Group 7_Indian Banking Industry

Diapositiva 1

The Indian Banking IndustryGroup No: 7

Presented By:

Fenal Shah PG12034Nishad Patil PG12069Hasnain Kanchwala PG12072Gopal Dhage PG12073Purva Kashikar PG12074Priyanka Mahapadi PG12078Keval Savla PG12118

Case FactsInitial Years (Prior to 1950)Indian joint stock banksThe Imperial Bank of IndiaFormation of RBI

Foundation Phase (1950 -69)Emergence of development banksEmergence of co-operative banks

Expansionary Phase (1969 85)

Consolidation & Diversification Phase(1985 91)

Financial Reform Phase(Post Liberalization 1991+)

The Narasimham Committee External Constraints:CRRSLRRegulation of Interest rates

Internal Constraints:Prudential NormsReducing government stakes in banks to 33%Conversion of weak banks into narrow banks

The Features of the Banking IndustryHigh growth potential

Deregulation

Sector being brought at par with international norms and standards

Banks has to have a minimum equity base of Rs. 100 crores

Serves two types of customers; corporate and individuals

Defining Industry

Rivalry among Competitors(Retail Banking)Column1 Low High 12345No. of CompetitorsLargeSmallIndustry GrowthSlowFastFixed CostHighLowDifferentiationLowHighSwitching CostLowHighOpenness in terms of saleSecretOpenExcess CapacityHighLowGovernment Low High

AttractivenessTable-1

Rivalry among Competitors(Corporate Banking)

Column1 Low High 12345No. of CompetitorsLargeSmallIndustry GrowthSlowFastFixed CostHighLowDifferentiationLowHighSwitching CostLowHighOpenness in terms of saleSecretOpenExcess CapacityHighLowGovernment Low High


Barriers to exit (Retail Banking)

Column1 Low High 12345Assets SpecializationHighSmallCost of ExitHighSmallGovernment RestrictionsHighSmall


Barriers to exit (Corporate Banking)

Column1 Low High 12345Assets SpecializationHighSmallCost of ExitHighSmallGovernment RestrictionsHighSmall


Barriers to entry (Retail Banking)

Low High 12345Economies of ScaleSmallLargeProduct DifferentiationLowHighBrand IdentityLowHighSwitching CostLowHighAccess to Channels of DistributionEasyLimitedCapital RequirementSmallLargeAccess to TechnologyEasyRestrictedAccess to Raw MaterialEasyRestrictedGovt. ProtectionNoneSubstantial


Barriers to entry (Corporate Banking)

Low High 12345Economies of ScaleSmallLargeProduct DifferentiationLowHighBrand IdentityLowHighSwitching CostLowHighAccess to Channels of DistributionEasyLimitedCapital RequirementSmallLargeAccess to TechnologyEasyRestrictedAccess to Raw MaterialEasyRestrictedGovt. ProtectionNoneSubstantial


Threat from substitutes (Retail Banking)

Low High 12345Availability of close substitutesHighLowSwitching CostLowHighSubstitute's price valueBetterWorseProfitability of the producers of substitutesHighLowGovernment RestrictionsLow High


Threat from substitutes (Corporate Banking)

Low High 12345Availability of close substitutesHighLowSwitching CostLowHighSubstitute's price valueBetterWorseProfitability of the producers of substitutesHighLowGovernment RestrictionsLow High


Bargaining power of buyers (Retail Banking)

Low High 12345No. of BuyersSmallLargeAvailability of SubstitutesManyFewSwitching CostLowHighBuyers threat of Backward integrationHighLowIndustry's threat of Forward IntegrationLowHighContribution to Cost HighLowBuyers Profitability LowHighContribution to quality LowHigh


Bargaining power of buyers (Corporate Banking)

Low High 12345No. of BuyersSmallLargeAvailability of SubstitutesManyFewSwitching CostLowHighBuyers threat of Backward integrationHighLowIndustry's threat of Forward IntegrationLowHighContribution to Cost HighLowBuyers Profitability LowHighContribution to quality LowHigh


Bargaining power of suppliers (Retail Banking)

Low High 12345Number of SuppliersSmallLargeAvailability of Substitutes FewManySwitching CostHighLowSuppliers threat of Forward integrationHighLowIndustry's threat of Backward integrationLowHighContribution to Quality HighLowContribution to CostHighLowIndustry's importance to supplierLowHighGovernment Restrictions Low High


Bargaining power of suppliers (Corporate Banking)

Low High 12345Number of SuppliersSmallLargeAvailability of Substitutes FewManySwitching CostHighLowSuppliers threat of Forward integrationHighLowIndustry's threat of Backward integrationLowHighContribution to Quality HighLowContribution to CostHighLowIndustry's importance to supplierLowHighGovernment Restrictions Low High


Overall Assessment (Retail Banking)

LowHigh12345Barriers to entryRivalry among CompetitorsBarriers to exitPower of buyersPower of suppliersThreat of substitutesOverall attractiveness


Overall Assessment (Corporate Banking)

LowHigh12345Barriers to entryRivalry among CompetitorsBarriers to exitPower of buyersPower of suppliersThreat of substitutes Overall attractiveness


Corporate Banking (Generic Strategies)Indusind BankHDFC BankBOA

Retail Banking (Generic Strategies)HDFC BankIndusind Bank

Competitor analysis of Corporation Bank from the perspective of Citibank

Providing unique and tailor-made products to its customers

IT implementation

Current Strategies- Corporation Bank

Assumption- Corporation bankImplementation of IT will attract more customers

Opening of economy will lead to growth of the sector

Capabilities- Corporation Bank

Strength (Retail)3 tier set-upTailor-made productsGovernment Protection

Weakness: (Retail)Lacks global presence

Capabilities- Corporation BankStrength (Corporate)3 tier set-upUnique and tailor-made servicesFaster realisation of receivablesAdvisory services to importers and exporters

Weakness: (Corporate)Lacks global presence

Future Goal- Corporation BankFocus equally on corporate banking

Competitor Analysis of Citibank from the perspective of Corporation Bank

Current Strategies: Citibank More emphasis on relationships

Focus more on metros

Assumptions:CitibankIt can offer personal banking products on the strength of relationships that it is competent at building

Opening of economy will lead to high growth of sector

Capabilities- CitibankStrengths (Retail)One of largest banks in the world in terms of assetsOffers variety of servicesGlobal presence

Weakness (Retail)Operates only in the metros with 6 branches

Capabilities- CitibankStrengths (Corporate)One of largest banks in the world in terms of assetsGlobal finance- Wholesale banking divisionGlobal Relationships banking

Weakness (Corporate)Operates only in the metros with 6 branches

Future Goals- CitibankTo widen the scope of consumer banking services

Financial ComparisonCorporationCitibank969798969798Term Deposits63%61%70%84%76%80%Term advances36%40%41%56%84%84%Avg Return on Advances16.0%16.6%13.2%18.9%20.6%18.8%Avg Cost on Deposits6.4%8.0%7.8%6.2%7.6%7.5%Interest spread9.588.685.3912.6912.9511.34Credit deposit ratio0.370.410.40.490.530.6

Structural Analysis Within Industry

Step 1: To characterize the strategies of all significant competitors along the dimensions

Dimensions of StrategyDimensionsPublic Sector BanksPrivate Sector BanksForeign BanksNumber of branchesHigh Medium Low Quality Of ServiceSatisfactoryGoodExcellentRange of ProductsHighLowMediumSize of Fund BaseHighMediumLowTechnologyLess ComputerizedAdvanced TechnologyAdvanced TechnologyNiche Marketing / Mass MarketingMassNiche, MassNicheSkill of personnelLowHighHighRelation with Parent companyNAMediumHigh

Operational efficiencyLowHighHigh

Public sector Bank ( SBI, Corporation Bank)

Foreign Bank(Citibank,BOA)

XMarketingNo of Branches LowHighMassNichePrivate Sector Bank (HDFC, Indusind Bank)

Step 2: To assess the height & composition of the mobility barriers protecting each group

Mobility Barriers of Public Sector Banks vis--vis other players in the industryMobility Barriers of Private Sector Banks vis--vis other players in the industry

Mobility Barriers of Foreign Banks vis--vis other players in the industry

Strategy as an Analytical ToolNumber of BranchesMarket Share of AssetsLowMediumHighLowMedium HighPublic Sector BanksForeign BanksPrivate Sector Banks

Less Advanced Highly AdvancedMass NichePublic Sector BanksForeign BanksPrivate Sector BanksTechnologyMarketing

Step 3: To assess the relative bargaining power of each strategic group in the industry with its suppliers & buyers

Bargaining Power of Customers & SuppliersPublic Sector BanksPrivate Sector BanksForeign BanksNo. of Retail CustomersHighHighLowNo. of Corporate CustomersHighMediumMediumNo. of SuppliersHighHighMedium

Step 4: To assess the relative position of each strategic group vis--vis substitute products

Vulnerability with respect to Substitutes- NBFCs & Money Lenders

Public BanksPrivate BanksForeign BanksVulnerability to Threat From Substitutes Corporate(NBFCs)LowHighHighCommercialBankingLowLowLowCash ManagementLowLowLow

TreasuryManagementLowLowLowConsumerBankingMediumHighHighCorporateFinanceLowHighHigh

Retail (Moneylenders)HighLowLow

Step 5: To assess the pattern of market interdependence among strategic groups & their vulnerability to warfare initiated by other groups

Rivalry among strategic Groups in Retail IndustryCustomer Service Low HighCustomer SegmentMass NichePublic Sector BanksForeign Sector BanksPrivate Sector Banks

Rivalry among strategic Groups in Corporate IndustryCustomer Service Low HighCustomer SegmentMassNichePublic Sector BanksForeign BanksPrivate Sector Banks

Firms Position within Strategic groupDegree of Competition within strategic groupScale of Firm relative to othersCost of EntryAbility of firm to execute and implement its strategy

Public Sector BankSBICorpora-tion Bank

Private Sector BankIndus-landHDFC

Degree of competition- For SBI, this is low in the group of Public Sector BanksStructural position may be affected by its scale relative to others in a group- For SBI, the economies of scale is highCost of entering the group- High for other banks entering the group of Public Sector BanksTiming of entry- SBI has advantage over other banksImplementation ability- Weaker than other banks in the group

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BANKSROEROAState Bank of India21.17%1.12%Corporation Bank30.17%1.98%Indusind Bank23.01%2.12%HDFC Bank23.87%2.72%Bank of America34.42%2.95%Citibank13.76%1.17%

Are large firms more profitable than small firms?

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Thank You !

Documents

Group 7_Indian Banking Industry