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Tuesday, Oct 26, 2021
Outlook.com

Let's Open The Vault

India, a regional banking hub? Well, an innovation-technology mix could do it for us.

Let's Open The Vault
Punit Paranjpe
Let's Open The Vault
outlookindia.com
-0001-11-30T00:00:00+05:53
We have seen India evolve from a moderately growing traditional economy to one of the fastest growing economies of the world in the past decade—a period of rapid growth and transformation. Our GDP has grown by over 8 per cent in fiscal 2004 and by around 7 per cent in the first half of fiscal 2005. The composition of the GDP has also changed significantly, with services now contributing about 56 per cent of the total. With such robust growth trends, the services sector has emerged as a key growth driver of the economy.

Another key development over the past decade has been the favourable shift in India's consumer demographics. The number of households earning over Rs 80,000 a year has increased from 40 million in 1996 to about 60 million in 2005. Parallelly, household incomes have also increased substantially. ncaer data for the top 24 cities in India shows migration to higher income levels at over 40 per cent per annum. At 70 per cent, India has the highest proportion of population below 35 years of age. The Indian population also has a large working class (58 per cent). These are the figures that have paved the way for the robust retail credit growth in India.

The banking sector has capitalised on these positive economic developments and has experienced rapid growth over the decade—and even higher over the past five years. Total credit has grown at a compounded average annual rate of about 16 per cent since fiscal 2000. While retail credit has grown by over 40 per cent a year in the past five years, deposits have also recorded a robust average growth rate of about 16 per cent a year. But despite such fast growth, the sector has not compromised on asset quality. At about four per cent of GDP, the gross NPA level of the Indian financial services sector is one of the lowest in the world. Net NPAs of the Indian retail credit segment are even lower at...
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