RMBFI Report on

Sensitivity and Gap Analysis

Group No: 06
Aditya Kabra
Aman Wat
Akhil Inala
Ajay Pande
Ravi Khatik
Introduction
Banking Industry Overview
The Reserve Bank of India (RBI) claims that India's banking system is adequately capitalized and
regulated. The country's financial and economic conditions are significantly superior to those of
any other country on the planet. According to credit, market, and liquidity risk analyses, Indian
banks are generally robust and have fared well during the global slump.
Innovative banking concepts such as payments and small finance banks have lately been
introduced in the Indian banking market. The RBI's new policies may go a long way toward
assisting the domestic banking industry's reform.
India's digital payments system has advanced the most among 25 countries, with India's Immediate
Payment Service (IMPS) ranking fifth in the Faster Payments Innovation Index (FPII)

Market Size
In addition to cooperative credit institutions, the Indian banking system includes 12 public sector
banks, 22 private sector banks, 46 foreign banks, 56 regional rural banks, 1485 urban cooperative
banks, and 96,000 rural cooperative banks. The total number of ATMs in India has climbed to
209,282 as of November 2020.

In FY20, public sector banks' assets totaled Rs. 107.83 lakh crore (US$ 1.52 trillion).

Bank credit increased at a CAGR of 3.57 percent from FY16 to FY20. Total credit extended in
FY20 reached $1,698.97 billion.

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Deposits expanded at a CAGR of 13.93 percent from FY16 to FY20, reaching US$ 1.93 trillion in
FY20.

As of July 16, 2021, the RBI reported that bank credit totaled Rs. 108.79 trillion (US$ 1.46 trillion)
and bank deposits totaled Rs. 155.14 trillion (US$ 2.08 trillion).
As of July 16, 2021, credit to non-food industries was Rs. 107.93 trillion (US$ 1.45 trillion).

Investment and Developments

• Small shops will be able to receive loans through Google Pay for Business in July 2021,
thanks to a partnership with FlexiLoans, a digital lending platform for SMEs.
• In response to the RBI's warning, the Digital Lenders' Association established an updated
code of conduct for digital lending in December 2020.
• As of June 23, 2021, the government's major financial inclusion campaign, the Pradhan
Mantri Jan Dhan Yojana (PMJDY), had opened 42.55 crore bank accounts, with deposits
in Jan Dhan bank accounts totaling >Rs. 1.44 lakh crore (US$ 19.31 billion).
• WhatsApp began accepting UPI payments in India on November 6, 2020, after gaining
authorization from the National Payments Corporation of India (NPCI) to 'Go Live' on UPI
in a tiered manner.
• On Apollo's digital platform, HDFC Bank and Apollo Hospitals will introduce the
'HealthyLife Programme' in October 2020, a holistic healthcare solution that makes healthy
living accessible and affordable.
• In the banking and financial services industry, 32 M&A (merger and acquisition)
transactions totaling $1.72 billion were completed in 2019.
• In March 2020, India's largest lender, State Bank of India (SBI), raised $100 million in
green bonds through a private sale.
• The Cabinet Committee on Economic Affairs approved in February 2020 the continuation
of the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum
regulatory capital to RRBs for another year beyond 2019-20 - until 2020-21 - to those
RRBs that are unable to maintain a minimum Capital to Risk Weighted Assets Ratio
(CRAR) of 9% as per regulatory norms.
• In the last four years, commercial banks have recovered Rs. 400,000 crore (US$ 57.23
billion) in non-performing assets, with a record recovery of Rs. 156,746 crore (US$ 22.42
billion) in FY19.

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Government Initiatives

ICICI Bank
ICICI Bank Limited is a financial institution. Commercial banking, retail banking, project and
corporate financing, working capital finance, insurance, venture capital and private equity,
investment banking, broking, and treasury products and services are among the services provided
by the bank. Retail banking, wholesale banking, treasury, other banking, life insurance, general
insurance, and others are the bank's business segments. Its international banking division focuses
on delivering solutions for its Indian corporate clients' foreign banking needs while also exploiting
economic corridors between India and the rest of the world.
As part of its microfinance activities, the bank meets the financial needs of women entrepreneurs
through its Self-Help Group (SHG) Programme.

Analysis

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Scenario Analysis-
RSA RSL -50 -40 -30 -20 -10 10 20 30 40 50
966594.1 646229.5 -50 -1601.823 -2248.0525 -2894.282 -3540.5115 -4186.741 -5479.2 -6125.4295 -6771.659 -7417.889 -8064.118
-40 -635.2289 -1281.4584 -1927.6879 -2573.9174 -3220.147 -4512.6059 -5158.8354 -5805.0649 -6451.294 -7097.524
-30 331.3652 -314.8643 -961.0938 -1607.3233 -2253.553 -3546.0118 -4192.2413 -4838.4708 -5484.7 -6130.93
-20 1297.9593 651.7298 5.5003 -640.7292 -1286.959 -2579.4177 -3225.6472 -3871.8767 -4518.106 -5164.336
-10 2264.5534 1618.3239 972.0944 325.8649 -320.3646 -1612.8236 -2259.0531 -2905.2826 -3551.512 -4197.742
10 4197.7416 3551.5121 2905.2826 2259.0531 1612.8236 320.3646 -325.8649 -972.0944 -1618.324 -2264.553
20 5164.3357 4518.1062 3871.8767 3225.6472 2579.4177 1286.9587 640.7292 -5.5003 -651.7298 -1297.959
30 6130.9298 5484.7003 4838.4708 4192.2413 3546.0118 2253.5528 1607.3233 961.0938 314.8643 -331.3652
40 7097.5239 6451.2944 5805.0649 5158.8354 4512.6059 3220.1469 2573.9174 1927.6879 1281.458 635.2289
50 8064.118 7417.8885 6771.659 6125.4295 5479.2 4186.741 3540.5115 2894.282 2248.053 1601.823

As a part of scenario analysis, we have calculated change in NII depending on the change in basis
points varying from -50 to +50 for both RSA and RSL for the maturity bucket of 6 months to 1
year.
From the analysis, we see that the change in NII stays positive with an equal proportionate increase
in both RSA & RSL interest rates.

State Bank of India

Individuals, commercial enterprises, major corporations, public entities, and institutional
consumers are all served by the State Bank of India. It has a number of segments, including
treasury, which includes the entire investment portfolio as well as trading in foreign exchange and
derivative contracts; corporate/wholesale banking, which includes the lending activities of the
corporate accounts group, mid corporate accounts group, and stressed assets management group;
and retail banking, which includes National Banking Group branches and primarily includes
personal banking activities such as lending to corporations. Apart from SBI Life Insurance Co.
Ltd. and SBI General Insurance Co. Ltd., other banking activity covers operations of all non-
banking subsidiaries/joint ventures.

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Analysis

Scenario Analysis-
RSA RSL -50 -40 -30 -20 -10 10 20 30 40 50
297722.91 917953.61 -50 3101.1535 2183.19989 1265.24628 347.29267 -570.6609 -2406.568 -3324.522 -4242.475 -5160.42899 -6078.3826
-40 3398.87641 2480.9228 1562.96919 645.01558 -272.938 -2108.845 -3026.799 -3944.752 -4862.70608 -5780.65969
-30 3696.59932 2778.64571 1860.6921 942.73849 24.78488 -1811.122 -2729.076 -3647.03 -4564.98317 -5482.93678
-20 3994.32223 3076.36862 2158.41501 1240.4614 322.50779 -1513.399 -2431.353 -3349.307 -4267.26026 -5185.21387
-10 4292.04514 3374.09153 2456.13792 1538.18431 620.2307 -1215.677 -2133.63 -3051.584 -3969.53735 -4887.49096
10 4887.49096 3969.53735 3051.58374 2133.63013 1215.6765 -620.2307 -1538.184 -2456.138 -3374.09153 -4292.04514
20 5185.21387 4267.26026 3349.30665 2431.35304 1513.3994 -322.5078 -1240.461 -2158.415 -3076.36862 -3994.32223
30 5482.93678 4564.98317 3647.02956 2729.07595 1811.1223 -24.78488 -942.7385 -1860.692 -2778.64571 -3696.59932
40 5780.65969 4862.70608 3944.75247 3026.79886 2108.8453 272.93803 -645.0156 -1562.969 -2480.9228 -3398.87641
50 6078.3826 5160.42899 4242.47538 3324.52177 2406.5682 570.66094 -347.2927 -1265.246 -2183.19989 -3101.1535

As a part of scenario analysis, we have calculated change in NII depending on the change in basis
points varying from -50 to +50 for both RSA and RSL for the maturity bucket of 6 months to 1
year.
From the analysis, we see that the change in NII stays positive for RSL interest rates changes below
-20 basis points for all the corresponding variations in RSA interest rates.

Canara Bank
Canara Bank was formed in July 1906 in Mangalore, then a tiny port town in Karnataka, by Shri
Ammembal Subba Rao Pai, a remarkable thinker and philanthropist. Over the course of its
hundred-year history, the Bank has gone through numerous stages of its growth trajectory. Canara
Bank grew at a breakneck pace, particularly following nationalization in 1969, achieving the status
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of a national player in terms of geographic reach and clientele categories. For the Bank, the 1980s
were marked by commercial diversification. The Bank celebrated a century of service in the Indian
banking market in June 2006. Several significant milestones have marked the Bank's long and
adventurous journey. Canara Bank is now a leading player in the Indian banking industry.

Analysis

Scenario Analysis
RSA RSL -50 -40 -30 -20 -10 10 20 30 40 50
72877.52 174787.4 -50 509.54915 334.7618 159.97445 -14.8129 -189.60025 -539.17495 -713.9623 -888.74965 -1063.537 -1238.32435
-40 582.42667 407.63932 232.85197 58.06462 -116.72273 -466.29743 -641.08478 -815.87213 -990.65948 -1165.44683
-30 655.30419 480.51684 305.72949 130.9421 -43.84521 -393.41991 -568.20726 -742.99461 -917.78196 -1092.56931
-20 728.18171 553.39436 378.60701 203.8197 29.03231 -320.54239 -495.32974 -670.11709 -844.90444 -1019.69179
-10 801.05923 626.27188 451.48453 276.6972 101.90983 -247.66487 -422.45222 -597.23957 -772.02692 -946.81427
10 946.81427 772.02692 597.23957 422.4522 247.66487 -101.90983 -276.69718 -451.48453 -626.27188 -801.05923
20 1019.69179 844.90444 670.11709 495.3297 320.54239 -29.03231 -203.81966 -378.60701 -553.39436 -728.18171
30 1092.56931 917.78196 742.99461 568.2073 393.41991 43.84521 -130.94214 -305.72949 -480.51684 -655.30419
40 1165.44683 990.65948 815.87213 641.0848 466.29743 116.72273 -58.06462 -232.85197 -407.63932 -582.42667
50 1238.32435 1063.537 888.74965 713.9623 539.17495 189.60025 14.8129 -159.97445 -334.7618 -509.54915

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As a part of scenario analysis, we have calculated change in NII depending on the change in basis
points varying from -50 to +50 for both RSA and RSL for the maturity bucket of 6 months to 1
year.
From the analysis, we see that the change in NII stays positive for RSL interest rates changes below
-30 basis points for all the corresponding variations in RSA interest rates.

IDFC First Bank

IDFC Limited received in-principle clearance from the Reserve Bank of India to establish a new
private sector bank in 2014. After that, IDFC Limited sold its infrastructure finance assets and
liabilities to IDFC Bank, a new company. In November 2015, the bank was established following
the demerger of IDFC Limited.
IDFC Bank began operations in Madhya Pradesh on October 19, 2015, with 23 locations in Delhi,
Mumbai, Hyderabad, Bengaluru, Pune, Chennai, Ahmedabad, and Kolkata. It will have around
600 outlets in India by 2021. 15 branches are located in towns with populations of less than 10,000
people. In October 2017, IDFC Bank opened its 100th branch in Honnali, Karnataka.
The merger of Erstwhile IDFC Bank and Erstwhile Capital First was announced in January 2018.
Erstwhile Capital First shareholders were to get 13.9 shares of the amalgamated business for each
share of Erstwhile Capital First. As a result of the merger of Erstwhile IDFC Bank and Erstwhile
Capital First on December 18, 2018, IDFC FIRST Bank was established as a new organization.

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Analysis

Scenario Analysis
RSA RSL -50 -40 -30 -20 -10 10 20 30 40 50
17048.72 10632.49 -50 -32.0812 -42.7136 -53.34613 -63.97862 -74.61111 -95.8761 -106.50858 -117.1411 -127.774 -138.406
-40 -15.0324 -25.6649 -36.29741 -46.9299 -57.56239 -78.8274 -89.45986 -100.0924 -110.725 -121.357
-30 2.01629 -8.6162 -19.24869 -29.88118 -40.51367 -61.7787 -72.41114 -83.04363 -93.6761 -104.309
-20 19.06501 8.43252 -2.19997 -12.83246 -23.46495 -44.7299 -55.36242 -65.99491 -76.6274 -87.2599
-10 36.11373 25.48124 14.84875 4.21626 -6.41623 -27.6812 -38.3137 -48.94619 -59.5787 -70.2112
10 70.21117 59.57868 48.94619 38.3137 27.68121 6.41623 -4.21626 -14.84875 -25.4812 -36.1137
20 87.25989 76.6274 65.99491 55.36242 44.72993 23.46495 12.83246 2.19997 -8.43252 -19.065
30 104.3086 93.67612 83.04363 72.41114 61.77865 40.51367 29.88118 19.24869 8.6162 -2.01629
40 121.3573 110.7248 100.09235 89.45986 78.82737 57.56239 46.9299 36.29741 25.66492 15.03243
50 138.4061 127.7736 117.14107 106.50858 95.87609 74.61111 63.97862 53.34613 42.71364 32.08115

As a part of scenario analysis, we have calculated change in NII depending on the change in basis
points varying from -50 to +50 for both RSA and RSL for the maturity bucket of 6 months to 1
year.
From the analysis, we see that the change in NII stays positive with an equal proportionate increase
in both RSA & RSL interest rates.

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Conclusion (Comparison between Private and Public Sector)
From the GAP analysis, we observed that the Private sector Banks are able to maintain positive
GAPs almost in all maturity buckets whereas public sector banks are unable to do the same due to
their high-risk sensitive liabilities in comparison to their risk sensitive assets. Since the public
sector banks have high deposits associated to them, this rate sensitive liabilities seems to be high.