Summer Training Project on Banks

Introduction: Bank plays an important role in the economic development of the country. The entire commercial and industrial activities are well knitted with the banks. One cannot imagine the cessation of the banking activities even for a day. There may be an economic crisis in the country if the banks stop functioning for some days. In the early days, the banking business was confined to receiving of deposits and lending of money. But the modern bankers undertake wide variety of functions to assist their customers. In countries like United Kingdom, banking development preceded industrial development and in United States of America, the Banking development followed the industrial development. But in many other countries including India, the development has almost been simultaneous. The peculiarity of Indian Banking is that the banks were started, funded and managed by industrialists to enable them get adequate finance for their businesses or industries, we can see a direct relationship between banks and the business houses. The Tata group was associated with Central Bank of India; House of Birla with United Commercial Bank. It is often said that a banker is one who deals with other peoples money. The term Banking has been understood differently by different people at different times. Even mills and industrial concerns, which accepted public deposits, were classified as banks between 1932-1943. According to Sir John Pagget, no person or body, corporate otherwise, can be a banker who does not take deposit accounts; take current accounts; issue and pay cheques; and collect cheques, crossed and uncrossed, for his customers. But a statutory definition was introduced through the Banking Regulation Act, 1949. Accordingly, a bank is a company which accepts deposits of money from the public, for the purpose of lending or investment, repayable on demand or otherwise. This definition excludes mere money lending from the banking business. Similarly, mills and industrial concerns, which accept deposits, are also excluded from the classification of the term Banks. Commercial banks play an important role in directing the affairs of the economy in various ways. As a matter of fact the operations of commercial banks record

the economic pulse of the country. The size and composition of their transactions mirror the economic happenings in a country. Long back the well-known 19th century economist David Ricardo had stated that a bank was a dealer or transactor in money. Banks are thus financial intermediaries collecting deposits and lending loans. But now they are not only the purveyors of money but also the creators or manufacturers of money in a financial system. It is the bank who set the tempo of aggregate economic activity in any economy. A bank is an institution that deals with money and credit. Different people understand the meaning of a bank in different ways. For a common man bank means a storehouse where money is stored; for a businessman it is financial institution and for a day to day customer it is an institution where he can deposit his savings. In reality banks are service organization selling banking services. Banks play an important role in the economy of any country as they hold the savings of the public. Provide means of payment for goods and services and provide necessary finance for the development of business and trade. Thus bank is a link in the flow of funds from savers to the users. Hence they should render an efficient customer service in order to retain the present customers and also to attract the potential customers. In the past the banks did not find any attraction in the Indian economy because of the low level of economic activities and little business prospects. Today we find positive changes in the national business development policy. Earlier, the moneylenders had a strong hold over the rural population. This resulted in exploitation of small and marginal savers. The private sector banks failed in serving the society. This resulted in ht nationalization of 14 commercial banks in 1969. Nationalization of commercial banks paved ways for the development of Indian economy and channelized financial resources for the upliftment of weaker sections of the society. In 1980, the government was induced to nationalize more commercial banks. There was felt that bankers review their services not only as financial intermediary but also a pacesetter. Adequate financial resources are required for completing welfare projects. The entrepreneurs need large-scale credit facilities on liberal terms and conditions, an individual has developed new hopes and aspirations, from banks and the rural population and backward regions strongly claim their right for a sound and balanced development. For the accomplishment of all these tasks a rational approach is essential.

MARKETING OF BANKING SERVICES: Marketing of banking services is concerned with product, place, distribution, pricing and promotion decisions in the changing, socio-economic and business environment. It means organizing right activities and programmes at the right place, at the right time, at a right price with right communication and promotion. The users of banking services or prospects play a very significant role in the promotion of overall marketing strategies. The bank marketing activities are concerned with the designing of product strategies keeping in view the need and requirement of prospects. It is also related with the place decisions. It has unique features: Intangibility Inseparability Variability and Pershibality Banking is one industry where there are no middlemen serving the customer. The bank deals with the customers directly. However with liberalization and globalization of the economy, middlemen are gradually emerging from the banking industry. Foreign banks and new private banks like City banks, Global Trust Bank and ICICI Bank are offering their franchise in marketing their services. This has introduced the middlemen in marketing of banking services. In banking services, the marketing strategy starts with developing customer profiles by which the bank can collect and analyze all relevant information on customers. The preferences and prejudices of the customers are identified with the help of these profiles and this enables the bank to enhance its marketing activities. In order to satisfy the customers needs new services may be introduced or the existing services of the bank may be modified. Customer satisfaction prays an important role in banking services.

BANKING STRUCTURE IN INDIA: Reserve bank is the Central Banking Authority in India. All the activities of banks and non-finance companies are regulated and controlled by RBI through the credit and monetary policy. Commercial and Co-operative Banks which are scheduled banks are included in the second schedule to the Banking Regulation Act. They are entitled to some facilities with RBI.

(A) PUBLIC SECTOR BANKS

SBI and subsidiaries Nationalized Banks Regional Rural Banks

(B) PRIVATE SECTOR BANKS

Old Private Sector Banks New Private Sector Banks

RBI NORMS FOR MEW BANKS The RBI came our with new guideline for setting up of new banks in Jan 2001. The following are the guidelines: Minimum Net worth requirement for private banks Rs.200 crores. NBFCs of high net-worth and good track record to convert themselves into regular banks. It is necessary for promoters to have minimum net-worth of Rs. 200 crores to set up a bank by they should raise it to Rs. 300 crores in three years. They should have NPAs of less than 5% and capital adequacy requirement (CAR) above 12%. Triple credit rating is also needed.Corporates will not be permitted to set up banks irrespective of their networth. New banks cannot set up a subsidiary or mutual fund during the initial three years The newly licensed bank has to observe all existing requirements of priority sector. Additionally they should commit to having 25% of their branches in rural and semi urban areas.NRIs are allowed to pick up their equity share upto 40% of the total. The Users of Banking Services The users/customers constitute a place of outstanding significance. The line of services, the planning and development services, the offering of services, the pricing strategies or the interest charged for the services made available and the promotional strategies depend substantially upon the nature type of users using the services of the organization. It is against the background that a study of different categories of users is found significant. The emerging trends in the level of expectation affect the formulation of marketing mix. Innovative efforts become essential the moment we find a change in the level of expectations. Yesterday the users didnt expect fast decent services but today they expect. Yesterday, the consumer financing was not so much important but. Today the banks appear to think about the same on priority basis. These changes make it clear that the level of expectation containing dynamism vis--vis influence the marketing decision. We find two types of customers using the services of banks, such as general Customers and the industrial customer as shown below:

General user: Person having an account in the bank and using the banking facilities at the terms and condition fixed by a bank are know as general user of the banking services they are found small sized customer Industrial user: The industrialist, entrepreneurs having an account in the bank and using the credit facilities and other services for the establishment and expansion of their business are known as industrial users. They are found large sized Prospects: It is also essential to clarify the term, prospects! The general or industrial prospects do not use the banking services at present but they have the potential to become customers if induced or motivated in a right fashion. The aforesaid facts make it clear that the banking organization transact with different types of customers. The behavioral profile of the two of customers cant be identical. Both the customer is found important to marketer and their professional excellence is coiled in the essence of studying and understanding the customer in a right perspective. The marketing resources instrumentalist the process of transforming the prospect into customers /users. CONTROL ON BANKS: Following the recommendations of Narasimham Committee on Financial reforms, the regulatory framework for banks by RBI was liberalized in stages. The licensing of branch location or branch expansion or contraction was removed. Some controls on deposits interest rates and lending rates were removed by stages. In order to free the banks precommitted funds, the cash reserve ratio and the statutory ratio were reduced Refinance by RBI was also rationalized and only Export credit finance was provided. Refinance against Treasury bills and Government Securities etc. was discontinued. Interest rate charges were also made more frequently to suit the conditions in the economy. Government Securities were issued at market determined rates.

BANKS SOURCES AND USE OF FUNDS: Sources: 1. Deposits from public: Saving deposits. Current Deposits. Fixed deposits. 2.Borrowings from banks: Inter-bank borrowings and Inter-bank deposits. 3. Borrowings from RBI 4. Borrowings from financial institutions. 5. Borrowings from abroad. 6. Paid-up Capital/Reserves. Uses: Term loans. Overdraft. Cash credit. Loans and advances. Packing credit Bill Purchase and Discounting. Inland and foreign Investment in Approved Securities and other Shares and Securities. Current accounts do not carry any interest. They are generally deposits from Corporates and Business Executives. Overdraft facility is given to Current Account holders. Savings Accounts are for individuals, Hindu Undivided Families, partnership etc. they earn a modest rate of interest but do not carry any overdraft facility. Both the accounts get credit card facility and 24 hour banking and electronic mode of transfer.

REFORMS IN BANKING SECTOR: Banks are allowed to access the capital market funds directly. SCR and CRR cut down drastically, with the result that banks are left with larger discretionary funds for lending on commercial lines and improve profitability of banks. Deregulation of interest rate both in respect of deposits and advances. Capital Adequacy income Recognition and provision for bad and doubtful debts. Improving the loan delivery system by increasing the loan component of Maximum Permissible Bank Finance (MPBA) which will replace the cash credit system. Greater autonomy for PSBs to operate on Commercial lines and increase their profitability. MARKETING MIX FOR THE BANKING SERVICES The formulation of marketing mix for the banking services is the prime responsibility of the bank professional who based on their expertise and excellence attempt to market the services and scheme profitably. The innovative efforts of the professionals become essentials to make the services internationally competitive. it is in this context that we talk about the formulation of marketing mix . The need and requirements, the like and dislike, the preferences, the attitudes the expectation and the life style cant remain static. There are a number of factors influencing The process of change. Today we sell credibility and therefore a basic change in the perception of marketing is quite natural. This is essential for fulfilling the increasing level of expectation and even for increasing the market share. Innovation makes the way for perfection which help you substantially in maximizing profitability and establishing leadership .The bank professional having world class excellence make possible frequency in the innovation process which simplify their task of selling more but spending less. It is against this background that we go through the formulation process. The marketing mix, a combination of different submixes, has been discussed and deliberated by a number of experts. The four submixes of the marketing mix ,such as product mix the promotion mix, and the place mix no doubt , are found significant even to the banking organization but in addition to the traditional combination of recipes, the marketing experts have also

been talking about some more mixes for getting the best result. The Peoples as submixes is now found getting a new place in the management of marketing mix. It is right to mention that quality of people /employees serving an organization assumes a place of outstanding significance. This requires a strong emphasis on the development of personally-committed, value-based, efficient employees who contribute substantially to the process of making the efforts cost effective. In addition, we also find some of the marketing experts talking about a new mix, i.e. physical appearance. This draws our attention on the physical make up of the employees serving an organization. To be more specific in the service generating organization, we find this dimension impact since the employees looking impressive, smart and having aesthetic sense are found more effective in attracting the customers. In the corporate world, the personal care dimension thus becomes important. The employees are supposed to be well dressed, smart and active. Beside, we also find emphasis on Process which gravitates our attention on the way of offering the services. It is only not sufficient that you promise quality services. It is much more impact generating that your promises reach to the to the ultimate user without any distortion. This makes a strong advocacy in favor of decent behavior of the employees responsible for offering the services. The marketing experts also talk about Empathy in the very context which focuses on sharing the mental pressure or diffusing the mental tension of your customer by using soft word. This necessitates an in depth knowledge of behavior management. All the mixes need a detailed analysis. The banking organization of late, face a number of challenges and the organization assigning an overriding priority to the formulation processes get a success. The formulating of marketing mix is just like the combination of ingredients, spices in the cooking process. . THE PRODUCT The banks primarily deal in services and therefore, the formulation of product mix is required to be in the face of changing business environment condition. Of course the public sector commercial banks have launched a number of policies and programmers for the development of backward regions and welfare of the weaker section of the society but at same time it is also right to mention that their development-oriented welfare

programmes are not optional to the national socio-economic requirements. A proportionate contraction in the number of customer is found affecting the business of public sector commercial banks. The changing psychology, the increasing expectation, the rising income, the changing lifestyle, the increasing domination of foreign banks and changing needs and requirements of customer at large make it essential that the innovate their service mix and make them of world class. The development of new generic product, especially when the business environment is regulated found a difficult task. However, it is pertinent that banks formulate a package in tune with the changing business condition. Against this background we find it significant that the banking organization minify, magnify, combine and modify their service mix. In the formulation of services mix, the banks can follow two guidelines, first is related to the processing of product to market needs and the second is concerned with the processing of market needs to product. In the first process, the needs of the target segment are anticipated and visualized and therefore, we expect the process likely to be productive. In the second process, the banks react to the expressed needs and therefore we consider it reactive. It is essential that every product is measured up to the accepted technical standards. This is due to the fact that no consumer would buy a product which contain technical faults. Technical perfection in service is meant prompt delivery, quick disposal, and presentation of right facts and figures, right filing, proper documentation or so. If computer start disobeying the command and the customer get wrong fats, the use of technology would be a minus point, and you dont have any excuse for your faults. Marketing aims not only offering but also at creating/innovating the services/schemes found new to the competitors vis--vis to the customers. The enhanced customer patronage would be a reward to the bank. The additional attractions, the product attractiveness would help you in many ways. This makes it essential that the banking organizational are sincere to the innovation process and try to enrich their peripheral services much earlier than the competitors. The product portfolio of banks. While formulating the services mix, it is also pertinent that the bank professional make possible a fair synchronization of core and peripheral services. To be more specific, the peripheral services need an intensive care since the core services are found by and large the same. Innovating the peripheral services thus appears to be an important functional

responsibility of marketing professionals. We can t deny the fact that if the foreign banks have been getting a positive response; the credibility goes to their innovative peripheral services. Thus the formulation of product mix is found to be a difficult task that requires world class professionalism. Promotion mix In the formulation of marketing mix, the bank professionals are also supposed to blend the promotion mix which different component of promotion, such as advertising, publicity, sales promotion, word of mouth promotion, personal selling and telemarketing are given due weight age. The different component of promotion help bank professional in promoting the banking business. Advertising: We are well aware of the fact that advertising is a paid form of communication. Like other organizations, the banking organization also use this component of the promotion mix with the motto of informing, sensing and persuading the customers. While advertising, it is instrumentality helps bank organizations both at micro and macro levels. Finalizing the budget: This is related to the formulation of a budget for advertisement. The bank professional, senior executive and even the policy planners are found involved in the process. The formulation of a sound budget is essential to remove the financial constraint in the process. The business of a bank determines the scale of advertisement budget. In addition, the intensity of competition also plays a decisive role since in a majority of the cases; we find an increase in the budget due to a change in the competitors strategies. Selecting a suitable vehicle: Another task at apex level of the bank is to select a suitable vehicle for traveling the messages. There are number of devices to advertise, such as broadcast media, telecast media and the print media. For promoting the banking business, the print media is found economic as well as effective. The messages, appeals can be presented in a very effective way. Making possible creativity:In advertising, we find creativity playing a decisive role in making the process effective. The advertising professionals bear the responsibility of

making the appeal, slogans, and messages more creative. The banking organization should seek the cooperation of leading advertising professional for that very purpose. By creativity, we mean making the advertisement programmes distinct to the competitive organizations which are active in influencing the impulse of customer and successful in informing and sensing the customer. This requires in depth knowledge of the receiving capacity of the target market for which the advertisement are designed. Testing the effectiveness: It is not only sufficient that we advertise. It bears an analogue significance that our advertisements are effective in influencing the impulse of customer by energizing persuasion. For making the process effective, it is essential that we test the effectiveness before launching of the commercial advertisement. The life expectancy if increased makes advertisement are found productive. Instrumentality of branch manager: At micro level, a branch manager bear the responsibility of advertising locally in his/her command area so that the messages, appeals reach to the target customers of the command area. Of course we find a budget for advertisement at the apex level but the business of a particular branch is considerably influenced by the local advertisements. If we talk about the cause-related marketing, it is the instrumentality of branch manager that makes possible the identification of local events, moments and make advertisements condition-oriented. Characters and themes: At the apex, it is also important that while advertising, the senior executive watch the process minutely and select events, characters having a regional orientation. The popular characters and sensational moments are likely to be impact generating. The theme for appeals and messages also need due attention. Of course, they have a legitimate right of advertising but it is not meant that like the goods manufacturing organization, the service generating organization also start making invasions on our culture. We need to regulate a bias to gender, profession, region or so. The aforesaid facts make it clear that while advertising, the banks need to assign due weight age to the limitation failing which the advertisements would outlive their utility. We consider advertisement the most sensitive component of the promotion mix but in a

majority of the cases, we find misuse of this tool. In addition to other negative effects the unproductive advertisement would also increase the financial burden therefore utmost precaution are needed to make the entire process productive. The professional bear the responsibility of determining the share of this component to the promotion mix since we can t be proportionate MARKET SEGMENTATION: In banking services, the banks are expected to satisfy rural customers, urban customer, high-earning and low-earning, small-scale and large-scale entrepreneurs and so on. Hence segmentation of market is considered to be important. According to Philip kotler, market segmentation is the sub-division of market into homogenous sub-sets of customers where any sub-sets may conceivably be selected on a market target to be reached with a distinct marketing mix. INPORTANCE OF SEGMENTATION IN BANKING SERVICES: Since the banks have to deal with different types of customers from different fields and localities, Banking Services need segmentation. The purchasing power of potential customers is different. In respect of term deposits of different maturities or deposit schemes the potential customers are required to be influenced. These potential customers may be located in some packets of the urban areas. In the Indian setting we find the emergence of rural market which is wider. Here it is necessary that that segmentation should be done in tune with the changing socioeconomic conditions of the rural users Therefore market segmentation is important not only from the viewpoint of expanding the market but also with the motto of satisfying the user. If the marketing decisions of the banks are on the basis of micro-level market segment, then only a fine blending of service and profit elements are possible.

Major Players Nationalized Banks: The Government of India with effect from 19 July 1969 nationalized 14 major Indian Banks, each with an aggregate deposit of Rs-50 crores or more with a view to to serve better the needs of development of the economy, in conformity with National Priorities and Objectives. The following were considered to be the compelling reasons for the Bank Nationalization: Concentration of wealth and economic power in industrialists and businessmen; Branch expansion was confined only to urban areas with rural areas being neglected; Sectors like agriculture, small scale industries and the other deserving sectors were outside the purview of lending operations of the bank; Various malpractices indulged in by banks under private ownership and management to favor big businessmen and industrialists and To give a re-orientation in attitude and outlook of the bankers so as to make them conscious of social objectives and to make them embrace social banking. The ordinance through which the Banks were nationalized was struck down by Supreme Court as unconstitutional and invalid, on grounds of hostile discrimination and illusory compensation. So the Government addressed these lacunae and Banking Companies {Acquisition and Transfer of Undertakings} Act, 1970 was introduced. The fourteen banks covered under this Act of Nationalization were Central Bank of India Ltd. Bank of India Ltd. Punjab National Bank Ltd. Bank of Baroda Ltd. United Commercial Bank Ltd. Canara Bank Ltd. United Bank of India Ltd. Dena Bank Ltd.

Syndicate Bank Ltd. Union Bank of India Ltd. Allahabad Bank Ltd. Indian Bank Ltd. Bank of Maharashtra Ltd. Indian Overseas Bank Ltd. Eleven years after nationalization of 14 commercial banks the Government on April 15, 1980 took over six schedule Commercial Banks each with demand and time liabilities exceeding Rs-200 crores through an ordinance issued by the President. These banks were 1. Andhra Bank Ltd. Corporation Bank Ltd. New Bank of India Ltd. Oriental Bank of Commerce Ltd. Punjab and Sind Bank Ltd. Vijaya Bank Ltd. Of these twenty banks nationalized in two installments, New Bank of India got merged with Punjab National Bank in September 1993. Thus as of today, there are 19 nationalized banks operating in our country. Thus, as on date there are totally 19 nationalized banks existing as on date. Nationalized banks have been permitted to offer their equity shares to the public to the extent of 49% of their capital. Accordingly, the following nationlised banks offered shares to the public 1. Corporation Bank Bank of India Bank of Baroda Oriental Bank of Commerce Dena Bank Apart from the above, the following banks coming under the State Bank of India Group, have also offered shares to the public State Bank of India State Bank of India State Bank of Travancore

State Bank of Bikaner and Jaipur As of September05, nationalised banks contribute 55% of the aggregate deposits of the Banking System. The contribution of the nationalised banks in the domain of credit of the entire Banking System is to the extent of 48.5%. Similarly, as of September05, State Bank of India and its associates, contribute to 25% of the aggregate deposits of the Banking System and 28.4% of the aggregate credit of the banking system. 2. Private Sector Bank: By private sector banks we mean those banks where equity is held by private shareholders that is to say there is no government holding of the equity shares. This category of banks also occupies a significant position in the Banking Scenario. There are already 25 private sector banks operating in our country for quite some time. These banks are listed as underThe Vysya Bank Ltd. The Federal Bank Ltd. The Jammu & Kashmir Bank Ltd. Bank of Rajasthan Ltd. Karnataka Bank Ltd. The South Indian Bank Ltd. The United Western Bank Ltd. Bank of Madura Ltd. The Catholic Syrian Bank Ltd. The Karur Vysya Bank Ltd. Tamilnad Mercantile Bank Ltd. The Lakshmi Vilas Bank Ltd. The Sangli Bank Ltd. The Dhanalakshmi Bank Ltd. Development Credit Bank Ltd. Bharat Overseas Bank Ltd. City Union Bank Ltd.

The Benares State Bank Ltd. The Nedungadi Bank Ltd. Lord Krishna Bank Ltd. Bareily Corporation Bank Ltd. Nainital Bank Ltd. The Ratnakar Bank Ltd. The Ganesh Bank of Kurundwad Ltd. SBI Comm. & Int. Bank Ltd. There has been a growing presence of private sector banks, more so, after the introduction of financial sector reforms from 1991. Six new private banks listed as under were issued licenses in 1994-95 and commenced operations during the same year. UTI Bank Ltd. IndusInd Bank Ltd. ICICI Banking Corporation Ltd. Global Trust Bank Ltd. Centurion Bank Ltd. HDFC Bank Ltd. Again, during 1995-96, the following three banks were issued the licenses and commenced their operations: Times Bank Ltd. Bank of Punjab Ltd. IDBI Bank Ltd. Thus, apart from the twenty-five old private sector banks (already listed above), we have got nine new private sector banks. During the period Times Bank ltd. was merged with HDFC bank. However The Nedungadi Bank Ltd. was merged with one of the nationalize bank i.e. Andra Bank Ltd.

Private sector banks have been rapidly increasing their presence in the recent times and offering a variety of newer services to the customers and posing a stiff competition to the group of public sector banks.

3. Foreign Banks: The other important segment of commercial banking system is that of foreign banks. Foreign Banks, being banks registered and headquartered in Overseas Centres, have opened branches in our country on a continual basis. Even in the initial decades of the century, we had the presence of foreign banks in our country albeit in a smaller way. Here again, the presence of foreign banks has rapidly improved after 199, after the advent of the financial sector reforms. The increasing presence of foreign banks in our country has accentuated the competition in the Banking Industry bringing in the process newer products as well as resulting in improved customer service. They are employing and enhancing the impact of technology for the growth of business volumes along with sophisticated service delivery mechanism to the clientele. As per the present policy measures in force, all the foreign banks together cannot have more than 15% of the total business of the banking industry as a whole.

ADDITIONAL SERVICES AGENCY SERVICES In order to facilitate the customers, the banks accept standing instructions from their customers either to make payments on their behalf or collect money or effect transfer of money. The relationship between the banker and customer, in this case, is that of principal and agent. The customer directs the banker as to what he should do. The banker acts according to his direction. In case of any loss, the customer alone will bear this as his directions are carries out by the banker. The banker will charge the customer for doing such services. Some of the agency functions are as follows: The banker pays rent, insurance premium, subscription etc. on behalf of the customer as per his prior instructions on the appropriate dates. The payment will be made from the customers account.

In the same way the bank undertakes to collect such income on behalf of the customer. The banker also collects cheques/bills etc. on behalf of the customer. In India, we do not have banks exclusively dealing in foreign exchange. The commercial banks, in addition to their normal functions, undertake the business in foreign exchange. They buy and sell foreign exchange currencies as per the regulations. They also discount the foreign exchange bills. The financial stability of the bank and complete confidence of the customers, dealing with it has made the bank a natural and trusted friend for undertaking executorship and trusteeship. In addition to this, an increasing reluctance of customers to trust individuals, combined with insufficient knowledge of law on their part has led commercial banks to act as trustees/executors to their customers. As a trustee, the banker takes care of the management trust and administers the trust funds effectively. The functions undertaken under the executor/trustee services are as follows: To handle the investments/estates during the life time of the owner; and distribute them according to the terms of the will after his death; To manage the property during the owners life time and after his death on behalf of his dependants through their life time or till such property is distributed/ applied according to the instructions of the deceased; To manage movables and also act as a guardian of a minors property; Guide customers in filing estate duty returns and appear before Estate Duty Authorities when called upon to do so; Administration of public trusts; Acting as trustees for debentureholders.

GENERAL UTILITY SERVICES A number of incidental functions are carried on by the commercial banks to help his customers. Safe Custody of valuables:

One of the important services which a bank renders to his customers is that of keeping valuables of customers is that of keeping valuables of customers in safe custody including jewellery, share certificates, insurance policy, title deeds, gold ornaments, will etc. while banker accepts anything for safe custody he accepts them under duly sealed box, and banker passes receipt for such deposits. The safe deposit receipt has to be returned duly discharged when the banker redelivers the boxed/pocket. The relationship between banker and customer is that of a bailor and bailee. The contract entered into is a contract of Bailment. In present day banking, bankers are offering locker facility, which is superior, and hence becoming popular. However, at centers where locker facility is still not available the articles in safe custody are a service of great value to customers. Under this facility, bankers responsibility is higher, because if there is any damage to property bailed he would be responsible. This facility is used by bankers themselves to deposit their branch duplicate keys in some other bank/branch. In the event of any loss of keys or other problem, the duplicate keys can be withdrawn to ensure smooth functioning of the branch. The articles in safe custody facility is utilized by the people for depositing their will, their last wish as to how to deal with their property. Except in States of MP and UP in all other states probate or letters of administration will be necessary to deliver the articles. Safe Deposit Locker Facilities: Many banks offer safe deposit locker facility. Under the arrangement, a customer hires a locker cabinet, which is kept by the bank for the purpose. Lockers are generally kept in strong room, which is a water proof/ fireproof place. There are different sizes of lockers like small, medium, large and extra large, etc. The locker rent is recovered for a year in advance and depends on the size of the locker. A locker hirer has to sign an agreement on Rs-10/- stamp paper with the bank. Thereafter, a locker is allotted to him. The locker has two keys. The master key is kept by the bank whereas the other key is given to the customer. There is no duplicate key available for the customer. In case, it is lost, the locker has to be broken open at the cost of the customer.

The locker is a most essential facility in cities and urban places and even in villages for safe keeping of valuables. The locker system is superior to safe custody system because customer can keep anything the customer chooses to keep, he need not inform banker about the contents. It can be operated on locker, no need to seal, pack the contents etc. the charges are very nominal. Small locker with SBI costs Rs-100/- per annum.A locker can be opened jointly and access to the locker can be had by either of the joint account holder. If there is defaults in payment of locker, persistently, say more than 3 years, then bank can give notice to locker hirer and if he does not respond, with due notice break open the locker in presence of witnesses. The banker is at liberty to recover its locker rent from the proceeds of contents. The relationship of the banker and customer in the safe deposit locker is that of licensor and licensee. While surrendering the locker, the original locker holder has to come personally to surrender the key. At the time of allowing access to the locker, the hirer has to sign access register his signature is verified and thereafter access to locker is allowed. Telebanking: This is a secure, fast & convenient way to obtain a range of services by using a telephone without visiting the branch e.g. information on account, conduct of selected transactions, report loss of ATM card, order a cheque book, draft etc. What are the services available under "Telebanking"? Online balance inquiry. Details of transactions 1. Last five transactions 2. Transactions from a recent date Request for service 1. Cheque book request 2. Funds transfer request 3. Drafts request

Request for statement of account 1. From the date of last statement 2. From a specific date Change on PIN...etc. The facility is protected with two level passwords in addition to the Customer's account number, which is his login ID. The Customer should be careful to maintain secrecy of his password & PIN number. All individual customers in Personal segment except those whose accounts are operated through joint signature and whose accounts are not running satisfactorily, can avail the facility. Even the minors who are allowed to open and operate account can seek to avail the facility. The Customer is required to apply for the facility in the application form prescribed for the purpose. After scrutiny, the Branch will register the name & allot the PIN & Transaction password, which the Customer will change on his first log in for a number of his choice. Presently the facility is available in select fully computerized branches. The service is provided 'free of charge'.

7Ps PRODUCT

TYPES OF ACCOUNTS FIXED DEPOSITS Fixed deposits are made by the customers for a specified period, ranging from 15 days to 5 years or more, the rate of interest ranges from % to 11%. The longer the period of deposit, higher is the rate of interest. The depositor is assured of the safety of the funds, apart from higher returns. The depositor, as per the terms, agrees not withdraw the amount earlier. In acknowledgement of the fixed deposit, the customer is given a receipt called fixed deposit receipt popularly known as FDR in the business circle. The rules governing fixed deposits are printed on the reverse side of the FDR. At the end of the term, the customer may either withdraw the amount along with interest or renew the deposit for a further period at this convenience. Since the customer would withdraw the funds at the end of the period, the banker can lend the money confidently without keeping any reserve to meet the withdrawals. In case the customer needs money prior to the due date, although he may not be able to withdraw from the Fixed Deposit, he can obtain a loan from the bank on the strength of the Fixed Deposit Receipt. The banker charges an interest for this loan. RECURRING DEPOSIT ACCOUNT This is a type of account, which is a combination of the characters of saving bank account and fixed deposit accounts. In this account, the depositors can pay a fixed sum of money every month for various periods, say 12 to 120 months. This account is normally opened by salaried persons or individuals who get regular income. Deposits may be paid in easy installments. The commercial banks have introduced the Recurring Deposit Scheme to enable the small depositors to save for a predetermined period. In one way it may be viewed as compulsory savings to enable them to build up sizeable amount. The bankers allow compound rate of interest. In case the depositor needs the money even before the stipulated period he can get back the money. In such cases, the banker may pay a lesser rate of interest than it was agreed upon. Saving Bank Account: As the name indicates, the purpose of opening a savings bank account is to save money to meet the future contingencies. A person is allowed to open a savings bank account

provided he is properly introduced. The customer is expected to maintain a minimum balance of rs-20/- in his account. Nowadays, any savings bank account holder who agrees to maintain a minimum balance of Rs-500/- in his account may make use of the cheque facilities. The interest is allowed at the rate of 5% on the minimum balance as in the case of any date as stipulated and the last day of each calendar month. The rate allowed on savings bank account is 5% p.a. there are some restrictions relating to the number and amount of withdrawals. The number of withdrawals are generally restricted 100 per year and the total amount of withdrawals at any time should not exceed Rs-10000 or 10% of the balance whichever is higher. But if he wants to withdrawal large sum, he should give prior notice to the banker. Saving Bank Accounts are usually opened in the name of individuals. No saving bank account is opened for a trading company or a business concern whether such a concern is a proprietary concern, partnership firm, a company or association. Nowadays, a banker facilitates the collection of cheques drawn in the name of the customer through the savings bank account. However, he does not collect third party cheques. A third party cheque is one, which is drawn in the name of a person other than the customer. Current Account: A businessman for the purpose of his business normally opens a current account. He should always maintain such minimum balance in the account. A banker should be doubly cautious to get an introduction letter from the customer at the time of opening such account. He should also see that such introductory letters are verified, due to the following reasons: (1) The RBI has given a direction that the prospective customers should produce Introductory letter at the time of opening the account; (2) The banker should ascertain the bonafides of the customer; (3) Since third party cheques are collected through the account, there is a chance for fraud by unscrupulous elements; (4) Since overdraft and cash credit facilities are available, the banker should not be exploited by an unscrupulous customer.

In a current account the banker is obliged to honour the cheques drawn on him if there is sufficient balance to his credit. One of the peculiar features of the current account is that the banker does not allow any interest on the deposits whatever the balance is. However, if the customer overdraws the account he may have to pay interest to the banker. Overdraft may be granted for a temporary period of one moth or more depending upon the requirements of a customer. Cash credit facility is also available in the current account. Bankers allow certain special facilities such as free collection of outstation cheques, issue of demand drafts and mail transfers without any extra charges.

TYPES OF MICELLANEOUS ACCOUNTS

(1) Pigmy/Janata Deposits: (2) Insurance Linked Deposits: (3) People Saving Plan: (4) Daily Saving Schemes: Minors Savings: Annuity /Retiring Scheme: Farmers Deposit Scheme:Monthly Income Plan: (9) Cash Certificate Scheme: (10) Housing Deposit Scheme: (11) Amudha Surabi Deposit Scheme: -

VARIOUS TYPES OF CARDS Various types of Cards: Following types of cards are available in India: Credit Card:

The credit card is an instrument, which enables the cardholder to obtain goods or services from shops and establishments where arrangements have been made by issuing bank to reimburse them. The goods and services are bought by the cardholders from shops and establishments upon presentation of card instead of cash or cheque for settlement of their bills up of specified amount fixed the card-issuing bank. Such bills are sent for settlement by the shops and establishments to the card-issuing bank, monthly or periodically for obtaining reimbursement. Card issuing bank upon receipt of such bills from shops and establishments for reimbursement settle it by debiting the customers account. Thus cardholder gets credit for 30 to 45 days free of cost. Cash Card: Certain banks issue Cash Cards in addition to Credit Card which enable holder of card to draw certain amount of cash from the branch office, of the card issuing bank or now from ATM installed by the bank at various places. Smart Card: This type of cards is also known as Chip Card. With the increasing computerized network, banks extend the Chip Card facilities to the select customers. The Smart Card is a microcomputer chip giving its intelligence and a memory capacity much more than usual magnetic cards. Smart card has much computing power of Personal Computers. It has storage capacity of all types of personal data of the cardholder. Smart Card can be used with a Personal Identification Number (PIN). The Smart Card can be programmed to do any task within its processing power and memory capacity. It is a Data Carrier Identity Card and also meant for using for monetary transactions like payment of hotel bills, electricity bills. Co-Branded Cards: This type of credit cards are those which banks promotes jointly with another financial agencies, like Master Card, BOB Card, Diners Card, , Bank of Taj Card India BOI Card. These types of Cards are used with other non-financial institutions, which enables the cardholder to claim discount in price for the use of card. Debit Card: Debit Card is also known as a Payment Card used to obtain cash, goods and services automatically debiting the payments to the cardholders bank account immediately.

Charge Card: Charge Card is a type of card in which card holder is required to settle the outstanding in full at the end of a short period within 25-30 days to the extent of certain amount say Rs5000/- to Rs-10000/- at one time. PLACE Selection of suitable place in an important element in the overall marketing decision. The locational decision helps in activation the business. The means searching a suitable point for offering the banking services or location the branch at a sensitive point. Location of bank at places accessible to the actual and potential users will bring momentum in the banking activities while making a place decision the availability of transport communication, electricity and other necessary facilities for the smooth functioning of the bank should be considered. Neat and clean premises attract people. Of late the banks have been facing the problems of robbery. It is essential that branches are located at the points where security arrangements can be made available within a few minutes The banks have to be careful that the General of Industrial users of services coming to the banks return safely. In order to serve all customers segment round the clock the banks have introduced ATM, tele-banking, home-banking and now Inter.net banking

Nationalised Banks: Parameter: banks No of banks( as march06) No of branches Amount of deposits (as 19 71,398 6,37,512 Nationalised SBI and its Associates 8 52,995 3,13,163 crores

march05) Amount of advances

crores 2,28,644 crores 1,24,419 crores

Private Sector Bank: The size of the private sector banks in our country as on date is furnished hereunder. (As at June06) Number of Private Sector Banks in operation Number of Bank branches of Private Sector Banks Amount of Deposits ( as at march05) Amount of Advances ( as at march05) 31,692 crores 91,588 crores 35 4,473

Private sector banks have been rapidly increasing their presence in the recent times and offering a variety of newer services to the customers and posing a stiff competition to the group of public sector banks. PROMOTION Banking services can be promoted in two ways: Personal promotion i.e. person to person, person to persons, persons to persons and conferences. Impersonal promotion i.e. advertising, publicity and sales promotion measures. Personal promotion hips in creating impulse buying and generates selling with the help of impersonal communication. With the help of different promotional tools a manager can transform a potential customer into actual customer. In banking service the success of personal selling depends on the behavior and activities of the bankers Today Advertising has occupied a place of significance. It is used for masscommunication. Advertisement can serve the purpose if it is well read, heard, believed, remembered and acted upon by the potential users or target audience. It can create awareness and bring about attitudinal change in the target market.

Publicity is different to advertising. It is an editorial comment about the ideas, products and organizations. It is an important part of public relation. Today when we find that social welfare to be an important part of banking services, the publicity measures need due care. Displays, show, exhibitions, gifts are some of the important measures to stimulate the user action and bankers effectiveness. Word of mouth is the best form of publicity In order to lure the customers to buy the services of the bank, bank often tend to provide services which are beneficial to customers. Shown below are the special services offered to customers other then the regulatory services. Excellent service and lower costs. A quick survey of similar schemes available elsewhere and find out that SBI Car Loans for new and old vehicles offer: Lowest interest rates Longer repayment period of upto 84 months. No processing charges. No hidden costs or administrative charges. Free Personal Accident Insurance No advance EMIs. (Some Banks/companies ask to pay one or more EMIs at the time of disbursement of loan, thereby effectively reducing loan amount.) Complete transparency: SBI levy interest on daily reducing balance method. When customer pay one installment, the interest is automatically calculated on the reduced balance thereafter. When one pay interest on an annual reducing balance, as charged by many other companies/banks, the interest amount for the coming year is determined on the amount outstanding at the beginning of the year. Customer continues to pay interest even on the amounts he repays during the year. PROCESS The process involves all the activities of banking service from the product conception stage till its marketing at all branch level. It also includes the accounting procedure. Previously banks were more activity oriented by due to the technological advances they have shifted their approach to customer oriented service delivery.

The improvement in the process comes from reengineering of the process in order to reduce delays in processing the transaction e.g. loan applications, cheques clearing etc. The products and the seller together constitute the banking product. Bank products cannot be separated from people who market them. While designing the product due care should to given to both the product and the seller. A well conceived product could fail it it is not implemented properly. The bank products can be implemented only through people. Banks should adopt internal marketing in order to make the whole business customeroriented. The bank products should be marketed to the employees first before they are marketed to customers. The corporate mission must be communicated effectively to all the employees by the top level management. The recruits should not only be conversant with all the aspects of banking but also have the skill for social interaction and tolerance for inter-personal contact. Most of the banks are moving towards technology-based banking. But still matters like investment banking deposit, mobilization, and credit evaluation, etc. can be done through persona contact. The process involves all the activities of banking service from the product conception stage till its marketing at all branch level. It also includes the accounting procedure. Previously banks were more activity oriented by due to the technological advances they have shifted their approach to customer oriented service delivery. The improvement in the process comes from reengineering of the process in order to reduce delays in processing the transaction e.g. loan applications, cheques clearing etc. Separate registration is required in case the accounts are maintained at different branches. Separate registration is allowed for single and joint accounts at the option of the user. Normally the account holders can access his accounts through the www.onlinesbi.com only after he/she acknowledges to the respective Branch(es) the receipt of the User-Id and Password sent to him/her. Each account holder in a joint account with Either or Survivor type mode of operation may register himself/ herself as a USER of the www.onlinesbi.com facility. All other accounts not listed in the registration form will be available on the www.onlinesbi.com for the purpose of enquiry only. The customers may approach Branch for enabling transaction rights on such accounts any time.

Banks Terms: All requests received from the USERS are logged and transmitted to the Users Branch for their fulfillment. The requests become effective from the time these are recorded/ registered at the respective branch. While registering the request, the USER is informed about the time normally taken by the Bank for fulfillment such requests. The www.onlinesbi.com service is a VeriSign certified secure site. It assures that during the session user is dealing with web site of SBI. The two-way communication is secured with 128-bit SSL encryption technology, which ensures the confidentiality of the data during transmission. . PEOPLE The products and the seller together constitute the banking product. Bank products cannot be separated from people who market them. While designing the product due care should to given to both the product and the seller. A well conceived product could fail it it is not implemented properly. The bank products can be implemented only through people. Banks should adopt internal marketing in order to make the whole business customeroriented. The bank products should be marketed to the employees first before they are marketed to customers. The corporate mission must be communicated effectively to all the employees by the top level management. The recruits should not only be conversant with all the aspects of banking but also have the skill for social interaction and tolerance for inter-personal contact. Most of the banks are moving towards technology-based banking. But still matters like investment banking deposit, mobilization, and credit evaluation, etc. can be done through persona contact. Bank offer different schemes for different target segments. They exactly know what their customers want and accordingly provide services to their customers. For example Students a/c, which targets the people within the age group of 5-21, students Account, is opened. The bank also provides special accounts for special people who are associated with the bank for many years. Apart from these services banks also provide a host of other services as laid down by the RBI. Banks also offer Banking services according the target segment they are associated with; when any person comes to open a

new bank account their executives try and explain to them Terms and Conditions while opening their account. Banks also provide special consencial rates to senior citizens they are provided with more interest rates which are offered to other citizens. Banks also tend to provide special accounts for Specific Industries or companies who have a particular niche in the market. Similarly, these guidelines are also followed when a corporate executive or any particular executive applies for loan is provided with at special consencial rates. In this way banks often tend to segment their market and offer rates to special rates at special prices. PRICING Pricing is factor that majority of banks sustain in the market. Pricing is done in banks according to its services that they do offer. Nationalized banks charge low price for their services because the services that they provide are not up to the mark and also they provide low rate of interest as compared other than those provided by other private sector banks. On the other hand Private sector banks provide a host of essential services and even charge a price for that but in return they provide the customers with the services which they dont except. In the banks, pricing relates to interest paid by the bankers on deposits, interest charged on loans, overdraft, cash credit, charges for various types of services rendered on standing instructions given to the bank and commission charged. The Reserve Bank of India and the Indian Banking Association are concerned with this aspect. Pricing policy of a bank is considered important for raising the number of actual customers. The potential customer or investors generally frame their investment decisions on the basis of interest to be received on the investment. While framing a pricing policy different pricing methods can be used, in cost plus pricing a detailed analysis of cost structure of various banks products and services is to be done. In case of competition related approach, the price is decided on the competitors price. The banks are required to frame two fold strategies. Strategies concerned with interest and commission to be paid to the customer and interest or commission to be paid by the customer for different types of services.

The banks also have to take the value satisfaction variable into consideration while formulation pricing strategies. RBI has to be more liberal so that the commercial banks make decisions in tune with the changing savings and investment behavior PHYSICAL EVIDENCE: Physical evidence focuses the bankers attention because banking products are intangible. The environment is changing. It is becoming friendlier. Most of the private and foreign banks portray a new welcoming and friendly look to the customer. Flashy cheques books with the nave of the account holder printed, imaginative design of bank brochure, statement of accounts with details of transaction are other tangible aspects. Logos, symbols, attractive brand names etc. add to the customers perception of service quality. There is an urgent need to implement technologies in order to raise productivity as well as to enable the banking system to cop with the increasing complexities of business.It is also important for the banks to promote specialized services like credit analysis, foreign exchange dealings etc. by appointing persons who are conversant in such specialized activities.In order to improve financial viability and profitability of the banks the major task before the banking industry is to consolidate its progress by improving its operational efficiency and customer service. Various Opportunities for Banking Sector in INDIA THE Indian financial sector is undergoing rapid change. Structural reforms aimed at improving the productivity and efficiency of the economy are apace. The $28-billion sector, growing at roughly 15 per cent, has displayed remarkable stability over the years even when other markets in the Asian region were facing a crisis. The Indian financial sector has kept pace with the growing needs of its borrowers. Changing environment The most important factor shaping today's world is globalization. Companies are constantly in search of low-cost markets. Technology is driving growth in production and productivity and competition is stiff. Secondly, rapid development in communication

technology has lead to greater integration of global financial markets, in turn boosting private capital flows and foreign direct investment. A third factor is the increasing share of emerging market economies in world trade. Another fallout of globalization is the increase in volatility and vulnerability of markets. This calls for the adoption of international standards and global benchmarks. Aligning with global standards To strengthen India's banking system in an increasingly competitive environment and guard against financial fragility, financial sector reforms were initiated as part of the economic reforms launched in the country since 1991-92. Significant progress has been made in the past few years to bring the Indian Banking system closer to international standards. India has adopted international prudential norms and practices with regard to capital adequacy, income recognition, provisioning requirement and supervision and these norms have been progressively tightened over the years. There has been a steady decline in the level of resource pre-emption from the banking system in the form of CRR (cash reserve ratio) and SLR (statutory liquidity ratio). Interest rates in various segments of financial markets have been deregulated in a phased manner. The mark-to-market practice for valuation of government securities has been gradually enhanced and further refinement, in line with international best practices, carried out in valuation and classification of investment by banks. Risk management in banks has been strengthened and measures put in place to mitigate credit and market risks and efforts are on to measure and control operational risk. Banks have been given greater freedom in investing as also raising funds abroad and managing their external liability, subject to prudential guidelines. In the area of supervision, the Basel core principles for effective banking supervision are being followed. Along with off-site surveillance there is periodic on-site monitoring of the risk profile of banks and their compliance with prudential guidelines and a "CAMELS"-based rating system is being followed. The Reserve Bank of India's regulatory and supervisory responsibility has been widened to include banking institutions and non-banking financial companies.

The end result is that the Indian banking sector has been considerably strengthened; there is greater transparency and closer convergence of Indian financial system with practices prevailing in international financial markets. There is special focus on corporate governance and the setting up of specialized boardlevel panels such as the executive, risk management, audit, compensation, asset-liability management committees, and so on. The RBI's Standing Committee on International Financial Standards and Codes under the Chairmanship of Dr Y. V. Reddy has identified global standards and codes as part of the efforts to create a sound financial architecture aligned with global practices. Moving forward But there are some areas that need greater attention. Need to check NPAs: The biggest challenge is the problem of NPAs (non-performing assets). Around 12 per cent of bank credit is locked in NPAs, which means that banks do not earn any interest on NPA accounts. This is a drain on the financial health of banks. If banks have to cut their costs and improve performance, they must reduce their NPAs. The Government has re-promulgated the ordinance to help banks expedite recovery. This calls for strengthening credit appraisal and risk management and developing review and control systems in tune with the changing requirements. Strengthening internal controls: While the information technology explosion has been beneficial, it has also brought with it some unsavory side-effects. The increase in frauds and scams in the financial sector is a cause for concern and calls for the strengthening of internal controls of banks and financial institutions. Focus on Indian economy: Even as banks move closer to international standards, they cannot lose touch with the realities of the Indian economy. In this context, agriculture, small industries/businesses and the services sectors, must be given special consideration and credit flow to the rural sector increased. In an age where the world has become smaller and money moves as quickly as information, achieving global benchmarks is important for global players. But underlying this is the need to have sound fundamentals. There is no doubt that only banks and financial institutions that are focused on efficiency, productivity and

profitability have a chance to survive in a highly competitive environment and therefore need to equip themselves thoroughly to face the future competition.