EXECUTIVE SUMMARY

The presentation covers sector analysis of BFSI industry starting with the
discussions on basic structure of financial sectors and bank and the kinds
of financial markets that are present in India. Trends regarding
investments in various markets, credit growth, deposits growth and
sector deployment of credit have been discussed. The present sheds
some light on Asset quality and NPAs analysis and Profitability of the
banks in India. Demonetization and its impact on Indian Financial sector,
by increasing online transactions and boost to fintech sector due to
government initiatives and ever increasing digital savvy population is
covered. Towards the end impact of Technologies like ‘Blockchain’ and
‘IoT’, which are transforming almost every sector, on Finance sector has
been examined.
 BANKING, FINANCIAL SERVICES AND INSURANCE (BFSI)

The Indian financial sector has emerged as

a substantial segment of the economy
comprising diverse financial institution and
various markets
FINANCIAL MARKETS IN INDIA
 STRUCTURE OF BANKS

All the banks in India were earlier PRIVATE BANKS.

They were founded in the pre-independence era to cater to

the banking needs of the people.

After nationalization of banks in 1969 PUBLIC SECTOR

BANKS came to occupy dominant role in the banking
structure.

Private sector banking in India received a fillip in 1994 when

RESERVE BANK OF INDIA encouraged setting up of private
banks as part of its policy of liberalization of the Indian
Banking Industry

HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED

(HDFC) was amongst the first to receive an 'in principle'
approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector
 INVESTMENT MANAGEMENT

Development of digital tools and services in IM is

attracting a new set of first time millennial investors.
Current penetration of IM services is very low,
preferred channel for investors being the savings in
deposits through banks.

Customers are moving to automated platforms,

fewer IM products will be sold through own
advisory channels resulting in increased
competition amongst existing players in
specialized segments or services.

Data being major disruptor in IM, empowers investors

and service providers. Service providers monetize data
assets by targeting product and service decisioning.
Financial positions are readily provided to investors,
empowering them to execute investment strategies
 BUSINESS GROWTH

Credit growth in India has seen a declining trend over

the last three years due to decline in economic
activity leading to moderation in industrial output,
leveraged corporate balance sheets and low capital.
FY17 credit growth was at 4.7% which was lowest in
growth rate in over a decade

Incremental Credit 2014 2015 2016 2017

Shift in incremental growth has been towards services and
retail segments while incremental credit to industry has Agriculture & Allied 12% 21% 22% 19%
been negative during FY17. Activities
Retail segment has become lucrative due to Industry 43% 30% 13% -9%
diversification of risk over a large number of borrowers,
Services 28% 16% 24% 51%
development of credit bureaus to increasing awareness
about credit history among retail borrowers and Retail 17% 33% 42% 39%
technology helping lenders to rely upon analytics to Housing (Incl. Priority 12% 19% 22% 19%
estimate losses in retail segments Sector Housing)
DEPOSITS GROWTH

In line with the trend in credit growth, deposit

growth had seen a declining trend over the
three years

However, during FY17, deposit growth

increased to 11.2% largely supported by
Demonetization of high value currency notes
during November and December, 2016

The low cost Current AccountSaving Account

(CASA) deposits witnessed a growth 21.4%
during FY17 as against growth 9.8% during FY
16
SECTOR DEPLOYMENT OF CREDIT

Major sector for non-food credit

deployment:

• Infrastructure
• metal and metal products
(including iron & steel)
• Textiles
• Chemicals & chemical products
• Engineering
• Food processing.
 ASSET QAULITY

Gross NPAs of banks increased from around Rs.3 The overall Gross NPAs ratio increased from
lakh crore as on March 31, 2015 to nearly Rs.6 4.36% as on March 31, 2015 to 9.20% as on
lakh crore as on March 31, 2016 which jumped to March 31, 2017.
over Rs.7 lakh crore as on March 31, 2017 (Care
ratings)

As compared to PSBs, the private sector banks Public Sector Banks (PSBs) have witnessed a
continued to have strong net worth coverage to higher deterioration in asset quality as compared
Net NPA with Net NPA to Net worth ratio of to the private sector players. The Gross NPA ratio
13.03% as on March 31, 2017 as compared to for the PSBs studied by CARE Ratings increased
high 77.52% for PSBs. from 4.97% as on March 31, 2015 to 11.03% as on
March 31, 2017.
 NPA ANALYSIS

An industry-wise analysis of NPAs shows that the

major industries that have contributed to NPAs
are
metals (including iron & steel), infrastructure,
engineering, textiles, construction, chemicals and
gems &
jewellery.
 EARNINGS AND PROFITABILITY

• Profitability of the banks saw declining trend due to

worsening of asset quality
• Slow credit growth
• Deterioration in asset quality impacted the income growth
of banks
• PSBs reported growth of 3% in total income while private
banks reported growth of 13% during FY17
• overall Return on Total Assets (ROTA) for public sector
banks was negative for FY16 while it was near zero for FY17.
• Private sector, only one bank each reported loss during
F16 and FY17 respectively.
 IMPACT OF DEMONETISATION

Between 2011 and 2016, circulation of 500 rupee notes

grew 76% while 1000 rupee notes rose by 109%, far
outpacing the economy’s 30 percent growth India tops currency-GDP ratio among BRICS nations.
Currencies of all denominations held by the public dropped
in value, from INR 17 trillion in start of Oct 2016 to a low of
INR 7.8 trillion in December 2016.
IMPETUS TO MOBILE TRANSACTIONS DUE TO DEMONITISATION

India recorded over 49 crore mobile banking

transactions in December 2015, a month on month
increase of nearly 46%.

The electronic payments domain is marked

by significant risk of fraud. Some notable methods
of fraud are :

Site replication,
Credit card charge back
Phishing
Malware insertion
 INDIAN FINTECH SCENARIO: TO STAY AND TO GROW

• Combination of steady economic growth with low penetration of financial services.

• Large public sector banks and insurers lagging market growth.
• Regulatory forbearance toward FinTech.

• Indian Millennials rapidly ascending the adoption S-curve of digital financial services and thus perceiving higher
friction from incumbents.
• India Stack and internet data proliferation to improve financial services utility infrastructure and connectivity.
• Lower real interest rates in Indian economy
 GOVERNMENT INITIATIVES TO BOOST DIGITAL INDIA(1/2)

• Liberalization of the issuance of the coveted banking license - 2 Universal Banks,8 Payments Banks (of the 11 licenses
granted by RBI, 3 have surrendered it) and 10 Small Finance Banks.
• Foreign banks having an option to enjoy on par treatment with other banks in India.

• Announcement on the merger of the larger state run banks with the smaller and inefficient players, to salvage their
poor performance.
• NPCI’s) Unified Payment Interface (UPI), launched with the aim of achieving electronic payments.
 GOVERNMENT INITIATIVES TO BOOST DIGITAL INDIA(2/2)

The Indian Banks’ Association’s 2016 survey shows that almost 80 percent of transactions in the newer banks are made
through digital channels. Low-cost Indian platforms have been launched to promote digital payments—for example
RuPay, a cheaper, domestic alternative to international credit- or debit-card gateways such as MasterCard and Visa;
IMPACT ASSESSMENT ON PAYMENTS FINTECH
BLUEPRINT TO TRANSFORM INDIAN BANKING SECTOR
 TRENDS MAKE INDIAN BANKING INHERENTLY ATTRACTIVE

• India’s macroeconomic fundamentals continue to be strong. GDP grew at 7 percent in 2016, and International Monetary
Fund projections show an upward trend—growth could reach 7.7 percent by 2020.
• Government-backed initiatives like Aadhaar, DigiLocker, and IndiaStack.
BLOCKCHAIN FOR BANKS
 BLOCKCHAIN USE CASES FOR INDIAN BANKS(1/3)

• VENDOR FINANCING : Bank’s vendor financing program provides credit facilities such as Letter of credit, Bill discounting and
financing against purchase orders and invoices

WITHOUT BLOCKCHAIN WITH BLOCKCHAIN

 BLOCKCHAIN USE CASES FOR INDIAN BANKS(2/3)

• CUSTOMER LOYALTY PROGRAMS LOYALTY/REWARD POINTS are an integral part of the customer retention strategy across
industries.

WITHOUT BLOCKCHAIN WITH BLOCKCHAIN

 BLOCKCHAIN USE CASES FOR INDIAN BANKS(3/3)

• Syndicated Loans :Corporations undertake multiple large projects such as development of roads,airports, factories, new
business centers etc. which requires large-scale financing

WITHOUT BLOCKCHAIN WITH BLOCKCHAIN

 SYNDICATE LOANS WITH BLOCKCHAIN

HOW BLOCKCHAIN CAN HELP?

• Faster syndicate formation
• Quicker KYC for the Clients
• Reduced settlement periods would lead
to cost savings in the range of 70-80% for
a syndicate
• loan transaction facilitated by banks
• Fraud proof
• Digitization of documents
• Real time-tracking of transaction
• Automated documentation
• Technology integration
• Smooth integration of new merchants
• Document immutability
• Implementation of Blockchain
IOT TRANSFORMING BANKING
 IOT ENABLED BANK SERVICES

HOW IOT CAN HELP FINANCE SECTOR :

• Providing rewards, easy to access

• services to credit and debit card users.
• Analysing the usage of ATMs kiosk in specific
• Areas and increase/decrease the number of
ATMs.
• Bringing on demand services by providing
• Kiosks, and increased accessibility to customers.
• Identify customers business needs and their
value chain.
• Prediciting fraud in transactions.
• Minimise thefts and enable fast recovery of
loans
• By installing sensors in financed vehicles.