As we enter our 25th year of operations it gives me immense satisfaction toshare that the Bank over all these years has not only helped businesses and individualsmake real progress in their lives but our contribution towards society has had a deeperimpact beyond the economic growth of the nation. I would like to share with you all onesuch real-life story which I experienced during one of our visits to a rural branch.
Pramila a housewife from a small village near Indore had taken a microfinanceloan from us some 18 months back for setting up her grocery shop. The remarkable part isthat she has not only repaid that loan but has also used her income to set up few otherbusinesses like tailoring and a beauty parlour. This has earned her huge respect in herhousehold and made her a role model in the community and an inspiration for women acrossnearby villages.'
India's banks have evolved tremendously over the last 25 years from providingbasic banking services with little effective competition in the pre-liberalisation era tobecoming market-driven universal banks. The combination and contribution of the publicsector and private sector banks over all these years and more recently with theintroduction of small finance and payment banks has made tremendous positive impact onthe society and economy.
The branch network of all scheduled commercial banks in India has more than doubledfrom nearly 60000 in 1991 to over 138000 in 2017 offering direct employment to 1.35million people; total bank credit and deposits have grown nearly 70 times and 55 timesrespectively. The banks have not only aided economic expansion by meeting the creditrequirements of businesses and individuals but have also been the core facilitator ofinfrastructure development and have driven growth in priority sectors such as MSME andagriculture. The banks have also played a key role in extending the
Government's social benefit schemes and driving the financial inclusion agenda.
India's macroeconomic fundamentals continued to improve last year on the back ofsignificant policy initiatives by the Government aided by a stable monetary policy. Thecountry saw a sovereign rating upgrade and also climbed up the charts in ease of doingbusiness. Both these developments should result in higher foreign investments in themedium term. The implementation of the Goods and Service Tax (GST) regime in 2017 has beenone of the biggest structural economic reforms benefits of which will continue to accruein the years to come. GST reform along with demonetisation and digitisation efforts willsignificantly benefit towards formalisation of the economy.
From the perspective of the Indian banking industry the fiscal year 2018 was a mixedone. Apart from the lingering asset quality problems there were some serious issuesaround fraud and operational misses that came to the fore towards later part of the year.The regulator has initiated measures and issued guidelines to ensure that the systemsbusiness practices operational processes and risk management for the sector are robustand safe. While these challenges are real it is important to acknowledge that at thisstage in the development of our country the banking sector in India remains a force ofgood moving our inclusive growth agenda forward.
The resolution process for large stressed accounts referred by the Reserve Bank ofIndia (RBI) under the new Insolvency and Bankruptcy code (IBC) has largely been on track.On the credit growth side the situation seems to be improving. The credit growthcontinued to pick up through the year partially led by the base effect and tighterliquidity conditions helped shift credit demand back to banks from bond markets.
Moving on to the financial performance of the Bank Axis Bank had a second challengingyear in a row this year. Our historical focus on project finance in infrastructuresectors steel and power continued to create significant headwinds for us this year. Theasset quality issues thus continued to be a pain point for the second year. The recentguidelines on stressed asset recognition and resolution along with fully functioningbankruptcy infrastructure would not only expedite the recognition and resolutionmechanism but is also likely to inculcate a stronger corporate credit culture goingforward.
During this fiscal year the Bank undertook accelerated Non-Performing Asset (NPA)recognition in line with its desire to get past the asset quality issues of the lastcycle. With the aggressive recognition we undertook during the fiscal year we believe theNPA recognition phase of this credit cycle is now nearly complete.
The Axis franchise continued to deliver steady operating performance with coreoperating revenue growth of 6% and moderation in operating expenses growth. The Bank'sretail franchise remains robust with strong growth in loans fees and low-cost deposits.The Bank's SME loan growth improved considerably in the later part of the year with riskparameters under control. The quality of corporate book too has been steadily improvingwith higher incremental sanctions to better rated corporates significant reduction inconcentration risk and increase in the share of working capital loans. Despite the pain onasset quality front the Bank continues to have a strong balance sheet with one of thebest provision coverage and capital adequacy ratios of 65% and 16.57% respectively.During the course of the year the Bank raised capital from a few marquee investors thatfurther augmented the capital adequacy position with Tier-I ratio of 13.04% at the end offiscal year 2018. Our subsidiaries had another good year as they continued to gain scaleand market share in their respective segments.
In the corporate segment our learnings from the last cycle have helped us to calibrateour portfolio concentration a lot more tightly than in the previous years. In the last fewyears we have significantly strengthened credit underwriting and risk managementpractices at the Bank. We continue to focus on targeting the pool of better ratedcorporates and re-orienting the corporate franchise towards a more flow-led transactionbanking-oriented business.
The Bank continues to remain the leading player in the Debt Capital Market segment. Ourtop position in the leader board over the last 10 years positions the Bank very well tobenefit from the growth in the corporate bonds market.
We believe that demonetisation and the implementation of GST are likely to result infaster shift from informal to formal sector and that is perhaps being reflected in theSME growth. With significant government policy initiatives such as Skill India' andMake in India' directed around this sector we expect SME growth to come back intohigher trajectory than witnessed in the recent past. From a risk perspective the SME bookhas held up well and we intend to use more of data that is now available post GST toautomate underwriting and risk management for smaller ticket-size SME loans as well.
The Retail franchise remains robust as we continue to gain market share in both retaildeposits and loans. We reaffirmed our strong positioning in low-cost deposits with a CASAratio of 54%. During the year we added 400 branches to our distribution strength;however the branch formats have been smaller with improving employee productivity led byautomation and centralisation of back office operations.
We believe deposit mobilisation in fiscal year 2019 could pose some challenge. Weexpect branches to continue playing a crucial role in deposit mobilisation customeracquisition and providing localised services. Hence we would continue to make adequateinvestments in our branch network.
The overarching theme for us in Retail Banking has been to service and deepenrelationships with existing internal customers for growth. Over the last few years wehave made significant investments in technology and processes and further strengthened ourrisk management architecture. We have one of the best digital capabilities in India andhave been increasingly using digital analytics to identify potential customers optimisebranch locations and provide customised solutions through AI-backed chatbot and mobileapp.
Our retail loan book continues to grow strongly with significant diversification inportfolio mix. We believe there is considerable scope to cross-sell and grow the unsecuredside of our retail loan book as we look to onboard granular retail risk while reducingconcentration risk on the corporate side.
The Bank's strong distribution capabilities brand and ability to constantly innovateand offer right product proposition to customers has helped us build and gain significantmarket share in most of the retail businesses in quick time. We have the market leadershipin Forex cards and in the credit cards business. Despite being a late entrant we arecurrently ranked fourth in terms of market share. The Bank is today among the top fiveplayers in the home loan market. We have also built one of the best wealth managementfranchises among banks in the country - our Burgundy proposition is now among our fastestgrowing business lines.
Similarly within the Axis family our subsidiaries in institutional equity businessbroking asset management and non-banking finance arm have scaled up well. Axis AMC thatwas set up in 2009 is now among the top 10 mutual fund houses in India; Axis Direct thebroking business that was launched in 2011 ranks among the top three brokerage firms interms of active client base. Our institutional equities business that we acquired in 2010has maintained its leadership position on equity league tables over the last decade. Thesubsidiaries have helped the Bank to offer strong proposition to our corporate and retailcustomers and played a meaningful role in building the Axis Bank franchise.
Digital payments and online consumption of financial services are growing on the backof Digital India' initiatives. Today there is an opportunity to ride on the digitalinfrastructure to strengthen payments trade and information flow to aid sustainable andinclusive growth. The Bank has always been at the forefront of digitisation contributingactively to the Government's vision of a less cash' economy. We have the country'ssecond largest PoS network a strong cards franchise and in the mobile banking space theBank ranks among the top in terms of market share by transaction value and volumes.
The Bank continues to be the leader in partnership-driven innovation and has redefineddigital payments in India by providing its customers with a differentiated paymentsexperience. During the year the Bank in association with Kochi Metro Rail Limited(KMRL) launched India's first open-loop transit EMV contactless metro card. The Bank alsopartnered with marquee names such as Google IRCTC LIC Uber Ola and others to drive theacceptance of payments on the UPI platform.
The acquisition of FreeCharge earlier this year re-affirms the Bank's determination tolead the journey of digitisation of financial services. We believe that FreeCharge'sunique value proposition in the digital payments space and the strength of its acquisitionengine would help to build the Axis franchise further and create significant value for theBank. The post-acquisition activities at FreeCharge remain on track and all key top-linemetrics have shown considerable improvement.
During the year the Bank also launched instant international payment services usingRipple's enterprise blockchain technology solution. The Bank has been the first financialinstitution in India to offer a Ripple-enabled frictionless payments experience thatwould make international remittances faster.
Over the last 24 years the foundation of the Bank has been built on our core values to do the right thing for our 20+ million customers. Though we have progressed alot in terms of technology what hasn't changed is our legacy customer service TheAxis Experience' which is service in a digital world but with an old world charm.During the year Axis Bank very aptly won the NASSCOM Customer Service Excellence Award -2017 under the Transformation' category.
Core to our approach is the belief that our long-term success depends on the progressof the communities and the people we serve. Axis Bank Foundation has been relentlesslyworking over the last decade to help provide sustainable livelihoods and create value forthe communities through its various integrated rural skill development and educationalprogrammes. It is a matter of great satisfaction for us that the Axis Bank Foundation hasachieved the target it had set for itself of achieving a million sustainable livelihoodsby 2017. During the year the Bank also launched Axis Dil Se' a CSRinitiative in partnership with 17000 ft Foundation that saw 108 schools across theremotest parts of Kargil and Ladakh being adopted by 20 senior Axis Bank leaders for aperiod of three years.
The Bank deservingly was included in FTSE4Good Emerging Index in recognition of itsEnvironmental Social and Governance (ESG) practices. And as we move ahead we continue toremain conscious of our deep commitment to our environment and the underprivileged. TheAxis Bank Foundation now aims to create two million sustainable livelihoods over the nexteight years.
Going forward I continue to believe that the Indian banking sector is well placed tobenefit from the informal to formal shift that is currently underway. Also private banksin the country will continue to gain significant part of the incremental market share. Webelieve that with our strong financial and market position backed by our corecapabilities we would certainly be among the top few banks in the country.
I am extremely proud of the great franchise we have built and that is reflected in theway in which customers and shareholders have reposed faith in us. Over the last nineyears we have successfully built a strong CASA franchise on back of continued investmentsin branch infrastructure. Our market share in deposits has grown from 2.6% in 2008-09 to3.6% at the end of 2017-18 with branch network increasing from 835 branches to over 3700branches over this period. On the lending side we have grown our lending book from nearlyRs.80000 crores to around Rs.440000 crores over these nine years at a CAGR of 21%. Atthe same time we have achieved significant diversification in balance sheet with theshare of Retail loans in our loan book rising from 20% to 47%. Most notably we havefilled up strategic product gaps and developed key subsidiary businesses to become a fullservice bank. The Bank now has strong capabilities across retail corporate and SMEsegments and offers strong proposition to its customers with subsidiaries complementingthe strategy. The retailisation of the Axis franchise has been the bedrock of the Bank'sfinancial performance thus improving the quality and sustainability of its earnings.
Earlier this year I had requested the Board to reconsider my re-appointment till 31December 2018 which has been accepted and is subject to shareholder approval. Axis is agreat institution with a very promising future and I am confident that our Board will findthe right person to lead this institution in its next phase. While we go through thatprocess I am fully committed to maintain high performance levels at the Bank.
The Bank has taken significant steps in fiscal year 2018 to get past the asset qualityissues of this cycle and the top priority for us in fiscal year 2019 will be to achievenormalisation of credit risk. The second focus area would be to deliver profitable growth.The third area of delivery would be to enhance capabilities to strengthen operational riskmanagement and re-invent our corporate bank driven by technology. The fourth deliverablefor fiscal year 2019 is to continue investing in digital capabilities analytics and oursubsidiaries to drive future growth.
I have thoroughly enjoyed my nine-year long association with this great Bank. I havegiven it my best and have been rewarded by the support and association of all our internaland external partners. The future of Axis Bank remains extremely bright and I wish it andall its stakeholders the very best.