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PESTEL ANALYSIS- BANKING
         SECTOR



                ABHINAV SAINI
                AKANKSHYA BISHWAL
                BIPIN KUMAR
                GAURAV SHARMA
                PANKIT MAHENDRU
                RISHIKA MAHESHWARI
 The banking system remains, as always, the most dominant segment of the
financial sector. Indian banks continue to build on their strengths under the
regulator's watchful eye and hence, have emerged stronger.

 The banking sector in India has made significant progress in the last five years –
the growth is well reflected through parameters including profitability, annual credit
growth, and decline in non-performing assets (NPAs)

 Growth in the sector has been favoured by factors including low defaulter
ratio, strong economic growth, central bank’s regular intervention and pre-emptive
adjustment of monetary policy.

 The policy makers for the banking sector, which comprise the Reserve Bank of
India (RBI), Ministry of Finance and related government and financial sector
regulatory entities, have made several notable efforts to improve regulation in the
sector
WHAT IS PESTEL ANALYSIS
   To what degree a government intervenes in the economy. Ex-tax
policy, labour law, environmental law, trade
restrictions, tariffs, and political stability




 Some of the major political factors affecting the Banking
industry are :

•   Focus on regulation of government
•   Budget and budget measures
•   Foreign Direct Investment limits
• Indian banking sector is least affected as compared to other
  developed countries- thanks to robust policy framework of RBI.

• Government affects the performance of banking sector most by
  legislature and framing policy government through its budget affects
  the banking activities securitization act has given more power to
  banking sector against defaulting borrowers.

• Stricter prudential regulations with respect to capital and liquidity
  gives India an advantage in terms of credibility over other countries.

• To support capitalisation, the government has infused Rs 23,200
  crore (US$ 5.2 billion) into state-owned banks during the last three
  fiscals
• 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.

• Ceiling for FII investment in companies was also increased from 24.0
  percent to 49.0 percent and have been included within the ambit of FDI
  investment




   •   Increase Farm Credit
   •   Subvention of 1% to be paid as incentive to farmers
   •   Debt Waiver for Farmers
   •   Setting up of separate task force for those not covered under the
       debt waiver scheme
• Agriculture has been the mainstay of our economy with 60% of our population
deriving their sustenance from it.


•In the recent past, the sector has recorded a growth of about 4% per annum with
substantial increase in plan allocations and capital formation in the sector with help of
banking assistance.


•The one-time bank loan waiver of nearly Rs 71,000 crore to cover an estimated
 40 million farmers was one of the major highlights
•Every year RBI declares its 6 monthly policies and accordingly the various
measures and rates are implemented which has an impact on the banking
sector.

•The Economic measures affects the banking sector to boost the economy by
 giving certain concessions or facilities. If in the 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, booming the economy.

•If the FDI limits are relaxed, then more FDI are brought in India
 through banking channels
Key    July   Sept   Oct
Every year RBI declares its 6 monthly
                                           Rate   26th   16th   25th
policies and accordingly the various
                                           s
measures and rates are implemented which
has an impact on the banking               CRR    6.oo   6.00   6.00
sector.

In past 24 months RBI has changed its      Repo   8.00   8.25   8.50
key monetary rates 13 times to curb        rate
inflation and other economic risks.
                                           Rever 7.00    7.25   7.50
                                           se
                                           repo
                                           rate

                                           SLR    24     24     24
Indian economy has registered robust growth in past years and Banking sector is
directly related to the growth of the economy.



GOI is trying to push the economy by framing favorable FDI policies , NRI
Investment plans which directly affect the GDP.



These plans directly affect banking industry as money comes through banks and
bank earns interest on that.
Interest Rates:
RBI controls interest rates, which RBI monitors regularly

Recently RBI reduced bank rate to stimulate growth of banking industry


Inflation Rate:
India is facing huge troubles due to inflation as it is 10% now.

To curb the inflation and slowdown of economy RBI has taken various
steps like lowering interest rates to increase the demand in banking sector


Savings and Investments:
 Gross domestic saving is 28% of total income in India

Latest step taken by RBI to deregulate savings rates is a step to increase
Bank savings
It includes cultural aspects and health consciousness, population growth rate, age
distribution, career attitudes and emphasis on safety. This could be classified
into:



Before the birth of the banks, people of India were used to borrow money local
moneylenders, shahukars, shroffs. They were used to charge higher interest and
also mortgage land and house. But after emergence of banks attitude of people was
changed and they have started lending from the banks



 Life style of India is changing rapidly. They are demanding high class products.
 They have become more advanced. People needs and wants are increasing day
 by day. And this has this has opened opportunities for banking sector to tap this
 change. This has made things available easily to everyone.
Increase in population is one of he important factor, which affect the
private sector banks. Banks would open their branches after looking into the
population demographics of the area.

Newer branches are coming to serve the increasing population. This incentive to banks
comes on the back of the continuing need to open more branches in these States in
order to ensure more uniform spatial distribution




Literacy rate in India is very low compared to developed countries.
Illiterate people hesitate to transact with banks. So, this impacts negatively on
banks. But there is positive side of this as well i.e. illiterate people trust more on
banks to deposit their money, they do not have market information.
Opportunities in stocks or mutual funds
Technology plays a very important role in bank’s internal control mechanisms as well
as services offered by them. Through the use of technology new products and service
are introduced. It include technological aspects such
as R&D activity, automation, technology incentives and the rate of technological
change. Some of the technological changes which brought radical changes in banking
industry are described below :



  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. The use of ATM and Internet banking has allowed
  ‘anytime, anywhere banking’ facilities



  Automatic voice recorders now answer simple queries, currency accounting
  machines makes the job easier and self-service counters are now encouraged.
• Credit card facility has encouraged an era of cashless society. The
 banks have now started issuing smartcards or debit cards to be used for making
 payments. These are also called as electronic purse.

• 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, get the statement of accounts, give
instructions for fund transfers, etc.




• Today banks are also using SMS and Internet as major tool of promotions
 and giving great utility to its customers. For example SMS functions through
 simple text messages sent from your mobile

• Technology advancement has changed the face of traditional banking systems.
 Technology advancement has offer 24X7 banking even giving faster and secured
service
Indian economy has registered a high growth for last three years and is expected 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 growth rate of different industries were:
Agriculture : 18.5%
Industry : 26.3%
Services : 55.2%

• It is great news that today the service sector is contributing more than half of the
  Indian GDP. It takes India one step closer to the developed economies of the
  world. Earlier it was agriculture which mainly contributed to the Indian GDP.

• This increases the avenues of investment by the industrial sector . This would
further increase the borrowings by the industries leading to the banking Industry

• In regards with the service sector , as the income of the people will increase
, lending and savings will increase leading to increased business for the banks .
There are two major factors determining the legal aspects of the Banking Industry :



In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of
India (RBI) "to regulate, control, and inspect the banks in India.

The Banking Regulation Act also provided that no new bank or branch of an existing
bank could be opened without a license from the RBI, and no two banks could have
common directors




  The Reserve Bank of India (RBI) will intervene to smooth sharp movements in the
  rupee and prevent a downward spiral in its value, but will balance this with the need
  to retain reserves in the event of prolonged turbulence
• The impressive performance of Indian banks as compared to other large economies on
almost all parameters - profitability, cost to income ratio, non-performing asset (NPA)
levels, valuations, net interest margins, fee income - the industry is on the right side of
average among comparable economies.

• Transition from class banking to mass banking and increased customer focus is
drastically changing the landscape of Indian banking. Expansion of retail banking has a
lot of potential as retail assets

• New channels (like ATM and mobile phones) allow transactions at a fractional cost.
The study exposes a possibility for the next decade. Investment in technology in the
Indian banking industry is about half of international average

• Consolidation in the banking industry has remained crucial to ensuring technological
progress, excess retention capacity, emerging opportunities and deregulation of various
functional and product
Pestel analysis : Banking sector

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Pestel analysis : Banking sector

  • 1. PESTEL ANALYSIS- BANKING SECTOR ABHINAV SAINI AKANKSHYA BISHWAL BIPIN KUMAR GAURAV SHARMA PANKIT MAHENDRU RISHIKA MAHESHWARI
  • 2.  The banking system remains, as always, the most dominant segment of the financial sector. Indian banks continue to build on their strengths under the regulator's watchful eye and hence, have emerged stronger.  The banking sector in India has made significant progress in the last five years – the growth is well reflected through parameters including profitability, annual credit growth, and decline in non-performing assets (NPAs)  Growth in the sector has been favoured by factors including low defaulter ratio, strong economic growth, central bank’s regular intervention and pre-emptive adjustment of monetary policy.  The policy makers for the banking sector, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector
  • 3. WHAT IS PESTEL ANALYSIS
  • 4. To what degree a government intervenes in the economy. Ex-tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability  Some of the major political factors affecting the Banking industry are : • Focus on regulation of government • Budget and budget measures • Foreign Direct Investment limits
  • 5. • Indian banking sector is least affected as compared to other developed countries- thanks to robust policy framework of RBI. • Government affects the performance of banking sector most by legislature and framing policy government through its budget affects the banking activities securitization act has given more power to banking sector against defaulting borrowers. • Stricter prudential regulations with respect to capital and liquidity gives India an advantage in terms of credibility over other countries. • To support capitalisation, the government has infused Rs 23,200 crore (US$ 5.2 billion) into state-owned banks during the last three fiscals
  • 6. • 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. • Ceiling for FII investment in companies was also increased from 24.0 percent to 49.0 percent and have been included within the ambit of FDI investment • Increase Farm Credit • Subvention of 1% to be paid as incentive to farmers • Debt Waiver for Farmers • Setting up of separate task force for those not covered under the debt waiver scheme
  • 7. • Agriculture has been the mainstay of our economy with 60% of our population deriving their sustenance from it. •In the recent past, the sector has recorded a growth of about 4% per annum with substantial increase in plan allocations and capital formation in the sector with help of banking assistance. •The one-time bank loan waiver of nearly Rs 71,000 crore to cover an estimated 40 million farmers was one of the major highlights
  • 8. •Every year RBI declares its 6 monthly policies and accordingly the various measures and rates are implemented which has an impact on the banking sector. •The Economic measures affects the banking sector to boost the economy by giving certain concessions or facilities. If in the 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, booming the economy. •If the FDI limits are relaxed, then more FDI are brought in India through banking channels
  • 9. Key July Sept Oct Every year RBI declares its 6 monthly Rate 26th 16th 25th policies and accordingly the various s measures and rates are implemented which has an impact on the banking CRR 6.oo 6.00 6.00 sector. In past 24 months RBI has changed its Repo 8.00 8.25 8.50 key monetary rates 13 times to curb rate inflation and other economic risks. Rever 7.00 7.25 7.50 se repo rate SLR 24 24 24
  • 10. Indian economy has registered robust growth in past years and Banking sector is directly related to the growth of the economy. GOI is trying to push the economy by framing favorable FDI policies , NRI Investment plans which directly affect the GDP. These plans directly affect banking industry as money comes through banks and bank earns interest on that.
  • 11. Interest Rates: RBI controls interest rates, which RBI monitors regularly Recently RBI reduced bank rate to stimulate growth of banking industry Inflation Rate: India is facing huge troubles due to inflation as it is 10% now. To curb the inflation and slowdown of economy RBI has taken various steps like lowering interest rates to increase the demand in banking sector Savings and Investments: Gross domestic saving is 28% of total income in India Latest step taken by RBI to deregulate savings rates is a step to increase Bank savings
  • 12. It includes cultural aspects and health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. This could be classified into: Before the birth of the banks, people of India were used to borrow money local moneylenders, shahukars, shroffs. They were used to charge higher interest and also mortgage land and house. But after emergence of banks attitude of people was changed and they have started lending from the banks Life style of India is changing rapidly. They are demanding high class products. They have become more advanced. People needs and wants are increasing day by day. And this has this has opened opportunities for banking sector to tap this change. This has made things available easily to everyone.
  • 13. Increase in population is one of he important factor, which affect the private sector banks. Banks would open their branches after looking into the population demographics of the area. Newer branches are coming to serve the increasing population. This incentive to banks comes on the back of the continuing need to open more branches in these States in order to ensure more uniform spatial distribution Literacy rate in India is very low compared to developed countries. Illiterate people hesitate to transact with banks. So, this impacts negatively on banks. But there is positive side of this as well i.e. illiterate people trust more on banks to deposit their money, they do not have market information. Opportunities in stocks or mutual funds
  • 14. Technology plays a very important role in bank’s internal control mechanisms as well as services offered by them. Through the use of technology new products and service are introduced. It include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. Some of the technological changes which brought radical changes in banking industry are described below : 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. The use of ATM and Internet banking has allowed ‘anytime, anywhere banking’ facilities Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and self-service counters are now encouraged.
  • 15. • Credit card facility has encouraged an era of cashless society. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. • 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, get the statement of accounts, give instructions for fund transfers, etc. • Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile • Technology advancement has changed the face of traditional banking systems. Technology advancement has offer 24X7 banking even giving faster and secured service
  • 16. Indian economy has registered a high growth for last three years and is expected 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 growth rate of different industries were: Agriculture : 18.5% Industry : 26.3% Services : 55.2% • It is great news that today the service sector is contributing more than half of the Indian GDP. It takes India one step closer to the developed economies of the world. Earlier it was agriculture which mainly contributed to the Indian GDP. • This increases the avenues of investment by the industrial sector . This would further increase the borrowings by the industries leading to the banking Industry • In regards with the service sector , as the income of the people will increase , lending and savings will increase leading to increased business for the banks .
  • 17. There are two major factors determining the legal aspects of the Banking Industry : In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India. The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors The Reserve Bank of India (RBI) will intervene to smooth sharp movements in the rupee and prevent a downward spiral in its value, but will balance this with the need to retain reserves in the event of prolonged turbulence
  • 18. • The impressive performance of Indian banks as compared to other large economies on almost all parameters - profitability, cost to income ratio, non-performing asset (NPA) levels, valuations, net interest margins, fee income - the industry is on the right side of average among comparable economies. • Transition from class banking to mass banking and increased customer focus is drastically changing the landscape of Indian banking. Expansion of retail banking has a lot of potential as retail assets • New channels (like ATM and mobile phones) allow transactions at a fractional cost. The study exposes a possibility for the next decade. Investment in technology in the Indian banking industry is about half of international average • Consolidation in the banking industry has remained crucial to ensuring technological progress, excess retention capacity, emerging opportunities and deregulation of various functional and product