Michael Debabrata Patra: Fifty years of Indian banking through the
lens of basic statistical returns
Keynote address by Dr Michael Debabrata Patra, Deputy Governor of the Reserve
Bank of India, at the Conference on "BSR@50", organised by the Reserve Bank of
India, Mumbai, 28 October 2022.
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Dr. R. B. Barman, former Chairman, National Statistical Commission, Shri S. H. Saoji,
Dr. A. K. Nag and other former colleagues who contributed richly to the Basic Statistical
Return (BSR) system, senior officials from banks - I am glad to see many Chief
Compliance Officers (CCOs) of banks participating today - Executive Directors and
other colleagues from the Reserve Bank, Ladies and Gentlemen,
2. Today, we celebrate the 50th year of the BSR system and pause to reflect on the
way forward. Any system which has served us for half a century would surely have
inherent strengths and depth. I believe that as an exhaustive data collection system, the
BSR has endured the test of time. The development and maintenance of such a large
system is demanding, to say the least, and it calls for constantly adapting to emerging
realities. For this, I compliment my colleagues from the Department of Statistics and
Information Management or DSIM. The Reserve Bank has always strived to ensure that
its policies are data-driven and, in fact, data-intensive. Accordingly, the Reserve Bank
forms a significant part of the national statistical system. Our early publications, most of
which have now been digitised and placed on our website, profile the emphasis that the
Reserve Bank has placed for decades past on information gathering systems, censuses
and surveys to secure meaningful inputs for policy making as well as to disseminate a
wide and rich pool of information as a 'public good'. The BSR is a central feature of this
hallowed history. In fact, the BSR has been a silent sentinel watching over the
transformation of India banking, and that is theme of my address today.
3. For India, banking services serve as the lubricant that turns the wheels of the
economy. In the early years, agricultural finance became a priority for the Reserve
Bank, but comprehensive information for fashioning policies with the chisel of objective
assessment was a yawning gap. Way back in August 1943, the Reserve Bank wrote to
all the state governments about and I quote from that correspondence, "having sample
enquiries conducted rapidly in typical areas with a view to finding out the extent of
indebtedness on the eve of the war; how it has been affected by subsequent
developments; how agriculturists and moneylenders have reacted to them, what are the
tendencies and work for and against the utilisation of incomes for liquidation of old
debts-.." This shortfall was bridged post-independence by the Reserve Bank's rural
credit survey of 1951-52. It gave a detailed assessment of channels of finance in the
hinterland, which galvanised policies for expanding access to formal credit channels. In
those days, the spread of banking assumed importance from the point of view of
financially including farmers and small enterprises in order to reduce their reliance on
informal sources of credit. There was thus a concomitant objective of financial inclusion
in banking policies of those early times.
4. The next major milestone in the progress of Indian banking was the liberalisation of
branch licensing policy in 1965 to check the tendency of banks to concentrate their
branches in cities and major towns and to drive the expansion of branch networks to
unserved and under-served areas. The focus on credit to agricultural and small industries
sectors remained steadfast through this reform. These early developments led up to the
establishment of the National Credit Council in 1967. It became a forum for assessing
credit priorities on an all-India basis so as to assist the Reserve Bank and the
Government in the allocation of credit. Notably, the Council had to use credit data from
multiple reporting systems, as aggregate level regulatory reporting did not contain the
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desired dimensions . This became the next challenge.
5. The nationalisation of major commercial banks in 1969 was aimed "to meet
progressively, and serve better, the needs of development of the economy in conformity
with national policy and objectives and for matters connected therewith or incidental
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thereto" . This became the next milestone. In this milieu, the BSR system was
introduced as a "determined effort at systematising the reporting of banking data to
ensure the availability of fairly comprehensive information with a minimum time-lag, - to
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give more definite shape to the new policy of diversifying the pattern of credit" .
6. Since then, the BSR system has metamorphosed into a sound and comprehensive
reporting system, generating a wide array of useful statistics. Combined with bank
branch statistics [popularly known as Master Office File or MOF system], it has
supported the post-nationalisation expansion of the Indian banking system. It has also
caused attention to focus on financial inclusion by tracking the growing bank branch
network and the access of the public to banking services.
7. The collection and analysis of granular level financial data to assess the
interconnectedness of financial institutions was brought forward in terms of priority after
the global financial crisis (GFC) of 2008-09. Once again, the BSR system has turned
out to be well equipped and fortified well ahead of this need.
8. Over the years, innovations and demanding requirements resulting therefrom have
led to several modifications in the BSR system in terms of coverage, periodicity,
granularity and reference dates. This unsung history is included in the 'Commemorative
Volume' being released today. Developments in information technology have been
exploited to improve quality and timeliness of statistics. BSRs 3, 4, 5, 6 and 8 have
been discontinued. As a part of further rationalisation to reduce the reporting burden on
banks, we also plan to discontinue the quarterly BSR 7 reporting from March 2023. This
will leave us with only two BSRs, viz., BSR 1 on credit and BSR 2 on deposits, both of
quarterly frequency. Regional rural banks (RRBs) will continue to report at annual
frequency.
9. We in the Reserve Bank regard the BSR as living returns, continuously alive to
structural changes in the economy and in the banking system, and ready to quickly
adapt and incorporate. Let me give you a sense of the stories that the BSR has to tell.
We now have one commercial bank branch for every nine thousand citizens, a far cry
from a branch per forty thousand citizens in 1972. Commercial banks maintain around
2.25 lakh customer service points, including over 1.75 lakh ATMs. Co-operative banks
also have a significant network of branches and ATMs. In addition, over nine lakh fixed
point business correspondents (BCs) bring banking services virtually to the doorstep.
Digital banking has become a reality.
10. The reach and spread of the banking network have improved the mobilisation of
financial resources in the economy. The number of deposit accounts per thousand
population has increased from 43 in 1972 to over 1,600 now. Households currently
account for 63 per cent of total bank deposits. This is also reflected in the rise in the
ratio of per capita bank deposits to income from 15.8 per cent to 71.2 per cent and the
ratio of per capita credit to income from 12.2 per cent to 51.3 per cent over the period
from 1972 to 2022. Branches across rural, semi urban and urban areas have
contributed to this mammoth financial intermediation.
11. Patterns of financial intermediation are also shifting. Industry has been a major
recipient of bank credit but its share in total credit has come down from 60 per cent to
27 per cent during 1972-2022, broadly equal to that of services and personal loans. In
the personal loans segment, borrowings by individuals now account for over 40 per cent
as compared with less than 10 per cent share in 2000. This has ushered in to a unique
phenomenon - the share of smaller loans - of up to Rs.10 crore - in total loans has
increased to 60 per cent in 2022 from 45 per cent in 2014. This transformation has
brought in its trail of associated changes in assessment, risk management and pricing
of loans. On the lending side, a feature that has impacted the banking system is the
reduced role of term lending institutions and emergence of corporate treasuries with
new avenues for short-term financing. This has resulted in (a) increased reliance on
banks for long-term funds; and (b) gradual reduction in the share of working capital in
total loans. Banks' asset portfolios have become elongated, with term loans accounting
for 65 per cent of total loans.
12. In conclusion, I would say that the impetus for transformation has come calling as
India - already the fifth largest economy of the world - prepares to be among the
fastest growing economies and an engine of global growth (2nd largest contribution to
global growth in 2022). By 2025-26, India will match Germany and become the fourth
largest economy of the world. By 2027, it will surpass Japan and emerge as the third
largest economy of the world. India's population will become the largest in the world
next year and it's youngest. It will demand the world's best financial intermediation
services. Banks will have a critical role in this transformation. Information will be the
plumbing in this evolving architecture. As we consolidate the gains of the past and
move ahead to address new challenges, it is going to be up to us - all stake holders -
to keep the BSR system robust, timely, comprehensive and open to change. Today's
conference provides us an opportunity to prepare for this untravelled road that lies
ahead.
Thank you.
Speech delivered by Michael Debabrata Patra, Deputy Governor, Reserve Bank of
India in the Conference on 'BSR@50' organised by the Bank on October 28, 2022 at
Mumbai. Prescient comments from Om Prakash Mall, valuable inputs received from
Rajendra Raghumanda and Dibyendu Bhaumik and editorial help from Vineet Kumar
Srivastava are gratefully acknowledged.
For example, while the 'Uniform Balance Book (UBB) introduced in each bank office
required monthly reporting of account-wise information in regard to credit limits
sanctioned and advances outstanding according to the type of account, type of
borrower, occupation, purpose, security, and rate of interest charged, it had to be
supplemented by (i) annual survey on purpose-wise distribution of bank advances; (ii)
half-yearly survey of interest rates on deposits and advances; and (iii) mid-monthly
survey on security-wise classification of bank advances.
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The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
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Report of the Committee on Banking Statistics (Chairman: A. Raman), RBI, August
1972. The BSR system replaced the UBB system and other regular and ad hoc
reportings by banks to the RBI.