Banking

India I Equities
Update

23 February 2012

India Banking Deposit: 15.0%

Credit: 15.7%
Finance Tracker – Vol. 23/FY12 Investment: 17.6%
For the fortnight ending 10 Feb ’12, both credit and deposit growth
decreased to, respectively, 15.7% and 15%, yoy. Credit-to-deposit
increased 20bps from the previous fortnight, to 75.6%. Clyton Fernandes
+9122 6626 6744
 Credit growth lower, at 15.7%. For the fortnight ending 10 Feb ’12, clytonfernandes@rathi.com
credit growth slowed, to 15.7% yoy, compared with 16.4% the Gautam Singh
previous fortnight. Growth in food credit also came off, to 27.5% gautamsingh1@rathi.com
yoy. Kaitav Shah
kaitavshah@rathi.com
 Deposit growth also falls, to 15%. For the fortnight ending 10 Feb
’12, deposit growth decreased to 15% yoy, from 15.7% the previous
fortnight. Term-deposit growth slowed to 16.5% yoy.

 SLR growth increases to 17.6%. For the fortnight ending 10 Feb

’12, SLR investment growth was 17.6% yoy, higher than the 14% of
the prior fortnight. For the fortnight ending 27 Jan ’12, non-SLR
investment growth, at -0.2% yoy, slipped marginally as banks’
investment in mutual funds was reduced.

Fig 1 – Credit and Deposit growth decrease

(` bn) (Y-o-Y growth, %)
Latest fortnight Previous fortnight Same fortnight Change since the Latest fortnight Previous fortnight Same fortnight Change since the
ending last year previous fortnight last year previous fortnight
10-Feb-12 27-Jan-12 11-Feb-11 10-Feb-12 27-Jan-12 11-Feb-11 (pps)
(Outstanding amount as on date)
Deposit 58,005 57,681 50,460 324 15.0 15.7 17.0 -0.7
Demand 5,933 5,939 5,753 -7 3.1 0.5 5.0 2.6
Time 52,072 51,742 44,707 330 16.5 17.7 18.8 -1.2
Credit 43,824 43,513 37,878 311 15.7 16.4 24.0 -0.7
Food 816 831 640 -15 27.5 35.8 43.7 -8.3
Non-food 43,008 42,682 37,238 326 15.5 16.1 23.7 -0.6
Investment .. 19,745 17,802 .. .. 11.7 6.1 ..
SLR 17,314 16,900 14,721 414 17.6 14.0 5.5 3.7
Non-SLR* .. 2,844 3,081 .. .. -0.2 8.8 ..
(Incremental amount since the end of the previous financial year)
Deposit 5,958 5,634 5,531 426 7.7 13.9 15.8 -6.2
Demand -458 -451 -704 246 .. .. .. ..
Time 6,415 6,085 6,235 180 2.9 10.8 37.7 -7.9
Credit 4,437 4,127 5,430 -993 -18.3 -16.3 94.5 -2.0
Food 173 188 155 18 11.5 48.2 .. -36.7
Non-food 4,264 3,939 5,275 -1,010 -19.2 -18.0 87.8 -1.2
Investment .. 2,040 1,610 .. .. 37.2 -47.1 ..
SLR 2,314 1,900 873 1,441 165.0 93.5 -61.8 71.4
Non-SLR .. 141 736 .. .. -72.2 -2.6 ..

Source: The RBI, Anand Rathi Research * Data not released by the RBI for the fortnight

Anand Rathi Share and Stock Brokers Limited, its affiliates and subsidiaries, do and seek to do business with companies covered in its research reports. Thus,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Disclosures and analyst certifications are located in Appendix 1.

Anand Rathi Research India Equities

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 23 February 2012 India Banking: Finance Tracker – Vol. 23/FY12

Term-deposit growth falls
below 17%
Banking flows
Deposits: Growth in demand deposits
For the fortnight ending 10 Feb ’12, deposit growth decreased to 15%, from 15.7% the
previous fortnight. For the latest fortnight, demand deposits, at 3.1% yoy, grew faster
than the 0.5% growth in the fortnight ending 27 Jan ’12. Term-deposit growth slipped
to 16.6% compared with 17.7% the previous fortnight.

Fig 2 – Deposit growth lower than credit

32

28
(Growth, credit, deposit, %)
24

20

16

12

8
Feb-08

Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12
Credit Deposit
Source: The RBI, Anand Rathi Research

Fig 3 – SLR investment growth increases

Fortnight ending Change since
(` bn) 10-Feb-12 Previous fortnight Last two Last six fortnights Last 12 months
fortnights
Liabilities
Deposit 58,005 324 18 1,532 7,545
Demand 5,933 -7 -59 339 180
Time 52,072 330 77 1,193 7,365
Other DTL 3,421 -61 -57 -60 187
Assets
Credit 43,824 311 279 1,933 5,946
Food 816 -15 -48 29 176
Non-food 43,008 326 327 1,905 5,770
Cash and RBI balance 3,598 -455 -317 -371 166
Cash 340 -29 -1 -45 45
Balance with RBI 3,258 -426 -316 -326 121
SLR investment 17,314 414 418 174 2,593
Non-SLR investment* 2,844 46 123 -293 -42
CPs 265 -3 51 35 -53
Shares 372 -1 3 -16 3
Bonds 1,434 -8 -65 -80 278
Instruments of MFs 379 35 109 -289 -376
Instruments of FIs 395 24 25 56 106

* Data relate to the previous fortnight

Source: The RBI, Anand Rathi Research

Anand Rathi Research 2

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 23 February 2012 India Banking: Finance Tracker – Vol. 23/FY12

Credit growth declines: Food credit growth high

Credit growth for the latest fortnight decreased to 15.7%, compared with 16.4% yoy the
previous fortnight. Food-credit growth also slipped to below 30% levels, from 35.3%
yoy the previous fortnight. The yoy growth in non-food credit fell to 15.5%, from
16.1% the previous fortnight. Credit-to-deposit increased 20bps over the previous
fortnight, to 75.6%.

Fig 4 – Investment to credit bottoming out

20 60
19 58

(Demand to time deposit, %)

(Investment to credit ratio, %)

18 56
17 54
16 52
15 50
14 48
13 46
12 44
11 42
10 40
Feb-08

Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12
Demand to time deposit ratio Investment to credit ratio (RHS)
Source: The RBI, Anand Rathi Research

Fig 5 – SLR (as percent of DTL) above 27%

31 10

(Cash + balance with RBI to DTL, %)

30 9

29 8
(SLR to DTL, %)

28 7

27 6

26 5

25 4
Feb-08

Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12

SLR as % of DTL Cash plus balance with RBI as % of DTL (RHS)

Source: The RBI, Anand Rathi Research

Anand Rathi Research 3

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 23 February 2012 India Banking: Finance Tracker – Vol. 23/FY12

Fig 6 – Credit-to-deposit ratio above 75%

76 175

(Incremental YTD Credit-to-deposit, %)

75 150

(Credit-to-deposit, %)
74 125
73 100
72 75
71 50
70 25
69 0
68 -25
Feb-08

Feb-09

Feb-10

Feb-11

Feb-12
Aug-08

Aug-09

Aug-10

Aug-11
Credit-to-deposit Incremental YTD credit-to-deposit (RHS)
Source: The RBI, Anand Rathi Research

Fig 7 – Non-SLR investment growth falls sharply

50 150
(Growth, SLR, total investment, %)

(Growth, non-SLR investment, %)

40 120

30 90

20 60

10 30

0 0

-10 -30
Feb-08

Aug-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12

SLR investment Total investment Non-SLR investment (RHS)

Source: The RBI, Anand Rathi Research

Anand Rathi Research 4

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 23 February 2012 India Banking: Finance Tracker – Vol. 23/FY12

Fig 8 – Banks reduce investment in MF instruments

100%

(Share in Non-SLR investment, %)

80%

60%

40%

20%

0%

Oct-08

Oct-09

Oct-10

Oct-11
Jan-09
Apr-09
Jul-09

Jan-10
Apr-10
Jul-10

Jan-11
Apr-11
Jul-11

Jan-12
CP Shares
Bonds & Debentures MF instruments
FI instruments
Source: The RBI, Anand Rathi Research

Fresh developments
Draft norms on priority-sector status
The Nair Committee has come out with its report on priority-sector status.
Summary of the recommendations:
 Overall priority-sector lending target to be retained at 40% of Adjusted Net
Banking Credit (ANBC) for domestic banks.
 Lending to the agricultural sector would cover the entire spectrum of
‘agriculture and allied activities’ without any distinction between direct and
indirect agriculture; and 18% of ANBC to be retained as the target for the
agricultural sector.
 Bank loans sanctioned to non-bank financial intermediaries for lending on to
specified segments may be reckoned for classification under the priority sector,
up to a maximum of 5% of the ANBC. The spread on these transactions to be
capped according to the nature of asset securitized.
 The deposits deployed by banks, as penalty for non-achievement of priority-
sector lending targets for previous years, is to be netted off from the actual
penalty for subsequent years computed for non-achievement of targets.
 The interest-subvention scheme may be extended to agriculture loans given by
private-sector banks as well.
SBI waives service fee on SME loans
The country's largest lender, the State Bank of India, has decided to waive guarantees
and annual service fees on loans given to small and medium businesses, guaranteed
under the Credit Guarantee Fund Trust scheme.
Fitch cuts Dhanlaxmi Bank rating
Rating agency Fitch downgraded Dhanlaxmi Bank's subordinated debt (`170 m) from
BBB to BBB- as the old-generation private lender posted a net loss in the third quarter.
Fitch also put the rating under watch, with negative implications.

Anand Rathi Research 5

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 23 February 2012 India Banking: Finance Tracker – Vol. 23/FY12

Banking outlook
Based on the latest available data, our basic model estimates 14.7% yoy deposit growth
and 15.8% yoy credit growth by end-FY12.

Fig 9 – Deposit-growth outlook

23

21

(Growth, deposit, %)
19

17

14.7
15

13

11
Apr-09
May-09
Jul-09
Aug-09
Sep-09
Nov-09
Dec-09
Jan-10

May-11
Mar-10
Apr-10
Jun-10
Jul-10
Aug-10

Nov-10
Dec-10
Feb-11
Mar-11

Jun-11

Dec-11
Jul-11
Sep-11

Jan-12
Feb-12
Oct-10

Oct-11
Source: The RBI, Anand Rathi Research

Fig 10 – Credit-growth outlook

26
24
22
(Growth, credit, %)

20
18

15.8
16
14
12
10
8
Jan-10

Jun-10

Jun-11

Jan-12
Sep-09
Apr-09
May-09
Jul-09
Aug-09

Nov-09
Dec-09

Mar-10
Apr-10

Jul-10
Aug-10
Oct-10
Nov-10
Dec-10
Feb-11
Mar-11
May-11

Jul-11
Sep-11
Oct-11
Dec-11

Feb-12

Source: The RBI, Anand Rathi Research

Anand Rathi Research 6

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 Appendix 1
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research
analyst(s) in this report.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking
revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described
in the Ratings Table below.

Ratings Guide
Buy Hold Sell
Large Caps (>US$1bn) >20% 5-20% <5%
Mid/Small Caps (<US$1bn) >30% 10-30% <10%

Anand Rathi Research Ratings Distribution (as of 18 February 2012)

Buy Hold Sell
Anand Rathi Research stock coverage (138) 76% 12% 12%
% who are investment banking clients 6% 6% 0%

Other Disclosures
This report has been issued by Anand Rathi Share & Stock Brokers Limited (ARSSBL), which is regulated by SEBI.
The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed
constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities ("related
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investments, and may be on the opposite side of public orders. ARSSBL, its affiliates, directors, officers, and employees may have a long or short position in any
securities of this issuer(s) or in related investments. ARSSBL or its affiliates may from time to time perform investment banking or other services for, or solicit
investment banking or other business from, any entity mentioned in this report. This research report is prepared for private circulation. It does not have regard to
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© 2011 Anand Rathi Share & Stock Brokers Limited. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the
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Additional information on recommended securities/instruments is available on request.

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