Professional Documents
Culture Documents
ACKNOWLEDGEMENT
Working on this project has been a good experience. I would like to thank a number of people
Firstly I would like to thank the University of Mumbai, for bringing out a topic like this which
enabled me to explore the whole banking sector environment. Then I want to express my
I am grateful to my Prof. KALPANA RAI MENON who guided me throughout the procedure in
I would like to thank my classmates, friends and family members who supported me in collecting
13. QUESTIONNAIRE 43 - 53
14. FINDINGS 54 - 55
15. SUGGESTIONS 56
16 WEBILOGRAPHY 57
INTRODUCTION TO BANKING
The Indian banking can be broadly categorized into nationalized (government owned), private
banks and specialized banking institutions.The Reserve Bank of India acts a centralized body
monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks
in 1969 , the public sector banks or the nationalized banks have acquired a place of prominence
and has since then seen tremendous progress. The need to become highly customer focused has
forced the slow-moving public sector banks to adopt a fast track approach. The unleashing of
products and services through the net has galvanized players at all levels of the banking and
financial institutions market grid to look anew at their existing portfolio offering. Conservative
banking practices allowed Indian banks to be insulated partially from the Asian currency
crisis.Indian banks are now quoting al higher valuation when compared to banks in other Asian
countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to
huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble
footed in approach and armed with efficient branch networks focus primarily on the ‘high
The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian
market and is addressing the relevant issues to take on the multifarious challenges of
globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive
players capable of meeting the multifarious requirements of the large customers base. Private
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banks have been fast on the uptake and are reorienting their strategies using the internet as a
medium The Internet has emerged as the new and challenging frontier of marketing with the
conventional physical world tenets being just as applicable like in any other marketing medium.
The Indian banking has come from a long way from being a sleepy business institution to a
highly proactive and dynamic entity. This transformation has been largely brought about by the
large dose of liberalization and economic reforms that allowed banks to explore new business
opportunities rather than generating revenues from conventional streams (i.e. borrowing and
lending). The banking in India is highly fragmented with 30 banking units contributing to
almost 50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the
government) continue to be the major lenders in the economy due to their sheer size and
penetrative networks which assures them high deposit mobilization. The Indian banking can be
broadly categorized into nationalized, private banks and specialized banking institutions.Indian
Banking has helped in developing the vital sectors of the economy and usher in a new dawn of
progress on the Indian horizon. The sector has translated the hopes and aspirations of millions
of people into reality. But to do so, it has had to control miles and miles of difficult terrain,
suffer the indignities of foreign rule and the pangs of partition. Today ,Indian banks can
Before the 20th century, usury, or lending money at a high rate of interest, was widely prevalent
in rural India. Entry of Joint stock banks and development of Cooperative movement have taken
over a good deal of business from the hands of the Indian money lender, who although still
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exist, have lost his menacing teeth. In the Indian Banking System, Cooperative banks exist side
by side with commercial banks and play a supplementary role in providing need-based finance,
especially for agricultural and agriculture-based operations including farming, cattle, milk,
hatchery, personal finance etc. along with some small industries and self-employment driven
activities. Generally, co-operative banks are governed by the respective co-operative acts
of state governments. But, since banks began to be regulated by the RBI after 1stMarch 1966,
these banks are also regulated by the RBI after amendment to the Banking Regulation Act 1949.
The Reserve Bank is responsible for licensing of banks and branches, and it also regulates
credit limits to state co-operative banks on behalf of primary co-operative banks for financing
SSI units.4Banking in India originated in the first decade of 18th century with The General
Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both
these banks are now defunct. After this, the Indian government established three presidency
banks in India. The first of three was the Bank of Bengal, which obtains charter in 1809, the
other two presidency bank, viz., the Bank of Bombay and the Bank of Madras, were established
in 1840 and 1843,respectively. The three presidency banks were subsequently amalgamated into
the Imperial Bank of India (IBI) under the Imperial Bank of India Act, 1920 –which is now
known as the State Bank of India.A couple of decades later, foreign banks like Credit Lyonnais
started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active
trading port, mainly due to the trade of the British Empire, and due to which banking activity
took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank,
which was established in 1865.By the 1900s, the market expanded with the establishment of
banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai
– both of which were founded under private ownership. The Reserve Bank of India formally
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took on the responsibility of regulating the Indian banking sector from 1935. After India‟s
independence in 1947, the Reserve Bank was nationalized and given broader powers.As the
banking institutions expand and become increasingly complex under the impact of deregulation,
and stability. During the last 30 years since nationalization tremendous changes have taken
place in the financial markets as well as in the banking industry due to financial sector reforms.
The banks have shed their traditional functions and have been innovating, improving and
coming out with new types of services to cater emerging needs of their 5customers. Banks have
been given greater freedom to frame their own policies. Rapid advancement of technology has
portfolio and improvements in credit delivery of banks. Prudential norms, in line with
international standards, have been put in place for promoting and enhancing the efficiency of
banks. The process of institution building has been strengthened with several measures in the
areas of debt recovery, asset reconstruction and securitization, consolidation, convergence, mass
banking etc.
Despite this commendable progress, serious problem have emerged reflecting in a decline in
productivity and efficiency, and erosion of the profitability of the banking sector. There has
been deterioration in the quality of loan portfolio which, in turn, has come in the way of bank ‟s
income generation and enchancement of their capital funds. Inadequacy of capital has been
accompanied by inadequacy of loan loss provisions resulting into the adverse impact on the
Committee to look into the problems and recommend measures to improve the health of the
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financial system. The acceptance of the Narasimham Committee recommendations by the
overbureaucratized banking system into market driven and extremely competitive one.
The massive and speedy expansion and diversification of banking has not beenbe facing
increasing competition from non-banks not only in the domesticmarket but in the international
markets also. The operational structure of banking in India is expected to undergo a profound
change during the nextdecade. With the emergence of new private banks, the private bank sector
has 6become enriched and diversified with focus spread to the wholesale as well as
retail banking. The existing banks have wide branch network and geographicpread, whereas the
new private banks have the clout of massive capital, leanpersonnel component, the expertise in
Gradual deregulation that is being ushered in while stimulating the competitionwould also
facilitate forging mutually beneficial relationships, which wouldultimately enhance the quality
and content of banking. In the final phase, thebanking system in India will give a good account
of itself only with thecombined efforts of cooperative banks, regional rural banks and
development banking institutions which are expected to provide an adequate number of effective
retail outlets to meet the emerging socio-economic challenges during he next two decades. The
electronic age has also affected the banking system, leading to very fast electronic fund transfer.
However, the development of electronic banking has also led to new areas of risk such as data
Cooperative (mutual) banks are an important part of many financial systems. In a number of
countries, they are among the largest financial institutions when considered as a group.
Moreover, the share of cooperative banks has been increasing in recent years; in the sample
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ofbanks in advanced economies and emerging markets analyzed in this paper, the market shareof
cooperative banks in terms of total banking sector assets increased from about 9 percent in mid-
The Reserve Bank of India act as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The
nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking
arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223
banks are in the public sector and 51 are in the private sector. The private sector bank grid also
includes 24 foreign banks that have started their operations here. Under the ambit of the
nationalized banks come the specialized banking institutions. These co-operatives, rural banks
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INDUSTRY SCENARIO OF INDIAN BANKING INDUSTRY
The growth in the Indian Banking Industry has been more qualitative than quantitative and it is
expected to remain the same in the coming years. Based on the projections made in the "India
Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts
that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets
will comprise about 65 per cent of GDP at current market prices as compared to 67 per cent in
2002-03. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during
the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95
and 2002-03. It is expected that there will be large additions to the capital base and reserves on
The Public Sector Banks(PSBs), which are the base of the Banking sector in India account for
more than 78 per cent of the total banking industry assets. Unfortunately they are burdened with
excessive Non Performing assets (NPAs), massive manpower and lack of modern technology. On
the other hand the Private Sector Banks are making tremendous progress. They are leaders in
Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned
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In the Indian Banking Industry some of the Private Sector Banks operating are IDBI Bank, ING
Vyasa Bank, SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd. and banks
from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental Bank,
Allahabad Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank, American Express
Bank Ltd, Citibank are some of the foreign banks operating in the Indian Banking Industry.As
far as the present scenario is concerned the Banking Industry in India is going through a
transitional phase. 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
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-
ofthe-art technology, which in turn helps them to save on manpower costs and provide better
services
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EVOLUTION AND GROWTH OF DEBIT AND CREDIT CARD
The number of credit and debit card users in India is climbing fast, and rising affluence is likely
to erode Indians’ lingering reluctance to spend on credit. Indians have traditionally valued thrift
and frugality. But the spread of affluence in the wake of rapid economic growth is challenging
these values, at least for many middle-class and high-income families. One sign of this is the
phenomenal growth in the number of credit and debit cards in India—in the past three years, the
number of credit cards has more than doubled and the number of debit cards has almost
quadrupled. Credits cards are a relatively recent development. The VISA Company, for example,
traces its history back to 1958 when the Bank of America began its Bank Americard program. In
the mid-1960s, the Bank of America began to license banks in the United States the rights to
issue its special Bank Americards . In 1977 the name Visa was adopted internationally to cover
all these cards. VISA became the first credit card to be recognized worldwide.Credit cards are
relatively new to India. Andhra Bank and Central Bank of India introduced credit cards in 1981.
As of now there are about more than dozen major banks in Indian and foreign which have
entered this line of business, besides some non-banking institutions. Since the plastic money has
become as good as legal tender more people are using them in their day-to-day activities. The
attitude of people towards credit cards has changed. A phenomenal amount of money moves get
transacted nowadays through electronic transfer, credit cards and debit cards. The Indian credit
card market is in its growth phase, it recorded a growth of about 30 per cent a year. Debit cards
aregrowing at 40 per cent. The RBI data put total electronic transaction in the country at over
January) of 2007-08. At the end of April-January 2007-08, all of us together held about 27.5
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million credit cards transacted Rs.47,476crores through these cards in 10 months of the year.The
Indian credit cards industry is still in a relatively nascent stage when compared to economies in
West Asia, a survey by Master Card International. According to the survey results, only 14 per
cent of Indians currently own a credit card. This is in sharp contrast to countries such as the
United Arab Emirates and Kuwait where 63 per cent and 50 per cent of respondents,
respectively, own a credit card. The results indicate that the high growth potential for the
payment card industry in India, In terms of the single most important factor influencing choice of
credit card, 30 per cent of Indians say they are influenced by the credit card brand, closely
followed by 23 per cent who choose a credit card depending on the credit limit. Interestingly, 8
per cent of cardholders say they are influenced by the card design, while only 5 per cent and 2
per cent cardholders say they are influenced by the interest rate and the bank staff
recommendations respectively.
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WHAT IS DEBIT CARD
A debit card (also known as a bank card or check card) is a plastic payment card that provides
the cardholder electronic access to his or her bank account at a financial institution. Some cards
may bear a stored value with which a payment is made, while most relay a message to the
cardholder's bank to withdraw funds from a payer's designated bank account. The card, where
accepted, can be used instead of cash when making purchases. In some cases, the primary
account number is assigned exclusively for use on the Internet and there is no physical card.
In many countries, the use of debit cards has become so widespread that their volume has
overtaken or entirely replaced cheques and, in some instances, cash transactions. The
development of debit cards, unlike credit cards and charge cards, has generally been country
specific resulting in a number of different systems around the world, which were often
incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in
one country to be used in other countries and allowed their use for internet and phone purchases.
Unlike credit and charge cards, payments using a debit card are immediately transferred from the
cardholder's designated bank account, instead of them paying the money back at a later date.
Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash. Merchants may also offer cashback facilities to customers, where a customer
can withdraw cash along with their purchase.A debit card is always tied to a checking account;
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so they are also sometimes known as "checking cards." Any time you use a debit card to buy
something, money is deducted from your account — usually on the same day, if not immediately.
For example, if you have $1,000 in an account and spend $30 using a debit card, $30 is removed
from the checking account, leaving behind $970. With a debit card, you can really only spend the
money you have available to you. If you only have $970 left, spending any more than mayl result
in an overdraft charge.When you use a debit card for an in-person (not online) transaction, you
must use your personal identification number, or PIN, to approve the transaction. When you use
a debit card for a credit card-like transaction, you will normally have to sign a receipt (in the
U.S.). However, signature requirements are being phased out in favor of PINs, so soon there will
be no difference between the experience of using a debit card for a debit or credit transaction.It is
easy to apply for a debit card. Any bank or credit union that you have a checking account with
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Types of Debit Cards
1. PIN-only cards:
PIN-only debit cards are linked to your bank account and can be used for cash
transactions and fund transfer, buy from retailers and pay bills online or by phone. The
card holder is required to enter a secure PIN for every transaction to establish identity
2. Dual-use cards:
Dual-use debit cards are both signature- and PIN-enabled, and tied directly to your bank
account. You can verify your identity either by signing or entering your PIN.
3. EBT cards:
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Electronic Benefits Transfer (EBT) cards debit cards provided by a state or federal
government agency to users who qualify for food stamps, cash payments, or other
4. Prepaid cards:
Prepaid cards are not linked to a specific account, but provide access to funds deposited
directly on the card by you or a third party. In effect, they work as a store-credit or gift
card.
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ADVANTAGES OF DEBIT CARD
1. Prepaid card
Debit card acts as a type of prepaid card. It is so, since it already has a sufficient amount
of cash balance in its holder’s bank account. It permits to carry on the value of the transaction
(i.e. purchases) to the extent of available balance in its holder’s bank account.
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2. Nominal fee
Bank issuing a debit card charges an annual fee for the issuance and maintenance of card. This
fee charged is very nominal in nature. Generally, bank charges the fee on a per annum or
yearly basis. Such a fee gets automatically debited (deducted) from the debit-cardholder’s
bank account.
3. Alternative to cash
Debit card acts as an alternative mode of payment for executing various cash-related financial
transactions. It can be used for the purchases of goods and receipt of services. In its presence,
there is no need to carry a large amount of cash. Thus, it helps to avoid carrying huge amount
of cash while traveling and minimize risk of loss due to theft, damage, etc.
Debit card ensures immediate transfer of funds in the merchant’s or dealer’s bank account.
Such a transfer of funds takes place almost instantly at the moment of purchases of goods and
receipts of services. With its use, there is no need to visit bank’s office premise and do a
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Thus, it saves precious time and gives ease, safety, and comfort to its holder in his or her’s
finance-related activities.
The debit card facilitates instant withdrawal of cash from any nearest ATM. This helps its
holder to avoid a personal visit to bank’s office premise and wait in a long time-consuming
queue.In short, it also acts as an ATM card to meet its holder’s cash-related needs, anytime and
anywhere.
6. Easy to manage
Debit card is very easy to carry, handle and manage while traveling to outstations or overseas.
Being small, thin, flat and having a negligible weight it easily fits in any pocket. It can be
handled very freely even with just two fingers. Managing it is also not a big problem.
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a. Debit card is always covered with a thick plastic cover to avoid scratching of its sensitive
surface.
d. It is placed safely in a convenient location which one remembers. This helps to avoid it
Now-a-days, the competition among debit card providers (banks) is challenging. Today, most
banks offer bonus points to encourage their cardholders (customers) to make purchases using
their debit cards. Banks are able to offer such points to their cardholders as it’s merchants and
After every successful sale, a merchant gives the bank a small cut-off or percentage as a
commission. This commission is further shared or divided by the bank with its holder (as a
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reward) who did the original purchase. Thus, in return, it finally also helps the cardholder earn
bonus points on selected financial transactions executed by him or her via a debit card.
In this cycle, all, viz., bank, merchant, and cardholder are directly benefited. Bank offers an
incentive like this to improve the sale of the products in the ordinary course of business and
As we have seen above, debit card helps to accumulate bonus points through a reward
program. These points can be redeemed by the cardholder (within card’s expiration date) at
any merchant website and/or outlet that bank has already authorised. While redeeming
accurred points, cardholder gets an idea of its worthiness in terms of amount, and so he/she
9. Cash back
In a cash back, cardholder gets a percentage of the total amount spent on purchases made
using his card. In other words, when a holder use his debit card to buy something then a
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percentage of entire moneyhe spent usually in a month is credited-back to his account once
Consider for an example, a debit-cardholder spends 100 dollars three times a month on
shopping and the cash-back offer on shopping is 10 percent. In such a case, cardholder will get
back $30, which is 10% of $300 ($100 × 3) returned to his account in the coming month.
However, to avail this offer some minimal amount must be spent on some minimum number
For an instance, a cash back debit card provider may say in his terms as,
Debit-cardholders also gets free insurance coverage. The bankers provide such insurance
facilities to attract new customers and to maintain their current customer strength.
b. Purchase insurance,
c. Personal insurance,
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d. Accidental insurance,
However, these types of insurances are given freely to cardholders depending on which type
The cost of insurance premium is borne by the bankers who provide debit cards to their
customers.
It helps to budget one’s expenses and do a responsible spending of own money within
account limits.
Its holder uses his own money and not any borrowed (loaned) money. Unlike a credit
card, here, no interest is charged. Hence, its transactions are interest free.
It is accepted internationally, by e-commerce websites, and almost everywhere by
merchants who display the logo of payment processing companies like VISA, Master
Card, American Express, etc. This ensures making successful payments anywhere in the
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DISADVANTAGE OF DEBIT CARD
1.Disputed charges can be more difficult to resolve. Since money was spent out of your account
at the moment of purchase, you have more risk with a debit card than with a credit card if the
2. Some banks may charge you extra fees. There could be monthly service charges, over-limit
fees, per transaction costs, or penalties for dropping below a minimum required balance that
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3. You don't improve your credit score. Building up your credit score is an important
consideration for your financial future. Paying bills, such as credit card payments, on time is the
most effective way to increase your rating or to maintain a high credit score.
4. You can't take advantage of reward points. One of my favorite reasons for using a credit card
when making any large purchase is the opportunity to get travel reward points. There are many
different types of cards that offer a variety of great incentives, and I have an entire episode
5. It gives you lower levels of fraud protection. If a thief gets your Personal Identification
Number, they could easily empty your bank account. Fraud certainly happens with credit card
use as well. However, most credit card companies put a hold an any account that shows unusual
activity.
6. And lastly, your potential liability for misuse is unlimited.This contrasts the low risk that
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WHAT IS CREDIT CARD
Unlike debit cards, credit cards are not connected to a checking account. Instead, they are
tied to a financial institution, such as a bank or credit company, that is in the business of
issuing revolving lines of credit to consumers. Whereas a debit card transaction is mainly
between the buyer and seller, a credit card transaction specifically involves a third party: the
For example, if you use your credit card to buy $30 of groceries, you are not directly paying
the grocery store. Instead, the grocery store is paid $30 by the credit issuer. This is $30 that
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With a credit card, you are never limited by the amount of money you have in your
checking account, which can be one of the major cons to debit cards for many consumers.
Instead, you are limited by whatever the credit limit on the card is. If you are new to the
world of credit, a credit card company may only issue you a card with a $1,000 credit limit.
This means you only have $1,000 of revolving credit to use. Some card issuers increase
credit limits over time for those who build up a good credit history by paying off their
It is relatively harder to get a credit card than it is to get a debit card, especially for those
with no credit history or a poor credit history. When you apply for a credit card, the issuer
evaluates your creditworthiness to determine how risky it is to loan you money. If the
issuing company believes you are a poor credit risk, your application for a credit card will
be rejected.The credit card business got momentum in the sixties and a number of banks
entered the field in a big way. Credit card culture is an old hat in western countries. In
India, it is relatively a new concept that is fast catching on. The present trend indicates that
the coming years will witness a burgeoning growth of credit cards which will lead to a
cashless society. Credit has become an important vehicle of trade promotion. Credit cards
One of the important reasons for the popularity of credit cards is the sea change witnessed
without paying immediately. The buyer only needs to present the credit cards at the cash
counter and sign the bill. Credit card can, therefore, be considered as a good substitute for
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purchase goods, travel and dine in a hotel without making immediate payments. The
holders can use the cards to get credit from banks up to 50 days free of cost. The credit card
relieves the consumers from botheration of the carrying cash and ensures safety. It is a
convenience of extended credit without formality. Thus credit card is a passport to, “safety,
convenience, prestige and credit.”A credit card is a plastic card having a magnetic strip,
issued by a bank or business authorizing the holder to buy goods or services on credit. Any
card, plate or coupon book that may be used repeatedly to borrow money or buy goods and
services on credit is called credit card. A credit card is a card establishing the privilege of
the person to whom it is issued to charge bills. Most retail firms accept credit cards. Credit
cards allow consumers to make purchases without paying cash immediately or establishing
They eliminate the need to check credit ratings and to collect cash from individual
customers. The issuing institution establishes the card’s terms, including the interest rate,
annual fees, penalties, the grace period, and other features. Credit card debt is typically an
unsecured debt. Repossession is not easily accomplished by the lender to ensure payment.
Banks have often priced the product assuming maximum risk exposure.A credit card is a
device which enables the holder to obtain goods on credit from specified supplies. The
holder of the card, in some cases, has to pay the yearly subscription and the suppliers also
have to pay commission on sales to the bank or the body issuing the card. The suppliers are
paid promptly and so are protected against bad debts, while the holder makes a single
monthly payment to cover all his purchases for that period. Credit cards are issued only
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Types of Credit Cards
1. The Standard Credit Card: These are general purpose credit cards with revolving
balance (i.e. credit is used up when purchases are made, and is open again once the bill is
paid). Standards cards are usually starter credit cards, usually for applicants with little or no
2. Reward Credit Cards: These cards offer several rewards programs in the form of cash,
points or discounts, and are intended to influence your spending. Reward cards usually
come with an associated annual fee and a lot of fine print; the key is to make sure the
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3. Secured Credit Cards: Also known as pay-as-you-go cards, their primary purpose is to
give people with bad credit history a chance to reestablish credit. The user first deposits a
"secure" amount (say $300-$3000), which makes for the credit line. The credit limit is
usually a percentage (50%-100%) of this amount. These cards come with an annual fee and
a high APR.
4. Charge Cards: Charge cards do not have a preset spending limit and balances must be
Convenience--Credit cards can save you time and trouble--no searching for an ATM or keeping
cash on-hand.
Record keeping--Credit card statements can help you track your expenses. Some cards even
Low-cost loans--You can use revolving credit to save today (e.g., at a one-day sale), when
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Instant cash--Cash advances are quick and convenient, putting cash in your hand when you
need it.
Perks--From frequent flier miles to discounts on automobiles, there is a program out there for
everyone. Many credit card companies offer incentive programs based on the amount of
Build positive credit--Controlled use of a credit card can help you establish credit for the first
time or rebuild credit if you've had problems in the past--as long as you stay within your means
Purchase protection--Most credit card companies will handle disputes for you. If a merchant
won't take back a defective product, check with your credit card company.
Balance surfing--Many credit card companies offer low introductory interest rates. These offers
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Disadvantages of credit card
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Paperwork--You'll need to save your receipts and check them against your statement each
month. This is a good way to ensure that you haven't been overcharged.
High-cost fees--Your purchase will suddenly become much more expensive if you carry a
Unexpected fees--Typically, you'll pay between 2 and 4 percent just to get the cash advance; also
No free lunch--The high interest rates and annual fees associated with credit cards often
outweigh the benefits received. Savings offered by credit cards can often be obtained elsewhere.
Deepening your debt--Consumers are using credit more than ever before. If you charge freely,
you may quickly find yourself in over your head--as your balance increases, so do your monthly
minimum payments.
Homework--It's up to you to make sure you receive proper credit for incorrect or fraudulent
charges.
Teaser rates--Low introductory rates may be an attractive option, but they last only for a limited
time. When the teaser rate expires, the interest rate charged on your balance can jump
dramatically.
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Comparision chart
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Credit Card Debit Card
Credit cards are lines of credit. When you Any time you use a debit card to buy something,
use a credit card, the issuer puts money money is deducted from your account. With a
toward the transaction. This is a loan you debit card, you can really only spend the money
About
are expected to pay back in full (usually you have available to you.
charged interest.
To account.
Monthly Yes No
Bills
Applicatio Somewhat difficult, depending on one's Easy, with basically no barrier to receiving a
The credit limit set by the credit issuer. However much is in the bank account connected
Spending
Limits increase or stay the same over time to the card.
Limit
as a borrower's creditworthiness changes.
If a credit card bill is not paid in full, No interest is charged because no money is
Interest
interest is charged on outstanding balance. borrowed.
Charged
The interest rate is usually very high.
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Credit Card Debit Card
Credit cards in the U.S. are not very secure A PIN makes them secure so long as no one
in and of themselves because many still steals the card number and PIN, and as long as
Security use dated card security technology. you don't lose the card itself. If the card/info is
However, consumers are not held liable for stolen, debit cards are very insecure.
Low. Rarely held liable for fraudulent High. If someone steals your card and makes
activity. If you are, you are only held liable purchases, that money is removed from your
Fraud for a maximum of $50. bank account. Investigating this damage takes
Liability time. The longer you wait to report the fraud, the
losses.
Responsible credit card usage and payment Does not affect credit history.
on a monthly basis.
Low. Some credit card companies allow to High "overdraft" fees. Possible to overdraw
Overdraw
overdraw amount over the maximum credit amount over the account limit.
Fees
line with a fee.
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Credit Card Debit Card
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DIFFERENCE BETWEEN DEBIT CARDS AND CREDIT CARDS
Debit cards and credit cards are accepted at the same places. Debit cards all carry the symbol of
one of the major types of credit cards on them, and can be used anywhere that credit cards are
accepted. They both offer convenience. The fundamental difference between a debit card and a
credit card account is where the cards pull the money. A debit card takes it from your banking
Debit cards offer the convenience of a credit but work in a different way. Debit cards draw
money directly from your checking account when you make the purchase. They do this by
placing a hold on the amount of the purchase. Then the merchant sends in the transaction to their
bank and it is transferred to the merchants account. It can take a few days for this to happen, and
the hold may drop off before the transaction goes through. For this reason, it is important tokeep
and to make sure you do not accidentally overdraw your account. It is possible to do that with a
debit card.
A credit card is a card that allows you to borrow money in small amounts at local merchants. You
use the card to make your basic transactions. The credit card company then charges you interest
on your purchases, though there is generally a grace period of approximately thirty days before
interest is charged if you do not carry your balance over from month to month.
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In the past many people felt that you needed a credit card to complete certain transactions such
as rent a car or to purchase items online. They also felt that it was safer and easier to travel with a
credit card rather than carrying cash or trying to use your checkbook. However debit cards offer
the same convenience without making you borrow the money to complete the transactions.
It is better to use your debit card whenever possible, because it will prevent you from
accidentally falling into the credit card trap. When you can pay cash for most items, you are
doing better financially. Some rental car agencies and hotels may still request a debit card over a
credit card because they want to have a card where they can bill you for damages to their
property. Be sure to check with the hotel or agency before you travel to make sure you can use
your debit card instead of your credit card. Debit and credit cards offer more than a way to access
money without having to carry around cash or a bulky checkbook. Debit cards are like digitized
versions of checkbooks; a debit card is linked to your bank account (usually a checking account)
and money is debited (withdrawn) from the account as soon as the transaction occurs. Credit
cards are different; they offer a line of credit (i.e., a loan) that is interest-free if the monthly credit
card bill is paid on time. Instead of being connected to a personal bank account, a credit card is
connected to the bank or financial institution that issued the card. So when you use a credit card,
the issuer pays the merchant and you go into debt to the card issuer.Most debit cards are free
with a checking account at a bank or credit union.They can also be used to conveniently
withdraw cash from ATMs. Credit cards have the advantage of rewards programs but such cards
often require an annual fee to use. Financial responsibility is a big factor in credit card use; it is
easy to overspend and then get buried in overwhelming credit card debt at a veryhigh interest
rates.This comparison provides a detailed overview of what debit and credit cards are, their
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Outstanding credit card in Indian market
In the following table, we can see the year wise growth of the credit card industry in India.
(Number in lakh)
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From the above table one can observe that the credit card is a upward growth of 25 per cent to 34
per cent during 2001-02 to 2006-07. The highest growth rate reported on 2005-07 but in
FY2007-08, the rate of growth came down to 19.13 per cent which was below the average
growth scores of 23.20 per cent. Further, FY 2008-09, there was an unexpected sudden decline of
10.34 per cent and with many banks closing inactive and unproductive accounts in their credit
card portfolio. But during eight years commencing from 2001-2009 there was a growth of
around three time (307%). Further, the study indicates that the growth to some extent
willbeimpacted by the current financial turmoil and credit squeeze. Bankers will also become a
little more conscious while doing risk evaluation of card applicants upon expiration of the card,
banks did not renew for some customers and some canceled the cards voluntarily or by force due
to more default rate and credit losses of the banks. It could also be customer consolidation
because multiple cards becoming unmanageable by the users. The overall trend will remain
positive over the past periods. It is concluded that there was a growth of credit card business in
In the following table, we can see the year wise growth of the debit card in banking industry.
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(Number in lakhs)
The above table reveals that the growth of outstanding debit card in India for the past five years
around three times and the average score at the rate of 50.78 per cent. At present from 1st April
2009, the decision taken by the RBI to encourage paperless e-banking transaction, the customers
were allowed for free use of ATM-debit card without charge in any banks ATMs across the
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DEBIT CARDS OVERTAKING CREDIT CARDS IN INDIA
For the credit averse Indian, it's all about spending money that he already has and not paying
interest for credit taken. And that's becoming increasingly apparent in the growth of debit cards
in the country.
In the four years since the debit card was first launched in Bangalore by Citibank, issuance has
been growing at an annual rate of 150 per cent. The debit card base, which is already at 4
The country's credit card base, which is at 6 million, has been growing at an annual rate of 25-30
per cent.
The debit card base is going to see growth zoom when State Bank of India converts its one
million automated teller machine cards into debit cards in one shot in September this year. After
that, the bank will issue debit cards at the rate of 100,000 a month to other savings account
holders.
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Punjab National Bank, which has 30 million accountholders will also begin issuing debit cards to
accountholders within the next 2-3 months. MasterCard, will be the exclusive issuer for both
banks.
Though foreign and private banks were the first ones off the block in issuing debit cards, the real
Though debit card spends at present are much lower than spends on the credit card, issuers say it
"Its too early to expect high spends on the debit card. We are still in the process of growing the
cardholder base. The spends will follow," says Sameer Vakil, vice-president & country manager
Total spends on debit cards have increased to Rs 3,500 crore and are already a third that of credit
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QUESTIONNAIRE
1. Respondents were asked whether they know about Debit cards and credit
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2. Respondent were asked wether they use Debit cards. The result is as follows
44
3. Respondent were asked wether they use Credit cards.The result is as
follows
45
5. Respondent were asked about the frequently used cards . The results are
as follows
percentage
11% debit
credit
16%
both
47%
none
26%
46
5. Respondent were asked about who recommended them to use the cards.
percentage
10% friends
advertisement
20% banker
50% shopkeeper
20%
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6. Respondent were asked about the credit cards they used. The results are as
follows
percentage
visa card
25%
master card
amex card
45%
others
15%
15%
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7.Respondent were asked about the number of debit card owned by them. The
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8. Respondents were asked about the number of credit card owned by them. The
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9. Respondent were asked about the purpose of using the card. The results are as
follows
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11. Respondent were Asked about the credit limit of their cards. The results are as
follows
52
12.Reasons of choosing these particulars banks by the respondents. The results are
as follows
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FINDINGS
1. Respondent taken for this study is those who are using the debit and credit cards in their daily
life.
2. The respondents believe that the debit and credit cards are the currency of modern India.
3. 90 percent of respondents own debit card and 60 percent owns credit cards.
4. People have less craze for credit card. Only 60 percent of the respondents have credit card.
5. The 52 percent respondents use the only debit cards, the 25 percent use only credit cards and
6. The 38 percent respondents are advised by the bankers to use the cards, 25 percent are
influenced by the merchants and shopkeepers, and 5 percent are attracted by the advertisements.
7. The 32 percent respondents has maestro debit card, 28 percent master and 15 percent visa
8. The 25 percent credit cards holders owned the visa cards, 15 percent owned the master card
9. Respondents mostly prefer the credit cards of HDFC bank than ICICI bank and SBI.
10. The reasons behind choosing these banks are the more facilities and the past relationship with
these banks.
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11. The advantages of the debit cards and credit cards according to the respondents are easy to
carry, less time in money withdrawal, security in uses and mode of easy payments.
12. The different disadvantages of the debit and credit cards are more charges, limited credit
period, not use at everywhere, fear of losing the cards and insecurity in card processing.
13. Debit card is more beneficial according to respondents because easy payment and withdrawal
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SUGGESTIONS
1.Various offers and discounts should be provided on the cards uses so that all the users feel
2.The interest charges on credit cards should be reduced so that people are encouraged to use it
in regular routine.
3. More facility should be provided to the cardholder in order to satisfy them completely.
4.The unnecessary formalities should be reduced in order to obtain the plastic money.
5.Advertisements should be given through TVs, magazines and hoarding to have maximum
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WEBILOGRAPHY
http://www.asiatradehub.com/india/banks.asp
http://www.debitcardprocessing.org/advantagesanddisadvantagesofdebitcards.html
http://www.streetdirectory.com/travel_guide/151487/credit_cards/advantages_and_disadv
antages_of_credit_cards.html
http://www.allbankingsolutions.comTop-Topicsdep1.shtml
http://www.digit.in/forum/internet-www/161111-must-read-information-regarding-
indian-debit-cards.html
http://www.diffen.com/difference/Credit_Card_vs_Debit_Card
http://www.investopedia.com/terms/d/debitcard.asp
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