BANKING SCENARIO The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non- scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co- operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as “priority sectors”. The manufacturing sector also grew during the 1970s in protected environs and the banking 1
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
BANKING SCENARIO
The Indian Banking industry, which is governed by the Banking Regulation
Act of India, 1949 can be broadly classified into two major categories, non-
scheduled banks and scheduled banks. Scheduled banks comprise
commercial banks and the co-operative banks. In terms of ownership,
commercial banks can be further grouped into nationalized banks, the State
Bank of India and its group banks, regional rural banks and private sector
banks (the old/ new domestic and foreign). These banks have over 67,000
branches spread across the country.
The first phase of financial reforms resulted in the nationalization of 14
major banks in 1969 and resulted in a shift from Class banking to Mass
banking. This in turn resulted in a significant growth in the geographical
coverage of banks. Every bank had to earmark a minimum percentage of
their loan portfolio to sectors identified as “priority sectors”. The
manufacturing sector also grew during the 1970s in protected environs and
the banking sector was a critical source. The next wave of reforms saw the
nationalization of 6 more commercial banks in 1980. Since then the number
of scheduled commercial banks increased four-fold and the number of bank
branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the
sector in the early nineties, the Public Sector Banks (PSB) s found it
extremely difficult to compete with the new private sector banks and the
foreign banks. The new private sector banks first made their appearance
after the guidelines permitting them were issued in January 1993. Eight new
private sector banks are presently in operation. These banks due to their late
1
start have access to state-of-the-art technology, which in turn helps them to
save on manpower costs and provide better services.
During the year 2000, the State Bank Of India (SBI) and its 7 associates
accounted for a 25 percent share in deposits and 28.1 percent share in credit.
The 20 nationalized banks accounted for 53.2 percent of the deposits and
47.5 percent of credit during the same period. The share of foreign banks
(numbering 42), regional rural banks and other scheduled commercial banks
accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in
deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in
credit during the year 2000.
Current Scenario
The industry is currently in a transition phase. On the one hand, the PSBs,
which are the mainstay of the Indian Banking system are in the process of
shedding their flab in terms of excessive manpower, excessive non
Performing Assets (Npas) and excessive governmental equity, while on the
other hand the private sector banks are consolidating themselves through
mergers and acquisitions.
PSBs, which currently account for more than 78 percent of total banking
industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in
2000), falling revenues from traditional sources, lack of modern technology
and a massive workforce while the new private sector banks are forging
ahead and rewriting the traditional banking business model by way of their
sheer innovation and service. The PSBs are of course currently working out
2
challenging strategies even as 20 percent of their massive employee strength
has dwindled in the wake of the successful Voluntary Retirement Schemes
(VRS) schemes.
The private players however cannot match the PSB’s great reach, great size
and access to low cost deposits. Therefore one of the means for them to
combat the PSBs has been through the merger and acquisition (M& A)
route. Over the last two years, the industry has witnessed several such
instances. For instance, Hdfc Bank’s merger with Times Bank Icici
Bank’s acquisition of ITC Classic, Anagram Finance and Bank of
Madura. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are
said to be on the lookout. The UTI bank- Global Trust Bank merger however
opened a pandora’s box and brought about the realization that all was not
well in the functioning of many of the private sector banks.
Private sector Banks have pioneered internet banking, phone banking,
anywhere banking, mobile banking, debit cards, Automatic Teller Machines
(ATMs) and combined various other services and integrated them into the
mainstream banking arena, while the PSBs are still grappling with
disgruntled employees in the aftermath of successful VRS schemes.
In a span of just four years, ICICI Bank has emerged as a consumer banking
behemoth. With a retail book of over Rs 56,000 crore (Rs 560 billion) and a
market share that is the envy of competition -- it has a share of over 30 per
cent -- ICICI Bank today has reached a commanding position.
3
The bank boasts of the widest integrated technology platform in the country
and only a fourth of its business takes place at its branches.
Its legacy of non-performing assets (NPAs) -- for which it has been rated
below its peers -- is now almost history with net NPLs (non-performing
loans) down to 2 per cent.
Armed with a much stronger balance sheet, ICICI Bank is aggressively
foraying into overseas markets and also has an eye on rural India.
This year consumer credit will grow by about Rs 40,000 crore (Rs 400
billion) from Rs 145,000 crore (Rs 1,450 billion) to Rs 185,000 crore (Rs
1,850 billion).
Last year, despite competition from small savings, incremental deposits
grew at 15 per cent and this year, too, the RBI (Reserve Bank of India) is
pegging deposit growth at 15 per cent. That's not too different from the
historic growth rate of 17 per cent over 30 years. I acknowledge that small
savings pose competition; they have a lot of arbitrage.
But, interestingly, mutual funds were not competitors. MFs, I find, are
competitors when interest rates decline; they don't have ability to compete
when rates rise.
Also insurance companies, which saw money because of the tax incentives,
could be under pressure with the incentives going.
Today, ICICI Bank, India has the largest market share and value among all
banks in retail or consumer financing. ICICI Bank is the largest issuer of
credit cards in India. It was the first bank to offer a wide network of ATM's
4
and had the largest network of ATM's till 2005,before SBI caught up with it.
ICICI bank now is widely seen as a sophisticated bank able to take on many
global banks in the Indian market. The bank is expanding in overseas
markets. It has operations in the UK, Hong Kong, Singapore and Canada. It
acquired a small bank in Russia recently. It has tie-ups with major banks in
the US and China. The bank is aggressively targeting the NRI (Non Resident
Indian) population for expanding its business.
The global opportunity spectrum is changing dramatically, and in the next
three years, our global business will contribute one-third of our book --
topline and bottomline. Today it's about 10-12 per cent. The NRI is a great
customer and the other is the Indian corporate who is globalising -- either in
the trade business or is setting up businesses abroad.
Our USP (unique selling proposition) is our technology; we can get him to
talk to his constituents online. The NRI is an interesting link because today
he has tremendous needs in India; he wants to remit money, buy a home,
especially the H1 visa guys. This year 10 per cent of our home loans will be
to NRIs.
5
CHAPTER – 1
INTRODUCTION
6
INTRODUCTION
Founded in 1955 as Industrial Credit and Investment Corporation of India,
ICICI Limited was established by the Government of India in the 1960s as a
Financial Institution like Industrial Development Bank of India (IDBI) to
finance large industrial projects.
ICICI then, was not a bank and hence could not take retail deposits and was
not required to comply with Indian banking requirements for liquid reserves.
ICICI borrowed funds from various agencies like the World Bank, often at
concessional rates. These funds were deployed in large corporate loans.
However, the scenario changed drastically in1990s when ICICI founded a
separate legal entity and named it "ICICI Bank".ICICI Bank, as the name
would suggest, undertook normal banking operations like accepting
deposits, issuing credit cards, providing car loans etc. The experiment was
so successful that ICICI merged into ICICI Bank and this "reverse merger"
happened in 2002.
ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment
Corporation of India) "ICICI Bank is India's second largest Bank with
consolidated total assets of over Rs. 470,000 crores and networth of over Rs.
50,000 crores. The Bank's capital adequacy ratio of 15.6% is among the
than 2,500 branches throughout India and branches in Hong Kong and
London. All of Canara Bank's branches -- including those located in rural
areas -- are computerized, in a country where it is not a given that banks can
make such a claim. (The bank considers 30% of its branches to be located in
rural areas.) The modernization of all branches allows the bank to offer its
customers networked ATMs, telebanking, internet banking, and debit card
services. Other services include asset management and factoring. The
financial institution is 73% owned by India's government.
Contact InformationAddress:112 J C Rd.Bangalore, Karnataka 560002, India Phone: +91-80-2224-8831
45
MARKET SHARE
The fact that the top 8 banks account for barely 54 per cent of the market share suggests that several smaller players occupy the remaining 46 per cent.
46
FY04 (Rs bn)Advances Market
share
SBI 1,955 22.7%
ICICI Bank 631 7.3%
Canara Bank 476 5.5%
PNB 472 5.5%
Bank of India 458 5.3%
Bank of Baroda 356 4.1%
HDFC Bank 177 2.1%
Standard Chartered 162 1.9%
Total 4,687 54.4%
POSITIONING
ICICI Bank positioned itself as technology-savvy, customer-friendly bank.
To support its technology-focused strategy, ICICI Bank needed a robust
technology platform that would help it achieve its business goals. After an
intense evaluation of several global vendors, ICICI Bank identified Infosys
as its technology partner and selected Finacle, the universal banking solution
from Infosys, as its core banking platform. An open systems approach and
low Total Cost of Ownership (TCO) were some of the key benefits Finacle
offered the bank. Unlike most banks of that era, ICICI Bank was automated
from day one, when its first branch opened in the city of Chennai. ICICI
Bank was set up when the process of deregulation and liberalization had just
begun in India, and the Reserve Bank of India (India’s central bank) had
paved the way for private players in the banking sector, which at that time
was dominated by state-owned and foreign banks. Serving a majority of the
country’s populace, state-owned banks had a large branch network, with
minimal or no automation and had little focus on service. Foreign banks, on
the other hand, deployed high-end technology, had innovative product
offerings, but had a very small branch network that serviced only corporates
and individuals with high net-worth.
47
ADVERTISEMENT
Shahrukh Khan is ICICI Bank's brand ambassador globally
ICICI Bank Limited, India's second largest Bank brings its global brand ambassador, actor Shahrukh Khan, which helps the bank to advertise his product and services globally.
48
Shahrukh Khan.
CHAPTER-3
FINANCIAL
INFORMATION
49
STOCK EXCHANGE
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange
and the National Stock Exchange of India Limited and its American
Depositary Receipts (ADRs) are listed on the New York Stock Exchange
Sales Turnover 0.01 -0.96Other Income 33.94 3.62Total Income 6.57 0.12Total Expenditure -0.34 -18.49Operating Profit 8.08 4.94Interest 2.78 -1.79Gross Profit 21.27 22.68Depreciation 0.00 0.00Tax 41.43 83.12ReportedPAT 25.43 3.41Equity Capital 0.00 0.09Extra Ordinary Items 0.00 0.00Adjusted Profit After Extra Ordinary Item 25.43 3.41Book Value 0.00 0.00EPS 25.47 3.35Dividend 0.00 0.00
RATIO ANALYSIS
55
RatiosProfitability Ratios %
March- 2008(12 months)
March- 2007(12 months)
March- 2006(12 months)
Operating Profit Margin
14.45 13.33 18.66
Gross Profit Margin
12.99 11.41 15.10
Net Profit Margin 10.51 10.81 14.12Turnover RatiosInventory Turnover Ratio
0.00 0.00 0.00
Debtor Turnover Ratio
0.00 0.00 0.00
Fixed Asset Turnover Ratio
5.61 4.52 2.93
Solvency RatioCurrent Ratio 0 .73 0 .62 0 .62Debt Equity Ratio 5.22 9.35 7.32Interest Covering Ratio
0 .24 0 .23 0 .34
Performance Ratio %Return On Investment
1.95 1.48 1.74
Return On Networth
8.94 12.79 11.43
Dividend Yield 33.12 33.89 34.08
SHARE HOLDING PATTERN
Holder's Name No of Shares % Share Holding
56
Directors 914352 0.08%
OtherCompanies 52612667 4.73%
ForeignNRI 5389371 0.48%
ForeignOcb 50060 0.00%
ForeignOthers 10529566 0.95%
ForeignInstitutions 409979962 36.83%
ForeignIndustries 3790 0.00%
Others
304852852 27.38%
NBanksMutualFunds 88067601 7.91%
GeneralPublic 82265782 7.39%
FinancialInstitutions 158584639 14.25%
57
CHAPTER-4
HUMAN RESOURCES
&
HR POLICIES
58
ORGANITION STRUCTURE
An organization structure as an integral part of a system or a group. It has to accept the discipline and regulatory ethics of the system/group. It has also to compete within the group and strive to excel in its performance. An organization structure also operates with
in a social, economic and political environment
We believe that the structure of an organization needs to be dynamic, constantly evolvingand responsive to changes both in the external and internal environments. Our organizationalstructure is designed to support our business goals, and is flexible while at the same timeensuring effective control and supervision and consistency in standards across businessgroups.
59
NUMBER OF EMPLOYEES
Total number of employees in the organition are 25479
60
HR POLICIES
HR systems and policies are thereby designed to unleash the latent
capability of our people by fostering a continuous learning and performance
based culture where our people have the opportunity to grow and succeed
and realize their true potential while delivering high quality services.
To achieve these objectives our HR Policy is pivotal and aims to:
Achieve organizational and business goals with firm belief that "Our
Employees are our Future".
Have empowered and accountable employees to take decisions in
response to emerging challenges and opportunities in a competitive
environment.
Endeavor to make our employees "The Best" with an urge for and
commitment to excellence
61
RECRUITMENT PROCESS
In ICICI Bank RECRUITMENT PROCESS at all levels , we have carried out an in-
depth study of the competencies required to succeed in ICICI Bank which are called the
ICICI Bank DNA anchors. As per our research, the DNA anchors which indicated
success at the entry level in ICICI Bank are:
Customer first
Passion
Dynamism
Compliance with conscience
In order to assess the same we use a set of tools -
a. Aptitude Tests (for applicants with 0-2 years of work experience).
The tests are designed to assess basic aptitude of candidates including numerical
comprehension, verbal comprehension, logical reasoning and basic checking abilities.
These are important skills for the role of an entry-level manager and people who do well
in these tests tend to do well in their jobs at ICICI Bank. The total time taken in this
exercise is 55 minutes.
b.Occupational Personality Questionnaire.
Applicants are also required to complete the Occupational Personality Questionnaire
(OPQ) before they appear for the selection, the results of which are integrated into our
selection process.
62
SELECTION PROCEDURE
The selection process at all levels in ICICI Bank, they have carried out an in-depth study
of the competencies required to succeed in ICICI Bank. As per ICICI research, the
competencies which indicated success at the entry level in ICICI Bank are:
Drive for results
Process Orientation
Interpersonal Effectiveness
Analytical Thinking
Innovation &
Team Effectiveness
In order to assess the same ICICI use a set of 3 tools -
A Mental Ability Tests (for candidates with 0-2 years of work experience)
a Personality profiling system
The Mental Ability Test to find a fair and objective assessment of candidates’ skills in the
areas of verbal reasoning, numerical reasoning & diagrammatic reasoning. These are
important skills for the role of an entry level manager and people who do well in these
tests tend to do well in their jobs at ICICI Bank. The total time taken in this exercise is 2
hours with each of the three sections lasting 40 minutes.
Candidates (at all levels regardless of the number of years of work experience) are also
required to complete the Occupational Personality Questionnaire (OPQ ) before they
63
appear for the interview, the results of which are integrated into ICICI interview
process.
SWOT ANALYSIS
OF
ICICI BANK
64
SWOT ANALYSIS:
SWOT analysis is done for a company, to find out its
overall Strengths, Weaknesses, Threats and opportunities
leading to gauging the competitive potential of the
company.
The SWOT Analysis enables a company to recognize its
market standing and adopt strategies accordingly. Here
SWOT analysis of ICICI bank is made to understand the
positioning of the bank better:
65
STRENGTHS
1. BRAND NAME: ICICI Bank has earned a reputation in the market for extending
quality services to the market vis-Ã -vis its competitors. It has earned a strong Brand
name in banking in a very short span of time.
2. MARKET SHARE: ICICI Bank has the largest market share of 34% in the IT & ITES
industry in Hyderabad according to our survey (within the limitation of the sample size.)
3. HUGE NETWORK: ICICI Bank has the highest number of linked branches in the
country. The bank operates through a network of 450 BRANCHES AND over 1800
ATMs across India, thus enabling them to serve customer in better way.
4. DIVERSIFIED PORTFOLIO: ICICI Bank has all the products under its belt, which
help it to extend the relationship with existing customer. ICICI Bank has umbrella of
products to offer their customers, if once customer has relationship with the bank. Some
Products, which ICICI Bank is offering are:
• Retail Banking
• Business Banking
66
• Merchant Establishment Services (EDC Machine)
• Personal loans & Car loans
• Demat Services with E-Broking
• Mutual Fund (ICICI Bank is the Distributor of all Mutual Fund)
• Insurance
• Housing Loans
5. SALARY ACCOUNT: One very interesting thing that we have observed in our survey
is that ICICI is having an edge over other banks in case of Salary Account. Most of the
companies are having their Salary Account with ICICI even if their Current Account is
with any other Bank. This is mainly because of the huge network of ATMs and branches
of ICICI.
6. WORKING HOURS: ICICI is the only bank which is having its working hours from 8
to 8 which is one of the major strength of ICICI Bank with respect to IT & ITES
Industry. As most of the IT & ITES companies are global players and their Parent
company is in US, so they have to work according to their office time. Thus some have
their Office time in the morning and some have it in the evening so if the working hour of
the bank is 8 to 8 it is very convenient for them.
7. TREASURY DEPARTMENT: ICICI is the only bank which is having its treasury
department especially for Hyderabad Customers. So customers can get the best rates for
foreign exchange.
8. AGGRESSIVE MARKETING: ICICI Bank is known for its aggressive marketing of
its products. Recent Endorsement of its product by AMITABH BAHCHAN proves the
same. This gives ICICI an edge over other banks.
67
9. TECHNOLOGY: From its inception, ICICI Bank has adopted a policy of selecting
internationally proven and specialized Packaged Systems for its technology. ICICI
bank’s technology platform has been acknowledged globally as one of the best in
terms of robustness, flexibility and cost efficiency. ICICI Bank is in a position to leverage
this platform to further build cost and service advantage.
WEAKNESS
1. TRANSACTION COST: ICICI Bank charges high cost for its transactions. Through
our data analysis we have find out that most of the small companies prefer nationalized
banks only because of this cost factor. Also the group has found out that there are
companies which are going for multi bank system i.e. they are using only those facilities
of ICICI Bank which are provided at cheaper rates (read Salary Account) and for other
services they are going to nationalize banks and MNCs (read Forex). So there exists a
huge potential for ICICI Bank if they are ready to make their transaction cost flexible.
2. FOCUS ONLY ON HIGH END CUSTOMERS: The bank targets only the top bracket
of clients and does not cater to the needs of small customers. Due to this reason the bank
may sometimes loose good clients.
3. DEFENSIVE APPROACH IN LENDING: ICICI Bank has a defensive approach in
lending. Mainly to IT & ITES companies Bank do not provide loan as these companies
are not having collaterals so bank hesitate in giving loans to them. Because of this policy
companies prefer nationalized banks and ICICI Bank in turn sometimes loose potential
customers.
68
4. LITTLE PRESENCE OUTSIDE INDIA: ICICI Bank is having little presence Outside
India, because of which companies are preferring MNC Bank, mainly Citibank. So if
ICICI Bank tries to emerge outside India then it has a huge potential of customers.
5. POOR CUSTOMER CARE/SERVICE: With its aggressive marketing ICICI Bank is
rapidly increasing its customer base. They are not however, increasing the number of
employees accordingly. This is leading to deterioration of the standard of customer
service.
OPPORTUNITIES
1. NEW IT & ITES COMPANIES: IT & ITES sector is on a boom in the Indian market
context, with new companies mushrooming in the market; it opens the door for ICICI
bank to capture the huge untapped market.
2. Dissatisfied Customers of Other Banks: The group from its survey and analysis of IT
companies have found out that there are many companies which are not satisfied with its
current bank, so ICICI with its superior service quality and long working hours can
capture those customers.
3. Remittances: From the analysis group has also found out that ICICI bank has very little
presence as far as the EEFC account is concerned. Companies prefer to bank with MNCs
(which have greater presence in the foreign countries) and nationalized banks (which
according to the companies provide lower transaction rates) to get their inward
remittances in spite of ICICI being providing one of the most competitive rates. So the
bank can promote its EEFC account better and get the key to the door of huge potential
market.
69
4. Business advising for smaller Players: The analysis has also indicated that the concept
of business advising though very popular with the higher end players is virtually non
existent in the lower end of the market. ICICI should take this opportunity to provide
business advising to the smaller companies at competitive rates and try to take the first
mover advantage.
THREATS
1) Advent of MNC banks: Large numbers of MNC banks are mushrooming in the Indian
market due to the friendly policies adopted by the government. This can increase the
level of competition and prove a potential threat for the market share of ICICI bank.
2) Dissatisfied Customers: The analysis indicated that though most of the companies are
satisfied with the products offered by ICICI bank but the poor customer support/ service
is creating a lot of dissatisfaction among the customers, this can prove to be a serious
problem as far as the market reputation of the bank is concerned and cane be a major
threat in future business acquisition.
3) Ever improving nationalized banks: With PSU banks like SBI going all out to compete
with the private banks and government giving them a free hand to do so, it can prove to