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India has a well developed Banking system. The banking industry originated in India in the 18th century and since then it has undergone significant number of changes. The commercial banking industry in India over the past few decades has been revolutionized by a number of factors such as independence, nationalization, deregulation, rise of the Internet, etc.The commercial banking structure in India consists of Scheduled Banks and Unscheduled Banks. In the past the banks did not find any attraction in the Indian economy because of the low level of economic activities and little business prospects. Today we find positive changes in the National business development policy. Earlier, the money lenders had a strong hold over the rural population which resulted in exploitation of small and marginal savers. The private sector banks failed in serving the society. This resulted in the nationalization of 14 commercial banks in 1969. Nationalization of commercial banks paved ways for the development of Indian economy and channelized financial resources for the upliftment of weaker sections of the society. The passage of financial modernization legislation by Congress in 1999 removed barriers, allowing banks to expand product offerings, while the potential of the Internet as a sales, marketing and delivery tool, widened the avenues to sell and deliver these products. The main products of the commercial banking industry-insurance, securities, mortgages, mutual funds and consumer credit-have all benefited from these changes. This report will examine the extent to which increased product sales have influenced overall bank assets and how commercial banks' increased market share in each of these products areas over the next five years will raise overall bank income and assets. Currently (2009), banking industry in India is generally fairly mature in terms of supply, product range and reach-even though reaches in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with
minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect mergers and acquisitions, takeovers, and asset sales.
REVIEW OF LITERATURE
Indian banking system, over the years has gone through various phases after establishment of Reserve Bank of India in 1935 during the British rule, to function as Central Bank of the country. Earlier to creation of RBI, the central bank functions were being looked after by the Imperial Bank of India. With the 5-year plan having acquired an important place after the independence, the Govt. felt that the private banks may not extend the kind of cooperation in providing credit support, the economy may need. In 1954 the All India Rural Credit Survey Committee submitted its report recommending creation of a strong, integrated, State-sponsored, State-partnered commercial banking institution with an effective machinery of branches spread all over the country. The recommendations of this committee led to establishment of first Public Sector Bank in the name of State Bank of India on July 01, 1955 by acquiring the substantial part of share capital by RBI, of the then Imperial Bank of India. Similarly during 1956-59 the associate banks came into the fold of public sector banking. Another evaluation of the banking in India was undertaken during 1966 as the private banks were still not extending the required support in the form of credit disbursal, more particularly to the unorganised sector. Each leading industrial house in the country at that time was closely associated with the promotion and control of one or more banking companies. The bulk of the deposits collected, were being deployed in organised sectors of industry and trade, while the farmers, small entrepreneurs, transporters , professionals and self-employed had to depend on
money lenders who used to exploit them by charging higher interest rates. In February 1966, a Scheme of Social Control was set-up whose main function was to periodically assess the demand for bank credit from various sectors of the economy to determine the priorities for grant of loans and advances so as to ensure optimum and efficient utilisation of resources. The scheme however, did not provide any remedy. Though a no. of branches were opened in rural area but the lending activities of the private banks were not oriented towards meeting the credit requirements of the priority/weaker sectors. On July 19, 1969, the Govt. promulgated Banking Companies (Acquisition and Transfer of Undertakings) Ordinance 1969 to acquire 14 bigger commercial bank with paid up capital of Rs.28.50cr, deposits of Rs.2629cr, loans of Rs.1813cr and with 4134 branches accounting for 80% of advances. Subsequently in 1980, 6 more banks were nationalised which brought 91% of the deposits and 84% of the advances in Public Sector Banking. During December 1969, RBI introduced the Lead Bank Scheme on the recommendations of FK Narsimhan Committee. Meanwhile, during 1962 Deposit Insurance Corporation was established to provide insurance cover to the depositors. In the post-nationalization period, there was substantial increase in the no. of branches opened in rural/semi-urban centers bringing down the population per bank branch to 12000 appx. During 1976, RRBs were established (on the recommendations of M. Narasimham Committee report). The Service Area Approach was introduced during 1989.While the 1970s and 1980s saw the high growth rate of branch banking net-work, the consolidation phase started in late 80s and more particularly during early 90s, with the submission of report by the Narasimham Committee on Reforms in Financial Services Sector during 1991. In these five decades since independence, banking in India has evolved through four distinct phases: Foundation phase can be considered to cover 1950s and 1960s till the nationalisation of banks in 1969. The focus during this period was to lay the foundation for a sound banking system in the country. As a result the phase witnessed the development of necessary legislative framework for facilitating re-organization and consolidation of the banking system, for meeting the
However this weakened the lines of supervision and affected the quality of assets of banks and pressurized their profitability and brought competitive efficiency of the system at low ebb. technological changes. Measures were also taken to reduce the structural constraints that obstructed the growth of money market. credit management. staff productivity and profitability of banks. Expansion phase had begun in mid-60s but gained momentum after nationalisation of banks and continued till 1984. credit flows were guided towards the priority sectors.requirement of Indian economy. autonomy packages etc. more competition. CHAPTER 2 4 . A determined effort was made to make banking facilities available to the masses. Branch network of the banks was widened at a very fast pace covering the rural and semi-urban population. A major development was transformation of Imperial Bank of India into State Bank of India in 1955 and nationalisation of 14 major private banks during 1969. Reforms phase The macro-economic crisis faced by the country in 1991 paved the way for extensive financial sector reforms which brought deregulation of interest rates. Most importantly. customer service. Consolidation phase: The phase started in 1985 when a series of policy initiatives were taken by RBI which saw marked slowdown in the branch expansion. prudential guidelines on asset classification and income recognition. Attention was paid to improving house-keeping. capital adequacy. which had no access to banking hitherto.
• To draw a contrast between the old and the new Indian banking structure. • To draw conclusions of the impact of the changes in banking sector. • To assess the various factors that lead to the change in the Indian banking structure • To assess the impact of all these factors on the banking structure. • To study how new distribution channels such as Internet Banking. • To assess the change in the performance and efficiency of the banks in India. Phone Banking have changed the face of the Banking industry.OBJECTIVES OF THE STUDY The objectives of project are as follows: • To find out the earlier banking structure that prevailed in India. ATM facility. 5 . • To determine the various services offered by banks earlier and currently • To determine the future of Indian Banking Markets • To assess the impact of information technology on the banking sector.
It was collected from various websites. 6 . newspapers and books. The data used for preparing the project report was secondary data.CHAPTER 3 RESEARCH METHODOLOGY Secondary Data: Secondary data is the data which is collected for some other purpose.
CHAPTER 4 BANKING SECTOR IN THE PAST
Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865.By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. Early History At the time of the American Civil War, a void was created as the supply of cotton to Lancashire stopped from the Americas. Some banks were opened at that time which functioned as entities to finance industry, including speculative trades in cotton. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. The Bank of Bengal, which later became the State Bank of India. At the beginning of the 20th century, Indian economy was passing through a relative period of stability. Around five decades have elapsed since the India's First war of Independence, and the social, industrial and other infrastructure have developed. At that time there were very small banks operated by Indians. The banking in India was controlled and dominated by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras which later on merged to form the Imperial Bank of India, and Imperial Bank of India, upon
India's independence, was renamed the State Bank of India. The presidency banks were like the central banks and discharged most of the functions of central banks. They were established under charters from the British East India Company. Many Indians came forward to set up banks, and many banks were set up at that time, a number of which have survived to the present such as Bank of India and Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank Post-Independence The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal, and banking activities had remained paralyzed for months. The Government of India initiated measures to play an active role in the economic life of the nation. The major steps to regulate banking included:
In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an existing bank may be opened without a license from the RBI, and no two banks could have common directors.
However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. Nationalisation By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. Indira Gandhi’s move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the GOI controlled around 91% of the banking business of India. Liberalization In 1990s Narsimha Rao government embarked on a policy of liberalization and gave licenses to a small number of private banks, which included banks i.e. Global Trust Bank which later amalgamated with Oriental Bank of Commerce, UTI Bank, ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, kick started the banking sector in India, which has seen rapid growth with strong contribution from all the banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for FDI, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 49% with some restrictions. The new policy shook the Banking sector in India completely. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
through ATMs. CHANGES IN BANKING STRUCTURE The Tipping Point The opening up of the Indian banking sector to private players acted as 'the tipping point' for this transformation. And technology was central to this change. Multichannel banking gained prominence. Telegraphic Transfers. remittance products were limited to issuance of Drafts.SERVICES OFFERED BY BANKS EARLIER Banks in India have traditionally offered mass banking products. Current Account. Technology played a key role in providing this multi-service platform. Due to Reserve Bank of India guidelines. dictated by RBI. PLR (Prime lending rate) was the benchmark for interest on the lending products. With the entry of private players into retail banking and with multi-nationals focusing on the individual consumer in a big way. more often than not. Most common deposit products being Savings Bank. Banks have had little to do besides accepting deposits at rates fixed by Reserve Bank of India and lend amount arrived by the formula stipulated by Reserve Bank of India at rates prescribed by the latter. Further. the banking system underwent a phenomenal change. The deregulatory efforts prompted many financial institutions (like HDFC and ICICI) and non-financial institutions enter the banking arena. Bankers Cheque and Internal Transfer of funds. The entry of private players combined with new RBI guidelines forced nationalized banks to redefine their core banking strategy. 10 . For the first time consumers got the choice of conducting transactions either the traditional way (through the bank branch). Term deposit Account and lending products being Cash Credit and Term Loans. But PLR itself was. the telephone or through the Net.
Or for that matter shift accounts within a couple of hours. etc— morphing into Kotak Bank. it is now possible to open a new account within minutes. customers have become more discerning and less 'loyal' to banks.Pressing Issues Today banks have to look much beyond just providing a multi-channel service platform for its customers. 11 . Kotak Bank overcame the initial costs of setting up its own ATM network by getting into a sharing agreement with UTI bank. A recent example would be of Kotak Mahindra Finance Limited (KMFL)—a financial services company focused on investment consulting. Customer retention: Customer retention is one of the main priorities for banks today. Many other such players are waiting on the sidelines. Here are the top three concerns in the mind of every bank's CEO. There are other pressing issues that banks need to address in order to chalk-out a roadmap for the future. Given the various options. New entrants with strategies such as these make the banking game tougher. This has been one of the major reasons behind this kind of competition from players who do not have a banking background. Increased competition: The entry of new players into the banking space is leading to increased competition. Cost pressures: Cost pressures come into play when banks are not able to afford the cost of a certain service or initiative although they want to or need to have it in place. This is primarily because the cost structure at the backend is not efficient enough to offer that kind of service to the marketplace. Technology makes it easier for any company with the right channel infrastructure and money reserves to get into banking. With the entry of new players and multiple channels. insurance. This makes it imperative that banks provide best levels of service to ensure customer satisfaction. auto finance.
The main advantage of getting into retail banking is that the risks involved are lesser in this segment. banks have started venturing into newer territories. They are now focused on: • • • Cost reduction Product differentiation Customer-centric services Although the ways in which banks implement these vary. If banks can reduce costs. Differentiation The customer is interested in how he/she can benefit from the bank and its products. This is one of the main reasons why banks are focused on retail banking in a big way. That's why it becomes necessary for a bank to differentiate its products from the others.Redefining Objectives To cope with cost pressures and increased competition as well as to retain existing customers. Credit cards and debit cards are another focus area for banks. the underlying objectives remain the same. automotive. etc are being touted by banks like never before. The focus is on increasing the profit margins by cutting costs where it matters—on the operations side. Banks have woken up to the fact that they need to get into shape fast in order to handle competition. Some of the ways 12 . Cost Reductions Reduced costs basically translate to higher profit margins. There are lower Non Performing Assets (NPAs) in retail banking. With this banks have redefined their business priorities. it can go a long way in increasing profits. This is one of the reasons why loans such as those for housing.
Customer-Centric Model Indian banks have realized that it no longer pays to have a 'transaction-based' operating model. In this context. Specialization basically means that the bank gets involved only in selected areas.' which takes cues from customer aspirations and transaction patterns. Increasing the added value of products is another way of differentiation for banks. Another way to specialize could be by handling just specific sets of portfolios. new products. This will help banks in tailoring their products according to customer needs. For example. it will also provide better income generation capability. 13 . Customer relationships have to be managed in the best possible manner. Or. it could be limiting its services just for corporate banking clients. and increasing the value. While banks have to ensure product superiority and operational excellence. the bank might be getting involved only in housing finance. It also helps in new business opportunities like cross-selling and 'upselling. the biggest challenge today is to establish customer intimacy without which the other two are meaningless. Operational excellence is also a key factor in effective differentiation from the competition. This will ensure that the customer comes back to the bank. This will provide the bank with better yields per contact. Banks can differentiate themselves by adding new products to their range of services. rather than from new customers. This is because a major chunk of income of most banks comes from existing customers. it is very important that banks identify and understand customer needs.in which differentiation can be introduced are through specialization. In addition to good customer retention rates. This has led to the development of a relationship oriented model of operations focusing on customer-centric services.
The Indian Financial Network (INFINET) which initially comprised only the public sector banks was opened up for participation by other categories of members. This would result in funds transfers and funds-related message transfer to be routed electronically across banks using the medium of the INFINET. The first set of applications that could benefit greatly from the use of technological advances in the computer and communications area relate to the Payment systems which form the lifeline of any banking activity. a wide area satellite based network (WAN) using VSAT (Very Small Aperture Terminals) technology. Intra-city and intra-bank networking would facilitate in quick and efficient funds transfers across the country". banks as well as other financial entities entered the world of information technology and with Indian Financial Net (INFINET). was jointly set up by the Reserve Bank and Institute for Development and Research in Banking Technology in 1999.Emergence Of Information Technology In India. 14 . Internet has significantly influenced delivery channels of the banks. INFINET. which has become operational since February 2002 and RTGS (Real Time Gross Settlement system) scheduled towards the end of 2003 are other major developments in the area. Internet has emerged as an important medium for delivery of banking products & services. Detailed guidelines of RBI for Internet Banking has prepared the necessary ground for growth of Internet Banking in India. CFMS (Centralised Funds Management System) for better funds management by banks and SFMS (Structured Financial Messaging Solution) for secure message transfer. it is necessary that banks bestow sufficient attention on the computerisation and networking of the branches situated at commercially important centres on a time-bound basis. NDS. The process of reforms in payment and settlement systems has gained momentum with the implementation of projects such as NDS (Negotiated Dealing System). To reap the full benefits of such electronic message transfers.
• Creation of new jobs: Probably the best advantage of information technology is the creation of new jobs.Advantages of Information Technology • Globalization: IT has not only brought the world closer together. making purchases from different countries easier and convenient. This means that a business can be open anytime anywhere. Systems analyzers. communication has also become cheaper. We can now communicate with anyone around the globe by simply text messaging them or sending them an email for an almost instantaneous response. • Communication: With the help of information technology. quicker and more efficient. It also means that you can have your goods delivered right to your doorstep with having to move a single muscle. and allow for the exchange of views and ideas. • Cost effectiveness: Information technology has helped to computerize the business process thus streamlining businesses to make them extremely cost effective money making machines. This means that we can not only share information quickly and efficiently. but we can also bring down barriers of linguistic and geographic boundaries. but it has allowed the world's economy to become a single interdependent system. The internet has also opened up face to face direct communication from different parts of the world thanks to the helps of video conferencing. • More time: IT has made it possible for businesses to be open 24 x7 all over the globe. The world has developed into a global village due to the help of information technology allowing countries like Chile and Japan who are not only separated by distance but also by language to share ideas and information. thus increasing awareness. This in turn increases productivity which ultimately gives rise to profits that means better pay and less strenuous working. • Bridging the cultural gap: Information technology has helped to bridge the cultural gap by helping people from different cultures to communicate with one another. Hardware and Software 15 . Computer programmers.
16 . This means that one has to be in a constant learning mode. downsizing and outsourcing. it has also contributed to one culture dominating another weaker one. From cell phone signal interceptions to email hacking. with English becoming the primary mode of communication for business and everything else. dress and behave. Languages too have become overshadowed. it has also bought along privacy issues. For example it is now argued that US influences how most young teenagers all over the world now act. easier and more convenient. if he or she wishes for their job to be secure. Disadvantages of Information Technology • Unemployment: While information technology may have streamlined the business process it has also crated job redundancies. • Privacy: Though IT may have made communication quicker. • Lack of job security: Industry experts believe that the internet has made job security a big issue as since technology keeps on changing with each day. people are now worried about their once private information becoming public knowledge.developers and Web designers are just some of the new employment opportunities created with the help of information technology. This means that a lot of lower and middle level jobs have been done away with causing more people to become unemployed. • Dominant culture: While information technology may have made the world a global village.
With stiff competition and advancement of technology. Eventually. when allowed.value" clients. 17 . the services provided by banks have become more easy and convenient. This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems. Cash Management services. Different types of accounts and loans. A few foreign & private sector banks have already introduced customized banking products like Investment Advisory Services. The Indian banking industry is passing through a phase of customers market.4.2000 has further facilitated the entry of banks in this sector. Investment products and Tax Advisory services. banks are also adding services to their customers. Photo-credit cards.NEW SERVICES OFFERED BY BANKS Banking Services In India Bouquets of services are at customers demand in today’s banking system. Banks also offer advisory services termed as 'private banking' . The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. With years. A competition has been established within the banks operating in India. The customers have more choices in choosing their banks. the Banks plan to market bonds and debentures.to "high relationship . The recent Credit Policy of RBI announced on 27. Insurance peddling by Banks will be a reality soon. facilitating with plastic money and money transfer across the globe. SGL II accounts. A few banks have gone in to market mutual fund schemes.
the most common and first service of the banking sector. • Bank Term Deposits Account . Bank account online is registered through a PC with an internet connection. etc.Following are the services being offered: Bank Accounts Open bank account .Bank Term Deposits Account can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs/ Specified Associates / Societies / Trusts. • Bank Account Online . the major banks in the public and private sector has facilitated their customer to open bank account online.Bank Current Account can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs / Specified Associates / Societies / Trusts. The bank accounts are as follows: • Bank Savings Account .With the advancement of technology. The advent of bank account online has saved both the cost of operation for banks as well as the time taken in opening an account.Bank Savings Account can be opened for eligible person / persons and certain organizations / agencies (as advised by Reserve Bank of India (RBI) from time to time) • Bank Current Account . 18 . etc. There are different types of bank account in Indian banking sector.
It is generally of plastic quality. The modern banking system has the credit of simplifying the process which provides things at ease. like a credit instrument that helps in making payments at centres without limits but with some negligible amount. as specified by the ISO 7810 standard. The plastic money is in true sense. HDFC Bank. American Express. the monetary mechanism has witnessed radical changes. The credit cards are shape and size. Economy has developed a craze for plastic money which in turn is encouraging agencies in exploiting the credit card holders. from coin to paper and now from paper to plastic money.Plastic Money • From barter to coin. There are number of banks and financial institutions which are engaged in this business such as CITIBANK. It can be flashed at outlets and especially in times of emergency it provides an opportunity to withdraw cash at any hour of the day. Punjab National Bank. after getting special permission from the Reserve Bank of India. State Bank of India and many more. Plastic money saves the botheration of carrying cash. The first international credit card was issued to a restricted number of customers by Andhra Bank in 1987 through the Visa program. The first card was issued in India by Visa in 1981. ICICI Bank. Following are some of the forms of plastic money being used : • • • 19 .
Basically banks. which can be used more than once to borrow money or buy products and services on credit. Its products are issued by 23. Credit cards are financial instruments. American Express The world's favorite card is American Express Credit Card. retail stores and other businesses issue these.000 financial institutions in 220 countries and territories.Credit Cards Credit cards in India are gaining ground. Credit card however became more popular with use of magnetic strip in 1970. More than 57 million cards are in circulation and growing and it is still growing further. Credit card in India became popular with the introduction of foreign banks in the country. Nearly 600 million cards carry one of the VISA brands and more than 14 million locations accept VISA cards. A number of banks in India are encouraging people to use credit card. Master Card MasterCard is a product of MasterCard International and along with VISA are distributed by financial institutions around the world. Around US $ 123 billion was spent last year through American Express Cards and it is poised to be the world's No. Visa Card VISA cards is a product of VISA USA and along with MasterCard is distributed by financial institutions around the world. A VISA cardholder borrows money against a credit line and repays the money with interest if the balance is carried over from month to month in a revolving line of credit. 1 card in the near 20 . The concept of credit card was used in 1950 with the launch of charge cards in USA by Diners Club and American Express. Cardholders borrow money against a line of credit and pay it back with interest if the balance is carried over from month to month.
The following are some of the plus features of credit card in India • • • • • • • • Hotel discounts Travel fare discounts Free global calling card Lost baggage insurance Accident insurance Insurance on goods purchased Waiver of payment in case of accidental death Household insurance 21 .It is the most basic card (sans all frills) offered by issuers. Canada.Brand name for the standard card issued by VISA. Europe and Asia and are used widely in the retail and everyday expenses segment. In addition. the total amount spent on American Express cards rose by 4 percent. American Express cards are very popular in the U. Classic Card .S. • • Platinum Card . Titanium Card . Gold Card/Executive Card . issuers provide extra perks or incentives to cardholders.future..A card with an even higher limit than a platinum card. In a regressive US economy last year. Other cards: • • • Standard Card . Income eligibility is also higher.A credit card that offers a higher line of credit than a standard card.A credit card with a higher limit and additional perks than a gold card.
and restaurants.Debit Cards Debit cards also known as check cards look like credit cards or ATM cards (automated teller machine card). In India almost all the banks issue debit card to its account holders. . • The debit card is a quick. Debit cards are accepted at many locations. Using a debit card instead of writing checks saves you from showing identification or giving out personal information at the time of the transaction. our money is quickly deducted from the bank account. including grocery stores. retail stores. Debit cards are different from credit cards. • • Using a debit card frees you from carrying cash or a checkbook. Credit card is a way to "pay later. gasoline stations. •Using a debit card may mean you have less protection than with a credit card purchase for items which are never delivered. Using a debit card means you no longer have to stock up on traveler's checks or cash when you travel. you may dispute unauthorized charges or other mistakes within 60 days. or were misrepresented. "pay now" product. With debit card. as with credit cards. But. •Returning goods or canceling services purchased with a debit card is treated as if the 22 purchase were made with cash or a check. giving you no grace period." whereas debit card is a way to "pay now." When we use a debit card. It’s an alternative to carrying a checkbook or cash. It operates like cash or a personal check. • Debit cards may be more readily accepted by merchants than checks. we use our own money and not the issuer's money. are defective. Features of Debit Card • • Obtaining a debit card is often easier than obtaining a credit card. especially in other states or countries wherever your card brand is accepted.
ATM Cards Automated Teller machine (ATM) cards are capable of doing variety of functions. drafts etc. It is one of the fast moving financial product of banks. • Stop Payment instructions. • Balance enquiry. ATM Cash Transactions includes deposits and withdrawals. Non cash transactions incude: • Providing Mini Statement of last five transactions. In some banks upto last ten transactions. It can perform both cash and non-cash transactions in secured environment. Bill payments (electricity bills. Loans Banks in India with the way of development have become easy to apply in loan market. Car loan / auto loan are 23 . The following loans are given by almost all the banks in the country: • • • • • Personal Loan Car Loan or Auto Loan Loan against Shares Home Loan Education Loan or Student Loan Almost all the banks have jumped into the market of car loan which is also sometimes termed as auto loan. • Transfer of funds between accounts. • • Requisition of Cheque books. telephone bills etc).
Again SBI. Many banks will even use money transfer services as loss-leaders in order to generate account openings and cross-sell opportunities. Economists say that the market of money transfer will further grow at a cumulative 10.3% from 2003 to 2004 i. This is a type of Telegraphic Transfer or Tele Cash Orders. Money Transfer Besides lending and depositing money. The RBI has also liberalised the interest rates of home loan in order to match the repayment capability of even middle class people.e. Now people are moving to township outside the city. banks also carry money from one corner of the globe to another. More number of townships are coming up to meet the demand of 'house for all'. Banks generally issue Demand Drafts. to US$233 bn.sanctioned to the extent of 85% upon the ex-showroom price of the car with some simple paper works and a small amount of processing fee. ICICI. from US$213 bn. The price evolution of money transfer products for banks will be similar to that of consumer bill pay-the product is worth 24 . Students with certain academic brilliance. studying at recognized colleges/universities in India and abroad are generally given education loan / student loan so as to meet the expenses on tuition fee/ maintenance cost/books and other equipment. The international money transfer market grew 9. It has been only a couple of years that banks have jumped into the money transfer businesses in India. Banker's Cheques.1% average growth rate through 2008. Money Orders or other such instruments for transferring the money. HDFC. Almost all banks are dealing in home loan. The educational loan. With the use of high technology and varieties of product it seems that "Free" money transfers will become commonplace. rather to be termed as student loan. is a good banking product for the mass. in 2004. HSBC are leading. This act of banks is known as transfer of money. This activity is termed as remittance business. Home loan is the latest craze in the banking sector with the development of the infrastructure.
giving away as an account acquisition tool to win overall market share and establish banking relationships. By 2010. This service provides peace of mind to either the NRIs or to the visitors to India. ATM money transfer card products have had terrible bank adoption rates since being introduced in the last three to four years. Money transfer to India is one of the most important parts played by the banks. we will see a good percent of all foreign-born households doing some level of online banking. which currently frequents traditional money transmitters such as Western Union. First-mover banks will start having a window of opportunity to include online transfer functionality within the next couple of years. Some of them are as under: • • • • • • • • Western Union Money Transfer Union Money Transfer IKobo Money Transfer Cash2india.com Remit2india Samachar Money Transfer Wells Fergo International Money Transfer Travellers Express 25 . Money Transfer to India Apart from banks few financial institutions and online portals gives services of money transfer to India. There is a terrific opportunity for banks and non-banks to offer more robust global inter-institutional funds transfer services online. Many Indian banks have ATM'S (automatic teller machine). and most do not have an alternative product marketed by their bank that is painless. quick. and cost-effective. That will change as banks offer transfer services through their online channel. More than half of Western Union's customers today are already banked. enable to draw foreign currency in India.
000 marks in installing ATMs in India is ICICI. The first bank to cross 1. the banks can use each other's ATM at a cost. almost every commercial bank gives ATM facilities to its customers. to the third-party fund transfer option given by some banks to its account holders through e-cheque. 26 . Under this scheme. either debit or credit within India. It was in the year 1987. They are either setting up their own ATM centers or entering into tie-ups with other banks. 35 extra from their customers. Automated Teller Machines (ATM) The first bank to introduce the ATM concept in India was the Hong Kong and Shanghai Banking Corporation (HSBC).Visa Money Transfer Visa has recently introduced the 'Visa Money Transfer' option for its savings and current account holder of any bank with a visa debit card. usually Rs. ICICI. Public Sector Banks are also taking the installation of ATMs seriously for Indian market. UTI. Now. in many respects. A Visa Money Transfer is of similar kind. The main feature of ‘Swadhan Card’ is as follows: • No exchange fee charged to change an old ATM card for a Swadhan card. The Corporation Bank has the second largest network of ATMs amongst the Public Sector Banks in India. SBI is following the concept of 'ATMs in Quantity'. HDFC and IDBI count more than 50% of the total ATMs in India. But Private Sector Banks have taken the lead. This facility helps its customer to transfer funds from his bank account to any visa card. The Indian banks have also come up with a 'Swadhan' scheme. but this is restricted to only visa cardholders.
but only your own bank will provide this. In past two years. at anytime and in any condition or anyhow. Mobile Banking "The account that travels with you". Exception made for select customers who can withdraw up to Rs10. mobile banking users have increased three times if we compare the use of either debit card or credit card. 3. Mobile banking uses the same infrastructure like the ATM solution. Moreover 8590% mobile users do not own credit cards. With mobile banking facilities. Using compact HTML and WAP technologies. Still.000 by regular ATMs. The system is either through SMS or through WAP Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. But it is extremely easy and inexpensive to implement.000. It reduces the cost of operation for bankers in comparison to the use of ATMs. one can bank from anywhere.• • Rs. which is given only by your own bank. • All transactions conducted in any of the member banks appear on the bank statement. Transactions conducted through any of the member banks appear on a bank statement. • • IBA gives banks the discretion to decide a higher maximum amount for withdrawal.000 fixed as the ceiling on withdrawal. 27 . the following operations can be conducted through advanced mobile phones which can is further viewed on channels such as the Internet via the Channel Manager. This is needed in today's fast business environment with unending deadlines for fulfillment and loads of appointments to meet and meetings to attend. this is lower than the average withdrawal of Rs15.
Bank account data is encrypted on a smart-card chip. One for the telephonic purpose and the other for banking. If you are having non-WAP enabled mobile handset. It is very similar to how an ATM works.Last two Transactions Bill Payment The SMS facility brings peace of mind to customers and opens doors to many more technological possibilities and innovative services.Free Balance Holding Demat . The following operations can be easily used by the service provider: • • • • • • • • Balance enquiry Last three transactions Cheque payment status Cheque book request Statement request Demat . So is to be your money. The technology is at its highest level to move your money while you are on the move. two SIM Cards are used in mobile phones. About 3. SMS Banking Businesses are in move. 28 . you can use the facility of SMS services. You may have to thank the banks which are providing banking at the send-of-your-sms.• • • • Bill payments Fund transfers Check balances Any many more which is also available in SMS Banking In countries like Korea.3 million transactions were reported by Bank of Korea in 2004.
Banks are coming up with arrangements of utility payments. Net Banking Net Banking is conducting ones banking or bank account online through a computer and a net connection. Second. in abroad there are banks like EGG Bank or NET Bank. place queries and also can be facilitated with a wide range of transactions simultaneously. a mobile phone is needed. In both the cases. With the support of this technology. real time'. In other words it is said that it is updated 'on-line. They call it "Mobile Wallet". a card is necessary and to use SMS service. SMS banking is also very much safe. The system is updated immediately after every transaction automatically. Few banks provide interaction facility between the banks and its customers. etc. They are as follows: • • • The banks offer only relevant information about their products and services to the mass. one authenticates the mobile number with the authentications key. electricity bills.To use ATM. Net Banking has three basic features. secret number is necessary to access. which only have a virtual presence without any physical branches. the regulatory body has not yet sanctioned virtual bank. like telephone bills. the customer uses secret Mobile Personal Identification Number (MPIN). a customer can make payment and receive payment of account of buy/sell (merchants) through SMS. First. In India. Through net banking one can check the status of his/her account. 29 . A new concept has been developed by Bank of Punjab Ltd.
Among all the facilities provided the maximum of them uses only for checking balance or requesting for a cheque book.The current statistics show that hardly 10 per cent of Indian customers use the internet for banking. Very few customers uses the advance interactive services provided by the banks. Services provided by Net Banking Queries • • • • • • • • Check Balance See Statement Inquire about cheque status Ask for a Statement Ask for a Cheque Book Inquire about TDS details See Demat Account Update profile Transactions • • • • • • • • Stop a Cheque Pay Bills Ask for a Demand Draft Transfer funds between your accounts Transfer funds to a third party Request for a new Fixed Deposit Shop Online Pay Bank Credit Card Dues 30 .
With the help of fibre optic cables. This is known as Proxy Banking. Only 21% of rural households have access to credit from a formal source.Advantages of Net Banking • It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. validity of electronic contract. Thanks to Internet Kiosk and the ATM duo which has made it possible for rural India. This kiosk has been set up by ICICI Bank in partnership with network n-Logue Communications in remote villages of Southern part of the country. It has added a new dimension to different kinds of risks traditionally associated with banking. 87% households have no formal credit. Security of banking transactions. this kiosk works on wireless in local loop technology. etc. 70% of marginal farmers do not have deposit account. • • Proxy Banking Indian villages were miles away from mutual funds. not subject to control by any single authority or group of users. insurance and even equity trading. 31 . customers' privacy. which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain. This has raised the question of jurisdiction of law/supervisory system to which such transactions should be subjected.. Reasons for setting-up of Proxy Banking • • • • 58% of rural households still do not have bank accounts. heightening some of them and throwing new risk control challenges.
etc. • Consumers bribe officials to get loans approved which varies between 10 and 20 per cent of the loan amount. paddy crop. Insurance policies sold to farmers like groundnut. Life and non-life insurance provided. 32 . which is essentially the delivery channel of branch financial services via telecommunication devices where the bank customers can perform retail banking transactions by dialing a touchtone telephone or mobile communication unit. As far as the customers are concerned. The Proxy Banking is an innovative approach to rural lending and will add to the government's expanding base of Kisan credit cards and the good old guidelines for agricultural lending. soya. Benefits to Rural • • • • • Small loans given for buying buffaloes. Telebanking has numerous benefits for both customers and banks. Weather insurance given to farmers. • Branch banking in rural is a loss-making. · The loans take between 24 to 33 weeks to get sanctioned. It has almost all the impact on productivity of ATMs. Telephone Banking Tele banking (telephone banking) can be considered as a form of remote or virtual banking. from the banks’ perspective. it provides increased convenience. which is connected to an automated system of the bank by utilizing Automated Voice Response (AVR) technology. the costs of delivering telephone-based services are substantially lower than those of branch based services.• Only 1% rural households rely on a loan from a financial intermediary. castor. On the other hand. Loans for setting up a tea shop. expanded access and significant time saving.
Personal Computer Banking PC-Banking is a service which allows the bank’s customers to access information about their accounts via a proprietary network. This saves customers time. and gives more convenience for higher productivity. into one unified system in the form of a Wide Area Network (WAN) or Enterprise Network (EN) for the creating and sharing of consolidated customer information/records. Branch Networking Networking of branches is the computerization and inter-connecting of geographically scattered stand-alone bank branches. Also. It offers retail banking services to customers at their offices/homes as an alternative to going to the bank branch/ATM. there is more productivity per time period. there is simulated division of labour among bank branches with its associated positive impact on productivity among the branches. the customer can perform a lot of retail banking functions.except that it lacks the productivity generated from cash dispensing by the ATMs. It offers quicker rate of inter-branch transactions as the consequence of distance and time are eliminated. The increasing awareness of the importance of computer literacy has resulted in increasing the use of personal computers. Hence. Furthermore. and offers 24-hour service. 33 . It also has the benefits of Telephone Banking and ATMs. seven days a week. as it curtails customer travel distance to bank branches it offers more time for customers’ productive activities. Once access is gained. This certainly supports the growth of PC banking which virtually establishes a branch in the customers’ home or office. with the several networked branches serving the customer populace as one system. usually with the help of proprietary software installed on their personal computer.
reservations. The advances in IT have certainly introduced new delivery channels in the Indian banking industry. Electronic commerce is now thought to hold the promise of a new commercial revolution by offering an inexpensive and direct way to exchange information and to sell or buy products and services. They are briefly known as VSATs.Electronic Fund Transfer At Point Of Sale (EFTPoS) An Electronic Funds Transfer at the Point of Sale is an on-line system that allows customers to transfer funds instantaneously from their bank accounts to merchant accounts when making purchases (at purchase points). Increased banking productivity results from the use of EFTPoS to service customers shopping payment requirements in stead of clerical duties in handling cheques and cash withdrawals for shopping. hence continual productivity for the bank even after banking hours. VSATs use small antennas which may have variable size of 1. the system continues after banking hours. 34 . Technological developments particularly in the area of Telecommunications and Information Technology are revolutionizing the way business is done. The terminals used in VSATs have very small apertures. It also saves customers time and energy in getting to bank branches or ATMs for cash withdrawals which can be harnessed into other productive activities.8 meters and these acts as small earth stations. Through satellites.8 meters or 3. Very Small Aperture Terminals (VSATs) In Banking Very Small Aperture Terminals work with the help of the satellite. VSATs technology has made banking services very simple and speedy. retail trade. VSATs are very useful in banking industry. A POS uses a debit card to activate an Electronic Fund Transfer Process (Chorafas. This revolution in the market place has set in motion a revolution in the banking sector for the provision of a payment system that is compatible with the demands of the electronic marketplace. 1988). Furthermore. stock exchanges.
Characteristics • These terminals can exchange and transmit information. international services. The following operations can be performed by using this technology: • The quality of customer service at the counters has improved to a large extent. 135 crores out of which Rs. • Exchange of information has geared up and speedy clearing of pending entries has been made possible. weather forecasting. • The currency chest operation has become more fast and accurate. • File work can be easily transferred. • Payment system has been made more effective. The size of antennas Hub-Station ranges between 7. The transmission through a larger earth station which is called Hub-Station.corporate networking. • VSATs cannot directly transmit messages to each other. • VSATs can function at ‘C-Band’. • The shortcomings of telecommunications have been overcome with the help of VSATs. document services etc. industries. 100 crores were arranged by the public sector banks. 35 .5 m to 11m. 35 crores were arranged by RBI and Rs. Uses of VSATs The activities relating to VSATs technology has now started. • These earth stations normally use bit rate which is less than megabyte per second. The whole project is has incurred expenditure of Rs. This network links 2800 bank branches with one another.
They are: • • • Non-Resident (Ordinary) Account .NRO A/c Non-Resident (External) Rupee Account . • The banks offer specialized telephone facilities through this network.NRE A/c Non-Resident (Foreign Currency) Account .• The use of e-mail is made more effective through VSATs. There are different types of accounts for them. Banking Services For NRI’s Almost all the Indian Banks provide services to the NRIs.FCNR A/c An Indian resident who is earning foreign exchange can also maintain Foreign Currency account in the country with an authorized dealer. • The self owned communication system can be operationalised by the institution. 36 . • Through VSATs technology every organization is able to develop its own system of communications.
Convertibility clause no longer obligatory for assistance to corporate sanctioned by term-lending institutions. Opinions are also there that there should be a super-regulator for the financial services sector instead of multiplicity of regulators. Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) became important institutions. With the openings in the insurance sector for these institutions. The Reserve Bank of India (RBI) has become more independent. Private Sector Institutions played an important role. Now they have to approach the capital market for debt and equity funds. The important achievements the following fields are discussed under separate heads: Financial Markets In the last decade. They grew rapidly in commercial banking and asset management business. Competition among financial intermediaries gradually helped the interest rates to decline. Capital adequacy norms extended to financial 37 . Development Finance Institutions Financial institution's access to SLR funds reduced. Since 1991. every governments India took major steps in reforming the financial sector of the country. they started making debt in the market. The real interest rate was maintained.IMPACT OF CHANGE IN BANKING STRUCTURE ON ECONOMY Financial and Banking reforms The last decade witnessed the maturity of India's financial markets. Deregulation added to it. The Government accepted the important role of regulators. It was something between the nominal rate of interest and the expected rate of inflation. The borrowers did not pay high price while depositors had incentives to save. Regulators The Finance Ministry continuously formulated major policies in the field of financial sector of the country.
institutions. Stamp duty is being withdrawn at the time of dematerialization of debt instruments in order to encourage paperless trading. 38 . has a mandate to develop the secondary market in government securities. The secondary market was underdeveloped and lacked liquidity.2 crores. Until recently. The DFHI is the principal agency for developing a secondary market for money market instruments and Government of India treasury bills. asset management and insurance through separate ventures. The RBI has introduced a liquidity adjustment facility (LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out through repo auctions. has been raised to Rs. On account of the substantial issue of government debt.up. The Securities Trading Corporation of India (STCI).edged market occupies an important position in the financial set. Several measures have been initiated and include new money market instruments. the money market in India was narrow and circumscribed by tight regulations over interest rates and participants. the SEBI has now decided to concentrate on the development of the debt market. After bringing some order to the equity market. The RBI conducts its sales of dated securities and treasury bills through its open market operations (OMO) window. the gilt. DFIs such as IDBI and ICICI have entered other segments of financial services such as commercial banking. strengthening of existing instruments and setting up of the Discount and Finance House of India (DFHI). the requirement of minimum net owned funds. The move to universal banking has started. which started operations in June 1994. Non-banking finance companies In the case of new NBFCs seeking registration with the RBI. Long-term debt market. Primary dealers bid for these securities and also trade in them.
Foreign companies can only enter joint ventures with Indian companies. The biggest shock to the mutual fund industry during recent times was the insecurity generated in the minds of investors regarding the US 64 schemes. but it can be expected that the customer will gain from improved service. 1996 and amendments thereto. improving disclosure standards and experimenting with new types of distribution.70. Expectations are that India will be an attractive emerging market with tremendous potential. With the issuance of SEBI guidelines.The Capital Market The number of shareholders in India is estimated at 25 million. The foreign owned AMCs are the ones which are now setting the pace for the industry. Mutual Funds The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations. both Indian and foreign players. Unfortunately. which have led to retail investors deserting the stock markets. There has been a dramatic improvement in the country's stock market trading infrastructure during the last few years. with participation restricted to 26 per cent of equity. setting new standards of customer service. 39 . mutual funds started becoming popular. during recent times the stock markets have been constrained by some unsavory developments. With the growth in the securities markets and tax advantages granted for investment in mutual fund units.000 crores. the industry had a framework for the establishment of many more players. The insurance industry is the latest to be thrown open to competition from the private sector including foreign players. It is too early to conclude whether the erstwhile public sector monopolies will successfully be able to face up to the competition posed by the new players. The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly Rs. They are introducing new products. but its share is going down. only an estimated two lakh persons actively trade in stocks. However.
A credit information bureau being established to identify bad risks. RBI guidelines issued for risk management systems in banks encompassing credit. provisioning for delinquent loans and for capital adequacy. Capital Market Developments The Capital Issues (Control) Act. and special recovery tribunals set up to facilitate quicker recovery of loan arrears. the capital market regulator was established in 1992. repealed. Bank lending norms liberalized and a loan system to ensure better control over credit introduced. Derivative products such as forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced. in order to improve the low per capita insurance coverage. be essential. New private sector banks allowed promoting and encouraging competition. 1947. substantial capital were provided by the Government to PSBs. Banks asked to set up asset liability management (ALM) systems. Deregulation Of Banking System Prudential norms were introduced for income recognition. SEBI.The new players will need to bring in innovative products as well as fresh ideas on marketing and distribution. Recovery of debts due to banks and the Financial Institutions Act. market and operational risks. office of the Controller of Capital Issues was abolished and the initial share pricing were decontrolled. In order to reach the stipulated capital adequacy norms. 1993 was passed. PSBs were encouraged to approach the public for raising resources. of course. Good regulation will. 40 . Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash reserve ratio (CRR) brought down in steps. asset classification. Interest rates on the deposits and lending sides almost entirely were deregulated.
and made rules for making client or broker relationship more transparent which included separation of client and broker accounts.Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after registration with the SEBI. Standard denomination for equity shares of Rs. 100 were abolished. Several local stock exchanges changed over from floor based trading to screen based trading. clearing and settlement facilities was established. The practice of making preferential allotment of shares at prices unrelated to the prevailing market prices stopped and fresh guidelines were issued by SEBI. SEBI issued detailed employee stock option scheme and employee stock purchase scheme for listed companies. A system of rolling settlements introduced. To reduce the cost of issue. Companies were required to disclose all material facts and specific risk factors associated with their projects while making public issues. Dematerialization of stocks encouraged paperless trading. SEBI reconstituted governing boards of the stock exchanges. 41 . Steps were taken to improve corporate governance based on the report of a committee. underwriting by the issuer were made optional. subject to conditions. Indian companies were permitted to access international capital markets through euro issues. Buy Back Of Shares Allowed The SEBI started insisting on greater corporate disclosures. Derivatives trading starts with index options and futures. introduced capital adequacy norms for brokers. Companies given the freedom to issue dematerialized shares in any denomination. SEBI empowered to register and regulate venture capital funds. 10 and Rs. Private Mutual Funds Permitted The Depositories Act had given a legal framework for the establishment of depositories to record ownership deals in book entry form. with nationwide stock trading and electronic display. The National Stock Exchange (NSE).
. BANKING STRUCTURE IN INDIA Public Sector Banks Among the Public Sector Banks in India. was formed in 1950 with the amalgamation of four banks viz. United Bank of India is one of the 14 major banks which were nationalised on July 19. in the Public Sector Banks. Its predecessor. 1969. 42 .The SEBI (Credit Rating Agencies) Regulations. the United Bank of India Ltd. 1999 issued for regulating new credit rating agencies as well as introducing a code of conduct for all credit rating agencies operating in India.
17. (1932). NRI and Commercial banking services. Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharastra Canara Bank Central Bank of India Corporation Bank Dena Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank 43 . 16. 10. a Government of India Undertaking offers Domestic. 13. 8. 2. Bengal Central Bank Ltd. (1914). 19.Comilla Banking Corporation Ltd. 12. 11. 14. Oriental Bank of Commerce (OBC). 5. This Public Sector Bank India has implemented 14 point action plan for strengthening of credit delivery to women and has designated 5 branches as specialized branches for women entrepreneurs. (1922) and Hooghly Bank Ltd. OBC is implementing a GRAMEEN PROJECT in Dehradun District (UP) and Hanumangarh District (Rajasthan) disbursing small loans. The following are the list of Public Sector Banks in India 1. 3. 6. Comilla Union Bank Ltd. 7. 15. 9. 18. (1918). 4.
Major Private Banks in India are: 44 . It is one of the fastest growing Bank Private Sector Banks in India. The first Private Bank in India to receive an in principle approval from the Reserve Bank of India was Housing Development Finance Corporation Limited. It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and commenced operations as Scheduled Commercial Bank in January 1995. a Public Sector Banks • State Bank of India o o o o o o State Bank of Bikaner & Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of Indore (SBIr) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Travancore (SBT) Private Sector Banks Private banking in India was practiced since the beginning of banking system in India. IDBI ranks the tenth largest development bank in the world as Private Banks in India and has promoted a world class institution in India.List of State Bank of India and its subsidiary. The first private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. to set up a bank in the private sector banks in India as part of the RBI's liberalisation of the Indian Banking Industry.
• Bank of Rajasthan • Catholic Syrian Bank • Bharat Overseas Bank • Centurion Bank of Punjab • Dhanalakshmi Bank • Federal Bank • HDFC Bank • ICICI Bank • IDBI Bank • IndusInd Bank • ING Vysya Bank • Jammu & Kashmir Bank • Karnataka Bank • Karur Vysya Bank • Kotak Mahindra Bank • SBI Commercial & International Bank • South Indian Bank • United Western Bank • UTI Bank • YES Bank • City Union Bank • Nainital Bank • Tamilnad Mercantile Bank • Lord Krishna Bank • Lakshmi Vilas Bank • Ratnakar Bank 45 .
but the importance of such banks have assumed in India is rarely paralleled anywhere else in the world. Though the co operative movement originated in the West. The cooperative banks in India play an important role even today in rural financing. their number. Co operative Banks in India are registered under the Co-operative Societies Act. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act.Co-Operative Banks The Co operative banks in India started functioning almost 100 years ago. and the number of offices the cooperative bank operate. The Cooperative bank is an important constituent of the Indian Financial System. The cooperative bank is also regulated by the RBI. Cooperative banks in India finance rural areas under: • • • • • Farming Cattle Milk Hatchery Personal finance Cooperative banks in India finance urban areas under: • • • • • Self-employment Industries Small scale units Home finance Consumer finance Regional Rural Banks 46 . The businesses of cooperative bank in the urban areas also have increased phenomenally in recent years due to the sharp increase in the number of primary co-operative banks. the expectations the co operative is supposed to fulfill. 1965. judging by the role assigned to co operative.
475 rural banks in the country of which 2126 (91%) are located in remote rural areas. The total number of SBIs Regional Rural Banks in India branches is 2349 (16%). Few of them are as follows: • Haryana State Cooperative Apex Bank Limited • National Bank for Agriculture and Rural Development (NABARD) • Sindhanur Urban Souharda Co-operative Bank • United Bank of India • Syndicate Bank Foreign Banks Foreign Banks in India always brought an explanation about the prompt services to customers. the banking sector in India also become competitive and accurative. Apart from SBI. The rural banks of SBI are spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to North East. SBI has 30 Regional Rural Banks in India known as RRBs. on its terms) and their Indian subsidiaries will not be able to open branches freely. Rural Banks in those days mainly focused upon the agro sector. New rules announced by the Reserve Bank of India for the foreign banks in India in this budget have put up great hopes among foreign banks which allow them to grow unfettered. there are other few banks which functions for the development of the rural areas in India. Please see the list of foreign banks in India till date. The policy conveys that foreign banks in India may not acquire Indian ones (except for weak banks identified by the RBI. Now foreign banks in India are permitted to set up local subsidiaries. 47 . There are 197 RRB’s in India. After the set up foreign banks in India. there are 14. Regional rural banks in India penetrated every corner of the country and extended a helping hand in the growth process of the country. Till date in rural banking in India.Rural banking in India started since the establishment of banking sector in India.
Upcoming Foreign Banks In India 48 . the list of foreign banks in India is going to become more quantitative as a number of foreign banks are still waiting with baggage to start business in India.List of Foreign Banks in India • • • • • • • • • • • • • • • • • • • • ABN-AMRO Bank Abu Dhabi Commercial Bank Bank of Ceylon BNP Paribas Bank Citi Bank Deutsche Bank HSBC Sonali Bank JPMorgan Chase Bank Standard Chartered Bank Scotia Bank Bank of America American Express Bank DBS Bank Krung Thai Bank Chinatrust Commercial Bank Arab Bangladesh Bank Mizuho Corporate Bank Oman International Bank Calyon Bank By the year 2009.
20. This is as an aftermath of the sudden interest shown by Reserve Bank of India paving roadmap for foreign banks in India greater freedom in India. It was established in April 1935 under the RBI Act. 100 each fully paid which was entirely owned by private shareholders in the beginning. and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai.00.By 2009 few more names is going to be added in the list of foreign banks in India. Reserve Bank of India was nationalised in the year 1949. List of foreign banks going to set up business in India: • • • • • Royal Bank of Scotland Switzerland's UBS US-based GE Capital Credit Suisse Group Industrial and Commercial Bank of China RESERVE BANK OF INDIA The central bank of the country is the Reserve Bank of India (RBI). 5 crores on the basis of the recommendations of the Hilton Young Commission. 1934 with a share capital of Rs. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members. ten nominated Directors by the Government to give representation to important elements in the economic life of the country.000. one Government official from the Ministry of Finance. Chennai and New Delhi. The share capital was divided into 5. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. 49 . The Government held shares of nominal value of Rs. the Governor and four Deputy Governors. Kolkata.000 shares of Rs. 2.
Originally. Objectives of constituting the Reserve Bank of India: • • • • • • To regulate the issue of bank notes. It is so called as it maintains cash reserves of all the commercial banks in India with itself. To operate the credit and currency system of the country to its advantage. Under Section 22 of the Reserve Bank of India Act. It is also referred to as Central Bank. 1935. The RBI Act. To act as a regulator and supervisor of the financial system Management of foreign exchange control Banker to the Government because it performs merchant banking function for the central and the state governments. The assets and liabilities of the Issue Department are kept separate from those of the Banking Department.The Reserve Bank of India Act. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. To maintain reserves with a view to securing monetary stability. also acts as their banker. These are as follows: Bank Of Issue RBI is also known as the Bank of Issue as it enjoys monopoly in issuing currency throughout the country. 1934 provides the statutory basis of the functioning of the Bank. Functions Of Reserve Bank Of India • • The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank in the Reserve Bank of India. the assets of the Issue 50 . The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. the Bank has the sole right to issue bank notes of all denominations. Supervision and licensing of banks. Development of banks. 1934 was commenced on April 1.
It makes loans and advances to the States and local authorities. Bankers' Bank and Lender of the Last Resort The Reserve Bank of India acts as the bankers' bank. of which at least Rs. The remaining three-fifths of the assets might be held in rupee coins. 40 crores in value. 115 crores should be in gold. It acts as adviser to the Government on all monetary and banking matters. to receive and to make payments on behalf of the Government and to carry out their exchange remittances and other banking operations. every scheduled bank was required to maintain with the 51 . the Reserve Bank of India is required to maintain gold and foreign exchange reserves of Ra. agent and adviser. Government of India rupee securities. The system as it exists today is known as the minimum reserve system.Department were to consist of not less than two-fifths of gold coin. Due to the exigencies of the Second World War and the post-war period. It ensures flexibility in the money supply It ensures general public’s faith in the currency system of the country. these provisions were considerably modified. The Reserve Bank is agent of Central Government and of all State Governments in India excepting that of Jammu and Kashmir. The RBI acts as a financial advisor and performs agency functions for the government also. eligible bills of exchange and promissory notes payable in India. Following are the advantages of giving monopoly power to central bank:It brings uniformity in the notes issue. to keep the cash balances as deposits free of interest. gold bullion or sterling securities provided the amount of gold was not less than Rs. Banker To Government The second important function of the Reserve Bank of India is to act as Government banker. The Reserve Bank has the obligation to transact Government business. via. 200 crores. It adds to the government treasury. Since 1957. According to the provisions of the Banking Companies Act of 1949.
in detail. Every bank has to get a license from the Reserve Bank of India to do banking business within India. The Reserve Bank of India is armed with many more powers to control the Indian money market. Each scheduled bank must send a weekly return to the Reserve Bank showing. selective controls of credit are increasingly being used by the Reserve Bank. By an amendment of 1962. the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular groups or persons on the basis of certain types of securities. Every bank will have to get the permission of the Reserve Bank before it can open a new branch.e. According to the Banking Regulation Act of 1949. The minimum cash requirements can be changed by the Reserve Bank of India.Reserve Bank a cash balance equivalent to 5% of its demand liabilities and 2 per cent of its time liabilities in India. This power of the Bank to call for information is also intended to give it effective control of the credit 52 . its assets and liabilities. it has the power to influence the volume of credit created by banks in India. the license can be cancelled by the Reserve Bank of certain stipulated conditions are not fulfilled. the distinction between demand and time liabilities was abolished and banks have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit liabilities. The main objective behind this is that no investment opportunity should go unutilized just due to the scarcity of funds. Controller of Credit The Reserve Bank of India is the controller of credit i. The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial accommodation in times of need or stringency by rediscounting bills of exchange. Since 1956. It can do so through changing the Bank rate or through open market operations. Since commercial banks can always expect the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort.
has the following powers: It holds the cash reserves of all the scheduled banks. After India became a member of the International Monetary Fund in 1946.6d. The vast sterling balances were acquired and managed by the Bank. the Bank was required to buy and sell at fixed rates any amount of sterling in lots of not less than Rs. therefore. the Reserve Bank of India. It acts as the lender of the last resort by providing rediscount facilities to scheduled banks. It controls the banking system through the system of licensing. Besides maintaining the rate of exchange of the rupee. the RBI has the responsibility of administering the exchange controls of the country. 6d.F. Further. Custodian of Foreign Reserves The Reserve Bank of India has the responsibility to maintain the official rate of exchange.M. though there were periods of extreme pressure in favour of or against the rupee.system. The Reserve Bank has also the power to inspect the accounts of any commercial bank. 1 = sh. It controls the credit operations of banks through quantitative and qualitative controls. The RBI not only has to hold these foreign exchange reserves but also take various steps to enhance the volume of these reserves with it. the Reserve Bank has the responsibility of maintaining fixed exchange rates with all other member countries of the I. 10. inspection and calling for information.000. As supreme banking authority in the country. The rate of exchange fixed was Re. the Reserve Bank has to act as the custodian of India's reserve of international currencies. 53 . According to the Reserve Bank of India Act of 1934. Since 1935 the Bank was able to maintain the exchange rate fixed at lsh.
and establish and promote new specialized financing agencies. which. relating to licensing and establishments. were regarded as outside the normal scope of central banking.Supervisory functions In addition to its traditional central banking functions. and the Banking Regulation Act. The Reserve Bank Act. The supervisory functions of the RBI have helped a great deal in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation. the Reserve bank has certain nonmonetary functions of the nature of supervision of banks and promotion of sound banking in India. Promotional functions With economic growth assuming a new urgency since Independence. the Industrial Development Bank of India also in 1964. 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks. reconstruction. Accordingly. management and methods of working. branch expansion. it set up the Deposit Insurance Corporation in 1962. the range of the Reserve Bank's functions has steadily widened. and liquidation. at one time. The nationalisation of 14 major Indian scheduled banks in July 1969 has imposed new responsibilities on the RBI for directing the growth of banking and credit policies towards more rapid development of the economy and realisation of certain desired social objectives. The RBI is authorised to carry out periodical inspections of the banks and to call for returns and necessary information from them. The Bank now performs a variety of developmental and promotional functions. the Unit Trust of India in 1964. the Reserve Bank has helped in the setting up of the IFCI and the SFC. amalgamation. extend banking facilities to rural and semi-urban areas. the Agricultural Refinance 54 . liquidity of their assets. The Reserve Bank was asked to promote banking habit. 1934.
These institutions were set up directly or indirectly by the Reserve Bank to promote saving habit and to mobilise savings. But only since 1951 the Bank's role in this field has become extremely important. and to provide industrial finance as well as agricultural finance. The Controller of Certifying Authorities. 54 banks have implemented the system at their treasuries/funds management branches.Corporation of India in 1963 and the Industrial Reconstruction Corporation of India in 1972. to eliminate moneylenders from the villages and to route its short term credit to agriculture. No bank can undertake any activity without the approval of RBI and thus RBI played a major role in the introduction of the information technology in the banking sector. Reserve Bank Of India took several measures in the development of the banking sector. Certification and Digital Signatures The mid-term Review of October 2002 indicated the need for information security on the network and the use of public key infrastructure (PKI) by banks. The RBI has set up the Agricultural Refinance and Development Corporation to provide long-term finance to farmers. 55 . Being the central bank of the country. Government of India. While the first phase of the system covering the centralised funds enquiry system has been made available to the users. have approved the Institute for Development and Research in Banking Technology as a Certification Authority(CA)for digital signatures. Consequently. the process of setting up of registration authorities under the CA has commenced at various banks. The Bank has developed the co-operative credit movement to encourage saving. As far back as 1935. So far. The initiatives taken by RBI are as follows: Implementation of Centralised Funds Management System The centralised funds management system provides for a centralised viewing of balance positions of the account holders across different accounts maintained at various locations of RBI. the second phase comprising the centralised funds transfer system would be made available by the middle of 2003. the Reserve Bank of India set up the Agricultural Credit Department to provide agricultural credit.
R. a Committee on Payment Systems (Chairman: Dr. has been initiated. Government of India. The project is aimed at the formulation of standards for multi-application smart cards on the basis of inter-operable systems and technological components of the entire system. The draft Bill provides a legal basis for netting. The report of the Committee was put on the RBI website for wider dissemination. apart from empowering RBI to have regulatory and oversight powers over payment and settlement systems of the country. submitted its report in September 2002 along with a draft Payment Systems Bill. national EFT (NEFT) is being introduced using the backbone of the structured financial messaging system (SFMS) of the IDRBT. after examining the various aspects relating to payment and settlement systems. Special Electronic Funds Transfer As indicated in the mid-term Review of October 2002. The draft Bill has been forwarded to the Government. The Committee. under the aegis of the Ministry of Communications and Information Technology. Multi-application Smart Cards Recognising the need for technology based payment products and the growing importance of smart card based payment flows. the electronic clearing service and electronic funds transfer (EFT) are also being enhanced in terms of security by means of implementation of PKI and digital signatures using the facilities offered by the CA.H. Patil) was set up in 2002. NEFT would provide for movement of electronic transfer of funds in a safe. secure and quick manner across branches of any bank to any other bank through a central gateway of each 56 .In addition to the negotiated dealing system. Committee on Payment Systems In order to examine the entire gamut of the process of reforms in payment and settlement systems which would be culminating with the real time gross settlement (RTGS) system. a pilot project for multi-application smart cards in conjunction with a few banks and vendors.
which has become operational since February 2002.047 clearing houses managed by RBI. These include banks. insurance companies. public sector banks and other institutions. all deals in government securities. The following are some of the offerings of Central Bank of India. with the inter-bank settlement being effected in the books of account of banks maintained at RBI. call/notice/term money. government securities and foreign exchange markets. if done outside NDS. CDs and CP executed among NDS members have to be reported automatically through NDS. Since this scheme requires connectivity across a large number of branches at many cities. • The Home Savings Safe Deposit Scheme to build saving/thrift habits in all sections of the society. Reporting of Call/Notice Money Market Transactions on NDS Platform Negotiated dealing system (NDS). At present. 57 . enables on-line dealing and dissemination of trade information relating to instruments in money. mutual funds and any other institution as admitted by RBI. the SBI and its associates. primary dealers (PDs). In order to facilitate banks to have better control over their funds. if the deal is done on NDS and within 15 minutes of concluding the deal. it is proposed to introduce national settlement system in a phased manner. a special EFT was introduced in April 2003 covering about 3000 branches in 500 cities. • An Exclusive Ladies Department to cater to the Bank's women clientele. financial institutions (FIs). This has facilitated same day transfer of funds across accounts of constituents at all these branches. Membership in NDS is open to all institutions which are members of INFINET and are maintaining subsidiary general ledger (SGL) Account with RBI. National Settlement System(NSS) The clearing and settlement activities are dispersed through 1.bank.
including in the countries most affected by the 1997 financial crisis. The housing subsidiary Cent Bank Home Finance Ltd. Deposit Insurance Benefit Scheme. Recurring Deposit Scheme. the credit card of the Bank was introduced. respectively. cross-border M&A sales fell in 1999. Setting up of the Executor and Trustee Department. The Merchant Banking Cell was established. the announcement of a merger is usually accompanied by an 58 . Indeed. MERGERS AND ACQUISITIONS IN BANKING SECTOR Mergers and acquisitions (M&As) are a global phenomenon. was started with its headquarters at Bhopal in Madhya Pradesh. Developed countries are the most important sellers and buyers in crossborder M&As.• • • • • • • • Safe Deposit Locker facility and Rupee Travelers’ Cheques. • Quick Cheque Collection Service (QCC) & Express Service was set up to enable speedy collection of outstation cheques. In developing countries. This M&A-driven consolidation is raising important public policy concerns.000 deals taking place every year. Central card. notably with respect to employment. 'Platinum Jubilee Money Back Deposit Scheme' was launched. In developing Asia. Acquisitions are considerably more important than mergers in developing and transition countries. with an estimated 4. accounting for close to 90 per cent and 95 per cent of sales/purchases in 199899. they continued to grow.
59 . both for strategic investment as well as for business correspondent relationships. trimming duplicated operations which entails redundancies at all levels." Rangarajan said in his speech. often on a massive scale. Consolidation in the Indian banking sector was likely to gain prominence in the near future and this must be driven by commercial factors. More bank mergers in India The Indian government should infuse more capital into state-run banks or move to cut its stakes below 51 per cent to meet the growing needs of the economy. a top economic adviser to the government said yesterday. YES BANK IN TALKS WITH FOREIGN MAJORS The private sector YES Bank is in talks with foreign banks. C. It is nevertheless difficult to disentangle the employment effects of M&As from those of other factors such as increased competitive pressures. a copy of which was seen by Reuters. automation or the introduction of information and communication technologies which are similarly inciting organizations to restructure even in the absence of M&As. A 1999 KPMG survey of company directors whose companies had participated in major crossborder M&A deals between 1996 and 1998 found that 82 per cent of respondents believed the deals they had been involved in had been a success. who heads the prime minister's economic advisory panel. told a banking conference.announcement of cost-cutting redundancies in the merging organizations. "The government will have to make up its mind either to bring in additional capital or move towards reducing its share from 51 per cent through appropriate statutory changes. Rangarajan. two overlapping organizations are compressed into one. To gain full merger benefits.
Kapoor said. Banks such as YES bank will be in a privileged position to talk to foreign banks when the Reserve Bank of India guidelines become conducive. By then.09 per cent for the first time and made higher provisions of Rs 22. large corporates account for about 70 per cent. Mr. Rana Kapoor. as it will have a bigger network & larger share of SME and retail business. while mid-corporates or emerging corporates account for the remaining 30 per cent. The bank also reported a net NPA of 0. YES Bank. Monga said.Large MNC banks are keen on expanding in India and looking at significant minority or near majority stake in Indian banks. The net profit of the bank for the quarter ended March 31. Rajat Monga. 2008 more than doubled to Rs 64 crore from Rs 31 crore in the same period a year ago. “We do not have a single derivatives exposure to the SME sector. Mr. Out of the total MTM derivatives exposure.7 crore. The bank has 130 forex clients across large corporates and mid corporates. said Mr. Chief Financial Officer.” Mr. YES Bank would be in a better position to attract foreign partners. said the bank did not have any delinquency in its marked-to-market (MTM) derivatives exposure. 60 . We have filtered our clients very carefully.8 crore as against Rs 12. Foreign banks are expected to get more leeway in expanding their network in India after 2009. Chief Executive Officer and Managing Director.
First. These 61 . consumer finance and wealth management on the retail side. However. growth and value creation in the sector remain limited to a small part of it. which comprise the Reserve Bank of India (RBI). This is reflected in their market valuation. Ministry of Finance and related government and financial sector regulatory entities. A few banks have established an outstanding track record of innovation. Four challenges must be addressed before success can be achieved. have made several notable efforts to improve regulation in the sector. The sector now compares favorably with banking sectors in the region on metrics like growth.INDIAN BANKING SCENARIO 2010 Towards a High-performing Sector The last decade has seen many positive developments in the Indian banking sector. profitability and non-performing assets (NPAs). and in fee-based income and investment banking on the wholesale banking side. innovation. The policy makers. The cost of banking intermediation in India is higher and bank penetration is far lower than in other markets. growth and value creation. Opportunities And Challenges For Players The bar for what it means to be a successful player in the sector has been raised. India’s banking industry must strengthen itself significantly if it has to support the modern and vibrant economy which India aspires to be. the market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards. improved regulations.
While public sector banks still dominate India’s banking industry. This will expose the weaker banks. with assets expected to reach US$1 trillion by 2010. and technological innovations are all contributing to this growth. with global players now actively competing with domestic banks. with increased interest in India. 62 . Overview of Indian Banking Market. largely due to an expanding economy and growing consumer middle class in need of financial services. India's economy is growing at a rate of 8%. Fourth. middle class. banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. competition from foreign banks will only intensify. credit and operations. An expanding economy.4 billion in 2003 to US$616. Second. Third. the private sector is growing.15 billion in 2008. consumers will increasingly demand enhanced institutional capabilities and service levels from banks.require new skills in sales & marketing. given the demographic shifts resulting from changes in age profile and household income. A new Celent report. FUTURE OF INDIAN BANKING MARKET The Indian banking market is growing at an astonishing rate. from US$374. examines the impressive growth of this industry. with banking assets increasing at a CAGR of 24% from 2001 to 2008.
LIMITATIONS • This study is based on the secondary data collected from various newspapers. • Due to paucity of time only the important factors have been discussed. 63 . journals and books and no other efforts have been made to verify their correctness.
The government of India announced Banking Regulations Act in 1949 to consolidate and regulate the banking growth in India • After Nationalisation. • Before Nationalisation. priority sector advances. Therefore government focused on social banking than capitalistic banking. mobile banking. proxy banking. ATM cards. expansion of business. internet banking. 64 . New services have been started such as merchant banking. development and spread of banking. plastic money such as credit cards. Since then. The Reserve Bank of India is the apex institution in the Indian banking system & acts a regulator and a centralized body for monitoring any discrepancies and shortcoming in the system. During and after World War I. etc. SMS banking. After Independence. the performance of banking has been remarkable in the many aspects such as branch expansion. housing finance.CHAPTER 5 CONCLUSIONS AND SUGGESTIONS • The Indian banking can be broadly categorized into nationalized (government owned). investment banking. investment banking. telebanking. There was need for stimulating the savings and investment to meet the growing demand for bank credit for economic development. • Currently. the Indian banking underwent a thorough and moral change. growth of banking during the first 3 plan periods resembles that of capitalist growth. announcement of 14 banks was made for the purpose of nationalisation. Development of banks in India was characterized by bank failures. however. smart cards. banks in the beginning faced severs financial crisis. private banks and specialized banking institutions. branch banking. Hence. 87 banks were liquidated. debit cards. banking system has entered into the third phase of development which is characterized by innovation & diversification in order to meet new challenges. in February 1961. electronic money transfers.
which has resulted in innovative methods of offering new banking products & services. stock invest and other money and capital market instruments. focusing on the expansion of retail and rural banking. certificate of deposit. • The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look anew at their existing portfolio offering. commercial papers. However there is a need to create more awareness regarding social development. factoring services. The Indian banking industry is in the middle of an IT revolution. with assets expected to reach US$1 trillion by 2010. • Indian banking market is growing at an astonishing rate. • Industry estimates indicate that out of 274 commercial banks operating in India. housing finance. 223 banks are in the public sector & 51 are in the private sector. There is need for taking decisive actions . 65 . Banks are now realizing the importance of being a big player & are beginning to focus their attention on mergers & acquisitions to take advantage of economies of scale. mutual funds.Banks have indulged in activities such as service area approach. Indian nationalized banks continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization. As a result banks have become more efficient and cost-effective. The private sector bank grid also includes 24 foreign banks. Players are becoming increasingly customer-centric in their approach. Banks have been benefited a lot with the internet and information technology.
com accessed in March 2009 www.thehindubusinessline. Sultan Chand & Sons .com accessed in March 2009 Newspapers: The Economic Times Books: T.finance.banknetindia.com accessed in March 2009 www.org.bankingindiaupdate.business-standard. D Malhotra.com accessed in March 2009 www.rbi. Mumbai 66 .wikipedia. New Delhi Parmod Kumar. Banking Sector Efficiency in Globalised Economy M&A in Indian Banking System. Eletronic Banking & Information Technology in Banks.google.An Executive Handbook. First Edition 2002.com accessed in March 2009 www.indiamart.in accessed in March 2009 www.BIBLIOGRAPHY There was immense need and flow of the information while preparing the project report which was gathered through various sources mentioned below: Websites: www. 2005.com accessed in March 2009 www.com accessed in March 2009 www.