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M. NO.:9978919210
It is a matter of pleasure for me to work on a

practical project like “Kaleidoscopic view of Banking in

India” .This project has added value to my theoretical

knowledge. I would like to admit my sincere thanks to

the ICICI BANK for providing me such an opportunity to

work in their organization.

I would like to thank my professors for providing

me their valuable guidance and for taking keen interest

in my project.

Last but not least I thank such banks like Bank of

Baroda, State Bank of India, City Bank, Dena Bank,

Surat People’s Co-operative Bank Ltd. These branches

had co-operated me in my project. They had made this

project a great valuable event for me.

Usually all persons want money for personal
and commercial purposes. Banks are the oldest
lending institutions in Indian scenario. They are
providing all facilities to all citizens for their own
purposes by their terms. To survive in this modern
market every bank implements so many new
innovative ideas, strategies, and advanced
technologies. For that they give each and every
minute detail about their institution and projects to

They are providing ample facilities to satisfy

their customers i.e. Net Banking, Mobile Banking,
Door to Door facility, Instant facility, Investment
facility, Demat facility, Credit Card facility, Loans
and Advances, Account facility etc. And such banks
get success to create their own image in public and
corporate world. These banks always accepts
innovative notions in Indian banking scenario like
Credit Cards, ATM machines, Risk Management etc.
So, as a student business economics I take keen
interest in Indian economy and for that banks are
the main source of development.

So this must be the first choice for me to select

this topic. At this stage every person must know
about new innovation, technology of procedure new
schemes and new ventures.

Because of the following reasons, I prefer this

project work to get the knowledge of the
banking system.

• Banking is an essential industry.

• It is where we often wind up when we are
seeking a problem in financial crisis and
money related query.
• Banking is one of the most regulated
businesses in the world.
• Banks remain important source for career
opportunities for people.
• It is vital system for developing economy
for the nation.
• Banks can play a dynamic role in delivery
and purchase of consumer durables.
The crucial role of bank economists in transforming the banking system in India.
Economists have to be more ‘mainstreamed’ within the operational structure of
commercial banks. Apart from the traditional functioning of macro-scanning, the inter-
linkages between treasuries, dealing rooms and trading rooms of banks need to be viewed
not only with the day-to-day needs of operational necessity, but also with analytical
content and policy foresight.
Today, operational aspects of the functioning of banks are attracting intensive
research by professional economists. In particular, measuring and modeling different
kinds of risks faced by banks, the behavior of risk-return relationships associated with
different portfolio mixes and the impact of fluctuations in financial markets on the
financial performance of banks are areas which lend themselves to analytical and
empirical appraisal by economists and econometricians. They, in turn, are discovering the
degrees of freedom and room for analytical maneuver in high frequency information
generated by the day-to-day functioning of banks. It is vital that we develop an
environment where these synergies are nurtured so as to serve the longer-term strategic
interests of banks. Even in real time trading and portfolio decisions, the fundamental
analysis of economists provides an independent assessment of market behavior,
reinforcing technical analysis.
A serious limitation of the applicability of standard economic analysis to banking
relates to the inadequacies of the data-base. Absence of long time series data storage in
the banking industry often poses serious problems to the quest for the formal analytical
relationships between variables. Even if such data exist, the presence of structural breaks
may blur meaningful analysis based on traditional formulation. Economists need to think
innovatively to overcome this problem. Use of panel regression, non-parametric methods
and multivariate analyses could go a long way in understanding and validating behavioral
relationships in banking.
Another important challenge for the economics profession is to develop proper
models for measurement of various risks in Indian conditions. This is a necessity in view
of the move towards risk-based supervision. Quantification of operational risks and
calibration of Value at Risk (VaR) models pose major computational challenge to
bankers and policy makers alike, particularly in India. A major difficulty lies in
identifying the right statistical model that determines the underlying distribution suited to
the particular category of operational loss, and building the necessary database for
deriving operationally meaningful conclusions.
In my inaugural address last year, I had also emphasized the need for bank
economists to come out of their narrow specialization and address operational issues
relating to banking and finance. In order to make a meaningful contribution to banking,
economists must have the experience of working in operational areas of banks. For this
purpose, economists need to ‘soil their hands’ in dealing rooms, treasuries and investment
units, credit authorization and loan recovery, strategic management groups and
management information systems of the banks to understand the ground realities. There
are also ‘economies’ to be gained from field-level credit appraisal, asset recovery, debt
restructuring, market and consumer behaviors in which banks are involved. Thus, the
profession needs to amalgamate the objectivity and theoretical soundness of economics
with the functional dimensions of banking and finance. It is this combination of specialist
training with operational experience, which is going to make t he economics profession
relevant to the changing face of banking in India.
History of Banking in India
Banks In India
Banking services in India
Reserve Bank of India (RBI)

General Banking
Nat u re o f Ba n ki n g
Kinds of Banks

R ol e of Ban k s i n a Devel op i n g Eco n om y
P ri nci p l es of Bank Len d i n g P ol i ci es
Management of Banking

Bran ch s et up an d s t r u ct u re
Or gan i z at i o n an d s t ruct u re of a B an k B r an ch
Ex p l ai n b an k organi z at i on s ys t em i n Ind i a

R et ai l Bank i n g-Th e New Fl avo r
S t rat egi c i s s u es i n Bank i n g S erv i c es
Kno wl ed ge M an a ge m ent
In no v at i o n i n Ban ki ng

Tech no l o g y i n B an k i ng
R egu l at i on s an d C o m p l i an ce

C us t om er C en t ri c Org an i z at i on
Et h i cs and C o rpo rat e Gov ern an ce
Ent rep ren eu rs hi p
P erfo rm anc e an d Be nchm ark i n g
Managing New Challenges
In t rod u ct i o n
R ecen t M ac ro econ o m i c Devel o p m ent s a n d t h e Ban ki n g S ys t em

P rud en t i al No rm s
M arket Di s ci pl i ne
Uni v ers al Bank i n g
Hum an R es o urc e De v el o pm en t i n Bank i n g
 HISTORY OF BANKING IN INDIA---------------------------

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
For the past three decades India's banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no longer
confined to only metropolitans or cosmopolitans 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 simple as instant messaging or dial 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:

• Early phase from 1786 to 1969 of Indian Banks

• Nationalization of Indian Banks and up to 1991 prior to Indian banking sector
• New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and
Phase III.
• 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 Indians,
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 day’s public has lesser confidence in the banks.
As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility
provided by the Postal department was comparatively safer. Moreover, funds were
largely given to traders.

• Phase II
Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalized Imperial Bank of India with extensive banking
facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of
India to act as the principal agent of RBI and to handle banking transactions of the Union
and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960
on 19th July, 1969, major process of nationalization was carried out. It was the effort of
the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the
country were nationalized.
Second phase of nationalization Indian Banking Sector Reform was carried out in
1980 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.
• 1959 : 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 bank India
rose to 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.

• Phase III
This phase has introduced many more products and facilities in the banking sector
in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee
was set up by his name which worked for the liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are
being put to give a satisfactory service to customers. Phone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given more
importance than money. 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.
 BANKS IN INDIA-------------------------------------------------------------

In India the banks are being segregated in different groups. Each group has their
own benefits and limitations in operating in India. Each has their own dedicated target
market. Few of them only work in rural sector while others in both rural as well as urban.
Many even are only catering in cities. Some are of Indian origin and some are foreign
players. All these details and many more are discussed over here. The banks and its
relation with the customers, their mode of operation, the names of banks under different
groups and other such useful information are talked about.
One more section has been taken note of is the upcoming foreign banks in India.
The RBI has shown certain interest to involve more of foreign banks than the existing
one recently. This step has paved a way for few more foreign banks to start business in
Major Banks in India
• ABN-AMRO Bank • Indian Overseas Bank
• Abu Dhabi Commercial Bank • IndusInd Bank
• American Express Bank • ING Vysya Bank
• Andhra Bank • Jammu & Kashmir Bank
• Allahabad Bank • JPMorgan Chase Bank
• Bank of Baroda • Karnataka Bank
• Bank of India • Karur Vysya Bank
• Bank of Maharastra • Laxmi Vilas Bank
• Bank of Punjab • Oriental Bank of Commerce
• Bank of Rajasthan • Punjab National Bank
• Bank of Ceylon • Punjab & Sind Bank
• BNP Paribas Bank • Scotia Bank
• Canara Bank • South Indian Bank
• Catholic Syrian Bank • Standard Chartered Bank
• Central Bank of India • State Bank of India (SBI)
• Centurion Bank • State Bank of Bikaner & jaipur
• China Trust Commercial bank • State Bank of Hyderabad
• Citi Bank • State Bank of Indore
• City Union Bank • State Bank of Mysore
• Corporation Bank • State Bank of Saurastra
• Dena Bank • State Bank of Travancore
• Deutsche Bank • Syndicate Bank
• Development Credit Bank • Taib Bank
• Dhanalakshmi Bank • UCO Bank
• Federal Bank • Union Bank of India
• HDFC Bank • United Bank of India
• HSBC • United Bank Of India
• ICICI Bank • United Western Bank
• IDBI Bank • UTI Bank
• Indian Bank • Vijaya Bank


With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market. The customers have more
choices in choosing their banks. A competition has been established within the banks
operating in India.
With stiff competition and advancement of technology, the service provided by
banks has become more easy and convenient. The past days are witness to an hour wait
before withdrawing cash from accounts or a cheque from north of the country being
cleared in one month in the south.
This section of banking deals with the latest discovery in the banking instruments
along with the polished version of their old systems.
 RESERVE BANK OF INDIA (RBI) ------------------------------

The central bank of the country is the Reserve Bank of India (RBI). It was
established in April 1935 with a share capital of Rs. 5 crores on the basis of the
recommendations of the Hilton Young Commission. The share capital was divided into
shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the
beginning. The Government held shares of nominal value of Rs. 2, 20,000.
Reserve Bank of India was nationalized in the year 1949. The general
superintendence and direction of the Bank is entrusted to Central Board of Directors of
20 members, the Governor and four Deputy Governors, one Government official from the
Ministry of Finance, ten nominated Directors by the Government to give representation
to important elements in the economic life of the country, and four nominated Directors
by the Central Government to represent the four local Boards with the headquarters at
Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each
Central Government appointed for a term of four years to represent territorial and
economic interests and the interests of co-operative and indigenous banks.
The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act,
1934 (II of 1934) provides the statutory basis of the functioning of the Bank.
The Bank was constituted for the need of following:
• To regulate the issue of banknotes
• To maintain reserves with a view to securing monetary stability and
• To operate the credit and currency system of the country to its advantage.

• Functions of Reserve Bank of India

The Reserve Bank of India Act of 1934 entrust all the important functions of a
central bank the Reserve Bank of India.

• Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to
issue bank notes of all denominations. The distribution of one rupee notes and coins and
small coins all over the country is undertaken by the Reserve Bank as agent of the
Government. The Reserve Bank has a separate Issue Department which is entrusted with
the issue of currency notes. The assets and liabilities of the Issue Department are kept
separate from those of the Banking Department. Originally, the assets of the Issue
Department were to consist of not less than two-fifths of gold coin, gold bullion or
sterling securities provided the amount of gold was not less than Rs. 40 crores in value.
The remaining three-fifths of the assets might be held in rupee coins, Government of
India rupee securities, eligible bills of exchange and promissory notes payable in India.
Due to the exigencies of the Second World War and the post-was period, these provisions
were considerably modified. Since 1957, the Reserve Bank of India is required to
maintain gold and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115
crores should be in gold. The system as it exists today is known as the minimum reserve

• Banker to Government
The second important function of the Reserve Bank of India is to act as
Government banker, agent and adviser. The Reserve Bank is agent of Central
Government and of all State Governments in India excepting that of Jammu and Kashmir.
The Reserve Bank has the obligation to transact Government business, via. to keep the
cash balances as deposits free of interest, to receive and to make payments on behalf of
the Government and to carry out their exchange remittances and other banking
operations. The Reserve Bank of India helps the Government - both the Union and the
States to float new loans and to manage public debt. The Bank makes ways and means
advances to the Governments for 90 days. It makes loans and advances to the States and
local authorities. It acts as adviser to the Government on all monetary and banking

• Bankers' Bank and Lender of the Last Resort

The Reserve Bank of India acts as the bankers' bank. According to the provisions
of the Banking Companies Act of 1949, every scheduled bank was required to maintain
with the Reserve Bank a cash balance equivalent to 5% of its demand liabilities and 2 per
cent of its time liabilities in India. By an amendment of 1962, the distinction between
demand and time liabilities was abolished and banks have been asked to keep cash
reserves equal to 3 per cent of their aggregate deposit liabilities. The minimum cash
requirements can be changed by the Reserve Bank of India.
The scheduled banks can borrow from the Reserve Bank of India on the basis of
eligible securities or get financial accommodation in times of need or stringency by
rediscounting bills of exchange. Since commercial banks can always expect the Reserve
Bank of India to come to their help in times of banking crisis the Reserve Bank becomes
not only the banker's bank but also the lender of the last resort.

• Controller of Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to
influence the volume of credit created by banks in India. It can do so through changing
the Bank rate or through open market operations. According to the Banking Regulation
Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking
system not to lend to particular groups or persons on the basis of certain types of
securities. Since 1956, selective controls of credit are increasingly being used by the
Reserve Bank.
The Reserve Bank of India is armed with many more powers to control the Indian
money market. Every bank has to get a license from the Reserve Bank of India to do
banking business within India, the license can be cancelled by the Reserve Bank of
certain stipulated conditions are not fulfilled. Every bank will have to get the permission
of the Reserve Bank before it can open a new branch. Each scheduled bank must send a
weekly return to the Reserve Bank showing, in detail, its assets and liabilities. This power
of the Bank to call for information is also intended to give it effective control of the credit
system. The Reserve Bank has also the power to inspect the accounts of any commercial
bank. As supreme banking authority in the country, the Reserve Bank of India, therefore,
has the following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and
qualitative controls.
(c) It controls the banking system through the system of licensing, inspection
and calling for information.
(d) It acts as the lender of the last resort by providing rediscount facilities to
scheduled banks.
• Custodian of Foreign Reserves
The Reserve Bank of India has the responsibility to maintain the official rate of
exchange. According to the Reserve Bank of India Act of 1934, the Bank was required to
buy and sell at fixed rates any amount of sterling in lots of not less than Rs. 10,000. The
rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the
exchange rate fixed at lsh.6d. Though there were periods of extreme pressure in favor of
or against the rupee. After India became a member of the International Monetary Fund in
1946, the Reserve Bank has the responsibility of maintaining fixed exchange rates with
all other member countries of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to
act as the custodian of India's reserve of international currencies. The vast sterling
balances were acquired and managed by the Bank. Further, the RBI has the responsibility
of administering the exchange controls of the country.
• Supervisory functions
In addition to its traditional central banking functions, the Reserve bank has
certain non-monetary functions of the nature of supervision of banks and promotion of
sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation Act,
1949 have given the RBI wide powers of supervision and control over commercial and
co-operative banks, relating to licensing and establishments, branch expansion, liquidity
of their assets, management and methods of working, amalgamation, reconstruction, and
liquidation. The RBI is authorized to carry out periodical inspections of the banks and to
call for returns and necessary information from them. The nationalization of 14 major
Indian scheduled banks in July 1969 has imposed new responsibilities on the RBI for
directing the growth of banking and credit policies towards more rapid development of
the economy and realization of certain desired social objectives. The supervisory
functions of the RBI have helped a great deal in improving the standard of banking in
India to develop on sound lines and to improve the methods of their operation.
• Promotional functions
With economic growth assuming a new urgency since Independence, the range of
the Reserve Bank's functions has steadily widened. The Bank now performs varietyof
developmental and promotional functions, which, at one time, were regarded as outside
the normal scope of central banking. The Reserve Bank was asked to promote banking
habit, extend banking facilities to rural and semi-urban areas, and establish and promote
new specialized financing agencies. Accordingly, the Reserve Bank has helped in the
setting up of the IFCI and the SFC; it set up the Deposit Insurance Corporation in 1962,
the Unit Trust of India in 1964, the Industrial Development Bank of India also in 1964,
the Agricultural Refinance Corporation of India in 1963 and the Industrial Reconstruction
Corporation of India in 1972. These institutions were set up directly or indirectly by the
Reserve Bank to promote saving habit and to mobilize savings, and to provide industrial
finance as well as agricultural finance. As far back as 1935, the Reserve Bank of India set
up the Agricultural Credit Department to provide agricultural credit. But only since 1951
the Bank's role in this field has become extremely important. The Bank has developed the
co-operative credit movement to encourage saving, to eliminate moneylenders from the
villages and to route its short term credit to agriculture. The RBI has set up the
Agricultural Refinance and Development Corporation to provide long-term finance to

• Classification of RBIs functions

The monetary functions also known as the central banking functions of the RBI
are related to control and regulation of money and credit, i.e., issue of currency, control
of bank credit, control of foreign exchange operations, banker to the Government and to
the money market. Monetary functions of the RBI are significant as they control and
regulate the volume of money and credit in the country.
Equally important, however, are the non-monetary functions of the RBI in the
context of India's economic backwardness. The supervisory function of the RBI may be
regarded as a non-monetary function (though many consider this a monetary function).
The promotion of sound banking in India is an important goal of the RBI, the RBI has
been given wide and drastic powers, under the Banking Regulation Act of 1949 - these
powers relate to licensing of banks, branch expansion, liquidity of their assets,
management and methods of working, inspection, amalgamation, reconstruction and
liquidation. Under the RBI's supervision and inspection, the working of banks has greatly
improved. Commercial banks have developed into financially and operationally sound
and viable units. The RBI's powers of supervision have now been extended to non-
banking financial intermediaries. Since independence, particularly after its nationalization
1949, the RBI has followed the promotional functions vigorously and has been
responsible for strong financial support to industrial and agricultural development in the
 NATURE OF BANKING IN INDIA ---------------------------
A banking company in India has been defined in the banking companies
act, one “which transacts the business of banking which means the accepting,
for the purpose of lending or investment of deposits of money from the public,
repayable on demand or otherwise and withdraw able by cheque, draft, order or
Most of the activities a Bank performs are derived from the above definition. In
addition, Banks are allowed to perform certain activities which are ancillary to this
business of accepting deposits and lending. A bank's relationship with the public,
therefore, revolves around accepting deposits and lending money. Another activity which
is assuming increasing importance is transfer of money - both domestic and foreign -
from one place to another. This activity is generally known as "remittance business" in
banking parlance. The so called forex (foreign exchange) business is largely a part of
remittance albeit it involves buying and selling of foreign currencies.

Functioning of a Bank is among the more complicated of corporate operations.
Since Banking involves dealing directly with money, governments in most countries
regulate this sector rather stringently. In India, the regulation traditionally has been very
strict and in the opinion of certain quarters, responsible for the present condition of
banks, where NPAs are of a very high order. The process of financial reforms, which
started in 1991, has cleared the cobwebs somewhat but a lot remains to be done. The
multiplicity of policy and regulations that a Bank has to work with makes its operations
even more complicated, sometimes bordering on illogical. This section, which is also
intended for banking professional, attempts to give an overview of the functions in as
simple manner as possible. Banking Regulation Act of India, 1949 defines Banking as
"accepting, for the purpose of lending or investment of deposits of money from the
public, repayable on demand or otherwise and withdraw able by cheques, draft, and order
or otherwise."
 KINDS OF BANKS---------------------------------------------------------
Financial requirements in a modern economy are of a diverse nature, distinctive
variety and large magnitude. Hence, different types of banks have been instituted to cater
to the varying needs of the community.
Banks in the organized sector may, however, be classified in to the following
major forms:
1. Commercial banks
2. Co-operative banks
3. Specialized banks
4. Central bank

Commercial banks are joint stock companies dealing in money and credit. In
India, however there is a mixed banking system, prior to July 1969, all the commercial
banks-73 scheduled and 26 non-scheduled banks, except the state bank of India and its
subsidiaries-were under the control of private sector. On July 19, 1969, however,
14mejor commercial banks with deposits of over 50 Corers were nationalized. In April
1980, another six commercial banks of high standing were taken over by the government.
At present, there are 20 nationalized banks plus the state bank of India and its 7
subsidiaries constituting public sector banking which controls over 90 per cent of the
banking business in the country.

Co-operative banks are a group of financial institutions organized under the
provisions of the Co-operative societies Act of the states.
The main objective of co-operative banks is to provide cheap credits to their
members. They are based on the principle of self-reliance and mutual co-operation.
Co-operative banking system in India has the shape of a pyramid a three tier
structure, constituted by:

Central co-operative banks

[District level]

State co-operative banks

[Villages, Towns, Cities]

There are specialized forms of banks catering to some special needs with this
unique nature of activities. There are thus,
1. Foreign exchange banks,
2. Industrial banks,
3. Development banks,
4. Land development banks,
5. Exim bank.

A central bank is the apex financial institution in the banking and financial system
of a country. It is regarded as the highest monetary authority in the country. It acts as the
leader of the money market. It supervises, control and regulates the activities of the
commercial banks. It is a service oriented financial institution.
India’s central bank is the reserve bank of India established in 1935.a central
bank is usually state owned but it may also be a private organization. For instance, the
reserve bank of India (RBI), was started as a shareholders’ organization in 1935,
however, it was nationalized after independence, in is free from parliamentary

Banks play a very useful and dynamic role in the economic life of every modern
state. A study of the economic history of western country shows that without the
evolution of commercial banks in the 18th and 19th centuries, the industrial revolution
would not have taken place in Europe. The economic importance of commercial banks to
the developing countries may be viewed thus:
1. Promoting capital formation
2. Encouraging innovation
3. Monetsation
4. Influence economic activity
5. Facilitator of monetary policy
Above all view we can see in briefly, which are given below:
A developing economy needs a high rate of capital formation to accelerate the
tempo of economic development, but the rate of capital formation depends upon the rate
of saving. Unfortunately, in underdeveloped countries, saving is very low. Banks afford
facilities for saving and, thus encourage the habits of thrift and industry in the
community. They mobilize the ideal and dormant capital of the country and make it
available for productive purposes.
Innovation is another factor responsible for economic development. The
entrepreneur in innovation is largely dependent on the manner in which bank credit is
allocated and utilized in the process of economic growth. Bank credit enables
entrepreneurs to innovate and invest, and thus uplift economic activity and progress.
Banks are the manufactures of money and they allow many to play its role freely in the
economy. Banks monetize debts and also assist the backward subsistence sector of the
rural economy by extending their branches in to the rural areas. They must be replaced by
the modern commercial bank’s branches.
Banks are in a position to influence economic activity in a country by their
influence on the rate interest. They can influence the rate of interest in the money market
through its supply of funds. Banks may follow a cheap money policy with low interest
rates which will tend to stimulate economic activity.
Thus monetary policy of a country should be conductive to economic
development. But a well-developed banking system is on essential pre-condition to the
effective implementation of monetary policy. Under-developed countries cannot afford to
ignore this fact.
A fine, an efficient and comprehensive banking system is a crucial factor of the
developmental process.


The main business of banking company is to grant loans and advances to traders
as well as commercial and industrial institutes. The most important use of banks money is
lending. Yet, there are risks in lending. So the banks follow certain principles to
minimize the risk:
1. Safety
2. Liquidity
3. Profitability
4. Purpose of loan
5. Principle of diversification of risks

Normally the banker uses the money of depositors in granting loans and advances.
So first of all initially the banker while granting loans should think first of the safety of
depositor’s money. The purpose behind the safety is to see the financial position of the
borrower whether he can pay the debt as well as interest easily.
It is a legal duty of a banker to pay on demand the total deposited money to the
depositor. So the banker has to keep certain percent cash of the total deposits on hand.
Moreover the bank grants loan. It is also for the addition of short term or productive
capital. Such type of lending is recovered on demand.
Commercial banking is profit earning institutes. Nationalized banks are also not
an exception. They should have planning of deposits in a profitability way pay more
interest to the depositors and more salary to the employees. Moreover the banker can also
incur business cost and can give more benefits to customer.
Banks never lend or advance for any type of purpose. The banks grant loans and
advances for the safety of its wealth, and certainty of recovery of loan and the bank lends
only for productive purposes. For example, the bank gives such loan for the requirement
for unproductive purposes.
While lending loans or advances the banks normally keep such securities and
assets as a supports so that lending may be safe and secured. Suppose, any particular state
is hit by disasters but the bank shall get benefits from the lending to another states units.
Thus, he effect on the entire business of banking is reduced. There are proverbs that do
not keep all the eggs in one basket.
---a principle of considerations of sound lending is:
1. Safety
2. Liquidity
3. Shift ability
4. Profitability.
 BRANCH SETUP AND STRUCTURE-----------------------
Ever since major commercial banks were nationalized in two phases in 1969 and
1980, there has been a sea change in their functions, outlook and perception.
One of the main objectives of nationalization of banks has been to help achieve
balanced, regional, sectoral and sectional development of the economy by way of making
the banks reach out to the small man and to the remote areas of the country.


An organization consists of people who carry out differentiated tasks which are
coordinated so as to contribute and achieves planned goals. Organizations are created
mainly for producing goods and services to the society for which they have to incorporate
a formal structure.
Indian banking is now operating in a more competitive setting with the induction
of new banks. Both Indian and foreign, who will be bringing in new work technology and
specialist expertise and a variety of new financing instruments.
Branch is the primary unit of the bank’s business, particularly for serving the
weaker sections of the society. Branches have to develop close relationship they profess
to serve. This leads to opening up or specialized branches, like industrial finance, small
scale industries, and Hi-tech agriculture, overseas and non-resident Indian, according to
market segmentation. This new vision entails a new chain of command, a new technology
and specific delegation of authority.
This calls for the branch manger to concentrate on his/her styles, skills and
subordinates, goals, to shape the branch in the competitive environment to become a
profit centre and to render better customer service. This implies that the branch manager
should have adequate supporting staff to relieve him from the routine table work to
developmental activities.
In order to serve the customer it is necessary that one should understand and
accept role and relationship with other so as to make sure that none of the supporting staff
would be deemed to be independent of the branch manger. So the structure of branch
organization must, from time to time, conform to the demands and peculiarities of the
locality in which the branch is functioning.
Before looking in to the branch structure of bank, it will be worthwhile examining
how a formal organizational structure of a bank appears. After nationalization, generally
banks have a 4-tier structure represented as under:





During the mid-80s, banks started diversifying in to various areas like merchant
banking, mutual funds, leasing, hire purchase, etc., to improve their profitability and to
cater to the needs of the customers. These activities are performed by the banks either by
separate departments or as subsidiaries. After liberalization and globalization of the
economy, with a view to meeting the customer’s needs and to avoid delays, a revised
organizational structure of banks was convened by removing one tier. Now banks are
going in for a 3-tier structure as under:



The regional offices are given more powers and jurisdiction so as to enable them
to act quickly.

Now let discuss the structure of a branch. The branch is the focal point of all
activities. The structure of the branch may be as under:
Small/Medium Branch







This is the typical structure of a branch bank. In very large branches, the structure will
undergo slight changes as stated below:
Very Large Branch






From the structure we can see how the functional relationship works in a branch.
He structure also explains the reporting authority for each cadre of the employees. It
indicates the communication flow in the branch with well-defined accountability on the
part of the employees’ roles.
According to locations, there are four types’ bank branches. They are rural, semi-
urban, urban and metropolitan branches. The B.M. has special role and functions in
managing different types of branches.
Unniitt B
Baannkk B
Brraanncchh B
Grroouupp B
Baannkkiinngg C
Chhaaiinn B
Miixxeedd B
Baannkkiinngg C
Coorrrreessppoonnddeenntt B


The large volume of work passing through the banking system every day in the
form of cash, cheque, and other credit instruments, together with the complexity of the
many services rendered, calls not only for a high degree of skill, accuracy and knowledge
on the part of the officials, but also up-to-date and efficient methods of organization,
accountancy and control.
Head office
Shareholders and General Managers
Administration Foreign
The Branch Manager

The Chief Clerk The Security Clerk

The cashier

The Remittance or
Waste Clerk The Ledger-Keeper The day-book or
Control Clerk

The junior Clerk The Shorthand Typist

Rotation of Duties

Modern Banking Methods

 RETAIL BANKING-THE NEW FLAVOR-----------------------
• The Concept of Retail Banking:-

The retail banking encompasses deposit and assets linked products as well as
other financial services offered to individual for personal consumption. Generally, the
pure retail banking is conceived to be the provision of mass banking products and
services to private individuals as opposed to wholesale banking which focuses on
corporate clients. Over the years, the concept of retail banking has been expanded to
include in many cases the services provided to small and medium sized businesses. Some
banks in Europe even include their private banking business i.e. services to high net
worth net worth individuals in their retail Banking portfolio.
The concept of Retail banking is not new to banks. it is only now that it is being
viewed as an attractive market segment, which offers opportunities for growth with
profits. The diversified portfolio characteristic of retail banking gives better comfort and
spreads the essence of retail banking lies in individual customers. Though the term Retail
Banking and retail lending are often used synonymously, yet the later is lust one side of
Retail Banking. In retail banking, all the banking needs of individual customers are taken
care of in an integrated manner.

• Retail Lending Products:-

Major retail lending products offered by banks are the following:

I. Housing Loans
II. Loan for Consumer goods
III. Personal Loans for marriage, honeymoon, medical treatment and holding etc.
IV. Education Loans
V. Auto Loans
VI. Gold Loans
VII. Event Loans
VIII. Festival Loans
IX. Insurance Products
X. Loan against Rent receivables
XI. Loan against Pension receivables to senior citizens
XII. Debit and Credit Cards
XIII. Global and International Cards
XIV. Loan to Doctors to set up their own Clinics or for purchase of medical equipments
XV. Loan for Woman Empowerment for the Setting up of boutiques
• Setting up of beauty parlours
• Setting up of creches
• Setting up of flower shops
• For making jaipuri quilts etc.
• Preparation and supply of Food Tiffins
XVI. Loan for purchase of acoustic enclosures for Diesel Gen. Sets etc.

• Retail Banking Products for Depositors:-

Retail banking products for depositors in various segments of customers like;

children, salaried persons. Senior citizens, professionals, technocrats’ business men, retail
traders and farmers etc. include:

a. Flexi deposit Accounts

b. Savings Bank Accounts

c. Recurring Deposit Accounts

d. Short Term Deposits

e. Deferred pension Linked Deposit Schemes

Today pure deposit type products are giving way to multi-benefit, multi-access genres
of banking products. Most of the innovation is taking place in saving bank accounts to
make the meager return of 3.5% p.a. that they earn, more attractive. Most of the banks
now offer Sweep in and sweep out account, called 2-in-1 accounts or value added savings
bank accounts. This account is a combination of savings bank and term deposit accounts
and offers twin benefit of liquidity of a savings bank account and higher interest earning
of term deposit accounts.
• Add-ons and Freebies:-
To make their products and services more service more attractive so as to woo
maximum number of customers, the banks are vying with each other with whole lot off
rills, goodies, freebies are as under:

1. Free collection of specified number of outstation instruments

2. Instant credit of outstanding cheques up to Rs.15000/-

3. Concession in exchange on demand drafts and pay-orders and commission on

bills of exchange

4. Issuance of free personalized cheques books

5. Free issuance of ATM, Debit, Credit and add-on Cards

6. Free investment advisory services

7. Grant of redeemable reward points on use of credit cards

8. Free internet banking, phone banking and any where banking facilities

9. Issuance of discount coupons for purchase of various products like computer

accessories, music CDs, cassettes, books, toys, garments etc.etc.

10. Last but not the least, issuance of free PVR, Trade Fair tickets etc. etc.

11. Concession in rate of interest on Group advances

12. Exemption in upfront fees

These concessions, freebies and add-ons are based on the True Relationship Value
of customers and is calculated by the return on various products and services of the banks
availed by them. These concessions and freebies are usually offered for purchase of
consumer goods but now they have become an integral part of retail Banking products
and services also.
• Other Retail Banking Services:-
Offer of several frills and goodies is not the end of the game. Banks also offer following
Retail Banking services free of charges to customers:

1. Payment of utility bills like water, electricity, telephone and mobile phone bills

2. Payment of insurance premiums on due dates

3. Payment of monthly/quarterly education fee of children to their respective schools

4. Remittance of funds from one account to another

5. Demating of shares, bonds, debentures, and mutual funds

6. Payment of credit card bills on due dates

7. Last but not the least, the filing of income tax returns and payment of income tax

• Retail Lending at Point of Sale:-

More and more banks have since entered into tie up arrangement with leading
automobile, electronic and consumer goods dealers, builders and real estate agents,
universities and colleges etc. for promoting and selling their Retail Banking products
including housing and educational loans to customer at the very point of sale.

• New delivery channels for Retail Banking Products and Services:-

The advent of new delivery channels viz. ATM, Interest and Telebanking have
revolutionalised the retail banking activities. These channels enable Banks to deliver
retail Banking products and services in an efficient and cost effective manner. Now-a-
days the banks are under great pressure to attract new and retain old customers, as
margins are turning wafer thin. In these circumstances reducing administrative a
transaction cost has become crucial. Banks are making special offerings to customers
through these channels. Retail banking has been immensely benefited with the revolution
in IT. and communication technology. The automation of the Banking processes is
facilitating extension of their reach and rationalization of their costs as well. They are the
engine for growth of retail banking business of Banks. The networking of branches has
extended the scope of banking to anywhere and anytime 24 * 7 days week banking. It has
enabled customer to be the customer of a bank rather then the customers of a particular
branch only. Customers can transact retail Banking transactions at any of the networked
branches without any extra cost. As a matter of fact the Retail Banking per se has taken
off because of the advent of multiple banking channels. These channels have enabled
banks to go on a massive customer acquisition mode since transaction volumes spread
over multiple channels lessen the load on the brick and mortar bank branches.
• The impact of Retail Banking:-
 The major impact of Retail Banking is that, the customers have become the
emperors – the fulcrum of all banking activities, both on the asset side and the
liabilities front. The hitherto sellers market has transformed into buyers market.
The customers have multiple of choices before them now for cherry picking
products and services, which suit their life styles and tastes and financial
requirements as well. Banks now go to their customers more often than the
customers go to their banks.
 The non-banking finance Companies which have hitherto been thriving on retail
business due to high risk and high returns thereon have been dislodged from their
profit munching citadel.
 Retail banking is transforming banks in to one stop financial super markets.
 The share of retail loans is fast increasing in the loan books of banks.
 Banks can foster lasting business relationship with customers and retain the
existing customers and attract new ones. There is a rise in their service levels as
 Banks can cut costs and achieve economies of scale and improve their revenues
and profits by robust growth in retail business. Reduction in costs offers a win
win situation both for banks and the customers.
 It has affected the interface of banking system through different delivery
 It is not that banks are sharing the same pie of retail business. The pie itself is
growing exponentially; retail banking has fueled a considerable quantum of
purchasing power through a slew of retail products.
 Banks can diversify risks in their credit portfolio and contain the menace of
 Re-engineering of business with sophisticated technology based products will
lead to business creation, reduction in transaction cost and enhancement in
efficiency of operations.

• Draw-backs of Retail Banking :-

Despite the numerous advantage of Retail Banking there are some drew-Backs in this
business. These are as under:
a. Management of large number of clients may become a problem if IT systems are
not robust.
b. Rapid evolution of products can lead to IT complications.
c. The cost of maintaining large number of small value transactions in branch
networks will be relatively high, unless the customers use alternate delivery
channels like ATMs, internet and phone banking etc. for carrying out banking

• The Future of Retail Banking :-

Though at present Retail Banking appears to be the best bet for banks to improve their
top and bottom line, yet the future of Retail banking in general, may not be all roses as it
appears to be. There are signs of slowdown in customer growth in some countries, which
will inevitably have an impact on Retail Banking business growth. Secondly the
possibility of deterioration in asset quality cannot be ruled out. With the boom in housing
loan market, the sign of overheating has also started surfacing with potential problem for
banks that have not exercised sufficient caution. Further the pressure on margins is
mounting partly because of fierce competition and partly as a result of falling interest
rates environment which has diminished to some extent the endowment effect of
substantial deposit bases from which most retail banks have been deriving benefits. But
banks, which have built a significant retail banking portfolio may fare relatively well in
the current fiscal. Those banks which have a dynamic retail strategy and are well
diversified in products, services and distribution channels and have at the same time
managed to achieve a good level of cost efficiency are the ones that are most likely to
succeed in the longer term.

Strategic Planning: is the process of analyzing the organizational external and internal
environments; developing the appropriate mission, vision, and overall goals; identifying
the general strategies to be pursued; and allocated resources.
• Mission is an organization's current purpose or reason for existing.
• Vision is an organization's fundamental aspirations and purpose that usually
appeals to its member's hearts and minds.
• Goals are what an organization is committed to achieving.
• Strategies are the major courses of action that an organization takes to achieves
• Resource Allocation is the earmarking of money, through budgets, for various
• Downsizing Strategy signals an organization's intent to rely on fewer resources-
primarily human-to accomplish its goals.
Tactical Planning: is the process of making detailed decisions about what to do, which
will do it, and how to do it-with a normal time and horizon of one year or less. The
process generally includes:
• Choosing specific goals and the means of implementing the
organization's strategic plan,
• Deciding on courses of action for improving current operations, and
• Developing budgets for each department, division and project.
Strategic issues in banks services are known as or define by these ways, which are known
There was a significant decline in the non-performing assets (NPAs) of SCBs in
2003-04, despite adoption of 90 day delinquency norm from March 31, 2004. The Gross
NPAs of SCBs declined from 4.0 per cent of total assets in 2002-03 to 3.3 percent in
2003-04. The corresponding decline in net NPAs was from 1.9 per cent to 1.2 per cent.
Both gross NPAs and net NPAs declined in absolute terms. While the gross NPAs
declined from Rs. 68,717 crore in 2002-03 to Rs. 64,787 crore in 2003-04, net NPAs
declined from Rs. 32,670 crore to Rs. 24,617 crore in the same period. There was also a
significant decline in the proportion of net NPAs to net advances from 4.4 per cent in
2002-03 to 2.9 per cent in 2003-04. The significant decline in the net NPAs by 24.7 per
cent in 2003-04 as compared to 8.1 per cent in 2002-03 was mainly on account of higher
provisions (up to 40.0 per cent) for NPAs made by SCBs.
The decline in NPAs in 2003-04 was witnessed across all bank groups. The
decline in net NPAs as a proportion of total assets was quite significant in the case of new
private sector banks, followed by PSBs. The ratio of net NPAs to net advances of SCBs
declined from 4.4 per cent in 2002-03 to 2.9 per cent in 2003-04. Among the bank
groups, old private sector banks had the highest ratio of net NPAs to net advances at 3.8
per cent followed by PSBs (3.0 per cent) new private sector banks (2.4 per cent) and
foreign banks (1.5 per cent)
An analysis of NPAs by sectors reveals that in 2003-04, advances to non-priority
sectors accounted for bulk of the outstanding NPAs in the case of PSBs (51.24 per cent of
total) and for private sector banks (75.30 per cent of total). While the share of NPAs in
Agriculture sector and SSIs of PSBs declined in 2003-04, the share of other priority
sectors increased. The share of loans to other priority sectors in priority sector lending
also increased. Measures taken to reduce NPAs include re schedulement, restructuring at
the bank level, corporate debt restructuring, and recovery through Lok Adalats, Civil
Courts, and debt recovery tribunals and compromise settlements. The recovery
management received a major fillip with the enactment of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI)
Act, 2002 enabling banks to realize their dues without intervention of courts and
tribunals. The Supreme Court in its judgment dated April 8, 2004, while upholding the
constitutional validity of the Act, struck down section 17 (2) of the Act as
unconstitutional and contrary to Article 14 of the Constitution of India. The Government
amended the relevant provisions of the Act to address the concerns expressed by the
Supreme Court regarding a fair deal to borrowers through an ordinance dated November
11, 2004. It is expected that the momentum in the recovery of NPAs will be resumed with
the amendments to the Act.
The revised guidelines for compromise settlement of chronic NPAs of PSBs were
Issued in January 2003 and were extended from time to time till July 31, 2004. The cases
filed by SCBs in Lok Adalats for recovery of NPAs stood at 5.20 lakh involving an
amount of Rs. 2,674 crore (prov.). The recoveries effected in 1.69 lakh cases amounted to
Rs.352 crore (prov.) as on September 30, 2004.The number of cases filed in debt

recovery tribunals stood at 64, 941 as on June 30, 2004, involving an amount of Rs.
91,901 crore. Out of these, 29, 525 cases involving an amount of Rs. 27,869 crore have
been adjudicated. The amount recovered was to Rs. 8,593 crore. Under the scheme of
corporate debt restructuring introduced in 2001, the number of cases and value of assets
restructured stood at 121 and Rs. 69,575 crore, respectively, as on December 31, 2004.
Iron and steel, refinery, fertilizers and telecommunication sectors were the major
beneficiaries of the scheme. These sectors accounted for more than two-third of the
values of assets restructured.
As credit information is crucial for the development of the financial system and
for addressing the problems of NPAs, dissemination of credit information on suit-filed
defaulters is being undertaken by the Credit Information Bureau of India Ltd. (CIBIL)
from March 2003. In its annual policy statement for 2004-05, the RBI advised banks and
financial institutions to review the measures taken for furnishing credit information in
respect of all borrowers to CIBIL. In its mid-term review, the RBI again urged the banks
to make persistent efforts in obtaining consent from all the borrowers, in order to
establish an efficient credit information system, which would help in enhancing the
quality of credit decisions, improve the asset quality, and facilitate faster credit delivery.


The concept of minimum capital to risk weighted assets ratio (CRAR) has been
developed to ensure that banks can absorb a reasonable level of losses. Application of
minimum CRAR protects the interest of depositors and promotes stability and efficiency
of the financial system. At the end of March 31, 2004, CRAR of PSBs stood at 13.2 per
cent, an improvement of 0.6 per centage point from the previous year. There was also an
improvement in the CRAR of old private sector banks from 12.8 per cent in 2002-03 to
13.7 per cent in 2003-04. The CRAR of new private sector banks and foreign banks
registered a decline in 2003-04. For the SCBs as a whole the CRAR improved from 12.7
per cent in 2002-03 to 12.9 per cent in 2003-04. All the bank groups had CRAR above
the minimum 9 per cent stipulated by the RBI.
During the current year, there was further improvement in the CRAR of SCBs.
The ratio in the first half of 2004-05 improved to 13.4 per cent as compared to 12.9 per
cent at the end of 2003-04. Among the bank groups, a substantial improvement was
witnessed in the case of new private sector banks from 10.2 per cent as at the end of
2003-04 to 13.5 per cent in the first half of 2004-05. While PSBs and old private banks
maintained the CRAR at almost the same level as in the previous year, the CRAR of
foreign banks declined to 14.0 per cent in the first half of 2004-05 as compared to 15.0
per cent as at the end of 2003-04.
While Total Quality Management has proven to be an effective process for
improving organizational functioning, its value can only be assured through a
comprehensive and well thought out implementation process. The purpose of this chapter
is to outline key aspects of implementation of large scale organizational change which
may enable a practitioner to more thoughtfully and successfully implement TQM. First,
the context will be set. TQM is, in fact, a large scale systems change, and guiding
principles and considerations regarding this scale of change will be presented. Without
attention to contextual factors, well intended changes may not be adequately designed. As
another aspect of context, the expectations and perceptions of employees (workers and
managers) will be assessed, so that the implementation plan can address them.
Specifically, sources of resistance to change and ways of dealing with them will be
discussed. This is important to allow a change agent to anticipate resistances and design
for them, so that the process does not bog down or stall. Next, a model of implementation
will be presented, including a discussion of key principles. Visionary leadership will be
offered as an overriding perspective for someone instituting TQM. In recent years the
literature on change management and leadership has grown steadily, and applications
based on research findings will be more likely to succeed. Use of tested principles will
also enable the change agent to avoid reinventing the proverbial wheel. Implementation
principles will be followed by a review of steps in managing the transition to the new
system and ways of helping institutionalize the process as part of the organization's
culture. This section, too, will be informed by current writing in transition management
and institutionalization of change. Finally, some miscellaneous do's and don’t will be
Members of any organization have stories to tell of the introduction of new
programs, techniques, systems, or even, in current terminology, paradigms. Usually the
employee, who can be anywhere from the line worker to the executive level, describes
such an incident with a combination of cynicism and disappointment: some manager
went to a conference or in some other way got a "great idea" (or did it based on threat or
desperation such as an urgent need to cut costs) and came back to work to
enthusiastically present it, usually mandating its implementation. The "program"
probably raised people's expectations that this time things would improve, that
management would listen to their ideas. Such a program usually is introduced with
fanfare, plans are made, and things slowly return to normal. The manager blames
unresponsive employees, line workers blame executives interested only in looking good,
and all complain about the resistant middle managers. Unfortunately, the program itself is
usually seen as worthless: "we tried team building (or organization development or
quality circles or what have you) and it didn't work; neither will TQM". Planned change
processes often work, if conceptualized and implemented properly; but, unfortunately,
every organization is different, and the processes are often adopted "off the shelf" "the
'appliance model of organizational change': buy a complete program, like a 'quality circle
package,' from a dealer, plug it in, and hope that it runs by itself" (Kanter, 1983, 249).
Alternatively, especially in the under funded public and not for profit sectors, partial
applications are tried, and in spite of management and employee commitment do not bear
fruit. This chapter will focus on ways of preventing some of these disappointments.
In summary, the purpose here is to review principles of effective planned change
implementation and suggest specific TQM applications. Several assumptions are
1. TQM is a viable and effective planned change method, when properly installed
2. Not all organizations are appropriate or ready for TQM
3. Preconditions (appropriateness, readiness) for successful TQM can sometimes be
4. Leadership commitment to a large scale, long term, and cultural change is necessary.
While problems in adapting TQM in government and social service organizations have
been identified, TQM can be useful in such organizations if properly modified.
For survival, banks have to make efforts to improve their quality and
competitiveness by planning and taking innovative in fall areas:
• Increase emphasis on customer focused activities
• Intro a “total quality” program
• Developing differential value added services
• Educating employees through involvement programs
• Increase quality through management and system
• Increase effectiveness of product development
• Developing product with lower uses costs
TQM principles
 Customer satisfaction
 Plan-do-check-act (PDCA) cycle
 Management by 'fact' -- 5Ws (what, why, who, when, and where) + 1H
(how) approach
 Respect for people
TQM elements
 Total employee involvement (TEI)
 Total waste elimination (TWE)
 Total quality control (TQC)
TQM focus areas
 Customer satisfaction
 Product quality
 Plant reliability
 Waste elimination
Benefits achieved through TQM
 Increased focus on the customer
 Mindset of 'continuous improvement'
 Better product quality
 Better systems and procedures
 Better cross-functional teamwork
 Increased plant reliability
 Waste elimination in offices and factories.
 KNOWLEDGE MANAGEMENT-------------------------------------
According to Peter Drucker and Daniel Bell, the management Gurus knowledge is
the only meaningful economic resource.

Knowledge management can be defined as a systematic and integrative process of

coordinating organization-wide activities of acquiring, creating, storing, sharing,
diffusing, developing and deploying knowledge by individual and groups in the pursuit of
major organizational goals. It also involves the creation of an interacting learning
environment where organization members transfer and share what they know; and apply
knowledge to solve problems, innovate and create new knowledge.

Knowledge management is as much about people and culture as it is about

technology. Knowledge management thrives only when the human communication
network operates freely across the shortest path between the knowledge providers and
knowledge seekers. There must be a culture that promotes and rewards the pooling
together of knowledge resources. Thus organizations must build a culture that motivates
people to create, share and use knowledge.

After the preoccupation with system and procedures to collect data ad translate it
into information, its time for firms to focus on the next plane- knowledge. Knowledge
management is not a buzzword. Every knowledge management solution, if currently
implemented, has definite measurable business benefits.

Future business success increasingly depends on the retention and the creative use
of the knowledge ideas and experiences of an organization and its employees. And in
knowledge economy corporations need for workers will be more than the workers need
for employer.

The work will demand more formal education and more cutting edge knowledge
 INNOVATION IN BANK----------------------------------------------------

Innovation drives organizations to grow, prosper and transform in sync with the
changes in the environment, both internal and external. Banking is no exception to this.
In fact, this sector has witnessed radical transformation of late, based on many
innovations in products, processes, services, systems, business models, technology,
governance and regulation. A liberalized and globalize financial infrastructure has
provided an additional impetus to this gigantic effort.
The pervasive influence of in formation technology has revolutionalized banking.
Transaction costs have crumbled and handling of astronomical number of transactions in
no time has become a reality. Internationally, the number brick and mortar structure has
been rapidly yielding ground to click and order electronic banking with a plethora of new
products. Banking has become boundary less and virtual with a 24 * 7 model. Banks who
strongly rely on the merits of relationship banking’ as a time tested way of targeting and
serving clients, have readily embraced Customer Relationship Management (CRM), with
sharp focus on customer centricity, facilitated by the availability of superior technology.
CRM has, therefore, become the new mantra in customer service management, which is
both relationship based and information intensive.
Risk management is no longer a mere regulatory issue.basel-2 has accorded a
primacy of place to this fascinating exercise by repositioning it as the core of banking.
We now see the evolution of many novel deferral products like credit derivatives,
especially the Credit Risk Transfer (CRT) mechanism, as a consequence. CRT,
characterized by significant product innovation, is a very useful credit risk management
tool that enhances liquidity and market efficiency. Securitization is yet another example
in this regard, whose strategic use has been rapidly rising globally. So is outsourcing.


Tandon can, however, usefully cast an eye at one way of shopping without
revealing his credit card number. HDFC Bank’s ‘Net Safe’ card is a one-time use card
with a limit that’s specified, taken from Tendon’s credit or debit card. Even if Tandon
fails to utilize the full amount within 24 hours of creating the card, the card simply dies
and the unspent amount in the temporary card reverts to his original credit or debit card.
Welcome to one of the myriad ways in which bankers have been trying to innovate.
They’re bringing ATMs, cash and even foreign exchange to their customers’ doorsteps.
Indeed, innovation has become the hottest banking game in town.
Want to buy a house but don’t want to go through the hassles of haggling with
brokers and the mounds of paperwork? Not to worry. Your bank will tackle all this. It’s
ready to come every step of the way for you to buy a house. Standard Chartered, for
instance, has property advisors to guide a customer through the entire process of selecting
and buying a house. They also lend a hand with the cumbersome documentation
formalities and the registration.
Don’t fret if you’ve already bought your house or car – you can do other things
with both. You can leverage your new house or car these days with banks like ICICI
Bank and Stanchart ready to extend loans against either, till it’s about five years old.
Loans are available to all car owners for almost all brands of cars manufactured in India
that are up to five years old.
Still, innovation is more evident in retail banking. True, all banks offer pretty
much the same suite of asset and liability products. But it’s the small tweaking here and
there that makes all the difference. Take, for example, the once staid deposits. Some bank
accounts combine a savings deposit account with a fixed deposit. A sweep-in account, as
it is called, works like this: the account will have a cut-off, say, Rs 25,000; any amount
over and above that gets automatically transferred to a fixed deposit which will earn the
customer a clean 2 per cent more than the returns that a savings account gives.
Last month, Kotak Mahindra Bank introduced a variant of the sweep-in account.
If the balance tops Rs 1.5 lakh, the excess runs into Kotak’s liquid mutual fund. “Even if
the money is there only for the weekend, a liquid fund can earn you a clean 4.5 per cent
per annum,” points out Shashi Arora, vice president, marketing, Kotak Mahindra Bank.
That’s not a small gain considering that your current account does not pay you any
interest. And if, meanwhile, you want to buy a big-ticket home theatre system, the minute
you swipe your card the invested sum will return to your account.
There’s plenty of innovation on home loans. ABN Amro sent the home mortgage market
afire with its 6 per cent home loan offering last year. The product offers a 6 per cent
interest rate for two years after which the interest rate is reset in tune with the prevailing
market rate. All the other big home loan players slashed their rates after this was
Look too at the home saver product and its variants from Citibank, HSBC and
Stanchart. The interest rate on the loan is determined by the balance you maintain in the
savings account with the bank. The home builder can maintain a higher balance in his or
her savings account and bring down the interest rate on the home loan. The rate is
calculated on a daily basis on the net loan amount. Stanchart claims that since the launch
of its home saver product in April 2002, close to 40 per cent of its customers have chosen
it. Says Vishu Ramachandran, regional head, consumer banking, Standard Chartered:
“We believe that there are several ways to innovate and create value in the process, even
in developed product areas.”
Banks are also attempting to reach out to residents of metropolitan cities where
people are pressed for time (what with long commuting hours, traffic jams and both
spouses working), beyond conventional banking hours. ICICI Bank, for example,
introduced eight to eight banking hours, seven days of the week, in major cities. Not to be
outdone, some of the other private banks have also done this too. HDFC Bank even has a
24-hour branch at Mumbai’s international airport.
Several banks are even bringing ATMs to customer doorsteps. ICICI Bank, State
Bank of India and Bank of India now have mobile ATMs or vans that go along a
particular route in a city and are stationed at strategic locations for a few hours every day.
This saves the bank infrastructure costs since it has one mobile ATM instead of multiple
stationary ones.
That’s not all. Even money is delivered to customers at home. Kotak Mahindra
Bank, a late entrant into private banking, delivers cash at the doorstep. A customer can
withdraw a minimum of Rs 5,000 and up to a maximum of Rs 2 lakh and get the money
at home. And, mind you, Kotak is not alone. The list of banks offering a similar service
includes Citibank, Stanchart, ABN Amro and HDFC Bank. HDFC Bank brings even
foreign exchange, whether travellers cheques or cash, to your doorstep courtesy its tie-up
with Travelex India. All one has to do is call up the branch or HDFC Bank’s phone
banking number. The bank’s country head, retail, Neeraj Swaroop, believes that
continuous innovation will always make a difference, with customer needs changing day
by day. “Innovation will never become less important for us,” he says.
HDFC Bank has pioneered other innovations. Take point of sale (POS) terminals,
a prerequisite in any store or restaurant worth its name in the country. Earlier this year, it
tied up with Reliance Infocomm to offer mobile POS terminals. Although this might
sound a tad too fancy today, there could soon be a day when you can swipe your card to
pay your cabby, the pizza home delivery boy and even for the groceries from the local
kirana store.
But internet banking and shopping have been slow starters, given the low
computer penetration in the country but banks are going all out to get the customer
online. Not only is electronic fund transfer between banks across cities possible through
internet banking today but banks also offer other features that benefit the customer.
HDFC Bank, for instance, has an option called ‘One View’ on its internet banking site
which provides customers a comprehensive view of their investments and fund
movements. Customers can look at their accounts in six different banks on one screen.
These include HDFC Bank accounts and demat accounts, ICICI Bank, Citibank, HSBC
and Standard Chartered Bank accounts, apart from details of Citibank credit card dues
and so on.
Banks are also innovating on the company and treasury operations fronts. In
corporate loans, plain loans are passe. Mumbai inter-bank offered rate (MIBOR)-linked
and commercial paper-linked interest rates on loans are common. MIBOR is a reference
rate arrived at every day at 4 pm by Reuters. It is the weighted average rate of call money
business transacted by 22 institutions, including banks, primary dealers and financial
The State Bank of India was the first to usher in MIBOR-linked loans for top
companies. Soon enough, other banks followed. ICICI Bank carried out the world’s first
ever securitization of a micro finance portfolio last year. The bank securitized Rs 4.2
crore for Bharatiya Samruddhi Finance Ltd for crop production. Banks, of course, realize
that innovation gives them only a first mover advantage until their rivals catch up. But
then, they can console themselves. Isn’t imitation the best form of flattery?

 TECHNOLOGY IN BANKING----------------------------------------
Nobel Laureate Robert Solow had once remarked that computers are seen
everywhere excepting in productivity statistics. More recent developments have shown
how far this state of affairs has changed. Innovation in technology and worldwide
revolution in information and communication technology (ICT) have emerged as
dynamic sources of productivity growth. The relationship between IT and banking is
fundamentally symbiotic. In the banking sector, IT can reduce costs, increase volumes,
and facilitate customized products; similarly, IT requires banking and financial services
to facilitate its growth. As far as the banking system is concerned, the payment system is
perhaps the most important mechanism through which such interactive dynamics gets
Recognizing the importance of payments and settlement systems in the economy,
we have embarked on technology based solutions for the improvement of the payment
and settlement system infrastructure, coupled with the introduction of new payment
products such as the computerized settlement of clearing transactions, use of Magnetic
Ink Character Recognition (MICR) technology for cheque clearing which currently
accounts for 65 per cent of the value of cheques processed in the country, the
computerization of Government Accounts and Currency Chest transactions,
operationalisation of Delivery versus Payment (DvP) for Government securities
transactions. Two-way inter-city cheque collection and imaging have been
operationalised at the four metros. The coverage of Electronic Clearing Service (Debit
and Credit) has been significantly expanded to encourage non-paper based funds
movement and develop the provision of a centralized facility for effecting payments. The
scheme for Electronic Funds Transfer operated by the Reserve Bank has been
significantly augmented and is now available across thirteen major cities. The scheme,
which was originally intended for small value transactions, is processing high value (up
to Rs.2 crore) from October 1, 2001. The Centralized Funds Management System
(CFMS), which would enable banks to obtain consolidated account-wise and centre-wise
positions of their balances with all 17 offices of the Deposits Accounts Departments of
the Reserve Bank, has begun to be implemented in a phased manner from November
A holistic approach has been adopted towards designing and development of a modern,
robust, efficient, secure and integrated payment and settlement system taking into
account certain aspects relating to potential risks, legal framework and the impact on the
operational framework of monetary policy. The approach to the modernization of the
payment and settlement system in India has been three-pronged: (a) consolidation, (b)
development, and (c) integration. The consolidation of the existing payment systems
revolves around strengthening Computerized Cheque clearing, expanding the reach of
Electronic Clearing Services and Electronic Funds Transfer by providing for systems
with the latest levels of technology. The critical elements in the developmental strategy
are the opening of new clearing houses, interconnection of clearing houses through the
INFINET; optimizing the deployment of resources by banks through Real Time Gross
Settlement System, Centralized Funds Management System (CFMS); Nego tiated
Dealing System (NDS) and the Structured Financial Messaging Solution (SFMS). While
integration of the various payment products with the systems of individual banks is the
thrust area, it requires a high degree of standardization within a bank and seamless
interfaces across banks.
The setting up of the apex-level National Payments Council in May 1999 and the
operationalisation of the INFINET by the Institute for Development and Research in
Banking Technology (IDRBT), Hyderabad have been some important developments in
the direction of providing a communication network for the exclusive use of banks and
financial institutions. Membership in the INFINET has been opened up to all banks in
addition to those in the public sector. At the base of all inter-bank message transfers using
the INFINET is the Structured Financial Messaging System (SFMS). It would serve as a
secure communication carrier with templates for intra- and inter-bank messages in fixed
message formats that will facilitate ‘straight through processing’. All inter-bank
transactions would be stored and switched at the central hub at Hyderabad while intra-
bank messages will be switched and stored by the bank gateway. Security features of the
SFMS would match international standards.
In order to maximize the benefits of such efforts, banks have to take pro-active measures
 further strengthen their infrastructure in respect of standardization, high levels
of security and communication and networking;
 achieve inter-branch connectivity early;
 popularize the usage of the scheme of electronic funds transfer (EFT); and
 Institute arrangements for an RTGS environment online with a view to
integrating into a secure and consolidated payment system.
Information technology has immense untapped potential in banking. Strengthening of
information technology in banks could improve the effectiveness of asset-liability
management in banks. Building up of a related data-base on a real time basis would
enhance the forecasting of liquidity greatly even at the branch level. This could contribute
to enhancing the risk management capabilities of banks.

 REGULATIONS AND COMPLIANCE----------------------------

Progressive strengthening, deepening and refinement of the regulatory and

supervisory system for the financial sector have been important elements of financial
sector reforms. In the long run, it is the supervision and regulation function that is critical
in safeguarding financial stability. There is also some evidence that proactive and
effective supervision contributes to the efficiency of financial intermediation. Financial
sector supervision is expected to become increasingly risk-based and concerned with
validating systems rather than setting them. This will entail procedures for sound internal
evaluation of risk for banks. As mentioned earlier, bank managements will have to
develop internal capital assessment processes in accordance with their risk profile and
control environment. These internal processes would then be subjected to review and
supervisory intervention if necessary. The emphasis will be on evaluating the quality of
risk management and the adequacy of risk containment. In such an environment,
credibility assigned by markets to risk disclosures will hold only if they are validated by
supervisors. Thus effective and appropriate supervision is critical for the effectiveness of
capital requirements and market discipline.
In certain areas, as for instance, in the urban cooperative banking segment, the
regulatory requirements leave considerable scope for regulatory arbitrage and even
circumvention. The problem is rendered more complex by the existence of regulatory
overlap between the Central Government, the State Governments and the Reserve Bank.
Regulatory overlap has impeded the speed of regulatory response to emerging problems.
The need for removing multiple regulatory jurisdictions over the cooperative banking
sector has been reiterated on several occasions. In this regard, the Reserve Bank has
proposed the setting up of an apex supervisory body for urban cooperative banks under
the control of a high-level supervisory board consisting of representatives of the Central
governments, the State governments, the Reserve Bank and experts. The apex body is
expected to ensure compliance with prudential requirements and also supervise on-site
inspections and off-site surveillance.
Recent developments in certain segments of the financial sector have also brought to the
fore issues relating to corporate governance in banks. As part of on-going reforms, boards
have been given greater autonomy to prescribe internal control guidelines, risk
management and procedures for market discipline and accountability. It is extremely
important that greater vigilance over adherence to these norms goes hand-in-hand with
greater autonomy. Recent evidence of transgression of prudential guidelines by a few
banks has raised the issue of the audit and supervisory functions of boards. As we move
towards a more deregulated financial regime, these functions have to be transferred from
either the Government or the Reserve Bank to bank boards. This imposes a greater
responsibility and accountability on the bank management. It is in this context that a
consultative group of directors of select banks and other experts has been set up to
recommend measures to strengthen the internal supervisory role of boards. The objective
is to obtain a feedback on how boards function vis-à-vis compliance with prudential
norms, transparency and disclosure, functioning of the audit committee, etc., and to
devise effective mechanisms for ensuring management discipline.
Several other initiatives in improving the supervisory function have been
undertaken, including a prudential supervisory reporting system for financial institutions,
improvements in procedures for financial inspection, sensitizing the general public for
better regulation of the activities of NBFCs and enactment of appropriate legislation to
protect depositor interests in some States. Major legal reforms have been initiated in areas
such as security laws, the Negotiable Instruments Act, bank frauds and the regulatory
framework of banking. The Reserve Bank has also accepted the principle of transfer of
ownership to the Government in respect of some financial institutions in view of the
conflict of interest that may arise in the conduct of its supervisory function. It is expected
that these initiatives will pave the way for an efficient, and risk-based supervisory
environment in India.
The largest set of consolidated regulations that mandate integrity of data in India
are the IT Act and SEBI's clause 49 for listed companies. These regulations do not
currently enforce the kind of security standards that are common in Europe and the US.
In a global economy, however, no company is an island and India Inc is adopting US and
European compliance procedures and certifications such as Sarbanes Oxley, Safe
Harbour, BS, and ISO.
Compliance, regulatory or otherwise, does not directly concern the IT department.
In manufacturing for instance, compliance controls don't really involve system security,
and a large part of the quality control required by authorities cannot be imposed or
enforced using IT. Companies that deal with sensitive information, financial services and
BPOs, banks, MNC subsidiaries or those with plans to expand beyond Indian shores are
all affected. These will continue to make strides towards compliance. For the medium-
scale segment (Rs 100-300 crore turnover), security and audits are not a priority. This
segment is comfortable with public mail servers, and exchanging information over not
very secure connections.


1. Need and objective of the Code

Clause 49 of the Listing agreement entered into with the Stock Exchanges,
requires, as part of Corporate Governance the listed entities to lay down a Code of
Conduct for Directors on the Board of an entity and its Senior Management. The
term "Senior Management" shall mean personnel of the company who are
members of its core management team excluding the Board of Directors. This
would also include all members of management, one level below the Executive
Directors including all functional heads.
2. Bank's Belief System
This Code of Conduct attempts to set forth the guiding principles on which the
Bank shall operate and conduct its daily business with its multitudinous
stakeholders, government and regulatory agencies, media and anyone else with
whom it is connected. It recognizes that the Bank is a trustee and custodian of
public money and in order to fulfill fiduciary obligations and responsibilities, it
has to maintain and continue to enjoy the trust and confidence of public at large.
The Bank acknowledges the need to uphold the integrity of every transaction it
enters into and believes that honesty and integrity in its internal conduct would be
judged by its external behavior. The bank shall be committed in all its actions to
the interest of the countries in which it operates. The Bank is conscious of the
reputation it carries amongst its customers and public at large and shall endeavor
to do all it can to sustain and improve upon the same in its discharge of
obligations. The Bank shall continue to initiate policies, which are customer
centric and which promote financial prudence.
3. Philosophy of the Code
The code envisages and expects
a. Adherence to the highest standards of honest and ethical conduct,
including proper and ethical procedures in dealing with actual or apparent
conflicts of interest between personal and professional relationships.
b. Full, fair, accurate, sensible, timely and meaningful disclosures in the
periodic reports required to be filed by the Bank with government and
regulatory agencies.
c. Compliance with applicable laws, rules and regulations.
d. To address misuse or misapplication of the Bank's assets and resources.
e. The highest level of confidentiality and fair dealing within and outside the
A. General Standards of conduct
The Bank expects all Directors and members of the Core Management to exercise
good judgment, to ensure the interests, safety and welfare of customers, employees
and other stakeholders and to maintain a cooperative, efficient, positive, harmonious
and productive work environment and business organization. The Directors and
members of the Core Management while discharging duties of their office must act
honestly and with due diligence. They are expected to act with that amount of utmost
care and prudence, which an ordinary person is expected to take in his/ her own
business. These standards need to be applied while working in the premises of the
Bank, at offsite locations where business is being conducted whether in India or
abroad, at Bank-sponsored business and social events, or at any other place where
they act as representatives of the Bank.
B. Conflict of Interest
A "conflict of interest" occurs when personal interest of any member of the Board of
Directors and of the Core management interferes or appears to interfere in any way
with the interests of the Bank. Every member of the Board of Directors and Core
Management has a responsibility to the Bank, its stakeholders and to each other.
Although this duty does not prevent them from engaging in personal transactions and
investments, it does demand that they avoid situations where a conflict of interest
might occur or appear to occur. They are expected to perform their duties in a way
that they do not conflict with the Bank's interest such as :
 Employment /Outside Employment - The members of the Core Management
are expected to devote their total attention to the business interests of the Bank.
They are prohibited from engaging in any activity that interferes with their
performance or responsibilities to the Bank or otherwise is in conflict with or
prejudicial to the Bank.
 Business Interests - If any member of the Board of Directors and Core
Management considers investment in securities issued by the Bank's customer,
supplier or competitor, they should ensure that these investments do not
compromise their responsibilities to the Bank. Many factors including the size and
nature of the investment; their ability to influence the Bank's decisions, their
access to confidential information of the Bank, or of the other entity, and the
nature of the relationship between the Bank and the customer, supplier or
competitor should be considered in determining whether a conflict exists.
Additionally, they should disclose to the Bank any interest that they have which
may conflict with the business of the Bank.
 Related Parties - As a general rule, the Directors and members of the Core
Management should avoid conducting Bank' s business with a relative or any
other person or any firm, Company, association in which the relative or other
person is associated in any significant role. Relatives shall include :
o Father
o Mother (including step mother)
o Son's Wife
o Daughter (including step daughter)
o Father's father
o Father's mother
o Mother's mother
o Mother's father
o Son's son
o Son's son's wife
o Son's daughter
o Son's daughter's husband
o Daughter's husband
o Daughter's son
o Daughter's son's wife
o Daughter's daughter
o Daughter's daughter's husband
o Brother (including step brother)
o Brother's wife
o Sister (including step sister)
o Sister's husband
If such a related party Transaction is unavoidable, they must fully disclose the nature
of the related party transaction to the appropriate authority. Any dealings with a
related party must be conducted in such a way that no preferential treatment is given
to that party.
In the case of any other transaction or situation giving rise to conflicts of interests, the
appropriate authority should after due deliberations decide on its impact.
C. Applicable Laws
The Directors of the Bank and Core Management must comply with applicable laws,
regulations, rules and regulatory orders. They should report any inadvertent non -
compliance, if detected subsequently, to the concerned authorities.
D. Disclosure Standards
The Bank shall make full, fair, accurate, timely and meaningful disclosures in the
periodic reports required to be filed with Government and Regulatory agencies. The
members of Core Management of the bank shall initiate all actions deemed necessary
for proper dissemination of relevant information to the Board of Directors, Auditors
and other Statutory Agencies, as may be required by applicable laws, rules and
E. Use of Bank's Assets and Resources
Each member of the Board of Directors and the Core Management has a duty to the
Bank to advance its legitimate interests while dealing with the Bank's assets and
resources. Members of the Board of Directors and Core Management are prohibited
 Using Corporate property, information or position for personal gain,
 Soliciting, demanding, accepting or agreeing to accept anything of value
from any person while dealing with the Bank's assets and resources,
 Acting on behalf of the Bank in any transaction in which they or any of
their relative(s) have a significant direct or indirect interest.
F. Confidentiality and Fair Dealings
(i) Bank's confidential Information
 The Bank's confidential information is a valuable asset. It includes all trade related
information, trade secrets, confidential and privileged information, customer
information, employee related information, strategies, administration, research in
connection with the Bank and commercial, legal, scientific, technical data that are
either provided to or made available each member of the Board of Directors and the
core Management by the Bank either in paper form or electronic media to facilitate
their work or that they are able to know or obtain access by virtue of their position
with the Bank. All confidential information must be used for Bank's business
purposes only.
 This information includes the safeguarding, securing and proper disposal of
confidential information in accordance with the Bank's policy on maintaining and
managing records. The obligation extends to confidential of third parties, which the
Bank has rightfully received under non-disclosure agreements.
 To further the Bank's business, confidential information may have to be disclosed to
potential business partners. Such disclosures should be made after considering its
potential benefits and risks. Care should be taken to divulge the most sensitive
information, only after the said potential business partner has signed a
confidentiality agreement with the Bank.
 Any publication or publicly made statement that might be perceived or construed as
attributable to the Bank, made outside the scope of any appropriate authority in the
Bank, should include a disclaimer that the publication or statement represents the
views of the specific author and not the Bank.
(ii) Other Confidential Information
The bank has many kinds of business relationships with many companies and
individuals. Sometimes, they will volunteer confidential information about their
products or business plans to induce the Bank to enter into a business relationship.
At other times, the Bank may request that a third party provide confidential
information to permit the Bank to evaluate a potential business relationship with
the party. Therefore, special care must be taken by the Board of Directors and
members of the Core Management to handle the confidential information of
others responsibly. Such confidential information should be handled in
accordance with the agreements with such third parties.
 The Bank requires that every Director and the member of Core Management,
General Managers should be fully compliant with the laws, statutes, rules and
regulations that have the objective of preventing unlawful gains of any nature
 Directors and members of Core Management shall not accept any offer, payment,
promise to pay or authorization to pay any money, gift or anything of value from
customers, suppliers, shareholders/ stakeholders etc that is perceived as intended,
directly or indirectly, to influence any business decision, any act or failure to act,
any commission of fraud or opportunity for the commission of any fraud.
4. Good Corporate Governance Practices
Each member of the Board of Directors and Core Management of the Bank
should adhere to the following so as to ensure compliance with good Corporate
Governance practices.
(a) Dos
 Attend Board meetings regularly and participate in the deliberations and
discussions effectively.
 Study the Board papers thoroughly and enquire about follow-up reports on
definite time schedule.
 Involve actively in the matter of formulation of general policies.
 Be familiar with the broad objectives of the Bank and policies laid down
by the Government and the various laws and legislations.
 Ensure confidentiality of the Bank's agenda papers, notes and minutes.
(b) Don'ts
 Do not interfere in the day to day functioning of the Bank.
 Do not reveal any information relating to any constituent of the Bank to
 Do not display the logo / distinctive design of the Bank on their personal
visiting cards / letter heads.
 Do not sponsor any proposal relating to loans, investments, buildings or
sites for Bank's premises, enlistment or empanelment of contractors,
architects, auditors, doctors, lawyers and other professionals etc.
 Do not do anything, which will interfere with and/ or be subversive of
maintenance of discipline, good conduct and integrity of the staff.
5. Waivers
 Any waiver of any provision of this Code of Conduct for a member of the
Bank's Board of Directors or a member of the Core Management must be
approved in writing by the Board of Directors of the Bank.
The matters covered in this Code of Conduct are of the utmost importance to the
bank, its stakeholders and its business partners, and are essential to the Bank's ability to
conduct its business in accordance with its value system.

Entrepreneurship is the practice of starting new organizations, particularly new
businesses generally in response to identified opportunities. Entrepreneurship is often a
difficult undertaking, as a majority of new businesses fail. Entrepreneurial activities are
substantially different depending on the type of organization that is being started.
Entrepreneurship may involve creating many job opportunities.
Many "high-profile" entrepreneurial ventures seek venture capital or angel
funding in order to raise capital to build the business. Many kinds of organizations now
exist to support would-be entrepreneurs, including specialized government agencies,
business incubators, science parks, and some NGOs.
Our understanding of entrepreneurship owes a lot to the work of economist
Joseph Schumpeter and the Austrian School of economics. For Schumpeter (1950), an
entrepreneur is a person who is willing and able to convert a new idea or invention into a
successful innovation. Entrepreneurship forces "creative destruction" across markets and
industries, simultaneously creating new products and business models and eliminating
others. In this way, creative destruction is largely responsible for the dynamism of
industries and long-run economic growth. Despite Schumpeter's early 20th-century
contributions, the traditional microeconomic theory of economics has had little room for
entrepreneurs in their theories
• Characteristics of entrepreneurship:-
 The entrepreneur, who has a vision and the enthusiasm for this vision, is the
driving force of an entrepreneurship
 The vision is usually supported by a set of ideas that have not been awared by the
majority of the market/industry
 The overall blueprint to realize the vision is clear, however details may be
incomplete, flexible, and evolving
 The entrepreneur promotes the vision with an influential passion
 With a persistent and deterministic mindset, the entrepreneur devises a set of
entrepreneurial strategies to thrive for the vision
• Conclusion:-
We began by asserting that individual entrepreneurs get too much credit and
blame for the fate of new ventures. We also emphasized that successful entrepreneurs are
those who can develop the right kinds of relationships with others inside and outside their
firm. Our perspective suggests that, in trying to predict which entrepreneurs will succeed
or fail, instead of turning attention to the characteristics of individual founders and CEOs,
researchers and teachers would be wiser to turn attention to the other people the
entrepreneur spends time with and how they respond. Our perspective also implies that
the format of the "Entrepreneurs of the Year" competition described at the outset of this
chapter ought to be changed. Rather than using such events to recognize individual CEOs
or founders from successful start-ups, awards could be presented to recognize the
intertwined group of people who made each start-up a success.



Performance management is a systematic approach to improving worker

productivity through a year-round, ongoing process of communicating and managing
performance expectations. With Performance-based Management, performance
improvement becomes the joint responsibility of employees and their managers.
Generally there are two things which determine how successful a performance appraisal
system is in place in an organization.
1) The contents/design of the performance appraisal form and
2) The manner in which Performance Appraisal is conducted.
While organizations lay great emphasis on the contents/design part, spending
much of time, money and energy on designing most suitable, objective, comprehensive
formats, it serves no purpose if the appraising process is not conducted properly.
Performance-based Management measures, evaluates and improves performance
on the job. You can expect employee productivity to increase because performance
assessments and performance feedback will always be job-related, even if the duties of a
particular job expand or change. Furthermore, because this type of performance
management focuses on productivity and not personality and since it involves ongoing,
open, two-way communication between manager and employee, it greatly reduces many
of the stereotypes, problems and anxieties associated with traditional labor-intensive
annual performance reviews. In other words, the desired outcomes of performance
management can happen more easily and quickly.


A benchmark is a point of reference for a measurement. The term presumably
originates from the practice of making dimensional height measurements of an object on
a workbench using a graduated scale or similar tool, and using the surface of the
workbench as the origin for the measurements.
In surveying, benchmarks are landmarks of reliable, precisely-known altitude,
and are often man-made objects, such as features of permanent structures that are
unlikely to change, or special-purpose "monuments", which are typically small concrete
obelisks, approximately 3 feet tall and 1 foot at the base, set permanently into the earth.
In computing, a benchmark is the result of running a computer program, or a set
of programs, in order to assess the relative performance of an object, by running a
number of standard tests and trials against it. The term is also commonly used for
specially-designed benchmarking programs themselves. Benchmarking is usually
associated with assessing performance characteristics of computer hardware, e.g., the
floating point operation performance of a CPU, but there are circumstances when the
technique is also applicable to software. Software benchmarks are, for example, run
against compilers or database management systems.
Benchmarks provide a method of comparing the performance of various
subsystems across different chip/system architectures.
As computer architecture advanced, it became more and more difficult to compare
the performance of various computer systems simply by looking at their specifications.
Therefore, tests were developed that could be performed on different systems, allowing
the results from these tests to be compared across different architectures. For example,
Intel Pentium 4 processors have a higher hertz rating than AMD Athlon XP processors
for the same computational speed, in other words a 'slower' AMD processors could be as
fast on benchmark tests as a higher hertz rated Intel processors.
Benchmarks are designed to mimic a particular type of workload on a component
or system. "Synthetic" benchmarks do this by specially-created programs that impose the
workload on the component. "Application" benchmarks, instead, run actual real-world
programs on the system. Whilst application benchmarks usually give a much better
measure of real-world performance on a given system, synthetic benchmarks still have
their use for testing out individual components, like a hard disk or networking device.
Computer manufacturers have a long history of trying to set up their systems to give
unrealistically high performance on benchmark tests that is not replicated in real usage.
For instance, during the 1980s some compilers could detect a specific mathematical
operation used in a well-known floating-point benchmark and replace the operation with
a mathematically-equivalent operation that was much faster. However, such a
transformation was rarely useful outside the benchmark. Manufacturers commonly report
only those benchmarks (or aspects of benchmarks) that show their products in the best
light. They also have been known to mis-represent the significance of benchmarks, again
to show their products in the best possible light. Taken together, these practices are called
Users are recommended to take benchmarks, particularly those provided by
manufacturers themselves, with ample quantities of salt. If performance is really critical,
the only benchmark that matters is the actual workload that the system is to be used for. If
that is not possible, benchmarks that resemble real workloads as closely as possible
should be used, and even then used with skepticism. It is quite possible for system A to
outperform system B when running program "furble" on workload X (the workload in the
benchmark), and the order to be reversed with the same program on your own workload.

Benchmarking (Comparing) is a selective method of finding out how and why
some companies can perform tasks much better than other companies. There can be as
much as a tenfold difference in the quality, speed and cost-performance of an average
company versus a world-class company.
It involves the following seven steps
1) Determine functions to benchmark.

2) Identify the key performance variables to measure.

3) Identify the best-in-class companies.

4) Measure performance of best-in-class companies

5) Measures the company's performance.

6) Specify programs and actions to close the gap

7) Implement and monitor results

A company can identify "best practices" companies by asking employees,
customers, suppliers and distributors what they rate as doing the best. Major Consulting
Firms can also be contacted for this purpose. To keep costs under control, a company
should focus primarily on benchmarking those critical tasks that deeply affect customer
satisfaction and Cost Management and where substantially better performance is known
to exist.
• What is benchmarking? What is it valuable?
Benchmarking is finding and implementing best practices with a view to
improving organizations Competitive position. Benchmarking is valuable as it provides
insight into superior management practices, sets achievable Standards and targets before
the work-groups, and instill a spirit of competition.

The purpose of benchmarking is to improve the organization’s competitive
position and its learning Abilities. This perspective goes well with the unauthorized

“The practice of being humble enough to

Admit that someone else is better at something,
And wise enough to learn how to match and even surpass...”
• Operationally defined, benchmarking is:-
 Finding and implementing best practices
 An ongoing process of measuring and improving company’s products, services
and practices against
 Those companies that distinguish themselves in that same category of
 The first step in creating the recognition that changes and improvements are
 Why is benchmarking valuable?
 Benchmarking helps in three ways:
 Providing breakthrough insights by examining superior management practices.
 Inspiring people by demonstrating: “We can’t .... but others are ...”
 Setting objective targets by highlighting the gaps between “us” and “them”.
Benchmarking as a quality tool is simple to apply and does not require advance
and sophisticated techniques. More importantly, this process can provide an external
stimulus to encourage a reflective environment of continuous learning. A powerful
learning experience such as benchmarking can be a vehicle for creating sustainable
business solutions. This type of learning parallels Peter Senge’s description of a learning
organization as one that is continually expanding its capacity to create its future.
Benchmarking facilitates learning.
Benchmarking is a process used in management and particularly strategic
management, in which businesses use industry leaders as a model in developing their
business practices. This involves determining where you need to improve, finding an
organization that is exceptional in this area, then studying the company and applying it's
best practices in your firm. Benchmarking systematically studies the absolute best firms,
then uses their best practices as the standard of comparison, a standard to meet or even
Benchmarking recognizes that no company is exceptional at everything. That is
why it is an ongoing process involving firms from any industry and any country. It is not
a one-shot event. There is no room for complacency. Benchmarking requires that you
constantly search for better solutions. The rationale is, If you continuously search for best
practices in the best firms around the world, you should become an exceptional company.
Every function and task of your business can be benchmarked, from production, to
marketing, to purchasing, to information technology management, to customer service.
Some authors call benchmarking "best practices benchmarking" or "process
benchmarking". This is to distinguish it from what they call "competitive benchmarking".
Competitive benchmarking is used in competitor analysis. When researching your
direct competitors you also research the best company in the industry (even if it serves a
different location or market segment and is therefore not a direct competitor). This
benchmark company is then used as a standard of comparison when assessing your direct
competition and yourself. A process similar to benchmarking is also used in technical
product testing and in land surveying. See the article benchmark for these applications.
Identify your problem areas
Because benchmarking can be applied to any business process or function, a
range of research techniques may be required. They include: informal conversations with
customers, employees, or suppliers; exploratory research techniques such as focus
groups; or in-depth marketing research, quantitative research, surveys, questionnaires,
reengineering analysis, process mapping, quality control variance reports, or financial
ratio analysis.
Identify organizations that are leaders in these areas
Look for the very best in any industry and in any country. Consult customers,
suppliers, financial analysts, trade associations, and magazines to determine which
companies are worthy of study.
Study their best practices
An initial study can be done at a good university library or online. This will give
you an overview; however more detailed information will require an in-person visit.
Phone the CEO and ask if a group of your managers and employees can visit their
operations for an hour. Be forthright as to the purpose of the visit. Most CEOs will be
flattered and agree to the request. Make it clear that any information obtained from the
visit will be shared with them. Determine what subject areas will be off-limits. Ask if
camera or video recorders are acceptable. Prepare two lists well in advance: a list of your
objectives, and a list of questions. Choose 2 to 5 visitors, people that are closest to the
issue, that will be responsible for implementing any recommendations, and cover a broad
range of functional responsibilities. Occasionally an outside consultant is included in the
visit team so as to provide an alternative perspective. Meet with your employees to
explain the purpose of the visit and assign one or two questions to each employee.
Explain what subject areas are off limits. Ask them to think about how the visit could
benefit their area, and ask them to device more questions. Stay away from questions that
could cause legal problems (eg. price fixing or new product development). Send a
confirmation letter one week before the visit stating the date, time, and location of the
visit, the number of visitors and their positions, your objectives, and a list of possible
questions. Visits are typically 1 to 3 hours long. When at the site, provide a token gift to
show that you appreciate the opportunity, keep focused on your objectives, give praise
where it is due, and do not criticize. Look for anything remarkable or unexpected. As
soon as you get back to your office (or hotel), have an immediate debriefing. Discuss
what you have learnt and how you can apply it. Make sure that every visitor has an action
plan detailing how they will be implementing the new information in their job. Some
formal analysis (such as process mapping) of the benchmarked process may be necessary.
After several weeks, phone back the CEO to express your appreciation and give concrete
examples of how the knowledge gained from the visit will be used in your company.
Send them a copy of any written reports about the visit before they are distributed. This
allows them to correct inaccuracies and modify sensitive or proprietary information.
Implement the best practices
Delegate responsibility for actions to individuals or cross-functional teams. Set
measurable goals that are to be accomplished within a specified time frame. Monitor the
results. Get key personnel to give you a brief (one page) summary of how the
implementation is proceeding. Spread the information through out the entire organization.
Benchmarking is an ongoing process. Best practices can always be made better.


The impetus given to the strengthening of domestic financial systems and the
international financial architecture by the Asian crisis has gathered momentum in recent
years. An important development In this regard has been the move to set up universally
acceptable standards and codes for benchmarking domestic financial systems. Moreover,
multilateral assessments of country performance are increasingly focusing on observance
of standards. The IMF’s Article IV consultations, its Financial Sector Stability
Assessment and the Reports on Observance of Standards and Codes of the IMF and the
World Bank are indicative of the fact that a country’s adherence to benchmark standards
and codes is being considered integral to the preservation of international monetary and
financial stability. While the process has begun with the predominant involvement of
governments and regulators, the search for standards and codes is progressively
encompassing the private sector with consideration of issues relating to market discipline,
corporate governance, insolvency procedures and credit rights. It is important to
recognize that new standards and codes are not being regarded as final goals but as
instruments or enabling conditions for enhancing efficiency in financial intermediation
while ensuring financial stability. There are three levels at which action is necessary, viz.,
legal, policy and procedures, and market practices by participants. In several areas,
fundamental changes in the legal and institutional infrastructure are pre-requisites. Since
these changes can impinge upon the socio-cultural as well as politico-economic ethos,
appropriate adoption and some prioritization in implementation are unavoidable.
We have made some noteworthy progress in generating a constructive debate on
the applicability of international standards and codes to the Indian financial system.
Participative consultation has been supported by internal self-assessments as well as
external assessment. In several areas, the issues are of a technical nature. Accordingly,
the Standing Committee on International Standards and Codes, set up in December 1999,
constituted ten Advisory Groups comprising eminent experts, generally nonofficial, to
bring objectivity and experience into studying the applicability of relevant international
codes and standards to each area of competence.
The Advisory Groups have submitted their reports. They have set out a roadmap
for implementation of appropriate standard and codes in the light of existing levels of
compliance, the cross-country experience, and the existing legal and institutional
infrastructure. The Advisory Group on Banking Supervision has assessed the Indian
banking system vis-à-vis the principles of the Basel Committee on Banking Supervision.
It has found the level of compliance to be generally of a high order. The Advisory Group
on Bankruptcy Laws has, inter alias, recommended a comprehensive bankruptcy code
incorporating various aspects including cross-border insolvency and the repeal of the
Sick Industrial Companies Act. The Advisory Group on Corporate Governance has made
recommendations relating to rules and responsibilities of boards and has advised
amendments to the Companies Act. The Advisory Group on Data Dissemination has
found that India’s data dissemination compares favorably with many other countries and
has proposed the compilation of forward-looking indicators. The Advisory Group on
Fiscal Transparency is of the view that current fiscal practices meet the IMF’s Code of
Good Practices on Fiscal Transparency. It has recommended amplifying the scope of
fiscal responsibility legislation in order to include the essential elements of a budget law.
The Advisory Group on Insurance regulation has recommended flexible minimum capital
requirements depending on the class of business. With regard to actuarial and solvency
issues, the Group has found the Indian standards to be at par with international norms.
The Advisory Group on International Accounting and Auditing Standards has set out an
agenda for the future for convergence in auditing and accounting practices. It has
recommended a single standard setting authority and the need for convergence of
corporate and tax laws. The Advisory Group on Transparency in Monetary and Financial
Policies has recommended inflation as the single mandated objective for the central bank
and necessary autonomy to fulfill the mandate. It has also made recommendations on the
operating procedures of monetary policy. The Advisory Group on Payments and
Settlement has recommended legal reforms to empower the Reserve Bank to supervise
the payment and settlement system, application of the Lamfalussy standards to deferred
net settlement (DNS) and introduction of Real Time Gross Settlement (RTGS). It has also
recommended the setting up of the Clearing Corporation and a separate guarantee fund
for foreign exchange clearing. The Advisory Group on Securities Market Regulation has
compared India against the International Organization of Securities Commissions
(IOSCO) principles and emphasized the need to strengthen inter-regulator cooperation.
Thus, in India, we have made considerable progress in the identification of
international standards and codes in relevant areas, expert assessment regarding their
applicability, including comparator country evaluation and building up possible course of
action for the future. The next step is to sensitize all concerned – policy makers,
regulators and market participants – to the issues involved and to seek the widest possible
debate on issues as well as expert assessments with a view to generating a broad
consensus on implementation of a universally recognized set of codes and standards.

Benchmark PLR
Sr.No Banks
1 Public Sector Banks
2 Associate Banks of SBI
3 Private Sector Banks
4 Foreign Banks
5 Co-operative Banks
Above all banks prime lending rate benchmark is as follows:
Benchmark Prime Lending Rates (New): Public Sector Bank
New Old Difference in
Sr.No Name of the Bank W.E.F.
BPLR PLR Basis Points
1 Allahabad Bank 1/1/2004 11 11.5 50
2 Andhra Bank 2/5/2006 11 10.5 50
3 Bank of Baroda 1/5/2006 11 10.75 25
4 Bank of India 1/5/2006 11.25 10.75 50
5 Bank of Maharashtra 18/11 / 2004 11.25 11 25
6 Canara Bank 5/5/2006 11.25 10.75 50
7 Central Bank of India 15/5 / 2006 11.5 11 50
8 Corporation Bank 1/5/2006 11.25 11.5 25
9 Dena Bank 1/6/2006 11.5 11 50
10 Indian Bank 1/6/2006 11.5 11 50
11 Indian Overseas Bank 1/5/2006 11.5 11 50
Oriental Bank of
12 15/5 / 2006 11.5 11 50
13 Punjab & Sind Bank 1/5/2006 11.5 0 0
14 Punjab National Bank 1/5/2006 11.25 11 25
15 Syndicate Bank 16/5 / 2006 11.25 11 25
16 UCO Bank 2/5/2006 11.5 11 50
17 Union Bank of India 1/5/2006 11.25 11 25
18 United Bank of India 1/5/2006 11.25 10.75 50
19 Vijaya Bank 10/5/2006 11.25 11 25
Industrial Development
20 22/5 / 2006 11 10.5 50
Bank of India (IDBI)
21 State Bank of India 1/5/2006 10.75 10.25 50
Benchmark Prime Lending Rates (New): Associate Bank of SBI
New Old Difference in
Sr.No Name of the Bank W.E.F.
BPLR PLR Basis Points
State Bank of Bikaner &
1 8/5/2006 11.25 10.75 50
2 State Bank of Hyderabad 1/5/2006 11.5 11 50
3 State Bank of Mysore 22/5 / 2006 11.5 11 50
4 State Bank of Patiala 1/5/2006 11 10.5 50
5 State Bank of Saurashtra 8/5/2006 11.5 11 50
6 State Bank of Travancore 1/1/2004 11 11.5 50
Benchmark Prime Lending Rates (New): Private Banks of India
New Old Difference in
Sr.No Name of the Bank W.E.F.
BPLR PLR Basis Points
Bharat Overseas Bank
1 1/6/2006 11.75 11 75
Centurion Bank of Punjab
2 1/3/2004 11.5
3 City Union Bank Ltd. 1/1/2004 12 12.5 50
Development Credit Bank
4 15/6 / 2006 14.25 14 25
5 ICICI Bank Limited 1/1/2004 10.5 10.5 0
6 Lord Krishna Bank Ltd. 1/4/2006 12.5 12.5 0
SBI Commercial and
7 1/1/2004 11.5
International Bank Ltd.
Tamilnad Mercantile
8 1/1/2004 12 12.25 25
Bank Ltd.
The Bank of Rajasthan
9 1/5/2006 12.5 11.75 75
The Dhanalakshmi Bank
10 1/5/2006 13 0 0
11 The Federal Bank Ltd. 1/5/2006 12 0 0
The Ganesh Bank of
12 1/10/2004 10.5 0 0
Kurundwad Ltd.
13 The HDFC Bank Ltd. 14/6 / 2006 11.5 12 50
The Jammu & Kashmir
14 1/1/2004 11
Bank Ltd.
15 Karnataka Bank Ltd. 1/1/2004 12 0 0
The Karur Vysya Bank
16 1/1/2004 12.5 12.5 0
The Lakshmi Vilas Bank
17 1/1/2004 12.5 12.5 0
18 The Nainital Bank Ltd. 1/4/2006 11.5 0 0
19 The Sangli Bank Ltd. 1/5/2006 12 0 0
The South Indian Bank
20 1/5/2006 13.5 0 0
The United Western Bank
21 1/5/2006 12.5 11.5 100
22 ING Vysya Bank Ltd. 15/1 / 2004 11.25 11.5 25
23 UTI Bank Ltd. 14/3 / 2006 13 12 100
24 The Ratnakar Bank Ltd. 1/1/2004 11.5
Kotak Mahindra Bank
25 1/4/2006 14.5 13 150
Benchmark Prime Lending Rates (New): Foreign Banks
New Old Difference in
Sr.No Name of the Bank W.E.F.
BPLR PLR Basis Points
1 ABN AMRO Bank N.V. 15/3 / 2004 12.75 16 325
American Express Bank
2 1/5/2006 12.5 0 0
Arab Bangladesh Bank
3 15/9 / 2003 11 12 100
Bank International
4 1/5/2006 11 0 0
5 Bank of America N.A. 1/1/2004 13.5
Bank of Bahrain &
6 1/1/2004 12.5
Kuwait BSC
7 BNP PARIBAS 1/5/2006 12 0 0
8 Citibank N.A. 1/5/2006 12.75 0 0
Oman International Bank
9 1/8/2003 11.5 13.5 200
10 Societe Generale 1/3/2004 11 12 100

11 Standard Chartered Bank 1/5/2006 12 0 0

12 The Bank of Nova Scotia 1/2/2004 14 14 0

The Hong Kong &
13 Shanghai Banking 1/5/2006 13 0 0
Corporation Ltd.
Mizuho Corporate Bank
14 1/1/2004 11 13.5 150
Krung Thai Bank Public
15 1/5/2006 10 0 0
Company Limited

Benchmark Prime Lending Rates (New): Co-operative Banks

New Old Difference in
Sr.No Name of the Bank W.E.F.
BPLR PLR Basis Points
Bombay Mercantile Co-
1 1/5/2006 11 0 0
op. Bank Ltd.
Rajkot Nagarik Sahakari
2 1/6/2006 12 12.75 75
Bank Ltd.
3 Rupee Co-op. Bank Ltd. 1/5/2006 11 0 0
The Karad Urban Co-op.
4 1/5/2006 10.5 0 0
Bank Ltd.
The Shamrao Vithal Co-
5 1/5/2006 11.5 0 0
op. Bank Ltd.
The Zoroastrian Co-
6 1/5/2006 11 0 0
operative Bank Limited

In my inaugural address last year, I had indicated a vision for Indian banking in
the new millennium – that of a vibrant, internationally active banking system, drawing
upon its innate strengths and comparative advantages to make India a major banking
centre of the world. I had pointed out then that, while it may take up to 10 or even 15
years to achieve this vision, the time to begin was now. Recent developments have only
served to bring forward the urgency attached to embarking upon this quest. Even as we
do so, it is necessary to recognize that, in view of recent global developments and the
economic slowdown, the progress towards this goal would call for even greater effort and
determination. In this context, the theme chosen for this year’s Conference i.e., "Indian
Banking: Paradigm Shift" is most timely as it provides an opportunity to deliberate on the
new challenges ahead, and the action that we must take to manage them. I am happy to be
a part of these deliberate ions and to deliver the inaugural address to the 23rd Conference
of Bank Economists here today.
As you are aware, global economic prospects turned sharply adverse since
September 2001 following the terrorist attacks on the US. The possibilities of a recovery
in the global economy have become highly uncertain, belying the initial expectations of a
V-shaped recovery as well as the subsequent hopes of a U-shaped recovery. As of now,
the consensus of forecasts settles around 2.4 per cent for world GDP growth for 2001.
World trade volume growth could slow down to around 1.3 per cent and net capital
outflows from developing countries may now be larger than anticipated earlier. Although
the sharp spurt in international oil prices has abated, their future behavior remains
unclear. Macroeconomic weaknesses have also been associated with an erosion of
business confidence. Insurance, airlines, tourism and hotel industries have been hit hard
and the exposure of financial institutions to these industries can be a potential source of
Despite the relatively inward-looking nature of the Indian economy, it cannot
remain insulated from these international developments. The direct effects of these
external developments on our banking system are expected to be limited. Indirect effects,
especially through exports and subdued industrial activity could, however, impact upon
the asset quality of our banking system and other segments of the financial system. The
need to constantly monitor international developments and take appropriate and often,
preemptive action add an entirely new dimension to the progress of our banking system
towards its longer-term vision.
We have made considerable progress in implementing banking and financial
sector reforms. There is also some improvement in the financial performance of the
banking system in terms of various indicators of operating efficiency. Nevertheless, there
are several areas regarding the efficiency of our banking system – rather than its stability
– that raise concerns, especially during a period of generalized uncertainty. The level of
non-performing assets (NPAs) continues be high by international standards, preempting
funds for provisioning and eating into the performance and profitability of financial
intermediaries. The response to the debt recovery and asset restructuring initiatives
undertaken as part of financial sector reforms has also been slow.
In the period ahead, our financial system will also have to prepare for a tightening
of the prudential norms as the new Basel Accord becomes effective and a fuller response
to the current financial environment emerges. Our financial institutions continue to be
susceptible to financial market turbulence, especially in the equity market. Upgrading
technical skills, technology, research and human capital, developing effective ‘front-
office’ strategies and fortifying internal rules of governance and responsibility assumes a
renewed priority in the fast changing scenario.
The face of banking, as we have known it, is also changing rapidly. India is
approaching an era of financial conglomorisation and ‘bundling’ in the provision of
financial services. Besides infusing heightened competition, there are implications for the
regulatory and supervisory regime. Banks and financial institutions have to prepare for
changes in the regulatory framework towards a more focused, comprehensive and
efficient environment that eschews regulatory forbearance. Legal reforms accordingly
will have to ascend the hierarchy of priorities in the reform process.
Against this background, in this talk, I propose to focus on the main challenges
facing Indian banking, such as, the role of financial intermediation in different phases of
the business cycle, the emerging compulsions of the new prudential norms, and
benchmarking the Indian financial system against international standards and best
practices. I will also say a few words about the changing context of regulation and
supervision of the financial system in India, the need for introducing new technology in
the banking and financial system, and the importance of strengthening skills and
intellectual capital formation in the banking industry.


BANKING SYSTEM-----------------------------------------------------------------------------
For a greater part of the twentieth century, the role of the financial system was
perceived as mobilizing the massive resource requirements for growth. Since the 1970s
and 1980s, development economics underwent a paradigm shift. The financial system is
no longer viewed as a passive mobiliser of funds. Efficiency in financial intermediation
i.e., the ability of financial institutions to intermediate between savers and investors, to
set economic prices for capital and to allocate resources among competing demands is
now emphasized. Developments in endogenous growth theory since the late 1980s
indicate that efficiency in financial intermediation is a source of technical progress to be
exploited for generating increasing returns and sustaining high growth. These changes
have provided the rationale for many developing countries to undertake wide-ranging
reforms of their financial systems so as to prepare them for their true resource allocation
function. As important financial intermediaries, banks have a special role to play in this
new dispensation.
The sharp downturn in global macroeconomic prospects and the continuing
sluggishness in domestic industrial activity have necessitated a revision in the forecast for
India’s real GDP growth in 2001-02 from 6.0-6.5 per cent expected at the time of the
April 2001 Monetary and Credit Policy Statement to 5.0-6.0 per cent in the mid-term
review of the policy. The downward revision is primarily predicated on the outlook for
the industrial sector which grew by barely 2.2 per cent in April-October 2001 as against
5.9 per cent in the corresponding period of last year, mainly on account of the slowdown
in manufacturing and mining and quarrying. Capital goods production declined by as
much as 6.6 per cent and several sectors recorded a slow down in growth rate or an
absolute decline. On the other hand, agriculture sector, supported by reasonable
monsoon, recorded a rebound in growth. The kharif output is expected to cross a new
peak of 105.6 million tonnes and prospects for the Rabi crop are also good. On the
external front, merchandise exports increased marginally by 0.5 per cent in the first eight
months of 2001-02. While oil imports fell by 13.4 per cent, the non-oil imports showed
an increase of 8.4 per cent. Despite a moderate widening of the trade deficit, continuing
buoyancy in net invisible receipts has kept the current account deficit very low.
According to available data, net capital flows are also likely to be of a higher order than
in the preceding year. Foreign exchange reserves rose to US $ 48.0 billion as on
December 28, 2001 recording an accretion of the order of the US $ 5.8 billion over the
end-March 2001 level.
In the context of the recent deceleration in the economy the intermediation role
assumes even greater relevance. Banks and financial institutions should endeavor to play
a ‘supply-leading’ rather than ‘demand-following’ role in initiating the upturn by
energizing the financial intermediation process. By virtue of a bird’s eye view of the
economy and their superior credit assessment of the investment proposals and the
efficiency of capital, banks should endeavor to economies on ‘search’ costs in identifying
and nurturing growth impulses in the commodity and service producing sectors of the
In the recent period, monetary policy in India has also moved into a counter-
cyclical stance signaled by cuts in key interest rates and cash reserve requirements. At the
same time, market operations have ensured adequate liquidity to support the revival of
aggregate demand with a clear preference for softening of interest rates within the overall
institutional constraints on the interest rate regime. Inflation has been steadily falling and
this has had a positive impact on inflation expectations, along with the underlying
resilience of the macroeconomic fundamentals of the Indian economy. The 50 basis point
reduction in the Bank Rate and the 200 basis point reduction in the CRR, announced
recently, are expected to significantly enhance the lend able resources of the banking
The current situation of comfortable liquidity provides an opportunity for banks to
transform idle liquidity into investigable resources for growth. The easy interest rate
environment would make it possible for banks to ‘price in’ projects which would have
earlier remained unfunded due to inherently lower returns to capital or due to lack of
access to prime lending rates. This will, however, require reassessment of portfolios and
internal liquidity constraints, even adjustments in risk profiles and risk management. The
deceleration in the industrial growth scenario, of course, opens up the moral hazard of
adverse selection and the possibilities of large-scale contamination of portfolios. In a
situation of generalized slowdown, unviable projects can look potentially bankable given
the scarcity of investment avenues.
Nevertheless, the possibilities for financial intermediation in the current situation
are too varied and challenging to ignore. There is no systematic evidence that financial
sector reforms by themselves and without supportive policies in other areas, can
contribute to a revival of the economy; yet this is a time when the responsibility on the
financial system to contribute to the process of economic revival is greater than before.
Periods of downturn in economic activity also provide opportunities for banks to
undertake consolidation and strengthening. There is a strong complementarily between
financial stability and macroeconomic stability. The interests of both are served by a
stable and resilient financial system.
In recent years, various measures have been taken to improve the functioning of
different segments of the financial markets and thereby, to improve the operational
effectiveness of monetary policy. The Liquidity Adjustment Facility (LAF), which was
introduced in June 2000, has emerged as an effective and flexible instrument for
managing liquidity on a day-to-day basis. In the second stage of the LAF, which
commenced from May 2001, variable rate repo auctions replaced the collateralized
lending facility and Level I support to primary dealers. Standing facilities were
rationalized and a back-stop facility was introduced at variable market-related rates.
Concurrently, LAF operating procedures were recast to improve operational flexibility
and complementary measures were undertaken to improve the functioning of money and
government securities market segments and to facilitate their orderly integration.
In order to enable the call money market to evolve into a pure inter-bank market,
lending by non-banks was reduced to 85 per cent of their average daily call lending in
2000-01 from May 2001. The minimum maturity for wholesale term deposits of Rs.15
lakh and above has been reduced to 7 days from the earlier minimum maturity of 15 days.
The maintenance of daily minimum cash reserve requirements has been lowered to 50 per
cent from 65 per cent for the first seven days of the reporting fortnight. Interest paid on
eligible balances under CRR has been raised to the level of the Bank Rate from
November 3, 2001. The market has responded positively with an appreciable rise in
turnover and a decline in volatility.
Several measures have also been taken to improve the functioning of the
government securities market. 14-day and 182-day Treasury Bills were withdrawn and
the notified amount of 91-day Treasury Bills has been simultaneously increased. A
Negotiated Dealing System (NDS) is being introduced to facilitate electronic bidding and
to disseminate information on trades on a real-time basis. For this purpose, the Reserve
Bank has begun the automation of its public debt offices. An important step is the setting
up of the Clearing Corporation of India Ltd. (CCIL) to act as counterparty in all trades
involving government securities, Treasury Bills, repos and foreign exchange. The entire
system will operate in a networked environment and Indian Financial Network
(INFINET) will provide the backbone for communication.

 PRUDENTIAL NORMS---------------------------------------------------------

A strong and resilient financial system and the orderly evolution of financial
markets are key prerequisites for financial stability and economic progress. In keeping
with the vision of an internationally competitive and sound banking system, deepening
and broadening of prudential norms to the best internationally recognized standards have
been the core of our approach to financial sector reforms. This has been supported
concurrently by heightened market discipline, pro-active and comprehensive supervision
of the financial system and the orderly development of financial market segments. The
calibration of the convergence with international standards is conditioned by the specific
realities of our situation; however, the New Capital Accord of the Basel Committee on
Banking Supervision which was released in January 2001 adds urgency to the process of
convergence. It is against the backdrop of these exigencies that prudential norms are
being constantly monitored and refined. In the recent period, banks are being encouraged
to build risk-weighted components of their subsidiaries into their own balance sheets and
to assign additional capital. Risk weights are being constantly refined to take into
recognition additional sources of risk. The concept of ‘past due’ in the identification of
NPAs has been dispensed with. Banks and financial institutions are being urged to
prepare to move to the international practice of the ‘90 day norm’ in the classification of
assets as non-performing by 2003-04.
The new Basel Accord, as contained in the second Consultative Paper on Capital
Adequacy of the Basel Committee on Banking Supervision released in January 2001 is in
response to the perceived rigidities in the 1988 Accord’s capital requirements, the scope
for capital arbitrage and the increased sophistication in the measurement and
management of risk. The new Accord rests on three mutually reinforcing pillars i.e.,
minimum capital requirements, processes of supervisory review and market discipline.
Under the first pillar, the current definition of capital and the minimum requirement of 8
per cent of capital to risk weighted assets is retained. Capital requirements would be
extended on a consolidated basis to holding companies of banking groups.
The primary emphasis of the new Accord is on improving the measurement of
risk. The process of measurement of market risk is maintained. Three alternatives for
calculating credit risk capital requirements are proposed to be made available to banks,
depending on the complexity of their business and the quality of their risk management
operations. The ‘standardized approach’ which can be employed by less complex banks
remains conceptually the same as in the 1988 norms; however, it expands the scale of risk
weights and uses external credit ratings to categories credits. Banks with more advanced
risk management capabilities can employ an internal ratings based (IRB) approach –
‘foundation’ and ‘advanced’ variants are proposed on a progression scale – in which
banks may categories exposures into multiple credit ratings of their approved internal
rating systems. The internally estimated probability of default, the maturity of exposure
and the credit type i.e., corporate or retail, will determine risk weights. There is a new
explicit capital charge proposed on operational risk.
The processes of supervisory review contained in the second pillar emphasize the
need for banks to develop sound internal procedures to assess the adequacy of capital
based on a thorough evaluation of its risk profile and control environment, and to set
commensurate targets for capital. The internal processes would be subject to supervisory
evaluation, review and intervention, when appropriate. The third pillar aims at bolstering
market discipline through enhanced disclosure by banks. Disclosure requirements are set
out in several areas under the new Accord, including the way in which banks calculate
their capital adequacy and their risk assessment methods.
The Basel Committee on Banking Supervision has received more than 250
comments on the January 2001 proposals. The Committee is expected to release a fully
specified proposal, based on these comments, in early 2002 and to finalize the Accord
during 2002. An implementation date of 2005 is envisaged. The Reserve Bank forwarded
its comments to the Basel committee in May 2001. It has supported flexibility, discretion
to national supervisors and a phased approach in implementing the Accord. The Accord
could initially apply to internationally active – banks with over 15 per cent of their
business in cross-border transactions, as proposed by the Reserve Bank – and significant
banks whose domestic market share exceeds 1 per cent – with a simplified standardized
approach to be evolved for other banks. Material limits on cross-holdings of capital and
eschewing of direct responsibility on external credit rating agencies in the assessment of
bank assets have also been proposed by the Reserve Bank. It has also expressed its
preference for external credit rating agencies that publicly disclose risk scores, rating
processes and methodologies.
The new accord, when implemented, is likely to have significant implications for
the banking system as a whole. Besides requiring increased capital, it attaches urgency to
the development of efficient and comprehensive internal systems for assessment and
management of risks, setting up and adhering to adequate internal exposure limits and
improving internal control generally. The guidelines for risk management and asset
liability management provided by the Reserve Bank serve as a useful foundation for
building more sophisticated control systems. The feedback received from few banks
indicates the need for substantial up gradation of existing management information
systems, risk management practices and technical skills. Capital allocation is also
expected to be more risk sensitive and, therefore, banks and financial institutions will
have to plan in advance so that there are no disruptions in the capital structure. Further
sophistication in risk management and control mechanisms will have to evolve as
experience with preferential risk-weighting and sensitivity to external ratings is
A key requirement when the new Accord, after further modification, becomes
operational is that of high quality human resources to cope with and adapt to the new
environment. Enhancing technical skills and abilities to handle new technologies and new
risks, exploiting information flows to price them in, and developing foresight in
anticipating changing risk-return relationships will become essential.

 MARKET DISCIPLINE------------------------------------------------------

Processes of transparency and market disclosure of critical information describing

the risk profile, capital structure and capital adequacy are assuming increasing
importance in the emerging environment. Besides making banks more accountable and
responsive to better-informed investors, these processes enable banks to strike the right
balance between risks and rewards and to improve the access to markets. Improvements
in market discipline also call for greater coordination between banks and regulators.
India has been a participant in the international initiatives to ensure improved
processes of market discipline that are being worked out in several fora, such as, the
multilateral organizations, the BIS, the Financial Stability Forum, and the Core Principles
Liaison Group. Concurrent efforts are underway to refine and upgrade financial
information monitoring and flow, data dissemination and data warehousing. Banks are
currently required to disclose in their balance sheets information on maturity profiles of
assets and liabilities, lending to sensitive sectors, movements in NPAs, besides providing
information on capital, provisions, shareholdings of the government, value of investments
in India and abroad, and other operating and profitability indicators. Financial institutions
are also required to meet these disclosure norms. Banks also have to disclose their total
investments made in equity shares, units of mutual funds, bonds and debentures, and
aggregate advances against shares in their notes to balance sheets.
From this year onwards, notes to banks’ balance sheets will disclose the
movement of provisions against NPAs as well as those held towards depreciation on
investments. Guidelines relating to non-SLR investments through the private placement
route mandate the disclosure of information on issuer composition and non-performing
investments in a similar manner. Efforts have been made to identify and monitor early
warning indicators of financial crises. The overall approach is to combine the use of
micro-prudential indicators with macro-economic indicators in order to develop a set of
aggregate macro-prudential indicators. This brings about a mix between bottom-up and
top-down assessment. As the methodology gets refined and the indicators are stress-
tested for predictive power, financial stability surveillance will be significantly improved.
This process will involve greater transparency and objectivity in the disclosure practices
of banks.
Efforts have also been made to set up a Credit Information Bureau to collect and
share information on borrowers and improve the credit appraisal of banks and financial
institutions within the ambit of the existing legislation. The Bureau has been incorporated
by the State Bank of India in collaboration with Housing Development Finance
Corporation (HDFC) and foreign technology partners. Collection and sharing of some
items of information have already been initiated. Efforts are also going into the collection
and sharing of information on private placement of debt under the Bureau so that there is
greater transparency in such trades. The possibility of collecting and disseminating
information on suit-filed accounts by the Bureau (in place of the Reserve Bank) is being
explored by a Working Group constituted for this purpose with representation from
across the financial system. The Group will also examine the prospects of on-line supply
of information and the processing of queries. A draft legislation covering various aspects
of information sharing, including issues relating to rights, responsibilities, and privacy
has been prepared, which would considerably strengthen the functioning of the Bureau
when it is enacted.

 UNIVERSAL BANKING----------------------------------------------------

Since the early 1990s, banking systems worldwide have been going through a
rapid transformation. Mergers, amalgamations and acquisitions have been undertaken on
a large scale in order to gain size and to focus more sharply on competitive strengths.
This consolidation has produced financial conglomerates that are expected to maximize
economies of scale and scope by ‘bundling’ the production of financial services. The
general trend has been towards downstream universal banking where banks have
undertaken traditionally non-banking activities such as investment banking, insurance,
mortgage financing, securitization, and particularly, insurance. Upstream linkages, where
non-banks undertake banking business, are also on the increase. The global experience
can be segregated into broadly three models. There is the Swedish or Hong Kong type
model in which the banking corporate engages in in-house activities associated with
banking. In Germany and the UK, certain types of activities are required to be carried out
by separate subsidiaries. In the US type model, there is a holding company structure and
separately capitalized subsidiaries
In India, the first impulses for a more diversified financial intermediation were
witnessed in the 1980s and 1990s when banks were allowed to undertake leasing,
investment banking, mutual funds, factoring, hire-purchase activities through separate
subsidiaries. By the mid-1990s, all restrictions on project financing were removed and
banks were allowed to undertake several activities in-house. In the recent period, the
focus is on Development Financial Institutions (DFIs), which have been allowed to set up
banking subsidiaries and to enter the insurance business along with banks. DFIs were also
allowed to undertake working capital financing and to raise short-term funds within
limits. It was the Narasimham Committee II Report (1998) which suggested that the DFIs
should convert themselves into banks or non-bank financial companies, and this
conversion was endorsed by the Khan Working Group (1998). The Reserve Bank’s
Discussion Paper (1999) and the feedback thereon indicated the desirability of universal
banking from the point of view of efficiency of resource use, but it also emphasized the
need to take into account factors such as the status of reforms, the state of preparedness
of the institutions, and a viable transition path while moving in the desired direction.
Accordingly, the mid-term review of monetary and credit policy, October 1999
and the annual policy statements of April 2000 and April 2001 enunciated the broad
approach to universal banking and the Reserve Bank’s circular of April 2001 set out the
operational and regulatory aspects of conversion of DFIs into universal banks. The need
to proceed with planning and foresight is necessary for several reasons. The move
towards universal banking would not provide a panacea for the endemic weaknesses of a
DFI or its liquidity and solvency problems and/or operational difficulties arising from
undercapitalization, non-performing assets, and asset liability mismatches, etc. The
overriding consideration should be the objectives and strategic interests of the financial
institution concerned in the context of meeting the varied needs of customers, subject to
normal prudential norms applicable to banks. From the point of view of the regulatory
framework, the movement towards universal banking should entrench stability of the
financial system, preserve the safety of public deposits, improve efficiency in financial
intermediation, ensure healthy competition, and impart transparent and equitable


A recurring theme in the annual BECON Conference has been the need to focus
on developing human resources to cope with the rapidly changing scenario. The core
function of HRD in the banking industry is to facilitate performance improvement,
measured not only in terms of financial indicators of operational efficiency but also in
terms of the quality of financial services provided. Factors such as skills, attitudes and
knowledge of personnel play a critical role in determining the competitiveness of the
financial sector. The quality of human resources indicates the ability of banks to deliver
value to customers. Capital and technology are replicable, but not human capital which
needs to be viewed as a valuable resource for the achievement of competitive advantage.
The primary emphasis needs to be on integrating human resource management (HRM)
strategies with the business strategy. HRM strategies include managing change, creating
commitment, achieving flexibility and improving teamwork. These processes underlie the
complementary processes that represent the overt aspects of HRM, such as recruitment,
placement, performance management, reward management, and employee relations. A
forward looking approach would involve moving towards self-assessment of competency
and developmental needs as a part of a continuous learning cycle.
The Indian banking industry has been an important driving force behind the
nation’s economic development. The emerging environment poses both opportunities and
threats, in particular, to the public sector banks. How well these are met will mainly
depend on the extent to which the banks leverage their primary assets i.e., human
resources in the context of the changing economic and business environment. It is
obvious that the public sector banks’ hierarchical structure, which gives preference to
seniority over performance, is not the best environment for attracting the best talent from
among the young in a competitive environment. A radical transformation of the existing
personnel structure in public sector banks is unlikely to be practical, at least in the
foreseeable future. However, certain improvements can be made in the recruitment
practices as well as in on-the-job training and redeployment of those who are already
employed. There are several institutions in the country which cater exclusively to the
needs of human resource development in the banking industry. It is worthwhile to
consider broad-basing the courses conducted in these institutions among other higher-
level educational institutions so that specialization in the area of banking and financial
services becomes an option in higher education curriculums. In the area of information
technology, Indian professionals are world leaders and building synergies between the IT
and banking industries will sharpen the competitive edge of our banks.
How close are we to the vision of a sound and well-functioning banking system
that I outlined. It is fair to say that despite a turbulent year and many challenges, we have
made some progress towards this goal. There has been progressive intensification of
financial sector reforms, and the financial sector as a whole is more sensitized than before
to the need for internal strength and effective management as well as to the overall
concerns for financial stability. At the same time, in view of greater disclosure and
tougher prudential norms, the weaknesses in our financial system are more apparent than
There is greater awareness now of the need to prepare the banking system for the
technical and capital requirements of the emerging prudential regime and a greater focus
on core strengths and niche strategies. We have also made some progress in assessing our
financial system against international best practices and in benchmarking the future
directions of progress. Several contemplated changes in the surrounding legal and
institutional environment have been proposed for legislation.
The NPA levels remain too large by international standards and concerns relating
to management and supervision within the ambit of corporate governance are being tested
during the period of downturn of economic activity. The structure of the financial system
is changing and supervisory and regulatory regimes are experiencing the strains of
accommodating these changes. Certain weak links in the decentralized banking and non-
bank financial sectors have also come to notice. In a fundamental sense, regulators and
supervisors are under the greatest pressures of change and bear the larger responsibility
for the future. For both the regulators and the regulated, eternal vigilance is the price of
growth with financial stability.
We should strive to move towards realizing our vision of an efficient and sound
banking system of international standards with redoubled vigor. Our greatest asset in this
endeavor is the fund of technical and scientific human capital formation available in the
country. The themes which are being covered in this Conference under structural,
operational and governance issues should help in defining the road map for the future.