1_2-Organization of Banking Industry

7/28/2019 1_2-Organization of Banking Industry

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Organization of Banking

Industry


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Types of Bank Organizations

Unit Banks

Holding Companies

Branch Banks


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Banking Entities

Unit Banks

Indiana Community Bank, USA

Heartland Community Bank, USA

Holding Companies

Citi Group

State Bank of India Group

Branch Banks

Punjab National Bank

Indian Oversees Bank


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Unit Banks

Single entity.

Located in a specific area.

Functions as a community bank.

Banks are customer based.

Capital is comparatively lesser than other banking

structures.

Structure is based on the needs of the customers.


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Holding Companies

Organization owns and manages subsidiaries.

Utilizes its financial strength to acquire ownership of

subsidiary banks.

Large capital structure.

Standardization of subsidiary organizational structure.

Possibility of establishing banks across several

localities.


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Branch Banking

Single entity.

Establishment of branch offices.

Possibility of functioning across several localities.

Location of banks based on the needs of the society.

Possibility of operating banks on a large or small scale.

Scope for future expansion of banking functions.


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Comparative Features

Feature

Unit

Bank

Holding

Company

Branch

Company

Efficiency Scale Less Some Most

Efficiency Scope Most Most Some

FlowofFunds Low Possible Easy

Competition Exists No Exists

NewEntry Easy Little Easy

MarketAccess Tough Easy Easy

Liquidity Low High High

DecentralizedPower Most Little Moderate

Sensitivityto

Society Most Little Moderate

ConveniencetoCustomers Most Little Most


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Organization of Banks based on Ownership Pattern

Nationalized Banks (Government owned)

Private banks

Foreign Banks


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Banking Entities (Illustrative)

Nationalized Banks

Indian Bank

Corporation Bank

Andhra Bank

Private Banks

ICICI Bank

Axis Bank

HDFC Bank


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Banking Entities

Foreign Banks

Sonali Bank

Oman International Bank

Mizuho Corporate Bank

Societe Generale


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Bank Performance Comparison (2011)

NationalizedBanks

PrivateBanks

ForeignBanks

NumberofOffices 45640 11968 316

Numberof

Employees 475082 218679 27968

BusinessperEmployee(lakh) 1144.77 823.26 1559.74

ProfitperEmployee(lakh) 6.95 8.1 27.59

CapitalandReserves&Surplus

(lakh) 205857 138589 80972

CostofFunds 4.93 4.56 3.11

ReturnonAssets 1.03 5.11 1.74

CapitaltoRiskAdjustedAsset

Ratio(CRAR) 13.47 16.46 16.72

NetNon

Performing

Assets

(NPA)

Ratio 0.92 0.56 0.67

Reference:

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Statistical%20Tables%20Relating%20to%20Banks%20of%20India


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Banks Functioning in India

BankClassification 1999 2003 2006 2009 2010 2011

SBI&Associates 9 9 9 8 6 6

Nationalized

Banks 19 19 20 20 21 21Domestic

PrivateBanks 34 30 24 23 21 21

ForeignBanks 41 36 29 31 34 34

Reference:http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Statistical%20Tables%20Relating%20to%20Banks%20of%20India


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Organization of Banks Based on Size

Large Banks

Large Capital

Large Depositor base

Small Banks

Less Capital

Small Depositor base


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Banking Business Models

National banks

Regional banks

International banks

Community banks

Development banks

Core banks

Service banks


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National Banks

Banks are entitled to operate across the country.

Usually have operations in more than one region of the

country.

Large number of bank branches.

Comparatively large size capital banks.

Centralized operational structure.


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Regional Banks

Local banks.

Banking operations are within the region.

Cater to the specific needs of the region.

Regional banks are established to focus on the

requirements of the place of operation of the bank.

Focus on a specific locality and function as specialized

banks.


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Community Banks

Specialty banks.

Cater to the banking requirements of a specific society.

Based on a specific locality or built on the branch

structure to cater to the needs of the community indifferent areas.

Subject to the same regulations as that of other bankmodels.


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Development Banks

Focus is on development activities.

Funded by the government.

Objective of the bank is to meet the government targets.

Meets the funding requirement of large projects oractivities that are considered essential for the community

but not necessarily profitbased.


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International Banks

Engage in banking operations across several countries.

Large customer base.

Familiar with regulatory requirements of each country.

Banking risks are prominent since operations are subjectto the impact of banking functions across other nations.


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Core Banks

Function as deposit mobilization and lending agencies

for project finance.

Subject to regulations fromthe Central bank.

Services are based on the interest rate prevalent in the

system.

Larger capital base.

Subject to capital adequacy requirements to meet thecore banking risks.

Requires investor trust.


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Service Banks

Function as supportive players of core banks.

Perform roles such as insurance / asset management /

mutual funds / credit card / venture capital assistance /

consumer finance / leasing activities / trustee services

etc.

Uses the customer base acquired fromcore banks.

Income is based on operations of the banks and not

entirely on the interest rates.


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Commercial Banking Functions


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Investment Functions

1_2-Organization of Banking Industry

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