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Submitted By: Jignesh shah (En:11711059) Bharat patel (En:117110592105) Section : Finance B M.B.A – II, SEMESTER – III Parul Institute of Management & Research Parul Group of Institutes Affiliated to Gujarat Technological University (2011-13)
sr 1 2 3 4 5 6 particuler Page no 3 7 8 9 10 History and evolution Product of private sector bank Majer players Distribution channel Issues & current trends PESTEL ANALYSIS 11 2 .
These were not nationalized. bank of Bombay and bank of Madras were in service. 3 . In 1980. which were not nationalized at the time of bank nationalization that took place during 1969 and 1980 are known to be the old private-sector banks. about 10 percent of the bank branches were those of private-sector banks. RBI's liberalisation policy came in picture and with this the government gave licences to a few private banks. because of their small size and regional focus. Then from the early 1990s. the private banks like bank of Bengal. which all together formed Imperial Bank of India. In April 1980. after 6 more banks were nationalised. The old private-sector banks have been operating since a long time and may be referred to those banks. Initially. Between 1969 and 1980 there was rapid increase in the number of branches of the private banks. Old private-sector banks The banks. There are two categories of the private-sector banks: "old" and "new".History and evolution Private-sector banks have been functioning in India since the very beginning of the banking system. which are in operation from before 1991 and all those banks that have commenced there business after 1991 are called as new private-sector banks. they accounted for nearly 17. which came to be known as new private-sector banks. during 1921. to set up a bank in the private-sector banks in India. The share of the private bank branches stayed nearly same between 1980 and 2000. Housing Development Finance Corporation Limited was the first private bank in India to receive license from RBI as a part of the RBI's liberalization policy of the banking sector.5 percent of bank branches in India. Reserve Bank of India(RBI) came in picture in 1935 and became the centre of every other bank taking away all the responsibilities and functions of Imperial bank.
During the last decade. New channel – Mobile banking is expected to become the second largest channel for banking after ATMs: New channels used to offer banking services will drive the growth of banking industry exponentially in the future by increasing productivity and acquiring new customers. Indians have a conservative outlook towards credit except for housing and other necessities. This will help in acquiring new customers. services and agriculture.Most of the old private-sector banks are closely held by certain communities their operations are mostly restricted to the areas in and around their place of origin. This can be looked at as branchless banking and so will also reduce costs as there is no need for physical infrastructure and human resources. 4 . which indicates a large untapped market for banking players. Rising per capita income: The rising per capita income will drive the growth of retail credit. However. particularly. A study of the customer profiles of different types of banks. consumers have shown a higher willingness to take credit. One of the positive points of these banks is that. This will be backed by the stellar growth in infrastructure. mainly who live in rural areas (though this will take time due to technology and infrastructure issues). which is still in the growth phase. Private Banks also have a much higher share of the more profitable mass affluent segment. banking through ATMs and internet has shown a tremendous growth. with the help of new 3G and smart phone technology (mobile usage has grown tremendously over the years). they lean heavily on service and technology and as such. After ATMs. reveals that foreign and private banks share of younger customers is over 60% whereas public banks have only 32% customers under the age of 40. in India. This is expected to boost the corporate credit growth in the economy and provide opportunities to banks to lend to fulfil these requirements in the future. 41% of the adult population don’t have bank accounts. with an increase in disposable income and increased exposure to a range of products. The IBA-FICCI-BCG report predicts that mobile banking would become the second largest channel of banking after ATMs. they are likely to attract more business in days to come with the restructuring of the industry round the corner. India is one of the fastest growing economies in the world and is set to remain on that path for many years to come. Growth driver: High growth of Indian Economy: The growth of the banking industry is closely linked with the growth of the overall economy. Financial Inclusion Program: Currently. mobile banking is expected to give another push to this industry growth in a big way. young customers. Their Board of directors mainly consist of locally prominent personalities from trade and business circles. industry.
The ratio of standard assets was highest in the case of Foreign Banks and New Private Sector banks at 98. microfinance institutions. All bank groups reported a capital adequacy ratio of more than 12%.3% in Public Sector banks and 96. 9% or 6. helps corporate in fulfilling their social responsibilities and on the other side it is fueling growth in other industries and so as a The group of New Private Sector banks dominated the league tables of growth. for Deposits at 38.5% in New Private Sector banks and 0. with an average y-o-y growth in Assets at 38. "If the economy grows 8%. etc. self help groups. That means by 2020. as against the average of other bank groups. The use of computers had led to introduction of online banking in India. promoting effective use of development communication and using Information and Communication Technology (ICT) to spread general banking concepts to people in the under-banked areas. Financial inclusion is the delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income groups. this group fared better in Net profit.8%.Under the Financial Inclusion Program.6% in public sector and Old Private Sector banks. The ratio of Net NPAs to Total Assets was 0. The use of the modern 5 . Advances at 39. All these initiatives of promoting rural banking are taken with the help of mobile banking. on the one side.9% in Old Private Sector banks. The annual growth rate for this group for FY07 stood at 7. the private banking sector will grow at at least two-and-a-half times the rate of India’s GDP growth. Financial Inclusion.5%.1% in Assets.3% in Foreign banks. which grew by 30%.1% each.7%. So the growth opportunity is huge.9% and Operating Profit at 46. Kochhar sees great potential for further growth." Adoption of banking technology The IT revolution had a great impact in the Indian banking system. we as a sector can be five times what we are today. 0. The sector could grow 16%-to-24% per annum year-on-year for the next decade. RBI is trying to tap this untapped market and the growth potential in rural markets by volume growth for banks. The group of Old Private Sector banks (refer to annexure) showed relatively lower growth in business. However. The RBI has also taken many initiatives such as Financial Literacy Program.7%. 6% in Deposits and 12% in Advances. Looking forward. followed by 97.
Number of ATMs of different private Banks Of India.The New Private Sector Banks in India is having the largest numbers of ATMs which is fol off site ATM is highest for the SBI and its subsidiaries and then it is followed by New Private Banks.innovation and computerisation of the banking sector of India has increased many fold after the economic liberalisation of 1991 as the country's banking sector has been exposed to the world's market. While on site is highest for the Nationalised banks of India. Nationalised banks and Foreign banks.642. The Indian banks were finding it difficult to compete with the international banks in terms of the customer service without the use of the information technology and computers. BANK GROUP OLD PRIVATE SECTOR BANKS NEW PRIVATE SECTOR BANKS whole economy NUMBER OF BRANCHES 4511 1685 ON SITE ATM 800 1883 OFF SITE ATM 441 3729 TOTAL ATM 1241 5612 6000 5000 4000 3000 2000 1000 0 NEW PRIVATE SECTOR BANKS OLD PRIVATE SECTOR BANKS OLD PRIVATE SECTOR BANKS NEW PRIVATE SECTOR BANKS 6 .Total numbers of ATMs installed in India by various banks as on end March 2005 is 17. Apart from the above mentioned innovations the banks have been selling the third party products like Mutual Funds. insurances to its clients.
such as debit/ATM cards. credit products and customized banking services. loans and advances (short term and long term loans) and services. The basic differentiation is attained through quality of service and the delivery channels that are adopted. Product differentiating services have been attached to most products. nomination and demat services. credit cards. 7 . Innovations have been increasingly directed towards the delivery channels used. convertible savings deposit (wherein idle cash in savings account can be transferred to a fixed deposit). with the focus shifting towards ATM transactions. Apart from the generic products like deposits (demand deposits – current. there have been innovations in terms and products such as the flexible term deposit. phone and internet banking. etc.Products of the Banking Industry: The products of the banking industry broadly include deposit products. Most banks offer the same kind of products with minor variations. savings and term deposits).
cash management services. letter of credit and bank guarantee. foreign exchange services. Major players in India: There are 25 private sector banks in India which are categorized by the RBI as Old Private Sector Banks and New Private Sector Banks. factoring and forfeiting services. credit rating. Retail fee-based services include remittances and payment facilities. leasing.Other banking products include fee-based services that provide non-interest income to the banks. trading facilities and other value added services. bill discounting. underwriting and custodial services. The 18 Old Private Sector Banks are as follows Bank of Rajasthan [ Merger with ICICI going on] Bharat Overseas Bank Catholic Syrian Bank City Union Bank Dhanlaxmi Bank Federal Bank ING Vysya Bank Jammu & Kashmir Bank Karnataka Bank Karur Vysya Bank Lakshmi Vilas Bank Lord Krishna Bank Nainital Bank Ratnakar Bank Sangli Bank SBI Comm & Intl Bank Ltd South Indian Bank Tamilnadu Mercantile Bank Ltd The New Private Sector Banks where you have to deal with very carefully due to tons of Hidden Fees and Charges and almost similar pathetic customer care as that of PSU Banks. Corporate fee-based services offered by banks include treasury products. wealth management. DCB – Development Credit Bank HDFC Bank ICICI Bank 8 . merchant banking.
attitude towards technology. Internet). may be offered in an equivalent quantity with lower costs to the more potential customers. banking culture. Priority and Commercial customers. with the use of Internet. trust in banking institutions. which can be conducted through both fixed lines and mobile systems. IndusInd Bank Kotak Mahindra Bank Axis Bank Yes Bank Distribution channel of private banking: Some of the distribution channels currently used include: online banking offering. Internet banking 9 . branches and customer suites that offer comprehensive service offerings. our growing network of automated telling machines (ATMs). telephone banking. Banks have established an Internet presence with various objectives. Financial services. Most of them are using the Internet as a new distribution channel. security and privacy concerns. there have been identified some specific issues that restrain e-banking adoption: penetration and skills (PC. In the Romanian case. The banking industry is expected to be a leading player in ebusiness. e-banking culture. and specialised suites for Private Banking.
Consolidation could also take place through strategic alliances or partnerships covering specific areas of business such as credit cards. the revised system provides for a holistic and streamlined 10 . there have been a number of market-led mergers between private banks. and management skills which would increase the competitive spirit in the system leading to greater efficiency. technology. the RBI announced a new Branch Authorisation Policy in September 2005 under which certain changes were brought about in the authorisation process adopted by the RBI for the bank branches in the country. says the report.Issues and current trends: On the growing influence of globalisation on the Indian banking industry. the flow need not be one way. Mergers between public sector banks or public sector banks and private banks could be the next logical development. Some of the Indian banks may also emerge global players. However. Alongside. As globalisation opens up opportunities for Indian corporate entities to expand their business overseas. Opening up of the financial sector from 2005. through out the year for branch authorisation. under WTO. would see a number of global banks taking large stakes and control over banking entities in the country. In the past mergers were initiated by regulators to protect the interest of depositors of weak banks. the report adds. the report is of the opinion that the financial sector would be opened up for greater international competition under WTO. Government policy to allow greater FDI in banking and the move to amend Banking regulations Act to remove the existing 10 per cent cap on voting rights of shareholders are pointer to these developments. This process is expected to gain momentum in the coming years. will also impact on globalisation of Indian banking. In recent years. such as Singapore. says the report. The pressure on banks to gear up to meet stringent prudential capital adequacy norms under Basel II and the various Free Trade Agreements that India is entering into with other countries. banks in India wanting to increase their international presence could naturally be expected to follow these corporate entities and other trade flows out of India. according to the report. Branch Authorisation Policy As you are aware. As against the earlier system. They are expected to bring with them capital. the growing pressure on capital structure of banks is expected to trigger a phase of consolidation in the banking industry. piece meal. where the banks approached the RBI. insurance etc.
there have been delays in issuing authorisations. it is possible that the preparatory time required for filing their annual plan with the RBI might be a little longer. over a one-year time horizon. normally. respectively. For instance. under the new policy. by granting a bank-wise. There also seems to be a feeling among some banks that under the new authorisation policy. in the interim. The processing time at the end of the RBI. Since the branch expansion planning of the banks is expected to be a well thought out. as a result. the number of authorisations issued under the new policy during 2006-07 was 2028.1125 and 1259 authorisations given by the RBI under the old policy regime during 2003-04. including branch relocations. I would like to emphasise that the new policy does not preclude the possibility of any urgent proposals for opening bank branches being considered by the RBI even outside the annual plan. the banks have to wait for the annual authorisation exercise and are constrained in approaching the RBI for any emergent authorisation in between. specially in the rural / under-banked areas. the process adopted is more cumbersome and. anytime during the year. there should be no need for any emergent or urgent authorisation being required by the banks. Board-approved annual process. the fact is that there has been a sharp increase of about 61 per cent in the total number ofauthorisations granted last year POLITICAL Banking act 1949(code of conduct) Rules of RBI-Indian Banking Association. annual aggregated authorisation. it seems to have got overlooked.network needs. Thus. given the element of consultation with the banks built into the process. However. This flexibility has been clearly articulated in our policy guidelines as contained in the Master Circular of July 2007 but somehow. in consultation and interaction with each applicant bank. There seems to be some misunderstanding in some quarters that. however. The objective is to ensure that the banks take an integrated view of their branch. 2004-05 and 2005-06. the actual number of authorisations issued by the RBI under the new policy has been much higher than before. as against the general perception that the new policy has been more restrictive in grantingauthorisations. mergers. However. as against the a total of 881. and then approach the RBI for consolidated annual authorisations accordingly. Since the banks are required to approach the RBI only after obtaining the approval of their respective Boards for their annual branch expansion plan. Restriction on mergers Economical Money inflation and deflation 11 . in tune with their own business strategy. has been generally in the range of one to two months – which I consider to be reasonable. conversions and closures as well as setting up of the ATMs.approach for the purpose.
• Stricter prudential regulations with respect to capital and liquidity gives India an advantage in terms of credibility over other countries.• To support capitalisation. tariffs.2 billion) into stateowned banks during the last three fiscals • The move to increase Foreign Direct Investment FDI limits to 49 percent from 20 percent during the first quarter of this fiscal came as a welcome announcement to 12 . Income level is rising Society and aspiration values Technical Product innovation Focus on increasing level of service by technicaladvancement To what degree a government intervenes in the economy. Ex-taxpolicy. labour law. and political stability Some of the major political factors affecting the Bankingindustry are: :• Focus on regulation of government • Budget and budget measures • Foreign Direct Investment limits • Indian banking sector is least affected as compared to other developed countriesthanks to robust policy framework of RBI. traderestrictions. environmental law.• Government affects the performance of banking sector most by legislature and framing policy government through its budget affects the banking activities securitization act has given more power to banking sector against defaulting borrowers. Industrial growth Liberalization Globalization Capital market requirement CRR and other rates. the government has infused Rs 23. social Banking habits of the people.200 crore (US$ 5.
25 7.foreign players wanting to get a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net worth to meet CAR norms.50 se repo rate SLR 24 24 24 Indian economy has registered isdirectly related to the growth of framing favorable FDI policies GDP. robust growth in past years and Banking sector the economy.00 7. They were used to charge higher interest andalso mortgage land and house. thenmore deposits will be attracted towards the banks and inturn they can lendmore money to the agricultural sector and industrialsector.00sector. If in the savings are encouraged.To curb the inflation and slowdown of economy RBI has taken varioussteps like lowering interest rates to increase the demand in banking sectorSavings and Investments: Gross domestic saving is 28% of total income in IndiaLatest step taken by RBI to deregulate savings rates is a step to increaseBank savings It includes cultural aspects and health consciousness. population growth rate.•The Economic measures affects the banking sector to boost the economy by giving certain concessions or facilities.0 percent to 49. agedistribution. But after emergence of banks attitude of people 13 .These plans directly affect andbank earns interest on that.GOI is trying to push the economy by .•If the FDI limits are relaxed.oo 6.25 8.000 crore to cover an estimated 40 million farmers was one of the major highlights •Every year RBI declares its 6 monthly policies and accordingly the variousmeasures and rates are implemented which has an impact on the bankingsector. then more FDI are brought in India through banking channels Key July Sept OctEvery year RBI declares its 6 monthly Rate 26th 16th 25thpolicies and accordingly the various smeasures and rates are implemented whichhas an impact on the banking CRR 6. This could be classifiedinto:Before the birth of the banks. NRIInvestment plans which directly affect the banking industry as money comes through banks Interest Rates:RBI controls interest rates.0 percent and have been included within the ambit of FDI investment • Increase Farm Credit • Subvention of 1% to be paid as incentive to farmers • Debt Waiver for Farmers • Setting up of separate task force for those not covered under the debt waiver scheme • Agriculture has been the mainstay of our economy with 60% of our populationderiving their sustenance from it. therefore.• Ceiling for FII investment in companies was also increased from 24.00 6. people of India were used to borrow money localmoneylenders. career attitudes and emphasis on safety. Rever 7. which RBI monitors regularlyRecently RBI reduced bank rate to stimulate growth of banking industryInflation Rate:India is facing huge troubles due to inflation as it is 10% now. shahukars.In past 24 months RBI has changed its Repo 8.50key monetary rates 13 times to curb rateinflation and other economic risks. booming the economy . shroffs.00 8. the sector has recorded a growth of about 4% per annum withsubstantial increase in plan allocations and capital formation in the sector with help ofbanking assistance.•The one-time bank loan waiver of nearly Rs 71.•In the recent past.
It include technological aspects suchas R&D activity. So.• Some of the banks have also started home banking through telecommunicationfacilities and computer technology by using terminals installed at customers homeand they can make the balance inquiry.• Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers.The growth rate of different industries were:Agriculture : 18. This incentive to bankscomes on the back of the continuing need to open more branches in these States inorder to ensure more uniform spatial distributionLiteracy rate in India is very low compared to developed countries. etc. They have become more advanced. which affect theprivate sector banks. currency accounting machines makes the job easier and self-service counters are now encouraged. Earlier it was agriculture which mainly contributed to the Indian GDP. And this has this has opened opportunities for banking sector to tap this change.waschanged and they have started lending from the banks Life style of India is changing rapidly. • Credit card facility has encouraged an era of cashless society. illiterate people trust more onbanks to deposit their money. For example SMS functions through simple text messages sent from your mobile• Technology advancement has changed the face of traditional banking systems. Banks would open their branches after looking into thepopulation demographics of the area. It takes India one step closer to the developed economies of the world. they do not have market information. anywhere banking’ facilities Automatic voice recorders now answer simple queries.e. This has made things available easily to everyone. technology incentives and the rate of technologicalchange.Illiterate people hesitate to transact with banks.Opportunities in stocks or mutual funds Technology plays a very important role in bank’s internal control mechanisms as wellas services offered by them. The use of ATM and Internet banking has allowed ‘anytime. Some of the technological changes which brought radical changes in bankingindustry are described below : The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. Banking Industry is directly related to the growth of the economy. People needs and wants are increasing day by day. But there is positive side of this as well i.• This increases the avenues of 14 . These are also called as electronic purse. Increase in population is one of he important factor.5%Industry : 26. get the statement of accounts. Technology advancement has offer 24X7 banking even giving faster and securedservice Indian economy has registered a high growth for last three years and is expected tomaintain robust growth rate as compare to other developed and developingcountries. giveinstructions for fund transfers. Through the use of technology new products and serviceare introduced.3%Services : 55. automation. They are demanding high class products.Newer branches are coming to serve the increasing population. this impacts negatively onbanks. The banks have now started issuing smartcards or debit cards to be used for making payments.2%• It is great news that today the service sector is contributing more than half of the Indian GDP.
This wouldfurther increase the borrowings by the industries leading to the banking Industry• In regards with the service sector . the Banking Regulation Act was enacted which empowered the Reserve Bank ofIndia (RBI) "to regulate. and inspect the banks in India. Expansion of retail banking has alot of potential as retail assets• New channels (like ATM and mobile phones) allow transactions at a fractional cost. net interest margins. non-performing asset (NPA)levels. but will balance this with the need to retain reserves in the event of prolonged turbulence The impressive performance of Indian banks as compared to other large economies onalmost all parameters . There are two major factors determining the legal aspects of the Banking Industry :In 1949. valuations. as the income of the people will increase.• Transition from class banking to mass banking and increased customer focus isdrastically changing the landscape of Indian banking. cost to income ratio.The Banking Regulation Act also provided that no new bank or branch of an existingbank could be opened without a license from the RBI.The study exposes a possibility for the next decade. excess retention capacity. control. fee income . and no two banks could havecommon directors The Reserve Bank of India (RBI) will intervene to smooth sharp movements in the rupee and prevent a downward spiral in its value. lending and savings will increase leading to increased business for the banks .investment by the industrial sector . Investment in technology in theIndian banking industry is about half of international average• Consolidation in the banking industry has remained crucial to ensuring technologicalprogress. emerging opportunities and deregulation of variousfunctional and product 15 .the industry is on the right side ofaverage among comparable economies.profitability.
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