Scheduled commercial banks (SCBs) recorded INR 1,20,490.95 Bn deposits in FY 2020, expanding at compound annual growth rate (CAGR) of 3.96% during the FY 2017-FY 2020 period. Credit off-take of SCBs amounted to INR 1,37,321.69 Bn in FY 2020, expanding at a CAGR of 20.17% during the FY 2017-FY 2020 period. The COVID-19 pandemic and the current economic slowdown in the country are expected to adversely affect the credit off-take of scheduled commercial banks in FY 2021. However, initiation of the big bank merger program by the Government of India and the introduction of various economic relief packages are likely to increase the business value of the major public sector banks in the country.
Various government initiatives, such as increasing the number of banks’ public service units in rural areas, the Pradhan Mantri Jan Dhan Yojana program, free credit and debit cards with low transaction limits, and promotion of technology-based banking systems are driving the growth of the retail banking sector of India.
Major players operating in the Indian retail banking industry include Yes Bank Limited, Axis Bank Limited, Bandhan Bank Limited, State Bank of India Limited, and HDFC Bank Limited.
Market segment insights
As of FY 2019, in terms of deposits, public sector banks held the highest market share (~68.85%), followed by private sector banks. In FY 2019, SCBs opened around 4,518 new branches in tier I cities across India, which accounts for ~46.79% of the overall new branches opened in 2019. In 2019, public sector banks had around 78,420 on-site ATMs and about 27,840 off-site ATMs across India. Among these, most public sector bank ATMs are in the semi-urban regions.
Key growth drivers of the market
In order to increase the penetration of services across India, SCBs have introduced facilities Such as opening zero-balance savings accounts for the low-income population group in rural areas. Government-led, bank-based pension and insurance schemes including Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana, and Atal Pension Yojana have propelled the growth of the retail banking industry in India.
Owing such customer-centric facilities, the penetration level of the banking sector in India had reached ~80% in FY 2018. The introduction of internet-based banking facilities has made transactions easier, thereby increasing the account-to-account transaction volumes across the country.
Key deterrents to the growth of the market
Apart from banking, the popularity of internet-based banking has made it easy for hackers to engage in fraudulent activities. Crimes related to credit card fraud, spamming, spoofing, e-money laundering, ATM fraud, phishing, identity theft, and transactions through unauthorized cheques increased in India in FY 2019 compared to FY 2018. This, in turn, has led to customers’ dissatisfaction and loss of trust on web-based banking.
Axis Bank Limited
Bandhan Bank Limited
Bank of Baroda Limited
HDFC Bank Limited
ICICI Bank Limited
Kotak Mahindra Bank Limited
Ratnakar Bank Limited
State Bank of India Limited
Yes Bank Limited