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1 Bargaining Power of Suppliers to Banking industry The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services. Supplier bargaining power is likely to be high when: Interest rates play a major role in the functioning of the bank. Valuations of Dollar, Euro and Rupee play a major role. The economic out look of the country determining the future of lending and borrowing capability of the bank. RBI( Reserve Bank Of India) is the supreme controller of the functioning of the bank. The functioning of the bank is very sensitive to the fluctuations in the interest rates of the Federal Reserve Bank in the US. Since the bank has offshore operations in many countries its interest rate policy and products are directly related to the law of the land and the economy of the country. Example: Switzerland,Japan. The bank does not have direct influence on the prevailing conditions it should adapt to the market and economic conditions.

1.2 Bargaining Power of Customers for banking industry Bargaining power of customers is very high, as banks have also forayed into the long-term finance. Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes. Customers bargaining power is likely to be high when: They take large volumes of loans and deposit large sums of money; there is a concentration of buyers. The consumers have a wide choice of banks and services to choose, which offer very attractive offers for the consumers. Retail lending (especially mortgage financing) formed a significant portion of the portfolio for banking industry and they have customized their products to cater to the diverse demands. With better penetration in the semi urban and rural areas the bank garnered a higher proportion of low cost deposits thereby economizing on the cost of funds. Banking industrys Foray into Rural Markets

1.3 Threat of New Entrants for banking industry

Licensing and Government and RBI requirements, investment in technology, skills required for financial management, distribution reach, good branch networks. The entry of foreign banks is posing a big challenge. The competition in this industry will be the higher, if it is easier for other companies to enter this industry. Economies of scale (minimum size requirements for profitable operations) High initial investments and fixed costs Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets Bank reputation and brand loyalty of customers Protected intellectual property like patents, licenses, etc. Scarcity of important resources, e.g. qualified expert financial experts and adequate staff Good network of branches with ATMs channels are controlled by existing players Existing players have close customer relations, e.g. from long-term financial service contracts Moderate switching costs for customers Legislation and government action that control the banking sector

1.4 Threat of Substitutes for banking industry Close customer relationships Switching costs for customers The relative price for performance of substitutes Current trends High returns during Bull market. People are not very conservative and are risk takers. Non-banking financial companies (NBFCs) are privately owned financial intermediates focusing mainly on leasing, hire purchase, car and consumer durable finance, investment banking and advisory services.

1.5 Competitive Rivalry between Existing Players for banking industry There are many players of about the same size Players have similar strategies There is not much differentiation between players and their products, hence, there is much price competition Low market growth rates (growth of a finance organization / individual is possible only at the expense of a competitor) Barriers for exit are high (e.g. expensive and highly specialized service oriented approach) Less paper work in case of rural / local financers