Description
It describes about Industry Trends of banking industry, PEST Analysis of banking Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about Kotak Mahindra, it's Finance performance, SWOT analysis and Various Strategies employed.
KOTAK MAHINDRA BANK: COMPANY ANALYSIS HISTORY It was year 1984-85. In those days, banks in India used to giver interest of 6% on their deposits. But they used to charge interest of 16.5% from their borrowers. It was the when young Uday Kotak thought that banks were making too much money and also sensed an opportunity. He had just arranged the working capital for Nelco, the Tata Electronics company which gave him the much needed confidence. He along Sidney Pinto of Grindlays bank decided to start their own company and Kotak Capital management finance Ltd. was incorporated on 21st November 1985. They started their operations in bill discounting., Leasing and hire purchase, consumer finance. On 11th February 1986, they were joined by Anand Mahindra and his father Harish Mahindra and the company’s name was changed to Kotak Mahindra Finance Ltd. As Mr. Uday Kotak recalls, the “Kotak” name meant nothing. But addition of Mahindra gave company the credibility the wanted. Now they started operating in corporate finance, management of fixed deposit mobilisation, financing against securities, money market operations, investment banking and clients' money management. This was the beginning of India’s third largest private sector bank. In 2002 RBI gave in-principle approval to Kotak Mahindra Finance Ltd., flagship company Kotak Mahindra group to convert itself into a bank, thereby becoming India’s first ever non banking finance company converted into a bank. CURRENT STATUS Currently, Kotak Mahindra Bank enjoys the status of third largest private sector bank in India and is also one of the fastest growing bank in the country. It has over 357 branches and 866 ATMs in India and with revenues of bank touching 11 thousand crores in financial year 2011-12. It has it’s branches not just in Metros but also in Tier II cities and rural India as well. They cater needs of their individual and non individual customers. The bank in known for it’s technology platform. It’s IT team has won the Banking Technology Awards 4 times.
TOP MANAGEMENT
Mr. Uday Kotak, :Executive Vice-Chairman and Managing Director Mr. Uday Kotak, is the Executive Vice-Chairman and Managing Director of the Bank, and its principal founder and promoter. He is an alumnus of jamnalal Bajaj Institute of Management Studies. In 1985, when he was still in his early twenties, Mr Kotak thought of setting up a bank. Kotak Capital Management Finance Ltd which later became Kotak Mahindra Finance Ltd, Kotak became the first non-banking finance company in India's corporate history to be converted into a bank.
Mr. C Jayaram Joint Managing Director Mr. C. Jayaram is currently in charge of the Wealth Management Business of the Kotak Group. He is an alumnus of IIM Kolkata and has been with the Kotak Group since 1990 and member of the Kotak board in October 1999. He also oversees the international subsidiaries and the alternate asset management business of the group. He is the Director of the Financial Planning Standards Board, India. He has varied experience of over 25 years in many areas of finance and business, has built numerous businesses for the Group and was CEO of Kotak Securities Ltd.
Mr. Dipak Gupta Joint Managing Director Mr. Dipak Gupta, an alumnus of IIM Ahmedabad, has been with the Kotak Group since 1992 and joined the board in October 1999. He heads commercial banking, retail asset businesses and looks after group HR function. Early on, he headed the finance function and was instrumental in the joint venture between Kotak Mahindra and Ford Credit International. He was the first CEO of the resulting entity, Kotak Mahindra Primus Ltd. Head office of Kotak Mahindra Bank is located at Narimal Bhavan at nariman Point, Mumbai.
INDUSTRY ANALYSIS A) History and current scenario: The banking industry in India has long history, which covers the traditional banking practices from the time of British to the reforms after independence. It is followed by nationalization to privatization of banks and now increasing numbers of foreign banks in India. In recent time, the World Economy is passing through tough phase. It has caused debt crisis in major economies of the world and euro zone crisis. Devaluation of Rupee is also one of the concerns. This poses some serious questions about the survival, growth and maintaining the sustainable development. However, in this challenging phase India’s Banking Industry has been amongst the few to maintain resilience. The speed of development has slowed down, but not to the extent of hampering the industry. Lower incidence of non- performing assets and focus on financial inclusion has made Indian banking vibrant and strong. In addition, the RBI took some important steps to make the Indian Banking industry more robust and healthy. These steps include de-regulation of savings rate, guidelines for new banking licenses and implementation of Basel Norm III. According to a Mckinsey report, the banking sector in India is heading towards being a high-performing sector. According to an IBA-FICCI-BCG report Indian banking industry third largest in the world by 2025.
B) STRUCTURE: Banking Industry in India is regulated by Reserve Bank of India. This structure can be understood by the following graph For the assessment purpose of performance the Reserve Bank of India categorizes them as Public sector banks, Old Private sector banks, New Private sector banks and Foreign banks. Banks in India
Scheduled Commercial bank
Co operative credit institutions
Public sector bank
Private sector bank
Foreign bank
Regional Rural bank
Urban Cooperative bank
Rural Cooperative Credit Institutions
PEST ANALYSIS OF INDIAN BANKING INDUSTRY Political: India currently has Coalition government (United Progressive Alliance). It has affected speed and quality of decision making process of the government as no party has it’s discretionary power and decisions made are affected by pressure of alliance wings. This can be seen in Union Budget 2012. In the wake of global financial crisis, devaluation of Rupee and Euro zone crisis; the Budget failed to deliver the major reforms. Though political atmosphere in the country is not very bad and instable. But inability to deliver strong reforms and red tepism is hampering the speed of new changes to be bough in industry.
Economical: Economies of many nations in the worlds have became unstable. Global economic slowdown, Euro zone crisis and Devaluation of Rupee in terms of dollar has made overall economic scenario unstable. Though Budget was neutral for banking sector, it didn’t proposed major reforms for many sectors. It will not affect banking sector directly, but may hamper growth of those sector and indirectly to banking industry. On the other hand target to reduce the fiscal deficit will indirectly benefit the industry as it will lead to reduced inflation. It will in turn lead to a reduction in policy rates. It will also mean higher income from the securities held by banks as yield on bonds will decrease. The situation is quite alarming with Current account deficit at 4% and fiscal deficit little lower than 6%, But the banking system in the country is much bigger and stronger to address the problems. Social: In India, according to 2011 census, 68.84% population still resides in rural area. This population is spread over large geographical area. To cater them is always a great challenge before banking industry. By population, India has second highest number of bank accountholders in the world. But according to Livemint survery only 35% of people in India have formal bank accounts as compared to average of 41% in developing nations. This gives the Idea of the huge untapped market India has. While private sector banks are giving strong competition to Nationalized banks in urban area, rural customer still prefers Nationalised banks for investments. Around 60 % of India’s population is between age group of 18-60, which mean more working people who can do investments. But on the other hand, according to World Bank Survey, 32.7% of India’s population still lives below poverty line. Technological In last decade, Indian banking industry has certainly improved a lot on technological aspect. Last decade seen the computerization of all the major public and private sector bank which improver speed of clerical work. After arrival of many Foreign private sector
banks who had a superior technology, it became necessary for banks in India to be at par in terms of technology. Phone banking, ATM’s, Net banking, MICR based cheque clearing, Electronic Clearing Services are some of the technological advancements that added to customer satisfaction. Reserve Bank of India has implemented the Basel II standardized norms on 31 March 2009. Basel II provided Indian banks with the opportunity to reduce their credit risk weights and reduce their required regulatory capital, if they suitably adjust their portfolio by lending to rated but strong corporate and increase their retail lending. But there is also risk of foreign takeover if FDI policy with respect to banking sector is relaxed.
SWOT Analysis of Indian Banking industry Strength: Strength of the Indian banking industry lies in the quality of assets and growth over it’s global peers over the last few years. Geographical reach and market penetration have expanded at a very fast pace over the past few years. Customer base of industry is growing continuously. Liquidity position has been satisfactory in the recent times. Thanks to reforms and stringent regulatory measures taken by Reserve Bank of India, Banks in India are considered to have clean, strong and transparent balance sheets compared to other banks in comparable economies in it’s region. Thus they have good quality of assets relative to other banks in comparable economies in its region. Weakness: Weakness of the industry pertains to factors such as limited market penetration in some geographies, lack of fundamental institutional skill level and less household savings. Public sector banks hold approximately 70% of total assets of the banking industry. However they are Severely lacking in sales and marketing, service operations, risk management and adoption of new technology. Therefore these banks have not been able to match the aggressive growth by the private banks. Although the metros, urban and semi urban areas have been successfully penetrated by the banking sector, it hasn’t been able to penetrate the rural areas to it’s full potential. And for improving overall profitability, this segment cannot be ignored. Considering the latest report that only 35% people in India have bank accounts as against 41% which is average for developing countries in the world, this sector has certainly fell short in reach. Opportunities: Great deal of opportunity for the Indian banking industry lies in the untapped rural market spread over a large geographical area. Banking industry has not penetrated to the rural sector. As mentioned earlier, only 35% people in India have access to formal banking system. Out of the rest, around 46% used informal lending channels. 24% of
people from this category resorted to unregulated money lenders. These lenders charge very high interest rates on their loans which reflect that there is scope for cheaper and more formal lending in the rural credit market. The rural economy accounts for 68.84% of India's population and has a massive untapped potential. Banking sector also has opportunity to adopt more advance technology and be at par with Foreign banking giants in it’s systems.
Threats: Over the course of the years the number of players in the market has increased considerably. This Intense competition could adversely affect the profit margins of the bank. So there is threat of the stability for the entire system. Failure of some weak banks in last few years has threatened the stability of the system. Devaluation of Rupee has badly affected expansion plans and foreign investment plans of some of the banks. If FDI policy with respect to banking sector is relaxed, the threat of competition from foreign banks will arise. Indian banks are very small as compared to Foreign banking giants. So facing competition from them will be really a tough task.
Competitor Analysis of Kotak Mahindra bank In the age of stiff competition, competitors are Private banks as well as Nationalised banks. We will take examples of leading competitors of both type of banks. In Nationalized banks State bank of India and in private sector ICICI bank. A) ICICI Bank ICICI bank is the largest private sector bank in India. ICICI has first mover advantage in many banking and financial services. It is also one of the innovative bank in India which introduced mobile banking and concept of jewelry card in India. For jewelry card, it has tied up with leading brands like Asmi, Nakshatra etc. It also has longer working hours as compared to other banks which is also advantage for the customer. The bank has minimum number of Non Performing Assets. But on the other hand, bank has also earned bad reputation because of it’s Customer Support Section. There are many cases of abuse and misbehavior while recovering credit payment and bank is criticized because of it’s policy of employing third party for recovery. B)State Bank of India SBI is the oldest and largest bank in India. It roots back in 1806. But it was established under the name State Bank of India in 1955 by act in Parliament. It has long tradition of serving people from different economic sections of Society. Apart from India, It is presence in 31 countries in the world enabling currency trades all over the world. It’s recent acquisitions with State bank of Saurashtra and State bank of Indore has made this banking giant in India bigger. SBI in it’s print advertisements shows it’s long tradition of service and the great people it served over the years. It includes great names like Mahatma Gandhi, Dr. Sarvapalli Radhkrishnan, Mr. JRD Tata which adds to respect the customer has for the bank. The bank the first mover advantage in commercial banking service. It has strong presence all over India, especially the rural area. The name SBI is very familiar to every household in India. Due to good inflow of money from Asian market, SBI is planning to invest more in international operation and expand it’s market.
But on the other hand it uses less sophisticated technology as compared to leading private banks. It spends huge amount of money on historical building which houses it’s prominent branches and offices. It’s employees enjoy greater job security. It affects overall speed of operation. Even after these drawbacks, SBI is still very strong name in the banking sector that dominates the industry because of it’s strong customer base.
doc_329047572.doc
It describes about Industry Trends of banking industry, PEST Analysis of banking Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about Kotak Mahindra, it's Finance performance, SWOT analysis and Various Strategies employed.
KOTAK MAHINDRA BANK: COMPANY ANALYSIS HISTORY It was year 1984-85. In those days, banks in India used to giver interest of 6% on their deposits. But they used to charge interest of 16.5% from their borrowers. It was the when young Uday Kotak thought that banks were making too much money and also sensed an opportunity. He had just arranged the working capital for Nelco, the Tata Electronics company which gave him the much needed confidence. He along Sidney Pinto of Grindlays bank decided to start their own company and Kotak Capital management finance Ltd. was incorporated on 21st November 1985. They started their operations in bill discounting., Leasing and hire purchase, consumer finance. On 11th February 1986, they were joined by Anand Mahindra and his father Harish Mahindra and the company’s name was changed to Kotak Mahindra Finance Ltd. As Mr. Uday Kotak recalls, the “Kotak” name meant nothing. But addition of Mahindra gave company the credibility the wanted. Now they started operating in corporate finance, management of fixed deposit mobilisation, financing against securities, money market operations, investment banking and clients' money management. This was the beginning of India’s third largest private sector bank. In 2002 RBI gave in-principle approval to Kotak Mahindra Finance Ltd., flagship company Kotak Mahindra group to convert itself into a bank, thereby becoming India’s first ever non banking finance company converted into a bank. CURRENT STATUS Currently, Kotak Mahindra Bank enjoys the status of third largest private sector bank in India and is also one of the fastest growing bank in the country. It has over 357 branches and 866 ATMs in India and with revenues of bank touching 11 thousand crores in financial year 2011-12. It has it’s branches not just in Metros but also in Tier II cities and rural India as well. They cater needs of their individual and non individual customers. The bank in known for it’s technology platform. It’s IT team has won the Banking Technology Awards 4 times.
TOP MANAGEMENT
Mr. Uday Kotak, :Executive Vice-Chairman and Managing Director Mr. Uday Kotak, is the Executive Vice-Chairman and Managing Director of the Bank, and its principal founder and promoter. He is an alumnus of jamnalal Bajaj Institute of Management Studies. In 1985, when he was still in his early twenties, Mr Kotak thought of setting up a bank. Kotak Capital Management Finance Ltd which later became Kotak Mahindra Finance Ltd, Kotak became the first non-banking finance company in India's corporate history to be converted into a bank.
Mr. C Jayaram Joint Managing Director Mr. C. Jayaram is currently in charge of the Wealth Management Business of the Kotak Group. He is an alumnus of IIM Kolkata and has been with the Kotak Group since 1990 and member of the Kotak board in October 1999. He also oversees the international subsidiaries and the alternate asset management business of the group. He is the Director of the Financial Planning Standards Board, India. He has varied experience of over 25 years in many areas of finance and business, has built numerous businesses for the Group and was CEO of Kotak Securities Ltd.
Mr. Dipak Gupta Joint Managing Director Mr. Dipak Gupta, an alumnus of IIM Ahmedabad, has been with the Kotak Group since 1992 and joined the board in October 1999. He heads commercial banking, retail asset businesses and looks after group HR function. Early on, he headed the finance function and was instrumental in the joint venture between Kotak Mahindra and Ford Credit International. He was the first CEO of the resulting entity, Kotak Mahindra Primus Ltd. Head office of Kotak Mahindra Bank is located at Narimal Bhavan at nariman Point, Mumbai.
INDUSTRY ANALYSIS A) History and current scenario: The banking industry in India has long history, which covers the traditional banking practices from the time of British to the reforms after independence. It is followed by nationalization to privatization of banks and now increasing numbers of foreign banks in India. In recent time, the World Economy is passing through tough phase. It has caused debt crisis in major economies of the world and euro zone crisis. Devaluation of Rupee is also one of the concerns. This poses some serious questions about the survival, growth and maintaining the sustainable development. However, in this challenging phase India’s Banking Industry has been amongst the few to maintain resilience. The speed of development has slowed down, but not to the extent of hampering the industry. Lower incidence of non- performing assets and focus on financial inclusion has made Indian banking vibrant and strong. In addition, the RBI took some important steps to make the Indian Banking industry more robust and healthy. These steps include de-regulation of savings rate, guidelines for new banking licenses and implementation of Basel Norm III. According to a Mckinsey report, the banking sector in India is heading towards being a high-performing sector. According to an IBA-FICCI-BCG report Indian banking industry third largest in the world by 2025.
B) STRUCTURE: Banking Industry in India is regulated by Reserve Bank of India. This structure can be understood by the following graph For the assessment purpose of performance the Reserve Bank of India categorizes them as Public sector banks, Old Private sector banks, New Private sector banks and Foreign banks. Banks in India
Scheduled Commercial bank
Co operative credit institutions
Public sector bank
Private sector bank
Foreign bank
Regional Rural bank
Urban Cooperative bank
Rural Cooperative Credit Institutions
PEST ANALYSIS OF INDIAN BANKING INDUSTRY Political: India currently has Coalition government (United Progressive Alliance). It has affected speed and quality of decision making process of the government as no party has it’s discretionary power and decisions made are affected by pressure of alliance wings. This can be seen in Union Budget 2012. In the wake of global financial crisis, devaluation of Rupee and Euro zone crisis; the Budget failed to deliver the major reforms. Though political atmosphere in the country is not very bad and instable. But inability to deliver strong reforms and red tepism is hampering the speed of new changes to be bough in industry.
Economical: Economies of many nations in the worlds have became unstable. Global economic slowdown, Euro zone crisis and Devaluation of Rupee in terms of dollar has made overall economic scenario unstable. Though Budget was neutral for banking sector, it didn’t proposed major reforms for many sectors. It will not affect banking sector directly, but may hamper growth of those sector and indirectly to banking industry. On the other hand target to reduce the fiscal deficit will indirectly benefit the industry as it will lead to reduced inflation. It will in turn lead to a reduction in policy rates. It will also mean higher income from the securities held by banks as yield on bonds will decrease. The situation is quite alarming with Current account deficit at 4% and fiscal deficit little lower than 6%, But the banking system in the country is much bigger and stronger to address the problems. Social: In India, according to 2011 census, 68.84% population still resides in rural area. This population is spread over large geographical area. To cater them is always a great challenge before banking industry. By population, India has second highest number of bank accountholders in the world. But according to Livemint survery only 35% of people in India have formal bank accounts as compared to average of 41% in developing nations. This gives the Idea of the huge untapped market India has. While private sector banks are giving strong competition to Nationalized banks in urban area, rural customer still prefers Nationalised banks for investments. Around 60 % of India’s population is between age group of 18-60, which mean more working people who can do investments. But on the other hand, according to World Bank Survey, 32.7% of India’s population still lives below poverty line. Technological In last decade, Indian banking industry has certainly improved a lot on technological aspect. Last decade seen the computerization of all the major public and private sector bank which improver speed of clerical work. After arrival of many Foreign private sector
banks who had a superior technology, it became necessary for banks in India to be at par in terms of technology. Phone banking, ATM’s, Net banking, MICR based cheque clearing, Electronic Clearing Services are some of the technological advancements that added to customer satisfaction. Reserve Bank of India has implemented the Basel II standardized norms on 31 March 2009. Basel II provided Indian banks with the opportunity to reduce their credit risk weights and reduce their required regulatory capital, if they suitably adjust their portfolio by lending to rated but strong corporate and increase their retail lending. But there is also risk of foreign takeover if FDI policy with respect to banking sector is relaxed.
SWOT Analysis of Indian Banking industry Strength: Strength of the Indian banking industry lies in the quality of assets and growth over it’s global peers over the last few years. Geographical reach and market penetration have expanded at a very fast pace over the past few years. Customer base of industry is growing continuously. Liquidity position has been satisfactory in the recent times. Thanks to reforms and stringent regulatory measures taken by Reserve Bank of India, Banks in India are considered to have clean, strong and transparent balance sheets compared to other banks in comparable economies in it’s region. Thus they have good quality of assets relative to other banks in comparable economies in its region. Weakness: Weakness of the industry pertains to factors such as limited market penetration in some geographies, lack of fundamental institutional skill level and less household savings. Public sector banks hold approximately 70% of total assets of the banking industry. However they are Severely lacking in sales and marketing, service operations, risk management and adoption of new technology. Therefore these banks have not been able to match the aggressive growth by the private banks. Although the metros, urban and semi urban areas have been successfully penetrated by the banking sector, it hasn’t been able to penetrate the rural areas to it’s full potential. And for improving overall profitability, this segment cannot be ignored. Considering the latest report that only 35% people in India have bank accounts as against 41% which is average for developing countries in the world, this sector has certainly fell short in reach. Opportunities: Great deal of opportunity for the Indian banking industry lies in the untapped rural market spread over a large geographical area. Banking industry has not penetrated to the rural sector. As mentioned earlier, only 35% people in India have access to formal banking system. Out of the rest, around 46% used informal lending channels. 24% of
people from this category resorted to unregulated money lenders. These lenders charge very high interest rates on their loans which reflect that there is scope for cheaper and more formal lending in the rural credit market. The rural economy accounts for 68.84% of India's population and has a massive untapped potential. Banking sector also has opportunity to adopt more advance technology and be at par with Foreign banking giants in it’s systems.
Threats: Over the course of the years the number of players in the market has increased considerably. This Intense competition could adversely affect the profit margins of the bank. So there is threat of the stability for the entire system. Failure of some weak banks in last few years has threatened the stability of the system. Devaluation of Rupee has badly affected expansion plans and foreign investment plans of some of the banks. If FDI policy with respect to banking sector is relaxed, the threat of competition from foreign banks will arise. Indian banks are very small as compared to Foreign banking giants. So facing competition from them will be really a tough task.
Competitor Analysis of Kotak Mahindra bank In the age of stiff competition, competitors are Private banks as well as Nationalised banks. We will take examples of leading competitors of both type of banks. In Nationalized banks State bank of India and in private sector ICICI bank. A) ICICI Bank ICICI bank is the largest private sector bank in India. ICICI has first mover advantage in many banking and financial services. It is also one of the innovative bank in India which introduced mobile banking and concept of jewelry card in India. For jewelry card, it has tied up with leading brands like Asmi, Nakshatra etc. It also has longer working hours as compared to other banks which is also advantage for the customer. The bank has minimum number of Non Performing Assets. But on the other hand, bank has also earned bad reputation because of it’s Customer Support Section. There are many cases of abuse and misbehavior while recovering credit payment and bank is criticized because of it’s policy of employing third party for recovery. B)State Bank of India SBI is the oldest and largest bank in India. It roots back in 1806. But it was established under the name State Bank of India in 1955 by act in Parliament. It has long tradition of serving people from different economic sections of Society. Apart from India, It is presence in 31 countries in the world enabling currency trades all over the world. It’s recent acquisitions with State bank of Saurashtra and State bank of Indore has made this banking giant in India bigger. SBI in it’s print advertisements shows it’s long tradition of service and the great people it served over the years. It includes great names like Mahatma Gandhi, Dr. Sarvapalli Radhkrishnan, Mr. JRD Tata which adds to respect the customer has for the bank. The bank the first mover advantage in commercial banking service. It has strong presence all over India, especially the rural area. The name SBI is very familiar to every household in India. Due to good inflow of money from Asian market, SBI is planning to invest more in international operation and expand it’s market.
But on the other hand it uses less sophisticated technology as compared to leading private banks. It spends huge amount of money on historical building which houses it’s prominent branches and offices. It’s employees enjoy greater job security. It affects overall speed of operation. Even after these drawbacks, SBI is still very strong name in the banking sector that dominates the industry because of it’s strong customer base.
doc_329047572.doc