GENERAL MANAGEMENT PROJECT ON

“ANALYSIS OF BANKING INDUSTRY”

Submitted in partial fulfilment for the award of the degree of

Master of Management Studies (MMS)

University of Mumbai

Submitted by

VARSHA RAJPAL

Roll No: 50

MMS (Finance)

Under the guidance of

Dr. SEEMA SANT

2019-21

VESIM BUSINESS SCHOOL

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 CERTIFICATE

This is to certify that project title “ ANALYSIS OF BANKING INDUSTRY” is

successfully completed by VARSHA RAJPAL during the 1st Year, in partial fulfillment of
of the Master’s Degree in Management studies recognized by the University of Mumbai for
the academic year 2019-2021 through Vivekanand Education Society Institute of
Management Studies and Research (VESIM). This Project work is original and not
submitted earlier for the award of any degree/diploma or associate ship of any other
University/Institution.

Name:

Date:

(Signature of Guide)

2
 DECLARATION

I hereby declare that “ ANALYSIS OF BANKING INDUSTRY” submitted by me to the

Vivekanand Education Society Institute of Management Studies And Research-
MUMBAI is a bonafide work undertaken by me and it is not submitted to any other
University or institution for the award of any degree diploma certificate or published any time
before.

Name:

Roll no:

(Signature of the student)

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 TABLE OF CONTENT
Sr no. Topic Page no.

1 Executive Summary 5

2 Industry Analysis

2.1 Structure of the Banking Industry 6

2.2 Types of Banks 7

2.3 Customer Profile of the Industry 9

2.4 Competitive profile of the Industry 10

2.5 Market share of major players 13

2.6 Industry financials 14

2.7 Challenges faced by the Industry 15

2.8 Government Regulations 17

3 About the company- HDFC

3.1 Genesis of the company and its vision and mission 19

3.2 Products and Services of the company 20

3.3 Position in the Industry 21

3.4 Stakeholder's Details 21

3.5 Key Financials of the company 21

3.6 Challenges faced by the company 22

3.7 SWOT analysis of the company 22

3.8 Porter’s Five Forces Model 23

4 References/Bibliography 24

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 1.Executive Summary
Financial Institution is considered as the heart of the body in every organization. Financial
Institution deals with customers for accepting the deposits and lending the loans. The main
function of the financial institution is to raise the funds and also use the funds efficiently and
effectively.

The Financial sector is that sector which has a lot of growth opportunities in the coming
years. It has growth opportunities because slowly and gradually people are realizing the
importance of investments. It is also said that financial sector plays a very important role in
the functioning of economy.

In the last decades of the 18th century, banking in India was originated. Banks are regulated
by certain bodies established. Reserve Bank of India (RBI) and Banking Regulation Act are
the two bodies that govern these financial institutions. They also have to control the banks as
well as the economy through certain tools like CASH RESERVE RATIO, STATUTORY
RESERVE RATIO, and REPO RATE AND REVERSE REPO RATE.

The Indian Banking includes 20 public sector banks, 22 private sector banks, 44 foreign
banks, 44 regional rural banks, 1,542 urban co-operative banks and 94,384 rural co-operative
banks.

It has been found that Public Sector Bank covers 80% of the banking industry. Hence, they
employ around 7, 00,000 people as per latest data. Apart from this, mobile banking
transactions have also increased to four times.

The Banking Industry plays an important role in the country. This is because they contribute
to the economic development of the country. The growth of banking sector in India at present
is considered to be around 8.5% per year. Nearly 7.7% of the national GDP is contributed by
banking industry. This gives us the information that economy will grow in future. Indian
banking sector ranks 6th in the world.

Banks have to follow the rules and regulations provided by the Banking Regulation Act,
1949. At the start, the laws made were applicable only to banking companies but now these
are applicable to cooperative banks as well.

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 2.Industry Analysis
2.1 Structure of Indian Banking System:

Following is the structure of the Indian Banking System:

 Reserve Bank of India:

RBI is the first central bank to regulate the banking industry. Prior to RBI, there was
no central bank. RBI controls the entire banking system in India. The name given as
“Reserve Bank” is because it keeps the reserves of all the commercial banks.

 Commercial Banks:
The main function of commercial banks is to mobilize the savings of the public and
make them available to industry and trading units for their working capital

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 requirements. Commercial Banks in India mainly includes Indian public sector and
private sector with some of the foreign banks. More than 92% of the entire banking
system accounts from public sector banks.

 Regional Banks:
The main aim of these banks was to develop rural economy by providing credit and
deposit facilities for agriculture as well as for other productive activities in rural areas.
These banks came into existence in the middle of 1970’s.

 Co-operative Banks:
These banks are named as Co-operative Banks because they are organized under the
provisions of the Co-operative Credit Societies Act of the States. Agricultural sector
and rural sector in particular are the beneficiaries of these banks.

2.2 Types of Banks:

Following are the different types of banks:

 Universal Bank:
It is financial supermarket where all financial products are sold under the one roof. It
provides various financial services like investment banking, commercial banking,
development banking, and other financial functions mainly merchant banking, mutual
funds, etc.

 Development Bank:
The main aim is to provide infrastructure facilities for the industrial growth of the
country. Financial assistance is provided for both public and private sector industries.
Following is the structure of development banks:

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 These are classified into four groups:
 Industrial development banks:
Some of the examples of these banks are:
 Industrial Finance Corporation of India (IFCI).
 Small Industries Development Bank of India (SIDBI).
 Industrial Development Bank of India (IDBI).

 Agriculture development banks:

One of the examples is as follows:
 National Bank for Agriculture and Rural Development (NABARD).

 Export Import development bank:

This includes the following:
 Export Import Bank of India (EXIM).

 Housing Development Bank:

It considers the following:
 National Housing Bank (NHB).

 Lead Bank:
It was introduced by RBI in 1969, based on the recommendations of the Gadgil
Study Group. It was done for the implementation of social objectives. The
objectives are as follows:
 Removal of unemployment and under employment.
 Appreciable rise in the standard of living for the poorest of the poor.

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  Payment Bank:
A payment bank is similar to like any other bank. These banks are operated on the
small level or smaller scale. These banks conduct most of the banking operations but
can’t advance loans. It can accept demand deposits (up to Rs 1 Lakh), offer remittance
services, mobile payments/transfers/purchases and other banking services like
ATM/debit cards, net banking and third party fund transfers.

Some of the examples are:

 Airtel Payments Bank.
 Paytm Payments Bank.
 Jio Payments Bank.

 Small Finance Bank:

Niche banks in India are considered as small finance banks. The aim is to provide the
services to those sectors which are not being served by other type of banks. For
example:
 Micro and Small Industries.
 Unorganized Sector.

2.3 Customer Profile of the Industry:

 Individual Customers:-
It includes all types of salary holders, pension holders, stock holders, insurance policy
holders.

 Banks:-
In banking industry we can see that the some banks are also customer of another bank.It
happens when the other banks ask for loan from another bank then automatically it becomes a
client of that bank.

 Public Companies:-
The largest earning source for the banks is public sector companies. Bank charges highest
interest for day to day transactions on this type of companies. And it is also a beneficial for
public companies to get loans easily from banks as per required conditions. For examples,

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Indian Oil Corporation Limited, National Thermal Power Corporation, Oil and Natural Gas
Corporation etc.

 Private Entities:-
Under this companies like Reliance Industries Limited, Tata Consultancy Services, Infosys
Technologies limited, Wipro limited, Hindustan Lever limited etc. invests in banks.

 Hospitals:-
Hospitals are also customers of banks. There are some facilities which are only available to
hospitals in conditional situation.

 Hotels and Restaurants :-

Every hotels and restaurants needs to maintain a cash balance with them and with the help of
bank account they can easily maintain the cash inflow and outflow.

 Co-operative Societies:-
Cooperative societies also maintain the accounts with bank. From day to day activities to
occasional activities all transactions are done by the cooperative societies.

2.4 Competitive profile of the Industry:

Following are the major competitors prevailing in the industry:

I. Banking Competitors:
Below are the competitors who are involved in banking operations directly. These are
as follows:

 AXIS BANK:

AXIS BANK is the considered as the third largest private sector bank in India. This bank

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started its operations in the year 1994. This bank is providing their services from among
4800 branches. Initially it was known by the name UTI BANK. It has been found that
AXIS bank has the largest network of ATMs among the private banks. They have the
tagline of “ Badhti Ka Naam Zindagi”.

 BANK OF BARODA:

BANK OF BARODA is an Indian Multi-national, public sector banking company.

This bank ranks third largest public sector bank in India. This bank was nationalized
in the year 1969. This bank merged with Vijaya Bank and Dena Bank in the year
2018. They provide the services to its customers through 9500 branches. It has been
found that this bank has a total of 120 million customers.

 CANARA BANK:

CANARA BANK is considered to be the largest public sector bank owned by the
Government of India. This bank was nationalised in the year 1969. This bank has its
headquarters in Bengaluru. In the year 2019 it merged with Syndicate Bank. They have
also initiated with a solar loan program. They have the tagline of “Together We Can”. It
consists of 10400 branches to provide their amazing services to its customers.

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  PUNJAB NATIONAL BANK:

PUNJAB NATIONAL BANK has its headquarters in Delhi, India. PNB is

owned by Government of India. This Bank was established in the year 1894. It is
considered as second largest public sector bank not only in terms of its business but also
in its network. In the year 2019 it merged with Oriental Bank of Commerce and also with
United Bank of India. They are known for “The Name You Can Bank Upon”.

 ALLAHABAD BANK:

ALLAHABAD BANK is a nationalized bank. Its headquarters are situated in

Kolkata, India. It is considered as one of the oldest joint stock banks in India. The
bank was established in the year 1865. This bank is known for “Tradition of the
Trust”. It has merged with Indian Bank. It has 3245 branches across India to serve to
its customers. It has received prestigious awards like Indira Gandhi Rajbhasha
Award, Vigilance Excellence Award. The bank offer services such as net banking,
personal banking, and many more.

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 II. Financial Institutions Other than Banks:
 India Infrastructure Finance Company Ltd (IIFCL).
 Export-Import Bank of India (EXIM Bank).
 Small Industries Development Bank of India (SIDBI).
 National Housing Bank (NHB).
 Acuite Ratings & Research Limited.
 List of CMDs of Financial Institutions.
 Industrial Finance Corporation of India (IFCI).
These are the some financial institutions which also work similar as banks do.

III. Non- Banking Financial Institutions:

 Power Finance Corporation Limited.
 Bajaj Finance Limited.
 Mahindra & Mahindra Financial Services Limited.
 Muthoot Finance Ltd.
 HDB Finance Services.
 Tata Capital Financial Services Ltd.
 L & T Finance Limited.
 Aditya Birla Finance Ltd.

2.5 Market Share of Major Players:

As per the latest reports, HDFC is the leading private bank in terms of market capitalization
of Rs. 6, 25,666.08 crores. KOTAK MAHINDRA and ICICI bank followed with a market
capitalization of Rs. 2,55,537.49 crores and Rs. 2,56,205.53 crore respectively. Some other
major players with good market capitalization are as follows:

Major Players Market Capitalization

Axis Bank Rs. 1,97,360.89 crores,

Punjab National Bank Rs. 37,411.52 crores

Bank of Baroda Rs. 35,251.50 crores

Yes Bank Rs. 64,913.53 crores

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IndusInd Bank Rs. 1,07,064.08 crores

State Bank of India Rs. 2,93,218.11 crores

2.6 Industry Financials:

Key Industry Financials are as follows:

 Recently as per Reserve Bank of India (RBI), India’s foreign exchange reserves were
approximately US$ 490.04 billion as of May 22, 2020.
 Asset of public sector banks were approx. Rs 72.59 lakh crore (US$ 1,038.76 billion)
in FY19.
 It has been found that Non-Performing Assets (NPAs) of commercial banks has done
a recovery of Rs. 4, 00,000 crores in FY19.
 It has been found that the deposits under “Pradhan Mantri Jan Dhan Yojana”
(PMJDY) have increased considerably. The total number of deposits under PMJDY
scheme has increased to Rs. 1.28 lakh crore.
 During FY16–FY20, it has been found that deposits grew at a CAGR of 6.81 per cent
and reached US$ 1.90 trillion by FY20.
 The Government of India has planned to inject Rs 42,000 crore (US$ 5.99 billion) in
public sector banks by March.
 As on March 31, 2019, the number of debit and credit cards issued were 925 million
and 47 million, respectively.
 India stands on 28th position on the government's adoption of e-payments ranking in
2018.

 In October 2019, the Department of Post launched the mobile banking facility for all
post office savings account holders of the CBS (core banking solutions) post office.
 In August 2019, the government announced the major mergers of public sector banks
which included United Bank of India and Oriental Bank of Commerce to be merged
with Punjab National Bank, Allahabad Bank will be amalgamated with Indian Bank
and Andhra Bank and Corporation Bank will be consolidated with Union Bank of
India.
 The total equity funding's of microfinance sector grew at the rate of 42 year-on-year
to Rs 14,206 crore (US$ 2.03 billion) in 2018-19.

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  Under the Budget 2019-20, government has proposed Rs 70,000 crore (US$ 10.2
billion) to the public sector bank.
 The Government of India launched India Post Payments Bank (IPPB) as on
September, 2008 and has opened branches across 650 districts to achieve the
objective of financial inclusion.

2.7 Challenges faced by the Industry:

Below are the challenges that are faced by the banking industry. These are as follows:

 Increasing Competition:
It has been found that the competition in the banking industry is rising day by day.
Competition is a fact of business life. But competition in banking is entirely different
from other sectors of the economy due to the special function of banks in the financial
system. Banks compete with each other majority on the following things:
 Availability of ATMs.
 Digital Services.

Earlier Interest rates were considered for the competition. Other factor for
competition is profitability of the bank and also NPAs.

 Employee and Technology:

It has been found that the younger generation is replacing the elder ones which are
more experienced than them. The reason could be the retirement of elder ones. In this
digital era, it is necessary for the banks to improve the technology to provide the
services easily to their customers. It has also been found that people who are not good
at technology are finding it difficult to cope up with it. Therefore, there are also
chances that the respective person might get replaced with the one who is familiar
with the technology. Hence, employee and technology is also a challenge for the
banking industry.

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 Improving Profitability:
The most important challenge is to improve the profitability of the bank. It has been
difficult for the banks to improve the profits due to rise in provision of NPAs, lower
interest rates, high competition and so on. Many banks try to do mergers with other
banks so as to increase their profitability. Also the banks should keep a check on
balance sheet efficiency so as to get proper idea of profitability.

 Greater Customer Orientation:

In today’s competitive environment, banks have to attract the new prospects and
retain the old customers. This can be done through introducing innovative products
for them, increasing the quality of customer services. Prospects can also be attracted
by marketing variety of products and services through different channels of
communication.

 Regulatory Conditions:
Regulations to be followed by each and every bank are compulsory. Hence, for this
purpose banks have ro spend a good amount of money on systems and processes that
help them to be in regulations as mentioned. This is a challenge for traditional banks
that are not comfortable with this technology phase.

 Security Breaches:
Security has been considered as one of the most challenge for the banking industry.
So, banking industry considers it as a major concern for themselves as well as for
their customers. Hence, banks invest in such high standard technology which makes
them feel secure that their data will be stored safely.

 Capital Adequacy:
Banks have to keep aside certain amount to ensure themselves from bad loans. The
amount which has been set aside cannot be used for any other purpose. Also as per
RBI, all banks have to keep a certain amount with the central bank in the form of
reserves. Because of all this, banks have lower amount of capital to be used in various
operations. Hence, this is considered as one of the challenge for the banking industry.

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2.8 Government Regulations:

Banks in India are governed under various Acts. Some of them are Reserve Bank of India
(RBI) Act, 1934 and Banking Regulation Act, 1949 and so on. They provide to the banks
certain rules, procedures, guidelines and policies to be followed mandatory by all the banks.
Given below is the legal framework for the functioning of Banks in India:

Given below are some of the regulations to be followed by all commercial banks. These are
as follows:

 Cash Reserve Ratio:

Cash Reserve Ratio which is also known as CRR is a specified minimum fraction of
the total deposits of customers which commercial banks have to keep with the central
bank as reserves either in the form of cash or its deposits with the central bank. The
RBI from time to time changes the rate of CRR with reference to liquidity and
situation in the economy. Hence, all the commercial banks have to follow the rate
mentioned by RBI. The CRR rate is maintained or not this has to be checked by the
auditor that whether the banks are following the given guidelines or not. Currently
CRR rate of commercial banks is 3%.

 Statutory Liquidity Ratio;

Statutory Liquidity Ratio which is also called as SLR is the requirement that the
commercial banks in India require to maintain in the form of gold, government

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 approved securities before providing credit to the customers. The RBI wants that the
auditors appointed in all banks must check that the banks are following the
compliance with reference to SLR requirements. Currently SLR rate for commercial
banks is 18.50%.

 Disclosure of Accounts:
Every banking company needs to comply with the disclosure requirements under the
Accounting Standards, as specified. Balance Sheet and Profit & Loss Account of a
banking company should be audited by a respective auditor. A auditor has to check
whether these requirements are duly complied or not.

 Non-performing Assets:
Assets are considered as NPA when Interest and/or Installment of Principal Amount
remain overdue for a period of more than 90 days in case of term loan. Non-
performing Assets (NPA) is classified as follows:
 Substandard:
An asset is called as substandard when NPA status is for less than 12 months.
 Doubtful:
An asset is considered as doubtful at the end of the 12 months.
 Loss:
A loss is generally means that the bank expects for the recovery but it has already
been written off from the books of accounts.

 Provision for Loss Asset:

A loss asset is one where loss has been identified either by the bank itself or auditor or
the RBI inspection but the amount has not been written off wholly.
In such cases, it should be written off completely. If loss assets are permitted to
remain in the books of accounts for any reason, then in such cases, 100 percent of the
outstanding should be provided for.

Hence, all the above are some of the government regulations that all banks have to
follow in the industry.

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 3. Company Analysis

3.1 Genesis of the company and its vision and mission:

 The HDFC Bank was incorporated on August 1994 by the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. In January 1995, HDFC
commenced its operations as a Scheduled Commercial Bank.
 In 1994, as part of the RBI’s liberalization of the Indian Banking Industry, The
Housing Development Finance Corporation (HDFC) was amongst the first to receive
an 'in principle' approval to set up a bank in the private sector from Reserve Bank of
India.
 HDFC Bank is headquartered in Mumbai. Across India, the Bank at present has an
enviable network of over 1416 branches spread over 550 cities.
 All branches are linked on an online real–time basis. Through Telephone Banking
Customers in over 500 locations are also serviced. Across these cities, the Bank also
has a network of about over 3382 networked ATMs.
 HDFC has developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related credit
facilities.
 With its experience in the financial markets, a strong market reputation, large
shareholder base and unique consumer franchise, HDFC was ideally positioned to
promote a bank in the Indian environment.
 The shares are listed on the Bombay Stock Exchange Limited and the National Stock
Exchange of India Limited.

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  Vision:
“To be customer driven best managed enterprise that enjoys market leadership
in providing housing related finance.”

 Mission:
“HDFC banks mission is to be “World Class Indian Bank”, benchmarking
themselves against international standards and best practices in terms of
product offerings, technology, service levels, risk management and audit and
compliance.”

3.2 Products and Services:

 Personal Banking

 Accounts & Deposits

 Loans
 Cards
 Forex
 Investments & Insurance

 NRI Banking

 Accounts & Deposits

 Remittances
 Investments & Insurance Loans Payment Services

 Wholesale Banking

 Corporate
 Small & Medium Enterprises
 Financial Institutions & Trusts
 Government Sector

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3.3 Position in the industry:
The following chart shows the position of HDFC bank in the banking industry:

 Awards and Recognition:

 India’s Best Bank as per Euro money Awards.
 Winner in Innovation and Inclusiveness in Priority Sector Lending as per 11 th
Inclusive Finance India Awards (IFI) 2019.
 Best Bank in India 2019, by Global Magazine Finance Asia.
 Best Large Bank & Fastest Growing Large Bank in 2019, by Business World
Magna Awards.
 Award for Best Performance in Microfinance.

3.4 Stakeholder’s details:

 8.5% of shareholding is with individual shareholders.
 Insurance companies have shareholding of 5.38%.
 Corporate bodies have 7.5% of shareholding.
 Financial institutions have 2.75% of the shareholding.
 NRI have 0.29% of shareholding.

3.5 Company Financials:

 Revenue as per 2020, Rs. 147,068.27 crore.
 Net Income as per 2020, Rs. 27,253.95 crore.
 Total assets as per 2020, Rs. 1,580,830.44 crore.

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  Total equity as per 2020, Rs. 175,810.38 crore.
 Operating Income as per 2020, Rs. 114,032.21 crore.

3.6 Challenges faced by the Company:

 Creating awareness is difficult due to a huge customer base.
 Lack of experience in implementing centralized systems.
 Large employee base is considered as a challenge because some of the employees are
resistance to change, which means they are not comfortable with the computerized
system.

3.7 SWOT Analysis of the Company:

 Strengths:
 Right strategy for the right products.
 Great Brand Image.
 Good place to work.
 High degree of customer satisfaction.
 Lower response time with efficient and effective service.

 Weakness:
 Some gaps in range for certain sectors.
 Management cover insufficient.
 Customer service staffs need training.
 Processes and systems.
 Sectoral growth is constrained by low unemployment levels and
competition for staff.

 Opportunities:
 Profit margins will be good.
 Could extend to overseas broadly.
 Could seek better customer deals.
 Fast-track career development opportunities on and industry-wise basis.
 New specialist applications.

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  Threats:
 Legislation could impact.
 Great risk involved.
 Lack of infrastructure in rural areas could contain constrain investment.
 Very high competition prevailing in the industry.
 Vulnerable to reactive attack by major competitors.

3.8 Porter’s Five Forces model of the Company:

Following are the five forces model of HDFC Bank:
 Threat of new entrants:
 For any new entrants permission should be granted from RBI. Hence, it is
not easy to have the permission. LOW chance of entrants.

 Bargaining power of customers:

 Customer can switch to any other bank very easily if service is not good
because switching cost is low. But most of time customers are having their
accounts in most of the banks and they know that every bank provide
similar service. MEDIUM bargaining power of customers.

 Bargaining power of suppliers:

 In bank industry, there is no such supplier. LOW bargaining power

 Threat of Substitutes:
 Since there are many public and private banks and also the post office
provides some of the services, many private firm provide easy loan scheme
to attract the customers. Instead of saving the money, people started to
invest it in stock market, mutual funds, property, etc. HIGH chance of
threat.

 Degree of rivalry:
 There are large numbers of public and private banks and market growth
rate is also high. The switching cost is also low and the services provided
by all banks are same. Hence, HIGH degree of rivalry.

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 4. References/Bibliography:

 www.economictimes.com

 www.ibef.org

 www.economicdiscussion.net

 www.essay48.com

 www.financialexpress.com

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