An efficient, well-structured, developed banking system acts as the backbone of any economy as it contributes to increased efficiency of the economy by mobilizing savings and allocating them to higher return investment.
Three distinct milestones have been reached in the development of Indian banking. After the Banking Regulation Act of 1949, the Bank of Hindustan was established as the first Indian Bank. In 1969, the second phase saw the nationalization and reform of Indian banks.
The Banking Sector of India
The Indian banking system consists of 22 private sector, 12 public sector, 56 regional rural, 96,000 rural cooperative banks, and 1485 urban cooperative banks. It also includes 46 foreign banks as well as cooperative credit institutions. All these banks have a combined network of 213,145 ATMs.
The total assets of the banking sector, including private and public sector institutions, grew from FY18 to FY21.
In FY21, the total assets of the public and private banking sectors were Rs70 lakh crores and Rs128 trillion crores, respectively.
Bank credit increased by 0.29% between FY16 and FY21.
As of 31st December 2021, banks reported deposits totaling Rs 162 lakh crores (US$ 2,17 trillion).
After reviewing the report cards of both private and public banks, let’s compare the two largest private sector banks of India in order to help investors choose the best option.
Company Overview of Kotak Mahindra Bank
Kotak Mahindra Bank, a flagship of the Kotak Group, is one of India’s fastest-growing financial institutions. Did you know that it was the first NBFC to become a bank in India after receiving a banking license from the Reserve Bank of India in February 2003?
The Bank provides a wide range of financial services, including banking, treasury, and asset management. It also offers commercial banking services such as stockbroking, investment banking, and vehicle finance advisory. The Bank operated a nationwide network of ATMs and 1603 branches as of 31st December 2020.
Axis Bank: Company Overview
Axis Bank began operations in 1994. It is now one of India’s top private-sector banks. The Bank provides a wide range of financial services to a variety of segments, including MSME, Agriculture, Large and Mid-Corporates, and Retail Businesses. As of 31st March 2022, the bank has an extensive network consisting of 4,758 branch offices (including extension counters), 5,972 cash recyclers, and 10,990 ATMs. The Bank also has eight overseas offices with branches in Dubai, Gift City, IBU, and Singapore.
Kotak Mahindra Bank VS Axis Bank: Stock comparison
We have developed a number of ratios and parameters that will help investors make investment decisions.
Here are some ratios and other parameters that are not typical of the performance of Indian stock exchanges.
The Return on Equity (ROE) is a measure of a company’s financial performance. The formula is Net income/Shareholders equity.
The higher the ROE is, the more efficient the management of the company in generating revenue and returns from equity financing. Kotak Mahindra Bank’s ROE was 12.47% as of 19th July 2022, compared to Axis Bank’s ROE which was 7.06%.