Sector Banking

Company ICICI bank

Name- Rishi S Gaggar

Roll No. 213

Programme MBA Core.

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Table of contents

Introduction to Banking 3

Government regulations pertaining to Banking 4

Key Players in the sector 5

Introduction and USP of ICICI Bank 6

Services Offered 8

Key financial indicators for the past three years 9

Marketing Initiatives 10

CSR Activities 11

Porters Five Force Model 12

SWOT Analysis 13

References 15

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 Part I - Introduction to Banking

The definition of a bank states that a bank is a financial institute that accepts deposits and
channels the money into lending activities. Basically a bank connects those who have capital
like the investors or depositors with those who seek capital like individuals wanting a loan or
a business wanting to grow. Banking in general is a very highly regulated industry and the
government restrictions over financial activities vary from place to place.

The bank basically does three major functions:

Conducts current account for its customers.
To pay the cheques those are drawn on him.
Collecting cheques for his customers.

The various channels offered by banks nowadays are as follows:

A branch: provides face to face service to its customers.
ATM: computerized terminal which provides a method of financial transaction without
the need of a banker
Mail: various documents are delivered to the customers.
Telephone Banking: allows customers to do transactions over the telephone.
Online Banking: allows customers to perform transactions over the internet.
Mobile Banking: allows customers to perform transactions through mobile phones.
Video Banking: is the term used when transactions are carried out via a remote video
and audio connection.

The different types of banking activities are:

Retail Banking: deals with individuals and small businesses.
Business Banking: provides service to mid-market business.
Corporate Banking: directed at large business entities.
Private Banking: provides wealth management services to high networth individuals
and families.
Investment Banking: relating to activities on the financial markets.

Banks provides many products which are broadly classified in Retail or Wholesale. The
various products provided by the banks are as follows:
Retail:
Savings account
Cheque account
Credit Card
Home Loans
Personal Loans
Business Loans
Wholesale:
Revolving Credit
Term Loan
Risk Management
Project Finance.

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 Government Regulations pertaining to Banking

In most jurisdictions commercial banks are regulated by government entities and they require
a special bank license to operate. In Banking the regulator is also a participant of the market
i.e. government owned central bank for e.g.: The Reserve Bank of India. These banks have a
monopoly of issuing banknotes but we do have some exceptions to this.

The common objectives of bank regulations are:

To reduce the level of risk bank creditors are exposed to.
To reduce the risk of major bank failure.
To reduce risk of bank being used for criminal purposes.
To protect bank confidentiality.
To direct credit to favored sectors.

The general principles of banking regulation throughout the world are as follows:
The most important minimum requirement in banking regulation is maintaining
minimum capital ratios.
Banks are required to be issued with a bank license by the regulator in order to carry
on business as a bank, and the regulator supervises licensed banks for compliance
with the requirements and responds to breaches of the requirements through obtaining
undertakings, giving directions, imposing penalties or revoking the bank's license.
Banks are required to publicly disclose financial and other information so that
depositors and creditors would be able to use this information to assess the level of
risk and make an informed decision for their investments.

There are various instruments and requirements which are used for banking regulations.
Below are some of them which are used:
Capital requirement: It sets a framework on how banks must handle their capital in
relation to their assets.
Reserve requirement: It sets a minimum reserve each bank must hold to demand
deposits and banknotes.
Financial reporting and disclosure requirement: Banks are required to disclose
financial statements and have them audited.
Credit rating requirement: Banks maybe required to obtain and maintain a current
credit rating.
Large exposure restrictions: Large exposures to individual counterparties or groups of
them are restricted.

The Indian scenario of the banking industry is as follows. In India till 1990 there were 19
nationalized banks like Punjab National Bank, State Bank of India etc. But in the early
1990s the government embarked on a policy of liberalization licensing a small no. of private
banks. This move has helped in the revitalizing of the banking sector in India. Also the
foreign direct investment which was restricted to 10% previously has now gone upto 74%
with some restrictions.

Key Players in the Banking sector

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The major banks in the world are as follows:
Bank of America
HSBC Holdings
Bank of China
JPMorgan Chase
Citigroup
Wells Fargo

The major banks in India are as follows:

State Bank of India
Axis Bank
ICICI Bank
Punjab National Bank
Central Bank of India
IDBI bank

PART II- ICICI BANK

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 Introduction and USP

ICICI Bank is Indias second largest bank with total assets of Rs.3634.00 billion at March 31
2010 and profit after tax is Rs.40.25 billion for the year ended March 31 2010.The bank has a
network of 2009 branches and 5219 ATMs in India and presence in 18 countries. The 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 specialized subsidiaries and
affiliates in the areas of investment banking, life and non-life insurance, venture capital and
asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and
Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and
Dubai International Finance Centre and representative offices in United Arab Emirates,
China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has
established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on
the New York Stock Exchange (NYSE).

The various ICICI group companies are as follows:

ICICI Group
ICICI Prudential Life Insurance
ICICI Securities
ICICI Lombard General Insurance Company
ICICI Prudential AMC and Trust
ICICI Venture
ICICI Direct
ICICI Foundation
Disha Financial Counseling

Let us take a brief look at the history of ICICI Bank. In 1955, The Industrial Credit and
Investment Corporation of India Limited (ICICI) was started at the initiative of World Bank,
the Government of India and representatives of Indian industry, with the main goal of
creating a financial institution for providing medium-term and long-term project financing to
Indian businesses. In 1994 ICICI established Banking Corporation which was later termed as
ICICI Bank Limited. In the 1960s it had acquired Mercantile Bank and Illanji Bank and in
2001 ICICI acquired Bank of Madura. In 2002, The Boards of Directors of ICICI and ICICI
Bank approved the reverse merger of ICICI, ICICI Personal Financial Services Limited
and ICICI Capital Services Limited, into ICICI Bank. In 2003 ICICI Bank opened
subsidiaries in UK and Canada. In UK it established an alliance with Lloyds TSB. Also ICICI
set up offshore branches at Singapore, Dubai, Bangkok, Jakarta, Kuala Lumpur and
Shanghai.

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ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at
the initiative of the World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses. In the 1990s,
ICICI transformed its business from a development financial institution offering only project
finance to a diversified financial services group offering a wide variety of products and
services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In
1999, ICICI become the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities,
and would create the optimal legal structure for the ICICI group's universal banking strategy.
The merger would enhance value for ICICI shareholders through the merged entity's access
to low-cost deposits, greater opportunities for earning fee-based income and the ability to
participate in the payments system and provide transaction-banking services. The merger
would enhance value for ICICI Bank shareholders through a large capital base and scale of
operations, seamless access to ICICI's strong corporate relationships built up over five
decades, entry into new business segments, higher market share in various business
segments, particularly fee-based services, and access to the vast talent pool of ICICI and its
subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal
Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The
merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High
Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at
Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI
group's financing and banking operations, both wholesale and retail, have been integrated in
a single entity.

Services Offered
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The banking services offered by ICICI bank are as follows:
Personal Banking
NRI Banking
Corporate Banking
Business Banking
Agri & Rural Banking

Also the ICICI group provides insurance and investments services like Life Insurance,
General Insurance, Securities, Mutual Funds and Private equity Practice.

In Personal Banking ICICI bank offers Accounts and Deposit services like Saving Account,
Salary Account, Fixed Deposit, Recurring Deposits and more. Also it provides loans like
Home loans, Personal loans, Car loans and more. In this banking ICICI also provides credit
cards, debit cards and commercial cards, investments like ICICI Bonds, GOI bonds, Mutual
funds etc. and insurance options like General Insurance, Life Insurance and many more.

In NRI Banking ICICI bank offers various services like Money Transfers, Bank Accounts,
Investments, Home Loans, Insurance, and Loan against FD to NRIs residing in USA, UK,
Canada, Europe, Middle East, Singapore and other regions.

In Corporate Banking ICICI bank provides services like Cash Management Services which
meets the organizations complex cash management needs. It provides services in the global
markets by providing Forex desk, derivatives desk, collateral trading services, treasury
research and provides various structured products to the corporates. Also Mergers and
Acquisitions Advisory groups and International Syndicate Groups are provided by ICICI.
Also many other services like Structured Finance, Project Finance, International Banking,
and Government Banking are provided.

In Business Banking ICICI bank provides services like Club elite program which gives better
service, prepaid current account for those who prefer prepaid charge on annual basis, local
current account for discount on local transactions and many more features, roaming current
account which travels the distance with the business and offers services like encashing
cheques in 500 different centers in the country and many more. Also various types of
business loans like Business Advantage Loans (limited offer of 25 lakhs to 5 crores), Industry
specific Loans for industries like Construction, Pharmaceuticals, IT etc and Vendor Dealer
Finance are offered by ICICI Bank. Also along with loans advisory services are also offered
to businesses.

In Agri & Rural Banking ICICI bank provides services for Agri traders and processors like
Working Capital Loan which includes SCC( 25 lakhs-20 crores) ACL(10 lakhs 5 crores)
and Jet Overdraft(10 lakhs 65 lakhs), Long Term Loans which has loan upto 3 crores
against the residential/commercial property and Loan against warehouse receipt. Also it
provides micro finance and micro credit.

KEY FINANCIAL INDICATORS

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2007-2008:

Interest earned: Rs. 30788.34 crores

Interest expended: Rs. 23484.24 crores
Net Profit: Rs. 4157.73 crores
Interest Income/ Total Funds: 10.60
Credit Deposit Ratio: 10.12
Total debt to owners fund: 5.27
Current Ratio: 0.11

2008-2009:

Interest earned: Rs. 31092.55 crores

Interest expended: Rs. 22725.93 crores
Net Profit: Rs. 3758.13 crores
Interest Income/ Total Funds: 9.82
Credit Deposit Ratio: 10.14
Total debt to owners fund: 4.42
Current Ratio: 0.13

2009-2010:

Interest earned: Rs. 25706.93 crores

Interest expended: Rs. 17592.57 crores
Net Profit: Rs. 4024.98 crores
Interest Income/ Total Funds: 8.82
Credit Deposit Ratio: 10.72
Total debt to owners fund: 3.91
Current Ratio: 0.14

Marketing Initiatives
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Various marketing initiatives are taken by ICICI Bank. The promotion of ICICI Bank is done
through the following:

Advertising: Television, radio, movies, theatres

Print media: hoardings, newspaper, magazines
Publicity: road shows, campus visits, sandwich man, Sponsorship
Sales promotion: gifts, discount and commission, incentives,etc.
Personal selling: Cross-sale (selling at competitors place),personalized service
Telemarketing: ICICI one source Call center (mind space)

A lot of the marketing is done through the television media informing the people about the
various products and services offered by ICICI Bank. Also they have chosen Shahrukh Khan
to be their brand ambassador which would go a very long way to promote the bank as
Shahrukh Khan is a very well known figure among the Indian population.

CSR Activities

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ICICI Group right from ICICI Bank, ICICI Prudential Life Insurance, ICICI Lombard
General Insurance, ICICI Securities and ICICI Venture all are involved in CSR activities.
CSR initiatives are designed to be consistent with the respective business foci of each
company within the ICICI Group. Where the core competencies of the company can be put to
work ICICI has always taken a direct approach for e.g. activities conducted during the floods
in Bihar, but they also build strategic partnerships with other institutes and citizen bodies and
have worked tirelessly towards their goal. ICICI Group of Companies CSR efforts have been
and remain integral to its core mission of delivering value to its stakeholders and to the
sustainable growth and development of Indias economy.

The ICICI Bank's CSR activities have taken three broad strategic directions: CSR through
commercial activities, CSR in partnership with civil society and CSR through ICICI
Foundation for Inclusive Growth. The theme of their activity is Elementary Education and
the programme they are involved in is the Read to Learn programme in which
underprivileged children from the age group of 3-14 years including girls and tribal children
provided with elementary education.

ICICI Prudential's CSR activities aim to enhance the lives of senior citizens, and to create
safe and secure neighborhoods with the active involvement of citizens. The theme of their
CSR activity is Productive Ageing and the programme name is Project Dignity Millions in
which they support the NGO Dignity Foundation which works to ensure that senior citizens
are able to lead secure, productive, active and meaningful lives by providing easy access to
trusted information, opportunities for productive ageing and social support services.

ICICI Lombard's CSR activities offer protection to low-income households in the areas of
health, road safety and disaster management. Also the theme of the CSR activity is Health
and the programme they are involved in is strengthening maternal and child health care
services in which the goal is to reduce maternal and infant mortality.

ICICI Securities' CSR initiatives aim to provide superior quality education and health care to
poor and marginalized children across India. The theme of their CSR activity is Education
and the programme they are involved in is Support to NGOs working in the area of
education for disadvantaged children in which they have a long standing association with
Doorstep school which provides elementary education to out-of-schools or working children
in Mumbai and Pune.

ICICI Venture's CSR activities support social ventures that increase economic opportunities
for low-income Indians. The theme of their CSR activity is Social Ventures and the
programme they are involved in is Support to micro-ventures in which they support Rang
De Indias first micro lending platform. Rang De is an innovative attempt to bring down the
cost of micro credit by enabling individuals to become social investors, making it possible
for them to lend small sums of money to borrowers from low-income households who
typically have no access to low-interest credit.

Porters Five Force Model for ICICI BANK

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Rivalry among Competing Firms:

Rivalry among competing firms is very fierce in India. ICICI bank faces very fierce rivalry
from its peers like HDFC bank, Punjab National Banks, State Bank Of India and others. The
services banks offer is more homogenous which makes the company to offer the service at
lower rate and eat their competitors market share. ICICI Bank uses all sorts of aggressive
selling strategies and activities from intense advertisement campaigns to promotional stuff.
Consumers very well shift from one bank to another as the rivalry is very fierce so ICICI
does all it can to retain its customers.

Potential entry of new competitors:

The Reserve Bank of India has laid out certain rules and regulations for new entrants in the
Banking industry. Mostly mergers and acquisitions are seen and are also expected in the
future in the industry. Hence ICICI Bank is less prone to new competitors.

Potential developments of substitute products:

Everyday there is one or the other new product in the banking sector. Banks are not limited to
traditional banks which just offer deposits and lending. In addition banks nowadays offer
loans for all products, derivatives, FOREX, insurance, mutual fund and also Demat account
to name a few. Such a wide range of choices and needs give sufficient room for new products
development and product enhancement.

Bargaining power of suppliers:

Banking industry which includes the ICICI Bank is governed by the Reserve Bank Of India.
The Reserve Bank Of India has the authority to take monetary actions which leads to direct
impact on the circulation of money in the Economy. Thus the rules and regulations are laid
down by the Reserve Bank Of India.

Bargaining power of consumers:

In todays world Customer is the king. ICICI Bank offers different services according to
clients. They offer loans at Prime Lending Rate (PLR) to their trustworthy clients and a bit
higher rates to other clients. So basically ICICI Bank tries to retain its clients as the
competition is very fierce and their clients can change bank very easily.

SWOT Analysis

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The major competitor of ICICI Bank is HDFC Bank. The SWOT analyses of both the banks
are as follows.

ICICI BANK:

Strengths:

Great Brand Image.

Good place to work.
Lower response time with efficient and effective service.
High penetration in rural areas.

Weakness:

Customer service staff needs training.

International standards in providing customer is very low.
High paper work for rural selector banking activities

Opportunities:

Could extend to overseas broadly.

Consider additional benefits to customers.
Fast-track career development opportunities on an industry-wide basis.
developing techniques to provide added-value services

Threats:

Lack of infrastructure in rural areas could constrain investment.

Vulnerable to reactive attack by major competitors
Increased Competition from other pvt. Banks.

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HDFC BANK

Strengths:
Superior customer service.
Dedicate right strategy for the right products.
Dedicated workforce .
Good amount of capitalisation.

Weakness:

Some gaps in range for certain sectors.

Sectoral growth is constrained by low unemployment levels and competition for staff.
Working Hours not up to the customer satisfaction.

Opportunities:

Profit margins will be good.

Could seek better customer deals.
An applied research centre to create opportunities.
Steps to Ensure loyalty by old customers.

Threats:

Legislation could impact.

Very high competition prevailing in the industry.
Entry of many Foreign banks.

CONCLUSION:

We can say that both the banks have performed very well in todays business scenario
as both have a good unique product and service that have make them outperform
others.
As market indicators reflect we can say ICICI Bank has been badly hit by recession
and their loss in investment outside India.
New banking reform will be a good blessing for the banking sector in coming days
and on the same hand will be creating a high competition from foreign players who
will be allowed to increase their investment share in India.

REFERNCES

www.wikipedia.org
www.icicibank.com
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