Interest income 38,337 38,953 6.7 1.6 2. expenditure (i+ii+iii) 98 107 4.7 8.6 ii. Other income 3,481 4,228 6.1 21.4 i. Interest expended 42 45 -8.2 7.3 B expenditure (i+ii+iii) 40,317 42,893 8.9 6.4 ii. Provisions and 9 9 11.9 -6.4 i. Interest expended 23,868 23,684 2.1 -0.8 contingencies ii. Operating expenses 11,019 13,510 5.8 22.6 iii. Operating expenses 47 53 18.1 12.6 of which, Wage bill 7,044 9,457 2.9 34.2 of which, wage bill 20 24 11.8 22.2 iii. Provisions and 5,431 5,698 68.8 4.9 3. profit contingencies i. Operating profit/loss 27 20 30.9 -26.3 c profit ii. Net profit/loss 18 11 43.7 -36.7 i. Operating profit 7,543 5,619 25 -25.5 4. net Interest Income 48 52 15.1 7.9 ii. Net profit 1,501 -548 -31.8 -136.5 5. total assets 820 926 4.5 13 d total average assets 4,76,813 5,16,263 9.8 8.3 6. financial ratios @ e financial ratios # i. Operating Profit 3.3 2.1 i. Operating profit 1.6 1.1 ii. Net Profit 2.2 1.2 ii. Net profit 0.3 -0.1 iii. Income 14.1 12.7 iii. Income (a + b) 8.8 8.4 iv. Interest Income 11 10.4 a) Interest income 8.0 7.6 v. Other Income 3.2 2.3 b) Other income 0.7 0.8 vi. Expenditure 12 11.5 iv. Expenditure (a+b+c) 8.5 8.3 vii. Interest Expended 5.1 4.9 a) Interest expended 5.0 4.6 viii. Operating Expenses 5.7 5.7 b) Operating expenses 2.3 2.6 ix. Wage Bill 2.4 2.6 of which, Wage bill 1.5 1.8 x. Provisions and 1.1 0.9 c) Provisions and 1.1 1.1 contingencies contingencies xi. Net Interest Income 5.8 5.6 f analytical ratios (%) note: Financial ratios for 2018-19 are calculated based on the asset of current Gross NPA Ratio 9.5 10.7 year only. CRAR 12.1 11.5 @ Ratios as per cent of average assets of last two years. notes: 1. P- Provisional. 'Wage Bill' is taken as payments to and provisions for employees. 2: # Financial ratios are percentages with respect to average total assets. source: Off-site returns, global operations, RBI 3. Totals may not tally on account of rounding-off of figures in ₹crore. Percentage variations could be slightly different as absolute numbers 14.1 Balance Sheet have been rounded off to ₹crore. source: NABARD IV.77 The consolidated balance sheet of SFBs expanded in 2018-19. Their deposit base businesses, marginal farmers, micro and small industries, and the unorganised sector. At end- more than doubled as they shed their legacy March 2019, ten SFBs were operational. dependence on bank borrowings. While loans and advances grew strongly during the year table IV.27: profile of local area Banks and constituted 70.6 per cent of total assets, (At end- March) investments also registered a robust growth (Amount in ₹crore) 2017-18 2018-19 (Table IV.29). 1. Assets 819.5 926.4 14.2 Priority Sector Lending 2. Deposits 651.1 746.9 3. Gross Advances 514.1 559.7 IV.78 SFBs’ share in advances to the priority source: Off-site returns, global operations, RBI sector declined for the second year in a row in 71Report on Trend and Progress of Banking in India 2018-19 table IV.29: consolidated Balance sheet of table IV.31: financial performance of small small finance Banks finance Banks (Amount in ₹crore) (Amount in ₹crore) Sr. Item 2018 2019 Y-o-Y Sr. Item 2017-18 2018-19 Y-o-Y No. growth in No. growth per cent 1 2 3 4 5 1 2 3 4 a Income (i + ii) 9450.4 13239.0 40.1 1. Share Capital 4,178.8 4,759.6 13.9 i. Interest Income 8415.6 11818.8 40.4 2. Reserves & Surplus 5,502.6 6,967.1 26.6 ii. Other Income 1034.8 1420.2 37.2 3. Tier II Bonds Tier II Debt 1,604.0 2,109.0 31.5 B expenditure (i+ii+iii) 11566.2 13630.6 17.8 4. Deposits 26,470.7 55,686.3 110.4 i. Interest Expended 4308.0 5710.3 32.5 4.1 Current Demand Deposits 1,014.3 2,155.0 112.5 ii. Operating Expenses 4712.0 5728.4 21.6 4.2 Savings 4,528.7 7,669.1 69.3 of which staff expenses 2409.2 2961.1 22.9 4.3 Term 20,927.6 45,862.1 119.1 iii. Provisions and Contingencies 2546.1 2191.9 -13.9 5. Borrowings (Including Tier II 30,884.6 27,838.9 -9.9 c profit -2021.2 -391.6 Bonds) i. Operating Profit (EBPT) 393.8 1800.3 357.2 5.1 Bank 7,723.3 3,466.3 -55.1 ii. Net Profit (PAT) -2250.3 -932.3 5.2 Others 23,161.2 24,372.4 5.2 d total assets 69952.5 98923.7 41.4 6. Other Liabilities & Provisions 2,914.9 3,672.5 26 e financial ratios # total liabilities/assets 69,952.5 98,924.0 41.4 i. Operating Profit 0.6 1.8 7. Cash in Hand 320.4 461.3 44 ii. Net Profit -3.2 -0.9 8. Balances with RBI 1,859.2 3,162.1 70.1 iii. Income (a + b) 13.5 13.4 9. Other Bank Balances/ Balances 4,917.4 4,601.8 -6.4 (a) Interest Income 12.0 12.0 with Financial Institutions (b) Other Income 1.5 1.4 10 Investments 13,154.1 17,287.0 31.4 iv. Expenditure (a+b+c) 16.5 13.8 11 Loans and Advances 46,754.7 69,856.8 49.4 (a) Interest Expended 6.2 5.8 12 Fixed Assets 1,523.7 1,642.7 7.8 (b) Operating Expenses 6.7 5.8 13 Other Assets 1,427.1 1,913.3 34.1 of which staff expenses 3.4 3.0 (c) Provisions and Contingencies 3.6 2.2 source: Off-site returns (domestic operations), RBI f analytical ratios (%) 2018-19. Their focus remained on micro, small, Gross NPA Ratio 8.7 2.4 CRAR 22.9 21.5 and medium enterprises, followed by agriculture Core CRAR 19.5 18.5 (Table IV.30). notes: # As per cent to total assets. source: Off-site returns (domestic operations), RBI 14.3 Financial Performance in provisions and contingencies even as their IV.79 During 2018-19, the asset quality of SFBs CRAR remained stable. Total income also grew, improved significantly, leading to a contraction although one SFB reported exceptionally high table IV. 30: purpose-wise Outstanding losses which wiped out the net profit of other advances by small finance Banks SFBs taken together in their combined finances (Share in percentage) (Table IV.31). Sr. Purpose 31-Mar-18 31-Mar-19 No. 15. payments Banks I priority (i to v) 76.7 74.6 IV.80 Payments Banks (PBs) were set up on the Per cent to total loans outstanding i. Agriculture and allied activities 20.1 23.7 basis of the recommendations of the Committee ii. Micro, small and medium enterprises 31.0 36.7 on Comprehensive Financial Services for iii. Education 0.0 0.0 iv. Housing 2.1 2.7 Small Businesses and Low-Income Households v. Others 23.4 11.5 (Chairman: Shri Nachiket Mor) with the objective II non-priority (i to vi) 23.3 25.4 total (I+II) 100 100 of improving financial inclusion by harnessing source: Off-site returns (domestic operations), RBI technology services via mobile telephony. PBs 72OperatiOns and perfOrmance Of cOmmercial Banks cannot undertake lending activities and their table IV.32: consolidated Balance sheet of design is functionally equivalent to that of pre-paid payments Banks (Amount in `crore) instrument (PPI) providers which are permitted Item mar-18 mar-19 to receive cash payments from customers, store 1. Total Capital and Reserves 1,849 1,868 them in a digital wallet, and allow customers 2. Deposits 438 883 to pay for goods and services from this wallet. 3. Other Liabilities and Provisions 2,608 4,363 total liabilities/assets 4,895 7,114 Consequently, credit and market risks involved 1. Cash and Balances with RBI 377 729 in PBs’ activities are limited, though they are 2. Balances with Banks and Money Market 1,249 1,376 3. Investments 2,449 3,126 subject to operational and liquidity risks. The 4. Fixed Assets 235 547 evolution of PBs since their inception suggests 5. Other Assets 586 1,335 that they are yet to achieve the optimal scale to note: Data for end-March 2018 and end-March 2019 pertain to five and seven PBs, respectively. Hence, the data for these two years are not break-even or attain profitability. comparable. source: Off-site returns (domestic operations), RBI 15.1 Balance Sheet 15.2 Financial Performance IV.81 At end-March 2019, there were seven PBs IV.83 Despite improvement in net interest operational in India as compared with five as at income and non-interest income, increases end-March 2018. The consolidated balance sheet in operating expenses resulted in overall of PBs expanded in 2018-19 as their deposits negative profits for PBs in 2018-19. The limited more than doubled during the year. The share of operational space available to them and the deposits in total liabilities increased from 9 per large initial costs involved in setting up of the cent to 12.4 per cent during the same period, infrastructure imply that it may take time for although they can accept deposits only up to PBs to break even as they expand their customer ₹1 lakh per customer. While total capital and base (Table IV.33). reserves witnessed a marginal increase, other IV.84 Net interest margin (NIM) and efficiency liabilities (such as unspent balances in PPIs) (cost-to income) improved during the year even accounted for 61.3 per cent of total liabilities at end-March 2019 (Table IV.32). table IV.33: financial performance of payments Banks IV.82 PBs’ asset composition reflected the (Amount in `crore) regulatory structure under which they operate; Sr. No. Item Mar-18 Mar-19 they are required to maintain a minimum A Income (i+ii) investment of 75 per cent of demand deposit i. Interest Income 175.9 255.2 balances (DDBs) in Government securities ii. Other Income 1,003.6 2,093.7 B Expenditure for maintenance of SLR and hold a maximum i. Interest Expended 26.2 35.8 25 per cent with other SCBs. Furthermore, ii. Operating Expenses 1,677.1 2,925.9 iii. Provisions and Contingencies -7.4 14.0 balances outstanding under PPIs issued should of which Risk Provisions -8.4 0.9 be flexibly deployed between SLR-eligible Tax Provisions 1.0 13.0 Government securities and bank deposits in C Net Interest Income 151.5 219.4 D Profit such a manner that they are able to comply with i. Operating Profit (EBPT) -523.0 -612.8 the requirements of CRR and SLR on overall ii. Net Profit/Loss -515.6 -626.8 outside liabilities. During 2018-19, the share of note: Data for end-March 2018 and end-March 2019 pertain to five and seven PBs, respectively. Hence, the data for these two years are not investments declined to 43.9 per cent from 50 comparable. per cent in the previous year (Table IV.32). source: Off-site returns (domestic operations), RBI 73Report on Trend and Progress of Banking in India 2018-19 table IV.34: select financial ratios of remittances in terms of both value and volume payments Banks (Table IV.35). Item Mar-18 Mar-19 16. Overall assessment 1. Return on Assets -10.6 -8.9 2. Return on Equity -27.9 -34.0 IV.86 The banking sector is slowly turning 3. Investments to Total Assets 50.0 44.0 around on the back of improvement in asset 4. Net Interest Margin 4.5 5.2 5. Efficiency (Cost-Income ratio) 142.2 124.6 quality, strengthening capital base, and a 6. Operating Profit to Working Funds -10.7 -8.6 return to profitability. At this cusp, however, 7. Profit Margin -43.8 -27.0 the evolving macroeconomic scenario, and note: Data for end-March 2018 and end-March 2019 pertain to five and particularly, the ongoing loss of pace in domestic seven PBs, respectively. Hence, the data for these two years are not comparable. economic activity, presents daunting challenges source: Off-site returns (domestic operations), RBI as widespread risk aversion has turned as losses as reflected in RoA, RoE and profit credit demand anaemic even as corporations margins continued (Table IV.34). deleverage their own stressed balance sheets. 15.3 Inward and Outward Remittances Notwithstanding the improvement in 2018-19, the overhang of NPAs remains high. Further IV.85 In 2018-19, transactions through reduction in NPAs through recoveries hinges UPI took over from E-wallets as the most around a reversal of the downturn in the prominent channel for inward and outward economy. table IV.35: remittances through payments IV.87 While banks have oriented their lending Banks during 2018-19 towards the relatively stress-free retail, the (Number in Units, Amount in `crore) slowdown in private consumption spending has Channel Inward Remittances Outward Remittances imposed limits to this growth strategy even as Number Amount Number Amount the possibility of defaults among retail segments 1. NEFT 12,67,081 4,722 24,28,320 10,711 (0.2) (5.3) (0.3) (9.7) rises as growth slows down. i) Bill Payments 1,81,542 2,956 9,88,431 7,174 - (3.3) (0.1) (6.5) IV.88 The recapitalisation of PSBs remains ii) Other than 10,85,539 1,766 14,39,889 3,537 Bill Payments (0.2) (2) (0.2) (3.2) an unfinished agenda. Apart from meeting the 2. RTGS 18,341 11,184 6,390 7,015 regulatory minimum, commercial banks need - (12.5) - (6.3) to augment their capital base to guard against 3. IMPS 4,22,78,372 6,705 6,18,69,631 18,953 (6.4) (7.5) (8.7) (17.1) future balance sheet stress. Moreover, they also 4. UPI 49,11,05,418 56,543 49,40,90,598 57,219 (74.3) (63.1) (69.7) (51.8) need to improve their valuation methodologies, credit monitoring and risk management 5. E - Wallets 11,00,94,745 5,659 13,20,65,753 11,562 strategies in order to build resilience. (16.7) (6.3) (18.6) (10.5) 6. Micro ATM 43,87,591 1,698 83,303 26 IV.89 Over the last couple of years, the space (POS) (0.7) (1.9) - - 7. ATM - - 5,07,495 153 vacated by risk-averse PSBs was taken up by - - (0.1) (0.1) PVBs; more recently, however, fault lines are 8. Others 1,17,57,286 3,142 1,81,92,884 4,911 (1.8) (3.5) (2.6) (4.4) becoming evident in the latter’s corporate Total 66,09,08,834 89,653 70,92,44,374 1,10,549 governance. This is occurring at a time when notes: 1. -: Nil/ Negligible the balance sheets of PSBs have not yet regained 2. Figures in the parentheses are percentage to total. source: Off-site returns (domestic operations), RBI their strength. 74OperatiOns and perfOrmance Of cOmmercial Banks IV.90 Banks’ lending to NBFCs has remained effective risk management strategies will help strong, reflecting the policy initiatives to alleviate in strengthening the robustness of the banking liquidity stress in that sector. Nonetheless, system in an increasingly dynamic economic appropriate risk pricing is warranted so that environment. Emergence of niche players is excessive risk-build up does not occur. expected to augment innovation in financial IV.91 Going forward, optimal bank capital, technology and provide further impetus to the stringent corporate governance practices, and agenda of financial inclusion. 75v Developments In Co-operatIve BankIng The consolidated balance sheet of urban co-operative banks expanded moderately in 2018-19 on the back of robust deposit growth which financed the pick-up in lending. Although their asset quality and provisions improved, a fall in interest income adversely affected profitability. Among short-term rural co-operatives, the financial health of state co-operative banks and district central co-operative banks weakened on account of an increase in the non-performing assets and slowdown in profitability. The soundness indicators of long- term co-operatives remained fragile. 1. Introduction V.2 At the end of March 2019, credit co- operatives comprised 1,544 urban co-operative V.1 In keeping with their ‘grassroots’ banks (UCBs) and 96,248 rural co-operative integration into the life and ethos of the widest banks (end-March 20181), with the latter sections of society, co-operative banks in India accounting for 64.7 per cent of the total assets are invested with developmental goals among of co-operatives (Chart V.1). which financial inclusion has assumed crucial importance. These institutions play a critical V.3 UCBs and among the rural co-operatives, role in last-mile credit delivery and in extending the State Co-operative Banks (StCBs) and the financial services across the length and breadth District Central Co-operative Banks (DCCBs) of the country through their geographic and are registered either under the Co-operative demographic outreach. Societies Act of the state concerned or under Chart V.1: The Structure of Co-operatives by Asset Size ScheduledUCBs (54) 47.0 All Co-operatives Urban Co-operatives 100 Non-ScheduledUCBs (97,792) (1,544) (1,490) 35.3 PACS 53.0 DCCBs (95,238) (363) 23.6 100 StCBs 50.9 (33) 64.7 Rural Co-operatives 22.0 (96,248) 100 1.5 SCARDBs 2.0 (13) PCARDBs (601) Notes:1.Figuresinpercentandbubblesizeisscaledtoassetsize. 2.StCBs:StateCo-operativeBanks;DCCBs:DistrictCentralCo-operativeBanks;PACS:PrimaryAgriculturalCreditSocieties;SCARDBs:StateCo-operativeAgriculture andRuralDevelopmentBanks;PCARDBs:PrimaryCo-operativeAgricultureandRuralDevelopmentBanks 3.Figuresinparenthesesindicatethenumberofinstitutionsatend-March2019forUCBsandatend-March2018forruralco-operatives.Outof54scheduledUCBs-34are multi-stateand20aresingle-state.Outof1,490non-scheduledUCBs–24aremulti-stateand1,466aresinglestate. 1 Data on rural co-operatives are available with a lag of one year, the latest being for 2017-18. 76Developments in Co-operative Banking the Multi State Co-operative Societies Act, governance-based impediments have operated 2002. Banking laws were made applicable to as drags on their performance, stunting their co-operative societies since March 1, 1966. growth. Currently, there is duality of control over V.6 In this milieu, this chapter examines the StCBs/DCCBs/UCBs between the Registrar of performance of the urban co-operatives and Cooperative Societies (RCS) or the Central rural credit co-operatives in the remaining five Registrar of Cooperative Societies (CRCS) sections. Section 2 addresses the activities of and the Reserve Bank. While the mandates UCBs from the point of view of their financial of the RCS/CRCS encompass incorporation, performance and asset quality. Section 3 registration, management, recovery, audit, reviews the performance of State Co-operative supersession of Board of Directors and Banks (StCBs), District Central Co-operative liquidation, the Reserve Bank is invested with Banks (DCCBs) and PACS. A brief description regulatory functions. The Reserve Bank is also of long-term co-operatives is provided in section entrusted with the responsibility of supervision 4, notwithstanding the fact that they are outside of UCBs, entailing prescription of prudential the purview of the Reserve Bank’s regulation. norms for capital adequacy, income recognition, Section 5 concludes with some overall asset classification and provisioning, liquidity perspectives. Detailed tables on balance sheets, requirements and single/group exposure norms. financial performance indicators, asset quality In addition, it also helps in capacity building of and other salient indicators are presented in the employees and assist in implementation of IT appendix. infrastructure in UCBs. 2. Urban Co-operative Banks V.4 Primary Agricultural Credit Societies V.7 Despite their large number, UCBs account (PACS) and long-term co-operatives are outside for 3.6 per cent of the total assets of SCBs. the purview of the Banking Regulation Act, Most of them are single branch entities, with 1949. The NABARD has been given power under limited avenues to raise capital. Successful Section 35 (6) of the Banking Regulation Act to international co-operative models highlights the conduct inspections of StCBs and DCCBs. The role of umbrella organisation in strengthening NABARD also conducts voluntary inspections the performance of co-operatives by providing of State Co-operative Agriculture and Rural a range of services like liquidity and capital Development Banks (SCARDBs). support (Box V.1). V.5 The growth of these co-operative V.8 Enabled by a liberal licensing policy, the institutions has not been commensurate with period 1991-2004 saw phenomenal growth in that of other constituents of the banking sector UCBs’ number and asset size. Subsequently, in India. At the end of March 2018, the combined this expansion turned unsustainable and some assets of urban and rural co-operatives were of them became weak and unviable over time. 10.6 per cent of the total assets of scheduled The Reserve Bank’s Vision Document 2005, commercial banks (SCBs), down from 19.4 adopted a multi-layered approach for bolstering per cent in 2004-05. Several operational and the UCBs, including merger of weak UCBs with 77Report on Trend and Progress of Banking in India 2018-19 Box v.1: Co-operative Banks: a Cross-Country Comparison The financial co-operative (FC) institutions, which trace Market Share and Role in Credit Delivery back their origins to the 19th century, were established The market share of FCs in terms of asset size varies across jurisdictions with the objective of extending loans significantly ranging from 0.03 per cent in Brazil to 47 per at affordable prices to the unbanked population. Amongst cent in France. In India, credit co-operatives (including the FCs, the services of credit unions are exclusive urban and rural co-operatives) accounted for about one- for their members, who share a common profession, tenth of the total assets of scheduled commercial banks in entrepreneurship interests, or in some cases, just their 2017-18. Further, loans and advances by three major co- location. In contrast, co-operative banks offer services to operative banking groups in France accounted for 51 per non-members as well (Birchall, 2013). cent of the total loans of the financial system2 (Chart 1). While there are co-operatives based on a simple business In AEs, such as the United States (US), France and model of deposit-taking and lending, others, such as the Netherlands, FCs compete with commercial banks those in Europe, form federations by pooling their in retail banking and lending to small and medium resources resembling large banking groups and provide enterprises (SMEs)3. The market share of loans to SMEs a large array of services (for example, Rabobank Group of Rabobank in the Netherlands is 39.6 per cent and of in Netherlands, Credit Agricole Group in France and Op- the Credit Agricole Group in France is 34 per cent4. In Pohjola Group in Finland). comparison, the lending of Indian urban co-operative Regulation and Supervision banks (UCBs) to micro, small and medium enterprises The supervisory framework of FCs has evolved over time (MSMEs) is 14.5 per cent of the total commercial bank and differs across boundaries. In France, their regulation lending in 2018-19. FCs showed considerable resilience and supervision are at par with commercial banks which during the global financial crisis of 2007-08 as they includes, inter alia, removal of board members and outperformed commercial banks and continued lending power to appoint temporary administrators. In the US, to SMEs (Birchall, 2013). central co-operative banks are regulated by the National Umbrella Organisations Credit Union Administration (NCUA) and it has the power to merge FCs if there are risks of insolvency. Indian co- Co-operative banks have limited ability to raise capital operatives, on the other hand, are faced with a problem of given their business model, wherein they can raise dual regulation where their banking-related functions are resources only from member shares and retained regulated by the Reserve Bank and management-related earnings. Also, FCs find themselves unable to adopt latest functions are controlled by the concerned state/central banking technology due to their limited size. To some Government. Further, unlike France, the control over extent, these limitations faced by the FCs are overcome by co-operative banks is not at par with commercial banks. the presence of umbrella organisations, which can exist This system impedes effective regulatory control of the either in the form of an apex level entity or as a distinct Reserve Bank over co-operative banks. entity where the credit unions are its members. 2 Source: FSI Insights on policy implementation No 15. 3 The definition of small and medium enterprises varies across jurisdictions. 4 Source: European Association of Co-operative Banks: Key Statistics – Financial Indicators 2018. 78Developments in Co-operative Banking In some countries, the apex central body (umbrella legally binding cross guarantees, liquidity support, among organisation) provides services to its member banks and others and therefore adds to the strength of the system. regulates their activities. All local co-operative banks are Based on this important role, various committees5 of members of this apex entity and are provided with voting the Reserve Bank have recommended setting up of such rights based on ‘one member one vote’ system. These apex a structure. Accordingly, regulatory approval to the entities provide access to resources/capital to financial National Federation of Urban Cooperative Banks and co-operatives at the base level through their ability of Credit Societies Ltd. (NAFCUB) has been accorded by the tapping into the capital market, while maintaining the co- Reserve Bank for setting up an umbrella organisation as operative character. Member co-operatives within an apex a non-deposit taking NBFC (NBFC-ND) on June 06, 2019. bank also agree to provide mutual support to each other references in times of financial difficulty. Birchall, J. (2013). Resilience in a downturn: The power This system also enables self-regulation and good of financial cooperatives. Geneva: International Labour corporate governance in the sector. The Credit Agricole Office. Group in France has an internal audit mechanism that Coelho, R., J.A. Mazzillo, J.P. Sovornos & T. Yu (2019). covers all member co-operative banks and also has power Regulation and supervision of financial cooperatives, to issue instructions and merge two or more entities Bank for International Settlements (BIS). affiliated to them. Similarly, the Rabobank Group in the Netherlands is responsible for supervising the financial European Association of Co-operative Banks (EACB). Key health and professionalism of local co-operative banks. statistics – Financial indicators 2018. International experience suggests that existence of Reserve Bank of India (2009). Report of the Working an umbrella model (for instance, European model of Group on Umbrella Organization and Constitution of co-operatives) provides mutual support system, viz., Revival Fund for Primary (Urban) Co-operative Banks. stronger ones and exit of unviable ones that has resulted in the state of consolidation that exists today (Chart V.2). V.9 Maharashtra—which has the largest number of UCBs across states—accounted for the highest number of mergers (Chart V.3) V.10 Notwithstanding the fall in the number of UCBs, however, their combined asset size has continuously increased (Chart V.4). V.11 UCBs are classified for regulatory purposes into Tier-I and Tier-II categories, based on their depositor base6. Tier II UCBs have larger depositor bases and wider geographical presence than their Tier I counterparts. During 5 See Working Group to Examine Issues Relating to Augmenting Capital of UCBs, 2006 (Chairman: N.S. Vishwanathan); Working Group on Umbrella Organization and Constitution of Revival Fund for Urban Co-operative Banks, 2008 (Chairman: V.S. Das); Expert Committee on Licensing of New Urban Co-Operative Banks, 2011 (Chairman: Y.H. Malegam); High Powered Committee on Urban Co-operative Banks, 2015 (Chairman: R. Gandhi). 6 Tier-I UCBs are defined as: a) deposit base below ₹100 crore operating in a single district, or deposit base below ₹100 crore operating in more than one district, provided that the branches of the bank are in contiguous districts, and deposits and advances of branches in one district separately constitute at least 95 per cent of the total deposits and advances, respectively; b) deposit base below ₹100 crore, with branches originally in a single district which subsequently became multi-district in their operations due to a re-organisation of the district. All other UCBs are defined as Tier-II UCBs. 79Report on Trend and Progress of Banking in India 2018-19 2018-19, the number of Tier II UCBs increased and ₹100 crore to ₹250 crore. Since 2016- sharply (Table V.1). 17, however, the distribution has become uni- modal, with the largest frequency concentrated 2.1 Balance Sheet at the ₹100 crore to ₹250 crore asset bracket. V.12 The combined balance sheet of UCBs Moreover, there has been a rightward shift in the witnessed robust expansion underscoring the distribution, with the share of UCBs with assets effectiveness of measures taken to strengthen greater than ₹1,000 crore increasing to 6.5 per their financials. However, in the recent years, cent in 2018-19 from 4.6 per cent in 2014-15 UCBs’ assets growth has moderated (Chart V.5). (Chart V.6). V.13 In 2014-15, the distribution of UCBs became bi-modal, with concentration in two V.14 Deposits—which accounted for 89.5 per asset brackets viz., ₹25 crore to ₹50 crore cent of the resource base7 of UCBs—revived during table v.1: tier-wise Distribution of Urban Co-operative Banks (At end-March 2019) (Amount in ₹ crore) Tier Type Number of Banks Deposits Advances Total Assets Number % to Total Amount % to Total Amount % to Total Amount % to Total Tier I UCBs 917 59.4 43,588 9.0 25,076 8.3 54,591 9.1 Tier II UCBs 627 40.6 4,40,728 91.0 2,77,942 91.7 5,44,622 90.9 all UCBs 1,544 100.0 4,84,316 100.0 3,03,018 100.0 5,99,214 100.0 note: Data are provisional. source: Off-site surveillance returns, RBI. 7 Resource base comprises capital, reserves, deposits and borrowings. 80Developments in Co-operative Banking 2018-19 after a deceleration in the previous year borrowings reversed during 2018-19 as pick-up (Chart V.7). Nonetheless, UCBs’ deposit growth in deposit growth financed the increase in loans remains well-below the average of 13.9 per cent and advances (Table V.2). achieved during 2007-08 to 2016-17. V.16 While UCBs with deposit bases upto V.15 As deposit growth moderated during ₹10 crore formed the modal class at the end 2017-18, lending had to be financed by a of March 2008, the ₹100 crore to ₹250 crore bracket became the modal class at the end of steep increase in borrowings. This growth in March 2019 (Table V.3 and Chart V.8a). This suggests an increase in average deposit per account as well as an expansion of the customer base of UCBs. V.17 In contrast, UCBs with advances in the range of ₹10 crore to ₹25 crore formed the modal class during 2018-19 (Chart V.8b). V.18 Since 2015, the SLR requirements of UCBs are being reduced progressively in line with the prescription applicable to SCBs. Furthermore, since UCBs are governed by Basel I regulatory norms, the liquidity coverage ratio (LCR) requirement is not applicable to them. As SLR investments – constituting 88.9 per cent of total investments, primarily in central government securities – moderated over the 81Report on Trend and Progress of Banking in India 2018-19 table v.2: liabilities and assets of Urban Co-operative Banks (At end-March) (Amount in ₹ crore) Assets/Liabilities Scheduled Non-scheduled All Rate of Growth (%) UCBs UCBs UCBs All UCBs 2018 2019 2018 2019 2018 2019 2017-18 2018-19 1 2 3 4 5 6 7 8 9 liabilities 1. Capital 4,118 4,348 8,852 9,235 12,970 13,583 7.1 4.7 (1.6) (1.5) (3.0) (2.9) (2.3) (2.3) 2. Reserves 16,663 18,447 18,626 19,342 35,288 37,789 5.5 7.1 (6.3) (6.5) (6.2) (6.2) (6.3) (6.3) 3. Deposits 2,12,041 2,25,688 2,44,466 2,58,628 4,56,507 4,84,316 2.9 6.1 (80.1) (79.2) (81.9) (82.3) (81.0) (80.8) 4. Borrowings 4,628 4,908 367 333 4,995 5,241 41.6 4.9 (1.7) (1.7) (0.1) (0.1) (0.9) (0.9) 5. Other Liabilities 27,308 31,538 26,183 26,747 53,491 58,285 12.8 9.0 (10.3) (11.1) (8.8) (8.5) (9.5) (9.7) assets 1. Cash in Hand 1,482 1,342 3,982 4,046 5,464 5,388 21.7 -1.4 (0.6) (0.5) (1.3) (1.3) (1.0) (0.9) 2. Balances with RBI 10,360 11,080 2,144 2,699 12,503 13,779 8.9 10.2 (3.9) (3.9) (0.7) (0.9) (2.2) (2.3) 3. Balances with Banks 16,155 17,065 46,813 43,780 62,968 60,845 3.6 -3.4 (6.1) (6.0) (15.7) (13.9) (11.2) (10.2) 4. Money at Call and Short Notice 3,081 4,291 1,381 1,580 4,462 5,871 -11.0 31.6 (1.2) (1.5) (0.5) (0.5) (0.8) (1.0) 5. Investments 68,928 72,305 80,906 84,638 1,49,834 1,56,943 5.4 4.7 (26.0) (25.4) (27.1) (26.9) (26.6) (26.2) 6. Loans and Advances 1,36,822 1,46,572 1,43,637 1,56,446 2,80,460 3,03,018 7.4 8.0 (51.7) (51.4) (48.1) (49.8) (49.8) (50.6) 7. Other Assets 27,930 32,274 19,631 21,096 47,561 53,370 -13.3 12.2 (10.5) (11.3) (6.6) (6.7) (8.4) (8.9) total liabilities/ assets 2,64,758 2,84,929 2,98,494 3,14,285 5,63,252 5,99,214 4.3 6.4 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) notes: 1. Data for March 2019 are provisional. 2. Figures in brackets are proportion to total liabilities / assets (in per cent). 3. Components may not add up to the total due to rounding off. source: Off-site surveillance returns, RBI. last two years, overall investments also followed 2018, the list of eligible counterparties for trading suit (Table V.4). However, non-SLR investments in secondary market for this type of investment expanded by a faster pace. Incidentally, in August was widened. 82Developments in Co-operative Banking table v.3: Distribution of UCBs by size of Deposits and advances (At end-March 2019) (Amount in ₹ crore) Deposit Number of UCBs Amount of Deposits Advances Number of UCBs Amount of Advances Number % Share Amount % Share Number % Share Amount % Share 1 2 3 4 5 6 7 8 9 10 0.00 ≤ D < 10 115 7.4 651 0.1 0.00 ≤ Ad < 10 253 16.4 1,349 0.4 10 ≤ D < 25 216 14.0 3,661 0.8 10 ≤ Ad < 25 331 21.4 5,601 1.8 25 ≤ D < 50 281 18.2 10,101 2.1 25 ≤ Ad < 50 278 18.0 9,911 3.3 50 ≤ D < 100 285 18.5 19,997 4.1 50 ≤ Ad < 100 248 16.1 17,992 5.9 100 ≤ D < 250 323 20.9 50,755 10.5 100 ≤ Ad < 250 225 14.6 35,270 11.6 250 ≤ D < 500 140 9.1 47,216 9.7 250 ≤ Ad < 500 101 6.5 35,141 11.6 500 ≤ D < 1000 100 6.5 67,362 13.9 500 ≤ Ad < 1000 59 3.8 39,853 13.2 1000 ≤ D 84 5.4 2,84,574 58.8 1000 ≤ Ad 49 3.2 1,57,902 52.1 Total 1,544 100.0 4,84,316 100.0 Total 1,544 100.0 3,03,018 100.0 note: 1. Data are provisional. 2. ‘D’ and ‘Ad’ indicates amount of deposits and advances respectively. 3. Components may not add up to the whole due to rounding off. source: Off-site surveillance returns, RBI. V.19 During 2016-17 and 2017-18, the V.20 Since April 1, 2015 the balances of UCBs incremental credit-to-deposit ratio of UCBs rose with DCCBs and StCBs ceased to be treated as above those of SCBs, owing to the impact of high SLR investments. Consequently, the investment- deposit growth on account of demonetisation in to-deposit ratio of UCBs fell below that of SCBs 2016-17 and lower credit growth of SCBs in the for the first time and remained so in subsequent next year. This upturn was, however, reversed in years as well (Chart V.9b). 2018-19 with a pick-up in credit growth of SCBs (Chart V.9a). table v.4: Investments by Urban Co-operative Banks (Amount in ₹ crore) Item At end-March Variation (%) 2017 2018 2019 2017-18 2018-19 1 2 3 4 5 6 total Investments (a + B) 1,42,091 1,49,834 1,56,943 5.45 4.74 (100.0) (100.0) (100.0) a. slr Investments (i to iii) 1,25,378 1,35,863 1,39,450 8.36 2.64 (88.2) (90.7) (88.9) (i) Central Govt. Securities 95,471 98,433 98,215 3.10 -0.22 (67.2) (65.7) (62.6) (ii) State Govt. Securities 29,356 37,227 40,566 26.81 8.97 (20.7) (24.9) (25.9) (iii) Other approved Securities 551 204 669 -63.04 228.45 (0.4) (0.1) (0.4) B. non-slr Investments 16,713 13,971 17,493 -16.41 25.22 (11.8) (9.3) (11.2) notes: 1. Data for 2019 are provisional. 2. Figures in parentheses are percentages to total investments. source: Off-site surveillance returns, RBI. 83Report on Trend and Progress of Banking in India 2018-19 2.2 Soundness remained in the range of 4 to 5 per cent in the last five years (Chart V.10). V.21 A CAMELS (capital adequacy; asset quality; management; earnings; liquidity; and 2.3 Capital Adequacy systems and control) rating model is used to V.22 Under the Basel I norms, UCBs are required classify UCBs for regulatory and supervisory to maintain a minimum statutory capital to risk purposes8. UCBs in the top-ranking categories— weighted assets ratio (CRAR) of 9 per cent, with no with ratings A and B—accounted for 78 per cent additional requirements like capital conservation of the sector (Table V.5). The share of UCBs in buffer and high common equity tier 1 (CET 1) category A has, however declined in the last five years with a concomitant increase in category B banks. The share of UCBs in category D has table v.5: rating-wise Distribution of UCBs (At end-March 2019) (Amount in ₹ crore) Ratings Number Deposits Advances Banks % share Amount% share in Amount % share in Total Total in Total 1 2 3 4 5 6 7 A 286 18.52 1,39,696 28.84 88,640 29.25 B 913 59.13 2,71,573 56.07 1,71,129 56.47 C 275 17.81 63,488 13.11 38,620 12.75 D 70 4.53 9,559 1.97 4,628 1.53 total 1,544 100.00 4,84,316 100.00 3,03,018 100.00 notes: 1. Data are provisional. 2. Components may not add up to the total due to rounding off. 3. Ratings are based on the inspection conducted during the financial years 2017-18 and 2018-19. source: Off-site surveillance returns, RBI. 8 CAMELS rating model gives a composite rating of A/B/C/D (in decreasing order of performance) to UCBs, based on the weighted average rating of the individual components of CAMELS. 84Developments in Co-operative Banking table v.6: Crar-wise Distribution of UCBs per cent in H1:2019-20 from 13.5 per cent in (At end-March 2019) H1:2018-19. CRAR Scheduled Non-scheduled All UCBs 2.4 Asset Quality (in Per cent) UCBs UCBs V.24 While UCBs had higher NPA ratio than 1 2 3 4 CRAR < 3 4 34 38 SCBs till 2014-15, this was reversed on account 3 <= CRAR < 6 0 7 7 of two distinct factors. First, the asset quality 6 <= CRAR < 9 0 14 14 review (AQR), which resulted in better asset 9 <= CRAR < 12 6 150 156 12 <= CRAR 44 1,285 1,329 recognition of SCBs led to their NPA ratio rising total 54 1,490 1,544 to its true level. Second, the asset quality of note: Data are provisional. UCBs has been gradually improving over time source: Off-site surveillance returns, RBI. (Chart V.12). capital ratio. As of end-March 2019, more than V.25 During 2018-19, UCBs registered 96 per cent of UCBs maintained CRAR of 9 per moderate improvement in their asset quality, cent and above (Table V.6). driven by the decline in the GNPA ratio of NSUCBs. Notwithstanding this improvement, V.23 At a disaggregated level, non-scheduled the NSUCBs continue to have higher NPAs UCBs (NSUCBs) that are characterised by than SUCBs (Table V.7). SUCBs’ GNPA ratio lower asset size have better capital positions deteriorated to 10.5 per cent in H1: 2019-20 than scheduled UCBs (SUCBs). During 2018- reflecting large delinquencies in one of the fraud 19, the share of NSUCBs maintaining CRAR hit banks. of 9 per cent and above was 96 per cent vis-a- vis 92 per cent for SUCBs. On the downside, V.26 Larger increase in provisions vis-à-vis however, four SUCBs had negative CRAR in that GNPA enabled an improvement in UCBs’ year (Chart V.11). Latest supervisory returns provisioning coverage ratio (PCR) (Chart V.13). suggest deterioration in CRAR of SUCBs to 9.8 Given the elevated level of GNPA ratio in NSUCBs 85Report on Trend and Progress of Banking in India 2018-19 table v.7: non-performing assets of UCBs Sr. Items Scheduled UCBs Non-Scheduled UCBs All UCBs No. 2018 2019 2018 2019 2018 2019 1 2 3 4 5 6 7 8 1 Gross NPAs (₹ crore) 8,687 9,435 11,390 12,124 20,077 21,559 2 Gross NPA Ratio (%) 6.3 6.4 7.9 7.7 7.2 7.1 3 Net NPAs (₹ crore) 3,428 3,669 3,926 3,751 7,355 7,421 4 Net NPA Ratio (%) 2.6 2.6 2.9 2.5 2.8 2.6 5 Provisioning (₹ crore) 5,259 5,766 7,464 8,373 12,723 14,139 6 Provisioning Coverage Ratio (%) 60.5 61.1 65.5 69.1 63.4 65.6 note: Data for 2019 are provisional. source: Off-site surveillance returns, RBI. in comparison to SUCBs, the provisioning in both. Non-interest income declined for both requirements of the former are correspondingly SUCBs and NSUCBs reflective of a decline in higher (Chart V.13). During H1: 2019-20, PCR income from a host of fee-earning activities and of SUCBs reduced to 40.9 per cent from 48.4 loss on sale and trading of securities (Table V.8). per cent in H1:2018-19. V.28 The profitability of UCBs, measured in 2.5 Financial Performance and Profitability terms of return on equity (RoE), deteriorated marginally, mainly on account of below par V.27 UCBs recorded a decline in net profit performance of NSUCBs (Table V.9). During after taxes in 2018-19. Interest expenses H1:2019-20, SUCBs posted losses. declined for the second consecutive year, notwithstanding a revival in deposit growth. V.29 Notwithstanding this decline, the The decline in interest income and interest profitability indicators of NSUCBs, except RoE, expenses of all UCBs was driven by the NSUCBs remained higher than those of their scheduled whereas SUCBs registered a moderate growth counterparts (Chart V.14). 86Developments in Co-operative Banking table v.8: Financial performance of scheduled and non-scheduled Urban Co-operative Banks (Amount in ₹ crore) Item Scheduled Non-scheduled All UCBs All UCBs UCBs UCBs Variation (%) 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 1 2 3 4 5 6 7 8 9 a. total Income [i+ii] 23,222 23,360 30,200 28,744 53,422 52,103 1.5 -2.5 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) i. Interest Income 20,237 20,794 28,332 27,226 48,569 48,020 2.1 -1.1 (87.1) (89.0) (93.8) (94.7) (90.9) (92.2) ii. Non-interest Income 2,986 2,566 1,867 1,517 4,853 4,084 -4.1 -15.9 (12.9) (11.0) (6.2) (5.3) (9.1) (7.8) B. total expenditure [i+ii] 19,330 19,453 25,642 24,460 44,972 43,912 0.7 -2.4 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) i. Interest Expenditure 13,595 13,719 18,837 17,508 32,432 31,227 -2.6 -3.7 (70.3) (70.5) (73.5) (71.6) (72.1) (71.1) ii. Non-interest Expenditure 5,735 5,733 6,805 6,952 12,540 12,685 10.4 1.2 (29.7) (29.5) (26.5) (28.4) (27.9) (28.9) of which: Staff Expenses 2,486 2,591 3,631 3,609 6,117 6,199 4.7 1.3 C. profits i. Amount of Operating Profits 3,893 3,907 4,558 4,284 8,450 8,191 6.3 -3.1 ii. Provision, Contingencies 1,706 1,239 1,155 1,241 2,861 2,480 8.6 -13.3 iii. Provision for taxes 742 771 765 932 1,508 1,702 10.0 12.9 iv. Amount of Net Profit before Taxes 2,187 2,669 3,403 3,043 5,589 5,711 5.2 2.2 v. Amount of Net Profit after Taxes 1,445 1,898 2,637 2,111 4,082 4,009 3.5 -1.8 notes: 1. Data for 2018-19 are provisional. 2. Components may not add up to the total due to rounding off. 3. Percentage variation could be slightly different because absolute numbers have been rounded off to ₹ crores. source: Off-site surveillance returns, RBI. 2.6 Priority Sector Advances V.30 Bank-specific factors like credit risk, interest and non-interest income and the overall V.31 The Reserve Bank revised guidelines on macroeconomic environment weigh in as the key lending by UCBs to the priority sector9 effective May 10, 2018. New categories like credit determinants of UCBs’ profitability (Box V.2). to food and agro-processing units, medium table v.9: select profitability Indicators of UCBs enterprises, social infrastructure and renewable (Per cent) energy formed part of the priority sector. The Indicators Scheduled Non-scheduled All distinction between direct and indirect credit UCBs UCBs UCBs was dispensed with and micro-credit ceased to 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 be a separate category under the priority sector. 1 2 3 4 5 6 7 Return on Assets 0.56 0.69 0.90 0.79 0.74 0.74 V.32 Historically, UCBs’ lending to the priority Return on Equity 7.14 8.71 9.88 8.62 8.70 8.66 sector has been higher than their prescribed Net Interest Margin 2.56 2.57 3.25 3.62 2.93 3.12 priority sector targets. Despite inclusion of new note: Data for 2018-19 are provisional. categories in the priority sector targets, UCBs source: Off-site surveillance returns, RBI. 9 UCBs are required to meet the target for lending to the total priority sector of 40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent of off-balance sheet exposure, whichever is higher. Within the priority sector, the target of 10 per cent and 7.5 per cent of ANBC or credit equivalent of off-balance sheet exposure, whichever is higher, has been prescribed for weaker sections and micro enterprises. 87Report on Trend and Progress of Banking in India 2018-19 Box v.2: Drivers of profitability of scheduled Urban Co-operative Banks (sUCBs) Balance sheet dynamics suggest that key determinants table 1: Dependent variable – return on assets impacting profitability of Urban Co-operative Banks (1) (2) (3) (4) (UCBs) are credit risk and non-interest income. In the context of Indian scheduled commercial banks (SCBs), Credit Risk -0.119*** -0.113*** -0.118*** -0.115*** efficiency of fund management—defined as the ratio of (0.0217) (0.0239) (0.0216) (0.0209) interest expenses to interest income—is found to be a Interest expenses to -0.0396*** -0.0383*** -0.0404*** -0.0402*** prominent determinant of their profitability (Rakhe, interest income (0.00714) (0.00634) (0.00737) (0.00697) 2010). Economic literature points to macroeconomic Non-interest income to 0.197** factors driving profitability of banks besides bank-specific working fund (0.0829) factors (Athanasoglou et.al 2005, Kohlscheen et. al 2018). Non-interest expenses to -0.0950 total assets (0.0585) A fixed effects panel framework using annual balance sheet data for 52 SUCBs10 and macroeconomic data for Real GDP Growth 0.0895* the period 2012-2019 is employed, with the return on (0.0496) assets (RoA) defined as ratio of net profits to total assets Inflation -0.136 as the dependent variable. (0.0832) WALR 0.389*** Among bank-specific factors, non-interest income ratio (0.128) emerges as the most important determinant of profitability of SUCBs (Table 1). Credit risk (proxied by ratio of cons 3.684*** 3.472*** 3.942*** -0.849 (0.470) (0.435) (0.514) (0.928) provisions and contingencies to loans and advances) adversely affects the profitability of SUCBs as additional Bank fixed effects Yes Yes Yes Yes provisions in times of stress leaves lesser resources for Time fixed effects Yes Yes Yes No lending or investment. Other bank-specific factors like N 388 388 388 388 interest expenses to interest income negatively impact R2 0.336 0.362 0.341 0.322 profitability of SUCBs. Robust standard errors in parentheses In the case of macroeconomic control variables, real GDP * p < 0.10, ** p < 0.05, *** p < 0.01 growth positively impacts the RoA, implying pro-cyclicality of bank profitability–high growth is usually fuelled by financial Markets, Institutions and Money, 18(2), 121- high credit demand, which propels bank profitability. 136. The WALR of SCBs, taken as a proxy for lending rate is Kohlscheen, E., Murcia Pabón, A., & Contreras, J. (2018). positively related to the same. Determinants of bank profitability in emerging markets. references BIS Working Papers, No 686. Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Rakhe, P.B., (2010), “Profitability of Foreign Banks vis-à- Bank-specific, industry-specific and macroeconomic vis Other Bank Groups in India – A Panel Data Analysis”, determinants of bank profitability. Journal of international Reserve Bank of India Occasional Papers Vol. 31, No.2. recorded a dip in the share of priority sector sector advances, followed by advances to advances in total advances during 2018-19 but housing. Given the urban focus of UCBs, their maintained it above the overall priority target of share of agricultural lending under the priority 40 per cent (Table V.10). sector is low. V.33 The composition of credit to the priority V.34 UCBs are mandated to provide 10 per sector by UCBs shows that lending to micro, cent of adjusted net bank credit (ANBC) to small and medium enterprises (MSMEs) weaker sections11. During 2018-19, credit to accounted for 60.7 per cent of the total priority weaker sections fell below the minimum target 10 SUCBs account for 47 per cent of the assets of UCB sector as at end-March 2019. 11 Priority sector loans to the following borrowers will be considered under the weaker sections category: artisans; village and cottage industries where individual credit limits do not exceed ₹1 lakh; scheduled castes and scheduled tribes; self help groups; distressed farmers indebted to non-institu- tional lenders; distressed persons other than farmers, with loan amount not exceeding ₹1 lakh per borrower to prepay their debt to non-institutional lenders; women; persons with disabilities; overdrafts upto ₹5,000 under Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts, provided the borrow- ers’ household annual income does not exceed ₹100,000 for rural areas and ₹1,60,000 for non-rural areas. 88Developments in Co-operative Banking table v.10: Composition of Credit to priority table v.11: share in Credit Flow – sectors by UCBs rural Co-operatives (As on March 31, 2019) (Figures in Per cent) (Amount in ₹ crore) Share in Credit Flow to Agriculture Item Priority Sector Advances Co-operative Banks Regional Rural Banks SCBs Amount Share 2014-15 16.4 12.1 71.5 in Total 2015-16 16.7 13.0 70.2 Advances (%) 2016-17 13.4 11.6 75.0 1 2 3 2017-18 12.9 12.1 74.9 1. Agriculture [(i)+(ii)+(iii)] 9,803 3.2 2018-19 12.1 11.9 76.0 (i) Farm Credit 7,209 2.4 source: NABARD. (ii) Agriculture Infrastructure 589 0.2 (iii) Ancillary Activities 2,005 0.7 64 per cent in 1992-93—has fallen dramatically 2. Micro, Small and Medium Enterprises 81,387 26.9 [(i) + (ii)+(iii)+(iv)] over the years while commercial banks have (i) Micro Enterprises 27,789 9.2 acquired a dominant position (Table V.11). (ii) Small Enterprises 42,232 13.9 (iii) Medium Enterprises 11,013 3.6 V.36 As of March 2018, short-term co- (iv) Advances to KVI (Including ‘Other 353 0.1 Finance to MSMEs’) operatives comprising StCBs, DCCBs and PACS 3. Export Credit 218 0.1 accounted for 94.2 per cent of the total assets of 4. Education 1,910 0.6 rural co-operatives (Chart V.15). 5. Housing 22,721 7.5 6. Social Infrastructure 831 0.3 V.37 Long-term co-operatives comprise 7. Renewable Energy 241 0.1 State Co-operative Agriculture and Rural 8. ‘Others’ category under Priority Sector 16,916 5.6 9. total (1 to 8) 1,34,028 44.2 Development Banks (SCARDBs) and Primary of which, Loans to Weaker Sections 28,143 9.3 Co-operative Agriculture and Rural under Priority Sector Development Banks (PCARDBs). Due to the notes: 1. Data for 2019 are provisional. Component-wise comparable data for previous years are not available due to changes in limited range of credit products and relatively priority sector norms. lower outreach, their share in the total assets of 2. Components may not add up to the total due to rounding off. source: Off-site surveillance returns, RBI. of 10 per cent of ANBC and their share in overall lending to the priority sector also fell to 21 per cent. 3. rural Co-operatives V.35 Rural co-operatives play an important role in delivering affordable institutional credit and promoting financial inclusion in underbanked areas through their geographical outreach. Short- term co-operatives primarily meet crop loan requirements whereas long-term co-operatives make credit available for capital formation in agriculture, rural industries and housing. Although the focus of rural co-operative lending is agriculture, the share of rural co-operatives to this category of loans —which was as high as 89Report on Trend and Progress of Banking in India 2018-19 rural co-operatives has been declining over the 3.1 short-term Co-operatives years. V.39 Short-term co-operatives are arranged in a V.38 The structure of short-term rural co- three-tier structure in most of the states, StCBs operatives is largely federal – with StCBs acting at the apex level, DCCBs at the intermediate as the apex body – whereas that of long-term level and PACS at the grassroots level. Deposits co-operatives varies significantly across states. are the dominant component of the liability Presently, out of the thirteen fully functional structure of StCBs, and especially of DCCBs SCARDBs, five (Gujarat, Jammu & Kashmir, whose extensive branch network enables higher Puducherry, Tripura and Uttar Pradesh) are unitary, deposit mobilisation. In the case of PACS, i.e., they operate through their branches with however, borrowings from StCBs and DCCBs no separate PCARDBs, six (Haryana, Karnataka, are the key sources of funds12 (Chart V.16). Kerala, Punjab, Rajasthan and Tamil Nadu) are 3.1.1 State Co-operative Banks federal where they operate through PCARDBs, and two (Himachal Pradesh and West Bengal) have V.40 StCBs are established in each state to mixed structure with SCARDBs operating through mobilise deposits, provide liquidity support and PCARDBs as well as through their branches. offer technical assistance to DCCBs and PACS. table v.12: a profile of rural Co-operatives (At end-March 2018) (Amount in ₹ crore) Item Short-term Long-term StCBs DCCBs PACS SCARDBs PCARDBs 1 2 3 4 5 6 a. number of Co-operatives 33 363 95,238 13 601 B. Balance sheet Indicators i. Owned Funds (Capital + Reserves) 16,782 40,624 30,942 4,305 3,288 ii. Deposits 1,23,534 3,47,967 1,19,632 2,341 1,306 iii. Borrowings 72,170 90,312 1,28,333 15,400 16,349 iv. Loans and Advances 1,31,934 2,77,079 2,07,322 20,788 15,821 v. Total Liabilities/Assets 2,26,841 5,25,157 2,43,563* 28,994 30,550 C. Financial performance i. Institutions in Profits a. No. 32 311 46,405 9 257 b. Amount of Profit 1,037 1,744 4,134 74 127 ii. Institutions in Loss a. No. 1 52 37,838 4 344 b. Amount of Loss 7 893 7,316 83 638 iii. Overall Profits (+)/Loss (-) 1,030 851 -3,182 -9 -511 D. non-performing assets i. Amount 6,223 30,894 47,915** 5,206 6,058 ii. As percentage of Loans Outstanding 4.7 11.2 28.2 25.0 38.4 e. recovery of loans to Demand ratio# (per cent) 94.2 71.1 75.6 48.4 41.1 notes: StCBs: State Co-operative Banks; DCCBs: District Central Co-operative Banks; PACS: Primary Agricultural Credit Societies; SCARDBs: State Co-operative Agriculture and Rural Development Banks; PCARDBs: Primary Co-operative Agriculture and Rural Development Banks. *: Working Capital. **: Total overdues. #: This ratio captures the share of outstanding non-performing loan amounts that have been recovered. source: NABARD and NAFSCOB. 12 The source of funds of rural co-operatives comprises owned funds (capital and reserves), deposits and borrowings. 90Developments in Co-operative Banking table v.13: liabilities and assets of state Co-operative Banks (At end-March 2018) (Amount in ₹ crore) Item At end-March Percentage Variation 2017 2018 2016-17 2017-18 1 2 3 4 5 liabilities 1. Capital 5,161 5,542 -7.1 7.4 (2.2) (2.4) 2. Reserves 10,294 11,240 9.6 9.2 (4.4) (4.9) 3. Deposits 1,22,039 1,23,534 11.6 1.2 (52.3) (54.4) 4. Borrowings 80,892 72,170 17.6 -10.8 (34.7) (31.8) 5. Other Liabilities 14,515 14,355 6.6 -1.1 (6.2) (6.3) assets 1. Cash and Bank Balances 9,660 9,288 51.6 -3.9 (4.1) (4.0) In terms of size, StCBs account for 23 per cent 2. Investments 84,613 74,398 22.6 -12.1 of assets of short-term rural co-operatives and (36.3) (32.7) 3. Loans and Advances 1,27,048 1,31,934 3.4 3.9 rely on the NABARD refinance facility as the (54.5) (58.1) major source of borrowings. 4. Other Assets 11,580 11,221 36.2 -3.1 (4.9) (4.9) Balance Sheet Operations total liabilities/assets 2,32,901 2,26,841 12.7 -2.6 (100.00) (100.00) V.41 The consolidated balance sheet of StCBs notes: 1. Figures in parentheses are proportion to total liabilities/assets contracted in 2017-18 on account of a decline 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹1 crore in the table. in investments and cash and bank balances on 3. Components may not add up to the total due to rounding off. source: NABARD. the asset side. On the liability side, borrowings declined due to a fall in the short-term refinance Profitability support provided by NABARD. Deposits, which account for more than half of the liability side, V.43 Net profits of StCBs decelerated during decelerated during 2017-18, from a high base 2017-18 after a significant increase in the in the previous year when StCBs were allowed previous year. The slowdown mainly reflected a to garner deposits in the form of specified bank sharp increase in provisions and contingencies notes in the post-demonetisation period. On the in consonance with deteriorating asset quality assets side, StCBs unwound their investments during the year. On the positive side, however, to extend loans and advances especially against net interest income rose; although interest the backdrop of lower refinance support and income decelerated, it was outweighed by the muted deposits growth (Table V.13). contraction in the interest expenses. Another V.42 The latest data available for scheduled positive factor was the slowdown in operating StCBs show acceleration in both deposit and expenses, notwithstanding the acceleration in credit growth in 2018-19 (Table V.14). the wage bill. Consequently, operating profits 91Report on Trend and Progress of Banking in India 2018-19 table v.14: select Balance sheet Indicators of Asset Quality scheduled state Co-operative Banks V.44 The asset quality of StCBs—as reflected in (Amount in ₹ crore) the NPA ratio—had been improving continuously Item 2014-15 2015-16 2016-17 2017-18 2018-19 1 2 3 4 5 6 since 2012-13, but it deteriorated during 2017- Deposits 77,233 79,564 90,277 98,768 1,10,559 18. Alongside significant accretions to NPAs, (-0.6) (3.0) (13.5) (9.4) (11.9) both the doubtful and loss component of NPAs Credit 1,03,798 1,07,360 1,10,934 1,17,989 1,31,399 (10.6) (3.4) (3.3) (6.4) (11.4) also increased, notwithstanding an increase in SLR Investments 23,294 24,220 26,225 33,411 33,130 the recovery-to-demand ratio (Table V.16). (-3.1) (4.0) (8.3) (27.4) (-0.8) Credit plus SLR 1,27,092 1,31,580 1,37,159 1,51,400 1,64,529 V.45 This deterioration is stark against the Investments (7.8) (3.5) (4.2) (10.4) (8.7) backdrop of improvement in asset quality of notes: 1. Data pertains to last reporting Friday of March of the corresponding year. UCBs and SCBs (Chart V.17). 2. Figures in brackets are growth rates in per cent over previous year. source: Form B under Section 42 of RBI Act (as submitted by scheduled V.46 From a regional perspective, there has StCBs). been an increase in the NPA ratio in 2017-18 across all regions except in the north-eastern of the StCBs reversed the contraction of the region (Chart V.18a). The all-India recovery-to- previous two years and grew in double digits (Table V.15). demand ratio improved for StCBs, driven by the northern, eastern and southern regions. table v.15: Financial performance of (Chart V.18b). state Co-operative Banks (Amount in ₹ crore) 3.1.2 District Central Co-operative Banks Item As during Variation (%) V.47 DCCBs—the intermediate tier in the short- 2016-17 2017-18 2016-17 2017-18 term rural co-operatives structure—mobilise 1 2 3 4 5 deposits from the public and provide credit a. Income (i+ii) 15,247 15,477 -0.7 1.5 (100.0) (100.0) table v.16: soundness Indicators: state i. Interest Income 14,691 14,798 1.3 0.7 (97.8) (95.6) Co-operative Banks ii. Other Income 556 679 -30.0 22.1 (Amount in ₹ crore) (1.9) (4.5) B. expenditure (i+ii+iii) 14,295 14,447 -2.7 1.1 Item At end-March Variation (%) (100.0) (100.0) 2017 2018 2016-17 2017-18 i. Interest Expended 11,520 11,450 -3.5 -0.6 1 2 3 4 5 (80.5) (79.2) ii. Provisions and 860 1,078 a. total npas (i+ii+iii) 5,180 6,223 -7.1 20.1 -33.3 25.3 Contingencies (6.0) (7.4) i. Sub-standard 1,592 2,293 -15.8 44.0 iii. Operating Expenses 1,915 1,919 15.8 0.2 (30.8) (36.8) (13.3) (13.2) ii. Doubtful 2,419 2,539 -4.0 4.9 Of which : Wage Bill 1,148 1,212 0.0 5.6 (46.2) (40.7) (8.0) (10.5) iii. Loss 1,168 1,397 0.0 19.6 C. profitability (23.1) (22.4) Operating Profits 1,482 1,818 -16.7 22.7 B. npas to loans ratio (%) 4.1 4.7 - - Net Profits 952 1,030 66.7 8.2 C. recovery to Demand ratio (%) 93.5 94.2 - - notes: 1. Figures in parentheses are proportion to total income/expenditure (in per cent). notes: 1. Figures in parentheses are shares in total NPA (%). 2. Y-o-Y variations could be slightly different because absolute 2. Absolute numbers have been rounded off, leading to slight numbers have been rounded off to ₹1 crore in the table.. variations in per cent. 3. Components may not add up to the total due to rounding off. 3. Components may not add-up to the total due to rounding off. source: NABARD. source: NABARD. 92Developments in Co-operative Banking to the public and PACS. DCCBs’ borrowings the liabilities side, and in investments on the comprise of loans and advances from StCBs asset side. Loans and advances, which revived and direct refinancing from the NABARD. They after a deceleration in the previous year, were have a large number of depositors, given their funded mainly through reduction in cash and branch network. This also results in a lower bank balances (Table V.17). credit-to-deposit ratio than StCBs (Chart V.19). Profitability Balance Sheet Operations V.49 The net profit of DCCBs declined for the V.48 During 2017-18, the balance sheet of second consecutive year, though the pace of DCCBs decelerated on slowdown in deposits on reduction slowed. This was mainly on account 93Report on Trend and Progress of Banking in India 2018-19 table v.17: liabilities and assets of District table v.18: Financial performance of District Central Co-operative Banks Central Co-operative Banks (Amount in ₹ crore) (Amount in ₹ crore) Item At end-March Variation (%) Item As during Variation (%) 2017 2018 2016-17 2017-18 2016-17 2017-18 2016-17 2017-18 1 2 3 4 5 1 2 3 4 5 liabilities a. Income (i+ii) 38,546 39,437 4.9 2.3 1. Capital 18,674 19,693 13.3 5.5 (100.0) (100.0) (3.6) (3.7) i. Interest Income 36,592 37,669 5.5 2.9 2. Reserves 19,766 20,931 13.1 5.9 (94.9) (95.5) (3.9) (3.9) ii. Other Income 1,954 1,768 2.8 -9.5 3. Deposits 3,30,904 3,47,967 11.0 5.2 (5.0) (4.6) (65.4) (66.2) B. expenditure (i+ii+iii) 37,636 38,587 5.9 2.5 4. Borrowings 91,438 90,312 9.3 -1.2 (100.0) (100.0) (18.0) (17.1) i. Interest Expended 26,849 26,788 7.2 -0.2 5. Other Liabilities 44,698 46,254 5.4 3.5 (71.3) (69.4) (8.8) (8.8) ii. Provisions and 3,020 3,476 3.4 15.1 assets Contingencies (8.0) (9.0) 1. Cash and Bank Balances 32,874 27,230 41.2 -17.2 iii. Operating Expenses 7,767 8,323 2.6 7.2 (6.5) (5.1) (20.6) (21.5) 2. Investments 1,84,634 1,84,883 14.5 0.1 Of which : Wage Bill 4,980 5,222 4.2 4.9 (36.5) (35.2) (13.2) (13.5) 3. Loans and Advances 2,52,655 2,77,079 4.1 9.7 C. profits (49.9) (52.7) i. Operating Profits 3,331 3,812 -17.5 14.4 4. Other Assets 35,317 35,965 15.0 1.8 ii. Net Profits 910 850 -18.2 -6.6 (6.9) (6.8) notes: 1. Figures in parentheses are proportion to total liabilities/assets. total liabilities/assets 5,05,480 5,25,157 10.3 3.9 2. Y-o-Y variations could be slightly different because absolute (100.00) (100.00) numbers have been rounded off to ₹ 1 crore in the table. 3. Components may not add up to the total due to rounding off. notes: 1. Figures in parentheses are proportion to total liabilities/assets source: NABARD. 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹1 crore in the table. V.51 DCCBs have persistently higher NPA 3. Components may not add up to the total due to rounding off. ratios and lower recovery to demand ratio than source: NABARD. StCBs (Chart V.21a). The share of agricultural of higher provision requirements and slower lending in the portfolio of DCCBs is higher than growth in interest income (Table V.18). that of StCBs; as such, their balance sheets are Asset Quality exposed to the volatility in agricultural prices V.50 The asset quality of DCCBs deteriorated and output. DCCBs also have a higher share in 2017-18. Although there was a marginal of operating expenses in overall expenses than deceleration in the growth of sub-standard and StCBs due to their district level presence, which doubtful assets, they remained at elevated levels requires larger staff costs (Chart V.21b). (Table V.19). The decline in the asset quality is 3.1.3 Primary Agricultural Credit Societies attributable to farm loan waivers announced (PACS) by various state governments13. Pari passu, the recovery to demand ratio of DCCBs declined V.52 PACS form the third tier of short-term co- during this period across all regions with the operatives. Apart from providing agricultural exception of the southern region (Chart V.20). loans, they also arrange for the supply of 13 During 2017-18, Government of Maharashtra, Karnataka, Uttar Pradesh and Punjab announced debt waiver for farmers. 94Developments in Co-operative Banking table v.19: soundness Indicators: District V.54 The losses of PACS outweighed their profits Central Co-operative Banks in 2017-18. The Southern region contributed (Amount in ₹ crore) around two-third of the total losses (Appendix Item At end-March Variation (%) 2017 2018 2016-17 2017-18 Table V.6). 1 2 3 4 5 A. Total NPAs (i+ii+iii) 26,414 30,894 16.3 17.0 V.55 PACS extend loans only to their members i. Sub-standard 11,982 15,094 26.3 26.0 and therefore, borrower to member ratio is (45.3) (48.8) a useful indicator for access to and demand ii. Doubtful 12,040 13,232 10.1 9.9 (45.5) (42.8) for credit. During 2017-18, the ratio declined iii. Loss 2,392 2,568 4.3 7.4 to 38.8 per cent from 39.6 per cent in 2016- (9.0) (8.3) B. npas to loans ratio (%) 10.5 11.2 - - 17. The decline in the ratio was particularly C. recovery to Demand ratio (%) 78.9 71.1 - - striking in the case of ST members (Appendix notes: 1. Figures in parentheses are proportion to total NPAs. 2. Y-o-Y variations could be slightly different because absolute Table V.7). numbers have been rounded off to ₹1 crore in the table. 3. Components may not add up to the total due to rounding off. 4. long-term rural Co-operatives source: NABARD. V.56 Long-term rural co-operatives consist agricultural inputs, distribution of consumer of State Co-operative Agriculture and Rural articles and marketing of produce for their Development Banks (SCARDBs) operating members. at the state level and Primary Co-operative V.53 The liabilities side of the consolidated Agriculture and Rural Development Banks balance sheet of PACS – both deposits and (PCARDBs) operating at the district/block level. borrowings – decelerated sharply in 2017-18 These institutions play an important role in (Appendix Table V.5). On the asset side, credit agricultural development by purveying long- declined mainly on the back of contraction in short-term loans and deceleration in long-term term credit for capital. As of end-March 2018, advances. The share of agriculture in total lending there were 13 SCARDBs and 601 PCARDBs of PACS is 54.9 per cent. (Appendix Table V.6). across the country. 95Report on Trend and Progress of Banking in India 2018-19 Chart V.21: StCBsversusDCCBs a . NPAs and Recovery - StCB's versus DCCBs b . Share of Operating Expenses in Total Expenses 25 100 30 90 20 80 25 70 nt 15 60 nt Per ce 10 35 4 00 0 Perce cent 2 10 5 5 20 er 10 P 10 0 0 6 7 8 9 0 1 2 3 4 5 6 7 8 5 0 0 0 0 1 1 1 1 1 1 1 1 1 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 0 0 0 0 0 1 1 1 1 1 1 1 1 0 20 20 20 20 20 20 20 20 20 20 20 20 20 10 11 12 13 14 15 16 17 18 NPAratioof StCBs NPAratioof DCCBs 09- 10- 11- 12- 13- 14- 15- 16- 17- 0 0 0 0 0 0 0 0 0 Recovery to Demand RatioofStCBs (RHS) 2 2 2 2 2 2 2 2 2 Recovery to Demand RatioofDCCBs (RHS) DCCBs StCBs Source:NABARD. 4.1 State Co-operative Agriculture and Rural 5. overall assessment Development Banks (SCARDBs) V.59 The year 2018-19 turned out to be one of V.57 The consolidated balance sheet of consolidation and expansion in balance sheets SCARDBs contracted during 2017-18 in for UCBs, along with an improvement in asset quality and provision coverage ratio. Driving contrast to an expansion in the previous year this improvement were various measures (Appendix Table V.8). SCARDBs continued to taken by the government and the Reserve Bank report net losses for the second consecutive year to strengthen this sector’s performance and (Appendix Table V.9). Asset quality, measured financial health. Recently, the unearthing of in terms of the NPA ratio, also deteriorated irregularities in one of the UCBs has brought to (Appendix Table V.10). Among the states, Kerala the forefront issues relating to low capital base, maintained the highest recovery rate and the weak corporate governance, inability to prevent lowest NPA ratio, while Haryana had the highest frauds, slower adoption of new technology and NPA ratio (Appendix Table V.11) inadequate system of checks and balances. Going forward, UCBs need to break out of 4.2 Primary Co-operative Agriculture and these drags. The highest priority needs to be Rural Development Banks (PCARDBs) assigned to the establishment of a uniform V.58 The balance sheet of PCARDBs, which regulatory and supervisory structure and an showed signs of revival in 2016-17, deteriorated umbrella organisation in the architecture, in 2017-18 (Appendix Table V.12). PCARDBs which will provide liquidity and capital support posted operating profits due to moderation in and galvanise the spread of and leveraging on operating expenses reversing the operating IT infrastructure and other capacity and skill building facilities. losses of the previous year (Appendix Table V.13). Like the SCARDBs, the NPA ratio of PCARDBs V.60 Looking ahead, the co-operative sector also deteriorated (Appendix Table V.14). faces dual challenges: first, increasing 96Developments in Co-operative Banking competition from not only SCBs but also be overemphasised, given its predominant from small finance banks and payments banks; domestic orientation, its massive financial and second, vulnerability stemming from inclusion quotient and its sheer presence across internal weaknesses including the inability to the country, especially in lower tier towns and prevent frauds. Although this sector accounts villages. In view of this important role, there is a for just 10.6 per cent of the commercial need to undertake reforms aimed at upgrading banking sector, the need to strengthen it from corporate governance and strengthening their the financial stability point of view cannot financials. 97VI NoN-BaNkINg FINaNcIal INstItutIoNs The consolidated balance sheet of the NBFCs expanded at a slower pace in 2018-19 and in the first half of 2019-20 in the aftermath of IL&FS default and rating downgrades of a few companies. NBFCs credit growth continued, supported by bank borrowings. Although GNPA ratio showed an uptick, their capital position remained stable. HFCs experienced deceleration in credit growth and muted profitability as market confidence in the sector waned. The Reserve Bank and the government have taken several measures to address these challenges by enhancing systemic liquidity and strengthening the governance and risk- management framework of NBFCs, including HFCs. The consolidated balance sheet of AIFIs expanded on the back of robust credit growth, particularly due to augmentation of line of credit by NABARD. 1. Introduction Among the various institutions that perform this function1, those regulated by the Reserve Bank VI.1 Non-banking financial institutions (NBFIs) are a group of diverse financial are all-India financial institutions (AIFIs), non- intermediaries which, in a bank-dominated banking financial companies (NBFCs), primary financial system like India, serve as an alternative dealers (PDs) and the most recent addition, channel of credit flow to the commercial sector. housing finance companies2 (HFCs) (Chart VI.1). 1 Although merchant banking companies, stock exchanges, companies engaged in the business of stock-broking/sub-broking, venture capital fund companies, nidhi companies, insurance companies and chit fund companies are NBFCs, they have been exempted from the requirement of registration with the Reserve Bank under Section 45-IA of the RBI Act, 1934. 2 The Finance (No.2) Act, 2019 (23 of 2019) has amended the National Housing Bank Act, 1987, conferring certain powers for regulation of housing finance companies (HFCs) with the Reserve Bank of India. HFCs are henceforth treated as a category of NBFCs for regulatory purposes. 98NoN-BaNkiNg FiNaNcial iNstitutioNs AIFIs are apex financial institutions established to raise money. Among NBFCs-ND, those with during the development planning period to an asset size of ₹500 crore or more are classified ensure adequate flow of long-term financial as non-deposit taking systemically important resources to crucial sectors, i.e., agriculture, NBFCs (NBFCs-ND-SI). At the end of September rural development, small industries and so on. 2019, there were 82 NBFCs-D and 274 NBFCs- NBFCs are government/public/private limited ND-SI as compared to 88 and 263, respectively companies, which specialise in delivering credit at the end of March 2019. to a wide variety of niche segments, ranging VI.4 Since NBFCs cater to niche areas, they from infrastructure to consumer durables. PDs are also categorised on the basis of activities they came into existence in 1995 and act as market undertake. Till February 21, 2019, NBFCs were makers in the government securities (G-secs) divided into 12 categories. Thereafter, these market, besides ensuring that primary issuances categories were harmonised in order to provide of G-secs are subscribed. HFCs extend housing NBFCs with greater operational flexibility. As finance to individuals, co-operative societies a result, asset finance companies (AFCs), loan and corporate bodies and lease commercial and companies (LCs) and investment companies residential premises to support housing activity (ICs) were merged into a new category called in the country. Investment and Credit Company (NBFC-ICC). At VI.2 This chapter presents an analysis of the present, there are 11 categories of NBFCs in the financial performance of NBFIs in 2018-19 and activity- based classification (Table VI.1). April-September 2019. The rest of the chapter VI.5 As per the regulatory guidelines, only is organised into four sections. Section 2 those NBFCs with a minimum net owned provides an overview of the NBFC sector–both fund (NOF) of ₹2 crore are allowed to operate. non-deposit taking systemically important As a result, 2018-19 saw a record number of NBFCs (NBFCs-ND-SI) and deposit-taking cancellations of registration (Chart VI.2). The NBFCs (NBFCs-D). The activities of HFCs are number of NBFCs registered with the Reserve also covered in this section. An assessment of Bank declined from 9,856 at the end of March the performance of AIFIs is made in Section 3. 2019 to 9,642 at the end of September 2019. Section 4 evaluates the performance of PDs. Section 5 concludes and offers some policy 2.1 Ownership Pattern perspectives. VI.6 The NBFC sector is dominated by NBFCs- 2. Non-Banking Financial companies ND-SI, which constitute 86.3 per cent of the total asset size of the sector. Within this segment, VI.3 NBFCs can be classified on the basis government owned NBFCs (particularly the two of a) their asset/liability structures; b) their largest NBFCs i.e., Power Finance Corporation systemic importance; and c) the activities they Limited and REC Limited) hold around two- undertake. In terms of liability structures, fifth of the total assets (Table VI.2). NBFCs are subdivided into deposit-taking NBFCs (NBFCs-D) - which accept and hold VI.7 The strategy adopted by the Reserve Bank public deposits - and non-deposit taking NBFCs of limiting the operations and growth of NBFCs-D (NBFCs-ND) - which rely on markets and banks is driven by the need to secure depositors’ 99Report on Trend and Progress of Banking in India 2018-19 table V1.1: classification of NBFcs by activity type of NBFc activity 1. Investment and Credit Company (ICC) Lending and investment. 2. NBFC-Infrastructure Finance Company (NBFC-IFC) Provision of infrastructure loans. 3. NBFC-Systemically Important Core Investment Company (CIC-ND-SI) Investment in equity shares, preference shares, debt or loans of group companies. 4. Infrastructure Debt Fund-NBFC (IDF-NBFC) Facilitation of flow of long-term debt into infrastructure projects. 5. NBFC-Micro Finance Institution (NBFC-MFI) Credit to economically disadvantaged groups. 6. NBFC-Factor Acquisition of receivables of an assignor or extending loans against the security interest of the receivables at a discount. 7. NBFC-Non-Operative Financial Holding Company (NOFHC) Facilitation of promoters/ promoter groups in setting up new banks. 8. Mortgage Guarantee Company (MGC) Undertaking of mortgage guarantee business. 9. NBFC-Account Aggregator (NBFC-AA) Collecting and providing information about a customer’s financial assets in a consolidated, organised and retrievable manner to the customer or others as specified by the customer. 10. NBFC–Peer to Peer Lending Platform (NBFC-P2P) Providing an online platform to bring lenders and borrowers together to help mobilise funds. 11. Housing Finance Companies (HFC) Financing for housing. source: RBI. interest, given that deposits of NBFCs-D are not VI.8 As a consequence, NBFCs-D accounted covered by the Deposit Insurance and Credit for only 13.7 per cent of the total assets of the Guarantee Corporation (DICGC). The Reserve NBFC sector at the end of March 2019, with Bank has mandated that only investment grade 89.7 per cent of all NBFCs-D assets held by non- NBFCs-D shall accept fixed deposits from the government companies. Public non-government public, up to a limit of 1.5 times of their NOF companies are the dominant sub-group among and for a tenure of 12 to 60 months only, with the deposit taking NBFCs (Table VI.2). interest rates capped at 12.5 per cent. 2.2 Balance Sheet VI.9 Although the NBFC sector grew in size from ₹ 26.2 lakh crore in 2017-18 to ₹ 30.9 lakh crore in 2018-19, the pace of expansion was lower than in 2017-18 mainly due to rating downgrades and liquidity stress in a few large NBFCs in the aftermath of the IL&FS event. This slowdown was witnessed mainly in the NBFCs- ND-SI category, whereas, NBFCs-D broadly maintained their pace of growth. However, in 2019-20 (up to September) growth in balance- sheet size of NBFCs-ND-SI as well as NBFCs-D moderated due to a sharp deceleration in credit growth (Table VI.3, Appendix Tables VI.1 and VI.2). 100NoN-BaNkiNg FiNaNcial iNstitutioNs table VI.2: ownership Pattern of NBFcs (At end-March 2019) (Amount in ₹ crore) NBFCs-ND-SI NBFCs-D Type Number of Asset Share in per cent Number of Asset Share in per cent companies Size companies Size Number Asset Size Number Asset Size 1 2 3 4 5 6 7 8 9 A. Government Companies 29 10,59,336 10.7 39.8 8 43,358 9.8 10.3 B. Non-government Companies (1+2) 234 16,04,252 89.3 60.2 80 3,78,534 90.2 89.7 1. Public Limited Companies 120 12,03,189 46.0 45.2 78 2,83,900 87.8 67.3 2. Private Limited Companies 114 4,01,063 43.4 15.1 2 94,634 2.4 22.4 total (a+B) 263 26,63,588 100.0 100.0 88 4,21,892 100.0 100.0 Note: Data are provisional. source: Supervisory Returns, RBI. VI.10 Amongst NBFCs-ND-SI, ICCs and IFCs Despite liquidity stress faced by the sector, together account for 85.6 per cent of the total there was expansion in asset size of IFCs. asset size of the segment at end-March 2019. Balance sheets of micro finance institutions or table VI.3: abridged Balance sheet of NBFcs (Amount in ₹ crore) At end-March 2018 At end-March 2019 At end-September 2019 Items NBFCs NBFCs- NBFCs-D NBFCs NBFCs- NBFCs-D NBFCs NBFCs- NBFCs-D ND-SI ND-SI ND-SI 1 2 3 4 5 6 7 8 9 10 1. Share Capital and Reserves 6,10,383 5,56,043 54,339 6,95,807 6,28,603 67,204 7,73,163 6,99,301 73,862 (21.6) (20.6) (32.4) (14.0) (13.0) (23.7) (21.7) (21.5) (24.2) 2. Public Deposits 30,439 0 30,439 40,058 0 40,058 47,710 0 47,710 (-0.6) (-0.6) (31.6) (0) (31.6) (40.3) (0) (40.3) 3. Debentures 8,90,105 8,06,667 83,437 9,05,833 8,06,663 99,170 9,27,557 8,32,048 95,509 (33.1) (33.9) (25.5) (1.8) (0) (18.9) (7.7) (7.6) (8.4) 4. Bank Borrowings 4,18,902 3,47,546 71,356 6,07,037 5,00,803 1,06,235 6,30,786 5,13,205 1,17,581 (33.4) (37.4) (16.7) (44.9) (44.1) (48.9) (21.2) (21.9) (18.3) 5. Commercial Paper 1,47,742 1,29,569 18,173 1,54,469 1,36,357 18,112 1,23,440 1,04,477 18,964 (13.4) (12.2) (22.8) (4.6) (5.2) (-0.3) (-31.2) (-30.6) (-34.7) 6. Others 5,20,219 4,36,806 83,414 6,82,276 5,91,162 91,114 7,54,986 6,54,606 1,00,380 (24.5) (22.2) (37.8) (31.2) (35.3) (9.2) (16.8) (17.2) (14.4) total liabilities/assets 26,17,790 22,76,631 3,41,159 30,85,480 26,63,588 4,21,892 32,57,642 28,03,637 4,54,006 (26.8) (27.2) (24.2) (17.9) (17.0) (23.7) (13.2) (13.1) (14.1) 1. Loans and Advances 19,62,459 16,53,217 3,09,242 22,76,600 18,97,527 3,79,072 23,54,211 19,49,198 4,05,013 (31.8) (32.7) (26.7) (16.0) (14.8) (22.6) (9.9) (9.5) (12.2) 2. Investments 4,16,609 4,04,651 11,958 5,12,443 4,88,550 23,893 5,87,685 5,62,943 24,742 (21.2) (22.2) (-5.9) (23.0) (20.7) (99.8) (30.1) (29.4) (49.2) 3. Cash and Bank Balances 76,182 67,386 8,796 98,776 88,984 9,792 1,13,156 1,01,150 12,006 (-7.4) (-8.4) (1.2) (29.7) (32.1) (11.3) (23.8) (23.5) (26.0) 4. Other Current Assets 1,30,457 1,21,023 9,433 1,53,842 1,46,310 7,532 1,60,162 1,49,682 10,480 (8.7) (7.7) (22.6) (17.9) (20.9) (-20.2) (2.6) (1.9) (13.6) 5. Other Assets 32,084 30,354 1,729 43,820 42,216 1,603 42,429 40,664 1,765 (13.6) (13.4) (17.3) (36.6) (39.1) (-7.3) (18.5) (18.1) (28.2) Notes: 1. Data are provisional. Data for 2017-18 have been updated, while data at end-September 2019 exclude data of two large NBFCs merged with banks. 2. Figures in parentheses indicate y-o-y growth in per cent. source: Supervisory Returns, RBI. 101Report on Trend and Progress of Banking in India 2018-19 NBFCs-MFI also expanded on the back of strong in 2018-19 and 2019-20 (up to September), growth in their loans and advances, especially augmenting their resource base (Table VI.5). to the agriculture sector. For other categories of 2.3 Sectoral Credit of NBFCs NBFCs, excluding CICs, however, the growth of VI.12 Credit extended by NBFCs continued to loans and advances moderated during 2018-19 grow in 2018-19. Industry is the largest recipient (Table VI.4). of credit provided by the NBFC sector, followed VI.11 NBFCs-D largely comprise AFCs and LCs; by retail loans and services (Chart VI.3). since merged into a new category called ICC. Credit to industry and services was subdued In both these categories, moderation in credit in relation to the previous year. However, expansion led to the share of investments in total growth in retail loans continued its momentum (Table VI.6 and Appendix Table VI.3). assets rising from 3.5 per cent in 2017-18 to 5.7 per cent 2018-19. On the liabilities side, LCs VI.13 Over 40 per cent of the retail portfolio of and AFCs witnessed a spurt in deposit growth NBFCs are vehicle and auto loans. The slowdown table VI.4: Major components of liabilities and assets of NBFcs-ND-sI by activity (Amount in ₹ crore) Percentage At end-March 2018 At end-March 2019 At end-September 2019 Variation in Total Liabilities Category/ Liability Borrowings Other Total Borrowings Other Total Borrowings Other Total 2017-18 2018-19 Liabilities Liabilities Liabilities Liabilities Liabilities Liabilities 1 2 3 4 5 6 7 8 9 10 11 12 Investment and Credit 7,96,131 3,66,623 11,62,754 8,67,420 4,20,127 1,28,7547 8,99,660 4,36,934 13,36,594 22.3 10.7 Company Core Investment Company 85,104 1,40,222 2,25,326 1,06,647 1,82,441 2,89,088 1,13,969 2,36,753 3,50,723 19.8 28.3 Factoring – NBFC 1,828 1,969 3,797 2,087 2,087 4,174 1,906 2,074 3,981 37.7 9.9 IDF-NBFC 17,457 3,164 20,620 20,487 4,169 24,656 22,337 4,438 26,776 72.0 19.6 Infrastructure Finance 6,63,621 1,49,364 8,12,985 8,01,996 1,90,288 9,92,284 8,24,946 1,99,216 10,24,162 39.5 22.1 Company NBFC-MFI 35,912 15,237 51,149 43,212 22,627 65,839 41,866 19,535 61,401 -4.0 28.7 total 16,00,053 6,76,578 22,76,631 18,41,850 8,21,739 26,63,588 19,04,685 8,98,951 28,03,637 27.2 17.0 Category/ Asset Percentage At end-March 2018 At end-March 2019 At end-September 2019 Variation in Total Assets Loans and Other Total Loans and Other Total Loans and Other Total 2017-18 2018-19 Advances Assets Assets Advances Assets Assets Advances Assets Assets Investment and Credit 8,10,754 3,52,000 11,62,754 9,02,377 3,85,170 12,87,547 9,15,106 4,21,489 13,36,594 22.3 10.7 Company Core Investment Company 22,601 2,02,725 2,25,326 29,333 2,59,755 2,89,088 36,498 3,14,225 3,50,723 19.8 28.3 Factoring - NBFC 3,003 794 3,797 3,393 781 4,174 3,208 773 3,981 37.7 9.9 IDF-NBFC 15,175 5,445 20,620 18,843 5,813 24,656 20,364 6,412 26,776 72.0 19.6 Infrastructure Finance 7,60,240 52,745 8,12,985 8,91,659 1,00,625 9,92,284 9,25,588 98,575 10,24,162 39.5 22.1 Company NBFC-MFI 41,444 9,705 51,149 51,923 13,917 65,839 48,435 12,966 61,401 -4.0 28.7 total 16,53,217 6,23,414 22,76,631 18,97,527 7,66,061 26,63,588 19,49,198 8,54,439 28,03,637 27.2 17.0 Note: Data are provisional. source: Supervisory Returns, RBI. 102NoN-BaNkiNg FiNaNcial iNstitutioNs table VI.5: Major components of liabilities and assets of NBFcs-D by activity (Amount in ₹ crore) Items Asset Finance Companies Loan Companies Total NBFCs- D At end At end At end At end At end At end At end At end At end March March September March March September March March September 2018 2019 2019 2018 2019 2019 2018 2019 2019 1 2 3 4 5 6 7 8 9 10 Deposits 10,562 14,516 17,457 19,878 25,541 30,253 30,439 40,058 47,710 Borrowings 56,065 68,480 69,704 1,55,584 2,01,674 2,14,183 2,11,649 2,70,154 2,83,886 total liabilities/assets 86,983 1,06,081 1,11,581 2,54,177 3,15,810 3,42,425 3,41,159 4,21,892 4,54,006 Loans and Advances 77,431 93,862 96,050 2,31,811 2,85,211 3,08,963 3,09,242 3,79,072 4,05,013 Investments 4,367 5,854 8,009 7,592 18,039 16,733 11,958 23,893 24,742 Note: Data are provisional. source: Supervisory Returns, RBI. in auto loans in 2018-19 could be attributed table VI.6: sectoral credit Deployment by NBFcs to a slump in aggregate demand, exacerbated (Amount in ₹ crore) by postponement of vehicle purchases in Items At end- At end- At end- Percentage March March September Variation anticipation of the implementation of BS-VI 2018 2019 2019 2017-18 2018-19 norms, the sharp increase in insurance costs 1 2 3 4 5 6 in case of passenger vehicles and two wheelers, I. Gross Advances 19,62,459 22,76,600 23,54,211 31.8 16.0 and sizeable enhancement in permissible axle II. Food Credit 241 230 93 1856.9 -4.7 load for commercial vehicles. In the consumer III. Non-food Credit 19,62,217 22,76,370 23,54,118 31.7 16.0 durables segment, a decline in credit extended (1 to 5) 1. Agriculture and Allied 46,821 70,189 61,967 18.4 49.9 was observed, reflecting muted consumer Activities demand. NBFCs’ credit to commercial real 2. Industry 11,22,496 12,55,317 13,33,811 30.8 11.8 (2.1 to 2.4) 2.1 Micro and Small 64,455 54,597 59,713 32.0 -15.3 2.2 Medium 28,311 22,979 19,981 62.7 -18.8 2.3 Large 5,46,041 6,32,795 6,37,698 29.2 15.9 2.4 Others 4,83,689 5,44,946 6,16,420 31.1 12.7 3. Services 3,16,872 3,67,167 3,42,481 35.9 15.9 Of which, 3.1 Commercial Real 1,25,178 1,48,501 1,29,359 30.1 18.6 Estate 3.2 Retail Trade 27,057 28,976 27,850 31.2 7.1 4. Retail Loans 3,59,583 4,47,496 4,74,899 29.3 24.4 Of which, 4.1 Housing Loans 13,263 15,491 17,862 -16.4 16.8 4.2 Consumer 8,626 5,094 4,917 59.7 -40.9 Durables 4.3 Vehicle/Auto Loans 1,64,471 1,99,926 2,08,527 31.3 21.6 5. Other Non-food Credit 1,16,445 1,36,201 1,40,959 44.2 17.0 Note: Data are provisional. source: Supervisory Returns, RBI. 103Report on Trend and Progress of Banking in India 2018-19 estate decelerated in 2018-19, reflecting their grew at a robust pace. The share of CPs risk aversion in light of the slowdown in real declined marginally and CP issuances also estate sector despite expansion of bank credit decelerated in 2018-19 (Table VI.7). This to the sector. On the other hand, credit to happened even as the 3-month CP rates of NBFCs agriculture and allied activities saw a significant have been declining in the post IL&FS period increase in 2018-19, partly attributable to the barring occasional spikes (Chart VI.4). In spite policy measure of September 2018 enabling co- of the low borrowing costs, the attractiveness origination of loans for lending to priority sector of CPs as a source of borrowing for NBFCs by banks and NBFCs. diminished, owing to NBFCs preference for 2.4 Resource Mobilisation term-borrowings for better asset-liability management. VI.14 NBFCs-ND-SI mobilise around 70 per cent of their resources through bank borrowings VI.15 A slew of measures have been taken by and debentures. As investor confidence in the Government of India and the Reserve Bank the sector waned in 2018-19 and raising to alleviate the liquidity stress and strengthen money through debentures became costlier, confidence in the sector (Box VI.1). Amidst the reliance on bank borrowings increased. generalised risk aversion affecting various In fact, debenture issuances remained categories of investors, banks had emerged stagnant in 2018-19 whereas bank borrowings as a stable funding alternative for NBFCs in table VI.7: sources of Borrowings of NBFcs-ND-sI (Amount in ₹ crore) Items At end- At end- At end- Percentage Variation March 2018 March 2019 September 2019 2017-18 2018-19 1 2 3 4 5 6 1. Debentures 8,06,667 8,06,663 8,32,048 18.6 0.0 (50.4) (43.8) (43.7) 2. Bank borrowings 3,47,546 5,00,803 5,13,205 37.4 44.1 (21.7) (27.2) (26.9) 3. Borrowings from FIs 28,589 35,629 33,608 7.6 24.6 (1.8) (1.9) (1.8) 4. Inter-corporate borrowings 51,828 69,000 79,072 27.6 33.1 (3.2) (3.7) (4.2) 5. Commercial paper 1,29,569 1,36,357 1,04,477 10.3 5.2 (8.1) (7.4) (5.5) 6. Borrowings from Government 1,170 15,445 15,297 -3.1 1219.9 (0.1) (0.8) (0.8) 7. Subordinated debts 35,493 45,459 46,115 6.1 28.1 (2.2) (2.5) (2.4) 8. Other borrowings 1,99,190 2,32,493 2,80,864 24.1 16.7 (12.4) (12.6) (14.7) 9. Total borrowings 16,00,053 18,41,850 19,04,685 21.9 15.1 (100) (100) 100.0 Notes: 1. Data are provisional. 2. Figures in parentheses indicate share in total borrowings. source: Supervisory Returns, RBI. 104NoN-BaNkiNg FiNaNcial iNstitutioNs 2018-19. In 2019-20 (up to September), bank lending to NBFCs decelerated in light of defaults by and rating downgrades of a prominent HFC and a NBFC. However, share of bank borrowings in total borrowings of NBFCs-ND-SI increased to 26.9 per cent at end-September 2019 from 24.7 per cent a year ago (Chart VI.5). VI.16 While banks lend to NBFCs directly, they also subscribe to the debentures and CPs issued by NBFCs. However, given the prevailing risk-aversion, bank subscription to debentures and CPs issued by NBFCs-ND-SI has fallen in 2018-19 (Chart VI.6). In 2019-20 (up to September), direct lending by banks grew at 21.9 per cent. Box VI.1: Policy Measures for NBFc sector NBFCs are meshed into a web of inter-linkages with been removed, which would reduce the cost of raising banks and financial markets. Consequently, asset quality funds and deepen the corporate bond market. concerns relating to NBFCs constrain them to access • A Working Group constituted by the Reserve Bank liquidity with spill overs to financial markets. In the to review regulatory and supervisory framework for aftermath of the IL&FS episode in September 2018 sudden Core Investment Companies has submitted report and changes in sentiment, risk perceptions and asset liability recommended that the number of layers of CICs in a mismatches surfaced. In order to restore confidence and group should be restricted to two along with measures maintain stability, the Reserve Bank and the government to strengthen the governance practice by constituting responded with several measures as set out below: board level committees, appointing independent directors and a Group Risk Management Committee. • The Finance Bill 2019 through amendments in the RBI Act, 1934 conferred powers on the Reserve Bank • End-use restrictions relating to external commercial borrowings were relaxed with eligible borrowers to strengthen governance of NBFCs so as to protect allowed to raise ECBs from recognised lenders (except depositors’/creditors’ interest and secure financial foreign branches / overseas subsidiaries of Indian stability. The amendments empowered the Reserve banks) of (i) a minimum average maturity period of 10 Bank to remove the directors of NBFCs; supersede years for working capital purposes, general corporate their board and appoint administrators in order purposes and repayment of rupee loans availed to improve governance and protect the interests of domestically for purposes of on-lending (other than depositors and creditors; impose penalties in case of capital expenditure) by NBFCs. (ii) a minimum average non-compliance with various requirements; and to maturity period of 7 years for repayment of rupee resolve an NBFC by amalgamation, reconstruction or loans availed domestically for capital expenditure. splitting an NBFC into different units or institutions. • Banks were allowed to provide partial credit • Pursuant to Budget announcements, the government enhancement (PCE) to bonds issued by NBFCs-ND-SI amended the Companies (Share Capital and registered with the Reserve Bank and HFCs registered Debentures) Rules by removing Debenture Redemption with National Housing Bank, provided the tenor of the Reserve (DRR) requirement for NBFCs and HFCs. The bonds is not less than three years, proceeds from such requirement of a DRR of 25 per cent of the value of bonds shall only be utilised for refinancing existing outstanding debentures through public issues has debt of the NBFCs-ND-SI/HFCs. (Contd....) 105Report on Trend and Progress of Banking in India 2018-19 • In order to encourage NBFCs to securitise/assign or incremental loans will be given (This scheme their eligible assets, the Reserve Bank has relaxed will continue over 2018-19 and 2019-20 with SIDBI the minimum holding period (MHP) requirement till designated as the nodal agency for the purpose of December 31, 2019 for originating NBFCs in respect channelising of interest subvention to the various of loans of original maturity above 5 years, subject to lending institutions). In January 2019, a one-time certain conditions. restructuring of existing loans to MSMEs that were • All scheduled commercial banks (excluding Regional in default but ‘standard’ as on January 1, 2019 was Rural Banks and Small Finance Banks) were allowed to permitted without an asset classification downgrade. co-originate loans with NBFCs-ND-SI for the creation of eligible priority sector assets, facilitating sharing of • NBFCs-ND-SI in the category of ICCs would be eligible risks and rewards. to apply for grant of Authorised Dealer Category II • Asset Finance Companies, Loan Companies, and licence. Investment Companies were merged into a new • All government-owned NBFCs-ND-SI and government- category called NBFC- Investment and Credit Company owned NBFCs-D have been brought under the Reserve (NBFC-ICC), reducing the complexities arising from Bank’s on-site inspection framework and off-site multiple categories and also providing the NBFCs surveillance commencing from the inspection cycle greater flexibility in their operations. 2018-19. • Exposures to all NBFCs excluding CICs would be risk weighted as per the ratings assigned by the rating • The Ombudsman Scheme for NBFCs-D was extended agencies registered with the SEBI and accredited by the to eligible NBFCs-ND, with an asset size of ₹100 crore Reserve Bank in a manner similar to that of corporates or above with customer interface. under the existing regulations; exposure to CICs, rated • The Reserve Bank front-loaded the increase in the as well as unrated, will continue to be risk-weighted at facility to avail liquidity for liquidity coverage ratio 100 per cent. (FALLCR) of 0.5 per cent each of banks’ NDTL • Large NBFCs, with asset size of more than ₹5000 crore scheduled for August 1 and December 1, 2019, were required to appoint a functionally independent Chief Risk Officer (CRO) with clearly specified role and respectively, for incremental credit given to NBFCs and responsibilities, with involvement in the process of HFCs, over and above credit outstanding to NBFCs identification, measurement and mitigation of risks. and HFCs as on July 5, 2019. • The Reserve Bank has revised guidelines to raise other Measures announced in the Budget the standard of asset-liability management (ALM) • The Government of India has rolled out the scheme to framework of NBFCs including Core Investment provide a one-time partial credit guarantee for the first Companies (CICs). The revised guidelines stipulates loss up to 10 per cent to public sector banks (PSBs) for more granular maturity buckets and tolerance limits along with adoption of liquidity risk monitoring purchase of high-rated pooled assets amounting to ₹1 tools, including stress testing and diversification of lakh crore from financially sound NBFCs/HFCs. funding. The framework requires maintenance of a • FIIs/FPIs to be permitted to make investments in liquidity buffer in terms of a liquidity coverage ratio debt securities issued by Infrastructure Debt Fund– (LCR) starting at 50 per cent for all deposit taking Non-Bank Finance Companies (IDF-NBFCs) to be NBFCs and all non-deposit taking NBFCs (NBFCs- transferred/sold to any domestic investor within the ND) with an asset size of ₹10,000 crore and above and 30 per cent for all NBFCs-ND with an asset size of specified lock-in period. ₹5,000 crore and above but less than ₹ 10,000 crore, • NBFCs, not registered as NBFCs-Factor, will be from December 1, 2020 to reach 100 per cent on brought on the Trade Receivables Discounting December1, 2024. System (TReDS) platform, through amendment in • All NBFCs-ND-SI were advised to take appropriate the Factoring Regulation Act, 2011. All NBFCs would action as envisaged under the interest subvention directly participate on the TReDS platform. scheme for micro, small and medium enterprises (MSMEs) announced by Government of India on • Interest on bad or doubtful debts to be taxed in the year November 02, 2018, in which 2 per cent interest in which the interest is actually received by NBFCs-ND- subvention for all GST registered MSMEs, on fresh SI. 106NoN-BaNkiNg FiNaNcial iNstitutioNs 2.5 NBFCs-D: Deposits Their operating expenditures and interest payments grew significantly, as reflected in VI.17 Deposit mobilisation by NBFCs progressed at a robust pace of 31.6 per cent in their higher cost-to-income ratio. With growth 2018-19 even though the number of companies in expenditure outpacing income growth, net authorised to accept deposits came down from profit remained stagnant. For NBFCs-D on the 168 in 2017-18 to 88 in 2018-19 and 82 at end- other hand, profit grew robustly in 2018-19, on September 2019 (Chart VI.7). the back of fund-based income, with substantial 2.6 Financial Performance of NBFCs decrease in operating expenditure (Table VI.8, Appendix VI.4 and VI.5). VI.18 NBFCs’ profitability deteriorated in 2018- 19, attributable to the NBFCs-ND-SI segment. 107Report on Trend and Progress of Banking in India 2018-19 table VI.8: Financial Parameters of the NBFc sector (Amount in ₹ crore) 2017-18 2018-19 H1 :2019-20 Items NBFCs NBFCs- NBFCs-D NBFCs NBFCs- NBFCs-D NBFCs NBFCs- NBFCs-D ND-SI ND-SI ND-SI 1 2 3 4 5 6 7 8 9 10 A. Income 3,00,262 2,52,583 47,679 3,36,842 2,75,365 61,478 1,90,387 1,55,819 34,569 (20.1) (20.2) (19.5) (12.2) (9.0) (28.9) (11.1) (9.6) (18.8) B. Expenditure 2,40,222 2,03,129 37,092 2,68,968 2,24,288 44,680 1,52,380 1,26,536 25,844 (20.6) (21.7) (14.8) (12.0) (10.4) (20.5) (11.8) (10.0) (21.8) C. Net Profit 41,989 35,023 6,966 46,265 35,035 11,230 26,539 20,394 6,145 (29.8) (28.0) (39.4) (10.2) (0.0) (61.2) (7.1) (4.1) (18.4) D. Total Assets 26,17,790 22,76,631 3,41,159 30,85,480 26,63,588 4,21,892 32,57,642 28,03,637 4,54,006 (19.7) (19.0) (24.2) (17.9) (17.0) (23.7) (13.2) (13.1) (14.1) E. Financial Ratios (as per cent of Total Assets) (i) Income 11.5 11.1 14.0 10.9 10.3 14.6 5.8 5.6 7.6 (ii) Expenditure 9.2 8.9 10.9 8.7 8.4 10.6 4.7 4.5 5.7 (iii) Net Profit 1.6 1.5 2.0 1.5 1.3 2.7 0.8 0.7 1.4 F. Cost to Income 80.0 80.4 77.8 79.8 81.5 72.7 80.0 81.2 74.8 Ratio (Per cent) Notes: 1. Data are provisional. 2. Figures in parenthesis indicate Y-o-Y growth in per cent. source: Supervisory Returns, RBI. 2.7 Profitability 2.8 Asset Quality VI.19 The profitability indicators of NBFCs– VI.21 In 2018-19, NBFCs registered a return on assets (RoA), return on equity (RoE) deterioration of asset quality. While the gross and net interest margin (NIM) decreased in non-performing assets (GNPAs) ratio increased, 2018-19, reflecting the stress in the sector net non-performing assets (NNPAs) ratio edged (Chart VI.8). The overall decrease in profitability was driven by NBFCs- ND-SI for almost all categories. For NBFCs-MFI, profitability improved considerably (Chart VI.9). However, NBFCs-ND-SI posted an improvement in profitability indicators in the current financial year till September 2019, on the back of decline in other expenses. VI.20 In the case of NBFCs-D, there was improvement in RoA and RoE in 2018-19 on account of robust growth in business. Their NIM also improved, reflecting faster expansion in interest income than that of expenses (Chart VI.10). In 2019-20 so far (up to September), profitability indicators of NBFCs-D showed overall improvements. 108NoN-BaNkiNg FiNaNcial iNstitutioNs up marginally, reflecting sufficient provisioning category in 2018-19. In H1:2019-20, while the (Chart VI.11). In 2019-20 (up to September), proportion of sub-standard assets remained asset quality of the sector showed deterioration unchanged, an increase in proportion of with a slight increase in GNPA ratio. doubtful assets was observed in the period under review (Chart VI.12). VI.22 In terms of asset composition, the proportion of standard assets declined, part VI.23 In 2018-19, GNPA ratio of NBFCs-ND- of it being downgraded to the substandard SI deteriorated across all categories, except 109Report on Trend and Progress of Banking in India 2018-19 NBFCs-MFI, which reported significant assets. On the other hand, the NNPA ratio improvement in the GNPA ratio. The showed a deterioration, pointing to inadequate improvement in the GNPA ratio of the NBFCs- provisioning (Chart VI.15). MFI may be attributed to write offs of aging 2.9 Capital Adequacy loans (Chart VI.13a). The NNPA ratio for VI.26 NBFCs are generally well capitalised, NBFCs-ND-SI edged up marginally, reflecting with the system level capital to risk-weighted the maintenance of adequate buffers, especially assets ratio (CRAR) remaining well above the by MFIs and IFCs. On the other hand, there stipulated norm of 15 per cent, including in was a small increase in the NNPA ratio of ICCs (Chart VI.13b). In 2019-20 (up to September), the GNPA ratio of NBFCs-ND-SI exhibited an increase, while, the NNPA ratio registered no change. VI.24 The risk aversion among NBFCs-ND -SI coupled with their inability to mobilise adequate resources was reflected in the decrease in credit growth in spite of a fall in stressed assets ratio3. However, for the services sector, stressed assets rose, reflecting the built-up stress in the real estate segment, where NBFC exposures are significant. (Chart VI.14). VI.25 In the case of NBFCs-D, decline in the GNPA was aided by buoyant growth in 3 Stressed assets = NPAs+ restructured loans 110NoN-BaNkiNg FiNaNcial iNstitutioNs 2018-19 when they experienced an increase NBFCs-D registered a marginal improvement in non-performing assets (Chart VI.16). At the as growth in own funds outpaced expansion in end of September 2019, the sector maintained loans and advances (Chart VI.17a and b). At the capital position although there was a end-September 2019, CRAR of NBFCs-ND-SI deterioration in asset quality. and NBFCs-D remained above the stipulated VI.27 The CRAR for all categories of NBFCs-ND- norm despite divergent trends. SI except NBFCs-MFI and IDF-NBFCs, decreased 2.10 Exposure to Sensitive Sectors from 2017-18 levels, but it remained above the regulatory norm. For NBFCs-MFI, the CRAR VI.28 Capital market, real estate and improved with rising profitability. The CRAR for commodities have been categorised as sensitive 111Report on Trend and Progress of Banking in India 2018-19 sectors by the Reserve Bank as prices of these continued to remain well-capitalised above the assets are prone to fluctuations that may pose regulatory norm. Asset quality deteriorated a risk to financial stability. By the end of March across all NBFCs-ND-SI categories except that 2019, the capital market exposure of NBFCs of NBFCs-MFI. Profitability of NBFCs-ND-SI had decreased compared to March 2018, even waned while that of NBFCs-D registered an as real estate exposure edged down. As a result, improvement. an overall decrease in sensitive sector exposure 2.12 Housing Finance Companies (HFCs) was registered (Chart VI.18). VI.31 Housing finance companies (HFCs) are 2.11 Residuary Non-Banking Companies (RNBCs) specialised lending institutions which, along VI.29 RNBCs are primarily engaged in with SCBs, are the main providers of housing collecting deposits and deploying them in finance. The liquidity stress faced by the NBFC specific securities, as directed by the Reserve sector led to a sharp deceleration in the growth Bank. At present, there is only one RNBC, which of credit extended by HFCs. On the other hand, is not accepting any new deposits and is solely bank credit to the housing sector picked up engaged in repaying old deposits. and grew at a robust pace in 2018-19, partially making up for the slowdown in HFC credit VI.30 In sum, growth in the balance sheet of the (Chart VI.19). NBFC sector decelerated in 2018-19, attributable to muted credit growth in a risk- averse climate. VI.32 At the end of March 2019, there were On the liabilities side, while market borrowings 99 HFCs, of which only 18 were deposit taking slowed down, bank borrowings continued to entities. Non-government owned public limited support the NBFC sector. Deposit mobilisation companies dominate the segment with 94.4 per by NBFCs-D also showed an uptick. NBFCs cent of total assets and grew at 14.5 per cent 112NoN-BaNkiNg FiNaNcial iNstitutioNs table VI.9: ownership Pattern of HFcs table VI.10: consolidated Balance sheet of HFcs (At end-March) (At end- March) (Amount in ₹ crore) (Amount in ₹ crore) 2018 2019 2017 2018 2019 Percentage variation Items Type Number Assets Number Assets 2017-18 2018-19 of HFCs Size of HFCs Size 1 2 3 4 5 6 1 2 3 4 5 1. Share capital 9,352 30,548 34,360 226.6 12.5 A. Government 1 48,930 1 72,839 2. Reserves and surplus 94,283 1,25,922 1,54,807 33.6 22.9 Companies 3. Public deposits* 1,12,099 1,21,886 1,07,389 8.7 -11.9 B. Non-Government 90 11,10,837 98 12,72,300 4. Debentures 3,37,199 4,11,317 4,76,297 22.0 15.8 Companies (1+2) 5. Bank borrowings 1,77,877 2,35,958 3,27,500 32.7 38.8 1. Public Ltd. 72 11,09,324 78 12,69,634 Companies 6. Borrowings from 22,732 28,870 28,287 27.0 -2.0 NHB 2. Private Ltd. 18 1,513 20 2,667 Companies 7. Inter-corporate 2,008 4,013 35,627 99.9 787.8 borrowings total (a+B) 91 11,59,767 99 13,45,139 8. Commercial papers 68,587 98,324 80,646 43.4 -18.0 Note: 1. Data are provisional, 9. Borrowings from - - - - - 2. In 2019, asset size pertains to 96 HFCs only. Government source: NHB. 10. Subordinated debts 16,279 20,200 18,595 24.1 -7.9 11. Other borrowings 18,599 21,146 25,103 13.7 18.7 in 2018-19. The sole government HFC, with a 12. Current liabilities 24,673 32,052 14,003 29.9 -56.3 share of 5.4 per cent in total assets, grew by 13. Provisions 8,425 12,812 8,578 52.1 -33.0 14. Other** 17,101 18,410 40,397 7.7 119.4 an impressive 49 per cent in the same period 15. total liabilities/ 9,09,215 11,61,459 13,51,590 27.7 16.4 (Table VI.9). assets 16. Loans and advances 7,37,461 9,45,149 11,91,727 28.2 26.1 2.12.1 Balance Sheet 17. Hire purchase and 2 4 0 121.5 -94.6 lease assets 18. Investments 55,151 73,877 90,406 34.0 22.4 VI.33 The consolidated balance sheet of 19. Cash and bank 22,729 19,578 34,376 -13.9 75.6 HFCs showed reasonable expansion in 2018- balances 20. Other assets*** 93,871 1,22,851 35,082 30.9 -71.4 19, although considerably lower than in the *Public deposits given in the table include corporate deposits of a major previous year on account of moderation in HFC. credit and investment growth. On the liabilities **includes deferred tax liabilities and other liabilities. ***includes fixed assets, tangible and intangible assets, other assets and side, bank borrowings grew at a robust pace deferred tax asset. Notes: 1. Data are provisional, based on Ind AS as per Annual Reports of but borrowings via market instruments like reporting companies. 2. Information submitted by 84 out of 91 HFCs as on 31-03-2018. debentures and commercial paper decelerated 3. Information submitted by 83 out of 99 HFCs as on 31-03-2019. significantly, reflecting the waning of market VI.35 Public deposits are another important confidence (Table VI.10 and Chart VI.20). source of funding for HFCs. Deposit growth 2.12.2 Resource Profile of HFCs accelerated in 2018-19 (Chart VI.21); however, the share of deposits in total liabilities of HFCs VI.34 The sources of funds for HFCs has been steadily declining since 2014-15. The include public deposits, external commercial distribution of HFC deposits shows that almost borrowings, commercial papers and refinance support provided by NHB, though they primarily 95 per cent of the deposits is concentrated in rely on debentures and bank borrowings the 6-9 per cent interest rate bracket (Chart (Chart VI.20). The dependence of HFCs on VI.22). Furthermore, a maturity-wise analysis external sources grew as domestic markets shows that depositors’ preference is largely for remained risk averse. the maturity period between 24 to 48 months, 113Report on Trend and Progress of Banking in India 2018-19 though deposit mobilisation slowed for this slab was seen for the 12-24 months and 60 months in 2018-19. The acceleration in deposit growth maturities. 114NoN-BaNkiNg FiNaNcial iNstitutioNs 2.12.3 Financial Performance table VI.11: Financial Ratios of HFcs ( As per cent of Total Assets) VI.36 Income and expenditure of HFCs grew (At end-March) at a faster rate in 2018-19 than a year ago. Particulars 2015 2016 2017 2018 2019 However, expenditure grew at a relatively faster 1 2 3 4 5 6 pace, leading to an absolute decline in net profit total Income 10.8 10.5 10.0 9.0 10.0 (Chart VI.23). Income as a proportion to total 1. Fund Income 10.6 10.3 9.8 8.8 9.8 2. Fee Income 0.2 0.2 0.2 0.2 0.2 assets grew on account of increase in fund- total Expenditure 7.8 7.5 7.4 6.6 7.9 based earnings, while expenditure increased 1. Financial Expenditure 7.1 6.8 6.4 5.7 6.4 2. Operating 0.7 0.7 0.9 1.0 1.5 on account of higher financial and operating Expenditure expenses. As a result, there was a significant Tax Provision 0.9 0.9 0.8 0.7 0.7 jump in the cost to income ratio of HFCs in Cost to Income Ratio 72.6 71.6 73.6 73.6 79.1 (Total Exp./Total Income) 2018-19. Meanwhile, the RoA deteriorated due Return on Assets (RoA) 2.0 2.0 2.1 2.0 1.4 (PAT/Total Assets) to the decline in profits (Table VI.11). Note: Data are provisional. 2.12.4 Soundness Indicators source: NHB. over to the domain of housing finance, VI.37 GNPA and NNPA ratios increased in leading to a deceleration in credit extended by 2017-18. While the GNPA ratio stabilised in HFCs and adversely affecting their profitability. 2018-19, the NNPA ratio crept up further during Since August 2019, HFCs have been brought the year, reflecting a decrease in provisions under the regulatory purview of the Reserve maintained by HFCs (Chart VI.24). However Bank, which has taken swift measures to address compared to other NBFCs, HFCs presented governance concerns and payment defaults by a better asset quality. prominent HFC, thereby facilitating resolution VI.38 To sum up, in 2018-19, the liquidity of stress in the company and securing investors’ stress faced by the NBFC sector also spilled interest. 115Report on Trend and Progress of Banking in India 2018-19 3. all India Financial Institutions table VI.12: Financial assistance sanctioned and Disbursed by aIFIs VI.39 The Reserve Bank regulates and (Amount in ₹ crore) supervises four all India financial institutions Category 2017-18 2018-19 (AIFIs), viz., Export Import Bank of India (EXIM S D S D Bank), National Bank for Agriculture and Rural 1 2 3 4 5 Development (NABARD), Small Industries 1. SIDBI 59,452 75,386 59,046 76,011 Development Bank of India (SIDBI) and the 2, NABARD 2,00,847 2,23,754 3,03,870 2,81,947 3. NHB 44,934 24,921 32,753 25,177 National Housing Bank (NHB). Consequent 4. EXIM BANK 97,826 68,535 38,001 36,660 to the Reserve Bank’s divestment of its entire total 4,03,059 3,92,595 4,33,670 4,19,795 shareholding in NHB on March 19, 2019, it S: Sanction D: Disbursement has become an entirely government-owned source: SIDBI, NABARD, NHB and EXIM Bank. institution (Chart VI.25). under Pradhan Mantri Awas Yojana Gramin 3.1 AIFIs’ Operations4 (PMAY-G), Swachh Bharat Mission Gramin VI.40 Financial assistance sanctioned by AIFIs (SBM-G), Dairy Processing and Infrastructure during 2018-19 increased by 7.6 per cent, Development Fund (DIDF) and Green Climate whereas disbursement growth rate recorded a Fund (GCF) during the year (Table VI.12 and deceleration at 6.9 per cent in 2018-19 on the Appendix Table VI.6). top of 21.1 per cent in 2017-18. Barring EXIM 3.2 Balance Sheet Bank, disbursement by other AIFIs expanded VI.41 The AIFIs’ consolidated balance sheet grew during the year, with the largest expansion at a faster pace in 2018-19 on the back of robust recorded by NABARD by augmenting its line of expansion in loans and advances (Table VI.13). credit under refinance and direct loans. Further, Loans and advances constituted the largest NABARD has also sanctioned and disbursed share of assets followed by investments. On the liabilities side, AIFIs’ reliance on borrowings accelerated in order to finance enhanced credit disbursements and investment activities, while their borrowings through bonds and debentures moderated. Borrowings by EXIM Bank declined in 2018-19 due to erosion in its net owned fund (NOF) in 2017-18, resulting in the EXIM Bank’s aggregate borrowings to NOF ratio exceeding the stipulated ceiling. With government’s infusion of fresh capital on March 22, 2019, the EXIM bank’s NOF has improved. VI.42 NHB accounted for more than half of the total resources raised in 2018-19, followed by NABARD and SIDBI, while the share of the EXIM Bank constituted the least. AIFIs largely rely on short-term funds for financing their 4 The financial year for EXIM Bank, SIDBI and NABARD runs from April to March and for NHB, it is from July to June. 116NoN-BaNkiNg FiNaNcial iNstitutioNs table VI.13: aIFIs’ Balance sheet table VI.15: Resources Raised by (Amount in ₹ crore) aIFIs from the Money Market (At end-March)# Items 2018 2019 Percentage Variation (Amount in ₹ crore) 1 2 3 4 Instrument 2017-18 2018-19 liabilities 1 2 3 1. Capital 19,921 26,921 35.1 a. total 1,17,049 1,36,577 (2.8) (3.2) i) Term Deposits 3,931 5,420 2. Reserves 51,076 57,042 11.7 ii) Term Money 3,228 4,067 (7.3) (6.8) iii) Inter-corporate Deposits 7,850 7,431 3. Bonds and Debentures 1,85,011 2,09,059 13.0 (26.3) (25.1) iv) Certificate of Deposits 18,448 32,436 4. Deposits 2,91,301 3,36,914 15.7 v) Commercial Paper 83,593 69,363 (41.5) (40.4) Memo Items; 5. Borrowings 1,00,547 1,49,319 48.5 B. umbrella limit 66,925 1,03,887 (14.3) (17.9) c. utilisation of umbrella limit* 175 131 6. Other Liabilities 54,447 54,300 -0.3 (A as percentage of B) (7.8) (6.5) #: End-June for NHB. *: Resources raised under A. total liabilities/assets 7,02,302 8,33,554 18.7 Note: AIFIs are allowed to mobilise resources within the overall assets ‘umbrella limit’, which is linked to the net owned funds (NOF) of the 1. Cash and Bank Balances 23,740 23,437 -1.3 FI concerned as per its latest audited balance sheet. The umbrella (3.4) (2.8) limit is applicable for five instruments– term deposits; term money 2. Investments 49,529 61,256 23.7 borrowings; certificates of deposits (CDs); commercial paper (CPs); (7.1) (7.3) and inter-corporate deposits. source: SIDBI, NABARD, NHB and EXIM Bank. 3. Loans and Advances 6,09,741 7,29,226 19.6 (86.8) (87.5) VI.43 Resource mobilisation by the AIFIs 4. Other Assets 15,542 17,882 15.1 (2.2) (2.1) through money market instruments like Note: Figures in parentheses are percentages of total liabilities/assets. certificate of deposits, term deposits and term source: Audited OSMOS returns. money increased during 2018-19. Issuances activities, particularly NHB which raises over of commercial paper declined across all AIFIs. 97 per cent of its resources via this medium. The utilisation of borrowing limits remained However, in the case of NABARD, there was a high (Table VI.15). The NABARD and the SIDBI perceptible shift towards long-term funds, while together constituted around 80 per cent of SIDBI’s reliance on short term funds increased resources raised by the AIFIs from the money (Table VI.14). market. table VI.14: Resources Mobilised by 3.3 Sources and Uses of Funds aIFIs in 2018-19 (Amount in ₹ crore) VI.44 Funds raised and deployed by the AIFIs Institution Total Resources Raised Total grew by 13.4 per cent in 2018-19 compared with Outstand- Long- Short- Foreign Total ing a doubling of resources raised in the previous Term Term Currency 1 2 3 4 5 6 year. Repayment of past borrowings constituted 1. SIDBI 53,670 47,865 205 1,01,740 1,31,622 64.3 per cent of the resources mobilised which 2. NABARD 84,419 1,91,259 344 2,76,022 1,28,493 were essentially through internal sources 3. NHB 13,487 5,37,138 905 5,51,530 63,500 4. EXIM BANK - 8,487 7,054 15,541 92,304 (Table VI.16). total 1,51,576 7,84,750 8,508 9,44,833 4,15,919 3.4 Maturity and Cost of Borrowings and Note: Long-term rupee resources comprise borrowings by way of bonds/ debentures; while short-term resources comprise CPs, term deposits, Lending ICDs, CDs and borrowings from the term money market . Foreign currency resources largely comprise of borrowings by way of bonds, etc. in the VI.45 The weighted average cost (WAC) of international market. source: SIDBI, NABARD, NHB and EXIM Bank. rupee resources raised by NABARD and SIDBI 117Report on Trend and Progress of Banking in India 2018-19 table VI.16: Pattern of aIFIs’ sources and Deployment of Funds (Amount in ₹ crore) Items 2017-18 2018-19 Percentage Variation 1 2 3 4 a. sources of funds (i) Internal 12,88,774 31,32,555 143.1 (38.2) (82.0) (ii) External 19,48,028 5,99,920 -69.2 (57.8) (15.7) (iii) Others* 1,32,572 87,930 -33.7 (3.9) (2.3) total (i+ii+iii) 33,69,374 38,20,405 13.4 (100) (100) B. Deployment of Funds (i) Fresh Deployment 6,85,147 7,77,016 13.4 (20.3) (20.3) (ii) Repayment of Past 20,98,207 24,58,210 17.2 Borrowings (62.3) (64.3) (iii) Other Deployment 5,86,020 5,85,179 -0.1 (17.4) (15.3) Of which: Interest Payments 32,248 42,007 30.3 (Chart VI.26b). Thus the AIFIs elongated their (1.0) (1.1) average maturity period accompanied by rising total (i+ii+iii) 33,69,374 38,20,405 13.4 (100) (100) long-term costs. *: Includes cash and balances with banks and the RBI. Note: Figures in parentheses are percentages of total. VI.46 The long-term prime lending rate (PLR) source: SIDBI, NABARD, NHB and EXIM Bank. in 2018-19 marginally increased for EXIM Bank increased in 2018-19, while the other two and NHB and decreased for SIDBI, reflecting financial institutions were able to borrow at that the monetary easing cycle did not lead to similar rates (Chart VI.26a). The weighted average maturity (WAM) of rupee resources a reduction in the cost of funds for the former increased for all the institutions except NHB institutions (Chart VI.27). 118NoN-BaNkiNg FiNaNcial iNstitutioNs 3.5 Financial Performance table VI.17 Financial Performance of aIFIs (Amount in ₹ crore) VI.47 AIFIs posted robust growth in income Percentage during 2018-19, driven by substantial increase Variation Items 2017-18 2018-19 in interest income. However, expenditure 2017-18 2018-19 expanded at a faster pace, primarily on account 1 2 3 4 5 of interest expenses. Operating expenses a) Income 44,195 53,957 4.2 22.1 decreased due to a reduction in the wage bill 42,988 52,699 5.1 22.6 a) Interest Income (97.3) (97.7) and as a result, net profits of AIFIs posted a 1,207 1,258 -19.6 4.2 b) Non Interest Income robust growth during 2018-19 (Table VI.17). (2.7) (2.3) B) Expenditure 34,468 42,109 6.3 22.2 All financial ratios, except operating profit 31,646 39,321 6.2 24.3 a) Interest Expenditure increased or remained unchanged in 2018-19 (91.8) (93.4) 2,822 2,789 7.3 -1.2 as compared to previous year (Chart VI.28). b) Operating Expenses (8.2) (6.6) of which Wage Bill 2,068 1,987 -22.2 -3.9 VI.48 During 2018-19, there was an increase in c) Provisions for taxation 503 2,283 -62.4 354.2 net profit per employee for all AIFIs on account D) Profit of increase in interest income. This increase Operating Profit (PBT) 8,882 10,294 29.0 15.9 Net Profit (PAT) 2,752 6,683 -52.8 142.9 was more prominent for EXIM Bank. Except Note: Figures in parentheses are percentages of total income/ the SIDBI, the operating profits of all the AIFIs expenditure. improved, indicating efficient utilisation of source: Audited OSMOS returns. working capital (Table VI.18). 3.6 Soundness Indicators VI.49 The return on assets (RoA) for all VI.50 The total amount of the AIFIs’ net NPAs AIFI’s remained stagnant or moderated in as well as their net NPA ratio declined during 2018-19, except for EXIM Bank, which posted 2018-19. There was substantial decrease in a turnaround from negative RoA to marginally NPAs of EXIM Bank but SIDBI reported a positive one. However, the CRAR for all AIFIs marginal increase in its NPAs (Chart VI.30). remained higher than the stipulated norm of 9 The sharp decline in net NPA of EXIM bank was per cent (Chart VI.29). partly reflective of higher provisioning. 119Report on Trend and Progress of Banking in India 2018-19 table VI.18: aIFIs’ select Financial Parameters Institution Interest Income/ Non-interest Income/ Operating Profit/ Average Net Profit per Average Working Funds Average Working Funds Working Funds Employee (per cent) (per cent) (per cent) (₹ lakh) 2018 2019 2018 2019 2018 2019 2018 2019 1 2 3 4 5 6 7 8 9 EXIM 7.2 7.8 0.5 0.3 1.7 1.9 -860 23 NABARD 6.5 6.6 0.1 0.0 1.2 1.2 74 89 NHB 7.1 7.1 0.1 0.4 2.0 2.6 648 672 SIDBI 6.9 6.9 0.5 0.3 2.2 1.8 126 176 source: SIDBI, NABARD, NHB and EXIM Bank. VI.51 AIFIs experienced turnaround in asset 4.1 Operations and Performance of PDs quality as some portion of sub-standard VI.53 PDs are mandated to underwrite assets moved to standard assets, whereas a issuances of government dated securities and portion of assets experienced aging of NPAs as sub- participate in primary auctions. They are also standard assets moved to the doubtful category mandated to achieve a minimum success ratio in 2018-19 (Chart VI.31). This was particularly (bids accepted as a proportion to bidding true for EXIM Bank, which accounted for around commitment) of 40 per cent in primary auctions 95 per cent of the doubtful assets of AIFIs. of T-bills and Cash Management Bills (CMBs), assessed on a half-yearly basis. In 2018-19, 4. Primary Dealers all PDs outperformed their minimum bidding VI.52 As on September 30, 2019, there were commitments. They achieved a share of 71.4 per 21 primary dealers (PDs) – 14 run as bank cent in total issuance of T-Bills and CMBs during departments and 7 standalone PDs (SPDs)- the year, higher than 66.5 per cent achieved in registered as NBFCs under Section 45-IA of the the previous year. In H1: 2019-20, PDs achieved RBI Act, 1934. a share of 73.2 per cent in total issuance of 120NoN-BaNkiNg FiNaNcial iNstitutioNs table VI.19: Performance of PDs in the Primary Market (Amount in ₹ crore) Items 2017-18 2018-19 H1:2019-20 1 2 3 4 treasury Bills and cMBs (a) Bidding commitment 10,13,580 9,99,551 6,00,229 (b) Actual bids submitted 49,35,246 37,32,398 21,18,241 (c) Bid to cover ratio 4.9 3.7 3.5 (d) Bids accepted 5,77,232 6,70,849 3,79,138 (e) Success ratio (d) / (a) 56.9 67.1 63.2 (in Per cent) central government Dated securities (f) Notified amount 5,88,000 5,71,000 4,42,000 (g) Actual bids submitted 13,96,471 12,60,201 9,16,590 (h) Bid to cover ratio 2.4 2.2 2.1 (i) Bids of PDs accepted 3,15,641 2,88,748 1,97,967 (j) Share of PDs (i)/(f) ( in 53.7 50.6 44.8 per cent) source: Returns filed by PDs. T-Bills and CMBs. The government issued dated underwriting commission paid to PDs during securities with face value of ₹5,71,000 crore the same period amounted to ₹24.4 crore, which through auctions, as against ₹5,88,000 crore works out to 0.55p/₹100. issued during the previous year. PDs’ share of VI.55 In the secondary market, all PDs allotment in the primary issuances of dated individually achieved the required minimum securities reduced to 50.6 per cent in 2018-19, annual total turnover ratio (both in outright compared to 53.7 per cent in the previous year. and repo transactions). The minimum turnover During H1: 2019-20, against total issuance of ₹4,42,000 crore, allotment to PDs stood at 44.8 per cent as against 46.9 per cent during H1: 2018-19 (Table VI.19). VI.54 Partial devolvement on PDs took place on seven instances amounting to ₹14,600 crore during 2018-19 as against three instances for ₹10,297 crore in 2017-18. The underwriting commission paid to PDs during 2018-19 was considerably higher at ₹139.9 crore when compared to ₹61.3 crore in the previous year, which can be attributed to higher devolvement during the year. As a result, the average rate of underwriting commission rose in 2018-19 (Chart VI.32). The total devolvement during H1: 2019-20 aggregated to ₹3,606 crore. The 121Report on Trend and Progress of Banking in India 2018-19 targets combining repo transactions and 4.3 Sources and Application of SPDs’ Funds outright transactions for G-secs is set at 5 times VI.57 Funds mobilised by SPDs rose the average month-end stock of securities held, moderately on a year-on-year basis in 2018- of which the minimum ratio to be achieved 19. Borrowings remained the major source of through outright transactions exclusively is 3 SPDs’ funding, accounting for 89.7 per cent times. For T-Bills, the corresponding minimum of the total sources of funds. The quantum of targets are 10 times and 6 times, respectively. unsecured loans declined marginally, while secured borrowing increased. For the period 4.2 Performance of Standalone PDs H1:2019-20 also, borrowings continued remain VI.56 In the secondary market, the turnover the major source of funds amounting to 90 per of SPDs decreased in the outright segment cent of the total funding. Secured loans was the major component of total borrowings during while it increased in the repo segment the period (Table VI.21). during 2018-19. The SPDs’ share in total market turnover grew marginally on VI.58 The holdings in HTM by the SPDs account of their improved share in market decreased steeply in 2018-19 due to adoption of Indian Accounting Standard (Ind-AS) in repo turnover. For the period H1: 2019-20, the place of Indian Generally Accepted Accounting share of SPDs in the secondary market in the Principles (IGAAP). The largest share of SPDs outright and repo segment was 15.0 per cent funds are held in the form of current assets and 24.0 per cent, respectively. Total market which increased during the year (Table VI.21). share across both segments was 19.3 per cent table VI.21: sources and applications of (Table VI.20). sPDs’ Funds (Amount in ₹ crore) table VI.20: Performance of sPDs in the g-secs secondary Market Items 2017-18 2018-19 H1:2019-20 Percentage Variation (Amount in ₹ crore) 2018-19 over 2017-18 Items 2017-18 2018-19 H1:2019-20 1 2 3 4 5 1 2 3 4 sources of Funds 47,870 55,133 68,155 15.2 outright 1. Capital 1,447 1,609 1,609 11.2 Turnover of SPDs 37,34,289 27,74,591 22,09,109 2. Reserves and surplus 3,673 4,052 4,679 10.3 Market turnover 1,13,99,881 93,55,007 1,46,85,037 3. Loans (a+b) 42,749 49,472 61,867 15.7 Share of SPDs (Per cent) 32.8 29.7 15.0 (a) Secured 31,581 38,696 49,108 22.5 Repo (b) Unsecured 11,169 10,776 12,759 -3.5 Turnover of SPDs 40,45,407 47,57,405 32,00,951 application of Funds 47,870 55,133 68,155 15.2 Market turnover 1,27,80,289 1,35,66,142 1,33,47,579 1. Fixed assets 31 30 46 -2.6 Share of SPDs (Per cent) 31.7 35.1 24.0 2. HTM investments 2,099 454 581 -78.4 total (outright + Repo) (a+b) Turnover of SPDs 77,79,696 75,31,996 54,10,060 (a) Government 2,091 447 444 -78.6 Market turnover 2,41,80,170 2,29,21,149 2,80,32,615 securities Share of SPDs (Per cent) 32.2 32.9 19.3 (b) Others 7 7 136 0.0 3. Current assets 46,835 55,608 68,418 18.7 Notes: 1. Total turnover under outright trades is total of buy and sell. 4. Loans and advances 848 640 2,619 -24.6 2. Total turnover for standalone PDs for outright and repo trades includes both sides quantity that is, buy+sell. 5. Current liabilities 1,934 1,601 3,522 -17.2 3. In case of repo, only 1st leg is considered for SPDs’ turnover. 6. Deferred tax -6.6 7.5 17.9 -214.1 4. Total market turnover includes standalone PDs turnover for 7. Others -1.5 -5.6 -4.7 270.9 both outright and repo volume. source: Clearing Corporation of India Limited. source: Returns submitted by PDs. 122NoN-BaNkiNg FiNaNcial iNstitutioNs table VI.22: Financial Performance of sPDs (Amount in ₹ crore) Items 2017-18 2018-19 H1: Variation 2018-19 2019-20 over 2017-18 Amount Per cent 1 2 3 4 5 6 a. Income (i to iii) 3,042 3,518 2,924 476 15.6 (i) Interest and discount 2,966 3,799 2,282 833 28.1 (ii) Trading profits -2 -344 619 -342 - (iii) Other income 78 63 24 -15 -19.2 B. Expenses (i to ii) 2,590 3,402 1,898 812 31.4 (i) Interest 2,306 3,038 1,668 732 31.7 (ii) Other expenses 285 363 230 78 27.4 including establishment and administrative costs C. Profit before tax 452 444 874 -8 -1.8 D. Profit after tax 292 304 667 12 4.1 Note: Figures may not add up due to rounding-off. source: Returns submitted by PDs. 4.4 Financial Performance of SPDs increased in 2018-19. Pulled down by decline in VI.59 SPDs’ profit after tax (PAT) increased trading profits, however, the cost-income ratio marginally in 2018-19 over a year ago of these SPDs deteriorated sharply in relation (Appendix Table VI.7). A significant increase was observed in the interest and discount to the preceding year. During H1: 2019-20 income due to increased holdings of treasury however, trading profits rose sharply due to bills and G-secs, whereas trading profits were favourable market conditions for the SPDs, pulled down in a volatile yield scenario during thereby resulting in improved cost to income the year. Overall, expenditure outpaced income ratio (Table VI.23). due to an increase in interest expenses. During VI.61 The combined CRAR for all SPDs H1: 2019-20, PAT increased to ₹ 667 crore dipped marginally in 2018-19, though (Table VI.22). remained comfortably above the mandated VI.60 Corresponding to the marginal increase 15 per cent. Capital buffer position of SPDs in PAT, SPDs’ return on net worth also improved in H1: 2019-20 (Chart VI.33 and table VI.23: sPDs’ Financial Indicators Appendix Table VI.8). (Amount in ₹ crore) 5. overall assessment Indicators 2017-18 2018-19 H1:2019-20 1 2 3 4 VI.62 Although the balance sheet size of the (i) Net profit 292 304 667 NBFCs constitutes 18.6 per cent of SCBs, (ii) Average assets 48,206 54,487 67,686 (iii) Return on average assets 0.6 0.6 1.0 it has emerged as an important pillar of the (Per cent) (iv) Return on net worth 5.7 5.8 12.3 Indian financial system. The sector, which (Per cent) had witnessed a robust expansion in 2017-18, (v) Cost to income ratio 37.7 75.7 18.3 (Per cent) experienced headwinds in 2018-19 and 2019- source: Returns submitted by PDs. 20 (up to September) as market sentiments 123Report on Trend and Progress of Banking in India 2018-19 turned negative post-IL&FS event and recent encouraging PSBs to acquire high-rated pooled defaults by some companies. The Reserve assets of NBFCs. Furthermore, the Finance Bank and the government have taken several Bill 2019 through amendments in the RBI measures to restore stability in the NBFC space. Act, 1934 conferred powers on the Reserve The Reserve Bank took measures to augment Bank to bolster governance of NBFCs. These systemic liquidity, buttress standards of asset- measures are geared toward allaying investors’ liability management framework, ease flow of apprehensions and aiding NBFCs in performing funds by relaxing ECB guidelines and strengthen their role better. Going forward, the Reserve governance and risk-management structures. bank will continue to maintain constant vigil The government provided additional support over NBFCs and take necessary steps to ensure through the partial credit guarantee scheme, overall financial stability. 124Appendix TAbles Appendix Table IV.1: Indian Banking Sector at a Glance (Amount in ₹ crore) Sr. Items Amount Outstanding / Per cent Variation No Ratio / Number (At end-March) 2018 2019* 2017-18 2018-19* 1 2 3 4 5 6 1 Balance Sheet Operations 1.1 Total Liabilities/assets 1,52,55,033 1,66,01,224 7.6 8.8 1.2 Deposits 1,17,94,005 1,28,87,262 6.1 9.3 1.3 Borrowings 16,82,309 17,09,670 31.4 1.6 1.4 Loans and advances 87,45,997 97,09,829 7.8 11.0 1.5 Investments 41,26,237 43,20,270 13.0 4.7 1.6 Off-balance sheet exposure (as percentage of on-balance sheet liabilities) 113.5 122.7 - - 1.7 Total consolidated international claims 6,38,094 7,42,338 -11.0 16.3 2 Profitability 2.1 Net profit -32,438 -23,397 - - 2.2 Return on Asset (RoA) (Per cent) -0.15 -0.09 - - 2.3 Return on Equity (RoE) (Per cent) -2.81 -1.85 - - 2.4 Net Interest Margin (NIM) (Per cent) 2.5 2.7 - - 3 Capital Adequacy 3.1 Capital to risk weighted assets ratio (CRAR) @** 13.8 14.3 - - 3.2 Tier I capital (as percentage of total capital) @** 84.3 85.5 - - 3.3 CRAR (tier I) (Per cent) @** 11.7 12.2 - - 4 Asset Quality 4.1 Gross NPAs 10,39,679 9,36,474 31.3 -9.9 4.2 Net NPAs 5,20,838 3,55,076 20.3 -31.8 4.3 Gross NPA ratio (Gross NPAs as percentage of gross advances) 11.2 9.1 - - 4.4 Net NPA ratio (Net NPAs as percentage of net advances) 6.0 3.7 - - 4.5 Provision Coverage Ratio (Per cent)** 48.3 60.5 - - 4.6 Slippage ratio (Per cent)** 7.6 4.0 - - 5 Sectoral Deployment of Bank Credit 5.1 Gross bank credit** 83,99,196 95,19,554 10.4 13.3 5.2 Agriculture** 11,93,400 13,25,824 7.2 11.1 5.3 Industry** 31,29,512 33,04,940 6.2 5.6 5.4 Services** 19,98,817 24,77,517 10.6 23.9 5.5 Retail loans** 19,42,501 23,02,173 20.5 18.5 6 Technological Development# 6.1 Total number of credit cards (in lakhs) 375 471 25.6 25.6 6.2 Total number of debit cards (in lakhs) 8,611 8,582 11.6 -0.3 6.3 Number of ATMs 2,07,052 2,02,072 -0.6 -2.4 7 Customer Services 7.1 Total number of complaints received during the year 1,63,590 1,95,901 24.9 19.8 7.2 Total number of complaints addressed 1,74,805 2,02,083 28.1 15.6 7.3 Percentage of complaints addressed 96.5 94.0 - - 8 Financial Inclusion 8.1 Credit-deposit ratio (Per cent) 74.2 75.3 - - 8.2 Number of new bank branches opened 3,938 4,518 -26.5 14.7 8.3 Number of banking outlets in villages (Total) 5,69,547 5,97,155 -4.8 4.8 Notes : 1. * : Provisional. 2. ** : Based on off-site returns (Domestic Operations). @Figures are as per the Basel III framework. 3. Percentage variation could be slightly different as figures have been rounded off to lakh/crore. 4. # : Data on credit cards, debit cards and ATMs for March 2019 include 8 scheduled SFBs as at end-March 2019. 125Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.2: Off-Balance Sheet Exposure of Scheduled Commercial Banks in India (Amount in ₹ crore) Item Public Sector Private Sector Foreign Banks Small Finance Scheduled Banks Banks Banks Commercial Banks 2018-19 Percentage 2018-19 Percentage 2018-19 Percentage 2018-19 Percentage 2018-19 Percentage Variation Variation Variation Variation Variation 1 2 3 4 5 6 7 8 9 10 11 1. Forward exchange 26,47,228 -3.0 53,53,564 32.5 1,03,08,250 21.8 0 - 1,83,09,043 20.2 contracts@ (26.0) (101.0) (975.4) (0.0) (110.3) 2. Guarantees given 5,34,176 -14.7 4,48,420 16.8 1,59,935 15.7 236 40.4 11,42,768 -0.5 (5.3) (8.5) (15.1) (0.3) (6.9) 3. Acceptances, 5,21,828 -4.2 3,10,809 7.3 92,888 4.8 476 4.4 9,26,000 0.3 endorsements, etc. (5.1) (5.9) (8.8) (0.6) (5.6) Contingent 37,03,232 -5.0 61,12,793 29.6 1,05,61,073 21.5 713 14.1 2,03,77,811 17.7 Liabilities (36.4) (115.4) (999.3) (0.9) (122.7) - : Nil/Negligible. @ : Figures are as per Basel III framework. Notes: 1. Figures in brackets are percentages to total liabilities of the concerned bank-group. 2. @: includes all derivative products (including interest rate swaps) as admissible. 3. Due to rounding off of figures, the constituent items may not add up to totals. Source: Annual accounts of respective banks. 126Appendix TAbles Appendix Table IV.3: Kisan Credit Card Scheme: State-wise Progress (Continued) (As at end-March 2019) (Amount in ₹ Crore and number of operative KCCs issued in ‘000) Sr. State/UT Co-operative Banks Regional Rural Banks No. Number of Operative Amount outstanding Number of Operative Amount outstanding KCCs under Operative KCCs KCCs under Operative KCCs 2018 2019 2018 2019 2018 2019 2018 2019 1 2 3 4 5 6 7 8 9 10 Northern Region 5,709 5,274 29,674.3 27,151.2 1,107 1,177 24,613.1 27,410.9 1 Haryana 1,196 1,193 9,335.4 10,014.4 241 257 6,157.7 6,866.6 2 Himachal Pradesh 92 96 1,329.9 1,477.8 41 48 524.2 614.6 3 Jammu & Kashmir 11 10 58.9 58.0 65 68 607.9 669.6 4 New Delhi #$ 1 1 12.5 10.9 - - - - 5 Punjab 953 969 7,172.8 6,421.1 138 144 4,591.3 4,833.0 6 Rajasthan 3,455 3,005 11,764.7 9,169.0 623 661 12,732.0 14,427.1 7 Chandigarh #$ - - - - - - - - North-Eastern Region 114 77 137.5 139.1 442 427 1,404.6 1,424.7 8 Assam 3 1 11.3 10.9 284 279 1,036.4 1,053.8 9 Arunachal Pradesh # 1 1 2.0 4.0 3 3 13.2 26.4 10 Meghalaya # 17 16 31.4 32.0 19 21 98.5 110.6 11 Mizoram # 1 1 6.8 9.0 13 11 70.3 58.6 12 Manipur # - 1 0.7 1.6 8 9 26.0 28.0 13 Nagaland # 4 3 13.6 15.9 1 1 1.7 1.5 14 Tripura # 79 45 60.7 57.7 113 104 158.5 145.8 15 Sikkim #$ 8 9 11.1 8.0 - - - - Western Region 4,773 4,184 27,793.8 25,825.3 653 801 6,705.4 8,758.7 16 Gujarat 1,067 1,005 8,559.0 9,380.8 305 329 4,289.3 5,081.0 17 Maharashtra 3,704 3,177 19,214.9 16,425.9 348 472 2,416.0 3,677.7 18 Goa $ 2 2 19.9 18.5 - - - - 19 Daman and Diu @#$ - - - - - - - - 20 Dadra and Nagar Haveli @$ - - - - - - - - Central Region 11,501 9,052 23,162.3 26,383.6 3,992 4,115 37,918.7 43,561.4 21 Uttar Pradesh 4,468 3,202 5,664.0 6,354.6 3,266 3,436 29,677.5 35,501.0 22 Uttarakhand 269 234 971.2 987.1 47 43 300.6 306.1 23 Madhya Pradesh 5,774 4,614 14,970.8 16,758.6 501 467 6,910.0 6,896.2 24 Chhattisgarh 990 1,001 1,556.3 2,283.4 179 168 1,030.7 858.1 Southern Region 6,821 7,216 30,707.6 33,609.9 3,356 3,162 29,522.4 31,110.8 25 Karnataka 2,447 2,509 11,663.8 11,515.5 719 631 9,134.7 9,130.3 26 Kerala 629 836 2,989.8 3,274.3 149 146 1,274.7 1,309.9 27 Andhra Pradesh ** 1,545 1,563 7,334.3 8,146.3 843 1,015 8,132.0 10,152.4 28 Tamil Nadu 1,364 1,479 5,681.9 7,203.5 432 35 2,760.5 279.1 29 Telangana 830 822 3,033.6 3,462.0 1,211 1,333 8,209.7 10,226.5 30 Lakshdweep @$ - - - - - - - - 31 Puducherry # 6 6 4.2 8.4 1 1 10.9 12.6 Eastern Region 4,578 4,612 13,009.3 14,326.9 2,643 2,572 13,199.7 14,805.2 32 Odisha 2,873 2,795 9,090.2 10,573.3 581 490 2,470.8 2,380.9 33 West Bengal 1,540 1,538 3,543.7 3,276.7 332 324 1,356.9 1,515.1 34 Andaman and Nicobar Island@$ 5 5 13.4 13.8 - - - - 35 Bihar 141 253 328.9 425.5 1,361 1,390 7,958.6 9,300.7 36 Jharkhand** 20 21 33.1 37.6 369 367 1,413.4 1,608.6 Total 33,495 30,414 1,24,484.8 1,27,436.0 12,193 12,253 1,13,363.9 1,27,071.8 127Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.3: Kisan Credit Card Scheme: State-wise Progress (Concluded) (As at end-March 2019) (Amount in ₹ Crore and number of operative KCCs issued in ‘000) Sr. State/UT Commercial Banks Total No. Number of Operative Amount outstanding Number of Operative Amount outstanding KCCs under Operative KCCs KCCs under Operative KCCs 2018 2019 2018 2019 2018 2019 2018 2019 1 2 11 12 13 14 15 16 17 18 Northern Region 4,073 4,084 1,36,349.4 1,39,418.4 10,889 10,535 1,90,636.8 1,93,980.5 1 Haryana 660 655 27,171.7 27,635.0 2,097 2,104 42,664.8 44,515.9 2 Himachal Pradesh 214 214 3,711.2 3,924.8 347 357 5,565.3 6,017.1 3 Jammu & Kashmir 300 316 3,816.6 4,128.1 376 394 4,483.4 4,855.7 4 New Delhi #$ 3 3 98.4 91.0 4 4 110.9 101.9 5 Punjab 861 833 48,112.7 45,819.7 1,952 1,946 59,876.8 57,073.8 6 Rajasthan 2,031 2,060 53,152.4 57,474.5 6,109 5,726 77,649.1 81,070.6 7 Chandigarh #$ 4 3 286.4 345.5 4 3 286.4 345.5 North-Eastern Region 784 762 5,038.1 5,286.6 1,340 1,266 6,580.3 6,850.5 8 Assam 583 559 3,807.0 3,928.7 870 839 4,854.6 4,993.4 9 Arunachal Pradesh # 9 8 58.5 59.4 13 12 73.7 89.9 10 Meghalaya # 54 51 377.5 337.4 90 88 507.4 479.9 11 Mizoram # 11 9 76.8 75.5 25 21 153.9 143.1 12 Manipur # 16 15 117.6 119.5 24 24 144.2 149.0 13 Nagaland # 28 26 140.6 140.4 33 31 155.8 157.8 14 Tripura # 79 89 426.2 593.3 271 238 645.4 796.8 15 Sikkim #$ 5 4 34.1 32.5 13 13 45.2 40.6 Western Region 3,292 3,240 62,878.8 66,576.4 8,718 8,225 97,378.0 1,01,160.4 16 Gujarat 1,081 1,086 29,096.2 30,536.9 2,453 2,420 41,944.5 44,998.7 17 Maharashtra 2,203 2,146 33,591.9 35,831.2 6,255 5,795 55,222.8 55,934.8 18 Goa $ 7 8 172.9 190.5 9 10 192.7 209.0 19 Daman and Diu @#$ 0 0 8.6 9.6 0 0 8.6 9.6 20 Dadra and Nagar Haveli @$ 1 0 9.4 8.3 1 0 9.4 8.3 Central Region 6,349 6,579 1,06,467.7 1,18,548.3 21,842 19,746 1,67,548.7 1,88,493.4 21 Uttar Pradesh 4,271 4,499 59,594.7 68,090.8 12,005 11,137 94,936.1 1,09,946.3 22 Uttarakhand 216 204 4,431.4 4,503.4 532 481 5,703.2 5,796.5 23 Madhya Pradesh 1,634 1,651 37,863.7 41,070.4 7,909 6,732 59,744.5 64,725.2 24 Chhattisgarh 228 226 4,577.9 4,883.7 1,396 1,396 7,164.9 8,025.3 Southern Region 5,445 5,459 94,101.7 99,277.2 15,621 15,837 1,54,331.8 1,63,998.0 25 Karnataka 925 852 24,170.6 23,332.6 4,092 3,992 44,969.1 43,978.4 26 Kerala 310 313 12,210.9 13,118.8 1,087 1,296 16,475.4 17,702.9 27 Andhra Pradesh ** 1,873 1,964 24,400.3 27,175.2 4,261 4,543 39,866.6 45,474.0 28 Tamil Nadu 537 550 15,956.0 16,810.7 2,333 2,065 24,398.4 24,293.3 29 Telangana 1,795 1,775 17,211.6 18,678.4 3,836 3,930 28,454.9 32,366.9 30 Lakshdweep @$ 0 0 2.4 2.5 0 0 2.4 2.5 31 Puducherry # 4 5 149.9 159.0 12 12 165.0 180.0 Eastern Region 3,578 3,507 25,638.2 25,972.0 10,800 10,690 51,847.1 55,104.1 32 Odisha 654 655 4,806.7 5,099.8 4,108 3,940 16,367.8 18,053.9 33 West Bengal 1,004 1,003 7,399.2 7,402.9 2,875 2,866 12,299.8 12,194.6 34 Andaman and Nicobar Island@$ 0 0 2.8 2.2 5 5 16.1 16.0 35 Bihar 1,321 1,240 10,553.9 10,397.8 2,823 2,883 18,841.4 20,124.1 36 Jharkhand** 599 608 2,875.4 3,069.2 988 996 4,322.0 4,715.5 Total 23,521 23,632 4,30,473.9 4,55,079.1 69,210 66,300 6,68,322.6 7,09,586.9 -: Nil / Negligible. #: StCB functions as Central Financing Agencies. @: No Co-operative Banks in these UTs. $: No RRBs in these States/UTs. na: Not Available. Notes: Components may not add up to their respective totals due to rounding off. Source: NABARD/Returns from Commercial Banks. 128Appendix TAbles Appendix Table IV.4: Bank Group-wise Lending to the Sensitive Sectors (Amount in ₹ crore) Sector Public Sector Private Sector Banks Foreign Banks Small Finance Banks Scheduled Banks Commercial Banks 2018-19 Percentage 2018-19 Percentage 2018-19 Percentage 2018-19 Percentage 2018-19 Percentage Variation Variation Variation Variation Variation 1 2 3 4 5 6 7 8 9 10 11 1. Capital Market# 48,821 -18.0 78,694 8.2 11,771 51.5 114 150.0 1,39,400 -0.5 (0.8) (2.4) (2.97) (0.2) (1.4) 2. Real Estate@ 11,93,558 6.0 8,26,942 27.7 1,20,202 14.9 4,877 51.3 21,45,580 14.1 (20.1) (24.9) (30.3) (8.2) (22.1) 3. Commodities - - - - - - - - - - Total Advances to 12,42,379 4.8 9,05,637 25.7 1,31,973 17.4 4,991 52.7 22,84,980 13.1 Sensitive Sectors (21.0) (27.2) (33.3) (8.4) (23.5) Notes: 1. Figures in brackets are percentages to total loans and advances of the concerned bank-group. 2. - : Nil/negligible. 3. #: Exposure to capital market is inclusive of both investments and advances. 4. @: Exposure to real estate sector is inclusive of both direct and indirect lending. 129Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.5: Shareholding Pattern of Domestic Scheduled Commercial Banks (Continued) (As at end-March 2019) (Per cent) Sr. Bank Name Total Financial Financial Other Other Total Total Total - Total- No Government & Institutions - Institutions- Corporates - Corporates - Individual - Individual - Resident Non RBI - Resident Non Resident Resident Non Resident Resident Non Resident Resident Resident 1 2 3 4 5 6 7 8 9 10 11 Public Sector Banks 1 Allahabad Bank 85.8 6.5 1.7 0.6 - 5.4 0.1 98.3 1.7 2 Andhra Bank 90.9 3.5 1.0 0.6 - 3.9 0.1 98.9 1.1 3 Bank of Baroda 63.7 18.9 9.4 1.7 - 5.8 0.5 90.2 9.9 4 Bank of India 87.1 7.1 1.0 0.4 - 4.4 0.1 98.9 1.1 5 Bank of Maharashtra 87.7 8.5 0.2 0.3 - 3.2 0.2 99.7 0.3 6 Canara Bank 70.6 17.7 4.3 1.0 - 6.3 0.1 95.6 4.4 7 Central Bank of India 91.2 6.5 0.3 0.7 - 1.3 - 99.7 0.3 8 Corporation Bank 93.5 4.2 0.3 0.1 - 1.8 0.1 99.7 0.4 9 Dena Bank 80.7 1.6 - 9.3 1.6 6.6 0.2 98.1 1.9 10 Indian Bank 81.5 8.1 - 0.3 5.1 4.9 0.1 94.8 5.2 11 Indian Overseas Bank 92.5 3.0 - 0.5 0.3 3.7 0.1 99.7 0.4 12 Oriental Bank of Commerce 87.6 6.2 1.9 0.4 - 3.9 0.1 98.0 2.0 13 Punjab and Sind Bank 85.6 7.6 - 0.7 1.1 4.8 0.2 98.7 1.3 14 Punjab National Bank 75.4 13.1 3.4 0.8 - 7.1 0.1 96.5 3.6 15 State Bank of India 57.1 24.2 11.1 2.3 - 5.1 0.2 88.7 11.3 16 Syndicate Bank 84.7 9.1 1.7 0.8 - 3.8 - 98.3 1.7 17 UCO Bank 93.3 4.2 - 0.2 0.3 1.9 0.1 99.7 0.4 18 Union Bank of India 74.3 6.0 - 8.2 3.2 8.4 0.1 96.8 3.2 19 United Bank of India 96.8 1.5 - 0.2 - 1.4 - 100.0 - 20 Vijaya Bank 68.8 6.7 - 9.2 5.8 9.6 - 94.2 5.8 130Appendix TAbles Appendix Table IV.5: Shareholding Pattern of Domestic Scheduled Commercial Banks (Concluded) (As at end-March 2019) (Per cent) Sr. Bank Name Total Financial Financial Other Other Total Total Total Total No Government Institutions- Institutions- Corporates- Corporates- Individual- Individual- Resident Non- & RBI - Resident Non Resident Non Resident Non Resident Resident Resident Resident Resident 1 2 3 4 5 6 7 8 9 10 11 Private Sector Banks 1 Axis Bank Ltd. - 33.4 51.0 5.8 3.4 6.2 0.2 45.4 54.6 2 Bandhan Bank Ltd. - 2.7 5.6 82.6 7.3 1.7 0.1 87.1 13.0 3 Catholic Syrian Bank Ltd. - 2.8 - 27.3 28.2 30.6 11.2 60.7 39.3 4 City Union Bank Ltd. - 26.7 24.4 8.2 - 39.7 1.0 74.6 25.4 5 DCB Bank Ltd. - 24.2 - 8.2 40.1 26.0 1.6 58.3 41.7 6 Dhanalakshmi Bank Ltd. 0.54 2.5 - 16.8 11.4 49.5 19.3 69.3 30.7 7 Federal Bank Ltd. - 27.0 39.5 5.5 - 22.7 5.3 55.2 44.8 8 HDFC Bank Ltd. 0.2 13.3 71.9 5.5 - 9.1 0.1 28.0 72.0 9 ICICI Bank Ltd. 0.3 31.2 57.2 5.3 - 5.8 0.3 42.5 57.5 10 IDBI Bank Ltd. 46.5 51.3 - 0.3 0.1 1.8 0.1 99.8 0.2 11 IDFC Bank Ltd. 5.5 3.0 13.5 44.3 11.3 21.1 1.4 73.9 26.1 12 IndusInd Bank Ltd. - 9.9 58.5 8.4 15.2 7.3 0.8 25.6 74.4 13 Jammu & Kashmir Bank Ltd. 59.2 8.1 15.8 1.2 - 14.7 1.1 83.2 16.8 14 Karnataka Bank Ltd. - 15.4 14.6 8.1 - 59.6 2.3 83.1 16.9 15 Karur Vysya Bank Ltd. - 22.7 - 5.1 18.1 52.9 1.1 80.8 19.2 16 Kotak Mahindra Bank Ltd. - 11.6 42.0 4.4 1.8 39.8 0.4 55.8 44.2 17 Lakshmi Vilas Bank Ltd. 0.2 2.9 - 41.9 16.8 36.9 1.5 81.8 18.2 18 Nainital Bank Ltd. - 98.6 - - - 1.4 - 100.0 - 19 RBL Bank Ltd. 0.2 20.9 3.4 8.2 38.4 27.7 1.4 56.9 43.1 20 South Indian Bank Ltd. - 13.0 - 8.6 24.1 45.6 8.6 67.2 32.8 21 Tamilnad Mercantile Bank Ltd. 1.2 - - 4.8 24.9 68.2 1.0 74.1 25.9 22 Yes Bank Ltd. - 20.8 - 11.8 40.3 26.2 0.9 58.8 41.2 -: Nil / Negligible. Source: Off-site returns (domestic). 131Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.6: Overseas Operations of Indian Banks (At end-March) Sr. Name of the Bank Branch Subsidiary Representative Joint Venture Other Offices* Total No. Office Bank 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 1 2 3 4 5 6 7 8 9 10 11 12 13 14 I. Public Sector Banks 165 128 23 25 29 17 8 7 35 34 260 211 1 Allahabad Bank 1 1 - - - - - - - - 1 1 2 Andhra Bank - - - - 2 - - - - - 2 - 3 Bank of Baroda 50 36 9 9 - - 2 2 9 9 70 56 4 Bank of India 29 26 5 5 3 2 - - - - 37 33 5 Canara Bank 8 6 1 1 1 1 - - - - 10 8 6 Central Bank Of India - - - - - - - - - - - - 7 Corporation Bank - - - - 2 1 - - - - 2 1 8 Indian Bank 4 3 - - - - - - - - 4 3 9 Indian Overseas Bank 8 6 - - 1 1 - - 3 2 12 9 10 IDBI Bank Ltd. 1 1 - - - - - - - - 1 1 11 Punjab National Bank 3 2 2 2 4 - 2 2 - - 11 6 12 State Bank of India 52 40 5 7 8 7 4 3 23 23 92 80 13 Syndicate Bank 1 1 - - - - - - - - 1 1 14 UCO Bank 4 2 - - 1 1 - - - - 5 3 15 Union Bank 4 4 1 1 3 1 - - - - 8 6 16 United Bank of India - - - - 2 2 - - - - 2 2 17 Oriental Bank of Commerce - - - - 1 1 - - - - 1 1 18 Dena Bank - - - - 1 - - - - - 1 - II Private Sector Bank 20 19 3 3 19 20 - - - - 42 42 19 Axis Bank 5 5 1 1 4 4 - - - - 10 10 20 HDFC Bank Ltd. 3 3 - - 3 3 - - - - 6 6 21 ICICI Bank Ltd. 12 11 2 2 5 5 - - - - 19 18 22 IndusInd Bank Ltd. - - - - 3 3 - - - - 3 3 23 Federal Bank Ltd. - - - - 2 2 - - - - 2 2 24 Kotak Mahindra Bank Ltd. - - - - 1 1 - - - - 1 1 25 Yes bank - - - - 1 1 - - - - 1 1 26 South Indian Bank - - - - - 1 - - - - - 1 All Banks 185 147 26 28 48 37 8 7 35 34 302 253 Notes: 1. *: Other Offices include marketing/sub-office, remittance centres, etc. Source: RBI. 132Appendix TAbles Appendix Table IV.7: Branches and ATMs of Scheduled Commercial Banks (Continued) (At end-March 2019) Sr. Name of the Bank Branches ATMs No. Rural Semi - Urban Metro- Total On-site Off-site Total Urban politan 1 2 3 4 5 6 7 8 9 10 Public Sector Banks 28,800 24,599 16,975 17,486 87,860 78,419 57,679 1,36,098 1 Allahabad Bank 1,204 758 649 618 3,229 636 200 836 2 Andhra Bank 752 764 655 710 2,881 3,027 771 3,798 3 Bank of Baroda 1,845 1,546 960 1,201 5,552 6,329 3,243 9,572 4 Bank of India 1,829 1,456 793 947 5,025 2,615 3,539 6,154 5 Bank of Maharashtra 615 424 327 466 1,832 1,306 552 1,858 6 Canara Bank 1,821 2,003 1,205 1,282 6,311 4,756 4,095 8,851 7 Central Bank of India 1,601 1,345 830 883 4,659 2,958 1,008 3,966 8 Corporation Bank 588 795 521 545 2,449 2,365 650 3,015 9 Dena Bank 575 437 360 399 1,771 1,225 288 1,513 10 Indian Bank 737 824 624 640 2,825 3,191 701 3,892 11 Indian Overseas Bank 915 964 669 732 3,280 2,966 484 3,450 12 Oriental Bank of Commerce 561 626 601 586 2,374 2,341 284 2,625 13 Punjab and Sind Bank 563 279 351 325 1,518 1,153 48 1,201 14 Punjab National Bank 2,590 1,697 1,199 1,093 6,579 5,318 3,937 9,255 15 State Bank of India 7,743 6,480 3,964 3,858 22,045 25,555 32,860 58,415 16 Syndicate Bank 1,246 1,139 816 843 4,044 4,104 405 4,509 17 UCO Bank 1,075 821 603 580 3,079 2,030 328 2,358 18 Union Bank of India 1,249 1,288 847 904 4,288 3,864 2,786 6,650 19 United Bank of India 780 408 470 349 2,007 993 1,024 2,017 20 Vijaya Bank 511 545 531 525 2,112 1,687 476 2,163 133Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.7: Branches and ATMs of Scheduled Commercial Banks (Continued) (At end-March 2019) Sr. Name of the Bank Branches ATMs No. Rural Semi - Urban Metro- Total On-site Off-site Total Urban politan 1 2 3 4 5 6 7 8 9 10 Private Sector Banks 6,836 10,306 6,760 8,473 32,375 26,197 37,143 63,340 1 Axis Bank Ltd. 668 1,257 939 1,209 4,073 2,006 9,795 11,801 2 Bandhan Bank Ltd. 1,442 1,403 752 403 4,000 481 - 481 3 City Union Bank Ltd. 86 254 124 165 629 999 686 1,685 4 CSB Bank Ltd. 45 221 85 66 417 231 46 277 5 DCB Bank Ltd. 66 84 82 101 333 285 219 504 6 Dhanlaxmi Bank Ltd. 20 106 65 58 249 208 138 346 7 Federal Bank Ltd. 154 687 217 196 1,254 1,179 490 1,669 8 HDFC Bank Ltd. 998 1,573 966 1,430 4,967 6,036 7,124 13,160 9 ICICI Bank Ltd. 991 1,453 992 1,437 4,873 5,237 9,750 14,987 10 IDBI Bank Ltd. 412 585 504 495 1,996 2,203 1,497 3,700 11 IDFC First Bank Ltd. 32 61 93 160 346 107 6 113 12 IndusInd Bank Ltd. 281 375 429 517 1,602 1,084 1,461 2,545 13 Jammu & Kashmir Bank Ltd. 497 166 106 170 939 731 560 1,291 14 Karnataka Bank Ltd. 185 197 224 230 836 734 806 1,540 15 Karur Vysya Bank Ltd. 126 296 155 202 779 729 916 1,645 16 Kotak Mahindra Bank Ltd. 228 292 323 657 1,500 1,184 1,168 2,352 17 Lakshmi Vilas Bank Ltd. 107 175 125 161 568 448 600 1,048 18 Nainital Bank Ltd. 37 31 36 32 136 - - - 19 RBL Bank Ltd. 55 77 52 140 324 208 133 341 20 South Indian Bank Ltd. 104 461 170 188 923 795 608 1,403 21 Tamilnad Mercantile Bank Ltd. 106 247 80 77 510 472 680 1,152 22 Yes Bank Ltd. 196 305 241 379 1,121 840 460 1,300 134Appendix TAbles Appendix Table IV.7: Branches and ATMs of Scheduled Commercial Banks (Concluded) (At end-March 2019) Sr. Name of the Bank Branches ATMs No. Rural Semi - Urban Metro- Total On-site Off-site Total Urban politan 1 2 3 4 5 6 7 8 9 10 Foreign Banks 13 10 39 238 300 221 693 914 1 AB Bank Limited - - - 1 1 - - - 2 Abu Dhabi Commercial Bank PJSC - - - 2 2 - - - 3 American Express Banking Corp. - - - 1 1 - - - 4 Australia and New Zealand Banking Group Ltd. 1 - 1 1 3 - - - 5 Bank of America, National Association - - - 4 4 - - - 6 Bank of Bahrain & Kuwait B.S.C. - 1 - 3 4 - - - 7 Bank of Ceylon - - - 1 1 - - - 8 Bank of Nova Scotia - - - 3 3 - - - 9 Barclays Bank Plc - 1 1 4 6 - - - 10 BNP Paribas - - - 8 8 - - - 11 Citibank N.A - - 4 31 35 47 484 531 12 Co-operative Rabobank U.A. - - - 1 1 - - - 13 Credit Agricole Corporate and Investment Bank - - - 5 5 - - - 14 Credit Suisse AG - - - 1 1 - - - 15 CTBC Bank Co., Ltd. - 1 - 1 2 - - - 16 DBS Bank India Limited 6 4 2 13 25 16 27 43 17 Deutsche Bank AG 1 - 5 11 17 13 19 32 18 Doha Bank Q.P.S.C. - - 1 2 3 - - - 19 Emirates NBD Bank (P.J.S.C.) - - - 1 1 - - - 20 First Abu Dhabi Bank PJSC - - - 1 1 - - - 21 Firstrand Bank Ltd. - - - 1 1 - - - 22 Hongkong and Shanghai Banking Corpn.Ltd. - - 4 22 26 45 43 88 23 Industrial and Commercial Bank of China - - - 1 1 - - - 24 Industrial Bank of Korea - - - 1 1 - - - 25 JP Morgan Chase Bank National Association 2 - - 2 4 - - - 26 JSC VTB Bank - - - 1 1 - - - 27 KEB Hana Bank - - - 1 1 - - - 28 Kookmin Bank - - 1 - 1 - - - 29 Krung Thai Bank Public Company Ltd. - - - 1 1 - - - 30 Mashreq Bank Psc - - - 1 1 - - - 31 Mizuho Bank Ltd. - 1 - 4 5 - - - 32 MUFG Bank, Ltd. 1 - - 4 5 - - - 33 National Australia Bank - - - 1 1 - - - 34 Natwest Markets Plc - - - 1 1 - - - 35 PT Bank Maybank Indonesia Tbk - - - 1 1 - - - 36 Qatar National Bank (Q.P.S.C) - - - 1 1 - - - 37 Sberbank - - - 1 1 - - - 38 SBM Bank (India) Ltd. - - - 4 4 - - - 39 Shinhan Bank 1 - - 5 6 - - - 40 Societe Generale - 2 - 2 4 - - - 41 Sonali Bank - - 1 1 2 - - - 42 Standard Chartered Bank 1 - 18 81 100 100 120 220 43 Sumitomo Mitsui Banking Corporation - - - 2 2 - - - 44 United Overseas Bank Ltd. - - - 1 1 - - - 45 Westpac Banking Corporation - - - 1 1 - - - 46 Woori Bank - - 1 2 3 - - - Notes: (a) ‘Scheduled Commercial Banks’ are banks included in second schedule of the RBI Act. It comprises of Public Sector Banks, Regional Rural Banks, Private Sector Banks, Small Finance Banks (SFBs), Scheduled Payments Banks and Foreign Banks. (b) Public Sector banks’ comprises of State Bank of India (including erstwhile associate banks and Bharatiya Mahila Bank of period prior to April 1, 2017) and Nationalized banks. (c) IDBI Bank Limited which was classified as ”Public Sector Banks” before January 21, 2019, is now classified as “Private Sector Banks”. (d) Population groups are defined as follows: ‘Rural’ includes centres with population of less than 10,000, ‘Semi-Urban’ includes centres with population of 10,000 and above but less than of one lakh, ‘Urban’ includes centres with population of one lakh and above but less than of ten lakhs, and ‘Metropolitan’ includes centres with population of 10 lakhs and above. All population figures are as per census 2011. (e) Data exclude ‘Administrative Offices’. (f) Blank cell indicate nil. Source: Central Information System for Banking Infrastructure (erstwhile Master Office File system) database, Department of Statistics and Information Management, Reserve Bank of India. Central Information System for Banking Infrastructure data are dynamic in nature. The data are updated based on information as received from banks and processed at our end. 135Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.8: Statement of Complaints Received at Banking Ombudsman Office (Continued) (For the Period July-June 2018-2019) Sr. Name of the Bank Number of Complaints in Major Categories for Public Sector Banks Total Num- No. ber of Non- ATM/ Debit/ Failure on Pension Deposit Levy of Loans and Complaints* Observance Credit Commit- Account Charges Advances of Fair Cards ments and without Practices Non- Prior Code Adherence Notice to BCSBI Code 1 2 3 4 5 6 7 8 9 10 Public Sector Banks 23,518 32,291 11,559 6,927 6,004 4,260 4,097 1,21,277 1 Allahabad Bank 540 648 221 113 115 47 97 2,429 2 Andhra Bank 314 507 326 55 72 42 60 1,943 3 Bank of Baroda 1,911 2,162 1,068 302 515 399 396 9,385 4 Bank of India 1,080 1,255 603 312 241 184 163 5,226 5 Bank of Maharashtra 501 210 69 16 37 34 29 1,128 6 Canara Bank 1,215 1,207 774 347 498 218 187 5,997 7 Central Bank of India 618 909 347 508 124 111 201 3,865 8 Corporation Bank 608 895 229 18 171 84 122 2,924 9 Indian Bank 596 637 217 74 99 49 119 2,334 10 Indian Overseas Bank 711 606 215 78 92 95 103 2,491 11 Oriental Bank of Commerce 279 751 259 41 131 127 86 2,396 12 Punjab and Sind Bank 98 157 103 41 37 26 39 761 13 Punjab National Bank 1,633 2,954 1,015 772 485 328 315 10,791 14 State Bank of India 11,185 16,815 5,173 3,747 2,925 2,245 1,801 59,522 15 Syndicate Bank 426 354 193 194 92 75 111 1,989 16 UCO Bank 399 540 229 151 123 50 93 2,252 17 Union Bank of India 998 1,377 404 83 196 119 127 4,523 18 United Bank of India 406 307 114 75 51 27 48 1,321 *: Inclusive of complaints registered under other categories not listed at column 3 to 9. 136Appendix TAbles Appendix Table IV.8: Statement of Complaints Received at Banking Ombudsman Office (Continued) (For the Period July-June 2018-2019) Sr. Name of the Bank Number of Complaints in Major Categories for Private Sector Banks Total No. Number of Non- ATM/ Debit/ Failure on Pension Deposit Levy of Loans and Complaints* Observance Credit Commit- Account Charges Advances of Fair Cards ments and without Practices Non- Prior Code Adherence Notice to BCSBI Code 1 2 3 4 5 6 7 8 9 10 Private Sector Banks 10,525 14,787 6,070 53 2,487 3,812 2,067 54,922 1 Axis Bank Limited 1,816 2,415 1,160 14 559 903 341 10,010 2 Bandhan Bank Limited 71 67 28 - 20 8 11 300 3 Catholic Syrian Bank Ltd 19 23 17 - 3 17 2 109 4 City Union Bank Limited 68 43 17 1 8 14 12 221 5 DCB Limited 168 41 60 - 17 30 32 443 6 Dhanalakshmi Bank Limited 26 9 5 - 3 8 3 69 7 Federal Bank Limited 134 208 75 - 19 53 31 680 8 HDFC Bank Limited 2,763 4,519 1,861 14 499 989 545 15,105 9 ICICI Bank Limited 1,985 2,897 1,082 11 601 650 427 11,257 10 IDBI Bank Limited 699 491 227 2 116 202 102 2,484 11 IDFC Bank Limited 112 75 62 1 28 31 60 524 12 IndusInd Bank Limited 654 677 267 2 88 146 84 2,521 13 Jammu & Kashmir Bank Ltd. 43 203 19 1 18 12 10 439 14 Karnataka Bank Limited 52 127 50 - 14 43 13 407 15 Karur Vysya Bank Limited 114 90 50 - 22 39 14 451 16 Kotak Mahindra Bank Limited 915 1,173 573 4 295 376 222 4,951 17 Lakshmi Vilas Bank Limited 61 37 19 - 11 7 12 184 18 Nainital Bank Limited 10 14 5 - 5 4 1 55 19 Ratnakar Bank Limited 321 1,215 157 1 46 69 23 2,255 20 South Indian Bank Limited 49 65 49 - 9 32 13 306 21 Tamilnad Mercantile Bank Ltd. 69 23 23 1 5 14 11 181 22 Yes Bank Limited 376 375 264 1 101 165 98 1,970 *: Inclusive of complaints registered under other categories not listed at column 3 to 9. 137Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.8: Statement of Complaints Received at Banking Ombudsman Office (Concluded) (For the Period July-June 2018-2019) Sr. Name of the Bank Number of Complaints in Major Categories for Foreign Banks Total No. Number of Non- Ob- ATM/ Failure on Pension Deposit Levy of Loans and Complaints* servance Debit/ Commit- Account Charges Advances of Fair Credit ments and without Practices Cards Non- Prior Code Adherence Notice to BCSBI Code 1 2 3 4 5 6 7 8 9 10 Foreign Banks 601 1,820 382 2 269 129 108 4,196 1 AB Bank Limited 3 5 1 - - - - 9 2 American Express Banking Corp. 20 107 18 - 6 4 1 175 3 Australia and New Zealand 2 - - - - - - 2 Banking Group Limited 4 Bank of America N.T. and S.A. 3 - - - 1 - - 8 5 Bank of Bahrain And Kuwait B.S.C. 1 - - - 1 - - 4 6 Barclays Bank PLC 10 23 3 - 3 2 3 54 7 BNP Paribas 1 - 1 - - 1 - 4 8 Chinatrust Commercial Bank - 1 - - - - - 1 9 Citibank N.A 148 532 102 - 82 28 16 1,200 10 DBS Bank Ltd. 28 56 24 - 18 3 1 171 11 Deutsche Bank AG 27 5 14 - 6 7 10 94 12 Doha Bank QSC 1 - - - 1 - - 3 13 Emirates NBD Bank (P.J.S.C.) - 1 - - - - - 1 14 Hongkong and Shanghai Banking 80 232 67 - 38 13 17 534 Corpn.Ltd. 15 JP Morgan Chase Bank National - - - - - - - 1 Association 16 Mashreq Bank PSC - - - - - - - 1 17 Qatar National Bank SAQ - - 1 - - - - 1 18 Royal Bank of Scotland 10 34 4 - 3 2 2 63 19 Shinhan Bank - - - - - - - 1 20 Standard Chartered Bank 267 824 147 2 110 69 58 1,867 21 Sumitomo Mitsui Banking - - - - - - - 1 Corporation 22 The Bank of Tokyo-Mitsubishi - - - - - - - 1 UFJ Ltd Note: -: Nil/negligible. Source: Inclusive of complaints registered under other categories not listed at column 3 to 9. 138Appendix TAbles Appendix Table IV.9: International Liabilities of Banks in India – By Type of Instruments (Amount in ₹ crore) Liability Type Amount Outstanding Percentage Variation (At end-March) 2018 (PR) 2019 (P) 2017-18 2018-19 1 2 3 4 5 1. Loans and Deposits 10,02,046 11,40,461 11.0 13.8 (77.7) (74.3) a) Foreign Currency Non-resident (Bank) 1,43,622 1,55,667 6.9 8.4 [FCNR (B)] Scheme (11.1) (10.1) b) Foreign Currency Borrowings* 1,50,380 1,61,098 22.3 7.1 (11.7) (10.5) c) Non-resident External Rupee (NRE) Accounts 5,51,664 6,13,559 8.2 11.2 (42.8) (40.0) d) Non-resident Ordinary (NRO) Rupee Accounts 78,973 91,247 17.2 15.5 (6.1) (5.9) 2. Own Issues of Securities/ Bonds 1,159 792 -85.1 -31.7 (0.1) (0.1) 3. Other liabilities 2,86,314 3,93,730 18.8 37.5 (22.2) (25.7) of which: a) ADRs/GDRs 45,246 69,242 9.1 53.0 (3.5) (4.5) b) Equities of Banks held by non-residents 1,39,583 2,02,224 43.3 44.9 (10.8) (13.2) c) Capital / Remittable Profits of Foreign Banks in India 1,01,485 1,22,265 -0.6 20.5 and Other Unclassified International Liabilities (7.9) (8.0) Total International Liabilities 12,89,520 15,34,983 12.0 19.0 (100.0) (100.0) Notes: 1. PR:Partially Revised; P:Provisional. 2. *: Inter-bank borrowings in India and from abroad and external commercial borrowings of banks. 3. Figures in parentheses are percentages to total. 4. Percentage variation could be slightly different as absolute numbers have been rounded off to ₹ crore. Source: International Banking Statistics, RBI. 139Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.10: International Assets of Banks in India - By Type of Instruments* (Amount in ₹ crore) Asset Type Amount Outstanding Percentage Variation (At end-March) 2018 (PR) 2019 (P) 2017-18 2018-19 1 2 3 4 5 1. Loans and Deposits 5,84,768 6,49,616 6.9 11.1 (97.6) (93.7) of which: (a) Loans to Non-residents 1,97,484 2,17,317 18.4 10.0 (33.0) (31.3) (b) Foreign Currency Loan to Residents 1,53,706 1,41,865 -0.6 -7.7 (25.7) (20.5) (c) Outstanding Export Bills 89,263 1,01,782 4.4 14.0 (14.9) (14.7) (d) Foreign Currency in hand, Travellers Cheques, etc. 981 3,042 180.6 210.0 (0.2) (0.4) (e) NOSTRO Balances and Placements Abroad 1,43,334 1,85,611 2.4 29.5 (23.9) (26.8) 2. Holdings of Debt Securities 9,232 27,373 39.6 196.5 (1.5) (3.9) 3. Other International Assets 5,011 16,414 5.5 227.6 (0.8) (2.4) Total International Assets* 5,99,011 6,93,404 7.2 15.8 (100.0) (100.0) Notes: 1. *: In view of the incomplete data coverage from all the branches, the data reported under the locational banking statistics (LBS) are not strictly comparable with those capturing data from all the branches. 2. PR:Partially Revised; P:Provisional. 3. The sum of components may not add up due to rounding off. Source: International Banking Statistics, RBI. 140Appendix TAbles Table IV.11: Consolidated International Claims of Banks: Residual Maturity and Sector (Amount in ₹ crore) Residual Maturity/Sector Amount Outstanding Percentage Variation (At end-March) 2018 (PR) 2019 (P) 2017-18 2018-19 1 2 3 4 5 Total Consolidated International Claims 6,38,094 7,42,338 -11.0 16.3 (100.0) (100.0) Residual Maturity Short Term 4,48,243 6,07,802 -1.0 35.6 (70.3) (81.8) Long Term 1,77,569 1,29,671 -31.8 -27.0 (27.9) (17.5) Unallocated 12,282 4,865 260.0 -60.4 (2.0) (0.7) Sector Banks 2,08,383 2,40,893 13.2 15.6 (32.7) (32.4) Official Sector 20,238 38,860 -69.2 92.0 (3.2) (5.3) Non-Bank Financial Institutions 550 1,269 91.5 130.9 (0.1) (0.2) Non-Financial Private 3,01,033 3,42,533 -22.4 13.8 (47.2) (46.1) Others 1,07,890 1,18,782 37.2 10.1 (17.0) (16.0) Notes: 1. PR: Partially Revised; P: Provisional. 2. Figures in parentheses are percentages to total. 3. The sum of components may not add up due to rounding off. 4. Residual Maturity ‘Unallocated’ comprises maturity not applicable (for example, for equities) and maturity information not available. 5. The official sector includes official monetary authorities, general government and multilateral agencies. 6. Non-financial private sector includes non-financial corporations and households including non-profit institutions serving households (NPISHs). 7. Others include non-financial public sector undertakings and the unallocated sector. 8. Percentage variation could be slightly different as absolute numbers have been rounded off to ₹ crore. Source: International Banking Statistics, RBI. 141Report on Trend and Progress of Banking in India 2018-19 Appendix Table IV.12: Consolidated International Claims of Banks on Countries other than India (Amount in ₹ crore) Country Amount Outstanding Percentage Variation (At end-March) 2018 (PR) 2019 (P) 2017-18 2018-19 1 2 3 4 5 Total Consolidated 6,38,094 7,42,338 -11.0 16.3 International Claims (100.0) (100.0) of which 1. United States of America 2,62,808 3,15,587 40.5 20.1 (41.2) (42.5) 2. United Kingdom 40,153 63,390 -5.9 57.9 (6.3) (8.6) 3. Hong Kong 32,339 31,087 -18.5 -3.9 (5.1) (4.2) 4. Singapore 43,247 33,149 7.1 -23.3 (6.8) (4.5) 5. United Arab Emirates 64,016 67,591 -28.0 5.6 (10.1) (9.1) 6. Germany 7,718 13,116 -36.3 69.9 (1.3) (1.8) Notes: 1. PR:Partially Revised; P:Provisional. 2. Figures in parentheses are percentages to total. 3. Percentage variation could be slightly different as absolute numbers have been rounded off to ₹ crore. Source: International Banking Statistics, RBI. 142Appendix TAbles Appendix Table IV.13: Progress of Microfinance Programmes (At end-March) Item Self Help Groups Number (in lakhs) Amount (₹ crores) 2015-16 2016-17 2017-18 2018-19 2015-16 2016-17 2017-18 2018-19 Loans Disbursed by Banks 18.3 19.0 22.6 27.0 37,287 38,781 47,186 58,318 (9.3) (9.9) (13.8) (17.8) (19406.0) (20012.0) (27479.0) (36818.0) Loans Outstanding with Banks 46.7 48.5 50.2 50.8 57,119 61,581 75,598 87,098 (25.0) (28.1) (30.8) (35.1) (30589.0) (34127.0) (43575.0) (58431.0) Savings with Banks 79 85.8 87.4 100.1 13,691 16,114 19,592 23,324 (39.0) (42.9) (46.1) (60.2) (7251.0) (8679.0) (11784.0) (14481.0) Microfinance Institutions Number Amount (₹ crores) Loans disbursed by Banks 647 2,314 1,922 1,933 20,796 19,304 25,515 14,626 Loans Outstanding with Banks 2,020 5,357 5,073 5,488 25,581 29,225 32,306 17,761 Joint Liability Groups Number (in lakhs) Amount (₹ crores) Loans Disbursed by Banks 5.7 7.0 10.2 16.0 6161 9511 13955 30947 Notes: 1. Figures in brackets give the details of SHGs covered under the National Rural Livelihoods Mission (NRLM) and the National Urban Livelihoods Mission (NULM) for 2015-16, 2016-17 and 2017-18 and 2018-19, respectively. 2. Actual number of MFIs availing loans from banks would be less than the number of accounts, as most of MFIs avail loans several times from the same bank and also from more than one bank. Source: NABARD. 143Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.1: Select Financial Parameters: Scheduled UCBs (As on March 31, 2019) (Per cent) Sr. Bank Name CRAR Net Net Non Return Average Average Business Profit per No. Interest Interest Interest on Cost of Yield on per Employee Income Income Income Assets Deposits Advances Employee (₹ crore) to Total to to (₹ crore) Assets Working Working Funds Funds 1 2 3 4 5 6 7 8 9 10 11 1 Abhyudaya Co-operative Bank Limited, Mumbai 13.2 2.4 2.4 1.4 0.2 5.8 10.0 6.3 0.0 2 Ahmedabad Mercantile Co-operative Bank Limited 29.0 3.5 3.4 0.4 1.4 6.1 10.0 8.2 0.1 3 Akola Janata Commercial Co-operative Bank Limited, Akola 19.1 3.3 3.2 1.4 1.1 5.7 11.8 4.3 0.0 4 Akola Urban Co-operative Bank Limited, Akola 12.5 3.5 3.4 2.0 1.6 5.5 11.3 4.0 0.0 5 Amanath Co-operative Bank Limited, Bangalore -54.0 1.9 1.8 -0.4 -4.9 2.7 0.8 1.6 -0.1 6 Andhra Pradesh Mahesh Co-operative Urban Bank Limited 17.7 3.7 3.6 0.4 1.5 6.5 12.3 5.9 0.1 7 Apna Sahakari Bank Limited 11.9 2.7 2.7 1.0 0.5 6.1 10.9 8.2 0.0 8 Bassein Catholic Co-operative Bank Limited 17.7 2.9 2.7 0.5 2.2 6.4 10.6 18.6 0.3 9 Bharat Co-operative Bank (Mumbai) Limited, Mumbai 14.2 2.8 2.7 0.7 0.7 7.0 10.8 14.3 0.1 10 Bharati Sahakari Bank Limited 16.1 2.4 2.5 0.4 0.2 5.8 9.7 8.3 0.0 11 Bombay Mercantile Co-operative Bank Limited 15.7 3.3 3.1 2.7 0.4 3.9 10.4 3.1 0.0 12 Citizen Credit Co-operative Bank Limited, Mumbai 19.6 2.4 2.6 0.7 0.3 5.9 10.0 9.2 0.0 13 Cosmos Co-operative Bank Limited 12.9 2.1 2.2 2.2 0.4 6.3 9.9 9.5 0.0 14 Dombivli Nagari Sahakari Bank Limited 12.5 2.7 2.9 1.5 0.7 6.2 9.7 8.7 0.0 15 Goa Urban Co-operative Bank Limited 15.4 3.3 3.3 0.2 0.3 5.9 9.9 7.8 0.0 16 Gopinath Patil Parsik Janata Sahakari Bank Limited, Thane 18.4 4.3 3.4 1.0 2.2 5.9 11.0 7.4 0.1 17 Greater Bombay Co-operative Bank Limited 10.2 3.5 3.5 1.5 0.5 5.9 11.5 9.1 0.0 18 Indian Mercantile Co-operative Bank Limited, Lucknow 112.1 3.6 3.6 1.3 3.7 4.1 14.9 1.5 0.1 19 Jalgaon Janata Sahakari Bank Limited 12.6 3.4 3.2 0.7 0.7 5.8 11.2 7.1 0.0 20 Jalgaon People's Co-operative Bank Limited 12.3 2.8 2.7 0.9 0.3 5.3 10.4 7.8 0.0 21 Janakalyan Sahakari Bank Limited, Mumbai 10.3 3.3 3.3 0.4 0.8 5.9 11.2 8.5 0.1 22 Janalaxmi Co-operative Bank Limited, Nashik 48.4 1.0 1.9 1.2 0.1 6.2 6.1 1.1 0.0 23 Janata Sahakari Bank Limited, Pune 13.8 2.6 2.4 0.9 0.3 6.5 10.2 11.0 0.0 24 Kallappanna Awade Ichalkaranji Janata Sahakari Bank Limited 12.4 2.4 2.3 0.9 0.5 6.9 11.1 6.2 0.0 25 Kalupur Commercial Co-operative Bank Limited 16.7 3.3 3.1 0.7 1.5 6.0 9.7 14.2 0.2 26 Kalyan Janata Sahakari Bank Limited, Kalyan 12.5 2.9 2.7 1.2 0.7 6.3 10.7 9.8 0.0 27 Kapol Co-operative Bank Limited, Mumbai -139.4 -1.4 -0.8 0.3 -9.9 4.6 3.1 3.3 -0.2 28 Karad Urban Co-operative Bank Limited 15.6 3.0 2.9 1.3 0.7 6.8 11.1 5.4 0.0 29 Khamgaon Urban Co-operative Bank Limited, Khamgaon 15.5 4.0 4.4 0.6 1.3 5.7 12.1 4.2 0.0 30 Mahanagar Co-operative Bank Limited, Mumbai 14.3 3.8 4.1 0.6 0.8 6.0 11.5 6.0 0.0 31 Mapusa Urban Co-operative Bank of Goa Limited, Mapusa -66.5 0.7 1.2 0.1 -2.6 5.5 10.2 2.2 -0.1 32 Mehsana Urban Co-operative Bank Limited 13.6 3.4 3.0 0.4 1.2 6.8 11.2 17.8 0.1 33 Nagar Urban Co-operative Bank Limited, Ahmednagar 13.2 2.9 3.1 0.7 0.7 6.7 11.6 4.7 0.0 34 Nagpur Nagrik Sahakari Bank Limited 14.0 3.5 3.3 1.9 0.4 2.6 5.4 5.6 0.0 35 Nasik Merchant's Co-operative Bank Limited 42.1 3.8 4.0 0.5 0.8 5.6 10.0 4.7 0.0 36 New India Co-operative Bank Limited, Mumbai 11.3 1.5 1.4 1.1 0.2 6.4 10.9 13.4 0.0 37 NKGSB Co-operative Bank Limited, Mumbai 12.9 2.7 2.2 0.9 0.5 6.5 10.4 11.1 0.0 38 Nutan Nagarik Sahakari Bank Limited, Ahmedabad 13.2 2.6 2.5 0.9 0.8 6.2 9.6 9.7 0.0 39 Pravara Sahakari Bank Limited 13.5 6.5 3.9 0.4 0.9 6.2 13.1 4.2 0.0 40 Punjab & Maharashtra Co-operative Bank Limited 12.3 3.9 3.6 0.7 1.0 7.0 12.8 11.0 0.1 41 Rajarambapu Sahakari Bank Limited 13.2 2.6 2.3 0.6 0.7 7.2 11.0 8.9 0.0 42 Rajkot Nagrik Sahakari Bank Limited 17.5 2.9 2.8 0.9 1.5 6.4 11.1 7.0 0.1 43 Rupee Co-operative Bank Limited -671.1 1.1 2.6 0.3 0.4 2.0 2.9 5.0 0.0 44 Sangli Urban Co-operative Bank Limited, Sangli 13.3 2.5 2.6 0.5 0.2 7.0 10.6 4.9 0.0 45 Saraswat Co-operative Bank Limited, Bombay 13.2 2.3 2.0 0.9 0.7 5.9 9.4 14.2 0.1 46 SBPP Co-operative Bank Limited, Killa Pardi 19.3 3.8 3.6 0.3 0.7 5.2 10.2 9.4 0.0 47 Shamrao Vithal Co-operative Bank Limited 12.9 2.4 2.5 0.9 0.8 6.3 10.1 10.8 0.1 48 Shikshak Sahakari Bank Limited, Nagpur 10.7 2.5 3.0 1.1 -0.9 6.0 10.4 4.1 0.0 49 Solapur Janata Sahakari Bank Limited 11.2 2.8 3.0 0.6 0.2 7.3 12.0 7.8 0.0 50 Surat Peoples Co-operative Bank Limited 15.5 2.3 2.2 0.3 0.6 7.2 10.0 18.5 0.1 51 Thane Bharat Sahakari Bank Limited 12.6 3.1 3.2 0.7 0.3 5.9 11.4 8.3 0.0 52 TJSB Sahakari Bank 15.2 3.3 3.1 0.8 1.2 6.0 11.0 11.5 0.1 53 Vasai Vikas Sahakari Bank Limited 12.5 3.3 3.1 0.4 0.6 6.3 11.4 9.8 0.0 54 Zoroastrian Co-operative Bank Limited, Bombay 17.6 3.2 3.1 0.4 0.9 6.1 10.5 8.1 0.1 Note: Data are provisional. 144Appendix TAbles Appendix Table V.2: Indicators of Financial Performance: Scheduled UCBs (Continued) (As per cent to total assets) Sr. Name of the Banks Operating Profit Net Profit after Taxes Interest Income No. 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 1 2 3 4 5 6 7 8 1 Abhyudaya Co-operative Bank Limited, Mumbai 1.1 0.4 0.1 0.2 7.8 7.5 2 Ahmedabad Mercantile Co-operative Bank Limited 2.2 2.2 1.4 1.3 8.0 7.7 3 Akola Janata Commercial Co-operative Bank Limited, Akola 1.8 1.8 0.9 1.0 8.0 7.5 4 Akola Urban Co-operative Bank Limited, Akola 1.2 1.6 0.5 1.4 7.5 7.4 5 Amanath Co-operative Bank Limited, Bangalore 2.0 -0.9 2.0 -0.9 1.7 0.6 6 Andhra Pradesh Mahesh Co-operative Urban Bank Limited 2.1 2.2 1.1 1.5 9.2 8.8 7 Apna Sahakari Bank Limited 0.8 0.9 0.5 0.4 8.5 7.4 8 Bassein Catholic Co-operative Bank Limited 2.6 2.0 1.1 2.0 8.2 7.5 9 Bharat Co-operative Bank (Mumbai) Limited, Mumbai 1.9 1.4 0.9 0.7 8.5 8.2 10 Bharati Sahakari Bank Limited 1.5 1.0 0.5 0.2 8.8 7.2 11 Bombay Mercantile Co-operative Bank Limited 0.6 0.3 -0.3 0.2 5.0 4.6 12 Citizen Credit Co-operative Bank Limited, Mumbai 1.0 0.9 0.5 0.3 7.7 7.5 13 Cosmos Co-operative Bank Limited 1.2 1.3 -0.4 0.4 7.8 7.4 14 Dombivli Nagari Sahakari Bank Limited 2.8 2.3 0.7 0.7 7.9 8.3 15 Goa Urban Co-operative Bank Limited 1.7 1.8 0.1 0.3 8.0 7.9 16 Gopinath Patil Parsik Janata Sahakari Bank Limited, Thane 2.3 1.7 1.0 1.7 8.0 8.1 17 Greater Bombay Co-operative Bank Limited 1.2 1.8 0.4 0.4 8.9 8.7 18 Indian Mercantile Co-operative Bank Limited, Lucknow -0.7 2.3 1.7 3.5 6.5 6.1 19 Jalgaon Janata Sahakari Bank Limited 1.6 1.2 0.7 0.6 7.9 7.4 20 Jalgaon People's Co-operative Bank Limited 1.7 1.6 0.5 0.2 8.2 7.4 21 Janakalyan Sahakari Bank Limited, Mumbai 0.9 1.2 0.2 0.8 7.1 8.6 22 Janalaxmi Co-operative Bank Limited, Nashik 1.7 0.1 1.7 0.1 3.1 3.0 23 Janata Sahakari Bank Limited, Pune 1.2 1.4 0.4 0.3 8.1 7.9 24 Kallappanna Awade Ichalkaranji Janata Sahakari Bank Limited 1.0 1.0 0.5 0.4 7.3 7.1 25 Kalupur Commercial Co-operative Bank Limited 2.2 2.3 1.3 1.3 7.4 6.9 26 Kalyan Janata Sahakari Bank Limited, Kalyan 1.4 1.1 0.9 0.6 8.2 8.1 27 Kapol Co-operative Bank Limited, Mumbai -6.3 -4.6 -7.7 -6.3 3.9 2.9 28 Karad Urban Co-operative Bank Limited 1.4 1.7 -0.9 0.6 8.8 8.5 29 Khamgaon Urban Co-operative Bank Limited, Khamgaon 2.3 2.5 1.5 1.4 8.6 8.3 30 Mahanagar Co-operative Bank Limited, Mumbai 1.6 1.8 0.7 0.8 9.1 8.6 31 Mapusa Urban Co-operative Bank of Goa Limited, Mapusa -1.2 -2.4 -1.9 -2.6 6.8 4.3 32 Mehsana Urban Co-operative Bank Limited 2.5 2.4 1.0 1.1 8.6 8.3 33 Nagar Urban Co-operative Bank Limited, Ahmednagar 3.0 1.3 0.7 0.7 9.2 8.0 34 Nagpur Nagrik Sahakari Bank Limited 2.3 1.3 0.3 0.3 7.3 6.9 35 Nasik Merchant's Co-operative Bank Limited 2.9 2.3 1.2 0.8 8.5 7.4 36 New India Co-operative Bank Limited, Mumbai 0.7 0.5 0.2 0.2 8.4 7.0 37 NKGSB Co-operative Bank Limited, Mumbai 1.3 1.0 0.6 0.5 8.6 7.9 38 Nutan Nagarik Sahakari Bank Limited, Ahmedabad 1.4 1.4 0.7 0.7 7.7 7.5 39 Pravara Sahakari Bank Limited 0.5 0.8 0.5 0.5 8.5 7.7 40 Punjab & Maharashtra Co-operative Bank Limited 1.8 1.9 0.9 0.9 9.4 9.1 41 Rajarambapu Sahakari Bank Limited 1.6 1.3 0.7 0.6 8.3 7.9 42 Rajkot Nagrik Sahakari Bank Limited 1.6 1.6 0.9 1.0 5.8 5.5 43 Rupee Co-operative Bank Limited 0.0 0.4 0.3 0.6 2.7 2.8 44 Sangli Urban Co-operative Bank Limited, Sangli 0.9 0.3 0.3 0.2 8.2 7.5 45 Saraswat Co-operative Bank Limited, Bombay 1.1 1.3 0.5 0.6 6.4 6.0 46 SBPP Co-operative Bank Limited, Killa Pardi 1.7 1.8 0.5 0.7 7.7 7.2 47 Shamrao Vithal Co-operative Bank Limited 1.2 1.2 0.7 0.7 7.7 7.4 48 Shikshak Sahakari Bank Limited, Nagpur 0.9 0.5 -0.6 -0.9 7.1 6.4 49 Solapur Janata Sahakari Bank Limited 1.3 1.3 0.1 0.2 8.6 8.4 50 Surat Peoples Co-operative Bank Limited 1.6 1.2 0.8 0.5 7.8 7.9 51 Thane Bharat Sahakari Bank Limited 1.1 1.3 0.1 0.3 7.9 8.8 52 TJSB Sahakari Bank 1.6 1.7 1.0 1.0 7.9 7.5 53 Vasai Vikas Sahakari Bank Limited 1.6 1.8 0.5 0.6 8.4 8.3 54 Zoroastrian Co-operative Bank Limited, Bombay 1.5 1.5 0.8 0.9 8.3 8.0 -: Nil / negligible. Notes: 1. Data for 2018-19 are provisional. 2. The “Jalgaon People’s Co-operative Bank Limited” and “Rajarambapu Sahakari Bank Limited” were included in the second schedule of RBI Act, 1934 during the financial year 2016-17. 145Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.2: Indicators of Financial Performance: Scheduled UCBs (Concluded) (As per cent to total assets) Sr. Name of the Banks Interest Expended Non-Interest Expenses Provisions and No. Contingencies 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 1 2 9 10 11 12 13 14 1 Abhyudaya Co-operative Bank Limited, Mumbai 5.5 5.1 6.5 3.4 0.4 0.1 2 Ahmedabad Mercantile Co-operative Bank Limited 4.7 4.3 1.6 1.6 0.2 0.2 3 Akola Janata Commercial Co-operative Bank Limited, Akola 4.9 4.5 2.4 2.6 0.3 0.2 4 Akola Urban Co-operative Bank Limited, Akola 4.8 4.3 2.3 3.3 0.7 0.2 5 Amanath Co-operative Bank Limited, Bangalore 0.3 0.3 0.8 1.1 0.0 0.0 6 Andhra Pradesh Mahesh Co-operative Urban Bank Limited 5.6 5.2 1.9 1.8 0.6 0.3 7 Apna Sahakari Bank Limited 5.2 4.8 3.2 2.6 0.5 0.2 8 Bassein Catholic Co-operative Bank Limited 5.0 4.8 1.3 1.2 1.5 0.0 9 Bharat Co-operative Bank (Mumbai) Limited, Mumbai 5.7 5.6 2.1 1.9 0.6 0.3 10 Bharati Sahakari Bank Limited 5.7 4.8 1.9 1.8 0.8 0.6 11 Bombay Mercantile Co-operative Bank Limited 2.7 2.5 3.0 3.7 0.8 0.0 12 Citizen Credit Co-operative Bank Limited, Mumbai 5.1 4.9 2.3 2.4 0.2 0.4 13 Cosmos Co-operative Bank Limited 5.9 5.3 3.0 2.9 1.7 0.8 14 Dombivli Nagari Sahakari Bank Limited 5.1 5.5 1.6 2.0 2.1 1.3 15 Goa Urban Co-operative Bank Limited 5.0 4.7 1.6 1.6 1.1 1.1 16 Gopinath Patil Parsik Janata Sahakari Bank Limited, Thane 4.3 4.7 2.3 2.7 0.8 0.0 17 Greater Bombay Co-operative Bank Limited 5.9 5.3 2.6 2.9 0.7 1.0 18 Indian Mercantile Co-operative Bank Limited, Lucknow 5.3 2.6 2.8 2.5 -3.0 -2.2 19 Jalgaon Janata Sahakari Bank Limited 4.6 4.5 2.5 2.3 0.5 0.2 20 Jalgaon People's Co-operative Bank Limited 5.3 4.8 1.9 1.8 0.8 1.3 21 Janakalyan Sahakari Bank Limited, Mumbai 4.7 5.3 2.1 2.5 0.6 0.1 22 Janalaxmi Co-operative Bank Limited, Nashik 1.8 2.0 1.4 1.5 0.0 0.0 23 Janata Sahakari Bank Limited, Pune 5.6 5.6 2.0 1.7 0.8 0.7 24 Kallappanna Awade Ichalkaranji Janata Sahakari Bank Limited 5.1 5.0 1.8 1.9 0.3 0.3 25 Kalupur Commercial Co-operative Bank Limited 4.6 4.1 1.2 1.2 0.3 0.3 26 Kalyan Janata Sahakari Bank Limited, Kalyan 5.5 5.4 2.3 2.8 0.2 0.3 27 Kapol Co-operative Bank Limited, Mumbai 4.5 3.8 6.1 4.1 1.4 1.7 28 Karad Urban Co-operative Bank Limited 6.0 5.7 2.0 2.3 2.2 1.1 29 Khamgaon Urban Co-operative Bank Limited, Khamgaon 4.6 4.1 2.4 2.3 0.1 0.5 30 Mahanagar Co-operative Bank Limited, Mumbai 5.2 4.8 2.8 2.6 0.4 0.5 31 Mapusa Urban Co-operative Bank of Goa Limited, Mapusa 4.8 3.6 3.2 3.2 0.8 0.2 32 Mehsana Urban Co-operative Bank Limited 5.5 5.2 1.0 1.0 0.8 0.7 33 Nagar Urban Co-operative Bank Limited, Ahmednagar 5.2 5.1 2.1 2.2 1.8 0.1 34 Nagpur Nagrik Sahakari Bank Limited 4.1 3.6 2.5 3.8 1.6 1.0 35 Nasik Merchant's Co-operative Bank Limited 4.5 3.8 1.7 1.9 0.8 0.8 36 New India Co-operative Bank Limited, Mumbai 6.0 5.6 2.1 2.0 0.5 0.2 37 NKGSB Co-operative Bank Limited, Mumbai 5.7 5.5 2.3 2.4 0.4 0.4 38 Nutan Nagarik Sahakari Bank Limited, Ahmedabad 5.3 5.1 2.1 1.9 0.4 0.3 39 Pravara Sahakari Bank Limited 5.7 4.4 2.8 2.8 0.0 0.3 40 Punjab & Maharashtra Co-operative Bank Limited 5.8 5.6 2.4 2.2 0.4 0.6 41 Rajarambapu Sahakari Bank Limited 5.6 5.6 1.6 1.5 0.9 0.7 42 Rajkot Nagrik Sahakari Bank Limited 4.0 3.6 1.0 0.9 0.3 0.4 43 Rupee Co-operative Bank Limited 1.2 1.3 1.5 1.3 -0.2 -0.2 44 Sangli Urban Co-operative Bank Limited, Sangli 5.4 5.2 2.4 2.5 0.5 0.0 45 Saraswat Co-operative Bank Limited, Bombay 4.7 4.2 1.4 1.4 0.4 0.5 46 SBPP Co-operative Bank Limited, Killa Pardi 4.3 3.8 1.9 1.9 0.7 0.6 47 Shamrao Vithal Co-operative Bank Limited 5.4 5.1 2.0 2.0 0.3 0.2 48 Shikshak Sahakari Bank Limited, Nagpur 4.8 4.0 2.3 2.8 1.4 1.3 49 Solapur Janata Sahakari Bank Limited 6.1 5.7 1.9 1.9 0.8 0.9 50 Surat Peoples Co-operative Bank Limited 5.7 5.7 1.4 1.3 0.5 0.3 51 Thane Bharat Sahakari Bank Limited 5.0 5.6 2.4 2.6 0.7 0.7 52 TJSB Sahakari Bank 5.1 4.7 2.0 2.0 0.1 0.1 53 Vasai Vikas Sahakari Bank Limited 5.4 5.2 1.7 1.7 0.6 0.8 54 Zoroastrian Co-operative Bank Limited, Bombay 5.1 4.8 2.1 2.0 0.2 0.2 -: Nil/negligible. Notes: 1. Data for 2018-19 are provisional. 2. The “Jalgaon People’s Co-operative Bank Limited” and “Rajarambapu Sahakari Bank Limited” were included in the second schedule of RBI Act, 1934 during the financial year 2016-17. 146Appendix TAbles Appendix Table V.3: Indicators of Financial Health: State Co-operative Banks (At end-March) (Amount in ₹ lakh) Sr. Region/State Amount of Profit/Loss NPAs as Percentage of Recovery to Demand No Loans Outstanding (Per cent as at end-June) 2017 2018 2017 2018 2017 2018 1 2 3 4 5 6 7 8 Northern Region 22,557 16,772 1.8 2.0 97.5 99.1 1 Chandigarh 295 557 4.4 5.7 82.7 81.9 2 Delhi 1,994 2,214 2.9 1.8 95.5 95.7 3 Haryana 3,196 3,565 0.1 0.1 94.0 100.0 4 Himachal Pradesh 9,321 4,979 5.7 8.0 60.3 48.8 5 Jammu & Kashmir 426 376 10.0 4.8 64.8 72.5 6 Punjab 3,146 2,518 0.9 1.0 99.7 99.7 7 Rajasthan 4,180 2,563 1.1 0.2 99.7 99.8 North-Eastern Region 5,329 3,598 13.1 12.5 50.9 46.7 8 Arunachal Pradesh 23 28 50.2 55.8 22.2 7.7 9 Assam 1,549 -735 10.7 10.4 51.4 41.4 10 Manipur 19 1 91.6 83.3 7.3 3.9 11 Meghalaya 807 945 9.3 9.2 28.1 19.3 12 Mizoram 670 631 9.8 9.7 52.9 62.3 13 Nagaland 837 860 15.5 14.4 66.9 58.6 14 Sikkim 223 483 6.1 5.0 79.0 38.1 15 Tripura 1,200 1,385 3.2 3.2 81.5 81.6 Eastern Region 5,583 6,566 3.9 4.1 92.5 94.7 16 Andaman & Nicobar Islands 390 449 18.3 18.4 61.2 67.2 17 Bihar 3,620 3,963 4.5 3.9 76.1 93.3 18 Jharkhand -315 47 24.4 41.5 20.5 82.5 19 Odisha 1,770 1,984 2.1 1.7 97.9 98.1 20 West Bengal 119 124 5.1 5.2 84.5 86.9 Central Region 8,457 16,179 4.7 5.7 94.0 91.7 21 Chhattisgarh 1,489 4,466 3.2 3.1 80.6 77.2 22 Madhya Pradesh 2,980 6,352 4.8 4.9 93.9 89.7 23 Uttar Pradesh 3,282 4,091 5.7 8.5 95.5 95.7 24 Uttarakhand 706 1,270 2.5 4.9 97.4 96.4 Western Region 27,102 25,789 6.4 7.8 87.2 86.9 25 Goa -1,485 1,089 9.0 8.0 83.2 88.6 26 Gujarat 4,060 4,554 2.0 2.2 97.8 97.0 27 Maharashtra 24,527 20,146 8.0 9.9 79.2 83.6 Southern Region 26,211 34,090 2.6 3.4 94.4 96.5 28 Andhra Pradesh 6,860 8,203 1.8 1.6 98.7 98.4 29 Karnataka 3,300 3,425 2.2 4.4 97.4 96.8 30 Kerala 8,947 10,035 8.4 5.9 83.5 93.0 31 Puducherry 79 52 5.4 17.8 36.7 93.2 32 Tamil Nadu 4,370 8,277 1.3 3.4 99.6 98.8 33 Telgangana 2,655 4,099 0.4 0.2 77.1 99.8 All India 95,240 1,02,994 4.1 4.7 93.5 94.2 Notes: 1. Components may not add up to total due to rounding off. 2. Recovery for the year 2017-18 is taken as on 30th June 2017. Source: NABARD. 147Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.4: Indicators of Financial Health: District Central Co-operative Banks (At end-March) (Amount in ₹ lakh) Sr. Region/State 2016-2017 2017-2018 2017 2018 No. No. of Profit Loss No. of Profit Loss NPA Recov- NPA Recov- DCCBs DCCBs to ery to to ery to Loans Demand Loans Demand No. of Amt. No. of Amt. No. of Amt. No. of Amt. ratio (per ratio (per DCCBs DCCBs DCCBs DCCBs (per cent) (per cent) cent) (At end- cent) (At end- June) June)* 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Northern Region 73 56 10,096 17 12,727 73 60 11,463 13 12,114 7.0 80.9 7.9 74.7 1 Haryana 19 18 1,965 1 975 19 19 3,517 0 0 5.7 69.2 6.3 67.7 2 Himachal Pradesh 2 2 2,971 0 0 2 2 585 0 0 16.2 74.4 19.2 69.7 3 Jammu & Kashmir 3 0 0 3 5,123 3 0 0 3 7,971 20.6 62.1 27.8 53.3 4 Punjab 20 10 1,478 10 4,902 20 10 1,402 10 4,143 6.8 89.8 8.6 72.3 5 Rajasthan 29 26 3,683 3 1,727 29 29 5,959 0 0 4.5 83.1 4.2 82.3 Eastern Region 64 53 15,052 11 7,259 57 52 20,164 5 1,142 10.4 76.6 9.7 69.6 6 Bihar 22 17 1,009 5 4,728 22 18 1,605 4 747 21.4 40.2 23.8 36.8 7 Jharkhand 8 5 1,058 3 1,475 1 1 299 0 0 51.9 35.4 75.3 13.9 8 Odisha 17 17 8,008 0 0 17 17 14,220 0 0 7.3 79.8 7.2 69.8 9 West Bengal 17 14 4,977 3 1,056 17 16 4,040 1 395 10.4 81.2 9.6 77.9 Central Region 104 85 29,790 19 19,108 104 78 28,239 26 28,526 15.5 73.1 18.6 56.8 10 Chattisgarh 6 6 8,999 0 0 6 6 9,590 0 0 15.5 76.2 12.3 71.1 11 Madhya Pradesh 38 33 9,827 5 7,099 38 29 10,512 9 19,970 18.4 72.8 21.8 63.1 12 Uttar Pradesh 50 37 8,175 13 11,663 50 34 4,490 16 8,313 12.8 70.6 16.5 31.9 13 Uttarakhand 10 9 2,788 1 346 10 9 3,648 1 242 8.8 82.9 8.8 70.9 Western Region 49 43 59,721 6 23,479 49 43 53,586 6 10,950 14.3 71.2 14.3 57.9 14 Gujarat 18 17 14,970 1 94 18 17 16,405 1 89 6.1 92 5.6 87.9 15 Maharashtra 31 26 44,751 5 23,386 31 26 37,181 5 10,861 16.9 61.7 17.2 45.0 Southern Region 80 78 52,053 2 13,182 80 78 60,907 2 36,587 7.3 88.5 7.8 89.3 16 Andhra Pradesh 13 12 4,197 1 47 13 12 4,620 1 351 5.1 90.3 4.9 90.3 17 Telangana 21 21 10,382 0 0 21 21 13,858 0 0 4.5 94.7 6.4 92.4 18 Karnataka 14 13 11,520 1 13,135 14 13 13,391 1 36,236 9.5 88.9 10.2 88.1 19 Kerala 23 23 23,450 0 0 23 23 25,913 0 0 8.2 76.8 7.8 86.6 20 Tamil Nadu 9 9 2,505 0 0 9 9 3,125 0 0 5.5 89.8 5.3 89.3 All India 370 315 1,66,712 55 75,754 363 311 1,74,360 52 89,318 10.5 78.9 11.1 71.1 Notes: 1. Components may not add up to the total /s due to rounding off. 2. * Recovery for the year 2017-18 is taken as on 30th June 2017. Source: NABARD. 148Appendix TAbles Appendix Table V.5: Primary Agricultural Credit Societies (Amount in ₹ crore) Item As at end-March Variation (%) 2017 2018 2016-17 2017-18 1 2 3 4 5 A. Liabilities 1. Total Resources (2+3+4) 2,73,697 2,78,907 14.9 1.9 2. Owned Funds (a+b) 32,982 30,942 34.9 -6.2 a. Paid-up Capital 14,122 14,142 15.0 0.1 of which Government Contribution 829 807 3.9 -2.7 b. Total Reserves 18,860 16,800 55.1 -10.9 3. Deposits 1,15,884 1,19,632 14.7 3.2 4. Borrowings 1,24,831 1,28,333 10.8 2.8 5. Working Capital 2,39,967 2,43,563 19.2 1.5 B. Assets 1. Total Loans Outstanding (a+b) 1,70,459 1,69,629 7.6 -0.5 a) Short-Term 1,22,194 1,20,823 4.4 -1.1 b) Medium-Term 48,265 48,806 16.5 1.1 Note: Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹ crore. Source: NAFSCOB. 149Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.6: Indicators of Primary Agricultural Credit Societies-State-wise (Continued) (At end-March 2018) (Amount in ₹ lakh) Sr. State Number of Deposits Working Loans and Advances Societies in Profit No. PACS Capital Outstanding Agriculture Non- Number Amount Agriculture 1 2 3 4 5 6 7 8 9 Northern Region 13,431 11,08,565 45,63,405 14,62,832 1,19,908 9,467 1,38,957 1 Chandigarh 17 0 7 0.13 0.18 10 0.04 2 Haryana 613 1,26,652 11,31,093 4,84,003 1,19,238 52 24 3 Himachal Pradesh 2,166 4,92,033 6,01,469 1,28,982 0 1,855 5 4 Jammu & Kashmir 620 323 3,772 4,659 670 484 58 5 Punjab* 3,543 2,41,242 12,26,106 8,45,188 0 2,140 N.A. 6 Rajasthan 6,472 2,48,315 16,00,959 N.A N.A. 4,926 1,38,870 North-Eastern Region 3,396 8,464 80,775 6,519 1,160 739 8,806 7 Arunachal Pradesh* 34 0 1,940 0 0 13 452 8 Assam* 766 0 11,123 575 20 309 7,639 9 Manipur 90 43 446 23 33 46 73 10 Meghalaya* 179 684 3,166 2,579 54 57 81 11 Mizoram 164 907 35,048 605 98 22 0.90 12 Nagaland* 1,719 6,419 11,246 197 357 N.A. N.A. 13 Sikkim 176 411 2,254 1,324 78 112 52 14 Tripura 268 N.A. 15,552 1,216 521 180 508 Eastern Region 18,620 3,75,968 11,50,855 6,86,585 46,112 4,290 9,156 15 Andaman & Nicobar Islands 51 113 975 1,570 0 18 19 16 Bihar* 8,463 17,533 50,816 0 0 1,180 604 17 Jharkhand n.a. n.a. n.a. n.a. n.a. n.a. n.a. 18 Odisha 2,701 1,50,286 6,05,486 5,39,112 16,636 745 5,167 19 West Bengal 7,405 2,08,036 4,93,578 1,45,903 29,476 2,347 3,366 Central Region 15,478 2,32,607 14,55,769 7,51,149 27,283 8,082 28,500 20 Chhattisgarh 1,333 41,615 4,46,070 2,40,516 1,121 802 10,415 21 Madhya Pradesh* 4,457 81,731 6,45,546 3,39,959 11,892 2,153 13,124 22 Uttarakhand 759 1,02,441 2,38,226 90,643 14,271 591 3,188 23 Uttar Pradesh* 8,929 6,820 1,25,927 80,031 0 4,536 1,774 Western Region 29,797 1,05,485 33,12,774 19,38,111 3,28,082 14,773 9,685 24 Goa 81 5,631 7,076 1,346 1,200 51 116 25 Gujarat 8,535 78,723 13,67,886 9,76,106 25,525 5,931 8,986 26 Maharashtra 21,181 21,131 19,37,811 9,60,659 3,01,358 8,791 582 Southern Region 14,516 1,01,32,144 1,37,92,674 35,38,565 63,54,783 9,054 2,18,255 27 Andhra Pradesh 1,818 1,77,898 9,90,193 6,84,246 1,21,284 1,261 99,356 28 Telangana 799 43,334 4,87,909 3,91,584 9,836 541 15,797 29 Karnataka* 5,679 7,49,701 23,16,084 11,21,312 3,89,929 3,858 6,316 30 Kerala* 1,647 83,19,351 79,37,600 6,90,044 48,81,386 1,020 78,842 31 Puducherry 53 14,825 21,056 531 2,784 16 96 32 Tamil Nadu 4,520 8,27,036 20,39,833 6,50,846 9,49,563 2,358 17,848 All India 95,238 1,19,63,233 2,43,56,251 83,83,761 68,77,328 46,405 4,13,359 n.a. = not applicable, N.A. = Not Available. Notes: 1. *: Data relate to previous year. 2. Components may not add up to the exact total /s due to rounding off. Source: NAFSCOB. 150Appendix TAbles Appendix Table V.6: Indicators of Primary Agricultural Credit Societies-State-wise (Concluded) (At end-March 2018) (Amount in ₹ lakh) Sr. State Societies in Loss Viable Potentially Dormant Defunct Others No. viable Number Amount 1 2 10 11 12 13 14 15 16 Northern Region 3,777 52,381 4,768 1,889 113 96 6,565 1 Chandigarh 2 0.0004 12 0 0 5 0 2 Haryana 496 368 531 35 0 0 47 3 Himachal Pradesh 225 5 563 1,467 101 0 35 4 Jammu & Kashmir 105 2 458 48 12 91 11 5 Punjab* 1,403 N.A. 3,204 339 0 0 0 6 Rajasthan 1,546 52,006 N.A. N.A. N.A. N.A. 6,472 North-Eastern Region 703 11,452 1,763 463 680 395 95 7 Arunachal Pradesh* 19 717 20 5 4 5 0 8 Assam* 419 9,909 709 57 0 0 0 9 Manipur 24 25 46 20 13 11 0 10 Meghalaya* 122 713 116 55 8 0 0 11 Mizoram 7 1 29 40 0 0 95 12 Nagaland* N.A. N.A. 457 228 655 379 0 13 Sikkim 24 9 136 40 0 0 0 14 Tripura 88 79 250 18 0 0 0 Eastern Region 9,826 28,565 14,161 2,867 591 411 590 15 Andaman & Nicobar Island 26 77 39 5 7 0 0 16 Bihar* 3,962 94 8,463 0 0 0 0 17 Jharkhand n.a. n.a. n.a. n.a. n.a. n.a. n.a. 18 Odisha 1,860 26,966 1,711 614 10 1 365 19 West Bengal 3,978 1,429 3,948 2,248 574 410 225 Central Region 4,790 36,314 12,318 2,055 390 175 540 20 Chhattisgarh 531 17,905 863 0 0 0 470 21 Madhya Pradesh* 2,129 17,824 3,663 720 4 0 70 22 Uttarakhand 162 433 677 66 4 12 0 23 Uttar Pradesh* 1,968 153 7,115 1,269 382 163 0 Western Region 14,029 5,619 21,312 7,448 559 340 138 24 Goa 27 233 70 9 1 1 0 25 Gujarat 1,901 4,653 4,951 2,663 473 310 138 26 Maharashtra 12,101 733 16,291 4,776 85 29 0 Southern Region 4,713 5,97,226 10,060 3,243 376 125 712 27 Andhra Pradesh 555 4,85,413 1,200 508 26 3 81 28 Telangana 257 18,179 690 79 1 0 29 29 Karnataka* 1,457 3,409 4,004 1,303 165 35 172 30 Kerala* 558 67,138 1,462 136 33 10 6 31 Puducherry 37 2,551 16 37 0 0 0 32 Tamil Nadu 1,849 20,536 2,688 1,180 151 77 424 All India 37,838 7,31,557 64,382 17,965 2,709 1,542 8,640 n.a. = not applicable, N.A. = Not Available. Notes: 1. *: Data relate to previous year. 2. Components may not add up to the exact total /s due to rounding off. Source: NAFSCOB. 151Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.7: Details of Members and Borrowers of Primary Agricultural Credit Societies (Number in thousands) All India Members Borrowers 2017 2018 2017 2018 1 2 3 4 5 Scheduled Caste 14,998 14,883 5,413 5,233 Scheduled Tribes 9,316 9,443 3,453 3,135 Small Farmers 40,246 43,698 19,616 19,821 Rural Artisans 7,600 7,255 2,502 2,361 Others & Marginal Farmers 59,075 55,269 21,032 20,141 Source: NAFSCOB. 152Appendix TAbles Appendix Table V.8: Liabilities and Assets of State Co-operative Agriculture and Rural Development Banks (Amount in ₹ crore) Item As at end-March Variation (%) 2017 2018 2016-17 2017-18 1 2 3 4 5 Liabilities 1. Capital 939 945 0.0 0.6 (3.0) (3.2) 2. Reserves 3,365 3,360 -7.1 -0.2 (11.2) (11.5) 3. Deposits 2,423 2,341 0.0 -3.4 (7.9) (8.0) 4. Borrowings 15,500 15,400 6.2 -0.6 (51.0) (53.1) 5. Other Liabilities 8,130 6,948 49.1 -14.5 (26.7) (23.9) Assets 1. Cash and Bank Balances 453 275 25.0 -39.3 (1.4) (0.9) 2. Investments 3,240 3,537 6.7 9.2 (10.6) (12.1) 3. Loans and Advances 21,208 20,788 3.9 -2.0 (69.8) (71.6) 4. Other Assets 5,456 4,394 48.6 -19.5 (17.9) (15.1) Total Liabilities/Assets 30,357 28,994 10.5 -4.5 (100.0) (100.0) Notes: 1. Figures in parentheses are percentages to total liabilities/assets. 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹ 1 crore in the table. 3. Components may not add up to the total due to rounding off. Source: NABARD. 153Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.9: Financial Performance of State Co-operative Agriculture and Rural Development Banks (Amount in ₹ crore) Item As during Percentage Variation 2017 2018 2016-17 2017-18 1 2 3 4 5 A. Income (i+ii) 2,198 2,384 -0.1 8.5 (100.0) (100.0) i. Interest Income 2,070 2,287 -5.9 10.5 (94.5) (95.9) ii. Other Income 128 97 113.0 -24.2 (5.5) (4.1) B. Expenditure (i+ii+iii) 2,381 2,394 9.1 0.5 (100.0) (100.0) i. Interest Expended 1,485 1,502 7.1 1.2 (62.3) (62.7) ii. Provisions and Contingencies 486 452 25.0 -7.0 (20.4) (18.8) iii. Operating Expenses 410 402 0.0 -2.0 (17.2) (16.7) of which : Wage Bill 338 344 - 1.7 (14.1) (14.3) C. Profits i. Operating Profits 303 442 - 45.9 ii. Net Profits -183 -9.4 - - Notes: 1. Figures in parentheses are percentages to total income/expenditure. 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹ 1 crore in the table. 3. Components may not add up to the total due to rounding off. Source: NABARD. 154Appendix TAbles Appendix Table V.10: Asset Quality of State Co-operative Agriculture and Rural Development Banks (Amount in ₹ crore) Item As at end- March Percentage Variation 2017 2018 2016-17 2017-18 1 2 3 4 5 A. Total NPAs (i+ii+iii) 5,013 5,206 47.1 3.8 i) Sub-standard 1,953 1,944 5.3 -0.5 (38.9) (37.3) ii) Doubtful 3,050 3,252 100.0 6.6 (60.8) (62.4) iii) Loss 10 9 -90.0 -6.4 (0.2) (0.1) B. NPAs to Loans Ratio (%) 23.6 25.0 - - C. Recovery to Demand Ratio (%) 50.8 48.4 - - Notes: 1. Figures in parentheses are percentages to total NPAs. 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹1 crore. 3. Components may not add up to the total due to rounding off. Source: NABARD. 155Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.11: Financial Indicators: State Co-operative Agriculture and Rural Development Banks (At end-March) (Amount in ₹ lakh) Sr. Region/State Branches Profit / Loss NPAs to Loans ratio Recovery Ratio No. (per cent) (per cent) * (at End-June) 2018 2017 2018 2017 2018 2017 2018 1 2 3 4 5 6 7 8 9 Northern Region 1 Haryana @ 19 -21,810 -3,188 79.0 83.1 17.9 18.7 2 Himachal Pradesh # 51 360 127 19.4 23.8 54.7 52.4 3 Jammu & Kashmir* 51 -623 -693 11.4 20.2 50.6 46.2 4 Punjab @ 89 1,081 829 6.1 11.2 61.3 61.3 5 Rajasthan @ 7 561 -4,392 40.5 44.2 30.0 25.9 North-Eastern Region 6 Assam* - - - - - - - 7 Tripura* 5 -63 20 49.5 47.0 39.0 18.3 Eastern Region 8 Bihar* - - - - - - - 9 Odisha @ - - - - - - - 10 West Bengal # 2 59 244 23.7 23.3 40.1 40.6 Central Region 11 Chhattisgarh @ - - - - - - - 12 Madhya Pradesh @ - - - - - - 13 Uttar Pradesh* 323 -2,696 192 39.6 44.1 14.0 30.5 Western Region 14 Gujarat* 176 1,805 2,100 53.7 55.0 34.2 37.1 15 Maharashtra @ - - - - - - - Southern Region 16 Karnataka @ 25 15 69 21.6 22.7 42.6 36.8 17 Kerala @ 14 2,331 2,753 0.4 0.5 98.8 99.0 18 Puducherry* 1 -24 -42 3.6 2.6 95.6 - 19 Tamil Nadu @ 26 658 1,044 8.4 18.9 86.8 - All India 789 -18,345 -937 23.6 25.0 50.8 48.4 @ : Federal structure. # : Mixed structure. * : Unitary structure. -: Not applicable. Notes: 1. Components may not add up to the exact total/s due to rounding off. 2. In Chhattisgarh the Short-term co-operative credit structure merged with Long-term during 2014-15. Also, Assam,Bihar, Odisha, Madhya Pradesh and Maharashtra are no longer functional SCARDBs. 3. *Recovery for the financial year is taken as on 30th June. Source: NABARD. 156Appendix TAbles Appendix Table V.12: Liabilities and Assets of Primary Co-operative Agriculture and Rural Development Banks (Amount in ₹ crore) Item As at end-March Variation (%) 2017 2018 2016-17 2017-18 1 2 3 4 5 Liabilities 1. Capital 1,006 1,054 -8.5 4.8 (3.4) (3.4) 2. Reserves 1,688 2,234 -32.5 32.3 (5.8) (7.3) 3. Deposits 1,252 1,306 -7.1 4.3 (4.3) (4.2) 4. Borrowings 15,530 16,349 8.4 5.3 (53.4) (53.5) 5. Other Liabilities 9,591 9,607 96.0 0.2 (32.9) (31.4) Assets 1. Cash and Bank Balances 392 436 8.3 11.2 (1.3) (1.4) 2. Investments 2,222 2,286 48.7 2.9 (7.6) (7.4) 3. Loans and Advances 15,064 15,821 18.9 5.0 (51.8) (51.7) 4. Other Assets 11,389 12,007 20.0 5.4 (39.1) (39.3) Total Liabilities/Assets 29,067 30,550 20.7 5.1 (100.0) (100.0) Notes: 1. Figures in parentheses are percentages to total liabilities/assets. 2. Y-o-Y variations could be slightly different because absolute numbers have been off to ₹1 crore in the table. 3. Components may not add up to the total due to rounding off. Source: NABARD. 157Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.13: Financial Performance of Primary Co-operative Agriculture and Rural Development Banks (Amount in ₹ crore) Item As during Variation (%) 2017 2018 2016-17 2017-18 1 2 3 4 5 A. Income (i+ii) 2,219 2,464 4.8 11.0 (100.0) (100.0) i. Interest Income 1,629 1,992 -11.1 22.3 (73.4) (80.8) ii. Other Income 560 472 100.0 -15.7 (25.2) (19.1) B. Expenditure (i+ii+iii) 2,824 2,975 12.0 5.3 i. Interest Expended 1,690 1,786 13.3 5.7 (59.8) (60.0) ii. Provisions and Contingencies 596 748 20.0 25.5 (21.1) (25.1) iii. Operating Expenses 538 441 -2.0 -18.0 (19.1) (14.8) of which : Wage Bill 313 330 (11.1) (11.1) C. Profits i. Operating Profits -9 237 - - ii. Net Profits -605 -511 - - Notes: 1. Figures in parentheses are percentages to total income/expenditure. 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹1 crore in the table. 3. Components may not add up to the total due to rounding off. Source: NABARD. 158Appendix TAbles Appendix Table V.14: Asset Quality of Primary Co-operative Agriculture and Rural Development Banks (Amount in ₹ crore) Item As at end- March Variation (%) 2017 2018 2016-17 2017-18 1 2 3 4 5 A. Total NPAs (i+ii+iii) 4,949 6,058 4.3 22.4 i) Sub-standard 2,576 3,367 4.0 30.7 (52.0) (55.5) ii) Doubtful 2,345 2,662 4.5 13.5 (47.3) (43.9) iii) Loss 28 29 3.4 2.4 (0.5) (0.4) B. NPAs to Loans Ratio (%) 33.0 38.0 - - C. Recovery to Demand Ratio (%) 44.3 41.1 - - Notes: 1. Figures in parentheses are percentages to total NPAs. 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ₹ 1 crore in the table. 3. Components may not add up to the total due to rounding off. Source: NABARD. 159Report on Trend and Progress of Banking in India 2018-19 Appendix Table V.15: Financial Indicators: Primary Co-operative Agriculture and Rural Developments Banks (Amount in ₹ lakh) State 2016-17 2017-18 NPAs to Loans Recovery ratio ratio (per cent) (per cent) Profit Loss Profit Loss (At end-June) Number Amount Number Amount Number Amount Number Amount 2017 2018 2017 2018 1 2 3 4 5 6 7 8 9 10 11 12 13 Northern Region 23 1,058 122 46,163 20 853 125 50,635 50.3 57.0 22.1 21.4 Haryana 0 0 19 16,509 0 0 19 23,401 68.6 74.8 15.5 16.4 Himachal Pradesh 0 0 1 972 0 0 1 253 29.9 37.3 58.7 51.6 Punjab 5 194 84 23,914 6 459 83 20,833 45.0 56.3 19.6 19.6 Rajasthan 18 864 18 4,768 14 395 22 6,147 42.5 40.4 33.9 30.1 Central Region - - - - - - - - - - - - Chhattisgarh - - - - - - - - - - - - Madhya Pradesh - - - - - - - - - - - - Eastern Region 8 894 16 2,563 7 965 17 3,960 40.6 32.9 36.7 40.0 Odisha - - - - - - - - - - - - West Bengal 8 894 16 2,563 7 965 17 3,960 40.6 32.9 36.7 40.0 Western Region - - - - - - - - - - - - Maharashtra - - - - - - - - - - - - Southern Region 205 4,789 227 18,532 230 10,925 202 9,252 19.7 27.3 74.2 66.1 Karnataka 23 644 154 8,370 38 1,064 139 6,877 13.3 19.3 50.9 48.9 Kerala 22 914 53 9,898 32 6,630 43 2,111 22.6 31.1 76.3 62.2 Tamil Nadu 160 3,231 20 264 160 3,231 20 264 14.6 14.6 85.3 - All India 236 6,741 365 67,258 257 12,743 344 63,846 33.0 38.4 44.3 41.1 Notes: 1. Components may not add up to the exact total due to rounding off. 2. In Chhattisgarh the Short-term co-operative credit structure merged with Long-term during 2014-15 Also Maharashtra, Madhya Pradesh and Odisha structures are no longer functional. 3. Recovery for the financial year is taken as 30th June. 4. Data for 2016-17 are provisional in respect of Kerala, Karnataka & Tamil Nadu. 5. Data for 2017-18 are provisional in respect of 8 PCARDBs. 160Appendix TAbles Appendix VI.1: Consolidated Balance Sheet of NBFCs-ND-SI (Amount in ₹ crore) Item End- March End- March End- March End- Percentage 2017 2018 2019 September variation 2018- 2019 19 1 2 3 4 5 6 1. Share Capital 98,125 1,08,630 1,21,054 1,26,275 11.4 2. Reserves & Surplus 3,62,769 4,47,413 5,07,549 5,73,026 13.4 3. Public Deposits - - - - - 4. Total Borrowings (A+B) 12,20,328 16,00,053 18,41,850 19,04,685 15.1 A. Secured Borrowings 5,89,283 8,30,689 9,38,234 9,72,403 12.9 A.1. Debentures 2,99,681 4,47,083 4,42,677 4,37,616 -1.0 A.2. Borrowings from Banks 2,14,155 2,86,881 3,74,836 3,92,313 30.7 A.3. Borrowings from FIs 18,946 19,947 25,574 28,116 28.2 A.4. Interest Accrued 15,937 17,285 15,730 16,692 -9.0 A.5. Others 40,564 59,494 79,417 97,665 33.5 B. Un-Secured Borrowings 6,31,045 7,69,364 9,03,616 9,32,283 17.4 B.1. Debentures 3,02,717 3,59,584 3,63,986 3,94,432 1.2 B.2. Borrowings from Banks 38,833 60,665 1,25,967 1,20,892 107.6 B.3. Borrowings from FIs 7,632 8,643 10,055 5,492 16.3 B.4. Borrowings from Relatives 1,647 2,379 3,192 2,631 34.2 B.5. Inter-Corporate Borrowings 40,625 51,828 69,000 79,072 33.1 B.6. Commercial Paper 1,15,510 1,29,569 1,36,357 1,04,477 5.2 B.7. Interest Accrued 16,818 18,743 16,396 19,329 -12.5 B.8. Others 1,07,265 1,37,953 1,78,661 2,05,959 29.5 5. Current Liabilities & Provisions 1,07,905 1,20,535 1,93,136 1,99,650 60.2 Total Liabilities/ Total Assets 17,89,127 22,76,631 26,63,588 28,03,637 17.0 1. Loans & Advances 12,45,373 16,53,217 18,97,527 19,49,198 14.8 1.1. Secured 9,46,915 12,65,582 14,82,651 15,23,298 17.2 1.2. Un-Secured 2,98,458 3,87,635 4,14,877 4,25,900 7.0 2. Investments 3,31,008 4,04,651 4,88,550 5,62,943 20.7 2.1. Govt. Securities 17,244 26,069 39,827 45,204 52.8 2.2. Equity Shares 2,08,686 2,47,723 3,28,395 3,88,722 32.6 2.3. Preference Shares 11,365 11,816 12,753 12,211 7.9 2.4. Debentures & Bonds 40,016 55,677 45,869 37,402 -17.6 2.5. Units of Mutual Funds 36,880 42,104 43,379 53,999 3.0 2.6. Commercial Paper 1,414 2,666 782 960 -70.6 2.7. Other Investments 15,404 18,596 17,546 24,444 -5.6 3. Cash & Bank Balances 73,600 67,386 88,984 1,01,150 32.1 3.1. Cash in Hand 2,091 3,120 6,292 5,235 101.6 3.2. Deposits with Banks 71,509 64,266 82,692 95,915 28.7 4. Other Current Assets 1,12,372 1,21,023 1,46,310 1,49,682 20.9 5. Other Assets 26,773 30,354 42,216 40,664 39.1 Memo Items 1. Capital Market Exposure 2,22,464 2,54,337 2,85,827 3,38,892 12.4 of which: Equity Shares 1,24,942 1,37,512 1,80,261 2,46,129 31.1 2. CME as per cent to Total Assets 12.4 11.2 10.7 12.1 3. Leverage Ratio 2.9 3.1 3.2 3.0 Notes: 1. Data are provisional. 2. Percentage figures are rounded-off. Source: Quarterly returns of NBFCs-ND-SI (₹ 500 crore and above), RBI. 161Report on Trend and Progress of Banking in India 2018-19 Appendix Table VI.2: Consolidated Balance Sheet of NBFCs-D (Amount in ₹ crore) Item End- March End- March End- March End- Percentage 2017 2018 2019 September variation 2019 2018-19 1 2 3 4 5 6 1. Share Capital 3,132 3,278 5,222 6,897 59.3 2. Reserves & Surplus 37,904 51,061 61,982 66,965 21.4 3. Public Deposits 30,625 30,439 40,058 47,710 31.6 4. Total Borrowings (A+B) 1,69,248 2,11,649 2,70,154 2,83,886 27.6 A. Secured Borrowings 1,35,246 1,67,052 2,21,138 2,32,289 32.4 A.1. Debentures 66,340 82,964 97,278 92,612 17.3 A.2. Borrowings from Banks 59,278 70,029 1,06,083 1,17,280 51.5 A.3. Borrowings from FIs 3,071 3,455 4,976 4,984 44.0 A.4. Interest Accrued 4,219 5,193 3,119 2,967 -39.9 A.5. Others 2,337 5,410 9,682 14,446 79.0 B. Un-Secured Borrowings 34,002 44,597 49,016 51,597 9.9 B.1. Debentures 153 473 1,892 2,896 300.0 B.2. Borrowings from Banks 1,859 1,327 151 300 -88.6 B.3. Borrowings from FIs - - - - B.4. Borrowings from Relatives 102 105 90 97 -14.4 B.5. Inter-Corporate Borrowings 1,374 5,195 7,390 7,868 42.3 B.6. Commercial Paper 14,796 18,173 18,112 18,964 -0.3 B.7. Interest Accrued 4,172 4,197 3,645 3,598 -13.1 B.8. Others 11,547 15,126 17,736 17,873 17.3 5. Current Liabilities & Provisions 33,730 44,732 44,476 48,547 -0.6 Total Liabilities/ Total Assets 2,74,638 3,41,159 4,21,892 4,54,006 23.7 1. Loans and Advances 2,44,065 3,09,242 3,79,072 4,05,013 22.6 1.1. Secured 1,90,213 2,44,308 3,07,151 3,28,060 25.7 1.2. Un-Secured 53,852 64,933 71,922 76,952 10.8 2. Investments 12,712 11,958 23,893 24,742 99.8 2.1. Govt. Securities 3,783 3,610 4,476 5,766 24.0 2.2. Equity Shares 2,892 4,440 6,902 8,511 55.5 2.3. Preference Shares 3 695 225 240 -67.6 2.4. Debentures & Bonds 1,161 1,668 1,355 410 -18.8 2.5. Units of Mutual Funds 3,566 336 4,806 7,778 1,330.3 2.6. Commercial Paper 380 494 857 24 73.4 2.7. Other Investments 927 715 5,272 2,013 637.5 3. Cash & Bank Balances 8,693 8,796 9,792 12,006 11.3 3.1. Cash in Hand 337 326 447 350 37.1 3.2. Deposits with Banks 8,356 8,470 9,344 11,656 10.3 4. Other Current Assets 7,694 9,433 7,532 10,480 -20.2 5. Other Assets 1,474 1,729 1,603 1,765 -7.3 Memo Items 1. Capital Market Exposure 4,417 8,331 6,605 7,322 -20.7 of which: Equity Shares 140 437 503 501 15.2 2. CME as per cent to Total Assets 1.6 2.4 1.6 1.6 3. Leverage Ratio 5.7 5.3 5.3 5.1 Notes: 1. Data are provisional. 2. Percentage figures are rounded-off. Source: Quarterly returns of NBFCs-D, RBI. 162Appendix TAbles Appendix Table VI.3: Credit to Various Sectors by NBFCs (Amount in ₹ crore) Items End- March End- March End- Percentage 2018 2019 September Variation 2019 2018-19 1 2 3 4 5 I. Gross Advances (II + III) 19,62,459 22,76,600 23,54,211 16.0 II. Food Credit 241 230 93 -4.7 III. Non-Food Credit ( 1 to 5) 19,62,217 22,76,370 23,54,118 16.0 1. Agriculture and Allied Activities 46,821 70,189 61,967 49.9 2. Industry (2.1 to 2.4) 11,22,496 12,55,317 13,33,811 11.8 2.1 Micro and Small 64,455 54,597 59,713 -15.3 2.2 Medium 28,311 22,979 19,981 -18.8 2.3 Large 5,46,041 6,32,795 6,37,698 15.9 2.4 Others, if any, Please specify 4,83,689 5,44,946 6,16,420 12.7 3. Services (3.1 to 3.10) 3,16,872 3,67,167 3,42,481 15.9 3.1 Transport Operators 19,346 17,994 19,414 -7.0 3.2 Computer Software 1,262 1,552 1,111 23.0 3.3 Tourism, Hotel and Restaurants 5,893 8,969 8,743 52.2 3.4 Shipping 582 498 191 -14.5 3.5 Professional Services 7,779 8,535 7,360 9.7 3.6 Trade 34,318 37,547 36,747 9.4 3.6.1 Wholesale Trade (other than Food Procurement) 7,261 8,571 8,898 18.0 3.6.2 Retail Trade 27,057 28,976 27,850 7.1 3.7 Commercial Real Estate 1,25,178 1,48,501 1,29,359 18.6 3.8 NBFCs 24,074 29,988 27,421 24.6 3.9 Aviation 690 1,153 715 67.1 3.10 Other Services 97,750 1,12,430 1,11,420 15.0 4. Retail Loans (4.1 to 4.8) 3,59,583 4,47,496 4,74,899 24.4 4.1 Housing Loans (incl. priority sector Housing) 13,263 15,491 17,862 16.8 4.2 Consumer Durables 8,626 5,094 4,917 -40.9 4.3 Credit Card Receivables 17,436 22,789 28,571 30.7 4.4 Vehicle/Auto Loans 1,64,471 1,99,926 2,08,527 21.6 4.5 Education Loans 7,202 8,777 10,032 21.9 4.6 Advances against Fixed Deposits (incl. FCNR(B), etc.) - - - 4.7 Advances to Individuals against Shares, Bonds, etc. 16,101 16,356 13,029 1.6 4.8 Other Retail Loans 1,32,483 1,79,063 1,91,963 35.2 5. Other Non-food Credit 1,16,445 1,36,201 1,40,959 17.0 Notes: 1. Data are provisional. 2. This format of reporting of credit to various sectors was introduced from March 31, 2017. Hence, the comparable data for previous years are not available. Source: Supervisory Returns, RBI. 163Report on Trend and Progress of Banking in India 2018-19 Appendix Table VI.4: Financial Performance of NBFCs - ND-SI (Amount in ₹ crore) Items 2017-18 2018-19 H1: 2019-20 1 2 3 4 A. Total Income (i + ii) 2,52,583 2,75,365 1,55,819 (i) Fund Based Income 2,35,868 2,57,381 1,45,976 (93.4) (93.5) (93.7) (ii) Fee Based Income 16,715 17,984 9,842 (6.6) (6.5) (6.3) B. Expenditure (i + ii + iii) 2,03,129 2,24,288 1,26,536 (i) Financial Expenditure 1,13,727 1,33,480 78,468 (56.0) (59.5) (62.0) of which Interest payment 45,464 64,955 40,263 (22.4) (29.0) (31.8) (ii) Operating Expenditure 33,973 39,369 22,973 (16.7) (17.6) (18.2) (iii) Others 55,429 51,439 25,095 (27.3) (22.9) (19.8) C. Tax Provisions 14,430 16,041 8,843 D. Profit Before Tax 49,454 51,076 29,236 E. Net Profit 35,023 35,035 20,394 F. Total Assets 22,76,631 26,63,588 28,03,637 G. Financial Ratios (as Per cent of Total Assets) (i) Income 11.1 10.3 5.6 (ii) Fund Income 10.4 9.7 5.2 (iii) Fee Income 0.4 0.3 0.2 (iv) Expenditure 8.9 8.4 4.5 (v) Financial Expenditure 5.0 5.0 2.8 (vi) Operating Expenditure 1.5 1.5 0.8 (vii) Tax Provision 0.6 0.6 0.3 (viii) Net Profit 1.5 1.3 0.7 H. Cost to Income Ratio 80.4 81.5 81.2 Notes: 1. Data are provisional. 2. Figures in parentheses are share (in per cent) to respective total. Source: Quarterly Returns of NBFCs-ND-SI, RBI. 164Appendix TAbles Appendix Table VI.5: Financial Performance of NBFCs - Deposit Taking (Amount in ₹ crore) Items 2017-18 2018-19 H1: 2019-20 1 2 3 4 A. Total Income (i + ii) 47,679 61,478 34,569 i. Fund Based Income 46,814 59,935 33,485 (98.2) (97.5) (96.9) ii. Fee Based Income 864 1,542 1,084 (1.8) (2.5) (3.1) B. Expenditure (i + ii + iii) 37,092 44,680 25,844 i. Financial Expenditure 20,142 26,235 14,918 (54.3) (58.7) (57.7) of which Interest payment 4,854 5,527 3,015 (13.1) (12.4) (11.7) ii. Operating Expenditure 11,187 11,598 7,995 (30.2) (26.0) (30.9) iii. Others 5,763 6,847 2,932 (15.5) (15.3) (11.3) C. Tax Provisions 3,621 5,568 2,580 D. Profit Before Tax 10,587 16,798 8,725 E. Net Profit 6,966 11,230 6,145 F. Total Assets 3,41,159 4,21,892 4,54,006 G. Financial Ratios (as Per cent of Total Assets) (i) Income 14.0 14.6 7.6 (ii) Fund Income 13.7 14.2 7.4 (iii) Fee Income 0.3 0.4 0.2 (iv) Expenditure 10.9 10.6 5.7 (v) Financial Expenditure 5.9 6.2 3.3 (vi) Operating Expenditure 3.3 2.7 1.8 (vii) Tax Provision 1.1 1.3 0.6 (viii) Net Profit 2.0 2.7 1.4 H. Cost to Income Ratio 77.8 72.7 74.8 Notes: 1. Data are provisional. 2. Figures in parentheses are share (in per cent) to respective total. Source: Quarterly Returns of NBFCs-D, RBI. 165Report on Trend and Progress of Banking in India 2018-19 166 yb desrubsiD dna denoitcnaS ecnatsissA laicnaniF :6.IV elbaT xidneppA )deunitnoC( snoitutitsnI laicnaniF )erorc ₹ ni tnuomA( noitpircsbuS tceriD dna gnitirwrednU *snaoL snoitutitsnI 9102 peS-rpA 8102 peS-rpA 91-8102 81-7102 9102 peS-rpA 8102 peS-rpA 91-8102 81-7102 D S D S D S D S D S D S D S D S 71 61 51 41 31 21 11 01 9 8 7 6 5 4 3 2 1 132 858 415 031,1 245 434,1 443 276 390,36,1 638,56,1 503,59,1 723,23,2 580,51,4 237,05,4 784,28,3 275,32,4 laicnanif aidnI llA .A )4 ot 1( snoitutitsni 0 0 0 0 0 0 0 0 790,38 880,98 915,41,1 450,74,1 457,18,2 535,30,3 514,32,2 937,81,2 DRABAN .1 132 858 415 031,1 245 434,1 443 276 107,65 879,55 432,45 341,35 364,57 649,37 096,85 867,85 @IBDIS .2 0 0 0 0 0 0 0 0 624,61 784,61 308,22 463,12 066,63 100,83 535,86 628,79 knaB MIXE .3 0 0 0 0 0 0 0 0 968,6 382,4 947,3 567,01 702,12 052,53 748,13 932,84 BHN .4 0 0 35 35 35 35 871 871 303 732 121 325 105 570,1 057 923,1 laicnanif desilaicepS .B )7 dna 6 ,5( snoitutitsni 0 0 0 0 0 0 0 0 1 0 9 01 01 01 75 75 FCVI .5 - - - - - - - - - - - - - - - - erutnev ICICI .6 0 0 35 35 35 35 871 871 103 732 111 315 094 560,1 396 272,1 ICFT .7 624,83 519,24 665,21 007,41 377,15 352,86 702,36 058,48 11 000,4 74 0 86 58 994 818 snoitutitsni tnemtsevnI .C )9 dna 8( 624,83 519,24 665,21 007,41 377,15 352,86 702,36 058,48 11 000,4 74 0 86 58 994 818 CIL .8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CIG .9 756,83 377,34 231,31 388,51 863,25 047,96 927,36 007,58 604,36,1 370,07,1 374,59,1 058,23,2 356,51,4 298,15,4 637,38,3 917,52,4 snoitutitsnI laicnaniF .D )C+B+A( .. .. .. .. 0 0 0 0 .. .. .. .. 118,2 404,4 819,2 677,3 snoitutitsni level etatS .E )11 dna 01( .. .. .. .. 0 0 0 0 .. .. .. .. 118,2 404,4 819,2 677,3 ^sCFS .01 .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. sCDIS .11 756,83 377,34 231,31 388,51 863,25 047,96 927,36 007,58 604,36,1 370,07,1 374,59,1 058,23,2 464,81,4 692,65,4 456,68,3 594,92,4 lla yb ecnatsissa latoT .F )E+D( snoitutitsni laicnanif .lufgninaeM toN :.m.n .elbaliavA toN : .. liN :_ .stnemesrubsiD :D .snoitcnaS : S .snaol ycnerruc ngierof dna snaol eepur edulcni snaoL : * ERIPSA dna )SFF( sputratS rof sdnuF fo dnuF morf ylevisulcxe era 0202 YF dna 9102 YF gnirud sFIA ot snoitcnas/stnemtimmoc eht ,noitpircsbus tcerid dna gnitirwrednu fo esac nI : @ stnemesrubsid ehT .smron erusopxe IBR rednu llaf ton seod hcihw smeti ecnalab-ffo era stnemtimmoc esehT .reganaM dnuF eht si IBDIS erehw semehcs tvoG era esehT .dnuF dna SFF rednu erorc 27.203 ₹ fo tnemesrubsid fo sesirpmoc erorc 36.315 ₹ fo tnuoma desrubsid eht ,9102 YF gniruD .lacitreV snoitarepO FCV yb detarepo semehcs lla ot sniatrep .ERIPSA dna SFF rednu erorc 20.371 ₹ fo tnemesrubsid fo sesirpmoc erorc 08.032 ₹ fo tnuoma desrubsid eht ,0202 YF gnirud ,ylralimiS .ERIPSA .seetnaraug edulcni srehtO : # .sCFS enin ot sniatrep ataD : ^ .lanoisivorp era ataD .1 :setoN .ffo gnidnuor ot eud latot eht ot pu dda ton yam stnenopmoC .2 .snoitutitsni laicnanif evitcepser ehT :ecruoSAppendix TAbles Appendix Table VI.6: Financial Assistance Sanctioned and Disbursed by Financial Institutions (Continued) (Amount in ₹ crore) Institutions Others# 2017-18 2018-19 Apr-Sep 2018 Apr-Sep 2019 S D S D S D S D 1 18 19 20 21 22 23 24 25 A. All India financial institutions 5,877 13,125 4,840 15,970 3,250 15,461 5,625 18,568 (1 to 4) 1. NABARD 584 172 335 192 95 66 87 70 2. SIDBI@ 25 25 6 6 0 0 0 0 3. EXIM Bank 5,268 12,262 4,499 13,912 3,155 13,535 5,538 15,364 4. NHB** 0 667 0 1,860 0 1,859 0 3,133 B. Specialised financial institu- 0 0 0 0 0 0 0 0 tions (5, 6 and 7) 5. IVCF 0 0 0 0 0 0 0 0 6. ICICI venture - - - - - - - - 7. TFCI 0 0 0 0 0 0 0 0 C. Investment institutions 515 86 961 64 30 41 0 26 (8 and 9) 8. LIC 515 86 961 64 30 41 0 26 9. GIC 0 0 0 0 0 0 0 0 D. Financial institutions 6,392 13,212 5,801 16,034 3,280 15,501 5,625 18,594 (A+B+C) E. State level institutions (10 2 2 12 12 .. .. .. .. and 11) 10. SFCs^ 2 2 12 12 .. .. .. .. 11. SIDCs .. .. .. .. .. .. .. .. F. Total assistance by All finan- 6,394 13,213 5,813 16,046 3,280 15,501 5,625 18,594 cial institutions (D+E) S : Sanctions. D: Disbursements. _: Nil .. : Not Available. n.m.: Not Meaningful. * : Loans include rupee loans and foreign currency loans. @ : In case of underwriting and direct subscription, the commitments/sanctions to AIFs during FY 2019 and FY 2020 are exclusively from Fund of Funds for Startups (FFS) and ASPIRE Fund. These are Govt schemes where SIDBI is the Fund Manager. These commitments are off-balance items which does not fall under RBI exposure norms. The disbursements pertains to all schemes operated by VCF Operations Vertical. During FY 2019, the disbursed amount of ₹ 513.63 crore comprises of disbursement of ₹ 302.72 crore under FFS and ASPIRE. Similarly, during FY 2020, the disbursed amount of ₹ 230.80 crore comprises of disbursement of ₹ 173.02 crore under FFS and ASPIRE. # : Others include guarantees. ^ : Data pertains to nine SFCs. Notes: 1. Data are provisional. 2. Components may not add up to the total due to rounding off. Source: The respective financial institutions. 167Report on Trend and Progress of Banking in India 2018-19 Appendix Table VI.6: Financial Assistance Sanctioned and Disbursed by Financial Institutions (Concluded) (Amount in ₹ crore) Institutions Total Percentage variation 2017-18 2018-19 Apr-Sep 2018 Apr-Sep 2019 2018-19 Apr-Sep 2019 S D S D S D S D S D S D 1 26 27 28 29 30 31 32 33 34 35 36 37 A. All India financial 4,30,121 3,95,956 4,57,006 4,31,596 2,36,707 2,11,279 1,72,319 1,81,891 6.3 9.0 -27.2 -13.9 institutions (1 to 4) 1. NABARD 2,19,323 2,23,587 3,03,870 2,81,947 1,47,149 1,14,585 89,174 83,167 38.5 26.1 -39.4 -27.4 2. SIDBI@ 59,465 59,059 75,386 76,011 54,273 54,748 56,835 56,932 26.8 28.7 4.7 4.0 3. EXIM Bank 1,03,095 80,796 42,500 50,572 24,519 36,338 22,026 31,790 -58.8 -37.4 -10.2 -12.5 4. NHB** 48,239 32,514 35,250 23,067 10,765 5,609 4,283 10,002 -26.9 -29.1 -60.2 78.3 B. Specialised financial 1,507 929 1,127 553 576 173 237 303 -25.2 -40.4 -58.8 74.6 institutions(5, 6 and 7) 5. IVCF 57 57 10 10 10 9 0 1 -82.3 -82.3 -100.0 -85.5 6. ICICI venture - - - - - - - - - - - - 7. TFCI 1,451 871 1,117 543 566 164 237 301 -23.0 -37.7 -58.1 83.8 C. Investment institutions 86,184 63,793 69,300 51,905 14,730 12,654 46,915 38,463 -19.6 -18.6 218.5 204.0 (8 and 9) 8. LIC 86,184 63,793 69,300 51,905 14,730 12,654 46,915 38,463 -19.6 -18.6 218.5 204.0 9. GIC 0 0 0 0 0 0 0 0 n.m. n.m. n.m. n.m. D. Financial institutions 5,17,812 4,60,677 5,27,433 4,84,055 2,52,013 2,24,106 2,19,471 2,20,657 1.9 5.1 -12.9 -1.5 (A+B+C) E. State level institutions 3,778 2,919 4,417 2,824 .. .. .. .. 16.9 -3.3 .. .. (10 and 11) 10. SFCs^ 3,778 2,919 4,417 2,824 .. .. .. .. 16.9 -3.3 .. .. 11. SIDCs .. .. .. .. .. .. .. .. .. .. .. .. F. Total assistance by All 5,21,590 4,63,597 5,31,850 4,86,878 2,52,013 2,24,106 2,19,471 2,20,657 2.0 5.0 -12.9 -1.5 financial institutions (D+E) S : Sanctions. D: Disbursements. _: Nil .. : Not Available. n.m.: Not Meaningful. * : Loans include rupee loans and foreign currency loans. @ : In case of underwriting and direct subscription, the commitments/sanctions to AIFs during FY 2019 and FY 2020 are exclusively from Fund of Funds for Startups (FFS) and ASPIRE Fund. These are Govt schemes where SIDBI is the Fund Manager. These commitments are off-balance items which does not fall under RBI exposure norms. The disbursements pertains to all schemes operated by VCF Operations Vertical. During FY 2019, the disbursed amount of ₹ 513.63 crore comprises of disbursement of ₹ 302.72 crore under FFS and ASPIRE. Similarly, during FY 2020, the disbursed amount of ₹ 230.80 crore comprises of disbursement of ₹ 173.02 crore under FFS and ASPIRE. # : Others include guarantees. ^ : Data pertains to nine SFCs. Notes: 1. Data are provisional. 2. Components may not add up to the total due to rounding off. Source: The respective financial institutions. 168Appendix TAbles Appendix Table VI.7 Financial Performance of Primary Dealers (Continued) (Amount in ₹ crore) Sr. Name of the primary dealers Year Income No. Interest Trading Other Total income profit income income (including discount income) 1 2 3 4 5 6 7 1 STCI Primary Dealer Ltd. 2017-18 448 2 2 452 2018-19 582 63 8 653 H1:2019-20 310 121 18 449 2 SBI DFHI Ltd. 2017-18 351 -8 5 348 2018-19 457 41 4 502 H1:2019-20 304 41 2 347 3 ICICI Securities Primary Dealership Ltd. 2017-18 1,034 7 68 1,109 2018-19 1,086 -307 39 819 H1:2019-20 619 370 6 995 4 PNB Gilts Ltd. 2017-18 402 10 -2 410 2018-19 496 -47 2 451 H1:2019-20 351 29 -5 375 5 Morgan Stanley India Primary Dealer Pvt. Ltd. 2017-18 306 10 2 319 2018-19 654 -46 5 613 H1:2019-20 374 4 1 379 6 Nomura Fixed Income Securities Pvt. Ltd. 2017-18 332 -19 1 314 2018-19 391 -17 3 376 H1:2019-20 230 43 0 274 7 Goldman Sachs (India) Capital markets Pvt. Ltd. 2017-18 93 -5 1 89 2018-19 133 -31 3 104 H1:2019-20 95 11 0 106 Total 2017-18 2,966 -2 78 3,042 2018-19 3,799 -344 63 3,518 H1:2019-20 2,282 619 24 2,924 Notes: 1. Deutsche securities had surrendered its PD license w.e.f. March 28, 2014. 2. All amounts are rounded off to the nearest crore. Source: Returns submitted by the Primary Dealers. 169Report on Trend and Progress of Banking in India 2018-19 Appendix Table VI.7 Financial Performance of Primary Dealers (Concluded) (Amount in ₹ crore) Sr. Name of the primary Year Expenditure Profit Profit Return on No. dealers before tax after tax net worth Interest Other Total (per cent) expenses expenses expenditure 1 2 3 8 9 10 11 12 13 1 STCI Primary Dealer Ltd. 2017-18 366 27 393 59 38 7.7 2018-19 505 122 627 26 17 3.5 H1:2019-20 248 16 264 184 148 27.5 2 SBI DFHI Ltd. 2017-18 261 37 298 50 32 3.6 2018-19 369 33 401 96 63 6.9 H1:2019-20 224 29 253 131 98 9.5 3 ICICI Securities Primary 2017-18 824 115 939 170 110 11.2 Dealership Ltd. 2018-19 868 106 974 122 78 8.3 H1:2019-20 455 60 516 272 210 19.2 4 PNB Gilts Ltd. 2017-18 331 24 355 55 37 4.1 2018-19 403 22 426 82 72 8.2 H1:2019-20 247 82 329 60 43 4.5 5 Morgan Stanley India Primary 2017-18 230 20 249 70 45 7.2 Dealer Pvt. Ltd. 2018-19 513 25 538 -49 -34 -4.6 H1:2019-20 269 12 281 103 78 7.6 6 Nomura Fixed Income 2017-18 238 38 276 38 24 3.6 Securities Pvt. Ltd. 2018-19 295 33 328 150 98 13.5 H1:2019-20 162 19 181 100 71 8.5 7 Goldman Sachs (India) 2017-18 56 24 80 10 6 1.1 Capital markets Pvt. Ltd. 2018-19 85 23 108 16 10 1.9 H1:2019-20 62 12 74 23 18 3.3 8 Total 2017-18 2,306 285 2,590 452 292 5.7 2018-19 3,038 363 3,402 444 304 5.8 H1:2019-20 1,668 230 1,898 874 667 12.3 Notes: 1. Deutsche securities had surrendered its PD license w.e.f. March 28, 2014. 2. All amounts are rounded off to the nearest crore. Source: Returns submitted by the Primary Dealers. 170Appendix TAbles Appendix Table VI.8: Select Financial Indicators of Primary Dealers (Continued) (Amount in ₹ crore) Sr. Name of the primary Capital funds CRAR ( Per cent) No. dealers (Tier I + Tier II+ Eligible Tier III) 2015-16 2016-17 2017-18 2018-19 H1:2019-20 2015-16 2016-17 2017-18 2018-19 H1:2019-20 1 2 3 4 5 6 7 8 9 10 11 12 1 STCI Primary Dealer Ltd. 367 456 500 493 601 24 39 34 23 38 2 SBI DFHI Ltd. 1,001 1,046 900 954 1,041 38 91 69 67 40 3 ICICI Securities 1,223 1,338 1,400 1,453 1,514 25 26 24 28 45 Primary Dealership Ltd. 4 PNB Gilts Ltd. 700 842 900 886 897 70 51 67 37 24 5 Morgan Stanley India 528 589 600 919 1,041 143 82 51 62 71 Primary Dealer Pvt. Ltd 6 Nomura Fixed Income 575 666 700 797 855 53 52 58 40 35 Securities Pvt. Ltd. 7 Goldman Sachs (India) 466 532 500 547 566 164 155 144 133 313 Capital Markets Pvt. Ltd. Total 4,859 5,469 5,500 6,049 6,514 42 47 43 40 43 Note: All amounts are rounded off to the nearest crore. Source: Returns submitted by the Primary Dealers. 171Report on Trend and Progress of Banking in India 2018-19 Appendix Table VI.8: Select Financial Indicators of Primary Dealers (Concluded) (Amount in ₹ crore) Sr. Name of the primary Stock of government securities and treasury bills Total assets No. dealers (Market value) (Net of current liabilities and provisions) 2015-16 2016-17 2017-18 2018-19 H1:2019-20 2015-16 2016-17 2017-18 2018-19 H1:2019-20 1 2 13 14 15 16 17 18 19 20 21 22 1 STCI Primary Dealer Ltd. 4,208 3,551 3,600 8,219 7,427 372 5,340 7,700 9,361 9,112 2 SBI DFHI Ltd. 4,166 1,974 2,000 4,955 6,627 1,002 3,025 5,600 7,152 9,887 3 ICICI Securities Primary 12,279 6,590 6,600 7,723 13,690 14,461 10,827 16,500 11,431 16,304 Dealership Ltd. 4 PNB Gilts Ltd. 3,382 3,227 3,200 6,584 10,416 732 4,357 5,200 9,141 12,038 5 Morgan Stanley India 1,905 1,967 2,000 9,891 10,529 2,027 3,383 7,600 10,264 10,711 Primary Dealer Pvt. Ltd 6 Nomura Fixed Income 1,873 1,202 1,200 3,938 4,639 575 2,718 3,500 5,248 7,142 Securities Pvt. Ltd. 7 Goldman Sachs (India) 2,264 1,075 1,100 2,411 2,449 2,391 1,508 1,700 2,535 2,960 Capital Markets Pvt. Ltd. Total 30,077 19,585 19,700 43,722 55,777 21,560 31,157 47,800 55,133 68,155 Note: All amounts are rounded off to the nearest crore. Source: Returns submitted by the Primary Dealers. 172REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2018-19 भारत म� ब�िकं ग क विृ ि वं गित बं धं ी रपोट� 2018-19 भारतीय रज़व� ब�क भारत म� ब�िकं ग क विृ ि व ं गित बं धं ी रपोट� 2018-19 REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2018-19 वािम�व � भारतीय रज़व� ब�क, मंबु ई भारतीय रज़व� ब�क, शहीद भगत ि हं माग�, फोट�, मंबु ई - 400 001 के िल डॉ. नेहल . हेरवाडकर ारा कािशत �र �नके ारा जयतं ि टं री ल लपी, ��2��4, िगरगांव रोड, मरु लीधर मंिदर क�पा��ड, �ाकुर ार पो ट �िफ के पा , मंबु ई - 400 002 म� �िभकि�पत �र मिु�त � भारतीय रज़व� ब�क RESERVE BANK OF INDIA