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INTRODUCTION TO INDIAN BANKING INDUSTRY
in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.
INTRODUCTION TO INDIAN BANKING INDUSTRY ( cont ….)
couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. first fully Indian owned bank was the Allahabad Bank, which was established in 1865. Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's
GROWTH OF BANKING:
GROWTH OF BANKING
GROWTH OF ( PHASE
the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks mostly small. Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. those days public has lesser
GROWTH OF ( PHASE
BANKING II )
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. After the nationalization of banks, the branches of the public sector bank India
NATIONALISATION OF BANKING SECTOR
The nationalisation of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. It nationalised 14 banks then. These banks were mostly owned by businessmen and even managed by them.
Central Bank Maharashtra Dena Bank Syndicate Bank Indian Bank Bank Bank of Baroda
Punjab National Bank Canara Bank Indian Overseas Union Bank
GROWTH OF BANKING ( PHASE III )
phase has introduced many more products and facilities in the banking sector in its reforms measure. 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. country is flooded with foreign banks and their ATM stations.
BANKING SYSTEM IN INDIA
Public sector bank Private sector bank Co operative banks Foreign sector bank
PUBLIC SECTOR BANKS
public sector is working is in the government.
the one whose hands of the
government holds a majority stake in public sector industries. activities are mostly influenced by the government. may be defined as “an enterprise where there is no private ownership but its activities are not mainly confined to
PRIVATE sector bank
private bank is owned by either an individual or a general partner(s) with limited partner(s).
Old generation private banks: Old generation private banks are the banks which prevailed mainly before independence. The only purpose of those banks was to serve specific religion, caste, race, or region.
New generation private banks: New generation private banks like HDFC, ICICI, IDBI, and AXIS have grown with a rapid branch expansion. The network of private sector bank grew at almost three times of all scheduled commercial banks and more than four times that of public sector banks. The star performers among these banks were The
CO - OPERATIVE BANKS
co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest.
In rural areas, as far as the agricultural and related activities are concerned, the supply of credit was inadequate, and money lenders would exploit the poor people in rural areas providing them loans at higher rates. Co operative Banks in India are registered
Foreign banks working in India like Abn-amro, HSBC, CITI, Standard Chartered Bank brought the drastic changes in whole banking industry. Foreign Banks in India always brought an explanation about the prompt services to customers. After the set up foreign banks in India, the banking sector in India also become competitive and accretive. Computerized functioning, core banking, ATM centers are the ideas generated by foreign banks.
CHALLENGES FOR PUBLIC SECTOR BANKS IN INDIA
CHALLENGES FOR PUBLIC SECTOR INDIA ARE FOLLOWING :-
Implementation of latest technology How to reduce NPA Corporate governance Man power planning Talent management Risk management Challenges in banking security Growth in business Enhancing Customer Service
Implementation of latest technology
Online banking uses modern computer technologies to offer the users convenient banking facilities. If you have access to such a facility, there is absolutely no need for you to personally visit your bank’s branch for any sort of transaction. Private sector and foreign banks were using technology and computerized system since its beginning while PSBs were not. So they found difficulty in managing all these things. Many of Indian PSBs ignored technological change and had lost market share to foreign banks and new private banks.
Non performing asset
Definition :- A loan or lease that is not meeting its stated principal and interest payments. Banks usually classify as nonperforming assets any commercial loans which are more than 90 days overdue and any consumer loans which are more than 180 days overdue. More generally, an asset which is not producing income. The extent of NPA is comparatively higher in public sectors banks. To improve the efficiency and profitability, the NPA has to be scheduled. Various steps have been taken by government to reduce the NPA. It is highly impossible to have zero percentage NPA. But
and net NPA of different sector of bank. 1.76 1.49
11.09 9.64 5.38
Public sector 12.37 bank Private 8.37 sector Foreign bank 6.84
9.36 8.07 5.25
7.79 5.84 4.62
It is a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs. Corporate governance in PSBs is complicated by the fact that effective management of these banks vests with the government and the top managements and the boards of banks operate merely as functionaries.
Man - power Planning
Manpower is the biggest challenge for the public sector banks. public sector banks were faced with a large attrition rate of over 30 % and are experiencing an overall deceleration in the number of employees. Because It takes as long as 18 months for the recruitment process of a typical state-owned bank to be concluded . Public sector banks were more likely to be seen as an older generation organisation where the average age group would be 50 years. Public sector banks therefore need to implement right strategies to woo young
The banks also need to develop existing staff in newer competencies through a systematic and rigorous training and also recruit, if necessary super specialist and specialist in areas like technology, treasury management, marketing, operations and project management. So it is a challenge for Public sector Banks not only to recruit more employees but also to recruit quality professional.
Banks will have to pay increasing attention to education and training including sponsorship of identified persons to MBA programmes, PhD programmes and other long duration programmes in technology and financial management to develop a wider managerial pool of competent people who can be developed fast to play the role of modern banker in ever difficult and turbulent times. There is also need to develop organisationwide awareness about banks key business problems including stagnant business units, strain on profitability, cost of operations, unexplored business opportunities, manpower
management is the growing challenge for Indian public sector banks because competitive environment is increasing in public sector banks. Like:- Credit
Credit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit (either the principal or interest (coupon) or both)
Challenges in Banking Security
Security in banks has thus assumed significant proportions, comprising both physical aspects in addition to those relating to Information, Information Systems and Information Technology, all of which have an impact on the reputational risk of a financial organisation. Against this backdrop, the security requirements of the banking sector need to be assigned high levels of priority. I must add here that in a recent case of a cooperative bank, the entire operations, maintenance and management of the computer
GROWTH IN BUSINESS
Public Sector Banks should now go global in search of new markets, customers and profits. Some of the Public Sector Banks have their presence in overseas to a limited extent. The London based magazine “The Banker” has now listed only twenty Indian banks including private sector banks in the list of “Top 1000 World Banks”. The State Bank of India, the largest bank in India, ranks only 82nd amongst the top global banks. It is not even a 10th in size of the 9th largest bank, Sumitomo Mitsui, which has assets of $950 billion as against SBI’s assets of $91 billion.
ENHANCING CUSTOMER SERVICE
Customer is god in the UK and USA. Customer is the king in Japan. But, the customer is the ‘Boss’ in India and the ‘Boss’ is always right. The Public Sector Banks may need to include customer oriented approach or customer focus in their five areas of businesses such as cash accessibility, asset security, money transfer, deferred payment and financial advices. In order to develop close relationship with the customers the Public Sector Banks have to focus on the technology oriented innovations that offer convenience to the customers.
Indian banks are facing innumerable challenges such as worrying level of NPAs , deteriorating asset quality, increasing pressures on profitability, asset-liability management, liquidity risk management, market risk management and ever tightening prudential norms. The primary challenge for banks is to provide consistent service to customers irrespective of the kind of channel they use. Banks in India have been working towards a vision that includes transformed branches, enhanced telephone services, and leading edge internet, banking functions that provide a
www.rbi.org.in RBI newsletter Google search engine en.wikipedia.org Annual report of RBI 2007-2008
AMIT & NEERAJ SHARMA (MBA Ist Sem.)
GUIDED BY:Mrs. RITUPARNA