Market Size

The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49
foreign banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural
cooperative banks, in addition to cooperative credit institutions.^^

Banking industry current worth – 81 trillion (us $ 1.31 trillion)

Growth rate of financial sector – 8.5% per year

In FY07-18, total lending increased at a CAGR of 10.94 per cent and total deposits increased
at a CAGR of 11.66 per cent.

Major players

NUMBER COMPANY MARKET

CAPITALISATION
1 HDFC Bank 5,82,250.59
2 Kotak Mahindra 2,48,044.42
3 SBI 2,39,402.70
4 ICICI Bank 2,19,047.01
5 Axis Bank 1,79,205.99

Five Forces Model For Indian Banking Industry

Threat of New Entrants

The average person can’t come along and start up a bank, but there are services, such as
internet bill payment, on which entrepreneurs can capitalize. Banks are fearful of being
squeezed out of the payments business, because it is a good source of fee-based revenue.
Another trend that poses a threat is companies offering other financial services. What would
it take for an insurance company to start offering mortgage and loan services? Not much.
Also, when analyzing a regional bank, remember that the possibility of a megabank entering
into the market poses a real threat. In Indian banking industry, the main threats are foreign
players and Non Banking Finance Companies

Power of Suppliers
The suppliers of capital might not pose a big threat, but the threat of suppliers luring away
human capital does. In Indian Banking industry, RBI acts as a regulator which pose a big
threat for banks as a supplier of money

Power of Buyers
The individual doesn’t pose much of a threat to the banking industry, but one major factor
affecting the power of buyers is relatively high switching costs.If a person has a mortgage,
car loan, credit card, checking account and mutual funds with one particular bank, it can be
extremely tough for that person to switch to another bank. In an attempt to lure in customers,
banks try to lower the price of switching, but many people would still rather stick with their
current bank. On the other hand, large corporate clients have banks wrapped around their
little fingers. Financial institutions – by offering better exchange rates, more services, and
exposure to foreign capital markets – work extremely hard to get high-margin corporate
clients.

Availability of Substitutes
As you can probably imagine, there are plenty of substitutes in the banking industry. Banks
offer a suite of services over and above taking deposits and lending money, but whether it is
insurance, mutual funds or fixed income securities, chances are there is a non-banking
financial services company that can offer similar services. On the lending side of the
business, banks are seeing competition rise from unconventional companies. All offer
preferred financing to customers who buy big ticket items. If car companies are offering 0%
financing, why would anyone want to get a car loan from the bank and pay 5-10% interest?

Competitive Rivalry
The banking industry is highly competitive. The financial services industry has been around
for hundreds of years, and just about everyone who needs banking services already has them.
Because of this, banks must attempt to lure clients away from competitor banks. They do this
by offering lower financing, preferred rates and investment services. The banking sector is in
a race to see who can offer both the best and fastest services, but this also causes banks to
experience a lower ROA. They then have an incentive to take on high-risk projects. In the
long run, we’re likely to see more consolidation in the banking industry. Larger banks would
prefer to take over or merge with another bank rather than spend the money to market and
advertise to people.

SWOT analysis
Below is the Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis of HDFC
bank :

Strengths

1. HDFC is one of the leading new age private sector bank

2. HDFC Bank has over 4500+ branches and over 12000 ATMs, in more than 800 cities in
India

3. Existing CBS across its branches

4. Huge employee base i.e more than 80,000+ employees

5. HDFC has a large collaborations with corporate for employee salary accounts

6. Acquisitions have boosted the operations of the bank

7. HDFC bank has been responsible for several CSR activities and has also been recognized
with several banking awards

8. It offers several services like online banking, app, mobile banking, NRI services etc
Weaknesses

1.Rural penetration is low for HDFC as compared to nationalised banks

2.Competition from public sector and private sector banks means limited market share
growth

Opportunities

1.Mobile banking, internet banking etc can be a huge boon for HDFC's business

2.Venturing more into rural areas can be done by HDFC

3.Providing more complex products to the ever increasing demands of the industry

Threats

1.Competitors increasing their business can adversely effect HDFC's business

2.New banking licenses and regulations can impact operations

3.Foreign banks that offer complex products