A PROJECT REPORT ON CREATE AWARENESS OF BANKS PRODUCT OFFERED BY ING-Vysya Bank

SUBMITTED IN THE PARTIAL FULFILLMENT OF AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION (BATCH: 2010-12) SUBMITTED BY: SHILPA BANSAL ROLL NO. 310082 SUBMITTED TO:

DR. P.J. PHILIP (H.O.D) DEPARTMENT OF BUSINESS ADMINISTRATION NATIONAL INSTITUTE OF TECHNOLOGY KURUKSHETRA

ACKNOWLEDGMENT
The satisfaction Euphoria that accompany the successful completion of any work would be incomplete unless we mention the name of the person, who made it possible, who constant guidance and encouragement served as a beckon of light and crowned our efforts with success. I consider it a privilege to express through the pages of this report, a few words of gratitude and respect to those who guided and inspired in the completion of this project. I am deeply indebted to Mr. Gaurav Aggarwal (Branch Head) for giving me the opportunity to undergo my project in their esteemed organization and the their timely suggestions & Valuable guidance. I also want to give thanks to Ms. Tanuja mohindra (BOSH) They constantly encouraged me and showed the right path from day first till the completion of my project. I had visited almost all markets of Manimajra collected information of the project. I have also done promotional activities under the constant guidance of my project guide.

Preface

Decision-making is a fundamental part of the research process. Decisions regarding that what you want to do, how you want to do, what tools and techniques must be used for the successful completion of the project. In fact it is the researchers efficiency as a decision maker that makes project fruitful for those who concern to the area of study. Basically when we are playing with computer in every part of life, I used it in my project not for the ease of my but for the ease of result explanation to those who will read this project. The project presents the role of financial system in life of persons. I had toiled to achieve the goals desired. Being a neophyte in this highly competitive world of business, I had come across several difficulties to make the objectives a reality. I am presenting this hand carved efforts in black and white. If anywhere something is found not in tandem to the theme then you are welcome with your valuable suggestions.

DECLARATION
I SHILPA BANSAL ROLL NO 310082 CLASS MBA 3rd Sem of NATIONAL INSTITUTE OF TECHNOLOGY, Kurukshetra hereby declared that the project entitled "CREATE AWARENESS OF BANKs PRODUCT OFFERED BY ING-VYSYA BANK" is original work and the same has not been submitted to any institute for the award of any degree. The interim report was presented to the supervisor on and the pre-submission presentation was made on CREATE AWARENESS OF BANKs PRODUCT OFFERED BY ING-VYSYA BANK. The feasible suggestions have only incorporated in consultation with the supervisor.

SHILPA BANSAL Signature of the Candidate

TABLE OF CONTENTS CONTENTS COMPANY OVERVIEW ORIGIN OF ING GROUP COMPANY PROFILE MISSION NEW IDENTITY MILESTONES IN THE JOURNEY OF ING VYSYA BANK BOARD OF DIRECTORS SYNOPSIS FACTS ABOUT ING VYSYA PRODUCTS EXECUTIVE SUMMARY INTRODUCTION ON BANKING INDUSTRY TRAINING SASSION ON SELLING SKILLS KYC RESEARCH METHODOLOGY ANALYSIS OF DATA CONCLUSIONS and RECOMMENDATIONS QUESTIONNAIRE BIBLIOGRAPHY

Company Overview
ING Vysya Bank Ltd., is an entity formed with the coming together of erstwhile, Vysya Bank Ltd, a premier bank in the Indian Private Sector and a global financial powerhouse, ING of Dutch origin, during Oct 2002. The origin of the erstwhile Vysya Bank was pretty humble. It was in the year 1930 that a team of visionaries came together to form a bank that would extend a helping hand to those who weren't privileged enough to enjoy banking services. It's been a long journey since then and the Bank has grown in size and stature to encompass every area of present-day banking activity and has carved a distinct identity of being India's Premier Private Sector Bank. In 1980, the Bank completed fifty years of service to the nation and post 1985; the Bank made rapid strides to reach the coveted position of being the number one private sector bank. In 1990, the bank completed its Diamond Jubliee Year. The 75th anniversary, the Platinum Jubilee of the bank was celebrated during 2005.

The origin of ING Group

On the other hand, ING group originated in 1990 from the merger between Nationale Nederlanden NV the largest Dutch Insurance Company and NMB Post Bank Groep NV. Combining roots and ambitions, the newly formed company called Internationale Nederlanden Group. Market circles soon abbreviated the name to I-N-G. The company followed suit by changing the statutory name to ING Group N.V..

Profile ING has gained recognition for its integrated approach of banking, insurance and asset management. Furthermore, the company differentiates itself from other financial
saevices providers by successfully establishing lifeinsurance companies in countries with emerging economies, such as Korea, Taiwan, Hungary, Poland,

Mexico and Chile. Another specialization is ING Direct, an Internet and direct marketing concept with which ING is rapidly winning retail market share in mature markets. Finally, ING distinguishes itself internationally as a provider of employee benefits, i.e. arrangements of non wage benefits, such as pension plans for companies and their employees.

Mission

ING`s mission is to be a leading, global, client-focused, innovative and low-cost provider of financial services through the distribution channels of the clients preference in markets where ING can create value.

THE NEW IDENTITY The immediate benefit to the bank, ING Vysya Bank, has been the pride of having become a Member of the global financial giant ING. As at the end of the year December 2010, ING's total assets exceeded 13.31 billion euros, employed over 125000 people, served over 85 million customers, across 50 countries. This global identity coupled with the back up of a financial power house and the status of being the first Indian International Bank, would also help to enhance productivity, profitability, to result in improved performance of the bank, for the benefit of all the stake holders.

MILESTONES IN THE LONG JOURNEY OF ING-VYSYA BANK

1930 1948 1985 Sector Bank 1987 Leasing Ltd Commenced 1988 co Branding of Credit Cards 1990 Bank Housing Finance Ltd. 1992 1000 Crores 1993 Cross 300 1996 BBL.,Belgium. Two National Awards by Gem & Jewellery export Promotion council for excellent performance in export promotion. 1998 Cash Management Services & commissioning of VSAT. Golden Peacock Award-for the best HR Practices by Institute of Directors. Rated as Best Domestic Bank in India by Global Finance(International Financial Journal-June 1998)

Set up in Banglore Scheduled Bank Largest Private The Vysya Bank Pioneered the concept of

Promoted Vysya Deposits Cross Rs. Number of Branches Signs Strategic Alliance with

2000 State-of-the-art Date Centre at ITPL, Bangalore. RBI clears setting up of ING Vysya Life Insurance Company. 2001 ING Vysya Commenced Life Insurance Business 2002 ING takes over the management of the Bank from October 7,2002. 2002 RBI clears the new name of the Bank as ING Vysya Bank Ltd, vide their letter of 17.12.02. 2003 Introduced customer friendly services like orange savings account, orange current account and Protected Home Loans 2004 Introduced Protected Home Loan-a housing loan product 2005 Introduced Solo - My Own Account for youth and Customer Service Line Phone Banking Service 2006 Introduced Solo - My Own Account for youth and Customer Service Line Phone Banking Service

Board of Directors
BOARD OF DIRECTORS S.No 1 2 3 Name of Person Aditya Krishna Arun Thiagarajan K R Ramamoorthy Designation Director Director Director

Synopsis Title Awareness of ING-Vysya Objective To do the market analysis of the Bareilly city and to make aware the people of Bareilly about ING Bank Null Hypothesis (H0). ING Bank is not better than other banks present in Bareilly. Alternate Hypothesis (H1). ING Bank is better than other banks present in Bareilly.

Data Collection 1- Questionnaire filled bya) Existing customers of ING in Bareilly b) New customers who are not associated with ING in Research Design Problem identification Data collection related to awareness of ING in Manimajra Sampling Technique Convenience sampling It is purposive or non-probability sampling. This sampling method involves deliberate or purposive selection of particular units of the universe for consulting a sample, which represents the universe and when elements are selected for inclusion in the sample based on the ease of access, it is called convenience sampling. Research technique Conclusive research This type of research helps in reaching certain conclusions and also in taking decisions.

Some facts about ING-Vysya bank ING-Vysya bank branches works on profit centre Around 500 branches in India and 13 in UttarPradesh.

Products
Orange Savings Bank Account Quarterly Average Balance (QAB) of Rs. 5000/ Free issue of the International Debit Card. Shopping convenience at over 2 Lakh merchant locations, with the ING Vysya International Debit card. Free Unlimited ATM transactions at over 25,000 (Cirrus/Cash net) ATM's in India where QAB is maintained Free Unlimited ATM transactions at over 196 ING Vyasa ATMs. Free 2 Demand Drafts with a value not exceeding Rs. 50,000 per annum, where the QAB is maintained. Free Unlimited usage of payable at par (PAP) Cheques. Free Transfer of funds across all branches. Free National Electronic Funds Transfer (NEFT) through the internet banking channel. Free Electronic Bill Payment service Free Smartserv - Personal Assistance Service Free Statement of Account through E-mail. Free AAA Cash deposit (Customers) - Free up to 2 transactions per month and a value limit of Rs.
50000/-.

Benefits:
Free unlimited access to 25,000+ other bank ATMs enhanced accessibility. Free Multi branch, Multi-city banking convenience. Payable at par Cheques.
Eligibility:

Individuals above the age of 18. Guardians on behalf of minors. Salaried individuals. Trusts / Societies and Charitable Institutions Advantages Salary Account

Key Features:
Zero Balance Account. Free Unlimited ATM transactions on the ING Vysya ATM network and Corporation Bank ATM network 6 Free ATM transactions per month at 25,000 (Cirrus) ATMs Free ING Vysya International Debit Card. Re-issue charged at Rs. 200/- per request Shopping convenience at over 200,000 merchant

locations. Free issue of personalized chequebooks. Free transfer of funds across all the branches of ING. Free Bill Pay service at select centres. Free Bill Pay service at select centres. Internet banking facility. (Mi-b@nk). Free Customer Service Line Free for life ING Vysya Credit Card based on customers eligibility.

Benefits:
The quarterly average balance of Rs. 5000/- is waived as long as the employee is employed with the corporate. (Zero Balance Account). Free multi-city, multi-branch banking convenience. Minimum documentation supported by an official communication from the corporate. No restriction in the number of transactions in the
account.

Eligibility:
The minimum number of employees of the corporate, whose salary accounts are to be opened, should be
10.

The average salary credit in to the employees orange salary account should be equal to or higher than Rs. 10,000/- per month. Where there is a joint account holder, the normal KYC norms need to be adhered to for the joint
account holder.

 Preferably corporate to have a current account with

ING.

Orange Salary Account: Key Features:

Zero Balance Account. (QAB requirement of Rs. 5000/- reduced to zero) Free Unlimited ATM transactions on the ING Vysya ATM network and Corporation Bank ATM network. Free unlimited ATM transactions at 25,000 (Cirrus)
ATMs.

Free ING Vysya International Debit Card Re-issue charged at Rs. 200/- per request. Shopping convenience at over 200,000 merchant
locations.

Free issue and unlimited usage of Payable at Par

cheque books.

Free transfer of funds across all the branches of ING. Free Personal Assistance Service - Smartserv at select centres. Free Bill Pay service at select centres. Free statement of account through e-mail. Internet banking facility. (Mi-b@nk) Free Customer Service Line. Free joint account status with one other family
member.

 Free for life Credit Card based on Customers

eligibility.

Benefits: The quarterly average balance of Rs. 5000/- is waived as long as the employee is employed with the corporate. (Zero Balance Account). Enhanced Accessibility - Unlimited access to ING Vysya, Corporation Bank and Cirrus ATMs Enhanced Accessibility - Unlimited access to ING Vysya, Corporation Bank and Cirrus ATMs Minimum documentation supported by an official communication from the corporate. No restriction in the number of transactions in the
account.

Privileged Customer status for retail loan products.

Eligibility: The average salary credit in to the employees orange salary account should be equal to or higher than Rs.20,000/- per month. Where there is a joint account holder, the normal KYC norms need to be adhered to for the joint account holder. Preferably corporate to have a current account with
ING.

Solo Savings Account: Key Features: Quarterly Average Balance - Rs. 500/- to be maintained in the account. Penalty for non-maintenance of QAB will be Rs. 150/per quarter. Free International Debit Card, above 18 years of age, which affords shopping convenience at over 90,000 shopping outlets across the country. Free & unlimited access to all ING ATM's. Free 30 transactions per annum at HDFC & Corp Bank ATMs. Free Multi branch, Multi-city banking convenience. Internet Banking through Mi-b@nk. Free access to the Customer Service Line. Personalized Chequebook above 18 years of age. Smartserv & SMS Alerts at Rs. 100/- per annum. Bill Pay facility. Benefits: Student's first initiation into empowered banking Independent Bank account. Wide Accessibility through Corporation & HDFC

ATM's. E-channels to make banking convenient to the student. Freedom Account: Key Features: Quarterly Average Balance to be maintained in the account reduced to zero. (Zero Balance Account). Unlimited ATM transactions on all ING Vysya ATM's. Free four ATM transactions per month in over 25,000 other Bank ATM's in India. Shopping convenience at over 200,000 merchant locations, with the ING Vysya International Debit
card.

Free issue of Personalized chequebooks. Free Electronic Bill Payment service -at select
centres.

Free Statement of Account through E-mail at no

charge.

Customer Service Line facility Conversion from other type of accounts to the Freedom Savings Account is not allowed. Benefits: Customers can use up to the last penny in their
account.

No unexpected service charges for non-maintenance

of balances.

Free limited access to over 20,000+ other banks ATM's every month - enhanced accessibility.

 Free Multi branch, Multi-city banking convenience.

Eligibility: Individuals above the age of 18. Guardians on behalf of minors. Salaried individuals. Trusts / Societies and Charitable Institutions General Savings Account: Key Features: Quarterly Average Balance of Rs. 5000/- to be maintained in the account. Service charge for non-maintenance of the quarterly average balance is Rs. 200/- + taxes per quarter. Free Unlimited ATM transactions on all ING Vysya ATMs. Shopping convenience at over 200,000 merchant locations, with the ING Vysya International Debit card. Free International Debit Card for the first year, with a renewal fee of Rs. 150/- from the second year. Free Electronic Bill Payment service -at select centres. Free Statement of Account through E-mail at no charge.

 Free issue of Personalized chequebooks. Mi-b@nk - Internet banking facility. Free Customer Service Line facility. Benefits: Basic banking account without any frills. Service charge for non-maintenance of QAB is only Rs. 200 + taxes per quarter. Free Multi branch, Multi-city banking convenience. Eligibility: Individuals above the age of 18. Guardians on behalf of minors. Salaried individuals. Trusts / Societies and Charitable Institutions.

Saral Savings Account Key Features: Quarterly Average Balance of Rs. 200/- to be maintained in the account. Penalty for non-maintenance of QAB will be Rs. 45/per quarter.

Free issue of personalized chequebook. Free 4 Cash transactions per month at the base branch through withdrawal slips. Over and above 4 transactions per month, every additional transaction during the month will be charged at Rs. 20/- per transaction. Free annual Statement of Account. Additional value added services at a cost: Debit Card - Rs. 100/- per annum. Internet Banking - Rs. 100/- per annum. Customer Service Line - Rs. 100/- per annum. All AAA cash deposits and withdrawals are charged at Rs. 50/- per transaction. Adhoc / Additional statement of accounts will be charged at Rs. 50/- per transaction. Up gradation from any other savings account of the Bank to the Orange Savings account at no additional
cost.

BENEFITS:

Very low quarterly average balance. Basic banking facilities - with a view of financial
inclusion.

For the reach of banking facilities to a vast section of

the population.

Benefits of technology extended at a negligible cost

Eligibility:

Individuals above the age of 18. Customers at Rural & Semi Urban locations. Guardians on behalf of minors. Any individual. Trusts / Societies and Charitable Institutions.

Formula Savings Account:

International Debit card

Recognized the world over

The ING Formula debit card is accepted at over 23 million* merchant establishments worldwide, including 1,10,000* merchant establishments in India (*information basis MasterCard)

Race anytime, anywhere

Now you dont need to carry around large amounts of cash to shop, travel or entertain. Whether your purchase is planned or on impulse, all you need is your ING Formula debit card

Easy pit stops

Need cash? Just step into any one of our ATMs or member ATMs and withdraw cash up to Rs. 50, 000/- a day from ING ATM. Whats more, utilize this facility at over 25,000 ATMs across the country, free of charge.
Safety Car:

The debit card in your hands is the safest way to

transaction.

Special Benefits card Fuel Gauge

 Fill fuel across any petrol pump in India and get the 2.5% surcharge waived Speed Lap Shop using your ING Formula savings account and get Formula One merchandise. Refer to the rewards catalogue in your usage guide. Depending upon which item you are interested in use your ING Formula debit card to shop for the required amount fill in the details on the form and send it to us for us to send you the Formula One merchandise absolutely free. Race Day Whenever there is a Formula 1 race anywhere in the world, there is a race for you as well. Shop using your ING Formula debit card on the day of the race and top 25 spenders for the race day wins vouchers from ING 3 winners Gift vouchers worth Rs 5000/ 10 runner ups Gift vouchers worth Rs 2000/- 12 second runner ups Gift vouchers worth Rs
1000/-.

12 second runner ups Gift vouchers worth Rs 1000/Benefits 1) Formula 1 International Debit card 2) Free Payable at Par cheques 3) Exclusive F1 themed, Internet Banking services 4) Free sms alerts on transactions above Rs1,500
Eligibility:

Individuals above the age of 18.Guardians on behalf of minors.

 Guardians on behalf of minors. Salaried individuals. Average Quarterly balance amount of Rs25000/- to
be maintained.

ING Positive Life

Positive Life is a non-medical unit linked insurance plan for just Rs. 834/-* per month. Now you can meet all your personal goals and aspirations with ease. With ING Life Insurance you can truly experience the joy of living a
positive life.

Key Benefits of Positive Life: Avail the benefits of Systematic Investment by paying your premiums at pre-determined intervals. Convenient policy terms of 10, 15 and 20 years allow you to match your life goals to the policy terms. Free Unlimited ATM transactions in over 25,000 (Cirrus) ATMs in India. Flexible premium paying terms allows you to choose the period you wish to pay, starting from a minimum of 3 years. Choice of flexible investment options based on individual risk preferences.
Simple

documentation and easy processing of the

policy Key Benefits:

Limited Premium Payment Flexible investment options Systematic Investment benefit Eligibility

 Minimum entry age: 0 years Maximum entry age: 50 years

Policy Term:
Policy

term can be 10, 15 or 20 years

Premium Payment Terms Minimum of 3 years upto the policy term

ACCOUNTS

ING Platina & ING Formula Savings

Service Charges Account Details

Formula gs unt

ING Platina Account

ING Savin Acco

Quarterly Average Balance (QAB*) Requirement 1.Requirement to 1,00,000 maintain Platina

status.

NIL

2.Requirement to avoid nonmaintainence

50,000

NIL

3.*Quarterly 25000/Average Balance

NIL

Service Charges for Non-Maintenance of Quarterly Average

Balance(QAB)

1.First two calender quarters if QAB > = Platina status

Introduction: Executive summary of the project Executive Summary Banking Industry, which is basically my concern industry around which my project has to be revolved, is really a very complex industry. And to work for this was really a complex and hectic task and few times I felt so frustrated that I thought to left the project and go for any new industry and new project. Challenges, which I faced while doing this project, were following Banking sector was quite similar in offering and products and because of that it was very difficult to discriminate between our product and products of the
competitors.

Target customers and respondents were too busy persons that to get their time and view for specific questions was very difficult. Sensitivity of the industry was also a very frequent factor, which was very important to measure
correctly.

Area covered for the project while doing job also was very large and it was very difficult to correlate two different customers/respondents views in a one.

 Every financial customer has his/her own need and according to the requirements of the customer product customization was not possible. So above challenges some time forced me to leave the project but anyhow I did my project in all circumstances. Basically in this project I analyzed thatWhat factors are really responsible for performance of ING Banks performance in this competitive era. Industry status & ING-VYSYA Banks interface Industry introduction The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and schedule banks.Schedule Banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country in every city and villages of all nook and corners of the land. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority sectors. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. And that was not the limit of growth. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their

appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps then to save on manpower costs. During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period. The share of foreign banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in credit during the year 2000.about the detail of the current scenario we will go through the trends in modern economy of the country. Current Scenerio: The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking system are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (Npas) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions. PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the
succesfully voluntary retirement schemes(VRS).

The private players however cannot match the PSBs great reach, great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs

has been through the merger and acquisition (M&A) route. Over the last two years, the industry has witnessed several such instances. For instance, HDFC Banks merger with Times Bank , ICICI Banks acquisition of ITC Classic,Anagram finance and Bank of Madurai. Centurion Bank, IndusInd Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bank- Global Trust Bank merger however opened a pandoras box and brought about the realization that all was not well in the functioning of many of the private sector banks. Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS Schmes. Also following Indias commitment to the WTO agreement in respect of the services sector, foreign banks, including both new and the existing ones, have been permitted to open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches. Tasks of government diluting their equity from 51 percent to 33 percent in November 2000 have also opened up a new opportunity for the takeover of even the PSBs. The FDI rules being more rationalized in Q1FY02 may also pave the way for foreign banks taking the M& A route to acquire willing Indian partners. Meanwhile the economic and corporate sector slowdown has led to an increasing number of banks focusing on the retail segment. Many of them are also entering the new vistas of Insurance. Banks with their phenomenal reach and a regular interface with the retail investor are the best placed to enter into the insurance sector. Banks in India have been allowed to provide fee-based insurance services without risk participation, invest in an insurance company for providing infrastructure and services support and set up of a separate joint-venture insurance company with risk participation.

Aggregate Performance of the Banking Industry Aggregate deposits of scheduled commercial banks increased at a compounded annual average growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expanded at a Cagr of 16.3 percent per annum. Banks investments in government and other approved securities recorded a Cagr of 18.8 percent per annum during the
same period.

In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of only 6.0 percent as against the previous years 6.4 percent. The WPI Index (a measure of inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, money supply (M3) grew by around 16.2 percent as against 14.6 percent a year ago. The growth in aggregate deposits of the scheduled commercial banks at 15.4 percent in FY01 percent was lower than that of 19.3 percent in the previous year, while the growth in credit by SCBs slowed down to 15.6 percent
in FYO1 against 23 percent a year ago.

The industrial slowdown also affected the earnings of listed banks. The net profits of 20 listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits grew by 40.75 percent in the first quarter of 20002001, but dropped to 4.56 percent in the fourth quarter of
2000-2001.

On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill the norms, it was a feat achieved with its own share of difficulties. The CAR, which at present is 9.0 percent, is likely to be hiked to 12.0 percent by the year 2004 based on the Basle Committee recommendations. Any bank that wishes to grow its assets needs to also shore up its capital at the same time so that its capital as a percentage of the risk-weighted assets is maintained at the stipulated rate. While the IPO route was a much-fancied one in the early 90s, the current scenario doesnt look too attractive for bank
majors.

Consequently, banks have been forced to explore other avenues to shore up their capital base. While some are wooing foreign partners to add to the capital others are employing the M&A route. Many are also going in for right

issues at prices considerably lower than the market prices to woo the investors.
Interest Rate Scene

The two years, post the East Asian crises in 1997-98 saw a climb in the global interest rates. It was only in the later half of FY01 that the US Fed cut interest rates. India has however remained more or less insulated. The past 2 years in our country was characterized by a mounting intention of the Reserve Bank Of India (RBI) to steadily reduce interest rates resulting in a narrowing differential
between global and domestic rates.

The RBI has been affecting bank rate and CRR cuts at regular intervals to improve liquidity and reduce rates. The only exception was in July 2000 when the RBI increased the Cash Reserve Ratio (CRR) to stem the fall in the rupee against the dollar. The steady fall in the interest rates resulted in squeezed margins for the banks in
general.

Governmental Policy: After the first phase and second phase of financial reforms, in the 1980s commercial banks began to function in a highly regulated environment, with administered interest rate structure, quantitative restrictions on credit flows, high reserve requirements and reservation of a significant proportion of lendable resources for the priority and the government sectors. The restrictive regulatory norms led to the credit rationing for the private sector and the interest rate controls led to the unproductive use of credit and low levels of investment and growth. The resultant financial repression led to decline in productivity and efficiency and erosion of profitability of the banking sector in general. This was when the need to develop a sound commercial
s