Professional Documents
Culture Documents
Project
on
Commercial Bank In India
SUBMITTED BY
Tejas Makwana
Roll No : 51
T.Y.B.B.I. SEMESTER - V
PROJECT GUIDE
PROF. ARCHANA MAINKAR
SUBMITTED TO
UNIVERSITY OF MUMBAI
RAJASTHANI SAMMELAN'S
Ghanshyamdas Saraf College
of Arts & Commerce
Affiliated to University of Mumbai
Reaccredited by NAAC with 'A' Grade
S.V. Road, Malad (West)
Mumbai - 400064
A.Y. 2016 - 17
1
A
Project
on
Commercial Bank in India
SUBMITTED BY
Tejas Makwana
Roll No : 51
T.Y.B.B.I. SEMESTER - V
PROJECT GUIDE
PROF. ARCHANA MAINKAR
SUBMITTED TO
UNIVERSITY OF MUMBAI
RAJASTHANI SAMMELAN'S
Ghanshyamdas Saraf College
of Arts & Commerce
Affiliated to University of Mumbai
Reaccredited by NAAC with 'A' Grade
S.V. Road, Malad (West)
Mumbai - 400064
A.Y. 2016 - 17
2
RAJASTHANI SAMMELAN'S
Ghanshyamdas Saraf College
of Arts & Commerce
Affiliated to University of Mumbai
Reaccredited by NAAC with 'A' Grade
S.V. Road, Malad (West)
Mumbai - 400064
A.Y. 2016 - 17
CERTIFICATE
This is to certify that Mr. Tejas Makwana Roll no : 51 of Third Year
B.com (Banking & Insurance)
Semester
has
Successfully
Project
Guide
Principal :
Date :
External Examiner :
College
Seal :
Date :
DECLARATION
I, Tejas Makwana a Student of Ghanshyamdas Saraf College
of Arts & Commerce, Malad (West) T.Y.B.Com (Banking &
Insurance)
Date
Signature of Student :
ACKNOWLEDGEMENT
To list who all have helped me in difficult because they are so
numerous and the depth is so enormous.
would
like
to
acknowledge
the
following
as being
idealistic
of Mumbai for
would
like
to
thank
my
Principle
Dr.
Sujata
Karmakar
for
Project
Guide
to express
Prof.
my
sincere
Archana Mainkar
gratitude
who's
towards
guidance
and
my
care
INDEX
CHAPT
ER
1
PARTICULARS
PAG
E
NO.
COMMERCIAL BANK
9
2.1 INTRODUCTION
11
ADVANTAGES
&
DISADVANTAGES
OF
11
COMMERCIAL BANKING
2.4 FUNCTIONS OF COMMERCIAL BANKS
2.5 CREATION OF CREDIT
2.6 SERVICES OFFERED BY COMMERCIAL BANKS
2.7 POLICIES OFFERED BY COMMERCIAL BANKS
14
25
29
33
STATISTICAL DATA
3.1 Movement in assets, credit and deposit
38
liabilities
3.4 Maturity profile of select liabilities / assets of
40
41
42
the SCBs
3.5
39
expenditure
CASE STUDIES
4.1 HISTORY OF ICICI BANK
44
45
BANK
46
48
53
54
4.6 BIBIOLIOGRAPHY
54
4.7 REFRENCE
that have capital deficits to customers with capital surpluses. The term
bank is derived from the French word Bunco which means a Bench or
Money exchange table. In olden days, European money lenders or
money changers used to display (show) coins of different countries in
big heaps (quantity) on benches or tables for the purpose of lending or
exchanging.
Dealing in Money:
Acceptance of Deposit:
A bank accepts money from the people in the form of deposits which
are usually repayable on demand or after the expiry of a fixed period. It
gives safety to the deposits of its customers. It also acts as a custodian
of funds of its customers.
Giving Advances:
A bank lends out money in the form of loans to those who require it for
different purposes.
Connecting Link:
10
A bank acts as a
connecting
between
borrowers
Saving
Banks
link
and
Consumers
Banks
Commercial
Banks
lenders of money.
Banks
collect
money
from
Industrial
Banks /
Developmen
t Banks
Exchange
Banks
money
give
same
to
the
Cooperative
Banks
those
Land
Developmen
t Banks
Central /
Federal /
National
Bank
Indigenous
Banks
Banking Business:
Name Identity:
A bank should always add the word "bank" to its name to enable
people to know that it is a bank and that it is dealing in money.
11
Central
Bank
Export Import Bank
Commercial
Banks
Developmen
t Banks
Saving
Banks
Rural
Banking
Cooperative
Banks
Indigenous
Bankers
Specialized
Banks
12
4. Co-operative Banks
The main business of co-operative banks is to provide finance to
agriculture. They aim at developing a system of credit. Agriculture
finance is a special field. The co-operative banks play a useful role in
providing cheap exit facilities to the farmers.
In India there are three wings of co-operative credit system namely
(i)
(ii)
(iii)
(iv)
Short term,
Medium-term,
Long term credit.
The former has a three tier structure consisting of state
5. Specialized Banks
These banks are established and controlled under the special act of
parliament. These banks have got the special status. One of the major
bank is National Bank for Agricultural and Rural development
(NABARD) established in 1982, as an apex institution in the field of
agricultural and other economic activities in rural areas. In 1990 a
special bank named small industries development Bank of India (SIDBI)
was established. It was the subsidiary of Industrial development Bank
of India. This bank was established for providing loan facilities,
discounting and rediscounting of bills, direct assistance and leasing
facility.
6. Indigenous Bankers
That unorganized unit which provides productive, unproductive, long
term, medium term and short term loan at the higher interest rate are
known as indigenous bankers. These banks can be found everywhere
in cities, towns, mandis and villages.
14
7. Rural Banking
A set of financial institution engaged in financing of rural sector is
termed as Rural Banking. the policy of financing of these banks has
been designed in such a way so that these institution can play catalyst
role in the process of rural development.
8. Saving Banks
These banks perform the useful services of collecting small savings
commercial banks also run saving bank to mobilize the savings of
men of small means. Different countries have different types of savings
bank viz. Mutual savings bank, Post office saving, commercial saving
banks etc.
9. Export - Import Bank
These banks have been established for the purpose of financing
foreign trade. They concentrate their working on medium and longterm financing. The Export-Import Bank of India (EXIM Bank) was
established on January 1, 1982 as a statutory corporation wholly
owned by the central government.
10. Foreign Exchange Banks
These banks finance mostly to the foreign trade of a country. Their
main function is to discount, accept and collect foreign bulls of
exchange. They also buy and self-foreign currencies and help
businessmen to convert their money into any foreign currency they
need. Over a dozen foreign exchange banks branches are working in
India have their head offices in foreign countries.
15
18
DISADVANTAGES :
The Following are the Disadvantages of Commercial Banks in India:
LOAN APPROVALS :
One disadvantage of using a large, commercial bank can easily be
seen if you're trying to get a loan. Unlike a local bank, or a relatively
small bank, a larger, commercial bank will have to put a loan through
several different departments. Beyond that, you may have to have
dozens of people sign off on a single loan. This can lead to many more
people getting involved in saying yes or no to your loan, and it may
lead to a lot more negotiation than you were hoping to conduct. This is
especially true for a simple, relatively straightforward home or
business loan.
RIGID STANDARDS :
Another downside of using commercial banks is that they have very
rigid standards more often than not. All banks have to follow the
financial laws put forth by the U.S. government, but commercial banks
may treat their own, additional rules as if they're set in stone. Again,
this is most often seen in the loan process. Commercial banks, due to
their size and the sheer volume of the market that they command, are
20
SECURITY :
One of the biggest concerns that a person has with their bank is
whether or not their money is insured. If you put $10,000 in a savings
account, you want to be sure that money will be available, regardless
of what expenses your bank has to deal with. This is why the U.S.
government created FDIC insurance, which insures up to $100,000
worth of money (though it's more than $200,000 until 2013) per
depositor so that those depositors can have faith in the bank.
PRIMARY FUNCTIONS
SECONDARY FUNCTIONS
PRIMARY FUNCTIONS
Primary banking functions of the commercial banks include:
Acceptance of deposits
Advancing loans
Creation of credit
Clearing of cheques
Financing foreign trade
Remittance of funds
21
1)
ACCEPTANCE OF DEPOSITS :
22
interest on the current deposits and less than that on fixed deposit.
This system greatly encourages the habit of thrift or savings.
Fixed Deposits:
These deposits are also known as time deposits. These deposits cannot
be withdrawn before the expiry of the period for which they are
deposited or without giving a prior notice for withdrawal. If the
depositor is in need of money, he has to borrow on the security of this
account and pay a slightly higher rate of interest to the bank. They are
attracted by the payment of interest which is usually higher for longer
period. Fixed deposits are liked by depositors both for their safety and
as well as for their interest. In India, they are accepted between three
months and ten years.
2) ADVANCING LOANS:
The second primary function of a commercial bank is to make loans
and advances to all types of persons, particularly to businessmen and
entrepreneurs. Loans are made against personal security, gold and
silver, stocks of goods and other assets. The most common way of
lending is by
Overdraft Facilities:
In this case, the depositor in a current account is allowed to draw over
and above his account up to a previously agreed limit. Suppose a
businessman has only Rs. 30,000/- in his current account in a bank but
requires Rs. 60,000/- to meet his expenses. He may approach his bank
and borrow the additional amount of Rs. 30,000/-. The bank allows the
23
24
Bank also grant loans for a very short period, generally not exceeding
7 days to the borrowers, usually dealers or brokers in stock exchange
markets against collateral securities like stock or equity shares,
debentures, etc., offered by them. Such advances are repayable
immediately at short notice hence; they are described as money at call
or call money.
Term Loans:
Banks give term
loans
to
traders,
industrialists
and
now
to
agriculturists also against some collateral securities. Term loans are socalled because their maturity period varies between 1 to 10 years.
Term loans; as such provide intermediate or working capital funds to
the borrowers. Sometimes, two or more banks may jointly provide
large term loans to the borrower against a common security. Such
loans are called participation loans or consortium finance.
Consumer Credit:
Banks also grant credit to households in a limited amount to buy some
durable consumer goods such as television sets, refrigerators, etc., or
to meet some personal needs like payment of hospital bills etc. Such
consumer credit is made in a lump sum and is repayable in
installments in a short time. Under the 20-point programme, the scope
of consumer credit has been extended to cover expenses on marriage,
funeral etc., as well.
Miscellaneous Advances:
Among other forms of bank advances there are packing credits given
to exporters for a short duration, export bills purchased/discounted,
25
import finance-advances against import bills, finance to the selfemployed, credit to the public sector, and credit to the cooperative
sector and above all, credit to the weaker sections of the community at
concessional rates.
3) CREATION OF CREDIT:
A unique function of the bank is to create credit. Banks supply money
to traders and manufacturers. They also create or manufacture money.
Bank deposits are regarded as money. They are as good as cash. The
reason is they can be used for the purchase of goods and services and
also in payment of debts. When a bank grants a loan to its customer, it
does not pay cash. It simply credits the account of the borrower. He
can withdraw the amount whenever he wants by a cheque. In this
case, bank has created a deposit without receiving cash. That is, banks
are said to have created credit. Sayers says banks are not merely
purveyors of money, but also in an important sense, manufacturers of
money.
Promote the Use of Cheques:
The commercial banks render an important service by providing to
their customers a cheap medium of exchange like cheques. It is found
much more convenient to settle debts through cheques rather than
through the use of cash. The cheque is the most developed type of
credit instrument in the money market.
Financing Internal and Foreign Trade:
26
27
SECONDARY FUNCTIONS
1) AGENCY SERVICES :
Banks also perform certain agency functions for and on behalf of their
customers. The agency services are of immense value to the people at
large. The various agency services rendered by banks are as follows:
Collection and Payment of Credit Instruments:
Banks collect and pay various credit instruments like cheques, bills of
exchange, promissory notes etc., on behalf of their customers.
Purchase and Sale of Securities:
Banks purchase and sell various securities like shares, stocks, bonds,
debentures on behalf of their customers.
Collection of Dividends on Shares:
Banks collect dividends and interest on shares and debentures of their
customers and credit them to their accounts.
Acts as Correspondent:
28
Letter of Credit:
Letters of credit are issued by the banks to their customers certifying
their credit worthiness. Letters of credit are very useful in foreign
trade.
Collection of Statistics:
Banks collect statistics giving important information relating to trade,
commerce, industries, money and banking. They also publish valuable
journals and bulletins containing articles on economic and financial
matters.
Acting Referee:
Banks may act as referees with respect to the financial standing,
business reputation and respectability of customers.
Underwriting Securities:
Banks underwrite the shares
and
debentures
issued
by
the
Merchant Banking:
Some commercial banks have opened merchant banking divisions to
provide merchant banking services.
30
4. Supply of Securities
Loans are sanctioned on the basis of the securities provided to the
banks. If securities are available then the credit creation will be more
and vice-versa.
5. Willingness of people to borrow
Commercial banks may have enough money to lend. Customers should
be willing to borrow from the banks to facilitate credit creation. If they
are willing to borrow, then the credit created by banks will be less.
6. Monetary Policy of Central Bank
While credit is created by commercial banks, it is controlled by the
Central Bank. Credit control is one important function of the central
bank. Central Bank uses various methods of Credit Control from time to
time and thus influences the banks to expand or contract credit.
7. External Drain
External Drain refers to withdrawal of cash from the banking system by
the public. It lowers the reserves of the banks and limits the credit
creation.
8. Uniform Policy
If all the commercial banks follow a uniform policy related to CRR, then
credit creation would be smooth. If some banks follow liberal and
others follow a conservative one, then credit creation would be
affected.
Checking/Current account
Savings accounts
Internet/Mobile Banking
ATM Cards
Check Books
Deposit Accounts
Loans
Credit Cards etc.
They
They
They
They
accounts.
They offer credit and debit cards facility.
They also offer leasing services.
They give hire-purchase services to owners of various goods.
They are now allowed to offer insurance services.
They provide funds (capital) for starting new ventures.
2. SECONDARY SERVICES
MODERN TECHNOLOGICAL SERVICES
Technology :
Banks in India have started using technology in a proactive manner.
The huge number of bank customers and their myriad needs are being
met in increasingly sophisticated ways. In a number of areas, the
foreign banks and the new private sector banks have been the first
movers in the application of technology, but public sector banks are
also catching up. One major advantage that Indian banks have is the
availability of major IT companies in India who are the world leaders in
IT applications.
Mobile Banking :
Some banks have started offering mobile banking and tele-banking to
customers. The expansion in the use and geographical reach of mobile
phones has created new opportunities for banks to use this mode for
banking transactions and also provide an opportunity to extend
banking facilities to the hitherto excluded sections of the society.
With ICICI Bank Mobile Banking, you can have following access through
your mobile
35
Our Mobile Banking services work with almost all types of handsets
and help you access your ICICI Bank account easily and securely.
Internet Banking :
Through its website, a bank may offer its customers online access to
account information and payment and fund transfer facilities. The
range of services offered differs from bank to bank depending mainly
on the type and size of the bank. Internet banking is changing the
banking industry and affecting banking relationships in a major way.
The services provided through internet banking are:
Money manager
Fund transfer
Bills payment
Quick pay
Receive funds
Prepaid mobile recharge
Electronic Banking :
Electronic banking services provided by commercial banks include :
Order checks.
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INVESTMENT POLICY
The financial position of a commercial bank is reflected in its balance
sheet. The balance sheet is a statement of the assets and liabilities of
the bank. The assets of the bank are distributed in accordance with
certain guiding principles. These principles underline the investment
policy of the bank. They are discussed below:
Liquidity :
In the context of the balance sheet of a bank the term liquidity has two
interpretations. First, it refers to the ability of the bank to honor the
claims of the depositors. Second, it connotes the ability of the bank to
convert its non-cash assets into cash easily and without loss.
It is a well-known fact that a bank deals in funds belonging to the
public. Hence, the bank should always be on its guard in handling
these funds. The bank should always have enough cash to meet the
demands of the depositors. In fact, the success of a bank depends to a
considerable extent upon the degree of confidence it can instill in the
minds of its depositors. If the depositors lose confidence in the
integrity of their bank, the very existence of the bank will be at stake.
So, the bank should always be prepared to meet the claims of the
depositors by having enough cash. Among the various items on the
37
assets side of the balance sheet, cash on hand represents the most
liquid asset. Next comes cash with other banks and the central bank.
The order of liquidity goes on descending.
Liquidity also means the ability of the bank to convert its non-cash
assets into cash easily and without loss. The bank cannot have all its
assets in the form of cash because each is an idle asset which does not
fetch any return to the bank. So some of the assets of the bank, money
at call and short notice, bills discounted, etc. could be made liquid
easily and without loss.
Profitability :
Safety or Security :
Apart from liquidity and profitability, the bank should look to the
principle of safety of its funds also for its smooth working. While
advancing loans, it is necessary that the bank should consider the
three Cs of credit character, capacity and the collateral of the
borrower. The bank cannot afford to invest its funds recklessly without
considering the principle of safety. The loans and investments made by
the bank should be adequately secured. For this purpose, the bank
should always insist on security of the borrower. Of late, somehow or
other the banks have not been paying adequate importance to safety,
particularly in India.
Diversity :
The bank should invest its funds in such a way as to secure for itself an
adequate and permanent return. And while investing its funds, the
bank should not keep all its eggs in the same basket. Diversification of
investment is necessary to avoid the dangerous consequences of
investing in one or two channels. If the bank invest its funds in
different types of securities or makes loans and advances to different
objectives and enterprises, it shall ensure for itself a regular flow of
income.
39
Salability of Securities :
Further, the bank should invest its funds in such types of securities as
can be easily marketed at a time of emergency. The bank cannot afford
to invest its funds in very long term securities or those securities which
are unsalable. It is necessary for the bank to invest its funds in
government or in first class securities or in debentures of reputed
firms. It should also advance loans against stocks which can be easily
sold.
The bank should invest its funds in those stocks and securities the
prices of which are more or less stable. The bank cannot afford to
invest its funds in securities, the prices of which are subject to frequent
fluctuations.
LENDING POLICY
Types of Lending
A. Fund based (Current & Fixed Assets)
Overdrafts
Cash Credits
Bills Finance Demand or Usance Bills
Demand Loans
5.Term Loans
Other Loans - Car Loans, Consumer Durables, Educational
C. Others
Issue of Guarantees
Issue of Letters of Credit
Deferred Payments Guarantees
Lease Finance
Hire Purchase Finance
41
commercial
borrowings
(ECBs),
corporate
bonds
and
PSBs recorded decline in CASA deposits while PVBs and FBs recorded
higher growth during 2014-15.
The
maturity
profile
of
liabilities
of
the
SCBs
witnessed
an
The PSBs, however, had 52 per cent of their investments in more than
5 year maturity bracket during 2014-15 while investments of the PVBs
45
and FBs in that tenor, aggregated 30.4 per cent and 5.6 per cent,
respectively.
46
Bank group
Return on assets
Return on equity
0.50
0.45
0.46
0.37
8.47
7.76
7.76
6.44
banks
1.2 State Bank
Private sector banks
Foreign banks
All SCBs
0.63
1.65
1.54
0.81
0.66
1.68
1.87
0.81
10.03
16.22
9.03
10.68
10.56
15.74
10.24
10.42
47
4.1 HISTORY
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian
financial institution, and was its wholly-owned subsidiary. ICICI's
shareholding in ICICI Bank was reduced to 46% through a public
offering of shares in India in fiscal 1998, an equity offering in the form
of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of
Bank of Madura Limited in an all-stock amalgamation in fiscal 2001,
and secondary market sales by ICICI to institutional investors in fiscal
48
2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the
World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial
institution for providing medium-term and long-term project financing
to Indian businesses. ICICI Bank has formulated a Code of Business
Conduct and Ethics for its directors and employees. ICICI Bank is one of
the Big Four banks of India, along with State Bank of India, Punjab
National Bank and HDFC Bank.
Loans provided by ICICI Banks :
ICICI Bank offers wide variety of Loans Products to suit your
requirements. Coupled with convenience of networked branches/ ATMs
and facility of E-channels like Internet and Mobile Banking, ICICI Bank
brings banking at your doorstep. Select any of our loan product and
provide your details online and our representative will contact you for
getting loans.
Home Loans
The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans
offers some unbeatable benefits to its customers - Doorstep Service,
Simplified Documentation and Guidance throughout the Process. It's
really easy!
Personal Loans
49
If you're looking for a personal loan that's easy to get, your search
ends here. ICICI Bank Personal Loans are easy to get and absolutely
hassle free. With minimum documentation you can now secure a loan
for an amount up to Rs. 15 lakhs.
Car Loans
The most preferred financier for car loans in the country. Network of
more than 1000 channel partners in over 200 locations. Tie-ups with all
leading automobile manufacturers to ensure the best deals. Flexible
schemes & quick processing. Hassle free application process on the
click of a mouse.
You dont have to sell your securities. All you have to do is pledge your
securities in favor of ICICI Bank. We will then grant you an overdraft
facility up to a value determined on the basis of the securities pledged
by you.
50
51
We could see the private players now reduce lending rates to get
competitive as many public sector banks like State Bank of India and
Andhra Bank have cut rates on select retail products,'' said a banking
analyst with a domestic brokerage.
ICICI Bank is also doing this to maintain a healthy margin of over 3%,''
he added.
Account?
- ICICI Savings account requires an Average Monthly Balance of Rs.
75,000 in a combination of savings account/ current account and fixed
deposits including a minimum monthly balance of Rs. 25,000 in the
savings account / current account or Smart Money facility with a
minimum fixed deposit of Rs. 200,000. However, a "No Frills" Account
can be opened with Zero balance.
2.
52
3.
Is
there
charge
for
non-maintenance
of
Average
Savings Account?
- Currently, as per RBI regulations you earn interest at 4.00% p.a. (paid
half yearly) on your Savings Account balances and NIL interest on your
Current Account balances. However, if you choose, the moment your
savings cross the required balance amount, the excess amount will get
transferred to a Fixed Deposit, thereby earning you a higher rate of
interest.
6.
travelling in India?
- Yes, you can check both the balances in your account as well as your
transaction history at any of our branches or ATMs. Moreover you can
also apply for our Internet Banking or Phone Banking facility which will
give you access to your account balances and other services anytime,
anywhere.
53
7.
transactions?
- In respect of any other current account transaction please approach
the branch with:
A letter detailing and self-certifying the details of remittance and the
beneficiary to whom it is being made.
Supporting document detailing the nature of the transaction, value and
beneficiary
Complete the following forms given to you by the branch:
Application in Form A2 signed by the remitter
FEMA declaration
Draft or Telegraphic transfer application form
Once the Bank is satisfied with the nature of the transaction the Bank
will be able to effect the remittance as required. While most
transactions would be processed by the bank on the basis of the
above, there could be situations that could call for supplementary
information or reference to Reserve Bank. The Branch staff will guide
you on this when they are contacted.
9.
expenses?
Your International/debit card can be put to good use on various
occasions:
While you are on holiday outside India to meet your expenses.
54
10.
Branch
Phone-banking
Internet banking
55
4.5 CONCLUSION :
My study concludes that commercial banks form the most important
part of financial intermediaries. It accepts deposits from the general
public and extends loans to the households, firms and the government.
Banks form a significant part of the infrastructure essential for
breaking vicious circle of poverty and promoting economic growth.
A commercial bank is a bank that operates with a profit earning goal
i.e. a business bank while a non-commercial bank is a financial
institution that operates with the aim of alleviatingbanking on the
development of bank-customer relationship in the value creation
process.
Banks are financial institutions that can make or break economy.
Unsupervised and uncontrolled behavior from banks can spell doom to
the economy and for the customers as well. Banks are the regular
banks that provide basic banking facilities to its customers.
I also conclude that I had done my field study on ICICI Bank as a
commercial bank in India & collected many information related to its
services, relations with customers and many more aspects.
ICICI Bank provides a great customer service. They treat well to
their customers,
4.6 WEBLIOGRAPHY :
www.Scribd.Com
www.Slideshare.Net
www.indian.bank.com
www.commercialbank.com
www.rbi .com
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