Swadeshi Case Study

8/10/2019 Swadeshi Case Study

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CASE STUDY : 02

Summary

Mr. Kiran Nag the New chairman and managing director of Swadeshi bank has taken up the

challenge to change the stodgy, slow moving image of the bank the reason can be the dramaticchanges in in banking industry . Although the banks fundamentals are strong there are huge

Nonperforming assets and is incurring losses past four years. The chairmen believed that fund

management and export finance where excellent pockets and this will be the biggest challenge.

In comparison with private sector banks, the private sector banks enjoy the advantage of being

highly automated and incurring comparatively very less transaction cost it is a big threat to

nationalized banks and here in person to Swadeshi bank.

Considering the services which Swadeshi bank already offers it can easily upgrade to universal

banking but here it is not the best option as cost and profitability are the biggest stumbling

blocks. The London based consultancy firm, sigma Inc. has asked Mr. Nag to identify the corecompetencies of Swadeshi Bank. Mr. Nag is developing a strategic architecture focusing on

competence - building and providing a routeMap for the future with the help of top managers

of the bank. Mr. Nag is keen on decreasing the dependence on interest income and focusing on

fee - based income. The focus areas which can help in evolving some core competencies are

Mindset, Infotec, Marketing, Credit Risk Management, Exchange Risk Management; Fee based

income and Talent Search. Swadeshi Bank is in thoughts of divesting a part of its equity to the

public. Swadeshi bank can be excelled in fund management and export finance.

Q1. Examine the main problems plaguing Swadeshi Bank?

Answer: Main Problems plaguing swadeshi Bank are:

Swadeshi Bank has been incurring losses in the last 4 years and the ratio of our Non-

Performing assets to total assets was 16%

Bank had created vast infrastructure which is now been overtaken by technology

(infrastructure has become both asset and a liability)

Private sector had an advantage of automation which had cut their transaction cost.

With this advantage they focus more on retail banking, corporate finance, and

investment banking which creates threats to the profitability of the nationalized banks

For expansion cost could spin out of control so these costs and profitability could be

the biggest stumbling blocks.

Bank has to identify unique core competence as for restructuring the number of

competencies what the bank had identified was not enough as these were identified

by the other nationalized banks too.

Excessive dependence on interest income is another problem faced by Swadeshi

bank.


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There was a need to downsize the workforce but the President of Swadeshi bank

employee union was not convinced as the strong union would have opposed any such

plan.

Swadeshi bank wanted to grow in personal banking but this would take at least 6

months to firm up the plans.

Q2. Make a SWOT analysis of the Ban, bring out clearly its strengths and weaknesses,

opportunities and threats.

1) Strengths:

Large network branches

Large asset base

Provided Privileged access to public sector unit accounts

Brand equity in the small scale sector

Services already provided by Swadeshi Bank: Project Finance, Retail Finance,

Housing Finance, Export Finance & Asset Management

2) Weakness:

High ratio of NPAs to total advances

Lack of technology

Cost is the major factor coming in way of universal banking as bank is facing

losses since last 4 yrs

Dependence on interest income

3) Opportunities:

Fund management

Export finance

Easier to upgrade into One-Stop shop where all the customers requirements are

fulfilled under one roof

Exchange risk management skills should be developed as these skills are in

demand

Building treasury Management

Retail banking is emerging as a new growth area

Devising innovative sources of funds.

Developing business strategies.

Providing value added services. Differentiating services to secure competitive edge.

4) Threats:

New norms

Unmatched degree of automation of private Sector

Increasing number of Non-Banking Finance Companies


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Q3. What are the key areas for the survival of Swadeshi Bank that must be addressed to on a

priority basis by the new Chairman and Managing Director?

Answer: key areas for the survival of Swadeshi Bank that must be addressed to on a prioritybasis by the new Chairman and Managing Director are:

To appoint Sigma India to reengineer the banks processes

To enlarge fee-based business, i.e. Deriving income from non-fund-based activities

& venturing into housing finance and leasing.

People management has not been a strong point at Swadeshi Bank. Instead of training

people from scratch, they must recruit top-notch managerial talent from other

oragnisations.

Reducing the level of Non-Performing assets (NPAs)

Differentiating services to secure a competitive edge To find other ways of increasing banks other income.

Q4. Critically examine the possibility of a strategic alliance with an international partner for

Swadeshi Bank.

Answer: No, at present Swadeshi Bank should not go for strategic alliance with any global bank

Because

Due to large unfocussed workforce, they could face problems in finding the right

partner.

Moreover, the company is in losses since last 4 years, in this situation for an alliance,

a foreign bank might insist on acquiring a stake in Swadeshi bank.

Swadeshi should work on brand equity as well as services which they provide in

small scale should work out in large scale.

Documents

Swadeshi Case Study