VISION 2020 IN BANKING AND FINANCE Presenters:

Seemoli , Pardha , Anant & Preeti

Mergers & Acquisitions

• More BRIC nation companies will be on the acquiring side

• The highest volume of M&A transactions in 2020 will be seen in ‘Energy & Utilities’ sector

• Standardization of accounting policies worldwide facilitate M&A

• Indian banks may buy stakes in banks abroad

GlobalizationUpsurge of remote

banking

Adoption of global standards

Walk-in-loans & credit rating for each customer

Technology would be the key to

competitiveness

Financial Inclusion

• AADHAR will cover the entire population by 2020

• Urbanization & Predicted literacy rate close to 80%

• 600 million new customers' accounts

• Rural areas to be covered by ATMs

• More households investing in shares , debentures , mutual funds

Commodity Markets

2005-06 2006-07 2007-08 2008-09 2009-10 2010-110

20

40

60

80

100

120

Commodities Turnover

turnover Rs. Trillion

• FIs & banks will be permitted to invest in the

commodities markets.

• Bill to grant additional authority to the FMC has been

pending enactment for several years now – it will be

passed

• It is a Futures market , by 2020 options will be

introduced

• Commodities markets to overtake capital markets

FDIs & FIIs• FII inflows US$ 13 billion into Indian stocks till September 2012

• FDI inflow Rs. 734,240.48 Crores (162,305.99 US$ million)

• The Centre for Monitoring Indian Economy (CMIE) projects that FII inflows second half of FY13 at US$ 11.2 billion

• Major FIIs like JP Morgan, Morgan Stanley and Deutsche Bank are believed to drive the positive wave of foreign investments

PRIVATE EQUITY

Rs

Rs

Rs

Rs

Rs

Structure of Global GDP(in current US $ Trillion)2000 2011 2016 2020 2025

World GDP 32.2 68.7 90.5 110.5 140.5

Advanced Economies 25.7(79.7%)

44.4(64.6%)

53.3(58.9%)

61.1(55.3%)

71.7(51.1%)

Developing and Emerging 6.5(20.3%)

24.3(35.4%)

37.2(41.1%)

49.4(44.7%)

68.8(48.9%)

of which India 0.5(1.5%)

1.9(2.8%)

3.6(4.0%)

5.8(5.2%)

10.0(7.1%)

Industry 11th Plan(in %)

12th Plan(9.0%)(in %)

12th Plan(9.5%)(in %)

Agriculture, Forestry & Fishing

3.2 4.0 4.2

Construction 7.8 10.0 11.0

Financing, Insurance, Real Estate &Business services

10.7 10.0 10.5

Total GDP 8.2 9.0 9.5

Broad Macro-Economic Parameters - Previous Plan and Targets for Twelfth Plan•The labor force in India is expected to increase by 32 per cent over the next 20 years•The Interest rates may be decreased (to 8%) in order to encourage growth

11th Plan 12th Plan (Target 9.0%)

12th Plan (Target 9.5%)

1 Investment Rate 36.4 38.7 41.4

2 Fixed Investment 30.9 33.5 35.5

3 Savings Rate 34.0 36.2 38.9

4 Current Account Balance -2.4 -2.5 -2.5

5 WPI Inflation Rate 6.0 4.5-5.0 5.0-5.5

Regulatory Systems in the Indian Financial Market

• Maintain the current conservative system of regulation

• Indian banks should conservatively trade in derivative

market, not be influenced by US,UK banks

• Should resolve problems such as increasing population,

high unemployment rate

• Should not let the debt level rise as much as US, Europe

Microfinance

• Financial education

• Product range, informed by understanding client

needs

• Credit bureaus

• Client protection

• More loans available for rural india

Fiscal and Monetary policy

• FDI

• Investments

• Flexible Defence expenditure

• Short term loans

Financial Inclusion in the banking sector

The HR challenge : Re-skilling, attracting and retaining

Automation implicationsChallenges

Mortgages to cross Rs 40 trillion by 2020

The number of branches to grow 2X,ATMs 5X

Investment banking to grow ten fold.

Infrastructure financing : Rs 20 trillion on bank books

Wealth management : 10X growth

Opportunities

Banking Regulations

CAPITAL ACCOUNT 2020• Planning Commission envisages Foreign Direct

Investments (FDI) to contribute 35% (21% now) to

gross capital formation.

• FII inflows to get stronger in the second half of this

fiscal.

• Plan panel sets $100 billion target for pharma sector.

Cabinet approval of FDI cap hike to

49%

IRDA support:

Secure Rs 40,000 crore

Exit opportunity to promoters

India 2020:

Among top three life insurance

markets

Converge

Innovate

PenetrateInsurance in India in 2020

Insurance in India in 2020

Immediate employment potential: 10 million

30 percent mandatory procurement preferably from MSMEs

Infrastructure development: rural development

Technical expertise and better quality

F

ID

Retail

What it has in store for India?

Indian Pension market in

2020• Pension sector reforms (PFRDA Bill) : Favored by FICCI,

ASSOCHAM and CII.

• Easing rules for pension and insurance funds could help secure

$1 trillion in investment up to 2017.

• FDI could raise share of pension fund assets to GDP from the

current 5% to close to 17%, meeting capital needs.

Land Reforms and Land Acquisition And Rehabilitation Resettlements Bill

• Infrastructure development for GDP target of 5.5

trillion USD by 2020.: incentive to infrastructure

financing

• Bigger share of the rewards of urbanization and

industrialization to landowners.

• Balance between social and economic uses of land

References• Faster, Sustainable and More Inclusive Growth (Oct 11)• Report of the Committee on India Vision 2020 (2002)�• Report of The Committee on Angel Investment & Early�• Stage Venture Capital June 2012• http://www.dnb.co.in/India2020economyoutlook/

Macro_Economic_Outlook2020.asp• www.perjacobsson.org/external/np/seminars/eng/.../

fiscal/.../heller.pdf• www.business-standard.com/india/...regulationfinancial-

system/416450• www.articles.economictimes.indiatimes.com• www.mpra.ub.uni-muenchen.de/4438/1/

MPRA_paper_4438.pdf• http://socialenterprise.georgetown.edu/events-and-media/

2011-3/the-future-of-microfinance-opportunities-challenges-for-financial-inclusion

Thank you !