Macro-economic overview of India


The financial sector in India is sound and healthy. The banking and non-banking institutions are performing in a competitive environment and their regulatory framework is now aligned with the international best practices.

Reserve Bank of India Report on Trend and Progress of Banking in India, 2007-08


Indian Apex Bank
Reserve Bank of India

Bankers' Forum

Indian Banks' Association is a body of  public and private sector banks,  foreign banks having offices in India, urban co-operative banks, developmental financial institutions, federations, merchant banks, mutual funds, housing finance corporations, etc.

State Bank of India & Associates
State Bank of India
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore

Nationalised Banks
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab and Sind Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank

Private Sector Banks
Bank of Rajasthan
Bharat Overseas Bank  Ltd
Bank of Punjab
Centurion Bank Ltd
City Union Bank Ltd
Development Credit Bank Ltd
ICICI Bank Ltd
IDBI Bank Ltd
IndusInd Bank Ltd
Lord Krishna Bank Ltd
SBI Commercial and International Bank Ltd
Tamilnad Mercantile Bank Ltd
Bank of Punjab Ltd
Dhanalakshmi Bank Ltd
Federal Bank Ltd
HDFC Bank Ltd
Jammu & Kashmir Bank Ltd
Karnataka Bank Ltd
Karur Vysya Bank Ltd
Lakshmi Vilas Bank Ltd
Nainital Bank Ltd
Sangli Bank Ltd
South Indian Bank Ltd
United Western Bank Ltd
ING Vysya Bank Ltd
UTI Bank Ltd
Ratnakar Bank Ltd
Foreign Banks

ABN Amro Bank
Abu Dhabi Commercial Bank Ltd
American Express Bank Ltd
Arab Bangladesh Bank Ltd
Bank of America 
Bank International Indonesia
Bank Muscat SAAG
Bank of Bahrain & Kuwait BSC
BNP Paribas
Barclays Bank Plc.
Citibank NA
Credit Agricole Indosuez
Credit Lyonnais
Deutsche Bank AG
ING Bank N.V. (ING Barings)
Mashreq Bank psc
Oman International Bank
Societe Generale
Sonali Bank
Standard Chartered Bank
State Bank of Mauritius Ltd
The Bank of Nova Scotia
The Bank of Tokyo-Mitsubishi Ltd
JP Morgan Chase Bank
The Development Bank of Singapore Ltd
The Hongkong & Shanghai Banking Corporation Ltd
Mizuho Corporate Bank Ltd
Sumitomo Mitsui Banking Corporation
UFJ Bank Ltd.

Cooperative Banks
Abhyudaya Co-op. Bank Ltd
Amanath Co-op. bank Ltd
Apna Sahakari Bank Ltd
Bassein Catholic Co-op Bank Ltd
Bombay Mercantile Co-op Bank Ltd
Citizen Credit Co-op Bank Ltd
Dombivli Nagari Sahakari Bank Ltd
Jalgaon Janata Sahakari Bank Ltd
Janakalyan Sahakari Bank Ltd
Janata Sahakari Bank Ltd
Janalaxmi Co-op. Bank Ltd
New India Co-op. Bank Ltd
Nutan Nagarik Sahakari Bank Ltd
Punjab & Maharashtra Co-op. Bank Ltd
Rajkot Nagarik Sahakari Bank Ltd
Rupee Co.-op Bank Ltd
The AP Mahesh Co.-op Urban Bank Ltd
The Bharat Co-op. Bank (Mumbai) Ltd
The Cosmos Cooperative Bank Ltd
The Deccan Merchants' Co-op. Bank Ltd
The Greater Bombay Co-op. Bank Ltd
The Gujarat Industrial Co-op. Bank Ltd
The Jalgaon Peoples Cooperative Bank Ltd
The Kalupur Commercial Co-op Bank Ltd
The Kapol Co-op. Bank Ltd
The Karad Urban Co-op. Bank Ltd
The Madhavpura Mercantile Co-op Bank Ltd
The Mahanagar Co-op. Bank Ltd
The Municipal Co-op. Bank Ltd
The North Kanara GSB Co-op. Bank Ltd
The Saraswat Co-op. Bank Ltd
The Sham Rao Vithal Co-op. Bank Ltd
The Surat Peoples Co-op. Bank Ltd
The Thane Janata Sahakari Bank Ltd
The Urban Co-op. Bank Ltd
The Visnagar Nagarik sahakari Bank Ltd
The Zoroastrian Co-op Bank Ltd
Air Corporations Employees Co-op. Bank Ltd
Kolhapur Janta Sahakari Bank Ltd

Apex Rural Bank

National Bank for Agriculture & Rural Development


Trend and Progress of Banking in India, 2007-08

A sound & healthy financial sector

THE financial sector in India is sound and healthy. The banking and non-banking institutions are performing in a competitive environment and their regulatory framework is now aligned with the international best practices.

This is stated in the country’s central banking authority, Reserve Bank of India’s Report on Trend and Progress of Banking in India, 2007-08 that presented a detailed account of policy developments and performance of commercial banks, co-operative banks, and non-banking financial institutions during fiscal 2007-08 highlighted the major challenges facing the banking system in India and the RBI in the context of the ongoing global financial crisis. The major problems which banks and financial institutions have faced internationally are illiquid assets, capital shortages and collapse of counter-party trust. The Reserve Bank has been vigilant about the lessons emerging from the crisis. The crisis suggests that risk management and supervisory practices lagged behind financial innovations and emerging business models.

In another report on Indian Economy (2007-08), RBI said that the Indian economy continued to record strong growth during 2007-08, albeit with some moderation. Despite this moderation, the overall growth rate of the Indian economy during 2007-08 was noteworthy in the global context.

RBI, the report noted, has already put in place a system to mitigate liquidity risks at the very short-end, risks at the systemic level and at the institution level. Liquidity risk management in India has been made more granular and prudential norms for off-balance sheet exposure of banks have been prescribed. In order to further strengthen capital requirements, the credit conversion factors, risk weights and provisioning requirements for specific off balance sheet items, including derivatives, have been reviewed. Furthermore, in India, complex structured products such as synthetic securitization have not been permitted so far, the report said adding that introduction of such products, when found appropriate, would be guided by the risk management capabilities of the system.

RBI, the report noted, has already put in place a system to mitigate liquidity risks at the very short-end, risks at the systemic level and at the institution level. Liquidity risk management in India has been made more granular and prudential norms for off-balance sheet exposure of banks have been prescribed. In order to further strengthen capital requirements, the credit conversion factors, risk weights and provisioning requirements for specific off balance sheet items, including derivatives, have been reviewed. Furthermore, in India, complex structured products such as synthetic securitization have not been permitted so far, the report said adding that introduction of such products, when found appropriate, would be guided by the risk management capabilities of the system.

The report indicates that the challenge for banks is to develop adequate skills for managing emerging risks resulting from innovations in financial products as well as technological advancements. RBI has been encouraging banks to develop an integrated approach to managing risk and also undertake stress testing exercises, both for liquidity and credit risk management. In this context, the availability of reliable information is crucial for both banks and regulators/supervisors of the banking system. RBI took the first step in the direction of a more efficient financial data reporting system by implementing the online returns filing system. Another important step was the adoption of XBRL-based data reporting for Basel II reports from banks.

The report notes that a major challenge is how to meet the credit demand without impairing credit quality. Banks have to monitor their credit portfolios closely in the context of persisting high growth in bank credit at the system level and take corrective action as appropriate in order to prevent undue asset-liability mismatches or deterioration in the quality of credit, recognizing the reality of business cycles and counter-cyclical monetary policy measures. Banks, on their part, would need to ensure that their business strategies and decisions are guided by the longer-term perspective of systemic and macroeconomic developments and are not unduly influenced by the current stream of exceptional events.

The report observes that foreign banks operating in India and Indian banks with presence abroad migrated to the Basel II framework with effect from March 31, 2008. All other scheduled commercial banks (except regional rural banks and local area banks) are expected to migrate to the Revised Framework not later than by March 31, 2009. As noted in the report, the full implementation of the Basel II framework, even under the basic/standardized approaches, would remain a major challenge for some time to come, for both the banks and RBI. At the banks’ level, the implementation would require, inter alia, upgradation of the bank-wide information system through better branch-connectivity, which would entail cost and may also raise some IT-security issues. The implementation of Basel II also raises several issues relating to development of human resource skills and database management. Banks would require higher amount of capital under the Basel II framework. They would, therefore, need to explore various capital raising options.

The Indian central bank has urged banks to ensure that even as they give due emphasis to maintaining the credit quality, the flow of credit to productive sectors of the economy does not get affected. To enhance credit flow important initiatives were taken during the year including further fine-tuning of priority sector lending norms and implementation of the Agriculture Debt Waiver and Debt Relief Scheme, 2008, announced by the Government of India.

Commercial Banks

According to the RBI report, deposit growth continued to be strong, though it was marginally lower than the previous year mainly on account of deceleration in term deposits. Growth in bank credit of scheduled commercial banks exhibited some moderation during the year in line with the policy initiatives undertaken by the Reserve Bank. The moderation in credit was observed across all the sectors, barring services.

Lending rates of State Cooperative Banks (SCBs) across various bank groups showed a generally upward movement during the year. Net profit of SCBs increased significantly during 2007-08. Return on assets also increased.

For the first time since 2001-02 the gross non-performing assets (NPAs) of scheduled commercial banks increased in absolute terms during fiscal 2007-08. However, as percentage of gross advances the gross NPAs continued to decline.

The overall CRAR of all SCBs at end-March 2008 improved further from the level a year ago, reflecting a relatively higher growth rate in capital funds maintained by banks than risk-weighted assets. At the individual bank level, the CRAR of all SCBs was above the prescribed requirement of 9 per cent at end-March 2008. Aggregate income of RRBs increased during 2007-08 on account of higher interest as well as non-interest income.

RBI Mid-Term Policy review
for 2008-09

A stable & healthy financial sector*

INDIA’s financial sector is stable and healthy. Indian banks do not have direct financial exposure to the US sub-prime assets. Foreign subsidiaries and foreign branches of Indian banks have suffered some mark-to-market losses on financial instruments due to the general widening of credit spreads. These losses are modest relative to the size of their business. Adequate provisioning has been made for these. The overall capital adequacy ratio of commercial banks in India is 12.7 per cent, well above the regulatory minimum of 9 per cent and the Basel Accord requirement of 8 per cent. Furthermore, the regulatory mandate of 25 per cent as SLR and 6.5 per cent as CRR provides an inherent strength to the Indian banks. The most prominent symptom of the problem in the financial sectors of advanced countries has been the freezing up of inter-bank markets. On the contrary, the inter-bank market in India has been functioning in an orderly manner.

Nevertheless, the global developments have had indirect, knock-on effects on domestic financial markets. Money markets have experienced unusual tightening of liquidity in recent weeks as a result of global developments which were amplified by transient local factors such as advance tax payments. The foreign exchange market has experienced pressure on account of FII portfolio outflows and the enhanced foreign exchange requirements of oil and fertiliser companies. Constraints in access to external financing as also repricing of risks and higher spreads resulted in additional demand from corporates for domestic bank credit with attendant hardening of interest rates across the spectrum.

In the wake of the stress on our financial markets as a result of the global financial crisis, the Reserve Bank announced a series of measures starting mid-September 2008 to ease both domestic and foreign exchange liquidity. The following are the more important ones:

CRR was reduced by a cumulative 250 basis points effective from the fortnight beginning October 11. As an ad hoc and temporary measure, banks have been allowed to avail of additional liquidity support under the LAF up to one per cent of their net demand and time liabilities (NDTL). A special 14-day repo facility for an amount of Rs.20,000 crore has been instituted to alleviate liquidity stress faced by mutual funds, and banks have been allowed access to a special LAF window up to an additional 0.5 per cent of NDTL exclusively for this purpose. Reserve Bank provided an advance of Rs.25,000 crore to financial institutions under the Agricultural Debt Waiver and Debt Relief Scheme pending release of money by the Government. The interest rate ceilings on FCNR (B) and NR(E)RA term deposits were increased by 100 basis points each.

The Reserve Bank also announced that it would institute special market operations to meet the foreign exchange requirements of public sector oil market companies against oil bonds when they become available.   

In order to alleviate the pressures on domestic credit markets brought on by the indirect impact of the global liquidity constraints and, in particular, to maintain financial stability, it was decided on October 20, 2008 to reduce the repo rate under the Liquidity Adjustment Facility (LAF) by 100 basis points to 8.0 per cent with immediate effect.

The measures indicated above have substantially eased the liquidity stress in domestic financial markets. The total liquidity support provided through reductions in the CRR, the temporary accommodation under the SLR and the advance under the agricultural debt relief scheme is of the order of Rs.1,85,000 crore. In the inter-bank call money market, rates have softened from well above the repo rate to a level just above the reverse repo rate. The LAF window saw a mode reversal from a net injection of over Rs.90,000 crore on October 1, 2008 to a net absorption through reverse repos of over Rs.35,000 crore on October 23, 2008. Yields in the benchmark 10 year G-Secs dropped from 8.3 per cent on October 3, 2008 to 7.58 per cent on October 23, 2008. It is expected that the cut in the repo rate effected on October 20, 2008 will further ease the constraints in money and credit markets.

The task of monetary policy has always centred around managing a judicious balance between price stability, sustaining the growth momentum and maintaining financial stability. The relative emphasis across these objectives has varied from time to time depending on the underlying macroeconomic conditions. Prudent regulatory surveillance and effective supervision have ensured that our financial sector has been and continues to be robust. The global financial turmoil has, however, reinforced the importance of putting special emphasis on preserving financial stability. At the same time, inflation, which is still in double digits and moderation in growth continue to be critical policy concerns. Consequently, the central task for the conduct of monetary policy has become more complex than before, with increasing priority being given to financial stability. The current challenge, accordingly, is to strike an optimal balance between preserving financial stability, maintaining price stability, anchoring inflation expectations, and sustaining the growth momentum.  

The global downturn may be deeper, and the recovery longer, than expected earlier. Consequently, the adverse implications through trade and financial channels for emerging economies, including India, have amplified. These adverse developments are overlaid on the moderation of growth in industry and services sectors in the first half of 2008-09. Taking these developments and prospects into account, the Reserve Bank has revised the projection of overall real GDP growth for 2008-09 to a range of 7.5-8.0 per cent.

Globally, pressures from commodity prices, including crude, appear to be abating, though they continue to rule at elevated levels. Domestically, prices of food articles are moderating and the beneficial effects of the south-west monsoon should enable a further easing in the coming months. There are also incipient signs of some softening in prices of manufactured goods. Keeping in view the supply management measures taken by the Government and the lagged demand response to the monetary policy measures taken by the Reserve Bank over the last one year, RBI maintains its earlier projection of inflation of 7.0 per cent by end-March 2009.

Non-food credit has posted a growth of 29 per cent on a year-on-year basis as of October 10, 2008 which is well beyond the projected level of 20 per cent for 2008-09. Banks should continue to lend for productive purposes and, in particular, permit drawals of sanctioned limits, guided as always by their commercial judgment. It will be in order for banks to consider restructuring the dues of small and medium enterprises on merits. At the same time, they should pay attention to maintaining credit quality. In pursuit of this objective, banks should focus on stricter credit appraisals on a sectoral basis, monitor loan to value ratios and calibrate their credit portfolio in tune with their asset-liability projections. The Reserve Bank will monitor the rate of credit growth and credit quality closely and will, as necessary, engage with select banks which are outliers on the norms.

India's balance of payments continues to reflect strength and resilience in a highly unsettled international environment. In the capital account, sustained FDI inflows and higher NRI flows have partly off-set the impact of the FII outflows. Overall, during 2008-09, the current account deficit may be higher and net capital flows lower than during last year, but it is expected that net capital flows would meet the external financing requirements.

Given the uncertain global financial situation, monitoring and maintenance of domestic financial stability warrants continuous attention. The Reserve Bank will maintain a close vigil on the entire financial system to prevent pressures building up in the financial markets. This will include enhancing liquidity if pressures persist. This could also mean curtailing liquidity if the recent liquidity easing measures are seen to have injected excess liquidity, thereby stoking inflationary pressures.

The global financial situation, described as the worst since the Great Depression, continues to be uncertain and unsettled. No country can remain unscathed in a crisis of this proportion. This is uncharted territory and experience to date has evidenced the need to go beyond standard or conventional solutions. The Reserve Bank has endeavoured to be proactive, and has taken measures to manage the rapid developments and ease pressures stemming from the global crisis. The Reserve Bank reiterates that it is confident of managing the situation and of minimising the adverse impact of the global crisis on the Indian economy. Our financial system is healthy and resilient, and our economic fundamentals are strong. Once the global situation is stabilised, and calm and confidence are restored, we will return to our higher growth trajectory.

Based on the above overall assessment of the macroeconomic situation, the stance of monetary policy for the rest of 2008-09 will be as follows:

Ensure a monetary and interest rate environment that optimally balances the objectives of financial stability, price stability and well-anchored inflation expectations, and growth; Continue with the policy of active demand management of liquidity through appropriate use of all instruments including the CRR, open market operations (OMO), the MSS and the LAF to maintain orderly conditions in financial markets;

In the context of the uncertain and unsettled global situation and its indirect impact on the domestic economy in general and the financial markets in particular, closely and continuously monitor the situation and respond swiftly and effectively to developments, employing both conventional and unconventional measures; Emphasise credit quality and credit delivery, in particular, for employment-intensive sectors, while pursuing financial inclusion.

Against the backdrop of recent global and domestic developments and in the light of measures taken by the Reserve Bank over the last month, we have kept the Bank Rate, the repo rate and the reverse repo rate under the LAF and the cash reserve ratio (CRR) unchanged for the present. The Reserve Bank is closely and continuously monitoring the evolving macroeconomic and financial conditions, globally and domestically, and will respond to evolving circumstances proactively and swiftly." 

* Reserve Bank of India Governor, Dr. D. Subbarao’s Press Statement on Stance of Monetary Policy for the Remaining Period of 2008-09. This Mid-Term Monetary Policy Review of the Reserve Bank of India is set in the context of several complex and compelling policy challenges. The global financial system is in a crisis of unprecedented dimensions. Across the world, there have been severe disruptions in money markets, sharp declines in stock markets and extreme risk aversion in financial markets. Governments, central banks and financial regulators around the world are responding to the crisis with aggressive, radical and unconventional measures to restore confidence and stabilize the markets.

Co-operative Banking

Constitution of TAFCUBs instilled public confidence in the urban co-operative banking  sector which is evident from the increase in deposits for three successive years, i.e., from 2005-06 to 2007-08. The total number of Grade I and II banks increased over the past three years, while those in Grade III and IV declined. The consolidation of the UCBs through the process of merger of weak entities with stronger ones, set in motion by the Reserve Bank, progressed further during 2007-08.

The balance sheets of urban co-operative banks (both scheduled and non-scheduled) expanded significantly during 2007-08. Net profits of all UCBs declined on account of increase in provisions, contingencies and taxes. While net profits of scheduled UCBs increased during 2007-08, those of non-scheduled UCBs registered a decline. As at end-March 2008, the CRAR of 1,457 UCBs out of total 1,770 UCBs, was at 9 per cent and above. The gross and net NPAs increased in absolute terms. However, as percentage of total advances, both gross NPAs and net NPAs declined.

Balance sheets of all segments of the rural co-operative banking sector, except for SCARDBs, expanded during 2006-07. In the short-term structure of rural co-operative banks, both the operating profits and net profits of StCBs and DCCBs declined during 2006-07. While the total profits earned by profit-making PACS increased, the losses made by loss making PACS also increased.

In the case of long-term structure, operating profits of state co-operative agriculture and rural development banks (SCARDBs) registered a decline in 2006-07. However, primary co-operative agriculture and rural development banks (PCARDBs) made a turnaround with the operating profits increasing sharply during 2006-07 against a decline in the previous year. It is significant to note that the asset quality of StCBs, DCCBs, SCARDBs and PCARDBs during 2007-08 improved.

Consolidated Balance Sheet of Public Sector Banks (2007-08)
(In Rs. crore)

Public Sector Banks

  As on March 31, 2007 As on March 31, 2008
Amount % to total Amount % to total
1. Capital 12416.31 0.51 13064.66 0.43
2. Reserves & Surplus 123214.08 5.05 161787.74 5.35
3. Deposits 1994199.57 81.72 2453867.68 81.19
3.1 Demand Deposits 235401.27 9.65 283321.97 9.37
3.2 Savings Bank Deposits 518471.05 21.25 595733.73 19.71
3.3 Term Deposits 1240327.25 50.83 1574811.98 52.11
4. Borrowings 121772.60 4.99 151146.76 5.00
5. Other Liabilities and Provisions 188563.37 7.73 242370.37 8.02
Total Liabilities 2440165.92 100.00 3022237.21 100.00
1. Cash & balances with RBI 142211.48 5.83 229679.09 7.60
2. Balances with banks and money at call & short notice 94396.77 3.87 64439.68 2.13
3. Investments 664855.80 27.25 799028.64 26.44
3.1 Govt. Securities 538374.89 22.06 648847.47 21.47
3a. In India 534953.25 21.92 643429.70 21.29
3b. Outside India 3421.64 0.14 5417.77 0.18
3.2 In other approved securities 12338.56 0.51 10274.09 0.34
3.3 In non-approved securities 114142.43 4.68 139907.08 4.63
4. LOANS & ADVANCES 1440146.49 59.02 1797504.19 59.48
4.1 Bills purchased & discounted 92695.50 3.80 107782.87 3.57
4.2 Cash credit, Overdrafts etc. 556956.43 22.82 692473.00 22.91
4.3 Term loans 790494.56 32.40 997248.31 33.00
5. Fixed Assets 20195.16 0.83 28796.89 0.95
6. Other assets 78360.13 3.21 102788.73 3.40
Total Assets 2440165.92 100.00 3022237.21 100.00
Nationalized Banks
  As on March 31, 2007 As on March 31, 2008
Amount % to total Amount % to total
1. Capital 10656.16 0.70 10773.93 0.57
2. Reserves & Surplus 73733.01 4.82 93550.59 4.98
3. Deposits 1317369.93 86.07 1606995.05 85.46
3.1 Demand Deposits 128777.70 8.41 155858.57 8.29
3.2 savings Bank Deposits 342354.26 22.37 386277.18 20.54
3.3 Term Deposits 846237.97 55.29 1064859.30 56.63
4. Borrowings 31045.30 2.03 47943.36 2.55
5. Other Liabilities & Provisions 97727.05 6.39 121111.14 6.44
Total Liabilities 1530531.44 100.00 1880374.07 100.00
1. Cash & balances with RBI 91977.73 6.01 148270.51 7.89
2. Balances with banks and money at call & short notice 63834.50 4.17 43306.82 2.30
3. Investments 427305.90 27.92 502402.45 26.72
3.1 Govt. Securities 344728.68 22.53 416780.28 22.16
3a. In India 341874.76 22.34 411756.74 21.90
3b. Outside India 2853.93 0.19 5023.54 0.27
3.2 In other approved securities 8228.05 0.54 7003.36 0.37
3.3 In non-approved securities 74349.17 4.86 78618.81 4.18
4. LOANS & ADVANCES 895405.99 58.50 1121569.13 59.65
4.1 Bills purchased & discounted 53314.39 3.48 60859.81 3.24
4.2 Cash credit, Overdrafts etc. 370782.69 24.25 462470.32 24.59
4.3 Term loans 471308.92 30.76 598239.00 31.81
5. Fixed Assets 13455.22 0.88 21440.05 1.14
6. Other assets 38552.10 2.52 43385.10 2.31
Total Assets 1530531.44 100.00 1880374.07 100.00
State Bank Group
  As on March 31, 2007 As on March 31, 2008
Amount % to total Amount % to total
1. Capital 1035.80 0.13 1565.97 0.15
2. Reserves & Surplus 41905.56 5.20 60139.95 5.95
3. Deposits 633475.60 78.61 773874.65 76.53
3.1 Demand Deposits 99634.96. 12.36 120194.95 11.89
3.2 savings Bank Deposits 172082.37 21.36 204635.03 20.24
3.3 Term Deposits 361758.27 44.89 449044.66 44.41
4. Borrowings 48322.92 6.00 64590.85 6.39
5. Other Liabilities & Provisions 81055.27 10.06 110997.34 10.98
Total Liabilities 805795.15 100.00 1011168.75 100.00
1. Cash & balances with RBI 44827.28 5.56 74713.74 7.39
2. Balances with banks and money at call & short notice 29057.05 3.67 19068.92 1.89
3. Investments 211874.68 26.27 263823.26 26.09
3.1 Govt. Securities 177454.82 22.02 208763.78 20.65
3a. In India 176887.11 21.95 208369.55 20.61
3b. Outside India 567.72 0.07 394.23 0.04
3.2 In other approved securities 4093.27 0.51 3260.11 0.32
3.3 In non-approved securities 30326.59 3.74 51799.37 5.12
4. LOANS & ADVANCES 482269.67 59.87 593722.37 58.72
4.1 Bills purchased & discounted 37086.93 4.60 44280.01 4.38
4.2 Cash credit, Overdrafts etc 180696.10 22.42 221770.59 21.93
4.3 Term loans 264486.65 32.81 327671.77 32.41
5. Fixed Assets 3961.58 0.49 4590.85 0.45
6. Other assets 33804..30 4.20 55249.60 5.46
Total Assets 805795.15 100.00 1011168.75 100.00

1 crore : 10 million
Source : Reserve Bank of India

Micro Finance

The micro finance movement has been gaining momentum in India in recent years and it has now developed into an important delivery mechanism for reaching the poor. At present, there are two predominant models for micro finance delivery in India, viz., SHG-bank linkage programme (SBLP) model and the micro finance institution (MFI) model.  Recognising the potential of micro finance to positively influence the income and socio-economic conditions of the poor, the Reserve Bank, NABARD and SIDBI have taken several initiatives over the years to give a further fillip to the micro finance movement in India. The RBI report pointed out that the SBLP has made considerable progress since its inception in the early 1990s, both in terms of number of SHGs credit linked with banks as also bank loans disbursed by SHGs.

In terms of relative shares of different agencies, commercial banks continued to account for the largest share, both in terms of number of SHGs credit linked and bank loans disbursed, followed by RRBs and co-operative banks. The region-wise pattern of SHGs linked to banks showed greater concentration in the southern region, although the spatial disparity has declined in the last few years with some increase in the share of other regions. As on March 31, 2007, commercial banks held the largest share of SHG’s savings, followed by RRBs and co-operative banks. The recovery rates under the SBLP remained high with 37 per cent banks reporting recovery of above 95 per cent.

RBI carried out a survey of MFIs in 2007 which, inter alia, revealed that the products varied widely across MFIs and across states and that the commercial banks remained the most important source of funds for almost all the MFIs.

Consolidated Balance Sheet of Foreign Banks (2007-08)
(In Rs. crore)

  As on March 31, 2007 As on March 31, 2008

% to total


% to total

1. Capital 12999.36 4.74 22222.70 6.10
2. Reserves & Surplus 20076.09 7.32 27109.18 7.45
3. Deposits 150749.89 54.94 191113.78 52.49
3.1 Demand Deposits 46154.61 16.82 59200.04 16.26
3.2 Savings Bank Deposits 21839.14 7.96 26253.54 7.21
3.3 Term Deposits 82756.13 30.16 105660.20 29.20
4. Borrowings 51106.06 18.63 58361.92 16.03
5. Other Liabilities and Provisions 39460.73 14.38 65291.62 17.93
Total Liabilities 274392.14 100.00 364099.21 100
1. Cash & Balance with RBI 12144.71 4.37 22011.26 6.05
2. Balances with banks and money at call & short  notice 26612.28 9.59 19934.97 5.48
3. Investments 71471.30 25.71 98910.19 27.17
3.1 In Govt. Securities
a. In India
b. Outside India 
56220.11 20.23 82926.65 22.78
3.2 In other approved securities 84.99 0.03 33.22 0.01
3.3 In non-approved securities 15166.20 5.45 15950.32 4.38
4. Loans & Advances 126338.57 45.44 161132.63 44.26
4.1 Bills purchased & discounted 11543.78 4.15 15759.64 4.33
4.2 Cash credit, Overdrafts, etc. 49764.54 18.91 66583.83 18.29
4.3 Term Loans 65030.26 22.38 78789.16 21.64
5. Fixed Assets 3000.85 1.08 3968.69 1.09
6. Other Assets 34824.43 13.81 58141.47 15.97
Total Assets 274392.14 100.00 364099.21 100.00

1 crore : 10 million
Source : Reserve Bank of India Report

Non-Banking Financial Institutions

Commenting on the performance of financial institutions (FIs), non-banking financial companies (NBFCs), and primary dealers (PDs) RBI report said that both financial assistance sanctioned and disbursed by FIs continued to increase during 2007-08, but the increase was more pronounced in respect of sanctions than disbursements. The combined balance sheets of select FIs during 2007-08 expanded sharply. On the liabilities side, the resources mopped up by way of bonds and debentures (which form a major constituent) declined, though deposits and borrowings recorded a sharp increase. On the assets side, loans and advances continued to expand, while the investment portfolio continued to decline.

Non-interest income of FIs as well as their operating expenses increased significantly during 2007-08. The operating profits as well as net profit of FIs also increased.

The capital adequacy ratio of FIs continued to be significantly higher than the minimum stipulated norm of 9 per cent.

Total assets / liabilities of NBFCs (excluding RNBCs) expanded at a higher rate during 2007-08, as compared with 2006-07. Financial performance of NBFCs continued to improve during 2007-08. Both fund based income and fee based income increased sharply. Asset quality of various types of NBFCs as reflected in the various categories of NPAs (sub-standard, doubtful, loss) remained broadly at the previous year’s level.

The increase in income of RNBCs during 2007-08 was more than the increase in the expenditure, as a result of which the operating profit of RNBCs increased sharply.

The liabilities/ assets of non-deposit taking systemically important non-banking finance companies (with asset size of Rs. 100 crore and above) (NBFCs-ND-SI) increased during the year ended March 2008 over the previous year. The gross NPAs to total assets ratio of NBFCs-ND-SI remained unchanged during the year ended March 2008 (Para 6.82; Page 247).

The income earned by PDs declined during 2007-08 due to restructuring of business by PDs and consequent decline in income from other activities that were not allowed to be undertaken by PDs. However, a corresponding sharp decline on the expenditure front and a rise in trading profits restricted the decline in net profit during the year. The CRAR of individual stand-alone PDs remained above the prescribed minimum CRAR of 15 per cent.


Consolidated Balance Sheet of Private Sector Banks (2007-08)
(Rs in crore)


As on March 31, 2007

As on March 31, 2008


% to total


% to total

Capital 4143.73 0.56 4613.25 0.49
Reserves and Surplus 46328.98 6.22 86760.93 9.23
Deposits 551987.07 74.05 675073.39 71.80
3.1 Demand Deposits 73340.02 9.84 99533.73 10.59
3.2 Savings Bank deposits 91341.76 12.25 122064.41 12.98
3.3 Term Deposits  387305.29 51.96 453475.25 48.23
4. Borrowings 70131.41 9.41 87841.26 9.34
5. Other liabilities and Provisions 72812.81 9.77 85861.12 9.13
Total Liabilities 745404.00 100.00 940149.95 100.00
1. Cash and balances with RBI 40909.47 5.49 71307.14 7.58
2. Balances with banks and money at call and short notice 37293.48 5.00 25951.74 2.76
3. Investments 214654.74 28.80 278215.25 29.59
3.1 In Government Securities (a=b) 159851.45 21.44 194025.06 20.64
(a) In India  159549.45 21.40 193884.80 20.62
(b) Outside India 302.03 0.04 140.25 0.01
3.2 In other approved securities 340.51 0.05 280.55 0.03
3.3 in non-approved securities  54462.75 7.31 83909.64 8.93
4. Loans and advances 414751.28 55.64 518402.42 55.14
4.1 Bills purchased 7 discounted 20053.36 2.69 27441.47 2.92
4.2 cash Credits, Overdrafts etc. 103082.07 13.83 130607.15 13.89
4.3 Term loans 291615.80 39.12 360353.80 38.33
5. Fixed Assets 8166.82 1.10 9629.86 1.02
6. Other Assets 29628.00 3.97 36643.53 3.90
Total Assets 745403.79 100.00 940149.95 100
1 crore : 10 million
Source : Reserve Bank of India Report

*India’s fiscal year is April to March


Updated December 2008