A Turnaround Story: Group 8: Yash, Ritu, Bhartesh, Smriti, Rahul, Piyush & Jastej
A Turnaround Story: Group 8: Yash, Ritu, Bhartesh, Smriti, Rahul, Piyush & Jastej
A Turnaround Story: Group 8: Yash, Ritu, Bhartesh, Smriti, Rahul, Piyush & Jastej
Structure:
2007- 08 :
Non-Scheduled Public Sector
bank credits - 73%;
banks Banks
deposits – 74%
Banks in India
Scheduled Banks 2007- 08 :
Private Sector
(second schedule of RBI bank credits - 21%;
Act 1934) Banks
deposits – 20%
2007- 08 :
Foreign Banks bank credits - 6%;
deposits – 7%
1
IndusInd Bank:
Background
Inception of IndusInd Bank:
•
A Crisis:
IndusInd bank began operation in 1994; one of the nine
• Late 1990s - Indian Economy opened further to
private banks licenced after 1993 reforms
include foreign competition
• Set-up by Hinduja Group; first bank in India to be set-up by
• SMEs were effected and many of them were
NRIs
shut down
• Started off by focusing on mid-corporate and small and
• New private sector banks (including IndusInd
medium enterprises (SME) lending
bank) faced issues as they were catering to
- Retail banking requires substantial investment SMEs.
- Lending to large corporates required ability to lend large volumes
• The new private banks that failed were merged
at competitive costs
with other healthier banks
- Hence, loans to SMEs as it attracts higher yield that would
cover the higher costs of funds
The Solution:
• 2004 – Hinduja group decided to IndusInd merged with Ashok Leyland Finance (NBFC)
• IndusInd bank entered a new portfolio
2
Product Portfolio
• Deposits and Loans - personal and business • Corporate and Institutional Banking
• Financing of vehicles such as cars, commercial • Treasury and International operations catering to
vehicles, multi-utility vehicles etc. bank’s funding, asset liability management
• Wealth Management catering to HNIs and NRIs • Services for Capital and Commodity
• Distribution of MFs and insurance products • Investment Banking and Merchant Banking
3
ALF & IIB Merger
4
Post Merger Performance &
Issues Increasing Bank Network and Cost of
Deposits
Cost of deposits increased affecting the credit
growth while the bank increased number of
Asset-Liability
branches which further increased operating
expenses and more pressure on risk Mismatch
management 85% of funding
Changes in RBI’s Interest Rate policy through bulk deposits
5
IndusInd: Bank or NBFC?
The banks perception in the minds of general public was
not clear and Sobti felt it was holding the bank from its
intended growth objectives
6
CASA-Capital Dilemma
IndusInd Bank had The Low cost
a high amount of A High CASA required Capital! CASA deposits can
bulk deposit be increased by
which were more improving the
costly. To improve bank branches
operational and inter
efficiency they CASA Capital operability
needed to Deposits Requirement network within
increase them. The branch
proportion of numbers to be
Current account increased
and Saving required more
Account deposits capital inflow and
Capital Inflow needs Profits which which would only
which are less
costly
requires High CASA! be possible with
reduced interest
expenses
7
Other Problems
Lower number of Retail branches as compared to peers. AFL
branches not suited for regular banking. Layout and branch
position not best suited for retail banking
8 11
Missed Opportunities
CORPORATE RETAIL (Except vehicle loans)
(Apart from proprietary trading)
Other issues:
9
Solution Proposed (1/3)
Balancing Assets and Liabilities Retail Fee Income
65% of the assets were at a fixed Potential for selling life insurance,
rate while most of the liabilities mutual funds, wealth management
were floating. Higher proportions of products to high net worth
the loans should be re-priceable individuals
while making the liabilities side less
floating
11
10
Solution Proposed (2/3)
05 Corporate
06 Organizational 07 IT
Fee Income Issues integration
11
Solution Proposed (3/3)
Operating Costs
Operating costs should be brought down by having single offices for vehicle
financing, retail and corporate divisions, having single sources of procurements
for different parts of the bank
Hiring Process
Attracting the right people and matching their base compensation to that of
competitors, proper training for the new recruits
Corporate Vision
Development of corporate vision and strategy so that employees are clear about
their objectives and don’t feel disengaged
Along with certain
aspects of IT integration
playing a key role
We can solve through
certain organizational
changes
12
Recommendations (1/3)
Customer Focus (Centricity)
To improve Top-line
Customers of AFL and IndusInd should be combined and brought onto a common
one type platform.
Improving Customer experience & Service Quality in long run will gather more
CASA deposits & will increase loan portfolio to include more customers
This in turn will also increase size of the Balance Sheet.
To improve Bottom-line
Focus on improving relationships within Corporate Banking & Commercial Banking
services of the company.
Improving customer retention which will be done by following specific reward models for
loyalty & timely credit repayments.
Gathering customer feedback on services
Increasing convenience for people using Mobile & Internet Banking Services
13
Recommendations (2/3)
Products & Services (Offerings)
To improve Top-line
Cross-selling & Up-selling opportunities must be explored, leveraging experiences of
employees of AFL for Personal Banking & Wealth management facilities
Launching of new products like Home Loans, Education Loans and Personal Loans. In
addition to Insurance products like Life Insurance, Vehicle insurance, etc.
Forex products like IPO Management, Investment Banking facilities, Loan syndication, etc.
To improve Bottom-line
Operational expenses can be significantly reduced by partnering with other Banks for
specialized products like Home Loans or Personal Loans.
Improving Cash management amongst Branches by implementing a common way.
Centralized integrated Risk Management which is uniform to al branches
IT interventions to standardize & automate all Back office procedures by implementing
ERP, CRM & Banking solutions for the various processes
14
Recommendations (3/3)
Organizational (Macro)
To improve Top-line
Improving Employee training & motivation by making Managers responsible &
rewarded for Branch operations as if they own the branch.
Improving relations with Regulatory bodies & gaining their trust by working for
improvement in ratings provided by Ratings Agencies.
This in turn will attract better future prospectus for the company.
To improve Bottom-line
Reducing Attrition rate in Senior management by involving employees in a cohesive
decision making approach which will be exhaustive list of employees.
Optimizing Performance Management system using right corporate vision & strategy and
properly delivering that to the organization.
Creation of a NPA monitoring Committee for continuous follow up on credit recovery.
15
THANK
YOU
Higher Higher
Higher Customer Increased Levels of
Satisfactio Sales Profit
n
Servic
e Higher
& Shareholde
r Returns
Quality