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The latest mantra is Universal Banking, which is combination of

Commercial & Investment Banking. The concept is most relevant in the United
Kingdom and the United States. Barclays Bank, Chase Manhattan and Citicorp
are some of the examples of it. Recently every sector is going for expansion and
the same has been done by banking sector where it has also extended its
activities and functions. Traditional banking collects deposits from depositors and
disburses loan to the needy persons and institutions. In the globalization, banks
are provided with multifarious products for their customers under one roof.
Universal banking refers to those banks which offer a wide range of financial
services, beyond this amenities commercial banking, investment banking,
insurance etc. The universal banking is that includes not only services related to
savings and loans but also investments and insurance. The changes in the
banking sector can be summed up in two aspects first it is moving towards the
global standards and norms and second the system of banking has become more
customers oriented now. In general perception, the term Universal Banking refers
to a financial institution offering commercial as well as investment banking
services which also include services related to savings, loans and investments.
But in real practice, institutions which offer a wide range of financial services,
beyond commercial banking and investment banking and various other activities
including insurance are regarded as universal banking. It is like a coordinated
financial super market supplying innovative and multifarious products under one
roof. It is one spot ultimate shopping place for a customer who is willing to deal
in several financial products. The universal banking is one of the latest functional
bank with its objectives to get maximum profit by way of interest; fees based on
income and commission through various diversified activities. The suggestions of
Narasimhan Committee and Khan Committee for consolidation of banking
through mergers and amalgamations, has brought about a change in commercial
banks marching them towards universal banking.
Diversification of banking activities in India a move towards Universal
Banking framework
The Indian Banking system gained much strength and cohesion after the
first round of nationalization of banks in 1969. Nationalization improved the
environment in respect of formulation and implementation of the monetary and
banking policies. Post nationalization period witnessed rapid branch expansion,
increase in credit facilities to the priority sectors, and increase in the volume of
deposit mobilization and introduction of various schemes like Lead Bank Scheme,
Integrated Rural Development Programme etc. Early 1980s, India witnessed
explosive growth of financial markets. According to Rajadhyaksha (2004), these
developments in the Indian Financial sector allowed Companies and sometimes
even customers to bypass banks and get money directly from those who save it
a process called disintermediation. This forced banks to enter new business in
order to hang on to their precious customers. Moreover, product boundaries have
blurred which was also another striking reason for banks to enter into new areas
to meet customer needs. And above all, new network technology allowed banks
to exploit economies of scale and offer wider range of financial products. All
these enabled banks to offer a variety of innovative services in anticipation of

materials gains, following a cost-benefit analysis. An Overview of Microfinance

Service Practices in Nepal is on customers demand and satisfying their needs in
a best possible way and also on reducing transaction costs and to yield higher
profits. Moreover, as customers demanded for variety, convenience, and new
services, banks too wanted to provide products that could meet their precise,
individual needs. Significantly, the market shifted from being seller-centric to
buyer-centric and customers were flooded with offers of a variety of tailor-made
products like insurance, mutual fund, stock trading, housing finance etc. under
one roof along with their traditional products. Thus, diversification of banking
activities of Commercial banks eventually led to the emergence of Universal
Banks in the Indian Financial System. The first impulses of a more diversified
financial intermediation was witnessed in the late 1980s and early 1990s, when
banks were allowed to undertake leasing, investment banking, mutual funds,
factoring, hire-purchase activities through separate subsidiaries. By the mid1990, all restrictions on project finance were removed and banks were allowed to
undertake several activities in-house. According to the author, reforms in the
Insurance sector in the late 1990s and opening up of this field to private and
foreign players, also resulted in permitting banks to undertake sale of insurance
products. All these have resulted in gradual metamorphosis of Indian commercial
banks into Universal banks, offering a variety of financial services for developing
countries especially in South Asia there are no such empirical studies on
universal banking. Like India many countries in the region have recently opened
up their economies. The universal banking is yet to attain momentum as a
strategy of banking in India also. The mergers and acquisitions in the banking
sector in India may ultimately lead to emergence of universal banks, Commercial
banks enjoy long term relationship with their customers as compared to other
financial institutions. SBI and some other Public Sector Banks have also started
to adopt the conversion path leading to Universal Banking. These banks have
hired the services of experts also by outsourcing some services to outside
agencies. New Private Sector Banks especially ICICI Bank Ltd., Kotak Mahindra
Bank Ltd., HDFC Bank Ltd. and Development Credit Bank Ltd. have made
strategic alliances with several foreign companies for selling the insurance
products both in life as well and are moving very fast towards Universal Banking
ICICI Bank: A Universal Bank ICICI Bank has emerged as Indias first Universal
bank with a reputation for innovation and a universal culture that embraces
change. The bank believes in continuously enhancing stakeholder value by
providing innovative products and services at a competitive price to the
customers. The bank boasts of being a relationship based bank and uses its
capital strength as a competitive advantage in the market it serves and
leverages technology to satiate customer needs. The bank now has a presence in
17 states in India, with a branch network of 395 and over 3.7 million customer
accounts. ICICI bank has the largest ATM network in the country. ICICI bank
leverages on its resources and tie-ups at a fast pace and is constantly making
efforts to take the first mover advantage in the technology related businesses.
The bank has been rapidly expanding its ATM network, credit card business and
consolidating technology infrastructure. Telephone banking has been made

available from the customer base of Internet banking and has seen a
phenomenal rise to more than 0.5 million customers.
Conclusion Almost all the banks have started their journey towards becoming a
Universal Bank and in the years to come, Indian Banking sector can boast of
having a few more Universal banks. As a commercial bank has started to offer a
variety of products under an umbrella brand, the structure of banks has
changed. Initially, when banks were offering only the traditional banking
services, the organisational structure was quite simple, but with the introduction
of services like insurance, mutual funds, investments banking etc., banks are
required to opt for a different structure. In India, almost all banks have been
following the Bank Holding Company structure. In BHC structure, apart from a
banking subsidiary, the other areas of business activities are carried out through
intermediate holding companies. Universal banking concept can be successfully
implemented only when the bank managers have a positive attitude towards it.
This is deemed important as the bank managers are the ultimate authority to
create awareness on the variety of services that are offered by the bank and at
the same time popularise those services among customers of banks so as to
generate demand