Contents

Introduction History of Banking Current Banking Scenario Structure of Banking Industry environment Industry structure

Introduction
A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets.
Some of the products and services offered by the bank are as follows:

History of Banking
Banking in India originated in the last decades of the 18th century. General Bank of India and Hindustan Bank- 1786. State Bank of India(1906) was formed to act as the principal agent of the Reserve Bank of India and to handle banking transactions of the Union and State Governments all over the country. SBI is presently the largest commercial bank in the country.

Nationalisation
The Government of India issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. 6 more commercial banks followed in 1980. It was done to give the government more control of credit delivery. GOI controlled around 91% of the banking business of India.

Liberalisation
Narsimha Rao government embarked on a policy of liberalization in 1991. He allowed private banks to enter in to the Industry. Liberalized the interest rates and reduced the CRR and SLR. Three Sectors contributed well to economy: Public sector banks (those banks in which the Government of India holds a stake) Private sector banks (government doe not have a stake in these banks; they may be publicly listed and traded on stock exchanges) Foreign banks

Current Scenario
Today, banks have diversified their activities and are getting into new products and services that include opportunities in credit cards, wealth management, insurance, investment banking, etc. Further, most of the leading Indian banks are going global SBI is ranked among the Top 50 banks in the world(36th rank), as per the Brand Finance study. ICICI Bank also made it to the Top100list. According to RBI, nationalized banks, accounted for 51.9% of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 22.5%. The share of other scheduled commercial banks, foreign banks and regional rural banks in aggregate deposits were 17.5%, 5% and 3.1%, respectively.

The banking sector contributes about 7.2% GDP.

Current Rates: Bank rate 6% CRR rate 6%

Repo rate 6.5% Reverse Repo rate 5.5% SLR rate 24%

SLEPT Analysis

Number of players in the sector 128 Total market size of the banking sector is over Rs. 40632 billion in terms of deposits.

Market Share In Terms Of Assets

Oriental Bank 4% IOB 4% SBI 28% Central Bank 4% Union Bank 5%

Axis Bank 5% IDBI bank 6% Punjab National Bank 8% Bank Of Baroda 6% HDFC bank 6%

ICICI bank 11%

Canara Bank 7%

Bank Of India 6%

Initially was Oligopoly market in 1960s. After liberalization it has features of both Monopolistic and Oligopolistic market structure. But from last few years due to liberalization and new policies implemented by RBI, by encouraging FIIs, foreign banks to enter in to market by loosening the entry barriers and increasing foreign stake in a Indian bank, it is now tending towards Monopolistic.

Monopolistic market: Monopolistic is a form of market structure in which there are many sellers offering differentiated financial products and services. The interest rates are to some extent market-determined. The entry and exit barriers have been lowered for both domestic and international players so as to encourage the private banks to conduct banking business. At present there are 29 foreign banks operating in India

Exit barriers still remain relatively higher than entry barriers. Foreign banks wishing to establish presence in India for the first time could either choose to operate through branch presence or set up a Wholly Owned Subsidiary (WOS). They could also hold a subsidiary which has a foreign investment (capped at 74%) in a private bank. The WOS required a minimum capital requirement of Rs. 3 billion and a CAR of 10%.

Value- 515.69 This value shows, this Sector is low concentrated.

Concentration ratio: 0% to 50% .

Banking is a highly regulated industry A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice

Banks profit from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities

700

600

500 SBI 400 Axis Canara 300 HDFC PNB ICICI 200

100

0 2006 2007 2008 2009 2010

2000 1800 1600 1400 1200 1000 800 600 400 200 0 SBI ICICI HDFC Canara PNB Axis

2006 2007 2008 2009 2010

MOBILE BANKING ATM ELECTRONIC CLEARING SERVICE ELECTRONIC FUND TRANSFER INDIAN FINANCIAL NETWORK (INFINET) REAL TIME GROSS SETTLEMENT SYSTEM (RTGS) CENTRALISED FUND MANAGEMENT SYSTEM (CFMS) INTERNET BANKING

1800

1600

1400

1200 ICICI 1000 HDFC Axis 800 Canara SBI 600 PNB

400

200

0 2006 2007 2008 2009 2010

0.16

0.14

0.12

0.1

SBI PNB

0.08

Canara ICICI

0.06

HDFC Axis

0.04

0.02

0 2006 2007 2008 2009 2010

Growth Analysis Profitability Trend Accounting-based Measures

Return on Assets(ROA) Return on Sales(ROS)

70 60 50 40 30 20 10 0 -10 -20 2006 2007 2008 2009 2010 SBI PNB CANARA AXIS HDFC ICICI

25 20 SBI 15 10 5 0 2006 2007 2008 2009 2010 PNB CANARA AXIS HDFC ICICI

0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2006 2007 2008 2009 2010 SBI PNB CANARA AXIS HDFC ICICI

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006 2007 2008 2009 2010 SBI PNB CANARA AXIS HDFC ICICI

Bargaining Power of suppliers

Potential Entrants

Threat of Competitors

Threat of Substitutes

Bargaining Power of Consumers

Rivalry among competitors is very fierce in Indian Banking Industry:

Large no of banks High market growth rate Low switching costs Undifferentiated services High fixed cost

Bargaining Power of Suppliers is very low:

Nature of suppliers RBI rules and regulations Suppliers are not concentrated

Bargaining Power of Consumers is very high:

Large no. of alternatives Low switching costs Undifferentiated services Full information about the market

Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking Industry. We expect merger and acquisition in the banking industry in near future. Hence, the industry is less prone of new competitor.

Product differentiation very difficult Licensing requirement

Banks are not limited to tradition banking which just offers deposit and lending. Every day there is one Or the other new product in financial sector:

Non banking financial sector increasing rapidly Deposits in posts Stock Market