BANKING SYSTEM IN INDIA

The modern banking system in India started with establishment of the first joint stock
bank The General Bank of India in the year 1786. After this first bank, Bank of Hindustan
and Bengal Bank came to existence. In the mid of 19th century East India Company
established three banks The Bank of Bengal in 1809, The Bank of Bombay in 1840, and
bank of Madras in 1843. These banks were independent units and called Presidency
banks. These three banks were amalgamated in 1920 and new bank Imperial Bank of
India was established.

After Independence the Imperial Bank of India was nationalised with a new name State
Bank of India by passing State Bank of India act 1955. The Reserve Bank of India as a
Central bank was nationalised in the year 1935 by an act the Reserve bank of India act
passed in the parliament. Several new banks as Punjab National Bank, Bank of Baroda,
Canara Bank, Indian Bank , Bank of India etc were established after independence. On
july 19, 1969 14 major banks were nationalised. Later on more banks were nationalised.
At present the number of nationalised banks are 20. Several Foreign banks were allowed
to operate as per the guidelines of RBI. At present the banking system can be classified in
following categories:

PUBLIC SECTOR BANKS

1.
Reserve Bank of India
State Bank of India and its 7 associate Banks
Nationalised Banks (20 in number)
Regional Rural Banks sponsored by Public sector Banks
PRIVATE SECTOR BANKS
2.
Old Generation Private Banks
New Generation Private Banks
Foreign Banks in India
Scheduled Co-operative Banks
Non Scheduled Banks
CO-OPERATIVE SECTOR BANKS
3.
State Co-operative Banks
Central Co-operative Banks
Primary agriculture Credit Societies
Land Development Banks
Urban Co-operative Banks
State Land Development Banks
DEVELOPMENT BANKS
4.
Industrial Finance Corporation of India (IFCI)
Industrial Development bank of India (IDBI)
 Industrial Credit & Investment corporation of India (ICICI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture & Rural Development (NABARD)
Export-Import Bank of India
SCICI Ltd

All the types of banks have a centralised control of RBI. All the banks have to follow the
guidelines of RBI. Government used banks to provide credit and loan to weaker section.
This lead to a serious crisis of unrecoverable debt. At the end of 1990 banks were saddled
with NPA (Non Performing Assets) as a bad and recoverable debt touched to Rs. 75,000
crore.

Foreign Banks in India started to lure customers by good services. These banks were
more automated, providing more faster information, kept flexible working hours and
introduced 24 hrs ATM's.

Today Private Indian Banks as well as Nationalised Banks offering better services and
attempting to get on to the path of comprehensive automation

CHRONOLOGY OF BANKING DEVELOPMENTS

January 1, 1949

The Reserve Bank of India is Nationalised and made a Central Bank in India by an act of
Parliament.
September 4, 1951
The Government of India planned to seek loan from World Bank.
1956
Life Insurance Companies were Nationalised.
July 3, 1964
:
IDBI was set up.
July 6, 1966
:

First time the Rupee was devalued by 36.5 percent, one Dollar became Rs.7.50 from
Rs.4.75.
July 19,1969
:

Fourteen major banks were nationalised by Mrs. Indira Gandhi the Prime Minister if
India at that time.
1973
:

The Foreign Exchange Regulation Act came into existance. (Now Foreign Exchange
Management Act)
January 11, 1978
:

Currency notes in denomination of Rs.1000, Rs.5000 and Rs.10,000 were withdrawn

from circulation.
November 19, 1986
:
Government of India Launched Indira Vikas Patra.
1987
:

Government of India introduced 9 % Tax free relief bonds, to mobilize resources for
meeting draught related expenditure.
April 1988
:
National Housing Bank was set up with a share capital of Rs.100 crore entirely subscriber
by RBI.
July 1 and 3, 1991
:
RBI devalued the rupee downward of 17.38 percent.
November, 1991
:

M Narsiham committee on reforming the financial system submitted its report suggesting
phased reduction of SLR to 25 percent in three years and CRR to 10 percent in four year.
March, 1992
:

Dual Exchange rate system is instituted under liberised rate. Management enabling
orderly transition from a managed floated regime to a market determined one.
April, 1992
:
RBI introduced Risk-Assets-Ratio for Banks as a Capital adequacy measure.
January 8, 1993
:
FERA is amended and subsequently repealed and replaced by Foreign Exchange
Regulation Act 1993.
January, 1993
:
Guidelines for setting up private sector banks are issued.
March, 1993
:

Process of convertibility started and Rupee is made convertible on the trade account.
September, 1993
:
New Bank of India was merged into Punjab National Bank.
March, 1994
:

UTI Bank became the first private sector bank to start its operation.
June 13, 1994
:

RBI issued guidelines on Prudential norms. Banks should achieve minimum capital
adequacy ratio 6 percent on their risk weighted assets and off Balance Sheet exposures by
march31, 1995 and 8 percent by march 1996.
July 15,1994
:

Amendment in Banking Companies Act 1970, enabled the Nationalised bank to tap the
capital market. The Nationalised banks are allowed to strengthen their capital base to
contribute to their capital upto 49 percent in the capital market.
August, 1994
:
Full convertibility was taken by making the Rupee convertible on the current account.
October, 1994
:
Oriental Bank of Commerce became the first Nationalised bank to access the capital
market to raise Rs.387.24 crore capital.
October 1995
:

Banks are allowed to fix their own interest rates on domestic term deposits with maturity
of two years.
July, 1996
:

The insurance regulatory authority was set up to privatise the insurance sector.
May 9, 1997
:
RBI issued new norms for Non Banking Finance companies to improve their financial
health and viability. The financial companies are required to apply for registration with
RBI by July 8, 1997.
December 7, 1997
:

RBI constituted a working group under the Chairmanship of S.H.Khan to examine the
harmonisation of role and operations of development of Financial Institutions and Banks.
April 24,1998
:

The S.H.Khan committee on the harmonisation of the role and operations of development
of Financial Institutions and Banks submitted its recommendation to move towards
universal banking.
August 9, 2000
:

Banks having a minimum net worth of Rs.500 crore and satisfying other criteria were
regarded to capital adequacy are allowed to enter insurance business through a joint
venture.
November 10, 2000
:

Guidelines to Bank for financing of equities and investment in shares was issued. Banks
are allowed to invest upto 5 percent of its total outstanding domestic credit in capital
market.
January 3, 2001
:

revised guidelines for licensing of new banks in private sector are issued. This stipulate a
minimum initial paid-up capital of Rs.200 crore (to be raised to Rs. 3000 crore within
three years o commencement of business) with a minimum 40 percent as contribution
from its promoter.
April 19, 2001
:

Banks permitted to formulate Fixed Deposit Schemes specifically for senior citizen
offering higher and fixed rate of interest.
April 28, 2001
:

RBI clarifies approach to universal banking for term lending and reframing institutuions.

Universal Banking: The Road Ahead…

Economic historians have long emphasized the importance of financial institutions in
industrialization. More recently, economists have begun more intensive investigation of
the links between financial system structure and real economic outcomes. In theory, the
organization of financial institutions partly determines the extent of competition among
financial intermediaries, the quantity of financial capital drawn into the financial system,
and the distribution of that capital to ultimate uses. The choice between universal and
specialized banking may affect interest rates, underwriting costs, and the efficiency of
secondary markets in securities. Furthermore, the presence or absence of formal bank
relationships may affect the quality of investments undertaken, strategic decision-making,
and even the competitiveness of industry.

Particularly since World War II, many economists and historians have argued that
German-style universal banks offer advantages for industrial development and economic
growth. Universal banking efficiency combined with close relationships between banks
and industrial firms, they hypothesize, spurred Germany’s rapid development at the end
of the nineteenth century and again in the post-World War II reconstruction. A corollary
to this view holds that countries that failed to adopt the universal-relationship system
suffered as a consequence. Adherents suggest that British industry has declined over the
past hundred years or more, and that the American economy has failed to reach its full
potential, due to short-comings of the financial system that lead to relatively high costs of
capital.

In Indian context, the phenomenon of universal banking—as different from narrow

banking—has been in the news in the recently. With the last Narasimham Committee and
the Khan Committee reports recommending consolidation of the banking industry
through mergers and integration of financial activities, the stage seems to be set for a
debate on the entire issue.

A universal bank is a ‘one-stop’ supplier for all financial products and activities, like
deposits, short-term and long-term loans, insurance, investment banking etc. Global
experience with universal banking has been varied. Universal banking has been prevalent
in different forms in many European countries, such as Germany, Switzerland, France,
Italy etc. For example, in these countries, commercial banks have been selling insurance
products, which have been referred to as Banc assurance or Allfinanz.

After the stock market crash of 1929 and banking crisis of the 1930s, the US banned all
forms of universal banking through what is known as the Glass- Steagall Act of 1933.
This prohibited commercial banks from investment banking activities, taking equity
positions in borrowing firms, selling insurance products etc. The idea was to mitigate
risky behaviour by restricting commercial banks to their traditional activity of accepting
deposits and lending.

Research on the effects of universal banking has been inconclusive as there is no clear-cut
evidence in favour of or against it anywhere. Nevertheless, the United States has once
again started moving cautiously towards universal banking through the Gramm-Leach-
Bliley Act of 1999 which rolled back many of the earlier restrictions. Some recent
phenomenon, like the merger between Citicorp (banking group) and Travelers (insurance
group) confirmed the fact that universal banking is here to stay. Hence it becomes all the
more imperative to know whether we need universal banks in India. And whether it is a
more efficient concept than the traditional narrow banking. What are the benefits to banks
from universal banking? The standard argument given everywhere—also by the various
Reserve Bank committees and reports—in favour of universal banking is that it enables
banks to exploit economies of scale and scope. What it means is that a bank can reduce
average costs and thereby improve spreads if it expands its scale of operations and
diversifies its activities.

By diversifying, the bank can use its existing expertise in one type of financial service in
providing the other types. So, it entails less cost in performing all the functions by one
entity instead of separate specialized bodies. A bank possesses information on the risk
characteristics of its clients, which it can use to pursue other activities with the same
clients. This again saves cost compared to the case of different entities catering to the
different needs of the same clients. A bank has an existing network of branches, which
can act as shops for selling products like insurance. This way a big bank can reach the
remotest client without having to take recourse to an agent.Many financial services are
inter-linked activities, e.g. insurance and lending. A bank can use its instruments in one
activity to exploit the other, e.g., in the case of project lending to the same firm which has
purchased insurance from the bank.

Now, let us turn to the benefits accruing to the customers. The idea of ‘one-stop-
shopping’ saves a lot of transaction costs and increases the speed of economic activity.
Another manifestation of universal banking is a bank holding stakes in a firm. A bank’s
equity holding in a borrower firm acts as a signal for other investors on the health of the
firm, since the lending bank is in a better position to monitor the firm’s activities. This is
useful from the investors’ point of view.

Of course, all these benefits have to be weighed out against the problems. The obvious
drawback is that universal banking leads to a loss in economies of specialization. Then
there is the problem of the bank indulging in too many risky activities. To account for
this, appropriate regulation can be devised, which will ultimately benefit all the
participants in the market, including the banks themselves.

In spite of the associated problems, there seems to be a lot of interest expressed by banks
and financial institutions in universal banking. In India, too, a lot of opportunities are
there to be exploited. Banks, especially the financial institutions, are aware of it. And
most of the groups have plans to diversify in a big way.

Even though there might not be profits forthcoming in the short run due to the switching
costs incurred in moving to a new business.

The long-run prospects, however, are very encouraging. At present, only an ‘arms-length’
relationship between a bank and an insurance entity has been allowed by the regulatory
authority, i.e. the Insurance Regulatory and Development Authority (IRDA). This means
that commercial banks can enter insurance business either by acting as agents or by
setting up joint ventures with insurance companies. And the RBI allows banks to only
marginally invest in equity (5 per cent of their outstanding credit).

Development financial institutions (DFIs) can turn themselves into banks, but have to
adhere to the statutory liquidity ratio and cash reserve requirements meant for banks.
Even then, some groups like the HDFC (commercial banking and insurance joint venture
with Standard Assurance), ICICI (commercial banking), SBI (investment banking) etc.,
have already started diversifying from their traditional activities through setting up
subsidiaries and joint ventures. In a recent move, the Life Insurance Corporation
increased its stakes in Corporation Bank and is planning to sell insurance to the
customers of the Bank. Corporation Bank itself has been planning to set up an insurance
subsidiary since a long time. Even a specialized DFI, like IIBI, is now talking of turning
into a universal bank.

All these can be seen as steps towards an ultimate culmination of financial intermediation
in India into universal banking.

THE HINDU, Thursday, Nov 22, 2001 Thoughts on universal banking: FIs and banks

Mr. Raghavan looks at some of the troubling issues of universal banking. One key
question: the financial institutions, with subsidised funds, tax incentives and other
concessions have been unable to add to their resources (capital formation) over decades.

IN THE early Nineties the forces of globalisation were unleashed on the hitherto
protected Indian environment. The financial sector was crying out for reform. Public
sector banks which had a useful role to play earlier on now faced deteriorating
performance. For these and certain other reasons private banking was sought to be
encouraged in line with the Narasimham Committee's recommendations.

It would be pertinent to recapitulate the prevailing conditions in the banking industry in

the early Nineties: the nationalised sector had outlived its utility; in fact they became
burdened with unwelcome legacies; customer service had become a casualty; need for
computerisation, including networking among the vast branch network was felt. Private
banking in that context was viewed a brand new approach, to bypass the structural and
other shortcomings of the public sector. A few of the new ones that were promoted by the
institutions such as the IDBI and ICICI did establish themselves, though in varying
degrees, surviving the market upheavals of the 1990.That was possible apart from other
factors due to the highly professional approach some of them adopted: it helped them stay
clear of the pitfalls of nationalised banking. Yet in less than a decade after the advent of
these new generation banks, some of the successful ones, are being forced to change
organisationally and in every other way. Who benefits after this restructuring is
something that has to be asked.

It is essential to assimilate history of banking as well as the role of the financial

institutions till recently. The branch banking concept with which we are familiar and
practised since inception is basically on certain `protected' fundamentals. The insulated
economy till the Nineties provided comforts to public sector banks, in areas of liquidity
management while in an administered interest regime, discretion of managements was
limited and consequently, the risk parameters in these spheres were hazy and not
quantifiable. The share of private sector banks which is distinctly known as old private
sector banks' established before 1994, was thus not substantial while operations of
foreign banks were also restricted. Staff orientation especially at the branch level is a key
ingredient for success and neither the older private banks nor the nationalised banks were
successful in that respect.

The woes of the public sector banks till date relate to handling volumes, be it in the area
of transactions or staff complement or branch offices. Post nationalisation, mass banking
sans commercial or professional goals, indiscreet branch expansion, lack of networking,
wide gaps/inefficiency at the levels of control apart from environmental impacts,
contributed to their present status.

Turning to recent merger announcement between the ICICI and its more recently
promoted banking subsidiary the following become relevant. One of the main
motivations has been the need to access a low cost retail deposit base. Public sector
banks, by way of contrast never had to face such a constraint.

Today, in a market driven economy, to face the competition, one factor is the size and
hence, mergers are advocated. Talking of the PSBs it is relevant to note that except for a
build up of savings accounts (as low cost deposits), the advantage of vast branch network
is yet to be exploited by them while on the other hand, most of the complaints,
irregularities, mounting arrears in reconciliation are attributable to such branch
expansion.

At the same time, this has enabled a few of the smart foreign/new private sector banks to
enrich themselves by offering cash management products, utilising the same branch
network! All these pose a question to the recent merger of Bank of Madura - will the
ICICI Bank decide to shed unwanted, unremunerative branches? Pertinently for all banks
the RBI has already provided an exit route but there have been no takers among the
public sector banks, for obvious reasons.

Pertinent again is to note that another set of banks, namely, foreign banks prospered
during all these difficult days. Even today, these banks do not have branch network to
speak of but in terms of volume, profitability they are far ahead of the public sector
banks. Only a couple of new private sector banks have posed any challenge to them in the
recent years.

Converting into commercial banks

Hiterto the business of the financial institutions has been confined to only `credit' with
attendant forex business (with limitations). Apart from the proportion of existing NPAs in
their balance sheets the FIs have to reckon with other important variables while moving
towards commercial banking. Looking at the existing size of the financial institutions as
compared to the bank with which merger is intended, the relatively short gestation period
available to the bank to establish itself amdist the turbulent market/competition, the
scenario is quite challenging. One might well ask what is the input from a financial
institution, in a merger, to a relatively less asset based bank? FIs have had a crucial role
in the years following Independence: in the then prevalent conditions, financial
institutions built up infrastructure contributed to a better industrial climate. The expertise
in these fields may be subserved or enlarged appropriately. However is such expertise
relevant for say small, retail loans-which are promising avenues for the banks of today?
Are we looking at another type of mismatch?.

Further, it is a matter of introspection in general: in what may be termed as `conventional'

or `prudent' banking, (RBI itself had raised it in one of its circulars to banks way back in
1974) in the context of variation in profits (for whatever reasons), the net profit is to be
determined within prudent levels, that is, in years where large increase in profits accrue, it
was considered prudent to allocate larger amounts to `inner reserves' which were
consciously not disclosed in those years. Accordingly, dividend payouts were also
contained to take care of a lean period. The RBI is empowered even now by legislation
on this aspect. However, in the recent past corporates/banks vie with each other to declare
higher dividend payouts. What is worse ``creative accounting'' carries this process further.
For instance, a prudent banker may opt for `written down value' method for depreciating
fixed assets while some banks (including some of the new private sector banks) opt for
the straight line method whereby, profits are more with less depreciation charged to the
profit and loss account. Ironically they have been preaching to their borrowers those
salutary goals.

The long and short of it

Looked from another perspective, the financial institutions till yesterday are only for
`long term' both on the assets and liabilities sides while commercial banks cater to `short
term' businesses. There was a marked demarcation, though not a `chinese wall' between
these two. With the advent of market economy, the gap is getting closed through
`universal banking'. The subject is in the air for sometime but currently, rising NPAs and
dearth of avenues for resources for the financial institutions in the wake of falling market
sentiments in the recent period, have accelerated the process. For a few of the FIs
survival itself might be at stake. On the risk parameters, the long term liabilities (at
higher rates of interest, in the context of declining trends) will remain as they.
A relook on the assets side strongly suggests that after netting the NPAs, the existing
`mismatch' might well go up. Barring one or two of the new generation banks and foreign
banks of course, the concept of ALM (asset-liability management) remains an academic
subject. As far as the ICICI Bank is concerned, having only recently completed the
takeover of Bank of Madura, it probably needs some more time to prepare for another
drastic organisational upheaval.

ICICI-ICICI Bank merger

Yet another dimension: the intended reverse merger of ICICI with ICICI Bank is unique
in other ways too: the top management of ICICI `enbloc' will form the top corporate
management of the ICICI Bank; among banks ICICI Bank may be the first to be headed
by a non-executive Chairman and except for him, all others in the top management, after
the merger might be non-bankers. Also the proposed merger is the first of its kind that a
non-bank of a larger balance sheet size (Rs. 74,371 crores as on March 31, 2001) is
proposed with a commercial bank (Rs. 203,809 crores); post-merger again, the larger
complement of ICICI staff will be non-bankers again, having exposure to `credit' only
and would probably require a refresher course on diverse banking activities, the several
enactments as well as the peculiar banking practices.

Staff incompatibility

It is pertinent to mention that amalgamation between banks in the past, from a personnel
angle has not been at all compatible - the striking example of the New Bank of India with
the Punjab National Bank is a case in point. But here, larger strength of non-bankers need
to be groomed and accepted for banking counters! Dealings in financial institutions are
structured in an easier convenient ``one to one basis''unlike in commercial banks where
the personnel are rotated among different functions. There are sharp variations even in
lending practices. For instance, in the FIs loan disbursals are structured over a period as
compared to running accounts of borrowers in banks where they need to respond on the
spot to the situations.

In the context of RBI's dictates, in conformity with Basle Committee prescriptions at the
international level, to banks on `risk management', apparent risks in all spheres may call
for special dispensations to the merged entity and thus one more class of banks (apart
from public sector, old/new private sector, foreign banks) will emerge for the central bank
to deal with. Lest unhealthy precedents are permitted, the central bank may have to
envision a long term strategy to respond to emerging situations. In fact, RBI's policy to
have permitted private banks to be established in the early Nineties has already been
reviewed and yet another phase is now seen in regard to few banks which were then
established. In fact, ever since RBI talked of `risk management' since 1998, except for
some sporadic responses, it is yet to percolate at the top levels of management. So far it
has been yet another jugglery with figures. One has to see the kind of disclosures in
annual report of banks abroad on the risk parameters. The time is not far off for such
compulsions from the international arenas (as the attraction for GAAP registration
increases) to take hold. Failure or inaccuracies in disclosures may do greater harm at the
national levels. For example, recently the regulatory authorities in the U.S. demanded
policy documents on certain aspects of banking business: here, practices exist sans any
documents, notwithstanding the infamous securities scam of the 1990's; such
permissiveness need to be contained. The RBI has on its record, such prescriptions but
these need to be enforced with rigour to match the U.S. practices. It is time that a long
term approach, which should be sustained, sans pressures from any quarters is the need of
the hour.

Corporate Banking

SBI is a one stop shop providing financial products / services of a wide range for
large , medium and small customers both domestic and international.

Working Capital Financing

* Assistance extended both as Fund based and Non-Fund based facilities to Corporates ,
Partnership firms , Proprietary concerns
* Working Capital finance extended to all segments of industries and services sector such as IT

Term Loans

To support capital expenditures for setting up new ventures as also for expansion , renovation ,
etc.

Deferred Payment Guarantees

To support purchase of capital equipments.

Corporate Loans

For a variety of business related purposes to corporates.

Export Credit

To Corporates / Non Corporates

Strategic Business Units

(i) Corporate Accounts Group (CAG)

(ii)Project Finance
(iii) Lease Finance

* An exclusive unit providing one stop shopping to top Corporates

* A dedicated set up specialised in financing of infrastructure and other large projects
* Exclusive set up for handling large ticket leases.
 Pricing

* SBI's Prime Lending Rates (PLR) are among the lowest

* Presently Bank has two PLR's
--SBAR for loans payable on demand and upto one year
--SBMTLR for loans payable beyond one year.

BANK OF BARODA – CORPORATE BANKING

Deposits
Loans & Advances
Services
Deposits

Irrespective of whether your needs are short term or for longer periods, Bank of Baroda
enables you to maximise your savings and can offer good return on investment through
its Deposit plans.

The different types of deposit facilities available are listed below:

 Fixed Deposits

o Short Term (Under 12 months)

o Flexi Deposit Schemes
o Term Deposits (Over 12 months)

 Current Deposits

Fixed Deposits - Short Term (Under 12 months)

Ideal for those considering a transitory deposit during their business ventures. The extremely short period of one
year also helps in fast liquidity in addition to a good rate of interest.

 Ideal for all transitory savings.

 High liquidity with good returns.

 Avail of Overdraft / loan against deposit up to 95% of the deposit amount without the hassles of a
guarantor or processing fee or, filling of any forms etc.
 Ideal for meeting short-term commitments as these advances are also available for a single day and till
a maximum of 12 months.
 Interest will be charged at 1% over the deposit rate with monthly rests in case of depositor being the
borrower and higher in case your friends want to avail of the loan.
 On pre-matured withdrawal of your deposits amount, interest will be calculated at 1% below the rate
applicable for the period of deposits.
 The Government accepts this deposit as a Security.
 Can be used as margin money for Non-fund based facilities.
 Provision for nomination.

Fixed Deposits - Short Term (Under 12 months)

  Minimum deposit required would be Rs.1000/-, which has to be made for a minimum of 7 days,
and can then be extended to a maximum of 12 months.

 The minimum deposit acceptable for small periods such as 7-14 days will be Rs. 15 Lakhs.
 Compound interest is calculated quarterly and the rate is decided based on the maturity period.
 An additional interest of .5% is paid to the senior citizens for their deposits above Rs. 10000/-.
 Interest payments are subject to TDS (Tax Deducted at Source).
 Income from interest is exempted from income tax up to a limit of Rs. 9000 under the section 80
L. However, deposits that earn over Rs. 5,000/- per year are subject to TDS.
 Documents required:
o Passport size photograph
o Proof of residence
o An introduction as per Bank's norms

Fixed Deposits - Flexi Deposit Schemes

Ideal for corporations that have huge cash flow and need to
transfer and manage funds in excess of 5 crores or more.
Deposits can be maintained for as little as 7 days to one full
year.

Targets high value customers offering them the following conveniences:

 Flexibility - Allows withdrawals of deposit without any restriction on amount, even before the
maturity of the deposit, without a charge for premature withdrawal.

 The Interest on such premature withdrawal will be paid at the rate applicable to the period
for which the deposit has remained with the Bank.
 Withdrawals can be made by just serving one days notice.

 The minimum deposit amount for this scheme is Rs. 5 Crores, with subsequent deposits in
multiples of Rs. 1 crore.

 The period of deposit may range from 7 days to a maximum of 1 year.

 Premature withdrawal should not result in the balance falling below 5 crores, which has to be
maintained, till the expiry of the deposit.
 A notice of one business day is required to process withdrawals.
 The minimum period for the deposited amount to be eligible for interest payment is 7 days.
 Interest will be paid, as is customary for Bulk Deposits of Rs. 5 Crores and above.
 Interest will be paid at the rate which is applicable at the time of placing the deposit for the
period for which the deposit has remained with the bank or the applicable rate prevailing on
the day of premature payment of deposit, whichever is lower.

Fixed Deposits - Term Deposits (Over 12 months)

|> Fixed |> Current
 Ideal for long term investments. Secure
money that earns good returns and can be easily liquidated.

This product provides an answer to two very basic requirements of a deposit

keeper:

 Easy liquidity even with a long term period.

 Increasing interest in proportion to the increasing term of

deposit.

 Avail of Overdraft / loan against deposit up to 95% of the deposit

amount (plus accrued interest) without the hassles of a guarantor or
processing fee or, filling of any forms etc.

 Interest will be charged at 1% over the deposit rate with monthly rests
in case of depositor being the borrower and higher in case a third party
wants to avail of the loan.
 No processing fee is charged on loans and advances taken against
Bank's Deposits.
 For deposits up to Rs. 5 Lakhs, no interest will be charged for
premature withdrawal, provided it has remained with bank for a
minimum period of 12 months.
 Automatic renewal of deposit on maturity, thereby avoiding interest
loss in the absence of instructions from you.
 The Government accepts this deposit as a Security.
 Accepted as margin money for Non-fund based facilities.

 Provision for nomination.

Fixed Deposits - Term Deposits
(Over 12 months)

 Minimum deposit required is Rs. 1000/-

followed by regular deposits in multiples of
Rs. 100/-.

 Deposit Tenure:
o Minimum period of deposit - 12
months.
o Maximum period of deposit - 120
months.
 Compound interest is calculated quarterly and
can be paid on a monthly (discounted value
of the interest amount is payable), quarterly,
half-yearly basis or on maturity.
 Rate of interest depends on maturity period.
 Interest payments are subject to TDS (Tax
Deducted at Source).
 Income from interest is exempted from
 income tax up to a limit of Rs. 9000 under
the section 80 L. However, deposits that earn
over Rs. 5,000/- per year are subject to TDS.
 An additional interest of .5% is paid to the
senior citizens for their deposits above Rs.
10000/-.
 Documents required:
o Passport size photograph
o Proof of residence

o An introduction as per Bank's no

Current Deposits
|> Fixed |> Current

Current Deposits plan is ideal for professionals and provides flexibility

through overdraft facility. The most basic, most flexible deposit option for
those whose transactions take the form of an everyday exercise. Bank of
Baroda's Current Deposits are the back-bone of all trading activities.

 Ideal for businessmen & professionals in need of a flexible deposit

with an overdraft facility.

 Absolute liquidity for smooth functioning of transactions, helping to

meet all kinds of payment obligations.
 Instructions can be issues and carried out at moment's notice.
 Provision for collection of third party cheques.

 The minimum balance to be maintained in the various

current deposits are as shown in the table below:
Minimum Balance
Personal A/c. Other A/c.
Rural 500/- 500/-
Semi Urban 1000/- 1000/-
Urban 2000/- 5000/-
Metro 3000/- 5000/-

 Specific account opening formalities as per the type of account as per
bank norms:
1. Partnership Firm.
2. A Public Limited Company.
3. An H.U.F (Hindu Undivided Family).
 Documents required:

o Passport size photographs

o Proof of residence

o An introduction as per Bank's norms

 LOANS & ADVANCES
Working Capital Finance

A firm's working capital is the money it has available to meet current obligations (those due in less than a year)
and to acquire earning assets.

Bank of Baroda offers corporations Working Capital Finance to meet their operating expenses, purchasing
inventory, receivables financing, either by direct funding or by issuing letter of credit.

BENEFITS

 Funded facilities, i.e. the bank provides funding and assistance to actually purchase business assets or
to meet business expenses.

 Non-Funded facilities, i.e. the bank can issue letters of credit or can give a guarantee on behalf of the
customer to the suppliers, Government Departments for the procurement of goods and services on
credit.
 Available in both Indian as well as Foreign currency.

Term Finance
Under Term Finance, Bank of Baroda, offers the following:

 Fund Based Finance for capital expenditure / acquisition of fixed assets towards
starting / expanding a business or industrial unit or to swap with high cost
existing debt from other bank / financial institution.

 Non-Fund Based Finance in the form of Deferred Payment Guarantee for

acquisition of fixed assets towards starting / expanding a business or industrial
unit.
Short Term Corporate Loans
This loan plan takes care of the short-term business exigencies and requirements at
competent interest rates.
Loan to Small & Medium Borrowers
A) SCHEME FOR GRANT OF SHORT TERM LOAN TO SMALL AND MEDIUM SIZED
BORROWERS

NAME OF THE SCHEME: SME Short-term Loan (SSL)

BORROWER GROUP: Small and Medium-sized corporates, business and Trading houses
(including partnership firms).

ELIGIBILITY CRITERIA

 Continuous credit rating of at least B+ for the last three years

 Latest Balance Sheet etc. should be available.

 Satisfactory financial performance in terms of sales / turnover and profits.
Negative variance, if any, should not be more than 10%.
 Satisfactory dealings with the Bank for at least five years.
 No major inspection / audit irregularities.

LOAN AMOUNT:

Upto 25% of the existing Fund based Working capital limits (depending on the Credit
Rating), subject to a minimum of Rs. 10 lakhs and maximum of Rs. 250 lakhs.
PERIOD:
Not exceeding 180 days – minimum 90 days

PURPOSE: To meet temporary shortfall / mismatch in liquidity, for meeting genuine

business requirements only.

SECURITY

 First charge / Equitable mortgage of fixed assets of the company / firm or

extension of existing first charge / equitable mortgage of fixed assets, ensuring
that there is a minimum asset cover of 1.50.

 Extension of Charge on current assets for the additional facility ensuring that
adequate drawing power is available.
 Extension of all existing guarantees of Directors / Third party guarantees to
cover the additional facility.

RATE OF INTEREST: 0.5% below the existing rate on working capital limits

PROCESSING CHARGES: 0.1% of the amount of loan, with a minimum of Rs. 10,000/-
and maximum of Rs. 25,000/-.

B) SCHEME FOR GRANT OF MEDIUM TERM LOAN TO SMALL AND MEDIUM SIZED
BORROWERS

NAME OF THE SCHEME: SME Medium Term Loan

PRODUCT CODE: SML

BORROWER GROUP: Small and Medium-sized corporates, business and Trading houses
(including partnership firms).

ELIGIBILITY CRITERIA

 Continuous credit rating of at least B+ for the last three years

 Latest Balance Sheet etc. should be available.

 Satisfactory financial performance in terms of Sales/turnover and profits.
Negative variance, if any, should not be more than 10%.
 Debt-equity ratio should not be higher than 2.5:1 and average DSCR should be
not less than 1.5:1.
 Satisfactory dealings with the Bank for at least Three years.
 No major inspection / audit irregularities.

LOAN AMOUNT:

Upto 25% of the existing fundbased Working capital limits (depending on the Credit
Rating), subjectto a minimum of Rs. 25 lakhs and maximum of Rs. 500 lakhs.

PERIOD: Not exceeding –36- months, to be repaid in equal quarterly or half-yearly

instalments.

PURPOSE:

To augment borrower’s working capital gap and to help in improvement of current ratio
and also for meeting genuine business requirements. The facility will also be available for
repayment of secured and unsecured Loans of other banks or institutions, but not for any
purpose, which is not related to the borrowers activity.

SECURITY:

First charge / Equitable mortgage of fixed assets of the Company / firm or extension of
existing first charge/ equitable mortgage of fixed assets, ensuring that there is a minimum
asset cover of 1.50.

RATE OF INTEREST

 0.5% - 1.0% over the Bank’s BPLR, only for the additional Loan to be granted
under the Scheme.

 Prepayment penalty of 1%, if loan is prepaid within -24- months of drawdown.

PROCESSING CHARGES: 0.1% of the amount of loan, with a minimum of Rs. 25,000/-
and maximum of Rs. 50,000/-.

SUB-PLR Advances
Bank of Baroda makes available, loans and advances at a rate lower than the PLR (Prime
Lending Rate) of the bank to provide an easy, hassle free and convenient route for
availing finance for business purposes. Corporations with high credit ratings can issue
commercial paper as collateral for these loans.
Project Finance
Bank of Baroda provides its customers with the option of a loan to take care of the
needs of an ongoing project, whether it is in Indian or foreign currency. This facility is
available for project finance and also for project exports.
Infrastructure Finance
Available in Indian as well as foreign currency, this product enables funding for
infrastructure projects, such as, Power Generation, Transmission & Distribution, Road
Constructions, Construction of Bridges on the Road / Railway Lines, Air/ Sea Port-
Development Activities, Telecom, Water Supply System, Urban Development etc.
Services
In addition to the loans and advances offered by Bank of Baroda, there are other value-
added services that it provides to its corporate customers. The services offered are listed
as follows:

 Appraisal & Merchant Banking

o Appraisal
o Loan Syndication
o Other Consultations

 Cash Management & Remittances

o BoB Cash Reach

o Remittances & Collection

Appraisal & Merchant Banking
Bank of Baroda provides its assistance to corporate customers to assess the value of
their holdings, in syndicating loans and in consultations for Merchant Banking purposes.

Appraisal:
Bank of Baroda carries out credit and merchant appraisals of all types of business
ventures including infrastructure projects by our specialised team of officials at a
reasonable cost.

Loan Syndication:
The bank also assists in loan syndication for all kinds of business ventures when a tie-up
of business sources is required.

Other Consultations:
Our team is highly capable of advising on parameters of feasibility & viability of an
existing / proposed project and suggest measures, if required, for improvement of the
business enterprise.
Cash Management & Remittances
BOB Cash Reach:
A product that enables electronic transfers/ cash remittances at designated bank branches
through a specialised network of branches. This facilitates the availability of funds and
credits in your account on the same day.

Dial BOB:
Bank of Baroda also offers 24 hours tele-banking service through landline/ mobile phones,
facilitating the following:

 Balance Enquiry,
 An Enquiry into the last 5 transactions, and,
 Bank statements on fax for the last 2 months.

Remittances and Collections:

The bank provides remittance & collection facilities at market-competitive rates / fees. For
bulk / long-term requirements, the rates / fees are negotiable so as to add more value for
the Business Enterprises/Corporations.