Description
It describes about Industry Trends of banking industry, PEST Analysis of banking Industry, Competitor Analysis of IDBI bank, SWOT analysis of banking industry, Company Description, General Information about the company, it's Finance performance, SWOT analysis of IDBI bank and Various Strategies employed by IDBI bank.
Company Analyses: IDBI Bank.
Industry Analysis:
1. Industry trends: Indian and Global perspectives, recent happenings 2. PEST Analysis: Political, economic, social and technical aspects related to the industry 3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company 4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry
Company Analysis:
1. Company description (a brief introduction regarding what businesses the company is into) 2. General information about the company: location of the headquarters, year of founding, shareholding pattern, number of employees, top management, etc. 3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year 4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company 5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years. (Make intelligent use of above points while trying to understand the strategies used by the company) a. Hierarchical: At the corporate level, business unit level and functional or department level of the firm. b. Business Division: According to various products, divisions, markets, etc. c. Regional: Strategies devised as per regions, geographies, etc.
Industry Analysis: 1. Industry trends: Indian and Global perspectives, recent happenings.
The past 2-3 years for banking sector was much of recovery stage from the recession. In the year 2011-2012 there has been a series of changes to control inflation. This has come at the price of India?s growth. A host of initiatives have been taken in the recent past to ramp up the regulations for the private banking sector and along with that a new dimension in outlook toward customers, technology and banking as a sector on the whole has been adopted. Banking sector have faced many changes in recent years. One of them was to increase saving?s rate. This alone emerged as the strong attracting force for customers. It created more competitiveness among banks. New players like YES banks found the opportunity to gain market share by providing greater saving rates than their competitors. Banking Sector in India: ? The banking system remains, as always, the most dominant segment of the financial sector. Indian banks continue to build on their strengths under the regulator's watchful eye and hence, have emerged stronger. ? The banking sector in India has made significant progress in the last five years – the growth is well reflected through parameters including profitability, annual credit growth, and decline in non-performing assets (NPAs) ? Growth in the sector has been favored by factors including low defaulter ratio, strong economic growth, central bank?s regular intervention and pre-emptive adjustment of monetary policy. ? The policy makers for the banking sector, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector. Some of the Key notes on Indian banking Industry: 1. Standardization. 2. Reduce operational Discrepancies. 3. Customer Relationship. 4. Foundation to design banking products. 5. Complying with regulations. 6. Buzz around Basel III.: RBI to implement Basel III from January 1, 2013. 7. Outsourcing in Banking Industry. Global Perspective:
?
According to The Banker, out of the top 1000 banks globally, over 200 are located in USA, just above 100 in Japan. China has as many as 70 banks within the top 1000. India, on the other hand, had 20 banks within the top 1000 out of which only 6 were within the
? ?
?
top 500 banks. This is perhaps reflective of differences in size of economies and of the financial sectors. The share of bank assets in the aggregate financial sector assets: In most emerging markets, banking sector assets comprise well over 80 per cent of total financial sector assets, whereas these figures are much lower in the developed economies. Internationalization of banking operations: the foreign banks in India, which are present in the form of branches, seem to enjoy greater freedom in their operations, including retail banking, in the country on par with domestic banks, as compared with most of the other developing countries. Furthermore, the profitability of their operations in India is considerably higher than that of the domestically owned banks and, in fact, is higher than the foreign banks? operations in most other developing countries. India continues to grant branch licenses more liberally than the commitments made to the WTO. The share of state-owned banks in total banking sector assets: Emerging economies, with predominantly Government-owned banks, tend to have much higher state-ownership of banks compared to their developed counterparts. While many emerging countries chose to privatize their public sector banking industry after a process of absorption of the overhang problems by the Government, we have encouraged state-run banks to diversify ownership by inducting private share capital through public offerings rather than by strategic sales and still absorb the overhang problems. The process has helped reduce the burden on the Government, enhance transparency, encourage market discipline and improve efficiency as reflected in stock market valuation, promote efficient new private sector banks, while drastically reducing the share of the wholly government owned public sector banks in a rapidly growing industry. Our successful reform of public sector banks is a good example of a dynamic mix of public and private ownership in banks.
Source:
BANKING SECTOR IN GLOBAL PERSPECTIVE Inaugural Address by Governor, RBI At Banker?s Conference.
2. PEST Analysis: Political, economic, social and technical aspects related to the industry.
? Political Factors: To what degree a government intervenes in the economy. Ex-tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability Some of the major political factors affecting the Banking industry are: 1. Focus on regulation of government. ? Indian banking sector is least affected as compared to other developed countriesthanks to robust policy framework of RBI. ? Government affects the performance of banking sector most by legislature and framing policy government through its budget affects the banking activities securitization act has given more power to banking sector against defaulting borrowers. ? Stricter prudential regulations with respect to capital and liquidity give India an advantage in terms of credibility over other countries. ? To support capitalisation, the government has infused Rs 23,200 crore (US$ 5.2 billion) into state-owned banks during the last three fiscals 2. Budget and budget measures. ? The move to increase Foreign Direct Investment FDI limits to 49 per cent from 20 per cent during the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net worth to meet CAR norms. ? Ceiling for FII investment in companies was also increased from 24.0 per cent to 49.0 per cent and have been included within the ambit of FDI investment. Foreign Direct Investment limits. ? Increase Farm Credit ? Subvention of 1% to be paid as incentive to farmers ? Debt Waiver for Farmers ? Setting up of separate task force for those not covered under the debt waiver scheme.
3.
4. Agricultural Credits. ? Agriculture has been the mainstay of our economy with 60% of our population deriving their sustenance from it. ? In the recent past, the sector has recorded a growth of about 4% per annum with substantial increase in plan allocations and capital formation in the sector with help of banking assistance. ? The one-time bank loan waiver of nearly Rs 71,000 crore to cover an estimated ? 40 million farmers was one of the major highlights.
? Economic Factors. • Every year RBI declares its 6 monthly policies and accordingly the various measures and rates are implemented which has an impact on the banking sector.
•
•
The Economic measures affect the banking sector to boost the economy by giving certain concessions or facilities. If in the savings are encouraged, then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore, booming the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking channels
Monetary Policies: Every year RBI declares its 6 monthly policies and accordingly the various measures and rates are implemented which has an impact on the banking sector. In past 24 months RBI has changed its key monetary rates 14 times to curb inflation and other economic risks. Key Rates CRR Repo rate Reverse repo rate SLR Effects: GDP ? ? ? Indian economy has registered robust growth in past years and banking sector is directly related to the growth of the economy. GOI is trying to push the economy by framing favorable FDI policies, NRI Investment plans which directly affect the GDP. These plans directly affect banking industry as money comes through banks and bank earns interest on that. As on Today 4.75% (w.e.f. 10/03/2012) 8.00% (w.e.f.17/04/2012) 7.00% (w.e.f.17/04/2012) 24% (w.e.f. 18/12/2010)
Interest Rates: RBI controls interest rates, which RBI monitors regularly. Recently RBI reduced bank rate to stimulate growth of banking industry
Inflation Rate: India is facing huge troubles due to inflation earlier as Inflation rates were close to 10%. To curb the inflation and slowdown of economy RBI has taken various steps like lowering interest rates to increase the demand in banking sector.
Savings and Investments: Gross domestic saving is 28% of total income in India Latest step taken by RBI to deregulate savings rates is a step to increase Bank savings.
? Social Factors: 1. Traditional Mahajan Pratha: Before the birth of the banks, people of India were used to borrow money local moneylenders, shahukars, shroffs. They were used to charge higher interest and also mortgage land and house. But after emergence of banks attitude of people was changed and they have started lending from the banks. 2. Change in lifestyle: Life style of India is changing rapidly. They are demanding high class products. They have become more advanced. People needs and wants are increasing day by day. And this has this has opened opportunities for banking sector to tap this change. This has made things available easily to everyone. 3. Population: Increase in population is one of the important factors, which affect the private sector banks. Banks would open their branches after looking into the population demographics of the area. Newer branches are coming to serve the increasing population. This incentive to banks comes on the back of the continuing need to open more branches in these States in order to ensure more uniform spatial distribution. 4. Literacy Rate: Literacy rate in India is very low compared to developed countries. Illiterate people hesitate to transact with banks. So, this impacts negatively on banks. But there is positive side of this as well i.e. illiterate people trust more on banks to deposit their money; they do not have market information. Opportunities in stocks or mutual funds.
? Technological Factors: Technology plays a very important role in bank?s internal control mechanisms as well as services offered by them. Through the use of technology new products and service are introduced. It includes technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. Some of the technological changes which brought radical changes in banking industry are described below: 1. Automated Teller Machine (ATM). The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking.
The use of ATM and Internet banking has allowed „anytime, anywhere banking? facilities. 2. Automatic Voice Recorder. Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and self-service counters are now encouraged. 3. Credit Card facility. • Credit card facility has encouraged an era of cashless society. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. • Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc. 4. I.T. Services & Mobile Banking. • Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile. • Technology advancement has changed the face of traditional banking systems. 3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company. 1. The Method of raising funds to mobilize: While Indian banks depend heavily on Deposits (80%) the foreign banks depend a little less on Deposits (50%). This helps them in getting the business done with lesser branches. 2. Foreign Banks had 33% of income from other income sources while Indian banks had less than 20% from the other income. The below table (RBI website) shows the segmentation. This depicts that foreign bank earn a lot more income from advisory services.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry.
? STRENGTH: ? Indian banks have compared favorably on growth, asset quality and profitability witho t h e r r e g i o n a l b a n k s o v e r t h e l a s t f e w y e a r s . T h e b a n k i n g i n d e x h a s g r o w n a t a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. Policy makers have made some notable changes in polic y a n d r e g u l a t i o n t o h e l p strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks. Bank lending has been a significant driver of GDP growth and employment. Extensive reach: The vast networking & growing number of branches & ATMs. Indian banking system has reached even to the remote corners of the country. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake) after merger of New Bank of India in Punjab National Bank in 1993, 29 private banks (these do not have government stake; they may b e p u b l i c l y l i s t e d and traded on stock exchanges) and 31 foreign banks. They h a v e a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and6.5% respectively Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector banks and 20 per cent of government owned banks
?
? ? ? ? ?
?
? WEAKNESSES: ? PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organizational performance ethic and strengthen human capital. Old private sector banks also have the need to fundamentally strengthen skill levels.
?
? ?
? ?
The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labor laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCB?s), unless industry utilities and service bureaus. Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital. Impediments in sectorial reforms: Opposition from Left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term.
? OPPORTUNITY: ? The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. Banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. With increased interest in India, competition from foreign banks will only intensify. Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks. New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income and affluent/HNI segment; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms. Attracting, developing and retaining more leadership capacity. Foreign banks committed to making a play in India will need to adopt alternative approaches to win the “race for the customer” and build a value-creating customer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term.
? ? ?
?
?
?
?
?
With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. The Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives. Liberalization of ECB norms:
The government also liberalized the ECB norms to permit financial sector entities engaged in infrastructure funding to raise ECBs. This enabled banks and financial institutions, which were earlier not permitted to raise such funds, explore this route for raising cheaper funds in the overseas markets. ? Hybrid capital:
In an attempt to relieve banks of their capital crunch, the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore up their capital. If the new instruments find takers, it would help PSU banks, left with little headroom for raising equity. Significantly, FII and NRI investment limits in these securities have been fixed at 49%, compared to 20% foreign equity holding allowed in PSU banks. ? THREATS ? ? ? Threat of stability of the system: failure of some weak banks has often threatened the stability of the system. Rise in inflation figures which would lead to increase in interest rates. Increase in the number of foreign players would pose a threat to the PSB as well as the private players.
Company Analysis:
1. Company description (a brief introduction regarding what businesses the company is into) IDBI Bank Ltd. is a Universal Bank with its operations driven by a cutting edge core Banking IT platform. The Bank offers personalized banking and financial solutions to its clients in the retail and corporate banking arena through its large network of Branches and ATMs, spread across length and breadth of India. We have also set up an overseas branch at Dubai and have plans to open representative offices in various other parts of the Globe, for encashing emerging global opportunities. Our experience of financial markets will help us to effectively cope with challenges and capitalize on the emerging opportunities by participating effectively in our country?s growth process. As on March 31, 2012, the Bank had a network of 973 Branches and 1542 ATMs. The Bank's total business, during Fy 2011-12, reached Rs. 3,91,651 Crore, Balance sheet reached Rs. 2,90,837 Crore while it earned a net profit of Rs. 2032 Crore (up by 23.15 %). Vision for the IDBI Bank is “TO BE THE MOST PREFERRED AND TRUSTED BANK ENHANCING VALUE FOR ALL STAKEHOLDERS”. (Source: IDBI bank?s website) 2. General information about the company: location of the headquarters, year of founding, shareholding pattern, number of employees, top management, etc. IDBI (Industrial Development of India) was established in 1964 by the government under an act of the Indian Parliament called the IDBI act. IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004, the erstwhile IDBI converted into a Banking company (as Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agri products and services. Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state-of-the-art information technology platform, to structure and deliver personalised and innovative Banking services and customised
financial solutions to its clients across various delivery channels. As on March 31, 2012, IDBI Bank has a balance sheet of Rs.2.91 lakh crore and business size (deposits plus advances) of Rs.3.92 lakh crore. As a Universal Bank, IDBI Bank, besides its core banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market, Investment Banking and Mutual Fund Business. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders. Employees: 14,000 (2011) Shareholding pattern:
Top Management: IDBI Bank is a Board-managed organisation. The responsibility for the day-to-day management of operations of the Bank is vested with the Chairman & Managing Director and Deputy Managing Director, who draw upon the support and expertise of a cross-disciplinary Top Management Team. IDBI Bank Ltd.'s employee base includes professionals from the fields of accountancy, management, engineering, law, computer technology, banking and economics. Board of Directors (position as on July 8, 2012)
Mr. R. M. Malla (Chairman & Managing Director)
Mr. B. K Batra (Deputy Managing Director)
Mr. Sunil Soni
Mr. Pradeep Kumar Chaudhery
Mr. Subhash Tuli
Mr. P.S. Shenoy
Mr. S. Ravi
Mr. Ninad Karpe
3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year in Rs. Cr. in Rs. Cr. Balance Sheet Profit & Loss account Mar '11 Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities Income 984.57 Interest Earned 984.57 Other Income 0.99 Total Income 0 Expenditure 11,686.25 Interest expended 1,895.77 Employee Cost 14,567.58 Selling and Admin Expenses 180,485.79 Depreciation 51,569.65 Miscellaneous Expenses 232,055.44 Preoperative Exp Capitalised 6,753.77 Operating Expenses 253,376.79 Provisions & Contingencies Total Expenses Mar '11 19,559.05 1,207.03 157,098.07 68,269.18 4,375.10 1,405.82 2,969.28 68.06 4,206.13 253,376.80 108,278.85 29,995.93 128.69 Net Profit for the Year Extraordionary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total Mar '11 18,600.82 2,103.56 20,704.38 14,271.93 1,026.50 1,830.00 127.04 1,798.60 0 3,509.84 1,272.30 19,054.07 1,650.32 0 470.4 2,120.72 0 344.6 55.27 16.76 35 128.69 514.55 600 399.87 606.3 2,120.72
Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs)
Revenue 2011: Rs 20,858 crore.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company
Strengths:
?
The banks major strength is it involves latest cutting edge technologies to support its core banking operations The bank has network of 943 branches and 1529 ATMs The total turnover of the bank is 3,37,584 crores in the last FY 2010-11, and earned a net profit of Rs.1650 cr. The bank has grown at a rate of 60% compared to previous year IDBI has the first mover advantage in opening „G-sec portal?. This is a platform for the retail investors to invest in government securities IDBI is one of the largest commercial banks in India which focuses on industrial infrastructure and development IDBI?s product portfolio includes 14 broad classifications, and there are some sub categories in each. The bank has customized solution faculties for its industrial clients The location of its head quarters in Mumbai fosters the growth of the bank IDBI?s subsidiaries are into capital market services, IT services, asset management and life insurance. Weaknesses:
? ?
? ?
?
?
? ?
? ? ?
IDBI has less penetration into the rural market IDBI has very less number of branches and ATM network compared to other major players It concentrates mainly on commercial banking services whereas the individual banking services is where the main revenue lies. The customer help desk is not performing efficiently and there are many unresolved issues of customers The bank has lots of consumer complaints with respect to servicing charges The bank lacks in promotional activities
?
? ?
Opportunity:
? ?
Scope for bagging government schemes are high as IDBI belongs to public sector Global opportunities for IDBI are the rise as the management is keenly focusing on global expansion in next few years They have a good number of financial expertise to face the emerging industrial and economic growth in India It is the only bank in public sector which has enabled social media plug-in in its website. This has increased the brand awareness and better reach to its customers The bank has good opportunities in semi-urban and Tire II cities areas as the industrial growth is taking very rapidly. Threats:
?
?
?
?
IDBI faces tough competition in terms of new market development due to competition from both government and private banks FDI in Indian banking has been opened up to 74% by the RBI In private banking HDFC, ICICI and in public sector SBI, Punjab National Bank, Andhra bank and Allahabad bank are the major competitors The bank has to focus on improving the customer satisfaction in order to sustain the loyal customers Recent scams and fraudulent activities of bank have gained mistrust from its customers and investors
? ?
? ?
5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years.
To meet emerging challenges and to keep up with reforms in financial sector, IDBI has taken steps to reshape its role from a development finance institution to a commercial institution. With the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz. "Industrial Development Bank of India Limited" (IDBIL). Subsequently, the Reserve Bank of India (RBI) issued the requisite notification on 30 September 2004 incorporating IDBI as a 'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, formally entered the portals of banking business as IDBIL from 1 October 2004. The commercial banking arm, IDBI BANK, was merged into.
In March 2008, IDBI Bank entered into a joint venture with Federal Bank and Fortis Insurance International to form IDBI Fortis Life Insurance, of which IDBI Bank owns 48 percent. The company ended the year with over 300 Cr in premiums as on 31 March 2009.The name of IDBI Fortis Life Insurance is now changed to IDBI Federal Life Insurance Co Ltd. Government of India now owns 70.52% stake in IDBI Bank. Hence IDBI Bank is also referred as 'The New Age Government owned Bank' It has bought 10% stake in upcoming commodity bourse Universal Commo-dity Exchange (UCX) for Rs 10 crore, the bank's top official said. The deal was completed recently. RM Malla, chairman and MD of IDBI Bank, confirmed that the bank had picked up 10% in what will become the country's sixth commodity futures exchange. "The idea behind acquiring equity is to push agriculture loans through this venture," said Malla. "The other advantage is IDBI will be the only bank among the promoters and therefore all transactions of the exchange will be routed through IDBI." A breakthrough initiative in customer service was taken by IDBI Bank (branded as 'Customer Delight Campaign when it removed many of the charges from its retail banking services. This step has created a wave in banking industry and put the bank on a developmental pedestal never seen before. Some of the charges waived are- ATM-cum-Debit card annual charges, Transaction charges on other banks' ATMs, Demand Draft/Pay Order charges, RTGS/NEFT charges, Cheque book issuance and utilization charges and many more other charges. It was the winner in two categories in Dun & Bradstreet's Polaris Software Banking Awards 2011. It has now a network of 977 branches, 661 centres and 1547 ATMs as on April 18, 2012. The 977th branch is located at Kagal near Kolhapur in Maharashtra. Acquisition of United Western Bank In 2006, IDBI Bank acquired United Western Bank in a rescue. Annasaheb Chirmule, who worked for the cause of Swadeshi movement, founded Satara Swadeshi Commercial Bank in 1907, and some three decades later founded United Western Bank. The bank was incorporated in 1936, and commenced operations the next year, with its head office in Satara, in Maharashtra State. It became a Scheduled Bank in 1951. In 1956 it merged with Union Bank of Kolhapur, and in 1961 with Satara Swadeshi Commercial Bank. At the time of the merger with IDBI, United Western had some 230 branches spread over 47 districts in 9 states, controlled by five Zonal Offices at Mumbai, Pune, Kolhapur, Jalgaon and Nagpur. Sources: IDBI Bank website, moneycontrol.com and Wikipedia.
a. Hierarchical: At the corporate level, business unit level and functional or department level of the firm. b. Business Division: According to various products, divisions, markets, etc. c. Regional: Strategies devised as per regions, geographies, etc.
Hierarchical model of IDBI bank:
Business Division: Products of IDBI bank: Credit cards, consumer banking corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity and wealth management. Regional Strategy: To open more branches in the rural areas. To make better structured products for the investors.
doc_778462664.docx
It describes about Industry Trends of banking industry, PEST Analysis of banking Industry, Competitor Analysis of IDBI bank, SWOT analysis of banking industry, Company Description, General Information about the company, it's Finance performance, SWOT analysis of IDBI bank and Various Strategies employed by IDBI bank.
Company Analyses: IDBI Bank.
Industry Analysis:
1. Industry trends: Indian and Global perspectives, recent happenings 2. PEST Analysis: Political, economic, social and technical aspects related to the industry 3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company 4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry
Company Analysis:
1. Company description (a brief introduction regarding what businesses the company is into) 2. General information about the company: location of the headquarters, year of founding, shareholding pattern, number of employees, top management, etc. 3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year 4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company 5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years. (Make intelligent use of above points while trying to understand the strategies used by the company) a. Hierarchical: At the corporate level, business unit level and functional or department level of the firm. b. Business Division: According to various products, divisions, markets, etc. c. Regional: Strategies devised as per regions, geographies, etc.
Industry Analysis: 1. Industry trends: Indian and Global perspectives, recent happenings.
The past 2-3 years for banking sector was much of recovery stage from the recession. In the year 2011-2012 there has been a series of changes to control inflation. This has come at the price of India?s growth. A host of initiatives have been taken in the recent past to ramp up the regulations for the private banking sector and along with that a new dimension in outlook toward customers, technology and banking as a sector on the whole has been adopted. Banking sector have faced many changes in recent years. One of them was to increase saving?s rate. This alone emerged as the strong attracting force for customers. It created more competitiveness among banks. New players like YES banks found the opportunity to gain market share by providing greater saving rates than their competitors. Banking Sector in India: ? The banking system remains, as always, the most dominant segment of the financial sector. Indian banks continue to build on their strengths under the regulator's watchful eye and hence, have emerged stronger. ? The banking sector in India has made significant progress in the last five years – the growth is well reflected through parameters including profitability, annual credit growth, and decline in non-performing assets (NPAs) ? Growth in the sector has been favored by factors including low defaulter ratio, strong economic growth, central bank?s regular intervention and pre-emptive adjustment of monetary policy. ? The policy makers for the banking sector, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector. Some of the Key notes on Indian banking Industry: 1. Standardization. 2. Reduce operational Discrepancies. 3. Customer Relationship. 4. Foundation to design banking products. 5. Complying with regulations. 6. Buzz around Basel III.: RBI to implement Basel III from January 1, 2013. 7. Outsourcing in Banking Industry. Global Perspective:
?
According to The Banker, out of the top 1000 banks globally, over 200 are located in USA, just above 100 in Japan. China has as many as 70 banks within the top 1000. India, on the other hand, had 20 banks within the top 1000 out of which only 6 were within the
? ?
?
top 500 banks. This is perhaps reflective of differences in size of economies and of the financial sectors. The share of bank assets in the aggregate financial sector assets: In most emerging markets, banking sector assets comprise well over 80 per cent of total financial sector assets, whereas these figures are much lower in the developed economies. Internationalization of banking operations: the foreign banks in India, which are present in the form of branches, seem to enjoy greater freedom in their operations, including retail banking, in the country on par with domestic banks, as compared with most of the other developing countries. Furthermore, the profitability of their operations in India is considerably higher than that of the domestically owned banks and, in fact, is higher than the foreign banks? operations in most other developing countries. India continues to grant branch licenses more liberally than the commitments made to the WTO. The share of state-owned banks in total banking sector assets: Emerging economies, with predominantly Government-owned banks, tend to have much higher state-ownership of banks compared to their developed counterparts. While many emerging countries chose to privatize their public sector banking industry after a process of absorption of the overhang problems by the Government, we have encouraged state-run banks to diversify ownership by inducting private share capital through public offerings rather than by strategic sales and still absorb the overhang problems. The process has helped reduce the burden on the Government, enhance transparency, encourage market discipline and improve efficiency as reflected in stock market valuation, promote efficient new private sector banks, while drastically reducing the share of the wholly government owned public sector banks in a rapidly growing industry. Our successful reform of public sector banks is a good example of a dynamic mix of public and private ownership in banks.
Source:
BANKING SECTOR IN GLOBAL PERSPECTIVE Inaugural Address by Governor, RBI At Banker?s Conference.
2. PEST Analysis: Political, economic, social and technical aspects related to the industry.
? Political Factors: To what degree a government intervenes in the economy. Ex-tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability Some of the major political factors affecting the Banking industry are: 1. Focus on regulation of government. ? Indian banking sector is least affected as compared to other developed countriesthanks to robust policy framework of RBI. ? Government affects the performance of banking sector most by legislature and framing policy government through its budget affects the banking activities securitization act has given more power to banking sector against defaulting borrowers. ? Stricter prudential regulations with respect to capital and liquidity give India an advantage in terms of credibility over other countries. ? To support capitalisation, the government has infused Rs 23,200 crore (US$ 5.2 billion) into state-owned banks during the last three fiscals 2. Budget and budget measures. ? The move to increase Foreign Direct Investment FDI limits to 49 per cent from 20 per cent during the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get a foot hold in the Indian Markets by investing in willing Indian partners who are starved of net worth to meet CAR norms. ? Ceiling for FII investment in companies was also increased from 24.0 per cent to 49.0 per cent and have been included within the ambit of FDI investment. Foreign Direct Investment limits. ? Increase Farm Credit ? Subvention of 1% to be paid as incentive to farmers ? Debt Waiver for Farmers ? Setting up of separate task force for those not covered under the debt waiver scheme.
3.
4. Agricultural Credits. ? Agriculture has been the mainstay of our economy with 60% of our population deriving their sustenance from it. ? In the recent past, the sector has recorded a growth of about 4% per annum with substantial increase in plan allocations and capital formation in the sector with help of banking assistance. ? The one-time bank loan waiver of nearly Rs 71,000 crore to cover an estimated ? 40 million farmers was one of the major highlights.
? Economic Factors. • Every year RBI declares its 6 monthly policies and accordingly the various measures and rates are implemented which has an impact on the banking sector.
•
•
The Economic measures affect the banking sector to boost the economy by giving certain concessions or facilities. If in the savings are encouraged, then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore, booming the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking channels
Monetary Policies: Every year RBI declares its 6 monthly policies and accordingly the various measures and rates are implemented which has an impact on the banking sector. In past 24 months RBI has changed its key monetary rates 14 times to curb inflation and other economic risks. Key Rates CRR Repo rate Reverse repo rate SLR Effects: GDP ? ? ? Indian economy has registered robust growth in past years and banking sector is directly related to the growth of the economy. GOI is trying to push the economy by framing favorable FDI policies, NRI Investment plans which directly affect the GDP. These plans directly affect banking industry as money comes through banks and bank earns interest on that. As on Today 4.75% (w.e.f. 10/03/2012) 8.00% (w.e.f.17/04/2012) 7.00% (w.e.f.17/04/2012) 24% (w.e.f. 18/12/2010)
Interest Rates: RBI controls interest rates, which RBI monitors regularly. Recently RBI reduced bank rate to stimulate growth of banking industry
Inflation Rate: India is facing huge troubles due to inflation earlier as Inflation rates were close to 10%. To curb the inflation and slowdown of economy RBI has taken various steps like lowering interest rates to increase the demand in banking sector.
Savings and Investments: Gross domestic saving is 28% of total income in India Latest step taken by RBI to deregulate savings rates is a step to increase Bank savings.
? Social Factors: 1. Traditional Mahajan Pratha: Before the birth of the banks, people of India were used to borrow money local moneylenders, shahukars, shroffs. They were used to charge higher interest and also mortgage land and house. But after emergence of banks attitude of people was changed and they have started lending from the banks. 2. Change in lifestyle: Life style of India is changing rapidly. They are demanding high class products. They have become more advanced. People needs and wants are increasing day by day. And this has this has opened opportunities for banking sector to tap this change. This has made things available easily to everyone. 3. Population: Increase in population is one of the important factors, which affect the private sector banks. Banks would open their branches after looking into the population demographics of the area. Newer branches are coming to serve the increasing population. This incentive to banks comes on the back of the continuing need to open more branches in these States in order to ensure more uniform spatial distribution. 4. Literacy Rate: Literacy rate in India is very low compared to developed countries. Illiterate people hesitate to transact with banks. So, this impacts negatively on banks. But there is positive side of this as well i.e. illiterate people trust more on banks to deposit their money; they do not have market information. Opportunities in stocks or mutual funds.
? Technological Factors: Technology plays a very important role in bank?s internal control mechanisms as well as services offered by them. Through the use of technology new products and service are introduced. It includes technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. Some of the technological changes which brought radical changes in banking industry are described below: 1. Automated Teller Machine (ATM). The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking.
The use of ATM and Internet banking has allowed „anytime, anywhere banking? facilities. 2. Automatic Voice Recorder. Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and self-service counters are now encouraged. 3. Credit Card facility. • Credit card facility has encouraged an era of cashless society. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. • Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc. 4. I.T. Services & Mobile Banking. • Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile. • Technology advancement has changed the face of traditional banking systems. 3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company. 1. The Method of raising funds to mobilize: While Indian banks depend heavily on Deposits (80%) the foreign banks depend a little less on Deposits (50%). This helps them in getting the business done with lesser branches. 2. Foreign Banks had 33% of income from other income sources while Indian banks had less than 20% from the other income. The below table (RBI website) shows the segmentation. This depicts that foreign bank earn a lot more income from advisory services.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry.
? STRENGTH: ? Indian banks have compared favorably on growth, asset quality and profitability witho t h e r r e g i o n a l b a n k s o v e r t h e l a s t f e w y e a r s . T h e b a n k i n g i n d e x h a s g r o w n a t a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. Policy makers have made some notable changes in polic y a n d r e g u l a t i o n t o h e l p strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks. Bank lending has been a significant driver of GDP growth and employment. Extensive reach: The vast networking & growing number of branches & ATMs. Indian banking system has reached even to the remote corners of the country. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake) after merger of New Bank of India in Punjab National Bank in 1993, 29 private banks (these do not have government stake; they may b e p u b l i c l y l i s t e d and traded on stock exchanges) and 31 foreign banks. They h a v e a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and6.5% respectively Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector banks and 20 per cent of government owned banks
?
? ? ? ? ?
?
? WEAKNESSES: ? PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organizational performance ethic and strengthen human capital. Old private sector banks also have the need to fundamentally strengthen skill levels.
?
? ?
? ?
The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labor laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCB?s), unless industry utilities and service bureaus. Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital. Impediments in sectorial reforms: Opposition from Left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term.
? OPPORTUNITY: ? The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. Banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. With increased interest in India, competition from foreign banks will only intensify. Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks. New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income and affluent/HNI segment; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms. Attracting, developing and retaining more leadership capacity. Foreign banks committed to making a play in India will need to adopt alternative approaches to win the “race for the customer” and build a value-creating customer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term.
? ? ?
?
?
?
?
?
With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. The Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives. Liberalization of ECB norms:
The government also liberalized the ECB norms to permit financial sector entities engaged in infrastructure funding to raise ECBs. This enabled banks and financial institutions, which were earlier not permitted to raise such funds, explore this route for raising cheaper funds in the overseas markets. ? Hybrid capital:
In an attempt to relieve banks of their capital crunch, the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore up their capital. If the new instruments find takers, it would help PSU banks, left with little headroom for raising equity. Significantly, FII and NRI investment limits in these securities have been fixed at 49%, compared to 20% foreign equity holding allowed in PSU banks. ? THREATS ? ? ? Threat of stability of the system: failure of some weak banks has often threatened the stability of the system. Rise in inflation figures which would lead to increase in interest rates. Increase in the number of foreign players would pose a threat to the PSB as well as the private players.
Company Analysis:
1. Company description (a brief introduction regarding what businesses the company is into) IDBI Bank Ltd. is a Universal Bank with its operations driven by a cutting edge core Banking IT platform. The Bank offers personalized banking and financial solutions to its clients in the retail and corporate banking arena through its large network of Branches and ATMs, spread across length and breadth of India. We have also set up an overseas branch at Dubai and have plans to open representative offices in various other parts of the Globe, for encashing emerging global opportunities. Our experience of financial markets will help us to effectively cope with challenges and capitalize on the emerging opportunities by participating effectively in our country?s growth process. As on March 31, 2012, the Bank had a network of 973 Branches and 1542 ATMs. The Bank's total business, during Fy 2011-12, reached Rs. 3,91,651 Crore, Balance sheet reached Rs. 2,90,837 Crore while it earned a net profit of Rs. 2032 Crore (up by 23.15 %). Vision for the IDBI Bank is “TO BE THE MOST PREFERRED AND TRUSTED BANK ENHANCING VALUE FOR ALL STAKEHOLDERS”. (Source: IDBI bank?s website) 2. General information about the company: location of the headquarters, year of founding, shareholding pattern, number of employees, top management, etc. IDBI (Industrial Development of India) was established in 1964 by the government under an act of the Indian Parliament called the IDBI act. IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004, the erstwhile IDBI converted into a Banking company (as Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agri products and services. Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state-of-the-art information technology platform, to structure and deliver personalised and innovative Banking services and customised
financial solutions to its clients across various delivery channels. As on March 31, 2012, IDBI Bank has a balance sheet of Rs.2.91 lakh crore and business size (deposits plus advances) of Rs.3.92 lakh crore. As a Universal Bank, IDBI Bank, besides its core banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market, Investment Banking and Mutual Fund Business. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders. Employees: 14,000 (2011) Shareholding pattern:
Top Management: IDBI Bank is a Board-managed organisation. The responsibility for the day-to-day management of operations of the Bank is vested with the Chairman & Managing Director and Deputy Managing Director, who draw upon the support and expertise of a cross-disciplinary Top Management Team. IDBI Bank Ltd.'s employee base includes professionals from the fields of accountancy, management, engineering, law, computer technology, banking and economics. Board of Directors (position as on July 8, 2012)
Mr. R. M. Malla (Chairman & Managing Director)
Mr. B. K Batra (Deputy Managing Director)
Mr. Sunil Soni
Mr. Pradeep Kumar Chaudhery
Mr. Subhash Tuli
Mr. P.S. Shenoy
Mr. S. Ravi
Mr. Ninad Karpe
3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year in Rs. Cr. in Rs. Cr. Balance Sheet Profit & Loss account Mar '11 Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities Income 984.57 Interest Earned 984.57 Other Income 0.99 Total Income 0 Expenditure 11,686.25 Interest expended 1,895.77 Employee Cost 14,567.58 Selling and Admin Expenses 180,485.79 Depreciation 51,569.65 Miscellaneous Expenses 232,055.44 Preoperative Exp Capitalised 6,753.77 Operating Expenses 253,376.79 Provisions & Contingencies Total Expenses Mar '11 19,559.05 1,207.03 157,098.07 68,269.18 4,375.10 1,405.82 2,969.28 68.06 4,206.13 253,376.80 108,278.85 29,995.93 128.69 Net Profit for the Year Extraordionary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total Mar '11 18,600.82 2,103.56 20,704.38 14,271.93 1,026.50 1,830.00 127.04 1,798.60 0 3,509.84 1,272.30 19,054.07 1,650.32 0 470.4 2,120.72 0 344.6 55.27 16.76 35 128.69 514.55 600 399.87 606.3 2,120.72
Assets Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs)
Revenue 2011: Rs 20,858 crore.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company
Strengths:
?
The banks major strength is it involves latest cutting edge technologies to support its core banking operations The bank has network of 943 branches and 1529 ATMs The total turnover of the bank is 3,37,584 crores in the last FY 2010-11, and earned a net profit of Rs.1650 cr. The bank has grown at a rate of 60% compared to previous year IDBI has the first mover advantage in opening „G-sec portal?. This is a platform for the retail investors to invest in government securities IDBI is one of the largest commercial banks in India which focuses on industrial infrastructure and development IDBI?s product portfolio includes 14 broad classifications, and there are some sub categories in each. The bank has customized solution faculties for its industrial clients The location of its head quarters in Mumbai fosters the growth of the bank IDBI?s subsidiaries are into capital market services, IT services, asset management and life insurance. Weaknesses:
? ?
? ?
?
?
? ?
? ? ?
IDBI has less penetration into the rural market IDBI has very less number of branches and ATM network compared to other major players It concentrates mainly on commercial banking services whereas the individual banking services is where the main revenue lies. The customer help desk is not performing efficiently and there are many unresolved issues of customers The bank has lots of consumer complaints with respect to servicing charges The bank lacks in promotional activities
?
? ?
Opportunity:
? ?
Scope for bagging government schemes are high as IDBI belongs to public sector Global opportunities for IDBI are the rise as the management is keenly focusing on global expansion in next few years They have a good number of financial expertise to face the emerging industrial and economic growth in India It is the only bank in public sector which has enabled social media plug-in in its website. This has increased the brand awareness and better reach to its customers The bank has good opportunities in semi-urban and Tire II cities areas as the industrial growth is taking very rapidly. Threats:
?
?
?
?
IDBI faces tough competition in terms of new market development due to competition from both government and private banks FDI in Indian banking has been opened up to 74% by the RBI In private banking HDFC, ICICI and in public sector SBI, Punjab National Bank, Andhra bank and Allahabad bank are the major competitors The bank has to focus on improving the customer satisfaction in order to sustain the loyal customers Recent scams and fraudulent activities of bank have gained mistrust from its customers and investors
? ?
? ?
5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years.
To meet emerging challenges and to keep up with reforms in financial sector, IDBI has taken steps to reshape its role from a development finance institution to a commercial institution. With the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited company viz. "Industrial Development Bank of India Limited" (IDBIL). Subsequently, the Reserve Bank of India (RBI) issued the requisite notification on 30 September 2004 incorporating IDBI as a 'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, formally entered the portals of banking business as IDBIL from 1 October 2004. The commercial banking arm, IDBI BANK, was merged into.
In March 2008, IDBI Bank entered into a joint venture with Federal Bank and Fortis Insurance International to form IDBI Fortis Life Insurance, of which IDBI Bank owns 48 percent. The company ended the year with over 300 Cr in premiums as on 31 March 2009.The name of IDBI Fortis Life Insurance is now changed to IDBI Federal Life Insurance Co Ltd. Government of India now owns 70.52% stake in IDBI Bank. Hence IDBI Bank is also referred as 'The New Age Government owned Bank' It has bought 10% stake in upcoming commodity bourse Universal Commo-dity Exchange (UCX) for Rs 10 crore, the bank's top official said. The deal was completed recently. RM Malla, chairman and MD of IDBI Bank, confirmed that the bank had picked up 10% in what will become the country's sixth commodity futures exchange. "The idea behind acquiring equity is to push agriculture loans through this venture," said Malla. "The other advantage is IDBI will be the only bank among the promoters and therefore all transactions of the exchange will be routed through IDBI." A breakthrough initiative in customer service was taken by IDBI Bank (branded as 'Customer Delight Campaign when it removed many of the charges from its retail banking services. This step has created a wave in banking industry and put the bank on a developmental pedestal never seen before. Some of the charges waived are- ATM-cum-Debit card annual charges, Transaction charges on other banks' ATMs, Demand Draft/Pay Order charges, RTGS/NEFT charges, Cheque book issuance and utilization charges and many more other charges. It was the winner in two categories in Dun & Bradstreet's Polaris Software Banking Awards 2011. It has now a network of 977 branches, 661 centres and 1547 ATMs as on April 18, 2012. The 977th branch is located at Kagal near Kolhapur in Maharashtra. Acquisition of United Western Bank In 2006, IDBI Bank acquired United Western Bank in a rescue. Annasaheb Chirmule, who worked for the cause of Swadeshi movement, founded Satara Swadeshi Commercial Bank in 1907, and some three decades later founded United Western Bank. The bank was incorporated in 1936, and commenced operations the next year, with its head office in Satara, in Maharashtra State. It became a Scheduled Bank in 1951. In 1956 it merged with Union Bank of Kolhapur, and in 1961 with Satara Swadeshi Commercial Bank. At the time of the merger with IDBI, United Western had some 230 branches spread over 47 districts in 9 states, controlled by five Zonal Offices at Mumbai, Pune, Kolhapur, Jalgaon and Nagpur. Sources: IDBI Bank website, moneycontrol.com and Wikipedia.
a. Hierarchical: At the corporate level, business unit level and functional or department level of the firm. b. Business Division: According to various products, divisions, markets, etc. c. Regional: Strategies devised as per regions, geographies, etc.
Hierarchical model of IDBI bank:
Business Division: Products of IDBI bank: Credit cards, consumer banking corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity and wealth management. Regional Strategy: To open more branches in the rural areas. To make better structured products for the investors.
doc_778462664.docx