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Indian Banking Industry

Ayush Vaish
Jayanti Dutta
Kapildev C Iyer
Kunal Singhal
Raveendra C
Sathya Subramanium
Shashank Rath
Sudhanshu Nagpal
Tara Gupta
Background & Overview 1870-1991
1870 Bank of Hindustan set up
1934 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


1992 Post Liberalisation reforms
1993
Amendment of Banking Regulations Act
Entry of Private Players
Reduction of Statutory Liquidity Ratio
Since 1994
Deregulation of Lending Rates
Deregulation of Interest Rates
Risk Based Capital Standard for Banks
Prudential Accounting Norms
Rural Infrastructure Development Fund
Strong system of Financial supervision under RBI

Background & Overview 1992-2004
Scheduled Banks in India
Scheduled Cooperative Banks Scheduled Commercial Banks
Urban
Cooperative
Banks
State
Cooperative
Banks
Regional
Rural
Banks
Foreign
Banks
Private
Sector
Banks
Public
Sector
Banks
SBI
&
subsidiaries
Old Private
Sector
Banks
New Private
Sector
Banks
Nationalized
Banks
Structure of Indian Banking Industry
Central Bank, created under the Reserve Bank of India
Act, 1934
Empowered by the Banking Regulations Act 1949.
Main Functions
Monetary Authority
Regulation and supervision of the Financial System
Manager of Exchange Control
Issuer of Currency
Developmental Role
Banker to the Government
Banker of banks
Reserve Bank of India
Banking Products - Corporate
Funded Services
Working Capital Finance
Short Term Finance
Bill Discounting
Export Credit
Structured Cash Flow
Financing
Channel/Vendor
Financing

Non Funded Services
Letters of Credit
Guarantees
Collection of Documents
Bills Collection
Cash Management Services
Loan Syndication
Supply Chain Management
Payment Gateway Services


Banking Products - Retail
Assets

Auto Loans
Housing Loans
Credit Card And Debit
Card
Wealth Management
Insurance
Liabilities

Retail Deposits
Porters Five Forces Analysis
Suppliers Power
Public & Corporate Deposits
80% of total liabilities
Base too fragmented
Power increasing due to
Integration of rural areas
Improved Communication & Reach
RBI
Supplier of funds only
2% of total liabilities
Workforce
highly unionized industry.

Supplier Power is LOW
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
Industry- Medium and Large firms
35% of total Bank Credit
Credit Surplus situation
Alternate avenues
This segment power is MODERATE
Buyers Power (contd.)
Others
NBFC 4 percent of banks credit
Individuals 15 percent of banks credit
RBI
Control over SLR
Buyer Power is LOW
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
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
10 Banks Deposit Concentration Ratio: 60.9
82.2% Deposits with PSBs.
Friendlier Regulation promoting Competition
Slow Industrial Growth increasing rivalry to capture
potentially good clients
Increased Rivalry in Retail Banking
Brand Building Exercise
Customer Service
Coverage
Undifferentiated Products

Extent of Rivalry is HIGH
Rivalry
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
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
Bargaining Power
of Suppliers



Rivalry/Competiti
on
Threat of Substitutes

Threat of New entrants
Bargaining Power
of Buyers
LOW
LOW
MODERATE
HIGH
HIGH
Summary of Porters Forces
Emergence of New Customer Base
Demographic Changes
Growing Demand of sophisticated Retail Banking
services.
Knowledge
Innovation
Technology
Convergence
Consolidation
Key Drivers
Geographical spread
Range of services
Service quality
Human resource quality
Focus on brandbuilding
Distribution channels
Technological leadership
Price positions
Strategic Dimensions
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 Bank
Canara Bank
Co-operative Banks
Rural Banks
Bank of Baroda
Bank of India
Stan C
HSBC
Geographical Spread
Improvement in service
Better technology
Staff productivity
Increase of reach
No. of branches, ATMs, etc
Internet banking, tele-banking
Changes in channel structure
Heavy investment
Brand-building
Greater acceptance among people
Heavy advertising costs
Mobility Barriers in the Industry
Transformation of the industry structure
Emphasis on brand development
Adoption of new technologies
Improvement of service quality
Consolidation
Globalization of operations
Universalization of Banking
Focus on cost efficiency
Future Trends in Indian Banking
Thank You

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