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1. To understand the basic functional areas and their respective functions. 2. To evaluate the companys performance in over all industry growth. 3. To measure individual functional area in banks performance. 4. The effect of various political, social, economical and technological factors.


Source of Data: The data collected for the study was primary in nature as well as secondary data Research Instrument: Research tools were in depth interview of company employees. Sample Unit: Data collected from various departmental heads including Managers and executives. Sampling procedure: Non-probability judgment sample was selected for accurate information. Contact method: Here we have conducted personal interview for data collection.


A bank is a financial institution that provides banking and other financial services. By the term bank is generally understood an institution that holds a Banking Licenses. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so-called Non-bank. Banks are a subset of the financial services industry.

The word bank is derived from the Italian banca, which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Moneylenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table.

Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset. Development of banking industry in India followed below stated steps.

Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to rates of interest. Banking in India has an early origin where the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of the East India Company, was the turn of the agency houses to carry on the banking business. The General Bank of India was first Joint Stock Bank to be established in the year 1786. The others which followed were the Bank Hindustan and the Bengal Bank. In the first half of the 19th century the East India Company established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks also known as Presidency banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established in 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India

was taken by the newly constituted State Bank of India. The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve Bank of India Act, 1934 which was followed up with the Banking Regulations in 1949. These acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing, supervision and control of banks. Considering the proliferation of weak banks, RBI compulsorily merged many of them with stronger banks in 1969. The three decades after nationalization saw a phenomenal expansion in the geographical coverage and financial spread of the banking system in the country. As certain rigidities and weaknesses were found to have developed in the system, during the late eighties the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level committee was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial system. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the banking system was introduced in 1992-93. The objective of the reform measures was to ensure that the balance sheets of banks reflected their actual financial health. One of the important measures related to income recognition, asset classification and provisioning by banks, on the basis of objective criteria was laid down by the Reserve Bank.

The introduction of capital adequacy norms in line with international standards has been another important measure of the reforms process.

1. Comprises balance of expired loans, compensation and other bonds such as National Rural Development Bonds and Capital Investment Bonds. Annuity certificates are excluded. 2. These represent mainly non- negotiable non- interest bearing securities issued to International Financial Institutions like International Monetary Fund, International Bank for Reconstruction and Development and Asian Development Bank. 3. At book value. 4. Comprises accruals under Small Savings Scheme, Provident Funds, Special Deposits of Non- Government In the post-nationalization era, no new private sector banks were allowed to be set up. However, in 1993, in recognition of the need to introduce greater competition which could lead to higher productivity and efficiency of the banking system, new private sector banks were allowed to be set up in the Indian banking system. These new banks had to satisfy among others, the following minimum requirements: (i) (ii) (iii) (iv) It should be registered as a public limited company; The minimum paid-up capital should be Rs 100 crore; The shares should be listed on the stock exchange; The headquarters of the bank should be preferably located in a centre which does not have the headquarters of any other bank; and (v) The bank will be subject to prudential norms in respect of banking operations, accounting and other policies as laid down by the RBI. It will have to achieve capital adequacy of eight per cent from the very beginning. A high level Committee, under the Chairmanship of Shri M. Narasimham, was constituted by the Government of India in December 1997 to review the record of implementation of financial system reforms recommended by the CFS in 1991 and chart the reforms necessary in the years ahead to make the banking system stronger and better equipped to compete effectively in international economic environment. The Committee has submitted its report to the Government in April 1998. Some of the recommendations of the Committee, on prudential accounting norms, particularly in the areas of Capital Adequacy Ratio, Classification of Government guaranteed advances, provisioning requirements on standard advances and more disclosures in

the Balance Sheets of banks have been accepted and implemented. The other recommendations are under consideration.

The banking industry in India is in a midst of transformation, thanks to the economic liberalization of the country, which has changed business environment in the country. During the pre-liberalization period, the industry was merely focusing on deposit mobilization and branch expansion. But with liberalization, it found many of its advances under the non-performing assets (NPA) list. More importantly, the sector has become very competitive with the entry of many foreign and private sector banks. The face of banking is changing rapidly. There is no doubt that banking sector reforms have improved the profitability, productivity and efficiency of banks, but in the days ahead banks will have to prepare themselves to face new challenges.

2.1 Indian Banking: Key Developments

1969 Government acquires ownership in major banks Almost all banking operations in manual mode Some banks had Unit record Machines of IBM for IBR & Pay roll 1970- 1980 Unprecedented expansion in geographical coverage, staff, business & transaction volumes and directed lending to agriculture, SSI & SB sector Manual systems struggle to handle exponential rise in transaction volumes - Outsourcing of data processing to service bureau begins Back office systems only in Multinational (MNC) banks' offices 1981- 1990 Regulator (read RBI) led IT introduction in Banks Product level automation on stand alone PCs at branches (ALPMs) In-house EDP infrastructure with Unix boxes, batch processing in Cobol for MIS. Mainframes in corporate office Expansion slows down


Banking sector reforms resulting in progressive de-regulation of banking, introduction of prudential banking norms entry of new private sector banks Total Branch Automation (TBA) in Govt. owned and old private banks begins New private banks are set up with CBS/TBA form the start New delivery channels like ATM, Phone banking and Internet banking and convenience of any branch banking and auto sweep products introduced by new private and MNC banks Retail banking in focus, proliferation of credit cards Communication infrastructure improves and becomes cheap. IDRBT sets up VSAT network for Banks Govt. owned banks feel the heat and attempt to respond using intermediary technology, TBA implementation surges ahead under fiat from Central Vigilance Commission (CVC), Y2K threat consumes last two years Alternate delivery channels find wide consumer acceptance IT Bill passed lending legal validity to electronic transactions Govt. owned banks and old private banks start implementing CBSs, but initial attempts face problems Banks enter insurance business launch debit cards (Source: M.Y.KHAN, INDIAN FINANCIAL SYSTEM, 3rd edition Publication by TATA McGraw hill)



2.2. Current Scenario

The banking industry in India is in a midst of transformation, thanks to the economic liberalization of the country, which has changed business environment in the country. During the pre-liberalization period, the industry was merely focusing on deposit mobilization and branch expansion. But with liberalization, it found many of its advances under the non-

performing assets (NPA) list. More importantly, the sector has become very competitive with the entry of many foreign and private sector banks. The face of banking is changing rapidly. There is no doubt that banking sector reforms have improved the profitability, productivity and efficiency of banks, but in the days ahead banks will have to prepare themselves to face new challenges. For the first quarter ended June 2004, the banking sector recorded a bottom line growth of 18% to Rs 4852.50 crores. Higher net interest income and lower provisioning were the main reasons for the profit growth during the quarter. However, the above results were achieved despite higher operating expenses and a lower rise in non-interest income.

Among banks, public sector banks outperformed private sector banks by registering a 20% rise in the net profit compared to an 11% growth reported by private sector banks. This was mainly due to a higher rise in other income (OI) and a lower increase in operating expenses by public sector banks compared to a fall in OI and higher operating expenses by private sector banks. However, at the net interest level, private sector banks outperformed public sector banks by registering a growth of 36% compared to a 14% rise reported by public sector banks. .

The net interest income of the overall banking sector during the quarter rose 17% to Rs 11962.53 crores, mainly due to low cost of funds. The interest earned rose 4% to Rs 29747.88 crores, contributed mainly by interest income from core operations (i.e., lending). The interest expenses decreased by 4% to Rs 17785.35 crores. The interest spread of most banks witnessed an increase over the corresponding previous quarter, as the decline of yield on lending was lower than the cost of funds. In the falling interest rate scenario, the rate on deposits for most banks fell faster than advances. Thus, interest expenses came down faster to protect profit The sound economic growth, soft interest rate regime, upward migration of incomes and wider distribution to cover a larger proportion of the population are expected to increase the demand for retail loans in a significant manner. The retail credit as a percentage of GDP in India is only around 5% as compared to levels of 30 - 50% in other Asian economies and, therefore, offers significant growth opportunities. Also,

favorable demographic profile like 69% of the population estimated to be under 35 years and an increase in upper middle/high income households are to be the main drivers for retail credit. In the medium term, stronger demand for credit from the corporate sector is also expected consequent to the resurgence of this sector. Earlier, banks were seeing lower credit off take from corporate because of weak business sentiments and lower credit requirement due to improved operational efficiency

Also, most banks are aggressively augmenting their fee incomes and have embarked upon cross selling of products. They are also focusing on fuller utilization of their IT investments such as ATMs by entering into sharing arrangement with other banks to earn extra OI. Many banks are hopeful of effecting significant NPA recoveries due to the Securitization Act. Recoveries from NPAs, which have been provided for, add to OI.
The banking sector is poised to grow in line with the growth of the economy.

However, there are concerns that directed focus on lending to agriculture and SSI sector may increase NPAs of banks. Further, volatility and a sharp fall in g-sec prices may lead to trading losses or even depreciation provision for some banks, going forward. 2.2.1. Banking With the economic growth picking up pace and the investment cycle on the way to recovery, the banking sector has witnessed a transformation in its vital role of intermediating between the demand and supply of funds. The revived credit off take (both from the food and non food segments) and structural reforms have paved the way for a change in the dynamics of the sector itself. Besides gearing up for the compliance with Basel accord, the sector is also looking forward to consolidation and investments on the FDI front.


Public sector banks have been very proactive in their restructuring initiatives be it in technology implementation or pruning their loss assets. Windfall treasury gains made in the falling interest rate regime were used for writing off the doubtful and loss assets. Incremental provisioning made for asset slippages have safeguarded the banks from witnessing a sudden impact on their bottom lines. Retail lending (especially mortgage financing) formed a significant portion of the portfolio for most banks and the entities customized their products to cater to the diverse demands. With better penetration in the semi urban and rural areas the banks garnered a higher proportion of low cost deposits thereby economizing on the cost of funds.

(Source: )

Apart from streamlining their processes through technology initiatives such as ATMs, telephone banking, online banking and web based products, banks also resorted to cross selling of financial products such as credit cards, mutual funds and insurance policies to augment their fee based income. (Source: M.Y.KHAN, INDIAN FINANCIAL SYSTEM, 3rd edition Publication by TATA McGraw hill)

2.2.2. Financial Services: Then and Now

Old Economy

New Economy

Confined market place Competition between banks Limited product line One-size-fits-all products Branch-focused Focus on business growth Revenues through margin

Unlimited market space Competition from brands Extensive product breadth Customization and innovation e-Enabled, multi-channel players Focus on revenue growth as well as cost-reduction Revenue generated through fees and value-added services

Source: Table 1.2.1 Financial services: Then and Now

2.2.3. Diversification in Banking The changes, which have been taking, place in India since 1969 have necessitated banking companies to give up their conservative approach ad traditional system of banking and take up new and progressive functions. The government of India issued guidelines to the banks under the Banking Regulation Act 1949 permitting and encouraging them to diversify their functions. Merchant banking and Underwriting: Commercial banks have now set up merchant banking divisions and are underwriting new issues, especially preference shares and debentures and they have been instrumental in the conclusion of deferred payment agreements between Indian industrial housed and foreign firms. Mutual Funds: Many banks are now permitted to sell mutual funds under the guidelines of AMFI (Association of Mutual Funds of India) and SEBI (Securities and exchange board of India). Now all the banks form public as well as private sector banks are in the playground to sell the mutual funds with tie ups with different NBFCs as well as their own schemes. Housing Loans: With setting up of the National Hosing Bank in July 1988, commercial banks have started lending directly or indirectly for hosing. Commercial banks also act as channelise agent for the NHBs home loan scheme. Also, ICICI, HDFC, SBI are the major players in these area.

Venture Capital Funds: The purpose of VCF is to provide equity capital for pilot plants attempting commercial application of indigenous technology to domestic conditions. Many big players like ICICI, HDFC, and SBI are providing these facilities.

Banking Services: Banks has permitted finally to take up factoring subsidiaries SBI bank and Canara Bank have set up separate subsidiaries exclusively for undertaking factoring services.

However, besides these functions, the private and foreign banks perform a large number of functions like guaranteeing, underwriting, etc. E.g. ABN Amro bank

2.2.4. Life Cycle of Industry The banking industry is in its maturity stage. We can say it is in the early period of maturity. It has fully developed, is considerably profitable and has attained stability. With tough competition and a large number of players, it has saturated almost all the areas of product development. Banks have explored almost all the areas of business penetration, living little prospects for further growth. The banks have tapped almost all the segments of the society. Hence, it is a matured industry. 2.2.5. Products The products or services of all the banks are almost similar irrespective of the sector they belong to. They all provide products like traditional savings accounts for meant to save household money, Current A/C for daily cash requirements of the businessman or professionals, fixed deposits as an investment tool for the customers. Banking services, being a primarily necessity for people it is very important for the banks to offer products, which suit people coming from all the stratas of he society. However these are the common or basic products offered by almost all the banks. But today, in this competitive private sector and foreign banks provide a large number of other products to cater to the people and business housed right from the high end users to low-end customers or investors. These banks provide products like corporate pay roll A/Cs, savings A/c linked fixed deposits, accounts for kids, college going crowd, special A/Cs for

the premium business segments, on-line bank accounts, etc. These banks differentiate between their targeted segments by fixing different minimum balances for different accounts, ranging from Rs. 500 to Rs. 3, 00,000 averages per quarter. 2.2.6. Services All the banks provide certain common services like honoring of cheque, or remittances, granting loans against any products, accepting or sending demand drafts, cheque payments, etc. for a nominal fee. However, the scenario today has changed drastically. Banks today dont merely work as facilitators for peoples monetary transactions, but provide the state-of-the-art services and give priority to their convenience. So, private sector banks and foreign banks provide services like home services for account opening, free personalized cheque books, regular monthly statements, free cheque pick-up or cash delivery at a customers door steps, Demat services, internet banking, phone banking, etc. Another of the widely accepted services offered by these banks is the ATMs or Automatic Teller Machines-from where an individual can withdraw or deposit a stipulated maximum amount of cash at any odd hour of the day or even at night. Hence, with this type of service widely prevalent, the traditional long queues at the cash counters of various banks in the rush hours of morning has become a thing of the past! The public sector banks are yet to come out with such a service. Though only SBI has recently come up with its ATM centers at a few places across different cities. This is one of the major reasons for people to choose private sector banks over public sector banks. 2.2.7. Competition The banking sector has undergone tremendous changes since the past decade with the globalization and privatization policies of the government. A large number of private as well as foreign banks have come up due to the same. As a result this sector g\has become highly competitive. This competition has particularly affected the public sector banks which enjoying a monopoly in this sector. However, the ultimate consumes or the people have gained tremendously. There are a large number of banks trying to attract or retain customers by offering various products, services and privileges.

Though the competition is mainly sect oral in nature .i.e. between private sector banks and public sectors banks, private sector banks are mainly preferred by people because of their prompt services and variety of products. Though people prefer to maintain at least 1 account with the public sector banks due to their presence for safety of money. Moreover, the other reasons can be a wide network of branches, their reach to the rural areas, serving people of all income levels etc.

2.2.8. Liquidity This is one of the most crucial factors for all banks. The banks should have enough resources to pay their short-term obligations like interest payments to deposit holders, cheque honoring, etc. however, for maintaining the liquidity position investment management is very important. The banks should invest only in those assets or portfolio of stocks, which are profitable and can be converted into cash easily. Here every bank should do a risk-return analysis before taking investment decisions. This will have a deep impact in its overall reputation in the market.

2.3. Prospects
The prospect of Indian banking sector is very good. It is going to be flourished in years to come. As India become outsourcing hub for foreign companies. Some of the factors which have contributed to good prospects of banks are as under:

RBI's soft interest rate policy has helped increase the liquidity in the market; however credit off take has not exactly been robust. Going forward, the scenario is set to change in favour of higher credit off take due to expected improvement in agricultural output on the back of good monsoons as well as revival in the Indian industry. However the same cannot be said for the interest rate regime. Higher inflation and the prospect of the raising interest rates may necessitate a hike in interest rates in the domestic markets also. This may in turn curb the growth of the credit in the economy.

Hence while the growth in credit may still be robust, a higher interest rate scenario may however limit the potential.

While the new law regarding securitization and foreclosure of assets may take a while to bear any large benefits, currently the benefits of increased power in the hands of the lender are making the borrowers to come to the negotiating table. FY04 saw a scenario where the borrowers were forced to negotiate with the lenders, which consequently led to the borrowers returning some of the dues to the lenders. Going forward the new law will bring about greater accountability within the system and ensure that borrowers do not take undue advantage of the system. Already an asset reconstruction company has been set up by SBI in partnership with other institutions like ICICI bank and IDBI. If properly implemented, this new law may lead to significant benefits for the banking sector as a whole.

Currently the banking sector in the country is strongly fragmented and hence with further policy changes taking place in the sector, consolidation is likely to take place at a faster rate. However this is subject to the removal of the ceiling on voting rights will ensure that private sector and foreign banks will be in a much better position to carry out acquisitions in the banking sector. A hike in FDI capital limits in the sector would further go a long way in the process of consolidation.

In terms of credit growth, going forward. India's core sector is witnessing a revival of sorts. The manufacturing sector especially led by steel and cement industries has shown significant improvement in FY04. We expect the trend to continue. Hence as corporate growth picks up lending too is likely to see an up tick. Retail credit off-take is expected to remain strong going forward with the housing finance industry, the main contributor to credit off-take from this segment, expected to grow between 20%25% in the next 3-4 years. (Source: magazine, banking finance April-2005, page: 22-27)

2.4. Structure Of Indian Banking Industry

Organized banking was active in India since the establishment of the General Bank of India in 1786. After independence, the Reserve Bank of India (RBI) was established as the central bank and in 1955, the Imperial Bank of India, the biggest bank at the time, was taken over by the government to form state-owned State Bank of India (SBI). RBI had undertaken an

exercise to merge weak banks to strong banks and the total number of banks thus reduced from 566 in 1951 to 85 in 1969.

With the objective of reaching out to masses and meeting the credit needs of all sections of people, the government nationalized 14 large banks in 1969 followed by another 6 banks in 1980. This period saw enormous growth in the number of branches and the banks branch network became wide enough to reach the weakest sections of the society in a vast country like India. Sibs network of 9033 domestic branches and 48 overseas offices is considered to be one of the largest for any bank in the world.

The economic reforms unleashed by the government in early nineties included banking sector too, to a significant extent. Entry of new private sector banks was permitted under specific guidelines issued by RBI. A number of liberalization and de-regulation measures aimed at consolidation, efficiency, productivity, asset quality, capital adequacy and profitability have been introduced by the RBI to bring Indian banks in line with International best practices. With a view to giving the state-owned banks operational flexibility and functional autonomy, partial privatization has been authorized as a first step, enabling them to dilute the stake of the government to 51 per cent. The government further proposed, in the Union Budget for the financial year 2000-01, to reduce its holding in nationalized banks to a minimum of 33 per cent on a case by case basis. The banking system can be broadly classified as organized and unorganized banking system. The unorganized banking system comprises of moneylenders, indigenous bankers, lending pawnbrokers, landlords, traders, etc. Whereas the organized banking system comprise of Scheduled Banks and Non-Scheduled Banks that are permitted by RBI to undertake banking business. 2.4.1. Types of Banks A. Scheduled Banks Scheduled commercial banks are those that come under the purview of the Second Schedule of Reserve Bank of India (RBI) Act, 1934. The banks that are included under this schedule are those that satisfy the criteria laid down vide section 42 (6 of the Act).

1. The bank is dealing in banking business in India only. 2. The paid up capital and total funds of the bank should not be less than five lakh rupees. 3. It should convince RBI that its activities would not be against the interest of investors. 4. The bank must be: (a) State cooperative bank, or (b) A company according to the definition of the companies Act1956, or (c) An institution notified by the central government, or (d) A corporation or a company incorporated by or under any law in force in any place outside India. Thus, (I) Indian Commercial Banks (II) Foreign Commercial Banks, and (iii) State Cooperative Banks fulfilling the above condition are considered as scheduled banks. Moreover under the RBI Act section 42, the Central Government has declared the following banks as scheduled banks.

(i) (ii) (iii)

State Bank of India and its seven subsidiary banks, Twenty nationalized banks, and Urban Banks.

In June 1980 there were 149 scheduled banks which included (i) (ii) (iii) (iv) Public Sector Banks Private sector Banks, Foreign Exchange Banks and State Cooperative Banks.

A bank which wants to register its name as scheduled bank has to apply to the Central Government. On receiving such application, the central government orders RBI to investigate the banks accounts. If RBI gives favorable reports, the central government sanctions its proposal, and the bank is listed under schedule annexure II and is considered as a scheduled bank. Some co-operative banks come under the category of scheduled commercial banks though not all co-operative banks.


Public sector banks are those in which the Government of India or the RBI is a majority shareholder. These banks include the State Bank of India (SBI) and its subsidiaries, other nationalized banks, and Regional Rural Banks (RRBs). Over 70% of the aggregate branches in India are those of the public sector banks. Some of the leading banks in this segment include Allahabad Bank, Canara Bank, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank, State Bank of India, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Travancore, Bank of Baroda, Bank of India, Oriental Bank of Commerce, UCO Bank, Union Bank of India, Dena Bank and Corporation Bank. PRIVATE SECTOR BANKS Private Banks are essentially comprised of two types: Old banks and new banks The old private sector banks comprise those, which were operating before Banking Nationalization Act was passed in 1969. On account of their small size, and regional operations, these banks were not nationalized. These banks face intense rivalry from the new private banks and the foreign banks. The banks that are included in this segment include: Bank of Madura Ltd. (now a part of ICICI Bank), Bharat Overseas Bank Ltd., Bank of Rajasthan, Karnataka Bank Ltd., Lord Krishna Bank Ltd., The Catholic Syrian Bank Ltd., The Dhanalakshmi Bank Ltd., The Federal Bank Ltd., The Jammu & Kashmir Bank Ltd., The Karur Vysya Bank Ltd., The Lakshmi Vilas Bank Ltd., The Nedungadi Bank Ltd. and Vysya Bank.

The new private sector banks were established when the Banking Regulation Act was amended in 1993. Financial institutions promoted several of these banks. After the initial licenses, the RBI has granted no more licenses. These banks are gearing up to face the foreign banks by focusing on service and technology. Currently, these banks are on an expansion spree, spreading into semi-urban areas and satellite towns. The leading banks that are included in this segment include Bank of Punjab Ltd., Centurion Bank Ltd., Global Trust Bank Ltd., HDFC Bank Ltd., ICICI Banking Corporation Ltd., IDBI Bank Ltd., IndusInd Bank Ltd. and UTI Bank Ltd.

CO-OPERATIVE BANKS Co-operative banks act as substitutes for moneylenders, and offer timely and adequate short-term and long-term institutional credit at reasonable rates of interest. Cooperative banks are relatively similar in terms of functions to the other banks except for the following:

a) They are organized and managed on the principal of co-operation, self-help, and mutual help. b) They operate under the rule of "one member, one vote". c) Operate on "no profit, no loss" basis. d) Co-operative bank conducts all the main banking functions of deposit mobilization, supply of credit and provision of remittance facilities. Co-operative banks offer limited banking products and are functionally specialists in agriculture-related products, and even in providing housing loans of late. Urban Co-operative Banks offer working capital loans and term loans as well. e) Co-operative banks primarily operate in the agriculture and rural sector. However, UCBs, SCBs, and CCBs function in semi urban, urban, and metropolitan areas too f) Co-operative banks are probably the first government sponsored, government-supported, and government-subsidized financial agency in India. They get financial and other aid from the Reserve Bank of India NABARD, central government and state governments. They are the "most favored" banking sector with risk of nationalization. g) Co-operative banks normally concentrate on "high revenue" niche retail segments. DEVELOPMENT BANKS

Development banks are primarily intended to encourage industrial development by providing adequate flow of funds to industrial projects. In other words, these institutions undertake the responsibility of aiding all-round development in the countrys economy by promoting new industrial projects, and providing financial assistance for the expansion, diversification, and up gradation of the existing units.

Development Banks may be classified as All India development banks and Regional development banks. While All India development banks include Industrial Development Bank of India and Industrial Finance Corporation of India, examples of Regional development banks include State Financial Corporation and State Industrial Development Corporation.


NON-SCHEDULED BANKS: The banks, which are not included in the second schedule of RBI Act, 1934, are known as non-scheduled banks. Such banks total share capital is less than five lakh. These banks are not governed according to the RBI Act and they receive no benefits from the RBI. These banks have no place in the list of recognized banks of the RBI. These banks are not much trusted by the people and they do not get handsome deposits. Since 1951 the numbers of such banks have been gradually decreasing. In 1979 there were only five non-scheduled banks. Generally now days we found many cooperative banks which are belongs to the nonschedule co-operative banks. Following are the types of non-schedule banks they are work like the schedule banks but here difference in its status and it not having the status of the schedule banks.

a. b. c. d. e. f. g.

Deposits Banks Cooperative Banks Central Banks Exchange Banks Investment or Industrial Banks Land Development Banks Savings Banks

(a) Deposits Banks: Generally, banks which provide short-term loans to business and industrial units and which mobilize savings of people as deposits are called deposit banks. Deposit banks accept deposits from people, and provide short-term advances. They provide overdraft and cash credit facilities to merchants. To meet the long-term requirement of industrial units is not possible for these banks. They accept three types of deposits- saving bank deposits, fixed deposits and current account deposits. They accept these deposits which

are payable on demand or on short notice, and provide funds to trading and commercial units for short durations.

(b) Cooperative Banks Cooperative banks meet the short-term financial needs of farmers. Agriculturists, petty farmers and artisans organize themselves on cooperative principles and form cooperative societies and banks. Cooperative banks raise funds through various means, besides receiving all kinds of deposits to make them available as lend able funds to its members. In India developed cooperative banks supply finance for agriculture and non-agriculture activities. (c) Central Banks A central bank is a special institution which controls and regulates the entire banking structure of country. It also strives to maintain monetary stability of the country. Central bank is also known as the apex bank of a country. Since it functions in the best interest of the country and making profits is unknown to it, it is entrusted the right it issue currency notes. No other bank is allowed this right. It operates in close cooperation with the government of implementing economic policies, thereby promoting economic development.

(d) Exchange Banks: There is a difference in financing of foreign trade and financing of internal trade. Generally a person carrying on international trade requires foreign currencies to meet his obligation. It is here that exchange banks play the role of financing the dealer for setting transactions involved in foreign trade, there are specialized banks for exchange business. In India, there is an Export-Import Bank (EXIM).

(e) Investment or Industrial Banks: Investment banks provide long-term credit to industries. They raise their funds by way of share capital, debentures, and long-term deposits from the public. They also raise funds by the issue of bonds for business operations and government agencies. Usually they underwrite fresh issue of shares and debentures of companies. Such banks also buy the entire issue of new securities of public limited companies and try to get them subscribed at a higher price by the public.

(f) Land Development Banks: Land development banks were earlier known as land mortgage banks. In India, there is limited number of such banks. There are special institutions providing long-term loans to agricultures and farmers. They provide loans on security of land and other immovable properties. They supply long-term funds for periods exceeding six years. Agriculturists and farmers need such funds for making permanent improvements to land and for buying farming machinery and equipment. (g) Savings Banks: Savings Banks are specialized institutions, which encourage general public to save something from their earnings. In other words such banks pool the small savings of middle and lower income sections of society. They are the banks in the true sense of the term and their main aim is to promote and collect of the public. Not only the depositors are given interest, but also they are allowed to withdraw in times of need. The numbers of withdrawal are, however, restricted. Separate savings banks are organized in various nations. The government can also run a savings bank. In India the postal department runs the postal saving bank all over the country. It is very popular in rural areas where no branches where no branches of established commercial bank operate. In urban areas, commercial bank handles savings business

Scheduled Banks in India

Scheduled Commercial Banks in India

Scheduled Cooperative Banks

Public sector Banks (27)

Private sector Banks (30)

Foreign Banks in India (40)

Regional rural banks (196)

Scheduled Urban Cooperative Banks (52)

Scheduled Cooperative Banks (16)

Nationalized Banks (19)

SBI & its Assoc. (8)

Old Private Banks (21)

New Private Banks (21)

Source: India Info line Ltd. Fig. 1.2.1 Scheduled Banks in India

Table-1: Structure of the Indian banking industry, March 31, 2004 Sr. No. 1. Public Sector Banks Share Percentage 1. a State Bank Group Share (per cent) 1. b Nationalized Banks Share (per cent) 2. Private Sector Banks Share (per cent) 2.a Old Private Sector Banks Share (per cent) 2.b New Private Sector Banks Share (per cent) 3. Foreign Banks Share (per cent) 4. Total Pvt Sector Banks Share (per cent) {2+3} 5. Total Comm. Banks Share (per cent) {1+4} 6. Regional Rural Banks Share (per cent) 7. Total of Banks Share (per cent) Bank Group No. Of Deposits Banks 27 7.6 % 8 2.2 % 19 5.3 % 30 8.4 % 21 5.9 % 9 2.5 % 36 10 % 66 18.5 % 93 26 % 264 74 % 357 100 % 10796 76.8 % 3910 27.8 % 6886 49 % 2072 14.8 % 914 6.5 % 1158 8.3 % 693 4.3 % 2765 19.7 % 13559 96.6 % 483 3.4 % 14042 100 % Loans & Advances 5493 72.1 % 1892 24.8 % 3604 47.2 % 1389 18.2 % 494 5.3 % 895 11.9 % 522 6.8 % 1911 25.1 % 7405 97.1 % 218 2.9 % 7623 100 % 123 69.8 % 45 25.6 % 78 44.2 % 30 16.8 % 12 7% 17 9.8 % 18 10.4 % 48 27.2 % 171 97 % 5 3% 76 100 % Net Profit

(Source: M.Y.KHAN, INDIAN FINANCIAL SYSTEM, 4th edition Publication by TATA McGraw hill)


ICICI Bank Ltd.
ROC registration number Incorporation year Ownership Main activity Subsidiary/Ies 04 - 21012 1994 I.C.I.C.I. Group Banking services

ICICI Bank Canada ICICI Bank U K Ltd. ICICI Distribution Finance Pvt. Ltd. ICICI I Home Finance Co. Ltd. ICICI International Ltd. ICICI Investment Mngt. Co. Ltd. ICICI Lombard General Insurance Co. Ltd. ICICI Prudential Life Insurance Co. Ltd. ICICI Securities Ltd. ICICI Trusteeship Services Ltd. ICICI Venture Funds Mngt. Co. Ltd.

Above are engaged in banking services. It engages in a range of banking products and financial services to corporate and retail customers, investment banking, life and non-life insurance, venture capital, asset management and information technology

3.1 History of ICICI Bank

Milestone of ICICI
1955: The Industrial Credit and Investment Corporation of India Limited (ICICI) incorporated at the initiative of the World Bank, the Government of India and representatives of Indian industry, with the objective of creating a development financial institution for providing medium-term and long-term project financing to Indian businesses. Mr.A.Ramaswami Mudaliar elected as the first Chairman of ICICI Limited

ICICI emerges as the major source of foreign currency loans to Indian industry. Besides funding from the World Bank and other multi-lateral agencies, ICICI also among the first Indian companies to raise funds from International markets. 1956: ICICI declared its first Dividend at 3.5%. 1958: Mr.G.L.Mehta was appointed the 2nd Chairman of ICICI Ltd. 1960: ICICI building at 163, Back Bay Reclamation was inaugurated. 1961: The first West German loan of DM 5 million from Kredianstalt was obtained by ICICI. 1967: ICICI made its first debenture issue for Rs.6 crore, which was oversubscribed. 1969: First two regional offices in Calcutta and Madras were opened. 1972: Second entity in India to set-up merchant banking services. Mr. H. T. Parekh appointed as the third Chairman of ICICI. 1977: ICICI sponsors the formation of Housing Development Finance Corporation. Managed its first equity public issue 1978: Mr. James Raj appointed as the fourth Chairman of ICICI. 1979: Mr.Siddharth Mehta appointed as the fifth Chairman of ICICI. 1982: Becomes the first ever Indian borrower to raise European Currency Units. ICICI commences leasing business. 1984: Mr. S. Nadkarni appointed as the sixth Chairman of ICICI. 1985: Mr.N.Vaghul appointed as the seventh Chairman and Managing Director of ICICI. 1986: ICICI first Indian Institution to receive ADB Loans. First public issue by an Indian entity in the Swiss Capital Markets. ICICI along with UTI sets up Credit Rating Information Services of India Limited, (CRISIL) India's first professional credit rating agency. ICICI promotes Shipping Credit and Investment Company of India Limited. (SCICI) The Corporation made a public issue of Swiss Franc 75 million in Switzerland, the first public issue by any Indian equity in the Swiss Capital Market. 1987: ICICI signed a loan agreement for Sterling Pound 10 million with Commonwealth Development Corporation (CDC), the first loan by CDC for financing projects in India. 1988: ICICI promotes TDICI - India's first venture capital company. 1993:

ICICI sets-up ICICI Securities and Finance Company Limited in joint venture with J. P. Morgan. ICICI sets up ICICI Asset Management Company. 1994: ICICI sets up ICICI Bank. 1996: ICICI becomes the first company in the Indian financial sector to raise GDR. ICICI announces merger with SCICI. Mr.K.V.Kamath appointed the Managing Director and CEO of ICICI Ltd 1997: ICICI was the first intermediary to move away from single prime rate to three-tier prime rates structure and introduced yield-curve based pricing. The name "The Industrial Credit and Investment Corporation of India Limited was changed to "ICICI Limited". ICICI announces takeover of ITC Classic Finance. 1998: Introduced the new logo symbolizing a common corporate identity for the ICICI Group. ICICI announces takeover of Anagram Finance. 1999: ICICI launches retail finance - car loans, house loans and loans for consumer durables. ICICI becomes the first Indian Company to list on the NYSE through an issue of American Depositary Shares. 2000: ICICI Bank becomes the first commercial bank from India to list its stock on NYSE. ICICI Bank announces merger with Bank of Madura. 2001: The Boards of ICICI Ltd and ICICI Bank approved the merger of ICICI with ICICI Bank. 2002: Moodys' assign higher than sovereign rating to ICICI. Merger of ICICI Limited, ICICI Capital Services Ltd and ICICI Personal Financial Services Limited with ICICI Bank.

Awards And Recognition For Icici Bank & Erstwhile ICICI Ltd ICICI Bank 2005 Best Local Cash Management Bank Overall for Domestic Cash Management Services Asiamoney Best Local Cash Management Bank for Most Innovative Cash Management Solutions Asiamoney Listed on Forbes' Asia's Fab 50 Listed in Business Week Top 50 Performers Economic Times Award for Businesswoman Of The Year Triple AAA Best Cash Management Country Award in India" by The Asset

Bank of the Year Award for India by The Banker Best Bank in India by Euromoney Best Integrated Consumer Bank Site in Asia by Global Finance Best Consumer Internet Bank in India by Global Finance Best Corporate / Institutional Internet Bank by Global Finance Building Talent Enterprise-wise Award for Excellence in Learning from the American Society for Training and Development 2004

"Best Bank in India" by Euromoney "Best High-Yield Borrower in India" by Euromoney "India's Most Customer Friendly Bank" by Outlook Money "Best Bank" by Business India "India Derivative House of the Year" by AsiaRisk "Best Consumer Internet Bank in India" by Global Finance "Best Corporate / Institutional Internet Bank in India" by Global Finance "Most Challenging IT Implementation Award" for the ICICI Bank EAI project by PC Quest "Best Domestic Commercial Bank" in India by Asiamoney "Best Emerging Market Bank in India" by Global Finance "Best Domestic Fx Bank in India" by Asiamoney Poll "Best Bank of the Year in India" by Finance Asia "Best Retail Bank in India" by Asian Banker "Best Foreign Exchange Bank in India" by Global Finance "India's Most Admired Private Sector Bank" by Business Barons 2003

"Best Bank of the Year in India" by FinanceAsia "The Asian Banker Excellence in Retail Financial Services Program" by The Asian Banker "Best Bank Domestic Commercial Bank in India by Asiamoney "Best Emerging Market Bank in India" by Global Finance Magazine "Best Multi-Channel Strategy 2003' award by The Banker Magazine, UK. "Bank of the Year in India" by The Banker Grand Prize Winner in Peak Workload, Unix Environments, OLTP in Winter Corp.'s Top Ten Program DM Review Magazine-World Class Solution Award 2003 in the Business Intelligence category for its Teradata enterprise data warehouse solution. "Best Consumer Internet Bank in India" by Global Finance magazine "Best Integrated Consumer Bank Site in the Asia /Pacific Region" by Global Finance "Best Foreign Exchange Bank in India" by Global Finance "Best Trade Finance Bank in India" by Global Finance 2002 Bank of the Year from the Emerging Markets by The Banker Magazine of UK

Bank of the Year 2002, in India, by The Banker Magazine of UKBest Managed Bank in Asia, in a Poll by Euromoney India's top 5 most respected companies - Business World magazine Best Bank in India by Global Finance India's Most Admired Bank 2002 in the BB-TN Sofres Mode Poll 'Best Foreign Exchange Bank in India' by Global Finance. 'Excellence in Retail Banking' award by Asian Bankers Journal Best Consumer Internet Bank in India by Global Finance Best Bank in India by Global Finance India's Most Admired Bank 2002 in the BB-TN Sofres Mode Poll 2001 Best Retail Bank in India from the Asian Banker Product Innovation Award for Kid-e-bank account from the Asian Banker. India's top 5 most respected companies, Business World Magazine 2000 Best Bank Award by Global Finance. payment was selected as a finalist in the commercial credit product or services category in the Asian Banking Awards Featured amongst the best 15 bank web sites in the world reviewed by Forbes Global.

1999 Best IT usage Award by TCS Limited and Computer Society of India. Asian Banking Award by the Asian Banker's Association for record collections under the Resurgent India Bonds Scheme

1998 got commended rating from the Financial Times, London for two successive years. Cyber Corporate Award by the Economic Times and Microland Limited for making the best use of Internet for commercial purpose.

Erstwhile ICICI Ltd 2002 Ranked Third 'Best Employer' in a Campustrack study amongst the students of the best business school in India conducted by ORG-MARG. 2001

Mr.K.V.Kamath, MD and CEO won the Asian Business leader Award organized by CNBC Asia Pacific and TNT. Indian Express Marketing Excellence Award for "Most recalled advertisement on television". 20th Century Achievement Award for distinguished service to the cause of Development Financing and promoting national economic development by ADFIAP ( Association of Development Financial Institutions of Asia Pacific) 'Best Presented Accounts' by the Institute of Chartered Accountants of India for the third year running. Ranked fifth in the survey of India's Most Respected Companies, conducted by Business World and IMRB. 2000 'Best CEO' for innovative HR practices to Mr. Kamath by World HRD Congress. National HRD Network Award 2000 for innovative HR practices Rio Tinto Award for Long-term Commitment' by 'Worldaware' an UK -based charity organization, for companies showing strong commitment to development. Fourth leading Company of India - Far Eastern Economic Review Fourth best company to work for in India - in the Hewitt Associates and Business Today survey.

3.2 Organization And Management ICICI is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to shareholders. 3.2.1 Board of Directors Mr. N. Vaghul, Mr. Sridar Iyengar Mr. R.K.Joshi Mr. Lakshmi N. Mittal Mr. Narendra Murkumbi Mr. Anupam Puri Mr. Vinod Rai Mr. M.K. Sharma Mr. P.M. Sinha Prof. Marti G. Subrahmanyam Mr. T.S. Vijayan Mr. V. Prem Watsa Mr. K.V. Kamath, Ms. Lalita D. Gupte, Chairman

Managing Director & CEO Joint Managing Director

Ms. Kalpana Morparia, Ms. Chanda Kochhar, Dr. Nachiket Mor, 3.2.2 Board Committees

Deputy Managing Director Executive Director Executive Director

Audit Committee Mr. Sridar Iyengar Mr. Narendra Murkumbi Mr. M. K. Sharma

Board Governance & Remuneration Committee Mr. N. Vaghul Mr. Anupam Puri Mr. M. K. Sharma Mr. P. M. Sinha Prof. Marti G. Subrahmanyam

Business Strategy Committee Mr. N. Vaghul Mr. Anupam Puri Mr. M. K. Sharma Mr. P. M. Sinha Mr. K. V. Kamath Fraud Monitoring Committee Mr. M. K. Sharma Mr. Narendra Murkumbi Mr. K. V. Kamath Ms. Kalpana Morparia Ms. Chanda D. Kochhar ALM Committee Ms. Lalita D. Gupte Ms. Kalpana Morparia Ms. Chanda D. Kochhar Dr. Nachiket Mor

Credit Committee Mr. N. Vaghul Mr. M .K. Sharma Mr. P. M. Sinha Mr. K. V. Kamath

Risk Committee Mr. N. Vaghul Mr. Sridar Iyengar Prof. Marti G. Subrahmanyam Mr. V. Prem Watsa Mr. K. V. Kamath Committee of Directors Mr. K. V. Kamath Ms. Lalita D. Gupte Ms. Kalpana Morparia Ms. Chanda D. Kochhar Dr. Nachiket Mor

Share Transfer & Shareholders' Grievance Committee Mr. M. K. Sharma Mr. Narendra Murkumbi Ms. Kalpana Morparia Ms. Chanda D. Kochhar



Vice Chairman

Executive Director

Managing Director

Senior General Manager

Chief Financial Accounting and Taxation Group

General Manager Officer and Treasurer

Assistant Financial Officer

Account Manager


3.4 Overview of Bank

ICICI Bank is India's second-largest bank with total assets of about Rs.1,676.59 bn(US$ 38.5 bn) at March 31, 2005 and profit after tax of Rs. 20.05 bn(US$ 461 mn) for the year ended March 31, 2005 (Rs. 16.37 bn(US$ 376 mn) in fiscal 2004). ICICI Bank has a network of about 573 branches and extension counters and over 2,000 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Canada and Russia, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates, Bangladesh and South Africa.

ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees. At September 20, 2005, ICICI Bank, with free float market capitalization* of about Rs. 400.00 billion (US$ 9.00 billion) ranked third amongst all the companies listed on the Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for

providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.


4.1Political and Legal Environment

Annual Policy Statement for the Year 2006-07

Focus on credit quality and financial market conditions for maintaining macroeconomic, in particular, financial stability. Monetary and interest rate environment enabling growth momentum consistent with price stability. Bank Rate, Reverse Repo Rate, Repo Rate and Cash Reserve Ratio kept unchanged. GDP growth projection for 2006-07 at 7.5-8.0 per cent. Inflation to be contained within 5.0-5.5 per cent during 2006-07. M3 projected to expand by around 15.0 per cent for 2006-07. In normal circumstances, the policy preference would be for maintaining a lower order of money supply growth in 2006-07. Deposits projected to grow by around Rs.3,30,000 crore for 2006-07. Adjusted non-food credit projected to increase by around 20 per cent, implying a calibrated deceleration from a growth of around 30 per cent ruling currently. Appropriate liquidity to be maintained to meet legitimate credit requirements, consistent with price and financial stability. Ceiling interest rate on non-resident (external) rupee deposits rose to US dollar LIBOR/SWAP plus 100 basis points. Ceiling interest rate on export credit in foreign currency rose to LIBOR plus 100 basis points. Provisioning for standard advances raised to 1.0 per cent for personal loans, capital market exposures, residential housing beyond Rs.20 lakh and commercial real estate loans. Risk weight on exposures to commercial real estate rose to 150 per cent. Exposure to venture capital funds treated as part of capital market exposure and assigned with higher risk weight of 150 per cent. When issued market in Government securities announced.

Primary Dealers to be permitted to diversify their activities. Barring the emergence of any adverse and unexpected developments in various sectors of the economy and keeping in view the current assessment of the economy including the outlook for inflation, the overall stance of monetary policy at this juncture will be: to ensure a monetary and interest rate environment that enables continuation of the growth momentum consistent with price stability while being in readiness to act in a timely and prompt manner on any signs of evolving circumstances impinging on inflation expectations. To focus on credit quality and financial market conditions to support export and investment demand in the economy for maintaining macroeconomic, in particular, financial stability. to respond swiftly to evolving global developments

SLR (Statutory Liquidity Ratio):

In recent years, scheduled commercial banks' investment in government and other approved securities has been much in excess of the required statutory liquidity ratio (SLR) of 25 per cent Notwithstanding this reduction, the effective SLR investment at 39.7 per cent of NDTL for the banking system as a whole continues to be high relative to the statutory minimum of 25 per cent. As credit demand is expected to remain buoyant this year, lower appetite for SLR securities has implications for government borrowings in an environment of market determined interest rates.
Exchange Rate Management: In recent years, the annual policy Statements as well as mid-term Reviews have attempted to brings into sharper focus the main lessons emerging from our experience in managing the external sector during periods of external and domestic uncertainties. As articulated in the policy Statements in the recent years, the broad principles that have guided exchange rate management are:

Careful monitoring and management of exchange rates without a fixed target or a preannounced target or a band. Flexibility in the exchange rate together with ability to intervene, if and when necessary.

A policy to maintain a level of foreign exchange reserves which takes into account not only anticipated current account deficits but also liquidity at risk arising from unanticipated capital movements.

Policy Stance: Excerpts

The Reserve Bank will continue to ensure that appropriate liquidity is maintained in the system so that all legitimate requirements of credit are met consistent with objective of price stability. Bank Rate: Kept Unchanged at 6% Reverse Repo Rate: In view of the current macroeconomic and overall monetary conditions, it has been decided: To increase the fixed reverse repo rate by 25 basis points under the liquidity adjustment facility (LAF) of RBI effective from April, 2005 to 5% from 4.75 the fixed repo ate under LAF will continue to remain at 6%. CRR (cash reserve ratio): has kept unchanged at 5%.

Precise opinion from Guest writer Nilesh Shah, CIO, Prudential ICICI AMC RBI has initiated various steps like intra-day short selling of gilts, electronic trading platform for repo transactions and call money markets, reduction in minimum maturity period for Cost of debts to 7 days, consolidation of debt for increasing liquidity in gilt markets, T+1 settlements for government securities & introduction of when issue market.

These steps when implemented will deepen bond market & will help in increasing interest of the market participants in G-sec market. The liberalization of overseas investment by Indian entities up to 200% of net worth is positive. RBI has also taken a welcome step of holding four quarterly reviews for the monetary policy. RBI EFT (Electronic fund Transfer system) (Source:

RBI EFT is a Scheme introduced by Reserve Bank of India (RBI) to help banks offering their customers money transfer service from account to account of any bank branch to any other bank branch in places where EFT services are offered. The EFT system presently covers all the branches of the 27 public sector banks and 55 scheduled commercial banks at the 15 centres (viz., Ahmedabad, Bangalore, Bhubneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthpuram). Funds transfer is possible from any branch of these banks at these centres to other branch of any bank at these centres both inter-city and intra-city.

RBI EFT System - an improvement over the existing facilities The primary modes of funds transfer at present are demand draft, mail transfer and telegraphic transfer. The demand draft facility is paper based. The remitter, after purchasing demand draft from a bank branch, dispatches the same by post/courier to the beneficiary. The beneficiary, in turn, lodges the draft to his/her bank for collection and clearing. The time taken for completing the process is about 10 days. In the case of telegraphic transfer, fund reaches the beneficiary either on the same day or the next; but both the remitter and the beneficiary would have to be account holders of the same bank. If they are customers of different banks, a good deal of paper processing is required. On the other hand, RBI EFT system is an inter-bank oriented system. RBI acts as an intermediary between the remitting bank and the receiving bank and effects inter-bank funds transfer. The customers of banks can request their respective branches to remit funds to the designated customers irrespective of bank affiliation of the beneficiary.

Benefits for the banks: Banks can now provide inter-bank TT service. Reconciliation is automatic. Banks can make use of the EFT infrastructure for introducing new payment/cash management products to their customers. The number of outstation cheques issued by customers and consequent service load on banks may decline over a period of time.

Basel II Norms (Source: Business Standard) The exponential growth in sue of technology by the financial system over the last dew decades has seen certain issues cropping up regarding operational risks, especially that of risk management and capital adequacy. The growing inter-linkages between financial market participants across the globe also add up to the increased scrutiny of operational risks by regulators. Addressing these risk related issues is on top of mind for financial regulators today. In a bid to avoid collapses, the Basel Committee was established by the Central bank Governors of G-10 countries mainly to formulate broad supervisory standards and recommended statements of best practice for national banking supervisors. Basel in Switzerland is the headquarter of IBS. In, 1988, the Basel committee introduced a capital measurement system commonly referred to as the Basel Accord providing for a credit risk measurement framework with a minimum capital standard of 8 per cent. This framework has since been progressively introduced not only in member countries but also in virtually all other countries with active international banks.

Basel II refers to the proposed revised accord among the member of the Basel committee on Banking Supervision, bringing about more risk sensitivity into capital charges computation. The Basel Committee now proposes a New Capital adequacy framework to replace the 1988 accord. A consultative document has been issued in January 2001 and extensive interactions with banks and industry groups are on. While the work is in progress, the first draft of Basel II framework would be ready by December this year. The committee proposes to release its final draft accord during2003 and the implementation are set to begin by December 2006. However some international banks like Standard Chartered Bank seem to have gone ahead with the implementation.

The Basel II accord consists of three pillars, viz. minimum capital requirement, supervisory review and market discipline. The first pillar is on capital requirement, wherein, it identifies three different types of risk: credit risk, operational risk and market risk. Two approaches are there for maintaining the credit risk: Standardized approach, which is similar to the risk weighted approach as suggested in Basel I except for the difference that the risk

weights have been changed. The internal rating approach (IRB) is advanced more risk sensitive approach which comprises all the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of internal risk rating and quantification of probability of default (PD). Supervisory review process focuses on the banks internal processes and systems. Supervisory review process is to ensure that the banks implementing Basel-II accords have proper processes in place for assessing their capital adequacy. Market discipline focuses on market disclosures being made by the bank The purpose of this pillar 3 market discipline is to encourage market discipline by developing a set of disclosure requirements which will allow market participants to assess key pieces of information on the scope of application, capital, risk exposures, risk assessment processes, and hence the capital adequacy of the institution.

Union Budget 2006-07: Banking

Issues and Industry demands

Tax relief for long-term bank deposit. Exempt banks' long-term funds from SLR and CRR. Maintain tax incentives on housing loans.

Tax relief under Sec 80C for deposit with a maturity of 5 years or more. Special securities issued to PSU banks to be converted into tradable SLRs. Short-term credit for farmers at 7%. Rs 1,75,000 crores advance to farmers by FY07. Addition of 5 million farmers and open a separate window for self-help groups (SHGs). Additional 0.4mn SHGs to be credit-linked by FY07 in association with NABARD. Loans to food processing sector to be included in the priority-sector lending basket. Bill on insurance sector to be introduced in FY07. ATM operations and collection services( In public issue) to be brought under the service tax net.

Net capital support to banking sector (by way of issuance of special non-tradable government securities) standing at Rs.22,808 crores at the end of 9m FY06, to be converted into tradable SLR securities.

Fixed deposits in scheduled banks up to Rs.1,00,000 and having maturity of not less than 5 years to be included under Section 80C of the Income Tax Act for tax exemptions. Section 80C allows a deduction of up to Rs.1,00,000 on investments made from the gross taxable income. Other investment avenues that qualify for Sec. 80C benefits are PPF, insurance premium, NSC etc. Banking Cash Transaction Tax (BCTT) to continue until the Annual Information Return (AIR) system is able to capture all significant financial transactions. Banks to increase disbursements to farmers to Rs.1,75,000 crore in FY07 as against Rs.1,41,500 crore in FY06 and additional 50 lac farmers to be brought under credit delivery mechanism.

Banks to open separate window for self-help groups (SHGs) and additional 3.85 lac SHGs to be credit-linked in FY07 in association with NABARD. Primary Agricultural Credit Societies and Primary Cooperative Agricultural and Rural Development Banks to continue to be exempted from payment of tax on profits under section 80P of the Income Tax Act. All other co-operative banks are excluded from the scope of this section.

One time relief to be granted to farmers who have availed of crop loan from scheduled commercial banks, RRBs and PACS for Kharif and Rabi 2005-06 and amount equal to two percentage points of the borrowers interest liability on the principal amount up to Rs.1,00,000 will be credited to his/her bank account before March 31, 2006. A sum of Rs.1,700 crore has been provided for this purpose.

Advances given to food processing industry to be treated as priority sector advances for bank credit. Service tax net widened by inclusion of ATM operations, share transfer agents and bankers to an issue among others. At the same time service tax rate increased from 10 per cent to 12 per cent.

Exemption of Interest and installments of the principal amount for service tax for the leasing and hire purchase companies will help revive the industry.

Conversion of non-tradable government securities into tradable SLR securities will help beneficiary banks raise additional resources for lending to the productive sectors in light of increasing credit needs of the economy. Inclusion of Fixed Deposits with the maturity value of more than five years maturity in instruments eligible under section 80C for deduction may help banks to mobilize deposits with long term maturity and overcome the asset liability mismatches. It will also reduce the gap between yields on other small saving schemes and long term bank deposits, making bank deposits more attractive. Reduction in excise duty on small cars would increase demand for cars and subsequently provide increased avenues for auto financing to the banking sector. Increase in the Agri credit may have an effect on the credit quality of the banks in long term. At the same time banks are also mandated to provide short term credit to farmers up to Rs.3 lakh at a subsidized rate of 7% which is about 4% less than the PLRs of most scheduled commercial banks. The impact of this implicit subsidy will have effect on the margins of the banks. Due to amendment of Section 80P of Income Tax act Co-operative societies engaged in banking or providing credit facilities to its members will not be eligible to get deduction for its business profit in future. Inclusion of food processing in Agri credit is positive from the point of view of the banks. As lending to food processing industries will be the part of priority sector lending. It would help banks to meet their priority sector norms. The budget 2006-07 has been positive for banking. Measures like tax relief for bank deposit will allow banks to mobilize more deposits, conversion of non-tradable into tradable security may lead to increase in lending capacity and reduction of excise duty on small cars will increase banks lending to this sector thus being positive for ICICI, HDFC and SBI. However measure credit for farmer at 7% might put pressure on spreads.

Sector Outlook:

The banking and finance sector is witnessing a revival in credit off take from the non-food segment. Also, with the government emphasizing on the need to boost credit to the agriculture sector, the issue of NPAs could resurface. While we believe that overall credit growth is likely to move into a higher growth trajectory as compared to the past, not all banks will be able to reap the benefit from such sector trends. In the past, falling interest rates have helped most public sector banks to significantly improve their profitability owing to large profits from trading activities. With interest rates expected to harden, these profits may dry out, thus affecting profitability. Investors need to tread cautiously at this stage, as only a few banks will be able to balance the growth prospects together with the emerging concerns in the sector.

Role of Banks and financial Institutions The special Purpose vehicle will raise funds from the market by issuing long term debt financial instruments say bonds, which are mostly subscribed by various banks and financial institutions. Banks and financial institutions are playing a key role in the infrastructure development of the country, i.e., they are indirectly lending to infrastructure projects by subscribing to the bonds and debentures issued by Special Purpose Vehicle. Later on, this fund is lent directly to either public or private sector companies, which take up projects in infrastructure at an interest rate far below the prime lending rates to make this project more attractive and viable to both public and private sector. Institutions like Infrastructure development and finance company (IDFC), Power Finance Corporation (PFC), Indian Rail Finance Corporation (IRFC) etc., can now use the funds raised by the Special Purpose Vehicle. The Central government will offer a counter-guarantee to bonds issued by the Special Purpose Vehicle. The Special Purpose Vehicle will become intermediary fro channelizing funds for infrastructure projects. In simple terms, Special Purpose Vehicle will act as a unique platform that will facilitate consortium lending to infrastructure projects by banks and financial institutions. The Special Purpose Vehicle will play a role of facilitator. Apart from subscribing to the bonds issues by Special purpose Vehicle, banks and financial institutions play a major role of appraising an infrastructure project and projects viability. The special Purpose Vehicle in its own does not have the capability of vetting the projects.

4.2 Economic Environment

Global Economical Environment Global economic growth remained strong in 2004 (January to December), aided by expansionary monetary policies and comfortable financial conditions. Global growth, which was robust during the first half of 2004, slowed down somewhat in the latter part of the year, reflecting in the sharp rise in the commodity prices and the fear of the disorderly movement of currency adjustments. However, global economy grew by 5 per cent in 2004, the highest rate for nearly three decades. The US and the emerging Asia accounted for more than half of the increase in global output. Growth in the Euro area and Japan registered a much lower growth. With moderation in the global growth in the second half of 2004, growth differentials among different regions widened. While the US was able to sustain its growth on account of increased corporate spending and stronger job creation, the Euro area and Japan faced renewed weakness. Large and persistent growth differentials in the growth pattern in different regions lead to a significant widening of global financing imbalances Global inflation remained at a moderate level during 2004, despite the harp increase in oil and non-oil commodity prices and accommodative monetary and fiscal policies. The inflationary impact of rising oil prices was felt more by the emerging market economies, which depend heavily on oil than the advanced industrial economies. This, combined with the impact of a rise in food prices, resulted in an increase in headline inflation in Asia from about 3 per cent in he third quarter. In advanced industrial economies, consumer price inflation increased from 1.5 per cent at the beginning of 2004 to about 2.5 per cent towards the end of the year. The inflation situation also deteriorated in the central and eastern Europe following several years of disinflation. Nevertheless, underlying inflationary pressures remained generally contained in most parts of the globe. Core inflation (excluding food and energy components from headline inflation) remained broadly stable in several advanced and emerging market economies. Financial markets remained comfortable with ample liquidity, notwithstanding reversal of accommodative monetary policy by the US beginning June 2004. Long-term rats fell in the US, despite rise in short-term interest rates. This was in sharp contrast to previous periods of monetary tightening, when high policy rates were accompanied by high long-term interest

rates. The same trend was also observed in the UK, Australia, Canada and Switzerland, where long-term yields fell despite tightening of monetary policy. As a result the yield curve flattened, in several advanced economies. Credit spreads for corporate and sovereign borrowers declined to historical low levels, which helped in keeping borrowing costs down. Equity markets rallied in most of the major international markets, propelled by expectations of strong future corporate earnings on the back of strong economic recovery. Economic outlook and banking sectors performance Keeping in mind the impact of real sector shocks on financial stability, any assessment of the banking sector needs to be done in the backdrop of national as well as international economic outlook. During the last couple of years, global growth has been above the forecast in almost every region stimulated by strong monetary and fiscal measures. The domestic economic outlook is also bright with the real GDP growth rate surpassing 8% last year and estimated to be around 7% in the current year. Industrial performance also improved considerably with a strong manufacturing growth for the second consecutive year. Inflation rate has been under control, barring some hiccup for a short period. Aided by a good macro economic environment, banks bottom line has improved significantly over the last two years. However, let us not forget that a major contributor to the windfall gains has been treasury profits fuelled by a secular decline in interest rates during the four years period from 2001 to 2005 and consequent profit booking on sale of government securities. From the current year, with the hardening of interest rates, this trading component of profits is no longer going to shore up banks profitability. On the contrary, most banks have been required to provide for the decline in the market value of their investments portfolio. Thankfully, one offsetting factor has been the strong pick up in the credit off-take due to buoyant demand in the economy and revival of industrial activity, which have resulted in substantial increase in banks core interest income. Developments during 2004-05

broad based growth momentum continued for the first quarter of 2004-05.

GDP growth at 7.4 per cent was higher by about two percentage points over the growth recorded in the first quarter of 2003-04. Output of major Kharif crops is expected to be lower this year as compared with the corresponding

level of 2003-04. However, Rabi crop production is expected to be favorable. Seasonal (June-September) rainfall was excess/normal in 23 out of 36 meteorological sub-divisions and the remaining 13 sub-divisions registered deficient rainfall. While 56 per cent of the meteorological districts received excess/normal rainfall, the remaining 44 per cent received deficient/scanty rainfall. While the prospects are still somewhat unclear, the current assessments clearly indicate that agricultural growth of 3.0 per cent, projected earlier, is unlikely to materialize. Industrial growth as indicated by the Index of Industrial Production (IIP) has registered higher growth of 7.9 per cent during April-September 2004 as compared with 6.2 per cent growth during April-September 2003. There are signs of sustained growth in the production of basic goods, capital goods, intermediate goods and consumer durables. Thus, the prospects for growth in industrial output have improved. Further, exports continued to remain buoyant and recorded a growth of 24.4 per cent in US dollar terms during April-September 2004 as against 8.1 per cent during April-September 2003. While the CSO estimate of GDP for the first quarter is consistent with the earlier projected growth of 6.5 to 7.0 per cent for the full fiscal year, the deficient rainfall in some parts of the country and its impact on Kharif crop impart a downward bias to this growth projection. In addition, the higher oil prices tend to have an adverse impact on GDP growth. At the same time, the improved prospects for growth in industrial output and continued buoyancy in exports are likely to have a positive impact on growth. On the whole, while the picture is not very clear, it may be reasonable to place the overall GDP growth during 2004-05 in the range of 6.0 per cent to 6.5 per cent as against the earlier expectation of 6.5 per cent to 7.0 per cent, assuming that the combined downside risks of high and uncertain oil prices, and sudden changes in international liquidity environment remain manageable.

Money supply (M3) expansion in 2004-05 up to October 29, 2004 was lower at 6.6 per cent (Rs.1, 32,428 crore) [6.4 per cent (Rs.1, 28,859 crore), net of conversion] as compared with 8.9 per cent (Rs.1, 53,474 crore) in the corresponding period of 2003-04. On an annual basis, growth in at 14.1 per cent (13.9 per cent, net of M3 conversion) was, however, higher than 12.1 per cent during 2003-04.


inflation, as measured by variations in the wholesale price index

(WPI), on a point-to-point basis, which raised from 4.6 per cent at end-March 2004 to 8.7 percent by end-August 2004 declined to 7.1 per cent by October 30, 2004. On an average basis, annual inflation based on WPI was 6.3 per cent as on October 30, 2004 as compared with 5.0 per cent a year ago. While WPI inflation increased sharply on the back of a rise in international oil and metal prices, the CPI inflation witnessed only a moderate increase. On an annual average basis, inflation as reflected in CPI was 3.6 per cent in September 2004 as against 3.9 per cent a year ago.

CPI inflation could be impacted by WPI inflation with a lag. On

current assessment, assuming that there would be no further major supply shock and liquidity conditions remain manageable, the point-to-point year-end inflation based on WPI for the year 2004-05 could be placed around 6.5 per cent as against 5.0 per cent as projected in the annual policy Statement of May 2004.

The growth rate in aggregate deposits of SCBs was lower at 7.5 per cent (7.2 per cent, net of conversion) up to October 29, 2004 as compared with 9.0 per cent in the corresponding period of 2003-04, mainly attributable to reduction in nonresident Indian (NRI) deposits with the banking system. On an annual basis, growth in aggregate deposits at 15.8 per cent (15.6 per cent net of conversion) was, however, higher than that of 11.8 per cent during 2003-04. During 2004-05 (up to October 29, 2004), credit by SCBs increased by 17.5 per cent (Rs.1, 47,491 crore) [13.7 per cent (Rs.1, 14,809 crore), net of conversion] which was substantially higher than the increase of 4.5 per cent (Rs.33, 088 crore) in the corresponding period of 2003-04. Food credit increased by Rs.3, 751 crore as against a decline of Rs.13, 459 crore in 200304 reflecting a turnaround of about Rs.17, 210 crore. During the same period, non-food credit posted a robust increase of 17.9.

Under the effect of inflation RBI has changed repo and reverse repo rate by 25 basis points & remain bank rate unchanged. (Source: Business standard)

Risk Management

Risk is inherent in any commercial activity and banking is no exception to this rule. Rising global competition, increasing deregulation, introduction of innovative products and delivery channels have pushed risk management to the forefront of today's financial landscape. Ability to gauge the risks and take appropriate position will be the key to success. It can be said that risk takers will survive, effective risk managers will prosper and risk averse are likely to perish. In the regulated banking environment, banks had to primarily deal with credit or default risk. Operational risk, which had always existed in the system, would become more pronounced in the coming days as we have technology as a new factor in today's banking. RBI has announced that bank will have to adopt the standardized approach for credit risk and basic indicator approach for operational risk with effect from 31st March 2007. Risk management functions will be fully centralized and independent from the business profit centers. The risk management process will be fully integrated into the business process. Risk return will be assessed for new business opportunities and incorporated into the designs of the new products. All risks - credit, market and operational and so on will be combined, reported and managed on an integrated basis.

Risk management has to trickle down from the Corporate Office to branches or operating units. As the audit and supervision shifts to a risk based approach rather than transaction orientation, the risk awareness levels of line functionaries also will have to increase. Technology related risks will be another area where the operating staff will have to be more vigilant in the coming days. The legal environment is likely to be more complex in the years to come. Innovative financial products implemented on computers, new risk management software, user interfaces etc.,

may become patentable. For some banks, this could offer the potential for realizing commercial gains through licensing.

Advances in risk management (risk measurement) will lead to transformation in capital and balance sheet management. Dynamic economic capital management will be a powerful competitive weapon. The challenge will be to put all these capabilities together to create, sustain and maximize shareholders' wealth. The bank of the future has to be a total-riskenabled enterprise, which addresses the concerns of various stakeholders' effectively.

Risk management is an area the banks can gain by cooperation and sharing of experience among themselves. Common facilities could be considered for development of risk measurement and mitigation tools and also for training of staff at various levels. Needless to add, with the establishment of best risk management systems and implementation of prudential norms of accounting and asset classification, the quality of assets in commercial banks will improve on the one hand and at the same time, there will be adequate cover through provisioning for impaired loans. As a result, the NPA levels are expected to come down significantly. Banks in general face the following risks: Liquidity Risk Management Banks and primary dealers used to get refinance for their specific activities at a fixed rate. The RBI "de-regulated" the refinance facility and introduced the concept of Liquidity Adjustment Facility (LAF) in phases through its mid term review of Monetary Policy in 2001. Introduction of LAF will change the equation in money market functioning. As LAF is expected to develop a stable overnight rate, the market will be encouraged to take a view over a long period, which will help develop the rupee yield curve. While the Indian banking system is experiencing high liquidity, the experience of the American banks is totally opposite. The percentage of US banks which are able to find at least two thirds of total assets with core deposits fell from 95 percent to 75 percent between 1992 and 2000. The supply-demand gap between the deposit growth and deployment of funds always exists in the banking sector.

Cash Management Funds Management is the most crucial issue. Banks will have to take prudent decisions relating to asset liability mismatches. Liquidity management is an integral part of the funds management. If the technology helps to reduce the lead time for collection and payment of cheques at banks, it not only helps the clients to increase their cash management but also helps the banks to increase their liquidity. The sound payment system is a key element in maintaining financial stability. Credit Risk Management. In the global scenario, the increased credit risk arises due to two reasons. Banks have been forced to lend to riskier clients because well-rated corporate have moved away from banks as they have access to low cost funds through disintermediation. The other reason is the lurking fear of global recession. Recession in the economy could lead to low industrial output which may lead to defaults by the industry under recession culminating into credit risk. Hence, the markets are in search of new credit risk management models. Credit derivatives which were a new innovation in the market stood the real test in 1997 during the Asian financial crisis. Several European and US banks which were exposed to high-risk areas in Korea, Philippines and Thailand were able to save themselves from losses as they could hedge themselves with credit derivatives. In the recent times, we have witnessed runs on the banks - mainly the Urban Cooperative Banks like Madhavpura Coop Bank in Gujarat/Mumbai, Charminar Bank, a scheduled bank in Hyderabad and many others. Operational Risk Management The Basle committee formulated new rules on the capital adequacy, which are supposed to be introduced from 2005. The major issue of Basle II recommendations is the operational risk. Banks are yet to get clarity on the issues which are to be included in operational risk. System vendors have identified that a proper workflow and process automation would help reduce and detect errors. Apart from automating, right levels of audit and control are to be introduced to reduce operational risk. Increased operational efficiency of the system would reduce operational risk

The key factor in internet banking is the faith of the people on the regulations. But will it exist when they come to know that Bill Gates' credit card details were stolen by a hacker? Some of the new generation banks like ICICI Bank, UTI Bank, HSBC, HDFC Bank have introduced internet banking. Once the right infrastructure is in place, relatively risk free internet banking will see a boom with more banks joining the activity. Financial Safety Net The risks faced by a bank have interrelated components i.e., credit risk, environmental and financial risk, operational risk and strategic risk. The new Basle accord talks about three pillars of the banking industry. They are capital adequacy, supervisory review and market discipline. The Basle accord is targeted at greater risk sensitivity in the industry. It is aimed to promote safety and soundness in the financial system with competitive equality. The new accord is a further improvement over the 1988 accord, which essentially dealt with the regulatory mechanism in capital adequacy. But how far this new accord is fool proof against the recent crisis witnessed by the banks in the emerging economics is an issue for debate. The success of the new accord which is supposed to come into force in 2005 is yet to be experienced. Two of the models - German and British - follow the Universal Bank concept. The third one is the US model alternatively called as the bank holding company model. The US model talks about financial stability.

NPAs (Non Performing Assets)

The best indicator of the health of the banking industry in a country is its low level of NPAs. Given this fact, Indian banks seem to be better placed than they were in the past. A few banks have even managed to reduce their net NPAs to less than one percent but as the bond yields start to rise, the chances are the net NPAs will also start to go up. This will happen because the banks have been making huge provisions against the money they made on their bond portfolios in a scenario where bond yields were falling.

Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years. This does not seem to be the case. With increasing bond yields, treasury income will come down and if the banks wish to make large provisions, the money will have to come from their interest income, and this in turn, shall bring down the profitability of banks. The shaping up of newly formed Credit Information Bureau of India Ltd., (CIBIL) is much desired in the years to come so that entire MIS of banks depositors and borrowers is available on line. Credit decisions will be quicker, efficient and of quality both in respect of individuals and institutions. Views of top eminent bankers on reasons of high NPAs in banks: Lack of proper pre-sanction appraisal of credit proposals and deficiencies in postcredit supervision and follow-up of the loan account. Delayed payments by large corporate to their suppliers in SSI units which contributed indirectly for the NPA of such units. Lack of proper co-ordination between various financial institutions like LIC, GIC, UTI and SFCs. Lack of information on performance of the economy and low skills of the officials processing the loan proposals. Debt recovery Tribunals which were conceived as a fast-track technique for recovery of bank dues have been virtually non-starters. Banks have been harping too much on staff accountability and not looking at decisions from hindsight. Dilapidated and defaulter-friendly legal system which does not permit early recovery of dues. The level of non-performing loans is recognized as a critical indicator for assessing banks credit risk, asset quality and efficiency in allocation of resources to productive sectors. The Reserve Bank along with the Government of India, has initiated several institutional measures to contain the level of NPAs. Notable among these are Debt Recovery Tribunals, Lok Adalats (peoples courts) and Asset Reconstruction Companies (ARCs). Settlement Advisory Committees were formed at regional and head office level of commercial banks. Corporate Debt Restructuring (CDR) mechanism was institutionalized in 2001 to provide a timely and transparent system for restructuring of large corporate debts with the banks and financial institutions.

(Source: Business standard)

GDP Growth: Projection rose to 7.0-7.5% for the fiscal year to March 2006 from an earlier forecast of about 7% Inflation: It may be difficult to contain inflation in the range of 5-5.5% by the end of March 2006 projected earlier without an appropriate policy response. Non-Food Credit: Year-on-year adjusted non-food credit is expected to increase significantly higher than 19% projected earlier.

Banking and Markets:

Intra-day short selling in government securities proposed to be introduced Special purpose vehicles or any other entity notifies by the RBI, which are set up to finance infrastructure companies or projects, would be treated as financial institutions and ECBs raised by such entities would be considered under the approval route. Banks to be allowed to issue guarantees or stand by letters of credit in respect of ECBs raised by textile companies for modernization or expansion of textile units. Banks advised to fix their own targets for financing small and medium firms Banks aggregate capital market exposure restricted to 40% of the net worth of the bank on a solo and consolidated basis. Consolidated direct capital market exposure modifies to 20% of the banks consolidated net worth.


Demography and CRM (Customer relationship Management) Over the years, Indian banks have expanded to cover a large geographic & functional area to meet the developmental needs. They have been managing a world of information about customers - their profiles, location, etc. They have a close relationship with their customers and a good knowledge of their needs, requirements and cash positions. Though this offers them a unique advantage, they face a fundamental problem. Furthermore, banks need to have very strong in-house research and market intelligence units in order to face the future challenges of competition, especially customer retention. Marketing is a question of demand (customers) and supply (financial products & services, customer services through various delivery channels). Both demand and supply have to be understood in the context of geographic locations and competitor analysis to undertake focused marketing (advertising) efforts. Focusing on region-specific campaigns rather than national media campaigns would be a better strategy for a diverse country like India. Customer-centricity also implies increasing investment in technology. Throughout much of the last decade, banks world-over have re-engineered their organizations to improve efficiency and move customers to lower cost, automated channels, such as ATMs and online banking. But this need not be the case. As is proved by the experience, banks are now realizing that one of their best assets for building profitable customer relationships especially in a developing country like India is the branch-branches are in fact a key channel for customer retention and profit growth in rural and semi-urban set up. However, to maximize the value of this resource, our banks need to transform their branches from transaction processing centers into customer-centric service centers. This transformation would help them achieve bottom line business benefits by retaining the most profitable customers. Branches could also be used to inform and educate customers about other, more efficient channels, to advise on and sell new financial instruments like consumer loans, insurance products, mutual fund products, etc. There is a growing realization among Indian banks that it no longer pays to have a "transaction-based" operating model. There are active efforts to develop a relationshiporiented model of operations focusing on customer-centric services. The biggest challenge

our banks face today is to establish customer intimacy without which all other efforts towards operational excellence are meaningless. The banks need to ensure through their services that the customers come back to them. This is because a major chunk of income for most of the banks comes from existing customers, rather than from new customers. Customer relationship management (CRM) solutions, if implemented and integrated correctly, can help significantly in improving customer satisfaction levels. Data warehousing can help in providing better transaction experiences for customers over different transaction channels. This is because data warehousing helps bring all the transactions coming from different channels under the same roof. Data mining helps banks analyze and measure customer transaction patterns and behavior. This can help a lot in improving service levels and finding new business opportunities.

It must be noted, however, that customer-centric banking also involves many risks. The banking industry world over is being thrust into a wild new world of privacy controversy. The banks need to set up serious governance systems for privacy risk management. It must be remembered that customer privacy issues threaten to compromise the use of information technology which is at the very center of e-commerce and customer relationship management two areas which are crucial for banks' future.

The critical issue for banks is that they will not be able to safeguard customer privacy completely without undermining the most exciting innovations in banking. These innovations promise huge benefits, both for customers and providers. But to capture them, financial services companies and their customers will have to make some critical tradeoffs. When the stakes are so high, nothing can be left to chance, which is why banks must immediately begin developing comprehensive approaches to the privacy issue.

The customer centric business models based on the applications of information technology are sustainable only if the banks protect client confidentiality in the process - which is the basic foundation of banking business. Age The ratio of females to males as per 1991 census is 927. But the overall trend of the number of females to men has been declining. The highest ratio of females to males is in the state of Kerala, which is 1040, where as is least in Haryana i.e. 874.

In India 108 females are born per 100 males. But the loss of more females is due to insufficient attention and care to them after birth. According to the 1996 census, there was a high proportion of population in the age group of 0-14 years i.e. 37.7% followed by 55.6% in the age group of 15-60 and only 6.7% of the population above the age of 60. This shows that every 100 adults of productive age, there is a ratio of 131 consumer equivalent. Hence the age composition of population in our country indicates 10% more dependency load as compared to advanced countries like USA. According to the Government projections for the year 2016, the age composi6tion for the said age groups will be 27.7%, 63.3% and 9% respectively.

Moreover the overall life expectancy in India has also increased significantly. It was 60.3 years according to 1993-94 estimates. In males the average is 59.7 years while in females it is 60.9 years. There has been a significant improvement in these figures due factors like, better medical services, easy availability of medicines, increase in the number of doctors and nurses, etc. Sex Ratio
Years 1901 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 Sex Ratio 972 964 955 950 945 946 941 930 934 927 933

Source: Census of India 2001(sex ratio in India in 100 years)

This is one of the important factors in determining the population growth of any country. According to the estimate, the literacy rate is highest in the state of Kerala, which his more than 90%. Moreover, the government intends to achieve a literacy level of 75% by the year 2005. Literacy level increase would help the usage of banking functions and in turn generate revenues in the industry. Employment At the all India level the widely accepted measure of unemployment, is that of Open chronic unemployment. This shows worsening of the unemployment situation over the 1990s. In 3 out of the 4 population segments, with urban women as the sole exception. The increase in the daily status of the unemployment rat3 is the steepest for the rural males (29%), followed by the rural females 21%. For urban males, at 7% the increase is relatively modest. The increase in he unemployment rate for rural males has to be seen in the context of the rise in the share of casual labor (from 338 to 362 per thousand) and a decline in the share of selfemployed among rural male workers on the usual status (principal plus subsidiary). Thus this change can be attributed to the change in the status composition of the work force. Impact of computerization on the workforce Some of the general issues that have concerned unions and employees, especially women, in the wake of the introduction of new technology in the banking and finance sectors have been: Prospects of job losses and declining employment levels. Increase in workloads and pressure for flexibility. Changes in job contents Increase in insecurity in the workplace, and loss of union power. Increase in the proportion of 'non-bargainable' staff (i.e. those without an automatic right to unionize) as compared to the 'bargainable' staff. Changes in grading and pay. Changes in information and control. Changes in the autonomy of employees. Changes in health and safety conditions.

Job losses There have not been visible losses of employment in either the banking or insurance industries, due to the massive expansion and diversification in the two industries and to the high proportion of nationalized enterprises, in which workers are generally protected against job losses. Some of the foreign banks have undergone massive expansion in terms of the number of their branches and their areas of operation. In fact, in January 1992, 12 foreign banks sought permission to open 44 more branches in various major cities of India (Economic Times, 1992). There has however been a reduction in the rate of recruitment in the nationalized banks. According to a recent study covering three banks and two insurance companies, the growth of new jobs has dwindled. As the use of new technology expands, labor savings are likely to increase further in some operations (Chopra, 1991). The three developments that are likely to displace workers and women in particular, are voice recognition, optical character recognition and artificial intelligence (Rajan, 1990). An employee at the Hong Kong bank observed that the entire category of typists had already been abolished. II is possible to discern a tendency to reduce the proportion of 'bargainable' staff in both nationalized and foreign banks. The Banque National de Paris reduced its bargainable staff from 200 employees in 1979 to just 135 in 1992, by not recruiting staff at the lowest levels and by asking about 35 employees to accept the so-called Voluntary Retirement Scheme (VRS) because computerization was expected to reduce the need for their labor. Increase in workloads New technology could lessen the repetitive and heavy nature of certain operations. However, most employees in the insurance and banking industry, especially in the foreign banks, have experienced serious strain and heavy work-loads. According to an employee working in the cash department of the Citibank, before computerization we used to do 30-40 cash entries per day; now we have to do more than 100. There is a greater pressure of work more work and more responsibility. The speed has increased enormously. According to experienced unionists in ANZ Grindlays Bank, computerization, coupled with non-recruitment and non-replacement of retired staff, has led to a tremendous increase in workloads, 'after 20 years of employment, people are bound to be completely fagged out.

Then the management will term them "unsuitable", "old" or "unfit"'. The personnel officer of Grindlays, who disagrees with the union on everything else, admitted, 'Since the emphasis is entirely on productivity and efficiency, there has been intensification of work. Employees' efficiency levels have gone up ten-fold'. Personnel officers at the Life Insurance Corporation (LIC) confirmed this picture. Pressure for flexibility Over the last decade and a half, management has consistently sought to have flexible manning levels. They have argued that they need operational flexibility in order to respond quickly to changes in the market, to introduce technological innovations, and to deal with fluctuations in the flow of work. This, they say, can be achieved by employing a core of secure, permanent, multi skilled, full-time employees and a 'periphery' of marginal, generally single-skilled workers who may be employed part-time or temporarily, and directly or indirectly, in a variety of 'new' ways (Huws et al., 1989) Computer technology demands functionally flexible multi skilled workers rather than specialists. The strategy of increasing flexibility in the employment system frequently targets women workers, who occupy the lower rungs of the job hierarchy. They are often forced to change workstations or leave the firm. Professionals and specialists, a majority of whom are men, benefit from the strategy. Changes in job content Changes in work methods caused by the introduction of computerization affect the content of work as well as the skills needed by employees. The direction of changes is, however, not uniform. Two divergent tendencies can be observed. In routine transactions, certain skills of a mechanical nature, which nevertheless require a measure of mental effort and concentration, are no longer required or are needed less. The skills replacing them are equally mechanical but call for less mental effort. The level of skills required for the performance of routine transactions therefore actually falls, although the degree of attention and concentration required will be just as high or even higher. In contrast, in the area of customer services, computerization offers potential for an increase in both the necessary range and level of skills, for example, searching for, extracting and assimilating relevant information in

response to a request. The realization of the potential is, however, contingent on the relevant organizational decisions being taken by management (Ozaki et al., 1992) The impact of new technology on work content and the skills required of workers also depends on how rigidly jobs are defined and demarcated and on the skill levels of the existing workforce. Various studies seem to show that, in places where the tasks of workers have already been defined broadly and flexibly, with much overlapping, the reorganization of work after the introduction of new technology has been comparatively smooth and workers' resistance relatively minor. In places where the skill level of workers is high, technological change tends to strengthen the tendency towards the integration of planning and production tasks. Where skill levels are low there seems to be a trend towards polarization of skills. Computerization is also creating skills that are largely transferable from one enterprise to another, such as the skills of computer programmers (Ozaki et al., 1992). Product innovations have generally led to an increase in the importance of formal skills. The informal skills, learned on the job that characterized women's work are not seen as important. The professional and technical jobs increase in number and importance, and formal theoretical knowledge is becoming more important for employees in the banking sector (Tremblay, 1991). In India as elsewhere, categories such as junior clerks and tellers are becoming less important in the overall workforce as Automated Teller Machines (ATMs) multiply (Rajan, 1990). Increased insecurity and loss of union power Deskilling contributes to a feeling of powerlessness vis--vis the employer. This feeling was expressed more definitely by employees working in foreign banks than by those employed either in the nationalized banks or the nationalized LIC, Four women employees in the Banque National de Paris said that the closure of some branches and their awareness that they had not been given computer training at a time when nearly all the banking operations had been computerized had made them 'very scared.' All four were later made redundant. At ANZ Grindlays, insecurity was said to have increased, with early retirements and no recruitment for the last four to five years, 'That itself creates insecurity. If there is a reduction, then it creates panic.'

Citibank employees reported feeling, on the one hand, that their workload was generally too heavy, and, on the other hand, that any temporary reductions made them fear that work had been contracted out. They said that contract workers had been employed for specific tasks, without informing the employees or the union. This has become possible because of computerization.

4.4 Technological Factor Analysis

Technology: Key Differentiator of future success

Technology will bring fundamental shift in the functioning of banks. It would not only help them bring improvements in their internal functioning but also enable them to provide better customer service. Technology will break all boundaries and encourage cross border banking

business. Banks would have to undertake extensive Business Process Re-Engineering and tackle issues like a) how best to deliver products and services to customers b) designing an appropriate organizational model to fully capture the benefits of technology and business process changes brought about. c) How to exploit technology for deriving economies of scale and how to create cost efficiencies, and d) how to create a customer - centric operation model.

Entry of ATMs has changed the profile of front offices in bank branches. Customers no longer need to visit branches for their day to day banking transactions like cash deposits, withdrawals, cheque collection, balance enquiry etc. E-banking and Internet banking have opened new avenues in "convenience banking". Internet banking has also led to reduction in transaction costs for banks to about a tenth of branch banking.

Technology solutions would make flow of information much faster, more accurate and enable quicker analysis of data received. This would make the decision making process faster and more efficient. For the Banks, this would also enable development of appraisal and monitoring tools which would make credit management much more effective. The result would be a definite reduction in transaction costs, the benefits of which would be shared between banks and customers.

While application of technology would help banks reduce their operating costs in the long run, the initial investments would be sizeable. IT spent by banking and financial services industry in USA is approximately 7% of the revenue as against around 1% by Indian Banks. With greater use of technology solutions, we expect IT spending of Indian banking system to go up significantly.

One area where the banking system can reduce the investment costs in technology applications is by sharing of facilities. We are already seeing banks coming together to share ATM Networks. Similarly, in the coming years, we expect to see banks and FIs coming together to share facilities in the area of payment and settlement, back office processing, data warehousing, etc. While dealing with technology, banks will have to deal with attendant operational risks. This would be a critical area the Bank management will have to deal with in future.

Payment and Settlement system is the backbone of any financial market place. The present Payment and Settlement systems such as Structured Financial Messaging System (SFMS), Centralized Funds Management System (CFMS), Centralized Funds Transfer System (CFTS) and Real Time Gross Settlement System (RTGS) will undergo further finetuning to meet international standards. Needless to add, necessary security checks and controls will have to be in place. In this regard, Institutions such as IDRBT will have a greater role to play.

The IT Revolution on Banking In 1997, in an article published in New York Times, referring to the Internet, Bill Gates, the IT guru said: these changes wont come at the expense of the banking Industry.the future is bright.fore institutions that evolve. Technology will let banks get closer to customers, deliver a wider range of services at lower costs and streamline internal systems so that all customer data is integrated and can be used to spot trends that can lead to new products. The web will offer banks great opportunities- It will be interesting to see which banks step up this opportunity The revolutionary changes, which the banking sector is going through, are very much in line with the predictions of Bill Gates. Banking and financial services Industry are changing rapidly and the winners in the ensuring competition will be those that take full advantage of the new technological waves sweeping the industry. Technology can help banks in providing efficient and highly cost effective services in a timely manner.

The online revolution, Internet Banking and E-commerce activities have greatly influenced the banking and financial services sector in a big way. While Internet banking has made it possible for banks to offer safe and convenient new ways of conducting business increasing their reach significantly, the impact of e-0commerce has radically changed the ways of marketing products in many industrial segments of the world including banking. Apart from bringing about a change in the functioning of the banks both horizontally and vertically, technology has an important function to perform in developing a payments system network through which funds can be transmitted at less cost and quickly. VSAT, a satellite-based network, facilitating quicker and cheaper transmission of funds will soon be a reality. As we move in the 21st century, we find that recent technological innovations have made it possible for the banks toffee wide variety of complex financial products. The latest innovation in this area is core banking Solutions (CBS). CBS is a generic term which denotes

inter-branch transaction capability through a central database. By leveraging the power of CBS new generation banks and some foreign banks have successfully targeted niche markets by offering value added services efficiently. Since all other technology projects like treasury, ALM, ATM, Internet Banking etc., will be completely integrated to the CBS, this becomes a sine-qua-non for any Business Process reengineering (BPR) initiatives in of the bank.

5 Porter's Five Forces Model of Competition

The nature of competition in an industry in large part determines the content of strategy, especially business-level strategy. Based as it is on the fundamental economics of the industry, the very profit potential of an industry is determined by competitive interactions. Where these interactions are intense, profits tend to be whittled away by the activities of competing. Where they are mild and competitors appear docile, profit potential tends to be high. Yet a full understanding of the elements of competition within an industry is easy to overlook and often difficult to comprehend. Porter has identified five basic forces that collectively describe the state of competition in an industry:

1. The intensity of rivalry among competitors 2. The threat of new entrants to the market 3. The amount of bargaining power possessed by the firm's/industry's suppliers 4. The amount of bargaining power possessed by the firm's/industry's customers 5. The extent that substitute products present a threat to a firm's/industry's products These forces assist in identifying the presence or absence of potential high returns. The weaker are Porter's five forces, the greater is the opportunity for firms in an industry to experience superior profitability. More generally, understanding how these forces affect competition within an industry allows the strategist to identify the most advantageous strategic position. The actors within an industry on whom these forces exert pressure are, respectively, the industry's competing firms themselves, potential new entrants to the industry's markets, suppliers (vendors), customers, and makers of substitute products. Obviously, the starting point for conducting an analysis of the five forces of competition is to identify all the competitors, potential new entrants, and major suppliers, the demographics of customers, and makers of and nature of substitute products. Competitors would not only have to be identified, but various distinguishing data about the industry would also have to be specified. For each competitor this data would include market share, product line differences/similarities, market segments served, price/quality relationships represented by products, growth/decline trends, financial strength differences, and any other information that will help describe the industry.

Porters FIVE-FORCE analysis for Indian banking industry


-Low supplier bargaining power -Few alternatives available -Subject to RBI Rules and Regulations -Not concentrated


-Low barriers to entry -Government policies are supportive -Globalization and liberalization policy

Intense competition Many private, public,

THREAT OF SUBSTITUTES -High threat from substitutes Like Mutual funds, T-bills, Government securities

-High exit barriers


-High bargaining power
-Low switching cost -Large no. of alternatives -Homogeneous service by banks -Full information available with customers

Key Points:
Supply Liquidity (supply of money) is controlled by the Reserve Bank of India (RBI). Demand India is a growing economy and demand for credit is high though it could be cyclical. Barriers to entry

Licensing requirement, investment in technology and branch network. Bargaining power of suppliers High during periods of tight liquidity. Trade unions in public sector banks can be anti reforms. Depositors may invest elsewhere if interest rates fall. Bargaining power of customers For good creditworthy borrowers bargaining power is high due to the availability of large number of banks Competition - High There are public sector banks, private sector and foreign banks along with non banking finance companies competing in similar business lines.


Rivalry in banking industry is very high. There are so many private, public, co-operative and non-financial institutions operating in the industry. They are fighting for same customers. Due to government liberalization and globalization policy, banking sector became open for everybody. So, newer and newer private and foreign firms are opening their branches in India. This has intensified the competition. The no. of factors has contributed to increase rivalry those are: 1. A large no. Of banks There are so many banks and non-financial institutions fighting for same pie, which has intensified competition. 2. High market growth rate India is seen as one of the biggest market place and growth rate in Indian banking industry is also very high. This has ignited the competition. 3. Low switching cost Customer switching cost is very low. They can easily switch from one bank to another bank and very little loyalty exists. 4. In differentiate services Almost every bank provides similar services. No differentiation exists. Every bank tries to copy each other services and technology, which increases the level of competition.

6. High exit barrier High exist barriers humiliate banks to earn profit and retain customers by providing world-class services. 7. Low government regulations: There are low regulation exist to start a new business due LPG policy adopted India. So, sector is open for everybody. by


Suppliers of banks are depositors. These are those people who have excess money and prefer regular income and safety. In banking industry Suppliers have low bargaining power. Following are the reasons for low bargaining power of suppliers. 1. Nature of suppliers Suppliers of banks are generally those people who prefer low risk and those who need regular income and safety as well. Bank is best place for them to deposit their surplus money. They believe that banks are very safe than other investment alternatives. So, they do not consider other alternatives very seriously, which lower their bargaining power. 2. Few alternatives Suppliers are risk averters and want regular income. So, they have few alternatives available with them to invest like Treasury bills, government bonds. So, few alternatives lower their bargaining power. 3. RBI Rules and Regulations Banks are subject to RBI rules and regulations. Banks have to behave in the way that RBI wants. So, RBI takes all decisions relating to interest rates. This reduces suppliers bargaining power. 4. Suppliers are not concentrated Banking industrys suppliers are not concentrated. There are numerous suppliers with negligible portion to offer. So, this reduces their bargaining power. If they were concentrated then they can bargain with banks or can collectively invest in other norisky projects. 5. Forward integration

Forward integration is possible like mutual funds, but only few people now about this. Only educated people can forwardly integrate where as large no. Of suppliers are unaware about these alternatives.


Customers of the banks are those who take loans, advances and use services of banks. Customers have high bargaining power. Following are the reasons for high bargaining power of customers. 1. Large no. Of alternatives Customers have very large no. of alternatives. There are so many banks, which fight for same pie. There are many non-financial institutions like ICICI, HDFC, IFCI etc., which has also jumped into these businesses. There are foreign banks, private banks, cooperative banks and development banks together with the specialized financial companies that provide finance to customers. These all increase preferences for customers. 2. Low switching cost Cost of switching from one bank to another is low. Banks are also providing zero balance account and other types of facilities. They are free to select any banks service. Switching costs are becoming lower with Internet Banking gaining momentum and as a result consumers loyalties are harder to retain. 3. Undifferentiated service Banks provide merely similar services. There is no much difference in services provided by different banks. So, bargaining power of customers increases. They cannot be charged for differentiation. 4. Full information about the market Customers have full information about the market due to globalization and digitization consumers have become advance and sophisticated. They are aware with each market conditions. So, banks have to be more competitive and customer friendly to serve them.


Barriers to an entry in banking industry no longer exist. So, lots of private and foreign banks are entering in the market. Competitors can come from any industry to disinter

mediate banks. Product differentiation is very difficult for banks and exit is difficult. So, every bank strives to survive in highly competitive market. So, we see intense competition and mergers and acquisition. Government policies are supportive to start a new bank. There are less statutory requirements needed to start a new venture. Every bank tries to achieve economies of scale through use of technology and selecting and training manpower.


Competition from the non-banking financial sector is increasing rapidly. Sony and Software giants such as Microsoft are attempting to replace the banks as intermediaries. The threat of substitute products is very high. These new products include credit unions and investment houses. One feature of using an investment house is that the fees that the investment house charges are tax deductible, where as a bank it is considered personal expenses, which are not tax deductible. The rate of return with using investment houses is greater than a bank. There are other substitutes as well for banks like mutual funds, stocks (shares), government securities, debentures, gold, real estate etc. so, there is a high threat fro substitute.

Conclusion: Indian banking sector is one of the highly competitive sectors where high growth rate and high degree of competition exist. Low entry barriers and high exit barriers ignites competition in this industry. Every bank strives to survive in the shadow of these barriers. There are so many substitutes available with customers and they have high bargaining power where as suppliers i.e. depositors have low power in their hands.



The Seven-Ss is a framework for analyzing organizations and their effectiveness. It looks at the seven key elements that make the organizations successful, or not: strategy; structure; systems; style; skills; staff; and shared values.

7-S MODEL - a Systemic Approach to Improving Organizations

The 7-S model is a tool for managerial analysis and action that provides a structure with which to consider a company as a whole, so that the organization's problems may be diagnosed and a strategy may be developed and implemented. The 7-S diagram illustrates the multiplicity interconnectedness of elements that define an organization's ability to change. This model helps to change manager's thinking about how companies could be improved. It says that it is not just a matter of devising a new strategy and following it through. Nor is it a matter of setting up new systems and letting them generate improvements. To be effective, .organization must have a high degree of fit, or internal alignment among all the seven Ss. Each S must be consistent with and reinforce the other Ss. All Ss are

interrelated, so a change in one has a ripple effect on all the others. It is impossible to make progress on one without making progress on all. Thus, to improve your organization, you have to master systems thinking and pay attention to all of the seven elements at the same time. There is no starting point or implied hierarchy - different factors may drive the business in any one organization.

I. Strategy
The route that the organization has chosen for its future growth; a plan an organization formulates to gain a sustainable competitive advantage. As we have seen company has not just adopted hygiene factors like micro market, cross selling data management etc. but also adopted competitive strategies on valuable resources. Strategy adopted by ICICI bank for future prospectus Communicate or surprise: A Central Bankers dilemma

Central bankers face the classic dilemma of communicating their thoughts to bring in orderly corrections in the market and surprising the market to get desired results on the real economy. While Fed has stressed on effective communication and less of surprise, RBIs stance has been quite the opposite. Revisiting the old themes in a new year

FOMC is indicating its intention to alter its stance of monetary policy in 2006. Once the Fed hiking cycle is over, the twin deficit story might reappear as the driver for currency markets. Oil prices, housing led US growth slowdown, Chinese revaluation, global liquidity and reserve diversification are likely to be other significant factors to be watched.

USD-INR: Return of the static era

We expect the current Dollar rally to last only till market discounts a full probability of a March rate hike and probably a next one. In the interim, we are cautious ahead of the Budget with our eyes fixed on FII flows and NDF arbitrage.

Capital account convertibility and currency crisis

Opening up of the capital account entails running the risk of speculative currency crisis even when fundamentals of the economy are sound. Incompatible government policies, predominance of short term flows and lopsided balance sheets can aggravate the risks

G-sec: Rates heading north

RBI recently raised the key policy rates by 25 bps in its Quarterly review. We expect the yield curve to steepen from the current levels but in the medium term the yields in the long end are going to be determined more by the demand-supply scenario and less due to inflationary expectations

Swaps: MIFOR curve steepens

The last month was one of the most eventful months for both MIFOR and OIS. The rate hike resulted in some heavy paying in MIFOR before injection of liquidity by RBI resulted in quite a bit of easing. OIS also moved up by at least 30 bps for the entire length of the curve.

Inflation: RBI's fiscal year end target for inflation likely to be achieved

Headline inflation remained subdued moving in the 4.2-4.5% range. The manufacturing index inched up slightly, whereas the fuel and primary index recorded a slight decline. Though prices are inching up steadily, the RBI's fiscal end target for inflation is likely to be met. Inflation figures for the next month should remain contained within the 4.2-4.7% range. Commodity: Sugar On a Roll

Sugar is currently at a 25-year peak and geared for newer highs. Despite the record Indian crop expected in 2005-06, we expect sugar to surge ahead on falling stocks and rising demand.

Feature: Economic Derivatives

Economic Derivatives have started trading on Chicago Mercantile Exchange since October 2002. In this month's feature, we give a brief introduction to these and also try to ascertain if the Auction implied forecast of economic numbers could give more accurate information than usual consensus estimates bank for future prospectus

II. Structure

The framework in which the activities of the organization's members are coordinated. The four basic structural forms are the functional form, divisional structure, matrix structure, and network structure .ICICI bank is following network structure in which the branch manager of Ahmedabad is directly report to head of north Gujarat zone. All the employees of the Ahmedabad branch are directly reporting to the branch manager of Ahmedabad, the Branch manager responsible for handling of DSA and other associate of company.


Personal Banker Authorizer

Teller Authorizer


Sales Executive

Personal Banker


Functions Branch manager Require approval from BM for transaction more than 50,000 RS. Organizing coordinating and motivating employees in the organization. Develop his territory.

Personal Banker authorizer After his approval, all the applications collect and checked by PB, Executives go for further process to branch manager. -Daily stock (welcome kit, debit pin number, cheque book, and debit card) requires approval of PB authorizer. Personal Banker

Maintain contacts with walk-in customers, existing customers and provide satisfactory service to them. Handle all the complaint of the customers and resolve it. Maintain daily stock reports and take approval from the PB authorizer.

Teller Authorizer He gives approval to all types cheques and DDs by checking all the details and validity of it. At the end of the day all the cash on hand in the bank require signature of him. Report of cash loading in ATM is to be submitted to him. He is responsible for it. Teller Maintain daily transactions of cheque withdrawal, cheque deposits, cash withdrawal cash deposit, fund transfer and DD etc. Check the validity of all the above transactions.

Clearinghouse All the cheques are being transferred to this department and it checks the sign, balance amount in his/ her a/c, date of issuing. It also maintains the transaction with other branches and banks. DRF forms are being handled by this department.

Sales Executive Generate new inquiries by cold calling and tele marketing. Handle existing and new customers. Maintain customer relation ships.

III. Systems

The formal and informal procedures, including innovation systems, compensation systems, management information systems, and capital allocation systems, that govern everyday activity. ICICI Bank operates in a highly automated environment in terms of information technology and communication systems. The entire bank's branches have connectivity which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available internationally to build the infrastructure required for a world-class bank. In terms of software, the Corporate Banking business is supported by Flexcube, while the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are open, scalable and web-enabled.

The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web- enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share

IV. Style
The leadership approach of top management and the organization's overall operating approach are very systematic. Also the way in which the organization's employees present themselves to the outside world, to suppliers and customers. The coax of the bank comes in contact to the customers by cold calling, tale marketing. ICICI bank provide training to their employee for making and retaining customer for bank, the Organisation take responsibility to charge of employee training and development. The style of presentation and demonstration of product toward customer so that easy to understand and follows.

V. Skills

What the company does best; the distinctive capabilities and competencies that reside in the organization. ICICI Bank has good brand image in the customers mind and also has unique physical evidence compare to others in Ahmedabad. Location of bank and its internal layout so simple to follow. The skills included managerial skills, effective recovery techniques,

sharing of best practices and self-motivation for the recoveries staff and team building programmes for branches/departments.

VI. Staff
The organization's human resources; refers to how people are developed, trained, socialized, integrated, motivated, and how their carriers are managed. ICICI Bank generally recruits skilled employees and also gives training to them. Also it gives good incentive to their employees and have good growth prospect in the organization. The employee turn over ratio is very less which indicate good image amongst the employees. Most of employee are above graduation and hold different degrees. The evolution of employees on performance and work efficiencies and rewarded accordingly. ICICI invested in augmenting the knowledge and skills of its frontline staff with a focus on customers. A programme on Creating Value for Customers was designed and offered to all frontline staff. Source of recruitment are Personal data of candidates and data bank maintain by the HR department. Campus Recruitment. Companys own website. Placement consultants. Advertisement in the news papers like Times of India, Gujarat Samachar. Employee reference.

ICICI Bank HR Department this bank has its own sources of recruitment suggested by Mr. Raghurangarajan.

1. An interested candidate should drop in his / her bio-data at the branch personally or should log into the ICICI Bank or come & submit the resume. 2. They even approach to consultancy firms. 3. They give an advertisement in the leading newspaper. 4. ICICI Bank has recruited fresher through campus recruitment.

Staff references are given importance The company had a transparent performance appraisal process. For officers, the form

consisted of six sections: (i) Self-assessment, (ii) Appraisal of overall performance, (iii) Appraisal of personal attributes, (iv) Objectives for the following year, (v) Comments by appraiser (includes commentary on self- appraisal as well as achievement of

objectives and promo ability), and (vi) Development and training needs focus. Each officer was aware of and involved in all the sections of the appraisal except

Remuneration to employee is the compensation an employee receives in return for his/her contribution to the organization. Remuneration occupies an important place in the life of an employee. At ICICI, remuneration of an employee comprises wages and salary, incentives are commission, perks and additions of allowance. Training and development were given great importance. All employees rotated through the

training centre on a regular basis and had ample opportunities for personal development. In addition, the company reimbursed each employee for the qualifications. This process of training cost of two professional

and development, along with a commitment to

merit and reluctance to hire laterals, created some unique opportunities.

Disputes and their resolution

Disputes are common in organization. In practice, disputes mainly relate to the target only because if any employee is not achieving target he/she will not eligible for incentive which creates frustration among them.

Every employee is free to talk to the head of the particular department if they have any problem related to the job. Firstly, the problem is solved by the head of the particular department and if the problem does not solved by the head of that department then it is addressed to the HR Manager.

VII. Shared values

Shared values are what engender trust and link an organization together. Shared values are also the identity by which an organization is known throughout its business areas. These values must be stated as both corporate objectives and individual values. Most employees at ICICI Bank, especially knowledge workers, need to know who you are and what you are and what you're about. Talented people are looking for a "values fit" with their employees. The fundamental ideas around which a business is built; the things that influence a group to work

7.1 Shared ATMs

Till the year 2003, each bank was interested in opening its own ATMs to provide access and anytime banking to its customers. Cost of Installation of ATM is about Rs. 15 lacs with an additional maintenance cost of Rs.1.5 lacs per month. To break even, 300 transactions are to be put through each ATM per day. The cost of transaction in the branch of the Bank is approximately Rs. 60 while it is Rs. 10 if carried out through an ATM. To take advantage of this lower transaction cost, there is need for banks to induce customers to use more and more ATMs. In view of the huge investment cost of ATMs, Banks have now come to an understanding by which the customer of one Bank can use the ATMs of other Bank/s. This is in the right direction. Already SBI, HDFC Bank, ICICI Bank and others have started offering such a facility at a nominal payment per transaction, for which the customers are readily agreeable.

7.2. Outsourcing
The challenge of managing the diverse services in a networked environment has caused the banks to introspect on what should be considered as their core skills and primary roles. In future, banks will need to focus on value-differentiating services by keeping in-house their competitive advantages while partnering with others who complement its services-making the argument for best-of-breed integration a necessity.

For Ex. The basic difference between ICICI Bank and other Indian players in their overseas forays lies in the back-office operations. ICICI Bank is following a reverse BPO model for the entire processing requirement of its global operations, which is handled from India. This gives it cost advantage over the overseas players. Russia is the only country where ICICI Bank runs its back office locally because of the language barrier. (Source: business standard)

Outsourcing in banking industry

Off shoring which started with near shore ventures has moved on to outsourcing to countries such as India has become essential to survive in today's competitive market. The banks that have opted for offshoring have definitely increased profits and had proved to be a major

beneficiary. Offshoring enables the banks to do away with operational discrepancies and concentrate on moving up the ladder with strategic growth planning and implementation. The bank can focus on talent from all over the world, thus delivering higher quality service to the customers. Offshoring activities will make the banks operational system extremely effective as the bank can collect a talent pool for specific and defined areas, and the employees for the same will not overlap any function.

7.3. In sourcing and Banking timing

In sourcing is a model wherein banks perform operations that are originally done by their customers/other banks. Corporate clients may outsource activities like receivable management, accounting and risk management of corporate investments to banks. New product offerings will emerge as a combination of existing products and the new in sourced activities Banks, with their established processing capacities, are ideal partners for insurance and other financial service firms in their pursuit of customer reach and service provision. Best example is today many banks like HDFC Bank, ABN AMRO Bank are selling insurance of ICICI Lombard, Bajaj Allianz and other co.s. Also they are selling mutual funds of many NBFCs like Reliance Mutual Fund, Franklin Templeton & others.

Banking Hours:

Bank hours were fixed so far. Now the fact is that almost all banks are moving towards any time/any where/home banking. Again, a closer look at this will reveal that Banks are moving away from the traditional customer to the customer who is extra busy. Again, the high net worth individual and the highly profitable companies. For example ICICI bank has started 8 to 8 banking where the banking hours are 8 a.m. to 8 p.m. looking at this competitive market now all the public sector banks have started working for the same period. This will definitely bring a revolutionary step as an AAA banking strategy. Even some of the banks like ABN Amro and canara Bank work for 365 days. Now, BoB(Bank of Baroda) is planning to expand their services for 365 days.

7.4. Consolidation and move towards Universal Banking

Indian banking Industry is slowly but surely moving from a regime of large number of small banks to small number of large banks. The new era is going to be one of consolidation around identified core competencies. Mergers and acquisitions in the banking sector are going to be the order of the day. Successful merger of HDFC Bank and Times Bank earlier and Stanchart and ANZ Grindlays three years ago has demonstrated that trend towards consolidation is almost an accepted fact. We are also looking for such signs in respect of a number of old private sector banks, many of which are not able to cushion their NPAs, expand their business and induct technology due to limited capital base.

Coming times may usher in large banking institutions, if the development financial institutions opt for conversion into commercial banking in line with the recommendation of Narasimhan (II). In India, one of the largest financial institutions, ICICI, took the lead towards universal banking with its reverse merger with ICICI Bank coming through a few years ago. Another mega financial institution, IDBI has also adopted the same strategy, and has already transformed itself into a universal bank. Now the process of its progeny IDBI Bank merging itself with the parent IDBI has also completed. This trend may lead logically to promoting the concept of financial super market chain, making available all types of credit and non-fund facilities under one roof or specialized subsidiaries under one umbrella organization. Consolidated accounting and supervisory techniques would have to evolve and appropriate fire walls built to address the risks underlying such large organizations and banking conglomerates. Multiple products (deposits, credit cards, insurance, investments and securities); Multiple channels of distribution (call centre, branch, Internet and kiosk); and Multiple customer groups (consumer, small business, and corporate).

360-degree view of company: This means whoever the bank speaks to, irrespective of whether the communication is from sales, finance or support, the bank is aware of the interaction. Removal of inconsistencies of data makes the client interaction processes smooth and efficient, thus leading to enhanced customer satisfaction.

7.5. Strategies towards niche segment

By tapping the undeserved niches the new entrants in bancassurance can expand the market substantially. The service sector is taking a large and growing share of Indias GDP (around 42%). This offers expansion opportunities.

The first prong of a Bancassurers strategy could be to stimulate demand in the areas that are currently not served at all. For example Indian non-life insurers focus mainly on the manufacturing segment. However the services sector is taking a large and growing share of Indias GDP giving immense opportunities. Likewise being an agrarian economy, thee exist immense opportunities to provide the liability and risks associated in this sector like weather insurance, rainfall insurance, cyclone insurance, crop insurance etc.

Strategy to increase FDI in Indian banking and its related sector :

(Source: Business standard 10th November, BS)

ICICI bank may sell 10% Arcil stake as FDI in ARCs get nod
ICICI Bank, which holds 29.585 stake in Asset Reconstruction Company of India (Arcil), is expected to sell 10% stake following the governments decision to open up foreign director investment (FDI) route for Asset reconstruction companies (ARCs). Two of the main promoters of Arcil Industrial Development Bank of India (IDBI) and State Bank of India (SBI) hold 19.95% stake each.

Source close to Arcil said that ICICI Bank would bring down its stake at the earliest. It is expected to sell part of its stake at a premium to private equity investors which have been keen up to pick up stakes in ARCs. Foreign Banks are to keen to pick up stakes in ARCs. Foreign banks are too keen to enter the turf and the industry expects quite a few foreign banks to join hands with local players to float ARCs. So far foreign banks have been trying to buy out non-performing assets (NPAs) directly from banks participating at NPA auctions.

Arcil has been in operation for about two years now. Another ARC set up by Unit Trust of India is yet to commence operations. Arcil has so far acquired close to 400 NPA accounts worth Rs. 18,000 crore at a security receipts (SRs) value of Rs. 4,000 crore. The government has cleared the proposal to allow 49 per cent foreign direct investment in

ARCs. However, it is not known whether foreign investors will be allowed to buy the securities receipts issued by the ARCs.

ARCs purchase NPAs lending institutions at a discount and recover them. Any recovery made over and above the price at which the loan has been bought helps ARCs earn profit. The need for foreign investment is acutely felt to buy security receipts as ARCs are not cash rich to buy stressed asset upfront. These receipts are issued by ARCs against the bad loans and redeemed after the recovery process is complete. At present, banks which offload bad assets subscribe to the SRs issued by ARCs. The governments decision to allow overseas players to participate in ARCs is welcome. The government should also allow their foreign players to buy the SRs. This will add depth to the market, said a banker. The 49 per cent cap on FDI is in line with recommendations made by the Reserve Bank of India, though the government had originally mooted a 74 per cent ceiling on FDI in ARCs. Arcil, the lone ARC currently operating in the country, had also made a strong pitch for 74 per cent FDI in entities formed for restructuring assets.

7.6. Strategy of Globalization

The strategies of the Overseas players to enter into Indian Banking Industry: (Source: Business Standard)

Overseas players speed up consolidation in NBFCs

Overseas players have set their eyes on the non banking finance companies (NBFCs) to enter the Indian market even as the Reserve Bank Of India (RBI) has restricted the entry of foreign players in the banking space till April 2008. The latest to take his route is private equity firm Newbridge Capital which recently announced investment of $100 million in the used-truck financing business in India by picking up 49 per cent stake in Shriram Holdings (Madras) Pvt. Ltd. Prior to this another Chennai based NBFC, Cholamandalam Investment & Finance Company, sold 37.5% stake to the Singapore-based DBS at Rs 228 crore. Early this year, Shriram Investment Ltd, Shriram Transport Finance Company Ltd and Shriram Overseas Finance Ltd offered

20.6% per cent each to a Mauritius-based private equity fund for about Rs 100 crore through a preferential issue.

Analysts said more such deals would be struck leading to consolidation in the industry. In fact, this the second phase of consolidation in the NBFC sector after the domestic players witnessed a spate of mergers and amalgamations. Ashok Leyland finance was merged with IndusInd Bank to increase the Banks retail assets. Tata Finance, the NBFC arm of Tata Group, has been merged with Tata Motors while Sundaram Finance has merged itself with Lakshmi General Motors to increase its assets base. Shriram group plans top merge two of its companies, Shriram Transport finance and Shriram Investments, by the end off this year.

Restrained by the regulator from buying out stakes in local banks and spreading their branch network, foreign banks are using the NBFC route to build their asset books. Both Standard chartered and Citibank are using their NBFC arms to strengthen their presence in India. DBS is expected to use its NBFC vehicle for the same purpose. Unlike the commercial banks the Foreign Direct Investment (FDI) norms are liberal in NBFC sector. An NBFC can be even 100% owned by an overseas player provided it is ready to bring in $50 million out of which $7.5 million needs to be brought upfront and the balance in 24 months. For FDI up to 51 per cent, $0.5 million needs to be brought in upfront and for FDI above 51 per cent and up to 75 per cent, foreign players need to bring in $5 million upfront.

The strategies of some of the major Indian banking players for globalization: According to Boston Consulting Group Director, Mr. Janmejayqa Sinha, there could be four reasons for going global. Banks can tap the overseas markets when the domestic market is saturated. This reason clearly does not apply to Indian Banks as India is the fastest growing banking market. Besides, there are hugely under banked pockets in the country and only 20 cities account for 80 per cent of the new asset creation in the banking Industry. So, the growth opportunities within the country are enormous. Existing income sources are being threatened and need to be defended by being present abroad. They can also go global if they have a competitive weapon like a lower cost base on account of cheap technology and labor to capture new markets. Finally they can have overseas presence to upgrade employees skills through global exposures.

ICICI Bank: ICICI bank made a quite beginning in 2003 with a completely different business model. Its targets are the 25 million NRIs spread across the globe and their $500 billion wealth. Remittances to India account for about 10 per cent of the total remittances made across the world, making India the largest receiver worldwide. Last year the flow of money through this route was about$24 billion, higher than the flow of foreign Direct Investment (FDI). In 2004, the remittances were to the tune of $21.5 billion against $5.5 billion FDI and $8.8 billion FII inflows. ICICIs market share in the remittances business is about 15% now.

Strategy of Tie-up with foreign banks to get strategic benefits:

(Source: Business Standard) IndusInd bank plans foreign tie-ups to boost NRI deposits (28th October) IndusInd may tie up with local bank in Dubai, United Kingdom, United States, South East Asia to take advantage of its high net worth individuals non-resident Indian stake holders and mop-up more foreign funds, said managing director Bhaskar Ghose on Wednesday. Currently they have 10-15% of total deposits are NRI deposits. Today most of the local business of HNIs is not going to local banks. They typically bank with the big international players, Ghose said. The private sector bank has approached an Arab Bank or access to 15 of its branches. In return we will offer our branch network in India and would also bring a part of the local business to you, he said. Such a partnership would not require any additional investment, he said

7.7. HR Strategies
(Source: Monthly Public Opinion Surveys, The Indian Institute of Public Opinion, Vol. No. 12, September 2005)

PSU Banks are suddenly raising Managerial Posts for Better Performance PSU banks are suddenly increasing managerial posts, in one case this rose from seven to 19 overnight, as well as raising performance-linked pay. Now the public Sector banks no

longer have to follow rigid government rules on promotions, they are w\working overtime to frame new HR policies in order to reward performers. Last week BOB ( Bank of Baroda ), held a press conference to announce its plan for a performance-related pay packet for about 2,800 of its officers. State bank of India went one step ahead and introduced an incentive scheme for its branch managers, division heads and regional managers. These officers can now earn extra Rs. 45,000 to Rs. 50,000 annually if they achieve their performance targets like in terms of deposit mobilization, credit disbursement, reduction in bad loans and so on. Enlightened HR policies, it is obvious, are the need of the day since shortage of top quality personnel is a serious issue.

Under the freedom package approved a few months ago, PSU bank boards were to get the freedom to carry out their functions efficiently without ant impediment, subject to statutory requirements ( Like statutory Liquidity ratio, CRR and so on ), government policies ( On foreign holding for instance ) and regulatory guidelines ( On directed landings, rural branches, among others ) of the Reserve Bank Of India ( RBI ).

PSU banks now have the freedom to pursue new lines of business; make suitable acquisitions of companies or business, close/merge unviable branches; open overseas offices; set up subsidiaries and exit and existing line of business. They also have the last word on all HRD issues including the staffing pattern, recruitment, placement, transfer, training, promotions and pensions. The senior management team is free to travel overseas to interact with investors, depositors and other stakeholders.

One way to improve performance of all banks is to create benchmark for all departments, which can be a basis for rewarding the staff.

HR Policies of the Indian Banking sector (Source: AMA Publications) Private Sector Banks: ICICI Bank: Indias largest private sector bank has got an extensive recruitment procedure. It provides a culture, woven unconsciously into the mindset of the institution over the years, has been that of clearly providing opportunities to its employees on the basis of moist and performance. Over here, an employee is judged, rewarded, penalized purely on the basis of merit and his ability to perform.

According to Mr. Raghurangarajan from ICICI Bank HR Department this bank has its own sources of recruitment. 5. An interested candidate should drop in his / her biodata at the branch personally or should log into the ICICI Bank or come & submit the resume. 6. They even approach to consultancy firms. 7. They give an advertisement in the leading newspaper. 8. ICICI Bank has recruited fresher through campus recruitment.

9. Staff references are given importance.

They have different types of exams for clerical and officers level. HDFC and ICICI both new private sector banks has an OPQ occupational personality questionnaire to be filled in by the new comers into the bank which they find very helpful in a resigning the proper person, the Moist Suitable task.

The seven Ps contain the following 1. Product 2. Price 3. Promotion 4. Place 5. People 6. Process 7. Physical evidence

ICICI Bank offer verity of product such are Deposits, Loans, Plastic money, and other facilities such as ATM, Net banking, Mobile Banking


ICICI Bank offers wide variety of Deposit Products to suit your requirements. Coupled with convenience of networked branches/ ATMs and facility of E-channels like Internet and Mobile Banking, ICICI Bank brings banking at your doorstep. Select any of our deposit products and provide your details online and our representative will contact you for Account Opening. The basic products for banking industries are acceptance of deposit and lending of money . Deposit accounts are

Savings Account Special Savings Account Senior Citizen Services Fixed Deposit Easy FD Recurring Deposit Roaming Current A/c Young Stars Salary Account Women's Account EEFC Account

Savings Account ICICI Bank offers you a power packed Savings Account with a host of convenient features and banking channels to transact through. So now you can bank at your convenience, without the stress of waiting in queues

Senior Citizen Services We understand that as you reach the age to retire, you do have certain concerns whether your hard earned money is safe and secure whether your investments give you the kind of returns that you need. That's why we have an ideal Banking Service for

those who are 60 years and above. The Senior Citizen Services from ICICI Bank has several advantages that are tailored to bring more convenience and enjoyment in your life.

Young Stars It's really important to help children learn the value of finances and money management at an early age. Banking is a serious business, but we make banking a pleasure and at the same time children learn how to manage their personal finances.

Fixed Deposit We offer you competitive interest rates with the added comfort of safety and liquidity. You can also avail of loans against your Fixed Deposits up to 90% of attractive rates. Safety, Flexibility, Liquidity and Returns!!!! A combination of unbeatable features of the Fixed Deposit from ICICI Bank.

Recurring Deposit When expenses are high, you may not have adequate funds to make big investments. But simply going ahead without saving for the future is not an option for you. Through ICICI Bank Recurring Deposit you can invest small amounts of money every month that ends up with a large saving on maturity. So you enjoy twin advantagesaffordability and higher earnings


Personal Loans Features

Loans for salaried & self employed individuals. Loans are available from Rs. 20,000 to Rs. 10 Lakhs. Repayment tenures from 12 - 60 months. No Security,Collateral or Guarantors required. Loans can be used for any purpose with no questions asked regarding the end use of the loan.

A balance transfer facility available for those who want to retire any higher debt. All loan repayments are done via equated monthly instalments (EMI).

Home Loans Features Attractive interest rates Door-step service from enquiry stage till final disbursement No guarantor required Can transfer ones existing high-interest rate loan Free personal accidental insurance Special 100% funding for select properties

Car Loan The # 1 financier for car loans in the country. Preferred financier status with 12 leading car manufacturers. Largest network of branches and ATMs amongst private & foreign banks. Largest network of more than over 800 Direct Sales Agencies over 275 cities. Tie-ups with all leading dealers to ensure one stop solution. Flexible schemes & quick processing. Finance available for used cars. Hassle-free application process on the click of a mouse. All loans at the sole discretion of ICICI Bank Ltd Two-wheeler Loan Features ICICI Bank offers the Best Deals on Two Wheelers for our valued customers. Our flexible schemes will help one "Zoom " away in ones favourite two wheeler. We offer very attractive schemes at low interest rates. We extend finance facility on all two wheelers ranging from mopeds to motor bikes. We fund upto 85% of the on road cost of the vehicle repayable in convenient options of 12,18,24,30 & 36 months. Ride Easy Pay Easy with ICICI Bank Two Wheeler Loans.


Plastic money include Credit card and Debit card

Credit Card

Credit Card Features :You can view and manage your ICICI Bank Credit Card online on

Redeem Reward Points: Check out our rewards catalogue & order online against your accumulated reward points.

Payment Due Date: Check out payment status and amount due. Credit Card Statements by email: Subscribe for free statements to be delivered to your email id.

View Statements: View and print current and past statements. Place request for change of address: Issue instructions to change your communication address.

Pay your Utility bills: Pay utility bills online with your ICICI Bank Credit Card. Subscribe for Credit Card alerts: Subscribe to Credit Card alerts on sms (or) email. Dial A Draft: Order for a Demand Draft to be delivered to your communication address.

Duplicate Pin: Apply online for a duplicate ATM pin to enable cash withdrawal on your ICICI Bank Credit Card.

Secure Mailbox:Track your communication and resolve any queries with ICICI Bank.

Request for an add on card:Apply for an Add-on credit card to be delivered to your communication address.

The various types of Credit Cards offered by ICICI Bank are

1. Premium Cards, 2. Classic Cards, 3. Value for Money Cards, 4. Co-branded Cards,

5. Affinity Cards and 6. Corporate Cards.

Insurance Benefits on an ICICI Bank Credit Card

1. Internet Banking 2. Limited Lost Card Liability 3. Dial-A-Draft 4. Utility Payments 5. Purchase Protection 6. ICICI Bank 24-hour Customer Care Centre 7. Revolving Credit Facility 8. Auto Debit Facility 9. Temporary Credit Limit Enhancement 10. Travel Discounts from BTI-SITA 11. other are

Purchase protection benefit is available only if the articles are kept inside the residential premises.

Purchase protection is applicable only against Fire & Burglary and not against theft.

Medical Expenses will be covered only for injuries caused due to Rail/ Road Accident.

For the above cover, the claim is payable only if there is an involvement of the third party in an accident. Thus, cases like skidding from the bike where there is no involvement of third party are not covered.

For any overseas travel cover, claim is admissible only if it is a case of outbound flight from India. Thus inbound cases are not covered.

For any lost baggage claim, we require the bills of the items lost for processing the claim

With an ICICI Bank Credit Card in your wallet, you will not be strapped for cash ever again. You can withdraw cash on your Card, 24-hours a day from any VISA and MasterCard participating member bank ATM. During banking hours you can also

draw cash over-the-counter, from any ICICI Bank branch in cities where the ICICI Bank Credit Card has been introduced.

Debit Card
A Debit Card provides for on-line electronic payment from your savings / current accounts for purchases and access to ATMs for cash withdrawals and enquiries. It can be used both as an ATM card and as a method of payment (instead of cash / cheques) when purchasing goods and services, in India and overseas.

1. ICICI Bank HPCL Debit Card- The Sensible Choice

ICICI Bank and HPCL bring you the "Fuel" Debit Card. A debit card designed with just your convenience in mind. Just hand it over at any HPCL pumps and SAVE on your fuel purchases. In fact you can use the card for all your shopping, dining and traveling needs, so you spend with total control.

Your ICICI Bank HPCL Debit Card comes packed with the following features:

Direct On-line debit to your ICICI Bank account. Refund of surcharge* for fuel purchases at HPCL pumps. Accepted at over 90,000 shops, more than 1,800 ICICI Bank ATM's and more than 10,000 VISA ATMs all over India.

International card offering deposit access at over 13 million shops and & VISA ATM's all over the world.

24 Hour Customer Care Centre Speed-O-Miles Rewards Programme. Itemized billing on your bank statement. Lost card insurance.

Difference between an ATM Card and a Debit Card

Most of the Debit Cards issued by banks are also ATM cards. Hence they are also sometimes called as "Debit cum ATM card". While ATM Cards can only be used to access cash, Debit Cards can be used to make purchases at retail shops in the same way Credit Cards are used.

You can identify a Debit Card by the VISA Electron symbol. ICICI Bank Debit Cards carry the VISA "Dove" Hologram and the VISA Electron flag on the right hand side. Whereas an ATM card will not have these symbols.

2. ICICI Bank Ncash Debit Card- Power Your Wallet

Combining the acceptability of a credit card and the prudence of an ATM Card, the ICICI Bank Ncash Debit card is a most convenient accessory for you. No more fear of overspending. No more searching for the nearest ATM. Only more comfort and convenience! With the ICICI Bank Ncash Debit Card you can shop using VISA Electron's on-line debit program, and debit your ICICI Bank account directly when transacting at any VISA accredited member establishment or ATM across the world!

The ICICI Bank Ncash Debit card comes packed with the following features:

Direct On-line debit to your savings account. Accepted at over 90,000 merchant establishments, more than 1,800 ICICI Bank ATM's and more than 10,000 VISA ATMs all over India.

International Card, offering deposit access at over 13 million merchant establishments VISA

ATMs all over the world. 24 Hour Customer Care Centre. Itemized billing on your bank statement. Zero lost card liability.

Other ATM, Net banking, Mobile Banking, Insurance, Pension etc.


ICICI Bank's 24 Hour ATM network is one of the largest and most widespread ATM Network in India. Our ATMs are located in commercial areas, residential localities, major petrol pumps, airports, near railway stations and other places which are conveniently accessible to our customers.

ICICI Bank ATMs features user-friendly graphic screens with easy to follow instructions. We have introduced ATMs which interact with customers in their local language for increased convenience.

Mobile Banking, Bank on the move with ICICI Bank Mobile Banking. With ICICI Bank, Banking is no longer what it used to be. ICICI Bank offers Mobile Banking facility to all its Bank, Credit Card, Demat and Loan customers. ICICI Bank Mobile Banking can be divided into two broad categories of facilities:

Alert facility: ICICI Bank Mobile Banking Alerts facility keeps you informed about the significant transactions in your Accounts. It keeps you updated wherever you go.

Request facility: ICICI Bank Mobile Banking Requests facility enables you to query for your account balance.

Demat, With Mobile Banking you can remain updated while you are on the move, without even making a phone call or a visit or logging on the Internet. ICICI Bank Mobile Banking for Demat Accounts can be divided into two broad categories:

1. Request Facility Through ICICI Bank Mobile Banking Requests facility, you can query your demat account information anytime at your convenience. You can enquire for:

IBALD Balance Enquiry ITRAND - Transactions Status IBILLD Bill Enquiry ISIND - ISIN Enquiry

In Request facility, to check your holdings you can use any scrip descriptor like Company name, Webtrade scrip code, NSE symbol, BSE code in the message.

2. Alert Facility Through this facility, you will receive SMS alert from ICICI Demat on the following events:

Demat account getting credited Demat account getting debited Pledge creation Pledge closure Rejection of submitted instruction

Insurance, ICICI Bank has tied up with ICICI Lombard General Insurance Co Limited (a 74:26 joint venture between ICICI Bank and Fairfax Financial Holdings Limited) as its preferred general insurance partner through a referral arrangement. ICICI Lombard has designed various products for the retail customers keeping in mind their needs.The various products offered are:

Health Insurance - "Secure the health of your family and save tax" - 10K Tax Saver Health Insurance - Family Floater Health Insurance

Home Insurance - "Secure your most valuable asset" - Structure Insurance - Contents Insurance

Motor Insurance - Mandatory - "Secure your vehicle" - Car Insurance - 2 Wheeler Insurance

Travel Insurance - "Secure yourself during your travel" - Overseas Travel Insurance - Student Travel Insurance

Pension Life expectancy has been rising rapidly and today, you can now expect to live much longer than your earlier generations. For you, this will mean planning for a longer retirement life, probably without a regular income. ICICI Prudential Life Insurance presents LifeTime Pension II, a retirement plan that combines the best of investment and insurance and ensures that you get the power to maintain your lifestyle needs, for as long as you live.

Second P PRICE
LOAN (Rates & Fees)

1. Personal loan A processing fee of 2% of the loan amount is applicable. These fees are deducted upfront from the disbursement amount. Prepayment of the loan is possible after 180 days of availing the loan. Foreclosure charges as applicable would be levied on the outstanding loan. Part pre-payment is not allowed. No other fees or commitment charges are levied.

2. Home Loan Floating rate Tenure (yrs)

Rate of Interest * 8#

EMI per Lac 2028

Upto 5years

6 - 10 years 11 20 years

8.75% 9.25%

1254 916

Interest Calculated on basis of monthly rest.

Maximum Tenure of 20 years. 0% * Processing Fee. No fee for part prepayment. Interest rates would be adjusted periodically with change in ICICI Home PLR

3. Car Loan ICICI offer most competitive rates in the industry. Interest rates also depend on Car model, Loan Tenure, Customer Location and Profile, etc. For more information on our car loans and interest rates kindly contact our Branch or 24 Hour Customer Care Center and we will send our representative at ones place. One can also submit ones request online or contact nearest Car Dealers for the same. Interest is calculated on a monthly reducing balance and the rate remains unchanged till the maturity of the loan. No processing fee for Loans on New Cars. ICICI charge a processing fee of Rs.1000 for used car loans on loan amounts upto Rs.1.10 lac.

4. Two wheeler Loan

Rates Interest Rate : Fees Processing Fees : 2 % or Rs. 500 whichever is higher 7.5 % to 15.25 %


No transactions charges at ICICI Bank ATMs.

Transactions charges at Non ICICI Bank ATMs : Rs. 50/- for cash withdrawal & Rs. 25/- for balance enquiry.

List of other service charges available in membership guide. Low annual fee of Rs.99/- only. No transactions charges at ICICI Bank ATMs. Transactions charges at non ICICI Bank ATMs: Rs. 50/- for cash withdrawal & Rs. 25/- for balance enquiry.

List of other service charges available in membership guide.

ICICI Bank provide other facilities free of charge to retain customer and for attraction of more and more such facilities includes ATM, Mobile Banking and Phone banking


ICICI bank use competitive pricing model for determining the price and charge for deposit account the charges are validate for short period of time as long as credit policy work out.

The charges and interest rate are different according to types of account.

Although there could be a variety of objectives to promote, but the basic objective of promotion mix for services is to develop personal relations with client, make a strong impression of competency, honesty and sincerity, should be able to use indirect selling technique and manage to maintain a fine image by positive word of mouth.

Advertising ICICI bank uses the different source of advertising. For ICICI bank the main source of advertising is news papers. They gives regular advertising in the local news paper like Gujarat Samachar, sandesh and Divya Bhaskar. They also give the advertising in the national news paper like times of India. They have also started advertising on the television. They give the regular advertising on the Television channel like Zee TV, Zee Cinema and many more.

They also airing the advertising on the Radio. This source has got the momentum when the Radio Mirchi 91.9 FM was launch in Ahmedabad 3 years ago. They also do the advertising by the way of putting the big hoardings on the cross roads in the city where it is observed by the majority of the people. They have put their website on the internet where all the information regarding the various services offered by the ICICI bank is available Sales Promotion ICICI promotes its production regularly on television. Publicity ICICI has celebrity like Amitabh bachahan for promoting its products We can find many hoardings of ICICI at many places such as Ashram road ,parimal garden , S.G.road ext.

ICICI bank work over the country and having over seas branch also. Bank has select the location for establishing a branch as high volatile areas and area having opportunity of growing Bank proving license to work as representative of ICICI bank, such are called for DSA (direct selling agency) and Bank help to SHG (Self Help Group) to promote bank for penetration.

The basic location at Ahmedabad are 1. 2/1, Ground Floor, Popular House, Ashram Road, AHMEDABAD , 380009

2. JMC House, Opp. Parimal Gardens, Off C.G.Road Ambawadi, Ahmedabad AHMEDABAD , 380006

3. Samarpan Complex Bopal, (Gujarat) AHMEDABAD , 380058

4. wamini Complex, Opp. Drive-In Road(Cinema), Drive in Road, Ahmedabad AHMEDABAD , 380054

5. 6-10, Shukun Plaza, L G Corner, opp Pritivi Hotel, Maninagar, Ahmedabad. AHMEDABAD , 380008 6. ICICI Bank Ltd., Ground Floor, Sthapna Complex, Opp GHB Complex, Ankur Road, AHMEDABAD , 380013

7. FF/7 and 8, Tirthjal Complex, 132 Feet Ring Road, Jodhpurgam (Satellite Area), Ahmedabad District. AHMEDABAD , 380015

8. ICICI Bank Ltd., Sarthik II, Ground Floor, Opp. Rajpath Club, S. G. Road, Bodakdev, AHMEDABAD , 380054 9. ICICI Bank Ltd., Suvas Complex, Ground Floor, Opp. Rajasthan Hospital, Shahibaug AHMEDABAD , 380004

10. ICICI Bank Ltd., Ground Floor,Haash Business Centre,Fatehpura, Vasna AHMEDABAD , 380007


Total Staff Strength

Being a private sector bank, ICICI bank has paid its attention to the total staff strength of it. As against the total staff strength of the SBI bank, the total staff strength of ICICI bank is 12000.

Recruitment Process

Like the public sector banks, ICICI also organises the written test to employ people. They conduct exam from Mumbai on the Net. The candidates who passes the exam is called for interview to the branches for what the exam is conducted. They giveadvertisement in the news paper for the examination. They also use some persons reference as one source of recruitment.

Training Program

They have training programmes for both newly employed employees and existing employees too. They provide 7-day induction programme for newly employed employees. They also have the 8 days-training programme for existing employees.

Performance Appraisal

They evaluate each employees performance individually. They evaluate each employee first quarterly and then annually. They evaluate on specific point of Work Performance only on which they give maximum attention.

Whom to Appraise? Branch employees

Who appraises? Branch Manager

Branch Manager, Staff Manager, Asst. Super Boss(once only yearly) Manager

Promotion & Transfer The employee is promoted on the basis of his seniority only. There is no other base for promotion. The employee is given transfer only if there is any vacancy.

Trade Union There are no Trade Unions in ICICI bank. Standard Grievance Procedure There is a standard grievance procedure established in the Human Resource Department.

ICICI Bank-Application Process One can apply online for loans. OR Call Toll Free anywhere in India: 16 00 11 91 91 The documents may be handed over to our representatives or the dealer in ones city. If ones application is approved conditionally, our representatives will be happy to answer ones queries regarding the conditions. We sanction completed applications within 24 hours. The cheque, in favour of the dealership, is disbursed immediately after we receive all the post-sanction documents from one.

The product is hypothecated to ICICI Bank till the loan is repaid (ICICI Bank retains the right to repossess the product in case the loan is not repaid). However, one are still the owner of it and the invoice will be in ones name.

In case the loan has been sanctioned, one can cancel ones loan by sending us a letter asking for cancellation of application. If the loan has not been sanctioned, no letter would be required.

As a policy matter we do not disclose the reasons for being unable to approve any loan application. One is requested to deposit the Down Payment at the dealership counter.

FOR Personal Loan One has the option of applying online for a personal loan. An ICICI Bank Ltd. representative will contact one to service ones loan requirements. On receiving the completed application form with the requisite documents, we shall process ones loan within 3 working days. Please do not send any payment via cash/ cheque with ones application. Kindly ensure that all Post Dated Cheques are Drawn in favour of "ICICI Bank Limited", duly filled in all respects and endorsed "Account Payee only". One can give us a call or e-mail us too

ICICI & HDFC offer low interest rates but the public sector banks offer lower interest rates . BOB & SBI offers very low processing fees on home loans as compares to ICICI & HDFC . But BOB offers free personal property insurance & personal accident insurance during the period of loan taken. All the four banks offer the home loan to person who are employee or self employed and has a steady source of income . As compared to ICICI bank , all the other banks demand more document to take home loans.

Debit Card
Who Can Apply

1) Resident Indians holding any of the following Account(s) with HDFC Bank: 1 2 3 4 5 Savings Account Current Account (Sole Proprietorship) SuperSaver Account Loan Against Shares Account (LAS) Salary Account

2) Non-Resident Indians holding any of the following NRE Account(s) with HDFC Bank; 1 2 3 NRE Savings Account NRE Savings Depository Account NRE Current Depository Account


Obviously the primary role of evidence management is to support the organizations marketing program by making it possible to manage both intended and unintended clues which can give adequate evidence to a consumer and there by influence his perceptions. Interestingly, the physical evidence also influences the employees who ultimately interact with customers during the service delivery. As the service is provided by the theaters is mostly intangible their physical evidence can be divided in to two types:
Physical evidence relates to the other appearance of the organization. The atmosphere of any organization must be such that the employees & the customers both feel soothing & relaxed. The cool atmosphere of ICICI makes the customer feel at home. The interior of ICICI are really good along with proper lights. The atmosphere of the bank is calm, cool and relaxed. There is more space and there are no complexities.


ICICI Bank's 24 Hour ATM network is one of the largest and most widespread ATM Network in India. Our ATMs are located in commercial areas, residential localities, major petrol pumps, airports, near railway stations and other places which are conveniently accessible to our customers.

ICICI Bank ATMs features user-friendly graphic screens with easy to follow instructions. We have introduced ATMs which interact with customers in their local language for increased convenience.

SERVQUAL Model is a tool through which customer evaluates service quality experience as outcome of the gap between expected and perceived quality. The model was developed by Parasuram, Zeithaml and Berry in 1985 which emphasizes on the key requirements for a service provider delivering the expected service quality. It is also called PZB Model. The model identifies five gaps that can cause unsuccessful service delivery. By learning the flow of this model, it is possible to exercise greater management control over the customer relationship. The study of this model lead to an improved realization of the key issues at which the service provider can influence the satisfaction of consumers. SERVQUAL Model can be used to measure the gap between customers expected and perceived quality in the five different dimensions. These dimensions are the pillar of the SERVQUAL Model. They are Reliability, Assurance, Tangibles, Empathy and Responsiveness. Above RATER (Reliability, Assurance, Tangibles, Empathy and Responsiveness) Dimensions can be understood using following variables.

Reliability 1. Show sincere interest in solving customer problems

2. Perform the service right the first time 3. Provide their service as promised 4. Insist on error-free records

Assurance 1. Employee behavior instill customer confidence 2. Customers feel safe in their transactions 3. Employees are consistently courteous 4. Employees have knowledge to answer questions

Tangibility 1. Modern-looking equipment 2. Visually appealing physical facilities 3. Employees are neat-appearing 4. Visually appealing materials associated with the service 5. Keep promises

Empathy 1. Give customers individual attention 2. Operating hours are convenient to all customers 3. Employees give customers personal attention 4. Customers' best interests are at heart 5. Employees understand the specific needs of customers

Responsiveness 1. Inform exactly when services will be performed 2. Employees give prompt service 3. Employees are always willing to help 4. Employees are never too busy to respond to requests

SERVQUAL Model is a useful tool to find out the gaps which are shown in the figure. In case of the service industry, this gaps can be understood as follows: GAP 1: Lack of Understanding (Gap between Consumer Expectation and Management Perception) GAP 2: Lack of Development (Gap between Management Perception and Service Quality Specification) GAP 3: Poor Delivery (Gap between Service Quality Specifications and Service Delivery) GAP 4: Unrealistic Expectation (Gap between Service Delivery and External Communication) GAP 5: Service Gap (Gap between Perceived Service and Delivered Service)

Conceptual Model of Service Quality

Word-of-mouth Communication Expected service Personal needs Past experience

Gap 5

Customer Provider
Gap 3

Perceived service

Service delivery

Gap 4

External Communications

Service quality

Gap 1

to clients

Gap 2


Management perceptions Of client expectations

Finding from SERVQUAL Model: 1. Tangible

3.8 3.78 3.76 3.74 3.72 3.7 3.68 3.66 EXPECTATION PERCEPTION

Expectation: 3.789 Perception: 3.72

2. Reliability

3.8 3.78 3.76 3.74 3.72 3.7 EXPECTATION PERCEPTION

Expectation: 3.784 Perception: 3.73 3. Responsiveness

4.1 4 3.9 3.8 3.7 3.6 3.5 3.4 EXPECTATION PERCEPTION

Expectation: 4.07 Perception: 3.678 4. Assurance

3.9 3.8 3.7 3.6 3.5 3.4 3.3 EXPECTATION PERCEPTION

Expectation: 3.79 Perception: 3.475

5. Empathy

4.1 4 3.9 3.8 3.7 3.6 3.5 EXPECTATION PERCEPTION

Expectation: 3.68 Perception: 3.98

Comparative Gap Analysis


4.2 4 3.8 3.6 3.4 3.2 3




In bracing for tomorrow, a paradigm shift in bank financing through innovative products and mechanisms involving constant up gradation and revalidation of the banks internal systems and processes is called for. This requires product development and differentiation, innovation and business process reengineering, micro-planning, marketing, prudent pricing,

customization, technological up gradation, home / electronic / mobile banking, cost reduction and cross-selling. However, the kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in banking business. Furthermore, in all these customers interest is of paramount importance. The banking sector in India is demonstrating this and we do hope they would continue to chart in this traded path.





Year 2000 2001 2002 2003 2004 2005

Gross Profit Ratio Ratio 39.36% 37.81% 35.92% 40.97% 39.89% 38.19%

Gross Profit Ratio Ratio 40.97% 42.00% 39.36% 39.89% 38.19% 40.00% 37.81% 38.00% 35.92% 36.00% 34.00% 32.00% 2000 2001 2002 2003 2004 2005 Year

INTERPRETATION Ratio gives us the operating result of ICICI bank where it was good ever in time as the average rate is 38%. there was decline in years 2000, 2001, and 2002 it was due to expansion and other relative capital expenditure increased, after all bank maintain ratio to the level of average.



Net Profit Ratio Year 2000 2001 2002 2003 2004 2005 Ratio 10.05% 11.17% 9.48% 11.20% 14.14% 16.23%

Net Profit Ratio Ratio 16.23% 20.00% 14.14% 15.00% 10.05%11.17% 9.48% 11.20% 10.00% 5.00% 0.00% 2000 2001 2002 2003 2004 2005 Year

INTERPRETATION Ratio provide the actual margin to us that how much the bank will profitable after incurring all expenses and paying tax liabilities. Here the profit for paying dividend and making provision for reserve and surplus. The result of bank was not good it was RS. 10, Rs. 11, Rs. 9, Rs.11 Rs.14 for respective years from 2000 to 2004 out of which bank should has to provide for dividend and making provision for reserve and surplus. In year 2005 it was shown satisfactory position, even bank has to shown effort to increase ratio.



Return on equity Year Ratio 2000 9.16% 2001 12.27% 2002 3.92% 2003 16.56% 2004 19.58% 2005 15.54%

Return on equity Ratio 30.00%


20.00% 10.00% 0.00%


12.27% 3.92% 2001 2002









INTERPRETATION Here in the year 2001you can see that return on equity share capital has increased from 9.16 to 12.27 because of increase in profit. Now in the year 2002 it has been decreased 3.92. In the year 2003 and 2004 it has been increased by to 16.56 and 19.58. In the year 2005 it has been decreased form to 15.54. Here we can see that the equity share capital is not consistent, its high fluctuating in early years and become stagnant letter on.


YEAR 2001 2002 2003 2004 2005

RATIO 2.7 1.4 1.1 1.3 1.2

Current Ratio
3 2.5 2 Ratio 1.5 1 0.5 0 2001 2002 2003 2004 2005 Ye ar Ratios

INTERPRETATION In the year 2001 02, the current ratio has decreased from 2.7 to 1.4 due to the increase in the current liabilities. While in the year 2002-03, the current ratio has decreased from 1.4 to 1.1 due to increase in current laities. Year 2003-04 current ratio has increased from 1,1 to 1.2 that means there is a decrease in the current liabilities which is a quit good result for the company. Year 2004-05 the current ratio has deceased to 1 % there is a minute difference from last years ratio. The ratio decline due to concentration of bank toward retailing from the point of working capital and whole sale banking.

LIQUID RATIO Liquid Assets = Current Assets Stock Liquid Liability = Current Liability Bank Overdraft YEAR 2001 2002 2003 2004 2005 RATIO 3.0 1.78 1.3 1.47 1.39

Liquid ratio
3 2.5 2 Ratio 1.5 1 0.5 0 2001 2002 2003 2004 2005 Year Ratios

INTERPRETATION Here the Liquidity ratio of the company is not so satisfactory. Here we can see that there is continuous decrease in liquid ratio that means there is increase in liquid liabilities In the year 2001-02 liquid ratio has decreased from 3.0 to 1.78 here we can say that there is a increase in liquid liabilities. In the same way we can see in the year 2002-03, 2003-04 there in continuous decrees in liquid ratio by 1.78 and 1.3 respectively. In the year 2004-05 there is an increase in liquid ratio from 1.47 to 1.39


YEAR 2001 2002 2003 2004 2005

RATIO 6.65% 6.28% 6.75% 6.62% 7.65%


per cant






5.00% 0.00% 2001 2002 2003 year 2004 2005

INTERPRETATION Here we can say that the propriety ratio is in a good position that is a very good sign for the company. In the year 2001-02 the ratio has decreased from 6.65 to 6.28 . This is due to decrease in proprietor funds and increase in fixed assets. In the year 202 -03 there is increase in the proprietor ratio from 6.28 to 6.75 here there is an increase in proprietor funds and decrease in the fixed assets. In the year 2003-04 there is a decrease in the ratio by 6.75 - 6.62. In the year 2004 05 there is an increase from 6.62 7.65 thats the good sign for the company. So the proprietor ratio of the company is good.


YEAR 2001 2002 2003 2004 2005

CALCULATION 388.36/608.9 44858.4/4693.04 33637.95/4969.2 32125/5184.2 22004.86/5379.69

RATIO 0.63 9.5 6.76 6.1 4.0

Long Term Funds to Fixed Assets

10 8 6 Ratio 4 2 0 2001 2002 2003 2004 2005 Ye ar Ratios

INTERPRETATION Normally in this ratio fixed assets should be purchased from fixed capital only therefore decrease in this ratio would harm the company that means company has used the current capital to purchase the fixed assets. During the year 2001-02 the ratio has increased from 0.63 to 9.5 this is a very good sign for the company. In the Year 2002 -03 the ratio has decreased from 9.5 to 6.76 which means company was more dependent on the current capital. In the same way the decreasing trend was going in the years 2003 04, 2004-05 with ratio of 6.76 to 6.1 and 6.1 to 4.0 respectively.


YEAR 2001 2002 2003 2004 2005

RATIO 7.61% 0.41% 2.46% 3.51% 3.81%

Return on Capital Employed

10 8 6 Ratio 4 2 0 2001 2002 2003 2004 2005 Year


INTERPRETATION This ratio shows the net profit compared with capital employed. Here in the year 2001-20 the net profit ratio has been decreased from 7.61 to 0.41 which is a very bad sign for the company . In the year 2002-03 the net profit ratio has increased from 0.41 to 2.46 this is a very good sign that company is earning profit . In the year 2003-04 there is a still increase in the net profit 2.46 to 3.51 that means company is gradually earning the profit. In the year 2004-05 the net profit ratio has increased from 3.51 to 3.81 which show the increase in the profit.

RETURN ON SHARE HOLDERS FUNDS In order to judge the efficiency with which the proprietor funds are employed in business this ratio is ascertained. Proprietor funds include share capital and reserves. This ratio also indicates whether the return on proprietor is enough in relation to the risks that they undertake. This ratio also shows what amount of dividend is likely to be received on the shares.

Return on shareholder fund Year Ratio 2000 0.87% 2001 0.82% 2002 0.25% 2003 1.12% 2004 1.30% 2005 1.19%

Return on shareholder fund


Per cent

1.00% 0.50% 0.00%

0.87% 0.82% 0.25%


1.30% 1.19%

2000 2001 2002 2003 2004 2005 year

INTERPRETATION Here we can find that the ratio in the year 2001has decreased from .87 to 0.82 that mean the profitability of the company is not good. During the year 2002 the profit has decreased again to 0.25 is not good sign for the bank. During 2003-05 the profit has increased from 1.12 to 1.19. By the overall view of this ratio we can say that it is good for the prospective investors.


YEAR 2001 2002 2003 2004 2005

RATIO 11.55 10.02 10.72 12.08 16.99

Fixed Asset Turnover

20 15 Ratio 10 5 0 2001 2002 2003 2004 2005 Year ratios

INTERPRETATION Here in the year 2001-02 ht has decreased from 11.55 to 10.02 means in this year there was no proper utilization of asset. During the year 2002-03 the ratio has been increased from 10.02 to 10.72 it shows the slight improvement in the fixed asset. During the year 2003-04 the ratio has increased from 10.72 to 12.08 it indicates the efficiency has been increased. During the year 2004-05 the ratio has been increased from 12.08 to 16.99 in this year the profitability of the company is very good . So overall fixed assets turnover is good for this company where the assets are efficiently used.


ICICI Bank impaired loans Particulars Consumer loan &credit card receivable Wholesale banking Working capital finance

March 2005 544.9 2195.9 186.8

September 2005 736.9 1229.5 152.3

Here in 2005 the Non Performing Assets of the company has been increased. Here for the consumer loans and credit card receivables it has been increased from 544.9 to 736.9. For wholesale banking 2195.9 to 1229.5 and for working capital finance 18.6 to 152.3. It show that bank now concentrate on retailing rather than of wholesaling to corporate world.

Investment indicators
Investment indicators (BSE) Finance year 499.05 Trading date 30.26 30.26 Face value (Rs.) 184.39 Beta 9.2436 P/E (times) P/B (times) Market capitalisation 12772.95 (Rs. Crore) 736.75 41753.4 Total assets 5283.39 Sales PAT 0 PAT/Sales (%) 1106.95 782.54

Share price performance Market price (Rs.) EPS (Rs.) CPS (Rs.) BV per share (Rs.) Turnover (Rs. Crore) Financial indicators (Rs. Crore) Net worth Equity capital Borrowing GFA Capitalisation ratios Bonus equity/eq. cap (%) Free reserves/eq. cap (%) Mkt. cap/eq. cap+prem (%) Yield analysis Dividend rate (%) Yield (%) Pay out ratio (%)

Mar 2005 2-Nov-05 10 0.65 16.49 2.71 36982.71

165643.93 12355.02 2005.2 16.23

85 Dividend cover 1.7 Div./Net worth (%) 36.06

2.77 5.66


Risk is an inherent part of ICICI Banks business, and effective Risk Compliance & Audit
Group is critical to achieving financeial soundness and profitability. ICICI Bank has identified Risk Compliance & Audit Group as one of the core competencies for the next millennium. The Risk Compliance & Audit Group (RC & AG) at ICICI Bank benchmarks itself to international best practices so as to optimize capital utilization and maximize shareholder value. With well defined policies and procedures in place, ICICI Bank identifies, assesses, monitors and manages the principal risks:

1. Credit risk (the possibility of loss due to changes in the quality of counterparties) 2. Market Risk (the possibility of loss due to changes in market prices and rates of securities and their levels of volatility) 3. Operational risk (the potential for loss arising from breakdowns in policies and controls, human error, contracts, systems and facilities)

The ability to implement analytical and statistical models is the true test of a risk methodology. In addition to three departments within the Risk Compliance & Audit Group handling the above risks, an Analytics Unit develops quantitative techniques and models for risk measurement.

Credit Risk Management

Credit risk, the most significant risk faced by ICICI Bank, is managed by the Credit Risk Compliance & Audit Department (CRC & AD) which evaluates risk at the transaction level as well as in the portfolio context. The industry analysts of the department monitor all major sectors and evolve a sectoral outlook, which is an important input to the portfolio planning process. The department has done detailed studies on default patterns of loans and prediction of defaults in the Indian context. Risk-based pricing of loans has been introduced.

The functions of this department include: Review of Credit Origination & Monitoring Credit rating of companies/structures Default risk & loan pricing Review of industry sectors Review of large exposures in industries/ corporate groups/ companies Ensure Monitoring and follow-up by building appropriate systems such as CAS Design appropriate credit processes, operating policies & procedures Portfolio monitoring Methodology to measure portfolio risk Credit Risk Information System (CRIS)

Focussed attention to structured financing deals Pricing, New Product Approval Policy, Monitoring Monitor adherence to credit policies of RBI

During the year, the department has been instrumental in reorienting the credit processes, including delegation of powers and creation of suitable control points in the credit delivery process with the objective of improving customer response time and enhancing the effectiveness of the asset creation and monitoring activities.

Availability of information on a real time basis is an important requisite for sound risk management. To aid its interaction with the strategic business units, and provide real time information on credit risk, the CRC & AD has implemented a sophisticated information system, namely the Credit Risk Information System. In addition, the CRC & AD has designed a web-based system to render information on various aspects of the credit portfolio of ICICI Bank.

Market Risk
ICICI Bank is exposed to all categories of Market Risk, viz.,

Interest Rate Risk (risk due to changes in interest rates) Exchange Rate Risk (risk due to changes in exchange rates) Equity Risk (risk due to change in equity prices) Liquidity Risk (risk due to deterioration in market liquidity for tradable instruments)

The Market Risk Compliance & Audit Department evaluates tests and approves market risk methodologies developed by the Treasury. It also participates in the new product

approval process on a firm-wide basis and evaluates all new products from a market risk perspective

Operational Risk Management

ICICI Bank, like all large banks, is exposed to many types of operational risks. These include potential losses caused by events such as breakdown in information, communication, transaction processing and settlement systems/ procedures.

The Audit Department, an integral part of the Risk Compliance & Audit Group, focusses on the operational risks within the organisation. In recent times, there has been a shift in the audit focus from transactions to controls. Some examples of this paradigm shift are:

Adherence to internal policies, procedures and documented processes Risk Based Audit Plan Widening of Treasury operations audit coverage Use of Computer Assisted Audit Techniques (CAATs) Information Systems Audit Plans to develop/ buy software to capture the workflow of the Audit Department

The Audit Department conceptualized and put into operation a Risk Based Audit Plan during the year 1998-99. The Risk Based Audit Plan envisages allocation of audit resources in accordance with the risk constituents of ICICI Banks business


1. STRENGTHS Cutting edge technology, at least by Indian standards Lowest funding costs Best access among Indian banks to capital markets CRISIL assigns AAA rating to ICICI bank on 4/11/2005 which indicates sound position in the sector. Very low beta ICICIS distribution network is the biggest strength of the company. ICICI bank is giving low interest rate on housing finance than other private banks.

In private sector banking, ICICI bank has the highest number of branches in semiurban area and urban area. The bank has connection with SWIFT international network for easy transfer of money. ICICI has strong management to operate its function.

2. WEAKNESS Scale, some state banks a re larger much larger though sitting targets right now The company has large amount of non-performing loans. The bank has less concentration in rural areas. ICICI bank is taking higher charges on Demand draft, fund Transfer in regular current a/c than other nationalize bank. ICICI bank is not accepting cash deposit from third-party.

3. OPPORTUNITY Fast growing Indian economy and massive rise of middle class Rapid expansion of distribution network and retail offerings Low beta Low valuation Depreciating dollar The polarized banking scenario, with a large unfulfilled need gap, a bank that offered the best of both worlds had a ready and waiting market. Company also has opportunity from the dissatisfaction of the customers of public sector bank and foreign bank. Company gets benefit by minimizing the remedies of both private bank and foreign bank.

4. THREATS The 0.1% banking transaction tax will discourage cash transactions.

Due to government liberalization and globalization policy, banking sector became open for everybody. So, newer and newer private and foreign firms are opening their branches in India. This has intensified the competition Liquidity in co operative banks also make problem for the private banks. Miracle restructuring of state banks. Either that or they go nuts in trying to compete Indian Economic growth peters off.


The Industrial Credit and Investment Corporation of India (ICICI) was amongst the first bank work under company act 1956 not Indian banking regulation. The bank has largely outpaced the sector growth over the last few years, but of late the growth momentum has been subdued due to competitive reasons.

Rapid expansion of distribution network and retail offerings As Indian economy is rising and massive power of middle class family is also increased, ICICI bank is going to expand its distribution network and retail offering in semi-urban areas. The polarized banking scenario, with a large unfulfilled need gap, a bank that offered the best of both worlds had a ready and waiting market. Bank also has opportunity from the dissatisfaction of the customers of public sector bank and foreign bank and gets benefit by minimizing the remedies of both private bank and foreign bank. The 0.1% banking transaction tax will discourage cash transactions. Due to government liberalization and globalization policy, banking sector became open for everybody. So, newer and newer private and foreign firms are opening their branches in India. This has intensified the competition Liquidity in co operative banks also make problem for the private banks. Consolidation of ICICI bank has also lead to improve its corporate image as a universal bank. The bank has formulated a strong international strategy on the basis of their presence in the areas of information technology, investment banking and banking products. The positioning of the bank in present is in Home loans and good brand image amongst Indians. The bank has appointed DSA (Direct selling Agents) to market its different products and services. As per the charges the bank has bit high charges as compared to government and other banks.

Its marketing people should be through with knowledge of the product and their features, which will lead to attract more and more number of investors.

The number of ATM centers should be increased so that it would be stand as assets for
them at the time when they require the attention of the investors.

To make focus on the rural side because there is lot of potential in this part where much
of concentration is not made rather then having a full flagged branch bank has to develop its mobile branch like that of the other government banks so as to expand its area towards villages and towns. It focuses only on the areas, which are flourished with or where there is abundant of money, here they are lacking behind because per the experience now a days in rural areas also there is lot of potential for this type of bank. In case of charges they should have competitive charges as compared to that of other banks so that the investors who all are forwarding themselves towards other bank will divert their mind and will happily invest with ICICI. In marketing mix especially the promotion part should be developed like opening balance of the account should be less than two thousand five hundred i.e. it should be among thousand to two thousand and they should have to consider the charges of 750 Rs and try to reduce it. ICICI bank takes charges on transaction of cash which deposit to other branches of it. So bank should have to eliminate these charges as it is not taken by other banks.

14. Bibliography
We have got the necessary information for completing this grand project from the sources given below. From the Annual Reports of the sample banks ICICI Bank

Websites of the sample banks:

Brochures from the bank branch in Ahmedabad Magazines & Journals Banking Finance Professional Banker

News Papers: Business Standard Economic Times

Annexure-1 ASSETS & LIABILITIES Comparative Balance sheet and Analysis Balance sheet Assets ICICI BANK Ltd Cash & bank balance Investments Advances & Loans Deferred Tax assets Other Assets & Stocks Receivables Gross Fixed Assets Intangible/DRE not written off March 2000 March 2001 3415.16 4416.68 3657.34 0 0.1 336.44 320.32 19.6 3593.69 8186.86 7031.45 0 0.11 510.32 608.9 10.18 March 2002 12786.35 35891.08 47034.87 853.16 0.5 3955.41 4693.04 0 March 2003 6489 35462.3 53279.41 1437.14 0.81 6914.14 4969.2 0 March 2004 8470.64 43435.53 62647.62 1363.65 0.36 5915.95 5184.2 165.4 March 2005 12929.97 50487.35 91405.15 790.8 0.36 8560.36 5379.69 229.61

Total Assets







Balance sheet Liabilities ICICI BANK Ltd Capital Reserve & Surplus Deposits Borrowings Deferred Tax Liabilities Other liabilities & Provisions Total Liabilities March 2000 196.82 952.69 9866.01 659.46 0 397.64 March 2001 220.36 1092.26 16378.21 1200.8 0 844.96 March 2002 962.55 5632.41 32085.11 58969.97 1007.92 6301.51 March 2003 962.66 6320.65 48169.32 44051.95 948.31 7307.4 March 2004 966.4 7394.16 68108.59 39846.11 920.68 8913.62 March 2005 1086.75 11813.2 99818.78 41753.4 775.93 13187.27







Part of Liability in the balancesheet

8% 0% 25% Capital 1% 7% Reserve & Surplus Deposits Borrowings Deferred Tax Liabilities Other liabilities & Provisions


PROFIT & LOSS ACCOUNT OF ICICI BANK INCOME DATA OF ICICI BANK LTD Pr profit & Loss Account : income / banking cos. ICICI BANK Ltd Rs. Crore (NonAnnualized) Income Interest income On advances On deposits with RBI Mar 2000 12 mths Mar 2001 12 mths Mar 2002 12 mths Mar 2003 12 mths Mar 2004 12 mths Mar 2005 12 mths

1048.09 443.15 347.91 94.61

1442.48 686.41 570.91 108.67

2724.73 918.13 771.67 122.62

10771.83 6457.61 6016.24 235.57

11577.01 6421.69 6073.85 210.64

12355.02 7155.73 6752.83 232.01

On others Investment / dividend income Gain on security transactions Leasing & hire services Bills discounting Gain on forex transactions Commission & brokerage Other income Non-recurring income Gain on reval.of investments Tax refunds / adj. /defr. tax asset Provisions written back Others

0.63 409.71 101.14 4.63 0 22.39 67.07 0 0 0 0 0 0

6.83 555.72 19.21 0 0 41.61 139.53 6.35 20.26 13.77 0 6.49 0

23.84 1233.8 305.71 0 0 37.3 229.79 16.53 111.35 0 90.33 21.02 0

205.8 3019.86 492.33 0 0 10.24 791.79 570.38 1833.75 0.11 642.59 0 1191.05

137.2 2666.26 1224.63 0 0 192.63 1071.8 451.61 47.49 0 6.88 0 40.61

170.89 2417.52 546.13 0 0 314.64 1921 448.46 146.09 0 0 121.36 24.73


I C I C I Bank Ltd. Rs. Crore (Non-Annualized) Expenditure Interest expended On deposits On RBI loans Others Interest capitalized Mar 2000 12 mths 666.94 580.5 23.55 62.89 0 Mar 2001 12 mths 837.67 725.44 32.05 80.18 0 Mar 2002 12 mths 1558.93 1388.93 47.84 122.16 0 Mar 2003 12 mths 7881.77 2479.71 183.37 5218.69 0 Mar 2004 12 mths 6985.51 3023.02 229.37 3733.12 0 Mar 2005 12 mths 6545.63 3252.07 252.77 3040.79 0

Lease rent Other charges Other rent Loss on security transactions Loss on exchange transactions Prov.for diminution in investments Personnel cost VRS expenses Prov.for contingencies,NPA,etc. Insurance premium Other operating expenses Other expenses Legal expenses Less: expenses capitalized Non-recurring expenses Loss on sale of assets Loss on reval.of inves Prior period taxes Others

0 0 18.01 0 0 0 36.37 0 75.5 3.69 0.13 76.45 0.5 0 12.84 0 0 0 12.84

0 0 36.48 0 0 0 51.71 0 63.55 6.37 0 209.9 0.54 0 0.13 0.13 0 0 0

0 0 66.28 0 0 0 147.18 0 273.61 14.15 0 333.57 1.51 0 14.66 0.06 14.6 0 0

0 62.23 111.58 0 0 309.43 403.02 0 1474.98 25.18 0 972.35 8.51 0 6.5 6.5 0 0 0

0 29.74 149.25 0 0 98.71 520.46 25.6 459.12 33.5 0 1349.37 8.69 0 1.91 1.91 0 0 0

0 25.26 185.34 0 0 541.56 699.01 38.4 0 59.72 0 1773.32 9.71 0 2.17 2.08 0.09 0 0

PROFIT AND LOSS SUMMARY ICICI BANK LTD Profit & loss account: summary / banking cos. I C I C I Bank Ltd. Rs. Crore (NonAnnualized) Income Mar 2000 12 mths Mar 2001 12 mths Mar 2002 12 mths Mar 2003 12 mths Mar 2004 12 mths Mar 2005 12 mths







Interest income Investment / dividend income Others Other income Non-recurring income Expenditure Interest expended Personnel cost Prov.for contingencies,NPA,etc. Insurance premium Other expenses Less: expenses capitalised Non-recurring expenses Profits / losses PBDT Depreciation PBT Tax provision PAT Appropriation of profit Dividends Retained earnings

443.15 409.71 195.23 0 0 889.93 666.94 36.37 75.5 3.69 94.59 0 12.84

686.41 555.72 200.35 6.35 20.26 1205.81 837.67 51.71 63.55 6.37 246.38 0 0.13

918.13 1233.8 572.8 16.53 111.35 2408.38 1558.93 147.18 273.61 14.15 399.85 0 14.66

6457.61 3019.86 1294.36 570.38 1833.75 11247.04 7881.77 403.02 1474.98 25.18 1455.59 0 6.5

6421.69 2666.26 2489.06 451.61 47.49 9627.57 6985.51 520.46 459.12 33.5 1627.07 0 1.91

7155.73 2417.52 2781.77 448.46 146.09 9832.01 6545.63 699.01 0 59.72 2525.48 0 2.17

158.16 25.84 132.32 27.02 105.3

263.28 36.76 226.52 65.42 161.1

444.23 64.1 380.13 121.83 258.3

1928.92 505.94 1422.98 216.8 1206.18

2448.54 539.44 1909.1 271.99 1637.11

3117.56 590.36 2527.2 522 2005.2

27.47 77.83

48.57 112.53

48.57 209.73

518.69 687.49

613.77 1023.34

723.06 1282.14

Cash Flow of ICICI Bank Mar 2000 12 mths Mar 2002 12 mths Mar 2003 12 mths Mar 2004 12 mths Mar 2005 12 mths

I C I C I Bank Ltd. Rs. Crore (Non-Annualized) Net profit before tax & extra ord. items Add: depreciation Interest payable Gain or loss on forex

Mar 2001 12 mths

138.33 24.79 0 0

226.52 36.76 0 0

289.8 64.09 0 0

780.39 505.94 0 0

1902.22 926.85 0 0

2527.2 942.45 0 0

transactions Write offs / amortizations Profit on sale of investments Profit on sale of assets Interest income Investment / dividend income Other income / provision adjustments Cash flow before working cap. changes Trade and other receivables Trade payables Deposits Advances Others Cash flow from operations Interest paid Direct taxes paid Dividend tax paid Cash flow before extra ord. items Extraordinary items Cash flow from operating activities Net cash used in investing activities Purchase of fixed assets Sale of fixed assets Acquisition / merger of business unit Purchase of investments Sale of investments Disbursements Interest received Investment / dividend received Other income Net cash used in financing activities Proceeds from share issues

0 0 0.13 0 0 89.39

0 0 0.13 0 0 63.66

0 0 0.06 0 0 270.99

0 0 6.5 0 -109.42 1790.8

0 0 1.91 0 -126.17 578.62

0 0 2.08 0 -188.08 550.25

252.64 0 157.42 3793.07 -1612.96 137.23 2727.4 0 -67.55 0

327.07 0 156.87 3051.84 -1861.84 89.97

624.94 -507.07 1039.53 15706.9 2303.33 0

2974.21 0 326.66 16084.2 -7457.88 -2450.01 9477.18 0 -643.82 0

3283.43 0 1415.43 19939.28 -9089.99 -791.46 14756.69 0 -853.12 0

3833.9 0 4322.69 31710.19 -28794.98 -2073.5 8998.3 0 -848.74 0

1763.91 19167.63 0 0 -133.8 -127.53 -27.47 0

2659.85 0

1602.64 0

19040.1 -15.7

8833.36 0

13903.57 0

8149.56 -121.36







-1624.31 -56.14 0.11 0 -1568.28 0 0 0 0 0

-1883.41 -78.55 0.15 678.41 -2483.42 0 0 0 0 0

-8492.74 -24.42 0.73 6843.74 15312.79 0 0 0 0 0

-212.71 -451.69 10.21 0 -5411.17 5530.52 0 0 109.42 0

-6863.82 -483.83 33.79 0 -6539.95 0 0 0 126.17 0

-7758.63 -379.53 26.29 0 -7593.47 0 0 0 188.08 0

741.37 763.35

459.3 0

-1339 0

-14918 0.03

-5058.12 53.91

4189.77 3257.28

Total proceeds from borrowings Proceeds from long term borrowings Proceeds from short term borrowings Repayment of long term borrowings Repayment of short term borrowings Share issue expenses Dividend paid Other cash from financing activities Net cash flow Opening cash balance Closing cash balance

0 0 0 0 0 0 -21.98 0 1776.91 1638.25 3415.16

0 459.3 0 0 0 0 0 0 178.53

0 0 228.54 0 -1470.41 0 -97.13 0 9192.66

0 0 0 -14918.03 0 0 0 0 -6297.35 12786.35 6489

0 1140.15 0 -5733.41 0 0 -518.77 0 1981.63 6489 8470.63

0 5416.9 0 -3861.69 0 0 -622.72 0 4459.34 8470.63 12929.97

3415.16 3593.69 3593.69 12786.35