A project on Changing Paradigm of

banking sector

Developed by

ARJUN A DIXIT,

GAURANG PRAJAPATI,

PRATAP GOHIL.

ORION INSTITUTE OF MANAGEMENT & TECHNOLOGY.

SUBMITTED TO,

Mr.Hardik Vyas

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INDEX

NO PARTICULAR Page no.

1 PREFACE 3
2 ACKNOWLEDGEMENT 4
3 SECTOR PROFILE 5
4 OBJECTIVE 12
5 ANALYSIS 14
6 CONCLUSION 17
7 LIMITATION 18

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PREFACE
• ORION INSTITUTE OF MANAGEMENT AND TECHNOLOGY is an esteemed
institute. Orion was established in 2005 as INTERNATIONAL INSTITUTE OF
MANAGEMENT AND TECHNOLOGY.

• ORION INSTITUTE OF MANAGEMENT AND TECHNOLOGY believes that the

managers of tomorrow should be the people of vision. They must b well
equipped with knowledge, skills and inspired to lead.

• ORION INSTITUTE OF MANAGEMENT AND TECHNOLOGY has dual

specialization of Management & IT.

ACCREDITATION of ORION INSTITUTE OF MANAGEMENT AND TECHNOLOGY

University Grant Commission(UGC)

ISO 9001-2008

National Accreditation Council (NAAC)

Joint Accreditation System Of Australia And

Newzealand .

ORION INSTITUTE OF
MANAGEMENT AND
TECHNOLOGY

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 Orion Education Orion Education Pvt
Orion Placement.
Trust Ltd.

ACKNOWLEDGEMENT

• It’s a great privilege that I have done my project in such a well-

organized and diversified organization. I am grateful to all those
who helped and supported me in completing the project. First of all
I would sincerely like to thank Mr. HARDIK VYAS, for his
valuable guidance and kind co-operation during the project.
• I am also thankful to our director Mr. Sanjay Qureshi .Last but not
the least, I am also thankful to my parents, all the college staff and
my friends for helping me directly or indirectly in my project..

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5 | Page
Sector profile
Banking Sector.

• Banking in India originated in the last decades of the 18th

century. The first banks were The General Bank of India
which started in 1786, and the Bank of Hindustan, both of
which are now defunct. The oldest bank in existence in India
is the State Bank of India, which originated in the Bank of
Calcutta in June 1806.

• Foreign banks too started to arrive, particularly in Calcutta,

in the 1860s.

• The period between 1906 and 1911, saw the establishment

of banks inspired by the Swadeshi movement. The Swadeshi
movement inspired local businessmen and political figures to
found banks of and for the Indian community. A number of
banks established then have survived to the present such as
Bank of India, Corporation Bank, Indian Bank, Bank of
Baroda, Canara Bank and Central Bank of India.

• Indian banking sector is at 6th position among emerging

economies

(1) Malaysia

(2) Korea

(3) China

(4) Russia

(5) Chile

(6) India

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 (7) Brazil

(8) Mexico

(9) Thailand

(10) Philipines & Indoneshia

So we should proud to be Indian.

Terms used in banking sector.

Bank rate.

Bank Rate is the rate at which central bank of the country (in
India it is RBI) allows finance to commercial banks. Bank Rate is a
tool, which central bank uses for short-term purposes. Any
upward revision in Bank Rate by central bank is an indication that
banks should also increase deposit rates as well as Prime Lending
Rate. This any revision in the Bank rate indicates could mean
more or less interest on your deposits and also an increase or
decrease in your EMI.

Bank Rate (For Non Bankers)

This is the rate at which central bank (RBI) lends money to other
banks or financial institutions. If the bank rate goes up, long-
term interest rates also tend to move up, and vice-versa. Thus, it
can said that in case bank rate is hiked, in all likelihood banks
will hikes their own lending rates to ensure and they continue to
make a profit.

CRR

Cash Reserve Ratio (CRR)

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Consequent upon amendment to sub-Section 42(1), the Reserve
Bank, having regard to the needs have securing the monetary
stability in the country, can prescribe Cash Reserve Ratio (CRR)
for scheduled banks without any floor rate or ceiling rate.

RBI uses CRR either to drain excess liquidity or to release funds

needed for the economy from time to time.

Increase in CRR means that banks have fewer funds available and
money is sucked out of circulation. Thus we can say that this
serves duel purposes i.e. it not only ensures that a portion of bank
deposits is totally risk-free, but also enables RBI to control
liquidity in the system, and thereby, inflation by tying the hands
of the banks in lending money.

CRR (For Non Bankers)

CRR means Cash Reserve Ratio. Banks in India are required to

hold a certain proportion of their deposits in the form of cash.

However, actually Banks don’t hold these as cash with

themselves, but deposit such case with Reserve Bank of India
(RBI) / currency chests, which is considered as equivalent to
holding cash with them. This minimum ratio (that is the part of
the total deposits to be held as cash) is stipulated by the RBI and
is known as the CRR or Cash Reserve Ratio.

Thus, when a bank’s deposits increase by Rs100, and if the cash

reserve ratio is 9%, the banks will have to hold additional Rs 9
with RBI and Bank will be able to use only Rs 91 for investments
and lending / credit purpose.

Therefore, higher the ratio (i.e. CRR), the lower is the amount that
banks will be able to use for lending and investment.

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This power of RBI to reduce the lendable amount by increasing
the CRR makes it an instrument in the hands of a central bank
through which it can control the amount that banks lend. Thus, it
is a tool used by RBI to control liquidity in the banking system.

SLR

Every bank is required to maintain at the close of business every

day, a minimum proportion of their Net Demand and Time
Liabilities as liquid assets in the form of cash, gold and un-
encumbered approved securities.

The ratio of liquid assets to demand and time liabilities is known

as Statutory Liquidity Ratio (SLR). Present SLR is 24%. (Reduced
w.e.f. 8/11/208, from earlier 25%) RBI is empowered to increase
this ratio up to 40%.

An increase in SLR also restricts the bank’s leverage position to

pump more money into the economy.

SLR (For Non Bankers)

SLR stands for Statutory Liquidity Ratio. This term is used by

bankers and indicates the minimum percentage of deposits that
the bank has to maintain in form of gold, cash or other approved
securities. Thus, we can say that it is ratio of cash and some
other approved to liabilities (deposits) it regulates the credit
growth in India.

Repo rate and Reverse Repo rate

Repo (Repurchase) rate is the rate at which the RBI lends shot-
term money to the banks. When the repo rate increases

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borrowing from RBI becomes more expensive. Therefore, we can
say that in case, RBI wants to make it more expensive for the
banks to borrow money, it increases the repo rate; similarly, if it
wants to make it cheaper for banks to borrow money, it reduces
the repo rate

Reverse Repo rate is the rate at which banks park their short-term
excess liquidity with the RBI. The RBI uses this tool when it feels
there is too much money floating in the banking system. An
increase in the reverse repo rate means that the RBI will borrow
money from the banks at a higher rate of interest. As a result,
banks would prefer to keep their money with the RBI

We can directly see the growth of bank sector… it is on 11000

levels...

OBJECTIVES

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Objective of the banking sector is to increase the flow of money in
the market.

To give loan and to support financially.

Our objective.

To get information about banking sector.

Know the procedure of banking profit.

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ANALYSIS
In order to analysis bank first we should know the meaning of
bank.

MEANING

A bank is a financial intermediary that accepts deposits and

channels those deposits into lending activities, either directly or
through capital markets. A bank connects customers with capital
deficits to customers with capital surpluses.

HISTORY.

Banking in India originated in the last decades of the 18th

century.

The first banks were The General Bank of India which started in
1786, and the Bank of Hindustan

The oldest bank in existence in India is the State Bank of India,

which originated in the Bank of Calcutta in June 1806, which
almost immediately became the Bank of Bengal.

Foreign banks too started to arrive, particularly in Calcutta, in the

1860s. The Comptoire d'Escompte de Paris opened a branch in
Calcutta in 1860, and another in Bombay in 1862; branches in
Madras and Pondicherry, then a French colony, followed. HSBC
established itself in Bengal in 1869.

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 March
particular 1969
1995

Number of banks 89 282

Number of bank
8262 62264
branches

Population per 6269

14000
branch 7

Deposits
46 3758
(Rs.billion)

Per capita deposits

90 4148
(Rs.)

Deposits as % of
13 41
GDP

Credit/Deposit
78 59
Ratio (%)

Cash/Deposit Ratio
8
(%)

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 TYPES OF BANKS DEPOSITS.

Bank Fixed Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed
Deposit Account, a certain sum of money is deposited in the bank
for a specified time period with a fixed rate of interest. The rate of
interest for Bank Fixed Deposits depends on the maturity period.
It is higher in case of longer maturity period. There is great
flexibility in maturity period and it ranges from 15days to 5 years.

Current Account
Current Account is primarily meant for businessmen, firms,
companies, and public enterprises etc. that have numerous daily
banking transactions. Current Accounts are cheque operated
accounts meant neither for the purpose of earning interest nor for
the purpose of savings but only for convenience of business
hence they are non-interest bearing accounts

Demat Account
Demat refers to a dematerialized account. Demat account is just
like a bank account where actual money is replaced by shares.
Just as a bank account is required if we want to save money or
make cheque payments, we need to open a Demat account in
order to buy or sell shares.

Recurring Bank Deposits

under a Recurring Deposit account (RD account), a specific

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amount is invested in bank on monthly basis for a fixed rate of
return. The deposit has a fixed tenure, at the end of which the
principal sum as well as the interest earned during that period is
returned to the investor.

Savings Bank Account

Savings Bank Accounts are meant to promote the habit of saving
among the citizens while allowing them to use their funds when
required. The main advantage of Savings Bank Account is its high
liquidity and safety.

Senior Citizen Saving Scheme 2004

The Senior Citizen Saving Scheme 2004 had been introduced by
the Government of India for the benefit of senior citizens who
have crossed the age of 60 years. However, under some
circumstances the people above 55 years of age are also eligible
to enjoy the benefits of this scheme.

Nationalised Banks
Nationalised banks dominate the banking system in India. The
history of nationalised banks in India dates back to mid-20th
century, when Imperial Bank of India was nationalised (under the
SBI Act of 1955) and re-christened as State Bank of India (SBI) in
July 1955.

In 1948, the Reserve Bank of India, India's central banking

authority, was nationalized, and it became an institution owned
by the Government of India.

In 1949, the Banking Regulation Act was enacted which

empowered the Reserve Bank of India (RBI) "to regulate, control,
and inspect the banks in India."

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The Banking Regulation Act also provided that no new bank or
branch of an existing bank could be opened without a license
from the RBI, and no two banks could have common directors.

The RBI was nationalized on 1 January, 1949 in terms of the

Reserve Bank of India

LIBERALISATION

In the early 1990s, the then Narsimha Rao government embarked

on a policy of liberalization, licensing a small number of private
banks. These came to be known as New Generation tech-savvy
banks, and included Global Trust Bank

This later amalgamates with Oriental Bank of Commerce, Axis

Bank (earlier as UTI Bank), ICICI Bank and HDFC Bank.

The new policy shook the Banking sector in India completely.

Bankers, till this time, were used to the 4-6-4 method (Borrow at
4%; Lend at 6%; Go home at 4) of functioning. The new wave
ushered in a modern outlook and tech-savvy methods of working
for traditional banks. All this led to the retail boom in India. People
not just demanded more from their banks but also received more.

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.

Banks offer many different channels to access their banking

and other services:

ATM is a machine that dispenses cash and sometimes takes

deposits without the need for a human bank teller. Some ATMs
provide additional services.

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A branch is a retail location

Call center

Mail: most banks accept check deposits via mail and use mail to
communicate to their customers, e.g. by sending out statements

Mobile banking is a method of using one's mobile phone to

conduct banking transactions

Online banking is a term used for performing transactions,

payments etc. over the Internet

Relationship Managers, mostly for private banking or business

banking, often visiting customers at their homes or businesses

Telephone banking is a service which allows its customers to

perform transactions over the telephone without speaking to a
human

Video banking is a term used for performing banking transactions

or professional banking consultations via a remote video and
audio connection. Video banking can be performed via purpose
built banking transaction machines (similar to an Automated teller
machine), or via a videoconference enabled bank branch.

Suggestion
Some of the branches have staff of particular age who is above 35
years... they don’t do their work efficiently.

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Some of the branches have very old technology. Like they are
using the computer which is too old.. That computer even hangs
while transitions...

Some of the branches of bank don’t have polite people..They are

even too rude for customers….

Limitations
Bank managers are not giving appointment to us because of not
having identicard.

Some of the managers r not having proper knowledge of

particular bank.

There is a big problem to collect the basic information related to

bank.
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The bank managers are doing beat about bush.

CONCLUSION

I concluded that bank sector is progress making sector. Banking

sector is having the wide scope but the efficient utilization of all
the resources is not possible to utilize all the resource.

We had observed that the infrastructure of bank is very good. And

it is improving day b day.

Online transaction helps us to transit money anywhere in this

world.

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THANK YOU.

Best regards to,

Orion Institute of Management.

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