Project Report on Bandhan Bank

Course: Strategic Management

Batch: 2020-22

Submitted To: Dr. Samar Sarabhai

Submitted By: Group 3

Anisha Khandelwal PGFA2005

Divya Sharma PGFA2015
Kundan Roy PGFA2026
Prachi Jain PGFA2036
Sakshi Purohit PGFA2046
Tanshi Mehan PGFA2056

1. Overview
 The company started in 1990’s by Chandra Shekhar Ghosh in Kolkata with a vision of
providing loans to small time traders which were fed up with high interest rates
charged by money lenders. They become a micro institution which provided loans and
made it easier for poor people to get them.

In 2010 Bandhan become the biggest Micro finance company in the country, and in
2015 the Bandhan Bank launched its first operations as a Bank on August 23, with a
vision of serving every section of the society. The company launched with 2523
banking outlets in the country.

In 2019 Bandhan bank had acquired the stake in HDFC Limited in GRUH Finance,
and in 2020 the company had 5302 banking outlets spread across 34 states and union
territories in India with a deposit of 71,188 crores and 17 awards won in past 5 years,
with a customer base of 2.25 crores and still counting and employees touching a mark
of 47,620.

A. Strategic Posture
I. Vision- To be a world class bank that offers convenient and affordable
financial solutions to all, in an inclusive and sustainable manner.
II. Mission- To provide our customers accessible, simple, cost effective and
innovative financial solutions in a courteous and responsible manner. To
create value for all stakeholders through a committed team, robust policies,
and superior systems and technology.

2. Corporate Governance

A. Board of Directors

Dr. Anup Kumar Sinha Non-Executive (Independent)

Chairman
Chandra Shekhar Ghosh Managing Director & Chief Executive
Officer
Dr. Allamraju Subramanya Ramasastri Independent Director
 Dr. Holger Dirk Michaelis Nominee Director (Caladium
Investment Pte. Ltd.)
N V P Tendulkar Independent Director
Ranodeb Roy Non-Executive Non-Independent
Director
Santanu Mukherjee Independent Director
Snehomoy Bhattacharya Independent Director
Subrata Dutta Gupta Additional Director (Independent)
Suhail Chander Additional Director (Independent)
Thekedathumadam Subramani Raji Independent Director
Gain

Competitors and its competitive Advantage

Utkarsh Micro Finance, India Shelter Finance, Spandana Sphoorty Financial Limited,
Capital First Limited, Capital Small Finance Bank, PNB Housing, Jan Laxmi co-
operative bank and Finlinker, AU Small finance Bank, IDFC First Bank.

Competitive Advantage

 In April 2014, Ghosh's Bandhan Financial Services became the first microfinance
company in India to be granted a banking licence by the Reserve Bank of India
(RBI). IDFC, an infrastructure financing firm, was the only other candidate, and it
was also granted a new bank licence.
 Compared to other universal banks, Bandhan occupies a unique position. Its DNA is
financial inclusion and serving our society's large underserved segments.
 It took Bandhan just 12 quarters to increase its CASA ratio from 21% in March
2016 to 40% in December 2018. IndusInd Bank, a larger competitor, took 33
quarters to meet that target, while Kotak Mahindra Bank took 40. The CASA ratio is
a crucial measure of a bank's financial health because it demonstrates its ability to
collect funds at lower borrowing costs.
 With 1,045 branches throughout the country, Bandhan Bank served a customer base
of 20.8 million people and had a loan book of 76,620 crore. The company's total
deposits for the second quarter, which ended in September, were 66,130 crore. The
fact that the bank says 50 percent of its customers are exclusive to them is
important.

Ghosh wants to nurture this loyalty and customer connection even more in order to
fuel the bank's next phase of growth.

The fact that Bandhan is still concentrating on microfinance presents a significant

challenge. Microfinance loans now account for about 62 percent of the bank's loan
portfolio. Ghosh is aware of this, and understands that the bank must diversify in
order to flourish, or risk being pigeonholed. “We want to be our customers' primary
 bank, meeting all of their banking needs, from home loans to personal loans to gold
loans. This will also help us diversify away from our microcredit focus,” he says,
adding that Bandhan must become a “universal bank.”

Bandhan has a universal banking licence, so it's a good idea to move away from the
risky microfinance (MFI) market. The bank has announced a five-year plan in which
MFI will account for 30% of the expanded book. MFI will continue to be one of the
most important portfolios, but it will not be the only one.

Ghosh, on the other hand, knows how to play to his strengths. “In terms of size and
scope, I cannot compete with SBI or HDFC Bank, but I can compete with them in
terms of service, particularly in rural markets where I have an advantage,” he says.
That can only mean good things for Bandhan Bank in the future.

3. External Environment Scanning

A. PESTEL-

1. Inflation as it directly affects Interest rates in the economy and thereby

bank’s incomes. This is simple. Inflation raises interest rates. Higher interest
rates provide more opportunity (spread) for banks to build in a profit margin.

2. Exchange Rates, its correlated with interest and inflation coupled with FIIs
interest as a higher valued or strong currency may discourage foreign inflows.
Exchange rate depreciation can also adversely affect domestic borrowers and
in turn lead to the deterioration of the asset quality of the bank. Even when a
bank does not have foreign currency assets and liabilities mismatch, it may
face credit risk and liquidity risk that can lead to insolvency.

3. Technology as it can directly help in reduction of transactions Cost in terms

of automation of operations Banking, as of today, cannot survive without
technology. Like it or not, there is more in the store of banking. Technology is
set to play a major role in changing how financial services will work across
the sector, making it easier for customers and more profitable for the providers
of such services.
 4. Consumer behavior in spending as more the extravagant people more will
be the loan book and income of the banks.

5. Legal framework, an efficient, foolproof and stringent legal environment

helps a healthy banking and lower NPAs.

B. Porter Five Forces- Porter Five Forces model is borrowed from the field of
microeconomics. The five forces that determine the industry structure of
organization are-

1. Bandhan Bank's suppliers' bargaining power - If Bandhan Bank's suppliers

have good bargaining power, they can extract a higher price from the bank.
Depositors are lenders to banks, so they have a lot of negotiating leverage and
they can go to another bank if they don't get good interest rates.

2. Threat of new entrants - if there is a significant risk of new entrants, existing

players may be able to gain lower profits to mitigate the risks. However, since the
entry barriers for new entrants are strong, the threat of new entrants is poor.

3. Threat of substitute products and services - If the threat of substitute

products and services is strong, Bandhan Bank must either continue to invest in
R&D or risk losing market share to disruptors.

4. Rivalry among existing players – When competition is fierce, existing players

like Bandhan Bank find it difficult to make long-term profits. Bandhan Bank faces
stiff competition from rivals such as HFDC Bank and IDFC First.

5. Bargaining power of buyers of Bandhan Bank – Buyers with strong bargaining

power tend to push prices down, restricting Bandhan Bank's ability to earn
sustainable profits; nevertheless, the bargaining power of Bandhan Bank's buyers
is relatively low since the bank's competitive advantage is relatively large, and
customers don't easily switch banks.

C. Porter Generic Strategy-

It is a way of developing business strategies with a competitive advantage. The
competitive advantage is basically the higher profit than the competitors in the
market. Businesses can obtain this competitive advantage by considering the
following sizes:

1. Scope: It means access to the business or customer to be targeted.

• Broad

• Narrow

Therefore, a business can target a small market segment (focus entirely on that
segment) or look at the entire market.

2. Source of Competitive Profit: It is the real source of competitive profit. It

shows how businesses aim to reap the benefits of competition over the market.

• Differentiation

• Cost

Businesses can acquire it by differentiating their product or services or by offering

lower costs.

• Cost Leadership: This strategy focuses on low cost and refers to a broader
market segment. The business objective of this strategy is to gain a competitive
advantage by being a cost leader. Cost savings are achieved by creating a quality
economy, maintaining close relationships with suppliers, and investing in new
technologies.

• Differentiation: This strategy focuses on doing something different /more

efficient and better than the rest of the market to make customers pay more. It is
achieved by providing high quality, creating a product value, and most
importantly making a wide distribution.

• Cost Focus: It is a focused market because it focuses directly on a small market

segment. In simple terms, we can say that cost leadership is a small part.

• Differentiation Focus: It is a very focused market because it is aimed mainly at a

small market segment. Simply put, it can be said that it makes a difference in a
 small group. Businesses in this quadrant identify small groups of consumers and
understand and fulfil their needs and wants. This has made a difference in the
small market.

Bandhan Bank lies in a quadrant called "Differentiation Focus".

A. As the bank has identified the need for people living in non-banking
regions and provides services to people who do not have access to
banking facilities. It is mainly focused on people living in rural and
small towns in the country.

6. Internal Environment
A. Strengths-
 Financial Statement and Balance Sheet of Bandhan Bank is very strong and can
invest in multiple projects that can also increase the revenue stream, Return on
Sales & other metrics.
 Brand Equity and Awareness –The brand recognition plays an important role in
attracting new customers who are looking for solutions in Entrepreneurial finance
industries.
  Diverse Product Portfolio – The Brand Portfolio of Bandhan Bank has
diversified product which target customer from different segment in the domestic
market, which enabled Bandhan Bank to increase revenue source and profit.
 Superior product and quality- Bandhan Bank can compete with other global
players in National and International Market as they have enough evidence with
some high-quality of products and services which can also further increase its
market share

B. Weakness-
 Environmental issues – Bandhan bank has not been very keen on environmental
issues and according to Sujit Jagadale and Debasish Maitra consumers do not tend
to support this due to environment protection being an integral part of the
business.
 Customer Dissatisfaction – The customer base of Bandhan bank is not
particularly satisfied with the bank as reflected from reviews on online forums and
the bank should improve the pre and after purchase experience of customers.
 Organization Culture – The managers of the Bandhan bank tend to have more
control over the information and keep it very secretive and there seems to be a
communication gap between divisions, as Sujit Jagadale and Debasish Maitra
have pointed out the information kept so secretive can pose a roadblock in the
organisation leading to missed opportunities in future growth.
 Implementation of Technology– Bandhan bank is a little behind on the
technological front as it has been able to implement it on the backend of the
system but still faces a challenge in implementing it at the front end.

7. Analysis of Strategic Factors

A. Evaluation by Various Matrices
I. VRIO- The VRIO scheme is a tool for evaluating a company's internal
capabilities and expertise to see how they can have a long-term strategic
advantage.

Value: Does it provide customer value and Rareness: Do no other competitors possess
competitive advantage. it?
Is there a consumer benefit and a competitive
advantage?
No: The company is at a strategic
disadvantage, and it would need to reinvent
its finances and capabilities to turn a profit.
Yes, in your VRIO analysis, once you have
established value, move on to rarity.
Is Bandhan Bank interested in the resource?
Is the resource appealing to Bandhan Bank?
A company's financial capital, intellectual
resources, marketing expertise, and
operations management are all necessary
resources.
Imitability: Is it costly for others to imitate
it?
No: If a resource has meaning and
availability but is inexpensive or easy to
recreate, a company gains a temporary
competitive edge. To keep ahead of the
market and differentiate your offers, you will
need to bring in a lot of effort—rethink your
plan.
Yes, this is correct: Provide an important,
uncommon, and difficult-to-copy service;
now it is time to get down to business.
The majority of companies are now in danger
of being disrupted. The Bandhan Bank's main
distinction continues to be difficult to
No, businesses have merit but are not rare,
keeping them on a level playing field.
Competing in the industry is more complex
when resources are valuable not abundant
(but not impossible). Looking back and
rethinking is a smart idea.
Yes: Now that your business has assessed the
worth and rarity of your service, the next
hurdle to overcome is imitability.
"Bandhan Bank" needs services that are
either scarce or costly. Existing competitors
and entrants will be able to quickly access
them and enter the competitive scene if they
aren't rare.
Organization: Is the firm organized to
exploit the resources?
No, fully appreciating the importance of
valuable, unique, and difficult-to-copy tools
would be difficult without internal
organisation and assistance. Businesses
would gain an untapped strategic edge and
would have to reconsider how to put in place
the requisite structure.
Well, as a company defines the four elements
of the VRIO scheme, it has accomplished the
overall goal of long-term competitiveness.
replicate. Imitation of Bandhan Bank
products on a larger scale will take two
forms: product replication and rivals
producing replacement products that threaten
the existing market structure.

Organizational Competence & Capabilities for Resource Optimization – It evaluates a

company's ability to profit from a valuable, rare, and difficult-to-replicate resource in the
marketplace. When it comes to abuse stage, Bandhan Bank products can be examined from
two perspectives. Is the organisation able to fully exploit the resource's potential, or is there
still space for expansion?

I. IFAS- As we can seen in the IFAS matrix that the greater impact to a
factor is the well built balance sheet and financial statement which carries
the weightage of 0.80 that means the company can invest in new multiple
projects and can increase the revenue stream, and the last position there is
weakness that is customer disatisfaction whose weightage is 0.60 which
show that the bank should focus on customer pre purchase and after
purchase experience compared to our major competitor that is IDFC First
Bank. The difference between our strength and weakness is (2.38-
1.90=0.48)

II. EFAS- As we can see in the EFAS matrix the biggets opportunity we have
is Growing Market Size with na score of 0.80 that means the company can
grow its market size which can also add feature on customer preference
and the last position is its threats that is increaesing bargaining power of
buyers compared to our major competitor that is IDFC First Bank. The
difference between our opportunities and threats is (2.10-1.50=0.60)

III. TOWS - TOWS matrix refers to Threats, Opportunities, weakness and

strength, It helps us to analyze our external opportunites, threats and
 internal strength and weakness. This matrix consists of 4 quadrants these
are: Strength and Opportunites, Weakness and Opportunities, Strength and
Threats, and Weakness and Threats.

Here we have tried to analyze all the quadrants of the Tows matrix for the
Bandhan Bank after looking at all the strengths, weaknesses, opportunities
and threats that can be considered crucial for the sustanibilty of the
business and Based on our analysis of external and internal enviornment:

1. Strength and Opportunites

 Growing market share according to customer by maintaining a strong
financial statement.
 Using Ecommerce and social media to improve brand awareness and
maintaining a strong brand equity
2. Weakness and Opportunities
 As there is more disposable income, we can improve our services as
customer is willing to pay for it
 As the world is moving towards a digital banking system, we can use
AI and other technologies to improve our mobile banking, internet
banking and customer satisfaction
3. Strength and Threats
 As industry has fixed pricing for most of the products which are
similar across companies, we can diversify our products so we can
price them accordingly.
 As new companies enter the market with aggressive pricing, we can
undermine them with our superior product and quality services as
customers tend to be loyal if they are satisfied
4. Weakness and Threats
 If the customer is dissatisfied with the pricing of the products, we
cannot change much as there are guidelines regarding them.

IV. IE Matrix- The Internal External Matrix, or short IE matrix, is a model

that combines internal and external market variables into a single
 suggestive model. The EFE and IFE matrix models are combined into the
IE matrix. Total IFE score indicates the strength of business or competitive
position of the business. Whereas total EFE score indicates industry
attractiveness. As indicated in the given diagram, it has a scale of 1.0 to
4.0 on both x axis and y axis and ranges from weak to strong.

Total IFE score of bandhan bank= 3.8

Total EFE score of bandhan bank= 3.6

When we plot the above 2 scores on the IE matrix, then point lies in the 1 st
quadrant. It shows that Bandhan bank lies in the 1st quadrant. Both the scores
i.e., IFE and EFE are strong.

Strategy for bandhan bank is to Grow and Build.

V. Grand Matrix:
A grand strategic is a tool for building more and different strategies for an
organization. It has four quadrants strategies that can be used in any
organization. This has two dimensions; one competitive position, and the
other market growth. This matrix provides reliable organizational
strategies to measure each quadrant of the matrix.

Quadrant I (Strong Position of Competitiveness and Fast Market

Growth): Bandhan Bank lies in this quadrant. Companies in this case are
in a very good strategic position. Bandhan bank has a very strong
competitive base. In addition, it also operates in fast-growing growth
markets. The idea is to strengthen and focus on the current foundation of
competition. In addition, the bandhan bank has enough money, so it can
move on to consolidation strategies, but not by diverting the focus away
from their current competitive advantages.

Quadrant II (Weak Position of Competitiveness and Rapid Market

Growth): Companies in Quadrant II should consider their current market
strategy. Although their market is growing, they are not able to compete
effectively, and they have to decide why their current strategy does not
work and how they can better adapt to increasing their competition.
Product development, market development are appropriate strategies for
those businesses. With Quadrant II companies operating in a rapidly
growing market, a robust strategy is often the first decision to be made.
 Quadrant III (Weak Competitive Position and Small Market
Growth): Companies in this quadrant compete in the fastest-growing
sectors with poor competitive positions. To prevent further and ultimate
deaths being stopped, these companies must make drastic changes as soon
as possible. At the forefront should be capital costs and asset reduction
(retrenchment). Another option is to divert money from the current
company to other locations.

Quadrant IV (Strong Positioning Competition and Low Market

Growth) - Companies have a strong position in the market but operate in a
slow growth industry. To create a larger market for goods and services,
such companies must incorporate the same or unrelated integration. These
companies are also able to present a variety of programs in attractive
growth environments.

B. Review of Mission and Objectives:

a. Diversification of asset portfolio with modern underwriting and collection
capabilities.
b. Strengthening people capabilities, including by hiring fresh talent, for
growth.
c. Development of in-house technology, analytics, and digital capabilities.
d. Consolidate CASA by developing deeper customer engagement leveraging
digital and analytics.

8. Future Goals
A. Key Organization Future Goals
The Bank has stated clearly that it aspires to be an affordable financial
institution that provides straightforward, cost-effective, and creative financial
solutions while being courteous and responsible. Through a dedicated team,
solid policies, and superior systems and technologies, it aims to generate value
for all stakeholders.
 The following goals drive the Bank's 2025 vision:
1. Be a banker for the new Indian at every stage of their aspiration journey.
2. Meeting the needs of a developing India
3. Enabling entrepreneurs to expand their businesses
4. Value-based ‘employer of choice' – to recruit top-tier, empowered employees.

In order to drive the vison of the Bank, the following would be the key focus
areas in the next 5 years –
• Diversification of asset portfolio with modern underwriting and collection
capabilities.
• Strengthening people capabilities, including by hiring fresh talent, for growth.
• Development of in-house technology, analytics and digital capabilities.
• Consolidate CASA by developing deeper customer engagement leveraging
digital and analytics.
B. Strategy of the Bank

Given the vast untapped potential of India's microfinance industry, the bank will
continue to broaden its current geographic scope and expand its presence in
underbanked areas in the medium term. The bank has participated in a variety of
social development initiatives aimed at improving education, health, poverty
alleviation, livelihood promotion, and market development as part of its strategy.
The bank will continue to communicate with the community in the future
through strategic initiatives aimed at making a positive contribution to society.
The Bank is dedicated to implementing its strategy while maintaining
professional competence, corporate governance, and ethical principles, as well
as all legal and regulatory requirements.

C. Strategic enablers: Key differentiators

The bank will use its microfinance expertise to upgrade its top-tier microfinance
customers and provide them with individual loans. GRUH Finance's skills and
experience will also be used by the bank to gain a good foothold in the
affordable housing market. With growing demand from a variety of business
entities across the country, the SME segment is expected to play a significant
role in the country's growth story.
Internal controls have been introduced in the Bank's processes and divisions.
These controls are implemented through a set of well-defined policies and
procedures that are checked on a regular basis. To ensure the reliability and
accuracy of financial data, the Bank has a system for checking controls for
their design and operational effectiveness at regular intervals.