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Balance Sheet Analysis of Various Constituents of Indian
Financial Sector - A Bird's Eye View
Saket Kumar Sharma *1
Abstract: This paper discusses the structure of Indian Financial Sector. It
presents the analysis of major items of Balance sheets of various constituents of
Indian Financial Sector (i.e. viz. Scheduled Commercial Banks (SCBs), Urban
Cooperative Bank (UCBs), Rural Cooperative Banks (RCBs), Regional Rural Banks
(RRBs), Non Banking Financial Institutions (NBFIs), Non Banking Financial Companies
(NBFCs), Residual Non Banking Financial Companies (RNBCs), and Mutual funds). It
also highlights issues relating to data availability and data gaps with respect to UCBs
and NBFCs.
1 Author is currently working as a Research Officer in Reserve Bank of India. The views expressed in this paper
are those of author alone and not of the institution to which he belongs.
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Introduction
The saving and investment process in an economy is organised around a financial framework
that facilitates economic growth. A well designed financial system promotes growth through
effective mobilisation of savings and their allocation to the most productive uses by either
following a centralized approach or a decentralised approach or a combination of both.
Typically, economies with underdeveloped capital markets adopt a centralized approach,
whereby financial intermediaries mobilise resources from savers and allocate them to
borrowers. Traditionally, banks have played a critical role in the financial intermediation
process as they are able to deal more appropriately with transaction costs and information
asymmetries in a financial system. As financial markets develop, transaction costs and
information asymmetries reduce, the decentralized approach for guiding the saving-
investment process also gains significance, and households with surplus resources
increasingly invest in capital market instruments. The modern economic system depends on a
reliable flow of financing through intermediaries. Modern life requires the smooth operation
of banks, cooperatives, insurance companies, securities firms, capital market institution,
mutual funds, finance companies, non-banking financial companies, pension funds and
Governments. These institutions channel resources from those who save to those who invest,
and they are supposed to transfer risk from those who cannot afford it to those who are
willing and able to bear it. India too has a well-diversified financial system which comprises
of several types of institutions with newer innovative instruments which ultimately foster
soundness of financial sector. India's two decades of economic reforms has brought structural
reforms in Indian financial sector which increased the interdependence among financial
institutions, especially through inter-institutional exposures and payments and settlement
channels. Hence, deterioration in the financial position of any area could therefore get easily
transmitted to the other segments of the financial sector, which may lead to a systemic
problem for financial sector as banks also held inter-bank deposits from a large number of
banks, institutions, financial companies, etc.
Section I describes structure of Indian Financial sector. Section II elaborates about the major
items on the liability side of the Balance Sheet of the various constituents/ segments of
Indian Financial sector viz. Scheduled Commercial Banks (SCBs), Urban Cooperative Bank
(UCBs), Rural Cooperative Banks (RCBs), Regional Rural Banks (RRBs), Non Banking
Financial Institutions (NBFIs), Non Banking Financial Companies (NBFCs), Residual Non
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Banking Financial Companies (RNBCs), and Mutual funds. Section III discusses assets side
of the Balance Sheet of these constituents. Section IV deals with the issues relating to data
availability and data gaps with respect to the financial sector of India. Section V concludes
the paper.
Section I
1. Structure of Indian Financial Sector
Commercial Banks, Cooperative Banks and Non Banking Financial institution are the major
constituents of Indian Financial Sector. Commercial banks (171 in number as on end-
September 20092) can be divided as Scheduled Commercial banks (167 in number as on end-
September 2009), Regional Rural Banks (86 in number as on end-September 20092) and
Non-Scheduled Commercial banks (4 in number as on end-September 20092). Cooperative
banks occupy very significant position in Indian financial sector and they are of two types i.e.
Urban Cooperative Banks (UCBs) and Rural Cooperative Banks (RCBs). UCBs (1721 in
number as on end-March 20093) can be subdivided into Scheduled UCBs (53 in number as
on March 20092) and Non-Scheduled UCBs (1668 in number as on end-March 2009
2).
Rural cooperative credit institution (96061 in number as on end-March 20084) is bifurcated
into short-term and long-term structure. Short-term cooperative structure (95344 in number
as on end-March 20083) is a three tier structure having State Cooperative Banks (StCBs) (31
in number as on end-March 20083) at the apex level followed by District Central Cooperative
Banks (DCCBs) (371 in number as on end-March 20083) at the intermediate district level
followed by Primary Agricultural Credit Societies (PACS) (94942 in number as on end-
March 20083) at the village level. This structure is often referred to as federal structure of the
short term credit cooperatives. The long term cooperative (717 in number as on end-March
20083) structure has the State Cooperative Agriculture and Rural Development Banks
(SCARDBs) (20 in number as on end-March 20083) at the apex level followed by the
Primary Cooperative Agriculture and Rural Development Banks (PCARDBs) (697 in number
2 Source: Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: September, 2009, RBI.
3 Source: Report on Trend and Progress of Banking in India 2008-09.
4 Source: Report on Trend and Progress of Banking in India 2008-09.
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as on end-March 20083) at the district or block level. This is also referred to as federal
structure of the long term credit cooperatives.
The Non-Banking Financial Institutions (NBFIs) are providing medium to long-term finance
to different sectors of the economy and they play an important role by complementing banks
in providing a wide range of financial services. NBFIs are more heterogeneous group,
functionally as well as in terms of size and nature of activities. The major intermediaries that
are included in the NBFI group are Development Finance Institutions (DFIs), insurance
companies, non-banking financial companies (NBFCs), primary dealers (PDs) and capital
market intermediaries such as mutual funds. Based on the major activities undertaken by FIs,
they are classified into three broad categories.
� First, there exists the term-lending institution - EXIM Bank, whose main activity is
direct lending by way of term loans and investments.
� Second, there are refinance institutions such as National Bank for Agriculture and
Rural Development (NABARD), Small Industries Development Bank of India
(SIDBI) and National Housing Bank (NHB), which mainly extend refinance to banks
as well as NBFIs.
� In the third category, there are investment institutions such as Life Insurance
Corporation of India (LIC), which deploy their assets largely in marketable securities.
State/regional level institutions are a distinct group and comprise State Financial
Corporations (SFCs), State Industrial and Development Corporations (SIDCs) and North
Eastern Development Finance Corporation Ltd. (NEDFi). Some of these FIs have been
notified as Public Financial Institutions by the Government of India under Section 4A of the
Companies Act, 1956. As on March 31, 2009, there were four FIs viz., EXIM Bank,
NABARD, NHB and SIDBI which were under full-fledged regulation and supervision of the
Reserve Bank. Industrial Investment Bank of India (IIBI), a financial institution with its
headquarters at Kolkata is in the process of voluntary winding up in view of its very poor
financial position.
A Non-Banking Financial Company (NBFC) is a company registered under the Companies
Act, 1956 and is engaged in the business of loans and advances, acquisition of
Shares/stock/bonds/debentures/securities issued by Government or local authority or other
securities of like marketable nature, leasing, hire-purchase, insurance business, chit business
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but does not include any institution whose principal business is that of agriculture activity,
industrial activity, sale/purchase/construction of immovable property. A non-banking
institution which is a company and which has its principal business of receiving deposits
under any scheme or arrangement or any other manner, or lending in any manner is also a
non-banking financial company (Residuary non-banking company). NBFCs are doing
functions akin to that of banks; however there are a few differences which are as follows:
� An NBFC cannot accept demand deposits;
� An NBFC is not a part of the payment and settlement system and as such an NBFC
cannot issue cheques drawn on itself; and
� Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is
not available for NBFC depositors like banks.
Non-Banking Financial Companies (NBFCs) broadly fall into three categories, viz., (i)
NBFCs accepting deposits from the public; (ii) NBFCs not accepting/holding public deposits;
and (iii) core investment companies (i.e., those acquiring shares / securities of their group /
holding / subsidiary companies to the extent of not less than 90 per cent of total assets and
which do not accept public deposit). Originally, NBFCs registered with RBI were classified
as: 1) Equipment leasing company; 2) Hire-purchase company; 3) Loan company; 4)
Investment company. However, with effect from December 6, 2006 the above NBFCs
registered with RBI have been reclassified as: 1) Asset Finance Company (AFC) 2)
Investment Company (IC) 3) Loan Company (LC).
Section II
2. Resources Mobilised by Indian Financial Sector
In any economy, the financial sector plays a major role in the mobilization and allocation of
savings. Banks, Financial Institutions, instruments and markets which constitute the financial
sector act as a conduit for the transfer of financial resources from net savers to net borrowers,
i.e. from those who spend less than they earn to those who earn less than they spend. The
financial sector performs its basic function through a number of ways by liability- asset
transformation (i.e., accepting deposits as a liability and converting them into assets such as
loans), size transformation (i.e., providing large loans on the basis of numerous small
deposits); maturity transformation (i.e., offering savers alternative forms of deposits
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according to their liquidity preferences while providing borrowers with loans of desired
maturities); and risk transformation (i.e.; distributing risks through diversification which
substantially reduces risks for savers which would prevail while lending directly in the
absence of financial intermediation). How efficiently these transformation are performed by
financial sector will depends upon several factors of which mobilization of deposits (demand
deposit, saving bank deposit and term deposit), borrowings, capital, reserve & surplus etc.
are of importance. However, deposits are the major resource mobiliser in India. Of the total
resources mobilized by the Indian financial sector, deposits constitute 89 % of total resources
mobilised by the Indian Financial Sector. Aggregate deposits of Indian Financial Sector is
Rs. 54,86,514/- crore as on March 2009 which is 103 % of GDP at Market Prices. It is
observed that of the total deposits mobilized by the Indian Financial sector, deposits
mobilsed by SCBs constitute 80% of total deposits in India in the year 2009 followed by Post
Office deposits (10 %), Rural Cooperative Banks deposits (4 %), Urban Cooperative Banks
deposits (3 %) and Regional Rural Banks deposits (2 %), Financial Institutions deposits (1
%) and share of NBFC constitutes less than half percentage in the total deposits refer Chart –
1) with certain degree of overlapping.
Chart -1
Share of deposits, mobilised in Indian Financial Sector - 2009
2%
3%
4%
0%1%
10%
80%
SCBs
RRBs
UCBs
RCBs
NBFC
FI
small savingPost Office
Deposits
(Source: DBIE: RBI's Data Warehouse, Report on Trend and Progress of Banking in India)
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2.1 Trends of Deposits Mobilised by the Indian Financial Sector
This section deals with the trends of deposits for SCBs, RRBs, UCBs, Scheduled UCBs,
Non- Scheduled UCBs, RCBs, StCBs, DCCBs, PACBs, SCARDBs, PCARDBs, FIs and
NBFIs during 2005 to 2009.
2.1.1 Scheduled Commercial Banks: Trends exhibited by deposits of SCBs have been rising
during the last 5 years i.e. 2005 - 09 (Graph 1). However, growth rate of aggregate deposits
of SCBs decelerated to 22.4 % as at end March 2009 from 23.1 % as at end March 2008 and
that of 24.6 % in the previous year (i.e. end March 2007) Table 1. .
Graph -1
Trends of Deposits of
SCBs during 2005 to 2009
18375592164679
2696980
3320061
4063203
0
1000000
2000000
3000000
4000000
5000000
2005 2006 2007 2008 2009
Year
Rs.
Cro
re
SCBsc
(Source: DBIE:RBI's Data Warehouse)
Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: September,
2009, RBI highlights that annual growth rate of aggregate deposits of rural population
showed increasing trend whereas deposits generated by semi-urban branches were stagnant
and for urban and metropolitan it showed decreasing trend in September 2009 quarter (Table
4).
2.1.2 Post Office Deposits: Post office deposit mobilizes resources in the form of
small deposits and its trend is placed below in Graph 2. During 2005-06 its growth
rate was 15 % which declined recently and in 2008-09 growth rate (Y-o-Y) basis
becomes -2 %. Small Savings have experienced a decline during the financial year
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2007-08 and 2008-09 as commercial banks offer higher interest rates on the deposits
to lure investors, according to the Association of Chambers Eco Pulse Study (AEP).
Investment in the mutual funds also rose significantly since 2006-07 which might lead
to diversion of resources from small investors.
Graph -2
Trends of small saving Post Office Deposit
457732
527611564372
509411 498813.654
0
100000
200000
300000
400000
500000
600000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Small saving Post Off ice Deposit
(Source: DBIE: RBI's Data Warehouse)
2.1.3 Deposits of Rural Cooperative Banks: Cooperatives occupy an important position in the
Indian financial system. Cooperatives were the first formal institution to be conceived and
developed to purvey credit to rural India. Thus far, cooperatives have been a key instrument
of financial inclusion in reaching out to the last mile in rural areas. Heterogeneity is one of
important feature of cooperative credit institution in India. Rural cooperatives structure is
bifurcated into short-term and long-term structure. The short-term cooperative structure is a
three tier structure having State Cooperative Banks (StCBs) at the apex level followed by
District Central Cooperative Banks (DCCBs) at the intermediate district level followed by
Primary Agricultural Credit Societies (PACS) at the village level. This structure is often
referred to as federal structure of the short-term credit cooperatives. The unitary structure is
mainly observed in the North-eastern region, wherein the StCBs provide credit directly to
PACS instead of any district level intermediary. The long-term cooperative structure has the
State Cooperative Agriculture and Rural Development Banks (SCARDBs) at the apex level
followed by the Primary Cooperative Agriculture and Rural Development Banks
(PCARDBs) at the district or block level. This is often referred to as the federal structure of
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long-term credit cooperatives. There is also a unitary structure under which the SCARDBs
channel credit through their own branches.
Deposits of RCBs have shown a rising trend during 2005-08 (Graph -3). However, annual
growth rate of aggregated deposit of RCBs during 2005-08 are found to be 5 %, 9 % and 8.8
% respectively (Table 1). There is a lag in compiling of RCBs data which needs to be
addressed for it to be useful for any policy purpose. As can be seen from Table 1, deposits
growth of RCBs is approx one third of deposits growth of SCBs in the year 2007-08.
Graph - 3
Trends of Deposits of RCBs during 2005 to 2008
146321 153516167519
182384
0
50000
100000
150000
200000
2005 2006 2007 2008
Year
Rs
. C
rore
Deposits of RCBs
(Source: Report on Trend and Progress of Banking in India)
2.1.3.1 Deposits of StCBs: Deposits of StCBs has been showing moderately rising trend
during 2005 -08 (Graph – 4). Growth rates (Y-o-Y) of deposit variable for StCBs during
2005 to 2008 are 2.5 %, 7% and 9 % respectively (Table 1).
Graph -4
Trends of Deposits of StCBs during 2005 to 2008
44316 4540548560
52973
0
10000
20000
30000
40000
50000
60000
2005 2006 2007 2008
Year
Rs. C
rore
Deposit of StCBs
(Source: Report on Trend and Progress of Banking in India)
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2.1.3.2 Deposits of DCCBs: Deposits of DCCBs has been showing moderately rising trend
during 2005 -08 (Graph – 5). Growth rates (Y-o-Y) of deposit variable for DCCBs during
2005 to 2008 are 7 %, 8 % and 9 % respectively (Table 1). Among the RCBs, deposits share
of DCCBs is minimum as can be seen from chart -2.
Graph -5
Trends of Deposits of DCCBs during 2005 to 2008
8209887532
94529102986
0
20000
40000
60000
80000
100000
120000
2005 2006 2007 2008
Year
Rs.
Cro
re
Deposit of DCCBs
(Sou
rce: Report on Trend and Progress of Banking in India)
Chart -2
Share of Deposits, mobilised by segments of RCBs - 2008
52973, 29%
102986, 57%
25449, 14%
645, 0%
331, 0%
Deposit of StCBs
Deposit of DCCBs
Deposit of PACBs
Deposit of SCARDBs
Deposit of PCARDBs
(Source: Report on Trend and Progress of Banking in India)
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2.1.3.3 Deposits of PACBs: Deposits of PACBs has been showing moderately rising trend
during 2005 -08 (Graph – 6). Growth rates (Y-o-Y) of deposit variable for PACBs during
2005 to 2008 are 3 %, 20 % and 9 % respectively (Table 1).
Graph -6
Trends of Deposits of PACBs during 2005 to 2008
18976 19561
2348425449
0
5000
10000
15000
20000
25000
30000
2005 2006 2007 2008
Year
Rs.
Cro
re
Deposit of PACBs
(Source: Report on Trend and Progress of Banking in India)
2.1.3.4 Deposits of SCARDBs: Deposits of SCARDBs have been little bit erratic trend
during 2005 -08 (Graph – 7). Growth rates (Y-o-Y) of deposit variable for SCARDBs during
2005 to 2008 are 11 %, -5 % and 6 % respectively (Table 1).
Graph -7
Trends of Deposits of SCARDBs during 2005 to 2008
566636 605
645
0
100
200
300
400
500
600
700
2005 2006 2007 2008
Year
Rs. C
rore
Deposit of SCARDBs
(Source: Report on Trend and Progress of Banking in India)
2.1.3.5 Deposits of PCARDBs: Deposits of PCARDBs have been falling since 2005 -08
(Graph – 8). Growth rates (Y-o-Y) of deposit variable for PCARDBs during 2005 to 2008 are
5 %, -10 % and -3 % respectively (Table 1).
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Graph -8
Trends of Deposits of PCARDBs during 2005 to 2008
365 382341 331
0
100
200
300
400
500
2005 2006 2007 2008
Year
Rs.
Cro
re
Deposit of PCARDBs
(Source: Report on Trend and Progress of Banking in India)
2.1.4 Urban Cooperative Banks: Urban Cooperative Banks (UCBs) have posted high growth
in deposits of 15.2 % during the year 2007-08 unlike their rural counterparts. However, it is
still lower than the growth rate of deposits observed in SCBs in the respective years (Table 1).
Trends exhibited by deposit variable of UCBs have been rising during last 5 years which is
reflected in the Graph -9. Growth rates (Y-o-Y) of deposit variable for UCBs during 2005 to
2009 are 9 %, 6 %, 15 % and 13 % respectively (Table 1).
Graph -9
Trends of Deposits of UCBs in last 5 years
105021114060 121391
139871
158733
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
2005 2006 2007 2008 2009
Year
Rs. Cro
re
Deposits of UCBs
(Source: Report on Trend and Progress of Banking in India)
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Growth rate for deposits of UCBs shows little moderation in 2009 with 13.5 % compared
with the year 2008 figure of 15.6%. However deposit growth rate for UCBs were rising in
2006, 2007 and 2008.
Deposits of Scheduled UCBs and Non- Scheduled UCBs have seen expansion during period
of 2005 to 2009 and trends are observed in the Graph -10 and Graph – 11. Annual growth
rates (Y-o-Y) of deposit variable for Scheduled UCBs during 2005 to 2009 are 10 %, 13 %,
15 % and 15 % respectively (Table 1). Growth rates (Y-o-Y) of deposit variable for Non-
Scheduled UCBs during 2005 to 2009 are 7 %, 2 %, 15 % and 12 % respectively (Table 1).
Graph -10
Trends of Deposits of Sch UCBs in last 5 years
4095045297
5117358871
67929
0
10000
20000
30000
40000
50000
60000
70000
80000
2005 2006 2007 2008 2009
Year
Rs
. C
rore
Deposits of Sch UCBs
(Source: Report on Trend and Progress of Banking in India)
Graph -11
Trends of Deposits of Non-Sch UCBs in last 5 years
6407168763 70218
8100090804
0
20000
40000
60000
80000
100000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Deposits of Non Sch UCBs
(Source: Report on Trend and Progress of Banking in India)
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Overall, Non-scheduled UCBs generate higher deposits during last five years as compared
with Scheduled UCBs. This is partly on account of higher number of Non- Scheduled UCBs
as compared with Scheduled UCBs.
2.1.5 Regional Rural Banks: In a multi-agency approach for agricultural and rural credit in
India, RRBs have a special place. Being local level institutions, RRBs are ideally suited for
achieving financial inclusion. Trends exhibited by deposits of RRBs have been rising during
last 5 years and its trends are captured in the Graph -12. Growth rates (Y-o-Y) of deposit
variable for RRBs during 2005 to 2009 are 10 %, 27 %, 15 % and 20 % respectively (Table
1). In the year 2006-07, deposits growth rate was highest among the constituents of Indian
Financial Sector. It is also observed that annual growth rate of Agriculture and allied
activities of GDP at current price for 2006-07, 2007-08 and 2008-09 are 10 %, 14 % and 10
% respectively.
Graph -12
Trends of Deposits of RRBs during 2005 to 2009
5828664195
8162094412
113828
0
20000
40000
60000
80000
100000
120000
2005 2006 2007 2008 2009
Year
Rs.
Cro
re
Deposits of RRBs
(Source: DBIE:RBI's Data Warehouse)
2.1.6 Financial Institutions: Non-Banking Financial Institutions (NBFIs) play an important
role in the Indian financial system as they are providing complimentarity and
competitiveness to banks. The major intermediaries that are included in the NBFI group are
Development Finance Institutions (DFIs), insurance companies, nonbanking financial
companies (NBFCs), primary dealers (PDs) and capital market intermediaries such as mutual
funds. The NBFIs are providing medium to long-term finance to different sectors of the
economy. On account of intensification of the global financial crisis in September 2008,
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some impact was experienced in this sector, thereby creating liquidity constraints for NBFIs.
In response, the Reserve Bank introduced special fixed term rate Repo under liquidity
adjustment facility (LAF) to banks exclusively for the purpose of meeting the funding
requirements of Non-Banking Financial Companies (NBFCs).
There is a steep rise in deposits generated by FIs especially since March 2006. Combined
deposit variable of FIs registered sharp increases of 80.7 % during the year 2008-09. Growth
rates (Y-o-Y) of deposit variable for FIs during 2005 to 2009 are 8 %, 51 %, 65 % and 80 %
respectively (Table 1).
Graph -13
Trends of Deposits of FIs during 2005 to 2009
13355 14520
21998
36298
65591
0
10000
20000
30000
40000
50000
60000
70000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Deposit of FI
(Source: Report on Trend and Progress of Banking in India)
2.1.7 NBFCs: Trends exhibited by deposit variable of NBFCs is showing rising trend till
2006-07 thereafter declining during 2007-08 and 2008-09 (Graph -14). Growth rates (Y-o-Y)
of deposit variable for NBFCs during 2005 to 2009 are 11 %, 08 %, -1 % and -12 %
respectively. Decline in public deposits of NBFCs was observed in the aftermath of global
financial crisis. NBFCs were required to resort to borrowing in a big way to meet their fund
requirements which depleted on account of fall in deposits with NBFCs
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Graph -14
Trends of Deposits of NBFC during 2005 to 2009
2052622842
24699 2440021548
0
5000
10000
15000
20000
25000
30000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Deposits of NBFC
(Source: Report on Trend and Progress of Banking in India)
2.1.7.1 Finances of Deposit taking NBFCs
Borrowing is an important source of funds for the NBFCs, which showed increasing trend
over the period of 2005 to 2009 in the Graph -15. Growth rates (Y-o-Y) of deposit variable
for NBFC-D during 2005 to 2009 are 8 %, 30 %, 55 % and 9 % respectively.
Graph - 15
Trends in Borrowing of NBFC-D during 2005 to 2009
23044 24942
32452
5057755289
0
10000
20000
30000
40000
50000
60000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Borrow ing of NBFC-D
(Source: Report on Trend and Progress of Banking in India)
Borrowings by NBFCs from banks and financial institutions and by way of bonds and
debentures and ‘other sources’ (which include miscellaneous factors including inter alia,
money borrowed from other companies, unsecured loans from directors/ promoters,
commercial paper, borrowings from mutual funds and any other type of funds which are not
17/47
treated as public deposits), increased sharply during 2007-08. This broadly reflected the
pattern of borrowings of asset finance companies. Significantly, the borrowing from
Government, which was nil during 2006-07, increased sharply to Rs.2,319 crore during
2007-08 largely due to inclusion of IFCI Ltd. and TFCI Ltd. in this category.
2.1.8 Resource mobilised by Mutual Funds: Mutual funds play a role of capital market
intermediaries. A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through these
investments and the capital appreciation realised are shared by its unit holders in proportion
to the number of units owned by them. Thus a Mutual Fund is the most suitable investment
for the common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.
2.1.8.1 Gross Resource mobilised by Mutual Funds: Gross resource mobilised by mutual
funds shows increasing trends during 2005 - 2009 (Graph –16). Growth rates (Y-o-Y) of
Gross resource mobilised variable for mutual funds during 2005 to 2009 are 30 %, 76 %, 130
% and 21 % respectively (Table 1). Steep rise in resource mobilization by mutual funds
during year 2006 -07 & 2007 – 08 coincided with the boom in the capital market. It is
noteworthy to add that resource mobilised by SCBs in India in the year 2007-08 (i.e. end
March 2008) with gross resource mobilization by Mutual funds of Rs. 44,64,377 crore as
compared with deposits of SCBs of Rs. 33,20,061 crore.
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Graph –16
Trends in Gross Resource Mobilisation by Mutual Funds during 2005 to 2009
839708 1098149
1938493
4464377
5426354
0
1000000
2000000
3000000
4000000
5000000
6000000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Gross Resource Mobilisation of
Mutual Funds
(Source: SEBI Bulletin)
2.1.8.2 Redemptions by Mutual Funds: Redemptions by mutual funds also showed increasing
trends (Graph –17). Growth rates (Y-o-Y) of Redemptions for mutual funds during 2005 to
2009 are 25 %, 26 %, 133 % and 26 % respectively (Table 1A). Year 2007-08 resulted in
steep rise in redemption which showed increase in activities in the capital markets in India.
Graph –17
Trends of Redemption of Mutual Funds during 2005 to 2009
837508 1045370
1844508
4310575
5454650
0
1000000
2000000
3000000
4000000
5000000
6000000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Redemption of Mutual Funds
(Source: SEBI Bulletin)
Section III
Accepting deposits as a liability and converting them into assets such as loans, investments,
cash & balances with RBI etc. is one of fundamental function of the banks and other
19/47
constituents of the financial sector. Banks holds a portfolio of assets and, given the
characteristics and distribution of the liabilities, they attempt to structure of their portfolio of
assets in such a manner so as to yield the greatest return. Banks have four categories of assets,
viz., cash in hand and balances with the central bank, assets with the banking system,
investments in Government and other approved securities and loan and advances.
Quantitatively, lending and investments are the most important earning assets of the banks.
This section deals with the trends of loans & advances and investments for SCBs, RRBs,
UCBs, Scheduled UCBs, Non- Scheduled UCBs, RCBs, StCBs, DCCBs, PACBs, SCARDBs,
PCARDBs, FIs and NBFC-Ds.
3.1 Trends of Loan and Advances
Loans and advances comprises of i.) Bills purchased and discounted ii.) Cash credit,
overdraft etc. iii.) Term loans. As loans and advances is very important portfolio of the
balance sheet of the bank therefore, trend of SCBs, RRBs, UCBs, Scheduled UCBs, Non-
Scheduled UCBs, RCBs, StCBs, DCCBs, PACBs, SCARDBs, PCARDBs, FIs and NBFC-Ds
are captured for the period of 2005 to 2009.
3.1.1 Loans and advances of SCBs: It shows increasing trend for SCBs during 2005 to 2009
(Graph -18). However, growth rates of loans and advances of SCBs , which was 33.2 % in
the end –March 2005 was 33.2 % and it came down to 21.2 % on end-March 2009 (Table 2).
Graph -18
Trends of Loans & Advances of SCBs during 2005 to 2009
1150836
1516711
1981236
2476936
3000906
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Loans & Advances of SCBs
(Source: DBIE:RBI's Data Warehouse)
20/47
Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: September,
2009, RBI highlights that annual growth rate of gross bank credit of rural and semi-urban
population showed increasing trend in the September 2009 quarter. However, urban and
metropolitan population showed decreasing trend during the same period (Table 5).
3.1.2 Loans and advances of RCBs: Loans and advances portfolio of Rural Cooperative
Banks (RCBs), State Cooperative Banks (StCBs), District Central Cooperative Banks
(DCCBs), Primary Agricultural Credit Societies (PACS), State Cooperative Agriculture and
Rural Development Banks (SCARDBs) and Primary Cooperative Agriculture and Rural
Development Banks ( PCARDBs) constitute more than half of the total assets. Loans and
advances of all rural cooperative have shown rising trend during 2005 -08 (Graph -19) and
Growth rates (Y-o-Y) of aggregated loan & advances of rural cooperative during 2005 to
2008 are 6 %, 12 %, and 3 % respectively (Table 2). There is a lag in compiling of RCBs
data which needs to be addressed for it to be useful for any policy purpose. As can be seen
from Table 2, loans & advances growth of RCBs is approx one eighth of loans & advances
growth of SCBs in the year 2007-08.
Graph -19
Trends of Loans & Advances of RCBs during 2005 to 2008
189407201118
225770 233014
0
50000
100000
150000
200000
250000
2005 2006 2007 2008
Year
Rs. C
rore
Loans & Advances of RCBs
(Source: Report on Trend and Progress of Banking in India)
3.1.2.1 Loans and advances of StCBs: As loans and advances constitutes more than half of
the assets of StCBs and major part of it goes towards the lower tier institution in short term
credit structure and it has shown a rising trend during 2005 -08 (Graph – 20). Growth rates
(Y-o-Y) of loan & advances of StCBs during 2005 -08 are 6 %, 19 %, and 2 % respectively
21/47
(Table 2). Hence, declining of Loans and advances of StCBs means lessening of the flow of
the resources to lower institutions.
Graph – 20
Trends of Loans & Advances of StCBs during 2005 to 2008
3734639684
47354 48228
0
10000
20000
30000
40000
50000
60000
2005 2006 2007 2008
Year
Rs. C
rore
Loans & Advances of StCBs
(Source: Report on Trend and Progress of Banking in India)
3.1.2.2 Loans and advances of DCCBs: Loans and advances constitutes the most important
form of assets for DCCBs and it has shown rising trend during 2005 -08 (Graph – 21). The
share of loans and advances worked out to 56.4 per cent at end-March 2008 of its total asset.
Growth rates (Y-o-Y) of loan & advances of DCCBs during 2005 to 2008 are 8 %, 12 %, and
2 % respectively (Table 2). Among the RCBs, loans & advances share of DCCBs is highest
as can be seen from chart -3.
Graph -21
Trends of Loans & Advances of DCCBs during 2005 to 2008
7309179202
8903891374
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
2005 2006 2007 2008
Y ear
Loans & Advances of DCCBs
(Source: Report on Trend and Progress of Banking in India)
22/47
Chart -3
Share of loans & advances of segments of RCBs - 2008
48228, 21%
91374, 39%
65666, 28%
18217, 8%9529, 4%
Loans & Advances of StCBs
Loans & Advances of DCCBs
Loans & Advances of PACS
Loans & Advances of SCARDBs
Loans & Advances of PCARDBs
(Source: Report on Trend and Progress of Banking in India)
3.1.2.3 Loans and advances of Primary Agricultural Credit Societies (PACS): PACS form the
third and lowest tier in the short-term credit cooperative structure that operates directly at the
grassroots i.e. in villages. Loans and advances has shown rising trend during 2005 to 2008
(Graph -22). Growth rates (Y-o-Y) of loan & advances of PACS during 2005 to 2008 are 59
%, 13 %, and 12 % respectively (Table 2).
Graph -22
Trends of Loans & Advances of PACS during 2004 to 2008
32481
51779
58620
65666
0
10000
20000
30000
40000
50000
60000
70000
2005 2006 2007 2008
Year
Rs. C
rore
Loans & Advances of PACS
(Source: Report on Trend and Progress of Banking in India)
3.1.2.4 Loans and advances of SCARDBs: Loans and advances portfolio constitutes about
three fourths of the total assets of SCARDBs and it is showing rising trend till 2006-07
23/47
thereafter declined during 2007-08 (Graph 23). Growth rates (Y-o-Y) of loan & advances of
SCARDBs during 2005 to 2008 are 2 %, 5 %, and -2 % respectively (Table 2).
Graph -23
Trends of Loans & Advances of SCARDBs during 2005 to 2008
17422 1771318644 18217
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2005 2006 2007 2008
Year
Rs
. C
rore
Loans & Advances of SCARDBs
(Source: Report on Trend and Progress of Banking in India)
3.1.2.5 Loans and advances of PCARDBs: Trends exhibited by loans and advances of
PCARDBs is showing rising trend till 2005-06 thereafter it has shown declining trend during
2006-08 (Graph -24). Growth rates (Y-o-Y) of loan & advances of PCARDBs during 2005 to
2008 are 1 %, -5 %, and -21 % respectively (Table 2). Among the RCBs, loans & advances
share of PCARDBs is lowest as can be seen from Chart -3.
Graph -24
Trends of Loans & Advances of PCARDBs during 2005 to 2008
12622 1274012114
9529
0
2000
4000
6000
8000
10000
12000
14000
2005 2006 2007 2008
Y ear
Loans & Advances of PCARDBs
(Source: Report on Trend and Progress of Banking in India)
3.1.3 Loans and advances of UCBs: Loans and advances portfolio comprises of roughly 50
% of their total assets of UCBs. It has shown rising trends during 2005 to 2009 (Graph -25)
24/47
and it posted annual growth rates (Y-o-Y) of during 2005 to 2009 are 7 %, 11 %, 13 % and 8
% respectively (Table 2). Urban Cooperative Banks (UCBs) have posted high growth in
loans and advances of 13 % during the year 2007-08 unlike their rural counterparts. However,
it is still lower than the growth rate of loans and advances observed in SCBs in the respective
years (Table 1).
Graph -25
Trends of Loans & Advances of UCBs during 2005 to 2009
6687471641
79733
9044497918
0
20000
40000
60000
80000
100000
120000
2005 2006 2007 2008 2009
Y ear
Loans & Advances of UCBs
(Source: Report on Trend and Progress of Banking in India)
3.1.3.1 Loans and advances of Scheduled UCBs: Loans and advances portfolio comprises of
roughly 50 % of their total assets of Scheduled UCBs. It has been showing rising trends
during 2005 to 2009 (Graph -26) and it posted annual growth rates (Y-o-Y) of during 2005 to
2009 are 11 %, 17 %, 10 % and 16 % respectively (Table 2).
Graph -26
Trends of Loans & Advances of Sch UCBs during 2005 to 2009
2506127960
3280936147
42234
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Loans & Advances of Sch UCBs
(Source: Report on Trend and Progress of Banking in India)
25/47
3.1.3.2 Loans and advances of Non- Scheduled UCBs: Loans and advances portfolio
comprises of roughly 50 % of their total assets of Non- Scheduled UCBs. It has been
showing moderately rising trends during 2005 to 2007, thereafter increased sharply for 2007-
08 and again moderated for 2008-09 (Graph -27). It posted annual growth rates (Y-o-Y) of
during 2005 to 2009 are 4 %, 7 %, 15 % and 2 % respectively (Table 2).
Graph -27
Trends of Loans & Advances of Non Sch UCBs during 2005 to 2009
41813 4368046924
54297 55684
0
10000
20000
30000
40000
50000
60000
2005 2006 2007 2008 2009
Ye a r
Loans & Advances of Non Sch UCBs
(Source: Report on Trend and Progress of Banking in India)
Overall, Non- Scheduled UCBs generate higher loans and advances during last five years as
compared with Scheduled UCBs. This is partly on account of higher number of Non-
Scheduled UCBs as compared with Scheduled UCBs as well as more mobilization of
deposits.
3.1.4 Loans and advances of RRBs: Loans and advances portfolio of RRBs has been
expanded during 2005 to 2009 (Graph -28) and it posted annual growth rates (Y-o-Y) of 21
%, 22 %, 21 % and 19 % during 2005 to 2009 respectively (Table 2). The share of priority
sector loans issued by RRBs was 84 % for 2008-09.
26/47
Graph -28
Trends of Loans & Advances of RRBs during 2005 to 2009
31803
38520
47326
57568
69030
0
10000
20000
30000
40000
50000
60000
70000
80000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Loans & Advances of RRBs
(Source: DBIE: RBI's Data Warehouse)
3.1.5 Loans and advances of FIs: Loans and advances portfolio of FIs shows rising trends
during 2005 to 2009 (Graph -29) and it posted annual growth rates (Y-o-Y) of during 2005 to
2009 are 21 %, 12 %, 17 % and 21 % respectively(Table 2).
Graph -29
Trends of Loans & Advances of FIs during 2005 to 2009
91874
111441125194
147008
178595
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Loans & Advances of FIs
(Source: Report on Trend and Progress of Banking in India)
3.1.6 Loans and advances of NBFCs –D: Trends exhibited by loans and advances of
NBFCs –D (deposit taking) is showing declining trend till 2005-06 thereafter increasing
27/47
during 2006-09 (Graph -30). Annual growth rates (Y-o-Y) of loan & advances of NBFCs –D
during 2005 to 2009 are -16 %, 3 %, 70 % and 11 % respectively (Table 2).
Graph - 30
Trend in Loans & Advances of NBFCs-D during 2005 to 2009
12749
10686 11059
18823
21073
0
5000
10000
15000
20000
25000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Loans & Advances of NBFCs-D
(Source: Report on Trend and Progress of Banking in India)
3.1.6.1 Hire Purchase activities of NBFCs –D:Many NBFC-D companies are involved in
hire-purchase activities which are having origin of 30 years and they strengthened their
position in a short period of time. From only a handful of companies in the early 1980s,
numbers of NBFC companies have grown to around 12000. Their one of important role is to
provide hire-purchase activity which has shown increasing trends during 2005 to 09 in terms
of volumes (Graph -31). Growth rates (Y-o-Y) of hire-purchase activities of NBFCs –D
during 2005 to 2009 are 38 %, 31 %, 27 % and 6 % respectively (Table 2). However, during
2008-09 it shows moderation.
28/47
Graph -31
Trends in Hire Purchase Assets NBFCs-D during 2005 to 2009
14400
20008
26222
3352535647
0
5000
10000
15000
20000
25000
30000
35000
40000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Hire Purchase Assets NBFCs-D
(Source: Report on Trend and Progress of Banking in India)
3.2 Trends in Investments
Banks investments are of three types, viz., Government securities, other approved securities
and non-approved securities. These three are broadly categorized as SLR investments
(Government securities and other approved securities) and non-SLR investments (comprising
CPs, shares, bonds and debentures issued by the corporate sector). Banks and other deposit
taking entities have to invest in government securities and other securities as per the
regulations under BR Act, 1949. It serves twin purpose of making availability of funds for
government and acting as a shocker against risks as gilt edge securities are assigned with
negligible risk.
3.2.1 Investments of SCBs: It has shown increasing trend for SCBs during 2005 to 2009
(Graph -32). Growth rate of investments by SCB banks decelerated to 23.1 % as at end
March 2009. But percentage of SLR securities increased during the year due to low risks and
low returns against the backdrop of prevailing uncertainties.
29/47
Graph -32
Trends of Investments of SCBs during 2005 to 2009
869737 866508950981
1177329
1449474
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Investments of SCBs
(Source: DBIE: RBI's Data Warehouse)
3.2.2 Investments of RCBs: Investments of RCBs has shown increasing trend during 2005 to
2008 (Graph -33). Growth rates (Y-o-Y) of investment portfolio of RCBs during 2005 to
2008 are 8 %, 1.5 %, and 13 % respectively (Table 3). There is a lag in compiling of RCBs
data which needs to be addressed for it to be useful for any policy purpose. As can be seen
from Table 3, investments growth of RCBs is approx half of investments growth of SCBs in
the year 2007-08.
Graph -33
Trends of Investments of RCBs
6182866985 67886
76757
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
2005 2006 2007 2008
Year
Rs. C
rore
Investments of RCBs
(Source: Report on Trend and Progress of Banking in India)
3.2.2.1 Investments of StCBs: Trends exhibited by investments of StCBs is showing rising
trend till 2005-06 thereafter declining trend during 2006-07 and subsequently again rising
trend during 2007-08 (Graph -34). It is observed that decline in loan and advance portfolio of
StCBs reflect as the respective increase of investment portfolio. Annual Growth rates (Y-o-Y)
30/47
of investment portfolio of StCBs during 2005 - 08 are 19 %, -12 %, and 20 % respectively
(Table 3).
Graph - 34
Trends of Investments of StCBs during 2005 to 2008
0
5000
10000
15000
20000
25000
30000
35000
2005 2006 2007 2008
Year
Rs. C
rore
Investments of StCBs
(Source: Report on Trend and Progress of Banking in India)
3.2.2.2 Investments of DCCBs: Investment portfolio of DCCBs has shown increasing trend
during 2005 to 2008 (Graph -35). Growth rates (Y-o-Y) of investment portfolio of DCCBs
during 2005 to 2008 are 2 %, 12 %, and 8 % respectively (Table 3). Among the RCBs,
investments share of DCCBs is maximum as can be seen from Chart -4.
Graph -35
Trends of Investments of DCCBs during 2005 to 2008
35830 36628
4100644419
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2005 2006 2007 2008
Year
Rs. C
rore
Investments of DCCBs
(Source: Report on Trend and Progress of Banking in India)
31/47
Chart -4
Share of Invesments of segments of RCBs -2008
29060, 38%
44419, 58%
2526, 3%
752, 1%
Investments of StCBs
Investments of DCCBs
Investments of SCARDBs
Investments of PCARDBs
(Source: Report on Trend and Progress of Banking in India)
3.2.2.3 Investments of SCARDBs: Trends exhibited by investments of SCARDBs is showing
declining trend till 2005-06 thereafter rising trend till 2008-09 (Graph -36). Growth rates (Y-
o-Y) of investment portfolio of SCARDBs during 2005 - 08 are -1 %, 2 %, and 31 %
respectively (Table 3). It is noteworthy that over the recent past, there has been an increasing
share of investments in the total assets for SCARDBs. However, SCARDBs PCARDBs have
low share of investments vi-a-vis StCBs and DCCBs.
32/47
Graph -36
Trends of Investments of SCARDBs during 2005 to 2008
1905 1885 1916
2526
0
500
1000
1500
2000
2500
3000
2005 2006 2007 2008 2009
Year
Rs
. C
rore
Investments of SCARDBs
(Source: Report on Trend and Progress of Banking in India)
3.2.2.3 Investments of PCARDBs: Trends exhibited by investments of PCARDBs is showing
declining trend till 2005-06 thereafter increasing trend during 2006-07 and subsequently
again declining trend during 2007-08 (Graph 37). Growth rates (Y-o-Y) of investment
portfolio of PCARDBs during 2005 to 2008 are -3 %, 6 %, and -8 % respectively (Table 3).
Graph -37
Trends of Investments of PCARDBs during 2005 to 2008
804778
824
752
0
100
200
300
400
500
600
700
800
900
2005 2006 2007 2008
Y ear
Investments of PCARDBs
(Source: Report on Trend and Progress of Banking in India)
3.2.3 Investments of UCBs: Investments of UCBs has shown increasing trend during 2005 -
09 (Graph -38). Growth rates (Y-o-Y) of investment portfolio of UCBs during 2005 - 09 are
8 %, 1 %, 12 % and 13 % respectively (Table 3). It has been observed that investments are
the one of most important driving factor on the asset side during 2008-09. Further analysis of
investment portfolio of UCBs, Scheduled UCBs and Non-Scheduled UCBs shows SLR
33/47
investment was the most preferred investment portfolio which constitutes more than 90 % of
their total investment.
Graph -38
Trends of Investments of UCBs during 2005 to 2009
4687250395 50859
5691264171
0
10000
20000
30000
40000
50000
60000
70000
2005 2006 2007 2008 2009
Year
Rs
. C
rore
Investments of UCBs
(Source: Report on Trend and Progress of Banking in India)
3.2.3.1 Investments of Scheduled UCBs: Investments of Scheduled UCBs has shown rising
trend during 2005 -09 (Graph -39). Growth rates (Y-o-Y) of investment portfolio of
Scheduled UCBs during 2005 - 09 are 32 %, 1 %, 13 % and 13 % respectively (Table 3).
Graph -39
Trends of Investments of Sch UCBs during 2005 to 2009
17094
22593 22873
25776
29210
0
5000
10000
15000
20000
25000
30000
35000
2005 2006 2007 2008 2009
Y ear
Investments of Sch UCBs
(Source: Report on Trend and Progress of Banking in India)
3.2.3.2 Investments of Non- Scheduled UCBs: Investments of Non- Scheduled UCBs has
shown declining trend during 2005 -06 thereafter rising trend till 2008-09 (Graph -40).
Growth rates (Y-o-Y) of investment portfolio of Non- Scheduled UCBs during 2005 to 2009
are -6 %, 1 %, 11 % and 12 % respectively (Table 3).
34/47
Graph -40
Trends of Investments of Non-Sch UCBs during 2005 to 2009
2977827802 27985
31136
34961
0
5000
10000
15000
20000
25000
30000
35000
40000
2005 2006 2007 2008 2009
Y ear
Investments of Non-Sch UCBs
(Source: Report on Trend and Progress of Banking in India)
Overall, Non- Scheduled UCBs generate higher investment during last five years as
compared with Scheduled UCBs. This is partly on account of higher number of Non-
Scheduled UCBs as compared with Scheduled UCBs as well as more mobilization of
deposits.
3.2.4 Investments of RRBs: Investment of RRBs has shown increasing trend during 2005 to
2009 (Graph -41). Growth rates (Y-o-Y) of investment portfolio of RRBs during 2005 to
2009 are 2 %, 6 %, 14 % and 13 % respectively (Table 3).
35/47
Graph -41
Trends of Investments of RRBs during 2005 to 2009
24532 2492526352
30166
34168
0
5000
10000
15000
20000
25000
30000
35000
40000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Series1
(Source: DBIE: RBI's Data Warehouse)
3.2.5 Investments of FIs: Investments of FIs has shown declining trend till 2007 -08
thereafter it exhibit marginal increase during 2008-09 (Graph -42). Investments portfolio of
FIs shows decline since 2005 to 2007 as they liquidated their investment portfolio
significantly to accommodate the sharp increase the loan portfolio. Growth rates (Y-o-Y) of
investment portfolio of FIs during 2005 to 2009 are -23 %,-32 %, -4 % and 21 % respectively
(Table 3).
Graph -42
Trend of Investments of FIs during 2005 to 2009
0
2000
4000
6000
8000
10000
12000
14000
16000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Investments of FIs
(Source: Report on Trend and Progress of Banking in India)
3.2.6 Investments of NBFC-Ds: Investment portfolio of consolidated balance sheet of
NBFC-Ds has shown increasing trends during 2005 to 2009 (Graph 43). However, approved
securities which comprises of SLR securities and unencumbered term deposits in SCBs
36/47
constitute bulk investment. Growth rates (Y-o-Y) of investment portfolio of NBFC-Ds during
2005 to 2009 are 9 %, 71 %, 51 % and 32 % respectively (Table 3).
Graph 43
Trends in Investments NBFCs-D during 2005 to 2009
3957 4326
7412
11210
14813
0
2000
4000
6000
8000
10000
12000
14000
16000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Investments NBFCs-D
(Source: Report on Trend and Progress of Banking in India)
3.2.7 Investments by Mutual Funds: As a capital market intermediary, mutual funds invest
both in equity and debt instrument. During the last five years, there is an unprecedented
growth in mutual funds gross mobilization.
3.2.7.1 Net purchase/ sale in equity by Mutual Funds: Trend exhibited by it has shown
overall rising trends during 2005-06, thereafter it declined during 2006-07. It rose sharply
during 2007-08 and again declined significantly during 2009-09 (Graph – 44). Annual
growth rates (Y-o-Y) of it during 2005-09 are 3092 %, -36 %, 80 % and -57 % respectively
(Table 3).
37/47
Graph – 44
Trends of Net purchase/ sale in equity by Mutual Funds during 2005 to 2009
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Net purchase/ sale in equity by
Mutual Funds
(Source: SEBI Bulletin)
3.2.7.1 Net purchase/ sale in debt by Mutual Funds: It has shown rising trend during 2005-09
(Graph –45). Annual growth rates (Y-o-Y) of this portfolio of mutual funds during 2005 to
2009 are 116 %, 42 %, 40 % and 11 % respectively (Table 3).
Graph –45
Trends of Net purchase/ sale in debt instrument by Mutual Funds during 2005 to 2009
16987
36801
52544
73789
81803
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Net purchase/ sale in debt by
Mutual Funds
(Source: SEBI Bulletin)
3.2.8 Investments by Life Insurance Corporation of India Ltd. (LIC): There exists huge scope
of investment in the insurance sector in India. India has an enormous middle-class that can
afford to buy life, health and disability and pension plan products. Further, insurance is one
of the most important tax saving instrument in the country. Insurance sector has been opened
38/47
up for competition from Indian private insurance companies with the enactment of Insurance
Regulatory and Development Authority Act, 1999 (IRDA Act). As per the provisions of
IRDA Act, 1999, Insurance Regulatory and Development Authority (IRDA) was established
on 19th April 2000 to protect the interests of holder of insurance policy and to regulate,
promote and ensure orderly growth of the insurance industry. IRDA Act 1999 paved the way
for the entry of private players into the insurance market, which was hitherto the exclusive
privilege of public sector insurance companies/ corporations. Under the new dispensation
Indian insurance companies in private sector were permitted to operate in India on the
fulfillment of certain prerequisites. A large number of public and private players are
competing today in both life and general insurance segments. The FDI cap/ Equity in the
insurance sector is 26 percent under the automatic route subject to licensing by the insurance
regulatory and development authority.
LIC invests in public, private, joint and co-opeartive sectors. Investment by LIC has shown
increasing trend (Graph –46) and annual growth rates (Y-o-Y) of it during 2005 -09 are 24 %,
7 %, 21 % and 20 % respectively (Table 3).
Graph –46
Trends in Investments by LIC during 2005 to 2009
393185
487227521735
635747
762892
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
2005 2006 2007 2008 2009
Year
Rs. C
rore
Investment by LIC
(Source: DBIE: RBI's Data Warehouse)
Section IV
This section highlights issues of data availability and data gaps for related areas of financial
sector. Two types of returns, viz., statutory and non-statutory returns are being submitted by
banks and NBFCs to RBI which comprises of several indicators of balance sheet and profit
and loss account for fortnightly, monthly, quarterly and yearly frequencies.
39/47
4.1 SCBs submit section -42 data on fortnightly basis to RBI which comprises of provisional/
final Form 'A' and Form 'B' which comprise of asset and liability items of as per the
direction of Section– 42, of RBI Act 1934. SCBs also submit Form X data on monthly basis
as per the section 27 of Banking Regulation Act, 1949 which comprises assets & liabilities
items of balance sheet. Each bank also files annual returns called "Balance Sheet" which
contains balance sheet and profit & loss account items. Background work is going on to
introduce return on Sectoral deployment of Credit on fortnightly basis from 49 banks through
ORFS and XBRL which constitutes 95 % of credit outstanding. It will enhance data quality,
timeliness and provide valuable input for monetary policy. Details of sectoral items are
placed in Annex I. Banks also file returns related BSR 1A,BSR 1B, BSR 2, BSR 3, BSR 4,
BSR 5, BSR 6, BSR 7, Proforma-I, Proforma-II, and International Banking Statistics. BSR
1A return comprises of all borrowal accounts with credit limits over Rs.2 lakhs are to be
individually listed along with particulars of district and population group of the place of
utilisation, type of account, organisation, occupation, category of borrower, asset
classification, rate of interest, credit limit and amount outstanding in respect each loan or
advance. BSR 1B return elicit information about all borrowal accounts with credit limits of
Rs.2 lakhs and less are to be classified according to occupation and aggregate figures for
each occupation should be furnished in a consolidated from for each branch. BSR-2
comprises of category-wise number of staff, number of staff, number of accounts and amount
outstanding according to type of deposits and classification of all term deposits according to
original maturity, broad interest rate ranges, size of deposits and residual maturity. BSR 3
data are related to sensitive commodities' outstanding advances on monthly basis. BSR 4 data
is annual data and it is related to ownership pattern of deposits. BSR 5 data is also annual
data and related to Pattern of Investment of bank in Central and State Government Securities,
Other Trustee Securities, shares, etc.. BSR 6 data are quinque-nnial and related to survey of
Debits to Deposit Accounts. BSR 7 data are quarterly data and related to aggregate deposits
and gross bank Credit. International Banking Statistics, which is filed by banks on quarterly
basis, provides an understanding of the total magnitude of international assets and liabilities
of the banking system and their composition, mainly in terms of sector (bank, non-bank),
residual maturity, currency and country of residence. International assets / liabilities cover
claims /liabilities of reporting banks with/toward non-residents in any currency and residents
only in foreign currency.
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Details of these returns are present in the Annex II. Presently BSR 1A, BSR 1B, BSR 2, BSR
4, BSR 5 are coming with a lag of around 1 year therefore, its timeliness would be ensured.
4.2 UCBs submit 53 returns (Annex III), statutory as well as non-statutory, of fortnightly,
monthly, quarterly and yearly frequencies to RBI. All these returns capture informations
related to balance sheets, profit & loss account, off-balance sheet exposure and prudential
supervisory variables. As per the requirements, few returns are made only for scheduled
UCBs and few are only for non-scheduled UCBs. Some returns have been submitted by both
scheduled UCBs as well as non-scheduled UCBs. However, The Reserve Bank prepared
Prudential Supervisory Reporting System in the form of Off-Site Surveillance (OSS) for the
UCBs to obtain relevant information on areas of prudential interest as well as to address the
management information needs and to strengthen the MIS capabilities within the UCBs. The
system was designed to monitor compliance and obtain information in areas of prudential
interest including information on balance sheet and off-balance sheet exposures, profits and
profitability, asset quality and sector/segment-wise concentration of advances.
A collateral objective of the reporting system was to sensitise managements of banks to
prudential concerns of the supervisory authority and thereby help in self-regulation. The OSS
reporting system was first introduced in April 2001 for the scheduled UCBs comprising 10
OSS returns. With a view to reducing the volume of data required to be reported by banks,
while increasing the breadth and depth of information obtained from them, the Reserve Bank
rationalised the OSS returns and reduced their number from ten to eight (one annual and
seven quarterly) returns for the scheduled UCBs with effect from March 2004. Further, this
set of eight returns introduced for scheduled UCBs were also made applicable to non-
scheduled UCBs with deposits of over Rs.100 crore from June 2004 and then to non-
scheduled UCBs having deposits between Rs.50 crore and Rs.100 crore and with branches in
more than one district from June 2006. For banks that had deposits between Rs.50 crore and
Rs.100 crore and whose branch network was limited to a single district, a simplified set of
five (four quarterly and one annual) returns (defined as Simplified OSS (SOSS)) was made
applicable from June 2006 onwards. From December 2008 onwards, SOSS was extended to
Tier I UCBs that had deposits below Rs.50 crore and OSS returns were made applicable to
Tier II UCBs with deposits below Rs.50 crore. As such, all UCBs are now covered under the
OSS system – a set of eight (OSS) returns to Tier II UCBs and a set of five returns (SOSS) to
Tier I UCBs.
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The Committee on Financial Sector Assessment (CFSA) undertook a comprehensive self-
assessment of the Indian financial system. The CFSA assessed the financial health of the
UCB sector and carried out stress tests on this sector, which highlighted the weak financial
health of this sector. On account of data limitations, the stress tests were carried out on 52
scheduled UCBs accounting for 43 per cent of the total assets at end-March 2007 of all
scheduled UCBs. As on December 2009, data for OSS returns are available only for 4
quarters and long time series data would be built in the coming future which would facilitate
usability of UCBs data and stress testing. Data for sectoral deployment of credit for UCBs
are presently not available with the RBI as it is needed for monetary policy. Hence returns
should be revised for capturing sectoral deployment data by UBD, RBI.
4.3 NBFCs have been submitting returns related to balance sheet items, income &
expenditure items, sources & uses of funds items, off-balance sheet items etc. to RBI on
monthly, quarterly, half-yearly and yearly frequencies. All returns and form are present in the
Annex IV and also available on http://rbi.org.in . Data for sectoral deployment of credit for
NBFCs are presently not available with the RBI as it is needed for monetary policy. Hence
returns should be revised for capturing sectoral deployment data by DNBS, RBI. Out of
12000 NBFCs only 600 have been submitting returns to RBI as their deposits are more than
100 crore. Hence, coverage of companies may be enhanced.
Flow of funds (FOF) accounts show the transactions in financial instruments among major
sectors of the economy. These accounts provide a broad framework for analysing issues
related to financial sector and its relationships with the real economy and thereby facilitate
insights into the role of the financial sector in the development process. The channeling of
resources from the surplus units to the deficit units was reflected in the flow of funds (FOF)
accounts of the Indian economy across the six sectors, viz., households, corporates,
government, banks, other financial institutions (OFIs) and the rest of the world sector.
Households, the consistent surplus sector, met to a large extent the deficits of the public and
private corporate sectors, and to a limited extent of the rest of the world sector. Funds were
provided to meet the requirements of the deficit sectors either directly (primary issues) or
through the financial intermediaries such as banks and OFIs (secondary issues). Keeping in
view the analytical uses of the FOF, the Reserve Bank of India has been compiling and
disseminating FOF accounts in a detailed form from time to time since December 1964. The
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latest detailed ‘flow of funds accounts’ for the Indian economy are available for the period
2000-01 to 2007-08, which were published in the Reserve Bank of India Bulletin, October
2009.
Section V
Conclusion
Deposit is most important source of funds for Indian Financial sector and financial
institution among all players marked highest growth rate of deposit variable during 2005 to
2009. Deposits of Scheduled Commercial Banks growth rate has been consistent one by
showing 17 to 24 per cent during the 2005 to 2009. Growth rate of deposit variable for Urban
Cooperative Banks are consistent one during 2005 to 2009 which shows rising of confidence
level in the area. Placed below is table no. 1 of growth rates of the player of Indian Financial
Sector. Growth rates of deposit variable of NBFCs are declined during 2005 to 2009 which
shows changing pattern of the sources of funds for NBFCs.
Growth rate of Loans and advances of SCBs have declined from 31 % to 21 % during 2005
to 2009. However, growth rate of loan and advances RRBs, UCBs, Scheduled UCBs have
been consistent during 2005 to 2009. Growth rate of loan and advances of FIs shows
increasing trend. Details of growth rate for loan and advances are placed in table no. 2.
Growth rate of investment portfolio of SCBs has been increased to 23.11 % from -0.4 %
which shows banks preference to park their funds in the low risk and low return instrument.
It appears in table 3 that growth rate of investment increased during many years for many
variables which highlights high confidence of players for the G-sec market.
RBI has been having a long tradition of data dissemination related to Indian financial sector
through publication and internet. RBI has exclusively developed http://dbie.rbi.org.in web-
site for the dissemination of data to public which is also known as Database on Indian
Economy (DBIE): RBI's Data Warehouse. This web-site provides facility of generating
adhoc reports. It comprises of 411 Static Reports, 74 Data Query Templates (Subject-wise)
and 53 Data Query Templates (Frequency-wise) which are available to public through DBIE
internet site. List of all series available on Indian Financial Sector are given in Annex V.
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Further, RBI has also been disseminating data over UCBs and NBFCs through its statutory
publication viz. Reports on Trend and Progress of Banking in India. It has been endeavor of
RBI to enhance the coverage of financial sector data in DBIE: RBI's Data Warehouse by
incorporating more and more data series hitherto available in various publications of the
Bank.
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Table 1: Growth Rate of Deposits of various constituents of Indian Financial Sector
(Per cent)
Sr. No. Players of Indian
Financial sector
Year
2005-06 2006-07 2007-08 2008-09
1 SCBs 17.8 24.5 23.1 22.3
2 Small saving of Post
Office Deposit 15.2 6.9 -9.7 -2.0
3 RCBs 4.9 9.1 8.8
3.1 StCBs 2.4 6.9 9.0
3.2 DCCBs 6.6 7.9 8.9
3.3 PACS 3.0 20.0 8.3
3.4 SCARDBs 11.0 -5.1 6.2
3.5 PCARDBs 4.6 -10.7 -2.9
4 UCBs 8.6 6.4 15.2 13.4
4.1 Scheduled UCBs 10.6 12.9 15.0 15.3
4.2 Non- Scheduled
UCBs 7.3 2.1 15.3 12.1
5 RRBs 10.1 27.1 15.6 20.5
6 FIs 8.7 51.5 65.0 80.7
7 NBFCs 11.2 8.1 -1.2 -11.6
8 Mutual Funds
(Gross Resource
mobilised) 30.7 76.5 130.3 21.5 Source: DBIE: RBI's Data Warehouse, Report on Trend and Progress of Banking in India and SEBI Bulletin
Table 1A Growth Rate of Redemption of Mutual Funds
(Per cent)
Sr. No. Item Year
2005-06 2006-07 2007-08 2008-09
1 Redemption of
Mutual Funds 24.8 76.4 133.6 26.5 Source: SEBI Bulletin
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Table 2: Growth Rate of Loans & Advances of various constituents of Indian Financial
Sector
(Per cent)
Sr. No. Players of Indian
Financial sector
Year
2005-06 2006-07 2007-08 2008-09
1 SCBs 31.8 30.6 25.0 21.1
2 RCBs 6.1 12.2 3.2
2.1 StCBs 6.2 19.3 1.8
2.2 DCCBs 8.3 12.4 2.6
2.3 PACS 59.4 13.2 12.0
2.4 SCARDBs 1.6 5.2 -2.2
2.5 PCARDBs 0.9 -4.9 -21.3
3 UCBs 7.1 11.2 13.4 8.2
3.1 Scheduled UCBs 11.5 17.3 10.1 16.8
3.2 Non- Scheduled
UCBs 4.4 7.4 15.7 2.5
4 RRBs 21.1 22.8 21.6 19.9
5 FIs 21.2 12.3 17.4 21.4
6 NBFCs -16.1 3.4 70.2 11.9
Source: DBIE: RBI's Data Warehouse and Report on Trend and Progress of Banking in India
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Table 3: Growth Rate of Investments of various constituents of Indian Financial Sector
(Per cent)
Sr. No. Players of Indian
Financial sector
Year
2005-06 2006-07 2007-08 2008-09
1 SCBs -0.3 9.7 23.8 23.1
2 RCBs 8.3 1.3 13.0
2.1 StCBs 18.9 -12.8 20.3
2.2 DCCBs 2.2 11.9 8.3
2.3 PACS
2.4 SCARDBs -1.0 1.6 31.8
2.5 PCARDBs -3.2 5.9 -8.7
3 UCBs 7.5 0.9 11.9 12.7
3.1 Scheduled UCBs 32.1 1.2 12.7 13.3
13.2 Non- Scheduled
UCBs -6.6 0.6 11.2 12.2
4 RRBs 1.6 5.7 14.4 13.2
5 FIs -23.4 -32.5 -4.8 21.8
6 NBFCs 9.3 71.3 51.2 32.1
7 Mutual Funds net
purchase/ sale in
equity and debt
instrument 193.1 20.5 46.2 -1.4
7.1 Mutual Funds net
purchase/ sale in
equity 3092.6 -36.6 79.9 -57.1
7.2 Mutual Funds net
purchase/ sale in
debt 116.6 42.7 40.4 10.8
8 Investments by
LIC 23.9 7.0 21.8 19.9
Source: DBIE: RBI's Data Warehouse, Report on Trend and Progress of Banking in India
and SEBI Bulletin
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Table 4: Annual Growth Rates of Aggregate Deposit - Population Group*
(Per cent)
Annual Growth Rate
Time
Rural
Deposits
Semi-Urban
Deposits Urban Deposits
Metropolitan
Deposits
Sep-08 19.0 18.2 21.8 19.9
Dec-08 20.4 22.5 25.3 19.1
Mar-09 20.6 23.9 25.4 20.5
Jun-09 18.9 23.1 22.0 20.7
Sep-09 19.8 23.2 20.8 18.6 Source: Quarterly Statistics on Deposits & Credit of Scheduled Commercial Banks, Sep 2009.
Table 5: Annual Growth Rates of Gross Bank Credit - Population Group*
(Per cent)
Annual Growth Rate
Time
Rural Gross
Bank Credit
Semi-Urban
Gross Bank
Credit
Urban Gross
Bank Credit
Metropolitan Gross
Bank Credit
Sep-08 12.2 17.5 22.1 29.5
Dec-08 15.9 16.9 21.2 25.6
Mar-09 14.0 15.7 20.4 20.2
Jun-09 15.1 15.9 19.0 12.8
Sep-09 21.5 18.7 18.9 9.0 Source: Quarterly Statistics on Deposits & Credit of Scheduled Commercial Banks, Sep 2009.
Population Groups based on 2001 census
Population Group Population of all Centres
Rural Less than 10,000
Semi-Urban 10,000 and above but less than One lakh.
Urban One lakh and above but less than 10 lakh.
Metropolitan 10 lakh and above