Despite economic slowdown and asset quality deterioration in the last few years, the Indian banking industry has seen a modest growth of 6-9 per cent in its assets, deposits and loan & advances in 2019-20. But some of the banking numbers have seen a de-growth, which is both good and bad for the sector. Let's analyse the falling numbers.
Less new branches
There was a decline of 9 per cent in the new branch opening by banks in 2019-20. Despite new banks, especially Small Finance Banks (SFBs) and expansion of private banks in semi urban and rural areas, new branch openings were at 4,116 in 2019-20 as against 4,516 in the previous year. There are two reasons.
First, there has been a rationalisation of branches because of merger and acquisitions. Second, the branch model is transforming into a digital model as expansion of branches by big banks have halted in the last few years. In fact, many private banks are using fintech as a sourcing model especially to self-employed and MSME customers .
Steep fall in the debit cards
Debit card numbers have declined by 8.5 per cent from 90.58 crore in 2018-19 to 82.86 crore in 2019-20. The reason could be saturation after the government's Jan Dhan drive when banks issued huge number of debit cards to cover the unbanked population. Jan Dhan drive covered some 30 crore plus new bank account holders. Many of these debit cards are now inactive. Secondly, the digital channels of UPI and e-commerce is also reducing dependence on holding multiple debt cards.
Lesser credit off-take from industry
The credit off-take from the industry declined marginally by 1.2 per cent while agri, services and retail were in positive territory in 2019-20. The outstanding credit to industry fell from Rs 32.93 lakh crore in 2018-19 to Rs 32.52 lakh crore in 2019-20.
The fall in credit to industry is because of the slowdown in the economy. The capacity utilisation levels were also low which forced many of the companies to postpone their expansion plans.
Fall in gross and net NPAs
Finally, the gross and net NPAs have reduced in 2019-20. The gross NPAs have declined from Rs 9.36 lakh crore in 2018-19 to Rs 8.99 lakh crore in 2019-20. The RBI has been quite proactive in forcing banks to take timely action for the stressed loans and classify the loans as NPAs. The whole exercise that started 5 years ago by implementing the asset quality review (AQR) has saved the banks from a sudden piling up of NPAs.
Lesser borrowings by banks
Banks generally borrow debt as part of their capital requirement. Borrowings which were at Rs 17.09 lakh crore in 2018-19 reduced to Rs 16.96 lakh crore in 2019-20. Private banks were comfortably stocked with capital while public sector banks had limitation as their equity capital was low.