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Towards The Partial Fulfillment of Requirement for The Degree of Masters of Business Administration





Definitions of banks
The term bank is derived from the French word Banco which means a Bench or Money exchange table. In olden days, European money lenders or money changers used to display (show) coins of different countries in big heaps (quantity) on benches or tables for the purpose of lending or exchanging. A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lends money to those who need it. An organization, usually a corporation, chartered by a state or federal government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes; certifies depositor's checks; and issues drafts and cashier's checks. A financial institution that is licensed to deal with money and its substitutes by accepting time and demand deposits, making loans, and investing in securities. The bank generates profits from the difference in the interest rates charged and paid. "A bank is an institution, usually incorporated with potheyr to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit, to form a joint fund that shall be used by the institution, for its own benefit, for one or more of the purposes of making temporary loans and discounts; of dealing in notes, foreign and domestic bills of exchange, coin, bullion, credits, and the remission of money; or with both these potheyrs, and with the privileges, in addition to these basic potheyrs, of receiving

special deposits and making collections for the holders of negotiable paper, if the institution sees fit to engage in such business."

Role of banks in Indian economy

The economic development of our country depends more on real factors like the industrial development, modernization of agriculture, organization of internal trade and expansion of foreign trade, especially exports, and less on the monetary factors contributed by banking Economic planning like laying down of specific targets and allocating particular sums of money that constitute the economic policy of the government also plays a significant role. Still we cannot under-estimate the importance of banking and the monetary mechanism. One of the most important problems of a developing economy is that of capital formation. There is a good deal of difference between hoarding and saving and the people in the countryside have to be made to realize the difference. This can be easily done by banks. They can undertake to educate the rural populace and thus mobilize their savings. A number of leading economists have confirmed the fact that the amount of capital available in India for investment is surprisingly and inexplicably large. Only we need exploiting this idle capital. Who else can exploit it, if not banks? Both in rural and urban areas, huge amounts of money are wasted on celebrations like marriages and births. If banks can offer handsome interest on savings, people can be induced to direct their savings from wasteful activities to banks. Promoting attractive deposit schemes needs some very active work on the part of the banks, but it can certainly mobilize a large amount of saving for capital formation. The Government of India has now undertaken a large number of projects for the economic reconstruction of the country. Banks can generate an adequate volume of credit and conduct it along useful productive channels. They can distinguish between the essential and non-essential factors of the economy between productive and non-productive investment, between speculative arid non-speculative borrowings and thus help in the growth of the economy. Two other acute problems faced by our low and middle income groups are the housing problem and gnawing unemployment problem. If the banks undertake to help these groups, they will also be making a significant contribution to our economy. It will also help in removing the economic imbalance of the various sections of our society.

Before nationalization, our banks could not play this constructive role expected of them. But after nationalization, the entire banking machinery has now been geared to the economic development of the country. They have started looking after the needs of the small farmer and the new entrepreneur. It is earnestly hoped that the Government will take some more positive steps to ensure that the real benefits of an organized banking system percolate down to the poor illiterate masses of India.

Role of banks
Primary roles

a) Accepting deposits b) Granting loans and advances

Secondary roles

a) Issuing letters of credit, travelers cheques , circular notes etc. b) Undertaking safe custody of valuables, important documents, and Securities by providing safe deposit vaults or lockers; c) Providing customers with facilities of foreign exchange. d) Transferring money from one place to another; and from one branch to another branch of the bank. e) Standing guarantee on behalf of its customers, for making payments for purchase of goods, machinery, vehicles etc. f) Collecting and supplying business information; g) Issuing demand drafts and pay orders; and, h) Providing reports on the credit worthiness of customers


Since the financial reforms of 1991, there have been significant favorable changes in Indias highly regulated banking sector. It concludes that the financial reforms have had a moderately positive impact on reducing the concentration of the banking sector (at the lotheyr end) and improving performance. The empirical estimation shotheyd that regulation lotheyred the profitability and cost efficiency of public-sector banks at the initial stage of the reforms, but such a negative impact disappeared once they adjusted to the new environment. Profitability turned positive in 1997-2000, cost efficiency steadily improved over the reform period, and the gap in performance compared with foreign banks has diminished. (Biikrram De11 in 2003)

One of the major objectives of Indian banking sector reforms was to encourage operational selfsufficiency, flexibility and competition in the system and to increase the banking standards in India to the international best practices. The second phase of reforms began in 1997 with aim to reorganization measures, human capital development, technological up-gradation, and structural development which helped them for achieving universal benchmarks in terms of prudential norms and pre-eminent practices. This paper seeks to determine the impact of various market and regulatory initiatives on efficiency improvements of Indian banks. Efficiency of firm is measured in terms of its relative performance that is, efficiency of a firm relative to the efficiencies of firms in a sample. Data Envelopment Analysis (DEA) has used to identify banks that are on the output frontier given the various inputs at their disposal. The present study is confined only to the Constant-Return-to-Scale (CRS) assumption of decision making units (DMUs). Variable returns to scale (VRS) assumption for estimating the efficiency was not attempted. It was found from the results that national banks, new private Banks and foreign banks have high efficiency over a period time than remaining banks. (Amit Kumar Dwivedi D. Kumara Charyulu W.P. No. 2011-03-01 March 2011)

They do this using Data Envelopment Analysis and bank-specific data from 1997 to 2004. They recognize the controversy on the role of deposits as input or output by deriving efficiency scores

under alternative specifications. Their idea results show that the relative efficiency of banks by ownership does not critically depend upon whether deposits are treated as an input (intermediation approach) or output (production approach). In general, they find foreign banks to be the most efficient follotheyd by new private banks. While the efficiency scores of all banks have increased over the reform period, the nationalized banks have registered the strongest gains. This reflects the infusion of new capital and the increase in competition that these banks have experienced in recent years. Thus, the liberalization and deregulation of banks have raised efficiency scores over time of all banks in India regardless of their ownership. These gains in efficiency have also improved bank profitability. Still, the remaining RBI mandate of priority sector lending continues to hurt both the efficiency and profitability of state-owned and nationalized banks. The practice of hiring more officers in relation to non-officers among Foreign and new private banks also appear to have contributed to their enhanced profitability. This reflects perhaps the computer and credit-assessment skills that officer Employees bring to the table. (Kusum W. Ketkar & Suhas L. Ketkar)


To explore the role and relevance of banking in economic growth of a nation. To assess the progress and trends of banking growth in India during last five financial years (2006 2011).

To conduct a SWOT analysis of banking industry in current economic spectrum in Indian context.


Research Design Data Required Data Sources Period of Study Variables : : : : : Descriptive Research Secondary Data RBI web portal, articles, magazines, journals 2006 11 Branch Coverage, Employees, Advances, Deposits, NPAs, Earning & Expenses, Liabilities and Assets Research Area Statistical Tools : : Indian Banking Industry Correlation, Regression, ANOVA, t-test, and other appropriate tools

Critical analysis of Non Performance Assets in Indian banks (Anis Ali Vol.3 no. 2, 2011:249-254). Performance and Profitability of Indian Banks in the Post Liberalization Period The Indian Banking Sector On the Road to Progress (G. H. Deolalkar) (Amit Kumar Dwivedi D. Kumara Charyulu W.P. No. 2011-03-01 March 2011) Ownership Effects On Bank Performance: A Panel Study Of Indian Banks (Biikrram De11 in 2003) Governance of the banking system (Sayuri Shirai1)