[Provided by Rajeshkumar, Vadavalli, Coimbatore, Tamilnadu (10.06.09)]
The importance of banks in the modern economy cannot be neglected. They occupy a very important place in the field of commerce and industry of any country. No country can achieve commercial and industrial progress in the absence of a sound banking system.
According to section 5(b) of the Banking Regulation Act the term banking is defined as accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.
HISTORICAL BACKGROUND OF BANKING IN INDIA
From the early Vedic period the giving and taking of credit in one form or the other have
existed in Indian Society. The bankers are the pillars of the Indian society. Early days bankers were called as indigenous bankers. The development of modern banking has started in India since the days of East India Company. These banks mostly had no capital of their own and depended entirely on deposits in India.
Indian banking comprises of players who include public sector banks, State bank of India and its associates, private sector banks, both of old and new sectors, both of old and new generations, scheduled banks, cooperative banks, regional rural banks, foreign banks etc.
The banking industry worldwide is transformed concomitant with a paradigm shift in the Indian economy from manufacturing sector to nascent service sector. Indian banking as a whole in undergoing a change. Indian banks have always proved beyond doubt their adaptability to mould themselves into agile and resilient organizations.
The first bank in India, General Bank of India was established in 1786. From 1786 till today, the journey of Indian banking system can be segregated into three distinct phases.
They are as follows
- Early phase from 1786 to 1969 of Indian Banks.
- Nationalization of Indian banks and up to 1991 prior to Indian banking sector reforms.
- New phase of Indian banking system with the advent of Indian Financial & Banking sector Reforms after 1991.
CURRENT SCENARIO IN INDIAN BANKING:-
BUSINESS ENVIRONMENT
The Indian economy is on a growth path with the real GDP growth upwards of 9%. Industrial and services sectors have accelerated growth while growth in agricultural sector has continued to remain moderate. Inflation remained an area of concern. There was however robust build up of foreign exchange resources - close to $ 200 bn. Stock markets were buoyant while the Indian Rupee continued to appreciate against US Dollar.
BANKING SCENARIO
The future of the banking sector appears quite promising though there are quite a few challenges to contend with. The customer is more discerning and has a much wider access to technology and knowledge. Hence the imperative need to roll out innovative customized products which will be the key differentiator amongst banks. Time and distance have shrunk and the internet has greatly facilitated global reach and therefore, evolution of delivery channels and interactive services have been a boon to banking. The core banking solution platform is being increasingly adopted by the banks to fully realize the opportunity thrown up by technology.
Unlike the previous year, credit growth of the system was not as profound but quite robust nonetheless and resources though not really scarce, were a bit expensive. RBI initiated various measures such as increase of reverse repo rate, higher CRR prescriptions etc. which were aimed at moderating credit growth. To certain sector specific instructions have also been issued by RBI to rein in expansion of Bank credit to such sectors.All this ushered in a period of increasing cost, declining yields and consequently pressure on margins. Healthy rebalancing of the credit portfolio was the answer to this syndrome.
HIGHLIGHTS OF THE BANK'S PERFORMANCE
The year gone by was an exceptional year for the Bank in terms of most parameters. Net profit surged by 60% from Rs. 701 crores to Rs. 1123 crores and the global business mix crossed the milestone mark of Rs. 200,000 crores to touch Rs. 207,000 crores. While deposits grew by 27.6% to Rs. 119882 crores, the share of low cost deposits hovered at 40% and your bank continues to be one of the few banks with such a large share of low cost deposits. Credit expansion was a robust 30% touching an aggregate level of Rs.86791 crores. The growth has been quite broad based encompassing various segments such as agriculture, industry, SME and retail. Foreign branches accounted for a smart rise of 34% in advances.
Priority Sector not only constitutes the Bank's social commitment, but is recognized today as a profitable business opportunity. With almost two third branches in rural and semi urban areas, the bank has ably risen to the occasion. While agriculture clocked a growth of 25% and constituted 18.5% of net bank credit, priority sector grew by almost 23% and accounted for 45.5% of net bank credit. The Bank could for the first time record net NPA below 1%. In fact on the back of robust cash recoveries of Rs. 752 crore and upgradation of Rs. 132 core, gross NPA slid by Rs. 379 crore to Rs. 2100 crore. Recoveries together with prudent provisioning saw Net NPA falling sharply to Rs. 632 crore from Rs. 970 crore resulting in a healthy loan loss coverage ratio.
