TABLE OF CONTENTS
1. INDUSTRY PROFILE
2. COMPANY PROFILE
3. COMPETITORS PROFILE
4. RESEARCH METHODOLOGY AND OBJECTIVE
5. SWOT ANALYSIS OF BANKS
6. COMPARITIVE CHART
7. SURVEY RESULTS
8. STUDIES OF VARIOUS DEPARTMENTS
9. SUGESSTIONS & RECOMMENDATIONS
INDIAN BANKING SYSTEM
A HISTORICAL PERSPECTIVE
The earliest banks in India can be traced to the three presidency banks (in Bengal, Mumbai, and Chennai) in the early 1980s. Subsequently with the emergence of several small banks in the country, the number of banks had gone up 105 by December by 1934. In 1921, the three-presidency banks were merged into the imperial bank of India, which, apart from usual commercial operations, also took over certain central banking functions. Since the Reserve Bank of India was established as a full – fledged central bank of the country in 1935.
The Imperial bank of India was nationalized and came to be known as the State Bank of India the establishment of the state bank of India was one of the significant steps taken by the government of India to control its expanding economy.
The banking system witnessed a steady growth during the post- independence period and by the mid- sixties the system has become fairly strong and compact. However several deficiencies in their functioning were noticed, mainly in terms of geographical coverage and credit deployment. The network of branches of various banks covered only a limited segment of the population in major cities while the rural areas and semi- urban areas were totally neglected. it was also noticed that substantial gaps in credit deployment existed in financing agriculture, small - scale industry and self - employed persons. Further, the ownership pattern of banks showed the concentration of economic power in few hands
DEVELOPMENTS IN BANKING SYSTEM
SOCIAL CONTROL OF BANKS
Indian banking structure has grown considerably in strength and stability due to the vigorous control and effective monitoring by reserve bank of India. However, Order to remove the deficiency pointed above, the Government introduced a scheme of social control of banks. According to the Banking Commission (1972), the social control scheme was introduced with the main objective of “achieving a wider spread of bank credit flow to priority sectors and making it a more effective instrument of development “.
NATIONALISATION OF BANKS
Despite of scheme of social control there was no significant reorientation of lending activities of banks towards meeting the requirements of priority sector like agriculture. This resulted in nationalization of 14 major commercial banks with individual deposits exceeding Rs.50 crores in July 1969.
The major objective of nationalization were
· Reduction in concentration of economic power in hands of a few.
· Expansion of credit to priority areas, which were hitherto neglected like agriculture, small-scale industries and self, employed people.
· Elimination of the use of bank credit for speculative and unproductive purpose.
· To provide a professional bent to bank management and encourage upcoming entrepreneurs.
At the time of nationalization, the 14 major banks had a paid up capital of Rs. 28.5 crores, deposits of Rs. 2626 crores, advances Rs. 1813 crores and 4134 branches. In other words the nationalized banks accounted for 80% of branches, 83% of deposits and 84% of advances of the whole banking system.
The Banks nationalized in 1969 were: -
1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank of India
5. Canara Bank
6. Central Bank of India
7. Dena Bank
8. Indian Bank
9. Indian Overseas Bank
10. Punjab National Bank
11. United Commercial Bank
12. Union Bank of India
13. Syndicate Bank
14. Bank of Maharashtra
REGIONAL RURAL BANKS
The RRBs were established with a view to combining the local feel and familiarity with rural problems. The RRBs are primarily sponsored by the commercial banks.The primary objectives of these banks are:
· Providing credit for agricultural purposes to small entrepreneurs engaged in trade and industry and other productive activities in rural areas.
· To cater the needs weaker sections of the community.
In order to move effectively, meet the growing development needs of the economy and to promote welfare of people on the large scale six more commercial banks with Demand and Time Liabilities (Deposits) with 200 cr were nationalized in April 1980. With the second nationalization, the number of public sector banks increased to 28 (1st nationalization 14 banks, 2nd nationalization 6 bank and SBI and its seven associate banks).
Over the years with the directional change that has occurred in the banking system and the fact that the banks responding favorably by evolving new strategies and innovative ideas the credit structure of the country has become strong and steady. Recognizing the fact that the banks are vital catalytic agents of growth that provide the basic input of credit, new programmes with the social orientation have been designed with a view to assist the society.
The names six banks nationalized were as under:
1. Corporation Bank
2. Oriental Bank of Commerce
3. Punjab & Sind Bank
4. Vijaya Bank
5. Andhra Bank
6. New bank of India
After the nationalization of major banks the position altered rapidly and the flow of credit to the rural areas increased considerably. Along with quantitative expansion of branch network, there were qualitative improvements in the lending practices of the banks. The phenomenal change in the lending practices can be termed as a transformation from class banking to mass banking. In fact the broader national objectives of eradication of poverty, unemployment and growth with social justice have shaped the formulation of various directives/ schemes.
The Indian has finally worked up to the competitive dynamics of new Indian market and is addressing the relevant issues take on the multifarious challenges of globalization. Banks that employ IT solutions are perceived to be futuristic and proactive players capable of meeting the multifarious requirement of large customer base. Private Banks have been fast on the uptake and are reorienting their strategies using the Internet as a medium.
The Indian banking has come from a long from being a sleepy business institution to a highly proactive and dynamic entity this transformation has been largely brought by the large dose of liberalization and economic reforms that allowed exploring new business opportunities rather than generating revenues from conventional streams.
The Indian industry has confidently hit the growth trial that pick in activity is best reflected in the banking sector which after all is as candid a mirror of a country’s economy as you could ever find. Most of the Indian financial intermediaries have been keeping pace with the deepening market economy, riding the opportunity that come along with reforms even as they brace themselves for increased competition both foreign and private by strengthening prudential norms and leveraging technology to ensure that growth engine hums smoothly along
The essential function of a bank is to provide services related to the storing of value and the extending credit. The evolution of banking dates back to the earliest writing, and continues in the present where a bank is a financial institution that provides banking and other financial services. Currently the term bank is generally understood an institution that holds a banking license. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and
making loans. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so called non-bank. Banks are a subset of the financial services industry.
The word bank is derived from the italian banca, which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Money lenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table.
Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset.
Services typically offered by banks
Although the type of services offered by a bank depends upon the type of bank and the country, services provided usually include:
· Directly take deposits from the general public and issue checking and saving accounts.
· Lend out money to companies and individuals (see money lender)
· Cash checks.
· Facilitate money transactions such as wire transfers and cashiers checks
· Issue credit cards, ATM, and debit cards and online banking.
· Storage of valuables, particularly in a safe deposit box.
Types of banks
There are several different types of banks including:
Central banks usually control monetary policy and may be the lender of last resort in the event of a crisis. They are often charged with controlling the money supply, including printing paper money. Examples of central banks are the European Central Bank and the US Federal Reserve Bank.
Investment banks underwrite stock and bond issues and advice on mergers. Examples of investment banks are Goldman Sachs of the USA or Nomura Securities of Japan.
Merchant banks were traditionally banks which engaged in trade financing. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike Venture capital firms, they tend not to invest in new companies.
Private banks manage the assets of the very rich. An example of a private bank is the Union Bank of Switzerland. Savings banks write mortgages exclusively.
Offshore banks are banks located in jurisdictions with low taxation and regulation, such as Switzerland or the Channel Islands. Many offshore banks are essentially private banks.
Commercial banks primarily lend to businesses (corporate banking)
Retail banks primarily lend to individuals. An example of a retail bank is Washington Mutual of the USA. Universal banks engage in several of these activities. For example, Citigroup, a large American bank, is involved in commercial and retail
lending; it owns a merchant bank (Citicorp Merchant Bank Limited) and an investment bank (Salomon Smith Barney); it operates a private bank (Citigroup Private Bank); finally, its subsidiaries in tax-havens offer offshore banking services to customers in other countries.
Banks are prone to crisis
The traditional bank has an inherent tendency to crisis. This is because the bank borrows short term and lends leveraged long term. The sum of deposits and the bank's capital will never equal more than a modest percentage of the loans the bank has outstanding.
Even if liquidity is not a concern, if there is no run on the bank, banks can simply choose a bad portfolio of loans, and lose more money than they have. The US Savings and Loan Crisis in the late 1980s and early 1990s is such an incident.
Role in the money supply
A bank raises funds by attracting deposits, borrowing money in the inter-bank market, or issuing financial instruments in the money market or a securities market. The bank then lends out most of these funds to borrowers. However, it would not be prudent for a bank to lend out all of its balance sheet. It must keep a certain proportion of its funds in reserve so that it can repay depositors who withdraw their deposits. Bank reserves are typically kept in the form of a deposit with a central bank. This behaviour is called fractional-reserve banking and it is a central issue of monetary policy. Some governments (or their central banks) restrict the proportion of a bank's balance sheet that can be lent out, and use this as a tool for controlling the money supply. Even where the reserve ratio is not controlled by the government, a minimum figure will still be set by regulatory authorities as part of banking supervision.
The combination of the instability of banks as well as their important facilitating role in the economy led to banking being thoroughly regulated. The amount of capital a bank is required to hold is a function of the amount and quality of its assets. Major banks are subject to the Basel Capital Accord promulgated by the Bank for International Settlements. In addition, banks are usually required to purchase deposit insurance to make sure smaller investors are not wiped out in the event of a bank failure. Another reason banks are thoroughly regulated is that ultimately, no government can allow the banking system to fail. There is almost always a lender of last resort—in the event of a liquidity crisis (where short term obligations exceed short term assets) some element of government will step in to lend banks enough money to avoid bankruptcy.
How banks are viewed ?
Banks have a long history of being characterized as heartless, rapacious creditors, hounding honest folk down on their luck for the last dime. See Populism. In United States history, the National Bank was a major political issue during the presidency of Andrew Jackson. Jackson fought against the bank as a symbol of greed and profit-mongering, antithetical to the democratic ideals of the United States.
Large banks in the United States are some of the most profitable corporations, especially relative to the small market shares they have. This amount is even higher if one counts the credit divisions of companies like Ford, which are responsible for a large proportion of those company's profits. For example, the largest bank, Citigroup, which for the past 3 years has made more profit then any other company in the world, has only a 5 percent market share. Now if Citigroup were to be as dominant in its industry as a Home Depot, Starbucks, or Wal Mart in their respective industries, with a 30 percent market share, it would make more money than the top ten non-banking US industries combined. In the past 10 years in the United States, banks have taken many measures to ensure that they remain profitable while responding to ever-changing market conditions. First, this includes the Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance houses. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for "one stop shopping" by enabling the crossing selling of products (which, the banks hope, will also increase profitability).