Market Structure: Monopolistic Competition Case Study: Yes Bank
By Parvez Rangwalla Email:
[email protected]
Welingkar Institute of Management Development & Research
Banking Sector in India: The first bank in India, though conservative, was established in 1786. From 1786 till today, today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: • Early phase from 1786 to 1969 of Indian Banks Banks • Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. • New phase of Indian Banking Banking System with the advent of Indian Indian Financial & Banking Sector Reforms after 1991. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: • 1949 : Enactment Enactment of Banking Banking Regulation Regulation Act. • 1955 : Nationalization Nationalization of of State Bank of India. • 1959 : Nationalizat Nationalization ion of SBI subsidiaries. subsidiaries. • 1961 : Insurance Insurance cover extend extended ed to deposits. deposits. • 1969 : Nationaliza Nationalization tion of 14 major major banks. • 1971 : Creation Creation of credit guarantee guarantee corporation. • 1975 : Creation of regional regional rural banks. • 1980 : Nationalization Nationalization of seven banks banks with deposits over over 200 crore
All All valu values es in Rs. Rs. Cror Crores es
S.No
Financial In I ndicator
21 Ol O ld
9 New
Total otal 30
Privat Private e Banks Banks
Privat Private e Banks Banks
01
Deposits
Private Banks 1,09,805
1,58,743.80
2,68,549.26
02
Investments
49,545
85,255.33
1,34,801.03
03
Advances (Credit)
58,232
1,12,666.53
1,70,899.19
04
Total Assets
1,26,093
2,41,183.13
3,67,276.32
05
Gross NPAs
4,609
5,771.17
10,380.80
06
Net NPAs
2,142
2,664.40
4,806.47
07
Interest Income
9,472
16,068.95
25,541.79
08
Other Income
2,519
5,092.23
7,611.54
09
Total Income
11,992
21,161.18
33,153.33
10
Interest Expended
6,238
11,291.32
17,530.00
11 12
Operating Expenses Total Expenditure
2,503 8,742
4,911.07 16,202.39
13
Operating Profit
3,249
5,116.35
8,366.24
14
Provisions/Contingenc ies
1,786
2,941.14
4,727.20
15
Net Profit
1,463
2,017.63
3,481.46
7,414.59 24,944.59
The Beginning: Yes Bank, established by two former top executives of the Indian operations of Netherlands-based Rabobank, Rana Kapur & Ashok Kapur. Despite the crowded field, Rana Kapoor, Kapoor, Yes Yes Bank chief executive and co-founder, co-founder, said the bank will stand out through a knowledge-based approach. “
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Each branch will offer value enhancing information and services depending on the location and the profile of customers in the catchment area it caters to. For instance, we plan to cover the major agricultural belts of India so our branches located in these belts may have special desks dispensing information on horticulture, floriculture or irrigation techniques, Kapoor says. “
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CVC, Chryscapital, Russel Infra, 25%
Rabobank Nederland, 20%
Other Management people, 3% Rana Kapoor & Ashok Kapur, 52%
Key Features:
1. Food & Agribusiness: Ex. LOANS OF ABOUT Rs. 25,000 to bee farmers against their stocks of honey as collaterals.
2. Futuristic branch: A chip embedded in debit cards of high value customers alerts staff when customer walks into the branch. An executive meets him & greets him by name.
3. Double Security: Besides their regular password, a second code is also generated just in time & delivered to the customer’s mobile.
Key Features: 4. YesYes- Professional Entrepreneurship Entrepreneurship Programme: The bank tapped the best B school alumni network to hire the top notch graduates unhappy with the jobs they had chosen. That’s now become a campus strategy. Currently there are 270.
5. Microfinance: Among the earliest to start offering micro-finance loans directly to poor customers.
6. Money monitor: Savings account customers get an online personal finance & wealth management software.
Strategies & Results: 1. Know Knowle ledg dge e Banki Banking ng App Appro roac ach: h: Bank is focusing on 6 key sectors & has put together a experienced industry & banking professionals who have necessary knowledge & skill set in these sectors.
Manageable exposure to stressed sectors , total exposure to real state, iron & steel, sugar, textiles & auto components sectors is about 10%.
Fees Income comprises 23% of the total income Frontrunner in fees
55% of the income comes from advisory services
Strategies & Results:
2. Focus on lending to large & mid size Indian corporates select MNC’s & government institutions. Retail advances constitute only 1.1% of total advances. Zero exposure to credit cards, mortgages & auto loans. No exposure to toxic loans No secondary market equity exposure since April 2008, Zero risk in this asset class. Figures are as on Q4, 2008-09
3. Technology is outsourced based on rental model (built-own-operate) resulting in savings of about 30%. ATM’s are outsourced, soon even branch building may be outsourced.
Results:
Service Innovation: Sustainable
investment banking (SIB) – Established a business business model for specialist advisory in sustainable ventures as social, alternative energy and environment.
YES
TOUCH TOUCH - Electronic gateway to the branch, branch, allows clients to bank round the clock. Its a state of art smart technology interface interface which is the first interactive point point provided by a dedicated relationship manager for each client, extended banking hours and customised wealth management solutions. Yes
Money plant – Direct marketing campaign which portrays the symbiotic relationship relationship between the banks and its clients. It provides advisory services ranging from liabilities to insurance and mutual funds.
The
Knowledge Cafe – It’s a Wi-Fi enabled enabled area to enable discussions, advisory advisory services and information dissemination. This innovative technology is the first time in any bank worldwide powered by Intel and Cisco.
Yes
Lounge- It’s an exclusive wireless banking enclave for the banks YES FIRST, FIRST, Global Indian and YES Private clients. It is designed to offer comfort, privacy and intimacy for business and financial discussions.
Awards and Recognitions : 1. 2. 3. 4. 5.
Most innovative innovative recruiting recruiting and staffing staffing program program award award in 2007 Most innovat innovative ive HR practices practices award award at Asia Pacific Pacific HRM HRM conference conference in year 2007. 2007. NASSCOM NASSCOM award in 2006 2006 in IT Innovation Innovations s in emerg emerging ing India. India. Enviro Environme nment nt Lead Leaders ership hip award award from from USAID. USAID. Euro money money Trade Trade Financ Finance e Deal Deal of the the Year Year award award in March 2007 – it’s the only only Indian Indian bank to receive. 6. Financial Financial Insigh Insightt Innovation Innovation award award for for the most most innovative innovative E-Paymen E-Paymentt solution solution for two two consecutive years, FY08 and FY09. 7. Nati Nation onal al awa award rd for for data data cen centr tre. e. st 8. Ranked 1 in the business today Annual Survey 2008, among its peers. (KPMG BEST RANKS) 9. Ranked 2nd among new private sector banks and 1st in key parameter of growth among 64 10. Banks in India (Financial (Financial Express Survey-2007). rd 11. 11. Rank Ranked ed 3 among all private and public sector banks as per 2006 survey. 12. 12. Rank Ranked ed 4th by Thompson Financial Securitized Debt for the year 2008. 13. The only ‘Greenfield’ ‘Greenfield’ private sector bank set up in the last decade. st 14. 14. Indi India’ a’s s 1 Food and Agricultural Private Equity. Equity. 15. Only Indian bank to feature feature in the ‘World’s ‘World’s 25 Unsung Innovative companies’, companies’, by business Week.
Journey so far for YES BANK : 1. 2. 3. 4.
Currently Currentl y has 117 117 operational branches across 84 locations. location s. Two national nationa l operation centres and 81 offsite offsite ATMs Total Net Income of Rs. 9.8 billion in the FY 2009. Commercial banking relationships with 150 large companies.
Current Capital Structure:
Road Ahead:
1. Received Received an approva approvall to set 117 117 branches branches and 200 200 offsite offsite ATM centres centres across across India. India. 2. Gear up to an an economy economy upturn upturn to to reach reach a balance balance sheet sheet figure figure of $30 billion billion by 2012. 3. Plans to add new relatio relationship nships s with 350 large large and and 2500 mid-sized mid-sized compan companies. ies. 4. Plans to welcome welcome a Strategic Strategic partne partnerr at some some time in future future to launch as a Global Global Bank. 5. Formulati Formulation on of a ‘robust ‘robust risk risk managem management ent committe committee’, e’, conformin conforming g to the RBI’s RBI’s Basal Basal norms designed to scrutinise the risk exposure, better capital allocation and integration with industry. 6. Targets argets 750 branches branches by by 2015. 2015. Expanding Expanding its branch branch networ network k 6 folds, folds, Report- Thoms & Reuters, July, July, 2009
Thank You
