INNOVATIONS IN BANKING SECTOR

NAME
CLASS

: SANDHYA TAMBE
: T.Y.B&I

ROLL NO : 47

INDEX
INTRODUCTION DEFINITION EARLY PHASE FROM 1786-1949INDIAN BANKS

NATIONALIZATION OF INDIAN BANKS AND UP TO 1991 PRIOR :

PHASE 2 NATIONALIZATION OF COMMERCIAL BANKS 14 BANKS THAT WER NATIONALIZED

MAJOR MILESTONES IN BANKING HISTORY

 NEW PHASE OF INDIAN BANKING SYSTEM REFORMS AFTER 1991 PHASE 3

BANKING SECTOR REFORMS INNOVATION IN BANKING PRODUCTS TYPES OF COMMERCIAL BANKS INNOVATION IN BANKING BRANCHES NEW FINANCIAL PRODUCTS AND SERVICES CASE STUDY ON INNOVATION IN CENTRAL BANK OF INDIA

INTRODUCTION
Innovation generally refers to the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society. Innovation differs from invention or renovation in that innovation generally signifies a substantial positive change compared to incremetal changes Over the years, the banking sector in India has seen a number of changes. Most of the banks have begun to take an innovative approach towards banking with the objective of creating more value for customers, and consequently, the banks. Some of the significant changes in the Indian banking sector are discussed below: Banking in India has already undergone a huge transformation in the years since Independence. The rate of transformation was particularly high in the 1990s and 2000s, when a number of innovations changed the way banking was perceived.

DEFINITION BANKING
Section 5 (1) (b) of Banking Regulation Act defines "banking" as the accepting, for the purpose of lending or investment, of deposits of money from public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise. A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities.

Early phase from 1786-1949-indian banks

The General Bank of India was set up in the year 1786.

The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.

These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks.

Imperial Bank acted as banker to government until the establishment of RBI in 1935. The Reserve Bank of India began operations as private shareholders' entity on 1 April 1935, which makes it 74 years old. It was nationalized on 1 January 1949. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies.

Act, 1949 which was later changed to Banking Regulation Act, 1949.

 Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking authority.

NATIONALIZATION OF INDIAN BANKS AND UP TO 1991 PRIOR : PHASE 2

Imperial Bank was nationalized in under State Bank of India Act 1955 which led to the emergence of State Bank of India and marked the beginning of first phase of nationalization. Seven banks forming subsidiary of State Bank of India was nationalized in 1960. To extend banking facilities on a large scale specially in rural and semiurban areas. To act as the principal agent of RBI. To handle banking transactions of the Union and State Governments all over the country and to help to pursue broad economic objectives. SBI along with its associate banks account for 20% of total branches of all commercial banks in India.

 In1969, major process of nationalization was carried out. 14 major commercial banks in the country were nationalized. Second phase of nationalization was carried out in 1980 with six more banks. This step brought 80% of the banking segment in India under Government ownership.

NATIONALIZATION OF COMMERCIAL BANKS

On 19 July 1969, 14 commercial banks got nationalized.

Objectives
Removal of control by a few. Provision of adequate credit for agriculture and small industry and export. Giving a professional bent to management. Encouragement of a new class of entrepreneurs. The provision of adequate training as well as terms of service for bank staff.

14 BANKS THAT WERE NATIONALIZED

Central Bank of India Bank of Maharashtra Dena Bank Punjab National Bank Syndicate Bank Canara Bank Indian Bank Indian Overseas Bank Bank of Baroda Union Bank Allahabad Bank United Bank of India UCO Bank Bank of India

MAJOR

MILESTONES IN BANKING HISTORY

1949 : Enactment of Banking Regulation Act . 1955 : Nationalization of State Bank of India . 1960 : Nationalization of SBI subsidiaries.

 1969 : Nationalization of 14 major banks . 1971 : Creation of credit guarantee corporation . 1975 Creation of regional rural banks. 1980 : Nationalization of six banks with deposits over 200 crore.

NEW PHASE OF INDIAN BANKING SYSTEM REFORMS AFTER 1991PHASE 3

This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers Phone banking and net banking is introduced. The entire system became more convenient and swift.

BANKING SECTOR REFORMS

Measures for liberalization, like dismantling the complex system of interest rate controls, eliminating prior approval of the Reserve Bank of India for large loans, and reducing the statutory requirements to invest in government securities.

Measures designed to increase financial soundness, like introducing capital adequacy requirements and other prudential norms for banks and strengthening banking supervision.

Measures for increasing competition like more liberal licensing of private banks and freer expansion by foreign banks.

TYPES OF COMMERCIAL BANKS

Commercial banks operating in India may be categorized into public sector, private sector and Indian or foreign banks depending upon the ownership, management and control. They may also be differentiated as scheduled or non-scheduled, licensed or unlicensed. A commercial bank is run on commercial line that is to earn profits unlike a cooperative bank which is run for the benefit of a group of members of cooperative body e.g. a housing co-operative society.

The commercial banks are spread across the length and breadth of the country ad cater to the short term needs of industry, trade and commerce and agriculture unlike the developmental banks which focus on long term need.

Primary Functions of Commerical Bank

Primary Functions of Commerical Bank

Borrowing Lending

Secondary Function of Bank

Secondary Function of Bank
Issue of Travellers Cheque cash credit Debit card

collection of cheque Periodic payment Issue of letter of credit Remittances Other collaction

ATM
E-banking Safe deposit value Credit information

SCHEDULED BANKS
Scheduled Banks are those which are included in second scheduled of Banking Regulation Act 1965, other are non scheduled banks. To be included in scheduled category a bank. Must have paid up capital and reserves of not less than Rs 5 lakhs must also satisfy the RBI that its affairs are not conducted in a manner detrimental to the interests of its depositors.

 Scheduled banks are required to maintain a certain amount of reserves with the RBI, the in return enjoy the facility of financial accommodation and remittance facilities concessional rates from the RBI.

FOREIGN

BANKS

Foreign Commercial Banks are the branches in India of the joint stock banks incorporated abroad. Besides financing the foreign trade, they undertake banking business within the country as well. There are around 40 foreign banks in India. Standard Chartered Grind lays is the bank with the largest branches in India. Foreign banks have brought latest technology and latest banking practices in India. They have helped made Indian. Banking system more competitive and efficient.

PRIVATE BANKS
Private Bank is a bank registered as a public limited company under the Companies Act 1956. The RBI may on merit grant a license under the Banking regulation Act 1949 for such a bank. The banks may also be included in Schedule II of the RBI at the appropriate time. While granting a license, preference may be given to those banks the headquarters of which are proposed to be located in a centre which does not have the headquarters of any other bank.

NON-SCHEDULED BANKS
Those banks which are not included in the second schedule of the Banking Regulation Act 1965 are termed as non scheduled banks. Usually they are small sized institutions which restrict their activities to

local areas. Their paid up capital and reserves do not aggregate up to more than Rs 5 lakhs. Their banking activities are also limited e.g. they cannot deal in foreign exchange. The classification of Indian commercial banks into scheduled and non scheduled banks had significance prior to nationalisation but now almost all commercial unscheduled banks have been weede 2. out.

REGIONAL RURAL BANKS (RRBS)

RRBs are established under the Regional Rural Bank Act 1976 having a minimum capital of Rs 5 crore in business of granting loans and advances, particularly to small and marginal farmers and agricultural labourers, whether individually or in groups, and to co-operative societies etc.

Granting of loans and advances particularly to artisans, small entrepreneurs and persons of small means engaged in trade commerce or industry or other productive activities.

 Of the issued capital 50% is subscribed by the central government, 15% by the State Government and 35% by the sponsor bank. Apart from subscribing to the share capital, sponsor banks also provide managerial assistance, help in recruitment and training of personnel etc.

CO-OPERATIVE BANK
Co-operative Bank are only partial financial intermediaries which are engaged in financing rural and agriculture development.

Co-operative banking is small scale banking carried on a no profit, no loss basis for mutual cooperation and help. They were conceived to supplant money lenders and indigenous bankers by providing adequate short term and long term institutional credit at reasonable rates ofinterest.

RESERVE BANK OF INDIA

The Reserve Bank of India began operations as private shareholders' entity on 1 April 1935, which makes it 74 years old. It was nationalized on 1 January 1949. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949.Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority.

Functions of RBI formulation

Monetary Authority:
Formulation and Implementation of monetary policies. ObjectiveMaintaining price stability and ensuring adequate flow of credit to the productive sectors. Regulator and supervisor of the financial system

Issuer of Currency :
Issues and exchanges or destroys currency and coins not fit for circulation. Objective to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role:
Performs a wide range of promotional functions to support national objectives.

Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within which the country's banking and financial system functions. Objective - maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange:

Manages the Foreign Exchange Management Act, 1999. Objective - to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. Due to free

mobility of capital, there is inter linkage between domestic and international financial markets.

Banker to the government:

RBI performs merchant-banking function for the central and the state governments, also acts as their banker. It accepts money in deposit, permits withdrawal of cash by cheque, receives/collects payments to the Governments and transfers funds to various places in the country for the use of the Govt. Borrows on behalf of the Governments.

Bankers bank:
RBI maintains banking accounts of all scheduled banks. The Reserve Bank of India acts as the bankers' bank. All the Centeral Banks have to necessarily maintain their Current Accounts with the RBI for maintaining Cash Reserve Ratio as well as for smooth functioning of Clearing House functions. RBI also lends to the banks through Repos transactions with them.

DEPOSIT ACCOUNT
This is a core activity of the bank. Public deposits comprise the major proportion of a bankworking funds which are used primarily to make loans and advances and to purchase securities. The size of deposit is a fair reflection of the confidence, reposed by the public in that bank.The growth and propensity of a bank depends on how they are managed to maximize profits.Banks accept various types of deposits, which are generally categorized as demand or time deposits.

AXIS BANK NORMAL CURRENT ACCOUNT ( AS ON AUG 2008)

At a Monthly Average balance of Rs 10,000 this account takes you into the all new world of banking.

At-Par Cheque Facility

Enjoy the benefits of payable 'At-Par' cheque book at very nominal charges. Issue cheques payable at par at any of our branches / outlets, presently 575 across the country.

Inter Branch Cash Deposit Facility

Deposit cash up to 50,000 per day at a remote branch for instant credit in to your account.

Home Branch Cash Withdrawal

Free upto 50 transactions for unlimited amount per month.

AXIS BANK NORMAL CURRENT ACCOUNT (AS ON AUG 2008)

Demand Drafts
Avail Demand Drafts at very nominal charges. You can issue demand drafts at any of our branches / outlets, presently 575 and a wide network of correspondent bank locations.

Outstation Cheque Collection

Avail outstation cheques.

Cheque Deposit Facility

Deposit cheques at any Axis Bank branch and get the credit into your account.

DEMAT ACCOUNT
Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited to the investor's account with his Depository Participant (DP). It is introduced by the commercial banks to keep the record of the shareholdings of the customer regarding the opening stock and the closing stock of the shares.

FOREIGN DEPOSIT ACCOUNT

A bank normally offers the following foreign accounts 1. NRO Account (Non Resident Ordinary) 2. NRE Account (Non Resident External) 3. NRNR Account (Non-Resident Non Repartriable) 4. FCNR Account (Foreign Currency Non Resident)

NRO ACCOUNT (NON RESIDENT ORDINARY)

Indian national residing outside India (Other than Nepal & Bhutan). for employment etc. Intention to stay outside for a indefinite period. Maintained in Savings, Current and Fixed Deposits Account in India. Funds in these accounts are non repatriable, cannot be remitted abroad or transfer to NRE account. Interest on such deposits are taxable.

NRE ACCOUNT (NON RESIDENT EXTERNAL)

Indian national residing outside India (Other than Nepal & Bhutan) for employment etc Deposits designated in rupees Maintained in Savings, Current and Fixed Deposits account in India Intention to stay outside for a indefinite period

 Funds in these accounts are repatriable Interest on these account is tax free

NRNR ACCOUNT (NON-RESIDENT NON REPATRIABLE)

In this scheme accounts are to be opened in Indian Rupees with the authorized dealers. Authorized dealers are free to fix the maturity period of the deposits. Between 6 months and 3 years. Individual can withdraw their money at a premature stage. On maturity the principal amount of deposit will not qualify for repatriation outside at any tim. Interest accrued is allowed for repatriation.

FCNR ACCOUNT (FOREIGN CURRENCY NON RESIDENT)

Account in foreign currencies. Can be maintained by NRIs. Permitted to be maintained in Pound Sterling, USD, Deutshe Mark and Japanese Yen Fixed Deposits of 6 months and above and up to 3 years o Freely Repatriable.

INNOVATION IN BANKING PRODUCTS

Innovation in banking products includes E- Banking, Mobile Banking, Debit Cards, Credit Cards, ATM, Internet Banking.

E- BANKING
Introduction:
With the trend of globalization all over the world, it is difficult for any nation whether big or small, developed, to remain isolated from what is happening around. The growth of e-commerce and Internet has transformed the world into the GLOBAL VILLAGE. Fast development in electronic

technology has concerned the computers to take over the bank counters and to convert brick banking into electronic banking. Usage of technology by banks is due to challenge of competition, rising consumer expectations and shrinking margins of banks, which lead to reduction in cost, and enhancement of productivity, efficiency and customer convenience.

Meaning:
E-banking means,application of electronic technology towards transfer of funds through an electronic terminal, computer or magnetic tape to conduct various transactions like cash receipts, payments, transfer of funds etc. It is often known as banking on net. It does not involve any physical exchange of money, but its all done electronically, from one account to another, using the Internet. With the advent of e banking, customers are benefited by unlimited accessibility through the network of Automated Teller Machines, personal computers or even through mobile phones. Customer can perform various banking transactions such as balance enquires, bill payments, and transaction histories, transfer money between accounts, without having to step to office of the branch.

Features of e banking:
Anywhere any time banking:
Customers can avail banking facility while sitting at their home/office.

Globalization of service:
E-Banking has a special feature of globalising banks services all over.

Intense competition:
E-Commerce is a product of handling intense competition among various banks.

Cash less banking:

E-Commerce also provides feature of cash less banking as cash is not require in raw form but electronic cash like debit or credit cards may serve the purpose.

Promptness:
Another feature of E-Commerce is provides promptness in services.

PROCESS OF E-BANKING/ PROCEDURE OF E-BANKING

E-Banking process can be explained with the help of following diagram and explanation as under:

Log on to website Verification Of password

Log on to

website

Final Approval Credit Card request

Processing Of

information

To make the use of E-Banking user has to go to the World Wide Web and log on to the website.

Next step follows verification of user ID and password by the website server.

As soon as password is approved on the server, then processing of information will start on the web.

In this step, credit card number will be demanded for online transaction.

If all security measures are completed then the transaction is approved accordingly.

ADVANTAGES OF E-BANKING:
Importance of E-Banking can be explained from four aspects:

1. Benefits to banks
Reduction in cost:
E-Banking is helpful to banks by reducing the cost of various transactions as compared to traditional cost by way of ATMs Telephone banking.

Global

coverage:
E-Banking provides global network coverage of banks

services i.e. through the concept of Anywhere Anytime Banking

Good customer relationship:

E-Banking helps in attracting and retaining the customer by properly handling their grievances.

Reduction

in paper work:
E-Banking helps in eliminating endless paper based

bank statements, spreadsheets, bulky books of accounts, ledger including the use of calculator.

Reduction in frauds and misappropriations:

Through E-Banking frauds and misappropriations can be reduced as inter branch reconciliation is possible through internet.

2. Benefits to customers
Anytime

banking:
E-banking provides 24 hours, 365 days services to

customers.

Anywhere

banking:
customers can avail any sort of banking services from

anywhere around the globe from sitting at anyplace.

 Prompt

services:
Customer can avail the services of details regarding

their accounts and transactional details instantly.

On line purchase:
Customer can buy product of bank or invest in any scheme without actually insisting the bank branch but only through online.

Saving

in time:
With the help of E-banking there is no need for bank

customers to stand in queue for hours to complete financial transactions.

3. Benefits to government
Transparency

in transactions:
E-Banking provides transparency in transactions i.e.

access to information is possible easily.

Global market:
With the help of E-Banking products of our country will get global market to be popularized properly.
Risk

of carrying cash:
E-Banking provides the facility of cash less banking

which helps in growth of economy.

4. Benefits to merchant traders

Promotion of business:
With the help of E-Banking business of merchants traders will be promoted because of increased purchasing power of credit holder.

Immediate settlement:
E-Banking helps settlement, and payment of cash is possible by the customer.

Avoids risks:
It helps merchants bankers also as there is no risk of handling cash.

LIMITATIONS OF E BANKING:

Problems of security:
Security and privacy aspects are major issue in case of E-Banking transaction. Various sites are not properly locked at to ensure weather customers money is safe in cyber world or not.

High cost:
The infrastructural cost of providing E-Banking facility is very high. The banks not only have to automate front-end services but also back office services, which involves high cost.

Lack of awareness:
Another great hindrance is lack of awareness because effective and wide media efforts in publishing Internet banking need to be emphasized.

Lack of computerization:
Lack of computerization and low density of telephone lines is also a bottleneck for online banking. In India, out of 65000 bank branches, only 5000 branches are computerized.

Wrong assumption by people:

Many people are away from net banking on the assumption that it is more expensive than the traditional method of dealing with bank transactions. They still prefer going to bank to perform transactions.

TYPES OF E-BANKING SERVICES

Automatic Teller Machine Card E-Cheque Mobile Banking

Tele Banking Electronic Fund Transfar

1. Automatic Teller Machine (ATM):

Introduction:
ATM facility was started in early 1990s by foreign banks like HSBC, City bank. ATM is made to work 24 Hrs a day. For the purpose of withdrawing cash from ATM machine, plastic currency and debit cards are used. The account number and credit limit of customers are magnetically embedded on a strip of the tape on the back of card.

ATM function is to receive and dispense cash and to handle routine

financial transactions. The operation mechanism is that card is inserted into the ATM; the terminal reads the tape data to processes, which activates the accounts. According to the instructions, the details are displayed on the screen and by checking a few keys of the keyboard the user can direct the computer to carry out the financial transactions. An automated teller machine (ATM) is a computerized telecommunications device that provides the customers of a financial institution with access to financial transactions in a public space without the need for a human clerk or bank teller. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smartcard with a chip, that contains a unique card number and some security information, such as an expiration date or CVC (CVV). Security is provided by the customer entering a personal identification number (PIN).

ATM(AUTOMATED TELLER MACHINE)

Using an ATM, customers can access their bank accounts in order to make cash withdrawals (or credit card cash advances) and check their account balances as well as purchasing mobile cell phone prepaid credit. ATMs are known by various other names including Automated Banking Machine, Money Machine, Bank Machine, Cash Machine, Hole-In-The-Wall, Cash Point, Bancomat (in various

countries in Europe and Russia), Multibank (after a registered trade mark, in Portugal), and Any Time Money in India.

Working of ATM

Insertion of Card into ATM Actual Transmissio n of Tape data to Processor

Transaction

Clicking of keys

Activation of account Display of details on screen

of keyboard

ATM will give various options on the screen like: Balance enquiry

 Mini statement Deposits Cash withdrawals etc.

Banks have launched the operation of accepting payments for utility services like electricity and telephone bills etc. Banking on the net is only an extension of the ATM and tele banking services.

Various facilities produced by ATMs:

Cash withdrawals Personal identification number (PIN) change On line balance enquiry Transfer of funds between accounts linked to ones card Request for cheque book Request for account statement.

2.Cards DEBIT CARD

Introduction:
Debit cards combine the functions of ATM cards and checks. When you pay with a debit card, the money is automatically deducted from your checking

account. Many banks issue a combined ATM/debit card that looks just like a credit card and can be used in places where credit cards are accepted. But don't be mistaken -- they are not credit cards. The money you spend comes out of your checking account immediately. Debit and check cards, as they have become widespread, have revealed numerous advantages and disadvantages to the consumer and retailer alike.

Advantages Debit Card

(most of them applying only to a some countries, but the countries to which they apply are unspecified):

A consumer who is not credit worthy and may find it difficult or impossible to

obtain a credit card can more easily obtain a debit card, allowing him/her to make plastic transactions.

Use of a debit card is limited to the existing funds in the account to which it is

linked, thereby preventing the consumer from racking up debt as a result of its use, or being charged interest, late fees, or fees exclusive to credit cards.

For most transactions, a check card can be used to avoid check writing

altogether. Check cards debit funds from the user's account on the spot, thereby finalizing the transaction at the time of purchase, and by passing the requirement to pay a credit card bill at a later date, or to write an insecure check containing the account holder's personal information.

Like credit cards, debit cards are accepted by merchants with less

identification and scrutiny than personal checks, thereby making transactions quicker and less intrusive. Unlike personal checks, merchants generally do not believe that a payment via a debit card may be later dishonored.

Unlike a credit card, which charges higher fees and interest rates when a cash

advance is obtained, a debit card may be used to obtain cash from an ATM or a PIN-based transaction at no extra charge, other than a foreign ATM fee.

Disadvantages Debit Cards

Some banks are now charging over-limit fees or non-sufficient funds fees

based upon pre-authorizations, and even attempted but refused transactions by the merchant (some of which may not even be known by the client).

Many merchants mistakenly believe that amounts owed can be "taken" from a

customer's account after a debit card (or number) has been presented, without agreement as to date, payee name, amount and currency, thus causing penalty fees for overdrafts, over-the-limit, amounts not available causing further rejections or overdrafts, and rejected transactions by some banks.

In some unspecified countries, debit cards offer lower levels of security

protection than credit cards. Theft of the users PIN using skimming devices can be accomplished much easier with a PIN input than with a signature-based credit transaction. However, theft of users' PIN codes using skimming devices van be equally easily accomplished with a debit transaction PIN input, as with a credit

transation PIN input, and theft using a signature-based credit transation is equally easy as theft using a signature-based debit transaction.

In many places, laws protect the consumer from fraud a lot less than with a

credit card. While the holder of a credit card is legally responsible for only a minimal amount of a fraudulent transaction made with a credit card, which is often waived by the bank, the consumer may be held liable for hundreds of dollars in fraudulent debit transactions. The consumer also has a much shorter time (usually just two days) to report such fraud to the bank in order to be eligible for such a waiver with a debit card, whereas with a credit card, this time may be up to 60 days. A thief who obtains or clones a debit card along with its PIN may be able to clean out the consumer's bank account, and the consumer will have no recourse.

When a transaction is made using a credit card, the bank's money is being

spent, and therefore, the bank has a vested interest in claiming its money where there is fraud or a dispute. The bank may fight to void the charges of a consumer who is dissatisfied with a purchase, or who has otherwise been treated unfairly by the merchant. But when a debit purchase is made, the consumer has spent his/her own money, and the bank has little if any motivation to collect the funds.

In some unspecified coutriesand for certain types of purchases, such as

gasoline, lodging, or car rental, the bank may place a hold on funds much greater than the actual purchase for a fixed period of time. However, this isn't the case in other countries, such as Sweden. Until the hold is released, any other transactions presented to the account, including checks, may be dishonored, or may be paid at the expense of an overdraft fee if the account lacks any additional funds to pay those items.

While debit cards bearing the logo of a major credit card are accepted for

virtually all transactions where an equivalent credit card is taken, a major exception (in some unspecified countries only, is at car rental facilities. In some unspecified countries, car rental agencies require an actual credit card to be used, or at the very least, will verify the creditworthiness of the renter using a debit card

There are currently two ways that debit card transactions are processed:

online debit (also known as PIN debit) and offline debit (also known as signature debit). In some countries including the United States and Australia, they are often referred to at point of sale as "debit" and "credit" respectively, even though in either case the user's bank account is debited and no credit is involved. Some cards are blocked from making either online or offline transactions, while other cards are enabled for both kinds of transactions.

Online debit ("PIN debit" or "debit")

Online debit cards require electronic authorization of every transaction and the debits are reflected in the users account immediately. The transaction may be additionally secured with the personal identification number (PIN) authentication system and some online cards require such authentication for every transaction, essentially becoming enhanced automatic teller machine (ATM) cards. One difficulty in using online debit cards is the necessity of an electronic authorization device at the point of sale (POS) and sometimes also

a separate PINpad to enter the PIN, although this is becoming commonplace for all card transactions in many countries. Overall, the online debit card is generally viewed as superior to the offline debit card because of its more secure authentication system and live status, which alleviates problems with processing lag on transactions that may have been forgotten or not authorized by the owner of the card. Banks in some countries, such as Canada and Brazil, only issue online debit cards.

CREDIT CARD
Introduction:
Credit card is another facility produced by E-Banking. Credit card is a product with the help of which a customer can avail various facilities or buy products/services without making immediate payment and that payment could be made at later stage of time.. A credit card is a system of payment named after the small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards, the issuer lends money to the consumer (or the user). It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged. Most credit cards are the same shape and size, as specified by the ISO 7810 standard.

Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed if the balance is not paid in full (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts, thus avoiding late payment altogether as long as the cardholder has sufficient funds.

Interest charges
Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid. For example, if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received. The credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this

compartmentalization is the result of special incentive offers from the issuing bank, to encourage balance transfers from cards of other issuers. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument, or even if the issuing bank decides to raise its revenue.

Advantages of credit card

Advantages of credit card

Benefits to customers

Gr race period

Benefits to merchants

Benefits to customers:
Because of intense competition in the credit card industry, credit card providers often offer incentives such as frequent flyer points, gift certificates, or cash back (typically up to 1 percent based on total purchases) to try to attract customers to their programs. Low interest credit cards or even 0% interest credit cards are available. The only downside to consumers is that the period of low interest credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee.

Grace period:
A credit card's grace period is the time the customer has to pay the balance before interest is charged to the balance. Grace periods vary, but usually range from 20 to 40 days depending on the type of credit card and the issuing bank. Some policies allow for reinstatement after certain conditions are met. Usually, if a customer is late paying the balance, finance charges will be calculated and the grace period does not apply. Finance charges incurred depend on the grace period and balance; with most credit cards there is no grace period if there is any outstanding balance from the previous billing cycle or statement (i.e. interest is applied on both the previous balance and new transactions). However, there are some credit cards that will only apply finance charge on the previous or old balance, excluding new transactions.

Benefits to merchants:
An example of street markets accepting credit cards for merchants, a credit card transaction is often more secure than other forms of payment, such as checks, because the issuing bank commits to pay the merchant the moment the transaction is authorized, regardless of whether the consumer defaults on the credit card payment (except for legitimate disputes, which are discussed below, and can result in charges back to the merchant). In most cases, cards are even more secure than cash, because they discourage theft by the merchant's employees and reduce the amount of cash on the premises. Prior to credit cards, each merchant had to evaluate each customer's credit history before extending credit. That task is now performed by the banks which assume the credit risk. For each purchase, the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee.

Parties involved

Cardholder:
The holder of the card used to make a purchase; the consumer

Card-issuing bank:

The financial institution or other organization that issue the credit card to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. American Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case.

Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder.

Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant.

Independent sales organization: Resellers (to merchants) of the services of the acquiring bank.

Merchant account: This could refer to the acquiring bank or the independent sales organization, but in general is the organization that the merchant deals with.

Credit Card association: An association of card-issuing banks such as Visa, MasterCard, Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks.

Transaction network: The system that implements the mechanics of the electronic transactions. May be operated by an independent company, and one company may operate multiple networks. Transaction processing networks include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova,

TSYS, Concord EFSnet, and VisaNet.

Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their name. Examples of typical affinity partners are sports teams, universities, charities, professional organizations, and major retailers.

The flow of information and money between these parties always through the card associations is known as the interchange.

FEATURES:
As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cashback).

Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen.

Problems
A smart card, combining credit card and debit card properties. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The contact pads on the card enable electronic access to the chip. The low security of the credit card system presents countless opportunities for fraud. This opportunity has created a huge black market in stolen credit card numbers, which are generally used quickly before the cards are reported stolen. The goal of the credit card companies is not to eliminate fraud, but to "reduce it to manageable levels". This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction. Most internet fraud is done through the use of stolen credit card information which is obtained in many ways, the simplest being copying information from retailers, either online or offline. Despite efforts to improve security for remote purchases using credit cards, systems with security holes are usually the result of poor implementations of card acquisition by merchants. For example, a website that uses SSL to encrypt card numbers from a client may simply email the number from the webserver to someone who manually

processes the card details at a card terminal. Naturally, anywhere card details become human-readable before being processed at the acquiring bank, a security risk is created.

Electronic Cheques:
E-cheque is a system, which provides more security and reduction in overall cost. E-cheque facilitates on line payment. It needs no clearance charges. Issue of E-cheque is more familiar in various advanced countries.

MOBILE BANKING
Introduction:
There are rapid changes in the financial services environment, which has led to increased competition by few players and product innovations. Recent innovations in tele communications have opened up an additional channel for electronic banking.

Meaning:
Mobile banking provides customer to access their account on mobile phone screen. Routine banking transactions can be performed by just punching a few buttons on the mobile.

Banks have noticed and availed the opportunity that exists between banking and mobile telephony. SMS (short messaging services) and GSM(global

system mobile)of mobile can be used for banking transactions. The mobile banking enables the customers to bank anywhere and at any time. These wireless devices may give services as hand held PCs. Mobile devices are enabled now days to perform many activities which earlier have been available only as internet services.

Issues relating to M-Bankin

Cost saving:
SMS offers revenue opportunities for operators by changing SMS into higher value added applications. The service offerings in SMS banking are numerous and highly cost saving.

Simple to operate:
The success of M- Banking is due to its user-friendly interface and range of services it offers.

Market research: Proper understanding of specific market is key in the success of mobile banking. Research on available payment methods, user habits and key players is required to be done. Players will have to be creative to make users perceive it as beneficial.

 Services:
Global system mobile (GSM) is not just about voice communications but also supports wireless personal digital assistant and other devices just as it supports telephony. SMS tariffs should be lowered in order to capture the markets and to exploits the potential for commercial transactions over mobile device.

Many services and schemes are being piloted and some are already available. Few are mentioned here under: Balance enquiry can be made. Requesting for providing bank statement. Requesting countermanding cheque payments (stop cheque) Cheque book request can be made. Cheque clearance alerts are given to customers. Sending account balances every time one makes a withdrawal, which helps in finding out if someone else is using your ATM card.

Limitations /problems in M-Banking:

Possibility of error is higher than in internet banking. The data transmission is very slow. M-banking services are risky and not secure trials and pilots are still on World Wide Web to developed enhanced security. M-banking services are not enough versatile.

Some non-users of mobile banking perceive it to be complicated due to lack of guidance available. M Banking is not just a service reserved for international banks but for any financial institution wishing to take it. There is a great opportunity to exploit the combination of fast growing consumer device the mobile phone with the richness of internet protocols that will surpass a similar revolution imitated by pc related banking M-Banking has a lot to offer banks and to its customers, but its success depend upon of variety of services, security and user friendly interface its make it easy, cheaper it simple to use.

Telephone Banking:
Tele banking is another main service provide by e-banking Tele banking is a service where banks get various phone calls during their working hours. It helps the user to transact various transactions while remaining at home. Tele banking is a banking service offered by banks to enable customers to access their accounts for information or transactions. Cash withdrawal and deposit are not enabled through this services but many banks offer a cash delivery or collection services to certain classes of customers.

Electronic Fund Transfer (EFT):

E-Banking has given a system of electronically transferring funds .i.e. EFT which involves transfer of funds from bank account of one customer to bank account of another customer electronically. This is done through electronic data interchange (EDI).

INTERNET BANKING
Introduction:
Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.

Features:
Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific. The common features fall broadly into several categories :

Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer... and applications... apply for a loan, new account, etc.).

Electronic bill presentment and payment - EBPP.

Funds transfer between a customer's own checking and savings accounts, or to another customer's account.

Investment purchase or sale. Loan applications and transactions, such as repayments. Non-transactional (e.g., online statements, check links, cobrowsing, chat). Bank statements.

Security token devices

Protection through single password authentication, as is the case in most secure Internet shopping sites, is not considered secure enough for personal online banking applications in some countries. Basically there exist two different security methods for online banking.

The PIN/TAN system where the PIN represents a password, used for the login

and TANs representing one-time passwords to authenticate transactions. TANs can be distributed in different ways, the most popular one is to send a list of TANs to the online banking user by postal letter. The most secure way of using TANs is to generate them by need using a security token. These token generated TANs depend on the time and a unique secret, stored in the security token (this is called two-factor authentication or 2FA). Usually online banking with PIN/TAN is done via a web browser using SSL secured connections, so that there is no additional encryption needed.

Signature based online banking where all transactions are signed and

encrypted digitally. The Keys for the signature generation and encryption can be

stored on smartcards or any memory medium, depending on the concrete implementation.

Attacks
Most of the attacks on online banking used today are based on deceiving the user to steal login data and valid TANs. Two well known examples for those attacks are phishing and pharming. Cross-site scripting and keylogger/Trojan horses can also be used to steal login information. A recent FDIC Technology Incident Report, compiled from suspicious activity reports banks file quarterly, lists 536 cases of computer intrusion, with an average loss per incident of $30,000. That adds up to a nearly $16-million loss in the second quarter of 2007. Computer intrusions increased by 150 percent between the first quarter of 2007 and the second. In 80 percent of the cases, the source of the intrusion is unknown but it occurred during online banking, the report states.

Counter measures
There exist several countermeasures which try to avoid attacks. Digital certificates are used against phishing and pharming, the use of class-3 card readers is a measure to avoid manipulation of transactions by the software in signature based online banking variants.

To protect their systems against Trojan horses, users should use virus scanners and be careful with downloaded software or e-mail attachments.

INNOVATION IN BANKING BRANCHES

This chapter includes innovations in banking branches such as

Universal banking Offshore banking Retail banking Wholesale banking

UNIVERSAL BANKING
Introduction:
Universal banking is bank engaged in diverse kind of banking activities. Under the universal banking system the banks do broad based and comprehensive activities. R.H.Khan committee had recommended the concept of universal banking. As per universal banking financial institutions and banks are allowed to undertake all kinds of activities of banking, development financing and related activities subject to compliance of statutory and other requirements prescribed by RBI, Govt. and related legal acts.

Meaning:
Universal banking is a multipurpose and multi functional financial superstore providing both banking and financial services. A universal bank may undertake multifarious services under one roof, which includes: a. Receiving money on current or deposit accounts and lending of money for trade, industries, exports, agriculture etc. b. Mortgage financing; project financing infrastructure lending, asset securitisation, leasing, factory etc. c. Remittance of funds, custodial services, credit/debit cards, collection of cheque/bills etc. Corporate advisory services, insurance depository service, merchant banking (brokerage, underwriting new debt and equity shares) foreign exchange operations. Therefore in universal banking under one roof, corporate can get loans and avail, other financial services, while individuals can bank and borrow.

OBJECTIVES OF UNIVERSAL BANKING

To help in bringing harmony in the role of financial institutions and banks. To offer world-class financial services to the clients by using information technology and cross selling. To reduce per customer cost. To increase per customer revenue. To take benefit of economies of scale.

 To compete with international banks by expanding business beyond the national boundaries.

RBI Guidelines:
According to RBI guidelines of April 2001, financial institutions have an option to convert into a bank provided they ensure compliance with following provisions. Reserve provisions (CRR/SLR): A financial institution will have to comply with CRR and SLR provisions after its conversion into a universal banking. Permissible activities: In case an activity, which is not permissible for a bank under section 6(1) of B.R.Act 1949, is presently undertaken by financial institution, such activity will have to be stopped after its conversion into a universal banking. Composition of board: The section 10(A) of B.R. Act 1949 requires that at least 51% of that total number of directors should have special knowledge and experience. This provision has to be complied with constituting the board after transformation from financial institution to a bank.

Benefits of universal banking

The benefits of universal banking are as follows:

Benefits

To Organization

To Customers

To Shareholders

1.

To the organization:
When a bank diversifies its activities as a universal bank it can use

its existing expertise in one type of financial service in providing the other types. So, it entails less cost in performing all the functions by one entity instead of separate specialized bodies. A bank possesses information on the risk characteristics of its clients, which it can use to pursue other activities with the same clients. A bank has an existing network of branches, which can acts as shops for selling products like insurance. This way a big bank can reach the remotest client without having to recourse to an agent. Many financial services are interlinked activities, e.g. insurance and lending. A bank can use its instruments in one activity to exploit the other, e.g. in case of project lending to the same firm which has purchased insurance from the bank.

2.

To the customers:
Universal banking being a one-stop shops for all varied services,

some a lot of transaction costs and increases the speed of economic activity. The wide range of financial products and services offered by universal banks are preferred by the customers than the specialized banks due to comprehensive service provided by these banks.

3.

To the shareholders:
One manifestation of universal banking is a bank holding stakes in a

firm. When a lender has a stake in the firm he is in a better position to monitor the firm to safeguard his interest, which sends a good signal about the financial health the firm to the investors. This situation is beneficial from investors point of view.

DRAWBACKS
All these benefits have to be weighed out against the problems. The main

drawbacks are that:

a. Universal banking leads to a loss in economies of specialization. b. Problem of the bank indulging in too many risky activities. To account for this, appropriate regulation can be devised, which will ultimately benefit all the participants in the market, including the banks themselves. In spite of these problems, there is a lot of interest expressed by banks and financial institutions in universal banking. In India, too a lot of opportunities are there to be

exploited. Banks mainly the financial institutions are aware of it, and most of the groups have plans to diversify in big way. Even though there might not be profits forthcoming in the short run due to the switching costs incurred in moving to a new business.

OFFSHORE BANKING

Introduction:
Offshore banking refers to the banking business related to borrowing and lending funds abroad and meeting the special needs of international investors. An offshore bank is a bank located outside the resident country of the depositor. These banks are not subject to domestic monetary and fiscal regulations. Moreover offshore banks are also exempted from the regulations, which govern the branches of foreign banks. Rather they are situated in a low tax jurisdiction that provides, financial and legal advantages. These advantages may include strong privacy, low or no taxation protection against local political or financial instability. Services/functions

Functions or financial services

Deposit taking Project financing Syndication of loans Issuing short-term instruments like negotiable certificates to deposits. Carry merchant banking activities in foreign currency denominated bonds.

 Electronic funds transfer Foreign exchange Letter of credit and trade finance Investment management and investment custody Trustee services Corporate administration

Although every bank does not provide each service. Banks try to polarize between retail services (which are low cost) and private banking (which tries to bring personalized suite of services to the client).\

Benefits/Advantages of offshore banking

The main advantages of offshore banking are:
Economic and political stability: Offshore banking provides economically

politically stable jurisdictions especially for those resident in areas where there is a risk of political turmoil, and who fear their assets may be seized or disappear. Although, developed economies with regulated banking system offer same advantages in terms of stability.

 Payment of higher interest rates: Some of these banks which function at a lower cost base provide higher interest rates than the legal rates prevailing in their home countries due to lack of government intervention and lower overheads.

Tax benefits: Generally the interest paid by offshore banks is without tax deduction. This acts as a benefit for individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed.

Special banking services:

Certain offshore banks offer special banking services not offered else where such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities.

Development of remote areas/nation: offshore economies. banking helps even geographically

remote nations to generate investment and create growth in their

Disadvantages of offshore banking

There are some limitations of offshore banking are as follows:

Involved in crime:
Off shore banking has been found associated with the underground economy and organized crime through money lending. After 11 September 2001 these banks have been accused of helping various organized crime gangs, terrorist groups.

Encourages tax evasion: Offshore banks encourages tax evasion by giving people seeking tax evasion an attractive place to deposit their hidden income. Difficult physical access: As offshore banks are often remotely situated therefore the physical access is difficult. Access to information can be difficult, however in a global Tele Communication networks this does not seen to be a big problem as information can be set up

on line, by phone or by mail.

Developing countries may face financial disturbance: Sometimes developing countries may face problem due to speed at which money can be transferred in and out of their economy. This hot money coming from offshore accounts can be definitely increase problems of financial and economic disturbance in developing countries.

RETAIL BANKING
Introduction:
The coming up of middle class with substantial purchasing power in India during the last decade has given rise to its desire to spend according to the changing life style. This has offered the Indian banking system, a ready market, for mobilization and development of their funds. Given the rising purchasing power of this class, there is huge untapped potential for business.

Meaning:
Retail banking is activity devised in past few years and now used extensively. It represents any banking, which is not wholesale based. It includes any business that is conducted through branch network, which is mainly focused towards personal sector. It encompasses all institutions that provide a related range

of banking servicesmoney deposit, credit services and some form of financial advice.

Retail banking today is characterized by three areas:

Multiple products (deposits, credit cards, insurance, investment) Multiple channels of distribution (call center, branch internet) Multiple customer groups (consumer, small business)

Need for retail banking

Economic prosperity and the consequent increase in the

purchasing power of consumer. Technological factors also added to the requirement convenience of using credit cards, internet and phone banking anywhere and any time banking has also flood customers into banking. Decline in interest rates have also contributed to increase retail banking. With the large corporate borrowers having diversified the sources to fund their financial requirements, frequent reduction in cash reserve ratio resulting in pumping in of liquidity, declining bank rate leading to decline in spreads un- attractive yields on government securities etc. have all forced banks to be in search of alternative opportunity to deploy their funds.

Segments in retail banking:

There are three segments in retail banking which included: Deposit products (convenient deposit schemes such as flexi deposits) Loan products (such as housing loans, education loans, conveyance loans, personal loans for diverse purposes such as medical expenses, travel abroad) Other products

Besides there are a number of value added services such as free collection of outstation instrument, concession in service fee in case of remittances, issue of free ATM cards, waiver of fee on credit cards and utility services such as payment of water, electricity and phone bills.

Developments in retail banking in India:

Commercial banks in India are involving more and more in retail banking as it is now an attractive market segment having lot of opportunities for growth and profit. Retail banking refers to housing loans for purchasing durables, auto loans, credit cards and educational loans. The loan values can average between Rs.20000 to Rs.1 crore. These loans are of period of 5 to 7 years, with an exception of housing loan being

granted up to 15 years. The speed of growth of retail banking can be accelerated by growth in banking technology and automation of banking processes. Although the retail banking offers phenomenal opportunities for growth and profits but how far it is able to lead to growth will depend on the capacity of banks to meet these opportunities profitably. There is need for constant innovation to revalidate and upgrade existing internal systems. Banks can now use retail as growth trigger. This requires product differentiation, innovation, product pricing technological up gradation, cost reduction and cross selling.

WHOLESALE BANKING
Wholesale banking is the provision of services by banks to the like of large corporate clients, mid-sized companies, real estate developers and investors, international trade finance businesses, institutional customers (such as pension funds and government entities/agencies), and services offered to other banks or other financial institutions. In essence, wholesale banking services usually involve high value transactions. Wholesale banking contrasts with retail banking, which is the provision of banking services to individuals. Wholesale finance means financial services, which are conducted between financial services companies and institutions such as banks, insurers, fund managers, and stockbrokers.

Modern wholesale banks are engaged in finance wholesaling, underwriting, market making, consultancy, mergers and acquisitions, fund management. Various innovations of the bank provide benefits to the various business and Industries in many different ways. The innovations of bank are of two types: innovations in products & innovations in branches Innovations in products includes, E-banking, ATM, debit cards, credit cards & mobile banking whereas innovations in branches includes, universal banking, offshore banking, retail banking, wholesale banking. The project report summarizes about the facilities of CBI accounts and deposits and also provides the different products. This information is based on the primary and secondary data available from different sources.

NEW FINANCIAL PRODUCTS AND SERVICES

Merchant Banking
Only a body corporate other than a non-banking financial company shall be eligible to get registration as merchant banker. Without holding a certificate of registration granted by the Securities and Exchange Board of India, no person can act as a

merchant banker. the validity period of certificate of registration is 3 year from the date of issue.

Loan Syndication
Loan Syndication is more or less "Consortium Banking" Merchant bankers arrange to tie up loans for their clients. This takes place in a series of steps. Firstly, they analyze the pattern of the client's cash flows, based on which the terms of the borrowings can be defined. Then the merchant banker prepares a detailed loan memorandum, which is circulated to various banks and financial institutions and they are invited to participate in the

Mutual Fund

The value associated with each of these units is known as (NAV). Mutual fund issue securities known as units to the investors known as unit holders in accordance with quantum of money invested by them.

Leasing
Bank have started funding the fixed assets through leasing. It refers to the renting out of immovable property by the bank to the businessmen on a specified rent for a specific period on terms which may be mutually agreed upon. A written agreement is made in this respect. The bank have started subsidiaries to transact equipment-leasing business with the permission of RBI.

Hire purchase
Under the hire purchase system the buyer takes the possession of goods immediately and agrees to pay the total hire purchase amount in installments. Each installment is treated as hire charges. The ownership of the goods passes from the seller to the buyer on payment of all the installments. If the buyer makes any default in the payment of any installment the seller has the right to reposses the goods from the buyer and forfeit the amount already received treating it as hire charges.

Bancassurance
The concept of bancassurance is base on the availability of natural synergy between banks and insurance companies. banks and insurance companies target the same segments of population for mobilizing the peoples savings. Both banks and insurance company have a huge customer network and the supporting Infrastructure, which can be used for cross selling each others products. Both life and non-life insurance products can be marketed through banks.

Case study on Innovation in central bank of india Introduction

Established in 1911, Central Bank of India was the first Indian commercial bank, which was wholly owned and managed by Indians. The establishment of the Bank was the ultimate realisation of the dream of Sir Sorabji Pochkhanawala, founder of the Bank. Sir Pherozesha Mehta was the first Chairman of a truly 'Swadeshi Bank'. In fact, such was the extent of pride felt by Sir Sorabji Pochkhanawala that he proclaimed Central Bank as the 'property of the nation and the country's asset'. He also added that 'Central Bank lives on people's faith and regards itself as the people's own bank'. During the past 95 years of history the Bank has weathered many storms and faced many challenges. The Bank could successfully transform every threat into business opportunity and excelled over its peers in the Banking industry.

A number of innovative and unique banking activities have been launched by Central Bank of India and a brief mention of some of its pioneering services are as under: Subsequently, even after the nationalization of the Bank in the year 1969, Central Bank continued to introduce a number of innovative banking services as under:

1976 The Merchant Banking Cell was established 1980 Central card, the credit card of the Bank was
introduced.

1986 'Platinum Jubilee Money Back Deposit Scheme'

was launched. 1989 The housing subsidiary Cent Bank Home Finance Ltd. was started with its headquarters at Bhopal in Madhya Pradesh.

1994 Quick Cheque Collection Service (QCC) &

Express Service was set up to enable speedy collection of outstation cheque.

Further in line with the guidelines from Reserve Bank of India as also the Government of India, Central Bank has been playing an increasingly

active role in promoting the key thrust areas of agriculture, small scale industries as also medium and large industries. The Bank also introduced a number of Self Employment Schemes to promote employment among the educated youth. Among the Public Sector Banks, Central Bank of India can be truly described as an All India Bank, due to distribution of its large network in 27 out of 28 States as also in 4 out of 7 Union Territories in India. Central Bank of India holds a very prominent place among the Public Sector Banks on account of its network of 3194 branches and 267 extension counters at various centers throughout the length and breadth of the country In view of its large network of branches as also number of savings and other innovative services offered, the total customer base of the Bank at over 25 million account holders is one of the largest in the banking industry. Customers' confidence in Central Bank of India's wide ranging services can very well be judged from the list of major corporate clients such as ICICI, IDBI, UTI, LIC, HDFC as also almost all major corporate houses in the country.

VISION:
Our vision is to emerge as a strong, vibrant and pro-active bank and to positively contribute to emerging needs of the economy through harmonization of human, financial and technological resources and effective risk control system.

CAPITAL STRUCTURE:
The authorized Capital of Central Bank of India is 15,000 million

equity shares of Rs.10 each & 8,000 million are perpetual non-cumulative preference shares. Out of which 324,141,460 equity shares of Rs.10 issued and 80,000,000 equity shares of Rs. 10 fully paid up.

Products of central bank of india

CBI has offered a choice of various deposit schemes with unique features and facilities. These schemes suit different kinds of banking needs you might have

Money multiplier deposit certificate:

The interest accrued gets added back to the principal giving you an effective interest rate that is higher than the contracted interest rate

Khazaana deposit scheme

Khazaana deposit scheme offers you the double benefits of easy liquidity and high returns. It is also a flexible scheme that allows you to withdraw a part of the deposit amount as and when required.

Monthly interest deposit receipt

The MIDR scheme provides you with monthly interest earnings, without affecting the principal amount.

Quarterly interest deposit receipt

QIDR provides you quarterly interest without affecting the principal amount.

Centrals flexi yield deposit scheme

Under this scheme depositors can avail floating rate of interest, which is higher than the interest rate on normal term deposits

Loans
You can avail of easy and convenient loan offers for purposes ranging from housing finance to higher education to purchase of computer. Our loans enrich life and enhance lifestyles.

SERVICES
Central card
It is a unique credit card offering you innumerable facilities & convenience. It offers you the freedom to spend at a large number of member establishments.

Facilities offered by central card:

Our domestic card is accepted all over India and Nepal having more than

110000 merchant outlets.

All retail outlets, petrol pumps, Indian railways, airlines, nursing homes, hotels,

restaurants, departmental stores and grocery stores etc. now accept central card.

Mail order/telephone order, Internet transactions can also be made through

central card with prior approval/authorization from our system.

Group Accident Insurance Scheme coverage upto Rs. 1 lakh.

Central Card Electronic

Central card electronic is a new entry level credit product for the emerging, untapped market segments that previously did not have access to traditional bank card payment products.

Features:

It is designed for use only at electronic terminals. Acceptance at non-

terminalised merchants is not allowed.

Account information is printed and not embossed on the card. 24-hour customer call centers are available on India. There is zero lost card liability. Card will be replaced in seven days. You will get free accident insurance cover upto Rs. 100000/You will get free lost card insurance cover to the extent of credit limit. You will be allowed cheque encashment facility, upto Rs. 2500/- at all the

branches of CBI.

There is no fear spending over the limit, as only transactions within the

available limits would be authorized.

Cash withdrawal limit:

- Domestic card -Rs. 5000/- p.m. - Global card -Rs. 15000/- p.m.

Fees and charges:

There is no joining fee. An annual fee of Rs. 400/- is charged every year in advance. The card is issued/renewed every two years. A nominal fee of Rs. 50/- is charged for a photo card.

Debit Card
Features:

Direct online debit to your savings or current account. Completely safe and secure PIN based card. Globally accepted at merchant establishments displaying the maestro/cirrus logos.

24-hour customer call centers available in India. Zero lost card liability. Replacement card. Itemized billing on your statement/passbook.

FINDINGS
The Project work is done on basis of certain objectives, which are as follows:

To understand the various innovations in banking sector by the bank. To know about the different products of the bank. To discuss about the role of Central Bank of India in banking field. To know about the benefits of innovations of the bank. In the light of these objectives the following are the findings that represent

the changing environment of Indian economy in global scenario in the wake of liberalization and globalization. The study reveals about the different types of innovations of the bank, which helps the people in many ways.

 The role of board of directors is properly described. Processes are established in such a manner that allows the board of director to compliance with the policies of companies. The study presents the different types of products available in the bank for the help of its customers. So, these are the findings, which the project reveals by making an analysis of the topic. Moreover to making efficient central bank of India, certain suggestions have to be followed by these banks. These are as follows: Central bank of India has to provide ATM facility to its customers so that the

people can get benefit of this facility and withdraw money at any time at any place with this they would not have to face any problem regarding to money. Central bank of Indias branch network should be wider as, we have already

discussed about ATM network in each branch. Central bank of India has to improve its disclosure policies so that everyone can get easily all information regarding banking policies and other information related to bank. Indian market will provide for high growth market so bank should make strategies to grab such opportunities. Bank should open their branches in rural area