New Banking License by RBI

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Information about New Banking License by RBI
Finance

Published on February 27, 2014

Author: mitrasubhradeep

Source: slideshare.net

Presentation on New Banking License – Roadmap for NBFCs XIMB, PGDM (II year) Gokul V Subhradeep Mitra Sukant Bisoi

Profit and Marketing • Profits expected to reach Rs. 1361 crores • The year on year growth graph is shown and details mentioned in the excel sheet provided. • The marketing plan would be essentially to play upon ABCFL which already is a trusted brand name in the market. • The emphasis would be to market it through channels visible in rural markets which in future slides we’ll see as the primary market for the firm • The mediums of IMC include leaflets, Radio ads, Road Shows, and to a lower extent through State based TV channels as the viewership for the same would be higher.

Marketing(Cont) • The service levels and easiness of operation would lead to greater viral publicity which in future would be the bread and butter of the firm’s marketing. • Lastly to initiate ATMs into hitherto unknown markets, specifically rural areas will also increase visibility • Though the bank would look for a rural emphasis, it would also make sure its technologically competent.

Distribution Plans Branches • The branch penetration should be 40:60 skewed towards the rural segment. • Reasons: Rural Mix Branches Increase 800 600 400 Branches Increase 200 0 Year 1 Year 2 Year 3 Year 4 Year 5 – The Existing cities where ABCFL is present can be used as hubs to cater to spokes that will be rural in nature – Most established players have a huge presence in the urban segment – RBI guide lines require that 25% of new branches open in rural segment. Urban Mix

Loan Book after 5 Years • • • • Rural Penetration will provide greater deposits as the SB a/c from rural markets are in general terms greater than Urban Areas. A greater emphasis will move towards housing, personal and commercial vehicle loans as these will be in greater demand in the rural areas Infrastructure finance, currently the bread and butter should move to a lesser percentage as the risks associated with the same are very high with respect to options that would be available. Mortgages would also play a major role even in the future as risk to return ratios are higher. Loan Book Split Corporate Finance SMEs Mortgages Commercial Automotive Personal Housing Infrastructure Finance 12% 18% 14% 15% 12% 8% 13% 8%

Financial Strategies • In brief – CASA to be maintained at around 25% at the end of five years. • Reasons: » 1. Rural populace will have huge SB a/c » 2. Large penetration focused on rural areas. » 3. Fast paced growth in existing markets and lessening dependency on infra loans – Deposits to grow at 30% year on year. • Reasons: » 1. The target would be to create capital in rural areas that can be dispersed in the semi urban and rural areas itself. » Hence greater viral publicity in the markets increasing deposits and thereby sustaining the 30% growth.

Financial Strategies • Loan Growth Rates: • Though loans are going to rise, the rise will be skewed towards retail loans for the customers • Lesser intensified towards infrastructure, as the risk is greater in this area. • Assumed to be 14% based on global trends and existing growth rate of business

Risk Anticipated and Mitigation Strategies • New Entrant into the market; would over come this shortcoming through aggressive marketing. • Possibility of losses in the future: Plans established to prevent the same from happening; plans flexible to entertain the same. • Branch network building would determine the growth: If branch growth does not work out as anticipated, projected financials can drop to a great extent. • NPAs: Rural penetration means greater chances of NPAs as well; Securities will be ensured to mitigate the same.

Balance sheet total share capital equity share capital share application money preference share capital reserves revaluation reserves networth Deposits Borrrowings total debt total liabilities Mar-12 246.16 246.16 0 0 6,737.84 0 6984.00284 10.00 15433.0736 15,443.07 22427.0764 Mar-13 246.16 246.16 0 0 6,956.15 0 7202.313607 15 17285.04243 17300.04243 24502.35604 Mar-14 246.16 246.16 0 0 7,222.98 0 7469.136299 26.25 19359.24752 19385.49752 26854.63382 Mar-15 246.16 246.16 0 0 7,547.08 0 7793.238507 52.5 21682.35723 21734.85723 29528.09573 Mar-16 246.16 246.16 0 0 7,938.41 0 8184.574963 105 24284.24009 24389.24009 32573.81506 Application of fund Cash and balances with reserve bank of india balances with banks, money at call and short notice investments advances fixed assets other assets Total contingent liabilities 0.60 75.52 8,748.99 13018.225 192.73 391.01 22,427.08 448.54 0.90 1.58 3.15 6.30 76.02 77.15 79.77 85.02 8,752.74 8,759.30 8,772.43 8,798.68 14840.7765 16918.48521 19287.07314 21987.26338 267.73 342.73 417.73 492.73 564.19 755.40 967.95 1,203.82 24,502.36 26,854.63 29,528.10 32,573.82 490.05 537.09 590.56 651.48

P& L Rs crores Interest earned other income interest expended operating expenses provisions and contingencies net profit profit brought forward Mar-12 2864.01 874.90 Mar-13 Mar-14 Mar-15 Mar-16 3264.97083 3722.066746 4243.156091 4837.197943 875.27 875.93 877.24 879.87 1,853.17 2,076.01 2,326.26 934.7271 1035.061208 1149.499249 0 951.01 0 0 0 2,608.18 2,926.71 1280.09971 1429.266423 0 0 1,029.18 177.56 1,122.24 395.87 1,232.12 662.70 1,361.09 986.80 transfer to capital reserve transfer to statutory reserve transfer to investment reserve 2.38 2.57 2.81 3.08 3.40 237.75 257.29 280.56 308.03 340.27 0.19 0.21 0.22 0.25 0.27 dividend paid and its tax Tax 318.2 214.93 318.2 232.59 318.2 253.63 318.2 278.46 Carry to next balance sheet 177.56 395.87 662.70 986.80 318.2 307.61 1,378.13

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