Chapter

Banking Strategy

Hrishikes Bhattacharya

in Banking Strategy, Credit Appraisal, and Lending Decisions

Second edition

Published in print October 2011 | ISBN: 9780198074106
Published online September 2012 | e-ISBN: 9780199080861 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780198074106.003.0003
Banking Strategy

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This chapter begins with a description of financial sector reforms in India and their impact on banks and financial institutions. It then discusses changes in savings and investment behaviour, and the concepts of securitization, strategic planning, and capital planning. This is followed by the development of a mathematical model to establish relationships between profits, dividend payouts, and growth with a given capital adequacy norm. The model shows that the future growth of a bank ultimately depends on the return on assets (ROA). ROA, in turn, depends upon the quality of loan assets under the appropriate risk-return parameters and their funding operations. The case study of a real-life commercial bank in the public sector is presented to illustrate these banking strategies.

Keywords: India; banking regulation; financial sector reforms; off-balance sheet business; liquidity; securitization; capital planning; return on assets; cost allocation; risk component; asset allocation; cost of funds; operational plan

Chapter.  19850 words.  Illustrated.

Subjects: Financial Markets

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