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An Economic and Financial Analysis of Commercial Banks in

Bangalore in Evolving a Competitive Strategy for ICICI Bank

Submitted in partial fulfillment of the requirements of

for the award of the degree of

MASTERS OF BUSINESS ADMINISTRATION


Of
BANGALORE UNIVERSITY

Submitted By
Mr. Manu Mohanan
Reg. No. 05JJCM6031

Under the guidance of


Mr. Rajesh Pillai

Kristu Jayanti College of Management and Technology

2007
STUDENT’S DECLARATION

I, Manu Mohanan, hereby declared that this project titled “An Economic and
Financial Analysis of Commercial Banks in Bangalore in Evolving a Competitive
Strategy for ICICI Bank” submitted by me to the department of Management of
Bangalore University in partial fulfillment of requirement of MBA programme is a
bonafide work carried by me under the guidance of Mr. Rajesh Pillai .This has not been
submitted earlier to any other university or institution for the award of any degree
diploma / certificate or published any time before.

Signature of the student

(Manu Mohanan)
CERTIFICATE FROM GUIDE & HEAD OF THE INSTITUTION

Certified that this declaration entitled “An Economic and Financial Analysis of
Commercial Banks in Bangalore in Evolving a Competitive Strategy for ICICI Bank”,
submitted in partial fulfillment for the award of MBA Degree of Bangalore University
was carried out by Mr. Manu Mohanan under the guidance of Mr. Rajesh Pillai This has
not been submitted to any other university or institution for the award of any degree/
diploma/ certificate.

GUIDE DEAN
MBA DEPARTMENT

PRIN
CIPAL
ACKNOWLEDGEMENT

My project work would have become practical without the help of grace of the
“Almighty” and timely advice and creative support rendered by many. I express my
affectionate thanks to The Principal, Kristu Jayanti College, Bangalore for giving me
an opportunity to do this training.

I am highly indebted to my faculty guide Prof. Rajesh Pillai of the department of


management studies for inspiring me and for his valuable guidance and assistance
provided. I also thank all other staff members of the department for guiding me in my
training. I would also thank Mr. Venu Krishnan (Branch Manager) of ICICI Bank,
jayanagar for permitting me to do the practical training in the organization.

I express my sincere gratitude and special thanks to all employees especially


managers of different banks for their valuable suggestions and keen interest which are
extremely helpful in shaping this project work to success.

Manu Mohanan
EXECUTIVE SUMMARY

Indian banks find themselves in a scenario of tighter regulation, global and domestic
economic slowdown, half-backed reforms, dwindling industrial performance, a prolonged
lull in the capital market, increasing competition, excess liquidity and narrowing array of
development avenues. In such a situation the customer has become essential to gauge the
competitor’s offerings in terms of innovative products and services to the customer and
the reason behind customer’s loyalty to a particular bank.

In this regards, the scope of the project covers analyzing the private sector banks in India
with special emphasis on the product portfolio, both corporate and retail, evaluating the
thrust areas and strategies of these banks, and evolving a strategy for ICICI based on the
above findings.

The methodology employed for the above was secondary research backed by primary
research in the form of interviews of bank officers and corporates. The study was limited
to the Bangalore market.

The following private sector banks have been exhaustively studied for the purpose of
competition analysis.

• ABN Amro bank.

• Citibank.

• HDFC bank.

• HSBC.

• Standard chartered.

• UTI bank.
A comparative analysis of the banks has been done on two separate grounds:

A. Ratios, facts and balance sheet figures- these include the revenue, PAT, interest
income as a percentage of average working funds and other figures.

B. Product portfolio and features- these include loan products, credit cards and
ATM’s. Finally on the basis of these findings, recommendations have been
provided for ICICI bank to enhance its competitive and provide a unique offering
to its corporate clients.

Following is the project chapter’s classification of the study:

 Chapter 1: INTRODUCTION
This is about the general introduction of the topic.

 Chapter 2: RESEARCH METHODOLOGY


This deals with the method used in the study including sampling technique, sample
description, and instrumentation technique and data analysis software.

 Chapter 3: PROFILE OF THE INDUSTRY, COMPANY


This describes the back ground and history of Indian Banking sector and the profile of
company, products and its key policies

 Chapter 4: DATA ANALYSIS AND INTERPRETATION


This chapter deals with analyze the collected data through questionnaire and it also
interprets the different chart and graph.
 Chapter 5: FINDING AND RECOMMENDATION
This is the concluding chapter, which describe the overall finding and it also focus on
the recommendation for farther enhancement
Table of Contents

Chapter No Title Page No

1 Introduction 1-4

2 Research Design 5-10

3 Profile of the Company 11-20

4 Analysis and Interpretation 21-39


of Data

5 Summary of Findings, 40-61


Conclusions and
Recommendation

A Bibliography a-b

B Annexure I – VII
List of Graphs / Charts & Diagrams

Figure No Title Page No

1 General Analysis Of Banks 41

2 Net Profit and Deposits 42

3 Operating Efficiency 43

4 Earning Quality 44

5 Productivity 45

6 Asset Quality 46

7 Management Quality 47
List of Tables

Table No Title Page No

1 Trends Among The Private 48


Indian Banks

2 Comparison Of Loan 51-52


Products

3 Home Loans Of Different 53-54


Banks

4 Loans Against Shares 55-56

5 Two Wheeler Loans 57

6 Comparison OF ATM 58-59

7 Comparison Of Gold Credit 60-61


Cards
List of Annexure

Questionnaire No Title Page No

1 Questionnaire to HDFC II
Bank

2 Questionnaire to UTI Bank III

3 Questionnaire to Citibank IV

4 Questionnaire to STAN V
CHART Bank

5 Questionnaire to HSBC VI
Bank

6 Questionnaire to ABN VII


AMRO
ICICI Bank

CHAPTER 1
INTRODUCTION

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Introduction

With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market. The customers have more
choices in choosing their banks. A competition has been established within the banks
operating in India.

With stiff competition and advancement of technology, the services provided by banks
have become more easy and convenient. The past days are witness to an hour wait before
withdrawing cash from accounts or a cheque from north of the country being cleared in
one month in the south.

In India the banks are being segregated in different groups. Each group has their own
benefits and limitations in operating in India. Each has their own dedicated target market.
Few of them only work in rural sector while others in both rural as well as urban. Many
even are only catering in cities. Some are of Indian origin and some are foreign players.
All these details and many more are discussed over here. The banks and its relation with
the customers, their mode of operation, the names of banks under different groups and
other such useful information’s are talked about. One more section has been taken note of
is the upcoming foreign banks in India. The RBI has shown certain interest to involve
more of foreign banks than the existing one recently. This step has paved a way for few
more foreign banks to start business in India
In such a situation the customer has become essential to gauge the competitor’s offerings
in terms of innovative products and services to the customer and the reason behind
customer’s loyalty to a particular bank.
In this regards, the scope of the project covers analyzing the private sector banks in India
with special emphasis on the product portfolio, both corporate and retail, evaluating the
thrust areas and strategies of these banks, and evolving a strategy for ICICI based on the
above findings.

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ICICI Bank

The methodology employed for the above was secondary research backed by primary
research in the form of interviews of bank officers and corporates. The study was limited
to the Bangalore market.

Overview

ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn at
March 31, 2006 and profit after tax of Rs. 25.40 bn for the year ended March 31, 2006
(Rs. 20.05 bn for the year ended March 31, 2005). ICICI Bank has a network of 741
branches (including 48 extension counters) and over 3300 ATMs in India and presence in
30 International locations. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery channels
and through its specialized subsidiaries and affiliates in the areas of investment banking,
life and non-life insurance, venture capital and asset management. ICICI Bank set up its
international banking group in fiscal 2002 to cater to the cross border needs of clients and
leverage on its domestic banking strengths to offer products internationally. ICICI Bank
is the most valuable bank in India in terms of market capitalization.

ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE).

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and
employees. At June 5, 2006, ICICI Bank, with free float market capitalization* of about
Rs. 480.00 billion (US$ 10.8 billion) ranked third amongst all the companies listed on the
Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition

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of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary


market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses. In the 1990s, ICICI transformed its business from a development financial
institution offering only project finance to a diversified financial services group offering a
wide variety of products and services, both directly and through a number of subsidiaries
and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the
first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the


emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the ICICI group's universal
banking strategy.

The merger would enhance value for ICICI shareholders through the merged entity's
access to low-cost deposits, greater opportunities for earning fee-based income and the
ability to participate in the payments system and provide transaction-banking services.
The merger would enhance value for ICICI Bank shareholders through a large capital
base and scale of operations, seamless access to ICICI's strong corporate relationships
built up over five decades, entry into new business segments, higher market share in
various business segments, particularly fee-based services, and access to the vast talent
pool of ICICI and its subsidiaries.. The merger was approved by shareholders of ICICI
and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March
2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in
April 2002. Consequent to the merger, the ICICI group's financing and banking
operations, both wholesale and retail, have been integrated in a single entity.

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ICICI Bank

CHAPTER 2
RESEARCH DESIGN

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METHODOLOGY
PURPOSE:

Indian banks find themselves in a scenario of tighter regulation, global and domestic
economic slowdown, half-baked reforms, dwindling industrial performance, and a
prolonged lull in the capital market, increasing competition, excess liquidity and
narrowing array of development avenues. In such a situation the customer has become
prime importance. To stay one up in competition it has become essential to gauge the
competitor’s offering in terms of innovative products and service to the customer and the
reasons behind customer’s loyalty to a particular bank.

In this regards, the scope of the project covers analyzing the private sector banks in India
with special emphasis on the product portfolio, both corporate and retail, evaluating the
thrust areas and strategies of these banks, and evolving a strategy for ICICI based on the
project findings.

AIM

To identify and study the main banks in the private sector in India competing with ICICI
banks, and gauge the strategy followed by each competitor bank and thrust areas.

OBJECTIVES

 To identify the clients of these banks in Bangalore and analyze the marketing channels
used by various banks to push their products.
 To identify and study the main banks in the private sector in India competing with
ICICI bank.
 To compare various banks with respect to specific retail products such as retail loans,
cards, salary a/c and NRI service.
 To evolve a strategy for ICICI bank to follow based on project findings.

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ICICI Bank

METHODOLOGY

The study was exploratory in nature with primary data being collected though
questionnaire and balance sheets administered to a sample of 50 respondents. A personal
interview was conducted with respondents. Some of the questionnaires were filled up
after a small conversation relevant to the subject of the study. The questionnaire was
structured with both open and close-ended questions. The balance sheet also served the
purpose of calculating the various ratios. Analysis, tabulation and interpretation of the
data were done accordingly and conclusions were drawn. Thus the questionnaire and
interview method along with the balance sheets were adopted for the purpose of research.

AREA OF SAMPLING

The study was conducted in Bangalore.

SAMPLING

A sample is a small portion of the population selected for observation and analysis. By
observing the characteristics of the sample, one can make certain inferences about the
population from which it is drawn. A population is any group of individuals that have one
or more characteristics in common and are of interest to the researchers. The sampling
technique adopted was convenience sampling. Non-probability samples that are
unrestricted are called convenience samples; they include informal pools of neighbors,
friends, newspapers etc. In this study the size of the sample is 100 respondents and the
sampling unit constitutes the employees at different level of banks.

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ICICI Bank

DATA SOURCES

Both primary and secondary data are utilized for the purpose of this study. Primary data
is collected by means of administering a questionnaire to respondents and also through
balance sheets. Secondary data was collected from newspaper, magazines, and Internet.

TOOLS FOR DATA COLLECTION

The questionnaire method, along with the balance sheets of the companies, was used as
the main tools for data collection. The interview method was also adopted for the purpose
of collecting primary data.

FIELD WORK

50 respondents were met and personally interviewed for the primary data of the survey.
The survey was conducted in Bangalore, during the month of March and April 2007. An
informal discussion with the respondents also was held to procure additional information
and to probe feedback.

PLAN OF ANALYSIS

The data collected was tabulated and classified as required. Statistical techniques such as
correlation analysis, bar charts, pie charts, histograms, matrix and, graphs etc, were
adopted in the analysis. Conclusions were drawn based on the analysis and findings.

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ICICI Bank

SCOPE OF PROJECT

 To identify and study the banks in the private sector in Bangalore competing with
ICICI bank.
 Focus on specific retail products such as retail loans, salary accounts and NRI
services: corporate products such as trade finance services, foreign exchange
services and working capital finance of these banks with features wherever
possible.
 Compare the banks in respect to each product.
 Attempt to gauge the strategy followed by each competitor bank and its thrust
areas.
 Identify the clients of these banks Bangalore. In this regard, take a look at the
marketing channels used by various banks to push tier product.
 Evolve a strategy for ICICI bank to follow based on the above findings.

LIMITATIONS

 The sample size was limited to only 50 respondents.


 Time was major constraint.
 The study was confined to Bangalore.
 To obtain information particularly in respect of the functioning of banks is a
sensitive and secret aspect, thus some respondents were reluctant to answer the
questions.

Nevertheless in spite of the aforesaid hindrances, the findings and conclusions throw light
on aspects whose authenticity cannot be rejected.

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CHAPTER SCHEME

1. Introduction

2. Research Methodology

3. Profile of the Industry and Company

4. Analysis of the Data Collected

5. Findings, Suggestions and Conclusion

Bibliography

Appendix

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CHAPTER 3
PROFILE OF THE COMPANY

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Industry Profile

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.

For the past three decades India's banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reason of India's growth
process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with
the nationalization of 14 major private banks of India. Not long ago, an account holder
had to wait for hours at the bank counters for getting a draft or for withdrawing his own
money. Today, he has a choice. Gone are days when the most efficient bank transferred
money from one branch to other in two days. Now it is simple as instant messaging or
dial a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct phases.
They are as mentioned below:

• Early phase from 1786 to 1969 of Indian Banks


• Nationalization of Indian Banks and up to 1991 prior to Indian banking sector
Reforms.
• New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.

Phase I

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ICICI Bank

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency
Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was
established which started as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,
and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To
streamline the functioning and activities of commercial banks, the Government of India
came up with The Banking Companies Act, 1949 which was later changed to Banking
Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of
India was vested with extensive powers for the supervision of banking in India as the
Central Banking Authority. During those day’s public has lesser confidence in the banks.
As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility
provided by the Postal department was comparatively safer. Moreover, funds were
largely given to traders.

Phase II
Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a
large scale especially in rural and semi-urban areas. It formed State Bank of India to act
as the principal agent of RBI and to handle banking transactions of the Union and State
Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th

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July, 1969, major process of nationalization was carried out. It was the effort of the then
Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country
were nationalized. Second phase of nationalization Indian Banking Sector Reform was
carried out in 1980 with seven more banks. This step brought 80% of the banking
segment in India under Government ownership.

After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and
immense confidence about the sustainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was
set up by his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put
to give a satisfactory service to customers. Phone banking and net banking is introduced.
The entire system became more convenient and swift. Time is given more importance
than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any
crisis triggered by any external macroeconomics shock as other East Asian Countries
suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,
the capital account is not yet fully convertible, and banks and their customers have
limited foreign exchange exposure

Company Profile

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ICICI Bank

Introduction

ICICI Bank is India's second-largest bank, with total assets of about Rs.1, 676.59 billion
on 31 March 2005. ICICI Bank began its life 1994 as a wholly-owned subsidiary of
ICICI Limited, an Indian financial institution, whose shareholding in the bank was
reduced to 46 per cent through a public offering of shares in India in 1997-98, an equity
offering in the form of ADRs listed on the NYSE in fiscal 1999-2000, the ICICI Bank's
acquisition of Bank of Madura in fiscal 2000-01, and secondary market sales by ICICI to
institutional investors in fiscal 2001 and fiscal 2002.

In 2002, ICICI was merged with ICICI Bank to combine the wholesale and retail
operations of both organizations into a single entity. (ICICI, or the Industrial Credit and
Investment Corporation of India was formed in 1955 as a development financial
institution at the initiative of the World Bank, the Indian government and representatives
of Indian industry.) ICICI Bank's shares are listed on the Bombay Stock Exchange and
the National Stock Exchange of India Limited in India and its ADRs are listed on the
New York Stock Exchange.

Business

ICICI Bank offers a range of banking products and financial services to corporate and
retail customers through several delivery channels and specialized subsidiaries and
affiliates. The areas include: investment banking, life and non-life insurance, venture
capital and asset management. ICICI Bank set up its international banking group in fiscal
2002 to cater to clients' cross-border needs. It currently has subsidiaries in the UK,
Canada and Russia, branches in Singapore and Bahrain, and representative offices in the
US, China, UAE, Bangladesh and South Africa.ICICI Bank, which accepts deposits
under various savings and fixed schemes, offers a range of loans for various purposes,
including housing, cars and 2-wheelers, commercial vehicles, farm equipment, medical
equipment, office equipment and construction equipment. The bank also has a popular
credit card business.

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ICICI Bank

Location

ICICI Bank has a network of about 573 branches and extension counters and over 2,000
ATMs

History of ICICI Bank

1955 : The Industrial Credit and Investment Corporation of India Limited (ICICI) incorporated
at the initiative of the World Bank, the Government of India and representatives of
Indian industry, with the objective of creating a development financial institution for
providing medium-term and long-term project financing to Indian businesses.
Mr.A.Ramaswami Mudaliar elected as the first Chairman of ICICI Limited
: ICICI emerges as the major source of foreign currency loans to Indian industry. Besides
funding from the World Bank and other multi-lateral agencies, ICICI also among the
first Indian companies to raise funds from International markets.
1956 : ICICI declared its first Dividend at 3.5%.
1958 : Mr.G.L.Mehta was appointed the 2nd Chairman of ICICI Ltd.
1960 : ICICI building at 163, Backbay Reclamation was inaugurated.
1961 : The first West German loan of DM 5 million from Kredianstalt was obtained by ICICI.
1967 : ICICI made its first debenture issue for Rs.6 crore, which was oversubscribed.
1969 : First two regional offices in Calcutta and Madras were opened.
1972 : Second entity in India to set-up merchant banking services.
: Mr. H. T. Parekh appointed as the third Chairman of ICICI.
1977 : ICICI sponsors the formation of Housing Development Finance Corporation. Managed
its first equity public issue
1978 : Mr. James Raj appointed as the fourth Chairman of ICICI.
1979 : Mr.Siddharth Mehta appointed as the fifth Chairman of ICICI.
1982 : Becomes the first ever Indian borrower to raise European Currency Units.
: ICICI commences leasing business.
1984 : Mr. S. Nadkarni appointed as the sixth Chairman of ICICI.
1985 : Mr.N.Vaghul appointed as the seventh Chairman and Managing Director of ICICI.
1986 : ICICI first Indian Institution to receive ADB Loans. First public issue by an Indian
entity in the Swiss Capital Markets.
: ICICI along with UTI sets up Credit Rating Information Services of India Limited,

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ICICI Bank

(CRISIL) India's first professional credit rating agency.


: ICICI promotes Shipping Credit and Investment Company of India Limited. (SCICI)
: The Corporation made a public issue of Swiss Franc 75 million in Switzerland, the first
public issue by any Indian equity in the Swiss Capital Market.
1987 : ICICI signed a loan agreement for Sterling Pound 10 million with Commonwealth
Development Corporation (CDC), the first loan by CDC for financing projects in India.
1988 : ICICI promotes TDICI - India's first venture capital company.
1993 : ICICI sets-up ICICI Securities and Finance Company Limited in joint venture with J. P.
Morgan.
: ICICI sets up ICICI Asset Management Company.
1994 : ICICI sets up ICICI Bank.
1996 : ICICI becomes the first company in the Indian financial sector to raise GDR.
: ICICI announces merger with SCICI.
: Mr.K.V.Kamath appointed the Managing Director and CEO of ICICI Ltd
1997 : ICICI was the first intermediary to move away from single prime rate to three-tier prime
rates structure and introduced yield-curve based pricing.
: The name "The Industrial Credit and Investment Corporation of India Limited” was
changed to "ICICI Limited".
: ICICI announces takeover of ITC Classic Finance.
1998 : Introduced the new logo symbolizing a common corporate identity for the ICICI Group.
: ICICI announces takeover of Anagram Finance.
1999 : ICICI launches retail finance - car loans, house loans and loans for consumer durables.
: ICICI becomes the first Indian Company to list on the NYSE through an issue of
American Depositary Shares.
2000 : ICICI Bank becomes the first commercial bank from India to list its stock on NYSE.
: ICICI Bank announces merger with Bank of Madura.
2001 : The Boards of ICICI Ltd and ICICI Bank approved the merger of ICICI with ICICI
Bank.
2002 : Moodys' assign higher than sovereign rating to ICICI.
: Merger of ICICI Limited, ICICI Capital Services Ltd and ICICI Personal Financial
Services Limited with ICICI Bank.

Competitors of ICICI Bank

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ICICI Bank

With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market. The customers have more
choices in choosing their banks. Therefore there has been a heavy competition between
the banks and within the bank. Some of the major competitors are as follows , they are
namely:

1. ABN Amro Bank


2. Citibank
3. HDFC Bank
4. Standard Chartered Bank
5. UTI Bank
6. HSBC Bank
7. Canara Bank
8. Bank of Baroda

9. Catholic Syrian Bank

10. City Union Bank

11. Deutsche Bank

12. Federal Bank

13. ING Vysya Bank

14. JP Morgan Chase Bank

15. Syndicate Bank

16. Vijya Bank

17. Dena Bank

18. Taib Bank

19. Bank of Ceylon

20. Centurion Bank

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ICICI Bank

21. South Indian Bank

22. United Western Bank

23. Scotia Bank

24. BNP Paribas Bank

25. Karun Vysya Bank

26. Indus India Bank

27. Laxmi Vilas Bank

28. UCO Bank

29. Oriental Bank of Commerce

30. Syndicate Bank

Banking services in India

With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market. The customers have more
choices in choosing their banks. A competition has been established within the banks
operating in India.

With stiff competition and advancement of technology, the services provided by banks
have become more easy and convenient. The past days are witness to an hour wait before
withdrawing cash from accounts or a cheque from north of the country being cleared in
one month in the south.

In India the banks are being segregated in different groups. Each group has their own
benefits and limitations in operating in India. Each has their own dedicated target market.
Few of them only work in rural sector while others in both rural as well as urban. Many
even are only catering in cities. Some are of Indian origin and some are foreign players.

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ICICI Bank

All these details and many more is discussed over here. The banks and its relation with
the customers, their mode of operation, the names of banks under different groups and
other such useful information’s are talked about.

One more section has been taken note of is the upcoming foreign banks in India. The RBI
has shown certain interest to involve more of foreign banks than the existing one
recently. This step has paved a way for few more foreign banks to start business in India

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ICICI Bank

OVERVIEW OF PARTICULAR BANKS

The following section presents an overview of seven private sector banks with special
focus on unique products provided by them and their thrust areas.

ABN Amro bank


Basic facts
Revenue- 4942.2 crores
Net profit- 218.83 crores
No: of branches- 16
No: of customers-12 lakhs (approx)

ABN Amro bank has been in India for more than eight decades now. Established in 1920
it was traditionally known as a “diamond- financing bank”. In India it enjoys a strong
image as a corporate bank with comprehensive global transactions. It is gradually
increasing its real banking operations in India. As a first step it has acquired the retail
operations of bank of America. With its alliance with Mellon trust, it has also become
one of the world’s largest financial institutions providing global custody and local
custody. It also has the distinction of being the first custodian bank to handle ADR/GDR
transactions for a leading mutual fund in the country

Clients in Bangalore
 Asea brown boveri nestle
 PFC
 Dabur
 Air India

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ICICI Bank

Retail Features
The bank charges an over limit fees from the customers if the
Loan against shares amount of principal interest thereupon goes beyond 60%of the
value of deposits
A time frame of one month is given to the customer before the
shares are sold off
It also provides loyal discount to the borrowers at the time of
renewal of the loan at the end of the year
Shakti account Saving account of women requiring a minimum balance of
Rs.5000
Free e-mail and sms alerts are given
Personal loans specially for women working

Corporate Features
Quick enquire id  A quick enquire of id and pass word is provided so
that the clerks in the company can make enquires and keep
track of balances
 A transaction password is also provided to the
company so that the officers can use it to request DDs etc
 This essentially is an additional feature
Van Gogh banking Exclusive banking for customers with balances more than 20-
25 lakhs
The investment and banking aspect of the account is handled
by two different people
Features of online banking and 24 hours banking is also
provided
Precious banking Nominated by RBI to import golds,silver and platinum
Trading in bullion

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ICICI Bank

The bank charges a commission over and above the


international price of gold and silver
Liquidity management Zero balance account permitting a customer to sweep funds to
centralized position so that credit balances fund the debit
balances

Trust areas of the bank

A. Corporate
a. Trade finance services are the core strength and principal thrust area for ABN
Amro bank.
b. The bank also has a centralized trade financing processing center offering
advisory services to exports.
c. The bank was nominated by RBI to import gold, silver, and platinum from
overseas suppliers for bullion trading in India.
d. It has also entered into an alliance with a local registrar and transfer agency to
offer this service to mutual funds.
e. This interbank FX desk is one of the leading market in spot and forward Indian
rupees.
f. The bank is looking at a platform for scaling global transaction services business,
covering trade services, cash management services and payments.

g. The bank has also launched global support services in Chennai.


h. The bank is also planning to establish call centers in India.
i. ABN Amro brought about the first syndications deal based on letter of credit in
India.

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ICICI Bank

B. Retail

a. The bank is increasing its number of ATM’s providing 365 days banking facility.
b. The bank also helps NRI’s keep track of values of properties and to go through a
property transaction.
c. It also provides legal advisory services at concessional rate to its customers.
d. The bank is going to launch credit cards and debit cards in June.
e. The bank offers the best rates on fixed deposits.
f. The bank provides cash delivery at the doorstep to all its customers.
g. Free insurance service provided on current accounts.

CITIBANK

Basic facts

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ICICI Bank

No: of branches-NA
No: of ATM centers-NA
No: of customers-30 lakhs (approx)

Citibank started operation in India in 1902. it has been offering a wide range of services
from cards and loans on the retail side to cash management and worldwide security
services across the globe. The global corporate banking strategy of the bank was to grow
business with local corporates and the public sector, as well as maintain our global
relationship customers in the local country. But now the focus of the bank is to board
base the five sectors into twelve industry specific areas.

Clients in Bangalore
 Britannia
 MICO
 Sasken technologies
 Birla 3M
 Infosys technologies
 Madura coats
 Ingersoll Rand
 Oracle India Pvt Ltd.

INNOVATIVE PRODUCTS

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ICICI Bank

Retail Features
Salary Account  Min balance 1000
 Min balance of employees that a company should
have is 5
 Withdraw cash , take loans , paying utility bills. etc
Citialert  Provide information on credit cards , banking
accounts etc
 Information encompasses reminders , alerts and
confirmations
 Can be accessed from anywhere
 Customer can choose the frequency , mode of
receipt of information as well as contents
Electronic payment  Allow a customer to pay his or her credit card dues
scheme without issuing a cheque
 The customer has to authorize the bank to claim the
amount directly from the bank account
Investplus  Investment product combined with the life and disability
features
 6 different kind of investment option to choose from
 Facility provided to NRIs
Citibank ERA  Specifically designed for employee reimbursement
 Minimum delay in getting bills settled
Corporate Features
Cash management  Citicleared for metros
service  Citispeed is for the 100 big cities
 Citicheck is for the next 500 c class cities
 Citianywhere is for all the places
Paylink  Disbursement product offering single window coverage
 Offered through citidirect online banking
 Customers can send future dated instruction

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ICICI Bank

 Reconciliation and mis facility


 Used to make statutory payments , utility payments ,
salary payments etc
Newcitibanking  Electronic platform offering global multicurrency , multi
product information
 Provides access to cash services ,security services,
global trade import services
Asset based finance  Equipment finance for SMEs to structured finance
solutions like off balance sheet financing, portfolio management
etc

Thrust areas of the bank

A. Corporate
a. The bank continues to have a corporate focus with the intention of retaining its
position in the sector.
b. Capital market is major thrust area for the bank. In Bangalore alone there are 5-6
people working on this area.
c. Focus of the bank is on fee-based services with particular emphasis on cash
management system. It pioneered this facility in India in 1986 and continues to be
a leader processing volumes to 6% if the GDP of India.
d. Citibank is one of the largest providers of foreign exchange products in India. It is
the leading derivatives house in India.
e. Citibank has one of the largest overnight position limits approved by the reverse
bank.
f. The bank provides support service for exposure tracking and management
systems.
g. The bank also has the distinction of being the pioneer in securitization.

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ICICI Bank

h. ISO 9001 certification for cash management, custodial services, treasury, and
funds transfer and trade services.
i. Citibank is the leading player handling bulk dividend and interest disbursements
for all major financial institutions, corporates, finance companies, PSU’s and
mutual funds. In 2000, the market share of Citibank in corporate dividend
disbursements was more than 60%.
j. The bank has been targeting corporates with revenues of $50 million or less.
k. India’s trucking business has been one of the targeted sectors.
l. The strategy envisages broad basing the earlier five focus sectors (export,
software, transporter, manufacturer, dealer) into 12 areas with equal emphasis to
all.
m. The bank is also helping multinationals setup shop in India while at the same time
taking Indian corporations abroad, thereby retaining both customers.
n. Citibank is also targeting the growing SME sector in keeping with the trend.
o. The bank is also planning to introduce two new products outflow business and
broker back office clearing (of institutional clearers)

B. Retail
a. In case of salary accounts, the bank targeted mid sized corporates to setup retail
bank accounts for their entire staff. In three years the bank doubled its clients.
b. Credit cards have been focus areas with Citibank offering 12 different kinds of
cards.
HDFC BANK

Basic facts
Revenue-Rs7108.7 crores
Net profit-310 crores

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ICICI Bank

No: of branches-182
No: of ATM centers-1054
No: of customers-23 lakhs approx

HDFC bank limited was promoted by India’s premier housing finance company. The
housing development corporation limited (HDFC). Incorporated in august 1994, as a
scheduled commercial bank it started operation in January 1995. It was amongst the first
to receive approval from RBI to set up the bank in private sector. It entered in to strategic
business collaboration with chase Manhattan bank linking HDFC’s India corporate
clients to the chase network worldwide. In 2000, times bank limited was merged with
HDFC bank doubling the number of branches as well as the customers. NRE and NRO
accounts that were particularly non-existent grew as a result of the merger.

Clients in Bangalore
 Himatsingka seide
 PSI data systems
 HLL
 Nestle
 SRF ltd.

Retail Features
Defense salary account  Salary accounts of defense personnel
 Zero balance account
 Free international debit cards
 Free fund transfer facility
Direct pay  Register for net banking facility

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ICICI Bank

 Purchase and directly debited to the account of the


customers and credited to that of the establishment
 No need to carry cash or cards
Freedom  E-age savings account for people constantly on the move
 Min wage quarterly balance is a signified lower 1000 Rs
 Owner of a mobile phone
One view  Tracking and managing on line accounts
 Bring together online accounts of HDFC bank , Citibank
and ICICI bank
Corporate Features
Supply chain  End to end e–commerce solutions for collecting from
management service dealers and payment to suppliers
 Reducing processing cost
 Real time information
Corporate internet  ENET provides secure access to banking information
banking  It offers 12 layers of application and system security
 Account information
 Domestic payments
 Customizable user interface
Payment gateway  Payment are effected by debiting the account of
customers
 Transactions are routed such that the merchant portal
does not get to see the credit card number
Cash surplus service  Service related to investment of surplus banking
 Selection of right investment for the desired maturity
period and risk profile

Thrust areas of the bank


A. Corporate

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a. HDFC bank operates on three horizons – being a market leader earning a regular
revenue stream; focusing on the retail business that would contribute 15-20%
growth.
b. Income offering services like cash management services, custody services and
distribution of financial products have been a thrust areas for bank.
c. HDFC bank is a dominant player in providing cash management services to
national and regional stock exchanges and is now clearing bank for the various
stock exchanges. In fact, it is the only bank offering the entire gamut of capital
market services.
d. For online trading, the bank has tied up with 40 brokers.
e. The bank has established e-net with 60 corporate customers to offer cash
management services through the net.
f. The bank is a member of the foreign exchange dealers association of India.
g. It is the first private sector bank to be authorized by CBDT to accept direct taxes.
B. Retail
a. HDFC bank has been focusing the retail side. It is aggressive on retail assets
through numerous retail products it offers.
b. It is the only bank to provide access to all 3 major international card networks on
its ATM network. The tie up with America express in particular has helped the
bank get several blue collared customers.
c. The bank is pushing defense salary accounts and hopes to have the salary
accounts of all the military personnel with in two years time.
THE HONKONG AND SHANGHAI BANKING CORPORATION LTD. (HSBC)

Basic facts

Revenue-Rs 13731.9 crores


Profit-Rs 301 crores
No: of branches- 39

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ICICI Bank

No: of ATM centers- 200 (approx)


No: of customers-15 lakhs (approx)

HSBC, one of the world’s largest international banks, has been in existence in India for
about 150 years. The bank opened its first bank – staffed agency in Calcutta in the year
1867. The bank has the distinction of being a pioneer in electronic banking in India with
ATM’s, credit cards etc. It was the first bank in the country to introduce computerization,
ATM’s etc. HSBC offers services ranging from current and savings account on the retail
side to syndication and import export facilities on the corporate side. The bank focus is
on-long term relationships with corporate clients based on its global connections and
extensive knowledge of Asia and Asian business.

Clients in Bangalore
 Arthur Anderson
 Compaq
 Price water house coopers
 The oberoi group
 PFC
 Titan industries
 Mascot systems

INNOVATIVE PRODUCTS

Retail Features
Private clients  One of the type of relationship banking
 Deposits to be more than 50lakhs
 Offers wealth management services ,transaction service,

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ICICI Bank

custody etc
Power vantage  Deposit more than one lakh
 No cheque bounce facility
 Auto sweep facility
Insurance service  Offer both personal and business insurance
 Team of insurance professional design employee benefit
programmes and insurance programmes for corporates
Corporate Features
Business account  Avg. quarterly balance of Rs25000
 Door step banking, special ATM cards etc
Business vantage  Similar to power vantage
account  Avg. quarterly balance of Rs100000
 No bounce cheque protection facility
 Telegraphic transfer, etc
Corporate credit  Bill sent directly to company
account  Given to employee based on net worth of the company
Bullion trade  145 years of expertise in precious metals
 Worlds leading bullion house
 One of the 2 foreign banks offering bullion trading in
India

Thrust areas for the bank

A. Corporate

a. Corporate and treasury accounts for 80% of HSBC India’s balance sheet.
b. The bank is planning to focus on the top end of the market and expects to earn Rs
75000 lakhs approx. from corporate finance.
c. Concentrating on telecom, cement, pharmaceuticals, FMCG and financial services
market.
d. Convert India into a global processing hub.

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ICICI Bank

e. Increase investment in India and make India the testing ground for products and
services.
f. HSBC’s strategy is to move away from being a product – based selling strategy to
a need based on by concentrating on customer relationship management (CMR)
there by making quality of service as the differentiating features.
g. Another thrust area is institutional banking where it is among the top players.
h. With an existing 700 corporate clients, the group is trying to increase the business
from its global clients operating in India.
i. Offering factoring solutions to small and medium enterprises. Also planning to
launch products specifically for the SME segment.
j. The bank commands 45% of the market share in the bullion market.
k. Custody and clearing services commands close to 50% of the market cash
management service is ISO 9002 certified.
l. HSBC is the leader in providing project and export finance services to
governments, blue chip corporates and top tier banks.

B. Retail

a. The banks are shifting towards retailing banking. For this, it has moved
from the letter culture to the relationship culture. It has reoriented itself with
wealth management to select individuals and target market and consumer banking
and as its main priority.
b. Alliance with Punjab national bank for distribution of credit cards
c. Key retail strategy in cross selling of products
d. Tie up with Tata AIG for life and general insurance
e. Relationship discount on flexi finance

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ICICI Bank

f. Special offers at different restaurants , hospitals and shops

STANDERD CHARTERD GRINDLAYS BANK

Basic facts
Revenue-Rs16303 crores
Net profit-Rs266.69 crores
No: branches-62
No: customers-22 lakhs(approx)

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ICICI Bank

Standard chartered bank opened its first overseas bank in India in the year 1858 in
kolkata. It is one of the oldest foreign banks in India. The bank has a leadership in
emerging markets having had activities in Asia, Africa, Middle East and Latin America.
Subsequent to its merger with Grindlays bank to form standard chartered Grindlays in the
year 2001, it has become the largest foreign bank in India. However it has been the
subject of takeover speculation for a long time and is currently rumored to be in talks
with citigroup and Barclays bank.

Clients in Bangalore
 Titan industries
 Britannia industries
 Tata coffee
 Asea brown boveri
 Infosys ltd
 Madura coats
 Ingersoll rand

INNOVATIVE PRODUCTS

Retail Features
Homesaver  Helps reduce interest on loan
 A deposit surplus funds in the homesaver account,
reduces the balances outstanding on which interest is
calculated effectively charging the EMI

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ICICI Bank

Mileage  Cash overdraft up to 65%of value of car less than 5 year


old
 Post dated cheques not required
Service guarantee  Every time a service is delayed beyond the guaranteed
time ,the customer can claim Rs 50 for each day of delay
Reminders  The bank reminders for all sorts of events including
personal ones like wife’s birthday
 The reminder alert will appear on the customers personal
home page
Secure messaging  With a confidential login and pass word, through bank
can transfer information to its customers
Corporate Features
Private label  Allow correspondent bankers to generate incremental
from trade in Asia
 This is done by moving the domicile of the letter of
credit issuance to hongkong to take advantage of the
favorable pricing dynamics there

Cash management  Facility of investing end of day cash balance in countries


services where regulations permit or the transfer of funds into
and out of accounts after bank hours

Thrust areas of the bank

A. Corporate

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ICICI Bank

a. Stan chart is the no: 1 in treasury in India being a market leader in local
currency and money markets. In fact till about 1998 the bank invested in the
retail sector, treasury was the only major contribute to revenues.
b. Merchant banking and asset management are going to be the key focus areas
for the bank on its corporate side.
c. The composition of the corporate portfolios is 40% MNC’s, 15% PSU’s and
45% large sized companies.
d. The bank is planning to focus on the Indian debt market.
e. Stan chart is a leader in trade finance and provides expert assistance with letter
of credit reimbursement.
f. It is a leading cash management supplier in the emerging markets with cash
product specialists and customer service centers providing customers with
effective solutions.
g. ISO accreditation for the operational capacity in international trade.
h. Stan chart is also a top private sector bond arranger.

B. Retail

a. The bank is trying to increase its share in the retail sector.


b. The bank is setting up kiosks in post offices around to leverage on the distribution
strength and customer base of the post office.
c. As a part of the deal with the postal department, the bank is planning to use speed
post to send its credit cards to its customers.

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ICICI Bank

d. The bank is also planning to launch exclusive credit cards for the employees of
dept. of post.
e. Retail banking contributes close to 40% of the bank’s revenue and is expecteds to
increase to 60% by 2005.
f. Tie up with MUL to extend finances to its customers.

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ICICI Bank

CHAPTER 4
ANALYSIS AND INTERPRETATION OF DATA

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ICICI Bank

GENERAL ANALYSIS OF THE BANK

This section compares the various private sector banks using certain parameters for
analysis. All the figures given are for the year 2004-2005 given in crores of rupees.

REVENUE

16000

14000
ABN AMRO
12000
HSBC
10000 STANCHART

8000 UTI

GTB
6000
HDFC
4000
ICICI
2000

Figure 1

In case of revenues for banks, larger the revenue earned by the bank, the better it is as
revenues contribute directly to the profitability of the bank. In this regard, Stan chart is
the undisputed leader with revenues of Rs. 15,302.8 crores. ICICI bank follows up as
close second with revenues amounting to Rs. 12, 056 crores.

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ICICI Bank

NET PROFIT AND DEPOSITS

12000

10000

8000

6000 DEPOSITS
NET PROFIT (RsCrores)

4000

2000

0
RT
FC

BC
TB

RO
I

I
IC

UT

HA
IC

G
HD

HS

AM
C

N
AN

AB
ST

Figure 2

As in the case of any business, even in the case of the banking sector probability and
sources of funds are important. As such, higher the net profit and higher the deposits the
better for the bank. While high profits are indication of the bank, high deposits speak of
the extent to which the bank has been in a position to mobilize funds from customers.
ICICI bank has both the highest net profit as well as the largest deposit base among the
private sector and foreign banks that have been compared.

OPERATING EFFICENCY

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ICICI Bank

12

10

INTEREST INCOME/AVG
WORKING FUND
6
NON INTEREST INCOME/AVG
WORKING FUND

O
RT
C
I

TB

C
TI
IC

R
DF

SB
U

A
IC

M
G

CH
H

A
BN
N
A

A
ST

Figure 3

Measured in terms of interest income/ average working funds, it speaks of the extent to
which the funds have been deployed effectively to earn interest revenue for the bank.
Higher this ratio the better. On this parameter, Stan chart is the most efficient of all the
banks. ICICI bank’s performance is close to the average performance of the banks.

Measured in terms of non-interest income/ average working funds, this ratio speaks of the
amount of fee-based income that a bank can earn from its working funds. Judged on these
parameters, the performance of GTB surpasses that of all other banks. ICICI bank with a
ratio of about 2.01 is once again close to the average performance of the banks.

EARNING QUALITY

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ICICI Bank

4.5

3.5

2.5 OPERATING PROFITS /


AVG WORKING FUNDS
2 OTHER INCOME / NET
INTEREST INCOME
1.5

0.5

0
ICICI HDFC GTB UTI STANCHART HSBC ABNAMRO
Figure 4

Judged on the basis of operating profit/ avg-working funds, it speaks of how profitably
the funds of the bank have been used. Stan chart is the leader in this arena with a ratio of
4.15. ICICI bank is way below this figure with a ratio of 2.12 indicating that the funds
probably have not been utilized properly.
Taken as a ratio of other income / net interest income, the ratio speaks of the ability of the
bank to work on lower spreads. Based on this parameter, the performance of ICICI bank
is way beyond that of the other banks speaking of the ability of the banks to cut down
interest rates if the need arises.

PRODUCTIVITY

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ICICI Bank

50

45

40

35

30 BUSINESS PER EMPLOYEE

25
OPERATING PROFIT PER
20 EMPLOYEE

15

10

0
RT
FC

BC
TB

RO
I

I
IC

UT

HA
IC

G
HD

HS

AM
C

N
AN

AB
ST

Figure 5

Productivity of the bank has been measured in terms of the business and profitability per
employee. It speaks of whether the bank is over or understaffed. Based on these
parameters, ICICI bank is leader with the highest ratios for productivity based on both
business per employee and revenue per employee.

ASSET QUALITY

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ICICI Bank

Net NPAs / Net Advances (%)

4.5

3.5

ABN AMRO
3
HSBC
2.5 STANCHART
UTI
2 GTB
HDFC
1.5
ICICI

0.5

Figure 6

Asset quality measured in terms of net NPA’s as a percentage of net advances speak of
the assets that are doubtful to return the interest due in the near future. Judged on this
basis, ABN Amro bank has been most judicious in its lending’s. the performance of
ICICI bank is close to average performance for all the banks.

MANAGEMENT QUALITY

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ICICI Bank

RETURN ON ASSETS

3.5

ABN AMRO
2.5 HSBC
STANCHART
2 UTI
GTB
1.5 HDFC
ICICI

0.5

Figure 7

ICICI HDFC GTB UTI STANCHART HSBC ABN


AMRO
1.7 1.9 1.3 0.7 4 0.9 1.6

Measured in terms of return on assets, it speaks of how successful the management was
in using the assets judiciously. On this parameter Stan chart once again out performs the
remaining banks. The performance of ICICI banks is again close to average performance
of the banks.

TRENDS AMONG THE PRIVATE INDIAN BANKS

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ICICI Bank

Analysis made on the basis of any one year’s figures could always lead to faulty
conclusions as the year of review could have been an exceptional case. For example
around the year 2006 ICICI bank went in for its ADR and this could have affected the
return on assets of the bank. As such the consolidated figures of ICICI bank and ltd have
been taken and compared with the figures of the other banks for the year 2004-2005.
While the scope for error is still present as two years in still not a good indicator, the fact
that any banks have not published the audited results for the year 2005 has been a
constraining factor in this regard.

ICICI HDFC GTB UTI


Branches
2004 820 256 150 169
2005 1400 518 310 314
Size of the bank
Deposits ( in crores)
2004 47378 32658 21734 18924
2005 65749 48759 34976 27985
Net profit ( Rs in crores)
2004 1100 657 265 190
2005 1411 993 357 270
Operational Efficiency
Interest income / Avg Working funds
2004 9.0 4.7 10.7 10.8
2005 40.5 8.6 9.4 8.2
Non-interest income/ Avg working funds
2004 2.0 1.9 3.8 2.0
2005 6.3 1.1 1.7 1.5

Earning Quality
Operating profits / Avg Working fund
2004 2.1 4.2 4.13 2.6
2005 10.6 2.4 2.1 1.3
Other income / net interest income

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ICICI Bank

2004 22.2 40.5 36 18.9


2005 15.7 14.7 18.3 18.6
Productivity
Business per employee
2004 46.44 9.42 8.55 12.49
2005 8.15 14.7 10.08 9.59
Operating profits per employee
2004 .98 .09 .12 .07
2005 .06 NA .17 .07

Table 1
A look at the ratios and figures and both for 2004 and 2005 reveals that as compared to
all the other banks in the private sector in India, ICICI bank has grown by leaps and
bounds. Its branch network has increased and so has its deposit base. But this was
primarily due to the merger between ICICI bank and the bank of Madura. However, the
profitability of the company has dropped drastically. This drop has come primarily from
the corporate lending of the erstwhile ICICI ltd. The net profit as well as the non interest
income continues to be way beyond the income of the other three banks in the private
sector. Similarly is the case with earning quality ratios. The fall in the profitability has
also affected the productivity ratios of the bank.

As far as the banking sector is concerned, banks in India have turned risk averse. Banks,
which are predominant financial intermediaries in the economy, are turning in to business
that has to be profitable. Banks are more interested in putting their money into risk free
government securities rather than to the industry. The reason for this could be that
lending to the industry entails higher risk, which impacts the banks capital adequacy
forcing the bank to raise equity, which is difficult in a barely active capital market. The
very fact that most of the foreign banks have treasury services as a thrust area proves the
point that banks are averse to lending to corporates.

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While the importance levied on profitability has increased tremendously, banks on the
size are levying an almost equal importance. To fight foreign banks with global presence,
banks today have to be “big”. And size here is not just in terms of asset base but I also in
terms of geographical research. And to do so a vast majority of the banks going in
mergers. This is evidence by the plethora of mergers that have been taking place in the
last two years. Size is of importance t cut costs. If a bank wishes to become a universal
bank provided solutions to al the financial requirements of an individual or corporate, if it
wishes to have to ensure that they are big enough to provide services that reach the
customers.

Apart from size, one area that is gaining importance is the sector of fee-based income.
Being a risk free source of revenues, banks are more and more concentrating on pushing
fee-based activity. The market size of the fee-based activity is about Rs.111.1 bn. This
sector grew at about 83% the net increase in interest income in 2001 and amounted to
about to about 50% of interest income.

One other trend that has happened in the banking sector is the focus being levied upon the
retail side. It has been recognized that the retail lending attracts far greater spreads and
are a whole lot less risky than corporate lending. As such banks are using technology to
increase their offerings to the retail customers. Be it establishing more ATM’s or
introducing phone banking, internet banking and mobile banking, retail customers is
gaining importance today.

COMPARISON OF SPECIFIC PRODUCTS ACROSS BANKS

The section provides a board comparison of certain products across banks on the basis of
the essential features of the products. Specifically, we take a look at loan products, credit
cards and ATMs.

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COMPARISON OF LOAN PRODUCTS


The loan products offered by various private sector banks and foreign banks have been
compared to various parameters and an effort has been made to find the bank that makes
the best offering to the customer in each of the loan categories.

Features ICICI HDFC UTI Citibank Standard HSBC ABN


chartered Amro
Loan New car # Up to NA Up to # #
amount up to 80% 85%
90%
Old car
up to
80%
Interest New car 12.5%and 14.55 NA 14.25%- 13% NA
rate 14.5%- above 16% and
16.5% 8.5% above
Old car 18.5%
18.5%- 18.5%
20%
Processing 2%or 0 0 NA NA 2% NA
fees RS1000
if loan<1
lakh
Repayment Max of 5 Used car # # # # #
yrs 4 yrs
Processing 4 days at 2 days 15 days NA 7 days 2 days NA
time maximum
Pre Allowed 6 months Allowed After 6 Allowed After 6 Allowed
payment to 5 years months months
Pre 2% 2% 0 3% 0 2% if 4% if
payment more more
fees than than

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25% 25% pa
pa nil after
3 years
Guarantor No No Yes No No No No

Table 2

Car loan offered to customers have been compared primarily on the basis of loan amount,
interest rates, processing fees, pre-payment fees and processing time. The comparative
table reveals that of all the banks, the interest rates offered by HDFC bank are the most
competitive. HDFC bank offers the lowest rate of 12.5% for a small segment car as
against the other banks that charge a minimum of 14.5%. Additionally the bank does not
charge any processing fee at the time when 2% seems to be the norm. the offering of
HSBC is also very similar to that of HDFC bank with an interest rate that is 0.5% points
higher. Additionally they also charge a processing fee of 2%. But with a processing time
of just 48 hours it is likely to be the best alternative to a retail customer.

As compared to those two banks, ICICI bank offers as much higher rate of 14.5%. But
then this is on par with most of the other banks in the private and foreign sector. Further,
ICICI bank processes its loan in 4 days, which is significantly lesser than all other banks.
With most of its other features on par with the other banks, ICICI bank is likely to be the
third choice for all retail customers.

HOME LOANS

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Features ICICI UTI Citibank Standard HSBC


chartered
Eligibility 21-65 yrs 24-60 yrs NA 24-53 yrs 25-60 yrs
Interest rates Adj 11% Max NA 11.3% 16.5%
Fix 12% 12.75% 12.3%
Service 1% 1% NA 1.5% 1.5% less
charge 0.5% for
customers,
0.75% for
power
vantage
customers.1%
for premier.
Repayment 20 yrs 15 yrs 15 yrs 15 yrs 15 yrs
Processing 14 days 15 days NA 7-10 days 10-15 days
time
Pre-payment 2% 0 0 0 0
fee
Guarantor Yes only if Yes No No Only if loan
you are soft is more than
ware 12 lakhs
professional
Loan Up to 85% Up to 80% Up to 80% Up to 85% Up to 85%
amount of 30 lakhs

Table 3

In case of home loans, it has been assumed that the principal factors that would influence
the decision taken by a customer would be a loan amount, interest rates, repayment
period and the service charge. The various banks have been evaluated on the features. At
the out set it appears that both Stan chart and ICICI make offering that are equally
competitive. However ICICI bank charges a marginally lower rate both for interest and

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for service charge. Additionally they also give a repayment period of 20 years as against
Stan chart that offers only 15 years. While ICICI bank does charge a pre-payment fee of
2%, it is assumed that this is not a major consideration for a customer who takes a loan.
As such ICICI bank scores better than the other banks in the offerings it makes and is
likely to be the first choice for a customer looking for home loans.

LOANS AGAINST SHARES

Features ICICI HDFC UTI Citibank Standard HSBC ABN Amro


chartere
d
Eligilibility Should # Tempor # # # #
hold arily
forms in suspend
demat ed
form
Loan amount Up to # # # # # #
60% of
200000

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Interest rates Max Max 16% NA 17-19% 16.5% #


14% 15%
Processing 0.5% NA NA # NA 1.5% NA
fees less,0.5%for
customers,0.7
5%for power
vantage
customers,1%
for premier
Disbursement 4 days 3 days NA 1 week 1 week NA
time
Commitment NA NA NA NA NA Applicable
fees
Over limit NA NA NA NA 2% 150+2%
fees

Concessional Website NA NA NA NA #
rate of speaks
depositary of ATM
account and phone
car loans banking
services
ATM Free Debit- NA # Debit- #
ATM cum cum
cards ATM ATM
given
Phone # # NA # # #
banking

Table 4

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Loans against shares have been compared on a number of features, the most important
being interest rate and processing time is particularly important in themselves are liquid
securities and in case of need a customer can always choose to sell the shares if he/she
wanted the money urgently. The rates offered by ICICI bank at 14% are the most
competitive. The processing time of about 4 days is also among the lowest. On this basis
it can be said that the offering of ICICI bank is most attractive. Particularly so since all
the other features like ATM cards are also provided by the bank.
Competition for the ICICI bank would be from HDFC bank, which offers loans at 15%.

TWO WHEELER LOANS

Features ICICI bank HDFC bank


Loan amount Up to 85% Up to 90%
Interest rates NA Max 11.5%
Processing fees 2% 2%
Repayment 3 yrs 3 yrs
Processing time 48 hours 48 hrs
Pre-payment Allowed Allowed
Pre-payment fees 2% 0
Guarantor NO NO

Table 5

In the two wheeler segment, there are only two players- HDFC bank and ICICI bank.
None of the other private sector banks or foreign banks offers two wheeler loans and any
person seeking to buy a two wheeler would have to take a personal loan to do so. Of
these two banks, the terms of offering of HDFC bank is more competitive as compared to
those of ICICI bank. Their interest rates are a competitive 11.5% and they don’t charge

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any payment fee. However given the fact that ICICI bank makes most of the other
offerings, a retail customer might choose ICICI bank makes most of the other offerings, a
retail customer might choose ICICI bank just a frequently as HDFC bank. In other words
the competition is pretty stiff.

COMPARISONS OF ATM

ATM cards
Bank name GTB HDFC ICICI UTI HSBC CITI ABN STAND
BANK AMRO CHART
Eligilibility Savings All All All All All All All
account account account account account account account account
holder holders holders holders holders holders holders holders
only
Withdrawal Rs Rs Rs Rs Rs Rs 30000 Rs Rs
limit 20000 15000 20000 25000 30000 per day 30000 30000
per day per day per day per day per day per day per day
for all
saving
account
holders
and
100000

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per day
for all
current
account
holders

Services Account Mini Cheque Cash Withdrawal Withdrawal Withdrawal


status, statement, book withdrawal, and deposit and deposit and deposit
request transfers , request, cheque of cash of cash of cash
for bill cash request and
cheque , payments deposit and deposit,
demand withdrawal, account
draft balance statement
request enquiry and fund
recover
Penalty NA Rs 100 in Rs 250 in Rs 100 in Rs 200 in NA Rs 200 in
case of case of loss case of loss case of loss case of loss
loss of of card of card of card of card
card

Table 6

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The offerings most of the banks are the same in case of ATM card. However the
withdrawal limit incase of HSBC is better than Citibank or Stan chart in the sense that the
current holders of HSBC can withdraw greater amounts.

ICICI not only offers a lower withdrawal limit but also charges the highest penalty n case
of replacement of card.

COMPARISON OF GOLD CREDIT CARDS

Card Citibank ICICI Stan chart HSBC UTI


schemes
Card Gold Gold Gold Gold card Gold
category preferred standard
Association Master and Visa Both master Master and Master
visa and visa visa
Validity International International International International International
Joining fees NIL Rs 3000 Rs 5000 NIL NA
Add on Rs 5000 Rs 3000 Rs 5000 NIL Rs 5000
cards
Annual Rs 2000 Rs 2000 Rs 3000 Rs 1500 Rs 3000
charges
Cash Rs 25000 for 40% of the 30% of the 40% of the 60% of the

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withdrawal the first year credit limit credit limit credit limit credit limit
& then 60%
of the credit
limit

Interest on 2.95% 2.5% 2.5% 2.95% 2.95%


cash
withdrawal
Credit limit Rs 30000-Rs Rs 40000-Rs Rs 60000 Rs 50000- Rs 250000
250000 300000 Rs300000
Interest rate 2.95% 2.5% 1.75% 2.95% 2.95%
Late fees 5% 15% of the 15% of the Rs 1000 5%
min amount min amount
Credit 45 days 52 days 52 days 51days 45 days
period

Lost card Before No coverage No coverage No coverage Zero loss


liability report it is card liability
the liability
to the
customer

Table 7

In case of credit cards, it has been assumed that the chief factors that make a difference to
the decision taken by a client are credit period, credit limit, interest rates, cash withdrawal
and annual charge. The comparative given above reveals that the offering of Citibank,
UTI, and Stan chart are all attractive. The terms offered by ICICI though not the best in

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the market is either very close to the best in case of credit period of 50 days with that of
Stan chart or are comparable with the market average.

CHAPTER 5
SUMMERY OF FINDINGS, CONCLUSION AND
RECCOMANDATION

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FINDINGS

The old prophecy that once a customer is a customer has become a myth in the
present day competitive world. Brand image on banking sector no longer works a magic
with the consumer. So to hold the customer to the bank and attract new consumers the
ICICI Bank must come up with strategies that is efficient and competent in the present
scenario.

After analyzing the response of the respondent through questionnaire and observation the
following were found in the study.

 In the case of revenue of banks, Standard Chartered bank is the undisputed


leader. ICICI follows up as second in revenues.
 In the case of net profit and deposits ICICI bank is leading with both the
highest net profit and largest deposit among the private sector and foreign
banks.
 In the case of operating efficiency, standard chartered bank is the most
efficient of all the banks. Avg performance is shown by ICICI bank.
 In the case of earning quality, standard chart is the leader in this arena with a
ratio of 4.15. ICICI bank is way below this figure with a ratio of 2.12
indicating that the funds probably have not been utilized properly.
 In the case of productivity, ICICI is the leader with the highest ratio of
productivity based on both business per employee and revenue per employee.
 In the case of asset quality, ABN Amro bank has been most judicious in its
landings. ICICI bank is close of Avg performance for all the banks.
 In the case of management quality, stand chartered once again out performs
the other banks

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RECOMMENDATIONS

Based on the findings regarding the performance and thrust area of the other competing
private sector and foreign banks, the trends in the banking sector and the future of the
sector as such an attempt has been made to point our areas that the bank can possibly
concentrate upon.

Corporate sector

1. Continue focus on cash management service: with more and more companies
preferring to outsource their collection and payment, the sector fee based activity
growing. Given the vast geographical presence of ICICI bank that can be
leveraged upon, the bank is better placed to offer these services at a competitive
rate as compared to foreign banks.

2. Continue targeting SME segment: small and medium enterprises through in


existence for long, have gained prominence only in the recent past. In fact ICICI
bank got this segment as a result of their merger with the bank of Madura. The
foreign banks have also only just started targeting this segment. As such
leveraging on the expertise of the personnel of bank of Madura, ICICI bank ca try
to move faster than competitive and make use of the first move for merger.

3. Focus on FX services: FX services are an area that is being concentrated upon


only by one bank- Citibank. None of the other banks are targeting this product.
With Indian industries looking for a global presence, the need for this product is
likely to grow. That apart, FX services from close to 13% of the market for fee-
based product. With that market growing, FX services would also grow. As such,
ICICI bank could target this product and try to make attractive offerings to the
clients in the sector.

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4. Provide advisory services via specialists. The bank could appoint specialists in
certain definite industrial sectors who would not only evaluate projects for the
bank but would also give advisory services to the clients on the changes that make
in their investment. This person could be independent of any financing that the
bank would so that there is no clash of interest for him has evaluated the projects.

5. Single point interface: one of the complaints that clients had against private sector
and foreign banks was that, the company had to deal with multiple managers
depending upon the products that the company required. That is, for cash
management services there was one relationship manager, while treasury had
another. The companies found this highly disconcerting and preferred to deal with
a single individual from a bank, which could in turn interact with his colleagues.

6. Decentralization of decision making: another complaint that clients had against


banks was that there was a delay information transfer and approvals, primarily
because all banks branches had to contact the officials in their head offices before
approving clients. Decentralization on behalf of the bank would solve this
problem.

7. Flexibility and personalization of services: yet another reason, that some of the
companies mentioned, for their sticking on to the public sector banks was the
rigidity and impersonal touch with the foreign and private sector banks.

8. Collecting bank for direct and indirect taxes: an offshoot of the fact that clients
dealing only with one or two foreign banks were dealing with HDFC bank
because of their statues of being a collecting banker for direct taxes.

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Retail sector

1. Loan against shares and house loans: given the growing importance of the retail
sector and the bank offerings being the strongest in case of house loan and loan
against shares, ICICI bank could look at pushing home loans and loan against
shares.

2. Tie up with American express: ICICI bank could look at possible tie up with
American express not only for traveler’s cheque but also for providing ATM
facilities to the customers of American express. This would get them high net
worth clients.

3. Continue corporate credit cards: corporate credit cards would help employees pay
official bills through cards. This would save both then and the company the
trouble of reimbursing the expenditure.

4. Electronic clearing house: with RBI giving it approval for establishment of an


electronic clearing house by the banks, a move in this direction would help banks
hasten their clearing process and provide retail- time on-line service to their
clients that would help corporate.

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CONCLUSION

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CONCLUSION

A careful study has been done in the sector of commercial banks in Bangalore to evolve a
competitive strategy for ICICI Bank through questionnaires, observation, interviews and
through proper guidance of respective faculties.

The study which lasted for one month has provided information to understand the
working of different Banks in Bangalore and their strength and weakness. The project
covers analyzing the private sector banks in India with special emphasis on the product
portfolio, both corporate and retail, evaluating the thrust areas and strategies of these
banks, and evolving a strategy for ICICI.

The study is restricted to 6 Banks namely Amro bank, Citibank, HDFC bank, HSBC,
Standard chartered and UTI bank and the facts clearly shows that Standard Chartered
Bank leads in revenue terms whereas ICICI leads in case of deposits & revenue. In the
case of operating efficiency Standard chartered bank is on the top that means it is the
most efficient bank. In the case of management quality, once again Standard chartered is
at the top.

The study helped me to understand that the organisation (ICICI Bank) is facing a sever
competition and it affects the profitability of the Bank. I was also able to understand
some of the draw backs and problems of the ICICI Bank such as Decentralization of
decision making which make delay in information transfer and approvals, non flexibility
and personalization of services, non availability of specialist to advice the banks clients
on various investment. I hope that if the bank is managed to overcome these draw backs
and problems, it can increase its efficiency.

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BIBLIOGRAPHY

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BIBLIOGRAPHY

 www.google.com

 www.citibank.com

 www.icicibank.com

 www.stanchart.com

 www.hdfc.com

 www.hsbc.com

 www.alstavista.com

 Capitaline database from the college.

 Magazines, journals etc.

 Financial management book.

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ANNEXURE

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INTERVIEW QUUESTION

Questionnaire for HDFC bank


(Questionnaire No 1)

1. “……to remain the clear market leader in mortgages in India”. Mortgages as in


retail loan? What part of HDFC’s corporations does a mortgage form?
What is HDFC’s share in the mortgages market?
2. What is HDFC’s share in the banking sector
3. “the bank signed a strategic business collaboration agreement with chase
Manhattan bank in February 1999.” To what end? How did HDFC gain? Is it
looking at a possible merger?
4. Times bank amalgamation- what value did it add in terms of branch network,
geographic reach, customer base, alternative delivery channels?
5. Leader in cash management – what is HDFC’s share? How do you differentiate
your service? Leader in what sense – volume of transaction or no. of customers?
6. What are HDFC’s treasuries operations like? How it is positioned with respect to
competitors?
7. In case of corporate banking/ retail banking, what is HDFC’s thrust area?
8. Is a defense salary account any different from a normal salary account? If so what
are additional features available on the defense salary?
9. Sweep-in-facility – is it not available for all fixed deposit accounts?
10. Where is HDFC placed among the banks in India?
11. Who are HDFC’s major competitors?
12. Which sector is HDFC targeting? Small scale, medium scale or large scale?
13. How deep is HDFC’s dealing in the forex market?
14. CMS is one of our thrust areas. What is HDFC doing to promote this area?
15. How does HDFC market its products? Is HDFC planning to enter bank assurance?

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Questionnaire for UTI bank


(Questionnaire No 2)

1. “UTI provides an integrated service to an acquire ranging from strategic


vision through to completing the deal & integrating the acquired business”.
Who exactly are the clients and what are the services provided?
2. What are the corporate clients of UTI bank? Is bank targeting any particular
segment like say the large or the medium enterprises?
3. No of corporate clients UTI has?
4. What is the revenue per customer for UTI?
5. % shares both in corporate and retail sector?
6. Revenue per branch?
7. No of customers per employees?
8. Revenue per ATM?
9. Do UTI offers interest options?
10. Who are the major clients of UTI? What is the maximum amount lent to any
one customer? What is the basis by which UTI is differentiating its products
vis-à-vis its competitor’s products?
11. what is nature of tie up that UTI bank is planning with Belgium financial
group Forties?
12. UTI has set June’ 02 as the deadline for preferential allotment of shares to the
foreign strategic partner… how far has the discussion progressed?
13. How far has UTI’s plan of financing Tata steel succeed?
14. Did the tie up between UTI and exim bank finally work out?
15. You have a service ‘call linked products similar to MIB OR debentures’…
what exactly is this? How does it vary from MIBOR debentures?

Questionnaire for Citibank

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(Questionnaire No 3)

1. Is a card a thrust area for Citibank? If so, what is Citibank doing to promote its
cards?
2. How many banks in India have an association with all the three card services
providers? Has any special benefit accrued to Citibank as a result of this
association?
3. What is the minimum no of employees required to start a suvidha account?
4. How successful has net banking been? How many customer use net banking?
5. What is the total no of customer Citibank has?
6. What is the total no of ATM centers that Citibank has?
7. What is the revenue per customer, revenue per employee and revenue per ATM
for Citibank?
8. Does Citibank also have some sort of a portfolio investment scheme?
9. Who are Citibank competitors in the retail segment?
10. Who are Citibank’s major competitors?
11. What is Citibank’s share in the Indian baking sector, specifically in the corporate
and retail sector?
12. What is the net return that Citibank gets from a corporate?
13. What is Citibank doing to push cash management service and capital market
products which are thrust areas for the bank?
14. Are there any innovative products that Citibank offers? What has the customer
response to such products been?
15. In the banking sector, a bank can survive and get clients only through
differentiation… how does Citibank differentiates its service?

Questionnaire for Stan Chart Bank

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(Questionnaire No 4)

1. What is the total no of branches that Stan chart has in India?


2. What is the total no of ATM centers that Stan chart has?
3. What is the total no of customers Stan chart has?
4. What is the % of share of Stan chart is corporate and retail segment?
5. What is the revenue per customer per customer for Stan chart?
6. What is the revenue per branches?
7. What is the no of customer per employee? What is the revenue per ATM?
8. How often is it that you fail to live up to the services you promise to provide and
are forced to pay the Rs.50 per day penalty?
9. “Stan chart has maintained a long presence, since 1858, with particular emphasis
on relationship banking…. What do you mean by relationship banking? How are
you stressing on this area?
10. “Stan chart is leading player in the world’s major financial centers with clear
leadership in the emerging markets…” said about the global markets. What has
Stan chart does specifically for the emerging markets? What is its % markets
particularly India?
11. “Stan chart earned peer recognition when it over took Citibank in consumer
banking….” In what way has Stan chart overtaken Citibank?
12. What is Stan chart bank doing to increase its share on retail sector?
13. Do you have any charges for investment advisory service?
14. What is the charge incase of the fund transfer and other facilities available on
internet banking?
15. Secure measuring area is a service exclusive to Stan chart. But what sort of
information transfer takes place between customer and bank?

Questionnaire for HSBC

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(Questionnaire No 5)

1. What is the total no of branches that HSBC has in India?


2. What is the total no of ATM centers that HSBC has?
3. What is the total no of customers HSBC has?
4. What is the % share of HSBC is corporate and retail segment?
5. What is the revenue per customer for HSBC?
6. What is the revenue per branch?
7. What is the no of customer per employee? What is the revenue per ATM?
8. The cost of the fund for HDFC bank is about 6.4% what is it for HSBC?
9. “HSBC India is large in telecom, cement, pharmaceuticals, FMCG and the
financial service market.” Does the same hold true for HSBC operations in
Bangalore also?
10. Going by the general trend in the market, is HSBC also looking at merging some
bank?
11. Generally how many banks are appointed as clearing bank by the BSE?
Which are the other banks offering this service?
12. “HSBC is one of the largest users of SWIFT in the world, and is a licensed
SWIFT vendor….” Is there any advantage in being a SWIFT vendor?
13. Is HSBC planning go for banc assurance?
14. “Our treasury and capital market group ranks among the largest such business in
the world…” in fact treasury contributes to 55% of HSBC’s total revenue. How is
the bank pushing this area?
15. Do any of the other banks offer co-branded credit cards?

Questionnaire for ABN AMRO Bank

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(Questionnaire No 6)

1. What is the total no of branches that ABN Amro has in India?


2. what is the total no of ATM centers that ABN has?
3. What is the total no of customer ABN has?
4. What is the % share of ABN is corporate and retail segment?
5. What is the revenue per customer for ABN?
6. What is the revenue per branch?
7. What is the number of customer per employee? What is the revenue per ATM?
8. The cost of fund for HDFC bank is about 6.4%. What is it for ABN Amro?
9. ABN already has housing loans. So in what way it foray into home finance going
to be different from the housing loans?
10. “Dutch banking group ABN Amro NV set up global support center for its trade
and advisory unit in madras”…. What are its implications?
11. ABN Amro is looking at using India as a platform for scaling up its global
transactions services in India? What has bank done in this regard?
12. “Balance transfer programme” – is ABN the only bank making this offers?
13. You claim that ABN rates are among the highest in the country, what are the other
banks offering similar/ higher rates?
14. Does ABN provide real time on line service?
15. “Loyal discount on loans against securities”- is it specific to ABN?

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