SWOT Analysis of Banking Industry

The banking industry is one of the most dynamic industry because of the amount of money and transactions involved. Everyone needs loans and everyone wants to save money and increase it with interest as well. Without further ado, we present you

The SWOT analysis of Banking industry

Strengths in the SWOT analysis of Banking

• Banking is as old as Human race : Banking industry is the driving force to any nation. It helps in shaping the life of human race may be some time merely by Exchange (which was called barter system), or by transaction or by facilitating advances.
• Source of employment & GDP growth : There is a consensus among economists that development of the financial system contributes to economic growth. Financial development creates enabling conditions for growth through either a supply-leading (financial development spurs growth) or a demand-following. It is this industry which continuously works to secure financial stability, facilitate international trade, promote employment, & reduce poverty around the world.
• Hedge from risk : Whether it is natural calamity or man-made calamity banks mitigate the after effect of the destruction by providing financial support to the victims to stand –up & lead a peaceful life again.
• Diversified services: Banking industry offer services from CASA to insurance, to loan, to investment.
• Connecting People: With the advent of new age technological advancement Banks have made the life of the common man easier. People can transact on real time basis in many places.
• Changing from mere savings & loan facilitator role: Top priorities of banks now days include regulatory compliance, improving asset quality, enhancing customer centricity, focusing on digital convergence, and tackling competition from non-banks. Banks are therefore making business and technology investments to change their business models.

Weaknesses in the SWOT analysis of Banking

1. Lack Of coordination: The global banking industry faces short-term uncertainty due to the debt crises that challenge several major economies. Industry assets stand at $143 trillion (2013)&the EU is the largest regional market, with over 57% of the global market. Volatility in different market/Currencies has created problems for the banks in order to work properly across the borders.
2. Vulnerable to risk: Since this sector deals with finances, it is the most risky sector which can change the fate of any business/Industry.
3. High NPA’s: Rise in Retail & corporate NPA’s (Non-performing assets) is the single major issue this sector is going through worldwide.
4. Can’t reach to Under-penetrated market: Due to several conflicting objectives of government & banks which goes hand in hand, rural areas of developing nations are still not in the shadow of banks. Although PMJDY (PradhanMantri Jan DhanYojna) implemented by the Indian banks got acknowledged by World Bank for financial inclusion but the Idea is not fully capitalized even in the home country.
5. Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labor laws, weak corporate governance, Political pressure and ineffective regulations.

Opportunities in the SWOT analysis of Banking

1. Expansion: Penetrating to the rural markets & bringing the rural masses under the purview of organized banking will be the objective of the Banks in decades to come.
2. Changing Socio-cultural & demographic factors: Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.
3. Rise in private sector banking: Banking Industry across the world is highly regulated &lead by PSU’s with their respective central banks. With the advent of private sector banks this sector is going through structural & functional changes mainly due to the adaptation of the advanced technologies & increased competition thereby benefiting to the end customers.

Threats in the SWOT analysis of Banking

1. Recession: It is one of the major threats to the financial system of the nation. Traumatic shock of Economic crises & collapse of the several businesses can affect the banks and vice-versa.
2. Stability of the system: Failure of some weak banks has often threatened the stability of the system.
3. Competition: Competition from NBFC’s (Non-banking financial companies) like insurance companies & mutual fund companies can affect the business of Banks.

Here are some popular banks, the SWOT analysis of which is analysed on Marketing91.

• ICICI
• HDFC
• IDBI

Also read – The top banks in the world.

Liked this post? Check out the complete series on SWOT