|
|
|
Run up to the Budget: Banking sector
Background (FY 2000-01)
- Both deposit and term lending rates of Scheduled
Commercial Banks (SCB) remained largely unchanged in the first ten months
of this fiscal year. Deposit rates of major banks for one year and above ruled
at 8-10.5% in this period whereas Prime Lending Rates (PLR) have remained
at 12-12.5% for five major banks in the country.
- However, subsequent to the cut in Bank Rate
and Cash Reserve Ratio (CRR) on 16/02/01 by 50 basis points each, many banks
have lowered their PLR by 0.5%.
- Aggregate deposits of Scheduled Commercial Banks
have gone up by Rs 1,221.77 bn till January 26, 2001 compared to Rs 787.21 bn in the
corresponding period of the previous year. Inflows from India Millennium Deposits
(IMD), amounting to Rs 256.62 bn in November 2000, have contributed to higher bank
deposit growth witnessed in this fiscal year.
- Credit growth too has been significantly higher
as compared to the previous year. Bank credit has risen by Rs 636.28 bn till
January 26, 2001 as compared to Rs 464.51 bn in the corresponding period of the previous
year. The credit growth has been largely in the first six months of the fiscal
year, while the third quarter to date has witnessed a slowdown.
- Profitability of Banking sector saw a significant
improvement in the second quarter of FY 2000-01 with State Bank of India (SBI)
posting a 71% jump in its net profit. However, SBI reported a 45% decline
in its third quarter net profit.
Previous budget (FY 2000-01) announcements
- Government not to close any Public Sector Bank.
Weak banks to be restructured.
- Banks allowed to raise capital from the market
to expand operations and for meeting Capital Adequacy norms.
- Setting up of more Debt Recovery Tribunals and
Debt Recovery Appellate Tribunals announced.
- A new Deposit Insurance Bill to replace the
existing Deposit Insurance and Credit Guarantee Act of 1961.
Expectations from the Budget FY 2001-02
Following the cuts in Bank Rate and CRR on February 16, 2001, expectations are that the
Government may lower small savings rates by 1% in the coming budget. The expected
lowering of small savings rates will help banks boost their deposit mobilisation
as well as better rate flexibility to banks. The lowering of interest rates
will also encourage banks to value their approved securities on a fully "marked-to-market"
basis, thereby improving their bottomline.
Key Public Sector Banks: State Bank of India,
Bank of Baroda, Bank of India, Corporation Bank, Bank of Punjab, Corporation
Bank etc.
Key old Private Sector Banks: IndusInd Bank,
Vysya Bank, Oriental Bank of Commerce etc.
Key new Private Sector Banks: ICICI Bank,
HDFC Bank, UTI Bank, IDBI Bank etc.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
Tell us what you think of this analysis
|
