Smaller banks in India such as Yes Bank Ltd, Kotak Mahindra Bank Ltd and Axis Bank Ltd have been growing at a phenomenal pace. For instance, the compound annual growth rate, or CAGR, of assets for Yes Bank in the five years between fiscal 2006 and 2010 was 54.27%, Kotak Mahindra 29.76% and Axis Bank 29.41%. Similarly, the five-year CAGR of capital and reserves of Axis Bank was 40.93%, Yes Bank 40.08% and Kotak Mahindra 39.32%. They have been able to add to their reserves as their net profits, too, have been growing rapidly. Yes Bank’s five-year net profit grew at a CAGR of 53.91%, Axis Bank’s at 38.97% and Kotak Mahindra’s at 36.54%. On two critical business parameters, loan growth and deposit growth, the trio has done well. Yes Bank’s deposits grew at a CAGR of 55.90% in the five years, Kotak Mahindra’s at 29.47% and Axis Bank’s at 28.64%. Similarly, Yes Bank’s loan book has grown at a CAGR of 55.94%, Axis Bank’s at 36.14% and Kotak Mahindra’s at 26.76%. I am quoting these figures from a recent Reserve Bank of India publication, A Profile of Banks 2009-10, that contains important performance indicators of 81 commercial banks for the past five years. I have looked at 55 banks that had at least 1,000 crore of capital and reserves in 2010.

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Two of these three banks are really small. Kotak Mahindra had an asset base of 37,436 crore in fiscal 2010 and Yes Bank 36,383 crore. Axis Bank is much bigger with an asset base of 1.81 trillion and hence its growth is significant. The story of HDFC Bank Ltd is even more compelling. It had assets worth 2.23 trillion in 2010 and has been growing at a scorching pace. HDFC Bank’s assets grew at a CAGR of 24.78% in the five years, capital and reserves at 32.35%, net profit at 27.63%, deposits at 24.58% and advances at 29.12%.

Foreign banks see a huge opportunity in Indian markets, but none of the big three in India—Standard Chartered Plc., Citibank NA and Hong Kong and Shanghai Banking Corp. Ltd—has been growing at a pace comparable with local private banks. The five-year CAGR of HSBC’s assets was 19.27%, Citi’s 16% and Standard Chartered’s 14.27%. Their deposit growth varied between 11% and 17.4% and that of advances between 11.9% and 6.9%—mediocre and nothing to write home about. The five-year CAGR of net profit for Citi was just 4.05% and HSBC 9.48%. Standard Chartered’s is relatively better at 18.64%. Indeed, regulatory restrictions on branch expansion has a bearing on their growth, but it seems they love to talk more about the fascinating India opportunity story than act on it.

How have the big boys done? State Bank of India, the nation’s largest lender with 10.54 trillion of assets, has been growing its book at 16.36% and net profit at 15.77%. The five-year CAGR of its advances was 19.27% and deposits 16.17%. Punjab National Bank, with an asset base of 2.97 trillion, has been growing its book at 15.34%, net profit 22.10%, advances 20.12% and deposits 15.81%. Two of the three other big state-run banks—Bank of India (BoI) and Bank of Baroda (BoB)—with assets ranging between 2.75 trillion and 2.78 trillion have been growing at a healthy pace, but Canara Bank ( 2.65 trillion) is lagging behind. The five-year CAGR of assets for both BoB and BoI is around 19.6% each, but Canara has clocked 14.8%. Similarly, BoB’s advance and deposit growth has been 23.9% and 20.81% respectively, against BoI’s 20.9% and 19.6%; Canara is far behind with 16.35% loan growth and 14.97% deposit growth. When it comes to net profit, BoB’s five-year CAGR was 29.9%, ahead of BoI’s 19.94% and Canara Bank’s 17.6%. With a new chief executive officer at the helm, the Bangalore-headquartered bank will possibly try to catch up with the two Mumbai-based banks that were until recently considered its peers but have gone much ahead.

On two key efficiency parameters—net non-performing assets, or NPAs, as a percentage of advances and return on assets, or RoA—banks’ performance emits mixed signals. In 2006, there were eight zero-NPA bank while 25 banks had less than 1% net NPAs, 13 banks less than 2%, six banks less than 3% and two banks more than 3% but less than 4% net NPAs. In 2010, the number of zero-NPA banks has shrunk to three; banks with less than 1% NPA remained constant at 25 but 19 banks have more than 1% but less than 2% of NPAs, five banks less than 3% and two banks have more than 5% net NPAs. In 2010, only five banks had more than 2% RoA while 28 banks had an RoA of 1-2% and 20 less than 1% RoA. Two banks had negative RoA as they posted net losses. In 2006, seven banks had more than 2% RoA but 22 of them had 1-2% RoA and 25 of them less than 1% RoA. One bank does not have a comparable figure as it was not operational in 2006.

Where does ICICI Bank Ltd, India’s largest private sector lender with 3.64 trillion assets, stand? The five-year CAGR of its assets was 7.62%, net profit 9.64%, advances 4.39% and deposits 4.12%. The only parameter on which it has shown double-digit growth is in its capital and reserves, 18%, but that’s by virtue of a float in 2007 when it raised money from the public. Its net NPAs rose from 0.72% in 2006 to 2.12% in 2010 and its RoA declined from 1.3% in 2006 to 1.13% in 2010. Its chief executive officer Chanda Kochhar’s job is cut out. She needs to hurry up with ICICI Bank’s consolidation phase and start the growth phase if she does not want the lender to be overtaken by HDFC Bank and Axis Bank in the next five years.

Mint’s Ashwin Ramarathinam collated the data for this column.

Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as Mint’s deputy managing editor in Mumbai. Please email your comments to