Professional Documents
Culture Documents
SESSION: (2022-2023)
Roll no-2201080700025
MBA-2 ND SEMESTER
ROLL NO-2201080700025
RAJARSHI SCHOOL OF MANAGEMENT AND TECHNOLOGY
CERTIFICATE
Ashish Singh
MBA-2ND SEMESTER
ROLL NO-2201080700025
CONTENTS
1. Bibliography………………………………………………………...
2.Glossary………………………………………………………………
5
EXECUTIVE SUMMARY
This work has reached at the destiny, browsing through books, articles and currently
great source of information ‘internet’; and with the help of college and company guides.
Hence, this repot is the collection of brief information regarding banking and emerging
trends in banking.
The growth in the Indian banking Industry has been more qualitative than quantitative
and it is expected to remain same in the coming years. Today, it is known to almost
everybody that the recession period has crawled in and that too in almost every part of the
world. Presently, in India also almost all the sectors such as IT sector, automobile
industry and share market are also not in a very good condition. But, quite interestingly,
the baking sector of India is booming day-by-day and that too even in the period of global
crisis.
The concepts in the report are my own view and ideas, and the brief information on
the study. While browsing or by gulping the report one can get the concepts related to the
study. It gives an idea about, what is banking? Banking industry in India, emerging trends
in banking and current scenario of banking.
6
HISTORY OF BANKING
Banking in India originated in the last decades of the 18th century. The oldest
bank in existence in India is the State Bank of India, a government-owned bank that
traces its origins back to June 1806 and that is the largest commercial bank in the
country. Central banking is the responsibility of the Reserve Bank of India, which in
1935 formally took over these responsibilities from the then Imperial Bank of India,
relegating it to commercial banking functions. After India's independence in 1947, the
Reserve Bank was nationalized and given broader powers. In 1969 the government
nationalized the 14 largest commercial banks; the government nationalized the six next
largest in 1980.
Banking in India originated in the last decades of the 18th century. The first banks
were The General Bank of India which started in 1786, and the Bank of Hindustan, both
of which are now defunct. The oldest bank in existence in India is the State Bank of
India, which originated in the Bank of Calcutta in June 1806, which almost immediately
became the Bank of Bengal. This was one of the three presidency banks, the other two
7
being the Bank of Bombay and the Bank of Madras, all three of which were established
under charters from the British East India Company. For many years the Presidency
banks acted as quasi-central banks, as did their successors. The three banks merged in
1921 to form the Imperial Bank of India, which, upon India's independence, became the
State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in
1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank,
established in 1865 and still functioning today,
is the oldest Joint Stock bank in India. It was
not the first though. That honor belongs to the The Bank of Bengal, which later became
the State Bank of India.
Bank of Upper India, which was established in
1863, and which survived until 1913, when it
failed, with some of its assets and liabilities
being transferred to the Alliance Bank of Simla.
8
The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National
Bank, established in Lahore in 1895, which has survived to the present and is now one of
the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a
relative period of stability. Around five decades had elapsed since the Indian Mutiny, and
the social, industrial and other infrastructure had improved. Indians had established small
banks, most of which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some
exchange banks and a number of Indian joint stock banks. All these banks operated in
different segments of the economy. The exchange banks, mostly owned by Europeans,
concentrated on financing foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to compete with the presidency and
exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it
seems we are behind the times. We are like some old fashioned sailing ship, divided by
solid wooden bulkheads into separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and
political figures to found banks of and for the Indian community. A number of banks
established then have survived to the present such as Bank of India, Corporation
Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
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[1.5] Nationalization
By the 1960s, the Indian banking industry had become an important tool to
facilitate the development of the Indian economy. At the same time, it had emerged as a
large employer, and a debate had ensued about the possibility to nationalize the banking
industry. Indira Gandhi, the-then Prime expressed the intention of the GOI in the annual
conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank
Nationalizations." The paper was received with positive enthusiasm. Thereafter, her
move was swift and sudden, and the GOI issued an ordinance and nationalized the 14
largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash
Narayan, a national leader of India, described the step as a "masterstroke of political
sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the
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RESEARCH DESIGN
[2.1] Objectives
Some specific targets and the objectives of this study are listed below:
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[2.3] Scope of the study
The major area of this study is to tackle with the practical knowledge of the
banking to get the concepts and relate it to the syllabi being studied and further to study
in the future. The study basically is oriented to meet the crisis and to understand the
syllabus in the concrete terms and its implementation theoretically as well as practically.
Henceforth, the study will go long to shape-up my future career and as well as to
build various skills, abilities & personality which will finally result into future manager.
[2.4] Limitations
1. The project is just the collection of brief data on the banking industry.
2. It is based on the past and present data on banking industry; it may differ in future
as much more changes do take place day-by-day.
3. Project is involved with my own ideas and views which may differ from person to
person.
4. The course of project may be too short to conduct an extensive in depth study.
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PROFILE OF PUBLIC AND PRIVATE SECTOR BANKS
[3.1] History
In today’s time, if you have money, you should have a bank account too. The banking
system plays a major role in boosting economic growth by efficiently allocating
resources. It helps in promoting the economy by transforming your savings into
investments.
Banks in India are regulated by the top Bank of India, i.e., the Reserve Bank of India. It is
the most leading banking governing authority in India. In India, banks are categorized
into distinct groups, and all of them have their own way of functioning, different target
markets, benefits, and limitations.
A few banks operate in rural areas and are specifically engaged in serving small
businesses, agriculture, small cottage industries, or self-help groups. On the other hand,
commercial banks work in both rural and urban areas. Therefore, an effective banking
system is vital for the good growth of the economy.
PUBLIC SECTOR-
Public Sector Banks (PSBs) are a major type of government owned banks in India,
where a majority stake (i.e. more than 50%) is held by the Ministry of Finance of
the Government of India or State Ministry of Finance of various State Governments of
India. . The shares of these banks are listed on stock exchanges. Their main objective is
social welfare
Currently, India has 12 Public sector banks and RBI is the central authority that
manages all the banking operations in India.
13
Nationalized Banks In India 2022
Public Sector Bank is the bank that is owned by the Government or is the major
shareholder of more than 51% in the bank. Check the total nationalized banks in India,
SBI (State Bank of India) became first nationalized bank in India under the SBI Act
of 1955.
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7. UCO Bank Kolkata
PNB is the first Swadeshi Bank, which commenced its operations on April 12, 1895,
from Lahore, and had an authorized capital of Rs 2 lac and working capital of Rs 20,000.
The Bank was established to help the Indians. It is now merged with Oriental Bank Of
Commerce and United Bank Of India.
Indian Bank
Indian Bank was established on 15th August 1907 along with the Swadeshi movement. It
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has all India presence with 9786 touch points comprising 2872 domestic branches, 3892
ATMs/BNAs, and 3022 BCs, with the merger of Allahabad Bank.
State Bank of India
SBI is the largest commercial bank of the country and has a history of 200 years. SBI is
the largest in terms of assets, deposits, profits, branches, customers and employees, etc.
The Government of India has a stake of more than 50% in SBI.
These are the banks in which the maximum stake of shares or equity is maintained and
owned by private individuals. Initially, the Indian bank sector was dominated by the
Public Sector banks, but after the 1990s, private sector banks came into existence and
have grown immensely.
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The reason for their quick growth was because they used the latest technology, used new
monetary tools, and provided contemporary innovations.
1. HDFC Bank
It is said to be one of the biggest private banks in India in terms of complete assets and
market capitalization. It is the first Bank that got ‘in-principle permission from RBI to
establish a bank in the private sector as a division of RBI’s liberalization of the Indian
Banking Industry in 1994.
In fact, their tagline itself is “We understand your world,” and they completely abide by it
by offering great services. HDFC is one of the top-performing banks, and it comes under
the listing of 100 most valuable brands across the world.
They give a big variety of financial products and services that includes wholesale & retail
banking, all type of loans, treasury, and credit cards to its customers. Their banking
17
network is also huge; globally, they have more than 5430 branches and 15292 ATMs.
Revenue: Rs 105,161 Cr
NIM: 4.3%
Gross NPA: 1.36%
CASA: 48%
ATMs: 15292
Branches: 5,430
Customer Base: Over 49 Million
Employees: 98,061
2. ICICI Bank
It is the second-largest private sector bank in India as its total consolidated assets were
Rs.14.76 trillion in 2020. ICICI has a large network of branches nationwide; they have
5288 branches and 15158 ATMs across the country.
ICICI bank started in 1994, and its registered office is in Vadodara, Gujarat. They render
an extensive range of financial products and services, including Fixed Deposits, loans,
insurance, savings & current accounts, privileged banking, and Credit Cards.
They generate employment for more than 85000 people in the country. ICICI bank offers
services to the customers via several delivery channels and its group companies.
Revenue:
18 Rs 84,353 Cr
BANKING INDUSTRY AND ITS TRANSFORMATION IN
INDIA
The growth in the Indian Banking Industry has been more qualitative than quantitative
and it is expected to remain the same in the coming years. Based on the projections made
in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan,
the report forecasts that the pace of expansion in the balance-sheets of banks is likely to
decelerate. The total assets of all scheduled commercial banks by end-March 2010 is
estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of GDP at current
market prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at
an annual composite rate of 13.4 per cent during the rest of the decade as against the
growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that
there will be large additions to the capital base and reserves on the liabilities.
The Indian banking system can be classified into nationalized banks, private
banks and specialized banking institutions. The industry is highly fragmented with 30
banking units contributing to almost 50% of deposits and 60% of advances. The Reserve
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Bank of India is the foremost monitoring body in the Indian Financial sector. It is a
centralized body that monitors discrepancies and shortcomings in the system.
Industry estimates indicate that out of 274 commercial banks operating in the
country, 223 banks are in the public sector and 51 are in the private sector. These private
sector banks include 24 foreign banks that have beg up their operations here. The
specialized banking institutions that include cooperatives, rural banks, etc. form a part of
the nationalized banks category.
A robust increase in non-interest income has helped the SBI post a net profit of
US$ 530.6 million in the second quarter ended September 30, 2009, up 10 per cent from
the corresponding period last year. The bank has been growing its savings bank deposit
base at the rate of US$ 1.07 billion a month in the last few months, in a bid to grow low-
cost deposits and shed high-cost term deposits. This is expected to improve net interest
margin by 10-15 basis points in every quarter. The SBI is adding 23 new branches abroad
bringing its foreign-branch network number to 160 by March 2010. This will cement its
leading position as the bank with the largest global presence among local peers.
Amongst the private banks, Axis Bank’s net profit surged by 32 per cent to US$
115.4 million on 21.2 per cent rise in total income to US$ 852.16 million in the second
quarter of 2009-10, over the corresponding period last year. HDFC Bank, the country’s
second largest private sector lender, reported a 30.21 per cent rise in its quarterly net
profit, helped by non-interest income.
For the quarter ended September 2009, ICICI Bank reported a 2.6 per cent jump
in net profit at US$ 222.1 million from US$ 216.5 million in the same period a year-back.
ICICI Bank has raised US$ 750 million through a five-year bond issue at its Bahrain
branch.
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YES Bank, a new private sector bank, has inked pact with Proparco, a French
financing agency, to raise US$ 20 million capital through subordinated bonds to enhance
capital adequacy.
[4.3] Competition
The conditions in the banking industry have changed and are changing all over
the world. In our country, economic reform and in particular financial sector reform has
altered the atmosphere in which the participants operate.
First, market size -Usually, a small market does not attract too many competitors. The
size of the market is so large and with GDP likely to grow at 6.5 per cent in the medium-
to long-term, the Indian banking industry has become very attractive-as never before.
Third, rapid technological change-This enables not only quicker and more efficient
service but advantage to new entrants over existing players.
Fourth, product innovations-Features such as home banking, ATMs are all making the
industry to be continuously alert, and fiercely competitive.
Fifth, entry/exit norms-While regulatory barriers have been eased, desirable barriers exist
in the form of capital and other requirements. After all banking license cannot be like a
driving license. But, entry norms are fairly clear, though exit norms are not clear yet.
Sixth, markets are increasingly getting integrated in our country also. Domestic and
foreign currency, banking and non-banking are getting closer. Correspondingly, there are
institutional innovations and interlink ages, both in ownership and operations -be it in
depositories or mutual funds.
Seventh, consumers of banking services are getting increasingly agile, enlightened, cost
and quality conscious. They are already forcing the pace of competition on price, product
and quality products.
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Emerging Issues
First, the issue of competition is irrevocably linked with regulatory framework and level
playing field. This issue has been constantly raised in different forums and this relates to
not only banks but also to other financial intermediaries. The financial sector is still in
transition and let me assure you that this is an area that will gain greater attention in the
future.
Secondly, all other industries are vocal about the 100 million middle-classes. The
corporate sector is increasingly talking about exploiting the potential in the rural-semi-
urban markets. Perhaps, we should question the relevance of rural-urban dichotomy and
look at rural-urban continuum.
Thirdly, when competition intensifies, there has to be inevitable changes such as mergers-
what I earlier referred to as exit norms. As one of the Conference papers pointed out, the
net result in any field is either the crowding out of the weaker players or their
amalgamations with the stronger ones.
Fourthly, in this context, banks should concentrate on study of the success stories as well
as bank failures. Internationally, there are elaborate documented studies on bank failures;
Barings is just one example. We too need to make an incisive analysis of banks that
failed in our country and learn not to commit similar mistakes.
Fifthly, we have to think seriously about the nature of the control that exists. Banks will
need to be given more autonomy, and more important, they should assert their autonomy.
Here lies the importance of industry associations. The scope for self-regulatory industry
norms and banking industry protocol should be explored. This will bring about more
flexibility to banks and less regulatory intrusion.
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ITS TRANSFORMATION IN INDIA
Financial services sector in our country has witnessed notable transformation over the last
five decades and concerted efforts have been made by the banking system to grow by
building up an extensive branch net-work, penetrating into unbanked areas, mobilizing
untapped saving, promoting banking habits and providing credit for rural development,
besides diversifying new areas of business. The process of globalization of Indian
economy has created an environment where the financial service system has to be
effective, customer oriented and technology based.
The banking sector plays a crucial role in the economic development of the
nation. A sound, efficient, effective, vibrant and innovative banking system stimulates
economic growth by mobilizing savings on a massive scale and efficiently allocating
resources for the productive as well as consumption purpose. These banking sector
reforms includes progressive reduction of statutory liquidity ratio (SLR) and cash reserve
ratio (CRR); prescription of uniform accounting norms with regard to classification of
assets, enactment of a statute providing for setting up of tribunals for expeditious
adjudication and recovery of bank loans; establishment of separate board for financial
supervision of bank; permission for the entry of new private banks to inject competition;
rationalization and deregulation of interest rates; implementation of capital adequacy
norms; recapitalization of banks; permission to banks to access capital market for
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mobilizing additional equity; liberalized new branch licensing and new bank licensing
policy, etc.
The banking sector reforms can be classified into six categories namely (a)
measures meant for promotion of competition (b) measures meant for strengthening role
of the market (c) prudential measures (d) legal measures (e) measures meant for
strengthening supervision or supervisory controls and (f) measures relating to technology.
Some of these measures meant for strengthening of competition included grant of limited
operational autonomy to public sector banks(PSB); dilution of government stake in the
equity of PSBs permitting them to mobilize capital from the open market; adoption of
transparent licensing policy enabling the entry of private sector, foreign and joint venture
banks; permitting foreign direct investment (FDI) in the financial sector as well as
permitting portfolio investment; issues of guidelines on ownership and governance in
private sector banks; etc. Measures initiate to strengthen the role of market force included
progressive reduction in SLR and CRR, market determined pricing of government
securities, deregulation of interests rates etc. prudential measures which have been
implemented covered fulfillment of capital adequacy norms; and new accounting, income
recognition, provisioning and exposure norms, application for marked-to-market
principle for investment portfolio and fixation of limits for deployment of funds in
sensitive sectors and activities.
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Clearing Corporation of India Limited (CCIL) to act as central counter-party for
facilitating payments and settlement systems relating to fixed income securities and
money instrument extended support to banks. Certain supervisory measures such as
establishment of a separate Board for Financial Supervision in RBI, recasting the role of
statutory auditors and increased internal control through strengthening of internal audit,
strengthening of corporate governance, etc were also initiated. The technology related
measures included setting up of Indian Financial NETwork (INFINET) as the
communication backbone for the financial sector, introduction of negotiated dealing
system for screen based trading in government securities and implementation of Real-
Time Gross Settlement (RTGS) system.
Reforms made significant impart on banks and their functioning. The major areas
of transformation in Indian banking are as follows:
Banks in India have adopted comprehensive risk management systems for focused
attention to various types of risks such as interest rate risk, credit risk, liquidity risk,
market risk and operational risk. These risk management systems spell out internationally
accepted risk measurement methods for various types of risk to calculate capital charge
required for meeting prescribed capital adequacy ratio. Banks have set up separate risk
management departments to ensure
compliance with regulatory measures.
Competition
In post-reform era,
competition between banks is
continuously increasing. The market
for bank services and products has
now become a buyers’ market. Acute
competition with the advent of new generation private sector banks bringing in
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EMERGING TRENDS IN BANKING
At the beginning of the 21st century, the biggest banks in the industrial world
have become complex financial organizations that offer a wide variety of services to
international markets and control billions of dollars in cash and assets. Supported by the
latest technology, banks are working to identify new business niches, to develop
customized services, to implement innovative strategies and to capture new market
opportunities. With further globalization, consolidation, deregulation and diversification
of the financial industry, the banking sector will become even more complex.
Although, the banking industry does not operate in the same manner all over the
world, most bankers think about corporate clients in terms of the following:
Over the past decade there has been an increasing convergence between the activities
of investment and commercial banks, because of the deregulation of the financial sector.
Today, some investment and commercial banking institutions compete directly in money
26
market operations, private placements, project finance, bonds underwriting and financial
advisory work.
RBI issued detailed guidelines during April 2007 according to which the schedule
for implementation is as under:
(a) Foreign banks operating in India and Indian banks having presence outside India
would migrate to the standardized approach for credit risk and the basic indicator
approach for operational risk under Basel II with effect from Mar 31, 2008,
(b) All other banks (excluding IRBs and Local Area Banks) are to migrate by Mar
31, 2009.
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contemporary technologies, business solutions and innovations that enhances the
competitive advantage.
Objective:
The objective of a BPR initiate is to create and enhance the value of the bank for
the customers. It takes into account 4 important aspects customer (to given him enhanced
value), competition (to meet it successfully), change (to manage it) and cost (to reduce).
The basic objective of BPR are to reduce the transaction process time without sacrificing
security aspect, quality and real time service to clients and extensive propagation of
single window concept. BPR basically aimed at maintaining long term profitability and
strengthening the competitive edge of banks in conforming to transforming market
realities.
Benefits:
There is growing need for use of BPR to further the strategic goal of banks. BPR
can benefit the customer through significantly reduced transaction time, flexibility in
servicing and improved value. The banks can be benefited by increased volume of
business and higher productivity, reduced operational cost leading to higher profits,
improved employee loyalty and sense of belongingness and establishment of bank within
a branch concept. Employees benefit through empowerment leading to higher job
satisfaction, effective job rotation as an additional incentive and effective interface with
customers as work load is evenly distributed.
[5.4] E-banking:
Internet banking (or E-banking) means any user with a personal computer and a
browser can get connected to his bank -s website to perform any of the virtual banking
functions. In internet banking system the bank has a centralized database that is web-
enabled. All the services that the bank has permitted on the internet are displayed in
menu. Any service can be selected and further interaction is dictated by the nature of
service. The traditional branch model of bank is now giving place to an alternative
28
delivery channels with ATM network. Once the branch offices of bank are interconnected
through terrestrial or satellite links, there would be no physical identity for any branch. It
would a borderless entity permitting anytime, anywhere and anyhow banking.
The network which connects the various locations and gives connectivity to the central
office within the organization is called intranet. These networks are limited to
organizations for which they are set up. SWIFT is a live example of intranet application.
The Reserve Bank of India constituted a working group on Internet Banking. The
group divided the internet banking products in India into 3 types based on the levels of
access granted. They are:
i) Information Only System: General purpose information like interest rates, branch
location, bank products and their features, loan and deposit calculations are provided in
the banks website. There exist facilities for downloading various types of application
forms. The communication is normally done through e-mail. There is no interaction
between the customer and bank's application system. No identification of the customer is
done. In this system, there is no possibility of any unauthorized person getting into
production systems of the bank through internet.
ii) Electronic Information Transfer System: The system provides customer- specific
information in the form of account balances, transaction details, and statement of
accounts. The information is still largely of the 'read only' format. Identification and
authentication of the customer is through password. The information is fetched from the
bank's application system either in batch mode or off-line. The application systems
cannot directly access through the internet.
iii) Fully Electronic Transactional System: This system allows bi-directional capabilities.
Transactions can be submitted by the customer for online update. This system requires
high degree of security and control. In this environment, web server and application
systems are linked over secure infrastructure. It comprises technology covering
29
computerization, networking and security, inter-bank payment gateway and legal
infrastructure.
The Credit Card holder is empowered to spend wherever and whenever he wants with his
Credit Card within the limits fixed by his bank. Credit Card is a post paid card. Debit
Card, on the other hand, is a prepaid card with some stored value. Every time a person
uses this card, the Internet Banking house gets money transferred to its account from the
bank of the buyer. The buyers account is debited with the exact amount of purchases. An
individual has to open an account with the issuing bank which gives debit card with a
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Personal Identification Number (PIN). When he makes a purchase, he enters his PIN on
shops PIN pad. When the card is slurped through the electronic terminal, it dials the
acquiring bank system - either Master Card or VISA that validates the PIN and finds out
from the issuing bank whether to accept or decline the transactions. The customer can
never overspend because the system rejects any transaction which exceeds the balance in
his account. The bank never faces a default because the amount spent is debited
immediately from the customers account.
Smart Card:
Banks are adding chips to their current magnetic stripe cards to enhance security
and offer new service, called Smart Cards. Smart Cards allow thousands of times of
information storable on magnetic stripe cards. In addition, these cards are highly secure,
more reliable and perform multiple functions. They hold a large amount of personal
information, from medical and health history to personal banking and personal
preferences.
E-Banking Services:
You can facilitate payment of electricity and telephone bills, mobile phone, credit
card and insurance premium bills as each bank has tie-ups with various utility companies,
service providers and insurance companies, across the country. To pay your bills, all you
need to do is complete a simple one-time registration for each biller. You can also set up
standing instructions online to pay your recurring bills, automatically. Generally, the
bank does not charge customers for online bill payment.
You can transfer any amount from one account to another of the same or any
another bank. Customers can send money anywhere in India. Once you login to your
account, you need to mention the payees's account number, his bank and the branch. The
transfer will take place in a day or so, whereas in a traditional method, it takes about three
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working days. ICICI Bank says that online bill payment service and fund transfer facility
have been their most popular online services.
With Internet banking, customers can not only pay their credit card bills online
but also get a loan on their cards. If you lose your credit card, you can report lost card
online.
This is something that would interest all the aam janta. Indian Railways has tied up
with ICICI bank and you can now make your railway pass for local trains online. The
pass will be delivered to you at your doorstep. But the facility is limited to Mumbai,
Thane, Nashik, Surat and Pune.
You can now open an FD online through funds transfer. Now investors with
interlinked demat account and bank account can easily trade in the stock market and the
amount will be automatically debited from their respective bank accounts and the shares
will be credited in their demat account. Moreover, some banks even give you the facility
to purchase mutual funds directly from the online banking system.
Nowadays, most leading banks offer both online banking and demat account.
However if you have your demat account with independent share brokers, then you need
to sign a special form, which will link your two accounts.
Now; just top-up your prepaid mobile cards by logging in to Internet banking. By
just selecting your operator's name, entering your mobile number and the amount for
recharge, your phone is again back in action within few minutes.
(7) Shopping
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With a range of all kind of products, you can shop online and the payment is also
made conveniently through your account. You can also buy railway and air tickets
through Internet banking.
As per the Internet and Mobile Association of India's report on online banking
2006, "There are many advantages of online banking. It is convenient, it isn't bound by
operational timings, there are no geographical barriers and the services can be offered at a
miniscule cost."
Through Internet banking, you can check your transactions at any time of the day,
and as many times as you want to. Where in a traditional method, you get quarterly
statements from the bank. If the fund transfer has to be made outstation, where the bank
does not have a branch, the bank would demand outstation charges. Whereas with the
help of online banking, it will be absolutely free for you.
Security Precautions
Customers should never share personal information like PIN numbers, passwords
etc with anyone, including employees of the bank. It is important that documents that
contain confidential information are safeguarded. PIN or password mailers should not be
stored, the PIN and/or passwords should be changed immediately and memorized before
destroying the mailers.
With the opening up of insurance sector, the banks in India can undertake
insurance business either on risk participation basis (called underwriting) by setting up
insurance joint venture or undertake insurance business as agent of insurance companies
33
on fee basis, without any risk participation by banks themselves or their subsidiaries
(called Bancassurance).
Benefits:
The insurance business offers an opportunity for banks to increase fee based
business for improving their profits and make utilization of their branch network and
customer base optimally, to increase the fee-based income. Insurance is an appropriate
option since banks fulfill three major requirements for a successful insurance business i.e.
asset management and investment skills, distribution and capital adequacy.
Parameters:
As per RBI guidelines on insurance business (of March 16, 2000), the banks can
undertake insurance business (of underwriting) where:
[5.6] Bancassurance
Banks are required to obtain prior approval of the Insurance Regulatory and
Development Authority (IRDA) for acting as ‘composite corporate agent’ or referral
arrangement with insurance companies. Banks need not obtain prior approval of RBI to
undertake Bancassurance.
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Benefits of Bancassurance
Bancassurance helps the banks to build synergies between the insurance business
and bank branch network to sell insurance products through banking channels, as the
bank branches have a ready customer in need of financial products/services. Since those
customers are already having their dealing with the banking, they trust the branch staff,
more than a private agent.
Objective:
The basic objective is to help bring harmony in the role of FIs/Banks, offer world
class services to clients by using information technology and cross selling, reduce per
customer cost and per customer revenue, take benefit of economize of scale and compete
with international banks by expanding business beyond the boundaries of the country.
In India, the concept of narrow banking came into discussion after submission of
the repot by the committee on Capital Account Convertibility (Tarapore Committee). It
was suggested as the solution of the problem of high NPAs and related matters. The
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committee proposed that incremental resources of these narrow banks should be
restricted only to investments in government securities.
A ‘Narrow Bank’ in its narrow sense, can be defined as the system of banking
under which a bank places its funds in risk-free assets with maturity period matching its
liability maturity profile, so that there is no problem relating to asset liability mismatch
and the quality of asset remains intact without leading to emergence of sub-standard
assets.
Such an approach can ensure the regular deployment of funds in low risk liquid
asset. With such patter of deployment of funds, these banks are expected to remove the
problems of bank failures and the consequent systemic risk and loss to depositors.
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Retail banking objectives
Basically there are three important segments in retail banking which include
deposit products (convenient deposit schemes such as flexi-deposits), loan products (such
as housing loans, education loans, conveyance loans, personal loans for diverse purpose
such as medical expenses, travel abroad) and other products.
The delivery of these products and service can be through branch banking,
internet banking or by automated teller machines. These can be called home banking,
internet banking, mobile banking, credit cards, etc.
Banks have excellent opportunity to cross sell various retail products like credit
cards, insurance policies, funds investment services (including mutual funds), ancillary
services like dematerialization, portfolio management, safe custody etc.
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[5.10] Mobile Banking
Reserve Bank has brought out a set of operating guidelines (Oct 08, 2008) of
adoption by banks, u/s 18 of the payment and settlement system act, 2007 (Act 51 of
2007).
1. Only banks which are licensed and supervised in India and have a physical in
India will be permitted to offer mobile banking services.
2. The service should be restricted on to the customer of the bank and/or holders of
debit/credit cards issued as per the extent Reserve Bank of India guidelines.
3. Only Indian rupee based domestic service shall be provided. Use of mobile
banking services for cross border inward and outward transfers is strictly
prohibited.
4. Banks may also use the services of Business Correspondent appointed in
compliance with RBI guidelines, for extending this facility to their customers.
5. Banks shall file Suspicious Transaction Report to Financial Intelligence Unit –
India for mobile banking transactions as in the case of normal banking
transactions.
Transaction Limit
1. For the present, banks can offer this facility to their customers subject to a daily
cap of Rs.5000/- per customer for funds transfer and Rs.10000/- per customer for
transactions involving purchase of goods/services.
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2. Banks may also fix monthly transaction limit depending on the bank’s own risk
perception of the customer.
[5.11] Cross-selling
Cross-selling stands for offering to the existing and new customer, some
additional banking products, with a view to expand banking business, reduce the per
customer cost of operations and provide more satisfaction and value to customer. For
instance, when a bank is in a position to sell to a deposit customer, a loan product such as
housing loan, credit card, personal loan or vice versa, this would result into additional
business and lead to low per customer cost and higher per customer earning.
The cross selling can be taken place on the liability side (i.e. different kind of
deposit accounts), or on the asset side (i.e. loans for different requirements) or between
the two. It could be at the initiative of the customers or a bank can implement it as a well
prepared strategy.
The major benefit is in terms of cost reduction as for a bank, the cost of
contacting a new customer is much higher than to serve an existing customer. Further,
through cross selling the benefits of economies are available to the bank, which reduce
the cost further and increase the profits. Another additional advantage is that the cross
selling helps in building brand value if the loyalty of the customer could be ensured for
the brand, as in that case the likelihood of shifting the business dealing to another
organization/bank by the customer , is much less.
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[5.12] Door step banking
RBI had advised banks on Apr 30, 2005 (u/s 23 of Banking Regulation Act 1949)
to formulate the scheme, for providing services at the premises of a customer and submit
it to RBI for approval. RBI laid down general principles/parameters to be followed by
banks while offering “doorstep” services to their customers:
The services can be delivered by the banks either (a) through own employees or
(b) trough the agents.
Where banks engage the services of agents for delivery of services banks will
refer to RBI guidelines on Managing Risks and code of conduct in outsourcing of
financial Services by Banks.
Delivery Process
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Other conditions
1. Doorstep facility should be offered to only those customers in whose case KYC
procedure have been followed.
2. The services should be offered at either the residential or office, the address of
which should be clearly and explicitly mentioned in the agreement.
3. The agreement with the customer shall clearly specify that the bank will be
responsible for acts of omissions and commission of its agent.
4. The ‘Scheme’ should not restricted to any particular client/customer or class of
customer.
5. Banks may keep in view, the restriction imposed by section 10 (1) (b) (ii) (b) of
the Banking Regulation Act, 1949, while making payment for the services.
RBI issued the following guidelines (on Nov 21, 2005) on the recommendation of
its Working Group on Regulatory Mechanism:
41
CURRENT SCENARIO
“Now is the
time. Needs are
greater, but
your
possibilities are
greater.”
Today, it is known to almost everybody that the recession period has crawled in and that
too in almost every part of the world. Presently, in India also almost all the sectors such
as IT sector, automobile industry and share market are also not in a very good condition.
But, quite interestingly, the baking sector of India is booming day-by-day and that too
even in the period of global crisis.
42
quarter. The SBI is India's first non oil based sector to feature in fortune up to 500
esteemed list of companies. It has maintained the trust of Indian investors and FDIs with
this good news. Moreover, the banking sector of India is growing continuously without
any interruption because, even in the period of global crisis, it is still standing tall and is
regarded as one of the safest places for investing money. Recently, the banking industry
of India has grown by over 25 percent.
SBI has yet to computerize its operations and network all its branches. The
computers currently available serve only to relieve the burden of the clerical staff of
maintaining manual ledgers and not to penetrate into areas of customer service. ATMs,
Anytime-Anywhere, round the clock and telephone banking is still a far cry. These
computers at the best remain only as desk ornaments. With the New Telecom Policy
(NTP) almost in place, telecom sector will soon be revolutionized. E-commerce,
telephone banking, consumer banking, Internet banking, insurance et al are waiting just
around the corner. At least in major metros, virtual banking will soon take-over from the
brick-mortar banks.
43
To aid privatization and effect a better price realization, the bank is attempting to
change – over its accounting and reporting procedures to comply with US – GAAP
norms. This is a prerequisite for trying out the ADR route, as it is known that US market
is by far the undisputed biggest market and can offer the best price. At the moment, the
SBI stock is undervalued at Rs.240 whereas experts expect Rs.300 would be a more
realistic value. Action on this front at blitzkrieg pace is the need of the hour.
[7.1] Conclusions
1. The study and the project resulted from it, is the data base and its execution is totally
based on the study and relevant to the study itself. The ideas and view of mine are to
assist this work and for the partial fulfillment of the project; satisfies my work and project
completion. This project consisting the database and the information relevant to the
banking industry under the study and that is the soul of the written work being depicted in
the project report.
2. Banking in India originated in the last decades of the 18th century. The oldest bank in
existence in India is the State Bank of India, a government-owned bank that traces its
origins back to June 1806 and that is the largest commercial bank in the country.
3. Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks
(that is with the Government of India holding a stake), 31 private banks (these do not
have government stake; they may be publicly listed and traded on stock exchanges) and
38 foreign banks. They have a combined network of over 53,000 branches and
17,000 ATMs.
4. The growth in the Indian Banking Industry has been more qualitative than quantitative
and it is expected to remain the same in the coming years. Based on the projections made
in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan,
the report forecasts that the pace of expansion in the balance-sheets of banks is likely to
decelerate.
5. The banking sector plays a crucial role in the economic development of the nation. A
sound, efficient, effective, vibrant and innovative banking system stimulates economic
44
growth by mobilizing savings on a massive scale and efficiently allocating resources for
the productive as well as consumption purpose.
6. At the beginning of the 21st century, the biggest banks in the industrial world have
become complex financial organizations that offer a wide variety of services to
international markets and control billions of dollars in cash and assets. Supported by the
latest technology, banks are working to identify new business niches, to develop
customized services, to implement innovative strategies and to capture new market
opportunities. With further globalization, consolidation, deregulation and diversification
of the financial industry, the banking sector will become even more complex.
7. Today, it is known to almost everybody that the recession period has crawled in and
that too in almost every part of the world. Presently, in India also almost all the sectors
such as IT sector, automobile industry and share market are also not in a very good
condition. But, quite interestingly, the baking sector of India is booming day-by-day and
that too even in the period of global crisis.
[7.2] Suggestions
1. Awareness : Banking have developed and still developing and going on adding to
services and new facilities to it; but many people are not aware of these facilities, and
even if they know they are not able to utilize this services and facilities.
2. Need of basic know-how to the customers: Many times the customer are not aware
about the services that are been provided by the bank so; its necessary that banks make
some effort to give knowledge of the services been provided and guide the customer.
3. Make easy mandatory requirements: Any service to be adopted from bank requires
the lot much of documentation and mandatory requirements so; it get haste and panic to
the customers to utilize such services. Hence this should be considered and take some
actions that make it easy to adopt any services from the banks.
4. Safety: Now-a-days, with the increase in the facilities and services the risk
respectively has increased. Mostly, when it comes to e-banking many people do fraud
and hack the accounts of innocent people.
45
ANNEXURE
[ 1 ] Bibliography
[A] Books:
[B] Article:
Transformation in Indian Banking (pg.28)
Volume iii No.10; [October 2008]. THE INDIAN BANKER.
The monthly journal published by The Indian Banks’ Association, Mumbai – 400 020
[C] Reports:
3. November 27, 2007 RBI report on trend and progress of banking in India.
[D] Websites:
1. en.wikipedia.org
2. www.money control.com
3. www.rbi.org.in
46
4. www.bankingindiaupdate.com
[ 2 ] Glossary
Bancassurance It stands for distribution of financial products particularly the insurance
policies, also called referral business, by banks as corporate agents.
Bank Establishment for keeping money that is being paid out on customer’s order.
Bank rate Bank rate is one of the general control measures. It is the rate at which RBI
rediscounts or lends money to commercial banks.
Banking Ombudsman Are the courts for Redressal of banking related grievances.
Banking system The banking system constitutes the core of the financial sector and
plays a critical role in transmitting monitory policy impulses to the economy.
47
Cash reserve ratio (CRR) CRR requires that every bank should keep certain minimum
cash with RBI.
Credit Card It is a post paid card. The Credit Card holder is empowered to spend
wherever and whenever he wants with his Credit Card within the limits fixed by his bank.
Credit Risk The risk to a bank when there is possibility of default by the counter party to
meet its obligation. Credit risk is prevalent in case of loans.
Cross Selling It stands for offering to the existing and new customer, some additional
banking products, with a view to expand banking business, reduce the per customer cost
of operations and provide more satisfaction and value to customer.
Doorstep Banking Provides services at the premises of customer and submit it to RBI
for approval.
E- Banking Internet banking (or, e-banking) means any user with a personal computer
and browser can get connected to his banks’ website to perform any of the virtual
banking function.
Financial Sector Constitutes of financial institutions, instruments and markets, which act
as a conduit for the transfer of financial resources from the net savers to net borrowers.
Foreign Banks As per RBI roadmap in terms of WTO commitments (Mar 2005), RBI
allowed foreign banks to establish presence in India
Interest Rate Risk This is the risk arising from adverse movement of interest rates
during the period when the asset or liability was held by the bank.
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Liquidity Risk This is the risk arising from funding of long term assets by short term
liabilities or vice versa.
Narrow Banking The system of banking under which a bank places its funds in risk free
assets.
Operational Risk It is the risk that arises due to failed internal processes, people or
systems or from external events.
Retail Banking It is a banking sector with multiple products with multiple delivery
channels in multiple customer groups.
Risk Management This systems spell out internationally accepted risk measurement
methods for various types of risk to calculate capital charge required for meeting
prescribed capital adequacy ratio.
Statutory liquidity ratio (SLR) SLR mandates that every bank should deposit, in the
form of liquid assets, a certain percentage of its total time and demand deposit.
Universal Banking It allows FIs and banks to undertake all kinds of activity of banking
or development financing or activity associated with that, subject to compliance of
statutory and other requirements prescribed by RBI, Govt. and related legal Acts.
49