Revealed: India's Best Banks 2012

By Anand Adhikari

Four years after the global financial crisis began, India's $1,508 billion (Rs 82.6 trillion; a  trillion is 100,000 crore) banking sector still grapples daily with heightened risk. Banks and borrowers, both retail  and corporate, are under financial stress. 

Indian banks have shown resilience, as they have a buffer well over the required capital adequacy ratio of nine per cent. This will help them absorb nearterm shocks, but deteriorating asset quality and slow economic growth are hurting their profitability.

"The risk will keep emerging as the environment keeps changing," warns Chanda Kochhar, Managing Director and CEO, ICICI Bank Ltd.

"You have to constantly be in monitoring mode." A veteran banker, she gained substantial fire-fighting experience as she took over from K.V. Kamath in May 2009.

ALSO READ: Why Bank of Baroda is ranked India's best bank

The industry's performance parameters are sobering: the growth rate for deposits has crashed from 23 per cent in 2007/08 to 15 per cent in 2011/12.

Loans and advances growth has fallen from 25 to 18 per cent. Net non-performing assets (NPAs) have risen from one per cent to 1.28 per cent. 

Return on assets, a measure of profitability, is down from 1.12 per cent to 1.08 per cent. As if all that isn't pressure enough, regulations increasingly require banks to set aside more capital. The Basel III norms, to be implemented beginning January 2013, will require massive capital infusion by Indian banks in a phased manner. 

The high incidence of corporate debt restructuring in the last couple of years may add to the NPAs in the system. Provisioning for NPAs has risen from Rs 54,000 crore in 2010/11 to Rs 74,700 crore in 2011/12.

All these developments will increase pressure on profitability, although Basel III will go a long way in building a strong foundation for the Indian banking sector. All in all, the negatives far outweigh the positives.

Even as pinstripe-clad bankers tighten their belts, Business Today and KPMG together raise the annual toast to the best in the industry. For the second year running, the stateowned Bank of Baroda is the best among large banks.

A large bank is one with a balance sheet of more than Rs 1 trillion. In other words, the bank's assets - investments as well as loans and advances - exceed Rs 1 trillion. On the liabilities side are capital, deposits and borrowings.

In the BT-KPMG study, the country's largest bank, the State Bank of India, has risen from the 21st to the seventh spot thanks to improved operating profits. The second largest, ICICI Bank, has jumped to fifth place from the 13th spot last year.

The Indian banking sector has been insulated from the global banking crisis of 2008, but the industry regulator is concerned about important large institutions whose failure could put the entire sector at risk. When this happened globally, governments had to infuse vast amounts of capital to save large institutions.

The Reserve Bank of India (RBI) is in the process of classifying some domestic banks as systemically important institutions that would get special regulatory attention.

Banking institutions worldwide are yet to recover from the shocks of 2008. The net gainers are Chinese banks, which advanced in the top 100 global bank ratings.

In India, bankers say the challenge is to improve operational efficiency and risk management. "Banks that are agile and proactive will be able to mitigate risk," says Rana Kapoor, CEO of YES Bank Ltd. 

In eight years, this new private-sector bank has built up a balance sheet of over Rs 73,000 crore. It is the best bank in the mid-sized category.

Midsized banks are those with a balance sheet of less than Rs 1 trillion.

Both Bank of Baroda and YES Bank have among the lowest cost-to-income ratios at below 0.38. Banks are increasingly focusing on cost-to-income to protect margins. Branches today are a cost centre, and front-end technology such as ATMs and Internet banking are transforming banking in urban and semi-urban areas. "Branches are evolving to do more value-added business," says ICICI Bank's Kochhar.

As for risk management, the 2008 crisis highlighted the prudence of banks in India, which remained  unscathed. Over the last two decades, net NPAs have fallen. The sudden increase after 2008, while not alarming, is best nipped in the bud by both banks and regulators. The corporate debt restructuring mechanism is full of loopholes, though.

In this environment of gloom, there is still cause for hope. Finance Minister P. Chidambaram has asked the RBI to speed up the process of issuing fresh banking licences.

Close to a dozen foreign banks have entered India in the last two to three years, including the Industrial & Commercial Bank of China and the Australia & New Zealand Banking Group.

Shikha Sharma, Managing Director at Axis Bank, says the momentum for capital investment will recover as the reforms recently initiated by the UPA government kick in. "We should see corporate lending also pick up," she says. 

The industry has big challenges before it, including financial inclusion, and funding for sectors such as agriculture and infrastructure. So even if the years ahead are not hard, there's hard work to be done.


**THE

WINNERS**

BEST LARGE BANK: Bank of Baroda
BEST MID-SIZED BANK: YES Bank

BEST SMALL BANK: JPMorgan Chase

CONSISTENT PERFORMERS: Axis Bank & Bank
of Baroda
PRODUCTIVITY & EFFICIENCY (LARGE BANK): Bank
of Baroda
PRODUCTIVITY & EFFICIENCY (MID-SIZED BANK): DBS
Bank
PRODUCTIVITY & EFFICIENCY (SMALL BANK): Bank
of Nova Scotia
ASSET QUALITY (LARGE BANK): HDFC Bank

ASSET QUALITY (MID-SIZED BANK): Deutsche Bank

ASSET QUALITY (SMALL BANK): JPMorgan Chase
GROWTH (LARGE BANK): Bank of Baroda
GROWTH (MID-SIZED BANK): Ratnakar Bank

GROWTH (SMALL BANK): Bank of Tokyo


Reproduced From Business Today. © 2012. LMIL. All rights reserved.

ALSO READ: Why Bank of Baroda is ranked India's best bank

Latest News

  • Thomson Reuters profit beats but currency weighs on revenue
    Thomson Reuters profit beats but currency weighs on revenue

    Currency weighed on revenues, however, and the news and information company said volatile currencies would have a bigger impact on this year's results than usual. "The quarter and the first half just confirms the momentum that is building inside the business," Chief Executive Jim Smith said in an interview. Analysts, on average, were looking for 50 cents per share, according to Thomson Reuters I/B/E/S. …

  • Microsoft opens Windows 10, free update for one year

    New Delhi, July 29 (IANS) With blue as the theme colour, Microsoft on Wednesday launched with much fanfare its new operating system Windows 10, which will be a free upgrade for existing clients for a year, while priced at $199 as a new package. In a huge hall at the capital's largest exposition ground, the Pragati Maidan, Microsoft India chairman Bhaskar Pramanik and Windows director Vineet Durani opened Windows 10 to the Indian market, with which the Redmond, Washington-based company intends …

  • India's first-ever social polling app is here

    Mumbai, July 29 (IANS) Do you want to create a ripple on a burning topic among your friends on various social media platforms? Called "Whatsay", the app allows users to create and send visual polls (adding an image or video with your post) in 25 categories to their friends via mobile messaging service WhatsApp, social networking site Facebook, micro-blogging site Twitter and Gmail. "Whatsay is the perfect mobile companion for Facebook, Twitter and WhatsApp. …

  • Essar Oil posts best-ever quarterly net profit

    Kolkata, July 29 (IANS) Despite a slump in its net revenue by 34 percent, private oil refiner Essar Oil on Wednesday posted a healthy increase of 54 percent in its net profit at Rs. 1,063 crore for the first quarter of the current fiscal year. Incidentally, this is the company's best ever quarterly performance, with the highest ever net profit - Rs.691 crore. The net revenue during the quarter under review fell by 34 percent to Rs.16,340 crore against the earning of Rs.24,855 crore during …

  • Greece's Tsipras, hounded by left, vows "thus far and no further"

    Greek Prime Minister Alexis Tsipras, struggling to contain a revolt in his left-wing Syriza party, said on Wednesday that his government would not implement reform measures beyond those agreed with lenders at a euro zone summit this month. Tsipras faces a tough Syriza central committee session on Thursday with many activists angered by his acceptance of bailout terms more stringent than those voters rejected in a July 5 referendum. In a clear warning to party rebels, Tsipras said he could be …

  • Nestle India slips into loss as noodle scare hits sales
    Nestle India slips into loss as noodle scare hits sales

    Nestle India Ltd slipped to a second-quarter loss as sales plunged after its hugely popular Maggi noodles were pulled off shelves over safety concerns. "Nestle India is making all efforts and will continue to engage with authorities to bring Maggi Noodles back on the shelves," Suresh Narayanan, due to take over as managing director of the company in August, said in a statement. Nestle has been at the centre of India's worst food scare in a decade after local regulators reported that some …

  • Why Financial Education is the need of the hour

    You could be a onetime investor, an investment professional or a college graduate, you would still need to know how money works in the real world. A proper, methodical financial planning and education is necessary. Read on to find out all you need to know about financial education and what it comprises of. …

  • Gold prices remained steady

    Chennai, July 29 (IANS) Gold prices remained steady on Wednesday after several successive days of slide, said an industry official. "Gold prices today (Wednesday) remained at yesterday's (Tuesday) ... …

DON'T MISS

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    27.25+0.65+2.44%
    SPICEJET.BO
    169.70+0.70+0.41%
    IDEA.BO
    21.25+0.55+2.66%
    SUZLON.BO
    101.45+5.70+5.95%
    DLF.BO
    17.35+2.86+19.74%
    VIRTUALG.BO
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
    116.75+28.75+32.67%
    PALRED.BO
    50.40+8.40+20.00%
    PIRPHYTO.BO
    80.40+13.40+20.00%
    CNSDSEC.BO
    241.80+40.30+20.00%
    COSCO.BO
    354.00+59.00+20.00%
    SUMMITSEC.BO
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    2,123.50+97.90+4.83%
    BSX.BO
    500.50-108.75-17.85%
    AMMLTD.BO
    403.65-64.70-13.81%
    VAIBHAVGBL.BO
    487.70-61.05-11.13%
    GULFOILLUB.BO
    173.30-21.30-10.95%
    ASHOKALC.BO

QUOTES

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

Yahoo Cricket