Portfolio analysis in the banking sector
However, this bank suffers from higher NPA percentage as compared to other banks.
The risk on returns is also very high because of high chances of bad debts. The results thus obtained are displayed below. The agribusiness banking sector has been declared as a priority sector and being a nationalised bank, SBI has to cater to this segment.
Portfolio management in banking sector
It is characterized by high default risk and political interference. It has a very extensive distribution network and has reach in remote areas also. It is recommended that they continue the trend. There are minimal entry barriers for this segment as the government itself promotes investment by this segment. This is a generally unattractive segment. However, this bank suffers from higher NPA percentage as compared to other banks. It is recommended that they focus on active management of resources in this segment. Since this sector has been declared as a priority sector by the Indian government, the banks are required to lend a minimum percentage of their total loans to this sector. This segment does not require setting up of a large number of branches and ATMs which reduces the fixed costs. For this, it is recommended that SBI consolidates its branches and increases productivity in order to increase the operating efficiency. The average deposit per customer being higher in corporate banking, the opportunity to differentiate is also higher. Profitability in this segment is a direct function of the number of branches and reach of the bank. This segment ranks best in terms of ease of entry.
The capital investment is very low as most of the communication is done directly with the customers and no branches and ATMs are required. The cost efficiency of this sector is high because of lower fixed costs in setting up distribution channels. The corporate banking sector is moderately high in market attractiveness, yet none of these banks is very strong in this sector.
This segment is characterized by huge expenditure in setting up distribution channels as compared to other banking segments. For this, it is recommended that SBI consolidates its branches and increases productivity in order to increase the operating efficiency.
It is characterized by high default risk and political interference. These banks can look forward to exiting from this business segment. This sector has maintained a good growth in the recent few years and the profitability is also high.
based on 115 review