CASE STUDY : 02

Summary
Mr. Kiran Nag the New chairman and managing director of Swadeshi bank has taken up the
challenge to change the stodgy, slow moving image of the bank the reason can be the dramatic
changes in in banking industry . Although the banks fundamentals are strong there are huge
Nonperforming assets and is incurring losses past four years. The chairmen believed that fund
management and export finance where excellent pockets and this will be the biggest challenge.
In comparison with private sector banks, the private sector banks enjoy the advantage of being
highly automated and incurring comparatively very less transaction cost it is a big threat to
nationalized banks and here in person to Swadeshi bank.
Considering the services which Swadeshi bank already offers it can easily upgrade to universal
banking but here it is not the best option as cost and profitability are the biggest stumbling
blocks. The London based consultancy firm, sigma Inc. has asked Mr. Nag to identify the core
competencies of Swadeshi Bank. Mr. Nag is developing a strategic architecture focusing on
competence - building and providing a route Map for the future with the help of top managers
of the bank. Mr. Nag is keen on decreasing the dependence on interest income and focusing on
fee - based income. The focus areas which can help in evolving some core competencies are
Mindset, Infotec, Marketing, Credit Risk Management, Exchange Risk Management; Fee based
income and Talent Search. Swadeshi Bank is in thoughts of divesting a part of its equity to the
public. Swadeshi bank can be excelled in fund management and export finance.
Q1. Examine the main problems plaguing Swadeshi Bank?
Answer: Main Problems plaguing swadeshi Bank are:

Swadeshi Bank has been incurring losses in the last 4 years and the ratio of our NonPerforming assets to total assets was 16%
Bank had created vast infrastructure which is now been overtaken by technology
(infrastructure has become both asset and a liability)
Private sector had an advantage of automation which had cut their transaction cost.
With this advantage they focus more on retail banking, corporate finance, and
investment banking which creates threats to the profitability of the nationalized banks
For expansion cost could spin out of control so these costs and profitability could be
the biggest stumbling blocks.
Bank has to identify unique core competence as for restructuring the number of
competencies what the bank had identified was not enough as these were identified
by the other nationalized banks too.
Excessive dependence on interest income is another problem faced by Swadeshi
bank.

There was a need to downsize the workforce but the President of Swadeshi bank
employee union was not convinced as the strong union would have opposed any such
plan.
Swadeshi bank wanted to grow in personal banking but this would take at least 6
months to firm up the plans.

Q2. Make a SWOT analysis of the Ban, bring out clearly its strengths and weaknesses,
opportunities and threats.

1) Strengths:

Large network branches

Large asset base
Provided Privileged access to public sector unit accounts
Brand equity in the small scale sector
Services already provided by Swadeshi Bank: Project Finance, Retail Finance,
Housing Finance, Export Finance & Asset Management
2) Weakness:
High ratio of NPAs to total advances
Lack of technology
Cost is the major factor coming in way of universal banking as bank is facing
losses since last 4 yrs
Dependence on interest income
3) Opportunities:
Fund management
Export finance
Easier to upgrade into One-Stop shop where all the customers requirements are
fulfilled under one roof
Exchange risk management skills should be developed as these skills are in
demand
Building treasury Management
Retail banking is emerging as a new growth area
Devising innovative sources of funds.
Developing business strategies.
Providing value added services.
Differentiating services to secure competitive edge.
4) Threats:
New norms
Unmatched degree of automation of private Sector
Increasing number of Non-Banking Finance Companies

Q3. What are the key areas for the survival of Swadeshi Bank that must be addressed to on a
priority basis by the new Chairman and Managing Director?
Answer: key areas for the survival of Swadeshi Bank that must be addressed to on a priority
basis by the new Chairman and Managing Director are:

To appoint Sigma India to reengineer the banks processes

To enlarge fee-based business, i.e. Deriving income from non-fund-based activities
& venturing into housing finance and leasing.
People management has not been a strong point at Swadeshi Bank. Instead of training
people from scratch, they must recruit top-notch managerial talent from other
oragnisations.
Reducing the level of Non-Performing assets (NPAs)
Differentiating services to secure a competitive edge
To find other ways of increasing banks other income.

Q4. Critically examine the possibility of a strategic alliance with an international partner for
Swadeshi Bank.
Answer: No, at present Swadeshi Bank should not go for strategic alliance with any global bank
Because

Due to large unfocussed workforce, they could face problems in finding the right
partner.
Moreover, the company is in losses since last 4 years, in this situation for an alliance,
a foreign bank might insist on acquiring a stake in Swadeshi bank.
Swadeshi should work on brand equity as well as services which they provide in
small scale should work out in large scale.