Industry Profile

INDIAN BANKING SYSTEM

A HISTORICAL PERSPECTIVE banks in India can be traced to the three presidency

banks (in Bengal, Mumbai, and Chennai) in the early 1980s. Subsequently with the
emergence of several small banks in the country, the number of banks had gone up 105
by December by 1934. In 1921, the three-presidency banks were merged into the imperial
bank of India, which, apart from usual commercial operations, also took over certain
central banking functions. Since the Reserve Bank of India was established as a full –
fledged central bank of the country in 1935. The Imperial bank of India was nationalized
and came to be known as the State Bank of India the establishment of the state bank of
India was one of the significant steps taken by the government of India to control its
expanding economy.

The banking system witnessed a steady growth during the post- independence period and
by the mid- sixties the system has become fairly strong and compact. However several
deficiencies in their functioning were noticed, mainly in terms of geographical coverage
and credit deployment. The network of branches of various banks covered only a limited
segment of the population in major cities while the rural areas and semi- urban areas were
totally neglected. it was also noticed that substantial gaps in credit deployment existed in
financing agriculture, small - scale industry and self - employed persons. Further, the
ownership pattern of banks showed the concentration of economic power in few hands.

DEVELOPMENTS IN BANKING SYSTEM

SOCIAL CONTROL OF BANKS Indian banking structure has grown considerably in

strength and stability due to the vigorous control and effective monitoring by reserve
bank of India. However, Order to remove the deficiency pointed above, the Government
introduced a scheme of social control of banks. According to the Banking Commission
(1972), the social control scheme was introduced with the main objective of “achieving a
wider spread of bank credit flow to priority sectors and making it a more effective
instrument of development “.

NATIONALISATION OF BANKS Despite of scheme of social control there was no

significant reorientation of lending activities of banks towards meeting the requirements
of priority sector like agriculture.This resulted in nationalization of 14 major commercial
banks with individual deposits exceeding Rs.50 crores in July 1969.

At the time of nationalization, the 14 major banks had a paid up capital of Rs. 28.5
crores, deposits of Rs. 2626 crores, advances Rs. 1813 crores and 4134 branches.In other
words the nationalized banks accounted for 80% of branches, 83% of deposits and 84%
of advances of the whole banking system
The Banks nationalized in 1969 were: - 1. Allahabad Bank 2. Andhra Bank 3. Bank of
Baroda 4. Bank of India 5. Canara Bank 6. Central Bank of India 7. Dena Bank 8. Indian
Bank 9. Indian Overseas Bank 10.Punjab National Bank 11.United Commercial Bank
12.Union Bank of India 13. Syndicate Bank 14.Bank of Maharashtra

CURRENT SCENARIO

The Indian has finally worked up to the competitive dynamics of new Indian market and
is addressing the relevant issues take on the multifarious challenges of globalization.
Banks that employ IT solutions are perceived to be futuristic and proactive players
capable of meeting the multifarious requirement of large customer base. Private Banks
have been fast on the uptake and are reorienting their strategies using the Internet as a
medium. The Indian banking has come from a long from being a sleepy business
institution to a highly proactive and dynamic entity this transformation has been largely
brought by the large dose of liberalization and economic reforms that allowed exploring
new business opportunities rather than generating revenues from conventional streams
COMPANY PROFILE
ICICI BANK
ORIGINATION
The development banking institution set up in the country, after
Industrial Finance Corporation (IFC); was the Industrial Credit
Investment Corporation of India (ICICI).
It was set up during 1955 by government of India and World Bank.
It was to be a private sector development bank in so far as there
was no participation by government in its share capital
Its main objectives when it was started were:-
• to encourage and assist industrial investment in private sector
• to provide foreign currency loans
• to develop underwriting facilities in India, which was not taken
up by IFC at that time
In broad operational terms, the ICICI assist
• In the creation, expansion and modernisation of private sector
enterprises
• In encouraging and promoting participation of private capital,
both internal and external, in the ownership of industrial
investment through providing equity participation, underwriting
of new issue
TRANSFORMATION
In the 1990s, ICICI transformed its business from a development
financial institution offering only project finance to a diversified
financial services group offering a wide variety of products and
services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank.
It was after liberalization in 1994 that the government also allowed
private players in the banking industry
ICICI Bank was originally promoted in 1994 by ICICI Limited, an
Indian financial institution, and was its wholly-owned subsidiary.
ICICI bank was incorporated in1996 with its first branch in
CHENNAI under schedule (II) commercial banks which has given it
the right that every account holder of this bank can claim upto Rs
100000 from RBI if the bank goes into liquidation which is same in
any nationalized bank.
OVERVIEW OF BANK
ICICI Bank is India's second-largest bank with total assets of about
Rs.146,214 crore at December 31, 2004 and profit after tax of Rs.
1,391 crore in the nine months ended December 31, 2004 (Rs. 1,637
crore in fiscal 2004). ICICI Bank has a network of about 505 branches
and extension counters and about 1,850 ATMs. ICICI Bank offers a
wide range of banking products and financial services to corporate and
retail customers through a variety of delivery channels and through its
specialised subsidiaries and affiliates in the areas of investment
banking, life and non-life insurance, venture capital and asset
management. ICICI Bank set up its international banking group in
fiscal 2002 to cater to the cross-border needs of clients and leverage
on its domestic banking strengths to offer products internationally.
ICICI Bank currently has subsidiaries in the United Kingdom and
Canada, branches in Singapore and Bahrain and representative offices
in the United States, China, United Arab Emirates and Bangladesh.
ICICI Bank's equity shares are listed in India on the Stock Exchange,
Mumbai and the National Stock Exchange of India Limited and its
American Depositary Receipts (ADRs) are listed on the New York Stock
Exchange (NYSE).As required by the stock exchanges, ICICI Bank has
formulated a Code of Business Conduct and Ethics for its directors and
employees.
At October 31, 2004, ICICI Bank, with free float market capitalisation*
of about Rs. 220.00 billion (US$ 5.00 billion) ranked third amongst all
the companies listed on the Indian stock exchanges. ICICI Bank was
originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding
in ICICI Bank was reduced to 46% through a public offering of shares
in India in fiscal 1998, an equity offering in the form of ADRs listed on
the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura
Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal
2002. ICICI was formed in 1955 at the initiative of the World Bank,
the Government of India and representatives of Indian industry. The
principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian
businesses. In the 1990s, ICICI transformed its business from a
development financial institution offering only project finance to a
diversified financial services group offering a wide variety of products
and services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank. In 1999, ICICI become the first Indian
company and the first bank or financial institution from non-Japan Asia
to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the
context of the emerging competitive scenario in the Indian banking
industry, and the move towards universal banking, the managements
of ICICI and ICICI Bank formed the view that the merger of ICICI with
ICICI Bank would be the optimal strategic alternative for both entities,
and would create the optimal legal structure for the ICICI group's
universal banking strategy. The merger would enhance value for ICICI
shareholders through the merged entity's access to low-cost deposits,
greater opportunities for earning fee-based income and the ability to
participate in the payments system and provide transaction-banking
services. The merger would enhance value for ICICI Bank shareholders
through a large capital base and scale of operations, seamless access
to ICICI's strong corporate relationships built up over five decades,
entry into new business segments, higher market share in various
business segments, particularly fee-based services, and access to the
vast talent pool of ICICI and its subsidiaries.