Comparative Analysis between SBI, ICICI and HDFC Banks.
INTRODUCTION Sound banking system is an important indicator of an economically strong nation. The Indian banking system has played a vital role in the growth and development of the economy. The banking industry like many other financial service industries is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate has presented an unprecedented set of challenges. The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, nonscheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks. HISTORY Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who devoted a section of his work to deposits and advances and laid down rules relating to rates of interest. During the Mogul period, the indigenous bankers played a crucial role in lending money and financing foreign trade and commerce. During the days of the East India Company, it was the turn of the agency houses to carry on the banking business. The General Bank of India was the first Joint Stock Bank to be established in 1786. The others, which followed the suit, were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906, while the other two failed in the meantime. In the first half of the 19th century, the East India Company established three banks: the Bank of Bengal in 1809, the Bank of Bombay in 1840, and the Bank of Madras in 1843. These three banks were amalgamated in 1920 and a new bank, i.e., the Imperial Bank of India was established on January 27, 1921. With the passing of the State Bank of India Act in 1955, the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India. The Reserve Bank, which is the Central Bank, was created in 1935 by passing the Reserve Bank of India Act, 1934. In the wake of the Swadeshi Movement, a number of banks with Indian management were established in the country, namely, Punjab National Bank Ltd., Bank of India Ltd., Canara Bank Ltd., Indian Bank Ltd., the Bank of
Baroda Ltd., and the Central Bank of India Ltd. On July 19, 1969, 14 major banks of the country were nationalized and on April 15, 1980, six more commercial private sector banks were also taken over by the government. The banks operating in the present commercial banking system in India may be distinguished into Public sector banks, Private sector banks, Co-operative banking sector, and Development banks. In the changed environment, the Government of India and the Reserve Bank of India on the basis of the recommendations of the Narasimham Committee to improve the working of banks in line with the international banking practices have undertaken a series of reformative steps. The changes that have come about are greater degree of operational autonomy, deregulation of interest rate system and free pricing of products, consolidation and restructuring of weak public sector banks, freedom to open new branches, improved credit delivery mechanism, legal reforms to expedite recovery of bank dues, etc. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority sectors After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking system are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (Npas) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions. Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS schemes. Also, following Indias commitment to the W To agreement in respect of the services sector, foreign banks, including both new and the existing ones, have been permitted to open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches. Indian economy opened its doors to MNCs, the Indian banking sector has been witnessing bizarre changes in terms of new products and services and stiff competition as well. The sorts of IPOs that have been taking place in banking sector are amazing .As at end-March 2002, there were 296
Commercial banks operating in India. This included 27 Public Sector Banks (PSBs), 31 Private, 42 Foreign and 196 Regional Rural Banks. Also, there were 67 scheduled co-operative banks consisting of 51 scheduled urban cooperative banks and 16 scheduled state co-operative banks. The average capital adequacy ratio for the scheduled commercial banks, which was around two per cent in 1997, had increased to 13.08 per cent as on March 31, 2008. The improvement in the capital adequacy ratio has come about despite significant growth in the aggregate asset of the banking system. In regard to the asset quality also, the gross NPAs of the scheduled commercial banks, which were as high as 15.7 per cent at end-March 1997, declined significantly to 2.4 per cent as at end-March 2008. The reform measures have also resulted in an improvement in the profitability of banks. The Return on Assets (RoA) of scheduled commercial banks increased from 0.4 per cent in the year 1991-92 to 0.99 percent in 2007-08. The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end-March 2010 are estimated at Rs 40, 90,000 crores. That will comprise about 65 per cent of GDP at current market prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will be large additions to the capital base and reserves on the liability side. The Indian Banking Industry can be categorized into non-scheduled banks and scheduled banks. Scheduled banks constitute of commercial banks and co-operative banks. There are about 67,000 branches of Scheduled banks spread across India. As far as the present scenario is concerned the Banking Industry in India is going through a transitional phase. The Public Sector Banks (PSBs), which are the base of the Banking sector in India account for more than 78 per cent of the total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), massive manpower and lack of modern technology. On the other hand the Private Sector Banks are making tremendous progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned they are likely to succeed in the Indian Banking Industry.
PROFILE OF SBI, ICICI AND HDFC BANK State Bank of India State Bank of India (SBI) is the largest bank in India. It is measured by the number of branch offices and employees as the largest bank in the world. Established in 1806 as Bank of Bengal, it remains the oldest commercial bank in the Indian Subcontinent and also the most successful one providing various domestic, international and NRI products and services, through its network of 13,908 branches, including 4,731 associate banks' branches in India and overseas. It also provides financial services, such as life insurance, merchant banking, mutual funds, credit card, factoring, security trading and primary dealership in the money market. The bank was nationalized in 1955 with the Reserve Bank of India having a 60 percent stake. It has laid emphasis on reducing the huge manpower through Golden handshake schemes and computerizing its operations. It also has non-banking subsidiaries and joint ventures, such as SBI Capital Markets Ltd., SBI DFHI Ltd., SBI Funds Management Pvt Ltd., SBI Factors & Commercial Services Pvt Ltd. and SBI Life Insurance Company Ltd. Effective from April 20, 2005, it acquired a 51 percent stake in Indian Ocean International Bank Ltd. During the period ended 31st December 2008, the Bank has made aggregate investments of Rs. 807 crore in its subsidiaries / associates for the purpose of funding their business growth. During the quarter, the Bank has approved a further infusion of capital of Rs. 125 crores in Global Trade Finance Limited and Rs. 66 crores in SBI Cards & Payments Services Ltd to meet the CRAR requirements. Of this, Rs. 36 crores has been infused in SBI Cards & Payments Services Ltd. During the period, SBI has establi