Indian Banking Case Study

CHAPTER 3

HISTORY AND DEVELOPMENT OF INDIAN BANKING INDUSTRY

BANKING BUSINESS

Indian Banking has come from a long way from being a tired business organization to a highly positive and active body. This alteration has been brought by the liberalization and economic reforms that allowed Banks to discover new business opportunities. Banking in India has evolved through five distinct phases. Each phase could be separated from the other by a landmark development in the area of Banking Sector.

Before Independence

India had centuries old tradition of native Banking. There existed many evidences showing that the idea of Banking was not new to India. As Chanakya’s Arthashashtra “about 3000 B.C. showed facts that Banking was already there in powerful

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. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by