CHAPTER 4

IMPACT OF PROMOTIONAL ACTIVITIES ON BANKS

DEPOSITS

One of the important functions of the Bank is to accept deposits from the public for
the purpose of lending. In fact, depositors are the major stakeholders of the Banking
System. The depositors and their interests form the key area of the regulatory
framework for banking in India and this has been enshrined in the Banking
Regulation Act, 1949. The Reserve Bank of India is empowered to issue directives /
advices on interest rates on deposits and other aspects regarding conduct of deposit
accounts from time to time. With liberalization in the financial system and
deregulation of interest rates, banks are now free to formulate deposit products
within the broad guidelines issued by RBI .

This policy document on deposits outlines the guiding principles in respect of

formulation of various deposit products offered by the Bank and terms and
conditions governing the conduct of the account. The document recognizes the
rights of depositors and aims at dissemination of information with regard to various
aspects of acceptance of deposits from the members of the public, conduct and
operations of various deposits accounts, payment of interest on various deposit
accounts, closure of deposit accounts, method of disposal of deposits of deceased
depositors, etc., for the benefit of customers. It is expected that this document will
impart greater transparency in dealing with the individual customers and create
awareness among customers of their rights. The ultimate objective is that the
customer will get services they are rightfully entitled to receive without demand.

While adopting this policy, the bank reiterates its commitments to individual
customers outlined in Bankers' Fair Practice Code of Indian Banks' Association.
This document is a broad framework under which the rights of common depositors
are recognized. Detailed operational instructions on various deposit schemes and
related services have to be issued from time to time.

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In deposit terminology, the term Bank Deposit refer to an amount of money in cash
or check form or sent via a wire transfer that is placed into a bank account. The
target bank account for the Bank Deposit can be any kind of account that accepts
deposits. For example, a Bank Deposit is generally made when opening an account
or in the course of routine business or personal transactions that involve placing
funds with the bank for future use. Bank deposits can be made in a number of
different ways.

A deposit account is a savings account, current account or any other type of bank
account that allows money to be deposited and withdrawn by the account holder.
These transactions are recorded on the bank's books, and the resulting balance is
recorded as a liability for the bank and represents the amount owed by the bank to
the customer. Some banks may charge a fee for this service, while others may pay
the customer interest on the funds deposited.

MAJOR TYPES
• Transactional account
Current account (Commonwealth)
A deposit account held at a bank or other financial institution, for the
purpose of securely and quickly providing frequent access to funds on
demand, through a variety of different channels. Because money is available
on demand these accounts are also referred to as demand accounts or demand
deposit accounts, except in the case of NOW Accounts.
• Money market account
A deposit account that pays interest, and for which short notice (or no notice)
is required for withdrawals. In the United States, it is a style of instant access
deposit subject to federal savings account regulations, such as a monthly
transaction limit.
• Savings account
Accounts maintained by retail banks that pay interest but can not be used
directly as money (for example, by writing a cheque). Although not as
convenient to use as checking accounts, these accounts let customers keep
liquid assets while still earning a monetary return.

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 • Time deposit
A money deposit at a banking institution that cannot be withdrawn for a
preset fixed 'term' or period of time. When the term is over it can be
withdrawn or it can be rolled over for another term. Generally speaking, the
longer the term the better the yield on the money.
• Call deposit
A deposit account that allows for the withdrawal of funds without penalty,
generally without notification to the bank. Often it bears a favorable interest
rate, but also requires a minimum balance to take advantage of the benefits.

Bank Rate and Borrowing Rate

People make their funds available to the banks by depositing their ‘savings’ in
various types of accounts. In other words, bank funds mainly consist of deposits
from the public, though banks may also borrow money from other institutions and
the Reserve Bank of India. Banks, thus mobilises funds through its deposits. On
public deposits the banks pay interest at and the rate of interest vary according to the
type of deposit. The borrowing rate refers to the rate of interest paid by a bank on its
deposits. The rates which the banks allow depend upon the nature of deposit account
and the period for which the deposit is made with the bank. No interest is generally
paid on current account deposits. The rate is relatively lower on savings account
deposits. Higher rates ranging from 6% to 12% per annum are paid on Fixed deposit
accounts according to the period of deposit.

Banks also borrow from other institutions as well as from the Reserve Bank of India.
When the Reserve Bank of India lends money to commercial banks, the rate of
interest it charges for lending is known as ‘Bank Rate’.

MARKETING STRATEGY SYSTEM

For developing strategies relating to deposit mobilization and improving customer

service, market research has to be conducted for market segmentation and targeting
broadly covering the following categories.

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Determinants of Deposits

There are several factors which influence the growth of bank deposits. Some of them
are:

• higher industrial and agricultural production

• increasing savings rate in the economy

• development programmes of the government to boost rural economy and small

scale industries.

Factors having adverse effect on deposit mobilization are:

• setback in the agricultural sector during poor monsoon years

• rising cost of hiring

• government reducing its budget and restricting money supply

• growing competition from other channels of investment which offer higher interest
rates

• government's control on branch expansion of banks

• non-recovery of loans.

Enhance Deposit Capabilities

To make deposit management more effective, banks are investing in technology,

tools and staff. In addition, they’ll have to break down the walls separating the bank
treasury functions from the lines of business to more effectively link deposit
gathering and balance sheet management and centralized but flexible governance is
vital to improving pricing capabilities.

To enhance deposit capabilities of a bank following strategies needs to be

considered:
Pricing Methodology
• Linked to observed customer rate sensitivity and value
• Based on the customer’s market reference point
• Exploits segment/ geographic differentials
• Test and learn approach

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Governance
• Centralized data capture and pricing analytics
• Controlled exception management driven by the center
• Field flexibility to drive customer profitability
• Aligned business line, branch and sales officer incentives
Pricing Process
• Automated analytics and rate management
• Timely exception resolution
• End-to-end process automation for deposit account on-boarding
Technology
• Warehousing of required segmentation data
• Automated deposit analytics utilizing tools
• Automated data feeds capturing internal and external data needed to refresh
reference rates and regression analytics.

None of this is easy. But taking a more rigorous approach to managing deposit
portfolios will capture significant value.

TRENDS AND PATTERNS OF SAVINGS AND DEPOSITS

This involves estimating current and potential markets for deposits and segmenting
the market in term of geographical location, customers, socioeconomic
characteristics, and other related factors.

Customer Behaviour, Attitude, and Perceptions

This involves understanding customer profile, their socio-economic and

demographic background, their psychographic make-up, motivations behind their
savings, awareness of and attitude to various modes of savings, and reasons for their
preference for one form of savings over another. This will help bankers in providing
new banking services/products through which even non-bank customers can be
adopted.

Customer Services

Launching new schemes with advertisements attracts new depositors. However,

what ultimately

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sustains the process of generation of new deposits and continues the acceleration of
deposit mobilization is the quality of customer service as perceived by customers.

Bank's performance in different banking services like withdrawal of cash, collection

of cheques, quality and adequacy of infrastructural facilities available to customers,
attitudes of bank employees towards customers, promptness, and general attitude
have to be analyzed and evaluated before strategy formulation.

ANALYSIS OF SECONDARY DATA

As we know that the promotion expenditure is the part of the operating expenses, so
in this part we can analyze the impact of increase in the advertisement and publicity
expenses and overall operating expenses on the deposits of the banks. Following
table shows the five year (from 2010 to 2014) data of Deposits, expenses on
promotional activities and operating expenses of SBI and ICICI bank (as these two
banks are our selected population for the study). As we can see in the following
tables that all the deposits i.e. saving, current and term, expennses are taken
collectively this is because of the reason that in most of the financial statement of
different banks they have not shown them separately.

1) DEPOSITS

Table 4.1: Deposits of SBI and ICICI bank

S.No FY Deposits of SBI Deposits of ICICI

1 2009-10 804116.23 202,016.60

2 2010-11 933932.81 225,602.11

3 2011-12 1043647.36 255,499.96

4 2012-13 1202739.57 292,613.63

5 2013-14 1394408.51 331,913.66

Source; Annual report of SBI and ICICI

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Graph 4.1 : Deposits of SBI and ICICI bank

Deposits of SBI

2009-10: In this competitive and challenging scenario, despite shedding high cost bulk
deposits of Rs.77,679 crores (-50.15%), Bank's deposits went up by Rs.62,043 crores in
FY 2010, driven by CASA growth of 26.76% and retail term deposits growth of
17.64%, resulting in a YoY growth of 8.36% in deposits from Rs.7,42,073 crores in
March 2009 to Rs.8,04,116 crores in March 2010.

Savings Bank deposits grew at an average of Rs.4,897 crores per month during FY
2010, total CASA growth during the year being Rs.73,168 crores. While market share in
deposits in March 2010 at 16.31% (17.70% in March 2009), declined by 139 bps YoY,
market share in low cost demand deposits at 17.51% (17.43% in March 2009) was up by
8 bps.

2010-11: Deposits of the Bank rose to 16.14% yoy from `8,04,116 crores in
March’10 to `9,33,933 crores in March’11, driven by CASA growth of 22.14%.
With sustained 26.20% rise in Savings Bank deposits, CASA ratio improved from
46.67% in March’10 to 48.66% in March’11, an increase of 199 bps. In an
increasingly competitive environment, Bank’s market share in total deposits at
16.40% in March’11 was 11 bps higher than 16.29% in March’10. In the same
period, Bank’s market share in low cost demand deposits at 18.23% was 90 bps
higher than 17.33%.

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2011-12: Deposits of Bank rose from `9,33,933 crores in March’11 to Rs.10,43,647
crores in March’12, a growth of 11.75%. But the fact that not only deposits are
grown, but the quality of Bank’s deposit growth is very good. In a scenario where
other banks offer higher interest on savings bank deposits, SBI Savings Bank
deposits increased by 11.27% from Rs.3,23,394 crores in March 2011 to Rs.
3,59,847 crores in March 2012.

2012-13: The deposits of the Bank have risen to Rs.12,02,740 crores with the annual
growth at 15.24% over that of last year’s level of Rs.10,43,647 crores. What is
noteworthy is that not only is this better than last year’s growth, which was 11.75%
but Bank has achieved this against the trend prevailing in the industry. Furthermore,
it has come on the back of retail deposits and the deposit profile of the Bank shows a
significant move away from high cost bulk deposits. Out of the total Term Deposits
of Rs.6,04,649 crores, retail TDs comprise 78.27% at Rs.4,73,235 crores. Bank’s
strength lies in its wide reach covering all strata of society and the trust of the
people. Due to this the customer acquisition on growth is also encouraging. Under
Savings Bank, 287 lakh new accounts came to the books of the Bank representing
18.62% growth over last year and in Current Accounts bank could clock a growth of
8.43% with new accounts accretion at 2.20 lakhs.

2013-14: The deposits of the Bank rose by 15.94% to Rs.13,94,409 crores over the
previous year’s level of Rs.12,02,740 crores. Due to higher growth as compared to
the industry average, the market share of the Bank, in all scheduled commercial
Bank deposits (ASCB), increased by 11 bps to 16.57% in March 2014. The Bank’s
policy to shed high cost bulk deposits and more reliance on retail deposits has paid
dividends, which has resulted in increase in retail TD ratio from 41.87% to 45.47%
during FY 2014. Due to higher reliance on retail deposits, coupled with healthy
CASA of 44.43%, the ratio of CASA + retail TD to domestic deposits increased
smartly to 89.89% in Mar 2014 from 88.37% in the previous year. Savings Bank
Deposits increased by 13.1% to Rs.4,69,262 crores from Rs.4,14,907 crores in
March 2013. Under Savings Bank, 421 lakhs new accounts were opened during the
year which were 46.7% higher than 287 lakhs accounts opened during the previous
year. In current account also, Bank logged in a growth of 22.2% with new account
accretion of 269 lakhs.

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Deposits of ICICI

2009-10: Growth in total deposits moderated from 19.9% on a year-on-year basis at

end-fiscal 2009 to 17.0% at year-end fiscal 2010. The moderation was due to a
lower growth of 16.2% in term deposits during fiscal 2010 compared to 23.9% in
fiscal 2009 while demand deposits increased by 22.2% compared to a decline of
0.2% in fiscal 2009.

2010-11: Deposits increased by 11.7% from Rs. 2,020.17 billion at March 31, 2010
to Rs. 2,256.02 billion at March 31, 2011 (including Rs. 134.83 billion of Bank of
Rajasthan at August 12, 2010). Term deposits increased from Rs. 1,178.01 billion at
March 31, 2010 to Rs. 1,239.55 billion at March 31, 2011 (including Rs. 88.02
billion of Bank of Rajasthan at August 12, 2010), while savings deposits increased
from Rs. 532.18 billion at March 31, 2010 to Rs. 668.69 billion at March 31, 2011
(including Rs. 34.48 billion of Bank of Rajasthan at August 12, 2010) and current
deposits increased from Rs. 309.98 billion at March 31, 2010 to Rs. 347.78 billion at
March 31, 2011 (including Rs. 12.32 billion of Bank of Rajasthan at August 12,
2010). Total deposits at March 31, 2011 formed 67.4% of the funding (i.e. deposits
and borrowings, other than preference share capital). During fiscal 2010 and fiscal
2011, the bank focused on their strategy of increasing the share of current and
savings account deposits in total deposits and re-balancing our funding mix. The
current and savings account deposits increased from Rs. 842.16 billion at March 31,
2010 to Rs. 1,016.47 billion at March 31, 2011 (including Rs. 46.80 billion of Bank
of Rajasthan at August 12, 2010) and the ratio of current and savings account
deposits to total deposits increased from 41.7% at March 31, 2010 to 45.1% at
March 31, 2011.

2011-12: Total deposits increased by 13.3% from Rs. 2,256.02 billion at March 31,
2011 to Rs. 2,555.00 billion at March 31, 2012. Savings account deposits increased
by 13.7% from Rs. 668.69 billion at March 31, 2011 to Rs. 760.46 billion at March
31, 2012. Current and savings account (CASA) deposits ratio was 43.5% at March
31, 2012 compared to 45.1% at March 31, 2011. Term deposits increased by 16.6%

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from Rs. 1,239.55 billion at March 31, 2011 to Rs. 1,444.81 billion at March 31,
2012.

2012-13: Total deposits increased by 14.5% from Rs. 2,555.00 billion at March 31,
2012 to Rs. 2,926.14 billion at March 31, 2013. Savings account deposits increased
by 12.6% from Rs. 760.46 billion at March 31, 2012 to Rs. 856.51 billion at March
31, 2013. The current and savings account (CASA) ratio was 41.9% at March 31,
2013 compared to 43.5% at March 31, 2012. Term deposits increased by 17.7%
from Rs. 1,444.81 billion at March 31, 2012 to Rs. 1,700.37 billion at March 31,
2013.

2013-14: Total deposits increased by 13.4% from Rs. 2,926.14 billion at March 31,
2013 to Rs. 3,319.14 billion at March 31, 2014. Savings account deposits increased
by 15.7% from Rs. 856.51 billion at March 31, 2013 to Rs. 991.33 billion at March
31, 2014. Current account deposits increased by 17.1% from Rs. 369.26 billion at
March 31, 2013 to Rs. 432.45 billion at March 31, 2014. Term deposits increased by
11.5% from Rs. 1,700.37 billion at March 31, 2013 to Rs. 1,895.35 billion at March
31, 2014. The current and savings account (CASA) ratio was 42.9% at March 31,
2014 compared to 41.9% at March 31, 2013.

2) OPERATING EXPENSES

A category of expenditure that a business incurs as a result of performing its normal

business operations. One of the typical responsibilities that management must
contend with is determining how low operating expenses can be reduced without
significantly affecting the firm's ability to compete with its competitors. Fixed
operating costs that a financial institution must incur, such as anticipated bad debt
provisions. Noninterest expenses can include employee salaries and benefits,
equipment and property leases, taxes, loan loss provisions, depreciation on assets,
direct marketing agency expenses, other administrative expenses and professional
service fees. Companies will offset noninterest expenses by generating revenue
through noninterest income

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Table 4.2 : Operating Expenses of SBI and ICICI bank

S.No FY Operating Expenses of SBI Operating Expenses of

ICICI

1 2009-10 24941.01 10221.99

2 2010-11 23015.44 6617.24

3 2011-12 26068.99 7850.44

4 2012-13 29284.42 9012.88

5 2013-14 35725.85 10308.86

Source; Annual report of SBI and ICICI

Graph 4.2 : Operating Expenses of SBI and ICICI bank

Operating Expenses of SBI

2009-10: Operating Expenses were up by 29.84% in FY 2010 over FY 2009, driven by

five key costs, as the Bank invested heavily in laying the foundation for future growth:

(i) sharp increase in number of employees in various categories, the full impact of
which on staff expenses was felt during FY 2010;

(ii) Rs.627 crores arrears for wage revision pertaining to previous years provided
during FY 2010;

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(iii) Additional contribution for pension at Rs.1998 crores against Rs.1,469 crores last
year;

(iv) Additional expenses of Rs.59 crores on Financial Inclusion; and

(v) An expenditure of Rs.347 crores incurred on opening of 1,049 new branches and
installing 7,788 new ATMs during the year. Bulk of these got back ended to the
last quarter of the year. Our profits for Q4, therefore, went down by Rs.875.69
crores or 31.93% and the profit for the year remained flat at Rs.9166.05 crores.

2010-11: With lower growth in operating expenses at 13.27% in FY’11 against

growth of 29.84% in FY’10, Bank’s cost–income ratio fell below the psychological
threshold of 50% to 47.60% in FY’11 from 52.59% in FY’10. Average cost of
deposits has come down by 54 bps to 5.26% in March’11 from 5.80% in March’10,
though sequentially it is up from 5.20% in December’10. In the same period, the
yield on advances at 9.56% was 10 bps lower than 9.66% and 2 bps lower than
9.58% in December’10.

2011-12: Staff expenses, which have largely been contained after full provisions for
urrent wages and superannuation expenses rose by 11.59% from Rs.15,213 crores in
FY’11 to Rs.16,974 crores in FY’12. Due to consolidated improvement all round,
total provisions also increased by only 16.37% from Rs.17,071 crores in FY’11 to
Rs.19,866 crores in FY’12.

2012-13: Operating expenses increased by 12.33% to a level of Rs.29,285 crores

against last year’s 26,069 crores mainly on account of overhead expenses due to
significant increase in the physical spread and up gradation of branch ambience,
results from which will flow-in in the coming years. Staff costs, including provision
for superannuation benefits, have increased from Rs.16,974 crores to `18,381 crores
an increase of 8.29% primarily due to all round increase in inflation. However, as a
proportion of Operating expenses, staff expenses have declined to 62.77% from last
year’s 65.11%.

2013-14: Bank also made additional provision to cover expenses towards wage
revision, one time provision for pension due to change in mortality table and
payment for pension and gratuity. The three heads combined under the ‘additional

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provisioning’ accounted for 13.29% or Rs.4,751 crores of the total operating
expenses of Rs.35,726 crores for FY 2014.

Operating Expenses of ICICI

2009-10: Operating expense decreased by 16.8% from Rs. 70.45 billion in fiscal
2009 to Rs. 58.60 billion in fiscal 2010, primarily due to a decrease in direct
marketing agency expenses from Rs. 5.29 billion in fiscal 2009 to Rs. 1.25 billion in
fiscal 2010 and a reduction in salary and other operating expenses from Rs. 65.16
billion in fiscal 2009 to Rs. 57.35 billion in fiscal 2010 on account of overall cost
reduction initiatives undertaken by the bank.

2010-11: In fiscal 2011, operating expenses decreased by 35.26% from Rs. 102.21
billion in fiscal 2010 to Rs. 66.17 billion in fiscal 2011 primarily due to a decrease
in employee expenses partly offset by a decrease in other administrative expenses, a
decrease in direct marketing agency expenses and a decrease in depreciation on
leased assets.

2011-12: Operating expenses increased by 18.6% from Rs. 66.17 billion in fiscal
2011 to ` 78.50 billion in fiscal 2012 primarily due to an increase in employee
expenses and other administrative expenses.

2012-13: Operating expenses increased by 14.8% from Rs. 78.50 billion in fiscal
2012 to Rs. 90.13 billion in fiscal 2013 primarily due to an increase in employee
expenses and other administrative expenses.

2013-14: Operating expenses increased by 14.4% from Rs. 90.13 billion in fiscal
2013 to Rs.103.09 billion in fiscal 2014 primarily due to an increase in other
administrative expenses.

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3) EXPENSES ON PROMOTIONAL ACTIVITIES (ADVERTISEMENT
AND PUBLICITY )

Table 4.3 : Expenses on Promotional Activities in SBI and ICICI bank

S.No FY Expenses on Promotional Expenses on Promotional

Activities of SBI Activities of ICICI

1 2009-10 224.05 110.8

2 2010-11 257.88 148.75

3 2011-12 206.63 132.48

4 2012-13 384.35 189.16

5 2013-14 278.26 183.4

Source; Annual report of SBI and ICICI

Graph 4.3 : Expenses on Promotional Activities in SBI and ICICI bank

Expenses on Promotional Activities in SBI :

2009-10: Expenses on promotion were fell below by 10.82% in FY 2010 over FY 2009.

2010-11 : Higher growth in expenses on promotion at 15.10 % in FY’11 against

growth of FY’10.

2011-12: Expenses on promotion were fell below by 19.87% in FY 2012 over FY 2011.

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2012-13: Expenses on promotion increased by 86.01% from Rs. 206.63 billion in
fiscal 2012 to Rs. 384.35 billion in fiscal 2013.

2013-14: Expenses on promotion decreased by 27.60% from Rs. 384.35 billion in

fiscal 2009 to Rs 278.26 billion in fiscal 2010,primarily.

Expenses on Promotional Activities in ICICI

2009-10: Expenses on promotion were fell below by 21.02% in FY 2010 over FY 2009.

2010-11 : Higher growth in expenses on promotion at 34 .25% in FY’11 against

growth of FY’10.

2011-12: Expenses on promotion were fell below by 1 0.94% in FY 2012 over FY

2011.

2012-13: Expenses on promotion increased by 42.78% from Rs. 132.48 billion in

fiscal 2012 to Rs. 189.16 billion in fiscal 2013.

2013-14: Expenses on promotion decreased by 3.05% from Rs. 189.16 billion in

fiscal 2013 to Rs 183.4 billion in fiscal 2014.

Impact of Promotional Activities on bank growth

SBI

Table 4.4 : Amount of deposits, Operating expenses and expenses on promotion

in SBI

Rs. in crore FY2014 FY 2013 FY2012 FY 2011 FY 2010

Deposits 1394408.51 1202739.57 1043647.36 933932.81 804116.23

Operating 35725.85 29284.42

26068.99 23015.44 20318.68
expenses

Advertisement
278.26 384.35 206.63 257.88 224.05
and publicity

Source : Annual report of SBI

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Table 4.5: % change of deposits, Operating expenses and expenses on promotion in
SBI

Operating Advertisement &

Deposit
expenses Publicity
S.
FY
No
% Variation in
Amount Amount Amount % change
change %

1 2009-10 24941.01 29.84 224.05 -10.82 804116.23 8.36

2 2010-11 23015.44 -7.72 257.88 15.10 933932.81 16.14

3 2011-12 26068.99 13.27 206.63 -19.87 1043647.36 11.75

4 2012-13 29284.42 12.33 384.35 86.01 1202739.57 15.24

5 2013-14 35725.85 22.00 278.26 -27.60 1394408.51 15.94

Source: Annual report of SBI

Graph 4.4 : % change of deposits, Operating expenses and expenses on Promotion in

SBI

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Analysis

As we can see from the above table that the operating expenses of the banks are
increasing continuously from 2010 to 2014 but reason behind the lower growth in
operating expenses in FY’11 against growth in FY’10, Bank’s cost–income ratio fell
below and average cost of deposits has come down in March’11 from March’10,
though sequentially it is increasing continuously.

Advertisement and publicity expenses are part of the operating expenses than it is
also affected by the same factors.

The above table shows that the deposits are also increasing, it might happen that the
ratio and percentage of increase is different for the different banks, in some of the
cases banks are having separate divisions for the promotion of their products.

Through all above tables and graphs study reveals that there is no direct impact of
promotion shown on deposits but as we can see the trends of bank in this
competitive economy banks are continuously spending money and mind to retain
existing customers and attracting new customers which shows as a result in their
continuous growth in deposits.

ICICI

Table 4.6 : Amount of deposits, Operating expenses and expenses on Promotion

in ICICI

Rs. in crore FY2014 FY 2013 FY2012 FY 2011 FY 2010

Deposits 331,913.66 292,613.63 255,499.96 225,602.11 202,016.60

Operating
10,308.86 9,012.89 7,850.44 6,617.24 10,221.99
Expenses

Advertisement
183.40 189.16 132.48 148.75 110.80
and publicity

Source : Annual report of ICICI

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Table 4.7 : % change of deposits, Operating expenses and expenses on Promotion in
ICICI

Advertisement &
Operating expenses Deposit
Publicity
S.No FY
% variation in %
Amount Amount Amount
change % change

1 2009-10 10221.99 110.8 -21.02 202016.6 -7.48

2 2010-11 6617.24 -35.26 148.75 34.25 225602.11 11.68

3 2011-12 7850.44 18.64 132.48 -10.94 255499.96 13.25

4 2012-13 9012.88 14.81 189.16 42.78 292613.63 14.53

5 2013-14 10308.86 14.38 183.4 -3.05 331913.66 13.43

Source: Annual report of ICICI

Graph 4.5 : % change of deposits, Operating expenses and expenses on Promotion in

ICICI

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Analysis

As we can see from the above table that the operating expenses of the banks are
increasing continuously from 2010 to 2014 but reason behind the lower growth in
operating expenses in FY’11 against growth in FY’10, decrease in employee
expenses, decrease in other administrative expenses, decrease in direct marketing
agency expenses and a decrease in depreciation on leased assets in March’11 from
March’10, though sequentially it is increasing continuously.

Advertisement and publicity expenses are part of the operating expenses than it is
also affected by the same factors.

The above table shows that the deposits are also increasing, it might happen that the
ratio and percentage of increase is different for the different banks, in some of the
cases banks are having separate divisions for the promotion of their products like:
ICICI Bank is having a separate division named as ‘DMA’ i.e. Direct Marketing
Agency, some of the private banks are having their tie ups with some of the leading
marketing forms who handle their overall marketing campaigns.

Through all above tables and graphs study reveals that there is no direct impact of
promotion shown on deposits but in 2009 bank spent a large amount on promotional
activities which resulted in higher growth of deposits in 2011. As we can see the
trends of bank in this competitive economy banks are continuously spending money
and mind to retain existing customers and attracting new customers which shows as
a result in their continuous growth in deposits.

Conclusion

An increase in Market Promotion appears to lead to an increase in profitability.

Marketing promotion mix elements viz. Advertising and personal selling are
moderately effective in providing information, creating awareness and changing
attitude whereas ineffective in building company image and enforcing brand loyalty.
A well -designed promotional strategy is very important to promote banking services
effectively. The financial years between 2010-2014, shows very strong gains for the
both SBI bank and ICICI bank. The SBI is a government owned bank (public
sector), while ICICI is a privately owned bank (private sector). The SBI is much

164
older (more than 200 years old) and more established than the ICICI, which is less
than 25 years old. The analysis suggested that the promotional activities between
Banks do not differ significantly. Logically it can be said that marketing promotion
does not differ from Bank to Bank.

Above analysis highlight the impact of different promotional expenses on bank

deposits. From the analysis, it is concluded that banks expenses on promotional
activities are worthy. As above data shows that the impact of promotions on banks
deposit is not always shown in the same year as it’s a long term vision investment to
attract new customer and retain older ones. Promotional activities are going to create
an image in a customer mind and Once if the customer is attracted and get associated
with the bank it’s definitely going to increase its net worth or profitability which is
shown in the above analysis also. The banking sector needs to focus more attention
on the market promotion variables, to achieve their objective in this competitive
world of financial services.

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