PESTLE ANALYSIS: BANKING SECTOR

ECONOMICAL

POLITICAL

Gdp monsoon inflation savings & accounts agriculture credit interest rates raising living Standred disposable incomE

SOCIOCULTURAL

Government policy & budgect budject measures monatory policy fdi limit Organizatio n LEGAL

changes in life style literacy rate demographic of large population shift towards the nuclear family

TECHNICAL

RESERVE BANK OF INDIA ACT BANKING REGULATION ACT

technology in banks core banking solutions(cbs) ATM internate i.t serves and mobile banking

Presented By:Group 12

The New India Assurance Company Ltd. National Insurance Company Ltd. 2011 is capitalized to the extent of Rs. The Oriental Insurance Company Ltd. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st March. The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence. Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies.. and United India Insurance Company Ltd. The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. i.63%.AXIS BANK Axis Bank was the first of the new private banks to have begun operations in 1994. 2011) providing 24 hrs a day banking convenience to its customers. The Bank as on 31st December.I). . 2011). after the Government of India allowed new private banks to be established. The Bank has a network of over 7591 ATMs (as on 30th September.57 crores with the public holding (other than promoters and GDRs) at 53.e. This is one of the largest ATM networks in the country. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI .. 412.

to attract the farmer’s votes. Government affects the performance of banking sector most by legislature and framing policy . CRR.0 percent and have been included within the ambit of FDI investment Budget measures .PESTLE ANALYSIS:- POLITICAL ASPECTS:Government and RBI policies affect the banking sector. Sometimes looking into the political advantage of a particular party. etc are some of the tools used by the RBI in their free market operations in order to control the banking operations and bank like the Axis are affected by these policies.government through its budget affects the banking activities securitization act has given more power to banking sector against defaulting borrowers. Sometimes the government appoints various chairmen of the banks. Reverse Repo Rate.0 percent to 49. Ceiling for FII investment in companies was also increased from 24. the Government declares some measures to their benefits like waiver of short-term agricultural loans. They exploit these banks for their benefits. Monetary policy Repo Rate. the Liquidity Adjustment Facility (LAF). stricter prudential regulations with respect to capital and liquidity. Various policies are framed by the RBI looking at the present situation of the country for better control over the banks. Focus on Regulations of government Indian Banking is least affected as compare to other developed economy which is attributed to Reserve Bank of India for its robust policy framework. Various banks in the cooperative sector are open and run by the politicians. By doing so the profits of the bank get affected. FDI LIMIT The move to increase Foreign Direct Investment FDI limits to 49 percent from 20 percent during the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net worth to meet CAR norms. This gives India an advantage in terms of credibility over other countries.

The agriculture sector has recorded a growth of about 4% per annum with substantial increase in plan allocations and capital formation in the sector.Increase Farm Credit: The FM has further increase the farm credit target for 2009-10 at Rs 325000 crore compared to Rs 287000 crore targeted in 2008-09. Other provisions • The threshold for non-promoter public shareholding for all listed companies to be raised in a phased manner. To allow scheduled commercial banks setting up off-site ATMs without prior approval subject to reporting. Currently this facility has been extended from 30th June. With Government bearing this burden. To provide banking facilities in under-banked/un-banked areas in the next three years. It will only help banks to clear their most stubborn NPA accounts on banks book. A sub-committee of State level Bankers Committee (SLBC) would identify and formulate an action plan for the same. banks would not be affected much. Debt Waiver for Farmers: The Union Budget 2009-10 extended the debt waiver scheme by six more months for farmers owing more than 2 hectare of land. Setting up of separate task force for those not covered under the debt waiver scheme: The government also announced that it will set up a task force to examine the issue of debt taken by a large number of farmers in some regions of Maharashtra from private money lenders who were not covered by the loan waiver scheme announced last year. . The Union Budget 2008-09 allowed these farmers 25% rebate on loan if they repay 75% of their overdue within stipulated period of 30th June 2009. 2009. The Ministry has also granted Rs 100 crore of grants in aid to ensure provision of at least one Centre/Point of Sales (POS) for banking services in each of the un-banked blocks. This Union Budget has provided further six months extension of 25% rebate on loan for farmers owing more than 2 hectare of land. The one-time bank loan waiver of nearly Rs 71000 crore (Rs 710 billion) to cover an estimated 40 million farmers was one of the major highlights of the last Budget. Also additional allocation of Rs 411 crore over Interim Budget 2009-10 was made for the same. as incentive to those farmers who repay short-term crop loans on schedule. Also additional subvention of 1% to be paid from this year. • • • Budget impact The Union Budget 2008-09 has focused on farm credit. 2009 to 31st December. Subvention of 1% to be paid as incentive to farmers: The Budget continued the Interest subvention scheme for short-term crop loans up to Rs 300000 per farmer at the interest rate of 7% per annum.

Recapitalization will ensure adequate capital for the growth of the public sector banks and insurance companies. Budget Impact: Industry 1. On the flipside. expanding network with ATM's. 5. 4.Moreover the emphasize on hiking promoter shareholding in Public sector banks. Debt waiver and interest subvention schemes will not have much impact on banks. Rural Housing fund will boost the resource base of NHB for their refinance operation in rural housing sector. Long-term refinancing from IIFCL for infrastructure projects will ensure better asset-liability match for banks. through rise in yields on government securities. the spike in government borrowings is set to adversely affect the treasury income of banks in general and public sector banks in particular. 2. ECONOMIC ASPECTS:- . 3. opening of banking centre in un-banked blocks are some of the positive moves for the sector. Tax break for NPS trust will have positive impact on the same.

Inflation Rates Inflation represents a rise in general level of prices of goods and services over a period of time.25/11.92 per cent. Every year RBI declares its 6 monthly policy and accordingly the various measures and rates are implemented which has an impact on the banking sector. Also the Union budget affects the banking sector to boost the economy by giving certain concessions or facilities. we expect that . Recently RBI has reduced the interest rate which stimulates the growth rate of banking industry. decreasing crude prices and lowering interest rate. In India. Resultantly.50/3.00 per cent. As on September 11. which is based on several monetary policies. Banking Industry is directly related to the growth of the economy. To fight against the slowdown of the Economy. then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector. banking has existed in one form or the other from time to time. others followed.47 per cent as compared with 5. Allahabad bank was started in the year 1865 and Punjab national bank in 1895. the same as on the corresponding date of last year. decreasing commodity prices. Low Interest Rates Reserve Bank of India controls the Interest rate. If the FDI limits are relaxed. If in the Budget savings are encouraged. Clubbed with fiscal & monetary actions.Banking is as old as authentic history and the modern commercial banking are traceable to ancient times. and thus. Government of India & Reserve Bank of India took many fiscal as well as monetary actions. booming the economy.63 per cent to 3. each unit of currency buys fewer goods and services Different fiscal and monetary policies have curbed the Inflation rate from the high of 12. therefore. then more FDI are brought in India through banking channels Growing Economy / GDP Indian economy has registered a growth of more that 9 per cent for last three year and is expected to maintain robust growth rate as compare to other developed and developing countries. The present era in banking may be taken to have commenced with establishment of bank of Bengal in 1809 under the government charter and with government participation in share capital. It leads to an erosion in the purchasing power of money. 2009 Bank Rate was 6. Call money rates (borrowing & lending) were in the range of 1.00 per cent on the corresponding date of last year.

2009 . the sector has recorded a growth of about 4% per annum with substantial increase in plan allocations and capital formation in the sector.3 lakh per farmer at the interest rate of 7% per annum. I propose to extend this period by six months upto 31st December. For this. India continues to remain one of the high savings economies among the emerging market economies. I am making an additional Budget provision of Rs 411 crore over Interim BE. Gross Domestic Savings (GDS) of the Indian economy constitutes savings of public. Inflation stands at 3. Under the Agricultural Debt Waiver and Debt Relief Scheme (2008). Savings & Accounts As stated earlier. SOCIO-CULTURAL FACTORS:- . In the recent period the high growth performance of the Indian economy is driven by rise in savings Agriculture Credit Agriculture has been the mainstay of our economy with 60% of our population deriving their sustenance from it. the interest rate for these farmers will come down to 6% per annum.92 per cent on 7th February 2009 against a high of 12. farmers having more than two hectares of land were given time upto 30th June.000 crore in 2008-09.3. Debt relief for farmers The one-time bank loan waiver of nearly Rs 71. 2009 to pay 75% of their overdues.Indian Economy could again register a robust growth rate in the year 2009-10. In the recent past. To achieve this.87.63 per cent on 9th August 2008. The target for agriculture credit flow for the year 200910 is being set at Rs.000 crore. private corporate and household sectors. the government shall pay an additional subvention of 1% as an incentive to those farmers who repay their short term crop loans on schedule.000 crore to cover an estimated 40 million farmers was one of the major highlights of the last Budget. For this year.25. Due to the late arrival of monsoon. I propose to continue the interest subvention scheme for short term crop loans to farmers for loans upto Rs. Agriculture credit flow was Rs 2. Thus.

which affect the private sector banks. mobile. television. Socio-cultural factors like taboos. Now. Literacy Rate . A family need home consumer durables like freeze. As they do not have money they go for installments. is changing and also creating opportunities and threat for banking industry. banks satisfy nuclear families wants. customs. their behavior. buying and consumption habit of people. These factor are changing continuously people’s life style. etc. Banking industry is also operates under this social environment and it is also affect by this factor. They show in which people behave in country.Income distributions also affects the operations and overall business of private sector banks.. their language. Deposits showed a subdued growth during 2004-05.52. preferences. There are some socio-culture factors that affect banking in India have been analyzed below.645 crore as on 31st March 2005. The population of India is about 102. what their fore father had dreamed for. They are demanding high class products. 3. car. Total Deposits mobilized by the Private Sector Banks increased from Rs. Now teenagers also have mobile and vehicle. traditions. They are in the prime earning stage and this increase the earning of the banks.70 cores in 2011. bike.. Every thing is available so it has become easy to purchase anything if you do not have lump sum. tastes. Even middle class people also want to have well furnished home. mobile. they demand for these products and borrow from banks. They have become more advanced. etc. vehicle and this has opened opportunities for banking secter to tap this change.90 is expected to reach about 119. People want everything car. television. There are many reasons behind that.12. Joint families are breaking up. Shift to nuclear families Attitude of people of India is changing. Change in life style Life style of India is changing rapidly. consumption pattern etc. But banking sector is positively affected by this trend. beliefs and values affect the business.Socio culture factors also affect the business. About 70% of population is below 35years of age. Percentage of deposit in any branches of banks depends upon the population demographic of that area.335 crore as on 31st March 2004 to Rs. so. 2. So. younger generation wants to remain separate from their parents after they get married. washing machine. Population Increase in population is one of he important factor. Banks would open their branches after looking into the population demographics of the area. Recently there is boost in housing finance and vehicle loans.

illiterate people trust more on banks to deposit their money. So. The use of ATM and Internet banking has allowed ‘anytime. For example SMS functions through simple text messages sent from your . Credit card facility has encouraged an era of cashless society. So. IT Services & Mobile Banking Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers.e. These are also called as electronic purse. this impacts negatively on banks. Automatic voice recorders now answer simple queries. Today MasterCard and Visa card are the two most popular cards used world over. anywhere banking’ facilities. ATM The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. currency accounting machines makes the job easier and self-service counters are now encouraged. they do not have market information. Literacy rate of India is around 65% TECHNOLOGICAL ASPECTS:Technology plays a very important role in bank’s internal control mechanisms as well as services offered by them. But there is positive side of this as well i. etc. they look bank as their sole and safe alternative. get the statement of accounts. Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry. The banks have now started issuing smartcards or debit cards to be used for making payments. It has in fact given new dimensions to the banks as well as services that they cater to and the banks are enthusiastically adopting new technological innovations for devising new products and services. Through ECS we can receive the dividends and interest directly to our account avoiding the delay or chance of loosing the post. Illiterate people hesitate to transact with banks. Opportunities in stocks or mutual funds. give instructions for fund transfers.Literacy rate in India is very low compared to developed countries.

provisioning. In a totally de-regulated and globalised banking scenario. . a strong regulatory framework would be needed. De-regulation of interest rates and moving away from issuing operational prescriptions have been important changes. credit delivery. LEGAL ASPECTS:The advent of liberalization and globalization had seen a lot of changes in the focus of Reserve Bank of India as a regulator of the banking industry. c) Adoption of good corporate governance practices. Technology advancement has offer 24X7 banking even giving faster and secured service. The focus of inspection is also shifting from transaction-based exercise to risk based supervision. The messages are then recognized by the bank to provide you with the required information. The focus has clearly shifted from micro monitoring to macro management. d) Creation of an institutional framework to protect the interest of depositors. b) Adoption of best practices especially in areas like risk-management.mobile. All these technological changes have forced the bankers to adopt customer-based approach instead of product-based approach Technology advancement has changed the face of traditional banking systems. disclosures. Core banking solutions It is the buzzword today and every bank is trying to adopt it is the centralize banking platform through which a bank can control its entire operation the adoption of core banking solution will help bank to roll out new product and services. Supervisory role is also shifting more towards off-site surveillance rather than on-site inspections. The role of regulator would be critical for: a) Ensuring soundness of the system by fixing benchmark standards for capital adequacy and prudential norms for key performance parameters. etc.

ii) Enabling legislation for sharing of credit information about borrowers among lending institutions. iii) Integration of the financial system would change the way we look at banking functions. their impact is yet to be felt at the ground level. it is expected that CDR setup would gain more prominence making NPA management somewhat easier. ENVIRONMENTAL ASPECTS:Banks don't have much effect on the environment. It is expected that the issue of giving statutory backing for CDR system will be debated in times to come.e) Regulating the entry and exit of banks including cross-border institutions. regulation and supervision of these institutions will get a new direction. if banking institutions and non-banking entities are to merge into a unified financial system. in fact I think I have heard a few banks are actually helping rainforests etc Hong Kong and Shanghai Banking Corporation . Some of these issues are addressed in the recent amendment Bill to the Banking Regulation Act introduced in the Parliament. Further. v) The procedure for winding up of companies and sale of assets will also have to be streamlined. The integration of various financial services would need a number of legislative changes to be brought about for the system to remain contemporary and competitive. 2002 (SARFAESI Act) have helped to improve the climate for recovery of bank dues. Also as the co-operative banks are expected to come under the direct regulatory control of RBI as against the dual control system in vogue. the expected integration of various intermediaries in the financial system would add a new dimension to the role of regulators. Corporate Debt Restructuring has evolved as an effective voluntary mechanism. IN the recent past. iv) While the recent enactments like amendments to Debt Recovery Tribunal (DRT) procedures and passage of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act. The need for changes in the legislative framework has been felt in several areas and steps have been taken in respect of many of these issues. The present definition of banking under Banking Regulation Act would require changes. With the borrowers gaining confidence in the mechanism. to ensure that recovery of dues by creditors is possible within a reasonable time. i) Abolition of SICA / BIFR setup and formation of a National Company Law Tribunal to take up industrial re-construction. It would be necessary to give further teeth to the legislations. such as.

As of 2010. New York Stock Exchange. Euronext Paris and Bermuda Stock Exchange. with a market capitalization of £115. North America and South America and around 100 million customers. of which roughly half were in Europe. As of August 2010. PESTLE ANALYSIS:- . where it is now the largest international bank. The origins of the bank lie in Hong Kong and Shanghai. Europe.HSBC Holdings plc is a global financial services company headquartered in London. It has secondary listings on the Hong Kong Stock Exchange (where it is a constituent of the Hang Seng Index). where branches were first opened in 1865. it was the largest company listed on the London Stock Exchange. Asia. Today HSBC remains the largest bank in Hong Kong. it is the world's 6th largest banking and financial services group and the world's 8th largest company according to a composite measure by Forbes magazine. a quarter in the Americas and a quarter in Asia. United Kingdom. As of 30 June 2010 it had total assets of $2.8 billion. HSBC Holdings plc was founded in London in 1991 by The Hongkong and Shanghai Banking Corporation to act as a new group holding company and to enable the acquisition of UK-based Midland Bank.418 trillion. and recent expansion in mainland China. It has around 8.000 offices in 87 countries and territories across Africa. has returned it to that part of its roots. Its primary listing is on the London Stock Exchange and it is a constituent of the FTSE 100 Index. where the Group Chief Executive is currently based.

In spite of many dangers that they encounter in different parts of the world. Recently we all have received post of loans they are offering us at rates as high as 22%.Political Aspects HSBC Banking has been protected by the regulations and policies formulated by different government in the countries where they are operating. future possible problems include stricter regulations and breaking down the power of the banking sector. HSBC. Government is hounding the banking industry because of the image if politicians did not and that they did caused the fin crisis. people are less trusting of banks and the public now see banks as power and money hungry institutions who messed up society . HSBC tries harder to make sure that each society is given equal chances to take advantage of the resources given by the organization. Along with this. Higher interest rates because of the high default rates over the last few years.doubt it's all true. the company also formulates their own protection strategies against any governmental restrictions and limitations. the management of HSBC sees to it that they would be able to surpass such struggles and strives to have a better economic condition. banks are trying to build their balance sheets back up. No much business going on. Liquidity of banks is a worry but nothing is happening in the interbank market. Share prices are recovering. bank bonuses are taxed at 50% in order to deter paying them. at the same time. The company adheres to having good reputation and relations in the society that they belong. The company has been able to adhere to the policies given by each government to make sure that the company will be able to conduct business operations successfully and effectively. the government would also be thinking of a way to get back taxpayers' money that they invested in these institutions and what to do with the banks that have already merged or made acquisitions with other banks Economic Aspect Being the world’s largest and competitive industry in terms of banking and finance. but slowly like the rest of the financial market. but banks are still paying them in order to try to keep their star players within their organization. Social Aspect HSBC is being affected by the situation of the society in which they are operating. Publicity is not all that good either. Furthermore. is said to have a stable and successful economic stability. .

except for the fact banks are now opening on Saturdays as well as on weekdays Legal Aspects Stricter regulations and there have been quite a few court cases with a few banks because shareholders lost money (not that all of these cases actually get much of a fight) Environmental Aspects Banks don't have much effect on the environment. The company adopts different IT/IS systems and used internet to reach their customer all over the world and to know the latest trends in the global business. Aside from these. Things are rather slow in this area as well. etc. R&D is cooking up new forms of investments (we call that financial innovation) to get more business. the company also uses facilities which helps them improved their productions and operations. when confidence in the financial industry is restored. There have been things like the PIN entry device.Technological Aspect The emergence of information technology and internet affects how HSBC has been operating in the past years. online banking. there have been credit cards issued before the boom. nothing all that new. in fact I think I have heard a few banks are actually helping rainforests etc . At the moment.