MBM-414

REPORT
ON
INDUSTRIAL ANALYSIS
BANKING INDUSTRY IN INDIA
(PRIVATE BANKS)

SUBMITTED
BY
JUHI TILWANI
SHIVAM VERMA
SHUBHAM MEENA

Under the Guidance of:

Prof. SantiSwarupKandikonda
Management Faculty of Social Sciences
Dayalbagh Educational Institute
Agra - 282005

CERTIFICATE
We hereby declare that the work incorporated in this report entitled
"Analysis of Banking Industry (Private Banks)" in fulfillment of the
requirements for the award of Degree of Master of Business
Administration (MBA Semester-I) is the outcome of original study
undertaken by Juhi Tilwani, Shivam Verma, Shubham Meena submitted
to Prof. Santi Swarup Kandikonda, Management Faculty of Social
Sciences, Dayalbagh Educational Institute, Agra.

PREFACE
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It is a great experience being a part of corporate world. Real MBA can be achieved
only with such practical implications. We are very thankful to DEPARTMENT OF
SOCIAL SCIENCES, DEI who plans such learning programs for its students.
The basic motive behind of this project is to acquire knowledge about various
aspects of the industry that can aid the student in their future career.
For our interest we have selected BANKING INDUSTRY. The Indian Banking
Industry is the growth segment which has a large contribution in the formation of
the Indian economy. This report helps us to develop our skill & confidence to do
better in all respect in management fields. In our analysis we have gone for
analysing industry by various analysis, strength and weakness of the industry.
Future outlook of the industry is concluded that will help us in our future career.
We have tried our best and have applied all our efforts, knowledge and sources
available, in this project.

ACKNOWLEDGEMENT
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It is with profound in debtness that we acknowledge the efforts of all the

well-wishers who have in some or the other way contributes in their own
special way to the success of this project.
It is a universal fact that for study of a project in depth, we need the
support of many people right from the stage of conceiving the idea to
completion of report. It is difficult for single person to do the job
efficiently without interaction & involvement of others.
We express our gratitude to our college for giving us this opportunity.
We are also grateful to Prof. Santi Swarup Kandikonda Management
Faculty of Social Sciences, Dayalbagh Educational Institute for giving
us valuable Guidance and providing facilities to successfully complete
our project. We are highly indebted to valuable help and support.

CONTENTS
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1. INTRODUCTION
1.1 What is Bank
1.2 Structure of Indian Banking System

2. PRIVATE BANKS
2.1 List of Private Banks in India
2.2 History of Private Banks in India
2.3 Types of Private Sector Banks
2.3.1 Old Generation Private Banks
2.3.2 New Generation Private Banks
2.4 Functions of Private Banks
2.5 Geographical Distribution of Private Banks
2.6 Modern Trends in Private Sector Banks
2.7 Marketing Practices of Private Sector Banks

3. MODELS
3.1 SWOT ANALYSIS
3.2 NINE FORCES ANALYSIS
3.2.1 PEST Analysis
3.2.2 Porter's Five Forces Analysis

4. IMPACT ANALYSIS
4.1 Budget
4.2 Interest Rate Reduction
4.3 Government Relaxing Norms
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5. OUTLOOK
5.1 Long Term Outlook
5.2 Short Term Outlook
5.2.1 Investments/ Developments
5.2.2 Government Initiatives

6. TOP PLAYERS OF PRIVATE BANKS

6.1 HDFC BANK
6.1.1. About HDFC
6.1.2. Vision and Mission
6.1.3. History
6.1.4. Products and Services
6.1.5. Acquisitions
6.1.6. Business Focus
6.1.7. Marketing Strategy
6.1.8. Future Challenges
6.2 ICICI BANK
6.2.1. About ICICI
6.2.2. Vision and Mission
6.2.3. History
6.2.4. ICICI Group Companies
6.2.5 Products
6.2.6. Marketing Strategy
6.2.7. Future Planning
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6.3. AXIS Bank

6.3.1. About AXIS
6.3.2. Vision and Mission
6.3.3. History
6.3.4. Services
6.3.5. Marketing Strategy

7. PRIVATE SECTOR BANKS IN THE RECENT FEW YEARS

8. CONCLUSION
9. BIBLIOGRAPHY

1. INTRODUCTION
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1.1 What is BANK?

A Bank is a financial institution which deals with deposits and advances and other related
services It receives money from those who want to save in the form of deposits and it lends
money to those who need it . Due to their importance in the financial system and influence on
national economies, banks are highly regulated in most countries. Most nations have
instutionalized a system known as Fractional Reserve Banking under which banks hold liquid
assets equal to only a portion of their current liabilities. In addition to other regulations intended
to ensure liquidity, banks are generally subject to Minimum Capital Requirements based on an
international set of capital standards, known as Basel Accords.

1.2 STRUCTURE OF INDIAN BANKING SYSTEM:

The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks.
The scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India
Act, 1934. The scheduled banks are further classified into: nationalized banks; State Bank of
India and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private
sector banks. The term commercial bank refers to both scheduled and non-scheduled commercial
banks regulated under the Banking Regulation Act, 1949.
The Indian banking system consists of 26 public sector banks, 25 private sector banks, 43 foreign
banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative
banks, in addition to cooperative credit institutions. Public-sector banks control nearly 80 percent
of the market, thereby leaving comparatively much smaller shares for its private peers.

1. Reserve Bank of India:

Reserve Bank of India is the Central Bank of our country. It was established on 1st April 1935
under the RBI Act of 1934. It holds the apex position in the banking structure. RBI performs
various developmental and promotional functions.
It has given wide powers to supervise and control the banking structure. It occupies the pivotal
position in the monetary and banking structure of the country. In many countries central bank is
known by different names.
For example, Federal Reserve Bank of U.S.A, Bank of England in U.K. and Reserve Bank of
India in India. Central bank is known as a bankers bank. They have the authority to formulate

and implement monetary and credit policies. It is owned by the government of a country and has
the monopoly power of issuing notes.

2. Commercial Banks:

Commercial bank is an institution that accepts deposit, makes business loans and offer related
services to various like accepting deposits and lending loans and advances to general customers
and business man.
These institutions run to make profit. They cater to the financial requirements of industries and
various sectors like agriculture, rural development, etc. it is a profit making institution owned by
government or private of both.

Commercial bank includes public sector, private sector, foreign banks and regional rural
banks:

a. Public sector banks:

It includes SBI, seven (7) associate banks and nineteen (19) nationalised banks. Altogether there
are 27 public sector banks. The public sector accounts for 90 percent of total banking business in
India and State Bank of India is the largest commercial bank in terms of volume of all
commercial banks.

b. Private sector banks:

Private sector banks are those whose equity is held by private shareholders. For example, ICICI,
HDFC etc. Private sector bank plays a major role in the development of Indian banking industry.

c. Foreign Banks:

Foreign banks are those banks, which have their head offices abroad. CITI bank, HSBC,
Standard Chartered etc. are the examples of foreign bank in India.

d. Regional Rural Bank (RRB):

These are state sponsored regional rural oriented banks. They provide credit for agricultural and
rural development. The main objective of RRB is to develop rural economy. Their borrowers
include small and marginal farmers, agricultural laborers, artisans etc. NABARD holds the apex
position in the agricultural and rural development.

3. Co-operative Bank:

Co-operative bank was set up by passing a co-operative act in 1904. They are organized and
managed on the principal of co-operation and mutual help. The main objective of co-operative
bank is to provide rural credit.
The cooperative banks in India play an important role even today in rural co-operative financing.
The enactment of Co-operative Credit Societies Act, 1904, however, gave the real impetus to the
movement. The Cooperative Credit Societies Act, 1904 was amended in 1912, with a view to
broad basing it to enable organization of non-credit societies.

Three tier structures exist in the cooperative banking:

State cooperative bank at the apex level.

Central cooperative banks at the district level.
Primary cooperative banks and the base or local level.

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4. Scheduled and Non-Scheduled banks:

A bank is said to be a scheduled bank when it has a paid up capital and reserves as per the
prescription of RBI and included in the second schedule of RBI Act 1934. Non-scheduled bank
are those commercial banks, which are not included in the second schedule of RBI Act 1934.

5. Development banks and other financial institutions:

A development bank is a financial institution, which provides a long term funds to the industries
for development purpose. This organization includes banks like IDBI, ICICI, IFCI etc. State
level institutions like SFCs SIDCs etc. It also includes investment institutions like UTI, LIC,
and GIC etc.

2. PRIVATE BANKS
Private banks are banks owned by either an individual or a general partner(s) with limited
partner(s). Private banks are not incorporated. In any such case, the creditors can look to both the
"entirety of the bank's assets" as well as the entirety of the sole-proprietor's/general-partners'
assets.

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Today, the term "private bank" can also refer to the financial institution specializing in financial
advice and services for high-net-worth individuals (private banking).
"Private banks" can also refer to non-government owned banks in general, in contrast to
government-owned (or nationalized) banks, which were prevalent in communist, socialist and
some social democratic states in the 20th century.
Private Banks are banks like HDFC bank, ICICI Bank, UTI bank and IDBI bank. The concept of
private banking was introduced about 15 years ago. These are the banks that do not have any
governmentstakes.
Private Banks have gained quite a strong foothold in the Indian banking industry over the last
few years especially because of optimum use of technology. Private banks are accountable for
18.2% share of Indian Banks. IndusInd Bank was the first private bank in India. Currently the
bank is among the fastest growing Bank Private Banks in the country. IDBI which is ranked as
the tenth largest global development bank is counted as one of the finest financial institutions in
the subcontinent.
A private bank is a bank whose major stake is owned by private stakeholders and not by
government. Government has a very little role to play when it comes to private sector banking.
Private banks play a pivotal role for a country's economic development. They are the major
players in today's market. Private banking has invited foreign economies to invest in a
developing country like India. They have smoothen the process of business expansion, especially
for multinationals. Private banks are progressing at a faster rate in India than Government-owned
banks.
Private banks have been functioning in India ever since the origin of banking system in India.
But private banks were not given importance in the earlier years. The dominance of public sector
banks did not allow the private sector banks to participate in the overall development of our
country. Therefore, private banks were less active and non-participative before liberalization.
The country also witnessed a remarkable expansion in the banking and financial system. One of
the biggest achievement was reallocation of sectoral credit in favor of agriculture, small scale
industries and exports which formed the core of the priority sector. Certain other sectors of the
economy which also received attention for credit allocation were professionals and selfemployed persons, artisans and weaker sections of the society. Conversely, there was a sharp fall
in the bank credit to large scale industries.
Nationalization of banks was a mixed blessing. After nationalization there was a shift of
emphasis from industry to agriculture. The country witnessed rapid expansion in bank branches,
even in rural areas. Branch expansion program led to mobilization of savings from all parts of
the country.
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2.1 LIST OF PRIVATE BANKS IN INDIA:

Following are the private banks in India:

Axis Bank

Bandhan Bank

Catholic Syrian Bank

City Union Bank

Dhanlaxmi Bank

DCB Bank

Federal Bank

HDFC Bank

ICICI Bank

IDFC Bank

Karnataka Bank

IndusInd Bank

ING Vysya Bank (merged with Kotak Mahindra Bank in April 2015)

Jammu and Kashmir Bank

Karur Vysya Bank

Kotak Mahindra Bank

Lakshmi Vilas Bank

Nainital Bank

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RBL Bank

South Indian Bank

Tamilnad Mercantile Bank

Yes bank

2.2 HISTORY OF PRIVATE BANKS IN INDIA:

Private Banks are non incorporated banks. Private Banks are owned by either an individual or a
general partner. The Indian private banks may be listed publicly. Those can be traded on stock
exchanges as well. Private sector banks in India hold 18.2% of the total assets of Indian banking
industry.
Private Banks in India started way back and has a history due to the fact that in the past years
they were originally working in private during those days they were supposed to handle the more
able and Indians with their banking services and other banking needs that they would require all
this activities happened around 1921. During that time their was the Bank of Bengal, Banks of
Bombay, and Bank of Madras all this formed the Imperial Bank of India.
Presently, Private Banks in India includes leading banks like HDFC Bank, ICICI Bank, ING
Vysya Bank, Jammu & Kashmir Bank, Karnataka Bank, Kotak Mahindra Bank, SBI Commercial
and International Bank, etc. Certainly, being tech-savvy and full of expertise, private banks have
played a major role in the development of Indian banking industry. They have made banking
more competent and customer friendly. In the procedure they have jolted public sector banks out
of satisfaction and forced them to become more competitive.
The year 1969 was a landmark in the history of commercial banking in India. In July 1969, the
government nationalized 14 major commercial banks of the country. In 1980, government
nationalized 6 more commercial banks. But the importance of the private sector banks remained
the same even after nationalization. The RBI decided to liberalize the banking policies. The
liberalization policy gave license to private banks to operate in a more flexible environment. The
private banks before nationalization are called old private banks and the ones after
nationalization are called new private banks.
The banks that started operating post the Banking Sector Reforms in 1991 are called the new
private banks. They introduced economic and financial reforms in the country. The Banking
Regulation Amendment Act of 1993 permitted the entry of new private banks in the Indian
Banking System. However, these banks had to accomplish certain criteria if they wanted to
operate in the economy. The private banks like Bank of Bombay, Bank of Bengal, Bank of
Madras were merged together to form a single bank called Imperial Bank of India.
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2.3 TYPES OF PRIVATE SECTOR BANKS:

Private sector banking is a type of banking process that involves financial institutions which are
primarily owned and operated by private individuals and business organizations rather than by a
government entity. This is in contrast with public sector banking, in which the banking enterprise
is owned and operated by the state in some manner. In many nations that are supportive of free
enterprise, private sector banking is the most common form of banking available. While a
government may not actually control banks and other financial institutions that engage in this
form of banking, private sector institutions do typically have to comply with governmental
regulations that apply to banking in general. It is not unusual for private sector banking to play a
major role in the economy of a given nation. Since this form of banking along with other private
sector business enterprises tends to account for a large portion of the money that moves through
an economy, financial analysts will pay close attention to what is happening in the private sector.
In some nations, a government bank may sometimes set the standard for issues such as interest
rates, with banks in the private sector following the example. Since so much of the economy
depends on the activities occurring within the private sector, the current policies and procedures
that govern private sector banking within a given nation can often help to slow and eventually
reverse an unfavourable economic trend, such as a recession. Another benefit of private sector
banking is the support that the mechanism provides to the free enterprise system within a number
of economies. Assuming that the banks associated with the private sector are working in
harmony with other private sector businesses and concerns, the potential for growing the
economy at a consistent and prudent pace is possible. Banking of this tends to make it easier for
companies to obtain funds for expansion projects, the launching of stock offerings, and other
vital activities that ultimately benefit both the banks and the companies, as well as consumers in
general. While private sector banking does provide a wide range of benefits, this form of banking
has to comply with governmental regulations that are in effect in the nation where the banks are
located. This helps to provide a basis or foundation for the operation, allowing all banking
concerns to have the opportunity to compete for customers. Typically, the regulations also help to
establish guidelines for the creation of financial products that are offered to individual and
commercial customers, while still allowing each bank to offer value-added benefits that help
them to stand out among the different choices open to those potential customers.
There are types of Private banks in India;
a. Old generation private banks.
b. New generation private banks
2.3.1 OLD GENERATION PRIVATE BANKS:

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The banks, which were not nationalized at the time of bank nationalization that took place during
1969 and 1980s are known to be the old private-sector banks. These were not nationalized,
because of their small size and regional focus. Most of the old private-sector banks are closely
held by certain communities their operations are mostly restricted to the areas in and around their
place of origin. Their Board of directors mainly consist of locally prominent personalities from
trade and business circles. One of the positive points of these banks is that, they lean heavily on
service and technology and as such, they are likely to attract more business in days to come with
the restructuring of the industry round the corner.
List of the old private-sector banks in India:
1. Bank of Rajasthan Ltd.
2. Catholic Syrian Bank Ltd.
3. City Union Bank Ltd.
4. Dhanalakshmi Bank Ltd.
5 Federal Bank Ltd.
6. ING Vysya Bank Ltd.
7. Jammu and Kashmir Bank Ltd.
8. Karnataka Bank Ltd.
9. Karur Vysya Bank Ltd.
10. Lakshmi Vilas Bank Ltd
2.3.2 NEW GENERATION PRIVATE SECTOR BANKS:
The banks, which came in operation after 1991, with the introduction of economic reforms and
financial sector reforms are called "new private-sector banks". Banking regulation act was then
amended in 1993, which permitted the entry of new private-sector banks in the Indian banking s
sector.
However, there were certain criteria set for the establishment of the new private-sector banks,
some of those criteria being: The bank should have a minimum net worth of Rs. 200 Crores. 1.
The promoters holding should be a minimum of 25% of the paid-up capital. 2. Within 3 years of

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the starting of the operations, the bank should offer shares to public and their net worth must
increased to 300 crores.
List of the new private-sector banks in India
1. Bank of Punjab Ltd. (since merged with Centurian Bank)
2. Centurian Bank of Punjab (since merged with HDFC Bank)
3. Development Credit Bank Ltd.
4. HDFC Bank Ltd.
5. ICICI Bank Ltd.
6. IndusInd Bank Ltd.
7. Kotak Mahindra Bank Ltd.
8. Axis Bank (earlier UTI Bank)
9. Yes Bank Ltd.

2.4 FUNCTIONS OF PRIVATE BANKS:

The private sector banks play a vital role in the Indian economy. They indirectly motivate the
public sector banks by offering a healthy competition to them. The following are their
importance:

(i) Offering high degree of Professional Management:

The private sector banks help in introducing a high degree of professional management and
marketing concept into banking. It helps the public sector banks as well to develop similar skill
and technology.

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(ii) Creates healthy competition:

The private sector banks provide a healthy competition on general efficiency levels in the
banking system.

(iii) Encourages Foreign Investment:

The private sector banks especially the foreign banks have much influence on the foreign
investment in the country.

(iv) Helps to access foreign capital markets:

The foreign banks in the private sector help the Indian companies and the government agencies
to meet out their financial requirements from international capital markets. This service becomes
easier for them because of the presence of their head offices/other branches in important foreign
centres. In this way they help a large extent in the promotion of trade and industry in the country.

(v) Helps to develop innovation and achieve expertise:

The private sector banks are always trying to innovate new products avenues (new schemes,
services, etc.) and make the industries to achieve expertise in their respective fields by offering
quality service and guidance.
They introduce new technology in the banking service. Thus, they lead the other banks in various
new fields. For example, introduction of computerized operations, credit card business, ATM
service, etc.

2.5 GEOGRAPHICAL DISTRIBUTION OF PRIVATE BANKS:

The private banks started from the metropolitan cities. After growth in metros, the private sector
banks are expanding their network into urban, semi urban, and rural areas. Private Banks are not
just concentrated in metros but they have started making inroads into the rural market as well.
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The semi urban areas have benefitted significantly from the presence of private sector banks.
30% of the branches of private banks are in semi urban areas.
Initially private bank branches were concentrated in the southern and western states. But the
trend of new branches indicates that there is increase in branches in other regions also like Uttar
Pradesh added 265 more branches over 91 old branches, Rajasthan added 141 new branches,
Madhya Pradesh 117, Assam 46. The enhanced standard of governance in Bihar is also reflecting
in terms of growth in number of branches. Bihar added 40 new branches.

2.6 MODERN TRENDS IN PRIVATE SECTOR BANKS:

When the new generation private sector banks started operations in 1993, they had to compete
against established players, some of whom had been in business for over a century. The market
was dominated by the state-owned banks, which had strong branding as well as a widespread
branch network. There were also foreign banks operating in India. While the foreign banks were
not big in terms of the branch network, they had innovative products and a very customer
focused approach to the business. The new generation private sector banks had to carve out a
niche for themselves within this framework. Thus the first decade was spent focusing on the
corporate banking model. The second decade - post 2000 - saw them scaling up the retail
banking and consumer lending businesses. What impact have the new banks had? Today, they
have a market share of 20 per cent in deposits and advances. This has been achieved in a growing
market, indicating that private sector banks have successfully capitalised on the growth of the
Indian economy. But more than acquiring market share, the real contribution of private sector
banks has been to transform the way banking is done in India. In the late 1990s, there would
have been maybe a few hundred ATMs. The new banks developed the concept of direct selling
agents who reached out to customers with credit products, taking loans to the customer's
doorstep. Not only did the private sector banks expand in this manner, their example forced
public sector banks to also adopt similar strategies. It was banks like ours which made sure that
housing loans and other kinds of loans were made available in hundreds of cities and towns in
India. It is one thing to say that the demand existed, but what was also required was products and
the distribution network to reach those products to the people. This was a major contribution of
the new generation private sector banks. The Indian market is a growing market and to keep
succeeding one has to explore the existing opportunities well. The banking sector is expected to
grow at 2.5 to three times the country's GDP growth rate. For individual banks, a lot will depend
on their underlying business strategy. The differentiator will be a bank's efficiency and
innovation. How well it manages risk - and, therefore, profitability - will also be a key factor. For
banks, a large part of their IT investments in the last few years has gone toward rolling out core
banking solutions. But now, investments in deployment of other applications, outsourcing of
infrastructure and processes have picked up. According to the CIIBCG IT End User Survey
2013, new private banks and foreign banks have adopted IT the most, followed by nationalized
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banks and the old private sector banks. New Indian private banks and foreign banks extensively
use applications, provide facilities such as unified customer information and branchless banking,
and have developed alternate channels of banking. However, nationalized and old private sector
banks have used applications across their systems in a limited manner, and not focused heavily
on improving customer service and developing alternate banking channels. Unlike most of their
peers, old privatesector banks are yet to significantly outsource select business processes and
the management of their IT infrastructure. As far as adoption of new technologies like cloud
computing and data analytics is concerned, new Indian private banks and foreign banks have
been quite keen, and have started making efforts to leverage the advantages of such technologies.
In contrast, nationalized banks and old private sector banks are yet to make headway in this area.

2.7 MARKETING PRATICES OF PRIVATE SECTOR BANKS:

The new private sector banks have outperformed the scheduled commercial banks in other
categories in the last few years. Moreover, the share of the public sector banks in total credit and
deposits of scheduled commercial banks has fallen and that of the private sector banks has risen.
The private sector banks with their repertoire of skill, technology, customer-friendly approach
and market oriented product formulation are poised to emerge as leading players in the banking
sector in days to come. By posing stiff competition to the established players in the banking
industry, they are serving the cause of bringing out the best in the public sector banks also. It is,
therefore, only fair to expect that in the emerging banking scene, the private banks will be a
major force to reckon with. With a view to clean their balance sheets, the Ministry of Finance has
directed all RRBs to reduce their gross NPA ratio below 5% by 2010. At present, as many as 13
of them have the ratio over 10% (Ray 2009). Thus, it can be derived that though the problem
loans have exhibited a declining trend, yet, the problem remains and is continuing.
The first task before the Private sector Banks is to formulate that Bank marketing mix which
suits the national socio-economic requirements. Some have 4P's and some have 7P's of
marketing mix.

The common Ps of bank marketing mix are as follows:1. Product

First among the Ps of bank marketing is product mix. Product stands for both goods and service
combination offered to the public to satisfy their needs. In the highly regulated banking industry
all offered the same type of products. But the drawback is that no brand can be marketed with
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unique selling proposition for long because it can be copied immediately. Thus, it is better to
focus on some selected ideas relating to products, which have immediate operational utility as
well as feasibility on banks.
In the evolution of bank products, the products can be categorized into three groups. They are
Core products, Formal products, and augmented product. Core products are those products,
which define the business. For a bank, some of the core products are Savings Bank Account,
Current Account, Term deposit, Recurring deposit, Cash credit, Term loan, overdraft and the like.
In the line product evolution, the next type of product is Formal product. Formal product is
usually a combination of two or more core products and they have strong marketing content as
they cater to some specific customer needs augmented product is made out of formal product
which itself has a strong marketing content. It is further reinforced through value addition. A
very good example for augmented product is Smart Money Account with Hong Kong Bank.
When one opens a Smart Money Account, an account holder will also get free Any Time Money
Card.
2. Price:
Price is a critical and important factor of bank marketing mix due numerous players in the
industry. Most consumers will only be prepared to invest their money in search of extraordinary
or higher returns. They are ready to pay additional value if there is a perception of extra product
value. This value may be improved performance, function, services, reliability, promptness for
problem solving and of course, higher rate of return.
3. Promotion:
One of the most important elements of marketing mix of services is promotion. The promotion is
to inform and remind individuals and persuade them to accept, recommend or use of a product
service or ideas. Promotion is a demand stimulating aid through communication. When a bank
comes out with a new product, it makes its target customer segment aware of it only through
marketing promotion. It may be in various forms like press advertisement, sales campaign, word
of mouth, personal interaction directly mailing. Making the customer may be enough if the
product is unique or in great demand. Bank Marketing is actually is the marketing of reliability
and faith of the people. It is the responsibility of the banking industry to take people in favor
through word of mouth publicity, reliability showing through long years of establishment and
other services.
4. Place:
The most important element in distribution strategy relate to this issue of location of the banks to
render their service. Distribution means delivery of the products or service at the right time and
at the right place. The place where the banking products or service are delivered is an important
element in bank marketing. The place strategy of Indian banks has been on the basis of too many
parameters. Prior sanctions from RBI and responsibility of banks towards development of
banking habit in remote unbanked areas have been some of the important given parameters. So
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from the marketing stand point, place strategy is not fully positive to Indian baulks. The choice
of location and time to make a product available will have significant impact on the customers.
Customers often need to avail banking services fast for this they require the bank branches near
to their official area or the place of easy access.
5. Process:
The process is crucial to the bank marketing strategy. It gives value to the buyer and an element
of uniqueness to the product. It is very significant because it provides competitive advantage to
the bank. The importance of process in bank marketing strategy is based on 'value chain concept'
given by Michael Porter (1996). The concept basically stresses close attention to all the
organizational activities which go into marketing the final product to the customer. In the
banking context, a typical value chain would encompass all activities right from the product
conceptive stage down to its marketing at branch level. All these ultimately lead to the customer's
satisfaction with the product that the customer has purchased.
6. People:
The Indian banking industry is not an exception to the modern forces of changes and
competition. Many new ideas and strategies have been introduced since the introduction of the
new economic policy. Like any other service industry, banking is a labour intensive industry. The
human factor plays a pivotal role in the running of the businessmen unlike machine have varying
attitudes, moods, heterogeneous cultures, feelings and above all, different aspirations. People are
crucial to the success of any business. It is far more so in a service oriented industry like
banking.
7. Physical Evidence:
Physical evidence is the strategic tool for the bank marketer. Banking products are intangible.
Tangibilising the intangible commodity is a major challenge to the bank marketer. One among
the important methods is the upkeep of branch premises and interior decor. This is relevant not
only from the point of view of physical evidence but also for tangiblisation strategy. Another
strategy is imaginative designing of bank stationery used by customers. Product packaging could
be another tangibilisation strategy and marketers called it as a separate 'P' of marketing strategy.

8. Personal Selling:
Due to the characteristics of banking services, personal selling is the way that most banks prefer
in expanding selling and use of them. Personal selling occurs in two ways. First occurs in a way
that customer and banker perform interaction face to face at branch office. In this case, whole
personnel, bank employees, chief and office manager, takes part in selling. Second occurs in a
way that customer representatives go to customers place. Customer representatives are specialist
in banks services to be offered and they shape the relationship between bank and customer.
22

9. Public Relations:
Public relations in banking should provide avenues for establishing most effective
communication system, creating sympathy about relationship between bank and customer, and
giving broadest information about activities of bank.

3. MODELS:
3.1 SWOT ANALYSIS OF PRIVATE BANK
Private Bank provides a lot of services which are comes by the idea of marketing concept to
increase the customers to join private bank and also fulfilling the satisfaction of consumers
SWOT Analysis refers to identification of Strengths, Weakness , Opportunities and Threats.
23

STRENGTHS:
Strengths demonstrate the optimistic attributes, tangible and intangible, internal to your
organization. What do you do well? What resources do you have? What advantages do you have
over your competition?
1. Employees
Our private bank can hire young employees; because according to the market research we know
that nowadays young employees might have more idea which are more attractive and also have
their own ways or idea to pull out consumers to our private bank from the others private bank or
competitors.
2. Knowledge
Compare to our competitors, they are retailers, pushing boxes. We know the systems, networks,
connectivity, programming, all the Value Added Resellers (VARs), and also data management.
3. Relationship selling
We get to know our customers, one by one. Our direct sales force maintains a relationship.
4. History
We've been in our town forever. We have the loyalty of customers and vendors. We are local.
WEAKNESSES:
Note the weaknesses within your business. Weaknesses are factors that are within your control
that detract from your ability to obtain or maintain a competitive edge. Which areas might you
improve?

1. Competitor
For the Private Bank there are a lot of competitors in the market and each competitors will use
their skill or strategy to pull or attract the customers from others private bank, so that competitors
might be more attractive and abstract more consumers than our private bank.
2. Financial Problem
Private bank which just started their business from commercial bank moving to private bank,
when this happen our private bank need a lots of money to invest into our private bank so that
the private bank may used a lots money and the private bank might have financial problem and
need time recover slowly after joining private bank business.
24

3. Price and volume

The major stores pushing boxes can afford to sell for less. Their component costs are less and
they benefit from volume buying with the main vendors.
4. Brand power
Take one look at their full-page advertising, in color, in the Sunday paper. We can't match that.
We don't have the national name that flows into national advertising.

OPPORTUNITIES:
Opportunities assess the external attractive factors that characterize the causes for your business
to survive and prosper. What opportunities exist in your marketplace, or in the environment, from
which you hope to benefit?
1. Expectation of Stakeholder
Transform itself from a global bank to a more diversified global financial service company such
as Citibank.
2. Political or Legal
Penetrate a new markets need opportunities for expansion and the chance to gain the significant
market share at an early stage in the growth cycle with aggressive growth.
3. Service
As our target market needs more service, our competitors are less likely than ever to provide it.
Their business model doesn't include service, just selling the boxes.

THREATS:
What factors are potential threats to your business? Threats include factors beyond your control
that could place your marketing strategy, or the business itself, at risk. These are also external,
you have no control over them, but you may benefit by having contingency plans to address
them if they should occur.
1. Economic Condition
The main threats come from changes in general economic conditions in the markets in which
private bank operates (such as changes in foreign exchange rates, volatility in interest rates) and
changes in governmental policy and regulation.
2. The larger price-oriented store
25

When they have huge advertisements of low prices in the newspaper, our customers think we are
not giving them good value.

3.2 NINE FORCES ANALYSIS

Nine force analysis is done through
1. PEST Analysis
2. Porter's Five Forces Analysis

3.2.1 PEST ANALYSIS OF PRIVATE BANKS:

PEST Analysis consists of 4 types of Aspects:

Political Aspect
Economic Aspect
Social Aspect
Technological Aspect

POLITICAL ASPECT:
Private Bank has been confined by the regulation and policy formulated by different government
in the countries where they are operating. The company has been able to stick on to policy given
by each government to make sure that the company will be able to carry out business operations
successfully and effectively.
ECONOMIC ASPECT:
Private Bank is supposed to have steady and successful economic stabilize. In spite of many
dangers that they encounter in different part of the world, the management of Our Private Bank
sees to it that they would be able to surpass such struggles and strive to have a better economic
condition. The change in the Currency is also the economic factors to our private bank.

SOCIAL ASPECT:
Our Private Bank will be affected by the situation of the society in which they are operating.
Along with this, Our Private Bank try harder to make sure that each society is given equal chance
to take advantage of the resources given by the organization. The company adhere to having
good reputation and relations in the society that they belong.
TECHNOLOGICAL ASPECT:
26

The emergence of information technology and internet affects how Our Private has been
operating in the past years. The company adopts different IT/IS systems and used internet to
reach their customer all over the world and to know the latest trends in the global business.

3.2.2 PORTER'S FIVE FORCES ANALYSIS:

Porter's Five Forces Analysis consists of five forces that help in analysis of industry :
1. Industry Rivalry
2. Bargaining power of Suppliers
3. Bargaining power of Customers
4. Threat of New Entrants
5. Threat of Substitues
1. INDUSTRY RIVALRY:
Rivalry in banking industry is very high. There are so many private, public, co-operative and
non-financial institutions operating in the industry. They are fighting for same customers. Due to
government liberalization and globalization policy, banking sector became open for everybody.
So, newer and newer private and foreign firms are opening their branches in India. This has
intensified the competition.
The factors that have contributed to increase in rivalry are:
Number of players:
There are so many banks and non-financial institutions fighting for the same pie which has
intensified competition.
High market growth rate:
India is seen as one of the biggest market place and growth rate in Indian banking industry is also
very high. This has ignited the competition.
Low switching cost:
Customer switching cost is very low. They can easily switch from one bank to another bank and
very little loyalty exists.
Undifferentiated services:
Almost every bank provides similar services. No differentiation exists. Every bank tries to copy
each others services and technology, which increases the level of competition.
27

Low government regulations:

There are low regulations to start a new business due to the LPG policy adopted by India post
1991. So, sector is open for everybody.
2. BARGAINING POWER OF SUPPLIERS:
Suppliers of banks are depositors. These are those people who have excess money and prefer
regular income and safety. In banking industry suppliers have low bargaining power.
Following are the reasons for low bargaining power of suppliers:
Nature of suppliers:
Suppliers of banks are generally those people who prefer low risk and those who need regular
income and safety as well. Bank is best place for them to deposit their surplus money. They
believe that banks are safer than other investment alternatives. So, they do not consider other
alternatives very seriously, which lowers their bargaining power.
Few alternatives:
Suppliers are risk averters and want regular income. So, they have few alternatives available with
them to invest like Treasury bills, government bonds. So, few alternatives lower their bargaining
power.
RBI Rules and Regulations:
Banks are subject to RBI rules and regulations. Banks have to behave in the way that RBI wants.
So, RBI takes all decisions relating to interest rates. This reduces suppliers bargaining power.
Suppliers are not concentrated:
Banking industry's suppliers are not concentrated. There are numerous suppliers with negligible
portion to offer. So, this reduces their bargaining power. If they were concentrated then they can
bargain with banks or can collectively invest in other non risky projects.

Forward integration:
Forward integration is possible like mutual funds, but only few people now about this. Only
educated people can forwardly integrate where as a large number of suppliers are unaware about
these alternatives.
3. BARGAINING POWER OF CUSTOMERS:
Customers of the banks are those who take loans, advances and use services of banks. Customers
have high bargaining power.
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Following are the reasons for high bargaining power of customers:

Large number of players:
Customers have very large number of alternatives. There are so many banks, which fight for the
same pie. There are many non-financial institutions which have also jumped into this business.
There are foreign banks, private banks, cooperative banks and development banks together with
the specialized financial companies that provide finance to customers. These all increase
preferences for customers.
Low switching cost:
Cost of switching from one bank to another is low. Banks are also providing zero balance
account and other types of facilities. They are free to select any banks service. Switching costs
are becoming lower with internet banking gaining momentum and as a result consumers loyalties
are harder to retain.
Undifferentiated service:
Banks provide merely similar services. There is not much difference in services provided by
different banks. So, bargaining power of customers increases. They cannot be charged for
differentiation.
Full information about the market:
Customers have full information about the market. Internet has increased the customers access to
information. So, banks have to be more competitive and customer friendly to serve them.

4. THREAT OF SUBSTITUTES:
Competition from the non-banking financial sector is increasing rapidly. The threat of substitute
products is very high. These new products include credit unions and investment houses. One
feature of using an investment house is that the fees that the investment house charges are tax
deductible, whereas for a bank it is considered a personal expense, which is not tax deductible.
The rate of return with using investment houses is greater than a bank. There are other substitutes
as well for banks like mutual funds, stocks (shares), government securities, debentures, gold, real
estate etc. so, there is a high threat from substitutes.

5. THREAT OF NEW ENTRANT:

Barriers to entry in banking industry no longer exist. So, lots of private and foreign banks are
entering in the market. Product differentiation is low and exit is difficult. So, every bank strives
to survive in highly competitive market. So, we see intense competition and mergers and
acquisitions. Government policies are supportive to start a new bank. There are less statutory
29

requirements needed to start a new venture. Every bank tries to achieve economies of scale
through use of technology and selecting and training manpower.

4. IMPACT ANALYSIS
4.1 BUDGET

The biggest negative for Indias state-owned banks in the Union budget is finance minister Arun
Jaitleys announcement that the government will infuse (only)Rs.25,000 crore in fresh capital in
these banksmany of which are crumbling under the burden of bad loans.
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Expectations were running high ahead of the budget even as analysts talked about trillions of
rupees in capital to take care of the pile of bad loans as well as meet the new Basel norms which
will kick in from April 2019.
However, the expectations were exaggerated and the budget has quite a few things that can bring
cheer to the banking industry.
First, even though Jaitley has stuck to the Rs.25,000 crore figure laid out in August 2015 as part
of a four-year road map which envisaged infusion of Rs.25,000 crore each into public sector
banks in fiscal years 2016 and 2017 and Rs.10,000 crore each in 2018 and 2019, he has made it
clear that if more money is required, the government will not shy away from its responsibility.
Properly distributed between growth capital and survival capital, even this amount may meet
requirements for the time being unless there is a dramatic rise in credit demand. Many banks do
not deserve to get dollops of capital from the government. They should simply stick to cleaning
up their balance sheets and recovery of bad loans instead of giving fresh loans for which they
would need more capital.
Second, sticking to Rs.25,000 crore recapitalisation funds and pegging fiscal deficit at 3.5% in
2016-17 is a smart idea (higher recapitalisation funds would have derailed the fiscal
consolidation path) as this may encourage the Reserve Bank of India (RBI) to cut its policy rate
sooner than later.
With the government respecting its commitment to fiscal consolidation and retail inflation
trajectory in sync with the RBIs target, I will not be surprised if the central bank goes for a rate
cut even before its April policy. After two years of insufficient rainfall, we may have a decent
monsoon this year to take care of the food inflation which is a big worry for the central bank.
Third, the quantum of market borrowing for the next fiscal year is a big positive for the bond
market. While the expectations were for about Rs.6.4 trillion gross market borrowing by the
government to take care of its fiscal deficit in 2016-17, the actual figure is Rs.6 trillion. Net of
redemptions of old bonds, the net borrowing for the year is Rs.4.25 trillion.
Bond yields dropped after presentation of the budget. If indeed RBI goes for a rate cut in March,
the yield will drop further. This will boost banks treasury income which will come in handy to
take care of their rising bad assets in the March quarter. Banks are required to set aside money or
provide for bad assets.
Fourth, Jaitleys commitment to place a comprehensive bankruptcy code in the budget session of
Parliament is another piece of good news. This will help banks in the recovery of bad assets as
they will be able to fight the recalcitrant corporate borrowers with vigour.
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Fifth, allowing sponsors to hold up to 100% in asset reconstruction companies (ARCs) will also
help tackle bad assets. Currently, foreigners can hold up to 100% in ARCs but an individual
foreign entity cannot hold more than 49%. A sponsor is someone who holds at least 10% stake in
an ARC. By allowing the sponsors to have 100% stake, in effect, the government is allowing a
single foreign entity to have 100% stake. This will encourage many foreign entities that have
been waiting to take the plunge and address the capital problem of ARCs.
Sixth, by announcing that the government is willing to pare its stake to 49% in IDBI Bank Ltd,
Jaitley has made a political statement. In future, we may see a similar approach towards public
sector banks even though it may not happen soon. For the time being, the government will
continue to hold the majority stake in public sector banks.
Jaitley spoke about consolidation in the sector but hasnt clarified what exactly he meant by that.
I hope this does not mean forcing a relatively stronger bank to embrace a weak bank for merger.
Oriental Bank of Commerce has for long paid the price for taking over Global Trust Bank Ltd.
That experiment should not be repeated even within the circle of government-owned banks.
Seventh, the banking industry in general also should cheer the formation of the monetary policy
committee which will oversee the central banks policy rate movement. The proposed committee
will have six membersthree appointed by RBI and an equal number nominated by a outside
selection committee. The RBI governor will have the last word in the form of a casting vote in
case of a tie. This puts to rest all speculation about RBI losing its autonomy and the government
deciding on interest rates.
Finally, one must take into consideration the setting up of the Banks Board Bureau along with
the Union budget to appreciate the governments stance on public sector banks. The board could
not have a better boss than the former comptroller and auditor general Vinod Rai. Other members
are well chosen and the team could play a seminal role in overhauling the governance structure
in public sector banks which many blame for the mess these banks are in.
Much was expected from the Budget on the banking sector but given the limited fiscal space, it
could not do much for the cash-strapped public sector banks (PSBs).
While state-owned banks struggle for capital, the private sector will continue to reap benefits
through higher market share gains and lower tax rate in years to come. Additionally, the merger
of limits for foreign institutional investors and foreign direct investment, foreign limits for
foreigners will increase to 74 per cent. Axis Bank and YES are expected to be big beneficiaries.
The finance minister has allocated merely Rs 7,940 crore to the cash-starved PSBs, while the
capital needs of public sector lenders is in excess of $50 billion. This is a clear negative for
PSBs, as several of them are in desperate need of capital. With no capital from the
government, private banks are expected to garner further marketshare as demand for credit picks
up. Analysts are expected to turn overweight on stronger private sector banks such as Axis Bank,
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ICICI Bank, HDFC Bank and Kotak Mahindra Bank. Credit Suisse explains that continuing
capital constraints on PSBs will further accelerate the market share shift to private banks and,
thus, this Budget provides more reason to overweight them relative to the PSBs. HDFC
Securities believes the move is negative for Allahabad Bank, Bank of India and Central Bank.
The markets have welcomed the move to set up a Bank Board Bureau, which will be responsible
for the selection of top management of public-sector banks and to find innovative ways to raise
capital. However, since several legislative changes are required to implement this, the move will
have little impact in the near term. The timeline of this remains uncertain, claim analysts. Even
the Bankruptcy Code will help recovery of bad loans in times to come. However, that, too, is a
long-termpositive
The Street is looking at earnings upgrade for the sector from FY17, when the sector's tax rates
start to come off from the level. While some housing finance companies and banks enjoy certain
exemptions, the net impact of corporate taxes coming down will have a beneficial impact on
banks from FY17. According to JM Financial, lenders such as HDFC Bank, Axis Bank, IndusInd
and YES Bank, which do not avail the deduction, will benefit the most from corporate tax rate
reduction

4.2 INTEREST RATE REDUCTION

The Reserve Bank of India left its benchmark repo rate unchanged at a five-year low of 6.5
percent during the meeting held on June 7th,2016. RBI Governor Raghuram Rajan said that
ensuring that current and past policy rate cuts transmit to lower lending rates was more
important. What he implied was that despite the central bank lowering rates by 125 basis points
since 2015, banks have reduced rates only by close to 60 basis points. The RBI appears keen to
ensure that the benefits of a rate cut translates into lower borrowing costs for firms and
individuals and also assess the prospects of the monsoon before committing to an aggressive cut
in rates.
Rajan promised that the stance of monetary policy will remain accommodative and the RBI will
continue to watch macroeconomic and financial developments in the months ahead with a view
to responding with further policy action as space opens up.
In order to ensure better transmission of rates, the RBI Governor also announced structural
changes in the central banks liquidity management policy with banks complaining of liquidity
problems. To address that the RBI has reduced the Marginal Standing Facility or MSF by 75
basis points while also easing the requirement of maintaining a minimum daily cash reserve ratio
from 95 to 90 per cent.
The RBI has also raised the reverse repo rate by 25 bps and narrowed the interest rate corridor
the gap between the repo rate and the reverse repo rate to 50 bps. Besides, it has lowered the
limit of banks daily cash balance with the RBI from 95 per cent to 90 per cent and raised the rate
33

on marginal standing facility to 7 per cent. All these will ease the pressure on liquidity and lead
to faster transmission of the policy rate.
These steps are expected to bring down the cost of borrowing and help fuel economic growth.
Against this background, the RBI has kept the growth projection for FY17 unchanged at 7.6 per
cent even as inflation projection remains at 5 per cent by March 2017.
According to the RBI, the changes to the RBI Act to create a monetary policy committee will
further strengthen monetary policy credibility. In the FY17 Budget, the government has adhered
to the path of fiscal consolidation and this will support the disinflation process going forward.
Given weak private investment in the face of low capacity utilisation, a reduction in the policy
rate by 25 bps will help strengthen activity and aid the governments initiatives, Rajan said.
On the price front, Rajan said there are uncertainties surrounding this inflation path emanating
from recent unseasonal rains, the likely spatial and temporal distribution of monsoon, the low
reservoir levels, and the strength of the recent upturn in commodity prices, especially oil.
The persistence of inflation in certain services warrants watching, while the implementation of
the 7th Pay Commission awards will impart an upside to the baseline through direct and indirect
effects. There will be some offsetting downside pressures stemming from tepid demand in the
global economy, governments effective supply side measures keeping a check on food prices,
and the Governments commendable commitment to fiscal consolidation, he said.
The Confederation of Indian Industry (CII) said that the rate cut from the RBI could have been
higher in the current economic conditions which would have had a stronger impact on sentiment
and spurred investment. Factors such as soft commodity prices, expectations of a normal
monsoon, cut in small savings rate and the government delivering on fiscal prudence in the
Budget have made it the right time for the RBI to lean more towards growth, CII said.

HOW THIS RATE CUT AFFECTS DIFFERENT SEGMENTS?

Existing and potential home loan customers are delighted because it brings down their borrowing
costs. The EMI of a home loan of Rs 60 lakh for 20 years will come down by almost Rs 1,500.
Investors in debt funds and tax-free bonds are also happy because they have made big gains.
Long-term debt funds and taxfree bonds have rallied by nearly 2-4% after the rates were cut.
Corporates are pleased because their cost of capital comes down and stock investors see this as a
positive development. The Sensex gained more than 500 points in the two days after the rate cut
was announced.
At the same time, investors in fixed income instruments are a worried lot because banks have
brought down their deposit rates. The worst hit are senior citizens who depend largely on the
34

interest from their fixed deposits and small savings. Our cover story looks at the impact of the
RBI move on the entire spectrum of investors and borrowers. We also suggest strategies that can
help readers make the most of the rate cut.

4.3 GOVERNMENT RELAXING NORMS:

Seeking to further relax foreign investment norms, the government is considering increasing the
foreign direct investment (FDI) limit in private banks to 100 per cent, from the existing 74 per
cent.
The Department of Industrial Policy and Promotion (DIPP) has sent a proposal to hike the FDI
limit in the private banking industry to the Department of Financial Services for its comments,
sources said.
Currently, 74 per cent FDI is permitted in the private sector banking, of which up to 49 per cent
is allowed under the automatic route and beyond that through the approval of the Foreign
Investment Promotion Board (FIPB).
However, portfolio investments in the banking sector can go up to 49 percent. The move will
help the existing private sector banks, payments banks and small finance banks tap overseas
markets to enhance their capital base. RBI has recently given in-principle approval to 11 entities
to set up payments banks and 10 for small banks.
Recently, the government has introduced the concept of composite caps. But given the
sensitivities in the sector, the government has said foreign institutional investors (FIIs) cannot
exceed the cap prescribed for portfolio investments in private sector banks.
Private lender HDFC bank has already got government approval to raise foreign investment limit
to 74 per cent.

35

5. OUTLOOK
Banks play a major role in the economy. They provide loans to private individuals and
businesses on a daily basis. In doing so they give homeowners the opportunity to find quality
housing and build up equity. They help businesses to realise their investment plans and to finance
foreign trade.
Banks assist customers to hedge their risks and furnish them with financial advice. Banks also
process millions of cashless payments every day error-free and very inexpensively. A modern
economy cannot survive without an efficient and safe circulation of money.
Serious things have gone wrong at various banks in recent years and as a result the sector now
finds itself at the centre of a social debate on its future position and role in society. The world
economy has been in the grips of a financial crisis for several years now. History shows that
financial crises occur from time to time, as do economic cycles and public financing crises.

5.1 LONG TERM OUTLOOKS

The objective of banks in general and systemic banks in particular should be to serve the real
economy. They play a crucial role in payments and lending to private individuals, businesses and
other institutions. This is how they form the financial bloodline of the economy.
This gives banks and bankers a dual responsibility. Firstly, they must carry out their activities in
a way that ensures that customers interests are served as well as possible. Continuity and
consequently a long-term focus must be the top priorities at all times. Secondly, they must
ensure that the activities that are financed are at the service of society.
A modern economy must have these banks on account of the central role they play. Large and
smaller banks that are relevant to the performance of the entire financial-economic system are
designated systemically important banks. They have an extra responsibility.
Banks core functions are processing payments, managing savings and financing the economic
activities of businesses and consumers. Banks must provide their customers with access to
foreign currencies for cross-border transactions. Banks must be able to raise funds on the
financial markets if the available amount of savings is insufficient to finance the lending. This
means they must be able to maintain the secondary market for the debt securities they have
issued. Customers must also be given the opportunity to hedge financial risks through their bank.
The following aspects in on the future of the banking industry:
36

Systemically important banks concentrate primarily on customer-focused activities that

are of real economic importance and on activities that ensue from the banks own risk
management.

Risk management is a core competence of banking. Systemically important banks must

aim for a low risk profile in relation to the credit risk and the liquidity and interest risk.

Banks international activities must facilitate their customers international activities and
ensure stability and risk diversification.

Larger banks have various advantages over smaller banks.

What is the banks core business? Limitation holds the key to excellence.

The banking risks must correspond with the core banking business, be transparent to
society and must be controlled as well as possible.

5.2 SHORT TERM OUTLOOKS

The banking industry has been accused of bringing the world to its knees by taking breathtaking
risks, spurred by astronomical compensation, with little regard for the consequences. Much
energy has been expended in debating the responsibility for this upheaval; however, banking
leaders cannot afford to engage in the blame game. They must realize that despite the chaos and
restructuring experienced by the banking sector, the fundamentals of banking are unchanged.
They must continue to fulfill the societal purpose of their institutions while steering them to safe
harbor and future success.
To achieve this, senior leaders must recognize three developments that have been set in motion
by the financial crisis:

The role of government is growing around the world, as witnessed by increased

regulation and even outright ownership of the sector.

There is now an urgent need for banks to reintegrate the value chain and regain their
traditional closeness to the customer in order to better manage risk and create value.

The outlook has shifted to what will almost certainly be a prolonged period of low
growth, with important implications for how banks compete and capture value.

Although the fundamentals of banking are unchanged, banking leaders cannot respond to these
challenges with the kinds of short-term solutions and temporary fixes that are used to weather
37

minor cyclical dips. Instead, they must analyze and adjust their companies core capabilities in
their continuing quest to outperform the market and their competitors.
The Indian economy is on the brink of a major transformation, with several policy initiatives set
to be implemented shortly. Positive business sentiments, improved consumer confidence and
more controlled inflation are likely to prop-up the countrys the economic growth. Enhanced
spending on infrastructure, speedy implementation of projects and continuation of reforms are
expected to provide further impetus to growth. All these factors suggest that Indias banking
sector is also poised for robust growth as the rapidly growing business would turn to banks for
their credit needs.
Also, the advancements in technology have brought the mobile and internet banking services to
the fore. The banking sector is laying greater emphasis on providing improved services to their
clients and also upgrading their technology infrastructure, in order to enhance the customers
overall experience as well as give banks a competitive edge.
Many banks, including HDFC, ICICI and AXIS are exploring the option to launch contact-less
credit and debit cards in the market shortly. The cards, which use near field communication
(NFC) mechanism, will allow customers to transact without having to insert or swipe.
Exchange Rate Used: INR 1 = US$ 0.0149 as on May 16, 2016.

5.2.1 INVESTMENTS/DEVELOPMENTS
Key investments and developments in Indias banking industry include:

Canada Pension Plan Investment Board (CPPIB), an investment management company,

has bought a large stake in Kotak Mahindra Bank Ltd from Japan-based Sumitomo
Mitsui Banking Corporation.
Indias first small finance bank called the Capital Small Finance Bank has started its
operations by launching 10 branch offices in Punjab, and aims to increase the number of
branches to 29 in the current FY 2016-17.
FreeCharge, the wallet company owned by online retailer Snapdeal, has partnered with
Yes Bank and MasterCard to launch FreeCharge Go, a virtual card that allows users to
pay for goods and services at online shops and offline retailers.
Exim Bank of India and the Government of Andhra Pradesh has signed a Memorandum
of Understanding (MoU) to promote exports in the state.
Kotak Mahindra Bank Limited has bought 19.9 per cent stake in Airtel M Commerce
Services Limited (AMSL) for Rs 98.38 crore (US$ 14.43 million) to set up a payments
38

bank. AMSL provides semi-closed prepaid instrument and offers services under the
Airtel Money brand name.
Ujjivan Financial Services Ltd, a microfinance services company, has raised Rs 312.4
crore (US$ 45.84 million) in a private placement from 33 domestic investors including
mutual funds, insurance firms, family offices and High Net Worth Individuals (HNIs)).
India's largest public sector bank, State Bank of India (SBI), has opened its first branch
dedicated to serving start-up companies, in Bengaluru.
Global rating agency Moody's has upgraded its outlook for the Indian banking system to
stable from negative based on its assessment of five drivers including improvement in
operating environment and stable asset risk and capital scenario.
Lok Capital, a private equity investor backed by US-based non-profit organisation
Rockefeller Foundation, plans to invest up to US$ 15 million in two proposed small
finance banks in India over the next one year.
The Reserve Bank of India (RBI) has granted in-principle licences to 10 applicants to
open small finance banks, which will help expanding access to financial services in rural
and semi-urban areas.
IDFC Bank has become the latest new bank to start operations with 23 branches,
including 15 branches in rural areas of Madhya Pradesh.
The RBI has given in-principle approval to 11 applicants to establish payment banks.
These banks can accept deposits and remittances, but are not allowed to extend any loans.
The Bank of Tokyo-Mitsubishi (BTMU), a Japanese financial services group, aims to
double its branch count in India to 10 over the next three years and also target a 10 per
cent credit growth during FY16.
The RBI has allowed third-party white label automated teller machines (ATM) to accept
international cards, including international prepaid cards, and said white label ATMs can
now tie up with any commercial bank for cash supply.
The RBI has allowed Indian alternative investment funds (AIFs), to invest abroad, in
order to increase the investment opportunities for these funds.
RBL Bank informed that it would be the anchor investor in Trifecta Capitals Venture
Debt Fund, the first alternative investment fund (AIF) in India with a commitment of Rs
50 crore (US$ 7.34 million). This move provides RBL Bank the opportunity to support
the emerging venture debt market in India.
Bandhan Financial Services raised Rs 1,600 crore (US$ 234.8 million) from two
international institutional investors to help convert its microfinance business into a full
service bank. Bandhan, one of the two entities to get a banking licence along with IDFC,
launched its banking operations in August 2015.

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5.2.2 GOVERNMENT INITIATIVES

The government and the regulator have undertaken several measures to strengthen the Indian
banking sector.

The Reserve Bank of India (RBI) has issued guidelines for priority sector lending
certificates (PSLCs), according to which banks can issue four different kinds of PSLCs
those for the shortfall in agriculture lending, lending to small and marginal farmers,
lending to micro enterprises and for overall lending targets to meet their priority sector
lending targets.
The Reserve Bank of India (RBI) has allowed additional reserves to be part of tier-1 or
core capital of banks, such as revaluation reserves linked to property holdings, foreign
currency translation reserves and deferred tax assets, which is expected to shore up the
capital of state-run banks and privately owned banks by up to Rs 35,000 crore (US$ 5.14
billion) and Rs 5,000 crore (US$ 734 million) respectively.
Scheduled commercial banks can grant non-fund based facilities including partial credit
enhancement (PEC), to those customers, who do not avail any fund based facility from
any bank in India.
Ministry of Finance has planned to inject Rs 5,000 crore (US$ 734 million) in eight
public sector banks in order to boost their capital,
To reduce the burden of loan repayment on farmers, a provision of Rs 15,000 crore (US$
2.2 billion) has been made in the Union Budget 2016-17 towards interest subvention.
Under Pradhan Mantri Jan Dhan Yojna (PMJDY), 217 million accounts! have been
opened and 174.6 million RuPay debit cards have been issued. These new accounts have
mustered deposits worth almost Rs 37,000crore (US$ 5.53 billion).
The Government of India is looking to set up a special fund, as a part of National
Investment and Infrastructure Fund (NIIF), to deal with stressed assets of banks. The
special fund will potentially take over assets which are viable but dont have additional
fresh equity from promoters coming in to complete the project.
The Reserve Bank of India (RBI) plans to soon come out with guidelines, such as
common risk-based know-your-customer (KYC) norms, to reinforce protection for
consumers, especially since a large number of Indians have now been financially
included post the governments massive drive to open a bank account for each household.
To provide relief to the state electricity distribution companies, Government of India has
proposed to their lenders that 75 per cent of their loans be converted to state government
bonds in two phases by March 2017. This will help several banks, especially public
sector banks, to offload credit to state electricity distribution companies from their loan
book, thereby improving their asset quality.

40

Government of India aims to extend insurance, pension and credit facilities to those
excluded from these benefits under the PradhanMantri Jan DhanYojana (PMJDY).
To facilitate an easy access to finance by Micro and Small Enterprises (MSEs), the
Government/RBI has launched Credit Guarantee Fund Scheme to provide guarantee
cover for collateral free credit facilities extended to MSEs upto Rs 1 Crore (US$ 0.15
million). Moreover, Micro Units Development & Refinance Agency (MUDRA) Ltd. was
also established to refinance all Micro-finance Institutions (MFIs), which are in the
business of lending to micro / small business entities engaged in manufacturing, trading
and services activities upto Rs 10 lakh (US$ 0.015 million).

6. TOP PLAYERS OF PRIVATE BANK

There are large number of private sector banks in India that delivers customer centric services
and offer quality products:
1. HDFC Bank
2. ICICI Bank
3. Axis Bank
4. Kotak Mahindra Bank
5. IndusInd Bank
6. YES Bank
7. ING VYSYA Bank
8. FEDERAL Bank
9. JK Bank
10. KARUR VYSYA Bank

6.1 HDFC BANK

6.1.1. ABOUT HDFC:
41

HDFC Bank Limited is an Indian banking and financial services company headquartered
in Mumbai, Maharashtra. It has about 76,286 employees including 12,680 women and has a
presence in Bahrain, Hong Kong and Dubai. HDFC Bank is the second largest private bank in
India as measured by assets. It is the largest bank in India by market capitalization as of February
2016. It was ranked 58th among Indias most trusted brands according to Brand Trust Report,
2015.
Total balance sheet size as of June 30, 2016 was Rs.755,100 crores as against Rs.629,322 crores
as of June 30, 2015. The Banks total income for the quarter ended June 30, 2016 was
Rs.19,322.6 crores, as against Rs.16,503.0 crores for the quarter ended June 30, 2015. Net
revenues (net interest income plus other income) increased by 19.6% to Rs.10,588.1 crores for
the quarter ended June 30, 2016 as against Rs.8,850.7 crores in the corresponding quarter of the
previous year.

6.1.2. VISION AND MISSION:

Vision
Become the undisputed market leader in providing housing related finances, to realize the dream
of shelter for all.

Mission
Maintain Ethical Standards, Professional Integrity and Cooperate Governance.

6.1.3 HISTORY:
In 1994, HDFC Bank Limited was incorporated, with its registered office in Mumbai, India. Its
first corporate office and a full service branch at Sandoz House, Worli was inaugurated by the
then Union Finance Minister, Dr. Manmohan Singh.
As of June 30, 2016, the Banks distribution network was at 4,541 branches and 12,013 ATMs.

6.1.4. PRODUCTS AND SERVICES:

HDFC Bank provides a number of products and services which includes1. Wholesale banking services

42

2. Retail banking services

3. Treasury

Wholesale Banking Services The Bank's target market ranges from large, bluechip
manufacturing companies in the Indian corporate to small & midsized corporates and
agribased businesses.

Retail Banking Services The objective of the Retail Bank is to provide its target
market customers a full range of financial products and banking services, giving the
customer a onestop window for all his/her banking requirements.

Treasury Within this business, the bank has three main product areas Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities, and
Equities. The Treasury business is responsible for managing the returns and market risk
on this investment portfolio.

6.1.5. ACQUISITIONS:
HDFC Bank Limited merged with Times Bank Limited in February, 2000. This was the first
merger of two private banks in the New Generation Private Sector Banks category. In 2008,
Centurion Bank was acquired by HDFC Bank Limited. HDFC Bank Board approved the
acquisition of CBoP for Rs. 9,510 crore in one of the largest mergers in the financial sector in
India.

6.1.6. BUSINESS FOCUS:

HDFC Bank's mission is to be a World Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth in
profitability, consistent with the bank's risk appetite. The bank is committed to maintain the
highest level of ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Banks business philosophy is based on five core values: Operational
Excellence, Customer Focus, Product Leadership, People and Sustainability.

6.1.7. MARKETING STRATEGY:

From the very beginning, HDFC has planned and executed its promotional activities in a manner
that has suited its service catalogue, and has maintained a 360 degree approach in planning its
43

commercials, campaigns and marketing activities in general. These promotional activities

include variety of subtle television commercials with a message, a recent and innovative method
of promotion by placing signboards and milestones in the rural portions of country in local/native
language, and placing No Parking boards outside residential and commercial buildings, that
has promoted its connection with the masses and making prospective client base associated with
the name i.e. HDFC. HDFC uses undifferentiated marketing techniques, it mainly focuses on
introducing its financial products to everyone. Because banking in general, is a mass market
product. However, for the HNI customers, well trained relationship managers, wealth managers
are used to retain the HNI clients with HDFC. Thus, this service too is a promotional product for
HDFC. At the end, the promotions are focused on one thing only to spread the name of HDFC
far and wide.

6.1.8. FUTURE CHALLENGES:

For HDFC Bank, the biggest challenges include new payment banks - such as Paytm, Reliance
Industries, Tech Mahindra, NSDL and India Post - that are ready to launch operations. These are
allowed to accept deposits up to Rs 1 lakh but cannot lend. Interestingly, whereas SBI has
entered into an equity partnership with Reliance for a payment bank and Kotak Mahindra Bank
has joined hands with Bharti Airtel, HDFC Bank has decided to take on the challenge alone.
"Perhaps nobody is sure about how the space will pan out," says Sukthankar, Deputy General
Manager, HDFC Bank.
Payment banks could be useful for investors as they would leverage the strength of existing
banks and not invest too much on physical infrastructure. Of course, there is a lot of uncertainty
about what the future holds. "There is still not much clarity on the revenue model of payment
banks. There is certainly a limitation in earning high returns due to lending restrictions," says
Saday Sinha, Banking Analyst, Kotak Securities Ltd. But Sukthankar is unfazed and says HDFC
Bank's ATM network helps them roll out customised offerings and new features. "As you scale
up, transaction costs, say for an ATM, come down," he says.
HDFC Bank is also building a digital bank that will offer the whole gamut of services - from
account opening to loans - online. The trigger for this is traction in retail payments.

6.2 ICICI BANK

6.2.1. ABOUT ICICI
ICICI
Bank (Industrial
Credit
and
Investment
Corporation
of
India)
is
an Indian multinational banking and financial
services company
headquartered
in Mumbai, Maharashtra, India, with its registered office in Vadodara. In 2014, it was the second
44

largest bank in India in terms of assets and third in term of market capitalisation. It offers a wide
range of banking products and financial services for corporate and retail customers through a
variety of delivery channels and specialised subsidiaries in the areas of investment
banking, life, non-life insurance, venture capital and asset management. The bank has a network
of 4,450 branches and 13,995 ATMs in India, and has a presence in 19 countries including India.
ICICI Bank is one of the Big Four banks of India, along with State Bank of India, Bank of
Baroda and Punjab National Bank. The bank has subsidiaries in the United Kingdom and
Canada; branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar, Oman,
Dubai International Finance Centre, China and South Africa; and representative offices in United
Arab Emirates, Bangladesh, Malaysia and Indonesia. The company's UK subsidiary has also
established branches in Belgium and Germany.

6.2.2. VISION AND MISSION

Vision:
To be a leading institution for the promotion of inclusive growth in India by contributing to the
key enablers required for widespread participation in economic opportunities in the country.
Mission:
To promote inclusive growth in India through focused intiatives in the identified areas including
primary healthcare, elementary education, skill development & sustainable livelihood, financial
inclusion and rural development.

6.2.3. HISTORY

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,
and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%
through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs
listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an allstock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors
45

in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the
Government of India and representatives of Indian industry. The principal objective was to create
a development financial institution for providing medium-term and long-term project financing
to Indian businesses.
In the 1990s, ICICI transformed its business from a development financial institution offering
only project finance to a diversified financial services group offering a wide variety of products
and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank.
In 1999, ICICI become the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking, the
managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI
Bank would be the optimal strategic alternative for both entities, and would create the optimal
legal structure for the ICICI group's universal banking strategy. The merger would enhance value
for ICICI shareholders through the merged entity's access to low-cost deposits, greater
opportunities for earning fee-based income and the ability to participate in the payments system
and provide transaction-banking services. The merger would enhance value for ICICI Bank
shareholders through a large capital base and scale of operations, seamless access to ICICI's
strong corporate relationships built up over five decades, entry into new business segments,
higher market share in various business segments, particularly fee-based services, and access to
the vast talent pool of ICICI and its subsidiaries.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of
ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services
Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by
shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at
Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve
Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking
operations, both wholesale and retail, have been integrated in a single entity

6.2.4. ICICI Group Companies

46

ICICI Group

ICICI Prudential Life Insurance Company

ICICI Securities

ICICI Lombard General Insurance Company

ICICI Prudential AMC & Trust

ICICI Venture

ICICI Direct

ICICI Foundation

Disha Financial Counselling

6.2.5 PRODUCTS

ICICI Merchant Services:

ICICI Merchant Services represents an alliance formed in 2009 between ICICI Bank, Indias
largest private sector bank, and First Data, a global leader in electronic commerce and payment
services. First Data is the majority stakeholder in the alliance with ICICI Bank holding 19%.
Money2India:
Money2India (www.money2India.com) is an online money transfer tracking service offered to
Non-Resident Indians by ICICI Bank Ltd. With an ever-expanding base since its launch, it is the
47

preferred mode of online money transfers to India, facilitating seamless money transfers with
round the clock customer service availability. To use this service, a user needs to complete a
simple one-time online registration by accessing www.money2India.com and can thereafter, start
sending money from any bank in 9 countries (USA, Canada, UK, Singapore, Australia, UAE,
Sweden, Switzerland and Hongkong) to any beneficiary account with over 100 banks in India.

Extra home loans:

ICICI Bank Extraa Home Loans are 'mortgage-guarantee' backed loans for retail customers
who aspire to purchase their first homes in the affordable housing segment. This was introduced
in August 2015 in association with India Mortgage Guarantee Corporation (IMGC). IMGC is a
joint venture between National Housing Bank (NHB), an RBI subsidiary which regulates Home
Finance Companies in India; NYSE-listed Genworth Financial Inc., a Fortune 500 company;
International Finance Corporation (IFC) and Asian Development Bank (ADB).
Smart Vault:
Smart Vault are fully automated lockers available 24x7, including weekends and post banking
hours were launched in August 2015. The Smart Vault uses robotic technology to access the
lockers from the safe vault conveniently at any time of their preference in total privacy, without
any intervention of the branch staff.
Saral Loans:
In August 2015, ICICI Bank introduced Saral-Rural Housing Loan. Applicants from rural areas
including women borrowers as well as seekers from weaker sections can now avail home loans
at the ICICI Bank Base Rate (I-Base) which is currently at 9.70%. An eligible borrower can
take up to Rs.15 lac under the ICICI Bank Saral-Rural Housing Loan.
ICICI Bank Unifare Bangalore Metro Card:
ICICI Bank and Bangalore Metro Rail Corporation Limited (BMRCL) in April 2015, announced
the launch of the ICICI Bank Unifare Bangalore Metro Card to offer the commuters dual
benefits of an ICICI Bank credit or debit card and BMRCLs smart card, called Namma Metro
Smart Card.
'Touch n Remit' facility for NRIs in Kingdom of Bahrain:
In March 2015, ICICI Bank tied up with SADAD Electronic Payments WLL to offer remittance
service for NRIs based in Bahrain, enabling them to transfer monies instantly to India from the
48

latters kiosks spread across the Kingdom of Bahrain. This facility has been named as Touch n
Remit.
ICICI Bank Ltd launches 'Video Banking' for NRI:
In February 2015, ICICI Bank announced the launch of 'Video Banking' for all its NRI (Non
Resident Indian) customers. Using this service, the customers can now connect with a customer
care representative over a video call, round-the-clock, on all days from anywhere using their
smart phone.

Pockets by ICICI Bank:

In February 2015, ICICI Bank Re-Launched POCKETS, now working as a "Digital wallet" for
everyone (Android OS users only). The Wallet can be opened by anyone and can conduct
transactions like recharge, shopping, transfer money using the virtual visa card which is issued
when signing up for the wallet.
ICICIBankPay on Twitter:
ICICI Bank in January, 2015 launched banking services on Twitter, christened as
'ICICIBankPay'. This service in India enables ICICI Bank customers to transfer money to anyone
in the country who has a Twitter account, check account balance, view last three transactions and
recharge prepaid mobile in a completely secure manner.

Contactless Credit and Debit Cards:

ICICI Bank in January, 2015 announced the launch of the countrys first Contactless debit and
credit cards, enabling its customers to make electronic payments by just waving the cards near
the merchant terminal in lieu of dipping or swiping them. These cards are based on the Near
Field Communication (NFC) technology, which provides customers the improved convenience
of speed as these cards require significantly less time than traditional cards to complete a
transaction along with enhanced security as they remain in control of the customer.

MySavings Rewards:
ICICI Bank has rolled-out the programme 'MySavings Rewards' from 1 September 2012, where
reward points are offered to individual domestic customers for a variety of transactions done
through the savings bank account. Reward points are offered automatically to customers for
49

activating Internet banking, shopping online/ paying utility bills with Internet banking and autodebit from savings account towards equated monthly installments for home/ auto/ personal loan/
recurring deposit. Customers are required to maintain a monthly average balance of 15,000 or
more. th Indian bank will recuire 5.5% interest on short term loans and long term bonds and
mortgages loans up to $2 million up to 20years to pay back annual interest of 5.5% short term
loans from 3 months up to 3years at 5.5% .credit interest is reduced to 10% annually .

iWish- the flexible recurring deposit:

iWish is a flexible recurring deposit product launched by ICICI Bank for its savings account
customers. Unlike a traditional recurring deposit, iWish allows customers to save varying
amounts of money at any time of their choice. Customers can create several goals and track their
progress on an online interface.
ICICI Bank has developed this product in collaboration with Social Money. ICICI Bank has also
launched an app for Android and Apple smartwatches. The app will provide the facility of online
banking transaction from smartwatch.

6.2.6 MARKETING STRATEGY

The Marketing strategy of ICICI Bank comprises of direct and indirect communication to the
customers. Besides emphasizing on the modernization of its banking facilities stress is also laid
on the benefits one gets on using the banks services. The benefit of each product is highlighted
so that the clients become impressed and they are forced to grasp the services of this bank.
Under the promotional strategy, ads have been placed in the print media and famous personalities
have been roped in for visual media. It has been a huge boost forICICI Bank to hire Amitabh
Bacchan, the famous actor, in the advertisements. All the ads related to the bank denotetrust and
this has helped them immensely as trust is a rare commodity in todays world.
Promotions are also done through films like Baghban. Technology has been use to its maximum
potential in tracking the customers wishes and demands.ICICI and Amway have formed an
alliance for a credit card that can be used at international level.The bank has also patched with
Indian Railways and many services are provided for the benefit of the customer.
50

ICICI Banks tag line is very appropriate Hum Hain Na because it promotes credibility, trust
and financial solutions to every customer. It has been successful in its endeavour to project a
sophisticated image with modern concept.

6.2.7. FUTURE PLANNING

Foreseeing Indian economy back on a high-growth trajectory in the coming months, ICICI Bank
is looking at expanding its fund-generation profile and revenue streams to capitalise on the
forthcoming opportunities.
"Looking ahead, we see favorable prospects for the Indian economy. . . India has weathered the
global storm with a high degree of resilience and we expect the Indian economy to return to a
robust growth path ahead of other economies that are experiencing recessionary conditions,"
ICICI Bank managing director and chief executive officer Chanda Kochhar has said.
"As we prepare ourselves for the next phase of growth, we will work on further diversifying our
funding profile and revenue streams," Kochhar said in her message to the country's largest
private sector bank's shareholders in its annual report for 2008-09.
Since 2007, as the global and Indian economic environment has changed rapidly, the bank has
focused on a conscious strategy of capital conservation, risk containment and efficiency
improvement.
"We have healthy capital adequacy, sound liquidity and improved cost efficiencies," she added.
The bank's chairman K V Kamath also expressed confidence that 'the Indian economy's robust
fundamentals and domestic growth drivers will impart it the resilience to emerge stronger from
this period'.
"I believe the economic recovery, some signs of which are already visible, will gather
momentum in the coming months and in due course see India returning to a high growth
trajectory," he noted in his message to shareholders.
Kamath, who handed over the role of MD and CEO to Kochhar last month, further said, "The
last year has been an exceptionally challenging year for the global economy and financial sector.
"India, while fundamentally in a much stronger position, has also experienced the impact of
these events as they were transmitted through the trade and capital channels."

51

Kochhar said that the against the backdrop of an imminent recovery in Indian economy, "The
ICICI Group sees before it a wide opportunity spectrum: increasing household incomes and
consumption in both rural and urban India; significant industrial and infrastructure investment
potential; and the vast Indian diaspora spanning the globe.
"We, as a multi specialist financial services group, are well positioned to capitalise on these
opportunities. We will continue to participate in India's growth by meeting the financial services
needs of the Indian economy."
The annual report also quoted ICICI Bank's executive director Sonjoy Chatterjee as saying,
"Indian economy has strong fundamentals and will provide robust growth opportunities for
industry."
"The Indian corporate sector has demonstrated its ability to withstand the global economic
challenges and we will extend full support to the industry as it reorients strategies in this
environment. We will focus on deepening our client relationships to enhance the diversity and
resilience of our revenue streams," Chatterjee said.
Kamath further said that ICICI Bank was able to meet the challenge posed by the developments
in global economy 'due to its strong capital position and the fundamental strengths of its
franchise.'
"We have demonstrated our success over a long period of time. In fiscal 1985, we had a networth
of Rs 1.75 billion, assets of about Rs 21 billion and profits of Rs 0.36 billion.
In fiscal 2009, we had a networth of about Rs 500 billion, assets of about Rs 3,800 billion and
profits of Rs 37.58 billion. This represents over 20 per cent compounded annual growth over a
24-year period.
"Over the past few years, we have built a strong franchise in the Indian corporate and retail
segments, the non-resident Indian segment, and the wider deposit market in certain
countries. . .We believe that the strategy that we have followed and the franchise that we have
built provide a strong foundation for our growth in the years to come," Kochhar said.

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6.3 AXIS BANK

6.3.1. ABOUT AXIS

Axis Bank Limited is the third largest private sector bank in India. Axis Bank's stake holders
include prominent national and international entities. As of 31 Dec. 2013, approximately 43% of
the shares are owned by Foreign Institutional Investors. Promoters (UTI, LIC and GIC), who
collectively held approx. 34% of the shares, are all entities owned and controlled by
the Government of India. The remaining 23% shares are owned by corporate bodies, financial
institutions and individual investors among others. The bank offers financial services to customer
segments covering Large and Mid-Sized Corporates, MSME, Agriculture and Retail Businesses.
Axis Bank has its registered office at Ahmedabad.

6.3.2. VISION AND MISSION

VISION:
To be one of the most respected corporate foundations in the country excelling in project
management and contributing significantly to create factors responsible for sustainable
livelihoods.

MISSION:
ABF's mission is based on the classical theory of development wherein sustainable livelihood is
defined as the livelihood which can cope with and recover from stress and shocks, maintains or
enhances capabilities and assets (social, physical and economic) and create conditions that are
suitable for better education, health and sanitation seeking behavior and sustainable livelihood
for the next generation.
It aims to support programs, projects and activities that focus on creating conditions suitable for
sustainable livelihood. For this endeavor, ABF partners with civil society organizations and
provide them with financial, technical and capacity development support to make positive
contributions in the lives of the underprivileged and vulnerable communities.

6.3.3. HISTORY
53

Axis Bank established in 1993 was the first of the new private banks to have begun operations in
1994 after the Government of India allowed new private banks to be established. Axis Bank Ltd.
has been promoted by the largest and the best Financial Institution of the country, UTI. The Bank
was set up with a capital of Rs. 115 crore, with UTI contributing Rs. 100 crore, LIC Rs. 7.5
crore and GIC and its four subsidiaries contributing Rs. 1.5 crore each. Axis Bank is one of the
first new generation private sector banks to have begun operations in 1994. The Bank was
promoted in 1993, jointly by Specified Undertaking of Unit Trust of India (SUUTI) (then known
as Unit Trust of India),Life Insurance Corporation of India (LIC), General Insurance Corporation
of India (GIC), National Insurance Company Ltd., The New India Assurance Company Ltd., The
Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The shareholding of
Unit Trust of India was subsequently transferred to SUUTI, an entity established in 2003.
Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act, 1963, with a
view to encourage savings and investment. In December 2002, the UTI Act, 1963 was repealed
with the passage of Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 by the
Parliament, paving the way for the bifurcation of UTI into 2 entities, UTII and UTIII with
effect from 1st February 2003. In accordance with the Act, the Undertaking specified as UTI I
has been transferred and vested in the Administrator of the Specified Undertaking of the Unit
Trust of India (SUUTI), who manages assured return schemes along with 6.75% US64 Bonds,
6.60% ARS Bonds with a Unit Capital of over Rs. 14167.59 crores.
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.
Axis Bank entered a deal in November 2010 to buy the investment banking and equities units of
Enam Securities for $456 million. Axis Securities, the equities arm of Axis Bank, will merge
with the investment banking business of Enam Securities. As per the deal, Enam will demerge its
investment banking, institutional equities, retail equities and distribution of financial products,
and nonbanking finance businesses and merge them with Axis Securities.

6.3.4. SERVICES
Treasury operations:
The Banks treasury operation services include investments in sovereign and corporate debt,
equity and mutual funds, trading operations, derivative trading and foreign exchange operations
on the account, and for customers and central funding.
54

Retail banking:
In the retail banking category, the bank offers services such as lending to individuals/small
businesses subject to the orientation, product and granularity criterion, along with liability
products, card services, Internet banking, automated teller machines (ATM) services, depository,
financial advisory services, and Non-resident Indian (NRI) services. Axis bank is a participant in
RBI's NEFT enabled participating banks list.
Corporate/wholesale banking:
The Bank offers to corporate and other organisations services including corporate relationship
not included under retail banking, corporate advisory services, placements and syndication,
management of public issues, project appraisals, capital market related services and cash
management services.
NRI services:
Products and services for NRIs that facilitate investments in India.
Business banking:
The Bank collects income and other direct taxes through its 214 authorised branches at 137
locations and central excise and service taxes (including e-Payments) through 56 authorised
branches at 14 locations.
Investment banking:
Banks Investment Banking business comprises activities related to Equity Capital
Markets, Mergers and Acquisitions and Private Equity Advisory. The bank is a SEBI-registered
Category I Merchant Banker and has been active in advising Indian companies in raising equity
through IPOs, QIPs, and Rights issues etc. During the financial year ended 31 March 2012, Axis
Bank undertook 9 transactions including 5 IPOs and 2 Open Offers.
Lending to small and medium enterprises:
Axis Bank SME business is segmented in three groups: Small Enterprises, Medium Enterprises
and Supply Chain Finance. Under the Small Business Group a subgroup for financing micro
enterprises is also set up. Axis bank is the first Indian Bank having TCDC cards in 11 currencies.

55

Agriculture banking:
759 branches of the Bank provide banking services, including agricultural loans, to farmers. As
on 31 March 2013, the Banks outstanding loans in the agricultural sector was INR 148 billion,
constituting 7.5% of its total advances.
Advisory Services:
It has been developed to advise public and private sector clients on capital structuring and
funding options with a view to help the clients to help them reduce the cost of funds. The Group
has also been active in advising the central and various state governments or their agencies in
privatisation and bid process management. The Group has successfully worked on some of the
benchmark transactions in infrastructure development & manufacturing sector covering an entire
range of projects across roads, railways, airports, urban infrastructure maritime, power, oil and
gas, petrochemicals, cement, sugar, textiles, steel & allied sectors, auto ancillaries, paper,
Information Technology (IT), etc.
Ping Pay:
It was unveiled between 2125 May 2015, which is a multi-social payment solution that let
customers to transfer funds using their smart phones to both Axis Bank accounts and other banks'
account holders.

6.3.5 MARKETING STRATEGY

Marketing strategy of Axis bank is based on Segmentation, Targeting, Positioning.
Axis bank segments the market based on Psychographics & demographics variables like income
& occupation, age, social class etc. It targets the business class & tech savvy customers for
whom time is more important and who would prefer convenience in banking with bank.
Axis bank has positioned itself using a combination of positioning strategies i.e. product/service
attribute & quality /value basis.

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7. PRIVATE SECTOR BANKS IN THE RECENT FEW YEARS:

Private sector banks have managed to record better growth than their public sector counterparts
in the past few years, as the latter remain burdened with asset quality woes. Year 2015 has seen
private sector banks wrest more market share from public lenders.Presently, the PSBs with a
predominantly high share in infrastructure financing are observed to be facing the highest
amount of stress in their asset quality and profitability, noted the Financial Stability Report
released by the Reserve Bank of India. In 2015, PSBs seemed to lag private banks on asset
quality, profitability, and credit growth, among others. For instance, the PSBs recorded the
highest level of stressed assets at 14.1 per cent, followed by private banks at 4.6 per cent, and
foreign banks at 3.4 per cent. Because of the pressure on asset quality, the PSBs have also been
lending more cautiously, resulting in muted credit growth for them.
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Going ahead, the picture doesnt seem too rosy for public sector banks as well. A research report
by Brickwork Ratings has estimated PSBs would have lost market share by two per cent in
FY15, which has been gained by the private sector banks. If the current growth trend continues
for another three years, by FY18, our estimate is that PSBs share would have come down to 71
per cent (from 75 per cent in FY15) and the entire gain will be of private banks.

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8. CONCLUSION

The private sector banks are providing their services in all the population groups. They have
started expansion plans in semi urban and rural areas. This is a good sign for ensuring financial
inclusion and better quality of service in these areas. The number of branches of private banks
with economic freedom of states shows better rank correlation than with ratio of development
expenditure and gross state domestic product. Information and communication technology offers
the opportunity for the private banks to improve financial inclusion for the unbanked people.

Private banking has invited foreign economies to invest in our developing country. Private sector,
Indian Banks have exhibited profitability improvements, better asset quality trends, lower credit
costs and healthy capital levels over the years. Private banks in India has a got a great response
in terms of service and quality banking. Globalization has encouraged multinationals and foreign
banks to set up their business unit in a developing country like India.

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