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1.1 Individuals · Investment Banking focuses on

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1.1 Industry and Competition

Defining Bank:

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Bank
is a financial institution licensed to receive deposits and make loans1.
It can also provide other financial services like wealth management, currency
exchange and safe deposit boxes.

Different
categories of Banks in India are:

·        
Public
Sector Banks

·        
Private
Sector Banks

·        
Small
Finance Banks

·        
Local
Area Banks

·        
Payments
Banks

·        
Foreign
Banks

·        
Regional
Rural Banks

·        
Cooperative
Banks

Below
are the major types of banking present and their functions:

·        
Retail Banking which provides services to
individuals and small businesses

·        
Business Banking focuses on mid-market Businesses

·        
Corporate Banking concentrates on large
organizations

·        
Private Banking usually deals with High Net
Worth Individuals

·        
Investment Banking focuses on activities of
the financial markets

Evolution of Indian banking
sector:

Image
Source:  https://www.ibef.org/download/Banking-February-2017.pdf

Market
Size:

The products and services offered
by Banks can be broadly classified in to three types:

·        
Retail
Banking

o   Deposits

o   Loans, Cash Credit and Overdraft

o   Negotiating
for Loans and advances

o   Remittances

o   Book-Keeping
(maintaining all accounting records)

o   Receiving
all kinds of bonds valuable for safe keeping

·        
Trade
Finance

o   Issuing
and confirming of letter of
credit.

o   Drawing,
accepting, discounting, buying, selling, collecting of bills of exchange, promissory notes, drafts, bill of lading and other securities.

·        
Treasury
Finance

o   Buying
and selling of bullion, Foreign exchange.

o   Acquiring,
holding, underwriting and dealing in shares, debentures, etc.

o   Purchasing
and selling of bonds and
securities on behalf of constituents

Common
Banking products:

·        
Credit Card

·        
Debit Card

·        
Automated Teller Machine (ATM)

·        
E-Cheques

·        
Electronic Funds Transfer (EFT)

·        
Telebanking

·        
Mobile Banking

·        
Internet Banking

·        
Demat

 

 

 

 

 

 

 

Looking at the market share of
credit cards of different banks in 2017:

Image Source: http://www.deal4loans.com/loans/credit-card/top-10-credit-cards-in-india-review-analysis/

 

 

 

 

 

 

 

 

 

 

 

 

1.2. Market Trends:

NOTABLE
TRENDS IN THE BANKING INDUSTRY
SECTOR2:

Technological
innovations:

·        
Indian
banks, including public sector banks are aggressively improving their
technology infrastructure to enhance customer experience and gain competitive
advantage.

·        
Internet
and mobile banking is gaining rapid foothold.

·        
Customer
Relationship Management (CRM) and data warehousing will drive the next wave of
technology in banks.

·        
Indian
banks are rapidly focusing on SMAC (Social, Mobile, Analytics and Cloud)
techniques to reach new customers.

Wide usability of
RTGS and NEFT:

·        
Real
Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) are
being implemented by Indian banks for fund transaction

·        
Securities
Exchange Board of India (SEBI) has included NEFT and RTGS payment system to the
existing list of methods that a company can use for payment of dividend or
other cash benefits to their shareholders and investors

Demonetization:

Positive Effects:

·        
Free
flow of Cash which was deposited by customers and can be used various
investment options.

·        
A
very positive outcome is a drastic increase in usage of Digital Interfaces
because of demonetization.

·        
And
there is an absolute increase of customers at each and every bank depositing
their surplus money. So it resulted in a large increase of customer base.

Negative Effects:

·        
There
was a 100% CRR on incremental deposits due to which there was no interest
earned on Rs. 3Lakh crore for about a fortnight.

·        
Due
to excessive demand, the waived of ATM charges resulted in huge losses.

According to RBI:

·        
RBI
Deputy Governor said that since demonetization the Central Bank has collected
over USD 185.81 billion in demonetized notes from various bank branches.

·        
The
effects of demonetization are also visible in the fact that bank credit plunged
by 0.8 per cent from November 8 to November 25, as USD 9.85 billion were paid
by defaulters. As per RBI, a total of USD 125.53 billion was deposited in banks
till November 27, 2016.

Major advantage to
Paytm:

·        
With
the stroke of Demonetization Paytm became one of the most influential fintech firms
in the country.

·        
Paytm
has good presence in first tier cities, but in rural areas it was hardly used.
In two month span after demonetization the semi urban and rural areas share
increased from 2% to 25%, which also made them include 10 new languages where
as it used to have only English.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Structure:

The structure of Indian Banking
Sector

Image
Source:  https://www.ibef.org/download/Banking-February-2017.pdf

The
Indian banking system consists of 27 public sector banks, 26 private sector
banks, 46 foreign banks, 56 regional rural banks, 1,574 urban cooperative banks
and 93,913 rural cooperative banks, in addition to cooperative credit
institutions. Public-sector banks control more than 70 per cent of the banking
system assets, thereby leaving a comparatively smaller share for its private
peers3.

According to the results HDFC is
the major player with SBI and ICICI occupying 2nd and 3rd
positions.

According to Euronomy Foreign
Exchange Survey 2017 Results, below are the market shares of top 10 banks globally.

Image
source: https://www.euromoney.com/article/b1348tjhnv7h99/euromoney-fx-survey-2017-results-released

According
to RBI Annual reports,2017 top 10 banks contribution to total credit is:

Image
Source:

https://www.equitymaster.com/5minWrapUp/charts/index.asp?date=02/17/2017&story=1&title=Top-10-Banks-Contribution-to-Total-Credit

 

 

 

 

 

1.3. Characteristics of Competitor:

Global:

According
to Forbes Report on World’s largest Banks in 2017, the top 10 largest Banks
globally are4:

1.      Industrial and Commercial Bank of
China

2.      China Construction Bank

3.      JP Morgan Chase

4.      Wells Fargo

5.      Agricultural Bank of China

6.      Bank of America

7.      Citigroup

8.      Goldman Sachs

9.      Morgan Stanley

10.  Industrial Bank

In
2017, China Banks still being on top of the list, all 6 large Banks of USA made
into the list. The major reason for the performance of US Banks increasing,
being President Donald Trump vowing to roll back regulations and increase
lending.

India:

Coming
to India, the 10 banks in 2017 are5:

1.      State Bank of India

2.      ICICI Bank

3.      Punjab National Bank

4.      Bank of Baroda

5.      HDFC Bank

6.      Canara Bank

7.      Axis Bank

8.      Bank of India

9.      IDBI Bank

10.  Kotak Mahindra Bank

SBI
comprising 20% share of total market share in India and with an Asset
management value of $420 Billion, it became the largest public sector bank in
India.

Bank of Baroda:

Being
formed way back in 1908 and having 5538 branches and 10441 ATMs all over India;
it manages assets worth $3.58 Trillion and made it to the 4th
position in the list.

Going
by this list the major competitors of Bank of Baroda to reach the target of
attaining the first place are State Bank of India, ICICI, Punjab National Bank.
Analyzing the factors that contributed the competitors to be on the top:

State Bank of India
(SBI):

SBI
being the largest bank in India has 24,000 branches and 59,000 ATMs across the
country. It has provided employment for about 2 lakh people.

ICICI:

With
a network of 4850 branches and 13,8882 ATMs all over the country ICICI is one
the best banks in India as of 2017. One of its major factors contributing to
the success of ICICI is its wide range of services in the areas of Banking,
venture capitals and many more. The acquisitions made by ICICI like Bank of
Madurai, Shimla, and Anagram Finance etc6, also
contributed to increase its customer base.

Above
all these, the below initiative taken by ICICI is the biggest contributor:

·        
100
Digital villages to promote digital ecosystem in rural areas

·        
Go
Green Initiative

·        
Literary
Endeavour

They
are further planning to 500 villages to follow the initiative of 100 Digital
villages.

With
all these factors contributing, ICICI stood 2nd in the top banks of
India and in fact the top bank when Private sector Banks are considered.

Bank of Baroda:

Bank
of Baroda famously known as India’s International bank with 100+ branches in 24
countries. It has branches in major financial centers like New York, Dubai,
Singapore etc7.
Founded way back in 1908, Bank of Baroda has 5493 branches and 104411 ATMs in
India.

Bank
of Baroda was ranked 21st amongst Best Indian Brands 2016 in Brand Equity – The
Economic Times dated 31st August to 6th September, 2016.

 

 

 

 

 

1.4.
Ways of Competition/Behavioral traits of each major competitor:

 

1 https://www.investopedia.com/terms/b/bank.asp

2 https://www.ibef.org/download/Banking-February-2017.pdf

3 https://www.ibef.org/industry/banking-india.aspx

4 https://www.forbes.com/sites/antoinegara/2017/05/24/the-worlds-largest-banks-in-2017-the-american-bull-market-returns/#14cab12047d0

5 https://www.worldblaze.in/top-10-best-banks-in-india/

6 https://www.mbaskool.com/fun-corner/top-brand-lists/17198-top-10-banks-in-india-2017.html?start=7

7 https://www.mbaskool.com/fun-corner/top-brand-lists/17198-top-10-banks-in-india-2017.html?start=4

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