Organization of Banking Industry

Organization of Banking Industry

Types of Bank Organizations Unit Banks Holding Companies Branch Banks

Banking Entities Unit Banks Indiana Community Bank, USA Heartland Community Bank, USA Holding Companies Citi Group State Bank of India Group Branch Banks Punjab National Bank Indian Oversees Bank

Unit Banks Single entity. Located in a specific area. Functions as a community bank. Banks are customer based. Capital is comparatively lesser than other banking structures. Structure is based on the needs of the customers.

Holding Companies Organization owns and manages subsidiaries. Utilizes its financial strength to acquire ownership of subsidiary banks. Large capital structure. Standardization of subsidiary organizational structure. Possibility of establishing banks across several localities.

Branch Banking Single entity. Establishment of branch offices. Possibility of functioning across several localities. Location of banks based on the needs of the society. Possibility of operating banks on a large or small scale. Scope for future expansion of banking functions.

Comparative Features Feature Unit Bank Holding Company Branch Company Efficiency Scale Less Some Most Efficiency Scope Most Most Some Flow of Funds Low Possible Easy Competition Exists No Exists New Entry Easy Little Easy Market Access Tough Easy Easy Liquidity Low High High Decentralized Power Most Little Moderate Sensitivity to Society Most Little Moderate Convenience to Customers Most Little Most

Organization of Banks based on Ownership Pattern Nationalized Banks (Government owned) Private banks Foreign Banks

Banking Entities (Illustrative) Nationalized Banks Indian Bank Corporation Bank Andhra Bank Private Banks ICICI Bank Axis Bank HDFC Bank

Banking Entities Foreign Banks Sonali Bank Oman International Bank Mizuho Corporate Bank Societe Generale

Bank Performance Comparison (2011) Nationalized Private Foreign Banks Banks Banks Number of Offices 45640 11968 316 Number of Employees 475082 218679 27968 Business per Employee (lakh) 1144.77 823.26 1559.74 Profit per Employee (lakh) 6.95 8.1 27.59 Capital and Reserves & Surplus (lakh) 205857 138589 80972 Cost of Funds 4.93 4.56 3.11 Return on Assets 1.03 5.11 1.74 Capital to Risk Adjusted Asset Ratio (CRAR) 13.47 16.46 16.72 Net Non Performing Assets (NPA) Ratio 0.92 0.56 0.67 Reference: http://www.rbi.org.in/scripts/annualpublications.aspx?head=statistical%20tables% 20Relating%20to%20Banks%20of%20India

Banks Functioning in India Bank Classification 1999 2003 2006 2009 2010 2011 SBI & Associates 9 9 9 8 6 6 Nationalized Banks 19 19 20 20 21 21 Domestic Private Banks 34 30 24 23 21 21 Foreign Banks 41 36 29 31 34 34 Reference: http://www.rbi.org.in/scripts/annualpublications.aspx?head=statistical%20tabl es%20relating%20to%20banks%20of%20india

Organization of Banks Based on Size Large Banks Large Capital Large Depositor base Small Banks Less Capital Small Depositor base

Banking Business Models National banks Regional banks International banks Community banks Development banks Core banks Service banks

National Banks Banks are entitled to operate across the country. Usually have operations in more than one region of the country. Large number of bank branches. Comparatively large size capital banks. Centralized operational structure.

Regional Banks Local banks. Banking operations are within the region. Cater to the specific needs of the region. Regional banks are established to focus on the requirements of the place of operation of the bank. Focus on a specific locality and function as specialized banks.

Community Banks Specialty banks. Cater to the banking requirements of a specific society. Based on a specific locality or built on the branch structure to cater to the needs of the community in different areas. Subject to the same regulations as that of other bank models.

Development Banks Focus is on development activities. Funded by the government. Objective of the bank is to meet the government targets. Meets the funding requirement of large projects or activities that are considered essential for the community but not necessarily profit based.

International Banks Engage in banking operations across several countries. Large customer base. Familiar with regulatory requirements of each country. Banking risks are prominent since operations are subject to the impact of banking functions across other nations.

Core Banks Function as deposit mobilization and lending agencies for project finance. Subject to regulations from the Central bank. Services are based on the interest rate prevalent in the system. Larger capital base. Subject to capital adequacy requirements to meet the core banking risks. Requires investor trust.

Service Banks Function as supportive players of core banks. Perform roles such as insurance / asset management / mutual funds / credit card / venture capital assistance / consumer finance / leasing activities / trustee services etc. Uses the customer base acquired from core banks. Income is based on operations of the banks and not entirely on the interest rates.

Commercial Banking Functions

Investment Functions