Know Banking Sector

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As we all know the Indian banking system is grappling with the multi-fold growth of stressed assets on its balance sheet. Nevertheless with the upcoming strategies by the government to combat the problem the future still remains bright.

The Indian banking system consists of 27 public sector banks, 22 private sector banks, 44 foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative banks, in addition to cooperative credit institutions.

Chart 1-below shows the growth in the Bank Nifty over the last 5 years.

*Chart Source: Money control

Chart 2-below shows the growth in the deposits by the Indian Banks. The deposits have grown at 6.9% at $1715 billion in May 2018 from $1603 billion in May 2017.

The above charts form an evident to the fact that this sector is increasing and would continue with its growth.

Chart 3- below shows the %Contribution of Banks in the Nifty Bank on the basis of Market Capital.

*Chart Source: Money Control

Now lets study this by taking the highest contributing individual bank on the basis of Market Capital in our scope of analysis. –HDFC bank

Chart 4- below shows the 5yr growth chart of HDFC on NSE.

*Chart Source: Money Control

While analyzing a bank and its growth we need to take into account 4 points:

  • Assets –we study investment in Chart 5 below, more investment  means more growth opportunities of the bank.
  • Liabilities- we study Deposits in Chart 6 below
  • Income – we study the Interest earned income in Chart 7 below which form part of the profit for the bank.
  • Cost – we study the Operating Expenses in Chart 8 below.

With the banking sector adopting new strategies and the advancement in technology as part of Digital India campaign we have already started to pave our way to various cashless methods of payments, which further would also increase.

Now having said that- we are here to help you reap a little benefit for yourself. With these bi-monthly articles we hope to cover various aspects as how to study the banking sector,(at an overall Macro level) and how to gauge the performance of a company (thus trickling it down to micro level).

Stay tuned for the next update on Banking Sector.

 

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