Analysis of

Macroeconomic &
Banking Environment
Dr K Ramesha
Professor

How to Understand Macroeconomic

Environment?
Economic Growth GDP sector-wise contribution
Monetary Policy Money Supply, Inflation, Interest Rate
Scenario and Credit Growth all against the backdrop of
Banking Sectors Performance
Fiscal Policy Fiscal Deficit & GDP, Fiscal Deficit & Inflation,
Fiscal Deficit & Banking Sector
External Sector Balance of Payments, Exchange Rates,
Inflation all against the backdrop of Banking Sectors
Performance
Banking Sector & Its Performance is a reflection of the
Economy and Economic Environment

Understanding Macroeconomic
Environment
Please take a quick look at the following slides which
are self explanatory
What do you infer from each slide? For economy and
banking sector?

Indian Economy Improving

Macroeconomic Environment

Better Growth Prospects

Declining Inflation

Interest Rate Scenario Increasing

Savings Ratio?

Declining Growth of Rural Wages

Low Demand?

Investment A Key Concern

Some Charts/Excerpts from FSR

June 2015

Some Charts/Excerpts from FSR

June 2015

Some Charts/Excerpts from FSR

June 2015

Some Charts/Excerpts from FSR

June 2015

Some Charts/Excerpts from FSR

June 2015

Some Charts/Excerpts from FSR

June 2015

Some Charts/Excerpts from FSR

June 2015

Some Charts/Excerpts from FSR

June 2015
Economic growth in India is estimated to have improved
to 7.3 per cent during 201415 as per the recent
revisions in the National Account Statistics (base 2011
12)
However, notwithstanding this improvement, higher
growth seems at odds with low credit growth, relatively
lower flow of resources to the commercial sector, low
capacity utilisation, subdued growth in the index of
industrial production and muted corporate performance

Banking Environment

Banking Environment

Banking Environment

Banking Environment

Banking Environment

Banking Environment

Banking Environment

Banking Environment

Banking Environment

Performance Evaluation of Banks

Indian banking system has a long way to go in supporting the economy
Indian banking system may be considered as the one under transition
Saving rate has declined financial savings declined - only 15 percent of HH
savings available for banks
Weak financial deepening
High intermediation cost on account of Grand Bargain
High level of NPAs and restructured advances
Low productivity
Weakening PSBs a threat to stability & efficiency of banking system

Public Sector Banks (PSBs) accounting for more than 75 percent of the
industry have shown poor performance relative to Private Sector
counterparts

Public Sector Banks A Snapshot

Size - 76 percent of advances and 77 percent of
deposits
82 percent of branches and 61 percent of ATMs
Nation Building - 82 percent of infra finance and 82
percent of agri loans
Steady growth in assets, but decline in RoA/profitability
NPAs are quite high relative to Pvt Banks restructured
assets are also high
Capital requirement is huge on account of Basel III

Group-wise Performance of Banks

Challenges before the Banking

Sector - PSBs
Deteriorating asset quality
Financial exclusion
Financing MSMEs
Declining profitability/efficiency resulting heavy
dependence on Government
Constraints of Government Ownership
Social and nation-building obligations
Limited ability to raise capital lack of autonomy
Sub-optimal decision making due to fear of CVC, CAG, RTI etc

Leadership Gap with Sub-optimal Succession Planning

 Thank you very much