Banking Industry Analysis

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INDUSTRY PROFILE Banking in India originated in the first decade of 18th century with The GeneralBank of India coming into existence in 1786 Central banking is, the responsibility of theReserve Bank of India In 1969 the government started nationalization of bank. Total deposits, advances and net profit grew at CAGR of 19.6%, 27.4% and 20.2% respectively from FY03 to FY08

The India Scenario - A Comparison Only one Indian Bank in the top 100 Banks in the world India's best and brightest, the SBI, is roughly one-tenth the size of the world's biggest bank - Citigroup Six Chinese banks feature among the top 25 Asian banks while India has only two representatives - SBI and ICICI Bank. Similarly, SBI's consolidated pre-tax profit is $1.9 billion against Citigroup's $29 billion, Bank of America's $25 billion and HSBC's $21 billion The one area where Indian banks are able to compete with their global peers is their return on assets (RoA).

Three phases of banking system Early phase from 1786 to 1969 of Indian Banks Nationalizations of Indian Banks and up to 1991 prior to Indian banking sector Reforms New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991

Industry analysis FIVE FORCES Buyers bargaining power Suppliers bargaining power Threats of new entrant Threats of substitutes Rivalry/exiting competitors

Types of BanksIn terms of share holding pattern:-

Public sector Banks Private sector Banks Co-operative Bank Development Bank/Financial institutions

In terms of balance sheet size:-

Large bank (balance sheet more than Rs.24,000 crore) Mid-size bank ( balance sheet less than Rs.24,000 crore and more than20 branches)

Small banks10 branches)

(balance sheet less than Rs.3000 crore and less than

MAJOR REFORMS INITIATIVES Interest Rate Deregulation Government equity in banks New private sector banks New areas have been opened up Adoption of prudential norms Adoption of information technology

MAIN COMPETITORS FOR BANKING SECTOR Post offices Mutual fund Share market Insurance Money lenders Family and Friends

CHALLENGES AHEAD Improving profitability Reinforcing technology Risk management Sharpening skills Greater customer orientation Corporate governance International standards

Not yet out of the woods. The Indian banking system did well to survive the carnage of the global meltdown that brought marquee institutions down to their knees. But there are challenges which, if not tackled, could derail Indias ambition of higher economic growth.

Corporate credit growth plunged from 28% in 2007-08 to 19% in 2008-09. Retail credit growth crashed from 30% in 2007-08 to 10% in 2008-09 Many banks invest excessively on Govt. securities.

How the Indian banking system has been hit by the credit crisis

Retail banking Retail products such as credit cards, debit cards etc. Portfolio Management: Mutual Funds etc. Corporate lending and project financing (including loans) Investment banking Foreign exchange trading

products/services offered by bank

Number of bank in India till march 2009

HDFC Bank HDFC Bank was incorporated in august 1994 Among the first in new generation commercial bank Promoted by HDFC the parent company It has 1,412 branches and over 3,295 ATMs, in 528 cities in India Over the last few years, HDFC Bank as a whole has been growing steadily at a rate of 30 per cent

Strategy of HDFC bank Increasing market share in Indias expanding banking. Delivering high quality customer service Delivering more products to more customers Maintaining current high standards for asset quality through disciplined credit risk management

Segmentation strategyDemographic variables locations (metros & divisional cities) Occupation (business person, salaried class both govt. & pvt.) Age (senior citizens & minor ) Psychographic variablesLife styles people who belives in modern banking with higher set of service i.e internet banking.

Target market Corporate banking market-this market target the industries and fulfill their financial needs. Capital market-this segment is targeted on the long term needs of the individual as well as of industries. Retail banking market-this segment is for retail investors and provide them short term financial credit for their personal, household useeds.

Targeting strategy

Positioning strategy HDFC bank has positioned itself as a bank which give higher standard of services through product innovation for the diverse need of individual & corporate clients. So they want to highlight following points in their positioning segmentsCustomer centric Service oriented Product innovations

SWOT analysis StrengthsSupport of various promoters High level of services Knowledge of Indian market Weakness Far from rural reach

Contd OpportunitiesGrowing indian banking sector People are becoming more service oriented In the global market ThreatsEntry of foreign banks Perception of customer

Relative Market Share PositionHigh 1.0 High +20 Medium .50 Low 0.0

BCG Matrix

HDFC bank

Stars II

Question Marks I



Cash Cows IIIa S yrt s udn ILow -20

Dogs IV23

Credit Ratings The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality. Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations

conclusionHDFCs competitive strength clearly lies in the use of technology and the ability to deliver world-class service with rapid response time. Over the last 14 years, the bank has successfully gained market share in its target customer franchises while maintaining healthy profitability and asset quality.