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FORMALIZED
CUSTOMER UNFRIENDLY
NON COMPETETIVE
SERVICE CULTURE ATTITUDE.
WAS EXTREMELY
Technology Regulation
Robust regulatory system
Increasing use of
aligned to international
technology in operations
standards
Poised to expand and Efficient monetary
deepen technology usage
management
6
Sector Snapshot
Total
Totalassets
assetsof
ofUS$
US$335
335billion
billion
Size
Total deposits of US$ 279 billion
Total deposits of US$ 279 billion
Over
Over290
290scheduled
scheduledbanks
banks
Public sector: 27
Public sector: 27
Number of Private
Privatesector:
sector:new
new––9;
9;old
old ––24
24
banks Foreign: 37
Foreign: 37
Over
Over190
190regional
regionalrural
ruralbanks
banks
Over
Over66,000
66,000branches
branches
Public sector:46,000
Public sector: 46,000
Branch Private
Privatesector:
sector:5,500
5,500
network Foreign:
Foreign:190
190
Regional
Regionalrural:
rural:14,400
14,400
7
A New orientation among banks…
Traditional/ public sector New/ private sector
Sell products Meet customers’ needs
Product research: what Customer research:
will sell? what does the customer
Product sales and want?
profitability targets Customer segment
Product specialist sales and profitability
groups targets
Introduce new Customer owners
offerings every few Customer specific new
years/months offerings every
“Branch banking” week/day
Focus - customer Customer convenience
acquisition Deepen relationships
8
Flower of
banking service
Mobile
&
ncy
lta e Internet
u
s vic banking
n r
Co se
A
MT
eN
Financial wt
Change in kr o
service Good Waiting room
Product line
I
O ntro nal
sc f n . io
he ew Low ot nts
m r om cou
es interest P is
d
rates
Technological Innovations
in Banking sector.
Phone Banking
Data Mining.
Mobile Banking
Plastic money.
ATM
Virtual banking-
don’t visit the branch Insurance Product
Innovation In Banking Product.
Factoring.
Merchant Banking
Mutual Fund
Venture Capital.
Major drivers for Banking Sector, world wide
Technology- leads the Winning Combination
“The winners will be those institutions that tie their technology to their
strategies in order to meet their challenges.”
Cost
• Cutting Cost through Integration
• Better Information Management
Customer
• Reaching Customers Faster
• Managing Diverse Needs
Competition
Key Banking • Competitive Edge in
Technology Aspects its Strategic Group
• PSU Banks are likely to face more margin pressure compared to private sector banks:
– Lending rates have been cut much more then private sector banks
– Lending in a weak corporate environment
– High cost deposit mobilized during the second half of 2009
– Excess investment in government securities and parking of excess funds with RBI carry's a
negative yield on investment portfolio
• PSU banks are more likely to be persuaded by Government to reduce the lending rates
• Operating expenses for the PSU banks are likely to go up due to higher wage increase and transfer from
PF to pensions
• Restructuring has been high in PSU banks resulting in a increase in NPLs
• Cautious on fundamentals due to slowing loan growth, declining margins (NIMs) and rising credit costs
• Employee productivity and profit per branch have always been a concern in compare to private sector
banks
• Traditionally, PSU banks have been laggard in technology
• Asset quality will be a concern in a long run due to aggressive lending in a weak corporate environment
• Yield on advances at 9.5% is lower compared to private banks (11%)
Public Sector v/s Private sector Banks
• Non-performing assets
• Legacy systems
– Low levels of technology
• Seller’s market mindset
– Low level of innovation in products and
services
– Limited responsiveness to customers’ needs
India
China
J apan
S. Korea
Malaysia
Thailand
Net NPL accretion
tapering off with
progress in asset
US$ bn Net NPAs of banks & FIs
resolution and 1 2 .0
increase in 1 0 .0
provisioning levels 8 .0
6 .0
4 .0
2 .0
0 .0
1997 1998 1999 2000 2001 2002