Banking, Financial Services & Insurance

(BFSI) Sector
- Opportunity for Hitachi

Submitted By: (In Alphabetical order):

Barnaa L.Dekaa
Justin Thomas
Shreya Gupta
Delhi School of Management
Delhi Technological University, DELHI

Table of Contents
1. BFSI Sector in India 1
1.1.

Introduction

1.2.

SWOT Analysis 2

1.3.
1.4.

Porters Five Forces Analysis 2

Past Trends & Future Predictions of Growth 2

2. BFSI Institutions/Organizations
1
2.1.
Categories of BSFI Institutions 1
2.2.
Category wise List of All BFSI Institutions
2.3.
Demographic & Other Trends 1
3. Opportunities for Hitachi
3.1.
3.2.
3.3.

About Hitachi 1
SWOT Analysis 1
Business opportunities in BFSI Sector 1

4. Conclusion & Recommendations

1. BFSI SECTOR IN INDIA

1.1.

INTRODUCTION:

Banking, financial services and insurance (BFSI) is an industry term for companies that
provide a range of financial products/services. Banking may include core banking, retail,
private, corporate, investment, cooperatives and the like. Financial services may include
stock-broking, payment gateways, mutual funds, non-banking financial companies, pensions
funds, mutual funds and other smaller financial entities etc. Insurance can be of two types:
life (e.g. life insurance, health insurance) and non-life (e.g. general insurance like insurance
of car, bikes etc.).

1.2.

SWOT ANALYSIS OF INDIAN BFSI SECTOR

STRENGTH

WEAKNESS

Untapped and Unbanked Rural Market

Educated Manpower
Significant Driver of GDP, growth and
Employment
Vast networking, increasing no. of branches
and ATMs

OPPORTUNITY

THREAT

1.3.

PORTERS FIVE FORCES MODEL FOR INDIAN BFSI SECTOR

Force 1 - Bargaining Power of Buyers: All banks normally offer services that are
homogeneous in nature. Therefore, customer possesses all knowledge of how banks work
and what kind of services are on offer. Customer has a high bargaining power and low
switching cost. Factors affecting bargaining power are: long-term finance, competitive banks,
availability of large no. of alternatives, margins and volumes. Customer loyalty and
technology used also makes a difference in power of buyers.
Force 2 - Bargaining Power of Suppliers: Bargaining power of suppliers is low in BFSI
Industry as there are many rules and regulatory norms set by RBI for the BFSI companies.
Few alternatives available which lowers bargaining power. Suppliers are risk averters and
want regular income. Bank is safe option than other investment alternatives. So, they do not
consider other alternatives very seriously, which lowers their bargaining power. The factors
affecting bargaining power of supplier are RBI involvement, rise in investment avenues,
providers of funds, interest rates and valuations, overseas operations, economic outlook of
country.
Force 3 - Competitive Rivalry: Competition in BFSI sector is intense because of presence
of Public, Private, Rural, Cooperative, Foreign, Investment Banks, Insurance companies and
NBFCs. Acquisitions and mergers also are a result of increased rivalry. Factors affecting
competition: all banks provide nearly homogeneous services, price being the only
competitive advantage, players are of same size with similar strategies, barriers of exit are
high and growth rate of market is low.
Force 4 - Availability of substitutes: Threat from substitutes is high especially from NonBanking Financial Companies (NBFCs) with good market share as well as from mutual
funds, small cooperative banks, T-bills, Government securities, debentures, gold, real estate
etc. The rate of return with using investment houses is also greater than a bank. Factors
affecting this are: low switching cost of customer, risk-taking attitude of customers and so on.

Force 5 - Threat of new entrants: Due to stringent RBI norms, high initial investment and
high barriers to entry and exit the threat of new entrants is low in BFSI Sector. Although it is
worthwhile to mention that barriers to entry in banking industry are less and many private
and foreign banks are entering in the market. Government policies are becoming more
supportive to start a new bank with less statutory requirements. According to FDIC between
1977 and 2002 an average of 215 new banks opened in India. Factors affecting new entrants:
customer switching costs, undifferentiated product, market growth, regulations, accessible
distribution, skilled manpower, entry of foreign banks.

Fig. : PORTERS FIVE FORCES MODEL FOR BFSI INDUSTRY

2. BFSI INSTITUTIONS/ORGANIZATIONS

2.1.

CATEGORIES OF BFSI INSTITUTIONS/ORGANIZATIONS

2.2.

LIST OF ALL BFSI INSTITUTIONS/ORGANIZATIONS

Please refer the excel sheet attached here

List of all BFSI

Institutions in India.xlsx

2.2.1. Public, Private & Foreign Banks

2.2.2. Cooperative Banks & Regional Rural Banks

2.2.3. Insurance Companies

2.2.4. Investment Banks

2.2.5. List of BFSI institutions listed in top 100 NSE listed Companies with contacts

Please refer the attached excel sheet below:

NSE-BSE Listed BFSI

Companies.xlsx

2.3. DEMOGRAPHIC AND OTHER TRENDS OF THE BFSI INSTITUTIONS

3. OPPORTUNITIES FOR HITACHI IN BFSI SECTOR

3.1.

ABOUT HITACHI

Hitachi India Pvt. Ltd. (HIL) markets and sells a wide range of products ranging from Power
and Industrial Systems, Industrial Components & Equipment, Air Conditioning &
Refrigeration Equipment to International Procurement of software, materials and
components. Some of Hitachi India's product range includes Semiconductors and Display
Components. Hitachi also supports the sale of Projectors, and Interactive White Boards
(StarBoard).
Some interesting facts about Hitachi: (Source http://www.hitachi.co.in/about/hitachi/index.html)

Hitachi first started out as an electrical repair shop for a copper mining company in Hitachi City.
Hitachi's first products were electric motors.
Hitachi, Ltd. was established in 1910.
It took Hitachi 84 years to establish the 4 regional headquarters.
The inherent meaning of is corporate statement "Inspire the Next" means to breathe life into the

coming age.
Hitachi is responsible for generating about 50% of Singapore's electric supply.
The majority of mobile phones in Europe have a Hitachi component in them.
Hitachi developed the Automated Teller Machine (ATM) which enables bills to be pressed and
disinfected in 1994.
Hitachi developed the world's 1st 4.7 GB DVD-RAM standard compliant DVD Camcorder in
2000.
In the Japanese context, "Hi" means "Sun" while "tachi" means "Rise" which is why HITACHI is
known as "Sunrise" i.e. "ri li" in Chinese/Japanese.

3.2.

SWOT ANALYSIS OF HITACHI

S - Strengths

Hitachi has roughly 27% of the global

market share
Nearly 5 times as much as their nearest

W - Weaknesses

Systemic
High debt burden
Cost structure
Bad acquisitions

competitor
India 2014 : 6% increase in market share
Aided HHLS in declining U.S. market
growth
Differentiation:

Trade marked items

Comp & Benefits
Work/Life Balance
Senior Management
Culture & Values
Career Opportunities
International presence:

Global diversifications and ability to expand

rapidly (i.e. Asia)

O - Opportunities

Innovation
Online market
Emerging market
Benefits in further maintaining costs to

T - Threats
Bad economy
Change in tastes
Volatile currency

provide better margins

3.3.

BUSINESS OPPORTUNITIES FOR HITACHI ACs IN BFSI

SECTOR

According to the 15th census of India, 2011, only 58.7 per cent of households were availing
banking services in the country. While compared to the previous census 2001, there is a

significant improvement in access to banking services, it indicates that still over 40 per cent
of India's 1.2 billion people remain financially excluded.
3.3.1. Public and Private Sector Banks:
Scope:
India's banking system is dominated by state banks, which accounted for more than twothirds of industry assets at the end of March 2012, the latest RBI data showed. Sanjiv Bhasin,
the India CEO at the Singapore-based DBS Bank says, "If the Indian economy grows at 5%,
the financial services sector will typically grow three times faster, at about 15%."
According to a master circular issued by RBI in 2013, domestic scheduled commercial banks
(other than RRBs) in rural, semi-urban and urban centres have been given permission to open
branches in North Eastern states and Sikkim without prior permission from RBI. Banks are
encouraged to open branches in underbanked districts and rural centres and a list has been
provided by RBI of these underbanked areas. RBI has also made mandatory that 25% of new
private sector bank branches are in semi-urban and rural centres on an ongoing basis. Where
the banks do not find it viable to open branches in rural areas, they may open Satellite
Offices. Extension counters of banks are allowed to be opened in the premises of banks.
Also, RBI has permitted Scheduled Commercial Banks to install Off-site/Mobile ATMs at
centres/places identified by them, without permission from the Reserve Bank.
Challenges:

Increasing the penetration of banking in untapped rural markets.

Tackling demand-supply mismatch.

Credit disbursement to the priority sector.

Maintaining asset quality.

Improving risk management mechanism.

Revolution of Information Technology

Cyber-crime Facing the New Wave of criminal

High transaction costs of Non performing Assets

More stress testing

Dealing with heightened regulatory scrutiny

Facing another economic downturn?

Intensified competition

Opportunities:

A growing economy,

Banking deregulation,

Increased client borrowing,

An increase in the number of banks,

An increase in themoney supply,

Low government-set credit rates and

Larger customer checking account balances.

3.3.2. Foreign Banks: Scope, Challenges and Opportunities.

Scope:
Currently, foreign banks capital, reserves and surplus account for 15% of the overall banking
sector. KC Chakrabarty, former deputy governor of the Reserve Bank of India (RBI) says
India offers more banking licences to foreign banks than local players. But Foreign banks
often complain that their growth opportunities in India have been limited because of
restrictions on branch expansion so RBI has also promised foreign lenders a 'near-national'
treatment in branch expansion if they decide to create subsidiaries in India. This will be after
RBI reviews the priority sector lending (PSL) norms set for them. These banks would be
given capital gains tax and stamp duty benefits and allowed to acquire local private banks.
After more than one and a half years RBI has received applications from four foreign banks
to set up wholly-owned subsidiaries in India: Singapore-based DBS Bank and SBM Bank
(Mauritius) and others have not been named. RBI would soon come out with guidelines on
On-tap licences for niche banks (On tap would mean there is no closing date). Also, RBI
continues to allow branch expansion of existing Foreign banks in India on an annual basis.
As wholly owned subsidiaries (WoS) Foreign Banks will be able to penetrate to remote
corners of India. NPAs of foreign banks like Deutsche Bank have dropped from 0.57% to
0.33% in 2014 and net profit of HSBC, Deutsche Bank, CitiBank etc. have increased almost
twofold.
Challenges:
According to a survey, conducted by PricewaterhouseCoopers (PwC) these are the following
challenges a foreign bank faces when trying to Indian Economy:
41% of respondents rated regulatory change as the topmost concern for their bank.
33% said that political stability was their prime concern.
88% of respondents ranked China as the most preferred investment destination.

 12% of respondents ranking south-east Asia and the Middle East as the most attractive. None of
the respondents felt that India was the most attractive investment destination.
48% of respondents ranked regulatory environment as the most difficult aspect of the banking

industry.
19% said political uncertainty was a key challenge.
Foreign banks face added complexity on compliance with capital requirements.
Indian market is not perceived to be ready for sophisticated financial products.
69% of respondents said that lack of branches was the topmost concern for them.
Increasing no. of NPAs
Opportunities:

Around 70% of respondents perceived India to be a huge market for their banks products and
services.
70% respondents agreed that foreign exchange and corporate lending were major areas
contributing to growth of the foreign banks.
SMEs are very much on the agenda for foreign banks operating in India.
Social, mobile, analytics and cloud (SMAC) is the new buzzword across the banking landscape,
professed to be a huge catalyst for growth of the banking sector as a whole.
Most foreign banks are not really present in the retail segment so opportunity lies there.
Government removed cap on single-brand retail and allowe multi-brand retail for overseas
companies.
Foreign Banks are facilitating Indian banks with limited resources to be internationalized as they
have vast network.
3.3.3. Investment Banks: Scope, Challenges and Opportunities
Scope:
Challenges:
Opportunities:
3.3.4. Insurance Companies: Scope, Challenges and Opportunities
Scope:

Challenges:

Need for Accuracy in Pricing of Risks.

Rural Market still under penetrated.

Pension Market remains untapped

Opportunities:
3.3.5. Regional Rural Banks: Scope, Challenges and Opportunities
Scope:
Challenges:
Opportunities:

3.3.6. Co-operative Banks: Scope, Challenges and Opportunities (Scheduled Urban

Co-operative Banks and State Co-operative Banks)
Cooperative banking is retail and commercial banking organized on a cooperative basis.
Cooperative banking institutions take deposits and lend money in most parts of the world.
Cooperative banking includes retail banking carried out by credit unions, mutual savings
banks, building societies and cooperatives, as well as commercial banking services provided
by mutual organizations (such as cooperative federations) to cooperative businesses.
The co-operative banks are broadly categorized into two main categories:
(a)Short term lending oriented Co-operative Banks - within this category there are three
sub categories of banks i.e. State co-operative banks, District co-operative banks and Primary
Agricultural co-operative societies.

(b) Long term lending oriented Co-operative Banks - within the second category there are
land development banks at three levels i.e. State level, District level and Village level.
Scope:
Challenges:
Opportunities:
3.3.7. NBFCs

(Non-Banking

Financial

Company):

Scope,

Challenges

and

Opportunities
Non-Banking Financial Companies (NBFC) have rapidly emerged as an important segment
of the Indian financial system. Moreover, NBFCs assume significance in the small business
segment as they primarily cater to the credit requirements of the unorganised sector such as
wholesale & retail traders, small-scale industries and small borrowers at the local level.
NBFC is a heterogeneous group of financial institutions, performing a wide range of
activities like hire-purchase finance, vehicle financing, equipment lease finance, personal
loans, working capital loans, consumer loans, housing loans, loans against shares and
investment, etc. NBFCs are broadly divided into three categories namely (i) NBFCs
accepting deposits from banks (NBFC-D); (ii) NBFCs not accepting/holding public deposits
(NBFC-ND); and (iii) core investment companies (i.e. those acquiring share/securities of
their group/holding/subsidiary companies to the extent of not less than 90% of total assets
and which do not accept public deposits.)
While the functions of NBFCs are just like banks, there are few differences between both the
institutions. These are:
(i)
(ii)

NBFC cannot accept demand deposits;

NBFC is not part of the payment and settlement system as well as it cannot

(iii)

issue cheques drawn on itself and

Deposit insurance facility of Deposit Insurance & Credit Guarantee
Corporation is not available for NBFC depositors unlike in the case of banks.

Scope:

The segment has witnessed considerable growth in the last few years and is now being
recognised as complementary to the banking sector due to implementation of innovative
marketing strategies, introduction of tailor-made products, customer-oriented services,
attractive rates of return on deposits and simplified procedures, etc.
Challenges:
Opportunities:

3.3.8. Gujrat International Finance Tec-city (GIFT):

GIFT is conceptualized as a global Financial and IT Services hub, a first of its kind in India,
designed to be at or above par with globally benchmarked financial centres such as Shinjuku,
Tokyo, Lujiazui, Shanghai, La Defense, Paris, London Dockyards etc. GIFT Master Plan
facilitates Multi Services SEZ with IFSC (International Financial Services Centre) status,
Domestic Finance Centre and associated Social infrastructure. GIFT SEZ Limited has been
formed by GIFTCL at Gandhinagar with the prime focus on development of IFSC and allied
activities in SEZ. It is pertinent to note that the primary focus will be on financial services.
The core objectives of developing IFSC in GIFT Multi Services SEZ are as under To realize the vision of the Government of India to emerge as a major economic power.
Facilitate the implementation of the Governments strategy for the development of a financial
hub in the South Asian sub-continent.
Position the IFSC as a world-class zone for the long-term provision of office/service
accommodation and high technological, economical and commercial infrastructure
GIFT SEZ is divided into well-defined Processing & Non-Processing areas with emphasis on
integrated development such as limited residential & recreational facilities to make the area
lively 24 x 7.
PROCESSING AREA
International Financial Service Centre (IFSC)

NON-PROCESSING AREA
Related Commercial and Office Buildings

International Techno Park & International Service Apartments & Residential Flats
Market Zone
Commodity Exchanges

Hostels and Restaurants and Food Court

Global trading exchanges

Business Hotel, Shopping Centre, Retail

Stores and Banks

Insurance

Training center for Financial Services

Offshore Banking

Medical Centre

IT/ ITeS

Entertainment Centre/ Theatre

KPO/ BPO services

Post Office, Telephone Exchange, Police

Station, Security, etc.

Data Centre

Regulators Offices

GIFT expected to benefit the economy in multiple ways like:

Generation of additional economic activity.
Promotion of export of goods and services.
Promotion of investment, both foreign and domestic.
Creation of employment.
Development of infrastructure.
Phase-1 of GIFT is expected to commence in the later part of this year and would be completed
in 35 years. Subsequent phases would be implemented thereafter.

4. CONCLUSION AND RECOMMENDATIONS