Despite the improvement in the
US economy, more than a
tenth of its banks are at a risk of failure. The amount of loans
being charged by them has been on the decline for most of the major loan types.
According to the latest quarterly industry profile by the Federal Deposit
Insurance Corporation (FDIC), the number of troubled banks stands at 829, which
is the highest since 1993. Similarly, The eurozone financial system has been
affected by a weak economy and uncertainties in sovereign-debt
markets. Thus, the near collapse of the western banking system (post-Lehman
Brothers crisis) makes Indian banking system look even better than in the
past. Indian banks appear good and solid because they still enjoy a protected
market.
The Rs 30-tn buoyant banking sector had endured the global financial
crisis, backed by sound economic growth prospects, a stable deposit base
and more importantly a prudent regulatory environment. Despite intense
competition and inflationary pressures, the sector continues to show high growth.
The banking index has grown at a CAGR of over 51% since April 2001, compared
to a 27% growth in market index for the same period. During fiscal 2009, the
collective net profit of 39 listed banks rose by around 17% to Rs 51,020 cr. One
of the important milestones that the sector achieved is, the cost-to-income
ratio dropped from 60% at the beginning of the decade to around 15% in 2010.
Overall, the sector is not only profitable but also adequately capitalized. There
has been a remarkable development in the quality and quantum of financial
intermediation. The sector's profitability is on a par with that of the developed
countries and even better on various parameters at times. For example, return
on equity and assets of the Indian banks are on a par with Asian banks,
and higher when compared to that of the US and the UK.
|
