COMPARATIVE ANALYSIS OF COMMERCIAL BANK

( ICICI AND IDBI BANK)

1. INTRODUCTION

1. WHAT IS BANK?
The word bank comes from an Italian word banco, meaning a bench, since
Italian merchants in the Renaissance made deals to borrow and lend money beside a
bench. They placed the money on that bench.

A bank is a financial institution where customers can save or borrow money. Banks

also invest money to build up their reserve of money. What they do is regulated by laws.
Those laws differ in different countries. The people who work at a bank are called bank
employees. Certain banks deal directly with the public and they are the only ones which
an ordinary person will deal with. Other banks deal with investments and
international currency trading.

Customer's money may be placed in the bank for safe keeping. Banks may give loans to
customers under an agreement to pay the money back to the bank at a later time,
with interest. An example is getting a mortgage to buy a house or apartment. Banks also
can use the money they have from deposit accounts to invest in businesses in order to
make more money.
In most countries the rules for banks are made by the government acting through laws.
A central bank (such as the Bank of England) adjusts how much money is issued at a
particular time. This is a factor in the economy of a country, and the government takes
the big decisions. These "banks of issue" take in, and issue out, coins and banknotes.

1.1 Banks are divided into several sorts. The following are the different types of
banks in India:

A. Central Bank

B. Cooperative Banks

C. Commercial Banks

D. Regional Rural Banks (RRB)

E. Local Area Banks (LAB)

F. Specialized Banks

G. Small Finance Banks

H. Payments Banks

The several types of banks in India, their functions, and a list of banks under each sector
are all part of the banking awareness syllabus that is covered in most government exams.
A. Central Bank
Our country's central bank is the Reserve Bank of India. Each country has a central bank
that oversees all of the country's other financial institutions.
The central bank's principal role is to serve as the government's bank and to oversee and
regulate the country's other banking institutions. The functions of a country's central bank
are listed below:

 assisting other financial institutions

 Issuing money and enforcing monetary policies

 The financial system's supervisor

In other words, the country's central bank is also known as the banker's bank because it
assists other banks in the country and runs the country's financial system under the
supervision of the Government.
B. Cooperative Banks

People who come together to jointly serve their common interest often form a co-operative
society under the Cooperative Societies Act. When a co-operative society engages itself in
banking business it is called a Co-operative Bank. The society has to obtain a license from
the Reserve Bank of India before starting banking business. Any cooperative bank as a
society is to function under the overall supervision of the Registrar, Co-operative Societies
of the State. As regards banking business, the society must follow the guidelines set and
issued by the Reserve Bank of India.

Types of Co-operative Banks

Here are three types of co-operative banks operating in our country. They are primary credit
societies, central cooperative banks and state co-operative banks. These banks are organized
at three levels, village or town level, district level and state level.

Primary Credit Societies:

These are formed at the village or town level with the borrower and non-borrower members
residing in one locality. The operations of each society are restricted to a small area so that
the members know each other and are able to watch over the activities of all members to
prevent frauds.

Central Cooperative Banks:

These banks operate at the district level having some of the primary credit societies
belonging to the same district as their members. These banks provide loans to their
members (i.e., primary credit societies) and function as a link between the primary credit
societies and state co-operative banks.

State Co-operative Banks:

These are the apex (highest level) co-operative banks in all the states of the country. They
mobilize funds and help in its proper channelization among various sectors. The money
reaches the individual borrowers from the state cooperative banks through the central co-
operative banks and the primary credit societies.

C. Commercial Bank
The term commercial bank refers to a financial institution that accepts deposits,
offers checking account services, makes various loans, and offers basic financial
products like certificates of deposit (CDs) and savings accounts to individuals and small
businesses. A commercial bank is where most people do their banking.
Commercial banks make money by providing and earning interest from loans such as
mortgages, auto loans, business loans, and personal loans. Customer deposits provide
banks with the capital to make these loans.

Different Types of Commercial Banks in India

Commercial Banks in India can be classified into three different categories:

A. Scheduled bank
 The banks in the Indian banking system are sub categorized as Scheduled Banks,
Non-Schedule Banks, Private Banks and Public Banks. Scheduled banks are those
banks that are listed under Schedule II of the Reserve Bank of India Act, 1934.

 The bank's paid-up capital and raised funds must be at least Rs. 5 lakh to qualify
as a scheduled bank. These banks are liable for low interest loans from the RBI.

 They also have membership in clearing houses.

 They also have numerous obligations to fulfill such as maintaining an average

daily Cash Reserve Ratio with the central bank.

1. Public Sector Banks:

These banks are those financial institutions that have at least 51% of their ownership
being held by the central government. The management control is also in the hands of
the union government. State Bank of India, PNB, Bank of India are some of the
leading public sector banks in the country.
2. Private Sector Banks:

These banks are the financial institutions whose majority shareholding is with
corporations and individuals. In 1993, RBI allowed the formation of new private
sector banks in India, and this led to the rapid expansion of the banking network in
the country. HDFC Bank, ICICI Bank, Kotak Mahindra Bank are some of the leading
private sector banks in India.

3. Foreign Banks:

These banks have their headquarters located outside India. They perform their
banking functions through their wholly controlled subsidiaries. Barclays Bank,
Deutsche Bank, HSBC Bank are some of the leading foreign banks in India.

B. Non-Scheduled Bank:
Non-Schedule banks are those Banks whose names do appear in the list of scheduled
Banks maintained by the Reserve Bank.
However, Non-schedule bank come within the sweep of the banking regulation act, 1949
and are therefore obliged to follow the Reserve Bank’s guidelines and provisions of the
act.

For instance, Non-schedule banks are required to have a minimum capital of Rs 5 lakhs,
these banks have to comply with the cash reserve requirements condition of the Reserve
Bank etc. Non schedule Banks are not eligible for having financial assistance from
Reserve Bank except under emergency situations. Non-schedule banks are also deprived
of privileges available to scheduled Banks.

Differences between a Scheduled Bank and Non-Scheduled Bank

A. Scheduled Bank

 They are listed in the second schedule of the RBI Act.

 These have a paid up capital of Rs. 5 lakhs or more and comply with all the
requirements of the RBI.

 They maintain a cash reserve ratio with RBI.

 They are authorized to borrow funds from the Reserve Bank of India.
 They are comparatively more financially stable.

B. Non-Scheduled Bank

 They are not listed in the second schedule of the RBI Act.

 There is no such condition that needs to be fulfilled for it to be considered a non-

scheduled bank.

 They maintain the CRR amount with themselves.

 They are not allowed to.

 These banks are riskier.

D. Regional Rural Banks (RRB)

 These are unique types of commercial banks that lend to agriculture and the rural
economy at a reduced rate.

 RRBs were founded in 1975 and are governed by the 1976 Regional Rural Bank
Act.

 RRBs are 50/50 joint ventures between the federal government and state
governments (15%), as well as a commercial bank (35 percent).

 Between 1987 and 2005, 196 RRBs were established.

 From 2005 forward, the government began merging RRBs, bringing the total
number of RRBs to 82.

 A single RRB cannot open branches in more than three districts that are
geographically connected.
E. Local Area Banks (LAB)
 In India, it was first introduced in 1996.
 The private sector organizes these.
 Local Area Banks' primary goal is to make a profit.
 Local Area Banks are governed by the 1956 Companies Act.
 There are now just four Local Area Banks in existence, all of which are located in
South India.
F. Specialized Banks
There are some banks, which cater to the requirements and provide overall support for
setting up business in specific areas of activity. EXIM Bank, SIDBI and NABARD are
examples of such banks. They engage themselves in some specific area or activity and thus,
are called specialized banks. Let us know about them.

Export-Import Bank of India (EXIM Bank):

If you want to set up a business for exporting products abroad or importing products from
foreign countries for sale in our country, EXIM bank can provide you with the required
support and assistance. The bank grants loans to exporters and importers and also provides
information about the international market. It gives guidance about the opportunities for
export or import, the risks involved in it and the competition to be faced, etc.

Small Industries Development Bank of India (SIDBI):

If you want to establish a small-scale business unit or industry, loan on easy terms can be
available through SIDBI. It also finances the modernization of small-scale industrial units,
use of new technology and market activities. The aim and focus of SIDBI are to promote,
finance and develop small-scale industries.

National Bank for Agricultural and Rural Development (NABARD):

It is a central or apex institution for financing agricultural and rural sectors. If a person is
engaged in agriculture or other activities like handloom weaving, fishing, etc. NABARD
can provide credit, both short-term and long-term, through regional rural banks. It provides
financial assistance, especially, to co-operative credit, in the field of agriculture, small-scale
industries, cottage and village industries handicrafts and allied economic activities in rural
areas.

G. Small Finance Banks

This sort of bank, as the name implies, provides loans and financial help to micro
industries, small farmers, and the unorganized sector of society. The country's central
bank oversees these institutions.

H. Payments Banks
The Reserve Bank of India conceptualized the payments bank, a newly developed form
of banking. People who have a payment bank account can only deposit up to Rs.1,
00,000/- and cannot apply for loans or credit cards through this account.
Payment banks provide services such as internet banking, mobile banking, ATM card
issuance, and debit card issuance. The following is a list of our country's few payment
banks:

 Airtel Payments Bank

 India Post Payments Bank

 Fino Payments Bank

 Jio Payments Bank

 Paytm Payments Bank

 NSDL Payments Bank

1.2 Functions of Bank

A bank is a lawful organization that accepts deposits that can be withdrawn on demand.
Banks are institutions that help the public in the management of their finances, public
deposit their savings in banks with the assurance to withdraw money from the deposits
whenever required.

Banks accept deposits from the general public and from the business community as well
and give two assurances to the depositors –

1. Safety of deposit
2. Withdrawal of deposit, whenever needed

Banks give interest on deposits which adds to the original deposit amount and is a
great incentive to the depositor. This promotes saving habits among the public. Bank also
grants loans based on deposits thereby adding to the economic development of the
country and well being of the general public. With this stature, it becomes important to
understand the major functions of a bank. 

There are two types of functions of banks:

1. Primary functions – being primary are also called banking functions.

2. Secondary Functions

Both the types of functions of bank are explained below in detail:

 1. Primary Functions of Bank

All banks have to perform two major primary functions namely:

1. Accepting of deposits
2. Granting of loans and advances

1. Accepting of Deposits

A very basic yet important function of all the commercial banks is mobilizing public
funds, providing safe custody of savings and interest on the savings to depositors. Bank
accepts different types of deposits from the public such as:

1. Saving Deposits:  encourages saving habits among the public. It is suitable for
salary and wage earners. The rate of interest is low. There is no restriction on the
number and amount of withdrawals. The account for saving deposits can be
opened in a single name or in joint names. The depositors just need to maintain
minimum balance which varies across different banks. Also, Bank provides ATM
cum debit card, cheque book, and Internet banking facility. Candidates can know
about the Types of Cheques at the linked page.
2. Fixed Deposits: Also known as Term Deposits. Money is deposited for a fixed
tenure. No withdrawal money during this period allowed. In case depositors
withdraw before maturity, banks levy a penalty for premature withdrawal. As a
lump-sum amount is paid at one time for a specific period, the rate of interest is
high but varies with the period of deposit.

3. Current Deposits: They are opened by businessmen. The account holders get an
overdraft facility on this account. These deposits act as a short term loan to meet
urgent needs. Bank charges a high-interest rate along with the charges for
overdraft facility in order to maintain a reserve for unknown demands for the
overdraft.

4. Recurring Deposits: A certain sum of money is deposited in the bank at a

regular interval. Money can be withdrawn only after the expiry of a certain
period. A higher rate of interest is paid on recurring deposits as it provides a
benefit of compounded rate of interest and enables depositors to collect a big sum
of money. This type of account is operated by salaried persons and petty traders.

2. Granting of Loans & Advances

The deposits accepted from the public are utilized by the banks to advance loans to the
businesses and individuals to meet their uncertainties. Bank charges a higher rate of
interest on loans and advances than what it pays on deposits. The difference between the
lending interest rate and interest rate for deposits is bank profit.

Bank offers the following types of Loans and Advances:

1. Bank Overdraft: This facility is for current account holders. It allows holders to
withdraw money anytime more than available in bank balance but up to the
provided limit. An overdraft facility is granted against collateral security. The
interest for overdraft is paid only on the borrowed amount for the period for
which the loan is taken.
2. Cash Credits: a short term loan facility up to a specific limit fixed in advance.
Banks allow the customer to take a loan against a mortgage of certain property
(tangible assets and / guarantees). Cash credit is given to any type of account
holders and also to those who do not have an account with a bank. Interest is
charged on the amount withdrawn in excess of the limit. Through cash credit, a
larger amount of loan is sanctioned than that of overdraft for a longer period.

3. Loans: Banks lend money to the customer for short term or medium periods of
say 1 to 5 years against tangible assets. Nowadays, banks do lend money for the
long term. The borrower repays the money either in a lump-sum amount or in the
form of installments spread over a pre-decided time period. Bank charges interest
on the actual amount of loan sanctioned, whether withdrawn or not. The interest
rate is lower than overdrafts and cash credits facilities.

4. Discounting the Bill of Exchange: It is a type of short term loan, where the
seller discounts the bill from the bank for some fees. The bank advances money
by discounting or purchasing the bills of exchange. It pays the bill amount to the
drawer(seller) on behalf of the drawee (buyer) by deducting usual discount
charges. On maturity, the bank presents the bill to the drawee or acceptor to
collect the bill amount.

2. Secondary Functions of Bank

Like Primary Functions of Bank, the secondary functions are also classified into two
parts:

1. Agency functions
 2. Utility Functions

1. Agency Functions of Bank

Banks are the agents for their customers; hence it has to perform various agency
functions as mentioned below:

 Transfer of Funds: Transferring of funds from one branch/place to another. 

 Periodic Collections: Collecting dividend, salary, pension, and similar periodic

collections on the clients’ behalf. 

 Periodic Payments: Making periodic payments of rents, electricity bills, etc on

behalf of the client.

 Collection of Cheques: Like collecting money from the bills of exchanges, the
bank collects the money of the cheques through the clearing section of its
customers.

 Portfolio Management: Banks manage the portfolio of their clients. It

undertakes the activity to purchase and sell the shares and debentures of the
clients and debits or credits the account.

 Other Agency Functions: Under this bank act as a representative of its clients
for other institutions. It acts as an executor, trustee, administrators, advisers, etc.
of the client.

2. Utility Functions of Bank

 Issuing letters of credit, traveler’s cheque, etc.

 Undertaking safe custody of valuables, important documents, and securities by

providing safe deposit vaults or lockers.

 Providing customers with facilities of foreign exchange dealings

 Underwriting of shares and debentures

 Dealing in foreign exchanges

 Social Welfare programmers

 Project reports
  Standing guarantee on behalf of its customers, etc.

1.3 What Are Financial Statements?

Financial statements are written records that convey the business activities and the
financial performance of a company. Financial statements are often audited by
government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing,
or investing purposes. Financial statements include:

 Balance sheet
 Income statement

 Cash flow statement

KEY TAKEAWAYS
 Financial statements are written records that convey the business activities and
the financial performance of a company.
 The balance sheet provides an overview of assets, liabilities, and stockholders'
equity as a snapshot in time.

 The income statement primarily focuses on a company’s revenues and expenses

during a particular period. Once expenses are subtracted from revenues, the
statement produces a company's profit figure called net income.

 The cash flow statement (CFS) measures how well a company generates cash
to pay its debt obligations, fund its operating expenses, and fund investments.

Types of financial statements

 Income statement . This report reveals the financial performance of an

organization for the entire reporting period . It begins with sales , and then
subtracts out all expenses incurred during the period to arrive at a net profit or
loss. An earnings per share figure may also be added if the financial
statements are being issued by a publicly-held company . This is usually
 considered the most important financial statement, since it describes
performance.

 Balance sheet . This report shows the financial position of a business as of the
report date (so it covers a specific point in time). The information is
aggregated into the general classifications of assets , liabilities , and equity .
Line items within the asset and liability classification are presented in their
order of liquidity , so that the most liquid items are stated first. This is a key
document, and so is included in most issuances of the financial statements.

Understanding Balance Sheets

The balance sheet provides an overview of a company's assets, liabilities, and
stockholders' equity as a snapshot in time. The date at the top of the balance sheet tells
you when the snapshot was taken, which is generally the end of the fiscal year.

The Balance Sheet Formula

Assets=(\text{Liabilities}+\text{Owner'sEquity})Assets=(Liabilities+Owner’s Equit)

 Statement of cash flows . This report reveals the cash inflows and outflows
experienced by an organization during the reporting period. These cash flows
are broken down into three classifications, which are operating activities ,
investing activities , and financing activities . This document can be difficult to
assemble, and so is more commonly issued only to outside parties.

1.4 RATIO ANALYSIS OF OF BANKING SECTOR

Ratio analysis can be defined as the process of ascertaining the financial ratios that are
used for indicating the ongoing financial performance of a company using few types of
ratios such as liquidity, profitability, activity, debt, market, solvency, efficiency, and
coverage ratios and few examples of such ratios are return on equity, current ratio, quick
ratio, dividend payout ratio, debt-equity ratio, and so on.

Ratio analysis is a process used for the calculation of financial ratios or in other words,
for the purpose of evaluating the financial wellbeing of a company. The values used for
the calculation of financial ratios of a company are extracted from the financial
statements of that same company.

Types of Ratio Analysis

Types of ratios are given below:

1. Liquidity Ratios

This type of ratio helps in measuring the ability of a company to take care of its short-
term debt obligations. A higher liquidity ratio represents that the company is highly rich
in cash.

The types of liquidity ratios are: –

1. Current Ratio: The current ratio is the ratio between the current assets and current
liabilities of a company. The current ratio is used to indicate the liquidity of an
organization in being able to meet its debt obligations in the upcoming twelve months. A
higher current ratio will indicate that the organization is highly capable of repaying its
short-term debt obligations.

Current Ratio = Current Assets / Current Liabilities

2. Quick Ratio: The quick ratio is used to ascertain information pertaining to the

capability of a company in paying off its current liabilities on an immediate basis.

The formula used for the calculation of a quick ratio is-

Quick Ratio = (Cash and Cash Equivalents + Marketable Securities + Accounts

Receivables) / Current Liabilities
2. Profitability Ratios

This type of ratio helps in measuring the ability of a company in earning sufficient
profits.

The types of profitability ratios are: –

1. Gross Profit Ratios: Gross profit ratios are calculated in order to represent the
operating profits of an organization after making necessary adjustments pertaining to the
COGS or cost of goods sold.
The formula used for the calculation of gross profit ratio is-

Gross Profit Ratio = (Gross Profit / Net Sales) * 100

2. Net Profit Ratio: Net profit ratios are calculated in order to determine the overall
profitability of an organization after reducing both cash and non-cash expenditures.

The formula used for the calculation of net profit ratio is-

Net Profit Ratio = (Net Profit / Net Sales) * 100

3. Operating Profit Ratio: Operating profit ratio is used to determine the soundness of
an organization and its financial ability to repay all the short term and long term debt
obligations.

The formula used for the calculation of operating profit ratio is-

Operating Profit Ratio = (Earnings Before Interest and Taxes / Net Sales) * 100
4. Return on Capital Employed (ROCE): Return on capital employed is used to
determine the profitability of an organization with respect to the capital that is invested in
the business.

The formula used for the calculation of ROCE is:

ROCE = Earnings Before Interest and Taxes / Capital Employed

3. Solvency Ratios

Solvency ratios can be defined as a type of ratio that is used to evaluate whether a
company is solvent and well capable of paying off its debt obligations or not.

The types of solvency ratios are: –

1. Debt Equity Ratio: The debt-equity ratio can be defined as a ratio between total debt
and shareholders fund. The debt-equity ratio is used to calculate the leverage of an
organization. An ideal debt-equity ratio for an organization is 2:1.

The formula for debt-equity ratio is-

Debt Equity Ratio = Total Debts / Shareholders Fund

2. Interest Coverage Ratio: The interest coverage ratio is used to determine the
solvency of an organization in the nearing time as well as how many times the profits
earned by that very organization were capable of absorbing its interest-related expenses.

The formula used for the calculation of interest coverage ratio is-

Interest Coverage Ratio = Earnings Before Interest and Taxes / Interest Expense
4. Turnover Ratios

Turnover ratios are used to determine how efficiently the financial assets and liabilities of
an organization have been used for the purpose of generating revenues.

The types of turnover ratios are: –

1. Fixed Assets Turnover Ratios: Fixed assets turnover ratio is used to determine the
efficiency of an organization in utilizing its fixed assets for the purpose of generating
revenues.

The formula used for the determination of fixed assets turnover ratio is-

Fixed Assets Turnover Ratio = Net Sales / Average Fixed Assets

2. Inventory Turnover Ratio: Inventory turnover ratio is used to determine the speed of
a company in converting its inventories into sales.

The formula used for calculating inventory turnover ratio is-

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventories

3. Receivable Turnover Ratio: Receivable turnover ratio is used to determine the
efficiency of an organization in collecting or realizing its account receivables.

The formula used for calculating the receivable turnover ratio is-

Receivables Turnover Ratio = Net Credit Sales / Average Receivables

5. Earnings Ratios

Earnings ratio is used for the purpose of determining the returns that an organization
generates for its investors.
The types of earnings ratios are: –

1. Profit Earnings Ratio: P/E ratio indicates the profit earning capacity of the company.

The formula used for the calculation of profit earnings ratio is:

Profit Earnings Ratio = Market Price per Share / Earnings per Share
2. Earnings per Share (EPS): EPS signifies the earnings of an equity holder based on
each share.

The formula used for EPS is:

EPS = (Net Income – Preferred Dividends) / (Weighted Average of Outstanding

Shares)

1.4 History of ICICI Bank

ICICI Bank was established by the Industrial Credit and Investment Corporation of

India (ICICI), an Indian financial institution, as a wholly owned subsidiary in 1994
in Vadodara however the parent company was formed in 1955 as a joint-venture of
the World Bank, India's public-sector banks and public-sector insurance companies to
provide project financing to Indian industry.[13][14] The bank was founded as the Industrial
Credit and Investment Corporation of India Bank, before it changed its name to ICICI
Bank. The parent company was later merged with the bank. The Industrial Credit and
Investment Corporation of India (ICICI) was established on 5 January 1955 and Sir Arcot
Ramasamy Mudaliar was elected as the first Chairman of ICICI Ltd.

ICICI Bank launched Internet Banking operations in 1998.

ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of
shares in India in 1998, followed by an equity offering in the form of American
depositary receipts on the NYSE in 2000. ICICI Bank acquired the Bank of
Madura Limited in an all-stock deal in 2001 and sold additional stakes to institutional
investors during 2001–02.

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 a financial institution from non-Japan Asia to be listed on the NYSE.

ICICI, ICICI Bank, and ICICI subsidiaries ICICI Personal Financial Services Limited
and ICICI Capital Services Limited merged in a reverse merger in 2002.

During the financial crisis of 2007–2008, customers rushed to ICICI ATMs and branches
in some locations due to rumors of bank failure. The Reserve Bank of India issued a
clarification on the financial strength of ICICI Bank to dispel the rumours.

In March 2020, the board of ICICI Bank Ltd. approved an investment of Rs 1,000 crore
in Yes Bank, resulting in a 5% ownership interest in Yes.

1. Role in Indian financial infrastructure

ICICI bank has contributed to the setting up of a number of Indian institutions to

establish financial infrastructure in the country over the years:

 The National Stock Exchange was promoted by India's leading financial

institutions (including ICICI Ltd.) in 1992 on behalf of the Government of India
with the objective of establishing a nationwide trading facility for equities, debt
instruments and hybrids, by ensuring equal access to investors all over the
country through an appropriate communication network.
 In 1987, ICICI Ltd along with UTI set up CRISIL as India's first
professional credit rating agency.
 NCDEX (National Commodities and Derivatives EXchange) was set up in 2003,
by ICICI Bank Ltd, LIC, NABARD, NSE, Canara Bank, CRISIL, Goldman
Sachs, Indian Farmers Fertiliser Cooperative Limited (IFFCO) and Punjab
National Bank.

 ICICI Bank facilitated the setting up of "FINO Cross Link to Case Link Study" in
2006, as a company that would provide technology solutions and services to reach
the underserved and underbanked population of the country. Using technologies
like smart cards, biometrics and a basket of support services, FINO enables
financial institutions to conceptualise, develop and operationalise projects to
support sector initiatives in microfinance and livelihoods.

 Entrepreneurship Development Institute of India (EDII), was set up in 1983, by

the erstwhile apex financial institutions like IDBI, ICICI, IFCI and SBI with the
support of the Government of Gujarat as a national resource organisation
committed to entrepreneurship development, education, training and research.

 Eastern Development Finance Corporation (NEDFI) was promoted by national

level financial institutions like ICICI Ltd in 1995 at Guwahati, Assam for the
development of industries, infrastructure, animal husbandry, agri-horticulture
plantation, medicinal plants, sericulture, aquaculture, poultry and dairy in the
North Eastern states of India.

 Following the enactment of the Securitisation Act in 2002, ICICI Bank, together
with other institutions, set up Asset Reconstruction Company India Limited
(ARCIL) in 2003. ARCIL was established to acquire non-performing assets
(NPAs) from financial institutions and banks with a view to enhance the
management of these assets and help in the maximisation of recovery.

 ICICI Bank has helped in setting up Credit Information Bureau of India

Limited (CIBIL), India's first national credit bureau in 2000. CIBIL provides a
repository of information (which contains the credit history of commercial and
consumer borrowers) to its members in the form of credit information reports.
 2. MISION AND VISION

VISION

The official vision statement of ICICI Bank is: “To be the leading provider of financial
services in India and a major global bank.” The mission statement of ICICI Bank consists
of several points, but the first is to become the first choice among customers by providing
world-class services.

MISSION

ICICI Bank is an Indian multinational banking service that was established in 1994.
Other points of its mission statement include expanding its business on a global scale,
playing a significant role in realizing India’s economic potential, positively contributing
to the markets in which it operates, and maintaining a high level of governance and
ethics.

3. SWOT ANALYSIS OF ICICI BANK

Strengths in the SWOT Analysis of ICICI Bank

 India’s Second Largest Bank and First Largest Private Sector Bank.
 ICICI Bank is the second-biggest bank in terms of overall assets and market
share.
 ICICI Bank has a Revenue of Rs. 67803 Crores (US 9.5 Billion).
 ICICI Bank has 84922 Employees.
 ICICI’s total assets are Rs. 4062.34 billion and reported a cumulative after-tax
income of Rs. 51.51 billion, in 19 countries.
 According to financial analysts, one of the major strengths of ICICI bank is its
solid and consistent balance sheet and financial statements.
 In many banking and financial services, ICICI bank has first-mover advantage.
ICICI Bank is India’s first bank to launch full mobile banking and jewelry card
solutions.
 The bank has about 2,567 branches and 8003 ATM’s in PAN India.
 ICICI Bank is India’s first bank to connect life-style benefits to banking services
for exclusive transactions and tie-ups with industry-leading brands. ICICI Bank
 has the longest operating hours and additional facilities available at ATMs
attracting customers.
 ICICI’s marketing and advertisement campaigns are of decent scope compared to
other Indian banks.
 ICICI Bank Services are good.
 ICICI Bank is maintaining good Customer Relations.
 Employees of ICICI Bank show more courtesy.

Weaknesses in the SWOT Analysis of ICICI Bank

 Customer service for the ICICI segment is not doing well when it comes to
complaining resolution.
 Customer disputes against ICICI are high.
 The ICICI bank has the most strict debt and loan repayment programs, and
interest payments programs. They hire a third-party agency to handle the
management of recovery.
 Consumer attack and harassment issues often arise while recovery and credit
payment notices are sent well before the deadlines that bother the customers.
 The charges for the banking operation are comparatively growing.
 ICICI employees are a bank in the utmost stress due to the management’s
aggressive policies to win ahead in the race. In future years this can result in
lower productivity.

Opportunities in the SWOT Analysis of ICICI Bank

 In the next three years, Banking Sector growth is projected to rise at a rate of 17
percent.
 In rural areas, the idea of saving in banks and investing in financial products is
growing, as more than 62 percent of India’s population is still in rural areas.
 ICICI Bank plans to open 1500 new branches over the next four years.
 Because of its financial resources, ICICI will buy small and non-performing
banks.
 ICICI bank is expected to have a credit growth of 20 percent in the coming years.
 ICICI bank retains the minimum sum of unrealized assets.
 Threats in the SWOT Analysis of ICICI Bank
 RBI allowed foreign banks to invest in Indian banking up to 74 percent.
 Banks in the government sector are pushing to modernize the capacity to reduce
customers moving to new age banks.
 HDFC is ICICI’s biggest rival, and other emerging banks such as AXIS, HSBC
place a significant threat.
 NBFC and Mobile Payment Wallets are also emerging and become competitors
of ICICI Bank.
 The micro-financing groups have a large share in rural areas.
 Though the acquisition of customers is high on one hand, the unsatisfied
customers are rising and making them turn to other banks.
 Emerging Technology is also a major threat to the Banks.
 Crypto currency is also a threat to banks.

1.5 History of IDBI bank

1.1 Overview of development banking in India

Development Banking emerged after the Second World War and the Great Depression in

the 1930s. The demand for reconstruction funds for the affected nations compelled in
setting up of national institutions for reconstruction. At the time of Independence in
1947, India had a fairly developed banking system. The adoption of bank dominated
financial development strategy was aimed at meeting the sectoral credit needs,
particularly of agriculture and industry. Towards this end, the Reserve Bank concentrated
on regulating and developing mechanisms for institution building. The commercial
banking network was expanded to cater to the requirements of general banking and for
meeting the short-term working capital requirements of industry and agriculture.
Specialized Development Financial Institutions (DFIs) such as the
IDBI, NABARD, NHB and SIDBI were set up to meet the long-term financing
requirements of industry and agriculture.

1.2 Formation of Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was established in 1964 under an Act
of Parliament as a wholly-owned subsidiary of the Reserve Bank of India. In 1976, the
ownership of IDBI was transferred to the government of India and it was made the
principal financial institution for coordinating the activities of institutions engaged in
financing, promoting and developing industry in India. IDBI provided financial
assistance, both in rupee and foreign currencies, for green-field projects and also for
expansion, modernization, and diversification purposes. In the wake of financial sector
reforms unveiled by the government since 1992, IDBI also provided indirect financial
assistance by way of refinancing of loans extended by State-level financial institutions
and banks and by way of rediscounting of bills of exchange arising out of the sale of
indigenous machinery on deferred payment terms.

After the public issue of IDBI in July 1995, the government shareholding in the bank
came down from 100% to 75%.

IDBI played a pioneering role, particularly in the pre-reform era (1964–91), in catalyzing
broad-based industrial development in India in keeping with its Government-ordained

Some of the institutions built with the support of IDBI are the Securities and Exchange
Board of India (SEBI), National Stock Exchange of India (NSE), the National Securities
Depository Limited (NSDL), the Stock Holding Corporation of India Limited (SHCIL),
the Credit Analysis & Research Ltd, the Exim Bank (India), the Small Industries
Development Bank of India (SIDBI) and the Entrepreneurship Development Institute of
India.

1.3 Conversion of IDBI into a commercial bank

A committee formed by RBI recommended the development financial institution (IDBI)
to diversify its activity and harmonize the role of development financing and banking
activities by getting away from the conventional distinction between commercial banking
and developmental banking. To keep up with reforms in financial sector, IDBI reshaped
its role from a development finance institution to a commercial institution. With
the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI
attained the status of a limited company viz., IDBI Ltd.

Subsequently, in September 2004, the Reserve Bank of India incorporated IDBI as a

'scheduled bank' under the RBI Act, 1934. Consequently, IDBI formally entered the
portals of banking business as IDBI Ltd. from 1 October 2004. The commercial banking
arm, IDBI Bank, was merged into IDBI in 2005.

1.4 Direct government intervention

The merger was expected to streamline operations of the bank. However, IDBI continued
to base its policy towards industrial sector like the erstwhile IDBI entity did. This
resulted in the retail business of the bank to be limited to 13 percent of its total business.
As of March 2018, the total Non Performing Assets (NPA) rose
to 55,588 crore (equivalent to 630 billion or US$8.4 billion in 2020) and were about 28
percent of its total loans. This was the highest among Indian banks. The government of
India intervened, with Life Insurance Corporation bailing out the bank with an infusion
of 9,300 crores.

On 29 June 2018, LIC got a technical go-ahead from the Insurance Regulatory and
Development Authority of India (IRDAI) to increase stake in IDBI Bank up to 51%. LIC
completed the acquisition of 51% controlling stake on 21 January 2019, with a total
investment of 21,624 crores.

2. MISION AND VISION

Vision
To be the most preferred and trusted bank enhancing value for all stakeholders.

Mission
Delighting customers with there excellent service and comprehensive suite of best-in-
class financial solutions;
Touching more people's lives with there expanding retail footprint while maintaining our
excellence on corporate and infrastructure financing Continuing to act in an ethical,
transparent and responsible manner, becoming the role model for corporate governance;
Deploying world class technology, systems and processes to improve business efficiency
and exceed customers expectations;
Encouraging a positive, dynamic and performance-driven work culture to nurture
employees grow them and build a passionate and committed work force;
Expanding global presence;
Relentlessly striving to become a greener bank.

3. SWOT ANALYSIS OF IDBI BANK

Strengths in the SWOT analysis of IDBI bank

 The banks major strength is it involves latest cutting edge technologies to support

its core banking operations
 The bank has network of 943 branches and 1529 ATMs

 The total turnover of the bank is 3,37,584 crores in the last FY 2010-11, and
earned a net profit of Rs.1650 cr.

 The bank has grown at a rate of 60% compared to previous year

 IDBI has the first mover advantage in opening ‘G-sec portal’. This is a platform
for the retail investors to invest in government securities

 IDBI is one of the largest commercial banks in India which focuses on industrial
infrastructure and development

 IDBI’s product portfolio includes 14 broad classifications, and there are some sub

categories in each. The bank has customized solution faculties for its industrial
clients

 The location of its head quarters in Mumbai fosters the growth of the bank

 IDBI’s subsidiaries are into capital market services, IT services, asset

management and life insurance

Weaknesses in the SWOT analysis of IDBI bank

 IDBI has less penetration into the rural market

  IDBI has very less number of branches and ATM network compared to other
major players

 It concentrates mainly on commercial banking services whereas

the individual banking services is where the main revenue lies.

 The customer help desk is not performing efficiently and there are many
unresolved issues of customers

 The bank has lots of consumer complaints with respect to servicing charges

 The bank lacks in promotional activities

Opportunities in the SWOT analysis of IDBI bank

 Scope for bagging government schemes are high as IDBI belongs to public sector
 Global opportunities for IDBI are the rise as the management is keenly focusing
on global expansion in next few years

 They have a good number of financial expertise to face the emerging industrial
and economic growth in India

 It is the only bank in public sector which has enabled social media plug-in in its
website. This has increased the brand awareness and better reach to its customers

 The bank has good opportunities in semi-urban and Tire II cities areas as the
industrial growth is taking very rapidly

Threats in the SWOT analysis of IDBI bank

 IDBI faces tough competition in terms of new market development due to

competition from both government and private banks
 FDI in Indian banking has been opened up to 74% by the RBI

 In private banking HDFC, ICICI and in public sector SBI, Punjab National Bank,

Andhra bank and Allahabad bank are the major competitors

 The bank has to focus on improving the customer satisfaction in order to sustain

the loyal customers
  Recent scams and fraudulent activities of bank have gained mistrust from its
customers and investors

2. RESEARCH METHODOLOGY

Research may be very broadly defined as systematic gathering of data and information
and its analysis for advancement of knowledge in any subject. Research attempts to find
answer intellectual and practical questions through application of systematic methods.
Webster’s Collegiate Dictionary defines research as "studious inquiry or examination;
esp: investigation or experimentation aimed at the discovery and interpretation of facts,
revision of accepted theories or laws in the light of new facts, or practical application of
such new or revised theories or laws".

Some people consider research as a movement, a movement from the known to the
unknown. It is actually a voyage of discovery. We all possess the vital instinct of
inquisitiveness for, when the unknown confronts us, we wonder and our inquisitiveness
makes us probe and attain full and fuller understanding of the unknown. This
inquisitiveness is the mother of all knowledge and the method, which man employs for
obtaining the knowledge of whatever the unknown, can be termed as research.

Research is an academic activity and as such the term should be used in a technical sense.
According to Clifford Woody research comprises defining and redefining problems,
formulating hypothesis or suggested solutions; collecting, organizing and evaluating
data; making deductions and reaching conclusions; and at last carefully testing the
conclusions to determine whether they fit the formulating hypothesis. D. Steiner and M.
Stephenson in the Encyclopedia of Social Sciences define research as “the manipulation
of things, concepts or symbols for the purpose of generalizing to extend, correct or verify
knowledge, whether that knowledge aids in construction of theory or in the practice of an
art.”

Research is, thus, an original contribution to the existing stock of knowledge making for
its advancement. It is the pursuit of truth with the help of study, observation, comparison
and experiment. In short, the search for knowledge through objective and systematic
method of finding solution to a problem is research. The systematic approach concerning
generalization and the formulation of a theory is also research. As such the term
‘research’ refers to the systematic method consisting of enunciating the problem,
formulating a hypothesis, collecting the facts or data, analyzing the facts and reaching
certain conclusions either in the form of solutions(s) towards the concerned problem or in
certain generalizations for some theoretical formulation.

2.1 Objectives Of Research:

The purpose of research is to discover answers to questions through the application of

scientific procedures. The main aim of research is to find out the truth which is hidden
and which has not been discovered as yet. Though each research study has its own
specific purpose, we may think of research objectives as falling into a number of
following broad groupings:

 To compare the financial statement performance of IDBI bank and ICICI bank

 To study SWOT analysis of ICICI bank and IDBI bank

 To know the current and the future prospective of these banks.

 To provide recommendations and suggestion to these banks

 To study financial performance of these 2 banks selected for the purpose of study

 To compare the ICICI bank and IDBI banks in terms to understand the
profitability and managerial efficiency.

 To understand the clear idea of growth of ICICI bank and IDBI bank.

 To determine the liquidity and solvency position of these banks.

 To suggest them various changes in their information, services, etc. For

improving them.

 To find out which bank are performed better during current period and last 5
years.

 . To test a hypothesis of a causal relationship between variables

2.1 Limitations:

Limitations in research are restrictions and constraints which have been put on your
methodology of study and exploration process in general. Unfortunately, many
researchers don’t work with restraints and ignore them. They do so because they feel like
if they do actually determine some of the limitations, their work will not be valued as
much. Limitations depend on the different types of research design. Of course, this is not
the true cause. Every study should have its limits. If you want your work to be accurate,
the research limitations section should be a must-have for your study. [Original source:
https://pro-academic-writers.com/blog/limitations-in-research]

 To compare the performance of ICICI and IDBI bans with relates to Credit
Deposit Ratio.

 To compare the performance of ICICI and IDBI bans with relates to Investment
Deposit Ratio.

 To compare the performance of ICICI and IDBI bans with relates to Spread as
% of Assets

 The study is based on the secondary data and the limitation of using secondary
data may affect the results.

 Comparison is restricted to the ICICI Bank, and IDBI Bank only

 The secondary data was taken from the annual reports of the ICICI Bank, and
IDBI Bank. It may be possible that the data shown in the annual reports may be
window dressed which does not shown the actual position of the banks.

 The study was limited to only five year financial data

 There is no set industry standard for comparison so the comparison is done

between company’s 5 years calculated ratios.

 Errors while making calculating are likely to creep in.

 Some ratios could not be calculated as some amounts were not clearly shown in
the annual reports.

 Ratios analysis is subject to the limitations of according methods, different

accounting choices may result in different ratio values.

2.2 Hypothesis

Hypothesis is a predictive statement that relates independent variable to a dependent

variable and this is open to testing. This hypothesis is then proved or disproved by using
the information from the sample. The hypotheses formulated for testing are as follows:-
1) H0=There would be no significant difference in Credit Deposit Ratio of ICICI & IDBI
Banks.

H1= There would be significant difference in Credit Deposit Ratio of ICICI & IDBI
Banks.

2) H0=There would be no significant difference in Investment Deposit Ratio of ICICI &

IDBI Banks.

H1= There would be significant difference in Investment Deposit Ratio of ICICI & IDBI
Banks.

3) H0=There would be no significant difference in Spread as % of Assets of ICICI &

IDBI Banks.

H1= There would be significant difference in Spread as % of Assets of ICICI & IDBI
Banks.

2.3 Data collection method :

Secondary data means that are already available. i.e. the data which is already been
collected and analyzed by someone else. The researcher uses the secondary data for the
further study or research.

Secondary data analysis refers to the analysis of existing data collected by others.
Secondary analysis affords researchers the opportunity to investigate research questions
using large scale datasets that are often inclusive of underrepresented groups, while
saving time and resources.

Hera the data collected is secondary data from various sources like annual reports of
Industrial credit Investment Corporation of India (ICICI), and Industrial Development
Bank of India (IDBI), articles are related websites and financial literature. The data used
is Industrial credit Investments Corporation of India (ICICI), and Industrial Development
Bank of India (IDBI) balance sheet and income and expenditure account, annual reports,
and other details from official website. The study is based on secondary data that has
been collected from annual reports of the respective banks. The study covers the period
of 5 years.

2.4 Tools and Techniques:

1) Accounting Tool:

 Credit Deposit Ratio,

 Investment Deposit Ratio

2.5 IMPORTANCE OF THE STUDY

1. It finds out the gaps existing in IDBI bank and ICICI bank.

2. It can give ideas to banks regarding the gaps existing in different areas and
where they have to concentrate.

3. It will help the banks to identify their position in service performance vis-à-vis
competitors.

4. It will be able to identify whether there is difference in service quality

formulation and implementation between IDBI bank and ICICI bank.

2.6 Sample size

The sample size covers two important banks that are industrial development bank
of India and Industrial Credit Investment Corporation of India

It covers 12 ratios of Industrial Development Bank of India (IDBI) and Industrial

Credit Investment Corporation Of India (ICICI) for analysis and interpretation.

It has covers all different ratios related to balance sheet, Income statement and
cash flow statement

Here research has been done on the basis of 2 banks are ICICI bank and IDBI
bank to analysis of their ration and comparative study of IDBI banks and ICICI
bank.