INDUSTRY OVERVIEW The Reserve Bank of India (RBI) is the central regulatory and supervisory authority for the Indian financial system. A variety of financial intermediaries in the public and private sectors participates in India's financial sectors. These financial institutions include include- Commercial Banks NBFC Long-term lending institutions Insurance Companies Mutual Funds

Reserve Bank of India (RBI) The RBI, established in 1935, is the central banking and monetary authority in India. The RBI manages the country's money supply and foreign exchange and also serves as a bank for the GoI and for the country's commercial banks. n The RBI issues guidelines on exposure limits, income recognition, asset classification, provisioning for non performing and restructured assets, investment valuation and capital adequacy for commercial banks, long long- term lending institutions and non-bank finance companies. T bank The RBI requires these institutions to furnish information relating to their businesses to it on a regular basis.

Commercial Banks Commercial Banks in India provide banking facilities to individuals and business entities. As of June 30, 2009, there were 167 scheduled commercial banks in the country, with a network of 64,608 branches serving approximately Rs. 40,63,203 crore in deposit accounts and Rs. 30,00,906 crore in loan accounts. Scheduled commercial banks are banks listed in the schedule to the Reserve Bank of India Act, 1934, isted ("RBI Act") and are further categorised as public sector banks, private ") sector banks and foreign banks. Scheduled commercial banks have a presence throughout India, with approximately 56.03% of b bank branches located in rural or semi-urban areas of the country.

Public Sector Banks Public sector banks make up the largest category in the Indian banking system. They include the State Bank of India and its seven associate banks, 19 nationalised banks and IDBI Bank Limited. The public sector banks continue to be a dominant part of the banking system. The public sector banks have 55,438 branches, and account for 76.6 per cent of the aggregate deposits and 75.3 per cent of the aggregate advances of the scheduled commercial banking system as of March 31, 2009. The public Sector banks' large network of branches enables them to fund themselves out of low cost deposits. The State Bank of India is the largest public sector bank in India. As of March 31, 2009, the State Bank of India and its associate banks had 16,062 branches. They accounted for 24.8% of ggregate deposits and 24.6% of the aggregate advances of all scheduled commercial banks.

Private Sectors Banks In July 1993, as part of the banking reform process and as a measure to induce competition in the banking sector, the RBI permitted entry of the private sector into the banking system. This resulted in the introduction of nine private sector banks. These banks are collectively known as "new" private sector banks. As of March 31, 2009, there were 22 private sector banks, of which seven were "new" private sector banks and 15 were old private sector banks existing prior to January 1993. As of March 31, 2009, private sector banks accounted for approximately 18.1% of aggregate deposits and 19.02% of aggregate advances of the scheduled commercial banks. Private sector banks had a network of 8,877 branches, accounting for 13.73% of the total branch network of scheduled commercial banks in the country

Foreign Banks As of March 31, 2009, there were 31 foreign banks with 293 branches operating in India, accounting for 5.3% of aggregate deposits and 5.5% of aggregate advances of scheduled commercial banks. As part of the liberalisation process, the RBI has permitted foreign banks to operate more freely, subject to requirements largely similar to those imposed on domestic banks.

KEY CONCERN: Consolidation in the Banking Sector The GoI has expressed a preference for consolidation in the banking sector in India. Merger among public sector banks may result in enhanced competitive strength in pricing and delivery channel for merged entity. If there is liberalization of the rules for foreign investment in private sector banks, this could result in consolidation in the banking sector.

High Inflation and tight Monetary Environment High inflation and tight monetary environment acted as primary dampeners for consumption at the time of recession, At the time of the high inflation, RBI rise the key policy rate like CRR. SLR, Repo, Reverse Repo etc to tame inflation. Banks have to face tight liquidity situation at the time of the high inflation.

SARFAESI ACT SARFAESI Act is also a challenge faced by banks as it restricts the banks not to follow any stringent means of recovery of loan. Advanced Technology Technology is a key driver in the banking industry which revolutionized the distribution channel of the banks. Banks which have not made any adequate investment in technology faced a fall in market shares. There is also a challenge faced by PSB is to derive the maximum advantage from their investment in technology and avoid using inconsistent technology.

Industrial Performance PSB's credit exposure to borrowers is dispersed across various sectors including, infrastructure, real estate, textile, iron and steel, petroleum, construction, cement, chemicals and chemical products, engineering and other industries. Banks funded exposure in the infrastructure sector, which is the largest industry, as of March 31, 2010 was Rs. 5,926.90cr which constituted 18.11% of Psb total funded exposure.