Tybcbi Final Project

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Products and Services offered by bank
AN INTRODUCTION TO THE BANKING

SECTOR
Banks are the most significant players in the Indian financial market.
They are the biggest purveyors of credit, and they also attract most of the
savings from the population. Dominated by public sector, the banking
industry has so far acted as an efficient partner in the growth and the
development of the country. Driven by the socialist ideologies and the
welfare state concept, public sector banks have long been the supporters
of agriculture and other priority sectors. They act as crucial channels of
the government in its efforts to ensure equitable economic development.
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
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(NPAs) and payment defaults. Co-operative banks are nimble footed in

approach and armed with efficient branch networks focus primarily on the
high revenue niche retail segments.
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
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.
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The Reserve Bank of India acts 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.
The liberalize policy of Government of India permitted entry to

private sector in the banking, the industry has witnessed the entry of
nine new generation private banks.
The major differentiating
parameter that distinguishes these banks from all the other banks
in the Indian banking is the level of service that is offered to the
customer. Their focus has always centered on the customer
understanding his needs, preempting him and consequently
delighting him with various configurations of benefits and a wide
portfolio of products and services. These banks have generally
been established by promoters of repute or by high value domestic
financial institutions.
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I. HISTORY OF BANKING IN INDIA

There are three different phases in the history of banking in India.
1)
2)
3)
Pre-Nationalization Era.
Nationalization Stage.
Post Liberalization Era.
1) Pre-Nationalization Era:
In India the business of
banking and credit was practices even in
very early times. The remittance of money through Hundies,
an indigenous credit instrument, was very popular. The
hundies were issued by bankers known as Shroffs, Sahukars,
Shahus or Mahajans in different parts of the country.
The modern type of banking, however, was
developed by the Agency Houses of Calcutta and Bombay
after the establishment of Rule by the East India Company in
18th and 19th centuries.
During the early part of the 19 th Century, ht
volume of foreign trade was relatively small. Later on as the
trade expanded, the need for banks of the European type
was felt and the government of the East India Company took
interest in having its own bank. The government of Bengal
took the initiative and the first presidency bank, the Bank of
Calcutta (Bank of Bengal) was established in 180. In 1840,
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the Bank of Bombay and IN 1843, the Bank of Madras was

also set up.
These three banks also known as
Presidency Bank. The Presidency Banks had their branches
in important trading centers but mostly lacked in uniformity
in their operational policies. In 1899, the Government
proposed to amalgamate these three banks in to one so that
it could also function as a Central Bank, but the Presidency
Banks did not favor the idea. However, the conditions
obtaining during world war period (1914-1918) emphasized
the need for a unified banking institution, as a result of
which the Imperial Bank was set up in1921. The Imperial
Bank of India acted like a Central bank and as a banker for
other banks.
The RBI (Reserve Bank of India) was established in
1935 as the Central Bank of the Country. In 1949, the
Banking Regulation act was passed and the RBI was
nationalized and acquired extensive regulatory powers over
the commercial banks.
In 1950, the Indian Banking system comprised of
the RBI, the Imperial Bank of India, Cooperative banks,
Exchange banks and Indian Joint Stock banks.
2) Nationalization Stages:
After Independence, in 1951, the All India Rural Credit survey,
committee of Direction with Shri. A. D. Gorwala as Chairman recommended
amalgamation of the Imperial Bank of India and ten others banks into a
newly established bank called the State Bank of India (SBI). The
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Government of India accepted the recommendations of the committee and

introduced the State Bank of India bill in the Lok Sabha on 16th April 1955
and it was passed by Parliament and got the presidents assent on 8th May
1955. The Act came into force on 1st July 1955, and the Imperial Bank of
India was nationalized in 1955 as the State Bank of India.
The main objective of establishing SBI by nationalizing the Imperial Bank
of India was to extend banking facilities on a large scale more particularly
in the rural and semi-urban areas and to diverse other public purposes.
In 1959, the SBI (Subsidiary Bank) act was proposed and the
following eight state-associated banks were taken over by the SBI as its
subsidiaries.
Name of the Bank
1. State Bank of Hyderabad
Subsidiary with effect from

1st October
1959
2. State Bank of Bikaner
1st January
1960
3. State Bank of Jaipur
1st January
1960
4. State Bank of Saurashtra
1st May 1960
5. State Bank of Patiala
1st April 1960
6. State Bank of Mysore
1st March 1960
7. State Bank of Indore
1st January
1968
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8. State Bank of Travancore
1st January
1960
With effect from 1st January 1963, the State Bank

of Bikaner and State Bank of Jaipur with head office located
at Jaipur. Thus, seven subsidiary banks State Bank of India
formed the SBI Group.
The SBI Group under statutory obligations was
required to open new offices in rural and semi-urban areas
and modern banking was taken to these unbanked remote
areas.
On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi
announced the nationalization of 14 major scheduled Commercial
Banks each having deposits worth Rs. 50 crore and above. This was a
turning point in the history of commercial banking in India.
Later the Government Nationalized six more commercial
private sector banks with deposit liability of not less than Rs. 200
crores on 15th April 1980, viz.
i)
Andhra Bank.
ii)
Corporation Bank.
iii)
New Bank if India.
iv)
Oriental Bank of Commerce.
v)
Punjab and Sind Bank.
vi)
Vijaya Bank.
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In 1969, the Lead Bank Scheme was introduced to

extend banking facilities to every corner of the country. Later
in 1975, Regional Rural Banks were set up to supplement the
activities of the commercial banks and to especially meet
the credit needs of the weaker sections of the rural society.
Nationalization of banks paved way for retail
banking and as a result there has been an alt round growth
in the branch network, the deposit mobilization, credit
disposals and of course employment.
The first year after nationalization witnessed the total growth in
the agricultural loans and the loans made to SSI by 87% and 48%
respectively. The overall growth in the deposits and the advances indicates
the improvement that has taken place in the banking habits of the people in
the rural and semi-urban areas where the branch network has spread. Such
credit expansion enabled the banks to achieve the goals of nationalization, it
was however, achieved at the coast of profitability of the banks.
Consequences of Nationalization:
The quality of credit assets fell because of liberal credit extension
policy.
Political interference has been as additional malady.
Poor appraisal involved during the loan meals conducted for credit
disbursals.
The credit facilities extended to the priority sector at concessional
rates.
The high level of low yielding SLR investments adversely affected the
profitability of the banks.
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The rapid branch expansion has been the squeeze on profitability of

banks emanating primarily due to the increase in the fixed costs.
There was downward trend in the quality of services and efficiency of
the banks.
3) Post-Liberalization Era---Thrust on Quality and

Profitability:
By the beginning of 1990, the social banking goals set for the
banking industry made most of the public sector resulted in the presumption
that there was no need to look at the fundamental financial strength of this
bank. Consequently they remained undercapitalized. Revamping this
structure of the banking industry was of extreme importance, as the health of
the financial sector in particular and the economy was a whole would be
reflected by its performance.
The need for restructuring the banking industry was felt greater
with the initiation of the real sector reform process in 1992. the reforms have
enhanced the opportunities and challenges for the real sector making them
operate in a borderless global market place. However, to harness the benefits
of globalization, there should be an efficient financial sector to support the
structural reforms taking place in the real economy. Hence, along with the
reforms of the real sector, the banking sector reformation was also
addressed.
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The route causes for the lackluster performance of banks,

formed the elements of the banking sector reforms. Some of the factors that
led to the dismal performance of banks were.
Regulated interest rate structure.
Lack of focus on profitability.
Lack of transparency in the banks balance sheet.
Lack of competition.
Excessive regulation on organization structure and managerial
resource.
Excessive support from government.
Against this background, the financial sector reforms were initiated to
bring about a paradigm shift in the banking industry, by addressing the
factors for its dismal performance.
In this context, the recommendations made by a high level
committee
on financial sector, chaired by M. Narasimham, laid the
foundation for the banking sector reforms. These reforms tried to enhance
the viability and efficiency of the banking sector. The Narasimham
Committee suggested that there should be functional autonomy,
flexibility in operations, dilution of banking strangulations, reduction in
reserve requirements and adequate financial infrastructure in terms of
supervision, audit and technology. The committee further advocated
introduction of prudential forms, transparency in operations and
improvement in productivity, only aimed at liberalizing the regulatory
framework, but also to keep them in time with international standards.
The emphasis shifted to efficient and prudential banking linked to better
customer care and customer services.
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Private Sector Banks

Private banking in India was practiced since the
begining of banking system in India. The first
private bank in India to be set up in Private
Sector Banks in India was Indus Ind Bank. It
is one of the fastest growing Bank Private
Sector Banks in India. IDBI ranks the tenth
largest development bank in the world as
Private
Banks
in
India and has promoted a world class institutions in India.
The first Private Bank in India to receive an in
principle approval from the Reserve Bank of India was
Housing Development Finance Corporation Limited, to set up
a bank in the private sector banks in India as part of the
RBI's liberalization of the Indian Banking Industry. It was
incorporated in August 1994 as HDFC Bank Limited with
registered office in Mumbai and commenced operations as
Scheduled Commercial Bank in January 1995.
ING Vysya, yet another Private Bank of India was
incorporated in the year 1930. Bangalore has a pride of
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place for having the first branch inception in the year 1934.
With successive years of patronage and constantly setting
new standards in banking, ING Vaysya Bank has many
credits to its account.
Entry of Private Sector Banks:

There has been a paradigm shift in mindsets both at the
Government level in the banking industry over the years since
Nationalization of Banks in 1969, particularly during the last decade (19902000). Having achieved the objectives of Nationalization, the most
important issue before the industry at present is survival and growth in the
environment generated by the economic liberalization greater competition
with a view to achieving higher productivity and efficiency in January 1993
for the entry of Private Sector banks based on the Nationalization
Committee report of 1991, which envisaged a larger role for Private Sector
Banks.
The RBI prescribed a minimum paid up capital of Rs. 100 crores for the new
bank and the shares are to be listed at stock exchange. Also the new bank
after being granted license under the Banking Regulation Act shall be
registered as a public limited company under the companies Act, 1956.
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Private Sector
Banks
Old Pvt. Sector
Banks (25)
New Pvt.
Sector Banks
(9)
Subsequently 9 new commercial banks have been granted

license to start banking operations. The new private sector banks have been
very aggressive in business expansion and is also reporting higher profile
levels taking the advantage of technology and skilled manpower. In certain
areas, these banks have even our crossed the other group of banks including
foreign banks.
Current scenario
Currently (2007), overall, banking in India is
considered as fairly mature in terms of supply, product range
and reach-even though reach in rural India still remains a
challenge for the private sector and foreign banks. Even in
terms of quality of assets and capital adequacy, Indian banks
are considered to have clean, strong and transparent
balance sheets-as compared to other banks in comparable
economies in its region. The Reserve Bank of India is an
autonomous body, with minimal pressure from the
government. The stated policy of the Bank on the Indian
Rupee is to manage volatility-without any stated exchange
rate-and this has mostly been true. With the growth in the
Indian economy expected to be strong for quite some timeespecially in its services sector, the demand for banking
services-especially
retail
banking,
mortgages
and
investment services are expected to be strong. M&As,
takeovers, asset sales and much more action (as it is
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unraveling in China) will happen on this front in India.

In March 2006, the Reserve Bank of India allowed
Warburg Pincus to increase its stake in Kotak Mahindra Bank
(a private sector bank) to 10%. This is the first time an
investor has been allowed to hold more than 5% in a private
sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need
to be vetted by them. Currently, India has 88 scheduled
commercial banks (SCBs) - 28 public sector banks (that is
with the Government of India holding a stake), 29 private
banks (these do not have government stake; they may be
publicly listed and traded on They have a combined network
of over 53,000 branches and 17,000 ATMs. According to a
report by ICRA Limited, a rating agency, the public sector
banks hold over 75 percent of total assets of the banking
industry, with the private and foreign banks holding 18.2%
and 6.5% respectively stock exchanges) and 31 foreign
banks.
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II. BANKING IN INDIA

Overview of Banking:
Banking Regulation Act of India, 1949 defines
Banking as accepting, for the purpose of lending or of
investment of deposits of money from the public, repayable
on demand or otherwise or withdrawable by cheque, draft
order or otherwise. The Reserve Bank of India Act, 1934 and
the Banking Regulation Act, 1949, govern the banking
operations in India.
organizational Structure of Banks in India:

In India banks are classified in various categories according
to differ rent criteria. The following charts indicate the
banking structure
Reserve Bank
of India
Commercial Banks
Agricultural
Nationalized
Credit
Urban
Private
Credit
Co-operative Banks
Short-term
EXIM
credit
Development Banks
Long-term
Industrial
credit
Agricultural
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Broad Classification of Banks in India:

1) The RBI: The RBI is the supreme monetary and
banking authority in the country and has the
responsibility to control the banking system in the
country. It keeps the reserves of all scheduled banks
and hence is known as the Reserve Bank.
2) Public Sector Banks:
State Bank of India and its Associates (8)
Nationalized Banks (19)
Regional Rural Banks Sponsored by Public Sector Banks
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(196)
(3) Private Sector Banks:
Old Generation Private Banks (22)
Foreign New Generation Private Banks (8)
Banks in India (40)
(4) Co-operative Sector Banks:

State Co-operative Banks
Central Co-operative Banks
Primary Agricultural Credit Societies
Land Development Banks
State Land Development Banks
(5) Development Banks: Development Banks mostly
provide long term finance for setting up industries. They also
provide short-term finance (for export and import activities)
Industrial Finance Co-operation of India (IFCI)
Industrial Development of India (IDBI)
Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture and Rural Development

(NABARD)
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Export-Import Bank of India
Role of Banks:
Banks play a positive role in economic
development of a country as repositories of communitys
savings and as purveyors of credit. Indian Banking has aided
the economic development during the last fifty years in an
effective way. The banking sector has shown a remarkable
responsiveness to the needs of planned economy. It has
brought about a considerable progress in its efforts at
deposit mobilization and has taken a number of measures in
the recent past for accelerating the rate of growth of
deposits. As recourse to this, the commercial banks opened
branches in urban, semi-urban and rural areas and have
introduced a number of attractive schemes to foster
economic development.
The activities of commercial banking have growth
in multi-directional ways as well as multi-dimensional
manner. Banks have been playing a catalytic role in area
development, backward area development, extended
assistance to rural development all along helping agriculture,
industry, international trade in a significant manner. In a
way, commercial banks have emerged as key financial
agencies for rapid economic development.
By pooling the savings together, banks can make
available funds to specialized institutions which finance
different sectors of the economy, needing capital for various
purposes, risks and durations. By contributing to government
securities, bonds and debentures of term-lending institutions
in the fields of agriculture, industries and now housing,
banks are also providing these institutions with an access to
the common pool of savings mobilized by them, to that
extent relieving them of the responsibility of directly
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approaching the saver. This intermediation role of banks is

particularly important in the early stages of economic
development and financial specification. A country like India,
with different regions at different stages of development,
presents an interesting spectrum of the evolving role of
banks, in the matter of inter-mediation and beyond.
Mobilization of resources forms an integral part of
the development process in India. In this process of
mobilization, banks are at a great advantage, chiefly
because of their network of branches in the country. And
banks have to place considerable reliance on the
mobilization of deposits from the public to finance
development programmes. Further, deposit mobalization by
banks in India acquired greater significance in their new role
in economic development.
Commercial banks provide short-term and
medium-term financial assistance. The short-term credit
facilities are granted for working capital requirements. The
medium-term loans are for the acquisition of land,
construction of factory premises and purchase of machinery
and equipment. These loans are generally granted for
periods ranging from five to seven years. They also establish
letters of credit on behalf of their clients favouring suppliers
of raw materials/machinery (both Indian and foreign) which
extend the bankers assurance for payment and thus help
their delivery. Certain transaction, particularly those in
contracts of sale of Government Departments, may require
guarantees being issued in lieu of security earnest money
deposits for
years. release of advance money, supply of
raw materials for processing, full payment of bills on the
assurance of the performance etc. Commercial banks issue
such guarantees also.
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The Role of Reserve Bank of India (RBI) Bankers Bank:

The Reserve Bank of India (RBI) is the central bank of India,
and was established on April 1, 1935 in accordance with the provisions of
the Reserve Bank of India Act, 1934. Since its inception, it has been
headquartered in Mumbai. Though originally privately owned, RBI has been
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fully owned by the Government of Indian since nationalization in 1949
Main Objective:
Monetary Authority
Formulates, implements and monitors the monetary policy.
Objective: maintaining price stability and ensuring adequate flow of
credit to productive sectors.
Regulator and supervisor of the financial system
Prescribes broad parameters of banking operations within which the
countrys banking and financial system functions.
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Objective: maintain public confidence in the system, protect

depositors interest and provide cost-effective banking services to the
public. The Banking Ombudsman Scheme has been formulated by the
Reserve Bank of India (RBI) for effective redressal of complaints by
bank customers
Manager of Exchange Control

Manages the Foreign Exchange Management Act, 1999.
Objective: to facilitate external trade and payment and promote

orderly development and maintenance of foreign exchange market in
India.
Issuer of currency
Issues and exchanges or destroys currency and coins not fit for
circulation.
Objective: to give the public adequate quantity of supplies of currency
notes and coins and in good quality.
Developmental role
Performs a wide range of promotional functions to support national

objectives.
Related Functions
Banker to the Government: performs merchant banking function for
the central and the state governments; also acts as their banker.
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Banker to banks: maintains banking accounts of all scheduled banks.

Owner and operator of the depository (SGL) and exchange (NDS) for
government bonds.
There is now an international consensus about the need to focus the
tasks of a central bank upon central banking. RBI is far out of touch
with such a principle, owing to the sprawling mandate described
above.
Supervisory Functions:
In addition to its traditional central functions, the
Reserve bank has certain non-monetary functions of the
nature of supervision of banks and promotion of sound
banking in India. The Reserve Bank Act, 1934, and the
Banking Regulation Act, 1949 have given the RBI wide
powers of supervision and control over commercial and
cooperative banks, relating to licensing and establishments,
branch expansion, liquidity of their assets, management and
methods of working, amalgamation, reconstruction and
liquidation. The RBI is authorized to carry out periodical
inspections of the banks and to call for returns and
necessary information from them. The nationalization of 14
major Indian scheduled banks in July 1969 has imposed new
responsibilities on the RBI for directing the growth of banking
and credit policies towards more rapid development of the
economy and realization of certain desired social objectives.
The supervisory functions of the RBI have helped a great
deal in improving the standard of banking in India to develop
on sound lines and to improve the methods of their
operation.
Promotional Functions:
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With economic growth assuming a new urgency

since Independence, the range of the Reserve Banks
functions have steadily widened. The Bank now performs a
variety of developmental and promotional functions, which,
at one time, were regarded as outside the normal scope of
central banking. The Reserve Bank was asked to promote
banking habit, extend banking facilities to rural and semiurban areas, and establish and promote new specialized
financing agencies. Accordingly, the Reserve bank has
helped in the setting up of the IFCI and the SFC: it set up the
Deposit Insurance Corporation of India in 1963 and the
Industrial Reconstruction Corporation of India in 1972. These
institutions were set up directly or indirectly by the Reserve
Bank to promote saving habit and to mobilize savings, and to
provide industrial finance as well as agricultural finance. As
far back as 1935, the RBI set up the Agricultural Credit
Department to provide agricultural credit. But only since
1951 the Banks role in this field has become extremely
important. The Bank has developed the co-operative credit
movement to encourage saving, to eliminate money-lenders
from the villages and to route its short term credit to
agriculture. The RBI has set up the Agricultural Refinance
and Development Corporation to provide long-term finance
to farmers
Co-operative Banks:
The Co-operative bank has a history of almost 100
years. The Co-operative banks are an important constituent
of the Indian Financial System, judging by the role assigned
to them, the expectations they are supposed to fulfill, their
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number, and the number of offices they operate. The cooperative movement originated in the West, but the
importance that such banks have assumed in
India is rarely paralleled anywhere else in the
world. Their role in rural financing continues
to be important even today, and their
business in the urban areas also has
increased phenomenally in recent years
mainly due to the sharp increase in the
number of co-operative banks.
While the co-operative banks in rural areas mainly
finance agricultural based activities including farming, cattle,
milk, hatchery, personal finance etc. along with some small
scale industries and self-employment driven activities, the
co-operative banks in urban areas mainly finance various
categories of people for self-employment, industries, small
scale units, home finance, consumer finance, personal
finance, etc. Some of the co-operative banks are quite
forward looking and have developed sufficient core
competencies to challenge state and private sector banks.
According to NAFCUB the total deposits &
lendings of Co-operative Banks is much more than Old
Private Sector Banks & also the New Private Sector Banks.
This exponential growth of Co-operative Banks is attributed
mainly to their much better local reach, personal interaction
with customers, their ability to catch the nerve of the local
clientele. Though registered under the Co-operative
Societies Act of the Respective States (where formed
originally) the banking related activities of the co-operative
banks are also regulated by the Reserve Bank of India. They
are governed by the Banking Regulations Act 1949 and
Banking Laws (Co-operative Societies) Act, 1965.
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There are two main categories of the cooperative banks.

Short term lending oriented co-operative
Banks within this category there are three sub categories
(a)
of banks viz state co-operative banks, District co-operative

banks and Primary Agricultural co-operative societies.
Long term lending oriented co-operative

Banks within the second category there are land
(b)
development banks at three levels state level, district level

and village level.
Features of Cooperative Banks

Co-operative Banks are organized and managed on the
principal of co-operation, self-help, and mutual help. They
function with the rule of one member, one vote. Function
on no profit, no loss basis. Co-operative banks, as a
principle, do not pursue the goal of profit maximization. Cooperative bank performs all the main banking functions of
deposit mobilization, supply of credit and provision of
remittance facilities. Co-operative Banks provide limited
banking products and are functionally specialists in
agriculture related products. However, co-operative banks
now provide housing loans also.
UCBs provide working capital loans and term loan as well.
The State Co-operative Banks (SCBs), Central Co-operative
Banks (CCBs) and Urban Co-operative Banks (UCBs) can
normally extend housing loans upto Rs 1 lakh to an
individual. The scheduled UCBs, however, can lend upto Rs 3
lakh for housing purposes.
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The UCBs can provide advances against

shares and debentures also. Co-operative bank do
banking business mainly in the agriculture and rural
sector. However, UCBs, SCBs, and CCBs operate in semi
urban, urban, and metropolitan areas also.
The urban and non-agricultural business of these
banks has grown over the years. The co-operative banks
demonstrate a shift from rural to urban, while the
commercial banks, from urban to rural. Co-operative banks
are perhaps the first government sponsored, governmentsupported, and government-subsidized financial agency in
India. They get financial and other help from the Reserve
Bank of India NABARD, central government and state
governments. They constitute the most favoured banking
sector with risk of nationalization. For commercial banks, the
Reserve Bank of India is lender of last resort, but cooperative banks it is the lender of first resort which provides
financial resources in the form of contribution to the initial
capital (through state government), working capital,
refinance.
Co-operative Banks belong to the money market
as well as to the capital market. Primary agricultural credit
societies provide short term and medium term loans. Land
Development Banks (LDBs) provide long-term loans. SCBs
and CCBs also provide both short term and term loans. Cooperative banks are financial intermediaries only partially.
The sources of their funds (resources) are (a) central and
state government, (b) the Reserve Bank of India and
NABARD, (c) other co-operative institutions, (d) ownership
funds and, (e) deposits or debenture issues. It is interesting
to note that intra-sectoral flows of funds are much greater in
co-operative banking than in commercial banking. Inter-bank
deposits, borrowings, and credit from a significant part of
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assets and liabilities of co-operative banks. This means that

intra-sectoral competition is absent and intra-sectoral
integration is high for co-operative bank.
Some co-operative banks are scheduled banks,
while others are non-scheduled banks. For instance, SCBs
and some UCBs are scheduled banks but other co-operative
bank are non-scheduled banks. At present, 28 SCBs and 11
UCBs with Demand and Time Liabilities over Rs 50 crore
each included in the Second Schedule of the Reserve Bank of
India Act.
Co-operative Banks are subject to CRR and liquidity
requirements as other scheduled and non-scheduled banks
are. However, their requirements are less than commercial
banks. Since 1966 the lending and deposit rate of
commercial banks have been directly regulated by the
Reserve Bank of India. Although the Reserve Bank of India
had power to regulate the rate co-operative bank but this
have been exercised only after 1979 in respect of nonagricultural advances they were free to charge any rates at
their discretion. Although the main aim of the co-operative
bank is to provide cheaper credit to their members and not
to maximize profits, they may access the money market to
improve their income so as to remain viable.
Maketing concept
7 PS of BANKING SECTOR
It is very important for any bank to identify the 7 Ps of services so
was understands their customers better and provide them with best of
service. The 7 Ps are:
29
1. PRODUCT MIX
2. PRICE MIX
3. PLACE
4. PROMOTION
5. PEOPLE
6. PROCESS
7. PHYSICAL EVIDENCE
PRODUCT MIX
The product mix of a company includes all different product lines
a company offers to its customers. The product line of a bank might
easily include more than 100 different services. In todays competitive
scenario it has become very necessary for a bank to provide its
customers with a wide variety of services and the best technology in
order to attract them. Here is an example of some of the products
offered by UTI Bank to its customers.
PRODUCT WIDTH AND DEPTH

Width
Width of the product mix is the number of product lines a
company is offering. The product width could be a narrow one or a
30
wide one depending from bank to bank. A wide mix encourages more
sales since the banks are able to diversify and provide more to their
customers and they also appeal to a larger target market.
Depth
Depth of the product mix is the number of product items in
each product line. Banks with more schemes and services have more
depths than those offering only a few.
Here is table giving an example of Width and Depth in the Product
Mix:
Similarly, different banks plan out their product portfolios and

based on that, the depth and width of their product mix can be
determined.
In todays scenario, where there is cutthroat competition and
new foreign banks entering the Indian markets, it has became more or
less like a law to have very wide product lines with more and more
number of products in each line.
31
PRODUCT LEVELS
Core Benefit:
It is the main or core reason why the customer will buy the
service of the bank. More like the basic purpose or necessity.
Basic Product:
The core benefit is converted into a basic product. That is the
service can used by the customer in order to fulfill his/her needs.
Expected Product:
It refers to the set of attributes and conditions expected by the
customers when they purchase the service.
Augmented Product:
It is the additional feature that the banks provide which exceeds
the customers expectations.
Potential Product:
Innovations and product differential is the bases of a Potential
Product. If the banks alter its services according to the requirements of
the individual customers it reaches this level.
Core
Product
The basic
necessity
to use
Basic
Product
Safety of
deposits
Loan able
Expected
Product
Timely
service Long
banking
Augmented
Product
Goods waiting
rooms
Extensive ATM
Potential
Product
Mobile and
internet
Banking New
32
banking funds etc.

services
in order
to handle
finance
more
efficientl
y
hours Low
network
interest rates Promotional
Discounts
Schemes
tailored for
specific
customers
Thus it can be seen how a particular product passes through

different levels. In todays competitive scenario most banks try
offering services at the Augmented and Potential level.
PRICE MIX
The price mix in the banking sector is nothing but the interest
rates charged by the different banks. In todays competitive scenario
where customer is the king, the banks have to charge them interest at a
rate in accordance with the RBI directives. Banks also compete in
terms of annual fees for services like credit cards, DMAT etc. Another
important aspect of the banks pricing policy today is the interest
charged on the Home Loans and Car Loans. With Indias economy
progressing, there are more and more buyers seeking these loans but
at a very competitive interest rate.
Lets understand this with an example. A particular buyer
approaches a bank for a car loan for a period of 3 years. He is charged
Rs. 20,000 as interest. However, if a sale representative of another
bank comes to know of this deal, he will try to attract the customer by
33
giving him a better deal i.e. a loan at a lower rate on interest. In this
way, it is the customer that ultimately benefits.
Here is an example of some of the prices charged by sbi bank

for their services
ATM Card Issue
Free 2 ATM cards issued free

if it joint account
RS. 100 Beyond 2 cards
Rs. 100
Add on Card
Duplicate Card
Other General Charges
Current Account
Transaction Charges
Charges for issue of
Cheques book
Issue of duplicate
statement
Account closure
Savings Account
NIL
NIL
NIL
NIL
Rs. 25 per page
Rs. 25 per page
Rs.100
Rs.100
This example evinces some of the charges that the customer has to pay
for the services provided by the bank.
The pricing factor is very important because of the kind of
competition that is prevailing today in the Indian market. However it
is very important to understand that in the banking sector, the main
pricing policy is concerned with the interest rate charged. This interest
rate is however regulated by the RESERVE BANK OF INDIA and
THE INDIAN BANKING ASSOCAITION. Any one particular bank
or a group of banks does not regulate it. The interest rate charged
34
cannot be higher than that decide by the RBI and the INDIAN
BANKING ASSOCIATION.
Thus, inspite of the constraints in the pricing policy due to the
RBI directives there are mainly three types of pricing methods
adopted by banks. They are:
Value pricing:
Banks having unique or different products or schemes mainly
do this type of pricing. They usually charge a combination of high and
low prices depending on the customer loyalty as well as the products.
This type of pricing strategy is usually coupled with promotion
programmes.
Going Rate pricing:

The most commonly used pricing technique is the going rate
pricing. In going rate pricing, the bank bases its price largely
depending on the competitors prices. The banks however have to stay
within the RBI directives and compete. The banks may charge higher
or lower than their competitors. After 1991 when the foreign banks
entered the Indian market this method of pricing has gained increasing
importance.
Mark up pricing:
35
This is a pricing technique wherein the cost of the service is determined

and a small margin is added to it and then the final price is offered to the
customers. This type of pricing is the not very popular since in the
banking sector it is not very easy to arrive at the cost of the service. Thus
most banks use a combination of mark up pricing and going rate
pricing.
THE MOST FAVORABLE PRICING STRATEGY
36
This model shows a pricing strategy, which should be adopted

in order to ensure maximum satisfaction to both the bank as well as
the customers.
The price should be set in such a manner that the customer is assured that
he is not being cheated or overcharged by the bank and at the same time
the bank is able to reap maximum profits. Such a pricing stand helps the
bank get maximum sales as well as profits since the customer feels that
by entering such a transaction he is winning.
PLACE MIX
37
Place mix is the location analysis for banks branches. There are
number a factors affecting the determination of the location of the
branch of bank. It is very necessary a bank to situated at a location
where most of its target population is located.
Some of the important factors affecting the location analysis of a bank
are:
1. The trade area
2. Population characteristics
3. Commercial structure
4. Industrial structure
5. Banking structure
6. Proximity to other convenient outlets
7. Real estate rates
8. Proximity to public transportation
9. Drawing time
10.Location of competition
11. Visibility
12.Access
It is not necessary that all the above conditions have to be satisfied
while selecting the location but it should be tried to satisfy as many of
them as possible.
1. The Trade Area:
38
The trade area is a very important factor determining the place

where a bank branch should be set up. For e.g. a particular location
maybe a huge trading place for textiles, diamonds or for that case
even the stock market. Such locations are ideal for setting up of bank
branches.
2. Population Characteristics:
The demography of a place is a very important factor. This
includes:
The income level of the population
The average age
The average male female population
The caste, religion, culture and customs
The average spending and saving habit of the people.

These factors are very important for a bank as the help them
decide the kind of business the branch will get.
3. Commercial Structure:
The commercial structure refers to the level of commerce i.e.
business activities taking place at a particular location. The higher the
level of business activities taking place in a particular location the
more preferable it is for setting up a bank branch.
4. Industrial Structure:
39
This is nothing but a combination of the trade area analysis and

the commercial structure. However the industrial structure focuses
more on the kind of industries operating in a particular location. For
example, an area like SEEPZ is marked with a lot of electronic
manufacturing units. Thus the industrial stricture determines the kind
of financial transactions that could take place in a particular location.
5. Banking Structure:
The Banking structure refers to the existence of other banks in
the area. Whether there is already an efficient network of other bank

branches operating at that particular area. Thus the overall
infrastructure needed for the working of a bank.
6. Proximity of other convenient outlets:

This refers to the other branches of the same bank as well other
commercial, entertainment and industrial outlets.
7. Real Estate Rates:

This is mainly dealing with the cost factor involved in opening
up a bank branch at a particular location. The real estate rate is a very
strong factor influencing the location decision for a bank branch.
8. Proximity to public transportation:
40
The location should be proximate to public transportation

facilities. This means it should have bus stops close by as well as it
should be proximate to railway stations so as to make it convenient for
the common man.
9. Drawing Time:
Drawing time refers to the time period during which a customer
can draw money from the banks. It should be convenient to the
customer and somewhat flexible to accommodate the customers
needs. No bank has more than a certain amount with them and in case
a customer wants to withdraw an amount more than that available
with the bank, the bank needs to draw that amount from other banks.
Hence, a location must be such that it facilitates minimum drawing
time.
10. Location of Competition:
The existence of other banks also means competition. If the level of
competition is very high in a particular location, it is necessary that a bank does a
lot of market research before opening a branch so as to estimate the kind of
business it would get.
10. Visibility
The location of a branch should be such that it is visible and
easily noticed by the customers as well other people.
10. Access:
41
The bank branch should be very easily accessible to the

customers. If this is not the case, the customer might switch to some
other bank, which is more convenient to him and very easily
accessible. The location should be such that it is very convenient for
the customer to reach.
Promotion Mix
Promotion is nothing but making the customer more and more
aware of the services and benefits provided by the bank. The banks
today can use a lot of new technology to communicate to their
customers. Two of the fastest growing modern tools of
communicating with the customers are:
1. Internet Banking
2. Mobile Banking
This can be better explained with the example of SBI bank.
SMS services
42
SMS functions through simple text messages sent from your

cellular phone. These messages are recognized by ICICI bank to
provide you with the required information.
For example, when you enter IBAL your cellular

phone screen will display the current balance in
your primary account. Thus with the help of SMS
a wide range of query based transactions can be
performed
without even making a call.
ICICI was the first organization in India to provide Wireless Application

Protocol (WAP) based services. Mobile commerce using WAP
technology, allows secure online access of the web using mobile devices.
With WAP one can directly access the ICICI WAP server, check ones
account details and use other value added services.
Thus different methods are used by different banks to promoter
its services.
A bank may have very attractive schemes and services to offer to their
customers but they are of no use if they are not communicated properly
to the customers. Promotion is o inform and remind the individuals and
persuade them to accept, recommend or use of product, service or idea.
However there some very important points that is to be considered before
the promotion strategy is made. These points are:
43
Finalizing the Budget

Before the bank decides the kind of promotion that should be done, it
very important to finalize the budget for it. The formulation of a sound
budget is essential to remove the financial constraints in the process. The
budget is determined on the basis of volume of business of the bank. In
addition to this the intensity of competition also plays a decisive role.
Selecting a suitable vehicle

Another very important task is to select a suitable vehicle for driving the message.
There are a number of devices to advertise such as broadcast media, telecast media
and the print media. The selecting of the mode of advertising is strongly influenced
by the kind of budget decided. Usually for promoting banks the most effective and
economical form of advertising has been the print media.
Making possible creativity

Making possible creativity is nothing but the kind of slogans, punch lines
etc. that are supporting the message. They should be very creative but yet
simple to be understood by the common man. It should appeal to the
customers. It should be distinct from that of the competitors and should
be successful in informing and sensing the customers.
Testing the Effectiveness
44
It should be borne in mind that the advertisement is first tested for its
effectiveness. This should be done with the help of various techniques
like testing effectiveness on a sample group. This helps determine the
success of the advertisement and in case of any problem the
advertisement can be altered and remedied.
Instrumentality of Branch Managers

At a micro level, it is the responsibility of the branch managers to
promote and drive the message to the people in the local area. They
should organize small programs in order to attract people and crate
awareness in the local area about the new schemes of the bank.
Different Ways of Promotion

Public Relations:
In todays competitive scenario developing strong public
relations is very important for any bank to be successful. Most banks
today have a separate Public Relations department. However
primarily it is considered as a responsibility of the various bank
managers to develop a steady and strong relationship with their
present customers as well as potential customers. This can be done by
a constant follow up, small programmes etc.
Personal Selling:
45
Personal selling is found to be one of the most effective and

popular forms of promoting bank business. The main reason for this is
that banking is a service in which trust plays a very important role. In
personal selling, a bank representative goes to the customers and
explains the scheme to the customers. Also he gives the customers any
kind consultation he might need. He provides the customers all the
information sought by him. The representative tries to persuade the
customers to go for the scheme provided by the bank by telling him
all the benefits. Here are some of the important features of personal
selling
It is a direct relation between the buyers and the seller
It is oral presentation in conversation
It is personal and social behavior
It is found to be more effective in service oriented organizations
It is based on the professional excellence or expertise of an individual
Sales Promotion:
46
Sales promotions are basically giving the customers some

additional benefits, maybe at times just some
small gifts, in order to promote the schemes. The
more innovative the sales promotions the more
positive are the results. Some of the most popular sales
promotions techniques are gifts, contests, fairs
and
shows,
discounts
and
commission,
entertainment and traveling plans for bankers,

additional allowance, low interest financing etc. It is very important
that the sales promotions benefits are designed in such a manner that
they are better than those of the competitors.
Word of mouth Promotion:

This form of promotions is not only very effective in banking
services but in any kind of service. However it is more important in
banking for the only reason that this is a service where trust plays a
very important role. If a particular banks services are recommended
by friends, relatives, or other well wishers the person is more
influenced and inclined towards that bank. It is very important to note
that the internal employees of the bank play a very important role in
word of mouth promotion technique. This is because they can start
the process by recommending the bank to their friends and relatives
and after that it is like a chain, which spreads like a wild fire.
Telemarketing:
In recent times telemarketing has gained increasing importance
as an effective tool for promotion. The telemarketing is a process of
47
making use of sophisticated communication network for promoting

the banks. This includes promoting through television, telephone, and
radio. Nowadays, cell phones are used extensively for the
same. This is the most popular form of promotion.
Banks today have started using SMS and many
other services supported by cell phones to provide
benefits to their customers and thus have tried to
increase their sales. In todays competitive and
modern scenario it very important that banks makes
use of telemarketing techniques very efficiently to have desirable
results.
Internet:
The use of Internet as a promotional tool is increasing. More
and more banks are using Internet to promote their services. The
online banking has made it even easier for the customers to avail the
banks services. No longer do people have to go to their bank
branches for small petty matters like checking their balance etc. All
this can be done with the help of a few clicks.
Thus, these were the numerous ways in which a bank can
promote its services and create more awareness amongst the people.
People
48
People are the employees that are the service providers. In a

banking sector, the service provider plays a very important and
determinant role in rendering the customers a satisfactory and a good
service. It is extremely essential that the service provider understand
what his customers expect from him. In the banking sector, the
customer needs to be guided in a lot of matters, which is possible only
with the help of the service provider.
The position in the eyes of the customer will be perceived by
appearance, attitude and behavior of the customer contact employees.
Not only does the customer contact employee influence the
customers perception but also the customer base of the organization
does so.
Process Mix
The process mix constitutes the overall procedure involved in
using the services offered by the bank. It is very necessary that the
process is very customer friendly. In other words a process should be
such that the customer is easily able to understand and easy to follow.
Today if particular banks formalities are long and the procedure very
complicated the overall process fails an the customer may not be
inclined towards using that banks services.
Lets take for example the process for application for a car loan.
Now this mainly involves 3 things.
1. Producing of proper documents
49
2. Filling up of application form

3. Paying for the initial down payment.
Here the process may fail in the following cases:
1. If the customer is asked to produce a number of forms out of which
some may not be necessary at all. Thus it is very necessary that the
customer be asked for the minimum but most necessary document and
not the other unnecessary documents.
2. In case of application form, the application form must be in a
language best understood by the customers and it should not be very
lengthy one or demanding a lot of unnecessary information.
3. Finally the payment of initial amount. The customer should be given
options as to how he would like to pay by cheques or by credit card.
Once again the amount should be very competitive not very high
above the regular rates prevailing in the markets.
The smaller and simpler the procedure, the better the process, and the
customer will be more satisfied.
PHYSICAL EVIDENCE
Physical evidence is the overall layout of the place i.e. how the entire
bank has been designed. Physical evidence refers to all those factors
that help make the process much easier and smoother. For example, in
50
case of a bank, the physical evidence would be the placement of the

customer service executives desk, or the location of the place for
depositing cheques. It is very necessary that the place be designed in
such a manner so as to ensure maximum convenience to the customer
and cause no confusion to him.
Let us see an example as to how banks try to make little changes so as to
make the service better for their customers.
The SBI has decided in introducing a common uniform for all the
employees in all its branches all over India. The plan is possibly in line
with the aggressive retail banking adopted by HSBC. A common uniform
its nothing like a revolutionary change but however this little change
makes it very easy for the customer to identify with his service provider
and makes the entire process very easy for him. The more the bank does
to make the service easier and better the more satisfied will be the
customer.
Thus, these are the 7 Ps of services. Each of them plays a very

important and a pivotal role in determining the quality of the service
provided to the customer.
51
III. PRODUCTS AND SERVICES OFFERED BY

BANKS
Broad Classification of Products in a bank:
The different products in a bank can be broadly classified
into:
Retail Banking.
Trade Finance.
Treasury Operations.
Retail Banking and Trade finance operations are conducted
at the branch level while the wholesale banking operations,
which cover treasury operations, are at the hand office or a
designated branch.
Retail Banking:
Deposits
Loans, Cash Credit and Overdraft
Negotiating for Loans and advances
Remittances
Book-Keeping (maintaining all accounting records)
Receiving all kinds of bonds valuable for safe keeping
52
Trade Finance:
Issuing and confirming of letter of credit.
Drawing, accepting, discounting, buying, selling,
collecting of bills of exchange, promissory notes, drafts,
bill of lading and other securities.
Some co-operative banks are scheduled banks, while others
are non-scheduled banks. For instance, SCBs and some UCBs
are scheduled banks but other co-operative bank are nonscheduled banks. At present, 28 SCBs and 11 UCBs
with Demand and Time Liabilities over Rs 50 crore each

included in the Second Schedule of the Reserve Bank of
India Act.
Co-operative Banks are subject to CRR and liquidity
requirements as other scheduled and non-scheduled
banks are. However, their requirements are less than
commercial banks. Since 1966 the lending and deposit
rate of commercial banks have been directly regulated
by the Reserve Bank of India. Although the Reserve
Bank of India had power to regulate the rate cooperative bank but this have been exercised only after
1979 in respect of non-agricultural advances they were
free to charge any rates at their discretion. Although
the main aim of the co-operative bank is to provide
cheaper credit to their members and not to maximize
profits, they may access the money market to improve
their income so as to remain viable.
53
Treasury Operations:
Buying and selling of bullion. Foreign exchange
Acquiring, holding, underwriting and dealing in shares,
debentures, etc.
Purchasing and selling of bonds and securities on behalf
of constituents.
The banks can also act as an agent of the
Government or local authority. They insure, guarantee,
underwrite, participate in managing and carrying out
issue of shares, debentures, etc.
Apart from the above-mentioned functions of
the bank, the bank provides a whole lot of other
services like investment counseling for individuals,
short-term funds management and portfolio
management for individual undertakes the inward and
outward remittances with reference to foreign exchange
and collection of varied types for the Government.
Common Banking Products Available:

Some of common available banking products are
explained below:
54
1) Credit Card: Credit Card is post

paid or pay later card that draws from a
credit line-money made available by
the card issuer (bank) and gives one a
grace period to pay. If the amount is
not paid full by the end of the period, one
interest.
is charged
A credit card is nothing but a very small card

containing a means of identification, such as a signature and
a small photo. It authorizes the holder to change goods or
services to his account, on which he is billed. The bank
receives the bills from the merchants and pays on behalf of
the card holder. These bills are assembled in the bank and
the amount is paid to the bank by the card holder totally or
by installments. The bank charges the customer a small
amount for these services. The card holder need not have to
carry money/cash with him when he travels or goes for
purchasing.
Credit cards have found wide spread acceptance in
the metros and big cities. Credit cards are joining popularity
for online payments. The major players in the Credit Card
market are the foreign banks and some big public sector
banks like SBI and Bank of Baroda. India at present has
about 3 million credit cards in circulation.
2) Debit Cards: Debit Card is a prepaid or pay now
card with some stored
value. Debit Cards quickly debit or
subtract money from ones savings
account, or if one were taking out cash.
Every time a person uses the
card, the merchant who in turn can get the
money transferred to his account from the
bank of the buyers, by debiting an exact amount of
55
purchase from the card. To get a debit card along with a

Personal Identification Number (PIN).
When he makes a purchase, he enters this number
on the shops PIN pad. When the card is swiped through the
electronic terminal, it dials the acquiring bank system
either Master Card or Visa that validates the PIN and finds
out from the issuing bank whether to accept or decline the
transaction. The customer never overspread because the
amount spent is debited immediately from the customers
account. So, for the debit card to work, one must already
have the money in the account to cover the transaction.
There is no grace period for a debit card purchase. Some
debit cards have monthly or per transaction fees.
Debit Card holder need not carry a
bulky checkbook or large sums of cash when he/she
goes at for shopping. This is a fast and easy way of
payment one can get debit card facility as debit cards
use ones own money at the time of sale, so they are
often easier than credit cards to obtain.
The major limitation of Debit Card is that
currently only some 3000-4000 shops country wide
accepts it. Also, a person cant operate it in case the
telephone lines are down.
3) Automatic Teller Machine: The introduction of ATMs
has given the customers the facility of round the clock
banking. The ATMs are used by banks for making the
customers dealing easier. ATM card is a device that allows
customer who has an ATM card to perform routine banking
transaction at any time without interacting with human
teller. It provides exchange services. This service helps the
customer to withdraw money even when the banks ate
closed. This can be done by inserting the card in the ATM
56
and entering the Personal Identification Number and secret

Password.
ATMs are currently becoming
popular in India that enables the customer
to withdraw their money 24 hours a day and
365 days. It provides the customers with
the ability to withdraw or deposit funds,
check account balances, transfer funds and
check statement information. The
advantages of ATMs are many. It increases
existing business and generates new
business. It allows the customers.
To transfer money to and from
accounts.
To view account information.
To order cash.
To receive cash.
Advantages of ATMs:
To the Customers
ATMs provide 24 hrs., 7 days and 365 days a year
service.
Service is quick and efficient
Privacy in transaction
Wider flexibility in place and time of withdrawals.
The transaction is completely secure you need to key
in Personal Identification Number (Unique number for
every customer).
57
To Banks
Alternative to extend banking hours.
Crowding at bank counters considerably reduced.
Alternative to new branches and to reduce operating
expenses.
Relieves bank employees to focus an more analytical
and innovative work.
Increased market penetration.
ATMs can be installed anywhere like Airports,
Railway Stations, Petrol Pumps, Big Business arcades,
markets, etc. Hence, it gives easy access to the
customers, for obtaining cash.
The ATM services provided first by the foreign
banks like Citibank, Grind lays bank and now by many
private and public sector banks in India like ICICI Bank,
HDFC Bank, SBI, UTI Bank etc. The ICICI has launched
ATM Services to its customers in all the Metropolitan
Cities in India. By the end of 1990 Indian Private Banks
and public sector banks have come up with their own
ATM Network in the form of SWADHAN. Over the past
year upto 44 banks in Mumbai, Vashi and Thane, have
became a part of SWADHAN a system of shared
payments networks, introduced by the Indian Bank
Association (IBA).
4) E-Cheaques: The e-cheaques consists five primary
facts. They are the consumers, the merchant, consumers
bank the merchants bank and the e-mint and the clearing
process. This cheaquring system uses the network services
to issue and process payment that emulates real world
58
chaquing. The payer issue a digital cheaques to the payee

ant the entire transactions are done through internet.
Electronic version of cheaques are issued, received and
processed. A typical electronic cheque transaction takes
place in the following manner:
The customer accesses the merchant server and the
merchant server presents its goods to the customer.
The consumer selects the goods and purchases them
by sending an e-cheque to the merchant.
The merchant validates the e-cheque with its bank for
payment authorisation.
The merchant electronically forwards the e-cheque to
its bank.
The merchants bank forwards the e-cheque to the
clearing house for cashing.
The clearing house jointly works with the consumers
bank clears the cheque and transfers the money to the
merchants banks.
The merchants bank updates the merchants account.
The consumers bank updates the consumers account
with the withdrawal information.
The e-chequing is a great boon to big
corporate as well as small retailers. Most major banks
accept e-cheques. Thus this system offers secure
means of collecting payments, transferring value and
managing cash flows.
5)
Electronic Funds Transfer (EFT): Many modern banks

have computerized their cheque handling process with
59
computer networks and other electronic equipments. These

banks are dispensing with the use of paper cheques. The
system called electronic fund transfer (EFT) automatically
transfers money from one account to another. This system
facilitates speedier transfer of funds electronically from any
branch to any other branch. In this system the sender and
the receiver of funds may be located in different cities and
may even bank with different banks. Funds transfer within
the same city is also permitted. The scheme has been in
operation since February 7, 1996, in India.
The other important type of facility in the EFT
system is automated clearing houses. These are the
computer centers that handle the bills meant for
deposits and the bills meant for payment. In big
companies pay is not disbursed by issued cheques or
issuing cash. The payment office directs the computer
to credit an employees account with the persons pay.
6)
Telebanking: Telebanking refers to banking on

phone services.. a customer can access information about
his/her account through a telephone call and by giving the
coded Personal Identification Number (PIN) to the bank.
Telebanking is extensively user friendly and
effective in nature.
To get a particular work done
through the bank, the users may
leave his instructions in the form of
message with bank.
Facility to stop payment on request. One can easily
know about the cheque status.
Information on the current interest rates.
Information with regard to foreign exchange rates.
60
Request for a DD or pay order.

D-Mat Account related services.
And other similar services.
7 Mobile Banking: A new revolution in the realm of ebanking is the emergence of mobile banking. On-line
banking is now moving to the mobile world, giving
everybody with a mobile phone access to real-time
banking services, regardless of their location. But there is
much more to mobile banking from just on-lie banking. It
provides a new way to pick up information and interact
with the banks to carry out the relevant banking business.
The potential of mobile banking is limitless and is
expected to be a big success. Booking and paying for
travel and even tickets is also
expected to be a growth area.
According to this system,
customer can access account details
on mobile using the Short Messaging System (SMS)
technology6 where select data is pushed to the mobile
device. The wireless application protocol (WAP) technology,
which will allow user to surf the net on their mobiles to
access anything and everything. This is a very flexible way of
transacting banking business.
Already ICICI and HDFC banks have tied up cellular
service provides such as Airtel, Orange, Sky Cell, etc. in Delhi
and Mumbai to offer these mobile banking services to their
customers.
8 Internet Banking: Internet banking involves use of
internet for delivery of banking products and services. With
61
internet banking is now no longer confirmed to the branches

where one has to approach the branch in person, to
withdraw cash or deposits a cheque or request a statement
of accounts. In internet banking, any inquiry or transaction is
processed online without any reference to the branch
(anywhere banking) at any time.
The Internet Banking now is more of a normal
rather than an exception due to the fact that it is the
cheapest way of providing banking services. As indicated by
McKinsey Quarterly research, presently traditional banking
costs the banks, more than a dollar per person, ATM banking
costs 27 cents and internet banking costs below 4 cents
approximately. ICICI bank was the first one to offer Internet
Banking in India.
Benefits of Internet Banking:

Reduce the transaction costs of offering several
banking services and diminishes the need for longer
numbers of expensive brick and mortar branches and
staff.
Increase convenience for customers, since they can
conduct many banking transaction 24 hours a day.
Increase customer loyalty.
Improve customer access.
Attract new customers.
Easy online application for all accounts, including
personal loans and mortgages
Financial Transaction on the Internet:
62
Electronic Cash: Companies are developing electronic

replicas of all existing payment system: cash, cheque, credit
cards and coins.
Automatic Payments: Utility companies, loans payments,
and other businesses use on automatic payment system with
bills paid through direct withdrawal from a bank account.
Direct Deposits: Earnings (or Government payments)
automatically deposited into bank accounts, saving time,
effort and money.
Stored Value Cards: Prepaid cards for telephone service,
transit fares, highway tolls, laundry service, library fees and
school lunches.
Point of Sale transactions: Acceptance of ATM/Cheque at
retail stores and restaurants for payment of goods and
services. This system has made functioning of the stock
Market very smooth and efficient
9)
Demat: Demat is short for de-materialisation of shares. In

short, Demat is a process where at the customers request
the physical stock is converted into electronic entries in the
depository system.
In January 1998 SEBI (Securities and
Exchange Board of India) initiated DEMAT
ACCOUNTANCY System to regulate and to improve
stock investing. As on date, to trade on shares it has
become compulsory to have a share demat account
and all trades take place through demat.
63
How to Operate DEMAT ACCOUNT?

One needs to open a Demat Account with any of
the branches of the bank. After opening an account with any
bank, by filling the demat request form one can handover
the securities. The rest will be taken care by the bank and
the customer will receive credit of shares as soon as it is
confirmed by the Company/Register and Transfer Agent.
There is no physical movement of share certification any
more. Any buying or selling of shares is done via electronic
transfers.
1) If the investor wants to sell his shares, he has to place
an order with his broker and give a Delivery
Instruction to his DP (Depository Participant). The DP
will debit hi s account with the number of shares sold
by him.
2) If one wants to buy shares, he has to inform his broker
about his Depository Account Number so that the
shares bought by him are credited in to his account.
3) Payment for the electronic shares bought or sold is to
be made in the same way as in the case of physical
securities.
BANKING SERVICES
64
Customer service is the service provided in support of a

banks core products. Customer service often includes
answering questions; handling complaints. Customer service
can occur on site (as when an onstage employee helps a
customer or answers a question) or it can occur over the
phone or the Internet. Quality customer service is essential
to building cordial customer relationship.
Banking being a service industry, a lot depends on
efficient and prompt customer service. Customer service is
the most important duty of the banking operations. Prompt
and efficient service with smile will develop good public
relations reduce complaints and increase business values.
Why is Customer Service Important?
Changing customer expectations: Today the
customer is more demanding and more sophisticated
than he or she was thirty years ago.
The increased importance of customer service:
With changing customer expectations, competitors are
seeing customer service as a competitive weapon with
which they differentiate their products and services.
The need for a relationship strategy: To ensure that

a customer service strategy that will create a value
preposition for customers should be formulated
implemented and controlled. It is necessary to give it a
central role and not one that is subsumed in the various
elements of the marketing mix.
SOME OF THE IMPORTANT SERVICES ARE:

LEASING:
65
Leasing is a cost-effective method to finance your business equipment

needs. For many years, we have provided creative leasing solutions
for Canadian businesses looking to finance commercial equipment
such as medical equipment, construction equipment, commercial
aircraft, office furniture and much more. With our national network of
specialists, and a comprehensive set of products, we have competitive
lease rates and the expertise to suggest the right equipment lease for
your business.
Equipment leasing can help business by:
Allowing you to acquire equipment while preserving your working

capital.
Simplifying your budget. RBC Royal Bank can structure the terms of your
lease through regular fixed monthly payments that can be matched to the
cash flows generated by the asset financed and the useful life of your
equipment.
Offering possible tax advantages. Lease payments can be tax deductible,
so the after-tax cost of leasing equipment may be more beneficial to you
than other financing alternatives.
Merchant banking.:
. A merchant bank deals with the commercial banking needs of
international finance, long-term company loans,
and stock underwriting. This type of bank
does not have retail offices where a
customer can go and open a savings or
checking account. A merchant bank is
sometimes said to be a wholesale bank, or
in the business of wholesale banking. This
is because merchant banks tend to deal
primarily with other merchant banks and other large financial
institutions.
The most familiar role of the merchant bank is stock underwriting. A
large company that wishes to raise money from investors through the
stock market can hire a merchant bank to implement and underwrite
the process. The merchant bank determines the number of stocks to be
issued, the price at which the stock will be issued, and the timing of
the release of this new stock. The bank then files all the paperwork
required with the various market authorities, and is also frequently
66
responsible for marketing the new stock, though this may be a joint
effort with the company and managed by the merchant bank. For very
large stock offerings, several merchant banks may work together, with
one being the lead underwriter.
By limiting their scope to the needs of large companies, merchant
banks can focus their knowledge and be of specific use to such clients.
Some merchant banks specialize in a single area, such as underwriting
or international finance
Loan syndication.
A merchant banking subsidiary set up by several banks that may or
may not be of the
same nationality. consortium banks are common in the Euromarket
and are active in loan syndication.
OTHER ADVANTAGES OF SYNDICATED LOANS
In addition, economists and syndicate executives contend that there
are other, less obvious ssadvantages to going with
a syndicated loan. These benefits include:
Syndicated loan facilities can increase
competition for your business, prompting other
banks to increase their efforts to put market
information in front of you in hopes of being
recognized.
Flexibility in structure and pricing. Borrowers have a variety of
options in shaping their syndicated loan, including multicurrency
options, risk management techniques, and prepayment rights without
penalty.
Syndicated facilities bring businesses the best prices in aggregate and
spare companies the time and effort of negotiating individually with
each bank.
Loan terms can be abbreviated.
67
Increased feedback. Syndicate banks sometimes are willing to share

perspectives on business issues with the agent that they would be
reluctant to share with the borrowing business.
Syndicated loans bring the borrower greater visibility in the open
market. Bunn noted that "For commercial paper issuers, rating
agencies view a multi-year syndicated facility as stronger support than
several bilateral one-year lines of credit."
Internet banking
Internet banking is a system of banking that enables customers to
perform various financial transactions on a secure website via the
Internet. There are many banks and credit union that operate websites
for internet banking. Internet Banking is basically conducted via a
personal computer connected to Internet. Apart from it, people can
also do financial transactions using Internet banking on their cellular
phones or personal digital assistants. Internet banking offers large
number of benefits for people involved in financial transactions. There
is no need to visit your bank every time you need to transfer money.
You can do so by internet banking from the comfort of your home.
With net banking facility, one can not only transfer money, but also
pay bills, check bank statements, check account balance, request for
check book and various other financial transactions.
68
Internet banking
has become
widely popular
among the
masses because
of its wide array
of benefits. All
banks offer the
online banking
facility for their customers nowadays. Online banking has made the
lives easier for people who are too busy to go to bank for conducting
their financial transactions. Net banking offers the flexibility to do
financial transaction on any day irrespective of the time. In todays
fast paced life, people are too much stressed out because of their work
pressure and net banking offers them peace of mind as they can pay
their bills, book their tickets, do online shopping, etc. by relaxing on
couch in their home. Best part of net banking is that it is very easy to
do any transaction over the net and highly secure website takes care of
all your worries.
All one need is a computer, PDA or cell phone with active internet
connection to get going with net banking. Before using net banking,
one needs to activate net banking facility with his/her bank. Bank
provides a unique user ID and password for its customers to login into
69
the bank website for conducting financial transactions using net

banking. For any transaction, one should have an active bank account,
appropriate bank balance for transactions,bank account number,
customers user ID, debit/credit card number,and Internet banking PIN
number along with access to the internet.
Banks have designed their websites in a very user-friendly manner for
net banking facilities. Most of the banking interfaces are easily
viewable and instructions are provided at every step so that people can
carry out any transaction almost effortlessly. In case, a person gets
stuck in any transaction due to internet failure or any other reason,
he/she can take assistance from phone banking facility offered by
banks. The phone banking feature allows the customers to call the
banks toll-free number and get required assistance in finishing their
transactions. To avail the phone banking facility customers are
provided with phone banking PIN along with their ATM PIN and net
banking PIN.
When a customer opens an account with a bank, he/she receives a
welcome kit from the bank. This kit contains all the important
documents including confidential information required by the
customer including document with account number, Debit cum ATM
card, ATM PIN, customers user ID, online banking password, phone
banking password, checkbook, etc. Customer should ensure that all
the passwords or PIN should be received in a closed envelope failing
70
which he/she should report to the bank immediately. Customer need to

complete a form for activating internet banking facility and submit it
in person at a banks branch. Only once the net banking facility gets
activated, customer can login to the website and enter user ID and
password to access his account details and conduct financial
transactions.
Banks maintain high security regarding the password
authentication and encryption. Moreover, banks suggest
customers to keep their password secret and change it
periodically. The Internet banking facilities varies from bank
to bank. One should read the net banking guidelines
thoroughly before conducting financial transactions over the
internet
Factoring
Factoring is a financial option for the management of receivables. In
simple definition it is the conversion of credit sales into cash. In
factoring, a financial institution (factor) buys the accounts receivable
of a company (Client) and pays up to 80 %( rarely up to 90%) of the
amount immediately on agreement. Factoring company pays the
remaining amount (Balance 20%-finance cost-operating cost) to the
client when the customer pays the debt. Collection of debt from the
customer is done either by the factor or the client depending upon the
type of factoring. We will see different types of factoring in this
article. The account receivable in factoring can either be for a product
or service. Examples are factoring against goods purchased, factoring
for construction services (usually for government contracts where the
government body is capable of paying back the debt in the stipulated
period of factoring. Contractors submit invoices to get cash instantly),
factoring against medical insurance etc. Let us see how factoring is
done against an invoice of goods purchased.
71
Characteristics of factoring
1. Usually the period for factoring is 90 to 150 days. Some factoring
companies allow even more than 150 days.
2. Factoring is considered to be a costly source of finance compared to
other sources of short term borrowings.
3. Factoring receivables is an ideal financial solution for new and
emerging firms without strong financials. This is because credit
worthiness is evaluated based on the financial strength of the customer
(debtor). Hence these companies can leverage on the financial
strength of their customers.
4. Bad debts will not be considered for factoring.
72
5. Credit rating is not mandatory. But the factoring companies usually

carry out credit risk analysis before entering into the agreement.
6. Factoring is a method of off balance sheet financing.
7. Cost of factoring=finance cost + operating cost. Factoring cost vary
according to the transaction size, financial strength of the customer
etc. The cost of factoring varies from 1.5% to 3% per month
depending upon the financial strength of the client's customer.
8. Indian firms offer factoring for invoices as low as 1000Rs
9. For delayed payments beyond the approved credit period, penal
charge of around 1-2% per month over and above the normal cost is
charged (it varies like 1% for the first month and 2% afterwards).
Portfolio management
Third-Party Portfolio Management Services (PMS) are designed for a
select few who want more from their investments. You can consider
how more sophisticated investment strategies could be applied for
your benefit, even if it means taking on additional volatility in
investment returns. A reputed portfolio manager will then craft a
portfolio especially for you, based on your specific objectives. Your
portfolio may combine a basket of securities including derivatives,
stocks, bonds and money market instruments, and your portfolio
manager may take a more focused exposure in select securities at
times, to maximize your opportunity from them.
73
Some benefits of building an investment

portfolio comprising of mutual funds and
third-party PMS through Standard Chartered
Private Bank:
Fund & Portfolio Classification
Specialized Research
Convenience
Confidentiality
NRI SERVICES
The bank provides types of accounts
to nri
Non-resident (External) Rupee Accounts (NRE A/cs.)
Non-resident (Ordinary) Rupee Accounts (NRO A/cs.)
Foreign Currency Non-resident Accounts (FCNR(B) A/c s) -Resident Foreign Currency Account (RFC A/cs.)
Letter of credit
74
A letter of credit is a promise to pay. Banks issue letters of credit as a

way to ensure sellers that they will get paid as long as they do what
they've agreed to do.
Letters of credit are common in international trade because the bank
acts as an uninterested party between buyer and seller. For example,
importers and exporters might use letters of credit to protect
themselves. In addition, communication can be difficult across
thousands of miles and different time zones. A letter of credit spells
out the details so that everybody's on the same page.
Mortgage bank
Mortgage bank specializes in originating
and/or servicing mortgage loans.
A mortgage bank is a state-licensed banking entity
that makes mortgage loans directly to consumers. The
difference between a mortgage banker and a mortgage broker is that
the mortgage banker funds loans with its own capital.
Generally, a mortgage bank originates a loan and places it on a preestablished warehouse line of credit until the loan can be sold to an
investor such as Fannie Mae, or Freddie Mac. The process of selling a
loan from the mortgage bank to another investor is referred to as
selling the loan on the secondary market.
Mortgage banks frequently use the secondary market to sell loans
because the funds received pay down their warehouse lines of credit
which enables the mortgage bank to continue to lend. A mortgage
75
bank is not regulated as a federal or state bank and does not take
deposits from consumers or businesses. A mortgage bank raises some
equity which it uses to guarantee the warehouse line and the bulk of
the funds are provided by the warehouse lender.
A line of credit is any credit source extended to a government,
business or individual by a bank or other financial institution. A line
of credit may take several forms, such as overdraft protection,
demand loan, special purpose, export packing credit, term loan,
discounting, purchase of commercial bills, etc. It is effectively a bank
account that can readily be tapped at the borrower's
discretion. Interest is paid only on money actually withdrawn,
although the borrower may be required to pay an unused line fee,
often an annualized percentage fee on the money not withdrawn.
Lines of credit can be secured by collateral or unsecured.
Lines of credit are often extended by banks, financial institutions and
other licensed consumer lenders to creditworthy customers (though
certain special purpose lines of credit may not have creditworthiness
requirements) to address liquidity problems; such a line of credit is
often called a personal line of credit. The term is also used to mean
the credit limit of a customer, that is, the maximum amount of credit a
customer is allowed.
Cash credits
A cash credit is a short-term cash loan to a company. A bank provides
this type of funding, but only after the required security is given to
secure the loan. Once a security for repayment has been given, the
business that receives the loan can continuously draw from the bank
up to a certain specified amount.
Overdraft
An overdraft occurs when money is withdrawn from a bank account
and the available balance goes below zero. In this situation the
account is said to be "overdrawn". If there is a prior agreement with
the account provider for an overdraft, and the amount overdrawn is
76
within the authorized overdraft limit, then interest is normally charged

at the agreed rate. If the negative balance exceeds the agreed terms,
then additional fees may be charged and higher interest rates may
apply.
Bill discounting
A debt is that which one party, the debtor, owes to a second party,
the creditor; usually this refers to assets owed, but the term can also be
used metaphorically to cover moral obligations and other interactions
not based on economic value.
A debt is created when a creditor agrees to lend a sum of assets to a
debtor. Debt is usually granted with expected repayment; in modern
society, in most cases, of the original sum plus interest.
In finance, debt is a means of using anticipated future purchasing
power in the present before it has actually been earned.
Some companies and corporations use debt as a part of their
overall corporate finance strategy.
Mutual funds
ICICI Bank Mutual Funds services aim at helping
you design the ideal portfolio for your investment
requirements. At ICICI Bank, we help you identify
the appropriate mix of Mutual Fund schemes on the
basis of asset allocation strategies. Invest in various
schemes of multiple mutual funds with a satisfactory
performance record and reap the benefits. Additionally, ICICI Bank
Mutual Funds services also equip you with various research reports to
help you make an informed decision.
Home loan
A home loan, or mortgage, is a secured loan that
borrowers obtain in order to purchase a home.
Because a home is the largest purchase many
individuals will ever make, most borrowers utilize
home loans to assist with their home purchase.
77
A home loan, or mortgage, is a secured loan that borrowers obtain in

order to purchase a home. Because a home is the largest purchase
many individuals will ever make, most borrowers utilize home loans
to assist with their home purchase.
Core banking
Core Banking is normally defined as the business conducted by a
banking institution with its retail and small business customers. Many
banks treat the retail customers as
their core banking customers, and
have a separate line of business to
manage small businesses. Larger
businesses are managed via the
corporate banking division of the
institution. Core banking basically is
depositing and lending of money.
Nowadays, most banks use core
banking applications to support their
operations where CORE stands for "centralized online real-time
exchange". This basically means that all the bank's branches access
applications from centralized datacenters. This means that the deposits
made are reflected immediately on the bank's servers and the customer
can withdraw the deposited money from any of the bank's branches
throughout the world. These applications now also have the capability
to address the needs of corporate customers, providing a
comprehensive banking solution.
A few decades ago it used to take at least a day for a transaction to
reflect in the account because each branch had their local servers, and
the data from the server in each branch was sent in a batch to the
servers in the datacenter only at the end of the day (EoD).
Normal core banking functions will include deposit accounts, loans,
mortgages and payments. Banks make these services available across
multiple channels like ATMs, Internet banking, and branches.
78
Chapter 5
Challenges faced by
banks
Interest rate risk
Interest rate risk can be defined as exposure of bank's net interest income to
adverse movements in interest rates. A bank's balance sheet consists mainly
of rupee assets and liabilities. Any movement in domestic interest rate is the
main source of interest rate risk.
Interest rates and non-performing assets
The best indicator of the health of the banking industry in a country is its
level of NPAs. Given this fact, Indian banks seem to be better placed than
they were in the past. A few banks have even managed to reduce their net
NPAs to less than one percent (before the merger of Global Trust Bank into
Oriental Bank of Commerce , But as the bond yields start to rise the chances
are the net NPAs will also start to go up. This will happen because the banks
have been making huge provisions against the money they made on their
bond portfolios in a scenario where bond yields were falling.
Reduced NPAs generally gives the impression that banks have strengthened
their credit appraisal processes over the years. This does not seem to be the
79
case. With increasing bond yields, treasury income will come down and if
the banks wish to make large provisions, the money will have to come from
their interest income, and this in turn, shall bring down the profitability of
banks.
Competition in retail banking
The entry of new generation private sector banks has changed the entire
scenario. Earlier the household savings went into banks and the banks then
lent out money to corporates. Now they need to sell banking. The retail
segment, which was earlier ignored, is now the most important of the lot,
with the banks jumping over one another to give out loans. The consumer
has never been so lucky with so many banks offering so many products to
choose from. With supply far exceeding demand it has been a race to the
bottom, with the banks undercutting one another. A lot of foreign banks
have already burnt their fingers in the retail game and have now decided to
get out of a few retail segments completely.
The nimble footed new generation private sector banks have taken a lead on
this front and the public sector banks are trying to play catch up.
The PSBs have been losing business to the private sector banks in this
segment. PSBs need to figure out the means to generate profitable business
from this segment in the days to come.
The urge to merge

In the recent past there has been a lot of talk about Indian Banks lacking in
scale and size. The State Bank of India [ Get Quote ] is the only bank from
India to make it to the list of Top 100 banks, globally. Most of the PSBs are
either looking to pick up a smaller bank or waiting to be picked up by a
larger bank.
.
Impact of BASEL-II norms
Banking is a commodity business. The margins on the products that banks
offer to its customers are extremely thin vis a vis other businesses. As a
result, for banks to earn an adequate return of equity and compete for capital
along with other industries, they need to be highly leveraged.
80
This is not an efficient use of capital. The company with the best credit
rating is more likely to repay the loan vis a vis the company with a low
credit rating. So the bank should be setting aside a far lesser amount of
capital against the risk of a company with the best credit rating defaulting
vis a vis the company with a low credit rating. With the BASEL-II norms
the bank can decide on the amount of capital to set aside depending on the
credit rating of the company.
Credit risk is not the only type of risk that banks face. These days the
operational risks that banks face are huge. The various risks that come under
operational risk are competition risk, technology risk, casualty risk, crime
risk etc. The original BASEL rules did not take into account the operational
risks. As per the BASEL-II norms, banks will have to set aside 15 per cent
of net income to protect themselves against operational risks.
So to be ready for the new BASEL rules the banks will have to set aside
more capital because the new rules could lead to capital adequacy ratios of
the banks falling. How the banks plan to go about meeting these
requirements is something that remains to be seen. A few banks are
planning initial public offerings to have enough capital on their books to
meet these new norms.
81
Conclusion
The banking scenario has changed drastically. The changes
which have been took place in the last ten years are more
than the changes took place in last fifty years because of the
institutionalization, liberalization, globalization and
automation in banking industry. Now, bank has spread out in
to remote areas of our country through innovative
technology.
To face competition it is necessary for banks to absorb
the technology and upgrade their services. Today bank is
marked by customer expectation and technological
innovations. Various banks that have harnessed and
leveraged technology having innovative strategies.
In todays context are following the strategy of
innovative banking than retail banking which in need of
the hour. Banks retains their customers according to their
profiles and preferences. Prompt and efficient banking
service, thus has become very significant.
82
FIELD STUDY
Bank details: state bank of india
Branch: Ulhasnagar-3
Person visited: Mr.H.P DESHPANDE
Chief manager
State bank of india.
Topic: products and services offered by

bank.
QUESTIONNAIRE
1.Are there any products or services that are specially
given to NRIs ?
Yes through different types of accounts like NRO, NRE,
FCNR ETC.
83
2.What are the new products offered by bank ?

Atm , internet banking, mobile banking, green channel
counter,etc.
3.What are the different types of services you
provide ?
Savings bank a/c, current a/c, fixed deposit a/c, loans and
advances, sbi life.,etc
4. What is the latest technology adopted by your
bank ?
Issuing of green channel counter.
5. What marketing strategy you adopted ?
Through advertisement , distributing brochures,
sending letters to existing customers.etc
6. What strategies are adopted to retain the
Customers ?
Better customer services, special products of all
categories.
7. Is there any channels preferred for marketing
services ?
SBI LIFE.
8. What are your future stratagies for enhancing
the services ?
Issuing branches in remote areas, better customer
services.
9. What challenges you face in retaining the
Customers?
84
Competition, interest rate, crowd, etc

10.
How many services does your bank provide ?
Almost 150.
11.
Is customer services is an instrument to
create a sense of competition among banks ?
Yes definitely it is.
Bipliography
Primary data :
Visit at state bank of india ,

Ulhasnagar-3 branch
And meeting with Mr. H.P.Deshpande
Secondary data:
Books and magazines
Innovations in banking and insurance
-Romeo mascarenhas
85
Environmental management and financial services

- Romeo mascarenhas
News papers - economic times
Websites www.wikipedia.com
www.sbi.co.in.

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1

Products and Services offered by bank

AN INTRODUCTION TO THE BANKING

(NPAs) and payment defaults. Co-operative banks are nimble footed in

transformation has been largely brought about by the large dose of

The banking in India is highly

fragmented with 30 banking units contributing to almost 50% of deposits

The Indian banking can be broadly categorized into

nationalized, private banks and specialized banking institutions.

The Reserve Bank of India acts as a centralized body monitoring any

The nationalized banks (i.e.

government-owned banks) continue to dominate the Indian banking arena.

The liberalize policy of Government of India permitted entry to

The major differentiating

I. HISTORY OF BANKING IN INDIA

the Bank of Bombay and IN 1843, the Bank of Madras was

Government of India accepted the recommendations of the committee and

Subsidiary with effect from

1st May 1960

5. State Bank of Patiala

1st April 1960

6. State Bank of Mysore

1st March 1960

7. State Bank of Indore

8. State Bank of Travancore

With effect from 1st January 1963, the State Bank

New Bank if India.

Oriental Bank of Commerce.

Punjab and Sind Bank.

In 1969, the Lead Bank Scheme was introduced to

The rapid branch expansion has been the squeeze on profitability of

3) Post-Liberalization Era---Thrust on Quality and

The route causes for the lackluster performance of banks,

on financial sector, chaired by M. Narasimham, laid the

Private Sector Banks

Entry of Private Sector Banks:

Subsequently 9 new commercial banks have been granted

unraveling in China) will happen on this front in India.

II. BANKING IN INDIA

organizational Structure of Banks in India:

Broad Classification of Banks in India:

State Bank of India and its Associates (8)

Nationalized Banks (19)

Regional Rural Banks Sponsored by Public Sector Banks

Old Generation Private Banks (22)

Foreign New Generation Private Banks (8)

Banks in India (40)

(4) Co-operative Sector Banks:

Industrial Finance Co-operation of India (IFCI)

Industrial Development of India (IDBI)

Industrial Investment Bank of India (IIBI)

Small Industries Development Bank of India (SIDBI)

National Bank for Agriculture and Rural Development

Export-Import Bank of India

approaching the saver. This intermediation role of banks is

The Role of Reserve Bank of India (RBI) Bankers Bank:

fully owned by the Government of Indian since nationalization in 1949

Objective: maintain public confidence in the system, protect

Manager of Exchange Control

Objective: to facilitate external trade and payment and promote

Performs a wide range of promotional functions to support national

Banker to banks: maintains banking accounts of all scheduled banks.

With economic growth assuming a new urgency