Investment Portfolio of Scheduled Commercial Banks (Part 1 of 3) - RBI - Reserve Bank of India
Investment Portfolio of Scheduled Commercial Banks (Part 1 of 3)
(As On March 31, 2002)
INTRODUCTION
The latest annual survey on Investments of Scheduled Commercial Banks conducted by the Reserve Bank of India relates to March 31, 2002. The types of investments covered in the survey are (i) Central and State Government securities; (ii) securities, other than Central and State Government securities, approved for the purpose of investments under the Indian Trusts Act, 1882; (iii) shares, bonds and debentures of Indian joint stock companies; (iv) fixed deposits with banks; (v) domestic securities which are not eligible as trustee securities, such as initial contribution to the Unit Trust of India (UTI), share capital in Regional Rural Banks (RRBs) and (vi) foreign securities and other foreign investments. The survey covered all Indian scheduled commercial banks (other than RRBs) operating in India and abroad as well as Foreign Banks operating in India. The RRBs have been excluded from the survey as their investments accounted for only 1.6 per cent of total investments, in India, of all scheduled commercial banks1. The article provides the details of investments of scheduled commercial banks outstanding as on 31st March of 2001 and 2002.
2. The aggregate investments of scheduled commercial banks constituted 38.7 per cent of their deposits as on March 31, 2002. The movements of credit-deposit ratio, investment-deposit ratio and cash-deposit ratio, as on the last Friday of March of the last five years, are presented in Chart 1. Credit-deposit ratio, which declined from 53.5 per cent in 1998 to 51.1 per cent in 1999, showed an increasing trend thereafter. The investment-deposit ratio also showed an increasing trend after 1999. But investments of scheduled commercial banks registered a growth of 18.3 per cent during 2001-02, marginally lower than the growth of 19.2 per cent witnessed in 2000-01. The cash-deposit ratio exhibited a downward trend after 2000.
3. The results of the survey are presented in three sections. Section I presents an analysis of the aggregate investments of scheduled commercial banks according to types of securities. Data on investments of banks have been classified, for the first time, into three categories, viz., 'held to maturity ' (HTM), 'available for sale' (AFS) and 'held for trading' (HFT). Section II presents bank group-wise analysis of investments and Section III presents the investments of scheduled commercial banks in loans floated by the State Governments, contributions in the share capital of RRBs, subscription of debentures of Co-operative Institutions, subscription of bonds of State Government guaranteed bodies, viz. ,
Municipalities, State Electricity Boards, State Financial Institutions, Road Transport Corporations, etc. The investments data presented in this article will be generally referred to by their face value, though in certain cases the market value is also indicated alongwith the face value. Major recent policy developments relating to banks' investments are enumerated in the Box.
Box: Major recent policy developments relating to banks' investments
Source: Report on Trend and Progress of Banking in India, 2000-01 and 2001-02. |
SECTION I
Aggregate Investments of Scheduled Commercial Banks
4. Aggregate investments of scheduled commercial banks as on March 31, 2001 and 2002 are presented in Statement 1. Total investments of scheduled commercial banks increased from Rs.4,80,488 crore as on March 31, 2001 to Rs.5,68,346 crore as on March 31, 2002. The share of investments of banks' offices in India in the total investments of scheduled commercial banks continued to remain very high at around 98 per cent although the share of investments of foreign offices of Indian banks increased marginally from 2.2 per cent to 2.4 per cent between the years under reference (Chart 2). The investments by foreign offices of Indian banks were mainly in foreign countries' securities, and shares and debentures of joint stock companies registered abroad.
5. Indian Government securities consisting of Central Government securities, State Government securities and others, accounted for an increased share of 71.9 per cent of total investments of banks as on March 31, 2002 as against 71.4 per cent as on March 31, 2001. Thus, there appears clear preference for Indian Government securities, especially Central Government securities, in the investment choice of the banks in India. Other domestic securities formed 26.4 per cent and 25.7 per cent of the total investments of the banks as on March 31, 2001 and 2002, respectively (Chart 3).
6. Investments in Central Government securities increased from Rs.2,89,634 crore as on March 31, 2001 to Rs.3,45,321 crore as on March 31, 2002, indicating a growth of 19.2 per cent. The net increase of Rs.55,687 crore in investments in Central Government securities indicated continued investment preference of banks for this category of securities, as it constituted 63.4 per cent of the net increase in investments of the banks. Banks' investments in State Government securities also grew at a high rate of 19.0 per cent from Rs.52,704 crore as on March 31, 2001 to Rs.62,723 crore as on March 31, 2002.
7. The investments of scheduled commercial banks in other domestic securities comprise shares and debentures of joint stock companies, trustee securities (other than Central and State Government securities), fixed deposits, units of UTI, certificate of deposits (CD), commercial paper (CP), mutual funds, initial contribution to share capital of UTI, bonds and debentures of quasi-government bodies, venture capital funds, etc. Banks' investments in these domestic securities amounted to Rs.1,45,856 crore as on March 31, 2002 as against Rs.1,27,064 crore as on March 31, 2001. The investments in shares and debentures of joint stock companies have increased at higher rate of 22.8 per cent than the growth of 22.3 per cent recorded in the previous year. These investments (market value) amounting to Rs.98,068 crore accounted for 17.3 per cent of the total investments as on March 31, 2002. Banks' outstanding investments in 'other trustee securities' declined by 7.5 per cent from Rs.25,222 crore in March 2001 to Rs.23,329 crore in March 2002. Investments in units of UTI and mutual funds have also decreased between the reference dates under consideration. Investments in the certificate of deposits and commercial paper have registered a substantial growth of 35.1 per cent from Rs.4,955 crore as on March 31, 2001 to Rs.6,693 crore as on March 31, 2002. Other investments comprising bonds and debentures of quasi-government bodies, venture capital funds, etc., registered a marginal increase in 2002 as against a substantial rise in 2001. Banks' investments in fixed deposits of Rs.3,222 crore forming 0.6 per cent of the total investments as on March 31, 2002, had shown a substantial growth of 53.2 per cent, in contrast to a decline of 12.0 per cent in the previous year.
8. The investment portfolio of banks classified under the categories 'held to maturity' (HTM), 'available for sale' (AFS) and 'held for trading' (HFT) for different types of investments as on March 31, 2002 is shown in Chart 4. At the aggregate level, banks' investments for sale (AFS) accounted for the largest share of 61.4 per cent, while those HTM and HFT formed only 16.7 per cent, and 21.9 per cent, respectively. In the case of investments made in subsidiaries and joint ventures of banks, share of HTM category of investments was substantial at 81.1 per cent.
SECTION II
Bank Group-wise Investments of Scheduled Commercial Banks
9. The investments of scheduled commercial banks classified by type of securities across major bank groups are presented in Statement 2. The Nationalised Banks' group accounted for the highest share of 45.9 per cent in the total outstanding investments of Rs.5,68,346 crore made by scheduled commercial banks, followed by State Bank of India and its Associates at 31.6 per cent as on March 31, 2002. The shares of Other Scheduled Commercial Banks and Foreign Banks were 16.7 per cent and 5.8 per cent respectively. The shares of different bank groups in total outstanding investments in 2002 were marginally different from those observed for the previous year 2001 (Chart 5).
Bank Group-wise Investments in Other Trustee Securities
14. Bank group-wise investments of scheduled commercial banks in other trustee securities cover their investments in major all-India bodies like Industrial Development Bank of India (IDBI), State Electricity Boards (SEBs), State Financial Corporations (SFCs), Industrial Finance Corporation of India, etc., and these details are presented in Statement 3. Like last year, investments in IDBI, SEBs and SFCs topped in the investment portfolio of banks, with respective shares at 18.8 per cent, 16.3 per cent and 15.2 per cent as on March 31, 2002. The investment portfolio of State Bank of India and its' Associates indicated that SEBs accounted for 26.3 per cent of other trustee securities, followed by IDBI at 18.7 per cent and SFCs at 13.2 per cent. In the case of Nationalised Banks, investments in IDBI accounted for the largest share (19.3 per cent). In the case of Other Scheduled Commercial Banks, securities of IDBI, SFCs and Rural Electrification Corporation together accounted for 43.1 per cent of other trustee securities. In the case of Foreign Banks, securities of IDBI, Industrial Credit and Investment Corporation of India (ICICI), and Export-Import Bank of India together held a share of 47.2 per cent of their investments in other trustee securities.
Bank Group-wise Pattern of Investments in the Instruments of Capital Market
15. Instruments of capital market comprise shares and debentures of joint stock companies, units of UTI and mutual funds, initial contribution to share capital of UTI, CDs, CPs and shares of DICGC. Investments of scheduled commercial banks in these instruments increased from Rs.1,01,842 crore as on March 31, 2001 to Rs.1,22,528 crore as on March 31, 2002 registering 20.3 per cent growth rate in 2002 (Statement 4). Major portion of this category of investments was in the form of debentures of joint stock companies; market value of which increased from Rs.74,005 crore as on March 31, 2001 to Rs.89,569 crore as on March 31, 2002. Investments of banks in shares of joint stock companies also increased from Rs.5,869 crore to Rs.8,499 crore during the same period. The scheduled commercial banks' investments in the units of UTI, mutual funds and others increased from Rs.21,969 crore in 2001 to Rs.24,460 crore in 2002 (Chart 10).
16. Bank group-wise investments in instruments of capital market as on March 31, 2002 indicated that the Nationalised Banks accounted for the largest share of 46.2 per cent registering an increase in the share from 43.3 per cent in 2001. The share of Other Scheduled Commercial Banks also increased to 27.2 per cent as on March 31, 2002 from 24.5 per cent as on March 31, 2001. The State Bank of India and its Associates and Foreign Banks held lower shares at 18.2 per cent (20.8 per cent in 2001) and at 8.5 per cent (11.5 per cent in 2001), respectively (Chart 11).
17. It is observed that all bank groups continued to show preference for debentures over shares. The debentures (market value) formed 91.3 per cent of the total investments made by banks in shares and debentures. In respect of debentures and equity shares in joint stock companies, the share of investments of State Bank of India and its Associates in debentures increased from 90.9 per cent as on March 31, 2001 to 91.9 per cent as on March 31, 2002. Proportion of investments in debentures, in the case of Nationalised Banks, reduced marginally from 91.8 per cent to 91.5 per cent and that in the case of Other Scheduled Commercial Banks and Foreign Banks also came down from 91.7 per cent to 88.5 per cent and from 99.6 per cent to 97.4 per cent, respectively (Chart 12).
Bank Group-wise Investments in Public Sector Enterprises
18. Investments of banks in bonds of public sector enterprises increased from Rs.16,003 crore as on March 31, 2001 to Rs.17,246 crore as on March 31, 2002 (Statement 5). As regards their composition, banks invested about 25.3 per cent of these bonds in Rural Electrification Corporation, followed by Housing and Urban Development Corporation (HUDCO) (20.3 per cent), Power Finance Corporation (16.0 per cent), Railway Bonds (13.1 per cent) and Mahanagar Telephone Nigam Limited (11.3 per cent). The investments of all bank groups, except Foreign Banks, made in public sector bonds increased during the period 2001-02. Nationalised Banks' holdings in such securities increased from Rs.8,513 crore as on March 31, 2001 to Rs.9,010 crore as on March 31, 2002. In the case of State Bank of India and its Associates and Other Scheduled Commercial Banks, investments in these bonds increased from Rs.3,406 crore to Rs.3,662 crore and from Rs.3,494 crore to Rs.4,056 crore, respectively, during the years under reference.
Maturity Profile of Outstanding Investments in Government Securities according to Bank Groups
19. The maturity classification of investments in Government securities excluding postal savings, other obligations and zamindari bonds for different bank groups is presented in Statement 6. Pictorial representations of old loans and new loans (loans floated during April 2001 to March 2002), held by scheduled commercial banks as on March 31, 2002, are given in Chart 13 and Chart 14, respectively. Holdings of old loans accounted for 87.1 per cent of total Government securities held by scheduled commercial banks as on March 31, 2002.
20. In respect of both State Bank of India and its Associates and Nationalised Banks, 48.4 per cent of their holdings in old Government securities had maturity between April 2005 to March 2010 (Chart 13). Further, 39.1 per cent of old loans held by Nationalised Banks had long-term maturity beyond 2010. On the other hand, holdings of Other Scheduled Commercial Banks and Foreign Banks in old Government securities of maturity less than one year, were substantially high at 32.8 per cent and 48.6 per cent, respectively.
21. Although the maturity of old loans was spread over different years across bank groups, new loans had maturity beyond March 31, 2005 (Chart 14). Out of Rs.8,848 crore of new loans held by State Bank of India and its Associates, 77.3 per cent had maturity between April 2010 and March 2015 and the rest of new loans beyond 2015. The Nationalised Banks subscribed to the tune of Rs.28,784 crore in new loans; of which 61.6 per cent had the maturity during the period April 2010 to March 2015. Other Scheduled Commercial Banks' investments in new Government securities amounted to Rs.13,866 crore as on March 31, 2002; of which 32 per cent was in the maturity range of 2005-10, 25 per cent in 2010-15 and rest 43 per cent in 2015 and above. Foreign banks also held 27.4 per cent of new loans with maturity during 2005-2010 and 39.9 per cent with maturity during 2010-2015.
Investments in Central and State Government Securities (excluding Treasury Bills, Postal Obligations, etc.) - According to Interest Rate and Bank Groups
22. The distribution of banks' investments in Central and State Government loans according to different interest (coupon) rate classes, as on March 31, 2002, is set out in Statement 7. The proportion of banks' holdings of Central Government securities with high interest rates (11 per cent and above) had decreased between the two time points, viz., 2001 and 2002. These securities with interest rate of '12 per cent and above' accounted for 27.4 per cent of banks' holdings in Central Government securities in 2001, which had decreased to 24.9 per cent in 2002. The securities with interest rate of '11 per cent to 12 per cent' accounted for major share of 47.6 per cent in 2002 albeit the share had decreased. The share of securities, held by banks, with interest rate of '8 per cent to 11 per cent' increased from 12.6 per cent to 23.6 per cent during the reference years (Chart 15).
23. Similar trend was observed in respect of banks' holdings in State Government securities (Chart 16). The proportions of State Government securities in the interest rate ranges of '12 per cent and above' and '11 per cent to 12 per cent' decreased from 62.5 per cent to 51.9 per cent and from 26.3 per cent to 20 per cent, respectively, during 2001 and 2002. The proportion of banks' holdings in State Government securities with interest rate of '8 per cent to 11 per cent', increased from 11.1 per cent to 28.1 per cent during 2001-02. The share of State Government securities held by banks, which had coupon rate of less than 8 per cent, was negligible.
24. State Bank of India and its Associates' holdings of Central Government securities with interest rate of '11 to 12 per cent' accounted for 65.5 per cent and those with interest rate of '12 per cent and above' accounted for 22.7 per cent of their total holdings in Central Government securities as on March 31, 2002. Of the total Central Government securities held by Nationalised Banks, 36.2 per cent, 32.5 per cent and 27.3 per cent of total holdings of these securities were in the interest rate ranges of '8 to 11 per cent', '11 to 12 per cent' and '12 per cent and above', respectively. In respect of Foreign Banks, such securities with the interest rate of '11 to 12 per cent' accounted for 64.2 per cent of their investments in Central Government securities (Chart 17).
25. In the case of State Government securities held by each bank group, major portion of the holdings was with interest rate of '12 per cent and above'. In the case of Foreign Banks, 43 per cent of their investments in these securities was in the interest rate range of '11 to 12 per cent' (Chart 18).
Classification of Investment Portfolio of Banks into HTM, AFS and HFT categories by Bank Groups
26. Commercial banks' investments in different types of securities, as on March 31, 2002, are classified into three categories, viz., HTM, AFS and HFT for each of the four bank groups. The pattern of holdings under these categories was more or less similar for all bank groups (Chart 19). Holdings in HTM category were in the range of 13.1 per cent to 17.9 per cent for all bank groups, which are within the 25 per cent limit, as prescribed by the Reserve Bank. About 56 to 69 per cent of the investments were classified as securities 'available for sale'.
SECTION III
Investments of Scheduled Commercial Banks in State-level Securities
27. The state-wise investments of scheduled commercial banks in various state-level securities as on March 31, 2001 and 2002 are presented in Statement 8. State-level securities consist of securities floated by the State Governments, bonds of state-level bodies guaranteed by the State Governments, share capital of RRBs and debentures of co-operative institutions. Majority of such investments was in State Government securities, which accounted for 77.4 per cent of the total amount of state-level securities as on March 31, 2002. Important state-level securities, in which banks invested, were State Electricity Boards (SEBs) (8.3 per cent of state-level securities), Government and quasi-government Bodies (6.0 per cent) and State Financial Corporations (SFCs) (4.9 per cent). Banks' investments in six states, viz., Uttar Pradesh, Andhra Pradesh, Maharashtra, West Bengal, Rajasthan and Bihar, accounted for more than 50 per cent of their investments in various state-level securities.
28. State-wise investments of banks as on March 31, 2002 in the State Government securities was the highest in Uttar Pradesh (Rs.10,506 crore), followed by Andhra Pradesh (Rs.6,388 crore), Rajasthan (Rs.4,968 crore), Bihar (Rs.4,654 crore), West Bengal (Rs.4,527 crore), Orissa (Rs.3,803 crore), Tamil Nadu (Rs.3,578 crore), etc. Such investments in each of a few other states were less than Rs.1,000 crore. The scheduled commercial banks invested Rs.6,760 crore in the bonds of SEBs, as on March 31, 2002. Investments of banks in the bonds of SEBs, as on March 31, 2002, was the highest in Maharashtra (Rs.859 crore), followed by Madhya Pradesh (Rs.857 crore), Tamil Nadu (Rs.575 crore), Gujarat (Rs.561 crore), Punjab (Rs.553 crore) and Rajasthan (Rs.488 crore). Banks' investments in SFCs amounted to Rs.3,957 crore as on March 31, 2002 and these investments was the highest in Uttar Pradesh (Rs.559 crore), followed by Karnataka (Rs.511 crore), Andhra Pradesh (Rs.469 crore), Orissa (Rs.310 crore) and Gujarat (Rs.306 crore). Banks' investments in securities of State Industrial Development Corporations (SIDCs) amounted to Rs.996 crore as on March 31, 2002. Of this amount, investments in Tamil Nadu (Rs.318 crore) was found to be the highest, followed by West Bengal (Rs.119 crore) and Punjab (Rs.101 crore). Banks' investments in the bonds of Housing Boards, Municipal Corporation, Municipality and Port Trusts together amounted to Rs.636 crore and related to only a few states.
29. Scheduled commercial banks' investments in interest-bearing state loans as on March 31, 2001 and 2002 are presented in Statement 9. Of the total outstanding state loans of Rs.1,03,968 crore, six states, viz., Uttar Pradesh, Andhra Pradesh, Rajasthan, Bihar, West Bengal and Tamil Nadu together accounted for more than 50 per cent. Proportion (absorption rate) of investments of scheduled commercial banks, at the aggregate level, constituted 60.3 per cent of the total outstanding amount of interest-bearing state loans as at end March 2002. The absorption rates of banks remained high in the newly formed states. It was the highest in Uttaranchal (79.7 per cent) followed by Jharkhand (78.2 per cent) and Chhattisgarh (73.7 per cent). Of the remaining states, the absorption rates of banks were above 65 per cent in four states, viz., Jammu and Kashmir (67.8 per cent), Orissa (67.0 per cent), West Bengal and Rajasthan (65.8 per cent each). The absorption rates were between 60 per cent and 65 per cent for Uttar Pradesh, Haryana, Bihar, Madhya Pradesh, Kerala and Goa. Absorption rates of the banks in the interest bearing state loans were below 50 per cent in respect of Maharashtra, Sikkim and Tripura.
30. Bank group-wise pattern of investments in the State Government securities, shares, bonds, debentures, etc. for the years 2001 and 2002 has been presented in Statement 10. Of the total investments of Rs.81,076 crore in state-level securities as on March 31, 2002, the Nationalised Banks accounted for the highest share at 66.1 per cent, followed by State Bank of India and its Associates at 27.7 per cent and Other Scheduled Commercial Banks at 5.9 per cent.
31. Considering banks' investments in state-level securities classified by states, contribution of State Bank of India and its Associates was more than 50 per cent in the states of Arunachal Pradesh (57.4 per cent), Mizoram (57.1 per cent), Pondicherry (56.0 per cent), Sikkim (55.4 per cent) and Nagaland (52.4 per cent). In general, in North-Eastern states, State Bank of India and its Associates accounted for the highest share among all bank groups. Nationalised banks' share in total investments in state-level securities of a state was more than 70 per cent in the states of Chhattisgarh, Goa, Haryana, Himachal Pradesh, Punjab, Uttar Pradesh, West Bengal, Chandigarh and Delhi. Other Scheduled Commercial Banks accounted for more than 10 per cent in the state-level securities for the states of Jammu and Kashmir, Karnataka, Kerala and Tamil Nadu. Investments of Foreign Banks were negligible in the state-level securities, except for a few states like Gujarat, Maharashtra and Tamil Nadu.
* Prepared in the Banking Statistics Division of the Department of Statistical Analysis and Computer Services. The previous article as at end-March 2001 was published in the April 2002 issue of the Reserve Bank of India Bulletin.
1 As per the reported figures of investments of RRBs in Form 'A' returns under Section 42 (2) of RBI Act, 1934 as on last Friday of March 2002.
Note : Figures in brackets indicate percentages to Total * Includes Postal Savings Deposits Certificates and Other Postal Obligations. @ Includes Investments in Debentures and Bonds of Quasi - Govt.Bodies, Venture Capital Funds, etc. ‘—’ = Nil or Negligible. |
Notes : Figures in brackets indicate percentages to ‘Total’. @ Investments in shares and debentures are at estimated realisable value where market value is not available. * ‘Others’ includes securities such as initial contribution to share capital of UTI, shares of DICGC and Mutual Funds, CDs and CPs. |
Share this page:
Install the RBI mobile application and get quick access to the latest news!
