SWOT Analysis of Insurance Sector [1] STRENGTHS: 1.

New Products- A range of new products had been launched to cater to different segments of the market, while traditional agents were supplemented by other channels including the internet and bank branches. 2. Business Growth- These developments were instrumental in propelling business growth, in real terms, of 19% in life premiums and 11.1% in non life premiums between 1999 and 2003. 3. Rise in per capita Income- India has a large population with an increase in its per capita income. 4. Emerging Middle Income Group- Indias middle income group is rapidly increasing and would be emerging as a profitable market. [2] WEAKNESS: 1. Low investment- India is among the lowest-spending nations in Asia in respect of purchasing insurance (China, which spent USD 36.3 per capita on insurance products & Indian spent USD 16.4) 2. Dominance of Public sector- Even after the liberalization of the insurance sector, the public sector Insurance companies have continued to dominate the insurance market. 3. Promotion as a Barrier- In the long run, other forms of non-price competition like aggressive advertisement wars are likely to lead increasing costs, eventually harming the interests of the consumers. 4. Old tariff structure- A key challenge for Indias non-life insurance sector will be to reform the existing tariff structure. From a pricing perspective, the Indian non-life segment is still heavily regulated 5. Limited facilities- Reinsurance is only provided by GIC. Therefore limited facilities hamper the insurance sector. [3] OPPORTUNITIES: 1. Creation of stronger demand- Indias improving economic fundamentals will support faster growth in per capita income in the coming years, which will translate into stronger demand for insurance products. 2. Strong future growth- Strong growth can be sustained for 3040 years before the market reaches saturation. There is plenty of room for growth in personal accident, health and other liability classes. 3. Rise in Income and Awareness- Rising household income and risk awareness will be the key catalysts to spurring more demand for these lines of business in the future. 4. Health insurance- Health insurance could potentially have an important role in driving insurance market development forward.

5. Rural sectors- The largely underserved rural sector holds great promise for both life and non-life insurers

[4] THREATS: 1. Economic threats- Between 1985 and 2003, economic losses in India due to natural catastrophes averaged around USD 1.2 billion or 0.4% of GDP every year. 2. Natural Perils- Floods were the main peril, accounting for 40% of cumulative losses over the period, followed by storms (35%) and earthquakes (20%). 3. Pressure to manage Perils- Strong growth prospects pose pressure on the industry, and the economy at large, to better manage the exposure to natural perils

SWOT Analysis of Banking and Finance Sector [1] STRENGTHS: 1. Favorable Growth- Indian banks have compared favorably on growth, asset quality and profitability with other emerging economics banks over the last few years. 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 cooperative banks.

2. Bank lending- Bank lending has been a significant driver of GDP growth and employment. 3. Extensive reach- Extensive reach- the vast networking and growing number of branches and ATMs. Indian banking system has reached even to the remote corners of the country. 4. Quality of assets and capital adequacy- In terms of Quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. 5. Entry of foreign banks- Foreign banks will have the opportunity to own up to 74% of Indian private sector banks and 20% of government-owned banks. [2] WEAKNESS: 1. Need to strengthen Institutional skills- PSUs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organizational performance ethic and strengthen human capital. Old private sector banks also have the need to fundamentally strengthen skill levels. 2. Cost of Intermediation- The Cost of Intermediation remains high and bank penetration is limited to only a few customer segments and geographies. 3. Structural weakness- Structural weakness such as a fragmented industry structure, restrictions on capital availability and development, lack of institutional support infrastructure, restrictive labor laws, weak corporate governance and ineffective regulations beyond scheduled commercial banks(SCBs), unless industry utilities and services bureaus. 4. Low equity capital- Refusal to dilute stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital. [3] OPPORTUNITIES: 1. Increase in Profitability- Banking sector can increase the profitability by accessing international financial market for procuring funds cheaply and deploy funds prudently. 2. Intense competition from foreign banks- With increased interest in India, competition from foreign banks will only intensify. 3. Increased consumer demands- 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. 4. Growth of banking services- With the growth in the Indian economy expected to be strong for quite some time-especially in its service sector- the demand for banking services especially retail banking, mortgages and investment services are expected to be strong. 5. To permit banks to trade in commodities- Reserve Bank of India (RBI) has approved a proposal from the government to amend the banking regulation act to permit banks to trade in commodities and commodity derivatives.

[4] THREATS: 1. Competition- Competition among banks for highly rated corporate needing lower amount of capital may exert pressure on already thinning interest spread. Further, huge implementation cost may also impact profitability for smaller banks. 2. Re-structuring of assets- The biggest challenge is the restructuring of assets of some of the banks as it would be a tedious process, since most of the banks have poor asset quality leading to significant proportion of NPA. 3. Absence of basic amenities- Huge surplus manpower, absence of good work culture, antiquated labor laws, inflexible and inefficient labor and existence of strong labor union 4. High level of non-performing assets (NPA)- 6% of the advantages are still blocked up which is about 58000cr. Therefore problem of non-recognition of interest income and loans loss provisioning exists. 5. Moving away of household savings- The household savings comprising financial assets are moving away from bank deposits to more sophisticated form of financial assets such as mutual funds, stock and derivatives. 6. Customer switch- Demanding customer are ready to jump from one bank to another when they are not satisfied with the service provided. This causes major threat particularly to CSUs.