Group 3 idbi bank (strategy)

REPORT ON STRATEGIES OF

IDBI BANK

Submitted To Submitted By

Dr. Deepak Singh Group # 3

Aarti Sharma PGFB1101

Abhishek Kapoor PGFB1102

Anuja Srivastava PGFB1106

Shreya PGFB1144

Siddharth Rai PGFB1146

JAIPURIA INSTITUTE OF MANAGEMENT, NOIDA GROUP-3

OVERVIEW OF BANKING SECTOR

Recently, the RBI took a few important steps to make the Indian Banking industry more robust and healthy. This includes de-regulation of savings rate, guidelines for new banking licenses and implementation of Basel Norm III. Since March 2002, Bankex (Index tracking the performance of leading banking sector stocks) has grown at a compounded annual rate of about 31%. After a very successful decade, a new era seems to have started for the Indian Banking Industry. According to a Mckinsey report, the Indian banking sector is heading towards being a high-performing sector

Growth Drivers in Indian Banking Industry.

High growth of Indian Economy: The growth of the banking industry is closely linked with the growth of the overall economy. India is one of the fastest growing economies in the world and is set to remain on that path for many years to come. This will be backed by the stellar growth in infrastructure, industry, services and agriculture. This is expected to boost the corporate credit growth in the economy and provide opportunities to banks to lend to fulfill these requirements in the future.

Rising Per Capita Income: The rising per capita income will drive the growth of retail credit. However, with an increase in disposable income and increased exposure to a range of products, consumers have shown a higher willingness to take credit, particularly, young customers.

New Channel: Mobile banking is expected to become the second largest channel for banking after ATMs, New channels used to offer banking services will drive the growth of banking industry exponentially in the future by increasing productivity and acquiring new customers.

Financial Inclusion Program: Currently, in India, 41% of the adult population doesn’t have bank accounts, which indicates a large untapped market for banking players. Under the Financial Inclusion Program, RBI is trying to tap this untapped market and the growth potential in rural markets by volume growth for banks.


Future Outlook of the Banking Industry

Currently, there are many challenges before Indian Banks such as improving capital adequacy requirement, managing non-performing assets, enhancing branch sales & services, improving organization design; using innovative technology through new channels and working on lean operations. Apart from this, frequent changes in policy rates to maintain economic stability, various regulatory requirements, etc. are additional key concerns. Despite these concerns, we expect that the Indian banking industry will grow through leaps and bounds looking at the huge growth potential of Indian economy. High population base of India, mobile banking – offering banking operations through mobile phones, financial inclusion, rising disposable income, etc. will drive the growth Indian banking industry in the long-term. The Indian economy will require additional banks and expansion of existing banks to meet its credit needs.

Current Situation

Today, the banking sector in India is fairly mature in terms of supply, product range and reach. As far as private sector and foreign banks are concerned, the reach in rural India still remains a challenge. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate. Till now, there is hardly any deviation seen from this stated goal which is again very encouraging.


PROFILE OF IDBI BANK

IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004, the erstwhile IDBI converted into a Banking company (as Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agri products and services.

Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state-of-the-art information technology platform, to structure and deliver personalized and innovative Banking services and customized financial solutions to its clients across various delivery channels.

As on March 31, 2012, IDBI Bank has a balance sheet of Rs.2.91 lakh crore and business size (deposits plus advances) of Rs.3.92 lakh crore. As a Universal Bank, IDBI Bank, besides its core banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market, Investment Banking and Mutual Fund Business. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders.


Major competitors of IDBI bank are HDFC and ICICI bank in private sector and SBI in Public Sector.

HDFC BANK Market Strategy Emphasizes The Following:

Increase market share in India’s expanding banking and financial services industry by

following a disciplined growth strategy focusing on quality and not on quantity and

delivering high quality customer service.

Leverage our technology platform and open scalable systems to deliver more products to

more customers and to control operating costs.

Maintain current high standards for asset quality through disciplined credit risk management.

Develop innovative products and services that attract the targeted customers and

address inefficiencies in the Indian financial sector.

Continue to develop products and services that reduce bank’s cost of funds.

Focus on high earnings growth with low volatility.


1. Industrial banking expertise for businesses2. State of art IT support and technological innovations3. Customised banking solutions4. Has a strong employee base of over 14,000 STRENGTHS

1. Less penetration across India especially rural areas

2. Strong competition from other powerful branded banks3. Extremely low number of branches and ATM’s

Weaknesses

1. Personal banking and improved customer service2. Favourable Government schemes

Opportunities

1. Economic crisis2. Highly competitive environment due to Indian and foreign banks3. Complex financial products by foreign banks

Threats

SWOT ANALYSIS OF HDFC BANK

MARKETING STRATEGY OF ICICI BANK

• India’s second largest bank• 614 branches and extension counters• 2200 ATM’S• Biggest private sector bank in India• Most valuable bank in India in terms of market capitalization• Described by the competitors and industry expert in one word – “Aggressive”


Right strategy for the right products.

Superior customer service vs.

competitors.

Lower response time with efficient and effective service

Strength

Customer service staff needs training.

Sectoral growth is constrained by low unemployment levels and competition for staff.

Weaknesses

Could extend to overseas broadly.

Could seek better customer deals.

Fast-track career development

opportunities on an industry-wide basis.

opportunitiesLegislation could impact.

Very high competition prevailing in

the industry.

Lack of infrastructure in rural areas

could constrain investment.

Threats


Large Capital base.

Low operating costs

Strengths

Workforce Responsiveness.

Not Equal to International Standards.

Weakness

Market Expansion.

Outsourcing of Non Core Business.

Opportunity

Entry of many Foreign Banks.

Increased Competition from other private banks.

Threats

SBI`s Strategies in the current scenario.

SBI have set up capacity in places where they are not very strong. Its time for them to follow overall SBI philosophy of planning new branches, given the huge untapped potential. Besides, this is also the best time to benefit from their past expansion, since there is a lot of trust in SBI. Brand SBI is very strong, while people may be generally cautious about some other brands. They can not only tap the potential better but can also provide a safe and transparent insurance alternative to the public. The bank is entering into many new businesses with strategic tie ups – Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc – each one of these initiatives having a huge potential for growth.


Brand name Market Leader Wide Distribution Network Government Owned Diversified Portfolio

Strengths

Minor hindrances Hierarchical

management Lags modernisation

Weaknesses

Merger of associate banks with SBI

Opportunities for public sector banks

New Branches and ATM's Expansion on Foregin soil

Opportunities

Net profit of the year has decline from 9166.05 in the year FY 2010 to 7,370.35 in the year FY2011

This shows the reduce in market share to its close competitor ICICI

Customer prefer to switch to private banks and financial service providers for loans and mortgages, as SBI involves stringent verification procedures and take long time for processing.

Threats

Mission Statement of IDBI Bank

Delighting Customers with our excellent service and comprehensive suite of best-in-class financial solutions; Touching more people’s lives with our expanding retail footprint while maintaining our excellence in corporate and infrastructure financing; Continuing to act in an ethical, transparent and responsible manner, becoming the role model for corporate governance; Deploying world class technology, systems and processes to improve business efficiency and exceed customer’s expectations; Encouraging a positive. Dynamic and performance-driven work culture to nurture employees, grow them and build a passionate and committed work force; Expanding our global presence; Relentlessly striving to become a greener bank.

Mission Evaluation Matrix

COMPONENTS DESCRIPTIONCustomers YESProducts or services YESMarkets NOTechnology YESConcern for survival, growth, and profitability YESPhilosophy YESSelf-concept YESConcern for public image YESConcern for employees YES

Vision

To be the most preferred and trusted bank enhancing value for all stakeholders.

Objectives of IDBI Bank

Objectives

The main objectives of IDBI are to serve as the apex institution for term finance for industry in India. It includes:

(1) Co-ordination, regulation and supervision of the working of other financial institutions such as IFCI, ICICI, UTI, LIC, Commercial Banks and SFCs.

(2) Supplementing the resources of other financial institutions and thereby widening the scope of their assistance.

(3) Planning, promotion and development of key industries and diversifications of industrial growth.

(4) Devising and enforcing a system of industrial growth that conforms to national priorities.


PESTEL ANALYSIS:


PESTEL

POLITICAL

Government policy and budget

Monetary Policy

FDI Limits

ECONOMICAL

Inflation rate

Hike in interest rate

LEGAL

RBI policy change in

cash reserve ratio

and statutory

liquidity ratio.

ENVIRONMENTAL

Government regulations like subsidiaries

TECHNOLOGICAL

Core banking solutions

ATM

E-banking

M-banking

SOCIO CULTURAL

Demographic of large population

Changes in life style

FIVE PORTER’S MODEL:


Threat of new entrants

o Low barriers

o Globalization &

liberalization

o Government

Bargaining power of buyers

o High bargaining

power

o Homogenous service

o Large number of

alternatives

o Low switching cost

Rivalry among existing firms

o Intense competition as there is competitors

like SBI, PNB, Allahabad Bank, etc.

Threat of substitutes

o High threat from

mutual funds,

government

securities etc

Bargaining power of suppliers

o RBI rules

o Few alternatives available

THREAT OF SUBSITUTES- HIGH

COMPETITIVE RIVARLY- HIGH

BARGAINING POWER OF BUYER- HIGH

BARGAINING POWER OF SUPPLIER- HIGH

THREATS OF NEW ENTRANTS- LOW

VRIN Analysis of IDBI Bank

TANGIBLE RESOURCES V R I NPhysical Resources:Land, Building, Branches, ATMs, Infrastructure xFinancial Resources:Deposits xEquity xLoans and Interest xInsurance x xMutual Funds x xTechnological Resources:Finacle Software xOrganizational Resources:KIOSK xNEFT/RTGS X

INTANGIBLE RESOURCESHuman Assets and Intellectual Capital :Number of Employees xTraining x x x xExperience x x x xShare holders and Stake Holders

Brand, company image, reputational assets:

Ranking x xAwards and Recognitions x x x x

Relationships:

Customer Relationship Management x x xCustomized Service x x x x

Company culture and incentive system:

Employee Referral x xContract Hiring x x x xAppraisal System x x x


Value Chain Analysis


Infrastrusture

HRM

Tech. dev.

Procurement

Inbound Logistics

Operations Outbound logistics

Marketing and Sales

Services

(Use of finacle software,Vast number of employees)

Recruitment through exam and campus placement ,Training

Use of latest software for administrative work and security

Institution tie up, Marketing &Tie up with dealers.

Maintaining file of each customer and clients

Bank employee records

Filling form

Verification

Approval in case of loans

Sending documents from branch office to head office

Transferring

amount/cash to customer account

Promotion of employee

Interest rate of

loans and saving accounts

Training to employees

Customer relationship management

Group 3 idbi bank (strategy)

Economy & Finance

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