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Case: TO DIVERSIFY OR TO CONSOLIDATE: NICT AT A CROSS ROADS

An assignment submitted to Prof. Shubhabrata Basu in partial fulfilment of the
requirements of the GSDE course.









Submitted by:
Devi Prasad Khatua (2013PGPM017)




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1) Do you think NICT should take up PBI Offer?

Ans:

Yes, NICT should take up PBI offer due to following reasons:

Currently NICT is having rural penetration which is unmatchable in terms of IT
infrastructure. In case it leaves this opportunity then someone else might grab the
opportunity and will have wider reach due to largest networks of PBI.

Once the competitor is able to capture strong hold of the situation he might start
attracting other PSU banks or the PSU banks may approach him to offer service on
their behalf due to its capabilities.

PBI offer will give NICT the national reach which it can utilize to replicate the same
model to other states as well.

Currently NICT is having low bargaining power but once it takes up the offer and
executes the same, it will create a huge switching cost for PBI in case it wants to
terminate its contract with NICT in future. So there will be shifting of power from PBI
to NICT.

Even if NICT is removed from the PBI contract in future still its national recognition
and capabilities will help him in getting government contracts from both central &
state governments in future.

The offer will help NICT to stabilize its organization and help them in following single
centralized strategy rather than depending upon many clients.

So in above cases the risk associated with losing valuable customers like BoI and SBI can be
mitigated by developing its own sustainable capabilities to have more bargaining power.



2) What are ramifications with respect to SBI & BOI if it takes up PBI Offer?
Ans:
Advantages in accepting PBI Proposal with respect to SBI and BOI
Once NICT takes up PBI offer and executes the same it will become gain the
expertise in rural banking sector in terms of technology provider which may in turn
attract other PSU banks like SBI and BoI due to Public sector linkages.

It will prevent SBI and BOI from exhibiting opportunistic behavior in future.

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Disadvantages in accepting PBI Proposal with respect to SBI and BOI
In future PBI might dictate terms which are unfavorable for NICTs other clientele like
SBI, BoI etc. It may lead to conflict of interest for NICT and also there are chances of
losing its clients like SBI and BoI in return.

The PBI offer comes with high risk high reward. It means in case there is a failure; it
may lead to negative image of NICT. The impact may result in losing its major clients
like SBI and BoI who are bigger players in rural banking industry.