Commercial Banking

TYBBI Commercial Banking
EXECUTIVE SUMMARY
Commercial banks occupy a dominant place in the money market. They, as a
matter of fact, form the largest component in the banking structure of any
country. They are the oldest, largest and fastest growing financial
institutions in India. They are profit making institutions, dealing in money
and credit. Commercial banks play a major role in the growth and
development of the country due to the modern organiation and functioning,
huge funds and wide network all over the country.
Thus, they are like a reservoir into which flow the savings, the idle surplus
money of households and from which loans are given on interest to
businessmen and others who need them for investment or productive uses.
Commercial banks are very important source of institutional credit as
they are the major depository of people!s savings. They are very important
devices for providing short term credit to trade and commerce. Commercial
Banks being repositories of deposits have played significant role in
garnering savings of the people particularly after the nationaliation. Thus,
they have made praiseworthy efforts in pooling the savings.
Rationale of the study
The "ationale of the study can be considered as follows#$
The study includes essential core topics.
It aims at giving a thorough grounding on the subject.
The study is comprehensive.
It helps to improve the research and investigation
ability.
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It enables to think logically and practically
Hypothesis:
The hypothesis being put forth for this study about Commercial banking is
that awareness of Commercial banks is &''(, but there are still many
people who do not know about the Commercial banks and the amenities
provided by them. Commercial banks are coming up with new innovative
ideas and schemes for increasing their customer base and fulfilling the needs
of the general public.
Research Methodoloy:
The research methodology is data collection through#$
)"I*+"Y %,-"C.%
%.C,/0+"Y %,-"C.%
!ri"ary Sources: %urvey by distributing 1uestionnaire to the people
taking sample sie of &'', Interviews conducted with bankers2 accumulating
knowledge and help from friends, professors, etc.
Secondary Sources: 3athering data through books, journals, magaines,
websites, newspapers, etc.
E#pected Contri$ution
.4pectations from the study are that it may contribute to the real scenario of
commercial banking demand and accordingly the banks can go for new
innovative schemes. It will also specify some recommendations and based
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on that banks can make suitable arrangements in a particular sector. It will
also make people aware about Commercial banking.
Introduction of $an%in :
anking, in its crude form, is an age$old phenomenon. It was in
e4istence even in ancient times, too. It is the business of
providing financial services to consumers and businesses. They
are the single major source of institutional finance in the country.
B
+ccording to %ection 7 8c9 of the Banking "egulation +ct, &:;: $
<Banking company means any company which transacts the business of
banking in India=. %ection 7 8b9 of the act defines banking as accepting for
the purpose of lending or investment of deposits of money fro the public
repayable on demand or otherwise and withdrawable by che1ue, draft, order
or otherwise.
Banking services also serve two primary purposes. &irst, by
supplying customers with the basic mediums$of$e4change 8cash, checking
accounts, and credit cards9, banks play a key role in the way goods and
services are purchased. >ithout these familiar methods of payment, goods
could only be e4changed by barter 8trading one good for another9, which is
e4tremely time$consuming and inefficient. Second, by accepting money
deposits from savers and then lending the money to borrowers, banks
encourage the flow of money to productive use and investments. This in turn
allows the economy to grow. >ithout this flow, savings would sit idle in
someone!s safe or pocket, money would not be available to borrow, people
would not be able to purchase cars or houses, and businesses would not be
able to build new factories the economy needs to produce more goods and
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grow. .nabling the flow of money from savers to investors is called
financial intermediation, and thus, banking is e4tremely important to a free
market economy.
'riin and E(olution of Indian )an%in

,pinions differ as to the origin of the work ?Banking?. The word
?Bank? is said to be of 3ermanic origin, cognate with the @rench word
?Ban1ue? and the Italian word ?Banca?, both meaning ?bench?. It is
surmised that the word would have drawn its meaning from the practice of
the Aewish money$changers of Bombardy, a district in /orth Italy, who in
the middle ages used to do their business sitting on a bench in the market
place. +gain, the etymological origin of the word gains further relevance
from the derivation of the word ?Bankrupt? from the @rench word ?Ban1ue
route? and the Italian word ?Banca$rotta? meaning ?Broken bench? due
probably to the then prevalent practice of breaking the bench of the money$
changer, when he failed.
Banking is different from money$lending but two terms have in
practice been taken to convey the same meaning. Banking has two important
functions to perform, one of accepting deposits and other of lending monies
andCor investment of funds. It follows from the above that the rates of
interest allowed on deposits and charged on advances must be known and
reasonable. The money$lender advances money out of his own private
wealth hardly accepts deposits and usually charges high rates of interest.
*ore often, the rates of interest relate to the needs of the borrower. *oney$
lending was practiced in all countries including India, much earlier than the
recent type of Banking came on scene.
Sinificance of )an%s
The importance of a bank to modern economy, so as to enable them to
develop, can be stated as follows#
8i9 The banks collect the savings of those people who can save and allocate
them to those who need it. These savings would have remained idle due to
ignorance of the people and due to the fact that they were in scattered and
oddly small 1uantities. But banks collect them and divide them in the
portions as re1uired by the different investors.
8ii9 Banks preserve the financial resources of the country D it is e4pected
that they allocate them appropriately in the suitable D desirable manner.
8iii9 They make available the means for sending funds from one place to
another and do this in cheap, safe and convenient manner.
8iv9 Banks arrange for payments by che1ues, order or bearer, crossed and
uncrossed, which is the easiest and most convenient. Besides they also care
for making such payments as safe as possible.
8v9 Banks also help their customers, in the task of preserving their precious
possessions intact and safe. To advance money, the basis of modern industry
and economy and essential for financing the developmental process, is
governed by banks.
8vii9 It makes the monetary system elastic. %uch elasticity is greatly desired
in the present economy, where the phase of economy goes on changing and
with such changes, demand for money is re1uired. It is 1uite proper and
convenient for the government and ".B.I. to change its currency and credit
policy fre1uently, This is done by "BI, by changing the supply of money
with the changing needs of the public.
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+lthough traditionally, the main business of banks is acceptance of
deposits and lending, the banks have now spread their wings far and wide
into many allied and even unrelated activities.
Structure of )an%in Syste"
+t present, the organied banking system in India can be broadly divided
into three categories#
i9 The Central Bank of the country, the "eserve Bank of India
ii9 The Commercial Banks
iii9 The Cooperative Banks.
The "BI is the ape4 monetary and banking authority in the country
and has the responsibility to control the banking system in India.
Co""ercial $an%s play a major role in the growth and development
of the country. They mobilie savings and make them available to large and
small industrial enterprise and traders for working capital re1uirements.
+fter &:E:, commercial banks are broadly classified into nationalied or
public sector banks and private sector banks. The %BI and its associate
banks along with another 5' banks are the public sector banks. The private
sector banks include Indian scheduled banks which have not been
nationalied and branches of foreign banks operating in India. The "egional
"ural Banks came into e4istence since the middle of &:F's with the specific
objective of providing credit and deposits facilities to the small and marginal
farmers, agricultural labourers and artisans and small entrepreneurs.
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)an%in in India
Banking in India act as a connected link between the borrowers and lenders
of money. The banks main activity should be to do the business of banking
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which should not be subsidiary to any other business. Thus, a bank should
always add the word <Bank= to its name to enable people to know that it is a
bank and is dealing in money.
(From small to large, commercial banking have
got u covered,
as In banking there is no such thing as one size
fits all )
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I*TR'+UCTI'* T' C'MMERCIA, )A*-S:
Commercial banks play a vital role in the economic development of a
nation. They are the most important source of institutional credit in the
money market as they provide short term loans and advances to its
customers. They perform a variety of functions and are the main source of
credit which is the main input for trade and business activity. Credit created
by commercial banks is a major component of money supply in a modern
economy. *odern economies depend on the banking sector for production,
e4change and distribution.
+ Commercial bank is a type of financial intermediary and a type of
bank. Commercial bank has two possible "eanins:
a9 It is the term used for a normal bank to distinguish it from an
investment bank.
b9 Commercial banking can also refer to a bank or a division of a
bank that mostly deals with deposits and loans from corporations or large
businesses, as opposed to normal individual members of the public 8retail
banking9.
+ commercial bank is a profit seeking organiation dealing in the
other people!s money, in the sense that it accepts deposits of money from the
public to keep them in its custody for safety. %o also, it deals in credit, i.e., it
creates credit by making advances out of the funds received as deposits to
needy people. It charges higher rate of interests for the loans sanctioned and
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offers lower rate of interest for the deposits. The difference between the two
is the profit earned by the bank. Thus, a commercial bank functions as a
mobiliser of saving in the economy.
The most distinctive feature of a commercial bank is that it accepts
deposits called demand deposits from the public which are che1uable, i.e.,
withdrawable by means of che1ue. +cceptance of che1uable deposits alone,
however, does not give it a status of bank. Its another essential function is to
make use of these deposits for lending to others.
Commercial banks ordinarily are simple business or commercial
concerns which provide various types of financial services to Hcustomers in
return for payments in one form or another, such as interest, discounts, fees,
commission, and so on. %o, we can say that their objective is to make profits.
+ commercial bank is therefore like a reservoir into which flow the
savings, the idle surplus money of households and from which loans are
given on interest to businessmen and others who need them for investment
or productive uses.
+efinition:
.conomists have defined a Commercial Bank in various ways.
$ +ccording to )rof. Crowther, <a banker is a dealer in debt, his own and
other people!s.=
$ +ccording to )rof. sayes, <Commercial Banks are institutions whose
debts I usually reffered to as bank deposits I are commonly accepted in
final settlement of other people!s deposits.=
Thus, all these definitions clearly indicate the essential function of a
bank namely dealing in money and credit.
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&U*CTI'*S '& C'MMERCIA, )A*-S
Commercial banks perform several crucial functions to satisy the
needs of the various sectors of the economy, which may be classified into
two categories#
8I9 )rimary functions, and
8II9 %econdary functions.
.I/ !ri"ary $an%in functions of the commercial banks include#
&. +cceptance of deposits from the
public2
5. Bending of funds2
6. -se of che1ue system2 and
;. "emittance of funds.
01 Acceptance of +eposits fro" the !u$lic
+ccepting deposits is the primary function of a commercial bank. By
receiving deposits from the public, commercial banks mobilise savings of
the household sector.
Banks generally accept deposits in three types of accounts#
8i9 Current +ccount,
8ii9 %avings +ccount, and
8iii9 @i4ed 0eposits +ccount.
0eposits in Current Account are withdrawable by the depositors by
che1ues for any amount to the e4tent of the balance at their credit, at any
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time without any prior notice. 0eposits of current accounts are, thus, known
as 0emand deposits. %uch accounts are maintained by commercial and
industrial firms and businessmen, and the che1ue system is the most
convenient and very safe mode of payment. /o interest is provided for such
deposits. In fact bank charge certain commission for providing the facility.

Sa(in Accounts are maintained for encouraging savings of
households. >ithdrawals from deposits from savings account are not freely
allowed as in the case of current account. There are some restrictions on the
amount to be withdrawn at a time and also on the number of withdrawals
made during a period. Indian commercial banks have, however, rela4ed
these rules of savings accounts to a certain e4tent in recent times. Banks pay
a rate of interest on the savings account deposits as prescribed by the central
bank. )resently, it is 7 ( p.a. + nominal rate of interest is provided for such
deposits.
0eposits in &i#ed Account are time deposits. In the normal course,
deposits cannot be withdrawn before the e4piry of the specified time period
of the deposits. + premature withdrawal is, however, permitted only at the
cost of forfeiture of the interest payable, at least partly. ,n these deposits
commercial banks pay higher rates of interest, and the rate becomes higher
with the increase in duration. Bonger the time period, higher would be the
rate of interest and vice versa.
By creating such varieties of deposits, banks motivate savers and
depositors in a variety of ways and encourage savings in the economy.
@urther, by keeping deposits with banks, depositors! money is not secure
and remains in safe custody, but it yields interest also. *oreover, banks
demaand deposits are in the form of li1uid cash, for they serve as money to
the business community and, therefore, is called bank money.
21 ,endin of funds
+nother major function of commercial banks is to e4tend loans and
advances out of the money which comes to them by way of deposits to
businessmen and entrepreneurs against approved such as gold or silver
bullion, government securities, easily saleable stocks and shares, and
marketable goods.
Banks advances to customers may be made in many ways#
8i9 ,verdrafts,
8ii9 Cash Credits,
8iii9 0iscounting Trade Bills,
8iv9 *oney$at$call or very short$term advances,
8v9 Term loans,
8vi9 Consumer Credit,
8vii9 *iscellaneous +dvances.
8i9 '(erdraft: + commercial bank grants overdraft facility to an account
holder by which he is allowed to draw an amount in e4cess of the balance
hels in the account, up to the e4tent of stipulated limit. ,verdrafts are
permissible in current account only. %uppose, a customer has "s. 7',''' in
his current account with the bank. Bank grants him overdraft facility up to
"s. &','''. Then, this customer is entitled to issue che1ues upto "s. E','''
on his account. ,bviously, overdraft facility sanctioned up to "s.&',''' by
the bank in this case is as good as credit granted by the bank to that e4tent.
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8ii9 Cash credit: Bank give credit in cash to business firms in industry and
trade, against pledge or hypothecation of goods, or personal guarantee given
by the borrowers. It is essentially a drawing account against credit
sanctioned by the bank and is operated like a current account on which an
overdraft is sanctioned. It is the most popular mode of advance in the Indian
banking system.
8iii9 +iscountin trade $ill: The banks facilitate trade and commerce by
discounting bills of e4change called trade bills. Traders often draw bill of
e4change to meet their obligations in business transitions. %uch a trade bill is
payable in cash on maturity, after a stipulated date. 0iscounting of bills by
the bank amounts to granting of credit to the party concerned till the
maturity date of the bill. This method of bank lending is widely adopted for
two reasons# 8a9 such loans are self li1uidatory in character2 and
8b9 these trade bills are rediscountable with the central bank.
8iv9 Money at call or (ery short ter" ad(ances: Bank also grants loans for
a very short period, generally not e4ceeding F days to the borrowers,
usually dealers or brokers in stock e4change markets against collateral
securities like stock or e1uity shares, debentures, etc., offered by them. %uch
advances are repayable immediately at notice hence, they are described as
money at call or call money.
8v9 Ter" ,oans: Banks give term loans to traders, industrialists and now to
agriculturists also against some collateral securities. Term loans are so$
called because their maturity period varies between & to &' years. Term
loans as such provide intermediate or working capital funds to the
borrowers. %ometimes, two or more banks may jointly provide large term
loans to the borrower against a common security. %uch loans are called
participation loans or consortium finance.
8vi9 Consu"er Credit: Banks also grant to households in a limited amount
to buy some durable consumer goods such as television sets, refrigerators,
etc2 or to meet some personal needs like payment of hospital bills, etc. such
consumer credit is made in a lump sum and is repayable in installments in a
short time. -nder the 5'$point programme, the scope of consumer credit has
been e4tended to caver e4penses on marriage funeral etc2 as well.
8vi9 Miscellaneous Ad(ances: +mong other forms of bank advances there
are packing credits given to e4porters for a short duration, e4ports bills
purchasedC discounted, import finance $ advances against import bills,
finance to the self employed, credit to the public sector, credit to the
cooperative sector and above all, credit to the weaker sections of the
community at concessional rates.
31 Use of che4ue syste":
It is a uni1ue feature and function of banks that they have introduced
the che1ue system for the withdrawl of deposits.
There are two types of che1ues#
i9 the bearer che1ue and
ii9 the crossed che1ue.
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+ $earer che4ue is encashable immediately at the bank by its possessor.
%ince, it is negotiable, it serves as good as cash on transferability.
+ crossed che4ue, on the other hand, is one that is crossed by two parallel
lines on its face at the left hand corner and such a che1ue is not immediately
encashable. It has to be deposited only in the payee!s account. It is not
negotiable.
In modern business transactions, the use of che1ues to settle debts is
found to be much more convenient than the use of cash. Commercial banks,
thus, render an important service by providing an ine4pensive medium of
e4change such as che1ues. In fact, a che1ue is also considered as the most
developed credit instrument.
51 Re"ittance of &unds:
Commercial banks, on account of their network of branches
throughout the country, also provide facilities to remit funds from one place
to another for their customers by issuing bank drafts, mail transfers or
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telegraphic transfers on nominal commission charges. +s compared to the
postal money orders or other instruments, bank drafts have proved to be a
much cheaper mode of transferring money and has helped the business
community considerably.
8II9 Secondary $an%in functions of the commercial banks are also
known as non$banking functions. They perform a multitude of other non$
banking functions which may be classified as#
&. +gency %ervices, and
5. 3eneral -tility %ervices.
01 Aency Ser(ices
Bankers perform certain functions for D on behalf of their clients, as#
a9 To collect or make payments for bills, che1ues, promissory notes,
interest, dividends, rents2 subscriptions, insurance premia, etc. @or these
services, some charges are usually levied by the banks.
b9 To remit funds on behalf of the clients by drafts or mail or telegraphic
transfers.
c9 To act as e4ecutor, trustee and attorney for the customer!s will.
d9 %ometimes, bankers also employ income$ta4 e4porters not only to
prepare income$ta4 returns for their customers but also to help them to get
refund of income$ta4 in appropriate cases.
e9 To work as correspondents, agents or representatives of their clients.
,ften, bankers obtain passports, traveller!s tickets, secure passages for
their customers, and receive letters on their behalf.
21 6eneral Utility Ser(ices
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*odern commercial banks usually perform certain general utility
services for their community, such as#
a9 Betters of credit may be given by the banks at the behest of the importer
in favour of the e4porter.
b9 Bank drafts and traveller!s che1ues are issued in order to provide
facilities for transfer of funds from one part of the country to another.
c9 Banks may deal in foreign e4change or finance foreign trade by
accepting or collecting foreign bills of e4change.
%hares floated by government, public bodies and corporations may be
underwritten by banks2
d9 Certain banks arrange for safe deposit vaults, so that customers may
entrust their securities and valuables to them for safe custody.
e9 Banks also compile statistics and business information relating to trade,
commerce, and industry. %ome banks may publish valuable journals or
bulletins containing research on financial, economic and commercial
matters.
Co""ercial )an%s !lay an I"portant Role in a Modern Econo"y
&9 They constitute the very life$blood of modern trade, commerce D
industry, as they provide the necessary funds for their working capital such
as to buy raw materials, to pay wages, to incur current business e4penses in
marketing of goods, etc
59 These banks encourage people!s savings habit through their various
savings deposit schemes.
69 They also mobilie idle saving resources from households to business
people for productive use.
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;9 They transmit money from place to place with economy and safety.
79 Their agency services are, no doubt, of immense value to the people at
large, as they case their difficulties, save their time D energy Dprovide them
safety D security.
*ATI'*A,ISATI'* '& C'MMERCIA, )A*-S
By the &:E'!s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. >ith effect from Auly &:,
&:E:, &; largest commercial banks were nationalied. + second dose of
nationaliation of E more commercial banks followed in &:G'. The stated
reason for the nationaliation was to give the government more control of
credit delivery. >ith the second dose of nationaliation, the 3,I controlled
around :&( of the banking business of India. +fter this, until the &::'!s the
nationalied banks grew at a place of around ;(, closer to the average
growth rate of the Indian economy. %o, these nationaliation of banks was
carried out with the aim of Jremoval of control by a few! and to bring about
a more optimal allocation of bank funds. +fter nationaliation, the credit
policy of public sector banks underwent a radical change, with special
emphasis being placed on credit to priority sectors including agriculture,
small scale industry and programmes for poverty alleviation.
The "ain o$7ecti(es of nationali8ation 9ere as follo9s:
&. To introduce social banking by directing bank funds at concessional
rates to the weaker sections of societ for productive purposes.
5. To prevent monopolies in the banking sector caused due to use of
major share of funds by a few private entrepreneurs.
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6. To introduce D promote banking facilities in backward areas D reduce
regional disparities in branch e4pansion and growth of banking.
;. To e4pand the role of Commercial banking in agricultural credit.
!ER&'RMA*CE '& C'MMERCIA, )A*-S I* THE
!'ST :*ATI'*A,I;ATI'* !ERI'+
01 Achie(e"ents :
.a/ ,ead )an% Sche"e# +fter nationaliation, it was felt that banks should
be allotted particular districts where they would take the lead in studying the
need and scope for banking development. -nder the scheme, districts were
allotted to the %tate Bank 3roup, &; nationalised banks and 6 private banks.
.ach bank was assigned the status of Jlead bank! in a particular district. The
lead bank had to study and understand the socio$economic condition of the
district and undertake surveys for this purpose. Through the surveys the lead
bank would collect useful information about the credit needs, development
needs and pattern of production and nature of employment in the district.
+fter such informations were gathered, the lead bank would then plan and
implement development programmes in the area, with the help of other
banks and financial institutions. This scheme was a uni1ue e4periment and it
helped in branch e4pansion, deposit mobiliation and e4pansion of priority
sector lending.
.$/ )ranch E#pansion: +fter nationaliation, there was massive e4pansion
of bank branches, especially in the rural areas. The Bead Ban k scheme
played played a major role in this. 0uring the first fifteen years after
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nationaliation, branches e4panded at about 5,;'' per year. Total number of
bank branches has increased from G5E5 in &:E: to EF,5G6 in 5''F.
,ver G'( of bank offices are located in backward states and in semi$urban
areas and rural areas. This, to some e4tent took care of regional imbalance in
the spread of banking.
.c/ +eposit Mo$ili8ation: +s a result of e4pansion of banking facilities,
there was a large increase in deposits. In &:E:, deposits amounted to &6( of
the 30), by 5''; this ratio increased 67' times. The increase in rural
deposits as production of total has been from 6( to &7(. Bank deposits
now constitute about ;'( of financil assets held by households.
.d/ )an% ,endin: Traditionally, banks in India had concentrated in
providing working capital to industry and trade. ,nly after nationaliation,
loans are being given for agricultural operations. Bank credit stood at "s. 6,
6:: crore in &:E:. In the ne4t 6 decades, his increased by about 5'' times.
In &:EG, large and medium industries accounted for about 5'' times. In
&:EG, large and medium industries accounted for about E'( of aggregate
bank credit. +griculture accounted for about 5(. This changed drastically
after nationaliation and bank credit to priority sector, including agriculture
was close to ;'( of total credit.
.e/ +irected Credit !rora""es: + major objective of bank
nationaliation was to make bank credit available the priority sector,
comprising of agriculture, small scale industries, e4ports, transporters and
small traders at concessional rates. This system of directed bank credit was
e4pected to contribute to contribute to economic growth as well as social
justice. %uccess was achieved in this direction after nationaliation.
21 Shortco"ins#
.a/ Inade4uate )an%in facilities# 0espite achievements in branch
e4pansion, banking facilities continue to remain inade1uate to meet the
needs of the large population. The national average population per bank
branch is still very high at about &5'''. This ratio is higher than the national
average in some states like Bihar, ,rissa, >est Bengal and *adhya )radesh.
Banking facilities are still not e1uitably distributed among all states.
.$/ Inade4uate +eposit Mo$ili8ation: Banking habits of people in India
are still not very good. + large part of the population still prefer to carry out
transactions in cash and are not covered by the banking system . Therefore,
there is a large scope for further increasing deposits and bring in more
money in the banking system.
.c/ Inade4uate lendin: .ven though there has been significant increase
in lending to priority sectors, it is still inade1uate in comparison to the needs
of these sectors. Because of these small farmers and traders have to still
depend on the unorganied sector for meeting their credit re1uirements.
.d/ Increased E#penditure: +fter nationaliation, there has been
significant increase in e4penditure on banking operations. This is due to
aggressive and sometimes irrational branch e4pansion. There has been over$
staffing in nationalied banks and some of their operations in rural areas are
simply not economically feasible.
.e/ ,o9 ,e(el of Efficiency: )ublic sector banks have suffered from lack
of proper supervision and control. 0ue to high degree of political
interference and lack of competition, these banks have become highly
insufficient. There work culture was poor compared to private sector banks.
Kowever, this scenario has now changed with these banks becoming more
profit oriented and autonomous.
Thus, nationaliation of Commercial banks was done with the
objective of social and economic development. But this resulted in several
problems and desortions in the banking system. Till &::'s public sector
banks operated with low profitability and efficiency. In early &::'s, the
government implemented the /arsimham Committee "ecommendations in
order to bring about much needed reforms in the banking sector. %ince then,
the sector has been performing with higher profitability and efficiency.
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TY!ES '& C'MMERCIA, )A*-S:
%cheduled banks
/on$ %cheduled Banks
$ Scheduled )an%s:
+ scheduled bank is one which is registered in the second schedule of the
"eserve Bank of India. The following conditions must be fulfilled by a bank
for inclusion in the schedule#
i9 The banker concerned must be in business of banking in India2
ii9 It is either a company defined in %ection 6 of the Indian Companies
+ct, &:7E, or corporation or a company incorporated by or under any law in
force in any place outside India or an institution notified by the central
government in this behalf2
iii9 It must have paid$up capital and reserves of an aggregate role of
e4changeable value of not less than rupees five lakhs2
iv9 It must satisfy the "eserve Bank of India that its affairs are not
conducted in a manner detrimental to the interests of its depositors.
%cheduled banks come under the purview of the various credit control
measures of th "eserve Bank of India. They are re1uired to maintain a
certain minimum balance in their accounts with the "BI, and do certain
things prescribed by law. The %cheduled banks are entitled to bprrowings
and rediscounting facilities from the "BI. These are similar to the member
banks of the -.%.+.
$ *on: Scheduled )an%s:
Banks, which are not included in the %econd %chedule of the "BI, are
known as non$scheduled banks. They may be classified into ; groups#
a9 Banks with paid$up capital and reserves in e4cess of "s. 7 lakhs2
b9 Banks with paid$up capital and reserves ranging between "s.
7',''' and one lakh of rupees2
c9 Banks with paid$up capital and reserves ranging between one lakh
of rupees and 7 lakhs2
d9 Banks with paid$up capital and reserves below "s. 7','''.
/on$ %cheduled banks are not entitled to all those facilities that the
scheduled banks avail of from the "eserve Bank of India. %ince the
enactment of the Banking "egulation +ct in &:;:, non$scheduled banks
have also come under the ambit of the "BI control. It has become obligatory
on the part of these banks to carry a portion of their deposits with the "BI or
in the vault with the bank itself, and prepare their annual accounts and
balance sheets in accordance with the re1uirements stipulated in %ection 5:
of the Banking Companies +ct.
%cheduled Banks may be classified into two groups# Indian %cheduled
Banks and @oreign %cheduled Banks. The Indian %cheduled Banks are those
%hri Chinai College 5E
which have their registered officers in India and are registered in the second
schedule if the "BI. +s against this, foreign scheduled banks comprise those
commercial banks which are registered in the said schedule but have their
registered offices outside India. These banks have played a prominent role in
India!s foreign trade2 in fact, they had complete sway in this sphere until the
%econd >orld >ar. %ince then, a number of leading Indian scheduled banks
entered the field of foreign trade and have in the course of time achieved an
important position in this field.
Indian scheduled banks may be distinguished in two broad sectors#
a9 )ublic sector commercial banking comprising the %tate Bank of
Indian and its subsidiaries and the twenty nationalied banks2
b9 )rivate sector commercial banking comprising all the other Indian
scheduled banks that do not fall in the above group.
%hri Chinai College 5F
C'MMERCIA, )A*-S I* I*+IA
%hri Chinai College 5G
+s part of the financial services industry, insurance, commercial banking,
and capital markets companies worldwide are attempting to compete better
by improving core operations and differentiating the customer e4perience.
Kowever, this is not easily achieved because of the volume of business
challenges financial services companies deal with today.
*a"es of )an%s pro(idin Co""ercial )an%in ser(ices in India :
o +B* +*", India
o +bu 0habi Commercial Bank 8India9
o +llahabad Bank
o +ndhra Bank
o Bank of Baroda
o Bank of India
o Bank of India -.% operation
o Bank of )unjab
o Bank of *adura
o Bank of *aharashtra
o Canara Bank
o Centurion Bank of )unjab
o Corporation Bank
o 0CB 80evelopment Credit Bank Btd.9
o 0ena Bank
o 0eutsche Bank India
o 0hanalakshmi Bank
o @ederal Bank
%hri Chinai College 5:
o K%BC in India
o ICICI Bank
o Indus Bank Btd.
o %tate Bank of India, etc.
Ser(ices typically offered $y Co""ercial )an%s
+lthough the basic type of services offered by a
commercial bank depends upon the type of bank and
the country, services provided usually include#
$ Taking deposits from their customers and issuing current 8-L9 or
checking 8-%9 accounts and savings accounts to individuals and
businesses.
$ .4tending loans to individuals and businesses2 Cashing che1ues
$ @acilitating money transactions such as wire transfers and cashierHs
checks
$ Issuing credit cards, +T* cards, and debit cards
$ %toring valuables, particularly in a safe deposit bo4
$ Cashing and distributing bank rolls
$ Consumer D commercial financial advisory services
$ )ension D retirement planning.
@inancial transactions can be performed through many different channels#
$ + branch, banking centre or financial centre is a retail location where
a bank or financial institution offers a wide array of face to face
service to its customers.
$ +T* is a computerised telecommunications device that provides a
financial institutionHs customers a method of financial transactions in a
public space without the need for a human clerk or bank teller.
$ *ail is part of the postal system which itself is a system wherein
written documents typically enclosed in envelopes, and also small
packages containing other matter, are delivered to destinations around
the world.
$ Telephone banking is a service provided by a financial institution
which allows its customers to perform transactions over the telephone.
$ ,nline banking is a term used for performing transactions, payments
etc. over the Internet through a bank, credit union or building societyHs
secure website.

+E)IT CAR+ CRE+IT CAR+ MAI,

ATM '*,I*E )A*-I*6 TE,E!H'*E )A*-I*6
E&&ECT '& C'MMERCIA, )A*-I*6 '* )USI*ESS A*+
I*+USTRY I* I*+IA<
he term Commercial Bank is not meant only for Business and
industry. Commercial bank is meant primarily for personal
banking and secondarily for commercial developments. The banks
looking mainly deposits from public and lending small and short term loans
to public and short businessmen.
T
Banking sector is called the </erve centres of the nationHs economy= and
<Backbones of modern Industries and Commerce=. + minor change in the
basis points by the nationHs central bank can make a huge impact on the
&. nationHs production and
5. inflation.
Commercial banks facilitate the growth of the business. Be it rural small
scale 8Cottage industries9 or Mery large scale investments. The deposits
from public is mobilised to fund the commercial activities. These activities
in turn generate income which is added to the gross domestic product of
the nation. Thus, banks are the most crucial sector that helps a nation grow
economically.
CHA,,E*6ES )E&'RE I*+IA* C'MMERCIA, )A*-S
*ajor challenges which Indian commercial banks are facing today
and which are likely to be more poignant in the ensuing years in view of the
irreversible process of the reforms and resultant verisimilitude of more
players entering the banking sector are discussed below.
!ro$le" of pressure on profita$ility:
The greatest challenge which )%Bs are facing in recent years arises
out of pressure on their profitability. >ith continuous e4pansion in number
of branches and manpower, thrust on social and rural banking, directed
sector lending, maintenance of higher reserve ratios, waiver of loans under
+"0"$type concessions, repayment defaults by large industrial corporate
and other borrowers etc. had their telling impact on the profitability of the
banks.
@urther with the introduction of prudential norms, to be effective from
*arch &::6 a majority of the commercial banks balance sheets had shown
huge losses. In order to improve financial health of these banks the
3overnment provided a dose of hybrid capital and in return these banks
were made to sign a memorandum of understanding with "BI. +ccordingly,
the focus of operation of banks shifted from deposit mobiliation to services
marketing. @urther, accent of banks operation shifted to non$fund based
business with an eye on capital ade1uacy achievement and other ancillary
business which may cross subsidie the cost of certain unremunerative
services, the banks have to offer.
!ro$le" of lo9 producti(ity:
+nother furious challenge which indian commercial banks are
confronting is low productivity. The low productivity has been due to huge
surplus manpower, absence of good work culture, andbabsence of
employees commitment to the organiation. .
The management have continued to prefer not to see the problem in its
proper perspective due to the fear of strong unions. They have camouflaged
the issue by diverting their attention to such apparent face saving devices
like redeployment, repositioning , retraining, etc.. There are various ways of
minimiing the sie of the staff, such as voluntary retirement scheme or
golden shakehand. The problem before the management at present is how to
cut sie of the staff and improve productivity of the bank.
!ro$le" of *on:!erfor"in Assets.*!A/:
+ serious threat to the survival and success of Indian banking
system is uncomfortably high level of non$performing assets. In its "eport
on trend and )rogress of banking In India, &::F$:G, the "BI reported that
gross /)+s as percentage of advances of )%Bs was &E percent as on *arch
6&, 5''' with a colossal amount of about "s. 75,''' crore being locked up.
This might have recently recorded further increase due to default in
repayment by the industrial units affected by the two$year old recession.
This is much higher than the international level of below 7(. %piraling non$
performing assets are hurting bank!s profitability and even the basic inability
of the banking system by way of both non$recognition of interest income
and loan loss provisioning.
!ro$le" fro" custo"ers:
In view of unleashing of competitive forces and fast changing
life styles and values of customers who are now better informed and more
sophisticated and discerning and who have a wide choice to choose from
various banking and non$banking intermediaries have become more
demanding and their e4pectations in terms of products, delivery and price
are increasing, the )%Bs lacking in customers! orientation are finding it
difficult to even retain their highly valued customers what to talk of
attracting the new clients particularly when the foreign banks are also the
new breed of private sector banks have embarked upon aggressive marketing
programme aiming at niche markets. The telebanking, anywhere banking,
virtual or internet banking, +T*, credit cards and newly introduced interest
rate swap, forward rate agreements, etc. are some of the products innovated
by the new players. +lthough the )%Bs are trying to computerie their
operations, the pace of progress in this direction has been decidedly slow.
The rather tardy progress in the area has been due to the initial reservation of
the staff unions against computeriation for the lurking fear of employment
cut, as also the e4istence of huge number of branches in the rural areas,
where suitable logistics are not available. *arket share of )%Bs both in
deposits and lending has declined. This has already become a serious cause
of concern for )%Bs regulating strategic efforts for thwarting the challenges
from the new players.
Co"petition fro" *e9 )an%s:
The commercial banks in India which enjoyed monopoly position
until recently are facing perilous challenges particularly on 1uality, cost and
fle4ibility fronts from the newly emerging players who by dint of their
invigorating ambience and work culture supported by pragmatic leadership
committed, courteous, affable and trained staff and modern ultra gadgets are
offering e4cellent customers services and making inroads in the business
centres.
The new banks have set the tone and to e4tent also the standard for
technological improvements and product innovations which the vastly
dominating )%Bs will have to bring about in their own operations if they
have to maintain their present position of dominance.
@or instance, Bank of )unjab has opened a new savings bank product$swagat
with a minimum balance re1uirement . K0@C has launched 1 new retail
account$@reedom$for customers who would be using the non$branch
infrastructure of the bank like +T*, phone banking and internet banking .
The ICICI Bank has product offerings tailor$made to specific categories of
customers, such as students, traders, /"Is as well as the salary customers.It
is going to offer a special scheme for senior citiens.
By resorting to latest methods in human resources management as
well as information technology, the new entrants in the field have suddenly
sensitised even the ordinary user of the banking services in India to the type
and 1uality of services he can e4pect from his bank.
The market has become highly competitive and largely customers
centric. This calls for an ability to reach the client at his door step and meet
his re1uirements of products and services in a customied manner. The race
for customers could at times lead to adverse selections. This situation
demands aggression laced with caution, in turn, calls for highly efficient
management by the banks of both liabilities and assets.
These banks have to work in a market which will not know any
geographical barriers and therefore will have to develop abilities of product
innovation and delivery comparable to the best in the world.
Co"petition fro" lo$al "a7ors
3lobalisation and integration of Indian financial market with world
and the conse1uent entry of foreign players in domestic market has infused,
in its wake, brutal competitive pressure on the Indian commercial banks.
@oreign players endowed with robust capital ade1uacy, high 1uality assets,
world$wide connectivity, benefits of economies of scale and stupendous risk
management skills are posing serious threats to the e4isting business of the
Indian banks. In order to compete successfully with the new entrants, Indian
banks need to possess matching financial muscle, as fair competition is
possible only along the e1uals. +verage sie of an Indian bank is niggardly
low in comparison to a foreign bank. The 1uestion before the major Indian
Commercial Banks, therefore, is how to ac1uire competitive sie.
!ro$le" of Manain +uality of '9nership# *anaging duality of
ownershipis a peculiar problem which the )%Bs have to encounter because
of participation of the private shareholders in their capital. + public sector
bank to survive and grow successfully is e4pected to operate according to
the e4pectations if one of its principal shareholders. In the changed scenario,
there would be two major groups of shareholders, vi., the government of
India and "BI on the one hand and the private shareholder , on the other .
%ince the e4pectations of these two categories of owners are not necessarily
identical, the bankers will have to manage conflicting interests.
'!!'RTU*ITIES &'R I*+IA* C'MMERCIA, )A*-S
Challenges are the driving forces that keep on going.
They prevent us from being vagary because they also bring
in their wake opportunities. In fact, challenges D
opportunities are like healthy twins, knocking at our door
steps. The process of globaliation and liberaliation have
thrown open tremendous opportunities for the banks in terms of widening of
scope of business, greater freedom to operate in financial markets I both
national and international freedom to deloy relatively largest funds because
of reduction in preemption re1uirements. The Commercial banks are now
enjoying greater autonomy in reviewing D revising e4isting branch network
D greater discretion to reduce amplitude of cross subsidiation to priority
sector.
Indian Commercial banks have also got the autonomy in respect of
pricing of bank products. In the regulated regime, interest!s rates on both
deposits and advances of Commercial banks were tightly regulated and so
was the product range. >ith gradual deregulation of interest rates, banks are
blessed with more power in pricing and structuring their products.
+s we know, Commercial banks are in the business of providing
banking services to individuals, small businesses and large organiations.
>hile the banking sector has been consolidating, it is worth noting that far
more people are employed in the commercial banking sector than any other
part of the financial services industry. Aobs in banking can be e4citing and
offer e4cellent opportunities to learn about business interact with people and
build up a clientele. If you are well$prepared and enthusiastic about entering
the field, you are likely to find a wide variety of opportunities open to you.
STRE*6THS '& I*+IA* C'MMERCIA, )A*-S:
Indian commercial banks possess the following strengths which are distinct
from others#
i. Tremendous branch network giving an access to almost entire spectrum
of customers
ii. Kigh market coverage
iii. 0iversified operations
iv. Intimate knowledge of local environment
v. Kigh class human resource pool
=EA-*ESS '& I*+IA* C'MMERCIA, )A*-S:
Indian commercial banks have been ailing from the following weakness
because of which they are finding it to difficult to out beat the new players
and e4ploit the emerging opportunities#
i. Bower )rofitability
ii. Kigh ,perating Costs
iii. Kigh /)+s
iv. Bow )roductivity
v. Kigh )rovisioning
vi. Comple4 and /on$ responsive organiational structure
vii. )oor asset management
viii. Inade1uate K"0 strategy
i4. Bow work culture
4. +ction flippant and inward looking management and employees
4i. %trong, militant and non$responsive unions
4ii. Bimited automation.
)ASIC !R'),EM '& A C'MMERCIA, )A*-
The basic problem facing a bank manager is to have a satisfactory
trade off between li1uidity and profitability $ the two principal but
conflicting goals of a bank. + bank deals in the money of the people. The
success of the business of a bank depends partly on the efficiency with
which it can provide services to its creditors 8depositories9, but mainly on
the confidence it inspires among the depositors. It has been able to attract the
deposits of the people not only by promising some returns on their money
but also by committing itself to repayment on demand. This is why the
public accepts bank deposits as being <as good as cash.= The banker must,
therefore, ensure an ade1uate amount of li1uidity in his assets so that he may
be able to meet any claims upon it in cash on demand. The perfectly li1uid
asset is cash itself because it can fully satisfy the depositors! claims. The
more cash a banker holds, the more obviously he can, without difficulty of
any kind, offer cash in e4change for deposits. @urther, the banker with an
ade1uate amount of cash in hand can meet the credit needs of the
community and can make speculative gains. Kowever, cash is a sterile asset
which earns no income at all. + banker cannot afford to ignore income
because the ultimate object of a bank is to make earnings on its business
which are sufficient to compensate it for the cost which it incurs on raising
%hri Chinai College ;'
funds, besides paying the wages of the staff and meeting other e4penses. If
a banker holds a large portion of his funds in ready cash without earning any
income on it, his business will result in losses, and sound the death$knell of
the bank after some time. Ke must therefore, employ the bulk of the bank!s
resources in giving loans and advances, and in investing them in high$
yielding securities. %uch investments are, however, subject to credit risk I
the risk arising from default in repayment money lent out and the money rate
risk I the risk arising out of fluctuations in the market rate of interest. The
banker will not be able to satisfy the cash re1uirements of the depositors on
demand with the funds deployed in the other investments. ,nce the
depositor!s che1ues are not honored, the bank will lose the confidence of the
public, which will result in a mass run on the bank!s counters and jeopardie
the li1uidity position of the bank. -ltimately, the very survival of the bank is
endangered.
Bi1uidity and profitability are, therefore, inimical to each other. Cash
has perfect li1uidity but lacks yield. +t the other ends are some loans and
investments which yield a high rate of interest, but are hardly li1uid at all.
The conflict between li1uidity and income is not as sharp as it appears. In
order to ensure long$run earnings, the commercial bank must retain public
confidence in order to continue to survive and provide for the li1uidity needs
of the bank.
The art of commercial banking lies in the resolution of the conflicts
between li1uidity and profitability. <It is an art because science ha not
furnished inviolable rules2 banks must be managed with discrimination and
good judgement. "ules and scientific procedures for doing the whole job
cannot be framed.=& + number of approaches, ways and means of resolving
%hri Chinai College ;&
the conflicts have been developed from time$to$time. These approaches
subse1uently came to be known as theories of li1uidity management.
)A*- +E!'SITS A*+ THEIR STRUCTURE:
Commercial banks being repositories of deposits have played
significant role in garnering savings of the people particularly after their
nationaliation, as is evidenced from Table below. It may e noted from the
Table that bank deposits boomed by over "s. F,G;,''' crores between &:;F
and 5'''
6
. There was acceleration in deposit mobiliation after
nationaliation of banks. This was because of tremendous branch e4pansion,
growth in interest rates and introduction of innovative deposit schemes. +s a
result, per capita deposits to national income rose significantly from &7.7(
as on Aune &:E: to over ;&( as at the end of Auly 5'''.
+mount of bank deposits soared to "s. :, :&,6&G crore as on *ay ;, 5''&
with per capital deposits of the order of "s. :,:''.
+eposits of Co""ercial )an%s durin 0>5?: 2@@?
Year A"ount in
crore of Rs
!er capita
+eposits .Rs1/
+eposits as or of
*ational Inco"e
As on +ece"$er
0>5?
0A@B@ 32 *A
Cune 0>D> 5ADD0 55 0E1E
Cune 0>?D 0EA2EE 0A0>B 221B
Cune 0>BD >2A233 2A3DB 501E
March 0>>0 2A@@AED> EA5@2 5210
%hri Chinai College ;5
March 0>>? EA@3AE>D ?A0E? 501@
+ec1 2@@@ DA?>AB>5 ?AD0? 521D
Sept1 2@@3 ?AD0AD?B ?ABE0 5215
CulyA 2@@E ?ABEA0DE >A>@@ 501@
MayA 2@@? >A>0A30B >A>@@ *A
ASSET:,IA)I,ITY MA*A6EME*T .A,M/
In the recent past, banks in India have started using the +sset$Biability
*anagement 8+B*9 as the techni1ue or strategy for financial management.
+B* aims at planning, directing, and regulating the levels, changes, mi4es
of assets and liabilities of banks in the short$run, usually three to twelve
months, with a view to enable them to achieve their long$term objectives.
The net interest margin and its variability are the focus of its attention so as
to ma4imise "eturn ,n .1uity 8",.9, and to minimise fluctuations in ",..
It also links capital, non$interest income and e4penses, and strategic choices
regarding products, markets, and bank structure. +B* involves giving
balanced emphasis necessary in a competitive environment characterised by
deregulatiom. and greater viability 8volatility9 of interest rates, variable rates
pricing, and the use of interest rates derivatives.
+B* is an integrated strategic managerial approach of managing a total
Balance %heet dynamics having regard to the sie and 1uality in such a way
that the net earnings from interest are ma4imied. This is done by matching
of liabilities and assets in terms of maturity, cost and yield rates.
The focus of +B* is not to build up deposits and loansCassets in isolation,
but on net interest income and recogniing interest rates and li1uidity risks.
Thus, +B* is essentially a guide for survival of a bank in deregulated
environment.
0iagramatic presentation of +B* is brought out in the following
chart#
Asset:,ia$ility Manae"ent Structure
: '$7ecti(es of A,M
%hri Chinai College ;;
Asset Manae"ent
Asset-Liability Management
6eneral
Specific
AssetA ,ia$ility F Capital Manae"ent
&inancial
)alance Sheet
Manae"ent
Inco"e F E#penditure
Manae"ent
,ia$ility Manae"ent
)rimary objective of +B* approach is to manage market risk in such away
as to minimie the impact of net interest income fluctuations in the short run
and protect the net economic value of the bank in the long run. )recisely
speaking, +B* has the following objectives#
&. To control the volatility of net interest income and net economic value
of a bank.
5. To control volatility in all target accounts .
6. To control li1uidity risk, and
;. To ensure an acceptable Balance profitability and growth rate.
$ A,M And Co""ercial )an%s:
&9 "eformed process in India has emerged mew players, new instrument
and new products at competitive rates has increased banks risks.
59 This new development forced the Commercial banks to take a re$look
on +B* to remain competitive D withstand the risk.
69 "BI also advised Commercial Banks to tighten their +sset$Biability
management and to furnish data in a format outlined by it.
In the recent past, banks in India have started using the +sset$Biability
*anagement 8+B*9 as the techni1ue or strategy for financial management.
+B* aims at planning, directing, and regulating the levels, changes, mi4es
of assets and liabilities of banks in the short$run, usually three to twelve
months, with a view to enable them to achieve their long$term objectives.
The net interest margin and its variability are the focus of its attention so as
to ma4imise "eturn ,n .1uity 8",.9, and to minimise fluctuations in ",..
It also links capital, non$interest income and e4penses, and strategic choices
regarding products, markets, and bank structure. +B* involves giving
balanced emphasis necessary in a competitive environment characterised by
deregulatiom. and greater viability 8volatility9 of interest rates, variable rates
pricing, and the use of interest rates derivatives.
)A*-S )A,A*CESHEET F !'RT&',I' MA*A6EME*T
Conventionally, banks publish balance sheets in their annual reports. The
balance sheets contains particulars of a Bank!s current assets and current
liabilities. +ssets items refer to all credit items in indicating the wealth and
claims possessed by the bank. Biability items refer to all debit items
indicating the obligations of the bank. Thus, the balance sheet indicates the
manner in which the bank has raised funds and invested them in various
types of assets. It is the means by which the banks financial position I its
solvency and li1uidity I is judged. There is, of course the e1uity of assets
and liabilities in the balance sheet of a bank, as in the case of any other
balance sheet.
In a balance sheet, it is customary to state the liabilities on the left and assets
on the right. The liabilities of the banks are the items which are to be paid by
it either to its shareholders or depositors. The assets of the banks are those
items fro which it hopes to get an income. Thus, the assets include all the
amounts owed by others to the bank.
+ much simplified format of a bank!s balance sheet may be illustrated as
follows#
%hri Chinai College ;E
The &or"at of )alance Sheet of A )an%
,ia$ilities Assets
01 Share capital
21 Reser(e &unds
31 +eposits:
a/ Ti"e deposits
$/ +e"and deposits
c/ Sa(ins deposits
51 )orro9ins
E1 'ther ite"s
01 Cash in hand
GG 9ith central $an%
GG 9ith other $an%s
21 Money at call and short notice1
31 )ills discountedA includin treasury $ills1
51 In(est"ents
E1Ad(ances
D1'ther Ite"s
: '$7ecti(es of portfolio "anae"ent#
+ commercial bank has to manage its assets and liabilities with three
considerations in mind namely, li1uidity, profitability and solvency.
Bi1uidity means the capacity of the bank to give cash on demand in
e4change for deposits. But since a bank is a commercial concern, it aims at
profitability. )rofits come from the income accruing from the assets the bank
holds. The banker must arrange hiss assets in such a way that he makes more
income. Kence, in ac1uiring assets, the banker will be influenced by the
consideration of profit. + bank ac1uires assets mainly out of the deposits of
the public. )ublic confidence in the bank, however, depends on the belief
that the bank will always be able to e4change deposits for cash. + bank,
%hri Chinai College ;F
therefore, must keep a sufficient amount of cash balance to meet the actual
demand, while for meeting the potential demand, it has to keep its assets
sufficiently li1uid. Cash has perfect li1uidity, but yields no returns at all,
while other income$yielding assets such as loans are profitable but have no
li1uidity. Bi1uidity and profitability are, therefore, conflicting consideration
for the bankers.
+nother consideration of the bank is its solvency and security. This refers to
the li1uidity and shiftability of assets. Bi1uidity is the capacity to produce
cash on demand. %hiftability means that type of assets ac1uired by a bank be
easily shiftable to other banks or to the central bank. Therefore a banker will
prefer securities which can be 1uickly disposed of and which are easily
shiftable without any loss to the bank or to those which are highly risky but
more profitable. But a bank is li1uid only to the e4tent that it can turn its
assets into cash to meet the demands of depositors and other creditors.
Thus, the two motives of a banks li1uidity and profitability are
contradictory, but have to be reconciled. + good banker is one who follows a
wise investment policy and distributes the assets in such a way both the
re1uirements of li1uidity and profitability are satisfied. The assets should
bring in ma4imum profit and should provide ma4imum security to the
depositors. The secret of success of a bank lies in striking a sound balance
between li1uidity and profitability.
In reading a balance sheet of a bank, we have to e4amine the liabilities and
assets portfolios which reveals how best the two objectives of li1uidity and
profitability have been reconciled by the banker.
%hri Chinai College ;G
o ,ia$ilities !ortfolio
The liabilities portfolio of a bank is comparatively simple. It shows how the
bank raises funds. .very commercial bank usually gets its funds in three
ways# by share capital, reserve fund and deposits from the general public.
@or instance, liabilities may be incurred by accepting or endorsing bills of
e4change on behalf of customers.
o Assets !ortfolio
The assets portfolio of the bank is both comple4 and interesting. It
represents more faithfully the varied nature and ramification of the banks
functions and investment policies.
In fact the asset side of the balance sheet indicates the manner in
which the funds entrusted to the bank are deployed. -sually, every banker
seems to arrange its assets in an ascending order of profitability and
descending order of li1uidity. Thus, the structure of a balance sheet indicates
assets appearing in the descending order or li1uidity.
%hri Chinai College ;:
CURRE*T SCE*ARI' '& C'MMERCIA, )A*-I*6:
Currently 82@@?9, overall, banking in India is considered as fairly mature in
terms of supply, product range and reach$even though reach in rural India
still remains a challenge for the private sector and foreign banks. .ven in
terms of 1uality of assets and capital ade1uacy, Indian banks are considered
to have clean, strong and transparent balance sheets$as compared to other
banks in comparable economies in its region. The "eserve Bank of India is
an autonomous body, with minimal pressure from the government. The
stated policy of the Bank on the Indian "upee is to manage volatility$
without any stated e4change rate$and this has mostly been true. >ith the
growth in the Indian economy e4pected to be strong for 1uite some time$
especially in its services sector, the demand for banking services$especially
retail banking, mortgages and investment services are e4pected to be strong.
*D+s, takeovers, asset sales and much more action 8as it is unravelling in
China9 will happen on this front in India.
In *arch 5''E, the "eserve Bank of India allowed >arburg )incus to
increase its stake in Lotak *ahindra Bank 8a private sector bank9 to &'(.
This is the first time an investor has been allowed to hold more than 7( in a
private sector bank since the "BI announced norms in 5''7 that any stake
e4ceeding 7( in the private sector banks would need to be vetted by them.
Currently, India has GG scheduled commercial banks 8%CBs9 $ 5G public
sector banks 8that is with the 3overnment of India holding a stake9, 5:
private banks 8these do not have government stake2 they may be publicly
listed and traded on stock e4changes9 and 6& foreign banks. They have a
combined network of over 76,''' branches and &F,''' +T*s. +ccording to
a report by IC"+ Bimited, a rating agency, the public sector banks hold over
F7 percent of total assets of the banking industry, with the private and
foreign banks holding &G.5( and E.7( respectively.
>e know that, in banking, there is no such thing as ?one sie fits all.? But
todayHs commercial banks are more diverse than ever. YouHll find a
tremendous range of opportunities in Commercial banking, starting at the
branch level because Commercial bankers, now are highly e4perienced in
working with businesses to develop the right financial package to meet your
uni1ue business needs.
Thus, Commercial lending today is a very intense activity, with banks
carefully analysing the financial condition of their business clients to
determine the level of risk in each loan transaction

'VERVIE= '& ICICI )A*- F S)I )A*-
ICICI )an% is IndiaHs second$largest bank with total assets of "s.
6,;;E.7G billion 8-%N F: billion9 at *arch 6&, 5''F and profit after ta4 of
"s. 6&.&' billion for fiscal 5''F. ICICI Bank is the most valuable bank in
India in terms of market capitaliation and is ranked third amongst all the
companies listed on the Indian stock e4changes in terms of free float market
capitaliation. The Bank has a network of about :7' branches and 6,6''
+T*s in India and presence in &F countries. ICICI Bank offers a wide range
of banking products and financial services.
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The origin of the State )an% of India goes back to the first decade of the
ninet eenth century with the establishment of the Bank of Calcutta in
Calcutta on 5 Aune &G'E and three years later, it was re$designed as the Bank
of Bengal 85 Aanuary &G':9. + uni1ue institution, it was the first joint$stock
bank of British India sponsored by the 3overnment of Bengal. The Bank of
Bombay 8&7 +pril &G;'9 and the Bank of *adras 8& Auly &G;69 followed the
Bank of Bengal. These three banks remained at the ape4 of modern banking
in India till their amalgamation as the Imperial Bank of India on 5F Aanuary
&:5&.
!erfor"ance of ICICI )an%
Indias largest
private sector
bank and one
stop financial
solutions
provider with a
diversified and
de-risked
business model
Indias largest
private sector
bank and one
of the top financial
solution
provider with a
diversified and
de-risked
business model
ICICI Bank today
Large capital base
Vast talent pool
Low operating costs
Technology focus
Strong corporate
relationships
ICICI Bank, IndiaHs largest bank in the private sector. It is IndiaHs second$
largest bank with total assets of "s. 6,;;E.7G billion at *arch 6&, 5''F.
ICICI Bank is the most valuable bank in India in terms of market
capitaliation.The Bank has a network of about :7' branches and 6,6''
+T*s in India and presence in &F countries. ICICI Bank offers a wide range
of banking products and financial services to corporate and retail customers
through a variety of delivery channels and through its specialised
subsidiaries and affiliates in the areas of investment banking, life and non$
life insurance, venture capital and asset management. The Bank currently
has subsidiaries in the -nited Lingdom, "ussia and Canada, branches in
%ingapore, Bahrain, Kong Long, %ri Banka and 0ubai International @inance
Centre and representative offices in the -nited %tates, -nited +rab .mirates,
China, %outh +frica, Bangladesh, Thailand, *alaysia and Indonesia. ,ur
-L subsidiary has established a branch in Belgium.
ICICI offers various products and services in India in areas of commercial
banking, online stock trading, loans 8home, auto, personal etc9, insurance,
foreign e4change trading and mutual funds. It also offers services to non$
resident Indians like money transfer, /". and /", savings accounts and
certain investment options as well.
&or" HAG
B+B+/C. %K..T ,@ ICICI )A*-
B+B+/C. %K..T as on 6&
st
*arch# $ 2@@D:2@@? Rs1 in @@@Gs
CA!ITA, F ,IA)I,ITIES Sch 2@@? 2@@D
Capital & &5,;:6,;6F &5,6:G,6;7
"eserves and %urplus 5 56;,&6:,5'F 5&6,&E&,7F&
0eposits 6 5,6'7,&'&,GE6 &,E7',G6&,F&6
Borrowings ; 7&5,7E',5E6 6G7,5&:,&6E
,ther liabilities D )rovisions 7 6G5,5GE,67E 575,5FG,FFF
Total 3A55DAEB0A02D 2AE03ABB>AE52
ASSETS
Cash D balances with "BI E &GF,'EG,F:; G:,6;6,F6F
Balance with banks D money at
call D short notice
F &G;,&;;,;75 G&,'7G,7'G
Investments G :&5,7FG,;&G F&7,;F6,:;;
+dvances : &,:7G,E77,::E &,;E&,E6&,'G:
@i4ed +ssets &' 6:,56;,565 6:,G'F,&&7
,ther assets && &E;,G::,56; &5E,7F7,&;:
Total Assets 3A55DAEB0A02D 2AE03ABB>AE52
Contingent liabilities &5 7,E5:,7::,'E' 6,:7',66E,E77
Bills for collection ;',;E7,E&'
;6,6G;,E;G
Co""on si8e State"ent of ICICI )an%
CA!ITA, F ,IA)I,ITIES Sch 2@@? I
Capital & &5,;:6,;6F &
"eserves and %urplus 5 56;,&6:,5'F F
0eposits 6 5,6'7,&'&,GE6 EF
Borrowings ; 7&5,7E',5E6 &7
,ther liabilities D )rovisions 7 6G5,5GE,67E &'
Total 3A55DAEB0A02D 0@@
ASSETS
Cash D balances with "BI E &GF,'EG,F:; 7
Balance with banks D money at call
D short notice
F &G;,&;;,;75 E
Investments G :&5,7FG,;&G 5E
+dvances : &,:7G,E77,::E 7F
@i4ed +ssets &' 6:,56;,565 &
,ther assets && &E;,G::,56; 7
Total Assets 3A55DAEB0A02D 0@@
Contingent liabilities &5 7,E5:,7::,'E' &E6
Bills for collection ;',;E7,E&' &
Co"parati(e Si8e State"ent of ICICI )an%
CA!ITA, F
,IA)I,ITIES
Sch 2@@? 2@@D 6ro9th I .J/K.:/
Capital
&
& &5,;:6,;6F &5,6:G,6;7 :7':5 &
"eserve and surplus
5
56;,&6:,5'F 5&6,&E&,7F& 5':FFE6E &'
0eposit
6
5,6'7,&'&,GE6 &,E7',G6&,F&6 E7;5F'&7' ;'
Borrowing
;
7&5,7E',5E6 6G7,5&:,&6E &5F6;&&5F 66
,ther liabilities
7
6G5,5GE,67E 575,5FG,FFF &6'''F7F: 75
Total ,ia$ilities 3A55DAEB0A02D 2AE03ABB>AE52 >32D>0EB5 3?
ASSETS
Cash D balance with "BI
E
&GF,'EG,F:; G:,6;6,F6F :FF57'7F &':
Balance with banks D
money at call D short
notice F
&G;,&;;,;75 G&,'7G,7'G &'6'G7:;; &5F
Investments
G
:&5,7FG,;&G F&7,;F6,:;; &:F&';;F; 5G
+dvances
:
&,:7G,E77,::E &,;E&,E6&,'G: ;:F'5;:'F 6;
@i4ed +sset
&'
6:,56;,565 6:,G'F,&&7 87F5GG69 8&9
,ther assets
&&
&E;,G::,56; &5E,7F7,&;: 6G65;'G7 6'
Total Assets 3A55DAEB0A02D 2AE03ABB>AE52 >32D>0EB5 3?
Contingent liabilities
&5
7,E5:,7::,'E' 6,:7',66E,E77 &EF:5E5;'7 ;6
Bills for collection ;',;E7,E&' ;6,6G;,E;G 85:&:'6G9 8F9
Trend Analysis of ICICI )an%
CA!ITA, F
,IA)I,ITIES
Sch
2@@3 I 2@@5 I 2@@E I 2@@D I 2@@? I
Capital
& :,E5E,E'' &'' :,EE;,'&5 &'' &',GEF,F7G &&6 &&5,6:G,6;7 &&EG & &5,;:6,;6F &6'
"eserve and surplus
5 E6,5'E,76G &'' F6,:;&,7E& &&F &&G,&6&,:7; &GF 5&6,&E&,7F& 66F 56;,&6:,5'F 6F'
0eposit
6 ;G&,E:6,'E6 &'' EG&,'G7,G;7 &;& ::G,&GF,FF7 5'F &,E7',G6&,F&6 6;6 5,6'7,&'&,GE6 ;F:
Borrowing
; 6;6,'5;,5'6 &'' 6'F,;'5,6:6 :' 667,;;;,:E' :G 6G7,5&:,&6E &&5 7&5,7E',5E6 &;:
,ther liabilities
7 &F',7E:,57G &'' &G',&:;,:6' &'E 5&6,:E&,E'E &57 575,5FG,FFF &;G 6G5,5GE,67E 55;
Total 0A@DBA00>ADD2 0@@ 0A2E2A2BBA?50 00? 0AD?DAE>5A@E3 0E? 2AE03ABB>AE52 23E 3A55DAEB0A02D 323
ASSETS
Cash D balance with
"BI
E ;G,GE&,;;7 &'' 7;,'F:,:EE &&& E6,;;:,''; &6' G:,6;6,F6F &G6 &GF,'EG,F:; 6G6
money at call D short
notice
F &E,'5G,7G& &'' 6',E5E,6FG &:& E7,G7',F&: ;&& G&,'7G,7'G 7'E &G;,&;;,;75 &&;:
Investments G 67;,E56,''5 &'' ;6;,677,5&; &55 7,';,GF6,757 &;5 F&7,;F6,:;; 5'5 :&5,7FG,;&G 57F
+dvances : 765,F:;,&;; &'' E5E,;FE,5GG &&G :&;,'7&,7&F &F5 &,;E&,E6&,'G: 5F; &,:7G,E77,::E 6EG
@i4ed +ssets &' ;',E'F,5F; &'' ;',7E;,&;& &'' ;',6G',6E& :: 6:,G'F,&&7 :G 6:,56;,565 :F
,ther +ssets && F7,5'7,5&E &'' EE,&GE,F7; GG GF,:GG,:5F &&F &5E,7F7,&;: &EG &E;,G::,56; 5&:
Total Assets 0A@DBA00>ADD2 0@@ 0A2E2A2BBA?50 00? 0AD?DAE>5A@E3 0E? 2AE03ABB>AE52 23E 3A55DAEB0A02D 323
Contingent liabilities &5 G:;,6G7,'F' &'' 5,'5:,;&:,'5F 55F 5,EG&,76F,6G5 6'' 6,:7',66E,E77 ;;5 7,E5:,7::,'E' E5:
Bills for collection &6,6EF,G;6 &'' &7,&':,675 &&6 56,:5',:55 &F: ;6,6G;,E;G 657 ;',;E7,E&' 6'6
%hri Chinai College E'

MAI* )RA*CH '& STATE )A*- '& I*+IAA !A*ACI
!erfor"ance of State )an% of India .S)I/
%hri Chinai College E&
%BI is the number one Bank in India and is regarded as IndiaHs largest commercial
bank, listed in the @ortune 7'' among Banks world wide and is having more than
:6'' branches world wide 8appro4imately &;( of all bank branches9 and
commands one$fifth of deposits and loans of all scheduled commercial banks in
India. The main Branch ,f %tate Bank ,f India is at )anaji, has the uni1ue
privilege in 3oa to trace back its roots to two centuries of banking. +s there was
no formal transition either in 3overnment or in banking from )ortuguese control,
for a time the entire territory of 3oa was without any commercial banking facility.
In this backdrop, )anaji Branch then became first Branch of a Bank to start
functioning in 3oa.
The %tate Bank 3roup includes a network of eight banking subsidiaries and
several non$banking subsidiaries offering merchant banking services, fund
management, factoring services, primary dealership in government securities,
credit cards and insurance.
The eiht $an%in su$sidiaries are:
$ %tate Bank of Bikaner and Aaipur 8%BBA9
$ %tate Bank of Kyderabad 8%BK9
$ %tate Bank of India 8%BI9
$ %tate Bank of Indore 8%BI"9
$ %tate Bank of *ysore 8%B*9
$ %tate Bank of )atiala 8%B)9
$ %tate Bank of %aurashtra 8%B%9
$ %tate Bank of Travancore 8%BT9
The origins of %tate Bank of India date back to &G'E when the Bank of Calcutta
8later called the Bank of Bengal9 was established. In &:5&, the Bank of Bengal and
two other )residency banks 8Bank of *adras and Bank of Bombay9 were
amalgamated to form the Imperial Bank of India. In &:77, the controlling interest
in the Imperial Bank of India was ac1uired by the "eserve Bank of India and the
%hri Chinai College E5
%tate Bank of India 8%BI9 came into e4istence by an act of )arliament as successor
to the Imperial Bank of India.
Today, %tate Bank of India 8%BI9 has spread its arms around the world and has a
network of branches spanning all time ones. %BIHs International Banking 3roup
delivers the full range of cross$border finance solutions through its four wings $
the 0omestic division, the @oreign ,ffices division, the @oreign 0epartment and
the International %ervices division.
&EATURES '& STATE )A*- '& I*+IA
$ .4tended Banking Kours
$ "ound the Clock +T* and Telebanking
$ +ttractive 0eposit %chemes
$ The first Branch in operation in )ost Biberation 3oa
$ >arm unmatched ambience that you will love
$ @ully computeried Branch with latest Technological value added services.
$ Branch with the largest number of Customers among all Banks
$ The number one Bank in 3oa
$ )art of a group with over a century of Banking traditi
&or" HAG
B+B+/C. %K..T ,@ S)I )A*- ,T+
B+B+/C. %K..T as on 6&
st
*arch# $ 2@@?:2@@D Rs in @@@Gs
CA!ITA, F,IA)I,ITIES Sch 2@@? 2@@D
Capital
& 75E,5:,G: 75E,5:,G:
"eserve and surplus
5 6'FF5,57,F7 5F&&F,FG,F5
0eposit
6 ;6775&,'G:; 6G'';E,'7,76
Borrowing
; 6:F'6,66,75 6'E;&,5;,;6
,ther liabilities
7 E'';5,57,FG 77E:F,7E,GG
Total
EDDEDEA23ABB 5>5@2BA>EA5E
Assets
Cash D balance with "BI E 5:'FE,;5,7' 5&E75,F',6:
Balance with banks D money at call D short notice F 55G:5,5E,7' 55:'F,5:,F5
Investments G &;:&;G,GG,57 &E576;,5;,&'
+dvances : 66F66E,;:,67 5E&G'',:6,7:
@i4ed +ssets &' 5G&G,GE,EF 5F75:66:
,ther assets && 575:56'E& 556G',G;,5E
Total EDDEDEA23ABB 5>5@2BA>EA5E
Contingent liabilities &5 6'E7:','&,77 55,GGG,6F,F5
Bills for collection 566EF,7&,': 5'7:5,:767
%hri Chinai College E;
Co""on si8e State"ent of S)I )an%
CA!ITA, F ,IA)I,ITIES Sch 2@@? I
Capital & 75E,5:,G: &
"eserves and %urplus 5 6'FF5,57,F7 7
0eposits 6 ;6775&,'G:; FF
Borrowings ; 6:F'6,66,75 F
,ther liabilities D )rovisions 7 E'';5,57,FG &'
Total lia$ilities EDDEDEA23ABB 0@@
ASSETS
Cash D balances with "BI E 5:'FE,;5,7' 7
Balance with banks D money at call
D short notice
F 55G:5,5E,7' ;
Investments G &;:&;G,GG,57 5E
+dvances : 66F66E,;:,67 7:
@i4ed +ssets &' 5G&G,GE,EF &
,ther assets && 575:56'E& 7
Total Assets EDDEDEA23ABB 0@@
Contingent liabilities &5 6'E7:','&,77 7;
Bills for collection 566EF,7&,': ;
Co"parati(e Si8e state"ent of S)I $an%
Capital DBiabilities Sch 2@@? 2@@D 6ro9th I .J/K.:/
Capital
&
75E,5:,G: 75E,5:,G: $ $
"eserves and surplus
5
6'FF5,57,F7 5F&&F,FG,F5 6E7;,;F,'6 &6
0eposits
6
;6775&,'G:; 6G'';E,'7,76 77;F7.'6,;& &7
Borrowings
;
6:F'6,66,75 6'E;&,5;,;6 :'E5,':,': 6'
,ther liabilities
7
E'';5,57,FG 77E:F,7E,GG ;6;;,EG,:' G
Total ,ia$ilities EDDEDEA23ABB 5>5@2BA>EA5E ?2E3DA2BA53 0E
Assets
Cash D balance with "BI
E
5:'FE,;5,7' 5&E75,F',6: F;56,F5,&& 6;
Balance with banks D money at
call D short notice
F
55G:5,5E,7' 55:'F,5:,F5 8&7,'6,559 8'.&9
Investments
G
&;:&;G,GG,57 &E576;,5;,&' 8&66G7,67,G79 8G9
+dvances
:
66F66E,;:,67 5E&G'',:6,7: F7767,77,FE 5:
@i4ed +ssets
&'
5G&G,GE,EF 5F75:66: E7:65G 5
,ther assets
&&
575:56'E& 556G',G;,5E 5:&&;E67 &6
Total Assets EDDEDEA23ABB 5>5@2BA>EA5E ?2E3DA2BA53 0E
Contingent liabilities
&5
6'E7:','&,77 55,GGG,6F,F5 FFF'G,E6,G6 6;
Bills for collection 566EF,7&,': 5'7:5,:767 5FF;,77,F; &6
Trend Analysis
%hri Chinai College EE
%hri Chinai College EF
CA!ITA, F
,IA)I,ITIES
Sch 2@@D I 2@@? I
Capital
& 75E,5:,G: &'' 75E,5:,G: $
"eserve and surplus
5 5F&&F,FG,F5 &'' 6'FF5,57,F7 &&6
0eposit
6 6G'';E,'7,76 &'' ;6775&,'G:; &&7
Borrowing
; 6'E;&,5;,;6 &'' 6:F'6,66,75 &6'
,ther liabilities
7 77E:F,7E,GG &'' E'';5,57,FG &'G
Total
5>5@2BA>EA5E 0@@ EDDEDEA23ABB 00E
ASSETS
Cash D balance with "BI E 5&E75,F',6: &'' 5:'FE,;5,7' &6;
money at call D short notice
F 55:'F,5:,F5 &'' 55G:5,5E,7' &''
Investments G &E576;,5;,&' &'' &;:&;G,GG,57 :5
+dvances : 5E&G'',:6,7: &'' 66F66E,;:,67 &5:
@i4ed +ssets
&' 5F75:66: &'' 5G&G,GE,EF &'5
,ther assets && 556G',G;,5E &'' 575:56'E& &&6
Total Assets 5>5@2BA>EA5E 0@@ EDDEDEA23ABB 00E
Contingent liabilities &5 55,GGG,6F,F5 &'' 6'E7:','&,77 &6;'
Bills for collection 5'7:5,:767 &'' 566EF,7&,': &&6
C'MME*TS: :
Co""on si8e Analysis::
@rom the above common sie statement of S)I $an% we observe that the
percentage of capital is almost same as compared to ICICI bank. %BI banks
percentage of major funds from deposits and advances is high. The
borrowed funds are also less which is again not a good sign.
Hence they should introduce $orro9in and di(ersify their assets
and funds1
+s we go through common sie balance sheet of ICICI $an% we see that
percentage of capital of these bank is same as compared to %BI. 0eposits
and advances is less over here, but its "eserves and surplus, borrowings, call
money, etc. is high and we also know that its flow of funds is spread in other
sources also.

Co"parati(e Analysis: :
Capital of ICICI bank has increased by &(, whereas capital of %BI has
remained constant, but there is growth in capital of ICICI bank which
indicate that this is having sound position in market.
"eserves D %urplus of ICICI bank is appro4imately around &'(. But %BI
bank has &6( which indicate ICICI bank have less "eserves D %urplus
which is dangerous in future to e4pand D face challenges.
0eposits of ICICI B+/L is ;'( but %BI bank!s deposit is &7( due to
which it has failed to raise fresh capital from potential or present customer.
Borrowing of ICICI bank is 66( and that of %BI is 6'(. + bank should
borrow from outside to e4pand their work and business, which will increase
their profitability growth.
%hri Chinai College EG
Cash in hand balance with other bank call money deposits of ICICI bank is
high as compared to %BI bank which indicates that ICICI bank has good
track record.
The loans D advances of ICICI bank is also higher as compared to %BI
bank, which shows ICICI bank is earning more interest profit.
Trend analysis#$
>hen we go through the trend analysis of %BI bank we can observe that
even they are doing a fair business and are able to increase their customer
base.
The total asset of ICICI is increasing year by year and they are able to gain
income, profit, D public confidence.
ICICI $an%: : >hen we go through trend analysis of ICICI bank, we see
that there is a tremendous growth in capital, deposits and borrowings which
shows that it has gained confidence of public and also its profit has gone
satisfying upwards.
+s far as total assets are concerned there has been tremendous increase in
assets including loans D advances, investments, etc which shows that profits
and incomes of ICICI bank are increasing.
S)I $an%: : >hen we go through trend analysis of %BI bank, we can find
that there has been a very slow growth in deposits, borrowing and also in
capital, which shows that it has failed to attract the customers which has
resulted in low profit margin and less incomes as compared to ICICI.
%hri Chinai College E:
+s far as the fi4ed assets are concerned they have increased by 5(. Boans
and advances of %BI bank is showing less growth as compared to that of
ICICI bank.
ThusA 9e can conclude that the profit of ICICI $an% is "uch "ore
than S)I $an%.
%hri Chinai College F'
PERFORMANCE HIGHLIGHTS OF ICICI BANK
1%
7%
67%
15%
5%
5%
Capital
Reseres ! S"rpl"s
#ep$sits
B$rr$%i&'s
Cas( )al* %it( RBI
Fi+e, ! $t(er Assets
PERFORMANCE HIGHLIGHTS OF SBI BANK
1% 5%
77%
7%
5%
5%
Capital
Reseres ! S"rpl"s
#ep$sits
B$rr$%i&'s
Cas( )al* %it( RBI
Fi+e, ! Ot(er Assets
CASE STU+Y '& ICICI )A*- F S)I )A*-
%hri Chinai College F&
In spite of all this, the long case on ICICI is compelling. In my opinion, ICICIHs
earnings growth will continue thanks to the rising middle class income in India.
*ore and more people now have disposable income on their hands to buy car8s9,
buy houses, invest or just plain deposit in the savings accounts. In speaking to a lot
of my friends and family back in India, almost everyone from the younger
generation prefers private banks like ICICI or %BI bank.
The younger generation does not like government$owned banks because they do
not understand the concept of ?customer service?$$ they treat you like they are
doing you a favor by safe$keeping your hard$earned money. +verage salary
increases in India are currently at 6'( and this alone gives people a lot of
disposable income at hand.
Co"petition and personal e#perience
ICICI faces competition primarily from %BI bank, which is another growing bank
in the private sector, as well as others like K0@C, Canara bank, and )unjab
/ational Bank. But here we will focus on two banks ICICI and %BI. +lso, after
having spoken to friends and family back in India, I got the impression that ICICI
was more aggressive in terms of its marketing strategies as well as following$up
with potential customers. ,ne of my uncle was trying to open up an /". savings
account about a year back, he was e4ploring options with %BI as well as ICICI.
+fter having emailed both through their respective company websites, he is still
waiting on hearing back from %BI, whereas ICICI got in touch with him within ;G
hours. This gave me the impression that if %BI bank did not care about a potential
customer, it wouldnHt care much after we actually became their customer $ no
points for guessing he finally ended up opening an account with %BI.
Conclusion
+ll in all, I think ICICI has a very compelling growth story ahead of it as Indian economy
continues to boom as we have seen above by doing analysis of the financial statements
which is in the form of Common sie, Comparative and Trend analysis.
SHRI CHINAI COLLEE O! CO""ERCE # ECONO"ICS
%hri Chinai College F5
Sur$ey for %ro&ect on Co''ercial (an)ing
NA"E* +
,ESINATION* +
SINAT-RE* +
CONTACT NO.* +
/0 ,oes a Co''ercial (an) play a 'a&or role in growth # 1e$elop'ent of the
country2
3es No

40 3ou open an account in a Co''ercial ban) for what reason2
High profits 5uic) Ser$ices
6hy2
70 How 8uic) is your Co''ercial (an) at respon1ing to your 8ueries # proble'2
%oor (a1 oo1 E9cellent
6hy2
:0 In which areas of a co''ercial ban) you nee1 i'pro$e'ent2
Interest Ser$ice (eha$iours Sche'es Others

Co''ent for I'pro$e'ent*
%RO;ECT -I,E* "rs. Leena Nair Sur$ey con1ucte1 by*
SARI<A. A. SHETT3
SINAT-RE* ____________________ T3((I Roll No. 5?
- Analysis -
&9 0oes a Commercial bank play a major role in growth and
development of the countryO
-%
2/3
.ES
NO
Analysis:
@rom the above graph we can analye that :5( of the people
interviewed think that a Commercial Bank does play a major role in
economic development whereas there are still G ( of them who
don!t feel the same way.
59 Kow do you find depositing in a Commercial BankO

?EI
2EI
Si/ple
C$/ple+
Analysis
@rom the above graph we can analye that F7( of the people interviewed
find it convenient for depositing in a Commercial Bank, whereas 57( of
the people find it difficult for depositing.
%hri Chinai College F;
69 Kow 1uick is your Commercial Bank at responding to your 1ueries
and problemO
15%
01%
5%
56%
P$$r
Ba,
G$$,
E+2elle&t
Analysis
@rom the above graph we can analye that 7E( of the people are
contented with the way a commercial bank response to their 1ueries and
problems.
;9 In which areas of a Commercial bank you need improvementO
17%
51%
0%
00%
-%
I&terest
Seri2e
Be(ai$"r
S2(e/es
Ot(ers
Analysis
@rom the above graph we can analye that 7&( of the people want
reasonable interest rates. +nd about 55( of the people want new,
effective and efficient schemes to be introduced by the banks. +nd about
5F( of the people want convenient and effective services to be provided
by commercial banks.
C'*C,USI'*:
@riends, as we know, over five decades the Commercial banks in
India achieved astounding success by enormously spreading banking
services in far$flung and unbanked areas of the country through their
massive branch network are garnering burgeoning amount of savings which
represent half of the 30) of the country. + major portion of these resources
had been deployed to meet the needs of priority sectors which are critical to
the economy.
Kowever, it is crucial for the commercial banking industry to meet the
increasingly comple4 savings and financing needs of the economy by
offering a wider and fle4ible range of financial products tailored for all types
of customers. In recent years, it is being felt widely that the commercial
banking system has not actually grown as sound D vibrant as it needed to
be. %trong capital positions and balance sheets places the Commercial banks
in a better position to deal with and absorb the economic shocks. These
Banks need to face competition without diluting the operating standards.
In banking, there is no such thing as ?one sie fits all.? But todayHs
commercial banks are more diverse than ever. YouHll find a tremendous
range of opportunities in commercial banking, starting at the branch level
because commercial bankers, now are highly e4perienced in working with
businesses to develop the right financial package to meet your uni1ue
business needs. The face of Commercial banking is changing rapidly.
Competition is going to be tough Banks should avail of the e4isting and
upcoming opportunities as well as address the above$discussed issues if they
have to succeed, not just survive, in the changing environment.
Thus, Commercial Banks occupy a dominant place in the money
market, they are like a reservoir into which flow the savings, the idle
surplus, money of households and from which loans are given on interest to
businessmen D others who need them for investment or productive uses.
%hri Chinai College FE
REC'MME*+ATI'*S
Banking in India has made a remarkable progress in its growth and
e4pansion, as well as business with social perspective in the fulfillment of
national objectives. Indian Commercial banking has developed, but, its
perfection is yet to be seen. There still remains many tasks to be fulfilled.
&. %till there are villages left without banking facilities, so many more rural
banks branches need to be opened.
5. Puality of Commercial banking facilities should be improved to the
atmost satisfaction of the customer.
6. ,perational costs of Commercial banks should be reduced to the
minimum profitability and working results must be ma4imied.
;. Banking staff should be ade1uately trained.
7. *ore lending should be made in favour of priority sectors.
E. *alpractices, fraud, corruption and red$tapism must be done away with.
F. *ore attention should be paid to the development of e4ports.
G. /ationalised banks should give more technical assistance to the small
industrialists.
:. Interest rates on deposits should be enhanced reasonably up to &5$&6 (
so that savers get their legitimate returns.
&'. The high level of overdues of banks have become a matter of concern.
%o, banks should make all possible efforts to reduce their overdues. This
all re1uires that no loans should be given without proper identification
and address of the deserving rural poor.
Thus, in order that the association of banks with industry is more fruitful and
rewarding, many innovations have to be planned and introduced
systematically and greater degree of managerial competence will have to be
developed in Commercial banking sector.
%hri Chinai College FF
&UTURE !R'S!ECTS '& C'MMERCIA, )A*-I*6:
Indian banking has developed. But, its perfection is yet to be seen. There
still remain many tasks to be fulfilled. Kistorically, profitability from
lending activities has been cyclic and dependent on the needs and strengths
of loan customers. In recent history, investors have demanded a more stable
revenue stream and banks have therefore placed more emphasis on
transaction fees, primarily loan fees but also including service charges on
array of deposit activities and ancillary services 8international banking,
foreign e4change, insurance, investments, wire transfers, etc9. Kowever,
lending activities still provides and in futureA too will provide bulk of a
Commercial bankHs income.
+s part of the financial services industry, commercial banking are
worldwide attempting to compete better by improving core operations and
differentiating the customer e4perience. The banking sector has been
consolidating2 it is worth noting that far more people are employed in the
Commercial banking sector than any other part of the financial services
industry. Aobs in banking can be e4citing and offer e4cellent opportunities to
learn about business, interact with people and build up a clientele. In future,
if we are well$prepared and enthusiastic about entering the field, we are
likely to find a wide variety of opportunities open to us.
Thus, we can predict the future of Commercial bank, to be spreaded world
wide. They will be providing an unprecedented level of service to a wide
range of business clients, from small business, through to multi$national
corporate clients. In future, Commercial Bank will come up with more
innovative and e4perienced depth knowledge of specific sectors, to meet all
of our banking re1uirements.
%hri Chinai College FG
Annexure
I had (isited ICICI )an%A Andheri L9M $ranch on 2B
th
Auust 2@@?1
There I inter(ie9ed Miss1 Shu$hani 6ai%9ad N Assistant Manaer
of the $an%1 It 9as a (ery ood e#perience inter(ie9in her1 Also she
entertained "e to the full e#tent and rendered full support $y
pro(idin "e 9ith the rele(ant infor"ation in reards to the
co"pletion of this pro7ect1
%hri Chinai College F:
)I),I'6RA!HY
=e$sites
9991oole1co" 9991r$i$ulletin1co"
9991 icici1co"
9991 $ritannica1co"
)oo%s
Co""ercial )an%in Manae"ent N )y OReed Ed9ardP
)an%inA Theory and !ractice N )y OReddy ! *P
)an%in N $y !ar%er C
Maa8ines
$ !R'&ESSI'*A, )A*-ERS .The IC&AI Uni(ersityA Cune 2@@?/
'ther sources:
Interview with *iss %hubhangi 3aikwad 8+ssisstant *anager9 of ICICI
Bank, +ndheri8>9 Branch and *rs. *ithila Aadhav 8 Chief *anager9 of
%BI, +ndheri 8.9 Branch.
%hri Chinai College G'

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