fibac 2019 - boston consulting group

FIBAC 2019ANNUAL BENCHMARKING AND INSIGHTS

AUGUST 2019

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Established in 1927, FICCI is the largest and oldest apex business organisation in India. Its history is closely interwoven with India‘s struggle for independence, its industrialization, and its emergence as one of the most rapidly growing global economies. A non-government, not-for-profit organisation, FICCI is the voice of India‘s business and industry. From influencing policy to encouraging debate, engaging with policy makers and civil society, FICCI articulates the views and concerns of industry. It serves its members from the Indian private and public corporate sectors and multinational companies, drawing its strength from diverse regional chambers of commerce and industry across states, reaching out to over 2,50,000 companies. FICCI provides a platform for networking and consensus building within and across sectors and is the first port of call for Indian industry, policy makers and the international business community.

Indian Banks’ Association (IBA) the only advisory body for banks in India, was set up in 1946 as an association to discuss vital issues of Banks. The onward journey of IBA has been progressive and enriched by the development of India’s banking sector since independence. Having bestowed with the status of the “torch bearer” for the banking industry, IBA has initiated several path breaking policies during the last seven decades which have eventually transformed the banking sector. Over a period of time IBA has evolved as the “Voice of the Indian Banking Industry”. At present IBA has 248 Members, 144 Ordinary Members comprising Public, Private, Foreign and Cooperative Banks and 104 financial institutions and Banking related organizations as Associate Members.

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Credit Insights Partner

Established in 1927, FICCI is the largest and oldest apex business organisation in India. Its history is closely interwoven with India’s struggle for independence, its industrialization, and its emergence as one of the most rapidly growing global economies. A non-government, not-for-profit organisation, FICCI is the voice of India’s business and industry. From influencing policy to encouraging debate, engaging with policy makers and civil society, FICCI articulates the views and concerns of industry. It serves its members from the Indian private and public corporate sectors and multinational companies, drawing its strength from diverse regional chambers of commerce and industry across states, reaching out to over 2,50,000 companies. FICCI provides a platform for networking and consensus building within and across sectors and is the first port of call for Indian industry, policy makers and the international business community.

TransUnion CIBIL is India’s leading credit information company and maintains one of the largest repositories of credit information globally. We have over 4500 members–including all leading banks, financial institutions, non-banking financial companies and housing finance companies–and maintain more than 1000 million credit records of individuals and businesses.

Our mission is to create information solutions that enable businesses to grow and give consumers faster, cheaper access to credit and other services. We create value for our members by helping them manage risk and devise appropriate lending strategies to reduce costs and increase portfolio profitability. With comprehensive, reliable information on consumer and commercial borrowers, they are able to make sound credit decisions about individuals and businesses. Through the power of information, TransUnion CIBIL is working to support our members drive credit penetration and financial inclusion for building a stronger economy.

Indian Banks’ Association (IBA) the only advisory body for banks in India, was set up in 1946 as an association to discuss vital issues of Banks. The onward journey of IBA has been progressive and enriched by the development of India’s banking sector since independence.Having bestowed with the status of the “torch bearer” for the banking industry, IBA has initiated several path breaking policies during the last seven decades which have eventually transformed the banking sector. Over a period of time IBA has evolved as the “Voice of the Indian Banking Industry”. At present IBA has 251 Members, 144 Ordinary Members comprising Public, Private, Foreign and Cooperative Banks and 107 financial institutions and Banking related organizations as Associate Members.

August 2019 | Boston Consulting Group

FIBAC 2019ANNUAL BENCHMARKING AND INSIGHTS

Executive Summary

Overall Metrics

Deposits

Advances

Fee Income

Glossary

Non-Performing Assets

Traditional Channels

Digital Channels

Organization Design

For Further Reading

Note to the Reader

04

05

11

23

43

51

57

67

77

85

86

87

Executive Summary

Overall Metrics

Deposits

Advances

Fee Income

Glossary

Non-Performing Assets

Traditional Channels

Digital Channels

Organization Design

For Further Reading

Note to the Reader

04

05

11

23

43

51

57

67

77

85

86

87

4

FIBAC 2019 | ANNUAL BENCHMARKING AND INSIGHTS

The banking sector in India is at an inflection point. The worst phase of the recent NPA crisis is well and truly over. However, the gap between strong and weak banks is widening by the year, necessitating a change in the landscape of the industry with consolidation of players becoming one of the key ways to achieve this change. The past year saw muted growth in credit as well as deposits, however margins for banks improved due to lower cost of funds. Also, recoveries from write-offs gave a boost to fee income across the industry. Although overall growth in credit and deposits slowed, NPAs for retail as well as SME loans improved across all bank categories.

With all these changing market dynamics, there is a pressing need to assess new paradigms which would define the success for thebanking industry. NBFCs continue to play a crucial role by leading the acquisition of new-to-credit (NTC) customers. In fact, NBFCsare adding as many new-to-credit customers as rest of the banking industry put together. However, the problem of NPAs in NBFCsseems to persist and needs to be addressed. PSU banks are playing a critical role in extending credit to Tier 3-4-5 towns.

The link between branch growth and savings account deposits growth has weakened. There is a disruption in CASA, with rate war shifting incremental market shares in a significant manner. Across bank categories, there is an apparent trend of shifting market shares in savings deposits, with Private-New banks increasingly taking away share from peers. This is attributed to their continued investment in branch infrastructure, better digital adoption as well as higher interest rate offerings. On the lending front, lenders are exercising more caution as they sanction loans to customers with higher credit scores. However, it leaves a section of peopleunserved, leading to a higher demand-supply gap. Among the other factors, this has led to a slower growth in the retail segment.

As the digitization wave is picking up steam, for the first time in the history of Indian banking, almost two-thirds of all banking financial transactions are now digital; with UPI, mobile and internet banking leading the way. Growth in traditional channels like ATMs and branches has stagnated for all bank categories and the industry is investing heavily in non-traditional channels. Relocation and rationalization of ATMs and branches is leading to higher efficiency of these channels. Digital penetration is showing results with an average of one in five savings account holders using their debit cards at POS terminals. Banks are also increasingly improving their capabilities to monetize their digital channels with almost one in four personal loans being sold digitally.

Executive Summary

OVERALL METRICS

6


Gap in overall performance further widened within PSU and Private banksin FY 19

1Return on Assets is calculated as net profit/average assets 2Return on Equity is calculated as net profit/average shareholders' fundNote: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: RBI data; Capitaline data; BCG analysis

-2

-1

0

1

2

(%)

0.6%

0.3%

1.8%

0.8%

FY15

PSU-Medium

0.7%

-0.4%

-1.8%

0.2%

1.6%

0.7%

FY16

Private-Old

1.4%

-0.4%

0.2%

FY17

-0.6%

-1.5%

1.1%

0.4%

-0.4%

FY18

-0.2%0.0%

1.1%

0.4%

-0.1% -0.3%

FY19

PSU-Large

Private-New

Industry

0.3%

Return on Assets1(%) Return on Equity2 (%)

-40

-20

0

20

(%)

10%9%

Industry

11%

PSU-Large5%

FY15

PSU-Medium

17%

Private-New

-2%

-28%

-7%

15%9%

2%

-7%

12%

0%

4%3%

FY17

Private-Old5%

-9%

10%

5%

10%

-6%

-31%

FY18

-4%

FY19FY16

7

BOSTON CONSULTING GROUP FICCI IBA

Slowdown in advances growth in PSU banks evident in asset profile

15 yr CAGR (FY 14 to FY 19)Note: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: RBI data; Capitaline data; BCG analysis

Private-New Private-Old PSU-MediumPSU-Large Industry

Balance Sheet Composition (%): Asset Mix

Growth1 intotal assets (%) 16%

FY15 FY19

10% 7% 3% 8%

Advances

Investments

Cash and Balances with RBI

Fixed Assets

Other Assets

Balances with Banksand Money at Call

FY15 FY19 FY15 FY19 FY15 FY19 FY15 FY19100

50

0

100

50

0

100

50

0

100

50

0

100

50

0

7


Slowdown in advances growth in PSU banks evident in asset profile



Balance Sheet Composition (%): Asset Mix

Growth1 intotal assets (%) 16%

FY15 FY19

10% 7% 3% 8%

Advances

Investments

Cash and Balances with RBI

Fixed Assets

Other Assets

Balances with Banksand Money at Call

FY15 FY19 FY15 FY19 FY15 FY19 FY15 FY19100

50

0

100

50

0

100

50

0

100

50

0

100

50

0

8


Liability side balance sheet of the industry has improved with higher share of savings deposits; trend very prominent in PSU banks


Balance Sheet Composition (%): Liability Mix

16% 10% 7% 3% 8%

Savings Deposits

Current Deposits

Term Deposits

Borrowings

Capital

Reserves and Surplus

Other Liabilities and Provisions


100

50

0

100

50

0

100

50

0

100

50

0

100

50

0

FY15 FY19 FY15 FY19 FY15 FY19 FY15 FY19 FY15 FY19

Growth1 intotal assets (%)

9


Drop in savings account share of deposits for Private-New banks; steady growth for rest of the players in the industry

1Ratio is calculated on basis of deposits in India and abroad Note: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: RBI data; Capitaline data; BCG analysis

Savings Account Deposits/Total Deposits1 (%) Current Account Deposits/Total Deposits1 (%)

35

30

0

25

22%

26%

28%

FY16

21%

32%

25%

FY15

23%

30%29%

32%

26%

28%

34%

31%

FY17

32%

33%

30%

24%

FY18

25%

FY19

(%)

24%

28%8

16

0

18

FY17

7.3%

6.6%

(%)

7.4%

6.7%

15.9%

FY15

6.6%

16.0%

8.2%

FY16

6.7%

FY18

7.4%

6.8%

8.7%

17.9%

7.8%

8.6%

6.4%

15.6%

16.8%

FY19

8.2%

6.7%

6.6%

8.6%

PSU-Large Private-OldPrivate-NewPSU-Medium Industry

9


Drop in savings account share of deposits for Private-New banks; steady growth for rest of the players in the industry

1Ratio is calculated on basis of deposits in India and abroad Note: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: RBI data; Capitaline data; BCG analysis

Savings Account Deposits/Total Deposits1 (%) Current Account Deposits/Total Deposits1 (%)

35

30

0

25

22%

26%

28%

FY16

21%

32%

25%

FY15

23%

30%29%

32%

26%

28%

34%

31%

FY17

32%

33%

30%

24%

FY18

25%

FY19

(%)

24%

28%8

16

0

18

FY17

7.3%

6.6%

(%)

7.4%

6.7%

15.9%

FY15

6.6%

16.0%

8.2%

FY16

6.7%

FY18

7.4%

6.8%

8.7%

17.9%

7.8%

8.6%

6.4%

15.6%

16.8%

FY19

8.2%

6.7%

6.6%

8.6%

PSU-Large Private-OldPrivate-NewPSU-Medium Industry

10


While Cost to Income Ratio continued to rise, Net Interest Margin has started to inch up

1Net Interest Margin is calculated as net interest income/average assets 2Cost to Income Ratio is calculated as operating costs/revenues; Revenue is calculated as sum of net interest income and other incomeNote: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: RBI data; Capitaline data; BCG analysis

Net Interest Margin1 (NIM) (%)Cost to Income Ratio2 (CIR) (%)

40

45

50

55

47%

(%)

49%

FY15

50%48%

41%42%

51%

54%

41%

53%

50%49%

FY16

54%

48%

53%

41%

52%

47%

FY17

52%

51%

49%

FY18

53%

55%

43%

FY190

2

3

4

2.4%2.4%

2.6%

(%)

2.5% 2.1%

3.6%

2.2%

3.6%

FY17

2.8%

FY15

2.3%PSU-Medium

2.1%

Private-Old2.9%

2.5%

FY16

2.2%

2.0%

3.5%

2.0%

2.9%

3.4%

3.0%

2.4%

FY18

Industry

2.2%

PSU-Large

3.5%

2.9%

2.6%

FY19

Private-New

PSU-MediumPrivate-OldPSU-Large

Industry

Private-New

DEPOSITS

12


Private-New banks grew retail term deposits aggressively to further transform liability side balance sheet; overall deposits growth was muted

1Total Deposits represent only the domestic operations of banks 2Retail Term Deposits include Retail Fixed Deposits (less than INR 2 Crore) & Recurring Deposits 3Bulk Term Deposits include Bulk Term Deposits & CDs (equal to or more than 2 Crore) and Interbank Deposits & OthersNote: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 4 Private-New banks and 7 Private-Old banks included for the purpose of this analysis 2. Total may not sum to 100 because of differences due to rounding off Source: FIBAC Productivity Survey 2019; BCG analysis

Composition of Total Deposits1

(FY 19) (%)Growth in Total Deposits1

FY 19 over FY 18 (%)

PSU-Large

PSU-Medium

Private-New

Private-Old Industry

Savings 8% 8% 11% 14% 9%

Current 7% 19% 9% 7% 10%

Retail Term2 1% 3% 25% 14% 6%

BulkTerm3 36% -5% 23% 3% 16%

Total 8% 4% 18% 12% 9%

44%

7%

36%

13%

41%

7%

31%

21%

43%

12%

32%

13%

53%

8%

26%

13%

44%

8%

34%

15%

Bulk Term

Deposits

Retail Term

Deposits

Current Account

Deposits

Savings Account

Deposits

PSU-Large

PSU-Medium

Private-New

Private-Old

Industry

13


Most of the states in southern India showed robust growth in low cost deposits

Note: 1. Data of 5 PSU-Large banks, 10 PSU-Medium banks, 2 Private-New banks and 7 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Savings Account Deposits Growth (%)(FY 19 over FY 18)

Current Account Deposits Growth (%) (FY 19 over FY 18)

Quartile 2: SA Growth between 10% & 12%

Quartile 4: SA Growth less than 8%Quartile 3: SA Growth between 8% & 10%Quartile 1: SA Growth more than 12%

Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkhand

Karnataka

Tamil Nadu

PuducherryKeralaLakshadweep

Maharashtra

Rajasthan Uttar Pradesh

ManipurMizoram

Nagaland

Sikkim

Tripura

Orissa

West Bengal

UttarakhandPunjab Chandigarh

Meghalaya

Andaman andNicobar Islands

Delhi

Dadra and Nagar Haveli

Daman and Diu

Telangana

Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkhand

Karnataka

Tamil Nadu


Maharashtra

Rajasthan Uttar PradeshManipur

Mizoram

NagalandSikkim

Tripura

Orissa

West Bengal

UttarakhandPunjabChandigarh

Meghalaya


Delhi


Daman and Diu

Telangana

Quartile 2: CA Growth between 3% & 12%

Quartile 4: CA Growth less than -1%Quartile 3: CA Growth between -1% & 3%Quartile 1: CA Growth more than 12%

As on 31st March 2019

13


Most of the states in southern India showed robust growth in low cost deposits


Savings Account Deposits Growth (%)(FY 19 over FY 18)

Current Account Deposits Growth (%) (FY 19 over FY 18)

Quartile 2: SA Growth between 10% & 12%

Quartile 4: SA Growth less than 8%Quartile 3: SA Growth between 8% & 10%Quartile 1: SA Growth more than 12%

Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkhand

Karnataka

Tamil Nadu


Maharashtra


ManipurMizoram

Nagaland

Sikkim

Tripura

Orissa

West Bengal


Meghalaya


Delhi


Daman and Diu

Telangana

Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkhand

Karnataka

Tamil Nadu


Maharashtra

Rajasthan Uttar PradeshManipur

Mizoram

NagalandSikkim

Tripura

Orissa

West Bengal


Meghalaya


Delhi


Daman and Diu

Telangana

Quartile 2: CA Growth between 3% & 12%

Quartile 4: CA Growth less than -1%Quartile 3: CA Growth between -1% & 3%Quartile 1: CA Growth more than 12%


14


75

59

4028

52

3220

15

128

71

25

7

3425 22

7

77

50

3020

Urban Semi-UrbanMetro Rural

On branch productivity, PSU banks enjoy relative advantage in semi-urban & rural areas, Private-New banks in urban & metro and Private-Old in semi-urban


PSU-Large PSU-Medium IndustryPrivate-New Private-Old

CASA Deposits per Branch for FY 19 (INR Crore)

15


In savings deposits, individual salary accounts and BSBD grew faster than the other categories; PSU-Large dominating growth in both these segments

1Total Savings Account Deposits pertain to banks' operations in IndiaNote: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 3 Private-New banks and 6 Private-Old banks included for the purpose of this analysis2. Total may not sum to 100 because of differences due to rounding off

Source: FIBAC Productivity Survey 2019; BCG analysis

PSU-Large

PSU-Medium

Private-New


Individual-Salary 28% 20% 18% 29% 23%

Individual-Non-Salary 7% 6% 8% 11% 7%

BSBD 24% 13% -12% 13% 19%

Non-Individuals 5% 14% 9% 28% 8%

Total 8% 8% 11% 14% 9%

Composition of Total Savings Account Deposits1 for FY 19 (%)

Growth in Total Savings Account Deposits1

for FY 19 over FY 18 (%)

Individual-Salary

Individual-Non-Salary

PSU-Large

PSU-Medium

Private-New

Private-Old

Industry

BSBD

Non-Individuals

16


40

30

Overall savings account deposits growth at its slowest in a decade

1Overall Savings Account Deposits include both domestic as well as foreign deposits 2Growth represents absolute growth between each 2 year periodNote: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 9 Private-New banks and 9 Private-Old banks included for the purpose of this analysisSource: RBI data; BCG analysis

20

0FY13 FY19

23%

(%)

22%21%

9%

14%

26%23%

10%

15%

31%

21% 25%

16%

8%

19%

12%11%

FY15

27%

FY17

7%

13%9%

15%

FY11

Overall Savings Account Deposits1 Growth2 (%)

IndustryPSU-Large PSU-Medium Private-OldPrivate-New

17


Market shares in savings account deposits are shifting faster than before; banks with better digital capabilities at an advantage

1Total Savings Account Deposits pertains to banks' operations in India and abroad 2Private-New-Small banks are considered based on total assets less than INR 5 billion as on 31 March 2019 Note: 1. Data of 6 PSU-Large banks, 15 PSU-Medium banks, 3 Private-New-Large banks, 6 Private-New-Small banks and 9 Private-Old banks included for the purpose of this analysisSource: RBI data; BCG analysis

Market share for incremental Savings Account Deposit1 (%)

10%18% 16%19%

25% 25%22%

55% 55% 47%

2%

Private-New-Large

0%2%

FY09-FY14FY05-FY09

2% 2%Private-Old

FY14-FY19

PSU-Large

PSU-Medium

Private-New-Small2

18


In savings deposits, PSU banks have struck a balance across MUSR; Private-New skewed towards metro and urban; Private-Old have semi-urban as their strength

1Total Savings Account Deposits pertains to banks' operations in IndiaNote: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 4 Private-New banks and 7 Private-Old banks included for the purpose of this analysis2. Total may not sum to 100 because of differences due to rounding off Source: FIBAC Productivity Survey 2019; BCG analysis

PSU-Large

PSU-Medium

Private-New


Metro 5% 4% 12% 10% 7%

Urban 9% 9% 14% 12% 10%

Semi-Urban 9% 10% 6% 15% 9%

Rural 11% 11% -3% 21% 11%

Total 8% 8% 11% 14% 9%

Composition of Total Savings Account Deposits1 by Geography for FY 19 (%)

Growth in Total Savings Account Deposits1


24% 19% 13% 18%

24%22%

13%

40%22%

28%25%

24%

20%

26%

24%34%

59%

27% 34%

PSU-Large

PSU-Medium

Private-Old

Private-New

Urban

4%Industry

Metro

Semi-Urban

Rural

19


23 19

67

24 2524 19

67

25 26

PSU-MediumPSU-Large Private-New IndustryPrivate-Old

+3%+1%

+1%

+5% +3%

Average size of savings account deposits remains stagnant across all bank categories


FY 18 FY 19

Average Size of Savings Account Deposits (INR '000)

20


PSU-Large banks driving financial inclusion agenda across geographies

Note: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 3 Private-New banks and 5 Private-Old banks included for the purpose of this analysis 2. Total may not sum to 100 because of differences due to rounding off Source: FIBAC Productivity Survey 2019; BCG analysis

Market Share in BSBD Accounts by Geography by value for FY 19 (%)

Average Balance per BSBD Account forFY 19 (INR)

2%

45% 40%25% 28% 30%

50% 56%72% 69% 66%

Metro

1% 2%3%3%

1%

Urban

Private-New

2%

Semi-Urban

1%1%

Rural

1%

Overall

PSU-Large

PSU-Medium

Private-Old

2,352

2,866

2,502

3,281

2,500

Private-NewPSU-Large PSU-Medium


21


High activation of BSBD accounts for PSU-Large banks; however RuPay card activation lagging for them

1Active BSBD Accounts defined as accounts with at least 1 customer initiated financial transaction in last 6 months (as of 31 March 2019)Note: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 3 Private-New banks and 5 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Private-Old

PSU-Large

PSU-Medium

IndustryPrivate-New

28%

70%

49% 49%

64%

IndustryPSU-Large

15%

PSU-Medium

18%

Private-Old

Private-New

38%

18% 18%

Private-Old

PSU-Medium

PSU-Large

3%

Private-New

Industry

3%

17%

2% 3%

Active1 BSBD Accounts for FY 19 (%)

BSBD Accounts with RuPayDebit Cards for FY 19 (%)

BSBD Accounts with Active RuPayDebit Cards at POS for FY 19 (%)

ADVANCES

24


Retail loans continue to grow in FY 19 with Private-New banks leading the pack; PSU-Medium growth extremely slow across the board

1MSME advances includes CV/CE loansNote: 1. Data of 6 PSU-Large banks, 12 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysis2. Total may not sum to 100 because of differences due to rounding off Source: FIBAC Productivity Survey 2019; BCG analysis

42% 41% 34% 39% 40%

16% 17%14%

20% 16%

13% 17%

9%

11% 13%

28% 25%

43%30% 31%

Corporate

PSU-Medium

MSME

Private-New

PSU-Large

Private-Old

Industry

Retail

Agriculture

PSU-Large

PSU-Medium

Private-New


Retail 18% 9% 30% 22% 20%

Agriculture 10% 5% -5% 8% 6%

MSME1 3% -6% 17% 10% 4%

Corporate 13% 3% 15% 9% 11%

Total 12% 3% 19% 13% 12%

Total Advances in FY 19 (%) Growth in Advances in FY 19 over FY 18 (%)

Only participant banks in FIBAC

25


While retail loans continue to grow at a steady pace, sharp fall seen in growth for MSME with PSU banks worst hit among all bank categories

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2Retail Business includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans 3MSME includes loans less than INR 50 crores (data from CIBIL Commercial Bureau) 4NBFCs includes HFCs 5Industry includes NBFCs, HFCs, Private banks, PSU banks, Co-operative banks, MNCs and Regional Rural banks Source: TransUnion CIBIL; BCG analysis

MSME3Retail Consumer1 Retail Business2Retail HomePlayer Category

0

45

1530

41%

16%

0153045

21% 24%

0153045

26% 26%

0153045

22%13%

15

-150

3045

-3%

13%

0153045 40%

27%

0153045

25%9%

150

3045

9%

32%

0153045 41%

26%

0153045 33%

17%

0153045

7%

40%

0153045

27%

45%

0153045

21%34%

0153045

19% 16%

0153045

20% 16%

0153045

20% 14%

NBFCs4

PSU

Private

Industry5

All banks & NBFCs in India

Growth in Outstanding Retail and MSME Advances (%)

FY 18 FY 19 FY 18 FY 19 FY 18 FY 19 FY 18 FY 19

26


PSU-Medium banks have higher share of NPA despite low advances growth across retail & MSME; Private-Old need to improve their risk management capabilities

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2 Retail Business includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans 3MSME includes loans less than INR 50 crores (data from CIBIL Commercial Bureau) Note: 1. NBFCs includes HFCs 2. Quadrants are defined based on Industry average 2. Industry includes Co-operative banks, MNCs and Regional Rural banks as wellSource: TransUnion CIBIL; BCG analysis

Retail Consumer1 Retail Business2

Retail Home MSME3

00-20

5

20

10

40

Private-New

GNPA (FY19) (%)

PSU-MediumNBFCs Private-Old

PSU-Large0

10

20

30

-10-15 -5 300

PSU-Large

PSU-Medium

GNPA (FY19) (%)

Private-OldNBFCs

Private-New

0

2

4

0 5 10 15 20 25 30

NBFCs

GNPA (FY19) (%)

PSU-Medium

Private-New

Private-Old

PSU-Large

0-10

10

20

100

20 30

30

NBFCs

PSU-Large

GNPA (FY19) (%)

Private-NewPrivate-Old

PSU-Medium

Advances Y-o-Y growth (FY19) (%) Advances Y-o-Y growth (FY19) (%)

Advances Y-o-Y growth (FY19) (%) Advances Y-o-Y growth (FY19) (%)


Retail Advances

Retail Advances

28


Unsecured loans continue to grow across the board; robust growth seen in home loans followed by auto loans

Note: 1. Data of 6 PSU-Large banks, 12 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysis 2. Total may not sum to 100 because of differences due to rounding offSource: FIBAC Productivity Survey 2019; BCG analysis

16%32%

23%

43%

23%

6%5%

13% 20%

14%

14%9%

15%10%

53% 50%40%

31%47%

4%4%

PSU-Large

4%

PSU-Medium

UnsecuredPersonal

1%

5%

4%

Private-New

Industry

4%

Student

2%

Private-Old

3%3%

Home

Auto

LADSJewel/Gold &

Others

PSU-Large

PSU-Medium

Private-New


Home 21% 12% 21% 32% 19%

Auto 10% 2% 18% 34% 14%

Unsecured Personal 11% 28% 37% 33% 24%

Student 4% -6% 31% 3% 1%

LADS 9% -18% 9% 5% 1%

Jewel/Gold & Others 27% 13% 54% 14% 29%

Total 18% 9% 30% 22% 20%

Split of Total Retail Advancesin FY 19 (%)

Growth in Retail Advances FY 19 over FY 18 (%)


29


NBFCs capturing lion's share of new retail loans (40%) and even higher share of New to Credit customer base (56%)

1Retail Loan includes Auto Loans, Personal Loans, Home Loans, Consumer Loans, Business Loans, Loan Against Property, Gold Loan, Credit Cards, Agri, Commercial Vehicle and Construction Equipment Loans 2NBFCs includes HFCs 3Others include Co-operative banks, MNCs and Regional Rural banksSource: TransUnion CIBIL; BCG analysis

7%

13%

24%

56%

FY19

PSU Banks

NBFCs2

PrivateBanks

Others3

27%

27%

40%

PrivateBanks

PSU Banks

5%Others3

FY19

NBFCs2

Share of New Retail Loans1

to New to Credit Customers by volume (%)


to New to Credit Customers by value (%)

87.5%

12.5%

Known toBureau

FY19

New to Credit

Share of New Retail Loans1 by Customer type by volume (%)


29


NBFCs capturing lion's share of new retail loans (40%) and even higher share of New to Credit customer base (56%)

1Retail Loan includes Auto Loans, Personal Loans, Home Loans, Consumer Loans, Business Loans, Loan Against Property, Gold Loan, Credit Cards, Agri, Commercial Vehicle and Construction Equipment Loans 2NBFCs includes HFCs 3Others include Co-operative banks, MNCs and Regional Rural banksSource: TransUnion CIBIL; BCG analysis

7%

13%

24%

56%

FY19

PSU Banks

NBFCs2

PrivateBanks

Others3

27%

27%

40%

PrivateBanks

PSU Banks

5%Others3

FY19

NBFCs2


to New to Credit Customers by volume (%)


to New to Credit Customers by value (%)

87.5%

12.5%

Known toBureau

FY19

New to Credit

Share of New Retail Loans1 by Customer type by volume (%)


30


NBFCs have captured a dominant share in loans to small business and home retail loans

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2Retail Business includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans 3NBFCs includes HFCs 4Others include Co-operative banks, MNCs and Regional Rural banksSource: TransUnion CIBIL; BCG analysis

10%

39% 38%19%

73%

39%

37%19%

32%

14%

26%

18%41% 42%

30%

6%

Private Banks

Retail Consumer1 Retail Home3%

Total RetailRetail Business2

7%Others4

4%

Retail Agri

6%

NBFCs3

PSU Banks

Share of Outstanding Retail Loans in FY 19 by value (%)

27% 13%38% 100%21%Share of Total Retail loans in

FY 19


31


While NPAs in retail home loans remain under control, retail business loans showing signs of stress; Agri loans still a segment under duress

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2Retail Business includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans Source: TransUnion CIBIL; BCG analysis

Y-o-Y Growth (%) GNPA (%)Retail Loan Products FY 18 FY 19 FY 17 FY 18 FY 19

33% 17%4.9% 5.3% 4.3%Retail Consumer1

20% 14% 1.7% 1.7% 1.7%Retail Home

34% 21%7.2% 7.3% 8.6%Retail Business2

14% 10% 12.5% 12.8% 17.5%Retail Agri

5.2% 5.3% 5.9%Retail Total 25% 16%


31


While NPAs in retail home loans remain under control, retail business loans showing signs of stress; Agri loans still a segment under duress

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2Retail Business includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans Source: TransUnion CIBIL; BCG analysis

Y-o-Y Growth (%) GNPA (%)Retail Loan Products FY 18 FY 19 FY 17 FY 18 FY 19

33% 17%4.9% 5.3% 4.3%Retail Consumer1

20% 14% 1.7% 1.7% 1.7%Retail Home

34% 21%7.2% 7.3% 8.6%Retail Business2

14% 10% 12.5% 12.8% 17.5%Retail Agri

5.2% 5.3% 5.9%Retail Total 25% 16%


32


City/Town

NBFCs captured almost 40% of share of new retail loans across geographies

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2Retail Business includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans 3NBFCs includes HFCs 4Others include Co-operative banks, MNCs and Regional Rural banksSource: TransUnion CIBIL; BCG analysis

10% 8% 11% 9% 9% 8%

11% 10%26% 24%

38% 35%

31% 31%

19% 21%

20% 20%

47% 51% 44% 47%33% 37%

FY18FY19 FY18FY18 FY19 FY19

NBFCs3 Private Banks PSU Banks Others4

Tier 1&2 Tier 3&4 Tier 5&6

11% 11% 10% 10%

22% 18%

32% 26%38%

28%

24% 27%

16%18%

13%16%

49% 51%40% 45% 38% 46%

5%

FY18

4%

FY18FY18 FY19FY19 FY19

31% 31%42% 42% 47% 47%

17% 18%11% 13% 9%

49% 49% 44% 42% 43% 40%

FY18 FY192%3%

FY18 FY19

4% 4%

7%

4%

FY18

4%

FY19

Retail Consumer1 Retail Business2Retail Home

Market share of New Retail Loans by Geography and by Volume (%)

Tier 1&2 Tier 3&4 Tier 5&6 Tier 1&2 Tier 3&4 Tier 5&6


33


Young India preferring Private-New banks and NBFCs for retail loans

1Retail Loan includes Auto Loans, Personal Loans, Home Loans, Consumer Loans, Business Loans, Loan Against Property, Gold Loan, Credit Cards, Agri, Commercial Vehicle and Construction Equipment Loans 2NBFCs includes HFCsSource: TransUnion CIBIL; BCG analysis

13%30% 30%

13%27%

23%

27% 29%

20%

30%

38%

30% 29%

39%

31%

26%13% 12%

28%12%

<29

30-39

40-49

Private-NewNBFCs2 PSU-MediumPSU-Large Private-Old

>50

Age of borrowers

Composition of New Retail Loans1 based on age of borrower in FY 19 by volume (%)


33


Young India preferring Private-New banks and NBFCs for retail loans

1Retail Loan includes Auto Loans, Personal Loans, Home Loans, Consumer Loans, Business Loans, Loan Against Property, Gold Loan, Credit Cards, Agri, Commercial Vehicle and Construction Equipment Loans 2NBFCs includes HFCsSource: TransUnion CIBIL; BCG analysis

13%30% 30%

13%27%

23%

27% 29%

20%

30%

38%

30% 29%

39%

31%

26%13% 12%

28%12%

<29

30-39

40-49

Private-NewNBFCs2 PSU-MediumPSU-Large Private-Old

>50

Age of borrowers

Composition of New Retail Loans1 based on age of borrower in FY 19 by volume (%)


34


Product leverage inching up as almost half of the loans are given to borrowers with two or more active loans

1Retail Loan includes Auto Loans, Personal Loans, Home Loans, Consumer Loans, Business Loans, Loan Against Property, Gold Loan, Credit Cards, Agri, Commercial Vehicle and Construction Equipment Loans 2NBFCs includes HFCsNote: 1. Count of loans excludes those loans which got closed before the new loan was sanctioned Source: TransUnion CIBIL; BCG analysis

Composition of New Retail Loans1 based on number of existing Active Loans of the Borrowers in FY 19 and by Volume (%)

No. of active loans

16% 19% 13% 15% 24% 24% 22% 24%37% 40%

37%39%

42% 44%41% 44% 42% 42%

36% 36%31%

30% 34% 31% 26% 25% 28% 25% 20% 18%16% 12% 12% 10% 10% 7% 9% 8% 8% 5%

FY19FY19 FY18FY18 FY18FY18 FY19 FY19 FY18 FY19

0 1 2-4 5+

NBFCs2 PSU-Large PSU-Medium Private-New Private-New


35


Retail Consumer Loans: Industry appears to have tightened lending standards leading to lower supply and slowdown in growth

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2Demand refers to unique enquiries made by a consumer and supply refers to number of new loans sanctioned 3NBFCs includes HFCsSource: TransUnion CIBIL; BCG analysis

New Retail Consumer Loans1 by Credit Score by Volume (%)

Demand2 vs supply2 of New Retail Consumer Loans

(Number of loans in Crore)

Retail Consumer Advances growth

Y-o-Y (%)

New to Credit

Knownto

Bureau

Private-NewNBFCs3

Private-Old

PSU-Large

PSU-Medium

Credit scores

22%

38%Demand growth

Supply growth

25%

16%

FY18 FY19

3%

3%

39%

17%

2%19%

2%17%2%

45%

37%

3%

45%

4%2%

40%

3%2%

3%17%

11%

4%

8%

7%

5%

38%35%54%

34%45%41%

50%

34%

47%

40%

58% 50%

39%49%

43%

-1 Below 650 650-750 750+

12.3

7.79.4

FY18 FY19

17.0

Demand Supply



35


Retail Consumer Loans: Industry appears to have tightened lending standards leading to lower supply and slowdown in growth

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans 2Demand refers to unique enquiries made by a consumer and supply refers to number of new loans sanctioned 3NBFCs includes HFCsSource: TransUnion CIBIL; BCG analysis

New Retail Consumer Loans1 by Credit Score by Volume (%)

Demand2 vs supply2 of New Retail Consumer Loans


Retail Consumer Advances growth

Y-o-Y (%)

New to Credit

Knownto

Bureau

Private-NewNBFCs3

Private-Old

PSU-Large

PSU-Medium

Credit scores

22%

38%Demand growth

Supply growth

25%

16%

FY18 FY19

3%

3%

39%

17%

2%19%

2%17%2%

45%

37%

3%

45%

4%2%

40%

3%2%

3%17%

11%

4%

8%

7%

5%

38%35%54%

34%45%41%

50%

34%

47%

40%

58% 50%

39%49%

43%

-1 Below 650 650-750 750+

12.3

7.79.4

FY18 FY19

17.0

Demand Supply



36


Tightening of norms has not led to improvement in profile of borrowers of small business loans, indicating business environment stress

1Retail Business includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans 2Demand refers to unique enquiries made by a consumer and supply refers to number of new loans sanctioned 3NBFCs includes HFCsSource: TransUnion CIBIL; BCG analysis

Demand2 vs supply2 of New Retail Business Loans


Retail Business Advances growth

Y-o-Y (%)

Credit scores

34%

21%

FY18 FY19

8%

18% 18% 12% 8% 16% 20%

2%8%

5%6%

42%

6%

46%

16% 7%7%

42%

6%

16%3%

19%

30%

44%

27%

18%

42%

39%

39%

40%

42%

35%36% 36%

47%

40%

45%

29%

48%

31%

650-750-1 750+Below 650

1.2

1.5

0.5 0.5

FY18 FY19

Demand Supply

6%

29%

Demand growth

Supply growth

New to Credit

Knownto

Bureau

Private-NewNBFCs3

Private-Old

PSU-Large

PSU-Medium



New Retail Business Loans1 by Credit Score by Volume (%)

37


Gujarat and Andhra Pradesh growing rapidly in retail loans; Maharashtra and Punjab reeling under high NPAs

1Retail Loan includes Auto Loans, Personal Loans, Home Loans, Consumer Loans, Business Loans, Loan Against Property, Gold Loan, Credit Cards, Agri, Commercial Vehicle and Construction Equipment Loans Note: 1. Quadrants defined based on Industry averageSource: TransUnion CIBIL; BCG analysis

205

8

3025 350

10

12

2

4

6

GNPA (FY19) (%)

Meghalaya

Advances growth (2year CAGR FY17-FY19)

Andhra Pradesh Arunachal Pradesh

Assam

Bihar

ChattisgarhGoa

GujaratHaryana

Himachal PradeshJharkhandKarnataka

Uttarakhand

Madhya Pradesh

Maharashtra

Manipur

MizoramNagaland

Odisha

Punjab

Kerala

Sikkim

TamilNadu

Telangana

Tripura

Uttar Pradesh

West Bengal

Rajasthan

Retail Loans1 by Geography: Advances vs GNPA



37


Gujarat and Andhra Pradesh growing rapidly in retail loans; Maharashtra and Punjab reeling under high NPAs

1Retail Loan includes Auto Loans, Personal Loans, Home Loans, Consumer Loans, Business Loans, Loan Against Property, Gold Loan, Credit Cards, Agri, Commercial Vehicle and Construction Equipment Loans Note: 1. Quadrants defined based on Industry averageSource: TransUnion CIBIL; BCG analysis

205

8

3025 350

10

12

2

4

6

GNPA (FY19) (%)

Meghalaya


Andhra Pradesh Arunachal Pradesh

Assam

Bihar

ChattisgarhGoa

GujaratHaryana

Himachal PradeshJharkhandKarnataka

Uttarakhand

Madhya Pradesh

Maharashtra

Manipur

MizoramNagaland

Odisha

Punjab

Kerala

Sikkim

TamilNadu

Telangana

Tripura

Uttar Pradesh

West Bengal

Rajasthan

Retail Loans1 by Geography: Advances vs GNPA



MSME Advances

39


Loans to medium sized enterprises growing fastest within MSME with PSU-Large banks leading the way

1MSME Advances does not include CV/CE loansNotes: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 2 Private-New banks and 7 Private-Old banks included for the purpose of this analysis 2. Total may not sum to 100 because of differences due to rounding offSource: FIBAC Productivity Survey 2019; BCG analysis

15% 12% 13% 14% 14%

42% 42%52% 49% 43%

43% 46%34% 37% 43%

IndustryPSU-Large

PSU-Medium

Private-Old

Private-New

Medium

Micro

Small

Total MSME Advances1 forFY 19 (%)

PSU-Large

PSU-Medium

Private-New


Micro 1% 4% -8% 4% 1%

Small -2% -5% -7% 13% -2%

Medium 15% -16% -4% 4% 4%

Growth in MSME Advances1



39


Loans to medium sized enterprises growing fastest within MSME with PSU-Large banks leading the way

1MSME Advances does not include CV/CE loansNotes: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 2 Private-New banks and 7 Private-Old banks included for the purpose of this analysis 2. Total may not sum to 100 because of differences due to rounding offSource: FIBAC Productivity Survey 2019; BCG analysis

15% 12% 13% 14% 14%

42% 42%52% 49% 43%

43% 46%34% 37% 43%

IndustryPSU-Large

PSU-Medium

Private-Old

Private-New

Medium

Micro

Small

Total MSME Advances1 forFY 19 (%)

PSU-Large

PSU-Medium

Private-New


Micro 1% 4% -8% 4% 1%

Small -2% -5% -7% 13% -2%

Medium 15% -16% -4% 4% 4%

Growth in MSME Advances1



40


Within MSME lending, loans with ticket size between INR 10 lacs to 10 crores emerging as the sweet spot for lenders

1MSME loans includes loans less than INR 50 crores (data from CIBIL Commercial Bureau)Source: TransUnion CIBIL; BCG analysis

35%10%

23% 16%

28%14%

1%22%

14.7% 16.4% 18.3%

10.0% 11.3% 11.1%

11.4% 11.8% 11.1%

15.2% 16.1% 15.6%

Y-o-Y Growth (%) GNPA (%)MSME1 (by ticket size) FY 18 FY 19 FY 17 FY 18 FY 19

<10 Lacs

10 Lacs-1 Crore

1 Crore-10 Crore

10 Crore-50 Crore


9%25% 12.7% 13.5% 13%MSME Total

41


In MSME advances, states in southern India performing better on risk management and have high advances growth

1MSME loans includes loans less than INR 50 crores (data from CIBIL Commercial Bureau)Note: 1. Quadrants defined based on Industry averageSource: TransUnion CIBIL; BCG analysis

25

30

15

150 20 250

10

Jharkhand

Rajasthan

Assam

Goa

Tripura

MeghalayaArunachal Pradesh

Manipur

Nagaland

SikkimMizoram

Jammu & Kashmir

West Bengal

Telangana

GNPA (FY19) (%)

AndhraPradeshChattisgarh

Gujarat

Bihar

Punjab

UttarPradesh Haryana

Uttarakhand

MaharashtraOdisha

Kerala

TamilNadu


KarnatakaMadhyaPradesh

HimahcalPradesh


MSME Loans1 by Geography: Advances vs GNPA


42


Sharp reduction in MSME credit by PSU banks due to high NPAs

1MSME loans includes loans less than INR 50 crores (data from CIBIL Commercial Bureau) 2Retail Business loans include Business loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans 3NBFCs includes HFCs 4Industry includes Co-operative banks, MNCs and Regional Rural banks as wellSource: TransUnion CIBIL; BCG analysis

-3-100

1020304050

NBFCs3

Growth (%)

Private banks

PSU banks

25%

9%

41%

16%

40%27%

13%

0

20

40

60

Growth (%)

45%

NBFCs3 Private banks

PSU banks

34%

7%21%

26% 26% 27%40%

0

10

20

30

Private-Old

14%

Private-New

GNPA (%)

NBFCs3 PSU-Large

5%

PSU-Medium

20%

13%3% 3% 5% 6% 8%

20% 21%25%

0

10

20

30

GNPA (%)

Private-New

NBFCs3

9%

Private-Old

PSU-Large

10%

PSU-Medium

8%13%

7%1% 1%

20%

5% 5%

19%24%

FY 18 FY 19 FY 19 Industry4 Average FY 18 Industry Average


MSMELoans1

Retail BusinessLoans2

FEE INCOME

44


Recovery income driving up share of fee income for the industry; Retail fee a driving factor for Private-New banks

1Fee Income is calculated as sum of commission, exchange and brokerage, forex income and miscellaneous income 2Total Income is calculated as sum of net interest income and other incomeNote: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 7 Private-Old banks included for the purpose of this analysisSource: RBI data; Capitaline data; BCG analysis

30

20

25

0

29%

FY 19

22%

22%

25%

21%

24%

22%

20%

Private-New

23%

(%)

PSU-Large

22%

18%

29%

20%

FY 15

27%27%

FY 16

21%

20%

25%

18%

FY 17

25%

FY 18

26%

25%

27%

PSU-Medium

Private-Old

Industry1.4

0.8

0.0

1.6

(%)

0.6%

0.8%

FY 15

PSU-Medium0.8%

0.8%

0.6%

1.5%

Private-Old

0.8%

0.9%

FY 16

1.5%

0.9%

0.7% 0.8%

0.6%

PSU-Large0.8%

FY 17

0.7%

1.4%

0.9%

1.4%

FY 19

Industry

Private-New

FY 18

1.6%

1.0%

Fee Income1/Total Income2 (%) Fee Income1/Average Assets (%)

45


Private-New banks continued to be twice as efficient in cross selling fee products to savings account customers than industry; overall efficiency declined marginally

1Retail commission includes commission on insurance business, brokerage on distribution of mutual funds, income from merchants through POS transactions, and other retail commission (Demat, Gold ETF etc) Note: 1. Data of 6 PSU-Large banks, 9 PSU-Medium banks, 4 Private-New banks and 7 Private-Old banks included for the purpose of this analysis 2. bps = basis points; 100 bps = 1%Source: FIBAC Productivity Survey 2019; BCG analysis

1.01%

0.38%0.28% 0.41%

0.97%

0.26% 0.13% 0.14%0.50% 0.39%

-2 bps+1 bps

-4 bps

-12 bps -2 bps

FY 18 FY 19

3% 22% 6% -13% 5%

PSU-Large PSU-Medium Private-OldPrivate-New Industry

Retail Commission1 by Total Savings Account Deposits (%)

8% 8% 11% 14% 9%

Growth in Retail commission

FY 19 on FY 18 (%)

Growth in Savings bank balance

FY 19 on FY 18 (%)

46


Third party sales driven by Life Insurance followed by Mutual Funds; Private-Old banks well behind peers in Mutual Fund sales

Note: 1. Data of 6 PSU-Large banks, 9 PSU-Medium banks, 3 Private-New banks and 5 Private-Old banks included for the purpose of this analysis2. Total may not sum to 100 because of differences due to rounding offSource: FIBAC Productivity Survey 2019; BCG analysis

Retail Commission as a % of Total Fee Income

Composition of Retail Commission (%)

Life Insurance 60% 34% 64% 78% 61%

General Insurance

Mutual Funds

16% 56% 6% 18% 13%

24% 11% 30% 4% 26%

PSU-Large

PSU-Medium

Private-New


Bank type

Share of Retail Commission in Total

Fee Income (%)

PSU-Large 4%

PSU-Medium 2%

Private-New 7%

Private-Old 3%

Industry 5%

47


Processing charges as a percentage of advances fell marginally across the board

Note: 1. Data of 5 PSU-Large banks, 12 PSU-Medium banks, 4 Private-New banks and 7 Private-Old banks included for the purpose of this analysis2. bps = basis points; 100 bps = 1%Source: FIBAC Productivity Survey 2019; RBI data; BCG analysis

Growth in Processing charges FY 19 on FY 18 (%)

4% -16% 10% 4% 3%

Growth in Total Advances

FY 19 on FY 18 (%)12% 3% 19% 13% 12%

0.17% 0.20%0.16%0.16% 0.13%

0.31%0.19%

0.29%0.20% 0.19%

-1 bps -3 bps

-2 bps

-1 bps -1 bps

FY 18 FY 19


Processing Charges by Total Advances (%)

48


Processing charges balanced between Corporate and Retail for Private-New banks; PSU banks focus on Corporate while subsidizing MSME and Retail


Composition of Processing Charges on Advances (%)

Bank type

Share of Processing Charges in Total Fee

Income (%)

PSU-Large 8%

PSU-Medium 9%

Private-New 11%

Private-Old 11%

Industry 10%

Corporate Advances 88% 57% 51% 56% 59%

MSMEAdvances

Retail Advances

10% 23% 3% 30% 9%

2% 20% 46% 14% 32%

Processing Charges as a % of Total Fee Income

PSU-Large

PSU-Medium

Private-New


49


Fee from non-fund based lending witnessed a slight decline even as Private-New banks marginally strengthen their position

1Commercial commission includes commission on inland LC, commission on inland guarantee, commission on import LC established/export LC advised or confirmed, commission on foreign guarantee issued, commission on inland bills/cheques for collection/purchased and commission on foreign bills/cheques for collection/purchased Note: 1. Data of 6 PSU-Large banks, 12 PSU-Medium banks, 3 Private-New banks and 7 Private-Old banks included for the purpose of this analysis 2. bps = basis points; 100 bps = 1%Source: FIBAC Productivity Survey 2019; BCG analysis

Growth in Commercial Commission

FY 19 on FY 18 (%)14% -14% 12% -3% 6%

Commercial Commission1 by Total Corporate and SME Advances (%)

Growth in Total Corp and SME Advances FY 19 on FY 18 (%)

10% 1% 4% 9% 7%

0.46%0.32% 0.28% 0.20%

0.33%0.33%0.18%

0.49%0.33% 0.33%

+1 bps -5 bps

+3 bps

-2 bps

0 bps

FY 18 FY 19


50


Forex income as a percentage of commercial advances fell across most bank categories

Notes: 1. Data of 5 PSU-Large banks, 11 PSU-Medium banks, 4 Private-New banks and 7 Private-Old banks included for the purpose of this analysis2. bps = basis points; 100 bps = 1%Source: FIBAC Productivity Survey 2019; RBI data; BCG analysis

Growth in Forex Income FY 19 on

FY 18 (%)-20% -6% 11% 14% -5%

Forex Income by Total Corporate and SME Advances (%)

0.22%0.21%0.25%0.34% 0.29%

0.66%

0.26%

0.64%

0.39% 0.34%

-9 bps-3 bps

-2 bps

+1 bps

-5 bps

FY 18 FY 19


52


Improvement in asset quality seen across all asset classes except Agri loans; turnaround in MSME and corporate NPA trend clearly evident

1Private vehicle includes two wheeler and four wheeler vehicles 2MSME includes data for MSMEs, construction equipment and commercial vehicles 3Corporate advances includes mid corporate and large corporate advancesNote: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 3 Private-New banks and 7 Private-Old banks included for the purpose of this analysis Source: FIBAC Productivity Survey 2019; FIBAC Productivity Survey 2018; BCG analysis

Private Vehicle1 Agriculture Corporate3MSME2

PSU-Large

PSU-Medium

Private-Old

Private-New

HomeBank type

1.5% 1.9% 10.1% 12.0% 23.7%

2.6% 3.4% 7.3% 14.8% 33.5%

1.0% 1.0% 3.4% 2.5% 5.9%

1.5% 1.1% 2.4% 4.9% 10.0%

1.6% 1.6% 8.1% 10.8% 22.8%

1.3% 1.6% 10.6% 15.3%11.6%

2.4% 3.1% 10.4% 29.8%12.8%

0.8% 1.0% 4.3% 4.5%2.3%

1.3% 1.1% 3.1% 10.1%5.8%

Industry1.4% 1.5% 9.4% 16.5%10.1%

X% Y%

X = Gross NPA (%) in FY 18Y = Gross NPA (%) in FY 19

Change in Gross NPA (%) in basis points

Heat Map indicating Change in Gross NPA (%)

Greater than 100

Between 0 and 100

Between -1 and -100

Less than -100

All participant banks in FIBAC

NON-PERFORMING ASSETS

52


Improvement in asset quality seen across all asset classes except Agri loans; turnaround in MSME and corporate NPA trend clearly evident

1Private vehicle includes two wheeler and four wheeler vehicles 2MSME includes data for MSMEs, construction equipment and commercial vehicles 3Corporate advances includes mid corporate and large corporate advancesNote: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 3 Private-New banks and 7 Private-Old banks included for the purpose of this analysis Source: FIBAC Productivity Survey 2019; FIBAC Productivity Survey 2018; BCG analysis

Private Vehicle1 Agriculture Corporate3MSME2

PSU-Large

PSU-Medium

Private-Old

Private-New

HomeBank type

1.5% 1.9% 10.1% 12.0% 23.7%

2.6% 3.4% 7.3% 14.8% 33.5%

1.0% 1.0% 3.4% 2.5% 5.9%

1.5% 1.1% 2.4% 4.9% 10.0%

1.6% 1.6% 8.1% 10.8% 22.8%

1.3% 1.6% 10.6% 15.3%11.6%

2.4% 3.1% 10.4% 29.8%12.8%

0.8% 1.0% 4.3% 4.5%2.3%

1.3% 1.1% 3.1% 10.1%5.8%

Industry1.4% 1.5% 9.4% 16.5%10.1%

X% Y%

X = Gross NPA (%) in FY 18Y = Gross NPA (%) in FY 19

Change in Gross NPA (%) in basis points

Heat Map indicating Change in Gross NPA (%)

Greater than 100

Between 0 and 100

Between -1 and -100

Less than -100

All participant banks in FIBAC

53


Marked improvement seen in asset quality across all retail consumer loans

1Retail Consumer includes Auto Loans, Personal Loans, Consumer Loans, Credit cards and Gold 2NBFCs includes HFCs 3Industry includes NBFCs, HFCs, Private banks, PSU banks, Co-operative banks, MNCs and Regional Rural banks Source: TransUnion CIBIL; BCG analysis

2.8

2

0

4

14

12

10

FY19

3.6%

1.5%

12.0%

9.8%

3.9%3.3%

FY17

3.0%

13.4%

9.5%

1.6%

8.4%

FY18

10.5%

2.7%

1.2%

%

GNPA: Retail Consumer1

Loans (%)GNPA: Retail Consumer Loans by

Product type (%)

0

4

13

5

8

FY19

4.6%5.2%

7.5%

3.6%

4.9%

FY17

4.4%

4.2%

3.5%

12.3%

5.3%

%

4.4%

3.5%

3.2%

4.3%4.1%

8.1%

5.3%

3.0%

FY18

PSU-LargeNBFCs2 PSU-MediumPrivate-New

Private-OldIndustry3

GoldAutoConsumer Durable

Personal UnsecuredCredit Card


54


Stress in CV/CE and LAP segments hurting smaller banks and NBFCs; PSU banks' NPAs in small business lending at unsustainable levels

1Retail Business loans include Business loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans 2NBFCs includes HFCs 3Industry includes NBFCs, HFCs, Private banks, PSU banks, Co-operative banks, MNCs and Regional Rural banks Source: TransUnion CIBIL; BCG analysis

0

5

10

15

FY19

LAP3.0%

CE & CV

5.5%

%

13.0%

7.6%

2.6%

FY17

14.0%

FY18

14.0%

9.7%

3.4%

Unsecured Business

GNPA: Retail Business1

Loans (%)GNPA: Retail Business Loans by

Product type (%)

5

25

0

6.1%4.8%

FY18

1.4%

8.2%

24.4%

PSU-Large

NBFCs2

19.3%

1.1%

20.3%

4.5%

7.3%

13.3%

8.6%

FY19

Private-Old

PSU-Medium

Industry3

19.0%

FY17

14.5%

1.4%

7.2%

Private-New

5.0%

%

7.7%


55


Home loans continue to be the safest asset class in retail loans with home loan NPAs further improving in FY19; Agriculture retail loans showing higher NPA across the board

1NBFCs includes HFCs 2Industry includes NBFCs, HFCs, Private banks, PSU banks, Co-operative banks, MNCs and Regional Rural banks Source: TransUnion CIBIL; BCG analysis

0

30

10

20

15

9.0%

15.7%

11.1%

%

FY17

7.7%

Private-Old

16.5%

FY19

14.6%

Industry2

7.9%9.8%

20.3%

16.1%

27.1%

12.5%

PSU-Large

Private-New

PSU-Medium19.6%

12.5%

17.5%

FY18

12.8%

8.2%NBFCs1

GNPA: Retail Home Loans (%) GNPA: Retail Agri Loans (%)

0.0

1.5

2.0

4.0

1.4%

PSU-Medium

FY17

3.7%

1.8%

0.6%

3.9%

1.4%

1.7%

0.6%

1.7%

FY19FY18

1.7%

Industry2

Private-New

NBFCs1

Private-Old

PSU-Large1.5%

2.0%

0.5%

1.6%

%

2.0%

3.9%


56


While Private New banks and NBFCs sustained their NPA levels in MSME, rest of the industry saw a major increase; PSU banks at unsustainable levels

1MSME loans includes loans less than INR 50 crores (data from CIBIL Commercial Bureau) 2NBFCs includes HFCs 3Industry includes NBFCs, HFCs, Private banks, PSU banks, Co-operative banks, MNCs and Regional Rural banks Source: TransUnion CIBIL; BCG analysis

14

0

12

16

20

16.4%

1-10Cr

10-50Cr

14.7%

11.4%

15.2%

FY17

11.3%

11.8%

FY18

18.3%

11.1%

15.6%16.1%

<10L

10.0%

10L-1Cr

%

FY19

GNPA: MSME Loans1

(%)GNPA: MSME Loans by Ticket size in

INR (%)

0

5

25

Private-Old

5.2%

%

5.7%

8.0%

4.2%

19.6%

6.4%

19.9%

FY17

5.2%

3.3%

13.5%

FY18

2.7%

20.2%

24.6%

Private-New

FY19

NBFCs2

PSU-LargePSU-Medium

13.0%12.7%

5.9%

20.5%

14.5%Industry3

Private-New banks & NBFCsoperate majorly in this bracket


TRADITIONAL CHANNELS

58


Banking industry invested in self-service machines across the board; number of ATMs declined for all bank categories

Note: 1. Data of 5 PSU-Large banks, 7 PSU-Medium banks, 2 Private-New banks and 5 Private-Old banks included for the purpose of this analysis Sources: FIBAC Productivity Survey 2019; RBI data; BCG analysis

POS terminalsCash deposit

machines

Cheque deposit

machinesPassbook printers

Self servicekiosks

PSU-Large

PSU-Medium

Private-Old

Private-New

ATMsBank type

2.04 13.8 0.28 0.12 0.54 0.13

1.08 10.0 0.15 0.04 0.20 0.06

2.88 87.7 0.26 0.03 0.05 0.21

1.61 13.1 0.33 0.12 0.18 0.07

1.86 22.5 0.24 0.09 0.37 0.13

1.97 16.7 0.28 0.12 0.61 0.12

1.02 10.8 0.20 0.09 0.27 0.06

2.73 91.1 0.44 0.05 0.07 0.24

1.51 14.6 0.40 0.17 0.19 0.05

Industry1.78 26.2 0.29 0.11 0.43 0.13

X Y

X = FY 18

Y = FY 19

Growth in FY 19 over FY 18

Self Service Machines per Branch

Growth less than or equal to 0%

Growth greater than 0% and less than 25%

Growth greater than or equal to 25%

59


Led by PSU banks, branch growth in India almost coming to a halt

1Private-New-Small banks are considered based on total assets less than INR 5 billion as on 31 March 2019Note: 1. Data of 5 PSU-Large banks, 12 PSU-Medium banks, 3 Private-New-Large banks, 6 Private-New-Small banks and 10 Private-Old banks included for the purpose of this analysisSource: RBI Data; BCG analysis

362

72105 69

1,1591,141

59

1,023

65

Private-OldPrivate-New-Small1

89

PSU-Medium Private-New-Large

Industry

340515489

PSU-Large

29139

362

128

499

+3% -2%

+3% 0%

+10%

+4%

+58%

+11%

+4% +4%

+6% +1%

Total Number of Branches ('00s)

FY 15 FY 17 FY 19x% Represents CAGR for 2 years

60


PSU banks rationalizing branch footprint across geographies

1Private-New-Small banks are considered based on total assets less than INR 5 billion as on 31 March 2019Note: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 3 Private-New-Large banks, 6 Private-New-Small banks and 10 Private-Old banks included for the purpose of this analysis 2. Total may not sum to 100 because of differences due to rounding offSource: RBI Data; BCG analysis

Branch Distribution by Geographyfor FY 19 (%)

34% 31%19% 25% 20%

29%27%

31%28% 38%

18%21%

21% 21%20%

19% 22% 29% 25% 22%

PSU-Medium

PSU-Large

Rural

Private-New-Large

Metro

Private-New-Small1

Private-Old

Semi-Urban

Urban

PSU-Large

PSU-Medium

Private-New-Large

Private-New-

Small1Private-

Old Industry

Metro -1% -1% 5% 17% 2% 2%

Urban -1% 0% 4% 12% 2% 1%

Semi-Urban -1% 0% 5% 10% 2% 1%

Rural 0% 0% 3% 6% 3% 1%

Total -1% 0% 5% 11% 2% 1%

Growth in Number of BranchesFY 19 over FY 18 (%)

61


Decline in number of ATMs deployed across the country; PSU banks leading ATM consolidation

Note: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: RBI Data; BCG analysis

PSU-Large

35

Industry

187193195

Private-Old

111010

Private-New

4243

103

423737

99106

PSU-Medium

-3% -4%

0% -4%+1% -2%

+4% +3%

-1% -3%

Number of ATMs ('000)

FY 18FY 17 FY 19

62


Clear push towards driving ATM profitability; financial transactions on the rise

Note: 1. No. of days has been taken as 365 for the year 2. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: RBI data; BCG analysis

Financial Transactions per ATM per Day

145 17497 112

71 81 80 93 116 136

+20%

+15%+15% +17%

+18%

FY 18 FY 19

PSU-Large PSU-Medium Private-OldPrivate-New IndustryGrowth in Financialtransactions for FY

19 over FY 18 (%)

Growth in No. of ATMs for FY 19 over

FY 18 (%)

15%

-4%

10%

-4%

13%

-2%

20%

3%

14%

-3%

63


Relocation and rationalization of ATMs leading to higher own ATM hits

Note: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 3 Private-New banks and 6 Private-Old banks included for the purpose of this analysis Source: FIBAC Productivity Survey 2019; FIBAC Productivity Survey 2018; BCG analysis

Share of Hits on Own and Other ATMs by Own Customers (%)

60%42% 46%

62%74%

51% 56%35%

58%47%

40%58% 54%

38%26%

49% 44%65%

42%53%

FY19FY19 FY18FY19FY19FY18 FY18 FY18 FY18 FY19

Hits on own ATMs

Hits on other ATMs

PSU-Large PSU-Medium Private-New Private-Old Industry

64


PSU-Large and Private-Old banks driving POS penetration in rural and semi-urban areas

Note: 1. Data of 6 PSU-Large banks, 11 PSU-Medium banks, 2 Private-New banks and 8 Private-Old banks included for the purpose of this analysis2. Total may not sum to 100 because of differences due to rounding offSource: FIBAC Productivity Survey 2019; BCG analysis

POS Terminal Distribution by Geography (%)

25%13%

19%

7%

28% 14%

13%

9%21%

27%15%

42%

83%71%

40%58%

Rural

PSU-Large

6% 6%3%

Private-NewPSU-Medium

1%

IndustryPrivate-Old

Metro

Urban

Semi-Urban

65


With improved automation, almost half of all calls by customers to banks' contact centers now resolved on IVR

1Account includes all CASA and Retail loan accountsNote: 1. Data of 6 PSU-Large banks, 8 PSU-Medium banks, 3 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Private-New

Private-Old

PSU-Large

PSU-Medium

Industry

59%

39%

28%

57%

46%

% Calls Truncated on IVR: Calls Truncated/Total Inbound calls (FY 19)

Industry

5%

PSU-Medium

PSU-Large

3%

Private-New

Private-Old

7%

13%

6%

% Calls Dropped:Calls Dropped/Total Inbound calls (FY 19)

0.3 0.1

1.6

0.3 0.4

IndustryPSU-Large

PSU-Medium

Private-New

Private-Old

Inbound calls per account1

per year (FY 19)

DIGITAL CHANNELS

68


Almost two-thirds of all banking financial transactions are now digital with UPI, mobile and internet banking leading the way

1Internet transactions include RTGS, ECS, NEFT and IMPS financial transactions 2ATM and Mobile transactions included are financial transactions onlyNote: 1. Data of 5 PSU-Large banks, 10 PSU-Medium banks, 3 Private-New banks and 6 Private-Old banks included for the purpose of this analysis2. Total may not sum to 100 because of differences due to rounding offSource: RBI data; BCG analysis

Breakdown of Total Financial Transactions (%)

42%35%

26%

9%

16%

17%

15%

10%10%

8%

11%13%

11%

8%

17%

14%5%

NEFT

0%

FY17

6%

5%

4%

Mobilebanking

2%

3%6%

FY18

1%4%

FY19

UPI

ATM

Internetbanking

ChequePOSNACH

Cash1%

Growth in Total Financial Transactions (%)

FY 18 on FY 17 FY 19 on FY 18Internet banking1 37% 36%

Mobile banking2 92% 231%

UPI 5024% 485%

NACH (non-branch) 22% 21%

POS 35% 34%

Total Digital Channels 49% 94%

Cheque 2% -2%

Cash -13% 7%

NEFT (at branch) 4% 9%

Total Branch Based -6% 5%

ATM2 0% 15%20 24 37

Total number of

transactions (bn)

69


Rural and Semi-Urban area well behind metro and urban in digital adoption by savings accounts

1Accounts active on Mobile Banking and Internet Banking defined as accounts with at least 1 login to Mobile Banking or Internet Banking in the last 6 months (as of 31 March 2019) 2Financially active on a channel defined as at least 1 user initiated financial transaction in last 6 months (as of 31 March 2019) Note: 1. Data of 5 PSU-Large banks, 11 PSU-Medium banks, 3 Private-New banks and 6 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Percentage of Savings Account active1

on Mobile Banking (FY 19)Percentage of Savings Account Financially

active2 on Mobile Banking (FY 19)

Percentage of Savings Account active1 on Internet Banking (FY 19)

Percentage of Savings Account Financially active2 on Internet Banking (FY 19)

Metro Urban Semi-Urban

5%29%

Rural

19% 12%

Metro

3%

Urban

13%

Semi-Urban

5%

Rural

8%

7%

Metro Urban Semi-Urban Rural

40%16%27% 15%


8% 5% 2%

70


Almost one in five savings account holders uses debit card at POS; wide variation seen across bank categories and geographies

1Active account defined as an account with at least 1 user initiated transaction in the last 6 months (as of 31 March 2019)Note: 1. Data of 6 PSU-Large banks, 12 PSU-Medium banks, 3 Private-New banks and 6 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Percentage of active Savings Account1

that use Debit card at ATMs (FY 19)Percentage of active Savings Account1

that use Debit card at POS (FY 19)


that use Debit card at ATMs (FY 19)Percentage of active Savings Account1

that use Debit card at POS (FY 19)

36%43%

Private-OldPSU-Large

PSU-Medium

Industry

57%

Private-New

47% 42% 46%

PSU-Large

PSU-Medium

Private-OldPrivate-New

Industry

14%18% 20% 19%

Metro Semi-UrbanUrban

31%

Rural

52% 42%49%24%


32%11%16%

71


Most states in southern India leading in usage of debit cards at POS terminals

1Active account defined as an account with at least 1 user initiated transaction in the last 6 months (as of 31 March 2019) Note: 1. Data of 5 PSU-Large banks, 10 PSU-Medium banks, 3 Private-New banks and 7 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis


that use Debit card at POS (FY 19)Percentage of active Savings Account1

that use Debit card at ATMs (FY 19)

Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkand

Karnataka

Tamil Nadu

Puducherry

KeralaLakshadweep

Maharashtra


ManipurMizoram

NagalandSikkim

Tripura

Orissa

West Bengal


Meghalaya


Delhi


Daman and Diu

Telangana

Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkand

Karnataka

Tamil Nadu


Maharashtra


ManipurMizoram

NagalandSikkim

Tripura

Orissa

West Bengal


Meghalaya


Delhi


Daman and Diu

Telangana

Quartile 2: Penetration between 41% and 45%

Quartile 4: Penetration < 35%Quartile 3: Penetration between 35% and 40%Quartile 1: Penetration > 45%




72


While states in southern India lead in internet banking penetration, states in eastern India lead in mobile penetration

1Financially active on a channel defined as at least 1 user initiated financial transaction in last 6 months (as of 31 March 2019)Note: 1. Data of 5 PSU-Large banks, 10 PSU-Medium banks, 3 Private-New banks and 7 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Percentage of Savings Account Financiallyactive1 on Mobile Banking (FY 19)

Percentage of Savings Account Financiallyactive1 on Internet Banking (FY 19)


Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkand

Karnataka

Tamil Nadu

Puducherry

KeralaLakshadweep

Maharashtra


ManipurMizoram

NagalandSikkim

Tripura

Orissa

West Bengal


Meghalaya


Delhi


Daman and Diu

Telangana





Madhya Pradesh

Andhra Pradesh

Arunachal Pradesh

AssamBihar

Chhattisgarh

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkand

Karnataka

Tamil Nadu


Maharashtra


ManipurMizoram

Nagaland

Tripura

Orissa

West Bengal



Delhi


Daman and Diu

Telangana

Meghalaya

Sikkim

73


Digital activation of current accounts in rural is half of that in metros

1Accounts active on Mobile Banking and Internet Banking defined as accounts with at least 1 login to Mobile Banking or Internet Banking in the last 6 months (as of 31 March 2019), 2Financially active on a channel defined as at least 1 user initiated financial transaction in last 6 months (as of 31 March 2019) Note: 1. Data of 4 PSU-Large banks, 10 PSU-Medium banks, 2 Private-New banks and 5 Private-Old banks for mobile banking 2. Data of 5 PSU-Large banks, 11 PSU-Medium banks, 2 Private-New banks and 8 Private-Old banks for internet banking included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Percentage of Current Accounts active1 on Mobile Banking (FY 19)

Percentage of Current Accounts Financially active2 on Mobile Banking (FY 19)

Percentage of Current Accountsactive1 on Internet Banking (FY 19)

Percentage of Current Accounts Financially active2 on Internet Banking (FY 19)

Metro

21%

Semi-UrbanUrban

28%

Rural

29% 29%

Metro

13%

Urban Semi-Urban Rural

18% 16% 17%

24%35%45%

Metro Urban RuralSemi-Urban

54%

20%

Metro

23%

RuralUrban Semi-Urban

28% 15%

74


Current account customers preferring internet banking over mobile banking

1Accounts active on Mobile Banking and Internet Banking defined as accounts with at least 1 login to Mobile Banking or Internet Banking in the last 6 months (as of 31 March 2019), 2Financially active on a channel defined as at least 1 user initiated financial transaction in last 6 months (as of 31 March 2019) Note: 1. Data of 4 PSU-Large banks, 11 PSU-Medium banks, 2 Private-New banks and 5 Private-Old banks for mobile banking 2. Data of 5 PSU-Large banks, 12 PSU-Medium banks, 2 Private-New banks and 8 Private-Old banks for internet banking included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Percentage of Current Accounts active1 on Mobile Banking (FY 19)

Percentage of Current Accounts Financially active2 on Mobile Banking (FY 19)

Percentage of Current Accounts active1 on Internet Banking (FY 19)

Percentage of Current Accounts Financially active2 on Internet Banking (FY 19)

PSU-Medium

IndustryPSU-Large

21%

Private-New

31%

Private-Old

21% 24% 20% 12%

IndustryPSU-Large Private-New

PSU-Medium

Private-Old

8%22% 19% 12%

66%

PSU-Large

31%

PSU-Medium

Private-New


20%41% 32%

Private-Old IndustryPSU-Large PSU-Medium

Private-New

10%34%22% 18% 18%

75


Almost one in four personal loans in India sold digitally

1Digital channels include UPI, mobile banking, internet banking, NACH and POS 2Physical channels include cheque, cash, NEFT (at branch) and ATMNote: 1. Data of 2 PSU-Large banks, 8 PSU-Medium banks, 3 Private-New banks and 6 Private-Old banks included for the purpose of this analysis Sources: FIBAC Productivity Survey 2019; RBI data; BCG analysis

82%98%

55% 62%73%

18%

45% 38%27%

DigitalChannels1

PSU-MediumPSU-Large

2%

IndustryPrivate-New Private-Old

PhysicalChannels2

Split of Personal Loans sold by banks in India in FY 19 (%)

ORGANIZATION DESIGN

78


PSU banks have reduced total headcount, while Private banks continue to hire

1FTE: Full time employeesNote: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: Capitaline data; Company financials; BCG analysis

Private-NewPSU-Large

547

Private-OldPSU-Medium

285540

288528

277 255 265 28956 59

Industry

1,146 1,149 1,154

60

-1.2%

-2.1%

-1.1%

-2.9%

+3.9%

+8.8%

+5.3%

+2.0%

+0.3%

+0.4%

FY 17 FY 19FY 18

Total FTEs1 in Indian Banking Industry (in '000)

79


10.1 10.3 10.6

12.9

7.07.4

7.88.2

9.1 9.1

10.68.9

9.4

6

8

10

12

14

9.9

FY15

PSU-Large

INR Lacs

FY18

8.6

Private-Old9.8

6.5

10.3

7.9

FY16

9.7

FY17

11.2

7.5

11.0

FY19

PSU-Medium

Private-New

Industry

Cost per employee highest in PSU-large banks and growing faster than revenue per employee; Private-new banks have contained cost per employee

1Revenue is calculated as sum of net interest income and other incomeNote: 1. Data of 6 PSU-Large banks, 13 PSU-Medium banks, 4 Private-New banks and 8 Private-Old banks included for the purpose of this analysisSource: Capitaline data; Company financials; BCG analysis

0

45

55

35

50

25

30

40

Private-New

36

27

33

44

3734

PSU-Large

30

INR Lacs

50

42

3433

FY16FY15

43

46

55

39

33

40

32

FY17

52

35

41

28

35

FY19

Private-OldPSU-Medium

30

Industry

FY18

Total Revenue1/Total Employees (INR Lacs)

Employee Cost/Total Employees (INR Lacs)

80


Digitization, automation and newer branch formats resulting in lower branch staff per branch across all geographies

Note: 1. Data of 5 PSU-Large banks, 10 PSU-Medium banks, 4 Private-New banks and 3 Private-Old banks included for the purpose of this analysis Source: FIBAC Productivity Survey 2019; FIBAC Productivity Survey 2018; FIBAC Productivity Survey 2017; RBI data; BCG analysis

Branch Staff per Branch by Geography

Growth in branch staff FY 19 on

FY 18 (%)-0.2% -1.2% -3.1%

Growth in number of

branches FY 19 on FY 18 (%)

2.1% -0.2% -0.1%

9.7 10.0 9.8 9.9 9.8 9.77.0 7.0 6.8 5.5 5.7 5.5

+3% -2% -1% -1%

+1% -3%+3% -3%


-2.9%

-0.2%

FY 17 FY 18 FY 19

81


CASA per branch staff increasing across the board showing impact of digitization

Note: 1. Data of 5 PSU-Large banks, 11 PSU-Medium banks, 4 Private-New banks and 3 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; FIBAC Productivity Survey 2018; FIBAC Productivity Survey 2017; BCG analysis

Growth in CASA (INR Crore) FY 19

on FY 18 (%)7% 10% 1% 12% 6%

CASA per Branch Staff (INR Crore)

Growth in Branch staff FY 19

on FY 18 (%)-2% -4% 1% -2% -2%


4.0 4.0 4.4 3.5 3.7 4.26.1 7.2 7.2

2.6 3.0 3.5 4.2 4.6 4.9

0% +9% +6+14%

+18 0%

+14

+15% +7 +8%

FY 17 FY 18 FY 19

82


PSU-Large

1.8%

1.6%

2.0%

2.0%

2.0%

4.4%

1.8%

7.3%

PSU-Medium

5.3%

5.7%

Private-New

2.9%

2.8%

Private-Old

3.6%

Industry

Credit

Operational

3.8%

6.2%

6% of Indian banks' FTEs in centralized back office; one-third deployed in credit related activities

1Credit back office includes Retail, SME and Corporate credit back offices 2Total staff includes staff of captive subsidiary as well as outsourced staff Note: 1. Data of 2 PSU-Large banks, 7 PSU-Medium banks, 1 Private-New banks and 3 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; BCG analysis

Credit and Operational Back Office1 FTEs as % of Total FTE2 (FY 19)

83


Straight-Through Processing and back office automation resulting in sharp drop in operational back office employees for liabilities processing

Note: 1. Data of 5 PSU-Large banks, 9 PSU-Medium banks, 3 Private-New banks and 4 Private-Old banks included for the purpose of this analysisSource: FIBAC Productivity Survey 2019; FIBAC Productivity Survey 2018; BCG analysis

-18%

Growth in Liabilities operational backoffice employee

FY 19 on FY 18 (%)

5% -9%

Liabilities Operational Back Office Employee per INR '000 Crore of CASA

Growth in CASA deposits FY 19 on FY 18

(%)7% 10% 9%

49 4692

137

6338 33

87 10352

Private-OldPSU-MediumPSU-Large Private-New Industry

-23% -28%

-5%

-24%

-16%

-21%

10%

-15%

12%

FY 18 FY 19

84


Banks continue to invest in call centers to improve customer service

Note: 1. Data of 4 PSU-Large banks, 7 PSU-Medium banks, 3 Private-New banks and 5 Private-Old banks included for the purpose of this analysis Source: FIBAC Productivity Survey 2019; FIBAC Productivity Survey 2018; BCG analysis

Call Center Employees per 100 Branch Employees

1.10.5

5.5

0.71.91.3

0.4

4.5

0.81.8

IndustryPrivate-OldPSU-Large PSU-Medium Private-New

+15%

-11%

-18%

+17%-6%

FY 18 FY 19

Growth in callcenter employee

FY 19 on FY 18 (%)13% -15% -14% 13% -7%

85


Individuals: Includes sole proprietors, partnership firms, trusts, HUFs, registered societies, association of persons, body of individuals and artificial juridical persons

Financial inclusion: Population above the age of 15 years which has a bank account is considered to be financially included

Retail Advances: Includes advances given for home loans, personal loans, education loans, auto loans, credit card loans, loans against deposits & shares, non-agriculture jewel loans and other retail loans

Micro, Small & Medium Enterprises (MSMEs) Advances: Includes advances given to entities defined as MSMEs by RBI

Corporate Advances: Includes advances given for working capital and term loans, given for business purposes to corporates other than Micro, Small & Medium Enterprises

NBFCs: Non-Banking Financial Companies registered under the companies act engaged in the business of loans and advances but do not hold a banking license

Retail Consumer Loans: Includes Auto Loans, Personal Loans, Consumer Loans, Credit Cards and Gold Loans

Retail Business Loans: Includes Business Loans, Loan Against Property, Commercial Vehicle and Construction Equipment Loans

Retail Commissions: These consist of fee income earned through mutual fund brokerage, insurance commissions and other miscellaneous retail commissions

Commercial Commissions: These consist of fee income earned through commissions on inland and foreign letters of credit, guarantees and bills

Digital transactions: These include transactions done through mobile banking, ECS, POS, internet banking, NACH and UPI

Branch Based Transactions: These include transactions through NEFT (in branch), cheque and cash transactions

Electronic points of service outlets: These include cash and cheque deposit machines, passbook printing machines and internet kiosks

Traditional outlets: These include branch and ATMs

Formalization: Existence of a formal record through registration with any one Government act/authority like GST, EPFO, Factory Act, Municipal/Local corporation

Digital MSMEs: These are MSMEs who have adopted digital across any one of accounting processes OR payments (>30% payment receipts through online banking, wallets/UPI apps, cards) OR online sales (sales on ecom platforms/websites)

PMJDY Accounts: Refers to accounts launched under the Pradhan Mantri Jan Dhan Yojana, which is a financial inclusion scheme launched in 2014

Volume increasers: This refers to customers who increase number of products or balances in account with a bank

Digital customers: These are customers who use digital channels for transactions at least once in three months and have visited a branch less than once or never for a transaction

Hybrid customers: These are customers who use digital channels for transactions at least once in three months and also visit a branch at least once in three months for doing a transaction

Face-to-face customers: These are customers who visit a branch for a transaction at least once in three months and have used digital channels less than once in a year for transactions

Mobile capture: Feature in which a customer is able to submit paperwork to the bank by photographing it with their smartphone camera

Real-time capture information: Information entered by customers in one channel (e.g. branch, or a mobile device) is saved in real time, so that they can continue their task on another channel seamlessly

Glossary

86


For further reading

Boston Consulting Group publishes other reports and articles on related topics that may be of interest to senior executives. Recent examples include:

Global Asset Management 2019: Will These ’20s Roar?A report by BostonConsulting Group, July 2019

Banks Brace for a New Wave of Digital DisruptionA report by Boston Consulting Group, July 2019

How Asset Managers Can Seize the Lead in Sustainable InvestingAn article by Boston Consulting Group, July 2019

Global Wealth 2019: Reigniting Radical GrowthAn article by Boston Consulting Group, June 2019

Unlocking Success in Corporate Banking through DigitalA report by BostonConsulting Group, May 2019

How Cashless Payments Help Economies GrowAn article by Boston Consulting Group, May 2019

Trimming the Sails: Insights from BCG’s Treasury Benchmarking Survey 2018A report by BostonConsulting Group, December 2018

Credit Disrupted: Digital MSME Lending in India A report by BostonConsulting Group, November 2018

What Do Corporate Banking Customers Really Want? An article by Boston Consulting Group, November 2018

Global Payments 2018: Reimagining the Customer ExperienceA report by Boston Consulting Group, October 2018

Banking’s Cybersecurity Blind Spot—and How to Fix It A report by Boston Consulting Group, August 2018

Four Ways Banks Can Radically Reduce Costs An article by Boston Consulting Group, June 2018

How Asset Managers Can Win in a Winner-Takes-All WorldA report by Boston Consulting Group, May 2019

Creating a Digital Treasury in BankingA report by Boston Consulting Group, May 2019

EASE reforms for public sector banksA report by BostonConsulting Group, April 2019

Global Risk 2019: Creating a More Digital, Resilient Bank A report by BostonConsulting Group, March 2019

How CIB Markets Divisions Can Boost Revenue Growth An article by BostonConsulting Group, March 2019

What Does Personalization in Banking Really Mean?An article by Boston Consulting Group, March 2019

How Mobile Money Agents Can Expand Financial InclusionA report by Boston Consulting Group, February 2019

MANPOWER PRODUCTIVITY

87


The authors gratefully acknowledge the data collection efforts on various metrics from the 34 participating banks made by the respective nodal teams as listed below. This report would not have been possible without their invaluable support.

PSU - Large Banks

Haresh KeswaniBank of Baroda

Shridhar Basudeo NarayanBank of India

Karthikeyan GCanara Bank

M.Vijay RaoPunjab National Bank

Sanjay GadgeState Bank of India

Sumit SrivastavaUnion Bank of India

PSU - Medium Banks

Manin SubramanianAllahabad Bank

ACV SubrahmanyamAndhra Bank

Ankita SinghBank of Maharashtra

Kanak RajuCentral Bank of India

Sunil Kumar JadliCorporation Bank

Veera Babu DeyyamIDBI Bank

V RammohanIndian Bank

S. PadmavathyIndian Overseas Bank

Sushil Kumar KhuranaOriental Bank of Commerce

A N SinghPunjab & Sind Bank

Renjini SSyndicate Bank

Sumit Kumar JhaUCO Bank

Arabindo MahapatraUnited Bank of India

Private - New Banks

Yash ParekhAxis Bank

Padmakumar KESAF Bank

Ashwini KulkarniHDFC Bank

Pawan AroraICICI Bank

Prashant AgarwalKotak Mahindra Bank

Note to the reader

Private - Old Banks

Ragesh MCatholic Syrian Bank

V SivakumarCity Union Bank

Navaneet KaisFederal Bank

Tariq AliJammu & Kashmir Bank

RameshKarnataka Bank

Dharmarajan HKarur Vysya Bank

Sushanta royLakshmi Vilas Bank

Ajit C JacobSouth Indian Bank

Co-operative Banks

Girish HoskoteNKGSB Co-operative Bank

D.Y. TawdeSaraswat Co-operative Bank

88


About the Authors

Saurabh Tripathi is a Managing Director and Senior Partner in the Mumbai office of Boston Consulting Group.

Varun Kejriwal is a Principal inthe Mumbai office of Boston Consulting Group.

Deep Narayan Mukherjee is an Associate Director, Data Science, in the Mumbai office of Boston Consulting Group.

Special Acknowledgement

We would like to thank IBA for providing data to help create this report and Ms. Jaya Puthli from IBA for her continued support and cooperation in data collection.

For Further Contact

If you would like to discuss the themes and content of this report, please contact:

Abhinav BansalManaging Director and PartnerBCG Mumbai+91 22 6749 7005 [email protected]

Alpesh ShahManaging Director and Senior Partner BCG Mumbai+91 22 6749 7163 [email protected]

Amit Kumar Managing Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Ashish GargManaging Director and PartnerBCG New Delhi+91 124 459 7076 [email protected]

Hemant JhajhriaManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Janmejaya SinhaManaging Director and Senior Partner BCG Mumbai+91 22 6749 7419 [email protected]

Jitesh ShahManaging Director and PartnerBCG Mumbai+91 22 6749 7341 [email protected]

Mayank JhaManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Neeraj AggarwalManaging Director and Senior PartnerBCG New Delhi+91 22 124 459 7078 [email protected]

Neetu ChitkaraManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Nipun KalraManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Pranay MehrotraManaging Director and PartnerBCG Mumbai+91 22 6749 7143 [email protected]

Prateek RoongtaManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Ruchin GoyalManaging Director and Senior Partner BCG Mumbai+91 22 6749 7147 [email protected]

Saurabh TripathiManaging Director and Senior PartnerBCG Mumbai+91 22 6749 [email protected]

Acknowledgements

This report has been prepared by Boston Consulting Group. The authors would like to thank IBA and FICCI for conducting surveys within member banks. The analysis of the survey has been included in this report. A special thanks to Jasmin Pithawala, Micky Chittora and Bhumika Gupta for managing the marketing process; Dewanshi Vora, Ruchit Lunia, Gopal Sharma, Juhi Agarwal and Gaurav Agarwal for their comprehensive inputs on the survey; Jamshed Daruwalla, Pradeep Hire, Ankit Kalia and Ratna Soni for their contribution towards the design and production of the report.

Note to the reader

87


The authors gratefully acknowledge the data collection efforts on various metrics from the 34 participating banks made by the respective nodal teams as listed below. This report would not have been possible without their invaluable support.

PSU - Large Banks

Haresh KeswaniBank of Baroda

Shridhar Basudeo NarayanBank of India

Karthikeyan GCanara Bank

M.Vijay RaoPunjab National Bank

Sanjay GadgeState Bank of India

Sumit SrivastavaUnion Bank of India

PSU - Medium Banks

Manin SubramanianAllahabad Bank

ACV SubrahmanyamAndhra Bank

Ankita SinghBank of Maharashtra

Kanak RajuCentral Bank of India

Sunil Kumar JadliCorporation Bank

Veera Babu DeyyamIDBI Bank

V RammohanIndian Bank

S. PadmavathyIndian Overseas Bank

Sushil Kumar KhuranaOriental Bank of Commerce

A N SinghPunjab & Sind Bank

Renjini SSyndicate Bank

Sumit Kumar JhaUCO Bank

Arabindo MahapatraUnited Bank of India

Private - New Banks

Yash ParekhAxis Bank

Padmakumar KESAF Bank

Ashwini KulkarniHDFC Bank

Pawan AroraICICI Bank

Prashant AgarwalKotak Mahindra Bank

Note to the reader

Private - Old Banks

Ragesh MCatholic Syrian Bank

V SivakumarCity Union Bank

Navaneet KaisFederal Bank

Tariq AliJammu & Kashmir Bank

RameshKarnataka Bank

Dharmarajan HKarur Vysya Bank

Sushanta royLakshmi Vilas Bank

Ajit C JacobSouth Indian Bank

Co-operative Banks

Girish HoskoteNKGSB Co-operative Bank

D.Y. TawdeSaraswat Co-operative Bank

88


About the Authors

Saurabh Tripathi is a Managing Director and Senior Partner in the Mumbai office of Boston Consulting Group.

Varun Kejriwal is a Principal inthe Mumbai office of Boston Consulting Group.

Deep Narayan Mukherjee is an Associate Director, Data Science, in the Mumbai office of Boston Consulting Group.

Special Acknowledgement

We would like to thank IBA for providing data to help create this report and Ms. Jaya Puthli from IBA for her continued support and cooperation in data collection.

For Further Contact

If you would like to discuss the themes and content of this report, please contact:

Abhinav BansalManaging Director and PartnerBCG Mumbai+91 22 6749 7005 [email protected]

Alpesh ShahManaging Director and Senior Partner BCG Mumbai+91 22 6749 7163 [email protected]

Amit Kumar Managing Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Ashish GargManaging Director and PartnerBCG New Delhi+91 124 459 7076 [email protected]

Hemant JhajhriaManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Janmejaya SinhaManaging Director and Senior Partner BCG Mumbai+91 22 6749 7419 [email protected]

Jitesh ShahManaging Director and PartnerBCG Mumbai+91 22 6749 7341 [email protected]

Mayank JhaManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Neeraj AggarwalManaging Director and Senior PartnerBCG New Delhi+91 22 124 459 7078 [email protected]

Neetu ChitkaraManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Nipun KalraManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Pranay MehrotraManaging Director and PartnerBCG Mumbai+91 22 6749 7143 [email protected]

Prateek RoongtaManaging Director and PartnerBCG Mumbai+91 22 6749 [email protected]

Ruchin GoyalManaging Director and Senior Partner BCG Mumbai+91 22 6749 7147 [email protected]

Saurabh TripathiManaging Director and Senior PartnerBCG Mumbai+91 22 6749 [email protected]

Acknowledgements

This report has been prepared by Boston Consulting Group. The authors would like to thank IBA and FICCI for conducting surveys within member banks. The analysis of the survey has been included in this report. A special thanks to Jasmin Pithawala, Micky Chittora and Bhumika Gupta for managing the marketing process; Dewanshi Vora, Ruchit Lunia, Gopal Sharma, Juhi Agarwal and Gaurav Agarwal for their comprehensive inputs on the survey; Jamshed Daruwalla, Pradeep Hire, Ankit Kalia and Ratna Soni for their contribution towards the design and production of the report.

Note to the reader

UNLOCKING SUCCESS IN CORPORATEBANKING THROUGH DIGITAL | 90

©Boston Consulting Group, Inc. 2019. All rights reserved.For information or permission to reprint, please contact BCG at:E-mail: [email protected]: +91 22 6749 7001, attentionBCG/PermissionsMail: BCG/PermissionsThe Boston Consulting Group (India) Private LimitedNariman Bhavan 14th Floor227, NarimanPointMumbai 400 021India

Please contact FICCI at:E-mail: [email protected] • Website: www.ficci.comFax: +91 11 2332 0714 — 2372 1504Tel: +91 11 2348 7525 (D)Mail: Ms. Supriya BagrawatAdditional Director - Financial SectorFICCIFederation House1, Tansen MargNew Delhi 110 001India

Please contact IBA at:E-mail: [email protected] • Website: www.iba.org.inTel: +91 22 2217 4020Contact person: Ms Jaya PuthliIndian Banks’ AssociationCorporate Communications, Centre 16th Floor, World Trade Centre,Cuffe ParadeMumbai 400 005India

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UNLOCKING SUCCESS IN CORPORATEBANKING THROUGH DIGITAL | 91

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