1.1 https://www.ibef.org/download/Banking-February-2017.pdf Market Size: According to Euronomy Foreign

1.1
Industry and Competition

Defining
Bank:

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Bank is a financial institution
licensed to receive deposits and make loans1.
It can also provide other financial services like wealth management, currency
exchange and safe deposit boxes.

Different categories of Banks in India
are:

·        
Public Sector Banks

·        
Private Sector Banks

·        
Small Finance Banks

·        
Local Area Banks

·        
Payments Banks

·        
Foreign Banks

·        
Regional Rural Banks

·        
Cooperative Banks

Below are the major types of banking
present and their functions:

·        
Retail
Banking which provides services to individuals
and small businesses

·        
Business
Banking focuses on mid market Businesses

·        
Corporate
Banking concentrates on large organizations

·        
Private
Banking usually deals with High Net Worth
Individuals

·        
Investment
Banking focuses on activities of the financial
markets

Evolution
of Indian banking sector:

Image Source:  https://www.ibef.org/download/Banking-February-2017.pdf

Market Size:

According
to Euronomy Foreign Exchange Survey 2017 Results, below are the market shares
of top 10 banks globally.

Image source: https://www.euromoney.com/article/b1348tjhnv7h99/euromoney-fx-survey-2017-results-released

 

Market
Trends:

NOTABLE TRENDS IN THE BANKING INDUSTRY SECTOR2:

Technological innovations:

·        
Indian banks, including public sector
banks are aggressively improving their technology infrastructure to enhance
customer experience and gain competitive advantage.

·        
Internet and mobile banking is gaining
rapid foothold.

·        
Customer Relationship Management (CRM)
and data warehousing will drive the next wave of technology in banks.

·        
Indian banks are rapidly focusing on
SMAC (Social, Mobile, Analytics and Cloud) techniques to reach new customers.

Wide usability of RTGS and NEFT:

·        
Real Time Gross Settlement (RTGS) and
National Electronic Funds Transfer (NEFT) are being implemented by Indian banks
for fund transaction

·        
Securities Exchange Board of India
(SEBI) has included NEFT and RTGS payment system to the existing list of
methods that a company can use for payment of dividend or other cash benefits
to their shareholders and investors

Demonetization:

Positive Effects:

·        
Free flow of Cash which was deposited
by customers and can be used various investment options.

·        
A very positive outcome is a drastic
increase in usage of Digital Interfaces because of demonetization.

·        
And there is an absolute increase of
customers at each and every bank depositing their surplus money. So it resulted
in a large increase of customer base.

Negative Effects:

·        
There was a 100% CRR on incremental
deposits due to which there was no interest earned on Rs. 3Lakh crore for about
a fortnight.

·        
Due to excessive demand, the waived of
ATM charges resulted in huge losses.

According to RBI:

·        
RBI Deputy Governor said that since
demonetization the Central Bank has collected over USD 185.81 billion in
demonetized notes from various bank branches.

·        
The effects of demonetization are also
visible in the fact that bank credit plunged by 0.8 per cent from November 8 to
November 25, as USD 9.85 billion were paid by defaulters. As per RBI, a total
of USD 125.53 billion was deposited in banks till November 27, 2016.

Major advantage to Paytm:

·        
With the stroke of Demonetization Paytm
became one of the most influential fintech firms in the country.

·        
Paytm has good presence in first tier
cities, but in rural areas it was hardly used. In two month span after
demonetization the semi urban and rural areas share increased from 2% to 25%.

Market
Structure:

The
structure of Indian Banking Sector

Image Source:  https://www.ibef.org/download/Banking-February-2017.pdf

The Indian banking system consists of
27 public sector banks, 26 private sector banks, 46 foreign banks, 56 regional
rural banks, 1,574 urban cooperative banks and 93,913 rural cooperative banks,
in addition to cooperative credit institutions. Public-sector banks control
more than 70 per cent of the banking system assets, thereby leaving a
comparatively smaller share for its private peers3.

Characteristics
of Competitor:

Global:

According to Forbes Report on World’s
largest Banks in 2017, the top 10 largest Banks globally are4:

1.     
Industrial and Commercial Bank of China

2.     
China Construction Bank

3.     
JP Morgan Chase

4.     
Wells Fargo

5.     
Agricultural Bank of China

6.     
Bank of America

7.     
Citigroup

8.     
Goldman Sachs

9.     
Morgan Stanley

10.  Industrial
Bank

In 2017, China Banks still being on top
of the list, all 6 large Banks of USA made into the list. The major reason for
the performance of US Banks increasing, being President Donald Trump vowing to
roll back regulations and increase lending.

India:

Coming to India, the 10 banks in 2017
are5:

1.     
State Bank of India

2.     
ICICI Bank

3.     
Punjab National Bank

4.     
Bank of Baroda

5.     
HDFC Bank

6.     
Canara Bank

7.     
Axis Bank

8.     
Bank of India

9.     
IDBI Bank

10.  Kotak
Mahindra Bank

SBI comprising 20% share of total
market share in India and with an Asset management value of $420 Billion, it
became the largest public sector bank in India.

Bank
of Baroda:

Being formed way back in 1908 and
having 5538 branches and 10441 ATMs all over India; it manages assets worth
$3.58 Trillion and made it to the 4th position in the list.

Going by this list the major
competitors of Bank of Baroda to reach the target of attaining the first place
are State Bank of India, ICICI, Punjab National Bank. Analyzing the factors
that contributed the competitors to be on the top:

Characteristics
of competitors:

State Bank of India (SBI):

SBI being the largest bank in India has
24,000 branches and 59,000 ATMs across the country. It has provided employment
for about 2 lakh people.

ICICI:

With a network of 4850 branches and
13,8882 ATMs all over the country ICICI is one the best banks in India as of
2017. One of its major factors contributing to the success of ICICI is its wide
range of services in the areas of Banking, venture capitals and many more. The
acquisitions made by ICICI like Bank of Madurai, Shimla, and Anagram Finance
etc6.
Also contributed to increase its customer base.

Above all these, the below initiative
taken by ICICI is the biggest contributor:

·        
100 Digital villages to promote digital
ecosystem in rural areas

·        
Go Green Initiative

·        
Literary Endeavour

They are further planning to 500
villages to follow the initiative of 100 Digital villages.

With all these factors contributing,
ICICI stood 2nd in the top banks of India and in fact the top bank
when Private sector Banks are considered.

Bank of Baroda:

Bank of Baroda famously known as India’s
International bank with 100+ branches in 24 countries. It has branches in major
financial centers like New York, Dubai, Singapore etc7.
Founded way back in 1908, Bank of Baroda has 5493 branches and 104411 ATMs in
India.

Bank of Baroda was ranked 21st amongst
Best Indian Brands 2016 in Brand Equity – The Economic Times dated 31st August
to 6th September, 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 https://www.investopedia.com/terms/b/bank.asp

2 https://www.ibef.org/download/Banking-February-2017.pdf

3 https://www.ibef.org/industry/banking-india.aspx

4 https://www.forbes.com/sites/antoinegara/2017/05/24/the-worlds-largest-banks-in-2017-the-american-bull-market-returns/#14cab12047d0

5 https://www.worldblaze.in/top-10-best-banks-in-india/

6 https://www.mbaskool.com/fun-corner/top-brand-lists/17198-top-10-banks-in-india-2017.html?start=7

7 https://www.mbaskool.com/fun-corner/top-brand-lists/17198-top-10-banks-in-india-2017.html?start=4

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