Download - 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
AttractivenessTable-8
Barriers to exit (Retail Banking)
Column1 Low High 12345Assets SpecializationHighSmallCost of ExitHighSmallGovernment RestrictionsHighSmall
AttractivenessTable-2
Barriers to exit (Corporate Banking)
Column1 Low High 12345Assets SpecializationHighSmallCost of ExitHighSmallGovernment RestrictionsHighSmall
AttractivenessTable-9
Barriers to entry (Retail Banking)
Low High 12345Economies of ScaleSmallLargeProduct DifferentiationLowHighBrand IdentityLowHighSwitching CostLowHighAccess to Channels of DistributionEasyLimitedCapital RequirementSmallLargeAccess to TechnologyEasyRestrictedAccess to Raw MaterialEasyRestrictedGovt. ProtectionNoneSubstantial
AttractivenessTable-3
Barriers to entry (Corporate Banking)
Low High 12345Economies of ScaleSmallLargeProduct DifferentiationLowHighBrand IdentityLowHighSwitching CostLowHighAccess to Channels of DistributionEasyLimitedCapital RequirementSmallLargeAccess to TechnologyEasyRestrictedAccess to Raw MaterialEasyRestrictedGovt. ProtectionNoneSubstantial
AttractivenessTable-10
Threat from substitutes (Retail Banking)
Low High 12345Availability of close substitutesHighLowSwitching CostLowHighSubstitute's price valueBetterWorseProfitability of the producers of substitutesHighLowGovernment RestrictionsLow High
AttractivenessTable-4
Threat from substitutes (Corporate Banking)
Low High 12345Availability of close substitutesHighLowSwitching CostLowHighSubstitute's price valueBetterWorseProfitability of the producers of substitutesHighLowGovernment RestrictionsLow High
AttractivenessTable-11
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
AttractivenessTable-5
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
AttractivenessTable-12
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
AttractivenessTable-6
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
AttractivenessTable-13
Overall Assessment (Retail Banking)
LowHigh12345Barriers to entryRivalry among CompetitorsBarriers to exitPower of buyersPower of suppliersThreat of substitutesOverall attractiveness
AttractivenessTable-7
Overall Assessment (Corporate Banking)
LowHigh12345Barriers to entryRivalry among CompetitorsBarriers to exitPower of buyersPower of suppliersThreat of substitutes Overall attractiveness
AttractivenessTable-14
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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