COMPETITIVE ANALYSIS OF INDIAN BANKING SECTOR ON THE BASIS OF PORTER'S FIVE- FORCES MODEL.

2.  Introduction
 Nature & Services Provided By Banks
 Banking Structure in India
 Major Market Players & Their Market Share
 Analysis of Indian Banking Sector on the basis of Porter’s
Five-Forces Model
 Basis of Competition Among The Existing Players
 Strategies Supposed to be Adopted

3. INTRODUCTION :
Banking in India originated in the last decades of the 18th century. The first banks were Bank of
Hindustan (1770-1829) and The General Bank of India, established 1786 .
The largest bank, and the oldest still in existence, is the State Bank of India, which
originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal.
The SBI was one of the three presidency banks, the other two being the Bank of Bombay and the Bank
of Madras, all three of which were established under charters from the British East India Company. The
three banks merged in 1921 to form the Imperial Bank of India, which, after India's independence,
became the State Bank of India in 1955. For many years the Imperial Bank of India acted as quasi-
central banks, until the Reserve Bank of India was established in 1935.
In 1969 the Indian government nationalized 14 banks and 6 other banks in 1980 and these have
remained under government ownership. They are run under a structure know as 'profit-making public
sector undertaking' (PSU) and are allowed to operate as commercial banks.

4. A bank is a financial institution which deals in deposits and advances
and other related services. It receives money from those who want to
save in the form of deposits and it lends money to those who need it.
1. Bank is the life blood of trade, commerce and industry. Now-a-days, banking
sector acts as the backbone of modern business. Development of any
country mainly depends upon the banking system.
2. The Public Sector Banks are back bone of Indian economy. Each and every
person of our country depends directly or indirectly on the banking sector for
various kinds of financial need.
3. Now a day the Government of India has given much attention to bring every
one under the banking net by launching various schemes, policies and also
by introducing several tech products and these tech products are very
helpful in availing day to day hassle free banking services.

6. NATURE Acceptance
of Deposits
Providing
Loans &
Advances
Payments
and
Withdrawals
Agency &
Utility
Services
Connecting
Link
Ever
Increasing
Function

7. Loan
• Auto Loan
• Gold Loan
• House Loan
• Credit cards
• Education Loan
Deposit
• Deposits
• Saving Accounts
• Current Accounts
• Fixed / Recurring
Other Services
• Private Banking
• Demat Services
• Mutual Fund Sales
• Foreign Exchange
Services
Commercial Banking
• Term Loan
• Guarantees
• Bill Collection
• Letter of Credit
• Working Capital
• Forex & Derivatives
Transaction Banking
• Custodian Services
• Clearing Bank Services
• Tax Collections
• Banker to Public Issues
Commodities(Inc Hedging)
Product Segment
• Equities
• Derivatives
• Capital Market
• Debt Securities
• Foreign Exchange
Other Financing
• Cash Management
• Statutory Reserve
• Financial Decisions
• Asset Liability Management
Retail Banking1
Wholesale Banking2
Treasury Banking3
SERVICES

9. Reserve Bank of India is also known as India's Central Bank. It
was established on 1st April 1935. Although the bank was initially
owned privately, it has been taken up the Government of India
when , it was nationalized. The bank has been vested with
immense responsibility of reviewing and reconstructing the
economic stability of the country by formulating economic policies
and ensuring a proper exchange of currency. In this regard, the
Reserve Bank of India is also known as the banker of banks .
 The Central Office of the Reserve Bank was initially established in
Calcutta but was permanently moved to Mumbai in 1937. The
Central Office is where the Governor sits and where policies are
formulated

10. Central Bank (RBI)
Non Banking Finance
Companies (NBFCs)
Commercial Banks Term Financial Institutions
State Finance
Corporations (SFCs)
Indian Financial Institutions
E.g.
IFCI
NABARD
SIDBI
Public
Sector(26)
Private
Sector(20)
Foreign
Bank(41) Co-operative
Banks
Regional
Rural Banks
E.g.
SBI
PNB
BOB
E.g.
HDFC Bank
AXIS Bank
ICICI Bank
E.g.
Citibank,
HSBC

11. Institution Market Share of Banking Assets(%)
Scheduled Commercial Banks 92.4
Public Sector Banks 67.2
Private Sector Banks 18.7
Foreign Banks 6.5
Regional Rural Bank 2.7
Co-operative Banks 3.4
Local Area Banks 1.5

12. Type of Banks Number of
Banks
Number of
Branches
Number of Branches(%) Market Share of
Loan & Advances
(%)
Public Sector 26 67,466 83.0 72.8
Private Sector 20 13,452 16.6 20.2
Foreign Banks 41 323 0.4 7.0
Total 87 81,241 100.0 100.0
Public sector banks have more presence relative to their share of assets.

13. Major Market Players &
Their Market Share

14.  Major Market Player means a very influential person or
group, a leading company or individual in a particular market
or industry .
 Market share represents the percentage of an industry or
market's total sales that is earned by a particular company
over a specified time period . This metric is used to give a
general idea of the size of a company in relation to its market
and its competitors.

15. 
MAJOR PLAYERS MARKET SHARE
(Customer Based)
PUBLIC SECTOR
SBI 25 %
PNB 13%
BOB 11%
UNION BANK 8%
BANK OF INDIA 6%
CANRA BANK 4 %
PRIVATE SECTOR
ICICI 6%
HDFC 5%
AXIS BANK 3%
YES BANK 2%
November 30, 2015
(SOURCE:-http://top10companiesinindia.co.in/top-10-banks-in-india-2/)

17. RIVALRY
AMONG THE
EXISTING
PLAYERS(HIGH)
• Large number
of banks
• Low switching
cost
• High fixed
cost
• High exit
barriers
POTENTIAL
ENTRANTS(HIG
H)
• Licensing
requirement is
very though
• Product
differentiation
is very difficult
BARGAINING
POWER OF
BUYER(HIGH)
• Providing
homogeneous
kind of
services so
there is high
chance of
switching
from one
bank to
another
THREAT OF
SUBSTITUTE
PRODUCT(MEDI
UM)
• NBFCs
• Mutual fund
• Govt.
securities & t-
bills
increasing
rapidly
BARGAINING
POWER OF
SUPPLIER(LOW)
• Banks have
to meet many
regulatory
criteria made
by the RBI.

18. Porter’s five force model determine long-term profitability & is a reality check to see if a industry is attractive enough to enter or
not. If all of those forces are high then the industry is less favorable to enter. Before entering a industry, one firm should check
whether those forces is low, so its favorable for the firm to enter.
Threats from new entrants or potential competitors : High
(Requires high initial investments)
The power of the suppliers : Low
(limited equity suppliers)
The power of the buyers/customers : High
(High competition, CRM, personal banking )
The intensity of competition among existing firms : High
(Zero balance, life insurance, free ATM, free credit card, door step delivery, opening new acct in 24hrs)
The easiness of changing to substitute products : Medium
As per porter's 5 forces model most of the forces scored low or medium, hence is moderately unfavorable.

20. Price based
competition
• Interest on Demand
Deposit
• Interest on Time
Deposit
• Interest on loan
• Service Charges
Non- Price based
competition
• Prompt services
• Door Step banking
• Tech- product
facility
• Tailor-made
Products
• Cross selling

22. The competitive environment in the banking sector is likely to
result in individual players working out differentiated strategies
based on their strengths and market shares. For example,
some players might emerge as specialists in mortgage products,
credit cards etc. whereas some could choose to concentrate on
particular segments of business system, while outsourcing all
other functions. Some other banks may concentrate on SME
segments or high net worth individuals by providing specially
tailored services beyond traditional banking offerings to satisfy
the needs of customers they understand better than a more
generalist competitor.

23. 1.Mergers
2.Redesigning of cost structure
3.Risk Management
4.Trainning and development of HRs/ manpower
5.Diversification of services

24. T