Business Planning by Banks 1

BUSINESS PLANNING BY BANKS
INDEX
TOPICS
PAGE NO.
What does banking mean?
Need of Business Planning?
Types of banks
Functions of Bank
Auditing required in Business Plan
13
Strategic Business Planning
15
Features and Benefit of Strategic Planning
16
Why BPM for Banking?
18
Indian Banking Research
19
Current Scenario
20
Business Plan Product or Service
21
Business Model
22
What are the growth drivers of the Banking 23

Industry?
Future Outlook of Indian Industry
26
Business Process Re-Engineering
27
Banking Regulation in Business Plan
30
Golden rule of banking in Business Plan
31
Instrument
Regulation
and
Requirement
Financial
Reporting
Requirement
and
of
Bank 32
Disclosure 33
Case Study in Business Plan
35
Business Plan Client Case Study
46
Executive Summary
47
Conclusion
48
Bibliography
49
Acknowledgement
50
K.C. COLLEGE
WHAT DOES BANKING MEANS?

A banking company means any Company which transacts the business of banking. Banking
means the accepting, for the purpose of lending or investment, of deposits of money from
the public, repayable on demand or otherwise, and withdrawal by cheque, draft or otherwise.
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."
BUSINESS BANKING
A company's financial dealings with an institution that provides business loans, credit,
savings and checking accounts specifically for companies and not for individuals. Business
banking is also known as commercial banking and occurs when a bank, or division of a
bank, only deals with businesses. A bank that deals mainly with individuals is generally
called a retail bank, while a bank that deals with capital markets is known as an investment
bank.
WHAT IS BUSINESS PLANING?

A business plan synthesizes all the essential aspects and information about a company,
whether it is being developed or already in operation. The business plan is a substantial,
detailed document containing the principal data about the structure of the company. This includes the
object of activity, a market analysis, the specific approach to strategic marketing of the
company, management structure and personnel and all relevant financial information.
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Three Reasons Why Any Business Should Have a Business Plan:

1) A business plan is an effective tool for defining the existing realities. It prompts you to
analyse your business project or the existing situation objectively and critically, define a
focus and set realistic goals. It may also constitute the basis for control and evaluation.
2) A good business plan will reveal weaknesses or omissions in your planning. Because good
business plans require a guesstimate of risk calculation, they help to reduce risks.
3) They provide a valuable communication tool presented in an organized, credible manner,
which allows lenders, outside directors, investors, banks and employees to obtain a complex view of
your business. Even if, in some cases, a business plan format is not officially required when
applying for a loan, although most lenders will ask for one, the very existence of a plan
constitutes a plus, a step forward in obtaining the loan
Writing Business Plans that Result:
The art of writing a business plan, lies not only in the content but in the way it is presented so as
to result in a professional, convincing material.
The first requirement is a general one that should be used in the case of any written (or spoken)
statement: in order to transmit information in a coherent, appealing manner, the business plan writer
should observe the main principles of discourse. These are: clarity, brevity/conciseness, logic and
truthfulness. In order to gain consistency and credibility, the presented information should be
backed up with figures whenever possible.
The second main requirement when writing business plans is that you always have to keep in mind the target
readers of your work and thus putting emphasis on their particular points of interest. But this
stage is a customizable one that will be grafted on a basic common structure. Usually,
business plans have the following components:
a) Executive Summary
b) The Product/Service)
c) The Market
d) The Marketing Plan
e) The Competition
f) Operations
g) The Management Team
h) Personnel
K.C. COLLEGE
TYPES OF BANKS
What is Scheduled Bank?

All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934
are scheduled banks. These banks comprise Scheduled Commercial Banks and Scheduled
Cooperative Banks. All most all banks are Scheduled banks in India.
What are Commercial Banks?

Commercial banks may be defined as, any banking organization that deals with the deposits
and loans of business organizations. Commercial banks issue bank checks and drafts, as
well as accept money on term deposits. Commercial banks also act as moneylenders, by
way of installment loans and overdrafts. Commercial banks also allow for a variety of deposit
accounts, such as checking, savings, and time deposit. These institutions are run to make a
profit and owned by a group of individuals.
Types of Loans offered by Commercial banks:

1) Secured Loan: A secured loan is one where the borrower provides a certain property or
asset as collateral against the loan. The main condition of these loans is that if the loan
remains unpaid, the bank has the right to use the property in any way they like to realize the
outstanding amount.
2) Unsecured Loan: Unsecured loans have no collateral and therefore command higher
interest rates. There are a variety of unsecured loans available today and these include
credit cars, credit facilities such as a lines of credit, corporate bonds, and bank overdrafts.
3) Mortgage Loans: Mortgage loans that are provided by commercial banks are similar to
secured loans but are used specifically to buy real estate property for commercial purposes.
In most of these cases, the banks hold a lien on the title to the particular property purchased
with the loan. If the borrower is unable to pay the loan back, the bank leverages this item
against the loan to generate funds or recover the principal.
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What are Public Sector Banks?

These are banks where majority stake is held by the Government.
Examples of public sector banks are: SBI, Bank of India, Canara Bank, etc.
What are Private Sector Banks?

These are banks majority of share capital of the bank is held by private individuals. These
banks are registered as companies with limited liability.
Examples of private sector banks are: ICICI Bank, Axis bank, HDFC, etc.
What are Foreign Banks?

These banks are registered and have their headquarters in a foreign country but operate
their branches in our country.
Examples of foreign banks in India are: HSBC, Citibank, Standard Chartered Bank, etc.
What are Regional Rural Banks?

Regional Rural Banks were established under the provisions of an Ordinance promulgated
on the 26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient
institutional credit for agriculture and other rural sectors. The area of operation of RRBs is
limited to the area as notified by GOI covering one or more districts in the State.
RRBs are jointly owned by GOI, the concerned State Government and Sponsor Banks (27
scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB
is shared by the owners in the proportion of 50%, 15% and 35% respectively.
Prathama bank is the first Regional Rural Bank in India located in the city Moradabad in
Uttar Pradesh.
K.C. COLLEGE
What are Cooperative Banks?

A co-operative bank is a financial entity which belongs to its members, who are at the same
time the owners and the customers of their bank. Co-operative banks are often created by
persons belonging to the same local or professional community or sharing a common
interest. Co-operative banks generally provide their members with a wide range of banking
and financial services (loans, deposits, banking accounts, extra).
They provide limited banking products and are specialists in agriculture-related products.
Cooperative banks are the primary financiers of agricultural activities, some small-scale
industries and self-employed workers. Co-operative banks function on the basis of "no-profit
no-loss". Anyonya Co-operative Bank Limited (ACBL) is the first co-operative bank in India
located in the city of Vadodara in Gujarat.
How Bank gets Money?

Banks make money by lending your money out at interest and by charging you for services
provided. Banks keep on lending money. The other big revenue items generated by banks
are the fees they charge. Bank charge for every service, whether it is for an electronic
transaction, or permitting a transfer through the Internet banking system. When banks get
profits they invest in other companies and in return they will get money.
What are the Functions of Banks?
The functions of banks are briefly highlighted in following Diagram or Chart.

K.C. COLLEGE
These functions of banks are explained in following paragraphs of this article.
A. Primary Functions of Banks
The primary functions of a bank are also known as banking functions. They are the main
functions of a bank.
These primary functions of banks are explained below.
1. Accepting Deposits
The bank collects deposits from the public. These deposits can be of different types, such as
:a.
b.
c.
d.
Saving Deposits
Fixed Deposits
Current Deposits
Recurring Deposits
a. Saving Deposits
This type of deposits encourages saving habit among the public. The rate of interest is low.
At present it is about 5% p.a. Withdrawals of deposits are allowed subject to certain
restrictions. This account is suitable to salary and wage earners. This account can be
opened in single name or in joint names.
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b. Fixed Deposits
Lump sum amount is deposited at one time for a specific period. Higher rate of interest is
paid, which varies with the period of deposit. Withdrawals are not allowed before the expiry
of the period. Those who have surplus funds go for fixed deposit.
c. Current Deposits
This type of account is operated by businessmen. Withdrawals are freely allowed. No

interest is paid. In fact, there are service charges. The account holders can get the benefit of
overdraft facility.
d. Recurring Deposits
This type of account is operated by salaried persons and petty traders. A certain sum of
money is periodically deposited into the bank. Withdrawals are permitted only after the
expiry of certain period. A higher rate of interest is paid.
2. Granting of Loans and Advances
The bank advances loans to the business community and other members of the public. The
rate charged is higher than what it pays on deposits. The difference in the interest rates
(lending rate and the deposit rate) is its profit.
The types of bank loans and advances are :a.

b.
c.
d.
Overdraft
Cash Credits
Loans
Discounting of Bill of Exchange
a. Overdraft
K.C. COLLEGE
This type of advances are given to current account holders. No separate account is
maintained. All entries are made in the current account. A certain amount is sanctioned as
Overdraft which can be withdrawn within a certain period of time say three months or so.
Interest is charged on actual amount withdrawn. An overdraft facility is granted against a
collateral security. It is sanctioned to businessman and firms.
b. Cash Credits
The client is allowed cash credit upto a specific limit fixed in advance. It can be given to
current account holders as well as to others who do not have an account with bank.
Separate cash credit account is maintained. Interest is charged on the amount withdrawn in
excess of limit. The cash credit is given against the security of tangible assets and / or
guarantees. The advance is given for a longer period and a larger amount of loan is
sanctioned than that of overdraft.
c. Loans
It is normally for short term say a period of one year or medium term say a period of five
years. Now-a-days, banks do lend money for long term. Repayment of money can be in the
form of installments spread over a period of time or in a lumpsum amount. Interest is
charged on the actual amount sanctioned, whether withdrawn or not. The rate of interest
may be slightly lower than what is charged on overdrafts and cash credits. Loans are
normally secured against tangible assets of the company.
d. Discounting of Bill of Exchange.
The bank can advance money by discounting or by purchasing bills of exchange both
domestic and foreign bills. The bank pays the bill amount to the drawer or the beneficiary of
the bill by deducting usual discount charges. On maturity, the bill is presented to the drawee
or acceptor of the bill and the amount is collected.
B. Secondary Functions of Banks
The bank performs a number of secondary functions, also called as non-banking functions.
These important secondary functions of banks are explained below.
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1. Agency Functions
The bank acts as an agent of its customers. The bank performs a number of agency
functions which includes :a.
b.
c.
d.
e.
f.
Transfer of Funds
Collection of Cheques
Periodic Payments
Portfolio Management
Periodic Collections
Other Agency Functions
a. Transfer of Funds
The bank transfer funds from one branch to another or from one place to another.
b. Collection of Cheques
The bank collects the money of the cheques through clearing section of its customers. The
bank also collects money of the bills of exchange.
c. Periodic Payments
On standing instructions of the client, the bank makes periodic payments in respect of
electricity bills, rent, etc.
d. Portfolio Management
The banks also undertakes to purchase and sell the shares and debentures on behalf of
the clients and accordingly debits or credits the account. This facility is called portfolio
management.
e. Periodic Collections
The bank collects salary, pension, dividend and such other periodic collections on behalf of
the client.
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f. Other Agency Functions
They act as trustees, executors, advisers and administrators on behalf of its clients. They act
as representatives of clients to deal with other banks and institutions.
2. General Utility Functions
The bank also performs general utility functions, such as :a.

b.
c.
d.
e.
f.
g.
Issue of Drafts, Letter of Credits, etc.

Locker Facility
Underwriting of Shares
Dealing in Foreign Exchange
Project Reports
Social Welfare Programmes
Other Utility Functions
a. Issue of Drafts and Letter of Credits
Banks issue drafts for transferring money from one place to another. It also issues letter of
credit, especially in case of, import trade. It also issues travellers' cheques.
b. Locker Facility
The bank provides a locker facility for the safe custody of valuable documents, gold
ornaments and other valuables.
c. Underwriting of Shares
The bank underwrites shares and debentures through its merchant banking division.
d. Dealing in Foreign Exchange
The commercial banks are allowed by RBI to deal in foreign exchange.

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e. Project Reports
The bank may also undertake to prepare project reports on behalf of its clients.
f. Social Welfare Programmes
It undertakes social welfare programmes, such as adult literacy programmes, public welfare
campaigns, etc.
g. Other Utility Functions
It acts as a referee to financial standing of customers. It collects creditworthiness information

about clients of its customers. It provides market information to its customers, etc. It provides
travellers' cheque facility.
WHY AUDITING IS REQUIRED IN BANKS PLANING?
Bank Auditing and Accounting Report is designed to help you understand the latest
issues and regulatory developments that affect bank auditing and accounting, including
activities at the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board
K.C. COLLEGE
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(FRB), Financial Accounting Standards Board (FASB), Office of the Comptroller of the
Currency (OCC), Office of Thrift Supervision (OTS), Securities and Exchange Commission
(SEC), and American Institute of Certified Public Accountants (AICPA).
Who are Bank auditor?
A bank auditor monitors the operations of her bank to ensure its compliance with industry
guidelines and adherence to measures that deter fraud. Her job generally requires she
establish and follow a schedule to regularly check the appropriateness of all business
activities. She may work in a large or small financial institution.
In an industry frequently considered highly competitive, a bank auditor reviews the general
and specific aspects of daily practices to guarantee her bank remains competitive and
maintains the integrity expected by its customers. She scrutinizes every practice from teller
transactions through the security of the banks vaults and courier services. As an industry
professional, she is generally aware of competitors procedures. She is typically expected to
objectively rate her banks performance against others and take measures to improve upon
areas that fall short of excellence.
Usually on an annual basis, a bank auditor prepares a list of goals for her bank.
Education Prerequisites to Become a Bank Auditor:

Employment as a bank auditor requires a baccalaureate degree, usually a Bachelor of
Science in Accountancy or a Bachelor of Science in Finance. Earning a graduate degree,
such as a Master of Business Administration (MBA) with a concentration in accountancy or
finance or a master's in accountancy or finance, enhances an individual's marketability as a
bank auditor. Obtaining certification as a Certified Bank Auditor (CBA) can increase an
individual's credibility as a bank auditor. This voluntary certification is earned by passing an
examination administered by the Business Administration Institute. The exam measures
competence in accounting, auditing principles, bank regulations and laws, auditing practices
and general business.
Advantages of an audit
We have seen that the need for an external audit in the case of companies arises primarily
from the existence of split-up of ownership from control. There are however, certain
advantages in having financial statements audited even where no statutory requirement
exists for such an audit in the case of a sole-trader-ship, partnership, or non-profit
organizations for example.
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14
These advantages can be summarized as follows:

a) Disputes between management may be more easily settled. For instance, a partnership
which has complicated profit sharing arrangements may require an independent examination
of those accounts to ensure, as far as possible, an accurate assessment and distribution of
the profits.
b) Major changes in ownership may be facilitated if past accounts contain an independent
audit report,
for instance, where two sole traders merge their business to form a new partnership.
c) Application to lenders/financial institutions for finance may be strengthened by the
submission of audited accounts. However do remember that a bank, for instance, is likely to
be far more concerned about the future of the business and available security, than by the
past historical accounts, audited or otherwise.
d) The audit is likely to involve an in depth examination of the business and so may enable
the auditor
to give more constrictive advice to management on improving the efficiency of the business.
Disadvantages of an audit
Like most thing in life, audits are not entirely without their disadvantages. There are two main
points to make here:
b) The audit fee! Clearly the services of an auditor must be paid for. It is for this reason that
few partnerships and even fewer sole traders are likely to have their accounts audited.
c) The audit involves the client's staff and management in giving time to providing
information to the auditor. Professional auditors should therefore plan their audit carefully to
minimize the disruption which their work will cause.
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Strategic Business Planning
Strategic Business Planning offers senior executives of banks an unparalleled decision

support tool, combining a comprehensive view of the banks operations with the ability to
stress, forecast and optimize over a range of possible changes in portfolios and key risk
drivers at the enterprise level. Featuring a web-based dashboard interface designed for ease
of use and supported by Algorithmic advanced aggregation and calculation capabilities,
Strategic Business Planning facilitates both day-to-day oversight and long-term strategic
planning by providing senior managers and decision makers with a holistic overview of their
firms risk/return profile.
With Strategic Business Planning a banks board and senior managers can view bank on a
page reports; attaining an at-a-glance understanding of the risk profile of the organization as
a whole, including the sensitivities to key risks and the factors impacting their institutions
stability , profitability and growth. This unique product, incorporating innovative intellectual
property that reflects decades of experience working with financial institutions around the
world, is pragmatic and cost effective in its integration of key risk and finance data whether
Algorithmic or non-Algorithmic sourced from a banks existing infrastructure and systems
into a single reporting and analysis framework.
Strategic Business Planning meets a need, accentuated by the recent financial crisis, for
bank senior managers and board members to incorporate a broader range of risk indicators
in setting a banks framework for risk appetite, with the objective of anticipating and
controlling possible losses with greater certainty while maximizing the banks overall
sustainable growth potential. This powerful decision support tool presents a wide array of
results and data derived from a banks existing systems. It features:
The bank on a page reports, showing key metrics for market risk, credit risk, ALM,
liquidity and capital within a single, web-based interface designed for intelligibility and
ease of use
CEO watch lists, e.g. top 10 counterparties by exposure or capital consumption, or
bottom 10 bank divisions by RAROC
Analysis of incremental economic capital and RAROC, showing the impact of
changes in exposure on capital consumption and profitability
Optimization, displaying the banks portfolio, and the investments and divestments
required to provide the optimal return, while maintaining desired risk exposure
Risk aggregation, revealing the results of the aggregation of risk silos into a single,
full economic capital distribution for the organization as a whole
Leveraging Algorithmic decades of experience as an industry-leading provider of awardwinning risk analytics and risk dashboards, Strategic Business Planning not only provides
senior executives with a wide array of data and analyses of their banks operations, but also
enables this complex data to be presented in an intelligible format and timely fashion,
facilitating clearer understanding of an institutions risk/return profile and enabling confident
and informed decision making.
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Features and Benefits
Presents the bank on a page
Strategic Business Planning offers senior executives and board members of banks of all
sizes the bank on a page: a comprehensive view of their banks operations and risk/return
profile, with data derived from various risk and finance systems, presented within a webbased dashboard interface designed for optimum intelligibility and ease of use.
Enhances strategic decision making and planning
Strategic Business Planning enhances the capacity of bank senior managers and board
members to plan and oversee risk and capital management at the enterprise level,
accentuating the banks ability to respond to potential change while continuing to meeting its
risk and return targets.
Optimizes a banks investment in existing financial infrastructure and systems
Strategic Business Planning represents a value-added complement to a banks existing

systems with its unparalleled capacity to integrate data regardless of source system, costeffectively leveraging Algorithmic decades of experience as an industry-leading provider of
risk systems and our capacity to amortize the cost of research and development over a
number of clients.
Enables effective reporting, analysis and oversight
Strategic Business Planning enables up-to-date reporting of risk metrics regarding risk
appetite and stability across the enterprise, conveyed in an intelligible format to enhance
analysts meetings and support regulatory requirements for effective board-level oversight.
Optimizes long-term profitability and growth
Strategic Business Planning optimizes bank profitability by giving senior executives,

required to manage the complexities of a banks risk/return profile both now and over the
planning horizon, the capacity to measure their banks policies and strategies in terms of
capital consumption, liquidity and profitability, and develop strategies enhancing the banks
ability to respond to market changes and maximize sustainable long-term growth potential.
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Crystal Gazing
On the macro economic front, GDP is expected to grow by 6.0 to 6.5 % while the projected
expansion in broad money (M3) for 2001-02 is about 14.5 %. Credit and deposits are both
expected to grow by 15-16 % in FY02. India's foreign exchange reserves should reach
US$50.0 billion in FY02 and the Indian rupee should hold steady.
The interest rates are likely to remain stable this fiscal based on an expected downward
trend in inflation rate, sluggish pace of non-oil imports and likelihood of declining global
interest rates. The domestic banking industry is forecasted to witness a higher degree of
mergers and acquisitions in the future. Banks are likely to opt for the universal banking
approach with a stronger retail approach. Technology and superior customer service will
continue to be the imperatives for success in this industry.
Public Sector banks that imbibe new concepts in banking, turn tech savvy, leaner and
meaner post VRS and obtain more autonomy by keeping governmental stake to the
minimum can succeed in effectively taking on the private sector banks by virtue of their
sheer size. Weaker PSU banks are unlikely to survive in the long run. Consequently, they
are likely to be either acquired by stronger players or will be forced to look out for other
strategies to infuse greater capital and optimize their
operations.
Foreign banks are likely to succeed in their niche markets and be the innovators in terms of
technology introduction in the domestic scenario. The outlook for the private sector banks
indeed looks to be more promising vis--vis other banks. While their focused operations,
lower but more productive employee force etc will stand them good, possible acquisitions of
PSU banks will definitely give them the much needed scale of operations and access to
lower cost of funds. These banks will continue to be the early technology adopters in the
industry, thus increasing their efficiencies. Also, they have been amongst the first movers in
the lucrative insurance segment. Already, banks such as ICICI Bank and HDFC Bank have
forged alliances with Prudential Life and Standard Life respectively. This is one segment that
is likely to witness a greater deal of action in the future. In the near term, the low interest rate
scenario is likely to affect the spreads of majors. This is likely to result in a greater focus on
better asset-liability management procedures. Consequently, only banks that strive hard to
increase their share of fee-based revenues are likely to do better in the future.
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Why BPM for Banking?

BPM enables banks to automate business processes like account opening, lending or
payments to optimize costs. Financial Service providers are increasingly looking to BPM not
only as a solution to specific, immediate process improvement objectives, but as a platform
that gives them the ability to tackle diverse process improvement initiatives and realize the
following benefits:
Better target and serve your customer

Economically streamline the end-to-end client management process and guide
employees through decision-making process with dynamic process coaches.
Enable Straight-Through Processing
Business rules in processes can help automate the routing and processing of tasks
often reducing the amount of human intervention needed by over 80%.
Create an audit trail
Detailed process reporting provides complete picture of the process including
activities, systems, and participants
TOP TEN BANKS IN THE WORLD

Rankings
Banks
Deutsche Bank
Mitsubishi UFJ Financial Group
HSBC Holdings
Industrial & Commercial Bank of China
BNP Paribas
Credit Agricole Group
Barclays PLC
Japan Post Bank
JPMorgan Chase & Co.
10
Royal Bank of Scotland Group
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INDIAN BANKINS RESEARCH

The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949
can be broadly classified into two major categories, non-scheduled banks and scheduled
banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms
of ownership, commercial banks can be further grouped into nationalized banks, the State
Bank of India and its group banks, regional rural banks and private sector banks (the old/
new domestic and foreign). These banks have over 67,000 branches spread across the
country.
The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969
and resulted in a shift from Class banking to Mass banking. This in turn resulted in a
significant growth in the geographical coverage of banks. Every bank had to earmark a
minimum percentage of their loan portfolio to sectors identified as priority sectors. The
manufacturing sector also grew during the 1970s in protected environs and the banking
sector was a critical source. The next wave of reforms saw the nationalization of 6 more
commercial banks in 1980. Since then the number of scheduled commercial banks
increased four-fold and the number of bank branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector in the early
nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new
private sector banks and the foreign banks. The new private sector banks first made their
appearance after the guidelines permitting them were issued in January 1993. Eight new
private sector banks are presently in operation. These banks due to their late start have
access to state-of-the-art technology, which in turn helps them to save on manpower costs
and provide better services.
During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25
% share in deposits and 28.1 % share in credit. The 20 nationalized banks accounted for
53.2 % of the deposits and 47.5 % of credit during the same period. The share of foreign
banks (numbering 42), regional rural banks and other scheduled commercial banks
accounted for 5.7 %, 3.9 % and 12.2 % respectively in deposits and 8.41 %, 3.14 % and
12.85 % respectively in credit during the year 2000.
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Current Scenario
The industry is currently in a transition phase. On the one hand, the PSBs, which are the
mainstay of the Indian Banking system are in the process of shedding their flab in terms of
excessive manpower, excessive non Performing Assets and excessive governmental equity,
while on the other hand the private sector banks are consolidating themselves through
mergers and acquisitions.
PSBs, which currently account for more than 78 % of total banking industry assets are
saddled with NPAs falling revenues from traditional sources, lack of modern technology and
a massive workforce while the new private sector banks are forging ahead and rewriting the
traditional banking business model by way of their sheer innovation and service. The PSBs
are of course currently working out challenging strategies even as 20 % of their massive
employee strength has dwindled in the wake of the successful Voluntary Retirement
Schemes (VRS) schemes.
The private players however cannot match the PSBs great reach, great size and access to
low cost deposits. Therefore one of the means for them to combat the PSBs has been
through the merger and acquisition (M& A) route. Over the last two years, the industry has
witnessed several such instances. For instance, HDFCBanks merger with Times Bank
ICICI Banks acquisition of ITC Classic, Anagram Finance and Bank of Madura. Centurion
Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI
bank- Global Trust Bank merger however opened a pandoras box and brought about the
realization that all was not well in the functioning of many of the private sector banks.
Private sector Banks have pioneered internet banking, phone banking, anywhere banking,
mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other
services and integrated them into the mainstream banking arena, while the PSBs are still
grappling with disgruntled employees in the aftermath of successful VRS schemes. Also,
following Indias commitment to the W To agreement in respect of the services sector,
foreign banks, including both new and the existing ones, have been permitted to open up to
12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches.
Talks of government diluting their equity from 51 % to 33 % in November 2000 has also
opened up a new opportunity for the takeover of even the PSBs. The FDI rules being more
rationalized in Q1FY02 may also pave the way for foreign banks taking the M& A route to
acquire willing Indian partners.
Meanwhile the economic and corporate sector slowdown has led to an increasing number of
banks focusing on the retail segment. Many of them are also entering the new vistas of
Insurance. Banks with their phenomenal reach and a regular interface with the retail investor
are the best placed to enter into the insurance sector. Banks in India have been allowed to
provide fee-based insurance services without risk participation, invest in an insurance
company for providing infrastructure and services support and set up of a separate jointventure insurance company with risk participation.
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Business Plan: Product or Service
This section of the business plan will describe in a non-technical manner the characteristics
of your products or services, stressing upon their competitive qualities.
This section describes what your product or service consists of. It should contain detailed
descriptions of products and/or services.
Make the presentation explicative, as if addressing a reader who is not familiar with the
offered products/services.
Product description: should cover size, shape, colour, design, capabilities. Representative
pictures might be helpful in retaining the readers attention. Also add a brief description of
the production technology (needed materials, type of labour) and some things on patent
protection.
Services: explain the services what they are, what needs they address, the operations
area, needed materials or equipment, operations program(scheduling days, hours), steps
in the service process, benefits for clients.
A competitive comparison of your products should be performed here, showing your key
advantages towards your competition.
For both producers and services providers, the sourcing analysis should be represented
here. It shows that you have considered and analysis the necessary means to fulfill your
objectives, that is the products/services you offer. Elements to be analysed: standard costs,
materials, manufacturing operations (purchased services if required) from the strengths
and weaknesses perspective.
A presentation of the technology you use in order to produce/maintain/develop your
products/services will speak about your ability to put to good use facilities offered by modern
science and about your openness to new.
You may also want to present future products or services future planning. It implies
describing a product strategy, how you see the relationship between market needs and
product development. This topic would mostly appeal to possible investors, who look for the
business perspective than to bankers who would not be interested in ideas of future
products but in more concrete things.
The business plan writer should treat this subject from the perspective of the
customers needs and the potential of your product of benefit offers. This chapter is
decisive for the wholistic impression of the reader whether the business/company has
anything interesting to offer, something that will sell, something that will retain attention and
seem attractive.
The section must be informative enough, offering an easily understandable image without
boring details. Emphasis should be placed on the difference your products or services make
on the market.
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Business model
A bank can generate revenue in a variety of different ways including interest, transaction
fees and financial advice. The main method is via charging interest on the capital it lends out
to customers. The bank profits from the difference between the level of interest it pays for
deposits and other sources of funds, and the level of interest it charges in its lending
activities.
This difference is referred to as the spread between the cost of funds and the loan interest
rate. Historically, profitability from lending activities has been cyclical and dependent on the
needs and strengths of loan customers and the stage of the economic cycle. Fees and
financial advice constitute a more stable revenue stream and banks have therefore placed
more emphasis on these revenue lines to smooth their financial performance.
In the past 20 years American banks have taken many measures to ensure that they remain
profitable while responding to increasingly changing market conditions. First, this includes
the Gramm-Leach-Bliley Act, which allows banks again to merge with investment and
insurance houses. Merging banking, investment, and insurance functions allows traditional
banks to respond to increasing consumer demands for "one-stop shopping" by enabling
cross-selling of products (which, the banks hope, will also increase profitability).
Second, they have expanded the use of risk-based pricing from business lending to
consumer lending, which means charging higher interest rates to those customers that are
considered to be a higher credit risk and thus increased chance of default on loans. This
helps to offset the losses from bad loans, lowers the price of loans to those who have better
credit histories, and offers credit products to high risk customers who would otherwise be
denied credit.
Third, they have sought to increase the methods of payment processing available to the
general public and business clients. These products include debit cards, prepaid cards,
smart cards, and credit cards. They make it easier for consumers to conveniently make
transactions and smooth their consumption over time (in some countries with
underdeveloped financial systems, it is still common to deal strictly in cash, including
carrying suitcases filled with cash to purchase a home).
However, with convenience of easy credit, there is also increased risk that consumers will
mismanage their financial resources and accumulate excessive debt. Banks make money
from card products through interest payments and fees charged to consumers and
transaction fees to companies that accept the credit- debit - cards. This helps in making
profit and facilitates economic development as a whole.
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What are the growth drivers of the Indian Banking Industry?

High growth of Indian Economy: The growth of the banking industry is closely linked with
the growth of the overall economy. India is one of the fastest growing economies in the world
and is set to remain on that path for many years to come. This will be backed by the stellar
growth in infrastructure, industry, services and agriculture. This is expected to boost the
corporate credit growth in the economy and provide opportunities to banks to lend to fulfil
these requirements in the future.
Rising per capita income: The rising per capita income will drive the growth of retail credit.
Indians have a conservative outlook towards credit except for housing and other necessities.
However, with an increase in disposable income and increased exposure to a range of
products, consumers have shown a higher willingness to take credit, particularly, young
customers. A study of the customer profiles of different types of banks, reveals that foreign
and private banks share of younger customers is over 60% whereas public banks have only
32% customers under the age of 40. Private Banks also have a much higher share of the
more profitable mass affluent segment.
New channel Mobile banking is expected to become the second largest channel for
banking after ATMs: New channels used to offer banking services will drive the growth of
banking industry exponentially in the future by increasing productivity and acquiring new
customers. During the last decade, banking through ATMs and internet has shown a
tremendous growth, which is still in the growth phase. After ATMs, mobile banking is
expected to give another push to this industry growth in a big way, with the help of new 3G
and smart phone technology (mobile usage has grown tremendously over the years). This
can be looked at as branchless banking and so will also reduce costs as there is no need for
physical infrastructure and human resources. This will help in acquiring new customers,
mainly who live in rural areas (though this will take time due to technology and infrastructure
issues). The IBA-FICCI-BCG report predicts that mobile banking would become the second
largest channel of banking after ATMs.
Financial Inclusion Program: Currently, in India, 41% of the adult population dont have
bank accounts, which indicates a large untapped market for banking players. Under the
Financial Inclusion Program, RBI is trying to tap this untapped market and the growth
potential in rural markets by volume growth for banks. Financial inclusion is the delivery of
banking services at an affordable cost to the vast sections of disadvantaged and low income
groups. The RBI has also taken many initiatives such as Financial Literacy Program,
promoting effective use of development communication and using Information and
Communication Technology (ICT) to spread general banking concepts to people in the
under-banked areas. All these initiatives of promoting rural banking are taken with the help
of mobile banking, self- help groups, microfinance institutions, etc. Financial Inclusion, on the
one side, helps corporate in fulfilling their social responsibilities and on the other side it is
increasing growth in other industries and so as a whole economy.
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Is there anything to be concerned about?

More stringent capital
al requirements to achieve as per Basel III: Recently, the RBI
released draft guidelines for implementing Basel III. As per the proposal, banks will have to
augment the minimum core capital after a stringent deduction. The two new requirements
capital conservative
nservative buffer(an extra buffer of 2.5% to reduce risk) and a counter cyclical
buffer (an extra capital buffer if possible during good times) have also been introduced for
banks. As the name indicates that the capital conservative buffer can be dipped during
stressed period to meet the minimum regulatory requirement on core capital. In this
scenario, the bank would not be supposed to use its earnings to make discretionary payouts
such as dividends, shares buyback, etc. The counter cyclical buffer, achieved
achie
through a procyclical build up of the buffer in good times, is expected to protect the banking industry from
system-wide
wide risks arising out of excessive aggregate credit growth.
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The above table reveals that even under current Basel Norm II, Indian banks follow more
stringent capital adequacy requirements than their international counterparts. For Indian
Banks, the minimum common equity requirement is 3.6%, minimum tier I capital requirement
is 6% and minimum total capital adequacy requirement is 9% as against 2%, 4% and 8%
respectively recommended in the Basel II Norm. Due to this the capital adequacy position of
Indian banks is at comfortable level. So, going ahead, they should not face much problem in
meeting the new norms requirements. But as we saw
saw earlier, private sector banks and
foreign banks have considerable high capital adequacy ratio, hence are not expected to face
any problem. But, public sector banks are lagging behind. So, the Government will have to
infuse capital in public banks to meet
meet Basel III requirements. With the higher minimum core
Tier I capital requirement of 7-9.5%
7
and overall Tier I capital of 8.5-11%,
11%, Banks ROE is
expected to come down.
performing and restructured assets: Due to a slowdown in economic
Increasing non-performing
activity in past couple of years and aggressive lending by banks many loans have turned
non-performing.
performing. Restructuring of assets means loans whose duration has been increased or
the interest rate has been decreased. This happens due to inability of the loan taking
company/individual to pay off the debt. Both of these have impacted the profitability of banks
as they are required to have a higher provisioning amount which directly eats into the
profitability. The key challenge going forward for banks is to increase loans
loans and effectively
manage NPAs while maintaining profitability.
Intensifying competition: Due to homogenous kind of services offered by banks, large
number of players in the banking industry and other players such as NBFCs, competition is
already high. Recently,
cently, the RBI released the new Banking License Guidelines for NBFCs.
So, the number of players in the Indian banking industry is going to increase in the coming
years. This will intensify the competition in the industry, which will decrease the market share
sh
of existing banks.
Managing Human Resources and Development: Banks have to incur a substantial
employee training cost as the attrition rate is very high. Hence, banks find it difficult manage
the human resources and development initiatives.
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he Future Outlook for this Industry?

What is the
Currently, there are many challenges before Indian Banks such as improving capital
adequacy requirement, managing non-performing
non performing assets, enhancing branch sales &
services, improving organisation design; using innovative technology through new channels
and working on lean operations. Apart from this, frequent changes in policy rates to maintain
economic stability, various regulatory requirements, etc. are additional key concerns.
Despite these concerns, we expect that the Indian banking industry will grow through leaps
and bounds looking at the huge growth potential of Indian economy. High population base
of India, mobile banking offering banking operations through mobile phones, financial
inclusion, rising disposable income,
ncome, etc. will drive the growth Indian banking industry in the
long-term.
term. The Indian economy will require additional banks and expansion of existing banks
to meet its credit needs.
MoneyWorks4
assessment for few banks: At MoneyWorks4me we
Given below is the MoneyWorks4me
have assigned colour codes to the 10 YEAR X-RAY
X RAY and Future Prospects of the companies,
as Green (Very Good), Orange (Somewhat Good) and Red (Not Good).
Good)
*The 10 YEAR X-RAY
RAY facilitates analysis of the financial performance of the bank
considering the seven most important parameters. A 10 Year period will normally
encompass an entire business cycle. Analysis the performance over this time frame is
essential to understand
and how a company has fared during the good as well as bad times. The
seven most important parameters that one needs to look at are Net Interest Income Growth
Rate, Total Income Growth Rate, EPS Growth Rate, Book Value per Share (BVPS) Growth
Rate, Return on Assets (ROA), Net NPA to Net Advances Ratio and Capital Adequacy
Ratio.
While investing, one must always invest in the stocks of a company that operates in an
industry with bright long-term
term prospects. Further, the companys 10 YEAR X-RAY
X
and future
prospects should also be
e Green.
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BUSINESS PROCESS RE-ENGINEERING

In the banking industry, the Business Process Re-engineering (BPR) means
transforming the select processes and procedures with a view to empower the bank
with contemporary technologies, business solutions and innovations that enhances
the competitive advantage. BPR can be defined as the fundamental reconsideration
and radical redesign of organizational processes, in order to achieve drastic
improvement of current performance in cost, service and speed in the words of
Michael Hammer and James Champy. To ensure survival in the changing global
environment it is essential that banks respond to major trends reshaping the markets.
Objective: The objective of a BPR initiate is to create and enhance the value of the
bank for the customers. It takes into account 4 important aspects customer (to given
him enhanced value), competition (to meet it successfully), change (to manage it)
and cost (to reduce). The basic objectives of BPR are to reduce the transaction
process time without sacrificing security aspects, quality and real time service to
clients and extensive propagation of single window concept. BPR basically aimed at
maintaining long term profitability and strengthening the competitive edge of banks in
conforming with transforming market realities.
Process: There are three key parameters for BPR i.e. customer service, product
innovation and operational excellence. BPR envisages a number of activities such as
procurement, order fulfilment, product development, customer service and sales. The
process involves identification of the business processes to be redesigned,
understanding and measuring the existing processes, identifying the information
technology levers and designing and building a prototype of new process.
Benefits: There is growing need for use of BPR to further the strategic goals of
banks. BPR can benefit the customers through significantly reduced transaction time,
flexibility in servicing and improved value. The banks can be benefited by increased
volume of business and higher productivity, reduced operational cost leading to
higher profits, improved employee loyalty and sense of belongingness and
establishment of bank within a branch concept. Employees benefit through
empowerment leading to higher job satisfaction, effective job rotation as an additional
incentive and effective interface with customers as work load is evenly distributed.
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REGULATION:
Currently commercial banks are regulated in most jurisdictions by government entities and
require a special bank license to operate.
Usually the definition of the business of banking for the purposes of regulation is extended to
include acceptance of deposits, even if they are not repayable to the customer's order
although money lending, by itself, is generally not included in the definition.
Unlike most other regulated industries, the regulator is typically also a participant in the
market, being either a publicly or privately governed central bank. Central banks also
typically have a monopoly on the business of issuing banknotes. However, in some countries
this is not the case. In the UK, for example, the Financial Services Authority licenses banks,
and some commercial banks (such as the Bank of Scotland) issue their own banknotes in
addition to those issued by the Bank of England, the UK government's central bank.
Banking law is based on a contractual analysis of the relationship between the bank (defined
above) and the customerdefined as any entity for which the bank agrees to conduct an
account.
The law implies rights and obligations into this relationship as follows:
1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the customer;
when the account is overdrawn, the customer owes the balance to the bank.
2. The bank agrees to pay the customer's checks up to the amount standing to the
credit of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the
customer, e.g. a check drawn by the customer.
4. The bank agrees to promptly collect the checks deposited to the customer's account
as the customer's agent, and to credit the proceeds to the customer's account.
5. The bank has a right to combine the customer's accounts, since each account is just
an aspect of the same credit relationship.
6. The bank has a lien on checks deposited to the customer's account, to the extent
that the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's account
unless the customer consents, there is a public duty to disclose, the bank's interests
require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since
checks are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular jurisdiction
may also modify the above terms and/or create new rights, obligations or limitations relevant
to the bank-customer relationship.
Some types of financial institution, such as building societies and credit unions, may be
partly or wholly exempt from bank license requirements, and therefore regulated under
separate rules.
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The requirements for the issue of a bank license vary between jurisdictions but typically
include:
1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, or senior
officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.
Globalization in the Banking Industry

In modern time there has been huge reductions to the barriers of global competition in the
banking industry. Increases in telecommunications and other financial technologies, such as
Bloomberg, have allowed banks to extend their reach all over the world, since they no longer
have to be near customers to manage both their finances and their risk. The growth in crossborder activities has also increased the demand for banks that can provide various services
across borders to different nationalities. However, despite these reductions in barriers and
growth in cross-border activities, the banking industry is nowhere near as globalized as
some other industries. In the USA, for instance, very few banks even worry about the RiegleNeal Act, which promotes more efficient interstate banking. In the vast majority of nations
around globe the market share for foreign owned banks is currently less than a tenth of all
market shares for banks in a particular nation. One reason the banking industry has not
been fully globalized is that it is more convenient to have local banks provide loans to small
business and individuals. On the other hand for large corporations, it is not as important in
what nation the bank is in, since the corporation's financial information is available around
the globe.
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BANK REGULATIONS
Bank regulations are a form of government regulation which subject banks to certain
requirements, restrictions and guidelines. This regulatory structure creates transparency
between banking institutions and the individuals and corporations with whom they conduct
business, among other things. Given the inter connectedness of the banking industry and
the reliance that the national (and global) economy hold on banks, it is important for
regulatory agencies to maintain control over the standardized practices of these institutions.
Supporters of such regulation often hinge their arguments on the "too big to fail" notion. This
holds that many financial institutions (particularly investment banks with a commercial arm)
hold too much control over the economy to fail without enormous consequences. This is the
premise for government bailouts, in which federal financial assistance is provided to banks
or other financial institutions who appear to be on the brink of collapse. The belief is that
without this aid, the crippled banks would not only become bankrupt, but would create
rippling effects throughout the economy. Others advocate deregulation, or free banking,
whereby banks are given extended liberties as to how they operate the institution.
General principles of bank regulation

Banking regulations can vary widely across nations and jurisdictions. This section of the
article describes general principles of bank regulation throughout the world.
Minimum requirements
Requirements are imposed on banks in order to promote the objectives of the regulator.
Often, these requirements are closely tied to the level of risk exposure for a certain sector of
the bank. The most important minimum requirement in banking regulation is maintaining
minimum capital ratios.
Supervisory review
Banks are required to be issued with a bank license by the regulator in order to carry on
business as a bank, and the regulator supervises licensed banks for compliance with the
requirements and responds to breaches of the requirements through obtaining undertakings,
giving directions, imposing penalties or revoking the bank's license.
Market discipline
The regulator requires banks to publicly disclose financial and other information, and
depositors and other creditors are able to use this information to assess the level of risk and
to make investment decisions. As a result of this, the bank is subject to market discipline and
the regulator can also use market pricing information as an indicator of the bank's financial
health.
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GOLDEN RULE OF BANKING

While conducting financial transactions, banks have to keep three things in mind namely
liquidity, profitability and solvency Liquidity means the capacity of the banks to give cash on
demand in exchange of deposits Profitability means income accruing on from the assets the
bank holds Solvency means liquidity and shift ability of the assets held by the bank .The first
two are primary in nature while the last one is supportive But first two objectives are
contradictory in nature. High liquidity means less investments and low profit. And high profit
requires large investments hence lower liquidity. It may be noted that banks inability to show
the satisfactory on any of the two will weaken it to the point of closure. Hence it is said that
the golden rule of banking is to strike a balance between
Now let us have a look at factors determining them profitability and liquidity.
a. FACTORS DETERMINING LIQUIDITY
1- Statutory requirements
2- Banking habits of the people
3- Nature of money market
4- Structure of banking system
5- Number and size of deposits
6- Nature of deposits
b. FACTORS DETERMINING PROFITABILITY
1-Amount of working funds deployed (Total fund used in business)
2-Cost of funds (Interest expenses on capital)
3-Yeilds on funds (Returns on capital invested)
4-Spread (Difference between interest income and interest expenses)
5-Operating costs (Management cost excluding cost of funds and provisions)
6-Risk costs (provisions made for bad and doubtful debts etc)
7-Burden (Difference between non interest income and miscellaneous income)
8-Level of NPA (Assets which have no EMI of interest or capital or both for more than
three months
9-Level of competition
.
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Instruments and requirements of bank regulation

Capital requirement
Requirement sets a framework on how banks must handle their capital in relation to their
assets. Internationally, the Bank for International Settlements' Basel Committee on Banking
Supervision influences each country's capital requirements. In 1988, the Committee decided
to introduce a capital measurement system commonly referred to as the Basel Capital
Accords. The latest capital adequacy framework is commonly known as Basel III.[4] This
updated framework is intended to be more risk sensitive than the original one, but is also a
lot more complex.
Reserve requirement
Main article: Reserve requirement
The reserve requirement sets the minimum reserves each bank must hold to demand
deposits and banknotes. This type of regulation has lost the role it once had, as the
emphasis has moved toward capital adequacy, and in many countries there is no minimum
reserve ratio. The purpose of minimum reserve ratios is liquidity rather than safety. An
example of a country with a contemporary minimum reserve ratio is Hong Kong, where
banks are required to maintain 25% of their liabilities that are due on demand or within 1
month as qualifying liquefiable assets.
Reserve requirements have also been used in the past to control the stock of banknotes
and/or bank deposits. Required reserves have at times been gold coin, central bank
banknotes or deposits, and foreign currency.
Corporate governance
Corporate governance requirements are intended to encourage the bank to be well
managed, and is an indirect way of achieving other objectives. As many banks are relatively
large, with many divisions, it is important for management to maintain a close watch on all
operations. Investors and clients will often hold higher management accountable for
missteps, as these individuals are expected to be aware of all activities of the institution.
Some of these requirements may include:
1. To be a body corporate (i.e. not an individual, a partnership, trust or other
unincorporated entity)
2. To be incorporated locally, and/or to be incorporated under as a particular type of
body corporate, rather than being incorporated in a foreign jurisdiction.
3. To have a minimum number of directors
4. To have an organisational structure that includes various offices and officers, e.g.
corporate secretary, treasurer/CFO, auditor, Asset Liability Management Committee,
Privacy Officer etc. Also the officers for those offices may need to be approved
persons, or from an approved class of persons.
5. To have a constitution or articles of association that is approved, or contains or does
not contain particular clauses, e.g. clauses that enable directors to act other than in
the best interests of the company (e.g. in the interests of a parent company) may not
be allowed.
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Financial reporting and disclosure requirements

Among the most important regulations that are placed on banking institutions is the
requirement for disclosure of the bank's finances. Particularly for banks that trade on the
public market, the Securities and Exchange Commission (SEC) requires management to
prepare annual financial statements according to a financial reporting standard, have them
audited, and to register or publish them. Often, these banks are even required to prepare
more frequent financial disclosures, such as Quarterly Disclosure Statements. The
Sarbanes-Oxley Act of 2002 outlines in detail the exact structure of the reports that the SEC
requires.
In addition to preparing these statements, the SEC also stipulates that directors of the bank
must attest to the accuracy of such financial disclosures. Thus, included in their annual
reports must be a report of management on the company's internal control over financial
reporting. The internal control report must include: a statement of management's
responsibility for establishing and maintaining adequate internal control over financial
reporting for the company; management's assessment of the effectiveness of the company's
internal control over financial reporting as of the end of the company's most recent fiscal
year; a statement identifying the framework used by management to evaluate the
effectiveness of the company's internal control over financial reporting; and a statement that
the registered public accounting firm that audited the company's financial statements
included in the annual report has issued an attestation report on management's assessment
of the company's internal control over financial reporting. Under the new rules, a company is
required to file the registered public accounting firm's attestation report as part of the annual
report. Furthermore, the SEC added a requirement that management evaluate any change
in the company's internal control over financial reporting that occurred during a fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the company's internal
control over financial reporting.[5]
Credit rating requirement

Banks may be required to obtain and maintain a current credit rating from an approved credit
rating agency, and to disclose it to investors and prospective investors. Also, banks may be
required to maintain a minimum credit rating. These ratings are designed to provide colour
for prospective clients or investors regarding the relative risk that one assumes when
engaging in business with the bank. The ratings reflect the tendencies of the bank to take on
high risk endeavours, in addition to the likelihood of succeeding in such deals or initiatives.
The rating agencies that banks are most strictly governed by, referred to as the "Big Three"
are the Fitch Group, Standard and Poor's and Moody's. These agencies hold the most
influence over how banks (and all public companies) are viewed by those engaged in the
public market. In recent years, following the Great Recession, many economists have
argued that these agencies face a serious conflict of interest in their core business model.[6]
Clients pay these agencies to rate their company based on their relative riskiness in the
market. The question then is, to whom is the agency providing its service: the company or
the market?
European financial economics experts- notably the World Pensions Council (WPC) have
argued that European powers such as France and Germany pushed dogmatically and
naively for the adoption of the Basel II recommendations, adopted in 2005, transposed in
European Union law through the Capital Requirements Directive (CRD). In essence, they
forced European banks, and, more importantly, the European Central Bank itself, to rely
more than ever on the standardized assessments of credit risk marketed aggressively by
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34
two US credit rating agencies- Moodys and S&P, thus using public policy and ultimately
taxpayers money to strengthen anti-competitive duopolistic practices akin to exclusive
dealing. Ironically, European governments have abdicated most of their regulatory authority
in favour of a non-European, highly deregulated, private cartel
Large exposures restrictions
Banks may be restricted from having imprudently large exposures to individual
counterparties or groups of connected counterparties. Such limitation may be expressed as
a proportion of the bank's assets or equity, and different limits may apply based on the
security held and/or the credit rating of the counterparty. Restricting disproportionate
exposure to high-risk investment prevents financial institutions from placing equity holders'
(as well as the firm's) capital at an unnecessary risk.
Activity and affiliation restrictions
In 1933, during the first 100 days of President Franklin D. Roosevelts New Deal, the
Securities Act of 1933 and the Glass-Steagall Act (GSA) were enacted, setting up a
pervasive regulatory scheme for the public offering of securities and generally prohibiting
commercial banks from underwriting and dealing in those securities. GSA prohibited
affiliations between banks (which means bank-chartered depository institutions, that is,
financial institutions that hold federally insured consumer deposits) and securities firms
(which are commonly referred to as investment banks even though they are not technically
banks and do not hold federally insured consumer deposits); further restrictions on bank
affiliations with non- banking firms were enacted in Bank Holding Company Act of 1956
(BHCA) and its subsequent amendments, eliminating the possibility that companies owning
banks would be permitted to take ownership or controlling interest in insurance companies,
manufacturing companies, real estate companies, securities firms, or any other non-banking
company. As a result, distinct regulatory systems developed in the United States for
regulating banks, on the one hand, and securities firms on the other.
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CASE STUDY
Business Planning, Information Preference, and Information Use as Factors in
Banking Operations in Nigeria
Introduction
The banking industry in Nigeria has been faced with enormous challenges that affect
performance, management, and reliability. There are 24 banks in Nigeria today. These
banks are referred to as consolidated banks. They emerged after the recapitalisation
initiative of the central bank of Nigeria in 2005. Specifically, the central bank of Nigeria
(CBN) raised the minimum capital requirement for each bank in Nigeria to N 25billion. This
study is mindful of the recent efforts by the federal government of Nigeria to recapitalise and
reconsolidate banking operations, which may reduce the number of licensed banks in
Nigeria by ten. Banks constitute an important vehicle for economic growth and sustainable
development in Nigeria.
Ekanem (2003) takes a look at the banking industry in Nigeria provides estimates of
total productivity of the banking industry in Nigeria for 1986-2000. He concludes that the
banking industry in Nigeria has expanded rapidly in recent years with productivity rising
sharply since 1996. Nnanna (2001) observe that bank credit is important for the startup and
efficient performance of any enterprise, which requires provision of funds for capitalization,
working capital, and rehabilitation, as well as for the creation of new investments. Funds are
required to bring together the other factors of production land, labour, and capital - before
production can take place. This is why credit is very important in any economy.
Nzotta (1999) stresses that bank credits influence positively the level of economic activities
in any country. They influence what is to be produced, who produces it, and how much is to
be produced. This, he further argues, is derived from the intermediate role of banks, i.e., as
a link between surplus and deficit units in the economic system. Dauda (2007) assesses the
role, size, and contribution of the community banking system in Nigerias development
process from 1992 to the present she looks into extent to which community banks have been
efficient in performing their development roles at the grassroots level using the following
criteria:
Inculcation of good banking habits,

Deposit generation and savings mobilization
Granting of loans and advances
Development of real sector
Development of non productive activities.
She concludes that the Nigerian community banking system is growing in size, but is still
unable to be productive enough to help poor households escape from poverty.
Aiyegbusi and Soetan (2003) examine the impact of community banks such as Microfinance
Banks (MFB) on the credit habits of women, and seeks to amplify the importance of the
banks for improved quality of life of marginalised groups like women. Their findings show an
upsurge in the credit habits of all respondents since these banks have been introduced. This
was attributed to community banks flexible requirements for loan procurement.
Objectives of the Study
K.C. COLLEGE
36
1. Determine the influence of management motivation on job performance of bankers in

Nigeria;
2. Identify information preference of bank workers in Nigeria;
3. Identify the degree of information usage in Nigeria banks; and
4. Determine the extent to which business planning and information use has affected the
development or otherwise of banks in Nigeria.
Significance of the Study
This study will be important to the banking industry in the following areas.
1. It will offer recommendations of ways of achieving enhanced productivity in the
banking industry;
2. It will enable banks to implement programmes that will be geared toward effective
use of information.
3. it will be a meaningful addition to the literature on proper planning in the banking
sector
Scope of the Study
This study focuses on business planning, information preference and use among the twenty
four recapitalised banks in Nigeria. Managers and Senior Staff members of these 24 banks
were used as respondents which specifically have their headquarters in Lagos and Abuja.
After the recapitalisation and consolidation exercise, the following 24 banks emerged:
1. Access Bank
2. Skye Bank
3. Stanbic IBTC Bank
4. United Bank For Africa
5. Union Bank Nigeria
6. Unity Bank
7. Wema Bank
8. Zenith Bank
9. Equatorial Trust Bank
10. Universal Trust Bank
11. Spring Bank
12. Sterling Bank
K.C. COLLEGE
37
13. Standard Chartered Bank

14. Platinum Habib Bank
15. Afribank Nigeria
16. Diamond Bank
17. Ecobank Nigeria
18. Fidelity Bank
19. First Bank of Nigeria
20. First City Monument Bank
21. First Inland Bank
22. Guaranty Trust Bank
23. Intercontinental Bank
24. Oceanic Bank International
Limitations of the Study
This study is expected to cover all the above listed banks and their branches in Nigeria,
which has been conservatively put at about 2,000. The locations of these branches and size
of the country have made it difficult for the researchers to administer questionnaire on all
the of the 24 banks. Headquarters and major branches of these banks are located in Lagos
and Abuja constitute the focus of the research.
Hypotheses
1. There is on significant difference in the business planning and bank productivity in
Nigeria;
2. There is no significant difference in information preference and use of bank workers
and productivity in Nigeria;
3. There is no significant difference in in the application of ICT and bank activities in
Nigeria;
4. There is no significant difference in the information format used by bank workers and
performance in Nigeria.
Conceptual Issues
Planning is a management function which is essentially for the survival of any business. It is
the process of determining the future direction of an organisation, the formulation and
implementation of strategy that will enhance its overall competitiveness. Enzine (2004)
describes planning as a blueprint of business growth and a road map that tells you and the
world how you expect your company to achieve its stated objectives.
K.C. COLLEGE
38
Planning involves deciding on what the objective of an organisation will be, both
quantitatively and qualitatively, while keeping in view the resources available to the
organisation, simply put, planning involves setting up goals and objectives to be achieved. It
also involves the selection from alternative courses of action and available resources the
best option suitable for the achievement of these objectives. Planning is regarded as a vital
step in business without which success cannot be achieved it enables a firm to decide on
how to balance resources, supply and demand. Planning reduces the likelihood of a venture
collapsing, and essential to the success of any venture.
Planning can be short term or long term or both. Planning is pervasive and encompassing at
all management levels. Ezine (2004) considers a business plan as an internal document that
is considered as useful tool in business. It is a comprehensive document that clearly
describes how the entrepreneur intends to operate its business as follows:
A detailed outline of resources needed to realise the developmental objectives of the

business.
Sources of resources
How resources are to be utilized
Method of periodic evaluation of the plan
Purpose of Planning
It is important to determine the purpose of any business in order to have a clear reason for
its existence. Without a clear knowledge of its purpose, a business will destabilize, falter and
may eventually fail. Planning helps managers to clarify focus of their business or project
development and prospect. It equally provides a logical framework within which a business
can develop. And it helps to determine the business focus and strategy over the next few
years. There are different levels of planning and strategy in decision making in business. A
number of researcher have tried to distinguish between these different levels. The levels are:
strategic level, business level, operational level, and functional level. All the levels are
interrelated and can be represented as diagrammatically done below. These levels also
constitute models for planning.
K.C. COLLEGE
39
Diagram 1: Business Planning Conceptual Model
The banking industry usually identities goals and objectives through a clear planning, and
mission statement about the business they are involved in. this are usually encapsulated in
the long term vision of what the organisation tends to achieve, e.g. to be the Nigeria leading
provider of financial services. Banks in Nigeria have subsidiaries through which to further
achieve their broad objective, such subsidiaries can be involved in capital market, retail and
commercial banking, corporate financing, leasing e.t.c.
K.C. COLLEGE
40
Information Preference and Use

Making use of information is an important part of coping with challenges faced by employees
on their jobs. This include communicative and cognitive activities like seeking, avoiding,
providing, appraising and interpreting information. It is also complex in that employees
information preference and use vary over the course of their jobs along with the availability
and quality of information.
Preference is a basic concept in information studies but one which is difficult to define.
Essentially it implies the type of information and the form of which an individual wants his/her
information delivered. Information preference of bank managers may differ from that of other
fields of human endeavour. Their information preference can also be influenced by the
source of the information content, medium and language of communication, time and nature
of information. Interest in the information sought, authenticity of the source, motives and past
experiences in similar content do affect information preference (` and Vickery, 1987) Being
very busy group of workers, it has been observed that bank managers at times send their
subordinates to gather information for them; this subordinates oftentimes, even interprets the
information for them. Consequently, information preference and use by banks can be
determined by the content; medium and format; and time schedule.
ICT and Productivity in the Banking Industry
The internet offers an incredible and unprecedented communication and transactions to the
banks connected to the Web. Most banks in Nigeria are now internet connected, advancing
their objectives of creating new ideas, new product lines and expanding markets. Starting as
a new medium for communications and information, the internet has quickly metamorphosed
into a lace of learning and transactions. Accordingly, its initial impact in the banking industry
in Nigeria has been on increasing productivity. (Ekanem, 2003).
Ishaq (2002) states that the full promise of the digital revolution lies in the blossoming of a
creativity revolution world wide. The development of new creative capacities should be the
challenge of all personnel and banking organisations. With universal access and an internet
literate work force, the digital revolution can be the engine of growth in the banking
industry and the economy as a whole. In the industry, the efficiency and ingenuity that
separate them from their counterparts in the advanced nations of the world are being
bridged. It is advisable that all banks should be Internet Connected. This vital link results in a
new and potent avenue for exchange of ideas, expedition of transaction and foster worldwide collaboration in the industry.
Research Design
Survey design is used to provide data for a study from respondents spread over a large
geographical area, and numerous. In this case the respondents are managers in banks
operating all over Nigeria. There are twenty-four (24) of such banks (commercial and
consolidated ones). The banks have about 2000 branches scattered all over the country.
Study Population
The study population is limited to the banks found at their respective headquarters and
branches in Lagos and Abuja. Twelve bank managers were randomly selected from each of
the 24 banks headquarters and branches, except FirstBank, Intercontinental Bank,
Guaranty Trust Bank ,and UBA where thirteen bank managers and senior personnel were
K.C. COLLEGE
41
selected from each of these four banks because of the higher number of staff found, making
a total of three hundred (300) Bank Managers and Senior Staff.
Sampling and Sample Size
As stated above, all the banks found in Nigeria constitute the population for this study.
However, the twelve copies of the questionnaire earmarked for each of the banks were
randomly given to the various managers found in the banks, and other senior personnel of
the banks. The respondents were given a copy each of the questionnaire with a plea to
complete and return them.
Research Instrument
Questionnaire is the main instrument employed to gather data for this study. This has been
proved effective in gathering reliable, valid, and usable data in survey research. The
questionnaire used for this study is divided into three (3) sections. The sections are;
Demographic data / information

Business planning
Information preference and use
Data Analysis and Interpretation

These aspects deals with the result of the analysis and interpretation in line with the
objectives, research question/hypothesis postulated for the study.
Table 1: Distribution of Respondents by Sex
Sex
Male
Female
Total
Frequency
178
122
300
%
59.3
40.7
100.0
The table above presents the distribution of respondents by sex. According to the result of
the analysis, 178(59.3%) of the respondents were male while 122(40.7%) were female. This
shows that majority of the respondents who constitute the target population were male.
Table 2: Distribution of Respondents by Marital Status
Marital Status
Single
Married
Total
Frequency
92
208
300
%
30.7
69.3
100.0
The table above presents the distribution of respondents by marital status. According to the
result of the analysis, 92(30.7%) of the respondents were single while 208(69.3%) were
married. This shows that majority of the respondents who constitute the target population
were married.
Table 3: Distribution of Respondents by Age Group
K.C. COLLEGE
Age
Less than 36 years
36-40 years
41-45 years
46-50 years
Above 50 years
Total
42
Frequency
74
104
95
18
9
300
%
24.7
34.7
31.7
6.0
3.0
100.0
The table above presents the distribution of respondents by age group. According to the
result of the analysis, 74(24.7%) of the respondents were below 36 years, 104(34.7%) of the
respondents were between 36-40 years, 95(31.7%) were between 41-45 years and
18(6.0%) were between 46-50 years while 9(3.0%) were above 50 years. This shows that
majority of the respondents were between 36-45 years of age.
Table 4: Distribution of Respondents by Rank in the service
Rank
Manager
Accountant
Supervisor
Cashier
Auditor
Total
Frequency
92
9
162
28
9
300
%
30.7
3.0
54.0
9.3
3.0
100.0
The table above presents the distribution of respondents by rank in the service. According to
the result of the analysis, 92(30.7%) of the respondents were manager, 9(3.0%) of the
respondents were accountant, 162(54.0%) were Supervisor and 28(9.3%) were cashier
while 9(3.0%) were auditor. This shows that majority of the respondents were supervisor.
Table 5: Distribution of Respondents by Working Experience
Experience
6-10 years
11-15 years
16-20 years
Total
Frequency
92
141
67
300
%
30.7
47.0
22.3
100.0
The table above presents the distribution of respondents by working experience. According
to the result of the analysis, 92(30.7%) of the respondents had between 6-10 years of
working experience and 141(47.0%) had between 11-15 years of working experience while
67(22.3%) had between 16-20 years of working experience. This shows that majority of the
respondents had between 11-15 years of working experience.
Table 6: Distribution of respondents by educational qualification
Qualification
First Degree
Second Degree
Third Degree
Professional
K.C. COLLEGE
Frequency
50
72
9
49
%
16.7
24.0
3.0
16.3
Professional + First Degree

Professional + Second Degree
Total
43
66
54
300
22.0
18.0
100.0
The table above presents the distribution of respondents by educational qualifications.

According to the result of the analysis, 50(16.7%) of the respondents had first degree
qualification, 72(24.0%) had second degree qualification, 9(3.0%) had third educational
qualification 49(16.3%) had professional qualification and 66(22.0%) had professional and
first degree qualification while 54(18.0%) had professional and second degree qualification.
This shows that majority of the respondents were had second degree qualification.
Table 7: Regression Analysis Showing Significant Influence of Business Planning and Self
Management on Bank Performance
Variable
Coefficient Standard error T-Statistic Probability
Constant
6.53
2.21
2.953
0.003
Business Planning
0.428
0.058
7.415
0.000
Information Preference and Use 0.044
0.050
0.877
0.381
2
R
0.160
Adjusted R2
0.154
F- Statistics
28.206
Mathematically,
BKP = o + 1BP + 1SMUn ---------------------------------i
Where:
BKP = Bank Performance
BP = Business Planning
Therefore,
BKP = 6.533 + 0.428BP + 0.044SM + Un ----------------------ii
(7.415)* (0.877)
Discussion
Evaluation of the result presented above showed that the observed t-ratios were significant
at the 5% two-tail test, for business planning that is, [tc /2] > [tT /2]. The observed F-ratio,
which measured the joint effect of all the explanatory variables on the dependent variable,
was significant at both the 5 % and 1 % level. The R2 of 16.0% reveal the total explanatory
power of the model. Put differently, the model explains 16% of the total variation in bank
performance as explained by business planning and self management. The low goodness of
fit is as a result of the fact that there are some other important variable that are not included
in the model.
The sign of the co-efficient of the explanatory variable followed a prior expectation. Thus, an
increase in business planning and self management of the staff in the banking sector will
K.C. COLLEGE
44
lead to an increase in bank profitability. The implication of this is that for an organization like
banking sector to survive, business planning and self management is very important.
Table 8: Chi-square analysis showing the impact of educational training on development
Parameter
Averagely
Related
Highly Related
Total
Observed N Expected N
75
150
225
300
150
300
Chi-Square
Probability
Remark
75.00
0.00
Significant
The table above present a chi-square analysis showing the impact of educational training on
career development in banking sector. The result of the analysis presented above shows
that 75 respondents were of the opinion that educational training were averagely related to
career development while 225 respondents were of the opinion that educational training
were highly related to career development in the banking sector.
Nevertheless, the chi-square value of 75.00 whose probability close to zero percents shows
statistically that educational training were highly related to career development in the
banking sector.
Table 9: Chi-square analysis showing the impact of ICT on career development in the
banking sector
Parameter
Very Significant
Fairly Significant
Significant
Not at all
Total
Observed N
165
40
80
15
300
Expected N Chi-Square Probability

75.0
75.0
75.0
172.66
0.00
75.0
300
Remark
Significant
The table above presents a chi-square analysis showing the impact of ICT on career
development in banking sector. The result of the analysis presented above shows that 165
respondents were of the opinion that ICT has very significant effect on career development,
40 respondents opined that ICT has a fairly significant effect on career development and 80
respondents opined that ICT has a significant effect on career development while 15
respondents were of the opinion that ICT has no effect on career development.
Nevertheless, the chi-square value of 172.66 whose probability close to zero percents shows
statistically that ICT has very significant effect on career development.
K.C. COLLEGE
45
Discussions of Findings
The study dealt extensively on business planning, information preference and use among
managers in Nigeria banking industry. The study reveals among others that for any financial
institution to thrive well, they must plan ahead in order to determine the future direction of the
organization. Planning is not a waste of time but an important pre-requisite for any
successful organization. Planning reduces the likelihood of a venture collapsing which is
essential to the success of the venture. The study also reveals that increase in business
planning will lead to increase in profitability. And this is the ultimate goals and objective of
any organization. It also reveals that making use of digitalised information in banking sector
is an important part of coping with challenges faced by employee on their jobs, this will
enhance the performance and productivity of the sector. The 172.66 value with the zero
percents probability of ICT applicability in the activities of banks in Nigeria is an indication
that, the device has significant effect on bank workers performance.
Conclusion
Banks in Nigeria must take into account proper adequate planning, information preference
and use for better performance and to be in line with the ultimate mission, aim and objective
of the organization. To this regard, the efficiency and ingenuity that separate banking sector
in Nigeria from their counterpart in the developed nation need to be join together through
stable internet connectivity, planning ahead of major and minor activities and genuine
consolidation of e-banking system that has come to stay.
Recommendations
1. Management of each of the banks in Nigeria must take into consideration proper provision
and maintenance of efficient information system in order to achieve maximum profit. They
should provide this information by establishing and maintaining libraries and information
services.
2. Proper planning must be carried out before the establishment of any financial institution.
3. The bank management should recognize the rights of their managers and other personnel
to necessary specialized information services such as automated reference services, current
awareness services, and selective dissemination of information can be provided to further
enhance their productivities and self-development.
4. Information technology application to banking activities, and services of the banks should
be improved upon to further enhance effectiveness.
5. Existing banks in Nigeria should be made to carry out overhauling of the operations by
ensuring appraisal of the strategies and approach to information use and preference
K.C. COLLEGE
46
Business Plan Client Case Study

Two of the most basic questions you'll hear from people unfamiliar with business planning
are (a) what sort of business requires a plan, and (b) what does a business plan look like? In
short, the answer to (a) is: any business. If you need funding to launch an idea or expand
your current set of products or services, you'll need a business plan, no matter what sort of
work you're doing. The brief answer to (b) is: a business plan is a highly structured,
information-rich document filled with data and research that support every aspect of your
company (or idea) in order to make the expansion (or start-up) an appealing venture for a
bank or private investor.
But perhaps a more useful way to examine the scope of this complex document, the
business plan, is to string together several case studies that show a range of business
concepts in action. By considering specific examples of business plans we have created, we
can begin to demonstrate precisely how this industry operates and what it ultimately
produces. So, first, we'll consider the case of Synergy Dental, a Portland, Oregon dentist.
Synergy Dental, now in active operation, is a full-service Portland, Oregon dentist with an
office not far from downtown that offers an entire spectrum of orthodontic services and
procedures. The owner's idea was to create a premier facility which specialized in advanced
dental procedures, but still offered commonplace services like tooth cleaning and whitening.
Fortunately for the client, he was already well-known regionally as a high-quality Portland,
Oregon dentist, which made his goal of creating a top-flight dental office more realistic. It is
important to note, however, that reputation alone will not guarantee you approval on a major
bank loan. Far from it. Without supporting market research, convincing financials, and
accurate service descriptions, the concept simply wouldn't stand up against the litmus test
that the SBA, banks, and venture capitalists employ to measure the worth of a business
idea. That's where the business plan comes in. We partnered with Synergy Dental to create
a document that would answer these needs. We performed careful market research
(analyzing the demographics of the surrounding area that the clinic would target); clearly
spelled out the services that would be available; prepared vetted, painstaking financial
forecasts; and developed a marketing strategy designed to leverage the dentist's formidable
background and experience to bring the company into great prosperity. Many days, hours of
revision, and thirty pages later, we delivered The Plan, and the Portland, Oregon dentist that
yearned to open a full-service office was on his way toward a hearty approval from the bank
an approval that would never have come without the Document.
K.C. COLLEGE
47
EXECUTIVE SUMMARY
The growing needs of individuals and business enterprises over the years saw an immense
change in economies across the globe. This increase led to globalization - where business
entities were open to take risks not only in their country, but foreign nations as well. This, in
turn, led to the liberalization of economies and deregulation of certain guidelines set by
regulatory and supervisory authorities. The Indian Banking system has The Reserve Bank of India
(RBI) as the apex body for all matters relating to the banking system. It is the Central bank
of India and known as the
banker to all other banks. Business planning and strategies help owners and managers
crystallize their ideas, focus their efforts and monitor performance against established
objectives. This project on Business Planning by Banks will initially begin with giving you an
overview of business planning needs, ethics and standards followed by companies, in general.
Banks formulate business activities in order to attract more customer more deposits and
advances. These avenues bring interest to a bank. But in the more recent times banks have
spotted a huge business potential in fee-based income as well. They realized that, by
widening their product base, more income from non-interest sectors could be earned. Thus came into
existence merchant banking, non-personal banking facilities and even the merger of bankinginsurance. These aspects of business planning have also been covered through this project. The
above business avenues increase the needs of customers as well. In order to feed this demand, banks
must be able to equalise it with a steady and probably high growing supply. But again this
would require certain guidelines to be either altered or framed in the favour of banks. Banks
too, require a certain amount of credit security while conducting various businesses.
Guidelines by the Reserve Bank of India, the Securities and Exchange Board of India, and
the Insurance Regulatory and Development Authority have been discussed for certain business
avenues of banks. In conclusion to this extremely vast and debatable topic of Business
Planning by Banks, I have also included a case study of Canara Bank and some of its business
details, goals for the current financial year and its most recent venture with HSBC Bank and
Oriental Life Insurance Company, during the current year.
K.C. COLLEGE
48
CONCLUSION
Banks have evolved a great deal in comparison to the number of products and level of sophistication in
terms of business today, and back in the past. Banks not only operate on their basic banking
business of accepting deposits and lending their customers money to others to earn profit,
but have ventured out into aspects that fetches them a high amount of fee for the service provided. The
merchant banker plays a vital role in channelizing the financial surplus of the society into
productive investment avenues. The use of technological facilities by banks makes payment
mechanism speedy and hassle free .ATMs and Credit Cards are the need of the hour.
People today own credit cards with an intention to earn status, and some, since it is much
easier than to carry bundles of currency notes. Banks today, are absorbing maximum
advantage of these situations to earn fee based income. This is possible when card holders make
interbank transactions or exceed credit limits. Banks also induce customers to deposit upto a
certain amount in order to get additional facilities on the credit card .Consumer Loans and
corporate loans today, are available for practically any commodity. Rates are being sacked
by the RBI in order to meet the needs of the market. This in one way may prove negative, because
reduction of interest rates would induce customers to borrow more and this can put the bank at
a risk of non-repayment of principal and interest. The most interesting fact about business planning
by banks is that, banks cannot work under rules set by them. They must function under a frame work of
regulations, be it in the sector of providing advances or making technological changes. Even new
business avenues that are being entered into must gain prior approval of various regulatory authorities.
Finally, I would like to conclude my project on Business Planning by Banks. The project had
been taken up by me, to get an insight of how the banking business functions in its numerous activities
bearing in mind the guidelines, that must be mandatorily followed.
K.C. COLLEGE
BIBLIOGRAPHY
http://www.scribd.com/doc/36743856/Business-Planning-by-Banks
http://www.algorithmics.com/en/services/10421-prodserv.cfm
http://www.masterplans.com/help/client-case-study-synergy-dental
http://www.investopedia.com/terms/b/business-banking.asp#ixzz26WMdD5UZ
http://www.investopedia.com/terms/b/business-banking.asp#axzz26WMYx687
http://currentaffairsbankpo.blogspot.in/2010/03/types-of-banks-in-india-2010.html
http://www.banknetindia.com/banking/boverview.htm
http://en.wikipedia.org/wiki/Financial_services
http://www.indiainbusiness.nic.in/studies_survey/banking_systemsurvey.pdf
K.C. COLLEGE
49
50
ACKNOWLEDGEMENT
I Rohit Sachdeva Roll No. 28 semester Fifth B.Com(Banking and

Insurance)would like to express my deepest gratitude to my advisor and
my professor Miss Ritika Nichani, for her excellent guidance, caring,
patience, and providing me with an excellent atmosphere for doing
research. I would never have been able to finish my project without the
guidance of her. She has taken a lot of hard work to go through the
project and make necessary correction as and when needed. I express
my thanks to the Principal of K.C. College Miss Manju Nichani
for extending her support.
I would also thank my Institution and my faculty members without whom
this project would have been a distant reality
K.C. COLLEGE

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BUSINESS PLANNING BY BANKS

What does banking mean?

Need of Business Planning?

Auditing required in Business Plan

Strategic Business Planning

Features and Benefit of Strategic Planning

Why BPM for Banking?

Indian Banking Research

Business Plan Product or Service

What are the growth drivers of the Banking 23

Business Process Re-Engineering

Banking Regulation in Business Plan

Golden rule of banking in Business Plan

Case Study in Business Plan

Business Plan Client Case Study