TERM PAPER

OF
FINANCIAL INSTITUTION AND SERVICE

TOPIC: STUDY ON PRIVATE AND PUBLIC SECTOR BANK

SUBMITTED TO, MR. BHAVDEEP S KOCHAR LECT. OF LIM

SUBMITTED BY, NEHA TYAGI RT-1902 A01 10906036

1

INTRODUCTION
The Indian financial system comprises of four segments or components. These are financial institutions, financial markets, financial instruments and financial services. Banks come under the financial institutions segment. Financial institutions are intermediaries that mobilize savings and facilitate allocation of funds in an efficient manner.The Indian financial system was quite well developed even prior to India¶s political independence in August 1947. Both foreign and domestic banks were present and so was a well-developed stock market. Until the 1990s, the Indian financial system was tightly regulated. Following the balance of payments crisis in 1991-92, a stabilization program was initiated with the help of International Monetary Fund, which specifically included a reform of the financial system. The foundation for the financial sector reforms was laid by recommendations of the Committee on Financial System 1991 (Narasimham Committee). The Committee again reviewed the financial system in 1998 and made further recommendations. The objectives of the financial sector reforms were to bring about greater efficiency and competitiveness in all the spheres of the economic activity. Banking in India has its origin in Vedic times, i.e. 2000 to 1400 BC. Indigenous bankers and moneylenders have played a vital role for centuries. Modern banking in India emerged between the 18th and beginning of 19th centuries. In 1683, the officers of East India Company set up the first bank in Madras. Between 1770 and 1850 banks such as Bank of Hindustan, Commercial Bank, Calcutta Bank, Bank of Calcutta and Bank of Bombay. Later, Commercial Bank and Calcutta Bank merged to form Union Bank. Three Presidency Banks i.e. Bank of Bombay, Bank of Madras and Bank of Bengal which were set up between 1809 and 1843 were amalgamated to form the Imperial Bank of India in 1921.The Imperial Bank of India later became the State Bank of India. The sudden boom of investment in the 1900¶s led to the emergence of leading joint stock banks such as the Punjab National (1895), Bank of India (1906), Indian Bank (1907), Bank of Baroda (1909), Central bank of India (1911) and Union Bank of India (1919). The major functions of these banks were to finance foreign trade while domestic trade was largely handled by the Multani Shroffs and moneylenders. Between 1941 and 1945, the number of banks increased from 473 to 737 but these banks suffered from certain limitations such as inadequate capital
2

structure and unsound methods of operations and management. Thus, the government in consultation with Reserve Bank of India enacted the Banking Companies Act in 1949. Between 1947 and 1969 banks were under private ownership of maharaja¶s, or king s of the princely states of India and these banks served the rich families and industrial houses which narrowed the industrial growth of the banking system. The Reserve Bank of India thus made it compulsory for reconstruction and / or merger of the weak units with the sound one¶s as per the Banking Companies Act of 1960 and the number of banks declined from 548 in 1947 to 89 in 1969. Fourteen private banks were nationalized on July 19, 1969 and another six in 1980. One of the objectives of nationalization was to extend the reach of organized banking to rural areas and neglected sections of the society. Between 1969 and 1992, there was rapid expansion of bank network. The number of bank branches increased from 8262 to 60570. The banking system spread to rural areas. Small Scale, tiny and cottage industries benefited from the spread of banking system. The share priority sector in total banking grew up from14 percentage in 1969 to 43% in 1990 and banking density improved from 64000 people per branch in 1969 to 14000 people per branch in 1991. The world of banking has assumed a new dimension at dawn of the 21st century with the advent of tech banking, thereby lending the industry a stamp of universality. In general, banking may be classified as retail and corporate banking. Retail banking, which is designed to meet the requirement of individual customers and encourage their savings, includes payment of utility bills, consumer loans, credit cards, checking account and the like. Corporate banking, on the other hand, caters to the need of corporate customers like bills discounting, opening letters of credit, managing cash, etc. Metamorphic changes took place in the Indian financial system during the eighties and nineties consequent upon deregulation and liberalization of economic policies of the government. India began shaping up its economy and earmarked ambitious plan for economic growth. Consequently, a sea change in money and capital markets took place. Application of marketing concept in the banking sector was introduced to enhance the customer satisfaction the policy of privatization of banking services aims at encouraging the competition in banking sector and introduction of financial services. Consequently, services such as Demat, Internet banking, Portfolio Management, Venture capital, etc, came into existence to cater to the needs of public. An important agenda for every banker today is greater operational

3

efficiency and customer satisfaction. The mew watchword for the bank is pretty ambitious: customer delight. The introduction to the marketing concept to banking sectors can be traced back to American Banking Association Conference of 1958. Banks marketing can be defined as the part of management activity, which seems to direct the flow of banking services profitability to the customers. The marketing concept basically requires that there should be thorough understanding of customer need and to learn about market it operates in. Further the market is segmented so as to understand the requirement of the customer at a profit to the banks.

DEFINITION OF BANK: o The Oxford dictionary defines the Bank as An establishment for the custody of money, which it pays out, on a customer Order. o According to Whitehead : A Bank is defined as an institution which collects surplus funds from the public, safeguards them, and makes them available to the true owner when required and also lends sums be their true owners to those who are in need of funds and can provide security. o Banking Company in India has been defined in the Banking Companies act 1949, One which transacts the business of banking which means the accepting, for the purpose of lending or investment of the deposits of money from the public, repayable on demand, or otherwise and withdraw able be cheque, draft, order or otherwise. The banking system is an integral subsystem of the financial system. It represents an important channel of collecting small savings from the households and lending it to the corporate sector. The Indian banking system has Reserve Bank of India (RBI) as the apex body for all matters relating to the banking system. It is the central Bank of India. It is also known as the Banker To All Other Banks.

4 

Public Sector Banks
Public sector banks are the ones in which the government has a major holding. They are divided into two groups i.e. Nationalized Banks and State Bank of India and its associates. Among them, there are 19 nationalized banks and 8 State Bank of India associates. Public Sector Banks dominate 75% of deposits and 71% of advances in the banking industry (Indian financial system, by Bharti Pathak, 2003) 

Private Sector Banks
Private sector banks came into existence to supplement the performance of Public sector banks and serve the needs of the economy better. As the public sector banks were merely in the hands of the government, banks had no incentive to make profits and improve the financial health. Nationalized killed competition and stifled competition in banking. Banks operated in regulatory environment with administered rate of interest structure, quantitative restrictions on credit flows, high reserve requirements and significant proportion of lend able resources going to the priority and government sectors. This resulted in low levels of investment and growth, decline in productivity and erosion of profitability of banking sector. Thus, Narasimham Committee I (1991) which recommended the free entry of new banks in the financial market provided they confirm the minimum start up capital and other requirements by the permission of Reserve Bank of India. Currently there are 31 Private Sector Banks, which includes 23 old, and 8 new banks. (Indian financial system, by Bharti Pathak, 2003) 

EVOLUTION OF INDIAN BANKING:

Ancient banking system of India constituted of indigenous bankers. They have been carrying on their age-old banking operations in different parts of the country under different names.

5

The modern age of banking constitutes the fundamental basis of economic growth. The term Bank is being used since long time but there is no clear conception regarding its beginning. According to the viewpoint, in good old days. Italian money leaders were known as Banchi´ because they kept a special type of table to transact their business. 

IMPORTANCE OF BANKS

Today banks have become a part and parcel of Kotak Bank's life. There was a time when dwellers of the city alone could enjoy their services. Now banks offer access to even a common man and their activities extend to areas hitherto untouched. Banks cater to the needs of agriculturalists, industrialists, traders and to all the other sections of the society. In modern age, the banking constitutes the fundamental basis of economic growth. Thus, they accelerate the economic growth of a country and steer the wheels of the economy towards its goals of self reliance in all fields´. It naturally arouses Kotak Bank's interest in knowing more about the µBank and the various men and the activities connected with it. 

INDIAN BANKING SYSTEM:
"The success of the economic reforms is therefore all to see and the driving force of these reforms is the banking sector". P. Chidam Baram Union Finance Minister P. Chidambaram strongly believes that the country's banking sector has been one of the driving forces in the process of economic reforms. Banking system occupies an important place a nation's economy. A banking institution is indispensable in a modern society. In plays a pivotal role in the economic development of a country. Thus, economic development of a country depends upon success of banking industry and success of banking Industry is determined to a large extent by now well then needs of its customers have been understood and satisfied. Reserve Bank of India

6

The Banking system is an integral sub-system of the financial system. It represents an important channel of collecting small savings from the households and lending it to the corporate sector. The Indian banking system has The Reserve Bank of India (RBI) as the apex body from all matters relating to the banking system. It is the³Central Bank´ of India and act as the banker to all other banks

y Functions of RBI:
a. b. c. d. e. f. g. h. Currency issuing authority Banker to the government. Banker to other Bank. Framing of monetary policy. Exchange control. Custodian to foreign exchange and gold reserves. Development activities. Research and development in the banking sector. 

CLASSIFICATION OF BANKS:
On the basis of Ownership: 1. PUBLIC SECTOR BANKS Nationalized banks or public banks dominate banking System in India. The nationalization of banks in India took place in 1969 by Mrs. India Gandhi the then prime minister. The major objective behind nationalization was to spread banking infrastructure in rural areas and make available cheap finance to Indian farmers. Before 1969, State Bank of India (SBI) was the only public sector bank in India. Despite the entry of many new domestic and foreign private banks since liberalization, public sector banks continue to dominate the commercial banking Industry.

7

2. PRIVATE SECTOR BANKS Private sector banking in India received a flip in 1994 when Reserve Bank of India Encouraged setting up of private banks as part of its policy of liberalization of the Indian Banking Industry. Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. Private Banks have played a major role in the development of Indian banking industry. They have made banking more efficient and customer friendly. In the process they have jolted public sector banks out of complacency and forced them to become more competitive. India has a better banking system in place of other developing Countries.

3. CO-OPERATIVE BANKS These are those banks that are jointly run by a group of individuals. Each individual has an equal share in these banks. Its shareholders manage the affairs of the bank. 4. COMMERCIAL BANKS These are the banks that do banking business to earn profit. These banks make loans for short to business and in the process create money. Credit creation is the main function of these banks. 5. FOREIGN BANKS These are those banks that are incorporated by foreign company. They have set up their branches in India. These banks have their head offices in foreign countries. Their principle function is to make credit arrangement or the export and the import of the country and these banks deals in foreign exchange. 6. INDUSTRIAL BANKS Industrial banks are those banks that offer long term and medium term loan to the industries and also work for their development. These banks help industries in sale of their shares, debentures and bonds. They give loan to the industries for the purchase of land and machinery.
8

7. AGRICULTURAL BANKS Agricultural banks are those banks that give credit to agricultural sector of the economy.

8. SAVING BANKS The principle function of these banks is to collect small savings across the country and put them to the productive use. In India department of post office functions a savings banks. 9. CENTRAL BANK Central Bank is the apex bank of the banking system of the country. It issues currency notes and acts a banker's bank. Economic stability is the principle function of this bank. In short, it regulates and controls the banking system of the country. RBI is the Central Bank of India. 

STRUCTURE OF BANKING SYSTEM
Different countries of the world have different types of banking systems. However, Commercial banking had grown under all these banking systems. To understand the structure of banking system, let us take up various types of banking systems one by one. These types are: (1) UNIT BANKING: Unit Banking originated in the United State of America. It grew in the United States of America. An independent unit bank is a corporation that operates one office and that is not related to other banks through either ownership or control.

9

(2) BRANCH BANKING: This the most popular and important banking system. In branch banking, a bank has a large network of branches scattered all over the country. Branch banking developed in England. Subsequently most of the countries of the world adopted the system. In terms of branches, the State Bank of India has emerged as one of the largest banks in the world. Under the system branches can operate without keeping large idle cash reserves. Branch Banking tends to bring homogeneity in the prevailing Interest Rates. The choice of securities and investments is larger. With the growth of large scale business it is no wonder that the trend is almost every country towards the branch banking i.e. big banks with a network of branches all over the country. The Bank of America has now more than 500 branches in the state of California itself.

(3) CHAIN BANKING: Under the system there is pooling of resources. Chain banking overcomes certain limitations of unit banking. But the system suffers from certain limitations of its own. There may be a lack of co-ordination, proper control etc. The system is inflexible. (4) GROUP BANKING: It is similar to Chain Banking, the difference being that under Group Banking two or more banks are brought under the control of the same management through a Holding Company. Both the systems aim at gaining the advantages of large scale operations. The banks are able to pool their resources in case of emergency or when large amount of cash is required to meet the loan requirements of the customer. (5) CORRESPONDENT BANKING: Under Correspondent banking, small banks serving local communities hold deposits with joint banks serving in big cities. This kind of banking is prevalent in U.S.A. The correspondent banks perform two important services of outstation cheque clearing and loan participation for the respondent banks while they benefit for the deposit funds of respondent banks.
10

PRIMARY FUNCTIONS: 1) Accepting of Deposits: A bank accepts deposits from the public. People can deposit their cash balances in either of the following accounts to their convenience:(a) Fixed or Time Deposit Account: Cash is deposited in this account for a fixed period. The depositor gets receipts for the amount deposited. It is called Fixed Deposit Receipt. The receipt indicates the name of the depositor, amount of
11

deposit, rate of interest and the period of deposit. This receipt is not transferable. If the depositor stands in need of the amount before the expiry of fixed period, he can withdraw the same after paying the discount to the bank. (b) Savings Account: This type of deposit suits to those who just want to keep their small savings in a bank and might need to withdraw them occasionally. Banks provide a certain rate of interest on the minimum balance kept by the depositor during the month. (c) Current Account: This type of account is kept by the businessmen who are required to withdraw money every new and then. Banks do not pay any interest on this account. Any sum or any number of withdrawals can be presented by such an account holder

2) Advancing of Loans: The bank advances money in any one of the following ways. (a) Overdraft Facilities: Customers of good trading are allowed to overdraw from their current account. But they have to pay interest on extra amount they have withdrawn. Overdrafts are allowed to provide temporary accommodation since the extra amount withdrawn is payable within a short period. (b) MoneyatCall: It is the money lent for a very short period varying from 1 to 14 days. Such advances are usually made to other banks and financial institutions only. Money at call ensures liquidity. In the Interbank market it enables bank to make adjustment according to their liquidity requirements. (c) Loans: Loans are granted by the banks on securities which can be easily disposed off in the market. When the bank has satisfied itself regarding the soundness of the party, a loan is advanced. (d) Cash Credit: The Debtor is allowed to withdraw a certain amount on a given Security. The debtor withdraws the amount within this limit, interest is charged by the bank on the amount actually withdrawn.

12

(e) Discounting Bill of Exchange: It is another method of making advances by the banks. Under this method, banks give advance to their clients on the basis of their bills of exchange before the maturity of such bills. (f) Investment in Government Securities: Purchasing of government securities by the banks tantamount to advancing loans by them to the Government. Banks prefer to buy government securities as these are considered to be the safest investment. For example: Indira Vikas Patra: It enables the banks to meet requirement of statutory liquidity ratio (SLR)

(3) Credit Creation: One of the main functions of banks these days is to create credit. Banks create credit by giving more loans than their cash reserves. Banks are able to create credit because the demand deposits i.e. a claim against the bank is accepted by the public in settlement of their debts. In this process the bank creates money. For this reason Prof. Sayers has called bank³the manufactures of money. (4) Cheque system of Payment of Funds: A cheque, a negotiable instrument, which in fact is a bill of exchange, drawn upon a banker, is the most popular credit instrument used by the client to make payments. Cheque system is the main credit instrument in the banking world. Although a cheque is not legal tender money, they serve as a medium of exchange in a limited way as it is a negotiable instrument

SECONDARY FUNCTIONS: Besides the above primary functions, banks also perform many secondary functions such as agency functions, general utility and social functions. (1) Agency Functions Banks act as agents to their customers in different ways:(a) Collection and Payment of Credit and Other instruments: The Commercial banks collect and pay cheques, bills of exchange, promissory notes, hundies, rent, and interest etc.On behalf of their customers and also make payments of income tax, fees, insurance premium etc. on behalf of the customers. (b) Purchase and Sale of Securities : T h e modern commercial banks also undertake the purchase and sale of various securities like shares, stocks, bonds units and debentures etc.On behalf of the customers, banks do not give any advice
13

regarding the suitability or otherwise of a security but simply perform the functions of a broker. (c) Trustee and Executor: Banks also acts as trustees and executors of the property of their customers on their advice. Sometimes banks also undertake income tax services on behalf of the customers. (d) Remittance of Funds : The Commercial banks remit funds on behalf of clients from one place to another through cheques, drafts, mail transfers etc. (e) Representation and Correspondence: Sometimes commercial banks acts as representatives or correspondents of the clients especially in handling various applications. For instance, passports and travel tickets, booking of vehicles, plots etc. (f) Billion Trading: In many countries, the commercial banks trade is billions like gold and silver. In Oct 1997, 8 banks including SBI, IOB, Canada Bank and Allahabad Bank have been allowed import of gold which has been put under open general licensed category. (g) Purchase and Sale of Foreign Exchange: Banks buy and sell foreign exchange, promoting international trade. This function is mainly discharged by foreign Exchange Banks. (h) Letter of References: Banks also give information about economic position of their customers to domestic and foreign traders and vice versa.

(2) GENERAL UTILITY SERVICES:In addition to agency services, banks render many more utility services to the Public. These services are:(a) Locker Facilities : Banks provide locker facilities to their customers. People can keep their valuables or important documents in these lockers. Their annual rent is very nominal. (b) Issuing letters of credit: Bankers in a way by issuing letters of credit certify the credit worthiness of the customers. Letters of credit are very popular in foreign trade.
14

(c) Acting as Underwriters: Banks also underwrite the securities issued by the Government and Corporate bodies for a commission. The name of bank as an underwriter encouraged investors to have faith in the security. (d) Help inter aspiration of Goods: Big businessmen or industrialists after consigning goods to their retailers send the Railway Receipt (Consignment Note) to the bank. (e) Issuing of gift c heques: Certain banks issue gift cheques of various denominations, e.g. Some Indian banks issue gift cheques f the denominations of Rs. 21, 31, 51 and 101 etc. They are generally issued free of charge. (f) Dealing in Foreign Exchange: Major branches of commercial banks also transact business of foreign exchange. Commercial banks are the main authorized dealers of foreign exchange in India. (g) Merchant banking Services: Commercial banks also render merchant banking services to the customers. They help in availing loans from non-banking financial institutions. Public Sector Banks Reserve Bank of India - Central Bank Bank of India Dena Bank IDBI Bank Indian Bank Oriental Bank of Commerce Punjab National Bank United Bank of India Allahabad bank Andhra Bank Bank of Baroda Bank of Maharashtra Canada Bank Central Bank of India Corporation Bank Indian Overseas Bank Syndicate Bank Union Bank of India Vijay Bank
15

Punjab & Sind Bank

Private Banks Axis Bank Bank of Rajasthan Catholic Syrian Bank City Union Bank Dhanalakshmi Bank Federal Bank Jammu & Kashmir Bank Tamil Nadu Mercantile Bank Yes Bank ICICI Bank HDFC Bank PB BANK HSBC BANK ABN AMRO DEUTSCHE BANK

PRODUCTS/SERVICES OFFERED BY BANK: Some of common available banking products are explained below: (a) Credit Card: Credit Card is³post paid´ or³pay later´ card that draws from a credit Line-money made available by the card issuer (bank) and gives one a grace period to pay. If the amount is not paid full by the end of the period, one is charged interest. These bills are assembled in the bank and the amount is paid to the bank by the card holder totally or by installments. The card holder need not have to carry money/cash with him when he travels or goes for purchasing. Credit cards have found wide spread acceptance in the µmetros and big cities. Credit cards are joining popularity for online payments. The major players in the Credit Card market are the foreign banks and some big public sector banks like SBI and Bank of Baroda. India at present has about 3 million credit cards in circulation. (b) Debit Cards: Debit Card is a³prepaid´ or³pay now´ card with some stored value. Debit Cards quickly debit or subtract money from ones savings account, or if one were taking out cash.
16

When A CUSTOMER makes a purchase, he enters this number on the shops PIN pad. When the card is swiped through the electronic terminal, it dials the acquiring bank system either Master Card or Visa that validates the PIN and finds out from the issuing bank whether to accept or decline the transaction. The customer never overspread because the amount spent is debited immediately from the customer¶s account. So, for the debit card to work, one must already have the money in the account to cover the transaction. There is no grace period for a debit card purchase. The major limitation of Debit Card is that currently only some 30004000 shops country wide accepts it. (c) Automatic Teller Machine: The introduction of ATMs has given the customers the facility of round the clock banking. ATM card is a device that allows customer who has an ATM card to perform routine banking transaction at any time without interacting with human teller. This can be done by inserting the card in the ATM and entering the Personal Identification Number and secret Password. ATMs are currently becoming popular in India that enables the customer to Withdraw their money 24 hours a day and 365 days. It provides the customers with the ability to withdraw or deposit funds, check account balances, transfer funds and check statement information. (d) E-Cheques: The e-cheques consists five primary facts. They are the consumers, the merchant, consumers bank the merchants bank and the e-mint and the clearing process. This chequring system uses the network services to issue and process payment that emulates rewords chequing. The payer issues digital cheques to the payee ant the entire transactions are done through internet. Electronic version of cheques are issued, received and processed. The e-chequing is a great boon to big corporate as well as small retailers. Most major banks accept e-cheques. Thus this system offers secure means of collecting payments, transferring value and managing cash flows. (e)Electronic Funds Transfer (EFT): Many modern banks have computerized their cheque handling process with computer networks and other electronic equipments. These banks are dispensing with the use of paper cheques. The system called electronic fund transfer (EFT) automatically transfers money from one account to another. This system facilitates speedier transfer of funds electronically from any branch to any other branch. In this system the sender and the receiver of funds may be located in different cities and may even bank with different banks. Funds transfer within the same city is also permitted. The scheme has been in operation since February 7, 1996, in India.
17

(f) Telebanking: Telebanking refers to banking on phone services. A customer can access information about his/her account through a telephone call and by giving the coded Personal Identification Number (PIN) to the bank. Telebanking is extensively user friendly and effective in nature. (g)Mobile Banking: A new revolution in the realm of e-banking is the emergence of mobile banking. On-line banking is now moving to the mobile world, giving everybody with a mobile phone access to real-time banking services, regardless of their location. The potential of mobile banking is limitless and is expected to be a big success. According to this system, customer can access account details on mobile using the Short Messaging System (SMS) technology where select data is pushed to the mobile device. The wireless application protocol (WAP) technology, which will allow user to surf the net on their mobiles to access anything and everything. This is a very flexible way of transacting banking business. Already ICICI and HDFC banks have tied up cellular service provides such as Airtel, Orange, Sky Cell, etc. in Delhi and Mumbai to offer these mobile banking services to their customers (h) Internet Banking: Internet banking involves use of internet for delivery of banking products and services. With internet banking is now no longer confirmed To the branches where one has to approach the branch in person, to withdraw cash Or deposits a cheque or request a statement of accounts. In internet banking, any inquiry or transaction is processed online without any reference to the branch (Anywhere banking) at any time. ICICI bank was the first one to offer Internet Banking in India. Financial Transaction on the Internet: Electronic Cash: Companies are developing electronic replicas of all existing payment system: cash, cheque, credit cards and coins. Automatic Payments: Utility companies, loans payments, and other businesses use on automatic payment system with bills paid through direct withdrawal from a bank account. Direct Deposits: Earnings (or Government payments) automatically deposited into bank accounts, saving time, effort and money. Stored Value Cards: Prepaid cards
18

for telephone service, transit fares, highway tolls, laundry service, library fees and school lunches. Point of Sale transactions: Acceptance of ATM/Cheque at retail stores and restaurants for payment of goods and services. This system has made functioning of the stock Market very smooth and efficient. (i) Cyber Banking: It refers to banking through online services. Banks with web site Cyber branches allowed customers to check balances, pay bills, transfer funds, and apply for loans on the Internet. (j) Demat: Demat is short for de-materialisation of shares. In short, Demat is a process where at the customer¶s request the physical stock is converted into electronic entries in the depository system 

OBJECTIVES OF THE STUDY This study has been conducted with a variety of important objectives in mind. The following provides us with the chief objectives that have tried to achieve through the study. The extent to which these objectives have been met could judge from the conclusions and suggestions, which appear in the later of this study. The Chief Objectives of this study are: 1. To find the bank sector that is largely availed by the customer. 2. To study the factors the factors influencing the choice of a bank for availing services. 3. To find and compare the satisfaction level of customers in public sector as well as in private sectors bank. 4. To study the problem faced by customer. 5. To get suggestions for improvement or change in the services of public and private sector banks. 6. To study what do people expect in the new era of banking. 7. To study whether the customers are satisfied with their service 8. To know about the Customer preferences 9. To give Suggestions to improve the service

19 

Performance of Public and Private Sector Banks: A Comparison
The performance and the roles of private and public sector banks are undergoing changes. The banks, both private as well as public have to now operate in an increasingly competitive environment. The competition for public sector banks is coming from the private sector banks. Despite having the advantage of a substantial presence and penetration in the rural areas, the public sector banks are under tremendous pressure to maintain their margins and to survive the competition. The customer-centric approach of private sector banks have thrown open many more challenges for the public sector banks especially in retaining customers and expanding customer base. We have compared Public and Private sector banks based on 11 parameters, which are critical while evaluating their performance. These criteria are as follows:

1. Assets and Liabilities 2. Share in Aggregate Deposits 3. Priority Sector Lending 4. Sensitive Sector Lending 5. Credit Deposit Ratio 6. Cost of Funds and Return on Funds 7. Operating Profit and Net Profit 8. Net Profitability of Banks 9. Gross and Net NPAs 10. Capital Adequacy Ratio 11. ATM¶s

20

At present, there are 20 old private sector banks and 9 new private sector banks. The private sector banks, which have been formed after the banking sector reforms in 1991 are called as the new private sector banks. Below are the names of old and new private sector banks. Old Private Sector Banks: 1. Bank of Rajasthan Ltd. 2. Bharat Overseas Bank Ltd. 3. Catholic Syrian Bank Ltd. 4. City Union Bank Ltd. 5. Dhanalakshmi Bank Ltd. 6. Federal Bank Ltd. 7. Ganesh Bank of Kurundwad Ltd 8. ING Vysya Bank Ltd. 9. Jammu and Kashmir Bank Ltd. 10. Karnataka Bank Ltd. 11. Karur Vysya Bank Ltd. 12. Lakshmi Vilas Bank Ltd. 13. Lord Krishna Bank Ltd. 14. Nainital Bank Ltd. 15. Ratnakar Bank Ltd. 16. Sangli Bank Ltd. 17. SBI Commercial and International Bank Ltd 18. South Indian Bank Ltd. 19. Tamilnad Mercantile Bank Ltd. 20. United Western Bank Ltd. New Private Sector Banks: 1. Bank of Punjab Ltd. 2. Centurion Bank Ltd. 3. Development Credit Bank Ltd.
21

4. HDFC Bank Ltd. 5. ICICI Bank Ltd. 6. IndusInd Bank Ltd. 7. Kotak Mahindra Bank Ltd. 8. UTI Bank Ltd. 9. Yes Bank Ltd.

CONCLUSION
In any banking system, no bank -- public or private -- can survive unless it continuously strives to transform its organization into a self-governing, selfcorrecting and self-adjusting entity. For banks to grapple with these problems and manage the future, structural and institutional rigidities need to be eased in two critical areas: comprehensive legal support for recovery of bad debts and a fundamental change in the pattern of governance for the PSBs. While public sector banks are in the process of restructuring, private sector banks are busy consolidating through mergers and acquisitions (the sector has been recently opened up for foreign investments). PSB¶s need to improve in the services like ATM¶s, Credit and Debit cards. They lack behind in providing facilities like loans and other accounts. These branches are not interlinked with each other and working hours are less. In case of Private sector banks customers are not aware of the facts and hidden costs in view, as there are various products and facilities provided by the banks. The charges that are been taken are also too high. Challenges and Opportunities exist for both the public sector as well as the private sector banks, their nature however differs.

22

REFERENCES

1. Publications; Trends and Progress in India- Operations and Performance of Commercial Banks: 2. www.rbi.org.in 3. RBI¶s New Initiatives, the ICFAI University Press, May 2006 4. Bharati V. Pathak, Indian Financial System, Pearson Education Pvt. Ltd., 2003

23

Sign up to vote on this title
UsefulNot useful