Banking Sector Overview


Banking is a Very Good business if you don’t do anything dumb – Warren Buffett

A Bank is a financial institution which accepts Deposits and lend the money.

Bank plays very important role in financial system as it is critical to decide the cost of fund. Recently I was reading a report about how giving permission to open bank account to Rural part or any other part of economy, developers and helping whole economy.

I don’t know weather it is right or wrong, but I feel that For running the Bank, you need Right man at right time and right place. You may find many examples in industry itself. From Deepak Parekh, P J Nayak to Shikha Sharma, Uday KOTAK. It is the management who decided the future by its decision. It is the management or the employees who are working in the Bank is biggest asset for many banks.

Banking industry is different from other industries. No other industries come into directly contact with general public. Banking is the business where the Raw material and Final product is Same. Money. The assets in banking is far different from other businesses. No other business is as important as banking in Economy. That is why they called equivalent of economy. Many times the health of economy is analyse from health of Banking. As Banking is come into contact with general public and Industrial customer, it is important for Govt also. No other businesses hold this level of importance. Naturally it attracts highest amount of regulation.

Banking is a Good industry where you can earn money. But for that you need to do right things. The reason is Banking is not Manufacturing where you buy Raw material and process it and then manufacture something else. Banking is simply the process to earn money from the money you have. If you do it right, you are winner. The most important thing in this is pretty simple. Make successful Formula and  keep repeating it until you succeed. In the language of Saurabh Mukherjee, Ambit Capital, The word that is repeatedly mentioned in the context of HDFCBANK is execution. For Axis Bank, you may realize that it is Consumer satisfaction and Technology.

As India is emerging economy, the healthy banking is more and more important for Indian economy.

Running a bank is as difficult as analysing BANK and its Fundamentals. Many Small, Check and Uncheck, many small thing, Many parameters to check. But there is reason for that as Bank business come into contact with Public money which makes it important role player in Country’s economy. If handled by wrong person, you are inviting disaster. For running the Bank, Management and the way they run it is important. The parent Institution is also important for bank as it’s possible for them it’s possible to use brand name or develop one. If they are strong, the bank will eventually follow it.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me or @androidashu & @InsideFinanc on twitter