pradeep final prjct report

8/7/2019 PRADEEP final Prjct report

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INTRODUCTION


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EXE CUTIV E SUMMARY

In this project an attempt is made to compare the nationalized & privatized banks within terms of profitability preposition factors used to indicate the health of the bankingsector.

In recent years, we have witnessed a rapid worldwide consolidation process of thebanking industry. The securitization of markets has broken the traditional link betweentaking deposits and making loans, thereby challenging the domain of old-fashionedbanking, which was based on collection of savings in order to provide capital for entrepreneurial projects. Nowadays large corporations have direct access tointernational capital markets at terms which outperform banks. Thus, banks have tooperate in a world where markets for financial services banking, brokerage as well asinsurance have become increasingly competitive. This development has seriousconsequences from the point of view of traditional banking, since, as Kay (1998)recently wrote,

The rational for the traditional association of functions that we call a bank hassimply disappeared, and most of these specific functions retail marketing of financial services, financial advice to companies, monitoring the creditworthinessof large companies are better done by some specialist institution that is notnecessarily a bank.

The new millennium has brought with it challenges and opportunities in various fieldsof economic activities including banking. Indian banking, which was operating in ahighly comfortable environment till the beginning of the 1990s, has been pushed intothe choppy water of intense competition. The modern banking activity is marked byitineraries into un-chartered horizons mingled with risks and heavy competition.Immediately after nationalization, the Public Sector Banks spread their branches toremote areas at a rapid pace Their main objective was to act on behalf of thegovernment to fulfill economic obligations towards the common man. They acted over enthusiastically in penetrating into far-flung and remote corners of the country. Thesocial responsibility that was entrusted upon the Public sector Banks digresses themfrom the profit motive. On the other hand private banks did not make such moves.Instead, they pursued profit making as the objectives for their operations.

There is some debate about whether profitability measures are appropriate indicators of performance of public sector enterprises who are required to produce socio-economicoutputs that cannot be reflected in the Balance sheet. This is relevant especially for thepublic sector banks in India whose objectives have been more social than economic.However, the policy makers laid emphasis on profitability as an important benchmark through which the performance of public sector banks is to be judged. The improvedprofitability is the only key parameter for evaluating performance from thecustomers & shareholders point of view.

The focus of the research is to find out the key profitability preposition factors of nationalized banks are better than the privatized banks. Out of the whole banking sector this research has been carried out in Bank of Baroda (nationalized bank) & ICICI bank (privatized bank).


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W ORKING HYPOTH E SIS

B etter management of profitability preposition is the key contributingfactors for the growth of nationalized banks.

AIM OF STUDY

This project aims at making a financial comparative analysis of nationalized &privatized banks in terms of the key profitability preposition factors. An analysis has asbeen made of the recent trends, technological advancement, future potential of thebanking industry. The focus of the study is to find out the key profitability prepositionfactors of nationalized banks are better in the banking industry as a whole.

O BJ E CTIV E S OF STUDY

The basic objective of the study is to get an opportunity to know about impact of Celebrity endorsement on various advertisements and there effectiveness and how theymakes a Brand success or failure.

Objective of the research undertaken are as under:-

1. To study the importance of banking sector in the growth of Indian economy.2. To analyze the factors contributing to the growth of nationalized & privatized

banks.3. To study the key factors in ascertaining the profitability nationalized &

privatized banks.

4. To ascertain the recent trends, future potential & technological advancement &development in banking sector.

5. To study the contribution of nationalized & privatized banks in the developmentof rural banking sector.

6. The comparative analysis of profitability preposition of Bank of Baroda &ICICI banks.


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INDUSTRYPROFIL E


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INDUSTRY PROFIL E

Banking is the backbone of a modern economy. Health of banking industry is one of the most important pre-conditions for sustained economic progress of any country. The

world of banking has assumed a new dimension at the dawn of the 21st

century with theadvent of tech banking, thereby lending the industry a stamp of universality.

HISTORY

Banking in India originated in the last decades of the 18th century. The first banks wereThe General B ank of India which started in 1786, and the B ank of Hindustan , bothof which are now defunct. The oldest bank in existence in India is the State B ank of India , which originated in the Bank of Calcutta in June 1806, which almostimmediately became the Bank of Bengal . This was one of the three presidency banks,the other two being the B ank of B ombay and the B ank of Madras , all three of whichwere established under charters from the British East India Company. The three banksmerged in 1921 to form the Imperial B ank of India which, upon India's independence,became the State Bank of India. Indian merchants in Calcutta established the UnionBank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49.The Allahabad B ank , established in 1865 and still functioning today, is the oldestJoint Stock bank in India. . HS B C established itself in Bengal in 1869. Calcutta was themost active trading port in India, mainly due to the trade of the British Empire, and sobecame a banking center.

There are three different phases in the history of banking in India.1) Pre-Nationalization Era.

2) Nationalization Stage.3) Post Liberalization Era.

1) PR E- NATIONALIZATION E RA

In India the business of banking and credit was practices even in very early times. Theremittance of money through Hundies, an indigenous credit instrument, was verypopular. The hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in different parts of the country. The modern type of banking, however, wasdeveloped by the Agency Houses of Calcutta and Bombay after the establishment of Rule by the East India Company in 18th and 19thcenturies.

During the early part of the 19th Century, ht volume of foreign trade was relativelysmall. The government of Bengal took the initiative and the first presidency bank, theB ank of Calcutta (Bank of Bengal) was established in 180. In 1840, the B ank of B ombay and IN 1843, the B ank of Madras was also set up.

These three banks also known as Presidency Bank. The Presidency Banks had their branches in important trading centers but mostly lacked in uniformity in their operational policies. In 1899, the Government proposed to amalgamate these three


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banks in to one so that it could also function as a Central Bank, but the PresidencyBanks did not favor the idea. However, the conditions obtaining during world war period (1914-1918) emphasized the need for a unified banking institution, as a result of which the Imperial Bank was set up in1921. The Imperial Bank of India acted like aCentral bank and as a banker for other banks.

The R B I (Reserve Bank of India) was established in 1935 as the Central Bank of theCountry. In 1949, the Banking Regulation act was passed and the RBI was nationalizedand acquired extensive regulatory powers over the commercial banks.

In 1950, the Indian Banking system comprised of the RBI, the Imperial Bank of India,Cooperative banks, Exchange banks and Indian Joint Stock banks.

2) NATIONALIZATION STAG E

After Independence, in 1951, the All India Rural Credit survey, committee of Directionwith Shri. A. D. Gorwala as Chairman recommended amalgamation of the ImperialBank of India and ten others banks into a newly established bank called the State B ank of India (SBI). The Government of India accepted the recommendations of thecommittee and introduced the State Bank of India bill in the Lok Sabha on 16th April1955 and it was passed by Parliament and got the presidents assent on 8th May 1955.The Act came into force on 1st July 1955, and the Imperial Bank of India wasnationalized in 1955 as the State Bank of India.

Name of the B ank Subsidiary with effect from1. State Bank of Hyderabad 1st October 19592. State Bank of Bikaner 1st January 19603. State Bank of Jaipur 1st January 19604. State Bank of Saurashtra 1st May 19605. State Bank of Patiala 1st April 19606. State Bank of Mysore 1st March 19607. State Bank of Indore 1st January 19688. State Bank of Travancore 1st January 1960

Later the Government nationalized six more commercial private sector bankswith deposit liability of not less than Rs. 200 corers on 15th April 1980, viz.

1. Andhra Bank.2. Corporation Bank.3. New Bank if India.4. Oriental Bank of Commerce.

5.

Punjab and Sind Bank.


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3) POST LI B E RALIZATION E RA

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known asNew Generation tech - savvy banks , and included Global Trust B ank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank , ICICI Bank and HDFC Bank.

The next stage for the Indian banking has been setup with the proposed relaxation inthe norms for Foreign Direct Investment, where all Foreign Investors in banks may begiven voting rights which could exceed the present cap of 10%, at present it has goneup to 74% with some restrictions. The new policy shook the Banking sector in Indiacompletely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lendat 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook andtech-savvy methods of working for traditional banks.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stakein Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time aninvestor has been allowed to hold more than 5% in a private sector bank since the RBIannounced norms in 2005 that any stake exceeding 5% in the private sector bankswould need to be vetted by them.

B ANKING S E CTOR - PR E SE NT (2010)

Indian banking industry stood firm and resilient amid the global crisis on the back of itsimproved productivity since the mid-1990s and a robust regulatory and supervisoryframework. The Industrys financial soundness indicators remained strong with the

Return on Average Assets (ROAA) at 1.13%, Capital Adequacy Ratio (CAR) at13.98% and Net NPA ratio at 1.05% as at end-March, 2009.

During the year FY10, the banking industry posted a decent business and financialperformance despite several challenges. For instance, the scheduled commercial banks(SCB) Aggregate Deposits grew by 17.1% (y-o-y). Within this, the term deposits grewby 16.2%, primarily due to a sharp decline in interest rates offered on term deposits byseveral banks. As credit growth was quite muted until November, 2009, the banksstruggled to protect their net interest margins by reducing the pressure on cost of deposits. A slower growth in term deposits resulted in a slower growth of broad moneysupply or M3 by 16.8% (y-o-y) during FY10. However, the banks demand depositsgrew healthily by 22.8% (y-o-y) during FY10 reflecting the industrys .Asset quality of

Indian banks too remained largely stable during the year FY10 except for a few banks..

As a result, foreign and new private banks grow at rates of 50 per cent, while PSBsimprove their growth rate to 15 per cent. The share of the private sector banks(including through mergers with PSBs) increases to 35 per cent and that of foreignbanks increases to 20 per cent of total sector assets. The share of banking sector valueadds in GDP increases to over 7.7 per cent, from current levels of 2.5 per cent. Fundingthis dramatic growth will require as much as Rs. 600 billion in capital over the next fewyears.


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B ANKING S E CTOR - FUTUR E

INDIAN BANKING stands at the threshold of a mega change in the next five years.Many new situations as compared to the present scenario are predicted to emerge. Thelast decade has seen many positive developments in the Indian banking sector. Thesector now compares favorably with banking sectors in the region on metrics likegrowth, profitability and non-performing assets (NPAs). A few banks have establishedan outstanding track record of innovation, growth and value creation. The failure torespond to changing market realities has stunted the development of the financial sector in many developing countries. A weak banking structure has been unable to fuelcontinued growth, which has harmed the long-term health of their economies. Further,the inability of bank managements (with some notable exceptions) to improve capitalallocation, increase the productivity of their service platforms and improve theperformance ethic in their organizations could seriously affect future performance.

A THRUST AR E A

Standard & Poor's, which compares Indian and Chinese banking, prescribes risk management as a thrust area for the former. McKinsey, however, suggests differentgoals (and ways of achieving them) to different sets of bankers public sector, oldprivate, new private and foreign while visualizing different scenarios of Indianbanking five years from now. The Independent Commission of Bank Officers analyses,in detail, the issues that had hampered the Indian banking system in the past and argueshow the Government's recent proposals foreign direct investment (FDI) andconsolidation of public sector banks will not ensure systemic transparency andefficiency as projected.

POT E NTIAL SC E NARIOS

In an interesting futuristic study, McKinsey uncovers "three potential scenarios'' thatcould emerge in the banking sector.

y The first is a "high performing'' scenario, where policy makers intervene only to theextent required to ensure system stability and protection of consumers' interest, andbank managements step up the drive for far-reaching change.

y In the second, "evolving'' scenario, policy makers adopt a pro-market stance but arecautious on pushing reform. The share of the banking sector value added would be 4.7per cent of GDP.

y And in the third scenario stagnating policy makers intervene to set restrictiveconditions and management is unable to execute changes to deliver value toshareholders or customers. Here, the share of the banking sector value added would beonly 3.3 per cent of GDP.


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B ROAD CLASSIFICATION OF B ANKS IN INDIA

1) TH E R B I: The RBI is the supreme monetary and banking authority in the countryand has the responsibility to control the banking system in the country. It keeps thereserves of all Scheduled banks and hence is known as the Reserve Bank.

2) PU B LIC S E CTOR B ANKS:y State Bank of India and its Associates (8)y Nationalized Banks (19)y Regional Rural Banks Sponsored by Public Sector Banks (196)

(3) PRIVAT E SE CTOR B ANKS:y Old Generation Private Banks (22)y Foreign New Generation Private Banks (8)y Banks in India (40)

(4) CO - OP E RATIV E SE CTOR B ANKS:y State Co-operative Banksy Central Co-operative Banksy Primary Agricultural Credit Societiesy Land Development Banksy State Land Development Banks


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PU B LIC S E CTOR B ANKS

Public sector banks are those in which the Government of India or the RBI is a majorityshareholder. These banks include the State Bank of India (SBI) and its subsidiaries,other nationalized banks, and Regional Rural Banks (RRBs). Over 70% of theaggregate branches in India are those of the public sector banks.

The motives for nationalized banks are social as well as economic. Nationalizedbanks, charged with operating in the public interest, may be under strong political andsocial pressures to give much more attention to externalities. They may be obliged tooperate some loss making activities where social benefits are clearly greater than socialcosts - for example, rural postal and agriculture loan & dues.

The nationalized banks have the support & backing of the government. Thegovernment provides the subsidies to these banks to fulfill their socio-economicobligations. The customers in the public banks are provided more attention & are dealtwith personal touch & care. The interests rates provide by these banks are low ascompared to the public sector banks but the money in these banks is fully secured.Therefore the majority of customers prefer the public sector banks.

Some of the leading banks in this segment include:

y Allahabad Bank y Canara Bank y Bank of Maharashtray Central Bank of Indiay Indian Overseas Bank y State Bank of Indiay State Bank of Patialay State Bank of Bikaner and Jaipur y State Bank of Travancorey Bank of Baroday Bank of Indiay Oriental Bank of Commercey UCO Bank y Union Bank of Indiay Dena Bank y Corporation Bank.


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PRIVAT E SE CTOR B ANKS

Private sector Banks are essentially comprised of two types: the old and the new.

Private Banks offer banking services to high net-worth individuals. Private bankingservices are largely related to asset management; that is, a private banking institutionassists the high net-worth individual in investing his/her money in exchange for commissions and fees. Private banking combines some of the services of a brokeragewith normal banking services.

The main aim of these banks is profit making by providing fast & easy servicesto the customers. Though private banks charge high but they provide better services tothe customers though latest technology. They provide better returns as compared to thepublic sector banks. These banks suffer from high employee turnover. They dont havethe backing & support of the government. Therefore private sector banks dont havehuge customers base.

The old private sector banks comprise those, which were operating beforeBanking Nationalization Act was passed in 1969. On account of their small size, andregional operations, these banks were not nationalized. These banks face intense rivalryfrom the new private banks and the foreign banks. The banks that are included in thissegment include:

y Bank of Madura Ltd. (now a part of ICICI Bank)y Bharat Overseas Bank Ltd.y Bank of Rajasthany Karnataka Bank Ltd.y Lord Krishna Bank Ltd.y The Catholic Syrian Bank Ltdy The Dhanalakshmi Bank Ltdy The Federal Bank Ltd.y The Jammu & Kashmir Bank Ltd.y The Karur Vysya Bank Ltd.y The Lakshmi Vilas Bank Ltd.y Vysya Bank.

The new private sector banks were established when the Banking RegulationAct was amended in 1993. After the initial licenses, the RBI has granted no morelicenses. Currently, these banks are on an expansion spree, spreading into semi-urbanareas and satellite towns. The leading banks that are included in this segment include:

y Bank of Punjab Ltd.y Centurion Bank Ltd.y Global Trust Bank Ltd.y HDFC Bank Ltd.y ICICI Banking Corporation Ltd.y IDBI Bank Ltd.y IndusInd Bank Ltdy UTI Bank Ltd.


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NE T PROFIT OF TOP B ANKS IN TH E MARCH 2010 QUART E R

1. C E NTRAL B ANK OF INDIA

Net profit rises 174.64% in the March 2010 quarter. Particulars Quarter Ended Year Ended

Mar. 2010 Mar. 2009 % Var. Mar. 2010 Mar. 2009 % Var.

Sales 3155.01 2647.28 19 12064.31 10455.19 15

OPM % 70.52 68.68 3 77.36 77.30 0

PBDT 302.53 107.27 182 1549.54 924.98 68

PBT 302.53 107.27 182 1549.54 924.98 68

NP 171.68 62.51 175 1058.85 571.24 85

2. KOTAK MAHINDRA B ANK

Net profit rises 97.43% in the March 2010 quarter Particulars Quarter Ended Year Ended


Sales 880.76 803.03 10 3255.62 3065.14 6

OPM % 46.69 53.36 -13 48.54 55.43 -12

PBDT 308.03 160.17 92 811.10 426.06 90

PBT 308.03 160.17 92 811.10 426.06 90

NP 202.50 102.57 97 561.10 276.10 103

3. ICICI B ANK

ICICI Bank net profit rises 35.20% in the March 2010 quarter

Particulars Quarter Ended Year Ended


Sales 5826.98 7529.69 -23 25706.93 31092.55 -17

OPM % 56.81 63.59 -11 60.14 65.09 -8

PBDT 1409.14 1070.92 32 5345.32 5116.97 4

PBT 1409.14 1070.92 32 5345.32 5116.97 4

NP 1005.57 743.76 35 4024.98 3758.13 7


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7. PUN J AB NATIONAL B ANK

Net profit rises 31.13% in the March 2010 quarter


Mar. 2010 Mar. 2009 % Var. Mar. 2010 Mar. 2009 % Var.Sales 5607.63 5116.57 10 21466.91 19127.21 12

OPM % 69.29 72.80 -5 71.20 73.18 -3

PBDT 1629.15 1320.33 23 5751.96 4766.92 21

PBT 1629.15 1320.33 23 5751.96 4766.92 21

NP 1135.03 865.57 31 3905.35 3090.88 26

8. B ANK OF B ARODA

Net profit rises 20.41% in the March 2010 quarter.



Sales 4353.84 4138.78 5 16698.34 15091.58 11

OPM % 69.18 70.29 -2 73.00 69.93 4

PBDT 1251.45 1094.74 14 4238.06 3247.93 30

PBT 1251.45 1094.74 14 4238.06 3247.93 30

NP 906.28 752.69 20 3058.33 2227.20 37


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COMPANYPROFIL E


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COMPANY PROFIL E

B ANK OF B ARODA

Bank of Baroda is the 3rd largest bank in India, after State Bank of India and PunjabNational Bank and ahead of ICICI Bank. BOB has total assets in excess of Rs. 2.27lakh crores and profit after tax Rs. 90628lacs. BOB has a network of over 3000branches and offices, and about 1100+ ATMs. It offers a wide range of bankingproducts and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, credit cards and asset management.

BOB's equity shares are listed in India on Bombay Stock Exchange and the NationalStock Exchange of India Limited and its American Depositary Receipts (ADRs) arelisted on the New York Stock Exchange (NYSE).

LOGO

Our new logo is a unique representation of a universal symbol. It comprisesdual B letterforms that hold the rays of the rising sun. We call this the Baroda Sun.The sun is an excellent representation of what our bank stands for. It is the single mostpowerful source of light and energy its far reaching rays dispel darkness to illuminateeverything they touch. At Bank of Baroda, we seek to be the sources that will help allour stakeholders realize their goals.

MISSION STAT E M E NT

The

Bank aspires to regain the leadership spot in the public sector banking spaceby 2009 - 10, deploying the most modern technology and pursuing global best

practices for affording world - class banking experience and best value to itscustomers.

VISION

To be a top ranking National B ank of International Standers committed toaugmenting stake holders value through concern, care, competence.


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HISTORY

Maharajah of Baroda Sir Sayajirao Gaekwad III founded the bank on July 20, 1908 inthe princely state of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of India, was nationalized on 19 July 1969, by the Government of India.

B O B Mergers & Acquisitions

Maharaja Sayajirao Gaekwad III set up Bank of Baroda (BOB).BOB established itsfirst branch in Ahmadabad. Then it acquired the following banks:

y Hind Bank.y New Citizen Bank of India, Maharashtra.y Surat Banking Corporation in Surat, Gujaraty

Umbergaon Peoples Bank in southern Gujaraty Tamil Nadu Central Bank in Tamil Nadu state.y 1972: BOB acquired Bank of Indias operations in Uganda.y Bareilly Corporation Bank & Nainital Bank in Uttar Pradeshy Traders Bank, Delhi.y Punjab Cooperative Bank y Benares State Bank (BSB)y Gujarat Local Area Bank

1996: BOB Bank entered the capital market in December with an Initial PublicOffering (IPO). The Government of India is still the largest shareholder, owning 66%of the bank's equity.

2005: BOB built a Global Data Centre (DC) in Mumbai for running its centralizedbanking solution (CBS) and other applications in 1900+ branches across India and 20other counties where the Bank is operating. BOB also opened a representative office inThailand. The Reserve Bank of India (RBI) has approved a joint venture between BOB,Bank of Maharashtra (BOM).

B O B FOR E IGN PR E SE NC E

BOB has got branches in Mombasa, Kampala, Nairobi, London, Fiji, Mauritius,Guyana, Uganda, Dubai, Abu Dhabi, Antwerp, Seychelles, Sydney, Hong Kong, Kenya,Tanzania, Kuala Lampur, Guangdong, Thailand, Kenya, Guangdong, China, New Zealand.


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Names of the Related Parties and their relationship with the Bank:

(A) SU B SIDIARI E S:i. BOB Capital Markets Limited

ii. BOB Cards Limitediii. The Nainital Bank Limited

iv. Bank of Baroda (Botswana) Limitedv. Bank of Baroda (Kenya) Limitedvi. Bank of Baroda (Uganda) Limited

vii. Bank of Baroda (Guyana) Inc.viii. Bank of Baroda (UK) Limited

ix. Bank of Baroda (Tanzania) Limitedx. Baroda Capital Markets (Uganda) Limited. (Subsidiary of Bank of Baroda

Uganda Ltd.)xi. BOB Trinidad & Tobago Ltd

xii. Bank of Baroda (Ghana) Ltd.xiii. Bank of Baroda (New Zealand) Ltd.

(B ) ASSOCIAT E S :i. Baroda Uttar Pradesh Gramin Bank

ii. Nainital-Almora Kshetriya Gramin Bank iii. Baroda Rajasthan Gramin Bank iv. Baroda Gujarat Gramin Bank v. Jhabua-Dhar Kshetriya Gramin Bank

vi. Indo Zambia Bank Limitedvii. Baroda Pioneer Asset Management Co. Ltd.


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FUTUR E POT E NTIAL & PLANS

RURAL & AGRICULTUR E SE CTOR

Rural Sector Approximately 23.0% of Indias GDP is derived from agriculture. Theindustry supports approximately two-thirds of Indias population and accounts for

14.7% of export earnings. Rural India has approximately 500 million people who, untilnow, have had limited access to traditional banking services simply because mostcommercial banks found it too uneconomical to serve them.

Rural India contributes a major chunk to the economy every year. To give this sector astronghold on finance and to enable economic independence, Bank of Baroda hasspecial offerings that extend credit facilities to small and marginal farmers, agriculturallaborers and cottage industry entrepreneurs. With the objective of developing ruraleconomy through promotion of agriculture, trade, commerce, industry and extendingcredit facilities particularly to small and marginal farmers, agricultural laborers andsmall entrepreneurs, Bank of Baroda, over the years, has reached out to larger part of rural India. We extend loans for agricultural activities and a host of services for farmerswell tuned to the rural market, and aim to make a Self Reliant Rural India. BOB alsohas special offerings that extend credit facilities to small and marginal farmers,agricultural laborers and cottage industry entrepreneurs.

B O B NEX T - G E N PRODUCTS

y Gen-Next Junior (Saving Account) -This is a Special kind of Savings Bank Deposit product for children to be made available in Gen-Next Pune branch.

y Gen-Next life Styley Gen-Next Power (OD Facility) -This is a special Savings Deposit product

having an in built feature of overdraft facility to be available at Gen-Next Punebranch.

y Gen-Next Suvidha -This is a Recurring Deposit product enabling the customer to make regular savings on monthly basis and earn higher interest


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COMPANY PROFI L E

ICICI B ANK (INDUS T RIA L CR E DI T AB D INV E STM E NT CORPORA TION OF INDIA)

ICICI B i Indi four t l rges t bank w it total asse ts of R s. 3,634.00 b illion (US$81 b illion) a t March 31, 2010 and prof it af ter tax R s. 40.25 b illion (US$ 896 m illion)for the year ended March 31, 2010. The Bank has a ne twork of 2,014 branches andabou t 5,219 AT Ms in Ind ia and presence in 18 coun tr ies. ICICI Bank's equ ity sharesare listed in Ind ia on Bombay S tock Exchange and the Na tiona l Stock Exchange of India Limited and its Amer ican Depos itary R eceipts (AD R s) are listed on the NewYork S tock Exchange (NYSE).

LOGO

MISSION S T AT E M E NT P E RF E CT ION IS POW E R

We w ill leverage our peop le, techno logy, speed and f inanc ial cap ital to:

y Be the banker of f irst choice for our cus tomers by de liver ing h igh qua lity,wor ld-class produc ts and serv ices.

y Expand the fron tiers of our bus iness g loba lly.y Play a proac tive ro le in the fu ll rea li ation of Ind ias potential.y Maintain a hea lthy f inanc ial prof ile and d ivers ify our earn ings across bus inesses

and geograph ies.y Maintain high s tandards of governance and e thics.y Contr ibute pos itively to the var ious coun tr ies and marke ts in which we opera te.y Create va lue for our s takeho lders.

VISION

T be the lead i prov ider of f i anc ia l serv ices in Ind ia and a major g loba l bank.


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HISTORY

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financialinstitution, and was its wholly-owned subsidiary.

The Industrial Credit and Investment Corporation of India Limited (ICICI) wasincorporated at the initiative of World Bank, the Government of India andrepresentatives of Indian industry, with the objective of creating a developmentfinancial institution for providing medium-term and long-term project financing toIndian businesses. Mr.A.Ramaswami Mudaliar is elected as the first Chairman of ICICILimited.

ICICI B anks Mergers & Acquisitions

y ITC Classic Financey Bank of Maduray Sangli Bank y

Anagram Financey ICICI Ltd.

ICICI B anks Schemes

ICICI launched retail finance, ICICI Bank Home Shoppe, Visa Mini Credit Card, MaxMoney, Kisan Loan Card, and Free for Life credit cards, NRI smart save Deposits,SME Toolkit, Probationary Officer Programme, and ICICI ACTIVE-BankingInteractive Service - along with DISH TV.

ICICI B ANKS FOR E IGN PR E SE NC E

ICICI Bank now has wholly-owned subsidiaries, branches and representatives officesin 18 countries, including an offshore unit in Mumbai. This includes wholly ownedsubsidiaries in Canada, Russia and the UK, offshore banking units in Bahrain andSingapore, an advisory branch in Dubai, branches in Belgium, Hong Kong and SriLanka, and representative offices in Bangladesh, China, Malaysia, Indonesia, SouthAfrica, Thailand, the United Arab Emirates and USA. Overseas, the Bank is targetingthe NRI (Non-Resident Indian) population in particular.


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Names of the Related Parties and their relationship with the Bank:

SU B SIDIARI E S

y ICICI Groupy ICICI Prudential Life Insurance Companyy

ICICI Securitiesy ICICI Lombard General Insurance Companyy ICICI Prudential AMC & Trusty ICICI Venturey ICICI Directy ICICI Foundationy Disha Financial Counseling


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FUTUR E POT E NTIAL & PLANS

Rural Sector Approximately 23.0% of Indias GDP is derived from agriculture. Theindustry supports approximately two-thirds of Indias population and accounts for 14.7% of export earnings. Rural India has approximately 500 million people who, untilnow, have had limited access to traditional banking services simply because most

commercial banks found it too uneconomical to serve them.

RURAL & AGRICULTUR E SE CTOR

ICICI Bank recognizes the role of prompt finance, and stable cash flows for a business. ICICI Bank focuses on all your energies on the growth of rural business.ICICI Banks push to offer services to so many rural communities across India,leveraging the best technologies and biometric security is truly innovative and canserve as a model for other banks with large-scale populations to reach. ICICI Bank recognizes your key role in the Agricultural supply chain. ICICI Bank offers financing

options designed to service your specific requirements. Be it overdrafts or loans, our approvals are localized, speedy and hassle-free. ICICI Bank has created products thatare simple, convenient and locally accessible so as to maximize your comfort

INT E RNATIONAL OP E RATIONS

International operations are subject to inherent risks, including: Cost structures and cultural and language factors, associated with managing and

coordinating our international operations; Compliance with a wide range of foreign laws, including immigration, labor and tax

laws; Restrictions on repatriation of profits and capital in some cases; Compliance with a wide range of Indian laws and regulations which impact our

international operations; and Exchange rate volatility.

International business has been identified as a key growth driver for ICICI Bank. Webelieve that the development of a strong international presence would enable us todiversify risks across geographies, support the cross-border needs of our customers,accelerate growth and profitability and build domestic capabilities to matchinternational standards. The initial international strategy is based on leveraging our India linkages be it catering to the varied financial requirements of Non-residentIndians (NRIs), cross-border financing and trade requirements of Indian corporate or India-related business requirements of multinational corporations and banks.


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PROFITA B ILITYPR E POSITION

FACTORS


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B ANKS PROFITA B ILITY PR E POSITION FACTORS

The following are the key factors in ascertaining the profitability of nationalized &privatized banks.

1. Capital adequacy ratio

2.

Non-performing asset ratio3. Credit to deposit ratio4. Provision coverage ratio5. Return on assets ratio6. Return on Equity7. Statutory Liquidity Ratio8. Cost-Income Ratio9. CASA10. Net interest Margin

1. CAPITAL AD E QUACY RATIO: A bank's capital ratio is the ratio of qualifying

capital to risk adjusted (or weighted) assets. The RBI has set the minimum capitaladequacy ratio at 9% for all banks. A ratio below the minimum indicates that the bank is not adequately capitalized to expand its operations. The ratio ensures that the bank donot expand their business without having adequate capital. The minimum CAR is 9%,the higher the better it is.

2. NON - P E RFORMING ASS E T RATIO: The net NPA to loans (advances) ratio isused as a measure of the overall quality of the banks loan book. An NPA are thoseassets for which interest is overdue for more than 90 days (or 3 months). Net NPAs arecalculated by reducing cumulative balance of provisions outstanding at a period endfrom gross NPAs. Higher ratio reflects rising bad quality of loans. The NPA ratio is oneof the most important ratios in the banking sector. It helps identify the quality of assetsthat a bank possesses. The lower the NPA, the better it is.

3. CR E DIT TO D E POSIT RATIO: This ratio indicates how much of the advanceslent by banks are done through deposits. It is the proportion of loan-assets created bybanks from the deposits received. The higher the ratio, the higher the loan-assetscreated from deposits. Deposits would be in the form of current and saving account aswell as term deposits. The outcome of this ratio reflects the ability of the bank to makeoptimal use of the available resources. Higher CD ratios reflect more credit being givenout, lower the CD better.

4. PROVISION COV E RAG E RATIO: The key relationship in analyzing assetquality of the bank is between the cumulative provision balances of the bank as on aparticular date to gross NPAs. It is a measure that indicates the extent to which the bank has provided against the troubled part of its loan portfolio. A high ratio suggests thatadditional provisions to be made by the bank in the coming years would be relativelylow (if gross non-performing assets do not rise at a faster clip).


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5. R E TURN ON ASS E TS RATIO: Returns on asset (ROA) ratio is the net income(profits) generated by the bank on its total assets (including fixed assets). The higher the proportion of average earnings assets, the better would be the resulting returns ontotal assets.

The formula for return on assets is:

6. R E TURN ON E QUITY: It is the relationship between net income and stockholders' funds. The ratio of a company's net income as a percentage of shareholders' funds. It is probably the most widely used measure of how well acompany is performing for its shareholders. It is calculated by dividing the net incomeshown on the income statement (usually of the past year) by shareholders' equity,which appears on the balance sheet:

Net income / Owners' equity = Return on equity

7. STATUTORY LIQUIDITY RATIO : SLR is the amount of liquid assets, such ascash, precious metals or other short-term securities, that a financial institution mustmaintain in its reserves. The SLR is commonly used to contain inflation and fuelgrowth, by increasing or decreasing it respectively. This counter acts by decreasing or increasing the money supply in the system respectively

SLR Rate = Total Demand/Time Liabilities x 100%

This percentage is fixed by the Reserve Bank of India. The maximum andminimum limits for the SLR are 40% and 25% respectively.

8. COST-INCOM

ERATIO: The cost/income ratio is an efficiency measure similar tooperating margin. Unlike the operating margin, lower is better. t is useful to measure

how costs are changing compared to income - for example, if a bank's interest incomeis rising but costs are rising at a higher rate looking at changes in this ratio willhighlight the fact. The cost/income ratio reflects changes in the cost/assets ratio and ininterest margin. The lower the better it is.

Cost-income ratio is= Operating expenses/operating income

9. CASA: CASA stands for Current and Savings account. Different kinds of deposits -current account, savings account and term deposits - form the major source of funds for banks. The CASA ratio shows how much deposit a bank has in the form of current and

saving account deposits in the total deposit.

10. N E T INT E R E ST MARGIN: NIM represents the percentage difference betweenthe interest income produced by a bank's earning assets (loans and investments) and itsmajor expense-interest paid to its depositors. The net difference between interest earnedand interest paid is a key measure of bank profitability. The higher the NIM, the better it is. .


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COMPARATIV E ANALYSIS OF B ANK OF B ARODA & ICICIB ANK

Sno. Ratios B O B (31.0 3.10) ICICI( 31.0 3.10)

1. Capital adequacy ratio(Basel II) 14.36% 19.4%2. Non-performing asset ratio 0.34% 1.87%3. Credit to deposit ratio 84.55% 89.70%4. Provision coverage ratio 74.90% 59.5%5. Return on assets ratio 1.10% 1.1%6. Return on Equity 22.19% 29.8%7. Statutory liquidity ratio 86.78%8. Cost Income ratio 43.57% 57.1%9. CASA 35.63% 41.7%10. NIM 2.74% 2.4%

R E ASONS

1. Capital adequacy ratio - ICICI bank has high CAR as compared to BOB due toprivate ownership. It is in the newly established bank & is in the phase of expansion sothe inflow is high which results in high capitalization & thus high CAR.On the other hand the BOB has low CAR because it is a 102 year old bank & is established bank.The inflow limited & smooth as provide by the government policies. Still the CAR iswell above the minimum requirement & it is adequately capitalized.

2. Non - performing asset ratio - The NPA of BOB is quiet low as compared to ICICI

bank due to the highly experienced & quality sales force. Their main aim is to fulfill thesocio-economic obligations rather than profit making. They strictly follow the rules &regulations of the bank & no bogus business is done. They are more successful inupgrading the NPA to performing categories. On the other hand high NPA is the major problem of ICICI. Their main aim is profit making & the sales force is new & nothighly experienced. In order to fulfill the profit motive fake & bogus accounts arecreated which later become dormant & thus results in high NPA.

3. Credit to deposit ratio - BOB has low CD ratio as compared to ICICI bank becausethe loan & advances on the deposits are given only after fulfilling all the documentalprocess as per rules & regulation as specified by BOB. On the other hand high CD ratiois 2 nd major problem with the ICICI bank. This is due to the reason that they give loans& advances on small deposits to achieve their profit motive.

4. Provision coverage ratio - BOB has high Provision coverage ratio as compared toICICI bank as the loans & advances given to according to the strict rules & regulationswhich are recovered easily & if not then the government provides the backing. On the


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other hand ICICI bank has low provision coverage ratios as they give more loans &advances even on small deposits which they fail to recover after certain period.

5. Return on assets ratio - It is similar for both the bank yet it is better for BOB inspiteof giving low returns on loans & deposits to the customers. The customer prefers BOBdue to safety & security reasons & they have the government support.

6. Return on E quity - ICICI bank has high ROE as compared to BOB as they providehigh rate of returns to the customers & still they have low customers base. On the other hand BOB as low ROE due to rate of return as they have to follow the governmentpolicies. Still the customers prefers the BOB as they provide better safety, security &have the government support.

7. Statutory Liquidity Ratio - BOB as low SLR as compared to ICICI bank but still itis high. This is due to the reason that bank needs to maintain the minimum SLR & has

to invest in GOI & other approved securities & also they have high cash reserve ratio.On the other hand ICICI bank has even higher SLR due to its high cash reserve ratios.

8. Cost - Income Ratio - BOB has low Cost income ratio as compared to ICICI bank asthey have low operating cost as they dont spend much on training & promotionalactivities. On the other hand ICICI bank has high operating cost as they spend high ontraining, technology & promotion.

9. CASA - ICICI bank have high CASA as compared to BOB because their minimum

balance requirements are high & have high service charges in order to make profits. Allthis adds to their high CASA. On the other hand BOB have low CASA as they havevery low minimum balance requirements. Most of the services are free in BOB whichresults in low CASA. Despite of all these BOB has got good CASA.

10. Net interest Margin - BOB has high NIM as compared to ICICI bank as they earnin volume. They earn on their loan & advances in volume rather than on deposits. Onthe other hand ICICI bank has low NIM as they earns in margin that they charge to thecustomers.

On the whole 7 out of 10 are better for the BOB as compared to ICICI bank. So thecustomers prefer the BOB over ICICI bank.

In short nationalized banks are still preferred over the privatized by the customers.


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COMPARATIV E ANALYSIS


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COMPARATIV E ANALYSIS OF NATIONALIZ E D B ANKS &PRIVATIZ E D B ANKS

1. S W OT ANALYSIS

SWOT analysis is done for a company, to find out its overall Strengths, Weaknesses,Threats and opportunities leading to gauging the competitive potential of the company.SWOT Analysis examines the company's key business structure and operations, historyand products, and provides summary analysis of its key revenue lines and strategy.

B ANK OF B ARODA

STR E NGTHS

1. Great Brand Image.2. High degree of customer satisfaction by making a repo with the customers.

3.

Dedicated workforce aiming at making a long-term career in the field.4. Support sales activities by understanding your customers businesses better.5. Improved management & Better accountability.6. Low degree of employee turnover.7. Better risk management the private sector banks.

W E AKN E SS

1. Some gaps in range for certain sectors.2. Customer service staff needs training.3. Processes and systems, etc4. Management cover insufficient.

5. Greater response time to customers.

OPPORTUNITI E S

1. Profit margins will be good.2. Could extend to overseas broadly.3. Multi-channel real time transactions processing.4. Mew market, products, services, delivery channels.5. Emergence of non-intrusive, focused supervision with a view to prevent frauds

and disturbances to financial stability

THR E ATS

1. Lack of infrastructure in rural areas could constrain investment.2. High volume/low cost market is intensely competitive.3. Very high competition prevailing in the industry.4. Rendered more vulnerable the domestic payment system and financial stability

to international shocks


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ICICI B ANK

STR E NGTHS

1. Right strategy for the right products.2. Superior customer service vs. competitors.3. Products have required accreditation.4. Good place to work.5. Lower response time with efficient and effective service.6. High interest rates then publics sector banks.

W E AKN E SS

1. Both old and new private banks are operating in a limited area confined to aregion.

2. The employee turnover appears to be on higher side. 3. There is dissimilarity between old and new private banks by virtue of their age,

functional area, products and services, etc.4. Some gaps in range for certain sectors.5. Sectoral growth is constrained by low unemployment levels and competition for

staff

OPPORTUNITI E S

1. Being in private sector, these banks enjoy high level of autonomy facilitatingthem for faster decision making.

2. To face stiff competition, they can innovate new products and services andachieve high customer satisfaction.

3. Fast-track career development opportunities on an industry-wide basis.4. Third party involvement to trace the remote areas.5. Resulting from demographic shifts resulting from changes in age profile and

household income, consumers will increasingly demand enhanced institutionalcapabilities and service levels from banks.

THR E ATS

1. Dominant PSBs which are recharged with a high market share will over-shadowthe Private Sector Banks.

2. Frequent announcements of takeover / Mergers & Acquisitions by PSBs as wellas new Private sector banks disturb the very functioning of old Private Sector Banks.

3. RBI / GOI relaxation of FDI investment norms cause worry among themanagements4. Lack of infrastructure in rural areas could constrain investment.5. Banks will no longer enjoy windfall treasury gains that the decade-long secular

decline in interest rates provided


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2. RISK MANAG E M E NT

Managing various types of financial risks is an integral part of the banking business.Bank must have a robust and integrated Risk Management system to ensure that therisks assumed by it are within the defined risk appetites and are adequatelycompensated. The Risk Management Architecture in the Bank comprises Risk Management Structure, Risk Management Polices and Risk ManagementImplementation and Monitoring Systems.

B ANK OF B ARODA

The overall responsibility of setting the Bank's risk appetite and effective risk management rests with the Board and apex level management of the Bank. Bank hasconstituted a Sub Committee of the Board on ALM (Asset Liability Management) andRisk Management to assist the Board on financial risk related issues. The Bank has afull-fledged Risk Management Department headed by a General Manager and

consisting of a team of qualified, trained and experienced employees. The Bank has setup separate committees, of Top Executives of the Bank to supervise respective risk management functions as under.

y Asset Liability Management Committee (ALCO) is basically responsible for themanagement of Market Risk and Balance Sheet Management.

y Credit Policy Committee (CPC) has the responsibility to formulate andimplement various enterprise-wide credit risk strategies including lendingpolicies and also to monitor Banks credit risk management functions on aregular basis.

y Operational Risk Management Committee (ORMC) has the responsibility of mitigation of operational risk by creation and maintenance of an explicitoperational risk management process.

ICICI B ANK

Risk is an integral part of the banking business and ICICI Bank aims at the delivery of superior shareholder value by achieving an appropriate trade-off between risk andreturns. ICICI Bank is exposed to various risks, including credit risk, market risk andoperational risk. Our risk management strategy is based on a clear understanding of various risks, disciplined risk-assessment and measurement procedures and continuousmonitoring. The policies and procedures established for this purpose are continuouslybenchmarked with international best practices. A comprehensive range of quantitativeand modeling tools developed by a dedicated risk analytics team supports the risk management function at ICICI Bank.

The Risk, Compliance & Audit Group (RCAG) is responsible for assessment,management and mitigation of risk in ICICI Bank. This group, forming a part of theCorporate Centre, is completely independent of all business operations and accountableto the Risk and Audit Committees of the Board of Directors.


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RCAG is organized into six sub-groups:

y Credit Risk Management Group,y Market Risk Group,y Credit Policies Group,y Internet Audit Group,y Retail Risk Group and

TYP E S OF RISKS

I) CR E DIT RISK

Credit Risk is the risk that the counterparty to a financial transaction will fail todischarge an obligation resulting in a financial loss to the Bank. Credit risk management processes involve identification, measurement, monitoring and control of credit exposures. Credit risk is the risk that a borrower is unable to meet its financialobligations to the lender.

B ANK OF B ARODA

In order to provide clarity to the operating functionaries, the Bank has various policiesin place such as Domestic Loan Policy, Investment Policy, Off-Balance Sheet ExposurePolicy, etc, wherein the Bank has specified various prudential caps for credit risk exposures. The Bank has adopted various credit rating models to measure the level of credit risking a specific loan transaction. The Bank uses a robust rating modeldeveloped to measure credit risk for majority of the business loans (non personalloans). The rating model haste capacity to estimate probability of default (PD), LossGiven Default (LGD) and unexpected losses in a specific loan asset. Apart fromassessing credit risk at the counterparty level, the Bank has appropriate processes andsystems to assess credit risk at portfolio level. The Bank undertakes portfolio reviews atregular intervals to improve the quality of the portfolio or to mitigate the adverseimpact of concentration of exposures to certain borrowers, sectors or industries.

ICICI B ANK

ICICI Bank measures, monitors and manages credit risk for each borrower and also atthe portfolio level. ICICI Bank has a standardized credit approval process, whichincludes a well-established procedure of comprehensive credit appraisal and rating.ICICI Bank has developed internal credit rating methodologies for rating obligors as

well as for rating. ICICI Bank has developed internal credit rating methodologies for rating obligors as well as for product / facilities. The rating factors in quantitative andqualitative issues and credit enhancement features specific to the transaction. The ratingserves as a key input in the sanction as well as post-sanction credit processes. Creditrating, a as concept, has been well internalized within the Bank. The rating for everyborrower is reviewed as least annually and for higher risks credits and large exposuresat shorter intervals. Sector knowledge has been institutionalized across ICICI Bank through the availability of sector-specific information on the Intranet.


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II) MARK E T RISK

Market risk implies possibility of loss arising out of adverse price movements of financial instruments like bonds, equity, forex contracts, etc. The objective of marketrisk management is to avoid excessive exposure of the Bank's earnings and equity tosuch losses and to reduce the Bank's exposure to the volatility inherent in financialinstruments such as securities, foreign exchange contracts, equity and derivativeinstruments, as well as balance sheet or structural positions. The objective of marketrisk management is to minimize the impact of losses due to market risks on earning andequity capital.

B ANK OF B ARODA

The Bank has clearly articulated policies to control and monitor its treasury functions.The Bank also has an asset liability management policy to address the market risk.These policies comprise management practices, procedures, prudential risk limits,review mechanisms and reporting systems. These policies are revised periodically in

line with changes in financial and market conditions. The Interest rate risk is measuredthrough interest rate sensitivity gap reports and Earning at Risk. The Bank monitors theshort-term Interest rate risk byNII (Net Interest Income) perspective and long-terminterest rate risk by EVE (Economic Value of Equity) perspective.

ICICI B ANK

The Asset-Liability Management Committee (ALCO) of Board of Directorsapproves ALM policies. ALCOs role encompasses stipulating liquidity and interest-rate risk limits, monitoring risk levels by adherence to set limits, articulating theorganizations interest rate view and determining business strategy in the light of thecurrent and expected business environment. These sets of policies and processes are

articulated in ALM policy. A separate set of policies for the trading portfolio addressissues related to investments in various trading products and are approved by theCommittee of Directors (COD) of the Board. RCAG exercises independent controlover the process of market-risk management and recommends changes in processes andmethodologies for measuring market risk.

III) OP E RATIONAL RISK

Operational risk is the risk of loss on account of inadequate or failed internal process,people and systems or external factors. Operational risk can result from a variety of factors, including failure to obtain proper internal authorization, improperlydocumented transactions, failure of operational and information security procedures,computer systems and software or equipment, fraud, inadequate training and employeeerrors.

B ANK OF B ARODA

The Operational Risk Management Committee (ORMC) has the responsibility of monitoring the operational risk of the Bank. The Bank monitors operational risk byreviewing whether its internal systems and procedures are duly complied with. TheBank collects and analyses loss and near miss data on operational risk based on


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different parameters on a half yearly basis and, wherever necessary, corrective steps aretaken.

ICICI B ANK

We attempt operational risk by maintaining a comprehensive system of internalcontrols, establishing systems and procedures to monitors transactions, maintaining keyback-up procedures and undertaking regular contingency planning. The Middle OfficeGroup monitors adherence to credit procedures. The International Audit Groupundertakes a comprehensive audit of all business group and other functions, inaccordance with a risk-based audit plan. This plan allocates audit resources based on anassessment of the operational risks in the various businesses. ICICI Bank has been apioneer in the implementation of a risk-based audit methodology in the Indian bankingsector.

3. FACILITI E S

I) PRODUCTS RANG E

P E RSONAL B ANKING

y Depositsy Loansy Cardsy Investmentsy Insurancey Demat servicesy Wealth management

NRI B ANKINGy Money Transfer y Bank accountsy Investmentsy Property Solutionsy Insurancey Loans

B USIN E SS B ANKING

y Corporate net banking

y Cash Managementy Trade servicesy FXonliney SME servicesy Online taxesy Custodial services


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II) LOAN FACILITY

B ANK OF B ARODA

Bank of Baroda offers a wide range of retail loans to meet your diverse needs. Whether the need is for a new house, child's education, purchase of a new car or homeappliances, our unique and need specific loans will enable you to convert your dreamsto realities. The BPLR (benchmark prime Lending rate) is 12%.

Key Products:

y Home Loany Home Improvement Loany Mortgage Loany Loan Against future Rent receivablesy Advance against Securitiesy Education loany Car loany

Baroda Carrer development loany Auto loany Two wheeler loany Loan to doctorsy Traders loan(up to 25lac)y Personal Loany Baroda Ashrya(reverse Mortgage Loan)y SME loan Factory

ICICI B ANK

ICICI Bank offers wide variety of Loans Products to suit your requirements. Coupledwith convenience of networked branches/ ATMs and facility of E-channels like Internetand Mobile Banking, ICICI Bank brings banking at your doorstep. The ICICI Bank Base Rate (I-Base) has been fixed at 7.50%. This is the minimum rate that ICICI Bank will charge to its new customers. Interest rates on loans and advances are IBAR (ICICIBank Benchmark Advance Rate) linked. Present Interest rate is I BAR + 3% based onproduct offered

Key Products:

y Home Loany Personal Loans (up to 10 lacs)y Loans against Securitiesy Car Loans (up to 90% of ex-showroom price)y Business Loans(25 lacs to 5 Cr)y Industry Specific Loans (Construction,Pharmaceuticals,Educational Institutions,

Information Technology )y Working Capital loan Dealer financingy Vendor financing


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4. INT E R E ST RAT E S ON D E POSITS (DOM E STIC)

B O B (W.E.F 17.08.2009)

Maturity RangeUpto Rs. 15 lacs Above Rs. 15 lacs toless than Rs. 1 Cr.

7 days to 14 days 2.50% 2.50%15 days to 45 days 3.00% 3.00%46 days to 90 days 4.00% 4.00%91 days to 180 days 5.00% 5.00%181 days & above but less than1 year 5.50% 5.50%

1 year & above but less than 2years 6.50% 6.50%

2 years and above upto 749days 7.00% 7.00%750 days 7.00% 7.00%Above 750 days but less than 3years 7.00% 7.00%

3 years and above but less than5 years 7.00% 7.00%

5 years and above but less than8 years 7.00% 7.00%

8 years and above up to 10years 7.00% 7.00%

FOR DOM E STIC, NR E , NRO

Savings Deposits Interest Rate (% p.a.) Minimum B alanceSavings Account 3.50% 1000


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ICICI B ank (W.E.F 17.08.2009)

Maturity Range Upto Rs. 15 lacs Above Rs. 15 lacs to lessthan Rs. 1 Cr.

7 days to 14 days - 3.50%15 days to 29 days 3.50% 3.50%30 days to 45 days 3.50% 3.50%46 days to 60 days 3.50% 3.50%61 days to 90 days 3.50% 3.50%91 days to 120 days 5.25% 4.00%121 days to 180 days 5.25% 4.25%181 days to 210 days 6.00% 5.50%211 days to 269 days 6.00% 6.00%270 days to less than 1year 6.00% 6.00%

1 year to 389 days 6.25% 6.25%390 days 6.75% 6.75%391 days to 589 days 6.25% 6.25%590 days 6.75% 6.75%591 days to less than 2years 6.25% 6.25%

2 years to 989 days 7.00% 7.00%990 days 7.25% 7.25%991 days to less than 3years

7.00% 7.00%

3 years to less than 5 years 7.50% 7.50%5 years up to 10 years 7.75% 7.75%

FOR DOM E STIC, NR E , NRO

Savings Deposits Interest Rate (% p.a.) MinimumB alance(with

Cheque book)Savings Account 3.50% 10000


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5. TRAINING & MANPO W E R

B ANK OF B ARODA

Being a nationalized bank the manpower in BOB is aged but they are highlyexperienced & have high energy level. Since most of the employees work in the bank for a longer period of time the Knowledge work force is very high & have low attritionrate. Being highly experienced they are very good at problem solving & customer handling. As the employees work in a particular are for long period they understand thelocal culture & have the local support which helps in building the long term relationswith the customers. BOB needs to spend on technology so that experienced manpower can be utilized to an optimum level. The BOB needs to introduce the third partyproducts to increase their profitability.

ICICI B ANK

The manpower in ICICI bank is young & has low experience& hence they qualitymanpower is low. The employees dont work for a longer period & hence the attritionlevel is very high & thus the knowledge retentions are low. Being young & in-experienced they are not very good at problem solving & customer handling. As theturnover rate is high they fail to build strong & long term relations with the customer.They spend very heavily on the training & technology to fulfill their aim of leadingfinancial service provider. The marketing & sales team is very trained & motivated.

6. T E CHNOLOGY & ADVANC E M E NT

Technology is an integral part of banking. Right from sourcing and acquiring thecustomer to servicing and delighting the customer, bank depends upon technology.Technology needs to be leveraged to make the Banks routine operations cost-effective.

B ANK OF B ARODA

Bank has engaged the services of McKinsey & Co. to advise it on Business Process Re-engineering and Organizational Restructuring so that its branches can devote maximumtime to sales and marketing functions and handle the newly acquired business in aneffective manner. The newly created robust technology platform would also facilitatesupervision and control and building up of rich management information system to aidthe business decision making.

y With 100% CBS and various initiatives, Bank has enabled its customer with thestate of the art technology; duly complemented with the human interface.

y The Banks Technology initiatives are clearly focused on the customer. TheBusiness Transformation Programmed encompassing technology is beingimplemented by the Bank with a view to provide its customer, conveniencebanking on 24 X 7 basis in India and abroad through deployment of a single


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Core Banking Solution platform across globe with integrated delivery channelslike ATM, Internet, Phone, Mobile, Kiosk, Call Centre etc.

y It also covers other applications like Enterprise wide General Ledger, Risk Management, Anti-Money Laundering, Cheque Truncation, Credit Cards,Mutual Funds, On-line Trading, Data Warehousing, Customer RelationshipManagement, SWIFT, RTGS, NEFT, Internet Payment gateway, GlobalTreasury, Human Resources Management System, Employee Pay Roll, CashManagement, Mobile Banking, SMS delivery, Retail Depository, PhoneBanking, Risk Management, Knowledge Management etc. which are wellintegrated and provide a seamless experience to customers of all segments andlines of business.

ICICI B ANK

In less than a decade, the bank has become a universal bank offering a well diversifiedportfolio of financial services.

y It currently has assets of over US$ 79 billion and a market capitalization of US$9 billion and services over 14 million customers through a network of about 950branches, 3300 ATM's and a 3200 seat call center (as of 2007). The hallmark of this exponential growth is ICICI Banks unwavering focus on technology.

y The bank has successfully leveraged the power of Finacle and has deployed thesolution in the areas of core banking, consumer e-banking, corporate e-bankingand CRM. With Finacle, ICICI Bank has also gained the flexibility to easilydevelop new products targeted at specific segments such as ICICI Bank YoungStars- a product targeting children, Women's Account addressing workingwomen and Bank campus targeting students. ICICI Bank needed a robusttechnology platform that would help it achieve its business goals.

y

An open systems approach and low TCO (Total Cost of Ownership) were someof the key benefits Finacle offered the bank. Unlike most banks of that era,ICICI Bank was automated from day one, when its first branch opened in thecity of Chennai. Some of the reasons cited by the bank for its decision to selectFinacle includes Finacles future-proof technology, best-of-breed retail andcorporate banking features, scalable architecture and proven implementationtrack record.


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7. CUSTOM E R SATISFACTION

Material customer satisfaction level has been examined on the basis of three variables:

y Fees Chargedy Problem Facedy Post Purchase Behavior

B ANK OF B ARODA

We continue to implement new information technology and other initiatives to providetotal customer centricity and have made advances in the networking, computerizationand interconnectivity of our branches, ATMs and other delivery channels. We haveentered into an agreement with Hewlett Packard (HP) to assist us in delivering auniform, portal-based IT infrastructure to cover both our domestic and internationaloperations. Through this project we will implement and manage an enterprise-wide

service-oriented architecture including, among others, core banking, phone banking,Internet banking, call centre, delivery channel integration, risk and performancemanagement, financial analysis and planning, customer relationship management, datawarehousing, enterprise general ledger, global treasury, human resources managementsystem and cheque truncation system.

ICICI B ANK

The aim of ICICI bank is that all our branches and offices should be brought under our private network in order to provide the customers with total customer centricity andservice their needs on an anywhere anytime basis across the globe. We believe this

will help us to compete and excel in the increasingly challenging and competitivedomestic and global banking environments.


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8. PROFITA B ILITY

B ANK OF B ARODA

Balance Sheet as on 31st March, 2010 (Rs.In 000's)As on 31.0 3.2010 As on 31.0 3.2009

Capital & LiabilitiesCapital 365,52,77 365,52,77Reserves & Surplus 14740,85,50 12514,19,53Deposits 241044,26,42 192396,95,17Borrowings 13350,08,50 12767,90,64Other Liabilities & Provisions 8815,97,09 8627,65,66Total 278316,70,28 226672,23,77

AssetsCash and balances with Reserve Bank of

India

13539,96,91 10596,34,35

Balances with Banks and Money at Call andShort Notice

21927,08,85 13490,77,35

Investments 61182,37,54 52445,87,58Advances 175035,28,59 143251,40,84Fixed Assets 2284,76,48 2309,71,93Other Assets 4347,21,91 4578,11,72Total 278316,70,28 226672,23,77

Contingent Liabilities 87836,07,99 73386,09,83Bills for Collection 18185,57,81 13963,99,04


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ICICI B ANK

Balance Sheet as on 31st March, 2010 (Rs.In 000's)As on 31.0 3.2010 As on 31.0 3.2009

Capital & LiabilitiesCapital 1,114.89 1,113.29

Reserves & Surplus 50,503.48 48,419.73Deposits 202,016.60 218,374.73Borrowings 96,263.57 93,155.46Other Liabilities & Provisions 15,501.17 18,264.66Total 363,399.71 379,300.96

AssetsCash and balances with Reserve Bank of India 27,514.29 17,563.33Balances with Banks and Money at Call andShort Notice

11,359.40 12,430.23

Investments 120,892.80 103,058.31Advances 181,205.60 218,310.85Fixed Assets 3,212.69 3,801.62Other Assets 19,214.93 24,163.62Total 363,399.71 379,300.62


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TR E NDS INB ANKINGSE CTOR


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TR E NDS & D E VE LOPM E NT

Banks' activities can be divided into retail banking, dealing directly with individuals;business banking, providing services to mid-size business; corporate banking dealingwith large business entities; private banking, providing wealth management services toHigh Net worth Individuals; and investment banking, relates to helping customers raise

funds in the Capital Markets and advising on mergers and acquisitions. Banks are nowmoving towards Universal Banking, which is a combination of commercial banking,investment banking and various other activities including insurance.

I am confident that India will become a Developed Nation by 2020. Come,let us strive together to turn this resolve into reality Atal Bihari Vajpayee

1. CHANG E S IN TH E STRUCTUR E OF B ANKS

The financial sector reforms ushered in the year 1991 have been well calibrated andtimed to ensure a smooth transition of the system from a highly regulated regime to amarket economy. The first phase of reforms focused on modification in the policyframework, improvement in financial health through introduction of various prudentialnorms and creation of a competitive environment. The second phase of reforms startedin the latter half of 90s, targeted strengthening the foundation of banking system,streamlining procedures, upgrading technology and human resources development andfurther structural changes. The financial sector reforms carried out so far have made the balance sheets of banks look healthier and helped them move towards achievingglobal benchmarks in terms of prudential norms and best practices.

y Public Sector Banks had, in the past, relied on Government support for capitalaugmentation. However, with the Government making a conscious decision toreduce its holding in Banks, most Banks have approached the capital marketfor raising resources. This process could gain further momentum when thegovernment holding gets reduced to 33% or below. It is expected thatpressures of market forces would be the determining factor for theconsolidation in the structure of these banks . If the process of consolidationthrough mergers and acquisitions gains momentum, we could see the emergenceof a few large Indian banks with international character. There could be somelarge national banks and several local level banks. Mergers, acquisitions,strategic alliances / partnerships could be one way to achieve this.

y Rationalization of a very large network of branches, which at present hasrendered the system cost ineffective and deficient in service, would take place.Most of the banks would have adopted core-banking solutions in a fully

networked environment. Back office functions would be taken away frombranches to a centralized place. While brick and mortar branches wouldcontinue to be relevant in the Indian scenario, the real growth driver for costcutting would be virtual branches viz., ATMs, Internet Banking, mobilebanking, kiosks etc., which can be manned by a few persons and run on 24 x 7basis to harness the real potential of these technological utilities, there will bestrategic alliances / partnership amongst banks and this phenomenon hasalready set in.


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y The composition of bank staff will change . As total computerization willrender a part of the workforce surplus, banks will go for a rightsizing exercise.Some may resort to another round of VRS to shed excess flab while some other may go for re-deployment to strengthen marketing arms. With greater use of technology and outsourcing of services in different areas, the manpower recruitment will mostly be in specialized areas and technology applications.With commitment shifting from the organization to the profession, we could seegreater lateral movement of banking personnel. Training and skill developmentwill, however, continue to be key HR functions. With the age profile of staff undergoing changes, banks will have to focus on leadership development andsuccession planning. Knowledge management will become a critical issue.

y Management structure of banks will also undergo drastic changes in thecoming years. Instead of the present pyramid structure, the banks will movetowards reduction in tiers to ultimately settle for a flat structure. Product-wisesegmentation will facilitate speedier decision-making.

2. T E CHNOLOGY

Technology will bring fundamental shift in the functioning of banks. It would not onlyhelp them bring improvements in their internal functioning but also enable them toprovide better customer service. Technology will break all boundaries and encouragecross border banking business. Banks would have to undertake extensive BusinessProcess Re-Engineering and tackle issues like:

a) How best to deliver products and services to customers

b) Designing an appropriate organizational model to fully capture the benefits of technology and business process changes brought about.

c) How to exploit technology for deriving economies of scale and how to create costefficiencies, and d) how to create a customer - centric operation model.

y INT E RN E T B ANKINGInternet banking (or E-banking) means any user with a personal computer and abrowser can get connected to his bank -s website to perform any of the virtualbanking functions. In internet banking system the bank has a centralizeddatabase that is web-enabled. All the services that the bank has permitted on theinternet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of

bank is now giving place to an alternative delivery channels with ATMnetwork. Once the branch offices of bank are interconnected through terrestrialor satellite links, there would be no physical identity for any branch.

y AUTOMAT E D T E LL E R MACHIN E (ATM)ATM is designed to perform the most important function of bank. It is operatedby plastic card with its special features. The plastic card is replacing cheque,personal attendance of the customer, banking hours restrictions and paper based verification. There are debit cards. ATMs used as spring board for


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Mobile Banking Services:

y Account Informationy Payments, deposits, withdrawals & transfersy Investments(PMS, Real-time stock quote, personalized alerts & notification on

security prices)

3. PRODUCT INNOVATION & PROC E SS R E-E NGIN EE RING

With increased competition in the banking Industry, the net interest margin of bankshas come down over the last one decade. Product innovations and process re-engineering will be the order of the day. The changes will be motivated by the desire tomeet the customer requirements and to reduce the cost and improve the efficiency of service. All banks will therefore go for rejuvenating their costing and pricing tosegregate profitable and non-profitable business.

As banks strive to provide value added services to customers, the market will see the

emergence of strong investment and merchant banking entities. Product innovation andcreating brand equity for specialized products will decide the market share andvolumes. New products on the liabilities side such as forex linked deposits;investment - linked deposits , etc. are likely to be introduced, as investors with variedrisk profiles will look for better yields. R isk management products like options,swaps, and derivative products and will offer a variety of hedge products to thecorporate sector and other investors. There will be more and more of tie-ups betweenbanks, corporate clients and their retail outlets to share a common platform to shore uprevenue through increased volumes.

4. R E GULATORY & L E GAL E NVIRONM E NT

The advent of liberalization and globalization has seen a lot of changes in the focus of Reserve Bank of India as a regulator of the banking industry. De-regulation of interestrates and moving away from issuing operational prescriptions have been importantchanges. The focus has clearly shifted from micro monitoring to macro management.Supervisory role is also shifting more towards off-site surveillance rather than on-siteinspections. The focus of inspection is also shifting from transaction-based exercise torisk-based supervision. In a totally de-regulated and globalised banking scenario, astrong regulatory framework would be needed. The role of regulator would be criticalfor:

y Ensuring soundness of the system by fixing benchmark standards for capitaladequacy and prudential norms for key performance parameters.y Adoption of best practices especially in areas like risk-management,

provisioning, disclosures, credit delivery, etc.y Adoption of good corporate governance practices.y Creation of an institutional framework to protect the interest of depositors.y Regulating the entry and exit of banks including cross-border institutions.


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5. APPLICATION SUPPORT E D B Y B LOCK E D AMOUNT (AS B A)

SEBI has introduced the facility of making application through APPLICATIONSUPPORTED BY BLOCKED AMOUNT process, in book built public issue. ASBA

is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, hisapplication money shall be debited from the bank account only if his/her application isselected for allotment after the basis of allotment is finalized, or the issue iswithdrawn/failed. In case of rights issue his application money shall be debited fromthe bank account after the receipt of instruction from the registrars. Merchant bankers,Registrars and Self Certified syndicate banks(SCSBs) are advised to provide the ASBAfacility in rights issues with suitable modifications to ASBA process specified by SEBIfor public issue through book building route, as deemed fit. SCSB is a bank which isrecognized as a bank capable of providing ASBA services to investors.

The lists of SCSBs are as below.

y Axis Bank y Bank of Baroday Corporation Bank y HDFC Bank y ICICI Bank Ltdy IDBI Bank Limitedy Kotak Mahindra Bank y State Bank of Bikaner & Jaipur y State Bank of Indiay Union Bank of Indiay Yes Bank Limited

The objective of introducing ASBA is to ensure that the investor's funds leave his bank account only upon allocation of shares in public issues. The ASBA process also ensuresthat only the requisite amounts of funds are debited to the investor's bank account onallotment of shares. In this mechanism, the need for refunds is completely obviated.


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R E SE ARCHM E THODOLOGY


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R E SE ARCH M E THODOLOGY

Research in common parlance refers to a search for knowledge. One can also defineresearch as a scientific and systematic search for pertinent information on a specifictopic. The Advance Learners Dictionary of Current English lays down the meaning of research as

A careful investigation or inquiry especially through search for new factsin any branch of knowledge.

Research methodology is a systematic way, which consists of series of action steps,necessary to effectively carry out research and the desired sequencing to these steps.

This research studies about the Indian banking scene that has changed drastically withthe private sector making inroads in an area hitherto dominated by large nationalizedbanks. Growing disinvestment is likely to impact the banking industry as well. There isevery possibility of privatization of public sector banks, leading to greater operationalautonomy.

This research makes a financial analysis of profits preposition of the nationalizedbanks & privatized banks by making a comparison between their product ranges.

R E L E VANC E OF TH E TOPIC

Opportunities in Indian Banking Sector provide extensive research & rationalanalysis on national & private banks. This report has been made to help to evaluate theopportunities, challenges & driving forces critical to the growth of banking industry inIndia.

The report provides detailed overview of the Indian banking industry by contemplating& analyzing various parameters like asset size, income level, profit preposition etc. Itwill help to ascertain the key profitability factors in the privatized & nationalizedbanks. This study is comparative analysis of products, risk management, technology &advancement etc. provided by the national & private banks. It is helpful in analyzingthe range of products provided to the customer by Bank of Baroda & ICICI.

"T he success of the economic reforms is therefore all to see and the driving force of these reforms is the banking sector " .

P. Chidam B aram


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ST E PS OF R E SE ARCH PROC E SS

y Formulation of the research problem.y Extensive literature Survey.y Development of working hypothesis.y Preparing the research design.y Determining sample design.y Collecting the data.y Analyzing the data.y Hypothesis testing.y Interpretation of facts and figures.

FORMULATION OF TH E R E SE ARCH PRO B L E M

Research problem can be formulated on the basis of nature and variables. Initially theproblem may be stated in a broad way and than the ambiguities, if any, relating to theproblem be resolved. Then the feasibility of a particular solution has to be consideredbefore a working formulation of the problem can be setup. Essentially two steps areinvolved in formulating the research problem, viz, understanding the problemthoroughly, and rephrasing the same in to maniple terms from an analytical point of view.

The best way of understanding of problem is to discus it with once on colleagues or with those having some expertise in matters. In the academic institution the researcher can seek the help from a guide who is usually an experienced man and has severalresearch problems in mind. In private business units or in governmental organization,the problem is usually earmarked by the administrative agencies.

The New World has ensured survival of the Fittest. New products & services are theorder of the day, in order to stay ahead in the rat race. Banks are now foraying into netbanking, securities, consumer finance, treasury market, merchant banking, mutualfunds & insurance.

In todays highly-charged and hyper-competitive commercial environment, a bankingproduct rarely can survive solely based on its own utility. With the plethora of productscurrently flooding the banking sector, banks are finding it more difficult than ever todistinguish their products from those offered by different types of banks.

The society that we live in can not only be called secular or democratic, it should bemore appropriately termed as over-communicated these days. There are manynationalized, privatized, corporate banks in India.


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EX T E NSIV E LIT E RATUR E SURV E Y

The banking sector in India has made remarkable progress since the economic reformsin 1991. New private sector banks have brought the necessary competition into theindustry and spearheaded the changes towards higher utilization of technology,improved customer service and innovative products. Customers are now becoming

increasingly conscious of their rights and are demanding more than ever before. Therecent trends show that most banks are shifting from a product-centric model to acustomer-centric model as customer satisfaction has become one of the major determinants of business growth. In this context, prioritization of preferences and closemonitoring of customer satisfaction have become essential for banks. Keeping these inmind, an attempt has been made in this study to analyze the factors that are essential ininfluencing the investment decision of the customers of the public sector banks. For this purpose, Factor Analysis, which is the most appropriate multivariate technique, hasbeen used to identify the groups of determinants. Factor analysis identifies commondimensions of factors from the observed variables that link together the seeminglyunrelated variables and provides insight into the underlying structure of the data.Secondly, this study also suggests some measures to formulate marketing strategies tolure customers towards banks.

For the above research work extensive literature survey of the topic is done. For thepurpose various books, journals, magazines, websites etc in the given bibliography arereferred.

It is found that good amount of work is done in similar area. There are various theoriesgiven about the banking like banking theory, banking methods, banking credibilitytheories, different models of banking.

This has helped to understand the fundamentals of the study and to have the deepunderstanding of the research problem.

R E ASONS B E HIND ITS S E L E CTION

The financial sector is one of the booming and increasing sectors in India. The bankingproducts are one of the most powerful, efficient and effective channel to attract thecustomers. It is really difficult to convince customers and sell a single product but sincethese banks provide a bundle of products through their executives who have their ownpersonal contacts which make th

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