Report on Trend and Progress of Banking in India 2021-22

Report on Trend and Progress of Banking in India for the year ended March 31, 2022 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 2021-22 RESERVE BANK OF INDIA© Reserve Bank of India 2022 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 ACME Packs & Prints (I) Pvt. Ltd., A Wing, Gala No.73, Virwani Industrial Estate, Goregaon - East, Mumbai - 400 063.Contents Sr. No. Particulars Page No. Chapter I: Perspectives 1-7 Chapter II: Global Banking Developments 8-24 1 Introduction ...................................................................................................... 8 2 Global Macroeconomic Conditions .................................................................... 8 3 Global Banking Policy Developments ................................................................ 12 4 Performance of the Global Banking Sector ........................................................ 18 5 World’s Largest Banks ....................................................................................... 23 6 Conclusion ........................................................................................................ 24 Chapter III: Policy Environment 25-43 1 Introduction ...................................................................................................... 25 2 Monetary Policy and Liquidity Management ...................................................... 25 3 Regulatory Policies ............................................................................................ 29 4 Supervisory Policies .......................................................................................... 37 5 Technological Innovations ................................................................................. 38 6 Financial Markets and Foreign Exchange .......................................................... 39 7 Credit Delivery and Financial Inclusion ............................................................. 40 8 Consumer Protection and Retail Participation ................................................... 41 9 Payments and Settlement Systems .................................................................... 42 10 Overall Assessment ........................................................................................... 43 Chapter IV: Operations and Performance of Commercial Banks 44-94 1 Introduction ...................................................................................................... 44 2 Balance Sheet Analysis ...................................................................................... 44 3 Financial Performance ....................................................................................... 51 4 Soundness Indicators ........................................................................................ 56 5 Sectoral Bank Credit: Distribution and NPAs .................................................... 65 6 Ownership Pattern in Commercial Banks .......................................................... 72 7 Corporate Governance ...................................................................................... 73 8 Foreign Banks’ Operations in India and Overseas Operations of Indian Banks . 74 9 Payment Systems and Scheduled Commercial Banks ....................................... 75 10 Consumer Protection ......................................................................................... 78 vSr. No. Particulars Page No. 11 Financial Inclusion ............................................................................................ 80 12 Regional Rural Banks ........................................................................................ 87 13 Local Area Banks .............................................................................................. 89 14 Small Finance Banks ........................................................................................ 90 15 Payments Banks ................................................................................................ 91 16 Overall Assessment ........................................................................................... 94 Chapter V: Developments in Co-operative Banking 95-116 1 Introduction ...................................................................................................... 95 2 Structure of the Co-operative Banking Sector ................................................... 95 3 Urban Co-operative Banks ................................................................................ 97 4 Rural Co-operatives .......................................................................................... 108 5 Overall Assessment ........................................................................................... 116 Chapter VI: Non-Banking Financial Institutions 117-151 1 Introduction ...................................................................................................... 117 2 Non-Banking Financial Companies .................................................................... 119 3 All India Financial Institutions .......................................................................... 143 4 Primary Dealers ................................................................................................ 148 5 Overall Assessment ........................................................................................... 151 viList of Boxes Sr. No. Particulars Page No. II.1 Impact of Financial Conditions on Banking Sector Risk ....................................... 10 III.1 Inflation Volatility and Credit Growth ................................................................... 27 III.2 Survey on Climate Risk and Sustainable Finance ................................................. 32 III.3 Review of Regulatory Framework for ARCs........................................................... 36 IV.1 Impact of Bank Profitability on Financial Stability................................................ 52 IV.2 Impact of Monetary Policy on Bank Profitability ................................................... 54 IV.3 Bank Herding and Systemic Risk ......................................................................... 66 V.1 Determinants of Profitability of Scheduled Urban Co-operative Banks ................. 107 VI.1 New Regulatory Framework for NBFCs ................................................................ 120 viiList of Tables Sr. No. Particulars Page No. III.1 Large Exposure Framework for NBFC-Upper Layer .............................................. 33 III.2 Provisioning for Standard Assets by NBFCs-UL .................................................... 34 IV.1 Consolidated Balance Sheet of Scheduled Commercial Banks .............................. 45 IV.2 Investments of SCBs ............................................................................................. 48 IV.3 Bank Group-wise Maturity Profile of Select Liabilities /Assets ............................... 49 IV.4 Trends in Income and Expenditure of Scheduled Commercial Banks ................... 53 IV.5 Cost of Funds and Returns on Funds - Bank Group-wise ...................................... 56 IV.6 Component-wise Capital Adequacy of SCBs .......................................................... 56 IV.7 Resources Raised by Banks through Private Placements ....................................... 58 IV.8 Net Stable Funding Ratio ....................................................................................... 58 IV.9 Movement in Non-Performing Assets ..................................................................... 60 IV.10 Classification of Loan Assets by Bank Group ........................................................ 60 IV.11 NPAs of SCBs Recovered through Various Channels .............................................. 62 IV.12 Details of Financial Assets Securitised by ARCs .................................................... 63 IV.13 Frauds in Various Banking Operations Based on the Date of Reporting ................ 64 IV.14 Frauds in Various Banking Operations Based on the Date of Occurrence .............. 64 IV.15 Enforcement Actions ............................................................................................. 65 IV.16 Sectoral Deployment of Gross Bank Credit by SCBs ............................................. 65 IV.17 Credit Flow to the MSME sector by SCBs .............................................................. 69 IV.18 Priority Sector Lending by Banks .......................................................................... 69 IV.19 Weighted Average Premium on Various Categories of PSLCs ................................. 70 IV.20 Sector-wise GNPAs of Banks ................................................................................. 71 IV.21 Independent Directors on various committees of the board .................................. 74 IV.22 Operations of Foreign Banks in India .................................................................... 74 IV.23 Payment Systems Indicators .................................................................................. 76 IV.24 Number of ATMs ................................................................................................... 77 IV.25 Geographical Distribution of ATMs: Bank Group-wise .......................................... 78 IV.26 Nature of Complaints at RBIOs ............................................................................. 79 IV.27 Bank Group-wise Insured Deposits ....................................................................... 80 IV.28 Progress in Financial Inclusion Plan ...................................................................... 83 IV.29 Tier-wise Break-up of Newly Opened Bank Branches by SCBs .............................. 85 viiiSr. No. Particulars Page No. IV.30 Progress in MSME Financing through TReDS ....................................................... 86 IV.31 Consolidated Balance Sheet of Regional Rural Banks ............................................ 88 IV.32 Purpose-wise Outstanding Advances by RRBs ....................................................... 88 IV.33 Financial Performance of Regional Rural Banks .................................................... 88 IV.34 PSLC Transactions of RRBs .................................................................................. 89 IV.35 Profile of Local Area Banks ................................................................................... 89 IV.36 Financial Performance of Local Area Banks .......................................................... 90 IV.37 Consolidated Balance Sheet of Small Finance Banks ............................................ 91 IV.38 Purpose-wise Outstanding Advances by Small Finance Banks .............................. 91 IV.39 Financial Performance of Small Finance Banks ..................................................... 91 IV.40 Consolidated Balance Sheet of Payments Banks .................................................... 92 IV.41 Financial Performance of Payments Banks ............................................................ 92 IV.42 Select Financial Ratios of Payments Banks ............................................................ 93 IV.43 Remittances through Payments Banks .................................................................. 93 V.1 Share in Credit Flow to Agriculture ....................................................................... 97 V.2 Tier-wise Distribution of Urban Co-operative Banks ............................................. 98 V.3 Balance Sheet of Urban Co-operative Banks ......................................................... 99 V.4 Distribution of UCBs by size of Deposits and Advances......................................... 101 V.5 Investments by Urban Co-operative Banks ............................................................ 102 V.6 Rating-wise Distribution of UCBs .......................................................................... 103 V.7 CRAR-wise Distribution of UCBs ........................................................................... 103 V.8 Component-wise Capital Adequacy of UCBs .......................................................... 104 V.9 Non-performing Assets of UCBs ............................................................................ 104 Financial Performance of Scheduled and Non-scheduled Urban Co-operative- V.10 Banks .................................................................................................................... 105 V.11 Select Profitability Indicators of UCBs ................................................................... 106 V.12 Composition of Credit to Priority Sectors by UCBs ............................................... 106 V.13 A Profile of Rural Co-operatives ............................................................................ 109 V.14 Liabilities and Assets of State Co-operative Banks ................................................ 111 V.15 Select Balance Sheet Indicators of Scheduled State Co-operative Banks ............... 111 V.16 Financial Performance of State Co-operative Banks .............................................. 112 V.17 Soundness Indicators of State Co-operative Banks ............................................... 112 ixSr. No. Particulars Page No. V.18 Liabilities and Assets of District Central Co-operative Banks ................................ 113 V.19 Financial Performance of District Central Co-operative Banks .............................. 113 V.20 Soundness Indicators of District Central Co-operative Banks ............................... 114 VI.1 Classification of NBFCs by Activity under the New Regulatory Framework ............ 120 VI.2 Ownership Pattern of NBFCs ................................................................................. 122 VI.3 Abridged Balance Sheet of NBFCs ......................................................................... 123 VI.4 Major Components of Liabilities and Assets of NBFCs-ND-SI by Classification ..... 125 VI.5 Sectoral Credit Deployment by NBFCs .................................................................. 128 VI.6 Sources of Borrowings of NBFCs .......................................................................... 129 VI.7 Financial Parameters of the NBFC Sector .............................................................. 134 VI.8 Ownership Pattern of HFCs ................................................................................... 140 VI.9 Consolidated Balance Sheet of HFCs ..................................................................... 140 VI.10 Financials Parameters of HFCs ............................................................................. 142 VI.11 Financial Assistance Sanctioned and Disbursed by AIFIs ...................................... 143 VI.12 AIFIs’ Balance Sheet .............................................................................................. 143 VI.13 Resources Mobilised by AIFIs in 2021-22.............................................................. 144 VI.14 Resources Raised by AIFIs from the Money Market .............................................. 144 VI.15 Pattern of AIFIs’ Sources and Deployment of Funds ............................................. 145 VI.16 Financial Performance of AIFIs .............................................................................. 146 VI.17 AIFIs’ Select Financial Parameters ......................................................................... 147 VI.18 Performance of PDs in the Primary Market ........................................................... 148 VI.19 Performance of SPDs in the G-secs Secondary Market .......................................... 149 VI.20 Sources and Applications of SPDs’ Funds ............................................................. 150 VI.21 Financial Performance of SPDs ............................................................................ 150 VI.22 SPDs’ Financial Indicators .................................................................................... 150 xList of Charts Sr. No. Particulars Page No. II.1 Macroeconomic Background ................................................................................. 9 II.2 Monetary Policy Rates ........................................................................................... 10 II.3 Bank Credit to the Private Non-Financial Sector ................................................... 19 II.4 Asset Quality ......................................................................................................... 20 II.5 Provision Coverage Ratio ....................................................................................... 20 II.6 Return on Assets ................................................................................................... 21 II.7 Regulatory Capital to Risk-Weighted Asset ............................................................. 21 II.8 Leverage Ratio ....................................................................................................... 22 II.9 Market-based Indicators of Bank Health ............................................................... 22 II.10 Distribution of Top 100 Banks by Tier-I Capital .................................................... 23 II.11 Asset Quality of the Top 100 banks ....................................................................... 24 II.12 Soundness of the Top 100 Banks .......................................................................... 24 III.1 Major Monetary Policy Rates ................................................................................. 29 IV.1 Select Aggregates of SCBs ..................................................................................... 44 IV.2 Balance Sheet Composition ................................................................................... 46 IV.3 Savings and Deposits ............................................................................................ 46 IV.4 Growth in Borrowings ........................................................................................... 47 IV.5 Growth in Advances .............................................................................................. 47 IV.6 Incremental Credit- Population Group-wise ........................................................... 48 IV.7 Credit-Deposit and Investment-Deposit Ratios ...................................................... 49 IV.8 Gap between Proportion of Assets and Liabilities in Various Maturity Brackets .... 49 IV.9 International Liabilities and Assets of Indian banks .............................................. 50 IV.10 Off-Balance Sheet Liabilities of Banks ................................................................... 51 IV.11 Profitability Ratios ................................................................................................. 51 IV.12 G-Sec Yield and Non-interest income of SCBs ....................................................... 54 IV.13 Expenditure of SCBs ............................................................................................. 55 IV.14 Impact of Provisioning on Profitability ................................................................... 55 IV.15 RWAs and Assets Growth of SCBs ......................................................................... 57 IV.16 Capital Adequacy................................................................................................... 57 IV.17 Leverage and Liquidity .......................................................................................... 58 IV.18 Asset Quality of Banks .......................................................................................... 59 xiSr. No. Particulars Page No. IV.19 Reduction in GNPAs .............................................................................................. 59 IV.20 Overall Stress vis-à-vis Stress in Large Borrowal Accounts .................................. 61 IV.21 Restructuring ........................................................................................................ 61 IV.22 Stressed Asset sales to ARCs ................................................................................. 63 IV.23 Bank Group-wise Frauds ...................................................................................... 65 IV.24 Retail Lending ....................................................................................................... 66 IV.25 Housing Credit ...................................................................................................... 67 IV.26 Education Loans ................................................................................................... 68 IV.27 MSMEs versus Large Industries ............................................................................ 68 IV.28 Trading Volumes of PSLCs .................................................................................... 70 IV.29 Exposure to Sensitive Sectors ............................................................................... 71 IV.30 Share of Unsecured Advances ............................................................................... 72 IV.31 Bank Group-wise Ownership pattern .................................................................... 72 IV.32 Government’s Shareholding in PSBs ..................................................................... 72 IV.33 Share of Variable Pay in Total Remuneration ......................................................... 73 IV.34 CEO Pay vis-à-vis Average Employee Pay .............................................................. 74 IV.35 Components of Payment Systems .......................................................................... 75 IV.36 RBI – Digital Payments Index ................................................................................. 76 IV.37 Distribution of Complaints .................................................................................... 79 IV.38 Progress in Financial Inclusion in G-20 countries ................................................. 81 IV.39 Financial Inclusion Indicators ............................................................................... 82 IV.40 State-wise distribution of FBCs ............................................................................. 83 IV.41 Bank Group-wise Distribution of FBCs ................................................................. 83 IV.42 Number of PMJDY Accounts ................................................................................. 84 IV.43 PMJDY Accounts: Distribution and Average Balance ............................................. 84 IV.44 Distribution of Newly Opened Bank Branches of SCBs ......................................... 85 IV.45 SHGs - Average Loan Disbursed, Average Loan Outstanding and Average Savings of SHGs ....................................................................................... 86 IV.46 Region-wise Average Population Per Bank Branch ................................................. 87 IV.47 Contribution of PSLCs to Miscellaneous Income ................................................... 89 IV.48 Payment System Transactions of PBs .................................................................... 93 V.1 Structure of Co-operative Banks ........................................................................... 96 xiiSr. No. Particulars Page No. V.2 Distribution of Co-operative Banks by Asset Size ................................................. 96 V.3 Number of UCBs ................................................................................................... 97 V.4 Consolidation Drive in UCBs ................................................................................. 98 V.5 Asset Growth ......................................................................................................... 99 V.6 Deposits and Advances: UCBs ............................................................................... 100 V.7 Credit-Deposit Ratio: UCBs versus SCBs .............................................................. 100 V.8 Distribution of UCBs by Asset Size ........................................................................ 100 V.9 Distribution of UCBs’ Deposits and Advances ....................................................... 101 V.10 Investments of UCBs ............................................................................................. 102 V.11 Distribution of Number and Business of UCBs-by Rating Categories ..................... 103 V.12 Share of UCBs with CRAR less than 9 per cent ..................................................... 103 V.13 Stress in Large Borrowal Accounts ....................................................................... 105 V.14 Profitability Indicators- SUCBs versus NSUCBs .................................................... 106 V.15 Priority Sector Lending ......................................................................................... 107 V.16 Long-term versus Short-term Rural Co-operatives ................................................ 109 Comparison of Short-term Rural Co-operatives V.17 (Balance sheet and Financial Performance) ........................................................... 110 V.18 Asset Quality of Shot-term Co-operatives: A comparison ....................................... 114 V.19 Liabilities and Assets of Long-Term Rural Co-operatives: A Comparison ............... 116 VI.1 Structure of NBFIs under the Reserve Bank’s Regulation ...................................... 118 VI.2 NBFCs’ Credit vis-à-vis SCB’s Credit and GDP ..................................................... 119 VI.3 Registrations and Cancellations of Certificate of Registrations of NBFCs ............... 122 VI.4 Classification of NBFCs’ Loans and Advances ....................................................... 124 VI.5 Classification-wise NBFCs-ND-SI: Select Indicators .............................................. 125 VI.6 Distribution of NBFC Credit .................................................................................. 126 VI.7 NBFCs’ Credit to MSME Sector ............................................................................. 126 VI.8 Vehicle Loans- NBFCs vis-a-vis SCBs .................................................................... 127 VI.9 Distribution of Advances against Gold: NBFCs and SCBs ..................................... 127 VI.10 Classification-wise Sectoral Distribution of Credit................................................. 128 VI.11 Micro-credit Loan Outstanding across Regulated Entities ..................................... 129 VI.12 Repayment of NBFCs’ Borrowings ......................................................................... 129 VI.13 NCD Private Placements of Private NBFCs ............................................................. 130 xiiiSr. No. Particulars Page No. VI.14 Yield of NBFC Bonds: Spread over G-Sec of Corresponding Maturity ................... 130 VI.15 Bank Lending to NBFCs, Group-wise .................................................................... 131 VI.16 Instruments of Bank Lending to NBFCs ................................................................ 131 VI.17 Public Deposits with NBFCs- D ............................................................................. 132 VI.18 Distribution of Deposits with NBFCs-D ................................................................. 132 VI.19 Loan Sales and Securitisation of NBFCs-ND-SI ..................................................... 132 VI.20 Structural Liquidity Statement of NBFCs .............................................................. 133 VI.21 Profitability Ratios of NBFCs ................................................................................. 134 VI.22 Profitability Ratios of NBFCs-ND-SI ...................................................................... 134 VI.23 Asset Quality of NBFCs ......................................................................................... 135 VI.24 Provision Coverage Ratio of NBFCs ....................................................................... 135 VI.25 Classification of NBFCs' Assets ............................................................................. 135 VI.26 Delinquency in Performing Assets ......................................................................... 136 VI.27 NPAs of NBFCs-ND-SI ........................................................................................... 136 VI.28 Sectoral Distribution of NPAs of NBFCs ................................................................ 137 VI.29 Gross and Net NPA Ratios of NBFCs- D ................................................................. 137 VI.30 Stress in Large Borrowal Accounts ....................................................................... 137 VI.31 Capital Position of NBFC Sector ............................................................................ 138 VI.32 CRAR of NBFCs by Category ................................................................................. 138 VI.33 Exposure to Sensitive Sectors ............................................................................... 139 VI.34 Credit to Housing sector by HFCs and SCBs ......................................................... 139 VI.35 Resources mobilised by HFCs ............................................................................... 141 VI.36 Public Deposits with HFCs .................................................................................... 141 VI.37 Distribution of Public Deposits with HFCs ............................................................ 141 VI.38 HFCs' GNPA and NNPA Ratios ............................................................................... 142 VI.39 Weighted Average Cost and Maturity of Rupee Resources Raised by AIFIs ............. 145 VI.40 Long-term PLR Structure of Select AIFIs ............................................................... 146 VI.41 AIFIs’ Financial Ratios ........................................................................................... 146 VI.42 Select Financial Parameters of AIFIs ..................................................................... 147 VI.43 AIFIs’ NNPA Ratios ................................................................................................ 147 VI.44 AIFIs’ Assets Classification .................................................................................... 148 VI.45 Average Rate of Underwriting Commission of PDs ................................................. 149 VI.46 Capital and Risk Weighted Asset Position of SPDs ................................................. 150 xivList of Appendix Tables Sr. No. Particulars Page No IV.1 Indian Banking Sector at a Glance ....................................................................... 152 IV.2 International Liabilities of Banks in India – By Type of Instruments ..................... 153 IV.3 International Assets of Banks in India - By Type of Instruments ........................... 154 IV.4 Consolidated International Claims of Banks: Residual Maturity and Sector ......... 155 IV.5 Consolidated International Claims of Banks on Countries other than India ......... 156 IV.6 Off-Balance Sheet Exposure of Scheduled Commercial Banks in India ................ 157 IV.7 Kisan Credit Card Scheme: State-wise Progress ................................................... 158 IV.8 Bank Group-wise Lending to the Sensitive Sectors .............................................. 160 IV.9 Shareholding Pattern of Domestic Scheduled Commercial Banks ........................ 161 IV.10 Overseas Operations of Indian Banks ................................................................... 164 IV.11 Branches and ATMs of Scheduled Commercial Banks ......................................... 165 IV.12 Statement of complaints received at RBI Ombudsman Office ............................... 168 IV.13 Progress of Microfinance Programmes ................................................................. 172 IV.14 Major Financial Indicators of Regional Rural Banks- State Wise .......................... 173 IV.15 RRBs- PSL Target and Achievement-2021-22 ....................................................... 175 IV.16 Frauds in Various Banking Operations Based on Date of Reporting ..................... 176 V.1 Select Financial Parameters: Scheduled UCBs ..................................................... 179 V.2 Indicators of Financial Performance: Scheduled UCBs ......................................... 181 V.3 Salient Indicators of Financial Health of State Co-operative Banks ...................... 183 V.4 Salient Indicators of Financial Health of District Central Co-operative Banks ...... 184 V.5 Primary Agricultural Credit Societies ................................................................... 185 V.6 Select Indicators of Primary Agricultural Credit Societies-State-wise ................... 186 V.7 Details of Members and Borrowers of Primary Agricultural Credit Societies ........ 188 Liabilities and Assets of State Co-operative Agriculture and V.8 Rural Development Banks .................................................................................... 189 Financial Performance of State Co-operative Agriculture and Rural Development V.9 Banks ................................................................................................................... 190 V.10 Asset Quality of State Co-operative Agriculture and Rural Development Banks .... 191 Financial Indicators of State Co-operative Agriculture and Rural Development V.11 Banks ................................................................................................................... 192 Liabilities and Assets of Primary Co-operative Agriculture and Rural V.12 Development Banks ............................................................................................. 193 V.13 Financial Performance of Primary Co-operative Agriculture and Rural Development Banks ............................................................................................. 194 xvSr. No. Particulars Page No V.14 Asset Quality of Primary Co-operative Agriculture and Rural Development Banks .................................................................................... 195 V.15 Major Financial Indicators of Primary Co-operative Agriculture and Rural Developments Banks ........................................................................................... 196 VI.1 Consolidated Balance Sheet of NBFCs .................................................................. 197 VI.2 Consolidated Balance Sheet of NBFCs-ND-SI ....................................................... 198 VI.3 Consolidated Balance Sheet of NBFCs-D .............................................................. 199 VI.4 Credit to Various Sectors by NBFCs ..................................................................... 200 VI.5 Financial Performance of NBFCs-ND-SI ............................................................... 201 VI.6 Financial Performance of NBFCs-D ...................................................................... 202 VI.7 Financial Assistance Sanctioned and Disbursed by Financial Institutions ............ 203 VI.8 Financial Performance of Primary Dealers ........................................................... 207 VI.9 Select Financial Indicators of Primary Dealers ..................................................... 209 xviList of Select Abbreviations AD-1 Authorized Dealers Category-I bps Basis Points AEs Advanced Economies BSBDAs Basic Savings Bank Deposit Accounts AePS Aadhaar Enabled Payment Systems CADs Current Account Deficits AFA Additional Factor of CAGR Compound Annual Growth Rate Authentication CASA Current Account and Savings AFS Available for Sale Account CBDC Central Bank Digital Currency AI/ML Artificial Intelligence and Machine Learning CBS Core Banking Solution AID All Inclusive Directions CC Contact Centre AIFIs All India Financial Institutions CCB Capital Conservation Buffer AML Anti-Money Laundering CCO Chief Compliance Officer ANBC Adjusted Net Bank Credit CCPs Central Counterparties APR Annual Percentage Rate C-D Credit-Deposit AQR Asset Quality Review CDS Credit Default Swap ARCs Asset Reconstruction Companies CDs Certificates of Deposits ARDL-EC Autoregressive Distributed Lag CEPCs Consumer Education and Model with Error Correction Protection Cells CET Common Equity Tier ASISO Automated Sweep-In and Sweep- Out CFLs Centres for Financial Literacy BBPOUs Bharat Bill Payment Operating CFSS Core Financial Services Solution Units CGFMU Credit Guarantee Fund for Micro BBPS Bharat Bill Payment System Units BCBS Basel Committee on Banking CI Confidence Interval Supervision CICERO Centre for International Climate BC-ICT Business Correspondents - Research Information and Communication CICs Core Investment Companies Technology CICs Credit Information Companies BCs Business Correspondents CIMS Centralised Information and BEI Banking Expectations Index Management System BFSCI Bloomberg U.S. Financial CIRP Corporate Insolvency Resolution Conditions Index Process BIS Bank for International CISBI Central Information System for Settlements Banking Infrastructure BISIH BIS Innovation Hub CMBs Cash Management Bills BOS Banking Ombudsman Scheme CME Capital Market Exposure xviiCoR Certificate of Registration D-SIBs Domestic Systemically Important Banks CoVaR Conditional Value at Risk DTH Direct-To-Home CPI Consumer Price Index EBLRs External Benchmark Linked CPMI Committee on Payments and Lending Rates Market Infrastructures ECB European Central Bank CPs Commercial Papers ECBs External Commercial CRAR Capital to Risk-Weighted Assets Borrowings Ratio ECL Expected Credit Loss CRAs Credit Rating Agencies ECLGS Emergency Credit Line CRE Commercial Real Estate Guarantee Scheme CRE-RH Commercial Real Estate – EGARCH Exponential Generalized Residential Housing Autoregressive Conditional CRILC Central Repository of Heteroskedasticity Information on Large Credits EMDEs Emerging Market and CRM Credit Risk Mitigation Developing Economies CRMs Cash Recycling Machines EMEs Emerging Market Economies CRO Chief Risk Officer eNWRs Electronic Negotiable Warehouse Receipts CRR Cash Reserve Ratio ESG Environmental, Social And CSRD Corporate Sustainability Governance Reporting Directive EXIM Bank Export Import Bank of India CVA Credit Valuation Adjustment FADA Federation of Automobile DAY-NRLM Deendayal Antyodaya Yojana- Dealers’ Associations National Rural Livelihood Mission FAS Financial Access Survey DBTs Direct Benefit Transfers FBCs Fixed-point Business Correspondents DBUs Digital Banking Units FBs Foreign Banks DCCBs District Central Co-operative Banks FCI Financial Conditions Index DFI Development Financial FCNR(B) Foreign Currency (Non-Resident) Institution Accounts (Banks) DICGC Deposit Insurance and Credit FCS-OIS Foreign Currency Settled Guarantee Corporation Overnight Indexed Swap DIF Deposit Insurance Fund FIs Financial Institutions DLAs Digital Lending Applications FI-Index Financial Inclusion Index DP Discussion Paper FIPs Financial Inclusion Plans DPI Digital Payments Index FLCs Financial Literacy Centres xviiiFMIs Financial Market Infrastructures IPOs Initial Public Offerings FPC Fair Practices Code IRB Internal Ratings-Based FRRR Fixed Rate Reverse Repo IRRBB Interest Rate Risk in the Banking Book FSB Financial Stability Board ISSB International Sustainability FSWM Financially Sound and Well Standards Board Managed IVR Interactive Voice Response GCCs General Credit Cards JLGs Joint Liability Groups GDP Gross Domestic Product KCC Kisan Credit Card GFC Global Financial Crisis KFS Key Fact Statement GNPA Gross Non-Performing Assets KMP Key Managerial Personnel G-SAP Government Securities KPIs Key Performance Indicators Acquisition Programme KYC Know Your Customer G-Secs Government Securities KUA KYC User Agency HFCs Housing Finance Companies LABs Local Area Banks HFT Held for Trade LAF Liquidity Adjustment Facility HO Head Office LCR Liquidity Coverage Ratio HQLAs High Quality Liquid Assets LEF Large Exposure Framework HTM Held to Maturity LEs Legal Entities IAC Independent Advisory Committee LIBOR London Interbank Offered Rate IBBI Insolvency and Bankruptcy LR Leverage Ratio Board of India LSPs Lending Service Providers IBC Insolvency and Bankruptcy Code LTV Loan-to-Value ICCW Interoperable Card-less Cash mCBDC Multi-CBDC Withdrawal MD Master Direction ICMA International Capital Market MIBOR Mumbai Interbank Offered Rate Association’s MIGR Minimum Investment Grade I-D Investment-Deposit Credit Ratings IFR Investment Fluctuation Reserve MMF Money Market Fund IFSC International Financial Services MPC Monetary Policy Committee Centre MoSPI Ministry of Statistics and IIS Investment In Securities Program Implementation IMF International Monetary Fund MSF Marginal Standing Facility INR Indian Rupees MSMEs Micro, Small and Medium IO Internal Ombudsman Enterprises xixMtM Mark-to-Market NCDs Non-Convertible Debentures NABARD National Bank for Agriculture NCLTs National Company Law and Rural Development Tribunals NaBFID National Bank for Financing NDS-OM Negotiated Dealing System- Infrastructure and Development Order Matching NDTL Net Demand and Time Liabilities NACH National Automated Clearing House NED Non-Executive Directors NBFC-AA NBFC-Account Aggregator NGFS Network for Greening the Financial System NBFC-BL NBFC-Base Layer NHB National Housing Bank NBFC-ICCs NBFC-Investment And Credit NII Net Interest Income Companies NIM Net Interest Margin NBFC-IDF NBFC-Infrastructure Debt Fund NNPA Net Non-Performing Assets NBFC-IFC NBFC-Infrastructure Finance Company NOF Net Owned Fund NBFC-MFIs NBFC-Micro Finance Institutions NPAs Non-Performing Assets NPCI National Payments Corporation NBFC-ML NBFC-Middle Layer of India NBFC-NOFHC NBFC-Non-Operative Financial NPLs Non-Performing Loans Holding Company NRC Nomination and Remuneration NBFC-P2P NBFC–Peer to Peer Lending Committee Platform NRO Non-Resident Ordinary NBFCs Non-Banking Financial NSFI National Strategy for Financial Companies Inclusion NBFCs-D Deposit-Taking NBFCs NSFR Net Stable Funding Ratio NBFCs-ND Non-Deposit Taking NBFCs NSUCBs Non-Scheduled Urban Co- NBFCs-ND-SI Non-Deposit Taking Systemically operative Banks Important NBFCs NWRs Negotiable Warehouse Receipts NBFC-TL NBFC-Top Layer O-ARR Overnight Alternative Reference Rate NBFC-UL NBFC-Upper Layer OD Overdraft NBFI Non-Bank Financial Intermediation OEFs Open-Ended Funds NBFIs Non-Bank Financial OFCBs Overseas Foreign Currency Intermediaries Borrowings OIS Overnight Indexed Swap NBFIs Non-Banking Financial Institutions OMO Open Market Operation NCCDs Non-Centrally Cleared OSDT Ombudsman Scheme for Digital Derivatives Transactions xxOSNBFC Ombudsman Scheme for Non- RMCB Risk Management Committee of Banking Financial Companies the Board OTC Over-the-Counter RoA Return on Assets OTS One-Time Settlement RoE Return on Equity PACS Primary Agricultural Credit RR Reserve Ratio Societies RRBs Regional Rural Banks PBs Payments Banks RS Regulatory Sandbox PCA Prompt Corrective Action RSA Restructured Standard Advances PCARDBs Primary Co-operative Agriculture RT Risk Thresholds and Rural Development Banks RTGS Real Time Gross Settlement PCR Provision Coverage Ratio PDs Primary Dealers RWAs Risk-Weighted Assets PLI Production Linked Incentive SARFAESI Act Securitisation and Reconstruction of Financial PLR Prime Lending Rate Assets and Enforcement of PMAY-G Pradhan Mantri Awaas Yojana- Security Interest Act Gramin SBM-G Swachh Bharat Mission-Gramin PMAY-U Pradhan Mantri Aawas Yojna- SBR Scale Based Regulation Urban SCARDBs State Co-operative Agriculture PMCBL Punjab and Maharashtra Co- and Rural Development Banks operative Bank Ltd SCBs Scheduled Commercial Banks PMJDY Pradhan Mantri Jan Dhan Yojana SDF Standing Deposit Facility PML Prevention of Money Laundering SEs Supervised Entities PSBs Public Sector Banks SF/MF Small and Marginal Farmers PSL Priority Sector Lending SFBs Small Finance Banks PSLCs Priority Sector Lending SFG Sustainable Finance Group Certificates SGBs Sovereign Gold Bonds PSUs Public Sector Undertakings SHG-BLP Self-Help Group - Bank Linkage PVBs Private Sector Banks Programme QBs Qualified Buyers SHGs Self Help Groups RBIH Reserve Bank Innovation Hub SIAM Society of Indian Automobile RB-IOS Reserve Bank - Integrated Manufacturers Ombudsman Scheme SIDBI Small Industries Development RDG Retail Direct Gilt Bank of India REE Real Estate Exposures SLF Special Liquidity Facility REs Regulated Entities SLR Statutory Liquidity Ratio xxiSLTRO Special Long-Term Repo TREPS Triparty Repo Dealing and Operations Settlement SMA Special Mention Accounts UCBs Urban Co-operative Banks SMEs Small and Micro Enterprises UIDAI Unique Identification Authority SMFs Small and Marginal Farmers Of India SPDs Standalone Primary Dealers UPI Unified Payments Interface SPO Second Party Opinion U.K. United Kingdom SRs Security Receipts U.S. United States SSBs Standard Setting Bodies USFB Unity Small Finance Bank SSE Sensitive Sector Exposure UTs Union Territories StCBs State Co-operative Banks VAR Vector Auto Regression SUCBs Scheduled Urban Co-operative Banks VaR Value at Risk TBTF Too-Big-To-Fail VP Variable Pay TCFD Task Force on Climate-Related VRR Variable Rate Repo Financial Disclosures VRRR Variable Rate Reverse Repo TLAC Total Loss-Absorbing Capacity WAC Weighted Average Cost TLTRO Targeted Long-Term Repo Operations WAPs Weighted Average Premiums TR Trade Repository WEO World Economic Outlook TR Total Remuneration WGDL Working Group on Digital TReDS Trade Receivables Discounting Lending System WOS Wholly-Owned Subsidiary xxiiI PERSPECTIVES The banking and non-banking sectors globally are facing headwinds emanating from globalisation of inflation, synchronised monetary policy tightening and continuing geopolitical risks to growth. Although presently the Indian banking sector remains robust and resilient with improved asset quality and strong capital buffers, the policymakers remain mindful of dynamically evolving macroeconomic conditions that may impinge on the health of regulated entities. Going forward, the focus of the Reserve Bank will remain on encouraging use of technology and innovation in this space, while containing the possible systemic risks. I.1 In 2022, with the globalisation of high capital buffers are reinforcing investor inflation, energy and food shortages and confidence in banks. synchronised tightening of monetary policy I.3 The bottom lines of the non-banking worldwide, the outlook for global growth and financial company (NBFC) sector improved in trade is deteriorating. The combination of 2021-22 with the waning of COVID-19. With capital outflows, currency depreciations and strong capital buffers, adequate provisions, reserve losses has exacerbated the prospects for and sufficient liquidity, NBFCs are poised for emerging market economies (EMEs), exposing expansion. Nevertheless, going forward, NBFCs their financial systems to greater uncertainties need to be wary of rising borrowing costs as and downside risks. Financial conditions have financial conditions tighten. On the regulatory tightened, though sentiment has improved front, scale-based regulation is expected to recently on expectations of inflation peaking. strengthen the NBFCs in step with the growing Although global banks appear robust, asset scope for organic consolidation in the sector. quality may come under strain in a rising interest rate environment with weak growth impulses. I.4 Against this backdrop, this chapter As yields rise, banks may incur mark-to-market presents a bird’s eye view of the challenges faced (MTM) losses on their investment portfolios and by banking and non-banking sectors and the way higher provisioning requirements can dent their forward. profitability. Impact of Rising Interest Rates on Bank I.2 In this highly uncertain global Profitability environment, the Indian economy is exhibiting signs of a gradual strengthening of the growth I.5 In an environment of rising interest rates, momentum, drawing from macroeconomic an increase in banks’ net interest income (NII) fundamentals. In 2021-22 as also in 2022-23 can be expected in the near term, reflecting so far, the balance sheets of scheduled better transmission to lending rates. On the commercial banks (SCBs) in India have other hand, higher yields expose banks to MTM expanded strongly, fuelled by robust credit losses on their treasury investments, decreasing demand. Their asset quality and profitability their non-interest income. The impact of rising have improved, while low slippages and yields on SCBs’ profitability has been mitigated 1Report on Trend and Progress of Banking in India 2021-22 to some extent by the increase in the limit of may be compared with the liquidation value SLR securities under the held to maturity (HTM) of stressed assets. Data indicate that at end- portfolio1. The investment fluctuation reserve September 2022, in cases where the corporate (IFR), that was introduced in 2018, is another insolvency resolution processes (CIRPs) were mitigating factor. Data on modified duration initiated by financial creditors (FCs), the gathered at end-September 2022 from select realisation through the IBC was close to 201 per banks showed that, ceteris paribus, banks would cent of the liquidation value. remain adequately capitalised even after making I.8 Within the IBC framework, the time taken necessary provisions for MTM losses due to a for admission of resolution application as well as rise in yield. the final resolution and liquidation has steadily increased. The Insolvency and Bankruptcy Resolution of Stressed Assets Board of India (IBBI) recently amended the I.6 The enactment of the Insolvency and CIRP regulations aimed at improving realised Bankruptcy Code (IBC) in 2016 was a paradigm value, reducing delays in the process, enhancing shift in the ethos for resolution of stressed assets efficiency of available time, and improving in India. In recent years, however, declining information availability. Through another rates of recovery in comparison to their claims amendment to IBC regulations, performance- admitted through this mechanism has raised linked incentives have been introduced for concerns2. The rate of recovery is contingent insolvency professionals, which should help in on several factors, including the overall maximising the realised value of stressed assets macroeconomic environment, perceived growth beyond their liquidation value, and in their timely prospects of the entity and its sector, and the resolution. extent of erosion in the intrinsic value of the I.9 The pre-packaged insolvency resolution entity. As a broad-based recovery gains traction, process combines the best of the out-of-court these factors are likely to turn favourable for resolution efforts and the judicial finality of financial resolution. a resolution plan. This mechanism, which is I.7 In a public auction-based resolution allowed only for micro, small and medium model such as the IBC, the extent of haircut enterprise (MSME) borrowers, may effectively represents the discount the market demands for complement the prudential framework of the acquiring the stressed entity as a going concern. Reserve Bank, if extended to all borrowers. In Since significant value destruction may have India, credit contracts are often embedded with already happened in these assets, a comparison cross obligations and credit risk mitigation of realised value with admitted claims may not be covers provided by parent and group companies a reasonable indicator of the effectiveness of the of the borrower. In such a system, a default by resolution process. Rather, the resolution value one borrower is likely to spur cross defaults by 1 In October 2020, banks were permitted to exceed the HTM ceiling up to an overall limit of 22 per cent of NDTL (instead of 19.5 per cent earlier), creating greater headroom for banks to invest in SLR securities. The limit was further extended to 23 per cent in April 2022. The dispensation was made available up to March 31, 2023, which was further extended up to March 31, 2024. The HTM limits will be restored to 19.5 per cent in a phased manner starting from the quarter ending June 30, 2024. 2 As on September 30, 2022 the realisation was 33 per cent of total claims in cases where CIRPs were initiated by FCs. 2PERSPECTIVES group companies, thereby increasing the overall flexibility to banks in the management of credit risk to the financial system. A group their investment portfolio while addressing resolution framework, in which the resolution of transparency concerns through enhanced borrowers belonging to the same corporate group disclosures. Its proposals include inter alia if undertaken together, could help in improving symmetric recognition of fair value gains and the efficacy of the IBC. losses, removal of various restrictions on investment portfolio such as the ceilings on Securitisation of Stressed Assets investments in HTM and allowing non-SLR securities to be included under the HTM book. I.10 In September 2021, the Reserve Bank The proposed guidelines, which are being issued the revised framework for securitisation of examined in view of the feedback received from standard assets, which simplified requirements stakeholders, will promote transparency and on minimum holding period and minimum entrench market discipline while increasing retention requirement, while the capital banks’ freedom. requirements for securitisation exposures were converged with Basel III norms. Securitisation Framework on Expected Credit Loss of non-performing assets (NPAs) are currently allowed to be undertaken by licensed asset I.12 Currently, banks operating in India are reconstruction companies (ARCs), under the required to make loan loss provisions based Securitisation and Reconstruction of Financial on an incurred loss model wherein provisions Assets and Enforcement of Security Interest are made after the occurrence of a default. A (SARFAESI) Act, 2002. In addition to the ARC revised approach, termed as expected credit route, the Reserve Bank proposes to introduce a loss (ECL) model, requires a credit institution framework for securitisation of stressed assets to make provisions based on forward-looking similar to the revised framework for standard estimations of credit losses. In India, some assets. As announced in September 2022, a NBFCs3 follow the ECL approach, in contrast discussion paper (DP) will be issued soon to to their banking peers. The Reserve Bank’s solicit comments from market participants. proposed DP on the ECL framework for banks will help in formulating principle- Prudential Norms for Investment Portfolio based guidelines, supplemented by regulatory backstops wherever necessary. I.11 The extant guidelines for valuation of investments were issued nearly two decades Bank Ownership ago. Since then, domestic financial markets have grown manifold in size and complexity, I.13 The Government of India has been necessitating a comprehensive review. The facilitating consolidation of public sector Reserve Bank released a DP on the prudential banks (PSBs) through mergers over the last norms for classification, valuation, and few years. In the Union Budget for 2021-22, operations of the investment portfolio of the government announced its intent to take commercial banks in January 2022. The up the privatisation of two PSBs. Convergence proposed framework aims at providing greater is required between PSBs and private sector 3 NBFCs covered by Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015. 3Report on Trend and Progress of Banking in India 2021-22 banks (PVBs) on corporate governance practices tune with the international best practices. A major as well as managerial and operational flexibility. initiative in this regard was the commissioning Going forward, this will generate the requisite of the advanced supervisory monitoring space for both PSBs as well as PVBs to expand system—DAKSH, which is a fully functional their business and thrive. platform for further digitalisation of supervisory work processes. Other major initiatives in Regulatory Sandbox the pipeline include (a) implementation of the Centralised Information and Management I.14 The Reserve Bank conceptualised the System (CIMS) for automatic data reporting by regulatory sandbox (RS) in 2019 to enable regulated entities (REs) and monitoring tools; entities to test innovative products, services (b) supplementing supervisory intelligence with or business models, usually in a live but big data; (c) implementation of Cyber Range—a controlled environment with certain safeguards and oversight. The themes of the RS cohort virtual controlled environment and tool used for announced so far include ‘retail payments’, cyber security drills; (d) development of a fraud ‘cross-border payments’, ‘MSME lending’ vulnerability index4 dashboard using artificial and ‘prevention and mitigation of financial intelligence and machine learning (AI/ML); and frauds’. So far, six entities have successfully (e) standardisation / optimisation of a risk based exited the first cohort and four entities have approach for know-your-customer (KYC) and successfully exited the second cohort. The anti-money laundering (AML) framework of entities selected under the third cohort all supervised entities (SEs). Emphasis is also are currently undergoing testing and the being placed on capacity building, development applications received under the fourth cohort of specialised workforce and use of modern are being evaluated for shortlisting of entities technology. for the test phase. The fifth cohort under the Differential Banking RS has been announced to be theme neutral for innovative products/ services/ technologies I.16 While small finance banks (SFBs) and cutting across various functions of the Reserve payments banks (PBs) have played an important Bank. Based on experience gained so far, the role in financial inclusion, some PBs are yet enabling framework for the RS has undergone to break even. Moreover, technology-oriented changes to make it more broad-based and business models are no longer the niche of these innovation friendly. Further, ‘on tap’ application banks alone; almost all banks are leveraging facility has been introduced in RS for themes of technology to improve and expand delivery of closed cohorts to ensure continuous innovation. financial services and products. These efforts have received a boost with the establishment of Digital Strengthening Off-site Monitoring System Banking Units (DBUs). Against this backdrop, I.15 The Reserve Bank has been actively concerns are being raised in some quarters engaged in making its off-site surveillance about viability and sustainability of differentiated systems sharper, more comprehensive and in banking models. It needs to be ensured that their 4 Presently the fraud vulnerability index is designed to track vulnerabilities in banks. Going forward, the scope of the index may be enhanced to cover other SEs. 4PERSPECTIVES business models are sufficiently robust and good ensure optimal cost to users and returns to governance and technological standards are operators. In August 2022, the Reserve Bank adhered to, so that they survive in a competitive published a discussion paper (DP) which environment. outlined existing rules for charges in payment systems, while also presenting other options Payment and Settlement Systems through which such charges could be levied. Based on the feedback received, the Reserve I.17 Recent pro-active measures undertaken Bank endeavours to structure its policies by the Reserve Bank have revolutionised the and streamline the framework of charges for payment and settlement ecosystem, enhancing different payment services and activities in the consumer experience, deepening digital reach country. This will ensure that India has a state- and aiding financial inclusion. The introduction of-the-art payment and settlement system that of UPI123Pay has facilitated access to unified is not just safe, secure, efficient and fast but payments interface (UPI) to more than 40 also affordable. crore feature phone subscribers in the country. In addition, UPI Lite has facilitated low value FinTechs transactions in offline mode through on-device I.19 In India, one of the most transformative wallet. The eligible subsidy amount from the roles that can be played by FinTechs is credit Payment Infrastructure Development Fund delivery in partnership with traditional lenders, (PIDF) was enhanced and the subsidy claim especially in rural and semi-urban areas. The process was simplified to provide further current credit delivery systems are largely impetus to deployment of payment acceptance paper-based, with high turnaround time and touchpoints. The Reserve Bank allowed foreign requiring multiple visits to bank branches. It inward remittances received under the Rupee entails high operational costs for lenders and drawing arrangement (RDA) to be transferred opportunity cost for borrowers. Considering to the KYC compliant bank account of the these challenges, digitalisation of agri-finance biller (beneficiary) through Bharat Bill Payment was conceptualised jointly by the Reserve Bank System (BBPS) subject to certain conditions. and the Reserve Bank Innovation Hub (RBIH). This is expected to facilitate payment of utility, This will enable delivery of Kisan Credit Card education and other bills by non-resident Indians (KCC) loans in a fully digital and hassle-free (NRIs) on behalf of their families in India. Quick manner. A pilot project based on this innovation response (QR) based person-to-merchant (P2M) was launched in Madhya Pradesh and Tamil payments, leveraging UPI, have been enabled in Nadu in partnership with Union Bank of India Bhutan, Singapore and UAE. The DigiSaathi and Federal Bank, respectively, for new KCC Helpline was established to enhance awareness loans as well as renewal of such loans. Going about payment systems. Card tokenisation and forward, the vision of the Reserve Bank is to enhancement of e-mandate limit for recurring develop and operationalise an integrated and transactions further bolstered the safety of standardised technological platform to facilitate digital transactions. frictionless flow of credit to all segments of the I.18 An efficient payment system requires society, with a special emphasis on rural and that the fees are appropriately determined to agricultural credit. 5Report on Trend and Progress of Banking in India 2021-22 Cyber Security Risks business strategies as also in their governance and risk management frameworks. In line with I.20 With the exponential growth of digital the international best practices, REs were guided payments and expanding digitalisation of the to adopt a forward-looking, comprehensive, and financial ecosystem, cyber security risks for strategic approach to deal with climate-related financial institutions are also increasing. These risks. warrant building of strong defences against cyber-attacks and constant upskilling of I.23 Sustainable finance taxonomies are personnel. Continuous knowledge acquisition tools intended to help investors decipher and staying ahead of the curve will be crucial. whether an economic activity is environmentally sustainable, and to navigate the transition to I.21 The Reserve Bank has been undertaking a low-carbon economy. Such a taxonomy can pro-active steps to keep the supervised entities play a key role in channelising and scaling up (SEs) abreast of new security challenges and sustainable finance funds to India. It will also cyber threats. A draft master direction (MD) on make the tracking of sustainable finance flows outsourcing of IT services, which was issued in easier. Development of the taxonomy will require June 2022 for public comments, is being revised concerted efforts from stakeholders, led by the based on feedback received. Moreover, a draft government. MD providing a consolidated and updated IT governance and risk management framework I.24 Mobilising resources for green projects for regulated entities (REs) has been placed on or refinancing them through issuance of green the Reserve Bank’s website in October 2022 for bonds provides a strong signal of the country’s public comments. commitment to a low-carbon economy. Pursuant to an announcement made by Hon’ble Finance Climate Change and Green Finance Minister in her budget speech on February 1, 2022, I.22 Climate change may result in both physical the Government has decided to issue `16,000 and transition risks that could have implications crore of sovereign green bonds in the domestic for sustainability and financial soundness of market during 2022-23. These borrowings will individual REs as well as systemic financial be part of Government of India’s overall market stability. There is a need for REs to develop and borrowing for the year 2022-23 and proceeds implement processes for understanding and will be deployed in green public sector projects. assessing the potential impact of climate-related The sovereign green bond framework has been financial risks in their business strategies published by Government of India on November and operations. This will require inter alia 09, 2022. Further, Centre for International appropriate governance structures and strategic Climate Research (CICERO), an independent frameworks to effectively manage and address and globally renowned Norway-based second these risks. REs will also need to focus on party opinion (SPO) provider was appointed to appropriate capacity building of their staff. evaluate the framework and certify its alignment Accordingly, the Reserve Bank released a DP with International Capital Market Association’s on climate risk and sustainable finance in July (ICMA) green bond principles and international 2022. The DP recommended REs to incorporate best practices. It rated the framework as ‘medium climate-related and environmental risks in their green’ with a ‘good’ governance score. 6PERSPECTIVES I.25 Overall, the Indian banking and non- the production linked incentive (PLI) scheme banking financial sectors have displayed opens new business avenues, it is important resilience to several shocks, facilitated to be mindful of emerging risks from tech-led effective delivery of post-pandemic public complex networks, alternative finance options policy measures to targeted sectors of the and geopolitical developments. The financial economy, and preserved financial soundness sector also needs to remain alert to risks and while supporting a broad-based recovery of uncertainties associated with climate change. the Indian economy. While the current wave The regulatory and supervisory policies of of technological innovations in the field of the Reserve Bank will endeavour to promote finance and new growth opportunities arising a dynamic, robust, resilient, and competitive from global rebalancing of supply chains and financial system, while preserving financial domestic support to fourteen industries under stability. 7II GLOBAL BANKING DEVELOPMENTS The global banking sector remained financially sound in 2021 and 2022 so far on the back of implementation of various regulatory and macro-prudential reforms post-global financial crisis (GFC). The top 100 banks maintained healthy capital buffers while their profitability improved. The aggressive tightening of monetary policy in the recent period, however, has led to more austere financial conditions, posing risks to the global banking system. The medium-term challenges include effective regulation of technological innovations in the financial sector and risks emanating from climate change. 1. Introduction likely increase in debt servicing burdens. Credit demand—which is largely procyclical— II.1 The prospects for sustaining the global is likely to remain subdued in response to the recovery that characterised the year 2021 on weakening economic outlook, with depressed the back of unprecedented policy stimulus and treasury income, the likelihood of increasing rapid pace of vaccinations have been dimmed by the war in Europe and synchronized and front- delinquencies and dents to profitability. loaded monetary policy tightening in the face of II.3 Against this backdrop, this chapter is surging global inflation. With persisting concerns organised into five sections. An overview of about the near-term inflation outlook, amplified global macro-financial conditions is presented market volatility is raising financial stability in Section 2. In Section 3, recent global banking risks. Higher capital and liquidity buffers have policy developments are tracked. Section 4 helped banks and financial institutions to evaluates the financial performance of the global remain resilient and stable. Nonetheless, fears banking sector with Section 5 focusing on an of a hard landing have increased worldwide. For analysis of the world’s largest banks. Section 6 emerging market economies, these factors have concludes the chapter with the way forward. translated into surges in capital outflows, sharp depreciation of exchange rates, loss of reserves 2. Global Macroeconomic Conditions and darkening macroeconomic prospects. II.4 In its October update of the World II.2 The global banking sector weathered Economic Outlook (WEO), the International the pandemic shock well, gaining strength Monetary Fund (IMF) kept the global GDP growth from capital buffers built since the global forecast for 2022 at 3.2 per cent after three financial crisis (GFC) and supported by various regulatory concessions to mitigate the impact successive downward revisions since January of the pandemic. In the fast-changing global 2022. It highlighted growing risks to a darkening macroeconomic environment, fraught with outlook and an increased divergence in the geopolitical and pandemic-related concerns, growth trajectories of advanced economies (AEs) however, the banking sector faces new challenges and emerging market and developing economies emanating from rising interest rates and the (EMDEs) (Chart II.1a). 8GLOBAL BANKING DEVELOPMENTS II.5 The projection for global inflation has AEs are likely to widen further , reaching the been revised upwards to 8.8 per cent in 2022 highest level after the GFC of 2008 (Chart II.1c). from 4.7 per cent in the previous year, led by While government debt has moderated from a sharp increase in food and energy prices, a post-pandemic peak in 2020, it still lingering demand-supply imbalances and remains elevated relative to historical averages continuation of some supply chain disruptions (Chart II.1d). (Chart II.1b). II.7 Central banks across the world have II.6 The growth in global goods and services front loaded monetary policy tightening to trade is projected to moderate to 4.3 per restore price stability. Among the EMDEs, cent in 2022 from 10.1 per cent a year ago. Brazil, Chile, Mexico and Russia have already The current account deficits (CADs) of major raised policy rates several times through 2021. Chart II.1: Macroeconomic Background a. Global Growth b. Inflation c. Current Account Balance and World Trade d. Public Debt Note: *: Projections. Source: World Economic Outlook, IMF. 9Report on Trend and Progress of Banking in India 2021-22 Chart II.2: Monetary Policy Rates a. AEs b. EMDEs Source: Bank for International Settlements. Other EME central banks have also started II.9 The outlook for 2023 remains uncertain, retracting accommodative stances by early 2022 with little clarity on how quickly energy and (Chart II.2b). food security could be restored globally. Consequently, the trajectory of inflation is II.8 AEs, on the other hand, started policy expected to remain elevated going ahead, with normalisation more slowly, with a majority of central banks starting their rate hike cycle diminishing confidence in the effectiveness only in early 2022. In the United States, the of monetary policy to ensure a soft landing. Federal Reserve started policy tightening in The synchronised and aggressive tightening March 2022 and has raised the federal funds of monetary policy has led to more austere rate to 4.25-4.50 per cent up to December 2022 financial conditions, posing risks to the global (Chart II.2a). banking system (Box II.1). Box II.1: Impact of Financial Conditions on Banking Sector Risk Historical data suggests that banking sector risk increases ...(Eq.1) during periods of economic distress, such as the GFC and the COVID-19 pandemic (Chart 1). In equation 1, represents a vector of endogenous variables comprising of year-on-year growth (%) in The following four-variable vector autoregression (VAR) consumer price index (CPI) and real gross domestic model for G20 economies was estimated using quarterly product (GDP) of G20 countries along with US financial aggregate data from 2000Q1 to 2022Q1 : conditions index (FCI)1,2. also includes a proxy (Contd.) 1 The Bloomberg U.S. Financial Conditions Index (BFSCI) tracks the overall level of financial stress in the U.S. money, bond, and equity markets and helps assess the availability and cost of credit. The Index has a weight of 33.3 per cent each for money market, bond market and equity market. A positive value indicates accommodative financial conditions, while a negative value indicates tighter financial conditions relative to pre-2008 crisis period. 2 Data source: Bloomberg. 10GLOBAL BANKING DEVELOPMENTS Chart 1: Global Banking System Risk Indicator Note: Time-varying standard deviation of the MSCI AWCI Bank Equity Index – consisting of large and mid-cap banking stocks from 23 AEs and 24 EMDEs – is taken as a proxy for international banking sector risk (green line). US financial conditions index is used as a proxy for global financial conditions (blue line). Data has been normalised to have a zero mean and unit standard deviation. Source: Bloomberg; RBI Staff Estimates. indicator of banking sector risk embodied in time-varying On the other hand, an unanticipated increase in GDP volatility of the MSCI AWCI Bank Index estimated from growth lowers banking sector risk in the short-term, which an Exponential Generalized Autoregressive Conditional may, however, increase over the medium term in response Heteroskedasticity (EGARCH) model (Bollerslev, 1986; to a credit boom that often accompanies a post-crisis Nelson, 1991). The results suggest that one standard recovery in growth (Chart 2b). A shock to FCI, signifying a deviation increase in global inflation increases banking tightening of financial conditions, increases global banking sector risk by 1.5 points over the medium term sector risk by 1.1 points, which persists over the medium (Chart 2a). term (Chart 2c). Chart 2: Impulse Responses of Banking Sector Risk to Global Shocks a. Inflation Shock (increase in b. GDP Growth Shock (increase in c. Financial Conditions Shock (tightening global inflation) global GDP growth) of global financial conditions) Note: The above chart shows the accumulated response of global banking system risk to generalized one std. deviation innovations in global inflation, global growth and financial conditions. The y-axis measures the impact in std. deviation terms while x-axis displays the horizon in quarters. Point estimates along with 95% confidence interval bands are shown in solid black line and dotted orange lines, respectively. Standard errors were computed using Hall’s percentile bootstrap with 1000 bootstrap iterations. Source: RBI Staff Estimates. References Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31(3), 307-327. Nelson, D. B. (1991). Conditional heteroskedasticity in asset returns: A new approach. Econometrica: Journal of the Econometric Society, 347-370. 11Report on Trend and Progress of Banking in India 2021-22 3. Global Banking Policy Developments completed, including capital requirements for bank exposures to central counterparties (CCPs) II.10 Following the disruptions caused by and the total loss-absorption capacity (TLAC) the GFC in 2008, the G20 in coordination with holdings standard. For the disclosure standards, the Financial Stability Board (FSB) launched a five more adoptions are observed, mainly for net comprehensive programme of financial reforms stable funding ratio (NSFR) and interest rate risk with the aim of fixing the fault lines that led to in the banking book (IRRBB). One more adoption the GFC. It has four core elements: (i) building each in the implementation of the framework for resilient financial institutions; (ii) too-big-to-fail domestic systemically important banks (D-SIBs) (TBTF) reforms; (iii) making derivatives markets and the large exposures framework has happened safer; and (iv) enhancing the resilience of non- during the period. bank financial intermediation (NBFI). Recent policy developments in the areas of technological Too-Big-To-Fail (TBTF) Reforms5 innovations and climate change risks also II.12 The focus of G-SIB resolution planning present opportunities as well as challenges. is shifting to fine-tuning and testing resolution Building Resilient Financial Institutions3 preparedness. In 2022, unwinding of COVID-19 support measures by governments and central II.11 As the deadline for adoption and banks across countries, along with heightened implementation of the outstanding Basel III geopolitical risks added to the macroeconomic standards — set at January 20234 — draws and financial uncertainties. Some banks lost closer, further progress is made in that access to key services due to sanctions, while direction. Since September 2021, six additional loss of market confidence led to a liquidity run member jurisdictions have adopted the revised in some others. Authorities had to step in to standardised approach for credit risk and four resolve or liquidate a few (non-systemic) banks. additional member jurisdictions each have As four G-SIBs from EMEs are due to comply adopted the revised internal ratings-based (IRB) with the TLAC standard by January 2025, work approach, the revised operational risk framework is continuing to build up external TLAC. All other and the output floor. Furthermore, three G-SIBs currently meet or exceed the final TLAC additional member jurisdictions have adopted requirement, according to self-reporting. the revised credit valuation adjustment (CVA) framework, the revised minimum requirements Making Derivatives Markets Safer for market risk, the revised leverage ratio (2017 II.13 The FSB6 has found that 18 out of 24 exposure definition) and the global systemically FSB member jurisdictions have implemented important banks (G-SIB) leverage ratio buffer. final higher capital requirements for non- For standards that are past due, seven more centrally cleared derivatives (NCCDs). Margin capital standard implementations have been requirements for NCCDs are in force in 16 3 https://www.bis.org/bcbs/implementation/rcap_reports.htm 4 A jurisdiction is considered as having adopted a standard if a final rule is published and as having implemented a standard if a final rule has been published and is implemented by banks. 5 https://www.fsb.org/wp-content/uploads/P081222.pdf 6 https://www.fsb.org/2022/11/otc-derivatives-market-reforms-implementation-progress-in-2022/ 12GLOBAL BANKING DEVELOPMENTS jurisdictions; two jurisdictions have published NBFI under the FSB’s NBFI work programme. final standards and three jurisdictions expect The main focus of the NBFI work programme to implement the requirements in 2023. Trade includes: policy work to enhance money market reporting requirements for over-the-counter fund (MMF) resilience9; assessing liquidity risk (OTC) derivatives transactions are in force in 23 and its management in open-ended funds (OEFs); FSB member jurisdictions and in the remaining examining the structure and drivers of liquidity in jurisdiction7, preparations for authorising a core government10 and corporate bond11 markets trade repository (TR) and implementing the during stress; an examination of the frameworks jurisdiction’s requirements are ongoing. Central and dynamics of margin calls12 in centrally and clearing requirements are in force in 17 FSB non-centrally cleared markets; an assessment of member jurisdictions and platform trading the fragilities in USD cross-border funding and requirements are in force in 13 FSB member their interaction with vulnerabilities in EMEs13. jurisdictions. Climate-Related Financial Disclosures Enhancing Resilience of Non-Bank Financial II.16 Increasingly, central banks and Intermediaries (NBFI) policymakers around the world are considering II.14 The FSB, together with standard climate change as a potential source of systemic setting bodies (SSBs) and other international risk to the financial system. These risks, organisations, has been working towards including physical, transition and liability risks14, enhancing the resilience of the NBFI sector. It may be transmitted across the financial system, also focuses on reducing the systemic risks in the including across borders and across sectors15. sector by strengthening their ongoing monitoring II.17 In recent years, efforts to address and, where appropriate, developing policies to climate change risks have been growing across address such risks. jurisdictions and a large and increasing number II.15 In November 2022, the FSB issued a of central banks are either contemplating or progress report on enhancing resilience of Non- have put in place plans for addressing financial Bank Financial Intermediation8, which describes sector risks from climate change. The lack of progress over the past year and planned work by sufficiently consistent, comparable, granular and the FSB, as well as by SSBs and other international reliable climate data remains a major challenge organisations, to enhance the resilience of in measuring exposures to climate-related risks. 7 South Africa 8 https://www.fsb.org/wp-content/uploads/P101122.pdf 9 https://www.fsb.org/wp-content/uploads/P111021-2.pdf 10 https://www.fsb.org/2022/10/liquidity-in-core-government-bond-markets/ 11 https://www.iosco.org/library/pubdocs/pdf/IOSCOPD700.pdf 12 https://www.bis.org/bcbs/publ/d537.htm 13 https://www.fsb.org/wp-content/uploads/P260422.pdf 14 Liability risks arise when people or businesses seek compensation for losses that they may have suffered from the physical or transition risks from climate change. 15 https://www.fsb.org/2022/10/supervisory-and-regulatory-approaches-to-climate-related-risks-final-report/ 13Report on Trend and Progress of Banking in India 2021-22 II.18 General sustainability- related disclosure four blocks of the roadmap viz., firm-level requirements and climate-related disclosure disclosures, data, vulnerabilities analysis and requirements are the two areas where the regulatory and supervisory tools were assessed. International Sustainability Standards Board The report highlighted the need to establish (ISSB) has recently proposed standards16. They common metrics for climate-related financial are built on the recommendations of the Task risks, including forward-looking metrics and Force on Climate-Related Financial Disclosures establish data repositories for open access to (TCFD) and industry-based disclosure climate-risk related data in a consistent form. standards. The objective is to develop a global II.21 In the same month, the European baseline standard of sustainability disclosures Central Bank (ECB) announced that it will with consistent, complete, comparable, and incorporate climate change considerations into verifiable information. the Eurosystem’s monetary policy framework19. II.19 In June 2022, the BCBS issued 18 The related measures include: (i) tilting ECB’s principles for effective management and corporate bond holdings towards issuers with supervision of climate-related financial risks17. lower greenhouse gas emissions, more ambitious These principles cover diverse areas such as carbon reduction targets and better climate- corporate governance, internal controls, risk related disclosures; (ii) limiting the share of assessment, management and reporting. The assets issued by entities with a high carbon objective of these principles is to achieve a footprint that can be pledged as collateral by balance in improving practices and providing individual counterparties when borrowing from a common baseline for internationally active the Eurosystem; (iii) accepting marketable assets banks and supervisors, while retaining sufficient and credit claims from companies and debtors flexibility, given the degree of heterogeneity and that comply with the Corporate Sustainability evolving practices in this area. These principles Reporting Directive (CSRD) as collateral in are designed in a manner that enables their Eurosystem credit operations; and (iv) further adoption by a diverse range of banking systems enhancing the ECB’s risk assessment tools and in a proportional manner, depending on the capabilities to capture climate-related risks size, complexity and risk profile of the bank or better. banking sector. II.22 In November 2022, the FSB published a II.20 In July 2022, the FSB, assessed the joint report20 with the Network for Greening the progress made by SSBs and other international Financial System (NGFS) providing a synthesis organisations for addressing climate related of the findings of climate scenario analysis financial risks18 for the first time. All the undertaken by various financial authorities. 16 https://www.ifrs.org/news-and-events/news/2022/03/issb-delivers-proposals-that-create-comprehensive-global-baseline-of- sustainability-disclosures/ 17 https://www.bis.org/press/p220615.htm 18 https://www.fsb.org/2022/07/fsb-outlines-progress-made-on-addressing-financial-risks-from-climate-change/ 19 https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr220704~4f48a72462.en.html 20 https://www.fsb.org/wp-content/uploads/P151122.pdf 14GLOBAL BANKING DEVELOPMENTS Enhancing Cross-Border Payments II.25 In a paper published in August 202226, the ECB compared six27 potential avenues for II.23 The major challenges in achieving the cross-border payments systems that could pass goal of faster and more efficient cross-border the test of being immediate, cheap, universal payments include high costs, low speed, and settled in a secure settlement medium. The limited access and inadequate transparency. In report found that central bank digital currency 2021, the FSB sought to address these issues (CBDC) and instant domestic payment systems, by setting 11 global level quantitative targets both interlinked through an FX conversion layer, for three segments – wholesale cross-border could be the ‘holy grail’ of cross-border payments. payments; retail cross-border payments; and remittances21. Furthermore, in July 2022, the Central Bank Digital Currency (CBDC) FSB proposed key performance indicators II.26 Globally, a consensus is emerging that (KPIs) to monitor progress toward the targets CBDCs, if implemented correctly, can promote and identified existing and potential sources of diversity in payment options, make cross- data for calculating these KPIs22. A more detailed border payments faster and cheaper, increase discussion of the KPIs and main data sources financial inclusion and possibly facilitate crisis underlying their calculation, including material time –such as a pandemic – fiscal transfers gaps, the approach to operationalising the to targeted beneficiaries. Many central banks monitoring exercise were discussed in the final and governments are stepping up their efforts report published in November 202223. towards exploring a digital version of fiat II.24 In May 2022, the Committee on Payments currency. The COVID-19 pandemic created and Market Infrastructures (CPMI) published best conditions to support exponential growth in practices to self-assess the access arrangements digital payments and the proliferation of private of key payment systems, especially real time cryptocurrencies as an alternative to financial gross settlement (RTGS) systems24. The CPMI assets fetching low returns. This experience is also working towards extending the operating prompted central banks to accelerate work hours of RTGS systems across jurisdictions to on CBDCs. The results of the 2021 Bank for increase the speed of cross-border payments International Settlements (BIS) survey on while reducing liquidity costs and settlement CBDCs28 revealed that 90 per cent of central risks25. banks were actively researching the potential 21 https://www.fsb.org/wp-content/uploads/P131021-2.pdf 22 https://www.fsb.org/wp-content/uploads/P060722.pdf 23 https://www.fsb.org/2022/11/developing-the-implementation-approach-for-the-cross-border-payments-targets-final-report/ 24 https://www.bis.org/cpmi/publ/d202.htm 25 https://www.bis.org/cpmi/publ/d203.htm 26 Towards the holy grail of cross-border payments. Available at https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2693~8d4e580438. en.pdf?972bbc119868c193467dc86f4a7cf706 27 These include (i) modernized correspondent banking; (ii) emerging cross-border FinTech solutions; (iii) Bitcoin; (iv) global stablecoins; (v) interlinked instant payment systems with FX conversion layer; (vi) interlinked CBDC with FX conversion layer. 28 This report presents the results of a survey of 81 central banks about their engagement in CBDC work, as well as their motivations and their intentions regarding CBDC issuance. Available at https://www.bis.org/publ/bppdf/bispap125.pdf 15Report on Trend and Progress of Banking in India 2021-22 for CBDCs, 62 per cent were experimenting with of the project, published in March 2022, confirm the technology and 26 per cent were deploying the technical viability of mCBDCs based on pilot projects. two prototypes developed on blockchain based distributed ledger technology. II.27 In October 202129, the ECB launched an investigation phase of the digital euro project II.29 The BISIH is also developing a prototype with the aim of addressing key issues regarding for retail CBDCs, based on a two-tier distribution design and distribution, based on users’ model (central bank at the foundation of the retail preferences and technical advice by merchants CBDC system and customer-facing activities and intermediaries. The investigation phase will carried out by the private sector) that can enable last for 24 months and would assess the possible a central bank ledger to interact with private impact of a digital euro on the market, identifying sector service providers in a safe environment the design options to ensure privacy and avoid for retail payments30. risks for euro area citizens, intermediaries and Regulation of Crypto-Assets the overall economy. It will also define a business model for supervised intermediaries within the II.30 Following the aggressive tightening digital euro ecosystem. of monetary policy by the US Fed, crypto markets31 have witnessed high volatility. Even II.28 The BIS Innovation Hub (BISIH), along StableCoins32 were not spared. The crypto- with the central banks of Australia, Malaysia, sector’s market capitalisation fell from a peak Singapore and South Africa, designed and of around $3 trillion in November 2021 to less developed a multi-CBDC (mCBDC) shared than $1 trillion in December 202233. Some major platform called “Project Dunbar” that could crypto lending and trading platforms suspended enable international settlements using digital withdrawals from their platforms or announced currencies issued by multiple central banks. Unlike the correspondent banking model in bankruptcy34. The crypto market faced another which banks hold foreign currency accounts with episode of turmoil in November 2022 following each other, a multi-currency common settlement the collapse of a major crypto exchange35. These platform could enable transacting parties to pay episodes have once again brought the issue of each other in different currencies directly without financial stability risks posed by these assets the need for intermediaries and thus reduce the to the fore. Policy makers and SSBs across the time, effort, cost and settlement risk for cross- world are working towards the development of border payments. The results of the initial phase risk-based and technology-neutral policies for 29 https://www.ecb.europa.eu/paym/digital_euro/investigation/governance/shared/files/ecb.degov220929.en.pdf 30 https://www.bis.org/about/bisih/topics/cbdc/rosalind.htm 31 https://fortune.com/crypto/2022/05/05/bitcoin-plummets-alongside-stocks-federal-reserve-decision/ 32 Stablecoins are special category of crypto assets that aim to maintain a stable value relative to a specified asset (typically US dollars), or a pool or basket of assets, in contrast to the unbacked crypto-assets. 33 https://coinmarketcap.com/charts/ 34 Celsius Network Ltd, Babel Finance, CoinFlex, Voyager Digital, Vauld and Zipmex announced pause of withdrawal on June 12, 2022, June 17, 2022, June 23, 2022, July 01, 2022, July 04, 2022 and July 20, 2022, respectively. Celsius Network, Three Arrows Capital and Voyager Digital have since filed for bankruptcy. Source: https://www.bloomberg.com/news/articles/2022-07-21/ crypto-woes-spread-as-celsius-babel-links-hit-another-exchange?sref=QF6yuiF0 35 https://www.nytimes.com/2022/11/10/technology/ftx-binance-crypto-explained.html 16GLOBAL BANKING DEVELOPMENTS effective regulation and supervision of crypto- II.33 The BCBS divides crypto-assets into assets, commensurate with risks that these Group-1 crypto-assets, which fully meet a set of assets pose. classification conditions, and Group-2 crypto- assets that do not meet such conditions. Group-1 II.31 The FSB identified the following assets were further divided into Group 1a assets, vulnerabilities related to the crypto-sector which include tokenised traditional assets that may have financial stability implications: and Group 1b assets, which include crypto- increasing linkages between crypto-asset markets assets with effective stabilisation mechanisms. and the regulated financial system; liquidity Group 1 crypto-assets are proposed to be mismatch, credit and operational risks that make subject to at least equivalent risk-based capital stablecoins susceptible to sudden and disruptive requirements, based on the risk weights on runs on their reserves, with the potential to underlying exposures as set out in the existing spill over to short term funding markets; the Basel capital framework and Group 2 crypto- increased use of leverage in investment strategies; assets would be subject to further conservative concentration risk of trading platforms; opacity capital treatment37. and lack of regulatory oversight of the sector; low levels of investor and consumer understanding II.34 In June 2022, BCBS suggested some of crypto-assets; money laundering; cyber-crime additions/changes to the framework which and ransomware36. include: (i) development of standards text for inclusion in the Basel Framework; (ii) refinement II.32 The FSB also highlighted four of the classification conditions; (iii) introduction transmission channels through which such of an add-on to risk-weighted assets (RWA) to vulnerabilities may have financial stability cover infrastructure risk for all Group 1 crypto- implications: (i) the financial sector’s direct assets; (iv) recognition of hedging for certain exposures to crypto-assets, related financial Group 2 crypto-assets; and (v) introduction of an products and entities that are financially exposure limit, which will initially limit a bank’s impacted by these assets; (ii) wealth effects, total exposures to Group 2 crypto-assets to one i.e., the degree to which changes in the value of per cent of Tier 1 capital38. crypto-assets might impact their investors with subsequent knock-on effects on the financial II.35 In July 2022, the FSB prescribed system; (iii) confidence effects through which the international stance on the way forward developments concerning crypto-assets could regarding the regulation and supervision of the impact investor confidence in crypto-asset crypto sector. Their recommendations include39: markets, and potentially the broader financial (i) crypto-assets and markets must be subject to system; and (iv) extent of crypto-assets’ usage in effective regulation and oversight commensurate payments and settlements. with the risks they pose both at the domestic 36 https://www.fsb.org/wp-content/uploads/P160222.pdf 37 https://www.bis.org/bcbs/publ/d519.htm 38 https://www.bis.org/bcbs/publ/d533.pdf 39 https://www.fsb.org/wp-content/uploads/P110722.pdf 17Report on Trend and Progress of Banking in India 2021-22 and international level; (ii) crypto-asset service due to the implementation of various regulatory providers must at all times ensure compliance and macro-prudential reforms. Moreover, with existing legal obligations in the jurisdictions regulatory dispensations and extraordinary in which they operate; (iii) the recent turmoil in monetary and fiscal support helped banks to crypto-asset markets highlights the importance play a key role in ensuring availability of credit of progress in ongoing areas of work of the FSB to the real sector. and the international standard-setting bodies Bank Credit Growth to address the potential financial stability risks posed by crypto-assets, including the so-called II.38 At the onset of COVID-19 pandemic, stablecoins; (iv) stablecoins should be subjected credit growth slumped in the first half of 2020 to robust regulations and supervision of relevant on the back of contraction in global growth authorities if they are to play an important role and restrictions on mobility. The revival of in the financial system. The statement further credit growth in the second half of 2020 proved declares that FSB members support the full and short-lived—lasting only till the first half of timely implementation of existing international 2021—and a sharp downturn has taken hold standards and that the FSB is working to since then across AEs and EMDEs on weak ensure that crypto-assets are subject to robust demand drivers (Chart II.3a). While credit regulation and supervision. growth moderated in most of the AEs, USA and II.36 In October 2022, the FSB made Australia have exhibited signs of recovery since recommendations for the regulation, the second half of 2021 (Chart II.3b). A similar supervision and oversight of crypto- revival is observed for most of the EMEs with asset activities and markets and reviewed the notable exception of China (Chart II.3c). In previous recommendations for the regulation, contrast, credit growth was dismal across the supervision and oversight of ‘Global Stablecoin’ Euro area. Contraction in bank credit growth in arrangements. These proposals seek to promote Greece continued for the eleventh consecutive the comprehensiveness and international year in 2021 (Chart II.3d). consistency of regulatory and supervisory Asset Quality approaches to crypto-asset activities and markets40, 41. II.39 Asset quality, as measured by the ratio of non-performing loans to total gross 4. Performance of the Global Banking loans (NPL ratio), continued to improve across Sector AEs (Chart II.4a). In the Euro area, government II.37 The global banking sector was on a and institution-specific interventions in Greece strong footing when the pandemic struck and led to significant improvement in its banks’ has continued since then to remain financially asset quality (Chart II.4b). Among the EMEs it sound throughout 2021 and 2022 so far, largely has been improving since 2019, though the NPL 40 https://www.fsb.org/wp-content/uploads/P111022-3.pdf 41 https://www.fsb.org/wp-content/uploads/P111022-4.pdf 18GLOBAL BANKING DEVELOPMENTS Chart II.3: Bank Credit to the Private Non-Financial Sector a. AEs and EMEs b. AEs c. Select EMEs d. Select Euro Area Countries Source: Total Credit Statistics, BIS. ratio remained elevated in Russia and India vis- (Chart II.5b). For the EMDEs, PCR remained à-vis other countries (Chart II.4c). stable, except for Brazil and Argentina where it declined but remained well above 100 per cent Provision Coverage Ratio (Chart II.5c). II.40 The provision coverage ratio (PCR) Bank Profitability has been high in some AEs like the USA and Norway, indicating greater resilience to stress II.41 Despite lower interest rates, bank in the banking book (Chart II.5a). The ratio profitability, measured in terms of return on has, however, remained low—in the range of total assets (RoA), continued to improve for 15 per cent to 35 per cent—in other economies most AEs. In the USA and Denmark, however, like Australia, Canada and UK. PCR moderated profitability declined on account of higher loan slightly in few Euro area countries in 2021 loss provisioning (Chart II.6a). In the Euro 19Report on Trend and Progress of Banking in India 2021-22 Chart II.4: Asset Quality (NPL as a per cent of Total Gross Loans) a. Select AEs b. Select Euro Area c. Select EMDEs Source: Financial Soundness Indicators, IMF. area, RoA increased, except in Spain. Although Capital Adequacy profitability was in the negative territory II.42 The capital to risk weighted assets for Greece, it improved from the second quarter of 2021 (Chart II.6b). Among EMDEs, ratio (CRAR) of banks remained well above RoA remained robust on account of lower the Basel III prescribed levels across provisioning requirements for non-performing jurisdictions, although marginal moderation loans (Chart II.6c). is observed for AEs like Denmark and US Chart II.5: Provision Coverage Ratio (NPL Provisions as a per cent of Total Gross Loans) a. Select AEs b. Select Euro Area c. Select EMDEs Source: Financial Soundness Indicators, IMF. 20GLOBAL BANKING DEVELOPMENTS Chart II.6: Return on Assets a. Select AEs b. Select Euro Area c. Select EMDEs Source: Financial Soundness Indicators, IMF. in recent quarters. Among the Euro area Switzerland and Australia maintained a leverage countries and EMDEs, capital positions either ratio of more than twice the prescribed levels, remained stable or improved (Chart II.7). although marginal decline was observed in Leverage Ratio recent quarters. Germany, France and Portugal lead the Euro Area banks in maintaining high II.43 The leverage ratio i.e., regulatory Tier I leverage ratios. Among the EMDEs, Argentina capital as a proportion to total assets, remained well above the minimum of 3 per cent under and Indonesia maintained healthy leverage Basel III norms. Within the AEs, the USA, ratios (Chart II.8). Chart II.7: Regulatory Capital to Risk-Weighted Asset a. Select AEs b. Select Euro Area c. Select EMDEs Source: Financial Soundness Indicators, IMF. 21Report on Trend and Progress of Banking in India 2021-22 Chart II.8: Leverage Ratio (Regulatory Tier I Capital as a percent of Total Assets) a. Select AEs b. Select Euro Area c. Select EMDEs Source: Financial Soundness Indicators, IMF. Financial Market Indicators Indian banks have revived, mainly reflecting their robust capital positions and improvement II.44 Banking stocks plummeted globally in in profitability and asset quality. Equity prices 2020 but recovered during 2021 on liquidity in other AEs and EMEs have also recovered infusions by central banks, turnaround in recent months, but are still trading below in economic activity and a positive growth previous highs (Chart II.9a). outlook. This reversed in early March 2022 as the war in Europe ushered in a new wave II.45 After declining from their peaks in of uncertainty. Since then, the equity prices of March 2020, credit default swap (CDS) spreads Chart II.9: Market-based Indicators of Bank Health a. Bank Equity Price Indices b. Five-Year Bank CDS Spread Source: Refinitiv Datastream. 22GLOBAL BANKING DEVELOPMENTS of banks have increased significantly from the of AE banks declined (Chart II.11a). However, beginning of 2022. Global sanctions and rating the provision coverage ratio (PCR) was more downgrades following the Russia-Ukraine war than 100 per cent for all the Chinese banks in have led to a dramatic rise in CDS spreads in the list, indicating higher loss absorbing capacity Russia. The CDS spreads of banks in other in case of distress. In contrast, roughly half of markets also followed suit; however, spreads banks in AEs and EMDEs (excluding China) had have moderated in recent months (Chart II.9b). PCRs greater than 100 per cent (Chart II.11b). II.48 Banks further shored up their capital 5. World’s Largest Banks in 2021, with all banks maintaining capital to II.46 The country-wise distribution of the top risk weighted assets ratio (CRAR) at or greater 100 banks ranked by Tier-1 capital remained than 12 per cent and 64 banks with CRAR largely similar in 2021 to that a year ago42 higher than 16 per cent (Chart II.12a). The (Chart II.10a). Moreover, out of 20 Chinese distribution of banks as per their leverage banks in the list, the ranking of 18 banks either ratios (capital to assets ratio) remained similar improved or remained same as previous year in 2021 as in 2020 and only two banks had on higher accumulation of Tier-1 capital relative leverage ratio at or below three per cent. to other banks. Consequently, the share of total 64 banks had leverage ratio greater than 6 assets held by China-based banks increased per cent indicating their comfortable capital year-on-year in 2021 while that of banks in AEs position (Chart II.12b). The profitability of declined during the same period (Chart II.10b). banks improved, with higher number of banks II.47 In terms of asset quality, the share of registering RoA in the range of 1 to 2 per cent Chinese banks in non-performing loans (NPLs) of and greater than 3 per cent as compared with top 100 banks increased in 2021 while the share the previous year (Chart II.12c). Chart II.10: Distribution of Top 100 Banks by Tier-I Capital a. Distribution of Top 100 Banks by Tier-I Capital b. Share of Country Groups in the Total Assets of Top 100 Global Banks Source: Bankers Database, Financial Times. 42 The only change was that a Chinese bank was added to the list and a Swedish bank was dropped. 23Report on Trend and Progress of Banking in India 2021-22 Chart II.11: Asset Quality of the Top 100 banks a. Share of Country Groups in the Total NPLs of Top 100 b. Distribution of PCR by country groups Global Banks Note: The number of banks may not add up to 100 due to some missing values. Source: Bankers Database, Financial Times. 6. Conclusion possibility of continuing geopolitical tensions, tighter monetary and liquidity conditions and II.49 With global growth set to deteriorate in potential adverse spillover effects on profitability 2022 and with rising prospects of a recession and asset quality. Moreover, wider adoption of in 2023, credit growth, could procyclically decelerate across major economies which, in technology in the financial system amidst a new turn, could shrink bank profitability. While banks wave of innovations and climate change risks weathered the pandemic with high capital buffers pose new challenges for financial stability that and improved asset quality, going forward, would require risk mitigating regulatory and they face a highly uncertain outlook, with the supervisory actions. Chart II.12: Soundness of the Top 100 Banks a. Distribution of Banks by CRAR b. Distribution of Banks by c. Distribution of Banks by ROA Leverage Ratio Source: Bankers Database, Financial Times. 24III POLICY ENVIRONMENT The Reserve Bank’s policies in 2021-22 aimed at assuaging the impact of the pandemic and nurturing economic recovery. During 2022-23 so far, the policy focus has shifted to securing price stability characterised by policy rate action and gradual withdrawal of accommodation. The regulatory and supervisory policy measures of the Reserve Bank were undertaken to ensure level playing field across regulated entities, enhance consumers’ convenience and expand the reach and quality of financial services. 1. Introduction relating to scheduled commercial banks (SCBs), non-banking finance companies (NBFCs) and III.1 During 2021-22, the Reserve Bank credit co-operatives in Section 3. Supervisory sustained its policy focus on mitigating the strategies for banks and NBFCs are discussed adverse impact of the pandemic on the economy in Section 4, while policies pertaining to while supporting the nascent economic recovery. technological innovations are covered in Section In the second half of the year, there was a gradual 5. Policies relating to financial markets and shift towards a calibrated withdrawal of liquidity foreign exchange, and credit delivery and financial by allowing pandemic-related measures to lapse inclusion are covered in Sections 6 and 7, on due dates and cessation of unconventional respectively. Section 8 reviews initiatives related measures with a view to safeguarding financial to consumer protection and retail participation, stability and ensuring that inflation remains while the Reserve Bank’s initiatives for enhancing within the target going forward. During 2022-23 the scope and reach of the payments ecosystem so far, the policy focus has shifted to securing are set out in Section 9. The chapter concludes price stability in view of the inflationary with an overall assessment in Section 10. pressures. Accordingly, policy rate hikes and the gradual withdrawal of accommodation 2. Monetary Policy and Liquidity have commenced. Simultaneously, the Reserve Management Bank has also ushered in major regulatory and III.3 The monetary policy committee (MPC) supervisory reforms, with a focus on containing kept the policy repo rate under the liquidity potential vulnerabilities, ensuring orderly adjustment facility (LAF) unchanged at 4 per functioning of financial markets, strengthening cent during 2021-22 with a view to supporting a consumer protection, expanding the reach tenuous recovery that was taking hold after the and quality of financial services, improving the severe impact of the second wave of COVID-19. payments ecosystem and enhancing the adoption Inflationary pressures, which had built up in of digital banking. Q4:2021-22 due to rising international crude oil III.2 Against this backdrop, this chapter and other commodity prices, were expected to begins with an account of monetary and liquidity moderate in H1:2022-23. Accordingly, the MPC measures in Section 2. This is followed by an decided to continue with an accommodative overview of the regulatory policy developments monetary policy stance during 2021-22. 25Report on Trend and Progress of Banking in India 2021-22 III.4 Within a fortnight from the sixth and the large market borrowing programme of the final meeting of MPC for the year 2021-22, the central government, followed by G-SAP 2.0 in conflict in Ukraine broke out amidst escalated June 2021, with a commitment to cumulatively geopolitical tensions and the global and domestic purchase `2.2 lakh crore of government outlook was drastically altered. Surging prices of securities (G-secs) in H1:2021-22. Under the international crude oil and other commodities G-SAP, the Reserve Bank purchased both on the and food and energy shortages imposed upside run (liquid) and off the run (illiquid) securities risks to domestic inflation and downside risks to across the maturity spectrum, with more than the growth outlook. In its April 2022 resolution, 68 per cent of the purchases concentrated in the the MPC decided to keep the policy rate on hold. 5 to 10-year maturity segment, thus imparting The Reserve Bank, however, started the process liquidity to maturities across the mid-segment of withdrawal of accommodation by restoration of the term structure. G-SAP also facilitated of the liquidity management framework. The monetary transmission by containing volatility in institution of a standing deposit facility (SDF), G-sec yields that serve as the benchmark for the replacing the fixed rate reverse repo (FRRR) as pricing of other financial market instruments. the floor of the LAF at a rate 40 basis points (bps) In October 2021, given the overhang of surplus above the latter, effectively tightened monetary liquidity, the Reserve Bank discontinued G-SAP. conditions as money market rates rose from III.6 Apart from G-SAP, the Reserve Bank their pandemic lows and the liquidity overhang provided special refinance facilities of `66,000 was pulled in through variable reverse repo crore to all-India financial institutions (AIFIs); a (VRR) auctions of varying maturities. With the term liquidity facility of `50,000 crore to ramp shock of the war causing commodity prices to up COVID-related healthcare infrastructure and scale new highs and upside risks to the inflation services in the country; special long-term repo outlook, the MPC raised the policy repo rate operations (SLTRO) for small finance banks by 40 bps in an off-cycle meeting in May 2022, (SFBs) of which `10,000 crore had to be deployed followed by increases of 50 bps each in June in fresh lending of up to `10 lakh per borrower; 2022, August 2022 and September 2022, and and an on-tap liquidity window of `15,000 crore 35 bps in December 2022. Since May 2022, the in order to mitigate the adverse impact of the Reserve Bank has thus cumulatively raised the second wave of the pandemic on certain contact- policy repo rate by 225 bps to anchor inflation intensive sectors. The deadlines of key targeted expectations and contain second-round effects liquidity facilities were also extended, given the of repetitive shocks. Empirical estimates for needs of the stressed sectors: the SLTRO facility India indicate that high and volatile inflation for SFBs was made available till December 31, is detrimental to the functioning of the credit 2021, while also making it available on tap; the market (Box III.1). liquidity facility of `50,000 crore to ease access Liquidity Management during 2021-22 to emergency health services and `15,000 crore for contact-intensive sectors were extended up to III.5 The Reserve Bank announced a June 30, 2022. secondary market government securities acquisition programme (G-SAP) 1.0 in April III.7 Recognising that the large liquidity 2021 to assuage market sentiments in view of overhang from the pandemic-induced measures 26POLICY ENVIRONMENT Box III.1: Inflation Volatility and Credit Growth Monthly data from January 2009 till March 2022 were Table 1: ARDL Regression Results analysed in an autoregressive distributed lag model with Credit Growth Coefficient Std. Err. t-statistic P>t error correction (ARDL-EC)1 and 2. The results indicate ADJ that both inflation and inflation volatility drag down Credit Growth (L1). -0.1399 0.0395 -3.54 0.001*** credit growth by creating uncertainty around future cash LR flows, delaying investment planning decisions (Friedman, ∆ Interest (L1). -0.4377 0.2492 -1.76 0.081* 1977 and Fischer, Sahay, & Végh, 2002). While higher Inflation (L1). -2.4329 1.2256 -1.99 0.049** interest rates have a negative impact on credit growth, Inflation volatility (L1). 2.4396 2.6719 0.91 0.363 BEI (L1). 0.6967 0.1985 3.51 0.001*** business expectations embodied in the Reserve Bank’s GDP growth (L1). 0.1123 0.1655 0.68 0.499 index (BEI)3 are positively correlated with credit growth. Constant -73.7918 22.6043 -3.26 0.001*** A disturbance to the long-run equilibrium is corrected SR at a moderate speed. This suggests that credible, front- Credit Growth LD. -0.1647 0.0846 -1.95 0.054* loaded actions to contain inflation can help a quicker L2D. -0.1022 0.0803 -1.27 0.205 normalisation of the credit market after a shock L3D. 0.2086 0.0772 2.70 0.008*** ∆ Interest (Table 1). D1. -0.0254 0.0277 -0.92 0.361 LD. 0.0814 0.0282 2.89 0.004*** References L2D. 0.0848 0.0275 3.09 0.002*** Inflation (quarterly) Fischer, S., Sahay, R., & Végh, C. A. (2002). Modern Hyper D1. -0.7663 0.1550 -4.95 0.000*** and High Inflations. Journal of Economic Literature. Inflation volatility D1. -2.8310 1.0854 -2.61 0.010** Friedman, M. (1977). Inflation and Unemployment. BEI D1. 0.0710 0.0407 1.75 0.083* Journal of Political Economy. LD. -0.1675 0.0449 -3.73 0.000*** L2D. -0.0698 0.0446 -1.57 0.119 Pesaran, M. H., & Shin, Y. (1997). An Autoregressive L3D. -0.1035 0.0439 -2.36 0.020** Distributed Lag Modelling Approach to Cointegration GDP growth D1. 0.0157 0.0228 0.69 0.491 Analysis. Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium. Number of observations = 155 R-squared = 0.3607 Cambridge University Press. Adjusted R-squared = 0.2761 Notes: 1. BEI is Business Expectations Index. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds 2. L1, L2, L3 refer to relevant lags. 3. D refers to difference. Testing Approaches to the Analysis of Level Relationships. 4. LD refers to lag difference. Journal of Applied Econometrics. 5. The ARDL bounds test suggest that the findings are robust. 6. ***p<0.01, **p<0.05, *p<0.1 could engender mispricing of risks and pose was restored to its pre-pandemic level of 4.0 financial stability challenges, the Reserve Bank per cent of net demand and time liabilities started normalisation of liquidity conditions (NDTL) in two phases with an increase of during 2021-22 to align them with the evolving 0.5 percentage point each, effective from the macroeconomic developments. As a part of fortnights beginning March 27, 2021 and May this process, the cash reserve ratio (CRR) 22, 2021. 1 Since the variables under consideration are of different orders of integration, Engle Granger and Johansen tests of cointegration cannot be applied. To circumvent this problem, the ARDL method was chosen. 2 Inflation volatility was calculated using an exponential generalised auto regressive conditional heteroskedastic (EGARCH (1,1)) model as it does not impose non-negativity constraints on parameters and is able to capture asymmetry in the responsiveness of inflation volatility to shocks to inflation (Katusiime, 2018). 3 Business expectations index (BEI) combines nine parameters- (1) overall business situation, (2) production, (3) order books, (4) inventory of raw material, (5) inventory of finished goods, (6) profit margin, (7) employment, (8) exports and (9) capacity utilisation. A value above 100 indicates an expansion of the overall business activity and a value below 100 indicates contraction. 27Report on Trend and Progress of Banking in India 2021-22 III.8 In order to re-establish the 14-day variable 2022 that (i) the VRR operations of varying rate reverse repo (VRRR) as the main liquidity tenors would be conducted as and when management tool as part of the restoration of warranted as fine-tuning operations to tide over the revised liquidity management framework, any unanticipated liquidity changes during the an upscaling of the size of VRRR auctions was reserve maintenance period, while auctions undertaken through a pre-announced schedule of longer maturity will also be conducted, if from `2.0 lakh crore during April-July 2021 required; and (ii) the windows for FRRR and to `7.5 lakh crore by end-December 2021. the MSF operations would be available during As a result, surplus liquidity absorption was 17.30-23.59 hours on all days effective March seamlessly rebalanced from the overnight FRRR 1, 2022 (as against 09.00-23.59 hours since window to longer tenor 14-day VRRR auctions. March 30, 2020). Market participants were These operations were complemented by the advised to shift their balances out of the FRRR 28-day VRRRs and fine-tuning operations of 3-8 into VRRR auctions and avail the automated days maturities. Reflecting these developments, sweep-in and sweep-out (ASISO) facility in the the amount absorbed under the FRRR reduced e-Kuber portal for operational convenience4. significantly, averaging `2.0 lakh crore during Liquidity Management during 2022-23 H2:2021-22 from `4.6 lakh crore during III.12 Against the backdrop of the economic H1:2021-22. recovery gaining traction and the persistence of III.9 As an additional step towards absorbing inflation above the upper tolerance band of the the liquidity surplus, banks were provided one target, the focus of liquidity management during more option in December 2021 to prepay the 2022-23 moved to withdrawal of accommodation outstanding amount of funds availed under the in a non-disruptive manner. targeted long-term repo operations (TLTRO 1.0 III.13 In April 2022, as alluded to earlier, SDF and 2.0) conducted during March-April 2020. at 3.75 per cent was introduced as the floor of Accordingly, banks returned `2,434 crore in the LAF corridor, replacing the FRRR. Thus, December 2021 over and above `37,348 crore the SDF rate was placed 25 bps below the then paid earlier in November 2020. prevailing policy rate (4.00 per cent) and was III.10 Given the limited recourse to the marginal applicable on overnight deposits; however, the standing facility (MSF) by banks due to surplus SDF window retained the flexibility to absorb liquidity conditions in the post-pandemic period, liquidity of longer tenors, if necessary, with the normal dispensation of allowing banks to dip appropriate pricing. The MSF rate was retained up to 2 per cent (instead of 3 per cent during the at 4.25 per cent – 25 bps above the policy repo pandemic) of their NDTL was reinstated effective rate. Thus, the width of the LAF corridor was January 1, 2022. restored to its pre-pandemic configuration of III.11 With the progressive return of normalcy, +/- 25 bps symmetrically around the policy repo the Reserve Bank announced on February 10, rate (Chart III.1). With the institution of the SDF, 4 ASISO was introduced in August 2020 to provide greater flexibility to banks in managing their day-end CRR balances under which banks pre-set a specific (or range of) amount that they wish to maintain at the end of the day. Any shortfall or excess balances maintained automatically trigger MSF or reverse repo bids, as the case may be, under the ASISO facility. 28POLICY ENVIRONMENT moderated from `7.5 lakh crore during March Chart III.1: Major Monetary Policy Rates 2022 to `2.6 lakh crore in December 2022 (up to December 11). Cumulatively, these actions gradually lifted overnight money market rates closer to the policy repo rate. To assuage the temporary liquidity tightness from transient liquidity frictions due to tax outflows, the Reserve Bank conducted two VRR auctions on July 26 and September 21, 2022 of 3 days and 1 day maturity, respectively. Going forward, the Reserve Bank would be nimble and flexible in its liquidity management operations to meet the requirements of the productive sectors of the economy. Source: Database on Indian Economy, RBI. 3. Regulatory Policies III.15 The Reserve Bank complemented the the FRRR rate was retained at 3.35 per cent post-COVID monetary and liquidity measures and was delinked from the policy repo rate. It with regulatory policy changes to assuage remains a part of the toolkit and will be used the impact of the pandemic while containing at the Reserve Bank’s discretion for purposes associated risks to financial stability. During the specified from time to time. Akin to the MSF, second half of 2021-22 and 2022-23 so far, the access to the SDF is at the discretion of banks, focus of the Reserve Bank has been on gradual unlike repo/reverse repo, open market operation and non-disruptive withdrawal of post-COVID (OMO) and CRR which are at the discretion of policy support and regulations, keeping in mind the Reserve Bank. By removing the binding the needs of regulated entities (REs) and their collateral constraint on the central bank, the customers. SDF strengthens the operating framework of monetary policy. Moreover, it is a financial 3.1 Scheduled Commercial Banks stability tool in addition to its role in liquidity management. Regulatory Framework for Microfinance Loans III.14 Along with the policy repo rate hike III.16 The regulatory framework for NBFC - in an off-cycle meeting on May 4, 2022, the Micro Finance Institutions (NBFC-MFIs) was Reserve Bank increased the CRR by 50 bps reviewed. With effect from April 1, 2022 a to 4.50 per cent (effective fortnight beginning uniform regulatory framework for microfinance May 21, 2022), withdrawing primary liquidity lending by all REs was introduced. Apart to the tune of `87,000 crore from the banking from introducing a common definition of a system. In sync with the stance of withdrawal of microfinance loan and withdrawal of exemption accommodation, surplus liquidity as indicated for ‘not for profit’ companies engaged in these by the daily average absorption under the LAF activities, the guidelines also required REs to put 29Report on Trend and Progress of Banking in India 2021-22 in place Board-approved policies on assessment to asset reconstruction companies (ARCs) of household income and indebtedness, pricing against inter alia the SRs issued by the latter. of microfinance loans, conduct of employees In cases where stressed assets are sold against and flexibility in repayment periodicity SRs, the risks of the underlying exposures do of microfinance loans as per borrowers’ not effectively get separated from the sellers’ requirements. Besides introducing activity- books. With a view to mitigating this concern based regulation in the microfinance sector, and ensuring ‘true sale’ of such assets, in this framework is intended to deleverage 2016, the Reserve Bank had prescribed higher microfinance borrowers, strengthen customer provisioning with a floor when investments protection measures, enable competitive forces in such SRs constituted more than 50 per to bring down interest rates, and provide cent (later reduced to 10 per cent) of the total flexibility to the REs to meet credit needs of the SRs issued under that specific securitization. microfinance borrowers in a comprehensive These instructions were made applicable to all manner. lenders on September 24, 2021. In order to Foreign Currency (Non-resident) Accounts ensure smooth implementation, REs other than (Banks) [FCNR(B)] Scheme – Revised SCBs were advised on June 28, 2022, that the Benchmark Rate additional provisions could be spread over a five-year period starting with the financial year III.17 In view of the discontinuance of London ending March 31, 2022, i.e., from 2021-22 till interbank offered rate (LIBOR) as a benchmark 2025-26. Moreover, additional provisions made rate, it was decided in November 2021 to permit in every financial year should not be less than banks to offer interest rates on FCNR(B) deposits one fifth of the total required provisions. using the widely accepted overnight alternative reference rate (O-ARR) for the respective Large Exposure Framework (LEF) currency. Accordingly, the interest rate ceiling III.19 In the absence of a formal cross-border for FCNR(B) deposits with a maturity period of resolution regime, a large exposure framework 1 year to less than 3 years was revised as O-ARR (LEF) was made applicable to foreign banks’ or swap plus 250 bps. For deposits of 3 years (FBs’) exposures on their head office (HO) to and above up to and including 5 years, it was ring-fence the operations of their branches in revised to O-ARR or swap plus 350 bps. On July India. Considering that this will place additional 6, 2022, the ceiling was temporarily withdrawn capital burdens on such banks, a new credit for incremental FCNR (B) deposits mobilized by risk mitigation (CRM) mechanism was issued banks for the period until October 31, 2022 as on September 9, 2021. The CRM can comprise a measure for attracting capital inflows in the cash/unencumbered approved securities, the face of heightened volatility in financial markets sources of which should be interest-free funds globally and ensuing spillovers. from HO, or remittable surplus retained in the Provisioning Requirement for Investment in Indian books (reserves). The gross exposure Security Receipts (SRs) of foreign bank branches to HO (including III.18 REs are permitted to sell their stressed overseas branches) was allowed to be offset with assets, irrespective of their ageing criteria, the CRM while reckoning LEF limits, subject to 30POLICY ENVIRONMENT certain conditions. Foreign bank branches were these guidelines was deferred progressively till permitted to exclude all derivative contracts September 30, 2021 and came into effect from executed prior to April 1, 2019 (grandfathering), October 1, 2021. while computing derivative exposure on the HO. Review of Definition of Small Business Limit on Loans to Directors Customers for LCR and NSFR III.20 The threshold of loans to directors of III.23 For maintenance of liquidity coverage other banks and relatives of directors (of own ratio (LCR) and NSFR, the extant guidelines banks as also other banks) requiring sanction consider deposits and other extensions of funds of the Board or Management Committee of made by non-financial small business customers banks was fixed at `25 lakh in 1996. The as having similar liquidity risk characteristics as limit needed an upward revision to reflect the retail accounts. To be eligible, a threshold of `5 increase in general prices, to encourage expert crore (on a consolidated basis where applicable) professionals to join the Boards and reduce was prescribed on the aggregated funding from the number of cases requiring approval of the each customer. To better align the Reserve Board or Management Committee. Accordingly, Bank’s guidelines with the Basel Committee on on July 23, 2021, the Reserve Bank revised the Banking Supervision (BCBS) standards and threshold to `5 crore for sanction of personal enable banks to manage liquidity risk more loans to directors of other banks and all loans to effectively, the threshold was increased to `7.5 relatives of directors (of own banks as also other crore with effect from January 06, 2022. banks) and associated entities. Periodic Updation of KYC Fair Valuation of Banks’ Investment in Re- III.24 In order to avoid inconvenience to capitalisation Bonds customers during the pandemic, REs were III.21 On March 31, 2022, the Reserve Bank advised on May 5, 2021 that in cases where clarified that banks’ investment in special know-your-customer (KYC) updation was due securities received from the Government and pending, no restrictions on operations of towards banks’ recapitalisation from 2021-22 their accounts may be placed till December 31, onwards shall be recognised at their fair value or 2021. This relaxation was extended till March market value on initial recognition in the held to 31, 2022. maturity (HTM) category. Any difference between III.25 REs are required to periodically update the acquisition cost and fair value based on the the KYC (re-KYC) at least once in 2 years, 8 years criteria specified shall be immediately recognised and 10 years for high-risk, medium-risk and low- in the profit and loss account. risk customers, respectively. On May 10, 2021, Implementation of Net Stable Funding Ratio the Reserve Bank simplified this process. In case III.22 The final guidelines regarding the Basel of no change in KYC details, a self-declaration III net stable funding ratio (NSFR) were issued on can be furnished by the customer using various May 17, 2018 and were scheduled to come into channels, including digital. This provision was effect from April 1, 2020. Due to the uncertainty also introduced in respect of legal entities (LEs). on account of COVID-19, the implementation of In case of a change only in the address of the 31Report on Trend and Progress of Banking in India 2021-22 individual customer, a self-declaration of the new India’s Financial System’ on November 3, 2021. address has been allowed, subject to verification In view of the increasing significance of climate- by REs through a ‘positive confirmation’ within related financial risks, the Reserve Bank set up two months. These simplified measures are a Sustainable Finance Group (SFG) in May 2021 expected to provide convenience to customers to lead the regulatory initiatives in the area of and enable REs to update KYC records on time. climate risk and sustainable finance, including appropriate climate-related disclosures for Regulatory Response to Climate Risks banks and other REs, propagate sustainable III.26 The Reserve Bank joined the Network practices and mitigate climate-related risks in for Greening the Financial System (NGFS) as the Indian context. The Reserve Bank conducted a Member on April 23, 2021 and published its a survey on climate risk and sustainable finance ‘Statement of Commitment to Support Greening in January 2022 (Box III.2). Box III.2: Survey on Climate Risk and Sustainable Finance On July 27, 2022 the Reserve Bank released the results of high-carbon emitting/polluting businesses in the coming the survey on climate risk and sustainable finance, covering years. A few banks have either mobilised new capital to 12 PSBs, 16 PVBs and 6 FBs in India. The objective was scale up green lending and investment or set a target to assess the approach, level of preparedness and progress for incremental lending and investment for sustainable made by leading SCBs in managing climate risk. The key finance. Most banks have launched a few loan products observations from the survey are as follows: to tap the opportunities from climate change, while a few have also launched green deposits to scale up lending to Board-level engagement and responsibility: Board- environment-friendly businesses. level engagement on climate risk and sustainable finance is inadequate. In about a third of the banks that were Climate-related financial disclosures: A majority surveyed, responsibility for overseeing initiatives related of banks have not aligned their climate-related to climate risk and sustainability was yet to be assigned. financial disclosures with any internationally accepted Furthermore, only a few banks have included climate risk framework. / sustainability / environmental, social and governance Moving towards a low-carbon environment in banking (ESG) related key performance indicators (KPIs) in the operations: Most banks have either taken some performance evaluation of their top management. measures or have plans to decrease the absolute carbon Strategy: A majority of banks did not have a separate emissions arising from their operations and increase the business unit or vertical for sustainability and ESG- proportion of renewable energy in their total sourced related initiatives. Only a few banks had a strategy for electricity. A few banks have either announced time- embedding ESG principles in their business, scaling bound plans or intend to come up with a roadmap over up their sustainable finance portfolio and incorporating the next 12 months to become carbon-neutral. climate change risks into their existing risk management Capacity building and data gaps: Most banks are framework. looking at capacity building to better understand the Risk management: Almost all the surveyed banks financial implications of climate risk. Most banks recognised the urgency of the issue, and most of them also felt that the available data were insufficient for considered climate-related financial risks to be a an appropriate assessment of climate-related financial material threat to their business. Physical and transition risks and the processes and methodologies to measure risks were seen as the main sources of climate-related and monitor these risks were also not sufficiently risks. Some banks are focusing on social and governance developed. aspects, apart from climate and environment-related The responses to the survey indicate that although banks risks while evaluating credit proposals above a certain have begun taking steps in the area of climate risk and amount, while a few others are also attempting to quantify sustainable finance, there is a need for concerted effort the amount of their loan and investment portfolio that is and further action in this regard. The insights from this susceptible to such risks. exercise are expected to help in shaping the regulatory and Transition to low-carbon exposure: Most of the surveyed supervisory approach of the Reserve Bank to climate risk banks have decided to gradually reduce their exposure to and sustainable finance. 32POLICY ENVIRONMENT 3.2 Non-Banking Finance Companies Table III.1: Large Exposure Framework for NBFC – Upper Layer III.27 The contribution of NBFCs towards Sum of all Large exposure limit as per cent of eligible capital base supporting real economic activity and acting as exposure value to Other than Infrastructure Infrastructure Finance an additional channel of credit intermediation Finance Companies Companies supplementing the banks is well recognised. Single • 20 per cent • 25 per cent In recent years, this sector has grown in size, counterparty • additional 5 per cent • additional 5 per with Board approval cent with Board complexity and interconnectedness, making • additional 5 per cent approval some of the entities systemically significant. if exposure towards infrastructure loan/ This necessitated adoption of a scale-based investment • (Single counterparty regulatory (SBR) approach, effective October limit shall not exceed 25 1, 2022. The framework divides NBFCs into per cent in any case) Group of • 25 per cent • 35 per cent a base layer (NBFC-BL), middle layer (NBFC- connected • additional 10 per cent counterparties if exposure towards ML), upper layer (NBFC-UL) and top layer, infrastructure loan/ with a progressive increase in the intensity of investment regulation. Glide paths were provided to ensure Source: RBI. that the implementation of SBR is smooth and gradual. In particular, the glide paths for NPA guidelines providing detailed instructions on classification norms and minimum net owned components as well as regulatory adjustments funds requirement norms extend up to March and deductions from CET-1 capital, applicable 31, 2026 and March 31, 2027, respectively. to all NBFCs identified as NBFC-UL, except Core Large Exposure Framework for NBFC-UL Investment Companies (CICs)5. Provisioning for Standard Assets for NBFC-UL III.28 The upper layer of NBFCs as per the SBR comprises those that are specifically III.30 With a view to harmonising the identified by the Reserve Bank as warranting provisioning norms for outstanding funded enhanced regulatory attention, based on a set assets of NBFCs-UL with those of the commercial of parameters. Detailed guidelines on regulatory banks, standard asset provisioning norms for restrictions on lending and large exposures the former were issued on June 6, 2022. The framework (LEF) for NBFC-UL were issued on guidelines became effective from October 1, April 19, 2022 (Table III.1). 2022 and the provisioning rates range from 0.25 per cent for individual housing loans and loans Capital Requirements for NBFC-UL to small and micro enterprises (SMEs) to 2.00 III.29 In order to enhance the quality of per cent for teaser housing loans (Table III.2). regulatory capital, NBFCs-UL are required to Registration of Factors maintain common equity tier (CET)-1 capital of at least 9 per cent of risk weighted assets. III.31 Subsequent to the amendment to the On April 19, 2022, the Reserve Bank issued Factoring Regulation Act, 2011, on January 14, 5 CICs will continue to maintain, on an on-going basis, adjusted net worth in terms of their extant directions. 33Report on Trend and Progress of Banking in India 2021-22 Table III.2: Provisioning for Standard Assets purpose of enforcement of security interest in by NBFCs-UL secured debts and were required to apply on an Category of Assets Rate of Provision as per cent of individual entity basis. In order to simplify the funded amount outstanding process and improve the enforceability of the Individual housing loans and 0.25 per cent loans to SMEs objectives of the SARFAESI Act, the Government Housing loans extended at teaser 2.00 per cent, which will decrease of India notified on June 17, 2021 that HFCs rates to 0.40 per cent after one year from the date on which the rates registered under Section 29A of National Housing are reset to higher rates (if the Bank Act, 1987, which have assets worth `100 accounts remain ‘standard’) Advances to commercial real 0.75 per cent crore and above, may be treated as ‘FI’ under estate – residential housing (CRE Section 2(1)(m)(iv) of the SARFAESI Act, 2002. - RH) sector Advances to commercial real 1.00 per cent Accordingly, the previously prescribed criteria estate (CRE) sector (other than CRE-RH) for notification of HFCs were withdrawn by the Restructured advances As stipulated in the applicable Reserve Bank on August 25, 2021. prudential norms for restructuring of advances Review of Minimum Investment Grade Credit All other loans and advances not 0.40 per cent included above, including loans to Ratings (MIGR) for Deposits of HFCs and medium enterprises NBFCs Source: RBI. III.33 Extant guidelines relating to acceptance of public deposits by NBFCs and HFCs lay down 2022 the Reserve Bank specified criteria for a list of approved credit rating agencies (CRAs) granting certificates of registration to NBFCs and their corresponding MIGR. On May 02, 2022 which propose to undertake factoring business. the approved rating was uniformly standardized In addition to NBFC-Factors, all non-deposit to ‘BBB-’ for any of the SEBI-registered CRAs, taking NBFC-investment and credit companies resulting in better comparability with other (NBFC-ICCs) with asset size of `1,000 crore long-term debt instruments and across CRAs. and above were permitted to undertake factoring business, subject to meeting specified Aadhaar e-KYC Authentication for Non-Bank conditions. Any other NBFC-ICC intending to Entities undertake factoring business has to approach III.34 In terms of Section 11A of the prevention the Reserve Bank for conversion to NBFC- of money laundering (PML) Act, 2002, entities Factor. other than banking companies may be permitted Housing Finance Companies (HFCs) as through a notification of the central government Financial Institutions (FIs) under SARFAESI Act to carry out authentication of clients’ Aadhaar III.32 Earlier, HFCs had to satisfy certain number using e-KYC facility provided by the prescribed norms6 to be notified as an FI Unique Identification Authority of India (UIDAI). under the Securitisation and Reconstruction of Such notification is to be issued only after Financial Assets and Enforcement of Security consultation with UIDAI and the appropriate Interest Act, 2002 (SARFAESI Act) for the regulator. Accordingly, on September 13, 6 such as compliance with minimum supervisory rating and no adverse report from other authorities. 34POLICY ENVIRONMENT 2021, the Reserve Bank enabled all NBFCs, to Authorized Dealers Category-I (AD-1), to payment system providers and payment system strengthen their role as market makers at par participants desirous of obtaining Aadhaar with banks operating primary dealer business. Authentication Licence—KYC User Agency Effective January 01, 2023, all financial (KUA) Licence or sub-KUA Licence (to perform transactions involving the Rupee undertaken authentication through a KUA)—to submit globally by related entities of the SPD are their applications to the Reserve Bank for required to be reported to Clearing Corporation examination and recommending to UIDAI after of India’s trade repository before 12 noon of the necessary due diligence. business day following the date of transaction. Guidelines on Compensation of Key Managerial Revised Regulatory Framework for Asset Personnel (KMP) and Senior Management in Reconstruction Companies NBFCs III.37 In April 2021, the Reserve Bank had set up a Committee to undertake a comprehensive III.35 On April 29, 2022, the Reserve Bank review of the working of ARCs and recommend issued a set of principles for fixing compensation suitable measures to enable them to fully utilise of key managerial personnel (KMP) and senior their potential for resolving stressed assets and management of NBFCs. As per the guidelines, function in a more transparent and efficient NBFCs are required to constitute a Nomination manner. Accordingly, the extant regulatory and Remuneration Committee (NRC), which framework for ARCs was amended on the basis will be responsible for framing, reviewing and of recommendations of the Committee and implementing the compensation policy. The feedback from the stakeholders (Box III.3). NRC is also required to ensure ‘fit and proper’ status of the proposed as well as existing 3.3 Co-operative Banks directors and that there is no conflict of interest in appointment of directors on Board Appointment of Chief Risk Officer in Primary of the company, KMPs and senior management. (Urban) Co-operative Banks The guidelines inter alia prescribe that the III.38 On June 25, 2021, the Reserve Bank compensation package comprising fixed and advised all UCBs having asset size of `5,000 crore variable pay may be adjusted for all types of or above to appoint a Chief Risk Officer (CRO) risks. A certain portion of variable pay may have in view of the increasing size and scope of their a deferral arrangement and the deferral pay may business. The Board of the UCB is required to be subjected to malus/ clawback arrangement. clearly define the CRO’s role and responsibilities and ensure that they function independently. Diversification of Activities by Standalone Primary Dealers (SPDs) Revised Regulatory Framework for UCBs III.36 On October 11, 2022, the Reserve Bank III.39 On July 19, 2022, the Reserve Bank allowed SPDs to offer all foreign exchange issued a revised regulatory framework for UCBs market-making facilities to users as a part of under which a simple four-tiered approach their non-core activities, as currently permitted was adopted with differentiated regulatory 35Report on Trend and Progress of Banking in India 2021-22 Box III.3: Review of Regulatory Framework for ARCs The revised regulatory framework for ARCs issued on better returns for investors. ARCs are also required to October 11, 2022 was intended to strengthen the corporate retain a CRA for at least 6 rating cycles (of half year each) governance at ARCs, enhance transparency of their to ensure continuous engagement with them. functioning, strengthen prudential norms and facilitate Strengthening of prudential norms their role in resolution of stressed assets. The revised mechanism for one-time settlement (OTS) Strengthening corporate governance requires ARCs to get the OTS proposals evaluated by an Every ARC is required to appoint an independent director independent advisory committee (IAC) of professional as the Chair of the Board and at least half of the directors experts, followed by review of the IAC’s recommendations in a Board meeting should be independent directors. by the Board. Under the new framework, ARCs are Maximum continuous tenure for an incumbent Managing mandated to charge any management fee or incentive only Director/ Chief Executive Officer or Whole-time Director has from the recovery effected from the underlying financial been capped at fifteen years to promote a robust culture of assets. Minimum net owned fund (NOF) requirement for sound governance practices, professional management of ARCs has also been increased from `100 crore to `300 ARCs and to adopt the principle of separating ownership crore following a glide path in order to strengthen the from management. ARCs are also required to constitute balance sheet of ARCs adequately so as to hasten the debt- two committees of the Board viz., Audit Committee and aggregation process. Nomination and Remuneration Committee which are Facilitating ARCs’ role in resolution of stressed assets expected to enhance the efficacy of the Board and improve its focus on specific areas. The guidelines permit ARCs to invest in the SRs at a minimum of either 15 per cent of transferors’ investment Enhancing transparency and disclosures in the SRs or 2.5 per cent of the total SRs issued, whichever The revised framework has introduced a gamut of is higher, vis-à-vis the previous requirement of 15 per cent measures to enhance transparency in the functioning of of total SRs issued in all cases. This is expected to result ARCs. These measures include providing disclosures in in efficient utilisation of capital, thus enabling ARCs to the offer document about the track record of (i) returns participate in more and bigger deals. ARCs have also been generated for the SR investors, (ii) recovery rating migration permitted to invest surplus funds in certain additional and (iii) engagement with rating agency of schemes floated short-term instruments viz., money market mutual funds, in last eight years. In addition, disclosure period for the certificates of deposits and AA- or above rated corporate past performance of ARCs has been increased from three bonds/ commercial papers. Moreover, ARCs with minimum years to five years and ARCs are required to disclose NOF of `1000 crore have been permitted to act as resolution the assumptions and rationale behind ratings of SRs to applicants under IBC. On the other hand, lenders have SR holders. These measures are expected to facilitate been permitted to transfer all stressed loans to ARCs vis- investments from a broader set of qualified buyers (QBs), à-vis earlier stipulation of transfer of only those stressed address information asymmetry between the ARCs and loans which were in default for more than 60 days. This SR holders, foster healthy competition among ARCs and is expected to facilitate debt aggregation as well as better nudge ARCs to focus on resolution of assets to achieve reconstruction and recovery from stressed assets. prescriptions aimed at strengthening their ability to fund their growth. Recent guidelines financial soundness7. It stipulated a minimum on the matter stipulate that UCBs which do not net worth of `2 crore for Tier 1 UCBs operating meet the requirement are provided a glide path in single district and `5 crore for all other UCBs till March 31, 2028 with an intermediate target (of all tiers) to strengthen their resilience and to achieve at least 50 per cent of the applicable 7 Tier 1 - All unit UCBs and salary earners’ UCBs (irrespective of deposit size), and all other UCBs having deposits up to `100 crore; Tier 2 - UCBs with deposits more than `100 crore and up to `1,000 crore; Tier 3 - UCBs with deposits more than `1,000 crore and up to `10,000 crore; Tier 4 - UCBs with deposits more than `10,000 crore. 36POLICY ENVIRONMENT minimum net worth on or before March 31, the supervisory intensity and effectiveness 2026 to facilitate smooth transition. remain contemporaneous with the fast-changing financial system, efforts are channelised towards III.40 The minimum CRAR requirement for making the surveillance systems sharper, more Tier 1 banks was retained at 9 per cent, while comprehensive and in tune with the international that for Tier 2, Tier 3 and Tier 4 UCBs was best practices. revised to 12 per cent to strengthen their capital structure. Banks that did not meet the revised Chief Compliance Officer (CCO) in NBFCs CRAR were provided a glide path of three years III.43 To strengthen the compliance function with a target of achieving CRAR of 10 per cent by in NBFCs, the Reserve Bank prescribed certain March 31, 2024, 11 per cent by March 31, 2025 principles, standards, and procedures on April and 12 per cent by March 31, 2026. 11, 2022. The guidelines, made applicable to Automatic Route for Branch Expansion NBFCs in the upper and middle layer, envisage putting in place a board approved policy and a III.41 Under the revised regulatory framework, compliance function, including the appointment the Reserve Bank decided to introduce an of a Chief Compliance Officer (CCO), latest automatic route for branch expansion of UCBs by April 1, 2023 and October 1, 2023, that meet the revised financially sound and well respectively. The instructions inter alia specify managed (FSWM) criteria8, permitting them the responsibilities of the Board and senior to open new branches up to 10 per cent of the management, conditions for appointment and number of branches as at end of the previous tenure of CCO, and minimum expectations from, financial year subject to a minimum of one independence of and dual hatting of compliance branch and a maximum of five branches. While function. the branch expansion proposals under the prior approval route will continue to be examined as Core Financial Services Solution for NBFCs hitherto, the process of granting approval will be III.44 NBFCs in the middle and upper layer simplified. with ten and more fixed point service delivery units as on October 1, 2022 are mandated 4. Supervisory Policies to implement core financial services solution III.42 In line with international best practices, (CFSS) by September 30, 2025 in a phased the Reserve Bank has evolved its supervision manner akin to the core banking solution (CBS) to be more risk focused and forward looking. adopted by banks. NBFCs in the base layer Ongoing activities and proposed projects are and those in middle and upper layers with less expected to further augment the scope and than ten fixed point service delivery units were capacity of off-site as well as on-site supervision, advised to consider implementation of a CFSS monitoring and surveillance. To ensure that for their own benefit. 8 The revised criteria for determining the FSWM status include: CRAR to be at least 1 percentage point above the minimum CRAR applicable; net NPA of not more than 3 per cent; net profit for at least three out of preceding four years and no net loss in the immediate preceding year; no default in the maintenance of CRR / SLR during the preceding financial year; sound internal control system with at least two professional directors on the Board; core banking solution (CBS) fully implemented; and no monetary penalty imposed on the bank on account of violation of the Reserve Bank directives/ guidelines during the last two financial years. 37Report on Trend and Progress of Banking in India 2021-22 5. Technological Innovations and services in these units will be provided in two modes, namely, self-service and assisted Establishment of Digital Banking Units modes, with self-service mode being available on III.45 A Committee on establishment of digital 24*7*365 basis. banking units (DBUs) was set up by the Reserve Digital Lending Bank, which gave its recommendations on a digital banking unit model, facilities to be offered III.48 In the recent period, technological in DBUs, monitoring of functioning of DBUs, innovations have led to marked improvements cyber security and other IT related aspects, and in efficiency, productivity, quality, inclusion the role of DBUs in spreading digital banking and competitiveness in extension of financial awareness. Based on the recommendations of services, especially in the area of digital lending. the Committee, the guidelines on establishment Against the backdrop of business conduct and of DBUs were issued on April 7, 2022. customer protection concerns arising out of the spurt in digital lending activities, the Reserve III.46 The guidelines provided clarity on Bank had set up a Working Group on ‘Digital definitions of digital banking and DBUs, the Lending including Lending through Online infrastructure and resources required by DBUs, Platforms and Mobile Applications’ (WGDL), products and services to be offered, reporting which placed its report in the public domain on requirements, role of Board of Directors and November 18, 2021. On August 10, 2022, the customer grievance redressal mechanism. As Reserve Bank released a regulatory framework per the guidelines, DBUs are required to create for its REs, lending service providers (LSPs) awareness among their customers by offering engaged by them and their respective digital hands-on customer education on safe digital lending applications (DLAs) to support orderly banking practices. They will facilitate customers growth of credit delivery through digital lending in embarking on the digital journey through methods based on the inputs received from digital modes in a paperless, efficient, safe various stakeholders. and secured environment. This is expected to enhance financial inclusion and make available III.49 The recommendations of WGDL accepted the full array of financial products to the public in for immediate implementation on September 2, a seamless and efficient manner. In the process, 2022 focus on enhancing customer protection digital banking has also been recognised as a and making the digital lending ecosystem safe distinct business segment under retail banking. and sound while encouraging innovation. These III.47 On October 16, 2022 75 DBUs were set include: (i) all loan disbursals and repayments up in 75 districts of the country to commemorate to be executed only between the bank accounts of 75 years of India’s independence. The financial borrower and the RE without any pass-through/ services to be provided by the DBUs include pool account of the LSP or any third party; (ii) savings, credit, investment and insurance. On any fees or charges payable to LSPs in the credit the credit delivery front, to start with, the DBUs intermediation process to be paid directly by the will provide end-to-end digital processing of RE and not by the borrower; (iii) a standardized small ticket retail and MSME loans, starting from key fact statement (KFS), including annual online applications to disbursals. The DBUs will percentage rate (APR), to be provided to the also provide services related to certain identified borrower before executing the loan contract; (iv) government sponsored schemes. The products a cooling-off period during which the borrowers 38POLICY ENVIRONMENT can exit digital loans by paying the principal may find it difficult to directly access overseas and the proportionate APR without any penalty markets, the Reserve Bank permitted AD-I to be provided as part of the loan contract; (v) banks on July 07, 2022 to utilise overseas REs to ensure that they and the LSPs engaged by foreign currency borrowings (OFCBs) for them have a suitable nodal grievance redressal lending in foreign currency to constituents in officer to deal with FinTech/ digital lending India for a wider set of end-use purposes. This related complaints; (vi) data collected by DLAs is, however, subject to the negative list set out to be need based, have clear audit trails and for external commercial borrowings (ECBs). only collected with prior explicit consent of the The dispensation for raising such borrowings borrower, wherein the borrower may accept was available till October 31, 2022. or deny consent for use of specific data; and Permitting Banks and SPDs to Deal in Off-shore (vii) any lending sourced through DLAs and all Foreign Currency Settled Rupee Derivatives new digital lending products extended by REs Market over merchant platforms involving short term credit or deferred payments are required to be III.52 To provide a fillip to the interest rate reported to credit information companies (CICs) derivatives market, remove the segmentation by REs. The guidelines were made applicable between on-shore and off-shore markets and to new customers getting onboarded as well as improve the efficiency of price discovery, the to the existing customers availing fresh loans Reserve Bank on February 10, 2022 and August effective September 2, 2022, while the existing 8, 2022 allowed AD-I banks and SPDs authorized digital loans had to comply with the guidelines under section 10(1) of FEMA, 1999, respectively, by November 30, 2022. to undertake transactions in the off-shore foreign currency settled overnight indexed swap (FCS- 6. Financial Markets and Foreign OIS) market based on the overnight Mumbai Exchange interbank offered rate (MIBOR) benchmark with non-residents and other market-makers. AD-1 III.50 The Reserve Bank introduced market banks can undertake these transactions through reforms and regulatory policy changes in coordination with the Government and other their branches in India, foreign branches or stakeholders with a view to developing safe and International Financial Services Centre (IFSC) stable financial markets which facilitate efficient banking units. price discovery. The policy aim is to increase the International Trade Settlement in Indian depth and width of financial markets and provide Rupees (INR) appropriate products for trading and risk III.53 In order to boost export growth and management. As a part of this approach, it also to support the increasing interest of the global aims at easing access, enhancing participation, trading community in the Indian rupee, on facilitating innovation, protecting users and July 11, 2022 the Reserve Bank put in place an promoting fair conduct of businesses. additional arrangement for invoicing, payment Foreign Currency Lending by Authorised Dealer and settlement of exports and imports in INR. Category I (AD-I) Banks Accordingly, AD banks in India were allowed III.51 With a view to facilitating foreign currency to open special rupee vostro accounts of borrowings by a larger set of borrowers who correspondent banks of the partner trading 39Report on Trend and Progress of Banking in India 2021-22 country for settlement of trade transactions with 7. Credit Delivery and Financial Inclusion the prior approval of Reserve Bank. III.56 The Reserve Bank has put in place Liberalisation of External Commercial several policies to improve access to an array of Borrowing (ECB) Policy basic formal financial services and products and to scale up financial awareness. The National III.54 On August 1, 2022, the Reserve Bank, Strategy for Financial Inclusion (NSFI) 2019-24 in consultation with the Central Government, sets forth the vision and key objectives of financial increased the automatic route limit for ECBs inclusion policies in India, with an emphasis on from USD 750 million or equivalent to USD 1.5 enhancing digital financial inclusion, promoting billion or equivalent and the all-in-cost ceiling financial literacy and strengthening the grievance for ECBs by 100 bps for eligible borrowers with redressal mechanism in the country. an investment grade rating from Indian CRAs. Initiatives in Priority Sector Lending (PSL) The above dispensations will be available up to December 31, 2022. III.57 To ensure continuation of the synergies that have been developed between banks and Operationalisation of New Overseas Investment NBFCs in delivering credit to the specified Regime priority sectors, the facility of PSL classification III.55 On August 22, 2022, the Reserve Bank for loans to NBFCs by commercial banks and issued directions operationalising a new overseas loans to NBFC-MFIs by SFBs for the purpose investment regime. The new regime, simplifying of on-lending to certain priority sectors has the existing framework for such investment been allowed on an on-going basis. The PSL by persons resident in India, covered a wider limit for loans against negotiable warehouse range of economic activities and significantly receipts (NWRs) or electronic NWRs (eNWRs)9 reduced the need for seeking specific approvals. was increased from `50 lakh to `75 lakh per borrower to encourage their use and to ensure The directions, brought through the Overseas greater flow of credit to the farmers against Investment Rules and Regulations, 2022, are pledge or hypothecation of agricultural produce. expected to promote ease of doing business and reduce compliance burden and associated Enhancement of Collateral Free Loans to compliance costs. The directions include, Self Help Groups (SHGs) under Deendayal inter alia, the introduction of the concept of Antyodaya Yojana ‘strategic sector’, flexibility in pricing guidelines III.58 Following amendments in the Credit for investment/ disinvestment, and investment Guarantee Fund for Micro Units (CGFMU) in financial service sector by non-financial scheme carried out by the Government in July sector (except insurance and banking) entities 2021, the amount of collateral free loan to under the automatic route subject to certain SHGs under the Deendayal Antyodaya Yojana- conditions. Additionally, a mechanism of a ‘late National Rural Livelihood Mission (DAY-NRLM) submission fee (LSF)’ was introduced for taking has been enhanced from `10 lakh to `20 lakh. on record delayed reporting. The guidelines of the Reserve Bank have been 9 NWRs and eNWRs are issued by warehouses registered and regulated by Warehouse Development and Regulatory Authority. 40POLICY ENVIRONMENT revised to stipulate that for loans to SHGs companies (CICs) were also brought under the above `10 lakh and up to `20 lakh, no collateral ambit of RB-IOS with effect from September 01, should be charged and no lien should be marked 2022. against their savings bank account. The entire Internal Ombudsman (IO) Scheme for NBFCs loan (irrespective of the loan outstanding, even and CICs if it subsequently goes below `10 lakh) would III.61 The objective of the IO scheme is to be eligible for coverage under CGFMU. This is enable satisfactory resolution of complaints expected to enable women SHGs to access higher at the REs’ level itself so as to minimise the quantum of loans. need for escalation of complaints at other fora. Accordingly, deposit-taking NBFCs (NBFCs-D) 8. Consumer Protection and Retail with 10 or more branches and non-deposit Participation taking NBFCs (NBFCs-ND) with an asset size of III.59 Consumer education and protection have `5,000 crore and above having a public customer been the prime focus of the Reserve Bank. It interface were directed on November 15, 2021 continued to take initiatives at various levels— to appoint an IO at the apex of their internal covering REs, customers and the Reserve Bank grievance redressal mechanisms. On October 6, ombudsmen—to improve customer satisfaction. 2022, the directions were extended to CICs and During 2021-22, the Reserve Bank also initiated will come into effect from April 1, 2023. The steps to increase retail participation in G-secs. directions cover inter alia the appointment and Reserve Bank - Integrated Ombudsman Scheme tenure, roles and responsibilities, procedural (RB-IOS), 2021 guidelines, and oversight mechanism for the IO. All complaints that are wholly or partially III.60 To make the Ombudsman mechanism rejected by the internal grievance mechanism simpler, efficient and more responsive, the of the RE, except on aspects related to frauds, Reserve Bank rolled out the RB-IOS on and complaints involving commercial decisions, November 12, 2021 by integrating the three internal administration, pay and emoluments erstwhile ombudsman schemes, namely the of staff and sub-judice matters, are required to Banking Ombudsman Scheme (BOS), 2006; be reviewed by the IO before a final decision is the Ombudsman Scheme for Non-Banking conveyed to the complainant. Financial Companies (OSNBFC), 2018 and the Ombudsman Scheme for Digital Transactions Introduction of the Reserve Bank Retail Direct Scheme (OSDT), 2019. The scheme defines ‘deficiency in service’ as the ground for filing a complaint III.62 The Reserve Bank as the debt manager with a specified list of exclusions. This implies of the Government of India has been proactively that no complaints will be rejected on account engaged in the development of the G-secs market, of not being covered under the grounds listed in including broadening of the investor base. As a the scheme. The system is designed on the ‘One part of the continuing efforts to increase retail Nation, One Ombudsman’ principle and has participation in G-secs, the ‘RBI Retail Direct done away with the jurisdictions assigned to each Scheme’ was announced on July 12, 2021. of the 22 ombudsman offices. To address credit The online portal, which was launched on information related issues, cr edit information November 12, 2021 makes it convenient for the 41Report on Trend and Progress of Banking in India 2021-22 retail investors to invest in central government and (iv) proximity sound-based payments. It securities, state government securities and has facilitated access to UPI for more than 40 sovereign gold bonds (SGBs) by opening a retail crore feature phone subscribers in the country. direct gilt (RDG) account with the Reserve Bank In September 2022, UPI Lite was introduced to and to participate in both primary issuances facilitate low value transactions in offline mode of these securities as well as their secondary through an on-device wallet feature. The Reserve markets in a safe, simple, secured and direct Bank also allowed linking of credit cards to manner. the UPI network in June 2022, with the initial facilitation planned for RuPay credit cards. This III.63 Further, the Reserve Bank on January arrangement is expected to enhance convenience 04, 2022 also notified Retail Direct Market by providing more avenues to customers for Making Scheme mandating primary dealers to making payments through the UPI platform. be present on the Negotiated Dealing System- Order Matching (NDS-OM) platform (odd lots Interoperable Card-less Cash Withdrawal and request for quotes segments) throughout (ICCW) at ATMs market hours and respond to buy/sell requests III.66 To encourage a card-less cash withdrawal from RDG account holders. facility across all banks and ATM networks in an interoperable manner, the Reserve bank 9. Payments and Settlement Systems permitted customer authorisation using UPI III.64 The accelerated development of the with settlement of transactions through the ATM payments ecosystem in India, facilitated by network in May 2022. The facility of card-less increased adoption of technology and innovation, cash withdrawal will help contain frauds like has established the country as a force to reckon skimming, card cloning and device tampering. with in the global payments arena not only in Offline Payments terms of growth in digital payments but also III.67 Absence of or erratic internet connectivity, through the availability of a bouquet of safe, especially in remote areas, is a major impediment secure, innovative and efficient payment systems. for adoption of digital payments. A pilot to The recent initiatives taken by the Reserve Bank test innovative technologies that enable offline have focused on technology-based solutions for digital payments was undertaken in different the improvement of the payments ecosystem parts of the country from September 2020 to and are built upon the five pillars of integrity, July 2021. The experience of pilot programmes inclusion, innovation, institutionalisation and the feedback received indicated a scope for and internationalisation, as envisaged in the introduction of such offline payment solutions, Payments Vision 2025. particularly in semi-urban and rural areas. Enhancements to Unified Payments Interface Accordingly, the Reserve Bank released a (UPI) framework for facilitating small value digital III.65 UPI123Pay was launched in March payments in offline mode on January 03, 2022. 2022 to enable feature phone users to make Under this framework, offline transactions do UPI payments. It can be accessed through four not require an additional factor of authentication options viz., (i) app-based functionality, (ii) (AFA) and are subject to a limit of `200 per missed call, (iii) interactive voice response (IVR), transaction with an overall limit of `2,000 for 42POLICY ENVIRONMENT all transactions until the balance in the account to pay dividend and interest on all days, and is replenished. Replenishment of used limit is enabling recovery of recurring amounts like loan permitted only in online mode with AFA. instalments, insurance premiums and SIPs on due dates. e-Mandates for Recurring Payments – Limit Enhancement Enhancements to Indo-Nepal Remittance Facility Scheme III.68 Keeping in view the dynamic payment requirements and the need to balance safety III.71 The ceiling per transaction under the and security of card transactions with customer Indo-Nepal Remittance Facility Scheme was convenience, the Reserve Bank had permitted enhanced from `50,000 to `2 lakh with effect processing of e-mandates on all types of cards from October 1, 2021 and the cap on the for recurring transactions on August 21, 2019. number of remittances in a year was removed to The instructions were subsequently extended boost trade payments between India and Nepal on January 10, 2020 to cover UPI transactions. and facilitate person-to-person remittances Based on requests received from stakeholders electronically to Nepal. The enhancements are and keeping in mind the sufficient protection expected to facilitate payments including inter available to customers, the limit for such alia retirement and pension to ex-servicemen transactions was increased from `2,000 to who have settled in or relocated to Nepal. `15,000 per transaction on June 16, 2022. 10. Overall Assessment Availability of National Automated Clearing House (NACH) on All Days of the Week III.72 The Reserve Bank’s policy responses in 2021-22 and 2022-23 so far have been III.69 The NACH system is a web-based solution conditioned by the fast changing macro-financial operated by National Payments Corporation environment hit by multiple shocks as also the of India to facilitate inter-bank, high volume, overriding goal of promoting a robust, resilient electronic transactions which are repetitive and efficient financial system. Even as storm and periodic in nature. In 2021-22, the NACH clouds gather over the global economy, the processed 421 crore transactions that included strength and resilience of the Indian financial 313 crore credit transactions, of which 247 crore system has been a key factor in supporting its involved direct benefit transfers (DBT). comparatively superior overall macro outlook. III.70 To cater to the demand from Government Banks and non-banking financial institutions and billers and the rising need to ensure will have to remain prepared to face new availability of all channels facilitating electronic challenges and reap emerging opportunities in payments throughout the year, the Reserve Bank this dynamic environment, keeping their focus made NACH operational on all days of the week, on appropriate business models, adoption including weekends and other holidays, with of new technologies, sustainability, stability, effect from August 1, 2021. Thereafter, more consumer protection and financial inclusion. settlement cycles have been introduced in NACH The Reserve Bank’s forthcoming initiatives to further enhance efficiency of the ecosystem. are expected to guide the progress of regulated This initiative provided many advantages entities in this direction, secure and preserve including inter alia faster credit and utilisation of financial stability and enhance efficient DBT, allowing corporates and other stakeholders functioning of markets. 43OPERATIONS AND PERFORMANCE IV OF COMMERCIAL BANKS The Indian banking sector remained resilient in 2021-22 and 2022-23 so far, as banks witnessed healthy balance sheet growth on broad-based acceleration in credit. Deposit growth moderated from the COVID-19 induced precautionary surge. Augmented capital buffers, better asset quality and enhanced profitability indicators reflected their robustness. Going forward, fuller transmission of increased policy interest rate to deposit rates may augment deposit growth to meet credit demand. Slippages in restructured assets need to be monitored closely. 1. Introduction (LABs), small finance banks (SFBs) and payments banks (PBs) are examined in Sections 12 to 15 IV.1 During 2021-22, the balance sheet of individually. Section 16 concludes the chapter commercial banks expanded at a multi-year by highlighting major issues emerging from the high pace. Timely policy support cushioned analysis and provides some perspectives on the the impact of the pandemic on banks’ financial way forward. performance and soundness indicators. The legacy challenge of non-performing assets 2. Balance Sheet Analysis (NPAs) is easing, and profitability has been IV. 3 The consolidated balance sheet of improving sequentially to levels last observed scheduled commercial banks (SCBs) registered in 2014-15. This has been accompanied by double digit growth in 2021-22, after a gap lower slippages and the bolstering of capital of seven years (Chart IV.1). Deposit growth buffers. IV.2 Against this backdrop, this chapter Chart IV.1: Select Aggregates of SCBs addresses the operations and performance of commercial banks during 2021-22 and H1:2022- 23. An analysis of balance sheet developments and financial performance is presented in Sections 2 and 3, respectively. A discussion of their financial soundness is set out in Section 4, followed by an evaluation of the pattern of sectoral deployment of credit in Section 5. Sections 6 to 11 deal with themes relating to ownership patterns, corporate governance and compensation practices, foreign banks’ operations in India and overseas operations of Indian banks, developments in payments systems, consumer protection and financial inclusion. Specific issues pertaining to Source: Annual accounts of respective banks. regional rural banks (RRBs), local area banks 44OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS moderated from the COVID-19-induced IV.4 Despite some recent moderation, public precautionary surge a year ago. A rebound in sector banks (PSBs) still have the lion’s share borrowings after a two year hiatus shored up in the consolidated balance sheet. At end- the liabilities side. On the asset side, the main March 2022, they accounted for 62 per cent development was the strengthening of the of total outstanding deposits and 58 per cent credit pick-up through the year. Concomitantly, of total loans and advances extended by SCBs investments moderated. (Table IV.1). Table IV.1: Consolidated Balance Sheet of Scheduled Commercial Banks (At end-March) (Amount in ` crore) Item Public Sector Private Sector Foreign Small Finance Payments All Banks Banks Banks Banks Banks SCBs 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 1. Capital 59,328 71,176 30,641 31,243 91,465 1,01,933 5,375 5,800 1,300 4,287 1,88,109 2,14,439 2. Reserves and Surplus 6,49,142 7,27,852 7,07,346 8,08,446 1,24,693 1,39,569 14,800 16,543 -704 -2,533 14,95,278 16,89,877 3. Deposits 99,00,766 1,07,17,362 47,91,279 54,64,181 7,76,266 8,45,482 1,09,472 1,45,731 2,543 9,954 1,55,80,325 1,71,82,709 3.1. Demand 6,84,451 7,23,259 6,82,092 7,83,883 2,37,412 2,78,677 3,964 5,770 19 2,155 16,07,938 17,93,745 Deposits 3.2. Savings Bank 34,62,923 38,20,484 14,55,976 17,47,958 87,032 92,120 22,198 43,577 2,524 7,799 50,30,653 57,11,938 Deposits 3.3. Term Deposits 57,53,392 61,73,618 26,53,211 29,32,339 4,51,821 4,74,685 83,310 96,384 - - 89,41,734 96,77,026 4. Borrowings 7,17,410 7,51,236 6,25,683 7,57,261 1,02,331 1,27,467 27,828 27,011 198 307 14,73,450 16,63,283 5. Other Liabilities and 4,02,154 4,39,034 2,66,835 3,10,584 1,65,928 1,54,070 6,081 7,991 737 5,666 8,41,734 9,17,346 Provisions Total Liabilities/Assets 1,17,28,799 1,27,06,661 64,21,784 73,71,715 12,60,682 13,68,521 1,63,557 2,03,076 4,072 17,681 1,95,78,895 2,16,67,655 (59.9) (58.6) (32.8) (34.0) (6.4) (6.3) (0.8) (0.9) (0.0) (0.1) (100.0) (100.0) 1. Cash and balances 5,39,149 6,22,619 2,90,509 3,93,531 1,10,723 1,43,273 6,921 8,725 196 1,484 9,47,498 11,69,632 with RBI 2. Balances with banks 5,91,125 6,42,484 2,75,256 3,33,745 1,02,108 1,17,739 12,309 10,212 790 3,273 9,81,588 11,07,452 and money at call and short-notice 3. Investments 34,00,895 35,95,647 15,12,480 16,26,725 4,69,712 5,05,001 30,660 41,661 2,413 9,937 54,16,159 57,78,971 3.1 In Government 28,07,934 29,75,938 12,57,135 13,68,694 4,20,141 4,47,584 27,142 36,683 2,412 9,924 45,14,765 48,38,822 Securities (a+b) a) In India 27,70,643 29,32,482 12,36,660 13,50,959 3,86,490 3,98,009 27,142 36,683 2,412 9,924 44,23,347 47,28,057 b) Outside 37,292 43,456 20,476 17,735 33,651 49,575 - - - - 91,418 1,10,765 India 3.2 In Other 12 5 - - - - - - - - 12 5 Approved Securities 3.3 In Non- 5,92,949 6,19,704 2,55,345 2,58,031 49,570 57,417 3,517 4,978 1 13 9,01,382 9,40,144 Approved Securities 4. Loans and Advances 63,47,417 70,43,940 39,29,572 45,62,780 4,20,780 4,65,484 1,08,613 1,35,802 0 2 1,08,06,381 1,22,08,009 4.1 Bills purchased 1,45,894 2,33,191 1,19,295 1,50,703 60,380 64,595 124 585 - - 3,25,694 4,49,074 and discounted 4.2 Cash Credits, 24,90,604 26,61,563 11,46,858 13,62,842 1,79,873 2,01,228 8,929 12,582 - - 38,26,263 42,38,214 Overdrafts, etc. 4.3 Term Loans 37,10,919 41,49,187 26,63,419 30,49,235 1,80,527 1,99,661 99,560 1,22,636 0 2 66,54,424 75,20,720 5. Fixed Assets 1,06,826 1,09,784 39,714 44,456 4,457 4,964 1,676 2,001 222 370 1,52,895 1,61,575 6. Other Assets 7,43,389 6,92,188 3,74,253 4,10,478 1,52,903 1,32,061 3,378 4,674 452 2,615 12,74,374 12,42,015 Notes: 1. -: Nil/negligible. 2. Components may not add up to their respective totals due to rounding-off number to ` crore. 3. Detailed bank-wise data on annual accounts are collated and published in Statistical Tables Relating to Banking in India, available at https://www.dbie.rbi.org.in. 4. Figures in parentheses are shares in total assets/liabilities of different bank groups in all SCBs. Source: Annual accounts of respective banks. 45Report on Trend and Progress of Banking in India 2021-22 private sector banks (PVBs). This suggests that Chart IV.2: Balance Sheet Composition (At end-March 2022) the latter resort to borrowings to fuel credit growth. Furthermore, while the loans-to-assets ratio of PSBs has historically remained lower than PVBs, the investments-to-assets ratio of the former has remained higher, reflective of high investments in risk-free government securities (Chart IV.2). 2.1. Liabilities IV.6 Household financial saving rates declined to a 5-year low in 2021-22, which was also reflected in subdued deposit growth (Chart IV.3a). The transmission of the 190 basis points (bps) increase in the repo rate Source: Annual accounts of banks. during May-October 2022 to deposit rates is likely to provide a fillip to deposit growth rates IV.5 A closer look into the balance sheet (Chart IV.3b). composition across bank groups highlights their operational idiosyncracies. The deposit IV.7 Borrowings of SCBs accelerated in funding ratio, defined as the share of deposits 2021-22, as deposit growth did not keep pace in total liabilities, is higher for PSBs than for with credit offtake (Chart IV.4). This, combined Chart IV.3: Savings and Deposits a. Household Savings and Bank Deposits b. Transmission to Lending and Deposit Rates of SCBs (May to October 2022) Note: WALR: Weighted Average Lending Rate; WADTDR: Weighted Average Domestic Term Deposit Rate; MCLR: Marginal Cost of Funds-based Lending Rate; EBLR: External Benchmark-based Lending Rate. Source: NSO, Annual accounts of banks and RBI. 46OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS 2.2. Assets Chart IV.4: Growth in Borrowings IV.8 Credit growth accelerated to a ten- year high at end-September 2022, led by PVBs (Chart IV.5a). Both working capital and term loans, which were decelerating since Q4:2018- 19, showed steady growth during 2021-22. Around 75 per cent of incremental credit during the year was in the form of term lending, which grew at a 10-quarter high pace (Chart IV.5b). IV.9 Historically, metropolitan areas have garnered the largest share of incremental credit. In the aftermath of the COVID-19 lockdowns, however, their share declined to 20 per cent by end-March 2021 on higher credit flows to rural Source: Annual accounts of banks. and semi-urban areas. Subsequently, as credit flows revived, metropolitan areas regained their share (Chart IV.6). with the higher statutory reserve requirements1 that involved withdrawal of durable liquidity IV.10 Around 80 per cent of SCBs’ investments from the system, propelled borrowings by PVBs are in government securities (G-secs) and the and foreign banks (FBs). overall G-sec holdings of banks are impacted Chart IV.5: Growth in Advances a. Bank Group-wise2 b. Account Type-wise Note: Working capital is defined as the sum of cash credit, overdraft and demand loans. Term loan is defined as the sum of medium and long-term Source: Quarterly Statistics on Deposits and Credit of Scheduled loans. Commercial Banks. Source: Basic Statistical Returns I, RBI. 1 The cash reserve ratio (CRR) was increased from 3.5 per cent to 4 per cent of net demand and time liabilities (NDTL) effective from the fortnight beginning May 22, 2021. Subsequently, it has been further increased to 4.5 per cent of NDTL effective from the reporting fortnight beginning May 21, 2022. 2 IDBI Bank Ltd. has been categorized as Private Sector Bank with effect from January 21, 2019. Hence, from March 2019 round onwards IDBI Bank Ltd. is excluded from Public Sector Banks group and included in Private Sector Banks group. ‘The Lakshmi Vilas Bank Ltd.’ (a Private Sector Bank) was amalgamated with ‘DBS Bank India Ltd.’ (a Foreign Bank) with effect from November 27, 2020. 47Report on Trend and Progress of Banking in India 2021-22 of SCBs increased across all bank groups Chart IV.6: Incremental Credit- Population Group-wise (Table IV.2). IV.11 During 2021-22, as credit growth picked up and deposit growth moderated, the incremental credit-deposit (C-D) ratio reached a four-year high. As investments decelerated, the incremental investment-deposit (I-D) ratio declined (Chart IV.7). Going forward, fuller transmission of increased policy interest rate to deposit rates is likely to augment deposit flows to meet credit demand. Note: All the centres are classified into following four population groups based on their population size as per Census 2011: a) ‘Rural’ group includes centres with population of less than 10,000. b) ‘Semi-urban’ 2.3. Maturity Profile of Assets and Liabilities group includes centres with population of 10,000 and above but less than 100,000. c) ‘Urban’ group includes centres with population of 100,000 and above but less than ten lakhs. d) ‘Metropolitan’ group includes all centres IV.12 Maturity transformation is the essence with population of one million and above. Source: Quarterly Statistics on Deposits and Credit of Scheduled of banking business, and asset-liability maturity Commercial Banks. mismatches are inevitable as banks extend longer-term loans against short-term deposits. by factors such as credit demand conditions, During 2021-22, however, the maturity mismatch demand-supply dynamics of G-secs and interest moderated across all durations in comparison rate cycle. Special dispensation of enhanced with the previous year, reflecting improvements HTM limits for statutory liquidity ratio (SLR) in asset-liability management (Chart IV.8). eligible securities has ensured greater headroom for banks to invest in such securities3. Reflecting IV.13 Banks, especially from the private a confluence of these factors, SLR investments sector, ramped up short-term borrowings4 in Table IV.2: Investments of SCBs (At end-March) (Amount in ` crore) PSBs PVBs FBs SFBs SCBs 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 1 2 3 4 5 6 7 8 9 10 11 Total Investments (A+B) 34,09,289 36,03,007 15,21,942 16,32,570 4,49,403 4,77,085 30,709 41,695 54,11,343 57,54,358 A. SLR Investments (I+ II+III) 26,05,240 27,87,114 12,28,288 13,40,152 3,87,308 4,06,226 27,192 36,711 42,48,027 45,70,203 I. Central Government Securities 16,06,247 16,58,556 10,22,461 11,00,902 3,84,439 4,03,539 20,484 28,223 30,33,632 31,91,220 II. State Government Securities 9,96,676 11,26,852 2,05,826 2,39,249 2,869 2,687 6,708 8,487 12,12,080 13,77,276 III. Other Approved Securities 2,316 1,707 0 0 0 0 0 0 2,316 1,707 B. Non-SLR Investments (I+II) 8,04,049 8,15,893 2,93,654 2,92,419 62,095 70,858 3,517 4,985 11,63,316 11,84,154 I. Debt Securities 7,56,313 7,61,390 2,76,043 2,75,903 61,645 70,482 3,498 4,922 10,97,499 11,12,698 II. Equities 47,736 54,503 17,610 16,515 450 376 20 62 65,817 71,456 Source: Off-site returns (global operations), RBI. 3 Commercial banks were granted initial special dispensation of enhanced Held to Maturity (HTM) limit of 22 per cent of Net Demand and Time Liabilities (NDTL), for Statutory Liquidity Ratio (SLR) eligible securities acquired between September 1, 2020 and March 31, 2021. The limit was further extended to 23 per cent in April 2022, which is scheduled to be phased out gradually beginning from end June 2023. 4 Short-term is defined as up to 1 year while long-term is more than 3 years. 48OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Chart IV.7: Credit-Deposit and Investment- Chart IV.8: Gap between Proportion of Assets and Deposit Ratios Liabilities in Various Maturity Brackets Notes: 1. Assets consist of loans and advances and investments. Liabilities consist of deposits and borrowings. 2. Gap is calculated as assets minus liabilities. Source: Weekly Statistical Supplement, RBI. Source: Annual accounts of banks. 2021-22, taking advantage of low interest short-term category, indicative of active rates in that year. The investment portfolio investment risk management by these banks of PVBs and FBs is concentrated in the (Table IV.3). Table IV.3: Bank Group-wise Maturity Profile of Select Liabilities /Assets (At end-March) (Per cent) Assets/Liabilities PSBs PVBs FBs SFBs PBs All SCBs 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 1 2 3 4 5 6 7 8 9 10 11 12 13 I. Deposits a) Up to 1 year 36.2 35.0 34.2 32.3 62.4 62.8 53.6 50.2 13.0 10.3 37.0 35.6 b) Over 1 year and up to 3 years 21.9 21.9 28.9 30.2 30.8 29.2 42.1 46.0 87.0 89.7 24.7 25.2 c) Over 3 years and up to 5 years 11.3 12.7 9.2 9.7 6.7 8.0 1.7 1.6 0.0 0.0 10.3 11.4 d) Over 5 years 30.6 30.5 27.7 27.8 0.05 0.05 2.6 2.2 0.0 0.0 28.0 27.9 II. Borrowings a) Up to 1year 54.5 53.9 41.4 50.0 83.8 80.5 46.9 37.1 100.0 100.0 50.8 53.9 b) Over 1 year and up to 3 years 20.9 22.9 34.0 29.2 11.8 16.3 37.3 49.5 0.0 0.0 26.1 25.7 c) Over 3 years and up to 5 years 12.7 14.0 13.9 11.5 1.9 1.6 13.8 9.2 0.0 0.0 12.5 11.8 d) Over 5 years 11.9 9.2 10.6 9.3 2.4 1.6 2.1 4.2 0.0 0.0 10.5 8.6 III. Loans and Advances a) Up to 1 year 24.8 25.2 32.1 30.6 55.8 53.3 41.8 38.2 100.0 100.0 28.8 28.4 b) Over 1 year and up to 3 years 36.9 35.4 34.2 33.8 22.2 24.3 34.0 35.8 0.0 0.0 35.3 34.4 c) Over 3 years and up to 5 years 14.9 15.1 12.8 13.4 9.1 10.3 11.0 11.1 0.0 0.0 13.9 14.2 d) Over 5 years 23.4 24.4 20.9 22.3 12.9 12.1 13.2 14.9 0.0 0.0 22.0 23.0 IV Investments a) Up to 1 year 23.7 25.2 50.7 48.8 84.9 83.2 58.1 53.8 97.4 98.7 36.8 37.3 b) Over 1 year and up to 3 years 16.7 16.4 20.7 22.4 10.5 10.8 25.4 25.6 1.9 0.8 17.3 17.6 c) Over 3 years and up to 5 years 13.2 13.2 6.5 7.8 2.3 2.5 2.9 4.9 0.4 0.1 10.3 10.7 d) Over 5 years 46.4 45.2 22.2 20.9 2.4 3.5 13.6 15.7 0.2 0.3 35.6 34.4 Note: Figures denote share of each maturity bucket in each component of the balance sheet. The sum of components may not add up to 100 due to rounding off. Source: Annual Accounts of banks. 49Report on Trend and Progress of Banking in India 2021-22 2.4. International Liabilities and Assets and moved away from non-financial private institutions towards banks (Appendix Table IV.4 IV.14 During 2021-22, international liabilities and Chart IV.9b). Banks’ country composition of Indian banks, especially non-resident ordinary of international claims underwent geographical (NRO) rupee accounts and foreign currency changes favouring the United States (U.S.) borrowings, rose substantially, encouraged and the United Kingdom (U.K.) (Appendix by interest rate differentials in favour of India Table IV.5). (Appendix Table IV.2). On the other hand, an increase in international assets was led by loans 2.5. Off-Balance Sheet Operations and deposits and holding of debt securities. IV.16 Contingent liabilities’ growth of all SCBs Loans to non-residents declined relative to a year crossed 23 per cent – the highest in 11 years ago, while foreign currency loans to residents and – led by growth in forward exchange contracts, NOSTRO balances increased (Appendix Table and acceptances and endorsements (Chart IV.3). Reflecting these factors, the international IV.10a). As a proportion of balance sheet size, assets to liabilities ratio of Indian banks has contingent liabilities increased from 119 per been increasing for three consecutive years cent in 2020-21 to 133 per cent in 2021-22 (Chart IV.9a). (Appendix Table IV.6). FBs’ contingent liabilities IV.15 During the period under review, the are more than 10 times their balance sheet size share of international claims of Indian banks and constitute about half of the banking system’s i.e., assets held abroad by domestic as well as total off-balance sheet exposures (Chart IV.10b). foreign branches of Indian banks, excluding Their non-interest income, however, has not FBs, shifted towards short-term maturities increased commensurately. Chart IV.9: International Liabilities and Assets of Indian banks a. International Assets and Liabilities of Banks b. Consolidated claims of Indian Banks (At end-march) Source: Annual accounts of banks and DBIE. 50OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Chart IV.10: Off-Balance Sheet Liabilities of Banks a. Growth in OBS Exposures b. Distribution of OBS Exposures (At end-March 2022) Source: Annual accounts of banks. 3. Financial Performance measured in terms of return on equity and return on assets (RoA), improved to levels last observed IV.17 With greater transparency in asset in 2014-15 (Chart IV.11). recognition and stronger capital and provision buffers, banks faced the pandemic on a stronger IV.18 Robust bank profitability is an indicator of footing. Enhanced credit monitoring processes, a healthy financial system, which augurs well for coupled with portfolio diversification, helped financial stability. An alternative view is that high arrest slippages and strengthened their balance profitability could loosen leverage constraints and sheets. Accordingly, the pr ofitability of SCBs, lead to more risk-taking5. Empirical estimates Chart IV.11: Profitability Ratios (At end-March) a. Return on Assets b. Return on Equity Source: Annual accounts of banks and DBIE, RBI. 5 Xu, TengTeng & Hu, Kun & Das, Udaibir. (2019). Bank Profitability and Financial Stability. IMF Working Papers. 19. 1. 10.5089/9781484390078.001. 51Report on Trend and Progress of Banking in India 2021-22 for India suggest the existence of a threshold net interest margin (NIM) of SCBs at 2.9 per cent beyond which higher bank profitability may be at end-March 2022 remained much below the detrimental to financial stability (Box IV.1). The threshold. Box IV.1: Impact of Bank Profitability on Financial Stability Following literature, financial stability is captured by Table 1: Estimates of Panel Threshold Regression idiosyncratic risk measured by historical value at risk Models with Two regimes (VaR) of equity prices (Xu, Hu and Das,2019). Quarterly Model (1) (2) stock returns data of 24 banks for the period 2008-20196 Dependent Variable VAR_H VAR_95 is used for the purpose. The threshold value of NIM above Threshold 5.0011 5.0011 which higher profits can pose risks to financial stability is (p value = 0.00) (p value = 0.00) assessed through a fixed effect panel threshold regression. NIM The results suggest a non-linear relationship between NIM β -0.130* -0.213*** 1 and financial stability (Chart 1). This implies that an NIM (0.0756) (0.0811) higher than a threshold has a negative impact on financial β 0.153** 0.0568 2 (0.0729) (0.0782) stability. The endogenously determined threshold value of NIM works out to around 5 per cent7. This result remains Control Variables robust even after controlling for banks’ CRAR, GNPA, size CRAR -0.0371 -0.0667*** measured by log of total assets, short term interest rate (0.0227) (0.0244) (call rate) and GDP (Table 1). GNPA 0.0275*** 0.0541*** (0.00813) (0.00872) Log total assets -0.358*** -0.313** Chart 1: Bank Net Interest Margin and VaR_95: 2008-2019 (0.117) (0.125) FC (Dummy variable) 1.757*** 2.020*** (0.133) (0.143) Call rate 0.222*** 0.198*** (0.0198) (0.0213) GDP Growth -0.0332*** -0.0276** (0.0102) (0.0109) Constant 6.983*** 7.484*** (1.555) (1.667) Observations 1,152 1,152 R-squared 0.430 0.430 Number of banks 24 24 No. of Bootstraps 500 500 Prob>F 0 0 Notes: 1. Standard errors in parentheses. Note: Blue dots represent PSBs and orange dots represent PVBs. 2. *** p<0.01, ** p<0.05, * p<0.1. Source: RBI Staff Calculations. 3. FC refers to a crisis dummy, which takes value 1 for years 2008 and 2009, and 0 otherwise. References: Claudiu Tiberiu Albulescu, Banks’ Profitability and Financial Soundness Indicators: A Macro-level Investigation in Emerging Countries, Procedia Economics and Finance, Volume 23,2015,Pages 203-209,ISSN 2212-5671, https://doi.org/10.1016/ S2212-5671(15)00551-1. Zicchino, Lea & Tsomocos, Dimitrios & Segoviano, Miguel & Goodhart, Charles & Bracon, Oriol. (2006). Searching for a Metric for Financial Stability. Financial Markets Group, FMG Special Papers. 6 In the post 2019 period several bank mergers took place, constraining the availability of consistent time series data. In view of this, the analysis is limited to the period 2008-2019. 7 The 95 per cent confidence interval for optimal NIM is (4.9733, 5.2333). Testing whether this non-linear relationship has more than one threshold, the hypotheses of two and higher number of thresholds were rejected as bootstrap p-values were not found to be significant. 52OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS IV.19 Higher profits during 2021-22 were In contrast, the increase in other income of contributed by acceleration in income and PVBs was mainly contributed by acceleration contraction in expenditure (Table IV.4). Interest in commission and brokerage income that income, which forms 84 per cent of SCBs’ total forms more than 60 per cent of non-interest income, reversed the contraction experienced a income. year ago. Higher lending and investment volumes IV.21 Ongoing synchronised monetary led to higher interest income from these channels, policy actions across the world may have an notwithstanding then prevailing lower interest asymmetric impact on various components rates. Expenditure contracted, aided by decline of bank profitability viz, net interest income, in interest expended and lower provisions and non-interest income and loan loss provisions. contingencies. An increase in interest rate can lead to a rise IV.20 Typically, an inverse relationship in net interest income. On the other hand, as between G-sec yields and the non-interest banks suffer trading losses on their treasury income of banks is observed in India investments when yields go up, their non-interest (Chart IV.12). The other income of PSBs and income may suffer. Increased provisioning on FBs declined during the year, partly reflecting these losses as well as for NPAs could further trading losses on their investment portfolios. erode profitability. The net impact of monetary Table IV.4: Trends in Income and Expenditure of Scheduled Commercial Banks (Amount in ` crore) Items Public Sector Private Sector Foreign Small Finance Payments All Banks Banks Banks Banks Banks SCBs 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 1. Income 8,30,345 8,31,900 5,42,035 5,72,397 80,356 79,498 22,418 25,060 1,004 4,952 14,76,159 15,13,806 (-0.5) (0.2) (-0.8) (5.6) (-3.4) (-1.1) (16.6) (11.8) (1733.5) (393.2) (-0.5) (2.6) a) Interest Income 7,07,201 7,09,132 4,51,439 4,70,943 63,688 65,837 19,523 22,120 101 446 12,41,953 12,68,479 (-1.3) (0.3) (0.5) (4.3) (-4.5) (3.4) (15.2) (13.3) (120.1) (343.3) (-0.6) (2.1) b) Other Income 1,23,144 1,22,768 90,596 1,01,454 16,669 13,660 2,894 2,940 903 4,505 2,34,206 2,45,327 (4.3) (-0.3) (-6.9) (12.0) (0.7) (-18.0) (27.4) (1.6) (9931.3) (398.7) (-0.03) (4.7) 2. Expenditure 7,98,527 7,65,360 4,72,559 4,76,174 61,391 61,113 20,380 24,087 1,304 5,041 13,54,161 13,31,774 (-7.2) (-4.2) (-10.4) (0.8) (-8.4) (-0.5) (18.1) (18.2) (235.4) (286.6) (-8.0) (-1.7) a) Interest Expended 4,31,627 4,11,181 2,32,370 2,24,235 21,560 21,482 9,122 9,513 55 156 6,94,735 6,66,566 (-7.8) (-4.7) (-9.9) (-3.5) (-25.2) (-0.4) (15.1) (4.3) (307.7) (181.4) (-8.9) (-4.1) b) Operating Expenses 2,03,855 2,20,091 1,30,451 1,56,613 22,334 24,969 7,549 9,816 1,251 4,882 3,65,440 4,16,371 (5.8) (8.0) (3.0) (20.1) (3.5) (11.8) (5.6) (30.0) (156.6) (290.3) (4.8) (13.9) Of which : Wage Bill 1,24,612 1,32,747 50,280 58,851 7,891 9,178 4,304 5,305 398 788 1,87,485 2,06,870 (7.6) (6.5) (6.2) (17.0) (0.2) (16.3) (12.9) (23.3) (50.6) (98.1) (7.0) (10.3) c) Provision and 1,63,045 1,34,088 1,09,737 95,326 17,498 14,662 3,709 4,758 -2 3 2,93,987 2,48,837 Contingencies (-18.3) (-17.8) (-23.0) (-13.1) (5.1) (-16.2) (70.8) (28.3) (-18.5) (-15.4) 3. Operating Profit 1,94,863 2,00,628 1,79,214 1,91,549 36,463 33,047 5,747 5,732 -302 -87 4,15,985 4,30,869 (12.3) (3.0) (10.9) (6.9) (11.1) (-9.4) (38.8) (-0.3) (11.9) (3.6) 4. Net Profit 31,818 66,540 69,477 96,223 18,965 18,385 2,038 974 -300 -90 1,21,998 1,82,032 - (109.1) (263.5) (38.5) (17.2) (-3.1) (3.5) (-52.2) (1018.1) (49.2) 5. Spread (NII) 2,75,574 2,97,950 2,19,069 2,46,708 42,128 44,356 10,401 12,608 45 290 5,47,218 6,01,912 (11.0) (8.1) (14.7) (12.6) (11.3) (5.3) (15.3) (21.2) (40.7) (541.7) (12.6) (10.0) 6. Net Interest Margin 2.45 2.44 3.58 3.58 3.30 3.37 7.02 6.88 1.58 2.67 2.91 2.92 Notes: 1. Figures in parentheses refer to per cent variations over the previous year. 2. Percentage variations could be slightly different as absolute numbers have been rounded off to ` crore. 3. NIM has been defined as NII as percentage of average assets. Source: Annual accounts of respective banks. 53Report on Trend and Progress of Banking in India 2021-22 policy on banks’ profitability is thus an empirical Chart IV.12: G-Sec Yield and Non-interest income of SCBs issue (Box IV.2). IV.22 The contraction in total expenditure of SCBs was led by interest expenditure, which declined due to low deposit rates. As deposits form a relatively small portion of FBs’ balance sheet, their interest outgo as per cent of total assets is lower than that of the other two bank groups (Chart IV.13 a). On the other hand, the cost-to-income ratio, which is the ratio of operating expenses to operating income, was the highest for PSBs, owing to their high wage expenditure (Chart IV.13 b). IV.23 As banks were required to maintain Source: Bloomberg and Annual Accounts of Banks. higher provisions on loans which were Box IV.2: Impact of Monetary Policy on Bank Profitability An annual dataset on 234 banks from BRICS countries for Table 1: Regression Results the period 2010- 2021, along with various macroeconomic Variables Dependent variable: Return on Assets factors such as short-term interest rates, yield, GDP and (1) (2) (3) inflation was constructed to evaluate the relationship Dependent variable (-1) 0.244*** 0.235*** 0.148** between monetary policy and bank profitability8. In line (0.0599) (0.0609) (0.0598) with Goodhart (2019), the short-term interest rates were OIS 0.168*** 0.108** 0.158** (0.0402) (0.0438) (0.0692) proxied by overnight indexed swaps (OIS)9. The slope of OIS^2 -0.00705** -0.00415 -0.00539 the yield curve—calculated as the difference between the (0.00301) (0.00304) (0.00396) Yield curve Slope 0.168*** 0.255*** 0.307*** 10-year and the two-year government bond yields—is used (0.0571) (0.0663) (0.0816) to account for expectations about interest rate movements. Yield curve Slope^2 -0.0642*** -0.0753*** -0.0816*** (0.0135) (0.0127) (0.0139) The results from a fixed effects panel regression Equity-to-total assets Ratio 0.110*** (0.0220) suggest a concave relationship between banks’ RoA Cost-to-Income Ratio -0.00103 and short-term interest rates. Similar relationship is (0.00120) Log of total assets 0.256* also observed between RoA and slope of the yield curve. (0.140) This implies that upto a threshold, the negative impact GDP growth 0.0266*** 0.0207** (0.00805) (0.00912) of increase in policy rates on non-interest income and Inflation 0.0378 0.0399 provisions is more than offset by the positive effect on (0.0249) (0.0309) Constant 0.127 0.0202 -3.757** net interest income. Beyond the threshold, however, the (0.131) (0.118) (1.778) negative impact dominates. Bank-specific factors are also Observations 2,986 2,986 2,014 R-squared 0.411 0.414 0.452 found to significantly affect profitability. A higher equity- to-total assets ratio and a larger asset size are associated Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 with higher profitability. The impact of GDP growth rate on bank profitability is found to be positive and statistically Reference: significant (Table 1). Goodhart, C. A., & Kabiri, A. (2019). Monetary Policy and Cross-country evidence, thus, suggests that banks’ RoA is Bank Profitability in a Low Interest Rate Environment: A non-linearly related to short term rates as well as to the Follow-up and a Rejoinder . Centre for Economic Policy slope of the yield curve. Research. 8 Banking data has been sourced from the Banker Database, while financial and macroeconomic data has been taken from Bloomberg and CEIC. 9 Refers to three-month OIS except for Brazil, where it pertains to the one-year OIS. 54OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Chart IV.13: Expenditure of SCBs a. Interest Expenditure b. Cost-to-Income Ratio Source: Annual accounts of respective banks. granted moratorium during the pandemic, of deposits went down across the board as the their net profits were adversely affected in share of current and savings account (CASA) 2019-20 and 2020-21. During 2021-22, a deposits in total deposits increased. At end- reduction in provisions, inter alia, boosted March 2022, 44 per cent of SCBs’ outstanding banks’ net profits (Chart IV.14 a). Moreover, floating rate rupee loans were at external as the GNPAs declined, the provision coverage benchmark linked lending rates (EBLRs). The ratio surged (Chart IV.14 b). comparable positions for PSBs and PVBs were IV.24 As the reduction in return on funds was 33 per cent and 62 per cent, respectively. The slightly higher than the reduction in cost of return on advances decreased, primarily due to funds, the spread declined marginally. The cost re-pricing of existing floating rate loans at the Chart IV.14: Impact of Provisioning on Profitability a. Provisioning and Profitability b. Provision Coverage Ratio Note: Provision coverage ratio is not write-off adjusted. Source: Annual accounts of banks. Source: Off-site (domestic operations) returns, RBI. 55Report on Trend and Progress of Banking in India 2021-22 Ta ble IV.5: Cost of Funds and Returns on Funds - Bank Group-wise (Per cent) Bank Group/ Year Cost of Cost of Cost of Funds Return on Return on Return on Spread Variable Deposits Borrowings Advances Investments Funds 1 2 3 4 5 6 7 8 (8-5) PSBs 2020-21 4.2 4.3 4.2 7.5 6.6 7.2 3.0 2021-22 3.7 4.2 3.7 6.9 6.1 6.6 2.9 PVBs 2020-21 4.3 5.6 4.5 9.1 6.2 8.3 3.9 2021-22 3.7 5.2 3.9 8.5 5.8 7.7 3.9 FBs 2020-21 2.4 3.3 2.5 7.1 6.0 6.5 4.0 2021-22 2.1 3.6 2.3 7.0 5.7 6.3 4.0 SFBs 2020-21 6.8 8.8 7.3 17.1 6.8 14.9 7.6 2021-22 5.9 7.1 6.1 15.8 5.9 13.6 7.4 PBs 2020-21 3.0 5.3 3.1 9.3 4.0 4.0 0.9 2021-22 2.4 2.8 2.4 5.2 5.1 5.1 2.7 SCBs 2020-21 4.2 4.9 4.2 8.1 6.4 7.6 3.4 2021-22 3.6 4.6 3.7 7.6 6.0 7.0 3.3 Notes: 1. Cost of Deposits = Interest Paid on Deposits / Average of Current and Previous Years' Deposits. 2. Cost of Borrowings = (Interest Expended - Interest on Deposits) / Average of Current and Previous Years' Borrowings. 3. Cost of Funds = (Interest Expended) / Average of Current and Previous Years' (Deposits + Borrowings). 4. Return on Advances = Interest Earned on Advances / Average of Current and Previous Years' Advances. 5. Return on Investments = Interest Earned on Investments / Average of Current and Previous Years' Investments. 6. Return on Funds = (Interest Earned on Advances + Interest Earned on Investments)/ Average of Current and Previous Years' (Advances + Investments). Source: Calculated from balance sheets of respective banks. then prevailing lower rates as also incremental March 2021 to one at end-March 2022. At end- lending at lower rates (Table IV.5). September 2022, there was no bank under the PCA framework. 4. Soundness Indicators 4.1. Capital Adequacy IV.25 During 2021-22, SCBs’ capital position, asset quality and leverage ratios IV.26 The capital to risk-weighted assets ratio improved, and liquidity position remained (CRAR) of SCBs has been rising sequentially robust. The number of banks under the in the post-asset quality review (AQR) period Reserve Bank’s prompt corrective action (Table IV.6). This increase kept pace during (PCA) framework reduced from three at end- 2021-22, despite growth in risk-weighted Table IV.6: Component-wise Capital Adequacy of SCBs (At end-March) (Amount in ` crore) PSBs PVBs FBs SCBs 2021 2022 2021 2022 2021 2022 2021 2022 1. Capital Funds 7,93,971 8,93,870 7,72,389 8,80,664 2,04,433 2,19,844 17,90,330 20,15,443 i) Tier I Capital 6,49,082 7,35,753 7,01,622 8,06,457 1,86,369 2,01,196 15,54,796 17,62,613 ii) Tier II Capital 1,44,889 1,58,117 70,767 74,207 18,064 18,648 2,35,535 2,52,830 2. Risk Weighted Assets 56,56,060 60,84,930 41,92,303 46,92,169 10,49,878 11,09,568 1,08,98,241 1,18,86,667 3. CRAR (1 as % of 2) 14.0 14.7 18.4 18.8 19.5 19.8 16.3 16.8 Of which: Tier I 11.7 12.7 16.9 17.1 17.7 18.2 14.1 15.7 Tier II 2.5 2.7 1.7 1.3 1.6 1.6 2.2 1.8 Source: Off-site returns, RBI. 56OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS IV.27 With activation of the last tranche in Chart IV.15: RWAs and Assets Growth of SCBs (At end-March) October 2021, the total capital conservation buffer (CCB) to be maintained by banks increased to 2.5 per cent, thereby raising the total minimum capital requirement to 11.5 per cent. At end-March 2022, all banks met this regulatory minimum as also the CET-1 ratio requirement of 8 per cent (Chart IV.16). IV.28 Resource mobilisation by banks through private placements, which had accelerated in 2020-21, slowed during 2021-22. Although the number of issues tripled for PVBs in 2021-22, the total amount raised increased by only 5 per cent. The majority of the resources mobilised Source: RBI. by PVBs through private placements in 2021- 22 were via bonds/debentures, while during 2020-21, it was entirely via equity issuances assets (RWAs). Since 2016, the growth in RWAs (Table IV.7). has remained lower than the overall assets 4.2. Leverage and Liquidity growth, signifying a move towards safer assets (Chart IV.15). Around 92 per cent of increase in IV.29 The leverage ratio (LR), calculated as the the capital funds was contributed by increase in ratio of tier-I capital to total exposures, serves as Tier-I capital of banks, indicative of robustness a backstop to risk-weighted capital requirements. of capital buffers. At end-September 2022, the It is required to be maintained at a minimum CRAR of SCBs stood at 16 per cent. of 4 per cent and 3.5 per cent for domestic 57 )tnec rep ni( htworg y-o-Y Chart IV.16: Capital Adequacy a. CRAR b. CET-1 Ratio Note: Based on public and private sector banks. Source: Off-site returns, RBI.Report on Trend and Progress of Banking in India 2021-22 Table IV.7: Resources Raised by Banks through Private Placements (Amount in ` crore) 2019-20 2020-21 2021-22 2022-23 (Up to November 2022) No. of issues Amount raised No. of issues Amount raised No. of issues Amount raised No. of issues Amount raised PSBs 20 29,573 36 58,697 29 50,719 13 27,234 PVBs 8 23,121 4 33,878 12 35,682 3 5,194 Foreign Banks - - - - - - 1 125 Notes: 1. Includes private placement of debt and Qualified institutional placement. Data for 2022-23 are provisional 2. -: Nil/Negligible. Source: BSE, NSE, Merchant Bankers and Prime Database. systemically important banks and other banks, IV.31 The net stable funding ratio (NSFR) – the respectively. At end-March 2022, all bank groups ratio of available stable funding to the required met the stipulated minimum requirement ratio. stable funding – is a measure of a sustainable PVBs and FBs maintained LR much above the finance structure. Implementation of the required levels. NSFR, which was halted during the COVID-19 pandemic, was made effective October 1, 2021. IV.30 The liquidity coverage ratio (LCR) With this, banks are required to maintain NSFR stipulates that banks should maintain high at a minimum of 100 per cent, which was met by quality liquid assets (HQLAs) to meet 30 days’ all bank groups at end-March 2022 (Table IV.8). net cash outflows under stressed conditions. 4.3. Non-Performing Assets Although all the bank groups met the Basel requirement of 100 per cent LCR at end-March IV.32 NPAs adversely affect credit deployment, 2022, the ratio was lower than a year ago banks’ profitability through increased (Chart IV.17). provisioning, and impinge on their capital, apart from entailing recovery costs. F rom its peak in 2017-18, the GNPA ratio of SCBs has been Chart IV.17: Leverage and Liquidity declining sequentially to reach 5 per cent at end- September 2022. This decrease was led by lower slippages as well as reduction in outstanding Table IV.8: Net Stable Funding Ratio (At end-March 2022) (Amount in ` crore) Available Required NSFR Stable Stable (per cent) Funding Funding Public Sector Banks 93,46,181 69,40,125 134.7 Private Sector Banks 51,12,372 39,01,260 131.0 Foreign Banks 5,71,172 4,15,495 137.5 Small Finance Banks 1,39,917 1,10,157 127.0 Scheduled Commercial 1,51,69,642 1,13,67,038 133.5 Banks Source: Off-site returns (global operations), RBI. Source: Off-site returns, RBI. 58OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Chart IV.18: Asset Quality of Banks a. GNPA Ratio b. Slippage Ratio (At end-March) 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 (global operations). GNPAs through recoveries, upgradations and IV.34 Taking into account the global operations write-offs (Chart IV.18). of banks, asset quality improved across the board for all bank groups. Lower GNPAs, IV.33 In 2021-22, the reduction in NPAs was combined with high provisions accumulated in mainly contributed by written-off loans in the recent years, contributed to a decline in net NPAs case of PSBs, while upgradation of loans was the (Table IV.9). primary driver for asset quality improvement for PVBs (Chart IV.19). IV.35 As far as banks’ domestic operations are concerned, the proportion of standard assets to total advances increased and there Chart IV.19: Reduction in GNPAs (At end-March) was an overall reduction in GNPAs for all bank groups, except in case of FBs, during 2021-22 (Table IV.10). IV.36 Large borrowal accounts i.e., accounts with a total exposure of `5 crore and above, comprised 47.8 per cent of total advances in 2021-22, down from 48.4 per cent in 2020-21. Their share in total NPAs declined during the year to 63.4 per cent from 66.4 per cent in 2020- 21. The special mention accounts-0 (SMA-0) ratio, which is the proportion of loan accounts that were overdue for 0-30 days, shot up for overall as well as large borrowal accounts for Source: Annual accounts of banks. both bank groups (PSBs and PVBs) at end-March 59Report on Trend and Progress of Banking in India 2021-22 Table IV.9: Movement in Non-Performing Assets (Amount in ` crore) Item PSBs PVBs FBs SFBs All SCBs Gross NPAs Closing Balance for 2020-21 6,16,616 1,97,508 15,044 5,971 8,35,138 Opening Balance for 2021-22 6,16,616 1,97,508 15,044 5,971 8,35,138 Addition during the year 2021-22 1,39,905 1,25,834 8,320 9,381 2,83,441 Reduction during the year 2021-22 (i+ii+iii) 2,14,347 1,42,559 9,578 8,441 3,74,926 i. Recovered 56,959 34,139 2,722 1,758 95,579 ii. Upgradations 37,675 55,333 3,390 3,785 1,00,184 iii. Written-off # 1,19,713 53,087 3,466 2,898 1,79,163 Closing Balance for 2021-22 5,42,174 1,80,782 13,786 6,911 7,43,653 Gross NPAs as per cent of Gross Advances* 2020-21 9.1 4.8 3.6 5.4 7.3 2021-22 7.3 3.8 2.9 4.9 5.8 Net NPAs Closing Balance for 2020-21 1,96,451 55,377 3,241 2,981 2,58,050 Closing Balance for 2021-22 1,54,745 43,733 3,023 2,725 2,04,226 Net NPAs as per cent of Net Advances 2020-21 3.1 1.4 0.8 2.7 2.4 2021-22 2.2 1.0 0.6 2.0 1.7 Notes: 1. #: Includes prudential as well as actual write-offs. 2.*: Calculated by taking gross NPAs from annual accounts of respective banks and gross advances from off-site returns (global operations). Source: Annual accounts of respective banks and Off-site returns (Global Operations), RBI. 2022 pointing towards temporary stress among IV.37 In response to COVID-19, the Reserve borrowers (Chart IV.20). SMA-1 and SMA-2, Bank announced inter alia two restructuring which indicate impending stress for longer time schemes. In August 2020, the Reserve Bank buckets, declined to their lowest levels since end- announced resolution framework 1.0, which March 2016 for all accounts. was largely aimed at corporate exposures and Table IV.10: Classification of Loan Assets by Bank Group (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 2021 55,87,450 90.6 1,03,744 1.7 3,51,014 5.7 1,22,217 2.0 2022 61,96,768 92.4 75,843 1.1 3,29,264 4.9 1,02,400 1.5 PVBs 2021 37,57,240 95.3 65,363 1.7 90,228 2.3 31,350 0.8 2022 43,63,690 96.3 41,251 0.9 77,394 1.7 50,619 1.1 FBs 2021 4,10,418 97.6 3,648 0.9 5,566 1.3 986 0.2 2022 4,62,299 97.1 3,649 0.8 7,953 1.7 2,184 0.5 SFBs** 2021 1,05,619 94.6 4,965 4.4 841 0.8 165 0.1 2022 1,33,093 95.0 5,039 3.6 1,908 1.4 39 0.0 All SCBs 2021 98,60,726 92.7 1,77,720 1.7 4,47,648 4.2 1,54,717 1.5 2022 1,11,55,849 94.1 1,25,782 1.1 4,16,519 3.5 1,55,243 1.3 Notes: 1. Constituent items may not add up to the total due to rounding off. 2. *: As per cent to gross advances. 3. **: Refers to scheduled SFBs. Source: Off-site returns (domestic operations), RBI. 60OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS deadline of September 30, 2021 for invocation. Chart IV.20: Overall Stress vis-à-vis Stress in Large Borrowal Accounts These frameworks were designed with (At end-March 2022) sufficient safeguards, which helped in avoiding restructuring of inherently weak accounts. IV.38 The impact of these schemes could be gauged through the restructured standard advances (RSA) ratio, which is the share of RSA in total gross loans and advances. During 2020-21, the RSA ratio increased by 0.3 percentage points for all the borrowers taken together, while the comparative increase for large borrowers was 0.4 percentage points. In contrast, during 2021-22, the ratio increased by Note: The ratios for large borrowal accounts and overall accounts 1.1 percentage points for all the borrowers and are calculated as percentage of their respective amounts outstanding. Source: Central Repository of Information on Large Credits (CRILC) by 0.5 percentage points for large borrowers database and Off-site Returns. (Chart IV.21a). The higher order of increase in the RSA ratio of all borrowers in 2021-22 may personal loans facing COVID-19 related stress. indicate that the objective of the Reserve Bank’s The framework had a deadline of December 31, resolution framework 2.0, i.e., of aiding retail loans and MSMEs in dealing with COVID-related 2020 for invocation. A scheme for resolution stress, was largely successful. of micro, small and medium enterprises (MSMEs) was already operational since 2019. IV.39 The number of accounts restructured by Resolution framework 2.0 announced in May PVBs through both resolution frameworks 1.0 as 2021 and subsequently revised in June 2021, well as 2.0 grew multi-fold, albeit on a low base. In was aimed specifically at MSMEs, individual contrast, PSBs had restructured fewer accounts borrowers and small businesses which had a under resolution framework 1.0 but they picked Chart IV.21: Restructuring a. Restructured Standard Advances Ratio b. Total Number of Restructured Accounts Source: Central Repository of Information on Large Credits (CRILC) database and Off-site Returns. 61Report on Trend and Progress of Banking in India 2021-22 up steam in resolution framework 2.0 (Chart IV.41 Sales of stressed assets to asset IV.21b). The differential behaviour of PSBs vis-à- reconstruction companies (ARCs) is another vis PVBs may be reflective of the former’s legacy mode of their resolution. However, sales to of stress in large borrowal accounts. ARCs have gradually decreased over the years, and in 2021-22, only 3.2 per cent of the 4.4. Recoveries previous year’s GNPAs were sold to ARCs IV.40 Banks have multiple channels through (Chart IV.22a). The ratio of acquisition cost which stressed assets can be resolved. As fresh to book value increased marginally, denoting insolvency cases could be admitted after the one- slightly higher recovery rates for the selling year suspension during COVID-19, admissions banks (Chart IV.22b). under the IBC increased by 65 per cent during IV.42 Although the Reserve Bank has been 2021-22. Although the number of cases referred disincentivising banks from holding excess under Lok Adalats and SARFAESI Act increased security receipts (SRs) through increased by 336 per cent and 335 per cent, respectively, provisioning, the share of SRs subscribed by the IBC mechanism was the leader in terms of amount involved (Table IV.11). Defying the banks in total SRs issued increased to 68 per lull in the interim years, SARFAESI and DRTs cent in 2021-22. Further, the share of ARCs yielded recovery rates comparable to the IBC also increased to 18.1 per cent from 17.5 per mechanism. The pre-pack insolvency resolution cent a year ago. Redemption of SRs issued process, introduced for MSMEs in April 2021, by ARCs, which is an indicator of recovery is yet to gain traction and only two cases have through this mode, increased during the year, been admitted under the channel so far (up to resulting in a decline in the total SRs outstanding September 2022). (Table IV.12). Table IV.11: NPAs of SCBs Recovered through Various Channels (Amount in ` crore) Recovery Channel 2020-21 2021-22 (P) No. of cases Amount Amount Col. (4) as No. of cases Amount Amount Col. (8) as per referred involved recovered* per cent of referred involved recovered* cent of Col. (7) Col. (3) 1 2 3 4 5 6 7 8 9 Lok Adalats 19,49,249 28,084 1,119 4 85,06,648 1,19,005 2,777 2.3 DRTs 28,182 2,25,361 8,113 3.6 29,487 47,165 12,114 25.7 SARFAESI Act 57,331 67,510 27,686 41 2,49,475 1,21,642 27,349 22.5 IBC @ # 536 1,35,319 27,311 20.2 885 1,99,250 47,421 23.8 Total 20,35,298 4,56,274 64,229 14 87,86,495 4,87,062 89,661 18.4 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. 4. @: Data in column no. 2 and 6 are the cases admitted by National Company Law Tribunals (NCLTs) under IBC. 5. #: Data in column no. 3, 4 and 5 are with respect to 121 cases, and in column no. 7, 8 and 9 are with respect to 143 cases, where in resolution plans were approved during 2020-21 and 2021-22, respectively. Source: Off-site returns, RBI and Insolvency and Bankruptcy Board of India (IBBI). 62OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Chart IV.22: Stressed Asset sales to ARCs a. Sale to ARCs b. Stressed Assets Acquired and Acquisition Cost Source: Quarterly statements submitted by ARCs and off-site returns (domestic operations), RBI. 4.5. Frauds in the Banking Sector reputational, operational and business risk, along with endangering customers’ trust in IV.43 Banking frauds have implications the system. During 2021-22, the average for financial stability as they are a source of amount of fraud10 decreased substantially (Table IV.13). Table IV.12: Details of Financial Assets Securitised by ARCs IV.44 Based on the date of occurrence of (Amount in ` crore) frauds, advances-related frauds formed the Item Mar-20 Mar-21 Mar-22 biggest category prior to 2019-20. Subsequently, Number of Reporting ARCs 28 24 28 however, in terms of number of frauds, the 1. Book Value of Assets Acquired 4,35,122 4,71,204 5,65,683 modus operandi shifted to card or internet- 2. Security Receipt issued by SCs/ 1,53,239 1,33,755 1,22,130 RCs based transactions. Additionally, cash frauds 3. Security Receipts Subscribed to are also on the rise (Table IV.14). by (a) Banks 1,02,005 87,897 83,190 IV.45 The number of fraud cases reported (b) SCs/RCs 30,167 23,359 22,105 by PVBs outnumbered those by PSBs for the (c) FIIs 10,367 10,156 4,548 (d) Others (Qualified 10,700 12,343 12,288 second consecutive year in 2021-22. In terms Institutional Buyers) of the amount involved, however, the share of 4. Amount of Security Receipts 18,213 23,131 23,396 Completely Redeemed PSBs was 66.7 per cent in 2021-22, as 5. Security Receipts Outstanding 1,09,168 85,298 69,219 compared with 59.4 per cent in the previous Source: Quarterly statements submitted by ARCs. year (Chart IV.23). 10 Defined as total amount involved in frauds divided by number of frauds. 63Report on Trend and Progress of Banking in India 2021-22 Table IV.13: Frauds in Various Banking Operations Based on the Date of Reporting (Cases in number and amount in `crore) Area of Operation 2019-20 2020-21 2021-22 2021-22 (April-September) 2022-23 (April-September) Number Amount Number Amount Number Amount Number of Amount Number of Amount of frauds involved of frauds involved of frauds involved frauds involved frauds involved Advances 4,607 1,81,865 3,496 1,36,429 3,838 58,303 1,800 35,034 2006 18,746 Off-balance Sheet 34 2,445 23 535 21 1077 10 612 5 283 Forex Transactions 8 54 4 129 7 7 1 0 10 3 Card/Internet 2,677 129 2,545 119 3,596 155 1532 60 2321 87 Deposits 530 616 504 434 471 493 208 362 270 135 Inter-Branch Accounts 2 0 2 0 3 2 0 0 2 0 Cash 371 63 329 39 649 93 245 51 589 81 Cheques/DDs, etc. 201 39 163 85 201 158 107 149 73 12 Clearing Accounts, 22 7 14 4 16 1 9 1 11 2 etc. Others 250 173 278 54 300 100 157 47 119 136 Total 8,702 1,85,391 7,358 1,37,828 9,102 60,389 4,069 36,316 5,406 19,485 Notes: 1. Refers to frauds of `1 lakh and above. 2. The figures reported by banks and financial institutions 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 are as reported and do not reflect the amount of loss incurred. Depending on recoveries, the loss incurred gets reduced. Further, the entire amount involved in loan accounts is not necessarily diverted. Source: RBI. 4.6. Enforcement Actions frauds classification and reporting, and violation of cyber security framework guidelines. During IV.46 During 2021-22, the major reasons for the year, the average per instance penalty was imposition of monetary penalties on regulated entities (REs) included, inter alia, non- the highest for PVBs and was the lowest for co- compliance with exposure and IRAC norms, operative banks (Table IV.15). Table IV.14: Frauds in Various Banking Operations Based on the Date of Occurrence (Cases in number and amount in ` crore) Area of Operation Prior to 2019-20 2019-20 2020-21 2021-22 2022-23(April - September) Number Amount Number Amount Number Amount Number Amount Number of Amount of frauds involved of frauds involved of frauds involved of frauds involved frauds involved Advances 9,230 3,41,768 1,947 32,386 1,477 14,973 1112 6,042 181 174 Off-balance Sheet 66 3,860 8 423 8 31 1 26 0 0 Forex Transactions 3 47 8 135 4 2 9 8 5 2 Card/Internet 766 55 2,717 144 2,435 124 3849 120 1372 46 Deposits 508 651 495 402 387 524 328 82 57 20 Inter-Branch Accounts 3 0 2 0 3 2 1 0 0 0 Cash 99 48 392 38 457 58 745 82 245 49 Cheques/DDs, etc. 90 29 205 70 156 164 160 25 27 6 Clearing Accounts, etc. 19 7 16 2 9 3 14 2 5 0 Others 331 115 178 163 255 117 160 60 23 8 Total 11,115 3,46,580 5,968 33,763 5,191 15,998 6379 6,447 1915 305 Notes: 1. Refers to frauds of `1 lakh and above. 2. The figures reported by banks and financial institutions 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. 4. Data in the table pertain to cases reported from 2019-20 till September 30, 2022. 5. Amounts involved are as reported and do not reflect the amount of loss incurred. Depending on recoveries, the loss incurred gets reduced. Further, the entire amount involved in loan accounts is not necessarily diverted. Source: RBI. 64OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.15: Enforcement Actions Chart IV.23: Bank Group-wise Frauds Regulated Entity April 2020 to April 2021 to March 2021 March 2022 Instances Total Instances Total of Penalty of Penalty imposition (` crore) imposition (` crore) of penalty of penalty 1 2 3 4 5 Public Sector Banks 4 9.50 13 17.55 Private Sector Bank 3 5.92 16 29.39 Cooperative Banks 43 3.89 145 12.10 Foreign Banks 3 8.00 4 4.25 Payments Banks 1 1.00 - - Small Finance Banks - - 1 1.00 NBFCs 7 3.05 10 1.03 Total 61 31.36 189 65.32 Source: RBI. Source: RBI. loans, especially housing. Credit flows to the services sector revived from a contraction in the 5. Sectoral Bank Credit: Distribution and previous year. The recovery was broad-based, NPAs encompassing contact-intensive segments as well IV.47 The sharp acceleration in credit growth as commercial real estate and computer software during 2021-22 was led by services and retail (Table IV.16). Table IV.16: Sectoral Deployment of Gross Bank Credit by SCBs (Amount in ` crore) Sr. Item Outstanding at end Per cent variation (y-o-y) No. Mar-20 Mar-21 Mar-22 2019-20 2020-21 2021-22 1 Agriculture & Allied Activities 12,39,575 13,84,815 15,16,303 1.8 11.7 9.5 2 Industry, of which 32,52,801 32,53,636 35,08,744 -1.2 0.0 7.8 2.1 Micro & Small Industries 4,37,658 4,72,529 6,14,037 -0.5 8.0 29.9 2.2 Medium 1,12,367 1,87,599 2,63,959 -9.3 67.0 40.7 2.3 Large 26,11,377 24,76,702 24,88,228 0.0 -5.2 0.5 3 Services, of which 27,54,823 27,45,324 31,48,321 5.9 -0.3 14.7 3.1 Trade 6,28,142 7,14,210 7,76,737 8.8 13.7 8.8 3.2 Commercial Real Estate 2,66,357 2,52,696 2,90,623 9.6 -5.1 15.0 3.3 Tourism, Hotels & Restaurants 60,039 62,722 69,846 6.8 4.5 11.4 3.4 Computer Software 24,404 23,742 24,993 9.8 -2.7 5.3 3.5 Non-Banking Financial Companies 7,36,447 7,98,241 9,27,520 17.4 8.4 16.2 4 Retail Loans, of which 26,59,249 29,86,457 33,94,028 15.4 12.3 13.6 4.1 Housing Loans 13,96,444 15,61,913 17,54,298 15.9 11.8 12.3 4.2 Consumer Durables 11,154 21,569 37,349 21.3 93.4 73.2 4.3 Credit Card Receivables 1,32,076 1,38,560 1,63,626 18.6 4.9 18.1 4.4 Auto Loans 2,89,366 3,29,522 3,79,139 7.3 13.9 15.1 4.5 Education Loans 79,056 78,823 84,677 3.7 -0.3 7.4 4.6 Advances against Fixed Deposits (incl. FCNR (B), etc.) 80,753 74,013 78,965 4.7 -8.3 6.7 4.7 Advances to Individuals against Shares, Bonds, etc. 5,619 5,619 16,259 -39.8 0.0 189.4 4.8 Other Retail Loans 6,64,781 7,76,437 8,79,716 21.5 16.8 13.3 5 Other Non-Food Credit 1,38,439 2,09,869 2,27,268 126.9 51.6 8.3 6 Non-food Credit (1- 5) 1,00,44,887 1,05,80,100 1,17,94,665 6.0 5.3 11.5 7 Gross Bank Credit 1,00,98,420 1,06,40,808 1,18,53,392 6.0 5.4 11.4 Notes: 1. Figures in the table may not tally with the figures released by RBI in ‘Sectoral Deployment of Bank Credit’ every month due to difference in coverage of banks. 2. Per cent variations are March over March. Source: Off-site returns (domestic operations), RBI. 65Report on Trend and Progress of Banking in India 2021-22 Chart IV.24: Retail Lending a. Share of Retail Loans in Total Loans for PSBs b. Share of Retail Loans in Total Loans for PVBs Notes: 1. Each dot represents a PSB’s share of retail loans in total loans Notes: 1. Each dot represents a PVB’s share of retail loans in total loans at the end of the said quarter. at the end of the said quarter 2. Line represents the share of retail loans in total loans for PSBs. 2. Line represent the Share of retail loans in total loans for PVBs. Source: OSMOS. IV.48 Credit to industry grew at the highest lending away from the industrial sector towards rate in 8 years. In incremental terms, 21 per retail loans (Chart IV.24 a and b). The decline cent of the credit went to the industrial sector was evident across banks groups. during the year as against 0.2 per cent in IV.50 Empirical evidence suggests that a build- 2020-21. up of concentration in retail loans may become 5.1. Retail Credit a source of systemic risk. The Reserve Bank is IV.49 In recent years, Indian banks appear to equipped with its policy toolkit to handle any have displayed ‘herding behaviour’ in diverting systemic risk that may arise (Box IV.3). Box IV.3: Bank Herding and Systemic Risk “Systemic as a herd” refers to a phenomenon when stock market returns of all listed banks (15 PVBs and institutions which are not individually systemically 12 PSBs) between 2015-202211 were used. The quarterly important behave in a way similar to the market leaders CoVaR measure was regressed on lagged values of the and, as a result, get exposed to common risks. This could share of retail sector loans, along with some bank-specific amplify systemic risk through higher co-movement of and macro economic control variables (Hirakata et. al, performance of banks, even though individually they may 2017). The results indicate a positive and statistically focus on reducing their standalone bank risk through significant impact of bank herding in retail sector loans portfolio diversification. on systemic risk (Table 1). There is no difference between To estimate conditional value at risk (CoVaR) as a proxy the risk posed by PSBs and PVBs as the co-efficient of for systemic risk, (Adrian and Brunnermeier, 2016), daily the bank group dummy is 0. Additionally, systemic risk (Contd...) 11 The specific time period was chosen in accordance with data availability for bank-wise sectoral credit. Also, the data has been adjusted for M&As during this period. 66OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table 1: Impact of Herding in Retail Sector Loans on Systemic Risk increases with increase in stressed assets and size of the ∆CoVaR (95) ∆CoVaR (99) ∆CoVaR (90) bank, while higher NPA provisions ratio and higher GDP growth are associated with lower systemic risk. The Share of Retail Sector Loans .0052*** .0037 .0034** (.0019) (.0031) (.0014) results are consistent across various measures of CoVaR. Log of Total Assets .1592*** .295*** .1087*** (.0352) (.0573) (.0256) References: Deposit to Total Assets .0035 .0026 .0005 (.0031) (.0051) (.0023) Adrian, Tobias, and Markus K. Brunnermeier. “CoVaR.” Stressed Advances .0473*** .0415 .0265** (.0173) (.0281) (.0125) The American Economic Review, vol. 106, no. 7, 2016, NPA Provisions to Gross Loans -.0079** -.0022 -.0038 pp. 1705–41. JSTOR, available at http://www.jstor.org/ (.0035) (.0057) (.0025) Nominal GDP Growth -.0117*** -.0184*** -.0083*** stable/43861110. Accessed 28 Nov. 2022. (.0012) (.0019) (.0009) Constant -1.197** -2.8125*** -.9427*** Hirakata, Naohisa, Yosuke Kido and Jie Liang Thum, (.4707) (.7674) (.3423) “Empirical Evidence on “Systemic as a Herd” (2017): The Bank Group Dummy .0000 .0000 .0000 Observations 756 756 756 Case of Japanese Regional Banks”, Bank of Japan Working R-squared .2046 .1871 .1848 Paper Series, No.17-E-1, 2017, available at https://www. Notes: 1. *** p<.01, ** p<.05, *p<.1 boj.or.jp/en/research/wps_rev/wps_2017/data/wp17e01. 2. Figures in the parentheses represent standard errors. 3. All the covariates are winsorized at the 95th percentile. pdf. IV.51 During 2021-22, credit to the revived, albeit on a low base. In the case of PVBs, housing sector accelerated, led by PVBs credit growth reflected declining GNPA ratios (Chart IV.25a), amid low and declining GNPA (Chart IV.26). ratios (Chart IV.25b). 5.2. Credit to the MSME Sector IV.52 The education loans of SCBs had been IV.53 In the post-COVID period, credit decelerating since March 2016 against the growth to MSMEs in the industrial sector was backdrop of high NPAs in this sector. The share distinctly higher on a year-on-year basis, as well of education loans in total retail lending has as in comparison with credit growth to large fallen. In 2021-22, however, credit to this sector industries (Chart IV.27a). Incentives provided by Chart IV.25: Housing Credit a. Credit Growth b. GNPA Ratio Source: Off-site returns (domestic operations), RBI. 67Report on Trend and Progress of Banking in India 2021-22 Chart IV.26: Education Loans a. Credit Growth b. GNPA Ratio c. Education Loans as per cent of Retail Loans Source: Off-site returns (domestic operations), RBI. the Emergency Credit Line Guarantee Scheme result, the share of the former in outstanding (ECLGS), coupled with lower GNPA ratios, credit increased in 2021-22 as well helped in boosting credit to MSMEs (Chart (Table IV.17). IV.27b). At the same time, addition of wholesale 5.3. Priority Sector Credit and retail trade in the MSME category since July 2021 also helped boost the overall credit IV.55 During 2021-22, outstanding priority to the MSME sector. sector advances grew at 12.34 per cent. All bank IV.54 Since 2018-19, MSME credit growth groups managed to meet their overall priority by PVBs has far exceeded that by PSBs. As a sector lending targets, while FBs and SFBs Chart IV.27: MSMEs versus Large Industries a. Credit b. GNPA Ratio Source: Off-site returns (domestic operations), RBI. 68OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.17: Credit Flow to the MSME Sector by SCBs (Number of accounts in lakh, amount outstanding in ` crore) Bank Groups Items 2018-19 2019-20 2020-21 2021-22* PSBs No. of accounts 112.97 110.82 150.77 149.70 (1.76) (-1.90) (36.05) (-0.71) Amount Outstanding 8,80,032.90 8,93,314.83 9,08,659.06 9,55,860.38 (1.79) (1.51) (1.72) (5.19) PVBs No. of accounts 205.31 270.62 266.81 112.86 (38.42) (31.81) (-1.41) (-57.70) Amount Outstanding 5,63,678.47 6,46,988.27 7,92,041.95 9,69,844.22 (37.23) (14.78) (22.42) (22.45) FBs No. of accounts 2.40 2.74 2.60 2.11 (9.14) (14.17) (-5.11) (-18.84) Amount Outstanding 66,939.14 73,279.06 83,223.79 85,352.38 (36.94) (9.47) (13.57) (2.56) All SCBs No. of accounts 320.68 384.18 420.19 264.67 (22.61) (19.80) (9.37) (-37.01) Amount Outstanding 15,10,650.52 16,13,582.17 17,83,924.80 20,11,056.98 (14.08) (6.81) (10.56) (12.73) Notes: 1. *- The reduction in the number of accounts partly reflects the mandatory registration requirement on Udyam portal under the new MSME definition implemented by GoI. 2. Figures in the parentheses indicate y-o-y growth rates. Source: Financial Inclusion and Development Department, RBI. also achieved all the sectoral targets. PSBs fell fulfilled their target only for micro enterprises short of achieving their target only in the micro (Table IV.18). After growing at only 1.3 per cent enterprises category. PVBs, on the other hand, in 2020-21, the amount outstanding under Table IV.18: Priority Sector Lending by Banks (As on March 31, 2022) (Amount in ` crore) Item Target/ Public Sector Private Sector Foreign Small Finance Scheduled Commercial sub- Banks Banks Banks^ Banks Banks target Amount Per Amount Per Amount Per Amount Per Amount Per (per outstanding cent of outstanding cent of outstanding cent of outstanding cent of outstanding cent of cent of ANBC/ ANBC/ ANBC/ ANBC/ ANBC/ ANBC/ CEOBE CEOBE CEOBE CEOBE CEOBE CEOBE) 1 2 3 4 5 6 7 8 9 10 11 12 Total Priority 40/75* 2649179.95 42.90 1685805.56 43.71 208106.50 42.65 73505.52 85.08 4616597.54 43.52 Sector Advances of which Total Agriculture 18.00 1182377.52 19.15 622339.14 16.14 48876.88 19.27 21361.96 24.73 1874955.50 18.07 Small and marginal 9.00 648227.14 10.50 286829.08 7.44 26336.73 10.38 17274.46 20.00 978667.40 9.43 farmers Non-corporate 12.73 924640.55 14.97 415711.15 10.78 33116.26 13.05 27619.46 31.97 1401087.42 13.51 Individual Farmers# Micro Enterprises 7.50 442596.73 7.17 318688.90 8.26 20524.93 8.09 23813.65 27.56 805624.21 7.77 Weaker Sections 11.00 827895.58 13.41 386742.30 10.03 30411.53 11.99 38345.20 44.38 1283394.62 12.37 Notes: 1. Amount outstanding and achievement percentage are based on the average achievement of banks for four quarters of the financial year. 2. *: Total priority sector lending target for Small Finance Banks was 75 per cent. 3. #: Target for non-corporate farmers is based on the system-wide average of the last three years’ achievement. For FY 2021-22, the applicable system wide average figure was 12.73 percent. 4. ^: For foreign banks having less than 20 branches, only the total PSL target of 40 per cent is applicable. Source: Priority Sector Returns submitted by banks. 69Report on Trend and Progress of Banking in India 2021-22 Table IV.19: Weighted Average Premium on Chart IV.28: Trading Volumes of PSLCs Various Categories of PSLCs (Per cent) PSLC 2018-19 2019-20 2020-21 2021-22 2021-22 2022-23 Category (Apr- (Apr- Sep) Sep) PSLC- 0.79 1.17 1.55 1.37 2.00 0.88 Agriculture PSLC-Micro 0.57 0.44 0.88 0.95 2.03 0.60 Enterprises PSLC-SF/ 1.15 1.58 1.74 2.01 2.38 1.97 MF PSLC- 0.31 0.35 0.46 0.6 0.85 0.22 General Source: RBI. Source: RBI. 35.3 per cent in 2020-21 to 35.8 per cent in 2021-22, their share in total GNPAs increased from 40.4 per cent to 43.1 per cent, led by operative kisan credit cards (KCCs) grew by 24.5 defaults in the agricultural sector. While per cent during 2021-22, mainly contributed SFBs extend 76 per cent of their loans to the by the southern region – especially, Karnataka priority sector, close to 88 per cent of their (Appendix Table IV.7). NPAs originate from this portfolio. On the IV.56 The total trading volume of the priority other hand, a disproportionately lower share of sector lending certificates (PSLCs) registered a NPAs resulted from the priority sector for PVBs growth of 12.43 per cent and stood at `6,62,389 (Table IV.20). crore in 2021-22. Amongst the four PSLC 5.4. Credit to Sensitive Sectors categories, the highest trading was observed in IV.59 The real estate sector constituted 95 PSLC-General and PSLC-Small and Marginal per cent of SCBs’ lending to sensitive sectors at Farmers (SF/MF) (Chart IV.28). end-March 2022. As real estate market activity IV.57 In 2021-22, weighted average premiums gained traction after a lull during the COVID (WAPs) increased across the board for all period, lending to it also picked up, led by PVBs categories of PSLCs, except PSLC-A, with PSLC- (Chart IV.29a). PSBs’ lending to capital market, SF/MF commanding the highest premium which was subdued since 2017-18, picked up (Table IV.19). during the year, partly reflecting the buoyant IV.58 Although the share of priority sector equity market (Chart IV.29b and Appendix loans in total loans increased marginally from Table IV.8). 70OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.20: Sector-wise GNPAs of Banks (At end-March) (Amount in ` crore) Bank Group Priority Sector Of which Non-priority Sector Total NPAs Agriculture Micro and Small Enterprises Others Amount Per cent Amount Per cent Amount Per cent Amount Per cent Amount Per cent Amount Per cent PSBs 2021 2,57,858 44.69 1,14,911 19.92 1,01,786 17.64 41,161 7.13 3,19,116 55.31 5,76,974 100.00 2022 2,43,283 47.94 1,10,649 21.80 96,231 18.96 36,403 7.17 2,64,225 52.06 5,07,508 100.00 PVBs 2021 50,557 27.04 18,900 10.11 23,473 12.56 8,184 4.38 1,36,384 72.96 1,86,941 100.00 2022 48,588 28.71 20,863 12.33 17,799 10.52 9,926 5.86 1,20,676 71.29 1,69,264 100.00 FBs 2021 1,802 17.67 329 3.23 1,194 11.70 279 2.74 8,397 82.33 10,199 100.00 2022 2,555 18.53 481 3.49 1,638 11.88 436 3.16 11,231 81.47 13,786 100.00 SFBs 2021 4,974 83.31 1,510 25.28 2,049 34.32 1,415 23.70 996 16.69 5,971 100.00 2022 6,111 87.48 1,999 28.62 2,024 28.98 2,087 29.88 874 12.52 6,985 100.00 All SCBs 2021 3,15,192 40.40 1,35,650 17.39 1,28,502 16.47 51,039 6.54 4,64,893 59.60 7,80,085 100.00 2022 3,00,537 43.09 1,33,993 19.21 1,17,692 16.87 48,852 7.00 3,97,006 56.91 6,97,543 100.00 Notes: 1. Per cent: Per cent of total NPAs. 2. Constituent items may not add up to the total due to rounding off. Source: Off-site returns (domestic operations), RBI. 5.5. Unsecured lending for banks, attracting greater provisions and risk IV.60 Unsecured lending — characterised by weights. The share of unsecured credit in total lack of collateral — presents a higher credit risk credit has been increasing since 2015, largely Chart IV.29: Exposure to Sensitive Sectors a. Real Estate b. Capital Market Source: Annual accounts of respective banks. 71Report on Trend and Progress of Banking in India 2021-22 6. Ownership Pattern in Commercial Chart IV.30: Share of Unsecured Advances Banks12 IV.61 The ownership pattern of PSBs and PVBs has been documented as an important idiosyncratic factor influencing their operations (Chavan and Gambacorta, 2016)13. PVBs have a more diversified ownership as compared with their public sector counterparts (Chart IV.31). IV.62 The government’s shareholding in PSBs declined during 2021-22 due to fresh equity issuances by Bank of India, Bank of Maharashtra, Canara Bank, Indian Bank, Punjab National Bank and Union Bank of India Source: Off-site returns (global operations), RBI. (Chart IV.32). Non-residents’ shareholding was within the limits of 74 per cent for PVBs, LABs due to the higher interest earnings of banks from and SFBs, and 20 per cent for PSBs (Appendix such loans (Chart IV.30). Table IV.9). Chart IV.31: Bank Group-wise Ownership pattern Chart IV.32: Government’s Shareholding in PSBs (At end-March 2022) Source: RBI. Source: Off-site returns (domestic operations), RBI. 12 Source: The shareholding data have been sourced from the NSE website as on March 31, 2022. 13 Chavan, Pallavi & Gambacorta, Leonardo. (2016). Bank lending and loan quality: The case of India. BIS Working Paper. 72OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS 7. Corporate Governance Chart IV.33: Share of Variable Pay in Total Remuneration IV.63 Failures and weaknesses in corporate governance, especially in large financial institutions, was one of the important factors that contributed to the global financial crisis. Employees were often rewarded for increasing short-term profit without adequate recognition of the risks and long-term consequences. Compensation has, therefore, been at the centre stage of regulatory reforms. 7.1. Executive Compensation Note: The whiskers of the boxplots are indicative of maximum and IV.64 The revised guidelines14 on compensation minimum share of variable pay in total remuneration. The coloured box shows distance between first quantile and third quantile. require the target variable pay (VP) component Horizontal line in each box shows the median while ‘X’ shows the mean. of the total pay to be in the range of 50 per Source: RBI. cent to 75 per cent and the cash component of target VP to be between 33 per cent and 50 IV.65 The remuneration paid to the MD and CEO per cent15. Incidentally, actual VP16 for PVBs of a bank in comparison to the average employee increased from 16 per cent of total remuneration pay varies across bank groups. At end-March (TR) at end-March 2020 to 31 per cent at end- 2021, for PVBs, on an average, CEOs earned 73 March 2021. For SFBs, on the other hand, it times the average employee remuneration, while has remained constant at around 25 per cent in SFBs, CEOs earned 76 times the average during the same period (Chart IV.33). For PVBs, employee. This was much higher than any of the share of the cash component of VP reduced the PSBs, where on an average, CEOs earned from 31 per cent at end-March 2020 to 22 per 2.2 times the average employee remuneration cent at end-March 2021 and for SFBs from 65 (Chart IV.34). per cent to 59 per cent during the same period. 7.2. Composition of Boards The guidelines also require that a minimum of 60 per cent of the total VP must invariably be IV.66 The presence of independent directors on under deferral arrangements. In line with these the board is considered necessary for objective revised guidelines, the deferred component of decision making and for protecting interests of the performance linked pay of the MD and CEO minority shareholders. Instructions on corporate increased from 41 per cent to 82 per cent for governance issued by the Reserve Bank on April PVBs and from 22 per cent to 65 per cent for 26, 202117 mandate inter alia that at least half of SFBs. the directors attending the meetings of the board 14 Guidelines on compensation of whole time directors/ chief executive officers/material risk takers and control function staff issued on November 4, 2019, became effective for the pay cycles beginning from/after April 01, 2020. 15 In case the VP is up to 200 per cent of the fixed pay, a minimum of 50 per cent of the VP should be via non-cash instruments and in case the VP is above 200 per cent, the same should be a minimum of 67 per cent of the VP. 16 VP used here is the actual amount paid by the bank. 17 Corporate Governance in Banks - Appointment of Directors and Constitution of Committees of the Board 73Report on Trend and Progress of Banking in India 2021-22 management expertise. The proportion of PVBs Chart IV.34: CEO Pay vis-à-vis Average Employee Pay where the chair is not a member of the RMCB increased from 29 per cent at end-March 2021 to 39 per cent at end-March 2022. In SFBs, the proportion increased from 40 per cent to 50 per cent during the same period. Around 10 per cent of the PVBs at end-March 2021 did not have any management presence18 in the RMCB and the proportion remained unchanged at end-March 2022. For SFBs, however, there was a marginal increase from 30 per cent to 33 per cent. Note: The whiskers of the boxplots are indicative of maximum and 8. Foreign Banks’ Operations in India and minimum share of variable pay in total remuneration. The coloured box shows distance between first quantile and third quantile. Overseas Operations of Indian Banks Horizontal line in each box shows the median while ‘X’ shows the mean. The points outside the whiskers represent outliers. Source: RBI. IV.68 During 2021-22, the number of foreign banks (FBs) operating in the country remained shall be independent directors. The proportion unchanged; however, the number of branches of independent directors on the board of PVBs decreased (Table IV.22). PSBs reduced their increased from 59 per cent at end-March 2021 overseas presence so as to rationalise their to 63 per cent at end-March 2022. Similarly, the operations and improve cost efficiency by shutting proportion of independent directors in the Risk down less profitable operations. Indian PVBs, Management Committee of the Board (RMCB) however, increased their overseas presence by and Nomination and Remuneration Committee opening more representative offices during the (NRC) also increased (Table IV.21). year (Appendix Table IV.10). IV.67 As per the Reserve Bank’s directions, the Table IV.22: Operations of Foreign Banks board is required to constitute an RMCB with in India a majority of non-executive directors (NED). Foreign banks operating Foreign banks having through branches representative offices The chair of the board may be a member of No. of Banks Branches the RMCB only if he / she has the requisite risk Mar-17 44 295 39 Mar-18 45 286 40 Table IV.21: Independent Directors on Various Mar-19 45# 299* 37 Committees of the Board Mar-20 46# 308* 37 (At end-March) Mar-21 45# 874* 36 (Share in per cent) Mar-22 45# 861* 34 RMCB NRC Audit Committee of Notes: 1. #: Includes two foreign banks, namely SBM Bank (India) the Board (ACB) Limited and DBS Bank India Limited, which are operating through Wholly Owned Subsidiary (WOS) mode. 2021 2022 2021 2022 2021 2022 2. *: Includes branches of SBM Bank (India) Limited and DBS PVBs 58 65 76 80 79 76 Bank India Limited (including branches of amalgamated entity i.e., Lakshmi Vilas Bank as on March 2021) operating SFBs 69 74 77 83 80 83 through Wholly Owned Subsidiary (WOS) mode. Source: RBI. Source: RBI. 18 Presence of whole time directors (WTDs) including MD & CEO. 74OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS 9. Payment Systems and Scheduled digital payment options available for bill Commercial Banks payments, available channels for cross-border remittances and decline in cheque usage. The IV.69 The payments landscape across the world exercise highlighted that there is a scope for is evolving at a rapid pace, with the introduction improvement in acceptance infrastructure i.e. of various innovative payment systems and ATMs and point of sale (PoS) terminals. The instruments. The Indian payments ecosystem has Payment Infrastructure Development Fund emerged as a world leader with the availability scheme was operationalised in 2021 to enhance of a plethora of payment systems, platforms, the acceptance infrastructure and bridge the payment products and services catering to the gap. various needs of consumers. This has been 9.1. Digital Payments supported by the launch and acceptance of new modes of payment in the retail payment segment. IV.71 Digital modes of payments have grown by leaps and bounds over the last few years. As IV.70 An exercise to benchmark India’s a result, conventional paper-based instruments payment systems was undertaken in 2019 to such as cheques and demand drafts now ascertain its strengths and shortcomings and constitute a negligible share in both volume and a follow-on exercise was conducted in 2022. value of payments (Chart IV.35). The latest assessment showed that despite some challenges, the growth of Indian payment IV.72 The COVID-19 related lockdowns and systems remained robust during the COVID-19 restrictions on public movement, coupled with pandemic. India was categorised as ‘leader’ in the sharp contraction in GDP, had an adverse 16 out of 40 indicators when compared with impact on the growth of both value and volume 20 other jurisdictions. Since the last exercise, of payment instruments in 2020-21. The volume India demonstrated progress in large value of total payments accelerated by 63.8 per cent payment systems, fast payment systems, during 2021-22 from 26.6 per cent in 2020-21, Chart IV.35: Components of Payment Systems a. Payment Systems (Value) b. Payment Systems (Volume) Note: Retail digital payments include NEFT, IMPS, UPI, NACH, BHIM Aadhar Pay, AePS fund transfer, NETC, card payments and prepaid payment instruments. Source: RBI. 75Report on Trend and Progress of Banking in India 2021-22 Table IV.23: Payment Systems Indicators Item Volume (Lakh) Value (` Crore) 2019-20 2020-21 2021-22 2019-20 2020-21 2021-22 1. Large Value Credit Transfers – RTGS 1,507 1,592 2,078 13,11,56,475 10,55,99,849 12,86,57,516 2. Credit Transfers 2,06,297 3,17,868 5,77,935 2,85,56,593 3,35,04,226 4,27,28,006 2.1 AePS (Fund Transfers) 10 11 10 469 623 575 2.2 APBS 16,747 14,373 12,573 99,048 1,11,001 1,33,345 2.3 ECS Cr 18.3 0 0 5,146 0 0 2.4 IMPS 25,792 32,783 46,625 23,37,541 29,41,500 41,71,037 2.5 NACH 11,100 16,465 18,758 10,37,079 12,16,535 12,81,685 2.6 NEFT 27,445 30,928 40,407 2,29,45,580 2,51,30,910 2,87,25,463 2.7 UPI 1,25,186 2,23,307 4,59,561 21,31,730 41,03,658 84,15,900 3. Debit Transfers and Direct Debits 6,027 10,457 12,189 6,05,939 8,65,520 10,34,444 3.1 BHIM Aadhaar Pay 91 161 228 1,303 2,580 6,113 3.2 ECS Dr 1.14 0 0 38.607 0 0 3.3 NACH 5,842 9,646 10,755 6,04,397 8,62,027 10,26,641 3.4 NETC 93 650 1,207 200 913 1,689 4. Card Payments 72,384 57,787 61,783 14,34,813 12,91,799 17,01,851 4.1 Credit Cards 21,773 17,641 22,399 7,30,894 6,30,414 9,71,638 4.2 Debit Cards 50,611 40,146 39,384 7,03,920 6,61,385 7,30,213 5. Prepaid Payment Instruments 53,941 49,366 65,783 2,14,860 1,97,095 2,79,416 6. Paper-based Instruments 10,414 6,704 6,999 78,24,822 56,27,108 66,50,333 Total Digital Payments (1+2+3+4+5) 3,40,155 4,37,068 7,19,768 16,19,68,681 14,14,58,488 17,44,01,233 Total Retail Payments (2+3+4+5+6) 3,49,063 4,42,180 7,24,689 3,86,37,028 4,14,85,747 5,23,94,049 Total Payments (1+2+3+4+5+6) 3,50,570 4,43,772 7,26,767 16,97,93,503 14,70,85,596 18,10,51,565 Source: RBI. with 99 per cent of total payments being done payments modes across the country in recent through digital modes. In terms of value, total years. The index grew by 29.1 per cent in March payments grew by 23.1 per cent, reflecting a 2022 over the previous year (Chart IV.36). pickup in economic activity (Table IV.23). Almost all the digital instruments have surpassed the Chart IV.36: RBI – Digital Payments Index levels seen at end-March 2020, however, RTGS transactions still lag behind. IV.73 The Reserve Bank launched a composite Digital Payments Index (DPI) in January 2021 to effectively capture the extent of digitisation of payments across the country. The index is based on five broad parameters – payment enablers; payment infrastructure - demand side factors; payment infrastructure - supply side factors; payment performance; and consumer centricity, and is computed semi-annually with March 2018 as the base. The RBI-DPI score has demonstrated significant growth representing the Source: RBI. rapid adoption and deepening of various digital 76OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS IV.74 The Bharat Bill Payment System (BBPS) Operating Units (BBPOUs). In May 2022, the is an interoperable platform for bill payments minimum net worth requirement for non-bank operated by National Payments Corporation of BBPOUs was reduced from `100 crore to `25 India Bharat Bill Pay Limited, guidelines for crore to increase their participation and to align which were issued by the Reserve Bank in 2014. their net worth requirement with that of other Users of BBPS enjoy benefits like standardised non–bank participants in payment systems that bill payment experience, centralised customer handle customer funds and have a similar risk grievance redressal mechanism and prescribed profile. customer convenience fee. The scope and 9.2. ATMs coverage of BBPS initially covered five categories of billers viz., direct to home (DTH), electricity, IV.76 At end-March 2022, PSBs and PVBs gas, telecom, and water. The scope was expanded accounted for 63 per cent and 35 per cent subsequently to include all categories of billers share, respectively, in total ATMs deployed that raise recurring bills as eligible participants by all SCBs. PVBs as also WLAs spurred on a voluntary basis. The BBPS ecosystem the growth of on-site as well as off-site ATMs has grown from 168 billers and processing (Table IV.24 and Appendix Table IV.11). of 1.10 crore transactions for value `1,900 IV.77 At end-March 2022, the share of ATMs crore in September 2019 to 20,519 billers and in rural areas lagged behind other geographies. processing of 9.49 crore transactions for value While ATMs of PSBs are more evenly `16,585 crore in November 2022. distributed, those of other bank groups are IV.75 At end-November 2022, 43 banks and 10 skewed towards urban and metropolitan areas non-banks participated as Bharat Bill Payment (Table IV.25). Table IV.24: Number of ATMs (At end-March) Sr. Bank Group On-Site ATMs Off-site ATMs Total Number of ATMs No. 2021 2022 2021 2022 2021 (3+5) 2022 (4+6) 1 2 3 4 5 6 7 8 I PSBs 78,007 78,540 59,106 59,516 1,37,113 1,38,056 II PVBs 35,282 38,254 38,087 37,289 73,369 75,543 III FBs 236 716 614 1,081 850 1,797 IV SFBs* 2,079 2,237 52 25 2,131 2,262 V PBs# 1 1 111 70 112 71 VI WLAs 0 0 25,013 31,499 25,013 31,499 VII All SCBs (I to V) 1,15,605 1,19,748 97,970 97,981 2,13,575 2,17,729 VIII Total (VI+VII) 1,15,605 1,19,748 1,22,983 1,29,480 2,38,588 2,49,228 Notes: 1. *: 10 scheduled SFBs at end-March 2021 and 12 at end-March 2022. 2. #: 6 scheduled PBs at end-March 2021 and at end-March 2022. Source: RBI. 77Report on Trend and Progress of Banking in India 2021-22 Table IV.25: Geographical Distribution of IV.79 During the year 2021-22, 4,18,184 ATMs: Bank Group-wise@ complaints were received by the Reserve Bank’s (At end-March 2022) Ombudsmen, an increase of 9.4 per cent19 year- Bank group Rural Semi - Urban Metro- Total on-year. Close to 98 per cent of complaints were Urban politan 1 2 3 4 5 6 redressed/ disposed and closed as on March 31, I. Public Sector Banks 29,252 39,812 35,103 33,889 1,38,056 2022. Complaints against REs not covered under (21.19) (28.84) (25.43) (24.55) (100) the RB-IOS are dealt with by Consumer Education II. Private Sector 6,415 19,328 18,897 30,903 75,543 Banks (8.49) (25.58) (25.01) (40.90) (100) and Protection Cells (CEPCs) across 30 offices III. Foreign Banks 136 373 450 838 1,797 (7.57) (20.76) (25.04) (46.63) (100) of the Reserve Bank. 45,106 complaints were IV. Small Finance 217 740 722 583 2,262 Banks* (9.59) (32.71) (31.92) (25.77) (100) received at CEPCs during the year. The disposal V. Payments Banks# 9 14 27 21 71 rate20 of CEPCs stood at 98.5 per cent as on (12.68) (19.72) (38.03) (29.58) (100) All SCBs (I to V) 36,029 60,267 55,199 66,234 2,17,729 March 31, 2022. (16.55) (27.68) (25.35) (30.42) (100) All SCBs (y-o-y growth) 4.39 2.83 -7.59 9.50 1.94 IV.80 In order to gauge the effectiveness of WLAs 16,410 10,234 3,150 1,705 31,499 (52.09) (32.48) (10.00) (5.41) (100) the functioning of the RB-IOS, including CRPC WLAs (y-o-y growth) 24.44 25.38 37.19 24.63 25.93 and CC, the Reserve Bank conducted a pan- Notes: 1. Figures in parentheses indicate percentage share of total ATMs India customer satisfaction survey through under each bank group. telephonic interviews. The survey covered more 2. *: 10 scheduled SFBs at end-March 2021 and 12 at end-March 2022. than 4,000 respondents from across the country. 3. #: 6 scheduled PBs at end-March 2021 and at end-March 2022. 4. @: Data includes number of ATMs and Cash Recycling More than 60 per cent respondents who had Machines (CRMs). lodged a complaint under both mechanisms Source: RBI. viz., one of the erstwhile ombudsman schemes and the current RB-IOS, felt that the overall 10. Consumer Protection process under the latter had improved in the IV.78 The Reserve Bank has been taking first six months of the operationalisation of the various policy initiatives to improve the scheme. grievance redressal mechanism for resolving IV.81 The structural changes in the customer complaints against its REs. With effect from November 12, 2021, the Reserve Bank’s Ombudsman framework make the year-on-year Ombudsman framework was restructured trend in inflow and disposal of complaints at with a ‘One Nation One Ombudsman’ approach RBIOs non-comparable. However, grievances and provides cost free centralised redressal of pertaining to ATM/debit cards, mobile/electronic customer complaints while doing away with banking, non-observance of fair practices code jurisdictional limitations. This is supplemented and credit cards were the highest in 2021-22 and by Centralised Receipt and Processing Centre contributed 51.5 per cent of the total complaints (CRPC) and Contact Centre (CC). (Table IV.26). 19 3,82,292 complaints received in 2020-21 including complaints received under Banking Ombudsman Scheme, Ombudsman Scheme for NBFCs and Ombudsman Scheme for Digital Transactions. 20 The disposal rate is computed as: [(complaints disposed during the year) ÷ (opening complaints +receipt of complaints during the year)]. 78OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.26: Nature of Complaints at RBIOs in these areas regarding grievance redressal mechanism of the Reserve Bank (Chart IV.37a). Categories 2019-20 2020-21 2021-22# 46 per cent of complaints related to levy of ATM/ Debit Cards 69,205 60,203 41,375 Mobile / Electronic Banking 39,627 44,385 40,597 charges without prior notice were filed against Non-observance of Fair Practice Code 40,124 33,898 37,880 PVBs, while 98.2 per cent of complaints related to Credit Cards 26,616 40,721 34,828 Loans and Advances 14,731 20,218 30,734 pension were filed against PSBs – the traditional Failure to Meet Commitments 22,758 35,999 22,031 preference for pensioners (Chart IV.37b and Deposit Accounts 10,188 8,580 16,707 Appendix Table IV.12). Levy of Charges without Prior Notice 17,268 20,949 14,516 Pension Payments 6,884 4,966 6,179 IV.83 The deposit insurance system plays an Non-adherence to BCSBI Codes 11,758 14,490 4,816 Remittances 4,130 3,394 3,235 important role in maintaining the stability of the DSAs and Recovery Agents 1,474 2,440 1,604 financial system, particularly by safeguarding Para-Banking 1,134 1,236 1,480 Notes and Coins 551 332 296 the interests of small depositors, thereby Out of Purview of e-Ombudsman 9,412 10,250 7,363 preserving public confidence. The deposit Schemes Others 30,844 39,686 40,855 insurance extended by the Deposit Insurance Total 3,06,704 3,41,747 3,04,496* and Credit Guarantee Corporation (DICGC) Notes: 1. Year pertains to April to March of the respective year; covers all commercial banks including LABs, 2. #: Out of the complaints assigned to ORBIOs; 3.*: Excludes 1,13,688 complaints handled at CRPC. PBs, SFBs, RRBs and co-operative banks. With Source: RBI. the current limit of deposit insurance in India at `5 lakh, 97.9 per cent of total accounts were IV.82 The share of complaints emanating from fully protected at end-March 2022, as against urban and metropolitan areas accounted for 73.8 the international benchmark of 80 per cent. In per cent of the total complaints received during terms of amount, 49.0 per cent of assessable 2021-22, indicating higher awareness levels deposits were covered by insurance, as against Chart IV.37: Distribution of Complaints a. Population Group-wise b. Bank Group-wise Break-up of Major Complaint Types: 2021-22 Notes: 1. Data pertain to April to March. 2. Data on population group was not available for 162,126 complaints during 2021-22, i.e., for 53 per cent of complaints. Hence, the available data has been extrapolated to all the complaints retaining the proportions from the available data. Source: Various Offices of Banking Ombudsman. 79Report on Trend and Progress of Banking in India 2021-22 Table IV.27: Bank Group-wise Insured Deposits 15 urban co-operative banks (UCBs) amounting (At end-March 2022) to `1,225.0 crore under Section 17 (1) of the (Amount in ` crore) DICGC Act, 1961 and an amount of `3,791.6 Bank Group No. of Total Total ID as Insured Assessable Insured percentage crore provided to Unity Small Finance Bank Banks Deposits Deposits of AD (USFB) for making payment to the depositors (AD)* (ID)* 1 2 3 4 5 of the erstwhile Punjab and Maharashtra Co- Public Sector Banks 12 92,53,975 50,05,209 54.1 operative Bank Ltd (PMCBL). This also includes Private Sector Banks** 39 49,66,447 19,20,359 38.7 the claims settled of 22 UCBs under All Inclusive Foreign Banks 45 8,00,107 86,728 10.8 Regional Rural Banks 43 4,92,966 4,08,744 82.9 Directions (AID) amounting to `3,457.4 crore as Local Area Banks 2 981 750 76.4 on March 31, 2022. Co-operative Banks 1,899 10,35,154 6,88,642 66.5 Total 2,0401,65,49,630 81,10,431 49.0 IV.86 During 2021-22, the DICGC Act, 1961 Notes: 1. *: Based on deposit base of September 2021 i.e., six months was amended which facilitated disbursal of prior to the reference date. 2. **: Data on private sector banks is inclusive of small finance depositors’ insured money for the banks placed banks and payments banks. Source: Deposit Insurance and Credit Guarantee Corporation. under AID. The DICGC is now empowered to disburse to depositors of these banks a sum of up to `5 lakh each, within a period of 90 the international benchmark21 of 20 to 30 per days. An insured bank is required to submit its cent (Table IV.27). claim within 45 days of imposition of AID after IV.84 The DICGC builds up its Deposit which the DICGC is required to get the claims Insurance Fund (DIF) through transfer of its verified within 30 days and pay the depositors surplus, i.e., excess of income (mainly comprising within the next 15 days. There is no provision premium received from insured banks, interest in the DICGC Act to extend the timelines fixed income from investments and cash recovery by the statute either for the insured bank or the out of assets of failed banks) over expenditure DICGC. However, there have been instances of (payment of claims of depositors and related non-submission of depositors claim list by some expenses) each year, net of taxes. The fund is UCBs within the statutory timeline of 45 days, available for settlement of claims of depositors of thereby constraining the DICGC from making banks taken into liquidation/amalgamation and pay-outs to eligible depositors of such banks. stood at `1,46,842 crore as on March 31, 2022, yielding a reserve ratio (RR)22 of 1.81 per cent. 11. Financial Inclusion IV.85 During 2021-22, the corporation settled IV.87 Financial inclusion has been an aggregate claims of `8,516.6 crore23 under important policy endeavour with a view to different channels. This includes the main promoting economic development and social claims and supplementary claims in respect of well-being. While the implementation of the 21 IADI (2013), Enhanced Guidance for Effective Deposit Insurance Systems: Deposit Insurance Coverage, Guidance Paper, March, available at www.iadi.org. 22 Ratio of deposit insurance fund to insured deposits. 23 Inclusive of main claims settled under the expeditious claims settlement policy of the Corporation for an amount of `42.6 crore in case of three co-operative banks. 80OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Business Correspondent (BC) model and the of bank branches in India has increased in the Pradhan Mantri Jan Dhan Yojana (PMJDY) gave last decade, despite fast paced digitisation. a strategic boost to these efforts, the National In contrast, digitisation has led to fewer bank Strategy for Financial Inclusion (NSFI) 2019- branches all over the world (Chart IV.38a). 2024 defines the vision and key objectives to IV.90 Although India has the second largest help expand its reach and sustain the progress. number of ATMs deployed, the per capita The overarching goal is to provide access availability remains low (Chart IV.38b). Facilities to formal financial services in an affordable such as PoS terminals and micro-ATMs using manner, while promoting financial literacy and Aadhaar enabled payment systems (AePS) help consumer protection. in bridging the gap. IV.88 In January 2020, the Reserve Bank set the target of having a banking outlet within a IV.91 According to the World Bank’s Global 5 km radius of every village or hamlet of 500 Findex Database, 78 per cent of Indian adults households in hilly areas. As on September 30, (population with 15 years or more of age) had 2022 the milestone was fully achieved in 26 states a bank account in 2021, comparable to the and 7 union territories (UTs). The coverage of world average. In 2021, while the gender gap24 identified villages and hamlets across the country in account ownership across the world fell to 4 reached 99.97 per cent and only 40 villages were percentage points from 7 percentage points in left to be covered in 2 states viz., Chhattisgarh 2014, this gender gap has been eliminated in and Odisha and 1 UT viz., Ladakh. India. On the other hand, the proportion of the IV.89 The latest Financial Access Survey (FAS) adult population receiving wages in cash in India of the IMF shows that the per capita availability is still higher at 43 per cent than the developing Chart IV.38: Progress in Financial Inclusion in G-20 countries a. Number of commercial bank branches b. Number of ATMs per 1,00,000 adults per 1,00,000 adults Source: Financial Access Survey, IMF. 24 Gender gap relates to per cent of males holding a bank account minus per cent of females holding a bank account. 81Report on Trend and Progress of Banking in India 2021-22 outlets [branches and BCs], basic savings bank Chart IV.39: Financial Inclusion Indicators deposit accounts (BSBDAs), overdraft (OD) facilities availed in these accounts, transactions in Kisan Credit Cards (KCC) and General Credit Cards (GCCs) and transactions through Business Correspondents - Information and Communication Technology (BC-ICT) channel. IV.95 The BCs model has gained traction in solving the last mile problem and reaching the grassroots at a faster rate and lower cost than traditional brick-and-mortar branches. BC outlets constitute 97.5 per cent of the total banking outlets in villages in 2021-22 even as branches have decreased. The BC-ICT model has Note: Data as per cent of population above 15 years of age. Source: Global Findex Database, World Bank. gained popularity even in rural areas as evident from its increasing usage (Table IV.28). countries’ average of 26 per cent and the world IV.96 The state-wise distribution of fixed- average of 20 per cent (Chart IV.39). point business correspondents (FBCs), IV.92 Centres for Financial Literacy (CFLs) however, remains uneven - more than 50 per support financial education efforts in the cent of FBCs are located in Uttar Pradesh, country through innovative interventions and Bihar, Maharashtra, West Bengal and Madhya community participation. As on July 1, 2022 Pradesh (Chart IV.40). Since March 2018, PBs 1,112 CFLs had been established, and 500 more have a dominant share in the total number of centres are planned to be set up by December FBCs, with PVBs having a negligible presence 2022. (Chart IV.41). IV.93 In addition, Financial Literacy Centres 11.2. Financial Inclusion Index (FLCs) undertook 1,07,564 financial literacy IV.97 The Reserve Bank has constructed programs during 2021-22 to disseminate a composite Financial Inclusion Index (FI- financial education. A Financial Literacy Week Index) to capture the extent of financial was observed during February 14-18, 2022 on inclusion across the country. It has three sub- the theme “Go Digital, Go Secure”. indices, viz. FI-access, FI-usage and FI-quality. 11.1. Financial Inclusion Plans The index incorporates granular data on IV.94 Banks have been advised to put in place banking, investments, insurance, postal as Financial Inclusion Plans (FIPs) to ensure a well as the pension sector collated from the systematic approach towards increasing the level government and sectoral regulators. The value of financial inclusion in a sustainable manner. of FI Index for March 2022 was 56.4 vis-à-vis The FIPs capture banks’ achievements on 53.9 in March 2021, with growth across all various parameters like the number of banking sub-indices. 82OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.28: Progress in Financial Inclusion Plan (At end-March) Sr No. Particulars 2010 2015 2020 2021 2022* 1 Banking Outlets in Villages- Branches 33,378 49,571 54,561 55,112 53,287 2 Banking Outlets in Villages>2000-BCs 8,390 90,877 1,49,106 8,50,406 18,92,462^ 3 Banking Outlets in Villages<2000-BCs 25,784 4,08,713 3,92,069 3,40,019 3,26,008 4 Total Banking Outlets in Villages – BCs 34,174 4,99,590 5,41,175 11,90,425 22,18,470^ 5 Banking Outlets in Villages – Other Modes 142 4,552 3,481 2,542 2,479 6 Banking Outlets in Villages –Total 67,694 5,53,713 5,99,217 12,48,079 22,74,236^ 7 Urban Locations Covered Through BCs 447 96,847 6,35,046 4,26,745 12,95,307^ 8 BSBDA - Through Branches (No. in Lakh) 600 2,103 2,616 2,659 2,661 9 BSBDA - Through Branches (Amt. in Crore) 4,400 36,498 95,831 1,18,392 1,20,464 10 BSBDA - Through BCs (No. in Lakh) 130 1,878 3,388 3,796 4,015 11 BSBDA - Through BCs (Amt. in Crore) 1,100 7,457 72,581 87,623 1,07,415 12 BSBDA - Total (No. in Lakh) 735 3,981 6,004 6,455 6,677 13 BSBDA - Total (Amt. in Crore) 5,500 43,955 1,68,412 2,06,015 2,27,879 14 OD Facility Availed in BSBDAs (No. in Lakh) 2 76 64 60 68 15 OD Facility Availed in BSBDAs (Amt. in Crore) 10 1,991 529 534 731 16 KCC - Total (No. in Lakh) 240 426 475 466 473 17 KCC - Total (Amt. in Crore) 1,24,000 4,38,229 6,39,069 6,72,624 7,10,715 18 GCC - Total (No. in Lakh) 10 92 202 202 96 19 GCC - Total (Amt. in Crore) 3,500 131,160 1,94,048 1,55,826 1,70,203 20 ICT-A/Cs-BC-Total Transactions (No. in Lakh) # 270 4,770 32,318 30,551 28,533 21 ICT-A/Cs-BC-Total Transactions (Amt. in Crore) # 700 85,980 8,70,643 8,49,771 9,05,252 Notes: 1. *: Provisional. 2. #: Transactions during the financial year. 3. ^: There is a significant increase in data reported by few private sector banks. Source: FIP returns submitted by public sector banks, private sector banks and regional rural banks. 11.3. Pradhan Mantri Jan Dhan Yojana financial services like availability of basic IV.98 The flagship financial inclusion program savings bank accounts, access to need-based PMJDY aims at ensuring access to various credit, remittances, insurance and pension to Chart IV.40: State-wise distribution of FBCs Chart IV.41:Bank Group-wise Distribution of FBCs Note: Lighter shades are associated with higher number of FBCs. Source: Central Information System for Banking Infrastructure Source: Central Information System for Banking Infrastructure (CISBI), RBI. (CISBI), RBI. 83Report on Trend and Progress of Banking in India 2021-22 the unbanked weaker sections and low-income Chart IV.42: Number of PMJDY Accounts groups through effective usage of technology. After a high growth phase in the initial years, the rate of accretion of new PMJDY accounts has slowed in recent years. This is an indication that the programme is nearing its intended aim of universal access to financial services (Chart IV.42). IV.99 Over eight years of its operations, the total deposit balances under PMJDY have increased, with the average deposit per account having also grown (Chart IV.43a). At end-August 2022, 56 per cent of account holders were women and 67 per cent PMJDY accounts were in rural and semi urban areas (Chart IV.43b). As per Source: Pradhan Mantri Jan Dhan Yojana, Government of India. extant guidelines, a PMJDY account is treated 11.4. New Bank Branches by SCBs as inoperative if there are no customer-induced transactions in it for two years. By August 2022, IV.100 After declining for two consecutive years, out of a total of 46.25 crore PMJDY accounts, new bank branches opened by SCBs increased 81.2 per cent were operative, up from 76 per cent by 4.6 per cent during 2021-22. The growth was in 201725. Only 8.2 per cent of PMJDY accounts led by new branches opened in Tier 4, Tier 5 and were zero balance accounts. Tier 6 centres. Although the share of Tier 2 and Chart IV.43: PMJDY Accounts Distribution and Average Balance a. Average Balance in PMJDY Accounts b. Distribution of PMJDY Accounts (At end-August 2022) Source: Pradhan Mantri Jan Dhan Yojana, Government of India. 25 Source: https://pib.gov.in/PressReleasePage.aspx?PRID=1854909 84OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.29: Tier-wise Break-up of Newly Chart IV.44: Distribution of Newly Opened Bank Opened Bank Branches by SCBs Branches of SCBs Centre 2018-19 2019-20 2020-21 2021-22 Tier 1 2,194 2,279 1,541 1,543 (47.4) (52.4) (49.9) (47.7) Tier 2 519 367 279 235 (11.2) (8.4) (9.0) (7.3) Tier 3 712 570 481 426 (15.4) (13.1) (15.6) (13.2) Tier 4 363 355 262 293 (7.8) (8.1) (8.5) (9.1) Tier 5 373 282 178 226 (8.1) (6.5) (5.7) (7.0) Tier 6 465 500 348 509 (10.1) (11.5) (11.3) (15.7) Total 4,626 4,353 3,089 3,232 (100.0) (100.0) (100.0) (100.0) Notes: 1. Figures in the parentheses represent proportion of the branches opened in a particular area vis-à-vis the total. 2. Tier-wise classification of centres is as follows: ‘Tier 1’ includes centres with population of 1, 00,000 and above, ‘Tier 2’ includes centres with population of 50,000 to 99,999, Source: CISBI, RBI. ‘Tier 3’ includes centres with population of 20,000 to 49,999, ‘Tier 4’ includes centres with population of 10,000 to 19,999, ‘Tier 5’ includes centres with population of 5,000 to 9,999, and ‘Tier 6’ includes centres with population of Less than metropolitan areas declined from 63.6 per cent 5000. 3. Data exclude ‘Administrative Offices’. to 52.6 per cent in the same period (Chart IV.44). 4. All population figures are as per census 2011. 5. All the scheduled banks as on December 01, 2022, are 11.5. Microfinance Programme considered for collating the data from 2018-19 onwards. Source: CISBI, RBI. CISBI data is dynamic in nature and is updated IV.102 The Self-Help Group - Bank linkage based on information received from banks. programme (SHG-BLP), which aims at extending formal credit facilities to the poor, has emerged Tier 3 centres in new branches declined in 2021- as the world’s largest micro-finance movement. 22 from a year ago, more than half of the new During 2021-22, close to 34 lakh SHGs availed branches opened during the year were in Tier 1 loans from banks. The average size of loan and Tier 3 centres (Table IV.29). disbursed during the year as well as that of loan IV.101 During 2021-22, new branches opened outstanding had declined at end-March 2021 by PVBs increased by 21.2 per cent as compared reflecting COVID-19 related disturbances. This to a decline of 30.8 per cent in the previous revived by end-March 2022 and surpassed end- year. Although PVBs opened new branches March 2019 levels (Chart IV.45). The southern across all population groups, the increase was region (36 per cent) had the highest share of the sharpest in metropolitan areas. PSBs, on savings linked SHGs during 2021-22, followed the other hand, opened fewer new branches in by the eastern region (27.4 per cent) and the 2021-22. The share of rural areas in newly opened western region (11.4 per cent) (Appendix Table bank branches by PSBs, however, increased to IV.13). The NPA ratio of SHGs decreased to 20.8 per cent in 2021-22 from 11.5 per cent in 3.80 per cent in 2021-22 from 4.73 per cent in 2020-21, while the combined share of urban and 2020-21. 85Report on Trend and Progress of Banking in India 2021-22 promoted as on 31 March 2022, the southern Chart IV.45: SHGs - Average Loan Disbursed, Average Loan Outstanding and Average Savings of SHGs states recorded the highest growth of 49 per cent, followed by the western states at 48 per cent. 11.6. Trade Receivables Discounting System (TReDS) IV.104 TReDS is an electronic platform to help MSMEs in managing their working capital needs by facilitating the financing / discounting of trade receivables through multiple financiers. These receivables can be due from corporates and other buyers, including government departments and public sector undertakings (PSUs). TReDS was introduced by the Reserve Bank in 2014, and three platforms were granted licenses to operate in 2017. During 2021-22, the number Source: NABARD. of invoices uploaded and financed through the platform more than doubled and the success IV.103 Joint Liability Groups (JLGs) are a rate26 improved to 94.7 per cent from 91.3 per vehicle of strategic intervention for augmenting cent a year earlier (Table IV.30). the flow of collateral free credit to landless 11.7. Regional Banking Penetration farmers cultivating land as tenant farmers, oral lessees, sharecroppers and small/marginal IV.105 At end-March 2022, due to concentration farmers and other poor individuals taking up of bank branches in the western, southern and northern regions, the population served by farm, off farm and non-farm activities. To boost each branch in other regions was comparatively JLG financing by banks, NABARD introduced a higher. There was less variation across southern business model in 2017, whereby banks (PSBs, states than eastern and north-eastern states RRBs and co-operative banks) execute an MoU (Chart IV.46). with NABARD for financing JLGs on terms and conditions as specified in the MoU. During 2021- 22, keeping in view the increased participation Table IV.30: Progress in MSME Financing under JLG financing, grant assistance under the through TReDS Business Model Scheme was extended to SFBs (Invoices in number, amount in ` crore) and scheduled PVBs. Under the scheme, grant Financial Year Invoices Uploaded Invoices Financed support towards JLG formation and linkage is Invoices Amount Invoices Amount assured from NABARD. During 2021-22, loans 2018-19 251,695 6,699.57 232,098 5,854.48 2019-20 530,077 13,088.27 477,969 11,165.86 disbursed by banks to JLGs increased by 93.4 2020-21 861,560 19,669.84 786,555 17,080.14 per cent as compared to a decline of 29.8 per 2021-22 1,733,553 44,111.80 1,640,824 40,308.59 cent a year ago. In terms of cumulative JLGs Source: RBI. 26 Defined as per cent of invoices uploaded that get financed. 86OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS 2022-23, with 50 per cent contribution from Chart IV.46: Region-wise Average Population Per Bank Branch central government, 15 per cent from state (At end-March 2022) governments and the rest from sponsor banks. The capital infusion is expected to help RRBs in greater adoption of technology, accompanied by operational and governance reforms. To this end, a Sustainable Viability Plan has been drawn up, aimed at credit expansion, business diversification, NPA reduction and cost rationalisation. IV.108 For 2021-22, `8,168 crore was sanctioned as recapitalisation assistance for 22 RRBs. At end-March 2022, NABARD had released the central government’s share of Source: RBI and Ministry of Statistics and Program Implementation (MoSPI). `3,197.29 crores to 21 RRBs after proportionate release of equivalent amount by sponsor banks and state governments. 12. Regional Rural Banks IV.109 During the year, the growth in IV.106 At end-March 2022, there were 43 RRBs consolidated balance sheet of RRBs moderated sponsored by 12 SCBs, with 21,892 branches, on account of slowdown in the growth of and operations extending to 29.7 crore deposit loans and advances as well as investments on accounts and 2.7 crore loan accounts in 26 States the asset side, and deposits and borrowings and 3 Union Territories (Puducherry, Jammu & on the liabilities side. The deposit growth of Kashmir, Ladakh). 92 per cent of their branches RRBs was lower than that of SCBs. At end- were in rural/semi-urban areas. The southern March 2022, RRBs had the highest share of region had the highest number of RRBs, followed low cost CASA deposits (54.5 per cent of total by the eastern region (Appendix Table IV.14). deposits) amongst all categories of SCBs27 12.1. Balance Sheet Analysis (Table IV.31). IV.107 During the past 46 years, all the IV.110 RRBs are mandated to lend 75 per cent stakeholders taken together (such as central of their adjusted net bank credit (ANBC) of government, state governments and sponsor the previous year to the priority sector. During banks) have infused capital of `8,393 crore in 2021-22, all except 2 RRBs overachieved RRBs. In contrast, `10,890 crore is budgeted their targets by lending over 90 per cent to the to be infused in RRBs during 2021-22 and priority sector, of which close to 70 per cent 27 PSBs had 43.8 per cent CASA share in total deposits, PVBs 47 per cent, SFBs 40.5 per cent and Foreign Banks 43.8 per cent. 87Report on Trend and Progress of Banking in India 2021-22 Table IV.31: Consolidated Balance Sheet of 12.2. Financial Performance Regional Rural Banks IV.111 After two consecutive years of reporting (Amount in ` Crore) losses in 2018-19 and 2019-20, RRBs turned Sr. Item At Y-o-Y Growth No. end-March (in per cent) around in 2020-21 and posted net profits, which 2021 2022 2020-21 2021-22 improved further in 2021-22. Their CRAR also 1 2 3 4 5 6 increased significantly (Table IV.33). During the 1 Share Capital 8,393 14,880 6.9 77.3 2 Reserves 30,348 34,359 13.2 13.2 year, the number of RRBs with CRAR less than 3 Deposits 5,25,226 5,62,538 9.7 7.1 3.1 Current 11,499 12,042 7.0 4.7 the regulatory requirement of 9 per cent declined 3.2 Savings 2,71,516 2,94,438 11.1 8.4 from 16 to 13 and those with negative CRAR 3.3 Term 2,42,211 2,56,057 8.3 5.7 4 Borrowings 67,864 73,881 24.8 8.9 declined from 8 to 3. 4.1 from NABARD 61,588 67,054 33.5 8.9 4.2 Sponsor Bank 3,444 3,879 -23.8 12.6 4.3 Others 2,832 2,948 -24.6 4.1 Table IV.33: Financial Performance of Regional 5 Other Liabilities 19,754 19,742 -2.3 -0.1 Rural Banks Total liabilities/Assets 6,51,585 7,05,400 10.8 8.3 6 Cash in Hand 2,954 3,119 3.3 5.6 (Amount in ` crore) 7 Balances with RBI 18,947 22,174 13.2 17.0 Sr. Item Amount Y-o-Y Change 8 Balances in current 5,987 8,127 -21.4 35.8 No. (in per cent) account 9 Investments 2,75,658 2,95,665 9.9 7.3 2020-21 2021-22 2020-21 2021-22 10 Loans and Advances (net) 3,15,181 3,42,479 12.5 8.7 11 Fixed Assets 1,229 1,256 -0.5 2.2 1 2 3 4 5 6 12 Other Assets # 31,629 32,580 11.0 3.0 A Income (i + ii) 53,858 56,585 8.9 5.1 12.1 Accumulated Losses 8,264 9,062 27.8 9.7 i Interest income 46,803 48,048 7.1 2.7 ii Other income 7,055 8,537 22.6 21.0 Notes: 1. #: Includes accumulated losses. B Expenditure (i+ii+iii) 52,176 53,367 1.0 2.3 2. Totals may not tally on account of rounding off of figures in ` Crore. Percentage variations could be slightly different as i Interest expended 25,588 24,817 -1.5 -3.0 absolute numbers have been rounded off to ` Crore. ii Operating expenses 20,201 21,295 0.6 5.4 Source: NABARD. of which, Wage bill 15,799 16,338 7.8 3.4 iiiProvisions and 6,386 7,254 14.1 13.6 contingencies was to agriculture and 11.5 per cent to MSMEs of which, Income Tax 1,279 1,278 37.5 -0.1 C Profit (Table IV.32 and Appendix Table IV.15). i Operating profit 7,872 10,337 164.9 31.3 ii Net profit 1,682 3,219 -- 91.3 Table IV.32: Purpose-wise Outstanding D Total Average Assets 6,17,305 6,66,532 11.1 8.0 Advances by RRBs E Financial ratios # i Operating profit 1.3 1.6 (Amount in ` Crore) ii Net profit 0.3 0.5 Sr. Purpose/End-March 2021 2022 iiiIncome (a + b) 8.7 8.5 No. a) Interest income 7.6 7.2 1 2 3 4 b) Other income 1.1 1.3 I Priority (i to v) 3,00,962 3,24,207 iv Expenditure (a+b+c) 8.5 8.0 Per cent of total loans outstanding 90.1 89.4 a) Interest expended 4.1 3.7 i Agriculture 2,33,145 2,52,890 b) Operating expenses 3.3 3.2 ii Micro small and medium enterprises 39,543 41,609 of which Wage bill 2.6 2.5 iii Education 2,132 1,896 c) Provisions and 1.0 1.1 vi Housing 21,127 22,020 contingencies v Others 5,016 5,791 F Analytical Ratios (%) II Non-priority (i to vi) 33,209 38,631 Gross NPA Ratio 9.4 9.1 Per cent of total loans outstanding 9.9 10.6 CRAR 10.2 12.7 i Agriculture 29 0 ii Micro small and medium enterprises 434 35 Notes: 1. # Financial ratios are percentages with respect to average iii Education 92 139 total assets. iv Housing 4,347 6,187 2. --: RRBs turned profitable in 2020-21 from losses during the v Personal Loans 8,311 10,088 previous year. vi Others 19,996 22,181 3. Totals may not tally on account of rounding off of figures in Total (I+II) 3,34,171 3,62,838 ` Crore. 4. Provisions & Contingencies include Provision for Income Tax/ Note: Totals may not tally on account of rounding off of figures in ` Crore. Income Tax paid. Source: NABARD. Source: NABARD. 88OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS IV.112 During the year, interest income grew Chart IV.47: Contribution of PSLCs to at a modest rate, but interest expenditure Miscellaneous Income contracted, resulting in higher net interest income as well as net interest margin. The number of profit earning RRBs increased to 34 in 2021-22 from 30 in 2020-21 (Appendix Table IV.14). 12.3. Priority Sector Lending IV.113 Since RRBs lend around 48 per cent of their total loans to small and marginal farmers (SF/MF), they are the major sellers in the PSLC-SF/MF category. As PSLC-SF/MF are traded at a premium in comparison to the PSLC- general category, RRBs oversell PSLCs under the Source: NABARD. former category and compensate for the same by purchasing PSLCs under the latter category 13. Local Area Banks to meet the overall PSL target of 75 per cent IV.115 LABs were established in 1996 for (Table IV.34) mobilising rural savings and making them IV.114 PSLCs have helped RRBs leverage their available for investments in the local areas. As high PSL portfolio to augment miscellaneous of March 2022, two LABs with 79 branches28 income (Chart IV.47). Though RRBs account were operational in the country. In 2021-22, the for just 3 per cent of the total bank credit of all consolidated balance sheet of LABs decelerated. SCBs, their share in total PSLC traded volume As the deceleration in credit was lower than that (issue and purchase) was 35 per cent during in deposits, the credit-deposit ratio increased to 2021-22. 82 per cent in 2021-22 from 80.7 per cent in 2020-21 (Table IV.35). Table IV.34: PSLC Transactions of RRBs (Amount in ` crore) Table IV.35: Profile of Local Area Banks (At end-March) PSLC Category Value of PSLCs Value of PSLCs (Amount in ` crore) Issued Purchased 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 1. Assets 1,166.2 1,273.2 PSLC Agriculture 40,731 29,850 735 1,150 (14.1) (9.18) PSLC General 4,004 1,750 52,628 67,771 2. Deposits 952.5 1,020.3 PSLC Micro Enterprises 3,580 7,644 7,125 6,223 (17.05) (7.11) 3. Gross Advances 769.2 838.0 PSLC SF/MF 78,837 1,17,163 4,953 865 (16.46) (8.95) Total 1,27,151 1,56,407 65,440 76,009 Note: Figures in parentheses represent y-o-y growth in per cent. Source: OSS Returns, Ensure Portal, NABARD. Source: Off-site returns (global operations), RBI. 28 Source: Central Information System for Banking Infrastructure (CISBI). 89Report on Trend and Progress of Banking in India 2021-22 13.1. Financial Performance of LABs 14. Small Finance Banks IV.116 During the year, both interest IV.117 The SFBs were set up in 2016 to expended as well as interest income earned further financial inclusion through tailored decelerated, keeping net profits stable. deposit products and for providing credit Operating profits witnessed subdued growth as to small business units, small and marginal compared to previous year, owing to a sharp farmers, micro and small industries and other acceleration in operating expenses, especially unorganized sector entities through technology the wage bill (Table IV.36). led low-cost operations. At end-March 2022, twelve SFBs with 5,677 domestic branches Table IV.36: Financial Performance of across the country were operational, including Local Area Banks Shivalik Small Finance Bank Ltd. and Unity Amount Y-o-Y growth Small Finance Bank Ltd., that were licensed in (in ` crore) (in per cent) 2021-22. 2020-21 2021-22 2020-21 2021-22 14.1. Balance Sheet A. Income (i+ii) 148 159 9.5 7.1 i. Interest income 123 130 14.8 6.2 IV.118 During 2021-22, the consolidated balance ii. Other income 25 28 -10.4 11.7 sheet of SFBs grew at a pace faster than that of B. Expenditure (i+ii+iii) 122 132 0.0 9.0 i. Interest expended 55 58 6.5 4.7 SCBs. Deposit growth as well as that of loans and ii. Provisions and 20 22 42.8 11.9 advances accelerated year-on-year. On balance, contingencies the credit-deposit ratio of SFBs decreased to iii. Operating expenses 47 53 -16.7 12.8 of which, wage bill 22 25 5.1 12.5 93.2 per cent in 2021-22 from 99 per cent a year C. Profit ago, though it remained higher than that of SCBs i. Operating profit/loss 47 49 68.4 4.3 (Table IV.37). ii. Net profit/loss 27 26 94.3 -1.4 D. Net Interest Income 68 73 22.7 7.4 14.2. Priority Sector Lending E. Total Assets 1,166 1,273 14.1 9.2 F. Financial Ratios IV.119 The share of the priority sector in SFBs’ i. Operating Profit 4.0 3.8 total lending increased during 2021-22 after ii. Net Profit 2.3 2.1 declining over three consecutive years. After a iii. Income 12.7 12.5 iv. Interest Income 10.5 10.2 break in the previous year, the SFBs met their v. Other Income 2.2 2.2 priority sector lending target of 75 per cent vi. Expenditure 10.4 10.4 in 2022. Within the priority sector, the focus vii. Interest Expended 4.7 4.5 remained on MSMEs, followed by agriculture viii. Operating Expenses 4.0 4.1 ix. Wage Bill 1.9 1.9 and allied activities (Table IV.38). x. Provisions and 1.7 1.7 contingencies 14.3. Financial Performance xi. Net Interest Income 5.8 5.7 IV.120 During 2021-22, the net profits and Notes: 1. Financial ratios for 2020-21 and 2021-22 are calculated based on the assets of current year only. operating profits of SFBs contracted. The 2. 'Wage Bill' is taken as Payments to and provisions for slowdown was on account of higher operating employees. Source: Off-site returns (global operations) RBI. expenses and provisioning for bad loans. The 90OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.37: Consolidated Balance Sheet of Table IV.39: Financial Performance of Small Finance Banks Small Finance Banks (At end-March) (Amount in ` crore) (Amount in ` crore) Sr. Item Amount Y-o-Y No. growth Sr. Item Amount Y-o-Y growth (in per No. (in per cent) cent) 2021 2022 2021-22 2020-21 2021-22 2021-22 1 3 4 5 1 2 3 4 5 1 Share Capital 5,375.4 5,800.2 7.9 2 Reserves & Surplus 14,800.3 16,543.5 11.8 A Income (i + ii) 22,499.9 25,060.0 11.4 3 Tier II Bonds 2,468.0 1,687.7 -31.6 i Interest Income 19,523.4 22,120.4 13.3 4 Deposits 1,09,472.5 1,45,730.5 33.1 ii Other Income 2,976.4 2,939.6 -1.2 4.1 Current Demand 3,964.2 5,770.0 45.6 B Expenditure (i+ii+iii) 20,462.2 24,086.5 17.7 Deposits i Interest Expended 9,122.2 9,512.6 4.3 4.2 Savings 22,198.3 43,576.8 96.3 ii Operating Expenses 7,549.0 9,815.9 30.0 4.3 Term 83,310.0 96,383.7 15.7 5 Borrowings 27,828.2 27,011.3 -2.9 of which, Staff Expenses 4,301.8 5,304.5 23.3 (Including Tier II Bonds) iiiProvisions and contingencies 3,791.0 4,758.0 25.5 5.1 Bank 1,366.4 4,303.7 215.0 C Profit (Before Tax) 2,580.9 1,283.8 -50.3 5.2 Others 26,461.8 22,707.6 -14.2 i Operating Profit (EBPT) 5,828.7 5,731.5 -1.7 6 Other Liabilities & 6,076.3 7,990.8 31.5 ii Net Profit (PAT) 2,037.7 973.5 -52.2 provisions Total liabilities/Assets 1,63,552.5 2,03,076.2 24.2 D Total Assets 1,63,552.5 2,03,076.2 24.2 7 Cash in Hand 1,052.2 1,235.0 17.4 E Financial Ratios# 8 Balances with RBI 5,869.2 7,490.1 27.6 i Operating Profit 3.6 2.8 9 Other Bank Balances/ 12,309.1 10,212.3 -17.0 ii Net Profit 1.2 0.5 Balances with Financial iiiIncome (a + b) 13.8 12.3 Institutions 10Investments 30,659.8 41,661.5 35.9 a. Interest Income 11.9 10.9 11Loans and Advances 1,08,612.6 1,35,802.4 25.0 b. Other Income 1.8 1.4 12Fixed Assets 1,676.3 2,001.0 19.4 iv Expenditure (a+b+c) 12.5 11.9 13Other Assets 3,373.2 4,674.0 38.6 a. Interest Expended 5.6 4.7 b. Operating Expenses 4.6 4.8 Note: Data pertains to 10 scheduled SFBs at end-March 2021 and 12 at end-March 2022. of which Staff Expenses 2.6 2.6 Source: Off-site returns (domestic operations), RBI. c. Provisions and contingencies 2.3 2.3 F Analytical Ratios (%) asset quality of SFBs improved marginally during Gross NPA Ratio 5.4 4.9 CRAR 22.1 19.3 the year (Table IV.39). Core CRAR 20.1 17.6 Note: #: As per cent to total assets. Table IV.38: Purpose-wise Outstanding Source: Off-site returns (domestic operations), RBI. Advances by Small Finance Banks (At end-March) 15. Payments Banks Purpose 2021 2022 IV.121 PBs were set up as niche entities to I Priority (i to v) 70.5 75.6 i. Agriculture and allied activities 22.8 26.1 facilitate small savings and to provide payments ii. Micro, small and medium enterprises 27.1 28.8 and remittance services to migrant labour, iii. Education 0.1 0.1 iv. Housing 4.5 5.5 low-income households, small businesses and v. Others 16.0 15.1 other unorganised sector entities. At end-March II Non-priority (i to vi) 29.5 24.4 Total (I+II) 100.0 100.0 2022, six PBs were operational, of which only Note: Share in total advances. three managed to become profitable in their Source: Off-site returns (domestic operations), RBI. operations. 91Report on Trend and Progress of Banking in India 2021-22 Table IV.40: Consolidated Balance Sheet Table IV.41: Financial Performance of of Payments Banks Payments Banks (At end-March) (Amount in ` crore) (Amount in ` crore) Sr. Item 2019-20 2020-21 2021-22 No. Sr. Item 2020 2021 2022 No. A Income (i + ii) 1 Total Capital and Reserves 1,868 1,761 2,494 i. Interest Income 348 360 460 2 Deposits 2,306 4,625 7,854 ii. Non-Interest Income 3,115 3,562 5,416 3 Other Liabilities and Provisions 4,254 6,083 8,172 B Expenditure Total Liabilities/Assets 8,429 12,469 18,520 i. Interest Expenses 62 100 157 1 Cash and Balances with RBI 785 1,255 1,560 ii. Operating Expenses 4,324 4,584 5,826 2 Balances with Banks and Money 2,101 2,393 3,322 Provisions and Contingencies -96 36 24 Market of which, 3 Investments 4,077 7,116 10,178 Risk Provisions 3 9 17 4 Fixed Assets 351 355 372 Tax Provisions -100 22 5 5 Other Assets 1,115 1,350 3,088 C Net Interest Income 286 260 303 D Profit Note: Data pertains to six PBs. Source: Off-site returns (domestic operations), RBI. i. Operating Profit (EBPT) -923 -762 -107 ii. Net Profit/Loss -827 -798 -130 Source: Off-site returns (domestic operations), RBI. 15.1. Balance Sheet IV.122 In line with their mandate, the asset side offering credit as a product, their interest of PBs’ balance sheet is concentrated in SLR earnings are low. investments and money placed at call and short IV.124 Although efficiency, measured by the notice with other banks. Deposits form 42.4 per cost-to-income ratio, improved for the fourth cent of their liabilities, the majority of which consecutive year, margins were thin even for are on demand. At end-March 2022, all PBs the profitable PBs. NIM declined for the third complied with the regulatory minimum CRAR of consecutive year. Other performance metrics, 15 per cent (Table IV.40). such as RoA, RoE, operating profit to working 15.2. Financial Performance funds ratio and profit margins remained negative IV.123 Notwithstanding the increase in during the year, but the extent of losses reduced both interest and non-interest income, PBs considerably (Table IV.42). ended 2021-22 with losses due to high 15.3. Inward and Outward Remittances operating expenses (Table IV.41). PBs earn their IV.125 Income from remittance operations revenues primarily from six income streams formed a major part of income of PBs, especially viz., (i) earnings from micro-ATMs for providing for those with a good network and reach. PBs’ remittances and cash withdrawal services to transactions in centralised payment systems customers; (ii) providing BC services to other (RTGS and NEFT) increased by around 19 times banks; (iii) transaction charges on utility bill from March 2020 to June 2022, while the amount payments and other small transactions; (iv) involved in the transactions also increased by cash management/ collection services; (v) more than 4 times (Chart IV.48). commissions on transactions through PoS terminals and MDR charges; and (vi) para- IV.126 In 2021-22, the volume of inward and banking activities. Since PBs are barred from outward remittances by PBs increased by 76.3 92OPERATIONS AND PERFORMANCE OF COMMERCIAL BANKS Table IV.42: Select Financial Ratios of Chart IV.48: Payment System Transactions of PBs Payments Banks (At end-March) Sr. Item 2020 2021 2022 No. 1 Return on Assets -9.8 -6.4 -0.7 2 Return on Equity -44.3 -45.3 -5.2 3 Investments to Total Assets 48.4 57.1 55.0 4 Net Interest Margin 4.8 2.8 2.3 5 Efficiency (Cost-Income Ratio) 124.8 116.9 99.1 6 Operating profit to working funds -10.9 -6.1 -0.6 7 Profit Margin -23.9 -20.3 -2.2 Note: Data pertains to 6 PBs. Source: Off-site returns (domestic operations), RBI. per cent and 84.5 per cent, respectively, and the value of both inward and outward remittances Note: Includes NEFT and RTGS transactions. increased by more than 100 per cent as against Source: Monthly data release by RBI on bank-wise volumes in NEFT/ RTGS. a 20 per cent decline recorded in the previous year in both value and volume terms. UPI had inward flows. In terms of the value of outward the highest share in the number of inward remittances, however, IMPS had the largest share and outward remittances and it also occupied (Table IV.43). the first place in terms of share in the value of Table IV.43: Remittances through Payments Banks (Number in thousand, amount in ` crore) Channel 2020-21 2021-22 Inward Remittances Outward Remittances Inward Remittances Outward Remittances Number Amount Number Amount Number Amount Number Amount 1. NEFT 13,893 26,295 8,259 60,649 37,036 37,999 7,238 64,610 (0.9) (9.8) (0.5) (19.8) (1.3) (6.7) (0.2) (7.1) i) Bill Payments 94 17 233 28 472 82 391 34 (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) ii) Other than Bill Payments 13,799 26,278 8,026 60,621 36,564 37,918 6,847 64,576 (0.8) (9.8) (0.5) (19.8) (1.3) (6.6) (0.2) (7.1) 2. RTGS 190 56,460 17 35,107 382 1,28,030 41 1,00,370 (0.0) (21.0) (0.0) (11.4) (0.0) (22.4) (0.0) (11.1) 3. IMPS 1,36,274 37,466 1,89,879 65,866 1,95,781 60,838 1,99,386 4,01,203 (8.3) (14.0) (11.1) (21.5) (6.8) (10.7) (6.3) (44.3) 4. UPI 11,72,699 1,13,289 12,00,688 1,03,908 21,70,638 2,68,887 25,10,470 2,65,610 (71.8) (42.2) (70.3) (33.9) (75.4) (47.1) (79.7) (29.3) 5. E - Wallets 2,31,624 20,406 3,01,499 38,317 2,61,540 33,202 3,85,949 66,899 (14.2) (7.6) (17.7) (12.5) (9.1) (5.8) (12.2) (7.4) 6. Micro ATM (POS) 32 20 144 45 1,361 499 57 27 (0.0) (0.0) (0.0) (0.0) (0.0) (0.1) (0.0) (0.0) 7. ATM - - 9 3 - - 24 9 (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) 8. Others 78,208 14,384 7,185 2,866 2,12,792 41,322 48,237 7,266 (4.8) (5.4) (0.4) (0.9) (7.4) (7.2) (1.5) (0.8) Total 16,32,920 2,68,321 17,07,680 3,06,761 28,79,529 5,70,777 31,51,403 9,05,994 Notes: 1. Figures in the parentheses are percentage to total. 2. Data pertains to 6 PBs. Source: Off-site returns (domestic operations), RBI. 93Report on Trend and Progress of Banking in India 2021-22 16. Overall Assessment banking sector. If downside risks materialise, asset quality could be affected. Hence, slippages IV.127 The Indian banking sector has weathered in restructured assets need to be monitored the pandemic, emerging more resilient and closely. Timely resolution of stressed assets is robust. Owing to timely policy support, banks essential to prevent asset value depletion. have reported improved profitability, asset quality and capital buffers. More recently, IV.129 The push provided by the JAM trinity has banks’ balance sheets have witnessed healthy resulted in increased access to banking services acceleration with broad-based credit growth to the unserved and the underserved sections of driving the flow of resources to the productive the population. With the success of UPI and mass sectors of the economy. Credit to MSMEs received adoption of digital banking services, various a boost from the government’s guarantee cover concerns such as unbridled engagement of third under the ECLGS. parties, mis-selling, breach of data privacy, unfair business conduct, exorbitant interest rates, and IV.128 Going forward, it is imperative that unethical recovery practices have emerged. Banks banks ensure due diligence and robust credit need to develop appropriate business strategies, appraisal to limit credit risk. The uncertainties strengthen their governance framework and characterising fast-changing macroeconomic implement cybersecurity measures to mitigate scenario amidst formidable global headwinds these concerns. during 2022-23 can pose new challenges to the 94DEVELOPMENTS IN CO-OPERATIVE V BANKING The financial performance of urban co-operative banks (UCBs) improved in 2021-22 characterised by augmented capital buffers, lower gross non-performing assets (GNPA) ratio and higher profitability. Among the short-term rural co-operatives, balance sheets of both, state co-operative banks (StCBs) and district central co-operative banks (DCCBs) accelerated in 2020-21 after a slowdown in the previous year. Notably, the profitability of the latter improved. 1. Introduction catering to the heterogeneity in the customer base, while offering more operational flexibility V.1 Co-operative banks function as to strong UCBs in order to enhance their intermediaries for last mile credit delivery contribution to credit intermediation. and promote financial inclusion. In the recent period, however, this sector has faced challenges V.3 Against this backdrop, the rest of the emanating from ownership structure, deficient chapter focuses on the performance of urban and corporate governance practices, and rising rural co-operative banks during the period under incidence of frauds besides issues arising review. Section 2 sets out the structure of the from dual regulation of the Reserve Bank and co-operative banking sector and its regulation, government. Mobilisation of additional capital followed by evaluation of financial viability of is constrained by shareholding patterns and UCBs in terms of profitability, asset quality and constitutional provisions. Legal impediments capital adequacy in section 3. Section 4 examines and idiosyncratic factors tend to hinder their the financial performance of short-term rural co- expeditious resolution. operatives and long-term rural co-operatives. This is followed by an overall assessment in V.2 Over the years, the Reserve Bank has section 51. been initiating reforms to strengthen the co- operative banking structure. Its two-pronged 2. Structure of the Co-operative Banking strategy consists of statutory reforms and Sector regulatory support. The amendment to the Banking Regulation Act, 2020 has eased capital V.4 The co-operative banking structure raising constraints of urban co-operative banks in India was developed to complement and (UCBs). The Reserve Bank has been empowered supplement the commercial banking structure, to reconstruct or amalgamate them. The Reserve with a specific focus on serving the requirements Bank also revised the regulatory framework of marginalised borrowers and meeting the governing UCBs on July 19, 2022. The vision development needs of rural as well as urban guiding the framework is to consolidate their areas. UCBs are classified as scheduled and non- position as friendly neighborhood banks by scheduled, based on their inclusion or otherwise 1 Although primary agricultural credit societies (PACS) and long-term co-operatives are outside the regulatory purview of the Reserve Bank, data and a brief description of their activities are covered in this chapter for providing completeness of analysis. 95Report on Trend and Progress of Banking in India 2021-22 Chart V.1: Structure of Co-operative Banks Notes: 1. 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. 2. Figures in parentheses indicate the number of institutions at end-March 2022 for UCBs and at end-March 2021 for rural co-operatives. 3. DCCBs excluding Tamil Nadu Industrial Co-operative Bank Ltd. Source: RBI, NABARD and NAFSCOB. in the second schedule of the Reserve Bank of Chart V.2: Distribution of Co-operative Banks by Asset Size India Act, 19342, and their geographical outreach (At end-March 2021) (single-state or multi-state). Rural co-operatives are segregated by activity, i.e., into short term vis-à-vis long-term lending. At end-March 2022, the sector consisted of 1,514 UCBs and 1,03,560 rural co-operatives3 (Chart V.1). V.5 In terms of number of banks as well as asset size, short-term rural co-operatives dominate the sector (Chart V.2). V.6 Increasingly, the distinction between scheduled commercial banks (SCBs), rural co-operatives and urban co-operatives is Note: The sunburst chart represents layers in the co-operative getting blurred, with all of them competing banking sector. Size of each segment is proportional to its share (mentioned in parentheses) in total assets of the sector. to serve the same set of clients. Even short- Source: RBI, NABARD and NAFSCOB. 2 Apart from Scheduled Co-operative Banks, Scheduled Commercial Banks are also included in the same schedule of the Act. 3 Data on rural co-operatives are available with a lag of one year, i.e., they relate to 2020-21. 96DEVELOPMENTS IN CO-OPERATIVE BANKING Table V.1 Share in Credit Flow to Agriculture Chart V.3: Number of UCBs (per cent) Co-operative Regional Rural Commercial Banks Banks Banks 1 2 3 4 2015-16 16.7 13.0 70.2 2016-17 13.4 11.6 75.0 2017-18 12.9 12.1 74.9 2018-19 12.1 11.9 76.0 2019-20 11.3 11.9 76.8 2020-21 12.1 12.1 75.8 2021-22 13.0 11.0 76.0 Source: Data submitted by Banks on ENSURE portal of NABARD. term credit co-operatives like the State Co- operative Banks (StCBs) are diversifying their portfolios, with long term lending to housing Source: Off-site surveillance returns, RBI. and education. Apart from traditional brick- and-mortar models, SCBs have been relying on business correspondents and harnessing in nearly one-third of the newly licensed UCBs benefits of FinTech to solve the problem of last becoming unsound. Since 2004-05, the Reserve mile connectivity. With growing penetration of Bank initiated a process of consolidation in commercial banks in the hinterland, the relative the sector, including amalgamation of unviable size and influence of co-operatives is shrinking. UCBs with their viable counterparts, closure of At end-March 2021, the aggregate balance non-viable entities and suspension of issuance of sheet size of the co-operative banking sector at new licenses. As a result, the number of UCBs `20 lakh crore was 10.3 per cent of the SCBs’ progressively declined (Chart V.3). consolidated balance sheet, down from 19.4 per V.9 Nine non-scheduled UCBs (NSUCBs) cent at end-March 2005. were voluntarily merged with financially stronger V.7 Although the rural co-operatives were banks during 2021-22. Since 2004-05, the sector established with the objective of lending to has witnessed 145 mergers, with the majority in agriculture, their share in total lending to the Maharashtra, followed by Gujarat and Andhra sector declined since 2015-16 until 2019-20, but Pradesh. During 2021-22, licenses of 10 UCBs improved marginally thereafter (Table V.1). were cancelled, raising the cumulative tally since 2015-16 to 54. Except one amalgamation 3. Urban Co-operative Banks relating to a scheduled UCB (SUCB), other V.8 The liberal licensing policy adopted in the mergers and cancellation of licenses took place 1990s led to a surge in the number of UCBs. Over in case of NSUCBs, leading to a fall in their the years the inherent fragility in their structures number from 1,481 in 2020-21 to 1,462 in coupled with financial weaknesses, resulted 2021-22 (Chart V.4). 97Report on Trend and Progress of Banking in India 2021-22 Chart V.4: Consolidation Drive in UCBs a. Geographical Distribution of UCB Mergers b. Licence cancellation (Cumulative at end-March 2022) Source: RBI. V.10 Based mainly on deposit size, UCBs are 3.1 Balance Sheet segregated into Tier I and Tier II categories4,5. V.11 The consolidation of the UCB sector Tier II banks remain the dominant players in since 2004-05 initially resulted in large gains. the segment, with their share in total assets Their combined balance sheet size grew by a increasing from 86.2 per cent in 2016-17 to 93.3 compound annual growth rate (CAGR) of 11.4 per cent in 2020-21, before dipping marginally in per cent during the decade following the drive, 2021-22 (Table V.2). Nonetheless, the asset size of Tier II UCBs, on an average, is 13 times larger as compared with 15.9 per cent for SCBs. than their Tier I counterparts. Their lending Subsequently, however, the balance sheet growth ticket size is also larger by around 14 times. of both segments moderated; while UCBs grew Table V.2: Tier-wise Distribution of Urban Co-operative Banks (At end-March 2022) (Amount in `Crore) Tier Type Number of Banks Deposits Advances Total Assets Number % to Total Amount % to Total Amount % to Total Amount % to Total 1 2 3 4 5 6 7 8 9 Tier I 813 53.7 40,019 7.6 23,174 7.4 53,551 8.0 Tier II 701 46.3 4,86,001 92.4 2,91,566 92.6 6,12,935 92.0 All UCBs 1,514 100.0 5,26,021 100.0 3,14,741 100.0 6,66,486 100.0 Note: Data are provisional. Source: Off-site surveillance returns, RBI. 4 (a) Tier I UCBs are defined as: i) Banks with deposits below `100 crore operating in a single district, ii) Banks with deposits below `100 crore operating in more than one district will be treated as Tier I provided the branches 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 of the bank, and iii) Banks with deposits below `100 crore, whose branches were originally in a single district but subsequently, became multi-district due to reorganisation of the district may also be treated as Tier I UCBs. (b) All other UCBs are defined as Tier II UCBs. 5 In July 2022, the Reserve Bank announced adoption of a four-tier structure for UCBs. 98DEVELOPMENTS IN CO-OPERATIVE BANKING by a CAGR of 4.8 per cent during 2015-16 to Chart V.5: Asset Growth 2021-22, SCBs grew by 7.4 per cent (Chart V.5). Apart from the cyclical downturn during the period, this deceleration in balance sheet growth can be ascribed to competition from other niche players like FinTech, small finance banks (SFBs) and non-banking financial companies (NBFCs). V.12 In contrast with the acceleration in SCBs’ balance sheet, the asset size of UCBs decelerated during 2021-22, led by contraction in the balance sheet of SUCBs (Table V.3). V.13 Deposits contracted during 2021-22 for the first time in nearly two decades, leading to a deceleration in UCBs’ balance sheet. The high deposits base of 2020-21 was a reflection of Source: Off-site Surveillance returns, RBI. Table V.3: Balance Sheet of Urban Co-operative Banks (At end-March) (Amount in `Crore) Items Scheduled UCBs Non-Scheduled UCBs All UCBs Rate of Growth (%) All UCBs 2021 2022 2021 2022 2021 2022 2020-21 2021-22 1 2 3 4 5 6 7 8 9 Liabilities 1) Capital 4,467 4,193 9,844 10,065 14,311 14,258 1.4 -0.4 (1.5) (1.4) (2.7) (2.7) (2.2) (2.1) 2) Reserves and Surplus 15,536 19,405 22,848 22,947 38,384 42,352 15.2 10.3 (5.1) (6.5) (6.4) (6.2) (5.8) (6.4) 3) Deposits 2,39,579 2,34,080 2,89,650 2,91,940 5,29,229 5,26,021 5.7 -0.6 (79.4) (78.6) (80.7) (79.2) (80.1) (78.9) 4) Borrowings 4,755 5,418 333 242 5,089 5,660 -4.7 11.2 (1.6) (1.8) (0.1) (0.1) (0.8) (0.8) 5) Other Liabilities and Provisions 37,455 34,810 36,280 43,385 73,736 78,196 4.6 6.0 (12.4) (11.7) (10.1) (11.8) (11.2) (11.7) Assets 1) Cash in Hand 1,676 1,855 4,230 4,426 5,906 6,281 1.2 6.3 (0.6) (0.6) (1.2) (1.2) (0.9) (0.9) 2) Balances with RBI 11,131 12,404 3,382 4,039 14,514 16,443 15.2 13.3 (3.7) (4.2) (0.9) (1.1) (2.2) (2.5) 3) Balances with Banks 21,888 23,176 48,189 47,330 70,077 70,506 5.8 0.6 (7.3) (7.8) (13.4) (12.8) (10.6) (10.6) 4) Money at Call and Short Notice 5,087 3,505 1,910 1,488 6,998 4,993 -16.6 -28.6 (1.7) (1.2) (0.5) (0.4) (1.1) (0.7) 5) Investments 80,297 81,128 1,00,728 1,06,574 1,81,025 1,87,702 12.1 3.7 (26.6) (27.2) (28.1) (28.9) (27.4) (28.2) 6) Loans and Advances 1,43,175 1,42,627 1,70,786 1,72,114 3,13,961 3,14,741 2.8 0.2 (47.4) (47.9) (47.6) (46.7) (47.5) (47.2) 7) Other Assets 38,538 33,211 29,729 32,608 68,267 65,819 6.3 -3.6 (12.8) (11.1) (8.3) (8.8) (10.3) (9.9) Total Liabilities/ Assets 3,01,793 2,97,906 3,58,955 3,68,580 6,60,748 6,66,486 5.9 0.9 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) Notes: 1. Data for March 2022 are provisional. 2. Figures in parentheses are proportion to total liabilities / assets (in per cent). 3. Components may not add up to the whole due to rounding off. Source: Off-Site surveillance returns, RBI. 99Report on Trend and Progress of Banking in India 2021-22 Chart V.6: Deposits and Advances: UCBs a. Deposits Growth b. Advances Growth Source: Off-site surveillance returns, RBI. pandemic-driven precautionary savings, which however, the C-D ratio of UCBs rose in 2021-22. normalised during 2021-22. On the asset side, This was mainly on account of contraction in both loans and advances and investments deposits of SUCBs (Chart V.7). decelerated (Chart V.6). V.15 Before the consolidation drive was V.14 In comparison to SCBs, the credit-deposit initiated, in terms of number of UCBs, the asset (C-D) ratio of UCBs has always been significantly size was bimodal: `25 crore to `50 crore and lower, particularly NSUCBs, due to higher `100 crore to `250 crore. Since then, however, reliance on deposits and lower credit disbursal. the distribution has shifted rightward, indicating After declining for three consecutive years, asset concentration at higher levels (Chart V.8). Chart V.7: Credit-Deposit Ratio: UCBs versus SCBs Chart V.8 Distribution of UCBs by Asset Size Amount (` crore) Source: Off-site surveillance returns, RBI. Source: Off-site surveillance returns, RBI. 100DEVELOPMENTS IN CO-OPERATIVE BANKING Chart V.9: Distribution of UCBs’ Deposits and Advances (At end-March) a. Deposits Distribution b. Advances Distribution Source: Off-site surveillance returns, RBI. V.16 In terms of number of UCBs, the modal V.17 For advances, the modal class in class for deposits in 2015-16 was `25 crore to 2016-17 was `10 crore to `25 crore, which has `50 crore. Over the years, it has shifted upwards evolved to become bi-modal, with `10 crore to to reach `100 crore to `250 crore at end-March `25 crore and `25 crore to `50 crore classes 2022 (Chart V.9a). registering the highest shares at end-March 2022 (Table V.4 and Chart V.9b). Table V.4: Distribution of UCBs by size of Deposits and Advances (At end-March 2022) (Amount in `crore) Deposits No. of UCBs Amount of Deposits Advances No. 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 87 5.7 532 0.1 0.00 ≤ Ad < 10 216 14.3 1,241 0.4 10 ≤ D < 25 188 12.4 3,257 0.6 10 ≤ Ad < 25 286 18.9 4,895 1.6 25 ≤ D < 50 263 17.4 9,793 1.9 25 ≤ Ad < 50 284 18.8 10,081 3.2 50 ≤ D < 100 291 19.2 20,799 4.0 50 ≤ Ad < 100 261 17.2 18,892 6.0 100 ≤ D < 250 321 21.2 51,128 9.7 100 ≤ Ad < 250 238 15.7 37,807 12.0 250 ≤ D < 500 169 11.2 59,480 11.3 250 ≤ Ad < 500 117 7.7 40,226 12.8 500 ≤ D < 1000 105 6.9 72,351 13.8 500 ≤ Ad < 1000 65 4.3 44,863 14.3 1000 ≤ D 90 5.9 3,08,681 58.7 1000 ≤ Ad 47 3.1 1,56,736 49.8 Total 1,514 100.0 5,26,021 100.0 Total 1,514 100.0 3,14,741 100.0 Notes: 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. 101Report on Trend and Progress of Banking in India 2021-22 Table V.5: Investments by Urban Co-operative Banks (Amount in ` Crore) Item Amount outstanding (At end-March) Variation (%) 2020 2021 2022 2020-21 2021-22 1 2 3 4 5 6 Total Investments (A + B) 1,61,696 1,81,025 1,87,702 12.0 3.7 (100.0) (100.0) (100.0) A. SLR Investments (i to iii) 1,42,093 1,61,477 1,67,893 13.6 4.0 (87.9) (89.2) (89.4) (i) Central Govt. Securities 96,471 1,02,033 1,04,728 5.8 2.6 (59.7) (56.4) (55.8) (ii) State Govt. Securities 44,428 58,951 62,643 32.7 6.3 (27.5) (32.6) (33.4) (iii) Other approved Securities 1,194 492 522 -58.7 6.0 (0.7) (0.3) (0.3) B. Non-SLR Investments 19,603 19,549 19,809 -0.3 1.3 (12.1) (10.8) (10.6) Notes: 1. Data for 2022 are provisional. 2. Figures in parentheses are proportion to total investments (in per cent). Source: Off-site surveillance returns, RBI. V.18 The moderation in investments of UCBs investments of SUCBs was reflective of contraction was on account of SLR investments, especially in the latter’s deposit base (Chart V.10). those in state government securities (Table V.5). 3.2 Soundness Relative to NSUCBs, the sharper moderation in V.19 The penalty imposition instances for UCBs increased to 145 during 2021-22 from Chart V.10: Investments of UCBs 43 in the previous year. Correspondingly, the penalty amount increased by 211 per cent as compared with a decline in the previous year (Refer to Table IV.15). Claims settled by the Deposit Insurance and Credit Guarantee Corporation (DICGC) during 2021-22 pertained entirely to co-operative banks and increased by over eight times as compared with the previous year. This mainly reflects the amendment to DICGC Act 1961, which facilitated time bound disbursal of depositors’ insured money (Refer to Para IV.86). V.20 The CAMELS-based rating system6 was Source: Off-site surveillance returns, RBI. revised in 2019, under which ratings of A/B+/B/ 6 The CAMELS (capital adequacy, asset quality, management, earnings, liquidity, and systems and control) rating model in its present form became applicable to UCBs from April 2008. 102DEVELOPMENTS IN CO-OPERATIVE BANKING Table V.6: Rating-wise Distribution of UCBs Table V.7: CRAR-wise Distribution of UCBs (End-March 2022) (End-March 2022) (Amount in ` crore) (Number of banks) Ratings Number Deposits Advances CRAR (in Per cent) Scheduled Non- All UCBs UCBs Scheduled Banks % share Amount % share Amount % share UCBs in Total in Total in Total 1 2 3 4 1 2 3 4 5 6 7 CRAR < 3 4 58 62 A 153 10.1 30,240 5.7 17,190 5.5 3 <= CRAR < 6 0 12 12 B+ 203 13.4 83,152 15.8 49,642 15.8 6 <= CRAR < 9 0 16 16 B 740 48.9 2,50,292 47.6 1,52,571 48.5 9 <= CRAR < 12 7 115 122 C 345 22.8 1,48,925 28.3 85,794 27.3 12 <= CRAR 41 1,261 1,302 D 73 4.8 13,411 2.5 9,545 3.0 Total 52 1,462 1,514 Total 1,514 100.0 5,26,021 100.0 3,14,741 100.0 Note: Data are provisional. Notes: 1. Data is provisional. Source: Off-site surveillance returns, RBI. 2. Components may not add up to the whole due to rounding off. 3. Ratings are based on the latest available data reported in offsite returns and collected from UCBs. has shifted rightwards with higher share of ‘C’ 4. Percentage variation could be slightly different because absolute numbers have been rounded off to rupees Crores. category in total business (Chart V.11). Source: Off-site surveillance returns, RBI. 3.3 Capital Adequacy C/D (in decreasing order of performance) have V.21 At end-March 2022, 94 per cent of UCBs been assigned to UCBs. At end-March 2022, maintained capital to risk-weighted assets ratio the ‘B’ category was the modal class in terms (CRAR) above the regulatory minimum of 9 per of number as well as business (sum of deposits cent (Table V.7). Over the last decade, the capital and advances). As compared to the previous buffers of UCBs have improved, with fewer year, however, its share in total decreased banks defaulting on regulatory requirements (Table V.6). Over the years, the distribution (Chart V.12). Chart V.11: Distribution of Number and Business of Chart V.12: Share of UCBs with CRAR UCBs-by Rating Categories less than 9 per cent (End-March) (End-March) Source: Off-site surveillance returns, RBI. Source: Off-site surveillance returns, RBI. 103Report on Trend and Progress of Banking in India 2021-22 Table V.8: Component-wise Capital Adequacy of UCBs (At end-March) (Amount in `crore) Scheduled UCBs Non-Scheduled UCBs All UCBs 2021 2022 2021 2022 2021 2022 1 Capital Funds 13,520 20,955 25,543 27,916 39,063 48,871 i) Tier I Capital 7,758 15,019 22,010 24,006 29,768 39,025 ii) Tier II Capital 5,762 5,935 3,533 3,910 9,295 9,845 2 Risk-Weighted Assets 1,45,352 1,46,925 1,67,243 1,65,940 3,12,594 3,12,865 3 CRAR (1 as % of 2) 9.3 14.3 15.3 16.8 12.5 15.6 Of which: Tier I 5.3 10.2 13.2 14.5 9.5 12.5 Tier II 4.0 4.0 2.1 2.4 3.0 3.1 Note: Data for 2022 are provisional. Source: Off-site returns, RBI. V.22 SUCBs improved their capital positions 2020-21 before improving in 2021-22 when a substantially during the year ended March 2022 decline in the amount of gross non-performing with additions to Tier I capital. Although the assets occurred for the first time since 2012-13. CRAR of the UCB sector still remains lower than Provisioning requirements have also reduced SCBs, the sector is poised to meet the revised for both SUCBs and NSUCBs. UCBs, however, regulatory requirements of higher CRAR for Tier showed prudence and their provision coverage II to Tier IV banks7 (Table V.8). ratio increased year-on-year, although it still remains below that of SCBs (Table V.9). 3.4 Asset Quality V.24 At end-March 2022, 26 per cent of UCBs’ V.23 Asset quality of UCBs, measured by total funded loans and 32 per cent of their the gross non-performing assets (GNPA) ratio, NPAs originated from large borrowal accounts continuously deteriorated during 2015-16 to i.e., exposure of `5 crore and above. NSUCBs’ Table V.9: Non-Performing Assets of UCBs (At end-March) Sr. Items Scheduled UCBs Non-Scheduled UCBs All UCBs No. 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 1 2 3 4 5 6 7 8 1 Gross NPAs (` crore) 15,047 10,678 22,950 19,794 37,996 30,473 2 Gross NPA Ratio (%) 10.5 7.5 13.4 11.6 12.1 9.7 3 Net NPAs (` crore) 5,746 4,116 11,037 8,798 16,783 12,914 4 Net NPA Ratio (%) 4.3 3.0 7.0 5.6 5.8 4.4 5 Provisioning (` crore) 9,537 6,983 12,848 12,179 22,385 19,162 6 Provisioning Coverage Ratio (%) 63.4 65.4 56.0 61.5 58.9 62.9 Note: Data for 2021-22 are provisional. Source: Off- site surveillance returns, RBI. 7 On July 19, 2022, the Reserve Bank announced a revised regulatory framework for UCBs. Accordingly, the CRAR requirement for all UCBs – except Tier I UCBs – was revised from 9 per cent to 12 per cent. While the Reserve Bank acknowledged that most of the banks already meet this criterion, for banks which do not have adequate capital buffers presently, a glide path winding upto end-March 2026 has been prescribed. 104DEVELOPMENTS IN CO-OPERATIVE BANKING exposure to these borrowers was less than 10 Chart V.13: Stress in Large Borrowal Accounts per cent of their total loans at end-March 2022 as compared with 47 per cent share for SUCBs. The GNPA ratio of UCBs emanating from large borrowal accounts declined, mainly on the back of decline for SUCBs. In the case of NSUCBs, however, the ratio has remained high and has deteriorated further recently (Chart V.13). 3.5 Financial Performance and Profitability V.25 Anaemic credit growth in a low interest rate regime, pulled down the interest income of UCBs in 2021-22. The contraction in interest expenditure was, however, even sharper leading to improvement in their profitability. Amalgamation of a large debt-ridden and stressed Source: Central Repository of Information on Large Credits (CRILC) database. SUCB with a small finance bank also helped in improving profitability. On the other hand, the increase in non-interest expenditure, especially non-interest income, had a moderating influence staff costs, coupled with a sharp reduction in (Table V.10). Table V.10: Financial Performance of Scheduled and Non-scheduled Urban Co-operative Banks (Amount in ` crore) Item Scheduled UCBs Non-scheduled UCBs All UCBs All UCBs Variation (%) 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 2021-22 1 2 3 4 5 6 7 8 A. Total Income [i+ii] 22,301 20,743 30,148 29,879 52,449 50,622 -3.5 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) i. Interest Income 19,463 18,551 27,837 28,022 47,300 46,573 -1.5 (87.3) (89.4) (92.3) (93.8) (90.2) (92.0) ii. Non-interest Income 2,838 2,192 2,311 1,857 5,149 4,049 -21.4 (12.7) (10.6) (7.7) (6.2) (9.8) (8.0) B. Total Expenditure [i+ii] 18,884 17,017 25,773 24,875 44,657 41,892 -6.2 (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) i. Interest Expenditure 13,503 11,398 18,613 17,311 32,116 28,709 -10.6 (71.5) (67.0) (72.2) (69.6) (71.9) (68.5) ii. Non-interest Expenditure 5,381 5,619 7,160 7,565 12,541 13,183 5.1 (28.5) (33.0) (27.8) (30.4) (28.1) (31.5) of which: Staff Expenses 2,745 2,876 3,923 4,144 6,668 7,020 5.3 C. Profits i. Amount of Operating Profits 3,417 3,727 4,375 5,004 7,792 8,730 12.0 ii. Provision, Contingencies 2,242 1,921 2,584 2,805 4,826 4,726 -2.1 iii. Provision for taxes 597 306 811 817 1,408 1,124 -20.2 iv. Amount of Net Profit before Taxes 1,175 1,805 1,791 2,199 2,966 4,004 35.0 v. Amount of Net Profit after Taxes 578 1,499 980 1,382 1,558 2,881 85.0 Notes: 1. Data for 2021-22 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 `crore. 4. Figures in parentheses are proportion to total income/expenditure (in per cent). Source: Off-site surveillance returns, RBI. 105Report on Trend and Progress of Banking in India 2021-22 Table V.11: Select Profitability Indicators 13, 2020 — requiring them to meet the target of of UCBs 45 per cent, 50 per cent, 60 per cent and 75 per (Per cent) cent of adjusted net bank credit by end-March Indicators Scheduled Non-Scheduled All UCBs UCBs UCBs 2021, 2022, 2023 and 2024, respectively. 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 V.28 Priority sector lending of UCBs has 1 2 3 4 5 6 7 always exceeded the stipulated target over the Return on Assets 0.19 0.50 0.28 0.38 0.24 0.43 last decade. This trend continued even with the Return on Equity 2.94 6.88 3.22 4.21 3.11 5.27 Net Interest higher regulatory target, 55 per cent of UCBs’ Margin 2.01 2.39 2.67 2.94 2.36 2.69 lending during 2021-22 was directed towards Note: Data for 2021-22 are provisional. Source: Off-site surveillance returns, RBI. the sector. MSMEs received a lion’s share in lending (Table V.12). In June 2022, the Reserve V.26 Key measures of UCBs’ profitability — Bank increased individual housing loan limits return on assets (RoA) and net return on equity for UCBs, StCBs and DCCBs. Going forward, (RoE) — improved for the second consecutive year this may give a fillip to their credit to the housing (Table V.11 and Chart V.14). The fall in average sector. cost of deposits, coupled with hardening of Table V.12: Composition of Credit to Priority average return on advances, led to improvement Sectors by UCBs in profitability of SUCBs (Appendix Table V.1). (As at end-March) (Amount in ` Crore) 3.6 Priority sector lending Item 2021 2022 V.27 The strong grassroot level presence of co- Amount Share Amount Share in Total in Total operative banks facilitates their pivotal role in Advances Advances (%) (%) furthering financial inclusion. The priority sector 1. Agriculture [(i)+(ii)+(iii)] 12,245 3.9 13,213 4.2 lending norms for UCBs were revised on March (i) Farm Credit 8,913 2.8 9,841 3.1 (ii) Agriculture 676 0.2 915 0.3 Infrastructure (iii) Ancillary Activities 2,701 0.9 2,457 0.8 Chart V.14: Profitability Indicators- SUCBs versus 2. Micro and Small 1,01,340 32.3 1,07,847 34.3 NSUCBs Enterprises [(i) + (ii) +(iii) + (iv)] (i) Micro Enterprises 34,301 10.9 37,681 12.0 (ii) Small Enterprises 46,128 14.7 46,733 14.8 (iii) Medium Enterprises 20,547 6.5 22,894 7.3 (iv) Advances to KVI 365 0.1 539 0.2 (Including ‘Other Finance to MSMEs’) 3. Export Credit 368 0.1 284 0.1 4. Education 2,374 0.8 2,629 0.8 5. Housing 25,211 8.0 26,803 8.5 6. Social Infrastructure 1,185 0.4 1,114 0.4 7. Renewable Energy 1,291 0.4 1,380 0.4 8. ‘Others’ category under 17,694 5.6 20,012 6.4 Priority Sector 9. Total (1 to 8) 1,61,708 51.5 1,73,282 55.1 of which, Loans to Weaker 33,590 10.7 34,844 11.1 Sections under Priority Sector Notes: 1. Data for 2022 are provisional. 2. Percentage share are with respect to the total credit of UCBs. 3. Components may not add up to total due to rounding off. Source: Off-site surveillance returns, RBI. Source: Off-site surveillance returns, RBI. 106DEVELOPMENTS IN CO-OPERATIVE BANKING Chart V.15: Priority Sector Lending a. SUCBs b. SCBs Source: Staff calculations based on supervisory data. V.29 Despite the increasing share of the V.30 Empirical evidence suggests that while priority sector in total lending of SUCBs, their asset quality and capital buffers are significant GNPAs have remained low, especially when determinants of SUCBs’ profitability, priority compared with the SCBs (Chart V.15a and 15b). sector lending does not weaken it (Box V.1). Box V.1: Determinants of Profitability of Scheduled Urban Co-operative Banks For scheduled urban co-operative banks (SUCBs), panel regression framework. The dependent variable viz. quarterly panel data of 54 entities for the period March profitability of banks is proxied by return on assets (RoA) 2013 to December 2021 were used in a fixed effects and alternately by net interest margin (NIM). Explanatory Table 1a: Impact of Priority Sector Lending on Profitability of SUCBs Model I: Bank Specific Factors (1) (2) (3) (4) VARIABLES Return on Assets NIM Return on Assets NIM PSL -0.00331 0.000879 -0.00466 0.000587 (0.00453) (0.00208) (0.00473) (0.00210) TOTAL GNPA -0.0284*** -0.0220*** (0.00586) (0.00389) Total Assets -0.0501 -0.587** 0.0330 -0.466 (0.367) (0.275) (0.351) (0.302) CRAR 0.0256*** -0.00455 0.0298*** -0.000873 (0.00515) (0.00348) (0.00730) (0.00582) Priority GNPA -0.0209*** -0.0139** (0.00687) (0.00557) Constant 1.466 12.19** 0.0164 10.06* (6.221) (4.655) (5.878) (5.066) Bank Fixed Effects Yes Yes Yes Yes Time Fixed Effects Yes Yes Yes Yes Observations 1,938 1,938 1,938 1,938 R-squared 0.254 0.764 0.206 0.740 Number of Banks 55 55 55 55 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 (Contd...) 107Report on Trend and Progress of Banking in India 2021-22 variables include bank specific factors such as ratio of Table 1b: Impact of Priority Sector Lending on Profitability of SUCBs priority sector lending to total lending (PSL ratio) of Model II: Bank Specific Factors and Macroeconomic Controls SUCBs, gross non-performing assets (GNPA) ratio, total assets, CRAR and GNPA of priority sector in Model I. Variables (1) (2) The same relationship is examined by controlling for Return on Return on Assets Assets macroeconomic variables like real GDP growth and PSL -0.00302 -0.00317 inflation in Model II. (0.00452) (0.00427) TOTAL GNPA -0.0278*** -0.0281*** The findings suggest that asset quality, measured by total (0.00600) (0.00577) CRAR 0.0254*** 0.0258*** GNPA ratio and GNPA ratio of priority sector lending, is (0.00481) (0.00506) inversely related to profitability of SUCBs, while capital Non-Interest Income to Operating Income 1.165** (0.498) buffers have a positive impact. Priority sector lending is Total Assets -0.0535 -0.00229 not a significant determinant of profitability. The results (0.339) (0.340) are consistent across different specifications of the model Real GDP 0.00555** (0.00245) (Table 1a). Inflation -0.0138 (0.0106) The results remain consistent even after controlling WALR 0.0478 for macroeconomic variables viz. real GDP growth and (0.0621) Constant 1.017 0.526 inflation (Table 1b), suggesting pro-cyclicality of bank (6.560) (5.733) profitability, while high inflation seems to erode profit Bank Fixed Effects Yes Yes Time Fixed Effects No Yes margins. The ratio of non-interest income to operating Observations 1,938 1,937 income, representing income diversification, has a R-squared 0.209 0.265 significant and positive impact on RoA. Number of Banks 55 55 Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 4. Rural Co-operatives rural co-operatives is relatively better, with a proportionally higher share in net profits, V.31 Rural credit co-operatives came into a lower share in NPAs and higher recovery existence as an institutional mechanism to of loans to demand ratio. (Table V.13 and dispense credit to marginalised areas and Chart V.16). activities at affordable cost to address the twin problem of rural indebtedness and poverty. The V.33 At the same time, the sector is also share of rural co-operatives has been growing — riddled with both structural and transient their share in total assets increased from 66.9 challenges. While a broad depositor base enables per cent at end March 2020 to 67.3 per cent at UCBs to raise funds at relatively low cost, end March 2021. rural co-operatives are heavily dependent on V.32 Rural co-operative banks’ network of borrowings for their operations. At end-March short and long-term institutions has nurtured 2021, borrowings constituted around 1 per a distinctive place in the rural credit delivery cent of UCBs’ liabilities, as against as high as 29 system due to outreach and volume of business. per cent for rural co-operatives. Despite recent Deposits are the major sources of funds for moderation, the number of loss-making rural co- short-term credit co-operatives while long-term operatives has remained high, largely reflecting credit co-operatives rely heavily on borrowings. asset quality concerns. Adequacy of capital is The financial performance of short-term also a weak spot for many institutions. 108DEVELOPMENTS IN CO-OPERATIVE BANKING Table V.13: A Profile of Rural Co-operatives (At end-March 2021) (Amount in ` Crore) Item Short-term Long-term StCBs DCCBs PACS SCARDBs (P) PCARDBs (P) 1 2 3 4 5 6 A. Number of Co-operatives 34* 351 102,559 13 603 B. Balance Sheet Indicators i. Owned Funds (Capital + Reserves) 24,425 46,773 42,311 6,142 4,227 ii. Deposits 2,23,057 3,81,825 1,70,922 2,546 1,551 iii. Borrowings 1,07,207 1,08,077 1,43,044 13,293 16,144 iv. Loans and Advances 2,11,794 3,04,990 2,29,443 20,918 15,325 v. Total Liabilities/Assets 3,77,338 5,88,914 3,34,718 27,275 31,677 C. Financial Performance i. Institutions in Profits a. No. 32 308 47,297 10 311 b. Amount of Profit 1,669 2,091 5,298 180 193 ii. Institutions in Loss a. No. 2 43 37,419 3 292 b. Amount of Loss 268 669 4,320 17 665 iii. Overall Profits (+)/Loss (-) 1,402 1,422 978 163 -473 D. Non-performing Assets i. Amount 14,113 34,761 72,550 6,942 6,818 ii. As percentage of Loans Outstanding 6.7 11.4 33.5 33.2 44.5 E. Recovery of Loans to Demand Ratio** (Per cent) 90.5 74.9 71.1 46.5 41.8 Notes: 1. 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 2. (P)- Data are provisional. 3. *: Till FY 2019-20, data of Daman & Diu StCB was reported as a part of Goa StCB. Audit of Goa StCB and Daman & Diu StCB was undertaken separately for the position as on 31 Mar 2021. 4.** : This ratio captures the share of outstanding non-performing loan amounts that have been recovered and is as on 30 June of FY Source: NABARD & NAFCOB (PACS Data). 4.1 Short-term Rural Co-operatives Chart V.16: Long-term versus Short-term Rural Co-operatives V.34 Short-term credit co-operatives, viz. (At end-March 2021) state co-operative banks (StCBs), district central co-operative banks (DCCBs) and Primary Agricultural Credit Societies (PACS) that operate at the grass root level, cater to the credit requirements of the members through provision of crop loans / working capital. They also provide several non-financial services like input supply, storage and marketing of produce as well as supply of consumer goods. V.35 A major part of profits earned by StCBs in 2021 was sourced from the southern and western regions (Appendix table V.3). DCCBs, Source: NABARD and NAFSCOB. which have a stronger presence in the central 109Report on Trend and Progress of Banking in India 2021-22 region, earn the highest share of their profits apart from customer lending on their own. from the western region (Appendix Table V.4). At end-March 2021, they had 2,078 branches On the other hand, although PACS are more across 35 states and UTs8, providing credit for concentrated in the Western region, they depend a range of agricultural and non-agricultural heavily on the northern region for profits purposes. Agricultural loans constituted 43 per (Appendix Table V.6). cent of the total loan portfolio of StCBs. Balance Sheet Operations V.36 A comparison of financial performance suggests that PACS are the weakest link in the V.38 State co-operative banks’ (StCBs) balance short-term rural co-operative segment. Their sheet grew by over 7 per cent for the third high dependency on borrowings, coupled with consecutive year in 2020-21. Like in previous higher NPA ratios and low recovery ratios point years, deposits remain the mainstay of their to underlying vulnerabilities (Chart V.17). liabilities. The sharp increase in borrowing also highlights their dynamic resource mobilisation 4.1.1 State Co-operative Banks strategy — taking advantage of lower cost of V.37 State co-operative banks (StCBs) are borrowing available in 2020-21. However, the the apex institutions in the rural co-operative higher incremental resources mobilised could not structure, providing liquidity and technical be utilised for extending loans and advances in assistance to the Tier II and Tier III institutions, the face of anaemic credit demand that prevailed then. Instead, these resources were deployed as investments and cash holdings (Table V.14). Chart V.17: Comparison of Short-term Rural Co-operatives (Balance sheet and Financial Performance) V.39 Supervisory data available for 2021-22 (At end-March 2021) show a reversal, with robust credit pick-up and corresponding slowdown in SLR investments (Table V.15). Profitability V.40 During 2019-20, both interest income and interest expended had contracted, but the latter more than compensated for the former. As a result, it turned out to be a profitable year for StCBs. This was reversed in 2020-21 and as the increase in interest expenditure outpaced that of interest earnings, the sector witnessed erosion in profitability. Increase in operating Source: NABARD and NAFSCOB. expenditure, mainly on account of wage bills, 8 Though there are 34 StCBs, the Jammu and Kashmir State Co-operative Bank Limited has 7 branches in the Union Territory of Ladakh. 110DEVELOPMENTS IN CO-OPERATIVE BANKING Table V.14: Liabilities and Assets of State further accentuated the contraction in profits Co-operative Banks (Table V.16). (Amount in ` Crore) Item At end-March Variation (%) V.41 The contraction in profits was sharpest 2020 2021 2019-20 2020-21 in the northern region, mainly contributed by the 1 2 3 4 5 StCB in Jammu and Kashmir, which reported Liabilities a loss of `24,751 lakhs. Combined with profit 1. Capital 7,459 8,577 0.4 15.0 (2.2) (2.3) deceleration in the southern region, this dragged 2. Reserves 14,441 15,848 4.7 9.7 (4.2) (4.2) down gains registered across the country 3. Deposits 2,10,342 2,23,057 9.2 6.0 (Appendix Table V.3). (61.8) (59.1) 4. Borrowings 85,723 1,07,207 2.0 25.1 (25.2) (28.4) Asset Quality 5. Other Liabilities 22,301 22,648 16.9 1.6 (6.6) (6.0) V.42 After a deterioration in 2019-20, the NPA Assets 1. Cash and Bank accretion of StCBs slowed down in 2020-21. A 10,229 14,360 -32.6 40.4 Balances sharp increase in doubtful and loss accounts (3.0) (3.8) 2. Investments 1,12,828 1,29,329 9.4 14.6 acted as a countervailing force to improvement (33.2) (34.3) 3. Loans and Advances 1,99,943 2,11,794 8.9 5.9 in sub-standard assets, resulting in the NPAs to (58.8) (56.1) loan ratio remaining unchanged at 6.7 per cent, 4. Accumulated Losses 1,232 1,405 25.0 14.0 (0.4) (0.4) as in the previous year. The improvement in the 5. Other Assets 16,035 20,451 13.3 27.5 (4.7) (5.4) NPA ratio in the eastern, central and southern Total Liabilities/Assets 3,40,267 3,77,338 7.3 10.9 regions was counterbalanced by deterioration in (100.0) (100.0) the other regions (Appendix Table V.3). A decline Notes: 1. Figures in parentheses are proportion to total liabilities/assets (in per cent). in the recovery ratio highlights the underlying 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to `1 Crore. weakness in the sector (Table V.17). 3. Components may not add up to the total due to rounding off. 4. During 2019-20, 13 DCCBs (except Mallapuram DCCB) in 4.1.2 District Central Co-operative Banks Kerala were amalgamated with Kerala StCB. The data of 13 DCCBs have been added to the StCB totals for previous years V.43 District central co-operative banks to facilitate comparison and compute growth rates. Source: NABARD. (DCCBs), which constitute the second tier in Table V.15: Select Balance Sheet Indicators of Scheduled State Co-operative Banks (Amount in `crore) Item 2016-17 2017-18 2018-19 2019-20* 2020-21 2021-22 1 2 3 4 5 6 7 Deposits 90,277 98,768 1,10,559 1,87,456 1,97,751 2,11,784 (13.5) (9.4) (11.9) (69.6) (5.5) (7.1) Credit 1,10,934 1,17,989 1,31,399 1,94,310 2,06,322 2,28,194 (3.3) (6.4) (11.4) (47.9) (6.2) (10.6) SLR Investments 26,225 33,411 33,130 54,181 67,788 77,677 (8.3) (27.4) -(0.8) (63.5) (25.1) (14.6) Credit plus SLR Investments 1,37,159 1,51,400 1,64,529 2,48,492 2,74,110 3,05,871 (4.2) (10.4) (8.7) (51.0) (10.3) (11.6) Notes: 1. Data pertains to last reporting Friday of March of the corresponding year. 2. Figures in brackets are growth rates in per cent over previous year. 3. *: The high growth is mainly due to amalgamation of 13 District Central Co-operative Banks with Kerala State Co-operative Bank. Source: Form B under Section 42 of RBI Act. 111Report on Trend and Progress of Banking in India 2021-22 Table V.16: Financial Performance of State Table V.17: Soundness Indicators of State Co-operative Banks Co-operative Banks (Amount in ` Crore) (Amount in ` Crore) Item As during Percentage Variation Item At end-March Percentage Variation 2019-20 2020-21 2019-20 2020-21 2020 2021 2019-20 2020-21 1 2 3 4 5 1 2 3 4 5 A. Income (i+ii) 21,922 24,318 -1.6 10.9 A. Total NPAs (i+ii+iii) 13,477 14,113 35.2 4.7 (100.0) (100.0) i. Sub-standard 7,883 7,379 67.3 -6.4 i. Interest Income 20,014 23,177 -6.4 15.8 (58.5) (52.3) (91.3) (95.3) ii. Doubtful 4,400 5,294 9.7 20.3 ii. Other Income 1,908 1,141 111.9 -40.2 (32.6) (37.5) (8.7) (4.7) iii. Loss 1,195 1,440 -4.1 20.5 B. Expenditure (i+ii+iii) 20,198 22,916 -4.1 13.5 (100.0) (100.0) (8.9) (10.2) i. Interest Expended 14,871 17,318 -8.6 16.5 B. NPAs to Loans Ratio (%) 6.7 6.7 - - (73.6) (75.6) C. Recovery to Demand 94.4 90.5 - - ii. Provisions and 2,646 2,181 67.6 -17.6 Ratio (%) Contingencies (13.1) (9.5) Notes: 1. Figures in parentheses are shares in total NPA (%). iii. Operating Expenses 2,681 3,418 -16.4 27.5 2. Absolute numbers have been rounded off, leading to slight (13.3) (14.9) variations in per cent. Of which, Wage Bill 1,491 1,926 -14.3 29.1 3. Components may not add up to the total due to rounding off. (7.4) (8.4) 4. During 2019-20, 13 DCCBs (except Mallapuram DCCB) in C. Profits Kerala were amalgamated with Kerala StCB. The data of 13 i. Operating Profits 2,974 2,947 26.0 -0.9 DCCBs have been added to the StCB totals for previous years to facilitate comparison and compute growth rates. ii. Net Profits 1,724 1,402 41.3 -18.7 5. Recovery position as on 30th June of the financial year. Notes: 1. Figures in parentheses are proportion to total income/ Source: NABARD. expenditure (in per cent). 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. Balance Sheet Operations 4. During 2019-20, 13 DCCBs (except Mallapuram DCCB) in Kerala were amalgamated with Kerala StCB. The data of 13 V.44 After a deceleration in 2019-20, the DCCBs have been added to the StCB totals for previous years to Facilitate comparison and compute growth rates. revival in the consolidated balance sheet growth Source: NABARD. of DCCBs in 2020-21 was led by deposits and borrowings on the liabilities side. This the short-term rural co-operative structure, are was matched by acceleration in loans and operating in 20 states/ UTs with a network of advances and investments on the asset side. The 13,610 branches that are largely concentrated in deceleration in accumulated losses for the second the central region. They mobilise funds through consecutive year is a sign of a strengthening public deposits, borrowing from StCBs and balance sheet (Table V.18). refinance from NABARD to lend to individual Profitability borrowers and third tier institutions, viz. PACS. Almost 60 per cent of the lending of DCCBs V.45 Although both income and expenditure is through PACS. Being able to leverage their of DCCBs decelerated, the growth slowdown in extensive branch network to garner deposits, the former was less severe than in the latter, DCCBs are less dependent on borrowings in resulting in higher profit growth (Table V.19). In comparison with StCBs. This also translates particular, interest income growth outweighed to lower C-D ratios than StCBs, although the interest expenses growth, boosting net interest outstanding credit of DCCBs is larger. income. 112DEVELOPMENTS IN CO-OPERATIVE BANKING Table V.18: Liabilities and Assets of District Table V.19: Financial Performance of District Central Co-operative Banks Central Co-operative Banks (Amount in ` Crore) (Amount in `Crore) Item At end-March Percentage Variation Item As during Percentage Variation 2020 2021 2019-20 2020-21 2019-20 2020-21 2019-20 2020-21 1 2 3 4 5 1 2 3 4 5 Liabilities A. Income (i+ii) 38,398 39,982 7.3 4.1 1. Capital 20,913 22,391 3.9 7.1 (100.0) (100.0) (3.9) (3.8) i. Interest Income 36,473 38,089 7.3 4.4 2. Reserves 22,332 24,381 7.5 9.2 (4.2) (4.1) (95) (95.3) 3. Deposits 3,45,682 3,81,825 7.7 10.5 ii. Other Income 1,924 1,893 8.0 -1.6 (64.5) (64.8) (5) (4.7) 4. Borrowings 97,448 1,08,077 4.8 10.9 B. Expenditure (i+ii+iii) 37,552 38,560 6.9 2.7 (18.2) (18.4) (100.0) (100.0) 5. Other Liabilities 49,602 52,239 6.1 5.3 i. Interest Expended 24,830 25,480 7.9 2.6 (9.3) (8.9) (66.1) (66.1) Assets ii. Provisions and 3,886 3,720 8.0 -4.3 1. Cash and Bank 23,409 26,973 -8.7 15.2 Balances (4.4) (4.6) Contingencies (10.3) (9.6) 2. Investments 1,86,745 2,11,380 10.1 13.2 iii. Operating Expenses 8,836 9,361 3.9 5.9 (34.8) (35.9) (23.5) (24.3) 3. Loans and Advances 2,79,272 3,04,990 5.4 9.2 Of which, Wage Bill 5,663 5,864 5.4 3.6 (52.1) (51.8) (15.1) (15.2) 4. Accumulated Losses 6,721 7,046 9.5 4.8 C. Profits (1.3) (1.2) i. Operating Profits 4,229 4,723 11.8 11.7 5. Other Assets 39,830 38,525 13.1 -3.3 ii. Net Profits 846 1,422 28.4 68.1 (7.4) (6.5) Notes: 1. Figures in parentheses are in proportion to total income/ Total Liabilities/Assets 5,35,977 5,88,914 6.9 9.9 expenditure (in per cent). (100.0) (100.0) 2. Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ` 1 Crore in the table. Notes: 1. Figures in parentheses are proportion to total liabilities/assets 3. Components may not add up to the total due to rounding off. (in per cent). 4. During 2019-20, 13 DCCBs (except Mallapuram DCCB) in 2. Y-o-Y variations could be slightly different because absolute Kerala were amalgamated with Kerala StCB. The data of 13 numbers have been rounded off to `1 Crore in the table. DCCBs have been deducted from the DCCB totals for previous 3. Components may not add up to the total due to rounding off. years to facilitate comparison and compute growth rates. Source: NABARD. 4. During 2019-20, 13 DCCBs (except Mallapuram DCCB) in Kerala were amalgamated with Kerala StCB. The data of 13 DCCBs have been deducted from the DCCB totals for previous years to facilitate comparison and compute growth rates. states announced farm debt waiver schemes. In Source: NABARD. 2020-21, asset quality improved on the back of V.46 The share of profit making entities a fall in sub-standard assets and deceleration in increased across all regions. DCCBs in the doubtful assets. Concomitantly, their recovery to southern and western regions contributed demand ratio was at its highest since 2016-17. the lion’s share of all-India net profits. The The improvement in asset quality and recovery acceleration in profits during 2020-21 within ratio was contributed by all the regions, except the western region was mainly contributed by for the northern region. The southern region has Maharashtra, while in the southern region, the lowest NPA ratio and the highest recovery Andhra Pradesh was the biggest contributor. ratio (Table V.20 and Appendix Table V.4). (Appendix Table V.4). 4.1.3 Primary Agricultural Credit Societies Asset Quality V.48 Primary Agricultural Credit Societies V.47 The asset quality of DCCBs has been (PACS) are the grass root level institutions in worsening since 2016-17, when a number of the short-term rural co-operative structure. 113Report on Trend and Progress of Banking in India 2021-22 Table V.20: Soundness Indicators of District undertake a gamut of other activities, including Central Co-operative Banks supply of agricultural inputs, distribution of (Amount in ` Crore) consumer articles and marketing of produce for Item At end-March Percentage Variation their members. 2020 2021 2019-20 2020-21 1 2 3 4 5 V.49 At end-March 2021, PACS served 13.7 A. Total NPAs (i+ ii + iii) 35,298 34,761 10.3 -1.5 crore members and 5.4 crore borrowers. They i) Sub- standard 15,885 13,940 1.6 -12.2 (45) (40.1) have a dominant presence in the western region ii) Doubtful 16,990 18,367 22.1 8.1 (mainly Maharashtra), followed by the eastern (48.1) (52.8) iii) Loss 2,423 2,455 -0.6 1.3 region. The borrower-to-member ratio — a (6.9) (7.1) metric to gauge credit penetration of PACS — B. NPAs to Loans Ratio (%) 12.6 11.4 - - C. Recovery to Demand was progressively declining from 39.6 per cent 70.2 74.9 - - Ratio (%) in 2016-17 to 38 per cent in 2019-20. During Notes: 1. Figures in parentheses are proportion to total NPAs (in per cent). 2020-2021 however, the ratio increased to 2. Y-o-y variations could be slightly different because absolute numbers have been rounded off to `1 Crore in the table. 39.1 per cent, mainly reflecting a fall in total 3. Components may not add up to the total due to rounding off. membership and a rise in total number of 4. During 2019-20, 13 DCCBs (except Mallapuram DCCB) in Kerala were amalgamated with Kerala StCB. The data of 13 borrowers9. Rural artisans’ and ‘other and DCCBs have been deducted from the DCCB totals for previous years to facilitate comparison and compute growth rates. marginal farmers’ share rose in the membership 5. Recovery Position as on 30th June of corresponding FY. (Appendix Table V.7). Source: NABARD. V.50 The asset quality measured in terms of the NPA ratio of StCBs and DCCBs has Historically, they have raised resources through historically been better than PACS. Additionally both borrowings and deposits for providing their recovery ratio has also remained at short-term and medium-term agricultural its lowest level for two consecutive years credit, especially to marginal farmers. They also (Table V.13 and Chart V.18). Chart V.18: Asset Quality of Shot-term Co-operatives: A comparison a. NPA Ratio b. Recovery to Demand Ratio Source: NABARD and NAFSCOB. 9 NABARD Annual Report 2021-22 available at https://www.nabard.org/nabard-annual-report-2021-22.aspx 114DEVELOPMENTS IN CO-OPERATIVE BANKING V.51 The total resources of PACS decelerated (PCARDBs) operating at the district/block level. during 2020-21. Notwithstanding significant The structure of long-term rural co-operatives increase in the government’s contribution, differs across states. States like Jammu and owned funds contracted in 2020-21, reflective Kashmir, Tripura, Uttar Pradesh, Gujarat of erosion in membership base, and leading to and Puducherry follow a unitary structure i.e., a negative growth in paid up capital (Appendix SCARDBs operate through their own branches Table V.5). In line with their mandate, PACS with no separate PCARDBs. On the other extend proportionately more short-term loans hand, states like Haryana, Punjab, Rajasthan, than medium-term loans. During the year under Karnataka, Kerala, and Tamil Nadu follow review, both short-and medium-term loans a federal structure wherein SCARDBs lend grew at around 2 per cent, thus maintaining through PCARDBs. In two states viz. Himachal the share of short-term loans in the total at Pradesh and West Bengal, SCARDBs operate 88 per cent. through PCARDBs as well as through their own branches. V.52 The business model of PACS is largely tilted towards lending to agriculture. At end- V.55 The business model of SCARDBs and March 2021, its share in total lending was high PCARDBs depends heavily on borrowings; the at 80 per cent. On y-o-y growth basis, however, former borrow from institutions such as NABARD their agriculture lending decelerated to 3.9 for direct lending as well as lending through per cent as compared with 6.8 per cent in the PCARDBs. The financial health of PCARDBs preceding year. is, however, more fragile than SCARDBs, given the high share of accumulated losses on their V.53 More than half of the PACS were profitable balance sheets (Chart V.19). during the year, outweighing the losses incurred by the other half. Region-wise aggregation reveals 4.2.1 State Co-operative Agriculture and that only the northern region was profitable Rural Development Banks (SCARDBs) with more than 70 per cent societies in profit, V.56 SCARDBs are operating in 13 states, with contributed mainly by Haryana and Rajasthan. 794 branches of which the maximum number of The losses were the highest in the southern branches are in Uttar Pradesh. The consolidated region, mainly contributed by Kerala and Tamil balance sheet of SCARDBs expanded in 2020-21, Nadu (Appendix Table V.6). albeit marginally, after witnessing contraction 4.2 Long-term Rural Co-operatives for three consecutive years. The expansion was led by a turnaround in deposits on liabilities V.54 Long-term rural co-operatives were side and continuing acceleration in loans and established for providing funds for investment advances on the assets side (Appendix V.8). in agriculture — including land development, farm mechanisation and minor irrigation — V.57 Although both income — interest as rural industries and housing. This structure well as non-interest — and expenditure consists of 13 state co-operative agriculture and contracted as compared with the previous year, rural development banks (SCARDBs) operating the fall in the former outweighed that of the at the state level and 603 primary co-operative latter, leading to a deterioration in profitability agriculture and rural development banks (Appendix Table V.9). 115Report on Trend and Progress of Banking in India 2021-22 Chart V.19: Liabilities and Assets of Long-Term Rural Co-operatives: A Comparison (At end-March 2021) a. Components of Total Liabilities b. Components of Total Assets Source: NABARD. V.58 NPAs of SCARDBs decelerated in 2020- NPA accretion has slowed down in 2020-21 on 21 on account of a contraction in sub-standard a fall in sub-standard assets (Appendix Table assets. The recovery to demand ratio improved V.14). The recovery to demand ratio has fallen in 2020-21 in comparison to 2019-20, largely for all states, except Himachal Pradesh and West contributed by Himachal Pradesh, West Bengal, Bengal (Appendix Table V.15). Karnataka, and Kerala (Appendix Table V.10 and V.11). 5. Overall Assessment 4.2.2 Primary Co-operative Agriculture and V.61 During 2021-22, the performance of Rural Development Banks (PCARDBs) UCBs improved on all parameters — capital buffers, asset quality and profitability. The V.59 The consolidated balance sheet of amalgamation of a large stressed UCB helped PCARDBs decelerated during 2020-21 on the in shoring up the performance of the sector, back of a contraction in loans and advances however, a close monitoring is needed to ensure on the asset side as well as borrowings on the viability of other stressed and weak UCBs. The liabilities side (Appendix Table V.12). performance of some segments of the rural co- V.60 The operating profit of PCARDBs operatives also needs improvement. Recent accelerated as their income growth surpassed legal and regulatory measures initiated by the growth in expenditure. However, as their Reserve Bank are likely to bolster the financial provision requirements remained high, health of the sector, enabling it to perform the the historical trend of net losses continued role as conduit of financial inclusion more (Appendix Table V.13). On the positive side, effectively. 116NON-BANKING FINANCIAL VI INSTITUTIONS During 2021-22, NBFCs’ balance sheet grew at a subdued pace driven by deceleration in their loans and advances. The sector, however, continued to show resilience in terms of sound capital position, improved asset quality, adequate provisioning and higher profitability. HFCs’ balance sheet expanded moderately in 2021-22 on the back of consolidation. AIFIs’ balance sheet exhibited double digit growth mainly on account of growth in investments and loans and advances. 1. Introduction duties and the shift in labour market conditions with a preference to work from home. All India VI.1 Non-banking financial companies financial institutions (AIFIs) also realigned their (NBFCs) weathered the pandemic supported business strategies to contribute to economic by various policy initiatives. They built up recovery, buoyed by the refinance support from financial soundness during 2021-22, marked the Reserve Bank. by balance sheet consolidation, improvement in asset quality, augmented capital buffers and VI.2 This chapter analyses the operations profitability. In the second wave of the pandemic and performance of non-banking financial during H1: 2021-22, the disruption to economic institutions (NBFIs) regulated by the Reserve activity was limited due to adoption of localised Bank1, comprising NBFCs, HFCs, AIFIs and and region-specific containment policies primary dealers (PDs) (Chart VI.1). NBFCs and the steady pace of vaccination. Contact- comprise government/ public/ private limited intensive segments and smaller businesses in companies which provide niche financing to the NBFC sector were however, hit hard and various sectors of the economy, ranging from faced asset quality and liquidity stress. As the real estate and infrastructure to agriculture and impact of the second wave waned and the third micro loans, thereby supplementing bank credit. wave turned out to be short-lived, the NBFC HFCs specialise in providing housing finance to sector regained momentum, cushioned by individuals, co-operative societies and corporate pro-active policy measures announced by the bodies to support housing activity in the country2. Reserve Bank and the government. Housing AIFIs, i.e., the National Bank for Agriculture and finance companies (HFCs) remained resilient Rural Development (NABARD), the Export Import as property sales picked up, driven by pent up Bank of India (EXIM Bank), the Small Industries demand, low interest rates, reduction in stamp Development Bank of India (SIDBI), the National 1 Although merchant banking companies, stock exchanges, companies engaged in the business of stock-broking/sub-broking, nidhi companies, alternative investment fund 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) 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 now treated as a category of NBFCs for regulatory purposes. 117Report on Trend and Progress of Banking in India 2021-22 Chart VI.1: Structure of NBFIs under the Reserve Bank’s Regulation (As on July 31, 2022) Non-Banking Financial Institutions All India Financial Non-Banking Financial Primary Dealers Institutions (5) Companies (9,640) (21) NABARD, SIDBI, Asset Housing Finance NBFCs-D NBFCs-ND Bank PDs EXIM Bank, NHB Reconstruction Companies (49) (9,467) (14) and NaBFID Companies (29) (95) Systemically Important NBFCs-ND Standalone PDs (NBFCs-ND-SI) (415) (7) Other NBFCs-ND (9,052) Notes: 1. Figures in parentheses indicate the number of institutions (Provisional). 2. Although standalone PDs are registered as NBFCs under Section 45-IA of RBI Act, 1934, they have also been kept under PDs in this chart. 3. NBFCs-ND include 62 CICs. Source: RBI. Housing Bank (NHB) and the recently established four sections. Section 2 provides an overview of National Bank for Financing Infrastructure and the NBFC sector, covering in detail non-deposit Development (NaBFID)3, are the apex financial taking systemically important NBFCs (NBFCs- institutions which provide long-term funding ND-SI) and deposit-taking NBFCs (NBFCs-D). to agriculture, foreign trade, small industries, The activities and financial performance of HFCs housing finance companies and infrastructure, are also covered in this section. An assessment of respectively. PDs ensure subscription to primary the performance of AIFIs and PDs is provided in issuances of government securities (G-secs), Section 3 and Section 4, respectively. Section 5 besides acting as market makers in the G-sec concludes with an overall assessment and offers market. The rest of the chapter is organised into perspectives for the way forward. 3 NaBFID has been set up as a Development Financial Institution (DFI) and shall be regulated and supervised as an AIFI by the Reserve Bank under Sections 45L and 45N of the RBI Act, 1934. 118NON-BANKING FINANCIAL INSTITUTIONS 2. Non-Banking Financial Companies Layer (NBFC-TL), based on their size, activity, (NBFCs)4 and perceived level of riskiness. In terms of size, NBFC-BL comprises all NBFCs-ND with asset size VI.3 The growing importance of the NBFC below `1,000 crore. NBFCs-ND with asset size sector in the Indian financial system is reflected above `1,000 crore and NBFCs-D are put in NBFC- in the consistent rise of NBFCs’ credit as a ML. NBFC-UL comprises those NBFCs (including proportion to GDP as well as in relation to credit NBFCs-D) which are specifically monitored by the extended by scheduled commercial banks (SCBs) Reserve Bank on the basis of a set of parameters (Charts VI.2a and b). and scoring methodology. The framework also VI.4 In terms of asset/liability structures, envisages that top ten eligible NBFCs in terms NBFCs are subdivided into deposit-taking of their asset size shall always reside in NBFC- NBFCs (NBFCs-D) - which accept and hold UL. Accordingly, the Reserve Bank has identified public deposits - and non-deposit taking NBFCs and placed 16 NBFCs (including HFCs) in NBFC- (NBFCs-ND). Among non-deposit taking NBFCs, UL. NBFC-TL shall ideally remain empty and those with asset size of `500 crore or more are will be populated if the Reserve Bank perceives classified as non-deposit taking systemically a substantial increase in the potential systemic important NBFCs (NBFCs-ND-SI). risk from specific NBFCs in NBFC-UL. Apart VI.5 After the regulatory overhaul in October from scale, the new regulatory framework also 2022, NBFCs are segregated into four layers, prescribes activity-based regulation for NBFCs namely, Base Layer (NBFC-BL), Middle Layer (Table VI.1). The Reserve Bank also specified a (NBFC-ML), Upper Layer (NBFC-UL) and Top Prompt Corrective Action (PCA) framework for Chart VI.2: NBFCs’ Credit vis-à-vis SCBs’ Credit and GDP (At end- March) a. NBFCs’ and SCBs’ Credit to GDP Ratios b. NBFCs’ Credit to SCBs’ Credit Ratio and their Growth Rates Note: GDP refers to GDP at Current Market Prices (Base: 2011-12). Sources: 1. Report on Trend and Progress of Banking in India, various issues. 2. Handbook of Statistics on the Indian Economy, various issues. 4 This section focuses only on NBFCs-D and NBFCs-ND-SI, excluding CICs and PDs. 119Report on Trend and Progress of Banking in India 2021-22 Table VI.1: Classification of NBFCs by Activity under the New Regulatory Framework Type of NBFC Activity Layer 1. NBFC-Investment and Credit Lending and investment. Any layer, depending on the parameters of Company (NBFC-ICC) the scale based regulatory framework. 2. NBFC-Infrastructure Finance Financing of infrastructure sector. Middle layer or Upper layer, as the case Company (NBFC-IFC) may be. 3. Core Investment Company (CIC) Investment in equity shares, preference shares, debt, or Middle layer or Upper layer, as the case loans of group companies. may be. 4. NBFC-Infrastructure Debt Fund Facilitation of flow of long-term debt only into post Middle layer (NBFC-IDF) commencement operations in infrastructure projects which have completed at least one year of satisfactory performance. 5. NBFC-Micro Finance Institution Providing collateral free small ticket loans to low income Any layer, depending on the parameters of (NBFC-MFI) households. the scale based regulatory framework. 6. NBFC-Factors Acquisition of receivables of an assignor or extending loans Any layer, depending on the parameters of against the security interest of the receivables at a discount. the scale based regulatory framework. 7. NBFC-Non-Operative Financial Facilitation of promoters/ promoter groups in setting up Base layer Holding Company (NBFC-NOFHC) new banks. 8. NBFC-Mortgage Guarantee Company Undertaking of mortgage guarantee business. Any layer, depending on the parameters of (NBFC-MGC) the scale based regulatory framework. 9. NBFC-Account Aggregator (NBFC- Collecting and providing a customer’s financial information Base layer AA) in a consolidated, organised, and retrievable manner to the customer or others as specified by the customer. 10. NBFC–Peer to Peer Lending Platform Providing an online platform to bring lenders and Base layer (NBFC-P2P) borrowers together to help mobilise funds. 11. Housing Finance Company (HFC) Financing for purchase/ construction/ reconstruction/ Middle layer or Upper layer, as the case renovation/ repairs of residential dwelling units. may be. Notes: 1. Standalone Primary Dealers (SPDs) lie in the middle layer. 2. Government NBFCs lie in either base or middle layer. Source: RBI. NBFCs in the middle and upper layers to further VI.6 The current regulatory guidelines mandate strengthen its oversight over these segments that only those companies with minimum net (Box VI.1). owned funds (NOF) of `10 crore can commence Box VI.1: New Regulatory Framework for NBFCs Over the years, the NBFC sector in India has made rapid cent of the total assets and may pose systemic risks (Charts strides, furthering financial inclusion by offering tailored 1a and b). As a result, the Reserve Bank has prescribed financial products to segments underserved by banks. In progressively stringent regulatory regimes for NBFCs in recent years, however, many NBFCs have assumed systemic these two layers. significance with inter-linkages across the financial system. The Reserve Bank has also extended its Prompt Corrective In keeping with the principle of proportionality, the Reserve Action (PCA) framework, akin to that applicable to Bank recently introduced scale-based regulation (SBR) for banks, to NBFCs in the middle and upper layers5 so as to NBFCs, thereby narrowing the regulatory arbitrage between undertake remedial measures in a timely manner if vital banks and large NBFCs while preserving operational financial parameters breach the prescribed thresholds. In flexibility. case of NBFCs-ND-SI and NBFCs-D, capital adequacy ratio (CRAR), Tier- I capital ratio and net non-performing assets An analysis of supervisory data reveals that NBFCs residing in the middle and upper layers account for almost 95 per (Contd...) 5 PCA framework is also applicable to NBFCs in the top layer (NBFC-TL). However, the top layer is currently empty. PCA framework is not applicable to government NBFCs, Standalone Primary Dealers (SPDs), Housing Finance Companies (HFCs) and NBFCs not accepting/not intending to accept public funds. 120NON-BANKING FINANCIAL INSTITUTIONS Chart 1: NBFC Sector under Scale- based Regulation (At end-March 2022) a. Share in Number b. Share in Total Assets Notes: 1. Data are provisional. 2. Including CICs, PDs and HFCs Source: Staff calculations based on available supervisory data. Chart 2: Average values of parameters for NBFC-ML and NBFC-UL Table 1: Risk Thresholds defined under PCA (At end- March 2022) Framework for NBFCs-ND-SI and NBFCs-D. Indicator RT-1 RT-2 RT-3 CRAR Less than the regulatory Less than 12 per cent Less than minimum of 15 per but greater than or 9 per cent. cent but greater than or equal to 9 per cent. equal to 12 per cent. Tier-I Less than the regulatory Less than 8 per cent but Less than Capital minimum of 10 per greater than or equal to 6 per cent. Ratio cent but greater than or 6 per cent. equal to 8 per cent. NNPA Greater than 6 per cent Greater than 9 but less Greater Ratio but less than or equal to than or equal to 12 per than 12 9 per cent. cent. per cent. Note: Data are provisional. (NNPA) ratio are the key indicators used to demarcate Source: Staff calculations based on available supervisory data. various risk thresholds (RT)6 (Table 1). Resolution of Stressed Assets, 2019 and are in breach of the Supervisory data suggest that at the aggregate level, prescribed risk thresholds. Going forward, it is expected NBFC-ML and NBFC-UL are adequately capitalised, with that once the companies successfully undergo resolution, low delinquency ratios (Chart 2). A granular analysis of they will be able to maintain healthy prudential ratios. NBFCs populating various risk thresholds reveals that the References 10 NBFC-UL7, which include three NBFCs-D and seven NBFCs-ND-SI, fulfil the regulatory norms in all the three Scale Based Regulation (SBR): A Revised Regulatory parameters. The Reserve Bank engages in continuous Framework for NBFCs, RBI, October 22, 2021. monitoring of these companies to maintain system-level https://rbidocs.rbi.org.in/rdocs/notification/PDFs/ resilience. NT1127AD09AD866884557BD4DEEA150ACC91A.PDF In case of NBFC-ML, around 90 per cent of the NBFCs Prompt Corrective Action (PCA) Framework for Non- considered in the analysis meet the regulatory norms in all Banking Financial Companies (NBFCs), RBI, December three parameters. Some companies, however, are currently 14, 2021. undergoing arbitration and resolution under the Insolvency https://rbidocs.rbi.org.in/rdocs/notification/PDFs/139PCA and Bankruptcy Code (IBC) and Prudential Framework for NBFCSC3389782516C440DAF56D30473BF005B.PDF 6 For CICs, the monitorable criteria are Adjusted Net Worth/Aggregate Risk Weighted Assets, Leverage Ratio and NNPA. 7 The remaining six NBFC-UL include five HFCs and one CIC. 121Report on Trend and Progress of Banking in India 2021-22 the activities of NBFCs8.The existing NBFCs-ICC, Chart VI.3: Registrations and Cancellations of NBFCs-MFI and NBFC-Factors are required to Certificate of Registrations of NBFCs attain NOF of `10 crore by March 2027 following a glide-path. VI.7 During 2021-22, the number of registrations of NBFCs dipped marginally and the number of cancellations increased year- on-year (Chart VI.3). The pandemic led to a mushrooming of digital lenders as customers increasingly resorted to digital platforms for quick short-term loans. Several such NBFCs violated extant regulations and guidelines on outsourcing and Fair Practices Code (FPC) and faced cancellation of licenses. Note: Data are provisional. 2.1 Ownership Pattern Source: Supervisory Returns, RBI. VI.8 The NBFCs-ND-SI category accounted Bank has mandated that only investment grade for around 86 per cent of the total assets of the NBFCs-D shall accept fixed deposits from the NBFC sector at end-March 2022. Although the public up to a limit of 1.5 times of their NOF category is largely populated by non-government and for a tenure of 12 to 60 months only, with companies, a few large government-owned interest rates capped at 12.5 per cent, keeping NBFCs hold a substantial share of the assets of depositors’ interest in view. In May 2022, it was the NBFCs-ND-SI sub-sector (Table VI.2). mandated that the deposits of NBFCs shall have VI.9 The deposits of NBFCs-D are not insured a minimum investment grade credit rating of by the Deposit Insurance and Credit Guarantee ‘BBB–’ from any of the SEBI-registered credit Corporation (DICGC). Hence, the Reserve rating agencies. Table VI.2: Ownership Pattern of NBFCs (At end-March 2022) (Amount in ` crore) NBFCs-ND-SI NBFCs-D Type Number Asset Size Asset share in Number Asset Size Asset share in per cent per cent 1 2 3 4 5 6 7 A. Government Companies 19 14,91,617 45.4 4 64,729 11.7 B. Non-government Companies (1+2) 403 17,96,727 54.6 45 4,87,848 88.3 1. Public Limited Companies 234 13,96,233 42.5 41 4,87,839 88.3 2. Private Limited Companies 169 4,00,494 12.2 4 9 0 Total (A+B) 422 32,88,344 100.0 49 5,52,577 100.0 Note: Data are provisional. Source: Supervisory Returns, RBI. 8 For NBFCs-P2P, NBFCs-AA, and NBFCs with no public funds and no customer interface, the NOF continues to be `2 crore. Further, there is no change in the existing regulatory minimum NOF for NBFCs-IDF, NBFCs-IFC, NBFCs-MGC, HFCs, and SPDs. 122NON-BANKING FINANCIAL INSTITUTIONS VI.10 At end-March 2022, NBFCs-D accounted unsecured loans by NBFCs-ND-SI, highlighting for 14.4 per cent of the total assets of the NBFC their preference for safe assets in an atmosphere sector. Non-government public limited companies of economic uncertainty. NBFCs-ND-SI also dominate this category, with a share of 88.3 per continued to shore up their liquidity, with their cent of the total assets of NBFCs-D (Table VI.2). cash and bank balances exhibiting double digit growth. At end- September 2022, balance sheet 2.2 Balance Sheet growth of NBFCs moderated on the back of a VI.11 The balance sheet size of NBFCs grew at decline in investments of NBFCs-ND-SI. Credit, a subdued pace in 2021-22, reflecting both weak however, grew in double digits for both NBFCs- demand and risk aversion amid disruptions ND-SI and NBFCs-D (Appendix Tables VI.1, VI.2 caused by the second wave of COVID-19. NBFCs and VI.3). also faced headwinds as competition from banks intensified, particularly in the retail space. The VI.13 The allure of higher interest rates sector nevertheless maintained comfortable offered by NBFCs-D ensured a steady growth liquidity buffers, adequate provisioning, and a in their public deposits in 2021-22. While their strong capital position. credit books exhibited a robust expansion, their VI.12 The deceleration in loans and advances investments, cash and bank balances declined of the sector was driven by an absolute decline in (Table VI.3). Table VI.3: Abridged Balance Sheet of NBFCs (Amount in ` crore) Items At end-March 2021 At end-March 2022 At end-September 2022 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 7,97,627 6,96,742 1,00,884 9,01,449 7,89,909 1,11,541 8,40,345 7,25,704 1,14,641 (26.3) (27.6) (17.6) (13.0) (13.4) (10.6) (3.4) (2.7) (8.5) 2. Public Deposits 62,262 - 62,262 70,754 - 70,754 71,640 - 71,640 (24.5) (24.5) (13.6) (13.6) (7.8) - (7.8) 3. Debentures 9,82,576 8,83,895 98,681 10,06,496 8,97,508 1,08,988 10,09,804 8,98,490 1,11,314 (8.4) (10.1) (-4.5) (2.4) (1.5) (10.4) (2.2) (1.5) (8.1) 4. Bank Borrowings 7,75,099 6,60,285 1,14,815 9,04,715 7,85,089 1,19,625 9,23,732 7,88,646 1,35,086 (11.5) (15.7) (-7.7) (16.7) (18.9) (4.2) (26.4) (26.1) (28.0) 5. Commercial Paper 72,597 64,074 8,523 70,117 62,218 7,899 72,340 57,560 14,780 (8.6) (7.9) (14.0) (-3.4) (-2.9) (-7.3) (0.5) (-4.7) (27.2) 6. Others 8,14,174 6,80,946 1,33,228 8,87,389 7,53,619 1,33,770 9,00,311 7,64,012 1,36,298 (-0.6) (-3.2) (15.0) (9.0) (10.7) (0.4) (7.1) (9.1) (-3.0) Total Liabilities/Assets 35,04,335 29,85,943 5,18,392 38,40,921 32,88,344 5,52,577 38,18,173 32,34,413 5,83,760 (10.6) (11.3) (6.5) (9.6) (10.1) (6.6) (8.8) (8.6) (9.6) 1. Loans and Advances 27,02,618 22,78,224 4,24,394 29,08,743 24,47,059 4,61,684 29,37,051 24,51,024 4,86,028 (9.7) (11.3) (1.6) (7.6) (7.4) (8.8) (10.3) (10.3) (10.7) 2. Investments 4,44,837 3,98,236 46,601 5,13,891 4,68,413 45,479 4,50,462 3,98,252 52,210 (27.9) (29.0) (19.0) (15.5) (17.6) (-2.4) (-4.1) (-5.9) (11.5) 3. Cash and Bank Balances 1,57,708 1,23,474 34,235 1,80,341 1,48,174 32,167 1,80,066 1,48,793 31,272 (20.0) (8.1) (98.2) (14.4) (20.0) (-6.0) (11.1) (14.8) (-3.4) 4. Other Current Assets 1,59,543 1,46,988 12,555 1,65,364 1,52,703 12,661 1,75,179 1,63,808 11,371 (-11.5) (-12.8) (32.2) (3.6) (3.9) (0.8) (8.9) (8.7) (12.3) 5. Other Assets 39,629 39,021 608 72,581 71,994 587 75,414 72,536 2,878 (-13.1) (-12.9) (-80.3) (83.2) (84.5) (-3.4) (34.5) (39.7) (-30.6) Notes: 1. Data are provisional. 2. Figures in parentheses indicate y-o-y growth in per cent. Source: Supervisory Returns, RBI. 123Report on Trend and Progress of Banking in India 2021-22 Chart VI.4: Classification of NBFCs’ Loans and Advances (At end- March) a. Maturity-wise b. Entity-wise Note: Data are provisional. Source: Supervisory Returns, RBI. VI.14 The maturity profile of NBFCs’ credit NBFCs which operate in the infrastructure indicates that over two- thirds of their loans space. Lending by ICCs grew on the back of a are receivable after 12 months, although rebound in the services sector. In particular, the the pandemic did induce a marginal shift commercial real estate (CRE) segment has been toward shorter-tenure loans (Chart VI.4a). on the upswing since H2: 2021-22, driven by Corporates and retail customers are the largest a resumption in economic activity, low interest beneficiaries of NBFC credit. The share of rates on home loans and stamp duty cuts in a few states. Loans and advances extended by wholesale loans in NBFCs’ loan book declined NBFCs-MFI also grew in double digits, albeit at between 2020 and 2022 amidst muted demand. a slower pace than last year. The share of retail loans, on the other hand, grew strongly, as discretionary spending picked VI.17 To mitigate the adverse effects of the up (Chart VI.4b). pandemic on the power sector finances, the Union government had directed two government VI.15 Amongst NBFCs-ND-SI, balance sheets IFCs in the power sector to lend to eligible of ICCs and IDFs continued to grow in 2021- DISCOMS under the Atmanirbhar Bharat 22, while the performance of IFCs moderated. Abhiyan (ABA). As a result, both these IFCs In case of NBFCs-MFI, growth decelerated as had made large disbursements in 2020-21. collection efficiency and disbursals moderated in While disbursements under ABA continued in the aftermath of the second wave of COVID-19 2021-22, the pace slowed. Disbursements by (Table VI.4). another government IFC lending to railways fell VI.16 ICCs and IFCs accounted for around from over `1 lakh crore in 2020-21 to around 95 per cent of total assets of NBFCs-ND-SI `60,000 crore in 2021-22. With these three in 2021-22 (Chart VI.5a). While the former government IFCs accounting for around 40 largely lend to services and retail sectors, the per cent of total assets of NBFCs-ND-SI, IFC latter mainly comprises large Government credit grew at a slower pace in 2021-22. NBFC- 124NON-BANKING FINANCIAL INSTITUTIONS Table VI.4: Major Components of Liabilities and Assets of NBFCs-ND-SI by Classification (Amount in ` crore) Category / Liability As at As at As at Percentage Variation end-March 2021 end-March 2022 end-September 2022 of Total Liabilities Borrow- Other Total Borrow- Other Total Borrow- Other Total March March ings Liabilities Liabilities ings Liabilities Liabilities ings Liabilities Liabilities 2021 2022 over over March March 2020 2021 1 2 3 4 5 6 7 8 9 10 11 12 NBFC-ICC 9,30,742 6,28,683 15,59,426 10,25,201 6,99,637 17,24,838 10,31,564 6,28,668 16,60,232 8.1 10.6 NBFC-Factors 1,839 2,039 3,878 1,477 1,418 2,895 1,203 659 1,862 -0.4 -25.4 NBFC-IDF 28,429 6,415 34,844 34,641 8,003 42,644 29,386 6,601 35,988 16.9 22.4 NBFC-IFC 10,41,895 2,39,515 12,81,409 11,12,015 2,72,543 13,84,558 11,26,612 2,89,536 14,16,149 13.9 8.0 NBFC-MFI 62,585 25,830 88,415 75,127 28,712 1,03,840 66,779 24,210 90,989 33.6 17.4 Others 77 17,893 17,970 1,900 27,670 29,569 2,086 27,108 29,194 26.8 64.6 Total 20,65,567 9,20,376 29,85,943 22,50,360 10,37,984 32,88,344 22,57,631 9,76,782 32,34,413 11.3 10.1 Category / Asset Loans and Other Total Loans and Other Total Loans Other Total Percentage Variation Advances Assets Assets Advances Assets Assets and Assets Assets of Total Assets Advances March March 2021 2022 over over March March 2020 2021 NBFC-ICC 10,07,142 5,52,283 15,59,426 10,85,372 6,39,466 17,24,838 10,82,404 5,77,828 16,60,232 8.1 10.6 NBFC-Factors 2,961 917 3,878 2,296 599 2,895 1,767 96 1,862 -0.4 -25.4 NBFC-IDF 30,414 4,430 34,844 34,475 8,169 42,644 32,902 3,086 35,988 16.9 22.4 NBFC-IFC 11,69,244 1,12,165 12,81,409 12,43,485 1,41,073 13,84,558 12,60,866 1,55,283 14,16,149 13.9 8.0 NBFC-MFI 68,462 19,954 88,415 81,430 22,410 1,03,840 73,086 17,903 90,989 33.6 17.4 Others - 17,970 17,970 1 29,569 29,569 - 29,194 29,194 26.8 64.6 Total 22,78,224 7,07,719 29,85,943 24,47,059 8,41,285 32,88,344 24,51,024 7,83,389 32,34,413 11.3 10.1 Note: Data are provisional. Source: Supervisory Returns, RBI. Factors was the only category which registered flow disruptions faced by the MSME sector a decline in credit growth, reflecting the cash (Chart VI.5b). Chart VI.5: Classification-wise NBFCs-ND-SI: Select Indicators a. Share in Total Assets b. Growth in Loans and Advances (At end-March 2022) Note: Data are provisional. Source: Supervisory Returns, RBI. 125Report on Trend and Progress of Banking in India 2021-22 Chart VI.6: Distribution of NBFC Credit (At end-March) a. Share b. Growth in NBFCs’ and SCBs’ credit Note: Data are provisional. Source: Supervisory Returns, RBI. 2. 3 Sectoral Credit of NBFCs to access enhanced credit. The co-lending model introduced by the Reserve Bank in VI.18 Industry has traditionally remained the November 2020 also improved the flow of largest recipient of credit from the NBFC sector, credit to the MSME sector. Subsequently, followed by retail, services and agriculture the Union Budget 2022-23 has extended the (Chart VI.6 a and Appendix Table VI.4). In 2021- ECLGS up to March 2023, with the guarantee 22, credit growth to industry and retail sectors cover raised by `50,000 crores to a total of was subdued relative to the previous year, while ` 5 lakh crores. credit to the service sector exhibited double digit growth. VI.19 During 2021-22, while banks’ credit Chart VI.7: NBFCs’ Credit to MSME Sector to industry and services sector benefitted (At end-March) from a favourable base effect, it is the retail segment in which banks outperformed NBFCs (Chart VI.6 b). VI.20 Within industry, about 86 per cent of industrial credit goes to infrastructure, which grew at just 1.6 per cent in 2021-22 dragging down the overall credit growth. VI.21 NBFCs also play a crucial role in bridging the credit needs of micro, small and medium enterprises (MSMEs), primarily those engaged in services (Chart VI.7). The emergency credit line guarantee scheme (ECLGS) launched Note: Data are provisional. Source: Supervisory Returns, RBI. by the government in May 2020 helped MSMEs 126NON-BANKING FINANCIAL INSTITUTIONS Chart VI.8: Vehicle Loans- NBFCs vis-a-vis SCBs a. Share b. Growth Note: Data are provisional. Sources: 1. Supervisory Returns, RBI. 2. Society of Indian Automobile Manufacturers (SIAM). 3. Federation of Automobile Dealers’ Associations (FADA) VI.22 Vehicle loans, which traditionally form with a modest improvement in their share the biggest component of NBFCs’ retail portfolio, (Chart VI.9). declined during 2021-22. Accordingly, the share VI.24 Credit to transport operators, retail trade, of vehicle and auto loans, which accounted for and commercial real estate (CRE) segments about 45 per cent of NBFCs’ retail portfolio at the expanded strongly by end-March 2022. Renewed end of March 2021, dropped to around 40 per cent at end-March 2022. In recent years, banks Chart VI.9: Distribution of Advances against Gold: had ceded ground to NBFCs in the vehicle loan NBFCs and SCBs space. This reversed in 2021-22, with the share of banks surpassing that of NBFCs (Chart VI.8a). In 2021-22, retail sales of vehicles improved after witnessing a contraction in the previous year (Chart VI.8b). VI.23 Advances against gold is a niche segment in which NBFCs have a robust market presence. However, the relaxation in loan-to-value (LTV) requirements given to banks gave a fillip to their gold loan business during the pandemic period. As a result, the share of NBFCs in the gold loan segment moderated in 2020-21. Subsequently, Note: Data are provisional. unwinding of the relaxation restored the Sources: 1. Supervisory Returns, RBI. 2. Handbook of Statistics, RBI. competitive edge of NBFCs during 2021-22, 127Report on Trend and Progress of Banking in India 2021-22 Table VI.5: Sectoral Credit Deployment by NBFCs (Amount in ` crore) Items At end-March 2021 At end-March 2022 At end-September 2022 Percentage Variation 2020-2021 2021-2022 1 2 3 4 5 6 I. Gross Advances (II + III) 27,02,618 29,08,743 29,37,051 9.7 7.6 II. Food Credit - - 1,752 III. Non-Food Credit (1 to 5) 27,02,618 29,08,743 29,35,299 9.7 7.6 1. Agriculture and Allied Activities 37,728 50,422 46,464 9.5 33.6 2. Industry 10,60,411 11,12,852 11,15,749 10.6 4.9 2.1 Micro and Small 44,235 46,967 49,966 21.4 6.2 2.2 Medium 14,910 17,186 15,103 5.9 15.3 2.3 Large 8,54,546 8,94,102 8,99,619 7.5 4.6 2.4 Others 1,46,720 1,54,598 1,51,061 30.1 5.4 3. Services 3,30,758 4,02,935 3,81,485 -5.2 21.8 of which, 3.1 Transport Operators 65,313 1,02,742 90,059 2.1 57.3 3.2 Retail Trade 26,719 40,390 45,066 0.0 51.2 3.3 Commercial Real Estate 80,480 88,123 79,754 -20.7 9.5 4. Retail Loans 7,90,073 8,29,485 8,79,571 7.5 5.0 of which, 4.1 Housing Loans 21,484 23,329 24,680 52.7 8.6 4.2 Consumer Durables 18,519 24,802 27,464 -3.4 33.9 4.3 Vehicle/Auto Loans 3,57,338 3,34,947 3,54,966 7.5 -6.3 4.4 Advances to Individuals Against Gold 1,12,899 1,18,918 1,18,723 49.6 5.3 4.5 Micro Finance Loan/SHG Loan 59,635 74,826 77,567 32.2 25.5 5. Other Non-food Credit 4,83,648 5,13,050 5,12,031 24.9 6.1 Note: Data are provisional. Source: Supervisory Returns, RBI. demand for office and retail spaces, along with Chart VI.10: Classification-wise Sectoral a favourable base effect, aided this recovery. A Distribution of Credit (At end-March) normal monsoon supported credit to agriculture and allied sectors (Table VI.5). VI.25 Unlike IFCs, which deploy their credit primarily in industries, ICCs extend credit across all sectors, with the highest allocation made to the retail sector (Chart VI.10). NBFC- MFIs, which provide collateral-free small ticket loans showed a pick-up in credit disbursement at end-March 2022. VI.26 There was a substantial increase in the share of microfinance loans extended by NBFC- MFIs in 2021-22 (Chart VI.11). The Reserve Note: Data are provisional. Source: Supervisory Returns, RBI. Bank set out a common regulatory framework 128NON-BANKING FINANCIAL INSTITUTIONS Table VI.6: Sources of Borrowings of NBFCs Chart VI.11: Micro-credit Loan Outstanding across (Amount in ` crore) Regulated Entities (At end- March) Items At end- At end- At end-Percentage Variation March 2021 March September 2022 2022 2020-21 2021-22 1 2 3 4 5 6 1. Debentures 9,82,576 10,06,496 10,09,804 8.4 2.4 (41.8) (39.5) (39.1) 2. Bank 7,75,099 9,04,715 9,23,732 11.5 16.7 Borrowings (33.0) (35.5) (35.7) 3. Borrowings 57,355 66,418 70,875 -9.7 15.8 from FIs (2.4) (2.6) (2.7) 4. Inter- 77,840 86,663 95,573 -0.6 11.3 corporate (3.3) (3.4) (3.7) Borrowings 5. Commercial 72,597 70,117 72,340 8.6 -3.4 Paper (3.1) (2.7) (2.8) 6. Borrowings 19,129 18,804 18,857 2.0 -1.7 from (0.8) (0.7) (0.7) Government 7. Subordinated 68,984 70,863 67,640 -6.9 2.7 Debts (2.9) (2.8) (2.6) 8. Other 2,98,099 3,27,015 3,25,874 -10.3 9.7 Source: Microfinance Institutions Network (MFIN). Borrowings (12.7) (12.8) (12.6) 9. Total 23,51,679 25,51,092 25,84,696 5.2 8.5 Borrowings Notes: 1. Data are provisional. 2. Figures in parentheses indicate share in total borrowings. for microfinance loans that is applicable across Source: Supervisory Returns, RBI. the regulated entities (REs) in March 2022. Provisions like revision in the income limit to ` 3 in the total private placements of private NBFCs lakh and removal of the interest rate cap should (Chart VI.13a). help facilitate expansion in credit flows to this VI.30 NCDs of two years and three years tenor segment. together constitute about half of the total NCDs 2.4 Resource Mobilization VI.27 NBFCs other than NBFCs-D rely heavily Chart VI.12: Repayment of NBFCs’ Borrowings on borrowings to fund their activities. Borrowing from the markets and from banks constituted around 75 per cent of total borrowings at end- March 2022. A benign interest rate environment contributed to the increase in borrowings from banks. In H1:2022-23, total borrowings accelerated mainly due to increase in borrowings from banks (Table VI.6). VI.28 While NBFCs have been gradually relying more on long-term borrowings, the share of borrowings payable in three months or less increased marginally in 2021-22 (Chart VI.12). VI.29 Non-convertible debentures (NCDs) with Note: Data are provisional. Source: Supervisory Returns, RBI. AAA and AA ratings have an overwhelming share 129Report on Trend and Progress of Banking in India 2021-22 Chart VI.13: NCD Private Placements of Private NBFCs a. Rating-wise b. Tenor-wise NCDs Sources: 1. Staff calculations. 2. PRIME database. issued in Q2:2022-23. NCDs of long tenor marginally with the normalisation of monetary (greater than 10 years) were mainly raised by policy, elevated oil prices and rising global yields prominent private NBFCs (Chart VI.13 b). (Chart VI.14a and b). VI.31 The spike in spreads, which was observed VI.32 As alluded to earlier, NBFCs rely heavily during the pandemic period, moderated owing to on SCBs for their funds. Public sector banks the liquidity enhancing measures announced by (PSBs) are the foremost lenders, followed by the Reserve Bank. In recent months, however, private sector banks (PVBs) and foreign banks the spread of NBFC bonds yields over G-sec (FBs) (Chart VI.15a and b). yields of corresponding maturity has widened Chart VI.14: Yield of NBFC Bonds: Spread over G-Sec of Corresponding Maturity a. AAA-rated NBFCs b. AA-rated NBFCs Sources: 1. FIMMDA. 2. Bloomberg. 130NON-BANKING FINANCIAL INSTITUTIONS Chart VI.15: Bank Lending to NBFCs, Group-wise a. Share b. Growth Note: Data are provisional. Source: Supervisory Returns, RBI. VI.33 The exposure of banks to NBFCs grew 2.5 NBFCs-D: Deposits mainly due to increase in direct lending which VI.34 Public deposits constituted 12.8 per amounted to 86.5 per cent of the total bank funding to the NBFC sector (Chart VI.16a). cent of total liabilities of NBFCs-D at end- Banks also subscribe to debentures and March 2022. Competitive interest rates offered commercial papers (CPs) issued by NBFCs. The along with robust credit ratings contributed to growth of banks’ subscription to CP issuances their steady growth. The number of companies by NBFCs has turned around since Q3:2021-22 authorized to accept such deposits, however, has (Chart VI.16b). been gradually declining (Chart VI.17). Chart VI.16: Instruments of Bank Lending to NBFCs a. Share b. Growth Note: Data are provisional. Source: Supervisory Returns, RBI. 131Report on Trend and Progress of Banking in India 2021-22 Chart VI.17: Public Deposits with NBFCs- D Chart VI.18: Distribution of Deposits with NBFCs-D (At end-March) (At end-March 2022) Note: Data are provisional. Note: Data are provisional. Source: Supervisory Returns, RBI. Source: Supervisory Returns, RBI. VI.35 Public deposits allow these companies exposures and enhancing liquidity. Asset sales to diversify their sources of funds rather than picked up after dipping marginally in December relying exclusively on banks and capital markets. 2021 and volumes crossed pre-COVID levels Almost 90 per cent of deposits were held by 5 in March 2022 (Chart VI.19a). Securitisation, NBFCs-D, with all of them having total deposits unlike strategic asset sales, helps NBFCs in of greater than `5,000 crores (Chart VI.18). spreading out credit risk to a wider investor base comprising banks, insurance companies 2.6 Asset Sales and Securitisation and asset reconstruction companies. It also VI.36 Asset sales allow NBFCs to strengthen provides them an additional source of funding. their balance sheets by rebalancing their Securitized assets have been gathering pace on a Chart VI.19: Loan Sales and Securitisation of NBFCs-ND-SI a. Loan sales during the quarter b. Loans securitised during the quarter Note: Data are provisional. Source: Supervisory Returns, RBI. 132NON-BANKING FINANCIAL INSTITUTIONS sequential basis since June 2021 (Chart VI.19b). Chart VI.20: Structural Liquidity Statement of NBFCs Nevertheless, securitisation volumes are yet to (At end- March/ September) reach pre-COVID levels. In both asset sales and securitisation undertaken by NBFCs, banks are the main counterparties, utilising these arrangements to meet their commitments under priority sector lending requirements. 2.7 Asset Liability Profile of NBFCs VI.37 The liquidity position of NBFCs is assessed by monitoring the liquidity mismatch, which is the difference between inflows and outflows for a given time bucket. An improvement in mismatch indicates a comfortable liquidity position which can be attributed to either an Notes: 1. Data are provisional. 2. Mismatch is defined as inflows minus outflows. increase in inflows or a decrease in outflows. Source: Supervisory Returns, RBI. Short-term mismatches viz., in the 1-30/31 days bucket is critical for liquidity risk management. hand, declined reflecting easing of asset quality Due to fall in outflows, an improvement in concerns. Overall, expenditure of the sector the cumulative mismatch was observed in declined due to lower provisions and decrease this bucket at end-March 2022 vis-à-vis end- in interest expenses on bank loans and inter- March 2021. All time buckets except that of corporate deposits. The result was a sizable over six months to one year and over five years, growth in net profit. The decline in cost to income recorded improvement at end-March 2022, with ratio for the NBFC sector, across all categories, no cumulative negative mismatches in the less indicates efficiency gains in their operations than one-year buckets (Chart VI.20). (Table VI.7). In 2022-23 (up to end-September), 2.8 Financial Performance of NBFCs there was a turnaround in total income surpassing the growth in total expenditure. VI.38 NBFCs’ income grew at a higher rate in 2021-22 than a year ago, primarily driven 2.9 Profitability Indicators by fund-based income of NBFCs-ND-SI and VI.40 Profitability indicators - return on assets NBFCs-D. During H1:2022-23, net profits (RoA), return on equity (RoE) and net interest of NBFCs improved mainly by a turnaround margin (NIM) - increased in 2021-22. NBFCs-ND- in fund-based income (Appendix Tables VI.5 SI and NBFCs-D experienced bottom line growth and VI.6). at end-March 2022 (Chart VI.21). All profitability VI.39 On the expenditure side, there was indicators showed an improvement in H1:2022- a steep growth in the operating expenses of 23 over the corresponding period in the previous NBFCs. Provisions against NPAs, on the other year. 133Report on Trend and Progress of Banking in India 2021-22 Table VI.7: Financial Parameters of the NBFC Sector (Amount in ` crore) 2020-21 2021-22 H1:2022-23 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 3,56,252 2,89,157 67,095 3,76,563 3,03,831 72,732 2,09,589 1,69,696 39,893 (3.9) (4.7) (0.8) (5.7) (5.1) (8.4) (20.0) (21.7) (13.2) B. Expenditure 3,00,373 2,44,869 55,504 2,94,928 2,39,645 55,282 1,53,366 1,25,955 27,411 (4.8) (4.2) (7.9) (-1.8) (-2.1) (-0.4) (10.9) (16.4) (-8.9) C. Net Profit 41,578 32,901 8,677 61,843 48,523 13,319 45,204 35,766 9,437 (6.5) (16.2) (-19) (48.7) (47.5) (53.5) (55.9) (44.7) (120.7) D. Total Assets 35,04,335 29,85,943 5,18,392 38,40,921 32,88,344 5,52,577 38,18,173 32,34,413 5,83,760 (10.6) (11.3) (6.5) (9.6) (10.1) (6.6) (8.8) (8.6) (9.6) E. Financial Ratios (as per cent of Total Assets) (i) Income 10.2 9.7 12.9 9.8 9.2 13.2 11.0 10.5 13.7 (ii) Expenditure 8.6 8.2 10.7 7.7 7.3 10.0 8.0 7.8 9.4 (iii) Net Profit 1.2 1.1 1.7 1.6 1.5 2.4 2.4 2.2 3.2 F. Cost to Income Ratio (Per cent) 84.3 84.7 82.7 78.3 78.9 76.0 73.2 74.2 68.7 Notes: 1. Data are provisional. 2.Figures in parentheses indicate y-o-y growth in per cent. Source: Supervisory Returns, RBI. VI.41 Among NBFCs-ND-SI, all segments 2.10 Asset Quality except NBFC-IDF registered an improvement VI.42 In 2021-22, asset quality of the sector in RoA and RoE at end-March 2022 improved as evident from the decline in (Chart VI.22). both GNPA and NNPA ratios. While business Chart VI.21: Profitability Ratios of NBFCs Chart VI.22: Profitability Ratios of NBFCs-ND-SI Return on Assets (RoA) = Net Profit by Average Total Assets Return on Equity (RoE) = Net Profit by Average Total equity Net Interest Margin (NIM) = Net Interest Income by Average Total Assets Note: Data are provisional. Note: Data are provisional. Source: Supervisory Returns, RBI. Source: Supervisory Returns, RBI. 134NON-BANKING FINANCIAL INSTITUTIONS Chart VI.23: Asset Quality of NBFCs Chart VI.24: Provision Coverage Ratio of NBFCs (At end-March) (At end-March) Note: Data are provisional. Note: Data are provisional. Source: Supervisory Returns, RBI. Source: Supervisory Returns, RBI. conditions improved, the deferment in the 2021-22, there was a marginal improvement in NPA upgradation norms9 by the Reserve Bank, the proportion of standard assets (Chart VI.25). better recovery and lower fresh accretions facilitated the decline in NPAs during the period. Chart VI.25: Classification of NBFCs’ Assets (At end-March) An increase in provision coverage ratio (PCR) from 56.7 per cent at end March 2021 to 60.7 per cent at end March 2022 suggests enhanced resilience (Chart VI.23). In 2022-23 (up to end-September), asset quality of the sector witnessed an improvement. VI.43 At end-March 2022, all categories of NBFCs-ND-SI maintained a higher PCR than in the previous year, indicating that they are cushioned to deal with credit impairment risk (Chart VI.24). VI.44 Based on the duration for which an asset remains non-performing, NPAs can be categorised Note: Data are provisional. Source: Supervisory Returns, RBI. into sub-standard, doubtful and loss assets. In 9 https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12230&Mode=0 135Report on Trend and Progress of Banking in India 2021-22 VI.45 Among performing loans, the overall Chart VI.26: Delinquency in Performing Assets delinquency ratios came down year-on-year (At end-March) by end-March 2022. Loans overdue in the first bucket viz., less than 30 days were the largest, but the position improved in 2021-22 vis-à- vis the previous year, resulting in an overall reduction in the overdues of performing loans (Chart VI.26). The share of standard assets with no overdues in total performing loans increased from 87.7 per cent in 2020-21 to 90.6 per cent in 2021-22. VI.46 Overall, GNPA and NNPA ratios of NBFCs-ND-SI showed an improvement in 2021-22 as the quality of assets improved in Note: Data are provisional. all the segments, with the exception of ICC Source: Supervisory Returns, RBI. (Chart VI.27 a and b). In H1: 2022-23, GNPA and NNPA ratios continued to decline. the largest share of impaired assets in retail and VI.47 A sectoral distribution of delinquent service sector loans, respectively (Chart VI.28). At assets of NBFCs shows that industry, which end-September 2022, NPA ratio broadly declined is traditionally the largest recipient of credit across the sectors. from NBFCs, also had the dominant share of NPAs at end-March 2022, with large industries VI.48 In the case of NBFCs-D, the decline in the accounting for the major portion. Vehicle/auto GNPA ratio was aided by buoyant growth in loans loans and commercial real estate segments have and advances. The NNPA ratio also registered Chart VI.27: NPAs of NBFCs-ND-SI (At end-March) a. GNPA Ratio b. NNPA Ratio Note: Data are provisional. Source: Supervisory Returns, RBI. 136NON-BANKING FINANCIAL INSTITUTIONS Chart VI.28: Sectoral Distribution of NPAs of NBFCs Chart VI.29: Gross and Net NPA Ratios of NBFCs- D (At end-March 2022) (At end-March) 7R .e 1aC l Eom stam tee rcial OperatorT s r 2a .n 0sport Oth 1e 0r . 7Services Se (r 1v 9ic .8es ) Ot Ch re er d N ito (n 1- .f 4o )od Agriculture and Allied Activities (2.0) Large loan/SM Hic Gr o L F oi an na n 1c .8e Industry 41.0 (50.6) Othe Lr o 8aR .n 2e stail Reta (i 2l 6L .o 2a )ns AV ue th o 1i c L 6l oe .3a/ ns 2.2 m uideM dna orciM9.2 llam S srehtO6.4 Note: Data are provisional. Note: Data are provisional. Source: Supervisory Returns, RBI. Source: Supervisory Returns, RBI. a marginal reduction in the same period Special mention accounts (SMA) give a sense of (Chart VI.29). In 2022-23 so far (up to incipient stress in performing assets. While SMA- September), asset quality improved further. 0 increased, SMA-2, which comprises loans on the brink of being classified as NPAs, declined VI.49 Large borrowal accounts (exposure of `5 crore and above) constituted 51.3 per cent during the year. The increase in GNPA ratio in of gross advances extended by NBFCs. They, large borrowal accounts indicates build-up of however, contributed around 76.6 per cent of stress in this segment even as GNPA and NNPA total NPAs at end-March 2022 (Chart VI.30a). at the aggregate level declined (Chart VI.30b). Chart VI.30: Stress in Large Borrowal Accounts a. Total Gross Advances and Total NPA b. Large Borrowers’ Gross Advances Outstanding RSA: Restructured standard advances. SMA-0, where principal or interest payment was not overdue for more than 30 days, but the account showed signs of incipient stress. SMA-1, where principal or interest payment was overdue for 31-60 days. SMA-2, where principal or interest payment was overdue for 61-90 days. Note: Data are provisional. Source: Central Repository of Information on Large Credits (CRILC) database. 137Report on Trend and Progress of Banking in India 2021-22 2.11 Capital to Risk Weighted Assets Ratio Chart VI.31: Capital Position of NBFC Sector (CRAR) (At end-March) VI.50 As per the extant regulation, NBFCs are required to maintain a minimum capital ratio of not less than 15 per cent of aggregate risk-weighted assets (including both on and off- balance sheet exposures). The NBFC sector is comfortably placed, with CRAR well above the regulatory requirement (Chart VI.31). VI.51 In 2021-22, amongst NBFCs-ND-SI, IFCs registered a significant improvement in their CRAR, buoyed by an increase in Tier I capital. Among other categories, ICCs recorded Notes: 1. Capital to Risk-weighted Assets Ratio (CRAR)= Tier I plus marginal improvement, while CRAR of NBFCs- Tier II Capital by Risk- weighted Assets. 2. Data are provisional. IDF and NBFCs-MFI deteriorated (Chart VI.32a). Source: Supervisory Returns, RBI. NBFCs-D continued to maintain adequate capital, considerably higher than the stipulated capital market and advances to individuals for norm (Chart VI.32b). investment in Initial Public Offerings (IPOs). 2.12 Exposure to Sensitive Sectors CME’s share in total sensitive sector exposure VI.52 Assets in sensitive sectors are (SSE) has remained almost invariant since susceptible to fluctuations in value, which end-March 2020. Real estate exposures (REE), makes them important from the viewpoint of which include credit and investments in real financial stability. Capital market exposure estate, have been declining in terms of share in (CME) includes advances to and investment in total SSE. Investment in securities (IIS), which Chart VI.32: CRAR of NBFCs by Category (At end-March) a. NBFCs-ND-SI b. NBFCs-D Note: Data are provisional. Source: Supervisory Returns, RBI. 138NON-BANKING FINANCIAL INSTITUTIONS Chart VI.33: Exposure to Sensitive Sectors Chart VI.34: Credit to Housing sector by HFCs and SCBs (At end-March) (At end- March) AAC: Advances against commodities; IIS: Investment in securities; REE: Real estate exposure; CME: Capital market exposure; SSE: Sensitive sector exposure. Note: Data are provisional. Note: Data are provisional. Source: Supervisory Returns, RBI. Source: NHB and supervisory returns, RBI. includes investment in quoted and un-quoted compiled under Master Directions issued on securities and equities, has been gaining share February 17, 2021. at the expense of REE. SSE of NBFCs recorded VI.54 HFCs’ credit to the housing sector an increase in 2021-22, as a share of total assets, decelerated in 2021-22 mainly due to change mostly on account of growth in investment in in valuation of loan assets of a distressed HFC securities (Chart VI.33). pursuant to its amalgamation with another HFC. 2.13 Housing Finance Companies (HFCs) However, HFCs continued to maintain a sizable share in the housing credit market. SCBs’ credit VI.53 In India, housing finance companies to the housing segment accelerated in 2021-22, (HFCs) are specialised institutions which extend buoyed by surplus liquidity and various policy housing credit, along with SCBs. Effective August measures, such as reduction in stamp duties, 9, 2019 HFCs are being regulated as a category easing of interest rates and fiscal incentives to of NBFCs, after the transfer of regulation of households (Chart VI.34). HFCs to the Reserve Bank by amendment of the NHB Act, 1987. Furthermore, with a VI.55 At the end of March 2022, there were 95 view of harmonising the regulations between HFCs, of which only 15 were deposit taking entities. HFCs and NBFCs in a phased manner, HFCs Six of the latter need prior permission from the have undergone several legislative/regulatory regulator before accepting public deposits. Non- changes. Based on a review, the Reserve Bank government public limited companies dominate issued the revised regulatory framework for the segment, comprising 94.3 per cent of total HFCs on October 22, 2020, and subsequently assets. The combined balance sheet of these the extant regulations applicable to HFCs were entities grew, albeit at a slower pace during 139Report on Trend and Progress of Banking in India 2021-22 TableVI.8: Ownership Pattern of HFCs 2021-22 than in the previous year. The asset (At end- March) size of the lone government HFC expanded in (` crore) 2021-22 (Table VI.8). Type 2021 2022 2.13.1. Balance Sheet Number Asset Size Number Asset Size 1 2 3 4 5 VI.56 The consolidated balance sheet of HFCs A. Government 1 76,959 1 80,939 Companies decelerated in 2021-22 due to resolution of a B. Non-Government 99 14,05,904 94 14,46,022 stressed HFC and merger of another HFC with Companies (1+2) its parent NBFC resulting in tepid growth of 1. Public Ltd. 78 14,01,522 73 14,39,592 Companies loans and advances, along with contraction 2. Private Ltd. 21 4,382 21 6,430 of investments. On the liabilities side, inter- Companies Total (A+B) 100 14,82,863 95 15,26,961 corporate borrowings recorded a steep rise Notes: 1. Two companies whose Certificate of Registration (CoR) has as funds availed from other sources, such as, been cancelled and did not submit the data have not been debentures, borrowings from NHB, commercial included in the list above for the position as on March 31, 2022. papers, borrowings from the government and 2. Data are provisional. Source: NHB. other borrowings declined (Table VI.9). Table VI.9: Consolidated Balance Sheet of HFCs (At end- March) (` crore) Items 2020 2021 2022 Percentage variation 2021 2022 1 2 3 4 5 6 1 Share capital 36,858 37,696 40,357 2.3 7.1 2 Reserves and surplus 1,45,053 1,70,359 2,24,698 17.4 31.9 3 Public deposits 1,19,795 1,26,691 1,25,236 5.8 -1.1 4 Debentures 3,97,949 3,97,816 3,56,320 0.0 -10.4 5 Bank borrowings 3,53,214 3,29,835 3,74,803 -6.6 13.6 6 Borrowings from NHB 49,673 67,341 59,551 35.6 -11.6 7 Inter-Corporate Borrowings 6,206 19,182 1,24,969 209.1 551.5 8 Commercial papers 46,631 54,554 50,216 17.0 -8.0 9 Borrowings from Government* 1,282 19,313 2,587 1406.9 -86.6 10 Subordinated debts 17,348 19,168 15,363 10.5 -19.9 11 Other borrowings 1,49,404 1,31,818 71,410 -11.8 -45.8 12 Current liabilities 20,446 8,100 28,922 -60.4 257.0 13 Provisions^ 7,499 64,303 33,793 757.5 -47.4 14 Other** 42,508 36,686 18,738 -13.7 -48.9 15 Total Liabilities / Assets 13,93,865 14,82,863 15,26,961 6.4 3.0 16 Loans and advances 11,83,561 12,77,653 13,28,070 7.9 3.9 17 Hire purchase and lease assets 33 10 20 -70.4 106.5 18 Investments 97,931 1,29,961 1,04,625 32.7 -19.5 19 Cash and bank balances 56,955 36,864 39,968 -35.3 8.4 20 Other assets*** 55,384 38,375 54,277 -30.7 41.4 ^The sudden increase in provisions at end-March 2021, is due to high provision reported by one major HFC. * includes borrowings from foreign government also. **includes deferred tax liabilities and other liabilities. ***includes tangible & intangible assets, other assets, and deferred tax asset. Note: Data are provisional. Source: NHB. 140NON-BANKING FINANCIAL INSTITUTIONS Chart VI.35: Resources Mobilised by HFCs Chart VI.36: Public Deposits with HFCs (At end-March) (At end- March) Note: Data are provisional. Note: Data are provisional. Source: NHB. Source: NHB. 2.13.2. Resource Profile of HFCs VI.58 Public deposits, which constitute another important source of funding, declined in 2021-22 VI.57 HFCs essentially rely on debentures (Chart VI.36). Furthermore, the share of deposits and borrowings from banks to perform the in total liabilities of HFCs has been steadily credit intermediation function. Together these declining since 2016-17, except in 2019-20. two sources constituted around 62 per cent of total resources mobilised at end-March 2022. VI.59 The distribution of deposits with HFCs The share of debentures moderated in 2021- in 2021-22 shows that there is a concentration 22, while HFCs’ dependence on banks increased in the 6-9 per cent interest rate bracket. Growth (Chart VI.35). was observed in deposits in the below 6 per cent Chart VI.37: Distribution of Public Deposits with HFCs (At end-March) a. Interest rate-wise deposits b. Maturity-wise deposits Note: Data are provisional. Source: NHB. 141Report on Trend and Progress of Banking in India 2021-22 interest rate bracket on account of the overall Chart VI.38: HFCs’ GNPA and NNPA Ratios soft interest rate regime (Chart VI.37a). Maturity (At end-March) wise, the maximum share of deposits was in the tenure of 1 to 5 years (Chart VI.37b). 2.13.3. Financial Performance VI.60 The consolidated income of HFCs contracted in 2021-22 on account of a decline in both fund income and fee income. Expenditure, however, increased marginally due to rise in provisions/depreciations. Consequently, there was an increase in the cost to income ratio in 2021-22. Net profit of HFCs improved, mainly due to resolution of one major HFC. The RoA also improved and became positive (Table VI.10). Note: Data are provisional. 2.13.4. Soundness Indicators Source: NHB. VI.61 Asset quality of the sector improved in 2021-22 compared to the previous year, when VI.62 To sum up, in 2021-22, HFCs showed there was a spike in GNPA ratio of two major resilience as macroeconomic conditions HFCs. However, both GNPA and NNPA ratios improved. Timely regulatory and liquidity declined at end-March 2022 due to resolution of measures by the Reserve Bank, along with a major HFC (Chart VI.38). the announcement of the additional outlay for Prandhan Mantri Aawas Yojna-Urban (PMAY-U) Table VI.10: Financial Parameters of HFCs (At end-March) by the government, assisted in enhancing (` crore) liquidity. The low interest rate environment 2019-20 2020-21 2021-22 Percentage improved affordability and contributed to Variation the resurgence in demand for housing 2020-21 2021-22 1 2 3 4 5 6 loans. Total Income* 1,41,692 1,29,476 1,25,425 -8.6 -3.1 1. Fund Income 1,39,683 1,27,924 1,22,998 -8.4 -3.9 VI.63 Going forward, HFCs are expected to 2. Fee Income 2,009 1,537 1,376 -23.5 -10.5 improve their credit disbursements. They need Total Expenditure** 1,22,128 98,965 1,00,264 -19.0 1.3 1. Financial 89,041 79,392 74,467 -10.8 -6.2 to be cautious, however, about rising borrowing Expenditure 2. Operating 33,087 19,199 10,638 -42.0 -44.6 costs and competition from SCBs. With the Expenditure Tax Provision 8,561 13,135 4,766 53.4 -63.7 implementation of scale-based regulation, a few Net Profit (PAT) -2,669 210 20,395 -107.9 9624.1 Total Assets 13,93,865 14,82,863 15,26,961 6.4 3.0 HFCs have been included in the upper layer, Cost to Income 86.2 76.4 79.9 which highlights their systemic importance in Ratio# Return on Assets@ -0.2 0.0 1.3 the Indian financial landscape. The regulatory (RoA) arbitrage between NBFCs and banks has been * Total income also comprises income from non-financial business. ** Total expenditure also comprises depreciation/provisions. gradually narrowing, as reflected in the recent # Total Exp./Total Income @ PAT/Total Assets application filed by a major HFC to merge with Note: Data are provisional. Source: NHB. its parent entity. 142NON-BANKING FINANCIAL INSTITUTIONS 3. All India Financial Institutions Table VI.11: Financial Assistance Sanctioned & Disbursed by AIFIs VI.64 All-India financial institutions (AIFIs) (` crore) facilitate sector-specific long-term financing Institutions Sanctions Disbursements to agriculture and the rural sector, small 2020-21 2021-22 2020-21 2021-22 1 2 3 4 5 industries, housing finance companies, NBFCs, EXIM BANK 36,521 54,807 34,122 52,271 MFIs and international trade. At end-March NABARD 4,59,849 3,80,396 3,50,022 3,78,387 2021, four AIFIs, viz. the National Bank for NHB 37,791 22,330 34,230 19,313 SIDBI 98,354 1,48,550 98,115 1,46,402 Agriculture and Rural Development (NABARD), Total 6,32,515 6,06,083 5,16,489 5,96,373 the Small Industries Development Bank of India Note: Data are provisional. Source: Respective Financial Institutions. (SIDBI), the National Housing Bank (NHB) and the Export Import Bank of India (EXIM Bank) 3.2. Balance Sheet were registered with the Reserve Bank. Since the enactment of the NaBFID Act 2021, effective VI.66 In 2021-22, the consolidated balance April 19, 2021, NaBFID10 has been established sheet of AIFIs’ continued to grow at a double as the fifth AIFI, which will cater to long term digit rate. This was mainly on account of financing needs of India’s infrastructure sector. It growth in investments and loans and advances, shall be regulated and supervised as an AIFI by the Reserve Bank under Sections 45L and 45N of Table VI.12: AIFIs’ Balance Sheet (` crore) the Reserve Bank of India Act, 1934. 2021 2022 Percentage 3.1. AIFIs’ Operations11 variation 2021-22 VI.65 Financial assistance sanctioned by AIFIs 1 2 3 4 declined during 2021-22, primarily on account 1. Capital 32,221 35,008 8.6 of contraction in sanctions by NABARD as no (3.0) (2.9) 2. Reserves 71,025 81,538 14.8 (6.6) (6.7) fresh loans were sanctioned under Pradhan 3. Bonds & Debentures 3,27,427 3,56,901 9.0 (30.4) (29.2) Mantri Awaas Yojana-Gramin (PMAY-G) and 4. Deposits 4,12,001 4,36,057 5.8 (38.3) (35.7) Swachh Bharat Mission-Gramin (SBM-G). 5. Borrowings 1,70,820 2,43,121 42.3 (15.9) (19.9) 6. Other Liabilities 62,023 68,612 10.6 Further, no new projects were sanctioned in (5.8) (5.6) Total Liabilities / Assets 10,75,517 12,21,236 13.5 2021-22, while disbursements of instalments 1. Cash & Bank Balances 34,595 28,379 -18.0 (3.2) (2.3) were made against ongoing projects sanctioned 2. Investments 79,275 1,06,329 34.1 (7.4) (8.7) in earlier years. Disbursements by EXIM 3. Loans & Advances 9,44,318 10,69,116 13.2 (87.8) (87.5) Bank and SIDBI gained traction during 2021- 4. Bills Discounted / 1,410 3,058 116.9 Rediscounted (0.1) (0.3) 22, reflecting the thrust on promoting trade 5. Fixed Assets 1,273 1,268 -0.4 (0.1) (0.1) and on MSMEs and manufacturing. Total 6. Other Assets 14,646 13,087 -10.6 (1.4) (1.1) disbursements of AIFIs improved in 2021-22 Notes: 1. Figures in parentheses are percentages of total liabilities/ as a share of total sanctions (Table VI.11 and assets. 2. Data are provisional. Appendix Table VI.7). Source: Respective Financial Institutions. 10 NaBFID has not yet started submitting supervisory data to the RBI. Therefore, this section analyses financial performance of four AIFIs viz, EXIM Bank, NABARD, NHB and SIDBI. 11 The financial year for EXIM Bank, SIDBI and NABARD runs from April to March and for NHB, it is from July to June. 143Report on Trend and Progress of Banking in India 2021-22 primarily by NABARD and SIDBI. Loans and Table VI.13: Resources Mobilised by AIFIs in 2021-22 advances constituted the largest share in the (` crore) total assets of AIFIs, followed by investments. Institution Total Resources Raised Total On the liabilities side, AIFIs’ borrowings Outstand- Long- Short- Foreign Total ing increased steeply followed by moderate growth Term Term Currency in bonds and debentures (Table VI.12). The 1 2 3 4 5 6 former was mainly due to steep increase in EXIM BANK 0 39,123 18,302 57,425 1,07,477 NABARD 1,34,919 2,11,051 0 3,45,970 6,29,586 borrowings by SIDBI to facilitate revival and NHB 8,576 2,605 0 11,182 65,641 growth of MSMEs. SIDBI 62,780 53,211 0 1,15,991 2,14,024 Total 2,06,275 3,05,990 18,302 5,30,567 10,16,728 VI.67 The Reserve Bank announced a number Note: Long-term rupee resources comprise borrowings by way of of measures for AIFIs during the COVID-19 bonds/debentures, term loans, PSL deposits of LT nature; while short- term resources comprise CPs, term deposits, ICDs, CDs, SLF from pandemic, which included a special refinance RBI, borrowings from the term money market and ST loans. Foreign currency resources largely comprise of borrowings by issuing of bonds facility of `75,000 crore in 2020-21. In in the international market. Source: Respective Financial Institutions. continuation with the objective of supporting nascent growth, the Reserve Bank extended VI.69 NABARD and SIDBI together constituted fresh support of `50,000 crore to three AIFIs around 81 per cent of total resources raised by for new lending in 2021-22. This included a AIFIs from the money market. While resources special liquidity facility (SLF) of `25,000 crore raised through certificate of deposits increased, to NABARD, an SLF of `10,000 crore to NHB to commercial paper issuances declined during the support the housing sector and `15,000 crore to year. The utilisation of umbrella limit increased the SIDBI to meet the funding requirements of in 2021-22 (Table VI.14). micro, small and medium enterprises (MSMEs). Table VI.14: Resources Raised by AIFIs NABARD, NHB and SIDBI utilised the full from the Money Market amount under the SLF. Additionally, in order (At end-March) # to meet MSMEs’ short and medium-term credit (` crore) needs, with a special focus on smaller MSMEs Instrument 2020-21 2021-22 1 2 3 and businesses including those in credit deficient A. Total 94,604 97,709 and aspirational districts, SIDBI was provided i) Term Deposits 3,396 5,258 ii) Term Money 3,602 1,987 SLF of `16,000 crore during 2021-22. iii) Inter-corporate Deposits - - iv) Certificate of Deposits 21,275 38,170 VI.68 Total resources mobilised by all AIFIs, v) Commercial Paper 66,331 52,294 except NHB, increased in 2021-22. NABARD Memo: B. Umbrella Limit^^ 1,34,662 1,32,240 mobilised the highest share, followed by SIDBI, C. Utilization of Umbrella limit* 70.3 73.9 EXIM Bank and NHB. NABARD and SIDBI (A as percentage of B) together accounted for 87 per cent of the total #: End-June for NHB. *: Resources raised under A. ^^: post adoption of accounts by the Board resources. AIFIs’ reliance on short-term funds Note: AIFIs are allowed to mobilise resources within the overall ‘umbrella limit’, which is linked to the net owned funds (NOF) of the FI concerned as increased in 2021-22 vis-à-vis the previous per its latest audited balance sheet. The umbrella limit is applicable for five instruments– term deposits; term money borrowings; certificates of year. EXIM Bank remains the lone AIFI to raise deposits (CDs); commercial paper (CPs); and inter-corporate deposits. resources from foreign sources (Table VI.13). Source: Respective Financial Institutions. 144NON-BANKING FINANCIAL INSTITUTIONS 3.3. Sources and Uses of Funds Table VI.15: Pattern of AIFIs’ Sources and Deployment of Funds VI.70 Funds raised and deployed by the AIFIs (` crore) decelerated in 2021-22. Though internal funds Items 2020-21 2021-22 Percentage variation remained as the major source, external funds 1 2 3 4 increased sharply. The share of repayment of past A. Sources of Funds (i+ii+iii) borrowings in mobilised resources decreased i. Internal 43,78,840 45,88,852 4.8 (82.3) (78.0) marginally (Table VI.15). ii. External 8,82,814 12,31,852 39.5 (16.6) (20.9) 3.4. Maturity profile and Cost of Borrowings iii. Others@ 60,018 65,124 8.5 and Lending (1.1) (1.1) Total (i+ii+iii) 53,21,672 58,85,828 10.6 VI.71 AIFIs, except SIDBI, were able to borrow (100) (100) at lower rates as the weighted average cost B. Deployment of Funds (i+ii+iii) (WAC) of rupee resources decreased in 2021-22 i. Fresh Deployment 8,03,936 8,60,062 7.0 vis-à-vis the previous year due to monetary policy (15.1) (14.6) ii. Repayment of Past 31,36,755 34,42,379 9.7 support. The weighted average maturity of rupee Borrowings resources of all AIFIs, except NHB, decreased (59.0) (58.5) iii. Other Deployment 13,74,471 15,77,707 14.8 (Chart VI.39a and b). Long-term prime lending (25.9) (26.8) rate (PLR) of EXIM Bank decreased marginally, of which: Interest Payments 39,344 39,590 0.6 (0.7) (0.7) while it remained stagnant for NHB and SIDBI Total (i+ii+iii) 53,15,161 58,80,149 10.6 in 2021-22 (Chart VI.40). (100) (100) 3.5. Financial Performance @: Includes cash and balances with banks and the Reserve Bank of India Notes: 1. Figures in parentheses are percentages of total. 2. Data are provisional. VI.72 AIFIs registered a marginal decline in Source: Respective Financial Institutions. income during 2021-22, primarily on account of decline in non-interest income. Interest income, income, remained stagnant. Expenditure, on which constitutes around 97 per cent of total the other hand, increased marginally during Chart VI.39: Weighted Average Cost and Maturity of Rupee Resources Raised by AIFIs a. Weighted average cost of AIFIs b. Weighted average maturity of AIFIs Note: Data are provisional. Source: Respective Financial Institutions. 145Report on Trend and Progress of Banking in India 2021-22 VI.73 The financial ratios of AIFIs reveal that Chart VI.40: Long-term PLR Structure of Select AIFIs operating profit as a ratio of total average assets declined during 2021-22, whereas net profit increased slightly during the year. However, all other financial ratios, decreased year on year (Chart VI.41). VI.74 During 2021-22, interest income as a ratio of average working funds declined for all AIFIs which may be attributed to the low interest rate environment. Operating profits as a ratio of average working funds improved for EXIM Bank and NHB indicating efficient utilization of working funds; however, for SIDBI Notes:1. EXIM Bank is using long-term minimum lending rate based and NABARD, it decreased during the year on the base rate. 2. Data are provisional. (Table VI.17). Source: Respective Financial Institutions. VI.75 The RoA for all AIFIs improved marginally in 2021-22, except for SIDBI (Chart VI.42). AIFIs 2021-22, mainly on account of increase in continued to maintain CRAR above the regulatory interest expenditure and operating expenses. requirement, which indicates a comfortable The net profits of AIFIs recorded an impressive capital position. The CRAR for EXIM Bank and growth during 2021-22 (Table VI.16). NHB improved in 2021-22, while that of NABARD Table VI.16: Financial Performance of AIFIs and SIDBI moderated. (` crore) 2020-21 2021-22 Percentage Variation Chart VI.41: AIFIs’ Financial Ratios 2020-21 2021-22 1 2 3 4 5 A) Income 59,291 59,022 1.4 -0.5 a) Interest Income 57,597 57,543 1.3 -0.1 (97.1) (97.5) b) Non-Interest Income 1,694 1,479 6.1 -12.7 (2.9) (2.5) B) Expenditure 42,913 43,671 -3.6 1.8 a) Interest Expenditure 39,829 40,280 -3.4 1.1 (92.8) (92.2) b) Operating Expenses 3,084 3,390 -5.5 9.9 (7.2) (7.8) of which Wage Bill 2,203 2,270 -5.2 3.0 C) Provisions for Taxation 2,409 4,064 7.4 68.7 D) Profit Operating Profit (PBT) 16,378 15,351 17.3 -6.3 Net Profit (PAT) 7,635 9,698 17.6 27.0 Notes: 1. Figures in parentheses are percentages of total income/ Notes: 1. As percentage of total average assets. expenditure. 2. Data are provisional. 2. Data are provisional. Source: Respective Financial Institutions. Source: Respective Financial Institutions. 146NON-BANKING FINANCIAL INSTITUTIONS Table VI.17: AIFIs’ Select Financial Parameters Interest Income/Average Non-interest Income/ Operating Profit/Average Net Profit per Employee Working Funds Average Working Funds Working Funds (` lakh) (per cent) (per cent) (per cent) 2021 2022 2021 2022 2021 2022 2021 2022 1 2 3 4 5 6 7 8 9 EXIM 6.4 6.3 0.5 0.3 2.3 2.5 73 216 NABARD 6.1 5.5 0.0 0.0 1.5 1.2 127 160 NHB 5.5 5.1 0.1 0.6 1.3 1.9 436 1192 SIDBI 5.7 4.3 0.5 0.2 2.3 1.3 237 199 Note: Data are provisional. Source: Respective Financial Institutions. 3.6. Soundness Indicators VI.78 As AIFIs play a critical role in facilitating credit to important sectors of the economy with VI.76 The net NPAs (NNPA) ratios of all AIFIs significant backward and forward linkages, it is decreased during 2021-22. All AIFIs except imperative to ensure the financial resilience of SIDBI reported zero per cent NNPAs on account these institutions. To this end, the Reserve Bank of full provisioning for NPA (Chart VI.43). released the draft Master Direction on Prudential VI.77 Overall, the proportion of standard assets Regulation for AIFIs on October 22, 2021 in increased while that of doubtful assets declined. order to extend the Basel III capital framework This indicates an improvement in asset quality to the AIFIs. (Chart VI.44). Chart VI.42: Select Financial Parameters of AIFIs Chart VI.43: AIFIs’ NNPA Ratios Notes: 1. RoA refers to Return on Average Assets. 2. Data are provisional. Note: Data are provisional Source: Respective Financial Institutions. Source: Respective Financial Institutions. 147Report on Trend and Progress of Banking in India 2021-22 of the total quantum of T-Bills issued during the Chart VI.44: AIFIs’ Assets Classification year, as compared with 68.9 per cent in 2020- 21. The actual quantum of bids accepted from PDs was, however, less than in the previous year. During H1:2022-23, PDs subscribed to 69.3 per cent of the total quantum of T-Bills issued. PDs’ share of allotment in the primary issuance of dated securities decreased in 2021-22 vis-à-vis the previous year, but increased during H1:2022- 23 (Table VI.18). VI.81 Partial devolvement on PDs took place on 17 instances amounting to `97,938 crore during 2021-22 as against 15 instances amounting to `1,30,562 crore in the previous year. During Note: Data are provisional Source: Respective Financial Institutions. H1:2022-23, there were 7 instances of partial devolvement on PDs aggregating to `14,799 crore. While the total underwriting commission 4. Primary Dealers paid to PDs decreased from `455 crore in VI.79 As on March 31, 2022 there were 21 primary dealers (PDs), of which 14 function as Table VI.18: Performance of PDs in the bank departments and 7 as Standalone PDs Primary Market (` crore) (SPDs). The latter are registered as NBFCs under Items 2020-21 2021-22 H1:2022-23 Section 45-IA of the RBI Act, 1934. 1 2 3 4 4.1. Operations and Performance of PDs12 Treasury Bills and CMBs (a) Bidding commitment 17,35,783 15,37,735 8,07,225 VI.80 PDs are financial intermediaries (b) Actual bids submitted 49,05,302 37,21,906 18,00,182 (c) Bids accepted 10,24,732 9,59,380 4,88,867 mandated to take part in the all-round (d) Success ratio (c) / (a) 59.0 62.4 60.6 development of the primary and secondary (in Per cent) government securities market, underwrite (e) Share of PDs in total 68.9 76.9 69.3 allotment (in Per cent) issuances of government dated securities and Central Government Dated Securities participate in primary auctions. They are also (f) Notified amount 12,85,000 10,80,000 8,12,000 (g) Actual bids submitted 24,54,253 22,22,924 14,13,444 mandated to achieve a minimum success ratio (h) Bids accepted 6,80,763 5,33,201 4,38,580 (bids accepted as a proportion of bidding (i) Share of PDs (h)/(f) 49.7* 47.3** 55.1*** (in per cent) commitment) of 40 per cent in primary auctions * Calculated with respect to the total accepted amount of of T-bills and Cash Management Bills (CMBs), `13,70,324 crore. ** Calculated with respect to the total accepted amount of assessed on a half-yearly basis. In 2021-22, all `11,27,382 crore. *** Calculated with respect to the total accepted amount of PDs achieved more than their minimum bidding ` 7,96,000 crore. Source: Returns filed by PDs. commitments and subscribed to 76.9 per cent 12 This section analyses all 21 PDs. 148NON-BANKING FINANCIAL INSTITUTIONS 2020-21 to `413 crore in 2021-22, the average notwithstanding a decrease in the overall market rate of underwriting commission increased in turnover during the same period. In the repo the same period (Chart VI.45). In 2022-23 (up to segment, the turnover by SPDs increased over end-September), the underwriting commission the previous year. The share of SPDs in total paid to the PDs was `88 crore. market turnover increased marginally during the year (Table VI.19). VI.82 In the secondary market, all PDs individually achieved the required minimum 4.3. Sources and Application of SPDs’ Funds annual total turnover ratio. In Government dated VI.84 Funds mobilized by SPDs rose on a securities, the minimum turnover ratio is set at year-on-year basis in 2021-22. Borrowings 5 times for repo and outright taken together and remained the major source of their funding. The 3 times for outright transactions of the average total quantum of secured and unsecured loans month-end stock of securities held by them. For increased during this period. The largest share of T-Bills, the corresponding minimum targets are set at 10 times and 6 times respectively. their investments was held in the form of current assets (Table VI.20). 4.2. Performance of Standalone PDs13 4.4. Financial Performance of SPDs VI.83 In the secondary market outright segment, the turnover of SPDs increased during VI.85 SPDs recorded a substantial decrease in 2021-22 as compared with the previous year, profit after tax in 2021-22 vis-a-vis the previous Table VI.19: Performance of SPDs in the Chart VI.45: Average Rate of Underwriting G-secs Secondary Market Commission of PDs (` crore) Items 2020-21 2021-22 H1:2022-23 1 2 3 4 Outright Turnover of SPDs 24,71,523 25,91,788 18,09,980 Market turnover 1,00,32,187 87,98,428 53,35,981 Share of SPDs (Per cent) 24.6 29.5 33.9 Repo Turnover of SPDs 90,75,360 95,60,700 57,89,793 Market turnover 2,27,70,547 2,55,25,641 1,59,61,220 Share of SPDs (Per cent) 39.9 37.5 36.3 Total (Outright + Repo) Turnover of SPDs 1,15,46,883 1,21,52,488 75,99,774 Market turnover 3,28,02,734 3,43,24,069 2,12,97,200 Share of SPDs (Per cent) 35.2 35.4 35.7 Note: Total Turnover for Market Participants / Standalone PDs includes Outright and Repo 1st Leg settlement volumes. Source: Returns submitted by PDs. Source: Clearing Corporation of India Ltd. 13 Seven standalone PDs are registered as NBFCs with the Reserve Bank. 149Report on Trend and Progress of Banking in India 2021-22 Table VI.20: Sources and Applications of Table VI.22: SPDs’ Financial Indicators SPDs’ Funds (` crore) (` crore) Indicators 2020-21 2021-22 H1: Items 2020-21 2021-22 H1: Percentage 2022-23 2022-23 Variation 1 2 3 4 2021-22 over 2020-21 (i) Net profit 1,938 937 102 1 2 3 4 5 (ii) Average assets 77,357 79,085 91,155 Sources of Funds 71,986 86,669 79,157 20.4 (iii) Return on average assets (Per cent) 2.6 1.2 0.1 1. Capital 1,849 1,849 1849 0.0 (iv) Return on net worth (Per cent) 26.0 11.6 0.9 2. Reserves and surplus 7,011 7,425 7,199 5.9 (v) Cost to income ratio (Per cent) 11.2 21.8 76.8 3. Loans (a+b) 63,127 77,394 70,109 22.6 (a) Secured 50,374 61,188 55,262 21.5 Source: Returns submitted by PDs (b) Unsecured 12,752 16,207 14,847 27.1 Application of Funds 71,986 86,669 79,157 20.4 1. Fixed assets 44 71 82 58.8 income (Table VI.21 and Appendix Table VI.8). 2. HTM investments 154 2,870 5,704 1767.2 Consequently, SPDs’ return on net worth also (a+b) (a) Government 0 2,688 5,522 0.0 decreased during the year (Table VI 22). securities (b) Others 154 182 182 18.7 VI.86 The combined CRAR for all SPDs 3. Current assets 72,389 80,841 75,836 11.7 increased in 2021-22 and remained above 4. Loans and advances 1,986 7,048 4,861 254.8 the mandated 15 per cent, largely on account 5. Current liabilities 2,616 4,118 7,280 57.4 6. Deferred tax 33 -35 -38 -206.7 of improvement in capital buffers. During 7. Others -3 -8 -8 153.1 H1:2022-23, the combined CRAR however, Source: Returns submitted by PDs. decreased primarily due to increase in their risk weighted assets (Chart VI.46 and Appendix year on account of decrease in trading profit and Table VI.9). a marginal decrease in the interest and discount Table VI.21: Financial Performance of SPDs Chart VI.46: Capital and Risk Weighted Asset Position of SPDs (` crore) Items 2020-21 2021-22 H1: Percentage 2022-23 Variation 2021-22 over 2020-21 1 2 3 4 5 A. Income (i to iii) 5,386 4,002 2,055 -25.7 (i) Interest and 4,173 4,139 2441 -0.8 discount (ii) Trading profits 1,008 -244 -396 -124.2 (iii) Other income 205 107 10 -47.9 B. Expenses (i to ii) 2,493 2,622 1995 5.1 (i) Interest 2,130 2,238 1794 5.1 (ii) Other expenses # 364 384 201 5.5 C. Profit before tax 2,582 1,253 153 -51.4 D. Profit after tax 1,938 937 102 -51.6 #: Includes establishment and administrative costs Note: Figures may not add up due to rounding-off. Source: Returns submitted by PDs. Source: Returns submitted by PDs. 150NON-BANKING FINANCIAL INSTITUTIONS 5. Overall Assessment issues. These entities also need to strengthen their oversight of outsourced activities to prevent VI.87 NBFIs exhibited remarkable resilience in undue harassment of their customers by third the face of the COVID-19 shock. During 2021-22, party applications. The Reserve Bank, on its their operations gained traction notwithstanding part, has endeavoured to address these issues the divergent speed of recovery in different proactively and has provided timely regulatory sectors of the economy and cash flow disruptions guidance. faced by borrowers. Strong capital buffers VI.89 HFCs came out of the pandemic with and adequate provisioning in this unsettling moderate expansion in their balance sheet. environment are reassuring. The asset quality of HFCs, however, have been increasingly facing NBFCs is expected to further improve in the near competition from SCBs which have access to term, aided by strengthening economic activity. funds at cheaper rates. AIFIs growth has been Sharper regulatory oversight, realignment in impressive, with improvement in disbursements asset quality classification and prompt corrective and rise in profitability. PDs achieved the action norms will further entrench stability. minimum success ratio and fulfilled the VI.88 NBFCs need to be mindful of the rising minimum bidding commitments in primary interest rate cycle and persisting uncertainties market and turnover ratio in the secondary due to global shocks. They also face intensifying market, thus aiding in borrowing programme of competition from banks, particularly in the Government. With robust pick-up in bank segments that were NBFC strongholds like credit raising demand on the available pool of vehicle and gold loans. The fast growing digital resources in the economy, and ongoing global lending ecosystem poses novel challenges, and spill-overs on the domestic financial system and regulated entities need to be cautious about markets, the role of PDs in ensuring orderly unethical recovery practices and data privacy conditions in the market would be critical. 151Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.1: Indian Banking Sector at a Glance (Amount in ` crore) Sr. Items Amount Outstanding Percentage Variation No (At end-March) 2021 2022* 2020-21 2021-22* 1 2 3 4 5 6 1 Balance Sheet Operations 1.1 Total Liabilities/assets 1,95,78,895 2,16,67,655 8.7 10.7 1.2 Deposits 1,55,80,325 1,71,82,709 11.5 10.3 1.3 Borrowings 14,73,450 16,63,283 -13.1 12.9 1.4 Net Loans and advances 1,08,06,381 1,22,08,009 4.9 13.0 1.5 Investments 54,16,159 57,78,971 15.5 6.7 1.6 Off-balance sheet exposure 118.8 132.8 - - (as percentage of on-balance sheet liabilities) 1.7 Total consolidated international claims 6,13,794 7,29,114 6.1 18.8 2.0 Profitability 2.1 Net profit 1,21,998 1,82,032 - - 2.2 Return on Asset (RoA) (Per cent) 0.7 0.9 - - 2.3 Return on Equity (RoE) (Per cent) 7.7 10.1 - - 2.4 Net Interest Margin (NIM) (Per cent) 2.9 2.9 - - 3.0 Capital Adequacy 3.1 Capital to risk weighted assets ratio (CRAR) @ 16.3 16.8 - - 3.2 Tier I capital (as percentage of total capital) @ 86.8 87.5 - - 3.3 CRAR (tier I) (Per cent) @ 14.1 15.7 - - 4.0 Asset Quality 4.1 Gross NPAs 8,35,138 7,43,653 -7.2 -11.0 4.2 Net NPAs 2,58,050 2,04,226 -10.8 -20.9 4.3 Gross NPA ratio (Gross NPAs as percentage of gross advances) 7.3 5.8 - - 4.4 Net NPA ratio (Net NPAs as percentage of net advances) 2.4 1.7 - - 4.5 Provision Coverage Ratio (Per cent)** 67.4 70.8 - - 4.6 Slippage ratio (Per cent) ** 2.8 2.1 - - 5.0 Sectoral Deployment of Bank Credit 5.1 Gross bank credit 1,06,40,808 1,18,53,392 5.4 11.4 5.2 Agriculture 13,84,815 15,16,303 11.7 9.5 5.3 Industry 32,53,636 35,08,744 0.0 7.8 5.4 Services 27,45,324 31,48,321 -0.3 14.7 5.5 Personal loans 29,86,457 33,94,028 12.3 13.6 6.0 Technological Development 6.1 Total number of credit cards (in lakhs) 620 736 7.5 18.7 6.2 Total number of debit cards (in lakhs) 8,982 9,177 8.4 2.2 6.3 Number of ATMs and CRMs 2,38,588 2,49,228 1.8 4.5 7.0 Customer Services 7.1 Total number of complaints received against banks during the year 3,41,747 2,68,085# 11.4 -21.6 7.2 Total number of complaints handled## during the year 3,81,473 2,79,422^ 16.0 -26.8 7.3 Total number of complaints addressed 3,71,395 2,74,116*** 21.5 -26.2 7.3 Percentage of complaints addressed 97.4 98.1 - - 8.0 Financial Inclusion 8.1 Credit-deposit ratio (Per cent) 69.4 71.1 - - 8.2 Number of new bank branches opened 3,089 3,232 -29.0 4.6 8.3 Number of banking outlets in villages (Total) 12,48,079 22,74,236^^ 108.3 82.2 Notes: 1. * : Provisional. 2. ** : Based on off-site returns. 3. @ : Figures are as per the Basel III framework. 4. Percentage variation could be slightly different as figures have been rounded off to lakh/crore. 5. # : Excludes complaints handled at CRPC. 6. ## : Complaints handled includes complaints received and complaints brought forward from previous year. 7. ^ : Includes complaints brought forward from previous year received by email before March 31, 2022 but registered on or after April 01, 2022. 8. *** : The status of complaints addressed is as on March 31, 2022. The complaints pending as on March 31, 2022 have since been addressed. 9. ^^ : There is a significant increase in data reported by few private sector banks. 152APPENDIX TABLES Appendix Table IV.2: International Liabilities of Banks in India – By Type of Instruments (Amount in ` Crore) Liability Type Amount Outstanding Percentage Variation (At end-March) 2021(PR) 2022(PR) 2020-21 2021-22 1 2 3 4 5 1. Loans and Deposits 11,42,402 12,05,274 -2.2 5.5 (68.8) (67.6) a) Foreign Currency Non-resident (Bank) [FCNR (B)] Scheme 1,33,986 1,05,587 -20.8 -21.2 (8.1) (5.9) b) Foreign Currency Borrowings* 54,998 81,575 -53.4 48.3 (3.3) (4.6) c) Non-resident External (NRE) Rupee Accounts 7,20,626 7,49,061 8.6 3.9 (43.4) (42.0) d) Non-resident Ordinary (NRO) Rupee Accounts 1,17,500 1,41,240 14.2 20.2 (7.1) (7.9) 2. Own Issues of Securities/ Bonds 2,468 3,039 -59.7 23.1 (0.1) (0.2) 3. Other liabilities 5,14,748 5,74,436 63.0 11.6 (31.0) (32.2) Of which: a) ADRs/GDRs 86,860 92,255 79.6 6.2 (5.2) (5.2) b) Equities of Banks Held by Non-residents 2,96,355 3,22,215 122.6 8.7 (17.9) (18.1) c) Capital / Remittable Profits of Foreign Banks in India and 1,31,534 1,59,966 -2.1 21.6 Other Unclassified International Liabilities (7.9) (9.0) Total International Liabilities 16,59,618 17,82,749 11.4 7.4 (100.0) (100.0) Notes: 1. PR : Partially Revised. 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. 153Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.3: International Assets of Banks in India - By Type of Instruments (Amount in ` Crore) Asset Type Amount Outstanding (At end-March) Percentage Variation 2021 (PR) 2022 (PR) 2020-21 2021-22 1 2 3 4 5 1. Loans and Deposits 6,56,688 6,79,018 22.3 3.4 (93.4) (88.6) Of which: (a) Loans to Non-residents 1,49,800 1,40,708 75.3 -6.1 (21.3) (18.4) (b) Foreign Currency Loan to Residents 1,27,869 1,34,290 -16.9 5.0 (18.2) (17.5) (c) Outstanding Export Bills 57,283 53,191 -21.8 -7.1 (8.1) (6.9) (d) Foreign Currency in hand, Travellers Cheques, etc. 5,663 342 82.8 -94.0 (0.8) (0.0) (e) NOSTRO Balances and Placements Abroad 3,16,074 3,50,487 43.0 10.9 (45.0) (45.7) 2. Holdings of Debt Securities 39,024 71,331 67.7 82.8 (5.6) (9.3) 3. Other International Assets 7,293 15,924 -52.7 118.4 (1.0) (2.1) Total International Assets* 7,03,005 7,66,273 22.1 9.0 (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. 3. The sum of components may not add up due to rounding off. 4. Figures in parentheses are percentages to total. Source : International Banking Statistics, RBI. 154APPENDIX TABLES Appendix Table IV.4: Consolidated International Claims of Banks: Residual Maturity and Sector (Amount in ` Crore) Residual Maturity/Sector Amount Outstanding Percentage Variation (At end-March) 2021 (PR) 2022 (PR) 2020-21 2021-22 1 2 3 4 5 Total Consolidated International Claims 6,13,794 7,29,114 6.1 18.8 (100) (100) Residual Maturity Short Term 4,81,320 5,89,366 8.7 22.4 (78.4) (80.8) Long Term 1,28,699 1,34,978 -2.0 4.9 (21.0) (18.5) Unallocated 3,774 4,771 -8.4 26.4 (0.6) (0.7) Sector Banks 3,16,642 4,11,443 36.2 29.9 (51.6) (56.4) Official Sector 44,611 51,320 37.4 15.0 (7.3) (7.0) Non-Bank Financial Institutions 4,248 3,083 12.8 -27.4 (0.7) (0.4) Non-Financial Private 2,06,419 2,20,398 -22.5 6.8 (33.6) (30.2) Others 41,873 42,871 -3.7 2.4 (6.8) (5.9) Notes: 1. PR: Partially Revised. 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. 155Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.5: Consolidated International Claims of Banks on Countries other than India (Amount in ` Crore) Country Amount Outstanding Percentage Variation (At end-March) 2021 (PR) 2022 (PR) 2020-21 2021-22 1 2 3 4 5 Total Consolidated International Claims 6,13,794 7,29,114 6.1 18.8 Of which 1. United States of America 1,94,023 2,46,092 24.7 26.8 (31.6) (33.8) 2. United Kingdom 67,652 89,813 19.0 32.8 (11.0) (12.3) 3. Hong Kong 35,828 30,054 67.5 -16.1 (5.8) (4.1) 4. Singapore 45,049 41,744 10.0 -7.3 (7.3) (5.7) 5. United Arab Emirates 79,446 89,522 -5.0 12.7 (12.9) (12.3) 6. Germany 27,116 31,090 76.6 14.7 (4.4) (4.3) Notes: 1. PR: Partially Revised. 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. 156APPENDIX TABLES Appendix Table IV.6: Off-Balance Sheet Exposure of Scheduled Commercial Banks in India (Amount in ` Crore) Item Public Sector Private Sector Foreign Small Finance Scheduled Commercial Banks Banks Banks Banks Banks* 2021-22 Percentage 2021-22 Percentage 2021-22 Percentage 2021-22 Percentage 2021-22 Percentage Variation Variation Variation Variation Variation 1 2 3 4 5 6 7 8 9 10 11 1. Forward 39,18,689 21.0 83,54,591 38.6 1,31,87,671 17.7 - - 2,54,60,950 24.4 exchange (30.8) (113.3) (963.6) (117.5) contracts@ 2. Guarantees 5,58,797 3.1 4,73,427 2.2 1,92,320 10.2 1,539 107.9 12,26,083 3.9 given (4.4) (6.4) (14.1) (0.8) (5.7) 3. Acceptances, 7,93,145 32.1 3,44,959 25.3 9,45,228 30.1 879 27.1 20,84,242 30.0 endorsements, (6.2) (4.7) (69.1) (0.4) (9.6) etc. Contingent 52,70,631 20.3 91,72,977 35.5 1,43,25,220 18.4 2,417 68.9 2,87,71,276 23.7 Liabilities (41.5) (124.4) (1046.8) (1.2) (132.8) Notes: 1. -: Nil/Negligible. 2. Figures in brackets are percentages to total liabilities of the concerned bank-group. 3. Due to rounding off of figures, the constituent items may not add up to totals. 4. @: Includes all derivative products (including interest rate swaps) as admissible. 5. *: inclusive of Payments Banks. Source: Annual accounts of respective banks. 157Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.7: Kisan Credit Card Scheme*: State-wise Progress (Continued) (At end-March 2022) (Amount in ` Crore and number of issued cards in ‘000) Sr. State/UT Co-operative Banks Regional Rural Banks No. Number of Amount outstanding Number of Amount outstanding Operative KCCs under Operative KCCs Operative KCCs under Operative KCCs 2021 2022 2021 2022 2021 2022 2021 2022 1 2 3 4 5 6 7 8 9 10 Northern Region 5,409 5,318 30,415.00 37,239.93 1,372 1,417 31,809.30 34,814.48 1 Haryana 1,179 1,169 11,436.20 12,059.26 276 287 7,697.00 8,270.90 2 Himachal Pradesh 111 115 1,742.00 1,869.99 63 69 829.70 932.00 3 Jammu & Kashmir 8 8 58.60 61.56 118 124 883.50 988.89 4 Ladakh 0 0 0.00 0.00 0 0 0 0.00 5 New Delhi #$% 0 0 4.50 2.01 0 0 0.00 0.00 6 Punjab 961 976 7,162.70 7,495.56 155 157 5,306.90 5,779.20 7 Rajasthan 3,150 3,050 10,011.00 15,751.55 760 780 17,092.20 18,843.49 8 Chandigarh #$ 0 0 0.00 0.00 0 0 0.00 0.00 North-Eastern Region 114 114 174.20 169.49 442 454 1,748.50 1,925.69 9 Assam 1 1 19.30 17.95 280 282 1,218.70 1,295.40 10 Arunachal Pradesh # 1 1 4.90 7.40 3 3 24.30 23.41 11 Meghalaya # 16 16 32.00 32.02 25 31 144.30 175.29 12 Mizoram # 1 1 5.70 5.74 14 19 153.10 220.99 13 Manipur # 2 2 17.00 10.18 10 10 38.00 40.45 14 Nagaland # 4 4 20.20 20.23 1 1 1.60 1.61 15 Tripura # 88 88 73.30 73.27 109 109 168.50 168.53 16 Sikkim #$ 1 1 1.80 2.70 0 0 0.00 0.00 Western Region 4,348 4,505 30,411.30 34,226.52 975 1,088 11,206.40 13,301.52 17 Gujarat 954 965 11,589.70 13,098.40 384 414 6,621.50 7,391.86 18 Maharashtra 3,392 3,539 18,806.00 21,111.68 591 674 4,584.90 5,909.66 19 Goa $ 2 1 15.60 16.44 0 0 0.00 0.00 20 Dadar & Nagar Haveli & Daman & Diu @#$ 0 0 0.00 0.00 0 0 0.00 0.00 Central Region 8,076 8,229 30,752.00 33,742.79 4,155 4,118 50,443.90 52,243.40 21 Uttar Pradesh 2,661 2,682 6,759.50 7,375.41 3,541 3,517 41,838.90 44,985.55 22 Uttarakhand 279 295 1,191.20 1,548.66 41 39 295.50 286.76 23 Madhya Pradesh 3,792 3,851 19,375.50 20,798.16 439 425 7,484.50 5,978.01 24 Chhattisgarh 1,344 1,401 3,425.80 4,020.57 134 136 825.00 993.08 Southern Region 7,245 8,006 38,185.90 1,76,075.24 3,318 3,483 38,160.20 42,040.12 25 Karnataka 2,925 3,125 17,172.70 1,44,511.43 606 668 9,777.20 11,701.01 26 Kerala 584 667 4,017.30 5,324.11 298 365 3,961.80 5,561.23 27 Andhra Pradesh 1,463 1,535 10,879.20 12,136.26 931 946 10,823.20 11,569.01 28 Tamil Nadu 1,373 1,744 1,360.20 9,124.19 34 39 311.00 502.40 29 Telangana 894 928 4,746.20 4,968.60 1,448 1,465 13,274.30 12,695.94 30 Lakshdweep @$ 0 0 0.00 0.00 0 0 0.00 0.00 31 Puducherry # 6 6 10.30 10.64 1 1 12.70 10.51 Eastern Region 4,989 4,959 17,042.60 17,828.11 2,630 2,788 16,047.70 17,734.38 32 Odisha 3,000 2,901 12,216.60 12,809.27 440 433 2,298.70 2,402.98 33 West Bengal 1,732 1,787 4,355.10 4,501.22 391 401 1,751.10 1,916.02 34 Andaman and Nicobar Island$ 6 7 16.30 17.50 0 0 0.00 0.00 35 Bihar 238 251 417.60 464.47 1,420 1,572 10,035.40 11,261.49 36 Jharkhand 13 13 37.00 35.65 379 382 1,962.50 2,153.89 Total 30,181 31,131 1,46,981.00 2,99,282.08 12,892 13,348 1,49,416.00 1,62,059.58 158APPENDIX TABLES Appendix Table IV.7: Kisan Credit Card Scheme*: State-wise Progress (Concluded) (At end-March 2022) (Amount in ` Crore and number of issued cards in ‘000) Sr. State/UT Commercial Banks Total No. Number of Amount outstanding Number of Amount outstanding Operative KCCs under Operative KCCs Operative KCCs under Operative KCCs 2021 2022* 2021 2022* 2021 2022 2021 2022 1 2 11 12 13 14 15 16 17 18 Northern Region 5,847 5,455.26 1,36,112.69 1,44,350.74 12,628 12,190 1,98,336.99 2,16,405.15 1 Haryana 809 796 26,222.75 27,719.06 2,264 2,253 45,355.95 48,049.22 2 Himachal Pradesh 218 240 4,054.50 4,507.33 392 424 6,626.20 7,309.32 3 Jammu & Kashmir 883 802 5,575.98 5,241.42 1,009 934 6,518.08 6,291.87 4 Ladakh 30 190 281.02 4,225.76 30 190 281.02 4,225.76 5 New Delhi #$% 4 3 90.87 53.39 4 3 95.37 55.39 6 Punjab 1,128 1,036 42,056.38 42,504.87 2,244 2,169 54,525.98 55,779.63 7 Rajasthan 2,705 2,387 57,533.94 59,991.67 6,615 6,216 84,637.14 94,586.72 8 Chandigarh #$ 71 1 297.26 107.24 71 1 297.26 107.24 North-Eastern Region 585 491 3,176.83 3,289.28 1,141 1,058 5,099.53 5,384.46 9 Assam 456 375 2,517.09 2,582.70 737 658 3,755.09 3,896.06 10 Arunachal Pradesh # 5 6 32.82 45.42 9 10 62.02 76.23 11 Meghalaya # 20 19 113.99 112.70 61 66 290.29 320.02 12 Mizoram # 10 8 32.61 41.91 25 27 191.41 268.64 13 Manipur # 6 6 46.39 60.28 18 18 101.39 110.91 14 Nagaland # 23 22 125.22 131.60 28 26 147.02 153.44 15 Tripura # 59 49 276.58 270.94 256 246 518.38 512.74 16 Sikkim #$ 6 6 32.13 43.72 7 7 33.93 46.43 Western Region 4,453 4,205 66,274.16 71,643.99 9,776 9,798 1,07,891.86 1,19,172.03 17 Gujarat 1,554 1,500 33,909.45 36,450.35 2,892 2,879 52,120.65 56,940.61 18 Maharashtra 2,885 2,696 32,244.34 35,069.20 6,868 6,910 55,635.24 62,090.54 19 Goa $ 12 7 98.39 93.96 14 8 113.99 110.40 20 Dadar & Nagar Haveli & Daman & Diu @#$ 1 1 21.98 30.48 1 1 21.98 30.48 Central Region 7,697 6,524 1,20,761.57 1,22,146.69 19,928 18,870 2,01,957.47 2,08,132.89 21 Uttar Pradesh 5,079 4,272 69,467.22 70,672.67 11,281 10,471 1,18,065.62 1,23,033.63 22 Uttarakhand 286 212 5,624.07 4,852.19 606 547 7,110.77 6,687.61 23 Madhya Pradesh 2,043 1,794 41,367.31 41,837.06 6,274 6,070 68,227.31 68,613.22 24 Chhattisgarh 288 246 4,302.97 4,784.77 1,766 1,782 8,553.77 9,798.43 Southern Region 7,979 7,133 1,08,631.27 1,14,023.45 18,542 18,622 1,84,977.37 3,32,138.81 25 Karnataka 1,292 944 19,139.79 19,013.66 4,823 4,737 46,089.69 1,75,226.10 26 Kerala 981 905 18,766.03 17,068.52 1,863 1,937 26,745.13 27,953.85 27 Andhra Pradesh 2,211 2,096 30,576.42 32,420.05 4,605 4,577 52,278.82 56,125.33 28 Tamil Nadu 1,566 1,273 18,193.36 21,982.65 2,973 3,055 19,864.56 31,609.25 29 Telangana 1,918 1,880 21,800.90 22,946.79 4,260 4,273 39,821.40 40,611.34 30 Lakshdweep @$ 0 25 2.65 376.03 0 25 2.65 376.03 31 Puducherry # 9 10 152.12 215.75 16 18 175.12 236.91 Eastern Region 4,136 3,063 21,779.82 20,816.50 11,755 10,810 54,870.12 56,378.98 32 Odisha 898 666 4,804.77 5,108.97 4,338 4,000 19,320.07 20,321.21 33 West Bengal 1,589 1,034 7,536.68 7,366.58 3,712 3,222 13,642.88 13,783.82 34 Andaman and Nicobar Island$ 2 2 17.70 27.96 8 9 34.00 45.46 35 Bihar 1,113 834 6,931.67 5,854.90 2,771 2,657 17,384.67 17,580.87 36 Jharkhand 533 527 2,488.99 2,458.09 925 922 4,488.49 4,647.62 Total 30,696 26,870 4,56,736.33 4,76,270.65 73,769 71,349 7,53,133.33 9,37,612.31 Notes: 1. %: Negligible. 2. #: StCBs function as Central Financing Agencies. 3. @: No Co-operative Banks in these UTs. 4. $: No RRBs in these States/UTs. 5. *: Data is provisional. 6. Components may not add up to their respective totals due to rounding off. Source: Returns from Scheduled Commercial Banks. 159Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.8: Bank Group-wise Lending to the Sensitive Sectors (Amount in ` crore) Sector Public Private Foreign Small Scheduled Sector Banks Sector Banks Banks Finance Banks Commercial Banks* 2021-22 Percentage 2021-22 Percentage 2021-22 Percentage 2021-22 Percentage 2021-22 Percentage Variation Variation Variation Variation Variation 1 2 3 4 5 6 7 8 9 10 11 1. Capital Market # 48,278 24.0 96,618 19.1 9,079 -17.0 323 187.2 1,54,311 17.7 (0.7) (2.1) (2.0) (0.2) (1.3) 2. Real Estate @ 14,75,735 7.3 11,62,001 16.2 1,39,153 6.3 23,056 24.0 27,99,945 10.9 (21.0) (25.5) (29.9) (17.0) (22.9) 3. Commodities - - - - - - - - - - Total Advances to 15,24,013 7.7 12,58,619 16.4 1,48,233 4.5 23,379 24.9 29,54,256 11.2 Sensitive Sectors (21.6) (27.6) (31.8) (17.2) (24.2) Notes: 1. #: Exposure to capital market is inclusive of both investments and advances. 2. @: Exposure to real estate sector is inclusive of both direct and indirect lending. 3. Figures in brackets are percentages to total loans and advances of the concerned bank-group. 4. *: Inclusive of Payments Banks. 5. - : Nil/Negligible. Source: Annual accounts of respective banks. 160APPENDIX TABLES Appendix Table IV.9: Shareholding Pattern of Domestic Scheduled Commercial Banks (Continued) (At end-March 2022) Sr. Name of the Bank 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 - Non Resident Resident Resident Resident 1 2 3 4 5 6 7 8 9 10 11 Public Sector Banks 1 Bank of Baroda 64 15 9.2 3.5 0 8 0.4 90.5 9.5 2 Bank of India 81.4 10.8 0.9 6.6 0.1 0 0 98.9 1.1 3 Bank of Maharashtra 91 3.7 0.1 0.4 0 4.7 0.1 99.7 0.3 4 Canara Bank 62.9 12.6 0 4 8.5 10.8 1.2 90.3 9.7 5 Central Bank of India 93.1 2.8 0.1 0.3 0 3.7 0.1 99.8 0.2 6 Indian Bank 79.9 11.1 0 0.7 1.7 6.5 0.2 98.1 1.9 7 Indian Overseas Bank 96.4 1.3 0.1 0.2 0 2 0.1 99.9 0.1 8 Punjab and Sind Bank 98.3 0.6 0 0.1 0 1 0 100 0 9 Punjab National Bank 73.2 11.6 1.4 1 0 12.6 0.3 98.4 1.6 10 State Bank of India 56.9 24.4 9.9 0.9 1.2 6.5 0.3 88.7 11.3 11 UCO Bank 95.4 1.3 0 0.1 0 3.1 0.1 99.9 0.1 12 Union Bank of India 83.5 1 1.2 6.8 0 7.4 0.1 98.7 1.3 161Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.9: Shareholding Pattern of Domestic Scheduled Commercial Banks (Continued) (At end-March 2022) Sr. Name of the Bank Total Financial Financial Other Other Total Total Total - Total- Non No. Government Institutions Institutions- Corporates Corporates Individual Individual Resident Resident & RBI - - Resident Non - Resident - Non - Resident - Non Resident Resident Resident Resident 1 2 3 4 5 6 7 8 9 10 11 Private Sector Banks 1 Axis Bank Ltd. - 37.5 48.1 3.2 4.4 6.6 0.3 47.3 52.8 2 Bandhan Bank Ltd. - 8.5 30.3 50.5 4.1 6.3 0.4 65.3 34.7 3 Catholic Syrian Bank Ltd. - 8.4 - 12.7 55.3 16.6 7 37.7 62.3 4 City Union Bank Ltd. - 41.2 18.1 3.2 - 36.6 0.9 81 19 5 DCB Bank Ltd. 0.2 37.5 - 7.8 22.9 30.1 1.5 75.6 24.4 6 Federal Bank Ltd. - 42.7 27 2.5 - 22.9 4.8 68.1 31.9 7 HDFC Bank Ltd. 0.1 20 68.6 1.7 - 9.5 0.1 31.3 68.7 8 ICICI Bank Ltd. 0.2 25.3 54.7 12.5 - 7 0.4 44.9 55.1 9 IDBI Bank Ltd. 45.5 49.6 - 0.7 - 3.9 0.4 99.6 0.4 10 IDFC Bank Ltd. 4.2 3.9 13.5 44.2 7.6 25.3 1.3 77.6 22.4 11 IndusInd Bank Ltd. - 20.1 50.7 4.3 16 8.3 0.6 32.7 67.3 12 Jammu & Kashmir Bank Ltd. 70.1 2.1 0.7 2.5 - 23.8 0.8 98.5 1.5 13 Karnataka Bank Ltd. - 5.3 - 4.6 11.9 75.3 2.9 85.2 14.8 14 Karur Vysya Bank Ltd. - 21.9 - 4.6 15.4 57 1.2 83.5 16.5 15 Kotak Mahindra Bank Ltd. - 16.6 42.5 3 1.6 35.8 0.5 55.4 44.6 16 Nainital Bank Ltd. - 98.6 - - - 1.4 - 100 - 17 RBL Bank Ltd. 0.4 18.9 2.4 7.4 38.8 30.7 1.5 57.3 42.7 18 South Indian Bank Ltd. - - - 21.8 7.4 63.2 7.7 85 15 19 Tamilnad Mercantile Bank Ltd. - - - 13.5 24.9 61.5 0.1 75 25 20 The Dhanalakshmi Bank Ltd. 0.5 0.4 - 10.7 11.5 57.8 19.1 69.4 30.6 21 Yes Bank Ltd. - 44 - 8 11 35.5 1.6 87.5 12.5 162APPENDIX TABLES Appendix Table IV.9: Shareholding Pattern of Domestic Scheduled Commercial Banks (Concluded) (At end-March 2022) Sr. Name of the Bank Total Financial Financial Other Other Total Total Total - Total- Non No. Government Institutions Institutions- Corporates Corporates Individual Individual Resident Resident & RBI - - Resident Non - Resident - Non - Resident - Non Resident Resident Resident Resident 1 2 3 4 5 6 7 8 9 10 11 Small Finance Banks 1 Au Small Finance Bank - 11.22 34.31 13.59 3.21 36.85 0.82 61.66 38.34 Limited 2 Capital Small Finance Bank 21.86 9.83 0.22 - 50.79 17.3 72.87 27.13 Limited 3 Equitas Small Finance Bank - 16.68 3.62 74.68 - 4.86 0.16 96.22 3.78 Limited 4 Esaf Small Finance Bank - 66.63 - 17.21 - 7.43 8.73 91.27 8.73 Limited 5 Fincare Small Finance Bank - 80.29 - 6.67 10.72 2.31 0.01 89.27 10.73 Limited 6 Jana Small Finance Bank - 5.67 47.59 45.87 - 0.87 - 52.41 47.59 Limited 7 North East Small Finance - - - 100 - - - 100 - Bank Limited 8 Shivalik Small Finance Bank - - - 7.69 - 92.31 - 100 - Limited 9 Suryoday Small Finance Bank - 21.27 - 7.16 28.46 42.98 0.13 71.41 28.59 Limited 10 Ujjivan Small Finance Bank - - - 84.51 0.15 14.69 0.65 99.2 0.8 Limited 11 Utkarsh Small Finance Bank - - - 89.36 10.25 0.39 - 89.75 10.25 Limited Local Area Banks 1 Coastal Local Area Bank Ltd. - - - 25 - 47.91 27.09 72.91 27.09 2 Krishna Bhima Samruddhi - - - 24.67 - 75.33 - 100 - Lab Ltd. Note: -: Nil/ Negligible. Source: Off-site returns (domestic operations), RBI. 163Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.10: Overseas Operations of Indian Banks (At end-March) Sr. Name of the Bank Branch Subsidiary Representative Joint Venture Other Offices* Total No. Office Bank 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 1 2 3 4 5 6 7 8 9 10 11 12 13 14 I. Public Sector Banks 111 108 22 21 13 13 7 7 35 35 188 184 1 Bank of Baroda 33 30 7 7 0 0 2 2 10 10 52 49 2 Bank of India 23 23 4 4 1 1 0 0 0 0 28 28 3 Canara Bank 5+1# 6 1 1 1 1 0 0 0 0 8 8 4 Indian Bank 3 3 0 0 0 0 0 0 0 0 3 3 5 Indian Overseas Bank 4 4 0 0 0 0 0 0 2 2 6 6 6 Punjab National Bank 2 2 2 2 2# 2 2 2 0 0 8 8 7 State Bank of India 35 35 7 6 7 7 3 3 23 23 75 74 8 Syndicate Bank 0 0 0 0 0 0 0 0 0 0 0 0 9 UCO Bank 2 2 0 0 1 1 0 0 0 0 3 3 10 Union Bank of India 3 3 1 1 1 1 0 0 0 0 6 5 11 United Bank of India 0 0 0 0 0 0 0 0 0 0 0 0 12 Oriental Bank of Commerce 0 0 0 0 0 0 0 0 0 0 0 0 II Private Sector Banks 15 15 3 3 21 25 0 0 1 1 40 44 13 Axis Bank Ltd. 2 2 1 1 4 4 0 0 0 0 7 7 14 HDFC Bank Ltd. 3 3 0 0 3 3 0 0 0 0 6 6 15 ICICI Bank Ltd. 8 8 2 2 6 10 0 0 1 1 17 21 16 IDBI Bank Ltd. 1 1 0 0 0 0 0 0 0 0 1 1 17 IndusInd Bank Ltd. 0 0 0 0 3 3 0 0 0 0 3 3 18 Federal Bank Ltd. 0 0 0 0 2 2 0 0 0 0 2 2 19 Kotak Mahindra Bank Ltd. 1 1 0 0 1 1 0 0 0 0 2 2 20 Yes Bank Ltd. 0 0 0 0 1 1 0 0 0 0 1 1 21 South Indian Bank Ltd. 0 0 0 0 1 1 0 0 0 0 1 1 All Banks 126 123 25 24 34 38 7 7 36 36 228 228 Notes: 1. *: Other Offices include marketing/sub-office, remittance centres, etc. 2. #: Syndicate Bank merged with Canara Bank, Andhra Bank and Corporation bank merged with Union Bank of India, United Bank of India and Oriental Bank of Commerce merged with Punjab National Bank w.e.f. April 01, 2020. Source: Reserve Bank of India. 164APPENDIX TABLES Appendix Table IV.11: Branches and ATMs of Scheduled Commercial Banks (Continued) (At end-March 2022) Sr. Name of the Bank Branches ATMs and CRMs No. Rural Semi-urban Urban Metropolitan Total On-site Off-site Total 1 2 3 4 5 6 7 8 9 10 Public Sector Banks 28,762 23,157 16,134 16,203 84,256 78,540 59,516 1,38,056 1 Bank of Baroda 2,840 2,071 1,480 1,777 8,168 8,756 2,730 11,486 2 Bank of India 1,844 1,455 813 934 5,046 5,197 2,751 7,948 3 Bank of Maharashtra 611 507 414 490 2,022 1,693 435 2,128 4 Canara Bank 3,041 2,754 1,981 1,958 9,734 8,073 4,135 12,208 5 Central Bank of India 1,602 1,328 786 812 4,528 2,389 587 2,976 6 Indian Bank 1,940 1,494 1,159 1,139 5,732 4,304 625 4,929 7 Indian Overseas Bank 902 960 653 684 3,199 2,738 616 3,354 8 Punjab And Sind Bank 570 278 357 325 1,530 657 19 676 9 Punjab National Bank 3,853 2,453 2,036 1,757 10,099 8,233 5,117 13,350 10 State Bank of India 7,948 6,500 3,997 3,826 22,271 26,364 39,088 65,452 11 UCO Bank 1,076 815 610 558 3,059 2,094 223 2,317 12 Union Bank of India 2,535 2,542 1,848 1,943 8,868 8,042 3,190 11,232 165Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.11: Branches and ATMs of Scheduled Commercial Banks (Continued) (At end-March 2022) Sr. Name of the Bank Branches ATMs and CRMs No. Rural Semi-urban Urban Metropolitan Total On-site Off-site Total 1 2 3 4 5 6 7 8 9 10 Private Sector Banks 7,856 11,971 7,976 10,069 37,872 38,254 37,289 75,543 1 Axis Bank Ltd 800 1,424 1,128 1,521 4,873 5,748 11,174 16,922 2 Bandhan Bank Ltd 1,996 2,088 1,024 531 5,639 466 5 471 3 Catholic Syrian Bank Ltd 126 277 148 170 721 1,110 622 1,732 4 City Union Bank 47 316 119 124 606 407 52 459 5 DCB BANK LTD 72 105 111 112 400 341 8 349 6 Dhanalakshmi Bank Ltd 19 106 62 58 245 214 44 258 7 Federal Bank Ltd 164 687 237 212 1,300 1,505 380 1,885 8 HDFC BANK LTD 1,148 2,038 1,307 1,845 6,338 8,703 9,427 18,130 9 ICICI BANK LTD 1,127 1,581 1,074 1,575 5,357 8,402 8,175 16,577 10 IDBI LTD 405 582 469 428 1,884 2,221 1,182 3,403 11 IDFC BANK LIMITED 51 201 254 346 852 505 214 719 12 Indusind Bank Ltd 294 453 565 731 2,043 1,492 1,275 2,767 13 Jammu And Kashmir Bank 527 176 107 166 976 840 613 1,453 14 Karnataka Bank Ltd 201 204 230 242 877 822 626 1,448 15 Karur Vysya Bank Ltd 134 305 161 230 830 1,362 861 2,223 16 Kotak Mahindra Bank Ltd 265 304 365 766 1,700 1,385 1,314 2,699 17 Nainital Bank Ltd 53 34 44 33 164 - - - 18 RBL Bank Limited 64 75 72 290 501 373 41 414 19 South Indian Bank 109 457 172 197 935 852 418 1,270 20 Tamilnad Mercantile Bank Ltd 106 245 80 78 509 475 668 1,143 21 Yes Bank Ltd 148 313 247 414 1,122 1,031 190 1,221 166APPENDIX TABLES Appendix Table IV.11: Branches and ATMs of Scheduled Commercial Banks (Concluded) (At end-March 2022) Sr. Name of the Bank Branches ATMs and CRMs No. Rural Semi-urban Urban Metropolitan Total On-site Off-site Total 1 2 3 4 5 6 7 8 9 10 Foreign Banks 124 183 166 388 861 716 1,081 1,797 1 AB Bank Limited - - - 1 1 - - - 2 Abu Dhabi Commercial Bank (P.J.S.C.) - - - 1 1 - - - 3 American Express Banking Corp. - - - 1 1 - - - 4 Australia and New Zealand Banking Group Limited 1 - 1 1 3 - - - 5 Bank of America, National Association - - - 4 4 - - - 6 Bank of Bahrain & Kuwait B.S.C. - 1 - 3 4 4 0 4 7 Bank of Ceylon - - - 1 1 - - - 8 Bank of China Limited - - - 1 1 - - - 9 Bank of Nova Scotia - - - 2 2 - - - 10 Barclays Bank Plc - 1 - 2 3 - - - 11 BNP Paribas - - - 5 5 - - - 12 Citibank N.A - - 4 31 35 47 441 488 13 Co-operative Rabobank U.A. - - - 1 1 - - - 14 Credit Agricole Corporate and Investment Bank - - - 5 5 - - - 15 Credit Suisse Ag - - - 1 1 - - - 16 CTBC Bank Co., Ltd. - 1 - 1 2 - - - 17 DBS Bank India Limited* 116 177 127 171 591 500 521 1021 18 Deutsche Bank AG 1 - 5 11 17 13 19 32 19 Doha Bank Q.P.S.C. - - 1 2 3 3 3 20 Emirates NDB Bank (P.J.S.C.) - - - 1 1 - - - 21 First Abu Dhabi Bank (P.J.S.C.) - - - 1 1 - - - 22 Firstrand Bank Ltd - - - 1 1 - - - 23 Hongkong And Shanghai Banking Corpn.Ltd. - - 4 22 26 46 28 74 24 Industrial and Commercial Bank of China - - - 1 1 - - - 25 Industrial Bank of Korea - - - 1 1 - - - 26 JPMorgan Chase Bank National Association 2 - - 2 4 - - - 27 JSC VTB Bank - - - 1 1 - - - 28 KEB Hana Bank - 1 - 1 2 1 1 29 Kookmin Bank - - 1 - 1 1 1 30 Krung Thai Bank Public Company Limited - - - 1 1 - - - 31 Mashreq Bank PSC - - - 1 1 - - - 32 Mizuho Bank Ltd - 1 1 3 5 - - - 33 MUFG Bank, Ltd. 1 - - 4 5 - - - 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) Limited 1 - - 7 8 6 6 39 Shinhan Bank 1 - - 5 6 - - - 40 Societe Generale - - - 2 2 - - - 41 Sonali Bank - - 1 1 2 - - - 42 Standard Chartered Bank 1 1 20 78 100 95 72 167 43 Sumitomo Mitsui Banking Corporation - - - 3 3 - - - 44 United Overseas Bank Ltd - - - 1 1 - - - 45 Woori Bank - - 1 2 3 - - - Notes: (a) 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. (b) Data on branches exclude ‘Administrative Offices’. (c) -: nil. Source: Central Information System for Banking Infrastructure (erstwhile Master Office File system) database, RBI. Central Information System for Banking Infrastructure data are dynamic in nature and are updated based on information as received from banks and processed at our end. 167Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.12: Statement of complaints received at RBI Ombudsman Office (Continued) (April to March 2021-22) Sr. Name of the Bank Number of complaints in major categories for Public Sector Banks Others Total No. Deposit Loans ATM/ Mobile Levy of Pension Non- Failure on Account and Debit Banking/ Charges Observance Commitments Advances card/ Electronic Without of Fair and Failure of Credit Banking Prior Practices Commitment card Notice to BCSBI Code Public Sector Banks 10,632 12,609 35,037 24,226 5,087 6,070 13,445 14,669 25,250 147,025 1 State Bank of India 3,858 4,889 13,003 12,275 1,862 2,710 5,047 5,390 9,610 58,644 (excluding SBI card) 2 Bank of Baroda 1,080 1,283 3,214 1,734 630 256 1,549 1,259 2,369 13,374 3 Bank of India 452 602 2,923 966 215 217 608 530 1,319 7,832 4 Bank of Maharashtra 123 145 624 320 92 30 110 111 398 1,953 5 Canara Bank 980 1,202 1,992 1,111 581 343 1,256 1,463 2,042 10,970 6 Central Bank of India 417 527 2,346 904 140 373 585 513 1,033 6,838 7 Indian Bank 757 792 1,940 1,168 275 429 777 741 1,361 8,240 8 Indian Overseas Bank 201 351 492 290 98 46 265 251 400 2,394 9 Punjab and Sind Bank 61 82 207 134 31 7 60 210 156 948 10 Punjab National Bank 1,600 1,430 4,492 2,909 645 1,192 1,785 2,789 3,776 20,618 11 UCO Bank 206 236 464 384 84 76 221 262 498 2,431 12 Union Bank of India 897 1,070 3,340 2,031 434 391 1,182 1,150 2,288 12,783 168APPENDIX TABLES Appendix Table IV.12: Statement of complaints received at RBI Ombudsman Office (Continued) (April to March 2021-22) Sr. Name of the Bank Number of complaints in major categories for Private Sector Banks Others Total No. Deposit Loans ATM/ Mobile Levy of Pension Non- Failure on Account and Debit Banking / Charges Observance Commitments Advances card/ Electronic Without of Fair and Failure of Credit Banking Prior Practices Commitment card Notice to BCSBI Code Private Sector Banks 4,215 10,025 28,903 11,180 6,727 62 8,762 9,805 14,596 94,275 1 Axis Bank Limited 856 1,499 5,685 1,694 1,730 7 1,424 1,779 2,318 16,992 2 Bandhan Bank Limited 48 134 184 106 21 1 83 54 138 769 3 Catholic Syrian Bank Limited 7 19 15 7 10 - 24 12 25 119 4 City Union Bank Limited 18 54 49 60 19 - 34 20 53 307 5 DCB Bank Limited 31 188 35 26 50 1 90 108 119 648 6 Dhanlaxmi Bank Limited 6 16 6 5 4 - 7 7 13 64 7 Federal Bank Limited 77 119 241 207 38 - 118 66 175 1,041 8 HDFC Bank Limited 834 2,077 5,950 2,673 1,248 18 1,849 2,305 3,090 20,044 9 ICICI Bank Limited 1,050 2,529 5,815 3,158 1,698 21 2,102 2,298 3,372 22,043 10 IDBI Bank Limited 179 392 383 301 217 5 250 252 521 2,500 11 IDFC First Bank Limited 136 790 406 289 232 1 527 493 913 3,787 12 Indusind Bank Limited 221 467 1,960 515 298 - 488 614 860 5,423 13 Jammu & Kashmir Bank 28 59 190 143 31 2 52 29 123 657 Limited 14 Karnataka Bank Limited 36 76 98 106 45 - 55 89 87 592 15 Karur Vysya Bank Limited 48 103 69 79 27 1 83 57 69 536 16 Kotak Mahindra Bank 326 765 2,152 1,048 503 5 706 785 1,451 7,741 Limited 17 Nainital Bank Limited 6 8 11 12 3 - 9 5 7 61 18 RBL Bank Limited 114 234 4,856 294 297 - 433 417 657 7,302 19 South Indian Bank Limited 32 89 88 77 31 - 67 36 80 500 20 Tamilnad Mercantile Bank 30 43 49 51 28 - 69 17 43 330 Limited 21 Yes Bank Limited 132 364 661 329 197 - 292 362 482 2,819 169Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.12: Statement of complaints received at RBI Ombudsman Office (Continued) (April to March 2021-22) Sr. Name of the Bank Number of complaints in major categories for Foreign Banks Others Total No. Deposit Loans ATM/ Mobile Levy of Pension Non- Failure On Account and Debit Bankin/ Charges Observance Commitments Advances card/ Electronic Without of Fair and Failure of Credit Banking Prior Practices Commitment card Notice to BCSBI Code Foreign Banks 163 318 2,085 458 203 6 355 326 550 4,464 1 AB Bank Limited - - 2 - - - - - 1 3 2 Abu Dhabi Commercial Bank PJSC - 1 - - - - - - - 1 3 American Express Banking Corporation 1 2 233 4 26 - 14 19 10 309 4 Barclays Bank Plc 2 1 6 1 1 - - 2 6 19 5 Bank of America National Association - - - 2 - - 2 - 4 8 6 Bank of Bahrain and Kuwait B.S.C - - - - - - 1 - - 1 7 BNP Paribas - 1 - - - - 1 - - 2 8 Citibank N.A. 33 34 777 136 41 - 98 80 162 1,361 9 DBS Bank India Limited 54 27 56 105 20 2 48 40 81 433 10 Deutsche Bank A.G., 7 38 4 3 5 - 15 18 34 124 11 Doha Bank QSC - - - - - - 1 - - 1 12 Emirates NBD BANK (P.J.S.C.) 1 - - - - - - - - 1 13 FirstRand Bank Limited - - - 1 - - - - - 1 14 Hong Kong and Shanghai Banking Corporation Limited 14 26 217 27 11 - 32 21 31 379 15 Industrial & Commercial Bank of China Limited - - - - - - - 1 - 1 16 JP Morgan Chase Bank N.A. - - - - - - - - 1 1 17 Mizuho Bank Limited - - - - - - - - 2 2 18 MUFG Bank, Ltd. - - - - - - 1 - - 1 19 Natwest Markets PLC (Erstwhile The Royal Bank of Scotland PLC) - - 4 - - - 2 4 1 11 20 SBM Bank (India) Limited 10 6 66 11 1 - 2 9 10 115 21 Shinhan Bank - 1 - - - - - 1 1 3 22 Sonali Bank - - - - - 1 - - - 1 23 Standard Chartered Bank 41 177 720 168 98 3 138 129 206 1,680 24 United Overseas Bank Limited - 1 - - - - - - - 1 25 Woori Bank - 3 - - - - - 2 - 5 170APPENDIX TABLES Appendix Table IV.12: Statement of complaints received at RBI Ombudsman Office (Concluded) (April to March 2021-22) Sr. Name of the Bank Number of complaints in major categories for Small Finance Banks Others Total No. Deposit Loans ATM/ Mobile Levy of Pension Non- Failure On Account and Debit Banking/ Charges Observance Commitments Advances card/ Electronic Without of Fair and Failure of Credit Banking Prior Practices Commitment card Notice to BCSBI Code Small Finance Banks 155 388 196 189 115 1 243 263 389 1,939 1 AU Small Finance Bank Limited 39 160 62 60 45 - 88 103 172 729 2 Capital Small Finance Bank Limited 1 10 2 4 1 - - 16 7 41 3 Equitas Small Finance Bank Limited 28 85 24 35 19 - 49 39 61 340 4 ESAF Small Finance Bank Limited 3 9 13 8 4 - 10 7 14 68 5 Fincare Small Finance Bank Limited 26 22 21 20 10 - 17 19 27 162 6 Jana Small Finance Bank Limited 16 42 31 5 12 - 36 33 38 213 7 North East Small Finance Bank Limited 1 1 2 - - - 1 - - 5 8 Suryoday Small Finance Bank Limited 6 4 1 - 2 - 10 1 9 33 9 Ujjivan Small Finance Bank Limited 23 49 33 43 19 1 24 33 49 274 10 Utkarsh Small Finance Bank Limited 12 6 7 14 3 - 8 12 12 74 Payments Banks 578 44 461 2,433 133 1 278 645 1,564 6,137 1 Airtel Payments Bank Limited 346 5 102 1,167 92 1 131 397 821 3,062 2 Fino Payments Bank Limited 15 3 50 34 3 - 15 23 62 205 3 India Post Payments Bank Limited 32 2 53 84 7 - 15 33 61 287 4 Jio Payments Bank Limited 1 - 1 9 - - 1 1 1 14 5 NSDL Payments Bank Limited 17 2 2 10 7 - 8 15 28 89 6 Paytm Payments Bank Limited 167 32 253 1,129 24 - 108 176 591 2,480 Others (SBI Cards+Primary Urban Cooperative Banks+RRBs+Others) 964 7,350 9,521 2,111 2,251 39 14,797 1,139 12,484 50,656 Note: Nil/negligible. Source: RBI. 171Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.13: Progress of Microfinance Programmes (At end-March) Item Self Help Groups Number Amount (in ` crores) 2017-18 2018-19 2019-20 2020-21 2021-22 2017-18 2018-19 2019-20 2020-21 2021-22 Loans Disbursed by 2,261,132 2,698,400 3,146,002 2,887,394 3,398,267 47,186 58,318 77,659 58,071 99,729 Banks (During the FY) (1,377,278) (1,777,763) (2,208,182) (1,696,299) (2,474,719) (27,479) (36,819) (55,590) (31,755) (68,917) Loans Outstanding with 5,020,358 5,077,332 5,677,071 5,780,244 6,739,957 75,598 87,098 108,075 103,289 151,051 Banks (3,083,143) (3,510,238) (3,956,504) (3,601,395) (4,781,201) (43,576) (58,432) (73,184) (61,393) (101,840) Savings with Banks 8,744,437 10,014,243 10,243,323 11,223,400 11,893,053 19,592 23,324 26,152 37,477 47,240 (4,608,745) (6,019,185) (6,258,085) (3,601,395) (7,764,906) (11,785) (14,482) (15,836) (21,308) (31,077) Microfinance Institutions Number Amount (in ` crores) Loans Disbursed by 1,902 1,913 4,746 28,542 24,628 22,228 13,721 19,133 12,120 23,173 Banks Loans Outstanding with 4,973 5,404 15,141 61,111 58,753 26,172 16,045 27,256 21,063 34,865 Banks Joint Liability Groups Number (lakhs) Amount (in ` crores) Loans Disbursed by 10.2 16 41.8 41.3 54.1 13,955 30,947 83,103 58,312 112,773 Banks (During the FY) 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 2017-18, 2018-19, 2019-20, 2020-21 and 2021-22, 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. 172APPENDIX TABLES Appendix Table IV.14: Major Financial Indicators of Regional Rural Banks- State Wise (Continued) (Amount in ` Crore) Region/State 2020-21 2021-22 No. of Profit Earning Loss Incurring Net No. of Profit Earning Loss Incurring Net RRBs Profit/ RRBs Profit/ Loss Loss Mar-21 No. Amount No. Amount Mar-22 No. Amount No. Amount 1 2 3 4 5 6 7 8 9 10 11 12 13 Central Region 7 5 468 2 224 245 7 6 253 1 125 128 Chhattisgarh 1 1 12 0 - 12 1 1 27 0 - 27 Madhya Pradesh 2 0 - 2 224 -224 2 1 33 1 125 -93 Uttar Pradesh 3 3 454 0 - 454 3 3 186 0 - 186 Uttarakhand 1 1 2 0 - 2 1 1 7 0 - 7 Eastern Region 8 3 112 5 1,116 -1,004 8 5 154 3 486 -332 Bihar 2 0 - 2 432 -432 2 0 - 2 386 -386 Jharkhand 1 1 32 0 - 32 1 1 73 0 - 73 Odisha 2 0 - 2 623 -623 2 2 7 0 - 7 West Bengal 3 2 80 1 61 19 3 2 74 1 100 -26 North Eastern Region 7 4 246 3 121 124 7 5 228 2 5 223 Arunachal Pradesh 1 1 6 0 - 6 1 1 12 0 - 12 Assam 1 0 - 1 114 -114 1 1 0 0 - 0 Manipur 1 0 - 1 5 -5 1 0 - 1 4 -4 Meghalaya 1 1 1 0 - 1 1 1 23 0 - 23 Mizoram 1 1 39 0 - 39 1 1 49 0 - 49 Nagaland 1 0 - 1 2 -2 1 0 - 1 1 -1 Tripura 1 1 200 0 - 200 1 1 143 0 - 143 Northern Region 7 5 435 2 49 386 7 5 851 2 61 790 Haryana 1 1 18 0 - 18 1 1 141 0 - 141 Himachal Pradesh 1 1 9 0 - 9 1 1 5 0 - 5 Jammu & Kashmir 2 0 - 2 49 -49 2 0 - 2 61 -61 Punjab 1 1 53 0 - 53 1 1 109 0 - 109 Rajasthan 2 2 355 0 - 355 2 2 597 0 - 597 Southern Region 10 10 2,117 0 - 2,117 10 10 2,410 0 - 2,410 Andhra Pradesh 3 3 565 0 - 565 3 3 780 0 - 780 Karnataka 2 2 21 0 - 21 2 2 79 0 - 79 Kerala 1 1 33 0 - 33 1 1 124 0 - 124 Puducherry 1 1 9 0 - 9 1 1 10 0 - 10 Tamil Nadu 1 1 185 0 - 185 1 1 229 0 - 229 Telangana 2 2 1,304 0 - 1,304 2 2 1,187 0 - 1,187 Western Region 4 3 172 1 357 -185 4 3 219 1 220 -1 Gujarat 2 2 119 0 - 119 2 2 214 0 - 214 Maharashtra 2 1 54 1 357 -304 2 1 5 1 220 -215 All India 43 30 3,550 13 1,867 1,682 43 34 4,116 9 897 3,219 173Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.14: Major Financial Indicators of Regional Rural Banks- State Wise (Concluded) Region/State Gross NPA (%) CRAR (%) Mar-21 Mar-22 Mar-21 Mar-22 1 14 15 16 17 Central Region 10.4 9.6 9.9 11.8 Chhattisgarh 3.1 2.6 20.4 19.3 Madhya Pradesh 19.7 13.0 -0.1 9.2 Uttar Pradesh 8.8 9.5 11.4 11.9 Uttarakhand 7.9 7.2 6.2 11.0 Eastern Region 23.1 25.1 0.6 7.8 Bihar 29.3 38.4 1.9 7.8 Jharkhand 9.2 6.4 10.9 11.7 Odisha 26.5 22.1 -10.8 4.8 West Bengal 14.7 12.2 1.7 8.4 North Eastern Region 19.0 15.6 13.1 15.7 Arunachal Pradesh 5.6 3.9 10.6 12.2 Assam 33.5 27.7 1.8 7.6 Manipur 28.7 17.5 2.4 7.2 Meghalaya 11.0 7.6 13.9 12.7 Mizoram 6.1 5.3 9.5 11.5 Nagaland 4.1 1.9 -2.9 8.2 Tripura 8.3 6.8 26.8 29.2 Northern Region 5.6 4.7 11.4 12.1 Haryana 9.3 7.2 13.6 14.1 Himachal Pradesh 5.4 5.7 10.1 9.5 Jammu & Kashmir 8.9 6.8 -1.7 -2.1 Punjab 7.5 6.6 15.5 15.6 Rajasthan 3.1 2.8 10.8 11.9 Southern Region 5.2 5.2 13.4 15.4 Andhra Pradesh 1.5 1.3 15.4 17.8 Karnataka 14.0 14.5 11.2 11.1 Kerala 3.6 3.1 6.6 11.4 Puducherry 2.0 2.1 12.0 10.6 Tamil Nadu 2.2 1.9 12.2 13.0 Telangana 1.4 1.9 17.2 20.6 Western Region 7.3 5.8 5.9 9.6 Gujarat 3.5 2.9 10.8 13.1 Maharashtra 11.4 8.7 0.6 6.2 All India 9.4 9.1 10.2 12.7 Note: Components may not add up to the exact total due to rounding off. Source: NABARD. 174APPENDIX TABLES Appendix Table IV.15: RRBs - PSL Target and Achievement - 2021-22 Sector/Sub Sector Target (%) Achievement (%) RRBs not Meeting Target/Sub-target Overall Priority Sector 75 90.1 Meghalaya Rural Bank (71.5%) Nagaland Rural Bank (69.3%) Agriculture 18 46.4 - Small and Marginal Farmers 9 26.8 - Non-Corporate Farmers 12.73 89.6 - Micro Enterprises 7.5 12.0 - Weaker Sections 15 78.9 - Note: Target and Achievement are as a percentage of ANBC as on corresponding date of previous year. Source: NABARD. 175Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.16: Frauds in Various Banking Operations Based on Date of Reporting (Continued) (Amount in ` crore) Area of Operation 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount Advances 1,564 672 1,525 1,162 1,734 1,055 1,750 721 1,976 1,388 2,190 1,263 2,382 2,740 Card/Internet 26 3 144 6 491 11 679 15 1,036 37 1,215 35 763 21 Deposits 374 28 325 28 384 49 458 79 599 66 666 195 790 583 Off-balance sheet 6 33 7 25 4 4 6 8 9 22 10 370 10 212 Foreign exchange 16 14 10 30 28 7 25 30 15 14 16 28 19 148 transactions Cash 75 4 89 16 87 7 99 5 141 36 143 14 154 21 Cheques /demand drafts, 108 15 110 9 141 10 192 17 234 15 202 17 184 27 etc. Inter-branch accounts 31 6 36 7 18 1 22 3 16 5 18 2 10 1 Clearing, etc accounts 20 2 23 4 35 12 30 9 52 45 51 7 34 11 Non-resident accounts 11 2 9 0 17 1 9 4 26 2 13 2 9 2 Others 204 16 148 29 88 51 97 26 146 39 146 64 179 56 Grand Total 2,435 795 2,426 1,316 3,027 1,208 3,367 917 4,250 1,669 4,670 1,997 4,534 3,822 176APPENDIX TABLES Appendix Table IV.16: Frauds in Various Banking Operations Based on Date of Reporting (Continued) (Amount in ` crore) Area of Operation 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 No. Amount No. Amount No. Amount No. Amount No. Amount No. Amount Advances 1,953 3,552 2,087 6,530 1,985 8,334 2,256 17,123 2,120 17,367 2,320 20,556 Card/Internet 629 23 793 49 978 54 845 52 1,191 40 1,372 42 Deposits 857 219 791 291 774 331 875 437 759 809 693 903 Off-balance sheet 5 373 18 1,527 15 1,088 10 699 4 132 5 63 Foreign exchange transactions 22 130 10 98 9 144 16 899 17 51 16 2,201 Cash 173 20 140 23 145 24 153 43 160 22 239 37 Cheques/demand drafts, etc. 172 40 141 22 180 19 254 26 234 25 235 40 Inter-branch accounts 24 8 6 3 7 1 4 0 4 10 1 0 Clearing, etc accounts 38 31 36 7 36 24 29 7 17 87 27 6 Non-resident accounts 11 3 17 3 38 10 23 8 8 9 10 3 Others 207 98 197 112 135 64 179 162 176 146 153 77 Grand Total 4,091 4,497 4,236 8,665 4,302 10,093 4,644 19,456 4,690 18,698 5,071 23,928 177Report on Trend and Progress of Banking in India 2021-22 Appendix Table IV.16: Frauds in Various Banking Operations Based on Date of Reporting (Concluded) (Amount in ` crore) Area of Operation 2017-18 2018-19 2019-20 2020-21 No. Amount No. Amount No. Amount No. Amount Advances 2,525 22,558 3,602 64,508 4,607 1,81,865 3,496 1,36,429 Card/Internet 2,059 110 1,866 71 2,677 129 2,545 119 Deposits 691 457 593 148 530 616 504 434 Off-balance sheet 20 16288 33 5538 34 2445 23 535 Foreign exchange transactions 9 1426 13 695 8 54 4 129 Cash 218 40 274 56 371 63 329 39 Cheques/demand drafts, etc. 207 34 189 34 201 39 163 85 Inter-branch accounts 6 1 3 0 2 0 2 0 Clearing, etc accounts 37 6 24 209 22 7 14 4 Non-resident accounts 6 5 3 0 8 1 1 0 Others 138 242 197 244 242 172 277 54 Grand Total 5,916 41,167 6,797 71,503 8,702 1,85,391 7,358 1,37,828 Notes: 1. Refers to frauds of `1 lakh and above. 2. The figures reported by banks and financial institutions 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 are as reported and do not reflect the amount of loss incurred. Depending on recoveries, the loss incurred gets reduced. Further, the entire amount involved in loan accounts is not necessarily diverted. Source: RBI. 178APPENDIX TABLES Appendix Table V.1: Select Financial Parameters: Scheduled UCBs (Continued) (As on March 31, 2022) (Per cent) Sr. Bank Name Average Average Net Interest Net Non- Return CRAR Business Profit per No. Cost of Yield on Income to Interest Interest on Assets per Employee Deposits Advances Total Assets Income to Income to (RoA) Employee (` crore) (Spread) Working Working (` crore) Funds Funds 1 2 3 4 5 6 7 8 9 10 11 1 Abhyudaya Co-operative Bank 4.84 8.48 1.73 1.72 0.66 0.02 9.02 6.23 0.00 Limited, Mumbai 2 Ahmedabad Mercantile Co- 5.36 8.62 3.23 3.15 1.61 2.48 28.86 10.34 0.21 operative Bank Limited 3 Akola Janata Commercial Co- 4.17 10.06 3.13 3.09 0.91 0.56 22.97 4.87 0.02 operative Bank Limited, Akola 4 Akola Urban Co-operative 4.18 10.18 3.68 3.49 0.99 0.58 14.80 4.23 0.02 Bank Limited, Akola 5 Amanath Co-operative Bank 2.68 1.54 1.78 1.78 3.88 1.30 1.26 1.67 0.02 Limited, Bangalore 6 Andhra Pradesh Mahesh Co- 6.03 11.42 2.77 2.77 0.78 0.97 28.49 7.08 0.06 operative Urban Bank Limited 7 Apna Sahakari Bank Limited 5.05 9.51 2.56 2.79 1.21 0.35 9.43 8.39 0.02 8 Bassein Catholic Co-operative 5.46 9.47 2.59 2.54 0.52 0.76 17.38 19.85 0.12 Bank Limited 9 Bharat Co-operative Bank 5.51 9.73 2.40 2.36 0.84 0.29 13.98 13.10 0.03 (Mumbai) Limited, Mumbai 10 Bharati Sahakari Bank Limited 4.51 8.94 2.37 2.41 0.47 0.02 19.72 8.67 0.00 11 Bombay Mercantile Co- 3.17 9.75 4.06 3.62 1.64 0.10 17.22 3.58 0.00 operative Bank Limited 12 Citizen Credit Co-operative 4.07 8.99 2.67 3.05 0.48 0.63 24.76 9.60 0.06 Bank Limited, Mumbai 13 Cosmos Co-operative Bank 4.73 9.13 2.90 3.07 2.71 0.38 13.19 10.85 0.03 Limited 14 Dombivli Nagari Sahakari 4.38 9.57 2.44 2.59 3.44 0.49 14.99 7.89 0.03 Bank Limited 15 Goa Urban Co-operative Bank 5.35 9.23 3.00 3.00 0.51 0.72 19.96 5.31 0.03 Limited 16 Gopinath Patil Parsik Janata 4.49 9.73 3.30 3.25 0.48 1.02 22.31 6.92 0.06 Sahakari Bank Limited, Thane 17 Greater Bombay Co-operative 4.96 9.51 2.52 2.43 1.74 0.29 16.33 9.50 0.02 Bank Limited 18 Indian Mercantile Co-operative 3.50 5.68 3.41 4.05 0.45 0.44 23.16 1.46 0.01 Bank Limited, Lucknow 19 Jalgaon Janata Sahakari Bank 4.59 10.56 3.47 3.50 1.07 0.83 14.37 8.58 0.05 Limited 20 Jalgaon People's Co-operative 4.10 9.98 3.12 3.15 0.70 0.04 13.49 6.78 0.00 Bank Limited 21 Janakalyan Sahakari Bank 4.87 10.40 3.08 2.99 0.43 0.05 10.08 8.91 0.00 Limited, Mumbai 22 Janalaxmi Co-operative Bank 5.32 18.78 2.95 5.57 5.59 1.32 35.41 1.31 0.03 Limited, Nashik 23 Janata Sahakari Bank Limited, 5.00 8.90 2.31 2.15 1.48 0.01 15.06 10.82 0.00 Pune 24 Kallappanna Awade 5.63 10.41 2.94 2.94 0.48 0.44 13.88 7.13 0.02 Ichalkaranji Janata Sahakari Bank Limited 25 Kalupur Commercial Co- 4.80 8.40 2.80 2.64 0.80 1.46 18.87 16.89 0.18 operative Bank Limited 26 Kalyan Janata Sahakari Bank 4.88 9.85 2.57 2.54 1.20 0.56 11.70 10.53 0.04 Limited, Kalyan 27 Kapol Co-operative Bank 2.59 5.18 0.61 0.59 0.26 -3.98 -347.90 2.19 -0.16 Limited, Mumbai 179Report on Trend and Progress of Banking in India 2021-22 Appendix Table V.1: Select Financial Parameters: Scheduled UCBs (Continued) (As on March 31, 2022) (Per cent) Sr. Bank Name Average Average Net Interest Net Non- Return CRAR Business Profit per No. Cost of Yield on Income to Interest Interest on Assets per Employee Deposits Advances Total Assets Income to Income to (RoA) Employee (` crore) (Spread) Working Working (` crore) Funds Funds 1 2 3 4 5 6 7 8 9 10 11 28 Karad Urban Co-operative 5.37 9.74 2.94 2.89 0.57 0.28 16.91 5.96 0.01 Bank Limited 29 Khamgaon Urban Co-operative 3.81 9.73 3.71 3.88 0.63 0.46 20.75 4.76 0.02 Bank Limited, Khamgaon 30 Mahanagar Co-operative Bank 4.99 9.94 3.30 3.39 0.51 0.56 15.51 7.28 0.03 Limited, Mumbai 31 Mehsana Urban Co-operative 5.65 10.23 3.66 3.31 0.52 1.42 14.77 21.82 0.19 Bank Limited 32 Nagar Urban Co-operative 5.39 7.35 1.89 2.57 1.35 -2.88 -8.81 3.08 -0.11 Bank Limited, Ahmednagar 33 Nagpur Nagrik Sahakari Bank 2.70 5.45 2.20 2.55 2.26 0.12 12.30 6.62 0.01 Limited 34 Nasik Merchant's Co-operative 4.25 10.04 3.95 3.95 2.26 1.30 37.58 3.81 0.04 Bank Limited 35 New India Co-operative Bank 4.70 9.76 2.05 2.07 0.81 0.08 9.03 13.38 0.01 Limited, Mumbai 36 NKGSB Co-operative Bank 4.95 11.24 2.38 2.51 0.77 0.20 13.07 10.84 0.02 Limited, Mumbai 37 Nutan Nagarik Sahakari Bank 5.88 8.39 1.86 1.66 0.90 0.61 16.68 12.65 0.05 Limited, Ahmedabad 38 Pravara Sahakari Bank Limited 5.57 10.96 3.37 3.23 1.01 0.42 14.42 5.67 0.02 39 Rajarambapu Sahakari Bank 6.13 10.01 2.68 2.68 0.27 0.46 12.80 9.06 0.03 Limited 40 Rajkot Nagrik Sahakari Bank 5.04 9.92 3.16 3.04 0.50 1.37 18.41 8.43 0.08 Limited 41 Rupee Co-operative Bank 1.76 1.30 1.03 2.60 0.14 0.08 -749.39 4.11 0.01 Limited 42 Sangli Urban Co-operative 5.41 8.82 2.16 2.40 0.52 -0.65 11.29 6.14 -0.03 Bank Limited, Sangli 43 Saraswat Co-operative Bank 4.63 8.52 2.12 2.04 1.03 0.56 13.94 15.28 0.06 Limited, Bombay 44 SBPP Co-operative Bank 4.54 9.82 3.44 3.31 0.32 0.89 20.89 8.40 0.06 Limited, Killa Pardi 45 Shamrao Vithal Co-operative 4.85 8.76 2.50 2.93 0.90 0.71 13.32 13.60 0.07 Bank Limited 46 Shikshak Sahakari Bank 4.71 11.06 2.36 2.94 0.80 0.04 11.71 4.82 0.00 Limited, Nagpur 47 Solapur Janata Sahakari Bank 5.22 10.65 2.93 3.41 0.83 0.55 14.70 7.54 0.04 Limited 48 Surat Peoples Co-operative 5.79 8.60 1.90 1.84 0.37 0.75 13.73 24.48 0.12 Bank Limited 49 Thane Bharat Sahakari Bank 4.37 11.08 4.07 4.29 0.90 0.46 13.70 7.52 0.03 Limited 50 TJSB Sahakari Bank 4.72 9.72 3.23 2.94 0.59 1.12 15.28 12.54 0.10 51 Vasai Vikas Sahakari Bank 5.54 9.23 1.91 1.93 0.60 0.34 14.84 10.05 0.03 Limited 52 Zoroastrian Co-operative Bank 4.58 9.33 2.22 2.38 0.52 0.30 27.65 7.18 0.02 Limited, Bombay Note: Data are provisional. Source: Off-site surveillance returns, RBI. 180APPENDIX TABLES Appendix Table V.2: Indicators of Financial Performance: Scheduled UCBs (Continued) (As per cent to total assets) Sr. Name of the Banks Interest Income Operating Profit Net Profit after Taxes No. 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 1 2 3 4 5 6 7 8 1 Abhyudaya Co-operative Bank Limited, Mumbai 6.5 5.8 0.3 -0.4 0.0 0.0 2 Ahmedabad Mercantile Co-operative Bank Limited 7.4 7.0 2.3 2.2 1.5 1.3 3 Akola Janata Commercial Co-operative Bank Limited, Akola 6.2 6.4 0.5 1.0 0.3 0.5 4 Akola Urban Co-operative Bank Limited, Akola 7.1 6.8 1.4 1.4 0.3 0.5 5 Amanath Co-operative Bank Limited, Bangalore -0.1 0.4 -0.3 0.1 -0.3 0.1 6 Andhra Pradesh Mahesh Co-operative Urban Bank Limited 8.2 8.2 1.6 1.8 1.0 1.0 7 Apna Sahakari Bank Limited 7.2 7.0 0.7 0.7 -1.7 0.3 8 Bassein Catholic Co-operative Bank Limited 7.4 6.7 1.9 1.6 0.6 0.7 9 Bharat Co-operative Bank (Mumbai) Limited, Mumbai 7.3 7.1 0.7 0.9 0.0 0.2 10 Bharati Sahakari Bank Limited 6.4 6.0 0.9 0.7 0.4 -0.1 11 Bombay Mercantile Co-operative Bank Limited 4.9 4.5 0.4 0.6 0.0 0.1 12 Citizen Credit Co-operative Bank Limited, Mumbai 6.6 6.5 0.9 1.2 0.3 0.7 13 Cosmos Co-operative Bank Limited 6.6 6.8 2.3 1.8 0.2 0.1 14 Dombivli Nagari Sahakari Bank Limited 6.9 6.6 2.4 3.3 0.8 2.1 15 Goa Urban Co-operative Bank Limited 7.1 7.1 1.3 1.5 0.8 0.7 16 Gopinath Patil Parsik Janata Sahakari Bank Limited, Thane 7.3 6.9 1.2 1.3 0.4 1.0 17 Greater Bombay Co-operative Bank Limited 7.1 6.5 1.6 1.7 0.1 0.3 18 Indian Mercantile Co-operative Bank Limited, Lucknow 6.2 5.3 1.4 0.8 -7.7 0.4 19 Jalgaon Janata Sahakari Bank Limited 7.5 7.2 2.1 2.1 0.5 0.6 20 Jalgaon People’s Co-operative Bank Limited 6.9 6.7 0.9 1.1 0.0 0.2 21 Janakalyan Sahakari Bank Limited, Mumbai 7.2 6.5 0.8 1.2 0.0 0.0 22 Janalaxmi Co-operative Bank Limited, Nashik 3.2 5.8 -1.1 1.6 -1.1 1.6 23 Janata Sahakari Bank Limited, Pune 6.6 6.4 1.3 1.1 -1.2 -0.3 24 Kallappanna Awade Ichalkaranji Janata Sahakari Bank Limited 7.4 7.1 1.3 1.5 0.4 0.4 25 Kalupur Commercial Co-operative Bank Limited 6.5 5.7 2.2 2.1 1.3 1.3 26 Kalyan Janata Sahakari Bank Limited, Kalyan 7.2 6.9 0.8 0.8 0.5 0.5 27 Kapol Co-operative Bank Limited, Mumbai 1.8 2.2 -3.3 -1.7 -4.5 -4.2 28 Karad Urban Co-operative Bank Limited 7.8 7.0 1.8 1.2 0.6 0.3 29 Khamgaon Urban Co-operative Bank Limited, Khamgaon 7.1 6.8 2.0 1.6 0.6 0.5 30 Mahanagar Co-operative Bank Limited, Mumbai 7.7 7.1 1.7 1.4 0.6 0.6 31 Mehsana Urban Co-operative Bank Limited 7.9 7.6 2.6 2.7 1.2 1.3 32 Nagar Urban Co-operative Bank Limited, Ahmednagar 5.7 5.0 -0.2 0.5 -6.8 -3.5 33 Nagpur Nagrik Sahakari Bank Limited 6.6 6.4 0.4 1.1 0.0 -0.4 34 Nasik Merchant’s Co-operative Bank Limited 7.3 7.3 2.3 3.5 0.7 2.7 35 New India Co-operative Bank Limited, Mumbai 6.0 5.4 0.3 0.4 -0.2 0.2 36 NKGSB Co-operative Bank Limited, Mumbai 7.6 6.7 1.0 0.9 0.3 0.2 37 Nutan Nagarik Sahakari Bank Limited, Ahmedabad 6.2 6.1 0.7 0.5 0.3 0.1 38 Pravara Sahakari Bank Limited 8.1 7.8 2.0 1.7 0.2 0.4 39 Punjab & Maharashtra Co-operative Bank Limited 2.3 NA -3.0 NA -3.0 NA 40 Rajarambapu Sahakari Bank Limited 7.8 7.8 1.2 1.5 0.4 0.4 41 Rajkot Nagrik Sahakari Bank Limited 6.9 7.0 2.1 2.1 1.2 1.3 42 Rupee Co-operative Bank Limited 2.2 2.3 1.2 0.4 0.9 0.1 43 Sangli Urban Co-operative Bank Limited, Sangli 7.1 6.5 1.1 0.5 -0.1 -0.6 44 Saraswat Co-operative Bank Limited, Bombay 5.7 5.2 1.2 1.0 0.4 0.4 45 SBPP Co-operative Bank Limited, Killa Pardi 6.6 6.4 1.3 1.4 -0.9 0.8 46 Shamrao Vithal Co-operative Bank Limited 6.7 6.3 1.2 1.2 0.8 0.8 47 Shikshak Sahakari Bank Limited, Nagpur 5.5 5.8 -0.6 0.2 -0.8 -0.1 48 Solapur Janata Sahakari Bank Limited 7.8 7.2 1.1 1.9 -0.4 0.6 49 Surat Peoples Co-operative Bank Limited 6.9 6.7 0.7 0.9 0.5 0.7 50 Thane Bharat Sahakari Bank Limited 7.6 8.3 1.5 1.7 0.2 0.6 51 TJSB Sahakari Bank 7.0 6.3 1.5 1.4 1.0 0.9 52 Vasai Vikas Sahakari Bank Limited 7.2 6.7 1.1 0.3 0.3 0.3 53 Zoroastrian Co-operative Bank Limited, Bombay 6.9 5.7 0.5 0.5 -0.3 0.3 Note: Data for 2021-22 are provisional. Source: Off-site surveillance returns, RBI. 181Report on Trend and Progress of Banking in India 2021-22 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 2020-21 2021-22 2020-21 2021-22 2020-21 2021-22 1 2 9 10 11 12 13 14 1 Abhyudaya Co-operative Bank Limited, Mumbai 4.7 4.1 2.5 2.7 0.3 1.0 2 Ahmedabad Mercantile Co-operative Bank Limited 4.1 3.8 1.5 1.4 0.3 0.4 3 Akola Janata Commercial Co-operative Bank Limited, Akola 4.1 3.4 2.7 2.8 0.2 0.3 4 Akola Urban Co-operative Bank Limited, Akola 3.8 3.4 2.4 2.9 1.2 0.9 5 Amanath Co-operative Bank Limited, Bangalore 0.2 0.2 0.6 0.5 0.0 0.0 6 Andhra Pradesh Mahesh Co-operative Urban Bank Limited 5.1 5.3 1.8 1.9 0.4 0.5 7 Apna Sahakari Bank Limited 5.1 4.3 2.4 2.5 2.8 0.2 8 Bassein Catholic Co-operative Bank Limited 4.8 4.2 1.2 1.3 1.0 0.6 9 Bharat Co-operative Bank (Mumbai) Limited, Mumbai 5.4 4.8 1.9 2.1 0.6 0.8 10 Bharati Sahakari Bank Limited 4.3 3.8 1.6 1.9 0.4 0.8 11 Bombay Mercantile Co-operative Bank Limited 2.2 1.9 3.4 3.2 0.4 0.8 12 Citizen Credit Co-operative Bank Limited, Mumbai 4.2 3.5 2.1 2.3 0.3 0.2 13 Cosmos Co-operative Bank Limited 4.8 3.9 1.9 2.0 1.8 1.6 14 Dombivli Nagari Sahakari Bank Limited 4.7 4.0 2.2 2.8 1.7 1.0 15 Goa Urban Co-operative Bank Limited 4.2 4.1 2.0 1.9 0.1 0.5 16 Gopinath Patil Parsik Janata Sahakari Bank Limited, Thane 4.2 3.7 2.3 2.3 0.7 0.1 17 Greater Bombay Co-operative Bank Limited 4.5 4.1 2.2 2.3 1.4 1.2 18 Indian Mercantile Co-operative Bank Limited, Lucknow 3.4 2.1 2.7 2.8 9.0 0.4 19 Jalgaon Janata Sahakari Bank Limited 4.4 3.9 2.0 2.1 1.2 1.0 20 Jalgaon People’s Co-operative Bank Limited 4.2 3.6 2.4 2.6 0.9 0.9 21 Janakalyan Sahakari Bank Limited, Mumbai 4.6 3.6 2.4 2.2 0.8 1.4 22 Janalaxmi Co-operative Bank Limited, Nashik 2.1 2.3 2.6 5.4 0.0 0.0 23 Janata Sahakari Bank Limited, Pune 4.7 4.3 1.5 1.7 2.5 1.4 24 Kallappanna Awade Ichalkaranji Janata Sahakari Bank Limited 5.1 4.4 1.5 1.5 0.7 0.8 25 Kalupur Commercial Co-operative Bank Limited 3.8 3.3 1.3 1.1 0.4 0.3 26 Kalyan Janata Sahakari Bank Limited, Kalyan 5.0 4.4 2.1 2.3 0.2 0.2 27 Kapol Co-operative Bank Limited, Mumbai 2.5 1.6 3.0 2.5 1.2 2.5 28 Karad Urban Co-operative Bank Limited 5.0 4.3 2.2 2.1 0.9 0.8 29 Khamgaon Urban Co-operative Bank Limited, Khamgaon 3.7 3.0 2.1 2.8 0.8 0.9 30 Mahanagar Co-operative Bank Limited, Mumbai 4.5 3.9 2.1 2.3 1.0 0.6 31 Mehsana Urban Co-operative Bank Limited 4.9 4.3 1.0 1.1 0.9 0.9 32 Nagar Urban Co-operative Bank Limited, Ahmednagar 4.1 3.0 2.5 1.9 6.7 4.1 33 Nagpur Nagrik Sahakari Bank Limited 4.4 3.9 2.4 2.3 0.3 1.3 34 Nasik Merchant’s Co-operative Bank Limited 4.2 3.6 1.9 2.4 1.1 0.3 35 New India Co-operative Bank Limited, Mumbai 4.4 3.6 2.3 2.0 0.5 0.2 36 NKGSB Co-operative Bank Limited, Mumbai 5.5 4.2 2.1 2.3 0.5 0.6 37 Nutan Nagarik Sahakari Bank Limited, Ahmedabad 4.8 4.4 1.7 1.7 0.3 0.2 38 Pravara Sahakari Bank Limited 5.3 4.6 2.4 2.5 1.8 1.3 39 Punjab & Maharashtra Co-operative Bank Limited 4.4 NA 1.2 NA 0.0 NA 40 Rajarambapu Sahakari Bank Limited 5.6 5.2 1.5 1.4 0.8 1.0 41 Rajkot Nagrik Sahakari Bank Limited 4.6 4.1 1.3 1.4 0.5 0.4 42 Rupee Co-operative Bank Limited 1.1 1.0 1.0 0.9 0.3 0.3 43 Sangli Urban Co-operative Bank Limited, Sangli 5.0 4.3 2.1 2.2 1.1 1.1 44 Saraswat Co-operative Bank Limited, Bombay 4.1 3.4 1.5 1.6 0.5 0.5 45 SBPP Co-operative Bank Limited, Killa Pardi 3.4 3.3 2.3 1.9 1.9 0.3 46 Shamrao Vithal Co-operative Bank Limited 4.4 3.8 1.9 2.0 0.2 0.3 47 Shikshak Sahakari Bank Limited, Nagpur 4.2 3.4 2.6 2.6 0.3 0.4 48 Solapur Janata Sahakari Bank Limited 5.3 4.2 1.8 1.8 1.3 1.1 49 Surat Peoples Co-operative Bank Limited 5.7 4.9 1.9 1.3 0.2 0.2 50 Thane Bharat Sahakari Bank Limited 4.4 4.2 2.6 3.3 1.1 0.9 51 TJSB Sahakari Bank 4.3 3.6 1.8 1.8 0.1 0.2 52 Vasai Vikas Sahakari Bank Limited 4.9 4.8 1.6 2.2 0.7 0.0 53 Zoroastrian Co-operative Bank Limited, Bombay 4.7 3.5 2.1 2.1 0.6 0.3 Note: Data for 2021-22 are provisional. Source: Off-site surveillance returns, RBI. 182APPENDIX TABLES Appendix Table V.3: Salient Indicators of Financial Health of State Co-operative Banks (At end-March) (Amount in ` Lakh) Sr. Region/State Amount of Profit/Loss NPAs as Percentage of Loans Recovery to Demand No Outstanding (%) 2019-20 2020-21 31-Mar-20 31-Mar-21 30-Jun-19 30-Jun-20 1 2 3 4 5 6 7 8 Northern Region 22,210 1,275 2.1 3.3 98.8 98.3 1 Chandigarh 341 259 6.2 6.8 80.7 74.5 2 Delhi 2,072 2,653 1.4 1.3 97.0 97.7 3 Haryana 5,150 6,136 0.1 0.1 100.0 100.0 4 Himachal Pradesh 5,049 7,934 8.0 9.0 51.2 38.8 5 Jammu & Kashmir 1,489 -24,751 5.1 50.1 79.5 73.4 6 Punjab 2,269 2,463 1.0 1.0 99.6 99.4 7 Rajasthan 5,840 6,581 0.2 0.2 98.8 98.9 North-Eastern Region 5,956 6,022 8.6 8.7 46.9 69.7 8 Arunachal Pradesh -1,550 -2,006 54.2 48.5 1.8 9.1 9 Assam 736 1,045 6.8 7.4 25.9 67.8 10 Manipur 200 201 29.5 35.3 44.7 45.4 11 Meghalaya 1,128 1,204 7.4 7.2 22.1 22.1 12 Mizoram 1,262 2,032 5.6 4.4 67.8 60.6 13 Nagaland 1,272 816 13.7 14.6 62.0 58.4 14 Sikkim 1,132 764 4.2 3.8 38.9 17.3 15 Tripura 1,775 1,967 3.8 4.8 86.9 95.4 Eastern Region 17,051 25,949 4.7 3.7 93.2 88.9 16 Andaman & Nicobar Islands 367 720 48.1 39.7 38.4 43.0 17 Bihar 4,885 7,677 4.9 1.9 77.7 54.9 18 Jharkhand 264 518 51.6 38.9 64.3 76.2 19 Odisha 8,181 6,850 1.4 1.3 98.3 98.4 20 West Bengal 3,354 10,184 4.2 4.1 91.6 91.3 Central Region 19,918 15,742 5.6 5.2 91.3 90.7 21 Chhattisgarh 2,576 2,712 3.0 2.9 93.9 83.5 22 Madhya Pradesh 12,789 7,387 5.4 5.2 92.9 92.1 23 Uttar Pradesh 4,328 4,547 5.9 5.4 83.3 85.3 24 Uttarakhand 225 1,095 9.3 7.6 97.2 96.9 Western Region 40,115 44,228 8.6 9.6 82.8 84.5 25 Daman & Diu - 1,222 - 5.9 - 84.9 26 Goa 4,442 1,124 10.4 11.2 85.9 82.9 27 Gujarat 3,173 5,441 1.3 1.5 94.8 96.8 28 Maharashtra 32,500 36,441 10.8 11.6 79.3 82.1 Southern Region 67,152 46,962 8.6 7.9 98.5 90.9 29 Andhra Pradesh 9,991 14,768 1.2 0.9 99.7 99.7 30 Karnataka 5,100 6,000 3.7 4.5 97.2 95.1 31 Kerala 37,475 6,199 15.3 14.5 98.4 85.6 32 Puducherry 2,343 567 16.3 17.1 87.1 85.7 33 Tamil Nadu 9,017 14,795 2.7 4.1 99.6 99.4 34 Telangana 3,226 4,634 0.2 0.1 98.6 98.0 All India 1,72,401 1,40,178 6.7 6.7 94.4 90.5 Notes: 1. Components may not add up to total due to rounding off. 2. Recovery for a financial year is as on 30th June. 3. During FY 2019-20, 13 of 14 DCCBs in Kerala (except Mallapuram DCCB) amalgamated with Kerala StCB. 4. Till FY 2019-20, data of Daman & Diu StCB was reported as a part of Goa StCB. Audit of Goa StCB and Daman & Diu StCB was undertaken separately for the position as on 31 Mar 2021. Source : NABARD. 183Report on Trend and Progress of Banking in India 2021-22 Appendix Table V.4: Salient Indicators of Financial Health of District Central Co-operative Banks (At end-March) (Amount in ` Lakh) Sr. Region/State 2019-20 2020-21 2020 2021 No. No. of Profit Loss No. of Profit Loss NPA Recovery NPA Recovery DCCBs DCCBs to to to to No. of Amt. No of Amt. No. of Amt. No of Amt. loans Demand loans Demand DCCBs DCCBs DCCBs DCCBs ratio (%) ratio (%) (%) (At (%) (At end- end- June) * June) * 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Northern region 73 58 15,599 15 16,950 73 64 16,238 9 11,195 10.8 75.1 11.3 74.7 1 Haryana 19 17 5,289 2 867 19 19 6,053 0 - 6.3 65.2 7.1 68.2 2 Himachal Pradesh 2 1 712 1 4,033 2 2 1,140 0 - 25.2 74.2 27.8 61.3 3 Jammu & 3 0 - 3 4,276 3 0 - 3 4,145 37.2 39.2 38.4 30.9 Kashmir 4 Punjab 20 12 2,185 8 7,563 20 15 2,843 5 5,243 10.3 76.7 11.1 75.8 5 Rajasthan 29 28 7,412 1 211 29 28 6,201 1 1,807 8.9 83.5 8.4 85.1 Eastern region 58 51 24,682 7 5,711 58 53 20,612 5 2,909 9.3 67.3 8.9 77.5 6 Bihar 23 16 1,415 7 5,711 23 20 1,651 3 2,013 17.7 29.7 9.2 27.9 7 Jharkhand 1 1 219 0 - 1 1 212 0 - 63.4 17.2 17.4 28.6 8 Odisha 17 17 14,791 0 - 17 17 9,988 0 - 7.3 67.1 7.8 82.3 9 West Bengal 17 17 8,258 0 - 17 15 8,761 2 896 9.8 76.9 10.4 75.8 Central region 104 73 25,754 31 29,547 104 76 30,108 28 48,300 21.2 55.4 19.7 61.8 10 Chattisgarh 6 6 6,465 0 - 6 6 6,277 0 - 14.5 70.2 13.6 82.0 11 Madhya Pradesh 38 25 6,699 13 19,686 38 24 9,799 14 41,130 26.7 47.7 25.8 53.6 12 Uttar Pradesh 50 32 8,289 18 9,861 50 36 9,325 14 7,169 13.9 62.6 12.8 67.5 13 Uttarakhand 10 10 4,301 0 - 10 10 4,707 0 - 12.1 75.0 9.3 67.9 Western region 49 45 75,883 4 47,935 49 48 83,914 1 4,480 16.2 61.9 13.4 71.6 14 Gujarat 18 18 18,093 0 - 18 18 20,869 0 - 5.4 90.5 4.6 92.4 15 Maharashtra 31 27 57,790 4 47,935 31 30 63,044 1 4,480 20.1 49.7 16.4 62.6 Southern region 67 64 46,738 3 3,922 67 67 58,196 0 - 6.9 87.7 6.8 87.7 16 Andhra Pradesh 13 12 4,773 1 1,411 13 13 9,938 0 - 5.8 90.8 5.2 85.8 17 Karnataka 21 20 14,152 1 1,788 21 21 16,303 0 - 6.1 88.1 5.3 90.6 18 Kerala 1 1 315 0 - 1 1 326 0 - 15.5 77.8 13.7 64.3 19 Tamil Nadu 23 23 24,641 0 - 23 23 26,688 0 - 7.1 85.6 8.9 89.3 20 Telangana 9 8 2,857 1 723 9 9 4,940 0 - 7.5 87.0 6.1 81.8 All India 351 291 1,88,656 60 1,04,066 351 308 2,09,067 43 66,884 12.6 70.2 11.4 74.9 Notes: 1. Components may not add up to the total /s due to rounding off. 2. Recovery for a FY is taken as on 30th June. 3. During FY 2019-20, 13 of 14 DCCBs in Kerala (except Mallapuram DCCB) amalgamated with Kerala StCB and Supaul DCCB was formed in Bihar. Source: NABARD. 184APPENDIX TABLES Appendix table V.5: Primary Agricultural Credit Societies (Amount in ` Crore) As at end-March Percentage Variation Item 2020 2021 2019-20 2020-21 1 2 3 4 5 Liabilities 1. Total Resources (2+3+4) 3,47,788 3,56,277 10.7 2.4 2. Owned Funds (a+b) 43,741 42,311 3.7 -3.3 a. Paid-up Capital 2,2,994 19,115 0.8 -16.9 of which Government Contribution 649 900 -50.9 38.7 b. Total Reserves 20,747 23,196 7.1 11.8 3. Deposits 1,65,476 1,70,922 24.4 3.3 4. Borrowings 1,38,571 1,43,044 -0.3 3.2 5. Working Capital 3,25,322 3,34,718 9.7 2.9 Assets 1. Total Loans Outstanding (a+b) 2,12,360 2,16,862 84.6 2.1 a) Short-Term 1,86,249 1,90,111 98.3 2.1 b) Medium-Term 26,111 26,751 23.6 2.5 Note: Y-o-Y variations could be slightly different because absolute numbers have been rounded off to ` crore. Source: NAFSCOB. 185Report on Trend and Progress of Banking in India 2021-22 Appendix Table V.6: Select Indicators of Primary Agricultural Credit Societies-State-wise (Continued) (At March 31, 2021) (Amount in ` lakhs) 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 14,112 16,74,999 48,55,498 14,30,282 67,077 9,613 3,07,165 1 Chandigarh 17 - 5 0 - 13 0 2 Haryana 730 49,956 13,41,057 5,95,645 25,747 49 1,06,743 3 Himachal Pradesh 2,178 5,99,288 7,57,818 1,16,989 18,610 1,903 6,625 4 Jammu & Kashmir* 620 323 3,772 4,659 670 484 58 5 Punjab 3,998 7,72,226 13,28,203 7,12,988 22,050 2,062 22,908 6 Rajasthan* 6,569 2,53,206 14,24,642 N.A. N.A. 5,102 1,70,832 North-Eastern region 9,440 1,04,856 1,59,398 36,682 32,016 781 8,739 7 Arunachal Pradesh 35 43 4,772 - - 18 16 8 Assam* 766 - 11,123 575 20 309 7,639 9 Manipur* 261 162 682 48 31 131 26 10 Meghalaya 179 1,569 5,297 3,453 60 65 91 11 Mizoram 154 2,075 485 705 210 30 396 12 Nagaland 7,601 97,313 1,17,058 30,245 31,586 N.A. N.A. 13 Sikkim 176 452 2,451 1,117 105 114 52 14 Tripura 268 3,241 17,530 539 4 114 519 Eastern region 18,627 3,80,959 16,25,883 7,45,225 43,121 4,342 8,504 15 Andaman & Nicobar Islands 58 114 1,251 1,625 568 19 17 16 Bihar* 8,463 17,533 50,816 - - 1,180 604 17 Jharkhand* N.A. N.A. N.A. N.A. N.A. N.A. N.A. 18 Odisha 2,701 1,52,712 10,70,176 5,94,324 13,039 751 4,418 19 West Bengal 7,405 2,10,601 5,03,639 1,49,275 29,514 2,392 3,465 Central region 15,708 2,67,520 16,63,203 7,88,169 60,220 8,077 24,326 20 Chhattisgarh* 1,617 63,145 5,49,825 2,06,713 10,435 842 9,041 21 Madhya Pradesh* 4,457 81,731 6,45,546 3,39,959 11,892 2,153 13,124 22 Uttarakhand 705 1,15,824 3,41,905 1,61,466 37,893 546 387 23 Uttar Pradesh* 8,929 6,820 1,25,927 80,031 - 4,536 1,774 Western region 29,273 1,32,901 36,91,512 22,70,689 3,10,959 15,247 17,568 24 Goa 74 9,478 16,282 2,585 2,876 42 108 25 Gujarat 9,048 1,00,366 15,91,662 12,60,378 38,022 6,466 16,854 26 Maharashtra* 20,151 23,057 20,83,568 10,07,727 2,70,061 8,739 607 Southern region 15,399 1,45,30,981 2,14,76,348 39,83,152 17,42,973 9,237 1,63,468 27 Andhra Pradesh 2,101 3,34,612 19,25,470 12,14,591 1,66,867 1,346 13,718 28 Telangana 852 39,996 5,13,014 4,90,713 50,687 537 6,167 29 Karnataka 6,248 15,33,365 36,25,724 20,76,140 4,15,348 4,140 44,067 30 Kerala* 1,643 1,15,90,200 1,30,12,397 N.A. N.A. 964 78,897 31 Puducherry 53 19,900 28,494 40 20,308 15 209 32 Tamil Nadu 4,502 10,12,907 23,71,250 2,01,667 10,89,764 2,235 20,409 All India 1,02,559 1,70,92,217 3,34,71,841 92,54,198 22,56,366 47,297 5,29,769 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. 186APPENDIX TABLES Appendix Table V.6: Select Indicators of Primary Agricultural Credit Societies-State-wise (Concluded) (At March 31, 2021) (Amount in ` lakhs) 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 3,917 88,650 5,135 1,731 295 234 6,717 1 Chandigarh 4 0 13 0 0 4 0 2 Haryana 681 29,155 612 91 26 1 0 3 Himachal Pradesh 197 692 547 1,481 107 9 34 4 Jammu & Kashmir* 105 2 458 48 12 91 11 5 Punjab 1,513 6,619 3,505 111 150 129 103 6 Rajasthan* 1,417 52,182 N.A. N.A. N.A. N.A. 6,569 North-Eastern Region 816 11,887 8,995 239 59 57 90 7 Arunachal Pradesh 14 6 30 0 0 5 0 8 Assam* 419 9,909 709 57 0 0 0 9 Manipur* 99 40 122 71 23 45 0 10 Meghalaya 114 771 70 73 36 0 0 11 Mizoram 2 1 32 32 0 0 90 12 Nagaland N.A. N.A. 7,601 0 0 0 0 13 Sikkim 14 3 169 0 0 7 0 14 Tripura 154 1,157 262 6 0 0 0 Eastern Region 9,844 27,991 14,172 2,866 586 413 590 15 Andaman &Nicobar Island 27 120 41 12 3 2 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 1,854 26,305 1,717 608 10 1 365 19 West Bengal 4,001 1,472 3,951 2,246 573 410 225 Central Region 4,747 25,749 12,544 2,471 392 168 133 20 Chhattisgarh* 491 7,610 1,178 439 0 0 0 21 Madhya Pradesh* 2,129 17,824 3,663 720 4 0 70 22 Uttarakhand 159 162 588 43 6 5 63 23 Uttar Pradesh* 1,968 153 7,115 1,269 382 163 0 Western Region 13,338 17,882 20,856 7,505 651 176 85 24 Goa 20 7 67 3 3 1 0 25 Gujarat 1,649 17,132 5,370 2,838 594 161 85 26 Maharashtra* 11,669 743 15,419 4,664 54 14 0 Southern Region 4,757 2,59,825 10,846 3,185 358 62 948 27 Andhra Pradesh 617 9,197 1,667 255 46 12 121 28 Telangana 278 18,749 703 136 1 0 12 29 Karnataka 1,274 11,214 4,303 1,570 106 50 219 30 Kerala* 632 1,86,138 1,643 0 0 0 0 31 Puducherry 38 2,968 15 38 0 0 0 32 Tamil Nadu 1,918 31,560 2,515 1,186 205 0 596 All India 37,419 4,31,984 72,548 17,997 2,341 1,110 8,563 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. 187Report on Trend and Progress of Banking in India 2021-22 Appendix table V.7: Details of Members and Borrowers of Primary Agricultural Credit Societies (Numbers in thousands) All India Members Borrowers 2020 2021 2020 2021 1 2 3 4 5 Scheduled Castes 15,886 14,183 4,044 4,390 Scheduled Tribes 9,087 8,482 2,572 2,666 Small Farmers 35,959 35,507 12,449 12,559 Rural Artisans 2,996 3,231 762 820 Others and Marginal Farmers 74,230 75,767 32,728 33,217 Source: NAFSCOB. 188APPENDIX 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 Percentage Variation 2020 2021P 2019-20 2020-21 1 2 3 4 5 Liabilities 1. Capital 939 949 -0.1 1.2 (3.5) (3.5) 2. Reserves 4,928 5,193 38.8 5.4 (18.2) (19) 3. Deposits 2,409 2,546 -1.0 5.7 (8.9) (9.3) 4. Borrowings 13,740 13,293 -9.0 -3.3 (50.7) (48.7) 5. Other Liabilities 5,090 5,293 -14.8 4.0 (18.8) (19.4) Assets 1. Cash and Bank Balances 174 234 -32.2 34.4 (0.6) (0.9) 2. Investments 2,498 2,272 -24.4 -9.0 (9.2) (8.3) 3. Loans and Advances 20,704 20,918 0.3 1.0 (76.4) (76.7) 4.Accumulated Losses 611 518 7.5 -15.2 (2.3) (1.9) 5. Other Assets 3,119 3,332 -3.1 6.8 (11.5) (12.2) Total Liabilities/Assets 27,106 27,275 -3.2 0.6 (100.0) (100.0) Notes: 1. Figures in parentheses are proportion to total liabilities/assets (in per cent). 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. 4. P- Provisional Source: NABARD. 189Report on Trend and Progress of Banking in India 2021-22 Appendix Table V.9: Financial Performance of State Co-operative Agriculture and Rural Development Banks (Amount in ` Crore) Sr. Item As during Percentage Variation No. 2019-20 2020-21P 2019-20 2020-21 1 2 3 4 5 6 A Income (i+ii) 2,584 2,343 2.9 -9.3 (100.00) (100.00) i Interest Income 2,376 2,156 -2.1 -9.3 (92) (92) ii Other Income 208 187 149.2 -10.1 (8) (8) B Expenditure (i+ii+iii+iv) 2,333 2,180 -8.8 -6.6 i Interest Expended 1,297 1,175 -5.7 -9.4 (55.6) (53.9) ii Provisions and Contingencies 453 465 14.7 2.7 (19.4) (21.3) iii Operating Expenses 399 404 -12.1 1.3 (17.1) (18.5) Of which, Wage Bill 349 351 -7.4 0.4 (15) (16.1) iv Other Expenditure 185 136 -44.8 -26.3 (7.9) (6.2) C Profits i Operating Profits 703 627 103.7 -10.8 ii Net Profits/Loss 250 163 Notes: 1. Figures in parentheses are proportion to total income/expenditure (in per cent). 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. 4. P- Provisional Source: NABARD. 190APPENDIX 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 2020 2021P 2019-20 2020-21 1 2 3 4 5 A. Total NPAs (i+ii+iii) 6,836 6,942 24.8 1.5 i) Sub-standard 2,518 2,337 18.9 -7.2 (36.8) (33.7) ii) Doubtful 4,285 4,570 28.9 6.6 (62.7) (65.8) iii) Loss 34 35 -0.8 4.5 (0.5) (0.5) B. NPAs to Loans Ratio (%) 33.0 33.2 C. Recovery to Demand Ratio (%) 43.0 46.5 Notes: 1. Figures in parentheses are proportions 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. 191Report on Trend and Progress of Banking in India 2021-22 Appendix Table V.11: Financial Indicators of State Co-operative Agriculture and Rural Development Banks (At end - March) (Amount ` Lakh) Sr. Region/State Branches Profit / Loss NPAs to Loans ratio Recovery Ratio No. (%) (%) (at End-June) 2021 2020 2021P 2020 2021P 2020 2021P 1 2 3 4 5 6 7 8 9 Northern region 1 Haryana @ 19 6,392 2,381 81.0 76.1 16.7 12.5 2 Himachal Pradesh # 51 -1,210 109 33.0 39.0 33.3 39.7 3 Jammu & Kashmir* 51 -2,237 -1,462 32.1 41.5 33.3 30.6 4 Punjab @ 89 227 247 27.7 32.3 41.6 32.9 5 Rajasthan @ 2 2,971 1,679 51.1 52.9 28.8 20.8 North-eastern region 6 Assam* - - - - - - - 7 Tripura* 5 -3 -63 98.2 99.4 40.5 NA Eastern region 8 Bihar* - - - - - - - 9 Odisha @ - - - - - - - 10 West Bengal # 11 358 1,060 24.0 23.5 22.0 32.9 Central region 11 Chhattisgarh @ - - - - - - - 12 Madhya Pradesh @ - - - - - - - 13 Uttar Pradesh* 323 9,770 2,323 72.1 83.7 27.1 25.5 Western region 14 Gujarat* 176 2,525 1,150 56.3 61.4 34.6 32.0 15 Maharashtra @ - - - - - - - Southern region 16 Karnataka @ 25 76 2,411 31.4 27.1 38.1 44.0 17 Kerala @ 16 2,868 2,646 5.8 6.1 88.0 100.0 18 Puducherry* 1 -146 -171 7.6 13.2 92.8 89.7 19 Tamil Nadu @ 25 3,440 3,948 12.1 11.9 86.2 87.7 All India 794 25,032 16,258 33.0 33.2 43.0 46.5 @ : 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 coop 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. 4. Provisional Data for 2021. Source: NABARD. 192APPENDIX 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 Percentage Variation 2020 2021P 2019-20 2020-21 1 2 3 4 5 Liabilities 1. Capital 1,056 1,024 -1.1 -3.1 (3.4) (3.2) 2. Reserves 2,603 3,203 49.5 23.1 (8.3) (10.1) 3. Deposits 1,372 1,551 5.3 13.0 (4.4) (4.9) 4. Borrowings 16,643 16,144 3.4 -3.0 (53.1) (51) 5. Other Liabilities 9,663 9,755 -2.3 1.0 (30.8) (30.8) Assets 1. Cash and Bank Balances 378 503 -14.3 33.1 (1.2) (1.6) 2. Investments 2,065 2,213 2.3 7.2 (6.6) (7) 3. Loans and Advances 15,810 15,325 1.4 -3.1 (50.5) (48.4) 4. Accumulated Losses 5,479 5,854 13.1 6.8 (17.5) (18.5) 5. Other Assets 7,605 7,783 5.5 2.3 (24.3) (24.6) Total Liabilities/Assets 31,337 31,677 4.1 1.1 (100.0) (100.0) Notes: 1. Figures in parentheses are proportion to total liabilities/assets (in per cent). 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. 4. Provisional Data for 2021. Source: NABARD. 193Report on Trend and Progress of Banking in India 2021-22 Appendix Table V.13: Financial Performance of Primary Co-operative Agriculture and Rural Development Banks (Amount in ` Crore) Item As during Percentage Variation 2019-20 2020-21P 2019-20 2020-21 1 2 3 4 5 A. Income (i+ii) 2,651 3,114 5.1 17.5 (100.0) (100.0) i. Interest Income 2,008 1,999 2.9 -0.5 (75.8) (64.2) ii. Other Income 643 1,115 12.7 73.4 (24.2) (35.8) B. Expenditure (i+ii+iii) 3,230 3,587 8.9 11.1 i. Interest Expended 1,733 1,791 0.5 3.4 (53.6) (49.9) ii. Provisions and Contingencies 1,013 1,061 31.3 4.8 (31.4) (29.6) iii. Operating Expenses 484 734 3.3 51.7 (15.0) (20.5) Of which, Wage Bill 274 304 -13.9 11.0 (8.5) (8.5) C. Profits i. Operating Profit 435 589 31.8 35.4 ii. Net Profit -578 -473 Notes: 1. Figures in parentheses are proportion to total income/expenditure (in per cent). 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. 4. Provisional Data for 2021. Source: NABARD. 194APPENDIX TABLES Appendix Table V.14: Asset Quality of Primary Co-operative Agriculture and Rural Development Banks (Amount in ` Crore) Item As at end-March Percentage Variation 2020 2021P 2019-20 2020-21 1 2 3 4 5 A. Total NPAs (i+ii+iii) 6,773 6,818 10.6 0.7 i) Sub-standard 3,493 3,247 11.3 -7.1 (51.6) (47.6) ii) Doubtful 3,259 3,553 10.9 9.0 (48.1) (52.1) iii) Loss 21 19 -52.3 -11.1 (0.3) (0.3) B. NPAs to Loans Ratio (%) 43 44 - - C. Recovery to Demand Ratio (%) 47 42 - - Notes: 1. Figures in parentheses are proportions 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. 4. Provisional Data for 2021. 5. Recovery for the financial year is taken as on 30th June. Source: NABARD. 195Report on Trend and Progress of Banking in India 2021-22 Appendix Table V.15: Major Financial Indicators of Primary Co-operative Agriculture and Rural Developments Banks (Amount in ` Lakh) State 2019-20 2020-21P NPAs to Loans Recovery Ratio ratio (%) Profit Loss Profit Loss (%) (at End-June) Number Amount Number Amount Number Amount Number Amount 2020 2021 2019 2020 1 6 7 8 9 6 7 8 9 10 11 12 13 Northern Region 42 2,815 103 27,331 26 1,122 119 41,560 68 72 25 19 Haryana 4 264 15 9,411 0 0 19 18,598 82 84 22 10 Himachal Pradesh 0 0 1 442 1 16 0 0 51 31 49 53 Punjab 18 1,131 71 12,750 7 406 82 16,758 73 80 25 20 Rajasthan 20 1,419 16 4,728 18 699 18 6,205 45 45 30 29 Central Region - - - - - - - - - - - - Chhattisgarh - - - - - - - - - - - - Madhya Pradesh - - - - - - - - - - - - Eastern Region 8 527 16 2,089 10 1,226 14 4,278 34 35 36 39 Odisha - - - - - - - - - - - - West Bengal 8 527 16 2,089 10 1,226 14 4,278 34 35 36 39 Western Region - - - - - - - - - - - - Maharashtra - - - - - - - - - - - - Southern Region 177 4,471 256 36,239 275 16,903 159 20,694 32 34 73 64 Karnataka 41 1,709 137 10,444 127 9,703 51 1,715 25 21 72 70 Kerala 18 554 57 25,030 23 4,759 53 18,359 36 40 64 56 Tamil Nadu 118 2,208 62 765 125 2,441 55 620 10 9 93 81 All India 227 7,813 375 65,659 311 19,251 292 66,532 43 44 47 42 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. 3. Also Maharashtra, Madhya Pradesh and Odisha structures are no longer functional. 4. Recovery for the financial year is taken as on 30th June. 5. Data for 2020-21 is Provisional. Source: NABARD. 196APPENDIX TABLES Appendix Table VI.1 : Consolidated Balance Sheet of NBFCs (Amount in ` crore) Item End-March End-March End-March End-March End-March End- Percentage 2018 2019 2020 2021 2022 September variation 2022 2021-22 1 2 3 4 5 6 7 8 1. Share Capital 94,807 1,03,244 1,25,801 1,26,474 1,31,241 1,27,088 3.8 2. Reserves & Surplus 3,90,222 4,45,614 5,05,865 6,71,153 7,70,209 7,13,257 14.8 3. Public Deposits 30,129 40,057 50,022 62,262 70,754 71,640 13.6 4. Total Borrowings (A+B) 16,84,663 20,02,808 22,35,336 23,51,679 25,51,092 25,84,696 8.5 A. Secured Borrowings 9,19,538 11,06,917 13,05,214 13,30,129 14,73,253 14,87,012 10.8 A.1. Debentures 4,90,070 5,21,003 5,13,108 5,54,477 5,74,102 5,79,789 3.5 A.2. Borrowings from Banks 3,53,415 4,89,732 5,72,253 6,17,897 7,28,266 7,37,356 17.9 A.3. Borrowings from FIs 22,885 29,027 57,610 46,279 57,305 62,821 23.8 A.4. Interest Accrued 20,692 16,958 17,732 19,264 20,052 14,607 4.1 A.5. Others 32,476 50,196 1,44,510 92,213 93,528 92,438 1.4 B. Un-Secured Borrowings 7,65,125 8,95,891 9,30,122 10,21,549 10,77,838 10,97,684 5.5 B.1. Debentures 3,36,171 3,40,905 3,93,392 4,28,099 4,32,394 4,30,015 1.0 B.2. Borrowings from Banks 59,746 1,19,964 1,22,657 1,57,203 1,76,448 1,86,376 12.2 B.3. Borrowings from FIs 8,318 9,700 5,906 11,076 9,113 8,054 -17.7 B.4. Borrowings from Relatives 2,324 1,994 2,642 4,196 2,824 1,631 -32.7 B.5. Inter-Corporate Borrowings 54,100 72,103 78,279 77,840 86,663 95,573 11.3 B.6. Commercial Paper 1,36,072 1,42,966 66,865 72,597 70,117 72,340 -3.4 B.7. Interest Accrued 21,165 17,598 19,000 19,477 18,207 18,025 -6.5 B.8. Others 1,47,228 1,90,661 2,41,381 2,51,062 2,82,070 2,85,669 12.4 5. Current Liabilities & Provisions 1,55,439 2,33,415 2,52,111 2,92,768 3,17,625 3,21,492 8.5 Total Liabilities/ Total Assets 23,55,260 28,25,139 31,69,135 35,04,335 38,40,921 38,18,173 9.6 1. Loans & Advances 19,43,494 22,95,371 24,63,943 27,02,618 29,08,743 29,37,051 7.6 1.1. Secured 15,00,477 16,49,728 18,58,735 19,64,895 22,42,969 22,54,593 14.2 1.2. Un-Secured 4,43,017 6,45,643 6,05,208 7,37,723 6,65,774 6,82,458 -9.8 2. Investments 2,19,795 2,59,008 3,47,875 4,44,837 5,13,891 4,50,462 15.5 2.1. Govt. Securities 10,330 17,328 68,777 47,439 65,287 75,538 37.6 2.2. Equity Shares 1,10,412 1,35,395 1,44,453 2,63,932 2,98,740 2,20,378 13.2 2.3. Preference Shares 7,479 6,644 6,439 6,073 6,681 5,968 10.0 2.4. Debentures & Bonds 40,865 35,446 34,696 26,747 33,757 31,363 26.2 2.5. Units of Mutual Funds 31,608 44,421 65,106 66,936 66,710 68,218 -0.3 2.6. Commercial Paper 2,135 1,390 1,275 1,450 1,714 929 18.2 2.7. Other Investments 16,965 18,384 27,129 32,261 41,003 48,068 27.1 3. Cash & Bank Balances 67,429 96,030 1,31,459 1,57,708 1,80,341 1,80,066 14.4 3.1. Cash in Hand 3,367 6,770 6,260 4,458 7,963 5,094 78.6 3.2. Deposits with Banks 64,062 89,260 1,25,199 1,53,250 1,72,378 1,74,972 12.5 4. Other Current Assets 98,803 1,24,170 1,80,281 1,59,543 1,65,364 1,75,179 3.6 5. Other Assets 25,739 50,560 45,577 39,629 72,581 75,414 83.2 Memo Items 1. Capital Market Exposure 1,61,874 1,39,965 1,62,749 1,91,616 2,19,054 2,26,992 14.3 of which: Equity Shares 59,876 70,611 89,565 1,10,125 1,42,457 1,39,976 29.4 2. CME as per cent to Total Assets 6.9 5.0 5.1 5.5 5.7 5.9 3. Leverage Ratio 3.9 4.1 4.9 4.5 4.3 4.6 Notes: 1. Data are provisional. 2. Percentage figures are rounded-off to one decimal place. 3. Excluding CICs and PDs. Source: Quarterly returns of NBFCs, RBI. 197Report on Trend and Progress of Banking in India 2021-22 Appendix Table VI.2 : Consolidated Balance Sheet of NBFCs-ND-SI (Amount in ` crore) Item End-March End-March End-March End-March End-March End- Percentage 2018 2019 2020 2021 2022 September variation 2022 2021-22 1 2 3 4 5 6 7 8 1. Share Capital 91,545 98,041 1,18,610 1,18,011 1,24,241 1,22,112 5.3 2. Reserves & Surplus 3,39,179 3,83,655 4,27,288 5,78,731 6,65,668 6,03,592 15.0 3. Public Deposits - - - - - - 4. Total Borrowings (A+B) 14,72,716 17,32,680 19,40,954 20,65,567 22,50,360 22,57,631 8.9 A. Secured Borrowings 7,52,488 8,85,800 10,51,652 10,82,638 12,13,224 12,12,569 12.1 A.1. Debentures 4,07,105 4,23,738 4,13,555 4,60,918 4,71,208 4,75,121 2.2 A.2. Borrowings from Banks 2,83,386 3,83,654 4,48,215 5,03,397 6,08,726 6,02,420 20.9 A.3. Borrowings from FIs 19,430 24,051 49,542 33,609 45,946 51,924 36.7 A.4. Interest Accrued 15,499 13,839 14,404 14,782 16,397 12,272 10.9 A.5. Others 27,067 40,518 1,25,935 69,931 70,946 70,832 1.5 B. Un-Secured Borrowings 7,20,228 8,46,880 8,89,302 9,82,930 10,37,136 10,45,062 5.5 B.1. Debentures 3,35,698 3,39,013 3,89,607 4,22,977 4,26,300 4,23,369 0.8 B.2. Borrowings from Banks 58,420 1,19,813 1,22,307 1,56,888 1,76,363 1,86,226 12.4 B.3. Borrowings from FIs 8,318 9,700 5,906 11,076 9,113 8,054 -17.7 B.4. Borrowings from Relatives 2,223 1,909 2,561 4,127 2,779 1,588 -32.7 B.5. Inter-Corporate Borrowings 48,905 64,713 69,750 69,934 75,564 79,994 8.1 B.6. Commercial Paper 1,17,899 1,24,854 59,386 64,074 62,218 57,560 -2.9 B.7. Interest Accrued 16,969 13,953 15,509 18,523 17,142 16,935 -7.5 B.8. Others 1,31,796 1,72,926 2,24,277 2,35,332 2,67,657 2,71,335 13.7 5. Current Liabilities & Provisions 1,10,709 1,88,933 1,95,461 2,23,633 2,48,075 2,51,078 10.9 Total Liabilities/ Total Assets 20,14,150 24,03,310 26,82,313 29,85,943 32,88,344 32,34,413 10.1 1. Loans & Advances 16,34,294 19,16,352 20,46,134 22,78,224 24,47,059 24,51,024 7.4 1.1. Secured 12,44,815 13,42,155 15,29,828 16,71,935 18,84,879 18,75,417 12.7 1.2. Un-Secured 3,89,479 5,74,197 5,16,306 6,06,289 5,62,180 5,75,607 -7.3 2. Investments 2,07,838 2,35,117 3,08,724 3,98,236 4,68,413 3,98,252 17.6 2.1. Govt. Securities 5,392 11,790 59,659 29,706 39,613 47,875 33.3 2.2. Equity Shares 1,07,302 1,28,494 1,34,110 2,53,551 2,87,756 2,07,395 13.5 2.3. Preference Shares 6,784 6,419 6,174 5,789 6,678 5,964 15.3 2.4. Debentures & Bonds 39,197 34,091 34,199 26,453 33,443 31,047 26.4 2.5. Units of Mutual Funds 31,272 39,615 49,803 55,738 62,187 63,672 11.6 2.6. Commercial Paper 1,641 533 423 939 1,614 901 72.0 2.7. Other Investments 16,250 14,175 24,356 26,061 37,123 41,398 42.4 3. Cash & Bank Balances 58,634 86,244 1,14,184 1,23,474 1,48,174 1,48,793 20.0 3.1. Cash in Hand 3,041 6,323 6,120 4,081 7,326 4,427 79.5 3.2. Deposits with Banks 55,593 79,920 1,08,063 1,19,393 1,40,848 1,44,366 18.0 4. Other Current Assets 89,371 1,16,638 1,68,481 1,46,988 1,52,703 1,63,808 3.9 5. Other Assets 24,013 48,959 44,790 39,021 71,994 72,536 84.5 Memo Items 1. Capital Market Exposure 1,53,542 1,30,334 1,52,724 1,79,375 2,03,294 2,14,899 13.3 of which: Equity Shares 59,439 70,095 84,051 1,04,378 1,41,899 1,39,441 35.9 2. CME as per cent to Total Assets 7.6 5.4 5.7 6.0 6.3 6.6 3. Leverage Ratio 3.7 4.0 4.9 4.4 4.3 4.6 Notes: 1. Data are provisional. 2. Percentage figures are rounded-off to one decimal place. 3. Excluding CICs and PDs. Source: Quarterly returns of NBFCs-ND-SI, RBI. 198APPENDIX TABLES Appendix Table VI.3 : Consolidated Balance Sheet of NBFCs-D (Amount in ` crore) Item End-March End-March End-March End-March End-March End- Percentage 2018 2019 2020 2021 2022 September variation 2022 2021-22 1 2 3 4 5 6 7 8 1. Share Capital 3,262 5,202 7,191 8,463 7,000 4,976 -17.3 2. Reserves & Surplus 51,043 61,959 78,577 92,422 1,04,541 1,09,665 13.1 3. Public Deposits 30,129 40,057 50,022 62,262 70,754 71,640 13.6 4. Total Borrowings (A+B) 2,11,947 2,70,128 2,94,382 2,86,111 3,00,731 3,27,065 5.1 A. Secured Borrowings 1,67,050 2,21,117 2,53,562 2,47,492 2,60,029 2,74,443 5.1 A.1. Debentures 82,964 97,265 99,553 93,559 1,02,894 1,04,668 10.0 A.2. Borrowings from Banks 70,029 1,06,079 1,24,038 1,14,499 1,19,540 1,34,936 4.4 A.3. Borrowings from FIs 3,455 4,976 8,068 12,670 11,359 10,897 -10.3 A.4. Interest Accrued 5,193 3,119 3,328 4,482 3,655 2,335 -18.5 A.5. Others 5,408 9,678 18,576 22,282 22,581 21,606 1.3 B. Un-Secured Borrowings 44,897 49,010 40,820 38,620 40,702 52,622 5.4 B.1. Debentures 473 1,892 3,785 5,122 6,094 6,646 19.0 B.2. Borrowings from Banks 1,326 151 350 315 85 150 -73.0 B.3. Borrowings from FIs - - - - - - - B.4. Borrowings from Relatives 101 86 82 69 45 43 -34.2 B.5. Inter-Corporate Borrowings 5,195 7,390 8,529 7,906 11,099 15,580 40.4 B.6. Commercial Paper 18,173 18,112 7,478 8,523 7,899 14,780 -7.3 B.7. Interest Accrued 4,197 3,645 3,491 955 1,066 1,089 11.6 B.8 Others 15,432 17,736 17,104 15,730 14,414 14,334 -8.4 5. Current Liabilities & Provisions 44,729 44,209 56,653 69,135 69,551 70,414 0.6 Total Liabilities/ Total Assets 3,41,110 4,21,829 4,86,825 5,18,392 5,52,577 5,83,760 6.6 1. Loans & Advances 3,09,199 3,79,019 4,17,807 4,24,394 4,61,684 4,86,028 8.8 1.1. Secured 2,55,662 3,07,573 3,28,907 2,92,960 3,58,091 3,79,176 22.2 1.2. Un-Secured 53,538 71,446 88,899 1,31,434 1,03,593 1,06,851 -21.2 2. Investments 11,957 23,891 39,151 46,601 45,479 52,210 -2.4 2.1. Govt. Securities 4,938 5,538 9,118 17,733 25,674 27,664 44.8 2.2. Equity Shares 3,111 6,901 10,343 10,381 10,985 12,984 5.8 2.3. Preference Shares 695 225 265 284 3 3 -98.9 2.4. Debentures & Bonds 1,668 1,355 496 294 314 316 6.9 2.5. Units of Mutual Funds 336 4,807 15,302 11,198 4,523 4,546 -59.6 2.6. Commercial Paper 494 857 852 511 100 28 -80.4 2.7. Other Investments 714 5,272 2,773 6,200 3,880 6,670 -37.4 3. Cash & Bank Balances 8,795 9,786 17,275 34,235 32,167 31,272 -6.0 3.1. Cash in Hand 326 447 139 377 636 666 68.6 3.2. Deposits with Banks 8,469 9,339 17,136 33,857 31,530 30,606 -6.9 4. Other Current Assets 9,432 7,531 9,494 12,555 12,661 11,371 0.8 5. Other Assets 1,727 1,601 3,093 608 587 2,878 -3.4 Memo Items 1. Capital Market Exposure 8,331 9,630 10,025 12,241 15,761 12,092 28.8 of which: Equity Shares 437 516 5,514 5,747 558 536 -90.3 2. CME as per cent to Total Assets 2.4 2.3 2.1 2.4 2.9 2.1 3. Leverage Ratio 5.3 5.7 5.0 4.5 4.2 4.4 Notes: 1. Data are provisional. 2. Percentage figures are rounded-off to one decimal place. Source: Quarterly returns of NBFCs-D, RBI. 199Report on Trend and Progress of Banking in India 2021-22 Appendix Table VI.4: Credit to Various Sectors by NBFCs (Amount in ` crore) Items End- March End- March End- March End- Percentage 2020 2021 2022 September variation 2022 2021-22 1 2 3 4 5 6 I. Gross Advances (II + III) 24,63,943 27,02,618 29,08,743 29,37,051 7.6 II. Food Credit 75 - - 1,752 - III. Non-Food Credit (1 to 5) 24,63,868 27,02,618 29,08,743 29,35,299 7.6 1. Agriculture and Allied Activities 34,448 37,728 50,422 46,464 33.6 2. Industry (2.1 to 2.4) 9,58,468 10,60,411 11,12,852 11,15,749 4.9 2.1 Micro and Small 36,441 44,235 46,967 49,966 6.2 2.2 Medium 14,077 14,910 17,186 15,103 15.3 2.3 Large 7,95,188 8,54,546 8,94,102 8,99,619 4.6 2.4 Others, if any, Please specify 1,12,762 1,46,720 1,54,598 1,51,061 5.4 3. Services (3.1 to 3.10) 3,48,901 3,30,758 4,02,935 3,81,485 21.8 3.1 Transport Operators 63,963 65,313 1,02,742 90,059 57.3 3.2 Computer Software 1,391 1,706 1,659 1,462 -2.7 3.3 Tourism, Hotel and Restaurants 7,035 8,453 7,673 7,177 -9.2 3.4 Shipping 165 140 172 167 22.9 3.5 Professional Services 14,664 16,396 20,749 21,592 26.5 3.6 Trade 33,864 33,594 49,928 54,951 48.6 3.6.1 Wholesale Trade (other than Food Procurement) 7,142 6,875 9,538 9,885 38.7 3.6.2 Retail Trade 26,722 26,719 40,390 45,066 51.2 3.7 Commercial Real Estate 1,01,454 80,480 88,123 79,754 9.5 3.8 NBFCs 26,647 28,671 34,292 32,757 19.6 3.9 Aviation 801 948 1,143 1,301 20.5 3.10 Other Services 98,917 95,058 96,455 92,265 1.5 4. Retail Loans (4.1 to 4.10) 7,34,795 7,90,073 8,29,485 8,79,571 5.0 4.1 Housing Loans (incl. priority sector Housing) 14,071 21,484 23,329 24,680 8.6 4.2 Consumer Durables 19,171 18,519 24,802 27,464 33.9 4.3 Credit Card Receivables 24,606 25,991 32,710 40,166 25.8 4.4 Vehicle/Auto Loans 3,32,449 3,57,338 3,34,947 3,54,966 -6.3 4.5 Education Loans 9,049 9,277 14,264 7,879 53.8 4.6 Advances against Fixed Deposits (incl. FCNR(B), etc.) 44 31 42 213 36.2 4.7 Advances to Individuals against Shares, Bonds, etc. 7,940 8,298 12,998 13,398 56.6 4.8 Advances to Individuals against Gold 75,451 1,12,899 1,18,918 1,18,723 5.3 4.9 Micro finance loan/SHG Loan 45,107 59,635 74,826 77,567 25.5 4.10 Other Retail Loans 2,06,907 1,76,600 1,92,648 2,14,513 9.1 5. Other Non-food Credit 3,87,256 4,83,648 5,13,050 5,12,031 6.1 Notes: 1. Data are provisional. 2. Percentage figures are rounded-off to one decimal place. 3. Excluding CICs and PDs. Source: Quarterly returns of NBFCs, RBI. 200APPENDIX TABLES Appendix Table VI.5 : Financial Performance of NBFCs - ND-SI (Amount in ` crore) Items 2020 2021 2022 (P) H1: 2022-23 1 2 3 4 5 A. Total Income 2,76,203 2,89,157 3,03,831 1,69,696 (i) Fund Based Income 2,59,320 2,70,172 2,81,508 1,45,440 (93.9) (93.4) (92.7) (85.7) (ii) Fee Based Income 8,692 8,233 11,340 7,074 (3.1) (2.8) (3.7) (4.2) B. Expenditure 2,35,021 2,44,869 2,39,645 1,25,955 (i) Financial Expenditure 1,47,014 1,44,816 1,42,896 74,449 (62.6) (59.1) (59.6) (59.1) of which, Interest payment 67,730 68,738 67,450 34,705 (28.8) (28.1) (28.1) (27.6) (ii) Operating Expenditure 42,258 39,334 48,479 25,046 (18.0) (16.1) (20.2) (19.9) (iii) Others 45,749 60,719 48,270 26,460 (19.5) (24.8) (20.1) (21.0) C. Tax Provisions 12,872 11,387 15,663 7,975 D. Profit Before Tax 41,182 44,288 64,186 43,741 E. Net Profit 28,310 32,901 48,523 35,766 F. Total Assets 26,82,313 29,85,943 32,88,344 32,34,413 G. Financial Ratios (as Per cent of Total Assets) (i) Income 10.3 9.7 9.2 10.5 (ii) Fund Income 9.7 9.0 8.6 9.0 (iii) Fee Income 0.3 0.3 0.3 0.4 (iv) Expenditure 8.8 8.2 7.3 7.8 (v) Financial Expenditure 5.5 4.8 4.3 4.6 (vi) Operating Expenditure 1.6 1.3 1.5 1.5 (vii) Tax Provision 0.5 0.4 0.5 0.5 (viii) Net Profit 1.1 1.1 1.5 2.2 H. Cost to Income (percentage) 85.1 84.7 78.9 74.2 Notes: 1. Data are provisional. 2. Total income includes non-financial income as well, which is not reported in the table. 3. Excluding CICs and PDs. 4. Figures in parentheses are share (in per cent) to respective total. 5. Percentage figures are rounded-off to one decimal place. Source: Quarterly returns of NBFCs-ND-SI, RBI. 201Report on Trend and Progress of Banking in India 2021-22 Appendix Table VI.6: Financial Performance of NBFCs-D (Amount in ` crore) Items 2020 2021 2022 (P) H1: 2022-23 1 2 3 4 5 A. Total Income 66,574 67,095 72,732 39,893 (i) Fund Based Income 64,278 65,547 70,478 38,411 (96.6) (97.7) (96.9) (96.3) (ii) Fee Based Income 131 107 301 172 (0.2) (0.2) (0.4) (0.4) B. Expenditure 51,461 55,504 55,282 27,411 (i) Financial Expenditure 27,893 28,386 29,620 14,560 (54.2) (51.1) (53.6) (53.1) of which, Interest payment 11,620 13,435 15,653 7,289 (22.6) (24.2) (28.3) (26.6) (ii) Operating Expenditure 12,514 11,371 12,983 8,116 (24.3) (20.5) (23.5) (29.6) (iii) Others 11,054 15,747 12,680 4,735 (21.5) (28.4) (22.9) (17.3) C. Tax Provisions 4,398 2,913 4,130 3,045 D. Profit Before Tax 15,114 11,591 17,449 12,482 E. Net Profit 10,716 8,677 13,319 9,437 F. Total Assets 4,86,823 5,18,392 5,52,577 5,83,760 G. Financial Ratios (as Per cent of Total Assets) (i) Income 13.7 12.9 13.2 13.7 (ii) Fund Income 13.2 12.6 12.8 13.2 (iii) Fee Income 0.0 0.0 0.1 0.1 (iv) Expenditure 10.6 10.7 10.0 9.4 (v) Financial Expenditure 5.7 5.5 5.4 5.0 (vi) Operating Expenditure 2.6 2.2 2.3 2.8 (vii) Tax Provision 0.9 0.6 0.7 1.0 (viii) Net Profit 2.2 1.7 2.4 3.2 H. Cost to Income (percentage) 77.3 82.7 76.0 68.7 Notes: 1. Data are provisional. 2. Total income includes non-financial income as well, which is not reported in the table. 3. Figures in parentheses are share (in per cent) to respective total. 4. Percentage figures are rounded-off to one decimal place. Source: Quarterly returns of NBFCs-D, RBI. 202APPENDIX TABLES Appendix Table VI.7: Financial Assistance Sanctioned and Disbursed by Financial Institutions (Continued) (Amount in ` crore) Institutions Loans* 2020-21 2021-22 Apr-Sep 2021 Apr-Sep 2022 S D S D S D S D 1 2 3 4 5 6 7 8 9 A. All India financial institutions (1 to 4) 6,32,385 5,23,958 6,11,600 6,01,320 1,97,937 2,03,381 2,66,391 2,66,596 1. NABARD 4,59,205 3,49,470 3,79,618 3,77,748 1,18,766 1,27,551 86,717 90,270 2. SIDBI 96,718 97,542 1,46,668 1,45,311 43,206 42,530 1,44,940 1,42,478 3. EXIM Bank 36,521 34,122 54,807 52,271 27,603 19,452 20,263 23,561 4. NHB@ 39,941 42,824 30,507 25,990 8,362 13,847 14,470 10,286 B. Specialised financial institutions (5, 6 and 7) 469 457 237 277 174 124 142 111 5. IVCF 0 0 0 0 0 0 0 0 6. ICICI venture - - - - - - - - 7. TFCI 469 457 237 277 174 124 142 111 C. Investment institutions (8 and 9) 13 0.5 0 0 0 0 0 0 8. LIC 13 0.5 0 0 0 0 0 0 9. GIC 0 0 0 0 0 0 0 0 D. Financial Institutions (A+B+C) 6,32,867 5,24,416 6,11,837 6,01,597 1,98,111 2,03,505 2,66,533 2,66,706 E. State level institutions (10 and 11) 6,473 5,497 5,828 4,578 .. .. .. .. 10. SFCs^ 6,473 5,497 5,828 4,578 .. .. .. .. 11. SIDCs .. .. .. .. .. .. .. .. F. Total assistance by all financial institutions (D+E) 6,39,340 5,29,913 6,17,665 6,06,176 1,98,111 2,03,505 2,66,533 2,66,706 S: Sanctions. D: Disbursements. _: Nil. .. : Not Available. n.m.: Not Meaningful. *: Loans include rupee loans and foreign currency loans. @: The data pertains to April-March while NHB’s financial year runs from July-June. #: Others include guarantees. ^: Data pertains to ten SFCs. Notes: 1. Data are provisional. 2. Components may not add up to the total due to rounding off. Source: The respective financial institutions. 203Report on Trend and Progress of Banking in India 2021-22 Appendix Table VI.7: Financial Assistance Sanctioned and Disbursed by Financial Institutions (Continued) (Amount in ` crore) Institutions Underwriting and Direct Subscription 2020-21 2021-22 Apr-Sep 2021 Apr-Sep 2022 S D S D S D S D 1 10 11 12 13 14 15 16 17 A. All India financial institutions (1 to 4) 1,631 573 1,871 1,091 350 456 160 579 1. NABARD 0 0 0 0 0 0 0 0 2. SIDBI 1,631 573 1,871 1,091 350 456 160 579 3. EXIM Bank 0 0 0 0 0 0 0 0 4. NHB@ 0 0 0 0 0 0 0 0 B. Specialised financial institutions (5, 6 and 7) 0 0 0 0 0 0 0 0 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 (8 and 9) 1,23,128 42,182 95,527 38,163 51,327 13,344 43,731 22,844 8. LIC 1,23,128 42,182 95,527 38,163 51,327 13,344 43,731 22,844 9. GIC 0 0 0 0 0 0 0 0 D. Financial Institutions (A+B+C) 1,24,759 42,755 97,398 39,254 51,677 13,799 43,891 23,423 E. State level institutions (10 and 11) 0 0 0 0 .. .. .. .. 10. SFCs^ 0 0 0 0 .. .. .. .. 11. SIDCs .. .. .. .. .. .. .. .. F. Total assistance by all financial institutions (D+E) 1,24,759 42,755 97,398 39,254 51,677 13,799 43,891 23,423 S: Sanctions. D: Disbursements. _: Nil. .. : Not Available. n.m.: Not Meaningful. *: Loans include rupee loans and foreign currency loans. @: The data pertains to April-March while NHB’s financial year runs from July-June. #: Others include guarantees. ^: Data pertains to ten SFCs. Notes: 1. Data are provisional. 2. Components may not add up to the total due to rounding off. Source: The respective financial institutions. 204APPENDIX TABLES Appendix Table VI.7: Financial Assistance Sanctioned and Disbursed by Financial Institutions (Continued) (Amount in ` crore) Institutions Others# 2020-21 2021-22 Apr-Sep 2021 Apr-Sep 2022 S D S D S D S D 1 18 19 20 21 22 23 24 25 A. All India financial institutions (1 to 4) 7,071 3,623 14,844 4,623 4,746 2,117 8,530 1,328 1. NABARD 644 552 778 639 155 160 248 152 2. SIDBI 5 0 11 0 1 0 3 0 3. EXIM Bank 6,422 3,071 14,055 3,984 4,590 1,957 8,279 1,176 4. NHB@ 0 0 0 0 0 0 0 0 B. Specialised financial institutions (5, 6 and 7) 0 0 0 0 0 0 0 0 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 (8 and 9) 200 192 1,829 370 1,350 233 250 118 8. LIC 200 192 1,829 370 1,350 233 250 118 9. GIC 0 0 0 0 0 0 0 0 D. Financial Institutions (A+B+C) 7,271 3,815 16,673 4,993 6,096 2,350 8,780 1,446 E. State level institutions (10 and 11) 0 0 0 0 .. .. .. .. 10. SFCs^ 0 0 0 0 .. .. .. .. 11. SIDCs .. .. .. .. .. .. .. .. F. Total assistance by all financial institutions (D+E) 7,271 3,815 16,673 4,993 6,096 2,350 8,780 1,446 S: Sanctions. D: Disbursements. _: Nil. .. : Not Available. n.m.: Not Meaningful. *: Loans include rupee loans and foreign currency loans. @: The data pertains to April-March while NHB’s financial year runs from July-June. #: Others include guarantees. ^: Data pertains to ten SFCs. Notes: 1. Data are provisional. 2. Components may not add up to the total due to rounding off. Source: The respective financial institutions. 205Report on Trend and Progress of Banking in India 2021-22 Appendix Table VI.7: Financial Assistance Sanctioned and Disbursed by Financial Institutions (Concluded) (Amount in ` crore) Institutions Total Percentage variation 2020-21 2021-22 Apr-Sep 2021 Apr-Sep 2022 2021-22 Apr-Sep 2022 (Y-o-Y) 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 institutions 6,41,087 5,28,154 6,28,315 6,07,034 2,03,033 2,05,953 2,75,081 2,68,502 -2.0 14.9 35.5 30.4 (1 to 4) 1. NABARD 4,59,849 3,50,022 3,80,396 3,78,387 1,18,921 1,27,711 86,965 90,423 -17.3 8.1 -26.9 -29.2 2. SIDBI 98,354 98,115 1,48,550 1,46,402 43,558 42,985 1,45,104 1,43,057 51.0 49.2 233.1 232.8 3. EXIM Bank 42,943 37,193 68,862 56,255 32,193 21,410 28,542 24,737 60.4 51.3 -11.3 15.5 4. NHB@ 39,941 42,824 30,507 25,990 8,362 13,847 14,470 10,286 -23.6 -39.3 73.0 -25.7 B. Specialised financial institutions 469 457 237 277 174 124 142 111 -49.4 -39.3 -18.1 -10.9 (5, 6 and 7) 5. IVCF 0 0 0 0 0 0 0 0 n.m. n.m. n.m. n.m. 6. ICICI venture - - - - - - - - - - - - 7. TFCI 469 457 237 277 174 124 142 111 -49.4 -39.3 -18.1 -10.9 C. Investment institutions (8 and 9) 1,23,341 42,374 97,356 38,533 52,677 13,577 43,981 22,963 -21.1 -9.1 -16.5 69.1 8. LIC 1,23,341 42,374 97,356 38,533 52,677 13,577 43,981 22,963 -21.1 -9.1 -16.5 69.1 9. GIC 0 0 0 0 0 0 0 0 n.m. n.m. n.m. n.m. D. Financial Institutions (A+B+C) 7,64,897 5,70,985 7,25,908 6,45,844 2,55,884 2,19,654 3,19,205 2,91,576 -5.1 13.1 24.7 32.7 E. State level institutions (10 and 6,473 5,497 5,828 4,578 .. .. .. .. -10.0 -16.7 .. .. 11) 10. SFCs^ 6,473 5,497 5,828 4,578 .. .. .. .. -10.0 -16.7 .. .. 11. SIDCs .. .. .. .. .. .. .. .. .. .. .. .. F. Total assistance by all financial 7,71,370 5,76,482 7,31,736 6,50,422 2,55,884 2,19,654 3,19,205 2,91,576 -5.1 12.8 24.7 32.7 institutions (D+E) S: Sanctions. D: Disbursements. _: Nil .. : Not Available. n.m.: Not Meaningful. *: Loans include rupee loans and foreign currency loans. @: The data pertains to April-March while NHB’s financial year runs from July-June. #: Others include guarantees. ^: Data pertains to ten SFCs. Notes: 1. Data are provisional. 2. Components may not add up to the total due to rounding off. Source: The respective financial institutions. 206APPENDIX TABLES Appendix Table VI.8 Financial Performance of Primary Dealers (Continued) (Amount in ` crore) Sl. Name of the Primary Dealers Year Income No. Interest income Trading profit Other income Total income (including discount income) 1 2 3 4 5 6 7 1 STCI Primary Dealer Ltd. 2020-21 449 173 7 629 2021-22 600 27 -48 579 H1: 2022-23 365 -61 -21 282 2 SBI DFHI Ltd. 2020-21 730 32 16 779 2021-22 631 29 16 676 H1: 2022-23 400 -22 3 381 3 ICICI Securities Primary Dealership Ltd. 2020-21 999 554 70 1624 2021-22 846 109 64 1019 H1: 2022-23 471 -63 16 425 4 PNB Gilts Ltd. 2020-21 779 272 21 1072 2021-22 971 -137 21 855 H1: 2022-23 619 -121 5 503 5 Morgan Stanley India Primary Dealer Pvt. Ltd. 2020-21 607 -12 54 650 2021-22 648 -157 19 511 H1: 2022-23 345 -66 1 280 6 Nomura Fixed Income Securities Pvt. Ltd. 2020-21 452 -6 17 462 2021-22 288 -83 11 216 H1: 2022-23 135 -46 1 91 7 Goldman Sachs (India) Capital Markets Pvt. Ltd. 2020-21 157 -6 19 170 2021-22 155 -31 24 147 H1: 2022-23 106 -17 5 93 8 Total 2020-21 4,173 1,008 205 5,386 2021-22 4,139 -244 107 4,002 H1: 2022-23 2,441 -396 10 2,055 Note: All amounts are rounded off to the nearest crore. Source: Returns submitted by the Primary Dealers. 207Report on Trend and Progress of Banking in India 2021-22 Appendix Table VI.8 Financial Performance of Primary Dealers (Concluded) (Amount in ` crore) Sl. Name of the Primary Dealers Year Expenditure Profit Profit Return on No. before tax after tax networth Interest Other Total (per cent) expenses expenses expenditure 1 2 3 8 9 10 11 12 13 1 STCI Primary Dealer Ltd. 2020-21 294 28 322 307 228 33.4 2021-22 415 27 442 137 100 13.3 H1: 2022-23 283 16 299 -17 -13 -1.7 2 SBI DFHI Ltd. 2020-21 379 42 421 346 251 22.5 2021-22 336 43 378 191 142 11.5 H1: 2022-23 297 21 319 -74 -56 -4.7 3 ICICI Securities Primary Dealership Ltd. 2020-21 504 118 622 762 569 40.2 2021-22 472 132 603 444 330 21.4 H1: 2022-23 372 67 439 153 114 7.5 4 PNB Gilts Ltd. 2020-21 395 41 436 617 464 35.3 2021-22 510 37 547 210 166 11.9 H1: 2022-23 441 22 463 -114 -97 -7.3 5 Morgan Stanley India Primary Dealer Pvt. Ltd. 2020-21 291 60 350 278 204 11.5 2021-22 306 55 361 237 178 8.1 H1: 2022-23 233 28 261 114 85 3.7 6 Nomura Fixed Income Securities Pvt. Ltd. 2020-21 204 39 243 217 181 17.3 2021-22 133 52 184 -4 -4 -0.3 H1: 2022-23 89 22 112 86 64 5.7 7 Goldman Sachs (India) Capital Markets Pvt. Ltd. 2020-21 63 35 98 55 41 6.8 2021-22 67 39 105 37 25 3.8 H1: 2022-23 78 23 102 6 5 0.7 8 Total 2020-21 2,130 364 2,493 2,582 1,938 26.0 2021-22 2,238 384 2,622 1,253 937 11.6 H1: 2022-23 1,794 201 1,995 153 102 1.2 Note: All amounts are rounded off to the nearest crore. Source: Returns submitted by the Primary Dealers. 208APPENDIX TABLES Appendix Table VI.9: Select Financial Indicators of Primary Dealers (Continued) (Amount in ` crore) Sr. Name of the Primary Dealers Capital funds (Tier I + Tier II+ Eligible Tier III) CRAR ( Per cent) No. 2018-19 2019-20 2020-21 2021-22 H1: 2018-19 2019-20 2020-21 2021-22 H1: 2022-23 2022-23 1 2 3 4 5 6 7 8 9 10 11 12 1 STCI Primary Dealer Ltd. 493 493 731 777 740 23.3 23.0 29.0 32.0 19.5 2 SBI DFHI Ltd. 954 1,054 1,245 1,311 1,172 67.0 35.0 33.0 42.0 32.3 3 ICICI Securities Primary 1,453 1,456 1,723 1,899 1,690 28.0 39.0 44.0 48.0 40.6 Dealership Ltd. 4 PNB Gilts Ltd. 886 1,043 1,316 1,427 1,241 37.0 34.0 46.0 66.4 22.0 5 Morgan Stanley India Primary 919 1,118 2,105 2,290 2,277 62.0 81.0 51.9 58.5 79.7 Dealer Pvt. Ltd 6 Nomura Fixed Income Securities 797 919 1,077 1,068 1,021 40.0 41.5 60.2 49.0 32.3 Pvt. Ltd. 7 Goldman Sachs (India) Capital 547 582 625 648 630 133.0 170.0 109.2 116.2 74.1 Markets Pvt. Ltd. Total 6,049 6,665* 8,822* 9,420 8,771 40.7 41.9* 45.4* 51.6 36.4 Notes: 1. All amounts are rounded off to the nearest crore. 2. *: Revised figures. Source: Returns submitted by the Primary Dealers. 209Report on Trend and Progress of Banking in India 2021-22 Appendix Table VI.9: Select Financial Indicators of Primary Dealers (Concluded) (Amount in ` crore) Sr. Name of the Primary Dealers Stock of government securities and treasury bills Total assets (Net of current liabilities and No. (Market value) provisions) 2018-19 2019-20 2020-21 2021-22 H1: 2018-19 2019-20 2020-21 2021-22 H1: 2022-23 2022-23 1 2 13 14 15 16 17 18 19 20 21 22 1 STCI Primary Dealer Ltd. 8,219 7,151 11,230 13,616 12,794 9,361 8,187 11,423 12,024 10,408 2 SBI DFHI Ltd. 4,955 7,892 6,840 12,390 15,691 7,152 11,328 9,958 12,659 15,851 3 ICICI Securities Primary 7,723 14,748 14,044 15,864 16,989 11,431 15,815 18,099 17,534 16,031 Dealership Ltd. 4 PNB Gilts Ltd. 6,584 10,664 9,316 15,273 15,409 9,141 13,207 11,190 14,887 13,788 5 Morgan Stanley India Primary 9,891 10,821 10,564 13,646 6,916 10,264 11,655 13,029 15,078 8,844 Dealer Pvt. Ltd 6 Nomura Fixed Income Securities 3,938 3,997 2,737 4,849 4,387 5,248 5,704 4,452 5,629 5,568 Pvt. Ltd. 7 Goldman Sachs (India) Capital 2,411 2,616 3,457 3,468 2,119 2,535 3,675 3,836 4,723 2,926 Markets Pvt. Ltd. Total 43,722 57,888 58,187 79,106 74,306 55,133 69,573 71,986 82,535 73,416 Note: All amounts are rounded off to the nearest crore. Source: Returns submitted by the Primary Dealers. 210