ICICI Bank and SBI – too big to fail

Abstract

Learning outcomes The learning outcomes of this study are to gain an understanding of the banking regulations and their impact on banking performance, to understand the intermediation role of banks by channelizing depositors’ savings and providing loans to borrowers, to explain an impact of a recent regulatory change in the Indian banking that directly impacts their financial performance, to critically evaluate the different financial ratios to analyze the performance of a bank and to build a DuPont analysis framework for banks. Case overview/synopsis The case serves as a primer on banking regulations in India and provides insights into banking performance. Banking regulations play an important role in maintaining financial stability, specifically in emerging economies like India. The protagonist of the case is Salil Kumar who presented his internship project to the review committee of Stock Investment Company on April 16, 2021. However, he had to rework and present his final project within seven days on the basis of the feedback received from the committee. Kumar faced the dilemma of bringing together a comparative study across two banks, namely, Industrial Credit and Investment Corporation of India (ICICI Bank) and State Bank of India (SBI) and building a DuPont framework covering the different aspects of banking performance. The case exemplifies the intricate regulatory landscape in India within which banks operate and highlights the recent alterations introduced by the Reserve Bank of India. For instance, the framework for dealing with domestic systemically important banks (D-SIBs) was introduced in 2014 and subsequently adopted in August 2015. The D-SIB framework provides inherent guarantee to large banks such as ICICI Bank and SBI. This ensures government backup in the event of any failure, thereby securing financial stability. The case study is suitable for banking and financial accounting courses taught in postgraduate management programs. Once the case is studied, the students are expected to understand the basics of banking, regulations, impact of regulations on banking performance and financial measures. Complexity academic level The case provides valuable insights into the intricate dynamics of the banking industry, offering a critical perspective for analysis. A well-structured teaching note would serve as a valuable tool for instructors, allowing them to facilitate engaging classroom discussions and effectively guide students toward achieving the desired teaching objectives. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance.