The Indian banking market is growing at an astonishing rate, with assets expected to reach US$1 trillion by 2010. An expanding economy, middle class, and technological innovations are all contributing to this growth, according to a new report, "Overview of Indian Banking Market" from Celent, a Boston-based financial research and consulting firm.
Key findings of the report include:
• India’s economy is growing at a rate of 8%, with banking industry assets experiencing a compound annual growth rate of 24%, from US$374.4 billion in 2003 to US$616.15 billion in 2006. Considering a nominal CAGR of 17% during the last five years, Celent expects the industry to grow at a rate of 15-17% to reach US$1 trillion by 2010.
• Public sector banks still dominate India’s banking industry, although the private sector is growing. Public sector banks hold 72.3% of banking assets, followed by private sector banks with 17.2% of assets; foreign banks and regional rural banks hold 7.2% and 3.2% respectively.
• The Indian banking industry is focusing on the retail side of the market, moving towards increasing credit distribution, with a CAGR of 23% in the last five years. Loans and advances of SCBs registered a robust growth of 31.8% over the previous year compared to US$335.2 billion in 2005-2006.
• The banking industry in India is in the midst of an IT revolution. As of March 2006, 78% of all public sector bank branches were computerized. Since 2000, growth in the number of ATMs has been exponential, with a CAGR of 70% to 21,523 ATMs by the end of March 2006. Celent expects this number to hit 175,000 by 2010.
• Rural reach is more of an opportunity than a challenge. The new issue that banks are facing is reaching unbanked areas. The Indian rural market consists of 74% of the total population, of which 30% is consumer middle class with 58% of disposable income. Celent expects the rural market to be the next big thing in the Indian banking industry. Banks have also realized this potential and have come up with innovative means of reaching this semi-literate population.
• Global banks are now competing with domestic banks. Currently, there are 29 foreign banks from all over the world operating in India with approximately 258 offices spread across the country. These banks have introduced more sophisticated ways of banking through ATMs, Internet banking, mobile banking, etc.