India Banking -Finance Tracker:: Anand Rathi

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India Banking
Finance Tracker – Vol. 17/FY11
 Deposit growth down. The fortnight ending 5 Nov ’10 saw a sharp
decline in deposits growth, while credit growth improved. Deposits
growth for the latest (5 Nov ’10) fortnight decelerated to 15.3% yoy
compared with 17.3% yoy growth the previous fortnight. Demand
deposits growth sharply reduced to 12.3% yoy, after witnessing an
impressive growth of 24.4% during the previous fortnight.


 Credit growth picks up. Credit growth spiked up to 22% yoy for the
latest fortnight compared with 21.2% the previous fortnight

 Guidelines on banks’ interest rate risk. The RBI has announced
that banks should move to a more sophisticated system of interest
rate risk measurement of Duration Gap Analysis (DGA) from the
present system of Traditional Gap Analysis (TGA) from 1 Apr ’11.

 Union Bank fund-raising plans. Union Bank of India has applied
to the government for a capital infusion of `15bn. The bank got
`1.11bn in the form of perpetual non-cumulative preference shares
(PNCPS) in Jun ’10.



Banking flows
Deposits
Deposits growth for the fortnight ending 5 Nov ’10 decelerated to 15.3% yoy compared
with 17.3% yoy growth the previous fortnight. Demand deposits growth sharply
reduced to 12.3% yoy, after witnessing an impressive growth of 24.4% during the
previous fortnight.

Credit


Credit growth spiked up to 22% yoy for the latest fortnight compared with 21.2% the
previous fortnight. Credit continues to grow faster than deposits, pushing up the creditdeposit
ratio to 73.4% for the fortnight.



Fresh developments

Regulatory changes
Guidelines on banks’ asset liability management framework – Interest rate risk
The RBI has announced that banks should move to a more sophisticated system of
interest rate risk measurement of Duration Gap Analysis (DGA) from the present
system of Traditional Gap Analysis (TGA) from 1 Apr ’11.

Liquidity support under Liquidity Adjustment Facility (LAF)
To alleviate liquidity pressure, the RBI has allowed additional liquidity support, under
LAF, of up to 1% of NDTL for all scheduled commercial banks till 16 Dec ’10. Banks
may seek waiver of penal interest on any shortfall in maintenance of the statutory
liquidity ratio (SLR) during 9 Nov-16 Dec ’10 arising out of availing this facility.

Business initiatives
Union Bank fund-raising plans
Union Bank has applied to the government for capital infusion of `15bn. The bank got
`1.11bn in the form of PNCPS in Jun ’10.

SBI plans to launch another retail bond issue in Jan ’11
State Bank of India (SBI) plans to come out with another retail bond issue worth `10bn
within the next two months, enthused by an overwhelming response to its debut paper
for retail investors.

Government has infused `56.9bn under the recapitalisation program
The government has infused `56.9bn as part of the recapitalization program of PSU
banks to maintain their Tier I capital-adequacy ratio of over 8% up to Jul ’11; in the
Union Budget FY11, the government has provided for the same in the form of direct
equity and hybrid Tier I capital, including PNCPSs.



Banking outlook
Based on the latest available data, our basic model estimates 16.8% yoy deposits growth
and 18.2% yoy credit growth by end-FY11.