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Banking Industry: Structure and Comparison
1
A PROJECT REPORT ON
“Banking Industry: Structure and Comparison”
GUIDANCE OF: Mr. Anil Suvarna
SUBMITTED BY: Rafat Khan
Semester – III, Roll no 30
Nerul Batch – 2009 - 2011
In partial fulfillment of Executive Post Graduate Program in Business Management
(Finance)
SIES College of Management Studies
Nerul, Navi-Mumbai
Banking Industry: Structure and Comparison
2
TABLE OF CONTENTS
Chapter 1 – Introduction…………………………………………7
Chapter 2 – Bank Overview……………………………………...8
2.1 State Bank of India……………………………………9
2.1.1 Services………………………………………………...10
2.2 ICICI Bank…………………………………………….16
2.2.1 Services………………………………………………...17
2.3 Punjab National Bank…………………………………20
2.3.1 Services………………………………………………...21
2.4 HDFC Bank…………………………………………...22
2.4.1 Services…………………………………………….......23
2.5 Axis Bank……………………………………………..25
2.5.1 Services…………………………………………...........26
Chapter 3 – Capital Structure…………………………………...27
3.1 State Bank of India…………………………………...27
3.2 ICICI Bank…………………………………………...28
3.3 Punjab National Bank………………………………...31
3.4 HDFC Bank…………………………………………...33
3.5 Axis Bank……………………………………………..36
Chapter 4 – Financial Performance……………………………..39
4.1 Balance Sheet of State Bank of India…………………39
4.2 Profit & Loss Account of State Bank of India…….......40
4.3 Balance Sheet of ICICI Bank………………………….41
4.4 Profit & Loss Account of ICICI Bank………………....42
Banking Industry: Structure and Comparison
3
TABLE OF CONTENTS
4.5 Balance Sheet of Punjab National Bank…………………43
4.6 Profit & Loss Account of Punjab National Bank ……….44
4.7 Balance Sheet of HDFC Bank……………………………45
4.8 Profit & Loss Account of HDFC Bank…………………..46
4.9 Balance Sheet of Axis Bank……………………………...47
4.10 Profit & Loss Account of Axis Bank…………………….48
Chapter 5 – Key performance indicators..........................................56
Chapter 6 – Ratio Analysis……….………........................................58
Chapter 7 – SWOT Analysis……………...………...........................65
6.1 State Bank of India………………………………………65
6.2 ICICI Bank………………………………………………66
6.3 Punjab National Bank……………………………………67
6.4 HDFC Bank………………………………………………68
6.5 Axis Bank………………………………………………....69
Chapter 8 – Corporate Social Responsibility……………………...70
7.1 State Bank of India………………………………………..70
7.2 ICICI Bank……………………………………………….75
7.3 Punjab National Bank……………………………………79
7.4 HDFC Bank………………………………………………81
7.5 Axis Bank…………………………………………………82
Chapter 9 – Challenges facing Banking industry in India………...83
WEBLIOGRAPHY…………………………………………………….88
Banking Industry: Structure and Comparison
4
Acknowledgement
I owe a great many thanks to a great many people who helped and supported me
during the writing of this Project report.
My deepest thanks to my Guide Mr. Anil Suvarna for Guiding me on “Banking
Industry: Structure and Comparison” and correcting various documents of mine
with attention and care. They have taken pain to go through the project and make
necessary correction as and when needed.
I would also thank my Institution and my faculty members without whom this
project would have been a distant reality. I also extend my heartfelt thanks to my
family and well wishers.
Banking Industry: Structure and Comparison
5
Declaration
I, Ms. Rafat Khan of SIES College of Management Studies hereby declare that I
have completed this project on “Banking Industry: Structure and Comparison” in
the academic year 2009 – 2011. The information submitted is true and original to
the best of my knowledge.
Signature of the student
Banking Industry: Structure and Comparison
6
Executive Summary
I as a student of SIES College of Management Studies have been asked to prepare a Capstone
project as a part of my Curriculum. I have prepared my project on “Banking Industry: Structure
and Comparison”.
The way of doing every business has been changing drastically. Banking industry is not
untouchable of it. Even there is more implication of changes in the banking. The whole
definition of banking has been changed by the competition and the application of IT enabled
services. Earlier it was people who use to persuade the banks, for availing the services of banks,
but now we say that banks are persuading customers by creating need of financial services for
customers. They are doing each effort to make customers loyal and add new customers.
So, now it is the customers, who run the Banks, not the governments or any individual
organization. Banks are bound to provide the personalized products to different category of
customers.
Customers need to be segmented and classified according to the different attributes. Once we
divide them into the different segments, we can easily provide them the products which is
suitable for them, and from which he can be satisfied. If we talk about specially Investments,
there are varieties of schemes available in Investments, and we cannot sell same products to all
customers, and here the segmentation comes in light.
Once we define the segments, we need to promote the products to the different classes of
customers. As for Preferred customers, we need to pitch them personally. And for the regular
customer, we need to promote through cross – selling at banks.
This project compares the five top banking companies in terms of its assets– State Bank of India,
ICICI Bank, Punjab National Bank, HDFC Bank and Axis Bank.
Banking Industry: Structure and Comparison
7
Chapter 1:
Introduction
A bank is a financial institution that provides banking and other financial services. By the term
bank is generally understood an institution that holds a banking license. Banking licenses are
granted by bank regulatory authorities and provides rights to conduct the most fundamental
banking services such as accepting deposits and making loans. There are also financial
institutions that provide certain banking services without meeting the legal definition of a bank, a
so called non-banking financial company. Banks are a subset of the financial services industry.
Figure 1: Structure of the organised banking sector in India.
Banking Industry: Structure and Comparison
8
Chapter 2:
Bank Overview
The current report examines major trends in the Banking sector focusing on five top companies
in terms of its assets– State Bank of India, ICICI Bank, Punjab National Bank, HDFC Bank and
Axis Bank. Summary information for each company is presented in Figure 1.
(Rs. in crores)
State Bank
of India
ICICI
Bank
PNB HDFC
Bank
Axis Bank
Last Price 2,312.50 1,047.40 1,080.25 2,356.75 1,242.75
Market
Capitalization
146,843.52 120,636.64 34,223.63 109,642.06 51,065.78
Net Interest
Income
81,394.36 25,974.05 26,986.48 19,928.21 15,154.81
Net Profit 8,264.52 5,151.38 4,433.50 3,926.39 3,388.49
Total Assets 1,053,413.74 363,399.71 296,632.79 262,458.56 242,713.37
Figure 1 Summary company information
Throughout the report analysis has been presented based on information gathered from various
sources, including company annual reports, company website, moneycontrol website, BSE
website and NSE website. I have tried to acknowledge each source of information where
possible.
2.1 State Bank of India
State Bank of India (SBI) is the largest Indian banking and financial s
turnover and total assets) with its headquarters in Mumbai, India. It is state
traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of
the Bank of Calcutta, making it the olde
Madras merged into the other two presidency banks, Bank of Calcutta and Bank of Bombay to
form Imperial Bank of India, which in turn became State Bank of India. The government of India
nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60%
stake, and renamed it the State Bank of India. In 2008, the government took over the stake held
by the Reserve Bank of India.
Figure 2 State Bank of India shareholding pattern
13%
12%
6%
4%3%
SBI
Banking Industry: Structure and C
State Bank of India (SBI) is the largest Indian banking and financial services company (by
turnover and total assets) with its headquarters in Mumbai, India. It is state-owned. The bank
traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of
the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of
Madras merged into the other two presidency banks, Bank of Calcutta and Bank of Bombay to
form Imperial Bank of India, which in turn became State Bank of India. The government of India
Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60%
stake, and renamed it the State Bank of India. In 2008, the government took over the stake held
State Bank of India shareholding pattern
59%
3%
Promoters
FII/NRI
Financial
Institutions/Bank/Insurance
Individuals
MutualFunds/UTI
Depository receipts
Bodies Corporate
Banking Industry: Structure and Comparison
9
ervices company (by
owned. The bank
traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of
st commercial bank in the Indian Subcontinent. Bank of
Madras merged into the other two presidency banks, Bank of Calcutta and Bank of Bombay to
form Imperial Bank of India, which in turn became State Bank of India. The government of India
Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60%
stake, and renamed it the State Bank of India. In 2008, the government took over the stake held
Institutions/Bank/Insurance
Banking Industry: Structure and Comparison
10
2.1.1 Services
Personal Banking
The SBI Personal Banking service is controlled and accessible from the entire SBI branches
available throughout the country. In fact, it will be unfair to mention only about the branches.
The network can be accessible through online banking services available from the SBI.
The Personal Banking services that are offered by the State Bank of India offer certain list of
services, and facility related schemes. Some of the most popular ones are availing of personal
loans with lowest interest rates, online money transferring facility, opening up of tax saving
policies, fixed deposit schemes with higher and effective interest rates, etc. The genuineness in
service providing facility have made the State Bank of India a name to be reckoned and
respected by millions of users and customers. The services are quick, fast and genuine. The State
Bank of India personal banking services and schemes are created keeping in mind the needs and
demands of each and every individual customers. The services are available twenty four hours
online banking technique. Moreover, the toll free customer care number can be called anytime to
clear the doubts and misconceptions regarding any service. The SBI ATM service is available
throughout the country with the inclusion of wide range of outlets opened twenty four hours and
seven days a week.
Following are the list of services offered by State Bank of India:
SBI Term Deposits SBI Loan for Pensioners
SBI Recurring Deposits Loan against Mortgage Of Property
SBI Housing Loan Loan against Shares & Debentures
SBI Car Loan Rent-Plus Scheme
SBI Educational Loan Medi-Plus Scheme
SBI Personal Loan Rates of Interest
Banking Industry: Structure and Comparison
11
Agricultural/Rural Banking
State Bank of India Caters to the needs of agriculturists and landless agricultural labourers
through a network of 8750 rural and semi-urban branches. Apart from the branches, there are
428 Agricultural Development Branches (ADBs) which also cater to agriculturists. SBI are the
leaders in agri finance in the country with a portfolio of Rs. 64,000 crs in agri advances covering
around 80 lac accounts.
Their branches have covered a whole gamut of agricultural activities like crop production,
horticulture, plantation crops, farm mechanization, land development and reclamation, digging of
wells, tube wells and irrigation projects, forestry, construction of cold storages and godowns,
processing of agri-products, finance to agri-input dealers, allied activities like dairy, fisheries,
poultry, sheep-goat, piggery and rearing of silk worms.
To give special focus to agriculture lending Bank has also appointed agri specialists in various
disciplines to handle projects/ guide farmers in their agri ventures. Advances are given to
borrowers for very small activities covering poorest of the poor to hitech activities involving
large fund outlays.
Now SBI is setting up Agri Commercial Branches (ACBs) which will handle high value agri
financing involving large investments. It envisages lending through corporate partnerships and
other large enterprises for commodity financing, investment credit, other high value agriculture
segments like horticulture, floriculture & food processing etc. It also focuses on Agri related
SME including setting up of Rice and Dhal mills, seed processing industry, food processing
industry, large and small scale dairy units, etc.
Traditionally, rural business is associated with agriculture and allied activities. Of late however,
the trickle down effect of economic growth, renewed focus on infrastructure development, and
employment generation in rural areas have led to huge investment by the Government in rural
India, with a view to bridge the urban and rural divide.
Banking Industry: Structure and Comparison
12
Considering that agriculture would continue to be significant driver of Indian economy, with the
possibilities of rapid growth in emerging areas like contract farming, agro-processing and agro-
export zones, etc., a separate Agri Business Unit (ABU) with a distinct organizational structure
has been set up in the Bank and under noted objectives has been created in 2004:-
• Providing focused attention on the banking requirements of the agriculture segment,
• Achieving 18% target under agricultural advances as required under priority sector
norms,
• Focus on micro finance and SHG opportunities (now part of non-farm sector in Rural
Business),
• Focus on Key Corporate and Institutional relationships in agriculture, emerging
opportunities, and special initiatives, as may be necessary,
• Focus on product development and management,
• Reduce NPA levels in Agriculture,
• Make agriculture a commercial proposition.
ABU has four departments headed by Deputy General Managers:
1. Agri Business, Planning, Monitoring and Market Intelligence.
2. Corporate and Institutional Relationship.
3. Product Development and Marketing.
4. RRBs & Lead Bank Department.
SBI also have an effective Marketing and recovery team in each region with responsibilities for
marketing and building relationships with dealers of agri-products, organizing promotional
events and for loan sanction, processing, monitoring and recovery.
With a collective effort of Govt. and the people, SBI are set forth to continue growth in the rural
and agri development and become the ‘Banker to Every Indian’.
Banking Industry: Structure and Comparison
13
NRI Services
SBI offers specifically designed banking services to the expatriate Indians settled in various parts
of the world in the name of SBI NRI services or SBI NRI Banking services with over 73 SBI
NRI branches in 30 countries along with representative offices and off shore banking units across
the globe.
NRI accounts, deposit schemes, loans, remittance, investments, are some of the services being
offered by the state bank of India to its NRI customers throughout the world. Being India's
largest and the most trusted bank State bank of India provides special services through SBI
Online to its NRI customers spread across the globe.
International Banking
International banking services of State Bank of India are delivered for the benefit of its Indian
customers, non-resident Indians, foreign entities and banks through a network of 131
offices/branches in 32 countries as on 31 July 2009, spread over all time zones. The network is
augmented by a cluster of Overseas and NRI branches within India and correspondent links with
over 522 banks, the world over. Bank's Joint Ventures and Subsidiaries abroad further underline
the Bank's international presence.
The services include corporate lending, loan syndications, merchant banking, handling Letters of
Credit and Guarantees, short-term financing, collection of clean and documentary credits and
remittances.
The Bank has carved a niche for itself in the Euroland with branches located in Antwerp, Paris
and Frankfurt. Indian banks and corporates are able to avail single-window Euro services from
the Bank's Frankfurt branch.
Banking Industry: Structure and Comparison
14
Corporate Banking
The SBI’s powerful corporate banking formation deploys multiple channels to deliver integrated
solutions for all financial challenges faced by the corporate universe. The Corporate Banking
Group and the National Banking Group are the primary delivery channels for corporate banking
products.
The Corporate Banking Group consists of dedicated Strategic Business Units that cater
exclusively to specific client groups or specialize in particular product clusters. Foremost among
these specialized groups are the Corporate Accounts Group (CAG), focusing on the prime
corporate and institutional clients of the country’s biggest business centers. The others are the
Project Finance unit and the Leasing unit.
The National Banking Group also delivers the entire spectrum of corporate banking products to
other corporate clients, on a nationwide platform.
The SBI offers an exhaustive range of financial products and services that answers any business
or market circumstance, backed by an assublack expertise in customizing the product to meet the
most sensitive specificities of each client and each business context.
It is committed to understanding the finest nuances of your business objectives and engineering
cblackit and non-cblackit solutions to suit them. Its team of highly skilled and experienced
product specialists can help you forecast your cblackit patterns and structure complex transaction
requirements.
Commanding unsurpassed respect and legacy in the Indian financial expanse, the SBI is
committed to offering you financial solutions that extract maximum value from business and
market situations.
While the bank is strongly positioned to structure financial packages that anticipate the changing
business environment, its vast network--the world’s largest—ensures delivery channels of
unmatched reach, both in India and abroad.
Banking Industry: Structure and Comparison
15
Government Business
State Bank of India's linkage with Government business is widespread. No wonder that out of
9315 branches in India, about 7000 branches are conducting Government Business. The large
network of our branches provides easy access to the common man to deposit the following
Government dues and pension payments.
• SBI e-Freight
• Centralised Pension Processing Center (CPPC)
• Government Accounts
• SBI e-TAX
• Senior Citizens Savings Scheme
• Public Provident Fund
SME
State Bank of India has been playing a vital role in the development of small scale industries
since 1956.The Bank has financed over 8 lakhs SSI units in the country. It has 55 specialised SSI
branches, 99 branches in industrial estates and more than 400 branches with SIB divisions.
The Bank finances for Small Business activities which are of special significance to a large
number of people as many of these activities can be started with relatively lower investment and
with no special skills on the part of the entrepreneurs.
Other Services
Domestic Treasury SBI Vishwa Yatra Foreign Travel Card
Broking services Foreign inward remittances
ATM services Internet Banking
E-Pay/E-Rail Micro codes
RBIEFT Safe deposit locker
2.2 ICICI Bank
ICICI Bank (formerly Industrial Credit and Investment Corporation of India) established in 1955
is a major banking and financial services organization in India. It is the second largest bank in
India and the largest private sector bank in India by market c
are listed on the stock exchanges at BSE, NSE, Kolkata and Vadodara; its ADRs are traded on
the New York Stock Exchange (NYSE).
largest international balance sheet amo
subsidiaries, branches and representatives offices in 19 countries, including an offshore unit in
Mumbai.
Figure
28%
17%
7%
6%3%
1%
ICICI
Banking Industry: Structure and C
ICICI Bank (formerly Industrial Credit and Investment Corporation of India) established in 1955
is a major banking and financial services organization in India. It is the second largest bank in
India and the largest private sector bank in India by market capitalization. ICICI Bank's shares
are listed on the stock exchanges at BSE, NSE, Kolkata and Vadodara; its ADRs are traded on
the New York Stock Exchange (NYSE). The Bank is expanding in overseas markets and has the
largest international balance sheet among Indian banks. ICICI Bank now has wholly owned
subsidiaries, branches and representatives offices in 19 countries, including an offshore unit in
Figure 3 ICICI Bank shareholding pattern
38%
FIIs/NRIs/Foreign Banks/Foreign
Companies/OCBs/Foreign
Nationals/NRI Directors
Deuts che Bank Trust Co.
(Depositary For ADS Holders )
Insurance Companies
Mutual Funds
Individuals
Bodies Corporates
Banks/Financial Institutions/UTI
MF
Banking Industry: Structure and Comparison
16
ICICI Bank (formerly Industrial Credit and Investment Corporation of India) established in 1955
is a major banking and financial services organization in India. It is the second largest bank in
apitalization. ICICI Bank's shares
are listed on the stock exchanges at BSE, NSE, Kolkata and Vadodara; its ADRs are traded on
The Bank is expanding in overseas markets and has the
ng Indian banks. ICICI Bank now has wholly owned
subsidiaries, branches and representatives offices in 19 countries, including an offshore unit in
FIIs/NRIs/Foreign Banks/Foreign
Companies/OCBs/Foreign
Nationals/NRI Directors
Deuts che Bank Trust Co.
(Depositary For ADS Holders )
Insurance Companies
Banks/Financial Institutions/UTI
Banking Industry: Structure and Comparison
17
2.2.1 Services
Personal Banking
ICICI Bank personal banking services include customized products to suit each individual
investor and customer. The diversity of requirements makes each individual unique. ICICI Bank
addresses to personal banking needs of everyone with specially designed products and highly
efficient in-house teamwork. The wide array of ICICI personal banking solutions include:
• Personal Deposits in the form of usual and special savings accounts, fixed and recurrent
deposits, tax-saver deposits, outward remittance accounts, EEFC accounts and many
more.
• Personal Loans available for buying home, vehicles, business investments, and also
against property and securities.
• Personal Use Cards that include credit cards, ATM/ debit cards, travel, pre-paid cards,
and many more.
• Personal Investments in ICICI Bank bonds, GOI bonds, mutual funds, IPO, pure gold,
and senior citizens savings.
• Personalized Online Share Trading through demat accounts.
• Personal Insurance for students medical or overseas travel, health insurance, vehicle
(car or two-wheeler) insurance and home insurance.
Wealth Management
ICICI bank is a leader in the wealth management service with its exclusive ICICI wealth
management offerings. ICICI bank wealth management department has a dedicated team of
experts with a rich experience in finance and related areas. When you subscribe to ICICI wealth
management services, a dedicated wealth manager works closely with you in understanding your
current assets, your risk profiles and your financial objectives. The wealth managers are backed
up by a highly expert ICICI bank wealth management team. Based on a thorough study, your
wealth manager along with the ICICI wealth management team comes up with solutions and
recommendations. A professionally built portfolio is the main output of the whole exercise. Of
Banking Industry: Structure and Comparison
18
course, it is an ongoing process with regular portfolio updates and reviews done by the same
ICICI wealth management experts.
NRI Banking
ICICI Bank offers specifically designed banking services to the expatriate Indians settled in
various parts of the world in the name of ICICI NRI services or ICICI NRI Banking services
along with representative offices and off shore banking units across the globe. NRI accounts,
deposit schemes, loans, remittance, investments, are some of the services being offered by the
ICICI Bank to its NRI customers throughout the world.
Corporate Banking
ICICI Bank corporate banking strategy is based on providing comprehensive and customised
financial solutions to corporate customers. The Bank offers a complete range of corporate
banking products including rupee and foreign currency debt, working capital credit, structured
financing, syndication and commercial banking products and services.
The corporate and investment banking franchise is built around a core relationship team that has
strong relationships with almost all of the country’s corporate houses. The relationship team is
product agnostic and is responsible for managing banking relationships with clients. They have
also put in place product specific teams with a view to focus on designing financial solutions for
clients. The investment banking team is responsible for working with the relationship team in
India and our international subsidiaries and branches, for structuring and execution of investment
banking mandates. The Bank have a Commercial Banking Group within the Wholesale Banking
Group for growing this business through identified branches, while working closely with the
corporate relationship teams. Their strategy for growth in commercial banking, or meeting the
regular banking requirements of companies for transactions and trade, is based on leveraging our
strong client relationships and focusing on enhancing client servicing capability at the
operational level.
Banking Industry: Structure and Comparison
19
Business Banking
At ICICI Bank, there is an ideal bank account that takes care of all the customers cashflow and
banking needs. Whether the customer business is local or national, starting up or scaling up,
ICICI Bank's business services and banking facilities keep the customers on top of their business,
round the clock, all the time. For a small or medium business, timely finance is the key to
making the most of business opportunities. ICICI Bank has a host of innovative loan and
overdraft products that can make all the difference to the customers bottomline. ICICI Bank
provides with vital services to help the customers focus on their business and compete in global
markets. ICICI Bank’s trade services strengthen the customers business relationships by ensuring
reliability and speed in their business documentation and payments. ICICI Bank credit facilities
smoothen the customers cash flows. ICICI Bank's Small Enterprises Group's (SEG) Investment
Banking team is dedicated to provide the customers niche and exclusive investment banking
services.
2.3 Punjab National Bank
Punjab National Bank (PNB) is the third largest bank in India. It was registered on May 19, 1894
under the Indian Companies Act with its office in Anarkali Bazaar
the second largest state owned commercial bank in India with about 5000 branches across 764
cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the
world by the Bankers Almanac, London. The bank's total assets for financial year 2007 were
about US$60 billion. PNB has a banking subsidiary in the UK, as well
Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai.
Figure 4 Punjab National Bank shareholding pattern
19%
15%
3%1%
PNB
Banking Industry: Structure and C
is the third largest bank in India. It was registered on May 19, 1894
under the Indian Companies Act with its office in Anarkali Bazaar, Lahore. Today, the Bank is
the second largest state owned commercial bank in India with about 5000 branches across 764
cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the
world by the Bankers Almanac, London. The bank's total assets for financial year 2007 were
about US$60 billion. PNB has a banking subsidiary in the UK, as well as branches in Hong
Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai.
Punjab National Bank shareholding pattern
58%
1%4%
President of India
FIIs/NRIs/OCBs
Banks/Financial
Institutions/Insurance
Companies
Mutual Funds
Domestic Companies/Trusts
Indian Public/Resident
Individuals
Banking Industry: Structure and Comparison
20
is the third largest bank in India. It was registered on May 19, 1894
Lahore. Today, the Bank is
the second largest state owned commercial bank in India with about 5000 branches across 764
cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the
world by the Bankers Almanac, London. The bank's total assets for financial year 2007 were
as branches in Hong
Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai.
Domestic Companies/Trusts
Banking Industry: Structure and Comparison
21
2.3.1 Services
Punjab National Bank offers financial solutions and services in an array of sectors. All these
services that are offered keep pace with the changing market trends in order to fulfill the needs
and preferences of the customers. Some of the well known sectors on which the main functions
of the bank are based are:
Personal Banking
The company offers personal banking products and services comprising savings accounts,
current accounts, fixed deposits, nomination facilities, and debit cards, as well as various credit
schemes, such as housing loans, car finance, personal loans, professional loans, educational
loans, reverse mortgage loans, and various other credit schemes.
Corporate Banking
The corporate banking products and services of PNB are loans against future lease rentals, EXIM
finance products, cash management services, and gold card schemes for exporters.
Financial Services
The Bank provides agriculture finance services, industrial finance services and trade financial
services.
International banking/NRI
Punjab National Bank is extensively catering to banking needs of Non-resident Indians,
Importers & Exporters particularly relating to foreign exchange business including Imports &
Exports of Goods & Services as also Remittances etc. PNB offers various schemes / products
/services relating to international banking.
2.4 HDFC Bank
HDFC Bank Limited is a major Indian financial services company based in India, incorporated
in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The
Bank was promoted by the Housing Development Finance Corporation, a p
finance company (set up in 1977) of India. HDFC Bank has 1,725 branches and over 5,000
ATMs, in 780 cities in India, and all branches of the bank are linked on an online real
As of 30 September 2008 the bank had total assets of R
2008-09, the bank has reported net profit of 2,244.9 crore (US$498.37 million), up 41% from the
previous fiscal. Total annual earnings of the bank increased by 58% reaching at 19,622.8 crore
(US$4.36 billion) in 2008-09.
Figure
17%
9%
9%
7%
HDFC
Banking Industry: Structure and C
HDFC Bank Limited is a major Indian financial services company based in India, incorporated
in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The
Bank was promoted by the Housing Development Finance Corporation, a p
finance company (set up in 1977) of India. HDFC Bank has 1,725 branches and over 5,000
ATMs, in 780 cities in India, and all branches of the bank are linked on an online real
As of 30 September 2008 the bank had total assets of Rs.1006.82 billion. For the fiscal year
09, the bank has reported net profit of 2,244.9 crore (US$498.37 million), up 41% from the
previous fiscal. Total annual earnings of the bank increased by 58% reaching at 19,622.8 crore
Figure 5 HDFC Bank shareholding pattern
30%
23%
5%
FII/OCBs/NRIs
Promoters
Depository receipts
Indian
Public/Resident
Individuals
Banking Industry: Structure and Comparison
22
HDFC Bank Limited is a major Indian financial services company based in India, incorporated
in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The
Bank was promoted by the Housing Development Finance Corporation, a premier housing
finance company (set up in 1977) of India. HDFC Bank has 1,725 branches and over 5,000
ATMs, in 780 cities in India, and all branches of the bank are linked on an online real-time basis.
s.1006.82 billion. For the fiscal year
09, the bank has reported net profit of 2,244.9 crore (US$498.37 million), up 41% from the
previous fiscal. Total annual earnings of the bank increased by 58% reaching at 19,622.8 crore
Banking Industry: Structure and Comparison
23
2.4.1 Services
HDFC Bank deals with three key business segments. - Wholesale Banking Services, Retail
Banking Services, Treasury. It has entered the banking consortia of over 50 corporates for
providing working capital finance, trade services, corporate finance and merchant banking. It is
also providing sophisticated product structures in areas of foreign exchange and derivatives,
money markets and debt trading and equity research.
Wholesale Banking Services
The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian
corporate to small & mid-sized corporates and agri-based businesses. For these customers, the
Bank provides a wide range of commercial and transactional banking services, including
working capital finance, trade services, transactional services, cash management, etc. The bank is
also a leading provider of structured solutions, which combine cash management services with
vendor and distributor finance for facilitating superior supply chain management for its corporate
customers. Based on its superior product delivery / service levels and strong customer
orientation, the Bank has made significant inroads into the banking consortia of a number of
leading Indian corporates including multinationals, companies from the domestic business
houses and prime public sector companies. It is recognised as a leading provider of cash
management and transactional banking solutions to corporate customers, mutual funds, stock
exchange members and banks.
HDFC Bank
Wholesale Banking Retail Banking Treasuries
Banking Industry: Structure and Comparison
24
Retail Banking Services
The HDFC Bank products are backed by world-class service and delivered to customers through
the growing branch network, as well as through alternative delivery channels like ATMs, Phone
Banking, Net Banking and Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the
Investment Advisory Services programs have been designed keeping in mind needs of customers
who seek distinct financial solutions, information and advice on various investment avenues. The
Bank also has a wide array of retail loan products including Auto Loans, Loans against
marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider
of Depository Participant (DP) services for retail customers, providing customers the facility to
hold their investments in electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in association with
VISA (VISA Electron) and issues the MasterCard Maestro debit card as well. The Bank
launched its credit card business in late 2001. By March 2010, the bank had a total card base
(debit and credit cards) of over 14 million. The Bank is also one of the leading players in the
“merchant acquiring” business with over 90,000 Point-of-sale (POS) terminals for debit / credit
cards acceptance at merchant establishments. The Bank is well positioned as a leader in various
net based B2C opportunities including a wide range of internet banking services for Fixed
Deposits, Loans, Bill Payments, etc.
Treasury
Within this business, the bank has three main product areas - Foreign Exchange and Derivatives,
Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the
financial markets in India, corporates need more sophisticated risk management information,
advice and product structures. These and fine pricing on various treasury products are provided
through the bank's Treasury team. To comply with statutory reserve requirements, the bank is
required to hold 25% of its deposits in government securities. The Treasury business is
responsible for managing the returns and market risk on this investment portfolio.
2.5 Axis Bank
Axis Bank Limited, formerly UTI Bank, is a financial services firm that had begun operations in
1994. The Bank was promoted jointly by the Administrator of the Specified Undertaking of the
Unit Trust of India (UTI-I), Life Insurance Corporation of India (L
Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The
Oriental Insurance Corporation and United India Insurance Company. The bank changed its
name to Axis Bank in April 2007 to avoid confusion with o
name. The Bank has strengths in both retail and corporate banking and is committed to adopting
the best industry practices internationally in order to achieve excellence.
Figure
37%
9%
6%
5%
Axis
Banking Industry: Structure and C
Axis Bank Limited, formerly UTI Bank, is a financial services firm that had begun operations in
1994. The Bank was promoted jointly by the Administrator of the Specified Undertaking of the
I), Life Insurance Corporation of India (LIC), General Insurance
Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The
Oriental Insurance Corporation and United India Insurance Company. The bank changed its
name to Axis Bank in April 2007 to avoid confusion with other unrelated entities with similar
The Bank has strengths in both retail and corporate banking and is committed to adopting
the best industry practices internationally in order to achieve excellence.
Figure 6 AXIS Bank shareholding pattern
38%
37%
3%
2%0%
0%
Axis FII/NRIs
Promoters
Depository
receipts
Bodies Corporate
Individuals
MutualFunds/UTI
Financial
Institutions
Others
ForeignOthers
Banking Industry: Structure and Comparison
25
Axis Bank Limited, formerly UTI Bank, is a financial services firm that had begun operations in
1994. The Bank was promoted jointly by the Administrator of the Specified Undertaking of the
IC), General Insurance
Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The
Oriental Insurance Corporation and United India Insurance Company. The bank changed its
ther unrelated entities with similar
The Bank has strengths in both retail and corporate banking and is committed to adopting
Banking Industry: Structure and Comparison
26
2.5.1 Services
Personal Banking
Axis Bank offers Personal Banking in accounts, loans, deposits, cards, forex, investments,
insurance, payments and other services.
Corporate Banking
The Bank's Corporate Banking franchise aims to provide a wide array of products across several
customer segments, including credit, trade finance, structured finance and syndication services
for debt and equity. Since each corporate engagement also offers opportunities on the retail side
of the business, products anchored in the Retail SBUs also form a part of the corporate marketing
effort. New customer acquisition and relationship-deepening constitute the two-pronged strategy
for growth. In order to leverage growth opportunities offered by India's infrastructure sector, a
separate infrastructure business group has been established within the corporate banking group.
NRI services
Wide gamut of services and fast application processing are tempting many NRI to open Axis
bank NRI account/Axis bank NRE account. Any Indian residing abroad and is of Indian origin is
eligible to open Axis bank NRI account/Axis bank NRE account.
Agri & Rural services
Axis Bank one of the largest private sector financer in India for Agriculture loans wiz Retail
Agri, Commodity & Corporate Agri.
Banking Industry: Structure and Comparison
27
Chapter 3:
Capital Structure
As per the RBI capital adequacy norms, Bank’s regulatory capital is classified into Tier-1 capital
and Tier-2 capital.
a) Tier-1 capital: includes paid-up equity capital, statutory reserves, other disclosed free
reserves, capital reserves and innovative perpetual debt instruments (Tier-1 bonds)
eligible for inclusion in Tier-1 capital that comply with requirement specified by RBI.
b) Tier-2 capital: includes revaluation reserves (if any), general provision and loss reserve,
investment reserve, upper Tier-2 instruments (upper Tier-2 bonds) and subordinate debt
instruments (lower Tier-2 bonds) eligible for inclusion in Tier-2 capital.
3.1 State Bank of India
Banking Industry: Structure and Comparison
28
3.2 ICICI Bank
Tier-1 bonds are non-cumulative and perpetual in nature with a call option after 10 years.
Interest on Tier-1 bonds is payable either annually or semi-annually. These Tier-1 bonds have a
step-up clause on interest payment ranging up to 100 basis points.
The upper Tier-2 bonds are cumulative and have an original maturity of 15 years with call
option after 10 years. The interest on upper Tier-2 bonds is payable either annually or semi-
annually. Some of the upper Tier-2 debt instruments have a step-up clause on interest payment
ranging up to 100 basis points.
The lower Tier-2 bonds (subordinated debt) are cumulative and have an original maturity
between 5 to 15 years. The interest on lower Tier-2 capital instruments is payable quarterly,
semi-annually or annually.
a) Details of amount of Tier-1 capital
(Rs. in billion)
Tier-1 capital elements Amount
Paid-up share capital^1 12.65
Reserves^2 501.44
Innovative Tier-1 capital instruments 28.21
Minority interest 0.41
Gross Tier-1 capital 542.71
Deductions:
Investments in instruments eligible for regulatory capital of
financial subsidiaries/associates
23.45
Securitisation exposures including credit enhancements 36.17
Deferred tax assets 21.43
Others^3 1.82
Minority interest not eligible for inclusion in Tier-1 capital 0.16
Net Tier-1 capital 459.68
Banking Industry: Structure and Comparison
29
1. Includes preference shares permitted by RBI for inclusion in Tier-1 capital.
2. Includes statutory reserves, disclosed free reserves, capital reserves and special reserves (net
of tax payable).
3. Includes goodwill and adjustments for less liquid positions.
b) Details of amount of Tier-2 capital
(Rs. in billions)
Tier-2 capital elements Amount
General provisions 16.65
Investment reserves 1.16
Upper Tier-2 capital instruments 141.73
Lower Tier-2 capital instruments 121.61
Gross Tier-2 capital 281.15
Deductions:
Investments in instruments eligible for regulatory capital of
financial subsidiaries/associates
23.45
Securitisation exposures including credit enhancements 36.17
Net Tier-2 capital 221.54
c) Debt capital instruments eligible for inclusion in Tier-1 and Tier-2 capital
(Rs. in billions)
Particulars Tier-1 Upper
Tier-2
Lower
Tier-2
Total amount outstanding at March 31, 2010 28.21 141.73 150.12
Of which, amounts raised during the year __ 33.80 30.27
Amount eligible to be reckoned as capital funds at
March 31, 2010
28.21 141.73 121.61
Banking Industry: Structure and Comparison
30
d) Total eligible capital
(Rs. in billions)
Particulars Amount
Tier-1 capital 459.68
Tier-2 capital 221.54
Total eligible capital 681.22
Banking Industry: Structure and Comparison
31
3.3 PNB Bank
Banks Tier 1 capital comprises of Equity Shares, Reserves and Innovative Perpetual Bonds.
Bank has issued Innovative Perpetual Bonds (Tier 1 capital) and also other bonds eligible for
inclusion in Tier 2 capital.
a) The Tier 1 capital of the bank comprises:
b) The amount of Tier 2 capital (net of deductions) is:
c) The debt capital instruments eligible for inclusion in Upper Tier 2 capital are:
Banking Industry: Structure and Comparison
32
d) The subordinated debts eligible for inclusion in Lower Tier 2 capital is:
e) Other deductions from capital, if any:
f) The total eligible capital comprises:
Banking Industry: Structure and Comparison
33
3.4 HDFC Bank
The Bank has issued debt instruments that form part of Tier I and Tier II capital. The terms and
conditions that are applicable for these instruments comply with the stipulated regulatory
requirements. The Bank has not issued any Tier I and Tier II bonds in the financial year 2009–
2010.
Tier I bonds are perpetual in nature with a call option after 10 years from the date of allotment.
Interest on Tier I bonds is payable semi-annually and is not cumulative. There is a step up clause
on interest payment of 100 basis points in conjunction with call option.
The upper Tier II bonds have an original maturity of minimum 15 years with call option after
10 years from the date of allotment. These Tier II bonds have a step-up clause on interest
payment ranging from 50 bps to 100 bps in conjunction with call option. The interest on upper
Tier II bonds is payable either annually or semi-annually.
The lower Tier II bonds have an original maturity upto 14 years. The interest on lower Tier II
capital instruments is payable either annually or semi-annually.
a) The details of Tier I capital of the Bank are given below :
(Rs. Lacs)
Particulars Amount
Paid-up share capital 457,74
Reserves 21,111,10
Innovative Tier-1 capital instruments 200,00
Gross Tier-1 capital 2176884
Deductions:
Deferred tax assets (84416)
Securitisation exposures including credit enhancements (24075)
Total Deductions (108491)
Net Tier-1 capital 2068393
Banking Industry: Structure and Comparison
34
b) The details of Tier II capital of the Bank are given below:
(Rs. lacs)
Tier-2 capital elements Amount
Provision for Standard assets 76029
Investment Reserve Account 2614
Upper Tier-2 capital instruments 275990
Lower Tier-2 capital instruments 324824
Gross Tier-2 capital 679457
Deductions:
Securitisation exposures including credit enhancements 24075
Net Tier-2 capital 655382
c) Debt capital instruments eligible for inclusion in Upper Tier-2 are given below:
(Rs. lacs)
Particulars Amount
Total amount outstanding at March 31, 2010 275990
Of which, amounts raised during the year __
Amount eligible to be reckoned as capital funds at
March 31, 2010
275990
Banking Industry: Structure and Comparison
35
d) Subordinated debt eligible for inclusion in Lower Tier II capital is given below :
(Rs. lacs)
Particulars Amount
Total amount outstanding at March 31, 2010 339320
Of which, amounts raised during the year __
Amount eligible to be reckoned as capital funds at
March 31, 2010
324824
e) Other deductions from capital: Nil as on March 31, 2010 (Nil as on March 31, 2009).
f) The total eligible capital of the Bank outstanding as of March 31, 2010 amounts to Rs.
27,237,75 lacs (previous year: Rs. 20,440,32 lacs).
Banking Industry: Structure and Comparison
36
3.5 Axis Bank
Axis Bank has issued debt instruments that form a part of Tier-1 and Tier-2 capital. The terms
and conditions that are applicable for these instruments comply with the stipulated regulatory
requirements.
Tier-1 bonds are non-cumulative and perpetual in nature with a call option after 10 years.
Interest on Tier-1 bonds is payable either annually or semi-annually. Some of the Tier-1 bonds
have a step-up clause on interest payment ranging up to 100 bps.
The Upper Tier-2 bonds have an original maturity of 15 years with a call option after 10 years.
The interest on Upper Tier-2 bonds is payable either annually or semi-annually. Some of the
Upper Tier-2 debt instruments have a step-up clause on interest payment ranging up to 100 bps.
The Lower Tier-2 bonds have an original maturity between 5 to 10 years. The interest on lower
Tier-2 capital instruments is payable either semi-annually or annually.
Equity Capital
The Bank has authorized share capital of Rs. 500.00 crores comprising 500,000,000 equity
shares of Rs. 10/- each. As on 31 March 2010 the Bank has issued, subscribed and paid-up equity
capital of Rs. 405.17 crores, constituting 405,174,119 numbers of shares of Rs. 10/- each. The
Bank's shares are listed on the National Stock Exchange and the Bombay Stock Exchange. The
GDRs issued by the Bank are listed on the London Stock Exchange (LSE).
During the year ended 31 March 2010, the Bank raised additional equity capital in the form of
5,055,500 Global Depository Receipts (GDRs) (each GDR representing 1 underlying equity
share of Rs. 10/- each), at a price of US$ 18.90 per GDR. The Bank also undertook a Qualified
Institutional Placement (QIP) of 33,044,500 shares and a preferential allotment of 3,976,632
shares at a price of Rs. 906.70 per share. As a consequence, the paid-up share capital of the Bank
has increased by Rs. 42.08 crores and the reserves of the Bank have increased by Rs. 3,725.64
crores after charging of issue related expenses.
Banking Industry: Structure and Comparison
37
During the year, the Bank has also allotted equity shares to employees under its Employee Stock
Option Plan.
The provisions of the Companies Act, 1956 and other applicable laws and regulations govern the
rights and obligations of the equity share capital of the Bank.
Debt Capital Instruments
The Bank has raised capital through Innovative Perpetual Debt Instrument (IPDI) eligible as Tier
1 Capital and Tier 2 Capital in the form of Upper Tier 2 and Subordinated bonds (unsecured
redeemable non-convertible debentures).
a) The details of Tier I capital of the Bank are given below :
(Rs. crores)
Particulars Amount
Paid-up share capital 405.17
Reserves 15632.32
Innovative Tier-1 capital instruments 420.54
Gross Tier-1 capital 16458
Deductions:
Deferred tax assets (611.33)
Investments in subsidiaries (57.28)
Total Deductions (668.61)
Net Tier-1 capital 15789
Banking Industry: Structure and Comparison
38
b) The details of Tier II capital of the Bank are given below:
(Rs. crores)
Tier-2 capital elements Amount
Provision for Standard assets 484
Upper Tier-2 capital instruments 1249
Lower Tier-2 capital instruments 4843
Gross Tier-2 capital 6576
Deductions:
Investments in subsidiaries (57)
Net Tier-2 capital 6519
c) Debt capital instruments eligible for inclusion in Upper Tier-2 are given below:
(Rs. crores)
Particulars Amount
Total amount outstanding at March 31, 2010 1249
Of which, amounts raised during the year __
Amount eligible to be reckoned as capital funds at
March 31, 2010
1249
d) Subordinated debt eligible for inclusion in Lower Tier II capital is given below:
(Rs. crores)
Particulars Amount
Total amount outstanding at March 31, 2010 5486
Of which, amounts raised during the year 2000
Amount eligible to be reckoned as capital funds at
March 31, 2010
4843
Banking Industry: Structure and Comparison
39
Chapter 4:
Financial Performance
4.1 Balance Sheet of SBI as on 31st March 2010
Banking Industry: Structure and Comparison
40
4.2 Profit and Loss Account of SBI for the year ended 31st March 2010
Banking Industry: Structure and Comparison
41
4.3 Balance Sheet of ICICI Bank as on 31st March 2010
Banking Industry: Structure and Comparison
42
4.4 Profit and Loss Account of ICICI Bank for the year ended 31st March 2010
Banking Industry: Structure and Comparison
43
4.5 Balance Sheet of PNB as on 31st March 2010
Banking Industry: Structure and Comparison
44
4.6 Profit and Loss Account of PNB for the year ended 31st March 2010
Banking Industry: Structure and Comparison
45
4.7 Balance Sheet of HDFC Bank as on 31st March 2010
Banking Industry: Structure and Comparison
46
4.8 Profit and Loss Account of HDFC Bank for the year ended 31st March 2010
Banking Industry: Structure and Comparison
47
4.9 Balance Sheet of Axis Bank as on 31st March 2010
Banking Industry: Structure and Comparison
48
4.10 Profit and Loss Account of Axis Bank for the year ended 31st March 2010
Net Profit
Figure
The net profit of SBI Bank stood at Rs.
registered a growth of Rs. 4024.98
of Rs. 3905.36 crores and Axis Bank of Rs.
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
SBI
Banking Industry: Structure and C
Figure 7 Net profit of the five Banks
The net profit of SBI Bank stood at Rs. 9166.05 crores in 2009-10 whereas ICICI Bank
4024.98 crores. HDFC Bank made a profit of Rs. 3926.4
crores and Axis Bank of Rs. 2514.53.
ICICIPNB
HDFCAXIS
Banking Industry: Structure and Comparison
49
10 whereas ICICI Bank
3926.4 crores, PNB
Operating Expense
Figure
SBI Bank’s Operating Expense stood at Rs.
of ICICI Bank’s. HDFC Bank’s operating expense is Rs.
is Rs. 5761.36 crores and Axis Bank’s is Rs.
0
5000
10000
15000
20000
25000
SBI
Banking Industry: Structure and C
Figure 8 Operating expense of the five Banks
’s Operating Expense stood at Rs. 24941.01 crores as compared to Rs.
of ICICI Bank’s. HDFC Bank’s operating expense is Rs. 8045.36 crores, PNB operating expense
crores and Axis Bank’s is Rs. 5066.76 crores.
ICICIPNB
HDFCAXIS
Banking Industry: Structure and Comparison
50
crores as compared to Rs. 10221.99 crores
crores, PNB operating expense
Reserves and Surplus
Figure 9
SBI Bank’s reserves and surplus is Rs.
HDFC Bank is Rs. 24914.04 crores, PNB is Rs.
15639.27 crores.
0
10000
20000
30000
40000
50000
60000
70000
SBI
Banking Industry: Structure and C
9 Reserves & Surplus of the five Banks
’s reserves and surplus is Rs. 65314.32 crores, ICICI Bank’s is Rs.
crores, PNB is Rs. 17407.62 crores and Axis Bank’s is Rs.
ICICIPNB
HDFCAXIS
Banking Industry: Structure and Comparison
51
crores, ICICI Bank’s is Rs. 50503.48 crores,
crores and Axis Bank’s is Rs.
Provisions and Contingencies
Figure 10 Provisions &
SBI Bank ranks higher in terms of provisions and contingencies with Rs.
Bank ranks second with Rs. 3004.88
1368.98 crores and least is the ICICI B
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
SBI
Banking Industry: Structure and C
Provisions & Contingencies of the five Banks
ranks higher in terms of provisions and contingencies with Rs. 4532.53
3004.88 crores, PNB with Rs. 2421.49 crores, AXIS bank with Rs.
crores and least is the ICICI Bank with Rs. 1159.81 crores.
ICICIPNB
HDFCAXIS
Banking Industry: Structure and Comparison
52
4532.53 crores, HDFC
crores, AXIS bank with Rs.
Assets
Figure
The total assets of SBI Bank is Rs.
crores, PNB with Rs. 296632.79
with Rs. 180647.87 crores.
0
200000
400000
600000
800000
1000000
1200000
SBI
Banking Industry: Structure and C
Figure 11 Total Assets of the five Banks
of SBI Bank is Rs. 1053413.74 crores, ICICI Bank total assets is Rs.
296632.79 crores, HDFC Bank with Rs. 277352.61 crores
ICICIPNB
HDFCAXIS
Banking Industry: Structure and Comparison
53
crores, ICICI Bank total assets is Rs. 363399.71
crores and Axis Bank
Total Advances
Figure
The total advances of SBI Bank is Rs.
ICICI Bank’s is Rs. 181205.6 crores, HDFC Bank’s is Rs.
Rs. 104343.12 crores.
0
100000
200000
300000
400000
500000
600000
700000
Banking Industry: Structure and C
Figure 12 Total Advances of the five Banks
of SBI Bank is Rs. 631914.15 crores, PNB Bank’s is Rs. 186601.21
crores, HDFC Bank’s is Rs. 159982.67 crores and Axis Bank’s is
SBIICICI
PNBHDFC
AXIS
Banking Industry: Structure and Comparison
54
186601.21 crores,
crores and Axis Bank’s is
Total Deposits
Figure
The total deposit of SBI Bank is Rs. 804116.23
ICICI Bank has Rs. 202016.6 crores
Rs. 141300.22 crores.
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
SBI
Banking Industry: Structure and C
Figure 13 Total Deposit of the five Banks
The total deposit of SBI Bank is Rs. 804116.23 crores, PNB Bank has Rs.
crores, HDFC Bank has Rs. 208586.41 crores and Axis Bank has
ICICIPNB
HDFCAXIS
Banking Industry: Structure and Comparison
55
crores, PNB Bank has Rs. 249329.8 crores,
crores and Axis Bank has
Banking Industry: Structure and Comparison
56
Chapter 5:
Key Performance Indicators
Figure 14 No. of offices of the five Banks
Figure 15 No. of employees of the five Banks
SBI ICICI PNB HDFC AXIS
Series1 200299 35256 53417 51888 21640
0
50000
100000
150000
200000
250000
Axis Title
No. of employees
58%
8%
22%
8%
4%
No. of offices
SBI
ICICI
PNB
HDFC
AXIS
Banking Industry: Structure and Comparison
57
Figure 16 Business per employee of the five Banks
Figure 17 Profit per employee of the five Banks
SBI ICICI PNB HDFC AXIS
Series1 4.46 12 7.31 5.98 12
0
2
4
6
8
10
12
14
Axis Title
Profit per employee
0
200
400
600
800
1000
1200
SBI ICICI
PNBHDFC
AXIS
Axis Title
SBI ICICI PNB HDFC AXIS
Series1 636 1029 807.95 590 1111
Business per employee
Credit to deposit ratio (CD ratio):
is done through deposits. It is the proportion of loan
received. The higher the ratio, the higher the loan
be in the form of current and saving account as well as term deposits. The outcome of this ratio
reflects the ability of the bank to make optimal use of the available resources.
Figure
0.00
20.00
40.00
60.00
80.00
100.00
SBI
Credit to deposit ratio (CD
ratio)
Credit deposit ratio
Banking Industry: Structure and C
Ratio Analysis
Credit to deposit ratio (CD ratio): This ratio indicates how much of the advances lent by banks
is done through deposits. It is the proportion of loan-assets created by banks from the deposits
received. The higher the ratio, the higher the loan-assets created from deposits. Deposits would
e in the form of current and saving account as well as term deposits. The outcome of this ratio
reflects the ability of the bank to make optimal use of the available resources.
Figure 18 Credit Deposit ratio of the five Banks
ICICIPNB
HDFCAXIS
SBI ICICI PNB HDFC AXIS
Credit to deposit ratio (CD 78.58 90.04 74.34 75.17 71.87
Credit deposit ratio
Banking Industry: Structure and Comparison
58
Chapter 6:
Ratio Analysis
This ratio indicates how much of the advances lent by banks
assets created by banks from the deposits
assets created from deposits. Deposits would
e in the form of current and saving account as well as term deposits. The outcome of this ratio
71.87
Banking Industry: Structure and Comparison
59
Capital adequacy ratio (CAR): A bank's capital ratio is the ratio of qualifying capital to risk
adjusted (or weighted) assets. The RBI has set the minimum capital adequacy 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 do not expand their business without having
adequate capital.
CAR = Tier I capital + Tier II capital / Risk weighted assets
It must be noted that it would be difficult for an investor to calculate this ratio as banks do not
disclose the details required for calculating the denominator (risk weighted average) of this ratio
in detail. As such, banks provide their CAR from time to time.
Tier I Capital funds include paid-up equity capital, statutory and capital reserves, and perpetual
debt instruments eligible for inclusion in Tier I capital. Tier II capital is the secondary bank
capital which includes items such as undisclosed reserves, general loss reserves, subordinated
term debt, amongst others.
Figure 19 Capital adequacy ratio of the five Banks
0
5
10
15
20
25
SBI ICICI PNB HDFC AXIS
Capital adequacy ratio
Series1
Tier I Tier II Total Tier I Tier II Total
State Bank of India 8.46 3.54 12 9.45 3.94 13.39
ICICI Bank 13.48 5.66 19.14 13.96 5.45 19.41
Punjab National Bank 8.38 4.59 12.97 9.11 5.05 14.16
HDFC Bank 12.5 3.95 16.45 13.26 4.18 17.44
AXIS Bank 10.65 4.4 15.05 11.18 4.62 15.8
Basel - I Basel - II
Banking Industry: Structure and Comparison
60
Non-performing asset (NPA) ratio: The net NPA to loans (advances) ratio is used as a measure
of the overall quality of the bank’s loan book. An NPA are those assets for which interest is
overdue for more than 90 days (or 3 months).
Net NPAs are calculated by reducing cumulative balance of provisions outstanding at a period
end from gross NPAs. Higher ratio reflects rising bad quality of loans.
NPA ratio = Net non-performing assets / Loans given
Figure 20 Net NPA ratio of the five Banks
1.72
2.12
0.53
0.310.4
0
0.5
1
1.5
2
2.5
SBI ICICI PNB HDFC AXIS
Net NPA ratio
Series1
Return on assets (ROA): Returns on asset 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 on total assets. Similarly, ROE (returns
equity) indicates returns earned by the bank on its total net worth.
ROA = Net profits / Avg. total assets
Figure
0
0.5
1
1.5
2
SBI
Return on Assets
Banking Industry: Structure and C
Returns on asset 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 on total assets. Similarly, ROE (returns
equity) indicates returns earned by the bank on its total net worth.
ROA = Net profits / Avg. total assets
Figure 21 Return on Assets of the five Banks
ICICIPNB
HDFCAXIS
Return on Assets
Banking Industry: Structure and Comparison
61
Returns on asset 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 on total assets. Similarly, ROE (returns on
Earning per share: The portion of a company's profit alloca
common stock. Earnings per share serve as an indicator of a company's profitability.
EPS = (Net profit after tax
Figure 22
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
SBI
Banking Industry: Structure and C
The portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's profitability.
= (Net profit after tax − Preference dividend) / No. of equity shares
22 Earning per share of the five Banks
SBIICICI
PNBHDFC
AXIS
Earning per share
Banking Industry: Structure and Comparison
62
ted to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's profitability.
shares
Return on Equity: The amount of net income returned as a percentage of shareholders equity.
Return on equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.
Return on Equity = Net Income
Figure
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
SBI
Banking Industry: Structure and C
The amount of net income returned as a percentage of shareholders equity.
Return on equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.
Equity = Net Income after tax/Shareholder's Equity
Figure 23 Return on Equity of the five Banks
SBIICICI
PNBHDFC
AXIS
Return on equity
Banking Industry: Structure and Comparison
63
The amount of net income returned as a percentage of shareholders equity.
Return on equity measures a corporation's profitability by revealing how much profit a company
Dividend per share: The sum of declared dividends for every ordinary share issued. Dividend
per share (DPS) is the total dividends paid out over an entire divided by the number of
outstanding ordinary shares issued.
DPS = dividends paid/
Figure 24
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
SBI
Banking Industry: Structure and C
The sum of declared dividends for every ordinary share issued. Dividend
per share (DPS) is the total dividends paid out over an entire divided by the number of
outstanding ordinary shares issued.
DPS = dividends paid/number of shares in issue
24 Dividend per share of the five Banks
SBIICICI
PNBHDFC
AXIS
Dividend per share
Banking Industry: Structure and Comparison
64
The sum of declared dividends for every ordinary share issued. Dividend
per share (DPS) is the total dividends paid out over an entire divided by the number of
Banking Industry: Structure and Comparison
65
Chapter 7:
SWOT Analysis
State Bank of India
Strengths
• Brand Name
• Market Leader
• Wide Distribution
Network
• Diversified Portfolio
• Government Owned
• Low Transition Costs
Opportunities
• Merger of associate banks
with SBI
• Additional 2000 branches
and 3000 ATMs
• Increasing trade and
business relations
• Low Transition Costs
Weakness
• Hierarchical management
structure of the bank
• Non performing assets
(NPAs)
• Modernisation
Threats
• Advent of MNC banks
• Consumer expectations
• Employee Strike
• Private banks venturing
into the rural and semi-
urban sector
Banking Industry: Structure and Comparison
66
ICICI Bank
Strenghts
• Brand Name
• Market Share
• Huge Network
• Diversified Portfolio
• Salary Account
• Working Hours
• Treasury Management
• Aggressive Marketing
Opportunities
• New IT & ITES Companies
• Dissatisfied Customers of Other
Banks
• Remittances
• Business advising for smaller
Players
Weakness
• Transaction Cost
• Focus on High end customers
• Defensive Approach in lending
• Little Presence outside India
• Poor customer Care/ service
Threats
• Advent of MNC banks
• Dissatisfied Customers
• Ever improving nationalized
banks
Banking Industry: Structure and Comparison
67
Punjab National Bank
Strengths
• Brand name
• Single window clearance
• Appraisal techniques
• specialised softwares
• no penalty for prepayment from
borrowers own service
Opportunities
• Special rate of interest during
exhibitions
• Special rate of interest can be
introduced for employees of PSU
• Product life cycle is to be
reviewed
Weakness
• High interest rates
• Only through direct sales agent
• No publicity
• People not aware of wide variety
of schemes
• Shortage of staff
• Delegation of authority not
proper
Threats
• Competition in market very high
• Rate of interest of other players
are very low
• Innovative schemes from other
players
• Processing process quite slow
Banking Industry: Structure and Comparison
68
HDFC Bank
Axis Bank
Strengths
• Right strategy for the right products.
• Superior customer service vs.
competitors.
• Great Brand Image.
• Products have required accreditation.
• High degree of customer satisfaction.
• Good place to work
• Lower response time with efficient and
effective service.
Opportunities
• Profit margins will be good.
• Could extend to overseas broadly.
• New specialist applications.
• Could seek better customer deals.
• Fast-track career development
opportunities on an industry-wide basis.
• An applied research center to create
opportunities for developing techniques
to provide added-value services.
Weakness
• Some gaps in range for certain sectors.
• Customer service staff needs training.
• Processes and systems, etc
• Management cover insufficient.
• Sectoral growth is constrained by low
unemployment levels and competition
for staff
Threats
• Legislation could impact.
• Great risk involved
• Very high competition prevailing in the
industry.
• Vulnerable to reactive attack by major
competitors.
• Lack of infrastructure in rural areas could
constrain investment.
• High volume/low cost market is intensely
competitive.
Banking Industry: Structure and Comparison
69
Axis Bank
Strengths
• Extremely competitive and
profitable banking franchise
• Sound technological platform
with centralized database and
operations
• Support of various promoters
Opportunities
• Large retail and corporate market
• Wide scope in rural India
• Other activity (non banking
activity)
• People are becoming more
service oriented
Weakness
• Not having image UTI (fraud)
• Higher cost
• Customer service
• Market capitalization very low
Threats
• Very high competition with
private sector and public sector
• Government rules and regulation
• Rising rates
• Other better saving, investment
option available
Banking Industry: Structure and Comparison
70
Chapter 8:
Corporate Social Responsibility
Due to the wide variability of business environments under which the five firms operate, I have
chosen to do a firm specific analysis of social issues.
State Bank of India
Corporate Social Responsibility has been a part of the State Bank of India since 1973 under the
name of Community Service Banking covering various social, environmental and welfare
activities.
The stated Corporate philosophy is as follows –
• The Bank is a corporate citizen, with resources at its command and benefits which it derives
from operating in the society in general. It, therefore, owes a solemn duty to the less fortunate
and underprivileged members of the same society.
• Staff members are expected to make their contribution by understanding the aspirations of the
public around them and by endeavouring to evolve measures to remove the apolitically
indisputable social and developmental lacunae.
During the financial year 2009-10, the Bank implemented 136 projects with donations
aggregating Rs.19.72 crores. Numerous welfare and social activities were implemented both in
Banking and Non- Banking areas with the basic aim of raising the quality of life in the
community, especially in and around the area of operation of the branches. Particular attention
was given to ameliorating the condition of the downtrodden and underprivileged common man.
Currently, the focus areas under Community Service Banking are
• Health
• Education
• Adoption of Girl Child
Banking Industry: Structure and Comparison
71
• Women’s empowerment
• Child development
• Welfare and rehabilitation of poor and handicapped
• Assistance to poor and underprivileged
• Entrepreneur development programmes
• Vocational guidance
• Thrust for assistance to IT education in Rural/Tribal/unreached areas
• Environment Protection
• Assistance during natural calamities.
Projects during FY 2009-10
1. Community Service Banking
a. 114 projects were assisted with Rs.6.93 crores covering the areas of Health, Education,
Assistance for Handicapped, Sports, Environment and Assistance to tribals & other
underprivileged members of the society.
b. Natural Calamities: 6 Projects amounting to Rs.5.22 crores were undertaken for providing
relief and rehabilitation to victims of Natural Calamities. Of this Rs.5.15 crores was donated to
the Chief Minister’s Relief Funds of 4 States.
c. Adoption of Girl Child: Society’s preference for the boy child resulted in a large number of
instances when the girl child was deprived of familial attention, education, affection, healthcare,
in extreme cases, even food etc. This saw a high incidence of female infanticide or ill-treatment
of girl children.
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72
As a part of its commitment to the welfare of our society, the Bank decided to adopt Girl
Children in the age group of 6 to 14 who were orphans, destitute, physically handicapped,
belonging to poor families.
This initiative was started in 2008 with 8,338 children. There are presently 19,534 girl children
covered under the scheme. These belong to 6,658 schools spread all over the country and have
been adopted by 5,726 branches. An assistance of Rs.4.84 crores was extended during Financial
year 2009-10.
Apart from financial assistance, individual employees from the Bank/spouses of employees or
members of SBI Ladies Club adopt one or two children for care, mentoring, counselling, to try
and fulfill the role of a guide. This includes periodic visits to the schools by Staff Members / SBI
Ladies Club Members, talking to the girl child to understand her difficulties, academic or
otherwise, and offering solutions. A close liaison is also maintained with the teachers and the
academic progress of the girl child is monitored. If felt necessary, timely corrective action is
suggested.
While gradually increasing the coverage, the Bank has emphasized that individual care and
attention to the adopted children as originally envisaged, should not be diluted.
d. R&D Fund
The Bank has set up a chair named ‘Indian Observatory and IG Patel Chair’ at Asia Research
Centre of the London School of Economics jointly with the Reserve Bank of India. In addition,
the Bank has established an ‘SBI Chair for Public Leadership’ in the Indian School of Business,
Hyderabad. These 2 chairs have been assisted with donations amounting to Rs.2.73 crores during
FY 2009-10.
SBI Children’s Welfare Fund
Apart from the projects reported above, the SBI Children’s Welfare Fund, which was set up with
donations from the employees of SBI with matching contributions from the Bank to assist
underprivileged and poor children in their educational and economic development, undertook 6
projects during FY 2009-10 and distributed grants of Rs.4.58 lacs for child welfare projects.
Banking Industry: Structure and Comparison
73
Green Banking Initiatives of the Bank
Global warming has become a serious issue attracting attention from all the Nations of the world
warranting urgent measures to combat the climate change, which may otherwise result in
irregular Monsoons, floods, draughts and uneven temperatures, altogether keeping the existence
of flora and fauna of the universe at stake. As the Country’s Premier Financial Conglomerate
providing financial resources and services to clients pan India, the Bank has a strategic role to
play in addressing this issue, both in terms of its obligations and in terms of its opportunities.
Being a responsible Corporate Citizen of the country, the Bank has adopted a Green Banking
Policy with an objective of contributing towards the fight against the adverse climatic changes.
The policy envisages two pronged approach to address the issue viz. i) to reduce the Bank’s own
carbon footprint and ii) to sensitise the Bank’s clients to adopt low carbon emission practices. As
part of the Bank’s initiatives to move towards low carbon operations, the Bank has initiated
several measures, which include switching over to energy efficient lighting systems, installation
of energy savers, efficient water management systems, waste disposal and tree plantation etc.
First of its kind in the entire Banking, Finance and Insurance Sector (BFIS), the Bank has
conceptualised generation of energy through renewable energy resources and therefore, resolved
to install windmills for the Bank’s captive use with a view to substitute the polluting power with
green power. A total of 10 windmills with an installed capacity of 15 MW came up in the States
of Tamilnadu, Gujarat and Maharashtra. The project has been installed and commissioned in a
record time of four months which reflects the Bank’s sincerity and urge in its efforts to protect
the environment and mankind.
Financial Inclusion
Considering the fact that a majority of 6.38 lacs habitations in India are not served by any
Commercial Bank or Regional Rural Bank, the Bank took upon itself the task of reaching out to
these unbanked villages and making available the basic banking facilities at affordable cost.
Thus, the Bank envisioned a mission of covering 1 lac unbanked villages by March 2010.
Banking Industry: Structure and Comparison
74
The realization that the job demands highly innovative and technological initiative in view of the
fact that brick and mortar branches alone were not sufficient to reach out, the Bank decided to
take on multipronged approach of engaging Business Facilitators (BF), Business Correspondents
(BC) and technological innovations to cover the unbanked villages besides expanding through
new branches.
In the process, the Bank engaged 10 National level partners as BC /BFs and 8,000 BC/BFs as
regional level alliances. The alternate channel of BC/BF expanded its footprints at 25,000
Customer Service Points throughout the length and breadth of the country for serving unbanked
villages. The Bank also added 1,001 new branches during the last two years in Rural and Semi
Urban areas to contribute to this national cause.
Education Partnership with the Municipal Corporation of Greater Mumbai
The Municipal Corporation of Greater Mumbai (MCGM) has launched a project to transform
and upgrade the outcome of education in schools run by the Municipal Corporation. The Bank
has agreed to support this project as a partner for a period of 2 years as this project may evolve as
a model for replication across the country. The project has the following objectives:
• Improvement in average learning outcomes from 30-35% to 70-80%.
• Improvement in student attendance from 50-60% to 90%+.
• Reduction in drop-out rates especially at upper primary level.
• Enabling at least 30-50% of the children to speak English comfortably.
• At least 20% of secondary school children getting strong vocational training.
• At least 20% of parents being highly involved in the child’s learning.
• Creating infrastructure of the right quality in each school.
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75
ICICI Bank
In January 2008, the ICICI Group established the ICICI Foundation for Inclusive Growth (ICICI
Foundation). ICICI Foundation’s mission is to create and support strong independent
organisations that work towards empowering the poor to participate in and benefit from the
Indian growth process. Since its inception, ICICI Foundation has taken forward the ICICI
Group’s existing initiatives in the areas of primary health, elementary education and access to
finance and supported new initiatives in the areas of civil society and environmental
sustainability. ICICI Bank and its subsidiaries have, till year-end fiscal 2010, provided grants
aggregating Rs. 854.0 million to ICICI Foundation.
Banking Industry: Structure and Comparison
76
Areas of focus
a) Primary health: Through the ICICI Centre for Child Health and Nutrition (ICICI Child
Health) in Pune, ICICI Foundation seeks to support mothers and children in the poorest
communities across India through improvements in government health systems.
In Ranchi district, Jharkhand, ICICI Child Health has worked in partnership with Krishi Gram
Vikas Kendra, Child in Need Institute and the Government of Jharkhand to reduce the number of
babies born with low birth weight. Village Health Committees (VHCs) and voluntary health
workers (Sahiyyas) were developed that work together to help improve access to health services
and the functioning of health centres, through organising medical camps, awareness campaigns
and building roads to ensure reach of mobile medical vans to remote areas. This five-year
initiative has covered 200,000 women, newborns up to one year of age and adolescents in two
blocks of Ranchi district. The VHC and Sahiyya models have been adopted by the State
Government for larger health sector reforms.
In Bihar, ICICI Child Health has worked with the Public Health Resource Network and the
National Health Systems Resource Centre to support preparation of District Health Action Plans
in all 38 districts of the state for fiscal 2011. ICICI Child Health has also conducted extensive
capacity building training right up to the block level in Bhagalpur district.
Through the City Initiative for Child Health in Mumbai, ICICI Child Health partnered with
Bombay Municipal Corporation (BMC) to improve antenatal, postnatal and neonatal care in
public health facilities in eight wards of the city and improved the quality of service accessed by
400,000 households in 48 slum communities. BMC has subsequently replicated the project
across the city’s western suburbs.
b) Elementary education: Through the ICICI Centre for Elementary Education (ICICI
Elementary Education) in Pune, ICICI Foundation seeks to support the transformation of student
learning by focusing on quality of learning at government-run pre-schools and elementary
schools across India. Among other activities, ICICI Elementary Education works to improve the
Banking Industry: Structure and Comparison
77
support available to teachers, to accurately measure performance of schools and students and
strengthen capabilities of state and district functionaries.
In partnership with the State of Chhattisgarh since it was constituted in 2002, ICICI Elementary
Education has taken on the task of developing school curriculum and textbooks, teacher training
and issues relating to the improvement of quality of school education. In the district of Baran,
Rajasthan, ICICI Elementary Education has worked with the Vidya Bhawan Education Resource
Centre and the Government of Rajasthan to strengthen and improve the quality of the
government system of elementary education. ICICI Elementary Education is strengthening the
capacity of district level institutions and providing training and in-classroom support for teachers
in 78 schools, aiming to improve the quality of education for 450,000 children.
ICICI Elementary Education has supported the development of the MA Education (Elementary)
course at the Tata Institute for Social Sciences, Mumbai, aiming to enhance knowledge and skills
that are relevant to strengthening elementary education. Since the inception of the programme,
two batches of 25 students each have been admitted.
c) Access to finance: In addition to the ICICI Group’s direct work in the area of financial
inclusion, which is described subsequently, ICICI Foundation has supported the IFMR Finance
Foundation in projects to develop models for enhancing access to financial services among low-
income communities in rural and urban areas. IFMR Finance Foundation works with partners
like Aajeevika Bureau (for migrants) and Kshetriya Gramin Financial Services (for remote rural
geographies). It has also participated in product development and training efforts for local
financial institutions covering micro money market mutual funds, livestock insurance,
emergency loans and weather insurance. It also works on strengthening risk management
capabilities of local financial institutions and has currently focused on access to debt
securitisation markets for Micro Finance Institutions (MFIs). IFMR Finance Foundation has
worked with partners to develop recommendations to strengthen the policy environment for
financial inclusion in India.
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78
d) Civil society: Through its support to CSO Partners in Chennai, ICICI Foundation supports
civil society organisations across India by enabling them to tap into new resources and networks
of support. CSO Partners provides human and financial resources to NGOs and creates platforms
for individuals, corporates and government to engage with NGOs.
Corporate Disaster Resource Network (CDRN): CDRN is a web-based supply chain
management system that enables relief agencies, first responders and local governments to
highlight their immediate resource needs and access response offers from potential product
suppliers, donors and volunteers. Currently, it has 300 NGOs and 5,000 corporate organisations
as members. CDRN is a joint initiative of CSO Partners, the National Disaster Management
Authority and Aidmatrix.
NGO Marketplace: NGO Marketplace is an online portal providing national networking
opportunities for the social sector in India. The intent is to facilitate collaborative work and
networking by NGOs with other civil society organisations as well as donors, social contributors,
researchers, policymakers and other stakeholders.
The ICICI Group has supported GiveIndia, an online platform to enable individuals to support
social causes and in turn garner funds for India’s social sector. GiveIndia has cumulatively risen
over Rs.800.0 million for over 200 NGOs; last year alone it raised approximately Rs.270.0
million. GiveIndia eventually aims to raise Rs. 3.00 billion annually to support NGOs across
India.
e) Environmental sustainability: ICICI Foundation has supported the Environmentally
Sustainable Finance group at the Centre for Development Finance at IFMR, in Chennai. One
example of the group’s work is the Environmental Sustainability Index, an index ranking the
environmental performances of Indian states, which policymakers are using as a diagnostic tool
for planning better environmental policies.
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79
Punjab National Bank
PNB regards Corporate Social Responsibility (CSR) as an investment in society and in its own
future. Its goal as a responsible corporate citizen is to create social capital. PNB leverage its core
competencies in five areas of activity.
Sustainability: An integral part of all PNB activities- in their core business and beyond- is being
responsible to its shareholders, clients, employees, society and the environment.
Corporate Volunteering: A growing number of PNB employees are committed to civic
leadership and responsibility- with the support and encouragement of the Bank.
Social Investments: PNB create opportunities for people and communities. They help them
overcome unemployment and poverty and shape their own futures. The Bank has set up
numerous training institutes and counseling centres for this purpose.
Health: PNB believe that healthy mind and healthy body in a healthy environment is essential
for overall growth of society and the nation. That is why they invest in areas that facilitate such
enhancements.
Education: PNB enable talent across all disciplines as one of the most important sources of
growth and progress. Their philosophy is to catch the young and empower them through skill
enhancement.
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80
PNB awarded Golden Peacock Corporate Social Award 2011
Punjab National Bank, the leading Nationalised Bank bagged the 'Golden Peacock Award for
Corporate Social Responsibility' for the year 2011 by the Awards Jury of Institute of Directors
under the Chairmanship of Justice P N Bhagwati, former Chief Justice of India and Member, UN
Human Rights Commission.
Punjab National Bank is the Second largest bank in the country with a business of over Rs 5 lakh
crore and pan India presence of more than 5000 branches. PNB believes that being profitable and
doing good work for the people and the world around us aren’t exclusive of each other; they're
an integrated goal.
PNB said in a statement, "A strong and well governed business enables us to translate positive
financial results into sustainable community and environmental efforts that benefit everyone.
This is the essence of Bank's CSR paradigm. Everyday Bank strives to be a good corporate
citizen and in the process-the most respected financial services institution."
PNB said that it has a vision of reaching the poor through technology driven, foolproof and risk
free door step banking, improving their financial awareness and education; developing and
upgrading their farming and other skills. The Bank has created social structures like Farmers'
Training Centres; Financial Literacy & Credit Counselling Centres; PNB Rural Self Employment
Traning Institutes; PNB Prerna; Hockey Academy etc. that impart training to people from
underprivileged segments aimed at their empowerment for their sustainable upliftment.
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81
HDFC Bank
HDFC Bank’s CSR initiatives range across the spectrum of purely operational and financial
parameters at one end to social and altruistic at the other. Together, these elements go towards
fulfilling its CSR objectives. The Bank seeks to achieve its corporate and social objectives by
focusing on the following strategic areas.
Environmental Responsibility: HDFC Bank is aware of its role of an influencer towards the
environment, which is embodied in its approach to Carbon Emission Reduction. The Bank
demonstrates this commitment to contribute positively to the environment and sustainable
development by calculating its carbon footprint and preparing a carbon management plan to
reduce it. In addition, in order to create awareness amongst employees on climate change and the
need to reduce and recycle various drives to conserve the environment including tree plantation
are organized on a regular basis.
Employee Engagement: The Bank’s employees are encouraged to volunteer time and skills
through the ‘Corporate Volunteering Program’. Bank’s employees have engaged in activities
such as academic support classes, held English speaking courses and helped in organizing special
events in order to celebrate festivals with the underprivileged. Additionally the Bank has
facilitated employee donations to charities of their choice through ‘Give India’. The bank makes
a donation matching the amounts donated by its employees on a monthly basis.
Community Initiatives: As a responsible Corporate Citizen HDFC Bank strives for community
empowerment through socio-economic development of underprivileged and marginalized
sections of society. The Bank partners with NGOs across India to support educational initiatives
and livelihood training programs. The Bank also supports projects that provide skills training to
school dropouts, youth, women and other disadvantaged groups. The Bank’s social development
programs have so far touched the lives of over 73,000 children and 700 women and youth.
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82
Axis Bank
As an integral part of society, the Bank is aware of its corporate social responsibilities and has
been engaged in community and social investments. For this purpose, the Bank has set up a Trust
- the Axis Bank Foundation, to channel its philanthropic initiatives. The Axis Bank Foundation
has committed itself to participate in various socially relevant endeavours with a special focus on
education for the special/underprivileged children. The Trustees of the Foundation have focused
on education for underprivileged children and these are largely supported by programme grants
in order that the projects become replicable. The Bank has decided to contribute upto one percent
of its net profit annually to the Foundation under its CSR initiative. During the year, the
Foundation partnered with twelve more NGOs, taking the partnership to a total of 42 NGOs, for
educating underprivileged children and special children all over India. The Foundation has
committed grants for projects running upto three years. Eight hundred and fifty nine education
centres, involving 12 States are covered by the Foundation programmes. 55,452 children are
covered under the programmes that include 27,899 girls and 27,553 boys. The projects supported
by the Foundation involves imparting quality education for the underprivileged child (with a
special focus on the girl child), focusing on early childhood programmes for 2-6 year olds,
focusing on projects that encourage 'Inclusive Education' for physically challenged children,
teacher training programmes that result in competencies to teach pre-primary and primary school
children and supporting vocational training centres in slum areas to imparting training to school
dropouts.
The Axis Bank Foundation will also play an important role under the Bank’s Financial Inclusion
initiative. It is proposed that literacy campaigns will be launched by the Bank in all regions
where financial inclusion is undertaken where the objective of the Bank will be to impart
financial awareness. It will also undertake various other initiatives such as healthcare, vocational
training and other community development programmes like afforestation and rain-water
harvesting in these areas.
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83
Chapter 9:
Challenges facing Banking industry in India
The banking industry in India is undergoing a major transformation due to changes in economic
conditions and continuous deregulation. These multiple changes happening one after other has a
ripple effect on a bank trying to graduate from completely regulated seller market to completed
deregulated customers market.
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84
• Deregulation: This continuous deregulation has made the Banking market extremely
competitive with greater autonomy, operational flexibility and decontrolled interest rate
and liberalized norms for foreign exchange. The deregulation of the industry coupled
with decontrol in interest rates has led to entry of a number of players in the banking
industry. At the same time reduced corporate credit off take thanks to sluggish economy
has resulted in large number of competitors batting for the same pie.
• New rules: As a result, the market place has been redefined with new rules of the game.
Banks are transforming to universal banking, adding new channels with lucrative pricing
and freebees to offer. Natural fall out of this has led to a series of innovative product
offerings catering to various customer segments, specifically retail credit.
• Efficiency: This in turn has made it necessary to look for efficiencies in the business.
Banks need to access low cost funds and simultaneously improve the efficiency. The
banks are facing pricing pressure, squeeze on spread and have to give thrust on retail
assets.
• Diffused Customer loyalty: This will definitely impact Customer preferences, as they
are bound to react to the value added offerings. Customers have become demanding and
the loyalties are diffused. There are multiple choices, the wallet share is reduced per bank
with demand on flexibility and customization. Given the relatively low switching costs;
customer retention calls for customized service and hassle free, flawless service delivery.
• Misaligned mindset: These changes are creating challenges, as employees are made to
adapt to changing conditions. There is resistance to change from employees and the
Seller market mindset is yet to be changed coupled with Fear of uncertainty and Control
orientation. Acceptance of technology is slowly creeping in but the utilization is not
maximized.
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85
• Competency Gap: Placing the right skill at the right place will determine success. The
competency gap needs to be addressed simultaneously otherwise there will be missed
opportunities. The focus of people will be on doing work but not providing solutions, on
escalating problems rather than solving them and on disposing customers instead of using
the opportunity to cross sell.
Strategic options with banks to cope with the challenges
Leading players in the industry have embarked on a series of strategic and tactical initiatives to
sustain leadership. The major initiatives include:
• Investing in state of the art technology as the back bone to ensure reliable service
delivery
• Leveraging the branch network and sales structure to mobilize low cost current and
savings deposits
• Making aggressive forays in the retail advances segment of home and personal loans
• Implementing organization wide initiatives involving people, process and technology to
reduce the fixed costs and cost per transaction
• Focusing on fee based income to compensate for squeezed spread, (e.g. CMS, trade
services)
• Innovating Products to capture customer ‘mind share’ to begin with and later the wallet
share
• Improving the asset quality as per Base II norms
Transformation initiatives needed for banks
Strategy
• Sales & Marketing strategy for both retail & wholesale banking
• Expanding geographies
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86
Brand
• Understanding the values of the brand
• Repositioning the brand to communicate the values
Organization restructuring
• Re organization of the bank in line with the strategic thrust
Re engineering of the key business processes
• Redesign of Sales processes to increase conversion ratio
• Six Sigma process improvements for branch channel, Call Center & back office
processes
• Centralization of branch operations and deferred processes to free up resources
Cost efficiency
• Reduction in Total cost of acquisition
• Reduction in transaction costs
• Reduction in fixed and overheads cost
Right sizing and matching of skills
• Manpower modeling for branch & back office at various volume scenarios
• Productivity improvement for sales & service functions
• Competency Assessments & profiling
Banking Industry: Structure and Comparison
87
Creating a high performing organization
• Define new roles & responsibilities, KRA
• Assessing competencies of people across levels and match the position with the skill set
• Designing and implementing a new PMS for restructured organization
Change management & creating a new mind set
• Developing critical mass of champions and drive ‘Change’ across the organisation to
move from conventional banking to new age banking
Banking Industry: Structure and Comparison
88
Webliography
http://www.bseindia.com
http://www.nseindia.com
http://www.moneycontrol.com
http://www.rbi.org.in
http://www.statebankofindia.com
http://www.icicibank.com
http://www.pnbindia.in
http://www.hdfcbank.com
http://www.axisbank.com