Banking Industry in India

Citi Bank

Akshat Bansal PGPBL0203 Group# 1 Lavanya Kashyap PGPBL0210

Introduction

The banking industry in India has seen multiple transitions from post-Independence to the
current structure, marked by the end of the regime of Laissez-faire followed by the
nationalisation of the banks, liberalisation, and the ongoing consolidation of banks. As per the
IBEF report April 2021, total banking sector assets have increased to the US $2523.48 billion
from US$ 2363.37 billion. In India, the entry of private banks post-liberalisation was done to
open up the Indian economy, increase competition, and promote efficiency. Liberalisation
marked the issue of banking licenses which were stalled for many years. As time progressed,
foreign banks were allowed in the banking industry, and existing banks expanded to more
branches liberally to gain market share.

Foreign Banking in India

The banking system in India can be seen from the below perspectives:

1. Scheduled commercial banks

2. Co-operative credit institutions

Under the scheduled commercial banks, the classification is mentioned as below:

1. Public sector banks

2. Private sector banks
3. Foreign banks
4. Regional rural banks

A foreign bank is an International Bank headquartered in a different country but obligated to

follow the norms of both the home and the host countries. The foreign banks account for
roughly 6.5% of the banking industry’s assets, and there has not been much change in their
market share over the years. However, innovation in foreign banks is yet to be seen in the
Indian banking segment.

With the ease of FDI (Foreign Direct Investment) norms within the country, foreign banks
provide a base for connecting the Indian firms with the global clientele. At the same time,
foreign banks need to look for opportunities in the Indian business opportunities. One
successful initiative was the Suvidha Bank Account by Citi Bank in Bangalore, about
branchless banking.

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Citibank’s entry

Citibank pioneered its entry to the Indian market in 1902 in Kolkata and is a foreign investor
in its financial market. Citibank is a subsidiary of Citigroup, a multinational financial services
corporation headquartered in New York, US. The Indian headquarters is at Bandra Kurla
Complex, Mumbai, Maharashtra. Citigroup, the owner of Citi India, is one of the largest
foreign direct investors in financial services in the country. As of February 2021, Citibank
had the below portfolio:

 26.45 lakh credit cards

 6% of the country’s credit card market
 16.56 lakh outstanding debit cards
 Average spends per card 1.4 time higher than the industry average
 29 lakh retail customers and has three dozen branches in the country

Appendix A1 shows the essential deals and innovations of Citibank within the Indian market.

Appendix A2 depicts the business portfolio and segments of Citibank over the years.

Appendix A3 shows the key employees of Citibank.

Business Analysis

Management:

 Ashu Khullar : He is Chief Executive Officer, Citi Regional Head for South Asia and
India . Ashu is responsible for all of Citi's businesses in India and has oversight of
Bangladesh and Sri Lanka.
 Tushar Vikram (Head of Commercial Banking,Citibank India) : Tushar Vikram is
Head of Commercial Banking, Citibank India, with over 20 years of experience
 Sharad Mohan (Country Head - Retail Banking, Citibank India) : Sharad is
responsible for the Retail Banking Business that comprises all of Citi's client
segments across High Net worth, Affluent, Emerging Affluent, Salaried, Business and
Non Resident Indians; Distribution channels, including Branches and ATMs, and all
Wealth Management and transaction products including Investments, Insurance, and
Liabilities.

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Society At large:

 Citibank claims to be an institution connecting millions of people across

hundreds of countries and cities.
 Being a socially responsible company , Citibank provides loans to small
as well as large companies to help them grow , create jobs and real
economic value at home and in the community at large.
 They also strive to maintain public’s trust by constantly adhering to
highest ethical standards
 They believe that if they do thinks well it translates into positive financial
and social impact for the communities
 Citi believes in improving quality of their lives by protecting people’s
savings and advise people on investments

Stakeholder Engagement:

 Effective Stakeholder Management helps maintain stronger relationships

with people who are outside your control but have a major part in you
success.
 Citibank’s stakeholder include customers , investors , employees ,
vendors, suppliers , communities , regulators and Non governmental
organisation(NGOs)
 They organise group calls, meetings, investor conferences, Citi-hosted
group meetings for investors
 For employees Citibank takes customer satisfaction surveys , social
media including its customer service twitter handle , Citi blogs
 Method of engagement for employees is through performance reviews ,
community events , voice of employee surveys and then though in-person
meetings/mails

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  Also for suppliers, community leaders and Non governmental
Organisation In-person meetings , calls , emails , social media and events
are ways for stakeholder management

SWOT Analysis:

A. Strengths:
Citigroup supports Citibank operations, and so it has maintained a strong financial
position with the annual profits improving for the last two years. Over the years, Citi
Bank has tried and maintained a strong portfolio, and this helps in its sustained
business. Citi bank established Citi Innovation Labs to reinvent client experiences in
digital banking. It was one of the pioneers in credit cards back in 1986 when it
established in India. The quality of the workforce is highly skilled through training
and learning programs. The bank spends huge Human Capital to keep its workforce
motivated and top-notch. Citi group has always focused on keeping good relationships
with the customers. The value proposition of the bank is regularly communicated with
the customers and their concerned address efficiently. One way to acquire a vast
customer base is through its partnership with well-established retail brands.

B. Weaknesses
While investment in sustainability might be helpful, it further reduces the operating
profits in light of the pandemic. Citibank was the first to launch branchless banking
for its Suvidha Account holders (Salary Accounts) in Bangalore, but they could not
replicate the success in Bangalore to other metropolitan areas within the country. The
Indian banking customer has changed leaps and bounds from 2015 to 2020, from
looking for online banking to wealth management to instant payments and digital
payments. Though a pioneer in credit cards, Citibank was late to enter the digital
payments segment. Citibank only partnered with Samsung pay and did not support
Apple Pay and Google Pay, restricting the platform effects for Citibank. For instance,
UPI payments came to Citibank application only after a year after the launch of UPI.
C. Opportunities
There are emerging economies in Asian markets, and capturing the Asian market is an
opportunity to increase customer base significantly and profits. The revised strategy
of Citi Bank to focus on wealthy markets like Hong Kong, UAE, US and London for

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 corporate and institutional banking can provide a better value proposition for
Citibank. The Citibank credit card program within the country could be a value
proposition for the other banks to capture. The entry to the Indian digital customer
base is crucial for the success of banks within the country. The delayed entry of
Citibank to wealth management is a robust portfolio where a mark could be made in
terms of offerings provided.
D. Threats
The pandemic poses a critical challenge for the banking industry regarding the
adoption of technologies and offering a broader portfolio of services. The pandemic
has forced customers to choose banks offerings a more comprehensive portfolio of
offerings to ensure customer retention. The slow push and technology adoption has
been haunting Citibank in terms of Suvidha account or credit cards, being a market
leader in the credit cards to a market share of 6%, the inability of Citibank to capture
first movers advantage is a significant threat to the organisation. In addition, the late
entry to the mobile banking system and matured wealth management portfolios and
offerings are vital threats restricting the market share of Citibank offerings.

Table 1 shows the summary of the SWOT analysis.

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 Table:1 SWOT Analysis (Summary)

Strengths: Weaknesses:
 Strong Financial Position  High investment in sustainability
 Established Brand Portfolio  Unable to replicate successful offerings to a broader audience
 Innovation and a heavy focus on Digitalization  Inability to read the changing market dynamics in the banking
 Highly Skilled Workforce industry.
 Strong Customer Base with affluent customers  Shows complacence by not diversifying to upper middle class
 Partnered with retail brands customer portfolio after 2010

 First Introduced concept of relation managers

 Co branded cards with Paytm(Digital Banks)
Threats Opportunities
 Pandemic  Presence in Global economies and Asian markets
 Aggressive competitors  Revised strategy to focus on corporate markets
 Late entry to the mobile-based banking  Current credit card portfolio in exited markets
 Matured, tried and tested wealth management solutions  Entry to the Indian digital marketplace
available to the customers  Expansion and integration with the digital wallet industry
 Domestic players attracted Citibank’s customer segment by  Wealth Management
lucrative cashbacks and incentives  Leveraging the global clientele to serve as an investor of
choice for Indian firms

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 Strengths Weaknesses
Opportunities Co branded cards with Since they invest highly on
Paytm and other digital sustainability hence their
payments provider model will be more lucrative
option for corporate markets
as corporates look for long
term associations
Threats Co branded cards with Their target market of
Paytm will enable to bank affluent customers were
with Paytm’s digital bank being attracted by domestic
and would have proved a players and so they should
beneficial leap during the have diversified when
pandemic while digital Indian households started
payments increased becoming affluent due to
manifold economic growth

Ansoff analysis:

Throughout the years, Citibank was a pioneer in technological leadership. The two key
projects which drove Citibank were:

1. Credit cards
2. Suvidha Account (Branchless account opening)
3. Wealth Management

Appendix A2 demonstrates the various offerings of Citibank. However, one fundamental

weakness of Citibank was to retain and capture any of the market segments and become a
dominant player. In order to increase customer experience, Citibank in 2017 launched a new
mobile app for its customers to ensure a seamless user experience, and in 2018, it launched
the Wealth Management module in the mobile application. With the businesses divided under
two segments ICG (Institutional Clients Group) and GCB (Global Consumer Bank), the bank
had a more extensive portfolio than many of its competitors, and with the current market
being saturated, Citibank needs to opt for market development at the same time look to gain
technological leadership to drive new products. The ideal combination would be product
development and product development.
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Common Industry Characteristics

In order to understand the competitive forces that dictate the banking industry, we use Porters
five forces. The five forces include:

1. The threat of new entrants

2. Power of suppliers
3. Power of buyers
4. The threat of substitute products
5. Competition in the industry

Let us try to understand the above in detail.

A. The threat of new entrants

The current banking system has 34 commercial banks, 12 public sector and 22 private
sector banks. Assisting the firm investors are the foreign banks such as Citibank, DBS
bank giving access to the global clientele. As of March 2021, there are 46 foreign
banks in India. Considering the product offerings, they can be divided into three
segments:

 Core business
 Wealth Management
 Credit cards

The Indian banking industry since 2016 had another addition of payments bank
offerings targeting rural areas to have bank accounts where physical branches are hard
to reach. With strict i and increasing NPAs (Non-performing assets), the threat of new
entrants is lesser. A bank usually enters if it has a distinct value proposition such as
Bandhan bank; otherwise, with the consolidation of public sector banks, the threat of
new entrants is lesser. Also, with the customer perception towards the bank, the
customer prefers to keep their money in public sector banks or older banks compared
to new banks.

B. Power of buyers
The buyers do have the option to switch between banks, and many buyers have
multiple bank accounts to cater to different needs. For higher convenience and faster

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 approvals of loans, customers prefer private banks; however, price-sensitive
customers prefer public sector banks. Though the switching costs between the banks
is lesser in the industry, the due diligence and processes make it challenging to switch
between banks. However, with internet banking and e-KYC (online Know your
customer), it has become easier for customers to switch banks.
C. Power of suppliers
The power does not lie with the individual banks but rather with the regulatory body,
which restricts the amount of money in the Indian economy controlling the supply
side of the equation. The power shift also implies a significant burden on banks to
ensure consistent capital flows to ensure profitability.
D. The threat of substitute products
To the core banking solutions, there is no immediate threat to the offerings by the
traditional banks. Both the private and public sector banks offer similar services with
better customer experience from the private banks and a better trust factor from the
public sector banks owing to the government backing. However, for foreign banks,
the threat lies from the foreign banks, the local banks and other vendors offering
similar product portfolio. For instance, the wealth management of Citibank competes
with trading apps for market share along with the private sector bank. Foreign banks
compete for market share among the foreign banks, private and public sector banks
and thus have the only option of innovation to drive a higher value proposition than
other players. Also, with digital banks, the rural segment of the Indian demography is
not lucrative anymore owing to the lower ticket size, which ideally was to be
compensated with higher numbers. Even the credit card and lending space are
overcrowded; the once leading Citibank now has only a 6% market share in credit
card spaces in India.
The entry of digital payments and the high adoption rate among the youth posts even
a more significant challenge for banks to maintain a consistent market share in the
current scenario.
E. Competition in the industry
With the industry highly regulated by RBI, the competition in the industry is
relatively high, with similar offerings being provided by competitors. The only
difference between the offerings lies in the way in which offerings are being provided.
The service level is the primary differentiator in terms of value offerings, and thus the
competition is very high. The competition in the industry is also coming from the new
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 digital vendors such as DBS bank (foreign bank) and payments banks, which are
catering to different segments of the society with customised offerings for the
segment.

Strategic Groups

Strategic groups consist of similar operating models of organisations within the same
industry. For example, for the Indian banking industry, we can categorise the groups into the
below groups based on technological leadership and the number of products/offerings
available to the customer:

1. Private sector banks (HDFC, ICICI) [Low/Moderate technological leadership, many

product offerings]
2. Public sector banks (SBI, PNB) [Moderate technological leadership, Similar product
offerings]
3. Foreign banks (DBS, Citibank) [Moderate technological leadership, More product
offerings than public/private banks]
4. Payments banks (Paytm, Airtel Payments Bank) [Higher technological leadership,
Lesser product offerings as compared to traditional banks but more than aggregators]
5. Banking service aggregators (Google Pay, Apple Pay, Phonepe)

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Each of the above interacts in some manner, providing customer with a broader portfolio of
offerings to the end customer. The strategic groups are identified on the basis as below:

 A public sector bank usually has the primary strategy of increasing the banking
services within the country.
 A private sector bank with a core service of providing banking services at a low price
has profitability as a determining factor of its success.
 Foreign banks offer global banking services and expose Indian firms to foreign
investors to increase the reach within the country and are essential for FDIs within the
country.
 Payments banks strategy is critical to increasing user onboarding and using a platform
model to capitalise on the network effect. The main intention of introducing payments
bank was to ensure banking services to areas where branches cannot be set up but the
availability of the cellular network to ensure financial connectivity.
 Aggregators: The aggregator applications use the above services to give the customer
more personalised service and cater to tech-savvy users to increase convenience.

Regarding the above, we analyse the strategic groups based on:

1. Height of mobility barrier

Mobility barrier refers to the transition from one strategic group to another. For
example, for payments banks and banking service aggregators, the mobility barriers
are low. However, for the other groups, once a particular strategic group is identified,
it remains the same unless specific operating concerns are found in the banks.
2. Bargaining power with strategic groups and suppliers
The bargaining power with strategic groups and suppliers fluctuates based on RBI
guidelines. However, it is low for most of the situations because each of them
competes with each other for market share. With the underlying transaction charges
and customer adoption higher for public sector banks, they enjoy higher bargaining
power with the other strategic groups competing in the same segment.
3. Vulnerability of strategic groups concerning substitutes

Strategic Group Vulnerability Comments

Public sector banks Low Backed by the government and trust
factor from the customers
Private sector banks Low Usually used in conjunction with

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 public sector banks, owing to their
superior customer experience
Foreign banks Moderate Private and public sector banks can
substitute core banking, and
switching between the strategic
groups is relatively easy.
Payments Banks Moderate/High It can be easily substituted in urban
areas. In rural areas, these are the
only options available to the
customers
Aggregators High Can be easily replaced with
traditional banking solution
provided by public, private and
foreign banks. The cost of switch
and transition here is the forgone
convenience.

4. Exposure to rivalry
Within a strategic group, the rivalry is insignificant for public sector banks as the
services offered are similar on multiple levels. However, the intergroup rivalry is high
among the remaining groups as with each innovation, the market share has changed
dramatically, as evident with Citibank’s inability to replicate Suvidha Accounts
strategy to other metropolitan areas and declining credit card segment.

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 Fig. 1 Strategic Group Analysis
Fig.1 demonstrates the strategic group map based on technological leadership and
service based on product/offerings portfolio. The public and the private sector banks
have roughly the same technological leadership, but public sector banks have a higher
market share. On the map, SBI has roughly 24% of the market share. The foreign
banks have access to much better technology and thus have higher technological
leadership and even more product offerings based on the global clientele. On the map,
Citibank has a 6% market share. The following strategic group of payments banks and
aggregators have higher technological leadership but lesser product portfolio and a
lesser market share than the public, private and foreign banks.

Competitive Intelligence

The personality of the competitors

1. Future goals
The response of each of the strategic group differs based on the clients it is targeting.

Group Future goals

Public sector banks Accounting for 60% of banking assets, these are key for
governments implementation of banking schemes.
Reducing NPAs remains a primary focus for them
Private sector banks Usually offering similar services as public sector banks but

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 do not have higher technological leadership allowing them
to give a better customer experience. The experience could
be in terms of accessibility of services, fintech and tech-
driven solutions.
Payments banks The immediate concern for payments banks is to increase
the number of users in the application environment to cater
to the new age tech-savvy users by offering a more
expansive portfolio.
Aggregators The network effect plays a crucial role in the success of
aggregators providing multiple financial services which
can be integrated via third party apps to ensure a seamless
and hassle-free experience.

2. Current strategy
Since the threat of substitutes differs between strategic groups, the industry’s strategy
relies heavily on the external stimulus either by the RBI or the governmental policies.
One such change was the introduction of UPI by NPCI. Now, with other vendors
looking to enter the digital payments space, the UPI by NPCI would no longer remain
a monopoly and would give the bankers choices for which service provider to choose,
increasing their bargaining power to leverage economies of scale and scope.
3. Assumptions
The assumptions within the strategic groups need to be questioned to allow expansion
in other domains. The target segment of each group is predefined, and these have been
saturated to a large extent.
4. Capabilities
The competitor of Citibank can be any one of the strategic groups or someone close to
it, such as DBS bank. The closest competitor to Citibank would be private sector
banks and then public sector banks. Both of these have established customer base and
migration of customers is challenging. Technological innovation is a crucial element
in the current banking scenario. With the dynamic political, economic and social
constructs changing dynamically, the ability to adapt to changes is very high and
quick compared to those of foreign banks. However, the exit barriers remain high in
the industry as the current set of customers need to be migrated to some other bank.

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 Sr No Personality Trait Citigroup HSBC
1 Values 1.To responsibly 1. To be
provide financial Dependable and do
services that enable the right thing
growth and 2. To open to
economic progress different ideas and
2. To do cultures
responsible finance 3. To stay
3. To value connected to
our core businesses customers,
4.To value communities,
ethics and global regulators and each
citizenship other

2 Current Strategy Global Consumer core banking (retail

Banking and commercial
contributed 45% of banking) operations
Citigroup revenues
but have
diversified revenue
streams
Better operating
Citigroup is more margins than
efficient in using Citigroup and is
its assets and has more efficient
better Return on
Assets (RoA)
figure.

3 Strategic Locations Citigroup is HSBC is more

heavily dependent reliant on Asia &
on its operations in EMEA (Europe,
North America Middle East &
Africa)
4 Capabilities Citigroup is a HSBC IS one of the
leading global largest banking and
financial services financial services
holding company organizations in the
which does world with
business in over presence in 71
160 countries. countries

Market Signals and Trends

Some of the key trends in the banking industry in India are:

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  Digitisation (24X7 availability of NEFT, IMPS and RTGS)
 Mobile banking (Convenient banking at any time)
 Unified Payments Interface (UPI)
 Fintech companies (Offering technology solutions to banks/customers)
 Digital-only banks (Eg. DBS banks)
 AI/Block-chain
 Payments Banks

Due to the industry’s speed of changes, incumbents need to move towards digitisation and
enhance customer experience. The market signals apply more towards the industry as a
whole, the competition among the different strategic groups in terms of core banking services
is shallow, but private banks and foreign banks compete for market share by offering a
similar portfolio of services. The signals usually come in the form of changes or reforms
made by RBI based on the country’s economic prospects. Citibank has the largest balance
sheet size of Rs 2.18 lakh crores against its competitors HSBC Rs 2.11 lakh crore and
Standard Chartered Rs 1.94 lakh crore in 2019-20.

Strategic Choice Analysis:

Industry Evolution:

The primary peers of Citibank division in India are:

1. Axis Bank
2. DBS Bank
3. HDFC Bank

Citibank offers services in four segments:

1. Corporate banking
2. Retail banking
3. Treasury
4. Other Banking

Citibank in April 2021 announced its exit from India and many other regions in retail banking
owing to the lack of scale and focussing on wealth management business. Over the last two
years Citibank tried to leverage the technology and tie-ups with multiple organisations to
induce scale in its operations for retail banking. Some of the key launches were:

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  In October 2020, Citibank launched IKEA family credit card
 In May 2019, Citibank announced partnership with Paytm to launch India’s first
unlimited cashback credit card ‘Paytm First Card’
 In March 2018, launched Home Loan solutions linked to T-bills.

Appendix A4 shows the revenue growth for Citibank retail division in India.

The industry evolution from 2016 has been significant in terms of growth. The top four
performers have been:

 State Bank of India

 HDFC
 ICICI Bank
 Axis Bank

The reaction to market signals of the above banks has been positive and in the industry such
as India differentiated products play a huge role. Most of the offerings and product lines
offered have similar goals but the only way of differentiating for a bank could come up in
terms of lending rates and government projects. Overall, the industry since 2018 has been in
the consolidation stage with the increase in NPAs and is expected to continue to the
government model of a few state-run banks and other private banks. The below table
compares the banking infrastructure with the country’s top four banks and Citibank:

Sr. No Bank Branches ATMs

1. SBI 22,010 58,415
2. ICICI 4,874 14.987
3. HDFC >3,000 >11,000
4. Axis 4,594 11,333
5. Citibank 47 >700

The above highlights the scale concern in terms of retail banking for Citibank. In a country
where the touchpoint of a branch and bank is crucial for inviting customers, Citibank falls
short on the branches and ATM. However, until 2015 the bank was able to provide the
required services through its online channels. The overall transition of the industry happened
with the evolution of wealth management, introduction of UPI and demonetisation which
signified the need for increasing the touchpoints within the country through ATMs and
branches.

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The industry has been moving towards digital banking to convenience-based banking. There
have been new modes of addressing the banking penetration within the country with:

 Payments bank
 Small finance banks

With each of these creating a separate niche in the market and catering to the people the
competition in the industry remains high. As the industry evolves below are the Porter’s five
forces:

Sr. No Forces Nature

1. Buyer power Moderate
2. Supplier power Strong
3. Threat of new entrants Moderate
4. Threat of substitutes Low
5 Degree of rivalry Moderate

The above shapes the gains from the potential growth in the industry. Since, the supplier
power remains strong and threat of substitutes low the established entities in the market enjoy
above average returns and profits. The same has been the case with Citibank. It still boasts of
having the most profitable operations in the banking sector within the industry, however
despite the scale it cannot offer its differentiated products to a large market and withholding
government restrictions do not allow for easy market penetration.

Inflection Point

Appendix A1 shows the innovations from Citibank over the years. Using these we try to
explore the inflection points in the industry if any in the Indian banking industry. Some of the
key events from the innovations are:

 1993/1998/2001: First to offer 24 hours internet banking

 2009: Bringing contactless credit card payments using NFCs (Near Field
Communication)
 2013: Instant credit card issuance
 2015: Global wallet with MasterPass
 2016: Paytm wallet loading with Citi Internet Banking
 2019: Paytm first card
 2020: Ikea family credit card by Citi

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Appendix A5 shows the profits and percentage of profits of Citibank from 2008 till 2020.
Based on this appendix we create two plots:

 Identify the profit trends over the years

 Identify the percentage change in profits over the years

The below graph represents the profit trends of Citibank India from 2008 onwards. From the
below we focus on two points A and B.

Profit (Rs '000)

₹ 60,000,000.00

₹ 50,000,000.00

₹ 40,000,000.00

₹ 30,000,000.00

₹ 20,000,000.00

₹ 10,000,000.00

₹ 0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Fig.1 Citibank: Profit in absolute values since 2008

1. Point A: This point represents the launch of contactless credit cards payments in the
country using NFC technology. During this time in the first year the profits margin
shrunk in the first year but in the next five years and the launch of multiple credit card
programs Citibank was able to triple its profits from 2010 till 2015. In this period
from Appendix A1 it can also be seen the customer alignment of Citibank with
multiple customer centric measures and this translated into strong profits for the bank.
Point A represents an inflection point for the industry as during the recession, the
buyers propensity to spend reduced due to slowing economy. Thereby giving easy
credit to the customers Citibank was able to leverage and restore the spending
purchases of the middle-class Indian economy and thus contributing heavily to its
profit margins.
2. Point B: This point represents the change in the government regulations and focus on
the Indian banking system. Till 2015 the Indian banking system operated on the
model of public sector bank with a few private sector banks and foreign banks. But

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 after 2015, in order to bring-in financial inclusion, and handle the growing NPAs
within the banks below were critical changes:
o Consolidation of public sector banks
o Payments banks
o Business allowed to open banks
o Demonetisation and push for digital banking
o NPCI introduction of UPI
o NEFT/RTGS/IMPS 24 hours availability
o Rise of fintech companies
o Increase in governmental compliances for banks

With the number of changes in these sectors we could see the first response from Citibank
was in the year 2016 with the wallet launch with Paytm followed by 2017 and 2019. The
main target segment of Citibank was still credit card users and at point B the transition in the
retail banking was missed by Citibank. Though they tried to get back in the retail segment
offering wealth management and integrated services in 2019, the market dynamics had been
shifted towards payments banks. Their late entry to the digital offerings is one of the
inflection points missed by the company. This led to missing scale of operations in the retail
segment.

The Fig.2 shows the changes in percentage profits over the years from 2008.

Profitability
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-20.00%
-40.00%
-60.00%
-80.00%

Fig. 2 Percentage change in profits from 2008

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Citibank did capture the market from 2010 onwards but the profits are characterized by
continuous spikes. Though they were able to double the profits from 2010 to 2015 the year-
on-year change in profits were fluctuating. With the changes in the Indian banking industry
from 2015 no substantial increase in the profits was seen for Citibank and in April 2021
Citibank NA announced its exit from the Indian retail banking sector.

Industry Transition Analysis:

After 2015 and rise of digital payments and refocus of banking industry the highest gainers
were the early adopters of new technology and at the same time ability to increase the ease of
use of banking services using mobile devices. Citibank offered all of its services through its
Internet banking, but was very restrictive in mobile banking. It was only in 2017 that
Citibank extended some of the services to its mobile banking for Indian customers and
completely moved most of customer services to its mobile platform by as late as 2019.

 UPI for instance was integrated after one year of launch

 Wealth Management was introduced along with its retail offerings in the year 2019
 The complete list of services from Internet and Mobile banking was completed in the
year 2019

The delay in catering to the mobile banking demand and the already small target customers of
Citibank meant that it was not operating at scale and the customers of Citi were primarily
salaried middle class income group and for its wealth management services for its top-tier
customers. The target segment didn’t allow for Citibank to operate at scale to increase the
market penetration and with the increased digitalisation of the Indian banking environment
the retail segment for the bank, Citibank exited the Indian retail market.

The below demonstrates Kurt-Lewin framework for organisation change. The ideal target
segment for Citibank needed to be expanded and the digital adoption of its mobile services
had to be increased.

Plan: Increase the scale of operations in retail banking

Forces for change:

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  Increased point of sale for Citibank credit cards
 Improve speed of resolution of customer complaints
 Improve retail banking customer base
 Add new offerings with payments bank and multiple vendors
 Initiate tie-ups with aggregators

Forces against change:

 Increased cost of maintenance

 Increased cost of training staff
 Operational expenses: Setting up new branches. Getting close to the customer
 Excess spends in hospitality and customer services
 Digital transformation of the banking services
 Target segment identification and product line extension

The above analysis presents the challenges for Citibank to work around in the retail banking.
With multiple players offering similar services and lack of differentiating services Citibank
couldn’t increase its hold in the market leading to its parent Citigroup’s decision to move out
of the Indian retail business.

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Appendix

A1. Key projects for the Citi Bank [Source: Citi Bank website]

A2. Citibank’s businesses

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A3. Key Employees

Sr. No Employee Designation

1. Ashu Khullar CEO, Citi India, Region Head South Asia
2. K Balasubramanian Head Corporate Banking Group, South Asia
3. Mridula Iyer Head - Treasury & Trade Solutions (TTS) for Citi
South Asia
4. Badrinivas Managing Director
Head of Markets & Securities Services
Citi South Asia
5. Tushar Vikram Head of Commercial Banking,
Citibank India
6. Arjun Chowdhry Country Business Manager, Global Consumer Bank,
Citi India
7. Sharad Mohan Country Head - Retail Banking, Citibank India
8. Debasis Ghosh Public Affairs Officer, Citi India
Cluster Head, Global Public Affairs, Citi South Asia
9. Nishith Parashar ORM Head - Citi South Asia
10. Niraj Parekh India Subcontinent Cluster Finance Officer
11. Shweta Mehrotra Chief Human Resources Officer
Citi South Asia
12. Siddharth Mehta Chief Country Compliance Officer
India and Cluster Lead for Compliance
Risk Management for South Asia
13. Padmaja Chakravarty General Counsel for Citi India,
Sri Lanka and Bangladesh.

A4. Revenue growth for Citibank [6]

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A5. Profits of Citibank India from 2008 (Source: Citibank NA financial statements)

Financial Year Profit (Rs '000) % Change

2007 ₹ 90,00,010.00
2008 ₹ 1,80,42,600.00 100.47%
2009 ₹ 2,17,30,785.00 20.44%
2010 ₹ 86,03,865.00 -60.41%
2011 ₹ 1,42,46,369.00 65.58%
2012 ₹ 1,92,19,900.00 34.91%
2013 ₹ 2,71,83,400.00 41.43%
2014 ₹ 2,89,27,400.00 6.42%
2015 ₹ 3,42,25,500.00 18.32%
2016 ₹ 3,23,29,700.00 -5.54%
2017 ₹ 3,62,56,100.00 12.14%
2018 ₹ 3,40,30,500.00 -6.14%
2019 ₹ 4,18,53,000.00 22.99%
2020 ₹ 4,91,83,700.00 17.52%

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References

1. https://www.ibef.org/industry/banking-india.aspx
2. https://www.livemint.com/Opinion/KyKDcWk6WJD7zHpanunxwK/Do-we-need-
foreign-banks-in-India.html
3. https://www.online.citibank.co.in/press-room/citi-in-india.htm
4. https://www.businesstoday.in/current/corporate/why-is-citibank-exiting-consumer-
business-in-india/story/436724.html
5. https://www.businesstoday.in/sectors/banks/breaking-citigroup-to-shut-down-
consumer-operations-in-india/story/436714.html
6. https://advantage.marketline.com/Company/Profile/citibank-na_3417144?
companyprofile
7. https://www.forbes.com/sites/greatspeculations/2019/10/02/which-geographically-
diversified-banking-giant-is-better-citigroup-or-hsbc/?sh=7b75a6027c04

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