1

Structure of Management in the Banking Sector

A comparative analysis of SBI and ICICI Bank

Animesh Ranjan, (20010733)

Jindal Global Law School, OP Jindal University

L-CB-0001: Principles of Management

Dr. Chetan Sinha

November 11th, 2020

 2

Structure of Management in the Banking Sector

A comparative analysis of SBI and ICICI Bank

"Management is a multi-purpose organ that manages the business and manages

managers and manages workers and work." This management definition was given by Peter

F. Drucker in his book, The Practice of Management (Choudhary, 2018). It can also be

simply defined as a process undertaken by an organization to fulfil goals effectively and

efficiently (Gandhi, 2019-2020). Here the concept of management insists on three major

components,

Process – It is the combination of various sequence and steps which is undertaken to

complete a task or a goal. Management is a process as it involves steps like planning,

organizing, staffing, directing, and controlling to achieve goals.

Effective – It refers to achieving the right goals. It is concerned with the completion of goals

within the time.

Efficient – It refers to doing the task the right way, i.e. optimum utilization of resources and

cost-effective techniques used for the completion of goals or tasks. Management is related to

efficiency as it leads to higher profits by reduction of costs.

Management aims to achieve all its set objectives. An organizational structure is a system

that outlines how certain activities are directed to achieve the goals of an organization. These

activities can include rules, roles, and responsibilities. (Kenton, 2020). The functions of the

manager lead to the completion of organizational objectives. Management combines its

activities to achieve common goals.

Management is not a single activity but usually a combination of three main activities i.e. (i)

Management of people (ii) Management of Work and Management of Operations

 3

Management is a continuous group activity because it is a never-ending process and all of its

functions are performed continuously. They undertake activities with coordination to

complete tasks. Management is an intangible dynamic function as there is a lot of changes

that are made regularly to the operations and the works to achieve goals in accordance with

the environment of the organization.

The efficiency of the financial sector depends on a robust and sound banking system.

Through intermediation, the banking system helps productive and gainful utilization of

resources. The banking sector is an industry and a section of the economy devoted to the

holding of financial assets for others and investing those financial assets as a leveraged way

to create more wealth. The sector also includes the regulation of banking activities by

government agencies, insurance, mortgages, investor services, and credit cards. (Hall, 2020).

It is a sector that comes in the tertiary sector of an economy. In modern times its strength

determines a country's financial strength. It is also one of the major employers around the

world.

BANKING SECTOR IN INDIA

The post-independence Banking sector has played a critical role in the development of

the Indian financial sector. It gave a further boost to the economy after the Nationalisation of

Banks and liberalization of the Indian Financial sector. Banks supported the government to

achieve its objective of deposit mobilization, employment generation, and directed lending

through an extensive branch network. The current scenario of the Indian Banking System is

portrayed in the flow chart below.

 4

Source: (Ram, 2020)

Commercial Banks – Commercial Bank is an institution that performs the function of

accepting the deposit, granting loans, and making investments, to earn profits. (Garg, 2019-

2020) It is a primary unit in the banking system. The target audience of these banks is usually

people of urban, semi-urban and to some extent rural areas of the country. Since they are

centrally managed, they are not very agile which leads them to have a very different clientele

than Regional Rural Banks and Cooperative Banks in rural areas. Their objectives are to

diversify their market operations and achieve much of market share along with profit

maximization. It further has two main sub-divisions which are:

Public Banks – These banks are owned by the government and focus on providing

services to society. Profit maximization is one of their objectives however it does not

hamper their primary function of service to society. Examples of these banks are:

State bank of India (SBI),

Punjab National Bank (PNB),

 5

UCO Bank,

Union Bank of India (UBI),

Bank of Baroda (BOB),

Bank of India (BOI), etc.

Private Banks – These banks are owned by private individual businessmen. Their

main objective is profit maximization Examples of these banks are:

Industrial Credit and Investment Corporation of India Bank (ICICI)

Housing Development Finance Corporation (HDFC),

Axis Bank,

Yes Bank,

Kotak Mahindra Bank,

Bandhan Bank, etc.

Cooperative banks – Co-operative banks are financial entities established on a co-operative

basis and belonging to their members. This means that the customers of a co-operative bank

are also its owners. These banks provide a wide range of regular banking and financial

services. (Khendelwal, 2019)

Payments Banks – A payments bank is like any other bank, but it cannot advance loans or

issue credit cards. It also operates on a smaller scale without involving any credit risk but

carries out most of the other banking services. It can accept demand deposits (up to Rs 1

lakh), offer remittance services, mobile payments/transfers/purchases, and other banking

services like ATM/debit cards, net banking, and third-party fund transfers.
 6

Foreign Banks – These are the banks owned and operated by foreign promoters and have

their head offices abroad and not in India. After the liberalization of the economy in 1991,

their presence has rapidly increased in the Indian banking sector. Examples: Standard Charter

Banks, etc.

Regional Rural Banks – They are the banks that are created by the central government, state

government, and sponsor bank in areas where there is no banking facility (usually rural areas)

to specifically focus its attention on rural lending and development. Their focus is to provide

credit facility to small and marginal farmers, artisans, and small entrepreneurs. Example:

Mizoram Rural Bank, Bihar Grameen Bank, etc.

The target audience of Regional Rural Banks is the small and marginal farmers, artisans,

local vendors, and other small entrepreneurs in the rural areas which are normally

inaccessible by commercial or cooperative banks. Their objective is to provide banking

services to poor sections so that they do not get trapped in the vicious clutches of

moneylenders who charge exorbitant interest for small loans.

Central bank – “Central Bank is the apex institution in a banking sector which controls,

operates, regulates, and directs the entire banking and monetary structure of the country”

(Garg, 2019-2020). It is the supreme position in the banking system and every financially

developed country has this as the head of the banking system. In India, the central bank is

called The Reserve Bank of India which was established on April 1st, 1935 after the passing

of The Reserve Bank of India Act in 1934. Some other examples of central banks around the

world are:

Reserve Bank of Australia (RSA)

Hong Kong Monetary Authority (HKMA)

Federal Reserve (USA)

 7

Bank of Japan

Reserve Bank of New Zealand

European Central Bank, etc

CASE STUDY: STATE BANK OF INDIA V. ICICI BANK

OVERVIEW OF STATE BANK OF INDIA

The roots of the State Bank of India rest in the first decade of the 19th century when

the Bank of Calcutta later renamed the Bank of Bengal, which was established on 2 June

1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank

of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July

1843). With the result of the royal charters, all three Presidency banks were incorporated as

joint-stock companies and received the exclusive right to issue paper currency in 1861 with

the Paper Currency Act. They retained this right till the formation of the Reserve Bank of

India. The Presidency banks amalgamated on 27 January 1921 and renamed the Imperial

Bank of India. The Imperial Bank of India remained a joint-stock company. The State Bank

of India was constituted on 1st July 1955, according to the State Bank of India Act, 1955 (the

"SBI Act") to create a state-partnered and state-sponsored bank integrating the former

Imperial Bank of India. The State Bank of India is the largest bank, with approximately

24,000 branches in India and 190 international offices (About Us, n.d.). In 1959, the State

Bank of India (Subsidiary Banks) Act was passed, enabling the Bank to take over eight

former state associated banks as its subsidiaries (Gupta & Kaur, 2017).

OVERVIEW OF ICICI BANK

ICICI Bank is the second-largest leading bank of the private sector in India. It’s

headquartered is in Mumbai, India. The Bank has 5,324 branches and 15,688 ATMs in India.
 8

In 1998 ICICI Bank launched internet banking operations (About Us, n.d.). The Bank offers a

wide range of banking products and financial services to corporate and retail customers. It

also provides services in the areas of venture capital investment banking, asset management,

and life and non-life insurance. ICICI Bank Limited is one of the main banking and financial

services organization in India. The bank is the second-largest private sector bank in India by

market capitalization. They are a publicly held banking company engaged in providing a

wide range of banking and financial services including commercial banking and treasury

operations. The bank and its subsidiaries offer a wide range of banking and financial services

including commercial banking, retail banking, project, and corporate finance, working capital

finance, insurance, venture capital and private equity, investment banking, broking, and

treasury products and services. They offer through a variety of delivery channels and their

specialized subsidiaries in the area of investment banking, life and non-life insurance, venture

capital, and assets management. The bank has a presence in 18 countries (SINGH &

TANDON, 2012).

THE RATIONALE FOR THE TOPIC SELECTION

Since the banking sector plays a crucial role in the growth and development of the

economy and Management is the pivot on which the fortune of any company hangs in

balance, I chose to analyze the management in the banking sector in this paper. This was also

done as this is one of the areas which has not been examined very closely since it is

qualitative and subjective. Further, to elucidate and explain the structure in the right context I

have chosen the State Bank of India and ICICI Bank as both are leaders in the Public Sector

and Private Sector Banking space in India.

BASIS FOR ANALYSIS

For the analysis the following tools have been used to determine the conclusion:
 9

 FUNCTIONS OF MANAGEMENT

Planning – It is the function that is always undertaken first by the managers of an

organization. It refers to “deciding in advance what to do, how to do, when to do, and who is

going to do it” (Gandhi, 2019-2020). It also refers to the bridge which covers the gap from

today’s position of an organization to where it wants to reach in the future. It is the base of all

the functions as without a plan the organization's action will disarray and not be able to

achieve the set goals.

Organising – This is the step that follows planning. It refers to the organising of activities

and establishing an organisation structure to execute the plans which have been made in the

previous step. Organisational structure means refers to the number of units and its subunits or

departments are to be created. it also distributes authority and responsibility to different

people in various departments or units.

Staffing – the third step in the process of management is staffing and it deals mainly

with human resources. It refers to recruiting and selection of the employees for various

appointments within the organisation along with assigning them duties and solving their

grievances. It further includes the training and development of employees motivating

employees, supervising activities of employees, and the remuneration and compensation

procedure. Under this function, the organisation also maintains a detailed record of their

employees and also evaluate their performance.

Directing – After staffing when the employees are appointed to their positions there is a need

to guide them and pass on instructions to get the work done. Therefore, it refers to the

communication of instructions and directions to employees by supervising their activity and

motivating them to work to their optimum potential. Managers act as leaders and guide the
 10

employees in the correct way forward. So, to summarise the function is supervising,

motivation, communication, and leadership.

Controlling – This is the step that is concerned with the moderation of an employee’s

performance by the manager. It is the step when the managers try to match the actual

performance with the initial calculation made during the planning procedure to accomplish

the set tasks and goals. If there is a deviation or no match in the comparison then the

managers suggest a corrective measure to go forward which leads the performance to the

levels expected by the plan.

Planning

Organising

Staffing

Directing

Controlling

Coordinatio
n

Coordination – “The process by which a manager coordinates and synchronises the activities

of different departments are known as coordination” (Gandhi, 2019-2020). It is an essential

function of management which is important in order to bind the other functions of

management. It is the base of every manager as each department functions separately and to

achieve goals integration of their activities is necessary.

 OBJECTIVES OF MANAGEMENT
 11

“Objectives are the ends towards which the activities of an organisation are

directed.” (Gandhi, 2019-2020). Therefore, the objectives of a manager can be

classified into three main categories:

Organisational Objective – These are the objectives that aim at the growth and

stability along with the prosperity of an organisation. Profit maximization is expected

to be the most important; however, it is not true. There are three important

organisational objectives of a manager:

Survival – The basic objective of every business is to survive in a competitive

market for as long as possible. It can only achieve that when it can cover its

costs.

Profit – Profit is the reward for risks undertaken by an organisation. Profit is

necessary for the growth and expansion of the organisation.

Growth – The success of any business is determined by its growth and the

growth is determined by the increase in the operations of an organisation and

its ability to continue forward. Therefore, an organisation must ain to grow

and expand its activities.

Social Objectives – It refers to the moral obligation of an organisation or its

commitment to society. An organisation exists in a society and uses its resources

therefore it contributes to society as compensation. Some examples of social

objectives are:

Selling of goods at a reasonable price

Generation of employment, etc.

 12

Personal Objectives – It refers to the objectives of an individual employee in an

organisation. Employees are the most important resource for an organisation therefore the

organisation should aim to assist its employees with their objectives keeping in mind the

organisational objectives. The employees will lose interest in work if these objectives are

neglected. Main objectives are:

Appropriate salary to meet the basic need of the employees and also their role in the

organisation.

Peer recognition and mutual respect in the workplace.

Healthy working conditions and safety of employees

Training, promotion, self-growth, and development to fulfil esteem and other needs of

employees.

Comparative Analysis between State Bank of India (SBI) and Industrial Credit and

Investment Corporation of India (ICICI) Bank:

Basis State Bank of India ICICI Bank

Planning The planning process of SBI is The planning process of ICICI

generally based on multiple factors Bank will be entirely based on

which include the organisational organisational growth and stability

goals as well as its socio-economic in earnings. Once the plan is

commitments as the largest public devised it is generally followed

sector bank in India. Here the plans very aggressively to achieve the set

are followed according to laid down goals.

procedures.

Organising The type of organising structure The type of organising structure

 13

followed is the functional structure. followed is the functional structure.

However, this structure is followed Though the structure is defined at

strictly and is very rigid in the the core, however, sufficient

organisation. flexibility around the core is

incorporated to adapt to the fast-

changing financial world.

Staffing All employees of SBI are recruited All employees of ICICI Bank are

through exams and interviews along recruited through interviews and

with other procedures. After the other procedures. Though the

selection and completion of their authority given to the employees is

training, they are considered public lower than the public sector banks,

sector employees. The remuneration the salary and incentive structure is

is lower when compared to the more and also linked to the

private sector but the facilities (living performance of the employees.

quarters, etc) and authority are given There are relatively fewer transfers

is more than the private sector. There of employees than that of public

are constant transfers of employees sector banks. ICICI Bank has

all around India to maintain the 84,922 (2019) employees.

vacancies. SBI has 249,448 (March

2020) employees.

Directing Directing structure in SBI is rigid. The directing structure in ICICI

The internal communication process Bank is flexible. The internal

is very strict as they have to strictly communication process is relaxed

follow the chain of hierarchy and and employees usually do not have

subordinates are to communicate to to strictly follow the chain of

 14

their immediate superiors. The hierarchy to convey their

autocratic style of leadership is messages. The democratic style of

generally followed in SBI. leadership is generally followed in

ICICI Bank.

Ownership The government is the majority ICICI Bank is owned by private

shareholder of the bank which is why individuals and institutional

the bank is treated as a public sector investors. It is managed by the

banking unit. It is however managed board of directors appointed by the

by a board of directors appointed by shareholders after the approval of

the government. the Reserve Bank of India.

Accessibility State Bank of India is the largest Industrial Credit and Investment

bank in the banking sector in India Corporation of India is the second-

with almost 24000 branches pan largest private sector bank in India

India. with almost 5324 branches pan

India.

Objective The primary objective of SBI is to The primary objective of ICICI

provide basic financial services to all Bank along with other private

the ranks of the community and sector banks is to maximize profits.

doing social services like educating Therefore, they aim to achieve a

poor sections of society about higher return to equity while

financial literacy, etc to maximize undertaking relatively higher risks.

profits.

FINDINGS AND CONCLUSION

 15

After the above examination and analysis, we can conclude that management is

present and plays an important role in the whole banking sector. In the sector, the same

structure is followed and the difference is mostly on objectives, target audience, and the

process is undertaken to come up with decisions. State Bank of India and ICICI Bank despite

being part of the same system of regulations and the same sector have some differences in

mode of operations. The State Bank of India needs to relax its very rigid directing as well as

the organisational structure so that there can be a free flow of ideas and information to

relevant departments as quickly as possible to enable quick decision making and responses to

changes in the market. This will enable them to achieve set targets faster. ICICI Bank should

focus more on expanding its accessibility in India as it has very few branches in India. It

should also focus more on its social responsibilities and not just profit maximisation as it

needs to have a good profile in the masses and also have a moral obligation for it. It should

also start venturing more into rural credit markets and other responsibilities like imparting

financial literacy, etc. Both of these banks are competing in the global arena as well and not

just in Indian markets. Therefore, they must assess regularly and take into account their

strengths, weakness, opportunities, and threats to not only survive but also duel for a position

in the market.

BIBLIOGRAPHY

About Us. (n.d.). Retrieved from State Bank of India :

https://www.statebank-frankfurt.com/en/about-us.html

About Us. (n.d.). Retrieved from ICICI Bank: https://www.icicibank.com/aboutus/about-

us.page

Choudhary, A. (2018, August 02). A profile of Peter F. Drucker – Father of Modern

Management. Retrieved from torontosom: https://www.torontosom.ca/blog/a-profile-

 16

of-peter-f-drucker-father-of-modern-management#:~:text=%22Management%20is

%20a%20multi%2Dpurpose,book%2C%20The%20Practice%20of%20Management.

Gandhi, P. (2019-2020). Business Studies Class XII. New Delhi: VK Global Publications Pvt

Ltd.

Garg, S. (2019-2020). Introduction to Macro Economics. New Delhi: Dhanpat Rai

Publications (P) LTD.

Gupta, C., & Kaur, A. (2017). A STUDY OF FINANCIAL PERFORMANCE: A

COMPARATIVE ANALYSIS OF STATE BANK OF INDIA AND ICICI BANK.

International Journal of Management Studies.

Hall, M. (2020). How the Banking Sector Impacts our Economy. Investopedia.

Kenton, W. (2020). Organisational Structure. Investopedia.

Khendelwal, T. (2019). Explained: The concept of co-operative banking in India.

Moneycontrol.

Ram. (2020, September 08). List of all Public and Private Sector Banks in India. Retrieved

from NCERT Books: https://www.ncertbooks.guru/list-of-all-public-and-private-

sector-banks-in-india

SINGH, D. A., & TANDON, M. P. (2012). A STUDY OF FINANCIAL PERFORMANCE: A

COMPARATIVE ANALYSIS OF SBI AND ICICI BANK. International Journal of

Marketing, Financial Services & Management Research .