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Bachelor of Commerce Banking & Insurance Semester V [2013-2014] Guided by Mr. Vikram trivedi Submitted bySupriya s Kharade. Roll No. 15


BANKING BUSINESS STRATEGIES Bachelor of Commerce Banking & Insurance Semester V Submitted In Partial Fulfillment of the requirements For the Award of Degree of Bachelor of Commerce Banking & Insurance By Supriya s Kharade. Roll No. 15 ST. GONSALO GARCIA COLLEGE Vasai, Dist. Thane

St. Gonsalo Garcia college Vasai, Dist. thane


This is to certify that Shri. Supriya s Kharade. , Roll No. 15 student of st. Gonsalo Garcia College has completed the Project on BANKING BUSINESS STRATEGIES in the year 2013-2014 in fulfillment of B.Com. Banking & Insurance. He has successfully completed the project under the guidance of mr. vikram trivedi





DECLARATION I hereby declare that the Project report titled BANKING BUSINESS STRATEGIES is my original work to the best of my knowledge and has not been published or submitted for any degree, diploma or other similar titles elsewhere. This has been undertaken for the purpose of partial fulfillment of B.Com. Banking & Insurance at St. Gonsalo Garcia college.

Date:Signature of Student :Name of the Student :- Supriya s Kharade. Roll No. : - 15


It is really a matter of pleasure for me to get an opportunity to thank all the persons who contributed directly or indirectly for the successful completion of the project report, Employee Turnover and Retention in Banks. First of all I am extremely thankful to my college St. Gonsalo Garcia college for providing me with this opportunity and for all its cooperation and contribution. I also express my gratitude to my Project mentor and guide Mr. Vikram trivedi I am highly thankful to our respected project guide for giving me the encouragement and freedom to conduct my project. I am also grateful to all my faculty members for their valuable guidance and suggestions for my entire study.

Supriya s Kharade. Roll No.: 15


EXECUTIVE SUMMARY: This paper aims at clarifying the relationship between individual bank and banking industry behavior in credit expansion. We argue that the balance sheet structure of an individual bank is only partially determined by its management decision about how aggressively to expand credit; it is also determined by the balance sheet positions of other banks. This relationship is explicitly shown by a simple disaggregation of the variables that enter into the economy-wide money multiplier. The approach taken here revives a multi-bank approach to banking analysis pioneered by Wallace and Karmel (1962) which is particularly well-suited for integrating the micro and macro levels in Keynesian banking analysis.

Objective of the study: To Determination of long term goals and objectives To Adoption of courses of action To Allocation of resources To Unified comprehensive and integrated plan

RESEARCH & METHODOLOGY: Secondary data: - They are those which have already been passed through the statistical process. In this case one is not confronted with the problems that are usually associated with the collection of original data. Secondary data can be collected from journals, magazines, websites, and annual publication of the bank. Secondary data for this report has been collected from websites and from journals.

Meaning of strategy : The word strategy has entered in the field of management from the military services where it refers to apply the forces against an enemy to win a war. Originally, the word strategy ha s been derived from Greek, strategos which means generalship. The word as used for the first time in around 400 BC. The word strategy means the art of the general to fight in war. The dictionary meaning of strategy is the art of so moving or disposing the instrument of warfare as to impose upon enemy, the place time and conditions for fighting by one self Definition of Strategies A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem. 2. The art and science of planning and marshalling resources for their most efficient and effective use. The term is derived from the Greek word for generalship or leading an army. See also tactics.

Three Types of Strategy The word strategy means different things to different people, much of which isnt really strategy at all (see A Strategy by Any Other Name for more on this topic). But within the domain of well-defined strategy there are uniquely different strategy types. Here are three that come to mind. What strategy types do you see?

Business strategy Business strategy is primarily concerned with how a company will approach the marketplace where to play and how to win. Where to play answers questions like, which customer segments will we target, which geographies will we cover, and what products and services will we bring to market. How to win answers questions like, how will we position ourselves against our competitors, what capabilities will we employ to differentiate us from the competition, and what unique approaches will we apply to create new markets. Senior managers typically create business strategy. After it is created, business architects play an important role in clarifying the strategy, creating tighter alignment among different strategies, and communicating the business strategy across and down the organization in a clear and consistent fashion. Executives are just beginning to bring advanced, highly credible business architecture practices into the strategy discussions early to provide tools, models, and facilitation that enable better strategy development. Operational strategy

Operational strategy is primarily concerned with accurately translating the business strategy into a cohesive and actionable implementation plan. This strategy answers the questions, which capabilities need to be created or enhanced, what technologies do we need, which processes need improvement, and do we have the people we need. The vast majority of business architects are currently working in the operational strategy domain reaching up into the business strategy domain for direction. They work from the middle out to bring clarity and cohesiveness to the organizations operating model typically working vertically within a single business unit while resolving issues at the business unit boundaries. More mature business architecture practices work in multiple verticals or move from one vertical to another creating common business architecture patterns. Transformational strategy Transformational strategy is seen less often as it represents the wholesale transformation of an entire business or organization. This type of strategy goes beyond typical business strategy in that it requires radical and highly disruptive changes in people, process, and technology. Few organizations go down this path willingly. Transformational strategy is generally the domain of Human Resources, organizational development, and consultants. These efforts are incredibly complex and can experience significant benefit from applying business architecture discipline though it is rare to see business architects playing a significant role here.

Features of Strategy
1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment. 2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future. 3. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior. 4. A successful implementation plan will have a very visible leader, such as the CEO, as he communicates the vision, excitement and behaviors necessary for achievement. 5. Everyone in the organization should be engaged in the plan. Performance measurement tools are helpful to provide motivation and allow for followup. 6. Implementation often includes a strategic map, which identifies and maps the key ingredients that will direct performance. Such ingredients include finances, market, work environment, operations, people and partners. Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organizations strengths and to minimize the strengths of the competitors. Strategy, in short, bridges the gap between where we are and where we want to be.

Importance of strategies: Most corporations would purport to have a well defined strategy which they have developed to take their business forward. Often however strategy is confused with operational planning, planning focused on delivering a more effective outcome for the business as it exists and not about positioning the company for the future. So widgets are made with ever increasing efficiency until the time comes when no one wants widgets like the company makes them any longer and a once proud company is consumed by its wily competitor or ceases to exist. Strategy is about planning to reach a vision which differentiates a company from its competitors in a positive way. It encompasses overall direction as well as the many detailed activities that occur in a company. Strategic success generally depends on possessing an enlightened and unique vision as well as doing the many things needed to achieve the vision well. If one focuses too much on the activities often the vision is lost, likewise if the focus on the vision is too intense then the operational matters are neglected resulting in across the board problems in personnel, quality, poor productivity, and so on. Indeed, ask any manager to define his or her idea of strategy and one will invariably be given a raft of answers as the person struggles to differentiate between corporate strategy and operational planning. Thus whilst one may be given the answer that the corporate strategy is to improve quality over a 2 year period to such and such a standard, the answer one is getting relates not to strategy but to an operational plan. Indeed over the past

decade, many companies have greatly improved their production performance by implementing operational plans that have reduced inefficiencies, improved quality and greatly enhanced productivity. All these things increase competitiveness but they do so on the same plane as before, and they do so, generally, within the same overall strategy. Typically, as well, competitors rapidly follow suit, thus the gains in terms of profitability are short lived and the relative status quo of the industry remains little changed. Indeed, the major benefactors of all these improvements are not the companies implementing the improvements but the customers who get better products at lower prices and to a lesser extent the suppliers involved in supporting the company to make the improvements by way of supplying services or new equipment. A prime case of this can be seen in the computer hardware industry where companies are more efficient than ever but making for less money than ever before. The one exception is perhaps Dell which adopted a different strategy than its rivals and as a result has gained considerable market share while others have had to merge to survive. Developing a corporate strategy, like most simple things, is deceptively hard. Even the best thinkers tend to confuse the need for detailed operational planning with their view of the strategy the company needs to follow. For some reason, a strategic thought tends to soak up operational plans like a sponge does water until waterlogged it is of use no more. For this reason then it is important to define the area to which the strategy should relate and then limit the strategy to that area alone and drive the company along that strategy without deviation. Thus, if the corporate strategy is based on customer

needs, determine the customer base you wish to serve, its needs, and then only meet the needs of those customers, foregoing all others. Operational plans, the detail of making the strategy happen, must complement the strategy and be subordinate to meeting the strategy and not become an end in themselves. Likewise, if the strategy is based on customer accessibility or product variety or product delivery, or some other base, the emphasis must be on differentiating the company from its competition in a way that is attractive to the customers it wants to purchase its products. For this to be perceived as such by these customers, the company must hold its course and follow its strategy, until reality and perception meet. However, no one strategy can last forever and any corporate strategy needs to be reviewed on a regular basis, not only to ensure it is still relevant but to also ensure that the original strategy has not become blurred by misconceived operational responses to threats and opportunities that are not in keeping with the original strategy.

NEEDS OF STRATEGIES. Without a strategy an existing business can drift away from its customers and become uncompetitive within its environment and eventually stops making profit, this is known as Strategic Drift2. Therefore having a strategy is a way to remain competitive or a way of forcing a strategic change when an organisation has drifted away from its environment and is starting to fail. To successfully implement your strategy, several items must be in place. The right people must be ready to assist you with their unique skills and abilities. You need to have the resources, which include time and money, to successfully implement the strategy. The structure of management must be communicative and open, with scheduled meetings for updates. Management and technology systems must be in place to track the implementation, and the environment in the workplace must be such that everyone feels comfortable and motivated. Most small businesses have a strategy in the form of a business plan; this is usually a standard document generated to convince either an advisor or a bank they have a good idea and have thought about it. The UK governments (Business Link 2010)3 business advice recommends at least some SWOT analysis and financial forecasting within its business plan template. This type of strategic business plan is then used to secure funding from the stakeholders. Strategy has a military history, going back at least to 600 b.c. with The Art of War by Sun Tzu, and as such has been mostly concerned with competitiveness. How to win a battle with your competitors has been the main stay of strategic literature for many year, with positioning of products (Strategic choice) aim to make the business better than the competition. More recently, strategic tools are being used in the creation of vision and mission statements; to be communicated to the stakeholders. These have a number of uses: Firstly, to help sell the idea of the company to its investors to secure resources for expansion. Secondly, the move to culture based management; where the

organisation rely on its culture to inform the employees choices, enabling them to make the correct decisions at all levels without strict supervision.

REQUIREMENTS OF STRATEGIES. Requirements for scope: The first stage of requirements gathering is designed to establish a rough scope of the project, a process often called simply scoping. Occasionally its done as a part of the budgeting process. The objective is to provide a general framework for how much activity will be necessary to create the solution without delving into the specific algorithms, formulas, and techniques which must be used. The scoping part of the requirements process is designed to meet a continuous monitoring need for projects of all sizes. The initial scope and associated rough estimate, sometimes called a "guestimate," since it is often times more of a guess than a formally constructed estimate, are designed to be a way for the potential benefit of the solution to be weighed against the costs. In the initial parts of the requirements process, its important to make and refine estimates of how much effort will be involved in the solution so that, if the solution will end up costing more than the problem is worth, the project can be scrapped for a different set of requirements or a different approach. The initial scoping exercises are also useful for helping to define a budget. At the beginning of the budgeting cycle the complete set of requirements may not be available and more often than not it isnt feasible to perform a complete requirements process. Instead an initial scoping requirements session can be done very quickly and a rough "order of magnitude" type of estimate can be made for inclusion in the budget. The key to managing requirements for scoping is to remember that its a continuous process where the accuracy of the estimate improves with additional information about the problem. However, the process is logarithmic. This means that even a basic understanding of the problem creates a rough idea of the overall cost for the solution. Although the more you know about the problem and the solution the more accurate the estimate will be, the amount of additional accuracy

in the estimate gets smaller and smaller. Eventually you plateau where no amount of additional knowledge will make the estimate more accurate. The scoping part of the requirements process should start the requirements process and provide a foundation for the estimated costs. Periodic review of the scope and associated estimate can help you make sure that youre on track. A final estimate, which will become the basis for the project plan, should punctuate the close of the requirements phase. Requirements for detailed understanding: The requirements phase that most people think about when talking about requirements is the phase where detailed requirements are gathered so that a detailed design specification can be created. The requirements process is often thought of as the prelude to the design phase and is a phase where detailed user requests are cataloged, prioritized, and organized. This part of the requirements process--capturing detailed user requests and organizing them--is needed to proceed to a design step. Whether the process is a traditional waterfall process or something more radical, it's necessary to understand the problem and, in some cases the proposed solution, in order to be able to design a solution or to design how the solution will work. As a general rule the part of the requirements process that deals with the detailed user requests and needs will be substantially longer than the process of scoping the project. TechRepublic's free Strategies that Scale newsletter, delivered each Tuesday, covers topics such as how to structure purchasing, when to outsource, negotiating software licensing or SLAs, and budgeting for growth. Automatically sign up today!

Advantages of strategies.
1. Facilitates communication between managers. One of the goals of strategic managers is to facilitate the collaboration of functional managers to achieve synergy between different parts of organization. Managers in finances, marketing, operations and human resources are essential for an organization but they often compete rather than collaborate. Even worse situation is with separate SBUs. Strategic planning is in place to facilitate the collaboration between these managers. 2. Identifies strategic goals and strategic intent. CEOs are usually the people who create goals and envisions the future of the company. Nonetheless, they are often engaged in many other activities and have less time to search for the best strategic fit. 3. Reduces resistance to change. It is strategic planner's job to inform the whole organization of strategic changes, company's plans, current situation implications and what changes are expected to be done. Thorough explanation of this information to managers in every level, reduces resistance to change as managers are less uncertain about the future. 4. Improves resource allocation. New products, services, strategies, goals or objectives require resource allocation (moving people from one team to another or moving the facilities into another country), which is done more efficiently when aligned with strategic objectives. 5. Leads to sustainable competitive advantage. Competitive advantage is often achieved without strategic planning but if the company wants to achieve sustainable competitive advantage it has to plan strategically.

Disadvantages of strategies
1. Costly to perform for small and medium businesses. Strategic planning, the same as marketing or proper human resource management, adds a lot of expenses to an organization. Managers or strategic planners have to be hired, additional efforts are required towards analysis of external and internal environments and some tools have to be designed to properly implement strategic planning process. Although all of this is done to some extent by all organizations (who doesn't monitor firm performance or analyze competitors?), mainly the large enterprises are the ones capable to hire competent personnel to implement strategic plans. 2. The process is very complex. Strategic planning process consists of many steps that are connected to each other and must be constantly adjusted. Some unexpected factors also appear that may change the whole strategy and as a result, strategic planning process. 3. Low rate of successful implementation. Due to its complexity and heavy commitment to strategic goals, strategic planning is rarely implemented successfully. Often, the poor implementation is the reason for failure, although it is more often the case of misaligned operational and strategic goals.

Ten characteristics of strategy plan.

1.Take care over the number of pages The best strategic plan is the one you can throw away everyone knows what they have to do. The next best plan is one page it can be easily digested. A plan of ten pages is acceptable. After that the plan becomes unwieldy and is likely to be ignored. 2. Use diagrams and flow charts Capture the key elements of your plan on one page the use of a diagram with logical linkages is a powerful aid for people to understand the essence of the schools direction. If that one page can be in poster format it has even greater impact. 3. Beware of too many bullet points and lists. Your strategy should tell the story of where your business / school is. Do not hesitate to put your strategy in a narrative format. But remember to keep it succinct. 4. .Apply the 60 percent test

If 60 per cent of actions in the plan are due for completion within a twelve month period, you have an operational plan, not a strategic plan. Consciously focus on the long term. 5. Prefer outputs over inputs A good plan is quantitative and focuses on measuring outputs not just inputs. Strategic planning must be results-oriented. Remember: outcomes, not activities; deliverables, not actions. 6. Document the future not the status quo Be cautious that you are not just documenting the status quo. Statements such as, We will provide an inspiring learning environment are not strategic in intent. You might as well include an initiative that says We will encourage s taff to turn up to work. 7.Apply the True Strategy Test Examine your plan in light of the diagram below. Outwardoriented Accountability Inwardoriented Monitoring and supervising Past & present focus Future focus In which quadrant do most of your schools strategic initiatives fall and what does that tell you about your planning process? How future- and outwardoriented has your teams thinking been? 8.Search for stretch.



Ask yourself the following questions about the strategic thrust of the plan:

Is the future marginally different or substantially different from the past? Does our vision for the future optimise current strengths and identifiable opportunities? Is there enough stretch implicit in the vision for the schools future; enough challenge to keep everyone on their toes? Does the future convey a sense of excitement that could permeate the school community as a whole?

9.Seek feedback on the plan Always check for meaning in the plan your business / school produces. Ask the following questions and prepare to act on the feedback:

How could we improve the value and relevance of the content of the plan? How could we improve its structure? How could we improve the style? How could we improve the format of the plan? How could we simplify the wording?

10. Take a future focus, not a problems perspective. The authors Gary Hamel and CK Prahalad have said, Although strategic planning is billed as a way of becoming future-oriented, most leaders, when pressed, will admit that their strategic plans reveal more about todays problems than tomorrows opportunities.

5 Essential Steps to Successful Strategy Implementation

Why Strategies Fail There are three reasons strategy fails to execute. They are: Company initiatives dont aligned with strategy Company processes dont align with strategy Employees and stakeholder fail to engage (for more information see my prior post Why strategy Fails) So how do we ensure that our strategies implement successfully? The answer is to build the execution into and across the strategy and the strategy planning process. Below are the 5 steps to successful strategy implementation. 1. Align your initiatives A key road to failed implementation is when we create a new strategy but then continue to do the same things of old. A new strategy means new priorities and new activities across the organisation. Every activity (other than the most functional) must be reviewed against its relevance to the new strategy. A good way of doing this is to create a strategic value measurement tool for existing and new initiatives. Initiatives should be analysed against their strategic value and the impact to the organisation. Kaplan & Norton developed a scorecard based on the following criteria: Strategic Relevance/Benefit (weighted 50%), Resource Demands (30%) and Risks (20%).

Measuring your initiatives against a scorecard will help highlight the priorities and ensure the right initiatives are adopted for delivery. 2. Align budgets & performance Ideally your capital budgets are decentralised, so each division can both allocate and manage the budgets to deliver the divisions strategic initiatives. Norton and Kaplan in their recent book The Execution Premium recommend cross functional strategic initiatives be allocated specific budget (STRATEX) alongside capital (CAPEX) and operating (OPEX) budgets. This protects strategic expenditure from being re-allocated to short-term requirements of OPEX whilst subjecting strategic initiatives to a rigorous review (eg. forecasted revenue growth and productivity) much like is done for CAPEX. Organisational performance should be closely aligned to strategy. Performance measures should be placed against strategic goals across the organisation and each division and staff member. All staff will have job functions that will impact on strategy. Most staff will have impact across a series of strategic goals (eg. financial, customer service, product). Ensure employees are aware of their role and influence on strategy delivery and performance. This is also important to employee engagement (see below). Likewise performance incentives should be directly linked to performance against strategy. They should include a combination of individual, team and corporate performance measures that ensure staff recognise their direct and indirect impact on strategy performance. 3. Structure follows strategy A transformational strategy may require a transformation to structure. Does the structure of your organisation allow strategy to cascade across and down the organisation in a way that meaningfully and efficiently delivers the strategy? Organisations that try and force a new strategy into an out-dated structure will find their strategy implementation eventually reaches a deadlock. 4. Engaging Staff The key reason strategy execution fails is because the organisation doesnt get behind it. If youre staff and critical stakeholders dont understand the strategy and fail to engage, then the strategy has failed. The importance of this step cannot be understated. If youre staff are not delivering the strategy, then the strategy has failed. So how do we engage staff?

Prepare: Strategy involves change. Change is difficult and human tendency is to resist it. So not matter how enlightened and inspiring your new strategic vision, it will come up against hurdles. Tipping Point Leadership theory (a key principle of the Blue Ocean Strategy methodology) outlines four key hurdles that executives must overcome to achieve execution. Those hurdles are cognitive, resource, motivation and political hurdles. It is important we understand each of these hurdles and develop strategies to overcome them. Include: Bring influential employees, not just executive team members into the planning process. Not only will they contribute meaningfully to strategy, they will also be critical in ensuring the organisation engages with the strategy. Furthermore, listen across the organisation during strategy formulation. Some of your best ideas will come from within your organisation, not the executive team (think 3Ms Post It Notes) Communicate: Ensure every staff member understands the strategic vision, the strategic themes and what their role will be in delivering the strategic vision. And enrich the communication experience. Communicate the strategy through a combination of presentations, workshops, meetings, newsletters, intranets and updates. Continue strategy and performance updates throughout the year. And engage them emotionally in the vision. The vision needs to give people goose bumps a vision they believe in, that they want to invest and engage with. Clarify: It is important that all employees are aware of expectations. How are they expected to change? What and how are they expected to deliver? Each individual must understand their functions within the strategy, the expected outcomes and how they will be measured. As mentioned above performance measures and incentives should be aligned with performance against strategic KPIs. 5. Monitor and Adapt A strategy must be a living, breathing document. As we all know: if theres one constant in business these days its change. So our strategies must be adaptable and flexible so they can respond to changes in both our internal and external environments. Strategy meetings should be held regularly throughout the year, where initiatives and direction are assessed for performance and strategic relevance. At least once a year we should put our strategy under full review to check it against changes in our external and competitive environments as well as our internal environments.

Strategy is not just a document written by executive teams and filed in the CEOs desk. It is a vision for the organisation, owned by the organisation. And to succeed the whole organisation must engage with it and live and breathe it. Strategy should inform our operations, our structure, and how we go about doing what we do. It should be the pillar against which we assess our priorities, our actions and performance. When execution is brought into strategic planning we find that our strategy is weaved through our organisation, and its from here that great leaps in growth and productivity can be achieved.

Strategic Planning That Gets Results

How can you get the highest value from the time and effort spent on annual strategic plans? Most financial institutions will invest significant energy conducting business unit and corporate strategy reviews in preparation for the 2014 budget, but few senior executives believe this process delivers sufficient pay off for the time invested. The most frequent complaint: lots of business updates on past progress, but too few implementable new initiatives that will really drive the business forward. How do the best performing organizations do it?
1. Avoid incrementalism, the last year plus 10% syndrome. Start with the goal you aspire to achieve, and work backwards to determine the strategies required to accomplish it. The most effective organizations dont just identify and fix known problems they identify the future results they desire and create solutions to achieve them. 2. Once you have made the commitment to change, be realistic. You cant make the changes necessary, or assign the resources required, without an objective assessment of the market opportunity, financial potential, internal capabilities and resources required. 3. Remember that focus is the essence of strategy. Its not just what you decide to do, but also what you decide not to do. In most organizations the greater problem is usually deciding which good ideas are of lesser value and should not be implemented, or which current activities should be stopped in order to re-direct resources to insure that higher value opportunities have appropriate resources. 4. Its all about execution. Fortune reports that only 10% of strategies are effectively implemented. The best performing organizations implement rapidly and effectively. They recognize that a good plan effectively implemented is far superior to a great planning document which is not a living part of your business. Identify accountabilities for key objectives and make

sure they are on track. Update your plan regularly to insure it is relevant and effective after all, your business is not static but dynamic and changing. 5. Identify risks. Do a pre-mortem step into the future and write the obituary, the reasons why the plan failed. Then establish strict controls over the risk factors you identified. 6. Communicate, communicate, communicate. Everyone needs to know what the goal is, what their part is in accomplishing the objective, and how effective the organization is in achieving results

Introduction to Business Strategy

It is a fact that organizations strategy gives us an idea about what the organization wants to achieve and the process how they want to achieve it. It basically includes the purpose of the entire organization, its goals and objectives as well as the plans and methods that they are considering so that they can achieve this. A strategy also involves the determination of the entire basic long term goals as well as objectives of the organization. At the same time, it adopts the courses of action that is necessary and the allocation of all the resources needed to achieve the goals. And then, here comes business strategy. A business strategy is a report that shows the plans of the entire business. It is a plan that is often used so that they can attract financing from big investors as well as creditors. This is a plan designed to give information regarding a new venture so that they can convince financial backers to invest in the said business. It describes the market opportunities that the business intends to develop, the process on how they are going to do it and the resources that are required to make it possible.

Business strategies demonstrate the following roles:

1. It is applied to encourage people to invest in an enterprise. 2. It is also a tool used to assure creditors about the credit worthiness of the enterprise. 3. Another role is to persuade banks to lend or perhaps invest money.

4. Last, but not least, business strategy helps you stay focused on whats important for your business in order to achieve your desired results. It saves your time, energy and money. And since this is necessary, a strategy needs to: Show the lender or the investor that they have a big chance of being repaid and that they will be getting good returns on their investment. Build the necessary confidence for the firm and the capabilities of the owner. Show the investors that there is a very good market for the service or product that you offer. Show you a clear picture where youre heading and how to get there. A good business strategy is the base ingredient for a successful business. However, there are many different kinds of business strategies. The best business strategy should be able to guide your company into a direction wherein the expected internal pressure due to business continuity meets the great demand of the fast changing world for the revolutionary business plans.


Corporate Strategy
Single-business companies have the advantage of focus and rapid response but are vulnerable to problems in their industry. Their corporate strategy must demonstrate the advantages of remaining active in only one industry while evaluating business opportunities in areas with complementary activities. With a goal of optimizing company operations, profitability and growth, the corporate strategy must compare the return of a continuing investment in the single business with the acquisition or starting up of complementary businesses.

Business strategy
Business strategy is primarily concerned with how a company will approach the marketplace where to play and how to win. Where to play answers questions like, which customer segments will we target, which geographies will we cover, and what products and services will we bring to market. How to win answers

questions like, how will we position ourselves against our competitors, what capabilities will we employ to differentiate us from the competition, and what unique approaches will we apply to create new markets. Senior managers typically create business strategy. After it is created, business architects play an important role in clarifying the strategy, creating tighter alignment among different strategies, and communicating the business strategy across and down the organization in a clear and consistent fashion. Executives are just beginning to bring advanced, highly credible business architecture practices into the strategy discussions early to provide tools, models, and facilitation that enable better strategy development.

Marketing Functional Strategy

In companies that are marketing oriented, the marketing strategy on a functional level influences the other functions and their strategies. A typical marketing strategy is to determine customer needs in an area where the company has a natural competitive advantage. Such advantages might be in location, facilities, reputation or staffing. Once the marketing strategy has identified the kind of product customers want, it passes the information to operations to design and produce such a product at the required cost. The advertising department must develop a promotional strategy, sales must sell the product and customer service must support it. The marketing strategy forms the basis for the strategies of these other departments.

Other Functional Strategies

The non-marketing functional strategies must support the marketing strategy that, in turn, is a component of the overall business strategy. In a single-business

company, those strategies are tightly focused on one industry, but they must also deliver data that allows the corporate strategy to examine possible diversification. Single-business companies are usually either highly ranked in their single business or dominant in their niche. The strategies at the functional level try to maintain such a position but also look for external danger signs. If events outside the company's control lead to a deterioration of its position, strategic components from a functional level must signal to the corporate level that an implementation of alternative strategies is required.


With this in mind, here are my top 10 business development strategies for professional service providers:

1. Be Inspiring: How you come across and relate to a prospective client will
often be the difference between an enquiry and a sale. When you're genuine, positive and enthusiastic, and have confidence and belief in yourself and what you have to offer, prospective clients will find you inspiring and an attractive person to do business with.

2. Maximise your online opportunities: Having an online presence not only

gives you credibility as a business, but it reduces your need to personally address frequently asked questions, over and over again. Although people often still rely on recommendations from family, friends and colleagues when choosing a service provider, a 'Google' or other online search is the most popular way people do their own research to

help them choose among service providers. If you'd like to have a stronger online presence,

3. Encourage referrals and word-of-mouth business: Regularly ask for

referrals from your existing clients and actively refer your clients to others whenever possible. This will help grow your network and encourage the people you've referred business to, to look out for business to refer to you.

4. Form strategic alliances: Create relationships with other business owners

with a similar target market and ask them to refer their clients to your business when they notice an opportunity and offer to do the same for them.

5. Become an expert in something: When you're an expert in something,

even people within your industry will refer business to you when their clients need assistance that's outside their area of expertise. Another benefit is that the media will often seek out your comments for news items.

6. Use PR/Media: Press releases are an effective way to get word out and
educate the marketplace about your services or areas of expertise. Learn how to write and distribute your own press releases.

7. Speak at conferences, events or teach a class: Sharing your expertise

with others through speaking is another way to be more visible and to demonstrate your credibility to potential clients. People are more likely to remember who you are once they've seen you speak at an event.

8. Network with your target market or potential business referrers:

Choose networking events where you'll either have an opportunity to meet your target clients or potential strategic alliance partners or referral sources and actively connect people whenever you see an opportunity to do so.

9. Get published: Write articles,an e-zine or newsletter, a column or even a

book! Any of these will increase your credibility and encourage clients to want to do business with you.

10. Follow up effectively: After meeting a potential client or referral source,

ensure that you follow up by arranging a meeting, lunch or coffee. Stay in contact by inviting them to join your e-zine or newsletter mailing list or ask them to be your guest at an upcoming event. Whichever strategies you choose to use, design a sales and marketing plan that you action on a daily basis. Remember, the best time to be marketing is when you don't need the business! Banks make money based on the total deposits maintained and loans issued. Consumers have many banks and credit unions to choose from, all competing for their checking, savings and lending needs. In highly competitive markets, banks must utilize strategies for acquiring and retaining assets from new and existing customers.

Banking is nearly as old as civilization. The history of banking could be said to have started withthe appearance of money. The first record of minted metal coins was in Mesopotamia in about2500B.C. the first European banknotes, which was handwritten appeared in1661, in Sweden.cheque and printed paper money appeared in the 1700s and 1800s, with many banks created todeal with increasing trade.The history of banking in each country runs in lines with the development of trade and industry,a n d wi t h t h e l e v e l o f p o l i t i c a l c o n f i d e n c e a n d s t a b i l i t y. Th e a nc i e n t R o ma n s d e v e l o p e d a n advanced banking system to serve their vast trade network, which extended throughout Europe,Asia and Africa.M o d e r n b a n k i ng b e g a n i n V e n i c e . Th e wo r d b a n k c o me s f r o m t h e I t a l i a n wo r d ba n co,

meaning bench, because moneylenders worked on benches in market places. The bank of Venicewas established in 1171 to help the government raise finance for a war.At the same time, in England merchant started to ask goldsmiths to hold gold and silver in their safes in return for a fee. Receipts given to the Merchant were sometimes used to buy or sell, withthe metal itself staying under lock and key.


In todays dynamic world banks are inevitable for the development of a country. Banks play a pivotal role in enhancing each and every sector. They have helped bring a draw of development on the worlds horizon and developing country like India is no exception.Banks fulfills the role of a financial intermediary. This means that it acts as a vehicle for movingfinance from those who have surplus money to (however temporarily) those who have deficit. Ineveryday branch terms the banks channel funds from depositors whose accounts are in credit to borrowers who are in debit.Without the intermediary of the banks both their depositors and their borrowers would have to contact each other directly. This can and does happen of course. This is what has lead to the veryfoundation of financial institution like banks.B e f o r e f e w d e c a d e s t h e r e e x i s t e d s o me i n f l u e n t i a l p e o p l e wh o u s e d t o l a n d mo n e y.

B u t a substantially high rate of interest was charged which made borrowing of money out of the reachof the majority of the people so there arose a need for a financial intermediate.T h e B a n k h a v e d e v e l o p e d t h e i r r o l e s t o s u c h a n e x t e n t t h a t a d i r e c t c o n t a c t b e t w e e n t h e depositors and borrowers in now known as disintermediation.Banking industry has always revolved around the traditional function of taking deposits, moneytransfer and making advances. Those three are closely related to each other, the objective beingto lend money, which is the profitable activity of the three. Taking deposits generates funds for lending and money transfer services are necessary for the attention of deposits. The Bank haveintroduced progressively more sophisticated versions of these services and have diversifiedintroduction in numerable areas of activity not directly relating to this traditional.

Implementation of banking Strategy and Change

Leading Implementation of Strategy and Change
The banking industry is a vital player in the health of the global economy, and its future will be decided by the actions of todays senior managers. Will they leave behind a legacy of change and renewal? Will they be remembered as the industry captains that simplified complexity, innovated valuable new services, built a reputation as trusted advisors to customers, improved the banking experience for everyone, and attracted a new wave of young talent to the industry?

Whenever a change has to be made, the key to success lies in successful implementation. This means change for the way the bank operates and the way people work. It upsets the status quo for some senior managers. It will be a challenge to adapt a product centric culture to a new customer-centric way of working.

Change on this level requires strong leadership. It cannot be achieved with a simple directive or surface adjustment in people policies. It requires an innovative rethink of the entire management system, in a strong partnership between bank leaders and their change agents. New systems and policies must support the strategy to be successful. The real test of a good strategy implementation plan is whether the people understand the strategy, are motivated and enabled to implement it, and actually start achieving its goals.

Talk to MCE about Implementing Banking Strategy

MCE Senior Associates have over 20 years of senior management experience, and we have a dedicated team of associates who come from senior international careers in the banking industry. They have led strategy implementation and change in difficult circumstances. They can help you partner with your leadership team in implementation of strategy, not just from theory but from what works in real life, in different contexts.

Our Senior Associates can work with your bank at all levels, helping to align different departments and divisions to your corporate strategy and customer value proposition. MCE enables individual managers and management teams to deliver on strategic goals. 60% of strategic success is about implementation and people alignment. Therefore, people are at the core of everything we do to help you get your strategy implemented. Our Senior Associates draw on their years of experience in top managerial and leadership roles to help you solve problems and identify the "best practices" in different circumstances, countries and cultures. Above all, they have led their people through the challenges of developing new capabilities and working in a different way.

Five successful banking business strategy

Community Marketing
Banks range in size and capabilities. Small banks may only have one or two branch offices whereas large commercial banks may have thousands of branches across the nation. Regardless of the size of the bank, each branch needs to tailor local marketing strategies to serve the immediate community. Consumers bank in a place where they feel safe and comfortable. This means tellers and account representatives who speak English as well as any prominent language in the community. By having branch managers look at the local community needs, the bank can attract a larger percentage of the target market.

Product Bundling
A successful strategy employed by all banks is product bundling, such as offering a free checking account for those who open a savings account. Because this has become common practice, successful strategies implement creative bundling solutions. An automatic home line of credit with a mortgage refinance might be a

solution when interest rates are low or the community has a large percentage of consumers looking to consolidate debt.

Pre-Approved Products
Consumers are more likely to say yes to something when they already know they are approved for it. Banks can review existing accounts to determine positive banking and credit trends in customers. Those identified with positive trends and credit history are sent "pre-approval" letters for credit cards, lines of credit or mortgages.

Teller Referrals
Bank tellers interact with the majority of the bank clientele. Tellers perform the day-to-day transactions, such as cashing checks, making deposits or transferring money. Successful banks consistently train tellers to look for opportunities to cross-sell bank products and refer customers to the right person. A teller may see a regular customer cash a dividend check and refer the person to the investment specialist. The teller may see a high savings balance and suggest a higher -earning time certificate. Smart banks reward top referring tellers to entice them to take the time to suggest a new product or service.

Premier Services
Premier services are designed to attract high net worth bank clientele. High net worth clients often have different needs as well as expectations. By offering a select set of private bankers to personally handle all transactions and account reviews, client trust increases. Service is often better with private bankers able to focus on finding the best solutions to fit complete financial scenarios. For all the chaos in the global economy since early 2008, some things have not changed. The vast majority of banks that were in business then are still standing. The purpose of banking is the same. Banks provide a safe haven for the savings of individuals and businesses, they support productive human endeavor and economic growth by efficiently and effectively allocating funds, and they bridge the divergent maturity needs of short-term depositors and long-term borrowers. If the global financial crisis has demonstrated anything, it is the continuing and essential value of these services to society.

The fundamental needs of banking customers are also unchanged. Individuals and organizations need bank accounts and services that enable them to safely hold cash and make transactions. They need access to credit in forms ranging from microcredit to massive corporate loans to enable investment and economic advancement. Individuals, businesses, and institutions need to protect themselves against a range of risks that could not be borne at either an individual or an organizational level. Customers need savings and wealth creation vehicles in which to invest their money. And they need periodic advice on their financial situation and on appropriate products and services. Finally, the core organizational capabilities that banks rely on as they pursue their purpose and meet customers needs are still the same. What, then, is different? The environment in which banks operate and compete. Three of the worlds largest retail banks are now Chinese state-owned enterprises. Six of the 20 largest banks are new to the top order. Nine are based in the Asia/Pacific region, including two Australian banks and HSBC Group (whose CEO, Michael Geoghegan, is moving from London to Hong Kong). (See Exhibit 1.) Stand-alone investment banks, which formerly dominated much of the sector, have all but disappeared. Consolidation is creating high levels of concentration in the banking industry; witness JPMorgan Chases takeover of Washington Mutual in the U.S., the acquisition of HBOS by Lloyds in the U.K., and Westpacs merger with St. George Bank in Australia. The ranks of the truly global retail banks are thinning, as yesterdays titans (such as the Royal Bank of Scotland, Bank of America, and Citigroup) retreat to the security of their home markets and capital bases, and as domestic banks merge, disappear, or narrow the focus of their businesses. The level of government regulation and ownership in the sector has risen dramatically.

Banking business strategies to accelerate the banking sells

Maybe it's true: If you stepped on the sales accelerator now, perhaps your bank's sales engine would cough or die. The market is bad. There's a lot of uncertainty. Maybe your bank still has credit quality challenges... or now you're INCREDIBLY PICKY about to whom you will lend. Competitors may have better products, perhaps at lower prices. Your salespeople may think the quality of the leads they're getting is poor, or that they're spread too thin. But now is not the time for excuse making. Instead, implement these six strategies to retune and restore power to your bank's sales engine. 1. Target sales efforts When times are slow, sales team standards go lower. Salespeople sell to "everybody" whether or not they are a good fit for the bank, saying, "If we don't sell to them, somebody else will," or "If I don't sell to them, I won't make quota." When bank credit standards are high, sales team members can freeze or give up, saying, "The Loan Center isn't approving anything, or they change their standards week by week, so why bother?"

Both statements may be true, but they aren't good guides to profitable sales growth. In many companies, the top 10-20 percent of customers generate 80 percent or more of profits and sales, while the bottom 20-40 percent may be marginally profitable or unprofitable. Targeting your sales efforts is a better strategy, in both lean times and good. Ask yourself and your sales team:

Do you know who your most profitable (and credit-worthy) accounts are and why they are profitable? What are the demographics of these accounts? What are the industries, situations, or companies that need the value you offer? What is your value proposition to them (and it may be different for specific industries)? What specific companies or buying centers within those industries and companies are you targeting? How are you applying your value proposition to them?

Then, ask your salespeople the really difficult question: May I see your plan for attacking these industries and companies? In our experience, most salespeople have not developed written plans for their businesses, and most do not have written plans of any length for their top five accounts. If 80 percent of your revenue per salesperson is coming from their top five accounts, your sales future is at risk. Action steps:

Define your value proposition clearly. Define the buyers who are "in" your sales and credit target zones and those who are "out" of it. Align yourself or your sales team members to deliver the best value to "in target zone" buyers and focus yourself on them through planning and active strategy coaching. Discourage or don't pay incentive compensation for sales that come from "out of target zone" buyers.

2. Position and differentiate value Once your salespeople open conversations with your target customers and prospects, you must make sure they can articulate your value proposition and differentiate it from other banks' propositions. If your bank's credit standards are more stringent than other banks' standards, this is particularly important. Value, in this context, means a change in your customers' business operations (revenue, costs, risks, time) or feelings about themselves or their businesses. A "features-advantages-values" assessment will help you and your salespeople understand and communicate your bank's value. Action steps:

Write statements describing what's different about your staff, products, and work methods and what value those differences create for your clients.

Validate with your clients that they see it the same way and that they will pay for the value either through the fees they pay or the loyalty they afford you (e.g. by staying with the bank or by giving you first look and last look at any new opportunity). Make sure your salespeople can deliver short statements that describe your bank's value, distinguish that value from other banks' values, and demonstrate their own personal value to your clients and prospects.

3. Boost sales capacity Notice this says "boost capacity," not "hire more salespeople." Particularly in lean times, sales managers want to reduce costs by reducing headcount, particularly administrative headcount. Inevitably, they ask salespeople to take on more and more administrative work, expecting somehow that sales efforts will continue unabated. Our research indicates that the average business-to-business salesperson dedicates less than 30 percent of his or her time to conversations with prospects and customers. Meanwhile, they spend somewhere between 30-40 percent of their time on administrative tasks, and the balance on servicing and traveling to and from their accounts. If this is true in your bank, you're paying your salespeople to be unproductive, and you're making it worse if you're firing $20-an-hour sales support staff. The numbers may suggest you might consider hiring more support staff. Suppose one of your salespeople generates $450,000 of gross profit per year in 15 hours per week of selling time (30 percent of 50 hours). That's $600 gross profit per selling hour (assuming a 50-week year). If you increase the sales rep's effective selling time by two hours per week, you could generate $60,000 in additional gross profit, more than enough to pay for a full-time administrator for that sales rep.

Action steps:

Determine time spent on specific tasks and gross profit per selling hour for all sales reps. If profit per selling hour is greater than cost of an administrator per hour, consider hiring administrative support. Design your fulfillment and account management processes to reduce demands on your sales peoples' time. Eliminate steps that do not add value to clients.

4. Increase activity discipline Most sales managers manage most salespeople based on results. Salespeople love this: "Don't worry about how I do it, boss, just measure my results." There are several problems with this approach:

You lose the opportunity to understand the relationships between activities and results that would help you understand your sales teams' efficiency and effectiveness. You lose opportunities to coach salespeople to higher levels of performance.

You lose any hope of consistency in the market. You lose sales opportunities.

Why do you lose sales opportunities? Because salespeople, in general, look for low-hanging fruit and stop reaching out to buyers who aren't ready to buy now. For example, check to see how many attempts are needed to book an appointment with a prospect; we'd expect that the number would be between three and seven attempts. If your sales activity discipline is low, we'd also expect that your salespeople will stop calling for appointments after two or three attempts. Action steps:

Develop a success model that connects activities to results. Create benchmarks that define the path to success (activities, work in process and results). Coach and manage to the success path benchmarks.

5. Grab market mindshare Many companies compete for less than 10 percent of the business available to them because their salespeople aren't aware of or haven't contacted the prospects and aren't engaged with them when they're ready to make a change. As a result, prospects feel no connection to your salespeople or your bank when they're ready to change. Maintaining prospects' and customers' top-of-mind awareness of your bank requires a series of "touches" throughout the year. These may be phone calls, e-mails, encounters at networking or community events, letters, or face-to-face calls. Once you have identified your targets, touch them consistently and relentlessly. This includes the touches needed to obtain appointments and maintain top-of-mind awareness after initial contact. To ensure that you and your salespeople are focusing your touches on the best targets, tier your prospects and customers and determine how many touches are appropriate for each tier. For example, you might determine:

Six to eight touches per year for high potential/most profitable prospects, of which two or three should be face to face. Four to six touches for medium potential prospects and top tier clients. Two to four touches for low potential prospects and low and medium tier clients.

To maximize your sales team's efficiency, use automated software to generate letters or emails, and use support staff to manage the paperwork. 6. Pay for performance The number one mistake in sales compensation is paying salespeople for not selling or for underperformance. Fixing this mistake is usually beyond the scope of team leaders, within the scope of line-of-business leaders or segment leaders, and so time-consuming (working with HR,

handling all of the legal issues) that many sales leaders fiddle with the incentive compensation plan without making major changes. That said: If salespeople can earn what they need without doing what you want them to, you won't get what you want. You can't make salespeople earn more than they want to earn. To fix this problem (these are the steps I recommend, but I'm not saying it's easy), think about compensation in three levels: need to survive (pay rent, etc.), want (important add-ons like fancier vacations, private lessons for the kids, etc.) and dream (the obscenely fast car, the BIG house, etc.). Then:

Define the outcomes you want very clearly. Connect incentive compensation to outcomes you want. Set base and incentive compensation at goal to cover "need to survive" plus a little "want." Set additional compensation (performance above goal) to cover some portion of "want." For extraordinary performance (you define this), set incentive compensation to cover "want" and some percentage of "dream."

Development of banking strategies.

Strategy for the banking sector development for the period till the end of 2011 (hereinafter referred to as Strategy) reflects purposes and objectives of the banking system for the following medium-term (3 years) period 2009-2011. When developing the present Strategy, such documents and plans of strategic measures as the Strategy for development of the country for 2007-2010, provisions of new economic policy in accordance with the statement of the President of the Kyrgyz Republic, Bakiev K.S., Strategic orientation of the NBKR activity for the period 2008-2011 as well as other strategic documents were used. The Strategy is aimed at further growth of the financial intermediation level, strengthening of the banking sector role in the economy of the Kyrgyz Republic, maintenance of effectiveness, security and reliability of the banking activity.

Development of the present Strategy is based on plans of commercial banks for medium-term perspective. In the framework of general strategy for strengthening of the banking sector and creation of favorable conditions for further development of the financial sector of the Kyrgyz Republic, starting from 2003 the National Bank of the Kyrgyz Republic has performed the work on further development of payment system by means of implementation of the State program and introduction of the project on modernization of payment and banking systems to provide population with free access to banking services, not only in cities, but also in distant rural rayons of the Kyrgyz Republic as well as to provide commercial banks with a wide range of banking services for attraction of populations contributions and investing them into the real sector of economy.

Basic problems, risks and threats in the banking sector.

There are following problems in the banking sector: 1. Relatively low level of the financial intermediation in the banking sector, in spite of positive development of the index shown in the table below. Basic index development of the financial intermediation in the banking system of the banking sector.

Mentioned indexes of the financial intermediation (assets, credits and deposits ratio to GDP) remain at a low level in comparison with the similar indexes of other countries with transition economy. That testifies considerable extension of influence of the banking system on the economic development in general. 2. Possible negative influence of external shocks on the banking sector .Today, recessionary events in the global economy and economy of countries main foreign trade partners, can implicitly affect banking system. Therefore, it is of a high priority to make all efforts for development of risk management system in commercial banks and implementation of risk-oriented supervision elements in the National Bank of the banking sector. 3. Relatively low level of resources obtained from population. Low interest rates on deposits, high inflationary expectations, inability to get insurance compensation, in the nearest time, using deposit protection system, rise in the cost of living and decrease of personal savings amount with regard to price increase on food products, petroleum, oil and lubricants, electric power and other substantial risks affect population deposit level which remains low. 4. High level of interest rates for issued credits and large spread of interest rates. Level of current interest rates in the commercial banks remains high and has a tendency for increase that negatively affects the level of financial intermediary and economy growth in general. Average interest rate level on credits by the end of 2007 constituted 25 % in national currency and 18 % in foreign currency. Besides, interest rate spread remains high and by the end of 2007 it amounted to 20.5 percentage points in national currency and 12.6 percentage points in foreign

currency. High spread of interest rates on credits and deposits in the Kyrgyz Republic caused by the influence of the following factors: High demand on credit means; Remaining high level of risks; Insufficient level of competition in the banking system; Relatively low interest rates for obtained deposits.

Stakeholder management and investor relations. The need to be more proactive in dealing with governments and to provide more transparent and relevant information to others will require improvements in stakeholder and investor relations management capabilities. Banks will need to explain how they can fulfill the fundamental social roles of the banking sector; they will need to engage in the debate over optimal regulation, and in its development, to help establish a robust and sustainable industry. To do this, banks will need to show that they understand the needs and objectives of public officials, particularly the need for systemic stability. They will be called on to help achieve those goals and to demonstrate the progress they have made toward restoring confidence and stability, particularly in the areas of compensation and risk management. The recent and very public efforts of some banks, such as Commonwealth Bank of Australia and Deutsche Bank in Germany, to cut executive salaries and reduce exception fees (consumer charges such as overdraft and late payment fees) represent a good example of this approach. Performance management. Regardless of the regulation and government ownership that arises from the crisis, banks must be prepared to respond to demands for much greater transparency from all their stakeholders including investors, governments, customers, and communities. No longer can metrics be focused solely on short-term financials, such as profit growth, cost-toincome performance, and dividend payout ratios. They must expand to include longer-term measures that offer insight into funding durations, loan-to-deposit ratios, and capital management through the full course of an economic cycle. Banks will be asked to show their

contribution to the stability of the larger financial system, reporting in greater detail on credit liquidity, the balance of assets and liabilities, and the safety of savings. And they will need to demonstrate strong ongoing institutional financial performance. Customer management. Bankers have been reminded that their core asset is their customer base, both individual customers and businesses. Like successful businesses in most other industries, the leading banks are sharpening their capability for capturing customer information in a timely manner. For banks, this means analyzing their customers product holdings, cash flows, behaviors, and personal circumstances. Depth of relationship will be more important than breadth. It will be more valuable for a bank to have an 80 percent wallet share of 1 million customers than a 10 percent share of 8 million customers. Greater wallet share permits greater insight into buying patterns, credit risk, and loyalty, enabling a stronger, more profitable lifelong customer relationship. For their part, customers will find that scarce credit lines are more accessible when they concentrate their banking activities among fewer providers. Risk management. Both the effectiveness and the efficiency of risk processes must be improved. To enhance effectiveness, banks must price accurately for risk and make full use of the improved information flow that results from retaining more direct ownership of their assets. They will need to regularly review risk management approaches within the different parts of their portfolios, and to complement external ratings (by agencies such as Moodys and Standard & Poors) with their own more robust internal analyses. This will yield other benefits: It will broaden the base of information available to banks, and it will minimize their reliance on the narrow and potentially skewed analysis that resides at centralized credit bureaus. Unemployment and poor stock market performance will continue to increase the inherent riskiness of many consumer loans. Banks will need to augment their current statistically based methods for assessing risk for consumer loans with the more sophisticated use of customer behavior information. As some banks learn to cherry-pick low-risk loan customers, broader approaches, such as community-rated pricing (in which all customers are charged the same premiums), will prove less competitive. To enhance efficiency, many banks will revisit the way they process credit applications, adopting abbreviated or short-form processes only for existing customers or for refinancing, and applying a more complete analysis to higher-risk or more uncertain prospects. Distribution management. Banks need to place less emphasis on third-party intermediaries such as brokers, aggregators, and referrers. Instead, they should refocus on establishing and developing their own channels to customers. With these in-house channels, banks will become more sophisticated in defining and targeting customer segments, designing differentiated customer experiences that align with their brands, and delivering value across an integrated suite of programs and products. For example, HSBC has created a high-touch customer experience for its premier clients in Hong Kong. These high-net-worth customers receive preferential counter service and pricing, supported by a branch upgrade that allows tellers to spend more time on service and less on routine transactions, plus a 24-hour call center and website that provide an integrated view of both local and foreign currency accounts.

Among universal banks, in-house channels for investors will replace intermediaries, especially for complex financial instruments. Banks will also need to reevaluate how they move loans off their balance sheet through securitization. The basic practice will continue, because its essential premise remains sound. It provides an effective means of funding and managing lenders balance sheets, and it provides investors with risk and return profiles tailored to their needs. It is highly unlikely, however, that second- and third-order securitizations (in which tranches are recombined and repackaged several times) will return, given the lack of transparency and unsustainable leverage they engendered. Instead, investors will conduct their own due diligence, demanding clear transparency into asset quality and first-order relationships with lenders. Banks that brand themselves as providing superior reporting on the quality of their assets will command strong relationships with investors and maintain an edge over resurgent nonbank lenders. They may even be able to develop and market branded securitizations, in which the integrity of the originating institution becomes a key selling point to investors. Product and offer development. In the post-crisis era, customers will concentrate their business, favoring banks they perceive as stable, secure, and able to provide the products and services they require. To win these customers, and the greater wallet share they represent, banks will increase their efforts to meet a full range of customer needs. They will offer services such as cash-flow management (especially as customers face changing personal situations and budgets) and new forms of financial advice, likely with a greater focus on transactional support. Bancassurance (the selling of insurance through a banks existing channels) represents another critical opportunity; with the destruction of wealth in stock markets and other investment channels over the last year, banks can expect to see a strong and growing demand for mortgage protection, income protection, life insurance, and health savings accounts. Operations and information technology. Many banks have had difficulty reducing costs enough to compensate for shrinking margins. In the past, expense reductions have tended to come from two sources. The first is process improvements aligned with individual products; this approach is now at odds with the need for greater customer-centricity. The second source is offshoring and outsourcing, which will become less acceptable in a climate of greater government oversight. In fact, some bank chief executives, such as Gail Kelly of Westpac in Australia, have publicly ruled out offshoring in an effort to improve their battered corporate reputations and brands. Numerous banks will thus seek to develop better operational and IT management capabilities to cut costs. This represents a major opportunity for them: They can reinvent their systems architectures, replace core mainframes that date back to the 1970s or earlier, and realign the structure of the business around customer needs. A clear differentiation will likely emerge between the banks that have the resources and drive to take this opportunity and those that dont. Asset and liability management. Easy access to low-cost wholesale capital during the pre-crisis era caused many banks to lose sight of the role of deposits as a critical source of funding. Too often, deposits were managed in a fragmented manner across multiple lines of business. Now, however, banks must manage their cash holistically. The banks that do this well will have a distinct advantage, and some will emerge as aggressors in M&A deals.

The recent dramatic rise in saving rates in Europe and North America represents another major opportunity for banks to shore up a critical gap in their customer offerings while more proactively managing a core element of their funding mix. Capturing these new deposits will require banks to apply a level of sophistication to product innovation, pricing, and customer analytics that was previously applied only to the lending side. Capital management and portfolio strategy. Capital is now acknowledged as a critical strategic asset and needs to be managed as such. A restricted flow of capital destroyed institutions such as Bear Stearns and Lehman Brothers, whereas more savvy stewards of capital, such as JPMorgan Chase and Goldman Sachs, are emerging from the crisis as clear winners. But it wont be enough to manage capital strategically. To securely fund business growth in the coming era, banks will have to diversify their funding base. For debt, this will mean diversifying duration; in fact, regulators in some countries are already moving to mandate longer-term requirements. For equity, it will mean thinking ahead about alternative sources of capital, including strategic investors and sovereign wealth funds, before they are needed. Banks must also effectively communicate their strategy to investors, particularly as they seek to expand. Big is not necessarily beautiful anymore; shareholders will no longer tolerate empire building for its own sake. They will expect to see a compelling business case for each M&A deal, as well as subsequent reporting on a deals performance. At the same time, as noted earlier, the old promise of low risk and high return has proven illusory. Shareholders in many countries are now presented with a less attractive, although possibly more sustainable, opportunity: low risk, low return, low volatility. Banks need to set this expectation as part of their branding and manage it actively. Talent management. The last decade of banking has seen an increase in hiring from outside the financial-services sector, focused on functional skills like marketing that were thought to be transferable. Today, banks need more comprehensive industry-related expertise; a single executive might need to be fluent in customer analytics, asset and liability management, distribution, products, and operations. This highlights the value of a more traditional rotation model, in which well-rounded, high-potential bankers are groomed for senior leadership by being asked to serve in multiple functions during their careers. And it reinforces a shift that is already under way, from talent recruitment to talent retention and development. Important cultural changes will also be required in the aftermath of the current crisis. The need for a holistic view requires effective teaming at senior levels and the elimination of the cult of the leader phenomenon that creates barriers to collaborative management. As banks become more outwardly focused, they will also need people who can understand customers more easily, and who can work with regulators, investors, and communities in a more inclusive way.






In modern economy commercial Banks Play an important role in the financial sector. A Bank is an institution dealing in money and credit. Credit money is the major component of money supply in a modern economy. Commercial banks are the creators of credit. The strength of economy of any country basically depends on a sound and solvent banking system. A Commercial bank is a profit seeking business firms dealing in money or rather claims to money. It safeguards the savings of the public and give loans and advances. The Banking Companies Act of 1949, defines banking company as accepting for the purpose of lending or investment of deposit money from the public, repayable on demand or otherwise and withdrawable by cheque, drafts, order or otherwise.

Nature of Commercial Banks

Commercial banks are an organisation which normally performs certain financial transactions. It performs the twin task of accepting deposits from members of public and make advances to needy and worthy people form the society. When banks accept deposits its liabilities increase and it becomes a debtor, but when it makes advances its assets increases and it becomes a creditor. Banking transactions are socially and legally approved. It is responsible in maintaining the deposits of its account holders.

Functions of Commercial Banks

Commercial bank being the financial institution performs diverse types of functions. It satisfies the financial needs of the sectors such as agriculture, industry, trade, communication, etc. That means they play very significant role in a process of economic social needs. The functions performed by banks are changing according to change in time and recently they are becoming customer centric and widening their functions. Generally the functions of commercial banks are divided into two categories viz. primary functions and the secondary functions. The following chart simplifies the functions of banks.

Primary Functions of Commercial Banks

Commercial Banks performs various primary functions some of them are given below 1. Accepting Deposits : Commercial bank accepts various types of deposits from public especially from its clients. It includes saving account deposits, recurring account deposits, fixed deposits, etc. These deposits are payable after a certain time period. 2. Making Advances : The commercial banks provide loans and advances of various forms. It includes an over draft facility, cash credit, bill discounting, etc. They also give demand and demand and term loans to all types of clients against proper security. 3. Credit creation : It is most significant function of the commercial banks. While sanctioning a loan to a customer, a bank does not provide cash to the borrower Instead it opens a deposit account from where the borrower can withdraw. In other words while sanctioning a loan a bank automatically creates deposits. This is known as a credit creation from commercial bank.

Secondary Functions of Commercial Banks

Along with the primary functions each commercial bank has to perform several secondary functions too. It includes many agency functions or general utility functions. The secondary functions of commercial banks can be divided into agency functions and utility functions. A. Agency Functions : Various agency functions of commercial banks are

o o o o o o

To collect and clear cheque, dividends and interest warrant. To make payment of rent, insurance premium, etc. To deal in foreign exchange transactions. To purchase and sell securities. To act as trusty, attorney, correspondent and executor. To accept tax proceeds and tax returns.


General Utility Functions : The general utility functions of the commercial banks include

o o o o o o o

To provide safety locker facility to customers. To provide money transfer facility. To issue traveller's cheque. To act as referees. To accept various bills for payment e.g phone bills, gas bills, water bills, etc. To provide merchant banking facility. To provide various cards such as credit cards, debit cards, Smart cards, etc.

Advantages and disadvantages of the commercial banks

Advantages of the commercial banks Disadvantages of the commercial banks Capitalization growth of the commercial Still low level of capitalization in the banks allows increasing of financing of sphere of competition with the foreign major projects and coverage of substantial banks risks Most of commercial banks do not have Growth of the banking system credit developed branch network and savings portfolio increases financing of banks, particularly in the remote areas population and businesses, and allows increase of banking operation Low level of funds attraction from profitability businesses and population, especially in the local market High level of the current liquidity Utilization of old-fashioned information Availability of the developed and technologies and automated systems by productive network of the correspondence many commercial banks relations Undeveloped franchising of the bank International audit of number of retail services commercial banks operational activity Low level of consumer awareness about Implementation of new bank products bank products and services Limited capacity for mobilization of Effective and various sales outlets substantial capital Quality improvement of customer service and continuous perfection of this direction Availability of regular customers Personnel, having long-term experience and high qualification in the banking system Ongoing professional improvement of the personnel and availability of training centers Smooth-running operation Shortage of long-term financial resources Lack of funds for the institutional and infrastructural development Absence of adequate risk management in some banks Unbalanced structure of funding sources in some commercial banks Undifferentiated credit products

Implementation of deposit system protection Longstanding experience on the market of banking and financial services Availability of risk management system Material and technical equipment Access of some banks to the inexpensive resources of the parent companies Performance of the existing activities for the credit portfolio quality improvement Conservative policy of crediting

Feasibilities and threats for commercial banks activity

Current feasibilities of commercial banks Current threats to the commercial banks activity activity Increase of assets and credit portfolio as Expansion of crisis situation in the world well as improvement of its quality economy and in the economies of countries foreign trade partners of the Kyrgyz Republic through the bank Personnel proficiency subsidiaries in the Kyrgyzstan Improvement of the applied information Deterioration of the macroeconomic technologies situation may negatively affect bank activity Stretching of services and product line (checking cards, retail credits, new Inflation growth deposits, Internet Banking, Master Card, American Express etc.), may lead to the bank services demand increase and Sudden change of the local exchange successful development of the retail rate activity Raising operation expenditures Diversification of the sales outlets including the branch network, particularly Deterioration of the external trade in the regions conditions

Research and adaptation of the financial institution international experience on the local market Prime cost decrease due to dynamic utilization of the modern technologies in the sphere of automation of the bank processes and application of network servers for the clients self-service International audit proceedings as an independent audit will increase trust among clients and allow to change the bank strategy with regard to target groups Access to the new markets; provision of services List of services oriented to the clients requirement Resource base expansion Authorized capital increase Participation in implementation of the government programs for economy financing for long and medium terms Optimization of the bank structure

Deposits outflow due to the political or economical instability; moreover, exchange rate fluctuations in the international markets may promote transfer of savings to other sectors of economy or to the real estate market Inadequate financial data reporting of the potential borrowers; non-transparency of their activity restrains the possibility of the adequate financial analysis of the potential borrowers Legislation is in the development stage and as a result it is a subject to changes High fluctuation of the personal Endowment capital volume decrease in the economy Circumstances of insuperable force (force majeure)

A Case Study of Punjab National Bank

The Indian Banking Industry has undergone radical changes due to liberalization and globalization measures undertaken since 1991. Today, Indian Banking Industry is one of the largest industry in the world. There has been a great surge in efficient customer services. A highly satisfied and delighted customer is a very vita qndl non-financial asset for the banks in the emerging IT era. The curtsey, accuracy and speed are like a crown factors for a bank. Based on the responses of 100 customers of Punjab National Bank operating in the Meerut district of Uttar Pradesh has been taken into consideration. The survey was conducted in Meerut district.

Key Words: Organized Segment, Customer satisfaction, Retail Banking,

Universal Banking.

Case study on state bank of india Abstract:

State Bank of India (SBI) is the largest nationalized commercial bank in India in terms of assets, number of branches, deposits, profits and workforce. With the liberalization of the Indian banking industry in the mid-1990s, SBI faced stiff competition from the private sector and foreign banks which resulted in significant loss of its market share. The case describes the efforts of SBI to regain its lost market share by undergoing a major restructuring exercise which involved redesigning its branch network, providing alternate banking channels, emphasis on lean structure and technology up gradation. The case also discusses how SBI is building its image as a customer friendly bank by launching innovative products & services and promoting its brand. Finally, it discusses the challenges faced by SBI in 2004 and its plans in the future. The case includes a note on the recent trends in the Indian banking industry.

Understand the strategies adopted by a market leader in the banking industry to retain its market share Explore the reasons how a market leader can loose its market share significantly Examine and analyze the key elements of the restructuring exercise undertaken by SBI Study the marketing initiatives adopted by SBI to reposition itself as a customer-oriented bank Examine the challenges that can be faced by a market leader due to the changes in the industry structure Study and analyze the structure of the Indian banking industry