Banking problems in rural areas (A Comparative study


A Brief History of Banking
In the recent era, the story of "the Banks" commences with the development of the modern banking system in Middle Ages Europe. At that time, disposable wealth was usually held in the form of gold or silver bullion. For safety, such assets were kept in the custody of the local goldsmith, he usually being the only individual who had a vault on his premises. The goldsmith would issue a receipt for the deposit and, to undertake financial transactions, the buyer would withdraw his gold and give it to the seller, who would then deposit it again, frequently with the same goldsmith. As this was a time-consuming process, it became common practice for people to simply exchange smiths' receipts when conducting financial transactions. As time passed, the goldsmiths began to issue receipts for specific values of gold, making buying and selling easier still. The smiths' receipts thus became the first banknotes. The goldsmiths, now fledgling bankers, noticed that at any one time only a small proportion of the gold held with them was being withdrawn. So they hit upon the idea of issuing more of the receipt notes themselves, notes that did not refer to any actual deposited wealth. By giving these receipts to people seeking capital, in the form of loans, the goldsmiths could use the money deposited with them by others to make money for themselves. It was found that, for every unit of gold held by the goldsmith, ten times the sum could be safely issued as notes without anyone usually becoming any the wiser. If a goldsmith held, say, 100 pounds of other people's gold in his vaults, he could issue banknotes to the value of 1000 pounds. As long as no more than 10 percent of the holders of those notes wanted their gold at any one time, no one would realize the fraud being perpetrated. This practice, known as "fractional reserve lending," continues to this day and is actually the backbone of the modern banking industry. Banks typically loan ten times their actual financial holdings, meaning 90% of the money they lend does not now, never has, and never will exist.

Loans issued by the goldsmiths had to be paid back to them with interest, meaning non-existent money slowly became converted to tangible assets in the form of goods and labor. Should the loan be defaulted upon, the banker had the right to seize the defaulter's property. As time passed, 1

Banking problems in rural areas (A Comparative study) therefore, the goldsmiths became wealthier and wealthier. They had devised a scheme to create money out of thin air and then convert this money into real goods, labor, or property. A loan of money at 12% interest recouped not merely 12% for the banker, but 112%, as it does to this day.

As the industrial era began, so the potential for furthering this scheme increased exponentially. The goldsmiths were now fully-fledged bankers, and their ability to create money out of thin air and then convert it into tangible assets enabled them to begin to control whole industries to the point where the worlds of banking and industry became, to all intents and purposes, seamless entities. As the twentieth century dawned, the banking families hit upon a new means to consolidate and increase their gains. They discovered that by periodically restricting the money supply crashes within the emergent stock exchanges of the world could easily be engineered. The most notable example of this was the famous Wall Street Crash of 1929. What the history books usually fail to record is that, in a crash, wealth is not actually destroyed, but merely transferred. The "Crash of '29" allowed the most powerful of the banking and industrial families to absorb the weaker elements, generating even greater levels of centralized control. As the technological revolution progressed, so the buying up of TV stations and newspapers allowed the creation and control of the mass media. This served to ensure that only a portrayal of events that suited the interests of the elite banking families would get to public attention invariably one that all but denied their very existence.


Banking problems in rural areas (A Comparative study)

INTRODUCTION ABOUT BANK In modern age, Banking constitutes the fundamental basis of economic growth. The term bank is being used since long time but there is no clear conception regarding its beginning. According to one viewpoint, in good old days, Italian moneylenders were known as Bane chi or Banacheri, because these people kept special type of table to transact their business, called Ban chi. Origin of the word bank belongs to the word Banchi or to the Greek word Banque. Both these words refer to some kind of banking. According to another viewpoint, bank originated from the German word (ital) Banque meaning Joint Fund.

Casa De SanGiorgio was the first bank to be established in 1148. The First Public bank of Veanice. It was established in 1157.
As per Banking Regulation Act. 1949, “Banking” means: “Accepting for the purpose of lending or investment of deposit of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise” In simple words, bank refers to an institution that deals in money. This institution accepts deposits from the people and gives loans to those who are in need. Besides dealing in money, banks these days perform various other functions such as credit creation, agency job and general service. Bank, therefore, is such an institution, which loans, creates credit and undertakes agency work. accepts deposits from the people, gives


Banking problems in rural areas (A Comparative study)

Without a sound and effective banking system in India, it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades, India's banking system has had several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitan or cosmopolitan areas in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is as simple as instant messaging or dialing for a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Phase 1:-Early phase from 1786 to 1969 of Indian Banks Phase 2:-Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. Phase 3:-New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.


Banking problems in rural areas (A Comparative study)

Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865, Allahabad Bank was established and first time exclusively by Indian, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase, the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those days public had lesser confidence in the banks. As a result deposit mobilization was slow. However, the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.


Banking problems in rural areas (A Comparative study)

Phase II
Government took major steps in Indian Banking Sector Reform after independence. In the 1960’s a major portion of nationalization was carried out with nationalization of seven banks forming subsidiaries of State Bank of India on 19th July 1960. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. Fourteen major commercial banks in the country were nationalized. Second phase of nationalization under Indian Banking Sector Reform was carried out in 1980’s with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:
• • • • • • • •

1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1960: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of Credit Guarantee Corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector banks in India experienced a rise of approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.


Banking problems in rural areas (A Comparative study)

Phase III
This phase is characterized by introduction of many more products and facilities in the banking sector due to various reform measures. In 1991, under the chairmanship of M Narasimham, a committee of the same name was set up. Which worked for the liberalization of banking practices? The country was flooded with foreign banks and their ATM’s proliferation. Efforts were started to give a satisfactory service to customers. Phone banking and net banking were introduced. The entire system became more convenient and swift. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

At present, the number of nationalized banks is 20. Several Foreign banks were allowed to operate as per the guidelines of RBI. At present the banking system can be classified in following categories: PUBLIC SECTOR BANKS o Reserve Bank of India o State Bank of India and its 7 associate Banks o Nationalized Banks (20 in number) o Regional Rural Banks sponsored by Public sector Banks


Banking problems in rural areas (A Comparative study) PRIVATE SECTOR BANKS o o o o o Old Generation Private Banks New Generation Private Banks Foreign Banks in India Local Area Banks Non Scheduled Banks

CO-OPERATIVE SECTOR BANKS o o o o o o o State Co-operative Banks Central Co-operative Banks Primary Agriculture Credit Societies Land Development Banks Urban Co-operative Banks State Land Development Banks Scheduled Co-operative Banks

DEVELOPMENT BANKS o o o o o o o Industrial Finance Corporation of India (IFCI) Industrial Development Bank of India (IDBI) Industrial Credit & Investment Corporation of India (ICICI) Industrial Investment Bank of India (IIBI) Small Industries Development Bank of India (SIDBI) National Bank for Agriculture & Rural Development (NABARD) Export-Import Bank of India


Banking problems in rural areas (A Comparative study)

The Reserve Bank of India (RBI) is the central bank of India, and was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office is located at Mumbai since inception. Though originally privately owned, since nationalization in 1949, RBI is fully owned by the Government of India. RBI is governed by a central board (board headed by a governor) appointed by the Central Government of India. The current governor of RBI is Dr.Y.Venugopal Reddy, who succeeded Dr. Bimal Jalan on September 6, 2003. RBI has 22 regional offices across India.

Main Functions
Monetary Authority:
o o

Formulates implements and monitors the monetary policy. Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within which the country's banking and financial system functions. Objective: maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.


Manager of Exchange Control:
o o

Manages the foreign exchange under Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:
o o

Issues and exchanges or destroys currency and coins not fit for circulation. Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality. 9

Banking problems in rural areas (A Comparative study)
o o

Developmental role Performs a wide range of promotional functions to support national objectives. Related Functions Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. Banker to banks: maintains banking accounts of all scheduled banks.



Central Bank & Monetary Authority“RBI”Apex Banking Institutions






National Housing Bank

Banking Institutions

Commercial Banks

Regional Rural Banks

Co-operation Bank State Cooperative Bank

Public sector banks

Private Sector Banks

Central Distt. Cooperative Bank State Banks Nationalized Banks Subsidiary Companies State Bank of India Subsidiary banks Indian Banks
Foreign Banks

Primary Credit Societies

Old Banks

New 10 Banks

Local Banks

Banking problems in rural areas (A Comparative study)














Banking problems in rural areas (A Comparative study)

Entire banking in the state of Jammu and Kashmir was performed by traditional lenders till 1920 -30 and that too at exorbitant interest rates. At the same time some banks functioned on a very limited scale, such as Punjab National Bank Limited, Grind-lay’s Bank and Imperial Bank of India. The role of these banks was reduced to the acceptance of deposits, as they could not grant loans and advances to the people of the state owing to the statutory limitations. Under this scenario banks could not ameliorate the financial and social position of the people of the state. To over come this critical situation the then Maharaja of the state conceived an idea of setting up of a state bank in the state. After a prolonged exercise and deliberations the assignment for establishment of “The Jammu and Kashmir Bank Limited” was given to the late Sir Sorabji N Pochkhanwala, the then Managing Director of the Central Bank of India. Mr. Pochkhawala formulated a scheme on 24-09-1930, suggesting establishment of a semi state Bank with participation in capital by state and the public under the control of state Government. Thus the bank was formally incorporated on the Ist of October 1938 and commenced business from 4th of July 1939 at its Registered Office, Residency Road, Srinagar, Kashmir. The Jammu & Kashmir Bank Limited has been the first of its nature and composition as a State owned bank in the country. The state Govt. besides contributing half of the issued capital also appointed it as its bankers for general banking and treasury business. In its formative years, the bank had to encounter several serious problems, particularly around the time of independence, when out of its total of ten branches two branches of Muzaffarabad and Mirpur fell on the other side of the line of control along with cash and other assets; in 1947. However the State Govt. came to its rescue with the assistance of Rs.6.00 Lacs to meet the claims thereafter, the bank stead fastily over came its difficulties and kept growing. Following the extension of Central laws to the state of Jammu & Kashmir, the bank was defined as a govt. company as per the provisions of Indian Companies Act 1956 .The bank had its first 12

Banking problems in rural areas (A Comparative study) full time chairman in 1971, following social Central measures in banks .The year 1971 was a turning point for the bank on conferment of scheduled bank status and witnessed remarkable progress in all the vital fields of operations .The bank was declared as "A" Class Bank by Reserve Bank of India in 1976. In recognition of dominant role and exalted performance , Reserve bank of India appointed the bank as its agent for performing the general banking business of the Central Govt. especially in maintaining currency chests and collection of taxes.

The Jammu & Kashmir Bank is today one of the fastest growing banks in India with a network of more than 526 branches/offices spread across the country offering world class banking products/services to its customers. Today, the Bank has a status of value driven organization and is always working towards building trust with Shareholders, Employees, Customers, Borrowers, Regulators and other diverse Stakeholders, for which it has adopted a strategy directed to developing a sound foundation of relationship and trust aimed at achieving excellence, which of course, comes from the womb of good Corporate Governance. Good Governance is a source of competitive advantage and a critical input for achieving excellence in all pursuits. J&K Bank considers good Corporate Governance as the sine qua non of a good banking system and has adopted a policy based on all the four pillars of good governance – Transparency, Disclosures, Accountability and Value, enabling it to practice Trusteeship, Transparency, Fairness and Control, leading to stakeholders delight, enhanced shareholder value and ethical corporate citizenship. It also ensures that bank is managed by an independent and highly qualified Board following best globally accepted practices, transparent disclosures and empowerment of shareholders, besides ensuring to meet shareholders aspirations and societal expectations following the principles of management's executive freedom to drive the bank forward without undue restraints but within the framework of effective accountability.


Banking problems in rural areas (A Comparative study)


The Bank's vision is “To catalyze economic transformation and capitalize on growth”. The bank aspires to make Jammu and Kashmir the most prosperous state in the country, by helping create a new financial architecture for the J&K economy, at the center of which will be the J&K Bank. The Bank is committed to achieve healthy growth in profitability and simultaneously to remain consistent with the Bank's risk appetite and at the same time ensuring the highest levels of ethical standards, professional integrity and regulatory compliance.

The company’s mission is two-fold: To provide the people of J&K international quality financial service and solutions and to be a super-specialist bank in the rest of the country. The two together will make it the most profitable bank in the country.

The Bank recorded an outstanding achievement in the last financial year (2008-09.) in key areas of its operations. During the year 2008-09., the Bank the bank continued to register an impressive improvement in earnings. During the year, the total income has increased by 13.34% to Rs. 2056.54 crore from Rs.1817.10 crore in the previous year. The Capital & Reserves of the Bank increased from Rs.1799.47 crore to Rs.2008.73 crore as on 31st March 2009. The Capital Adequacy Ratio stood at 13.24%, which is comfortably much above the minimum stipulated by Reserve Bank of India. The Bank posted a net profit of Rs.274.49 crore in the last fiscal as against the previous year figure of Rs.176.84 crore in 2008-09, registering an impressive growth of 55.22%.


Banking problems in rural areas (A Comparative study) Bank's aggregate deposits recorded an appreciable accretion of 7.28% to Rs.25194.29 crore at the end of financial year 2008-09 The credit portfolio of the Bank also recorded an appreciable growth during the year. The total advances of the Bank increased to Rs.17080 crore against the corresponding period of the previous year registering a growth of 23%. The net NPA’s stood at 1.09%, as on the end of financial year 2008-09. During the year, the Foreign Exchange business recorded an impressive growth of 19%, moving to Rs.22573.58 crore. The contribution of this segment to the Bank's gross income has been to the tune of Rs.36.98 crore. Keeping in view overall performance of the Bank, the Bank, after the approval of shareholders, paid 115% dividend (free of tax) for the year ended 31st March 2009

The Bank has diversified its business activities into insurance, both life and non-life. The Bank not only became the strategic partner of, M/S METLIFE INDIA INSURANCE CO. Ltd but also has been acting as corporate agent of the said company for distribution of their life insurance products through network of its branches. The Bank also entered into a tie-up with BAJAJ ALLIANZ GENERAL INSURANCE COMPANY for distribution of their non-life insurance products. In view of Bank's deep branch network and loyal customer base particularly in Jammu and Kashmir, the Bank has been able to distribute insurance products in deep rural and far flung areas and has made penetration in the new areas thereby adding to its non-interest and fee based income. The bank’s insurance business continued to record splendid growth. During the year under report the bank as a corporate agent further extended the marketing of products of M/S METLIFE INDIA INSURANCE CO. Ltd into new areas, which were hitherto neglected by the traditional competitors in the business. Bank has sold 9019 life policies of METLIFE INDIA and collected annualized premium amount of Rs. 1277.84 lacs during the year. In the non-life business, the 15

Banking problems in rural areas (A Comparative study) bank has shown a better performance and collected aggregate premium amount of Rs. 1759.03 lacs. This has yielded non-interest income of Rs.509.21 lacs to the bank

The Bank recently won the prestigious Asian Banking Award – 2005 for its ‘Development Project Financing Program', contributing significantly to the development of tourism industry of the J&K State. The award was presented by the Under Secretary Finance, Philippines, at a glittering Gala Dinner award function held at Manila, Philippines on June 17, 2005. The annual Asian banking awards recognize and honor Asian banks for outstanding, innovative and world-class products and programs implemented during the previous year. It is the most respected and premier banking awards program in Asia Pacific region. It is worth mentioning that the Bank has won the Asian Banking Award consecutively for the second year. Last year, the Bank won the award for Customer Convenience Programs and was also given runners up certificate for its project ‘Motivating Employees for Better Performance' under ‘operational efficiency program' category. The Bank was ranked fifth among the top ten Asian banks and 762nd among top 1000 World banks. A renowned business journal "Business Today” ranked JK Bank among 25 top investor friendly companies in India, the only bank in the whole Indian Banking industry, which has been ranked in the magazine among first 10 Investor Friendly Companies. The Bank for the second consecutive year was ranked Best Private Sector Bank in Financial Express/Ernest and Young combined Survey for the year 2002-03 released recently. Bank was awarded ‘Shiromani Award' for outstanding achievements in the field of banking and commitment to national progress and human welfare during the year under report. The Bank has figured among 24 Indian companies in Forbes Global - 100 best ‘under a billion Asia's Rising Companies', listed by Forbes magazine in its issue dated November 01 2006. The publication has commended J&K Bank for representing economic dynamism' in the region, sustained growth in all spheres and an excellent track record of rewarding its shareholders. 16

Banking problems in rural areas (A Comparative study)

o The J&K Bank Savings Accounts o The J&K Bank Current Accounts

o The J&K Bank Fixed Deposits o The J&K Bank’s various Loans Schemes o The J&K Bank various Depository Schemes

NEW PRODUCTS OF J&K BANK:For the benefit of the people of J & K State , the has developed some special schemes for some special category. These schemes are as under  APPLE ADVANCE SCHEME.  J & K BANK DASTAKAR FINANCE.  J & K BANK ALL TERM AGRI TERM LOANS.  J & K BANK AHATANBAND FINANCE.  J & K BANK ZAFRAN FINANCE  J & K BANK RATION CARD.

APPLE ADVANCE SCHAME:J&K Bank’s specially designed product named as apple advance scheme has struck at the root of the explorative system that thrived on scant or untimely fund availability at times even lack of finance through formal channels. Last year after a detailed study of the apple economy, need based, time specific product was introduced. The product incorporated all the critical necessary to make our financial intervention effective and grow friendly. Apple advance scheme was introduced to meet the comprehensive requirements of the apple growers with distinctive features like reduced margins ,higher scale of finance that includes production and post harvest maintenance, auto renewal of limits and most importantly very easy and hassle free documentation.. The scale of finance was increased to Rs. 1.5 lacks per acre from Rs. 40000 per acre


Banking problems in rural areas (A Comparative study) The objectives that guided the customization of the product include the easy access, simplified documentation, avoiding redundancies, shortened process time and flexible fund limit. Even for the for the growers who have just leased orchards can avail finance under the scheme.With hypothecation of fruit crop and third party guarantee of two persons as security and no emphasis on collaterals, the borrower is also allowed drawls up to 50 % of the previous year limit till the bank renews the sanction foe the next year.The process has been made extremely easy and hassle free to ensure that comprehensive requirements of apple growers to take care of production and marketing costs are fulfilled adequately and in time. Simplified legal documentation has been made to expedite the loan processing. J&K BANK DASTAKAR FINANCE:J & K Bank in its Endeavour to promote trade, industry and to preserve the tradition arts and crafts of the state devised a scheme aimed at the financial needs of the artisan community aptly called J & K Bank dastakar finance. The scheme provides easy and soft credit to the crafts men engaged in the trade ,a and helps them to set up their own ventures, weeding out the middle men responsible for their exploitation. Keeping in view the specific production cycle associated with this trade loan comprises of term loan and working capital components. The disbursement is phased in quarterly installments and aligned to the status of work in progress [WIP].This ensures proper end use, quality control and timely completion of work. The weavers ascertain are allowed a reasonable time for the repayment of the bank finance. To make the credit hassle free no third party \collateral guarantee is required. The product has been designed on the banks philosophy of confidence-based lending as opposed to collateral based lending. There are no requirements of any collateral security under this product. The legal documentation has been kept at bare minimum with only two documents to be executed for disbursement of the loan. In order to increase the reach of the product the data base of the weaver’s artisans available with the various trade associations is being utilized besides identification of the people by concerned of the bank. 18

Banking problems in rural areas (A Comparative study) J&K BANK ALL PURPOSE AGRI TERM LOAN:The product aptly named as All-Purpose Agro Term Loan has been designed in a way that lays special emphasis on small and marginal farmers and provides sufficient and more importantly timely finance to the farmers engaged in all types of agriculture and allied activities. The product aims to cater to the needs of the small farmers within very little land holdings in the rural and semi urban areas of the J & K State. The objective has been to provide easy finance to needy farmers through regular channels of finance and to wean them away from the exploitative circle created by the non banking intermediaries. Foe that purpose, the product has been devised in such a way that hitherto unbanked customers get an easy access to banking services through simple and affordable documentation process. A maximum credit of 1 lakh, depending upon the agri-activity to be financed is provided but multiple activities can also be considered for finance. The product is offered at affordable interest rates. This product is available for farmers of cereal crops and vegetables, orchids. It is also available for unemployed rural youth for setting up of small dairy, poultry units, in purchase of seeds, pesticides, fertilizers, plough and farm machines. This seems just the beginning, as the fruits of this harvest are expected to yield much. The strengths of being a community bank with a monopolistic presence are being exploited more effectively so that the product reaches all the small growers of the state. And with every loan granted, we are having more and more happy faces. J&K BANK KHATAMBAND FINANCE:Khatamband craft is a specialized scheme that provides employment to few thousand people living in the J & K State .a specialized scheme was customized to the people according to the needs of the Khatamband craftsmen. The product was tailored to provide comprehensive and timely credit to them, based on paper understanding of the production cycle and need for finance at its different stages.


Banking problems in rural areas (A Comparative study) The finance is provided as a revolving facility, eligible for enhancement every year on the basis on the turn-over. The product has been intentionally targeted at crafts men aged between 18-55 years, no collateral security is asked for and the documentation process has been kept simple . The prospective borrowers have to only submit their identity proofs to avail the facility. The response to the khatamband finance so far, has been Impressive. It has again generated hope among the traditional khatamband crafts of the JK State, especially to the small ones. Access to affordable finance is no longer a problem or them. Kindling such hope is the first step towards the revival of all such culturally rich arts and crafts in the state. J&K BANK TRUMP CARD:Deepening of financial intermediation is a pre-requisite for sustained economic growth. The bank have given a new meaning to inclusive growth by working on empowering people and demonstrating that people with lesser means can be reached and reached profitably. For bank, making a difference in people’s lives and making profits can not be mutually exclusive. The bank is therefore combining the sensibility of social enterprises with the form of a far- profit business. A very novel initiative was started in this respect , which proved to be quite useful in reaching out to almost every house hold of J & K State. The initiative was to print the ration books for the Govt. The state Govt. annually prints and distributes twenty lakh Ration books to customer families to facilitate them purchase of rations from Govt. owned fair prices. Practically every family in the state gets a ration book including more than eight lakh BPL families. These ration books reached places where even roads don’t go. There ration cards can be used as an ideal delivery vehicle to reach out to the unbanked people and to carry out the empowerment initiative through an assured and established distribution network system active across J 7 K State. The ration books also contained personal information coupons which helped the bank create a data base of around twenty lakh people .The data would be used for strategizing the banks other initiatives aimed at economic empowerment. The bank spent quite a sum on printing these ration books, which was other wise to be spent by the J & K State government. But the smiles on the faces of our people were a return that 20

Banking problems in rural areas (A Comparative study) was match less. Applications forms provided within the ration book, they went to their nearest branches to put their hard earned money to better use instead of keeping the cash at home. JK BANK ZAFRAN FINANCE:With a view of preserving this prized spice, JK Bank tailored a specific product named JK Bank Zafran Finance .Its purpose is to provide adequate ,timely and need based finance to Saffron growers. The scheme is for all saffron growers, especially the smaller and Marginal ones including even the contract farmers engaging in or intending to start its cultivation. The quantum of finance is to proportionate to the land holding of a grower. The product also provides an additional finance for post harvest and packaging. The disbursement is done in two phases; 60 % in the first year and 40 % in the second ,when the growers are in need of funds. The repayment of the advance is scheduled within the four year growing cycle of saffron. Refinancing facility can be availed on fresh plantation of the crop. The documentation has been simplified and kept minimum to make it hassle free. Saffron finance has made the middle men and other informal channels of finance and attractive for the saffron growers. Besides it has encouraged the small growers to with stand the price fluctuations because now they are not forced to sell their produced and they can wait till they are satisfied with the rates .With the much needed direct finance leading to the prosperity of some, others have already made up their mind to follow. Hence the product is in demand across the saffron belts of the valley.

o Automatic Teller Machines. o Locker Facility. o Mobile ATM Service. o The J&K Bank Credit Cards. o The J&K Bank Global Access Debit Cards.
o o SMS Banking Anywhere banking facility

o The J&K bank is the only bank in India which provides Amaranth Yatra Tickets
to pilgrims.


Banking problems in rural areas (A Comparative study)


The new identity for J&K Bank is a visual representation of the Bank’s philosophy and business strategy. The three coloured squares represent the regions of Jammu, Kashmir and Ladakh. The counter-form created by the interaction of the squares is a falcon with outstretched wings – a symbol of power and empowerment. The synergy between the three regions propels the bank towards new horizons. Green signifies growth and renewal, blue conveys stability and unity, and red represents energy and power. All these attributes are integrated and assimilated in the white counter-form.


Banking problems in rural areas (A Comparative study)

The term SWOT is the acronym made up of four words viz, Strengths, Weaknesses, opportunities and Threats. The first two variables are internal to an organization whereas the last two are external. The value of SWOT analysis cannot be over emphasized. It is rightly said” winners recognize their limitations but focus on their strengths; losers recognize their strength but focus on their limitations.”

SWOT Analysis

Internal Environment ____________________

External Environment ____________________





Internal factors Strength:
Strength is defined as something which is positive, good or such other characteristics that give to the company an edge in the competitive market. The Bank has one unique source of strength which if cultivated carefully, can be virtually impregnable – its roots are in the state, and as such it shares with the people of Jammu and Kashmir a kinship, and empathy for the cause of the state’s progress, which no outside bank ever can. The J&K Bank also performs the leaders role in the J&K. As a leader the Bank continued to discharge its Lead Bank responsibility in 8 out of 14 districts of J&K State satisfactorily.


Banking problems in rural areas (A Comparative study) A weakness refers to something which one lacks. It is something which restricts us to move forward. While doing my summer training in the J&K Bank I found the following weaknesses; (i) There is less competent staff at lower level. (ii) Weak competitive capability because of lack of lesser advertisement budget. (iii) Labour problems because of militancy in the state which results in strikes and tense conditions. (iv) The activities of Branch managers are not effectively monitored.

External factors Opportunities:
Opportunities are entirely external concerning the business environment. Opportunities do not come very frequently and therefore, the management must exploit them to the maximum extent without any delay. Each opportunity should be analyzed in terms of its profitability. The opportunities analyzed by me for the J&K Bank are; (i) There is agriculture market which is still fully not trapped by the J& K Bank .There are a lot of schemes regarding agriculture such as post harvest , preservation scheme and many other schemes (2) The historical activities of the state such as carpet industry, dastakar finance, khatamband schemes and many other activities of historical importance are not still fully covered by J&K Bank

With every opportunity, there also goes alongside certain threats which may adversely affect the profitability and competitive capability of an enterprise. The threats analyzed are; (i) Competitors like HDFC Bank, Central Co-operative Bank, ICICI Bank etc. may enter in the field to provide finance facility. 24

Banking problems in rural areas (A Comparative study) (ii) There may be change in the policies of the state government

Objectives of the Study

Banking problems in rural areas (A Comparative study) • • • • • • To determine the accessibility of banks. To check the performance of the bank. To determine various types of loan provided by bank. To determine the relationship of customers with different banks. To determine the market share of the banks. To know the awareness of customers about products and services provided by the bank.



Banking problems in rural areas (A Comparative study) Success or failure of any project entirely depends upon methodology adopted by the researcher. Methodologies basically use different methods of research systematically and scientifically. Objective of the study, its research design, its sampling design, coding and editing methods, presentations and analyses of the data together with interpretation of the data are essential part of research methodology.

Fundamental to any marketing research project is a sound research design. A good research design has certain characteristics viz. problem definition, specific method of data collection and analysis etc; a research design is purely and simply the framework or plan for a study that guides the collection and analysis of data. In this research Explorative and Descriptive Research method was adopted.

Data collection is an essential part of every project. Success or failure of any project entirely depends on the method of collection of data. The data can be collected by the following two ways. a) PRIMARY SOURCE b) SECONDARY SOURCE In this project, primary data is collected from information that was collected from the respondents through structured questionnaire. The information brochures of the bank and articles in newspapers have been consulted as a secondary source of information. Secondary data has also been collected through the various websites on the Internet. Contact method- The respondents were contacted personally and a structured questionnaire were administered to them. 27

Banking problems in rural areas (A Comparative study)

Sampling plan
Population – The managers of different banks operating in Anantnag. Sample unit-Any manager of the bank. Sample size- 100 Sampling Procedure-Convenience Sampling.

About Banking problems in rural areas of Distt.Baramulla.

Banking problems in rural areas (A Comparative study)

QNO1:- Do you have a bank account? Yes No QNO2:- With witch bank you maintain your banking relationship? J& K bank HDFC BANK KRB SBI PNB KAMCO None QNO3:-How far is the branch of bank from your home? 1-5km 5-10km 10-15km Above 15 QNO.4:-How much time you spend while depositing or with drawling the money? <15 Min. 15-30 Min. 30-60 Min Above 60 Min QNO5:-Do you avail any loan facility? Yes No QNO6:- Which type of loan do you avail? Agricultural Horticultural Handicraft Business QNO.6:- Are you aware about various new products and services provided by the bank? Yes No QNO7: - Is the modern technology available in the bank? Yes No Q NO8:- Respond the statements in terms of SD= Strongly Disagree D= Disagree A= Agree SA= Strongly Agree

SN O. 1 2 3 4 5 6 7 8

STATEMENTS Cash is available at bank on time Bank is handling customer grievances very well Processing of bank is fast The bank is unable in fulfilling the needs of customers Services and products provided to you are good The ATM machines are maintained well Ambience of the bank is not good Punctuality of the staff is good




Banking problems in rural areas (A Comparative study)

Q,1. Gender Male 80 Female 20

The above graph shows that 80% of the total responds belongs to the male category while as remaining 20% of the total respondents belongs to female category this shows that males are more knew towards banking


Banking problems in rural areas (A Comparative study) Q, 2. Occupation

Student 17

Business 15

Service 18

Others 50

From the above fig. It is clear that majority of the respondents i.e. 50% have other occupations like agriculture, horticulture, labour, etc. 18% respondents are the service persons .17% respondents are the students and only 15% respondents have occupied business occupation.


Banking problems in rural areas (A Comparative study) Q, 3. Age 15-25 years 20 25-35 years 45 35-45 years 17 45-55 years 10 55 above 8

From the above fig. It can be interpreted that majority of the respondents i.e. years and 17% respondents are between the age of 36-45 years.


respondents belong to middle age, 20% respondents are between the age of 15-25


Banking problems in rural areas (A Comparative study) Q, 4. Do you have a bank a\c ?

Yes 70

No 30

The above fig. shows that out of 100 respondents 70 are having a bank a\c and 30 respondents are not having any bank relation.


Banking problems in rural areas (A Comparative study) Q,5. With which bank you maintain your banking relation?

J&K bank 60


KRB 15




The above chart shows that 60% respondents have maintained their banking relationship with J&K Bank, 10% respondents maintained their banking relationship with HDFC Bank, 3% respondents maintained relationship with state bank of India (SBI) and 2% respondents have build their banking relationship with Punjab national bank (PNB) , 15% respondents showed that they have maintained their relationship with KRB, and about 10% have maintained their relation with KAMCO bank.


Banking problems in rural areas (A Comparative study)

Q, 6. How far is the branch of bank from your home?

1-5 km 70%

5-10 km 20%

10-15 km 7%

Above 15 km 3%

As the above chart shows that 70% respondents have the branch of the bank in between 1-5 km, 20% have in between 5-10 km, 7% have in between 10-15km and 3% have to travel more than 15km up to bank.


Banking problems in rural areas (A Comparative study)

Q, 7. How much time do you spend while depositing or withdrawing money from the bank?

Less than 15 mins 40%

15-30 mins. 30%

30-60 mins 20%

More than 60 mins 10%

The above fig. shows that 40% of respondents spends less than 15 mins in bank, 30% spends 1530 mins, 20% spends 30-60 mins and only 10% spends more than an hour in bank.


Banking problems in rural areas (A Comparative study)

Q,8. Do you avail any loan facility?

Yes 60%

No 40%

As shown in fig. 60% respondents avail loan from the bank and 40% do not avail any loan facility from the bank.


Banking problems in rural areas (A Comparative study)

Q,9. Which type of loan do you avail from the bank?

Agriculture 30%

Horticulture 40%

Handicrafts 10%

Business 20%

The above fig. shows that 40% of respondents avail horticulture loan from bank, 30% avail agriculture loan, 20% avail business loan and only 10% avail handicrafts loan from the bank.


Banking problems in rural areas (A Comparative study)

Q10.Are you aware about various new products and services provided by the bank?

Yes 42

No 58

58% of the respondents are aware about the new products and services provided by the bank and 42% respondents are not aware about the new products and services provided by the bank.


Banking problems in rural areas (A Comparative study)

Q11.Is the modern technology used in the bank?

Yes 32

No 63

As shown in above fig. 66% respondents know that modern technology is used in banks and 34% respondents don’t know about modern technology used in banks due to illiteracy.


Banking problems in rural areas (A Comparative study)

Q12.Cash is available on time in bank.

SD 4

D 8

A 20

SA 68

The above fig shows that 68% of respondents strongly agreed that cash is available at bank on time, 20% respondents agreed, 8% disagreed and only 4% strongly disagreed that cash is availale at bank on time.


Banking problems in rural areas (A Comparative study)

Q13 Bank is handling customer grievance well. SD 15 D 20 A 30 SA 35

As shown above 35% respondents strongly agreed the fact that bank is handling customer grievance well, 20% disagreed, 30% agreed and only15% strongly disagreed.


Banking problems in rural areas (A Comparative study)

Q14.Process of bank is fast. SD 20 D 16 A 38 SA 26

Most no. of respondents 38% agreed that process is fast, 26% agreed, 16% disagreed and 20% disagreed that process of the bank is fast.


Banking problems in rural areas (A Comparative study)

Q14.Bank is unable in fulfilling needs of customers.

SD 11

D 8

A 41

SA 40

41% of respondents believe that bank is not able to fulfil all needs of customers, 40% strongly agreed the fact, 11% strongly disagreed the fact and 8% disagreed the fact.


Banking problems in rural areas (A Comparative study)

Q16.Services and products provided to you are good.

SD 33

D 21

A 35

SA 11

35%of respondents believe that services and products provided by bank are good, 11% strongly agreed, 21% disagreed and 33% strongly disagreed.


Banking problems in rural areas (A Comparative study)

Q17.The ATM machines are maintained very well.

SD 44

D 12

A 30

SA 24

44% respondents said that ATM machines are not maintained properly,12% strongly dis agreed, 30% agreed that machines are maintained well and 24% strongly agreed.

Q18.Ambience of the bank is not good . SD D A 46 SA

Banking problems in rural areas (A Comparative study) 40 20 10 30

Most no. of respondents 40% strongly disagreed that ambience of bank is good, 20% disagreed, 10% agreed and 30% strongly agreed.

Q19 Punctuality of the staff is good .


Banking problems in rural areas (A Comparative study) SD 30 D 35 A 20 SA 15

3 5%respondents believe that punctuality of staff is not good, 30% strongly disagreed , 20 % agreed and only 15% strongly agreed.


Banking problems in rural areas (A Comparative study) • • • • • • • • • • The study reveals that 70% respondents are having accounts in different banks and other 30% are having no bank accounts Majority of respondents i.e.60% are having their accounts in j&k bank by this loyalty of customers can be interpreted. Majority of the respondents have to travel nearly in between 1-5 km for banking. The study reveals that 40% respondents spend below 15 mins in bank. From our findings it is clear that 60% of respondents have availed loan from banks. Most respondents i.e. 40% have availed loan for horticulture and 30% respondents have availed loan for agriculture. The study reveals that 58% respondents are aware about new products and services offered by bank. Most respondents disagree with the fact that modern technology is used in bank. The study reveals that 35% respondents strongly agree the statement that bank is handling customer grievance very well. Most no. of respondents 35% disagree the statement that punctuality of staff is good.


Banking problems in rural areas (A Comparative study)

Suggestions & Recommendations
• The customer education should be provided with proper information about the services of the bank. • Bank must be placed at proper location so that customers can easily reach their. This will help bank is maintaining good relationship with customers. • The services should be made available at every time to meet expectations of customers. • Grievances of customers must be handled in a proper way and within the shorter period of time by doing this the image of bank adopts in the eyes of customers. • The no. of ATM machines should be increased and it should be located at proper places and at proper distances it will help bank do interact with maximum customers. • Parking facility is the biggest problem of customers. Proper parking facility should be made available which will reduce the problems of customers to some extend. • The bank must be filled with modern technology so as to provide service within the short time.


Banking problems in rural areas (A Comparative study)

However, every care has been taken to make this report authentic in every sense. Yet, there were a few uncomfortable factors, which might have had their influence on the final report. It is said,” nothing is perfect” and if this quote is true I am sure there would be few shortcomings in this project also. Sincere efforts have been made to eliminate due to the limitations of the study. These are:● the study was to be completed in a short time; the time factor put a considerable limit on the scope and the extensiveness of the study. ● Because of the diversity of nature of respondents the findings of the survey could not be generalized. ● Some of the respondents gave ambiguous replies for certain questions or omitted the responses to some of them. The interpretation of some responses become difficult and could generate wrong results ● the survey was conducted only in Baramulla ; the respondents belonged only to this region of the country. This could have brought biasness into the study


Banking problems in rural areas (A Comparative study)

● Zeithmal, A.V. (2006). Service marketing. Tata McGraw-Hill publishing company, vol.6, 16-78 ● Kotler, p., Keller, k., Koshy, A. & Jha, M. (2007). Marketing management. Pearson Education, VOL.12, 339-359. WEB SITES     www.theunjustmedia.comm


Banking problems in rural areas (A Comparative study)

Working on this project has proved more interesting, I have really enjoyed this. “Banking problems in rural areas of distt. Baramulla” is a project which I have Made using the first hand collected data. I am highly thankful to those persons who have helped me in completing the project I am thankful to: Mr. Riyaz Ahmad Mir. (Cluster head J&K bank) Mr. Mohd Aslam Mr. Javaid Ahmad Mr. Mushtaq Ahmad lone Mr. Sameer Ahmad


Banking problems in rural areas (A Comparative study)

TABLE OF CONTENTS Chapter No. Name of the Chapter
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

A Brief History of Banking Introduction About J&K Bank History of Banking in India Historical background of J&K Bank Vision, Mission, Financials of J&K bank Recognition & Awards Products Offered by the Bank Bank’s new Identity SWOT Analysis Objectives of the study Research Methodology Questionnaire Analysis & Interpretation Findings Suggestions & Recommendations Limitations of the study Bibliography

Page No. 01 03 04 09 12 16 17 22 23 26 27 29 30 49 50 51 52


Banking problems in rural areas (A Comparative study)

Submitted to: Mr. Riyaz Ahmad Mir Cluster Head (Cluster 2) J & K Bank

Submitted by: Owais Fayaz Khan MBA 3rd Sem. SUSCET Tangori Mohali


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