INTRODUCTION OF

BANKING
INDUSTRY
About the Banking Sector: -

Banking Companies (Regulation) Act, 1949

Definition of Bank: -
Banking Means "Accepting Deposits for the purpose of lending or Investment of deposits of
money from the public, repayable on demand or otherwise and withdraw by cheque, draft or
otherwise."

Origin of The Word “BANK”: -

The origin of the word bank is shrouded in mystery. According to one view point the Italian
business house carrying on crude from of banking were called banchi bancheri" According to
another viewpoint banking is derived from German word "Branck" which mean heap or mound.
In England, the issue of paper money by the government was referred to as a raising a bank.

Origin Of Banking: -
Its origin in the simplest form can be traced to the origin of authentic history. After recognizing.
Provides the safer place to store the money. This safe place ultimately evolved in to financial
institutions that accepts deposits and make loans i.e., modern commercial banks.

A bank is a financial institution that provides banking and other financial services to their
Customers. A bank is generally understood as an institution which provides fundamental

Banking services such as accepting deposits and providing loans. There is also nonbanking
Institutions that provide certain banking services without meeting the legal definition of a bank.

Banks are a subset of the financial services industry.

A banking system also referred as a system provided by the bank which offers cash management
services for customers, reporting the transactions of their accounts and Portfolios, throughout
the day.
Need of the Banks: -
Before the establishment of banks, the financial activities were handled by money lenders and
individuals. At that time, the interest rates were very high. Again, there were no security of public
savings and no uniformity regarding loans. So as to overcome such problems the organized
banking sector was established, which was fully regulated by the government. The organized
banking sector works within the financial system to provide loans, accept deposits and provide
other services to their customers. The following functions of the bank explain the need of the
bank and its importance:

 To provide the security to the savings of customers.

 To control the supply of money and credit

 To encourage public confidence in the working of the financial system, increase savings speedily
and efficiently.

 To avoid focus of financial powers in the hands of a few individuals and institutions.

 To set equal norms and conditions (i.e. rate of interest, period of lending etc.) to all types of
customers.
 RESEARCH
METHODOLOGY
OBJECTIVE OF STUDY
 To study the Indian banking industry.
 To study demand determination of the banking industry.
 To do the five-force analysis.
 To study opportunities and threats of the industry.
 To understand the financial performance of the banks.
STUDY OF WORLD
MARKET
Introduction: -

The global financial system suffered a profound and traumatic shock in September 2008 when
US investment bank Lehman Brothers collapsed. As market players withdrew from the financial
system, credit dried up and world trade collapsed, there was a real and immediate fear that the
world was heading for a repeat of the Great Depression of the 1930s. Two years on and there is
growing optimism that both the world economy and the banking industry are recovering from
the impact of the financial crisis. But it is equally clear that the financial world has changed
permanently, both in terms of who holds the balance of power within global industry and how
banks will be allowed to operate in future.

Global shifts in banking: -

While the growing power of emerging markets is a long-term structural phenomenon, it has
accelerated in the banking industry thanks as much to the relative decline of the west as to
expansion in the east. There has been a pronounced shift from west to east – and, to some extent,
from north to south-in the wake of the crisis. Banks on both sides of the Atlantic are expected to
have written down more than $2.1trn of assets by the end of 2010, according to the International
Monetary Fund. The equivalent figure for Asian banks is just $115bn.1 Banks in emerging markets
are now well capitalized and well-funded and big enough to be able to compete directly against
their western counterparts in the global marketplace. The two largest banks by market
capitalization are both Chinese – ICBC and China Construction Bank. Although third place is taken
by a British bank, HSBC, it is largely an Asian operation. A league table, compiled by Bloomberg in
April, shows that Cities, once the world’s largest bank, comes in at fifth, while banks from Brazil,
Russia and India – the other members of the BRIC grouping alongside China are all in the top 25.
Stephen Green, Group Chairman of HSBC, referred to this trend just a month after the collapse of
Lehman, when he said there was a long-term shift towards Asia and the Middle East. ‘It is this shift
that will affect financial markets most profoundly,’ he told a global financial summit in Dubai. ‘The
rapid growth of emerging markets does not signal an absolute decline in the economies of mature
nations. The pie will grow. But it does entail a loss of share – the developed world will have a
smaller share of a larger pie.’ 3 The rise of China is the most obvious feature of this shift. China’s
banking market is dominated by the ‘big four’ state owned commercial banks, of which three are
listed on the Shanghai stock market.
Banking Scenario in the world: -

 The Italian banking scenario: -

“Widespread crises and scandals affected the credibility of the Italian banking sector, lessening
Italian investor’s sentiments” says Claudia Segre, UBM – Head of Emerging & New Europe DCM.

“The general situation of crisis can be seen as one of the causes leading the banking sector to
seek new solutions supporting increasing flexibility on investment-grade rated paper supply in
order to cover the new needs of ethnic communities with special financial requirements, such as
the Islamic community. Apart from increasing the level of market shares, this operation hit new
customers meet the clients’ needs and renew the market image of banks consolidating a stable
business confidence relationship with banks in contrast with recent disaffection tendencies. On
the other hand, institutions are aware of the profit opportunities offered by capital flows to the
Euro area. In conclusion, is seems as if we are at an important turning point, particularly for Latin
cultures, like the Italian one”. Though at an early stage, a new wave of interest for unconventional
modes of finance is arising in the Italian banking sector.

In the occasion of the “Investing in microfinance, the role of commercial banks” conference,
organized at Milan’s Stock exchange in 2004 to celebrate the opening of the international year
of microcredit ABI (the Italian Banking Association), underlined the changing needs of new
segments of clientele such as migrants, microenterprises, young entrepreneurs, no profit sector
organizations and low-income families. Through these efforts, banks can play a pivotal role in
fostering the financial inclusion and integration1 of more than nine million people who don’t
even hold a bank account2. Though Italian Banks’ interest for microfinance should not only be
regarded in a welfare policy perspective channelled through Foundations or charities but as part
of the core responsibility of the sector for new stakeholders.

In order to promote and effectively support the role of banks in microfinance, ABI engaged in a
preliminary assessment on microfinance with the support of Fondazione Giordano

Dell’ Amore, a centre for financial growth and development assistance on microfinance projects.
The pros and cons of introducing Islamic banking services in Italy were attentively weighted
during the Conference on Islamic Banking organized by ABI, with the support of the Islamic
Development Bank, Islamic Research and Training Institute and the Arab-Italian Chamber of
Commerce, in December 2002.

Doubts over the readiness of the Italian banking system to welcome Islamic products have been
stigmatized by Hamza Picardo, Secretary General of the Islamic Communities and Organizations
 in Italy (UCOII): “There have been several attempts to establish Islamic friendly banking services
in Italy over the last decade, but they have all failed because of lack of investment guarantees.
The time for Islamic finance in Italy has not jet come, since Muslim communities have arrived
within the past ten years and are still facing problems with settlement. Their focus is on sending
remittances to their home country in order to economically support their families or to purchase
a home. (Ferro, June 2005)

 Islamic Banking: -

Islamic finance is a mode of finance inspired by the provisions set forth by the Qu ‘ran, the holy
book setting Islamic Law (Sharia law). While secular societies generally propose a system of ethics
divorced from religion and law, Sharia law governs religious as well as civil life, including business
life.

Considered from this perspective, Islam convictions on the responsibility of business go well
beyond mere profitability goals and coincide with the renewed perception on business recently
at stake within the most advanced sectors of western business and civil societies. Far from the
limits imposed by neo-classical thought, this new wave implies new sorts of responsibilities on
behalf of the company falling under the rubric of corporate social responsibility.

The essential feature of Islamic finance is the prohibition of interest (Reba) on money. Banks
resort to an alternative mechanism based on profit and loss sharing, and become a prime actor,
and not only an intermediary, in investments. Islamic law, also regulates the direction
investments take, strictly forbidding areas such as pornography, tobacco, gambling, weapons,
pork and alcohol industries. Although there are some differences, the overlap with socially
responsible investments highly diffused in Western countries has an appeal for non-Muslims
seeking ethically- driven investments.

A further distinguishing element of banking based on Islamic beliefs is the religious obligation to
pay Zakat, a fee with the two-fold purpose of redistributing wealth among the poor and achieving
purification. Conclusively, to ensure that the products offered by the bank meet the requirements
set by Sharia, an independent Supervisory Committee of scholars is needed, possibly in
accordance with the standards set by the Accounting and Auditing Organization for Islamic
Financial Institutions (AAOIFI).

Islamic Finance developed primarily in those Islamic countries where increased revenues from oil
created a new middle wealth segment of clientele in need of banking services and investment
facilities. Nowadays, besides the huge market represented by Eastern countries, Muslim
communities living in the West are increasingly attracted by Islamic products and services. Great
Britain’s long tradition of immigration (about 1.8 million Muslims are currently living in the
country, including second and third generations of Muslims), has made London the centre for the
dissemination of Islam banking in Europe. The first bank operating wholly in accordance with
Islamic precepts ever created in Europe is the Islamic Bank of Britain, which was opened in
London. Great potentiality for Islam banking can also be found in the U.S due to its 6 to 12 million
Muslim population.

Western banks waking up to Islamic finance in the mid 90’s operate through two main channels.
The first consists of including Sharia compliant products in the bank’s conventional products and
services through special facilities called “Islamic windows”, also available at Western banks such
as Abn-Amro, Citibank, and the German Dresdner Bank. While the financial systems of some
countries underwent a complete Islamization, making Islamic windows no longer necessary,
many western banks preferred to open ad hoc, owned subsidiary divisions totally devoted to
Islamic Finance, and operating in countries such as Bahrain and UAE where the flows are
particularly high, as they are considered the two main important financial hubs for the Middle
East followed by Qatar and Dubai. City Islamic Investment Corp. as an owned subsidiary division
of Citigroup was created in 1996 and paved the way to a major involvement of international banks
in Islamic finance. The protagonists of this newly established trend are more or less the same
banks that are turning their interest to microfinance. Just to name a few: HSBC with its Amanah
unit established in 1998, as well as Barclays, Deutsche Bank.

Emirates Bank is a good example of the appeal Islamic products can have on the markets, even
in the West. As a matter of fact, the bond was very well received by the market with good cover
ratios of subscriptions, and over 80%, was sold to investors outside the Middle East, recording
the highest ever proportion of non regional buyers of any Middle Eastern Eurobonds. Another
reason of this success is the rarity of investment-grade rated paper paying a generous return.
European and Asian issuers of this grade do not feel compelled to offer investors such an
incentive. (Ferro, June 2005)
PEST Analysis of Banking Industry in World Market: -

 Political Factors: A tool for the big guys: -

The banking sector looks all powerful — but it’s susceptible to a bigger giant: the government.
Government laws affect the state of the banking sector. The government can intervene in the
matters of banking whenever, leaving the industry susceptible to political influence. This includes
corruption amongst political parties, or specific legislative laws such as labour laws, trade
restrictions, tariffs, and political stability.

 Economic factors: Easily influenced: -

The banking industry and the economy are tied. How income flows, whether the economy is
prospering or barely surviving during times of recession, affects how much capital banks can
access. Spending habits, and the reasons behind them, affect when customers borrow or spend
funds at banks.

 Sociocultural factors: Consumers want ease: -

Cultural influences, such as buying behaviours and necessities, affect how people see and use
banking options. People turn to banks for advice and assistance for loans related to business,
home, and academics. Consumers seek knowledge from bank tellers regarding saving accounts,
bank related credit cards, investments, and more.

Consumers desire a seamless banking experience. And technology is developing to allow

consumers to buy products easier, without requiring assistance directly from banks.

 Technological factors: Smartphones to the rescue: -

Once, it was expected to visit the local bank to make changes to financial accounts. But not
anymore.
Technology is changing how consumers handle their funds. Many banks offer a mobile app to
witness accounts, transfer funds, and pay bills on smartphones.

Smartphones can scan cheques, and the bank can process it from their end, at their location. This
change helps to save paper and the need to drive directly to the branch to handle these affairs.

Debit cards are also changing. Chips have been implemented, requiring users to insert their card
into debit machines rather than swiping them. Other countries, such as Canada, have
implemented a “tap” option tapping the debit card onto the device, requiring no pin, for a
transaction to complete. These changes make it easier on the user to make purchases without
required intrusion from banks.
 Even banks themselves are utilizing technology within the workplace. Telecommunicating
through virtual meetings is being embraced. It replaces the need for in-person meetings.

Global Trends In Banking: -

1: Focus on Next-Generation Remote Banking Solutions: -
The major drivers for an increased focus on next-generation remote banking solutions are:

 Increased customer comfort level in using internet-based services for carrying out financial
transactions.
 The impact of new regulations on traditional sources of fee income for the financial services
industry means banks are looking to recoup some of the lost income by charging for web-based
value-added services.
 The expense of person-to-person interaction has pushed banks to offer more services to
customers through the online channel.

2: Drive towards Core Banking Platform Replacement: -

The key drivers for the move towards core banking platform migration and replacement are:

 Increased need for business agility that will cut turnaround time for implementing new business
rules and industry regulations.
 Heightened consolidation activity in the banking industry has made standardization and
homogenization of merging banks’ platforms necessary.
 Development of new and more agile core banking solutions and their adoption by competitors
has made upgrading core banking systems a competitive necessity for banks.

3: Increased Role of Business Intelligence and Analytics in Transaction Monitoring: -

Key drivers behind this trend are:

 Business Intelligence tools that enable transaction monitoring and behavior analysis are key
components of a larger, enterprise-wide fraud prevention solution—something all banks should
have in place.
 Business Intelligence is increasingly being seen as a key enabler for consumerization—
developing products and solutions which are geared towards meeting specific consumer needs.
4: Focus on Enterprise Payments Hubs in Payments Processing: -
The key drivers behind the increasing focus on establishing enterprise payment hubs for payment
processing are:

 Competition from banks and non-banks offering innovative payment services; e.g. mobile
payment, contactless cards, and faster payments
 Reduced revenues from commoditization of payments services and increased costs from
redundant infrastructure
 Globalization that has resulted in customer demands for consistent offerings and services
across geographies
STUDY OF INDIAN
MARKET
HISTORY OF BANKING INDUSTRY IN INDIA: -

Banking in India has its origin as early or Vedic period. It is believed that the transitions from
many lending to banking must have occurred even before Manu, the great Hindu furriest, who
has devoted a section of his work to deposit and advances and laid down rules relating to the
rate of interest. During the mogul period, the indigenous banker played a very important role in
lending money and financing foreign trade and commerce.

During the days of the East India Company it was the turn of agency house to carry on the
banking business. The General Bank of India was the first joint stock bank to be established in the
year 1786. The other which followed was the Bank of Hindustan and Bengal Bank. The Bank of
Hindustan is reported to have continued till 1906. While other two failed in the meantime. In the
first half of the 19th century the East India Company established there banks, the bank of Bengal
in 1809, the Bank of Bombay in 1840 and the Bank of Bombay in1843. These three banks also
known as the Presidency banks were the independent units and functioned well.

 The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They areas
mentioned below:

 Early phase from 1786 to 1969 of Indian Banks.

 Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

 New phase of Indian Banking System with the advent of Indian Financial & Banking
Sector Reforms after 1991.
BANKS IN INDIA: -
In India, the banks are being segregated in different groups. Each group has their own benefits
and limitations in operating in India. Each has their own dedicated target market. Few of them
only work in rural sector while others in both rural as well as urban. Many even are only catering
in cities. Some are of Indian origin and some are foreign players.

All these details and many more is discussed over here. The banks and its relation with the
customers, their mode of operation, the names of banks under different groups and other such
useful information’s are talked about.

One more section has been taken note of is the upcoming foreign banks in India. The RBI has
shown certain interest to involve more of foreign banks than the existing one recently. This step
has paved a way for few more foreign banks to start business in India.

BROAD CLASSIFICATION OF BANKS IN INDIA: -

1) The RBI

The RBI is the supreme monetary and banking authority in the country and has the responsibility to
control the banking system in the country. It keeps the reserves of all scheduled banks and hence is
known as the “Reserve Bank”.

2) Public Sector Banks

 State Bank of India and its Associates.

 Nationalized Banks.

 Regional Rural Banks Sponsored by Public Sector Banks.

3) Private Sector Bank

  Old Generation Private Banks.

 Foreign New Generation Private Banks.

 Banks in India.

4) Co-operative Sector Banks

 State Co-operative Banks.

 Central Co-operative Banks.

 Primary Agricultural Credit Societies.

 Land Development Banks.

 State Land Development Banks.

5) Development Banks
Development Banks mostly provide long term finance for setting up industries. They also provide
short-term finance (for export and import activities).

 Finance Co-operation of India (IFCI).

 industrial Development of India (IDBI).

 Industrial Investment Bank of India (IIBI).

 Small Industries Development Bank of India (SIDBI).

 National Bank for Agriculture and Rural Development (NABARD).

6) NABARD

National Bank for Agriculture and Rural Development (NABARD) is a development bank in the
sector of Regional Rural Banks in India. It provides and regulates credit and gives service for the
promotion and development of rural sectors mainly agriculture, small scale industries, cottage
and village industries, Handicrafts. It also finances rural crafts and other allied rural economic
activities to promote integrated rural development. It helps in securing rural prosperity.

INDIAN SCENARIO OF BANKING INDUSTRY: -

The growth in the Indian Banking Industry has been more qualitative than quantitative and it is
expected to remain the same in the coming years. Based on the projections made in the "India
Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts
that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets
of all scheduled commercial banks by end-March 2010 is estimated at Rs 40,90,000 crores. That
will comprise about 65 per cent of GDP at current market prices as compared to 67 per cent in
2002-03. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during
the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95
and 2002-03. It is expected that there will be large additions to the capital base and reserves on
the liability side. The Indian Banking industry, which is governed by the Banking Regulation Act
of India, 1949 can be broadly classified into two major categories, non- scheduled banks and
scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In
terms of ownership, commercial banks can be further grouped into nationalized banks, the State
Bank of India and its group banks, regional rural banks and private sector banks (the old/ new
domestic and foreign). These banks have over 67,000 branches spread across the country. The
Public Sector Banks (PSBs), which are the base of the Banking sector in India account for more
than 78 per cent of the total banking industry assets. Unfortunately, they are burdened with
excessive Non-Performing assets (NPAs), massive manpower and lack of modern technology. On
the other hand, the Private Sector Banks are making tremendous progress. They are leaders in
Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned
they are likely to succeed in the Indian Banking Industry. In the Indian Banking Industry some of
the Private Sector Banks operating are IDBI Bank ING Vyasa Bank, SBI Commercial and
International Bank Ltd, Bank of Rajasthan Ltd. and banks from the Public Sector include Punjab
National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank among others. ANZ Grind
lays Bank, ABN-AMRO Bank, American Express Bank Ltd, Citibank are some of the foreign banks
operating in the Indian Banking Industry. As far as the present scenario is concerned the Banking
Industry in India is going through a transitional phase. The first phase of financial reforms resulted
in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass
banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every
bank had to earmark a minimum percentage of their loan portfolio to sectors identified as
“priority sectors”. The manufacturing sector also grew during the 1970s in protected environs
and the banking sector was a critical source. The next wave of reforms saw the nationalization of
6 more commercial banks in 1980. Since then the number of scheduled commercial banks
increased four-fold and the number of bank branches increased eight-fold. After the second
phase of financial sector reforms and liberalization of the sector in the early nineties, the Public
Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks
and the foreign banks. The new private sector banks first made their appearance after the
guidelines permitting them were issued in January 1993. Eight new private sector banks are
presently in operation. These banks due to their late start have access to state-of-the-art
technology, which in turn helps them to save on manpower costs and provide better services.
During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent
share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2
percent of the deposits and 47.5 percent of credit during the same period. The share of foreign
banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for
5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent
and 12.85 percent respectively in credit during the year 2000.
PRODUCTS PROFILE
Products: -
1) Secured Loan: -
Secured loans are loans that are protected by collateral. When you apply for a secured
loan, the lender will want to know which of your assets you plan to put up as collateral. The
lender will then place a lien on that asset until the loan is repaid in full. If you default on the
loan payments, the lender can claim the collateral and sell it to recoup the loss.

2) Unsecured Loan: -
An unsecured loan is a loan that is issued and supported only by the borrower's
creditworthiness, rather than by any type of collateral. Because unsecured loans, sometimes
referred to as signature loans or personal loans, are obtained without the use of property as
collateral, the terms of such loans, including approval and receipt, are most often contingent
on the borrower's credit score. Borrowers must generally have high credit ratings to be
approved for certain unsecured loans.

3) Personal Loans: -
A personal loan is a type of unsecured loan and helps you meet your current financial
needs. You don't usually need to pledge any security or collateral while availing a personal
loan and your lender provides you with the flexibility to use the funds as per your need.

4) Short Term Loan: -

A loan scheduled to be repaid in less than a year. When your business doesn't qualify for
a line of credit from a bank, you might still have success in obtaining money from then in the
form of a one-time, short-term loan (less than a year)

5) Credit Card Loans: -

Credit card debt is a type of unsecured liability which is incurred through revolving credit
card loans. The majority of outstanding debt on a borrower’s credit report is typically credit
card debt since these accounts are revolving and remain open indefinitely.

6) Home Loans: -
Home loan is a secured loan that borrowers obtain in order to purchase a home. Because
a home is the largest purchase many individuals will ever make, most borrowers utilize home
loans to assist with their home purchase.

7) Gold Loan: -
Gold loan or loan against gold is a secured loan in which a customer pledges his/her
gold ornaments as collateral with a gold loan company. It is a very quick and easy way of
fulfilling one's financial needs as compared to the other loans.
8) Cash Loan: -
A cash loan is a loan which is received by the borrower in cash. Cash loans may be given
to a private individual as a personal loan or to a business as a business loan.

9) Insurance Loan: -
Payment protection insurance (PPI), also known as credit insurance, credit
protection insurance, or loan repayment insurance, is an insurance product that enables
consumers to ensure repayment of credit if the borrower dies, becomes ill or disabled, loses
a job, or faces other circumstances that may prevent them.

10) Business Loan: -

A business loan is a loan specifically intended for business purposes. As with all loans, it
involves the creation of a debt, which will be repaid with added interest.

11) Property Loan: -

A mortgage is a loan in which property or real estate is used as collateral. The borrower
enters into an agreement with the lender (usually a bank) wherein the borrower receives cash
upfront then makes payments over a set time span until he pays back the lender in full.

12 Car Loans: -
A car loan (also known as an automobile loan, or auto loan) is a sum of money a consumer
borrows in order to purchase a car. ... Many consumers apply for car loans at their local bank.
When applying for a car loan a borrower will usually begin by specifying how much money he
or she wants to borrow.

13) Two-Wheeler Loans: -

Unsecured bike loans are not secured against any valuable asset of the borrower
whether tangible or intangible. You can avail a two-wheeler loan secured against your two-
wheeler (The two-wheeler is the collateral). You can also avail a two-wheeler loan without
collateral.

14) Education Loans: -

Education loan is a must these days as individuals wish to pursue higher studies in India
as well as abroad.
Amount is applicable for the deduction only on the interest repayment part, not on the
principal amount of education loan.

15) Loan Against Fixed Deposits: -

Banks generally offer 90 per cent of the value of the fixed deposit. This also means that
the tenure of the personal loan given against the FD cannot exceed the residual tenure of
the fixed deposit. Banks offer overdraft facility against bank fixed deposit. This enables
borrowers to have access to liquidity
DEMAND DETERMINATION
OF THE INDUSTRY
 PRICE (INTEREST RATE): -
The Pricing factor included all critical switching behaviours that involved
prices, rates, fees, charges, surcharges, service charges, penalties, price deals, coupons,
and/or price promotions. In the financial service industry, price has wider implications
than in other services industries. Price in banking industry refers to fee implementation,
bank charges, interest on loans, interest for saving account and deposits. Price is
consideration of what one pays for the benefit or service he gets from another. Price may
include the benefit also. Customers in general are price conscious in their purchasing
behaviour. Price is an important factor in choice situations as a consumer’s choices
typically relies heavily on the price of alternatives. Similarly, Varki & Colgate identify that
the role of price, as an attribute of performance, can have a direct effect on customer
satisfaction and behavioural intentions. I found that the price element in a banking
industry influences the young customer to compare between two banks and induce them
to switch over from one bank to another bank. C Segment accounts people consider
influences the price is most important like DD charges and consolidate charges compare
to P segment accounts people.

 INCOME LEVELS: -
Income is defined as the payment received in exchange for labour or services
or from the sale of goods or properties. In cross sectional studies, income levels are often
observed to be intimately related to financial sector development and by extension the
demand for financial services in both developed and developing countries. This is
explained thus; that the volume and sophistication of the financial services demanded is
much greater in the higher income economies than in the lower income economies and
as such developed countries are better able to achieve economies of scale in banking. In
micro studies where household surveys are utilized, a peculiar phenomenon begins to
emerge whereby negative income growths correlate with positive demand for financial
services in particular loans or credits for purposes of household consumption smoothing
or among micro and small enterprises to subsidize the operational costs of the enterprise.
 LOAN PROMOTION SCHEME: -
This scheme is for providing loans to new and smaller organizations with experience of at
least 6 months in thrift & credit. The organization can avail a maximum loan up to Rs. 10
lakhs.

 CREDIT POLICY: -
 Basic Guidelines for the Loan Portfolio: -
To bring the Bank’s loan portfolio into line with stated policies, the Bank will follow the
guidelines listed below:
o Keep past due and nonaccrual loans to a minimum by applying aggressive
collection procedures to all problem loans.
o The credit committee will meet on a weekly / monthly basis to review new and
renewing credits, Bank overdrafts, past-due and non-accrual loans and the credit
presentations of any new and renewing credits.
o Precede all loan decisions with sound credit analysis.
o Take loan documentation seriously.
o Aggressively seek good loan relationships; the Bank believes that a good loan
relationship includes a good deposit relationship, so loan officers should strive to
build a deposit relationship, as well as cross selling other bank services, with each
loan customer.

 External Policy Goals: -

The Banks reputation, its image, and community’s high level of public confidence in the
Bank are extremely important, and the Bank will do whatever is necessary to maintain its
image. Each loan officer is responsible for doing everything possible to help maintain the
Banks reputation as a friendly and professional Bank that routinely delivers quality service
to its customers and the communities it serves.

 Internal Policy Goals: -

The Banks primary internal objectives are to establish a sound asset portfolio. The Banks
objectives will be constrained somewhat by liquidity, flexibility, and risk considerations
and will be pursued, mindful of the constraints, by exercising tight controls on noninterest
expenses and close management of the total asset/liability mix. The funds remaining
after the Bank achieves its desired liquidity and investment positions will be used to make
sound consumer, commercial, agricultural, and real estate loans. These loans will be
made on a non-discriminatory basis.
 Confidentiality: -
The Bank considers the confidentiality and privacy of all customer information to be of
prime importance. The cornerstone of this institution is the trust, respect, and confidence
of its customers. To promote that trust, all information regarding the personal, business,
and financial affairs of customers will be kept strictly confidential.

 MONETARY POLICY OF INDIA: -

Monetary policy is the process by which monetary authority of a country , generally
central bank controls the supply of money in the economy by its control over interest
rates in order to maintain price stability and achieve high economic growth.[1] In India, the
central monetary authority is the Reserve Bank of India (RBI). It is so designed as to
maintain the price stability in the economy. Other objectives of the monetary policy of
India, as stated by RBI

 Price Stability: -
Price Stability implies promoting economic development with considerable emphasis on
price stability. The centre of focus is to facilitate the environment which is favourable to
the architecture that enables the developmental projects to run swiftly while also
maintaining reasonable price stability.

 Controlled Expansion Of Bank Credit: -

One of the important functions of RBI is the controlled expansion of bank credit and
money supply with special attention to seasonal requirement for credit without affecting
the output.

 Promotion of Fixed Investment: -

The aim here is to increase the productivity of investment by restraining non-essential
fixed investment.

 Restriction of Inventories and stocks: -

Overfilling of stocks and products becoming outdated due to excess of stock often results
in sickness of the unit. To avoid this problem the central monetary authority carries out
this essential function of restricting the inventories. The main objective of this policy is to
avoid over-stocking and idle money in the organization.
 To Promote Efficiency: -
It is another essential aspect where the central banks pay a lot of attention. It tries to
increase the efficiency in the financial system and tries to incorporate structural changes
such as deregulating interest rates, ease operational constraints in the credit delivery
system, to introduce new money market instruments etc.

 Reducing the Rigidity: -

RBI tries to bring about the flexibilities in the operations which provide a considerable
autonomy. It encourages more competitive environment and diversification. It maintains
its control over financial system whenever and wherever necessary to maintain the
discipline and prudence in operations of the financial system.
PLAYERS IN THE
INDUSTRY
 NUMBER OF PLAYERS IN BANKING INDUSTRY: -

1) State Bank of India

2) HDFC Bank

3) ICICI Bank

4) Punjab National Bank

5) Axis Bank

6) Canara Bank

7) Bank of Baroda

8) Union Bank

9) IDBI Bank

10)Bank of India
 Market Rate of Various Brands/Firms: -
 Private bank

product HDFC ICICI Axis

Home Loan 8.80% - 9.55% 8.85% 8.80%

Personal Loan 10.99% 10.75% 10.99%

Business Loan 15.50% - 18.30% 16% 11.20%

Gold Loan 10.50% 10.0% - 16.5% 10.49%

Market Share Price 1,985.30 322.95 564.20

 Nationalisation Bank

product Bank of Baroda Punjab National Bank of India

Bank
Home Loan 8.35% 8.65% 8.80%

Personal Loan 11.60 - 16.60% 12% - 15% 12.95% - 14.95%

Business Loan 14.10% 12.65% 10.20% - 12.95%

Gold Loan 3.00% - 12.60% 10.5% 10.50%

Market Share Price 101.70 64.75 75.40

 DISTRIBUTION
CHANNEL IN THE LOAN
INDUSTRY
 Flow of Diagram for Loan:
PESTEL
ANALYSIS
PESTEL ANALYSIS OF BANKING SECTOR

PESTEL analysis of any industry investigates the important factors that affect the industry and
influence the companies operating in the sector.
PESTEL stands for Political, Economic, Social, Technological, Environmental, legal analysis.
The PEST Analysis is a tool to analyse the forces that drive the industry and how those factors can
influence the industry.

 Political Factors: -

The overall restrictions, limitations, and boundaries are considered in the banking system. This
helps to support the new investment which will be anticipated form Government. It is best to
recognize the patterns that how stable and shape the political environment I and what type of
government policies will help to impact the laws. These laws then regulate in the banking industry
and are implemented for the apparent taxed. It is advisable to check that the government is
involved in trading agreement or not because it will be able to manage the banking market.
Following are the political factors which affects in making a stable banking system.

Political factors acquire a very important role in the context of the banking and financial services
sector. Traditionally, these financial institutions have held immense power and influence. Due to
this the level of government scrutiny and regulation they have to deal with is also very high.
However, because of being the leading repositories of the public's savings the banks must be
regulated and still strict regulation has often been criticised for hindering growth. Apart from it
the level of involvement between the banks and eh government has also been high since always.
There has always been a high level of involvement between banks and the federal, state and local
governments.

A dual banking system has regulated the banks in US where both Federal and State authorities
hold significant regulatory authority. While everyone knows the reasons why governments have
regulated the banking system, whether this regulation must remain strict or be made lenient has
remained a topic of debate. In response to the financial crisis of 2008, the Obama administration
passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The provisions of this
act are intended to decrease risks in several areas in the banking system. A number of new
government agencies were established and tasked with the job to oversee compliance.

However, the Dodd Frank act has also been criticized for being over restrictive and for reducing
the US firms' competitiveness against their US counterparts. In 2017, it is expected that the
American government will reduce the regulatory pressures on the banking system. It is expected
that the regulatory system will be less zealous in terms of reinforcement as well as more
measured when levelling fines. Such changes will encourage the banks to increase their focus on
the customer facing activities. The banks have been forced to bear massive costs related to
compliance which also might be reduced owing to these changes.

o Government stability and its type

o Laws, corruption and level of bureaucracy
o The role of press or social media
o Regulated and de-regulated trends
o Tax policies
o Employment legislation

 Economic Factors: -
The economic factor of PESTAL analysis for the bank helps to determine the current situation of
the marketplace. You will be able to consider the general position and shape of the market. The
inflation and the interest rates and various other conditions will be known by considering the
economic factor. The primary goal of the PESTEL analysis will help in the financial institution
which contributes to the present economic climate. Following are the important factors which
affects the economical banking industry.

Banks and economic growth are interrelated. A growing economy is good for banking sector and
a healthy banking sector can be good for the regional economy. Investment banks play an
important role in the regional economies and this is particularly true in the case of the US
economy. In case of the mixed economies, large corporations and governments depend upon the
investment banks when they have to raise funds. In the 21st century, the banks have emerged as
important players facilitating business growth They have emerged as critical partners for small
and large businesses helping them with loans, consumer transactions and several other things.
These banks are important partners for the individual economies. While on the one hand their
health depends upon the state of the economy, on the other the economy's health depends upon
the operations of the banking sector. Both are complementary. In today's globalized world, a

o A proper business cycles

o The current economic growth
o Costs of labour
o Globalization
o Unemployment rate
o Interest rates and inflation
o Change in economic environment
o Levels of income distribution
 Social Cultural: -
The social, cultural factors affect the scheme, especially in the banking sector. You will be able to
determine money related issues and the attitude of the market. The savings will be recognized,
the approach used and the productive loans which provide profitable results to the clients. It will
help to determine the attitude of various markets products and foreign services. Social factors do
involve.

Sociocultural forces too can have a deep impact on the banking industry. Changing social trends
and people's preferences can affect the business and growth of the banking brands. Consumer
demographics and people's attitudes towards the financial services have also changed a lot. The
millennials whether students or professionals make use of credit cards for small and big
transactions. Businesses whether small or big are more open to taking financial assistance from
the banks. Consumer confidence has surged owing to economic factors but socially to the
acceptance of bans and banking services has risen.

So, several things have changed in the twenty first century. The millennials want great customer
service and convenience and it sis why the banks have focused in providing a whole range of
services online combined with round the clock customer assistance. In this way, banking industry
has taken an entire new direction in the 21st century and customer satisfaction as well as
customer orientation has become important for them just like other big businesses. Socially other
small and big changes to affect the banks like growing use of banking services in the rural sector,
among the women and the growing income of the middle-class consumers.

 The growth of population

 Health consciousness
 Attitudes and lifestyle changes
 Social, press and public attitudes
 Health, social mobility, population attitudes
 Changes in socio-cultural changes
 Technological Factors: -
The advancement of technology plays a crucial role in the banking industry. It is essential for the
competitive advantage and proves to be a core driver for the globalization. Technology provides
a variety of quality products and services at reasonable rate. For the banks, the internet services
are essential, and they have to utilize it to provide more efficient and practical service. The
technological factors do play an important role in banking industry.

technology is virtually everywhere in the 21st century. A large part of the works carried out online
Information technology has taken center stage and from customer accounts to loans and
insurance, many services can be availed of online Technology has added convenience 10 banking
However, SO issues also have arisen all the technical development and innovation. Privacy and
security concerns have also grown Banks have spent huge sums on the maintenance of a large
technology. Apps are common and customers use them any time from their smartphones to shop
and pay online. These apps are full of features and make it easy to pay bills online.

o Technological transfer and its impact

o Emerging technologies
o Internet, remote working and communication costs
o Rate technological change

 Environmental Factors: -
It is the final and the last step of the PESTLE analysis which allows you to deal with the
environmental platform. To consider the environmental factors, you have to consider the various
locations and they impacts on the trading which is sponsored by the banking industry. The
climatic changes affect the bank operations and most of the time proves to be a hurdle in many
cases. The environmental factors include.

Sustainability and environment friendliness has become important for the banking sector. Energy
management and other environmental concerns are addressed by banks globally. Banks like
HDFC are investing in energy management. Paperless transactions. In order to control its
environmental footprint, HDFC has also introduced solar ATMs. "These use rechargeable lithium
on batteries which use solar energy for their functioning, thereby reducing the Consumption of
Conventional Energy". Banks also publish their critical annual reports on their critical
achievements over the year in this area. It creates a positive image and also reduces Costs in
many operational areas.
 o Natural disasters
o Environmental factors
o Usage Green products
o Climate and weather changes

 Legal Factors: -
Legal factors leave a countless impact on the banking industry. The trade structures, securities
law, note regulations and various legal necessities help to confirm the legal frameworks which
are available in the market. It is best to make assured that these structures facilitate the
commercial tools and are reliable for the international economy. For the safe and secure banking
transaction and procedures following are the legal laws which affects industry.

The banking industry globally is impacted by several laws . It is also a large employer and is
affected by the labour laws . Legal risks are immense because Oversight and regulation are very
high in this sector . In US alone , several laws have been introduced to regulate this sector of the
industry . Since the Federal Reserve act of 1913 , the Glass Steagall Act and the Dodd Frank several
laws have been introduced and several agencies founded to Oversee and ensure compliance .
Customer concerns and social responsibility have also made the government introduce Several
laws . Banking is a heavily regulated area where Compliance requires a lot of FOCUS and also
spending .

o Safety and health laws

o Discrimination law
o Employment legislation
o Antitrust rules
o Consumer law
Company Study
 Private bank:

1. HDFC BANK:

Housing Development Finance Corporation Limited, more popularly known as HDFC Bank Ltd,
was established in the year 1994, as a part of the liberalization of the Indian Banking Industry
by Reserve Bank of India (RBI). It was one of the first banks to receive an 'in principle' approval
from RBI, for setting up a bank in the private sector.

The bank was incorporated with the name 'HDFC Bank Limited', with its registered office in
Mumbai. The following year, it started its operations as a Scheduled Commercial Bank. Today,
the bank boasts of as many as 4,805 branches and over 12,260 ATMs across 2,657 cities and
towns. The banks also installed 4.30 Lacs credit cards and 85.4 Lacs credit card in FY 2017.
2. ICICI BANK:

ICICI Bank Limited (Industrial Credit and Investment Corporation of India) is an Indian
multinational banking and financial services company headquartered in Mumbai,
Maharashtra. In 2014, it was the second largest bank in India in terms of assets and third in
term of market capitalisation. It offers a wide range of banking products and financial services
for corporate and retail customers through a variety of delivery channels and specialised
subsidiaries in the areas of investment banking, life, non-life insurance, venture capital and
asset management. The bank currently has a network of 4,867 branches and 14,417 ATMs
across India and has a presence in 19 countries including India.
3. AXIS BANK:

Axis Bank was the first of the new private banks to have begun operations in 1994, after
the Government of India allowed new private banks to be established. The Bank was
promoted jointly by the Administrator of the specified undertaking of the Unit Trust of
India (UTI-I), Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company
Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and
United India Insurance Company Ltd.

Axis Bank is the third largest of the private-sector banks in India offering a comprehensive
suite of financial products. The bank has its head office in Mumbai, Maharashtra. It has
3,703 branches, 13,814 ATMs, and nine international offices. The bank employs over
55,000 people and had a market capitalization of ₹1.31 trillion (US$18 billion) (as on
March 31,2018). It sells financial services to large and mid-size corporates, SME, and retail
businesses.
 Nationalisation Bank

1. BANK OF BARODA:
Bank of Baroda (BOB) is an Indian International banking and financial services company headquartered in
Vadodara (earlier known as Baroda) in Gujarat, India. It has a corporate office in Mumbai.

Based on 2017 data, it is ranked 1145 on Forbes Global 2000 list.BOB has total assets in excess of ₹ 3.58
trillion (making it India’s 2nd biggest bank by assets), a network of 5538 branches in India and abroad, and
10441 ATMs as of July, 2017.The government of India announced the merger of Bank of Baroda, Vijaya
Bank and Dena Bank on September 17, 2018 to create the country's third largest lender. The envisaged
amalgamation will be the first-ever three-way consolidation of banks in the country, with a combined
business of Rs 14.82 lakh crore, making it the third largest bank after State Bank of India (SBI) and ICICI
Bank.

The bank was founded by the Maharaja of Baroda, Maharaja Sayajirao Gaekwad III on 20 July 1908 in the
Princely State of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of India, was
nationalised on 19 July1969, by the Government of India and has been designated as a profit-making
public sector undertaking (PSU).
2. PUNJAB NATIONAL BANK:

Punjab National Bank (PNB) is an Indian multinational banking and financial services company. It is a state-
owned corporation based in New Delhi, India. The bank was founded in1894. As of 31 March 2017, the
bank has over 80 million customers, 6,937 branches (7,000 as on 2nd oct,2018) and 10681 ATMs across
764 cities.

In February2018, PNB was part of India’s biggest ever fraud in which two junior officers at a single branch
had illegally steered $1.77 billion in fraudulent loans to companies, most of them controlled by billionaire
jeweller Nirav Modi. Based on the data available with Reserve Bank of India, among state run banks in
India, PNB topped in the number of loan fraud cases across India with 389 cases totalling Rs 65.62 billion
over the last five financial years.

PNB has a banking subsidiary in the UK (PNB International Bank, with seven branches in the UK), as well
as branches in Hong Kong, Kowloon, Dubai, and Kabul. It has representative offices in Almaty (Kazakhstan),
Dubai (United Arab Emirates), Shanghai (China), Oslo (Norway), and Sydney (Australia). In Bhutan it owns
51% of Druk PNB Bank, which has five branches. In Nepal PNB owns 20% of Everest Bank Limited, which
has 50 branches. Lastly, PNB owns 84% of JSC (SB) PNB Bank in Kazakhstan, which has four branches.
3. BANK OF INDIA:
Bank of India was founded on 7 September 1906 by a group of eminent businessmen from Mumbai,
Maharashtra, India. The Bank was under private ownership and control till July 1969 when it was
nationalised along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up capital of ₹5 million (US$70,000) and 50 employees,
the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong
national presence and sizable international operations. In business volume, the Bank occupies a premier
position among the nationalised banks.

The bank has 4,963 branches in India spread over all states/ union territories including specialised
branches. These branches are controlled through 54 Zonal Offices. There are 60 branches/ offices and 5
Subsidiaries and 1 joint venture abroad.

The Bank came out with its maiden public issue in 1997 Bank of India (BOI) is commercial bank with
headquarters at Bandra Kurla complex, Mumbai and it is one of the top 5 nationalised banks in India.
Product profile
 What is Bank Loans?

A bank loan is the most common form of loan capital for a business.

A bank loan provides medium or long-term finance. The bank sets the fixed period over which
the loan is provided (e.g. 3, 5 or 10 years), the rate of interest and the timing and amount of
repayments.

The bank will usually require that the business provides some security (“collateral) for the loan,
although in the case of a start-up this security often comes in the form of personal guarantees
provided by the entrepreneur.

Bank loans are good for financing investment in fixed assets (such as plant & machinery, land and
buildings). They are generally charged at a lower rate of interest that a bank overdraft. The
interest rate can be either fixed (e.g. 8% per year on the amount outstanding) or variable (where
the interest rate varies depending on the Bank of England base rate).

However, a bank loan provides less flexibility than a bank overdraft. The business commits to
meeting the bank loan repayments and interest – which it needs to do whether or not the cash
flow position is good. A failure to meet the terms of the bank loan may lead to the bank putting
the business into insolvency.

Bank loans tend not to be offered to start-ups or businesses with a track record of poor
profitability and cash flow. Such businesses are perceived as being high-risk by banks that, as a
result of the credit crunch, are more cautious about the kind of lending they offer.
PRODUCT PROFILE

 Private bank:

1. HDFC BANK:

 HDFC Bank Business Loan

To help small and medium scale businesses grow and flourish more, HDFC Bank offers
business loans loaded with a host of benefits. These loans are tailor-made to suit the unique
needs of a business and are available at competitive interest rates. There is no need to pledge
an asset as collateral for business loans and the application process is also transparent.
Additional features like 60-second eligibility check, disbursal within 48 hours, dropline
overdraft facility and the credit protect plan together make this loan a great option for small
businesses. Business loans up to Rs. 50 Lakhs can be availed at HDFC Bank.

 HDFC Bank Personal Loan

Meet your urgent financial needs with HDFC Bank personal loan. Offered at competitive rates,
personal loan can be used to provide for a number of financial needs such as wedding,
vacation, debt consolidation and more. HDFC Bank provides personal loans at easier terms
and conditions and with hassle-free documentation. Some of its benefits are listed below-

o Loan amount up to Rs. 40 Lakhs

o Loan disbursal in less than 4 hours
o Hassle-free application and minimal documentation
o Low EMIs

 HDFC Bank Education Loan

HDFC Bank also offers education loans at attractive interest rates to help the students pursue
education in their dream institute whether in India or abroad. Loans up to Rs. 10 Lakhs can
be availed at HDFC Bank which is also eligible for tax exemption under section 80(E) of the
Income Tax Act, 1961. For high-value loans, collateral security is required which includes fixed
deposit, LIC, NSC or a residential property. The bank also offers a flexible repayment tenure-
loans below Rs. 7.5 Lakhs can be paid within 10 years and those above Rs. 7.5 Lakhs have a
maximum tenure of 15 years. Transparent procedure and doorstep services make this a great
option to fund higher education.
 HDFC Bank Gold Loan

HDFC Bank offers gold loans to help its customers fulfil their immediate need for cash such as
wedding expenses, business expansion, education or medical needs. These loans require
minimal documentation and ensure quick funds disbursal. The pledged gold jewellery is kept
under secure storage to ensure safety. Some of its advantages include-

o Flexible rates of interest

o Minimal documentation
o Secure storage of the pledged gold

 HDFC Bank Home Loan

Customers can avail home loan from HDFC Bank at highly competitive rates of interest. This
loan can be availed for the purpose of buying a house or to build one. Outstanding home loan
from other banks can also be transferred to HDFC Bank at lower rates of interest. HDFC Bank
ensures a hassle-free application process and easy documentation formalities. You can also
get pre-approved home loan and go house hunting with more confidence. Some of the
reasons why you must avail HDFC Bank home loan are-

o Attractive interest rates

o Special lower rates of interest for women borrowers
o Safe document storage
o Quick processing and disbursal

 HDFC Bank Loan against Property

You can also avail loan against property with HDFC Bank to fulfil your personal and business
needs. Both residential and commercial properties can be put forward as collateral and up to
60 percent of the property’s value can be given to the borrower. Hassle-free loan processing
and quick disbursal make it a worthy option to fund your immediate financial needs. Low
EMIs, high loan amount and competitive pricing are a few more advantages of loan against
property by HDFC.

 HDFC Bank Car Loan

HDFC Bank offers car loans for purchasing a new car or a pre-owned car at highly attractive
rates of interest. Ranging from a compact car to a luxury sedan with lavish features, loans can
be availed to fund any dream vehicle. Up to 100 percent financing is offered by HDFC Bank
and there is flexible loan tenure for up to a period of 7 years. HDFC Car Loan can be taken for
a highest amount of Rs. 3 Crores. Customers can check their eligibility for this loan within 60
 seconds by filling some basic details and can be approved in just 30 minutes. Some special
benefits on car loan are provided to existing customers of HDFC Bank.

2. ICICI BANK:

 ICICI Bank Personal Loan

Meet your financial emergencies easily with the help of ICICI Bank personal loans. These are
unsecured loans and offer flexibility of usage- it can be used to provide for wedding expenses,
international vacation, medical needs or consolidating several pending debts. The application
procedure for personal loans is hassle-free and it requires simple documentation. Some
reasons why you should opt for ICICI Bank personal loan are-

o Flexible repayment tenure of up to 60 months

o Interest charged on monthly reducing basis
o No need for collateral
o Flexibility of fund usage
o Easy modes of repayment

 ICICI Bank Car Loan

ICICI Bank lets you own your dream car by offering easy car loans. You can get a loan up to
100% of the ex-showroom price of the car. The bank offers highly-competitive interest rates
on car loan with a maximum tenure of seven years. This loan can be availed by salaried as
well as self-employed individuals and can be taken for the purchase of new and used cars.
Existing customers can get loans at even more attractive terms and with lesser
documentation formalities. ICICI Bank car loan is also known in the market for charging one
of the lowest processing fees of 2% or Rs. 6,000 whichever is lower.

 ICICI Bank Home Loan

ICICI Bank Home Loan is the quickest and easiest way to get the key to your dream home.
Available at a competitive rate of interest, this loan is suitable for both salaried and self-
employed individuals. Customers can apply for these loans online by visiting the bank’s
website. Application process is hassle-free and the documentation is also easy. ICICI Bank also
offers pre-approved home loans to select existing customers who can also enjoy the benefit
of lesser documentation. Those who have already taken home loan from ICICI Bank have the
facility of availing top-up home loan to meet extra expenses like home renovation or any
other financial emergency. Outstanding home loan balance from other banks can also be
transferred to ICICI Bank to get lower interest rates.
 ICICI Bank Gold Loan

ICICI Bank offers instant gold loan as ultimate solution to all your financial constraints.
Available against gold jewellery, this loan is processed in a matter of minutes. The
documentation formalities are simplest in case of gold loan and the loan proceeds can be
utilized for varied purposes such as business expansion, children’s education, down payment
for big-ticket purchases, medical emergency and more. Moreover, there is complete
transparency and security of your assets. Some reasons why ICICI gold loans make sense are-

o Attractive rates of interest

o Easy documentation
o Complete safety of jewellery
o Loan within a few minutes

 ICICI Bank Loan Against Property

Loan against property is a multi-purpose loan which you can avail against your property. The
loan proceeds can be utilized to meet an urgent need of cash, to fund a wedding or to provide
for the long-term capital needs of your business. Such loans can be taken for a maximum
tenure of 15 years and are available at highly-competitive rates of interest. ICICI Bank ensures
faster processing of loans and simple documentation for existing customers. LAP can be
availed against both residential property and commercial property.

 ICICI Bank Business Loan

ICICI Bank provides different types of business financing such as working capital loans, instant
overdraft and unsecured term loans. These loans are offered to Small and Medium
Enterprises (SME) and other businesses that want to grow and expand their services. ICICI
Bank offers customized solutions to businesses in the form of collateral free loans, loans
without financials, finance for Importers & Exporters and loans for schools and colleges.
3. AXIS BANK:

 AXIS Bank Business Loan

To assist the small businesses in expansion, Axis Bank offers collateral-free business loans.
Amount up to Rs. 50 Lakhs can be availed at competitive rates of interest. In order to avail
the loan, the business should be at least 3 years old and have a turnover of Rs. 30 Lakhs to Rs.
10 Crores. Professionals like engineers, doctors and chartered accountants can also avail this
loan to expand their practice to new levels. Axis Bank Business Loan requires minimal
documentation and has a hassle-free application process that makes it one of the most
popular options in the market. The balance of existing business loans from other bank can
also be transferred to Axis Bank for availing lower rates of interest.

 AXIS Bank Car Loan

Axis Bank offers the easiest and the most cost-effective way to own your dream car in the
form of its car loan. Starting from Rs. 1 Lakh, the loan amount may go up to 100 percent of
the on-road price of the car. The maximum tenure is 8 years for Axis Bank car loan. Priority
Banking, Wealth Banking, Privee Banking customers and salary account holders- all are
eligible to avail a car loan with the bank. The processing fee for Axis Bank car loan is also
comparatively lower in the market and the interest rates start at 9.25% only.

 AXIS Bank Educational Loan

Whether it is about higher studies in a reputed Indian institute or in an international college,

Axis Bank fuels the dream of all students by offering financial assistance in the form of
education loan. It is available at attractive rates of interest and covers tuition fee, hostel fee,
cost of study material, etc. The quantum of loan depends on eligibility of the applicants and
cost of education; the maximum loan amount, however, is capped at Rs. 75 Lakhs. There is
no margin money required for loans of less than Rs. 4 Lakhs. The application process is also
smooth and hassle-free.

 AXIS Bank Gold Loan

Meet your urgent monetary needs with Axis Bank Gold Loan. Liquidate your gold jewellery
and get loan against it at competitive rates of interest. The loan is disbursed on the same day
provided that all your documentation formalities are in place. The pledged gold ornaments
are kept in secure bank vaults. Also, you do not have to pay any foreclosure charges on gold
loan. The tenure for such loans ranges from 6 months to 36 months and the applicants can
choose the tenure that suits them the best.
 AXIS Bank Home Loan

Axis Bank offers home loans at highly-competitive rates to make dream homes real for the
people. Applicants can choose a loan tenure that suits them the best- a longer tenure calls for
smaller EMIs and vice-versa. Both fixed and floating rate home loans are offered by Axis Bank.
Some reasons why Axis Bank home loans are so popular are-

o Attractive rates of interest

o Choice of interest rate type- fixed and floating
o Transfer other bank home loans to avail lower rates
o Zero pre-payment charges
o Service at your doorstep
o Smooth application process

 AXIS Bank Personal Loan

Whether it is about financing your wedding or going on a lavish vacation, Axis Bank personal
loan comes in handy. Available at attractive rates of interest and with minimal
documentation, these loans help you meet an urgent need of cash. You can get loan for an
amount as high as Rs. 15 Lakhs. Minimum age requirement for availing a personal loan is 21
years and a valid set of documents is needed including ID proof, address proof and income
proof. The application process is simple as it is an unsecured loan. You can also use their
personal loan EMI calculator to know the estimated amount of EMI that you have to pay per
month.
 Nationalisation Bank

1. BANK OF BARODA:
 Bank of Baroda Loan Against Property
Loan against property is a multipurpose loan that helps an individual to take loan against his
assets. Sometimes people face cash crunch despite, having various properties at different
places. At this time, people can take Bank of Baroda LAP to come out of their cash crisis. It is
a perfect way to unlock the value of one’s property and realize one’s dreams

 Bank of Baroda Personal Loan

o This loan is issued to all salaried, non-salaried, self-employed professionals,
insurance agents, and also to defence personnel and pensioners.
o The loan can also be availed for the purpose of depositing security money for
applicants wishing to purchase a flat or a new plot.
o This loan can be availed for a minimum amount of Rs 20,000 to a maximum amount
of Rs 10 Lakhs. However, the loan limit depends upon the business profile of the
applicant and the purpose of loan.
o The loan can be availed for a maximum period of 84 months.
o One can easily calculate EMI for BOB Personal Loan online.
o The payment of the loan has to be done through Equated Monthly Instalments
(EMI’S) payable on regular intervals at the specified date.

 Bank of Baroda Home Loan

o BOB offers Home loans to all salaried, non- salaried and self-employed professionals.

o The BOB Home loans interest rate is competitive

o Home loan from Bank of Baroda is available for the purpose of purchase of new
houses, purchase of old flats (not more than 25 years old), plots available for
construction of flats/houses (subject to be constructed within a period of 3 years),
construction or renovation of existing homes.
o The bank adopts the practice of charging floating or variable interest rates.
o The bank also provides refinancing options, which allows the customer to transfer his
existing home loans in other banks to Bank of Baroda at comparatively lower interest
rates.
o Bank of Baroda home loans also gives the applicant certain income tax benefits.
o It also gives its customer an option of applying for top up loans linked to the applicant’s
current BOB Home loans.
o It also gives the applicant a free personal accidental insurance for the stipulated BOB
Home loans repayment period.
o The bank also issues a complimentary credit card with a limit of Rs.2 lacs and above
to all the first time BOB home loan borrowers.
 o It also provides extra benefits in the form of concessions up to 0.25% in the interest
rate for car loans and concessions up to 0.50% in the interest rate of the loan for
consumer durables.
o Generally, the BOB Home loans are sanctioned within a period of 6 working days after
the submission of the relevant documents for home loans.
o Loan Amount: An applicant can apply for a BOB Home loan amounting to 80% of the
cost of the property, in the case of Bank of Baroda home loan.
o Age: The maximum age of applying for BOB Housing loans in case of a salaried
professional is set at 65 and 70 for self-employed professionals.
o The bank also provides the facility of adding a co-applicant while applying for the Bank
of Baroda home loan.
o The Co-applicants can be the applicant’s spouse or even children below the age of 50
years, with a steady source of income
o The validity of the Bank of Baroda home loan sanction stands for a period of 4 months.

 Bank of Baroda Car Loan

o Processing charges are applicable on Bank of Baroda car loans. These charges actually
include documentation charges, document verification charges, inspection charges,
and processing charges.
o The processing fee for Bank of Baroda car loan is reputed for being the lowest in the
country, and is listed as follows:
o The processing fee will be charged at 0.50 % of the total loan amount, and the
minimum amount in this case will be Rs. 2500 while the maximum being
Rs.10,000. Service taxes are also liable to be levied on the processing fee. The service
taxes however, will be collected separately.
o No foreclosure charges. This implies that if a borrower wishes to pre close their car
loan, they can easily do so by simply paying off the remaining amount, as there are no
foreclosure penalties levied by the bank.

 Bank of Baroda Gold Loan

Bank of Baroda offers Gold Loan to its customers under two different schemes. While one
scheme is a term loan the other is granted as an overdraft facility. Both the loans have
different features which should be studied in detail. Let us take a look at the different types
of Gold Loans available with the bank.

Types of Gold Loan

o Baroda Trader’s Loan Against the Security of Gold Ornaments / Jewellery

o Baroda Advance Against Gold Ornaments / Jewelleries
  Features
o The loan is available at the Metro or urban centers of the bank only
o The loan is offered as an overdraft facility or as a loan
o The loan is issued to traders for their working capital requirement or for purchasing
equipment for the purpose of development of the shop The minimum amount of
loan available is Rs.50,000 and the maximum amount of loan is Rs.2 lakhs. So,
traders can avail any amount from Rs.50,000 – Rs.2 lakhs to ensure a smooth
running of their business
o The bank keeps a margin of 25% as a margin and advances the rest 75% of the value
of the gold coins, jewellery or ornaments up to a maximum amount of Rs.2 lakhs
o In case of a loan the maximum repayment period is 60 months or 5 years. In case
the loan is availed as an overdraft facility, the maximum period of repayment is only
12 months or 1 year.
o The processing charges on the loan is 0.50% of the loan amount sanctioned subject
to a minimum of Rs.250 plus service tax as applicable

 Bank of Baroda Education Loan

o This Bank of Baroda education loan is available for studies from Nursery to Senior
Secondary School.
o There is no processing fees or documentation charges
o There is no margin or security required to avail the loan
o The loan covers a range of expenses including college tuition fees, fees for
Laboratory/library/examination, hostel charges, equipment/uniform purchase, cost
of laptop/PC and various refundable deposits.
o The maximum loan amount is Rs. 4 lakh with no collateral or guarantor
requirement.
o The loan sub-limit of each year is payable in 12 EMIs starting from 12 months after
the first disbursement of each year’s loan component
o 0.50% concession on regular interest rate for girl students.
2. PUNJAB NATIONAL BANK:

 Personal Loan
Personal Loans have made it possible for our desires to shape into reality and with varied
loan options PNB offers to its consumers, it best fits their needs and affordability. After
taking a loan, the borrower has to pay EMI (Equated monthly instalment) up to the end
of tenure of the loan. Given below are the following Personal Loan schemes
o Personal Loan Scheme for Public
The scheme is launched to make the funds available to the general public to meet
all type of personal expenses.
o Personal Loan Scheme For Pensioners
The scheme is launched to provide assistance to the public drawing pension
through the PNB

 Education Loan
PNB provides Education loan to meritorious and deserving students to help them pursue
their dream of higher studies. The various schemes launched by the bank include PNB
Saraswati, PNB Pratibha, PNB Udaan, PNB Kaushal, etc. The main objective of all the
schemes is to provide assistance to the students who want to do higher studies in India
or abroad. The loan amount can be used to pay the college/school/hostel fee,
examination fee, library fee, laboratory fee The bank also pays for the purchase of books,
instruments, uniforms, and equipment’s.

 Loan against Property

PNB grants loan to the customers against their property to help them achieve their
desires. PNB provides loan against residential as well as commercial property. You can
take the loan for personal need or for the business need. The maximum loan availed can
be the 60 % of the market value of the property

 Punjab National Bank Car Loan

o One of the most popular loan offerings of the bank is the Punjab National Bank car
loan. Under these car finance plans, Punjab National Bank extends its financing
services for the purchase of four wheelers. This includes the Punjab National Bank car
loan for a new car and for the pre-owned car loan. The car finance plans from Punjab
National Bank cover an extensive range of four wheelers including foreign and
indigenous make Sports Utility Vehicles (SUVs), Multi Utility Vehicles (MUVs), Jeeps,
Vans, and Cars. The used car loan is available to finance pre-owned cars that are no
older than 3 years from the date of their RTO registration.
 o The car loan application for Punjab National Bank car loans is accepted from salaried
and self-employed individuals, as well as firms and business concerns, as long as they
have a minimum annual income of Rs. 200000. The primary applicant also has the
option to club the income of their parent or spouse, to increase their car loan amount
eligibility. Punjab National Bank offers one of the best car loans in India, where the car
loan disbursals can go up to 25 times the applicant’s net monthly salary or Rs. 25 lakhs
(whichever is lower). For business concerns and firms, there is no applicable upper
limit to their car loan amount eligibility. Car loans offered by Punjab National Bank
have a maximum repayment period of 84 months for new cars and 60 months for a
used car loan. The bank also routinely offers promotional and festive deals on car
loans

 Education Loan

PNB provides Education loan to meritorious and deserving students to help them pursue
their dream of higher studies. The various schemes launched by the bank include PNB
Saraswathi, PNB Pratibha, PNB Udaan, PNB Kaushal, etc. The main objective of all the
schemes is to provide assistance to the students who want to do higher studies in India
or abroad. The loan amount can be used to pay the college/school/hostel fee,
examination fee, library fee, laboratory fee The bank also pays for the purchase of books,
instruments, uniforms, and equipment’s.

 Credit Cards
Introduction of credit cards have given a boost to cashless economy and resulted in
encouraging individuals and businessmen towards use of cashless transactions. Punjab
National Bank has three credit cards which are affiliated to VISA, these are, PNB Global
Gold Credit Card, PNB Global Classic Credit Card , PNB Global Platinum Credit Card All the
cards offer attractive perks and reward points against expenses which are charged to the
card or transactions carried out using the card. In case of theft or loss of credit card you
will have to immediately report to the toll free customer care number which is available
 Home Loans

The main objective of providing home loan is to ensure the availability of affordable
housing to all individuals at attractive interest rates. Loan can be availed for purchase of
land/already built house/under construction house, to cover escalation costs and for
renovation of the existing house. Given below are the various schemes introduced for the
various income groups

o PNB Pride Housing loan for government employees

This scheme has been introduced with the objective of ensuring that government
employees buy a house at attractive and affordable interest rates, the benefits of
scheme can be availed by permanent employee

o PNB Housing Loan For Public (Pradhan Mantri Awas Yojana, Housing For All)
This scheme was introduced with the objective of providing affordable housing to
the EWS (Economically Weaker Section) and LIG (Low Income Group) of
individuals. Loans can be availed for construction, purchase of house or for making
additions to the existing house.

o PNB Gen-Next Housing Finance

This loan is specifically designed for professionals working in the IT sector,
PSU/PSB/Government employees to ensure they can buy a home at affordable
price.
3. BANK OF INDIA:

 Star Educational Loan

The Educational Loan Scheme aims at providing financial support from the bank to deserving/
meritorious students for pursuing higher education in India and abroad.

 Star Holiday Loan

To meet the expenses (like airfare/Train/Bus charges, expenses for accommodation, sight
seeing, etc.) for going for pilgrimage/tours/excursions etc. undertaken/to be undertaken by
Self/spouse/children/ parents/family members/close relatives of proponent within India or
abroad.

 Star Home Loan

This type of Bank of India Loans provides loans to purchase a Plot for construction of a House,
to purchase/construct house/flat, as well as for renovation/repair/alteration/addition to
house/flat, furnishing of house, Takeover of customer's Housing Loan extended by other
Banks/F.Is /NBFCs at highly flexible and liberal terms and conditions.

 Star Mortgage Loan

This scheme provides loan/overdraft facility against mortgage of property at low rate of
interest. The scheme is for people engaged in trade, commerce & business and also
professionals & self employed, Prop. Firm, partnership firm, companies, NRIs and individuals
with high net worth including salaried people, agriculturists and staff members. The product
provides an opportunity to customers to borrow against a fixed asset (mortgage of property)
at a short notice without much paper work/attendant hassles.

 Star Mitra Personal Loan

The objective of this type of Bank of India Loans is to help Physically Challenged persons to
function independently and the purpose is to purchase durable and sophisticated aids /
appliances that promote their physical and social rehabilitation.

 Star Pensioner Loan Scheme

The target Customers of this type of Bank of India Loans are the Regular Pensioners or Family
Pensioners drawing regular monthly pension through the branch and the eligibility is retired
employees (other than dismissed/compulsorily retired).
 Bank Of India Personal Loans

o The maximum amount of loan to be sanctioned is Rs.10 lakhs. However, this

depends upon the income of the individual.

o The Bank of India offers personal loans at very attractive interest rates and easy
repayment plan.

o These loans are issued in the form of demand/term loans or a reducible or non-
reducible overdraft facility.

o Depending upon the purpose of the loan, Bank of India offers personal loan in
the form of unsecured loans (loans without collateral) and secured loans (loans
with collateral).

o The bank must be provided by legal mortgage/ equitable a charge of the

commercial or residential property as primary security. Hypothecations on the
assets have to be acquired by the banks to offer personal loans.

o The bank requires collateral security in the form of pledge of gold, gold
ornaments, NSC’S, Indira Vikas Patra, Bonds, LIC policies, Relief Bonds etc.
Industry Analysis
 Michel Porter’s Five Force Model

Threat of New Entrants

-Product Differencies
Difficulties
-Licensing requirement

Bargaining power of
Suppliers Threat of Competitors Bargaining Power Of
-Large No. of Banks Customers
-Nature of suppliers -High market growth -Large No. Of
rat alternatives
-RBI rules and
regulations -High fixed costs -Low Switching Costs
-Suppliers are not -High exit barriers -Undifferenciated
concentrated Services

Threat of Substitute
-Non Banking Financial
Sector Increasing rapidly
-Deposits in Posts
-Stock Market
-NBFC
1. Threat of New Entrants
The average person can’t come along and start up a bank, but there are services, such
as internet bill payment, on which entrepreneurs can capitalize. Banks are fearful of
being squeezed out of the payments business, because it is a good source of fee-
based revenue. Another trend that poses a threat is companies offering other financial
services. What would it take for an insurance company to start offering mortgage and
loan services? Not much. Also, when analysing a regional bank, remember that the
possibility of a megabank entering into the market poses a real threat. In Indian banking
industry, the main threats are foreign players and Non-Banking Finance Companies

2. Bargaining Power of Suppliers

Banking industry is governed by Reserve Bank of India. Reserve Bank of India is the
authority to take monetary action which leads to direct impact on circulation of money
in the Economy. The rules and regulation lay down by RBI. Suppliers of banks are
depositors. these are those people who have excess money and prefer regular income
and safety. In banking industry suppliers have low bargaining power.

 Nature of suppliers
Suppliers of banks are those people who prefer low risk and those who need
regular income and safety as well. Banks best place for them to deposits their
surplus money.

 RBI rules and regulations

Banks are subject to RBI rules and regulations. bank has to behave in a way
that RBI wants. So, RBI takes all decisions related to interest rates. This
reduces bargaining power of suppliers.

 Suppliers not concentrated

Banking industry suppliers sure not concentrated. There are numerous with
negligible portion of offer.so, this reduce their bargaining power.
3. Bargaining Power of Consumers
In today world, Customer is the King. Banks offers different services According to
clients need and requirement. Customers of banks are those who take loans and uses
services of banks. Customers have high bargaining power.

 Large no of alternatives
Customers have large no of alternatives, there are so many banks, which fight
for same pie.

 Low switching cost

Cost of switching from one bank to another is low. Banks are also providing
zero balance account and other types of facilities. They are free to select any
banks service. Switching cost are becoming lower with internet banking gaining
momentum and a result customers loyalty are harder to retain.

 Undifferentiated service
Bank provide merely similar service there are no much diffracted in service
provides by different banks so, bargaining power of customers increase.

4. Threat of Competitors

 A large no of banks
There is so many banks and non-financial institution fighting for same pie,
which has intensified Competition.

 High market growth rate

India is seen as one of the biggest market place and growth rate in Indian
banking industry is also very high. This has ignited the competition.

 High exit barriers

High exit barriers humiliate banks to earn profit and retain customers by
providing world class services.
5. Competitive Rivalry
The banking industry is highly competitive. The financial services industry has been
around for hundreds of years, and just about everyone who needs banking services
already has them. Because of this, banks must attempt to lure clients away from
competitor banks. They do this by offering lower financing, preferred rates and
investment services. The banking sector is in a race to see who can offer both the
best and fastest services, but this also causes banks to experience a lower ROA. They
then have an incentive to take on high-risk projects. In the long run, we’re likely to see
more consolidation in the banking industry. Larger banks would prefer to take over or
merge with another bank rather than spend the money to market and advertise to
people.
Financial Analysis
for
Banking
 Background of the Study:

 Meaning of Financial Statements

Financial statements refer to such statements which contains financial information
about an enterprise. They report profitability and the financial position of the business
at the end of accounting period. The team financial statement includes at least two
statements which the accountant prepares at the end of an accounting period. The
two statements are: -

o The Balance Sheet

o Profit and Loss Account

They provide some extremely useful information to the extent that balance Sheet
mirrors the financial position on a particular date in terms of the structure of assets,
liabilities and owners’ equity, and so on and the Profit And Loss account shows the
results of operations during a certain period of time in terms of the revenues obtained
and the cost incurred during the year. Thus the financial statement provides a
summarized view of financial positions and operations of a firm

 Meaning of Financial Analysis

The term financial analysis is also known as ‘analysis and interpretation of financial
statements’ refers to the process of determining financial strength and weakness of
the firm by establishing strategic relationship between the items of the Balance Sheet,
Profit and Loss account and other operative data.
The first task of financial analysis is to select the information relevant to the decision
under consideration to the total information contained in the financial statement. The
second step is to arrange the information in a way to highlight significant relationship.
The final step is interpretation and drawing of inference and conclusions. Financial
statement is the process of selection, relation and evaluation.
 Types of Financial Analysis

1. On the Basis Of Process Of Analysis

a) Horizontal Analysis:

This is used when the financial statement of a number of years are to be

analysed. Such analysis indicates the trends and the increase or decrease in
various items not only in absolute figures but also in percentage form. This
analysis indicates the strengths and weaknesses of the firm. This analysis is
also called as dynamic analysis because it also shows the trend of the
business.

b) Vertical Analysis:

This is used when financial statements of a particular year or on a particular

date are analysed. For this type of analysis we generally use common size
statements and the ratio analysis. It involves a study of quantitative relationship
among various items of balance sheet and profit and loss account. This type of
analysis is static analysis because this is based on the financial results of one
year. Vertical analysis is useful when we have to compare the performance of
different departments of the same company.

Among these two types of analysis, horizontal analysis is more useful because
it brings out more clearly the trends of working of a firm. This gives us more
concrete bases for future planning.
2. On the Basis of Information Available

a) Internal Analysis:
This analysis is based on the information available to the business firm only. Hence
internal analysis is made by the management. Internal analysis is more reliable
and helpful for financial decisions.

b) External Analysis:
This analysis is made on the basis of published statements, reports and
information. This analysis is made by external parties such as creditors, investors,
banks, financial analysis etc. external analysis is less reliable in comparison to
internal analysis because of limited and often incomplete information.
 RATIO ANALYSIS:
Meaning:
Absolute figures expressed in financial statements by themselves are
meaningfulness. These figures often do not convey much meaning unless
expressed in relation to other figures. Thus, it can be say that the relationship
between two figures, expressed in arithmetical terms is called a ratio.

TYPES OF RATIOS
1. Proportion or Pure Ratio or Simple ratio.
2. Rate or so many Times.
3. Percentage
4 Fraction.

OBJECTS AND ADVANTAGES OR USES OF RATIO ANALYSIS

1. Helpful in analysis of financial statements.

2. Simplification of accounting data.

3. Helpful in comparative study.

4. Helpful in locating the weak spots of the business.

5 Helpful in forecasting

6 Estimate about the trend of the business

7 Fixation of ideal standards

CLASSIFICATION OF RATIOS: -

Liquidity Ratios:
These are the ratios which measure the short-term solvency or financial position of a
firm. These ratios are calculated to comment upon the short-term paying capacity of a
concern or the firm’s ability to meet its current obligations.

Long –Term Solvency and Leverage Ratios:

Long-term solvency ratios convey a firm’s ability to meet the interest cost and
repayment schedules of its long-term obligation e.g. Debit Equity Ratio and Interest
Coverage Ration. Leverage Ratios.

Activity Ratios:
Activity ratios are calculated to measure the efficiency with which the resources of a
firm have been employed. These ratios are also called turnover ratios because they
indicate the speed with which assets are being turned over into sales e.g. debtors
turnover ratio.

Profitability Ratios:
These ratios measure the results of business operations or overall performance
and effective of the firm e.g. gross profit ratio, operating ratio or capital
employed. Generally, two types of profitability ratios are calculated.

(a) In relation to Sales, and

(b)In relation in Investment

RATIO ANALYSIS:

1. CURRENT RATIO:
An indication of a company's ability to meet short-term debt obligations; the higher the
ratio, the more liquid the company is. Current ratio is equal to current assets divided
by current liabilities. If the current assets of a company are more than twice the current
liabilities, then that company is generally considered to have good short-term financial
strength. If current liabilities exceed current assets, then the company may have
problems meeting its short-term obligations.

CURRENT RATIO = TOTAL CURRENT ASSETS / TOTAL CURRENT LIABILITY

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 0.38 0.33 0.34 0.36 0.33

ICICI 0.59 0.53 0.44 0.38 0.33

AXIS 0.45 0.40 0.36 0.37 0.31

Current Ratio
0.7

0.59
0.6
0.53

0.5
0.45 0.44
0.4
0.4 0.38 0.38
0.36
0.33 0.34 0.36 0.37 0.33
0.33
0.31
0.3

0.2

0.1

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

2. NET PROFIT RATIO (in %)
Net Profit Ratio is also termed as Sales Margin Ratio (or) Profit Margin Ratio (or) Net
Profit to Sales Ratio. This ratio reveals the firm's overall efficiency in operating the
business. Net profit Ratio is used to measure the relationship between net profit (either
before or after taxes) and sales this ratio indicates the Net margin on a sale of Rs.100.
It is calculated as follows:
Net Profit Ratio = Net Profit X 100
Net Sales

Net profit includes non-operating incomes and profits. Non-Operating Incomes such
as dividend received, interest on investment, profit on sales of fixed assets,
commission received, discount received etc. Profit or Sales Margin indicates margin
available after deduction cost of production, other operating expenses, and income
tax from the sales revenue. Higher Net Profit Ratio indicates the standard performance
of the business concern. An increase in the ratio over the previous period indicates
improvement in the operational efficiency of the business.

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 16.04 17.28 17.77 17.32 17.82

ICICI 17.19 17.96 18.24 14.29 13.30

AXIS 15.35 16.34 16.78 16.32 6.54

NET PROFIT RATIO

20
17.96 18.24 17.82
18 17.19 17.28 17.77 17.32
16.34 16.78
16.04 16.32
16 15.35
14.29
14 13.3
12
10
8
6.54
6
4
2
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

3. RETURN ON INVESTMENT (in %)

A performance measure used to evaluate the efficiency of an investment or to compare

the efficiency of a number of different investments. ROI measures the amount of return
on an investment relative to the investment’s cost. To calculate ROI, the benefit (or
return) of an investment is divided by the cost of the investment, and the result is
expressed as a percentage or a ratio.

Return on investment = Net Profit

X 100
Net Worth

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 18.57% 19.50% 16.47% 16.91% 16.26%

ICICI 12.48% 13.40% 13.90% 10.83% 9.80%

AXIS 15.64% 16.26% 16.46% 15.46% 6.60%

ROI
25.00%

20.00% 19.50%
18.57%

16.47% 16.46% 16.91% 16.26%

16.26%
15.64% 15.46%
15.00%
13.40% 13.90%
12.48%
10.83%
10.00% 9.80%

6.60%

5.00%

0.00%
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

4. DEBT- EQUITY RATIO

The Debt-Equity ratio is calculated to find out the long-term financial position of the
firm. This ratio indicates the relationship between long-term debts and shareholder’s
funds. The soundness of long-term financial policies of a firm can be determined with
the help of this ratio. It helps to assess the soundness of long-term financial policies
of a business. It also helps to determine the relative stakes of outsiders and
shareholders. Long-term creditors can assess the security of their funds in a business.
It indicates to what extent a firm depends upon lenders to meet its long-term financial
requirements. A low Debt-Equity ratio is considered better from the point of view of
creditors.

Debt Equity Ratio = Total Debt / Equity

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 0.05 0.07 0.06 0.06 0.06

ICICI 0.07 0.07 0.07 0.06 0.06

AXIS 0.06 0.06 0.06 0.06 0.07

DEBT EQUITY RATIO

0.08
0.07 0.07 0.07 0.07
0.07 0.07
0.06
0.06 0.06 0.06 0.06 0.06 0.06 0.06
0.06 0.06
0.05
0.05

0.04

0.03

0.02

0.01

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

5. ASSETS TURNOVER RATIO

The asset turnover ratio is an efficiency ratio that measures a company's ability to
generate sales from its assets by comparing net sales with average total assets. In
other words, this ratio shows how efficiently a company can use its assets to generate
sales.

The total asset turnover ratio calculates net sales as a percentage of assets to show
how many sales are generated from each dollar of company assets. For instance, a
ratio of .5 means that each dollar of assets generates 50 cents of sales.

Assets Turnover Ratio = Net Sales (revenue)

Average Total Assets

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 0.10 0.09 0.10 0.09 0.09

ICICI 0.08 0.08 0.08 0.08 0.08

AXIS 0.09 0.09 0.09 0.09 0.08

ASSETS TURNOVER RATIO

0.12

0.1 0.1
0.1
0.09 0.09 0.09 0.09 0.09 0.09 0.09
0.08 0.08 0.08 0.08 0.08
0.08 0.08

0.06

0.04

0.02

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

6. PRICE- EARNING RATIO

This ratio highlights the earning per share reflected by market share. Price
Earnings Ratio establishes the relationship between the market price of an equity
share and the earning per equity share. This ratio helps to find out whether the
equity shares of a company are undervalued or not. This ratio is also useful in
financial forecasting. This ratio is calculated as:

Price Earnings Ratio = Market Price per Share/ Earnings per Share

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 22.08 21.19 25.10 22.02 25.40

ICICI 2.90 2.93 16.36 12.86 14.97

AXIS 2.35 2.21 18.05 12.88 31.95

PRICE EARNING RATIO

35
31.95

30
25.1 25.4
25
22.08 22.02
21.19
20 18.05
16.36
14.97
15 12.86
12.88

10

5 2.92.35 2.93
2.21
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

7. EARNING PER SHARE

In order to avoid confusion on account of the varied meanings of the term capital
employed, the overall profitability can also be judged by calculating earnings per share
with the help of the following formula:

Earning Per Equity Share = Net Profit after Tax –Preference Dividend
No. of Equity shares

The earnings per share of the company help in determining the market price of the
equity shares of the company. A comparison of earning per share of the company with
another will also help in deciding whether the equity share capital is being effectively
used or not. It also helps in estimating the company’s capacity to pay dividend to its
equity shareholders.

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 28.27 35.34 40.76 48.64 56.78

ICICI 72.17 84.94 19.28 16.73 16.83

AXIS 110.68 132.34 31.04 34.51 15.36

EARNING PER SHARE

140
132.34

120 110.68

100
84.94
80 72.17

56.78
60
48.64
40.76
40 35.34 34.51
28.27 31.04
19.28 16.73 16.83
20 15.36

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

8.Non-Performing Asset (NPA)

A nonperforming asset (NPA) refers to a classification for loans on the books

of financial institutions that are in default or are in arrears on scheduled payments of
principal or interest. In most cases, debt is classified as nonperforming
when loan payments have not been made for a period of 90 days. While 90 days of
non-payment is the standard period of time for debt to be categorized as
nonperforming, the amount of elapsed time may be shorter or longer depending on
the terms and conditions set forth in each loan.

Bank Name 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC 0.43 0.44 0.33 0.32 0.30

ICICI 4.89 2.67 1.61 0.97 0.77

AXIS 2.11 0.70 0.44 0.40 0.32

Non-Performing Asset (NPA)

4.89
5

3 2.67

2.11
2 1.61

0.97
1 0.7 0.77
0.43 0.44 0.33 0.44 0.32 0.4 0.32
0.3

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

HDFC ICICI AXIS

OT Analysis
for
Banking
SWOT analysis of Banking industry
The banking industry is one of the most dynamic industry because of the amount of
money and transactions involved. Everyone needs loans and everyone wants to save
money and increase it with interest as well. Without further ado, we present you

1. Strengths in the SWOT analysis of Banking

 Banking is as old as Human race:

Banking industry is the driving force to any nation. It helps in shaping the life of
human race may be some time merely by Exchange (which was called barter system),
or by transaction or by facilitating advances.

 Source of employment & GDF growth:

There is a consensus among development of the financial system contributes
to economic growth. Financial development creates enabling conditions for growth
through either a supply- leading (financial development spurs growth) or a demand-
following. It is this industry which continuously works to secure financial stability
international trade, promote employment, & reduce poverty around the world.

 Hedge from risk:

Whether it is natural calamity or man-made calamity banks mitigate the after
effect of the destruction by providing financial support to the victims to stand -up &
lead a peaceful life again.

 Diversified services:
Banking industry offer services from CASA to insurance, to loan, to investment.

 Connecting People:
With the advent of new age technological advancement Banks have made the
life of the common man easier. People can transact on real time basis in many places.

 Changing from mere savings & loan facilitator role:

Top priorities of banks now days include regulatory compliance, improving
asset quality, enhancing customer centricity, focusing on digital vergence, ackling
competition from non-banks Banks are therefore making business investments to
change their business models.

2. Weaknesses in the SWOT analysis of Banking

 Lack Of coordination:
The global banking industry faces short-term uncertainty due to the debt crises
that challenge several major economies. Industry assets stand at $143 trillion
(20130) &the EU is the largest regional market, with over 57 % of the global market.
Volatility in different market/Currencies has created problems for the banks in order
to work properly across the borders.
 Vulnerable to risk:
Since this sector deals with finances, it is the most risky sector which can change
the fate of any business/Industry

 High NPA's:
Rise in Retail & corporate NPAs (Non-performing assets) is the single major
issue this sector is going the worldwide.

 Can't reach to Under-penetrated market:

Due to several conflicting objectives of government & banks which goes hand
in hand, rural areas of developing nations are still not in the shadow of banks.
Although PMJDY (Pradhan Mantri Jan DhanYojana) implemented by the
acknowledged by World Bank for financial inclusion but the Idea is not fully
capitalized even in the home country.

 Structural weaknesses:
such as a fragmented industry structure, restrictions on capital availability and
deployment, lack of institutional infrastructure, restrictive labour laws, weak
corporate governance, Political pressure and ineffective regulations.

3. Opportunities in the SWOT analysis of Banking

 Expansion:
Penetrating to the rural markets & bringing the rural masses under the purview
of nized banking will be the objective of the Banks in decades to come.

 Changing Socio-cultural 8 demographic factors:

Given the demographic shifts resulting from changes in age profile and
household income, consumers will increasingly demand enhanced institutional
capabilities and service levels from banks.

 Rise in private sector banking:

Banking Industry across the world is highly regulated &lead by PSU's with their
respective central banks. With the advent of private sector banks this sector is
going through structural & functional changes mainly due to the adaptation of the
advanced technologies competition thereby benefiting to the end customers.

4. Threats in the SWOT analysis of Banking

 Recession:
It is one of the major threats to the financial system of the nation. Traumatic
shock of Economic crises & collapse of the several businesses can affect the banks
and vice-versa.
 Stability of the system:
Failure of some weak banks has often threatened the stability of the system.

 Competition:
Competition from NBFC's (Non-banking financial companies) like insurance
companies &mutual fund companies can affect the business of Banks.
 Problem
Identification
Problem For loans:

The loans which cannot easily be recovered from borrowers are called Problem
loans.

When the loans can’t be repaid according to the terms of the initial agreement or in
an otherwise acceptable manner, it will be called problem loans.

Identifying Problem Loans Early:

Detecting Problem Loans is for loan officers and other credit professionals who need
to understand the ways to minimize problem loans and to deal with them once they
surface.

The course is appropriate for junior to mid-level commercial lenders, credit review
and credit policy officers, and junior workout officers.

Importance of identifying problem loans early;

o Maintaining Profitability of Bank.

o Providing Client Support.
o Saving Lending Institution Image.

Maintaining Profitability of Bank:

Problem loans must be identified early because they can affect profitability.

Repayments with interest are the primary income source of lending institutions. If
repayments are not made regularly, the ability to make a profit is severely affected.

Providing Client Support:

If the bank can identify a problem loan early, it will be able to take steps to support a
client to pay.

For instance, the banker may call them and offer them the option of paying part of
the repayment immediately and part later.

Saving Lending Institution Image:

If the bank is slow to identify and follow’ up on late repayments, it sends a specific
message to borrowers.

The bank sends the message that it is ‘soft’, that it will not take immediate action,
and that late payment or non-payment is a viable option for them.

To work towards zero delinquency, the bank must avoid this image at all costs”.
Indications of Problem Loans:

If the loan can be identified earlier as problem loans before it actually happens,
regulating monitoring along with some other measures can prevent the loans from
being problems loans.

For identifying the “potential” problem loans, we have to know the symptoms of a
problem loan.

The symptoms of problem loans can be classified in the following way:

Quantitative Indicators:

1. Preparation of irregular and delayed financial statements.

2. Refusal of a large insurance claim.
3. Creating hindrances to the main source of income
4. Diminishing deposit balance.
5. Inability to pay the debt of creditors other than the bank.
6. Non-repayment of the loan instalments as repayment dates.
7. Entering into big loan contracts frequently with institutions and persons other than
the existing
bank.
8. The continuous decline in the market price of the shares of the borrowing
company.
9. Sudden rise or fall of large size deposit withdrawals.
10. Excessive cash dividend payouts from reserve fund or even from the capital.
11. All the end of the cycle, creditors are not completely paid out.
12. Concentration changes from a well-known major customer to one of lesser
stature.
13. Loans are made to or from officers and affiliates.
14. Unable to clean up bank debt, or clean-ups are affected by rotating bank debt.
15. Investment in fixed assets has become excessive.
How Banks Deal with Problem Loans:

Problem loans cause delinquency and loss to the lending institution. Having
identified which loans are problematic, the banker needs to do the following:

o Create Policies and Procedures for Dealing with Problem Loan.

o Distinguish Between Can Pay versus Won’t Pay.
o Develop a Relationship with the Client Up-Front.
o Prompt and effective follow-up.
o Periodic stress testing of loans.

Create Policies and Procedures for Dealing with Problem Loan:

A policy is a set of decisions about how your company operates. Policies are written
guidelines that help operations.

Procedures are written instructions that tell staff how to implement policies. Each
lender must have its policy for identifying problem loans and dealing with problem
loans.

These instructions are the procedures that will tell staff what to do to identify problem
loans early. Sound policies and procedures protect lenders from loss.