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Analysis of Bfsi Industry in India: Prepared by Devansh Verma

The banking industry in India consists of public sector banks, private sector banks, and foreign banks. Total assets in public banking were $1.60 trillion in FY21, while private banking assets were $0.87 trillion. Loans and advances make up the largest portion of bank assets. The industry has shown resilience during global downturns due to effective risk management. New innovative models like payments and small finance banks have also been introduced. While non-performing assets pose a risk, the overall industry remains stable and growing.

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Devansh Verma
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116 views4 pages

Analysis of Bfsi Industry in India: Prepared by Devansh Verma

The banking industry in India consists of public sector banks, private sector banks, and foreign banks. Total assets in public banking were $1.60 trillion in FY21, while private banking assets were $0.87 trillion. Loans and advances make up the largest portion of bank assets. The industry has shown resilience during global downturns due to effective risk management. New innovative models like payments and small finance banks have also been introduced. While non-performing assets pose a risk, the overall industry remains stable and growing.

Uploaded by

Devansh Verma
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© © All Rights Reserved
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ANALYSIS OF BFSI

INDUSTRY IN INDIA
PREPARED BY DEVANSH VERMA
Industry highlights Executive Summary

·The Indian banking system consists of 12 The Banking Industry in India is sufficiently capitalized and
public sector banks, 22 private sector well regulated. According to the RBI, the financial and
banks, 46 foreign banks, 56 regional rural economic conditions in India are far superior to any other
banks, 1485 urban cooperative banks and country in the world. Indian banks have shown resilience
96,000 rural cooperative banks.
during global downturns owing to its credit and liquidity risk
In FY21, total assets in the public and
management.
private banking sectors were US$ 1.60
trillion and US$ 0.87 trillion, respectively. Moreover, the industry has witnessed the roll out of
Loans and advances stood as the highest, innovative banking models like payments and small finance
investment being the 2nd highest banks. The Immediate Payment Service is the only digital
component in the assets of the banks, payments mode in the Faster payment innovation Index
primarily due to investment in Govt (FPII).
securities.
During FY16-FY21, bank credit increased

at a CAGR of 0.29%. As of FY21, total


credit extended surged to US$ 1.48
Porters Analysis
trillion. During FY16-FY21, deposits grew The Banking industry in India has historically been one of the
at a CAGR of 12.38% and reached US$ most stable systems globally, despite global upheavals. The
2.06 trillion by FY21. government has consistently strived to promote financial
Google Pay for Business enabled small inclusion through various initiatives targeted to bring the
merchants to access credit through tie-up country’s underbanked population under the banking gamut.
with the digital lending platform for
MSMEs FlexiLoans. WhatsApp started UPI Threat of new entrants
payments service in India on receiving the The banking industry faces stiff regulations by the central bank
National Payments Corporation of India and the government. The issuance of licenses is in the hands of
(NPCI) approval. RBI, which makes is tougher for entrants.
In October 2021, UPI recorded 4.21 Bargaining Power of buyers
billion transactions worth INR. 7.71 An individual doesn't posture a lot of risk to a financial institution.
trillion. However in the case of Indian banks, government contracts and
As per Union Budget 2021-22, the loans account for a huge chunk of credit for commercial banks.
government will disinvest IDBI Bank and Bargaining Power of suppliers
privatize two public sector banks. Govt Most of the bank's asset comprise of Loans and advances,
also carried out consolidation, reducing investments and deposits. The institution requires these to earn a
the number of Public Sector Banks by substantial return on these to reward its stakeholders and meet
eight. their withdrawal needs as well.
Bank accounts opened under PMJDY Threat of substitutes
reached 40.50 Crore and deposits in The new wave of digital disruption is threatening to the traditional
these accounts stood at 1.3 Lakh Crore. banks. These tech firms have established themselves as financial
services and can afford to compete at lower costs thereby
reducing margins for the conventional banks.
Competitive Rivalry
Highly competitive market, SBI and its associates hold market
share of 24% in deposits and 22.5% in credit. Overall, the top five
banks hold an overall market share of 45% in deposits and 46%
in credits. a matter of concern for other public and private
players in this industry as their business is likely to be affected
due to higher market share of these banks.
Major Players in banking Trends in the BFSI sector
industry

·The assets of Indian banks amounted to about 2.5 trillion U.S.D in FY20.
Bank Nifty After a decrease during the previous year, the total value of assets reached
the highest value that year. During this period the public sector banks
accounted for the highest share of assets.

Developments in Banking
India recorded a gross non-performing asset (GNPA) to total advances ratio
Industry of over 8% in FY20. While this is a decrease from previous year, the country
is *expected to see an increase in bad loans due to the effect of the
pandemic.

Out of the 2.8 billion transactions,


PhonePe had share of 46 percent and
GooglePay a share of 35 percent. Third
big player is Paytm with a share of nearly In FY20, the loan to deposit ratio of pvt sector banks across the country was
around 88%. This was a light decrease compared to the previous year.
12 percent. Since 2012, the loan to deposit ratio has not been under 80 percent.

This data shows a forecast of the estimated


online banking penetration in India until
The loan to deposit ratio in India for financial year 2021 stood at over 64
2025. It is projected to reach 47 percent by percent, a significant decrease compared to the previous years. A higher
2025. The penetration rate refers to the Credit to deposit ratio indicates stressed resources whereas a lower ratio
share of the total population. means that the bank is not using its available resources optimally.
References
https://www.ibef.org/industry/banking-india.aspx
https://www.investindia.gov.in/sector/bfsi-banking
https://blog.investyadnya.in/indias-top-5-banks-by-market-share/
https://www.finra.org/investors/learn-to-invest/types-
investments/bonds/types-of-bonds/mortgage-backed-securities
https://www.statista.com/statistics/1006409/private-sector-bank-assets-
value-in-india/
https://www.moneycontrol.com/stocks/marketinfo/totassets/bse/bank-
private.html
https://www.moneycontrol.com/stocks/marketinfo/totassets/bse/bank-
public.html

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