Description
banking business is run and how is it different from other kind of business
What is Banking Business?
How do we run a business ?
2
? Raise financial resources
Long Term : Equity / Debt ? Short Term (rolling) : Working Capital
?
? Acquire Fixed Assets
Land & Building ? Machinery ? Furniture & fixtures
?
MBFI
How do we run a business ?
3
? Operate
?
Manufacture products by acquiring raw-materials, do value addition or process them
Or
?
Trade - acquire goods and sell them without value addition
Or
?
Provide services
? Working Capital Cycle
MBFI
How do we run a business ?
4
? Marketing
?
Products / Services
? Make Profit ? Expand business
? ? ?
Retained earnings Fresh equity and Debt Expand existing venture
?
New ventures and projects
MBFI
Challenges in a Business
5
? Cost of financial resources
? Operating efficiency
? 4 P’s or 7 P’s ? Competition both domestic & global ? Regulations ? Changing economic scenario
?
Both domestic and global
MBFI
What is a Financial Institution?
6
? Any venture in which the major portion of revenues
is from financial assets held by the venture ? A venture whose assets are mainly financial assets
MBFI
What is Banking Business?
7
? Accepting deposits & making loans
? Accepting deposits payable on demand
? Acquiring financial assets and funding them to
derive income from the spread
? Providing financial services ? Provide services to facilitate payments
?“The
Payments System”
MBFI
Are banks different?
8
? Venture in pursuit of profit
? Raise resources and utilize these for generating
profit ? Operating efficiency – cost competitiveness ? Tackle competition – competitive edge ? 7 P’s
MBFI
How are banks different?
9
? Built on faith
? Highly regulated
? Does not “create wealth” like manufacturing
? No
“value – addition”
? Always has “Asset-Liability mismatch” ? Does not minimize risk but takes on risk
deliberately
MBFI
How are banks different?
10
? Deals in money but cannot create money ? Profits come from margins or “Spreads" ? Changes in the economy affects banks directly
and immediately
? Cannot think of “diversification”
? “back-ward” ? Restrictions
or “forward integration” not possible
on activities
MBFI
How are banks different?
? PLC of financial products is very short
?
11
No IPR on financial products so can be duplicated in no time
? Product differentiation is difficult
? Branding ? Product branding ? Brand for the bank ? Does it make any difference?
MBFI
How are banks different?
? Sells products on both sides of the balance sheet
? ?
12
Focus in promotion become difficult Pricing becomes transparent
Is almost transparent ? Customers can compare the overall effect with competition in $ terms ? Since products have little non-monetary value (lifestyle etc) to customers, premium pricing is difficult
?
? Pricing
MBFI
Challenges in current scenario
13
? A different mind-set is required to manage and run a
bank as a business ? A mind-set of a business person required to run a service industry but one which takes into account the differences as well
MBFI
Challenges in current scenario
14
? To run banks as competitive businesses
? Domestic competition
? Global banks invasion ? Changing economic scenario ? Volatile interest rates ? Informed customer ? Changing regulatory scenario
MBFI
doc_637634631.pptx
banking business is run and how is it different from other kind of business
What is Banking Business?
How do we run a business ?
2
? Raise financial resources
Long Term : Equity / Debt ? Short Term (rolling) : Working Capital
?
? Acquire Fixed Assets
Land & Building ? Machinery ? Furniture & fixtures
?
MBFI
How do we run a business ?
3
? Operate
?
Manufacture products by acquiring raw-materials, do value addition or process them
Or
?
Trade - acquire goods and sell them without value addition
Or
?
Provide services
? Working Capital Cycle
MBFI
How do we run a business ?
4
? Marketing
?
Products / Services
? Make Profit ? Expand business
? ? ?
Retained earnings Fresh equity and Debt Expand existing venture
?
New ventures and projects
MBFI
Challenges in a Business
5
? Cost of financial resources
? Operating efficiency
? 4 P’s or 7 P’s ? Competition both domestic & global ? Regulations ? Changing economic scenario
?
Both domestic and global
MBFI
What is a Financial Institution?
6
? Any venture in which the major portion of revenues
is from financial assets held by the venture ? A venture whose assets are mainly financial assets
MBFI
What is Banking Business?
7
? Accepting deposits & making loans
? Accepting deposits payable on demand
? Acquiring financial assets and funding them to
derive income from the spread
? Providing financial services ? Provide services to facilitate payments
?“The
Payments System”
MBFI
Are banks different?
8
? Venture in pursuit of profit
? Raise resources and utilize these for generating
profit ? Operating efficiency – cost competitiveness ? Tackle competition – competitive edge ? 7 P’s
MBFI
How are banks different?
9
? Built on faith
? Highly regulated
? Does not “create wealth” like manufacturing
? No
“value – addition”
? Always has “Asset-Liability mismatch” ? Does not minimize risk but takes on risk
deliberately
MBFI
How are banks different?
10
? Deals in money but cannot create money ? Profits come from margins or “Spreads" ? Changes in the economy affects banks directly
and immediately
? Cannot think of “diversification”
? “back-ward” ? Restrictions
or “forward integration” not possible
on activities
MBFI
How are banks different?
? PLC of financial products is very short
?
11
No IPR on financial products so can be duplicated in no time
? Product differentiation is difficult
? Branding ? Product branding ? Brand for the bank ? Does it make any difference?
MBFI
How are banks different?
? Sells products on both sides of the balance sheet
? ?
12
Focus in promotion become difficult Pricing becomes transparent
Is almost transparent ? Customers can compare the overall effect with competition in $ terms ? Since products have little non-monetary value (lifestyle etc) to customers, premium pricing is difficult
?
? Pricing
MBFI
Challenges in current scenario
13
? A different mind-set is required to manage and run a
bank as a business ? A mind-set of a business person required to run a service industry but one which takes into account the differences as well
MBFI
Challenges in current scenario
14
? To run banks as competitive businesses
? Domestic competition
? Global banks invasion ? Changing economic scenario ? Volatile interest rates ? Informed customer ? Changing regulatory scenario
MBFI
doc_637634631.pptx