Project Report "Banking System" in India

Introduction of Banking

Banking regulation Act, 1949, defines banking as accepting for the purpose of
lending or investment, of deposits of money from the public, repayable on
demands or otherwise and with draw able on demand by cheques, draft or order
otherwise.

Functions of Commercial Banks :

1. To change cash for bank deposits and bank deposits for cash.
2. To transfer bank deposits between individuals and or companies.
3. To exchange deposits for bills of exchange, govt. bonds, the secured
and unsecured promises of trade and industrial units.
4. To underwrite capital issues. They are also allowed to invest 5% of
their incremental deposit liabilities in shares and debentures in the
primary and secondary markets.
5. The lending or advancing of money either upon securities or without
securities.
6. The borrowing, raising or taking of money.
7. The collecting and transmitting of money and securities.
8. The buying and selling of foreign exchange including foreign bank
notes.

Banking scene in India

The banking sector in India is passing through a period of structural change

under the combined impact of financial sector reforms, internal competition,
changes in regulations, new technology, global competitive pressure and fast
evolving strategic objectives of banks and their existing and potential
competitors. Until the last decade, banks were regarded largely as institutions
rather akin to public utilities. The market for banking services were oligopolies and
Centralized while the market place was regulated and banks were expected to
receive assured spreads over their cost of funds. This phenomenon, which was
caricatured as 3-6-3 banking in the united states, meaning that banks accepted
deposits at 3%, lent at 6%, and went home at 3 p.m. to play golf, was the result of
the sheltered markets and administrated prices for banking products. Existence of
entry barriers for new banks meant that competition was restricted to existing
players, who often operated as a cartel, even in areas where the freedom to price
their products existed.
The market place began to change for banks in India as a result of reforms of the
financial sectors initiated in the current decade. On account of policy measures
introduce to infuse greater competitive vitality in the system, the banking has
entered in to a competitive phase. Competition has emerged not only from within
the banking system but also from non-banking institutions. Lowering of entry
barriers, deregulation of interest rates and growing sophistication of customers
have made banking far less oligopolistic today. Introduction of capital adequacy
and other prudential norms, freedom granted to enter into new turf’s and greater
overlap of functions between banks and non-banks have forced banks to get out of
their cozy little world and think of the future of the banking.

Emerging Environment of Banking in India

Full convertibility of rupee leading to free mobility of capital, which will mean
virtual collapse of the national borders for trade and capital flows.

Greater coordination between monetary, fiscal and exchanged rate policies for
achieving the goals of faster and sustainable economic growth, macro-economic
stability and export promotion.

Close integration of various financial markets such as money market, capital

market and forex market.

Removal of lowering of existing barriers of competitiveness, which are present

today in the form of quantitative instructions on certain imports protective custom
duties, reservation of certain utilities for the public sector.

Growing privatization and commercialization infrastructure sector.

Today, Banks customers are better informed, more sophisticated and

discerning. They also have a wide choice to choose from various banks and non-
bank intermediaries. Their expectations are soaring. This is particularly true for
banks corporate clientele but also applies to customers from personal segment.

This is changing profile of customer’s call for a shift from product-based

approach to customers-based approach. A bank aiming at maximizing customer
value must, of necessity, plan for customized products. A combination of
marketing skills and state-of-the-art technology should enable to bank in
maximizing its profits through customer satisfaction.
In the next millennium banks will have to be more and more cautions about
customer service, profitability, increased productivity, to keep face with
changing banking scenario. As banks in India prepare themselves for the
millenium these are the shifts in the paradigm they are likely to experience. The
21st century may see the dawn of “DARWINIAN BANKING”. Only the banks
could fulfill the demands of markets and changing items would survive and
prosper.

A word about SBI card

SBI Segment : Small business credit card (SBI credit card)

Preamble :

Small business units, retail traders, artisans, village industries, small-scale

industrial units and tiny units, professionals and self employed persons etc.,
contribute significantly to the growth of our economy. The entrepreneur himself
manages many of the units. Very often, these entrepreneurs complain of procedural
delay in sanctions and renewal of limits. They also find it difficult to cope with the
demands for audited balance sheet and other statements sought by the bank from
time to time for availing credit facilities. With a view to providing hassle free
financial supports to the above categories of entrepreneurs who have shown
commitment to run the unit successfully and who are dealing with the banks for
last two years satisfactorily, new and friendly credit product namely small business
credit card scheme is designed. Under the scheme, cumbersome procedural aspects
relating to reviews and renewals, submission of balance sheet, stock statements and
other statements are done with credit delivery made simple and easy.

Purpose :

To meet the credit requirements of small business units, industrial unit, retail
trader, artisan, Small Scale Industry (SSI) and tiny units.

Eligibility :

A. Customers of the following segments with a satisfactory track record for the last
two years enjoying credit facilities.

 Small industrial units (SSI and tiny units including artisans)

 Small retail traders (Under SBF)
 Professional and self employed persons
  Small business enterprise

B. Units who do not enjoy credit limit with us/other banks at present with excellent
performance and credential may be considered.

Quantum of loan :

Loan up to Rs. 5 Lakh can be sanctioned to eligible persons.

Assessment :

The small business credit card limit can be fixed as follows :

 For small business, retail trader etc. 20% of the annual turnover
declared for tax purpose or last twelve months turnover in the
operative accounts, whichever is higher.

In respect of parties with good track record, where sales tax returns are not
available, the credit limits may be decided taking into consideration the actual
turnover in the accounts during the last two years.

 For professionals and self employed persons, 50% of their gross

annual income as per IT return shall be considered as the limit for
issuing the SBI credit card.
 For small scale industrial units, tiny sector units the assessment
norms in vogue as per the Nayak Committee recommendations would
continue.

Validity :

 Credit card limit will be valid for a period of three years, subject to
satisfactory conduct of the accounts.
 Annual review will be done based on conduct/operations of the A/cs.
A major portion of the sales turnover should have been routed through
the accounts as revealed by the credit summations.

Repayment :

 The working capital advance may be continued subject to that review

every year provided the credit summations in the account is not less
than 50% of the projected sales turnover. If the credit summations is
 less than 50% of projected sales turnover. The outstanding as on the
due date of review should be made repayable in suitable monthly
installments.
 The term loan is repayable in suitable installments with in a maximum
period of five years.
 In case of composite loans, only the term loan is repayable in
installments up to a maximum period of five years.

Interest rate :

As per extent instructions issued from time to time relating the market segment.

Refinance :

No refinance is to be claim from SIDBI

Security :

Primary : Hypothecation of the stock in trade receivables, machinery, office

equipment.

Collateral :

Under SSI-No collateral security as per existing guidelines of RBI.

User SBF :

 Up to Rs. 25000/- No collateral security.

 Over Rs. 25000/- charge over movable/immovable property or third
party granted.

However, in case of the excellent track record, sanctioning authority may waive
collateral requirement.

Margins :

Up to Rs. 25000/-   -  NIL

Rs. 25001/- to Rs. 5,00,000/-    -  20%

Documentation :
Documents as per extant instructions.

Credit Card - A Convenient Banking Product :

The credit card is a hassle free convenient banking product aimed at

simplifying the credit delivery mechanism. Cumbersome procedural aspects
relating to reviews and renewals, submission of stock statement, balance sheet and
other statements are done away with. The credit limit will be worked as detail
above.

Small business credit card

 Card No.
 Name
 Account No.
 Tel. No.
 Limit Rs.
 Date of issue
 Valid upto
 ………….. (Branch Code)

Signature of the Brach Manager                     Card holder’s Photograph with

signature

The borrower would be issued a photo card indicating sanctioned limit and validity
of the limit (sample card)

Insurance :

 Fixed assets/stock pledged/hypothecated to the bank be fully insured

at least to the extent of the bank interests.
 Bank may waive insurance of assets for equipment against the fire and
other risk up to Rs.25000/-

Cover under credit guarantee scheme :

All eligible loan accounts sanctioned for small scale industries (other than
services) would qualify for cover under CGTFSI scheme (presently the scheme
has been introduce in five circles on pilot basis viz. New Delhi, Chandigarh,
Lucknow, Patna & Hydrabad).
Operation :

 Small business credit card accounts should be maintained in a separate

ledger.
 Cheque book should be issued and marked as small business credit
card account.
 Pass book should be issued for mall business credit card holders.
 Stock statement waived.
 Submission of audited balance sheet waived.
 Borrower would be issued a small business credit card with
photograph thereon. Cost of photograph to be borne by banks.
 IRAC norms would be applicable.
 Brief opinion report should be recorded. Marked inquiries should be
made and recorded in the opinion report and singed by the field
officer/cash officer or officers not below that rank.
 Units within a radius of 5 kilometers may be covered intensively for
the issue of credit card. This condition may be waived for such of
those units already in the book of the branch. 

Inspections :

 Half-yearly inspection/monitoring to ensure the end user funds.

Sanction :

 Required loan may be sanctioned with in a week after receipt of

detailed information.
 Control return after sanction may be sent to next higher authority for
approval .

Scoring Model :

 Loan would be sanctioned up to Rs. 5,00,000/- based on the simplified

scoring model as given in annexure- II. Those who are scoring less
than 60% would not qualify for the loan.

Rationale :

 New schemes for hassle free credit facilities to small borrower.

Automatic Teller Machine (ATM)

An ATM (Automatic Teller Machine) card is useful to a card holder as it helps

him to withdraw cash from banks even when they are closed. This can be done by
inserting the card in the ATM installed at various banks locations.

State Bank Cash Plus CARD

 Signature Panel.
 Magnetic Stripe

Features of State Bank Cash Plus Card

 State Bank Cash Plus Card having the 19 digit.

 Name of the card holders mention there on it.
 In case of State Bank Cash Plus Card, there is no expiry period but for
the old card, the date after which your card needs to be renewed is the
last day of the month indicated on your card.
 Signature panel on which you must sign as soon as you’re your card.
It identifies the card as your State Bank Card Plus Card.
 The magnetic stripe, which contains encoded information.
 ATM card possess pincode which having the 4 digit.

Use of State Bank Cash Plus Card

 We uses our State Bank Cash Plus Card for cash withdrawal from
ATMs.
 We uses it for making the payments for purchase made at the
merchant establishments.

Significance of the Study

This study entitled “comparative study of various credit schemes of SBI V/s
other banks” will be helpful for bankers to maintain customers service policy,
for customers while deciding their financing needs and also helpful for other
researchers for further research in the future.

SBI card provides customers with an option, in addition to the existing banking
credit facilities available. With an SBI card customers can enjoy hassle-free credit
facilities.
This study would help us to know about the problems that are faced by the
consumers during transactions. It would also reveal the problems that are being
faced by the bank employees while dealing with customers and would also
highlight the future prospect of SBI card.

Review of Existing Literature :

It is very essential to know whether the study has already been conducted before. If
so, how and to what extent ? And because of this scholar has to go through all the
existing literature related to the study. SBI Card, very limited studies have been
conducted on the subject. Due to the time restrictions scholar could seek advice
from only the limited literature, which is available with the bank.

As the concept is completely under the control of various banks and RBI. So
the information is directly taken from these sources.

Conceptualization

As the concept includes two terms i.e. cash credit or working capital loans and
terms loans. Therefore both the terms are taken into consideration in the proposed
study. Due to the privatization of banking sector many big private players entered
in this sector giving a tough competition to the existing players. So, to face this
stiff competition all the public sector banks have to review their functioning. These
aspects will be given importance in this project report.

The concept of SBI card, question crops in mind what is a SBI card, What is
its shape and size, what is its function. A SBI card is nothing but a identity card
containing card holder’s photographs with signature, card no. Name, A/c No. limit,
validity period, branch code with signature of Branch Manager
 Focus of the problem

The study has been conducted at SBI Bhiwani. The main focus of the study

is to know about customer’s perceptions about various credit schemes. As

SBI card is an integral part of SBF (small business financing). So the due

weightage is given to SBI card. This study has been conducted by

classifying customers into two categories.

                       SBI Card holders

                       Non SBI Card holders

 Objective of the Study

                       To find out the market potential of SBI card in Bhiwani.

                To know customer’s perceptions about various credit schemes of

different banks.

                To compare the credit schemes of different banks.

                To find out main obstacles while getting finance under various credit

schemes.

 
 Limitations of the study

                       The time was very limited as for requirement of study.

                Taking Sample has carried out the study. Therefore, all the limitations

associated with sampling.

                Sometimes the respondent does not want to disclose some relevant

information.

                 The information provided by the respondent may not be authentic.

                The sample size was restricted to Bhiwani only.

CHAPTERISATION

The Chapterisation of the project report is as following :

Chapter –1 :

                I have discussed about the relevance and importance about the

project.  I have explained the topic with ATM facilities. Why this study is

required? What are the limitations? What are the objectives and what are

the steps I have adopted for doing this project.

Chapter –2 :

                This study consists of the whole research methodology about the

project. It means what are the steps have been taken for doing this study.

How much the sample size and what are the variables? So this study consist

the complete research methodology. In this chapter the profile of

organisation has been also covered.

Chapter –3 :

                It consists the detail descriptions about the raw data. Here the

complete analysis of the data, which is collected from the primary sources.

For tabulation the data is converted into the percentage and after that it is

tabulated. On the basis of this data the graph are inserted. At last the

conclusion is drawn on the basis of this data. 

Chapter –4 :

                It consists the appendices part of the project report in this part I have

mentioned the names of all those books, magazines, journals and web-sites

from where I have collected the material comes under the head of
bibliography. It also consists the questionnaire, which is used for collecting

the data.
 Universe or survey population

All the customers availing credit schemes in Bhiwani is our universe while

the sample size is 50. The sample unit is individuals.

Criteria of selecting sample :

We are taking the sample on our convenience.

Sampling techniques :

Sampling techniques may be divided into two categories :

(1)                 Probability sampling : 

Probability samples are characterized by the fact hat each element

of the population has known, non-zero chance of being included in

the sample.

(2)                 Non-probability sampling :

Non-probability sampling involves personal judgement somewhere

in the process. For the present study, convenient technique of

sampling (non-probability) was used.

Research Design
A research design is simply a plan for study in collection and analyzing the

data. It helps the researcher to conduct the study and ensure that

economical procedures are employed and probing is relevant to the

problem. Depending upon the objective of the study there is three-

research design available : .

                       Exploratory Research

                       Descriptive Research

                       Casual or Experimental Research

Data Collection :

There are two sorts of data available :

1.                        Primary Data :

Primary Data are those data which are collected to solve a problem or

take advantage of any opportunity on which a decision is depending.

These data are basically observe and recorded by the researcher for the

first time used primary data for my project work.

2.                        Secondary Data :

Secondary data are those data which are primarily collected by other

person for his own purpose.

Methods of Data Collection :

                       Observation Method

                       Questionnaire Method

Identified Independent and Dependent variables :

Independent variables :

All the external factors are independent variables  :

                       Govt. policy of RBI

                       Environmental factors

                       War

                       Technology

                       Natural Calamities

Dependent variables :

All the internal factors of organization are dependent variables  :

                        Company policy

                       Infrastructure

Table No. 1

Awareness level about various credit facilities

YES                                                             NO

46                                                                                                                                                        

           04

Most of the respondent are well awared about the credit facilities of different
Banks

 Table No. 2

No. of respondents availing the credit facilities

YES                                                             NO

44                                                                 06

 
Most of the respondent are availing credit facilities from Banks.

 Table No. 3

Distribution of Respondents availing the credit facilities from banks.

SBI                  PNB                 UCO               IOB                   Others

18                        14                       04                 06                          02

Nearly 40% of the Respondents are availing credit facilities from SBI followed
by PNB.
 

Table No. 4

Time since customers are availing credit facilities

More than 3              2 to 3              1 to 2              Less than One

        10                              16                       14                                04

Most of the respondents are availing the credit facilities ranging from 1 to 3 years.

 
 Table No. 5

No. of satisfied customers

Yes                                               No

32                                                  12

Customers are highly satisfied with their banks.

Table No. 6

Awareness level about various credit facilities of different banks

SBI                  PNB                 IOB                   UCO       CANARA           OBC

42               40              22                14             12                 08   

The credit facilities of SBI and PNB are well known to every respondent.
 

Table No. 7 (a)

Ranking of banks on the basis of interest rate

SBI                  PNB                 IOB                   UCO       CANARA           OBC

30                     27                    08                    13                    08                        

14                                

SBI and PNB are the most preferred banks in regard of interest rates.

Table No. 7 (b)

Ranking of banks on the basis of collateral security requirement

SBI                  PNB                 IOB                   UCO       CANARA           OBC

26               30              16              10              06                 12   

Respondents are very much satisfied with SBI and PNB in respect of collateral
security requirement.
 Table No. 7 (c)

Ranking of banks on the basis of attitude of the employees

SBI                  PNB                 IOB                   UCO       CANARA           OBC

28                     27                    20                       8                     10                        07    

Respondents  appreciate the attitude of employees of the SBI, PNB and IOB.

 Table No. 7 (d)

Ranking of banks on the basis of services

SBI                  PNB                 IOB                   UCO       CANARA           OBC

26                     32                    26                       06                  06                        04    

Respondents  appreciate the level of services provided by SBI, PNB and IOB.

 Table No. 7 (e)

 Ranking of banks on the basis of documents required

SBI                  PNB                 IOB                   UCO       CANARA           OBC

28                     24                    18                       12                  08                        10    

Customers are happy with the document requirement of SBI and PNB.

Table No. 7 (f)

Ranking of banks on the basis of renewal process

SBI                  PNB                 IOB                   UCO       CANARA           OBC

38                     22                    16                       08                  08                        08    

Customers are very much satisfied with the renewal process of SBI and tanks to

SBI card.
 Table No. 8

Main obstacle while getting finance

    (a)                              (b)                            (c)                                    

(d)                                   (e)

Security           Document                    Red                            Guarantee                

Attidute of

           Requirements         Tapisam                    requirement             Bank

Employees 

    24                                08                                   04                                    

08                                    06

Security requirements are the main obstacle while availing any credit facility.

  Table No. 9

Preference order of different parameters

    (a)                     (b)                           (c)           

(d)                        (e)                                (f)

Interest           Collateral          Attitude of      Services        

Document                       Validity

  Rate              Security             Bank Emp.                                       requirement

   42                    12                    08                 16                      14                   08

 
 Customer prefer low interest rates followed by services.

Table No. 10

Preference level of banks

SBI                  PNB                 IOB                   UCO       CANARA           OBC

56                     24                    10                       04                  04                        02    

More than half of the respondents prefer SBI followed by PNB.

Table No. 11

Awareness level of SBI Card

Yes                                               No

38                                                  12

A good awareness level is exist about SBI cards.

 
 Table No. 12

Sources of information about SBI card

Friends          Bank Employees                 Advertisement                      Publicity

06                                   22                                               04                                   

06             

Most of the respondents gets information about SBI card from bank employees.
Objective No. 1 :To find out the Market Potential of SBI card.

Ø                Most of the respondents covered in the survey know about the SBI

card and feel that this facility is beneficial to them as they can fix the

limit for three years.

Ø                Respondents even require further guidance related to few things.

Ø                Customers feel very enthusiastic about the launch of SBI card in

Bhiwani and very sure about its success.

Ø                Most of the respondents want an increase in existing limit i.e. 5.00

lacs.

Objective No. 2 : To know customer’s perceptions about various credit schemes

of different banks.

Ø                Most of the respondents like the credit facilities provided by SBI and

PNB.

Ø                According to most of respondents, PNB is the fastest service

provider. It takes only 15 days to disburse the sanctioned loans whereas

other banks including SBI takes 40 to 45 days.

Ø              PNB is offering the lowest PLR i.e. 11.25% whereas other banks are

offering 11.5%.

Objective No. 3 : To find out main obstacle while getting finance under various

credit schemes.

According to most of respondents, security and document requirement

are the main obstacles while getting finance under various credit schemes.

 Suggestions

On the basis of data analysis and interpretations, the following suggestions

can be made.

Ø                RBI Should reduce the SLR and CRR to increase the credit creation

capacity of the banks.

Ø                All the nationalized banks should try to improve their service level

to face the stiff competition given by private banks..

Ø                Banks should reduce the time length between sanction and

disbursement of loan.

Ø                SBI should increase the limit under SBI card to fulfill the growing

requirement of the customers.

Ø                Bank employees should bring more professionalism in their attitude

while dealing with customers to retain and attract more customers.

Ø                Banks should narrow down the spread between PLR and deposit

rates.

Ø                Banks should advertise and conduct special awareness programs to

make SBI cards more popular among customers.

 Questionnaire

Name …………………………       Age ………………………….

Income………………………...       Occupation…………………...

Q1.    Are you aware of various credit facilities of banks ?

          Yes                       No

Q2.    Are you availing credit facility from any bank ?

          Yes                       No

Q3.    If yes, from which bank you are availing credit facility ?

          …………………………………………………………

Q4.    Since when you are availing this facility.

          a)      More than 3 year            b)      2-3 years

          c)      1-2 years                        d)      Less than 1 year

Q5.    Are you satisfied with your existing bank ?

          Yes                       No

Q6.    If no, then why ………………………………………….

          …………………………………………………………..

Q.7    Tick the name of banks whose credit facilities are known to you ?

          a)      SBI                       b)      PNB            c)      IOB

          d)      CANARA            e)      UCO           f)       OBC

Q8.    Rate the banks on the basis of following parameters :

Factors Interes Collatarel Attitude Services Document Renewal

  t Rate Security of Field required process

officer
Banks
SBI            
PNB            
UCO            
OBC            
CANARA            
IOB            
Q9.    According to you what is the main obstacle while getting finance under

various credit facilities?

a)      Security                         b)      Document Requirement

c)      Red Tapism                   d)      Guarantee requirement

e)                Attitude of bank employees

Q10.  According to you arrange the parameters in the descending order of their

preference?

          a)      Interest Rate                   b)      Collateral Security

          c)      Services                         d)      Attitude of field Officer

          e)      Document required        f)       Validity period

Q11.  Which banks name comes to your mind first while availing credit facility and

why?

          ………………………………………………………………………..

          ………………………………………………………………………..

Q12.  Have you heard about SBI card?

          Yes                       No

Q13.  If yes, from where?

          a)      Friends                 b)      Bank Employees

          c)      Advertisement      d)      Publicity

Q14.  Do you want to give any suggestions to banks?

          ……………………………………………………………………….