Banking

Banking

Annual review

November 2004

Contents Summary

Part A: Core business to drive profitability

The net profitability margin (NPM) of banks will rise from

Executive summary Business Interest rate outlook and yields Profit and loss account Profitability

1.36 per cent in end-March 2003 to 1.45 per cent by March 2006, despite a continuing decline in spreads, on account

Part B: State of the industry

of the cost-control measures they have adopted. The business of the industry is expected to grow by 14.2 per cent CAGR between 2003-04 and 2005-06, led by continued growth in retail finance, recovery in commercial credit and growth in agricultural credit. Asset quality will also improve, with

dramatically reduce un-booked profits from the investment portfolio.

Overview Business Spreads & net profitability margin Profit and loss account Other income Operating expenses Important ratios

61 67 89 99 103 109 121

Part C: Industry statistics

net NPAs expected to touch 2.54 per cent by 2005-06. Interest rates have started to harden during 2004-05, which will

1 9 37 49 57

Industry structure Financial system in India Industry performance (tables) Industry performance (graphs) Player profiles

123 129 137 161 173

Part D: Annexure

289

Contact details Analyst: Yatin Gupte

Head of Research: Rajnish Rastogi

Client Servicing

([email protected])

([email protected])

([email protected]), 022-56913561

Opinion Sections

1.0

2.0

3.0

4.0

Executive summary - Net profitability margin expected to rise - Business to grow by 14.2 per cent CAGR in 2003-04 to 2005-06 - Asset quality of banks to improve - Interest rates to harden from 2004-05 - Unbooked profits on investments to reduce dramatically - Key ratios: Return on assets to be under pressure due to slow growth in fee-based income - Challenges faced by banks in an increasing interest rate scenario Business - Business of scheduled commercial banks to grow at 14.2 per cent - Sources of funds: Deposits - Borrowings to grow at 7.1 per cent CAGR - Equity capital & reserve and surplus - Capital adequacy ratio - Advances - With the improvement of credit offtake, credit deposit ratio to touch 62% by 2005-06 - Increasing credit deposit ratio to slow down the growth rate of investments - Asset quality - Cash in hand and balances with RBI grew at a CAGR of 4.1 per cent from 1997-98 to 2002-03 Interest rate outlook and yields - Interest rates to harden in 2004-05 - Yields and cost of scheduled commercial banks - Yield on investments Profit and loss account - Interest earned - Interest expended - Fee-based income: Core and non-core - Profit on sale of investments - Operating expenses to grow 8.8 per cent - Provision & contingencies Profitability - Net profitability margin highly susceptible to changes in operating expenses - Other key ratios

1 1 2 4 6 7 7 8 9 9 10 16 17 19 20 29 29 30 35 37 37 41 43 49 49 50 51 52 54 55 57 57 58

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

i

...continued

Boxes 1.0 01 02 03 04 05 06

Business Alternative investment products Movement & stock of foodgrains at FCI Impact on the spreads of interest rate reduction on FCI credit Corporate Debt Restructuring Mechanism (CDR) Sector-wise NPA of scheduled commercial banks Recent guidelines issued by RBI pertaining to CRR

15 22 23 32 33 36

2.0 01

Interest rate outlook and yields Fiscal deficit

39

3.0 01

Profit and loss account Prudential norm on classification of investment portfolio of banks

53

4.0 01

Profitability Net profitability margin

58

01 02 03 04 05

Executive summary Business of scheduled commercial banks Non-food credit Asset quality Non-performing assets Average yield on G-Sec

1.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Business Proportion of different sources of funds of SCBs Interest rate on deposits vs growth in term deposits Ownership of savings deposits Ownership of deposits within the household sector - 2002 Growth in saving deposits Ownership of current deposits with SCB Ownership of deposits within the household sector - 2002 Growth in borrowings Growth in borrowings (excluding ICICI Bank) CRAR of top six banks Food credit Agricultural credit Retail credit Operating rates Credit deposit ratio Investment-deposit ratio

Figures 2 3 4 5 7

10 12 13 13 13 14 14 16 16 19 20 24 25 27 29 30 continued...

ii

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

Figures 17 18 19

Asset quality Incremental NPA provision Comparison of CRR with proportion of cash in hand with T&DL

30 34 35

2.0 01 02 03 04 05

Interest rate outlook and yields Average WPI-All commodities Weekly WPI inflation Yield on advance portfolio vis-a-vis benchmark 3-year G-Sec Yield on investment portfolio vis-a-vis benchmark 5-year G-sec yield Yield on deposits portfolio vis-a-vis benchmark 2-year G-Sec yield

40 40 42 44 16

4.0 01

Profitability Spreads & NPM

58

01 02

Executive summary Net profitability margin (NPM) Key ratios

1.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Business Business of scheduled commercial banks in India 9 Sources of funds of scheduled commercial banks 10 Deposits of scheduled commercial banks from 1999-00 to 2005-06 11 Share of deposits 11 Proportion of different categories of deposits in the incremental deposits 11 Growth of deposits 11 Share of different investment alternatives in incremental investible funds 15 Equity and reserve surplus 17 Distributions of scheduled commercial banks by CRAR 18 Assets of the scheduled commercial banks 20 Food and non-food credit of scheduled commercial banks 20 Movement - food grains by FCI (provisional) 22 Stock in Central pool as on 30/06/2004 22 Impact on yield on advances 23 Non-food credit growth 24 Projected investments 27 NPAs of scheduled commercial banks 31 Progress under CDR Scheme 33 Sector-wise composition of NPAs of public sector banks (1999-2003) 33 Impact of CRR rate reduction on yields 36

Tables 1 7

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

iii

...continued

Tables

iv

2.0 01 02 03 04 05 06 07 08 09 10

Interest rate outlook and yields Average yields of government securities Projected interest rates of government securities Fiscal deficit and market borrowing Tax revenues and industrial growth Yields & costs of scheduled commercial banks Maturity profile of loans and advances of scheduled commercial banks Maturity profile of investments of scheduled commercial banks Maturity profile of term deposits of scheduled commercial banks Maturity profile of borrowings of scheduled commercial banks Average cost of borrowings of scheduled commercial banks

37 37 38 39 41 42 43 45 47 47

3.0 01 02 03 04 05 06

Profit and loss account Profit and loss account Interest on borrowings of scheduled commercial banks Non-interest income - break-up SCBs: Unbooked appreciation Employee cost of scheduled commercial banks Provisions and contingencies of scheduled commercial banks

49 50 51 52 54 55

4.0 01 02 03 04

Profitability Net profitability margin (NPM) Key ratios Projected profit and loss account of the scheduled commercial banks Projected balance sheet of all scheduled commercial banks

57 58 59 60

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

1.0

Business

Business of scheduled commercial banks to grow at 14.2 per cent

Business of scheduled commercial banks in India (Rs billion)

Table 1

1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 F 2005-06 F

CAGR 2000-03

CAGR CAGR 2000-03 2003-06 1

Deposits

9,325

10,935

12,472

14,045

15,688

17,658

19,929

14.6

13.7

12.4

Advances

4,559

5,407

6,635

7,599

8,703

10,372

12,300

18.6

16.0

17.4

Business

13,884

16,343

19,107

21,644

24,392

28,030

32,229

16.0

14.5

14.2

E: Estimated F: Forecasted 1

Excluding ICICI Bank

Source: RBI and CRIS INFAC estimates

In the banking industry, business is defined as the sum of the deposits and advances as on a particular date. CRIS INFAC estimates that the business of scheduled commercial banks will grow from Rs 21,644 billion in 2002-03 to Rs 32,229 billion by 2005-06 at a CAGR of 14.2 per cent, led by continued growth in retail finance, gradual recovery in commercial credit, pick-up in agriculture credit and growth in deposits. During 2003-04 to 2005-06, their advances will grow by 17.4 per cent on the back of growth in retail finance, and commercial and agriculture credit. Deposits are expected to grow by 12.4 per cent CAGR. From 2000-01 to 2002-03, the business of the scheduled commercial banks grew by 16.0 per cent (14.5 per cent) CAGR. The 14.5 per cent CAGR growth in business was mainly driven by a 16 per cent CAGR growth in advances (excluding ICICI Bank). Due to the slowdown in industrial growth, many corporates restructured themselves to survive; hence, credit offtake was low. With reduced avenues for investment of surplus funds, banks turned to retail financing. The retail finance portfolio grew by around 27 per cent during the same period.

Due to the merger of ICICI Ltd with ICICI Bank on March 30, 2002, all the growth figures for scheduled commercial banks (SCBs) for the period 1999-00 to 2002-03 are distorted. Hence, for a better comparison, we have calculated the growth figures excluding ICICI Bank, which are indicated in brackets throughout this Annual Review.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

9

Sources of funds: Deposits Overview The main sources of funds for the banking sector are deposits and borrowings. In addition, internal accruals and funds raised through equity form part of the funds available to banks for meeting their funding requirements. CRIS INFAC expects no significant change in the funding pattern during 2003-04 to 2005-06 Sources of funds of scheduled commercial banks (Rs billion)

1999-2000

Capital

205.60

Reserves and surplus

Table 2

2000-01

2001-02

2002-03

211.44

236.16

236.46

2003-04 F

2004-05 F

246.46

2005-06 F

250.46

254.46

446.75

500.19

645.70

781.80

950.80

1,111.03

1,309.71

9,324.68

10,935.27

12,472.39

14,044.90

15,688.27

17,657.65

19,928.76

491.15

594.85

1,117.05

912.19

945.09

1,023.06

1,121.96

10,468.18 Source: RBI & CRIS INFAC

12,241.75

14,471.30

15,975.35

17,830.62

20,042.20

22,614.90

Deposits Borrowings Total

Proportion of different sources of funds of SCBs 1997-98

(per cent) Reserves and surplus 5

Figure 1 (per cent)

Capital 3

2002-03 Reserves and surplus 5

Capital 1

Borrowings 6

Borrowings 4

Deposits 88

Deposits 88

Source: CRIS INFAC

Deposits expected to grow at a CAGR of 12.4 per cent Deposits consist of demand deposits (current account deposits), savings deposits and term deposits. CRIS INFAC expects the deposits of all scheduled banks to grow from a level of Rs 14,045 billion as of March 2003 to Rs 19,929 billion as of March 2006 at a CAGR of 12.4 per cent. This will be driven by a growth of 8.5 per cent, 16.2 per cent and 11.7 per cent in demand deposits, savings deposits and term deposits, respectively. Time and demand deposits of all scheduled commercial banks have been growing a CAGR of 14.6 per cent (13.7 per cent) during 2000-01 to 2002-03, driven primarily by the growth in term deposits and savings deposits, which grew by a CAGR of 13.8 per cent and 16.7 per cent (excluding ICICI Bank), respectively.

10

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Deposits of scheduled commercial banks from 1999-00 to 2005-06 (Rs billion)

Table 3

1999-2000 2000-01 2001-02 2002-03 2003-04 E 2004-05 F 2005-06 F

Demand deposits

1,308.6

1,414.7

1,550.3

1,668.1

1,739.0

1,821.6

CAGR CAGR CAGR 2000-2003 2000-03 2003-2006 (per cent) (per cent) (per cent) 1

1,880.8

8.4

8.1

4.1

Savings bank deposits

2,012.9

2,335.5

2,734.2

3,228.0

3,760.6

4,362.3

5,060.3

17.1

16.7

16.2

Term deposits

6,003.3

7,185.1

8,187.9

9,148.8

10,188.7

11,473.7

12,987.7

15.1

13.8

12.4

Deposits

9,324.7 10,935.3 12,472.4 14,044.9

15,688.3

17,657.7

19,928.8

14.6

13.7

12.4

E: Estimate; F: Forecast 1

Excluding ICICI Bank Source: RBI and CRIS INFAC Research

The proportion of term deposits in the total deposit mix has increased from 64 per cent in 1991-92 to around 66 per cent in 2002-03. Share of deposits (per cent)

Table 4 1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04 E

2004-05 F

2005-06 F

Demand deposits

14

14

14

13

12

12

11

10

9

Savings bank deposits

22

21

22

21

22

23

24

25

25

Term deposits

64

65

64

66

66

65

65

65

65

6,663

7,978

9,325

10,935

12,472

14,045

15,688

17,658

19,929

Deposits E: Estimate; F: Forecast

Source: RBI and CRIS INFAC Research

On an incremental deposit basis, the proportion of term deposits dropped from 70 per cent in 1998-99 to 61 per cent in 2002-03 due to falling interest rates. In the next 3 years, the proportion of term deposits is likely to go up, albeit at a slow rate, due to the expected rise in the interest rates and the introduction of technology-driven products. Proportion of different categories of deposits in the incremental deposits (per cent)

1998-99 1999-2000

2000-01

2001-02

Table 5

2002-03 2003-04 F

2004-05 F

2005-06 F

Demand deposits

11.01

14.81

6.59

8.83

7.49

4.31

4.19

2.61

Savings bank deposits

19.48

23.74

20.03

25.94

31.40

32.41

30.55

30.73

Term deposits

69.51

61.45

73.38

65.23

61.11

63.28

65.25

66.66

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Total Source: CRIS INFAC

Growth of deposits (Per cent)

Table 6 2000-01

2001-02

Demand deposits

1998-99 1999-2000 15.01

17.98

8.11

9.59

7.60

4.25

4.75

3.25

Savings bank deposits

17.83

18.88

16.03

17.07

18.06

16.50

16.00

16.00

Term deposits 21.45 Source: RBI and CRIS INFAC

15.99

19.69

13.96

11.74

11.37

12.61

13.19

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

2002-03 2003-04 F

2004-05 F

2005-06 F

11

Increase in interest rates to spur term deposits growth CRIS INFAC is of the view that term deposits will grow at a 12.4 per cent CAGR during 200304 to 2005-06, from Rs 9,148.8 billion as of March 2003 to Rs 12,737.9 billion as of March 2006 on the back of the expected increase in the interest rate of term deposits. From 2000-2003, term deposits recorded a growth of 15.1 per cent (13.8 per cent) CAGR on account of their perceived safety, in comparison to other investment instruments like equity and mutual funds. Term deposits have shown a strong correlation with the interest rates of deposits, with the coefficient of correlation at 0.82. For the purpose of our study, we have considered the interest rates offered on deposits with a 3-5 year tenure. CRIS INFAC believes that the interest rate offered on term deposits (3-5 year tenure) will rise from 5.25 per cent in 2003-04 to 6.15 per cent in 2004-05 (an increase of 90 bps) and go up further by 35 bps to 6.50 per cent in 2005-06. This will result in term deposits growing at 11.37 per cent, 12.61 per cent and 13.19 per cent in 2003-04, 2004-05 and 2005-06, respectively. Growth in term deposits moves in line with interest rate movement Interest rate on deposits vs growth in term deposits

Figure 2 (per cent)

(per cent)

25.0

13.0 12.0

20.0

11.0 10.0

15.0

9.0 10.0

8.0 7.0

5.0

6.0 5.0

1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

Interest rates on deposits (3-5 years maturity)

2003-04E 2004-05P 2005-06P growth in term deposits (%)

Source: RBI and CRIS INFAC

The regression equation y = 1.89 x

- 0.44.

Where, y = growth rate of term deposits, x

= interest rate on deposits (3 - 5 years maturity).

Savings deposits to grow at 16.2 per cent from 2003-04 to 2005-06 CRIS INFAC estimates that savings deposits will grow at a CAGR of 16.2 per cent from Rs 3,228 billion as of end-March 2002 to Rs 5,060 billion as of March 2006. Savings deposits accounted for nearly 23 per cent of the total deposit base of scheduled commercial banks in India as on March 31, 2003.

12

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Ownership of savings deposits (per cent)

Figure 3

Ownership of deposits within the household sector -2002

Corporate sector 1

Foreign 5 Govt. 6

Figure 4

(per cent) Trusts Associations Clubs etc. 1 Proprietary and Partnership 1 Religious Institutions 1

Individuals 90

Others(not elsewhere classified) 5

Household 88

Source: RBI and CRIS INFAC Research

Source: RBI and CRIS INFAC Research

As on the last reporting Friday of March 2002, nearly 88 per cent of the total savings deposits of scheduled commercial banks were owned by the household sector. Of these around 90 per cent were owned by individuals. About 79 per cent of the savings deposits are owned by individuals and are, hence, considered as a stable source of funds. Growth in saving deposits

Figure 5

(per cent)

21.00

17.00

13.00

9.00

5.00

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04 P

2004-05 P

2005-06 P

Source: CRIS INFAC Research

During 2000-01 to 2003-04, savings deposits registered a CAGR of 17.1 per cent (16.7 per cent). The year-on-year growth in savings deposits has remained more or less stable at 1617 per cent. This is primarily because Indians are generally inclined to save more, and growth in savings deposits is not very much driven by interest rate movement. Given the stable nature of these deposits and the ‘save more' mindset of the Indian public, CRIS INFAC expects the growth in savings deposits to be stable at 16.0-16.5 per cent CAGR during 2003-04 to 2005-06. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

13

Technology-driven products to taper growth in demand deposits CRIS INFAC estimates that demand deposits (current account) will grow at a CAGR of 4.1 per cent from Rs 1,668 billion as of March 2003 to Rs 1,881 billion by end-March 2006, due to the introduction of newer, technology-driven products/facilities. Firms maintain demand deposits to meet their day-to-day cash requirements. With the advent of new technology-driven products such as electronic fund transfers, Real Time Gross Settlements (RTGS) and Cash Management Systems (CMS), the clearing cycle has shortened. RTGS and CMS allow quick transfer of funds to and from any part of the country. This will encourage corporates/ firms to reduce their balances in demand deposits, and probably slow down their growth. Further, customer-friendly products that are introduced by banks with the aid of technology (swipe-in and swipe-out) will divert some portion of demand deposits towards fixed deposits. During 2000-01 to 2003-04, demand deposits have grown by a CAGR of 8.4 per cent (8.1 per cent) from Rs 1,308.6 billion as of March 2000 to Rs 1,668.1 billion as of March 2003. Demand deposits are the most volatile component of the deposits that banks have, and their year-on-year growth has shown an uneven trend over a 10-year period. During the last few years, a declining trend has been observed on account of the downturn in the industry. Ownership of current deposits with SCB

Ownership of deposits within the household Figure 6

(per cent)

sector - 2002 (per cent)

Financial Sector 16

Figure 7

Educational Institutions 3

Others 8

Traders 33

Household 47

Corporate sector 16

Foreign 3 Govt. 18

Source: RBI and CRIS INFAC Research

Proprietary and Partnership 33

Trusts Associations Clubs etc. 3

Other individuals 20

Source: RBI and CRIS INFAC Research

As on the last reporting Friday of March 2002, the corporate and the financial sectors together owned 32 per cent of the current deposits of scheduled commercial banks. Further, 47 per cent of the total current deposits were owned by the household sector, of which around 66 per cent were owned by traders and partnership firms together. Thus, close to 63 per cent of the demand deposits are owned by the business class, and are hence treated as the most volatile component of deposits.

14

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Alternative investment products

Box 1

Overview Besides term deposits, investors have the option of investing in insurance, small savings schemes, mutual funds and the like. While the share of small savings schemes in total investments has remained more or less stable, the share of insurance and mutual funds in the total pie is increasing. This has led to a drop in the share of the bank liability product (term deposits + savings deposits) from 68 per cent in 1998-99 to 57 per cent in 2002-03. But, going forward, we expect it to increase marginally to 58 per cent by 2005-06. The following table indicates the share of various investment alternatives in the incremental inflows of investible money in the economy.

Share of different investment alternatives in incremental investible funds Year

1998-99

Table 7

Life Share in Term Share in Savings Share in Small Share in M utual Share in insurance the deposits the Deposits the Savings the funds the premium incremental incremental incremental Schemes incremental incremental money money money money money supply (%) supply (%) supply (%) supply (%) supply (%) 22,806 13 91,419 53 25,626 15 28,541 17 2,695 2

1999-00

27,462

14

82,738

42

31,964

16

32,214

16

22,117

11

2000-01

34,898

15

118,186

50

32,262

14

37,577

16

11,135

5

2001-02

50,094

21

100,274

42

39,870

17

37,769

16

8,024

3

2002-03

55,738

22

96,092

38

49,381

19

40,602

16

13,480

5

2003-04 F

60,755

22

96,062

35

53,262

19

49,534

18

16,850

6

2004-05 F

65,676

20

121,313

38

60,170

19

59,441

18

15,165

5

2005-06 F

70,463

19

141,532

39

69,797

19

71,329

19

12,890

4

F: Forecast Source: CRIS INFAC Estimates

Insurance sector The life insurance sector, which was earlier a monopoly of the Life Insurance Corporation of India (LIC), was opened up to the private sector in 1999-2000. From 1996-97 to 2002-03, the total insurance premium increased by a CAGR of 22.8 per cent from Rs 162 billion to Rs 557.3 billion in 2002-03. However, during 2000-01 to 2001-02, the removal of assured returns schemes across insurance products of the Life Insurance Corporation of India has resulted in their becoming less attractive to investors. Since LIC still accounts for a significant portion of the life insurance market, the drop in its growth will result in a marginal decline in the growth rate of insurance premiums. CRIS INFAC expects insurance premiums to grow at a CAGR of 8.04 per cent from 2002-03 to 200506. Mutual funds as an investment channel The performance of the mutual fund industry is dependent on the performance of the capital markets; hence, money would flow in the mutual funds during a boom, but would flow back to the banks during a downturn. Growth in small savings scheme to remain constant In the last 3 years, the interest rates on small savings schemes has come down by around 400 basis points. Despite this, the average post-tax returns on these schemes are higher than the post-tax returns on term and other deposits. But the higher lock-in period (of 6-7 years) of these schemes has mitigated their attractiveness, particularly since interest rates are expected to increase in the short to medium term. Consequently, CRIS INFAC expects small savings schemes to grow at a CAGR of around 7.5 per cent from 2003-04 to 2005-06.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

15

Borrowings to grow at 7.1 per cent CAGR CRIS INFAC estimates the borrowings of scheduled commercial banks to grow at a CAGR of 7.1 per cent from Rs 912 billion as of March 2003 to Rs 1,122 billion by end-March 2006, led by a strong growth in advances. During 2000-01 to 2002-03, borrowings of scheduled commercial banks grew by 22.9 per cent (5.4 per cent) CAGR. Growth in borrowings

Figure 8

(per cent)

-10.0

10.0

9.0

8.0

2005-06

2004-05

-8.9

6.9 2001-02

9.7 2005-06 F

-5.0

2000-01

8.3 2004-05 F

-40.0

0.0

1999-2000

3.6 2003-04 F

2002-03

-18.3

5.0

2001-02

2000-01

11.8 1999-2000

-20.0

21.1

10.0

40.0

2003-04

15.0

60.0

11.2

20.0

80.0

0.0

20.2

87.8

25.0

2002-03

(per cent) 100.0

20.0

Growth in borrowings (excluding ICICI Bank) Figure 9

-15.0

Source: RBI and CRIS INFAC Research

Source: RBI and CRIS INFAC Research

In 2002-03, the borrowings of scheduled commercial banks recorded a negative growth rate of 18 per cent, primarily on account of: ICICI Bank replacing its high cost borrowings (of the erstwhile ICICI Limited) with term and savings account deposits. Excess liquidity prevailing in the system and lesser opportunity to invest the available funds. Banks taking advantage of reduced interest rates to prune their high-cost debt portfolio. CRIS INFAC estimates a marginal growth in borrowings in 2003-04. The liquidity position was comfortable throughout 2003-04, hence the demand for borrowings is expected to be low. Further, we also expect ICICI Bank to continue replacing its high cost borrowings with low cost deposits, but at a slower pace. However, as the demand for credit gradually increases, the demand for borrowings would increase, which will push up the growth in borrowings to 9 per cent in 200405 and 10 per cent in 2005-06

16

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Equity capital & reserve and surplus

Equity and reserve surplus (Rs billion)

Table 8

1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 F 2005-06 F

CAGR CAGR 1999-00 - 2003-04 2002-03 2005-06

New equity raised

205.6

211.4

236.2

236.5

246.5

250.5

254.5

4.8

2.5

Reserve & surplus

446.8

500.2

645.7

781.8

950.8

1100.7

1276.2

20.5

17.7

E: Estimates, F: Forecast Source: RBI & CRIS INFAC estimates

Another source of funds for the banking sector is the equity capital. In the last 10 years, the total equity capital raised by banks has gone up, although it is not the main source of funds for banks. With stricter capital adequacy norms and the growing loan book size, banks will need to infuse more capital to maintain a healthy capital adequacy ratio. Many of the public sector banks have reduced the government stake by raising equity from the market. In 2002-03, the total amount raised by public sector banks through equity was approximately Rs 7.7 billion. In 2003-04, public sector banks are estimated to raise nearly Rs 6.0 billion. Hence, in order to maintain a healthy capital adequacy ratio, going forward, banks will embark on infusing more equity capital. CRIS INFAC estimates equity capital to grow at CAGR of 2.5 per cent in the next year. The retained earnings of banks have grown at a CAGR of 20.5 per cent from 1999-00 to 200203. This was primarily on account of the over 31.2 per cent CAGR growth in net profits in the same period. CRIS INFAC expects profits after tax to grow at a CAGR of 10.3 per cent during 2003-04 to 2005-06 and the dividend payout ratio to be at 18.5 per cent. We also expect addition to the reserves through an increase in share premium, which is expected to grow in line with the projected growth in the equity capital. CRIS INFAC expects retained earnings to grow at a CAGR of 18.8 per cent in the next 3 years, based on the above factors.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

17

18

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

8

15

Source: Trends and Progress of Banking in India, 2002-03

8

2

Between 9-10 per cent

Above 10 per cent

1

Between 4-9 per cent 18

1

0

0

2001-02 2002-03

Nationalised banks 1

2002-03

Below 4 per cent

2001-02

State Bank Group

Distributions of scheduled commercial banks by CRAR

19

2

2001-02

19

2

2002-03

Old private sector banks

6

1

1

0

2001-02

6

1

0

2

2002-03

New private sector banks

Foreign banks

33

2 36

0

2001-02 2002-03

81

7

2

1

87

4

0

2

2001-02 2002-03

Total

Table 9

Capital adequacy ratio Capital to risk-weighted assets ratio (CRAR)

As of March 2003, all scheduled commercial banks, except two banks, had their CRAR above the stipulated norms. Between March 2002 and March 2003, we see a marked improvement in the nationalised banks, with all banks having capital adequacy above the stipulated norm of 9 per cent. This can be attributed to the increase in profitability and the fresh capital raised by many banks. With the likely implementation of new Capital Accord (Basel II), many banks, especially those having a global presence, have been holding capital in excess of the stipulated norm. CRAR of top six banks

Figure 10

(per cent)

13.5

13.5

13.4

12.8

12.0 10.7

10.2

11.1 10.4

11.6

11.4

11.7

11.1

11.1

10.7

12.0

12.2

13.0

13.1

13.9 11.3

12.7

12.8

14.0

12.0

13.9

16.0

10.0

8.0

Bank Of Baroda

Bank Of India

Mar-01

H D F C Bank Ltd.

Mar-02

ICICI Bank Ltd

Mar-03

Punjab National Bank

State Bank Of India

Mar-04

Source: CRIS INFAC Research

From the sample of six banks listed above, we see that the capital adequacy ratio of all banks, except ICICI Bank, has improved. The capital adequacy ratio of PSBs has shown a significant improvement in comparison to that of the new private sector banks. This is on account of the aggressive lending strategy of new private sector banks in comparison to the aggressive capital raising strategy of the public sector banks. CRIS INFAC expects advances to grow faster than deposits. With the expected increase in credit demand, banks will prefer to increase their loan portfolio instead of investments. This will result in banks shifting their focus from investments towards advances. This shift from the risk free assets to risky assets and the impending implementation of the new Basel accord, which is expected to increase the risk weights of the assets, would require banks to raise capital to maintain CAR above the stipulated norm.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

19

Advances

Assets of the scheduled commercial banks Assets

Table 10

1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 P 2005-06 P

cash and balances with RBI

CAGR CAGR 2000-03 2001-04

869

863

899

891

943

998

1056

0.9

5.8

961

1246

1385

900

976

1121

1289

-2.2

12.7

4216

5007

5975

7100

7934

8484

9150

19.0

8.8

4559

5407

6635

7599

8703

10372

12300

18.6

17.4

Fixed assets

155

163

202

203

205

207

210

9.3

1.1

Other assets

765

759

827

890

897

905

914

5.2

0.9

Total assets

11525

13446

15923

17585

19658

22087

24919

15.1

12.2

Balances with bank and money call and short notice Investments Advances

P: Projected Source: RBI and CRIS INFAC Estimates

Advances to grow at CAGR of 17.4 per cent from 2003-04 to 2005-06 Advances are divided into food and non-food credit. Non-food credit is further divided into agricultural credit, retail credit and other commercial credit. Food and non-food credit of scheduled commercial banks (Rs billion)

Table 11

1999-2000 2000-01 2001-02 2002-03 2003-04E 2004-05P 2005-06P

Food credit Non-food credit

CAGR CAGR (2000-03) (2003-06)

257

400

540

495

365

427

459

24.42%

-2.45%

4300

5007

6095

7105

8338

9945

11841

18.22%

18.56%

Source: RBI and CRIS INFAC

Food credit to show a negative CAGR of 2.5 per cent

Food credit

Figure 11

(Rs billion) 600

500

400

300

200

100

0

1999-2000

2000-01

2001-02

2002-03

2003-04E

2004-05P

2005-06P

Source: RBI and CRIS INFAC Research

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Food credit includes banks' credit to the Food Corporation of India (FCI) for procuring foodgrains from the market, at the minimum support prices, to be distributed through the public distribution system. CRIS INFAC believes food credit will show a negative CAGR of 2.45 per cent during 200304 to 2005-06. In sharp contrast to the accelerated growth witnessed in 2001-02, food credit declined steeply by 26.2 per cent in 2003-04 after declining by 8.3 per cent in 2002-03. The steep decline in food credit was on account of lower procurement and higher offtake of food grains from the public distribution system. The government has emphasised the need to improve the functioning of the public distribution system. This, coupled with the drop in the stock levels of FCI due to higher offtake of foodgrains through the public distribution system in earlier years, should increase the FCI's procurement in 2004-05. However, its procurement is likely to be influenced by the availability of storage capacity at its various godowns. FCI has over 23 million tonnes (owned & hired) of storage capacity in over 1,700 godowns all over India. Higher procurement will lead to increased credit. However, recently, the Central government permitted FCI to raise money from the market to the tune of Rs 50 billion. Though banks can subscribe to these bonds, they will have to compete with other market players, which will reduce their food credit exposure. During the last quarter of 2003-04, banks had reduced the interest rate charged on the food credit by about 150 bps from a level of 10.95 per cent, which will have an impact of about 6.23 basis points (annualised) on the yield on advances. Further, if FCI decides to raise Rs 50 billion of its requirement from the market, the yield on advances would face a further impact of 2.28 basis points (annualised). CRIS INFAC expects food credit to grow at a rate of 17 per cent in 2004-05 but taper to 7 per cent in subsequent years.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

21

Movement & stock of foodgrains at FCI

Box 2

Movement - food grains by FCI (provisional) Table 12 (million tonnes)

Foodgrains

Sugar

Total

1996-1997

23.6

1.2

24.8

1997-1998

19.1

1.1

20.2

1998-1999

19.1

1.1

20.2

1999-2000

22.1

0.7

22.8

2000-2001

16.2

0.3

16.5

2001-2002

20.5

0.3

20.8

2002-2003

24.8

0.2

25

2003-2004

29.9

0.8

29.98

2004-2005

10.6 Upto July'04

0.3

10.63

Source: Food Corporation of India

The total foodgrain stocks in the Central grain pool were estimated at around 29.9 million tonnes in the beginning of July. This comprised 19.15 million tonnes of wheat and 10.76 million tonnes of rice. The stock in the central pool as on June 30, 2004, is above the buffer stock norms

Stock in Central pool as on 30/06/2004 (million tonnes / Prov.)

With FCI

Table 13

With state govt. / agencies

Grand total

Rice

8.92

1.85

10.76

Wheat

7.17

11.97

19.15

Total

16.09

13.82

29.91

Buffer stock norms (million tonnes)

1st Jul

1st Oct

1st Jan

1st Apr 11.8

Rice

10.0

6.5

8.4

Wheat

14.3

11.6

8.4

4.0

Total

24.3

18.1

16.8

15.08

Source: FCI website

A food ministry sponsored study has concluded that the foodgrain requirement of the public distribution system and welfare schemes can be met with lower grain procurement and stockholding than at present

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Impact on the spreads of interest rate reduction on FCI credit

Box 3

The total outstanding food credit as in March 2003 was Rs 495 billion, which amounted to 9 per cent of the outstanding loans and advances of public sector banks as on March 31, 2003. Banks were earning a yield 10.95 per cent on their FCI exposure till December 2003-quarter end. The rate of 10.95 per cent is based on the prime lending rate (PLR) of five large public sector banks: State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda and Bank of India. During 2001-02 to 2002-03, the range of decline of the average PLR of these public sector banks at 125 bps (12 to 10.75 per cent) has been much lower than the decline on the 10-year Government of India (GOI) securities, which has fallen by around 400 bps (April 2001 to March 2003) During the last quarter of 2003-04, banks agreed to reduce their lending rate to FCI by 150 bps to 9.45 per cent. Recently, the Centre allowed FCI to borrow up to Rs 50 billion from the bond market, which would reduce the banks’ exposure to FCI, as they would compete with other players in the open market. Till date, FCI has not raised any loans from the market. We have tried to calculate the impact of these significant developments on the yield on advances

Impact on yield on advances

Table 14

(Rs million)

Current Refinancing Total Impact

Average food credit exposure (2004-05)

396,177

Maximum refinance available Total advances (average) Original interest rate Reduced interest rate

50,000 9,537,673 10.95% 9.45%

2-year GOI security yield rate Original interest income on FCI exposure

43,381 37,439

Interest rate on G-Sec

Expected reduction in the yields (in bps)

9,537,673

10.95% 9.45% 5.10%

Revised interest income on FCI exposure

Loss of revenue

9,537,673

43,381 4,725

35,264

2,550 (5,943)

(2,175)

(8,118)

(6.23)

(2.28)

(8.51)

Source: CRIS INFAC estimates

The impact of the reduction in the interest rate works out to 6.23 basis (annualised). If FCI were to access the bond market, banks can subscribe to these bonds, but would earn a low yield, because we believe the pricing of the paper would be at par with GOI paper of a similar duration., as the market borrowings would be backed with a GOI guarantee. Assuming an average G-Sec yield of 5.10 per cent during 2004-05 for 2-year paper, the impact on the spreads of banks is estimated to be 2.28 basis points (annualised). We have not factored in these developments in our projections. The total impact of the above-mentioned developments on the yield on carry business and spreads is estimated at around 8.5 basis points.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

23

Continued growth in the retail credit, coupled with the expected recovery in commercial credit, to drive growth in nonfood credit Non-food credit growth (Rs billion) Agri credit

Table 15

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 F 2005-06 F 371

433

504

591

CAGR CAGR 2000-03 2003-06

711

854

1,025

1,281

1,601

19

23

Retail credit

348

408

516

659

825

1,051

1,582

2,136

2,670

27

36

Other credit

2,494

2,791

3,279

3,757

4,559

5,200

5,731

6,528

7,570

17

13

Total non-food

3,212

3,633

4,300

5,007

6,095

7,105

8,338

9,945

11,841

18

19

E: Estimates, F: Forecasted CAGR is in per cent Source: RBI and CRIS INFAC

Non-Food credit constitutes about 96 per cent of the total advances. CRIS INFAC estimates that non-food credit will grow at a CAGR of 18.6 per cent during 200304 to 2005-06, driven by the continued growth in retail finance and the expected pick-up in agricultural and industrial credit. During 2000-01 to 2003-04, non-food credit recorded a CAGR of 18.2 per cent, primarily due to increased demand for retail credit, which grew at a CAGR of 27 per cent during the same period. Government's directive to push agriculture credit growth

Agricultural credit

Figure 12

(Rs billion) 1800 1601

1600 1400

1281

1200

1025

1000

854 711

800 600

433

504

591

400 200 0

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04P

2004-05P

2005-06P

Source: RBI and CRIS INFAC

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Along with the direct finance to farmers, lending to allied farming activities (public and private), subscription to bonds issued by NABARD (national bank for Agricultural and Rural Development), loans to co-operative marketing societies, loans to co-operative banks of producers, etc are all classified as agriculture credit. Agriculture lending is classified as priority sector lending. Every scheduled commercial bank is expected to ensure that priority sector advance constitute 40 per cent of net bank credit (in case of foreign banks, the priority sector advance ratio is 3.2 per cent), which further has a sub-limit of 18 per cent towards agriculture credit. CRIS INFAC expects agriculture credit to grow from Rs 854 billion (March 2003 end) to Rs 1,601 billion (March 2006 end) at a CAGR of 23.31 per cent, driven by the government's emphasis on improving credit delivery to the agriculture sector. During 1999-2000 to 2002-03, agriculture credit recorded a CAGR of 19.2 per cent from Rs 504.3 billion as of end-March 2000 to Rs 853.8 billion as of end-March 2003. The growth in agriculture credit has been steady, due to low penetration of agricultural credit in the rural areas and uneven agriculture output over the years. The government has laid emphasis on improving the credit delivery to the agriculture sector and thus improving agriculture production in the country. The Ministry of Finance has advised all banks to increase their agriculture credit by 30 per cent over the next 3 years, from 200405 to 2007-08. Further, several measures have been initiated, like increasing the credit limit of the kisan credit card scheme, special agricultural credit plans, etc. The Reserve Bank of India has directed banks to restructure / reschedule the overdue agriculture loans, waive margin money requirement for agricultural loans up to Rs 50,000, etc. Agriculture credit had been growing between 17-18 per cent during the last few years. Several banks have started restructuring their operations to meet the targeted agricultural growth. Banks have set up strategic business unit to cater to the agriculture credit demand. However, we feel the projected growth rate of 30 per cent to be optimistic. CRIS INFAC expects the growth in agricultural advances to be around 23 per cent CAGR during the 2002-03 to 2005-06. Continued growth in housing finance to drive retail credit Retail credit

Figure 13

(Rs billion) 3000 2670 2500 2136 2000 1582 1500 1051 1000

500

0

825 408

1998-99

516

1999-2000

659

2000-01

2001-02

2002-03

2003-04P

2004-05P

2005-06P

Source: RBI and CRIS INFAC CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

25

CRIS INFAC estimates the net outstanding retail finance portfolio of the banks to grow at a CAGR of 36 per cent during the period 2003-04 to 2005-06, from Rs 1,051 billion as of endMarch 2003 to Rs 2,670 billion as of end-March 2006, driven by continued growth in housing, commercial vehicles and car finance. The projected growth in the outstanding retail finance in the next 3 years would be mainly driven by the following factors. Continued growth expected in housing finance, and cars and commercial vehicles finance. Increasing market share of banks vis-à-vis NBFCs in the retail finance pie. Increasing tenures of the loans. During 2000-01 to 2002-03, the retail finance portfolio of banks has grown at a CAGR of 27 per cent from Rs 516.4 billion to Rs 1,051.4 billion. This steady growth in retail finance portfolio was mainly on account of the following factors: Focus of large public and private sector banks on disbursements to the household sector for housing loans, commercial vehicles, cars and two wheelers Increasing penetration of banks vis-à-vis NBFCs. Lower interest rates, contributing to increase in demand, and rising tenure of car, housing and commercial vehicle portfolio. We expect outstanding housing finance, which constitutes almost 52 per cent of the total retail finance, to grow at a CAGR of 40 per cent, while the outstanding car finance and commercial vehicle finance will grow at a CAGR of 35 per cent each, during 2003-04 to 2005-06. Car finance constitutes nearly 24 per cent of the retail finance portfolio. Banks, with their low cost funds advantage, will continue to dominate the retail finance market and CRIS INFAC expects banks to increase their market share in the retail finance market. Other commercial credit to grow at 13.3 per cent CAGR, driven by gradual pick-up in industrial credit Other commercial credit consists of the credit availed by large, medium and small-scale industries covering various sectors. CRIS INFAC estimates other commercial credit segment to grow from Rs 5,199.5 billion as of end-March 2003 to Rs 7,570.0 billion as at March 2006 at a CAGR of 13.3 per cent, led by the gradual upturn in the investment cycle in the manufacturing sector and a sustained growth in the service sector. Upturn in the investment cycle to boost credit from the manufacturing sector The manufacturing sector has not seen any major capacities being set up in the last 3 years. Consequently, many industries are reaching nearly full capacity utilisation levels. The present capacities are not sufficient to meet the expected growth in demand in various industries, which has increased the operating rates. Hence we expect capacity additions across all manufacturing sectors, which in turn would increase the demand for credit.

26

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Operating rates

Figure 14

(per cent)

(per cent)

100

105

95

100

90

95

85

90

80

85

75 70

80

65

75

60

70

55

65

50 1998-99

2000-01 Steel

2002-03

2004-05

Aluminium

60

2006-07

Paper

Cement

1998-99

2000-01

2002-03

Petrochemicals

2004-05 Fibres

2006-07 Refining

Note The operating rates projected for the period 2003-04 to 2007-08 are without considering any capacity built up. Source: CRIS INFAC

Projected investments (Rs billion)

Table 16 1998-03

2003-08

Steel

50.00

60.00

Aluminium

19.25

98.00

Paper

32.00

80.00

Cement

63.00

120.00

Petrochemicals

20.00

60.00

MMF and FI

7.00

91.50

Refining & Marketing

187.64

622.00

Oil & Gas

397.50

807.50

Total

776.39

1,939.00

Source: CRIS INFAC

A CRIS INFAC industry study has identified eight industries, which are listed above, where significant capital expenditure is projected. During 1998-99 to 2002-03, these sectors have made investment to the tune of Rs 776.39 billion. During the next 5-year period, these eight industries are projected to make investment to the tune of Rs 1,939 billion, which is 2.5 times the investments made by these industries in the last 5 years. Based on our study, these eight sectors account for almost 67 per cent of the total manufacturing sector (based on the capital expenditure), which gives a total capital expenditure requirement for the entire manufacturing sector of Rs 2,908.5 billion. Out of a capital expenditure of Rs 2,908.50 billion, almost Rs 349 billion would have taken place in 2003-04, while Rs 494 billion will occur in 2004-05 and Rs 756 billion in 200506. We estimate a total debt requirement of Rs 803.4 billion, to fund the capex requirement of the first 3 years (2003-04 to 2005-06). Of this, banks are expected to fund to the tune of Rs 281.2 billion, in the form of term loan.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

27

Short-term credit requirement for the manufacturing sector CRIS INFAC expects banks' short-term loan to the manufacturing industry to increase by Rs 541 billion during 2003-04 to 2005-06, driven by a 13.5 per cent growth in the topline of the manufacturing sector during the said period. CRIS INFAC, based on its study, expects the net sales of the manufacturing sector to grow at CAGR of 13.5 per cent between 2003-04 and 2005-06. Increase in sales would result in higher working capital requirement. But, due to better working capital management by corporates, we expect a marginal drop in the working capital requirements of the industry. The ratio of working capital gap to net sales has been showing an increasing trend. We believe this was due to companies changing their debt mix more towards short term to take advantage for the falling interest rates. But as the interest rates harden, firms would resort to long-term loans to lock their exposure at lower interest rates. Telecom, hotel industry to drive credit growth in service sector In 2002-03, the services sector accounted for around 51 per cent of the total GDP (at constant prices at factor cost). GDP in the service sector had clocked impressive growth rates of over 9 per cent during 1997-98 to 1999-2000. The services sector has grown at a steady pace, though there have been fluctuations in the growth in agricultural and industrial production. Crisil Centre of Economic Research (CCER) expects the services sector GDP to record a year on year growth of 8.4 per cent and 7.5 per cent in 2004-05 and 2005-06, respectively. Telecom, and hotel & tourism sectors constitute 45-50 per cent of the entire service sector in terms of bank finance (both short term and long term). As per our telecom industry study, the external funding requirement for the industry is almost Rs 414 billion during 2003-04 to 2005-06, of which, it is estimated that banks will fund Rs 145 billion in the form of term loans and working capital. As per CRIS INFAC's hotel industry study, we expect capital expenditure of Rs 31.20 billion during 2003-04 to 2007-08. Our analysis indicate that almost 80 per cent of the investment in the hotel industry is expected to place in the first 3 years (2003-04 to 2005-06). Analysing the funding pattern in the hotel industry, we expect banks to fund Rs 8.39 billion. With the expected revival of the hotel industry, and in view of new capacities, we expect the working capital requirement of the industry to grow from an average 23 per cent of sales to 26 per cent of sales over the 3-year period (2003-04 to 2005-06). The incremental net disbursement of working capital in the sector for 2003-05 to 2005-06 is estimated at Rs 19.37 billion. As mentioned earlier, hotel & tourism and telecom industry represent almost 45-50 per cent of the entire service sector. Hence, based on our estimate the incremental gross funding of banks to the service sector in next 3 years (2003-04 to 2005-06) is Rs 407 billion. Other sectors (including SSI credit) Based on our study, other industry represents approximately 25-30 per cent of the total small medium and large industry. CRIS INFAC estimates the gross disbursement to this sector during 2003-04 to 2005-06 to be Rs 822 billion.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

With the improvement of credit offtake, credit deposit ratio to touch 62% by 2005-06

Credit deposit ratio

Figure 15

(per cent) 65 62 60 59 55

55 54

53 50

50 48

49

49

45

40

1998

1999

2000

2001

2002

2003

2004 E

2005 P

2006 P

Source: CRIS INFAC

With industrial recession, and the resultant low demand for credit, the credit-deposit ratio had been as low as 48 per cent in 1999, but with the gradual recovery in the commercial credit and continued growth in the retail credit, we estimate total advance to grow at 17.4 per cent CAGR during 2003-04 to 2005-06. During the same period, total deposits will increase by 12.4 per cent. This would push up the credit deposit ratio to 62 per cent by end-March 2006, tightening the liquidity of the banking system. Increasing credit deposit ratio to slow down the growth rate of investments CRIS INFAC estimates the investments portfolio of banks to grow at CAGR of 8.8 per cent during 2003-04 to 2005-06. With low credit offtake, banks had no avenues to deploy funds. Hence they parked them in investments, both SLR and Non-SLR, or were holding on cash. The investment to deposit ratio grew from 42 per cent in 1998 to 51 per cent in 2003 and is estimated to have been 50.5 per cent in 2004. Going forward, with the expected increase in demand for commercial credit, banks would prefer lending to the industrial sector than invest in government securities, as the former yields higher returns. Further, to meet the demand for commercial credit, banks would prune their investment portfolio. With the estimated slow down in investments, the investment-deposit ratio is expected to taper to 46 per cent by March 2006.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

29

Investment-deposit ratio

Figure 16

(per cent) 55 51

51

50

48

48

46

46

45

45 43 42

40

35

30 1998

1999

2000

2001

2002

2003

2004 E

2005 P

2006 P

Source: CRIS INFAC

Asset quality

Asset quality

Figure 17

100

(per cent)

95

90

85

80

75 1999

2000 Standard

2001

2002

Sub-standard assets

2003

Doubtful assets

2004 E

2005 P

2006 P

Loss assets

Source: RBI and CRIS INFAC estimate

The share of standard assets to increase With better credit management, restructuring of loan portfolios and higher provisions/write off, the share of standard assets has increased from 85.3 per cent in 1998-99 to 91.2 per cent in 2002-03; it is expected to grow further to 94.2 per cent by 2005-06. The share of substandard and doubtful assets has shrunk from 5.0 per cent and 7.8 per cent, respectively, in 1998-99 to 2.6 per cent and 5.1 per cent, respectively, in 2002-03; it is expected to drop further to 1.5 per cent and 3.3 per cent, respectively, by 2005-06.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Net NPA expected to be around 2.5 per cent NPAs of scheduled commercial banks Basis

Table 17

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 P 2005-06 P

Gross NPA

Rs in Billion

587.22

608.4

639.63

709.53

687.80

677.21

698.61

728.09

Net NPA

Rs in Billion

280.20

300.73

324.61

355.46

327.64

274.17

273.32

309.59

Gross NPA

per cent

14.70

12.79

11.45

10.42

8.84

7.66

6.62

5.82

Net NPA

per cent

7.63

6.77

6.17

5.50

4.42

3.20

2.66

2.54

Provision for NPA

Rs in Billion

307.49

318.81

361.68

383.95

377.16

Provision cover

per cent

43.34

46.35

53.41

54.96

51.80

P: Projected Source: RBI and CRIS INFAC

CRIS INFAC estimates that by March 2006 the gross NPA will come down to 5.82 per cent as against as 8.84 per cent as of March 2003, while net NPA will drop to 2.54 per cent from 4.42 per cent during the same period. At the gross level, the gross NPAs, which stood at Rs 687.80 billion as on March 31, 2003, are expected to have fallen to Rs 669.15 billion as on March 31, 2004, but would rise thereafter to Rs 710.56 billion as in March 2006, with the growth in advances. CRIS INFAC estimates that gross NPAs will fall further to 5.84 per cent by end-March 2006. The prime drivers are expected to be: Credit administration: Improved credit management, by improving the process of credit appraisals, providing extensive training staff members undertaking appraisals, putting in place an effective system of post disbursement monitoring of accounts. Risk management: Increased focus on the improving risk management, with the aid of information technology. Improving corporate performance: Since March 2003, the corporate sector performance has improved significantly, and we expect it to continue improving its profitability in the current industrial upturn, which will help improve the risk profile of loans given to the industrial sector. Legal remedies: Banks would continue to take recourse to legal remedies such as DRT and SARFEASI, to pressurise defaulters to clear the overdues. The gross NPA of the scheduled commercial banks have fallen from 12.8 per cent as of endMarch 2000 to 8.8 per cent as of end-March 2003, while net NPAs had fallen from 6.8 per cent to 4.4 per cent during the same period. The primary drivers for the improvement are: Higher provisions: The falling interest rate and corresponding increase in profit on sale of investments provided banks enough room to increase their provisioning / write off of bad loans while maintaining profit growth. Regulatory measures: Regulators introduced various measures, such as One Time Settlement Scheme(OTS), Corporate Debt Restructuring (CDR) etc, which allowed banks to restructure the bad loans or settle the bad loans at a discount. It also prevented potential NPAs from becoming NPAs. Legal reforms: Reforms in the legal systems, in the form of strengthening the Debt Recovery Tribunal (DRT) and enactment of the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, enabling banks to pressurise the defaulters to clear the overdues, and thus clean their balance sheet. Best practices: Banks started adopting best practices, and building strong credit risk management to improve their loan portfolio CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

31

Corporate Debt Restructuring Mechanism (CDR)

Box 4

Objective: The objective of CDR is to ensure a timely and transparent mechanism for restructuring the corporate debts of viable entities, outside the purview of BIFR, DRTs and other legal proceedings, for all concerned. Structure: CDR will have a three-tier structure consisting of: (a) (a)

CDR Standing Forum and its core group - CDR standing forum is a self empowered body, which lays

down policies and guidelines, guides and monitors the progress of corporate debt restructuring. A CDR core group is carved out of the CDR standing forum to assist the standing forum in convening meetings and taking decision relating to policy, on behalf of the standing forum. The core group will consists of chief executives of IDBI, ICICI Bank, SBI, Bank of Baroda, Bank of India, Punjab National Bank, Indian Banks Association and a representative of the Reserve Bank of India. (b) CDR Empowered Group - The individual cases of corporate debt restructuring shall be decided by the CDR Empowered Group, consisting of ED level representatives of IDBI, ICICI Bank and SBI as standing members, in addition to ED level representatives of financial institutions and banks who have an exposure to the concerned company. The level of representations of banks/ financial institutions on the CDR Empowered Group should be at a sufficiently senior level to ensure that concerned banks/ FI abide by the necessary commitments including sacrifices, made towards debt restructuring. After the Empowered Group decides that restructuring of the company is prima-facie feasible and the enterprise is potentially viable in terms of the policies and guidelines evolved by the standing forum, the detailed restructuring package will be worked out by the CDR cell in conjunction will the lead institution. The empowered group has to examine the viability and rehabilitation potential of the company and approve the restructuring package within a specified time frame of 90 days or at best 180 days. The decision of the CDR Empowered group shall be final. If restructuring is not found viable, the creditors would then be free to take necessary steps for immediate recovery of dues and / or liquidation or winding up of the company, collectively or individually. (c) The CDR cell: The CDR Standing Forum and the CDR Empowered Group will be assisted by the CDR cell in all their functions. The CDR cell will make the initial scrutiny of the proposal received from borrowers/ lenders. If the rehabilitation is prima facie feasible, the CDR cell will proceed to prepare a detailed rehabilitation plan with the help of lenders and experts, if necessary. The salient features of the revised CDR scheme are as follows: It will cover only multiple banking accounts/ syndication / consortium accounts with outstanding exposure of Rs 20 crore and above. It will not apply to accounts involving only one financial institutions or one bank. It will be a voluntary system based on Debtor-Credit Agreement (DCA) and Inter-Creditor Agreement (ICA). The scheme will be applicable only to standard and sub-standard accounts. There would be no requirement of the account/ company being sick, NPA or being in default for a specified period before reference to the CDR Group. Request of any corporate indulging in wilful default or misfeasance will not be considered for restructuring under CDR. Reference to CDR could be triggered by (a) any or more of the secured creditors who have a minimum 20 per cent share in either working capital or term finance, or (b) by the concerned corporate, if supported by a bank or financial institution having stake as in (a) above. Lenders who do not wish to commit additional financing or wish to sell their existing stake will be provided with the exit options. ‘Stand-still' agreement binding for 90 days or 180 days by debtors and creditors respectively, under which both sides commit themselves not to take recourse to any legal action during the 'stand-still period'. If 75 per cent of the secured creditors by value, agree to a debt restructuring package, the same would be binding on the remaining secured creditors. Continued...

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

As on June 30, 2003, out of 57,915 cases (involving Rs 822.66 billion) filed by banks to the DRTs, 22,163 cases (involving Rs 196.33 billion) have been adjudicated and the amount recovered so far stood at Rs 57.87 billion.

Progress under CDR Scheme (Rs billion)

Table 18 No. of Cases

Amount Involved

Cases refererred to CDR forum

71

537.36

Final schemes approved

41

386.38

Rejected

18

72.52

Pending

12

78.46

Source: Report on Trends and Progress of Banking India, 2002-03

Sector-wise NPA of scheduled commercial banks

Box 5

While the gross NPA (as a percentage of advances) is falling in all the sectors, it is highest under the priority sector, with a drop of almost 10 percentage points. The NPAs under the public sector are the lowest, essentially due to the government backing. The NPAs are the highest under the priority sector because of the industries and sectors to which advance are given. Priority sector is more of directed lending, which puts pressure on the banks to meet the required target, which leads to some lapse in the credit assessment of the proposal. But, over the years, banks have improved their systems and, also with the restructuring of bad loans, NPAs are witnessing a declining trend.

Sector-wise composition of NPAs of public sector banks (1999-2003) (Rs billion)

Priority sector Advances

Public sector

NPA per cent

Advances

Table 19

Non-priority sector

NPA per cent

Advances

NPA

per cent

1999

937

226

24.12

395

15

3.8

1642

276

16.8

2000

1082

237

21.92

465

11

2.3

1974

285

14.5

2001

1270

242

19.02

710

17

2.4

2166

273

12.6

2002

1476

252

17.04

914

9

1.0

2416

284

11.8

2003

1763

249

14.15

924

11

1.2

2807

268

9.5

0.47

0.02

0.51

Source: Trends & progress of Banking in India 2002-03 and statistical tables

'Provision for NPA' charge to P&L expected to decrease With the expected fall in the profit on sale of investments, banks would have less leeway to make provisions for NPAs. We expect banks to have made the highest provisions during 2003-04, with the increase in the interest rates. Hence, the provision for NPA would have increased to Rs 178 billion in 2003-04. Since banks would have already made additional provisions in the previous years, the incremental provision are expected to be relatively smaller. Moreover, we expect banks to further strengthen their credit management, leading to an up gradation in the existing NPAs. This would lead to a reduction in the provision requirements for provision for NPAs' due to write back of the excess provisions made in the earlier years. These factors would reduce the provision for NPA charged to the P&L, from Rs 178 billion in FY 2004, to Rs 159 billion for 2004-05 and Rs 135 billion for 2005-06. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

33

Incremental NPA provision

Figure 18

(Rs billion) 200

178

160

159 132

120

135

80

40

0

2003

2004 P

2005 P

2006 P

Source: RBI and CRIS INFAC estimate

We do not expect the growth in agricultural credit to affect the NPA loans (declared/book) of the banks' assets, because of the following: Agriculture credit accounts for only 12 per cent of the total advances. Lenient norms for recognising NPA in the agriculture sector. Restructuring of old agricultural loans, as per the RBI's recent directives. Strategic business units (SBUs) set up by several banks, to cater to the agricultural credit demand. This focus approach would also help in better monitoring of these advances. Announcements made by banks to recruit agriculture specialist, for the agricultural credit division. CRIS INFAC expects the actual NPAs on the books of banks to be higher than the declared NPAs (book NPAs) on account of the following: Aggressive agriculture credit disbursement policies The aggressive agricultural credit disbursement policies pursed by banks under directives of RBI and the government will result in the inherent risk of an increase in the agricultural advances assets. Further, despite lenient NPA recognition norms historically, agricultural advances have higher NPA levels vis-à-vis non-priority sector advances. Unseasoned housing finance portfolio As per CRIS INFAC estimates, housing finance accounts for more than 50 per cent of the retail credit. Banks have aggressively pursued housing finance during the last 3 years (2000-01 to 2003-04), as a result of which the housing loan book size has more than quadrupled during this time of declining interest rates. The housing portfolio has not yet seasoned and has not been stress tested during a hardening interest rate environment. Therefore, the current NPA levels of this sector are expected to be understated.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Cash in hand and balances with RBI grew at a CAGR of 4.1 per cent from 1997-98 to 200203 The cash and bank balances with the banks consist primarily of cash with branches, cash in ATMs and the remaining cash balances with the RBI for maintaining the CRR ratio. Given the view that banks are substantially stronger than they were in the early nineties, coupled with a view that CRR was not longer an effective tool in controlling inflation and credit offtake, the RBI decided to bring down the CRR levels on a deferred manner in 1997-98. Since then the CRR levels have come down from a high of 11 per cent in 1998-99 to the present level of 5 per cent, after touching a low of 4.5 per cent. Further, CRR was also required to strengthen the bank against large withdrawals that result in the bank not been in a position to pay its obligation. The RBI has raised the CRR levels from 4.5 per cent to 5.0 per cent in two stages. The hike in the CRR would increase the cash and bank balance. But, the RBI initiated measure is more from keeping the inflation under check, and as the inflation pressure subsides, the CRR would be reduced. The RBI has retained its medium term objective of gradually lowering the CRR to 3 per cent. The CRR reduction is part of the RBI's endeavour to make available more resources with bank to lend. CRIS INFAC expects the cash in hand and balances with the RBI to growth at a small rate of 5.8 per cent, as per the historical trend.

Comparison of CRR with proportion of cash in hand with T&DL

Figure 19

(per cent)

11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

Cash in hand and balance with RBI as a percentage of T &DL

2004-05

2005-06

CRR ratio

Source: RBI and CRIS INFAC estimate

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

35

Recent guidelines issued by RBI pertaining to CRR

Box 6

The Reserve Bank of India has recently increased CRR of schedule commercial banks, by 50 basis points of their net demand and time liabilities, in two stages, effective from fortnight beginning from September 18, 2004 and October 2, 2004 to 4.75 per cent and 5.0 per cent respectively. Further, with effect from the fortnight beginning September 18, 2004, banks will be paid interest at the rate of 3.5 per cent per annum on their eligible cash balances maintained with RBI under CRR requirement as against the current practice of payment of interest at the Bank rate (6.0 per cent per annum).

Impact of CRR rate reduction on yields (Rs million)

Table 20

2005 with CRR impact

2005 without CRR impact

D&T liabilities

18,680,707

18,680,707

Average funds deployed in carry

19,480,370

19,480,370

CRR requirement Interest rate Interest income Contirbution to yield on avg funds deployed (in bps) Loss of revenue Impact on yield (in basis points)

5.00% 3.50%

4.50% 6.00%

12,360

15,891

6.7

8.7 3,531 1.9

Source: CRIS INFAC

With the reduction in the rate of interest offered on the CRR deposits, we expect the banks to take an additional hit of 2 basis points (annualised) on their spreads.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

2.0

Interest rate outlook and yields

Average yields of government securities (per cent)

Table 1

Tenure I year

3 year

5 year

10 year

1999-00

10.29

10.62

10.88

11.41

2000-01

9.88

10.07

10.33

10.96

2001-02

7.24

7.48

7.74

8.69

2002-03

5.98

6.19

6.43

6.91

2003-04

4.63

4.80

4.93

5.31

2004-05 P

4.92

5.32

5.61

6.10

2005-06 P

5.56

6.07

6.52

7.25

P: Projected Source: Crisil Centre for Economic Research, CRIS INFAC

Projected interest rates of government securities Table 2 (per cent)

Tenure I year

3 year

5 year

10 year

March 31, 2003

5.88

6.42

6.35

6.47

March 31, 2004

4.29

4.59

4.78

5.17

March 31, 2005 P

5.40

5.93

6.36

7.00

March 31, 2006 P

5.75

6.20

6.67

7.50

P: Projected Source: RBI, Crisil Centre for Economic Research, CRIS INFAC

Interest rates to harden in 2004-05 According to estimates by the CRISIL Centre for Economic Research (CCER) and CRIS INFAC, the benchmark 10-year yield on government securities is estimated to rise by 183 basis points (bps) during 2004-05 to 7.00 per cent by March 2005 from 5.17 per cent as of end-March 2004. The benchmark yield is expected to go up further by 50 bps during 2005-06 to touch 7.50 per cent by March 2006. Rising inflation and the gradual increase in credit demand has led to a hardening of interest rates. Banks have started moving to the short end of the curve with the rise in interest rates. As per CCER estimates, interest rates for corporate are expected to go up by an additional 40-50 bps over the corresponding G-Sec yield. In general, the movement of interest rates depends on: Growth in money supply Growth in credit offtake International interest rate. Expected rate of inflation Fiscal deficit, and the resultant borrowing programme of the government

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

37

Tightening money supply The year-on-year growth in money supply (M3) was higher at 16 per cent in 2003-04, compared to 15 per cent in 2002-03. In its credit policy for 2004-05, the Reserve Bank of India (RBI) has projected the expansion of money supply at 14 per cent. CRIS INFAC estimates the credit deposit ratio to go up to 62 per cent as on March 31, 2006. With the changing rupee-dollar parity and the increase in forward premiums, foreign currency borrowings are likely to become costlier, which will slow down the growth in external commercial borrowings. The inflows from non-resident Indians (NRIs) and foreign institutional investors (FIIs) are also likely to be affected, with the expected recovery in the US economy and the corresponding increase in the interest rate. Recently, the RBI increased the limit of borrowings under the Market Stabilisation Scheme (MSS) from Rs 600 billion to Rs 800 billion; thus, an additional liquidity of Rs 200 billion would be absorbed from the banking system. Moreover, the 50 bps increase in the CRR limit in two stages is estimated to absorb another Rs 80 billion from the system. These factors are expected to put pressure on the liquidity in the system. Credit growth As explained in the previous chapter, non-food credit is estimated to grow at 18.56 per cent during 2003-04 to 2005-06, with the credit deposit ratio likely to touch 62 per cent by endMarch 2006. International interest rates The US Federal Department has increased the Fed Rate thrice in a span of three months, each time by 25 bps, to 1.75 per cent, indicating a revival of the US economy, and giving a direction to the interest rates. US short-term rates are expected to rise by another 100 bps over the next 12 months. This would lead to a further rise in the domestic interest rate. (The shortterm interest rates in India show a strong correlation with the short-term interest rates in the US.) Fiscal deficit

Fiscal deficit and market borrowing

Table 3 2001-02 Actuals

2002-03 Actuals

Rs in billion

1409.55

Budgeted market borrowings Rs in billion

773.5253

Basis Fiscal deficit Actual market borrowings

Rs in billion

As a percentage of GDP

per cent

2003-04 RE

2004-05 2004-05 BE CCER Est

1450.73

1321.03

1374.07

1574.07

958.59

1071.94

903.65

1040

926.3

1120.48

879.94

6.2

5.9

4.8

4.4

5.0

Source: Budget Documents

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

The Central government's fiscal deficit is funded mainly through its market borrowings. Hence, with the increase in the fiscal deficit, the market borrowings would go up, leading to pressure on the interest rate. CCER estimates that the fiscal deficit will touch 5 per cent of GDP as against the budget estimates of 4.4 per cent, due to shortfall in the budgeted tax collections. With the expected increase in the fiscal deficit, CCER estimates the government's market borrowings to rise by Rs 136.35 billion, which will push the interest rate up.

Fiscal deficit

Box 1

The budget assumes a nominal GDP growth of 12.7 per cent for 2004-05. Assuming an inflation of 5.0-5.5 per cent, this translates into a high real growth of about 7.2-7.7 per cent. As per CCER's assessment, sustaining such a high growth over a strong base of 8.2 per cent growth in the previous year is unlikely. CCER expect real GDP growth of only 6.0-6.5 per cent even if the monsoons are normal. The central government has assumed a growth of 24.6 per cent in its gross tax revenues in 2004-05, over a high growth of 17.9 per cent in 2003-04. This translates into an increase in the tax/GDP ratio to 10.2 per cent in 2004-05 from 9.2 per cent in 2003-04. According to CCER, this projected growth in revenues is optimistic. The table below documents the expected shortfall in gross tax revenues under alternate assumptions of industrial growth. The estimates of gross tax revenues have been computed using the ratio of tax collections to nominal industrial GDP observed during 2003-04.

Tax revenues and industrial growth

Table 4

Industrial growth

Industrial inflation

(per cent)

(per cent)

Nominal industrial growth (per cent)

2004-05BE Gross tax Gross tax revenue revenue (EST) (BE)

6.5

5.5

12.0

285,612

317,733

32,121

7.0

5.7

12.7

287,397

317,733

30,336

8.0

6.0

14.0

290,712

317,733

27,021

9.0

6.0

15.0

293,262

317,733

24,471

Expected shortfall

Note 1) Rs in crores Sources: CRISIL Simulations

If the tax/industrial GDP ratio of 2003-04 is assumed to hold in the current fiscal, we get a significant revenue shortfall, ranging from Rs 244.71 billion to Rs 303.36 billion. This is likely to be an overestimate of the shortfall because of some changes in the tax regime and imposition of new taxes. Even if we optimistically assume the benefits from new taxes and efficiency improvement in tax collections at Rs 100 billion, we end up with a shortfall of about Rs 200 billion under a realistic assumption for industrial growth. The Budget is thus relying upon the recovery of large arrears in direct and indirect taxes to meet the revenue targets. This expected revenue shortfall would increase the fiscal deficit to 5 per cent of the GDP from a projected 4.4 per cent of the GDP. For more details, please refer our Budget document.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

39

Average inflation in 2004-05 seen in 6.0-6.5 per cent range The expected increase in inflation results in an increase in interest rates. This is because lenders demand compensation for the fact that the future interest and principal they receive will not be worth as much as the money they lend, in terms of the goods and services it would purchase. CCER estimates that average inflation will be about 6.0-6.5 per cent in 2004-05. Surging international crude oil prices, the rainfall deficiency in some parts of the country and rising metal prices will all exert upward pressure on inflation. Basic metals, alloys and metal products remained the major contributor to the overall manufacturing inflation during the first quarter of 2004-05. High domestic and international coal prices and higher iron ore prices have put an additional upward pressure on steel prices (which is a major constituent of basic metals group). But global commodity prices are expected to soften. In addition, the government has reduced the excise and customs duties on commodities like oil, metals and sugar, which will result in lower prices. Moreover, the base effect will come to play from September onwards, softening the rate of inflation to some extent. Average WPI-All commodities

Figure 1

(per cent)

Weekly WPI inflation

Figure 2

(per cent) 10.00

7.0

9.00 8.00

6.0

7.00 6.00

5.0

5.00 4.00 3.00

4.0

2.00

Source: CCER

06/07/2004

06/04/2004

06/01/2004

06/10/2003

06/07/2003

06/04/2003

06/01/2003

06/10/2002

06/07/2002

2005-06 E

06/04/2002

2004-05 E

06/01/2002

2003-04

06/10/2001

2002-03

06/07/2001

2001-02

06/04/2001

2.0

0.00

06/01/2001

1.00

3.0

Source: CCER

In 2003-04, average inflation was high at around 5.5 per cent, compared to 3.4 per cent in 2002-03 and 3.6 per cent in 2001-02. This was largely due to the rising inflationary trends in the second half of the financial year, largely due to rising manufacturing sector prices. Taking all these factors into consideration, CCER has forecast the average inflation for 200405 to be in the range of 6.0-6.5 per cent and nearly 5.0-5.5 per cent in 2005-06. For more details on inflation, please refer to CRISIL's EcoView of August 2004.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Yields and cost of scheduled commercial banks Yields & costs of scheduled commercial banks (Per cent) Yield on advances (i)

Table 5

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 F 2005-06 F 12.30

11.71

11.46

10.19

9.93

9.37

9.32

9.69

Yield on investments (ii)

12.05

11.85

11.28

10.75

9.80

8.49

8.07

7.85

Yield on AFCB (iii)

11.15

10.77

10.61

9.88

9.52

8.78

8.47

8.56

Cost of deposits (iv)

8.03

7.68

7.35

7.14

6.46

5.82

5.59

5.76

11.59

11.73

12.32

8.53

11.13

9.80

9.58

9.83

Interest Cost on FB (vi)

7.96

7.68

7.41

7.06

6.63

5.91

5.67

5.84

Spreads (iii - vi)

3.19

3.10

3.19

2.82

2.89

2.87

2.80

2.72

Cost of borrowings (v)

E: Estimate; F: Forecast AFCB: Average Funds in Carry Business FB: Funds Borrowed Source: CRIS INFAC estimates

Spreads Spreads are defined as the difference between the yield on carry business and the cost of borrowings. (The yield on carry business is the ratio of the total interest earned to the average funds deployed in the carry business. Carry business is the total funds deployed, excluding investments in shares, subsidiaries and others.) Generally, in an increasing interest rate regime, both yields and costs go up; conversely, in a declining interest rate scenario, both yields and costs go down. However, in a declining interest rate regime, the rate of decline in yields is faster than the rate of decline in costs. The converse is also true in a rising interest rate regime. We expect the interest rates to go up from 2004-05. The yield on carry business is mainly driven by the yield on investments and the yield on advances. Going forward, we expect the yield on investments to fall, despite an increase in the rate of interest, as securities are still being re-priced from historically higher interest rates to the relatively lower rates that are prevalent now. This is putting pressure on the yield on carry business and, in turn, on spreads. The spreads of the scheduled commercial banks have fallen from 3.19 per cent in 1998-99 to 2.89 per cent in 2002-03. They are expected to fall by an additional 0.17 percentage points to reach a level of 2.72 per cent in 2005-06. As has been explained in earlier sections, the developments pertaining to FCI would reduce the spreads for 2004-05 by 8.5 basis points (annualised) from an estimated 2.80 per cent to 2.72 per cent and the reduction of the interest rate offered on CRR deposits will further reduce the spreads by 2 bps (annualised) from 2.72 per cent to 2.70 per cent. We have not factored these developments in our projections. Hence, the combined effected of these developments is estimated to around 10 bps. Yield on carry business: The yield on carry business dropped to 9.52 per cent in March 2003 from 11.15 per cent in March 1999. As noted earlier, the yield on carry business is mainly influenced by the yield on advances and yield on investments. The continuous drop in the yield on carry business during this period was on account of the drop in both the yield on advances and yield on investments. CRIS INFAC expects the yield on carry business to drop sharply to 8.47 per cent in March 2005, but rise again to 8.56 per cent in March 2006. However, the rise will not be in line with the increase in interest rates because the yield on investments will continue to fall. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

41

Yield on advances 40 per cent of loans and advances are of short-term duration: Maturity profile of loans and advances of scheduled commercial banks (Per cent)

Table 6

<1

Years between 1 & 3

Between 3 & 5

2000

40.5

38.1

11.7

9.7

2001

41.6

38.4

7.4

12.6

2002

42.9

31.8

11.2

14.1

2003

40.8

33.4

11.1

14.7

2004 P

40.8

33.4

11.1

14.7

Above 5

Source: RBI and CRIS INFAC estimates

Banks have predominantly been providers of working capital finance to the industry, which is reviewed and renewed every year and hence classified in the 'less-than-1-year' maturity bucket. This is indicated by a steady percentage of advances, approximately 40 per cent, being classified in the 'less-than-1-year' maturity bucket. With the merger of ICICI Ltd with ICICI Bank, the advances classified under the 'above-5-year' maturity bucket have increased from 9.7 per cent in 1999-00 to 14.1 per cent in 2001-02. Moreover, banks have started focusing on retail finance, which has also influenced the increase in the share of advances classified under various buckets above 1 year. The retail finance loans are generally in the nature of term loans, which have tenures of more than 3 years. Yield on advance portfolio vis-a-vis benchmark 3-year G-Sec

Figure 3

(per cent) 14.0 12.3 11.7

12.0

11.5

11.4 10.0

10.2 10.6

10.1

9.9

8.0

9.4

9.7

9.3

7.5 6.1

6.2

6.0

4.8 5.3

4.0 1998-99

1999-00

2000-01

2001-02

yield on advance portfolio

2002-03

2003-04 E

2004-05 P

2005-06 P

benchmark 3-year G-sec yields

E: Expected; P: Projected Source: CRIS INFAC

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

The above graph compares the relationship between the average yield earned by the banks on their advance portfolio vis-à-vis the movement of the yield on the 3-year government securities. Based on the average duration of the loans and advances portfolio of scheduled commercial banks, we feel that the 3-year G-Sec paper is representative of the general interest rate scenario. Over the period 1999-2000 to 2002-2003, the yield on advances had fallen continuously with the general fall in the interest rates. Yield on advances dropped from 11.7 per cent in 199900 to 9.9 per cent in 2002-03, while the yield on the 3-year benchmark G-Sec dropped from 10.6 per cent in 1999-00 to 6.2 per cent in 2002-03. As per our study of the maturity profile of loans and advances, it is estimated that in any particular year, that year's disbursements accounted for about 48-50 per cent of the outstanding loans and advance portfolio. This indicated that every year approximately 50-52 per cent of the bank's loan yielded a higher rate of interest than the interest rates prevailing in that year. Further, the banks had not reduced their lending rate in line with drop in the interest rates. These factors led to a slower drop in the yield on advances vis-à-vis costs. With the continuing slide of the interest rate during 2003-04, we estimate the yield on advances to have declined to 9.4 per cent. The 3-year G-Sec yield is estimated to have dropped to its lowest level of 4.8 per cent in 2003-04. With the hardening of interest rates during 200405, banks are expected to start hiking the interest rate on the incremental advances, both fixed and floating, which would help in increasing the yields on advances. But, we expect the yield on advances to drop marginally to its lowest level of 9.3 per cent in 2004-05 before rising to 9.7 per cent in 2005-06, in spite of the increase in the interest rate, because part of the portfolio earning a higher yield (contracted at higher rates compared to prevailing rates) is getting re-priced at a comparatively lower rate of interest. However, in the subsequent years, as more advances get re-priced at higher interest rates, the yield on advances will go up. Yield on investments Maturity profile of investments

Maturity profile of investments of scheduled commercial banks Per cent

Table 7

<1

between 1 & 3

Years Between 3 & 5

Above 5

2002

17.0

16.9

17.3

51.1

2003

17.0

15.9

14.3

52.0

2004 P

18.1

15.0

13.8

53.1

Source: RBI and CRIS INFAC estimates

The above table indicates that almost two-thirds of the investment portfolio is more than 3 years.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

43

Yield on Investments

Yield on investment portfolio vis-a-vis benchmark 5-year G-sec yield

Fig 4

(per cent) 14.0 12.0 10.0

12.0 11.7

11.8

10.9

11.3

10.7 9.8

10.3

8.5

8.1

8.0 7.7

6.0

6.4

7.8 6.5

4.9

5.6

4.0 2.0 0.0 1999

2000

2001

2002

yield on investment portfolio

2003

2004 E

2005 P

2006 P

benchmark 5-year G-sec yields

E: Expected; P: Projected Source: CRIS INFAC

The above graph compares the relationship between the average yield earned by the banks on their investment portfolio vis-à-vis the movement of the yield on the 5-year government securities. Based on the average duration of the loans and advances portfolio of scheduled commercial banks, we feel that the 5-year G-Sec paper is representative of the general interest rate scenario. Assuming the maturity profile of investments to remain the same, yield on investments to have fallen sharply to 8.5 per cent during in 2002-2003. However, in the subsequent years, the decline would to the fall in 2004-05, as the incremental investments would get

CRIS INFAC estimates the 2003-04 from 9.8 per cent be marginal in comparison invested at higher yields.

As per the maturity profile of investments as in March 2003, approximately 30 per cent of the outstanding investments portfolio is getting re-priced every year at the prevailing interest rates. Till the mid-1990s, interest rates were very high and stable. But then the interest rate started falling. However, as only 30 per cent of the outstanding investments are re-priced every year, only incremental investments are at new rates, hence the impact of falling interest rates would come with a lag effect. The average yield of the benchmark 10-year G-Sec, which was quoting 12.04 per cent in 1997-98, fell to 5.31 per cent in 2002-03. The interest rates have started to rise from such low levels. But the securities are still being re-priced from higher interest rates to comparatively lower interest rates, hence the yield would continue to fall. However, the net yield, although it will continue to decline, will drop less significantly in 2005-06, due to a combination of factors: the reduction in the percentage of securities being re-priced at comparatively lower rates, and some short end securities being re priced at higher interest rate. Hence, the yield will continue to fall until a substantial portion of the old investments is re-priced at higher rates. Beyond that, the yield will start increasing if the interest rates continue to rise. 44

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

However, with rising interest rates, banks will try to reduce the duration of the investment portfolio by moving to the short end of the curve to avoid losses driven by higher interest rates. Interest cost The average interest cost of the scheduled commercial banks dropped to 6.63 per cent in March 2003 from 7.96 per cent in March 1999. The drop in the interest cost has been on account of the drop in both the cost of deposits and the cost of borrowings. CRIS INFAC estimates that interest cost will fall to 5.84 per cent in March 2006, after touching a low of 5.67 per cent in March 2005. The drop in the interest cost will be less than that on the yield on carry business, primarily because of slower drop in the cost of deposits. Cost of deposits Maturity profile of term deposits Maturity profile of term deposits of scheduled commercial banks Per cent

Table 8

Years <1

between 1 & 2

Between 2 & 3

Between 3 & 5

Above 5

1998-99

27.1

22.5

15.8

22.7

11.8

1999-00

28.9

22.6

15.6

22.1

10.8

2000-01

31.1

22.3

14.9

20.9

10.7

2001-02

34.8

22.7

13.7

19.0

9.8

2002-03

36.2

22.3

13.5

18.7

9.4

2003-04 P

36.2

22.3

13.5

18.7

9.2

Source: RBI and CRIS INFAC

The maturity profile of term deposits is likely to remain stable, with around 36 per cent of the portfolio expected to mature every year. With interest rates moving southwards, banks had reduced the interest rates offered on term deposits and also reduced the spreads between the interest rate offered on the long tenure and short tenure deposits, which led to an increase in the share of deposits classified under up to 2-year maturity bucket. Going forward, in spite of the expected jump in the interest rate, banks will desist from making an immediate upward revision in the interest rate in the near future. But as the liquidity pressure mounts, they will start increasing the spread between the long tenure and short tenure deposit rates, which is likely to have impact on term deposits and, thereby, on its maturity profile.

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45

Yield on deposits portfolio vis-a-vis benchmark 2-year G-Sec yield

Average cost of deposits

Yield on deposits portfolio vis-a-vis benchmark 2-year G-Sec yield Figure 5 (per cent) 12.0

11.2

11.0

10.5 10.0

10.0 9.0 8.0

8.0

7.7

7.0

7.4 7.4

6.5

7.1

6.0

5.8 6.1

5.8

5.0 4.7

4.0 1999

2000

2001

Yield on deposits portfolio

2002

2003

5.8

5.6

2004 E

5.1 2005 P

2006 P

Benchmark 2-year G-sec yield

E: Expected; P: Projected Source: CRIS INFAC

The above graph compares the relationship between the average interest cost the banks pay on their deposits portfolio vis-à-vis the movement of the yield on the 2-year government securities. Based on the average duration of the deposits portfolio of the scheduled commercial banks, we feel the 2-year G-Sec paper is representative of the general interest rate scenario. Term deposits constitute around 65 per cent of total deposits. Further, as per the maturity profile of term deposits as on March 31, 2003, approximately 42 per cent of the outstanding deposits were re-priced. We do not expect any material change in the maturity pattern during 200304 to 2005-06. Only 30 per cent of the term deposits outstanding as on March 31, 2003 are maturing after 3 years and, hence, would get re-priced then, by when interest rates will already be high; the remaining 70 per cent would have re-priced much earlier. The yield on deposits had been falling consistently in line with the decline in the interest rates, but the drop is not as steep as that observed in government securities, indicating that deposits are generally showing a low elasticity to interest rates. The average cost of deposits had dropped from 8.0 per cent in 1998-99 to 6.5 per cent in 2002-03, while the yield on the 2-year benchmark G-Sec dropped from 11.2 per cent in 1998-99 to 6.5 per cent in 2002-03. We expect the average cost of deposits to fall further to 5.8 per cent in 2003-04, as compared to 6.5 per cent in 2002-03. The benefit of the drop in interest rate has been coming with a lag effect, driven by the maturity profile of the deposits. The other components of deposits, both savings account (interest rate on the same are administered) and current account, are not very sensitive to the interest rate movement. CRIS INFAC expects the cost of deposits to drop further in 2003-04 and 2004-05 to 5.8 per cent and 5.6 per cent, respectively. It will then rise marginally to 5.8 per cent in 2005-06

46

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

due to the higher incremental pricing of the deposits. We expect the cost of deposits to rise further with the hardening of interest rates, but the rise would not be very steep as the interest rates are not expected to touch the historical highs prevailing in the late 1990s, and also because the cost of deposits have low elasticity to interest rates. Cost of borrowings Maturity profile of borrowings Maturity profile of borrowings of scheduled commercial banks Per cent

Table 9

Years <1

between 1 & 3

Between 3 & 5

Above 5

2002

63.1

20.2

11.9

4.9

2003

71.7

20.2

11.9

4.9

2004 P

67.4

20.8

3.4

4.1

Source: RBI and CRIS INFAC estimates

Most of the borrowings raised by the banks are for the purpose of tying up the short-term liquidity mismatches and are, hence, generally of a short-term nature. The above table validates this; almost 67-70 per cent of the borrowings of the scheduled commercial banks are classified in the less than 1-year maturity bucket. Essentially, almost 70 per cent of the outstanding borrowings of the bank are re-priced at the prevailing interest rate. With such a maturity profile, the banks are likely to take a hit in a rising interest rate scenario. But borrowings constitute only 5 to 6 per cent of the total liability, hence there will not be any appreciable impact. Keeping in view the main purpose for which borrowings are raised, CRIS INFAC expects the same maturity profile to continue during 2003-04 to 2005-06. Average cost of borrowings Average cost of borrowings of scheduled commercial banks (Per cent)

1998-99

1999-00

2000-01

2001-02

Including ICICI Bank

11.6

11.7

12.3

8.5

11.1

Excluding ICICI Bank

11.5

11.6

12.3

11.8

9.8

Table 10

2002-03 2003-04 E 2004-05 F 9.8

9.6

2005-06 F 9.8

E: Estimated; F: Forecast Source: CRIS INFAC

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With the liquidity overhang in the system, banks had reduced their borrowings. The drop in the interest rates also helped banks to cut their cost of borrowings, which is evident with the cost of borrowings (excluding ICICI) dropping to 9.8 per cent as in March 2003 from 12.3 per cent as in March 2001. We expect the cost of borrowings to fall in sharply in 2003-04 (inclusive of ICICI Bank) to 9.8 per cent from 11.1 per cent in 2002-03, It is expected to drop further to 9.6 per cent in 2004-05, but then go up to 9.8 per cent in 2005-06. The impact of the rise in interest rates is seen to be faster in the case of borrowings.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

3.0

Profit and loss account

Profit and loss account (Rs billion) Interest earned

Table 1 2000

2001

2002

1,034.4 1,195.7 1,321.7 1,458.8 1,507.6 1,650.5 1,895.0

Interest/discount on advances/bills

489.2

570.9

Income on investments

454.7

519.9

590.1

Other income

160.9

173.7

244.3

Total income

2003 2004 P 2005 P 2006 P

613.3

707.0

CAGR CAGR CAGR (2000 - 2003) (2000-2003) (2003 - 2006) 1

12.1

9.9

9.1

13.1

10.0

15.8

764.1

889.2 1,098.8

640.6

638.1

662.3

691.9

12.1

10.7

2.6

320.1

372.7

311.2

293.9

25.8

24.4

-2.8

1,195.3 1,369.4 1,565.9 1,778.9 1,880.4 1,961.7 2,188.9

14.2

12.1

7.2

7.7

7.0

Interest expended

718.8

811.2

908.5

969.2

955.5 1,026.0 1,187.3

10.5

Gross profit

476.5

558.2

657.5

809.7

924.9

935.7 1,001.6

19.3

7.3

Operating profit

190.1

204.8

305.9

413.2

487.4

462.2

491.6

29.5

6.0

78.0

71.0

121.9

176.3

191.7

189.2

236.4

31.2

10.3

1.8

1.6

2.0

2.4

2.5

2.0

1.8

Net profit Net profit margins (per cent) (incldg profit on sale of inv) P: Projected 1

Excluding ICICI Bank Source: RBI & CRIS INFAC Estimates

Interest earned CRIS INFAC estimates the total interest income to grow at a CAGR of 9.1 per cent during 2003-04 to 2005-06, with interest on advances expected to grow at a CAGR of 15.8 per cent. Between 2000-01 and 2002-03, the total interest income grew at a CAGR of 12.1 per cent (9.9 per cent), primarily led by 13.1 per cent (10.0 per cent) CAGR in the interest on advances. Interest on loans and advances The interest income from loans & advances is expected to grow at a CAGR of 15.8 per cent for the period 2003-04 to 2005-06, in comparison to 13.1 per cent (10.0 per cent) for the period 2000-01 to 2002-03. During the period 2000-01 to 2002-03, although advances grew by a CAGR of 18.6 per cent, the interest income on advances grew at a much lower figure of 13.1 per cent CAGR. This was due to general fall in the interest rates (yield on loans and advances dropped from 11.7 per cent in 1999-2000 to 9.9 per cent in 2002-03). The 13.1 per cent growth during 2000-01 to 2002-03 was led by a strong growth in the outstanding retail credit, which grew by around 28 per cent CAGR in the same period. During 2003-04 to 2005-06, advances are expected to grow by a CAGR of 17.4 per cent, while the interest on the loans and advances is estimated to grow at 15.8 per cent CAGR. The yield on loans and advances is expected to drop marginally from 9.9 per cent for 2002-03 to 9.7 per cent for 2005-06.

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49

Interest on investments CRIS INFAC estimates investments to grow at a CAGR of 8.8 per cent during 2003-2006 while the interest on investments is expected to grow only at a CAGR of 2.6 per cent. During the same period, the yield on investments is expected to fall to 7.8 per cent by end-March 2006 from 9.8 per cent as of end-March 2003. From 2000-01 to 2002-03, the interest on investment grew by 12.1 per cent (10.7 per cent), though the investments recorded a growth of 19 per cent CAGR. This is due to general drop in the interest rates. (The yield on investments dropped to 9.8 per cent by March 2003 from 11.8 per cent as of end-March 2000.) Interest expended Total interest expended is expected to grow at a CAGR of 7.2 per cent from 2003-04 to 2005-06, with interest on deposits expected to grow at 8.1 per cent, while the other interest component is expected to show a negative growth rate of 2.3 per cent. Interest on deposits CRIS INFAC expects total time and demand deposits to grow at 12.4 per cent CAGR during 2003-04 to 2005-06, while the interest on deposits is seen growing by only 8.1 per cent CAGR during the same period. The cost of deposits is expected to drop to 5.8 per cent by March 2006, from 6.5 per cent at March 2003. During 2000-01 to 2002-03, the interest on deposits grew at a rate of 8.8 per cent, though the deposits grew by 14.6 per cent. This is primarily due to the fall in the cost of deposits in line with the prevailing soft interest rate scenario. The cost of deposits dropped from 7.7 per cent as of March 2000 to 6.5 per cent as of March 2003. Interest on borrowings Interest on borrowings of scheduled commercial banks (Rs billion) Interest on total borrowings (All SCBs) Interest on total borrowings (ICICI Bank) Interest on total borrowings (All SCBs excluding ICICI Bank)

Table 2

1998-99 1999-00 2000-01 2001-02 2002-03 42.3

54.6

66.9

73.0

112.9

0.5

0.9

1.1

1.7

54.6

41.8

53.7

65.7

71.3

58.3

Source: RBI, Statistical tables relating to Banks in India

From 2000-01 to 2002-03, the interest on borrowings recorded a CAGR of 27.4 per cent, although borrowings grew at a CAGR of 22.9 per cent. The cost of borrowings dropped from 11.7 per cent as of March 2000 to 11.1 per cent as of March 2003. The interest on borrowings is expected to show a negative growth of 2.3 per cent during 200304 to 2005-06.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Fee-based income: Core and non-core Drop in treasury profits to hit other income growth

Non-interest income - break-up (Rs billion)

Table 3 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

Commission, exchange and brokerage

66

75

83

89

93

107

Net profit (loss) on sale of investments

19

9

30

32

94

143

Others Total non-interest income (Rs billion)

38

45

48

53

57

71

123

129

161

174

244

320

2003-04 E 2004-05 F

Commission, exchange and brokerage

127

138

Net profit (loss) on sale of investments

160 86 373

Others Total non-interest income

2005-06 F

CAGR CAGR 2000-03 2003-06 (per cent) (per cent)

149

9

12

60

0

68

-100

98

110

14

16

295

258

26

-7

E: Estimate; F: Forecast Source: RBI and CRIS INFAC

Non-interest income is a source of incremental revenues for banks and helps in maintaining a stable bottomline, as it is not sensitive to interest rates and is, hence, less volatile. Banks generate fee-based income through the issuance of guarantees, letters of credit, drafts etc, and by other income in the form of exchange profits, processing fees, income from demat activity, income credit cards, and other routine banking business. Banks have started acting as corporate agents of various mutual funds and insurance companies by distributing their products through their branch networks. This gives them an opportunity to earn other income in the form of commissions. Further, banks are also contemplating foraying into activities such as advising clients on fund management and other value-added services. This will give them an opportunity to generate fee-based income in the form of commission and brokerage Another component of other income is profit on sale of investments. But with interest rates hardening, the profit from sale of investments will come down. CRIS INFAC expects non-interest income (excluding profit on sale of investments) to grow at CAGR of 13.0 per cent, driven by the greater thrust of banks on core fee-based income. The drastic fall that is expected in profits on sale of investments will take its toll on total other income, which is expected to a show a negative CAGR of 7 per cent during 2003-04 to 200506.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

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2001-02 2002-03 E 2003-04 E

2004-05P

Years Per cent Per cent Basis points Rs crore Rs crore

Duration of the investment portfolio

Opening duration matched average G-Sec yields

Closing duration matched average G-Sec yields (March 31)

Change in average G-Sec yields

Appreciation/(losses) on investments for the year

Income from sale of investments Rs crore

10,816

871

11,687

(150)

11.68

13.19

4-5

230,687

40,794

189,893

19,170

423

2,977

10,909

(114)

10.55

11.68

4-5

285,777

55,090

230,687

Source: RBI and CRIS INFAC

3) Assumed that the SCB's investment portfolio has consistently remained in 4-5 year duration bucket

2) Unbooked appreciation could be marginally higher than our estimates

1) CRIS INFAC has assumed repricing of the entire investment portfolio to be in line with G-Sec's repricing

Notes

E: Estimates; P: Projections

Unbooked appreciation/(losses) at the end of the year

Appreciation/(losses) earned on the opening unbooked appreciation Rs crore

Rs crore Rs crore

Closing balance of investments

Net addition/(deletion) (fixed rate bonds)

Net addition/(deletion) (floating rate bonds)

Rs crore Rs crore

Op balance of investments

25,381

495

3,164

8,880

(75)

9.80

10.55

4-5

350,593

64,816

285,777

64,278

2,810

9,334

45,421

(303)

6.76

9.80

4-5

410,362

59,769

350,593

62,315

1,374

14,262

10,925

(60)

6.16

6.76

4-5

532,533

122,171

410,362

75,425

2,581

16,000

26,528

(114)

5.02

6.16

4-5

653,244

120,711

532,533

35,022

(3,499)

3,000

(33,904)

134

6.36

5.02

4-5

715,479

31,117

31,117

653,244

26,023

(380)

0

(8,619)

31

6.67

6.36

4-5

771,490

44,809

11,202

715,479

2005-06P

2000-01

Unit

Particulars

1998-99 1999-2000

Table 4

SCBs: Unbooked appreciation

Profit on sale of investments Unbooked profit on investments to reduce dramatically

In the last 3 years, interest rates fell by more than 550 basis points in a falling interest rates scenario. This enabled scheduled commercial banks to book huge gains, estimated at around Rs. 390.96 billion in the last 3 years (2000-01 to 2003-04), on their investment portfolio. As of March 2004, banks had unbooked profits of Rs 754.25 billion on their investment portfolio of government securities (which stood at Rs 6,532.4 billion). In 2004-05, we expect banks to book profits to the tune of 10 per cent of the unbooked profits. CRIS INFAC expects the yield on 5 year G-sec to rise by 165 bps to 6.67 per cent by the end of March 2006 from a level of 5.02 per cent as of March 2004. By this time, the investment book of SCBs is expected to rise by Rs 1,182 billion to Rs 7,715 billion. In recent times, the Reserve Bank of India (RBI) has been increasingly issuing floating rate long dated securities as part of the government of India's (GOI) borrowing programme. Between April 1, 2004 and September 10, 2004, the RBI raised Rs 540 billion through long dated GOI securities, of which approximately Rs 220 billion, nearly 40 per cent of the total debt raised, was through floating rate securities. Going forward, we expect this ratio to increase further. CRIS INFAC estimates that 50 per cent of RBI's borrowing during the financial year 2004-05 will be through floating rate government securities. This ratio is expected to rise further to 80 per cent in 2005-06. The floating rate bonds are generally priced as a 1-year security, hence the movement in the interest rate would have a lesser impact on the value of the security. Consequently, we expect the unbooked profit of the investment portfolio to provide a cushion of a further 83 basis points increase in interest rates, beyond the level prevailing by end of March 2006 (6.67 per cent). Thus, banks' investment portfolio can sustain an interest rate rise of 7.5 per cent on the 5 year G-Sec, which works out an increase of 248 basis points from an interest rate of 5.02 per cent prevailing in March 2004.

Prudential norm on classification of investment portfolio of banks

Box 1

A recent notification from the RBI regarding classification of the investment portfolio of banks allows the latter to exceed the present limit of 25 per cent of total investments under the held-to-maturity (HTM) category provided the excess comprises only of statutory liquid ratio (SLR) securities, and the total SLR securities held in the HTM category is not more than 25 per cent of their demand and time liabilities (DTL). Earlier, banks were allowed to shift SLR securities to the HTM category once in an accounting year. Under the new notification, banks will be allowed to shift SLR securities to the HTM category one more time (in addition to the one already allowed) any time during the current accounting year. Such shifting has to be done at the lower of the acquisition cost/ book value/market value on the date of transfer. The bank should fully provide for the depreciation, if any, on such a transfer. No fresh non-SLR securities are permitted to be included under the HTM category, while those already held as a part of the HTM category will continue. CRIS INFAC is of the view that this notification will help banks in reducing the negative impact of the rise in interest rates on their investment portfolio and help them postponing booking losses against the valuation of the portfolio. This step would have a positive impact on the bank's profit & loss account.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

53

Operating expenses to grow 8.8 per cent Wage cost to grow at 6.83 per cent

Employee cost of scheduled commercial banks (Rs billion)

Basis

Total staff

Nos

Total employee cost

Nos

Total business (deposits + advances)

Rs in billion

Table 5 1998

1999

2000

2001

2002

2003

1,023,971 1,017,490 1,006,631 926,518 901,288

n.a.

148

175

194

243

10,000

11,780

13,875

16,343

231

250

19,107 21,644

Employee cost as percentage of business per cent

1.5

1.5

1.4

1.5

1.2

1.2

Business per empoyee (Rs in million)

Rs in million

9.8

11.6

13.8

17.6

21.2

-

Offices

Nos

66,400

67,453

67,906

67,896

Business per office

Rs in million

151

175

204

241

68,174 68,540 280

316

n.a.: Not available Source: RBI, Statistical tables relating to Banks in India

Since 1998, the number of employees in scheduled commercial banks has fallen by 12 per cent. During the same period, there has been a rapid improvement in the productivity in the banking system. This is evident from the steep increase in the business per employee, which stood at Rs 21.2 million in 2002 compared to Rs 9.8 million in 1998. During 2000-01, 26 out of the 27 public sector banks (PSBs) had introduced voluntary retirement schemes. RBI had permitted PSBs to amortise VRS-related expenditure over a period of 5 years. As on March 31, 2003, the total cost of the scheme amounted to Rs 123 billion, and the balance of unamortised amount was Rs 69.47 billion as on March 31, 2003, to be amortised over 2-3 years. From 2000-01 to 2003-04, staff costs grew by 8.89 per cent, but the staff cost net of VRS recorded a CAGR of 5.5 per cent. During this period, the business of the scheduled commercial banks grew at a CAGR of 16 per cent. With greater automation, the productivity can improve further. CRIS INFAC expects the staff cost to grow at a CAGR of 6.78 per cent from 2003-04 to 2005-06. Other expenses to rise because of increased automation and marketing CRIS INFAC estimates other expenses (excluding staff cost) to grow at a CAGR of 12 per cent during 2003-04 to 2005-06, in comparison with a 16 per cent CAGR (2000-01 to 2002-03) in the previous corresponding 3-year period. Printing and stationery, advertisement, postage and depreciation are the main drivers of growth in other expenses. Banks are aggressively advertising their products through various channels of communication, which will increase its outgo on this head. Moreover, with increasing automation in banking operations, and the usage of ATMs and Internet as channels for distribution of products, the charge on account of depreciation and rent is also likely to go up. Over the years, due to the pressure on spreads, banks had controlled costs by rationalising operations. Additionally, they will have to focus on operating expenses in order to maintain their profitability.

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Provision & contingencies

Provisions and contingencies of scheduled commercial banks (Rs billion)

Table 6

2002-03

2003-04 P

2004-05 P

2005-06 P

132

178

159

135

Provision for NPA Provision for standard assets

3

3

4

5

Provision for tax

85

97

89

91

Other provisions

17

17

17

17

237

296

270

248

Total Source: RBI and CRIS INFAC Estimates

Provision and contingencies can be broadly divided into three categories: Provision for NPA and standard assets, provision for taxation, and other provisions. In the past 3 years, banks have increased their provisioning for non-performing assets. Although improving their loan portfolio was one of the key motives, the falling interest rate scenario and the corresponding increase in profit on sale of investments were key factors that led to this. CRIS INFAC estimates that banks will make higher provision for NPAs in 2003-04, but the same will decline in the subsequent years. As the banks have already made additional provisions in the earlier years, the incremental provisions come down in the subsequent years. Further, we also expect an improvement in the asset quality due to the strengthening of the credit management system in banks. This will further reduce the provision requirements with the reversal of excess provisions. As per norms, the banks have to make a provision of 0.25 per cent on standard assets. We believe that the provision for standard assets will grow at 13.3 per cent per over the next 3 years, with the expected improvement in the asset quality and rising share of standard assets in the total advances.

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4.0

Profitability

Net profitability margin highly susceptible to changes in operating expenses Net profitability margin (NPM)

Table 1 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 F 2005-06 F

Interest yield on carry business (i)

11.15

10.77

10.61

9.88

9.52

8.78

8.47

8.56

Interest cost (ii)

7.96

7.68

7.41

7.06

6.63

5.91

5.67

5.84

Spreads ( iii = i - ii )

3.19

3.10

3.19

2.82

2.89

2.87

2.80

2.72

Op. Expenses/average funds deployed (iv)

3.15

2.91

3.06

2.56

2.53

2.50

2.40

2.28

1.04 1.44 0.45 1.90

1.01 1.45 0.15 1.60

Core fee-based income/average funds deployed (v) 1.32 1.20 1.10 0.98 1.00 1.06 Net profitability margin (vi = iii - iv +v) 1.36 1.39 1.24 1.24 1.36 1.44 Other Income (vii) 0.22 0.44 0.40 0.80 1.04 1.06 Total profit margin (viii = vi + vii) 1.59 1.82 1.64 2.04 2.40 2.50 F: Forecast; E: Estimates Note Carry business: Funds deployed less investment in shares, investments in subsidiaries and other investments. Other profit on sale of investments Source: CRIS INFAC

income, includes

Although spreads will decline, CRIS INFAC is of the opinion that the net profitability margins (NPM) of scheduled commercial banks will go up from 1.36 per cent in March 2003 to 1.45 per cent by March 2006. Going forward, we expect banks to continue to rein in their costs and bring the operating cost ratio (operating expenses/average funds deployed) down to 2.28 per cent by March 2006. With spreads still under pressure, we expect banks to retain their focus on curbing operating costs by streamlining and restructuring the operational processes, which will further reduce the operating expense cost ratio to 2.28 per cent in 2005-06, from 2.53 per cent in 2003-04. The net profitability margin of scheduled commercial banks has remained flat at 1.36 per cent from 1998-99 to 2002-03, despite a decline in the contribution of core fee-based income (this is actually a ratio - core fee-based income/average funds deployed) to the NPM from 97 per cent in 1998-99 to 74 per cent in 2002-03. This has been due to the banks' focus on controlling their operating expenses, which has led to a drop in the operating expense ratio from 3.15 per cent in 1998-99 to 2.53 per cent in 2002-03. As remarked earlier, we expect the NPM to increase to 1.45 per cent in 2005-06, as banks continue their focus on controlling operating costs, which will reduce the operating expense ratio to 2.28 per cent by 2005-06. However, the stable core-fee based income ratio will restrict the rise in NPM to some extent. Fee-based income is a high margin revenue stream and provides stability to the bottomline due to its insensitivity to interest rate movement. Although the share of core fee-based income in NPM shrank to 74 per cent in 2002-03, from 89 per cent in 2000-01, it still remains a major contributor. In future, we expect this declining trend to continue, reducing the share of core-fee based income from 73 per cent in end-March 2004 to 69 per cent by end-March 2006. Although the share of core fee-based income is expected to fall, it will still help banks to maintain a steady bottomline as it is insensitive to interest rate changes and forms a large component of the NPM. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

57

Net profitability margin

Box 1

CRISIL uses the net profitability margin (NPM) to measure the profitability of a lending business. In CRISIL’s opinion, the measure of profitability for a lending business should capture its ability to generate income by deploying borrowed funds. While such a measure should capture the cost of operations and core non-fund income of the business, it should not be influenced by the returns from the business funded by equity capital. In parametric definition, NPM is equivalent to the yield on the fund-based business less the cost of borrowings plus non-fund (fee) income less operating expenses.

Spreads & NPM

Figure 1

(per cent) 3.50

3.00

2.50

2.00

1.50

1.00 1999

2000

2001 Spreads

2002

2003 NPM

2004 P

2005 P

2006 P

Total profit margin

Source: CRIS INFAC

Total profit margin (including non-core fee-based income) The major component of non-core fee-based income is profit on sale of investments. With profit on sale of investments rising from 2001-02 to 2003-04, the total profit margin also began to rise, but with the expected drop in the profit on sale of investments from 2004-05, the total profit margin is seen declining to 1.01 per cent. Other key ratios

Key ratios

Table 2

(Per cent)

1999

2000

2001

2002

2003

2004

2005

2006

Return on assets

0.49

0.68

0.53

0.77

1.00

0.98

0.80

0.83

Cost-to-income ratio (with profit on sale of investment)

64.81

60.10

63.32

53.47

48.97

47.30

51.48

52.80

Cost-to-income ratio (w/o profit on sale of investment)

66.24

64.13

67.14

62.48

59.41

57.20

55.07

52.80

Source: CRIS INFAC

58

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

The return on assets ratio, which had reached 1 per cent for March 2003, is expected to fall to 0.98 per cent for March 2004 and further to 0.80 per cent for March 2005. This drop can be attributed to the fall in other income, including profit on sale of investments, which is expected to fall with the hardening of interest rates. But the impact of the increase in interest rates on the spreads would come with a lag effect, which would then pull up the return on assets to 0.83 per cent by March 2006. The ongoing thrust of banks on controlling costs will lead to a drop in the cost-to-income ratio (without profit on sale of investments) during 2003-04 to 2005-06. The cost-to-income ratio (with profit on sale of investment) is estimated to increase due to the expected fall in the treasury profits. Projected profit and loss account of the scheduled commercial banks (Rs billion) Interest earned

Table 3

1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 P 2005-06 P

Interest/discount on advances/bills Income on Investments Other income Commission exchange and brokerage Net profit/ (loss) on sale of investments Others Total income Interest expended Interest on deposits Other interest Gross profit Operating expenses Operating profit Provisions and contingencies Provision for NPA Provision for tax Provision for standard assets Other provisions Net profit

1,034

1,196

1,322

1,459

1,508

1,651

1,895

489

571

613

707

764

889

1,099

455

520

590

641

638

662

692

161

174

244

320

373

295

258

83

89

93

107

127

138

149

30

32

94

143

160

60

0

48

53

57

71

86

98

110

1,195

1,369

1,566

1,779

1,880

1,946

2,153

719

811

908

969

955

1,026

1,187

664

744

835

856

865

932

1,082

55

67

73

113

91

94

105

477

558

657

810

925

920

966

286

353

352

397

437

474

510

190

205

306

413

487

446

456

112

134

184

237

296

270

248

n.a.

n.a.

n.a.

132

178

159

135

n.a.

n.a.

n.a.

85

97

89

91

n.a.

n.a.

n.a.

3

3

4

5

n.a.

n.a.

n.a.

17

17

17

17

78

71

122

176

192

177

208

n.a.: Not available, P: Projected Source: RBI and CRIS INFAC estimates

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

59

Projected balance sheet of all scheduled commercial banks (Rs billion)

Table 4

1999-00 2000-01 2001-02 2002-03 2003-04 E 2004-05 P 2005-06 P

Liabilities Capital

206

Reserve and surplus

211

236

236

246

250

254

447

500

646

782

951

1,101

1,276

Deposits

9,325

10,935

12,472

14,045

15,688

17,658

19,929

Demand deposits

1,309

1,415

1,550

1,668

1,818

1,973

2,131

Savings deposits

2,013

2,335

2,734

3,228

3,761

4,362

5,060

Term deposits

6,003

7,185

8,188

9,149

10,109

11,323

12,738

Borrowings

491

595

1,117

912

945

1,023

1,122

1,057

1,204

1,452

1,608

1,828

2,055

2,337

11,525

13,446

15,923

17,584

19,658

22,087

24,919

869 961

863 1,246

899 1,385

891 900

943 976

998 1,121

1,056 1,289

Investments

4,216

5,007

5,975

7,100

7,934

8,484

9,150

Advances

4,559

5,407

6,635

7,599

8,703

10,372

12,300

155

163

202

203

205

207

210

Other liabilities and provisions Total liabilities Assets Cash and balances with RBI Balances with bank and money call and short notice

Fixed assets Other assets

765

759

827

890

897

905

914

Total assets

11,525

13,446

15,923

17,585

19,658

22,087

24,919

P: Projected Source: RBI and CRIS INFAC Estimates

60

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

State of the industry Sections 1.0

2.0

3.0

4.0

5.0

6.0

7.0

Overview 61 - Spreads 61 - Net profitability margin (NPM) 62 - Outlook 63 - Business 64 - Investments 65 - Asset quality 66 - Overall assessment 67 Business 69 - Other scheduled commercial banks clocked the highest growth 69 - Advances 71 - Deposits 76 - Investments 79 - Non-performing assets 82 Spreads & net profitability margin 89 - Spreads 89 - Net profitability margin (NPM) 94 Profit and loss account 99 - Total interest income 99 - Interest expended 101 Other income 103 - Other income (excluding profit on sale of investment) as per cent of total income 103 - Profit on sale of investment 106 Operating expenses 109 - Staff cost 109 - Other operating expenses (Operating expenses excluding staff cost) 113 - Cost-income ratio 115 Important ratios 121 - Credit-deposit ratio 122

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

i

...continued

Figures 1.0 01 02 03

Overview Net profitability margin Group-wise business of banks 1998 to 2003 Group-wise SLR Securities to NTDL

62 64 65

2.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Business Group-wise business of banks 1998 to 2003 Share of bank groups Advances of OSCBs Advances of OSCBs (Ex ICICI Bank) Advances of nationalised banks Advances of SBI Group Foreign banks - outstanding advances Break-up of deposits - OSCBs Total deposits - OSCBs Deposits break-up - SBI & associates Total deposits - SBI & associates Break-up of deposits - Nationalised banks Total deposits - Nationalised banks Break-up of deposits - Foreign banks Total deposits - Foreign banks Statutory liquidity ratio - excluding gold Group-wise SLR Securities to NTDL

69 71 72 72 72 73 74 76 76 77 77 78 78 78 78 80 80

6.0 01 02 03 04 05 06 07 08 09

Operating expenses Group-wise share of employee cost in operating cost SBI & associates: No of employees vs cost per employee Nationalised banks: No of employees vs cost per employee OSC banks: No of employees vs cost per employee Foreign banks: No of employees vs cost per employee SBI & associates: Cost-income ratio Nationalised banks: Cost-income ratio OSC banks: Cost-income ratio Foreign banks: Cost-income ratio

109 110 111 112 113 116 117 118 119

7.0 01 02

Important ratios Credit-deposit ratio Investment-deposit ratio

122 122

continued...

ii

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

Tables 1.0 01

Overview Spreads

61

2.0 01 02 03 04 05 06 07 08

Business Advances to the priority sector by public sector banks Advances to the priority sector by private sector banks Advances to the priority sector by foreign banks SBI & associates Nationalised banks Other SCBs Other SCBs (net of ICICI Bank) Foreign banks

75 75 75 83 84 85 85 86

3.0 01 02 03 04 05 06 07 08

Spreads & net profitability margin Spreads: SBI and associates Spreads: Nationalised banks Spreads: Other scheduled commercial banks Spreads: Foreign banks NPM: Foreign banks NPM: Nationalised banks NPM: SBI and associates NPM: Other scheduled commercial banks

89 89 90 90 94 95 96 97

4.0 01 02 03 04 05 06 07 08

Profit and loss account OSC Banks: Interest income SBI and associates: Total interest income Nationalised banks: Interest income Foreign banks: Interest income OSC Banks: Interest expended SBI and associates: Total interest expended Nationalised banks: Interest expended Foreign banks: Interest expended

99 99 100 100 101 101 101 102

5.0 01 02 03 04 05

Other income Other income (ex treasury profits) as per cent of total income Core fee income as per cent of other income Core fee-based income Share of profit on sale of investments in total income Profit on sale of investments

103 103 104 106 106

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

iii

...continued

Tables 6.0 01

Operating expenses Other operating expenses

113

7.0 01 02 03 04

Important ratios SBI & associates Nationalised banks Other scheduled commercial banks Foreign banks

121 121 121 121

1.0

Overview

Spreads Spreads

Table 1 1999

2000

2001

2002

2003

SBI and assoc

3.01

2.87

2.81

2.52

2.58

Nationalised banks

3.27

3.08

3.32

3.11

3.29

OSCBs

2.60

2.73

2.78

2.01

2.00

Foreign banks

3.74

4.08

4.03

3.30

3.35

Source: CRIS INFAC

During 1998-99 to 2002-03, only the spreads of nationalised banks improved (by 2 basis points); spreads declined in all other categories. In 2002-03, foreign banks had the highest spreads, while other scheduled commercial banks (OSCBs) had the lowest spreads. The primary reason for the drop in the spreads was the faster decline in the yield on the carry business vis-à-vis interest cost, due to the decline in interest rates. As indicated in the earlier section, the yield on carry business is mainly influenced by the yield on advances and the yield on investments. Vis-à-vis other banks, public sector banks (nationalised banks and the SBI Group), because of their historically higher exposure to long tenure securities, have seen a slower drop in the yield on investments. Private sector banks (other scheduled commercial banks) and foreign banks have comparatively lesser exposure to long tenure securities, which increases their re-pricing ratio. Foreign banks recorded the highest drop in the yield on advances. These banks have a strong presence in trade finance and foreign currency lending. Trade finance advances are generally for the short term and hence get re-priced at a faster rate. The foreign currency loans also get re-priced as they carry a floating rate of interest. These factors pulled down the yield on advances for these banks at a faster rate. However, with hardening interest rates, the yield on advances will also rise. The decline in interest rates also resulted in a drop in the cost of deposits and, in turn, in the interest cost. But, as explained in the earlier section, because of the low elasticity of cost of deposits to interest rate movement, the drop in the cost of deposits was not steep. Foreign banks recorded the highest drop in the cost of deposits on account of the increased proportion of demand deposits in the low cost deposits (low cost deposits are made up of demand deposits and savings deposits), lower reliance on deposits and funding support from their parent companies. With the hardening of interest rates, we believe that the foreign banks' loans would get repriced at a faster rate, but the expected drop in the yield on the investments would restrict the rise in the yield on carry business. But since they continue to have the lowest cost of deposits, they will be able to maintain spreads. The spreads of public sector banks are expected to be under pressure during 2003-04 to 200506, as the continued drop in the yield on investments will restrict the rise in the yield on CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

61

carry business. Despite the hardening interest rates, their yield on investments will continue to fall on account of higher exposure to long tenure securities. The securities would get re-priced from historical higher yields to lower yields, which will lower the yield on investments. Hardening interest rates will increase the cost of deposits (albeit at a steeper rate) and cost of borrowings. The spreads of private sector banks are also expected to reduce during 2003-04 to 2005-06, due to the expected fall in the yield on investments. The yield on advances is expected to improve with the gradual increase in demand from commercial credit. As ICICI Bank continues to replace its high cost borrowings with low cost deposits, the interest cost is expected to reduce, which will restrict the drop in spreads. Net profitability margin (NPM) Net profitability margin

Figure 1

3.5

3.0

2.5

2.0

1.5

1.0

0.5 1999

2000 SBI & assoc

2001 Nat banks

OSCBs

2002 Foreign banks

2003 All SCBs

Source: CRIS INFAC

All segments, except OSCBs, either improved their NPM or at least maintained it during 199899 to 2002-03. In 2002-03, foreign banks had the highest NPM of 2.5 per cent, followed by the public sector banks with a NPM of 2.4 per cent. OSCBs had the lowest NPM of 0.79 per cent in 2002-03. Despite the decline in spreads and a reduction in the contribution of core fee income to the NPM (measured as a proportion of core fee income ratio to the NPM) there has been an improvement in NPM. This has been on account of cost control measures adopted by the banks, especially the public sector banks, which led to drop in the operating cost ratio (operating expenses as a per cent of average funds deployed). Contrary to the industry trend, other scheduled commercial banks witnessed a jump in the contribution of core fee income ratio to NPM. Public sector banks had introduced voluntary retirement schemes (VRS), which helped them to reduce manpower cost and increase productivity. This helped the segment in improving the operating expense ratio. Foreign banks have the highest operating expense ratio amongst all the bank groups because of their higher wage structure and investments in technology and infrastructure. But high spreads and support from core fee income help them in sustaining high costs. Private 62

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

sector banks are expanding their operations, hence there was a marginal saving in their operating expense ratio during 1997-98 to 2002-03. Foreign banks had the highest core fee income ratio, on account of their strong presence in trade finance, correspondent banking services, treasury management and cash management services. This provides them with an opportunity to earn fee income without taking high exposure. Public sector banks had one off the blocks in venturing average funds base led to a banks had the lowest core

of the lowest core fee income ratios, because they were not quick into new business areas to generate fee income; besides, a high low core fee income ratio. Of the public sector banks, nationalised fee income ratio during 2002-03.

Private banks (OSCBs), especially the new private sector banks, were amongst the first to foray into new business areas like credit cards, depository services and third party distribution, which helped them in generating fee income. Outlook CRIS INFAC is of the view that since spreads are under pressure all banks will have to concentrate on controlling their operating expenses and find new ways of generating fee income. Since manpower accounts for more than 70 per cent of the operating expense for the public sector banks, they need to control their staff cost by either increasing productivity or controlling cost. However, with public sector banks investing in technology and introducing new product delivery platforms, their other operating expenses are estimated to rise. The operating expense ratio may come under pressure in the short run, but it will fall as the benefits of investment in technology begin to accrue. However, in the short run, the pressure on the operating expense ratio will be reduced due to the expected demand for credit from the commercial sector. We expect the core fee income ratio to continue to decline because of increased competition. CRIS INFAC expects the NPM to be marginally under pressure in the next year, but improve afterwards, with increasing spreads and savings in operating expenses. Other scheduled commercial banks, especially the new private sector banks, are expanding their operations and are in their growth stage. Hence their operating expenses will increase, and the benefits of their investment will accrue, albeit only after a while. Till then the operating expense ratio may either remain stable or increase marginally, which can put pressure on the NPM. The core fee income ratio will continue to fall, but a slower pace, because of the increase in lending to the commercial sector and also due to the forays into new business activities. Foreign banks will continue have a high NPM on account of higher spreads and a high core fee income ratio. But as competition intensifies in areas where they are strong, their spreads and core fee income will reduce. Hence, we are of the view that foreign banks will have to control their operating expenses.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

63

Business

Group-wise business of banks 1998 to 2003

Figure 2

Rs/billion 8000 7000 6000 5000 4000 3000 2000 1000 0 SBI & ass

1997-98

Nat banks

1998-99

1999-00

Other SCBs

2000-01

2001-02

Foreign banks

2002-03

Source: CRIS INFAC

The business of other scheduled commercial banks (OSCBs) grew at 22 per cent (16 per cent) CAGR from 1999-00 to 2002-03, the highest amongst all the bank segments, driven by the strong growth in advances. The growth in advances was mainly driven by the growth in the retail credit. The business of the foreign banks grew by 12.7 per cent CAGR, which is lower than the industry average and also the lowest amongst all the bank groups. Both advances and deposits grew at a comparatively slower pace, in comparison to the peer groups. For all bank groups, except for the SBI Group, business growth had been primarily driven by the higher growth in advances. The deposits of the SBI Group grew at 15.1 per cent CAGR, in comparison to a 13.6 per cent CAGR growth in advances. The business of nationalised banks increased by 14.2 per cent CAGR during 1999-00 to 200203, driven by a 17.3 per cent CAGR growth in advances. The growth in advances was driven by the increase in commercial credit, which is contrary to what was witnessed in OSCBs. The share of OSCBs in the business increased from 13 per cent in 1999-00 to 16 per cent in 2002-03, due to their aggressive expansion strategy. The low cost deposit ratio was the highest in public sector banks and the lowest in OSCBs. However, during 1997-98 to 2002-03, the low cost deposit ratio went up for the private sector banks, while it fell for public sector banks, especially the SBI Group. Foreign banks had the highest proportion of demand deposits in the low cost deposits (no interest is paid on demand deposits), which contributed towards the lower cost of deposits.

64

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Investments

Group-wise SLR Securities to NTDL

Figure 3

50.0 45.0 40.0 35.0 30.0 25.0 20.0 1997-98

1998-99

1999-00

2000-01

2001-02

SBI & associates

Natonalised banks

Other SCBs

Other SCBs (ex ICICI Bank)

Foreign banks

SLR requirement

2002-03

Source: CRIS INFAC

All bank groups increased their exposure to SLR securities, mainly during 2002-03, due to the slowdown in credit offtake. While this high exposure helped almost all the groups in booking healthy profits during a period of soft interest rates, it can lead to losses during a period of hardening interest rates (due to the mark-to-market valuation of the investment portfolio). The SBI Group continuously increased its exposure to SLR securities during 1998-99 to 200203 and has the highest SLR ratio (government and approved securities as a percentage of net time and demand liabilities). With the expect hardening of interest rates, the SBI Group will suffer losses on account of the valuation of these securities (as the portfolio carries a higher proportion of securities purchased during the last 2 years). However, on account of its high exposure towards SLR securities, we believe that the portfolio will carry sufficient unbooked profits to provide a cushion against rising interest rates. Nationalised banks, unlike the SBI Group, had a stable SLR ratio during 1998-99 to 2001-02, but the ratio increased in 2002-03 (to take advantage of the soft interest scenario and book high treasury gains). CRIS INFAC believes that the investment portfolio of nationalised banks will have unbooked profits (although it may be far lower than that of the SBI Group) to protect them against rising interest rates. Hence, of the two public sector bank groups, nationalised banks will have higher losses from the valuation of the investment portfolio and sale of investments. Private sector banks and foreign banks maintained the SLR ratio in the range of 26-27 per cent during 1998-99 to 2001-02, but increased their exposure during 2002-03, when the acquisition cost of the securities was high (because of low interest rates). However, with the hardening interest rates, the losses from the valuation of investments or sale of investments would be high. Further, because of this group's comparatively low exposure to securities, especially high tenure ones, we expect that unbooked profits in the investment portfolio will be only marginal, which will not provide much resistance against increasing interest rates and is likely to result in the booking of high treasury losses.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

65

All bank groups will book treasury losses, but we expect these to be lower for the SBI Group and higher for foreign banks. Banks, therefore, need to reduce their exposure to investment by reducing the duration of the investment portfolio. Asset quality Based on our study of the gross and net NPA ratios of various bank groups, we found that there was a marked improvement in the declared asset quality of the nationalised banks and the SBI Group, while it was only marginally better for OSCBs and foreign banks. The marked improvement in the case of public sector banks (nationalised and SBI Group) has been primarily due to higher provisions and write-offs. These banks recorded a healthy growth in the profit from sale of investments, which helped them in writing off bad loans and also making excess/additional provisions towards NPAs. However, the improvement observed in the case of SBI Group was more at the gross NPA level, whereas in the case of the other three groups, the improvement was more at the net NPA level. This indicates that the SBI Group improved its credit management to improve asset quality, while other bank groups increased their provisioning cover. A comparison of the share of gross NPA ratios and net NPA ratios of the various bank groups to the industry average, during the period 1999-00 to 2002-03, revealed that the SBI Group had increased its asset quality both at the gross level and the net level. There was a slight deterioration in the asset quality of the nationalised banks at the gross level, but there was an improvement at the net NPA level, due to higher provisioning cover. Foreign banks witnessed a marginal deterioration in the asset quality at both gross and net levels, but more at the net level due to the decrease in the provisioning cover. In case of other scheduled commercial banks, excluding ICICI Bank, the asset quality worsened at the gross level, but remained stable at the net NPA level on account of the higher NPA provision. Aggressive lending polices adopted by the private sector banks led to a worsening of the asset quality at the gross levels, but they were able to maintain the net NPA ratios with higher provisions. Including ICICI Bank, the asset quality worsened at both levels; gross and net. Other scheduled commercial banks, especially the new private sector banks, are aggressively increasing the loan book by compromising a little on the asset quality. But the group is making higher provisions in maintaining a stable net NPA. Nationalised banks and the SBI Group are concentrating more on improving the asset quality. While nationalised banks are focussing on improvement at the net levels, the SBI Group is concentrating on improvement at the gross levels. Both groups had reduced the provisioning covers. The healthy growth in treasury profits helped banks in increasing their provision cover, but there will not be much leeway in future to make higher provisions towards NPAs due to the expected fall in treasury profits. Hence banks need to improve their credit management to improve their asset quality

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Overall assessment Foreign banks During 1999-00 to 2002-03, foreign banks held on to their share of the business and also maintained the highest spreads. Greater spreads and a high core fee income ratio helped them in sustaining high operating expenses. The high proportion of short-term assets and the low reliance on term deposits will help these banks in improving spreads. They will continue to have a high core fee income ratio, but are likely to face competition from other bank groups, who are increasing their worldwide presence. Foreign banks have the lowest NPA ratios and, with their stringent credit assessment norms, will continue to maintain them. Other scheduled commercial banks Since these banks, especially the new private sector banks, are expanding their operations operating expenses will be high. But the benefits of these large investments will accrue to them in the near future. The yield on carry business is likely to improve with the gradual increase in credit demand from the commercial sector. However, the improvement could be restricted due to the expected drop in the yield on investments. Because of the aggressive lending strategy adopted by the new private sector banks, the asset quality may deteriorate, although the banks will try to maintain the net NPA ratio. Private sector banks have to concentrate on their credit management systems to improve the asset quality. OSCBs will continue to focus on retail finance. This, coupled with increased credit to the commercial sector, will enable a healthy growth in advances. Public sector banks (State Bank of India & associates, & nationalised banks) These banks need to rein in their operating costs by controlling manpower costs and rationalising operations. Investments in technology may result in surplus staff, which can affect productivity (if the excess manpower is not utilised properly). The gradual increase in commercial sector credit will enable a healthy growth in advances. Public sector banks need to reduce their exposure to investments by focusing on the core activity of lending. Moreover, these banks have started focusing on retail finance, which will contribute to the growth in advances, which will help in improving the yield on carry business, and thus spreads. In addition, they need to strengthen their interest rate risk management and credit risk management. We believe that the structure of pricing of loans needs to be reviewed. We also expect the asset quality of the public sector banks to improve on account of the expected improvement in credit management. But PSBs need to improve and be aggressive in their communication and business strategies to garner more customers, if they want to attain mass in the retail finance segment.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

67

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2.0

Business

Other scheduled commercial banks clocked the highest growth Group-wise business of banks 1998 to 2003

Figure 1

(Rs/billion) 8000 7000 6000 5000 4000 3000 2000 1000 0 SBI & ass.

1997-98

Nat banks

1998-99

1999-00

Other SCBs

2000-01

2001-02

Foreign banks

2002-03

Source: CRIS INFAC

The business of all scheduled commercial banks grew at 16 per cent (14.5 per cent) CAGR from 1999-00 to 2002-03. During the same period, the business of other scheduled commercial banks (OSCBs) grew at 22 per cent (16 per cent) CAGR, the highest amongst all the bank segments, driven by a strong growth in advances. The business of foreign banks grew by 12.7 per cent CAGR, which is lower than the industry average and is also the lowest amongst all the bank groups. Both advances and deposits of foreign banks grew at a comparatively slower pace, in comparison with the other groups. For all the groups, except the SBI Group, business growth was primarily on the back of the higher growth in advances. The deposits of the SBI Group grew at 15.1 per cent CAGR, in comparison to a 13.6 per cent CAGR growth in advances.

Due to the merger of ICICI Ltd with ICICI Bank on March 30, 2002, the growth figures for the scheduled commercial banks (SCBs) for the period under consideration are slightly misleading. Hence, for a better comparison, we have also calculated the growth figures excluding ICICI Bank, which are indicated in brackets.

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Other scheduled commercial banks (OSCBs) Business grew by 22 per cent (16 per cent) CAGR from Rs 1,694 billion (Rs 1,559 billion) in March 2000 to Rs 3,446 billion (Rs 2,432 billion) as of March 2003, driven by a strong growth of 35.2 per cent (17.5 per cent) CAGR in advances. Deposits grew at 22.1 per cent (15.2 per cent) CAGR during 1999-00 to 2002-03. While the share of advances in funds deployed has gone up from 44.4 per cent (45.3 per cent) in 1998-99 to 50.7 per cent (47.8 per cent) in 2002-03, the share of investments increased from 37.8 per cent (37.4 per cent) in 1998-99 to 39.2 per cent (40.3 per cent) in 200203. The growth in advances was primarily driven by the focus on retail credit, especially by new private sector banks. State Bank of India & associates (SBI Group) The business of the SBI Group grew at 14.6 per cent CAGR from Rs 3,853 billion in March 2000 to Rs 5,802 billion in March 2003, driven by a 15.1 per cent CAGR growth in deposits. During the same period, advances grew at 13.6 per cent CAGR. The share of advances in funds deployed declined from 46.2 per cent in 1998-99 to 40.64 per cent in 2002-03, while the proportion of investments in the funds deployed increased from 34.4 per cent in 199899 to about 48 per cent in 2002-03. Nationalised banks The business grew at a 14.2 per cent CAGR from Rs 7,041 billion in March 2000 to Rs 10,485 billion in March 2003, driven by a 17.3 per cent CAGR growth in advances. Deposits grew at a slower rate of 12.7 per cent CAGR. The share of advances in funds deployed increased from 42.4 per cent in 1998-99 to 48 per cent in 2002-03, while the share of investment in funds deployed increased from 40.6 per cent in 1998-99 to 43 per cent in 2002-03. Foreign banks Foreign banks clocked the lowest growth in business amongst various bank categories, at a CAGR of 12.7 per cent during 1999-00 to 2002-03. The business grew from Rs 849 billion in March 2000 to Rs 1215 billion in March 2003, driven by 13.6 per cent CAGR growth in advances. Deposits grew at a slower rate of 12.0 per cent CAGR. The share of advances in the funds deployed increased from 42.6 per cent in 1998-99 to 50.2 per cent in 2002-03, while the share of investments in the funds deployed went up from 38.0 per cent in 1998-99 to 39.3 per cent in 2002-03.

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Share of bank groups

Figure 2 2002-03

1999-2000 (per cent) Other SCB 13

Forgn Banks 6

(per cent)

Forgn Banks 6 SBI & Ass 29

Nat Bank 52

Other SCB 16

SBI & Ass 28

Nat Bank 50

Source: CRIS INFAC

Though the share of nationalised banks in the total business of scheduled commercial banks is reducing, it is still approximately 50 per cent. The share of other scheduled commercial banks has increased from 13 per cent in 1999-00 to 16 per cent in 2002-03, due to the aggressive growth strategy adopted by them. Advances Overview OSCBs recorded the highest growth in advances amongst all the bank groups, while the foreign banks, along with the SBI Group, recorded the lowest growth. For OSCBs, the high growth was due to the focus on retail credit. The advances of OSCBs grew at 35.2 per cent (17.5 per cent) CAGR during 1999-00 to 2002-03. The advances of nationalised banks also recorded a healthy growth of 17.2 per cent CAGR, driven by the growth in commercial credit and agriculture credit. For foreign banks and nationalised banks, the growth of advances was lower than that of the industry. Increased competition from new private sector banks, coupled with low credit demand from the large corporates, slowed down the growth of advances of foreign banks. For the SBI Group, the growth of advances was low on account of a less aggressive lending strategy and greater competition. A study of the composition of loans and advances indicates that the SBI Group and nationalised banks have, over the years, been providers of working capital finance to the industry. Going forward, with the increasing focus of these groups on retail credit, the proportion of term loans in working capital is expected to rise further. Other scheduled commercial banks The advances of OSCBs grew faster than the industry average of 16 per cent (excluding ICICI Bank). Advances grew from Rs 557 billion (Rs 521 billion) in 1999-00 to Rs 1,377 billion (Rs 844 billion) in 2002-03. Due to the slowdown in industrial activity, the demand for credit from the commercial sector was low. Hence all the banks directed their efforts towards retail credit. OSCBs, especially the new private sector banks - ICICI Bank, HDFC Bank, UTI Bank etc were amongst the first to shift their focus towards retail finance. This helped them to post a healthy growth in advances. Today ICICI Bank and HDFC Bank are the leaders in retail finance. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

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Advances of OSCBs

Figure 3

(Rs/crores)

Advances of OSCBs (Ex ICICI Bank)

Figure 4

(Rs/crores)

160,000

90,000

140,000

80,000

120,000

70,000 60,000

100,000

50,000

80,000

40,000

60,000

30,000

40,000

20,000

20,000

10,000

0 1997-98

1998-99

Term loans

1999-2000

2000-01

2001-02

2002-03

Short term/working capital loans

0 1997-98

1998-99

Term loans

Source: CRIS INFAC

1999-00

2000-01

2001-02

2002-03

Short term/ working capital loans

Source: CRIS INFAC

The term loan of OSCBs grew at 75 per cent (34 per cent) CAGR from Rs 164 billion (Rs 161 billion) in 1999-00 to Rs 882.03 billion (Rs 385 billion) in 2002-03 on account of the enhanced focus on retail credit. Because of lower demand for credit from the commercial sector, working capital finance grew at a slower rate of 8 per cent (8.4 per cent) CAGR between 1999-00 and 2002-03. The share of term loans in total advances increased from 29 per cent (31 per cent) in 199900 to 64 per cent (46 per cent) in 2002-03. Nationalised banks The advances of nationalised banks also grew faster than that of the industry. Advances grew by 17.3 per cent CAGR from Rs 2,231 billion in 1999-00 to Rs 3,601 billion in 2002-03, on the back of a steady growth in both commercial and agricultural credit. As per our retail finance study, nationalised banks were slow to shift their focus towards retail finance in the initial years. However, many nationalised banks have now announced plans to focus on the retail finance portfolio. Advances of nationalised banks

Figure 5

(Rs/crores) 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 1997-98

term loans

1998-99

1999-00

2000-01

2001-02

2002-03

short term/working capital loans

Source: CRIS INFAC

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Term loans grew at a CAGR of 19.5 per cent, from Rs 830.1 billion as of end-March 2000 to 1,416.43 billion as of end-March 2003. Working capital loans grew from Rs 1,401 billion in 1999-00 to Rs 2,185 billion in 2002-03 at 16 per cent CAGR. The share of term loans increased from about 37 per cent in 1999-00 to 39 per cent in 200203. With the slowdown in industrial activity there was less demand for working capital loans, which resulted in an increase in the share of term loans in total advances. State Bank of India & associates During 2000-01 to 2002-03, amongst the scheduled commercial banks, the SBI Group accounted for the second largest portfolio of advances after nationalised banks. In the same period, the SBI Group's advances grew from Rs 1,290 billion in 1999-00 to Rs 1,892 billion in 2002-03, at a CAGR of 13.6 per cent. This lower-than-industry growth in advances was on account of the lower growth in commercial credit. The group is also facing competition from the new private sector banks and nationalised banks. Although the group was not aggressive in retail finance earlier, SBI has now announced plans to increase its focus on retail finance. (SBI plans to have 60 branches totally dedicated towards retail lending.) These measures, coupled with the expected recovery in the commercial credit, will help the group in posting a healthy growth in advances. Advances of SBI Group

Figure 6

(Rs/crores) 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1997-98

1998-99 Term loans

1999-00

2000-01

2001-02

2002-03

Short term/ working capital loans

Source: CRIS INFAC

Term loans of the group grew at 22 per cent CAGR from Rs 420 billion in 1999-00 to Rs 741 billion in 2002-03. The working capital loans grew at 11 per cent CAGR to Rs 1,151 billion in 2002-03 from Rs 871 billion in 1999-00. The share of term loans in total advances increased from 33 per cent in 1999-00 to 39 per cent in 2002-03. The increase in the share of term loans has been in line with the industry. The slow growth in working capital loans led to an increase in the share of term loans.

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Foreign banks The advances of foreign banks grew from Rs 356 billion in 1999-00 to Rs 522 billion in 200203 at 13.6 per cent CAGR, one of the lowest amongst all categories. Foreign banks, due to their limited reach, are not aggressive in retail finance. Further, most of the foreign banks prefer lending only to select large corporates. Hence, due to the lower demand for credit on account of general recession in the industrial activity, advances grew at a slower rate. Foreign banks - outstanding advances

Figure 7

(Rs/crores) 60,000 50,000 40,000 30,000 20,000 10,000 0 1997-98

1998-99 Term loans

1999-00

2000-01

2001-02

2002-03

Short term/working capital loans

Source: CRIS INFAC

Among the scheduled commercial banks, foreign banks are the only group in which the term loans have recorded a lower CAGR than the short term/working capital loans. Term loans grew from Rs 173.9 billion in 1999-00 to Rs 249.7 billion in 2002-03 at a rate of 12.8 per cent CAGR, while working capital finance grew from Rs 182 billion in 1999-00 to Rs 272 billion in 2002-03 at rate of 14.3 per cent CAGR. Foreign banks, because of their worldwide network, are strong in trade finance; especially export finance and cash management systems, where the lending is of short duration. These activities drove the growth in working capital credit. The low demand for corporate credit, coupled with the limited presence of foreign banks in retail finance, restricted the growth in the term loans. Only a few of the foreign banks are aggressive in retail finance. In addition, foreign banks have a strong presence in foreign currency loans - FCNR (B) term loans or ECBs - which are generally of 3-5 years tenure and are classified under term loans. This contributes to a higher proportion of term loans in advances vis-à-vis that of public sector banks. The lower growth in the term loans vis-à-vis working capital finance led to the a drop in the share of term loans.

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Priority sector advances As per the directive of the Reserve Bank of India, all scheduled commercial banks, except foreign banks; have to lend 40 per cent of the net bank credit to the priority sector, with more focus on the weaker sections. Foreign banks operating in India are required to lend 32.0 per cent of their net bank credit towards the priority sector. Public sector banks (State Bank of India & associates, and nationalised banks) The outstanding priority sector advances of PSBs increased by 18.6 per cent during 2002-03. As on the last reporting Friday in March 2003, the priority sector lending constituted 42.5 per cent of the net bank credit. Funding to agriculture and self-help groups helped the public sector banks in achieving the target. Advances to the priority sector by public sector banks (as on the last reporting Firday)

Basis

Priority sector lending As per cent of net bank credit

Table 1

Mar-00

Mar-01

Mar-02

Mar-03

Rs in billion

1275

1491

1712

2031

per cent

40.3

43.7

43.1

42.5

Source: RBI

Other scheduled commercial banks The total priority sector advances extended by private sector banks rose as a proportion of net bank credit, with the priority sector growing by 43 per cent in 2002-03. During 200001, OSCBs did not achieve the prescribed priority sector targets as some of the new private sector banks had been allowed certain concessions for meeting priority sector norms. Housing finance was classified as a priority sector with a limit of Rs 10 lakh (in the mid-term credit policy 2004-05, this limit was raised to Rs 15 lakh); hence with the growth in housing finance, the group witnessed a sudden rise in the priority sector ratio during 2002-03. Advances to the priority sector by private sector banks Mar-01

Table 2

(as on the last reporting Firday)

Basis

Mar-02

Mar-03

Priority sector advance

Rs in billion

216

257

367

As per cent of net bank credit

per cent

36.7

40.9

44.4

Source: RBI

Foreign banks

Advances to the priority sector by foreign banks

Table 3

(as on the last reporting Firday)

Basis

Mar-01

Mar-02

Mar-03

Priority sector advance

Rs in billion

116

134

148

As per cent of net bank credit

per cent

33.5

34

33.9

Source: RBI

As on the last reporting Friday of March 2003, priority sector lending constituted 33.9 per cent of the net bank credit. Foreign banks have maintained the priority sector ratio at a level of 33.5-34 per cent. All the bank groups had met their overall priority sector lending targets.

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Deposits Overview Deposits with scheduled commercial banks are classified into three categories Current deposits: Current deposits are those maintained by business class to meet the short-term contingencies. No interest is payable on current deposits. Savings deposits: Savings deposits are the deposits maintained by the households. RBI administers the interest rate offered on these deposits. Term deposits: These are also knows as fixed deposits or time deposits and are generally payable at the end of a fixed period. Term deposits constituted 64-65 per cent of the total deposits during1997-98 to 2002-03. Summary OSCBs recorded the highest growth in deposits amongst all the bank groups. During 1999-00 to 2002-03, deposits grew at 22 per cent (15.2 per cent) CAGR, followed by the SBI Group, whose deposits grew at 15.1 per cent CAGR. The 12 per cent CAGR growth in deposits of foreign banks was the lowest amongst all the bank groups. The strong growth in deposits of OSCBs was due to the aggressive growth strategies adopted by the new private sector banks. The SBI Group's extensive branch expansion enabled it to achieve a healthy growth in term deposits. However, for foreign banks, their limited branch network acted as a hindrance in the growth of deposits. Moreover, foreign banks also offered lower interest rates on term deposits. Of the three categories of deposits, savings deposits recorded the highest growth in all the bank groups. The growth was the highest for OSCBs on the back of a relatively lower base and the aggressive marketing strategy they adopted. Nationalised banks and the SBI Group have the highest low cost deposit ratios (the proportion of demand deposits and savings deposits to total deposits) among all bank groups. As of March 2003, the low cost deposit ratio was nearly 37 per cent for the SBI Group, while it was approximately 36 per cent for nationalised banks. Though OSCBs have the lowest low cost deposit ratio, they are giving tough competition to the nationalised banks and the SBI Group by increasing their market share in low cost deposits. Among all the groups, foreign banks have the highest composition of demand deposits in low cost deposits. Other scheduled commercial banks (OSCBs) Break-up of deposits - OSCBs

Figure 8

Total deposits - OSCBs

Figure 9

(Rs/billion)

100%

2500

90% 2000

80% 1500

70% 1000

60% 500

50% 1998

1999

Term deposits

Source: CRIS INFAC

76

2000

Savings deposits

2001

2002

Demand deposits

2003

0 1998

1999

2000

2001

2002

2003

Source: CRIS INFAC CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

OSCBs recorded the highest growth of 22.1 per cent (15.2 per cent) CAGR in total deposits between 1999-00 and 2002-03, mainly due to the new private sector banks who are aggressively expanding their operations. The share of deposits of OSCBs in the deposits of all scheduled commercial banks went up between 1997-98 and 2002-03, while it fell for nationalised banks and foreign banks. OSCBs, especially the new private sector banks, had started introducing technologydriven customised products, which also helped in the impressive growth in deposits. Low cost deposits (demand and saving deposits) constituted 24 per cent of the total deposits, which is the lowest amongst all the scheduled commercial banks. OSCBs do not have a wide network of branches that provide support in garnering more low cost deposits. Moreover, the technology-driven customised products introduced by the new private sector banks allow customers to switch between savings and term deposits. State Bank of India and associates

Deposits break-up - SBI & associates

Figure 10

Total deposits - SBI & associates

Figure 11

(Rs/billion)

100%

4500 4000

90%

3500 80%

3000 2500

70%

2000 1500

60%

1000 500

50% 1998

1999

Term deposits

2000 Savings deposits

2001

2002 Demand deposits

Source: CRIS INFAC

2003

0 1998

1999

2000

2001

2002

2003

Source: CRIS INFAC

The total deposits of the SBI Group grew from Rs 2,563 billion in 1999-00 to Rs 3,910 billion in 2002-03 at a rate of 15.1 per cent, while the industry grew at a rate of 14.6 per cent (13.7 per cent). The SBI Group's wide branch network helped it to achieve a healthy growth in deposits. The India Millennium Deposit (IMD) also spurred the growth in deposits. SBI mobilised deposits worth Rs 257 billion through the IMD scheme. Low cost deposits constitute 37 per cent of the total deposits as of March 2003, which is the highest amongst all scheduled commercial banks. The group's wide branch network helped it in maintaining the low cost deposit ratio at a high level. However, the share of low cost deposits in the total deposits fell from 42.6 per cent in 1997-98 to 37.0 per cent in 2002-03, due to the increase in competition.

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Nationalised banks Break-up of deposits - Nationalised banks Figure 12

Total deposits - Nationalised banks

Figure 13

(Rs/billion)

100%

8000

90%

7000 6000

80%

5000

70%

4000 3000

60%

2000 1000

50% 1998

1999

Term deposits

2000

2001

Savings deposits

2002

2003

0 1998

Demand deposits

1999

2000

2001

2002

2003

Source: CRIS INFAC

Source: CRIS INFAC

The total deposits of nationalised banks grew at 12.7 per cent CAGR, which was lower than that of the industry (all scheduled commercial banks). Total deposits grew from Rs 4,810 billion in 1999-00 to Rs 6,884 billion in 2002-03 on account of the low interest rates offered by the group on term deposits. Further, nationalised banks are facing stiff competition from the new private sector banks, who have capitalised on their technological edge and better service and increased their market share. Low cost deposits constituted 36 per cent of the total deposits. The share of term deposits had been stable at 36 per cent during 1999-00 to 2002-03. The term deposits of nationalised banks grew at 12.5 per cent CAGR during 1999-00 to 2002-03, which is lower than the industry average of 15.1 per cent (13.8 per cent). Foreign banks

Break-up of deposits - Foreign banks

Figure 14

Total deposits - Foreign banks

Figure 15

(Rs/billion) 800

100%

700

90%

600

80%

500 400

70%

300

60%

200 100

50% 1998

1999

Term deposits

Source: CRIS INFAC

78

2000 Saving deposits

2001

2002 Demand deposits

2003

0 1998

1999

2000

2001

2002

2003

Source: CRIS INFAC

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The total deposits of foreign banks grew from Rs 493 billion in 1999-00 to Rs 693 billion in 2002-03 at a CAGR of 12 per cent. Their limited branch network proved hindered the growth of deposits. The share of low cost deposits in total deposits increased from 31.5 per cent in 1999-00 to 33.8 per cent in 2002-03. Within low cost deposits, demand deposits have a higher share as foreign banks generally prefer to cater to corporate clients who maintain current account deposits, and also because they are strong in the cash management system. Generally foreign banks rely less on deposits to meet their funding needs. The funding requirements are met through the support of their parent organisations or by raising borrowings. Deposits constitute only about 70-75 per cent of the borrowed funds for foreign banks, while they constitute more than 95 per cent of the borrowed funds for public sector banks. Savings deposits of foreign banks grew at 23 per cent CAGR from a lower deposit base of Rs 49 billion in 1999-00 to Rs 90 billion in 2002-03. Foreign banks generally cater to high net worth individuals (HNIs) and NRI deposits. Further, only very few banks - such as HSBC, Standard Chartered Bank, Citibank and ABN Amro - are into the retail banking business. Many banks had hived off their retail business are concentrating on the institutional business. But of late, foreign banks (those who are active in the retail business) are also, with the aid of technology, luring customers to maintain low cost deposits with them. Of late a few foreign banks have started increasing their branch network, which is helping them in increasing their savings deposits. The lower deposit base, especially term loans, and their focus on HNIs and NRIs help them to keep the low cost deposit ratio at a very high level. Investments Under section 24 (b) of the Banking Regulation Act, 1949, every bank is required to maintain, at the close of business every day, a minimum proportion of its net demand and time liabilities (NDTL) as liquid assets in the form of cash and gold and un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). In 1997-98, the Reserve Bank of India fixed the SLR to be maintained on all the demand and time liabilities, including inter-bank borrowings, at 25 per cent, which is applicable till date. Banks hold a major portion of their investments in government securities and other approved securities. The proportion of government securities, along with the approved securities, to the net demand and time liabilities has been over 30 per cent during 1997-98 to 2002-03 for all SCBs as a whole.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

79

Statutory liquidity ratio - excluding gold

Figure 16

(per cent )

Group-wise SLR Securities to NTDL

Figure 17

(per cent) 50.0

40.00

45.0 35.00

40.0 35.0

30.00

30.0 25.0

25.00

20.0 1997-98

20.00 1997-98

1998-99

1999-2000

GSEC + Other approved

Source: CRIS INFAC

2000-01

2001-02

SLR requirement

2002-03

1998-99

1999-00

2000-01

2001-02

2002-03

SBI & associates

Natonalised banks

Other SCBs

Other SCBs (ex ICICI Bank)

Foreign banks

SLR requirement

Source: CRIS INFAC

Public sector banks (nationalised banks and SBI Group) had been investing in SLR securities well above the RBI stipulated norm, vis-à-vis other scheduled commercial banks and the foreign banks. The SLR ratio (SLR securities to net time and demand liabilities) of OSCBs and foreign banks has been marginally above the stipulated norm during 1997-98 to 2000-01, indicating that they utilised their funds better. However, during 2002-03, with low demand for credit from the commercial sector and excess liquidity in the system, banks in all the groups had increased their exposure to the SLR securities. This increased exposure helped many banks in booking huge treasury profits during the soft interest rate scenario that prevailed then. But, with the hardening of interest rates, this high exposure could impact their bottom line. Further, there will be a drop in the yield on investments as the re-pricing would be from a historically higher interest rate to current lower yields. The higher the exposure, the higher would be the loss on valuation of the investments. Of the bank groups, the highest exposure to SLR investments was by the SBI Group (48 per cent of NTDL) followed by nationalised banks (36 per cent of NTDL) in 2002-03. OSCBs had the lowest exposure of 30 per cent of NTDL in 2002-03. Though the SBI Group has the highest exposure to SLR securities (as a per cent of net demand and time liabilities), we believe that the unbooked profit of the investment portfolio will offer a sufficient cushion against losses arising from the increase in interest rates. The investment portfolio of nationalised banks is also expected to have some cushion (on account of their historically higher exposure towards SLR securities), although it will be significantly lower than that of the SBI Group. Hence the impact would be more in the form of a drop in the yield on investments. Other scheduled commercial banks and foreign banks have a comparatively lower exposure to SLR securities, which should lead to a comparatively lower loss from the valuation of investment portfolio. However, we believe that their investment portfolio does not carry significant unbooked profits to mitigate the impact of the interest rate rise and its resultant impact on the bottomline. Further, we also expect the yield on investments to come down. 80

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CRIS INFAC believes that the impact of increasing interest rates on the investment portfolio will be the highest on foreign banks, followed by OSCBs and nationalised banks. The least impact will be on the SBI Group. State Bank of India & associates This group's investment in SLR securities rose continuously to touch a high of 48 per cent in 2002-03 from 34 per cent in 1997-98. The group recorded the highest growth rate in deposits amongst all the scheduled commercial banks, which, coupled with the low credit offtake, forced it to increase its exposure. During the period of falling interest rates, the group was continuously increasing its exposure to SLR securities. Such a high exposure would have led to an increase the acquisition cost of investments (cost of acquisition of the securities is inversely related to yield on the security)., In an increasing the interest rate scenario, such a high exposure will have a negative impact on the profit and loss account, both in the form of treasury losses (losses from mark-to-market valuation of the investment portfolio) and the drop in the yield on investments. We believe the outstanding portfolio as of March 2003 would include a high proportion of securities purchased during the last 3 years, whose cost of acquisition would have been high. Hence, in a hardening interest the group is expected to book treasury losses on account of mark-to mark valuation of securities. But, as noted earlier, we believe that the portfolio will have sufficient unbooked profits to cushion the impact of the interest rate rise and the drop in the yield on investments. Nationalised banks Nationalised banks maintained a stable exposure to SLR investments at 32-33 per cent of the net time & demand deposits during 1997-98 to 2001-02. But with low demand for credit from the commercial sectors during 2002-03, they increased the exposure to SLR securities to approximately 36 per cent. During 2002-03, interest rates were very low and almost touched rock bottom in 2003-04. This is likely to have increased the cost of acquisition of the investments. Further this would also increase the proportion of these securities in the total outstanding investment portfolio. Hence, with hardening of interest rates, nationalised banks are likely to face heavy losses on account of mark-to-market valuations. Further, we also expect a drop in the yield on investments. Nationalised banks, due to their historically high exposure to SLR securities, will have some cushion to withstand the impact of the rise in the interest rates and be able to reduce the losses from treasury operations, although this cushion will be lower than that of the SBI Group. Foreign banks The exposure of foreign banks in SLR securities was maintained at 27 per cent of the net time and demand deposits during 1997-98 to 2000-01, but in 2001-02, the ratio dropped to 24 per cent. During 2002-03, with low credit offtake, foreign banks significantly increased its exposure towards SLR securities. The proportion of SLR securities to net time and demand deposits touched 34 per cent in 2002-03. As explained earlier, the interest rates being low during 200203, the cost of acquisition of the investments is likely to be high. As the outstanding investment portfolio would have high proportion of securities acquired recently, it will increase the overall cost of the portfolio. With the hardening of interest rates, foreign banks are likely to see a negative impact on their bottomline on account of the reduced yield on investments and also suffer losses on account of valuation of the portfolio. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

81

We believe that due to historically lower exposure of this group towards SLR securities, their investment portfolio does not have sufficient unbooked profits to mitigate the effects of hardening interest rates. Other scheduled commercial banks A trend similar to that of foreign banks is seen in other scheduled commercial banks, both including and excluding ICICI Bank. OSCBs had kept a steady SLR of 25-27 per cent during 1997-98 to 2000-01, but it dropped to 25 per cent in 2001-02. In 2002-03, this increased to 30 per cent. This ratio was lowest amongst all bank groups, hence we believe that the impact of hardening interest rates should be comparatively lower on this group vis-à-vis other bank groups. We expect the impact to be two fold: one by way of dropping the yield on investments and second by way of losses on valuation of the investment portfolio. We believe the investment portfolio of OSCBs will not have any cushion to bear the impact of the hardening of interest rates, and that their bottomline will get impacted due to losses on account of investment portfolio. Non-performing assets The Indian banking industry had always been plagued with the problem of high levels of non performing assets, which can be attributed to factors like archaic policies, industrial inefficiency, lack of adequate legal recourse to the lenders, wilful defaulters etc. Based on the study of the gross and net NPA ratios of various bank groups, we find that there has been a marked improvement in the declared asset quality of the nationalised banks and the SBI Group, while there has been only a marginal improvement in the case of OSCBs and foreign banks. The marked improvement seen in the case of public sector banks (nationalised and SBI Group) was primarily due to higher provisions and write-offs. These banks accounted a healthy growth in the profit from sale of investments, which helped them in writing off bad loans and also making excess/additional provisions towards NPAs. Both the SBI Group and nationalised banks recorded a growth of 73 per cent CAGR and 54.5 per cent CAGR, respectively, in the profits from the sale of investments. The improvement observed in the case of the SBI Group has been more at the gross NPA level, whereas in the case of the other three groups, the improvement is more at the net NPA level. During 1999-00 to 2002-03, the provision cover for the SBI Group reduced by more than 100 bps, while it went up in the case of other bank groups. An improvement in the gross NPA generally indicates an improvement in the bank's systems and procedures, whereas an improvement in the net NPA indicates that the bank's balance sheet has the strength to sustain higher provisions. A comparison of the share of gross NPA ratios and net NPA ratio of the various groups to the industry average, during 1999-00 to 2002-03, reveals that the SBI Group has increased its asset quality both at the gross level and the net level. There has been a slight deterioration in the asset quality of the nationalised banks at the gross level, but it has improved at the net NPA level on account of higher provision cover. Foreign banks witnessed a marginal deterioration in the asset quality at both gross and net levels, but more at the net level, on account of the decrease in the provision cover. In case of other scheduled commercial banks, excluding ICICI Bank, the asset quality at the gross level worsened, but remained stable at the net NPA level, on account of higher NPA provisions. Aggressive lending polices adopted by the private sector banks led to worsening of 82

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

the asset quality at the gross level, but, with higher provisions, they were able to maintain the net NPA ratios. Including ICICI Bank, the asset quality has worsened at both levels, gross and net. Take away Other scheduled commercial banks, especially the new private sector banks are aggressively increasing the size of their loan book, by compromising a little on the asset quality. But the group is making higher provisions in maintaining a stable net NPA. Nationalised banks and SBI Group are concentrating more on improving the asset quality. While nationalised banks are concentrating on an improvement in the net levels, the SBI Group is concentrating on an improvement at the gross levels. They had reduced the provision cover. State Bank of India and associates SBI & associates

Table 4 1999-00 2000-01 2001-02 2002-03

1

CAGR (per cent) (1999-00 to 2002-03)

19,773

20,593

19,451

17,044

-4.83

8,752

9,450

8,968

7,796

-3.78

14.08

12.73

11.23

8.68

6.77

6.27

5.45

4.12

Provisioning cover % (v)

55.74

54.11

53.89

54.26

Share of SBI in gross NPAs of all SCBs (vi)

32.79

32.29

27.87

24.86

Share of SBI in net NPAs of all SCBs (vii)

29.80

29.76

24.99

22.99

Share of SBI in net advances of all SCBs (viii)

29.10

28.61

25.49

25.59

Share of SBI in gross advances of all SCBs (ix)

29.63

28.96

25.90

25.27

Ratio of SBI shares in gross NPA to gr adv ( vi/ ix)

1.11

1.12

1.08

0.98

Ratio of SBI shares in net NPA to net adv ( vii/ viii)

1.02

1.04

0.98

0.90

Gross NPAs (i) 1

Net NPAs (ii) Gross NPA as % of gross advances (iii) Net NPAas % of net advances (iv)

1

Rs in crores Source: RBI & CRIS INFAC

The gross NPAs of the SBI Group declined from 14.08 per cent in 1999-2000 to 8.68 per cent in 2002-03 because the write offs/recoveries in the last 4 years were higher than the additions to gross NPAs, indicating an improvement in the NPA management systems over the last few years. In 2002-03, the additions to gross NPAs were Rs 5,791 crore while the deletion from gross NPAs was Rs 8,198 crore. Net NPAs declined in line with the drop in the gross advances. During 1999-00 to 2002-03, the ratio of net NPAs to net advances declined from 6.77 per cent in 1999-2000 to 4.12 per cent in 2002-03. During the same period, there was a drop in the NPA provision cover for the group as a whole, from 55.7 per cent in 1999-00 to 54.3 per cent in 2002-03, indicating a lower provision towards non-performing loans. This may be on account of the higher reversal of provisions for NPA due to the write-off and restructuring of NPAs. The share of SBI Group in gross advances of all scheduled commercial banks declined from 29.6 per cent in 1999-2000 to 25.3 per cent in 2002-03 while the share of gross NPAs has also declined at a faster rate from 32.8 per cent in 1999-00 to about 24.9 per cent in 200203. The ratio of share of gross NPAs of the SBI Group to all SCBs to the share of gross advances reduced from 1.11 per cent in 1999-00 to 0.98 per cent in 2002-03. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

83

The share of SBI Group in net advances of all scheduled commercial banks declined from 29.10 per cent in 1999-2000 to 25.59 per cent in 2002-03 while the share of net NPAs declined from 29.8 per cent to about 23.0 per cent. The ratio of share of net NPAs of the SBI Group to all SCBs to the share of net advances reduced from 1.02 per cent in 1999-00 to 0.90 per cent in 2002-03. The above ratios indicate improvement in the assets quality of the group, with more emphasis on an improvement in gross NPAs. Nationalised banks Nationalised banks

Table 5 1999-00 2000-01 2001-02 2002-03

CAGR (per cent) (1999-00 to 2002-03)

1

33,260

34,180

36,706

36,849

3.47

Net NPAs (ii)

17,048

17,993

19,298

17,799

1.45

13.91

12.16

11.01

9.72

7.8

7.01

6.01

4.77

43.93

42.35

45.41

50.93

Gross NPAs (i) 1

Gross NPA as % of gross advances ( iii ) Net NPAas % of net advances (iv ) Provisioning cover % ( v ) Share of nationalised banks in gross NPAs of all SCBs ( vi )

55.15

53.60

52.59

53.74

Share of nationalised banks In net NPAs of all SCBs ( vii )

58.04

56.66

53.77

52.50

Share of nationalised banks in net advances of all SCBs ( viii )

50.30

50.27

48.95

48.72

Share of nationalised banks in gross advance ( ix)

50.45

50.32

49.86

48.79

Ratio of nat. bank shares in gross NPA to gr adv ( vi/ ix)

1.09

1.07

1.05

1.10

Ratio of nat. bank shares in net NPA to net adv ( vii/ viii)

1.15

1.13

1.10

1.08

1

Rs in crores Source: RBI & CRIS INFAC

The ratios of gross NPAs to gross advances declined from 13.91 per cent in 1999-2000 to 9.72 per cent in 2002-03, on account of recovery and write-offs of sticky assets. During 1999-00 to 2002-03, the gross NPAs increased from Rs 33,260 crore in 1999-00 to Rs 36,849 crore in 2002-03. The provisioning cover increased from 43.93 per cent in 1999-2000 to 50.93 per cent in 200203, which led to a drop in the net NPA ratio to 4.77 per cent in 2002-03 from 7.8 per cent in 1999-00. The huge profits from the sale of investment made by the nationalised banks, especially in 2001-02 and 2002-03, enabled them to increase their provisioning cover. The share of the nationalised banks in total gross advances of all scheduled commercial banks has declined from 50.5 per cent in 1999-2000 to 48.8 per cent in 2002-03; however, the proportion of gross NPAs of nationalised banks to gross NPAs of the all scheduled commercial banks declined at a marginally slower rate from 55.2 per cent to 53.8 per cent. But this improvement is not that significant when compared to the industry. The ratio of the nationalised banks' share of gross NPA to the gross advances of all SCBs, has remained stable at 1.1 per cent between 1999-98 and 2002-03, indicating a stable reported asset quality of the group. The credit management of the group needs to be improved to arrest the further rise in the NPAs. But on comparing the group's performance with the industry on a net NPA level, we find that the share of net advances of the nationalised banks has declined from 50.30 per cent in 1999-

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

00 to 48.72 per cent in 2002-03; however, the proportion of net NPAs of nationalised banks to net NPAs of the all scheduled commercial banks declined drastically from 58.04 per cent to 52.50 per cent on account of higher provisions/ write-offs of sticky assets. This improvement, when compared to the industry, is marginal. The ratio of the nationalised banks' share of net NPA to the net advances has declined from 1.15 per cent in 1999-00 to 1.08 per cent in 2002-03, indicating a marginal improvement in the reported net asset quality of the group. The group had been making higher provision towards NPAs to improve the declared asset quality. Other scheduled commercial banks (private banks) Other SCBs

Table 6 1999-00 2000-01 2001-02 2002-03

CAGR (per cent) (1999-00 to 2002-03)

1

4,638

5,897

11,210

11,787

36.46

Net NPAs (ii)

2,817

3,592

6,058

6,077

29.21

8.17

8.37

9.64

8.08

Gross NPAs (i) 1

Gross NPA as % of gross advances ( iii ) Net NPAas % of net advances ( iv ) Provisioning cover % ( v ) Share of other SCBs in gross NPAs of all SCBs (vi ) Share of Other SCBs In net NPAs of all SCBs ( vii )

5.41

5.44

5.73

4.93

39.26

39.09

45.96

48.44

7.69

9.25

16.06

17.19 17.93

9.59

11.31

16.88

Share of Other SCBs in net advances of all SCBs ( viii )

12.57

12.95

18.03

18.63

Share of other SCBs in gross advances of all SCBs

11.98

12.61

17.39

18.77

Ratio of other SCBs shares in gross NPA to gr adv ( vi/ ix)

0.64

0.73

0.92

0.92

Ratio of other SCBs shares in net NPA to net adv ( vii/ viii)

0.76

0.87

0.94

0.96

1

Rs in crores Source: RBI & CRIS INFAC

Other SCBs (net of ICICI Bank)

Table 7 1999-00 2000-01 2001-02 2002-03

1

CAGR (per cent) (1999-00 to 2002-03)

Gross NPAs (i)

4,544

5,488

6,197

6,760

14.16

Net NPAs (ii) Gross NPA/Gross advances ( iii )

2,761

3,438

3,433

3,269

5.79

8.28

8.51

8.51

7.71

1

Net NPAas % of net advances ( iv ) Provisioning cover % ( v )

5.30

5.63

4.95

3.87

39.23

37.35

44.61

51.64

Share of other SCBs in gross NPAs of all SCBs (vi )

7.53

8.61

8.88

9.86

Share of other SCBs in net NPAs of all SCBs ( vii )

9.40

10.83

9.56

9.64

Share of other SCBs In net advances of all SCBs ( viii )

11.52

11.43

11.26

11.95

Share of other SCBs in gross advances (ix)

11.62

11.66

11.65

12.20

Ratio of other SCBs shares in gross NPA to gr adv ( vi/ ix)

0.65

0.74

0.76

0.81

Ratio of other SCBs shares in net NPA to net adv ( vii/ viii)

0.82

0.95

0.85

0.81

1

Rs in crores Source: RBI & CRIS INFAC

The private banks have seen their gross NPAs grow at a CAGR of 36.46 per cent (14.16 per cent) during 1999-2000 to 2002-03.The proportion of gross NPAs to gross advances declined from 8.17 (8.28 per cent) per cent to 8.08 per cent (7.71 per cent) during 1999-00 and 200203, which is a marginal improvement in comparison to that of the nationalised banks and the SBI Group. A significant increase in the gross NPA level in 2001-02 and 2002-03 is due to the merger of ICICI Ltd with ICICI Bank. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

85

During 1999-00 and 2002-03, the net NPAs as a proportion of net advances declined from 5.41 per cent (5.3 per cent) to 4.9 per cent (3.9 per cent) as the banks increased their provisioning cover from 39.26 per cent (39.23 per cent) in 1999-2000 to 48.44 per cent (51.64 per cent) in 2002-03. Increased treasury profits helped banks in making a higher provision. The marginal improvement witnessed in the gross NPAs, when compared to the industry performance, reveal a different picture altogether. The proportion of gross advances of the private banks in total net advances of all scheduled commercial banks increased from 12 per cent (11.6 per cent) in 1999-00 to 18.8 per cent (12.2 per cent) on 2002-03, while the proportion of gross NPAs of the private banks in the total net NPAs increased from 7.7 per cent (7.5 per cent) to 17.2 per cent (9.9 per cent). The ratio of the shares of gross NPAs to gross advances increased substantially from 0.64 in 1999-00 to 0.92 in 2002-03. The new private sector banks have been aggressive in their lending and have hence seen an increase in the gross NPAs. The group's share in the advances also went up substantially. Of all the bank groups, the private sector banks' performance as regards NPAs has been miserable. The group needs to tighten credit management policies to keep the NPAs under control. The proportion of net advances of private banks in the total net advances of all scheduled commercial banks increased from 12.57 per cent (11.52 per cent) in 1999-00 to 18.63 per cent (11.95 per cent) in 2002-03, while the proportion of net NPAs of the private banks in the total net NPAs increased from 9.59 per cent (9.40 per cent) to 17.93 (9.64) per cent. The ratio of the share of net NPAs to the share of net advances has also increased 0.76 per cent (0.82 per cent) in 1999-00 to 0.96 per cent (0.81 per cent) in 2002-03. In spite of the significant increase in the proportion of gross NPAs, we do not see a similar rise in the proportion of net NPA, which has been on account of higher provisions towards NPA. The group has been resorting to higher provisions to maintain a stable net NPA. Excluding ICICI Bank, the ratio of shares of net NPA to net advances has been stable between 1999-00 and 200203. Foreign banks Foreign banks

Table 8 1999-00 2000-01 2001-02 2002-03

1

Gross NPAs (i) 1

2,633

3,100

2,460

2,905

3.33 7.06

Net NPAs (ii)

757

723

827

929

Gross NPA as % of gross advances ( iii )

6.99

6.84

5.38

5.22

Net NPAas % of net advances ( iv )

2.41

1.82

1.89

1.76

Provisioning cover % ( v )

CAGR (per cent) (1999-00 to 2002-03)

71.25

76.68

66.38

68.02

Share of foreign banks in gross NPAs of all SCBs ( vi )

4.37

4.86

3.52

4.24

Share of foreign banks in net NPAs of all SCBs ( vii )

2.58

2.28

2.35

2.85

Share of foreign banks in net advances of all SCBs ( viii )

8.03

8.18

7.53

7.06

Share of foreign banks in gross advances (ix )

7.95

8.11

6.84

7.16

Ratio of foreign banks shares in gross NPA to gr adv ( vi/ ix)

0.55

0.60

0.52

0.59

Ratio of foreign banks share in net NPA to net adv ( vii/ viii)

0.32

0.28

0.31

0.40

1

Rs in crores Source: RBI & CRIS INFAC

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Foreign banks, due to their stringent risk management practices, have maintained the lowest NPA levels among all the scheduled commercial banks. The proportion of gross NPAs to gross advances declined from 6.99 per cent in 1999-2000 to 5.22 per cent in 2002-03, while the proportion of net NPAs to net advances declined from 2.41 per cent to 1.76 per cent. However, the drop in the net NPAs has not been in proportion with the drop in the gross NPAs on account of lower provision cover. The provision cover had dropped from 71.25 per cent in 1999-00 to 68.02 per cent in 2002-03. The share of foreign banks in gross advances of all scheduled commercial banks declined from 8.0 per cent in 1999-2000 to 7.2 per cent in 2002-03, and the share of net NPAs also declined from 8.03 per cent in 1999-00 to 7.06 per cent in 2002-03. The share of gross NPAs in all SCBs declined from 4.37 per cent in 1999-00 to 4.24 per cent with the decline in the share of gross NPAs. However, the share of net NPAs increased from 2.58 per cent to 2.85 per cent on account of lower provision cover. The drop in the share of gross NPAs in not in line with the drop in the share of gross advances, indicating a decline in the incremental asset quality. The share of foreign banks in net advances of all scheduled commercial banks declined from 8.03 per cent in 1999-2000 to 7.06 per cent in 2002-03; the share of gross NPAs also declined during this period. However the share of net NPAs grew from 2.58 per cent in 1999-00 to 2.85 per cent in 2002-03 on account of lower provisioning. The ratio of the group's share in the net NPAs to the share of net advances increased to 0.40 per cent in 2002-03 from 0.32 per cent in 1999-00. The performance of the group, quality. The ratio of the share in 1999-00 to 0.59 per cent in increased from 0.32 per cent

when compared to the industry, indicates a decline in the asset of gross NPA to gross advances increased from 0.55 per cent 2002-03, while the ratio of shares of net NPA to net advances in 1999-00 to 0.40 per cent in 2002-03.

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3.0

Spreads & net profitability margin

Spreads The spreads of all bank groups, except nationalised banks, dropped during 1998-99 to 200203. In the case of nationalised banks, spreads improved by 2 basis points (bps) during the same period. Other scheduled commercial banks (OSCBs) witnessed the steepest decline in spreads. On an absolute level, foreign banks, with a spread of 3.35 per cent, were the leaders in 200203, followed by nationalised banks with a spread of 3.29 per cent. The primary reason for the drop in the spreads, across categories, was the sharper decline in the yield on carry business in comparison to the interest cost. As interest rates declined, the yield on advances and the yield on investments both fell faster than the cost of deposits, which mounted pressure on spreads. Compared to other segments, the decline in the yield on investments was higher in the case of OSCBs and foreign banks. Spreads: SBI and associates Yield on carry business (I)

Table 1

1999

2000

2001

2002

2003

10.79

10.48

10.21

9.90

9.38

Yield on advances

11.32

10.89

10.75

9.72

9.04

Yield on investments

12.06

11.70

10.68

10.77

9.74

Interest cost (II)

7.78

7.61

7.39

7.39

6.80

Cost of deposits

8.11

7.90

7.58

7.57

7.02

10.98

10.62

12.43

13.44

10.56

3.01

2.87

2.81

2.52

2.58

Cost of borrowings Spreads (II - I) Source: CRIS INFAC

Spreads: Nationalised banks

Table 2

1999

2000

2001

2002

2003

10.93

10.70

10.62

10.19

9.61

Yield on advances

12.19

11.80

11.49

10.56

9.82

Yield on investments

11.72

11.72

11.41

11.02

10.18

Interest cost (II)

7.66

7.61

7.30

7.08

6.33

Cost of deposits

7.64

7.51

7.17

6.95

6.21

18.39

20.31

22.23

22.22

19.57

3.27

3.08

3.32

3.11

3.29

Yield on carry business (I)

Cost of borrowings Spreads (II - I) Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

89

Spreads: Other scheduled commercial banks

Table 3

1999

2000

2001

2002

2003

12.02

11.01

10.70

8.54

9.73

Yield on advances

13.56

12.26

11.68

8.75

10.93

Yield on investments

12.21

11.46

11.19

9.18

8.96

Interest cost (II)

9.42

8.28

7.91

6.53

7.73

Cost of deposits

9.31

8.11

7.80

7.34

6.62

15.23

13.29

11.96

3.30

12.55

2.60

2.73

2.78

2.01

2.00

Yield on carry business (I)

Cost of borrowings Spreads (II - I) Source: CRIS INFAC

Spreads: Foreign banks

Table 4 1999

2000

2001

2002

2003

12.50

11.49

11.38

9.91

8.69

Yield on advances

14.98

13.09

13.12

11.64

10.70

Yield on investments

12.20

11.78

11.03

10.36

8.26

Interest cost (II)

8.76

7.41

7.35

6.61

5.34

Cost of deposits

9.01

7.23

6.74

6.08

5.31

Cost of borrowings

8.63

8.46

9.25

8.10

5.76

Spreads (II - I)

3.74

4.08

4.03

3.30

3.35

Yield on carry business (I)

Source: CRIS INFAC

Foreign banks Spreads Foreign banks had the highest spreads in 1998-99, but they declined to 3.35 per cent in 200203 due to the higher drop in the yield on carry business. Despite this, foreign banks had the highest spreads among all bank groups. Yield on carry business The yield on carry business dropped by 381 bps from 12.50 per cent in 1998-99 to 8.69 per cent in 2002-03. This was primarily due to a 428 bps drop in the yield on advances from 14.98 per cent in 1998-99 to 10.7 per cent in 2002-03, and a 394 bps drop in the yield on investments from 12.20 per cent in 1998-99 to 8.26 per cent in 2002-03. The loan books of foreign banks generally have a high proportion of short-term loans and advances, which led to a faster drop in the yield on advances. Moreover, foreign banks generally lend foreign currency loans and ECBs, which carry a floating rate of interest. With the drop in the global interest rate, the yield on advances suffered. Further, foreign banks also started facing competition from the new private sector banks, forcing them to reduce the rate of interest. With the hardening of interest rates, the yield on advances is expected to improve. Foreign banks have very little exposure to long tenure securities, and the re-pricing of securities they hold is faster than that of other bank groups, which resulted in a drop in the yield on investments. But, in 2002-03, these banks increased their exposure to SLR securities, when the 90

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

acquisition cost of these securities was high. With the hardening of interest rates, this group will suffer from the drop in the yield on investments and also the losses arising from the markto-market valuation of the securities. Interest cost The interest cost dropped by 342 bps from 8.76 per cent in 1998-99 to 5.34 per cent in 2002-03, driven by a 370 bps drop in the cost of deposits, which fell from 9.01 per cent in 1998-99 to 5.31 per cent in 2002-03. Historically, the reliance of foreign banks on deposits has been lesser than that of the other bank groups. The interest rates that they offer on deposits are also lower than that offered by public sector banks. This, coupled with the increased share of low cost deposits, has helped them to achieve the highest drop in the cost of deposits during 1998-99 and 2002-03. Although the low cost deposit ratio of foreign banks is lesser than that of the public sector banks, the proportion of demand deposits in low cost deposits is higher than that of the public sector banks, which supported the drop in the cost of deposits. Borrowings constitute 25-30 per cent of the borrowed funds of the foreign banks. Borrowings are generally of short duration, hence the drop in the cost of borrowings has been in line with the general drop in the interest rates. Moreover, foreign banks also get funding support from their parent companies at a very low cost, and sometimes even free of cost. Nationalised banks Spreads The spreads of nationalised banks increased marginally by 2 bps from 3.27 per cent in 199899 to 3.29 per cent in 2002-03, driven by a 133 bps drop in the interest cost. The yield on carry business dropped by 131 bps to 9.61 per cent in 2002-03, on account of the slower drop in the yield on investments. Yield on carry business The yield on carry business fell from 10.93 per cent in 1998-99 to 9.61 per cent in 200203. The yield on advances dropped by 237 bps from 12.2 per cent in 1998-99 to 9.82 per cent in 2002-03, while the yield on investments slipped by just 153 bps from 11.72 per cent in 1998-99 to 10.18 per cent in 2002-03. The drop in the yield on advances was in line with the industry. Across all categories, the lowest drop in the yield on investment was witnessed in case of nationalised banks. This is due to the high exposure to long tenure securities, which lowered the re-pricing ratio, and also because the group maintained a steady SLR. Interest cost The cost of deposits of nationalised banks dropped by 143 bps from 7.64 per cent in 199899 to 6.21 per cent in 2002-03. Nationalised banks were quick to respond to the declining interest rates by revising downwards the interest rate on term deposits. Nationalised banks have one of the highest low cost deposit ratio of 36 per cent (next only to 37 per cent of the SBI Group). This helped banks in this category in lowering the cost of deposits. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

91

State Bank of India & associates Spreads The spreads of nationalised banks declined by 43 bps from 3.01 per cent in 1998-99 to 2.58 per cent in 2002-03. A faster decline was witnessed in both the yield on advances and the yield on investments, which pulled down the yield on carry business. A slower decline in the cost of deposits, vis-à-vis other bank groups, restricted the fall in the interest cost. Yield on the carry business The yield on carry business dropped by 141 bps from 10.8 per cent in 1998-99 to 9.4 per cent in 2002-03. During the same period, the yield on the advances fell by 228 bps from 11.32 per cent to 9.04 per cent and the yield on investments slipped by 232 bps from 12.06 per cent in 9.74 per cent. In 1998-99, this group enjoyed a higher yield on investments, compared to the nationalised banks, but in 2002-03, the yield on investments fell below that of the nationalised banks. We believe that this occurred due to the SBI Group's increasing exposure to SLR securities during 1998-99 to 2002-03, with the proportion of SLR securities to NTDL touching 46 per cent during 2002-03. With falling interest rates, every successive years' exposure to SLR securities was at a higher acquisition cost, which pulled down the yield. Further, the group had also booked healthy treasury profits by selling high-yield securities, which may have also contributed to the drop in the yield. In the case of the nationalised banks, the yield on investments was steady at 11.4-11.7 per cent during 1998-99 to 2001-02, but dropped to 10.2 per cent in 2002-03 when the group increased its exposure to SLR securities, with the SLR touching 36 per cent. Though nationalised banks also booked healthy profits on investments, the growth in treasury profits was less than that of the SBI Group. The yield on investments is higher than the yield on advances, which may be on account of the group's historically higher exposure to higher tenure government securities. The SBI Group has also shown a trend similar to that witnessed in the nationalised banks, with approximately 50 per cent of the loans and advances classified under 'more than 1 year' maturity bucket, and approximately 70 per cent of the investments being classified under 'more than 1 year' maturity buckets. The drop in the yield on advances has been in line with the industry. The 228 bps drop in the yield on advances has been the lowest amongst all the bank groups. For the SBI Group, the yield on advances in 2002-03 was lower than that of the nationalised banks, due to the lower lending rates that it offered on advances. Interest cost The interest cost declined by 133 bps from 7.66 per cent in 1998-99 to 6.33 per cent in 2002-03, with the cost of deposits dropping from 7.64 per cent in 1998-99 to 6.21 per cent in 2002-03. For this group, the proportion of low cost deposits to total deposits dropped to 37 per cent in 2002-03 from 43 per cent in 1997-98, but the ratio was still the highest amongst all the 92

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

scheduled commercial banks. A study of the composition of low cost deposits reveals that the share of savings deposits in low cost deposits rose from 52 per cent in 1997-98 to 61 per cent in 2002-03. Further, the drop in the interest cost was restricted due to the higher interest obligation (on account of Resurgent India Bonds and India Millennium Deposits). The outstanding deposits under RIB/IMD stood at Rs 437.3 billion as on March 31, 2003, in the books of SBI. Excluding RIB/ IMD, the cost of deposits for SBI fell from 8.05 per cent in 1998-99 to 6.43 per cent in 2002-03. Borrowings are generally raised to meet mismatches in short-term liquidity and are a very small proportion of the banks' total borrowings. The change in the cost of borrowing has a minor impact on the interest cost Other scheduled commercial banks Spreads Spreads dropped by 60 bps from 2.60 per cent (2.57 per cent) in 1998-99 to 2.00 per cent (2.60 per cent) in 2002-03. The steeper fall in the yield on investment dragged down the yield on carry business, which in turn put pressure on the spreads. If we exclude ICICI Bank from the OSCBs group, we observe a 3 bps increase in spreads, to 2.60 per cent in 200203. Yield on carry business The yield on carry business declined by 229 bps (265 bps) from 12.02 per cent (12 per cent) in 1998-99 to 9.73 per cent (9.36 per cent) in 2002-03, after touching the lowest level of 8.5 per cent (10.3 per cent) in 2001-02. This sudden drop was due to the merger of ICICI with ICICI Bank. The yield on advances dropped to 10.9 per cent (10.2 per cent) in 2002-03 from 13.6 per cent (13.47 per cent) in 1997-98, while the yield on investments shrank to 9.0 per cent (9.38 per cent) in 2002-03 from 12.2 per cent (12.3 per cent) in 1997.98. The higher fall in the yield on investments was due to the group's lower exposure to high coupon securities. Further, based on a study of the maturity profile of a sample set of private sector banks, we find that, for this group, the re-pricing of securities took place at a faster rate as compared to the public sector banks. Securities maturing within 1 year were 38 per cent in case of the sample private sector banks, while it was 10 per cent and 20 per cent in the case of a sample set of nationalised banks and SBI group, respectively. The drop in the yield on advances was due to the aggressive lending strategy adopted by the group, especially the new private sector banks. Further, the drop has been in line with the industry. Interest cost The interest cost increased from 9.42 per cent (9.43 per cent) in 1998-99 to 7.73 per cent (6.76 per cent) in 2002-03, with cost of deposits dropping by 269 bps (262 bps) from 9.31 per cent (9.35 per cent) in 1998-99 to 6.62 per cent (6.73 per cent) in 2002-03.

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93

There was a 98 to 24 per from 47 per has been in

marginal improvement in the low cost deposit ratio from 22 per cent in 1997cent in 2002-03. However, the proportion of savings in low cost deposits increased cent in 1997-98 to 53 per cent in 2002-03. The fall in the cost of deposits line with general drop in the interest rate.

Many OSCBs, especially the old private sector banks, offer a high rate of interest on term deposits, as compared to the public sector banks (nationalised banks and SBI Group). The low cost of deposits, 24 per cent in 2002-03, was the lowest amongst all bank groups. Moreover, the technologydriven products introduced by many private sector banks (OSCBs) allow customers to switch between term and savings accounts; this increases the liability of term deposits. These factors contribute to the higher cost of deposits. The cost of borrowings dropped from a high of 15.23 per cent (14.57 per cent) in 199900 to 12.55 per cent (9.45 per cent) in 2002-03 after touching a low of 3.3 per cent (12.03 per cent) in 2001-02. This sudden spike was because of the merger of ICICI Ltd with ICICI Bank. ICICI Ltd's high cost deposits were merged with the banking system, which led to a sudden surge in the interest cost. With the ICICI Bank's focus on replacing its high cost borrowings with low cost of deposits, there will be a drop in the cost of borrowings and a reduction in the share of borrowings in total borrowings. Net profitability margin (NPM) All segments, except OSCBs, either improved their NPM or at least maintained it during 199899 to 2002-03. In 2002-03, foreign banks had the highest NPM of 2.5 per cent, followed by public sector banks with a NPM of 2.4 per cent. Foreign banks NPM: Foreign banks Spreads ( I )

Table 5 1999

2000

2001

2002

2003

3.74

4.08

4.03

3.30

3.35 3.15

Operating expense as per cent of AFD (II)

4.05

3.58

3.70

3.45

Core-fee-income as per cent of AFD (III)

2.74

2.54

2.47

2.14

2.35

Net profitability margin (I - II + III)

2.43

3.04

2.81

1.99

2.55

AFD: Average funds deployed Source: CRIS INFAC

The NPM improved marginally to 2.55 per cent in 2002-03, from 2.43 per cent in 1998-99, despite the fall in the spreads. The operating expense ratio dropped by 90 bps to 3.1 per cent in 2002-03 from 4.05 per cent in 1998-99. However, the entire benefit could not be passed on to the NPM due to the drop in the core fee income ratio (also called core fee-based income ratio, which is core fee income as a percentage of average funds deployed), which dropped by 39 bps to reach 2.35 per cent by 2002-03 from 2.74 per cent in 1998-99. In spite of the sharpest decline (in percentage points) in the operating expense ratio (operating expense as a percentage of average funds deployed), foreign banks still continue to have a very high operating expense ratio amongst all bank groups. The high operating cost is on account of the heavy investments in infrastructure and technology, and staff cost. 94

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Foreign banks, due to their worldwide network, are strong in providing banking services like trade finance, custody and cash management services, due to which their fee-based income is high. They are also strong in treasury operations and foreign exchange remittances, which aid them in generating fee income in the nature of exchange gains. Though the ratio had been declining, foreign banks continued to enjoy the highest core fee income ratio amongst all the banking groups. Foreign banks lend foreign currency loans, and the syndication charges/processing charges recovered are high. They are also strong in trade finance and correspondent-banking services, where they earn fee-based income without taking exposure. This leads to a high core fee income ratio. The ratio of core fee income ratio to NPM dropped by 20 percentage points between 1998-99 and 2002-03, to 92 per cent in 2002-03, in line with the industry trend, yet it was a major factor in keeping the NPM stable. Greater spreads and high core fee based income help foreign banks in managing higher operating expenses and, thus, have a high NPM. The foreign banks' NPM of 2.55 per cent in 200203 was the highest amongst all scheduled commercial banks. But as more private sector banks venture into areas where foreign banks are strong, competition will increase, which will exert pressure on spreads and core fee income. Foreign banks will thus need to control to their operating costs to have a stable NPM. Nationalised banks NPM: Nationalised banks

Table 6 1999

2000

2001

2002

Spreads ( I )

3.27

3.08

3.32

3.11

2003 3.29

Operating expense as per cent of AFD (II)

3.07

2.95

3.15

2.72

2.62

Core-fee-income as per cent of AFD (III)

0.99

0.92

0.86

0.79

0.75

Net profitability margin (I - II + III)

1.20

1.05

1.03

1.17

1.42

AFD: Average funds deployed Source: CRIS INFAC

Despite stable spreads, the NPM of nationalised banks improved by 22 bps (the highest amongst all bank groups) to 1.42 per cent in 2002-03 from 1.20 per cent in 1998-99. This can be attributed to the savings in operating expenses. The operating expense ratio dropped to 2.6 per cent in 2002-03 from 3.1 per cent in 1998-99, after touching a high of 3.15 per cent in 2000-01. The sudden spike was on account of the voluntary retirement schemes (VRS) introduced by nationalised banks. The savings in manpower could be seen through 2001-02 and 2002-03, when the operating expenses ratio started declining to reach 2.62 per cent in 2002-03. However, the drop in the core fee-based income ratio restricted the increase in the NPM to 1.4 per cent. The ratio of core fee-based income to the average funds deployed had declined to 0.7 per cent in 2002-03 from 1.0 per cent in 1998-99, thereby reducing its contribution to the NPM to 53 per cent in 2002-03 from 0.83 per cent in 1998-99.

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95

Nationalised banks had the lowest core fee income ratio amongst all the SCBs. Further, the group's share in fee-based income reduced by about 5 percentage points during 1998-99 and 200203 to reach 34 per cent in 2002-03. Healthy spreads and control over operating costs helped the NPM to improve. Going forward, with the pressure on spreads as the yield on investments drop, the group needs to concentrate on increasing its core fee-based income and control operating expenses to maintain the growth in NPM. With staff cost accounting for more than 70 per cent of the operating expenses, the group needs to utilise manpower efficiently and improve productivity. To compete with the more aggressive private sector banks, the group will have to invest in technology, which will also increase the operating expense ratio and render some staff as excess. This can pull down the productivity. State Bank of India and associates NPM: SBI and associates Spreads ( I )

Table 7 1999

2000

2001

2002

2003

3.01

2.87

2.81

2.52

2.58

Operating expense as per cent of AFD (II)

3.23

2.89

3.13

2.36

2.34

Core-fee-income as per cent of AFD (III)

1.66

1.44

1.25

1.15

1.11

Net profitability margin (I - II + III)

1.44

1.42

0.94

1.31

1.35

AFD: Average funds deployed Source: CRIS INFAC

The NPM declined by just 9 bps to 1.35 per cent in 2002-03 from 1.44 per cent in 199899, despite the 43 bps decline in spreads and the fall in the contribution of core fee-based income from more than 100 per cent (115 per cent) in 1998-99 to 82 per cent in 200203. This has been on account the SBI Group's focus on controlling operating expenses. The operating expense ratio declined by 89 bps from 3.23 per cent in 1998-99 to 2.34 per cent in 2002-03. During 2000-01, the operating expense ratio increased to 3.13 per cent from 2.89 per cent in 1999-00, because of impact of voluntary retirement scheme introduced by the group. The operating expense ratio of 2.34 per cent during 2002-03 is lower than that of the nationalised banks. The core fee income ratio declined by 55 bps from 1.66 per cent in 1998-99 to 1.11 per cent in 2002-03, in line with the industry trend. Although the share of core fee income shrank to 82 per cent in 2002-03, it still remains the major contributor to the NPM. The core fee income ratio at 1.11 per cent is better than that of nationalised banks and other scheduled commercial banks. Staff cost accounts for than 70 per cent of the operating expense, hence, with increasing pressure on the spreads, the group will have to control staff cost and improve productivity to maintain a stable NPM. The group has planned investments in technology to compete effectively with other players. This is likely to result in excess manpower, which need to be utilised effectively so that overall productivity can be improved. Along with controlling operating costs, the SBI Group also need to continue its focus on increasing core fee income, so that NPM is stable. 96

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Other scheduled commercial banks NPM: Other scheduled commercial banks Spreads ( I )

Table 8

1999

2000

2001

2002

2003

2.60

2.73

2.78

2.01

2.00

Operating expense as per cent of AFD (II)

2.49

2.26

2.17

1.93

2.25

Core-fee-income as per cent of AFD (III)

1.24

1.11

1.03

0.78

1.04

Net profitability margin (I - II + III)

1.35

1.59

1.64

0.86

0.79

AFD: Average funds deployed Source: CRIS INFAC

With the drop in spreads, the NPM declined to 0.8 per cent (1.21 per cent) in 2002-03 from 1.4 per cent (1.26 per cent) in 1998-99. Further, the core fee income ratio declined by 20 bps (27 bps) from 1.24 per cent (1.22 per cent) in 1998-99 to 1.04 per cent (0.95 per cent) in 2002-03. However, the drop was restricted due to the marginal savings in the operating expenses ratio. The operating expenses ratio dropped to 2.25 per cent (2.33 per cent) in 2002-03 from 2.49 per cent (2.25 per cent) in 1998-99. But the operating expense ratio increased from 2.17 per cent (2.17 per cent) in 2000-01 to 2.25 per cent (2.33 per cent) in 2002-03 due to the aggressive branch expansion undertaken by this group, especially the new private sector banks - HDFC Bank, UTI Bank, ICICI Bank, IDBI Bank, Kotak Mahindra Bank etc. Many of the private sector banks are still in the growth stage and expanding their reach (new private sector banks), or are in the technology upgradation mode, the benefits of which are expected to accrue to them in later years. Contrary to the industry trend, the contribution of the core-fee income ratio to the NPM increased from 0.91 per cent (0.97 per cent) in 1998-99 to 1.32 per cent (0.78 per cent) in 200203. New private sector banks, especially ICICI Bank, have been pioneers in venturing into new business segments, which has helped them in generating higher fee-based income. ICICI Bank was among the first to venture into credit cards, providing depository services, third-party business (acting as corporate agents for distribution of mutual fund and insurance products of the leading mutual fund and insurance companies) and private banking services to their clients. Further, the huge thrust on retail credit also helped in the generation of fee-based income, in the form of processing fees. Since most of the banks in this group are in a growth phase, we believe that it will take some time for the operating expense ratio to stabilise. With spreads under pressure and operating expense ratio expected to increase, the group needs to increase its focus on improving the core fee income by venturing into new business areas.

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97

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4.0

Profit and loss account

Total interest income Other scheduled commercial banks (OSCBs) OSC Banks: Interest income Rs billion

1997-98

1998-99 1999-00 2000-01 2001-02

Table 1

2002-03

CAGR (per cent) (1997-98 to 2002-03)

24.5

Interest/discount on advances/bills

46.3

53.0

60.3

72.3

80.7

138.9

Income on Investments

28.5

38.4

50.0

63.1

73.9

92.1

26.5

3.6

6.9

7.1

8.4

9.7

8.5

18.9

Int on bal with RBI and other inter-bank funds Other interest income Total interest income

0.4

1.7

1.3

1.1

1.2

4.4

58.7

78.8

100.0

118.7

145.0

165.5

243.8

25.3

Source: RBI & CRIS INFAC research

Other scheduled commercial banks (OSCBs) recorded the highest growth in total interest income amongst all bank groups. The total interest income of OSCBs grew at a CAGR of 25.34 per cent (14.51 per cent) between 1997-98 and 2002-03, driven by a 24.54 per cent (11.87 per cent) CAGR growth in income from advances and 26.46 per cent (17.88 per cent) CAGR growth in income from investments. Between 1998-99 and 2002-03, the yield on advances declined by 264 (332) basis points, while the yield on investments declined by 325 (293) basis points. Advances grew by 31.18 per cent (19.72 per cent ) CAGR while investments went up by 32.0 per cent (22.7 per cent ) CAGR between 1998-99 and 2002-03. State Bank of India and associates SBI and associates: Total interest income Rs billion Interest/discount on advances/bills Income on Investments Int on bal with RBI and other inter-bank funds Other interest earned Total interest income

1997-98

Table 2 1998-99 1999-00 2000-01 2001-02

2002-03

CAGR (per cent) (1997-98 to 2002-03) 8.2

108.1

116.6

129.3

150.2

153.1

160.0

84.4

101.2

126.6

148.6

184.6

199.2

18.7

8.0

13.4

18.3

19.6

33.7

35.1

34.3

11.5

20.1

17.6

21.8

16.1

14.5

4.6

212.1

251.3

291.9

340.2

387.5

408.7

14.0

Source: RBI & CRIS INFAC research

During 1998-99 to 2002-03, the total interest income of the SBI Group grew at a CAGR of 14 per cent, with income from advances, income from investments, and income from RBI & inter-bank funds growing at a CAGR of 8.6 per cent, 18.6 per cent and 34.3 per cent, respectively. The low growth in income from advances was mainly on account of falling interest rates (the yield on advances declined from 11.32 per cent to 9.04 per cent), coupled with poor credit offtake.

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99

Income on investments grew faster than income on advances, as the SBI Group substantially increased its exposure towards SLR securities during 1997-98 to 2002-03. Further, we believe that the SBI Group has a relatively high exposure to high coupon securities in its investment portfolio. Nationalised banks Nationalised banks: Interest income Rs billion

Table 3

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

CAGR (per cent) (1997-98 to 2002-03)

Interest/discount on advances/bills

188.0

214.1

243.0

280.0

306.3

332.0

12.0

Income on Investments Int on bal with RBI and other inter-bank

166.9 19.7

196.9 24.6

230.9 24.1

256.2 28.8

278.3 30.8

300.8 21.2

12.5 1.5

4.0

7.9

4.8

4.6

4.4

9.2

18.4

378.6

443.5

502.7

569.7

619.8

663.2

11.9

Others Total interest income Source: RBI & CRIS INFAC research

Interest income grew at 11.87 per cent CAGR during 1997-98 to 2002-03, driven by a 12.5 per cent CAGR growth in income on investments. During the period under consideration advances grew at a CAGR of 17.28 per cent, while investments grew by a CAGR of 15.86 per cent. However, the interest on advances grew by only 12.1 per cent CAGR in comparison with a 12.5 per cent CAGR growth in the income on investments. This was primarily because, between 1998-99 and 2002-03, the decline in the yield on advances (237 basis points) was greater than the fall in the yield on investments (153 basis points), which offset the growth in the advances portfolio. The yield on advances is linked to the decline in the PLR (which dropped rapidly during 1998-2003) while the yield on investments depends on the composition of securities in the investment portfolio of the bank. Several nationalised banks carried high coupon securities in their portfolio. Foreign banks Foreign banks: Interest income Rs billion

Table 4 1997-98

1998-99 1999-00 2000-01 2001-02

2002-03

CAGR (per cent) (1997-98 to 2002-03) 4.8

Interest/discount on advances/bills

42.6

44.0

42.6

51.6

53.3

53.9

Income on Investments

19.8

27.3

33.0

36.1

36.7

31.4

9.6

4.4

5.9

5.0

5.8

6.1

3.0

-7.5

Int on bal with RBI and other inter-bank funds Other interest income Total interest income

0.9

1.3

1.2

1.3

0.9

1.4

7.8

67.8

78.6

81.8

94.7

97.0

89.7

5.7

Source: RBI & CRIS INFAC research

The total interest income of foreign banks grew at a CAGR of 5.74 per cent between 199798 and 2002-03, the lowest growth rate among all categories. Income from advances grew at a CAGR of 4.83 per cent and income from investments grew at a CAGR of 9.59 per cent. Advances grew at a CAGR of 12.2 per cent during the same period while investments grew at a CAGR of 17.3 per cent. Between 1998-99 and 2002-03, the yield on advances declined by 428 basis points while the yield on investments fell by 394 basis points. 100

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Interest expended Other scheduled commercial banks OSC Banks: Interest expended Rs billion Interest on deposits Interest on RBI/inter-bank borrowings Others Total interest expended

Table 5 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

CAGR (per cent) (1997-98 to 2002-03)

55.1

72.6

81.2

97.6

112.3

124.5

17.7

1.9 2.0

2.9 2.9

4.2 4.1

4.3 5.0

5.0 5.8

4.7 56.8

19.8 94.8

59.0

78.4

89.6

106.9

123.1

186.0

25.8

Source: RBI & CRIS INFAC research

The total interest expended grew at a CAGR of 25.8 per cent (12.93 per cent) between 199798 and 2002-03. The interest on deposits and interest on RBI/interbank borrowings grew at a CAGR of 17.70 per cent (13.26 per cent) and 19.80 per cent (9.75 per cent) respectively. The steep growth in the ‘others' category was because ICICI Bank classified Rs 5,280 crore of interest on borrowings of the erstwhile ICICI as other interest expense. State Bank of India & associates SBI and associates: Total interest expended Rs billion Interest on deposits Interest on RBI/inter-bank borrowings Others Total interest expended

Table 6

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

CAGR (per cent) (1997-98 to 2002-03)

128.4

159.4

187.9

215.4

251.1

260.6

15.2

5.3

5.4

6.4

6.2

4.6

2.3

-15.7

5.4 139.0

5.1 169.8

4.7 199.0

7.5 229.0

9.9 265.6

9.2 272.1

11.4 14.4

Source: RBI & CRIS INFAC research

During 1997-98 and 2002-03, total interest expended grew at a CAGR of 14.37 per cent, driven by a 15.21 per cent CAGR growth in interest on deposits. For SBI and associates, the cost of deposits had been higher than the average cost of deposits for all scheduled commercial banks due to the higher interest obligation (on account of Resurgent India Bonds and India Millennium Deposits). With excess liquidity and low demand for credit the borrowings of the bank group came down, which in turn led to a drop in the interest on RBI/ inter-bank borrowings. Nationalised banks Nationalised banks: Interest expended Rs billion Interest on deposits Interest on RBI/inter-bank borrowings(a) Others(b) Total interest expended

Table 7

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

CAGR (per cent) (1997-98 to 2002-03)

250.8

296.4

337.5

368.4

404.6

405.6

4.5

5.9

7.1

7.7

6.8

5.7

10.1 4.9

7.3 262.6

6.2 308.6

10.2 354.8

11.8 387.9

14.5 426.0

15.2 426.5

15.9 10.2

Source: RBI & CRIS INFAC research

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Between 1997-98 and 2002-03, total interest expended grew at a CAGR of 10.18 per cent, with interest on deposits growing at a CAGR of 10.09 per cent. The slow growth in the interest on deposits was on account of a fall in the interest rate offered on term deposits. The cost of deposits dropped by approximately 140 basis points to 6.2 per cent in 2002-03, while total deposits grew by 14 per cent CAGR during 1997-98 to 2002-03. Foreign banks

Foreign banks: Interest expended Rs billion Interest on deposits Interest on RBI/inter-bank borrowings(a) Others(b) Total interest expended

Table 8 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

CAGR (per cent) (1997-98 to 2002-03)

33.4

40.7

35.0

36.6

37.6

35.5

1.3

7.2 1.7

9.6 1.7

12.4 2.5

17.1 4.1

20.7 2.3

13.5 1.6

13.6 -0.9

42.2

52.0

49.9

57.7

60.5

50.7

3.7

Source: RBI & CRIS INFAC research

Between 1997-98 and 2002-03, the total interest expended grew at a CAGR of 3.7 per cent while the interest on deposits grew at a CAGR of 1.3 per cent. However, during the same period, the interest on RBI/ inter bank borrowings grew at a CAGR of 13.6 per cent as the share of borrowings in the total liabilities went up from 15 per cent to 20 per cent. While the domestic banks focus on mobilising deposits to meet their funding requirements, foreign banks (on account of the restricted branch network) have a higher proportion of borrowings in their total borrowed funds vis-à-vis their domestic peers. This higher proportion of borrowings of foreign banks has resulted in an increase in their interest on borrowings.

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5.0

Other income

Besides interest income, banks also earn fee income from services such as issuing letters of credit, providing bank guarantees, bill collection, and cash management services, for which they charge commission or brokerage, income in the form of draft charges and bank charges. These sources of income together constitute the "other income" of a bank. Banks also earn income by way of profits on the sale of their investments, which is also classified as other income. Other income can be divided into two broad categories: core fee income, and other income. Core fee income is the income generated from the banks' core activities such as mobilising deposits, lending and other normal banking services. Income from other allied activities like credit cards, depository services and third-party distribution are also classified under core fee income. On the other hand, the profits on sale of investments, fixed assets and other miscellaneous income are classified as other income. Since these are not regular sources of income, banks need to concentrate on core fee income to maintain stable profitability. Other income (excluding profit on sale of investment) as per cent of total income

Other income (ex treasury profits) as per cent of total income Table 1 (per cent)

1998

1999

2000

2001

2002

2003

SBI and assoc

14.0

14.1

12.9

11.8

11.2

10.9

Nationalised banks

9.7

9.5

9.0

8.5

7.9

7.8

10.6

10.8

10.4

10.0

8.6

10.2

Foreign banks

18.3

18.2

18.6

18.0

17.2

21.4

All SCBs

11.7

11.6

11.0

10.4

9.6

10.0

OSCBs

Source: CRIS INFAC

During 1997-98 to 2002-03, the share of other income (excluding profit on sale of investment) in total income has decreased for all the categories, except foreign banks. To a certain extent, this decline is the result of an increase in the total income on account of an increase in the profit on sale of investments. Core fee income as per cent of other income

Table 2

(per cent)

1998

1999

2000

2001

2002

2003

SBI and associates

92.6

94.1

85.6

80.4

76.9

62.0

Nationalised banks

74.0

79.8

67.0

66.1

46.6

39.8

OSCBs

55.1

73.3

54.6

69.2

36.9

37.3

Foreign banks

82.0

93.6

85.2

82.7

64.6

78.8

All SCBs

78.3

85.6

73.2

73.2

54.8

48.9

Source: CRIS INFAC

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Core fee-based income (Rs in billion)

Table 3

1997-98 1998-99 1999-00 2000-01 41.3

43.1

46.3

49.6

CAGR % (1998-2003)

SBI and associates

33.9

Nationalised banks

36.8

41.3

44.3

47.3

48.9

52.8

7.5

8.6

10.6

12.5

14.5

15.7

27.0

25.6

Foreign banks

15.7

17.4

18.3

20.8

21.1

24.4

9.2

All SCBs

96.0

110.1

117.8

127.2

133.9

156.4

10.3

OSCBs

39.7

2001-02 2002-03

7.9

Source: CRIS INFAC

Foreign banks Foreign banks have the highest proportion of other income (other income excluding the profit on sale of investment) to the total income amongst all categories. The share of other income in total income increased from 18.3 per cent in 1997-98 to 21.4 per cent in 2002-03. During 1997-98 to 2001-02, the proportion of other income (excluding profit on sale of investments) in total income had been stable between 17 per cent and 18 per cent, but it jumped to 21.4 per cent in 2002-03, driven by an impressive 24 per cent growth in the profit from exchange transactions. Moreover, interest income recorded a negative growth of 7.6 per cent during the same period due to low credit offtake. The core fee income of foreign banks grew at 9 per cent CAGR during 1997-98 to 200203, driven by the 11 per cent CAGR growth in profit on exchange transactions. Foreign banks, due to their global presence, are strong players in foreign exchange transactions and trade finance transactions. Further, the syndication fee/processing fee on foreign currency lending, in which they are strong, help foreign banks in increasing their fee-based income. However, restrictive branch networks hampers their fee income in the form of commission and exchange income. State Bank of India & associates The share of other income (excluding profit on sale of investments) in total income has declined from a high of 14 per cent in 1997-98 to 10.9 per cent in 2002-03, primarily due to the increased profit on sale of investments. During 1997-98 to 2002-03, other income grew at 8.8 per cent CAGR, while total income grew at 14.5 per cent CAGR. During 1997-98 to 2002-03, commission exchange and brokerage grew at 8.4 per cent CAGR, while miscellaneous income went up from Rs 1.8 billion in 1997-98 to Rs 7.34 billion in 200203, a growth of 31 per cent CAGR. The growth in commission exchange and brokerage is on account the SBI Group's wide branch network. The growth of the SBI Group's other income is lower than that of OSCBs on account of the following factors. Higher base effect Its late entry into other areas that generate fee-based income

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Other scheduled commercial banks The proportion of other income to the total income declined marginally from 10.6 per cent (10.5 per cent) in 1997-98 to 10.2 per cent (9.2 per cent) in 2002-03, due to the increase in the profit on sale of investment. During 1997-98 to 2002-03, other income grew at 26 per cent (13 per cent) CAGR, while the total income grew at 27 per cent (16 per cent) CAGR. Other scheduled commercial banks recorded the highest growth in core fee income amongst all the scheduled commercial banks. During 1997-98 to 2002-03, core fee income of OSCBs grew by 25.6 per cent (13.8 per cent) CAGR, driven by a 30 per cent (18 per cent) CAGR growth in commission, exchange and brokerage and a 32 per cent (10 per cent) CAGR growth in other miscellaneous income. This growth can be attributed to the following factors: Increase in reach through branch expansion (especially new private sector banks). Higher service charged in comparison to the public sector banks (nationalised and SBI Group) The entry of new private sector banks into new areas that generate fee-based income, such as credit cards, depository services, and third-party distributions. Increased focus on retail finance, especially by new private sector banks, which aided in generating feebased income (in form of processing fees). Low base effect. We believe that the new private sector banks will continue to explore new avenues to increase other income, which will enable them to diversify their revenue stream and also provide stability to their bottomline. Nationalised banks The share of other income in the total income of nationalised banks dropped from 9.7 per cent in 1997-98 to 7.8 per cent in 2002-03 due to higher growth in the profit on sale of investments. Other income (excluding profit on sale of investments) grew at 8 per cent CAGR during 199798 to 2002-03, driven by an 8 per cent CAGR growth in commission, exchange and brokerage and a 15 per cent CAGR growth in miscellaneous income. During 1997-98 to 2002-03, total income grew at 13.2 per cent CAGR, with interest income growing at 11.9 per cent CAGR. In the case of nationalised banks, the trend that is observed is similar to that seen in the SBI Group, i.e., growth was slower because nationalised banks were slow in foraying into different areas to diversify their revenue stream.

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Profit on sale of investment

Share of profit on sale of investments in total income (per cent)

1998

1999

2000

2001

Table 4 2002

2003

SBI and associates

0.7

0.3

1.3

1.8

2.3

5.5

Nationalised banks

1.9

1.0

2.6

2.6

6.6

8.9

OSCBs

6.0

1.8

5.7

2.7

11.9

12.7

Foreign banks

3.7

1.0

2.2

2.9

7.9

4.2

All SCBs

2.1

0.8

2.5

2.3

6.0

8.0

1998

1999

2000

2001

2002

2003

CAGR (per cent)

1.7

0.9

4.5

7.0

10.2

26.7

72.6

Source: CRIS INFAC

Profit on sale of investments (Rs in billion) SBI and associates

Table 5

Nationalised banks

8.1

4.8

14.9

16.8

48.1

70.8

54.5

OSCBs

5.6

2.1

8.1

4.4

24.9

40.0

48.0

Foreign banks All SCBs

3.3

1.0

2.3

3.5

10.3

5.1

9.5

18.7

8.7

29.9

31.7

94.2

142.6

50.2

Source: CRIS INFAC

Profit on sale of investments increased substantially The share of profit on sale of investments in the total income has increased for all categories. The falling interest rate scenario has helped all groups to post a healthy growth in treasury profits. Nationalised banks Nationalised banks had recorded the highest increase in the share of profit on sale of investments in the total income; it went up from a mere 1.9 per cent in 1997-98 to 8.9 per cent in 2002-03. The high exposure of nationalised banks to high coupon securities gave them an opportunity to book healthy profits during the soft interest rates scenario prevalent then. Our study of the maturity profile of investments of a sample set of banks falling within this group reveals that approximately 65 per cent of the securities are classified in 'over the 3year' maturity bucket. (In a hardening interest rate scenario, however, the profit on sale of investments will come down). Other scheduled commercial banks The proportion of profit on sale of investments in the total income has gone up from 6.0 per cent (5.8 per cent) in 1997-98 to 12.7 per cent (12.1 per cent) in 2002-03. The OSCBs have the highest share of profit on sale of investments in the other income amongst all groups. Compared to public sector banks (SBI Group and nationalised banks), the share of interest income in the total income is lower for the OSCBs, as they focused on increasing their fee-based income by venturing into new business opportunities. Further, with the impressive growth in the profit on sale of investments, its proportion in total income increased.

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With the hardening of interest rates, as explained in the earlier chapters, banks in this group are expected to book losses from the sale of investments, which will pull down the proportion of profit on sale of investments in total income. State Bank of India & Associates The share of profit on sale of investments in the total income of the SBI Group had also gone up impressively, rising from a mere 0.7 per cent in 1997-98 to 5.5 per cent in 200203. The profit on sale of investments recorded a highest growth of 73 per cent CAGR during 1997-98 to 2002-03. With their strong core business, the SBI Group had, over the years, relied less on other income including profit on sale of investments. The soft interest rate scenario and the high exposure to high coupon SLR helped the group to post a healthy growth in the profit on sale of investments and thus increase the share of treasury profits in total income. Foreign banks Foreign banks had registered a marginal increase in the share of profit on sale of investments in the total income during the period under review. The share rose from 3.7 per cent in 199798 to 4.2 per cent in 2002-03. Foreign banks recorded the lowest growth of 10 per cent CAGR in the profit on sale of investments during 1997-98 to 2002-03. Since foreign banks had comparatively lesser exposure to high coupon securities, the profit on sale of investments was less. Our study of the maturity profile of investment as of March 31, 2003, of a sample set of foreign banks, reveals that 43 per cent of the securities are classified in the 'up to 1 year' maturity bucket. Lower profit on sale of investments led to a marginal growth in the share of profit on sale of investments in total income. Also, the higher growth in other income (excluding profit on sale of investments) in comparison to profit on sale of investments slowed down the increase the share of profit on sale of investments in total income. With the estimated loss on sale of investments, this share is expected to drop.

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6.0

Operating expenses

The staff cost accounts for a major portion of the operating expense for all the bank groups, particularly so in the case of public sector banks. Hence, all the players need to control their manpower costs to control their operating expenses. We have made an attempt to analyse the performance of the various categories in two areas: staff cost, and other operating expenses (i.e., operating expenses excluding staff cost). Staff cost Group-wise share of employee cost in operating cost

Figure 1

(per cent) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 SBI & associates

Natonalised banks

Other SCBs

Foreign banks

All SCBs

Source: CRIS INFAC and RBI

State bank of India and associates Highest proportion of staff cost in total operating expenses among all SCBs Among all the scheduled commercial banks, the proportion of staff cost in total operating expenses is highest for the SBI Group. Due to the high levels of recruitment in earlier years, the proportion of staff cost to the operating expense is high for these banks. Further, banks in this group spent very little on technology, and most of the work was carried out manually. Even today, not all branches of SBI are computerised. The proportion of staff cost in the total operating cost has, however, declined from about 75 per cent in 1997-98 to about 71 per cent in 2002-03, due to a reduction in the number of employees from about 308,817 in 1997-98 to 282,923 in 2002-03, coupled with an increase in the non-staff operating expenses (which grew at 14.1 per cent CAGR during the same period). The reduction in the staff strength is on account of the voluntary retirement schemes (VRS) launched by the group. The technology upgradation drive, along with the focus on computerisation of all branches, had contributed to the growth in non-staff expenditure, along with expenses on advertising and sales etc. CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

109

Between 1997-98 and 2002-03, the SBI Group recorded a CAGR of 9.67 per cent in its staff cost while its cost per employee grew at a CAGR of 11.6 per cent. The group's cost per employee of Rs 0.262 million is the lowest amongst all scheduled commercial banks. Among the public sector banks, the SBI Group has in place a separate wage agreement. As of March 31, 2002, 25 per cent of the work force of this group constituted the management cadre, whereas it was 29 per cent in the case of nationalised banks. SBI & associates: No of employees vs cost per employee

Figure 2

315,000

325,000

275,000

295,000

225,000

285,000

175,000

275,000

Cost per employee (Rs)

Number of employees

VRS 305,000

125,000 1997-98

1998-99

1999-2000

Number Of employees

2000-01

2001-02

2002-03

Cost per employee

Source: CRIS INFAC and RBI

Nationalised banks The nationalised banks recorded a CAGR of 10.42 per cent in the staff cost between 199798 and 2002-03. The number of employees declined from 570,595 in 1997-98 to 472,514 in 2002-03, leading to a higher growth in the cost per employee. However, the staff cost as a percentage of total operating expenses reduced to 70.7 per cent for 2002-03 from 74 per cent in 1999-00 on account of VRS schemes and improved efficiencies. Akin to what was observed in the SBI Group, the legacy of heavy staff recruitment in the earlier years in this group has contributed to the higher share of staff cost. Moreover, lesser dependence on the technology and a wide branch network forced these banks to recruit more staff. Although, in 1997-98, the nationalised banks' cost per employee of Rs 0.139 million was lesser than that of the SBI Group, in 2002-03 it was higher than that of the latter, at Rs 0.276 million. This is despite the sharper drop in the number of employees. The staff cost of nationalised banks grew at 10.4 per cent CAGR during 1997-98 to 2002-03, possibly on account of the difference in the wage agreement for the two groups and also due to higher proportion of management staff in the total staff strength vis-à-vis the SBI group.

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Figure 3

600,000

325,000

550,000

275,000 VRS

500,000

225,000

450,000

175,000

400,000

Cost per employee (Rs)

Number of employees

Nationalised banks: No of employees vs cost per employee

125,000 1997-98

1998-99

1999-2000

2000-01

Number of employees

2001-02

2002-03

Cost per employee

Source: CRIS INFAC and RBI

Other scheduled commercial banks (OSCBs) The proportion of the staff cost in operating expenses declined sharply from about 49 per cent (50 per cent) in 1997-98 to about 36 per cent (44 per cent) in 2002-03, largely due to the focus of the private sector banks on automation, and advances in technology. For example, at the end of 2003, ICICI Bank had 1,675 ATM machines and about 70 per cent of its customerinduced transactions take place through electronic channels. The staff cost grew at a CAGR of 19.90 per cent between 1997-98 and 2002-03 while the cost per employee grew at a CAGR of 18.33 per cent from Rs 0.14 million in 1997-98 to 0.32 million in 2002-03. The private sector banks have been expanding aggressively and are still growing, hence their staff strength has gone up from about 61,700 in 1997-98 to about 66,000 in 2002-03. The cost of per employee for this group is higher than that of public sector banks, because of the higher salary structure. But the staff cost accounts for just 36 per cent of the total operating expense in comparison to 70-71 per cent observed in public sector banks. The branch network of new private sector banks is not as large as that of public sector banks. In addition, they have made massive investments in technology, which reduces their staff requirements. An ATM is manned by just one person and performs numerous basic banking operations. OSCBs make use of the DSA channel to source clients. Since their inception, the operations of OSCBs, especially the new private sector banks, are heavily technology-driven, hence the staff strength of these banks is not as high as that of public sector banks.

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OSC banks: No of employees vs cost per employee

Figure 4

80,000

375,000

ICICI Merger

325,000

70,000 275,000 65,000 225,000 60,000

Cost per employee (Rs)

Number of employees

75,000

175,000

55,000

50,000

125,000 1997-98

1998-99

1999-2000

Number of employees

2000-01

2001-02

2002-03

Cost per employee

Source: CRIS INFAC and RBI

Foreign banks Many multinational banks have set up their operations in India. Today there are about 38 foreign banks operating in India. Foreign banks have seen the proportion of operating expenses in the total expenses rise from about 24 per cent in 1997-98 to about 32 per cant in 2002-03. Foreign banks have the lowest proportion of staff cost in total operating expenses among all scheduled commercial banks The proportion of staff costs in the operating expenses has remained stable at almost 32 per cent during 1997-98 to 2002-03. This is much lower than the average for all scheduled commercial banks as foreign banks spend huge amounts on non-staff expenses like technology, advertising, sales and marketing, apart from the expenses on employees. Between 1997-98 and 2001-02, the staff cost of foreign banks grew at 16 per while the cost per employee grew at a CAGR of about 19 per cent (from Rs in 1997-98 to Rs 0.8 million in 2001-02). The number of employees has declined in 1997-98 to 13,827 in 2001-02. During the same period, foreign banks recorded CAGR in the cost per employee among all the scheduled commercial banks, .

cent CAGR 0.4 million from 15,354 the highest

In terms of cost per employee, the wide gap between foreign banks and other bank groups can be attributed to the following factors: Higher wage structure, as compared to the other bank groups. Drop in the staff strength. High investments in technology and infrastructure, which helps in reducing human intervention in routine banking operations. Low branch network, which reduces the need for high staff strength. Higher spreads and other income, which aid banks in sustaining high staff cost.

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Foreign banks: No of employees vs cost per employee

Figure 5

16,000

850,000

750,000

14,000 650,000 13,000 550,000 12,000

Cost per employee (Rs)

Number of employees

15,000

450,000

11,000

10,000

350,000 1997-98

1998-99

1999-2000

Number of employees

2000-01

2001-02

Cost per employee

Source: CRIS INFAC and RBI

Other operating expenses (Operating expenses excluding staff cost) Other operating expenses (Rs billion)

Table 1

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

CAGR 1998 to 2003

SBI Group

15.6

22.3

23.5

29.0

27.3

30.2

14.10

Nationalised banks

30.9

33.8

37.5

41.4

46.2

54.0

11.86

8.8

11.1

12.9

17.7

22.7

37.6

33.72

13.1

18.1

17.3

21.2

22.7

22.2

11.08

Other SCBs Foreign banks Source: RBI

Other scheduled commercial banks During 1997-98 and 2002-03, the other scheduled commercial banks recorded a growth of 34 per cent (21 per cent) CAGR in other operating expenses, the highest amongst all bank groups. In terms of expense heads, repairs and maintenance recorded the highest growth with a growth of 51 per cent CAGR during 1997-98 to 2002-03. This may be on account of the renovations carried out on the existing branch to meet client aspirations, and an increase in the maintenance contracts entered into by the banks. ‘Depreciation', which constitutes a significant portion of operating expense, has grown at 35 per cent (20 per cent) CAGR during the period under review. The proportion of depreciation in the operating expenses has increased from 13.35 per cent to about 18 per cent during the above period, on account of the greater investment in technology. As the private sector continues to grow and expand its network the proportion of depreciation is expected to increase. Along with depreciation, advertisement, printing & stationery and postage & telephone charges have also recorded a substantial growth on account of the aggressive communication and promotion strategy that players have adopted.

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With the new private sector banks expanding their operations and the older private sector banks upgrading their technology, we expect other operating expenses of this group to increase, especially those relating to depreciation, advertisement and postage and telephone. SBI & associates As observed earlier, other operating expenses account for only 30 per cent of the total operating expense, but, going forward, we expect that to increase as the banks in the group embark on increasing their investments in technology to upgrade their branch networks. The other operating expense ratio increased at 14 per cent CAGR during 1997-98 to 200203, driven by a 25 per cent CAGR growth in depreciation, 17 per cent growth in the advertisement and 7 per cent CAGR growth in printing and stationery. Increased spending on technology led to a higher growth in depreciation charge. In 2002-03, SBI alone had computerised about 41 per cent of its total branches, constituting about 82 per cent of its business volumes A comparison between the other operating expenses of SBI Group and OSCBs reveals that the former are not aggressive in marketing and communications. To put the figures in perspective, the total advertisement and publicity expense for the SBI Group in 2002-03 was Rs 0.42 billion (a growth of 8 per cent CAGR), while it was Rs 1.36 billion for OSCBs. Similarly, postage, telegram and telephone expenses for the SBI group in 2002-03 was Rs 0.81 billion, while it was Rs 2.62 billion for OSCBs. This is probably because the OSCBs generally focus on retail finance, while the SBI Group's focus was on wholesale lending. With the SBI Group planning to focus on retail finance too, these expenses are expected to increase further. Nationalised banks Nationalised banks, with the largest network of 33,942 offices, have the highest operating expenses among the scheduled commercial banks. During 1997-98 to 2002-03, the number of offices of nationalised banks as a proportion of offices of all scheduled commercial banks had remained almost constant at 50 per cent, but the proportion of operating expenses of the nationalised banks in operating expenses of all scheduled commercial banks has declined from about 51 per cent to about 47 per cent. The aggressive expansion by the new private sector banks has resulted in a significant increase in the operating expenses for private banks, leading to a decline in the nationalised banks' share in total operating expenses. The other operating expense has increased at a CAGR of 11.9 per cent during 1997-98 to 2002-03, driven by a 20 per cent CAGR growth in depreciation, a 15 per cent CAGR growth in auditors fees and a 14 per cent CAGR growth in advertisement and publicity. The 20 per cent CAGR growth in depreciation is on account of the expenditure on technological upgradation of offices and branch expansion. The number of offices went up from 33,263 in 1997-98 to 33,942 in 2002-03.

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With nationalised banks starting to advertise their products through various media, their advertisement expenses have increased, although they are still less than the amount spent by OSCBs. A very similar trend is also seen in case of postage and telephone expenses. Nationalised banks had also adopted a business model similar to that of the SBI Group. With banks in this group increasing their focus on retail finance and also venturing into other areas for diversifying their income, their other operating expenses are expected to increase. Foreign banks High proportion of selling cost/ professional fees Other operating expenditure (total operating expenses less staff cost) grew at 11 per cent CAGR between 1997-98 and 2002-03, driven by a 21 per cent CAGR growth in law charges, a 12 per cent CAGR growth in depreciation and a 10 per cent CAGR growth in repairs and maintenance. Foreign banks recorded the lowest growth in the other operating expenses amongst all scheduled commercial banks. CRIS INFAC believes that foreign banks are not in an aggressive expansion mode, compared to OSCBs, and have the necessary technology in place. The operations of the foreign banks have also stabilised. These factors could lead to a comparatively lower growth in operating expenses. Among all scheduled commercial bank groups, the proportion of other operating expenditure in total operating expenses is the highest for this group, indicating a heavy investment in infrastructure. Vis-à-vis other bank categories, depreciation, for banks in this group, has grown at a slower pace as these banks already have a technology platform and continue to get support from their parent organisations. Foreign banks also invest heavily in advertising and postage and telephone to reach out to the customers. Cost-income ratio State Bank of India and Associates Marginal improvement in the operating efficiency The cost income ratio for SBI and its associates declined from about 57 per cent in 199798 to about 48 per cent in 2002-03. However, when we exclude the profit on sale of investments from the net income and recalculate the cost income ratio, there was a decline of only about 2.8 percentage points. There was a marginal improvement in the operating efficiency of the group during this period.

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SBI & associates: Cost-income ratio

Figure 6

(per cent) 70 65 60 55 50 45 40 1997-98

1998-99

1999-2000

Cost income ratio with profit on sale of investments

2000-01

2001-02

2002-03

Cost income ratio without profit on sale of investments

Source: CRIS INFAC and RBI

From the above graph, we observe that the cost-income ratio jumped in 2000-01 to 65.2 per cent from 58.6 per cent in 1999-00 and again slipped to 52.1 per cent in 2001-02, primarily on account of the VRS launched by the group in 2000-01. Further, the healthy growth in the profit on sale of investment, coupled with savings in staff cost from VRS, helped bring down the cost-income ratio. Excluding profit on sale of investments, the cost-income ratio remained almost stable in 200203, on account of slower growth in interest income and other income Low credit demand and declining interest rates restricted the growth in interest income. Further, operating expenses also went up mainly due to the growth in the staff cost (on account of higher contribution towards retirement benefits) and higher depreciation charges. Nationalised banks Highest improvement in efficiencies, cost-income ratio declines by 800 basis points (excluding the profit on sale of investments) Nationalised banks recorded the maximum improvement in operating efficiencies among all scheduled commercial banks between 1997-98 and 2002-03. The cost-income ratio of the nationalised banks (including profit on sale of investments) declined from about 67 per cent in 1997-98 to about 50 per in 2002-03. Apart from the improvement in operating efficiency, the huge profits from the sale of investments contributed to this sharp decline. The savings in staff cost has also helped the group to improve operating expenses. However, the cost-income ratio, when calculated after excluding the profit on sale of investments, declined from about 70 per cent in 1997-98 to about 62 per cent in 2002-03. With the expected increase in productivity, this ratio is expected to decline further.

116

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Nationalised banks: Cost-income ratio

Figure 7

(per cent) 80 75 70 65 60 55 50 45 1997-98

1998-99

1999-2000

Cost income ratio with profit on sale of investments

2000-01

2001-02

2002-03

Cost income ratio without profit on sale of investments

Source: CRIS INFAC and RBI

The above graph depicts a rise in the cost-income ratio in 2000-01 and then a sudden decline, from a high of 68.2 per cent in 2000-01 to 50 per cent in 2002-03. The rise was due to a charge arising due to VRS. Savings in staff cost, coupled with increased profit on sale of investments, helped in achieving a decline in the cost-income ratio. In 2002-03, however, despite the steep decline, the cost-income ratio, with and without profit on sale of investments, was still higher than the SBI Group. This is on account of historically higher operating costs and higher operational inefficiencies. Many branches of nationalised banks were reporting losses. But a comparison of the improvement in the ratios of both these sectors shows that nationalised banks recorded greater improvement, on account of higher efficiency and cost-control initiatives. Other scheduled commercial banks Operating efficiencies decline during 1997-98 and 2002-03 The private sector banks expanded aggressively during the period under consideration and are still on a growth path. Once this aggressive growth strategy slows down, the cost-income ratio will improve significantly and investments in technology and networks will bring about substantial savings. The cost-income ratio (including the profit on sale of investments) of private sector banks recorded a decline of 3.70 percentage points from 48.75 per cent in 1997-98 to 45.05 per cent in 2002-03. However, if the profit on sale of investments is excluded while calculating the costincome ratio, there was an increase in the cost-income ratio from about 58 per cent (58 per cent) in 1997-98 to about 65 per cent (63 per cent) in 2002-03.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

117

OSC banks: Cost-income ratio

Figure 8

(per cent) 70 65 60 55 50 45 40 1997-98

1998-99

1999-2000

Cost income ratio with profit on sale of investments

2000-01

2001-02

2002-03

Cost income ratio without profit on sale of investments

Source: CRIS INFAC and RBI

The cost-income ratio (without profit on sale of investment) of 65 per cent for the group for the period 2002-03 is the highest amongst all the bank groups. As the new private sector banks expanded their operations, the operating cost went up. This, coupled with the aggressive lending methods adopted by the big players, increased the pressure on spreads of banks in this category. With many banks still expanding their operations we expect this ratio to keep rising for the next 2 years. Foreign banks Lower growth in net total income increases cost income ratio of most efficient bank group Among all the scheduled commercial banks, foreign banks have the lowest cost-income ratio, indicating high operating efficiencies. Between 1997-98 and 2003-03, the net total income of foreign banks recorded a CAGR of 9.33 per cent, while the operating expenses posted a CAGR of 11.05 per cent. Consequently, the cost-income ratio for foreign banks (including profit on sale of investments) increased from 43.15 per cent in 1997-98 to 46.66 per cent in 2002-03. When the profit on sale of investments is excluded, the cost-income ratio increases from about 46 per cent in 199798 to about 50 per cent in 2002-03. Foreign banks were able to maintain healthy spreads and, hence, have been able to sustain a high operating cost. Further, their core-fee income ratio is also the highest amongst all bank groups, which helps them to have the lowest cost-income ratio amongst all categories. With foreign banks now aggressively competing with public sector and private banks, banks need to maintain their low cost-income ratio by controlling costs, for a stable NPM.

118

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Foreign banks: Cost-income ratio

Figure 9

(per cent) 60

55

50

45

40 1997-98

1998-99

1999-2000

Cost income ratio with profit on sale of investments

2000-01

2001-02

2002-03

Cost income ratio without profit on sale of investments

Source: CRIS INFAC and RBI

Highest operating and staff cost per office The cost-income ratio (without profit on sale 02 from 53 per cent in 2000-01. This was on excluding profit on sale of investment. The interest expended grew by 5 per cent in

of investments) shot up to 57.7 per cent in 2001account of slower growth in the net total income, interest income grew by 2.5 per cent, while the 2001-02 over 2000-01.

However, during 2002-03, the cost-income ratio fell steeply because of the increase in other income, coupled with lesser operating expenses, mainly driven by savings in staff expenses.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

119

This page is intentionally left blank

7.0

Important ratios

SBI & associates Important ratios Return on assets (per cent) Business per employees (Rs million) Operating profit per employees (Rs in lakh)

Table 1 1998-99 1999-2000

2000-01 2001-02

0.93

0.47

0.72

0.52

10.64

12.58

16.10

18.15

1.51

1.91

2.00

3.07

Source: CRIS INFAC

Nationalised banks Important ratios Return on assets (per cent)

Table 2 1998-99 1999-2000 0.4

0.5

2000-01 2001-02 0.4

0.7

Business per employees (Rs million)

10.6

12.5

14.6

18.7

Operating profit per employees (Rs in lakh)

1.05

1.30

1.62

2.74

Source: CRIS INFAC

Other scheduled commercial banks Important ratios Return on assets (per cent) Business per employees (Rs million) Operating profit per employees (Rs in lakh)

Table 3 1998-99 1999-2000

2000-01 2001-02

1.1

1.9

1.9

2.4

20.6

26.9

32.8

39.1

2.3

4.2

4.6

6.3

Source: CRIS INFAC

Foreign banks Important ratios Return on assets (per cent)

Table 4 1998-99 1999-2000 0.9

1.2

2000-01 2001-02 1.0

1.3

Business per employees (Rs million)

49.6

58.2

77.2

81.8

Operating profit per employees (Rs in lakh)

12.5

18.9

23.5

25.4

Source: CRIS INFAC

Foreign banks continue to have high productivity ratios, both in terms of business and operating profits. The business per employee doubled between 1998-99 and 2001-02, and the operating profit per employee also doubled. Foreign banks are way ahead of other players in terms of productivity. This has been achieved by higher spreads and greater reliance on technology. In terms of productivity ratios, the performance of other scheduled commercial banks (OSCBs) has also been impressive. The business per employee has doubled, while the operating profit per employee has almost tripled during the period under consideration. Productivity will improve further due to the aggressive strategy being adopted by new private sector banks. On the other hand, productivity growth has been lower in public sector banks because a high staff base.

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

121

Credit-deposit ratio

Credit-deposit ratio

Figure 1

80.0

Investment-deposit ratio

Figure 2

65.0

75.0 60.0

70.0 65.0

55.0

60.0

50.0

55.0 50.0

45.0

45.0

40.0

40.0

35.0

35.0 1998

1999 SBI and Assoc OSCB All SCB

Source: CRIS INFAC

2000

2001

2002

Nationalised Banks Foreign Banks

2003

1998

1999

SBI and Assoc OSCB All SCB

2000

2001

2002

2003

Nationalised Banks Foreign Banks

Source: CRIS INFAC

The movement in the credit-deposit ratio has been in line with the industry. The ratio has gone up for all the bank groups, except the SBI Group, which has witnessed a drop. For foreign banks, the credit-deposit ratio is high because of the low deposit base. The share of borrowings in the total liabilities is higher for foreign banks in comparison with the other bank groups. Due to the low credit offtake, banks had parked their funds in investments, which drove the growth in the investment-deposit ratio. For almost all banks, the growth in the investment-deposit ratio has been steep in comparison to the rise in the credit-deposit ratio.

122

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Industry statistics Sections 1.0 2.0 3.0 4.0 5.0

Industry structure Financial system in India Industry performance (tables) Industry performance (graphs) Player profiles

123 129 137 161 173

1.0 01 02

Industry structure Evolution: Indian banking Banks and DFIs: Important activities

125 126

2.0 01

Financial system in India Financial system in India: Overview

129

4.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Industry performance SCBs: Profits SCBs: NIM SCBs: Segment-wise NIM Advances, IIP and imports: Growth SCBs: Advances IIP and credit: Growth Advances: Average yields Outstanding loans and advances: Break-up by interest rates SCBs: Investments PSU banks: Number of banks achieving CRAR Gross NPAs and net NPAs Investment and advances: Average yield SCBs: Other income to total income M3 and deposits M3 and reserve money: Growth Deposits: Demand, savings and time deposits (excl RRBs) Incremental deposits: Break-up by deposit type (excl RRBs)

161 161 162 162 162 163 163 163 164 164 164 165 165 165 166 166 166

Charts

Figures

Continued... CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

i

...continued

Figures

Tables

18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Deposits: Growth (excl RRBs) 167 NRI deposits: Growth 167 Deposits: Average costs 167 Term deposits: Interest rates (March 2003) 168 Incremental credit-deposit ratio 168 Incremental borrowing-deposit ratio 168 SCBs: Operating costs 169 SCBs: Segment-wise operating costs as a percentage of average assets 169 Overheads as a percentage of operating income 169 Overheads as a percentage of average assets 170 Operating costs: India vis-à-vis other countries 170 SCBs (excl RRBs): Number of branches 170 SCBs: Number of employees 171 Investments: Average yields 171 BSE volumes and capital issues 171

1.0 01 02 03 04 05

Industry structure Scheduled commercial banks: Progress since 1950 Financial markets: Total assets Indian banking system: Key financials Financial institutions: Financial performance Financial institutions: Liabilities and assets

123 124 124 126 127

2.0 01 02 03 04 05 06 07 08 09 10

Financial system in India Household sector savings in financial and physical assets Proportion of gross household savings in financial assets Banks and financial institutions: Financial assets Indian financial system: Key financials Capital markets: Resources mobilised Mutual funds vis-à-vis bank deposits Incremental mutual fund collections to bank deposits Banks: Investments in shares NBFCs: Total assets and deposits NBFCs: Net owned funds vis-à-vis public deposits (excl RNBCs)

130 131 132 132 133 134 134 135 135 136

Continued...

ii

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

Tables 3.0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Industry performance 25 banks: Financials Public sector banks: Priority sector advances Banks: Capital adequacy ratio Public sector banks: Capital adequacy ratio Capital adequacy ratio: 2003-04 Scheduled commercial banks: Capital infusion (1991-92 to 2003-04) Public sector banks: Recapitalisation support by the government Public sector banks: Writing down of capital base Public sector banks: Amounts returned to the government Public sector banks: Public/rights issues Old private sector banks: Public/rights issues New private sector banks: Public issues Public sector banks: Government ownership Public sector banks: Net worth Scheduled commercial banks: Net worth NRI deposits (1991-2003) Commercial banks: Branch network Banks: Distribution of net NPAs as a percentage of net advances Banks: Segment-wise incremental ratio of gross and net NPAs Banks: Segment-wise incremental gross and net NPAs Scheduled commerical banks: Gross and net NPAs Public sector banks: Net NPAs as a percentage of net advances Public sector banks: Classification of loan assets New private sector banks: Key financial parameters (2003-04) Old private sector banks: Key financial parameters (2003-04) Select public sector banks: Key financial parameters (2003-04) Scheduled commercial banks: Segment-wise financial performance (2003-04) Scheduled commercial banks: Segment-wise financial ratios (2003-04) Scheduled commercial banks: Segment-wise share (2003-04)

137 137 138 140 140 140 141 142 142 143 144 145 145 146 146 146 147 147 148 149 149 150 150 151 152 156 158 159 160

5.0 01 02 03 04 05 06 07 08 09

Player profiles Financial comparison of key banks: 2003-04 State Bank of India Bank of Baroda Bank of India Canara Bank Punjab National Bank Oriental Bank of Commerce Dena Bank Corporation Bank

173 175 180 185 190 195 200 205 210

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

iii

...continued

Tables 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

iv

State Bank of Travancore ICICI Bank HDFC Bank IndusInd Bank Global Trust Bank The Federal Bank Ltd Bank of Rajasthan Citibank HongKong Bank Standard Chartered Bank State Bank of Bikaner & Jaipur UTI Bank Ltd The South Indian Bank Ltd The Jammu & Kashmir Bank Ltd The Karnataka Bank Ltd

215 220 225 230 234 239 244 249 254 259 264 269 274 279 284

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

1.0

Industry structure

Scheduled commercial banks: Progress since 1950 1951 1969 Number of commercial banks Total branches in India

n.a.

89

Table 1

1984

1992

1996

1999

2000

2001

2002

2003

n.a.

276

293

301

298

300

297

292 68,561

4,151 8,262 45,332

60,570

64,937

67,157

67,868

67,937

68,195

- Rural

- 1,833 25,372

35,269

32,982

32,859

32,852

32,585

32,503

32,406

- Semi-urban

- 3,342

9,262

11,356

13,832

14,462

14,841

14,843

14,962

15,090

- Urban

- 1,584

5,769

8,279

9,964

10,841

10,994

11,193

11,328

11,553

- Metropolitan

- 1,503

4,929

5,666

8,159

8,995

9,181

9,316

9,402

9,512

15

14

15

15

15

15

15

16

Population per branch (in '000)

75

65

Deposits in India (Rs crore)

909 4,646 63,852 237,566 433,819 722,203 851,593 989,141 1,131,188 1,280,853

Deposits as a percentage of national income

9.0

Per capita deposits (Rs)

15.5

37.9

49.5

46.1

50.3

53.5

56.0

49.3

51.8 12,253

0

88

940

2,738

4,644

7,359

8,542

9,770

11,008

Deposits per branch (Rs crore)

0.2

0.6

1.4

3.9

6.7

10.8

12.5

14.6

16.6

18.7

Total bank credit (Rs crore)

727 3,599 43,058 131,520 254,015 368,837 454,069 529,271

609,053

729,214

Credit per branch (Rs crore)

0.2

7.8

8.9

10.6

80,831 126,309 155,779 182,255

205,606

n.a.

0.9

2.2

Bank credit to priority sectors (Rs crore)

-

504 14,834

0.4

47,318

3.9

5.5

6.7

Share of priority sector advances in

-

14.0

34.5

36.0

31.8

34.2

34.3

34.4

33.8

n.a.

80.0

77.5

67.4

55.4

58.6

51.1

53.3

53.5

53.8

56.9

Investment-deposit ratio (per cent)

-

29.3

36.3

38.0

38.0

35.3

36.6

37.1

38.7

42.7

Cash-deposit ratio (per cent)

-

8.2

14.5

18.2

12.4

9.4

9.8

8.4

7.1

6.5

gross credit Credit-deposit ratio (per cent)

n.a.: Not available Source: Statistical Tables Relating to Banks in India 2002-2003

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

123

Financial markets: Total assets

Table 2

(Rs crore)

2002-03

2001-02

2000-01 1999-2000

1998-99 Share of Growth assets1 (per cent)

All financial entities (A+B+C) 1

1,944,410 1,825,416 1,643,939 1,431,256 1,240,059

All banks (excl co-operative banks) (A)

1,760,659 1,593,226 1,343,543 1,147,888

987,508

Commercial banks

1,698,916 1,536,424 1,294,974 1,105,464

100

n.a.

91

10.51

950,718

87

10.58

State Bank Group

493,954

449,289

402,877

336,394

285,835

25

9.94

Nationalised banks

791,281

706,109

626,892

554,206

484,310

41

12.06

Old private banks

105,110

93,229

84,605

73,123

65,475

5

12.74

New private banks

192,170

174,477

78,776

58,931

38,531

10

10.14

Foreign banks in India

116,401

113,321

101,824

82,810

76,567

6

2.72

Regional rural banks

61,743

56,802

48,569

42,424

36,790

3

8.70

183,751

173,900

246,518

232,043

205,502

9

5.66

-

58,290

53,878

51,324

47,049

n.a.

n.a.

All India financial institutions (B) 1

NBFCs (C) n.a.: Not available 1

NBFC data for 2002-03 is not available

Note All India financial institutions include IDBI, IFCI, IIBI, IDFC, TFCI, Exim Bank, NABARD, NHB and SIDBI. Source: CRIS INFAC

Indian banking system: Key financials (Rs crore)

Scheduled commercial

Number

90

Number of branches

Table 3 Total Total Total Profit Spread assets deposits income (per cent)

54,275 1,975,020 1,575,145 183,767 22,273

Gross NPA

Gross NPA/ gross loans and advances

Year

3.0

n.a.

n.a. 2003-04

banks (excl RRBs) Public sector banks

48,150 1,471,428 1,226,838 137,603 16,547

3.1

n.a.

n.a. 2003-04

Nationalised banks

8

34,411

922,171

793,947

85,712 10,929

3.3

n.a.

n.a. 2003-04

State Bank Group

19

13,739

549,257

432,891

51,891

5,618

2.8

n.a.

n.a. 2003-04

OSCBs

30

5,903

367,276

268,550

33,154

3,484

2.5

n.a.

n.a. 2003-04

33

222

136,316

79,757

13,010

2,242

3.9

n.a.

n.a. 2003-04

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a. 2003-04

Foreign banks in India Regional rural banks

27

Figures exclude data of co-operative banks. Source: Trends and Progess of Banking in India

124

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Evolution: Indian banking Period

Event

The British Raj

Commercial banks (entities with unlimited liability) established.

Chart 1

1800s

Banks specialised in providing short-term credit for trade.

1896

The Presidency Act allowed the establishment of state partnered banks.

1921

Four large banks were merged to form the Imperial Bank of India (which later became State Bank of India).

1934

The Reserve Bank of India Act was passed.

1935

The RBI came into existence.

Post-Independence era The Indian banking system progressed in terms of functions and geographic coverage. The proportion of industrial credit was higher than agricultural credit. 1949

The Banking Regulation Act 1949, gave RBI the powers to regulate, supervise and develop the banking

After 1949

There was consolidation in the banking industry, and large commercial banks emerged through mergers

system. and amalgamations. 1955

The Imperial Bank of India was rescheduled as the State Bank of India.

1967

A scheme for social control on banks was introduced, in order to increase the availability of banking facilities, and change the uneven distribution of lending by banks.

Jul 1969

14 major banks, each with deposits of over Rs 500 crore, were nationalised by the Ministry of Finance.

1974

Targets for priority sector lending were set.

1980

The government further nationalised six banks.

Aug 1991

The Narasimham Committee was formed, in order to re-examine the financial system.

1992-93

Income recognition and capital adequacy norms were introduced, and interest rates were rationalised. Losses of public sector banks amounted to Rs 3,648 crore.

1993

Public sector banks accounted for 93 per cent of the total branches in India, 87 per cent of the total deposits, and 89 per cent of the total loans.

1994

Private sector banks were permitted to commence operations. The interest rates on loans of over Rs 200,000 were deregulated, allowing banks to fix prime lending rates. Banks were allowed to issue capital, up to 49 per cent of the equity, from the capital markets, by amending the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970/80.

1995-96

19 of the 27 scheduled commercial banks were able to achieve the stipulated capital adequacy ratio.

1997

Limited and conditional autonomy was provided to public sector banks.

1998

The committee on financial sector reforms (Narasimham Committee II) reviewed the progress of reforms, and recommended a plan for the implementation of second generation reforms. Norms for capital adequacy and a reduction in non-performing assets were evolved. Interest rates on term deposits of over 15 days were deregulated.

1999

Guidelines on asset-liability management and risk management were issued.

2000

In the Union Budget, the government announced its intention to reduce its equity in public sector banks to 33 per cent. HDFC Bank acquired Times Bank; the first private sector merger in India.

2001

RBI issued licences to 2 new banks, Kotak Mahindra and Rabo Bank. FDI limit in the banking sector increased to 51 per cent.

2002

Union Government allows the conversion of the branch operations of foreign banks into subsidiaries. RBI approves the merger of ICICI and ICICI Bank, making it the second largest bank in India, in terms of assets. Kotak Mahindra Finance, an NBFC, announces its intention to convert itself into a bank.

2003

Kotak Mahindra Bank commenced operations on March 24, 2003.

2004

HSBC acquired 20 per cent in UTI Bank. FDI limit in private banks increased from 49 per cent to 74 per cent. RBI placed moratorium on GTB's operations on 24th July 2004 RBI announced the merger of GTB with OBC on 26th July 2004 IDBI converted itself into a commercial bank from 1st October 2004.

Source: CRIS INFAC CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

125

Banks and DFIs: Important activities

Chart 2

Commercial banking or similar in nature

Investment banking

Other financial services

Banks

Accepting chequable deposits Granting loans and advances

Investments in securities Underwriting of issues Loan syndication

DFIs

Granting long-term loans and advances Underwriting and Granting short-term loans and advances / subscribing directly to working capital finance shares / debentures of Accepting term deposits and corporate bodies issuing CDs on prescribed terms and conditions

Factoring Hire-purchase Leasing Merchant banking Credit cards Dealing in gold Mutual fund Housing finance Commercial banking Housing finance Credit rating Custodial services Brokerage Investor services Registrar’s services Project consultancy Debenture trusteeship

Note The activities are performed either directly or through subsidiaries. Source: RBI

Financial institutions: Financial performance (Rs crore)

Table 4

1998-99

1999-2000

2000-01

2001-02

2002-03

Change (per cent)

Income

21,614

24,410

25,867

17,206

15,822

-8.0

Interest income

20,297

22,152

23,519

14,391

13,194

-8.3

Other income

1,317

2,258

2,348

2,815

2,628

-6.6

Expenditure

18,381

21,148

23,748

15,944

14,130

-11.4

Interest expended

15,675

18,245

19,567

13,284

11,825

-11.0

308

687

1,579

1,501

947

-36.9 17.2

Provisions Other expenses

2,398

2,216

2,602

1,159

1,358

-Wage bill

294

362

476

404

391

-3.2

Net profit

3,233

3,263

2,119

1,262

1,692

34.1

205,502

232,043

246,518

170,247

182,223

7.0

Total assets Ratios (per cent) 1 Net profit

1.6

1.4

0.9

0.7

0.9

-

10.5

10.5

10.5

9.9

8.6

-

Interest income

9.9

9.6

9.5

8.3

7.2

-

Other income

0.6

1.0

1.0

1.6

1.4

-

Expenditure

8.9

9.1

9.6

8.3

7.2

-

Interest expended

7.6

7.9

7.9

7.6

6.4

-

Other expenses

1.2

1.0

1.1

0.7

0.7

-

Wages

0.1

0.2

0.2

0.2

0.2

-

Income

Provisions and contigencies

0.2

0.3

0.6

0.9

0.5

-

Spread (net interest income)

2.3

1.7

1.6

0.6

0.7

-

1

Ratios calculated as a percentage of total assets

Notes 1) For 1998-99 to 2000-01, financial institutions comprise IDBI, ICICI, TFCI, EXIM Bank, NABARD, SIDBI, IDFC, IFCI, NHB and IIBI. 2) For 2001-02 and 2002-03, financial institutions comprise IDBI, TFCI, EXIM Bank, NABARD, SIDBI, IDFC, IFCI, NHB and IIBI. Source: RBI's Report on Trend and Progress of Banking in India 2002-03

126

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

127

10,581

41,305

26,040

Deposits

Borrowings

Other liabilities

Other assets

6.9

4.0

1.2

71.2

11.2

5.5

100.0

12.7

20.1

5.1

48.4

10.0

3.7

100.0

16,493

7,355

4,008

167,201

28,676

8,311

232,045

17,914

41,413

13,350

114,017

36,619

8,731

232,045

7.1

3.2

1.7

72.1

12.4

3.6

100.0

7.7

17.8

5.8

49.1

15.8

3.8

100.0

Rs crore Per cent

1999-2000

16,380

8,174

3,641

179,786

29,662

8,880

246,523

18,376

37,715

17,821

125,597

39,147

7,866

246,523

6.6

3.3

1.5

72.9

12.0

3.6

100.0

7.5

15.3

7.2

50.9

15.9

3.2

100.0

Rs crore Per cent

2000-01

8,878

3,226

2,987

131,510

21,671

5,628

173,900

27,170

24,400

15,088

83,595

16,836

6,811

173,900

5.1

1.9

1.7

75.6

12.5

3.2

100.0

15.6

14.0

8.7

48.1

9.7

3.9

100.0

Rs crore Per cent

2001-02

Source: RBI's Report on Trend and Progress of Banking in India 2002-03

2) For 2001-02 and 2002-03, financial institutions comprise IDBI, TFCI, EXIM Bank, NABARD, SIDBI, IDFC, IFCI, NHB and IIBI.

2002-03 Change1

Table 5

12,560

2,988

1,606

136,823

21,760

8,014

183,751

27,063

21,862

20,144

89,639

18,259

6,784

183,751

6.8

1.6

0.9

74.5

11.8

4.4

100.0

14.7

11.9

11.0

48.8

9.9

3.7

100.0

41.5

-7.4

-46.2

4.0

0.4

42.4

5.7

-0.4

-10.4

33.5

7.2

8.5

-0.4

5.7

Rs crore Per cent (per cent)

1) For 1998-99 to 2000-01, financial institutions comprise IDBI, ICICI, TFCI, EXIM Bank, NABARD, SIDBI, IDFC, IFCI, NHB and IIBI.

Notes

2002-03 over 2001-02

8,291

14,164

Fixed assets

1

2,387

Bills discounted/rediscounted

146,353

22,969

Investment

Loans and advances

11,338

Cash and bank balance

205,502

99,360

Assets

20,519

Bonds and debentures

7,698

205,502

Rs crore Per cent

Reserves

Capital

Liabilities

1998-99

Financial institutions: Liabilities and assets

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

129

Mutual funds

SIDC: State Industrial Development Corporation FII: Foreign Institutional Investor

EXIM: Export Import Bank of India

Source: CRIS INFAC

IIBI: Industrial Investment Bank of India

TFCI: Tourism Finance Corp of India

Stock exchange Merchant bankers Underwriters Stock brokers FIIs Retail investors

Capital markets

NABARD: National Agricultural Bank for Reconstruction & Development SFC: State Finance Corporation

Non-banking finance companies (NBFCs)

PFC: Power Finance Corporation

State level institutions SFCs SIDC

Commercial banks

IFCI: Industrial Finance Corporation of India

Sectoral institutions TFCI EXIM PFC NABARD

Financial institutions

Chart 1

Securities and Exchange Board of India (SEBI)

IDFC: Infrastructure Development Finance Corporation of India

Term-lending institutions IDFC IFCI IIBI

Pension funds, Provident funds

Ministry of Finance Reserve Bank of India (RBI)

Financial system in India

Financial system in India: Overview

2.0

Household sector savings in financial and physical assets (Rs crore) GDP at market prices Gross domestic savings

1997-98

1998-99 1999-2000

Table 1 2000-01 2001-02 P

2002-03 E

1,522,547

1,740,985

1,936,831

2,089,499

2,282,143

2,469,564

352,178

374,659

468,681

495,986

535,185

597,697

Percentage of GDP

23.1

21.5

24.2

23.7

23.5

24.2

Household savings

268,437

326,802

404,401

458,215

519,040

559,258

Percentage of GDP

17.6

18.8

20.9

21.9

22.7

22.6

146,777

180,346

205,743

222,721

254,304

254,407

9.6

10.4

10.6

10.7

11.1

10.3

121,660

146,456

198,658

235,494

264,736

304,851

- Financial assets (net) Percentage of GDP - Physical assets Percentage of GDP Private corporate sector Percentage of GDP Public sector Percentage of GDP

8.0

8.4

10.3

11.3

11.6

12.3

63,486

65,026

84,329

86,142

78,849

84,169

4.2

3.7

4.4

4.1

3.5

3.4

20,255

-17,169

-20,049

-48,371

-62,704

-45,730

1.3

-1.0

-1.0

-2.3

-2.7

-1.9

P: Provisional; E: Estimate Source: Handbook of Statistics on the Indian Economy, 2002

130

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

131

0.8

3.3

Units of UTI

PSU bonds

Mutual funds (other than UTI)

0.2

0.7

Postal insurance

State insurance

100.0

Source: RBI Annual Report 2003-04

P: Provisional

Preliminary

Total

1

18.9

8.5

Life insurance fund

Provident and pension fund

9.5

13.2

Insurance fund

Small savings

0.2

5.8

Co-operative banks and societies

13.5

0.2

Private corporate business

Government securities

4.1

Shares and debentures

Claims on government

-0.8

14.3

Trade debt (net)

2.2

4.7

With banks

With co-operative banks and societies

27.2

Deposits

With non-banking companies

10.6

33.3

Currency

12.0

100.0

18.3

0.7

0.2

9.4

10.3

7.6

-0.4

7.2

3.1

0.8

13.3

0.1

6.0

23.3

-0.6

5.0

3.3

21.3

28.9

8.2

100.0

18.4

0.6

0.2

8.0

8.8

4.9

0.0

4.9

1.6

0.1

7.0

0.1

8.4

17.2

-1.7

3.2

7.5

33.6

42.5

100.0

16.7

0.5

0.2

8.0

8.7

5.9

0.4

6.3

1.2

0.5

4.3

0.1

7.5

13.5

-1.1

5.2

10.6

27.9

42.6

12.2

100.0

14.7

0.5

0.2

7.2

7.8

9.0

0.1

9.1

1.1

0.1

2.7

0.1

8.0

11.9

-0.8

3.0

7.9

35.3

45.5

10.9

100.0

18.0

0.5

0.3

10.4

11.2

7.4

0.4

7.7

0.3

0.1

0.2

0.1

6.6

7.3

-0.2

5.8

10.6

26.3

42.5

13.3

8.6

100.0

19.2

0.4

0.3

9.5

10.2

7.0

0.4

7.4

0.3

0.1

2.4

0.1

3.6

6.6

-0.4

6.4

16.4

25.7

48.1

7.4

100.0

18.8

0.4

0.3

10.6

11.3

11.3

1.6

12.9

1.1

0.1

0.3

0.1

1.3

2.9

-0.4

5.3

3.9

37.8

46.6

100.0

22.4

0.5

0.3

10.6

11.3

13.0

0.7

13.6

0.8

0.0

0.9

0.1

1.5

3.4

-3.3

4.6

3.8

33.7

38.8

10.5

8.8

100.0

22.8

0.6

0.3

11.2

12.1

11.3

0.9

12.3

3.4

0.1

0.8

0.0

3.4

7.7

-0.4

4.3

1.7

30.8

36.3

6.3

100.0

19.3

0.5

0.2

12.9

13.6

14.0

1.7

15.7

1.3

0.1

-0.4

0.0

3.1

4.1

0.1

5.6

2.9

32.5

41.0

9.7

100.0

16.1

0.4

0.3

13.5

14.2

12.1

5.8

17.9

1.8

0.0

-0.6

0.1

1.5

2.7

-2.1

3.6

2.6

35.3

39.4

8.5

100.0

14.3

0.5

0.2

14.8

15.5

14.3

4.3

18.6

1.3

0.0

-0.5

0.0

0.8

1.6

-0.1

3.7

1.6

36.3

41.5

100.0

13.0

0.3

0.1

14.5

14.9

13.7

4.0

17.7

1.1

0.0

-0.4

0.0

0.7

1.4

-0.1

2.3

0.2

40.5

42.9

10.1

2003-041

(per cent)

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02P 2002-03P

Table 2

Proportion of gross household savings in financial assets

Banks and financial institutions: Financial assets

Table 3

(Rs crore)

As at the end of March 1990-91

1997-98

1998-99

1999-00

2000-01 P 2001-02 P

2002-03 P

I. Banks

2,32,786

6,54,406

7,61,326

8,88,781

10,50,276

12,69,034

14,44,993

Scheduled commercial banks

2,22,613

6,28,332

7,26,129

8,51,100

10,09,150

12,23,008

13,98,967

77

-

-

-

-

-

-

2,22,690

6,28,332

7,26,129

851,100

10,09,150

12,23,008

1398967

Non-scheduled commercial banks Total commercial banks State co-operative banks

10,096

26,074

35,197

37,681

41,126

46,026

46,026

II. Financial institutions

1,27,975

4,00,418

4,60,758

522,079

5,75,346

5,54,393

567,296

57,372

1,74,980

2,05,817

2,22,790

2,40,530

1,70,247

182,223

Term-lending institutions (All-India) State-level institutions

Investment institutions Other institutions Total

1

2 3

4

10,049

21,203

21,629

24,518

24,992

25,012

25,012

58,566

1,97,321

2,27,023

2,67,817

3,01,870

350,538

350,538

6,914

6,289

6,954

7,954

8,596

9,523

10,54,824 12,22,084

14,10,860

16,25,622

18,23,427

2,012,289

1,988 3,60,761

P: Provisional 1

Term-lending institutions include IDBI, NABARD, ICICI, IFCI, EXIM Bank, IIBI, NHB, IDFC, and SIDBI. From the end of March 2002 the data does not include ICICI, as it was merged with ICICI Bank. 2

Includes SFCs and SIDCs

3

Includes UTI, LIC, and GIC and its former subsidiaries

4

Includes DICGC and ECGC Source: Trends and Progress of Banking in India, 2003

Indian financial system: Key financials (Rs crore)

Scheduled commercial banks Regional rural banks Financial institutions NBFCs (excl RNBCs) RNBCs

Number

90 196

Number of branches

Table 4 Total Total Total Profit Spread Gross Gross NPA assets deposits income (per cent) NPA / loans and advances

Year

54,275 1,975,020 1,575,145 183,767 22,273

3.05

n.a.

n.a. 2003-04

14,777

63,614

48,346

5,931

524

3.10

n.a.

n.a. 2002-03

9

n.a.

183,751

20,144

15,882

1,693

0.70

n.a.

n.a. 2002-03

905

n.a.

39,832

5,933

5,357

-212

n.a.

n.a.

n.a. 2001-02

5

n.a.

18,458

12,889

n.a.

n.a.

n.a.

n.a.

n.a. 2001-02

n.a.: Not available Source: Trends and Progress of Banking in India, 2003

132

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

133

n.a.

Private sector

6,110

5,027

1,083

3,238

International capital markets

Euro-issues

GDR

FCCB

ECB

Source: Handbook of Statistics on Indian Economy

P: Provisional

n.a.: Not available

11,275

9,348

PSU bonds

Mutual funds

8,871

3,070

- Debentures

131

17,414

- Equity shares

- Preference shares

26,417

888

Non-government public companies

Government companies

Banks and FIs in the public sector

27,305

n.a.

Public sector

Prospectus and rights / IPO

n.a.

30,375

1994-95

Private placement

Primary capital markets (debt and equity)

(Rs crore)

Capital markets: Resources mobilised

-5,833

4,548

0

496

496

5,044

2,291

3,970

150

11,877

15,998

1,000

16,998

4,071

9,290

13,361

32,650

1995-96

-2,037

10,003

1,651

1,625

3,276

13,279

3,394

4,233

75

6,101

10,410

650

11,060

2,493

12,573

15,066

29,520

1996-97

4,064

14,557

48

4,330

4,378

18,935

2,983

1,972

4

1,162

3,138

43

1,476

4,657

9,202

20,896

30,099

37,738

1997-98

2,695

3,485

0

2,105

2,105

5,590

4,363

2,391

60

2,563

5,013

0

4,352

9,365

16,998

32,681

49,679

63,407

22,117

n.a.

n.a.

n.a.

3,487

n.a.

8,697

2,401

0

2,753

5,153

0

2,551

7,704

19,404

41,856

61,259

77,660

1998-99 1999-2000

11,135

n.a.

n.a.

n.a.

4,197

n.a.

16,632

2,140

142

2,608

4,890

0

1,472

6,362

23,106

44,731

67,836

74,199

2000-01

10,120

n.a.

n.a.

n.a.

n.a.

n.a.

14,436

4,832

0

860

5,692

n.a.

n.a.

5,692

28,620

36,256

64,876

70,568

4,583

n.a.

n.a.

n.a.

n.a.

n.a.

7,529

1,418

0

460

1,878

n.a.

n.a.

1,878

25,077

41,871

66,948

68,826

47,684

n.a.

n.a.

n.a.

n.a.

n.a.

12,536

1,251

0

1,959

3,210

n.a.

n.a.

3,210

14,866

44,349

59,215

62,425

2001-02 2002-03 P 2003-04 P

Table 5

Mutual funds vis-à-vis bank deposits (Rs crore)

Table 6

Net assets of

Bank deposits

Mutual funds to bank

mutual fund

(excl RRBs)

deposits (per cent)

1991-92

37,973

264,991

14.3

1992-93

47,734

299,602

15.9

1993-94

62,430

349,345

17.9

1994-95

72,967

403,403

18.1

1995-96

74,315

457,639

16.2

1996-97

70,197

537,557

13.1

1997-98

58,918

643,743

9.2

1998-99

70,624

766,814

9.2

1999-2000

103,453

896,728

11.5

2000-01

90,587

1,055,233

8.6

2001-02

100,594

1,205,930

8.3

1

2002-03

109,299

1,355,880

8.1

2003-04

139,616

1,575,140

8.9

1

Mutual funds: The 2002-03 figure includes Rs 29,835 crore assets under management of the Specified Undertaking of the Unit Trust of India

Source: Report on Trend and Progress of Banking in India and AMFI

Incremental mutual fund collections to bank deposits (Rs crore)

Table 7

Mutual fund

Bank deposits

Mutual fund/bank deposits (per cent)

1992-93

13,021

34,611

37.6

1993-94

11,243

49,743

22.6

1994-95

11,275

54,058

20.9

1995-96

-5,833

54,236

-10.8

1996-97

-2,037

79,918

-2.5

1997-98

4,064

106,186

3.8

1998-99

2,695

123,071

2.2

1999-2000

22,117

129,914

17.0

2000-01

11,135

158,505

7.0

2001-02

10,120

150,697

6.7

2002-03 P

4,583

149,950

3.1

2003-04 P

47,684

219,260

21.7

P: Provisional Note Figures for mutual fund collections during the 1998-99 to 2000-01 period are provisional. Source: Handbook of Statistics on Indian Economy

134

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Banks: Investments in shares (Rs crore)

1997-98

Investments in shares Deposits

Table 8

1998-99

1999-2000

2000-01

2001-02

2002-03

3,565

4,741

6,128

4,840

6,194

6,774

666,306

797,828

932,469

1,093,527

1,247,239

1,404,490

0.5

0.6

0.7

0.4

0.5

0.5

Per cent of deposits

Source: Statistical Tables Relating to Banks in India

NBFCs: Total assets and deposits (Rs crore)

1997-98

1998-99

NBFCs of which RNBCs Number of reporting

Table 9 1999-2000

NBFCs of which RNBCs

2000-01

NBFCs of which RNBCs

2001-02

NBFCs of which RNBCs

NBFCs

of which RNBCs 5

1,420

9

1,547

11

1,005

9

981

7

910

Total assets

34,790

10,718

47,049

11,081

51,324

11,317

53,878

16,244

58,290

18,458

Public deposits

13,572

10,249

20,429

10,644

19,342

11,004

18,084

11,625

18,822

12,889

8,573

-1,085

9,118

-666

6,223

-443

4,943

-179

4,383

111

companies

Net owned funds Note

Figures are as of end March. Source: Report on Trend and Progress of Banking in India 2002-03

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

135

NBFCs: Net owned funds vis-à-vis public deposits (excl RNBCs) (Rs crore)

Table 10

1998-99

1999-2000

No of Net Public Public deposits reporting owned deposits as a multiple of companies funds NOF Up to 0.25

736

0.25-0.5

319

0.5-5

332

5-10

55

10-50 50-100 100-500 Over 1,000 Total

38

No of Net Public Public deposits reporting owned deposits as a multiple of companies funds NOF

650

17.1

205

-215

395

-1.8

70

116

1.6

360

116

194

1.7

443

1,068

2.4

314

502

363

0.7

336

265

0.8

43

294

202

0.7

64

1,285

2,107

1.6

46

1,060

2,773

2.6

11

787

1,271

1.6

9

628

878

1.4

18

3,946

4,287

1.1

19

4,280

3,533

0.8

1

1,121

22

0.0

-

-

-

-

1,536

8,027

9,785

1.2

996

6,666

8,338

1.3

(Rs crore)

2000-01

2001-02

No of Net Public Public deposits reporting owned deposits as a multiple of NOF companies funds

No of Net Public Public deposits reporting owned deposits as a multiple of companies funds NOF

Up to 0.25

225

-859

807

-

214

-1,351

1,120

-

0.25-0.5

346

116

188

1.6

300

103

128

1.2

0.5-5

305

498

692

1.4

298

477

361

0.8

5-10

34

224

94

0.4

30

204

80

0.4

10-50

37

775

777

1.0

38

798

718

0.9

50-100

12

804

924

1.1

11

798

846

1.1

100-500

14

3,063

2,299

0.8

14

3,243

2,680

0.8

1

501

679

1.4

-

-

-

-

974

5,122

6,460

1.3

905

4,272

5,933

1.4

Over 1,000 Total NOF: Net owned funds Notes

1) Figures are as of end March. 2) In 1999-2000, there were no reporting companies with net owned funds over Rs 1,000 crore. Source: Report on Trend and Progress of Banking in India 2002-03

136

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

3.0

Industry performance

25 banks: Financials

Table 1

(Rs crore)

2003-04 H1

2002-03 H1

2003-04 Q3

2002-03 Q3

2003-04 9M

2002-03 9M

1

2003-04

2002-03

Income

64,234.3

58,957.9

30,934.5

30,172.9

95,168.7

89,130.8 123,579.7 121,470.0

Interest earned

50,164.4

49,167.0

25,169.8

24,732.1

75,334.2

73,899.1

97,536.7

99,617.4

Other income

14,069.9

9,790.9

5,764.7

5,440.7

19,834.6

15,231.7

26,043.0

21,852.5

Expenditure

56,562.9

53,434.2

25,259.2

25,219.5

81,822.1

78,653.7 108,523.4 109,624.6

Interest expended

32,249.1

33,923.0

15,426.0

16,828.6

47,675.1

50,751.6

60,678.1

67,424.2

Operating expenses

13,671.8

11,931.1

7,136.8

6,208.3

20,808.6

18,139.5

28,261.0

25,770.5

Provisions and contingencies

10,642.0

7,580.0

2,696.4

2,182.6

13,338.3

9,762.6

19,584.3

16,429.9

Operating profit

18,313.4

13,103.7

8,371.6

7,135.9

26,685.0

20,239.7

34,640.6

28,275.3

7,671.4

5,523.7

5,675.2

4,953.3

13,346.6

10,477.1

15,056.3

11,845.4

17,915.3

15,244.0

9,743.8

7,903.5

27,659.0

23,147.5

36,858.6

32,193.3

Net profit Net interest spread H1: First half; 9M: Nine months 1

Excludes Indusind Bank and Global Trust Bank

Note These 25 banks comprise 70 per cent of the total deposits of scheduled commercial banks in India. Source: Press releases

Public sector banks: Priority sector advances (Rs crore)

Table 2

1968-69

1997-98

1998-99

1999-2000

Rs crore Per cent

Rs crore Per cent

Rs crore Per cent

Rs crore Per cent

Agriculture

162

5.4

34,305

15.7

40,078

16.3

45,296

14.3

Small-scale industry

257

8.5

38,109

17.5

42,674

17.3

46,045

14.6

Other priority sectors

22

0.7

18,881

8.7

24,448

9.9

30,816

9.7

Total priority sector Net bank credit (Rs crore)

441

14.6

91,319

41.8

107,200

43.5

127,478

40.3

3,016

100.0

218,219

100.0

246,203

100.0

316,427

100.0

2000-01

2001-02

Rs crore Per cent

2002-03

Rs crore Per cent

2003-04

Rs crore Per cent

Rs crore

Per cent

90,541

11.9

Agriculture

53,571

15.7

63,082

15.9

73,507

15.4

Small-scale industry

48,400

14.2

49,743

12.5

52,988

11.1

65,855

8.6

Other priority sectors

40,791

12.0

53,712

13.5

71,448

15.0

107,438

14.1

Total priority sector 149,116 Net bank credit

341,291

43.7

171,185

43.1

203,095

42.5

263,834

34.5

100.0

396,954

100.0

477,899

100.0

763,855

100.0

Note The figures under the column 'Per cent' indicate the share in net bank credit. Source: RBI's Report on Trend and Progress of Banking in India 2002-03

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

137

138

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

6.0

Indian Overseas Bank

8.4

7.8

9.5

3.5

0.0

UCO Bank

Union Bank of India

United Bank of India

Vijaya Bank

8.2

Punjab National Bank

Syndicate Bank

5.5

Punjab and Sind Bank

17.0

- ve

Indian Bank

Oriental Bank of Commerce

8.3

11.3

2.6

10.4

Dena Bank

Corporation Bank

Central Bank of India

Canara Bank

8.4

8.5

Bank of Maharashtra

11.2

5.1

10.8

8.8

Bank of India

Bank of Baroda

Andhra Bank

Allahabad Bank

State Bank of Indore

12.4

8.8

State Bank of Mysore

State Bank of Saurashtra

9.4

9.3

9.9

State Bank of Hyderabad

State Bank of Bikaner & Jaipu

9.5

State Bank of Patiala

State Bank of Travancore

11.6

11.5

8.2

10.5

3.2

8.8

9.2

9.2

17.5

10.1

-18.8

10.8

11.3

9.4

10.2

9.1

10.3

11.8

12.1

11.0

9.3

12.1

10.8

8.8

8.2

10.8

11.3

12.2

10.3

8.4

10.9

9.1

10.5

8.8

11.4

15.3

9.3

1.4

11.9

16.9

10.4

9.5

10.9

9.1

12.1

12.4

11.6

9.8

18.1

11.6

10.7

11.5

10.8

13.2

14.6

10.0

9.6

10.1

9.6

9.6

10.8

10.9

14.1

10.2

- ve

11.1

13.2

11.9

11.0

9.8

10.6

13.3

11.0

10.4

12.4

14.4

10.2

12.3

10.3

10.7

12.5

12.5

1995-96 1996-97 1997-98 1998-99

State Bank of India

Public sector banks

(per cent)

Banks: Capital adequacy ratio

6.0

8.2

6.7

6.6

7.2

6.7

7.5

12.5

5.2

- ve

7.1

12.7

6.7

7.8

6.9

6.9

8.9

10.0

7.1

8.6

14.1

7.4

11.1

7.5

9.3

10.8

8.3

4.6

1.4

4.8

2.6

4.2

3.6

4.1

0.2

4.0

-

4.6

0.1

4.5

1.9

4.8

3.7

3.2

3.4

4.4

2.7

0.4

4.1

1.3

3.6

1.6

1.8

3.2

10.6

9.6

11.4

9.2

11.5

10.3

11.6

12.7

9.2

- ve

11.6

12.8

11.2

9.6

11.7

10.6

12.1

13.4

11.5

11.3

14.5

11.5

12.4

11.1

10.9

12.6

11.5

Tier I Tier II Total

1999-2000

8.0

7.0

6.2

5.4

7.9

6.8

6.9

11.5

5.8

- ve

4.4

13.0

5.7

7.3

6.4

7.6

8.5

9.8

6.7

9.1

13.7

6.8

11.6

7.7

9.6

10.7

8.6

3.5

3.4

4.7

3.7

3.8

3.4

4.6

0.4

4.4

-

3.4

0.3

4.3

2.5

4.3

4.6

4.3

3.6

3.8

3.6

0.2

4.4

0.8

4.1

2.7

1.7

4.2

11.5

10.4

10.9

9.1

11.7

10.2

11.4

11.8

10.2

- ve

7.7

13.3

10.0

9.8

10.6

12.2

12.8

13.4

10.5

12.7

13.9

11.2

12.4

11.8

12.3

12.4

12.8

Tier I Tier II Total

2000-01

8.9

8.8

6.2

4.9

8.5

6.3

6.4

9.6

6.2

0.9

4.4

16.8

5.2

8.1

6.6

6.4

7.6

8.8

6.2

8.2

12.1

6.7

10.9

7.8

9.5

10.0

9.2

3.4

3.2

4.9

4.8

3.7

4.4

4.3

1.4

4.7

0.9

3.3

1.1

4.4

3.8

4.6

4.3

3.8

3.8

4.4

4.6

1.1

5.1

1.4

4.8

4.2

2.6

4.1

12.3

12.0

11.1

9.6

12.1

10.7

10.7

11.0

10.8

1.7

7.6

17.9

9.6

11.9

11.2

10.7

11.3

12.6

10.6

12.8

13.2

11.8

12.3

12.5

13.7

12.6

13.4

Tier I Tier II Total

2001-02

7.4

12.6

6.9

5.2

7.7

7.1

6.1

10.7

5.8

7.5

5.3

17.3

5.7

7.9

5.9

7.6

8.1

8.2

6.4

9.4

11.7

7.2

10.5

6.8

9.8

10.4

8.8

5.2

2.5

5.6

4.9

3.3

4.9

4.3

3.3

5.5

3.3

4.0

1.2

4.9

4.7

5.9

4.5

4.6

5.4

4.8

3.7

2.0

4.4

2.6

4.5

5.0

3.2

4.7

12.7

15.2

12.4

10.0

11.0

12.0

10.4

14.0

11.3

10.9

9.3

18.5

10.5

12.5

11.8

12.0

12.7

13.6

11.2

13.1

13.7

11.6

13.1

11.3

14.8

13.6

13.5

Tier I Tier II Total

2002-03

8.4

15.0

6.5

6.1

6.8

7.0

6.4

9.9

6.7

7.7

5.2

16.5

6.2

7.8

7.0

7.5

8.5

8.2

6.3

8.3

11.0

7.2

9.0

6.2

8.4

9.9

8.3

Tier I

14.1

17.0

12.3

11.9

11.5

13.1

11.1

14.5

12.5

12.8

9.5

20.1

12.4

15.6

11.9

13.0

13.9

13.7

12.5

12.4

14.5

11.5

12.9

11.4

14.3

13.6

13.5

Total

Continued...

5.7

2.0

5.9

5.8

4.7

6.1

4.7

4.6

5.8

5.2

4.3

3.6

6.2

7.8

4.9

5.5

5.4

5.5

6.3

4.1

3.5

4.4

3.9

5.1

5.9

3.7

5.2

Tier II

2003-04

Table 3

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

139

10.7

United Western Bank

9.9

8.6

8.2

7.7

14.5

5.1

3.8

3.4

4.0

3.6

0.7

0.6

13.7

11.9

12.2

11.3

15.2

5.7

8.8

6.6

8.4

7.7

15.1

8.9

3.9

3.0

3.6

2.6

0.4

1.7

12.7

9.6

12.1

10.3

15.6

10.6

7.0

8.0

7.0

15.6

10.0

-

IDBI Bank

8.5

8.2

9.0

Deutsche Bank

ABN Amro Bank

American Express Bank

10.4

9.2

9.3

8.4

8.6

9.0

11.9

9.5

12.9

-

-

18.7

-

13.0

13.5

9.9

9.8

9.7

9.0

9.3

9.1

9.8

8.6

17.9

-

-

16.3

-

13.5

13.9

9.3

9.3

9.5

9.3

8.3

9.0

9.3

10.0

15.2

-

-

13.2

-

11.1

11.9

9.9

8.2

10.4

12.4

6.0

6.0

5.7

7.0

12.1

-

-

9.8

-

17.4

9.6

0.2

1.9

0.0

0.5

3.5

5.0

4.6

3.6

1.2

-

-

0.0

-

2.2

2.6

10.1

10.1

10.4

12.9

9.5

10.9

10.3

10.6

13.2

-

-

9.8

-

19.6

12.2

Source: IBA' Performance Highlights of Public, Private & Foreign Banks in India

n.a.: Not available

8.7

13.8

Bank of America

Standard Chartered Bank

9.5

11.7

Hongkong Bank

ANZ Grindlays Bank

10.1

Citibank

Foreign banks

18.2

-

UTI Bank

IndusInd Bank

-

Kotak Mahindra Bank

35.0

17.5

ICICI Bank

Bank of Punjab

23.5

HDFC Bank

9.4

9.5

12.5

12.5

6.7

6.9

8.6

7.9

12.6

-

-

8.5

-

10.4

8.7

0.2

1.9

0.2

0.5

2.9

5.6

3.7

3.3

2.4

-

-

2.5

-

1.2

2.4

9.6

11.4

12.7

13.0

9.6

12.5

12.4

11.2

15.0

-

-

11.0

-

11.6

11.1

10.3

11.2

13.7

13.5

6.9

6.5

7.5

8.4

10.5

6.4

30.5

8.5

6.4

7.5

10.8

2.6 12.0

11.6

10.6

10.3

14.5

0.8

2001-02

0.4

2.0

0.9

7.6

2.4

6.5

3.5

2.7

2.1

4.2

0.0

4.4

3.2

4.0

3.1

3.8

1.6

2.8

3.6

3.7

1.3

2.1

10.7

13.2

14.6

21.1

9.3

13.1

10.9

11.0

12.5

10.7

30.5

12.8

9.6

11.4

13.9

11.2

4.2

9.8

11.6

10.6

16.9

12.1

Tier I Tier II Total

7.4

10.3

9.9

12.5

9.4

14.5

5.5

2000-01 Tier I Tier II Total

Global Trust Bank

10.2

10.2

14.2

9.2

12.8

10.1

1999-2000 Tier I Tier II Total

Centurion Bank

9.4

11.9

Vysya Bank

New private sector banks

8.4

10.9

Karur Vysya Bank

Federal Bank

11.1

1995-96 1996-97 1997-98 1998-99

Bank of Rajasthan

Old private sector banks

(per cent)

...continued

10.5

10.7

15.2

13.7

6.8

n.a.

14.5

8.4

10.1

6.4

25.7

8.5

6.0

7.1

9.5

0.0

1.1

6.4

6.6

6.7

14.9

8.9

0.4

1.9

2.2

7.4

3.8

n.a.

3.6

2.9

2.1

4.5

0.3

5.1

3.6

4.1

1.6

0.0

0.9

3.8

3.2

4.6

2.1

2.4

10.9

12.6

17.4

21.1

10.6

n.a.

18.1

11.3

12.1

10.9

26.0

13.6

9.6

11.1

11.1

0.0

2.0

10.2

9.8

11.2

17.0

11.3

Tier I Tier II Total

2002-03

10.34

11.49

9.32

15.68

7.11

n.a.

11.17

8.79

8.91

6.44

14.64

7.74

5.84

6.09

8.03

0.0

3.08

5.33

n.a.

6.26

15.1

8.35

Tier I

0.4

1.99

5.1

7.24

3.76

n.a.

3.37

2.32

3.84

4.77

0.61

4.9

4.54

4.27

3.63

0.0

4.41

4.8

n.a.

5.22

2.01

2.83

Tier II

2003-04

10.74

13.48

14.42

22.92

10.87

n.a.

14.54

11.11

12.8

11.2

15.3

12.6

10.4

10.4

11.7

0.0

7.5

10.13

n.a.

11.48

17.11

11.18

Total

Public sector banks: Capital adequacy ratio Number of banks

Table 4

0-4 per cent

4-8 per cent

8-10 per cent

Over 10 per cent

Total

1993-94

11

8

4

4

27

1994-95

3

11

8

5

27

1995-96

5

3

13

6

27

1996-97

2

0

9

16

27

1997-98

1

0

7

19

27

1998-99

1

0

4

22

27

1999-2000

1

1

0

2

4

22

27

2000-01

1

1

1

2

2

23

27

1

2

2

23

27

2

25

27

1

26

27

2001-02

1

2002-03

0

2003-04

0

1

1

1

1

1

0

4-9 per cent

2

9-10 per cent Source: IBA' Performance Highlights of Public, Private & Foreign Banks in India

Capital adequacy ratio: 2003-04 Number of banks

Table 5

Less than 4 per cent

4-9 per cent

9-10 per cent

Over 10 per cent

Total

-

-

-

1

1

SBI SBI associates

-

-

-

7

7

Nationalised banks

0

0

1

18

19

n.a.

n.a.

n.a.

n.a.

n.a.

-

1

-

7

8

n.a.

n.a.

n.a.

n.a.

n.a.

0

1

1

33

35

Old private sector banks New private sector banks Foreign banks Total n.a. Not available

Source: IBA' Performance Highlights of Public, Private & Foreign Banks in India

Scheduled commercial banks: Capital infusion (1991-92 to 2003-04)

Table 6

(Rs crore) Public sector banks - Recapitalisation support by government

1

22,516

Public sector banks - Public and right issues

9,428

Old private sector banks - Capital issues

1,043

New private sector banks - Capital issues

2,987

Total

35,974

1

Figures for 2002-03 Source: CRIS INFAC

140

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

141

Canara Bank

Central Bank of India

357

183

Indian Overseas Bank

New Bank of India

126

Vijaya Bank

Source: CRIS INFAC

4,000

492

United Commercial Bank

Total

132

360

Syndicate Bank

United Bank of India

149

Punjab National Bank

Union Bank of India

206

165

Punjab and Sind Bank

77

194

Indian Bank

Oriental Bank of Commerce

146

Dena Bank

65

113

176

Bank of Maharashtra

Corporation Bank

455

182

Bank of India

163

89

171

5,700

65

535

215

200

680

415

160

50

-

705

220

130

45

490

365

150

635

400

150

90

3,889

62

280

471

-

279

-

116

-

-

259

231

6

-

632

-

240

848

-

109

356

473

-

236

67

-

-

-

-

-

-

-

-

-

-

-

-

95

-

-

76

-

925

-

-

-

-

89

-

-

-

-

133

181

72

-

-

-

-

348

-

-

102

Upto 1992-93 Jan 1994 Dec 1994 Feb 1995 Mar 1995

Bank of Baroda

Andhra Bank

Allahabad Bank

(Rs crore)

Public sector banks: Recapitalisation support by the government

850

-

110

256

-

172

-

72

-

-

-

-

-

-

-

-

80

-

-

-

160

1995-96

1,509

302

54

338

-

-

-

150

-

-

-

-

-

-

500

-

-

-

-

165

-

1996-97

2,700

-

350

-

-

-

-

-

-

-

-

1,750

-

-

-

600

-

-

-

-

-

1997-98

400

-

200

100

-

-

-

-

-

-

-

100

-

-

-

-

-

-

-

-

-

0

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

1998-99 1999-2000

0

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

2000-01

1,300

-

-

-

-

-

-

-

-

-

-

1,300

-

-

-

-

-

-

-

-

-

2001-02

770

-

-

-

-

-

-

-

-

-

-

770

-

-

-

-

-

-

-

-

-

2002-03

22,516

555

2,257

1,808

332

1,368

580

704

127

183

1,453

4,746

354

110

1,798

1,078

746

2,287

563

588

879

Total

Table 7

Public sector banks: Writing down of capital base (Rs crore)

Table 8

1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03

Allahabad Bank

-

-

532

-

-

-

-

-

-

Andhra Bank Bank of India

-

-

-

-

243

-

48

-

50

-

1,370

-

-

-

-

-

-

-

Bank of Maharashtra

-

-

-

-

418

-

-

-

-

Canara Bank

-

-

-

507

-

-

-

-

277

Central Bank of India

-

-

-

-

-

-

-

681

-

Dena Bank

-

136

-

-

-

-

-

-

-

Indian Overseas Bank

-

-

1,000

-

-

-

-

-

-

Punjab and Sind Bank

-

-

-

-

462

-

-

-

-

Punjab National Bank

425

-

-

-

-

-

-

-

-

Syndicate Bank

-

-

-

-

943

-

-

-

-

UCO Bank

-

-

-

-

-

-

-

-

1,665

Union Bank

-

-

-

-

-

-

-

-

58

Vijaya Bank

-

-

-

-

-

297

-

-

-

425

1,506

1,532

507

2,067

297

48

681

2,050

Total

Source: RBI's Report on Trend and Progress of Banking in India

Public sector banks: Amounts returned to the government (Rs crore) Andhra Bank Bank of Baroda

1996-97

Table 9

1997-98

2000-01

2001-02

2002-03

-

-

381

-

48

-

50

-

-

-

Bank of India

93

-

-

150

-

Canara Bank

-

-

-

-

278

30

-

-

-

-

Punjab National Bank

-

138

-

-

-

Vijaya Bank

-

-

-

25

-

Union Bank

-

-

-

-

58

504

138

48

175

386

Corporation Bank

Total Source: CRIS INFAC

142

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Public sector banks: Public/rights issues (Rs crore)

Table 10 Period

Amount

Issue price

Public issue State Bank of India

Dec 1993

2,212.2

90

Oriental Bank of Commerce

Oct 1994

360.0

50

Dena Bank

Dec 1996

State Bank of India

Oct 1996

180.0

20

1

233

Bank of Baroda

Dec 1996

850.0

75

Bank of India

Feb 1997

675.0

35

Corporation Bank

Oct 1997

304.0

70

State Bank of Bikaner and Jaipur

Nov 1997

73.4

440

State Bank of Travancore

Jan 1998

90.0

500

Syndicate Bank

Oct 1999

125.0

10

1,270.4

Vijaya Bank

Dec 2000

100.0

10

Andhra Bank

Feb 2001

150.0

10

Indian Overseas Bank

Feb 2001

111.2

10

Union Bank Of India

Aug 2002

288.2

16

Allahabad Bank

Oct 2002

100.0

10

Canara Bank

Nov 2002

385.0

35

Indian Overseas Bank

Sep 2003

240.0

24

Uco Bank

Sep 2003

240.0

12

Vijaya Bank

Oct 2003

240.0

24

Bank of Maharashtra

Feb 2004

230.0

23 260

Rights issue State Bank of India

Dec 1990

130.0

State Bank of India

Jan 1994

792.0

60

State Bank of Bikaner and Jaipur

Feb 1996

62.4

400

State Bank of Indore

Feb 1996

52.5

600

State Bank of Mysore

Feb 1996

84.0

350

State Bank of Travancore

Feb 1996

82.5

550

1

GDR issue Source: RBI's Report on Trend and Progress of Banks in India

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

143

Old private sector banks: Public/rights issues (Rs crore)

Period

Table 11 Amount

Issue price

1.4

10

Public issue Nedungadi Bank

Jan 1992

United Western Bank

Jan 1994

6.0

20

Federal Bank

Mar 1994

31.9

90

Sangli Bank

Dec 1994

37.5

100

Karnataka Bank

Oct 1995

54.1

120

Dhanalaxmi Bank

Mar 1996

41.4

50

Jammu & Kashmir Bank

May 1998

70.3

38

City Union Bank

Jun 1998

21.0

35

South Indian Bank

Sep 1998

51.2

32

Karur Vysya Bank

Nov 1991

3.0

60

Nedungadi Bank

Jan 1992

1.0

10

Federal Bank

Mar 1993

9.3

35

Bank of Rajasthan

Jul 1994

10.0

20

Rights issue

Karnataka Bank

Oct 1995

27.0

60

United Western Bank

Oct 1995

71.6

40

Lakshmi Vilas Bank

Nov 1995

20.0

35

Vysya Bank

Jan 1996

46.3

35

Bank of Madura

Feb 1996

33.0

70

Federal Bank

Feb 1996

111.2

150

Nedungadi Bank

Feb 1996

20.4

30

Lord Krishna Bank

Feb 1998

25.5

17

Catholic Syrian Bank

Dec 1998

15.7

32

Bank of Rajasthan

Oct 1999

67.3

15

Bharat Overseas Bank

1999-2000

10.5

n.a.

Ganesh Bank of Kurundwad

1999-2000

0.5

n.a.

Nainital Bank

1999-2000

2.5

n.a.

Ratnakar Bank

1999-2000

5.9

n.a.

Sangli Bank Vysya Bank

1999-2000 1

2000-01

3.2

n.a.

75.5

n.a.

Bank of Rajasthan

2000-01

35.8

10

Lord Krishna Bank

2001-02

36.0

12

Dhanalaxmi Bank

2001-02

27.5

15

Karnataka Bank

2002-03

33.6

25

Karur Vysya Bank

2002-03

36.0

60

1

Preference issue to foreign collaborators

n.a.: Not available Source: CRIS INFAC

144

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

New private sector banks: Public issues (Rs crore)

Table 12

Period

Amount

Issue price

Bank of Punjab

Mar 1995

95.0

10

Global Trust Bank

Aug 1994

95.8

10

HDFC Bank

Mar 1995

90.0

10

ICICI Bank

Aug 1997

1

35

IndusInd Bank

Nov 1997

180.0

45

31.5

21

UTI Bank

Sep 1998

UTI Bank

Sep 1998

IDBI Bank

Feb 1999

144.4

1

21

72.0

18

42.0

Times Bank

Jul 1999

35.0

10

Centurion Bank

Sep 1999

33.8

10

Global Trust Bank

1999-2000

125.8

85

HDFC Bank

1999-2000

ICICI Bank

Mar 2000

763.4

HDFC Bank

Jul 2001

780.7

UTI Bank

Sep 2001

157.6

IDBI Bank

4

1

Offer for sale by promoters

2

ADR issue

3

Private placement of shares

Sep 2003

186.2

94

2

240

2

217

3

34

154.2

22

4

Rights issue Source: CRIS INFAC

Public sector banks: Government ownership (per cent)

Table 13 2001-02

2002-03

Allahabad Bank

1998-99 1999-2000 2000-01 100

100

100

100

71

Andhra Bank

63

100

100

67

67

Bank of Baroda

66

66

66

66

66

Bank of India

77

77

77

69

69

Bank of Maharashtra

100

100

100

100

100

Canara Bank

100

100

100

100

73

Central Bank of India

100

100

100

100

100

Corporation Bank

68

68

68

57

57

Dena Bank

71

71

71

71

71

Indian Bank

100

100

100

100

100

Indian Overseas Bank

100

100

75

75

75

67

67

67

67

67

Oriental Bank of Commerce Punjab and Sind Bank

100

100

100

100

100

Punjab National Bank

100

100

100

100

100

Syndicate Bank

100

74

74

74

74

Union Bank of India

100

100

100

100

61

United Bank of India

100

100

100

100

100

UCO Bank

100

100

100

100

100

Vijaya Bank

100

100

72

70

70

Note In 2000-01 and 2001-02, government ownership was lowered in Andhra Bank, Indian Overseas Bank, Vijaya Bank and and Punjab National Bank. Source: IBA' Performance Highlights of Public Sector Banks in India

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

145

Public sector banks: Net worth Rs lakh

Table 14

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

Capital

3,925

4,499

10,259

14,689

14,132

13,870

16,071

Reserves and surplus

3,888

5,127

8,721

11,358

14,267

19,389

24,698

Total

7,813

9,626

18,980

26,047

28,399

33,259

40,769

Rs lakh

1998-99 1999-2000

Capital

14,405

2000-01

2001-02

2002-03

2003-04

14,547

15,013

14,175

14676

14,234

Reserves and surplus

27,447

31,819

35,358

42,276

51,407

64,549

Total

41,852

46,052

49,905

57,289

65,583

79,225

Source: IBA' Performance Highlights of Public Sector Banks in India

Scheduled commercial banks: Net worth

Table 15

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

4,053

4,673

10,548

15,225

16,261

16,873

19,363

Capital Reserves and surplus

4,979

7,189

11,750

15,643

20,504

26,874

34,000

Total

9,032

11,862

22,298

30,868

36,765

43,747

53,363

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-041 22,322

Capital

18,166

18435.2

19,095

20,949

21,594

Reserves and surplus

36,791

43451.87

48,647

62,555

76,274

94,246

Total

54,957

61887.07

67,741

83,504

97,868

116,568

1

excluding RRBs Source: IBA' Performance Highlights of Public Sector Banks in India

NRI deposits (1991-2003) ($ million) FCNR(A)

1991 10,103

1992

Table 16 1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

9,792 10,617

9,300

7,051

4,255

2,306

1

-

-

-

-

-

-

FCNR(B)

-

-

-

1,108

3,063

5,720

7,496

8,467

8,323

8,172

9,076

9,673 10,199 10,961

NR(E)RA

3,618

3,025

2,740

3,523

4,556

3,916

4,983

5,637

6,220

6,758

7,147

8,449 14,923 20,559

-

-

621

1,754

2,486

3,542

5,604

6,262

6,758

6,754

6,849

7,052

NR(NR)RD FC(O)N FC(B&O)D Total Change

3,407

1,746

-

-

-

12

10

13

4

2

-

-

-

-

-

-

265

732

1,037

533

-

-

-

-

-

-

-

-

-

-

13,986 13,549 15,015 16,230 17,166 17,446 20,393 20,369 21,301 21,684 23,072 25,174 28,529 33,266 -

-437

1,466

1,215

936

280

2,947

-24

932

383

1,388

2,102

3,355

4,737

FC(B&O)D: Foreign currency (bank and other) deposits; FC(O)N: Foreign currency (ordinary) non-repatriable deposits; FCNR(A): Foreign currency non-resident (accounts); FCNR(B): Foreign currency non-resident (banks); NR(E)RA: Non-resident (external) rupee accounts; NR(NR)RD: Non-resident (non-repatriable) rupee deposits. Note Figures are as at the end of March. Source: RBI Annual Report

146

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Commercial banks: Branch network 1984

1991

Table 17

(nos)

1969

1996

1997

Rural

1,860

Semi-urban

3,344

Urban

1,456

5,769

7,615

9,116

9,379

Metro

1,661

4,929

6,119

7,403

7,573

Total

8,321

2002

2003

25,372 35,187 33,000 32,918

32,857 32,791 32,649 32,631 32,434

32,386

9,262 11,269 13,586 13,783

13,985 14,205 14,431 14,509 14,742

45,332 60,190 63,105 63,653

1998

1999

2000

2001

9,692

9,931 10,130 10,219 10,493

7,816

8,069

8,346

8,441

14,830 10,650

8,590

8,648

64,350 64,996 65,556 65,800 66,259

66,514

Note Figures are for June. Source: RBI's Report on Trend and Progress of Banking in India 2002-03

Banks: Distribution of net NPAs as a percentage of net advances (nos)

Table 18

1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03

Public sector banks

27

27

27

27

27

27

27

27

Up to 10 per cent

19

17

17

18

22

22

24

25

6

9

9

8

5

5

3

2

Over 10 and up to 20 per cent Over 20 per cent

2

1

1

1

0

0

0

0

Old private sector banks

25

25

25

25

24

23

22

21

Up to 10 per cent

22

22

21

17

18

16

17

19

Over 10 and up to 20 per cent

3

3

4

5

5

4

3

1

Over 20 per cent

0

0

0

3

1

3

2

1

New private sector banks

9

9

9

9

8

8

8

9

Up to 10 per cent

9

9

9

9

8

8

8

8

Over 10 and up to 20 per cent

0

0

0

0

0

0

0

1

Over 20 per cent

0

0

0

0

0

0

0

0

Foreign banks in India

31

39

42

41

42

42

40

36

Up to 10 per cent

30

36

34

27

31

31

26

28

Over 10 and up to 20 per cent

1

1

6

11

7

6

5

4

Over 20 per cent

0

2

2

3

4

5

9

4

92

100

103

102

101

100

97

93

Total

Source: RBI's Report on Trend and Progress of Banking in India 2002-03

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

147

148

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Gross advances

0.5

0.9

4.0

- State Bank Group

- Old private sector banks

- New private sector banks

- Foreign banks in India

5.7

7.8

14.0

3.8

2.2

2.8

4.2

-7.3

11.4

11.7

-6.4

5.0

2.7

5.8

2.9

2.1

-3.9

-11.0

0.3

-3.5

-2.2

Source: RBI's Report on Trend and Progress of Banking in India 2002-03

0.6

5.3

- Nationalised banks

2.4

2.2

Total assets Net advances

4.1

0.4

0.4

2.2

0.3

1.1

1.1

2.4

3.4

5.3

1.2

1.3

1.3

1.8

-3.4

5.4

5.8

-1.9

3.4

1.4

3.0

3.3

2.4

-2.4

-5.6

0.1

-1.8

-1.3

-0.2

0.3

0.8

1.6

4.8

3.6

2.7

-0.7

3.7

9.2

3.2

2.7

2.9

2.9

2.4

6.2

5.6

-3.5

0.9

0.0

2.6

-0.1

3.1

-3.8

-4.8

-4.1

-4.4

-2.9

Total assets

Table 19

-0.2

0.1

0.8

0.7

2.3

1.6

1.3

-0.3

1.5

3.3

1.0

1.5

1.3

1.3

1.2

2.9

2.8

-1.1

0.6

0.0

1.3

-0.1

2.7

-2.3

-2.6

-2.1

-2.3

-1.7

1999-2000 2000-01 2001-02 2002-03

Incremental ratio of net NPAs to

1999-2000 2000-01 2001-02 2002-03 1999-2000 2000-01 2001-02 2002-03

Incremental ratio of gross NPAs to

1999-2000 2000-01 2001-02 2002-03

- Public sector banks

commercial banks

Scheduled

(per cent)

Banks: Segment-wise incremental ratio of gross and net NPAs

Banks: Segment-wise incremental gross and net NPAs (Rs crore)

Table 20

Incremental gross NPAs

Incremental net NPAs

1998-99 1999-2000 2000-01 2001-02 2002-03

1998-99 1999-2000 2000-01 2001-02 2002-03

Scheduled commercial banks

7,908

1,686

3,475

7,120

-2,147

4,260

2,053

2,394

3,093

-2,790

- Public sector banks

6,058

1,322

1,740

1,801

-2,387

2,979

1,976

1,781

-19

-2,995

- Nationalised banks

2,939

190

920

2,681

119

1,297

1,641

1,089

468

-1,822

- State Bank Group

3,119

1,132

819

-880

-2,506

1,683

335

693

-487

-1,173

990

31

605

505

-283

760

61

377

243

-272

- Old private sector banks - New private sector banks

479

75

674

5,195

421

320

27

291

2,734

479

- Foreign banks in India

381

257

457

-380

103

200

-11

-55

135

-2

Source: RBI's Report on Trend and Progress of Banking in India 2002-03

Scheduled commerical banks: Gross and net NPAs (Rs crore)

Gross advances

Gross NPAs

1996-97

301,698

1997-98 1998-99

Table 21

1

Gross NPAs as a percentage of gross advances

Net advances

Net NPAs

1

Net NPAs as a percentage of net advances

47,300

5,639

15.7

276,421

22,340

4,043

8.1

352,696

50,815

3,515

14.4

399,436

58,722

7,907

14.7

325,522

23,761

1,421

7.3

367,012

28,020

4,259

1999-2000

475,113

60,408

1,686

7.6

12.7

444,292

30,073

2,053

6.8

2000-01

558,766

63,741

2001-02

680,958

70,861

3,333

11.4

526,328

32,461

2,388

6.2

7,120

10.4

645,859

35,554

3,093

5.5

2002-03

778,043

68,714

-2,147

8.8

740,473

32,764

-2,790

4.4

Change

Change

1

Change in NPAs over the previous year Source: RBI's Report on Trend and Progress of Banking in India 2002-03

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

149

Public sector banks: Net NPAs as a percentage of net advances (per cent) Allahabad Bank

Table 22

1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03

2003-04

16.0

14.8

15.1

12.5

12.2

11.2

11.1

7.1

Andhra Bank

3.3

4.1

2.9

4.3

3.5

3.0

2.5

1.8

2.4 0.9

Bank of Baroda

8.2

7.5

6.6

7.7

7.0

6.8

5.0

3.7

3.0

Bank of India

7.0

6.9

7.3

7.3

8.6

6.7

6.0

5.6

4.5

Bank of Maharashtra

9.4

9.7

8.7

8.7

7.0

7.4

5.8

4.8

2.5

Canara Bank

7.5

9.3

7.5

7.1

5.3

4.8

3.9

3.6

2.9

13.5

14.4

12.2

9.8

9.8

9.7

8.0

6.7

5.6

2.3

3.6

2.9

2.0

1.9

2.0

2.3

1.7

1.8

Central Bank of India Corporation Bank Dena Bank

7.3

9.4

8.3

7.7

13.8

18.3

16.3

11.8

9.4

Indian Bank

23.9

25.2

26.0

21.7

16.2

10.1

8.3

6.2

2.7

8.6

7.6

6.3

7.3

7.7

7.0

6.3

5.2

2.9 0.0

Indian Overseas Bank Oriental Bank of Commerce

3.6

5.6

4.5

4.5

3.6

3.6

3.2

1.4

Punjab and Sind Bank

10.3

12.0

10.8

10.5

9.4

12.3

11.7

10.9

9.6

Punjab National Bank

12.7

10.4

9.6

9.0

8.5

6.7

5.3

3.9

1.0

State Bank of India

6.6

7.3

6.1

7.2

6.4

6.0

5.6

4.5

3.5

State Bank of Bikaner and Jaipur

6.1

8.0

7.1

10.5

10.1

7.8

5.0

4.1

1.2

State Bank of Hyderabad

9.9

11.4

10.9

8.8

7.3

7.8

5.0

3.3

0.7

State Bank of Indore

9.6

11.3

11.0

10.1

7.6

5.9

3.6

2.7

0.0

State Bank of Mysore

8.6

11.0

10.8

10.6

8.1

7.7

7.4

5.2

3.0

State Bank of Patiala

6.6

5.9

7.0

8.2

6.1

4.9

2.9

1.5

0.0

State Bank of Saurashtra

5.7

6.1

6.6

7.7

7.9

6.9

5.0

3.5

0.0

State Bank of Travancore

7.4

8.8

12.2

10.8

8.8

7.8

5.7

3.1

1.4

Syndicate Bank UCO Bank

8.4

7.5

5.8

3.9

3.2

4.1

4.6

4.3

2.6

11.4

13.7

11.1

10.8

8.8

6.4

5.5

4.4

3.7

Union Bank of India

5.9

7.0

7.7

8.7

8.0

6.9

6.3

4.9

2.9

United Bank of India

23.3

19.2

14.1

14.7

12.9

10.5

7.9

5.5

3.8

Vijaya Bank

11.9

9.6

7.6

6.7

6.6

6.2

6.0

2.6

0.9

Source: IBA' Performance Highlights of Public Sector Banks in India

Public sector banks: Classification of loan assets (percentage of advances)

1997

1998

Table 23 1999

2000

2001

2002

2003

2003

Standard assets

82.2

84.0

84.1

86.0

87.6

88.9

90.6

92.2

Total NPAs

17.9

16.1

15.9

14.0

12.4

11.1

9.4

7.8

5.1

5.1

4.9

4.3

3.3

3.1

2.6

2.6

- Sub-standard assets - Doubtful assets - Loss assets Total advances (Rs crore)

10.7

9.1

9.0

8.0

7.6

6.6

5.6

4.3

2.1

1.9

2.0

1.7

1.5

1.4

1.2

0.9

244,214 284,971 325,328 380,077 442,134 509,369 577,813 661,975

Note The figures are as at end March. Source: RBI's Report on Trend and Progress of Banking in India 2002-03

150

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

New private sector banks: Key financial parameters (2003-04) Unit 1

ICICI Bank

Table 24

HDFC UTI Bank IndusInd Centurion IDBI Bank Bank of Bank Bank Bank Punjab

Kotak Mahindra

nos

446

231

140

53

60

97

107

4

nos

10617

4791

2338

941

945

1453

1158

545

Rs crore

11959

3029

2127

1331

397

947

472

384

Operating profit

Rs crore

2372

1008

686

445

12

285

103

127

Net profit

Rs crore

1637

510

278

262

-105

132

37

79

Total assets

Rs crore

125229

42307

24150

15086

3549

13002

4839

5817

Branches

Number of employees Total income

1

Advances

Rs crore

62096

17745

9363

7812

1556

7399

2353

2097

Investments

Rs crore

42743

19257

7793

3972

1004

3914

1572

2883

Deposits

Rs crore

68109

30409

20954

11200

3029

10048

4137

4459

Paid-up equity capital

Rs crore

966

285

232

290

57

214

105

60

Net worth

Rs crore

8011

2693

1138

800

62

618

244

606

Income/ average assets

per cent

10.3

8.3

2.9

10.7

11.4

9.0

10.6

9.63

Interest earned / average assets

per cent

7.7

7.0

7.3

7.9

9.6

7.0

7.7

7.2

Other income / average assets

per cent

2.6

1.3

2.5

2.8

1.8

2.0

2.9

2.4

Expenditure / average assets

per cent

8.3

5.6

6.6

7.1

11.1

6.3

8.1

6.5

Interest expended / average assets

per cent

6.0

3.3

4.7

5.4

5.9

3.9

4.6

3.0

Operating expenses / average assets per cent

2.2

2.2

1.9

1.7

5.2

2.5

3.5

3.5

Provisions and contingencies / average assets

per cent

0.6

1.4

1.9

1.5

3.4

1.5

1.4

1.2

Operating profit / average assets

per cent

1.9

2.4

2.8

4.8

0.1

3.2

1.9

4.4

Return on assets

per cent

1.4

1.4

1.3

2.1

-3.0

1.3

0.8

2.0

Net interest margin

per cent

1.6

3.7

2.6

2.5

3.7

3.2

3.1

4.3

CRAR- Total

per cent

6.1

8.0

6.4

8.9

3.1

5.8

7.7

14.6

CRAR- Tier-I

per cent

4.3

3.6

4.8

3.8

4.4

4.5

4.9

0.6

Rs crore

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Capital adequacy

Asset quality Net NPA Net NPAs / net advances

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Business per employee

Rs lakhs

955.52

712.40

1032.70

1482.01

438.99

712.83

465.18

274.75

Profit per employee

Rs lakhs

13.00

14.51

17.54

34.46

2.30

11.02

9.41

24.62

Deposits per branch

Rs crore

108.0

96.9

121.2

162.2

47.2

62.2

33.5

64.2

130

95

49

36

1

29

Productivity 1

Valuation Book value

Rs

Stock price

Rs

Market capitalisation

Rs crore

23

102

217

304

93

30

12

37

24

284

13395

8659

2158

658

654

795

248

1694

Price / book value

times

1.67

3.22

1.90

0.82

10.62

1.29

1.02

2.79

Deposits / market capitalisation

times

5.08

3.51

9.71

17.02

4.63

12.64

16.66

2.63

EPS

Rs

26.56

17.89

12.02

11.90

-1.85

6.18

3.53

13.23

Current PE

times

8.18

17.00

7.75

2.51

-6.22

6.00

6.71

21.51

n.a.: Not available

1

For the year 2002-03

Source: IBA's Performance Highlights of Private Sector Banks

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

151

Old private sector banks: Key financial parameters (2003-04) Unit

1

Table 25

Jammu & ING Vysya Federal Karnataka United South Indian Kashmir Bank Bank Bank Bank Western Bank Bank

nos

454

371

420

360

231

391

nos

7,112

4,969

6,217

4,320

3,275

3,550

Rs crore

1,823

1,287

1,490

1,119

596

915

Operating profit

Rs crore

628

262

437

330

133

242

Net profit

Rs crore

406

59

136

133

31

84

Total assets

Rs crore

21206

13198

15114

10577

7139

9254

Advances

Rs crore

9285

7047

7701

4668

3744

4197

Investments

Rs crore

8451

4085

5507

4879

2413

3962

Deposits

Rs crore

18661

10478

13477

9407

6430

8280

Paid-up equity capital

Rs crore

48

23

22

40

30

36

Net worth

Rs crore

1,594

747

649

698

304

395

Income / average assets

per cent

9.6

10.4

10.9

11.3

9.1

10.8

Interest earned / average assets

per cent

8.0

7.5

8.7

8.6

7.1

8.1

Other income / average assets

per cent

1.6

2.9

2.2

2.7

2.0

2.8

Expenditure / average assets

per cent

6.3

8.3

7.7

8.0

7.1

8.0

Interest expended / average assets

per cent

4.7

5.5

5.6

6.4

5.2

5.7

Operating expenses / average assets per cent

1.5

2.8

2.1

1.6

1.9

2.3

Provisions and contingencies / average assets

per cent

1.2

1.6

2.2

2.0

1.6

1.9

Operating profit / average assets

per cent

3.3

2.1

3.2

3.3

2.0

2.9

Return on assets

per cent

2.1

0.5

1.0

1.3

0.5

1.0

Net interest margin

per cent

3.3

2.0

3.1

2.2

1.9

2.4

CRAR- Total

per cent

13.0

6.1

6.3

10.5

5.3

5.8

CRAR- Tier-I

per cent

3.9

4.9

5.2

2.6

4.8

5.5

Net NPA

Rs crore

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPAs / net advances

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Business per employee

Rs lakhs

287.00

242.42

270.00

275.32

242.00

265.00

Profit per employee

Rs lakhs

5.00

1.69

1.69

2.55

0.83

2.04

Deposits per branch

Rs crore

32.3

24.8

26.1

23.0

23.3

17.5

Book value

Rs

329

277

293

173

94

110

Stock price

Rs

296

363

201

92

29

61

Market capitalisation

Rs crore

1,436

na

446

371

86

219

Price / book value

times

0.9

1.3

0.7

0.5

0.3

0.6

Deposits / market capitalisation

times

13

na

30

25

75

38

EPS

Rs

83.8

25.4

61.5

32.9

10.4

23.6

Current PE

times

3.5

14.3

3.3

2.8

2.8

2.6

Branches

Number of employees Total income

1

Capital adequacy

Asset quality

Productivity1

Valuation

Continued...

152

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

Unit

Branches

1

Number of employees Total income

1

Operating profit

Karur Vysya Bank of Development Tamilnad Catholic Bank Rajasthan Credit Bank Mercantile Bank Syrian Bank

nos

214

336

59

nos

n.a.

n.a.

2,833

4,207

1,327

n.a.

n.a.

Rs crore

722

680

441

606

476

Rs crore

215

185

54

170

123

Net profit

Rs crore

161

69

17

81

56

Total assets

Rs crore

7107

8455

5393

5089

4307

Advances

Rs crore

4023

2432

2440

2114

1898

Investments

Rs crore

2173

4353

2084

2354

1819

Deposits

Rs crore

5911

7406

4474

4404

3880

Paid-up equity capital

Rs crore

18

108

39

28

11

Net worth

Rs crore

712

329

290

224

194

Income / average assets

per cent

10.9

9.3

9.0

12.3

11.7

Interest earned / average assets

per cent

9.7

6.9

7.2

11.0

8.7

Other income / average assets

per cent

1.1

2.4

1.8

1.4

2.9

Expenditure / average assets

per cent

7.6

6.8

7.9

8.9

8.6

Interest expended / average assets

per cent

5.3

4.3

5.2

6.6

5.8

Operating expenses / average assets per cent

2.4

2.5

2.7

2.3

2.9

Provisions and contingencies / average assets

per cent

0.8

1.6

0.7

1.8

1.6

Operating profit / average assets

per cent

3.2

2.5

1.1

3.5

3.0

Return on assets

per cent

2.4

0.9

0.4

1.6

1.4

Net interest margin

per cent

4.5

2.6

2.0

4.4

3.0

CRAR- Total

per cent

15.1

8.4

8.9

17.4

7.0

CRAR- Tier-I

per cent

2.0

2.8

5.4

3.7

4.3

Rs crore

n.a.

n.a.

n.a.

n.a.

n.a.

Capital adequacy

Asset quality Net NPA Net NPAs / net advances

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

Business per employee

Rs lakhs

288.00

164.64

463.00

270.83

164.94

Profit per employee

Rs lakhs

4.41

1.63

2.60

2.88

1.57

Deposits per branch

Rs crore

23.9

15.8

62.0

2.5

1.2

29

n.a.

n.a.

n.a. n.a.

Productivity1

Valuation Book value

Rs

1,187

Stock price

Rs

283

30

n.a.

n.a.

Market capitalisation

Rs crore

170

321

n.a.

n.a.

n.a.

Price / book value

times

0.2

1.0

n.a.

n.a.

n.a. n.a.

Deposits / market capitalisation

times

EPS

Rs

Current PE

times

35

23

n.a.

n.a.

268.4

6.4

n.a.

n.a.

n.a.

1.1

4.7

n.a.

n.a.

n.a. continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

153

...continued

Unit

Branches

1

Number of employees Total income

1

Operating profit

Lakshmi Bharat City Union Sangli Bank Dhanalakshmi Vilas Bank Overseas Bank Bank Bank

nos

216

80

123

184

159

nos

1,983

1,029

1,408

2,026

1,305

Rs crore

373

230

343

165

249

Rs crore

91

57

118

28

67

Net profit

Rs crore

41

35

57

12

17

Total assets

Rs crore

3821

8455

3191

1992

2445

Advances

Rs crore

2039

1392

1547

648

1139

Investments

Rs crore

1338

936

1279

1080

895

Deposits

Rs crore

3296

2472

2847

1859

2156

Paid-up equity capital

Rs crore

12

16

24

22

32

Net worth

Rs crore

227

127

203

86

134

Income / average assets

per cent

10.6

4.2

11.8

8.7

11.0

Interest earned / average assets

per cent

8.1

3.6

9.5

7.1

8.4

Other income / average assets

per cent

2.5

0.6

2.3

1.6

2.6

Expenditure / average assets

per cent

8.0

3.2

7.7

7.2

8.0

Interest expended / average assets

per cent

5.8

2.1

6.2

4.3

5.3

Operating expenses / average assets per cent

2.3

1.1

1.5

2.9

2.7

Provisions and contingencies / average assets

per cent

1.4

0.4

2.1

0.8

2.2

Operating profit / average assets

per cent

2.6

1.0

4.0

1.5

2.9

Return on assets

per cent

1.2

0.6

2.0

0.6

0.8

Net interest margin

per cent

2.4

1.6

3.3

2.8

3.0

CRAR- Total

per cent

8.5

9.8

10.7

11.0

8.6

CRAR- Tier-I

per cent

5.3

6.5

2.6

2.7

4.9

Rs crore

n.a.

n.a.

n.a.

n.a.

n.a.

Capital adequacy

Asset quality Net NPA Net NPAs / net advances

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

Business per employee

Rs lakhs

228.00

317.00

230.05

91.31

222.06

Profit per employee

Rs lakhs

1.72

2.77

2.37

0.59

1.15

Deposits per branch

Rs crore

12.8

26.9

18.8

9.1

11.6

Book value

Rs

n.a.

n.a.

85

n.a.

n.a.

Stock price

Rs

n.a.

n.a.

58

n.a.

n.a.

Market capitalisation

Rs crore

n.a.

n.a.

138

n.a.

n.a.

Price / book value

times

n.a.

n.a.

0.7

n.a.

n.a.

Deposits / market capitalisation

times

n.a.

n.a.

21

n.a.

n.a.

EPS

Rs

n.a.

n.a.

23.8

n.a.

n.a.

Current PE

times

n.a.

n.a.

2.4

n.a.

n.a.

Productivity1

Valuation

continued...

154

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

Unit

1

Lord Krishna Bank

Nainital Bank

Ratnakar Bank

SBI Ganesh Bank Commercial of Kurundwad

nos

n.a.

59

71

2

29

nos

n.a.

646

531

111

240

Rs crore

235

83

77

60

23

Operating profit

Rs crore

48

21

14

26

2

Net profit

Rs crore

26

12

8

18

1

Total assets

Rs crore

2605

854

815

489

222

Advances

Rs crore

1118

236

346

121

97

Investments

Rs crore

1047

410

258

143

78

Deposits

Rs crore

2311

759

715

373

208

Paid-up equity capital

Rs crore

57

15

18

100

2

Net worth

Rs crore

137

67

54

100

11

Income / average assets

per cent

10.5

10.2

9.9

11.1

10.8

Interest earned / average assets

per cent

7.5

8.6

8.4

7.3

8.7

Other income / average assets

per cent

3.1

1.6

1.5

3.8

2.1

Expenditure / average assets

per cent

8.3

7.7

8.1

6.3

9.9

Interest expended / average assets

Branches

Number of employees Total income

1

per cent

5.9

4.6

5.5

4.8

7.5

Operating expenses / average assets per cent

2.4

3.1

2.6

1.5

2.4

Provisions and contingencies / average assets

per cent

1.0

1.0

0.7

1.5

0.3

Operating profit / average assets

per cent

2.2

2.5

1.8

4.8

0.9

Return on assets

per cent

1.2

1.5

1.1

3.3

0.6

Net interest margin

per cent

1.5

4.1

2.9

2.5

1.2

CRAR- Total

per cent

10.1

14.3

13.5

28.8

7.9

CRAR- Tier-I

per cent

6.5

4.3

3.1

1.7

4.1

Net NPA

Rs crore

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPAs / net advances

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth

per cent

n.a.

n.a.

n.a.

n.a.

n.a.

Business per employee

Rs lakhs

264.17

115.38

179.73

621.78

126.52

Profit per employee

Rs lakhs

2.36

1.17

1.81

-7.71

1.39

Deposits per branch

Rs crore

1.8

11.3

9.0

247.2

-

Book value

Rs

n.a.

n.a.

n.a.

n.a.

n.a.

Stock price

Rs

n.a.

n.a.

n.a.

n.a.

n.a.

Market capitalisation

Rs crore

n.a.

n.a.

n.a.

n.a.

n.a.

Price / book value

times

n.a.

n.a.

n.a.

n.a.

n.a.

Deposits / market capitalisation

times

n.a.

n.a.

n.a.

n.a.

n.a.

EPS

Rs

n.a.

n.a.

n.a.

n.a.

n.a.

Current PE

times

n.a.

n.a.

n.a.

n.a.

n.a.

Capital adequacy

Asset quality

Productivity1

Valuation

n.a.: Not available 1

For the year 2002-03 Source: Performance Highlights of Private Sector Bank

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

155

Select public sector banks: Key financial parameters (2003-04) Unit Branches

1

Number of employees Total income

1

Andhra Bank

Bank of Baroda

Table 26 Canara Bank

Corporation Bank

nos

1,100

2,753

2,424

684

nos

12,991

40,313

47,566

10,729

Rs crore

2,799

7,359

9,080

2,718

Operating profit

Rs crore

930

2,485

2,859

907

Net profit

Rs crore

464

967

1,338

504

Total assets

Rs crore

27,009

85,109

99,539

29,154

Advances

Rs crore

12,885

35,601

47,639

13,890

Investments

Rs crore

10,317

38,019

35,793

10,685

Deposits

Rs crore

22,941

72,967

86,345

23,191

Paid-up equity capital

Rs crore

400

295

410

143

Net worth

Rs crore

1,453

5,131

5,252

2,769

Income / average assets

per cent

11.2

9.7

10.0

9.8

Interest earned / average assets

per cent

8.6

7.6

7.7

7.9

Other income / average assets

per cent

2.6

2.1

2.3

1.9

Expenditure / average assets

per cent

7.6

6.7

6.9

6.5

Interest expended / average assets

per cent

5.1

4.4

4.8

4.5

Operating expenses / average assets

per cent

2.5

2.2

2.1

2.1

Provisions and contingencies / average assets

per cent

1.8

1.9

1.7

1.5

Operating profit / average assets

per cent

3.6

3.1

3.1

3.3

Return on assets

per cent

1.8

1.2

1.5

1.8

Net interest margin

per cent

3.5

3.2

3.0

3.5

CRAR- Total

per cent

8.2

8.5

7.8

16.5

CRAR- Tier-I

per cent

5.5

5.4

7.8

3.6

Rs crore

n.a.

n.a.

n.a.

n.a.

Capital adequacy

Asset quality Net NPA Net NPAs / net advances

per cent

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth

per cent

n.a.

n.a.

n.a.

n.a.

Business per employee

Rs lakhs

250.75

252.50

236.65

314.60

Profit per employee

Rs lakhs

5.81

4.26

4.20

6.29

Deposits per branch

Rs crore

19.1

24.1

29.7

31.8

36

175

125

193

Productivity1

Valuation Book value

Rs

Stock price

Rs

Market capitalisation

Rs crore

Price / book value

times

Deposits / market capitalisation

times

EPS

Rs

Current PE

times

42

169

122

214

1,693

4,960

4,988

3,076

1.2

1.0

1.0

1.1

14

15

17

8

11.6

33.0

32.6

35.1

3.7

5.1

3.7

6.1 Continued...

156

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

Unit Branches

1 1

OBC

Punjab National Bank

Union Bank of India

State Bank of India

nos

989

4,037

2,020

9081

nos

13,507

58,981

25,706

208,998

Rs crore

4,022

9,647

5,348

38,073

Operating profit

Rs crore

1,533

3,121

1,483

7,775

Net profit

Rs crore

686

1,109

712

3,105

Total assets

Rs crore

41,007

102,332

58,317

407,815

Advances

Rs crore

19,681

47,225

29,426

157,934

Investments

Rs crore

16,794

42,125

22,442

185,676

Deposits

Rs crore

35,674

87,916

50,559

318,619

Paid-up equity capital

Rs crore

193

265

460

526

Net worth

Rs crore

2,677

4,955

3,087

20,231

Income / average assets

per cent

10.7

10.2

9.8

9.7

Interest earned / average assets

per cent

8.8

8.3

8.3

7.8

Other income / average assets

per cent

1.9

2.0

1.5

1.9

Expenditure / average assets

per cent

6.6

6.9

7.1

7.3

Interest expended / average assets

per cent

4.9

4.4

5.1

4.9

Operating expenses / average assets

per cent

1.7

2.5

2.0

2.4

Provisions and contingencies / average assets

per cent

2.3

2.1

1.4

1.5

Operating profit / average assets

per cent

4.1

3.3

2.7

2.0

Return on assets

per cent

1.8

1.2

1.3

0.8

Net interest margin

per cent

3.9

3.8

3.2

2.9

CRAR- Total

per cent

9.9

7.0

6.5

8.3

CRAR- Tier-I

per cent

4.6

6.1

5.9

5.2

Net NPA

Rs crore

n.a.

n.a.

n.a.

n.a.

Net NPAs / net advances

per cent

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth

per cent

n.a.

n.a.

n.a.

n.a.

Business per employee

Rs lakhs

336.76

196.74

273.33

207.60

Profit per employee

Rs lakhs

24.46

3.90

5.07

3.72

Deposits per branch

Rs crore

30.1

18.8

22.2

32.6

Book value

Rs

139

175

57

384

Stock price

Rs

208

204

44

468

Market capitalisation

Rs crore

4,002

5,411

2,023

24,608

Price / book value

times

1.5

1.2

0.8

1.2

Deposits / market capitalisation

times

9

16

25

13

EPS

Rs

35.6

41.8

15.5

59.0

Current PE

times

5.8

4.9

2.8

7.9

Number of employees Total income

Capital adequacy

Asset quality

Productivity1

Valuation

n.a.: Not available 1

For the year 2002-03

Source: Performance Highlights of Public Sector Bank

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

157

Scheduled commercial banks: Segment-wise financial performance (2003-04) (Rs crore)

Total (excl Public sector Nationalised State Bank RRBs) banks banks Group

Banks (nos) Branches

1

Number of employees Income

Table 27

1

Other Scheduled C i l 30

Foreign banks in I di 33

90

27

19

8

51,685

46,752

33,130

13,622

4,749

184

835,716

752,860

471,471

281,389

71,071

11,785

183,767

137,603

85,712

51,891

33,154

13,010

144,028

109,496

68,540

40,956

25542

8990

Other income

39,739

28,107

17,172

10,935

7,612

4020

Expenditure

Interest income

161,494

121,056

74,783

46,273

29,670

10,768

Interest expended

87,567

65,766

40,370

25,396

17,529

4272

Provisions and contingencies

30,400

22,929

14,184

8,745

4,727

2744

Operating expenses

43,527

32,361

20,229

12,132

7,414

3752

-Wage bill

26,195

22,421

14,068

8,353

2,574

1200

Net profit

22,273

16,547

10,929

5,618

3,484

2,242

Operating profit

52,673

39,476

25,113

14,363

8,211

4,986

Spread

56,461

43,730

28,170

15,560

8,013

4,718

1,975,023

Total assets

1,471,429

922,171

549,258

367,278

136,316

Spread (percentage of total assets) Operating expenses (percentage of total assets) Wage bill (percentage of total assets)

2.9

3.0

3.1

2.8

2.2

3.5

2.2

2.2

2.2

2.2

2.0

2.8

1.3

1.5

1.5

1.5

0.7

0.9

Profit (percentage of total assets)

1.1

1.1

1.2

1.0

0.9

1.6

Gross NPA

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPA

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Gross NPAs / gross advances (per cent)

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Gross NPAs / total assets (per cent)

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPAs / net advances (per cent)

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPAs / total assets (per cent)

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPA / net worth (per cent) Asset per employee (Rs lakhs)

1

Business per employee (Rs lakhs) Income per employee (Rs lakhs) Profit per employee (Rs lakhs)

1

1

Wages per employee (Rs lakhs) Employee per branch (Nos)

1

1

1

Wage costs per branch (Rs lakhs)

1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

236.3

195.4

195.6

195.2

516.8

1156.7

291.9

247.0

255.8

232.2

618.3

1,190.2

22.0

18.3

18.2

18.4

46.6

110.4

2.7

2.2

2.3

2.0

4.9

19.0

0.0

3.0

3.0

3.0

3.6

10.2

16.2

16.1

14.2

20.7

15.0

64.0

0.0

48.0

42.5

61.3

54.2

652.2

NPA: Non-performing asset; n.a.: Not available 1

For the year 2002-03 Source: RBI's Trend and Progress of Banking in India and Statistical Tables Relating to Banks in India

158

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Scheduled commercial banks: Segment-wise financial ratios (2003-04) (Rs crore)

Banks (nos) Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions

Total

Public Nationalised sector banks banks

Table 28

State Bank Group

Other Scheduled Commercial Banks

Foreign banks in India

90

27

19

8

30

33

1,975,023

1,471,429

922,171

549,258

367,278

136,316

22,323

14,676

13,640

1,036

3,002

4,645

94,245

64,549

37,835

26,714

19,496

10,200

1,575,145

1,226,838

793,947

432,891

268,550

79,757

96,491

30,736

13,921

16,815

40,366

25,389

186,819

134,630

62,828

71,802

35,864

16,325

1,975,023

1,471,429

922,171

549,258

367,278

136,316

Cash and bank balances with RBI

113,244

84,242

58,080

26,162

21,725

7,277

Balances with banks and money at call and short notice

82,226

57,449

30,115

27,334

15,116

9,661

Investments

802,066

625,678

377,903

247,775

134,802

41,586

Advances

864,143

632,740

412,224

220,516

170,896

60,507

Assets

Fixed assets

21,403

11,527

8,178

3,349

7,926

1,950

Other assets

91,941

59,793

35,671

24,122

16,813

15,335

Key ratios Deposits/Total liabilities (per cent)

80

83

86

79

73

59

RONW (per cent)

19.1

20.9

21.2

20.2

15.5

15.1

ROA (per cent)

1.13

1.12

1.19

1.02

0.95

1.64

NPA: Non-performing asset; ROA: Return on assets; RONW: Return on net worth Source: RBI's Trend and Progress of Banking in India

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

159

Scheduled commercial banks: Segment-wise share (2003-04) (per cent) Scheduled commercial banks

Number Number of Employees of banks branches1

1

90

51,685

Table 29 Total Deposits Advances Investments assets

833,261 1,975,020 1,575,145

864,143

802,066

Share of total (per cent) Public sector banks

27

90.46

90.66

74.50

77.89

73.22

78.01

- Nationalised banks

19

64.10

56.71

46.69

50.40

47.70

47.12

- State Bank Group

8

26.36

33.95

27.81

27.48

25.52

30.89

Other Scheduled Commercial banks

30

9.19

7.90

18.60

17.05

19.78

16.81

Foreign banks in India

33

0.36

1.44

6.90

5.06

7.00

5.18

(per cent)

Net worth

Gross NPA

Total income

Wage bill

116,558

n.a.

n.a. 183,767

26,195

22,273

52,673

56,461

Public sector banks

67.96

n.a.

n.a.

74.88

85.59

74.29

74.95

77.45

- Nationalised banks

44.16

n.a.

n.a.

46.64

53.70

49.07

47.68

49.89

- State Bank Group

23.80

n.a.

n.a.

28.24

31.89

25.22

27.27

27.56

Other Scheduled Commercial banks

19.30

n.a.

n.a.

18.04

9.83

15.64

15.59

14.19

Foreign banks in India

12.74

n.a.

n.a.

7.08

4.58

10.07

9.47

8.36

Scheduled commercial banks

Net NPA

Net Operating profit profit

Spread

Share of total (per cent)

n.a.: Not available 1

Figures for the year 2002-03 Source: CRIS INFAC

160

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

4.0

Industry performance

SCBs: Profits

Figure 1

(Rs crore) 60,000 50,000 40,000 30,000 20,000 10,000 0 -10,000 199192

199293

199394

199495

199596

199697

Net profit

199798

199899

19992000

200001

Operating profit

200102

200203

200304

Spread

Source: CRIS INFAC

SCBs: NIM

Figure 2

(Rs crore) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 199192

199293

199394

199495

199596

199697

199798

199899

NIM (NII as a percentage of avg assets)

19992000

200001

200102

200203

200304

Operating profit to avg assets

Source: Statistical Tables Relating to Banks in India

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

161

SCBs: Segment-wise NIM

Figure 3

(per cent) 5

4

3

2

1 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99

Private banks

19992000

2000-01 2001-02 2002-03 2003-04

Foreign banks

Public sector banks

Source: CRIS INFAC

Advances, IIP and imports: Growth

Figure 4

(per cent) 30 25 20 15 10 5 0 -5

1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04 2000 Advances

IIP

Imports

Source: Report on Trend and Progress of Banking in India & Statistical Tables Relating to Banks in India

SCBs: Advances

Figure 5

2003-04 2002-03 2001-02 2000-01 1999-2000 1998-99 1997-98 1996-97 1995-96 1994-95 1993-94 1992-93 1991-92 0%

20%

40%

Bills purchases and discounted

60% Term loans

80%

100%

Cash credit, overdraft

Source: Report on Trend and Progress of Banking in India

162

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

IIP and credit: Growth

Figure 6

(per cent) 30 25 20 15 10 5 0 Apr-95

Apr-96

Apr-97

Apr-98

Apr-99

Apr-00

IIP

Apr-01

Apr-02

Apr-03

Apr-04

Credit

Source: CSO, RBI’s Weekly Statistical Supplement

Advances: Average yields

Figure 7

(per cent) 16

14

12

10

8

6 1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

Source: Statistical Tables Relating to Banks in India

Outstanding loans and advances: Break-up by interest rates Figure 8 (per cent) 30

25

20

15

10

5

0 <6

6-9

10-11

12-13

14-<15

15- <16

16 - <17

17 - <18

18 - 19

20>

Source: Statistical Tables relating to Banks in India CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

163

SCBs: Investments

Figure 9

(Rs crore) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 1991-92

1993-94

1995-96

1997-98

Total investments

1999-2000

2001-02

2003-04

Government securities in India

Source: Report on Trend and Progress of Banking in India

PSU banks: Number of banks achieving CRAR

Figure 10

(nos) 30 25 20 15 10 5 0 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99

19992000

2000-01 2001-02 2002-03 2003-04

Source: IBA’ Performance Highlights of Public, Private & Foreign Banks in India

Gross NPAs and net NPAs

Figure 11

(per cent) 19 17 15 13 11 9 7 5 3 1996-97

1997-98

1998-99

1999-2000

Gross NPAs to gross advances

2000-01

2001-02

2002-03

Net NPAs to net advances

Source: RBI

164

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Investment and advances: Average yield

Figure 12

(per cent) 18 16 14 12 10 8 6 1992-93

1994-95

1996-97

1998-99

2000-01

Average yield of investments

2002-03

Average yield on advances

Source: Statistical Tables Relating to Banks in India

SCBs: Other income to total income

Figure 13

(per cent) 22 20 18 16 14 12 10 1991-92

1993-94

1995-96

1997-98

1999-2000

2001-02

2003-04

Source: CRIS INFAC

M3 and deposits

Figure 14

(Rs crore) 2,500,000

2,000,000

1,500,000

1,000,000

500,000

0 1991-92

1993-94

1995-96

1997-98

Total deposits

1999-2000

2001-02

2003-04

M3

Source: CRIS INFAC CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

165

M3 and reserve money: Growth

Figure 15

(per cent) 30 25 20 15 10 5 0 1991-92

1993-94

1995-96

1997-98

M3 growth

1999-2000

2001-02

2003-04

Reserve money growth

Source: CRIS INFAC

Deposits: Demand, savings and time deposits (excl RRBs)

Figure 16

(per cent) 70 60 50 40 30 20 10 0 1991-92

1993-94

1995-96

Demand deposits

1997-98 Savings deposits

1999-2000

2001-02

2003-04

Term deposits

Source: Report on Trend and Progress of Banking in India

Incremental deposits: Break-up by deposit type (excl RRBs) Figure 17 (per cent) 100

80

60

40

20

0 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04 2000 Demand deposits

Savings deposits

Term deposits

Source: Report on Trend and Progress of Banking in India

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CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Deposits: Growth (excl RRBs)

Figure 18

(per cent) 25

20

15

10

5

0 1992-93

1994-95

1996-97

Demand deposits

1998-99

2000-01

Savings bank deposits

2002-03

Term deposits

Source: Report on Trend and Progress of Banking in India

NRI deposits: Growth

Figure 19

($ million) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 -500 -1,000 -1,500 199192

199293

199394

199495

199596

199697

199798

199899

19992000

200001

200102

200203

Source: RBI’s Handbook of Statistics on the Indian Economy

Deposits: Average costs

Figure 20

(per cent) 10 9 8 7 6 5 4 1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

Source: CRIS INFAC CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

167

Term deposits: Interest rates (March 2003)

Figure 21

(per cent) 40 35 30 25 20 15 10 5 0 <6

6-8

8-9

9-10

10-11

11-12

12-13

> 13

Source: Basic statistical returns (RBI)

Incremental credit-deposit ratio

Figure 22

(per cent) 100

80

60

40

20

0 1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

Source: RBI and CRIS INFAC Research

Incremental borrowing-deposit ratio

Figure 23

(per cent) 40 30 20 10 0 -10 -20 1997-98

1998-99

1999-2000

2000-01

2001-02

2002-03

2003-04

Source: RBI and CRIS INFAC Research

168

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

SCBs: Operating costs

Figure 24

(Rs crore) 50,000

40,000

30,000

20,000

10,000

0 1991-92

1993-94

1995-96

1997-98

1999-2000

Operating expenses

2001-02

2003-04

Salaries

Source: CRIS INFAC

SCBs: Segment-wise operating costs as a percentage of average assets

Figure 25

(per cent) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1992-93

1994-95

1996-97

Private banks

1998-99

2000-01

Foreign banks

2002-03

Public sector banks

Source: CRIS INFAC

Overheads as a percentage of operating income

Figure 26

(per cent) 32 30 28 26 24 22 20 1991-92

1993-94

1995-96

1997-98

Overheads as a percentage of operating income

1999-2000

2001-02

2003-04

Spreads as a percentage of operating income

Source: CRIS INFAC CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

169

Overheads as a percentage of average assets

Figure 27

(per cent) 4.4 4.0 3.6 3.2 2.8 2.4 2.0 1991-92

1993-94

1995-96

1997-98

1999-2000

Overheads as a percentage of avg assets

2001-02

2003-04

Spread as a percentage of avg assets

Source: CRIS INFAC

Operating costs: India vis-à-vis other countries

Figure 28

(per cent) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 India

USA

Germany

UK

France

Italy

Spain

Canada

Sweden

Japan

Source: Report on Trend and Progress of Banking in India

SCBs (excl RRBs): Number of branches

Figure 29

(nos) 53,000 52,000 51,000 50,000 49,000 48,000 47,000 46,000 45,000 199192

199293

199394

199495

199596

199697

199798

199899

19992000

200001

200102

200203

Source: CRIS INFAC

170

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

SCBs: Number of employees

Figure 30

(nos) 980,000 960,000 940,000 920,000 900,000 880,000 860,000 840,000 820,000 800,000 1991-92

1993-94

1995-96

1997-98

1999-2000

2001-02

Source: CRIS INFAC

Investments: Average yields

Figure 31

(per cent) 14.0

13.0

12.0

11.0

10.0

9.0 1992-93

1994-95

1996-97

Average yield of investments

1998-99

2000-01

Interest rate on Central govt securities

Source: Statistical Tables Relating to Banks in India and Handbook of Statistics Relating to Indian Economy

BSE volumes and capital issues

Figure 32

(Rs crore) 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 1991-92

1993-94

1995-96

Turnover BSE

1997-98

1999-2000

2001-02

2003-04

Capital issues-equity

Source: RBI, CMIE CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

171

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5.0

Player profiles

Financial comparison of key banks: 2003-04

Table 1 Public sector banks

(per cent)

Average assets (Rs crore) Branches (nos) Employees (nos) 1

Interest earned 1

Other income

1

Interest expended

Operating expenses

1 1

SBI

BoB

BOI

Canara Bank

PNB

OBC

Dena Bank

407,815

85,109

80,577

99,539

102,332

41,007

10,081

9,093

2,730

2,562

2,469

4,022

1,013

1,130

207,039

39,803

42,977

47,796

58,839

13,602

10,957

7.5

7.2

7.2

7.0

7.6

8.0

17.2

1.9

2.0

2.2

2.1

1.8

1.8

6.1

4.7

4.2

4.5

4.3

4.1

4.5

11.3

2.3

2.1

2.2

1.9

2.3

1.4

4.7

1.1

1.1

1.0

1.2

1.3

0.9

3.6

1

0.9

1.1

1.3

1.3

1.1

6.3

2.6

1

0.4

0.7

0.5

0.3

0.6

1.1

1.2

0.5

0.5

0.8

1.0

0.4

5.2

1.4

12,667

3,980

433

3,127

4,670

1,211

1,484

5,442

1,761

1,234

1,378

449

0

884

3.5

3.0

4.5

2.9

1.0

0.0

9.4

13.5

13.9

13.0

12.7

13.1

14.0

9.5

Net Profitability Margin

1.2

1.9

1.8

1.5

1.9

2.6

1.0

Spreads

2.6

3.5

3.2

2.9

3.8

3.7

2.7

Average cost of deposits

5.9

4.8

4.6

5.2

4.8

5.5

6.1

Provisions (excluding taxes) Profit before taxes

Provision for taxes Profit after taxes1

Gross NPA (Rs crore) Net NPA (Rs crore) Quality of assets Net NPAs to advances Capital adequacy Profitability

Average yield on investments

8.8

8.6

8.0

9.0

9.7

10.3

9.5

Average yield on advances

7.6

8.3

7.5

8.7

8.9

9.0

9.2

Growth Growth in advances

14.6

0.7

7.6

17.7

17.4

25.5

11.6

Growth in deposits

7.6

9.8

10.8

19.8

16.0

19.7

11.3

Growth in investments

7.7

26.0

11.2

17.5

23.8

13.6

14.5

23

15

17

19

15

13

10

44.8

31.2

31.5

40.3

25.4

40.5

8.9

2.0

2.1

1.9

2.1

1.7

3.0

0.9

Productivity Employee per branch (nos) Assets per branch (Rs crore) Assets per employee (Rs crore)

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

173

...continued

(per cent)

New private sector banks ICICI HDFC IndusInd Bank Bank

Average assets (Rs crore)

125,229 42,307

Branches (nos) Employees (nos) 1

Interest earned 1

Other income

1

Interest expended

Operating expenses

1

Foreign banks Citibank HongKong Standard Bank Chartered Bank

9,318

8,441

13,658

7,292

27,418

23,133

31,829

69

410

432

354

20

38

66

5,673

n.a.

3,534

6,363

n.a.

n.a.

n.a.

n.a.

6.0

10.6

8.1

8.7

6.9

8.3

6.1

7.9

2.4

1.1

3.7

2.8

2.2

2.4

3.2

3.0

2.2

5.6

2.9

7.2

5.7

5.6

4.3

3.4

3.1

3.4

2.1

1.9

2.3

2.3

2.1

2.5

3.7

2.7

2.4

413 13,609 7.1

312

0.4

0.7

1.9

0.9

1.7

1.2

1.0

0.9

1.7

1

1.3

3.9

5.5

1.0

1.0

0.9

2.1

1.7

1.8

1

0.2

0.5

0.1

0.9

0.5

0.4

1.5

0.8

0.8

Provisions (excluding taxes) Profit before taxes

1

Old private sector banks South Federal Bank of Indian Bank Rajasthan Bank

Provision for taxes

1.1

3.4

5.4

0.1

0.4

0.6

0.6

0.9

1.0

Gross NPA (Rs crore)

3,048

336

259

328

601

237

393

419

482

Net NPA (Rs crore)

2,037

28

212

190

223

73

214

68

84

2.2

0.2

2.7

4.6

2.9

3.0

1.4

0.7

0.5

10.4

11.7

12.8

11.3

11.5

11.2

11.1

14.5

10.9

0.43

3.12

1.45

0.32

1.60

3.81

4.15

2.42

4.66

1

Profit after taxes

Quality of assets Net NPAs to advances Capital adequacy Profitability Net Profitability Margin Spreads

1.40

4.24

2.70

2.21

3.00

3.45

5.06

3.08

5.42

Average cost of deposits

5.20

3.93

5.05

6.15

5.92

4.86

4.16

3.45

3.77

Average yield on investments

6.22

8.10

8.00

8.88

8.68

8.04

7.75

6.58

6.77

10.53

7.52

10.59

9.17

10.26

8.48

9.93

8.40

10.47

Average yield on advances Growth Growth in advances

16.5

51.0

46.1

16.2

23.9

9.5

20.8

17.4

23.8

Growth in deposits

41.4

35.9

30.3

20.7

23.1

39.8

15.3

27.1

10.8

Growth in investments

20.5

43.8

56.7

32.1

21.0

64.7

-4.9

26.7

-1.4

Productivity Employee per branch (nos) Assets per branch (Rs crore) Assets per employee (Rs crore) 1

33

18

n.a.

9

15

n.a.

n.a.

n.a.

n.a.

303.2

135.6

135.0

20.6

31.6

20.6

1370.9

608.8

482.3

9.2

7.5

n.a.

2.4

2.1

n.a.

n.a.

n.a.

n.a.

as per cent of average assets

n.a. - not available Source: CRIS INFAC

174

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

State Bank of India (Rs crore)

Table 2 1996-97

1997-98

526

526

1998-99 1999-2000

2000-01

2001-02 20002-03

2003-04

Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions Total

526

526

526

526

526

526

7,450

9,082

9,876

11,621

12,935

14,698

16,677

19,705

110,702

131,091

169,042

196,821

242,828

270,560

296,123

318,619

6,960

8,093

9,079

9,278

10,722

9,324

9,304

13,431

30,835 156,473

30,880 179,673

33,986 222,509

43,259 261,505

48,632 315,644

53,120 348,228

53,246 375,876

55,534 407,815

Assets Cash and balances with RBI

10,847

13,415

17,392

18,903

18,496

21,873

12,738

19,041

Balances with bank and money at call

16,906

19,231

35,820

28,233

42,213

43,058

32,443

24,525

Investments

46,828

54,982

71,287

91,879

122,876

145,142

172,348

185,676

Advances

62,233

74,237

82,360

98,102

113,590

120,806

137,758

157,934

Fixed assets

1,171

1,506

2,194

2,478

2,593

2,415

2,389

2,645

Other assets Total

18,488 156,473

16,301 179,673

13,456 222,509

21,910 261,505

15,875 315,644

14,934 348,228

18,201 375,877

17,994 407,815

Deposits Demand

25,647

27,814

30,692

36,182

40,328

42,313

44,772

50,291

Savings

24,028

29,208

34,321

41,507

47,893

56,396

65,783

79,596

61,026 110,701

74,070 131,091

104,029 169,042

119,132 196,821

154,607 242,828

171,851 270,560

185,568 296,123

188,732 318,619

123548.7

160,255

187,639

234,896

262,549

288,866 309798.2

110,701

7543 131,091

8,787 169,042

9,182 196,821

7,932 242,828

8,011 270,560

7,257 296,123

8820 318,619

RBI

0

0

0

670

0

0

0

0

Other banks

0

0

0

0

0

0

0

0

883

837

1,076

1,670

2,537

2,153

1,572

1,365

6,077 6,960

7,256 8,093

8,003 9,079

6,938 9,278

8,185 10,722

7,170 9,323

7,732 9,304

12,066 13,431

Term Total Deposits of branches in India Deposits of branches abroad Total Borrowings

Other institutions and agencies Forex borrowings Total Other liabilities and provisions Inter-office adjustments Bills payable Interest accrued

0

0

555

0

0

4,722

3,685

5,823

8,403

8,755

10,796

10,563

13,598

13,875

14,036

15,665

7,338

7,620

10,101

13,081

16,966

19,286

20,060

17,428

Others (including provisions) Total

15,093 30,834

14,505 30,880

12,533 33,986

19,615 43,259

18,068 48,632

15237 53,120

15,465 53,246

16,618 55,534

Balance with RBI

10,354

12,906

16,894

18,345

17,628

20,820

11,602

17,756

493

508

498

558

868

1,053

1,136

1,285

6,656

7,933

7,741

9,235

12,840

11,555

12,405

14,859

Cash in hand Advances Bills purchases and discounted Cash credit and overdraft

38,472

43,553

45,991

54,979

61,197

64,178

69,117

69,329

Term loans Total

17,105 62,233

22,750 74,237

28,627 82,360

33,888 98,102

39,553 113,590

45,073 120,806

56,237 137,758

73,746 157,934

Secured

53,277

62,787

69,122

83,668

90,358

98,526

109,924

119,388

7,805

9,097

8,169

8,494

8,703

6,307

9,185

11,937

1,151 62,233

2,353 74,237

5,068 82,360

5,940 98,102

14,530 113,590

15,974 120,806

18,650 137,758

26,608 157,934

Government guarantee Unsecured Total

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

175

...continued

(Rs crore)

1996-97

1997-98

Priority sector

16,945

19,523

1998-99 1999-2000 23,090

25,878

2000-01 30,153

2001-02 20002-03 31,591

35,112

2003-04 42,706

Public sector

25,875

10,064

12,088

13,465

9,490

20,271

21,990

24,783

Banks

225

785

470

361

442

185

86

2,277

Others

27,788

31,744

34,234

49,808

48,372

53,764

63,869

71,169

Total domestic advances

55,022

64,140

71,259

85,537

99,239

107,530

123,850

142,026

7,211

10,097

11,101

12,564

14,351

13,276

13,909

15,907

62,233

74,237

82,360

98,102

113,590

120,806

137,758

157,934

1,115

2,221

2,690

3,200

3,961

4,669

4,462

3,992

33,973

39,025

51,568

67,747

96,127

117,029

143,727

157,738

7,472

7,158

6,464

5,914

5,705

5,220

4,527

4,194

984

950

993

902

11,111 12794.04

16,166

15,875

1,189

1,436

Advances outside India Total Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares

514

694

1,014

1,155

- Debentures

2,858

4,132

6,658

9,820

- Subsidiaries

874

987

1,043

1,111

- Others

1,173

1,186

22

765

1,849

2,932

3,815

3,293

1,283

1,539

Total

45,713

52,761

68,596

88,679

118,916

140,473

167,886

181,684

Total investm ents

46,828

54,982

71,287

91,879

122,876

145,142

172,348

185,676

n.a. n.a. n.a. n.a.

n.a. n.a. n.a. n.a.

14,065

15,246

15,875

15,486

13,506

3,681

4,352

4,170

4,889

5,721

2,500

3,724

4,559

6,668

6,560

Closing balance

n.a. n.a. n.a. n.a.

15,246

15,875

15,486

13,506

12,667

Net NPA-Closing balance

n.a.

n.a.

n.a.

6,284

6,856

6,810

6,183

5,442

Interest discount on advances and bills

8,137

7,829

8,581

9,554

11,143

11,063

11,229

11,267

Income on investments

Movement in NPA Gross NPA Opening balance Additions Reductions

Profit and loss statement Interest earned 5,521

6,392

7,585

9,506

11,230

14,272

15,258

15,716

Interest on balances with RBI

722

632

1,101

1,573

1,703

3,055

3,274

2,499

Others

570

1,027

1,840

1,567

1,927

1,420

1,327

978

14,950

15,879

19,108

22,201

26,003

29,810

31,087

30,460

1,805

2,038

2,379

2,567

2,632

2,817

2,977

3,121

Profit on sale of investments

26

117

73

269

477

352

1,695

3,073

Loss on sale of investments Profit on sale of fixed assets

0

0

0

0

0

0

0

0

0

0

0

0

0

15

0

0

Loss on revaluation of investments

0

0

-1

1

0

-19

-5

-1

699

505

569

329

304

408

464

503

40

50

62

65

77

103

137

161

0

0

0

0

0

267

221

172

73

110

203

338

528

234

252

582

Total Other income Commission exchange and brokerage

Profit on forex transactions Income from subsidiaries Lease Income Miscellaneous income Total Total income

2,643

2,820

3,285

3,569

4,018

4,174

5,740

7,612

17,593

18,699

22,392

25,770

30,021

33,985

36,827

38,073

continued...

176

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

8,301

9,586

1998-99 1999-2000

2000-01

2001-02 20002-03

2003-04

Interest expended Interest on deposits

12,197

14,397

16,643

19,554

20,174

18,123

Interest on RBI

482

481

474

557

521

364

195

161

Others

808

406

373

319

591

810

740

990

9,591

10,473

13,044

15,273

17,756

20,729

21,109

19,274

Salaries

3,323

3,558

4,140

4,478

6,012

5153

5689

6448

Others

1,281

1,163

1,756

1,818

2,287

1,633

1,760

2,099

0

0

0

0

0

425

494

698

4,604

4,721

5,897

6,296

8,299

7,211

7,942

9,245

Total Operating expenses

Depreciation Total Provisions and contingencies

2,048

1,644

2,424

2,151

2,363

4,013

5,870

6,213

16,243

16,838

21,365

23,719

28,417

31,952

34,922

34,732

Profit for the year

1,350

1,861

1,027

2,051

1,604

2,032

1,905

3,341

Profits inclusive of provisions

3,398

3,505

3,451

4,202

3,967

6,045

7,775

9,553

209

247

324

331

245

391

451

764

15

8

6

6

69

9

44

67

14,138

32,005

38,518

49,065

48,157

53,447

52,326

58,720

10,736

9,283

9,251

9,036

8,706

11,726

9,249

11,012

2,705

5,211

6,033

5,763

6,175

3,369

5,771

5,195

Total expenses including provisions

Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India - Outside India Acceptances and endorsements

11,742

10,830

9,786

12,942

12,895

12,591

15,868

21,119

Others

2,854

2,370

2,497

5,239

7,422

20,679

22,398

15,015

Total

42,399

59,954

66,415

82,383

83,669

102,213

106,106

111,892

Provison for doubtful debts

833

1,300

1,423

1,264

1,470

2,153

2,592

3694

Provision for wealth tax and interest tax

205

127

140

161

0

0

0

45

4

-964

15

-538

-116

198

420

508

925

1,001

383

979

971

1,603

2,149

1,566

Provisions and contingencies

Provision for depreciation on investments Provision for income tax Others

81

180

463

285

37

58

709

400

2,048

1,644

2,423

2,151

2,363

4,013

5,870

6,213

Overall

15

18

29

16

23

11

9

8

Demand

14

8

10

18

11

11

5

6

Savings

13

22

18

21

15

18

17

21

Term

16

21

40

15

30

11

8

2

Demand

23

21

18

18

17

16

15

16

Savings

22

22

20

21

20

21

22

25

Term

55

57

62

61

64

64

63

59

Total Financial analysis Growth in deposits (per cent)

Share of deposits (per cent)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

177

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02 20002-03

2003-04

Profitability (per cent) Return on assets

0.9

1.1

0.5

0.8

0.6

0.6

0.5

0.9

Return on equity

20.1

21.2

10.3

18.2

12.5

14.2

11.8

17.8

Gearing (times)

18.6

17.7

20.4

20.5

22.4

21.9

20.8

19.2

Staff costs to operating expenses

72.2

75.4

70.2

71.1

72.4

71.5

71.6

69.7

Non-fund income to total income

15.0

15.1

14.7

13.9

13.4

12.3

15.6

20.0

Operating expenses to total income

26.2

25.2

26.3

24.4

27.6

21.2

21.6

24.3

4.2

3.6

3.5

3.2

3.4

2.7

2.7

2.9

Earning per share (Rs)

25.7

35.4

19.5

39.0

30.5

38.6

36.2

63.5

Cost to income ratio

57.5

57.4

63.1

60.0

67.7

54.4

50.5

49.2

Cost to income ratio (w/o profit on invest)

57.7

58.2

63.6

61.5

70.4

55.9

56.6

58.8

Interest cost

n.a.

7.64

7.74

7.53

7.34

7.39

6.88

5.78

Average cost of deposits

8.0

7.9

8.1

7.9

7.6

7.6

7.1

5.9

Average cost of borrowings Yield on carry business

13.2 n.a.

11.8 10.90

9.9 10.69

9.5 10.35

11.1 10.08

11.7 9.81

10.0 9.31

10.1 8.38

Average yield on investments

12.2

12.6

12.0

11.7

10.5

10.6

9.6

8.8

Average yield on advances Spreads

13.3

11.5

11.0

10.6

10.5

9.4

8.7

7.6

n.a.

3.25

2.95

2.82

2.74

2.41

2.42

2.61

Operating expenses to AFD

n.a.

3.2

3.2

2.8

3.1

2.3

2.3

2.5

Core fee income to AFD

n.a.

1.7

1.7

1.4

1.2

1.1

1.0

1.1

Net Profitability Margin

n.a.

1.8

1.4

1.4

0.8

1.2

1.1

1.2

Deposits to borrowings (times)

10.6

16.1

17.5

19.9

22.0

25.6

30.4

27.0

Capital adequacy

12.2

14.6

12.5

11.5

12.8

13.4

13.5

13.5

Provisions as a percentage of profit before

60.3

46.9

70.2

51.2

59.6

66.4

75.5

65.0

30.5

18.7

24.2

19.1

18.5

26.4

34.1

30.7

Operating expenses to deposits

Financial management (per cent)

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio

56

57

49

50

47

44.7

46.5

49.6

Incremental C/D ratio

17

59

21

57

34

26.0

66.3

89.7

Borrowings to total deposits

6

6

5

5

4

3

3

4

Cash-deposit ratio

0

0

0

0

0

0

0

0

Investment-deposit ratio

42

42

42

47

51

54

58

58

Incremental I/D ratio

21

40

43

74

67

80

106

59

Reserves as a percentage of net worth

93

95

95

96

96

97

97

97

Growth (per cent) Advances

4

19

11

19

16

6

14

15

Deposits

15

18

29

16

23

11

9

8

Investments Salaries cost Commission and fee Interest income

7

17

30

29

34

18

19

8

n.a.

7

16

8

34

-14

10

13

2

13

17

8

3

7

6

5

15

6

20

16

17

15

4

-2

continued...

178

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02 20002-03

2003-04

8,888

8,925

8,982

9,043

9,078

9085

9081

9093

7.00

8.32

9.17

10.85

12.51

13.30

15.17

17.37

Others Branches (nos) Advances per branch (Rs crore) Operating expenses per branch (Rs crore)

0.52

0.53

0.66

0.70

0.91

0.79

0.87

1.02

236,204

239,649

237,504

233,433

212,649

209462

208998

207039

Income per employee (Rs crore)

0.07

0.08

0.09

0.11

0.14

0.16

0.18

0.18

Income/employee expenses (times)

5.29

5.26

5.41

5.76

4.99

6.60

6.47

5.90

85

85

85

86

87

88

84

80

4

3

3

1

1

1

1

1

10

11

11

10

9

8

8

8

27

26

28

26

27

26

25

27

18

18

18

16

Employees (nos)

Total income (per cent) Interest Forex Commission and brokerage Share of advances (per cent) Priority Public

16

16

16

10

0

1

1

0

0

0

0

1

Others

45

43

42

51

43

45

46

45

Abroad

12

14

13

13

13

11

10

10

Bills

11

11

9

9

11

10

9

9

Cash credits

62

59

56

56

54

53

50

44

Term loans

27

31

35

35

35

37

41

47 76

Inter-bank

Share of advances (per cent)

Share of advances (per cent) Secured

86

85

84

85

80

82

80

Government guaranteed

13

12

10

9

8

5

7

8

14

17

83

85

3

3

3

4

4

13

Government securities

73

71

72

74

78

81

Other approved securities

16 1

13 1

9 1

6 1

5 1

4

3

2

1

1

0

Debentures

6

8

9

11

9

9

9

9

Subsidiaries

2

2

1

1

1

1

1

1

Others

0

1

3

3

3

2

1

1

16.0

14.1

n.a.

14.3

12.9

n.a.

n.a.

n.a.

7.3

6.1

7.2

6.4

6.0

5.6

4.5

3.5

Unsecured Share of investments (per cent)

Shares and debentures

Gross NPAs (per cent) Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

179

Bank of Baroda (Rs crore)

Table 3 1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions Total

254

293

294

294

294

295

2,370

2,604

2,940

3,062

294 3,533

294

1,733

4,093

4,836

32,157

39,126

44,614

51,308

53,986

61,804

66,441

72,967

340

476

479

479

936

693

625

875

3,156

3,576

4,241

3,694

5,044

4,585

4,971

6,135

37,640

45,842

52,232

58,605

63,322

70,910

76,425

85,109 3,057

Assets Cash and balances with RBI

3,048

3,665

3,684

3,506

4,370 2581.068

3,466

Balances with bank and money at call

4,683

6,721

8,335

8,971

8,067

6,366

3,351

4,210

Investments

10,927

13,359

15,905

18,557

19,857

23,833

30,179

38,019

Advances

35,601

16,532

19,803

21,092

24,393

27,421

33,663

35,348

Fixed assets

570

581

597

608

647

692

697

815

Other assets

1,880

1,712

2,619

2,571

2,961

3,774

3,383

3,407

37,640

45,842

52,232

58,605

63,322

70,910

76,425

85,109

Total Deposits Demand

4,190

4,689

5,243

5,525

5,625

6,328

6,039

6,772

Savings

6,423

7,802

9,107

10,842

12,185

14,047

16,419

19,780

Term

21,544

26,635

30,264

34,941

36,176

41,429

43,983

46,415

Total

32,157

39,126

44,614

51,308

53,986

61,804

66,441

72,967

Deposits of branches in India

27,995

33,536

38,904

44,957

47,869

54,532

59,402

64,346

Deposits of branches abroad

4,162

5,590

5,710

6,351

6,117

7,272

7,040

8,621

32,157

39,126

44,614

51,308

53,986

61,804

66,441

72,967

RBI

0

0

0

0

0

140

0

0

Other banks

7

4

17

6

1

167

12

9

322

473

433

363

850

386

613

225

Total Borrowings

Other institutions and agencies Forex borrowings Total

0

0

29

0

85

0

0

640

329

476

479

479

936

693

625

875

Other liabilities and provisions Inter-office adjustments

0

Bonds/Debentures

0

0

0

0

0

0

308

500

1,100

1,099

1,200

1,200

1,200

1,500 1,032

Bills payable

885

873

872

782

702

1,004

1,256

Interest accrued

281

340

418

501

518

494

326

366

1,989

2,363

2,951

2,411

3,824

1,887

2,189

2,929

Others (including provisions) Total

3,155

3,576

4,241

3,694

5,044

4,585

4,971

6,135

Balance with RBI

2,833

3,448

3,437

3,238

4,015

2,253

3,048

2,655

215

217

248

268

355

328

402

418

1,364

1,422

1,365

1,438

1,536

2,002

2,339

2,496

11,190

13,370

13,177

14,969

16,654

19,602

19,537

18,394

3,978

5,011

6,550

7,986

9,231

12,059

13,473

14,711

16,532

19,803

21,092

24,393

27,421

33,663

35,348

35,601

Cash in hand Advances Bills purchases and discounted Cash credit and overdraft Term loans Total

Continued...

180

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Secured Government guarantee

1996-97

1997-98

13,653

17,052

1998-99 1999-2000 19,031

22,660

2000-01

2001-02

2002-03

2003-04

23,920

28,326

29,113

28,501

613

815

329

585

785

1,581

1,777

2,802

2,266 16,532

1,937 19,803

1,732 21,092

1,148 24,393

2,716 27,421

3,756 33,663

4,459 35,348

4,298 35,601

4,921 1,582

5,739

6,057

6,592

6,660

9,925

2,785

2,670

3,400

7,677 5,785

9176.21

2,689

5,160

3,577

Banks

18

20

9

84

398

503

530

466

Others Total

7,897 14,418

8,952 17,401

9,358 18,209

12,063 21,409

12,970 23,429

14,152 28,116

14,049 28,914

15,228 29,197

Advances outside India Total

2,114 16,532

2,402 19,803

2,882 21,092

2,984 24,393

3,992 27,421

5,547 33,664

6,434 35,348

6,404 35,601

511

610

908

1,172

1,395

1,946

1,802

1,963

- Government securities

6,843

8,342

9,719

11,052

11,610

14,327

21,348

27,372

- Other approved securities

1,845

1,778

1,717

1,736

1,648

1,596

1,460

1,396

225

235

222

249

299

332

412

517

1,268

1,921

2,553

2,866

3,300

3,834

4,400

4510

102

152

174

187

155

215

236

255

- Others Total

134 10,417

321 12,749

611 14,997

1,275 17,385

1,450 18,463

1,582 21,887

520 28,377

2,007 36,056

Total investments

10,928

13,359

15,905

18,556

19,857

23,833

30,179

38,019

Unsecured Total Priority sector Public sector

Investments Investments outside India Investments in India

- Shares - Debentures - Subsidiaries/JV

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

3,686

3,897

4186

4489

4168

Additions

n.a.

n.a.

n.a.

829

1,124

1035

717

1078

Reductions

n.a.

n.a.

n.a.

617

836

731

1039

1266

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

3,897 1,686

4,186 1,851

4489 1913

4168 1700

3980 1761

Interest/Discount on advances/bills

2,237

2,235

2,385

2,591

2,938

3,060

3,066

2,800

Income on investments

1,149

1,510

1,744

1,993

2,151

2,368

2,703

2,932

324

408

558

493

613

429

230

197

52 3,762

18 4,171

135 4,821

143 5,220

55 5,757

99 5,956

98 6,098

217 6,146

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

244

235

247

280

298

305

344

344

Profit on sale of investments

14

71

33

86

102

415

631

1018

Loss on sale of investments

0

-2

0

0

0

0

0

Profit on sale of fixed assets

1

0

0

0

-13

1

0

1

Profit/Loss on revaluation of investments

0

0

0

0

62

0

0

0

85

136

142

131

134

117

138

170

4

5

3

4

1

5

6

11

Profit on forex transactions Income from investments Lease income Miscellaneous income Total Total income

0

0

0

0

0

0

0

0

111 459

98 543

154 578

140 641

170 755

149 993

141 1,262

176 1,720

4,221

4,714

5,400

5,862

6,512

6,949

7,359

7,866

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

181

...continued

(Rs crore)

1996-97

1997-98

2,374

2,676 44

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

3,581 75

3,848 72

3,775 65

3,365 49

Interest expended Interest on deposits Interest on RBI/Inter bank Others

21

3,079 69

3,251 80

157

118

100

175

163

156

154

162

2,552

2,838

3,248

3,507

3,820

4,076

3,994

3,575

Salaries

606

652

845

896

1,146

1,056

1,129

1,253

Others

254

383

321

354

385

416

431

477

32

35

41

52

77

91

89

76

892

1,071

1,207

1,303

1,608

1,563

1,648

1,805

Total Operating expenses

Depreciation Total Provisions and contingencies

500

347

572

549

780

763

944

1,518

3,944

4,255

4,978

5,359

6,189

6,403

6,586

6,899

Profit for the year

277

459

421

503

323

546

773

967

Profits inclusive of provisions

777

806

945

1,052

1,085

1,309

1,717

2,485

389

487

265

153

238

152

343

828

9

0

0

0

0

1

0

0

4,327

6,600

7,621

7,518

13,313

8,875

17,616

22,309

- In India

2,317

2,857

2,337

2,126

2,007

3,261

- Outside India

1,022

785

848

1,199

1,443

1,775

2,091

1,796

1,740

2,122

348

298

347

568

596

10,187

13,118

13,215

13,304

298

323

361

87

-245

Provision for taxation

52

258

Other Provisions

63

Total expenses including provisions

Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees

Acceptances and endorsements Others Total

2,060

2,156

1,425

1,202

1,986

2,527

2,754

641

448

1,069

19,720

14,916

24,419

30,318

342

509

482

464

968

15

-33

58

-14

1

-101

147

240

185

250

398

566

27 780

45

81 944

86 1,518

Provisions and contingencies Provison for NPAs/Stadard assets Depreciation in values of investments

Total

500

12 347

49 572

0 549

763

Financial analysis Growth in deposits (per cent) Overall

13

22

14

15

5

14

8

10

Demand

12

12

12

5

2

12

-5

12

Savings

14

21

17

19

12

15

17

20

Term

13

24

14

15

4

15

6

6

Demand

13

12

12

11

10

10

9

9

Savings

20

20

20

21

23

23

25

27

Term

67

68

68

68

67

67

66

64

Domestic

87

86

87

88

89

88

89

88

Abroad

13

14

13

12

11

12

11

12

Share of deposits (per cent)

Share of deposits (per cent)

continued...

182

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Profitability (per cent) Return on assets

0.8

1.1

0.9

0.9

0.5

0.8

1.0

1.2

Return on equity

14.9

19.7

15.2

16.4

9.8

15.2

18.8

20.3

Gearing (times)

17.9

16.2

17.0

17.1

17.9

17.5

16.4

15.6

Staff costs to operating expenses

70.5

63.0

72.5

71.7

74.9

67.6

68.5

69.4

Non-fund income to total income

10.9

11.5

10.7

10.9

11.6

14.3

17.1

21.9

Operating expenses to total income

20.4

22.0

21.6

21.3

23.5

22.5

22.4

22.9

2.7

2.6

2.6

2.4

2.8

2.5

2.5

2.5

Earning per share (Rs)

10.9

15.7

14.3

17.1

11.0

18.5

26.3

32.8

Cost to income ratio

53.4

57.1

56.1

55.3

59.7

54.4

49.0

42.1

Cost to income ratio (w/o profit on invest) Financial management (per cent) Interest cost

53.9

59.3

56.9

57.4

62.0

63.6

60.3

55.2 4.99

Operating expenses to deposits

7.68

7.51

7.12

7.06

6.84

6.06

7.8

7.5

7.4

6.8

6.8

6.6

5.9

4.8

Average cost of borrowings Yield on carry business

23.2

40.2

35.3

53.3

33.7

28.0

33.2

28.1

10.91

10.79

10.48

10.57

10.03

9.26

8.45

Average yield on investments

11.2

12.4

11.9

11.6

11.2

10.8

10.0

8.6

Average yield on advances Spreads

13.7

12.3

11.7

11.4

11.3

7.8

7.8

8.3

3.23

3.28

3.36

3.51

3.18

3.20

3.45

Operating expenses to AFD

2.72

2.61

2.50

2.79

2.48

2.38

2.36

Core fee income to AFD

1.07

1.01

0.92

0.90

0.79

0.80

0.79 1.88

Average cost of deposits

Net Profitability Margin

1.57

1.68

1.79

1.61

1.49

1.62

Deposits to borrowings (times)

39.4

88.5

87.6

100.1

74.4

71.1

97.3

92.9

Capital adequacy Provisions as a percentage of profit before

11.8

12.1

13.3

12.1

12.8

11.3

12.7

13.9

64.4

43.1

55.4

52.2

70.2

58.3

55.0

61.1

25.2

13.0

18.1

17.0

22.7

19.9

21.5

29.6 49

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio

51

51

47

48

51

54

53

Incremental C/D ratio

14

47

23

49

113

80

36

4

Borrowings to total deposits

1

1

1

1

2

1

1

1

Cash-deposit ratio

1

1

1

1

1

4

5

4

Investment-deposit ratio

34

34

36

36

37

39

45

52

Incremental I/D ratio

35

35

46

40

49

51

137

120

Reserves as a percentage of net worth Growth (per cent)

87

89

90

91

91

92

93

94

Advances

3

20

7

16

12

23

5

1

Deposits

13

22

14

15

5

14

8

10

Investments

14

22

19

17

7

20

27

26

Salaries cost

10

8

30

6

28

-8

7

11

-28

-4

5

13

6

3

13

0

Interest income Others

7

11

16

8

10

3

2

1

Branches (nos)

2,493

2,522

2,573

2,652

2,669

2,679

2,753

2,730

6.63

7.85

8.20

9.20

10.27

12.57

12.84

13.04

Commission and fee

Advances per branch (Rs crore) Operating expenses per branch (Rs crore)

0.36

0.42

0.47

0.49

0.60

0.58

0.60

0.66

45,759

45,935

46,187

47,054

46,360

38,899

40,313

39,803

Income per employee (Rs crore)

0.09

0.10

0.12

0.12

0.14

0.18

0.18

0.20

Income/employee expenses (times)

6.97

7.23

6.39

6.54

5.68

6.58

6.52

6.28

Employees (nos)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

183

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Total income (per cent) Interest

89

88

89

89

88

86

83

78

Forex

2

3

3

2

2

2

2

2

Commission and brokerage

6

5

5

5

5

6

9

13

Priority

30

29

29

27

24

23

26

28

Public

10

14

13

11

12

17

15

10

0

0

0

0

1

1

1

1

Others

48

45

44

49

47

42

40

43

Abroad

13

12

14

12

15

16

18

18

Share of advances (per cent)

Inter bank

Share of advances (per cent) Bills

8

7

6

6

6

6

7

7

Cash credit

68

68

62

61

61

58

55

52

Term loans

24

25

31

33

34

36

38

41

83

86

90

93

87

84

82

80

Share of advances (per cent) Secured Government guarantee

4

4

2

2

3

5

5

8

14

10

8

5

10

11

13

12

Government securities

66

65

65

64

63

60

75

76

Other approved

18

14

11

10

9

7

5

4

2

2

1

1

2

1

1

1

Debentures

12

14

16

15

17

16

15

12

Subsidiary

1

1

1

1

1

1

1

1

Unsecured Share of investments (per cent)

Shares

Others

1

3

4

7

8

7

2

6

Outside India

0.05

0.05

0.06

0.06

0.07

0.08

0.06

0.05

Gross NPAs (per cent)

17.2

14.6

16.0

14.7

14.1

n.a.

n.a.

n.a.

8.9

6.6

7.7

7.0

6.8

5.0

3.7

3.0

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

184

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Bank of India (Rs crore)

Table 4 1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Liabilities Capital Reserves and surplus Deposits

597

638

638

638

638

488

488

488

1,342

1,677

1,768

1,873

2,048

2,357

3,053

3,522

31,973

39,339

44,430

47,744

51,679

59,711

64,098

71,003

Borrowings

1,453

1,557

2,979

1,876

1,798

3,348

4,027

4,521

Other liabilities and provisions

2,581

3,127

4,107

3,934

3,404

3,902

4,628

5,326

37,946

46,338

53,923

56,065

59,567

69,806

76,294

84,860

Cash and balances with RBI

2,281

3,131

3,639

3,229

3,836

3,632

3,350

4,231

Balances with bank and money at call

4,195

3,646

7,206

5,664

2,588

2,973

3,648

4,327

Investments

10,671

13,030

15,282

16,666

18,225

22,084

24,435

27,163

Advances

45,856

Total Assets

18,337

22,021

24,327

25,231

31,823

38,311

42,633

Fixed assets

516

696

710

741

763

705

737

799

Other assets

1,946

3,813

2,760

4,534

2,331

2,102

1,492

2,485

37,946

46,338

53,923

56,065

59,567

69,806

76,294

84,860

Total Deposits Demand

5,385

5,094

5,976

6,093

5,896

7,194

5,350

5,839

Savings

6,155

7,303

8,516

9,916

11,165

12,885

15,000

18,062

Term

20,433

26,941

29,938

31,735

34,618

39,632

43,749

47,102

Total

31,973

39,339

44,430

47,744

51,679

59,711

64,098

71,003

Deposits of branches in India

26,240

31,369

35,089

38,526

42,882

49,236

53,675

59,715

Deposit of branches abroad

5,733

7,970

9,341

9,218

8,796

10,475

10,424

11,288

31,973

39,339

44,430

47,744

51,679

59,711

64,098

71,003

Total Borrowings RBI

0

235

586

766

505

235

0

0

Other banks

242

191

220

275

699

1,093

832

481

Other institutions and agencies

658

794

1,690

796

493

513

473

948

Forex borrowings Total

553

338

483

39

101

1,507

2,722

3,092

1,453

1,558

2,979

1,876

1,798

3,348

4,027

4,521

Other liabilities and provisions Inter-office adjustments

480

0

630

44

14

163

139

149

Bills payable

720

1,147

838

902

933

854

866

835

Interest accrued

123

140

153

166

186

186

226

244

Others(including provisions)

1,258

1,840

2,486

2,822

2,271

2,700

3,397

4,099

Total

2,581

3,127

4,107

3,934

3,404

3,902

4,628

5,326

Balance with RBI

2,040

2,932

3,437

3,028

3,665

3,438

3,131

3,977

241

199

202

201

172

194

219

254

Cash in hand Advances Bills purchases and discounted Cash credit and overdraft Term loans Total

1,838

1,774

1,642

1,796

2,649

3,318

3,990

4,063

12,971

13,704

13,410

13,424

16,295

19,311

23,753

23,825

3,528

6,543

9,275

10,011

12,879

15,683

14,891

17,967

18,337

22,021

24,327

25,231

31,823

38,311

42,633

45,856

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

185

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

13,898

15,979

17,975

18,833

23,112

25,388

27,597

31,436

2,604

2,257

2,051

2,930

4,327

6,063

6,187

6,048

1,835 18,337

3,784 22,021

4,301 24,327

3,468 25,231

4,384 31,823

6,860 38,311

8,849 42,633

8,372 45,856

Priority sector

4,746

5,761

6,272

6,593

7,599

9,181

11,534

12,873

Public sector

1,192

2,195

2,228

2,589

3,390

4,661

4,812

5,505

Banks

44

104

1

6

7

6

234

6

Others Total

7,917 13,899

8,578 16,637

9,669 18,171

9,909 19,098

12,663 23,660

14,683 28,531

14,827 31,407

16,635 35,019

Advances outside India

4,438 18,337

5,383 22,021

6,156 24,327

6,133 25,231

8,163 31,823

9,779 38,311

11,226 42,633

10,837 45,856

1,518

2,205

2,707

2,816

3,338

5,337

6318.4

4,580

- Government securities

7,052

7,929

1,089

10,640

11,859

13,536

14,843

17,583

- Other approved securities

1,296

1,277

1,204

1,138

1,136

992

926

868

299

267

289

173

231

182

179

- Debentures

770

1,205

1,517

1,517

1,401

1,668

1,845

2,783

- Subsidiaries

21

21

21

76

171

173

181

173

14 9,153

94 10,825

83 4,181

190 13,850

147 14,887

146 16,747

140 18,116

998 22,583

10,671

13,030

6,889

16,666

18,225

22,084

24,435

27,163

Secured Government guarantee Unsecured Total

Total

1998-99 1999-2000

Investments Investments outside India Investments in India

- Shares

- Others Total Total investments Movement in NPA Gross NPAs Opening balance

n.a.

n.a.

n.a.

3,032

3,464

3434

3772

3804

Additions

n.a.

n.a.

n.a.

1,304

911

1355

1226

1204

Reductions

n.a.

n.a.

n.a.

872

941

1067

1144

1274

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

3,464 2,206

3,434 2,138

3722 2304

3804 2286

3734 2062

Interest/discount on advances/bills

2,234

2,461

2,627

2,750

3,129

3,293

3,563

3,309

Income on investments

1,096

1,264

1,513

1,673

1,806

1,919

2,023

2,072

141

174

164

187

358

349

262

219

42 3,513

37 3,936

287 4,591

128 4,737

25 5,317

48 5,609

80 5,928

196 5,796

255

272

284

293

324

324

359

376

10

56

8

167

196

427

858

946

0

32

1

0

0

0

26

11

74

110

120

112

105

124

142

213

3

0

1

2

2

2

48

18

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage Profit on sale of investments Loss on sale of investments Profit on sale of land, buildings Loss on revaluation of investments Profit on forex transactions Income from subsidiaries Lease income Miscellaneous income Total Total income

0

0

0

0

148 490

111 580

160 574

212 786

235 862

226 1,103

0 236 1,668

229 1,792

4,003

4,516

5,164

5,522

6,179

6,712

7,596

7,588

continued...

186

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2,231

2,469

2,900

140

182

280

2000-01

2001-02

2002-03

2003-04

3,062

3,216

3,314

3,413

3,087

310

344

316

326

316

Interest expended Interest on deposits Interest on RBI Others Total

2

0

0

71

103

138

153

192

2,373

2,651

3,181

3,443

3,663

3,769

3,892

3,594

Operating expenses Salaries

714

770

924

999

1,339

1,087

1,126

1,172

Others

289

330

288

336

343

370

436

491

Depreciation Total Provisions and contingencies Total expenses including provisions

48

67

67

61

74

68.23

87

88

1,051

1,167

1,279

1,396

1,744

1,531

1,649

1,752

219

333

504

510

520

903

1,179

1,234

3,643

4,151

4,963

5,350

5,927

6,203

6,720

6,580

Profit for the year

360

365

201

173

252

509

876

1,008

Profits inclusive of provisions

579

697

705

683

772

1,412

2,055

2,242

7

13

19

25

24

612

417

184

Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts

8

1

0

0

0

0

0

0

11,676

18,032

14,164

17,738

30,788

36,954

34,162

41,738

1,916

1,793

1,767

2,276

2,440

2,818

2,987

3,211

294

695

788

406

404

517

747

916

Guarantees - In India - Outside India Acceptances and endorsements

2,995

2,777

2,428

2,309

2,904

2,826

3,633

3,797

Others

1,298

1,500

2,553

3,401

4,984

7,254

10,228

15,877

Total

18,194

24,811

21,720

26,156

41,545

50,981

52,174

65,723

Provisions and Contingencies Provison for NPAs

4

316

352

386

351

642

682

634

98

-122

0

-43

67

0

25

42

115

116

110

77

66

191

338

399

2

22

42

90

36

136

347

433

219

333

504

510

520

903

1,179

1,234

Overall

16

23

13

7

8

16

7

11

Demand

29

-5

12

10

11

15

9

11

Savings

11

19

17

-1

-5

19

0

8

Term

15

32

13

7

8

16

7

11

Demand

17

13

13

13

11

12

8

8

Savings

19

19

24

26

26

26

28

30

Term

64

68

67

66

67

66

68

66

Domestic

82

80

79

81

83

82

84

84

Abroad

18

20

21

19

17

18

16

16

Depreciation in values of investments Provision for taxation Other Provisions Total Financial analysis Growth in deposits (per cent)

Share of deposits (per cent)

Share of deposits (per cent)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

187

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Profitability (per cent) Return on assets

1.0

0.9

0.4

0.3

0.4

0.8

1.2

1.3

Return on equity

22.5

17.1

8.5

7.0

9.7

18.4

27.5

26.7

Gearing (times)

18.6

19.0

21.4

21.3

21.2

23.5

20.5

20.2

Staff costs to operating expenses

67.9

66.0

72.2

71.6

76.8

71.0

68.3

66.9

Non-fund income to total income

12.2

12.8

11.1

14.2

13.9

16.4

22.0

23.6

Operating expenses to total income

26.3

25.9

24.8

25.3

28.2

22.8

21.7

23.1

Operating expenses to deposits

3.3

3.0

2.9

2.9

3.4

2.6

2.6

2.5

Earning per share (Rs)

6.0

5.7

3.1

2.7

3.9

10.4

18.0

20.7

Cost to income ratio

64.5

62.6

64.5

67.2

69.3

52.0

44.5

43.9

Cost to income ratio (w/o profit on invest) Financial management (per cent) Interest cost

64.9

64.5

64.7

73.0

75.2

60.8

57.9

57.5 4.95

6.96

7.05

6.97

6.98

6.37

5.86

Average cost of deposits

7.5

6.9

6.9

6.6

6.5

6.0

5.5

4.6

Average cost of borrowings Yield on carry business

9.0

12.1

12.4

15.7

24.3

17.7

13.0

11.9

10.76

10.60

9.99

10.63

9.86

9.24

8.11

10.7

10.7

10.5

10.4

9.5

8.7

8.0

Average yield on investments

10.8

Average yield on advances Spreads

13.2

12.2

11.3

11.1

11.0

9.4

8.8

7.5

3.80

3.56

3.02

3.65

3.49

3.38

3.17

Operating expenses to AFD

3.02

2.77

2.76

3.25

2.48

2.34

2.25

Core fee income to AFD

1.13

1.05

1.01

1.02

0.91

0.88

0.90

Net Profitability Margin

1.91

1.83

1.27

1.41

1.92

1.92

1.82

23.7

18.5

19.0

27.1

21.6

16.8

15.8

Deposits to borrowings (times)

18.8

Capital adequacy Provisions as a percentage of profit before

10.2

9.1

10.6

10.6

12.2

12.23

12.02

13.01

37.8

47.7

71.5

74.7

67.4

64.0

57.4

55.0

13.7

15.6

21.3

20.7

20.0

32.7

36.9

32.7

provisions Provisions as a percentage of networth Liquidity (per cent) Credit deposit ratio

57

56

55

53

62

64

67

65

Incremental C/D ratio

62

50

45

27

168

81

99

47

Borrowings to total deposits

5

4

7

4

3

6

6

6

Cash deposit ratio

1

1

0

0

0

0

0

0

Investment-deposit ratio

33

33

34

35

35

37

38

38

Incremental I/D ratio

24

32

44

42

40

48

54

40

Reserves as a percentage of net worth Growth (per cent)

69

72

73

75

76

83

86

88

Advances

18

20

10

4

26

20

11

8

Deposits

16

23

13

7

8

16

7

11

Investments

11

22

17

9

9

21

11

11

Salaries cost

9

8

20

8

34

-19

4

4

Commission and fee

8

7

4

3

11

0

11

5

22

12

17

3

12

5

6

-2

2,475

2,495

2,515

2,532

2,534

2548

2559

2562 17.90

Interest income Others Branches (number) Advances per branch (Rs crore)

7.41

8.83

9.67

9.96

12.56

15.04

16.66

Operating expenses/branch (Rs crore)

0.42

0.47

0.51

0.55

0.69

0.60

0.64

0.68

53,295

52,518

53,047

52,428

44,052

43420

43141

42977

Income per employee (Rs crore)

0.08

0.09

0.10

0.11

0.14

0.15

0.18

0.18

Income/employee expenses (times)

5.61

5.86

5.59

5.53

4.61

6.18

6.75

6.47

Employees (number)

continued...

188

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Total income (per cent) Interest

88

87

89

86

86

84

78

76

forex

2

2

2

2

2

2

2

3

Commission and brokerage

0

1

0

3

3

6

11

12

Priority

26

26

26

26

24

24

27

28

Public

7

10

9

10

11

12

11

12

Inter-bank

0

0

0

0

0

0

1

0

Others

43

39

40

39

40

38

35

36

Abroad

24

24

25

24

26

26

26

24

Share of advances (per cent)

Share of advances (per cent) Bills

10

8

7

7

8

9

9

9

Cash credit

71

62

55

53

51

50

56

52

Term loans

19

30

38

40

40

41

35

39

Secured

76

73

74

75

73

66

65

69

Government guarantee

14

10

8

12

14

16

15

13

Unsecured

10

17

18

14

14

18

21

18

Government securities

66

61

16

64

65

61

61

65

Other approved securities

12

10

17

7

6

4

4

3

Share of advances (per cent)

Share of investments (per cent)

Shares

0

2

4

2

1

1

1

1

Debentures

7

9

22

9

8

8

8

10

Subsidiary

0

0

0

0

1

1

1

1

Others

0

1

1

1

1

1

1

4

14

17

39

17

18

24

26

17

11.8

11.6

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

6.9

7.3

7.3

8.6

6.7

6.7

5.4

4.5

Outside India Gross NPAs (per cent) Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

189

Canara Bank (Rs crore)

Table 5 1996-97

1997-98

485

578

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

578

578

410

410

Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions

578

578

1,564

1,725

1,835

2,018

2,237

2894

3739

4842

31,445

38,045

41,959

48,001

59,070

64030

72095

86345

459

498

1,382

1,324

1,466

267

94

755

1,705

2,267

2,366

2,481

3,089

4366

5717

7188

35,657

43,112

48,119

54,402

66,439

72,135

82,055

99,539

Cash and balances with RBI

4,236

4,054

4,094

3,838

3,886

7,860

5,608

6,891

Balances with bank and money at call

2,688

3,667

4,085

3,707

9,285

4,638

2,090

5,136

Investments

12,280

16,031

17,357

20,023

21,445

23,220

30,458

35,793

Advances

14,413

16,825

19,530

23,547

27,832

33,127

40,472

47,639

419

430

550

560

650

659

660

680

Total Assets

Fixed assets Other assets Total

1,622

2,106

2,504

2,728

3,341

2,632

2,768

3,401

35,657

43,112

48,120

54,402

66,439

72,135

82,055

99,539

Deposits Demand

5,722

6,283

5,897

7,104

7,847

7,148

7,837

8,654

Savings

6,705

8,077

9,543

11,129

12,786

14,511

17,260

20,512

Term

19,018

23,686

26,518

29,768

38,436

42,370

46,998

57,179

Total

31,445

38,045

41,959

48,001

59,070

64,030

72,095

86,345

Deposits of branches in India

30,568

36,981

40,895

46,716

57,662

62,486

70,818

84,376

Deposits of branches abroad

877

1,064

1,064

1,285

1,407

1,544

1,277

1,968

31,445

38,045

41,958

48,001

59,070

64,030

72,095

86,345

RBI

0

0

375

530

430

0

0

0

Other banks

0

0

0

0

0

0

5

297

459

498

507

294

236

267

34

13

0

0

0

0

0

0

56

445

459

498

882

824

666

267

94

755

56

0

0

0

0

0

0

158

Total Borrowings

Other institutions and agencies Forex borrowings Total Other liabilities and provisions Inter-office adjustments Unsecured redeemable bonds Bills payable Interest accrued Others (including provisions)

0

0

500

500

800

1,250

1,750

2,000

958

1,269

1,025

999

1,328

1,116

1,607

1,540

24

31

53

52

26

75

69

97 3,393

667

966

1,287

1,431

1,735

1,925

2,292

Total

1,705

2,267

2,866

2,981

3,889

4,366

5,717

7,188

Balance with RBI

3,985

3,781

3,797

3,516

3,473

7,364

5,133

6,287

251

272

298

322

413

496

475

604

Cash in hand Advances Bills purchases and discounted

1,941

1,480

2,339

2,712

2,416

2,987

3,494

4,089

Cash credit and overdraft

8,732

10,901

11,415

12,949

16,686

19,849

23,546

24,307

Term loans

3,740

4,443

5,777

7,885

8,730

10,290

13,431

19,243

14,413

16,825

19,530

23,547

27,832

33,127

40,472

47,639

Total

Continued...

190

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

12,233

13,921

15,832

18,062

21,379

21826

32178

38654

1,187

1,417

1,594

2,359

1,965

6311

2579

2366

993 14,413

1,487 16,825

2,104 19,530

2,127 22,547

4,487 27,832

4989 33,127

5715 40,472

6619 47,639

Priority sector

5,267

6,006

6,271

6,807

8,069

9288

12170

16152

Public sector

1,344

1,721

2,911

4,702

6,205

7375

7592

7774

Banks

25

123

96

95

98

138

450

511

Others Total

7,586 14,222

8,655 16,505

9,795 19,071

11,511 23,115

12,997 27,369

15610 32,411

19694 39,906

22690 47,127

Advances outside India Total

191 14,413

319 16,825

459 19,530

432 23,547

463 27,832

716 33,127

566 40,472

512 47,639

77

91

300

402

499

527

520

547

Secured Government guarantee Unsecured Total

1998-99 1999-2000

Investments Investments outside India Investments in India - Government securities

6,824

9,394

9,955

11,775

14,449

16572

23307

28133

- Other approved securities

1,827

1,809

1,683

1,627

1,549

1246

865

878

133

204

246

256

200

236

221

236

2,636

3,600

3,978

4,940

4,390

4215

4975

4926

132

138

134

135

132

132

132

132

- Others Total

651 12,203

795 15,940

1,059 17,056

889 19,621

226 20,946

292 22,693

438 29,938

941 35,246

Total investments

12,280

16,031

17,356

20,023

21,445

23,220

30,458

35,793

- Shares - Debentures - Subsidiaries/JV

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

2,100

2,334

2150

2112

2475

Additions

n.a.

n.a.

n.a.

750

793

652

1228

1890

Reductions

n.a.

n.a.

n.a.

835

884

690

865

1238

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

2,015 1,244

2,243 1,346

2112 1,288

2475 1,454

3127 1,378

Interest/discount on advances/bills

1,972

2,015

2,283

2,488

2,920

3130

3591

3818

Income on investments

1,220

1,527

2,070

2,042

2,234

2497

2686

2994

215

258

303

321

463

708

414

143

7 3,414

24 3,824

0 4,657

1 4,852

0 5,618

36 6,371

0 6,692

52 7,007

246

254

297

320

323

322

360

381

22

100

61

133

201

663

640

1207

Profit and loss statement Interest earned

Interest on balances with RBI Others Total

Other income Commission exchange and brokerage Profit on sale of investments Loss on sale of investments Profit on sale of fixed assets

0

0

1

1

1

1

1

0

Loss on revaluation of investments

0

0

0

0

0

0

0

0

81

92

92

97

124

129

133

152

9

5

32

52

30

0

53

46

96 455

156 608

179 663

234 836

239 918

313 1,429

291 1,478

288 2,073

3,869

4,432

5,319

5,687

6,536

7,799

8,170

9,080

Profit on forex transactions Income from Investments Lease Income Miscellaneous income Total Total income

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

191

...continued

(Rs crore)

1996-97

1997-98

2,148

2,604

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

3,575

4350

4224

4121

Interest expended Interest on deposits

2,993

3,234

Interest on RBI /inter bank

54

20

13

19

29

22

9

13

Others

76

124

124

162

132

178

191

189

2,278

2,748

3,131

3,414

3,735

4,550

4,424

4,324

Salaries

641

691

880

951

1,253

1123

1162

1273

Others

251

268

296

323

351

377

477

510

45

51

55

75

66

93

109

114

937

1,010

1,231

1,350

1,670

1,593

1,748

1,897

Total Operating expenses

Depreciation Total Provisions and contingencies

507

469

732

687

846

915

978

1,521

3,721

4,228

5,094

5,451

6,251

7,058

7,150

7,741

Profit for the year

147

204

225

236

285

741

1,020

1,339

Profits inclusive of provisions

654

674

957

923

1,131

1,656

1,999

2,860

150

199

483

730

688

0

597

627

5

0

0

0

0

0

0

0

8,196

10,632

8,505

14,800

27,515

26895

39686

36109

3,401

3,394

3,645

4,145

4,425

5413

7019

9422

22

21

10

40

34

59

76

81

1,945

1,893

1,877

2,498

2,471

2954

3790

6198

373

338

299

225

69

704

9

3

14,091

16,477

14,820

22,438

35,202

36,024

51,177

52,441

260

398

506

466

409

386

476

1239

Depreciation on investments

-25

-90

0

0

8

13

18

18

Taxation

124

80

100

121

191

310

300

330

Contingencies

148

82

126

100

239

207

184

-66

Total

507

470

732

687

846

915

978

1,521

Total expenses including provisions

Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - in India - outside India Acceptances and endorsements Others Total Provisions and contingencies Provision for NPAs

Financial analysis Growth in deposits (per cent) Overall

20

21

10

14

23

8

13

20

Demand

20

10

-6

20

10

-9

10

10

Savings

16

20

18

17

15

13

19

19

Term

21

25

12

12

29

10

11

22

Demand

18

17

14

15

13

11

11

10

Savings

21

21

23

23

22

23

24

24

Term

60

62

63

62

65

66

65

66

97

97

97

97

98

98

98

98

3

3

3

3

2

2

2

2

Share of deposits (per cent)

Share of deposits (per cent) Domestic Abroad

continued...

192

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Return on assets

0.4

0.5

0.5

0.5

0.5

1.1

1.3

1.5

Return on equity

7.4

9.4

9.5

9.4

10.5

23.6

26.8

28.5

Profitability (per cent)

Gearing (times)

16.4

17.7

18.9

20.0

22.6

19.8

18.8

18.0

Staff costs to operating expenses

71.9

68.4

71.5

70.5

75.1

70.5

66.5

67.1

Non-fund income to total income

11.8

13.7

12.5

14.7

14.0

18.3

18.1

22.8

Operating expenses to total income

23.1

22.8

23.1

23.7

25.5

20.4

21.4

20.9

2.8

2.7

2.9

2.8

2.8

2.5

2.4

2.2

Operating expenses to deposits Earning per share (Rs)

3.0

3.5

3.9

4.1

4.9

12.8

24.9

32.7

Cost to income ratio

58.9

60.0

56.3

59.4

59.6

49.0

46.7

39.9

Cost to income ratio (w/o profit on invest) Financial management (per cent) Interest cost

59.7

63.8

57.9

63.1

64.2

61.6

56.3

53.4

-

7.56

7.48

7.29

6.74

7.20

6.36

5.32

7.4

7.5

7.5

7.2

6.7

7.1

6.2

5.2

Average cost of borrowings Yield on carry business

12.8

30.2

14.6

13.3

11.5

23.0

110.6

47.8

-

10.63

11.27

10.46

10.14

9.87

9.23

8.20

Average yield on investments

10.6

10.8

12.4

10.9

10.8

11.2

10.0

9.0

Average yield on advances Spreads

14.3

12.9

12.6

11.6

11.4

10.3

9.8

8.7

-

3.06

3.78

3.17

3.40

2.68

2.88

2.88

Operating expenses to AFD

-

2.72

2.88

2.81

2.94

2.43

2.37

2.18

Core fee income to AFD

-

1.14

1.12

1.11

1.00

0.93

0.87

0.78

Net Profitability Margin

-

1.48

2.02

1.47

1.46

1.18

1.37

1.47

Deposits to borrowings (times)

28.4

72.6

42.5

33.2

38.4

71.0

376.9

186.7

Capital adequacy Provisions as a percentage of profit before

10.2

9.5

11.0

9.6

9.8

11.88

12.5

12.66

77.5

69.7

76.5

74.4

74.8

55.2

49.0

53.2

24.7

20.4

30.4

26.5

30.1

26.4

23.6

29.0

Credit-deposit ratio

46

44

47

49

47

52

56

55

Incremental C/D ratio

Average cost of deposits

provisions Provisions as a percentage of networth Liquidity (per cent)

25

37

69

66

39

107

91

50

Borrowings to total deposits

1

1

3

3

2

0

0

1

Cash-deposit ratio

1

1

1

1

1

1

1

1

39

42

41

42

36

36

42

41

n.a.

57

34

44

13

36

90

37

76

75

76

78

79

83

90

92 18

Investment-deposit ratio Incremental I/D ratio Reserves as a percentage of net worth Growth (per cent) Advances

10

17

16

21

18

19

22

Deposits

20

21

10

14

23

8

13

20

Investments

15

31

8

15

7

8

31

18

Salaries cost

n.a.

8

27

8

32

-10

4

10

Commission and fee

0

3

17

8

1

0

12

6

Interest income Others

16

12

22

4

16

13

5

5

Branches (nos)

2,262

2,312

2,379

2,397

2,405

2409

2424

2469

6.37

7.28

8.21

9.82

11.57

13.75

16.70

19.29

Advances per branch (Rs crore) Operating expenses per branch (Rs crore) Employees (nos) Income per employee (Rs crore) Income/employee expenses (times)

0.41

0.44

0.52

0.56

0.69

0.66

0.72

0.77

54,316 0.07

54,703 0.08

55,097 0.10

55,363 0.10

48,257 0.14

47796 0.16

47566 0.17

47796 0.19

6.04

6.41

6.05

5.98

5.22

6.95

7.03

7.13

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

193

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Total income (per cent) Interest

88

86

88

85

86

82

82

77

Forex

2

2

2

2

2

2

2

2

Commission and brokerage

6

6

6

6

5

4

4

4

37

36

32

29

29

28

30

34

Public

9

10

15

20

22

22

19

16

Inter-bank

0

1

0

0

0

0

1

1

Others

53

51

50

49

47

47

49

48

Abroad

1

2

2

2

2

2

1

1

Share of advances (per cent) Priority

Share of advances (per cent) Bills

13

9

12

12

9

9

9

9

Cash credit

61

65

58

55

60

60

58

51

Term loans

26

26

30

33

31

31

33

40

85

83

81

80

77

66

80

81

Government guarantee

8

8

8

10

7

19

6

5

Unsecured

7

9

11

9

16

15

14

14

Government securities

56

59

57

59

67

71

77

79

Other approved securities

15

11

10

8

7

5

3

2

1

1

1

1

1

1

1

1

Debentures

21

22

23

25

20

18

16

14

Subsidiary

1

1

1

1

1

1

0

0

Share of advances (per cent) Secured

Share of investments (per cent)

Shares and debentures

Others

5

5

6

4

1

1

1

3

Outside India

1

1

2

2

2

2

2

2

20.3

18.7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

9.3

7.5

7.1

5.3

4.8

3.9

3.6

2.9

Gross NPAs (per cent) Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

194

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Punjab National Bank (Rs crore)

Table 6 1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Liabilities Capital

351

212

212

212

212

377

265

265

Reserves and surplus

991

1,442

1,718

2,060

2,457

3,004

3,768

4,747

30,806

35,174

40,777

47,483

56,131

64,123

75,813

87916

345

265

197

662

673

409

662

1289

2,550

2,675

3,419

3,710

4,032

5,002

5,713

8114

35,043

39,768

46,323

54,129

63,505

72,915

86,222

102,332

3,655

4,900

5,016

5,477

5,366

5,102

6,569

6742

961

561

824

753

704

1,297

1,509

2078

Investments

13,977

15,907

18,573

22,099

25,128

28,207

34,030

42125

Advances

14,068

16,043

19,047

22,572

28,029

34,369

40,228

47225

Fixed assets

586

595

617

681

724

796

885

900

Other assets

1,796

1,762

2,246

2,547

3,555

3,144

3,002

35,043

39,768

46,323

54,129

63,505

72,915

86,222

3261 102,332

Deposits Borrowings Other liabilities and provisions Total Assets Cash and balances with RBI Balances with bank and money at call

Total Deposits Demand

3,270

3,772

4,846

5,437

6,311

6,758

9,888

9,900

Savings

9,435

11,564

13,679

15,875

18,530

21,664

25,648

30,423

Term

18,101

19,838

22,252

26,171

31,290

35,701

40,277

47,593

Total

30,806

35,174

40,777

47,483

56,131

64,123

75,814

87,916

Deposits of branches in India

30,806

35,174

40,777

47,483

56,131

64,123

75,814

87,916

Deposits of branches abroad

0

0

0

0

0

0

0

0

30,806

35,174

40,777

47,483

56,131

64,123

75,814

87,916

Total Borrowings RBI

0

0

0

513

300

269

0

4

27

7

5

11

44

32

184

572

307

246

173

132

322

103

377

49

Other banks Other institutions and agencies Forex borrowings

11

12

19

6

7

4

101

663

345

265

197

662

673

409

662

1,289

Inter-office adjustments

251

138

463

333

117

66

34

374

Bills payable

838

878

632

706

745

866

948

1,396

Interest accrued

201

459

696

319

374

453

493

462

Others (including provisions)

1,259

1,201

1,629

2,352

2,796

3,617

4,238

5,883

Total

2,549

2,676

3,419

3,710

4,032

5,002

5,713

8,114

Balance with RBI

3,359

4,590

4,678

5,049

4,920

4,371

5,940

6,043

295

310

338

428

445

578

629

700

1,378

1,364

1,490

1,903

2,427

2,460

2,879

2,803

Total Other liabilities and provisions

Cash in hand Advances Bills purchases and discounted Cash credit and overdraft

8,894

9,845

10,824

12,686

15,730

18,748

20,901

21,812

Term loans

3,795

4,833

6,734

7,983

9,872

13,431

16,448

22,609

14,067

16,042

19,047

22,572

28,029

34,639

40,228

47,225

Total

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

195

...continued

(Rs crore) Secured Government guarantee Unsecured Total Priority sector Public sector

1996-97

1997-98

13,306

14,991

1998-99 1999-2000 18,336

21,634

2000-01

2001-02

2002-03

2003-04

26,503

32,601

36,714

42,123

618

919

458

335

387

493

662

364

143 14,067

132 16,042

254 19,047

602 22,572

1,139 28,029

1,275 34,369

2,852 40,228

4,737 47,225

4,380 1,495

5,275 1,745

6,595 2,417

8,323 3,065

10,857 4,408

13,441 6,225

16,034 6,860

20,735 6,519

Banks

52

12

12

10

28

237

237

205

Others Total

8,140 14,067

9,010 16,042

10,023 19,047

11,173 22,572

12,736 28,029

14,466 34,369

17,097 40,228

19,766 47,225

Advances outside India Total

0 14,067

0 16,042

0 19,047

0 22,572

0 28,029

0 34,369

0 40,228

0 47,225

0

0

9

9

9

10

9

9

- Government securities

8,974

10,106

12,326

16,089

18,437

19,304

25,338

33,069

- Other approved securities

2,886

3,041

2,827

2,624

2,501

2,459

2,409

2,343

62

99

364

325

257

344

270

267

1,623

2,317

2,698

2,651

3,306

5,383

5,458

5,766

149

189

227

254

213

212

220

206

- Others Total

282 13,976

154 15,906

122 18,564

146 22,090

406 25,120

495 28,197

326 34,021

465 42,116

Total investments

13,976

15,906

18,573

22,099

25,128

28,207

34,030

42,125

Investments Investments outside India Investments in India

- Shares - Debentures - Subsidiaries/JV

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

2,832

3,127

3460

4140

4980

Additions

n.a.

n.a.

n.a.

868

865

1180

1546

1044

Reductions

n.a.

n.a.

n.a.

574

531

500

706

1354

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

3,127 1,917

3,460 1,871

4140 1810

4980 1527

4670 449

Interest/Discount on advances/bills

1,954

1,961

2,182

2,514

2,824

3,318

3,712

3,876

Income on investments

1,525

1,821

1,976

2,417

2,742

3,003

3,298

3,681

169

164

182

172

152

228

179

113

6 3,654

46 3,992

108 4,448

52 5,155

146 5,863

99 6,648

296 7,485

110 7,780

248

280

328

382

419

434

480

552

Profit on sale of investments

35

237

79

215

242

447

677

1,265

Loss on sale of investments

0

0

0

0

0

-9

-5

-29

Profit on sale of fixed assets

0

1

1

1

0

0

0

0

Loss on revaluation of investments

0

0

0

0

-26

-58

-70

-118

73

62

74

76

94

92

95

106

Income from investments

7

25

15

20

3

28

24

30

Lease income

0

0

0

0

0

0

0

0

106 469

32 637

48 545

34 728

45 778

43 978

49 1,250

60 1,867

4,123

4,629

4,993

5,882

6,642

7,625

8,735

9,647

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

Profit on forex transactions

Miscellaneous income Total Total income

continued...

196

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

2,343

2,540

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

3,609

4122

4,163

3,926

Interest expended Interest on deposits Interest on RBI/inter bank

2,677

3,367

6

3

12

29

39

48

8

13

90

156

106

142

176

183

191

215

2,439

2,699

2,795

3,538

3,825

4,353

4,361

4,155

Salaries

811

871

1,069

1,184

1,459

1,316

1,476

1,654

Others

224

222

267

297

338

398

469

535

29

35

40

43

75

85

129

181

1,064

1,128

1,376

1,524

1,872

1,799

2,074

2,371

Others Total Operating expenses

Depreciation Total Provisions and contingencies

382

324

449

412

482

911

1,475

2,012

3,885

4,151

4,621

5,474

6,178

7,063

7,910

8,538

Profit for the year

238

478

372

408

464

562

825

1,109

Profits inclusive of provisions

620

802

821

820

945

1,473

2,300

3,121

714

895

831

929

585

558

195

252

1

1

1

0

0

0

0

0

2,131

3,628

3,190

3,942

12,619

16431

16,364

19,543

1,784

2,133

2,075

1,947

2,119

2616

3,151

3,995

336

583

535

613

431

449

382

1,131

1,594

1,634

1,692

1,978

2,441

2807

3,376

7,168

96

131

130

155

13

21

102

140

6,656

9,005

8,454

9,564

18,208

22,885

23,571

32,230

194

337

240

249

341

631

833

0

-333

0

-8

20

-35

133

1194 -31

123

276

159

124

111

199

341

65

44

51

47

10

116

168

661 188

382

324

449

412

482

911

1,475

2,012

Total expenses including provisions

Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India - Outside India Acceptances and endorsements Others Total Provisions and contingencies Provison for NPAs Depreciation in values of investments Provision for taxation Other Provisions Total Financial analysis Growth in deposits (per cent) Overall

14

14

16

16

18

14

18

16

Demand

5

15

28

12

16

7

46

0

Savings

14

23

18

16

17

17

18

19

Term

15

10

12

18

20

14

13

18

Demand

11

11

12

11

11

11

13

11

Savings

31

33

34

33

33

34

34

35

Term

59

56

55

55

56

56

53

54

100

100

100

100

100

100

100

100

0

0

0

0

0

0

0

0

Share of deposits (per cent)

Share of deposits (per cent) Domestic Abroad

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

197

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Profitability (per cent) Return on assets

0.7

1.3

0.9

0.8

0.8

0.8

1.0

1.2

Return on equity

19.0

31.9

20.8

19.4

18.8

18.6

22.3

24.5

Gearing (times)

25.1

23.0

23.0

22.8

22.8

20.6

20.4

19.4

Staff costs to operating expenses

78.4

77.2

77.7

77.7

78.0

73.2

71.2

69.8

Non-fund income to total income

11.4

13.8

10.9

12.4

11.7

12.8

14.3

19.4

Operating expenses to total income

25.1

24.4

27.6

25.9

28.2

23.6

23.7

24.6

Operating expenses to deposits

3.4

3.2

3.4

3.2

3.3

2.8

2.7

2.7

Earning per share (Rs)

6.8

22.5

17.5

19.2

21.8

14.9

31.1

41.8

Cost to income ratio

63.2

58.4

62.6

65.0

66.4

55.0

47.4

43.2

Cost to income ratio (w/o profit on invest) Financial management (per cent) Interest cost

64.5

66.6

64.9

71.6

72.7

63.7

56.1

56.1

n.a.

7.90

7.17

7.82

7.19

7.08

6.11

4.95

8.1

7.7

7.0

7.6

7.0

6.9

5.9

4.8

Average cost of borrowings Yield on carry business

11.5

52.1

51.3

39.9

32.3

42.7

37.1

23.4

n.a.

11.55

11.16

11.10

10.81

10.53

10.02

8.71

Average yield on investments

11.8

12.2

11.5

11.9

11.6

11.3

10.6

9.7

Average yield on advances Spreads

14.6

13.0

12.4

12.1

11.2

10.6

9.9

8.9

n.a.

3.65

3.99

3.27

3.62

3.45

3.91

3.76

Operating expenses to AFD

n.a.

3.22

3.40

3.23

3.40

2.81

2.74

2.63

Core fee income to AFD

n.a.

1.02

1.05

1.01

0.97

0.85

0.79

0.76 1.89

Average cost of deposits

Net Profitability Margin

n.a.

1.45

1.64

1.05

1.19

1.50

1.96

Deposits to borrowings (times)

34.8

108.2

164.2

102.6

77.6

111.2

130.7

83.9

9.2

8.8

10.8

10.3

10.2

10.7

12.0

13.1

61.6

40.4

54.7

50.2

50.9

61.9

64.1

64.5

28.5

19.6

23.3

18.1

18.0

27.0

36.6

40.1

Credit-deposit ratio

46

46

47

48

50

54

53

54

Incremental credit deposit ratio

38

45

54

53

63

79

50

58

1

1

0

1

1

1

1

1

Capital adequacy Provisions as a percentage of profit before provisions Provisions as a percentage of networth Liquidity (per cent)

Borrowings to total deposits Cash-deposit ratio Investment-deposit ratio

1

1

1

1

1

1

1

1

45

45

46

47

45

44

45

48

Incemental I/D ratio

55

44

48

53

35

39

50

67

Reserves as a percentage of net worth Growth (per cent)

74

87

89

91

92

89

93

95

Advances

11

14

19

19

24

23

17

17

Deposits

14

14

16

16

18

14

18

16

Investments

17

14

17

19

14

12

21

24

Salaries cost

7

7

23

11

23

-10

12

12

Commission and fee

19

13

17

16

10

3

11

15

Interest income Others

15

9

11

16

14

13

13

4

Branches (nos)

3,765

3,793

3,822

3,853

3,879

3,857

4,037

4,022

Advances per branch (Rs crore)

3.74

4.23

4.98

5.86

7.23

8.91

9.96

11.74

Operating expenses per branch (Rs crore)

0.28

0.30

0.36

0.40

0.48

0.47

0.51

0.59

67,616

66,599

65,705

64,733

58,309

57,859

58,981

58,839

Income per employee (Rs crore)

0.06

0.07

0.08

0.09

0.11

0.13

0.15

0.16

Income/employee expenses (times)

5.08

5.31

4.67

4.97

4.55

5.79

5.92

5.83

Employees (nos)

continued...

198

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04 81

Total income (per cent) Interest

89

86

89

88

88

87

86

Forex

2

1

1

1

1

1

1

1

Commission, brokerage

6

6

7

6

6

6

5

6

Priority

31

33

35

37

39

39

40

44

Public

11

11

13

14

16

18

17

14

0

0

0

0

0

1

1

0

Others

58

56

53

49

45

42

42

42

Abroad

0

0

0

0

0

0

0

0

Bills

10

9

8

8

9

7

7

6

Cash credit

63

61

57

56

56

54

52

46

Term loans

27

30

35

35

35

39

41

48

Share of advances (per cent)

Inter bank

Share of advances (per cent)

Share of advances (per cent) Secured

95

93

96

96

95

95

91

89

Government guarantee

4

6

2

1

1

1

2

1

Unsecured

1

1

1

3

4

4

7

10

Government securities

64

64

66

73

73

68

74

79

Other approved securities

21

19

15

12

10

9

7

6

0

1

2

1

1

1

1

1

Debentures

12

15

15

12

13

19

16

14

Subsidiary

1

1

1

1

1

1

1

0

Others

2

1

1

1

2

2

1

1

Share of investments (per cent)

Shares

Outside India

0

0

0

0

0

0

0

0

Gross NPAs (per cent)

16.3

14.5

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPAs (per cent)

10.4

9.6

9.0

8.5

6.7

5.3

3.9

1.0

n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

199

Oriental Bank of Commerce (Rs crore)

Table 7 1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

193

193

193

193

193

193

193

749

889 13,058

1,039

1,236

10,054

16,805

22,095

1,356

1,427

24,680

28,488

1,917 29,809

35,674

107

99

108

514

227

817

1,166

1,100

Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions

193

2,484

456

542

640

504

616

1,311

914

1,556

11,559

14,780

18,784

24,541

27,072

32,237

33,999

41,007

1,101

1,580

2,022

2,275

2,028

2,351

1,896

2,634

635

322

370

358

621

981

628

967

Investments

4,388

5,957

7,839

11,560

12,298

13,698

14,781

16,794

Advances

4,886

6,318

7,708

9,326

11,076

14,158

15,677

19,681

76

121

140

135

130

143

145

162

Total Assets Cash and balances with RBI Balances with bank and money at call

Fixed assets Other assets Total

472

482

705

888

918

906

872

770

11,559

14,782

18,784

24,541

27,072

32,237

33,999

41,007

Deposits Demand

1,217

1,379

1,537

1,884

2,070

2,307

2,744

3,113

Savings

1,935

2,418

2,981

3,657

4,249

4,848

5,762

7,074

Term

6,902

9,261

12,287

16,554

18,362

21,334

21,302

25,487

Total

10,054

13,058

16,805

22,095

24,680

28,488

29,809

35,674

Deposits of branches in India

10,054

13,058

16,805

22,095

24,680

28,488

29,809

35,674

Deposits of branches abroad Total

0

0

0

0

0

0

0

0

10,054

13,058

16,805

22,095

24,680

28,488

29,809

35,674

Borrowings RBI

0

0

0

100

0

0

0

0

Other banks

3

2

0

3

0

1

0

0

Other institutions and agencies

82

60

56

398

177

816

998

527

Forex borrowings

22

38

52

13

49

0

168

573

107

99

108

514

226

817

1,166

1,100

Inter-office adjustments

145

230

249

87

121

118

132

172

Bills payable

121

105

150

122

137

227

159

207

Total Other liabilities and provisions

Interest accrued

64

56

60

68

70

70

89

85

Others (including provisions)

128

150

181

226

288

896

534

1,092

Total

458

542

640

504

616

1,311

914

1,556

Balance with RBI

140

1,432

1,818

2,046

1,817

2,152

1,686

2,424

Cash in hand

961

148

205

229

212

199

210

210

Advances Bills purchases and discounted

451

611

751

681

672

691

905

869

Cash credit and overdraft

2,982

3,902

4,637

5,548

6,715

7,546

7,739

8,135

Term loans

1,453

1,806

2,319

3,097

3,690

5,921

7,032

10,678

Total

4,886

6,318

7,708

9,326

11,076

14,158

15,677

19,681

Continued...

200

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Secured Government guarantee

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

4,194

5,448

1998-99 1999-2000 6,596

7,645

8,946

10,483

12,089

14,942

593

787

963

1,305

1,533

2,207

1,929

1,563

Unsecured Total

99 4,886

83 6,318

148 7,708

375 9,326

597 11,076

1,468 14,158

1,660 15,677

3,175 19,681

Priority sector

1,958

2,474

3,061

3,702

4,293

5,455

6,028

7,488

244

325

336

536

661

879

1,471

3,241

Banks

24

31

29

0

25

30

3

1

Others Total

2,660 4,886

3,488 6,318

4,281 7,708

5,088 9,326

6,098 11,076

7,794 14,158

8,175 15,677

8,950 19,681

Advances outside India Total

0 4,886

0 6,318

0 7,708

0 9,326

0 11,076

0 14,158

0 15,677

0 19,681

0

0

0

0

0

0

0

0

2,760

2,965

4,069

6,564

7,363

8,552

10,157

12,451

439

444

498

472

499

498

491

459

21

127

176

252

159

143

133

124

1,124

2,323

2,990

4,069

3,904

4,183

3,732

3,546

0

0

0

0

0

0

0

0

- Others Total

44 4,388

98 5,957

105 7,839

204 11,560

374 12,298

322 13,698

267 14,781

214 16,794

Total investments

4,388

5,957

7,839

11,560

12,298

13,698

14,781

16,794

Public sector

Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares - Debentures - Subsidiaries/JV

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

498

528

586

952

1146

Additions

n.a.

n.a.

n.a.

237

446

601

630

527

Reductions

n.a.

n.a.

n.a.

207

388

235

435

462

Closing balances Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

528 336

586 397

952 436

1146 225

1211 0

Interest/Discount on advances/bills

708

739

933

1,011

1,203

1,416

1,536

1,591

Income on investments

494

669

847

1,367

1,441

1,546

1,613

1,633

36

43

70

79

94

81

88

71

13 1,251

7 1,458

23 1,873

2 2,458

21 2,759

6 3,049

68 3,304

5 3,301

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

66

72

82

96

96

102

106

114

Profit on sale of investments

2

15

23

58

99

316

393

511

Loss on sale of investments

0

0

0

0

-4

-5

-20

-7

Profit on sale of fixed assets

0

0

0

0

1

0

0

0

Loss on revaluation of investments

0

0

0

0

-10

-28

-26

-5

Profit on forex transactions

29

33

36

34

38

39

47

59

Income from Investments

1

5

14

19

16

9

10

0

Lease income

0

0

0

0

0

6 104

14 138

18 174

15 221

31 268

41 474

32 541

50 722

1,355

1,596

2,046

2,679

3,027

3,523

3,845

4,022

Miscellaneous income Total Total income

0

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

201

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

782

939

1,270

2000-01

2001-02

2002-03

2003-04

1,937

2,030

2,032

1,786

Interest expended Interest on deposits Interest on RBI /inter bank

1,718

7

11

10

15

12

10

3

6

Others

12

9

12

20

29

55

53

Total

801

9 959

1,290

1,745

1,968

2,068

2,090

1,845

154

185

217

231

315

288

348

366 177

Operating expenses Salaries Others

87

98

127

155

168

162

152

Depreciation

12

17

26

42

41

39

42

50

253

301

371

428

524

490

541

594

Total Provisions and contingencies

121

127

156

227

331

597

706

847

1,175

1,386

1,816

2,401

2,824

1,086

1,247

1,441

Profit for the year

180

210

230

279

203

2,437

2,598

2,581

Profits inclusive of provisions

301

337

386

506

534

3,033

3,304

3,428

72

100

177

200

259

198

280

147

1

1

8

0

0

0

0

0

253

562

537

599

594

1,020

1,015

2711

774

1,041

852

949

1,029

1,249

1,478

1844

7

25

20

24

28

48

64

76

292

271

354

406

428

464

489

1746

21

17

16

12

14

12

5

2

1,420

2,017

1,963

2,189

2,352

2,990

3,331

6,525

52

77

101

127

274

139

328

89

Total expenses including provisions

Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India - Outside India Acceptances and endorsements Others Total Provisions and contingencies Provison for NPAs Depreciation in values of investments Provision for taxation Other Provisions Total

2

4

0

0

-30

16

-6

0

66

46

52

60

79

249

279

460

0

0

3

40

9

193

105

298

120

127

156

227

331

597

706

847

Financial analysis Growth in deposits (per cent) Overall

15

30

29

31

12

15

5

20

Demand

18

13

11

23

10

11

19

13

Savings

18

25

23

23

16

14

19

23

Term

14

34

33

35

11

16

0

20

Demand

12

11

9

9

8

8

9

9

Savings

19

19

18

17

17

17

19

20

Term

69

71

73

75

74

75

71

71

100

100

100

100

100

100

100

100

0

0

0

0

0

0

0

0

Share of deposits (per cent)

Share of deposits (per cent) Domestic Abroad

continued...

202

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Profitability (per cent) Return on assets

1.6

1.6

1.4

1.3

0.8

8

8

7

Return on equity

20.4

20.8

19.9

20.9

13.6

154

139

108

Gearing (times)

11.3

12.7

14.3

16.2

16.5

19

15

14

Staff costs to operating expenses

61

62

58

54

60

59

64

62

Non-fund income to total income

8

9

8

8

9

13

14

18

19

19

18

16

17

14

14

15

3

2

2

2

2

2

2

2

9.3

10.9

12.0

14.5

10.5

126.6

134.9

134.1

Cost to income ratio

45.7

47.1

49.0

45.8

49.5

33.7

30.8

27.3

Cost to income ratio (w/o profit on invest) Financial management (per cent) Interest cost

45.8

48.2

50.5

48.9

54.6

43.0

39.7

35.7 5.42

Operating expenses to total income Operating expenses to deposits Earning per share (Rs)

n.a.

8.14

8.51

8.77

8.24

7.58

6.89

Average cost of deposits

8.3

8.1

8.5

8.8

8.3

7.6

7.0

5.5

Average cost of borrowings Yield on carry business

n.a.

19.4

18.9

8.7

8.4

7.3

5.8

5.2

n.a.

11.71

11.85

12.07

11.36

10.85

10.44

9.13

Average yield on investments

12.4

12.9

12.3

14.1

12.1

12

11

10

Average yield on advances Spreads

14.8

13.2

13.3

11.9

11.8

11

10

9

n.a.

3.57

3.34

3.30

3.12

3.27

3.55

3.71

Operating expenses to AFD

n.a.

2.39

2.31

2.07

2.12

1.71

1.69

1.63

Core fee income to AFD

n.a.

0.89

0.79

0.66

0.61

0.56

0.53

0.54

Net Profitability Margin

n.a.

2.07

1.83

1.90

1.61

2.12

2.39

2.63

Deposits to borrowings (times)

27.5

111.9

143.9

62.5

63.1

50.9

29.4

28.9

Capital adequacy Provisions as a percentage of profit before

17.5

15.3

14.1

12.7

11.8

11.0

14.5

14.0

40.2

37.8

40.4

44.9

62.0

19.7

21.4

24.7

12.9

11.8

12.7

15.9

21.4

36.8

33.5

31.6

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio

49

48

46

42

45

50

53

55

Incremental credit deposit ratio

16

48

37

31

68

81

115

68

1

1

1

2

1

3

4

3

10

1

1

1

1

8

6

7

Borrowings to total deposits Cash-deposit ratio Investment-deposit ratio Incemental I/D ratio

44

46

47

52

50

48

50

47

n.a.

52

50

70

29

37

82

34

80

82

84

87

88

88

91

93

Reserves as a percentage of net worth Growth (per cent) Advances

5

29

22

21

19

28

11

26

Deposits

15

30

29

31

12

15

5

20

Investments

22

36

32

47

6

11

8

14

Salaries cost

9

20

17

7

36

-8

21

5

Commission and fee

1

9

14

17

0

6

4

7

22

17

28

31

12

11

8

0 1013

Interest income Others Branches (nos)

755

841

899

915

932

967

989

Advances per branch (Rs crore)

6.47

7.51

8.57

10.19

11.88

15

16

19

Operating expenses per branch (Rs crore)

0.34

0.36

0.41

0.47

0.56

0.51

0.55

0.59

Employees (nos)

13,580

14,238

14,447

14,398

13,588

13589

13507

13602

Income per employee (Rs crore)

0.10

0.11

0.14

0.19

0.22

0.26

0.28

0.30

Income/employee expenses (times)

8.80

8.63

9.44

11.58

9.60

12.21

11.06

10.98

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

203

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Total income (per cent) Interest

92

91

92

92

91

87

86

82

Forex

2

2

2

1

1

1

1

1

Commission, brokerage

5

5

4

4

3

3

3

3

40

39

40

40

39

39

38

38

Share of advances (per cent) Priority Public

5

5

4

6

6

6

9

16

Inter bank

0

0

0

0

0

0

0

0

Others

54

55

56

55

55

55

52

45

Abroad

0

0

0

0

0

0

0

0

Share of advances (per cent) Bills

9

10

10

7

6

5

6

4

Cash credit

61

62

60

59

61

42

45

54

Term loans

30

29

30

33

33

42

45

54

Secured

86

86

86

82

81

74

77

76

Government guarantee

12

12

12

14

14

16

12

8

2

1

2

4

5

10

11

16

Government securities

63

50

52

57

60

62

69

74

Other approved securities

10

7

6

4

4

4

3

3

0

2

2

2

1

1

1

1

Debentures

26

39

38

35

32

31

25

21

Subsidiary

0

0

0

0

0

0

0

0

Share of advances (per cent)

Unsecured Share of advances (per cent)

Shares

Others

1

2

1

2

3

2

2

1

Outside India

0

0

0

0

0

0

0

0

Gross NPAs (per cent)

7.4

6.2

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPAs (per cent)

5.6

4.5

4.5

3.8

3.6

3.2

1.4

0.0

n.a.: Not available Source: CRIS INFAC

204

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Dena Bank (Rs crore)

Table 8 1996-97

1997-98

Capital

207

207

207

Reserves and surplus

296

339

489

7,861

10,115

11,795

Liabilities

Deposits Borrowings Other liabilities and provisions Total Assets Cash and balances with RBI Balances with bank and money at call

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

207

207

207

207

207

620

574

770

792

848

13,287

14,573

15,355

16,491

18,349

111

179

586

755

377

266

228

308

1,239

1,424

1,766

1,983

2,177

2,245

2,444

2,447

9,714

12,264

14,843

16,851

17,909

18,842

20,162

22,160

801

1,395

1,314

1,251

1,198

1,024

1,115

1,233

353

478

487

318

1,033

509

337

218

Investments

3,719

4,601

5,646

6,915

6,816

7,648

8,500

9,736

Advances

7,002

7,523

8,436

9,412

4,043

5,147

6,396

7,118

Fixed assets

154

163

289

335

327

316

296

294

Other assets

644

480

710

914

1,533

1,823

1,478

1,266

9,714

12,264

14,843

16,851

17,909

18,842

20,162

22,160

Demand

1,120

1,101

1,219

1,599

1,633

1,682

1,699

1,941

Savings

2,170

2,483

2,910

3,350

3,951

4,362

4,854

5,680

Term

4,571

6,530

7,666

8,338

8,989

9,311

9,938

10,728

Total Deposits

Total

7,861

10,115

11,795

13,287

14,573

15,355

16,491

18,349

Deposits of branches in India

7,861

10,115

11,795

13,287

14,573

15,355

16,491

18,349

Deposits of branches abroad

0

0

0

0

0

0

0

0

7,861

10,115

11,795

13,287

14,573

15,355

16,491

18,349

0

0

230

367

187

103

0

0

3

0

169

50

0

0

0

0

109

179

186

337

190

164

132

93

Total Borrowings RBI Other banks Other institutions and agencies Forex borrowings Total Other liabilities and provisions

0

0

0

0

0

96

216

112

179

586

755

377

266

228

308

0

0

0

23

Inter-office adjustments

0

0

0

0

Bills payable

320

272

332

255

298

306

261

177

Interest accrued

501

552

735

931

1,054

1,013

1,064

997

Others (including provisions) Total Balance with RBI

417

600

699

797

826

926

1,120

1,250

1,238

1,424

1,766

1,983

2,177

2,245

2,444

2,447

723

1,310

1,222

1,140

1,095

1082

981

908

78

85

92

111

102

151

134

116

Cash in hand Advances Bills purchases and discounted

479

588

563

605

537

546

668

687

Cash credit and overdraft

2,222

2,788

3,429

3,997

3,418

3,591

4,058

3,699

Term loans

1,343

1,772

2,402

2,515

3,046

3,386

3,710

5,026

4,044

5,147

6,395

7,118

7,002

7,523

8,436

9,412

Total

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

205

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

3,157

4,324

5,282

5,981

5,915

7,079

7,342

8,188

587

758

948

952

899

163

461

527

Unsecured Total

300 4,044

65 5,147

164 6,395

185 7,118

188 7,002

281 7,523

633 8,436

697 9,412

Priority sector

1,629

2,183

2,669

2,855

2,739

2,828

3,167

3,815

306

460

496

743

852

1,360

1,408

1,497

Banks

4

12

2

28

49

0

0

0

Others Total

2,105 4,044

2,492 5,147

3,227 6,395

3,492 7,118

3,362 7,002

3,334 7,523

3,861 8,436

4,100 9,412

0 4,044

0 5,147

0 6,395

0 7,118

0 7,002

0 7,523

0 8,436

0 9,412

0

0

0

0

0

0

0

0

2,503

2,976

3,409

4,313

4,285

5,256

5,979

7,601

343

344

605

287

276

294

315

298

35

58

43

59

120

127

145

113

697

1,202

1,523

2,161

2,049

1,909

1,800

1,503

10

16

19

22

22

22

22

22

131 3,719

6 4,601

47 5,646

64 6,906

64 6,816

39 7,648

239 8,500

200 9,736

3,719

4,601

5,646

6,906

6,816

7,648

8,500

9,736

Opening balance

n.a.

n.a.

n.a.

858

1400

1928

1996

1617

Additions

n.a.

n.a.

n.a.

785

788

496

294

459

Reductions

n.a.

n.a.

n.a.

244

259

428

673

591

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

1,400 983

1,928 1,280

1966 1,227

1617 997

1484 884

Interest/Discount on advances/bills

580

678

799

832

839

810

872

817

Income on investments

406

512

641

715

816

825

836

868

27

24

44

32

39

59

45

45

1 1,014

3 1,216

8 1,492

8 1,587

22 1,716

15 1,708

18 1,772

6 1,735

Commission exchange and brokerage

59

71

71

86

84

78

77

82

Profit on sale of investments

11

61

16

74

37

202

240

443

Loss on sale of investments

-5

0

0

0

0

0

0

-2

Profit on sale of fixed assets

0

0

0

0

0

0

0

0

Secured Government guarantee

Public sector

Advances outside India Total Advances Investments Investments outside India

1998-99 1999-2000

Investments in India - Government securities - Other approved securities - Shares - Debentures - Subsidiaries/JV - Others Total Total Investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income

Loss on revaluation of investments

0

0

0

0

0

0

0

0

19

19

35

20

16

16

19

24

Income from Investments

0

0

0

0

3

4

15

9

Lease income

0

0

0

0

0

0

0

0

27 111

34 184

30 153

32 212

59 199

53 353

86 437

61 617

1,125

1,400

1,645

1,799

1,916

2,062

2,209

2,353

Profit on forex transactions

Miscellaneous income Total Total income

continued...

206

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Interest expended Interest on deposits

1996-97

1997-98

1998-99 1999-2000

579

735

958

1,043

2000-01

2001-02

2002-03

2003-04

1,139

1,166

1,125

1,071

Interest on RBI /Inter-bank

14

3

10

29

28

21

3

3

Others

47

52

83

98

100

79

76

69

640

790

1,051

1,169

1,267

1,266

1,204

1,143

Salaries

212

245

276

293

434

323

366

339

Others

71

82

88

101

124

90

89

105

8

10

14

18

21

24

28

28

291

337

378

411

580

437

483

472

Total Operating expenses

Depreciation Total Provisions and contingencies

121

169

106

156

334

324

380

480

1,052

1,296

1,535

1,736

2,182

2,026

2,067

2,095

73

105

110

63

-266

35

142

258

194

274

216

219

68

359

522

738

Claims against banks

14

84

70

54

101

68

127

157

Liability for partly paid investments

11

0

0

0

0

0

0

0

408

480

715

1,369

3,014

573

1,180

3,548

725

740

808

619

783

1,052

1,035

1,188

0

0

0

0 875

Total expenses including provisions Profit for the year Profits inclusive of provisions Contingent liabilities

Liability for outstanding forex contracts Guarantees - In India - Outside India Acceptances and endorsements

691

753

728

798

512

507

662

Others

137

165

180

146

524

59

147

71

1,986

2,223

2,501

2,986

4,933

2,259

3,151

5,840

68

141

93

166

290

316

270

206

Total Provisions and contingencies Provision for NPAs Provision for depreciation in the value of inves

0

0

8

-38

41

5

9

0

Provision towards income tax

17

24

5

25

0

19

50

121

Others

36

4

1

3

3

-16

51

153

121

169

106

156

334

324

380

480

Overall

21

29

17

13

10

5

7

11

Demand

26

-2

11

31

2

3

1

14

Savings

14

14

17

15

18

10

11

17

Term

24

43

17

9

8

4

7

8

Demand

14

11

10

12

11

11

10

11

Savings

28

25

25

25

27

28

29

31

Term

58

65

65

63

62

61

60

58

100

100

100

100

100

100

100

100

0

0

0

0

0

0

0

0

Total Financial analysis Growth in deposits (per cent)

Share of deposits (per cent)

Share of deposits (per cent) Domestic Abroad

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

207

...continued

(Rs crore) Profitability (per cent)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Return on assets

0.8

1.0

0.8

0.4

-1.5

0.2

0.7

1.2

Return on equity

18.7

20.0

17.8

8.3

-33.1

4.0

14.4

25.1

Gearing (times)

18.3

21.5

20.3

19.4

21.9

18.3

19.2

20.0

Staff costs to operating expenses

72.9

72.6

73.0

71.2

74.9

73.9

75.7

71.8

Non-fund income to total income

9.9

13.1

9.3

11.8

10.4

17.1

19.8

26.2 20.0

Operating expenses to total income

25.9

24.1

23.0

22.9

30.3

21.2

21.9

Operating expenses to deposits

3.7

3.3

3.2

3.1

4.0

2.8

2.9

2.6

Earning per share (Rs)

3.5

5.1

5.3

3.0

-12.9

1.7

6.9

12.5

Cost to income ratio

60.0

55.2

63.6

65.3

89.5

54.8

48.1

39.0

Cost to income ratio (w/o profit on invest) Financial management (per cent) Interest cost

61.4

61.3

65.4

74.0

94.9

73.4

63.2

61.5

n.a.

8.38

9.03

8.66

8.58

8.12

7.32

6.38

8.1

8.2

8.7

8.3

8.2

7.8

7.1

6.1

Average cost of borrowings Yield on carry business

16.7

38.0

24.3

18.8

22.6

30.9

32.2

26.9

n.a.

11.99

11.81

10.88

10.97

10.56

10.27

9.08

Average yield on investments

12.5

12.3

12.5

11.4

11.9

11.4

10.4

9.5

Average yield on advances Spreads

15.6

14.7

13.8

12.3

11.9

11.1

10.9

9.2

Operating expenses to AFD

n.a.

3.62

2.78

2.22

2.39

2.44

2.96

2.69

n.a.

3.28

2.97

2.79

3.66

2.67

2.75

2.42

n.a.

1.04

0.95

0.83

0.82

0.74

0.79

0.70

n.a.

1.38

0.76

0.25

-0.46

0.51

1.00

0.97

Deposits to borrowings (times)

19.6

62.0

28.7

18.7

24.6

46.5

64.4

64.9

Capital adequacy Provisions as a percentage of profit before

10.8

11.9

11.1

11.6

7.7

7.6

6.0

9.5

62.4

61.6

49.0

71.2

490.2

90.1

72.7

65.0

24.1

30.9

15.2

18.8

42.8

33.2

38.0

45.5

Average cost of deposits

Core fee income to AFD Net Profitability Margin

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio

51

51

54

54

48

49

51

51

Incremental C/D ratio

46

49

74

48

-9

67

80

53

Borrowings to total deposits

1

2

5

6

3

2

1

2

Cash-deposit ratio

1

1

1

1

1

1

1

1

47

45

48

52

47

50

52

53

Investment-deposit ratio Incemental I/D ratio

n.a.

39

62

85

-8

106

75

67

Reserves as a percentage of net worth Growth (per cent)

59

62

70

75

74

79

79

80

Advances

19

27

24

11

-2

7

12

12

Deposits

21

29

17

13

10

5

7

11

Investments

35

24

23

22

-1

12

11

15

Salaries cost

14

15

13

6

48

-26

13

-7

Commission and fee

-2

20

0

21

-2

-7

-1

6

Interest income Others

24

20

23

6

8

0

4

-2

Branches (nos)

1,143

1,156

1,166

1,170

1,175

1,135

1,135

1,130

Advances per branch (Rs crore)

3.54

4.45

5.49

6.08

5.96

6.63

7.43

8.33

Operating expenses per branch (Rs crore)

0.25

0.29

0.32

0.35

0.49

0.38

0.43

0.42

15,610

15,109

14,881

14,412

10,947

10,700

10,553

10,957

Income per employee (Rs crore)

0.07

0.09

0.11

0.12

0.17

0.19

0.21

0.21

Income/employee expenses (times)

5.31

5.72

5.97

6.14

4.41

6.39

6.04

6.95

Employees (nos)

continued...

208

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Total income (per cent)

1996-97

1997-98

Interest

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

90

87

91

88

90

83

80

74

Forex

2

1

2

1

1

1

1

1

Commission and brokerage

5

5

4

5

4

4

4

3

Priority

40

42

42

40

39

38

38

41

Public

8

9

8

10

12

18

17

16

Share of advances (per cent)

Inter-bank

0

0

0

0

1

0

0

0

Others

52

48

50

49

48

44

46

44

Abroad

0

0

0

0

0

0

0

0

Bills

12

11

9

9

8

7

8

7

Cash credit

55

54

54

56

49

48

48

39

Term loans

33

34

38

35

44

45

44

53

Secured

78

84

83

84

84

94

87

87

Government guarantee

15

15

15

13

13

2

5

6

7

1

3

3

3

4

8

7

Share of advances (per cent)

Share of advances (per cent)

Unsecured Share of investments (per cent) Government securities

67

65

60

62

63

69

70

78

Other approved securities

9

7

11

4

4

4

4

3

Shares

1

1

1

1

2

2

2

1

Debentures

19

26

27

31

30

25

21

15

Subsidiary

0

0

0

0

0

0

0

0

Others

4

0

1

1

1

1

3

2

Outside India

0

0

0

0

0

0

0

0

15.1

13.7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

9.4

8.3

7.7

13.5

18.4

16.3

11.8

9.4

Gross NPAs (per cent) Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

209

Corporation Bank (Rs crore) Liabilities Capital Reserves and surplus Deposits

Table 9 1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

82

120

120

120

120

143

143

143

318

729

855

1,025

1,228

1,903

2,227

2,625

6,673

9,352

12,601

14,280

16,560

18,924

21,725

23191

Borrowings

271

70

198

296

595

1,424

803

934

Other liabilities and provisions

810

943

1,209

1,042

1,200

1,210

1,374

2,260

8,154

11,214

14,983

16,762

19,703

23,604

26,272

29,154

804

1,004

1,220

1,162

1,088

1,336

1,284

1,694

Total Assets Cash and balances with RBI Balances with bank and money at call

601

1,156

1,228

1,120

2,097

2,010

1,145

1,142

Investments

3,287

4,154

5,511

5,962

6,860

8,056

10,670

10,685

Advances

3,015

4,303

6,286

7,777

8,666

10,987

12,029

13,890

Fixed assets

64

92

117

143

155

199

233

249

Other assets

383

505

622

597

837

1,015

911

1,493

8,154

11,214

14,983

16,762

19,703

23,604

26,272

29,154

Demand

1,472

1,443

1,647

1,910

2,137

2,314

2,922

3,559

Savings

1,096

1,316

1,600

1,958

2,247

2,609

3,276

4,324

Term

4,105

6,593

9,355

10,412

12,177

14,001

15,527

15,308

Total Deposits

Total

6,673

9,352

12,601

14,280

16,560

18,924

21,725

23,191

Deposits of branches in India

6,673

9,352

12,601

14,280

16,560

18,924

21,725

23,191

Deposits of branches abroad

0

0

0

0

0

0

0

0

6,673

9,352

12,601

14,280

16,560

18,924

21,725

23,191

0

0

134

146

210

351

25

0

Total Borrowings RBI Other banks

233

0

0

0

130

510

170

7

38

70

63

150

255

563

509

41

0

0

0

0

0

0

99

886

271

70

198

296

595

1,424

803

934

Inter-office adjustments

166

205

239

193

0

0

0

0

Bills payable

390

347

509

361

639

583

710

1,130

28

40

51

63

79

56

47

54

226

350

410

424

483

572

616

1,076

810

943

1,209

1,042

1,200

1,210

1,374

2,260

741

936

1,124

1,065

980

1,215

1,130

1,449

62

68

91

91

102

121

154

245

Other institutions and agencies Forex borrowings Total Other liabilities and provisions

Interest accrued Others (including provisions) Total Balance with RBI Cash in hand Advances Bills purchases and discounted

279

547

441

455

594

610

811

1,098

Cash credit and overdraft

1,621

2,187

2,888

3,055

4,153

5,824

6,041

6,028

Term loans

1,115

1,569

2,957

4,268

3,918

4,553

5,177

6,764

3,015

4,303

6,286

7,777

8,666

10,987

12,029

13,890

Total

Continued...

210

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

2,281

3,196

4,606

5,733

7,145

7,221

9,895

11,549

448

477

621

919

328

1,476

392

530

286 3,015

630 4,303

1,060 6,286

1,126 7,777

1,194 8,666

2,290 10,987

1,742 12,029

1,811 13,890

Priority sector

952

1,257

1,873

2,257

2,869

3,052

3,970

4,979

Public sector

412

431

588

1,628

1,576

2,938

2,095

1,123

Banks

4

2

90

22

0

31

232

230

Others Total

1,647 3,015

2,613 4,303

3,736 6,286

3,870 7,777

4,221 8,666

4,967 10,987

5,731 12,029

7,557 13,890

Advances outside India Total

0 3,015

0 4,303

0 6,286

0 7,777

0 8,666

0 10,987

0 12,029

0 13,890

0

0

0

0

0

0

0

0

1,713

2,114

2,945

3,700

4,612

5,866

8,346

8,671

338

351

335

321

307

243

188

181

38

81

72

84

44

55

55

59

675

1,065

1,605

1,501

1,532

1,658

1,788

1,542

Secured Government guarantee Unsecured Total

Investments Investments outside India

1998-99 1999-2000

Investments in India - Government securities - Other approved securities - Shares - Debentures - Subsidiaries/JV

0

3

10

85

88

115

115

115

523 3,287

540 4,154

543 5,511

271 5,962

278 6,860

120 8,057

179 10,670

117 10,685

3,287

4,154

5,511

5,962

6,860

8,057

10,670

10,685

Opening balance

n.a.

n.a.

n.a.

n.a.

433

485

587

657

Additions

n.a.

n.a.

n.a.

n.a.

136

246

177

162

Reductions

n.a.

n.a.

n.a.

n.a.

85

143

107

227

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

n.a. n.a.

485 171

587 253

657 198

722 250

Interest/Discount on advances/bills

403

427

608

806

934

997

1,020

991

Income on investments

366

522

634

689

744

824

965

1,094

40

48

93

94

94

91

65

44

20 829

30 1,028

20 1,356

15 1,604

33 1,805

34 1,946

52 2,103

73 2,201

- Others Total Total investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

73

95

125

130

131

124

117

131

Profit on sale of investments

2

1

11

58

67

135

266

224

Loss on sale of investments

0

0

0

0

0

0

0

0

Profit on sale of fixed assets

0

2

0

0

0

0

1

Loss on revaluation of investments

0

0

0

0

0

0

0

0

Profit on forex transactions

13

22

29

35

37

53

40

27

Income from investments

0

0

0

9

11

18

37

33

Lease income

0

0

0

0

0

0

0

0

Miscellaneous income Total

23 111

26 144

31 198

39 271

47 292

52 382

71 532

101 517

Total income

940

1,171

1,555

1,875

2,097

2,328

2,634

2,718

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

211

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

493

623

961

2

3

6

1,116

1,184

1,285

1,270

1,190

17

20

19

16

16

13

18

11

13

20

17

24

29

511

639

978

1,146

1,223

1,320

1,310

1,237

Salaries Others

114

129

165

177

200

214

256

284

57

86

87

105

120

269

344

Depreciation

229

Total

12

15

18

22

22

32

49

60

183

230

271

304

341

515

648

574

Provisions and contingencies

121

136

114

193

270

315

437

403

815

1,005

1,363

1,643

1,835

2,150

2,395

2,214

125

167

192

232

262

177

239

505

246

303

306

425

532

492

675

908

Claims against the banks

13

36

49

45

50

50

39

44

Liability for partly paid investments

10

0

19

0

0

0

0

0

1,261

2,100

1,654

2,066

3,832

2665

4485

4,267

365

564

813

831

994

0

0

1,548

Interest expended Interest on deposits Interest on RBI /Inter-bank Others Total Operating expenses

Total expenses including provisions Profit for the year Profits inclusive of provisions Contingent liabilities

Liability for outstanding forex contracts

1998-99 1999-2000

Guarantees - In India - Outside India Acceptances and endorsements Others

7

13

21

34

23

0

0

62

262

259

293

411

443

466

668

1,353

20

14

20

10

23

27

18

46

1,938

2,987

2,870

3,397

5,364

3,208

5,211

7,320

35

47

46

70

99

129

174

106

2

3

0

8

29

23

42

12

83

85

67

105

135

152

211

267

2

1

9

8

0

0

0

120

136

114

193

270

315

437

403

Overall

16

40

35

13

16

14

15

7

Demand

23

-2

14

16

12

8

26

22

Savings

20

20

22

22

15

16

26

32

Term

13

61

42

11

17

15

11

-1

Demand

22

15

13

13

13

12

13

15

Savings

16

14

13

14

14

14

15

19

Term

62

70

74

73

74

74

71

66

100

100

100

100

100

100

100

100

0

0

0

0

0

0

0

0

Total Provisions and contingencies Provision for NPAs Provision for depreciation in the value of inves Provision towards income tax Others Total Financial analysis Growth in deposits (per cent)

Share of deposits (per cent)

Share of deposits (per cent) Domestic Abroad

continued...

212

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Profitability (per cent)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Return on assets

1.7

1.7

1.5

1.5

1.4

0.8

1.0

1.8

Return on equity

34.4

26.7

21.1

21.9

21.0

10.5

10.8

19.6

Gearing (times)

19.4

12.2

14.4

13.6

13.6

10.5

10.1

9.5

Staff costs to operating expenses

62.3

56.1

60.9

58.3

58.6

41.5

39.5

49.6

Non-fund income to total income

11.8

12.3

12.8

14.4

13.9

16.4

20.2

19.0

Operating expenses to total income

19.5

19.6

17.4

16.2

16.3

22.1

24.6

21.1

2.7

2.5

2.1

2.1

2.1

2.7

3.0

2.5

Earning per share (Rs)

15.2

13.9

16.0

19.4

21.8

12.4

16.7

35.2

Cost to income ratio

42.7

43.1

46.9

41.7

39.1

51.1

49.0

38.7

Cost to income ratio (w/o profit on invest) Financial management (per cent) Interest cost

42.9

43.2

47.9

45.3

42.3

59.0

61.3

45.6

Operating expenses to deposits

n.a.

7.47

8.48

8.12

7.47

6.82

5.93

5.10

Average cost of deposits

7.9

7.8

8.8

8.3

7.7

7.2

6.2

5.3

Average cost of borrowings Yield on carry business

6.9

9.5

12.6

12.3

8.8

3.5

3.6

5.4

n.a.

11.99

11.49

10.99

10.65

9.63

8.97

8.48

Average yield on investments

13.5

14.0

13.1

12.0

11.6

11.0

10.3

10.2

Average yield on advances Spreads

14.8

11.7

11.5

11.5

11.4

10.1

8.9

7.6

Operating expenses to AFD

n.a.

4.52

3.01

2.87

3.18

2.81

3.04

3.38

n.a.

2.51

2.18

2.01

1.97

2.51

2.73

2.18

n.a.

1.42

1.36

1.22

1.10

0.99

0.81

0.80

Core fee income to AFD Net Profitability Margin

n.a.

3.43

2.20

2.09

2.31

1.29

1.12

1.99

Deposits to borrowings (times)

23.6

46.9

81.9

54.5

34.6

17.6

18.3

25.9

Capital adequacy Provisions as a percentage of profit before

11.3

16.9

13.2

12.8

13.3

17.9

18.5

20.1

49.2

44.9

37.3

45.3

50.8

64

65

44

30.3

16.0

11.7

16.8

20.0

15.4

18.4

14.6

Credit-deposit ratio

45

46

50

54

52

58

55

60

Incremental C/D ratio

61

48

61

89

39

98

37

127

4

1

2

2

4

8

4

4

provisions Provisions as a percentage of networth Liquidity (per cent)

Borrowings to total deposits Cash-deposit ratio Investment-deposit ratio Incemental I/D ratio

1

1

1

1

1

1

1

1

49

44

44

42

41

43

49

46

n.a.

32

42

27

39

51

93

1

Reserves as a percentage of net worth Growth (per cent)

80

86

88

90

91

93

94

95

Advances

23

43

46

24

11

27

9

15

Deposits

16

40

35

13

16

14

15

7

Investments

54

26

33

8

15

17

32

0

Salaries cost

21

13

28

7

13

7

20

11

Commission and fee

20

30

31

4

0

-5

-5

12

Interest income Others

24

24

32

18

12

8

8

5 717

Branches (nos)

507

581

617

648

652

659

684

Advances per branch (Rs crore)

5.95

7.41

10.19

12.00

13.29

17

18

19

Operating expenses per branch (Rs crore)

0.36

0.40

0.44

0.47

0.52

0.78

0.95

0.80

9,379 0.10

9,615 0.12

10,182 0.15

10,587 0.18

10,837 0.19

10801 0.22

10729 0.25

10734 0.25

8.25

9.09

9.43

10.58

10.48

10.88

10.29

9.56

Employees (nos) Income per employee (Rs crore)

Income/employee expenses (times)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

213

...continued

(Rs crore) Total income (per cent) Interest

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

88

88

87

86

86

84

80

81

Forex

1

2

2

2

2

2

2

1

Commission and brokerage

8

8

8

7

6

5

4

5

Share of advances (per cent) Priority

32

29

30

29

33

28

33

36

Public

14

10

9

21

18

27

17

8

Inter-bank

0

0

1

0

0

0

2

2

Others

55

61

59

50

49

45

48

54

Abroad

0

0

0

0

0

0

0

0

Share of advances (per cent) Bills

9

13

7

6

7

6

7

8

Cash credit

54

51

46

39

48

53

50

43

Term loans

37

36

47

55

45

41

43

49

Secured

76

74

73

74

82

66

82

83

Govt. guarantee

15

11

10

12

4

13

3

4

9

15

17

14

14

21

14

13

Government securities

52

51

53

62

67

73

78

81

Other approved securities

10

8

6

5

4

3

2

2

1

2

1

1

1

1

1

1

21

26

29

25

22

21

17

14 1

Share of advances (per cent)

Unsecured Share of investments (per cent)

Shares and debentures Debentures Subsidiary

0

0

0

1

1

1

1

16

13

10

5

4

1

2

1

0

0

0

0

0

0

0

0

Gross NPAs (per cent)

9.9

7.6

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Net NPAs (per cent)

3.6

2.9

2.0

1.9

2.0

2.31

1.65

1.8

Others Outside India

n.a.: Not available Source: CRIS INFAC

214

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

State Bank of Travancore (Rs crore)

Table 10 1996-97

1997-98

35

50

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

50

50

50

50

Liabilities Capital Reserves and surplus Deposits

50

50

174

302

331

384

465

560

673

875

6,464

7,468

8,650

10,183

11,573

13,460

15,926

19,721

Borrowings

92

126

140

61

38

64

48

271

1,026 7,790

1,187 9,133

1,743 10,914

1,757 12,435

2,357 14,483

2,360 16,493

2,336 19,033

3,086 24,003

Cash and balances with RBI

777

642

631

566

705

994

829

958

Balances with bank and money at call

350

819

1,132

1,339

1,201

998

413

449

Investments

2,626

3,301

4,384

4,872

5,453

6,372

8,039

10,778

Advances

3,659

4,001

4,252

5,131

6,397

7,436

9,171

11,132

Other liabilities and provisions Total Assets

Fixed assets

44

47

45

52

67

69

72

106

Other assets Total

333 7,790

324 9,133

470 10,914

475 12,435

660 14,483

625 16,493

509 19,033

580 24,003

Deposits Demand

732

969

931

1,047

1,247

1,217

1,109

1,494

Savings

1,313

1,582

1,995

2,328

2,654

3,084

3,869

4,758

Term Total

4,419 6,464

4,917 7,468

5,725 8,650

6,808 10,183

7,671 11,573

9,158 13,460

10,948 15,926

13,470 19,721

Deposits of branches in India

6,464

7,468

8,650

10,183

11,573

13,460

15,926

19,721

Deposits of branches abroad

0

0

0

0

0

0

0

0

6,464

7,468

8,650

10,183

11,573

13,460

15,926

19,721

Total Borrowings RBI

0

0

0

16

8

40

0

0

Other banks

0

0

0

0

0

0

1

0

Other institutions and agencies

75

70

61

45

38

24

5

4

Forex borrowings Total

17 92

55 126

79 140

0 61

0 46

0 64

43 48

267 271 595

Other liabilities and provisions Inter-office adjustments

0

18

328

236

631

189

270

Bills payable

304

334

376

355

179

410

384

401

Interest accrued

426

545

693

669

841

953

958

1,058

296 1,026

291 1,187

346 1,742

497 1,757

706 2,357

808 2,360

724 2,336

1,031 3,086

746

609

597

531

663

936

790

919

32

33

34

35

41

57

39

39

242

358

428

406

691

506

856

1,279

Cash credit and overdraft

2,629

2,822

2,896

3,401

4,164

4,894

5,240

5,662

Term loans Total

789 3,659

821 4,001

928 4,252

1,324 5,131

1,543 6,397

2,035 7,436

3,074 9,171

4,191 11,132

Secured

3,270

3,510

3,639

4,139

4,985

4969

7238

8793

298

290

340

551

546

1155

750

855

92 3,659

201 4,001

273 4,252

441 5,131

867 6,397

1311 7,436

1183 9,171

1484 11,132

Others (including provisions) Total Balance with RBI Cash in hand Advances Bills purchases and discounted

Government guarantee Unsecured Total

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

215

...continued

(Rs crore) Priority sector Public sector

1996-97

1997-98

1,209

1,302

1998-99 1999-2000 1,409

1,705

2000-01 2,016

2001-02 20002-03 2260

3081

2003-04 4143 1570

538

618

677

962

1,313

1732

1248

Banks

0

2

0

7

2

1

28

131

Others Total

1,777 3,525

2,078 4,001

1,965 4,051

2,457 5,131

2,648 5,978

3442 7436

4813 9171

5288 11132

Advances outside India Total

134 3,659

0 4,001

0 4,051

0 5,131

0 5,978

0 7436

0 9171

0 11132

0

0

0

0

0

0

0

0

2,133

2,711

3,824

4,185

4,818

5815

7445

10145

291

293

259

237

212

186

162

153

Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares - Debentures - Subsidiaries/JV

143

183

231

370

30

36

34

36

158

200

336

348

288

358

419

0

0

0

0

0

0

0

0

- Others Total

59 2,626

114 3,459

70 4,584

79 5,207

45 5,453

48 6,372

40 8,039

24 10,778

Total investments

2,626

3,459

4,584

5,207

5,453

6,372

8,039

10,778

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

886

474

758

728

635

Additions

n.a.

n.a.

n.a.

244

256

205

133

257

Reductions

n.a.

n.a.

n.a.

318

309

235

225

230

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

811 452

758 496

718 425

635 280

662 154

Interest/Discount on advances/bills

600

553

475

515

621

683

790

868

Income on investments

269

372

470

560

611

680

725

828

21

19

18

23

19

41

51

31

19 909

38 982

56 1,019

61 1,160

64 1,315

50 1,454

18 1,584

13 1,740

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

88

93

111

129

123

118

132

141

Profit on sale of investments

1

14

6

25

30

75

130

269

Loss on sale of investments

0

0

0

0

0

0

0

0

Profit on sale of fixed assets

0

0

0

0

0

1

0

1

Loss on revaluation of investments

0

0

0

0

0

0

0

0

32

34

25

28

26

25

26

37

Profit on forex transactions Income from investments

0

0

0

5

5

5

5

5

Lease income

0

0

0

0

0

0

0

0

3 124

7 149

10 153

7 195

10 194

7 230

7 300

17 470

1,033

1,130

1,172

1,354

1,509

1,684

1,885

2,210

Miscellaneous income Total Total income

continued...

216

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

604

659

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

859

958

1002

996

Interest expended Interest on deposits

724

823

Interest on RBI /Inter-bank

18

22

26

25

36

2

2

1

Others

39

33

31

30

25

70

57

60

Total

661

714

781

878

920

1,029

1,062

1,057

Salaries

167

152

173

221

277

245

269

317

Others

47

58

67

73

69

55

59

68

Operating expenses

Depreciation Total

7

8

0

0

14

17

20

34

221

217

240

294

359

317

348

419

Provisions and contingencies

110

137

107

116

133

200

284

456

Total expenses including provisions

993

1,067

1,129

1,288

1,412

1,412

1,412

1,412

40

63

43

66

97

97

97

97

151

200

150

182

230

230

230

230

17

18

24

27

42

47

13

1

Profit for the year Profits inclusive of provisions Contingent liabilities Claims against banks Liability for partly paid investments

1

0

0

0

0

0

0

0

395

476

798

1,941

2937

4,252

7,279

10,061

471

395

387

382

380

352

462

677

9

18

20

3

3

9

1

3

Acceptances and endorsements

371

252

288

310

347

314

421

544

Others

150

151

231

214

261

133

316

112

1,413

1,310

1,747

2,878

3,969

5,107

8,493

11,398

61

138

109

84

94

143

160

262

Provision for depreciation in the value of inves

15

-69

-6

-4

9

4

9

5

Provision towards income tax

34

67

14

38

25

47

101

143

0

33

-62

22

-8

7

14

46

110

137

107

116

133

200

284

456

Liability for outstanding forex contracts Guarantees - In India - Outside India

Total Provisions and contingencies Provision for NPAs

Others Total Financial analysis Growth in deposits (per cent) Overall

19

16

16

18

14

16

18

24

Demand

38

32

-4

12

19

-2

-9

35

Savings

7

21

26

17

14

16

25

23

21

11

16

19

13

19

20

23

Demand

11

13

11

10

11

9

7

8

Savings

20

21

23

23

23

23

24

24

Term

68

66

66

67

66

68

69

68

Term Share of deposits (per cent)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

217

...continued

(Rs crore)

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Financial parameters Profitability (per cent) Return on assets

0.6

0.7

0.4

0.6

0.7

0.6

0.5

0.5

Return on equity

19.7

22.6

11.8

16.3

20.5

17.3

14.6

11.8

Gearing (times)

36.3

25.0

27.6

27.7

27.1

26.0

25.3

24.9

Staff costs to operating expenses

75.6

69.8

72.1

75.2

77.1

77.3

77.4

75.6

Non-fund income to total income

12.0

13.2

13.0

14.4

12.9

13.7

15.9

21.3

Operating expenses to total income

21.4

19.2

20.5

21.7

23.8

18.8

18.5

19.0

3.4

2.9

2.8

2.9

3.1

2.4

2.2

2.1

Earning per share (Rs)

11.5

12.7

8.6

13.3

19.4

19.4

19.4

19.4

Cost to income ratio

59.5

52.1

61.5

61.8

61.0

48.4

42.3

36.3

Cost to income ratio (w/o profit on invest)

59.6

53.9

62.5

65.2

64.3

54.6

50.3

47.3

Interest cost

n.a.

9.65

9.14

8.88

8.22

8.00

7.01

5.75

Average cost of deposits

10.2

9.5

9.0

8.7

7.9

7.7

6.8

5.6

Average cost of borrowings

60.8

50.0

42.6

54.4

113.3

130.3

106.2

37.9

Yield on carry business

n.a.

12.41

10.98

10.76

10.47

9.89

9.29

8.36

Average yield on investments

12.0

12.5

12.2

12.1

11.8

11.5

10.1

8.8

Average yield on advances

17.1

14.4

11.5

11.0

10.8

9.9

9.5

8.5

Spreads

n.a.

2.76

1.84

1.88

2.25

1.89

2.29

2.61

Operating expenses to AFD

n.a.

2.68

2.51

2.64

2.80

2.14

2.03

2.01

Core fee income to AFD

n.a.

1.62

1.47

1.44

1.20

0.99

0.94

0.89

Net Profitability Margin

n.a.

1.70

0.81

0.68

0.65

0.74

1.20

1.50

Deposits to Borrowings(times)

n.a.

64.02

60.54

93.35

219.25

246.10

261.51

111.75

Capital adequacy

8.2

11.5

n.a.

11.1

11.8

12.5

11.3

11.4

73.3

68.3

71.3

63.5

57.7

67.3

74.5

82.4

52.8

38.9

28.1

26.7

25.8

32.8

39.3

49.3

Credit-deposit ratio

57

54

49

50

55

55

58

56

Incremental C/D ratio

30

34

21

57

91

55

70

52

Borrowings to total deposits

1

2

2

1

0

0

0

1

Cash-deposit ratio

0

0

0

0

0

0

0

0

41

44

51

48

47

47

50

55

67

92

32

42

49

68

72

86

87

88

90

92

93

95

Operating expenses to deposits

Financial management (per cent)

Provisions as a percentage of profit before provisions Provisions as a percentage of networth Liquidity (per cent)

Investment-deposit ratio Incemental I/D ratio Reserves as a percentage of net worth

83

Growth (per cent) Advances

9

9

6

21

25

16

23

21

Deposits

19

16

16

18

14

16

18

24

Investments

-22

-10

10

15

6

0

8

18

Salaries cost

22

-9

14

28

25

-12

10

18

9

6

19

16

-5

-4

12

7

19

8

4

14

13

11

9

10

654

660

664

667

671

674

671

668

Commission and fee Interest income

Others Branches (nos) Advances per branch (Rs crore)

5.60

6.06

6.40

7.69

9.53

11.03

13.67

16.67

Operating expenses per branch (Rs crore)

0.34

0.33

0.36

0.44

0.54

0.47

0.52

0.63

Employees (nos)

12,990

13,049

13,234

12,953

12,172

12137

12005

12007

Income per employee (Rs crore)

0.08

0.09

0.09

0.10

0.12

0.14

0.16

0.18

Income/employee expenses (times)

6.18

7.46

6.76

6.11

5.45

6.87

7.00

6.98

continued...

218

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04 79

Total income (per cent) Interest

88

87

87

86

87

86

84

Forex

3

3

2

2

2

2

1

2

Commission, brokerage

8

8

9

10

8

7

7

6

Priority

33

33

35

33

34

30

34

37

Public

15

15

17

19

22

23

14

14

0

0

0

0

0

0

0

1

Others

49

52

49

48

44

46

52

48

Abroad

4

0

0

0

0

0

0

0

7

9

10

8

11

7

9

11

Cash credit

72

71

68

66

65

66

57

51

Term loans

22

21

22

26

24

27

34

38

Share of advances (per cent)

Inter bank

Share of advances (per cent) Bills

Share of advances (per cent) Secured

89

88

86

81

78

67

79

79

Govt. guarantee

8

7

8

11

9

16

8

8

Unsecured

3

5

6

9

14

18

13

13

Government securities

81

78

83

80

88

91

93

94

Other approved securities

Share of investments (per cent) 11

8

6

5

4

3

2

1

Shares

0

5

5

7

1

1

0

0

Debentures

5

5

4

6

6

5

4

4

Subsidiary

0

0

0

0

0

0

0

0

Others

2

3

2

2

1

1

0

0

8.8

12.2

10.8

8.6

7.8

5.7

3.1

1.4

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

219

ICICI Bank (Rs crore)

Table 11 1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

150

165

165

197

220

963

963

966

32

102

143

953

1,092

5,632

6,321

7,394

1,348

2,629

6,073

9,866

16,378

32,085

48,169

68,109

93

192

200

491

1,033

49,219

34,302

30,740

Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions

159

191

401

566

1,013

16,208

17,057

18,019

1,782

3,279

6,982

12,073

19,737

104,106

106,812

125,229

Cash and balances with RBI

150

310

466

722

1,232

1,774

4,886

5,408

Balances with bank and money at call

223

563

1,172

2,693

2,362

11,012

1,603

3,062

Investments

435

1,023

2,861

4,417

8,187

35,891

35,463

42,743

Advances

798

1,128

2,110

3,657

7,031

47,035

53,279

62,096

96

184

200

222

381

4,239

4,061

4,057

Total Assets

Fixed assets Other assets Total

79

72

172

361

543

4,155

7,521

7,863

1,782

3,279

6,982

12,073

19,737

104,106

106,812

125,229 7,260

Deposits Demand

316

363

577

1,587

2,622

2,736

3,689

Savings

50

104

227

533

1,881

2,497

3,793

8,372

Term

982

2,162

5,269

7,745

11,876

26,852

40,687

52,477

Total

1,348

2,629

6,073

9,866

16,378

32,085

48,169

68,109

Deposits of branches in India

1,348

2,629

6,073

9,866

16,378

32,085

48,169

68,109

Deposits of branches abroad Total Borrowings RBI

0

0

0

0

0

0

0

0

1,348

2,629

6,073

9,866

16,378

32,085

48,169

68,109

0

0

148

219

301

141

0

0

Other banks

80

29

42

192

398

2,688

2,447

1,657

Other institutions and agencies

13

163

10

81

325

39,114

25,964

21,309

Forex borrowings Total

0

0

0

0

9

7,276

5,892

7,774

93

192

200

491

1,033

49,219

34,302

30,740

Other liabilities and provisions Inter-office adjustments Bills payable Interest accrued

0

0

0

0

0

33

0

342

69

108

112

142

381

817

1,031

1,685

6

18

23

34

56

2,290

1,619

1,356

9,751

9,750

9,106

577

3,349

4,658

5,872

Unsecured redeemable bonds Others(including provisions)

85

66

97

390

Total

159

191

232

566

1,013

16,208

17,057

18,020

Balance with RBI

148

303

457

690

1,131

1529

4550

4961

3

7

9

31

101

246

336

447

76

141

455

701

1,087

1,654

438

1,231

632

842

1,384

2,578

4,971

2,403

3,134

6,098

89

145

272

378

974

42978

49,708

54,767

798

1,128

2,110

3,657

7,031

47,035

53,279

62,096

Cash in hand Advances Bills purchased and discounted Cash credit and overdraft Term loans Total

Continued...

220

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

771

1,057

1,825

2,806

4,947

44,604

50,068

56,801

0

6

58

98

449

1,029

1,700

615

Unsecured Total

27 798

64 1,128

227 2,110

753 3,657

1,635 7,031

1,401 47,035

1,511 53,279

4,679 62,096

Priority sector

219

329

478

497

1,185

1,986

8,938

14,531

0

0

4

104

844

4,356

1,897

707

Banks

15

0

0

15

91

179

101

43

Others Total

564 798

799 1,128

1,628 2,110

3,040 3,657

4,912 7,031

40,451 46,973

42,289 53,226

45,751 61,032

Advances outside India Total

0 798

0 1,128

0 2,110

0 3,657

0 7,031

62 47,035

54 53,279

1,064 62,096

0

0

0

0

8

12

9

361

313

705

1,527

2,815

4,070

22,722

25,549

29,888

0

0

0

0

41

70

34

30

- Shares

10

47

138

161

125

1,909

1,642

1,684

- Debentures

69

217

667

1,137

3,070

6,436

5,690

5,549

Secured Government guarantee

Public sector

1998-99 1999-2000

Investments Investments outside India Investments in India - Government securities - Other approved securities

- Subsidiaries/JV

0

0

0

0

0

607

781

1,104

- Others Total

42 435

55 1,023

529 2,861

304 4,417

872 8,179

4,134 35,879

1,758 35,454

4,127 42,382

Total investments

435

1,023

2,861

4,417

8,187

35,891

35,462

42,743

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

101

95

409

5013

5027

Additions

n.a.

n.a.

n.a.

68

128

4877

1194

1419

Additions -from Bank of Mathura

n.a.

n.a.

n.a.

0

238

0

0

0

Reductions

n.a.

n.a.

n.a.

75

51

274

1179

3399

Closing balances Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. 60

95 56

409 154

5013 2720

5027 3151

3048 2037

134

143

226

348

571

772

6,016

6,074

55

81

208

410

556

1,234

2,910

2,432

3

32

109

95

109

123

236

211

3 195

4 260

0 544

1 853

7 1,242

24 2,152

206 9,368

178 8,894

Commission exchange and brokerage

15

25

37

67

140

230

792

1,072

Profit on sale of investments

11

35

12

101

19

306

492

1,221

Profit on sale of fixed assets

0

0

0

0

0

0

-7

0

Profit on revaluation of investments

2

1

0

0

14

-15

0

0

Profit on forex transactions

9

17

34

22

42

37

10

193

Income from investments

0

0

0

0

0

0

109

0

Profit and loss statement Interest earned Interest/Discount on advances/bills Income on investments Interest on balances with RBI Others Total

Other income

Lease income

0

0

0

0

0

0

0

0

6 43

7 85

5 89

4 194

6 220

17 574

570 1,968

579 3,065

238

345

633

1,047

1,462

2,726

11,336

11,959

Miscellaneous income Total Total income

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

221

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

97

162

372

2000-01

2001-02

2002-03

2003-04

581

725

1,389

2,480

3,023

Interest expended Interest on deposits Interest on RBI /Inter-bank

5

10

20

24

32

48

183

229

Others

27

15

33

63

80

122

5,281

3,763

Total

129

187

426

667

838

1,559

7,944

7,015

Salaries

6

12

18

36

52

147

403

546

Others

26

31

47

92

246

423

1,417

1,764

8

14

18

25

36

53

191

261

40

58

83

153

334

623

2,012

2,571

Operating expenses

Depreciation Total Provisions and contingencies

28

50

61

121

129

287

1,365

735

198

295

569

941

1,301

2,468

11,321

10,322

Profit for the year

40

50

64

105

161

258

15

1,637

Profits inclusive of provisions

68

101

125

227

290

545

1,380

2,373

Claims against banks

0

1

0

25

55

1,023

2,025

2,502

Liability for partly paid investments

1

0

4

0

34

262

180

124

1,047

2,353

3,967

7,355

8,847

15,255

25,103

55,704

186

265

463

756

1,346

9,352

10,635

12,029

Total expenses including provisions

Contingent liabilities

Liability for outstanding forex contracts Guarantees in India outside India

0

0

0

0

0

0

0

0

Liability on account of outstanding derivative

0

0

0

0

0

0

0

0

251

559

849

1,287

1,739

0

766

871

2,041

4,325 2,901

6,514

0

287 0

11

2

22

29

271

11,817

44,268

121,620

1,496

2,907

5,014

9,780

12,711

41,488

89,438

202,942

2

14

32

76

64

274

1321

384

Acceptances, endorsements Currency swaps Others Total

4,448

Provisions and contingencies Provision for NPAs Provision for depreciation Provision towards income tax Other provisions Total

5

14

-5

13

-6

-16

309

-10

17

23

34

33

65

121

-426

265

4

0

0

0

7

-93

160

96

28

50

61

121

129

287

1,365

735

Financial analysis Growth in deposits (per cent) Overall

85

95

131

62

66

96

50

41

Demand

69

15

59

175

65

65

35

97

Savings

168

109

119

135

253

33

52

121

87

120

144

47

53

126

52

29

Demand

23

14

9

16

16

9

8

11

Savings

4

4

4

5

11

8

8

12

73

82

87

79

73

84

84

77

Term Share of deposits (per cent)

Term

continued...

222

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Financial parameters Profitability (per cent) Return on assets

2.7

2.0

1.2

1.1

1.0

0.4

0.0

1.4

23.7

22.4

22.2

14.4

13.1

6.5

0.2

20.9

8.8

11.3

21.6

9.5

14.0

14.8

13.7

14.0

Staff costs to operating expenses

15.2

21.3

22.0

23.7

15.5

23.6

20.0

21.2

Non-fund income to total income

14.2

8.1

5.8

1.8

2.7

3.0

29.0

18.9

Operating expenses to total income

95.0

67.7

92.8

79.0

151.9

108.4

102.2

83.9

Operating expenses to deposits

3.0

2.2

1.4

1.6

2.0

1.9

4.2

3.8

Earning per share (Rs)

2.7

3.0

3.9

5.4

7.3

2.7

0.2

17.0

Cost to income ratio

37.4

36.4

39.8

40.3

53.5

53.3

59.3

52.0

Cost to income ratio (w/o profit on invest) Financial management (per cent)

41.9

46.9

42.4

55.0

55.2

72.2

69.4

69.1

Interest cost

n.a.

8.4

9.1

7.9

5.9

3.1

9.6

7.6

Average cost of deposits

9.4

8.1

8.5

7.3

5.5

5.7

6.2

5.2

Average cost of borrowings

21.4

17.3

27.4

25.0

14.7

0.7

13.1

12.3

Yield on carry business

n.a.

11.6

12.3

10.1

8.6

4.0

10.4

9.0

Average yield on investments

15.7

11.1

10.7

11.3

8.8

5.6

8.2

6.2

Average yield on advances

18.5

14.9

14.0

12.1

10.7

2.9

12.0

10.5

Spreads

n.a.

3.2

3.1

2.2

2.7

0.9

0.8

1.4

Operating expenses to AFD

n.a.

2.49

1.72

1.69

2.21

1.09

2.11

2.47

Core fee income to AFD

n.a.

1.97

1.54

1.01

1.22

0.48

1.14

1.49

Net Profitability Margin

n.a.

2.7

3.0

1.5

1.7

0.3

-0.2

0.43

Return on net worth Gearing (times)

Deposits to borrowings (times)

6.9

13.9

22.2

23.1

17.2

1.0

1.0

1.8

Capital adequacy

13.0

13.5

11.1

19.6

11.6

11.4

11.1

10.4

Provisions as a percentage of profit before

40.7

50.0

49.0

53.5

44.5

52.6

98.9

31.0

15.2

18.8

19.9

10.6

9.8

4.3

18.7

8.8

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio

59

43

35

37

43

147

111

91

Incremental C/D ratio

24

26

29

41

52

255

39

44

Borrowings to total deposits

7

7

3

5

6

153

71

45

Cash-deposit ratio

0

0

0

0

1

1

1

1

32

39

47

45

50

112

74

63

Investment-deposit ratio Incemental I/D ratio

46

53

41

58

176

-3

37

Reserves as a percentage of net worth Growth (per cent)

18

38

46

83

83

85

87

88

Advances

23

41

87

73

92

569

13

17

Deposits

85

95

131

62

66

96

50

41

Investments

66

135

180

54

85

338

-1

21

Salaries cost

38

99

48

100

42

185

174

35

Commission and fee

58

69

49

79

108

65

245

35

Interest income Others

68

33

110

57

46

73

335

-5

Branches (nos) Advances per branch (Rs crore) Operating expenses per branch (Rs crore)

22

33

55

81

389

358

446

413

36.27

34.18

38.37

45.15

18.08

131.38

119.46

150.35

1.84

1.75

1.50

1.89

0.86

1.74

4.51

6.23

13,609

Employees (nos)

445

603

889

1,344

4,491

7,726

10,617

Income per employee (Rs crore)

0.53

0.57

0.71

0.78

0.33

0.35

1.07

0.88

38.52

28.12

34.83

28.78

28.28

18.52

28.13

21.90

Income/employee expenses (times)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

223

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Total income (per cent) Interest

82

75

86

81

85

79

83

74

Forex

4

5

5

2

3

1

1

2

Commission and brokerage

6

7

6

6

10

8

7

9

Priority

27

29

23

14

17

4

17

23

Public

0

0

0

3

12

9

4

1

Inter bank

2

0

0

0

1

0

0

0

Others

71

71

77

83

70

86

79

74

Abroad

0

0

0

0

0

0

0

2

Bills

10

12

22

19

15

4

1

2

Cash credit

79

75

66

70

71

5

6

10

Term loans

11

13

13

10

14

91

93

88

Share of advances (per cent)

Share of advances (per cent)

Share of advances (per cent) Secured

97

94

87

77

70

95

94

91

Government guaranteed

0

1

3

3

6

2

3

1

Unsecured

3

6

11

21

23

3

3

8 70

Share of investments (per cent) Government securities

72

69

53

64

50

63

72

Other approved securities

0

0

0

0

1

0

0

0

Shares

2

5

5

4

2

5

5

4

Debentures

16

21

23

26

38

18

16

13

Subsidiary

0

0

0

0

0

2

2

3

10

5

18

7

11

12

5

10

Others Outside India Net NPAs (per cent)

0

0

0

0

0

0

0

1

1.7

1.1

1.8

1.1

1.4

5.5

5.2

2.2

n.a.: Not available Source: CRIS INFAC

224

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

HDFC Bank (Rs crore)

Table 12 1996-97

1997-98

200

200

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

254

281

282

285

Liabilities Capital Reserves and surplus Deposits Borrowings

200

257

44

85

139

508

669

1,670

1,970

2,409

1,279

2,192

2,915

8,428

11,658

17,654

22,376

30,409

199

55

448

1,579

1,433

1,823

2,085

2,308

Other liabilities and provisions

93

298

648

885

1,603

2,359

3,712

6,897

1,815

2,830

4,350

11,656

15,617

23,787

30,424

42,307

178

212

292

850

986

1,211

2,082

2,542

85

329

248

768

1,625

2,247

1,087

1,116

Investments

730

1,121

1,904

5,748

7,145

12,004

13,388

19,257

Advances

575

842

1,401

3,362

4,637

6,814

11,755

17,745

99

110

132

237

290

371

529

617

Total Assets Cash and balances with RBI Balances with bank and money at call

Fixed assets Other assets Total

148

215

375

691

934

1,140

1,583

1,031

1,815

2,830

4,350

11,656

15,617

23,787

30,424

42,307

Deposits Demand

409

673

982

2,780

2,856

4,220

4,951

8,835

Savings

69

177

347

1,125

1,903

2,957

4,663

7,804

Term

802

1,341

1,587

4,523

6,899

10,476

12,762

13,769

Total

1,279

2,192

2,915

8,428

11,658

17,654

22,376

30,409

Deposits of branches in India

1,279

2,192

2,915

8,428

11,658

17,654

22,376

30,409

Deposits of branches abroad

0

0

0

0

0

0

0

0

1,279

2,192

2,915

8,428

11,658

17,654

22,376

30,409

Total Borrowings RBI Other banks

0

0

124

205

163

97

13

0

115

0

98

765

407

920

1,407

1,556

82

48

205

440

655

806

657

92

2

7

21

18

8

0

8

660

199

55

448

1,429

1,233

1,823

2,085

2,308

0

0

0

0

0

0

0

0 3,667

Other institutions and agencies Forex borrowings Total Other liabilities and provisions Inter-office adjustments Bills payable

30

58

244

372

511

867

851

Interest accrued

11

37

50

105

296

417

688

417

Others(including provisions)

52

103

220

482

796

1,075

2,172

2,813

Total

93

198

513

959

1,603

2,359

3,712

6,897

174

201

276

809

929

1098.32

1,915

2,288

5

11

16

41

57

113

167

254

44

275

295

571

716

1,325

2,623

3,194

Cash credit and overdraft

226

235

503

1,468

1,377

1,738

2,608

3,741

Term loans

305

332

603

1,323

2,544

3,751

6,524

10,810

Total

575

842

1,401

3,362

4,637

6,814

11,755

17,745

Balance with RBI Cash in hand Advances Bills purchased and discounted

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

225

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

359

535

753

2,958

3,944

6186

9991

15277

87

78

122

199

10

51

94

117

Unsecured Total

129 575

229 842

525 1,401

205 3,362

683 4,637

577 6,814

1670 11,755

2351 17,745

Priority sector

130

126

199

586

668

732

1,422

2,498

Public sector

73

7

26

12

505

911

852

335

Banks

0

121

108

169

447

188

22

11

Others Total

372 575

588 842

1,067 1,401

2,595 3,362

3,017 4,637

4,982 6,814

9,459 11,755

14,900 17,745

Advances outside India Total

0 575

0 842

0 1,401

0 3,362

0 4,637

0 6,814

0 11,755

0 17,745

0

0

0

0

0

0

0

0

365

573

868

3,217

3,413

5,295

6,356

11,531

Secured Government guarantee

1998-99 1999-2000

Investments Investments outside India Investments in India - Government securities - Other approved securities

9

0

0

12

12

12

12

7

- Shares

0

22

147

257

197

145

108

107

310

482

859

1,866

2,578

4,268

4,167

4,045

0

0

0

0

1

1

2

2

- Others Total

46 730

45 1,121

31 1,904

396 5,748

944 7,145

2,283 12,004

2,743 13,388

3,566 19,257

Total investments

730

1,121

1,904

5,748

7,145

12,004

13,388

19,257

Opening balance

n.a.

n.a.

n.a.

39

122

147

223

265

Additions

n.a.

n.a.

n.a.

48

40

91

106

119

Additions due to amalgmation

n.a.

n.a.

n.a.

62

0

0

0

0

Reductions

n.a.

n.a.

n.a.

27

15

15

64

37

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

122 37

147 21

223 34

265 43

336 28

- Debentures - Subsidiaries/JV

Movement in NPA Gross NPA

Profit and loss statement Interest earned Interest/Discount on advances/bills

92

118

143

267

493

624

777

1,109

Income on investments

62

104

182

367

636

864

1,113

1,322

0

19

50

46

131

214

120

111

8 162

1 241

0 376

0 680

0 1,259

1 1,703

3 2,014

7 2,549

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

21

30

41

83

134

164

236

320

Profit on sale of investments

5

21

15

21

12

104

132

38

Loss on sale of investments

0

0

0

0

-1

0

0

0

Profit on sale of fixed assets

0

0

0

0

0

-1

1

0

Loss on revaluation of investments

0

0

0

0

0

0

-2

-11

Profit on forex transactions

6

11

12

21

40

39

45

74

Income from investments

0

0

0

0

0

0

0

0

Lease income

0

0

0

0

0

0

0

0

0 32

0 62

0 68

0 125

1 186

27 333

53 466

59 480

193

303

444

805

1,445

2,036

2,479

3,029

Miscellaneous income Total Total income

continued...

226

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

Interest on deposits

71

104

176

Interest on RBI /inter-bank

2000-01

2001-02

2002-03

2003-04

287

639

916

1,063

1,038 144

Interest expended 16

32

40

65

95

133

103

Others

0

2

13

23

20

25

25

29

Total

87

138

229

374

754

1,074

1,192

1,211

Operating expenses Salaries

10

15

22

49

78

109

152

204

Others

26

37

52

96

178

240

334

480

6

11

15

26

54

69

106

126

42

63

89

171

310

418

592

810

Depreciation Total Provisions and contingencies

23

39

44

140

172

247

323

498

153

240

362

685

1,235

1,739

2,106

2,519

Profit for the year

41

63

82

120

210

297

373

510

Profits inclusive of provisions

64

103

126

260

382

545

695

1,008

0

0

4

2

2

2

51

99

Total expenses including provisions

Contingent liabilities Claims against banks Liability for partly paid investments

0

0

0

0

0

0

0

0

3,736

3,489

5,471

7,858

8,677

11,985

19,773

39,444

507

1,024

1,056

1,593

1,741

1,695

1,425

1,642

0

0

0

0

0

0

0

0

Liability on account of outstanding derivative

182

423

445

980

2,952

5,303

18,605

38,940

Acceptances, endorsements

686

837

1,066

956

1,172

944

1,172

1,892

Liability for outstanding forex contracts Guarantees - In India outside Inida

Currency Swaps Others Total

190

156

380

245

468

399

535

100

5,302

5,928

8,422

11,633

15,011

20,328

41,560

82,117

Provisions and contingencies Provision for NPAs

4

7

8

54

53

86

88

178

Provision for depreciation in the value of inves

2

1

1

6

13

19

50

93 210

Provision towards income tax

18

31

35

75

105

128

184

Others

0

0

0

5

0

14

0

17

Total

23

39

44

139

172

247

323

498

Overall

87

71

33

189

38

51

27

36

Demand

80

65

46

183

3

48

17

78

Savings

297

158

95

225

69

55

58

67

82

67

18

185

53

52

22

8

32

31

34

33

24

24

22

29

5

8

12

13

16

17

21

26

63

61

54

54

59

59

57

45

Financial analysis Growth in deposits (per cent)

Term Share of deposits (per cent) Demand Savings Term

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

227

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Financial parameters Profitability (per cent) Return on assets

2.9

2.7

2.3

1.5

1.5

1.5

1.4

1.4

Return on equity

17.4

23.9

26.4

21.7

24.9

20.7

17.7

20.6

Gearing (times)

6.4

8.9

11.8

14.2

15.9

11.2

12.5

14.7

Staff costs to operating expenses

24.2

23.7

24.8

28.3

25.2

26.1

25.7

25.2

Non-fund income to total income

16.3

20.5

15.3

15.6

12.8

16.4

18.8

15.9

Operating expenses to total income

26.7

21.8

20.7

20.0

21.3

21.4

20.5

23.9

Operating expenses to deposits

3.3

2.9

3.0

2.0

2.7

2.4

2.6

2.7

Earning per share (Rs)

2.0

3.2

4.1

4.7

8.3

10.6

13.2

17.9

Cost to income ratio

39.7

37.9

41.3

39.8

44.8

43.4

46.0

44.5

Cost to income ratio (w/o profit on invest) Financial management (per cent)

41.5

43.5

44.4

41.8

45.5

48.7

51.3

45.5

Interest cost

n.a.

7.22

7.75

5.41

6.38

6.36

5.22

3.93

Average cost of deposits

7.2

6.0

6.9

5.1

6.4

6.2

5.3

3.9

Average cost of borrowings

13.1

26.5

21.2

9.3

8.6

10.4

6.6

7.9

Yield on carry business

n.a.

12.16

12.32

9.89

10.80

10.29

8.89

8.16

Average yield on investments

11.9

11.2

12.0

9.6

9.9

9.0

8.8

8.1

Average yield on advances

19.5

16.6

12.8

11.2

12.3

10.9

8.4

7.5

Spreads

n.a.

4.95

4.57

4.48

4.42

3.93

3.67

4.24

Operating expenses to AFD

n.a.

3.08

2.80

2.35

2.46

2.28

2.34

2.35

Core fee income to AFD

n.a.

2.02

1.67

1.43

1.39

1.18

1.22

1.23

Net Profitability Margin

n.a.

3.89

3.44

3.56

3.34

2.83

2.54

3.12

Deposits to borrowings (times)

8.0

13.7

10.2

6.0

7.5

9.6

10.2

12.0

Capital adequacy

13.5

13.9

11.9

12.2

11.9

13.9

11.1

11.7

Provisions as a percentage of profit before

36.7

38.4

34.7

53.8

44.9

45.4

46.4

49.4

Provisions as a percentage of networth Liquidity (per cent)

9.6

13.8

12.9

18.2

18.6

12.7

14.3

18.5

Credit-deposit ratio

45

38

48

40

40

39

53

58

Incremental C/D ratio

35

29

77

36

39

36

105

75

Borrowings to total deposits

16

2

15

19

12

10

9

8

0

1

1

0

0

1

1

1

57

51

65

68

61

68

60

63

n.a.

43

108

70

43

81

29

73

18

30

41

66

72

86

87

89

provisions

Cash-deposit ratio Investment-deposit ratio Incemental I/D ratio Reserves as a percentage of net worth Growth (per cent) Advances

56

46

66

140

38

47

73

51

Deposits

87

71

33

189

38

51

27

36

Investments

132

54

70

202

24

68

12

44

Salaries cost

118

46

49

120

61

40

39

34

Commission and fee

188

45

34

103

61

23

44

36

41

49

56

81

85

35

18

27

Interest income Others Branches (nos) Advances per branch (Rs crore) Operating expenses per branch (Rs crore)

15

33

57

111

131

171

231

312

38.35

25.51

24.57

30.29

35.39

39.85

50.89

56.87

2.81

1.90

1.56

1.54

2.36

2.44

2.56

2.60 5,673

Employees (nos)

514

660

984

1,992

2,751

3742

4,791

Income per employee (Rs crore)

0.38

0.46

0.45

0.40

0.53

0.54

0.52

0.53

18.97

20.39

20.13

16.59

18.53

18.64

16.32

14.84

Income/employee expenses (times)

continued...

228

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

84

80

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

87

84

81

84

Total income (per cent) Interest Forex

85

84

3

4

3

3

3

2

2

2

11

10

9

10

9

8

10

11

Priority

23

15

14

17

14

11

12

14

Public

13

1

2

0

11

13

7

2

Commission, brokerage Share of advances (per cent)

Inter bank

0

14

8

5

10

3

0

0

Others

65

70

76

77

65

73

80

84

Abroad

0

0

0

0

0

0

0

0

Share of advances (per cent) Bills

8

33

21

17

15

19

22

18

Cash credit

39

28

36

44

30

26

22

21

Term loans

53

39

43

39

55

55

56

61

Secured

62

64

54

88

85

91

85

86

Govt. guarantee

15

9

9

6

0

1

1

1

Unsecured

22

27

38

6

15

8

14

13

50

51

46

56

48

44

47

60

1

0

0

0

0

0

0

0

Share of advances (per cent)

Share of investments (per cent) Government securities Other approved securities Shares Debentures

0

2

8

4

3

1

1

1

42

43

45

32

36

36

31

21

Subsidiary

0

0

0

0

0

0

0

0

Others

6

4

2

7

13

19

20

19

0.0

1.4

1.3

0.8

0.3

0.5

0.4

0.2

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

229

IndusInd Bank (Rs crore)

Table 13 1996-97

1997-98

120

158

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

159

159

219

290

Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions

159

159

159

355

371

374

385

403

383

510

3,093

4,273

5,018

6,546

7,187

8400

8598

11200

68

63

405

551

412

859

237

2310

121

177

215

366

509

383

464

775

3,561

5,026

6,168

7,997

8,653

10205

9901

15086

Cash and balances with RBI

244

330

375

370

385

510

575

1335

Balances with bank and money at call

132

257

567

724

963

983

576

918

Investments

1,055

1,696

2,095

2,732

2,494

2485

2535

3972

Advances

1,928

2,451

2,662

3,677

4,237

5574

5348

7812

100

127

124

112

96

87

110

298

Total Assets

Fixed assets Other assets

103

165

344

383

477

566

757

751

3,561

5,026

6,168

7,997

8,653

10205

9901

15086

Demand

212

342

560

871

651

916

822

857

Savings

27

44

94

135

143

172

225

395

Total Deposits

Term

2,855

3,887

4,364

5,541

6,393

7312

7551

9949

Total

3,093

4,273

5,018

6,546

7,187

8400

8598

11200

Deposits of branches in India

3,093

4,273

5,018

6,546

7,187

8400

8598

11200

Deposits of branches abroad Total

0

0

0

0

0

0

0

0

3,093

4,273

5,018

6,546

7,187

8400

8598

11200

Borrowings RBI

0

0

263

271

160

209

0

0

Other banks

53

20

31

34

0

260

33

1458

Other institutions and agencies

16

43

112

246

252

391

170

692

0

0

0

0

0

0

34

160

68

63

405

551

412

859

237

2310

Forex borrowings Total Other liabilities and provisions Inter-office adjustments

0

2

2

0

0

0

49

0

Bills payable

37

48

48

81

81

68

157

72

Interest accrued

46

63

66

82

76

71

0

66

0

0

0

50

102

0

0

0

37

63

99

153

250

245

258

638

Total

120

177

215

366

509

383

464

775

Balance with RBI

242

326

368

360

376

491

554

1311

2

4

7

10

10

19

21

24

102

311

457

562

897

1360

994

622

1,661

1,810

1,732

2,351

2,465

3314

3063

3175

164

330

473

764

874

900

1291

4015

1,928

2,451

2,662

3,677

4,237

5574

5348

7812

Unsecured non-convertible redeemable debentures Others (including provisions)

Cash in hand Advances Bills purchased and discounted Cash credit and overdraft Term loans Total

Continued...

230

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

1,682

2,137

2,251

3,196

3,321

4438

3711

6552

25

141

219

180

171

504

1047

371

221 1,928

172 2,451

192 2,662

302 3,677

744 4,237

632 5574

589 5348

889 7812

Priority sector

488

584

654

742

705

948

1000

2515

Public sector

20

25

27

164

640

930

764

869

Banks

25

0

68

167

463

463

932

437

Others Total

1,395 1,928

1,842 2,451

1,914 2,662

2,605 3,677

2,429 4,237

3233 5574

2652 5348

3991 7812

Advances outside India Total

0 1,928

0 2,451

0 2,662

0 3,677

0 4,237

0 5574

0 5348

0 7812

0

0

0

0

0

0

0

0

725

1,264

1,497

2,088

1,827

1954

2020

3770

17

26

26

26

26

26

26

23

9

17

22

8

3

9

11

382

533

569

605

482

415

164

Secured Government guarantee Unsecured Total

1998-99 1999-2000

Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares - Debentures

272

- Subsidiaries/JV

0

0

0

0

0

0

1

3

- Others Total

41 1,055

14 1,696

21 2,095

26 2,732

29 2,494

19 2485

65 2535

0 3972

Total investments

1,055

1,696

2,095

2,732

2,494

2485

2535

3972

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

224

265

262

417

266

Additions

n.a.

n.a.

n.a.

132

145

366

209

498

Reductions

n.a.

n.a.

n.a.

91

148

212

360

505

Closing balances Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

265 220

262 223

417 367

266 227

259 212

Profit and loss statement Interest earned Interest/Discount on advances/

302

343

352

325

372

428

467

697

Income on investments

101

191

216

284

327

255

244

260

7

14

26

29

30

27

31

28

0 409

2 551

0 594

0 637

0 729

0 710

0 743

0 986

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

31

36

35

33

33

26

23

21

Profit on sale of investments

11

85

3

66

25

121

193

227

0

-6

Profit on sale of fixed assets

0

0

Loss on revaluation of investments

0

0

11

10

Profit on forex transactions Income from investments

0

0

0

8

0

0

0

10

13

14

14

11

0

0

0

0

0

0

0

0

28 82

24 155

29 83

36 144

38 117

24 184

28 258

92 345

491

706

676

782

845

894

1001

1331

Miscellaneous income Total Total income

15

0 0

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

231

...continued

(Rs crore)

1996-97

1997-98

230

370

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

508

470

511

500

Interests expended Interest on deposits Interest on RBI /Inter-bank Others Total

430

446

11

16

15

29

26

29

11

93

69 310

43 429

34 479

25 501

36 569

48 547

37 558

76 669

4

7

11

12

13

20

28

50

Operating expenses Salaries Others

39

52

55

57

62

54

64

130

Depreciation Total

13 56

17 76

21 87

22 90

28 103

21 95

25 118

37 217

52 418

110 615

74 640

135 726

132 805

202 844

234 911

183 1069

73

91

37

56

41

51

90

262

125

201

110

190

173

252

324

445 161

Provisions and contingencies Total expenses including provisions Profit for the year Profits inclusive of provisions Provisions and contingencies Provisions for non-performing assets

7

9

25

92

111

162

230

Provision towards Income/Interest tax

30

35

10

6

15

27

5

9

Net Provision for depreciation on investments

14

23

-2

21

-2

8

0

-3

Others Total

0 52

42 110

41 74

16 135

8 132

4 202

0 234

16 183

7

8

11

13

9

11

10

8

Financial analysis Share of deposits (per cent) Demand Savings

1

1

2

2

2

2

3

4

92

91

87

85

89

87

88

89

Return on assets

2.7

2.1

0.7

0.8

0.5

0.5

0.9

2.1

Return on equity

28.7

23.0

7.1

10.5

7.5

9.2

15.5

37.4

Gearing (times)

11.7

8.8

10.6

14.0

14.9

17.2

15.4

17.8

Staff costs to operating expenses

7.5

9.9

12.9

13.3

13.0

21.4

24.0

23.2

Non-fund income to total income

16.7

21.9

12.2

18.5

13.8

20.6

25.8

25.9

Operating expenses to total income

11.4

10.7

12.9

11.5

12.2

10.6

11.8

16.3

1.8

1.8

1.7

1.4

1.4

1.1

1.4

1.9

Term Financial parameters Profitability (per cent)

Operating expenses to deposits Earning per share (Rs)

6.1

5.8

2.3

3.5

2.5

3.2

4.1

9.0

Cost to income ratio

31.0

27.4

44.1

32.1

37.4

27.3

26.7

32.8

Cost to income ratio (w/o profit on invest) Financial management (per cent)

33.0

39.5

44.8

42.0

41.0

41.8

47.3

49.9

Interest cost

n.a.

11.3

9.7

7.9

7.7

6.4

6.1

5.9

Average cost of deposits

10.2

10.1

9.2

7.7

7.4

6.0

6.0

5.1

Average cost of borrowings

71.9

89.3

21.0

11.4

12.8

12.2

8.7

13.3 8.6

Yield on carry business

n.a.

13.7

11.4

9.7

9.4

8.1

8.0

Average yield on investments

14.3

13.9

11.4

11.8

12.5

10.2

9.7

8.0

Average yield on advances

19.8

15.7

13.8

10.2

9.4

8.7

8.6

10.6

Spreads

n.a.

2.4

1.7

1.8

1.7

1.6

1.9

2.7

Operating expenses to AFD

n.a.

1.9

1.7

1.4

1.3

1.1

1.3

1.9

Core fee income to AFD

n.a.

1.4

1.3

0.9

0.8

0.6

0.6

0.7

Net Profitability Margin

n.a.

2.0

1.3

1.4

1.3

1.2

1.2

1.4

Deposits to borrowings (times)

45.2

68.3

12.4

11.9

17.4

9.8

36.3

4.8

Capital adequacy

12.9

17.9

15.2

13.2

15.0

12.51

12.13

12.75

Provisions as a percentage of profit before

41.3

54.7

66.7

70.8

76.5

79.9

72.2

41.1

18.5

21.5

13.9

25.3

24.3

35.9

38.9 22.8 continued...

provisions Provisions as a percentage of networth

232

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

62

57

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

59

66

62

70

Liquidity (per cent) Credit-deposit ratio Borrowings to total deposits

53

56

2

1

8

8

6

10

3

21

0.07

0.09

0.15

0.15

0.14

0.23

0.24

0.21

Investment-deposit ratio

34

40

42

42

35

30

29

35

Reserves as a percentage of net worth Growth (per cent)

57

69

70

70

71

72

64

64

Advances

n.a.

27

9

38

15

32

-4

46

Deposits

n.a.

38

17

30

10

17

2

30

Investments

n.a.

61

24

30

-9

0

2

57

Commission and fee

n.a.

13

-1

-7

1

-20

-11

-10

Interest income Others

n.a.

35

8

7

14

-3

5

33

Cash-deposit ratio

Branches (nos)

18

21

26

27

32

40

53

61

107.09

116.70

102.39

136.19

132.40

139.36

100.90

128.07

Operating expenses per branch (Rs crore)

3.12

3.61

3.35

3.34

3.22

2.37

2.22

3.56

Employees (nos)

251

351

508

513

581

738

941

n.a.

Income per employee (Rs crore)

1.96

2.01

1.33

1.52

1.45

1.21

1.06

n.a.

116.11

94.48

60.02

65.31

63.12

44.08

35.40

26.43 74

Advances per branch (Rs crore)

Income/employee expenses (times) Total income (per cent) Interest

83

78

88

82

86

79

74

Forex

2

1

2

1

2

2

1

1

Securities transaction

2

12

0

8

3

14

19

17

Commission and brokerage Share of advances (per cent)

6

5

5

4

4

3

2

2

Priority

25

24

25

20

17

17

19

32

Public

1

1

1

4

15

17

14

11

Inter bank Others Abroad Share of advances (per cent) Bills Cash credit Term loans Share of investments (per cent) Government securities

1

0

3

5

11

8

17

6

72

75

72

71

57

58

50

51

0

0

0

0

0

0

0

0

5

13

17

15

21

24

19

8

86

74

65

64

58

59

57

41

9

13

18

21

21

16

24

51 95

69

75

71

76

73

79

80

Other approved securities

2

2

1

1

1

1

1

1

Shares

0

1

1

1

0

0

0

0

Debentures

26

23

25

21

24

19

16

4

Subsidiary

0

0

0

0

0

0

0

0 0

Others

4

1

1

1

1

1

3

Outside India

0

0

0

0

0

0

0

0

2.1

4.0

7.2

6.0

5.3

6.6

4.3

2.7

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

233

Global Trust Bank (Rs crore)

Table 14 1996-97

1997-98

1998-99 1999-2000

104

104

104

80

138

186

2000-01

2001-02

2002-03

2003-04

121

121

121

121

121

407

467

273

146

146 6,399

Liabilities Capital Reserves and surplus Deposits

2,279

3,285

4,097

6,199

7,734

6,443

6,921

Borrowings

91

36

483

399

600

64

26

9

Other liabilities and provisions

98

218

330

406

550

406

451

528

2,652

3,781

5,200

7,531

9,472

7,308

7,666

7,203

253

306

474

514

666

484

727

644

26

87

107

224

69

128

78

433

662

1,215

1,962

2,926

3,865

2,900

2,499

2,118 2,246

Total Assets Cash and balances with RBI Balances with bank and money at call Investments Advances

1,462

1,756

2,118

3,211

4,100

3,033

3,276

Fixed assets

124

276

327

338

379

320

301

271

Other assets

124

141

213

318

393

443

786

1,491

2,652

3,781

5,200

7,531

9,472

7,308

7,666

7,203

Demand

174

214

380

845

624

653

753

969

Savings

23

47

124

294

407

480

549

717

Term

2,082

3,024

3,594

5,059

6,703

5310

5,619

4,713

Total

2,279

3,285

4,097

6,199

7,734

6,443

6,921

6,399

50

0

100

60

0

0

0

0

0

0

185

75

192

0

0

0

37

15

173

174

349

28

14

4

Total Deposits

Borrowings RBI Other banks Other institutions and agencies Forex borrowings Total

4

21

25

89

59

36

12

5

91

36

483

399

600

64

26

9

Other liabilities and provisions Inter-office adjustments

0

0

0

0

0

0

0

0

Bills payable

19

40

55

93

123

60

67

96

Interest accrued

39

49

41

44

68

39

33

39

Others (including provisions)

40

129

234

98

218

330

358 550

307

Total

269 406

406

351 451

393 528

249

301

466

505

644

436

638

559

4

5

7

9

22

48

89

85

Bills purchases and discounted

464

420

510

595

636

480

428

290

Cash credit and overdraft

819

911

1,051

1,817

2,151

1381

1,094

705

Term loans

180

424

557

799

1,313

1171

1,754

1,250

Total

1,462

1,756

2,118

3,211

4,100

3033

3,276

2,246

Secured

1,200

1,459

1,881

3,090

3,454

2629

2,742

2,023

184

226

167

105

19

8

94

18

78

71

71

17

627

396

440

205

1,462

1,756

2,118

3,211

4,100

3,033

3,276

2,246

Balance with RBI Cash in hand Advances

Government guarantee Unsecured Total

Continued...

234

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

Priority sector

453

555

1998-99 1999-2000 513

703

795

664

865

626

Public sector

18

29

0

10

36

7

15

0

Banks

0

0

4

0

49

0

0

6

Others Total

991 1,462

1,172 1,756

1,601 2,118

2,498 3,211

3,220 4,100

2361 3033

2,397 3,276

1,614 2,246

Advances outside India

0

0

0

0

0

0

0

0

Investments outside India Investments in India

0

0

0

0

0

0

0

0

622

804

1,074

1,742

2,293

1896

1,886

1,544

6

6

6

6

6

6

6

5

31

388

870

1,155

1,544

996

607

569

Units of UTI (MF)

2

17

0

0

0

0

0

0

Subsidiaries/JV

0

0

0

0

0

0

0

0

0 662

0 1,215

12 1,962

34 2,937

59 3,902

2 2,900

0 2,499

0 2,118

Opening balance

n.a.

n.a.

n.a.

n.a.

49

238

430

916

Additions

n.a.

n.a.

n.a.

n.a.

208

536

762

620

Reductions

n.a.

n.a.

n.a.

n.a.

19

344

277

219

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

n.a. 28

238 154

430 280

916 n.a.

1,317 n.a.

285

269

292

380

490

396

321

243

Government securities Other approved securities Shares and debentures

Others Total Movement in NPA Gross NPA

Profit and loss statement Interest earned Interest/Discount on advances/ bills Income on investments

68

Interest on balances with RBI

0

0

117

182

247

377

310

207

94

2

7

14

13

21

14

11

11

1 357

1 394

3 491

6 646

9 897

0 721

1 540

6 354

45

40

31

36

42

45

43

43

Profit on sale of investments

9

40

36

60

27

109

103

57

Loss on sale of investments

0

0

0

0

0

0

0

0

Profit on sale of fixed asets

0

0

0

0

0

20

0

13

Others Total Other income Commission exchange and brokerage

Loss on revaluation of investments Profit on forex transactions

0

0

0

0

0

0

-1

1

17

23

18

21

24

13

15

18

Income from investments

0

2

10

0

0

0

0

0

Lease income

0

0

0

49

0

0

0

0

18 90

22 127

52 146

67 233

71 164

42 229

31 191

29 161

447

521

638

879

1,062

950

731

515

Miscellaneous income Total Total income

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

235

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

251

303

634

579

480

382

36

14

15

26

17

15

1

1

3

6

15

38

46

42

36

53

290

323

438

507

697

636

517

435

6

9

13

18

30

36

42

37

Interest expended Interest on deposits Interest on RBI /Inter bank Others Total

409

444

Operating expenses Salaries Others

28

35

44

64

88

83

90

87

Depreciation

20

27

38

42

46

51

45

35

Total

53

71

95

124

164

170

177

159

Provisions and contingencies

46

47

34

139

120

108

309

734

390

441

567

770

982

913

1,004

1,328

57

80

71

109

80

36

-273

-812

104

127

105

248

200

144

36

-79

Provison for NPAs

n.a.

20

8

93

81

159

118

440

Depreciation in values of investments

n.a.

6

5

0

27

25

81

164

Provision for taxation

n.a.

22

15

40

11

-75

0

25

Total expenses including provisions Profit for the year Profits inclusive of provisions Provisions and contingencies

Other Provisions

n.a.

0

5

6

2

-1

111

104

Total

n.a.

47

34

139

120

108

309

734

72

44

25

51

25

-17

7

-8

Financial analysis Growth in deposits (per cent) Overall Demand

17

23

78

123

-26

5

15

29

Savings

95

108

161

138

38

18

14

31

Term

79

45

19

41

32

-21

6

-16

Demand

8

7

9

14

8

10

11

15

Savings

1

1

3

5

5

7

8

11

91

92

88

82

87

82

81

74

Share of deposits (per cent)

Term Financial parameters (per cent) Profitability (per cent) Return of assets

2.4

2.5

1.6

1.7

0.9

0.4

-3.6

-10.9

Return on equity

35.3

37.7

26.6

26.5

14.3

7.4

-82.4

-303.8

Gearing (times)

13.4

14.6

16.9

13.3

15.1

17.5

27.7

25.9

Staff costs to operating expenses

18.5

20.1

23.1

22.1

25.8

30.1

31.7

30.1

Non-fund income to total income

20.2

24.4

22.9

26.5

15.5

24.1

26.2

31.3

Operating expenses to total income

7.6

8.5

8.9

9.3

11.1

12.5

18.1

24.0

Operating expenses to deposits

1.5

1.3

1.4

1.3

1.5

1.8

1.9

1.9

Earning per share (Rs)

5.5

7.7

6.8

9.0

6.6

3.0

-22.5

-66.9

Cost to income ratio

33.9

35.9

47.5

33.3

45.0

54.1

82.9

198.4

Cost to income ratio (w/o profit on invest)

36.1

45.1

57.8

39.7

48.6

82.9

160.8

686.1

continued...

236

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Financial management (per cent) Interest cost

11.2

11.0

9.0

9.2

8.5

7.6

6.4

Average cost of deposits

13.9

10.9

11.1

8.6

9.1

8.2

7.2

5.7

Average cost of borrowings

10.1

31.5

11.3

14.4

12.7

17.2

82.0

303.4

13.7

12.3

11.3

11.6

9.5

8.2

5.9

Yield on carry business Average yield on investments

13.5

12.4

11.5

10.1

11.1

9.2

7.7

4.1

Average yield on advances

20.1

16.7

15.1

14.3

13.4

11.1

10.2

8.8

Spreads

2.4

1.3

2.3

2.4

1.0

0.6

-0.5

Operating expenses to AFD

2.5

2.4

2.1

2.1

2.2

2.7

2.6

Core fee income to AFD

2.6

1.9

2.4

1.3

1.0

1.1

1.3

Net Profitability Margin

2.5

0.8

2.6

1.6

-0.2

-1.0

-1.9

4.7

43.8

14.2

11.7

14.0

21.4

147.4

376.8

Capital adequacy

10.2

10.3

12.0

13.7

12.7

11.21

0

0

Provisions as a percentage of profit before

44.7

36.9

32.2

56.2

60.1

74.8

848.4

-931.0

25.3

19.4

11.6

26.4

20.5

27.3

115.6

274.5

Deposits to borrowings (times)

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio Incremental C/D ratio Borrowings to total deposits Cash-deposit ratio

64

53

52

52

53

47

47

35

9

29

45

52

58

83

51

197

4

1

12

6

8

1

0

0

0.19

0.16

0.18

0.15

0.28

0.75

1.28

1.34

Investment-deposit ratio

29

37

48

47

50

45

36

33

Incremental I/D ratio

33

55

92

46

61

75

-84

73

Reserves as a percentage of net worth Growth (per cent)

43

57

64

77

79

69

55

55

Advances

6

20

21

52

28

-26

8

-31

Deposits

72

44

25

51

25

-17

7

-8

Investments

90

84

61

49

32

-25

-14

-15

12

-12

-21

16

16

8

-6

0

109

10

25

32

39

-20

-25

-34

Commission and fee Interest income Others Branches (nos)

22

40

63

74

79

84

87

66.48

43.90

33.63

43.39

51.89

36.10

37.66

#DIV/0!

Operating expenses per branch (Rs crore)

2.43

1.78

1.50

1.67

2.08

2.02

2.04

#DIV/0!

Employees (nos)

429

532

748

939

1,173

1,147

1,314

Advances per branch (Rs crore)

Income per employee (Rs crore)

1.04

0.98

0.85

0.94

0.90

0.83

0.56

#DIV/0!

71.40

58.68

48.45

48.51

34.87

26.64

17.39

13.84

80

76

77

74

85

76

74

69

4

4

3

2

2

1

2

4

Commission, brokerage Share of advances (per cent)

10

8

5

4

4

5

6

8

Priority

31

32

24

22

19

22

26

28

Public

1

2

0

0

1

0

0

0

Inter bank

0

0

0

0

1

0

0

0

68

67

76

78

79

78

73

72

Income/employee expenses (times) Total income (per cent) Interest Forex

Others

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

237

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Share of advances (per cent) Bills

32

24

24

19

16

16

13

13

Cash credit

56

52

50

57

52

46

33

31

Term loans

12

24

26

25

32

39

54

56

Secured

82

83

89

96

84

87

84

90

Government guarantee

13

13

8

3

0

0

3

1

5

4

3

1

15

13

13

9

Share of advances (per cent)

Unsecured Share of investments (per cent) Government securities

94

66

55

59

59

65

75

73

Other approved securities

1

0

0

0

0

0

0

0

Shares and debentures

5

32

44

39

40

34

24

27

0

0

1

1

2

0

0

0

Subsidiary Others Gross NPAs (per cent)

3.7

2.1

n.a

n.a

n.a

n.a

n.a

n.a

Net NPAs (per cent)

2.4

1.4

2.2

0.9

3.8

9.2

19.8

28.0

n.a.: Not available Source: CRIS INFAC

238

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

The Federal Bank Ltd (Rs crore) Liabilities

Table 15 1996-97

Capital Reserves and surplus Deposits

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

22

22

21

22

22

22

22

22

309

352

301

340

394

427

508

627

4603

6,424

6,782

6,463

7,665

8,865

13477

Borrowings

287

232

488

380

344

374

10947 85

Other liabilities and provisions

241

281

481

398

396

456

640

862

5,462

7,311

8,074

7,603

8,820

10,145

12,202

15,114

345

423

446

390

262

460

609

726

Total Assets Cash and balances with RBI Balances with bank and money at call

127

285

228

274

119

215

219

299

566

Investments

1456

2,366

2,602

2,666

3,035

3,756

4552

5507

Advances

2999

3,921

4,228

4,036

4,854

5,189

6218

7701

Fixed assets

134

156

155

145

133

133

162

176

Other assets

241

216

370

247

320

388

362

439

5,462

7,311

8,074

7,603

8,820

10,145

12,202

15,114

265

328

432

437

654

674

700 2412

Total Deposits Demand

584

663

847

1,000

1,146

1,342

588 1727

Total

3754

5,434

5,503

5,026

5,866

6,850

8632

10365

4,603

6,424

6,782

6,463

7,665

8,865

10,947

13,477

Deposits of branches in India

4603

6,424

6,782

6,463

7,665

8,865

10,947

13,477

Deposits of branches abroad

0

0

0

0

0

0

0

0

4,603

6,424

6,782

6,463

7,665

8,865

10,947

13,477

67

8

33

111

81

38

0

0

75

55

161

0

0

120

0

0

145

168

294

269

263

209

85

18

Savings Term

Total Borrowings RBI Other banks Other institutions and agencies Forex borrowings Total Other liabilities and provisions

0

0

0

0

0

7

0

109

287

232

488

380

344

374

85

127

0

0

0

84

53

80

121

83

114

112

150

41

47

66

37

147

27

45

34

22

19

17

19

24

101

123

297

251

276

293

463

608

241

281

481

398

396

456

640

862

294

365

389

330

198

384

522

604

52

59

57

61

65

76

87

121

673

857

860

963

1133

Inter-office adjustments Bills payable Interest accrued Others (including provisions) Total Balance with RBI Cash in hand Advances Bills purchases and discounted Cash credit and overdraft Term loans Total

954

1,404

1,297

1,456

1,741

1,932

2,144

2,462

2,624

2,842

3521

590

776

999

1,218

1,535

1,705

2,412

3047

2,999

3,921

4,228

4,036

4,854

5,189

6,218

7,701

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

239

...continued

(Rs crore) Secured

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

2,317

2,474

2,857

3,286

3,791

4,168

4,988

6007

Government guarantee

295

1,114

915

622

694

709

732

837

Unsecured Total

387 2,999

333 3,921

456 4,228

128 4,036

369 4,854

312 5,189

498 6,218

857 7,701

Priority sector

697

943

1,228

1430

1,565

1,657

1,952

2412

Public sector

57

95

175

160

146

303

226

220

Banks

287

100

0

0

1

5

0

0

Others Total

1,959 2,999

2,783 3,921

2,825 4,228

2,446 4,036

3,142 4,854

3,224 5,189

4,040 6,218

5068 7,701

Advances outside India Total

0 2,999

0 3,921

0 4,228

0 4,036

0 4,854

0 5,189

0 6,218

0 7,701

0

0

0

0

0

0

0

0

986

1,535

1,732

1,776

1,883

2,625

3,456

4455 31

Investments Investments outside India Investments in India - Government securities - Other approved securities

75

78

75

66

61

55

51

125

140

126

112

82

83

88

362

602

626

662

977

991

926

851

15

15

15

15

1

1

1

1

18 1,456

12 2,366

15 2,602

21 2,666

2 3,035

2 3,756

35 4,552

82 5,507

1,456

2,366

2,602

2,666

3,035

3,756

4,552

5,507

Opening balance

n.a.

n.a.

n.a.

479

490

642

638

528

Additions

n.a.

n.a.

n.a.

153

314

191

117

218

Reductions

n.a.

n.a.

n.a.

142

163

195

227

145

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

490 345

642 489

638 446

528 308

601 223

Interest/Discount on advances/bills

385

529

561

636

660

714

151

428 239

505

Income on investments

324

318

336

385

423

437

46

31

27

21

13

20

28

30

7 588

4 702

3 859

13 882

9 919

1 1,042

1 1,111

11 1,192

22

27

38

48

45

45

50

59

Profit on sale of investments

6

33

28

34

20

131

144

174

Loss on sale of investments

0

0

0

0

0

0

0

0

Profit on sale of fixed assets

0

-1

0

0

0

0

0

Loss on revaluation of investments

0

0

0

0

0 2

-8

-1

17

19

- Shares - Debentures - Subsidiaries/JV - Others Total Total investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

13

11

15

15

13

-4 13

Income from investments

3

5

10

7

16

7

6

4

Lease income

0

0

0

0

0

0

0

0

28 72

17 93

22 113

28 132

29 125

29 220

26 234

42 298

659

794

972

1,014

1,044

1,263

1,346

1,490

Profit on forex transactions

Miscellaneous income Total Total income

continued...

240

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Interest expended Interest on deposits

1996-97

1997-98

456

536

Interest on RBI/inter bank

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

729

723

742

629

613

705

4

11

6

14

20

11

4

2

13

17

24

59

48

51

39

46

472

564

772

701

682

766

772

770

Salaries

67

79

93

118

111

121

139

178

Others

26

40

39

42

46

52

63

81

Others Total Operating expenses

Depreciation Total

19

19

20

18

18

18

19

24

113

138

151

177

175

191

222

283

Provisions and contingencies Total expenses including provisions Profit for the year

28

42

47

89

126

223

246

300

613

744

970

968

983

1,181

1,241

1,354

46

50

3

46

61

82

105

136

74

93

49

136

187

305

351

437

7

12

66

53

105

67

132

77

0

0 2553

0

0

0

0

0

0

1494

890

1,056

2,871

2650

3,906

4199

152

154

184

226

270

286

377

400

8 0

5

0

0

5

0

0

0

0

0

0

0

0

0

0

128

133

189

211

229

304

349

534

Profits inclusive of provisions Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India

0

- Outside India Liability on account of outstanding derivative Acceptances and endorsements Currency Swaps Others Total Provisions and contingencies

19

27

34

41

33

24

17

9

1,808

2,883

1,364

1,588

3,512

3,332

4,782

5,220

16

38

102

154

160

208

2

39 -23

72

2

0

0

20

9

5 75

Provison for NPAs Depreciation in values of investments Provision for taxation

2

3

0

8

23

44

71

Other Provisions

9

0

31

9

1

5

6

13

28

42

47

89

126

223

246

300

Total Financial analysis Growth in deposits (per cent) Overall

25

40

6

-5

19

16

23

23

Demand

-8

23

32

1

50

3

-13

19

Savings

13

14

28

18

15

17

29

40

Term

30

45

1

-9

17

17

26

20

Demand

6

5

6

7

9

8

5

5

Savings

13

10

12

15

15

15

16

18

Term

82

85

81

78

77

77

79

77

Share of deposits (per cent)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

241

...continued

(Rs crore) Financial Parameters

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Profitability (per cent) Return on assets

0.94

0.79

0.03

0.59

0.74

0.86

0.94

1.00

Return on equity

16.79

14.3

0.7

13.6

15.7

19.0

21.5

23.1

Gearing (times)

15.52

18.5

24.1

20.0

20.2

21.6

22.0

22.3

Staff costs to operating expenses

59.8

57.3

61.2

66.7

63.4

63.2

62.8

63.0

Non-fund income to total income

10.86

11.7

11.6

13.0

12.0

17.5

17.4

20.0

17.1

17.3

15.6

17.5

16.8

15.1

16.5

19.0

Operating expenses to total income Operating expenses to deposits

2.5

2.1

2.2

2.7

2.3

2.2

2.0

2.1

21.46

1.4

0.1

1.4

1.6

1.9

2.1

2.2

Cost to income ratio

60.3

59.7

75.4

56.7

48.3

38.5

38.7

39.3

Cost to income ratio (w/o profit on invest) Financial management (per cent)

62.5

69.8

87.4

63.6

51.1

52.2

51.7

51.9 6.21

Earning per share (Rs)

Interest cost

n.a.

9.58

10.88

9.81

9.13

8.83

7.58

10.98

8.3

8.1

9.5

8.7

8.5

7.4

5.9

Average cost of borrowings

5.88

8.0

9.6

16.8

19.0

17.0

18.8

44.7

Yield on carry business

n.a.

12.22

12.13

12.22

12.01

11.72

10.54

9.21

Average cost of deposits

Average yield on investments

11.57

1.6

1.1

0.8

11.8

11.4

10.2

8.7

Average yield on advances

14.71

12.4

12.4

12.8

12.6

12.7

11.6

10.3

Spreads

n.a.

2.65

1.26

2.42

2.88

2.89

2.96

3.00

Operating expenses to AFD

n.a.

2.29

2.09

2.40

2.25

2.13

2.09

2.16

Core fee income to AFD

n.a.

0.77

0.89

1.05

0.94

0.81

0.75

0.76

Net Profitability Margin Deposits to borrowings (times) Capital adequacy

n.a.

1.13

0.05

1.07

1.57

1.57

1.62

1.60

14.97

21.3

18.3

15.3

19.5

23.0

43.2

115.5

9.23

9.4

10.3

11.3

10.3

10.6

11.2

11.5

37.49

45.8

94.8

65.8

67.4

73.1

70.1

68.8

8.41

11.3

14.6

24.6

30.3

49.8

46.6

46.3

Credit-deposit ratio

65

61

62

62

63

59

57

57

Incremental credit deposit ratio

85

51

86

60

68

28

49

59

Borrowings to total deposits

6

4

7

6

4

4

1

1

Cash-deposit ratio

1

1

1

1

1

1

1

1 41

Provisions as a percentage of profit before provisions Provisions as a percentage of networth Liquidity (per cent)

Investment-deposit ratio

32

37

38

41

40

42

42

Incemental I/D ratio

34

50

66

-20

31

60

38

38

Reserves as a percentage of net worth Growth (per cent)

93

94

93

94

95

95

96

97

Advances

35

31

8

-5

20

7

20

24

Deposits

25

40

6

-5

19

16

23

23

Investments

27

62

10

2

14

24

21

21

17

17

27

-6

9

15

28

Salaries cost Commission and fee

17

25

40

28

-6

-1

10

20

Interest income Others

39

19

23

3

4

13

7

7

Branches (nos)

377

395

401

404

411

412

420

432

Advances per branch (Rs crore)

7.96

9.93

10.54

9.99

11.81

12.59

14.80

17.83

0.30 6,094

0.35 6,138

0.38 6,443

0.44 6,421

0.43 6,313

0.46 6,240

0.53 6,217

0.65 6363

Income per employee (Rs crore)

0.11

0.13

0.15

0.16

0.17

0.20

0.22

0.23

Income/employee expenses (times)

9.78

10.06

10.50

8.59

9.42

10.44

9.65

8.36

Operating expenses per branch (Rs crore) Employees (nos)

continued...

242

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Total income (per cent)

1996-97

1997-98

Interest

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

89

88

88

87

88

83

83

80

Forex

2

1

2

2

1

1

1

1

Commission, brokerage

3

3

4

5

4

4

4

4

23

24

29

35

32

32

31

31

Share of advances (per cent) Priority Public

2

2

4

4

3

6

4

3

Inter bank

10

3

0

0

0

0

0

0

Others

65

71

67

61

65

62

65

66

Abroad

0

0

0

0

0

0

0

0

Bills

32

36

31

17

18

17

15

15

Cash credit

49

44

46

53

51

51

46

46

Term loans

20

20

24

30

32

33

39

40

Secured

77

63

68

81

78

80

80

78

Government guarantee

10

28

22

15

14

14

12

11

Unsecured

13

8

11

3

8

6

8

11

Share of advances (per cent)

Share of advances (per cent)

Share of investments (per cent) Government securities

68

65

67

67

62

70

76

81

Other approved securities

5

3

3

2

2

1

1

1

Shares

0

5

5

5

4

2

2

2

Debentures

25

25

24

25

32

26

20

15

Subsidiary

1

1

1

1

0

0

0

0

Others

1

0

1

1

0

0

1

1

4.9

5.3

7.5

8.6

10.1

8.6

5.0

2.9

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

243

Bank of Rajasthan (Rs crore)

Table 16 1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04 108

Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions Total

18

18

18

63

100

100

106

169

173

169

194

78

133

179

222

2,939

2,827

2,985

3,242

3,533

3960

5299

7406 176

31

40

28

26

18

30

17

248

353

471

605

615

580

528

544

3,406

3,411

3,671

4,129

4,344

4803

6,130

8,455

393

302

343

357

423

353

379

326

Assets Cash and balances with RBI Balances with bank and money at call

201

251

268

290

282

366

628

1050

Investments

1,110

1,089

1,090

1,245

1,569

1884

2643

4353

Advances

1,498

1,480

1,487

1,728

1,867

1956

2221

2432 101

Fixed assets

93

84

80

72

75

62

80

Other assets

111

204

403

437

128

183

179

194

3,406

3,411

3,671

4,129

4,344

4803

6,130

8,455

522

480

534

616

680

755

832

931

Total Deposits Demand Savings

442

516

622

698

794

944

1079

1273

Term

1,975

1,831

1,829

1,928

2,059

2261

3388

5201

Total

2,939

2,827

2,985

3,242

3,533

3960

5299

7406

RBI

0

0

0

0

0

0

0

2879

Other banks

1

0

0

0

0

0

0

104

25

38

25

20

17

29

17

0

6

2

3

5

1

1

0

44

31

40

28

26

18

30

17

3,027

21

19

32

38

25

34

19

20

Borrowings

Other institutions and agencies Forex borrowings Total Other liabilities and provisions Inter-office adjustments Bills payable

47

46

55

54

66

50

61

56

123

219

280

395

410

334

243

233

57

69

105

117

114

162

205

234

Total

248

354

471

605

615

580

528

544

Balance with RBI

345

267

304

305

373

309

315

236

48

35

39

52

50

44

63

90

Bills purchases and discounted

164

158

178

190

226

180

222

164

Cash credit and overdraft

856

884

801

994

1,059

1076

1048

1132

Term loans

478

438

509

544

582

700

951

1136

Total

1,498

1,480

1,487

1,728

1,867

1956

2221

2432

Secured

1,160

1,177

1,193

1,377

1,407

1508

1665

1939

185

176

182

229

358

281

300

326

Interest accrued Others(including provisions)

Cash in hand Advances

Government guarantee Unsecured Total

154

127

113

122

101

167

256

166

1,498

1,480

1,487

1,728

1,867

1956

2,221

2,432

Continued...

244

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

Priority sector

551

490

1998-99 1999-2000 532

506

517

560

496

782

Public sector

139

182

192

203

276

293

252

209

Banks

3

1

2

19

0

0

0

1

Others Total

805 1,498

808 1,480

762 1,487

1,000 1,728

1,073 1,867

1102 1956

1474 2,221

1440 2,432

Government securities

606

629

708

806

846

1177

1885

3614

Other approved securities

240

237

230

223

216

210

203

166

8

4

5

10

10

13

33

112

122

163

282

336

370

327

Investments in India

Shares Debentures

166

Subsidiaries/JV Others Total

8

3

4

4

4

4

0

0

91 1,110

100 1,089

21 1,090

44 1,245

210 1,569

146 1,884

172 2,643

213 4,353

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

360

363

357

333

266

Additions

n.a.

n.a.

n.a.

55

50

85

40

70

Reductions

n.a.

n.a.

n.a.

52

56

108

107

99

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

363 170

357 n.a.

333 173

266 151

237 73

Interest/Discount on advances/bills

217

198

182

204

220

220

212

197

Income on investments

125

136

131

150

178

190

232

281

19

16

25

26

33

39

22

24

4 365

0 350

12 350

19 400

12 442

4 453

7 473

0 503

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

20

23

20

23

24

20

23

22

Profit on sale of investments

0

1

3

9

10

57

84

128

Loss on sale of investments

-1

0

0

0

0

0

0

0

Profit on sale of fixed assets

0

0

1

0

0

0

0

0

Loss on revaluation of investments

0

0

0

0

0

0

0

0

Profit on forex transactions

5

5

5

3

3

4

5

5

Income from investments

0

0

0

0

0

0

0

0

18 43

16 45

16 44

17 53

19 56

17 97

15 126

22 177

408

396

394

453

499

550

599

680

262

265

282

303

307

320

287

309

2

4

4

3

0

0

2

1

2 266

0 269

0 286

0 306

2 309

3 323

3 292

3 313

Salaries

53

62

82

90

87

94

104

116

Others

23

24

26

26

33

40

46

53

Depreciation

13

12

12

12

12

11

9

12

Total

89

98

119

129

132

145

159

182

45 400

117 484

56 461

6 441

25 467

41 510

80 531

116 611

Miscellaneous income Total Total income Interests expended Interest on deposits Interest on RBI /Inter-bank Others Total Operating expenses

Provisions and contingencies Total expenses including provisions

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

245

...continued

(Rs crore) Profit for the year Profits inclusive of provisions Contingent Liabilities Claims against the banks

1996-97

1997-98

2000-01

2001-02

2002-03

2003-04

8

-88

1998-99 1999-2000 -67

12

32

40

68

69

53

29

-11

18

58

81

149

185 0

6

5

12

62

78

0

0

10

0

0

0

0

0

0

0

165

250

192

189

92

266

141

316

116

171

135

169

92

101

170

181

0

0

0

0

0

0

0

0

Acceptances and endorsements

153

127

123

103

82

122

138

98

Others Total

56 505

73 626

102 563

55 579

31 376

98 586

94 544

96 690

Provision for Non-performing assets

33

94

55

8

22

22

31

22

Depreciation in value of investments

2

14

0

0

-1

3

0

0

Income-tax

9

7

0

-1

1

14

42

28

0 45

1 117

2 56

-1 6

3 25

3 41

7 80

66 116

Overall

17

-4

6

9

9

12

34

40

Demand

-10

-8

11

15

10

11

10

12

Savings

12

17

21

12

14

19

14

18

Term Share of deposits (per cent)

29

-7

0

5

7

10

50

54

Demand

18

17

18

19

19

19

16

13

Savings

15

18

21

22

22

24

20

17

Term Financial parameters (per cent)

67

65

61

59

58

57

64

70

Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India - Outside India

Provisions and contingencies

Others Total Financial analysis Growth in deposits (per cent)

Profitability (per cent) Return on assets

0.2

-2.6

-1.9

0.3

0.8

0.9

1.3

0.9

Return on equity

4.3

-46.5

-35.5

5.4

14.8

19.6

26.4

22.5

Gearing (times)

17.2

16.9

18.6

15.1

23.3

19.6

20.5

24.7

Staff costs to operating expenses

59.8

63.0

68.5

70.3

65.7

64.8

65.4

64.0

Non-fund income to total income

10.5

11.5

11.2

11.8

11.3

17.7

21.1

26.0

Operating expenses to total income

26.7

21.8

24.7

30.2

28.4

26.4

26.4

26.5

Operating expenses to deposits

3.0

3.5

4.0

4.0

3.7

3.7

3.0

2.5

Earning per share (Rs)

4.4

-49.0

-37.4

1.9

3.2

4.0

6.5

6.4

Cost to income ratio

62.9

77.2

110.2

87.5

69.6

64.1

51.6

49.5

Cost to income ratio (w/o profit on invest)

62.9

77.7

112.9

93.5

73.6

85.4

71.0

76.0

continued...

246

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Interest cost

n.a.

9.08

9.57

Average cost of deposits

9.6

9.2

9.7

9.58

8.91

8.45

6.20

3.95

9.7

9.1

8.5

6.2

Average cost of borrowings

4.2

10.8

4.9

12.2

10.3

10.8

14.6

19.2

Yield on carry business

n.a.

4.5

11.46

11.35

11.89

11.83

10.89

9.37

7.39

Average yield on investments Average yield on advances

12.5

12.4

12.0

12.8

12.6

12.7

10.2

8.0

15.2

13.3

12.3

12.7

12.2

11.5

10.1

Spreads

8.5

n.a.

2.38

1.79

2.31

2.91

2.44

3.18

3.45

Financial management (per cent)

Operating expenses to AFD

n.a.

3.09

3.78

3.78

3.40

3.34

3.04

2.59

Core fee income to AFD

n.a.

1.14

1.04

1.03

0.95

0.75

0.67

0.54 1.40

Net Profitability Margin

n.a.

0.43

-0.96

-0.45

0.46

-0.15

0.81

Deposits to borrowings (times)

29.0

80.4

84.7

115.6

155.8

156.6

196.3

65.6

Capital adequacy

10.1

5.5

0.8

5.7

10.6

12.07

11.29

11.18

Provisions as a percentage of profit before

84.9

404.8

-507.7

34.3

44.2

50.5

53.9

62.7

23.9

61.3

30.0

2.5

14.3

17.6

28.1

35.3

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio

51

52

50

53

53

49

42

33

Incremental credit deposit ratio

32

16

5

94

48

21

20

10

Borrowings to total deposits

1

1

1

1

1

1

0

2

Cash-deposit ratio

2

1

1

2

1

1

1

1

Investment-deposit ratio

38

39

37

38

44

48

50

59

Incremental I/D ratio

51

19

0

60

111

74

57

81

Reserves as a percentage of net worth Growth (per cent)

90

91

90

76

44

57

63

67

Advances

10

-1

0

16

8

5

14

9

Deposits

17

-4

6

9

9

12

34

40

Investments

25

-2

0

14

26

20

40

65

Commission and fee

-6

14

-14

16

4

-17

13

-2

Interest income Others

25

-4

0

14

11

2

4

6

Branches (nos)

298

302

306

310

309

314

336

354

Advances per branch (Rs crore)

5.03

4.90

4.86

5.58

6.04

6.23

6.61

6.87 0.51

Operating expenses per branch (Rs crore)

0.30

0.32

0.39

0.41

0.43

0.46

0.47

4,472

4,388

4,378

4,344

4,288

4282

4207

n.a.

Income per employee (Rs crore)

0.09

0.09

0.09

0.10

0.12

0.13

0.14

n.a.

Income/employee expenses (times) Total income (per cent)

7.67

6.43

4.83

5.01

5.76

5.85

5.77

5.85

Employees (nos)

Interest

90

89

89

88

89

82

79

74

Forex

1

1

1

1

1

1

3

3

Commission and brokerage Share of advances (per cent)

5

6

5

5

5

4

4

3

Priority

37

33

36

29

28

29

22

32

Public

9

12

13

12

15

15

11

9

Inter-bank

0

0

0

1

0

0

0

0

54

55

51

58

57

56

66

59

Others

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

247

...continued

(Rs crore)

1996-97

1997-98

1998-99 1999-2000

Bills

11

11

12

11

Cash credit

57

60

54

57

Term loans

32

30

34

Secured

77

80

Government guarantee

12

Unsecured

10

Government securities Other approved securities

2000-01

2001-02

2002-03

2003-04

12

9

10

7

57

55

47

47

31

31

36

43

47

80

80

75

77

75

80

12

12

13

19

14

14

13

9

8

7

5

9

12

7

55

58

65

65

54

63

71

83

22

22

21

18

14

11

8

4

0

1

0

0

1

1

0

1

15

10

11

13

18

18

14

8

8

9

2

4

13

8

7

5

Share of advances (per cent)

Share of investments (per cent)

Shares Debentures Others Subsidiaries/JV Net NPAs (per cent)

1

0

0

0

0

0

0

0

8.5

9.1

9.5

9.7

12.0

8.9

6.8

3.0

n.a.: Not available Source: CRIS INFAC

248

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Citibank (Rs crore)

Table 17 1996-97

1997-98

Capital

204

228

252

293

365

167

167

167

Reserves and surplus

868

984

879

991

1,244

1567

1960

2528

7,204

7,551

9,437

10,203

14,052

15242

17743

20465

622

1,265

1,412

1,623

2,668

3022

3388

3503

Liabilities

Deposits Borrowings Other liabilities and provisions Total Assets Cash and balances with RBI

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

959

998

1,160

1,354

1,432

1497

1982

2933

9,652

10,798

12,888

14,172

19,466

21,497

25,240

29,597

485

475

663

747

921

1162

1233

3497

Balances with banks and call money

1,902

1,972

2,215

1,152

2,298

1517

2590

1711

Investments

2,329

2,557

3,774

4,230

5,603

6007

7036

6690

Advances

3,984

4,767

5,000

6,620

9,273

11385

12629

15259

211

237

443

425

503

502

526

514

Fixed assets Other assets

741

791

793

998

867

923

1227

1927

9,652

10,798

12,888

14,172

19,466

21,497

25,240

29,597

Demand

1,462

1,262

1,890

2,343

2,858

3048

3626

5968

Savings

236

231

342

590

846

1605

2295

3478

5,505

6,058

7,204

7,270

10,347

10589

11821

11020

7,203

7,551

9,437

10,203

14,052

15242

17743

20465

7,203

7,551

9,437

10,203

14,052

15242

17743

20465

Total Deposits

Term Total Deposits of branches in India Deposits of branches abroad

0

0

0

0

0

0

0

0

7,203

7,551

9,437

10,203

14,052

15242

17743

20465

RBI

177

141

644

521

812

274

0

0

Other banks

255

845

559

609

1,343

1853

1310

433

Other institutions and agencies

162

266

198

490

510

889

331

523

Total Borrowings

Forex borrowings

27

13

12

2

3

6

1748

2548

621

1,265

1,412

1,623

2,668

3022

3388

3503

Inter-office adjustments

271

312

40

34

0

29

2

1

Bills payable

275

265

435

349

350

488

731

808

Total Other liabilities and provisions

Interest accrued

88

119

106

91

182

166

143

158

324

302

578

880

580

814

1106

1966

958

998

1,160

1,354

1,112

1497

1982

2933

469

454

634

716

866

1099

1179

3433

15

21

29

32

54

63

54

64

Bills purchases and discounted

196

200

264

645

1,032

1128

1110

1203

Cash credit and overdraft

581

712

1,543

1,673

2,086

2603

2860

3631

3,208

3,855

3,192

4,302

6,155

7654

8659

10425

3,985

4,767

5,000

6,620

9,273

11,385

12,629

15,259

Others(including provisions) Total Balance with RBI Cash in hand Advances

Term loans Total

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

249

...continued

(Rs crore)

1996-97

1997-98

2,180

2,778

2,472

15

0

330

1,789 3,984

1,989 4,767

Priority sector

529

544

Public sector

Secured Government guarantee Unsecured Total

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

3,021

4,395

5166

6045

8611

0

0

2213

2130

14

2,197 5,000

3,599 6,620

4,878 9,273

4006 11385

4454 12629

6634 15259

760

1,240

1,926

2497

2684

3435

27

8

8

44

146

418

94

102

Banks

0

0

0

0

91

0

47

121

Others Total

3,428 3,984

4,215 4,767

4,232 5,000

5,336 6,620

7,110 9,273

8471 11,385

9804 12,629

11601 15,259

Advances outside India Total

0 3,984

0 4,767

0 5,000

0 6,620

0 9,273

0 11,385

0 12,629

0 15,259

0

0

0

0

0

0

0

0

1,809

2,107

2,787

3,271

4,585

4814

5663

5288

36 0

36 0

48 0

34

19

17

17

15

3

3

4

4

4

345

320

860

849

950

1172

1281

1363

Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares - Debentures - Subsidiaries/JV

0

0

0

0

0

0

0

0

138 2,328

94 2,557

79 3,774

74 4,230

46 5,603

0 6,007

72 7,036

19 6,690

2,328

2,557

3,774

4,230

5,603

6,007

7,036

6,690

Opening balance

n.a.

n.a.

n.a.

152

121

127

107

248

Additions

n.a.

n.a.

n.a.

8

24

48

187

205

Reductions

n.a.

n.a.

n.a.

39

18

68

46

60

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

120 70

127 65

107 65

248 147

393 214

Interest/Discount on advances/bills

729

786

823

911

1,124

1313

1361

1385

Income on investments

281

299

408

494

501

511

503

749

97

100

104

72

123

87

106

143

13 1,120

2 1,187

10 1,345

12 1,489

3 1,750

0 1910

10 1979

2280

- Others Total Total investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

3

276

299

323

302

343

338

401

462

Profit on sale of investments

30

68

97

14

96

303

143

93

Loss on sale of investments

0

0

0

0

0

0

0

0

-1

-1

-3

2

-2

0

Profit on sale of fixed assets Loss on revaluation of investments Profit on forex transactions

0

0

0

0

0

0

0

0

44

48

107

68

80

129

199

304

Income from investments

0

0

0

0

0

0

0

0

Lease income

0

0

0

0

0

0

0

0

3 353

6 420

0 526

6 388

6 522

30 803

14 756

28 887

1,473

1,607

1,871

1,877

2,272

2713

2735

3167

Miscellaneous income Total Total income

continued...

250

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Interest expended Interest on deposits

1996-97

1997-98

534

552

808

37

89

81

90 661

72 713

Interest on RBI /Inter-bank Others Total Operating expenses

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

704

770

921

886

794

93

132

140

102

87

17 907

49 846

76 979

41 1103

42 1030

42 924

Salaries

73

78

101

106

139

163

189

252

Others

275

303

305

339

395

533

581

684

Depreciation Total

21 369

32 414

45 452

55 500

67 601

62 757

67 837

74 1010

388 1,418

361 1,488

396 1,754

280 1,626

408 1,987

527 2,388

477 2,344

662 2,595

Provisions and contingencies Total expenses including provisions Profit for the year

55

119

117

251

285

325

392

572

Profits inclusive of provisions Contingent liabilities

443

481

513

531

693

853

868

1,233

Claims against banks

112

2

2

2

15

0

0

0

0

0

0

0

0

0

0

0

11,001

27,887

27,031

30,903

43,566

60858

69753

130413

0

0

Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India

471

476

536

573

884

1558

1753

- Outside India

178

223

113

44

783

351

130

82

938

1,168

1,344

1,063

1,357

996

1284

1251

6 12,706

139 29,894

168 29,194

575 33,159

440 47,045

9957 73,720

15268 88,188

1249 135,369 165

Acceptances and endorsements Others Total Provisions and contingencies

2372

Provisions for non-performing assets

47

84

117

87

77

79

137

Provision towards Income/Interest tax

329

248

294

231

345

448

350

399

12

30

-16

-38

-14

0

0

1029

0 388

0 361

0 395

0 280

0 408

0 527

-10 477

-9 662

Net Provision for depreciation on investments Others Total Financial analysis Growth in deposits (per cent) Overall

6

5

25

8

38

8

16

15

Demand

70

-14

50

24

22

7

19

65

Savings

10

-2

48

72

43

90

43

52

Term Share of deposits (per cent)

-3

10

19

1

42

2

12

-7

Demand

20

17

20

23

20

20

20

29

Savings

3

3

4

6

6

11

13

17

76

80

76

71

74

69

67

54

Term Financial parameters Profitability (per cent) Return on assets

0.6

1.2

1.0

1.9

1.7

1.6

1.7

2.1

Return on equity

5.3

10.4

9.9

20.8

19.7

19.5

20.3

23.7

Gearing (times)

8.2

8.1

10.6

10.3

11.3

11.4

10.9

10.0

Staff costs to operating expenses Operating expenses to total income

19.8 24.0

18.9 26.1

22.4 28.1

21.2 20.7

23.2 23.0

21.5 29.6

22.5 27.6

25.0 28.0

Operating expenses to deposits

25.1

25.7

24.1

26.6

26.5

27.9

30.6

31.9

Operating expenses to deposits

5.1

5.5

4.8

4.9

4.3

5.0

4.7

4.9

Cost to income ratio

45.47

46.26

46.84

48.51

46.45

47.04

49.10

45.01

Cost to income ratio (w/o profit on invest)

47.21

50.04

52.10

49.18

50.19

57.96

53.61

46.96

continued... CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

251

...continued

(Rs crore)

1996-97

1997-98

Iinterest cost

n.a.

8.30

8.91

Average cost of deposits

7.6

7.5

9.5

Average cost of borrowings

16.0

17.0

Yield on carry business

n.a.

13.02

Financial management (per cent)

Average yield on investments

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

7.21

6.69

6.16

5.07

3.96

7.2

6.3

6.3

5.4

4.2

7.4

9.3

9.7

6.4

4.5

3.8

12.66

12.28

11.40

10.02

9.11

9.02 7.8

9.7

9.1

9.6

10.7

8.2

6.7

5.5

Average yield on advances

19.5

18.0

16.8

15.7

14.1

12.7

11.3

9.9

Spreads

n.a.

4.72

3.75

5.07

4.70

3.87

4.03

5.06

Operating expenses to AFD

n.a.

4.48

4.22

4.10

3.90

3.97

3.84

3.99

Core fee income to AFD

n.a.

3.79

4.01

3.05

2.76

2.53

2.79

3.08

Net Profitability Margin

n.a.

4.03

3.55

4.02

3.57

2.42

2.98

4.15

Deposits to borrowings (times)

8.8

7.8

6.3

6.5

5.7

5.1

5.1

5.5

Capital adequacy

9.5

8.6

10.0

10.6

11.2

11.04

11.3

11.11

87.6

75.2

77.3

52.7

58.8

61.8

54.9

53.7

36.2

29.8

35.0

21.8

25.3

30.4

22.4

24.5 75

Provisions as a percentage of profit before provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio

55

63

53

65

66

75

71

118

225

12

211

69

177

50

97

Borrowings to total deposits

9

17

15

16

19

20

19

17

Cash-deposit ratio

Incremental C/D ratio

0

0

0

0

0

0

0

0

Investment-deposit ratio Growth (per cent)

32

34

40

41

40

39

40

33

Advances

15

20

5

32

40

23

11

21

Deposits

6

5

25

8

38

8

16

15

Investments

1

10

48

12

32

7

17

-5

Salaries cost

40

7

30

5

31

17

16

34

Commission and fee

27

8

8

-7

14

-2

19

15

Interest income Others

27

6

13

11

18

9

4

15

Branches (nos)

6

7

8

11

15

18

20

20

664.00

680.97

624.94

601.83

618.19

632.51

631.43

762.96

Operating expenses per branch (Rs crore)

61.50

59.10

56.46

45.47

40.07

42.08

41.87

50.48

Employees (nos)

1,479

1,537

1,537

1,308

1,476

1470

1614

n.a.

1.00

1.05

1.22

1.43

1.54

1.85

1.69

n.a.

20.17

20.55

18.46

17.71

16.32

16.69

14.49

12.56

76

74

72

79

77

70

72

72

3

3

6

4

4

5

7

10

Commission and brokerage Share of advances (per cent)

19

19

17

16

15

12

15

15

Priority

13

11

15

19

21

22

21

23

Advances per branch (Rs crore)

Income per employee (Rs crore) Income/employee expenses (times) Total income (per cent) Interest Forex

Public

1

0

0

1

2

4

1

1

Inter bank

86

88

85

81

77

74

78

76

Others

86

88

85

81

77

74

78

76

Abroad

0

0

0

0

0

0

0

0

continued...

252

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Share of advances (per cent)

1996-97

1997-98

Bills

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

5

4

5

10

11

10

9

8

Cash credit

15

15

31

25

22

23

23

24

Term loans

81

81

64

65

66

67

69

68

55

58

49

46

47

45

48

56

0

0

7

0

0

19

17

0

45

42

44

54

53

35

35

43

Share of advances (per cent) Secured Govt. guarantee Unsecured Share of investments (per cent) Government securities

78

82

74

77

82

80

80

79

Other approved securities

2

1

1

1

0

0

0

0

Shares

0

0

0

0

0

0

0

0

Debentures

15

13

23

20

17

20

18

20

Subsidiary

0

0

0

0

0

0

0

0

Others

6

4

2

2

1

0

1

0

0.6

0.6

2.1

1.1

0.7

0.4

1.2

1.4

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

253

HongKong Bank (Rs crore) Liabilities

Table 18 1996-97

1997-98

1998-99 1999-2000

2000-01

Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions

2001-02

2002-03

2003-04

0

715

715

771

845

782

837

1,091

1231

1583

1738

4,527

5,493

6,386

8,755

9,951

12341

12801

16270

16

398

1,118

1,934

3,238

3659

3172

2539

479

682

913

1,140

1,314

1908

2639

4095

5,792

7,418

9,199

12,666

15,594

19139

20910

25357

Cash and balances with RBI

361

502

524

506

559

628

917

731

Balances with bank and money at call

437

780

1,301

1,584

1,708

1,860

2,221

3,465

4,919

5,792

265 8870

716

Investments

2678 6274

10395

Advances

2,219

2,808

2,795

4,302

6,246

7836

8202

9628

499

554

512

439

Total Assets

Fixed assets Other assets Total Deposits Demand Savings Term Total Deposits of branches in India Deposits of branches abroad Total Borrowings RBI

401

410

466

502

514

696

648

853

789

1169

2144

3447

5,792

7,418

9,199

12,666

15,594

19,139

20,910

25,357

1,143

1,167

1,255

1,616

1,639

1989

2100

4415

1,446

1781

2241

3107

592

650

863

1,178

2,792

3,676

4,268

5,960

6,866

8571

8461

8747

4,527

5,493

6,386

8,755

9,951

12,341

12,801

16,270

4,527

5,493

6,386

8,755

9,951

12341

12801

16270

0

0

0

0

0

0

0

0

4,527

5,493

6,386

8,755

9,951

12341

12801

16270

0

72

323

296

137

0 2874

1502

0

10

224

656

1,117

2,713

0 3180

Other institutions and agencies

3

87

126

519

353

466

56

0

Forex borrowings

3

15

14

0

35

12

242

1038

16

398

1,118

1,932

3,238

3659

3172

2539

32

50

0

0

0

0 403

476

Other banks

Total Other liabilities and provisions Inter-office adjustments

0

Bills payable

146

138

210

349

310

0 438

Interest accrued

209

241

247

297

451

532

496

496

1739

3123

Others(including provisions) Total

92

252

456

493

537

939

479

682

913

1,140

1,298

1908

2639

4095

Balance with RBI

347

487

502

480

559

572

852

660

66

71

Cash in hand Advances Bills purchases and discounted Cash credit and overdraft Term loans Total

14

15

23

25

46

56

318

287

286

689

740

1179

1230

956

3223

3959

4753

552

1,134

778

588

1,672

1,349

1,387

1,731

3,025

3,835

3434

3013

3919

2,219

2,808

2,795

4,302

6,246

7,836

8,202

9,628

Continued...

254

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Secured Government guarantee Unsecured Total Priority sector

1996-97

1997-98

1,820

2,118

1998-99 1999-2000 2,167

2,664

2000-01

2001-02

2002-03

2003-04

3,841

4945

5243

5962

852

654

187

177

324

486

761

1064

212 2,219

514 2,808

304 2,795

1,153 4,302

1,644 6,246

1827

2107

3012

7,836

8,202

9,628

537

581

683

776

1,253

1276

1305

1417

1

0

0

0

233

274

30

0

6

5

Public sector Banks

0

0

0

0

0

73

Others Total

1,681 2,219

2,227 2,808

2,112 2,795

3,526 4,302

4,760 6,246

6212

6862

8206

7,836

8,202

9,628

Advances outside India Total

0 2,219

0 2,808

0 2,795

0 4,302

0 6,246

0 7,836

0 8,202

0 9,628

0

0

0

0

0

0

0

0

1,268

1,663

2,104

2,866

3,556

4453

7147

8833

81 4

63 1

63

80

74

66

3

80 3

79

0

4

4

4

1606

1470

Investments Investments outside India Investments in India - Government securities

0

- Other approved securities - Shares - Debentures

256

435

1,191

1,723

1,994

1734

0

0

0

0

0

0

0

0

251 1,860

59 2,221

104 3,462

246 4,918

159 5,792

5

38

23

6,274

8,870

10,395

1,860

2,221

3,462

4,918

5,792

6,274

8,870

10,395

Opening balance

n.a.

n.a.

n.a.

253

441

440

447

435

Additions

n.a.

n.a.

n.a.

231

97

335

203

178

Reductions

n.a.

n.a.

n.a.

43

98

329

214

194

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

441 45

440 60

447 60

435 85

419 68

Interest/Discount on advances/bills

372

342

369

399

603

711

770

749

Income on investments

198

224

323

524

630

728

665

634

37

24

- Subsidiaries/JV - Others Total Total investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income

26

63

69

68

86

58

1 597

1 630

2 763

2 993

2 1,320

2

8

6

1,499

1,480

1,414

85

97

102

123

176

196

213

262

79

96

89

153 0

Commission exchange and brokerage Profit on sale of investments

1

Loss on sale of investments

-1

20

10

43

0

0

0

0

0

0

Profit on sale of fixed assets

0

0

0

0

-1

0

3

Loss on revaluation of investments

0

0

0

0

0

0

0

83

76

74

95

99

109

179

0

0

0

0

Profit on forex transactions

51

Income from investments

0

0

0

Lease income

0

0

0

0

0

0

0

0

0

Miscellaneous income Total

4 141

2 202

2 191

15 256

46 396

89

72

108

478

482

705

Total income

738

832

954

1,248

1,716

1,978

1,962

2,119

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

255

...continued

(Rs crore) Interest expended Interest on deposits Interest on RBI /Inter-bank Others Total Operating expenses Salaries Others

1996-97

1997-98

1998-99 1999-2000

378

366

460

2000-01

2001-02

2002-03

2003-04

532

656

695

598

502 190

6

13

55

95

166

275

253

1 385

0 379

0 516

17 645

26 848

26

27

30

997

878

723

56

72

98

101

148

155

234

231

313

334 59

84

105

134

165

217

286

Depreciation Total

22 163

24 201

26 258

32 298

49 415

62

67

502

614

624

Provisions and contingencies Total expenses including provisions

101 649

180 760

127 900

183 1,126

252 1,515

312 1,811

319 1,812

378 1,726

88

73

54

122

201

167

150

394

190

252

181

305

452

478

470

772

n.a.

n.a.

27,571

30,050

41,511

60,190

93,434

131483 1521

Profit for the year Profits inclusive of provisions Contingent liabilities Claims against the banks Currency Options Single Currency Interest Rate swaps Liability for outstanding forex contracts Guarantees - In India

n.a.

n.a.

966

1,119

1,379

1,417

1,274

- Outside India

n.a.

n.a.

195

82

75

186

521

961

Acceptances, endorsements

n.a.

n.a.

756

922

1,515

1,282

2,619

2957

Others Total

n.a. n.a.

n.a. n.a.

121 29,609

2,757 34,930

406 44,886

411 63,486

409 98,256

247

Provisions and contingencies Provison for bad and doubtful debts

137,169

15

44

43

32

15

0

0

0

Provision for taxation

105

121

178

8

230 0

173

-20

147 4

184

Net Provision for depreciation on investments

84 0

0

0

46

Others Total

1 101

6 135

0 84

0 151

6 252

128 312

146 319

154 378

Overall

18

21

16

37

14

24

4

27

Demand

44

2

8

29

1

21

6

110

Savings

16

10

33

36

23

23

26

39

Term Share of deposits (per cent)

10

32

16

40

15

25

-1

3

Demand

25

21

20

18

16

16

16

27

Savings

13

12

14

13

15

14

18

19

Term Financial parameters

62

67

67

68

69

69

66

54

Return on assets

1.2

1.1

0.6

1.1

1.4

1.0

0.8

1.7

Return on equity

12.3

9.0

6.6

15.1

20.8

14.3

8.5

16.6

Gearing (times)

6.5

7.8

10.8

14.1

13.3

14.5

8.1

9.3

Staff costs to operating expenses

34.5

36.0

37.9

33.9

35.7

30.8

38.1

37.1

Non-fund income to total income

19.1

24.3

20.0

20.5

23.1

24.2

24.6

33.3

Operating expenses to total income

22.1

24.1

27.0

23.9

24.2

25.4

31.3

29.5

Financial analysis Growth in deposits (per cent)

Profitability (per cent)

Operating expenses to deposits

3.6

3.7

4.0

3.4

4.2

4.1

4.8

3.8

Cost to income ratio

46.22

44.35

58.79

49.40

47.86

51.23

56.67

44.70

Cost to income ratio (w/o profit on invest)

46.35

46.41

60.21

53.21

52.68

56.79

61.75

50.20

continued...

256

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Financial management (per cent)

1996-97

Interest cost

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

7.08

7.50

6.88

6.92

6.66

5.35

4.05

Average cost of deposits

9.0

7.3

7.7

7.0

7.0

6.2

4.8

3.5

Average cost of borrowings

4.7

6.5

7.3

7.4

7.4

8.7

8.2

7.7

Yield on carry business

11.59

10.72

10.42

10.48

9.51

8.31

7.13

Average yield on investments

11.9

11.0

11.4

12.5

11.8

12.1

8.8

6.6

Average yield on advances

17.1

13.6

13.2

11.2

11.4

10.1

9.6

8.4

Spreads

4.51

3.22

3.55

3.56

2.84

2.96

3.08

Operating expenses to AFD

3.59

3.58

3.08

3.24

3.17

3.44

3.14

Core fee income to AFD

3.23

2.49

2.11

2.29

2.14

2.00

2.49

Net Profitability Margin

4.15

2.13

2.58

2.61

1.82

1.52

2.43

Deposits to borrowings (times)

27.9

24.2

7.8

5.0

3.6

3.2

3.7

5.1

Capital adequacy

11.9

9.8

9.3

10.3

12.4

11.04

11.3

14.54

Provisions as a percentage of profit before

53.4

71.2

70.3

60.0

55.6

65.2

68.0

49.0

Provisions as a percentage of networth Liquidity (per cent)

13

21

16

22

23

25

14

15

Credit-deposit ratio

49

51

44

49

63

63

64

59

Incremental C/D ratio

11

61

-2

64

162

67

80

41

0

7

18

22

33

30

25

16

provisions

Borrowings to total deposits Cash-deposit ratio

0

0

0

0

0

0

1

0

41

40

54

56

58

51

69

64

Advances

3

27

0

54

45

25

5

17

Deposits

18

21

16

37

14

24

4

27 27

Investment-deposit ratio Growth (per cent)

Investments

-13

0

23

76

35

0

13

6

28

35

3

47

4

52

-1

Commission and fee

36

13

6

20

43

11

8

23

Interest income Others

12

6

21

30

33

14

-1

-4

Salaries cost

Branches (nos) Advances per branch (Rs crore)

21

21

25

26

28

30

33

38

105.68

133.73

111.79

165.48

223.07

261.19

248.55

253.37

Operating expenses per branch (Rs crore) Employees (nos) Income per employee (Rs crore)

8

10

10

11

15

17

19

16

2,357

2,512

2,723

2,780

3,023

3355

3339

n.a.

0.31

0.33

0.35

0.45

0.57

0.59

0.59

n.a.

13.11

11.53

9.76

12.36

11.56

12.79

8.38

9.16

81

76

80

80

77

76

75

67

7

10

8

6

6

5

6

8

Commission, brokerage Share of advances (per cent)

12

12

11

10

10

10

11

12

Priority

24

21

24

18

20

16

16

15

Public

0

0

0

0

4

3

0

0

Inter bank

0

0

0

0

0

1

0

0

Others

76

79

76

82

76

79

84

85

Abroad

0

0

0

0

0

0

0

0

Income/employee expenses (times) Total income (per cent) Interest Forex

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

257

...continued

(Rs crore)

1996-97

1997-98

Bills

14

10

10

Cash credit

25

40

Term loans

61

49

82

75

78

62

61

8

6

12

11

12

10

18

11

27

26

Share of advances (per cent)

Share of advances (per cent) Secured Govt. guarantee Unsecured Share of investments (per cent) Government securities

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

16

12

15

15

10

28

14

27

41

48

49

62

70

61

44

37

41

63

64

62

14

10

7

23

26

31

68

75

61

58

61

71

81

85

Other approved securities

4

3

2

2

1

1

1

1

Shares

0

0

0

0

0

0

0

0

Debentures

14

20

34

35

34

28

18

14

Subsidiary

0

0

0

0

0

0

0

0

Others

13

3

3

5

3

0

0

0

Net NPAs (per cent)

1.8

2.0

0.9

1.0

1.0

2.3

1.0

0.7

n.a.: Not available Source: CRIS INFAC

258

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Standard Chartered Bank (Rs crore) Liabilities

Table 19 1998-99 1999-2000

Capital Reserves and surplus

0

0

2000-01

2001-02

2002-03

2003-04

0

374

515

515

580

717

766

1,147

2,285

2,218

Deposits

5,352

5,006

5,088

7,244

18,003

19,949

Borrowings

1,616

2,597

5,601

9,312

4,834

6,124

Other liabilities and provisions Total

608 8,156

787 9,107

879 12,334

835

3,675

5,539

18,911

29,312

34,345

Cash and balances with RBI

662

543

390

595

1,158

1,036

Balances with bank and money at call

231

132

289

616

212

620

Investments

2,720

3,140

5,401

10,223

10,079

Advances

3,381

4,319

5,187

7017 9,033

13,042

16,152

Fixed assets

266

208

173

166

574

438

Other assets Total

897 8,157

765 9,107

894 12,334

1,483

4,103

6,021

18,911

29,312

34,345

894

1,134

1,336

2024

3,692

5,125

2,935

3,819

Assets

Deposits Demand Savings

563

559

570

709

Term Total

3,896 5,353

3,312 5,006

3,182 5,088

4511

11,376

11,005

7,244

18,003

19,949

Deposits of branches in India

5,353

5,006

5,088

7,244

18,003

19,949

Deposits of branches abroad Total Borrowings

0 5,353

0 5,006

0 5,088

0 7,244

0 18,003

0 19,949

RBI Other banks Other institutions and agencies Forex borrowings Total Other liabilities and provisions

111

129

73

271

300

0

1,264

2,013

4,748

8821

2,398

1,738

233

449

780

198

139

1,802

0 5,601

23

1,997

2,584

9,312

4,834

6,124

0

0

268

354

8 1,616

Inter-office adjustments

0

0

0

47

34

40

0 1

344

274

367

259

284

289

575

3,124

4,895

Bills payable Interest accrued

6 2,597

Others (including provisions) Total

217 608

479 787

278 684

835

3,675

5,539

Balance with RBI

641

506

371

569

926

953

21

37

19

26

232

83

192

216

569

1290

725

993

Cash credit and overdraft

1,427

2,934

3,271

2448

4,315

7,800

Term loans Total

1,763 3,381

1,169 4,319

1,348 5,187

5295

8,002

7,359

9,033

13,042

16,152

Cash in hand Advances Bills purchases and discounted

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

259

...continued

(Rs crore) Secured Government guarantee Unsecured Total Priority sector Public sector

1998-99 1999-2000 1,931

2,700

2000-01

2001-02

2002-03

2003-04

2,394

4573

7,773

10,315

358

149

350

426

414

762

1,093 3,381

1,469 4,319

2,443 5,187

4033

4,855

5,075

9,033

13,042

16,152

841

910

1,433

1839

2,767

3,976

135

216

144

1

21

46

Banks

0

0

0

0

0

0

Others Total

2,539 3,381

3,387 4,319

3,708 5,187

7059 9,033

10,059

12,032

13,042

16,152

Advances outside India Total

0 3,381

0 4,319

0 5,187

0 9,033

0 13,042

0 16,152

0

0

0

0

0

0

1,613

1,906

3,104

4045

6,548

6,998

44

44

6

26

26

214

324

430

Investments Investments outside India Investments in India - Government securities - Other approved securities

25

3

43 3

978

1,174

2,252

2737

3,325

2,625

0

0

0

0

0

0

61 2,720

14 3,140

0 5,401

15

0

0

7,017

10,223

10,079

2,720

3,140

5,401

7,017

10,223

10,079

Opening balance

n.a.

310

366

421

322

427

Additions

n.a.

162

203

87

242

215

Reductions

n.a.

-106

-147

186

137

160

Closing balance Net NPA-Closing balance

n.a. n.a.

366 88

421 79

322 36

427 41

482 84

Interest/Discount on advances/bills

528

545

697

997

1461

1529

Income on investments

258

367

383

622

758

893

53

42

42

24

27

28

37 876

14 967

3 1,126

2

41

74

1,645

2,287

2,523

143

167

181

272

349

371 64

- Shares - Debentures - Subsidiaries/JV - Others Total Total investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage Profit on sale of investments

6

9

21

118

30

Loss on sale of investments

0

0

0

0

0

0

Profit on sale of fixed assets

4

-4

0

0

2

6

Profit on revaluation of investments

0

0

0

0

0

0

75

110

174

224

Profit on forex transactions

57

56

Income on investments

0

0

0

0

0

0

Lease income

0

0

0

0

0

0

4 215

1 229

24 301

17

6

35

517

561

699

1,091

1,196

1,426

2161

2848

3223

Miscellaneous income Total Total income

continued...

260

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Interest expended

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Interest on deposits Interest on RBI /Inter-bank Others Total Operating expenses

501 83 0 585

419 147 11 577

353 285 27 666

359 549 25 933

840 292 21 1153

715 210 146 1071

Salaries Others Depreciation Total

90 172 10 252

74 232 23 284

99 229 45 373

143 292 15 450

165 380 34 579

220 497 58 775

86 922 169

151 1,011 185

202 1,241 185

15 1,398 763

260 1,993 855

792 2,638 585

255

336

387

778

1,115

1,377

9 0 0 17,759

9 0 890 22,477

9 0 4,814 47,098

0 0 0 59929

0 0 0 57629

0 0 0 93216

1,856 0 626 62 20,312

2,179 0 664 91 26,311

2,602 0 492 97 55,112

2638 1602 1307 24878 90,353

3793 2040 2921 44291 110,674

3286 2195 1944 86324 186,964

89 2 -6 0 85

125 25 0 0 151

-2 205 -1 0 202

0 1 0 14 15

0 84 5 171 260

0 266 207 319 792

n.a. n.a. n.a. n.a.

-6 27 -1 -15

2 18 2 -4

42 51 24 42

149 82 314 152

11 39 30 -3

17 11 73

23 11 66

26 11 63

28 10 62

21 16 63

26 19 55

n.a. n.a. 13.1 35.7 19.7 23.1 15.6 49.7 50.3

2.1 5.9 11.7 26.2 19.2 23.7 10.9 45.8 46.4

1.7 25.0 15.1 26.6 21.1 26.2 6.7 49.1 50.4

4.9 66.8 11.4 31.7 23.9 20.8 4.8 36.6 40.5

3.5 39.6 9.5 28.5 19.7 20.3 12.0 34.2 34.8

1.8 21.1 11.6 28.4 21.7 24.0 12.7 36.0 37.1

Provisions and contingencies Total expenses including provisions Profit for the year Profits inclusive of provisions Contingent liabilities Claims against the banks Liability for partly paid investments Single Currency Interest Rate swaps Liability for outstanding forex contracts Guarantees - In India - Outside India Acceptances, endorsements Others Total Provisions and contingencies Provisions for non-performing assets Provision towards Income/Interest tax Net Provision for depreciation on investments Others Total Financial analysis Growth in deposits (per cent) Overall Demand Savings Term Share of deposits (per cent) Demand Savings Term Financial parameters Profitability (per cent) Return on assets Return on equity Gearing (times) Staff costs to operating expenses Non-fund income to total income Operating expenses to total income Operating expenses to deposits Cost to income ratio Cost to income ratio (w/o profit on invest)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

261

...continued

(Rs crore) Financial management (per cent)

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Interest cost

n.a.

7.87

7.25

6.84

5.82

4.32

Average cost of deposits

n.a.

8.1

7.0

5.8

6.7

3.8

Average cost of borrowings

n.a.

7.5

7.6

7.7

4.4

6.5

Yield on carry business

n.a.

12.87

11.62

11.6

11.1

9.7

Average yield on investments

n.a.

10.4

9.2

8.6

11.1

6.8

Average yield on advances

n.a.

14.1

14.7

14.0

13.2

10.5

Spreads

n.a.

5.00

4.37

4.78

5.25

5.42

Operating expenses to AFD

n.a.

3.75

3.85

3.15

2.76

2.95

Core fee income to AFD

n.a.

2.95

2.76

2.74

2.51

2.33

Net Profitability Margin

n.a.

4.20

3.28

4.37

4.99

4.80

Deposits to borrowings (times)

n.a.

2.5

1.2

1

2

3

Capital adequacy

8.3

9.5

9.6

9

11

11

33.6

44.8

52.1

2

23

58

Provisions as a percentage of networth Liquidity (per cent)

1.4

2.6

3.4

0.2

1.3

3.6

Credit-deposit ratio

63

86

102

125

72

81

n.a.

-271

1052

178

37

160

38

30

16

9

76

90

1

1

0

0

5

1

63

86

102

125

72

81

n.a.

28

20

74

44

24

n.a.

-6

2

42

149

11

Investments

n.a.

15

72

-89

1559

-1

Salaries cost

n.a.

-17

34

44

16

33

Commission and fee

n.a.

16

9

50

28

6

Interest income Others

n.a.

10

16

46

39

10

Provisions as a percentage of profit before provisions

Incremental C/D ratio Borrowings to total deposits Cash-deposit ratio Investment-deposit ratio Growth (per cent) Advances Deposits

Branches (nos)

24

18

19

19

65

66

Advances per branch (Rs crore)

11.08

11.54

9.10

8.73

8.83

6.64

Operating expenses per branch (Rs crore)

10.48

15.75

19.65

23.67

8.91

11.74

Employees (nos)

2,666

1,623

1,654

2142

3673

n.a.

Income per employee (Rs crore)

0.41

0.74

0.86

1.01

0.78

n.a.

12.13

16.12

14.38

15.16

17.25

14.62

80

81

79

76

80

78

5

5

5

1

0

1

Commission, and brokerage Share of advances (per cent)

13

14

13

13

12

11

Priority

25

21

28

20

21

25

Public

0

0

1

1

2

1

Inter bank

75

78

71

78

77

74

Others

75

78

71

78

77

74

Abroad

0

0

0

0

0

0

Income/employee expenses (times) Total income (per cent) Interest Forex

continued...

262

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Share of advances (per cent)

1998-99 1999-2000

Bills

2000-01

2001-02

2002-03

2003-04

6

5

11

14

6

6

Cash credit

42

68

63

27

33

48

Term loans Share of advances (per cent)

52

27

26

59

61

46

Secured

57

63

46

51

60

64

Govt. guarantee

11

3

7

5

3

5

Unsecured Share of investments (per cent)

32

34

47

45

37

31

Government securities

59

61

57

58

64

69

Other approved securities

2

1

1

0

0

0

Shares

1

0

0

3

3

4

Debentures

36

37

42

39

33

26

Subsidiary

0

0

0

0

0

0

Others

2

0

0

0

0

0

3.2

2.0

1.5

0.4

0.3

0.5

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

263

State Bank of Bikaner & Jaipur (Rs crore)

Table 20 1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Liabilities Capital

50

50

50

50

50

50

50

294

369

473

559

702

853

1,099

6,525

7,741

9074

10,326

11,661

13,280

15,642

112

101

95

69

23

311

616

1,542 8,523

1,967 10,228

2,777 12,469

2,883 13,888

3,116 15,552

3,495 17,989

2,850 20,256

Cash and balances with RBI

767

1,262

1,248

1,341

908

879

1,261

Balances with bank and money at call

625

378

1,028

1,090

1,069

904

607

Investments

2,827

3,802

4,846

5,325

6,305

7,679

8,430

Advances

3,660

3,841

4,401

5,168

5,931

6,773

8,597

Fixed assets

46

95

92

90

91

102

113

Other assets Total

597 8,523

850 10,228

854 12,469

874 13,888

1,248 15,552

1,651 17,989

1,248 20,256

Demand

1,117

1,317

1,367

1,621

1,774

2,340

2,302

Savings

1,698

2,065

2,413

2,869

3,290

3,893

4,817

Term Total

3,711 6,525

4,359 7,741

5,294 9,074

5,836 10,326

6,597 11,661

7,047 13,280

8,524 15,642

Deposits of branches in India

6,525

7,741

9,074

10,326

11,661

13,280

15,642

Deposits of branches abroad Total

0 6,525

0 7,741

0 9,074

0 10,326

0 11,661

0 13,280

0 15,642

RBI

0

0

0

0

0

0

0

Other banks

1

2

4

1

1

0

0

13

10

9

7

5

2

1

98 112

88 101

82 95

61 69

17 23

308 311

614 616

Reserves and surplus Deposits Borrowings Other liabilities and provisions Total Assets

Deposits

Borrowings

Other institutions and agencies Forex borrowings Total Other liabilities and provisions Inter-office adjustments

69

801

585

528

103

117

197

Bills payable

453

21

58

446

755

1,077

896

Interest accrued

520

640

846

887

883

978

935

500 1,542

506 1,967

1,289 2,777

1,023 2,883

1,375 3,116

1,322 3,495

821 2,850

745

1,235

1,219

1,306

860

834

45

23

27

29

35

49

1,209

51

Others (including provisions) Total Balance with RBI Cash in hand Advances Bills purchases and discounted

304

240

290

442

451

663

797

Cash credit and overdraft

2,489

2,688

3,030

3,462

3,903

4,118

4,837

Term loans Total

867 3,660

914 3,841

1,082 4,401

1,263 5,168

1,578 5,931

1,992 6,773

2,963 8,597

Secured

3,030

3,250

3,819

4,262

4,712

5,288

6,880

426

447

415

679

829

922

859

205 3,660

144 3,841

167 4,401

226 5,168

390 5,931

563 6,773

857 8,597

Government guarantee Unsecured Total

Continued...

264

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Priority sector

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

1,438

1,629

1,827

2,047

2,407

2,923

3,771

472

547

607

917

1,095

1,114

968

3

5

6

4

8

6

3

Others Total

1,748 3,660

1,660 3,841

1,961 4,401

2,201 5,168

2,421 5,931

2,730 6,773

3,854 8,597

Advances outside India Total

0 3,660

0 3,841

0 4,401

0 5,168

0 5,931

0 6,773

0 8,597

0

0

0

0

0

0

0

2,050

2,932

4,004

4,483

5,439

6,785

7,770

391

364

329

303

274

228

201

56

20

20

12

25

26

25

330

413

410

466

519

505

390

Public sector Banks

Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares - Debentures - Subsidiaries/JV

1

1

1

1

1

1

1

0 2,827

71 3,802

81 4,846

60 5,325

47 6,305

43 7,587

135 8,523

2,827

3,802

4,846

5,325

6,305

7,587

8,523

Opening balance

n.a.

n.a.

675

733

715

585

580

Additions

n.a.

n.a.

196

169

119

167

96

Reductions

n.a.

n.a.

98

228

218

172

192

Closing balance Net NPA-Closing balance

n.a.

n.a.

n.a.

n.a.

773 453

715 410

616 342

580 282

484 107

Interest/Discount on advances/bills

457

460

482

549

605

653

691

Income on investments

331

420

522

580

647

716

824

24

38

37

48

54

58

35

38 851

45 964

75 1,116

89 1,267

51 1,357

11 1,438

24 1,574

- Others Total Total investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

124

136

168

191

196

193

216

Profit on sale of investments

12

0

22

18

77

107

227

Loss on sale of investments

0

0

0

0

0

0

0

Profit on sale of fixed assets

0

0

0

0

0

0

0

Loss on revaluation of investments

0

0

0

0

0

0

0

Profit on forex transactions

27

19

23

23

21

24

25

Income from investments

0

0

0

0

0

0

0

Lease income

0

3

8

7

7

6

6

0 163

5 164

0 220

0 239

0 301

11 340

17 491

1,013

1,127

1,336

1,506

1,658

1,778

2,065

Miscellaneous income Total Total income

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

265

...continued

(Rs crore)

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Interest expended Interest on deposits

506

597

692

764

834

866

839

3

6

12

10

5

1

7

28 537

31 634

39 742

37 811

28 867

19 887

11 857

Salaries

215

251

266

328

289

320

361

Others

60

70

79

60

123

107

130

Depreciation Total

6 281

11 332

12 356

12 400

15 427

24 450

36 527

Provisions and contingencies Total expenses including provisions

n.a. 818

109 1,075

166 1,264

163 1,374

226 1,520

238 1,575

380 1,764

Interest on RBI/inter bank Others Total Operating expenses

Profit for the year

196

53

72

132

138

203

302

196

162

238

295

364

441

681

10

15

11

11

21

21

21

0

0

0

0

0

0

0

213

43

157

458

638

1,811

3,395

327

332

345

314

291

274

339

0

0

0

0

0

63

20

439

378

386

369

353

399

517

86 1,075

83 851

71 970

73 1,226

159 1,462

261 2,829

241 4,533

Provison for NPAs

n.a.

85

80

81

64

104

108

Depreciation in values of investments

n.a.

0

0

5

13

-3

-4

Provision for taxation

n.a.

23

73

71

172

124

199

Other Provisions Total

n.a. n.a.

1 109

12 166

6 163

-22 226

12 238

77 380

Overall

n.a.

19

17

14

13

14

18

Demand

n.a.

18

4

19

9

32

-2

Savings

n.a.

22

17

19

15

18

24

Term Share of deposits (per cent)

n.a.

17

21

10

13

7

21

Demand

17

17

15

16

15

18

15

Savings

26

27

27

28

28

29

31

Term

57

56

58

57

57

53

54

Profits inclusive of provisions Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India - Outside India Acceptances and endorsements Others Total Provisions and contingencies

Financial analysis Growth in deposits (per cent)

continued...

266

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Financial Parameters Profitability (per cent) Return on assets

5

1

1

1

1

1

2

Return on equity

n.a.

14

15

23

20

25

29

Gearing (times)

24

23

23

22

20

19

17

Staff costs to operating expenses

76

76

75

82

68

71

68

Non-fund income to total income

16

15

16

16

18

19

24

Operating expenses to total income

28

29

27

27

26

25

25

4

4

4

4

4

3

3

39

11

14

26

28

41

60

Cost to income ratio

58.9

67.2

59.9

57.6

54.0

50.5

43.6

Cost to income ratio (w/o profit on invest) Financial management (per cent)

60.4

67.2

62.2

59.2

59.8

57.4

53.7

15.14

8.47

8.69

8.08

7.45

6.54

5.39

n.a.

8.4

8.2

7.9

7.6

6.9

5.8

Operating expenses to deposits Earning per share (Rs)

Interest cost Average cost of deposits Average cost of borrowings Yield on carry business

n.a.

34.5

51.8

57.0

73.0

12.3

3.9

21.75

11.33

10.83

10.44

10.06

9.49

9.02 10.2

Average yield on investments

n.a.

12.7

12.1

11.4

11.1

10.2

Average yield on advances

n.a.

12.3

11.7

11.5

10.9

10.3

9.0

Spreads

6.61

2.86

2.14

2.36

2.61

2.95

3.63

Operating expenses to AFD

7.12

3.87

3.42

3.28

3.15

2.96

3.00

Core fee income to AFD

3.82

1.84

1.83

1.75

1.60

1.46

1.42

Net Profitability Margin

3.31

0.83

0.55

0.83

1.06

1.44

2.05

Deposits to borrowings (times)

n.a.

67.1

85.9

118.4

239.5

74.8

31.2

Capital adequacy

10.7

12.3

12.4

12.4

13.4

13.2

12.9

Provisions as a percentage of profit before

n.a.

67.5

69.6

55.3

62.1

53.9

55.7

Provisions as a percentage of networth Liquidity (per cent)

n.a.

26.1

31.7

26.7

30.1

26.3

33.1

Credit-deposit ratio

56.1

49.6

48.5

50.0

50.9

51.0

55.0

Incremental credit deposit ratio

n.a.

14.8

42.0

61.3

57.2

52.0

77.2

Borrowings to total deposits

1.7

1.3

1.0

0.7

0.2

2.3

3.9

Cash-deposit ratio

0.3

0.3

0.3

0.3

0.4

9.1

0.3

43.3

49.1

53.4

51.6

54.1

57.8

53.9

provisions

Investment-deposit ratio Incemental I/D ratio

n.a.

80.2

78.3

38.3

73.4

84.9

31.8

Reserves as a percentage of net worth Growth (per cent)

85.5

88.1

90.4

91.8

93.4

94.5

95.6

Advances

n.a.

4.9

14.6

17.4

14.8

14.2

26.9

Deposits

n.a.

18.6

17.2

13.8

12.9

13.9

17.8

Investments

n.a.

34.5

27.5

9.9

18.4

21.8

9.8

Salaries cost

n.a.

17.0

5.8

23.6

-11.9

10.6

12.8

Commission and fee

n.a.

10.1

23.2

13.7

2.6

-1.6

12.1

Interest income Others

n.a.

13.3

15.8

13.5

7.2

5.9

9.4

Branches (nos)

767

780

787

792

792

793

801

Advances per branch (Rs crore)

4.77

4.92

5.59

6.53

7.49

8.54

10.73

Operating expenses per branch (Rs crore)

0.37

0.43

0.45

0.51

0.54

0.57

0.66

Employees (nos)

15,046

14,970

14,778

13,392

13293

13,209

13,054

Income per employee (Rs crore)

0.07

0.08

0.09

0.11

0.12

0.13

0.16

Income/employee expenses (times)

4.72

4.49

5.03

4.59

5.74

5.56

5.73

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

267

...continued

(Rs crore)

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04 76.2

Total income (per cent) Interest

84.0

85.5

83.5

84.1

81.9

80.9

2.7

1.7

1.7

1.5

1.3

1.3

1.2

Commission, brokerage Share of advances (per cent)

12.2

12.1

12.6

12.7

11.8

10.8

10.4

Priority

39.3

42.4

41.5

39.6

40.6

43.2

43.9

Public

12.9

14.2

13.8

17.7

18.5

16.4

11.3

0.1

0.1

0.1

0.1

0.1

0.1

0.0

47.7

43.2

44.6

42.6

40.8

40.3

44.8

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Forex

Inter bank Others Abroad Share of advances (per cent) Bills

8.3

6.2

6.6

8.6

7.6

9.8

9.3

Cash credit

68.0

70.0

68.8

67.0

65.8

60.8

56.3

Term loans Share of advances (per cent)

23.7

23.8

24.6

24.4

26.6

29.4

34.5

Secured

82.8

84.6

86.8

82.5

79.4

78.1

80.0

Government guarantee

11.6

11.6

9.4

13.1

14.0

13.6

10.0

5.6

3.7

3.8

4.4

6.6

8.3

10.0

Government securities

72.5

77.1

82.6

84.2

86.3

89.4

91.2

Other approved securities

13.8

9.6

6.8

5.7

4.4

3.0

2.4

2.0

0.5

0.4

0.2

0.4

0.3

0.3

Debentures

11.7

10.9

8.5

8.8

8.2

6.7

4.6

Subsidiary

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Others

0.0

1.9

1.7

1.1

0.7

0.6

1.6

7.13

10.45

10.14

7.83

5.72

4.13

1.24

Unsecured Share of investments (per cent)

Shares

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

268

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

UTI Bank Ltd (Rs crore)

Table 21 1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04 232

Liabilities Capital

132

132

132

192

230

74

108

170

423

689

906

3,041

5,720

9,092

12,287

16,965

20954

521

531

1,146

1,246

719

528

148 3,915

178 6,669

226 10,766

227 14,374

1,010 19,613

1530 24,150

Reserves and surplus Deposits Borrowings Other liabilities and provisions Total Assets Cash and balances with RBI

338

401

881

1,123

1,600

3777

Balances with bank and money at call

158

492

331

628

1,970

1886

Investments

1,101

2,065

4,193

6,630

7,841

7793

Advances

2,170

3,507

4,821

5,352

7,180

9363

Fixed assets

69

85

234

260

306

435

Other assets Total

79 3,915

119 6,669

306 10,766

380 14,375

717 19,613

896 24,150

365

666

829

1,151

2,486

5,394

Deposits Demand Savings

147

306

569

876

1423.24

2,585

Term Total

2,529 3,041

4,748 5,720

7,694 9,092

10,260 12,287

13,056 16,965

12,976 20,954

Deposits of branches in India

3,041

5,720

9,092

12,287

16,965

20,954

Deposits of branches abroad Total

0 3,041

0 5,720

0 9,092

0 12,287

0 16,965

0 20,954

Borrowings RBI

43

80

72

51

0

0

Other banks

306

151

505

465

247

98

Other institutions and agencies

171

300

569

730

411

303

Forex borrowings Total

0 521

0 531

0 1,146

0 1,246

62 719

127 528

Other liabilities and provisions Inter-office adjustments

9

3

0

1

0

0

Bills payable

50

64

93

102

233

439

Interest accrued

14

3

50

16

21

31

Others (including provisions) Total

90 148

112 178

133 226

124 227

777 1,010

1,092 1,530

Balance with RBI

329

377

833

1,055

1,487

3,624

9

24

68

48

113

153

1,401

1,996

1,655

166

210

259

586

1,154

2,113

2,597

3,061

3,120

183 2,170

357 3,507

1,053 4,821

2,590 5,352

3,909 7,180

5,985 9,363

Cash in hand Advances Bills purchases and discounted Cash credit and overdraft Term loans Total

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

269

...continued

(Rs crore)

2000-01

2001-02

2002-03

2003-04

936

1,624

3,024

4,226

6,317

Government guarantee

1,233

1,533

732

67

58

8,239 88

Unsecured Total

1 2,170

349 3,507

1,066 4,821

1,060 5,352

804 7,180

1,036 9,363

235 21

303 93

348 430

868 13

1,639 111

2,456 15

Secured

Priority sector Public sector

1998-99 1999-2000

Banks

25

0

0

3

0

0

Others Total

1,890 2,170

3,111 3,507

4,043 4,821

4,468 5,352

5,429 7,180

6,892 9,363

Advances outside India Total

0 2,170

0 3,507

0 4,821

0 5,352

0 7,180

0 9,363

0

0

0

0

0

0

771

1,368

2,427

3,649

4,648

5,056

Investments Investments outside India Investments in India - Government securities - Other approved securities

0

0

0

0

0

0

70

118

192

197

205

190

138

243

1026

1,805

2,960

2,539

0

0

0

0

0

0

- Others Total

122 1,101

336 2,065

548 4,193

979 6,630

27 7,841

8 7,793

Total investments

1,101

2,065

4,193

6,630

7,841

7,793

n.a.

157

194

226

282

229

Additions

n.a.

63

48

200

86

241

Reductions

n.a.

27

16

143

139

195

Closing balance Net NPA-Closing balance

n.a. n.a.

194 165

226 181

282 185

229 162

275 112

Interest/Discount on advances/bills

237

297

474

540

736

768

Income on investments

117

157

374

603

576

639

18

25

40

31

37

33

2 373

5 483

2 890

7 1,180

116 1,465

147 1,587

- Shares - Debentures - Subsidiaries/JV

Movement in NPA Gross NPA Opening balance

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

33

45

86

98

144

182

40

64

305

Loss on sale of investments

6 0

0

0

0

246 0

321 0

Profit on sale of fixed assets

0

0

0

-1

-2

-1

Profit on sale of investments

Loss on revaluation of investments

0

0

0

0

0

0

Profit on forex transactions

5

5

5

9

17

28

Income from investments

0

0

0

0

0

0

Lease income

1

0

6

4

4

2

2 47

2 91

2 163

1 416

1.46 410

9 540

420

574

1,053

1,595

1,875

2,127

Miscellaneous income Total Total income

continued...

270

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Interest expended Interest on deposits

262

340

704

857

1,057

934

15

24

33

53

27

19

24 301

29 393

54 791

70 980

59 1,142

68 1,021

Salaries

12

15

29

50

85

121

Others

29

39

79

119

189

236

Depreciation Total

10 51

11 65

22 129

37 205

49 323

62 419

37 389

65 523

46 967

276 1,461

218 1,683

408 1,849

Interest on RBI/inter bank Others Total Operating expenses

Provisions and contingencies Total expenses including provisions Profit for the year

31

51

86

134

192

278

Profits inclusive of provisions Contingent liabilities

68

116

133

410

410

686

Claims against banks

26

26

26

36

36

40

Liability for partly paid investments

0

0

0

0

0

0

1,758

3,409

4,821

5780

11,176

34,622

197

290

727

865

984

1,222

0

0

0

0

0

0

0

0

0

0

0

0

387

267

484

528

872

1,535

0

0

0

0

0

0

6 2,375

12 4,005

15 6,073

9 7,219

1 13,068

21 37,440

13

9

19

59

90

244

4

2

-2

0

5

4

Provision for taxation

15

28

18

79

109

151

Other Provisions Total

18 37

35 65

30 46

197 276

13 218

9 408

Overall

n.a.

88

59

35

38

24

Demand

n.a.

82

25

39

116

117

Savings

n.a.

108

86

54

63

82

Term Share of deposits (per cent)

n.a.

88

62

33

27

-1

Demand

n.a.

12

9

9

15

26

Savings

n.a.

5

6

7

8

12

Term

n.a.

83

85

84

77

62

Liability for outstanding forex contracts Guarantees - In India - Outside India Liability on account of outstanding derivative contracts Acceptances and endorsements Currency Swaps Others Total Provisions and contingencies Provison for NPAs Depreciation in values of investments

Financial analysis Growth in deposits (per cent)

n.a.

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

271

...continued

(Rs crore)

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Financial Parameters Profitability (per cent) Return on assets

1.6

1.0

1.0

1.1

1.1

1.3

Return on equity

30.1

22.9

31.8

29.3

25.1

27.1

Gearing (times)

18.0

26.8

34.7

22.4

20.3

20.2

Staff costs to operating expenses

23.6

23.6

22.1

24.1

26.4

28.9

Non-fund income to total income

11.1

15.9

15.5

26.1

21.9

25.4

Operating expenses to total income

19.7

12.2

11.4

12.2

12.9

17.2

Operating expenses to deposits

1.7

1.1

1.4

1.7

1.9

2.0

Earning per share (Rs)

4.2

4.7

5.1

3.2

2.8

3.1

Cost to income ratio

42.79

36.02

49.28

33.39

44.05

37.92

Cost to income ratio (w/o profit on invest) Financial management (per cent)

45.24

46.10

65.20

66.29

66.33

53.43

Interest cost

n.a.

7.92

9.51

8.18

7.24

5.13

Average cost of deposits

17.2

7.8

9.5

8.0

7.2

4.9

Average cost of borrowings

14.8

10.1

10.5

10.3

8.7

14.0

Yield on carry business

n.a.

10.08

11.48

10.70

9.48

7.74

Average yield on investments

21.2

9.9

11.9

11.1

8.0

8.2

Average yield on advances

21.8

10.5

11.4

10.6

11.7

9.3

Spreads

n.a.

2.17

1.97

2.52

2.23

2.62

Operating expenses to AFD

n.a.

1.28

1.54

1.72

2.00

2.02

Core fee income to AFD

n.a.

0.99

1.18

0.92

1.02

1.05

Net Profitability Margin

n.a.

1.88

1.61

1.73

1.26

1.64

Deposits to borrowings (times)

5.8

8.3

8.8

8.9

14.9

30.4

Capital adequacy

11.6

11.4

9.0

10.7

10.9

11.2

Provisions as a percentage of profit before

54.5

56.2

35.0

67.3

53.1

59.4

18.0

27.2

15.4

44.9

23.7

35.8

71

61

53

44

42

45

n.a.

50

39

17

39

55

17

9

13

10

4

3

0

0

1

0

1

1 37

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio Incremental credit deposit ratio Borrowings to total deposits Cash-deposit ratio Investment-deposit ratio

36

36

46

54

46

Incemental I/D ratio

n.a.

36

63

76

26

-1

Reserves as a percentage of net worth Growth (per cent)

n.a.

45

56

69

75

80

Advances

n.a.

62

37

11

34

30

Deposits

n.a.

88

59

35

38

24

Investments

n.a.

88

103

58

18

-1

Salaries cost

n.a.

28

85

74

72

42

Commission and fee

n.a.

37

93

13

47

27

Interest income Others

n.a.

29

84

33

24

8

Branches (nos) Advances per branch (Rs crore) Operating expenses per branch (Rs crore)

35

49

86

139

192

188

61.99

71.56

56.06

38.51

37.40

49.80

1.46

1.33

1.50

1.48

1.68

2.23 3,447

Employees (nos)

521

739

1,185

1,721

2,338

Income per employee (Rs crore)

0.81

0.78

0.89

0.93

0.80

0.62

34.93

37.23

36.91

32.18

22.00

17.54

Income/employee expenses (times)

continued...

272

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Total income (per cent) Interest

89

84

85

74

78

75

Forex

1

1

0

1

1

1

Commission, brokerage Share of advances (per cent)

8

8

8

6

8

9

Priority

11

9

7

16

23

26

Public

1

3

9

0

2

0

Inter bank

1

0

0

0

0

0

87

89

84

83

76

74

0

0

0

0

0

0

Bills

65

57

34

3

3

3

Cash credit

27

33

44

49

43

33

8

10

22

48

54

64 88

Others Abroad Share of advances (per cent)

Term loans Share of advances (per cent) Secured

43

46

63

79

88

Government guarantee

57

44

15

1

1

1

0

10

22

20

11

11 65

Unsecured Share of investments (per cent) Government securities

70

66

58

55

59

Other approved securities

0

0

0

0

0

0

Shares

6

6

5

3

3

2

12

12

24

27

38

33 0

Debentures Subsidiary

0

0

0

0

0

Others

11

16

13

15

0

0

Net NPAs (per cent)

6.3

4.5

3.4

2.7

2.4

1.3

n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

273

The South Indian Bank Ltd (Rs crore)

Table 22 1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Liabilities Capital

19

35

36

36

36

36

36

Reserves and surplus

93

128

151

183

239

285

359

2,738

3,123

3,885

4,669

5,920

6,861

8280

30

108

96

64

61

95

79

183 3,064

188 3,582

276 4,444

265 5,216

299 6,555

352 7,629

500 9,254

Cash and balances with RBI

267

265

292

295

301

396

405

Balances with bank and money at call

199

305

227

282

620

384

401

Investments

1,006

1,200

1,749

1,998

2,181

2,999

3962

Advances

4197

Deposits Borrowings Other liabilities and provisions Total Assets

1,466

1,665

2,021

2,468

3,231

3,613

Fixed assets

24

28

34

36

44

54

66

Other assets Total

101 3,064

120 3,582

121 4,444

137 5,216

179 6,555

182 7,629

223 9,254

Demand

169

193

238

227

291

328

398

Savings

371

483

613

718

831

988

1,339

Term Total

2,199 2,738

2,447 3,123

3,034 3,885

3,724 4,669

4,797 5,920

5,545 6,861

6,544 8,280

Deposits of branches in India

2,738

3,123

3,885

4,669

5,920

6,861

8,280

Deposits of branches abroad Total

0 2,738

0 3,123

0 3,885

0 4,669

0 5,920

0 6,861

0 8,280

RBI

0

84

0

52

17

0

0

Other banks

0

0

0

5

2

81

4

Other institutions and agencies

28

18

10

0

0

0

0

Forex borrowings Total

2 30

6 108

85 96

7 64

42 61

14 95

75 79

Inter-office adjustments

18

9

10

20

16

15

5

Bills payable

40

43

53

47

72

60

82

Interest accrued

28

35

46

32

34

32

38

97 183

101 188

167 276

166 265

178 299

245 352

375 500

233

245

250

247

337

332

32

47

45

54

59

73

Deposits

Borrowings

Other liabilities and provisions

Others (including provisions) Total Balance with RBI Cash in hand Advances Bills purchases and discounted

175

185

194

257

355

393

509

Cash credit and overdraft

731

829

1,038

1,265

1,673

1,588

1,546

559 1,466

651 1,665

790 2,021

947 2,468

1,203 3,231

1,632 3,613

2,142 4,197

Term loans Total

Continued...

274

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Secured

1997-98

2000-01

2001-02

2002-03

2003-04

1,291

1,456

n.a.

2,132

2,557

2,763

15

42

n.a.

88

264

229

3,308 300

159 1,466

166 1,665

n.a. n.a.

248 2,468

410 3,231

621 3,613

589 4,197

388 10

473 10

n.a. n.a.

734 77

919 414

1,004 292

1,291 464

Government guarantee Unsecured Total Priority sector Public sector

1998-99 1999-2000

Banks

0

0

n.a.

0

0

68

66

Others Total

1,067 1,466

1,182 1,665

n.a. n.a.

1,658 2,468

1,898 3,231

2,249 3,613

2,376 4,197

Advances outside India Total

0 1,466

0 1,665

0 2,021

0 2,468

0 3,231

0 3,613

0 4,197

0

0

0

0

0

0

0 3,580

Investments Investments outside India Investments in India - Government securities

654

824

1,391

1,668

1,866

2,614

- Other approved securities

99

94

92

90

80

71

56

- Shares

19

22

23

14

12

13

10

205

226

221

220

216

240

201

2

3

2.82

0

0

0

0

- Others Total

28 1,006

31 1,200

20 1,749

6 1,998

7 2,181

62 2,999

116 3,962

Total investments

1,006

1,200

1,749

1,998

2,181

2,999

3,962

- Debentures - Subsidiaries/JV

Movement in NPA Gross NPA Opening balance

n.a.

n.a.

n.a.

n.a.

257

336

346

Additions

n.a.

n.a.

n.a.

n.a.

114

108

134

Reductions

n.a.

n.a.

n.a.

n.a.

35

982

152

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

n.a. n.a.

n.a. n.a.

336 213

346 216

328 190

Interest/Discount on advances/bills

204

237

264

303

360

374

358

Income on investments

126

148

188

218

236

262

309

0

0

18

0

0

0

0

8 339

15 400

0 469

19 540

20 615

21 657

13 680

12

15

20

24

24

19

20

2 0

3 0

33

25

86

133

187

Loss on sale of investments

0

0

0

0

0

Profit on sale of fixed assets

0

0

0

0

0

0

Loss on revaluation of investments

0

0

0

0

0

0

0 0

Profit on forex transactions

5

8

8

8

10

10

9

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage Profit on sale of investments

Income from investments

0

0

0

0

0

0

0

Lease income

0

0

13

0

0

0

0

7 26

10 37

0 75

15 73

18 139

18.96 180

18 235

365

437

543

613

754

838

915

Miscellaneous income Total Total income

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

275

...continued

(Rs crore)

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

370

449.2

469

465

Interest expended Interest on deposits Interest on RBI/inter bank

249

295

332

1

4

6

6

3

0

0

11 261

13 312

13 351

16 391

8 460

11 479

14 480

Salaries

54

64

86

85

84

94

131

Others

17

23

23

27

32

41

52

Depreciation Total

2 73

3 90

3 113

3 115

4 121

7 142

10 193

19 354

31 433

54 518

65 571

110 692

144 765

158 831

Profit for the year

11

4

26

41

62

72

84

Profits inclusive of provisions Contingent liabilities

30

35

80

107

173

216

242

Claims against banks

9

19

0

26

15

17

16

Liability for partly paid investments

0

0

0

0

0

0

0

80

173

153

140

222

389

457

75

152

111

103

157

138

150

0

0

0

0

0

0

0

0

0

0

0

0

0

0

70

125

172

158

191

161

179

0

0

0

0

0

0

0

0 234

0 469

23 459

0 428

0 586

1 706

1 802

Provison for NPAs

9

27

25

39

52

94

108

Depreciation in values of investments

0

0

0

0

1

0

Provision for taxation

7

1 0

24

25

61

72

77

4 19

3 31

5 54

1 65

-2 110

-23 144

-28 158

Overall

n.a.

14

24

20

27

16

21

Demand

n.a.

14

23

-5

29

13

21

Savings

n.a.

30

27

17

16

19

35

Term Share of deposits (per cent)

n.a.

11

24

23

29

16

18

Others Total Operating expenses

Provisions and contingencies Total expenses including provisions

Liability for outstanding forex contracts Guarantees - In India - Outside India Liability on account of outstanding derivative contracts Acceptances and endorsements Currency Swaps Others Total Provisions and contingencies

Other Provisions Total Financial analysis Growth in deposits (per cent)

Demand

6

6

6

5

5

5

5

Savings

14

15

16

15

14

14

16

Term

80

78

78

80

81

81

79

continued...

276

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore)

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Financial Parameters Profitability (per cent) Return on assets

n.a.

0.12

0.64

0.86

1.06

1.02

1.00

Return on equity

n.a.

2.8

14.8

20.5

25.3

24.3

23.6

Gearing (times)

26.2

20.9

22.8

22.9

22.9

22.8

22.4

Staff costs to operating expenses

73.5

71.0

76.7

74.1

69.8

66.5

67.6

Non-fund income to total income

7.1

8.4

13.7

11.8

18.4

21.5

25.7

20.1

20.6

20.7

18.8

16.0

16.9

21.1

Operating expenses to deposits

2.7

2.9

2.9

2.5

2.0

2.1

2.3

Earning per share (Rs)

1.1

0.3

1.7

2.3

2.6

2.5

2.3

Cost to income ratio

71.0

71.9

58.4

51.8

41.2

39.6

44.4

Cost to income ratio (w/o profit on invest) Financial management (per cent)

72.4

73.6

70.6

58.5

58.3

62.8

78.0

Interest cost

n.a.

10.25

9.66

8.91

8.50

7.34

6.21

Average cost of deposits

n.a.

10.1

9.5

7.8

7.0

7.3

6.1

Average cost of borrowings

n.a.

23.9

18.6

26.8

17.5

13.9

16.7

Yield on carry business

n.a.

12.76

12.31

11.66

10.86

9.64

8.42

Average yield on investments

n.a.

13.4

12.7

11.6

11.3

10.1

8.9

Average yield on advances

n.a.

15.1

14.3

13.5

12.6

10.9

9.2

Spreads

n.a.

2.51

2.65

2.75

2.36

2.31

2.21

Operating expenses to total income

Operating expenses to AFD

n.a.

2.82

2.91

2.47

2.13

2.07

2.36

Core fee income to AFD

n.a.

0.90

1.07

0.85

0.76

0.56

0.47

Net Profitability Margin

n.a.

0.58

0.80

1.13

0.99

0.80

0.32

Deposits to borrowings (times)

n.a.

42.6

34.5

53.6

84.4

81.8

86.8

Capital adequacy Provisions as a percentage of profit before

9.4

10.4

10.4

11.2

11.2

10.8

11.3

64.6

88.9

67.8

61.2

63.9

66.6

65.2

17.1

19.1

29.1

30.0

40.2

44.9

39.9

54

53

52

53

55

53

51

52

47

57

61

41

41

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio Incremental credit deposit ratio Borrowings to total deposits

1

3

2

1

1

1

1

Cash-deposit ratio

0

1

1

1

1

1

1

37

38

45

43

37

44

48

50

72

32

15

87

68

Investment-deposit ratio Incemental I/D ratio Reserves as a percentage of net worth Growth (per cent)

83

78

81

84

87

89

91

Advances

n.a

14

21

22

31

12

16

Deposits

n.a

14

24

20

27

16

21

Investments

n.a

19

46

14

9

38

32

Salaries cost

n.a

18

35

-1

-1

12

39

Commission and fee

n.a

28

31

21

-1

-18

5

Interest income Others

n.a

18

17

15

14

7

3

Branches (nos)

354

361

n.a.

372

380

391

410

Advances per branch (Rs crore)

4.14

4.61

n.a.

6.64

8.50

9.24

10.24

Operating expenses per branch (Rs crore)

0.21

0.25

n.a.

0.31

0.32

0.36

0.47

3,770

3,785

n.a.

3,739

3,697

3,350

3,534

Income per employee (Rs crore)

0.10

0.12

n.a.

0.16

0.20

0.25

0.26

Income/employee expenses (times)

6.76

6.85

6.30

7.19

8.93

8.88

7.00

Employees (nos)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

277

...continued

(Rs crore)

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Total income (per cent) Interest

93

92

86

88

82

78

74

Forex

1

2

2

1

1

1

1

Commission, brokerage Share of advances (per cent)

3

3

4

4

3

2

2

Priority

26

28

n.a.

30

28

28

31

Public

1

1

n.a.

3

13

8

11

Inter bank

0

0

n.a.

0

0

2

2

73

71

n.a.

67

59

62

57

0

0

0

0

0

0

0

Bills

12

11

10

10

11

11

12

Cash credit

50

50

51

51

52

44

37

Term loans Share of advances (per cent)

38

39

39

38

37

45

51

Secured

88

87

n.a.

86

79

76

79

1

3

n.a.

4

8

6

7

Unsecured Share of investments (per cent)

11

10

n.a.

10

13

17

14

Government securities

65

69

80

83

86

87

90

Other approved securities

10

8

5

5

4

2

1

2

2

1

1

1

0

0

Debentures

20

19

13

11

10

8

5

Subsidiary

0

0

0

0

0

0

0

Others

3

3

1

0

0

2

3

n.a.

n.a.

n.a.

7.1

6.6

6.0

4.6

Others Abroad Share of advances (per cent)

Government guarantee

Shares

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

278

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

The Jammu & Kashmir Bank Ltd (Rs crore) Liabilities

Table 23 1997-98

Capital Reserves and surplus Deposits

30

48

48

2000-01

2001-02

2002-03

2003-04

48

48

48

48

245

381

480

651

889

1194

1545

4,882

6,444

9,422

11,168

12,911

14,675

12

209

21

177

185

216

18661 297

Borrowings Other liabilities and provisions

1998-99 1999-2000

425

438

590

675

666

661

654

5,596

7,519

10,561

12,719

14,699

16,794

21,206

Cash and balances with RBI

883

773

1,402

1,088

1,016

721

1535

Balances with bank and money at call

261

567

894

970

952

800

1382

Investments

2,061

2,951

4,254

5,425

5,752

6,738

8451

Advances

2,158

2,951

3,518

4,763

6,424

8,011

9285

38

63

107

131

167

172

196

Total Assets

Fixed assets Other assets Total Deposits

195

214

386

344

387

352

357

4,712

7,519

10,561

12,719

14,699

16,794

21,206

2088 2812

2176 3471

Demand

802

1143

1,821

1,566

2,037

Savings

1,042

1,216

1,596

1,873

2,359

Term

3,039

4,085

6,005

7,729

8,515

9775

13,014

4,882

6,444

9,422

11,168

12,911

14,675

18,661

4,882

6,444

9,422

11,168

12,911

14,675

18,661

Total Deposits of branches in India Deposits of branches abroad

0

0

0

0

0

0

0

4,882

6,444

9,422

11,168

12,911

14,675

18,661

RBI

0

0

0

0

0

0

0

Other banks

2

2

0

0

0

150

200

10

206

15

167

175

45

36

0

2

5

10

10

21

61

12

209

21

177

185

216

297

Total Borrowings

Other institutions and agencies Forex borrowings Total Other liabilities and provisions Inter-office adjustments Bills payable

61

37

92

147

20

0

11

184

189

237

194

216

186

236

Interest accrued Others (including provisions) Total Balance with RBI

32

45

67

84

88

89

71

149

166

195

249

342

386

335

425

438

590

675

666

661

654

837

716

1,337

1,027

947

635

1,439

46

57

65

60

69

85

96

Cash in hand Advances Bills purchases and discounted Cash credit and overdraft Term loans Total

68

161

218

241

288

571

347

1,485

1,695

1,891

2,220

2,969

3,512

3,858

605

1,096

1,409

2,302

3,167

3,928

5,080

2,158

2,951

3,518

4,763

6,424

8,011

9,285

Continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

279

...continued

(Rs crore)

1997-98

1998-99 1999-2000

Secured

1,125

1,701

Government guarantee

1,015

1,187

Unsecured Total Priority sector Public sector

2000-01

2001-02

2002-03

2003-04

1,954

3,202

4,351

5,680

6,306

1,348

1,216

1,594

1,554

2,237

18

63

216

345

479

777

742

2,158

2,951

3,518

4,763

6,424

8,011

9,285

356

610

812

1,179

1,317

1,506

1,966 2,955

1,210

1,714

1424

1,717

2,233

2,327

Banks

1

34

2

3

240

311

200

Others

591

593

1,280

1,864

2,634

3,867

4,164

2,158

2,951

3,518

4,763

6,424

8,011

9,285

0

0

0

0

0

0

0

2,158

2,951

3,518

4,763

6,424

8,011

9,285

0

0

0

0

0

0

0

1,418

1,913

2,358

3,209

3,468

3,816

5,041

177

250

235

221

141

134

118

Total Advances outside India Total Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares - Debentures - Subsidiaries/JV

11

24

128

108

95

82

78

391

702

1,286

1,761

1,877

2,388

2,696

6

6

10

10

10

10

10

58

56

238

64

161

309

509

2,061

2,951

4,254

5,374

5,753

6,738

8,451

2,061

2,951

4,254

5,374

5,753

6,738

8,451

Opening balance

n.a.

n.a.

244

238

243

237

253

Additions

n.a.

n.a.

67

80

70

87

143

Reductions

n.a.

n.a.

73

75

76

71

110

Closing balance

n.a.

n.a.

238

243

237

253

286

n.a.

112

113

117

121

127

138

Interest/Discount on advances/bills

259

341

381

435

640

760

821

Income on investments

249

316

441

568

652

625

664

23

36

63

73

63

42

36

531

694

885

1,077

1,354

1,427

1,521

Commission exchange and brokerage

13

15

20

21.95

28

35

41

Profit on sale of investments

20

10

61

0

182

214

226

Loss on sale of investments

0

0

0

0

0

0

0

Profit on sale of fixed assets

0

0

0

0

0

0

0

0

0 20

0

Loss on revaluation of investments

19

0

0

Profit on forex transactions

5

6

1

4

4

5

5

Income from investments Lease income

0 0

0 0

0 0

0 0

0 0

2 0

2 0

20

12

24

36

23

32

27

58

43

105

81

257

287

302

588

737

990

1,157

1,611

1,715

1,823

- Others Total Total investments Movement in NPA Gross NPA

Net NPA-Closing balance Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income

Miscellaneous income Total Total income

continued...

280

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Interest expended Interest on deposits

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

328

429

573

713

879.44

856

876

Interest on RBI/inter bank

1

2

26

4

26

25

15

Others

0

0

0

3

10

10

10

329

431

598

720

915

892

901

Total Operating expenses Salaries

59

85

90

96

144

158

168

Others

35

41

59

52

66

72

88

Depreciation

4

8

11

17

24

30

37

98

134

159

165

234

260

293

111

86

112

105

210

214

222

538

651

870

990

1,360

1,366

1,417

50

85

120

168

251

349

406

161

172

232

273

461

563

628

6

7

10

9

11

10

9

1 554

0

0

0

0

0

0

292

122

1,745

1324

1,880

2,856

14

28

33

188

316

364

304

2

3

0

10

12

8

4

Total Provisions and contingencies Total expenses including provisions Profit for the year Profits inclusive of provisions Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India - Outside India Liability on account of outstanding derivative

0

0

0

0

0

0

0

Acceptances and endorsements

0

9

8

307

282

481

843

Currency Swaps

0

0

0

0

0

0

0

Others

23

16

15

7

5

4

2

600

355

187

2,266

1,949

2,747

4,017

Provison for NPAs

0

21.12

27.38

13

7

22 5.13

20.77

Depreciation in values of investments

13

0

6

13

30 0

Provision for taxation

48

45

57

65

119

134

170

Other Provisions

56

14

21

19

59

54

22

111

86

112

105

210

214

222

Overall

n.a.

32

46

19

16

14

27

Demand

n.a.

43

59

-14

30

2

4

Savings

n.a.

17

31

17

26

19

23

Term

n.a.

34

47

29

10

15

33

Demand

16

18

19

14

16

14

12

Savings

21

19

17

17

18

19

19

Term

62

63

64

69

66

67

70

Total Provisions and contingencies

Total Financial analysis Growth in deposits (per cent)

Share of deposits (per cent)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

281

...continued

(Rs crore) Financial Parameters

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Profitability (per cent) Return on assets

n.a.

1.40

1.33

1.44

1.83

2.21

2.14

Return on equity

n.a.

24.3

25.1

27.3

30.6

32.0

28.7

Gearing (times)

19.3

16.6

19.0

17.2

14.7

12.5

12.3

Staff costs to operating expenses

60.0

63.5

56.4

58.1

61.6

61.0

57.4

Non-fund income to total income

9.8

5.8

10.6

7.0

16.0

16.8

16.5

16.7

18.2

16.1

14.2

14.5

15.2

16.1

2.0

2.1

1.7

1.5

1.8

1.8

1.6

Operating expenses to total income Operating expenses to deposits Earning per share (Rs)

2.1

2.2

2.5

2.6

2.8

2.9

2.6

Cost to income ratio

37.8

43.8

40.7

37.7

33.7

31.6

31.8

Cost to income ratio (w/o profit on invest)

40.9

45.3

48.2

37.7

45.7

42.7

42.2

Interest cost

n.a.

7.23

7.24

6.78

7.37

6.28

5.26

Average cost of deposits

n.a.

7.6

7.2

6.9

7.3

6.2

5.3

Average cost of borrowings

n.a.

1.9

22.2

6.4

19.9

17.7

9.8

Yield on carry business

n.a.

12.00

10.50

9.90

10.44

9.60

8.47

Average yield on investments

n.a.

12.6

12.2

11.7

11.7

10.0

8.7

Average yield on advances

n.a.

13.4

11.8

10.5

11.4

10.5

9.5

Spreads

n.a.

4.77

3.26

3.11

3.07

3.31

3.21

Operating expenses to AFD

n.a.

2.28

1.84

1.48

1.78

1.71

1.59

Core fee income to AFD

n.a.

0.46

0.38

0.39

0.33

0.37

0.32

Net Profitability Margin

n.a.

2.95

1.79

2.03

1.63

1.97

1.95

Financial management (per cent)

Deposits to borrowings (times)

n.a.

51.1

69.0

104.2

66.5

68.8

65.0

Capital adequacy

20.5

24.5

18.8

17.4

15.5

16.5

16.9

Provisions as a percentage of profit before

68.7

50.3

48.2

38.6

45.6

38.0

35.3

40.2

20.2

21.2

15.0

22.5

17.2

13.9

44

46

37

43

50

55

50

51

19

71

95

90

32

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio Incremental credit deposit ratio Borrowings to total deposits

0

3

0

2

1

1

2

Cash-deposit ratio

1

1

1

1

1

1

1

42

46

45

49

45

46

45

57

44

67

19

56

43

89

91

93

95

96

97

Advances

37

19

35

35

25

16

Deposits

32

46

19

16

14

27

Investments

43

44

28

6

17

25

Salaries cost

45

6

7

50

10

6

Commission and fee

12

32

11

28

24

18

Interest income

31

28

22

26

5

7

Investment-deposit ratio Incemental I/D ratio Reserves as a percentage of net worth Growth (per cent)

89

Others Branches (nos)

370

389

404

426

441

454

475

Advances per branch (Rs crore)

5.83

7.59

8.71

11.18

14.57

17.65

19.55

Operating expenses per branch (Rs crore)

0.26

0.34

0.39

0.39

0.53

0.57

0.62

5,689

6,254

6,278

6,470

6,495

7,112

7,085

Income per employee (Rs crore)

0.10

0.12

0.16

0.18

0.25

0.24

0.26

Income/employee expenses (times)

9.99

8.66

11.02

12.08

11.17

10.82

10.83

Employees (nos)

continued...

282

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Total income (per cent)

1997-98

Interest

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

90

94

89

93

84

83

83

Forex

1

1

0

0

0

0

0

Commission, brokerage

2

2

2

2

2

2

2

Priority

17

21

56

25

21

19

21

Public

56

58

38

36

35

29

32

Share of advances (per cent)

Inter bank

0

1

6

0

4

4

2

Others

27

20

36

39

41

48

45

Abroad

0

0

0

0

0

0

0

Share of advances (per cent) Bills

3

5

6

5

4

7

4

Cash credit

69

57

54

47

46

44

42

Term loans

28

37

40

48

49

49

55

Secured

52

58

56

67

68

71

68

Government guarantee

47

40

38

26

25

19

24

1

2

6

7

7

10

8

Share of advances (per cent)

Unsecured Share of investments (per cent) Government securities

69

65

55

60

60

57

60

Other approved securities

9

8

6

4

2

2

1

Shares

1

1

3

2

2

1

1

Debentures

19

24

30

33

33

35

32

Subsidiary

0

0

0

0

0

0

0

Others

3

2

6

1

3

5

6

4.6

3.8

3.2

2.5

1.9

1.6

1.5

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

283

The Karnataka Bank Ltd (Rs crore) Liabilities Capital Reserves and surplus Deposits Borrowings Other liabilities and provisions Total Assets

Table 24 1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

13

13

13

13

13

40

40

214

248

298

336

428

543

3,408

4,382

5,174

6,076

7,001

8,292

658 9407

92

125

134

130

97

165

183

131 3,860

100 4,869

122 5,742

121 6,677

223 7,763

224 9,265

288 10,577

Cash and balances with RBI

417

455

528

394

342

437

389

Balances with bank and money at call

208

413

498

451

301

199

361

Investments

1,258

1,775

2,063

2,787

3,467

4,433

4879

Advances

1,818

2,047

2,451

2,828

3,418

3,900

4668

Fixed assets

65

74

72

77

74

79

93

Other assets Total

94 3,860

105 4,869

130 5,742

140 6,677

161 7,763

218 9,265

187 10,577

Demand

252

299

402

395

400

Savings

452

557

694

795

908

466 1070

569 1339

Term Total

2,705 3,408

3,527 4,382

4,078 5,174

4,886 6,076

5,693 7,001

6756 8,292

7,499 9,407

Deposits of branches in India

3,408

4,382

5,174

6,076

7,001

8,292

9,407

Deposits of branches abroad Total

0 3,408

0 4,382

0 5,174

0 6,076

0 7,001

0 8,292

0 9,407

RBI

0

49

87

92

63

20

0

Other banks

0

0

0

0

0

1

0

Other institutions and agencies

92

76

47

38

34

110

27

Forex borrowings Total

0 92

0 125

0 134

0 130

0 97

34 165

157 183

Deposits

Borrowings

Other liabilities and provisions Inter-office adjustments

9

12

17

18

4

88

124

Bills payable

26

43

40

42

89

2

3

Interest accrued

14

9

14

16

14

16

22

Others (including provisions) Total

83 131

36 100

52 122

46 121

116 223

118 224

139 288

Balance with RBI

n.a.

410

41

346

296

393

393

Cash in hand Advances

n.a.

45

487

48

46

44

56

Bills purchases and discounted

210

230

276

259

257

277

301

Cash credit and overdraft

1,223

1,368

1,596

1,875

2,368

2,490

2,813

Term loans Total

385 1,818

449 2,047

580 2,451

694 2,828

793 3,418

1,133 3,900

1,554 4,668

Continued...

284

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Secured Government guarantee Unsecured Total Priority sector

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04 3,492

1,528

1,649

1,954

2,297

2,638

2,971

253

359

424

430

436

602

760

37 1,818

38 2,047

73 2,451

101 2,828

344 3,418

327 3,900

417 4,668

694

781

916

953

1,195

1,501

1,910

Public sector

6

6

12

12

2

65

276

Banks

0

0

1

0

0

70

102

Others Total

1,118 1,818

1,259 2,047

1,523 2,451

1,862 2,828

2,221 3,418

2,263 3,900

2,379 4,668

Advances outside India Total

0 1,818

0 2,047

0 2,451

0 2,828

0 3,418

0 3,900

0 4,668

0

0

0

0

0

0

0

946

1,149

1,326

2,162

2,815

3,368

2,970

61

64

63

63

59

48

39

Investments Investments outside India Investments in India - Government securities - Other approved securities - Shares - Debentures

18

28

31

25

14

5

10

189

484

550

477

486

982

1,767

- Subsidiaries/JV

0

0

0

0

0

0

0

44 1,258

49 1,775

93 2,063

60 2,787

93 3,467

30 4,433

93 4,879

1,258

1,775

2,063

2,787

3,467

4,433

4,879

Opening balance

n.a.

n.a.

169

223

321

374

538

Additions

n.a.

n.a.

82

121

84

218

132

Reductions

n.a.

n.a.

28

228

317

54

72

Closing balance Net NPA-Closing balance

n.a. n.a.

n.a. n.a.

223 140

321 196

374 201

538 286

598 231

Interest/Discount on advances/bils

257

272

302

302

347

400

417

Income on investments

161

191

243

243

259

390

405

10

28

32

32

41

19

18

2 430

0 491

1 578

1 578

7 654

3 811

8 848

- Others Total Total investments Movement in NPA Gross NPA

Profit and loss statement Interest earned

Interest on balances with RBI Others Total Other income Commission exchange and brokerage

25

30

40

40

46

48

53

Profit on sale of investments

9

1

16

16

180

174

196

Loss on sale of investments

0

0

0

0

0

0

0

Profit on sale of fixed assets

0

0

0

0

0

0

0

Loss on revaluation of investments

0

0

0

0

0

0

0

Profit on forex transactions

8

11

10

10

10

12

14

Income from investments

0

0

0

0

0

0

0

Lease income

5

5

4

4

2

2

2

1 48

2 48

2 72

2 72

3 241

3 239

5 270

478

540

650

650

895

1,051

1,119

Miscellaneous income Total Total income

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

285

...continued

(Rs crore) Interest expended Interest on deposits

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

276

357

447

447

489.9

645

622

3

6

9

9

7

8

7

13 292

12 375

8 464

8 464

5 502

4 657

5 635

Salaries

61

64

75

72

89

89

94

Others

18

21

24

25

30

37

43

Depreciation Total

6 84

7 92

8 106

9 105

12 131

15 141

17 154

44 420

30 497

23 592

40 609

91 723

143 941

197 986

58

42

58

41

172

110

133

102

72

81

81

262

253

330

7

7

7

7

7

8

10

0 1587

0

0

0

0

0

0

1,210

2,642

2,642

1421

881

1,163

84

117

158

158

104

193

248

0

0

0

0

0

0

0

Interest on RBI/inter bank Others Total Operating expenses

Provisions and contingencies Total expenses including provisions Profit for the year Profits inclusive of provisions Contingent liabilities Claims against banks Liability for partly paid investments Liability for outstanding forex contracts Guarantees - In India - Outside India Liability on account of outstanding derivative contracts Acceptances and endorsements Currency swaps

0

0

0

0

0

0

0

80

126

170

170

117

203

284

0

0

0

0

0

0

0

13 1,771

30 1,489

35 3,013

35 3,013

63 1,712

124 1,408

145 1,850

Provison for NPAs

20

23 -18

37

81

128

-7

17 0

23

Depreciation in values of investments

0

38

0

0

Provision for taxation

31

13

17

17

15

62

68

Other Provisions Total

0 44

0 30

0 23

0 40

0 91

0 143

0 197

Overall

n.a.

29

18

17

15

18

13

Demand

n.a.

19

35

-2

1

16

22

Savings

n.a.

23

25

15

14

18

25

Term Share of deposits (per cent)

n.a.

30

16

20

17

19

11

Others Total Provisions and contingencies

Financial analysis Growth in deposits (per cent)

Demand

7

7

8

6

6

6

6

Savings

13

13

13

13

13

13

14

Term

79

80

79

80

81

81

80

continued...

286

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

...continued

(Rs crore) Financial Parameters

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

Profitability (per cent) Return on assets

3.01

0.97

1.10

0.66

2.38

1.29

1.34

Return on equity

51.0

17.3

20.3

12.4

43.4

21.5

20.8

Gearing (times)

15.9

17.6

17.4

18.1

16.6

14.9

14.1

Staff costs to operating expenses

72.0

69.7

71.3

68.1

68.1

63.4

61.0

Non-fund income to total income

10.0

8.9

11.1

11.1

26.9

22.8

24.2

Operating expenses to total income

17.6

17.1

16.2

16.2

14.6

13.4

13.8

Operating expenses to deposits

2.5

2.1

2.0

1.7

1.9

1.7

1.6

Earning per share (Rs)

2.7

1.7

2.0

1.2

4.0

2.0

2.0

Cost to income ratio

45.2

56.0

56.7

56.5

33.2

35.7

31.9

Cost to income ratio (w/o profit on invest) Financial management (per cent)

47.3

56.3

62.0

61.9

61.2

63.9

53.6

Interest cost

n.a.

9.29

9.37

8.00

7.47

8.39

7.03

Average cost of deposits

n.a.

9.2

9.3

7.9

7.5

8.4

7.0

Average cost of borrowings

n.a.

16.7

13.3

13.1

10.6

9.2

7.1

Yield on carry business

n.a.

11.91

11.53

9.80

9.48

9.92

8.87

Average yield on investments

n.a.

12.6

12.7

10.0

1.3

9.9

8.7

Average yield on advances

n.a.

14.1

13.4

11.4

11.1

10.9

9.7

Spreads

n.a.

2.62

2.15

1.80

2.01

1.53

1.84

Operating expenses to AFD

n.a.

2.20

2.07

1.76

1.87

1.71

1.60

Core fee income to AFD

n.a.

1.11

1.07

0.91

0.86

0.78

0.74

Net Profitability Margin

n.a.

1.53

1.16

0.96

1.00

0.60

0.98

Deposits to borrowings (times)

37.0

35.9

37.0

42.6

57.6

58.3

50.8

Capital adequacy

13.2

10.9

11.0

11.0

11.4

13.4

11.0

Provisions as a percentage of profit before

43.0

41.3

27.9

49.5

34.5

56.6

59.6

19.3

11.4

7.2

11.5

20.5

24.6

28.2

53

47

47

47

49

47

50

n.a.

23

51

42

64

37

69

3

3

3

2

1

2

2

n.a.

1

9

1

1

1

1

37

41

40

46

50

53

52

n.a.

53

36

80

73

75

40

94

95

96

96

97

93

94

Advances

n.a.

13

20

15

21

14

20

Deposits

n.a.

29

18

17

15

18

13

Investments

n.a.

41

16

35

24

28

10

Salaries cost

n.a.

6

17

-5

24

0

5

Commission and fee

n.a.

21

32

0

14

6

11

Interest income Others

n.a.

14

18

0

13

24

5

provisions Provisions as a percentage of networth Liquidity (per cent) Credit-deposit ratio Incremental credit deposit ratio Borrowings to total deposits Cash-deposit ratio Investment-deposit ratio Incemental I/D ratio Reserves as a percentage of net worth Growth (per cent)

Branches (nos)

324

338

347

354

357

360

370

Advances per branch (Rs crore)

5.61

6.06

7.06

7.99

9.57

10.83

12.62

Operating expenses per branch (Rs crore)

0.26

0.27

0.30

0.30

0.37

0.39

0.42

3,925

3,929

4,075

4,084

4,144

4,320

4,300

Income per employee (Rs crore)

0.12

0.14

0.16

0.16

0.22

0.24

0.26

Income/employee expenses (times)

7.89

8.40

8.64

9.06

10.06

11.78

11.90

Employees (nos)

continued...

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

287

...continued

(Rs crore) Total income (per cent) Interest

1997-98

1998-99 1999-2000

2000-01

2001-02

2002-03

2003-04

90

91

89

89

73

77

76

Forex

2

2

2

2

1

1

1

Commission, brokerage Share of advances (per cent)

5

6

6

6

5

5

5

Priority

38

38

37

34

35

38

41

Public

0

0

0

0

0

2

6

Inter bank

0

0

0

0

0

2

2

61

62

62

66

65

58

51

0

0

0

0

0

0

0

Bills

12

11

11

9

8

7

6

Cash credit

67

67

65

66

69

64

60

Term loans Share of advances (per cent)

21

22

24

25

23

29

33

Secured

84

81

80

81

77

76

75

Government guarantee

14

18

17

15

13

15

16

2

2

3

4

10

8

9

75

65

64

78

81

76

61

5

4

3

2

2

1

1

Others Abroad Share of advances (per cent)

Unsecured Share of investments (per cent) Government securities Other approved securities Shares

1

2

1

1

0

0

0

Debentures

15

27

27

17

14

22

36

Subsidiary

0

0

0

0

0

0

0

Others

4

3

5

2

3

1

2

3.1

5.0

5.7

5.7

6.9

7.4

5.0

Net NPAs (per cent) n.a.: Not available Source: CRIS INFAC

288

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

Annexure Section Glossary

CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

289

i

Glossary

Interest cost:

The ratio of total interest paid to average borrowed funds.

Borrowed funds: The total of deposits, borrowings and bills payable. Yield on carry business: Defined as the total interest cost upon the average funds in carry business. Funds in carry business: Funds deployed less investment in shares, investments in subsidiaries and joint ventures and other miscellaneous investments; invested within India and outside India. Funds deployed: The funds deployed is defined as the total asset of the bank excluding fixed assets and other assets. Spreads: Spreads are defined as the difference between the yield on carry business less interest cost. Net profitability margin (NPM): NPM is defined as spreads add core fee income ratio less operating expense ratio. Relationship between the interest rate and spreads: Generally, when interest rates are on the rise, both yields and costs go up; conversely, in a declining interest rate scenario, both yields and costs go down. However, in a declining interest rate regime, yields go down faster than costs do. The converse is true in a rising interest rate regime. Operating expense ratio: The ratio of total operating expense to the average funds deployed. Core fee income ratio (or core fee-based income ratio): The ratio of the core fee income to the average funds deployed. Core fee income (or core fee-based income): Core fee income is total other income excluding profit on sale of investments, sale of fixed assets and 50 per cent of the miscellaneous income. Other income: Other income includes income from profit on sale of investments, profit on sale of assets and half of the miscellaneous income. Cost-income ratio: Cost-income ratio is the ratio of total operating expenses to the difference of total income and interest expended. Cost-income ratio (without profit on sale of investment): Cost-income ratio, when calculated without considering profit of sale of investments in the net income. Continued... CRIS INFAC BANKING ANNUAL REVIEW: NOVEMBER 2004, 291 PAGES

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Net interest income (NII): The difference between the total interest income and total interest expended. Net interest margin (NIM): The ratio of net interest income to average total assets. Business per employee: The ratio of business to number of employees as at end-March. Operating profit per employee: The ratio of operating profit (i.e., profit before provisioning and tax) to the total number of employees as at end-March. Business: Business is defined as the summation of the advances and deposits for the bank. Current deposits: Current deposits are those maintained by business class to meet the shortterm contingencies. No interest is payable on current deposits. Savings deposits: Savings deposits are the deposits maintained by the households. RBI administers the interest rate offered on these deposits. Term deposits: These are also knows as fixed deposits or time deposits and are generally payable at the end of a fixed period. Low cost deposits: Demand deposits and saving deposits together form low cost deposits Low cost deposit ratio: The ratio of low cost deposits to the total deposits is termed as low cost deposit ratio. Food credit: Food credit is the loan/advance given by the banks to the FCI for procurement of food from the open market to be distributed through public distribution system Non-food credit: Non-food credit is the total credit excluding food credit. Capital adequacy ratio: is the ratio of total risk weighted assets of the bank to the eligible capital. Minimum stipulated norm is 9 per cent. Statutory liquidity ratio: Under section 24 (b) of the Banking Regulation Act, 1949, every bank is required to maintain, at the close of business every day, a minimum proportion of its net demand and time liabilities (NDTL) as liquid assets in the form of cash and gold and un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). Gross NPAs: Total of the non-performing assets, before making any provisions. Net NPAs: Non-performing assets net of provisions and amount collected from the NPAs and kept in suspense. continued...

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Gross NPA ratio: The ratio of gross NPAs to gross advances Net NPA ratio: The ratio of net NPAs to net advances. Basis points: One basis point is one hundredth of a percent. Return on assets: The ratio of profit after tax to average total assets (includes fixed assets and other assets) Credit-deposit ratio: The ratio of total net advances to total deposits. Investment-deposit ratio: The ratio of total investments to total deposits. Cost per employee: The ratio of total wage cost for the bank to total number of employees as at end-March.

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