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  • 1. Industry Analysis of Banking and comprehensive study of top two player ACKNOWLEDGEMENTS It is my proud privilege to release the feelings of my gratitude to severalpersons who helped me directly or indirectly to conduct this research project work. I express myheart full indebtness and owe a deep sense of gratitude to my teacher and my faculty guide MrNarendra Manral, Mr Nimish Saxena, Shri Ramswaroop Memorial Group of ProfessionalColleges, for their sincere guidance and inspiration in completing this project. I am extremely thankful to the Prof BB Tiwari, Prof Pankaj Dhingra, Mr NadeemQazilbash, and Mr Shayaan Zaidi and all faculties members of PGDM of Shri RamswaroopMemorial Group of Professional Colleges for their coordination and cooperation and for therekind guidance and encouragement. I also thank all my friends who have more or less contributed to the preparationof this project report. I will be always indebted to them. The study has indeed helped me to explore more knowledgeable avenues related tomy topic and I am sure it will help me in my future. Mohammad Azam PGDM 2nd year PGDM 10007 1|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 2. Industry Analysis of Banking and comprehensive study of top two player INTRODUCTION Banking Industry in IndiaThe Indian banking industry started taking shape after India‟s independence in 1947. Though theIndian banking industry can be traced as far back as 1806 with the establishment of Bank ofBengal, the industry was in a state of turmoil.Under the British influence, Calcutta witnessed a surge in trading activities, giving rise to anumber of banking establishments during the period. Several banks, set up in order to financetrading, went out of business. For instance, Union bank, formed by Indian merchants, failed dueto economic recession during 1848-49 resulting in depositors losing money. Such events resultedin shifting the reigns of the industry into the hands of Europeans till the early twentieth century.From 1906 to1911, several banks were set up based on the principles of the Swadesi movement.The movement inspired Indian businessmen and politicians to set up banks for the Indiancommunity and many new banks were launched to promote trade and finance in communalgroups. Some of the prominent ones among these are Bank of India, Corporation Bank, Bank ofBaroda, Indian bank, Canara Bank, and Central bank of India.Bank of Bengal, along with its sister banks, Bank of Bombay and Bank of Madras, set up byBritish East India Company, merged in 1921 to give birth to Imperial bank of India, now knownas State bank of India.During 1914-1945, India went through several ups and downs politically and economically andthe effects were felt in the banking sector too. The World Wars disrupted banking activities ofthe nation and almost 94 banks failed during this period. After 1947, however, banking activitiesflourished. 2|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 3. Industry Analysis of Banking and comprehensive study of top two playerAfter the partition of India, the government toook drastic steps to regulate the banking industry.For example, in 1948, additional powers and authority were vested in the Reserve bank of Indiato monitor the functioning of the entire banking system. The passing the Banking regulation actin 1949, empowered RBI to further regulate, inspect, and control Indian banks.The nationalization and liberalization of banks 1969 and 1991 respectively also boosted thedevelopment of the Indian banking sector. Nationalization resulted in 91% of governmentholding in the banking industry and liberalization paved the path for private players to participatein the industry. As a result, banks like Oriental bank of Commerce, HDFC bank, ICICI bank, andAXIS bank came into being. Foreign banks too were permitted to set up their offices in India.The rationalization of FDI norms in 2002 also allowed foreign players to acquire stakes in Indianbanks.These banks implemented innovative forms of banking like ATMs, mobile banking, phonebanking, internet banking, and debit/credit cards. The private players constantly improvedservices in order to retain customers and win the severe competition which had become a featureof the Indian banking industry.Currently, private banks are going through a series of mergers and acquisitions and public sectorbanks are shrinking in the form of manpower, equity, and non-performing assets.The public sector banks have been grappling with attrition which surfaced after the VoluntaryRetirement Scheme was announced. The dilution of equity from 51% to 33% has opened upopportunities for takeovers.The Indian banking system, however, proved resilient to shocks arising out of the globalfinancial recession. In terms of quality of assets, the Indian banking players have come out cleanwith strong and transparent balance sheets compared to their counterparts in other nations.Following the financial crisis, new deposits made their way towards public sector banks.According to RBIs Quarterly Statistics on Deposits and Credit of Scheduled CommercialBanks: September 2009, nationalized banks, as a group, accounted for 50.5% of the aggregatedeposits, while State Bank of India (SBI) and its associates accounted for 23.8%. The share ofother scheduled commercial banks, foreign banks and regional rural banks in aggregate depositswere 17.8%, 5.6%, and 3%, respectively. 3|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 4. Industry Analysis of Banking and comprehensive study of top two playerEver since US declared recovery from the global financial crisis, the confidence of non-residentIndians (NRIs) in the Indian economy has revived again. NRI fund inflows increased since April2009 and touched US$ 45.5 billion on July 2009, as per the RBIs February bulletin. Most of thishas come through Foreign Currency Non-resident (FCNR) accounts and Non-resident ExternalRupee Accounts. Indias foreign exchange reserves rose to US$ 284.26 billion as on January 8,2010, according to the RBIs February bulletin.The report also found that scheduled commercial banks served 34,709 banked centers. Of thesecenters, 28,095 were single office centers and 64 centers had 100 or more bank offices.The expansion plans are self evident from the example of SBI, which is adding 23 new branchesabroad, bringing its foreign-branch network number to 160 by March 2010. This will cement itsleading position as the bank with the largest global presence among local peers.Currently, the Indian banking framework is comprised of 88 scheduled commercial banks(SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29private banks (these do not have government stake, they may be publicly listed and traded onstock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branchesand 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sectorbanks hold over 75 percent of total assets of the banking industry, with the private andforeign banks holding 18.2% and 6.5% respectively.In its platinum jubilee year, the RBI, the central bank of the country, in a notificationissued on June 25, 2009, said that banks should link more branches to the NationalElectronic Clearing Service (NECS). NECS was introduced in September 2008 for centralizedprocessing of repetitive and bulk payment instructions. Currently, a little over 26,000 branches of114 banks are enabled to participate in NECS.Banking in India originated in the first decade of 18th century with The General Bank of Indiacoming into existence in 1786. This was followed by Bank of Hindustan. Both these banks arenow defunct. The oldest bank in existence in India is the State Bank of India being established as"The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like 4|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 5. Industry Analysis of Banking and comprehensive study of top two playerCredit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta wasthe most active trading port, mainly due to the trade of the British Empire, and due to whichbanking activity took roots there and prospered. The first fully Indian owned bank was theAllahabad Bank, which was established in 1865.By the 1900s, the market expanded with the establishment of banks such as Punjab NationalBank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were foundedunder private ownership. The Reserve Bank of India formally took on the responsibility ofregulating the Indian banking sector from 1935. After Indias independence in 1947, the ReserveBank was nationalized and given broader powers. 5|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 6. Industry Analysis of Banking and comprehensive study of top two player OBJECTIVE OF THE PROJECTThe Objectives of the project are as follows: Analyze the industry environment by applying various strategic tools like PESTANALYSIS and SWOT ANALYSIS. To find the recent happening in this industry and relate it to draw suitable inferences. Bring out TOP 2 Banks of Indian Banking Industry on the basis of relevant parameters. Analyze the financial statement of both the companies and discover the various region where one overcomes the other and try to find reasons for that. Analyze the Brand lines and try to explore the segmentation, targeting and positioning policies of these TOP 2 players. Evaluate the current scenario of the industry as well as estimating the chances of entry of new players by the help of PORTER FIVE FORCE ANALYSIS. Study the management, working style and other organizational parameters of the TOP 2 players. Conduct a comparative analysis between these TOP 2 players. 6|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 7. Industry Analysis of Banking and comprehensive study of top two player S.W.O.T ANALYSIS OF INDIAN BANKING INDUSTRY STRENGTH  Bank lending has been a significant driver of GDP growth and employment(The growth of services, including banking and insurance, improved to 9.9 per cent in 2010-11 from 9.2 per cent in the previous fiscal. articles.economictimes.indiatimes.com)  The vast networking & growing number of branches & ATMs. Indian banking system has reached even to the remote corners of the country.  Policy makers have made some notable changes in policy and regulation to help Strengthen the sector. These changes include strengthening prudential norms, Enhancing the payments system and integrating regulations between commercial and Co -operative banks.  They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the pr ivate and foreign banks holding 18.2% and 6.5% respectively.  In terms of quality of assets and capital adequacy, I ndian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region.  Currently, India has 81 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 22 private banks (these do not 7|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 8. Industry Analysis of Banking and comprehensive study of top two player have government stake; they may be publicly listed and traded on stock exchanges) and 32 foreign banks. WEAKNESS  PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organizational Performance ethic & strengthen human capital.  Bank penetration is limited to only a few customer segments and geographies  Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive about laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs), unless industry utilities and service bureaus.  Impediments in sectoral reforms: Opposition from Left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term. OPPORTUNITY  Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks. 8|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 9. Industry Analysis of Banking and comprehensive study of top two player  With the growth in the Indian economy expected to be strong for quite some time especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong  Reach in rural India for the private sector and foreign banks.  A multi-media campaign, “Swabhimaan”, has been launched to inform, educate and motivate people to open bank accounts.  The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee- based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations.  Foreign banks committed to making a play in I ndia will need to adopt alternative approaches to win the “race for the customer” and build a value- creating customer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term. Maintaining a fundamentally long-term value-creation mindset. THREATS  Rise in inflation figures which would lead to increase in interest rates.  Increase in the number of foreign players would pose a threat to the PSB as well as the private players 9|PageSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 10. Industry Analysis of Banking and comprehensive study of top two player PEST ANALYSIS OF INDIAN BANKING INDUSTRY PEST analysis of any industry investigates the important factors that affect the industry and influence the companies operating in the sector. PEST stands for Political, Economic, Social and Technological analysis. The PEST Analysis is a tool to analyze the forces that drive the industry y and how those factors can influence the industry.POLITICAL FACTORS: Government and RBI policies affect the banking sector. Sometimes looking into the political advantage of a particular party, the Government declares some measures to their benefits like waiver of short-term agricultural loans, to attract the farmer‟s votes. By doing so the profits of the bank get affected. Various banks in the cooperative sector are open and run by the politicians. They exploit these banks for their benefits. Sometimes 10 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 11. Industry Analysis of Banking and comprehensive study of top two player the government appoints various chairmen of the banks. Various policies are framed by the RBI looking at the present situation of the country for better control over the banks.BUDGET MEASURES:Agriculture CreditTo get the best from their land, farmers need access to affordable credit. Banks have beenconsistently meeting the targets set for agriculture credit flow in the past few years. For the year2011-12, The target raised of credit flow to the farmers from `3,75,000 crore this year to`4,75,000 crore in 2011-12. Banks have been asked to step up direct lending for agriculture andcredit to small and marginal farmers. (Budget 2011-2012 Speech of Pranab MukherjeeMinister of Finance February 28, 2011)FDI LIMITIn the private banking sector of India, FDI is allowed up to a maximum limit of 74 % of the paid-up capital of the bank.Benefits of FDI in Banking Sector in India- Transfer of technology from overseas countries to the domestic market. Ensure better and improved risk management in the banking sector.ECONOMIC FACTORS :Banking is as old as authentic history and the modern commercial banking are traceable toancient times. In India, banking has existed in one form or the other from time to time. Thepresent era in banking may be taken to have commenced with establishment of bank of Bengal in1809 under the government charter and with government participation in share capital.Allahabad bank was started in the year 1865 and Punjab national bank in 1895, and thus, others 11 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 12. Industry Analysis of Banking and comprehensive study of top two playerfollowed. Every year RBI declares its 6 monthly policy and accordingly the various measuresand rates are implemented which has an impact on the banking sector. Also the Union budgetaffects the banking sector to boost the economy by giving certain concessions or facilities. If inthe Budget savings are encouraged, then more deposits will be attracted towards the banks and inturn they can lend more money to the agricultural sector and industrial sector, therefore, boomingthe economy. If the FDI limits are relaxed, then more FDI are brought in India through bankingchannels.GROWING ECONOMY / GDP:Indian economy has registered a growth of more that 8.5 per cent for last three year and isexpected to maintain robust growth rate as compare to other developed and developing countries.Banking Industry is directly related to the growth of the economy. The contributions of varioussectors in the Indian GDP for 2010-2011 are as follows: Agriculture: 17% Industry: 29% ServiceSector: 54% It is great news that today the service sector is contributing more than half of theIndian GDP. It takes India one step closer to the developed economies of the world. Earlier itwas agriculture which mainly contributed to the Indian GDP. The Indian government is stilllooking up to improve the GDP of the country and so several steps have been taken to boost theeconomy. Policies of FDI, SEZs and NRI investment have been framed to give a push to theeconomy and hence the GDP.MONETARY POLICY :Monetary Policy 20010-2011Cash Reserve Ratio (CRR) 6.00% (w.e.f. 24/04/2010)Increased from 5.00% to 5.50% wef 13/02/2010; and then again to 5.75% wef 27/02/2010; andnow to 6.00% wef 24/04/2010Statutory Liquidity Ratio (SLR) 24%(w.e.f. 18/12/2010)Decreased from 25% which was continuing since 07/11/2009 12 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 13. Industry Analysis of Banking and comprehensive study of top two playerRepo Rate 8.50% (w.e.f.25/10/2011) Increased from 8.25% which was continuing since16/09/2011Reverse Repo Rate 7.50% (w.e.f. 25/10/2011) Increased from 7.25% which was continuingsince 16/09/2011.INFLATION RATES:Inflation represents a rise in general level of prices of goods and services over a period oftime. It leads to an erosion in the purchasing power of money. Resultantly, each unit ofcurrency buys fewer goods and services Different fiscal and monetary policies havecurbed. The inflation rate in India was last reported at 9.36 percent in nov of 2011SOCIO CULTUREAL FACTORS:Socio culture factors also affect the business. They show in which people behave in country.Socio-cultural factors like taboos, customs, traditions, tastes, preferences, buying andconsumption habit of people, their language, beliefs and values affect the business. Bankingindustry is also operates under this social environment and it is also affect by this factor. Thesefactor are changing continuously people‟s life style, their behavior, consumption pattern etc. ischanging and also creating opportunities and threat for banking industry. There are some socio-culture factors that affect banking inIndia have been analyzed below.SHIFT TOWARDS NUCLEAR FAMILY:Attitude of people of India is changing. Now, younger generation wants to remain separate fromtheir parents after they get married. Joint families are breaking up. There are many reasonsbehind that. But banking sector is positively affected by this trend. A family need homeconsumer durables likefreeze, washing machine, television, bike, car, etc.. so, they demand forthese products and borrow from banks. Recently there is boost in housing finance and vehicle 13 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 14. Industry Analysis of Banking and comprehensive study of top two playerloans. As they do not have money they go for installments. So, banks satisfy nuclear familieswants.CHANGE IN LIFE STYLE:Life style of India is changing rapidly. They are demanding high class products. They havebecome more advanced. People want everything car, mobile, etc.. what their fore father haddreamed for. Now teenagers also have mobile and vehicle. Even middle class people also want tohave well furnished home, television, mobile, vehicle and this has opened opportunities forbanking secter to tap this change. Every thing is available so it has become easy to purchaseanything if you do not have lump sum.POPULATION :Increase in population is one of he important factor, which affect the private sector banks. Bankswould open their branches after looking into thepopulation demographics of the area. Percentageof deposit in any branches of banks depends upon the population demographic of that area. Thepopulation of India is about 121 cores is expected to reach about 140 cores in 2018. About 70%of population is below 35years of age. They are in the prime earning stage and this increase theearning of the banks. Total Deposits mobilized by the Private Sector Banks increased from Rs,2,52,335 crore as on 31st March 2009 to Rs. 3,12,645 crore as on 31st March 20010.LITERACY RATE:Literacy rate in India is very low compared to developed countries. Illiterate people hesitate totransact with banks. So, this impacts negatively on banks. But there is positive side of this aswell i.e. illiterate people trust more on banks to deposit their money, they do not have marketinformation. Opportunities in stocks or mutual funds. So, they look bank as their sole and safealternative. 14 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 15. Industry Analysis of Banking and comprehensive study of top two playerTECHNOLOGICAL FACTORS:TECHNOLOGY IN BANKSTechnology plays a very important role in bank‟s internal controlmechanisms as well as servicesoffered by them. It has in fact given new dimensions to the banks as well as services that theycater to and the banks are enthusiastically adopting new technological innovations for devisingnew products and services.ATMThe latest developments in terms of technology in computer and telecommunication haveencouraged the bankers to change the concept of branch banking to anywhere banking. The useof ATM and Internet banking has allowed „anytime, anywhere banking‟ facilities. Automaticvoice recorders now answer simple queries, currency accounting machines makes the job easierand self-service counters are now encouraged. Credit card facility has encouraged an era ofcashless society. Today MasterCard and Visa card are the two most popular cards used worldover. The banks have now started issuing smartcards or debit cards to be used for makingpayments. These are also called as electronic purse. Some of the banks have also started homebanking through telecommunication facilities and computer technology by using terminalsinstalled at customers home and they can make the balance inquiry, get the statement ofaccounts, give instructions for fund transfers, etc. Through ECS we can receive the dividendsand interest directly to our account avoiding the delay or chance of loosing the post.IT SERVICES & MOBILE BANKINGToday banks are also using SMS and Internet as major tool of promotions and giving great utilityto its customers. For example SMS functions through simple text messages sent from yourmobile. The messages are then recognized by the bank to provide you with the requiredinformation. All these technological changes have forced the bankers to adopt customer-based 15 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 16. Industry Analysis of Banking and comprehensive study of top two playerapproach instead of product-based approach Technology advancement has changed the face oftraditional banking systems. Technology advancement has offer 24X7 banking even giving fasterand secured service.CORE BANKING SOLUTIONS:It is the buzzword today and every bank is trying to adopt it is the centralize banking platformthrough which a bank can control its entire operation the adoption of core banking solution willhelp bank to roll out new product and services. PORTER’S FIVE FORCES MODEL OF COMPETITIONThe nature of competition in the industry in large part determines the content of strategy,especially business level strategy .based it is on the fundamental economics of the industry, thevery profit potential of an industry is determine by competition interaction. Where theseinteractions are intense, profit tends to be whittled away by the activities of competing.Porter‟s model is based on the insight that a corporate strategy should meet the opportunities andthreats in the organizations external environment. Especially, competitive strategy should baseon and understanding of industry structures and the way they change. Porter has identified fivecompetitive forces that shape every industry and every market. These forces determine theintensity of competition and hence the profitability and attractiveness of an industry. Theobjective of corporate strategy should be to modify these competitive forces in a way thatimproves the position of the organization. Porter‟s model supports analysis of the driving forcesin an industry. Based on the information derived from the Five Forces Analysis, management candecide how to influence or to exploit particular characteristics of their industry. 16 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 17. Industry Analysis of Banking and comprehensive study of top two player Bargaining power of suppliers is very low Nature of suppliers Few alternatives RBI rules and regulations Suppliers are not concentrated forward integration Threat of competitors Threat ofBarriers to entry Large no of banks substitute Product High market growth differentiation rate Non banking very difficult Low switching costs financial sector Licensing Undifferentiated increasing requirement services rapidly High fixed cost Deposits in High exit barriers posts Stock Market Bargaining power of consumer very high Large no. of alternatives Low switching costs Undifferentiated services Full information about the market 17 | P a g e SHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 18. Industry Analysis of Banking and comprehensive study of top two player Rivalry among Competing Firms Rivalry among competitors is very fierce in Indian Banking Industry.The services banks offer is more of homogeneous which makes the Company to offer the sameservice at a lower rate and eat their competitor market‟s share. Market Players use all sorts ofaggressive selling strategies and activities from intensive advertisement campaigns topromotional stuff. Even consumer switch from one bank to another, if there is a wide spread inthe interest. Hence the intensity of rivalry is very high. The no of factors has contributed toincrease rivalry those are. 1. A large no of banks There is so many banks and non financial institution fighting for same pie , which has intensified competition? 2. High market growth rate India is seen as one of the biggest market place and growth rate in Indian bankingindustry is also very high. This has ignited the competition. 3. Homogegeous product and services The services banks offer is more of homogeneous which makes the company to offerthe same service at a lower rate and eat their competitor market‟s share. 4. Low switching cost Costumers switching cost is very low, they can easily switch from one bank to anotherbank and very little loyalty exist . 5. Undifferanciated services Almost every bank provides similar services. Every bank tries to copy each other servicesand technology which increase level of competition. 6. High fixed cost 18 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 19. Industry Analysis of Banking and comprehensive study of top two player 7. High exit barriers High exit barriers humiliate banks to earn profit and retain customers by providing worldclass services. 8. Low government regulations There are low regulations exist to start a new business due lpg policy adopted by India. BARGAINING POWER OF SUPPLIERS Banking industry is governed by Reserve Bank of India. Reserve Bank of India is theauthority to take monetary action which leads to direct impact on circulation of money in theEconomy. The rules and regulation lay down by RBI. Suppliers of banks are depositors .these are those people who have excess money andprefer regular income and safety. In banking industry suppliers have low bargaining power. 1. Nature of suppliersSuppliers of banks are those people who prefer low risk and those who need regular income andsafety as well. Banks best place for them to deposits theirs surplus money. 2. Few alternatives 3. Rbi rules and regulationsBanks are subject to rbi rules and regulations .bank have to behave in a way that rbi wants. So rbitakes all decisions related to interest rates . this reduce bargaining power of suppliers . 4. Suppliers not concentrated Banking industry suppliers sure not concentrated. There are numerous with negligibleportion of offer .so this reduce their bargaining power . 19 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 20. Industry Analysis of Banking and comprehensive study of top two player BARGAINING POWER OF CONSUMERS In today world, Customer is the King. Banks offers different services According toclients need and requirement. They offer loans at Prime Lending Rate (PLR) to their trust worthyclients and higher rate to others clients. Customers of banks are those who take loans and uses services of banks. Customers havehigh bargaining power. These are 1. Large no of alternatives Customers have large no of alternatives, there are so many banks, which fight for samepie. There are many non financial institutions like icici, hdfc, and ifci, etc. which has also jumpinto these business .there are foreign banks , privet banks, co-operative banks and developmentbanks together with specialized financial companies that provides finance to customers .these allincrease preference for customers.2. Low switching cost Cost of switching from one bank to another is low. Banks are also providing zero balanceaccount and another types of facilities. They are free to select any banks service. Switching costare becoming lower with internet banking gaining momentum and a result customers loyaltiesare harder to retain.3. Undiffenciated service Bank provide merely similar service there are no much diffracted in service provides bydifferent banks so, bargaining power of customers increase. They can not be charged fordifferentiation.4. Full information about the market Customers have full information about the market due to globalization and digitalizationConsumers have become advance and sophisticated .they are aware with each market conditionso banks have to be more competive and customer friendly to serve them. 20 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 21. Industry Analysis of Banking and comprehensive study of top two player For good creditworthy borrowers bargaining power is high due to the availability of largenumber of bank POTENTIAL ENTRY OF NEW COMPETITORS Reserve Bank of India has laid out a stagnant rules and regulation for new entrant inBanking Industry. We expect merger and acquisition in the banking industry in near future.Hence, the industry is less porn of new competitor. Barriers to an entry in banking industry no longer exist. So lots of privet and foreignbanks are entering in the market. Competitors can come from an industry to „disintermediate„bank product differentiation is very difficult for banks and exit is difficult. So everybank strives to survive in highly competitive market so we see intense competitive can mergersand acquisitions. Government policies are supportive to start new bank. There is less statutoryrequirement needed to start a new venture? Every bank to tries to achieve economics of scalethrough use of technology and selecting and training manpower . There are public sector banks, private sector and foreign banks along with non bankingfinance companies competing in similar business segments. POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTS Every day there is one or the other new product in financial sector.Banks are not limited to tradition banking which just offers deposit and lending. In addition,today banks offers loans for all products, derivatives, ForEx, Insurance, Mutual Fund, Demitaccount to name a few. The wide range of choices and needs give a sufficient room for newproduct development and product enhancement. Substitute products or services are those, which are different but satisfy the same set ofcustomers. In private banking industry following are the substitutes: 1. NBFC: Non-banking financial Institutions play an important role in giving financial assistance. Mobilization of financial resources outside the traditional banking system 21 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 22. Industry Analysis of Banking and comprehensive study of top two player has witnessed a tremendous growth in recent years in the India. NBFC is a close substitute of banking in respect of raising funds. Borrower can easily raise funds from NBFC because it requires less formal procedure for getting funds compare to private banks. 2. Post Office Products: Post office is also providing some service like fixed deposit facility, saving account, recurring account etc. The interest rate of saving account is higher than private banks. It is fully secured by the government so people who do not want to take risk for them post office saving is good substitute. 3. Government Bond: Govt. Bond also attracts savings from the general public. It is less risky and more secured as compare to savings in private banks. 4. Mutual Funds: Mutual funds are also now proving as good substitutes for banks. They assure for providing high return with less time in comparison of banks. The administrative expenses are also very low as compared to banks. Investment in Mutual funds is more flexible than investment in banks. 5. Stock Market: People who are ready to bear risk and wants a high return on their investment, stock market is a good substitute for them. Day by day investors are moving towards stock market as interest rate in banks are decreasing. So now stock market has proved as a big competitor for baking sector. 6. Debentures: Debentures is also proved as a good substitute of bank‟s fixed deposit as return on debenture is fixed and high. There are different types of debentures, which attract various classes of investors. 7. Other Investment Alternatives: Now common people‟s attraction is shifting from banks to other various alternatives such as gold, precious metals, land, small savings . 22 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 23. Industry Analysis of Banking and comprehensive study of top two player TOP TWO PLAYERS IN BANKING INDUSTRY  State Bank of India  ICICI bank 23 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 24. Industry Analysis of Banking and comprehensive study of top two player SELECTION CRITERIA  CASA or Deposits  Investment  Advances comparision chart 1200000 1000000 202017 800000 181206 Axis Title 600000 804116 400000 120893 631914 200000 285790 0 Deposits Investments Advances ICICI 202017 120893 181206 SBI 804116 285790 631914 24 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 25. Industry Analysis of Banking and comprehensive study of top two player STATE BANK OF INDIA (SBI) 25 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 26. Industry Analysis of Banking and comprehensive study of top two player History of SBIThe evolution of State Bank of India can be traced back to the first decade of the 19th century. Itbegan with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank wasredesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal.Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras(established on 1 July 1843) followed the Bank of Bengal. These three banks dominated themodern banking scenario in India, until when they were amalgamated to form the Imperial Bankof India, on 27 January 1921.An important turning point in the history of State Bank of India is the launch of the first FiveYear Plan of independent India, in 1951. The Plan aimed at serving the Indian economy ingeneral and the rural sector of the country, in particular. Until the Plan, the commercial banks ofthe country, including the Imperial Bank of India, confined their services to the urban sector.Moreover, they were not equipped to respond to the growing needs of the economic revivaltaking shape in the rural areas of the country. Therefore, in order to serve the economy as awhole and rural sector in particular, the All India Rural Credit Survey Committee recommendedthe formation of a state-partnered and state-sponsored bank.The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank ofIndia, and integrating with it, the former state-owned or state-associate banks. Subsequently, anAct was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI)was established on 1 July 1955. This resulted in making the State Bank of India more powerful,because as much as a quarter of the resources of the Indian banking system were controlleddirectly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in1959. The Act enabled the State Bank of India to make the eight former State-associated banksas its subsidiaries. 26 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 27. Industry Analysis of Banking and comprehensive study of top two playerThe State Bank of India emerged as a pacesetter, with its operations carried out by the 480offices comprising branches, sub offices and three Local Head Offices, inherited from theImperial Bank. Instead of serving as mere repositories of the communitys savings and lending tocreditworthy parties, the State Bank of India catered to the needs of the customers, by bankingpurposefully. The bank served the heterogeneous financial needs of the planned economicdevelopment.BranchesThe corporate center of SBI is located in Mumbai. In order to cater to different functions, thereare several other establishments in and outside Mumbai, apart from the corporate center. Thebank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at majorcities throughout India. It is recorded that SBI has about 10000 branches, well networked to caterto its customers throughout India.ATM ServicesSBI provides easy access to money to its customers through more than 8500 ATMs in India. TheBank also facilitates the free transaction of money at the ATMs of State Bank Group, whichincludes the ATMs of State Bank of India as well as the Associate Banks – State Bank ofBikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also transactmoney through SBI Commercial and International Bank Ltd by using the State Bank ATM-cum-Debit (Cash Plus) card.SubsidiariesThe State Bank Group includes a network of eight banking subsidiaries and several non-bankingsubsidiaries. Through the establishments, it offers various services including merchant bankingservices, fund management, factoring services, primary dealership in government securities,credit cards and insurance.The eight banking subsidiaries are: 27 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 28. Industry Analysis of Banking and comprehensive study of top two player State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of India (SBI) State Bank of Indore (SBIR) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT) SEGMENTATION ,TARGETING,POSITION OF SBISEGMENTATION STRATEGY: Demographics variablesLocation Metros & divisional citiesOccupation Business person Salaried class (both govt. & private)Age Senior citizens Major MinorTARGETING STRATEGY:Corporate banking market: This market targets the industries & fulfills their financial needs.Capital market : This segment is targeted on the long term needs of the individual as well as ofindustries. 28 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 29. Industry Analysis of Banking and comprehensive study of top two playerRetail banking market : this segment is for retail investors & provide them short term financialcredit for their personal, house hold needs.POSITIONING STRATEGY:SBI has positioned itself as a bank which gives higher standard of services through productinnovation for the diverse need of individual & corporate clientsTaglines: With you - all the way and Pure Banking. Nothing Else DIFFERENT PRODUCTS OF SBI: DEPOSIT LOANS  Savings Account  Home Loans  Current Account  Loan Against Property  Fixed Deposits  Personal Loans  Demat Account  Car Loan  Life Plus Senior Citizens Savings  Loans against Securities Account  Two Wheeler  Security Deposits  Retail Asset  Recurring Deposits  Farmer Finance  Tax-Saver Fixed Deposit  Business Installment  Salary Account Loans  Advantage Woman Savings Account  Rural Savings Account  No frill account 29 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 30. Industry Analysis of Banking and comprehensive study of top two player Industrial Credit and Investment Corporation of India(ICICI) 30 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 31. Industry Analysis of Banking and comprehensive study of top two player History Of ICICIICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,and was its wholly-owned subsidiary. ICICIs shareholding in ICICI Bank was reduced to 46%through a public offering of shares in India in fiscal 1998, an equity offering in the form ofADRs listed on the NYSE in fiscal 2000, ICICI Banks acquisition of Bank of Madura Limited inan all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutionalinvestors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the WorldBank, the Government of India and representatives of Indian industry. The principal objectivewas to create a development financial institution for providing medium-term and long-termproject financing to Indian businesses.In the 1990s, ICICI transformed its business from a development financial institution offeringonly project finance to a diversified financial services group offering a wide variety of productsand services, both directly and through a number of subsidiaries and affiliates like ICICI Bank.In 1999, ICICI become the first Indian company and the first bank or financial institution fromnon-Japan Asia to be listed on the NYSE.After consideration of various corporate structuring alternatives in the context of the emergingcompetitive scenario in the Indian banking industry, and the move towards universal banking,the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICIBank would be the optimal strategic alternative for both entities, and would create the optimallegal structure for the ICICI groups universal banking strategy. The merger would enhance valuefor ICICI shareholders through the merged entitys access to low-cost deposits, greateropportunities for earning fee-based income and the ability to participate in the payments systemand provide transaction-banking services. The merger would enhance value for ICICI Bankshareholders through a large capital base and scale of operations, seamless access to ICICIsstrong corporate relationships built up over five decades, entry into new business segments,higher market share in various business segments, particularly fee-based services, and access tothe vast talent pool of ICICI and its subsidiaries. 31 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 32. Industry Analysis of Banking and comprehensive study of top two playerIn October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICIand two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial ServicesLimited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved byshareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat atAhmedabad in March 2002, and by the High Court of Judicature at Mumbai and the ReserveBank of India in April 2002. Consequent to the merger, the ICICI groups financing and bankingoperations, both wholesale and retail, have been integrated in a single entity. SEGMENTATION ,TARGETING,POSITION OF ICICISEGMENTATION STRATEGY:Occupation Different products for different occupational segment identifiedIncomeGeographical Concentrated on Tier 1 & Tier 2 Cities trying to extend reachAge Senior citizens Major Minor 32 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 33. Industry Analysis of Banking and comprehensive study of top two playerTARGETING STRATEGY: Tailors its marketing campaigns to meet the needs of its target prospects.POSITIONING STRATEGY:Core proposition – ‘Hum hain na’ – trust, credibility, total financial solution provider(brought about through its cross selling effort) 33 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 34. Industry Analysis of Banking and comprehensive study of top two player DIFFERENT PRODUCTS OF ICICI: SAVINGS ACCOUNT SAVINGS ACCOUNT SAVINGS MAX ACCOUNT PENSIONS SAVINGS BANK ACCOUNT SALARY ACCOUNT CURRENT ACCOUNT PLUS CURRENT ACCOUNT TRADE CURRENT ACCOUNT PREMIUM CURRENT ACCOUNT FIXED DEPOSIT ACCOUNT REGULAR FD ACCOUNT FIVE YEAR TAX SAVING FD ACCOUNT DEMAT ACCOUNT LOANS  Home Loan  Personal Loan  Car Loan  Two Wheeler Loan  Commercial Vehicle Loan  Loan Against Securities  Loan Against Gold  Farm Equipment Loan  Construction Equipment Loan  Office Equipment Loan  Medical Equipment Loan  Rural Educational Institute Finance  Customer Durable Loans 34 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 35. Industry Analysis of Banking and comprehensive study of top two player FINANCIAL RATIO ANALYSISFinancial ratio analysis of both banks is as follows:P/E ratio: A valuation ratio of a companys current share price compared to its per-shareearnings.Calculated as: Market Value per Share Earnings per Share (EPS)EPS: The portion of a companys profit allocated to each outstanding share of commonstock. Earnings per share serve as an indicator of a companys profitability.Calculated as: PAT Number of ShareholdersDEBT EQUITY RATIO: A measure of a companys financial leverage calculated by dividing itstotal liabilities by stockholders equity. It indicates what proportion of equity and debt thecompany is using to finance its assets. Total liabilities Shareholder’s equity Debt equity ratio basically tells about the composition of the capital structure that how much is the ratio of equity to debt A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt 35 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 36. Industry Analysis of Banking and comprehensive study of top two player CURRENT RATIO: A liquidity ratio that measures a companys ability to pay short-term obligations. The Current Ratio formula is: Also known as "liquidity ratio", "cash asset ratio" and "cash ratio". The higher the current ratio, the more capable the company is of paying its obligations.BOOK VALUE: A companys common stock equity as it appears on a balance sheet, equal tototal assets minus liabilities, preferred stock, and intangible assets such as goodwill. This is howmuch the company would have left over in assets if it went out of business immediately. The book value is calculated by the formula: Internal liability Number of sharesDIVIDEND YIELD: A financial ratio that shows how much a company pays out in dividendseach year relative to its share price.In the absence of any capital gains, the dividend yield is thereturn on investment for a stock. Dividend yield is calculated as follows: 36 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 37. Industry Analysis of Banking and comprehensive study of top two player RATIO ANALYSIS OF BOTH COMPANIESRatio SBI ICICI BANKP/E ratio 17.01 17.27EPS 49.68 116.07Dividend yield 1.55% 1.63%Book Value 478.08 1,023.40Current Ratio 0.11 0.04Debt equity ratio 4.10 14.37 37 | P a g e SHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES
  • 38. Industry Analysis of Banking and comprehensive study of top two player BIBLIOGRAPHY  http://www.moneycontrol.com  http://www.nirmalbang.com  articles.economictimes.indiatimes.com)  business.mapsofindia.com  www.allbankingsolutions.com/DATA.htm  www.rbi.org.in/  www.statebankofindia.com/  www.icicibank.com/  Budget 2011-2012 Speech of Pranab Mukherjee Minister of Finance February 28, 2011  www.business-standard.com 38 | P a g eSHRI RAMSWAROOP MEMORIAL GROUP OF PROFESSIONAL COLLEGES