Rural Bank of Suares

Rural Bank of Suares

Point of View

The group will take the point of view of a controlling stockholder of RBS.

Statement of the Problem

1. Should RBS expand to the capital city? Why or why not?

2. If the bank should expand, should we acquire our own land and build a building or just rent a commercial space? Why?

PURPOSE

As per BSP’s classification of banks, rural banks exist to provide basic financial services to the rural community. They are formed to extend loans to farmers, fishermen, micro entrepreneurs and certain individuals to stimulate and develop the rural economy.

COMPETITORS

Having a specific purpose however does not eliminate competition for rural banks. Cooperatives serves the same market, their difference only lies in the ownership where rural banks are privately owned and managed while cooperative banks are organized and owned by cooperatives. Thrift banks on the other hand can do more than rural banks and cooperatives. They can invest in bonds and commercial papers and accept foreign currency deposits. Commercial banks can act as a broker to buy and sell securities, rent out safety deposit boxes and

CURRENT SITUATION

Options

1. Expand and buy their own land/building

2. Expand and rent

3. Don’t expand yet. RBS could remain as is for the mean time and concentrate serving their market. If they were able to attract customers from the city without having an actual office there, there is a probability that they will be able to do so for the coming years even if they don’t expand. 25 kilometers away may still be considered accessible to some especially in the province.

Advantages

1. The bank doesn’t have to shell out money immediately and get a loan for expansion. They can just save it for the next few years so they will only need to borrow a smaller amount and save on interest expenses.

2. They can focus on building their relationship with their current market and generate more income from them. Since the amount of deposits and income from loans substantially increased, we cannot say that the limit has already been reached unless the figures show a decline right after a continuous increase.

Disadvantages

1. They will not be able to seize the opportunity to generate more income from the customers from capital city.

2.

Competition:

• Universal