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vy Akshata Shete Asst.Company Secretary tnduslnd Bank Limited, 70 I - PDF document

Induslnd Bank Cir\i L65 i91 PN1 994PL.cO7G3:''1 February 7, 2018 The Deputy General Manager The Asst. Vice President Corporatc llelationshiP DePt. Listing Department National Stock Exchange of India Ltd. BSE Ltd. I't Floor, New Trading Ring Exchange


  1. Induslnd Bank Cir\i L65 i91 PN1 994PL.cO7G3:''1 February 7, 2018 The Deputy General Manager The Asst. Vice President Corporatc llelationshiP DePt. Listing Department National Stock Exchange of India Ltd. BSE Ltd. I't Floor, New Trading Ring Exchange Plaza, 5t'' Floor Rotunda Building, P. J. Towers Plot No.C/l, G Block Dalal Street, Fort Bandra-Kurla Complex Mumbai - 400 001 Bandra (East), Mumbai - 400 051 BSE Scrip Code: 532187 NSE Symbol: INDIISINDBK Madam / Dear Sir, subject: Disclosure under Regulation 30 of thc sEBI (Listins obligations and Disclosure Requirements) Regulations. 2015 we enclose herewith the Presentation on "lndian Banking at Inflection Topical Themes" made in Mumbai on February 7,2018, at the Edelweiss Conference on "lndia 2025 : Another Tryst with Destiny" In compliance with the Regulation 46, the Presentation is also being hosted on the Bank's website al www. indusind.com. Kindly take the same on record and oblige. Thanking you, Yours faithfully, For Induslnd Bank Limitcd vy Akshata Shete Asst.Company Secretary tnduslnd Bank Limited, 70 I -80 t Solitaire Corporate Park' 167' Guru Hargovindji Marg' Andheri (E)' iriJiifui.-noo osl. luluhlarashtra, India Tel: (o)2\ 664122oo Fa* \022\ 66/12224 R€olttered OfflGe: 24ol Gen Thimmayya Road' Pune 41'l 001' lndia i""iii,z,iiiuio iz,ii tl x: @zot 2634 3'41 visit ut at www indusind com CIN: 165191 PN1 994PLC076333

  2. Edelweiss Conference “India 2025: Another Tryst with Destiny” Indian Banking at Inflection – Topical Themes February 07, 2018

  3. Reforms Set to Expand the Banking Opportunity Serving the Rural Banking • Underserved Financialization of Savings Demonetization & Digitization • Formalization of Economy Goods & Service Tax • Current Banking Bankruptcy Code • Market 2 Note: Bubbles not to scale

  4. Reforms Set to Expand the Banking Opportunity Serving the Underserved 1. Legislation well drafted and thought through Financialization of Savings 2. Time lines being adhered 3. Haircuts?? Formalization of Economy Current • Bankruptcy Code Banking Market 3 Note: Bubbles not to scale

  5. Serving the • Rural Banking Underserved Financialization • Demonetization & Digitization of Savings Formalization of Economy • Goods & Service Tax: Benefits far outweigh initial hiccups Current • Bankruptcy Code Banking Market 4

  6. GST in New Zealand – A Case in Point Pre-GST New Zealand (NZ) exhibited macro characteristics similar to India on inflation, fiscal deficit and rates  NZ economy has improved consistently post implementation of GST in 1986. NZ today is one of the highest tax  productive nations (GST Revenue / GDP Ratio) among OECD nations (1) and has a Fiscal Surplus! Evidence from other countries indicate one-off effects dissipated after one to two years of implementation  Consumer Price Index Govt. 10 Year Bond Yield Fiscal Surplus / Deficit (% of GDP) (2) 20% 20% 5% 15% 15% 0% 10% 10% 5% -5% 5% 0% GFC GST GST 0% -10% -5% Mar-85 Apr-89 May-93 Jun-97 Jul-01 Aug-05 Sep-09 Oct-13 Nov-17 Mar-72 Jun-75 Sep-78 Dec-81 Mar-85 Jun-88 Sep-91 Dec-94 Mar-98 Jun-01 Sep-04 Dec-07 Mar-11 Jun-14 Sep-17 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 (1) Source : IMF 2015 (2) Source: NZ Treasury; Adjusted Financial Balance till 1993; Operating Balance Before Gains and Losses Post 1993 5

  7. GST To Benefit Growth & Profitability of Banks Informal Economy – Demonetization addressed the stock while GST addresses the flow.  Demonetization & GST driving Direct Tax triangulation; Direct tax collections for 9MFY18 up 18.2%  GST to boost economic growth by additional 0.5% to 1% with a stable and transparent tax system  Formalization of cash economy with improved quality of information enhancing bankable wallet  Lower government borrowings means lower SLR & CRR freeing capital to fund the economy (more benefit  to banks with higher difference between investment and loan yields) SME, MSME invoice / bill discounting to get a fillip with GSTN bills being offered / financed on TReDS*  * Trade Receivables e-Discounting System 6

  8. Serving the • Rural Banking Underserved Financialization • Demonetization & Digitization: of Savings To Expand Banking & Para Banking Formalization of • Goods & Service Tax: Economy Benefits far outweigh initial hiccups Current • Bankruptcy Code Banking Market 7

  9. Financialization is Now a Virtuous Cycle Lower Inflation Lower Lower Govt Rates Borrowing Lower Need for Funding Inflation Economy Hedging Assets Banking & Para Banking Assets 8

  10. Banks Are Natural Homes for Para-Banking Products Private Life Insurers - New Business Premiums by Channel General Insurance – IBL A Large Distributor Brokers, Corporate Individual 3% Agent (Non agents Bancassurance Banks), 3% 2% 24% Direct Direct and Majority Business Others, IBL 35% 10% Banks, 54% Corporate Agents - Non- Agents, Banks Brokers 30% 28% 11% AMC AUMs by Parent Entity Top 5 Retail Brokers are Linked to Banks Global AMC & ICICI Securities Others, 11% 10% HDFC Securities 7% NBFC/Financi al Institution, Sharekhan Ltd 13% 6% Banks, 49% Axis Securities 5% Others Conglomerates, 67% 27% Kotak Securities 5% 9 Source: IRDA, AMFI, NSE, Management Estimates

  11. Para Banking – Manufacture or Distribute?  What is attracting IndusInd management attention ? Preferred Approach High Low Capital Consumption Inorganic / JV Organic Gestation Period Inorganic / JV Organic Investment Size Issuance of Shares Cash Specialist Skills Inorganic / JV Organic / Bolt-on IBL Franchise Valuation for Franchise 10

  12. • Rural Banking: Serving the Next Growth Frontier Underserved Financialization Demonetization & Digitization: • of Savings Taking Para Banking to Next Orbit Formalization of • Goods & Service Tax: Economy Benefits far outweigh initial hiccups Current • Bankruptcy Code Banking Market 11

  13. The Urban / Rural Divide Household Details (2011 Census) Rural Urban 93% 81% 65% 64% 55% 52% 40% 31% 18% 11% House with Concrete House with Brick Walls Electricity Sanitation facility Cooking Gas Connection Roof within the premises 12 Source: Houselisting and Housing Census Data Highlights - 2011

  14. Government Schemes Are Bridging the Divide… Household Details (2011 Census) Rural Urban 93% 81% 65% 64% 55% 52% 40% 31% 18% 11% House with Concrete House with Brick Walls Electricity Sanitation facility Cooking Gas Connection Roof within the premises Pradhan Mantri Awas Saubhagya Swachh Bharat Ujjwala Yojana Yojana (Gramin) Yojana Yojana 13

  15. … And Are Well Executed Average Daily Rural Roads Constructed Expenditure on Rural Development Schemes (km) (Rs cr) 1,05,448 156 2.1x 95,099 2.4x 130 77,321 67,263 100 100 58,630 50,162 69 66 FY13 FY14 FY15 FY16 FY17 FY18 (E) FY13 FY14 FY15 FY16 FY17 FY18 (Target) 14 Source: Ministry of Rural Development

  16. Union Budget 2018-19 Promises More  Increasing Farm Income – Minimum Support Price for major crops at 1.5x the cost of production  National Health Protection scheme – Health insurance for 100 mn rural households; Pilot of Rs 20 bn to be ramped up in subsequent years.  Swachh Bharat Mission – targets additional ~19 mn individual household sanitation facilities  Ujjwala (LPG connections to BPL households) – increased target from 50 mn to 80 mn households  Saubhagaya (Electricity connection to households) – targets additional 17.5 mn households with electric point in every house. 15

  17. Rural India Under-served for both Assets & Liabilities Deposits by Population Category Credit by Population Category Rural, 10% Rural, 7% Semi-Urban, 11% Semi-Urban, 16% Metropolitan, 52% Urban, 15% Metropolitan, 67% Urban, 21% 16 Source: RBI, Data as of March 2017

  18. Rural Bankability is Improving Enablers in Place to Serve the Un-served and the Under-served Building Blocks of “Rural Stack” Government Schemes / Reforms • Credit Bureau Coverage • Pradhan Mantri Awas Yojana – Housing for all by 2022 Mobile Penetration Soubhagya Scheme – Electrification of all villages • • Jan Dhan Accounts Pradhan Mantri Gram Sadak Yojana • • GST to formalize MSME Mahatma Gandhi National Rural Employment Guarantee Act • • • Govt + Private Customer Service Centre Infrastructure • Target to Double Farmer Income Cost of Delivery Falling Rapidly ! 17

  19. Rural Opportunity >3x the Current Market Rural India HouseHolds: 168 mn  Less: Accessibility: 20%; Credit Rejection: 20%  Balance HouseHolds: 100mn  Average HouseHold Borrowing: Rs 1,50,000  Average Outstanding Credit Per Account (Rs mn) Rural Credit Market (Rs. Trillion) 15.0 1.07 0.47 5.3 0.21 0.15 Rural Semi-urban Urban Metro Current Potential Source: Census 2011, RBI Population Group-wise Outstanding Credit Of Scheduled Commercial Banks – March 2017 18

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