Case Study

State Bank of India The Big Daddy of Indian banks

ICICI Bank Limited An Indian Bank with global identity

Punjab National Bank A leader in the small bank category

Bank of Baroda A national bank with international standards

Axis Bank The Fastest growing Indian bank

Canara Bank The Farmers’ Bank
HDFC Bank Ltd A private sector bank with huge capital structure
IDBI Bank Ltd The Best Public Sector Bank
 ASSESTS($ BRANCHES ATM’S Employees
Billon)
State Bank of 352.12 16000 9000 200299
India
ICICI Bank 108.7 2518 5808 35000
Limited
Punjab 67.4 5000 3700
National Bank
Bank of 50.00 3000 1100
Baroda
Bank of India 44.32 3358 2000

Canara Bank 48.8 3057 2000 47389

HDFC Bank 39.72 1725 4234

Ltd
IDBI Bank Ltd 34.16 758 1300 8969
 Personal Banking
 Savings & Deposits
 Loans
 Cards
 Wealth Management
 Global Private Clients
 Corporate Banking
 Transaction Banking
 Treasury Banking
 Investment Banking
 Capital Markets
 Custodial Services
 Rural & Agri Banking
 Structured Finance
 Technology Finance
 Business Banking
 Current Account
 Business Loans
 Forex
 Trade
 Cash Management Services
 NRI Banking
 In Rs-crores
YEAR INCOME PAT
2004-05 11338.10 2005.2

2005-06 17517.83 2540.07

2006-07 28457.13 3110.22

2007-08 39467.92 4157.73

2008-09 38250.39 3758.13

2009-10 33184.58 4024.98

 Company INCOME (rs cr.) PAT (rs cr.) Market Cap (rs
cr.)
ICICI BANK LTD 38,250.39 3,758.13 97,030.41
19,770.72 2,244.94 76,251.27
HDFC BANK LTD
AXIS BANK LTD 13,550.95 1,815.36 41,389.35

YES BANK LTD 2423.90 303.84 7,895.55

ING VASYSA BANK 2,724.28 188.78 3,721.99

LTD.

STATE BANK OF 85,909.36 9,166.05 171,011.34

56,821.55INDIA
In Crores FY2006 FY2007 FY2008 FY2009 FY2010

Net 4187 5637 7304 8367 8114

Interest
income

Non 4055 5915 7996 7160 6297

interest
income

Treasury 928 1013 815 443 1181

income

TOTAL 9170 12565 16115 15970 15592

 Net Interest income – NIM
 Treasury Income
 Non Interest income
Fee Income
Lease income
 Fee generating activities – Non traditional
 Investment Banking
 Securities Brokerage
 Insurance Activities
 Merchant banking
Fee generating activities –Traditional
 Lockers
 Letter of credit
 Online bill payment
 Credit cards
 Cash management services
 NIM - Net interest Margin
 CASA – Low cost deposits… Current
account Saving account
 Capital Adequacy Ratio (CAR)
 Repo rate
 Reverse repo rate
 Statutory liquidity ratio
 Cash reserve ratio
 NPA
 Cash Reserve Ratio (CRR) - Every scheduled
commercial bank is required to maintain
with the RBI every fortnight a minimum
average daily cash reserve equivalent to 6%
of its Net Demand and Time Liabilities
(NDTL) outstanding as on the Friday of the
previous week.
 Statutory Liquidity Ratio (SLR) - Every
bank is required to maintain at the close of
business every day, a minimum proportion
(24%) of their Net Demand and Time
liabilities as liquid assets in the form of
cash, gold and un-encumbered approved
securities.
 Current Account Savings Account (CASA):
It is the proportion of current account and
savings account deposits in total deposits

 Net interest margin (NIM) – It is the ratio of

banks net interest income to its average
assets. It basically depicts banks net
interest earning capability from the assets
deployed.
 Capital Adequacy Ratio (CAR) – Capital
adequacy is determined as a ratio of capital
funds to total Risk Weighted Assets of the
bank. Currently, the minimum CAR to be
maintained is 9%.
 Capital structure of banks is made up of 2
tiers
 Tier I refers to core capital consisting of
Capital, Statutory Reserve, Revenue and
other reserves, Capital Reserve.
 Tier II is comprised of Hybrid Capital,
Revaluation Reserves , Undisclosed
Reserves and General Provisions
 Tier I Capital should at no point of time be
less than 50% of the total capital. This
implies that Tier II cannot be more than
50% of the total capital.
 Non-Performing Assets (NPA) – These are
advances where the principal and interest is
not paid by borrower for 90 days

 Net NPA = Gross NPA - Provisions

 When the banks have shortage of funds
they can borrow either from Reserve Bank
of India | or from other banks
 The repo rate is the rate at which the banks
borrow this excess funds. .....6.25%
 The borrowing bank mortgages its
government securities to carry out this loan
transaction
 A reduction in the repo rate will help banks
to get money at a cheaper rate
 In a reverse repo Reserve Bank borrows
money from banks by lending securities.
The interest paid by Reserve Bank in this
case is called reverse repo rate. ....5.25%
 Established in 1994, ICICI Bank is today the
second largest bank in India and among the
top 150 in the world.

 In less than a decade, the bank has become

a universal bank offering a well-diversified
portfolio of financial services.
 It currently has assets of over USD 109
billion , and provides services through a
network of about 2516 branches, 5800
ATMs and a 3200-seat call centre & has a
presence in 19 countries

 The hallmark of this exponential growth is

ICICI Bank’s unwavering focus on
technology
 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 specialised
subsidiaries in the areas of investment
banking, life and non-life insurance, venture
capital and asset management
 ICICI Bank was set up when the process of
deregulation and liberalization had just begun
in India, and the Reserve Bank of India had
paved the way for private players in the
banking sector, which at that time was
dominated by state-owned and foreign banks
 Serving a majority of the country’s populace,
state-owned banks had a large branch
network, with minimal or no automation and
had little focus on service.
 Foreign banks, on the other hand,
deployed high-end technology, had
innovative product offerings, but had a very
small branch network that serviced only
corporates and individuals with high net-
worth
 Sensing an untapped opportunity, ICICI Bank
decided to target India’s burgeoning middle class
and corporate segment by offering a high level of
customer service and efficiency that rivalled the
foreign banks, on a much larger scale, at a lower
cost.
 A crucial aspect of this strategy was the emphasis
on technology.
 ICICI Bank positioned itself as technology-savvy,
customer-friendly bank.
 To support its technology-focused strategy, ICICI
Bank needed a robust technology platform that
would help it achieve its business goals.

 After an intense evaluation of several global

vendors, ICICI Bank identified Infosys as its
technology partner and selected Finacle, the
universal banking solution from Infosys, as its
core banking platform.
 Finacle, the universal banking solution from
Infosys, empowers banks to transform their
business by leveraging agile, new-generation
technologies.
 This modular solution addresses the core
banking, treasury, wealth management,
consumer and corporate e-banking and web-
based cash management requirements of
universal, retail, corporate, community and
private banks, worldwide
 An open systems approach and low Total
Cost of Ownership were some of the key
benefits Finacle offered the bank.

 Unlike most banks of that era, ICICI Bank

was automated from day one, when its first
branch opened in the city of Chennai.
 Technology-led Excellence
 Niche marketing
 Innovative products and customized
solutions
 Foreign collaboration
 Retail Banking
 Rural Banking and agri-business
 Project Finance
 International Banking
 Mergers and acquisitions
 Any where any time bank through
networking the branches via satellite
(VSAT)
 Instant transfer of funds between branches

 With this technology ,the banks in position

to offer world class products – Merchant
banking, forex dealing , high speed funds
transfer all at lower cost.
 True 24x7 banking-Finacle enabled zero
downtime at both the central and branch
level server, ensuring banks are up and
running on a 24x7 basis, across electronic
delivery channels and branches

 Leveraging Straight-Through-Processing
(STP) -Tight integration with all delivery
channels using standard message protocols
 The powerful STP feature ensures that
several transactions are completed end-to-
end, without manual intervention.
 Unique extensibility features Finacle’s
unique Xtensibility tool kit provides the
flexibility to Banks, enabling it to easily and
rapidly add new business rules, launch new
products, and modify processes -
 Some of the modules that have been rolled out
with the help of Finacle’s unique Xtensibility tool
kit :
 Direct Sales Agent (DSA) Module
 Complaint and Request Tracking System
(CARTS)
 Cash Management System (CMS)
Banks have increased operational efficiency due
to integration across delivery channels, quicker
time-to-market, lower TCO and increased ROI.
 It refers to the dealing of commercial banks
with individual customers, both on liabilities
and assets sides of the balance sheet.
 Fixed, current / savings accounts on the
liabilities side
 Mortgages, loans (e.g., personal, housing,
auto, and educational) on the assets side, are
the more important of the products offered by
banks.
 Consumer
Durables
7%

Auto
28%
Home
49%

Other personal
Loans
16%
CHANGING CONSUMER DEMOGRAPHICS
 Growing disposable incomes
 Youngest population in the world
 Increasing literacy levels
 Higher adaptability to technology
 Growing consumerism
 Fiscal incentives for home loans
 Changing mindsets-willingness to borrow/lend
 Desire to improve lifestyles
 Banks vying for higher market share
 Indian business houses require foreign
currency for their overseas and domestic
expansion
 To build stable funding sources and expand
private banking operations ICICI bank has
opened subsidiaries in UK, Russia, and
Canada , branches in Singapore, Hong kong ,
Dubai Srilanka etc
 Targeting NRIs and providing them best
service and value added /tailor made
facilities
 ICICI launched NRI-Edge –a privilege
offering for affluent NRI’s, along with
global Indian and a innovative Call & Remit
offering
 ICICI customer base stands at 500000 NRI’s
with a market share of 25% in the inward
remittances
 Given the rapid growth of Indian economy,
infrastructure development and investment
across sectors is critical for sustaining
economic growth
 Many sectors such as Power / Telecom
/Transportation/Mining are expected to
witness large investments
 ICICI has been very aggressive in lending to
these sectors
 Rural India is the key to sustaining India’s
growth momentum and ICICI’s rural
banking strategy seeks to match the
growing demand for financial services in
rural areas
 Offering innovative products both to retail
customers and corporate customers
 Loans at fixed and floating rates
 Home loans with saving facility
 Unfixed deposits
 New products in the area of international
banking- SWIFT
 Internet banking
 Targeting NRIs and providing them best
service and value added /tailor made
facilities

 Focused on customers with high income

HNIs and corporates in mid segment
 Offering innovative products both to retail
customers and corporate customers
 Loans at fixed and floating rates
 Home loans with saving facility
 Unfixed deposits
 Derivatives and options
 New products in the area of international
banking- SWIFT
 Internet banking
 Our retail strategy is centered on a wide
distribution network, comprising our
branches and offices and dealer and real
estate developer relationships; a
comprehensive and competitive product
suite; technology-enabled back-office
processes; and a robust credit and analytical
framework.
 ICICI Bank Bank Of Rajasthan
Market Cap (Rs 99125 1471
Crores)
Branches 2009 458
No Of Employees 34596 4075
Gross NPA % 5..06 2.8
Capital Adequacy 19.4 11.31
%
Loan Book (Crores) 181200 8100
CASA 41.71 27.4
Takeover will aid ICICI branch network.

BOR has 463 branches, of which 63% in Rajasthan. It

will increase its branches to 2479 from current level of
2016.
It would gain deeper access in northern & western
parts of the country.

 It will in turn enhance its earning potentials, return on

assets (RoA) and return on equity (RoE).

 Net NPA of BOR at 1.05% compared to 1.87% to ICICI

Bank. Asset deterioration in BOR is lower than that in ICICI
Bank
 These branches are at a level where it would
have taken about 2 to 2.5 years for new
branches to reach.
 The customer base of Bank of Rajasthan is
close to 3.0 million and we would be working
to cross-sell our asset products to their
customers.
 The amalgamation of Bank of Rajasthan is
indeed of strategic importance to ICICI.
 It helps strengthen their competitive position
in the Indian banking sector.
 It will move towards a more branch-centric
and customer-centric model.
 Back up
 2005 2006 2007 2008 2009

EPS 27.22 28.55 34.59 37.37 33.78

Dividend / 8.5 8.5 10 11 11

share

OPM % 22.63 18.66 13.33 14.45 14.13

Debt/equity 7.98 7.45 9.5 5.27 4.42

RNOW 15.99 11.4 12.31 8.8 7.55

 2009 2010 2011

PROFIT 3578 4024 4926

EPS 33.78 36.14 44.42
PE 25 19.15
RATIO
 Maintain  Cash Reserve Ratio (CRR) as per
the RBI guidelines.
 Maintain Statutory Liquid Ratio (SLR)
 Deployment of surplus funds in securities -
SLR or Non-SLR
 Manage the market risks associated with
the investments
 Trade in the securities and earn profit
 Borrow / Lend money in the call money
market
 Invest in shares upto the maximum limits
allowed by RBI
 Pricing of the Interbank Rupee deposits and
Interbank foreign exchange deposits.
 Pricing of the products like FCNR deposits
and RFC Deposits.
 Provide constituent SGL facilities to its
corporate clients
 Provide quotes in major currencies of the
world
 Banks invest their surplus funds in
government bonds and the income on the
same is treasury income.Banks main sources
of income are the interest income on
loans,fee based income on various services
and treasury income which is on the portfolio
of investment in RBI and government Bonds.
Consumer Banking
Commercial Banking
Retail Banking
Private Banking
Asset Management
Pensions
Mortgages
Credit Cards
Investment Banking
 Investment bank is a financial institution that
assists individuals, corporations and governments
in raising capital by underwriting and/or acting as
the client's agent in the issuance of securities.

 An investment bank may also assist companies

involved in mergers and acquisitions, and
provides ancillary services such as market
making, trading of derivatives, fixed income
instruments, foreign exchange, commodities, and
equity securities.
 Refers to banking in which banking
institutions execute transactions directly with
consumers, rather than corporations or other
banks.
 Services offered include: saving accounts,
consumer loans, mortgages, personal loans,
debit cards, credit cards, and so forth.
 Also known as business banking .
 Some use the term "commercial bank" to refer to
a bank or a division of a bank primarily dealing
with deposits and loans from corporations or
large businesses.
 Commercial banking may also be seen as distinct
from retail banking, which involves the provision
of financial services direct to consumers.
World class service through state-
of-art technology-Technology-led
Excellence
Niche marketing
Innovative products and
customized solutions
Foreign collaboration
 A bank that deals mostly in (but is not limited
to) international finance, long-term loans for
companies and underwriting. Merchant
banks do not provide regular banking services
to the general public.
 investment bank, also called merchant bank, firm that
originates, underwrites, and distributes new security issues
of corporations and government agencies.. The major
responsibility for setting the public offering price rests on the
investment bank because it is in close contact with the
market, is familiar with current interest rates and yields, and
is best able to judge the probable demand for the issue in
question
 Merchant banks and investment banks, in their purest forms, are different kinds of
financial institutions that perform different services. In practice, the fine lines that
separate the functions of merchant banks and investment banks tend to blur.
Traditional merchant banks often expand into the field of securities underwriting,
while many investment banks participate in trade financing activities. In theory,
investment banks and merchant banks perform different functions.

Pure investment banks raise funds for businesses and some governments by
registering and issuing debt or equity and selling it on a market. Traditionally,
investment banks only participated in underwriting and selling securities in large
blocks. Investment banks facilitate mergers and acquisitions through share sales
and provide research and financial consulting to companies. Traditionally,
investment banks did not deal with the general public.

 
 Traditional merchant banks primarily perform
international financing activities such as foreign
corporate investing, foreign real estate investment,
trade finance and international transaction
facilitation. Some of the activities that a pure
merchant bank is involved in may include issuing
letters of credit, transferring funds internationally,
trade consulting and co-investment in projects
involving trade of one form or another.
 Direct Sales Agent (DSA) Module: To track
the performance of Direct Sales Agents
(DSA's)      of the bank and have customized
commission computation logic for the DSA's
based on      predefined parameters like
product type, geography and hierarchy.
 Complaint and Request Tracking System
(CARTS): To track customer request and
complaints      without manual intervention
and assign priority, based on customer profile
and severity of      request, by seeking
reference from the Finacle core banking
database..
 Card Management System (CMS): This is a
repository of customer card information and
acts      as a focal point in various events
relating to cards, like issue, reissue and
maintenance. An      additional feature of this
module is the ability to communicate on an
online basis for activities      like ‘hot carding’ a
card, activation/deactivation of cards, etc
 CIBIL is India’s first credit information
bureau.
 Its a repository of information, which
contains the credit history of commercial and
consumer borrowers.
 CIBIL provides this information to its
members in the form of credit information
reports.
 As on September 2009, CIBIL has an
information base on over 160 million
consumer trades, and 4 million commercial
trades
 CIBIL was promoted by the State Bank of
India, Housing Development Finance
Corporation Limited
 The need of credit information system was
increasingly felt in order to enable informed
credit decisions and aid fact based risk
management.
 It was also imperative to arrest accretion of
fresh NPAs in the banking system through an
efficient system of credit information on
borrowers as a first step in credit risk
management.
 Year Exchange rate (rupees per US$)
1970 7.576
1975 8.409
1980 7.887
1985 12.369
1990 17.504
1995 32.427
2000 45.000
2006 48.336
2007 (Oct) 38.48
2008 (June) 42.51
2008 (October) 48.88
2009 (October) 46.37
2010 (January 22) 46.21
 Who decides on the volume and value of
banknotes to be printed and on what basis?
 The Reserve Bank decides the volume and
value of banknotes to be printed each year.
The quantum of banknotes that needs to be
printed, broadly depends on the requirement
for meeting the demand for banknotes due to
inflation, GDP growth, replacement of soiled
banknotes and reserve stock requirements.