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trillion by 2010. The Indian banking Industry is in the middle of an IT revolution, focusing on the expansion of retail and rural banking. Banks focus their attention on mergers and acquisitions to take advantage of economies of scale and/or comply with Basel II regulation. The banking Industry was once a simple and reliable business that took deposits from investors at a lower interest rate and loaned it out to borrowers at a higher rate. However deregulation and technology led to a revolution in the Banking Industry that saw it transformed. Mortgage banking has been encompassing for the publicity or promotion of the various mortgage loans to investors as well as individuals in the mortgage business. Online banking services have developed the banking system easier worldwide. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over from the then Imperial Bank of India relegating it to the commercial banking functions. After India’s independence Reserve Bank of India was nationalized and was given the greater powers. In 1969, government nationalized 14 largest commercial banks. Currently India has 88 scheduled commercial banks (SCB’s)-27 public sector banks that these bank hold government stake-31 private sector banks that is they do not hold government stake but they may be publicly listed and traded on stock exchanges. There are also 38 foreign banks. According to the by ICRA, a credit rating agency 75% of the assets of the banking industry is held by public sector banks 18.2% by private sector banks and 6.5% by foreign banks. Early history Banking in India emerged in late 18th century with the first bank being The General Bank of India established in 1786 and the Bank of Hindustan both of which are now defunct. The oldest bank in India is the State Bank of India .This was one of the three presidency banks and the other two being the Bank of Bombay and The Bank of Madras merged together in 1926 to form The Imperial Bank of India which upon India’s independence became The State Bank of India.The oldest joint stock bank of India is Allahabad Bank established in 1865. From World war I to independence At least 94 banks in India failed between 1913 and 1918 as indicated: Years 1913 1914 1915 Number of banks failed 12 42 11 Authorised capital(Rs Lakhs) 274 710 56 Paid-up Capital (Rs Lakhs) 35 109 5
e. and included Global Trust Bank which later amalgamated with Oriental Bank of Commerce . ICICI Bank and HDFC Bank. India’s central banking authority was nationalized. If a talented individual is working in a smaller which empowered the Reserve Bank of . This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI has announced the norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. but there are services. These came to be known as new generation techsavvy banks. The average person can't come along and start up a bank.Axis Bank (earlier as UTI Bank). licensing a small number of private banks.1916 1917 1918 13 9 7 231 76 209 4 25 1 Post Independence The government of India initiated major steps to regulate banking include: (i) In 1948. Banks are fearful of being squeezed out of the payments business. In March 2006. Nationalization GOI issued an ordinance and nationalized the 14 national commercial banks w. Another trend that poses a threat is companies offering other financial services.f July 19. Later on in the year 1993. Power of Suppliers. on which entrepreneurs can capitalize. It was the only merger with nationalized bank and resulted in the reduction of the number of nationalized bank from 20 to 19. but the threat of suppliers luring away human capital does. Porter’s 5 forces model Threat of New Entrants.The Reserve Bank of India allowed Warsburg Pincus to increase it’s stake in Kotak Mahindra Bank (a private sector bank) to 10%. the GOI controlled over 91% of the banking business in India.1969. The suppliers of capital might not pose a big threat. the government merged New Bank of India with Punjab National Bank. such as internet bill payment. The Reserve Bank of India . A second dose of nationalization of 6 more commercial banks followed in 1980. Liberalization In the early 1990’s the then Narsimha Rao’s government embarked on the policy of liberalization . because it is a good source of fee-based revenue. (ii) In 1949 the Banking regulation act was enacted India. With the second dose of nationalization.
Availability of Substitutes. etc. banks are seeing competition rise from unconventional companies. banks try to lower the price of switching. If a person has a mortgage. there are plenty of substitutes in the banking industry. Power of Buyers. Because of this. CURRENT SCENARIO . checking account and mutual funds with one particular bank. it can be extremely tough for that person to switch to another bank. chances are there is a non-banking financial services company that can offer similar services. The banking sector is in a race to see who can offer both the best and fastest services. As you can probably imagine. On the lending side of the business.regional bank. but this also causes banks to experience a lower ROA. banks must attempt to lure clients away from competitor banks. preferred rates and investment services. investment firms. car loan. but one major factor affecting the power of buyers is relatively high switching costs. The individual doesn't pose much of a threat to the banking industry. there is the chance that person will be enticed away by bigger banks. The banking industry is highly competitive. credit card. but whether it is insurance. Competitive Rivalry. Banks offer a suite of services over and above taking deposits and lending money. In an attempt to lure in customers. They do this by offering lower financing. mutual funds or fixed income securities.
Singapore. o Respondents rated India’s Risk management systems more advanced than China. Japan. followed by factors such as identifying needs and developing relevant financial products (75%). Singapore and Hong Kong where as all our respondents feel that we are above par or at par with USA. 87. Russia. at par with Japan. 75% of the respondents feel that we are above or at par with Japan. as well as the policies and structures required to further stimulate the pace of growth. which makes it resilient in the current economic climate as highlighted by our survey were regulatory system (93. banks are happy with the current system and in fact 71. Almost 80% of the banks see personal loans as having the greatest potential for default.72% of the respondents feel that we are at least at par with Japan. economic growth (75%). MAJOR PLAYERS IN THE INDIAN BANKING SECTOR . Brazil.5% of the respondents consider credit information bureaus vital for the measurement of asset quality. All banks in the survey weigh Cost effective credit delivery mechanisms (100%) as most important to the promotion of financial inclusion. Russia.75%). Singapore & UK and 62. UK and USA but at par with Hong Kong and Singapore and 85. On being asked to rate India on certain essential banking parameters (Regulatory Systems.55 % with Hong Kong. Respondents perceived ever rising customer expectations and risk management as the greatest challenge for the industry in the current climate. FICCI conducted a survey on the Indian Banking Industry to assess the competitive advantage offered by the banking sector. demographic knowledge and strong local relations (62. Technological System and Credit Quality) in comparison with other countries the following results emerged: o Regulatory systems of Indian banks were rated better than China. o Technology systems of Indian banks have been rated more advanced than Brazil and Russia but below par with China. Hong Kong.5% with USA. Brazil and Russia.75%).75%). followed by corporate loans and credit cards. 55. Over 92% of the participants agree with recent stress test results that Indian banks have the capacity to absorb twice the amount of their current NPA levels. UK. Risk Assessment Systems.The pace of development for the Indian banking industry has been tremendous over the past decade.5%) and ensuring productive use and adequate returns on credit employed (43. UK and USA. Brazil. o Credit quality of banks has been rated above par than China. Some of the major strengths of the Indian banking industry.43% of people felt that there was no need for standardized credit appraisal across the industry. and relative insulation from external market (68. while industry shows preference for a joint appraisal system. With regards to loan disbursement.
97% against 16.40% the previous year. the State Bank of India is the main bank followed by ICICI bank.98 billion.9% INR32. The continued deregulation of deposits and interest on loans have led to a greater understanding of capital structure. as well as technological upgradation. increased competition and autonomy.45 billion in 2005.90 billion.39 billion.27 billion in fiscal 2005 from INR19.10 billion for 2004-05. and a 78.94% from 2004.35 billion.02 billion in fiscal 2004.66 billion in fiscal 2004.6% increase in fee income to INR20. the Sate bank of India reported the highest net profit at INR43. as well as containment of operating expenses at a moderate level of 8. State Bank of India In 2005. up from INR11. compared with a 5.19%. up 16.5% to INR22. The bank posted net profit at INR14. up 27.25%. ICICI ICICI Bank’s core operating profit increased 92. In terms of net profit. The total income in 2004-2005 was INR101.04 billion. It registered an operating profit for 2004-05 at INR109.07 billion. The growth in profit in 2004-05 was achieved due to an increase in net interest income.9% increase in net interest income to INR28. This was largely due to a 42. in terms of both performance indices and product range.07% increase in total income. Punjab National bank and Canara Bank. up 15. Punjab National Bank Punjab National Bank’s operating profit for 2004-05 stood at INR27.Indian banking has grown much stronger than its Asian counterparts in recent years.9% to INR25. a decline of 13. 56 of India’s domestic banks account for 95% of assets.83% increase in total expenses to INR74. . Profit before tax increased 32.04% from the previous year.28 billion. Operating profit reduced over the period because of a 13.
The bank has a branch in Hong Kong and a representative office in Shenzen. each with a face value Rs. 20th Century 1920: P & O Banking Corporation acquired Allahabad Bank with a bid price of Rs. History 19th Century 24 April 1865: A group of Europeans at Allahabad founded Allahabad Bank. This offering reduced the Government's ownership to 55. 1927: Chartered Bank of India.72. 21st Century October 2002: Bank came out with an Initial Public Offering (IPO) of 10 crores of shares. February 2007: Bank opened its first overseas branch. together with 13 other banks. Australia and China acquired P&O Bank.ALLAHABAD BANK : AN INTRODUCTION Allahabad Bank which began operations in 1865. in Hong Kong. Currently the bank has 2500 branches across the country. MAJOR PRODUCTS AND SERVICES There are three major product categories: (1) Deposit product : Rs 5 banking All time tax benefit term deposit scheme All bank mahila sanchay account All Bank Vikash Sanchay Account All Bank Premium Current Account Current Plus Desposit Scheme (2) Retail credit product . April 2005: Bank conducted a second public offering of 10 crores of shares. However.16%.00. Chartered Bank continued to operate Allahabad Bank as a separate entity. P. Dua. June 2006:Bank opened its first office outside India when it opened a representative office in Shenzen.10 and selling at a premium of Rs.1.000 crores mark. has its head-quarters in Kolkata. each with a face value Rs. 19 July 1969: The Government nationalized Allahabad Bank.436 per share.The Chairman and Managing Director of the bank is Shri J.10 each. Allahabad Bank is therefore now the oldest joint stock bank in India. The IPO reduced the Government's shareholding to 71. China.23%. March 2007: Bank's business crossed Rs.
ETC .Housing Loan Education Loan Car Loan Saral Loan Personal Loan for Pensioners (3) Flexi-Fix deposit Allbank rent loan Allbank property scheme Loan against NSC/KVP Services are: (1) (2) (3) (4) (5) (6) (7) ASBA (APPLICATION SUPPORTED BY BLOCKED AMOUNT) All ayushman bima yojna Cash management services Depository services International debit cum atm card RTGS NEFT .
) d.21 1.) b. It can be of two types: income efficiency and cost efficiency.37 5.42 7.56% as compared to 29. term deposits have grown by 26.55% in previous year).32% and term advances recorded a growth of 23.29%. The short term advances have shown a growth of 39.81 1.82%.64 7.63 5. the average growth in advances over these years is higher as compared to the average growth rate of deposits.PERFORMANCE PARAMETERS OF ALLAHABAD BANK Following are the various parameters on the basis of which we have analyzed the performance of Allahabad bank: a.) c.12 6.) Business Parameters Efficiency Parameters Productivity Parameters Vulnerability Parameters a. Out of the total deposits.) BUSINESS PARAMETERS:i)Business Growth: Like any other firm. b) EFFICIENCY PARAMETERS: Efficiency is measured by output per unit of input. there has been an increase in investment but not as high as compared to previous years. savings deposits by 23.e it grew by only 12. The total investments of the bank have been growing at an increasing rate over the period 20062010. The advances of the bank have also grown continuously over the period 2006-2011.808 2006 2007 2008 2009 . advances and investments.19 0. The deposits of Allahabad bank have grown continuously over the period 2006-2011and has recorded a growth of 24. the total advances have grown by 30.94 7.(i.80% and demand deposits by 10.11 1. the main objective of banking companies is also to grow their business.53 1. For the period ending march 2011.43 1. INCOME TO ASSET RATIOS (in %) Interest Total income PBDT to total income to total to assets assets total assets 4.29 1.12 PAT to total assets 1.36% in the year ending march 2011. For the year ending march 2011.75%. For a banking company growth is measured in terms of growth of its deposits.However.11% in the year ending march 2011.86 4.
Operating expense to total assets has shown a reversal trend . c) PRODUCTIVITY PARAMETERS: Productivity relates to output of employees.94 Interest income to total assets ratio has shown an upward trend over the years 20062009.36 2011 4.This could lead to the low interest expense to total assets ratio for the subsequent years. It has increased over the period 2006-2009 but has gradually declined in 2010 and 2011. .47 1. Although the interest income has been increasing over the years but the rate of increase has been reducing.2010 2011 Interpretation: 5.43 2010 4. Total income to total assets ratio has also shown a similar trend as interest income to total assets ratio.The operating expenses to total assets ratio presumably declines because of low staff cost.27% (as compared to 5. but the ratio declined in 2010. This is because the PBDT and PAT of the bank have shown tremendous increase in the year 2010 as compared to other years where it was increasing at a declining rate.The ratio has declined from the period 2006-2008 and .The percentage increase in interest expense is low in 2009 .39 2009 5.27 5. In the year 2009 interest income increased by 22. It has increased over the period 2006-2009 but has gradually declined in 2010.28 1 0.41 1. Both these ratios have declined for the years 20062009 and then have increased for the year ending march 2010.30 1.87 7.51%.The ratio has again increased in 2009 and 2011.52 2008 5. This decline in ratio can be attributed to the increase in interest income at a decreasing rate. However.52% but in 2010 it increased by only 16.95 1.64% for previous year).62 1.53 6.32 1. in the year ending march 2010 this ratio declined to 5. PBDT to total assets and PAT to total assets has shown a reverse trend as compared to other two ratios as discussed above. EXPENSE AS A PERCENTAGE OF TOTAL ASSETS (in %) Interest expense to total Operating expense to assets total assets 2006 3.68 1.58 Interest expense to total assets has shown a similar trend as interest income to total assets ratio.61 1.88 2007 4..
06 0.)VULNERABILITY PARAMETERS: Vulnerability indicates risk that banks may have to face if major adverse situations emerge. Average cost of funds has shown the incremental trend in the years 2006-2009 but then it decreased in 2010-2011. the bank can increase its profitability.76 lakhs 5.06 2.22 10.70 lakhs Productivity per employee 336 lakhs 495 lakhs 604 lakhs 706 lakhs 845 lakhs 1063 lakhs Average yield of funds 8. The interest spread has increased more than two times in 2007 from 2006 but then reduced drastically to 287 in 2008 .03 Net NPA to total advances(%) 0.83 Interest spread 9225 21554 287 30958 70780 139348 From the above chart we could analyse that the profit per employee has increased two folds .99 Contingent liabilities to total liabilities ratio(%) 38.97 5.This could lead to the increased efficiency on the per employee basis by not increasing the number of employees by 2 folds.69 lakhs 3.95 lakhs 3.37 12.62 5.68 lakhs 4.65 2.67 6.01 66. d.11 30.The Interest spread is the difference between the average lending rate and the average borrowing rate for a bank or other financial institution.But in 2010 we have seen a decrease in the average yield of funds in 2010 because of low interest and thus the interest earned would be less by the bank.84 1. 2006 2007 2008 Gross NPA to total advances(%) 4.It means that the bank is earning more but paying less.75 9.The interest spread again increased to 139348 If a bank can widen this spread by charging higher loan interest rates.57 10.88 10.67 6.Again it increased to 30958 in 2009 .The efficiency could in turn generate profits to the bank.97 5. Similarly we could see that the productivity per employee has increased approximately more than 3 folds and thus this could lead to the efficiency of the bank to a great extent.80 Capital adequacy ratio(%) 13.76 lakhs 6.2006 2007 2008 2009 2010 2011 Number of employees 19134 20379 20079 20457 21327 21485 Profit per employee 3.50 Average cost of funds 4.52 11. The average yield of funds has shown an increase in the years of 2006-2009 as the interest rate has increased and thus the income earned from interest by the bank has also shown a drastic change.86 .76 10.
2009 2010 2011 1.76 0.acceptances and endorsements etc.24 37.The minimum capital adequacy ratio as prescribed by (RBI) is 9 % but the bank is having around 13 % C.72 0. this shows that the profitability is continuously increasing and improving every year by overcoming the amount of gross NPAs Net NPA To Total advances .A.96 47. Contingent Liabilities to total liabilities ratio(%) :The Contigent liabilities arise due to off balance sheet activities like forward contrack. Gross NPA to Total advances As we can see from the data given the ration decreasing from 2006-2011 .83 1. As number of gross NPAs decreases relatively.This means that bank has more liquidity and the C.79 13.11 13. This also shows the improvement in efficiency of bank and the improvement in the quality of the asset.71 1.62 12.The bank is now more efficiently performing and is successful in reducing it’s NPA.A.20 Capital Adequacy Ratio is the ratio of capital to risk waited assets we can see that ratio is decreasing from 2006-2008 this means the bank is vulnerable to loan losses.R should be low. If we compare the ratios of gross NPAs to gross advances and gross NPAs to total assets we can see that the ratio is continuously decreasing over a period which means the gross NPAs is continuously decreasing relatively to total assets and gross advances which is a much positive sign for the bank. This shows the sign of efficiency in the bank.66 0.R(Capital Adequacy Ratio) in 2009-2010.93 40.guarantees.As we can see from the data given the ration increased from 2006-2008 but gradually decreased from 2009-2011 if the ratio increases it shows that the bank is vulnerable to credit risk and liquidity risk.
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