indianbanking.ppt

8/10/2019 IndianBanking.ppt

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Indian Banking Industry Ayush VaishJayanti DuttaKapildev C Iyer

Kunal SinghalRaveendra CSathya SubramaniumShashank Rath

Sudhanshu NagpalTara Gupta


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Background & Overview 1870-1991

1870 Bank of Hindustan set up1934 Reserve Bank of India Act passed

1949 Banking Regulation Act

1955 Takeover of Imperial Bank (SBI)1960 Empowerment of RBI

1969 Subsequent Nationalisation of Banks


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1992 Post Liberalisation reforms1993

Amendment of Banking Regulations ActEntry of Private PlayersReduction of Statutory Liquidity Ratio

Since 1994Deregulation of Lending RatesDeregulation of Interest RatesRisk Based Capital Standard for Banks

Prudential Accounting NormsRural Infrastructure Development FundStrong system of Financial supervision under RBI

Background & Overview 1992-2004


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Scheduled Banks in India

Scheduled Cooperative BanksScheduled Commercial Banks

UrbanCooperativeBanks

StateCooperativeBanks

RegionalRuralBanks

ForeignBanks

PrivateSectorBanks

PublicSectorBanks

SBI&

subsidiaries

Old PrivateSectorBanks

New PrivateSectorBanks

NationalizedBanks

Structure of Indian Banking Industry


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Central Bank, created under the Reserve Bank of IndiaAct, 1934Empowered by the Banking Regulations Act 1949.Main Functions

Monetary AuthorityRegulation and supervision of the Financial SystemManager of Exchange ControlIssuer of CurrencyDevelopmental Role

Banker to the GovernmentBanker of banks

Reserve Bank of India


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Banking Products - CorporateFund ed Serv ices

Working Capital Finance

Short Term Finance

Bill Discounting

Export Credit

Structured Cash FlowFinancing

Channel/VendorFinancing

Non Fund ed Serv icesLetters of Credit

Guarantees

Collection of Documents

Bills Collection

Cash Management Services

Loan Syndication

Supply Chain Management

Payment Gateway Services


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Banking Products - Retail

Assets

Auto LoansHousing LoansCredit Card And DebitCardWealth ManagementInsurance

Liabilities

Retail Deposits


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Porters Five Forces Analysis


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Suppliers Power

Public & Corporate Deposits80% of total liabilitiesBase too fragmented

Power increasing due toIntegration of rural areasImproved Communication & Reach

RBISupplier of funds only2% of total liabilities

Workforcehighly unionized industry.

Supplier Power is LOW


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Priority Sector Agriculture Small Scale Industries Others

Each accounts for 13% of Bank Credit Wide dispersion of the borrowers. Low Credit Standing

This segment power is LOW

Buyers Power

Wholesale Trade Diffused base Low credit rating 3.8 percent of bank credit


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Threat of New Entrants

Barriers to Entry Government Policies & Regulations Reach for economies of scale Product Differentiation Low Profitability

Threat of New Entrant is LOW


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Threat of Substitutes

Barriers to Entry Unorganized market Capital market Insurance

NBFC Financial Institutions Post Office deposits External commercial borrowings

Threat of Substitutes is HIGH


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10 Banks Deposit Concentration Ratio: 60.982.2% Deposits with PSBs. Friendlier Regulation promoting CompetitionSlow Industrial Growth increasing rivalry to capturepotentially good clientsIncreased Rivalry in Retail Banking

Brand Building ExerciseCustomer ServiceCoverageUndifferentiated Products

Extent of Rivalry is HIGH

Rivalry


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Government Regulations Agri lending concerns Infrastructure focus FDI Policy Securitisation Act fillip

Revival of Core Industry Segments Inflationary Pressures- RBI increasing interest rates Impact of Basel II norms

HIGH Impact of Government Regulations

External Factors affecting the Industry


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External Factors affecting the Industry

Lifestyle Changes Lesser hesitance towards taking credit Less time with people, so need for new products

Technology

Internet banking/ ATMs Bank branches become more of a Relationship management offices

HIGH Impact of Lifestyle & Technology


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Bargaining Powerof Suppliers

Rivalry/Competition

Threat of Substitutes

Threat of New entrants

Bargaining Powerof Buyers

LOW

LOW

MODERATE

HIGH

HIGH

Summary of Porters Forces


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Emergence of New Customer BaseDemographic ChangesGrowing Demand of sophisticated Retail Bankingservices.

KnowledgeInnovationTechnologyConvergenceConsolidation

Key Drivers


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Geographical spreadRange of services

Service qualityHuman resource qualityFocus on brand buildingDistribution channels

Technological leadershipPrice positions

Strategic Dimensions


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Strategic Map

S e r v

i c e

Q u a

l i t y

Rural Urban

L o w

H i g h

Regional

Citibank

ABN Amro

State Bank of India

ICICI Bank

HDFC

IndusInd Bank

Vysya Bank

Karur Vysya

PNB

Andhra BankCanara Bank

Co-operative Banks

Rural Banks

Bank of Baroda

Bank of India

Stan C

HSBC

Geographical Spread


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Improvement in serviceBetter technologyStaff productivity

Increase of reachNo. of branches, ATMs, etcInternet banking, tele-bankingChanges in channel structureHeavy investment

Brand-building

Greater acceptance among peopleHeavy advertising costs

Mobility Barriers in the Industry


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Transformation of the industry structureEmphasis on brand developmentAdoption of new technologiesImprovement of service qualityConsolidationGlobalization of operationsUniversalization of Banking Focus on cost efficiency

Future Trends in Indian Banking


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Thank You