1 Changing Profile of Household Sector Credit and Deposits in Indian Banking System -Deepak Mathur November 30, 2010

2 Indian Banking System Commercial & Co-operative banks Commercial – 90 % of systems assets 170 commercial banks (166 scheduled) 85, 000 branches, 45,000 ATMs 35,000 centres out of 675,000 habitats 660 mn deposit and 110 mn credit accounts Deposits: Rs. 48 trillion Credit : Rs. 35 trillion Employment :1 million

3 Basic Statistical Returns Statutory and non-statutory returns Basic Statistical Return (BSR) system Deposits, Credit, Employment, Investments BSR-1: Credit (annual, branch level) –Two parts – Large accounts: Account level data on several characteristics –Small accounts-Branch level purpose-wise data –Survey of small loan accounts

4 Basic Statistical Returns BSR-2 Deposits (annual, branch level) –Broad ownership, Type of deposits –Term deposits- maturity, Interest rate BSR-4 (sample survey, annual, branch level)- Composition and ownership pattern of deposits –Economic sectors- Government, Private Corporate, Financial, Household and Foreign Sectors, Detailed sub sectors –Type of deposits-Current/Savings/Term Other returns: Investments, Debits to Deposit and Credit accounts, etc.

5 Basic Statistical Returns BSR-4 : Survey of ownership pf deposits –Annual, Sample survey, Branch level data –Stratified sampling-State/UT, Population group, Bank group; Size (deposits) –Ratio Estimator –Type of Deposit account –Economic Sectors Household sector saving estimation

6 Basic Statistical Returns Household sector data –Credit and Deposits –Individuals accounts Males, Females Singly or jointly with other individuals and –Unincorporated bodies Partnerships, Proprietary concerns Trusts, associations, clubs, etc.

7 Household sector-Credit and Deposits –Deposits-High growth rates 16.2 % ( ), 17.3 % Though lower than overall deposit growth Largest constituent of depositor base Share 80.5 % in 1991, 67.2 % in 2001 About 58 % in recent years Individuals 90 % in 1991 and 80 % in 2009

8 Household sector-Credit and Deposits –Credit-High growth rates 16.6 % ( ), 21.5 % Though lower than overall credit growth A major constituent of borrower base Share 56.3 % in 1991, 47 % in , 44 % in 2008 and 39 % in 2009 Number of accounts 1991: 59 mn (62 mn total) 2009: 104 mn (110 mn total)

9 Household sector-Credit and Deposits –Credit-Deposit Ratio –Household sector-consistently lower –Household sector 1991: 43 %, : %, 2009: 47 % –Total credit 1991: 62 %, : 70-72% %, 2009: 71 % –Differential percentage points

10 Household sector-Credit- Purpose Personal loans (Housing, Consumer durables, vehicles, others) All other loans- productive sectors Share of Personal loans in total credit Number of accounts : %, % Amount outstanding : %, % Personal loans Growth : 25.5 %, : 39.5 %

11 Household sector-Credit- Purpose Large accounts ( ) –Agriculture : 10 % –Industry : : 35 %, : 20 % –Trade : 10 %, Professionals : 10% –Housing: 1996: 6 %, : 25 % Small accounts ( ) –Agriculture : 30 % –Industry : 4 % –Personal loans : 40 %

12 Household sector-Credit-Cost, Size Weighted average interest rate Large accounts ( ) –In alignment with overall rate for all sectors –No direct relationship –60 to 80 bps difference Small accounts ( ) –Housing loans and Agriculture loans at lower rates Average size of loan amount Household sector loans average about 34 % of all loan accounts average amount

13 Household sector-Credit- Type of account Short term accounts: Cash credits, overdrafts and demand loans Long term loans : Medium term loans and long term loans Increase in Long term accounts –Number : 1996 : 69 % 2009 : 77 % –Amount : 1996 : 42 % 2009 : 67 % Personal loans – term loans

14 Household sector-Deposits-Type of account Type of account Demand deposits: Current and savings deposits, Term deposits: Fixed maturity Term deposits : major share, though declining –1991: 61 %, 2006 : 51 %, 2009: 58% –Individuals sub-sector similar trend Household sector: recent years higher proportion in CASA deposits

15 Household sector-Term deposits-Maturity Maturity of term deposits Data for individuals sub-sector Original maturity. Maturity brackets: 3 years. Two-thirds of deposits below 3 years maturity. Share of maturity below 1 year declined. Average maturity: about 2.4 years ( ) (for all sectors: Higher 1.9 years in 2009)

16 Summary observations Household sector Consistently high growth in deposits and credit, though lower than overall Major share in banking system –Deposits : 58 % (79 % of which individuals) –Credit : 39 % –Credit-Deposit Ratio : 47 % Net saver-provider of funds

17 Summary observations Personal Loans-High and rising share –65 % accounts, 43 % amount –Housing loans : 56 % of personal loans Industry-declining share : 20 %, Agriculture : 10 %, Other services: 10 % Cost of credit: Similar to all loans Size per account : one-third of total credit Long term loans-Increasing share

18 Summary observations Deposits –44 % of current deposits with banks, 85 % of savings deposits, 52 % of term deposits –Decline in share of term deposits in total deposits. Higher proportion of current and savings deposits. –Term deposits average maturity higher compared to all sectors.

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