INDUSTRY ANALYSIS

Size of the Industry-The total Banking Sector assets have reached USD 1.8 trillion in FY
14 and total deposit and lending have increased at CAGR of 20.7 % and 19.7%
respectively during FY 06-13

Structure of the Industry-The Banking sector is classified into Public sector Banks,
Private Sector Banks, Foreign Banks ,Regional Rural Banks, Urban Cooperative Banks
and Rural cooperative credit institutions

RBI

SCHEDULED
COMMERCI
AL BANKS

PUBLIC
SECTOR
BANKS

PRIVATE
SECTOR
BANKS

FOREIGN
BANKS

COOPERATIVE
BANKS

REGIONAL
RURAL
BANKS

URBAN
COOPEARTIVE
BANKS

RURAL
COOPERATIVES
BANKS

Key Growth Drivers Economic and Demographic drivers- Favourable Demographics and rising
income levels, strong GDP growth rate over the next years will facilitate banking
sector expansion

Policy Support- RBI is considering giving more licenses to private sector players
to increase banking penetration, Simplification of KYC norms and introduction of
Kisan Credit Cards to increase rural banking penetration

Technological Innovation-New Channels in Banking Services such as Internet

Banking and Mobile Banking have increased productivity and helped in acquiring
new customers

 Infrastructure financing- Banking sector is expected to finance part of

the USD1 trillion infrastructure investments in the 12th Five Year
Plan, opening a huge opportunity for the sector. Planning
commission expects the current spending of 6% on infrastructure
to improve.
Key Performance ParametersGross NPA to Gross Advances Ratio, ROA, ROE, Capital Adequacy Ratio, Price to Book
Value, PE Ratio, CASA Ratio
PORTER FIVE FORCES MODEL
Banking is basically a customer oriented business. A high quality of customer service is crucial
for the growth and stability of any bank.
Threat of New Entrants
(Low)

Determinants of Supply
Power

Rivalry among Existing

Firms

(Low)

(High)

Determinants of Buyer
Power
(High)

Threat of Substitute Products

(High)

Threat of new entrants - Low threat of new entrants on account of stringent

banking regulations. Before setting up a new bank, it is essential to comply with
RBI licensing norms

 Rivalry among Existing Firms- Banking industry is considered highly competitive

due to less product differentiation and similar strategies being adopted by existing
players
Threat of Substitute Products-High Competition from substitutes like NBFCs,
Mutual Funds, Post Office and other schemes and Bills of the government.
Determinants of Buyer power- High bargaining power of customers on account of
homogeneous products offered by banks
Determinants of Supply Power-Suppliers of banks are essentially depositors who
prefer low risk and need regular income. Banks have to meet numerous regulatory
standards created by RBI. Hence RBI is the decision maker (Interest rates) This
reduces the bargaining power of suppliers

PESTEL FRAMEWORK
Political and Legal Factors Changes in Regulatory Framework
Budget and Budget measures
FDI limits
Intervention by RBI
Economic Factors Changes in Monetary Policy
Savings
GDP Growth
Disposable Income
Social and Environmental Factors Increase in Population
Changes in Lifestyle
Financial Inclusion
I-Banking and M-Banking: Reduced Paperwork
Technological Factors I-Banking and M-Banking-New Banking Channels-Cost and Time saved

 M-Banking has led to Effortless banking and I-Banking has led to faster Flow of

Information thereby aiding in swift decision making

ATM has made banking 'anywhere and at anytime'
Credit card has encouraged an era of cashless society
M-Pesa- Mobile money transfer service
Rupay Card- Potential rival to MasterCard and Visa