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Compare the performance of public sector and private sector bank

[Type the document subtitle]
1/18/2010 IBS Nishikant

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A report On

Compare the performance of public sector and private sector bank

By Nishikant Naveen (08BS0002041)

Submitted To Faculty guide: Prof. M.L. Gopichander IBS Hyderabad

DECLARATION

I, Nishikant Naveen hereby declare that this project report entitled compare the performance of public sector and private sector

bank is submitted by me for partial fulfillment of the M.B.A. program

from IBS Hyderabad. This report is exclusively prepared by me under the guidance of Prof. ML GOPICHANDER, Faculty IBS. This project report has not been submitted to any other institution or published anywhere before.

DATE:

SIGNATURE

Certificate of Completion of Management Research Project.

This is to certify that Nishikant naveen has successfully completed Management Research Project on compare the performance of public sector and private sector bank, under the supervision of GOPICHANDER, Faculty IBS. Prof.ML

_________________________

Prof.ML GOPICHANDER, Faculty IBS

Acknowledgement
Sit down before fact as a little child, prepared to give up every conceived notion, follow humbly wherever and whatever abysses nature leads, or you will learn nothing.

-Thomas Huxley

No task is single mans effort. Any job in this world however trivial or tough cannot be accomplished without the assistance of others. An assignment puts the knowledge and experience of an individual to litmus test. There is always a sense of gratitude that one likes to express towards the persons who helped to change an effort in a success. This is an opportunity to express my indebtedness to people who have helped me to accomplish this task. I deem it a proud privilege to extend my greatest sense of gratitude to my guide Prof. ML GOPICHANDER for the keen interest, inspiring guidance, continuous encouragement, valuable suggestions and constructive criticism throughout the pursuance of this report. His valuable remarks have made me improve my project a great deal. Without his guidance and support this project would not have been half as good. My sincere thanks are due for him for his valuable support in helping me to gain this opportunity of being associated with such a meaningful project.

I also express my profound gratitude to IBS, Hyderabad for giving the opportunity to work on the project and broaden my knowledge base and explore new horizons. -Nishikant Naveen

Abstract Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. The Indian banking scene has changed drastically with the private sector making inroads in an area hitherto dominated by large public sector banks. Growing disinvestment is likely to impact the banking industry as well. In my study I compare the performance of two leading private sector bank (ICICI bank & YES bank) and two public sector bank (PNB & DENA bank). I compare these banks on the basis of profitability, products and services they offered, their working culture, adoptability to new technology and innovation in their technique to enhance their productivity and efficiency. To find their profitability I study the banks financial statement and measure their ROA, capital adequacy ratio, profit margin analysis and nonperforming assets which is widely used to assess the performance of banks. Comparison of the net interest income (NII) and net interest margin (NIM) of these banks with their previous year performance as well as other player to judge the financial health of the bank. I also studied the various products & services offered by these banks and how much customized are they in their offering to increase the customer satisfaction as well as retaining the customer. I compare the performance of private bank and PSBs in implementing the CRM and business technology to generate the new business avenue. With the introduction of private sector bank and innovation of new technology, Indian banking sector sees major changes in their working culture and they continuously adopted new technology to improve their efficiency and productivity. The old PSBs employee started to change their robust attitude against the private sector banks to maintain the customer relation. The effect can easily be seen on the continuously increasing net profit per employee

of PSBs and their efficiency to reduce the operational cost. To survive in the situation, banks are forced to adopt various marketing techniques and approaches. Thus, marketing has become imperative for all banks including those in the public sector.

Today the banks are taking the banking services to the common man this helps them to develop new technology for survival and to reduce cut throat competition.

Objective of the project: Compare the performance of the public sector and private sector banks on the basis of their profitability, products and services they offered, their working culture, adoptability to new technology and innovation in their technique to enhance their productivity and efficiency.

Methodology Primary data collected by visiting various branches. Secondary data is collected from various published journals and from Internet. Financial statement like P\L account and balance sheet will be analyzed.

Limitations of the Study Inaccuracy of data: As it is not possible to check the authenticity of data available on the net and journals, so it may be possible that the result which I interpret on the basis of my secondary data may not be able to generate the best possible result due to inaccuracy of data. The cultural dimension of public sector and private sector bank is distinct, so precise comparison is difficult procedure.

Description of project in brief The new millennium has brought with it challenges and opportunities in various fields of economic activities including banking. Indian banking which was operated in a highly comfortable environment till the beginning of 1990s has been pushed into the choppy water of intense competition. The modern banking activity is marked by itineraries into un-chartered horizons mingled with risks and heavy competition. Immediately after nationalization, the Public Sector banks spread their branches to remote areas at a rapid pace Their main objective was to act on behalf of the government to fulfill economic obligations towards the common man. They acted over enthusiastically in penetrating into far-flung and remote corners of the country. The social responsibility that was entrusted upon the Public sector Banks digresses them from the profit motive. On the other hand private and foreign banks did not make such moves. Instead, they pursued profit making as the objective of their operation. Growing expectations of the customers drive business strategies for the banks, thereby causing changes in the banks operations. Switching over from plain products and services to offering tailor made products to individual customers, advisory services availability of preferred delivery channels; demonstrate how the banks have been fine tuning their business strategies towards achieving customer centricity and convenience. A steadily growing balance sheet, higher pace of credit expansion, rising profitability and productivity comparable to banks in developed markets, lower incidence of non-performing assets and focus on financial inclusion have contributed to making Indian banking vibrant and robust. Despite the current global financial meltdown sector, the Indian banking sector is considered to be among the most stable.

My project study the performance of two public sector banks (Punjab national bank & Dena bank) and two private sector banks (ICICI bank & yes bank) in current market scenario. I compare the performance of the public sector and private sector banks on the basis of their profitability, products and services they offered, their working culture, adoptability to new technology and innovation in their technique to enhance their productivity and efficiency. I deal with them one by one and their reaction to their current market situation.

Profitability

There is some debate about whether profitability measures are appropriate indicators of performance of public sector enterprises who are required to produce socio-economic outputs that cannot be reflected in the Balance sheet. This is relevant especially for the public sector banks in India whose objectives have been more social than economic. However, the policy makers laid emphasis on profitability as an important benchmark through which the performance of public sector banks is to be judged in the post reform era. In the market oriented economy some public sector banks have gone in for partial privatization and are already listed in the stock market and more banks are likely to approach the capital market to mobilize additional funds. The improved profitability is the only key parameter for evaluating performance from the shareholders point of view. Now it is up to the bank management to decide how to strike a tradeoff between social and commercial banking in order to improve market holdings and services and play the role of governments agent at the same time. In my project I tried to find out financial condition of the banks and compare it with the previous year as well I try to analyze it with the market trends. As we know that the whole industry was affected by the global recession although the impact was minimal in India. The Indian banking industry is experiencing rapid growth in terms of business, technology, products range and customer service. Competition has been a key driver in generating growth and profitability as also innovations in product design and distribution. The banking universe consisting of a wide variety of players from diverse ownerships, from state to private to foreign is leading to the

development of a vibrant and growing banking industry that is focused apart from adapting the best practices and global standards. To understand how well bank is doing, we need to start by looking at a banks income statement, the description of the source of income and expenses that affect the banks profitability. For this I analyze the net income of the bank after tax.

Profit after tax Figures are in Rs Crores.

Year ICICI bank YES BANK PNB BANK DENA BANK

2007 3110.22 94.37 1540 202

2008 4157.73 200.02 2049 363

2009 3758.13 303.84 3091 423

By analyzing the table we found that ICICI bank which maintains its leading position among the private sector banks with PAT of 3758 cr. for the FY09. However PAT for this year was less as compared to 4158 cr. for FY08 due to the higher effective tax rate on account of lower proportion of income taxable as dividends and capital gains. YES bank shows very high growth rate in last 3 financial years. The reason for this high growth is their niche market strategy which promotes the sunrise industry. They also maintain the industrys lowest NPA & very cost efficient with highest employee benefit ratio. Punjab National Bank is the second largest PSU bank, but is fast catching up with its private sector peers. Its 3 yr performance is commendable. Despite of the slowdown in FY09 PNB shows higher growth rate because of reducing NPA and good management. Public sector bank also benefitted because of the fear among the common people about financial condition of some

leading private sector banks. Dena bank with low assets size has registered a net profit of 423 cr. for the FY09. But against a net profit growth of 79% in fiscal 2008, Dena Banks net profit growth declined to 18% in fiscal 2009. This was quite unlike many PSBs, and hints at possible problems specific to Dena Bank.

Return on total assets Measures return on average total assets (ROA)) are widely used to assess the performance of banks. Bank regulator and analyst have used ROA to assess industry performance and forecast trends in market structure- as inputs in statistical models to predict bank failure and mergers- and for a variety of other purpose where a measure of profitability is desired. Year ICICI bank YES BANK PNB BANK DENA BANK 2007 1.09 1.44 1.03 0.71 2008 1.12 1.54 1.15 1.06 2009 0.98 1.60 1.39 1.02

For a bank the top RoA is in the range 1.2 to 1.4 which is considered very well. ICICI bank has shown deteriorating RoA in financial year 2009. This is mainly because of deteriorating asset quality and increase in nonperforming assets. Yes bank continuously shows higher return on assets over the three year and it is highest among the private sector bank. The reason for this is greater efficiency and lower nonperforming assets. Public sector bank also shows good RoA. For Punjab national bank profitability metrics like Return on Assets and Return on Equity are on par with private sector peers. RoA are good at around the 1.39% and RoE is around 19% which is one of the best in industry. And this ratio is achieved without very high financial leverage which is commendable. Current Ratio

Financial ratio used to test a company's liquidity by deriving the proportion of current assets available to cover current liabilities. The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes).

Current ratio = Current Assets Current Liabilities

Year ICICI bank YES BANK PNB BANK DENA BANK

2007 0.61 0.30 0.39 0.35

2008 0.72 0.51 0.29 0.35

2009 0.78 0.45 0.27 0.26

Profit Margin Analysis Profit margin analysis uses the percentage calculation to provide a comprehensive measure of a company's profitability on a historical basis and in comparison to peer companies and industry benchmarks. Basically, it is the amount of profit (at the gross, operating, pretax or net income level) generated by the company as a percent of the sales generated. The objective of margin analysis is to detect consistency or positive/negative trends in a company's earnings. Positive profit margin analysis translates into positive investment quality. To a large degree, it is the quality, and growth, of a company's earnings that drive its stock price.

Year ICICI bank YES BANK PNB BANK DENA BANK

2007 11.41 16.81 17.80 1.80

2008 12.99 16.33 20.67 5.92

2009 12.36 18.81 20.93 8.40

Here we found that except ICICI bank almost all bank shows the reasonable increase in gross profit margin. Reason for the decline is reduction in profit for the ICICI bank. Although PNB also shows very minimal increase in gross profit margin this is because of the expansion strategy adopted by Punjab national bank. DENA bank has shown good gross profit margin ratio which increase by 41.89% in FY09. Ratios for evaluating operating performance Operating Profit Margin By subtracting selling, general and administrative (SG&A), or operating, expenses from a company's gross profit number, we get operating income. Management has much more control over operating expenses than its cost of sales outlays. Thus, investors need to scrutinize the operating profit margin carefully. Positive and negative trends in this ratio are, for the most part, directly attributable to management decisions. A company's operating income figure is often the preferred metric (deemed to be more reliable) of investment analysts, versus its net income figure, for making inter-company comparisons and financial projections.

Year ICICI bank Operating profit

2007 5874.41

2008 7960.68

2009 8925.23

Operating profit margin YES BANK Operating profit Operating profit margin PNB BANK Operating profit Operating profit margin DENA BANK Operating profit Operating profit margin Figures are in Rs Crores

13.33 172.43 18.31 3617 19.41 635 3.24

14.45 350.08 17.54 4006 21.74 686 6.93

14.13 527.65 20.06 5744 21.80 726 9.13

Almost all the banks show better operating profit and operating profit margin in last few years. This is mainly because of increase in efficiency as well as better utilization of technology. Increase in ICICI banks operating profit because ICICI use marketing agents, called direct marketing agents or associates, for sourcing automobile loans. It incurred direct marketing agency expenses of Rs. 15.24 billion on the retail asset portfolio in fiscal 2007 compared to Rs. 11.77 billion in fiscal 2006. The growth in direct marketing expenses was commensurate with growth in business volumes.

Net interest margin (NIM) For banks, interest expenses are their main costs (similar to manufacturing cost for companies) and interest income is their main revenue source. The difference between interest income and expense is known as net interest income. It is the income, which the bank earns from its core business of lending. Net interest margin is the net interest income earned by the bank on its average earning assets. These assets comprises of advances, investments, balance with the RBI and money at call.

Net Interest Margin = Interest income Interest expenses

Average earning asset

Year ICICI bank YES BANK PNB BANK DENA BANK

2007 2.19 2.79 3.85 2.79

2008 2.20 2.74 3.58 2.74

2009 2.40 2.9 3.62 3.1

There is an increase in net interest margin by 21 basis points to 2.4% in fiscal 2009 compared to 2.2% in fiscal 2008 and 2007. Net interest margin of ICICI bank is expected to continue to be lower than other banks in India until it increase the proportion of low-cost deposits and retail deposits in our total funding. The net interest margin is also impacted by the relatively lower net interest margin earned by its overseas branches. Net Interest margins have been generally consistent, around the 3 percent mark. FY08 has shown NIMs coming down to 2.74 percent - the only parameter where a leading bank like HDFC Bank (NIM over 4%) beats Yes Bank handsomely. For Punjab national bank Net Interest Margins have been stable around the 3.5 -4 %mark. This is better than the leading SBI which is around 3% mark but lower than the HDFC. Dena bank also shows good net interest margin of around 3% over the year.

Net interest income Net Interest Income (NII) is a financial measure for banks, calculated by the amount of money the bank receives from interest on assets (commercial loan, personal mortgage etc) minus the amount of money bank pays out for interest on liabilities (personal bank account etc). Year ICICI bank 2007 6326.83 2008 8327.98 2009 9763.46

YES BANK PNB BANK DENA BANK

171.35 5306.29 855.36

336.72 5701.60 892.91

511.2 7030.9 1064.43

Figures are in Rs Crores Here we found that net interest income of all bank increases. Net interest income arouse because of better margin management. The reason for increase in ICICI bank net interest income is increase in non retail advances and decrease in cost of funds. PNB & DENA bank also registered a growth of 28% & 23% in fiscal year 2009.

Capital adequacy ratio A bank's capital ratio is the ratio of qualifying capital to risk adjusted (or weighted) assets. The RBI has set the minimum capital adequacy ratio at 10% as on March 2002 for all banks. A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations. The ratio ensures that the bank do not expand their business without having adequate capital. Capital adequacy ratio BASEL-1

Year ICICI bank YES BANK PNB BANK DENA BANK

2007 11.69 13.6 12.29 11.52

2008 14.92 13.6 12.96 11.09

2009 15.92 12.59 12.59 10.73

Banks are subject to the capital adequacy norms stipulated by the RBI guidelines on Basel II which became applicable to ICICI bank with effect from year-end fiscal 2008. Prior to year-end fiscal 2008, banks were subject to the capital adequacy norms as stipulated by the RBI guidelines on Basel I.ICICI bank maintain the very healthy capital adequacy ratio of 15.92% which is much above the mandatory 9%. YES bank with a capital adequacy ratio of around 13% is comfortably capitalized for growth. Punjab National Bank also excels on Capital Adequacy Ratio (CAR) perhaps the only parameter where many Indian banks fall short, much like their global counterparts. While many Indian Banks are struggling to keep their heads above the floor-levels of 9-12%, PNBs CAR is at a very comfortable 14%. Although all the banks shows healthy capital adequacy ratio except the DENA bank which is just above the UCO bank who has the lowest capital adequacy ratio. However private sector bank has better capital adequacy ratio than the public sector bank.

Nonperforming Assets ratio

The Bank classifies its advances (loans and debentures in the nature of an advance) into performing and nonperforming loans (NPL) in accordance with the extant RBI guidelines. A NPA is defined as a loan or an advance where: i) Interest and/or installment of principal remain overdue for more than 90 days in respect of a term loan. Any amount due to the bank under any credit facility is overdue if it is not paid on the due date fixed by the Bank; ii) The account remains out of order in respect of an overdraft/cash credit (OD/CC) facility continuously for 90 days. iii) A bill purchased/discounted by the Bank remains overdue for a period of more than 90 days; iv) interest and/or installment of principal in respect of an agricultural loan remains overdue for two crop seasons for short duration crops and one crop season for long duration crops. The net non-performing assets to loans (advances) ratio are used as a measure of the overall quality of the banks loan book. Net NPAs are calculated by reducing cumulative balance of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans.

Year ICICI bank YES BANK PNB BANK DENA BANK

2007 1.02 0.76 1.99

2008 1.55 0.09 0.64 0.94

2009 2.09 0.33 0.17 1.09

In 2008, ICICI BANK has increase in non-performing assets was due to higher level of nonperforming assets in the retail portfolio due to change in the portfolio mix towards noncollateralized loans and seasoning of the loan portfolio and increase in non-performing loans in rural segment. In 2009, the increase in retail non-performing assets was primarily on account of seasoning of the secured loan portfolio, relatively higher losses on unsecured portfolio and the adverse macro-economic environment. YES bank has the lowest net nonperforming asset ratio among the private sector bank. However ICICI bank has higher NPA because of their aggressive marketing. Punjab national bank continuously improves their nonperforming asset ratio which falls to 0.17 which is lowest in industry. DENA bank net NPA is around 1% continuously which is a big concern for the bank. To reduce the growing NPA bank has organized 949 recovery camp during the year. Public sector bank has better NPA than private sector bank because of better asset quality.

Products and services

Banks in India have traditionally offered mass banking products. Most common deposit products being Savings Bank, Current Account, Term deposit Account and lending products being Cash Credit and Term Loans. Due to Reserve Bank of India guidelines, Banks have had little to do besides accepting deposits at rates fixed by Reserve Bank of India and lend amount arrived by the formula stipulated by Reserve Bank of India at rates prescribed by the latter. In view of several developments in the 1990s, the entire banking products structure has

undergone a major change. As part of the economic reforms, banking industry has been deregulated and made competitive. New players have added to the competition. IT revolution has made it possible to provide ease and flexibility in operations to customers. Rapid strides in information technology have, in fact, redefined the role and structure of banking in India. Further, due to exposure to global trends after Information explosion led by Internet, customers both Individuals and Corporate - are now demanding better services with more products from their banks. Financial market has turned into a buyer's market. Banks are also changing with time and are trying to become one-stop financial supermarkets. Market focus is shifting from mass banking products to class banking with introduction of value added and customized products. ICICI BANK ICICI bank which is leading private sector bank provides variety of customized products for all their retail and corporate customers. For introducing new products and services or pulling out obsolete ones from the market, bank has proper system of business intelligence. By setting up a formalized system of receiving continuous feedback from customers, helps bank to develop a highly innovative product or service capable of creating a better brand for itself. ICICI Bank is partnering Indian industry at every level. From customizing innovative solutions for global Indian corporate to supporting indigenous R&D. ICICI bank also provides various tailor made product for the SMEs and NRIs. ICICI Bank offers a host of products and services to its clients, which include Deposits, Loans, Cards, Investments, Insurance, Demat, NRI Services and Online Services etc. Deposits ICICI BANK offers wide variety of deposit products to suit your requirements i.e. Convenience of networked branches/ ATMs and facility of e-channels like internet and mobile banking. Following deposits are offered:

Savings Account Advantage Deposit

Special Savings Account Life Plus Senior Citizens Savings Account Fixed Deposits Security Deposits Recurring Deposits Tax-Saver Fixed Deposit Young Stars Savings Account Child Education Plan Bank@Campus Salary Account Advantage Woman Savings Account EEFC Account Resident Foreign Currency (Domestic) Account Privilege Banking No Frills Account Rural Savings Account People's Savings Account Self Help Group Accounts Outward Remittance Freedom Savings Account Family Banking

Loans ICICI Bank offers following loan facilities:

Home Loans Loan Against Property Personal Loans Car Loans Two Wheeler Loans Commercial Vehicle Loans Loans Against Securities

Loan Against Gold Ornaments Pre-approved Loans

Cards ICICI Bank offers a variety of cards to suit your different transactional needs. One can use these cards for shopping, traveling or any other type of payments. These cards are of many types and used for different purpose.

Consumer Cards
o o o

Credit Cards Travel Cards Debit Cards

Commercial Cards
o o o o o

Corporate Cards Prepaid Cards Purchase Cards Distribution Cards Business Cards

Merchant Services

Investments Along with the cards and deposits ICICI provides online investments. With the help of online investment one can manage his finances by investing in following schemes of ICICI:

ICICI Bank Tax Saving Bonds Mutual Funds Government of India Bonds Initial Public Offers (IPO) by Corporate Foreign Exchange Services ICICI Bank Pure Gold Senior Citizens Savings Scheme, 2004

Insurance ICICI Bank offers various types of insurance. Customers can choose from the following:

Home Insurance
o o o o

Health Insurance Health Advantage Plus Family Floater Personal Accident

Travel Insurance
o o

Individual Overseas Travel Insurance Student Medical Insurance

Motor Insurance
o o

Car Insurance Two Wheeler Insurance

Life Insurance
o o

ICICI Pru LifeTime Gold ICICI Pru LifeState RP

NRI Services Following services are offered to the NRIs:

Money Transfer Bank Accounts Investments Home Loans Insurance Loans Against FD

YES BANK Yes bank is offering a suit of banking products and financial services which include corporate and institutional banking, financial markets, investment banking, business and transactional

banking, retail and private banking business across the country. YES BANK has a wide range of products and services that are classified under the following categories: Infrastructure Banking Unit (IBU): This Unit provides a full range of advisory and credit linked products to clients with a special focus on the infrastructure sector. We meet the financing needs of clients operating in the Power, Telecom, Mining, Oil & Gas, Transportation and Wind Energy segments. We assist our clients to obtain funding for projects and also offer end-to-end advisory services from the planning stage to financial closure. Structured & Project Finance Unit (SP&F): The SP&F unit offers structured and project finance expertise to non-infrastructure clients. The areas of specialization include: a. Securitization - We provide solutions that offer companies access to strategic sources of funding by converting assets with probable and predictable cash flows into a source of capital. This alters the risk profile of the corporate, provides the necessary liquidity and offers investors an opportunity to gain higher yields while taking acceptable risks. b. Structured Liability Products - The SP&F Group, in conjunction with the Debt Capital Markets Group, offers liability products to a range of financial and retail clients in packaging, structuring and placing ABS, MBS, CLOs and CDOs to generate costefficient liabilities for our clients. c. Debt Syndication - We provide debt solutions from local and international markets to both private and public sector institutions. Our strong relations with Borrowers, other banks and Institutional investors help our clients to fulfill their desired financing requirements d. Leverage Finance - This encompasses the origination, structuring, underwriting and participation through Funding in Leveraged Finance transactions, including leveraged Buy-Outs, Take-over and General Acquisition Finance e. Asset & Tax based structures - Comprehensive solutions to provide tax benefits, finance for physical assets and advisory services for leases Financial Restructuring Unit (FRU): This Unit provides specialized advisory services on financial restructuring, with expertise in the area of stressed assets. We offer our clients expert

advice and creative product solutions to overcome balance sheet and financing constraints. The team also assists financially distressed companies in the creation and implementation of comprehensive financial restructuring packages. One of the key attributes of YES BANK is the incorporation of knowledge banking in the delivery of services. This concept calls for customer-centric approach and knowledge-based financial solutions. Thus, customer gets exposed to lesser risk and s/he can enjoy better rewards on investments. PUNJAB NATIONAL BANK Considered the second largest public sector bank in India, Punjab National Bank completely justifies the tagline the name you can bank upon! PNB classify its products and services in personal banking, social banking and corporate banking. PNB has specialist savings and deposits products for senior citizens and minors. Products and services available under social banking segment are focused on strengthening rural infrastructure. PNB has set up specialist agricultural business cells to offer consultancy services to farmers. Low-interest lending products are also available for the rural population. For corporate customers PNB offers products, such as cash management, export-import finance and loan against future lease rentals, for corporate customers. Completed in November 2008, 4 months ahead of schedule, the bank implemented industry-leading Finacle core banking solution from Infosys across its operations running a flexible and scalable database platform from Oracle and innovative and cost-effective Sun SPARC enterprise servers from Sun Microsystems. Some of the PNB products are: Savings Fund Account - Total Freedom Salary Account, PNB Prudent Sweep, PNB Vidyarthi SF Account, PNB Mitra SF Account Current Account - PNB Vaibhav, PNB Gaurav, PNB Smart Roamer Fixed Deposit Schemes - Spectrum Fixed Deposit Scheme, Anupam Account, Mahabachat Schemes, Multi Benefit Deposit Scheme credit scheme Flexible housing loan, car finance, personal loan, credit cards. Social banking - mahila udyam nidhi, scheme krishi card, PNB farmers welfare trust

Corporate banking- gold card scheme for exporters, EXIM finance Business sector PNB karigar credit card, PNB kushal udhami, PNB pragati udhami, PNB vikash udham

DENA BANK Dena Bank is a public sector bank with its major operational area is in Gujarat. The bank offers a range of products and services, while specializing in home and personal loan products. It is the pioneer banking institution to introduce minor savings schemes, credit cards for the rural population and a customer rating system for banking services. The bank procured a loan from World Bank for technology upgrades and training to develop its modern banking infrastructure. In Personal banking Dena Bank has a basket of deposit schemes and loan plans for individual customers. Exclusive deposit schemes include Dena Savifix, Dena Samruddhi and Dena Freedom. Loan schemes include Dena Niwas Housing Finance, Dena Vidya Laxmi Educational and Dena Suvidha loans. In Priority banking Dena priority banking services are meant for small and medium industries, as well as agriculturists. Some of the exclusive priority banking products includes Dena Shakti Scheme, Dena Laghu Udyami Card Scheme and Dena Swarozgar Credit Card Scheme.While Corporate banking offers term finance, working capital finance and export credit products to corporate clients. The bank has specific finance schemes to meet the individual requirements of different industrial sectors, such as real estate, hotels and educational institutions. Dena IndiaRemit services allow non-resident Indians (NRIs) to transfer money to India. Online services such as bill payment, tax submission and e-shopping are also available with the bank. Dena customers also have access to the banks mobile and phone banking services.

Innovative technique to increase efficiency and productivity

The ongoing process of economic reforms has completely changed the operational environment for the whole banking industry in the country. A new era of financial intermediation in the deregulated market, has opened up new vistas of business for banks and also thrown up many

challenges. Banks are now required to cope with stiff competition in business and also the stringent and complex regulatory norms regarding capital adequacy and provisioning. To survive in the situation, banks are forced to adopt various marketing techniques and approaches. Thus, marketing has become imperative for all banks including those in the public sector.

Today the banks taking the banking services to the common man, this helps them to innovate new technology for survival and to reduce cut throat competition. Banks deploy techniques like market segmentation and market research. Today various bank adopted cross selling approach to increase their profitability. Banks have realized that a very effective way of exploiting their retail banking initiatives is cross selling. This is all the more so, since banks are sharing customer repayment track record databases, making cross selling far less risky than before. Banks can, therefore, safely cross sell not just products offered by their group companies, but also those of other banks, insurance companies and NBFCs with whom they have correspondent banking or other forms of alliances. Especially PSB are selling the third party products as most of the banks are selling the LIC insurance product to its customer. However Private sector and foreign banks were using technology and computerized system since its beginning while PSBs were not. So they found difficulty in managing all these things. Many of Indian PSBs ignored technological change and had lost market share to foreign banks and new private banks. Technology helps in having a huge branch network easily and also it reduces the operational cost this may b clarified by an example as:Operational cost per transaction of an account via different type is Via computers on counter- 40 Rs. Via ATM Via online - 16-17 Rs. - 46 paise

So it is cleared that manually/direct transaction cost comes very high and electronically and online it is very low. So thats why public sector banks should improve their working system and should make it totally online but challenge is before PSBs The users can do variety of work using your online banking pin code. The bankers benefit equally from the online banking facilities. Besides offering their users the convenience of

banking, the online banking system means significant cost savings for the bankers themselves. With such an automatic system in place, the bankers need not to hire employees specialized in handling paper work and teller interactions. This reduces the bankers operating costs considerably, translating into significant cost savings over the long-term.

ICICI BANK ICICI bank considered as the true champion of innovative technique to increase productivity and efficiency. It brings about the various strategies adopted by ICICI Bank, the leading private sector bank, to position itself as the strongest bank. ICICI bank is synonymous with the spread of retail financing in India and it has emerged as a champion of marketing in the entire banking industry. A wide range of innovative products in retail segment were introduced, which enabled ICICI bank to capture the largest market share in retail and consumer financing. A variety of delivery channels of its own, through its subsidiaries and affiliates in the areas of investment banking, life and non-venture capital and asset management have been tapped in this pursuit. The bank targeted the cash rich segment comprising NRIs and PIO by offering innovative and tailor made products. ICICI bank is the first bank to offer a wide network of ATMs through which 50% of the Banks business passes. It also offers novel services through internet banking, for which the e-cheque facility is one example. The bank is a pioneer in mobile ATMs, which are future potential branches. ICICI bank has mastered the art of cross selling as a strategic tool of marketing. The bank has built up strong brand image through constant branding efforts. All these achievements of ICICI bank can be attributed to the state of the art technology it uses.

ICICI bank successfully launches its e- transfer technology. This is a direct debit facility using automated clearing houses which allow the customers to transfer money online from the comfort of their home. There is no need of visiting any branch and eliminates the hassle of paper work transfers are a click away. The service can be used to credit any ICICI Bank, a Non ICICI Bank account or issue a Demand draft. ICICI Bank has various way through which its NRI account holding customers can transfer money and thereby has made the process of the same quicker, convenient and easy. ICICI Bank offers a host of online as well as walk-in options to transfer

money to India. ICICI bank successfully implemented RTGS and ETF technology in almost all their branches for quicker transfer of money. YES BANK YES bank is late entrant in the banking sector. The strategy they adopted is primarily of focusing on corporate banking. They adopted various modern technologies to improve their expertise in various field as it is rightly said by their tagline experience our expertise. Yes Bank has invested in the best IT systems and practices in order to make its technology platform a strategic business tool for building a competitive advantage. The bank has outsourced a significant part of its technology, infrastructure and hardware requirements, which has enabled the bank to achieve high standards of customer service at comparatively lower cost structures. Yes Bank has invested in several state-of-the-art technology initiatives and successfully implemented them. Since inception, Yes Bank has pursued outsourcing aggressively as part of its strategy. The philosophy of the bank has been to engage with select partner companies who are acknowledged leaders in their products or businesses in developing specific solutions for Yes Bank that are differentiators in the marketplace. To achieve this goal, Yes Bank has aligned with partners such as IBM for hardware, Microsoft and Oracle for environmental software (O/s and Database products), iFlex, Murex, FundTech (formerly CashTech), Nucleus, CMC Limited and Winsoft for core applications and several others for point solutions. To manage IT operations and also lend infrastructure as well as application support, Yes Bank has also entered into a long-term total outsourcing arrangement with Wipro Limited. Some of the new technique adopted by the yes bank to improve their efficiency and productivity are as follows. This also helps the bank to be a hard competitor for the existing player and helps to establish it as one of the fastest growing bank. Two Factor Authentication security process where customers need to include a second transaction password, which is sent as an instant SMS on their mobile phone to complete the fund transfer. YES Touch Phone Banking launched in 2008 integrates voice, email, chat and video in partnership with CISCO, Scansoft for speech-recognition and Servion Global

for system integration and implementation. This is the first and only implementation of speech enabled contact centre in the BFSI segment in Asia. WiFi and RFID enabled branch of the future in New Delhi, which provides an unparalleled and innovative banking service as never before. Yes Bank introduced Money Monitor a first-of-its-kind financial aggregation tool on the Internet in India in 2008. It provides seamless information of your financial health by aggregating data from over 11,000 financial and related sites across the world into Yes Bank Internet Banking, thereby giving you a single view across their own and family accounts. It was launched in partnership with YODLEE. Single PIN access for all channels, including Internet Banking, ATM and Debit Cards. Mobile Payments Person 2 Person payments in partnership with OBOPAY. Mobile platform agnostic solutions. This can work on SMS, GPRS (Java enabled), WAP, platforms Available 24 x 7. Online Mutual Funds platform MFONLINE enables customers to purchase and sell mutual funds over the internet on a daily basis. The product not only provides Marked to Market (MTM) updates but also tracks dividend performance and the Internal Rate of Return (IRR) of each transaction, within the consolidated portfolio thereby tracking the growth and progress of the portfolio. Pay utility bills to over 115 billers across India and make donations to various religious and charitable institutions Real time payments to various e-brokerage accounts Foreign exchange trading for corporate clients.

Yes Bank has adopted a knowledge-driven approach to offer financial solutions, which go beyond the traditional realm of banking. The belief that Indian banking is over-branched and with an under-serviced banking environment-motivated yes bank to conceive the dream of offering Indian consumers a bank that will epitomize the best in service quality and be a benchmark of service excellence. Currently Yes Bank has tied up with First Data for an innovative ATM deployment programme. First Data will leverage its extensive ATM capabilities to support Yes Bank in identifying new ATM locations predominantly in the Yes Bank branch

servicing areas and delivering installation and field management services including 24x7 monitoring and vendor management. This initiative reinforces Yes Banks strategy of expanding its ATM network in high-density consumer locations such as shopping areas and in high street business locations. This will surely help yes bank to improve their efficiency and productivity.

However, Public sector banks have long been chastised as the black sheep of the financial sector. But while a lot of experts might deride these institutions for their non-performing assets and lower productivity, at the end of the day, public sector banks have far happier customers compared to their counterparts in the private sector. To counter the private sector banks, public sector banks started to adopt new technology. One of the basic obstacles which public sector bank has to face is that they grow first and now they have to adopt the new technology. But with the globalization and opening up of the economy banking sector has changed a lot. . While deregulation has opened up new vistas for banks to augment revenues, it has entailed greater competition and consequently greater risks. Demand for new products, particularly derivatives, has required banks to diversify their product mix and also effect rapid changes in their processes and operations in order to remain competitive in the globalised environment. PUNJAB NATIONAL BANK Punjab national bank has gone through the major changes to be the second largest bank in public sector. A giant leap in this direction was that PNB planned a major organizational restructuring exercise involving redesigning of branches, providing alternate channels, emphasizing a lean structure and technical up gradation. The redesigning of branches focused more on core functions including sales and marketing. The focus on providing alternate channels of customer service was increased to provide more free time to branch staff, so that they could concentrate on sales and marketing. To keep pace with the tech savvy private sector and foreign banks, PNB began a massive technology up gradation program. The bank embarked upon core banking solution at all its branches that afford anywhere banking, apart from many other competitive advantages. PNB also carried out various marketing initiatives to enhance its reach. This case thus provides insights into the various strategies and initiatives on the part of Punjab national bank to become the market leader. Recently PNB become the 100% core banking implemented

public sector bank through Finacle Universal Banking solution from Infosys. PNB has also initiated multi-lingual touch screens to address the local banking issues, as well as ATMs for blind individuals. The bank's technology-backed operations also facilitate e-payment initiatives of the Central government through Internet banking, including the collection of tax, fee and duty. The bank has earned around Rs. 1,000 crore in profits during the last quarter of 2008. Its IT spend is more than Rs. 600 crore and that includes core banking solution. Within the budget and timeframe, PNB has already trained its staff with necessary education in order to handle technology-driven tools. However PNB has implementing VRS technique to get rid of unskilled labor and to increase their efficiency. As we see that the net profit per employee of PNB has increased drastically in last few years. The net profit per employee of PNB in 2007 was 2.68lac which increased to 3.66lac in 2008 and reached to 5.64lac in 2009 which is one of the fastest growths in industry. However this is much lower than other private sector player as in ICICI bank net profit per employee in FY09 was 11lac and in YES bank it was 11.38lac. PNB has also focused on SMEs and other rising industry to improve their productivity. They now implemented CRM technique and provide the customized services to their client. Now most of the city branches are RTGS enabled and they also opened the 8 to 8 branches in particular area according to the need of the customer. PNB has established call centre to help their customers. These call centers help the bank to successfully implement the CRM. DENA BANK Dena Banks principal activity is to provide commercial banking and other related services. The Company also provides in merchant banking, asset management and other related services. Dena bank is late in adopting the modern technology. But after getting the assistance from the World Bank, DENA bank looks forward to show their presence in the market. 700 branches of DENA bank are connected through their own network called denanet, which is through leased line. They are also moving to connect their branches and provide CBS solution to their customer. In Dena bank GoI has little over the statutory cap of 51 per cent, which restricts the bank from raising capital by diluting stake for its expansion plans. Most of the DENA bank branches are located in Gujarat, one of the most prosperous states in India. However according to Deccan chronicle (23rd nov 2009) news government of India planning to merge Dena bank with the Canara bank to increase banks efficiency and productivity.

Working culture
The working culture of private and public sector banks in India is considered as entirely different. It is assumed that in private bank one can find courteous employee which are very keen to help the customer unlike the private sector bank. In private sector bank one can find young employee who are more technology savvy and helps the bank to reduce the operational cost as well as maintain the customer satisfaction. This helps the bank to generate more revenue for the bank. As for example, on an average, a Citibank branch earns a net profit of Rs 18 crore annually. An average ICICI bank branch earns Rs 4.5 crore, while an average SBI branch earns just Rs 50 lakh, annually. But on the flip side, RBI latest report shows that the State Bank of India (SBI) recorded 0.1 complaints per branch while the corresponding figure for ICICI was 1.39more than 10 times that of SBI. Citibank fared far worse: it recorded a whopping 8.59 complaints per branch. These are the complaints registered in RBI grievance cell. But their rich rake-offs notwithstanding, the profit-complaint ratio of private sector banks is much lower than their much maligned public sector counterparts SBIs profit-complaint ratio of 4.1 is much higher than ICICI and Citibank. Working culture of various banks can also be defined by the business generated by each employee & net profit per employee

Business per employee (in crore)

Year ICICI bank YES BANK PNB BANK 2007 10.27 5.30 4.07 2008 10.08 6.83 5.05 2009 11.54 9.88 6.55

DENA BANK

4.58

5.59

7.14

Profit per employee (in lakh)

Year ICICI bank YES BANK PNB BANK DENA BANK 2007 9.00 3.86 2.68 1.99 2008 10.00 6.35 3.66 3.61 2009 11.00 11.38 5.64 4.28

However business generated by each employee as well as net profit by each employee is much higher in private sector bank than in public sector bank. As for example the business generated by each employee of ICICI bank and YES bank in FY09 is 11.54cr and 9.88cr respectively and the net profit per employee for ICICI bank is 11lac and for yes bank it is 11.38lac. While for public sector bank business generated by each employee of PNB and DENA bank in FY09 is 6.55cr and 7.14cr respectively and the net profit per employee for PNB is only 5.64lac and for DENA bank it is only 4.28lac.This shows the efficient work culture of private sector bank. Although with the innovation of new technology the banks starts to spend huge sum of their money in training and development of their employee in order to increase the efficiency of their employee. Usually public sector bank recruit their staff on the basis of all India examination. And their employees are regarded very prestigiously in our society. While the private sector banks recruit their employee directly from various management campus or through consultancy. ICICI bank has currently adopted innovative technique to recruit more talented employee. They directly recruit the employee from various undergraduate colleges and give them proper training

and develop them to suit their organizational needs. YES bank has adopted more innovative technique to improve the performance of their employee. In their YES Entrepreneur in Action program , they allows ONE YES BANKER to take time off to pursue his / her goals for a year during which time they will focus on a project of their choice. Also YES Professional Entrepreneurship Program (Y-PEP is designed around the concept of Talent Development. It aims to ensure the presence of an experienced, dynamic, energetic and driven team of professionals in Middle/Upper Management to implement various strategic initiatives of the Bank. This helps the bank to improve their work culture drastically and it also produce excellent result as net profit per employee has increased from 6.38 lakh in FY08 to 11.38lac in FY09. Yes bank has the maximum profit per employee in the industry.

SWOT ANALYSIS
PRIVATE SECTOR BANKS A. STENGTHS 1. All these private banks have professional, dedicated and well- trained manpower. 2. Efficiency is maintained at the highest level. 3. The new private banks have commenced with strong financials and with a clean slate i.e. without having to pursue NPAs. 4. Almost all these Banks have complied with Capital Adequacy Requirements. 5. Most of these banks are fully computerized and techno-savvy. B.WEAKNESSES 1. Both old and new private banks are operating in a limited. 2. Although highly networked, the number of branches is limited. 3. The employee turnover appears to be on higher side. 4. There is dissimilarity between old and new private banks by virtue of their age, functional area, products and services, etc. C. OPPORTUNITIES 1. Being in the private sector, these banks enjoy high level of autonomy facilitating them for faster decision making. 2. To face stiff competition, they can innovative new products and services and achieve high customer satisfaction.

3. With full computerization, they can offer cost-effective services like ATMs, Electronic Fund Transfer, etc. D. THREATS 1. Expansion of foreign banks poses severe competition. 2. Dominant Public sector banks which are recharged with a high market share will overshadow the Private Sector Banks. PUBLIC SECTOR BANKS A. STRENGTHS 1. Wide distribution network: Excellent penetration in the country with huge customer base. 2. Government owned: This gives an edge over the private banks in terms of customer security. 3. Low transition costs: This attracts small customers. B. WEAKNESSES 1. The existing hierarchical management structure of the bank, although strength in some respects, is a barrier to change. 2. High gross NPAs. 3. Modernization: Public sector banks lags in respect to private players in terms of modernization of its processes, infrastructure, centralization etc. C. OPPORTUNITIES 1. Increasing trade and business relations and a large number of expatriate populations offers a great opportunity to expand on foreign soil. D. THREATS 1. Advent of MNC banks: large numbers of banks are mushrooming in the Indian market due to the friendly policies adopted by the government. This can increase the level of competition and prove a potential threat for the market share of public sector banks. 2. Consumer expectations have increased many folds in last few years and the banks have not been responsive enough to meet them on time. 3. Private sector banks have venturing into the rural and semi-urban sector, which used to be the bastion of public sector banks.

References www.pnbindia.com www.denaban.com www.icicibank.com www.yesbank.in www.rbi.org.in www.iba.org.in www.economywatch.com Deccan chronicle Business today

Economic times