Financial Analysis of Commercial Bank

An Economic and Financial Analysis of Commercial Banks in

Bangalore in Evolving a Competitive Strategy for ICICI Bank

Submitted in partial fulfillment of the requirements of

for the award of the degree of

MASTERS OF BUSINESS ADMINISTRATION

Of

BANGALORE UNIVERSITY

Submitted By

Mr. Manu Mohanan

Reg. No. 05JJCM6031

Under the guidance of

Mr. Rajesh Pillai

Kristu Jayanti College of Management and Technology

2007

STUDENT’S DECLARATION

I, Manu Mohanan, hereby declared that this project titled “An Economic and

Financial Analysis of Commercial Banks in Bangalore in Evolving a Competitive

Strategy for ICICI Bank” submitted by me to the department of Management of

Bangalore University in partial fulfillment of requirement of MBA programme is a

bonafide work carried by me under the guidance of Mr. Rajesh Pillai .This has not been

submitted earlier to any other university or institution for the award of any degree

diploma / certificate or published any time before.

Signature of the student

(Manu Mohanan)

CERTIFICATE FROM GUIDE & HEAD OF THE INSTITUTION

Certified that this declaration entitled “An Economic and Financial Analysis of

Commercial Banks in Bangalore in Evolving a Competitive Strategy for ICICI Bank”,

submitted in partial fulfillment for the award of MBA Degree of Bangalore University

was carried out by Mr. Manu Mohanan under the guidance of Mr. Rajesh Pillai This has

not been submitted to any other university or institution for the award of any degree/

diploma/ certificate.

GUIDE DEAN MBA DEPARTMENT

PRINCIPAL

ACKNOWLEDGEMENT

My project work would have become practical without the help of grace of the

“Almighty” and timely advice and creative support rendered by many. I express my

affectionate thanks to The Principal, Kristu Jayanti College, Bangalore for giving me

an opportunity to do this training.

I am highly indebted to my faculty guide Prof. Rajesh Pillai of the department of

management studies for inspiring me and for his valuable guidance and assistance

provided. I also thank all other staff members of the department for guiding me in my

training. I would also thank Mr. Venu Krishnan (Branch Manager) of ICICI Bank,

jayanagar for permitting me to do the practical training in the organization.

I express my sincere gratitude and special thanks to all employees especially

managers of different banks for their valuable suggestions and keen interest which are

extremely helpful in shaping this project work to success.

Manu Mohanan

EXECUTIVE SUMMARY

Indian banks find themselves in a scenario of tighter regulation, global and domestic

economic slowdown, half-backed reforms, dwindling industrial performance, a prolonged

lull in the capital market, increasing competition, excess liquidity and narrowing array of

development avenues. In such a situation the customer has become essential to gauge the

competitor’s offerings in terms of innovative products and services to the customer and

the reason behind customer’s loyalty to a particular bank.

In this regards, the scope of the project covers analyzing the private sector banks in India

with special emphasis on the product portfolio, both corporate and retail, evaluating the

thrust areas and strategies of these banks, and evolving a strategy for ICICI based on the

above findings.

The methodology employed for the above was secondary research backed by primary

research in the form of interviews of bank officers and corporates. The study was limited

to the Bangalore market.

The following private sector banks have been exhaustively studied for the purpose of

competition analysis.

ABN Amro bank.

Citibank.

HDFC bank.

HSBC.

Standard chartered.

UTI bank.

A comparative analysis of the banks has been done on two separate grounds:

A. Ratios, facts and balance sheet figures- these include the revenue, PAT, interest

income as a percentage of average working funds and other figures.

B. Product portfolio and features- these include loan products, credit cards and

ATM’s. Finally on the basis of these findings, recommendations have been

provided for ICICI bank to enhance its competitive and provide a unique offering

to its corporate clients.

Following is the project chapter’s classification of the study:

Chapter 1: INTRODUCTION

This is about the general introduction of the topic.

Chapter 2: RESEARCH METHODOLOGY

This deals with the method used in the study including sampling technique, sample

description, and instrumentation technique and data analysis software.

Chapter 3: PROFILE OF THE INDUSTRY, COMPANY

This describes the back ground and history of Indian Banking sector and the profile of

company, products and its key policies

Chapter 4: DATA ANALYSIS AND INTERPRETATION

This chapter deals with analyze the collected data through questionnaire and it also

interprets the different chart and graph.

Chapter 5: FINDING AND RECOMMENDATION

This is the concluding chapter, which describe the overall finding and it also focus on

the recommendation for farther enhancement

Table of Contents

Chapter No Title Page No

1 Introduction 1-4

2 Research Design 5-10

3 Profile of the Company 11-20

4 Analysis and Interpretation of Data

21-39

5 Summary of Findings, Conclusions and Recommendation

40-61

A Bibliography a-b

B Annexure I – VII

List of Graphs / Charts & Diagrams

Figure No Title Page No

1 General Analysis Of Banks 41

2 Net Profit and Deposits 42

3 Operating Efficiency 43

4 Earning Quality 44

5 Productivity 45

6 Asset Quality 46

7 Management Quality 47

List of Tables

Table No Title Page No

1 Trends Among The Private Indian Banks

48

2 Comparison Of Loan Products

51-52

3 Home Loans Of Different Banks

53-54

4 Loans Against Shares 55-56

5 Two Wheeler Loans 57

6 Comparison OF ATM 58-59

7 Comparison Of Gold Credit Cards

60-61

List of Annexure

Questionnaire No Title Page No

1 Questionnaire to HDFC Bank

II

2 Questionnaire to UTI Bank III

3

Questionnaire to Citibank IV

4 Questionnaire to STAN CHART Bank

V

5 Questionnaire to HSBC Bank

VI

6 Questionnaire to ABN AMRO

VII

ICICI Bank

CHAPTER 1

INTRODUCTION

Kristu Jayanti College of Management & Technology11

ICICI Bank

Introduction

With years, banks are also adding services to their customers. The Indian banking

industry is passing through a phase of customers market. The customers have more

choices in choosing their banks. A competition has been established within the banks

operating in India.

With stiff competition and advancement of technology, the services provided by banks

have become more easy and convenient. The past days are witness to an hour wait before

withdrawing cash from accounts or a cheque from north of the country being cleared in

one month in the south.

In India the banks are being segregated in different groups. Each group has their own

benefits and limitations in operating in India. Each has their own dedicated target market.

Few of them only work in rural sector while others in both rural as well as urban. Many

even are only catering in cities. Some are of Indian origin and some are foreign players.

All these details and many more are discussed over here. The banks and its relation with

the customers, their mode of operation, the names of banks under different groups and

other such useful information’s are talked about. One more section has been taken note of

is the upcoming foreign banks in India. The RBI has shown certain interest to involve

more of foreign banks than the existing one recently. This step has paved a way for few

more foreign banks to start business in India

In such a situation the customer has become essential to gauge the competitor’s offerings

in terms of innovative products and services to the customer and the reason behind

customer’s loyalty to a particular bank.




ICICI Bank


above findings.

The methodology employed for the above was secondary research backed by primary

research in the form of interviews of bank officers and corporates. The study was limited

to the Bangalore market.

Overview

ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn at

March 31, 2006 and profit after tax of Rs. 25.40 bn for the year ended March 31, 2006

(Rs. 20.05 bn for the year ended March 31, 2005). ICICI Bank has a network of 741

branches (including 48 extension counters) and over 3300 ATMs in India and presence in

30 International locations. ICICI Bank offers a wide range of banking products and

financial services to corporate and retail customers through a variety of delivery channels

and through its specialized subsidiaries and affiliates in the areas of investment banking,

life and non-life insurance, venture capital and asset management. ICICI Bank set up its

international banking group in fiscal 2002 to cater to the cross border needs of clients and

leverage on its domestic banking strengths to offer products internationally. ICICI Bank

is the most valuable bank in India in terms of market capitalization.

ICICI Bank's equity shares are listed in India on the 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 (NYSE).

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and

employees. At June 5, 2006, ICICI Bank, with free float market capitalization* of about

Rs. 480.00 billion (US$ 10.8 billion) ranked third amongst all the companies listed on the

Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial

institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was


ICICI Bank

reduced to 46% through a public offering of shares in India in fiscal 1998, an equity

offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition

of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary

market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was

formed in 1955 at the initiative of the World Bank, the Government of India and

representatives of Indian industry. The principal objective was to create a development

financial institution for providing medium-term and long-term project financing to Indian

businesses. In the 1990s, ICICI transformed its business from a development financial

institution offering only project finance to a diversified financial services group offering a

wide variety of products and services, both directly and through a number of subsidiaries

and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the

first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards

universal banking, the managements of ICICI and ICICI Bank formed the view that the

merger of ICICI with ICICI Bank would be the optimal strategic alternative for both

entities, and would create the optimal legal structure for the ICICI group's universal

banking strategy.

The merger would enhance value for ICICI shareholders through the merged entity's

access to low-cost deposits, greater opportunities for earning fee-based income and the

ability to participate in the payments system and provide transaction-banking services.

The merger would enhance value for ICICI Bank shareholders through a large capital

base and scale of operations, seamless access to ICICI's strong corporate relationships

built up over five decades, entry into new business segments, higher market share in

various business segments, particularly fee-based services, and access to the vast talent

pool of ICICI and its subsidiaries.. The merger was approved by shareholders of ICICI

and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March

2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in


ICICI Bank

April 2002. Consequent to the merger, the ICICI group's financing and banking

operations, both wholesale and retail, have been integrated in a single entity.


ICICI Bank

CHAPTER 2

RESEARCH DESIGN


ICICI Bank

METHODOLOGY

PURPOSE:

Indian banks find themselves in a scenario of tighter regulation, global and domestic

economic slowdown, half-baked reforms, dwindling industrial performance, and a

prolonged lull in the capital market, increasing competition, excess liquidity and

narrowing array of development avenues. In such a situation the customer has become

prime importance. To stay one up in competition it has become essential to gauge the

competitor’s offering in terms of innovative products and service to the customer and the

reasons behind customer’s loyalty to a particular bank.




project findings.

AIM

To identify and study the main banks in the private sector in India competing with ICICI

banks, and gauge the strategy followed by each competitor bank and thrust areas.

OBJECTIVES

To identify the clients of these banks in Bangalore and analyze the marketing channels

used by various banks to push their products.

To identify and study the main banks in the private sector in India competing with

ICICI bank.

To compare various banks with respect to specific retail products such as retail loans,

cards, salary a/c and NRI service.

To evolve a strategy for ICICI bank to follow based on project findings.


ICICI Bank

METHODOLOGY

The study was exploratory in nature with primary data being collected though

questionnaire and balance sheets administered to a sample of 50 respondents. A personal

interview was conducted with respondents. Some of the questionnaires were filled up

after a small conversation relevant to the subject of the study. The questionnaire was

structured with both open and close-ended questions. The balance sheet also served the

purpose of calculating the various ratios. Analysis, tabulation and interpretation of the

data were done accordingly and conclusions were drawn. Thus the questionnaire and

interview method along with the balance sheets were adopted for the purpose of research.

AREA OF SAMPLING

The study was conducted in Bangalore.

SAMPLING

A sample is a small portion of the population selected for observation and analysis. By

observing the characteristics of the sample, one can make certain inferences about the

population from which it is drawn. A population is any group of individuals that have one

or more characteristics in common and are of interest to the researchers. The sampling

technique adopted was convenience sampling. Non-probability samples that are

unrestricted are called convenience samples; they include informal pools of neighbors,

friends, newspapers etc. In this study the size of the sample is 100 respondents and the

sampling unit constitutes the employees at different level of banks.


ICICI Bank

DATA SOURCES

Both primary and secondary data are utilized for the purpose of this study. Primary data

is collected by means of administering a questionnaire to respondents and also through

balance sheets. Secondary data was collected from newspaper, magazines, and Internet.

TOOLS FOR DATA COLLECTION

The questionnaire method, along with the balance sheets of the companies, was used as

the main tools for data collection. The interview method was also adopted for the purpose

of collecting primary data.

FIELD WORK

50 respondents were met and personally interviewed for the primary data of the survey.

The survey was conducted in Bangalore, during the month of March and April 2007. An

informal discussion with the respondents also was held to procure additional information

and to probe feedback.

PLAN OF ANALYSIS

The data collected was tabulated and classified as required. Statistical techniques such as

correlation analysis, bar charts, pie charts, histograms, matrix and, graphs etc, were

adopted in the analysis. Conclusions were drawn based on the analysis and findings.


ICICI Bank

SCOPE OF PROJECT

To identify and study the banks in the private sector in Bangalore competing with

ICICI bank.

Focus on specific retail products such as retail loans, salary accounts and NRI

services: corporate products such as trade finance services, foreign exchange

services and working capital finance of these banks with features wherever

possible.

Compare the banks in respect to each product.

Attempt to gauge the strategy followed by each competitor bank and its thrust

areas.

Identify the clients of these banks Bangalore. In this regard, take a look at the

marketing channels used by various banks to push tier product.

Evolve a strategy for ICICI bank to follow based on the above findings.

LIMITATIONS

The sample size was limited to only 50 respondents.

Time was major constraint.

The study was confined to Bangalore.

To obtain information particularly in respect of the functioning of banks is a

sensitive and secret aspect, thus some respondents were reluctant to answer the

questions.

Nevertheless in spite of the aforesaid hindrances, the findings and conclusions throw light

on aspects whose authenticity cannot be rejected.


ICICI Bank

CHAPTER SCHEME

1. Introduction

2. Research Methodology

3. Profile of the Industry and Company

4. Analysis of the Data Collected

5. Findings, Suggestions and Conclusion

Bibliography

Appendix


ICICI Bank

CHAPTER 3

PROFILE OF THE COMPANY


ICICI Bank

Industry Profile

Without a sound and effective banking system in India it cannot have a healthy economy.

The banking system of India should not only be hassle free but it should be able to meet

new challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements

to its credit. The most striking is its extensive reach. It is no longer confined to only

metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even

to the remote corners of the country. This is one of the main reason of India's growth

process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with

the nationalization of 14 major private banks of India. Not long ago, an account holder

had to wait for hours at the bank counters for getting a draft or for withdrawing his own

money. Today, he has a choice. Gone are days when the most efficient bank transferred

money from one branch to other in two days. Now it is simple as instant messaging or

dial a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till

today, the journey of Indian Banking System can be segregated into three distinct phases.

They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

Phase I


ICICI Bank

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan

and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of

Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency

Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was

established which started as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab

National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and

1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,

and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic

failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To

streamline the functioning and activities of commercial banks, the Government of India

came up with The Banking Companies Act, 1949 which was later changed to Banking

Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of

India was vested with extensive powers for the supervision of banking in India as the

Central Banking Authority. During those day’s public has lesser confidence in the banks.

As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility

provided by the Postal department was comparatively safer. Moreover, funds were

largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence.

In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a

large scale especially in rural and semi-urban areas. It formed State Bank of India to act

as the principal agent of RBI and to handle banking transactions of the Union and State

Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th


ICICI Bank

July, 1969, major process of nationalization was carried out. It was the effort of the then

Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country

were nationalized. Second phase of nationalization Indian Banking Sector Reform was

carried out in 1980 with seven more banks. This step brought 80% of the banking

segment in India under Government ownership.

After the nationalization of banks, the branches of the public sector bank India rose to

approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and

immense confidence about the sustainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in its

reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was

set up by his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put

to give a satisfactory service to customers. Phone banking and net banking is introduced.

The entire system became more convenient and swift. Time is given more importance

than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any

crisis triggered by any external macroeconomics shock as other East Asian Countries

suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,

the capital account is not yet fully convertible, and banks and their customers have

limited foreign exchange exposure

Company Profile


ICICI Bank

Introduction

ICICI Bank is India's second-largest bank, with total assets of about Rs.1, 676.59 billion

on 31 March 2005. ICICI Bank began its life 1994 as a wholly-owned subsidiary of

ICICI Limited, an Indian financial institution, whose shareholding in the bank was

reduced to 46 per cent through a public offering of shares in India in 1997-98, an equity

offering in the form of ADRs listed on the NYSE in fiscal 1999-2000, the ICICI Bank's

acquisition of Bank of Madura in fiscal 2000-01, and secondary market sales by ICICI to

institutional investors in fiscal 2001 and fiscal 2002.

In 2002, ICICI was merged with ICICI Bank to combine the wholesale and retail

operations of both organizations into a single entity. (ICICI, or the Industrial Credit and

Investment Corporation of India was formed in 1955 as a development financial

institution at the initiative of the World Bank, the Indian government and representatives

of Indian industry.) ICICI Bank's shares are listed on the Bombay Stock Exchange and

the National Stock Exchange of India Limited in India and its ADRs are listed on the

New York Stock Exchange.

Business

ICICI Bank offers a range of banking products and financial services to corporate and

retail customers through several delivery channels and specialized subsidiaries and

affiliates. The areas include: investment banking, life and non-life insurance, venture

capital and asset management. ICICI Bank set up its international banking group in fiscal

2002 to cater to clients' cross-border needs. It currently has subsidiaries in the UK,

Canada and Russia, branches in Singapore and Bahrain, and representative offices in the

US, China, UAE, Bangladesh and South Africa.ICICI Bank, which accepts deposits

under various savings and fixed schemes, offers a range of loans for various purposes,

including housing, cars and 2-wheelers, commercial vehicles, farm equipment, medical

equipment, office equipment and construction equipment. The bank also has a popular

credit card business.


ICICI Bank

Location

ICICI Bank has a network of about 573 branches and extension counters and over 2,000

ATMs

History of ICICI Bank

1955 : The Industrial Credit and Investment Corporation of India Limited (ICICI) incorporated

at the initiative of the World Bank, the Government of India and representatives of

Indian industry, with the objective of creating a development financial institution for

providing medium-term and long-term project financing to Indian businesses.

Mr.A.Ramaswami Mudaliar elected as the first Chairman of ICICI Limited

: ICICI emerges as the major source of foreign currency loans to Indian industry. Besides

funding from the World Bank and other multi-lateral agencies, ICICI also among the

first Indian companies to raise funds from International markets.

1956 : ICICI declared its first Dividend at 3.5%.

1958 : Mr.G.L.Mehta was appointed the 2nd Chairman of ICICI Ltd.

1960 : ICICI building at 163, Backbay Reclamation was inaugurated.

1961 : The first West German loan of DM 5 million from Kredianstalt was obtained by ICICI.

1967 : ICICI made its first debenture issue for Rs.6 crore, which was oversubscribed.

1969 : First two regional offices in Calcutta and Madras were opened.

1972 : Second entity in India to set-up merchant banking services.

: Mr. H. T. Parekh appointed as the third Chairman of ICICI.

1977 : ICICI sponsors the formation of Housing Development Finance Corporation. Managed

its first equity public issue

1978 : Mr. James Raj appointed as the fourth Chairman of ICICI.

1979 : Mr.Siddharth Mehta appointed as the fifth Chairman of ICICI.

1982 : Becomes the first ever Indian borrower to raise European Currency Units.


ICICI Bank

: ICICI commences leasing business.

1984 : Mr. S. Nadkarni appointed as the sixth Chairman of ICICI.

1985 : Mr.N.Vaghul appointed as the seventh Chairman and Managing Director of ICICI.

1986 : ICICI first Indian Institution to receive ADB Loans. First public issue by an Indian

entity in the Swiss Capital Markets.

: ICICI along with UTI sets up Credit Rating Information Services of India Limited,

(CRISIL) India's first professional credit rating agency.

: ICICI promotes Shipping Credit and Investment Company of India Limited. (SCICI)

: The Corporation made a public issue of Swiss Franc 75 million in Switzerland, the first

public issue by any Indian equity in the Swiss Capital Market.

1987 : ICICI signed a loan agreement for Sterling Pound 10 million with Commonwealth

Development Corporation (CDC), the first loan by CDC for financing projects in India.

1988 : ICICI promotes TDICI - India's first venture capital company.

1993 : ICICI sets-up ICICI Securities and Finance Company Limited in joint venture with J. P.

Morgan.

: ICICI sets up ICICI Asset Management Company.

1994 : ICICI sets up ICICI Bank.

1996 : ICICI becomes the first company in the Indian financial sector to raise GDR.

: ICICI announces merger with SCICI.

: Mr.K.V.Kamath appointed the Managing Director and CEO of ICICI Ltd

1997 : ICICI was the first intermediary to move away from single prime rate to three-tier prime

rates structure and introduced yield-curve based pricing.

: The name "The Industrial Credit and Investment Corporation of India Limited” was

changed to "ICICI Limited".

: ICICI announces takeover of ITC Classic Finance.

1998 : Introduced the new logo symbolizing a common corporate identity for the ICICI Group.

: ICICI announces takeover of Anagram Finance.


ICICI Bank

1999 : ICICI launches retail finance - car loans, house loans and loans for consumer durables.

: ICICI becomes the first Indian Company to list on the NYSE through an issue of

American Depositary Shares.

2000 : ICICI Bank becomes the first commercial bank from India to list its stock on NYSE.

: ICICI Bank announces merger with Bank of Madura.

2001 : The Boards of ICICI Ltd and ICICI Bank approved the merger of ICICI with ICICI

Bank.

2002 : Moodys' assign higher than sovereign rating to ICICI.

: Merger of ICICI Limited, ICICI Capital Services Ltd and ICICI Personal Financial

Services Limited with ICICI Bank.

Competitors of ICICI Bank



choices in choosing their banks. Therefore there has been a heavy competition between

the banks and within the bank. Some of the major competitors are as follows , they are

namely:

1. ABN Amro Bank

2. Citibank

3. HDFC Bank

4. Standard Chartered Bank

5. UTI Bank

6. HSBC Bank

7. Canara Bank

8. Bank of Baroda

9. Catholic Syrian Bank


ICICI Bank

10. City Union Bank

11. Deutsche Bank

12. Federal Bank

13. ING Vysya Bank

14. JP Morgan Chase Bank

15. Syndicate Bank

16. Vijya Bank

17. Dena Bank

18. Taib Bank

19. Bank of Ceylon

20. Centurion Bank

21. South Indian Bank

22. United Western Bank

23. Scotia Bank

24. BNP Paribas Bank

25. Karun Vysya Bank

26. Indus India Bank

27. Laxmi Vilas Bank

28. UCO Bank

29. Oriental Bank of Commerce

30. Syndicate Bank

Banking services in India


ICICI Bank



choices in choosing their banks. A competition has been established within the banks

operating in India.

With stiff competition and advancement of technology, the services provided by banks

have become more easy and convenient. The past days are witness to an hour wait before

withdrawing cash from accounts or a cheque from north of the country being cleared in

one month in the south.

In India the banks are being segregated in different groups. Each group has their own

benefits and limitations in operating in India. Each has their own dedicated target market.

Few of them only work in rural sector while others in both rural as well as urban. Many

even are only catering in cities. Some are of Indian origin and some are foreign players.

All these details and many more is discussed over here. The banks and its relation with

the customers, their mode of operation, the names of banks under different groups and

other such useful information’s are talked about.

One more section has been taken note of is the upcoming foreign banks in India. The RBI

has shown certain interest to involve more of foreign banks than the existing one

recently. This step has paved a way for few more foreign banks to start business in India


ICICI Bank

OVERVIEW OF PARTICULAR BANKS

The following section presents an overview of seven private sector banks with special

focus on unique products provided by them and their thrust areas.

ABN Amro bank

Basic facts

Revenue- 4942.2 crores

Net profit- 218.83 crores

No: of branches- 16

No: of customers-12 lakhs (approx)

ABN Amro bank has been in India for more than eight decades now. Established in 1920

it was traditionally known as a “diamond- financing bank”. In India it enjoys a strong

image as a corporate bank with comprehensive global transactions. It is gradually

increasing its real banking operations in India. As a first step it has acquired the retail

operations of bank of America. With its alliance with Mellon trust, it has also become

one of the world’s largest financial institutions providing global custody and local

custody. It also has the distinction of being the first custodian bank to handle ADR/GDR

transactions for a leading mutual fund in the country

Clients in Bangalore

Asea brown boveri nestle

PFC

Dabur

Air India


ICICI Bank

Retail Features

Loan against shares

The bank charges an over limit fees from the

customers if the amount of principal interest

thereupon goes beyond 60%of the value of

deposits

A time frame of one month is given to the customer

before the shares are sold off

It also provides loyal discount to the borrowers at the

time of renewal of the loan at the end of the

year

Shakti account Saving account of women requiring a minimum

balance of Rs.5000

Free e-mail and sms alerts are given

Personal loans specially for women working

Corporate Features

Quick enquire id A quick enquire of id and pass word is provided so

that the clerks in the company can make enquires and

keep track of balances

A transaction password is also provided to the

company so that the officers can use it to request DDs

etc

This essentially is an additional feature

Van Gogh banking Exclusive banking for customers with balances more

than 20-25 lakhs

The investment and banking aspect of the account is

handled by two different people


ICICI Bank

Features of online banking and 24 hours banking is

also provided

Precious banking Nominated by RBI to import golds,silver and platinum

Trading in bullion

The bank charges a commission over and above the

international price of gold and silver

Liquidity management Zero balance account permitting a customer to sweep

funds to centralized position so that credit

balances fund the debit balances

Trust areas of the bank

A. Corporate

a. Trade finance services are the core strength and principal thrust area for ABN

Amro bank.

b. The bank also has a centralized trade financing processing center offering

advisory services to exports.

c. The bank was nominated by RBI to import gold, silver, and platinum from

overseas suppliers for bullion trading in India.

d. It has also entered into an alliance with a local registrar and transfer agency to

offer this service to mutual funds.

e. This interbank FX desk is one of the leading market in spot and forward Indian

rupees.

f. The bank is looking at a platform for scaling global transaction services business,

covering trade services, cash management services and payments.

g. The bank has also launched global support services in Chennai.


ICICI Bank

h. The bank is also planning to establish call centers in India.

i. ABN Amro brought about the first syndications deal based on letter of credit in

India.

B. Retail

a. The bank is increasing its number of ATM’s providing 365 days banking facility.

b. The bank also helps NRI’s keep track of values of properties and to go through a

property transaction.

c. It also provides legal advisory services at concessional rate to its customers.

d. The bank is going to launch credit cards and debit cards in June.

e. The bank offers the best rates on fixed deposits.

f. The bank provides cash delivery at the doorstep to all its customers.

g. Free insurance service provided on current accounts.


ICICI Bank

CITIBANK

Basic facts

No: of branches-NA

No: of ATM centers-NA


Citibank started operation in India in 1902. it has been offering a wide range of services

from cards and loans on the retail side to cash management and worldwide security

services across the globe. The global corporate banking strategy of the bank was to grow

business with local corporates and the public sector, as well as maintain our global

relationship customers in the local country. But now the focus of the bank is to board

base the five sectors into twelve industry specific areas.


Britannia

MICO

Sasken technologies

Birla 3M

Infosys technologies

Madura coats

Ingersoll Rand

Oracle India Pvt Ltd.


ICICI Bank

INNOVATIVE PRODUCTS

Retail Features

Salary Account Min balance 1000

Min balance of employees that a company should

have is 5

Withdraw cash , take loans , paying utility bills. etc

Citialert Provide information on credit cards , banking

accounts etc

Information encompasses reminders , alerts and

confirmations

Can be accessed from anywhere

Customer can choose the frequency , mode of

receipt of information as well as contents

Electronic payment

scheme

Allow a customer to pay his or her credit card dues

without issuing a cheque

The customer has to authorize the bank to claim the

amount directly from the bank account

Investplus Investment product combined with the life and

disability features

6 different kind of investment option to choose from

Facility provided to NRIs

Citibank ERA Specifically designed for employee reimbursement

Minimum delay in getting bills settled

Corporate Features

Cash management

service

Citicleared for metros

Citispeed is for the 100 big cities


ICICI Bank

Citicheck is for the next 500 c class cities

Citianywhere is for all the places

Paylink Disbursement product offering single window

coverage

Offered through citidirect online banking

Customers can send future dated instruction

Reconciliation and mis facility

Used to make statutory payments , utility

payments , salary payments etc

Newcitibanking Electronic platform offering global multicurrency ,

multi product information

Provides access to cash services ,security services,

global trade import services

Asset based finance Equipment finance for SMEs to structured finance

solutions like off balance sheet financing, portfolio

management etc

Thrust areas of the bank

A. Corporate

a. The bank continues to have a corporate focus with the intention of retaining its

position in the sector.

b. Capital market is major thrust area for the bank. In Bangalore alone there are 5-6

people working on this area.

c. Focus of the bank is on fee-based services with particular emphasis on cash

management system. It pioneered this facility in India in 1986 and continues to be

a leader processing volumes to 6% if the GDP of India.


ICICI Bank

d. Citibank is one of the largest providers of foreign exchange products in India. It is

the leading derivatives house in India.

e. Citibank has one of the largest overnight position limits approved by the reverse

bank.

f. The bank provides support service for exposure tracking and management

systems.

g. The bank also has the distinction of being the pioneer in securitization.

h. ISO 9001 certification for cash management, custodial services, treasury, and

funds transfer and trade services.

i. Citibank is the leading player handling bulk dividend and interest disbursements

for all major financial institutions, corporates, finance companies, PSU’s and

mutual funds. In 2000, the market share of Citibank in corporate dividend

disbursements was more than 60%.

j. The bank has been targeting corporates with revenues of $50 million or less.

k. India’s trucking business has been one of the targeted sectors.

l. The strategy envisages broad basing the earlier five focus sectors (export,

software, transporter, manufacturer, dealer) into 12 areas with equal emphasis to

all.

m. The bank is also helping multinationals setup shop in India while at the same time

taking Indian corporations abroad, thereby retaining both customers.

n. Citibank is also targeting the growing SME sector in keeping with the trend.

o. The bank is also planning to introduce two new products outflow business and

broker back office clearing (of institutional clearers)

B. Retail

a. In case of salary accounts, the bank targeted mid sized corporates to setup retail

bank accounts for their entire staff. In three years the bank doubled its clients.

b. Credit cards have been focus areas with Citibank offering 12 different kinds of

cards.


ICICI Bank

HDFC BANK

Basic facts

Revenue-Rs7108.7 crores

Net profit-310 crores

No: of branches-182

No: of ATM centers-1054

No: of customers-23 lakhs approx

HDFC bank limited was promoted by India’s premier housing finance company. The

housing development corporation limited (HDFC). Incorporated in august 1994, as a

scheduled commercial bank it started operation in January 1995. It was amongst the first

to receive approval from RBI to set up the bank in private sector. It entered in to strategic

business collaboration with chase Manhattan bank linking HDFC’s India corporate

clients to the chase network worldwide. In 2000, times bank limited was merged with

HDFC bank doubling the number of branches as well as the customers. NRE and NRO

accounts that were particularly non-existent grew as a result of the merger.


Himatsingka seide

PSI data systems

HLL

Nestle

SRF ltd.


ICICI Bank

Retail Features

Defense salary account Salary accounts of defense personnel

Zero balance account

Free international debit cards

Free fund transfer facility

Direct pay Register for net banking facility

Purchase and directly debited to the account of the

customers and credited to that of the establishment

No need to carry cash or cards

Freedom E-age savings account for people constantly on the

move

Min wage quarterly balance is a signified lower 1000 Rs

Owner of a mobile phone

One view Tracking and managing on line accounts

Bring together online accounts of HDFC bank , Citibank

and ICICI bank

Corporate Features

Supply chain

management service

End to end e–commerce solutions for collecting from

dealers and payment to suppliers

Reducing processing cost

Real time information

Corporate internet

banking

ENET provides secure access to banking information

It offers 12 layers of application and system security

Account information

Domestic payments

Customizable user interface

Payment gateway Payment are effected by debiting the account of

customers


ICICI Bank

Transactions are routed such that the merchant portal

does not get to see the credit card number

Cash surplus service Service related to investment of surplus banking

Selection of right investment for the desired maturity

period and risk profile


A. Corporate

a. HDFC bank operates on three horizons – being a market leader earning a regular

revenue stream; focusing on the retail business that would contribute 15-20%

growth.

b. Income offering services like cash management services, custody services and

distribution of financial products have been a thrust areas for bank.

c. HDFC bank is a dominant player in providing cash management services to

national and regional stock exchanges and is now clearing bank for the various

stock exchanges. In fact, it is the only bank offering the entire gamut of capital

market services.

d. For online trading, the bank has tied up with 40 brokers.

e. The bank has established e-net with 60 corporate customers to offer cash

management services through the net.

f. The bank is a member of the foreign exchange dealers association of India.

g. It is the first private sector bank to be authorized by CBDT to accept direct taxes.

B. Retail

a. HDFC bank has been focusing the retail side. It is aggressive on retail assets

through numerous retail products it offers.

b. It is the only bank to provide access to all 3 major international card networks on

its ATM network. The tie up with America express in particular has helped the

bank get several blue collared customers.


ICICI Bank

c. The bank is pushing defense salary accounts and hopes to have the salary

accounts of all the military personnel with in two years time.

THE HONKONG AND SHANGHAI BANKING CORPORATION LTD. (HSBC)

Basic facts

Revenue-Rs 13731.9 crores

Profit-Rs 301 crores

No: of branches- 39

No: of ATM centers- 200 (approx)


HSBC, one of the world’s largest international banks, has been in existence in India for

about 150 years. The bank opened its first bank – staffed agency in Calcutta in the year

1867. The bank has the distinction of being a pioneer in electronic banking in India with

ATM’s, credit cards etc. It was the first bank in the country to introduce computerization,

ATM’s etc. HSBC offers services ranging from current and savings account on the retail

side to syndication and import export facilities on the corporate side. The bank focus is

on-long term relationships with corporate clients based on its global connections and

extensive knowledge of Asia and Asian business.


Arthur Anderson

Compaq

Price water house coopers

The oberoi group

PFC

Titan industries


ICICI Bank

Mascot systems

INNOVATIVE PRODUCTS

Retail Features

Private clients One of the type of relationship banking

Deposits to be more than 50lakhs

Offers wealth management services ,transaction service,

custody etc

Power vantage Deposit more than one lakh

No cheque bounce facility

Auto sweep facility

Insurance service Offer both personal and business insurance

Team of insurance professional design employee benefit

programmes and insurance programmes for corporates

Corporate Features

Business account Avg. quarterly balance of Rs25000

Door step banking, special ATM cards etc

Business vantage

account

Similar to power vantage

Avg. quarterly balance of Rs100000

No bounce cheque protection facility

Telegraphic transfer, etc

Corporate credit

account

Bill sent directly to company

Given to employee based on net worth of the company

Bullion trade 145 years of expertise in precious metals

Worlds leading bullion house

One of the 2 foreign banks offering bullion trading in


ICICI Bank

India

Thrust areas for the bank

A. Corporate

a. Corporate and treasury accounts for 80% of HSBC India’s balance sheet.

b. The bank is planning to focus on the top end of the market and expects to earn Rs

75000 lakhs approx. from corporate finance.

c. Concentrating on telecom, cement, pharmaceuticals, FMCG and financial services

market.

d. Convert India into a global processing hub.

e. Increase investment in India and make India the testing ground for products and

services.

f. HSBC’s strategy is to move away from being a product – based selling strategy to

a need based on by concentrating on customer relationship management (CMR)

there by making quality of service as the differentiating features.

g. Another thrust area is institutional banking where it is among the top players.

h. With an existing 700 corporate clients, the group is trying to increase the business

from its global clients operating in India.

i. Offering factoring solutions to small and medium enterprises. Also planning to

launch products specifically for the SME segment.

j. The bank commands 45% of the market share in the bullion market.

k. Custody and clearing services commands close to 50% of the market cash

management service is ISO 9002 certified.

l. HSBC is the leader in providing project and export finance services to

governments, blue chip corporates and top tier banks.


ICICI Bank

B. Retail

a. The banks are shifting towards retailing banking. For this, it has moved from the

letter culture to the relationship culture. It has reoriented itself with wealth

management to select individuals and target market and consumer banking and as

its main priority.

b. Alliance with Punjab national bank for distribution of credit cards

c. Key retail strategy in cross selling of products

d. Tie up with Tata AIG for life and general insurance

e. Relationship discount on flexi finance

f. Special offers at different restaurants , hospitals and shops


ICICI Bank

STANDERD CHARTERD GRINDLAYS BANK

Basic facts

Revenue-Rs16303 crores

Net profit-Rs266.69 crores

No: branches-62

No: customers-22 lakhs(approx)

Standard chartered bank opened its first overseas bank in India in the year 1858 in

kolkata. It is one of the oldest foreign banks in India. The bank has a leadership in

emerging markets having had activities in Asia, Africa, Middle East and Latin America.

Subsequent to its merger with Grindlays bank to form standard chartered Grindlays in the

year 2001, it has become the largest foreign bank in India. However it has been the

subject of takeover speculation for a long time and is currently rumored to be in talks

with citigroup and Barclays bank.


Titan industries

Britannia industries

Tata coffee

Asea brown boveri

Infosys ltd

Madura coats

Ingersoll rand


ICICI Bank

INNOVATIVE PRODUCTS

Retail Features

Homesaver Helps reduce interest on loan

A deposit surplus funds in the homesaver account,

reduces the balances outstanding on which interest is

calculated effectively charging the EMI

Mileage Cash overdraft up to 65%of value of car less than 5 year

old

Post dated cheques not required

Service guarantee Every time a service is delayed beyond the guaranteed

time ,the customer can claim Rs 50 for each day of delay

Reminders The bank reminders for all sorts of events including

personal ones like wife’s birthday

The reminder alert will appear on the customers

personal home page

Secure messaging With a confidential login and pass word, through bank

can transfer information to its customers

Corporate Features

Private label Allow correspondent bankers to generate incremental

from trade in Asia

This is done by moving the domicile of the letter of

credit issuance to hongkong to take advantage of the


ICICI Bank

favorable pricing dynamics there

Cash management

services

Facility of investing end of day cash balance in countries

where regulations permit or the transfer of funds into

and out of accounts after bank hours


A. Corporate

a. Stan chart is the no: 1 in treasury in India being a market leader in local

currency and money markets. In fact till about 1998 the bank invested in the

retail sector, treasury was the only major contribute to revenues.

b. Merchant banking and asset management are going to be the key focus areas

for the bank on its corporate side.

c. The composition of the corporate portfolios is 40% MNC’s, 15% PSU’s and

45% large sized companies.

d. The bank is planning to focus on the Indian debt market.

e. Stan chart is a leader in trade finance and provides expert assistance with letter

of credit reimbursement.

f. It is a leading cash management supplier in the emerging markets with cash

product specialists and customer service centers providing customers with

effective solutions.

g. ISO accreditation for the operational capacity in international trade.

h. Stan chart is also a top private sector bond arranger.


ICICI Bank

B. Retail

a. The bank is trying to increase its share in the retail sector.

b. The bank is setting up kiosks in post offices around to leverage on the distribution

strength and customer base of the post office.

c. As a part of the deal with the postal department, the bank is planning to use speed

post to send its credit cards to its customers.

d. The bank is also planning to launch exclusive credit cards for the employees of

dept. of post.

e. Retail banking contributes close to 40% of the bank’s revenue and is expecteds to

increase to 60% by 2005.

f. Tie up with MUL to extend finances to its customers.


ICICI Bank

CHAPTER 4

ANALYSIS AND INTERPRETATION OF DATA


ICICI Bank

GENERAL ANALYSIS OF THE BANK

This section compares the various private sector banks using certain parameters for

analysis. All the figures given are for the year 2004-2005 given in crores of rupees.

REVENUE

Figure 1

In case of revenues for banks, larger the revenue earned by the bank, the better it is as

revenues contribute directly to the profitability of the bank. In this regard, Stan chart is

the undisputed leader with revenues of Rs. 15,302.8 crores. ICICI bank follows up as

close second with revenues amounting to Rs. 12, 056 crores.


ICICI Bank

NET PROFIT AND DEPOSITS

Figure 2

As in the case of any business, even in the case of the banking sector probability and

sources of funds are important. As such, higher the net profit and higher the deposits the

better for the bank. While high profits are indication of the bank, high deposits speak of

the extent to which the bank has been in a position to mobilize funds from customers.

ICICI bank has both the highest net profit as well as the largest deposit base among the

private sector and foreign banks that have been compared.

OPERATING EFFICENCY


ICICI Bank

Figure 3

Measured in terms of interest income/ average working funds, it speaks of the extent to

which the funds have been deployed effectively to earn interest revenue for the bank.

Higher this ratio the better. On this parameter, Stan chart is the most efficient of all the

banks. ICICI bank’s performance is close to the average performance of the banks.

Measured in terms of non-interest income/ average working funds, this ratio speaks of the

amount of fee-based income that a bank can earn from its working funds. Judged on these

parameters, the performance of GTB surpasses that of all other banks. ICICI bank with a

ratio of about 2.01 is once again close to the average performance of the banks.

EARNING QUALITY


ICICI Bank

Figure 4

Judged on the basis of operating profit/ avg-working funds, it speaks of how profitably

the funds of the bank have been used. Stan chart is the leader in this arena with a ratio of

4.15. ICICI bank is way below this figure with a ratio of 2.12 indicating that the funds

probably have not been utilized properly.

Taken as a ratio of other income / net interest income, the ratio speaks of the ability of the

bank to work on lower spreads. Based on this parameter, the performance of ICICI bank

is way beyond that of the other banks speaking of the ability of the banks to cut down

interest rates if the need arises.

PRODUCTIVITY


ICICI Bank

Figure 5

Productivity of the bank has been measured in terms of the business and profitability per

employee. It speaks of whether the bank is over or understaffed. Based on these

parameters, ICICI bank is leader with the highest ratios for productivity based on both

business per employee and revenue per employee.

ASSET QUALITY


ICICI Bank

Net NPAs / Net Advances (%)

Figure 6

Asset quality measured in terms of net NPA’s as a percentage of net advances speak of

the assets that are doubtful to return the interest due in the near future. Judged on this

basis, ABN Amro bank has been most judicious in its lending’s. the performance of

ICICI bank is close to average performance for all the banks.

MANAGEMENT QUALITY


ICICI Bank

RETURN ON ASSETS

Figure 7

ICICI HDFC GTB UTI STANCHART HSBC ABN

AMRO

1.7 1.9 1.3 0.7 4 0.9 1.6

Measured in terms of return on assets, it speaks of how successful the management was

in using the assets judiciously. On this parameter Stan chart once again out performs the

remaining banks. The performance of ICICI banks is again close to average performance

of the banks.

TRENDS AMONG THE PRIVATE INDIAN BANKS


ICICI Bank

Analysis made on the basis of any one year’s figures could always lead to faulty

conclusions as the year of review could have been an exceptional case. For example

around the year 2006 ICICI bank went in for its ADR and this could have affected the

return on assets of the bank. As such the consolidated figures of ICICI bank and ltd have

been taken and compared with the figures of the other banks for the year 2004-2005.

While the scope for error is still present as two years in still not a good indicator, the fact

that any banks have not published the audited results for the year 2005 has been a

constraining factor in this regard.

ICICI HDFC GTB UTI

Branches

2004 820 256 150 169

2005 1400 518 310 314

Size of the bank

Deposits ( in crores)

2004 47378 32658 21734 18924

2005 65749 48759 34976 27985

Net profit ( Rs in crores)

2004 1100 657 265 190

2005 1411 993 357 270

Operational Efficiency

Interest income / Avg Working funds

2004 9.0 4.7 10.7 10.8

2005 40.5 8.6 9.4 8.2

Non-interest income/ Avg working funds

2004 2.0 1.9 3.8 2.0

2005 6.3 1.1 1.7 1.5

Earning Quality


ICICI Bank

Operating profits / Avg Working fund

2004 2.1 4.2 4.13 2.6

2005 10.6 2.4 2.1 1.3

Other income / net interest income

2004 22.2 40.5 36 18.9

2005 15.7 14.7 18.3 18.6

Productivity

Business per employee

2004 46.44 9.42 8.55 12.49

2005 8.15 14.7 10.08 9.59

Operating profits per employee

2004 .98 .09 .12 .07

2005 .06 NA .17 .07

Table 1

A look at the ratios and figures and both for 2004 and 2005 reveals that as compared to

all the other banks in the private sector in India, ICICI bank has grown by leaps and

bounds. Its branch network has increased and so has its deposit base. But this was

primarily due to the merger between ICICI bank and the bank of Madura. However, the

profitability of the company has dropped drastically. This drop has come primarily from

the corporate lending of the erstwhile ICICI ltd. The net profit as well as the non interest

income continues to be way beyond the income of the other three banks in the private

sector. Similarly is the case with earning quality ratios. The fall in the profitability has

also affected the productivity ratios of the bank.

As far as the banking sector is concerned, banks in India have turned risk averse. Banks,

which are predominant financial intermediaries in the economy, are turning in to business

that has to be profitable. Banks are more interested in putting their money into risk free

government securities rather than to the industry. The reason for this could be that


ICICI Bank

lending to the industry entails higher risk, which impacts the banks capital adequacy

forcing the bank to raise equity, which is difficult in a barely active capital market. The

very fact that most of the foreign banks have treasury services as a thrust area proves the

point that banks are averse to lending to corporates.

While the importance levied on profitability has increased tremendously, banks on the

size are levying an almost equal importance. To fight foreign banks with global presence,

banks today have to be “big”. And size here is not just in terms of asset base but I also in

terms of geographical research. And to do so a vast majority of the banks going in

mergers. This is evidence by the plethora of mergers that have been taking place in the

last two years. Size is of importance t cut costs. If a bank wishes to become a universal

bank provided solutions to al the financial requirements of an individual or corporate, if it

wishes to have to ensure that they are big enough to provide services that reach the

customers.

Apart from size, one area that is gaining importance is the sector of fee-based income.

Being a risk free source of revenues, banks are more and more concentrating on pushing

fee-based activity. The market size of the fee-based activity is about Rs.111.1 bn. This

sector grew at about 83% the net increase in interest income in 2001 and amounted to

about to about 50% of interest income.

One other trend that has happened in the banking sector is the focus being levied upon the

retail side. It has been recognized that the retail lending attracts far greater spreads and

are a whole lot less risky than corporate lending. As such banks are using technology to

increase their offerings to the retail customers. Be it establishing more ATM’s or

introducing phone banking, internet banking and mobile banking, retail customers is

gaining importance today.

COMPARISON OF SPECIFIC PRODUCTS ACROSS BANKS


ICICI Bank

The section provides a board comparison of certain products across banks on the basis of

the essential features of the products. Specifically, we take a look at loan products, credit

cards and ATMs.

COMPARISON OF LOAN PRODUCTS

The loan products offered by various private sector banks and foreign banks have been

compared to various parameters and an effort has been made to find the bank that makes

the best offering to the customer in each of the loan categories.

Features ICICI HDFC UTI Citibank Standard

chartered

HSBC ABN

Amro

Loan

amount

New car

up to

90%

Old car

up to

80%

# Up to

80%

NA Up to

85%

# #

Interest

rate

New car

14.5%-

16.5%

Old car

18.5%-

20%

12.5%and

above

8.5%

14.55 NA 14.25%-

16%

18.5%

13%

and

above

18.5%

NA

Processing

fees

2%or

RS1000

if loan<1

lakh

0 0 NA NA 2% NA

Repayment Max of 5 Used car # # # # #


ICICI Bank

yrs 4 yrs

Processing

time

4 days at

maximum

2 days 15 days NA 7 days 2 days NA

Pre

payment

Allowed 6 months

to 5 years

Allowed After 6

months

Allowed After 6

months

Allowed

Pre

payment

fees

2% 2% 0 3% 0 2% if

more

than

25%

pa

4% if

more

than

25% pa

nil after

3 years

Guarantor No No Yes No No No No

Table 2

Car loan offered to customers have been compared primarily on the basis of loan amount,

interest rates, processing fees, pre-payment fees and processing time. The comparative

table reveals that of all the banks, the interest rates offered by HDFC bank are the most

competitive. HDFC bank offers the lowest rate of 12.5% for a small segment car as

against the other banks that charge a minimum of 14.5%. Additionally the bank does not

charge any processing fee at the time when 2% seems to be the norm. the offering of

HSBC is also very similar to that of HDFC bank with an interest rate that is 0.5% points

higher. Additionally they also charge a processing fee of 2%. But with a processing time

of just 48 hours it is likely to be the best alternative to a retail customer.


ICICI Bank

As compared to those two banks, ICICI bank offers as much higher rate of 14.5%. But

then this is on par with most of the other banks in the private and foreign sector. Further,

ICICI bank processes its loan in 4 days, which is significantly lesser than all other banks.

With most of its other features on par with the other banks, ICICI bank is likely to be the

third choice for all retail customers.

HOME LOANS

Features ICICI UTI Citibank Standard

chartered

HSBC

Eligibility 21-65 yrs 24-60 yrs NA 24-53 yrs 25-60 yrs

Interest rates Adj 11%

Fix 12%

Max

12.75%

NA 11.3%

12.3%

16.5%

Service

charge

1% 1% NA 1.5% 1.5% less

0.5% for

customers,

0.75% for

power

vantage

customers.1%

for premier.

Repayment 20 yrs 15 yrs 15 yrs 15 yrs 15 yrs

Processing

time

14 days 15 days NA 7-10 days 10-15 days

Pre-payment

fee

2% 0 0 0 0

Guarantor Yes only if Yes No No Only if loan


ICICI Bank

you are soft

ware

professional

is more than

12 lakhs

Loan

amount

Up to 85% Up to 80%

of 30 lakhs

Up to 80% Up to 85% Up to 85%

Table 3

In case of home loans, it has been assumed that the principal factors that would influence

the decision taken by a customer would be a loan amount, interest rates, repayment

period and the service charge. The various banks have been evaluated on the features. At

the out set it appears that both Stan chart and ICICI make offering that are equally

competitive. However ICICI bank charges a marginally lower rate both for interest and

for service charge. Additionally they also give a repayment period of 20 years as against

Stan chart that offers only 15 years. While ICICI bank does charge a pre-payment fee of

2%, it is assumed that this is not a major consideration for a customer who takes a loan.

As such ICICI bank scores better than the other banks in the offerings it makes and is

likely to be the first choice for a customer looking for home loans.


ICICI Bank

LOANS AGAINST SHARES

Features ICICI HDFC UTI Citibank Standard

chartere

d

HSBC ABN Amro

Eligilibility Should

hold

forms in

demat

form

# Tempor

arily

suspend

ed

# # # #

Loan amount Up to

60% of

200000

# # # # # #

Interest rates Max

14%

Max

15%

16% NA 17-19% 16.5% #

Processing

fees

0.5% NA NA # NA 1.5%

less,0.5%for

customers,0.7

5%for power

vantage

customers,1%

for premier

NA

Disbursement

time

4 days 3 days NA 1 week 1 week NA

Commitment

fees

NA NA NA NA NA Applicable

Over limit

fees

NA NA NA NA 2% 150+2%


ICICI Bank

Concessional

rate of

depositary

account and

car loans

Website

speaks

of ATM

phone

banking

services

NA NA NA NA #

ATM Free

ATM

cards

given

Debit-

cum

ATM

NA # Debit-

cum

ATM

#

Phone

banking

# # NA # # #

Table 4

Loans against shares have been compared on a number of features, the most important

being interest rate and processing time is particularly important in themselves are liquid

securities and in case of need a customer can always choose to sell the shares if he/she

wanted the money urgently. The rates offered by ICICI bank at 14% are the most

competitive. The processing time of about 4 days is also among the lowest. On this basis

it can be said that the offering of ICICI bank is most attractive. Particularly so since all

the other features like ATM cards are also provided by the bank.

Competition for the ICICI bank would be from HDFC bank, which offers loans at 15%.


ICICI Bank

TWO WHEELER LOANS

Features ICICI bank HDFC bank

Loan amount Up to 85% Up to 90%

Interest rates NA Max 11.5%

Processing fees 2% 2%

Repayment 3 yrs 3 yrs

Processing time 48 hours 48 hrs

Pre-payment Allowed Allowed

Pre-payment fees 2% 0

Guarantor NO NO

Table 5

In the two wheeler segment, there are only two players- HDFC bank and ICICI bank.

None of the other private sector banks or foreign banks offers two wheeler loans and any

person seeking to buy a two wheeler would have to take a personal loan to do so. Of

these two banks, the terms of offering of HDFC bank is more competitive as compared to

those of ICICI bank. Their interest rates are a competitive 11.5% and they don’t charge

any payment fee. However given the fact that ICICI bank makes most of the other

offerings, a retail customer might choose ICICI bank makes most of the other offerings, a

retail customer might choose ICICI bank just a frequently as HDFC bank. In other words

the competition is pretty stiff.


ICICI Bank

COMPARISONS OF ATM

ATM cards

Bank name GTB HDFC ICICI UTI HSBC CITI

BANK

ABN

AMRO

STAND

CHART

Eligilibility Savings

account

holder

only

All

account

holders

All

account

holders

All

account

holders

All

account

holders

All

account

holders

All

account

holders

All

account

holders

Withdrawal

limit

Rs

20000

per day

Rs

15000

per day

Rs

20000

per day

Rs

25000

per day

Rs

30000

per day

for all

saving

account

holders

and

100000

per day

for all

current

account

holders

Rs 30000

per day

Rs

30000

per day

Rs

30000

per day


ICICI Bank

Services Account

status,

request

for

cheque ,

demand

draft

request

Mini

statement,

transfers ,

bill

payments

Cheque

book

request,

cash

deposit and

withdrawal,

balance

enquiry

Cash

withdrawal,

cheque

request and

deposit,

account

statement

and fund

recover

Withdrawal

and deposit

of cash

Withdrawal

and deposit

of cash

Withdrawal

and deposit

of cash

Penalty NA Rs 100 in

case of

loss of

card

Rs 250 in

case of loss

of card

Rs 100 in

case of loss

of card

Rs 200 in

case of loss

of card

NA Rs 200 in

case of loss

of card

Table 6


ICICI Bank

The offerings most of the banks are the same in case of ATM card. However the

withdrawal limit incase of HSBC is better than Citibank or Stan chart in the sense that the

current holders of HSBC can withdraw greater amounts.

ICICI not only offers a lower withdrawal limit but also charges the highest penalty n case

of replacement of card.

COMPARISON OF GOLD CREDIT CARDS

Card

schemes

Citibank ICICI Stan chart HSBC UTI

Card

category

Gold

preferred

Gold Gold

standard

Gold card Gold

Association Master and

visa

Visa Both master

and visa

Master and

visa

Master

Validity International International International International International

Joining fees NIL Rs 3000 Rs 5000 NIL NA

Add on

cards

Rs 5000 Rs 3000 Rs 5000 NIL Rs 5000

Annual

charges

Rs 2000 Rs 2000 Rs 3000 Rs 1500 Rs 3000

Cash

withdrawal

Rs 25000 for

the first year

& then 60%

of the credit

limit

40% of the

credit limit

30% of the

credit limit

40% of the

credit limit

60% of the

credit limit


ICICI Bank

Interest on

cash

withdrawal

2.95% 2.5% 2.5% 2.95% 2.95%

Credit limit Rs 30000-Rs

250000

Rs 40000-Rs

300000

Rs 60000 Rs 50000-

Rs300000

Rs 250000

Interest rate 2.95% 2.5% 1.75% 2.95% 2.95%

Late fees 5% 15% of the

min amount

15% of the

min amount

Rs 1000 5%

Credit

period

45 days 52 days 52 days 51days 45 days

Lost card

liability

Before

report it is

the liability

to the

customer

No coverage No coverage No coverage Zero loss

card liability

Table 7

In case of credit cards, it has been assumed that the chief factors that make a difference to

the decision taken by a client are credit period, credit limit, interest rates, cash withdrawal

and annual charge. The comparative given above reveals that the offering of Citibank,

UTI, and Stan chart are all attractive. The terms offered by ICICI though not the best in

the market is either very close to the best in case of credit period of 50 days with that of

Stan chart or are comparable with the market average.


ICICI Bank

CHAPTER 5

SUMMERY OF FINDINGS, CONCLUSION AND

RECCOMANDATION


ICICI Bank

FINDINGS

The old prophecy that once a customer is a customer has become a myth in the

present day competitive world. Brand image on banking sector no longer works a magic

with the consumer. So to hold the customer to the bank and attract new consumers the

ICICI Bank must come up with strategies that is efficient and competent in the present

scenario.

After analyzing the response of the respondent through questionnaire and observation the

following were found in the study.

In the case of revenue of banks, Standard Chartered bank is the undisputed

leader. ICICI follows up as second in revenues.

In the case of net profit and deposits ICICI bank is leading with both the

highest net profit and largest deposit among the private sector and foreign

banks.

In the case of operating efficiency, standard chartered bank is the most

efficient of all the banks. Avg performance is shown by ICICI bank.

In the case of earning quality, standard chart is the leader in this arena with a

ratio of 4.15. ICICI bank is way below this figure with a ratio of 2.12

indicating that the funds probably have not been utilized properly.

In the case of productivity, ICICI is the leader with the highest ratio of

productivity based on both business per employee and revenue per employee.

In the case of asset quality, ABN Amro bank has been most judicious in its

landings. ICICI bank is close of Avg performance for all the banks.

In the case of management quality, stand chartered once again out performs

the other banks


ICICI Bank

RECOMMENDATIONS

Based on the findings regarding the performance and thrust area of the other competing

private sector and foreign banks, the trends in the banking sector and the future of the

sector as such an attempt has been made to point our areas that the bank can possibly

concentrate upon.

Corporate sector

1. Continue focus on cash management service: with more and more companies

preferring to outsource their collection and payment, the sector fee based activity

growing. Given the vast geographical presence of ICICI bank that can be

leveraged upon, the bank is better placed to offer these services at a competitive

rate as compared to foreign banks.

2. Continue targeting SME segment: small and medium enterprises through in

existence for long, have gained prominence only in the recent past. In fact ICICI

bank got this segment as a result of their merger with the bank of Madura. The

foreign banks have also only just started targeting this segment. As such

leveraging on the expertise of the personnel of bank of Madura, ICICI bank ca try

to move faster than competitive and make use of the first move for merger.

3. Focus on FX services: FX services are an area that is being concentrated upon

only by one bank- Citibank. None of the other banks are targeting this product.

With Indian industries looking for a global presence, the need for this product is

likely to grow. That apart, FX services from close to 13% of the market for fee-

based product. With that market growing, FX services would also grow. As such,

ICICI bank could target this product and try to make attractive offerings to the

clients in the sector.


ICICI Bank

4. Provide advisory services via specialists. The bank could appoint specialists in

certain definite industrial sectors who would not only evaluate projects for the

bank but would also give advisory services to the clients on the changes that make

in their investment. This person could be independent of any financing that the

bank would so that there is no clash of interest for him has evaluated the projects.

5. Single point interface: one of the complaints that clients had against private sector

and foreign banks was that, the company had to deal with multiple managers

depending upon the products that the company required. That is, for cash

management services there was one relationship manager, while treasury had

another. The companies found this highly disconcerting and preferred to deal with

a single individual from a bank, which could in turn interact with his colleagues.

6. Decentralization of decision making: another complaint that clients had against

banks was that there was a delay information transfer and approvals, primarily

because all banks branches had to contact the officials in their head offices before

approving clients. Decentralization on behalf of the bank would solve this

problem.

7. Flexibility and personalization of services: yet another reason, that some of the

companies mentioned, for their sticking on to the public sector banks was the

rigidity and impersonal touch with the foreign and private sector banks.

8. Collecting bank for direct and indirect taxes: an offshoot of the fact that clients

dealing only with one or two foreign banks were dealing with HDFC bank

because of their statues of being a collecting banker for direct taxes.


ICICI Bank

Retail sector

1. Loan against shares and house loans: given the growing importance of the retail

sector and the bank offerings being the strongest in case of house loan and loan

against shares, ICICI bank could look at pushing home loans and loan against

shares.

2. Tie up with American express: ICICI bank could look at possible tie up with

American express not only for traveler’s cheque but also for providing ATM

facilities to the customers of American express. This would get them high net

worth clients.

3. Continue corporate credit cards: corporate credit cards would help employees pay

official bills through cards. This would save both then and the company the

trouble of reimbursing the expenditure.

4. Electronic clearing house: with RBI giving it approval for establishment of an

electronic clearing house by the banks, a move in this direction would help banks

hasten their clearing process and provide retail- time on-line service to their

clients that would help corporate.


ICICI Bank

CONCLUSION


ICICI Bank

CONCLUSION

A careful study has been done in the sector of commercial banks in Bangalore to evolve a

competitive strategy for ICICI Bank through questionnaires, observation, interviews and

through proper guidance of respective faculties.

The study which lasted for one month has provided information to understand the

working of different Banks in Bangalore and their strength and weakness. The project

covers analyzing the private sector banks in India with special emphasis on the product

portfolio, both corporate and retail, evaluating the thrust areas and strategies of these

banks, and evolving a strategy for ICICI.

The study is restricted to 6 Banks namely Amro bank, Citibank, HDFC bank, HSBC,

Standard chartered and UTI bank and the facts clearly shows that Standard Chartered

Bank leads in revenue terms whereas ICICI leads in case of deposits & revenue. In the

case of operating efficiency Standard chartered bank is on the top that means it is the

most efficient bank. In the case of management quality, once again Standard chartered is

at the top.

The study helped me to understand that the organisation (ICICI Bank) is facing a sever

competition and it affects the profitability of the Bank. I was also able to understand

some of the draw backs and problems of the ICICI Bank such as Decentralization of

decision making which make delay in information transfer and approvals, non flexibility

and personalization of services, non availability of specialist to advice the banks clients

on various investment. I hope that if the bank is managed to overcome these draw backs

and problems, it can increase its efficiency.


ICICI Bank

BIBLIOGRAPHY


ICICI Bank

BIBLIOGRAPHY

www.google.com

www.citibank.com

www.icicibank.com

www.stanchart.com

www.hdfc.com

www.hsbc.com

www.alstavista.com

Capitaline database from the college.

Magazines, journals etc.

Financial management book.


http://www.alstavista.com/

http://www.hsbc.com/

http://www.hdfc.com/

http://www.stanchart.com/

http://www.icicibank.com/

http://www.citibank.com/

http://www.google.com/

ICICI Bank

ANNEXURE


ICICI Bank

INTERVIEW QUUESTION

Questionnaire for HDFC bank

(Questionnaire No 1)

1. “……to remain the clear market leader in mortgages in India”. Mortgages as in

retail loan? What part of HDFC’s corporations does a mortgage form?

What is HDFC’s share in the mortgages market?

2. What is HDFC’s share in the banking sector

3. “the bank signed a strategic business collaboration agreement with chase

Manhattan bank in February 1999.” To what end? How did HDFC gain? Is it

looking at a possible merger?

4. Times bank amalgamation- what value did it add in terms of branch network,

geographic reach, customer base, alternative delivery channels?

5. Leader in cash management – what is HDFC’s share? How do you differentiate

your service? Leader in what sense – volume of transaction or no. of customers?

6. What are HDFC’s treasuries operations like? How it is positioned with respect to

competitors?

7. In case of corporate banking/ retail banking, what is HDFC’s thrust area?

8. Is a defense salary account any different from a normal salary account? If so what

are additional features available on the defense salary?

9. Sweep-in-facility – is it not available for all fixed deposit accounts?

10. Where is HDFC placed among the banks in India?

11. Who are HDFC’s major competitors?

12. Which sector is HDFC targeting? Small scale, medium scale or large scale?

13. How deep is HDFC’s dealing in the forex market?

14. CMS is one of our thrust areas. What is HDFC doing to promote this area?

15. How does HDFC market its products? Is HDFC planning to enter bank assurance?


ICICI Bank

Questionnaire for UTI bank


1. “UTI provides an integrated service to an acquire ranging from strategic

vision through to completing the deal & integrating the acquired business”.

Who exactly are the clients and what are the services provided?

2. What are the corporate clients of UTI bank? Is bank targeting any particular

segment like say the large or the medium enterprises?

3. No of corporate clients UTI has?

4. What is the revenue per customer for UTI?

5. % shares both in corporate and retail sector?

6. Revenue per branch?

7. No of customers per employees?

8. Revenue per ATM?

9. Do UTI offers interest options?

10. Who are the major clients of UTI? What is the maximum amount lent to any

one customer? What is the basis by which UTI is differentiating its products

vis-à-vis its competitor’s products?

11. what is nature of tie up that UTI bank is planning with Belgium financial

group Forties?

12. UTI has set June’ 02 as the deadline for preferential allotment of shares to the

foreign strategic partner… how far has the discussion progressed?

13. How far has UTI’s plan of financing Tata steel succeed?

14. Did the tie up between UTI and exim bank finally work out?

15. You have a service ‘call linked products similar to MIB OR debentures’…

what exactly is this? How does it vary from MIBOR debentures?

Questionnaire for Citibank


ICICI Bank


1. Is a card a thrust area for Citibank? If so, what is Citibank doing to promote its

cards?

2. How many banks in India have an association with all the three card services

providers? Has any special benefit accrued to Citibank as a result of this

association?

3. What is the minimum no of employees required to start a suvidha account?

4. How successful has net banking been? How many customer use net banking?

5. What is the total no of customer Citibank has?

6. What is the total no of ATM centers that Citibank has?

7. What is the revenue per customer, revenue per employee and revenue per ATM

for Citibank?

8. Does Citibank also have some sort of a portfolio investment scheme?

9. Who are Citibank competitors in the retail segment?

10. Who are Citibank’s major competitors?

11. What is Citibank’s share in the Indian baking sector, specifically in the corporate

and retail sector?

12. What is the net return that Citibank gets from a corporate?

13. What is Citibank doing to push cash management service and capital market

products which are thrust areas for the bank?

14. Are there any innovative products that Citibank offers? What has the customer

response to such products been?

15. In the banking sector, a bank can survive and get clients only through

differentiation… how does Citibank differentiates its service?

Questionnaire for Stan Chart Bank


ICICI Bank


1. What is the total no of branches that Stan chart has in India?

2. What is the total no of ATM centers that Stan chart has?

3. What is the total no of customers Stan chart has?

4. What is the % of share of Stan chart is corporate and retail segment?

5. What is the revenue per customer per customer for Stan chart?

6. What is the revenue per branches?

7. What is the no of customer per employee? What is the revenue per ATM?

8. How often is it that you fail to live up to the services you promise to provide and

are forced to pay the Rs.50 per day penalty?

9. “Stan chart has maintained a long presence, since 1858, with particular emphasis

on relationship banking…. What do you mean by relationship banking? How are

you stressing on this area?

10. “Stan chart is leading player in the world’s major financial centers with clear

leadership in the emerging markets…” said about the global markets. What has

Stan chart does specifically for the emerging markets? What is its % markets

particularly India?

11. “Stan chart earned peer recognition when it over took Citibank in consumer

banking….” In what way has Stan chart overtaken Citibank?

12. What is Stan chart bank doing to increase its share on retail sector?

13. Do you have any charges for investment advisory service?

14. What is the charge incase of the fund transfer and other facilities available on

internet banking?

15. Secure measuring area is a service exclusive to Stan chart. But what sort of

information transfer takes place between customer and bank?

Questionnaire for HSBC


ICICI Bank


1. What is the total no of branches that HSBC has in India?

2. What is the total no of ATM centers that HSBC has?

3. What is the total no of customers HSBC has?

4. What is the % share of HSBC is corporate and retail segment?

5. What is the revenue per customer for HSBC?

6. What is the revenue per branch?

7. What is the no of customer per employee? What is the revenue per ATM?

8. The cost of the fund for HDFC bank is about 6.4% what is it for HSBC?

9. “HSBC India is large in telecom, cement, pharmaceuticals, FMCG and the

financial service market.” Does the same hold true for HSBC operations in

Bangalore also?

10. Going by the general trend in the market, is HSBC also looking at merging some

bank?

11. Generally how many banks are appointed as clearing bank by the BSE?

Which are the other banks offering this service?

12. “HSBC is one of the largest users of SWIFT in the world, and is a licensed

SWIFT vendor….” Is there any advantage in being a SWIFT vendor?

13. Is HSBC planning go for banc assurance?

14. “Our treasury and capital market group ranks among the largest such business in

the world…” in fact treasury contributes to 55% of HSBC’s total revenue. How is

the bank pushing this area?

15. Do any of the other banks offer co-branded credit cards?

Questionnaire for ABN AMRO Bank


ICICI Bank


1. What is the total no of branches that ABN Amro has in India?

2. what is the total no of ATM centers that ABN has?

3. What is the total no of customer ABN has?

4. What is the % share of ABN is corporate and retail segment?

5. What is the revenue per customer for ABN?

6. What is the revenue per branch?

7. What is the number of customer per employee? What is the revenue per ATM?

8. The cost of fund for HDFC bank is about 6.4%. What is it for ABN Amro?

9. ABN already has housing loans. So in what way it foray into home finance going

to be different from the housing loans?

10. “Dutch banking group ABN Amro NV set up global support center for its trade

and advisory unit in madras”…. What are its implications?

11. ABN Amro is looking at using India as a platform for scaling up its global

transactions services in India? What has bank done in this regard?

12. “Balance transfer programme” – is ABN the only bank making this offers?

13. You claim that ABN rates are among the highest in the country, what are the other

banks offering similar/ higher rates?

14. Does ABN provide real time on line service?

15. “Loyal discount on loans against securities”- is it specific to ABN?


Documents

Financial Analysis of Commercial Bank