Professional Documents
Culture Documents
INDEX
Sr no.
Particulars
Introduction
Page no.
Types of bank
2.1 Central bank
2.2 Commercial Banks
a Public Sector Banks
b Private Sectors Banks
c Foreign Banks
d Development Banks
2.3.Co-operative Banks
2.4 Scheduled Banks
2.5 Non-scheduled bank in India
I Loans
II Advances
i Cash Credit
ii Overdraft
iii Discounting of Bills
3.2 Secondary functions
3.3 Online banking
3.4 Mobile Banking Services
4
Role of Banks
10
Banking reform
11
12
13
14
15
16
17
1.1Industry definition:
The Banking industry comprises of segments that provide financial assistance and advisory
services to its customers by means of varied functions such as commercial banking,
wholesale banking, personal banking, internet banking, mobile banking, credit unions,
investment banking and the like.
With years, banks are also adding services to their customers. The Indian banking industry is
passing through a phase of customers market. The customers have more choices in choosing
their banks. A competition has been established within the banks operating in India.
With stiff competition and advancement of technology, the services provided by banks have
become more easy and convenient. The past days are witness to an hour wait before
withdrawing cash from accounts or a cheque from north of the country being cleared in one
month in the south.
Banks are among the main participants of the financial system in India. Banking offers
several facilities & Opportunities. This section provides comprehensive and updated
information, guidance and assistance in all areas of banking in India.
Bank of Hindustan, set up in 1870, was the earliest Indian Bank . Banking in India on modern
lines started with the establishment of three presidency banks under Presidency Bank's act
1876 i.e. Bank of Calcutta, Bank of Bombay and Bank of Madras.
The commercial banking structure in India consists of: Scheduled Commercial Banks &
Unscheduled Banks. Banking Regulation Act of India, 1949 defines Banking as "accepting,
for the purpose of lending or investment of deposits of money from the public, repayable on
demand or otherwise and withdrawable by cheques, draft, order or otherwise."
The arrival of foreign and private banks with their superior state-of-the-art technology-based
services pushed Indian Banks also to follow suit by going in for the latest technologies so as
to meet the threat of competition and retain customer base.
The evolution of IT services outsourcing in the Indian banks has presently moved on to the
level of Facilities Management (FM). Banks now looking at business process management
(BPM) to increase returns on investment, improve customer relationship management (CRM)
and employee productivity.
For, these entities sustaining long-term customer relationship management (CRM) has
become a challenge with almost everyone in the market with similar products
Industry Segments:
Public Sector Banks:
Almost 80% of the business is still controlled by Public Sector Banks (PSBs). PSBs are still
dominating the commercial banking system. Shares of the leading PSBs are already listed on
the stock exchanges.
The PSBs will play an important role in the industry due to its number of branches and
foreign banks facing the constraint of limited number of branches. Hence, in order to achieve
an efficient banking system, the onus is on the Government to encourage the PSBs to be run
on professional lines.
Private Sector Banks:
The RBI has given licenses to new private sector banks as part of the liberalization process.
The RBI has also been granting licenses to industrial houses. Many banks are successfully
running in the retail and consumer segments but are yet to deliver services to industrial
finance, retail trade, small business and agricultural finance.
Foreign banks:
Foreign banks have been operating in India for decades with a few of them having operations
in India for over a century. The number of foreign bank branches in India has increased
significantly in recent years since RBI issued a number of licenses - well beyond the
commitments made to the World Trade Organization. The presence of foreign banks in India
has benefited the financial system by enhancing competition, resulting in higher efficiency.
There has also been transfer of technology and specialized skills which has had some
"demonstration effect" as Indian banks too have upgraded their skills, improved their scale of
operations and diversified into other activities. At a time when access to foreign currency
funds was a constraint for the Indian companies, the presence of foreign banks in India
enabled large Indian companies to access foreign currency resources from the overseas
branches of these banks. Also with the presence of foreign banks, as borrowers in the money
market and their operation in the foreign exchange market has resulted in the creation and
deepening of the inter-bank money market. Now, it is the challenge for the supervisors to
maximize the advantages and minimize the disadvantages of the foreign banks' local
presence.
2. A corporation empowered to deal with cash, domestic and foreign, and to receive the
deposits of money and to loan those monies to third-parties.
3. In 1899, the United States Supreme Court (Austen) used these words to define a bank:
"A bank is an institution, usually incorporated with power to issue its promissory notes
intended to circulate as money (known as bank notes); or to receive the money of others on
general deposit, to form a joint fund that shall be used by the institution, for its own benefit,
for one or more of the purposes of making temporary loans and discounts; of dealing in notes,
foreign and domestic bills of exchange, coin, bullion, credits, and the remission of money; or
with both these powers, and with the privileges, in addition to these basic powers, of
receiving special deposits and making collections for the holders of negotiable paper, if the
institution sees fit to engage in such business."
4. An establishment authorized by a government to accept deposits, pay interest, clear checks,
make loans, act as an intermediary in financial transactions, and provide other financial
services to its customers.
5. Bank is a lawful organization, which accepts deposits that can be withdrawn on
Demand. It also lends money to individuals and business houses that need it.
1.4Banking definition
In general terms, the business activity of accepting and safeguarding money owned by other
individuals and entities, and then lending out this money in order to earn a profit.
Banking as an activity involves
Acceptance of deposits and lending or investment of money. It facilitates business activities
by Providing money and certain services that help in exchange of goods and services.
Therefore,Banking is an important auxiliary to trade. It not only provides money for the
production of Goods and services but also facilitates their exchange between the buyer and
seller.
2 Types of bank
There are various types of banks which operate in our country to meet the financial
requirements Of different categories of people engaged in agriculture, business, profession,
etc. On the basis of Functions, the banking institutions in India may be divided into the
following types:
2.1 Central bank
A central bank, reserve bank, or monetary authority is a public
institution that manages the nation's currency, money supply, and interest rates. Central banks
also usually oversee the commercial banking system of their respective countries. In contrast
to a commercial bank, a central bank possesses a monopoly on increasing the nation's
monetary base, and usually also prints the national currency, which usually serves as the
nation's legal tender.[1][2] Examples include the European Central Bank (ECB), the Federal
Reserve of the United States, and the People's Bank of China.[3]
The primary function of a central bank is to manage the nation's money supply (monetary
policy), through active duties such as managing interest rates, setting the reserve requirement,
and acting as a lender of last resort to the banking sector during times of bank insolvency or
financial crisis. Central banks usually also have supervisory powers, intended to prevent
commercial banks and other financial institutions from reckless or fraudulent behavior.
Central banks in most developed nations are institutionally designed to be independent from
political interference.
Types of Commercial banks: Commercial banks are of three types i.e., Public sector banks,
Private sector banks and foreign banks.
(i) Public Sector Banks: These are banks where majority stake is held by the Government of
India or Reserve Bank of India. Examples of public sector banks are: State Bank of India,
Nationalized banks
Name
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab & Sind Bank
Punjab National Bank
State Bank of India
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
IDBI Bank
Dhanlaxmi Bank
Nainital Bank
(ii) Private Sectors Banks: In case of private sector banks majority of share capital of the
Bank is held by private individuals. These banks are registered as companies with limited
Liability. For example: The Jammu and Kashmir Bank Ltd., Bank of Rajasthan Ltd.,
Development Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat Overseas Bank Ltd.,Global
Trust Bank, Vysya Bank, etc.
(iii) Foreign Banks: These banks are registered and have their headquarters in a foreign
country but operate their branches in our country. Some of the foreign banks operating in our
country are Hong Kong and Shanghai Banking Corporation (HSBC), Citibank, American
Express Bank, Standard & Chartered Bank, Grindlays Bank, etc. The number of foreign
banks operating in our country has increased since the financial sector reforms of 1991.
Foreign banks operating in India
Bank of America NA
Bank of Ceylon
BNP Paribas
Calyon Bank
Citibank N.A.
DBS Bank
Deutsche Bank AG
HSBC
Shinhan Bank
SCOTIA BANK
Socit Gnrale
Sonali Bank
UBS
VTB [1]
(i) Primary Credit Societies: These are formed at the village or town level with borrower
and non-borrower members residing in one locality. The operations of each society are
restricted to a small area so that the members know each other and are able to watch over the
activities of all members to prevent frauds.
(ii) Central Co-operative Banks: These banks operate at the district level having some of
the primary credit societies belonging to the same district as their members. These banks
provide loans to their members (i.e., primary credit societies) and function as a link between
the primary credit societies and state co-operative banks.
(iii) State Co-operative Banks: These are the apex (highest level) co-operative banks in all
The states of the country. They mobilize funds and help in its proper channelization among
Various sectors. The money reaches the individual borrowers from the state co-operative
Banks through the central co-operative banks and the primary credit societies
2.4Scheduled Banks
Scheduled Banks in India are those banks which have been included in the
Second Schedule of Reserve Bank of India (RBI) Act, 1934.[1] RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the
Act.
a) Accepting deposits
The most important activity of a commercial bank is to mobilise deposits from the public.
People who have surplus income and savings find it convenient to deposit the amounts with
banks. Depending upon the nature of deposits, funds deposited with bank also earn interest.
Thus, deposits with the bank grow along with the interest earned. If the rate of interest is
higher, public are motivated to deposit more funds with the bank. There is also safety of
funds deposited with
the bank.
Types of Bank Accounts For Accepting deposits
Though, the types of accounts offered can vary from bank to bank, here are
some of the common bank accounts offered by commercial banks.
restriction on the number of withdrawals and the amount of money withdrawn. Customers are
generally given paper checks to carry out day-to-day transactions, like paying bills, making
purchases, or transferring money to another account. ATM (Automated Teller Machine)
facility is also provided to the customers. However, no interest is paid on the deposited
money and sometimes, customers have to pay a charge to the banks for rendering this service.
This type of account is generally maintained by businessmen or concerns, as they have to
make a number of financial transactions each day. A transactional account is sometimes
called a demand deposit account, as no notice is required to withdraw money, i.e. money is
available on demand.
Savings Account
Savings accounts are aimed towards mobilizing small savings from the general
public. There are certain restrictions regarding the number of withdrawals and the amount to
be withdrawn in a particular time period. However, money deposited in this account, earns a
fair rate of interest. Though the customers can't withdraw their money with checks, they can
avail the ATM facility for the same. A passbook is also provided, which keeps track of all the
financial transactions.
A certificate of deposit is also known as time deposit or fixed deposit account. This type of
bank account requires the customers to deposit a certain sum of money for a fixed time
period. The money deposited in this account can't be withdrawn before the date of maturity.
However, some banks allow customers to withdraw money before maturity, by charging a
penalty. The rate of interest paid on time deposits is usually higher than the other types of
bank accounts. In addition to this, the interest paid on this account depends on the maturity
period, i.e. longer the maturity period, the higher is the rate of interest paid.
Banking institutions offer several different types of bank accounts to satisfy the individual
needs of their customers. These bank accounts enable the public to deposit their money in
banks and thereby earn a monetary return.
The Recurring deposit
The Recurring deposit account is an account in the bank (or a Post office in some
countries) where an investor deposits a fixed amount of money every month for a fixed
tenure (mostly ranging from one year to five years). This scheme is meant for investors who
want to deposit a fixed amount every month, in order to get a lump sum after some years. The
small monthly savings in the Recurring Deposit scheme enable the depositor to accumulate a
handsome amount on maturity. Interest at term deposit rates is computable on quarterly
compounded basis.
i)
Loans
A loan is granted for a specific time period. Generally commercial banks
provide short-term loans. But term loans, i.e., loans for more than a year
may also be granted. The borrower may be given the entire amount in
Advances
An advance is a credit facility provided by the bank to its customers. It
differs from loan in the sense that loans may be granted for longer period, but
advances are normally granted for a short period of time. Further the purpose
of granting advances is to meet the day-to-day requirements of business. The
rate of interest charged on advances varies from bank to bank. Interest is
charged only on the amount withdrawn and not on the sanctioned amount.
o Types of Advances
Banks grant short-term financial assistance by way of cash credit, overdraft and bill
discounting.
Let us learn about these.
a) Cash Credit
Cash credit is an arrangement whereby the bank allows the borrower to draw amount
up to a specified limit. The amount is credited to the account of the customer. The customer
can withdraw this amount as and when he requires. Interest is charged on the amount actually
withdrawn. Cash Credit is granted as per terms and conditions agreed with the customers.
b) Overdraft
Overdraft is also a credit facility granted by bank. A customer who has a current
account with the bank is allowed to withdraw more than the amount of credit balance in his
account. It is a temporary arrangement. Overdraft facility with a specified limit may be
allowed either on the security of assets, or on personal security, or both.
c) Discounting of Bills
Banks provide short-term finance by discounting bills, that is, making payment of
the amount before the due date of the bills after deducting a certain rate of discount. The
party gets the funds without waiting for the date of maturity of the bills. In case any bill is
dishonored on the due date, the bank can recover the amount from the customer.
providing
3.3
Online banking
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.
E-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
Funds transfers between a customer's own transactional account and savings accounts
Personal financial management support, such as importing data into personal accounting
software. Some online banking platforms support account aggregation to allow the
customers to monitor all of their accounts in one place whether they are with their main
bank or with other institutions
Account Information
o Mini-statements and checking of account history
o Alerts on account activity or passing of set thresholds
o Monitoring of term deposits
o Access to loan statements
o Access to card statements
o Mutual funds / equity statements
Investments
o Portfolio management services
o Real-time stock quotes
o Personalized alerts and notifications on security prices
Support
Headquarters
Established
1 April 1935
Governor
Central bank of
Currency
Duvvuri Subbarao
India
Indian rupee
Reserves
8.50%
6.00%
Website
http://www.rbi.org.in
Structure
Monetary Authority:
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.
Objective: to facilitate external trade and payment and promote orderly development
and maintenance of foreign exchange market in India.
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.
Banker's Bank:
RBI acts as a banker for all the commercial banks. All scheduled banks come under
the direct control of RBI. All commercial as well as schedule bank has to keep a minimum
reserve with the RBI. They have to submit weekly reports to RBI about their transactions. By
performing 3 functions, the RBI helps the member banks significantly. They are given below
such as:
(a) It acts as the lender of the last resort.
(b) It is the custodian of cash reserves of commercial banks.
(c) It clears, transfers the transaction. It acts as the central clearing house.
Credit control:
The central bank uses the quantitative and qualitative tools to control credit. It
is one of the principal functions of RBI. It helps the bank to ensure exchange rate stability
and price stability. In quantitative credit control, the volume of credit is controlled and in
qualitative credit control, the direction of credit is regulated. Bank rate, open market
operations and cash reserve ratio are used under the quantitative method. In selective credit
control, the weapons used are variation in margin requirements, moral suasion, rationing of
credit, issue of directives etc. At present selective control has been given much importance
and it is more suitable for India.
Monetary policy
Monetary policy is the process by which the monetary authority of a country
controls the supply of money, often targeting a rate of interest for the purpose of promoting
economic growth and stability.[1] [2] The official goals usually include relatively stable prices
and low unemployment. Monetary theory provides insight into how to craft optimal monetary
policy. It is referred to as either being expansionary or contractionary, where an expansionary
policy increases the total supply of money in the economy more rapidly than usual, and
contractionary policy expands the money supply more slowly than usual or even shrinks it.
Expansionary policy is traditionally used to try to combat unemployment in a recession by
lowering interest rates in the hope that easy credit will entice businesses into expanding.
Contractionary policy is intended to slow inflation in hopes of avoiding the resulting
distortions and deterioration of asset values.
Monetary policy differs from fiscal policy, which refers to taxation, government spending,
and associated borrowing
Aims of Monetary policy
Financial stability
Instruments
Operation of Monetary
Policy
1. Discount Rate
(Bank Rate)
2.Reserve Ratios
3. Open Market
Operations
Operating
Target
Monetary Base
Bank Credit
Interest Rates
Intermediate
Target
Monetary
Aggregates(M3)
Long term
interest rates
Ultimate
Goals
Total Spending
Price Stability
Etc.
Repo Rate
Bank rate
Market Intervention
Cash Reserve ratio: 8.25% of demand and time deposits (w.e.f. 24.05.2008)
Just as additional cash inflows enable the banking system to create credit, any
increase in CRR will require the banking system to contract credit by a large amount.
Repo rate:
Repo rate or repurchase rate is a swap deal involving the immediate
sale of securities and simultaneous purchase of those securities at a future date, at a
designated price. It could also be an overnight deal with sale taking place on day one
and repurchase on day two. The repurchase price is adjusted for the interest payable
for the use of funds for the period of contract. Reverse repo involves the immediate
purchase and future sale of those same securities. RBI uses repo and reverse repo to
control liquidity on a day-to-day basis.
Bank rate:
RBI provides refinance to banks against funds deployed by banks in
specified sectors such as export finance portfolio of the banks. In the past, the bank
rate used to be the primary interest rate tool of RBI. But over a period of time the repo
rate has presently emerged as the primary interest rate tool and bank rate has lost
much of its relevance. Changes in the bank rate are a signal to the market regarding
the direction in which the RBI would like interest rates to move.
Market intervention:
Large balance of payment surpluses and build up of Forex reserves
are bound to strengthen the rupee in the exchange market. This market force cannot
be counted by RBI for long periods of time. However, by intervening in the market by
offering to buy any amount of foreign currency at a particular rate, RBI can prevent
the sudden strengthening of rupee. RBI seeks to smoothen the movement of rates in
either direction so than importers and exporters have time to adjust to the changing
exchange rate scenario and are not caught by surprise by violent rate movements,
which could cripple them.
Policy rates, Reserve ratios, lending, and deposit rates as of 14 September, 2011
Bank Rate
Repo Rate
Base Rate
Deposit Rate
6.0%
8.25%
7.25%
6.0%
24.0%
9.50%10.75%
4%
8.50%9.50%
5 Role of Banks
A proper financial sector is of special importance for the economic growth of
developing and underdeveloped countries. The commercial banking sector which forms one
of the backbones of the financial sector should be well organized and efficient for the growth
dynamics of a growing economy. No underdeveloped country can progress without first
setting up a sound system of commercial banking. The importance of a sound system of
commercial banking for a developing country may be depicted as follows :
1 Capital Formation
The rate of saving is generally low in an underdeveloped economy due tothe
existence of deep-rooted poverty among the people . Even the potential savings of thecountry
cannot be realized due to lack of adequate banking facilities in the country . To
mobilizedormant savings and to make them available to the entrepreneurs for productive
purposes , thedevelopment of a sound system of commercial banking is essential for a
developing economy .
2 Monetization
An underdeveloped economy is characterized by the existence of a large
nonmonetized sector , particularly , in the backward and inaccessible areas of the country .
Theexistence of this non monetized sector is a hindrance in the economic development of
thecountry . The banks , by opening branches in rural and backward areas , can promote the
processof monetization in the economy .
3 Innovations
Innovations
are
an
essential
prerequisite
for
economic
progress
Theseinnovations are mostly financed by bank credit in the developed countries . But the
entrepreneursin underdeveloped countries cannot bring about these innovations for lack of
bank credit in anadequate measure . The banks should , therefore , pay special attention to the
financing of business innovations by providing adequate and cheap credit to entrepreneurs
on account of the risks involved there in . They mostly extend credit to trade and commerce
where the risk involved is far less .But for the development of these countries it inessential
that the banks take risk in extending credit facilities to the priority sectors, such as agriculture
and small scale industries.
The high GDP growth in India is creating lots of job opportunities in urban and semi-urban
India and it will go further into rural India increasing the potential for rural
entrepreneurships and rural growth with higher per-capita income and savings opportunities.
Investment in Indian market
India, among the European investors, is believed to be a good investment despite political
uncertainty, bureaucratic hassles, shortages of power and infrastructural deficiencies. India
presents a vast potential for overseas investment and is actively encouraging the entrance of
foreign players into the market. No companies, of any size, aspiring to be a global player can,
for long ignore this country which is expected to become one of the top three emerging
economies.
Market potential:
India is the fifth largest economy in the world (ranking above France, Italy, the United
Kingdom, and Russia) and has the third largest GDP in the entire continent of Asia. It is also
the second largest among emerging nations. (These indicators are based on purchasing power
parity.) India is also one of the few markets in the world which offers high prospects for
growth and earning potential in practically all areas of business. Yet, despite the practically
unlimited possibilities in India for overseas businesses, the world's most populous democracy
has, until fairly recently, failed to get the kind of enthusiastic attention generated by other
emerging economies such as China.
Financial markets
Regulators
Mutual funds
Consolidation imperative
8 . India's GDP Growth to make the Indian Banking Industry third largest
in the World by 2025
A study titled Being five star in productivity road map for excellence in
Indian banking was released FICCI-IBA-BCG on 22 August 2011, the eve of IBA-FICCI
annual banking conference. The theme for the banking conference was decided to be
Productivity Excellence.
According to the study, India's gross domestic product (GDP) growth will make
the Indian banking industry third largest in the world by 2025. The report chalked out an
action agenda for banks, based on insights from an extensive productivity benchmarking
exercise conducted across 40 banks.
The report highlighted that banks have to strive for excellence on five
dimensions: branch sales and service, new channels, lean operations, organisation design and
bad debt management.
The report stated that branches of banks can generate higher levels of revenue for
the banks. Indian banks deploy 62 per cent of staff in customer facing roles as against the
benchmark of 82 per cent observed by BCG globally.
Break-out growth in usage of new channels will characterise the next decade in
Indian banking. Among the new channels, mobile phones, propelled by 3G and smart phone
technology, will emerge as an undisputed winner by 2020 accounting for 20-30 per cent of
total transactions. ATMs have seen exponential growth in usage but are far from maturity
with just about 50 per cent adoption even in metros. New channels will not only enhance the
productivity but can be a source of new customer acquisition.Indian banks, the report
mentioned were to be doing well overall with industry cost-income ratio below 50 per cent.
However, there remained plenty of scope for betterment. On an average, Indian
banks have about 20 per cent of staff deployed in back-office processing (for some banks, as
high as 40 per cent) as against a global best of 10 per cent observed by BCG. Process reengineering and operating model change if employed could help reduce costs, improve
service, and contain operating risks.
Public sector banks were found to be under-investing in technology with spends at
about 25 per cent of global benchmarks. An Indian banks average administrative overhead at
about 11 per cent of the total staff is in line with what BCG has observed globally.
The banking industry was holding low headcount in HR and finance roles.
Variable pay at 2 per cent of fixed compensation is far below the 12-15 per cent that is
optimal for incentive compensation. The public sector as per the report urgently needed an
adjustment in its compensation structure. The industry has an impressive bad debt
performance and the bad debt levels in priority sectors of MSME and agriculture are
significantly
high.
The report suggested major overhaul of NPA management processes at banks. Some banks
have alarmingly high NPA levels in relatively safe products such as home loans.
The report stressed on a whole new paradigm for risk management encompassing
operating model, technology, experience and expertise retention, and minimum critical size
of book.
Majority
Asset Size
Shareholding
(in$bllions)
Government
314
36.6
ICICI Bank
Private
81
25.6
Government
66
7.6
Mumbai
Bank of Baroda
Government
62
7.3
Mumbai
Bank of India
Government
61
5.1
Mumbai
Canara Bank
Government
59
5.5
Mumbai
IDBI Bank
Government
52
2.9
Mumbai
HDFC Bank
Private
49
22.2
Mumbai
Government
43
3.7
Mumbai
Private
40
11.6
Bank
Punjab
National
Bank
Union
Bank
India
Axis Bank
of
Capitalization (in
$ Billions)
Stock
Listing
Mumbai,
London
Mumbai,
New York
Mumbai,
London
Indian banking has come a long way since India embarked on the reforms path about a
decade-and-a-half ago in 1991-92. The reforms have unleashed tremendous change in the
banking sector. Today, Indian banks are as technology-savvy as their counterparts in
developed countries. On the networking front, branch banking the traditional forte, coupled
with ATM networks-the now imperative, have evolved to place the banking services on a
new trajectory. The competitive forces have led to the emergence of Internet and mobile
banking too, to let banks attract and retain customers.
The banking sector is also gearing up to embrace the Basel II regime, to benchmark with the
global standards. Similarly, retail lending has emerged as another major opportunity for
banks. All these factors are driving up competition, which in turn forcing banks to innovate.
A slew of innovative products, which could not be imagined even a couple of years ago, are a
reality now. Even mundane products like Saving Account, Personal Loans and Home Loans
have become subjects of innovation.
1.First Banking Sector Reforms (1991)
The Narasimham Committee had proposed wide-ranging reforms for:
1. Improving the financial viability of the banks;
2. Improving the macroeconomic policy framework for banks;
3. Increasing their autonomy from government directions;
4. Allowing a greater entry to the private sector in banking;
5. Liberalizing the capital markets;
6. Improvement in the financial health and competitive position of the banks;
7. Furthering operational flexibility and competition among the financial institutions.
A number of reforms initiatives have been taken to remove or minimize the distortions
impinging upon the efficient and profitable functioning of banks. These include the
followings:
1. Reduction in SLR & CRR
2. Transparent guidelines or norms for entry and exit of private sector banks
3. Public sector banks have been allowed for direct access to capital markets
4. The regulated interest rates have been rationalized and simplified.
5. Branch licensing policy has been liberalized
6. A board for Financial Bank Supervision has been established to strengthen the supervisory
system of the RBI.
These and other measures that have been taken would help the highly regulated and directed
banking system to transform itself into one characterized by openness, competition,
prudential and supervisory discipline. They will also make the new challenges particularly
the growing demands from customers for high quality 56 services. The objective of this is to
study, describe and analyze the impact of banking sector reforms on the performance of
commercial banks. On the basis of the impact of these reforms, to suggest third new modified
reforms in the changing scenario.
2. Second Banking Sector Reforms (1998)
By mid-1997, the RBI reported that the reform process had started yielding results. But as
observed by the NC in its second report, the improvement has arrested the deterioration of the
system earlier but there is still a considerable distance to traverse. There has been
improvement in several of the quantitative indices but there are many areas in which
weaknesses still persist. These include customer service, technological up gradation,
improvement in house keeping in terms of reconciliation of entries and balancing of books.
The second report was submitted on 23rd April, 1998, which sets the pace for the second
generation of banking sector reforms. These include:
1. Merge strong banks, close weak banks unviable ones
2. Two or three banks with international orientation, 8 to 10 national banks and a large
number of local banks
3. Increase Capital Adequacy to match enhanced banking risk
4. Rationalize branches and staff, review recruitment
5. De-politicize Bank Boards under RBI supervision
6. Integrate NBFCs activities with banks.
But many cities saw no purpose in setting up the second NC on banking sector reforms within
six years and before the full implementation of the recommendations of the first report of
1991. Strictly speaking, there were no new recommendations made in the second report
except two on:
1. Merger of strong units of banks
2. Adaptation of the narrow banking concept to rehabilitate the weak banks.
Various reform measures introduced in India have indeed strengthened the Indian banking
system in preparation for the global challenges ahead.
Some of the reforms introduced and their impact on banks and furnished in the table (Indian
banking on the reforms path)
After the brief introduction of theme, section II fixes the objectives, hypotheses and
methodology along with the database. Section III reviews the related studies and section IV
highlights the major issues faced by Indian banking sector. Section V analyses the results and
discussions whereas section VII exhibits the future agenda for the third reforms and
concludes the paper.
Banking in India began in the year 1786 with the establishment of the General Bank
of India and later Bank of Hindustan came into existence. However, these two banks
are not currently functioning in India.
At present, the oldest bank in India position is held by the State Bank of India, which
came into existence in the year 1806. Now, not only public sector banks, but a number
of private sector banks are also functioning in India. The list of leader in the banking
sector is given below:
HDFC Bank
Axis Bank
Bank of India
Bank of Baroda
Citibank
Canara Bank
HDFC Bank
ICICI Bank
Axis Bank
Yes Bank
IndusInd Bank
Dhanalakshmi Bank
Federal Bank
1.
2.
3.
Syndicate Bank --
4.
Federal Bank --
5.
6.
HDFC --
7. Bank Of Baroda --
8.
Yes Bank --
9. Allahabad Bank --
A tradition of trust
12.
Dena Bank --
Banking for all; not just for Big boys; "Aao Sochein Bada"
15. Canara Bank -- it's easy to change for those who you love; Together we can do...
Serving to Empower
Together we Prosper
23. SBI Bank - Nations banks on us; Pure Banking Nothing Else; With you all the
way.
Shiv Kumar,MD
M Bhagavantha Rao,MD
Dilip Mavinkurve,MD
Ashok Nayar,MD
P. Nanda Kumaran,MD
Nationalised Banks
Allahabad Bank
J. P. Dua,CMD
Andhra Bank
R. Ramchandran,CMD
Bank of Baroda
M D. Mallya,CMD
Bank of India
Bank of Maharashtra
Canara Bank
S Raman,CMD
M.V.Tanksale,CMD
Corporation Bank
Ajai Kumar,CMD
Dena Bank
R. M. Malla,CMD
Indian Bank
T. M. Bhasin,CMD
M.Narendra,CMD
Nagesh Pydah,CMD
K. R. Kamath,CMD
Syndicate Bank
Basant Seth,CMD
UCO Bank
Arun Kaul,CMD
M. V. Nair,CMD
Bhaskar Sen,CMD
Vijaya Bank
Private Banks
Axis Bank
Balasubramanian S,
Dhanalakshmi Bank
Federal Bank
HDFC Bank
ICICI Bank
Indusind Bank
Karnataka Bank
Uday Kotak , MD
P.R. Somasundaram, MD
Nainital Bank
Ratnakar Bank
HSBC Bank
Nainital bank
CLERICAL: This level entails the maintenance of the account books and the
documents, and attend to customers at the counter.
MANAGERIAL :The duties include organizing, controlling and supervising Bank Job
Openings India activities and holding overall charge of one or more departments or
branches.
Credit and Risk- analyzing loans and deciding whether to approve them.
Chief executives
Financial managers
Management analysts
Credit analysts
Financial analysts
Loan counselors
Loan officers
Computer programmers
financial
Tellers
The international recruiters are very particular when it comes to qualifications. The candidate
needs to be a graduate from a wide range of degree subjects. For specialist roles within a
bank, a candidate could be a graduate in the following disciplines:
Economics
Business studies
Financial services
Computing.