SUMMER TRAINING REPORT SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF POST GRADUATE DEGREE IN INTERNATIONAL BUSINESS

International Banking Operations and CRM of

SUBMITTED BY: KANIKA SINGLA

MBA-IB (2010-2012) Roll No. : A1802010389

MR RAJIT SINGLA (BRANCH MANAGER) AXIS BANK

MS SHALINI GAUTAM (FACULTY GUIDE)

AMITY INTERNATIONAL BUSINESS SCHOOL, NOIDA

AMITY UNIVERSITY UTTAR PRADESH

TO WHOM IT MAY CONCERN

This is to certify that KANIKA SINGLA, a student of Amity International Business School, Noida, undertook a project on International Banking operations (FOREX) and analysis of customer relationship management (CRM) at AXIS BANK from 3-06-2011 to 14-07-2011. Ms.KANIKA SINGLA has successfully completed the project under the guidance of Mr.RAJIT SINGLA. She is a sincere and hard-working student with pleasant manners. We wish all success in her future endeavors. Signature with date (Name) (Designation) (Company Name)

CERTIFICATE OF ORIGIN
This is to certify that Ms.KANIKA SINGLA, a student of Post Graduate Degree in MBA, Amity International Business School, Noida has worked in the AXIS BANK, under the able guidance and supervision of Mr.RAJIT SINGLA, (Branch manager) of AXIS BANK. The period for which he/ she was on training was for 6 weeks, starting from 3-02011 to 14-07-2011. This Summer Internship report has the requisite standard for the partial fulfillment the Post Graduate Degree in International Business. To the best of our knowledge no part of this report has been reproduced from any other report and the contents are based on original research.

MS SHALINI GAUTAM (Faculty Guide)

KANIKA SINGLA (Student)

ACKNOWLEDGEMENT

I express my sincere gratitude to my industry guide MR RAJIT SINGLA, (Branch manager) of AXIS BANK for his able guidance, continuous support and cooperation throughout my project, without which the present work would not have been possible. I would also like to thank the entire team of AXIS BANK, for the constant support and help in the successful completion of my project. Also, I am thankful to my faculty guide Ms. SHALINI GAUTAM of my institute, for her continued guidance and invaluable encouragement.

KANIKA SINGLA

PREFACE
The research studies are of a great help in enhancing the knowledge of a person. Practical knowledge is a suffix to theoretical knowledge. Classroom lecturers clarify the fundamental. But classroom lectures must be correlated with the practical research situation. It is in this sense that the research project is made compulsory for the curriculum and has a significant role to play in the field of business management. Through this type of project one can understand the application of theory into practical. In this project I have put a lot of effort to make it a success. This PROJECT is based on International Banking Operations AND CRM Of Axis Bank. The objective of my study is to understand how banking activities actually takes place and to gain an insight and in depth knowledge of the International banking operations viz., Export-Import Documentation, Letter of Credit, Inward-Outward Remittances, Export-Import Finance, NRI Deposits and guidelines of various authorities AND the how banks maintain relationship with customers. It was my fortune to do this PROJECT. I learned a lot of new things which could never been learned from the theory classes. This dissertation report is a presentation of my work. In the forthcoming pages an attempt has been made to present report covering different aspects of my project.

KANIKA SINGLA

Executive summary
Private banking is a concept which is fast emerging in the world of banking where changes have become a necessity in order for banks to survive in this competitive environment via- avis not only from the public and private sector bank but also from the following bank. The report contains the brief description of the banking industry in INDIA. It gives an indepth analysis and understanding of International Banking Operations and the survey conducted on CRM to gather primary data to judge the importance of various attributes that influence the satisfaction of customers in different manner and to different extent. It gives an overview of the conditions existing in the current global economy for International Banking Transactions. International Banking Transaction is the extension of credit by a bank headquartered in a particular country to residents of another country can occur via: (I) cross-border lending; (ii) local lending by affiliates established in the foreign country; or (iii) lending booked by an affiliate established in a third country (e.g. an international financial centre). In addition, the BIS international banking statistics on a residency basis include the extension of credit by a bank headquartered in a particular country to residents of the same country but in a foreign currency. The underlying financial instruments could be loans, deposits or securities as well as derivatives contracts and contingent facilities. Customer relationship management (CRM) is a companywide business strategy designed to reduce cost and increase profitability by solidifying customer loyalty. It is a strategy used to learn more about customers needs and behavior in order to develop stronger relationship with them. After all, good customer relationship is the heart of the business success. The attributes which influence the satisfaction of customer are initial experience, service delivery experience, relationship experience, grievance handling etc. The title of the project is INTERNATIONAL BANKING OPERATIONS AND ANALYSIS OF CRM in AXIS BANK. The approach for this project was to understand the basic concepts of the foreign exchange and the measures adopted by Axis Bank to promote fair relationship between bank and customer. International banking has expanded markedly over the last 30 years. Its form and Geographical coverage reflects two important aspects of the role international banks play in the global economy. The objective of my study is t to gain an insight and in depth knowledge of the International banking operations viz., Export-Import Documentation, Letter of Credit, Inward-Outward Remittances, Export-Import Finance, NRI Deposits and guidelines of various authorities. The International Chamber of Commerce (ICC) was founded in 1919, with an aim to promote trade and investment, open market for goods and services and free flow of capital.

As the trade transactions can be broken down into movement of goods, movement of documents and movement of funds. But banks (AXIS BANK also) plays a role in the movement of documents and movement of funds. Payments made for the exchange of goods and services across the countries in the international trade comprises of clean payments (payment in advance and open account) , bill of collection and documentary credit. Various documents have to be exchanged between the exporter and importer in the international trade which includes Airway bill, Bill of lading, Certificate of Origin, Bill of exchange, Insurance policy, Inspection Certificate etc. Foreign Exchange Management Act (FEMA) has also come into account in order to facilitate the external trade and payments and to promote the orderly development and maintenance of the foreign exchange market in India. Foreign Exchange Dealers Association of India (FEDAI) is the apex forum of banks authorized to deal in forex issues and guidelines. It mainly deals in Export transactions (Export bills purchased/ discounted/ negotiated, application of interest) and in Import transactions (application of rates, merchant trade, clean instruments and guarantees). An analysis of CRM is done by getting the questionnaire filled by the HNI customers of the Axis Bank. In order to promote fair relationship between the bank and the customer, helping the customer in understanding product and services, how to increase the value of customer and know their level of satisfaction and ultimately increases the bank profitability. Research methodology adopted for this research includes the descriptive study in which the overall needs and behavior of the customers are taken care of. My research is based on both primary (questionnaire and personal observation) and secondary data (website, bank manuals). The data is collected through the respondents of Axis bank of Panipat city, comprising of government employees, self-employed and housewife etc. through random sampling and the sample size consists of 100 respondents. The key findings were that 45% of the customers are having account for 3-5 years and they are satisfied with the way their account are managed.42% of customers are satisfied with the way their enquiries are handled through phones and letters. The staff of the axis bank is fully efficient according to the customers responses and they quickly sought out their grievances and mistakes. According to the customers feedback, the bank has improved its services and also the overall the satisfaction of the customers has also improved.

INDEX

Certificate Acknowledgement Preface Executive summary TABLE OF CONTENTS PART 1 - INTERNATIONAL BANKING TRANSACTIONS CHAPTER NO. CHAPTER NO.1 Title INTRODUCTION 1.1 Introduction to industry 1.2 Company Profile Page no. 1

CHAPTER NO.2

INTRODUCTION- INTERNATIONAL BANKING OPERATIONS(FOREX) 47 49

CHAPTER NO.3

REVIEW OF LITERATURE &RESEARCH METHODOLOGY

CHAPTER NO.4

ANALYSIS & INTERPRETATION

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PART 2- CUSTOMER RELATIONSHIP MANAGEMENT CHAPTER NO. CHAPTER NO 5 CHAPTER NO 6 CHAPTER NO 7 CHAPTER NO 8 TITLE INRODUCTION-CRM, ECRM REVIEW OF LITERATURE OBJECTIVES AND SCOPE RESEARCH METHODOLOGY 8 PAGE NO.

CHAPTER NO 9

ANALYSIS & INTERPRETATION

CHAPTER 10-FINDINGS AND CONCLUSION CHAPTER 11-SUGESSTIONS AND RECOMMENDATIONS CHAPTER12-SWOT ANALYSIS CHAPTER14-BIBLIOGRAPHY ANNEXURE CASE STUDY SYNOPSIS

1.1Banking in India: Overview

Banking in India originated in the first decade of 18th century. The first banks were The General Bank of India, which started in 1786, and 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 The Bank of Bengal in Calcutta in June 1806. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras. The presidency banks were established under charters from British East India Company. They merged in 1925 to form the Imperial Bank of India, which, upon Indias independence, became the State Bank of India. For many years the presidency banks acted as quasi-central banks, as did their successors. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After Indias independence in 1947, the Reserve Bank was nationalized and given broader powers.

Reserve Bank of India

Scheduled Cooperatives Bank

NonScheduled Commercial Banks

Urban Cooperatives

Foreign Banks

State Cooperatives Public Sector Private Sector Regional Rural Banks

Other Nationalized Banks SBI & Associates

1.2 Nationalized Banks in India

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Banking system in India is dominated by nationalized banks. The Nationalization of Banks in India took place in 1969 by Mrs. Indira Gandhi the Prime Minister. The major objective behind nationalization was to spread the banking infrastructure in rural areas and make available cheap finance to Indian framers. Fourteen banks were nationalized in 1969. Before 1969, State Bank of India (SBI) was the only public sector bank in India. SBI was nationalized in 1955 under the SBI Act of 1955. The second phase of nationalization of Indian Banks took place in the year 1980. Seven more banks were nationalized with deposits over 200 crores.

1.2.1List of Public Sector Banks in as follows:

Allahabad Bank Bank of Baroda Bank of Maharashtra Canara Bank Dena Bank IDBI Bank Oriental Bank of Commerce Punjab & Sind Bank Syndicate Bank Union Bank of India

Andhra Bank Bank of India Central Bank of India Corporation Bank Indian Bank Indian Overseas Bank Punjab National Bank UCO Bank United Bank of India Vijaya Bank

1.2.3 List of State Bank of India and its subsidiary, a Public Sector Banks

State Bank of India

o o o o o o

State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Saurastra State Bank of Travancore 11

1.2.4 Private Banks in India

All the banks in India were earlier private banks. They were founded in the pre-independence era to cater to the banking needs of the people. But after nationalization of banks in 1969 public sector came to occupy dominant role in the banking structure. Private banking sector in India received a fillip in 1994 when Reserve Bank of India encouraged setting up of private banks as a part of its policy of liberalization of the Indian Banking Industry. Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an in principle approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. Private Banks have played a major role in the development of Indian Banking Industry. They have made banking more efficient and customer friendly. In this process they have jolted public sector banks out of complacency and forced them to become more competitive.

1.2.5 List of Private Banks in India

Bank of Punjab Bank of Rajasthan Catholic Syrian Bank Centurion Bank City Union Bank HDFC Bank IndusInd Bank Karnataka Bank South Indian Bank UTI Bank

Dhanalakshmi Bank Development Credit Bank Federal Bank ICICI Bank ING Vysya Bank Jammu & Kashmir Bank Karur Vysya Bank Laxmi Vilas Bank United Western Bank

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1.3 Introduction of Axis Bank

Axis Bank, formally UTI Bank, is a financial services firm that had begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), General Insurance Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United India Insurance Company UTI-I holds a special position in the Indian capital markets and has promoted many leading financial institutions in the country. The bank changed its name to Axis Bank in April 2007 to avoid confusion with other unrelated entities with similar name. After the Retirement of Mr. P. J. Nayak, Shikha Sharma was named as the bank's managing director and CEO on 20 April 2009. The Bank today is capitalized to the extent of Rs. 406.94 crores with the public holding (other than promoters and GDRs) at 54.55%.

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1.4 PRODUCTS OF AXIS BANK:

1. Banking and Saving 3. Convenience banking 5. NRI services 7. Deposit corporate and Institutional corporate finance 8. Investment banking 10. Life Insurance 12. Gold 14. Loans and Borrowings 16. Commercial Loans 18. Personal Loans Property 20. Agriculture Loan 2 Banking and Accounts 4 Credit cards 6 DEMAT 9 11 13 15 17 19 Treasury Mutual Funds Share Trading Car Finance Home Loans Loans against

1.4.1 Branch Network

The Bank's Registered Office is at Ahmadabad and its Central Office is located at Mumbai. At the end of September 2010, The Bank has a very wide network of more than 1281 branches and Extension Counters (as on 31st December, 2010). The Bank has a network of over 6270 ATMs (as on 31st March, 2011). The Bank has loans now (as of June 2007) account for as much as 70 per cent of the banks total loan book of Rs 2,00,000 crore.

1.4.2 Risk and Earning Perspective

From a medium-term perspective, it appears that Axis Bank could be charting out a niche for itself in the private bank space. It appears to be following a business strategy quite different from the high-volume and commodity-style approach of ICICI Bank and HDFC Bank. That strategy also has its pluses in terms of the higher margins in some segments of the retail business and the in-built credit risk diversification (and mitigation) achieved through a widely dispersed retail credit portfolio. The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence.

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1.5 HISTORY OF AXIS BANK

1993: The bank was incorporated on 3rd December and Certification of business on 14th December. The bank transacts banking business of all description. The bank was the first private sector bank to get a license under the new guidelines issued by the RBI. 1997: The bank obtained license to act as Depository Participant with NSDL and

applied for registration with SEBI to act as Trustee to Debenture Holders. 1998: The bank has 28 branches in urban and semi urban areas as on 31 st July. All the branches are fully computerized and networked through VSAT. ATMs services are available in 27 branches. 1999: UTI Bank and CITI Bank have launched an International co-branded credit card. 2000: The bank has announced the launch of Tele-Depository Services for its depository clients. 2001: UTI bank launched a private placement of non-convertible debentures to rise up to Rs 75 crores. UTI has opened two offsite ATMs and one extension counter with an ATM in Mangalore. 2002: UTI bank has informed that Shri J M Trivedi has been appointed as an alternate director to Shri Donald Peck with effect from November 2, 2002. 2003: UTI has opened a branch at Nellore. 2004: Comes out with Rs. 500 mn Unsecured Redeemable Non-Convertible Debenture Issue and also opens new branch in Udupi-UTI bank and a website offering money transfer services. 2005: UTI bank enters into a banc assurance partnership with Bajaj Allianz General for selling general insurance products through its branch network. 2006: Sets up branch in Jaipur UTI bank unveils priority banking lounge. 15

 2007: UTI has informed that consequent upon handing over charge as Administrator of the Specified undertaking of the UTI of India,the nominee director of SUUTI has resigned as a Director of bank. And companys name has been changed from UTI BANK TO AXIS BANK. 2008: Axis bank launches platinum credit card, Indias first EMV CHIP based card and it set up its branch at ILANJI at meenakshi nagar. 2009: SHIKHA SHARMA was appointed as CEO and has set up a new branch at perumbavoor.The bank has a network of 832 branches and 3622 ATMs across the country. It also entered into strategic alliance with Motilal Oswal, in order to facilitate the online trading for bank customers. 2010: AXIS bank received final clearance from the SEBI to begin its mutual fund operations and will launch debt and equity schemes. It also opened new branch at IRINJALAKUDA while it has a network of 892 branches and 3,806 ATMs across the country.

1.6 BOARD OF DIRECTORS

During the year, some changes in the Board of Directors have taken place. Dr. P. J. Nayak, former Chairman and CEO of the Bank retired with effect from 20 April 2009. Shri A. T. Pannir Selvam, nominee Director of the Specified Undertaking of the Unit Trust of India (SUUTI) passed away on 21 April 2009. Shri Ramesh Ramanathan, Independent Director resigned with effect from 14 July 2009. Five new Directors have been inducted in the Board during the year. Smt. Shikha Sharma was appointed as Managing Director and CEO of the Bank with effect from 1 June 2009. RBI gave its approval for the appointment of Shri M. M. Agrawal, former Executive Director (Corporate Banking) of the Bank as Deputy Managing Director with effect from 10 February 2010. Shri V. R. Kaundinya, Managing Director, Advanta India Ltd. was appointed as an Additional Independent Director with effect from 12 October 2009. Dr. Adarsh Kishore, former Finance Secretary, Government of India and former Executive Director, International Monetary Fund and nominee of the Specified Undertaking of the Unit Trust of India (SUUTI) was appointed as an Additional Director with effect from 15 January 2010. RBI gave its approval for the appointment of Dr. Adarsh Kishore as a non-executive Chairman of the 16

Bank with effect from 8 March 2010. Shri S. B. Mathur, former Chairman of LIC and the National Stock Exchange of India was appointed as an Additional Independent Director with effect from 15 January 2010.

1.7 VISION 2015 & CORE VALUES

Vision 2015:
To be the preferred financial solutions provider excelling in customer delivery through insight, empowered employees and smart use of technology.

Core Values:
Customer centricity Ethics Transparency Teamwork Ownership

PRICE CHARGED BY AXIS BANK:

The pricing decisions or the decisions related to interest and fee or commission charged by banks are found instrumental in motivating or influencing the target market. The RBI and the IBA are concerned with regulations. The rate of interest is regulated by the RBI and other charges are controlled by IBA.

PROCESS:
1-Standardization: Bank has got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This is because of the rules they are subject to. Besides this, each of the banks has its standard forms, documentations etc. Standardization saves a lot of time behind individual transaction. 2-Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available alternatives. 17

3-Number of steps: numbers of steps are usually specified and a specific pattern is followed to minimize time taken. 4-Simplicity: Banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to deposits counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides instruction boards in national boards in national and regional language help the customers further. 5-Customer involvement: ATM does not involve any bank employees. Besides, during usual bank transactions, there is definite customer involvement at some or the other place because of the money matters and signature requires

TECHNOLOGY:
AXIS Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

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1.8 Business Overview

1 Placement / Syndication and Project Advisory

The Bank arranged debt aggregating `83,025 crores during FY11. The Bank was assessed by Prime Database as the No.1 Debt Arranger for the period April 2010 to December 2010 and also by Bloomberg Underwriter league table for the calendar year 2010. The Bank was awarded the Best Domestic Bank in India and Best Domestic Bond House in India at the Asset Triple A Country Awards 2010. It was also awarded the Best Domestic Debt House in India 2010 by Asia Money and Best Bond House in India 2010 by Finance Asia.

2 Retail Business The number of Savings Bank accounts grew from 81.22 lacs as on 31st March 2010 to 93.94 lacs as on 31st March 2011. Retail advances grew from `20,821 crores as on 31st March 2010 to `27,759 crores as on 31st March 2011, a growth of 33% YOY. Retail advances accounted for 19.49% of the total advances of the Bank as on 31st March 2011. The Bank's International Debit Card base has risen to 10 million debit cards as on 31st March 2011, compared to 8.6 million debit cards as on 31st March 2010. The Bank had over 6.3 lac credit cards in force and an installed base of over 1.8 lac Electronic Data Capture (EDC) machines as on 31st March 2011. The Bank offers personal investment products including life insurance products, general insurance products, online trading accounts and mutual funds of leading manufacturers as also wealth advisory services and Mohur - gold coins and bars - through select branches.

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3 International Business The Bank has six international offices - branches at Singapore, Hong Kong and Dubai (at the DIFC) and representative offices at Shanghai, Dubai and Abu Dhabi- with focus on corporate lending, trade finance, syndication, investment banking, risk management and liability businesses. The total assets under overseas operations amounted to USD 4.99 billion as on 31st March 2011 which represents a growth of 61% over the previous year. Axis UK Limited was incorporated as a subsidiary on 7th March 2011. 4 Capital and Shareholders Funds The Shareholders Fund of the Bank was `18,999 crores as on 31st March 2011, as compared to `16,044 crores as on 31st March 2010, a growth of 18% YOY. The Capital Adequacy Ratio for the Bank was 12.65%, as on 31st March 2011, as compared to 15.80% as on 31st March 2010. The Tier-I capital was 9.41% as on 31st March 2011, as compared to 11.18% as on 31st March 2010. 5 Dividend The Board of Directors have proposed a dividend of `14 per share. 6 Update on Proposed Acquisition of Enams Demerged Businesses The Board of Directors of the Bank and its wholly-owned subsidiary, Axis Securities & Sales Limited (ASSL), in their meetings held on the 17th November 2010, had approved a proposal to acquire certain demerged businesses of Enam Securities Private Limited. The proposed acquisition is subject to requisite approvals. In a letter dated 18th April, 2011, the Reserve Bank of India (RBI) has conveyed an in principle approval. The RBI has also required the fulfilment of certain conditions, including a revised scheme of accounting and the eventual structure for the business proposed to be acquired. Other terms of RBIs in-principle approval include the stipulation that no shareholder of Enam Securities Private Limited acquiring shares of Axis Bank under the Scheme of Arrangement would be eligible for being a Director on the Board of the Bank. The Board had decided at its meeting on 17th January, 2011 to explore ways of working with Mr. Vallabh Bhanshali to access his expertise as opposed to a Board position. The Bank is in the process of examining the implications of the conditions laid down by RBI and is reviewing the Scheme of Arrangement in order to proceed with the completion of the transaction.

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1.9 Organizational Chart

Managing Director Director Top Level Executive Director Retail and Branch Banking Head

Regional Head Zonal Head Cluster Head Branch Manager Personal Banker Authorize Personal Banker

National Head Zonal Head Area Sales Manager Regional Sales Manager Sales Manager Team Leader Sales Executive Middle Level

Lower Level

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1.10 Growth Chart past and projections for future

The net interest income (NII) of Axis Bank, over the last 10 years, has rocketed by 54.8% CAGR from Rs. 98 Cr. in FY01 to Rs. Rs. 5004 Cr. in FY10; and its total income has grown by 34.9%CAGR. During the same period its book value and EPS have jumped by 37% and 28% resp. The bank has maintained its net profit to total fund ratios between 1 and 1.25 during FY05 to FY08, whereas in the last two financial years, this ratio has been above 1.25. This increasing trend of net profit to total fund ratio shows that it has continuously increased its efficiency of utilizing funds. The non-performing assets (NPA) to net advances ratio has also shown a decreasing trend from 3.46% in FY02 to 0.4% in FY10 which shows the bank has continuously increased its assets quality. It has also maintained a very good capital adequacy ratio (CAR) of 15.8% at the end of FY10, well above the RBI guide line of 9%, which indicates that it can easily cover all the associated risks.
Hence, the 10 YEAR X-RAY of Axis Bank is Green (Very Good).

Axis Banks target for FY11: Business growth (Advances + Deposits) of 25%

Opening 200-250 new branches and 1000 new ATMs.

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Axis Bank has reported a strong performance in December, 2010 quarter:

It has shown a 36% jump in the Net Profit at Rs. 891.36 Cr. and a 28% rise in the Net Interest Income to Rs. 1733.12 Cr. on the back of robust 46% credit growth. The other income of the Bank inched up by 16% to Rs. 1147.71 Cr. mainly on the back of 21% jump in the fee income at Rs. 968 Cr. CAR has decreased to 12.46% in Q3 FY11, compared to 16.8% in the same quarter last year Its Net Interest Margin (NIM) stood at 3.81% during Q3 FY11, compared to 4% during Q2FY10 (much higher than the industry standard of 2-2.5%) The net NPAs of Axis Bank stood at 0.29% in Q3 FY11, which is amongst the lowest in the banking industry; the provision coverage ratio stood at 82.69%, much higher than the regulatory requirement of 70%

Advances of the Bank have reported a strong growth of 46% on y-o-y basis and 12% on qo-q basis to Rs. 123547 Cr. in the December 2010 quarter. The growth in the advances was driven by 69% jump in the corporate segments at Rs. 70518 Cr. and 33% rise in the retail segment at Rs. 25204 Cr. Agri & microfinance loan book grew by 24% to Rs. 10772 Cr. and SME by 9% to Rs. 17053 Cr. Exposure to the Microfinance institutions is around 1% of advance book and that of telecom (mainly 2G license advances) constitutes 6% of total advance book. For the nine months ended December 2010, Axis Bank has reported 37% rise in the NII at Rs 4861.99 Cr., 19% in fee-based income at Rs. 2559 Cr., and 6% in the other income at Rs 3181.73 Cr. compared to that of corresponding quarter last year respectively. In FY11, so far, it has opened 142 branches and 1010 ATMs. Thus, the bank is on line to achieve its target for FY11.

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Increasing cost of funds is a cause for concern:

The RBI has increased the Repo rate, Reverse repo rate, and CRR in the last one and a half year in several phases to control inflation. This has lead to lower loanable fund availability in the bank and continuous increase in cost of funds, which can be seen in the chart. As, the inflation rate is still on the higher side, tight monetary policy is expected to continue in the short-term. So, we expect that the cost of funds will also increase further in the short-term, which will keep margins under pressure. RBI, recently, has increased provisioning percentage on housing, real estate, and many other types of loans. This will affect the profitability of the bank because, in the retail segment, it finances almost 70% advances in housing.
Considering above factors, we expect that the short-term future prospects of Axis Bank will be Orange (somewhat good) Strength of Axis Bank: It is Indias third largest private bank, with 1281 branches and 5303 ATMs, and a

customer base of over 150 Lakh as on 31st Dec, 2010 It has the largest EDC network, the third largest ATM network, and the fourth largest base of debit cards in India. It already has branches in Singapore, Hong Kong and Dubai International Financial Centre. About 14% of the banks asset book is from international operations. It is further going to set up a subsidiary in London and upgrade its representative office in Shanghai to a branch. 100% core banking facilities with advanced technology On-line trading facilities in alliance with Geojit BNP Paribas In Jan 2011, Axis Bank, , announced the launch of Axis Direct, an online trading platform a product of its wholly-owned subsidiary, Axis Securities and Sales Ltd. Axis Direct will offer trading in cash, derivatives, IPO segments through NSE and BSE; and provide well-researched information about various corporate, access to independent third-party research, stock research and analysis tools.

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Axis Bank has maintained a very good Current Account Savings Account (CASA) ratio, above 40% in the last three years, which is higher than the industry standard of 35-40%. CASA plays a very significant role in keeping cost of funds low and margins high. Only four other banks SBI, PNB, HDFC Bank, and ICICI Bank have more that 40% CASA ratio.

Product strategy designed to benefit customers:

To beat the market, Axis Bank is adopting different product strategies. Recently, it has extended the repayment period of the standard home loan to the maximum tenure of 25 years. In the step down product (a type of home loan product), the customer has to pay a higher EMI when the combined family income is higher and a lower EMI when the family income has reduced over a period of time. Apart from this, the Bank has given option to its customers to close the loan before its maturity with no prepayment penalty.
Banking Sector Heading towards a high-performing sector:

The banking sector is poised to grow in line with the growth of the economy. The Indian economy is expected to have a high growth in the long-term and so is the Indian banking sector, which is currently in consolidation stage. According to Mckinsey Report on India Banking 2010, The banking index has grown at a compounded annual rate of over 51% since April 2001 as compared to a 27% growth in the market index for the same period (2001 to 2010). The report says that the Indian banking sector is heading towards a high-performing sector. Axis Bank, being the third largest private bank in India, is ready to take full advantage of this growth opportunity.
Financial Inclusion Program:

Under Financial Inclusion Program, RBI is taking initiative to provide banking services at affordable costs to the weaker sections of society or the unbanked segment, which does not have any access to the formal banking system. As of now, it is estimated that 60% of the Indian population does not have access to formal banking facility and RBI is keen on achieving 100% financial inclusion for sustaining equitable growth.

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Axis Bank is taking following initiatives under this Program:

o

Targets to cover 12,000 villages in the next 5 years : Axis Bank plans to cover 5,500

villages for financial inclusion by March 2011 and scale it up to 12,000 villages in five years time. It is looking at opening 18-lakh no-frills accounts, Rs. 40 Cr. of deposits, and Rs. 10 Cr. of advances. The 18-lakh account would include 12-lakh accounts that they have already opened for government-sponsored scheme. The bank is looking at several low-cost delivery models such as smart card, mobile banking and point of transaction device.
o

Tie up with Janalakshmi Social Services to tap urban poor: To tap unbanked

population in urban areas, Axis Bank has tied up with a Bangalore-based microfinance institution, Janalakshmi Social Services. Janalakshmi will use its client base to provide banking services of Axis Bank and will work as business correspondent to sell other products of the Bank. This service would be spread from Bangalore to 50 other cities in the near future.
o

MoU with Idea to test a Branchless Banking Model:

Axis Bank has signed a Memorandum of Understanding with Idea Cellular to test a Branchless Banking model through a mobile enabled remittance pilot. Idea will act as a Business Correspondent of Axis Bank to provide an entire range of financial products and services offered by the Bank, through the mobile operators retail outlets. Ideas network will help Axis Bank gain access to widespread distribution reach and a low-cost delivery channel for offering financial products and services, based on the mobile platform. On the other hand, Idea can offer value-added services to its customers by offering financial products and services. There is still a question mark on the viability of Financial Inclusion Program which primarily targets the low-income group. This leaves little scope of high margins under this program. However, this initiative is expected to help in economic development, and hence is expected to be fruitful in the long-term.
Diversified into non-banking financial services:

Axis Bank has started non-banking financial services to carry out investment and lending activities with a focus on infrastructure and other activities. It has five wholly-owned subsidiaries: 1. Axis Securities and Sales Ltd. To market credit cards , retail asset products and online trading facilities 2. Axis Private EqUity Ltd. To manage equity investments & provide venture capital to support businesses 3. Axis Trustee Services Ltd. To engage in trusteeship activities 4. Axis Asset Management Companies Ltd. To carry on the activities of managing mutual fund business 5. Axis Mutual Fund Trustee Ltd. To act as the trustee for the mutual fund business 26

Acquisition of Enams investment banking business expected to fill the gap in their portfolio:

Axis Bank has acquired Enams investment banking and institutional broking businesses for R.s 2,064 Cr. in a stock-swap deal. Pursuant to the scheme and in consideration for the proposed demerger, Enam shareholders will receive 5.7 shares of Axis Bank for every 1 share held in Enam; translating into an approximately 3.37% shareholding in Axis Bank. While the acquisition appears to be at a slight premium, it will help Axis Bank fill a key gap in portfolio, increase feebased income and bring significant long-term benefits. Also, as these businesses are profitmaking and enjoy one of the highest margins in the industry, they will contribute to Axis Banks profits and will be earnings accretive.

Low exposure in high-margin retail banking New Bank License would hamper banks profits: RBI is providing banking licenses to selected NBFCs from 2011. This would increase competition among banks which would consequently hamper their profits RBI, in Bancon 2010 held in Mumbai, has indicated that Indian Banks should operate at lower margin, in line with global standard. They should decrease lending rate and increase savings rate to help in achieving double digit economic growth. RBI may also increase Capital Adequacy Ratio benchmark from 2013. As the banks have mainly financial assets, they have to manage several risks such as credit risk, market risk, liquidity risk, country risk etc. So, banking business, as a whole, is considered as risky business Government regulation increases uncertainty in the banking sector: The Government of India frequently changes monetary policies by changing CRR, repo rate, reverse repo rate etc. to maintain stability in the economy. It increases uncertainty in the banking sector.
Considering the strong position that Axis Bank has established for itself in the banking industry and its recent acquisition of Enam, we can expect that the long-term future prospects of Axis Bank will be Green (Very Good).

The economy is expected to grow roughly by 5-7% in the next 5 years. The banking sector is poised to grow in line with the growth of the economy. Considering the banks large size and its strengths, we can expect this economic growth to have a positive impact on Axis Banks growth.

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2. International Banking Operations of Axis Bank

International Banking is the extension of credit by a bank headquartered in a particular country to residents of another country can occur via: (I) cross-border lending; (ii) local lending by affiliates established in the foreign country; or (iii) lending booked by an affiliate established in a third country (e.g. an international financial centre). In addition, the BIS international banking statistics on a residency basis include the extension of credit by a bank headquartered in a particular country to residents of the same country but in a foreign currency. The underlying financial instruments could be loans, deposits or securities as well as derivatives contracts and contingent facilities.

WHY IS IT NECCESARY? International banking transactions is mainly taken for 3 reasons: 1. To make the payment for the imports of goods and services to another countries. 2. To receive the payment for the export of goods and services from another countries 3. And for other remittances. 2.1 Introduction to Exports:
Export of Goods and Services from India is allowed in terms of clause (a) of sub-section (1) and sub-section (3) of Section 7 of the Foreign Exchange Management Act 1999 (42 of 1999), As per the Customs Act, 1962, Export means taking out of India to a place outside India. The Foreign Trade Policy regulates export of goods. For the purpose of exports, goods have been divided into following categories. Prohibited Goods are not permitted to be exported. Restricted Goods can be permitted for export under license or subject to compliance of stipulated procedures .An exporter has to obtain an Import Export Code (IEC) number from the office of DGFT prior to filing of shipping bill for clearance of export goods.

Export Procedures and Documents

The export documentation involves the preparation of the specified number of copies of the prescribed documents pertaining to the different procedures. 28

Preliminaries:
Some preliminary steps have to be taken before an export transaction begins. 1. IEC Number: The IEC Number is normally allotted by the regional licensing authorities. 2. Membership-cum-Registration: Members of EPC receive different kinds of assistance and services in respect of the export business. 3. Inquiry and Offer: An inquiry is a request from a perspective importer to be informed of the terms and conditions of sale. And the offer made by the exporter is usually in the form of a proforma invoice. This is an invoice sent in advance to the buyer before the shipment is made. 4. Confirmation of Order: Once the negotiations are completed and the terms and conditions are acceptable to the buyer and seller, the buyer may place an order with the exporter. The exporter should immediately confirm the order by sending his acceptance. 5. Export License: The exports of some goods are banned and of some items controlled by means of licenses, though many items are permitted to be exported freely. 6. Finance: If the exporter requires pre-shipment financial assistance, he should take the necessary steps to obtain it. 7. Production: Once the order is confirmed, the exporter should take necessary steps to ensure the timely availability of the goods of the specifications required and execute the export order promptly. 8. Shipping Space: As soon as the export order is confirmed, the exporter should contract the shipping companies. 9. Packing and Marking: Once the goods are ready, they are packed and marked properly. 10. Quality Control: Goods should be exported only after ensuring that they are of proper quality. 11. Excise Clearance: As a matter of policy, the government has granted excise duty exemption for export products. 12. Customs Formalities: Goods may be shipped out of India only after Customs clearance has been obtained. Exporters should present the following documents to the customs authorities: Shipping Bill 29

Declaration regarding truth of statement made in the shipping bill. Invoice GR Form Export License Quality Control Inspection Certificate Contract Registration Certificate Letter of Credit ( wherever applicable) Packing List AR-4 Form Any other documents

13. Exchange Control Formalities: An exporter, who has sent goods outside the country, has the obligation to satisfy the Reserve Bank of India that he has received payment from his overseas buyer. 14. Insurance: The goods that are exported may be subject to certain maritime perils. The risks of such perils may be covered under certain marine insurance. For instance, under the CIF terms, insurance is the responsibility of the exporter. 15. Shipping the Goods: Goods may be exported to foreign markets by sea, air, post, land and river. 16. Negotiation of Documents: After shipping the Goods, the exporter should arrange to obtain payment for the exports by negotiation the relevant documents through the bank. 17. Export Incentives: If the exporter is entitled to any export incentives, he should take the necessary steps to realize it.

Export Documents
It may include 16 commercial documents and 9 regulatory documents. The commercial documents are those which, by customs of trade, are required for affecting physical transfer of goods and their title from the exporter to the importer and the realization of export sale proceeds. It may be classified into principal documents and auxiliary documents. Principal Export Documents 30

Commercial Invoice Packing List Bill of Lading Combined Transport Document Certificate of Inspection Insurance Certificate Certificate of Origin Bills of Exchange and shipping advice

Auxiliary Documents
Proforma Invoice Intimation for Inspection Shipping Instructions Insurance Declaration Shipping Order Mate Receipt Application for Certificate of Origin Negotiation of Documents

The Regulatory Documents are those which have been prescribed by different Government departments/bodies, such as: Gate Pass 1/ Gate Pass 2 AR4/AR4A Form Shipping Bill Export Application Receipt for payment of Port charges Vehicle Ticket Exchange Control Declaration Freight Payment Certificate 31

Insurance Premium Payment Certificate

Important Documents:
Invoice: An invoice is the sellers bill for merchandise and contains particulars of goods, such as the price per unit at a particular location, quantity, total value etc. Packing list: The packing list is a consolidated statement of the contents of a number of packs. Certificate of Origin: It is a certificate which specifies the country of the production of the goods. Shipping Bill: It is the main document on the basis of which the Customs permission for export is given. Bill of Lading: It is also a document of title to the goods and, as such, is freely transferable by endorsement and delivery. Letter of Credit: It is a document containing the guarantee of a bank to honour drafts drawn on it by an exporter, under certain conditions and up to certain amounts, provided that the beneficiary fulfils the stipulated conditions. Bill of Exchange: An instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to a certain person. Certificate of Inspection: It is a certificate issued by the Export Inspection Agency, certifying that the consignment has been inspected as required under the Export and satisfies the conditions relating to quality control.

2.2 Schedule (Refer to Regulation 3)

Form GR: To be completed in duplicate for export otherwise than by Post including export of software in physical form i.e. magnetic tapes/discs and paper media. Form SDF: To be completed in duplicate and appended to the shipping bill, for exports declared to Customs Offices notified by the Central Government which have introduced Electronic Data Interchange (EDI) system for processing shipping bills notified by the Central Government. Form PP: To be completed in duplicate for export by Post. 32

Form SOFTEX: To be completed in triplicate for declaration of export of software otherwise than in physical form, i.e. magnetic tapes/discs, and paper media.

2.3 Introduction to Imports

Import of Goods and Services into India is being allowed in terms of Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), Import means commodities bought from foreign countries, To bring or carry in from an outside source, especially to bring in (goods or materials) from a foreign country for trade or sale. Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce & Industry, Department of Commerce, and Government of India. Authorized Dealer Category I (AD Category I) banks should ensure that the imports into India are in conformity with the Foreign Trade Policy in force and Foreign Exchange Management (Current Account Transactions) Rules.

2.3.1

General Guidelines for imports

1. General Guidelines
Rules and regulations to be followed by the AD Category I banks from the foreign exchange angle while undertaking import payment transactions on behalf of their clients are set out in the following paragraphs. Where specific regulations do not exist, AD Category I banks may be governed by normal trade practices. AD Category I banks may particularly note to adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking Operations & Development) in all their dealings.

2. Form A-1
Applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent, towards imports into India must be made in Form A-1. 33

3. Import Licenses
Except for goods included in the negative list which require license under the Foreign Trade Policy in force, AD Category - I banks may freely open letters of credit and allow remittances for import. While opening letters of credit, the For Exchange Control purposes copy of the license should be called for and special conditions, if any, attached to such licenses should be adhered to. After effecting remittances under the license, AD Category - I banks may preserve the copies of utilized license /s till they are verified by the internal auditors or inspectors.

4. Obligation of Purchaser of Foreign Exchange

(i) In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an Authorized Dealer Category I bank under Section 10(5) of the Act or to use it for any other purpose for which acquisition of foreign exchange is permissible under the said Act or Rules or Regulations framed there under. (ii) Where foreign exchange acquired has been utilised for import of goods into India, the AD Category I bank should ensure that the importer furnishes evidence of import viz., Exchange Control copy of the Bill of Entry.

2.3.2Evidence of Import Physical Imports

In case of all imports, where value of foreign exchange remitted/ paid for import into India exceeds USD 100,000 or its equivalent, it is obligatory on the part of the AD Category I bank through whom the relative remittance was made, to ensure that the importer submits. In respect of imports on D/A basis, AD Category I bank should insist on production of evidence of import at the time of effecting remittance of import bill. However, if importers fail to produce documentary evidence due to genuine reasons such as non-arrival of consignment, delay in delivery/ customs clearance of consignment, etc., AD bank may, if satisfied with the genuineness of request, 34

allow reasonable time, not exceeding three months from the date of remittance, to the importer to submit the evidence of import. The Exchange Control copy of the Bill of Entry for home consumption. The Exchange Control copy of the Bill of Entry for warehousing, in case of 100% Export Oriented Units, or Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs Authorities

Issue of acknowledgement
AD Category I bank should acknowledge receipt of evidence of import e.g. Exchange Control copy of the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate, etc., from importers by issuing acknowledgement slips containing all relevant particulars relating to the import transactions.

2.3.3

Documentation for Import

Introduction
An essential feature of all import sales transactions is import documentation. There are various categories of documents required in international trade transactions. This section lists the basic documentation required for an import shipment. Not all the documents listed below are required for every import transaction; many of them are applicable to specific products or circumstances.

Enquiry Documents
Costing sheet: It may include address, date, commodity, unit, weight, exchange rate, special
labeling and packaging, packing, marking, shipping fee, agents commission. Quotation/offer to the importer 35

 Pro-forma invoice: After receiving a quotation from the exporter, the importer may request a pro-forma invoice. This is a preliminary invoice and is prepared prior to shipment or even before a firm order has been received. The purpose is to enable the importer to obtain an import license (if required) or a letter of credit prior to entering into the contract of sale.

Instruction Documents
Forwarder's instruction: Most freight forwarders have a printed forwarder's instruction form, but the required information may also be printed on the exporters company letterhead. Information required includes instructions for booking of cargo, information for completing transport documents, description of goods as per the letter of credit etc. Shipping instruction: Where a shipping company has a computerized bill of lading system, it provides pre-printed shipping instruction forms which must be completed by the exporter/freight forwarder. The bill of lading is drawn up from the information provided on this form. Bank instruction: When the exporter is selling on the basis of a letter of credit, the instructions stipulated in the letter of credit must be followed. However, if selling on the basis of sight or usance draft under documentary collection, bank instructions must be generated to secure payment for the goods. Information supplied would include description of cargo, name of vessel, date of shipment etc; a detailed list of all documents submitted; payment method etc.

Transport Documents
1.

Bills of lading: The bill of lading is a contract of carriage and has three functions:
It defines in detail, the terms of the contract between the shipper and the shipping line for the carriage of goods from one specified port to another. ii) It is a formal, signed receipt for a specified number of packs e.g. crates, drums etc. which is given to the shipper by the shipping line when the shipping line receives the consignment. (It should be noted that the shipping line denies all knowledge of quantity, quality, value or condition of the contents of the packs.) iii) It is a document of title (i.e. a certificate of ownership) to the goods. As such, it must 36

be produced at the port of final destination by the consignee in order to claim the goods.

Air waybill: This transport document serves as:

1. Documentary evidence of the conclusion of a contract of carriage 2. Proof of receipt of the goods for shipment 3. An invoice for the freight 4. A certificate of insurance 5. Guide to airline staff for the handling, dispatch and delivery of the consignment. 6. The document consists of three originals and nine copies and is only issued in a non-negotiable form. The first original is intended for the carrier and is signed by the shipper; the second original, the consignee's copy, is signed by the shipper and accompanies the goods; the third original is signed by the carrier and is handed to the shipper as a receipt for the goods after they have been accepted for carriage. The copies are dispatched by the airline authorities as required to on-carriers, airport authorities, etc or they serve as delivery receipts, invoices etc.

2. Rail waybills:
Spoornet Combined Consignment Note and Truck Label (c.c.t.): This is the official transport document in respect of carriage of bulk cargo by rail Spoornet Freight Transit Order (f.t.o.): This is the official transport document in respect of carriage of containers by rail. The f.t.o. consists of five identical tear-off pages comprising a pricing copy, a checking copy, a receiver's copy, a delivery note and a sender's receipt.The c.c.t. and f.t.o. documents apply to transport within the borders of South Africa and serve both as evidence of the contract of carriage and as a receipt of goods.

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3. Road waybill
There is no standard transport document for road haulage. Road hauliers usually design their own waybills which serve as evidence of a contract of carriage and as receipts for consignment of goods. Insurance Documents Marine insurance policy document Certificate of insurance Customs Documents The Department of Customs and Excise requires the following documents to clear imports: Bill of Lading/Air Waybill/ Road Hauliers Certificate Commercial Invoice Customs Worksheet

2.4 Bill of Entry (DA500)

A certificate of origin (DA59) is required for imports of certain strategic commodities or imports of goods involved in anti-dumping charges (e.g.: shoes from Hong Kong, T-shirts from China) Exchange Control Documents Payment Documents Transport documents Marine insurance documents 38

Draft (bill of exchange) Pro-forma invoice Inspection certificates Commercial invoice (c/i): This should be virtually the same as the pro-forma invoice and should contain all the final and accurate details relating to a particular order. The import license number and the l/c number should all be stated on the commercial invoice. Also the price and the delivery term should be consistent with the sales contract. Certificate of origin (c/o) if it is a required document Packing declaration: The packing list indicates the number of packs involved the contents of each pack and the individual weights, dimensions. This list enables the customer to check that the correct number of units has been received. Customs authorities can also easily identify a specific pack they wish to inspect.

Inspection certificate Quality certificate Dangerous Goods Documentary Requirements There are a number of special shipping instruction forms and transport documents that are required in respect of dangerous goods. Special documentation is usually required for all shipments of dangerous goods, regardless of the mode of transport used. There are 3 standard ways of payment methods in the export import trade international trade market: 1. Clean Payments In clean payment method, all shipping documents, including title documents are handled directly between the trading partners. The role of banks is limited to clearing amounts as required. There are basically two types of clean payments:

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Advance Payment In advance payment method the exporter is trusted to ship the goods after receiving payment from the importer. Open Account In open account method the importer is trusted to pay the exporter after receipt of goods. The main drawback of open account method is that exporter assumes all the risks while the importer get the advantage over the delay use of company's cash resources and is also not responsible for the risk associated with goods. 2. Payment Collection of Bills in International Trade The Payment Collection of Bills also called Uniform Rules for Collections is published by International Chamber of Commerce (ICC) under the document number 522 (URC522) and is followed by more than 90% of the world's banks. In this method of payment in international trade the exporter entrusts the handling of commercial and often financial documents to banks and gives the banks necessary instructions concerning the release of these documents to the Importer. It is considered to be one of the cost effective methods of evidencing a transaction for buyers, where documents are manipulated via the banking system. There are two methods of collections of bill: Documents Against Payment D/P In this case documents are released to the importer only when the payment has been done. D/P means payable at sight (on demand). The collecting bank hands over the shipping documents including the document of title (bill of lading) only when the importer has paid the bill.

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Documents Against Acceptance D/A In this case documents are released to the importer only against acceptance of a draft. The Exporter allows credit to Importer, the period of credit is referred to as Usance, The importer/ drawee is required to accept the bill to make a signed promise to pay the bill at a set date in the future. 3. Letter of Credit L/c Letter of Credit also known as Documentary Credit is a written undertaking by the importers bank known as the issuing bank on behalf of its customer, the importer (applicant), promising to effect payment in favor of the exporter (beneficiary) up to a stated sum of money, within a prescribed time limit and against stipulated documents. It is published by the International Chamber of Commerce under the provision of Uniform Custom and Practices (UCP) brochure number 500. (Discussed below in detailed)

2.5

Letter of Credit

L/C provides complete financial security to the seller of the goods. A letter of credit reinforces the buyers integrity by adding to it his bankers undertaking. It is a signed instrument embodying an undertaking by the banker of a buyer to pay his seller a certain sum of money on presentation of stipulated document. It is a document containing the guarantee of a bank to honour drafts drawn on it by an exporter, under certain conditions and up to certain amounts, provided that the beneficiary fulfils the stipulated conditions.

2.5.1 Parties to Letters of Credit

Applicant (Opener): Applicant which is also referred to as account party is normally a buyer or customer of the goods, who has to make payment to beneficiary. LC is initiated and issued at his request and on the basis of his instructions.

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Issuing Bank (Opening Bank): The issuing bank is the one which create a letter of credit and takes the responsibility to make the payments on receipt of the documents from the beneficiary or through their banker. The payments have to be made to the beneficiary within seven working days from the date of receipt of documents at their end, provided the documents are in accordance with the terms and conditions of the letter of credit. If the documents are discrepant one, the rejection thereof to be communicated within seven working days from the date of receipt of documents at their end.

Beneficiary: Beneficiary is normally stands for a seller of the goods, who has to receive payment from the applicant. A credit is issued in his favour to enable him or his agent to obtain payment on surrender of stipulated document and comply with the term and conditions of the L/C. If L/C is a transferable one and he transfers the credit to another party, then he is referred to as the first or original beneficiary.

Advising Bank: An Advising Bank provides advice to the beneficiary and takes the responsibility for sending the documents to the issuing bank and is normally located in the country of the beneficiary.

Confirming Bank: Confirming bank adds its guarantee to the credit opened by another bank, thereby undertaking the responsibility of payment/negotiation acceptance under the credit, in additional to that of the issuing bank. Confirming bank play an important role where the exporter is not satisfied with the undertaking of only the issuing bank.

Negotiating Bank: The Negotiating Bank is the bank who negotiates the documents submitted to them by the beneficiary under the credit either advised through them or restricted to them for negotiation. On negotiation of the documents they will claim the reimbursement under the credit and makes the payment to the beneficiary provided the documents submitted are in accordance with the terms and conditions of the letters of credit.

Reimbursing Bank: Reimbursing Bank is the bank authorized to honor the reimbursement claim in settlement of negotiation/acceptance/payment lodged with it by

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the negotiating bank. It is normally the bank with which issuing bank has an account from which payment has to be made.

Second Beneficiary: Second Beneficiary is the person who represents the first or original Beneficiary of credit in his absence. In this case, the credits belonging to the original beneficiary is transferable. The rights of the transferee are subject to terms of transfer.

2.5.2 Types of Letter of Credit

1. Revocable Letter of Credit L/C A revocable letter of credit may be revoked or modified for any reason, at any time by the issuing bank without notification. It is rarely used in international trade and not considered satisfactory for the exporters but has an advantage over that of the importers and the issuing bank.

There is no provision for confirming revocable credits as per terms of UCPDC, Hence they cannot be confirmed. It should be indicated in LC that the credit is revocable. if there is no such indication the credit will be deemed as irrevocable. 2. Irrevocable Letter of Credit L/C In this case it is not possible to revoke or amended a credit without the agreement of the issuing bank, the confirming bank, and the beneficiary. Form an exporters point of view it is believed to be more beneficial. An irrevocable letter of credit from the issuing bank insures the beneficiary that if the required documents are presented and the terms and conditions are complied with, payment will be made.

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3. Confirmed Letter of Credit L/C Confirmed Letter of Credit is a special type of L/c in which another bank apart from the issuing bank has added its guarantee. Although, the cost of confirming by two banks makes it costlier, this type of L/c is more beneficial for the beneficiary as it doubles the guarantee. 4. Sight Credit and Usance Credit L/C Sight credit states that the payments would be made by the issuing bank at sight, on demand or on presentation. In case of usance credit, draft are drawn on the issuing bank or the correspondent bank at specified usance period. The credit will indicate whether the usance draft are to be drawn on the issuing bank or in the case of confirmed credit on the confirming bank. 5. Back to Back Letter of Credit L/C Back to Back Letter of Credit is also termed as Countervailing Credit. A credit is known as back to back credit when a L/c is opened with security of another L/c. A back to back credit which can also be referred as credit and counter credit is actually a method of financing both sides of a transaction in which a middleman buys goods from one customer and sells them to another. The parties to a Back to Back Letter of Credit are: 1. The buyer and his bank as the issuer of the original Letter. 2. The manufacturer's subcontractor and his bank. The practical use of this Credit is seen when L/c is opened by the ultimate buyer in favour of a particular beneficiary, who may not be the actual supplier/ manufacturer offering the main credit with near identical terms in favour as security and will be able to obtain reimbursement by presenting the documents received under back to back credit under the main L/c.The need for such credits arise mainly when: 1. The ultimate buyer not ready for a transferable credit 2. The Beneficiary does not want to disclose the source of supply to the openers.

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3. The manufacturer demands on payment against documents for goods but the beneficiary of credit is short of the funds 6. Transferable Letter of Credit L/C A transferable documentary credit is a type of credit under which the first beneficiary which is usually a middleman may request the nominated bank to transfer credit in whole. The L/c does state clearly mentions the margins of the first beneficiary and unless it is specified the L/c cannot be treated as transferable. It can only be used when the company is selling the product of a third party and the proper care has to be taken about the exit policy for the money transactions that take place. This type of L/c is used in the companies that act as a middle man during the transaction but dont have large limit. In the transferable L/c there is a right to substitute the invoice and the whole value can be transferred to a second beneficiary. The first beneficiary or middleman has rights to change the following terms and conditions of the letter of credit: 1. Reduce the amount of the credit. 2. Reduce unit price if it is stated 3. Make shorter the expiry date of the letter of credit. 4. Make shorter the last date for presentation of documents. 5. Make shorter the period for shipment of goods. 6. Increase the amount of the cover or percentage for which insurance cover must be effected. 7. Substitute the name of the applicant (the middleman) for that of the first beneficiary (the buyer).

2.6 Other Remittances

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Remittance facilities for Non Resident Indians/ Person of India Origin (NRIs) / PIO) and Foreign Nationals: Remittance of funds from the sale of capital assets in India held by a person, whether resident in or outside India, requires approval of the Reserve Bank except to the extent provided in FEMA or Rules or Regulations made there under. NRI for this purpose is defined as a person resident outside India who is citizen of India. In terms of Regulation 2 of FEMA Notification No.13 dated May 3, 2000, Non-Resident Indian (NRI) means a person resident outside India who is a citizen of India. Person of Indian Origin (PIO) means a citizen of any country other than Bangladesh or Pakistan who had (a) at any time held Indian passport or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 or (c) the person is a spouse of an Indian citizen or a person referred to in (a) or (b).

Remittance of current income:

(1) Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder is a permissible debit to the NRO account. Authorized Dealer banks may also allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for. (2) NRIs/PIO have the option to credit the current income to their Non-Resident (External) Rupee account, provided the Authorized Dealer bank is satisfied that the credit represents current income of the non-resident account holder and income tax thereon has been deducted / provided for.

Remittance of assets by a foreign national of non-Indian origin:

(1) A foreign national of non-Indian origin who has retired from an employment in India or who has inherited assets from a person resident in India or who is a widow of an Indian citizen who was resident in India, may remit an amount not exceeding USD one million, per

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financial year (April-March), subject to the satisfaction of the Authorized Dealer bank, on production of documentary evidence. (2) These remittance facilities are not available to citizens of Nepal and Bhutan.

Remittance of assets by NRI/PIO:

NRI/PIO may remit sale proceeds of immovable property purchased by him out of Rupee funds. The remittance facility in respect of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan. The facility of remittance of sale proceeds of other financial assets is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.

Remittance of Salary:
A citizen of a foreign state resident in India, being an employee of a foreign company and on deputation to the office/ branch/ subsidiary/ joint venture in India of such foreign company or being an employee of a company incorporated in India, may open, hold and maintain a foreign currency account with a bank outside India and receive/ remit the whole salary payable to him for the services rendered, by credit to such account, provided that income tax chargeable under the Income Tax Act, 1961 is paid on the entire salary as accrued in India.6.2. (ii) A citizen of India, employed by a foreign company outside India and on deputation to the office/ branch/ subsidiary/ joint venture in India of such foreign company, may open, hold and maintain a foreign currency account with a bank outside India and receive the whole salary payable to him for the services rendered to the office/ branch/ subsidiary/ joint venture in India of such foreign company, by credit to such account, provided that income tax chargeable under the Income Tax Act, 1961 is paid on the entire salary as accrued in India.

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Facilities for students:

Students going abroad for studies are treated as Non- Resident Indians (NRIs) and are eligible for all the facilities available to NRIs under FEMA. As non-residents, they will be eligible to receive remittances from India (i) up to USD 100,000 from close relatives in India, on self declaration, towards maintenance, which could include remittances towards their studies also (ii) up to USD 1 million per financial year, out of sale proceeds of assets / balances in their NRO account maintained with an Authorised Dealer bank in India and (iii) upto USD 200,000 per financial year under the Liberalized Remittance Scheme.

All other facilities available to NRIs under FEMA are equally applicable to the students.

Miscellaneous Remittances from India In order to provide adequate foreign exchange facilities and efficient customer service, the Reserve Bank has decided to grant licenses to certain entities by authorizing them as Authorized Dealer Category II to undertake a range of non-trade current account transactions. Accordingly, Authorized Dealer Category II are authorized to release / remit foreign exchange for the following non-trade current account transactions: (a) Private visits (b) Remittance by tour operators / travel agents to overseas agents / principals / hotels (c) Business travel (d) Fee for participation in global conferences and specialized training (e) Remittance for participation in international events / competitions (towards training, sponsorship and prize money) (f) Film shooting (g) Medical treatment abroad (h) Disbursement of crew wages (i) Overseas education (j) Remittance under educational tie up arrangements with universities abroad

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(k) Remittance towards fees for examinations held in India and abroad and additional score sheets for GRE, TOEFL, etc. (l) Employment and processing, assessment fees for overseas job applications

2.7 NRI Deposits

DEFINITIONS Non-Resident Indian (NRI) An NRI is a person resident outside India, who is a citizen of India or is a person of Indian origin. Person of Indian Origin (PIO) PIO for this purpose is defined in Regulation 2 of FEMA Notification ibid as a citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b). ELIGIBILITY (a) Any person resident outside India (as per Section 2 of FEMA), may open and maintain NRO account with an Authorized Dealer or an Authorized bank for the purpose of putting through bonafide transactions denominated in Indian Rupees, not involving any violation of the provisions of FEMA, Rules and Regulations made there under. (b) Opening of accounts by individuals / entities of Bangladesh / Pakistan nationality / ownership require prior approval of the Reserve Bank. TYPES OF ACCOUNTS NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. Rate of interest applicable to these accounts and guidelines for opening, 49

operating and maintenance of such accounts shall be in accordance with directives/instructions issued by the Reserve Bank from time to time. JOINT ACCOUNT WITH RESIDENT/ NON-RESIDENT The accounts may be held jointly with residents and / or with non-residents. ASSETS REQUIRED IN INDIA OUT OF RUPEE FUNDS NRI/PIO may remit sale proceeds of immovable property purchased by him as a resident or out of Rupee funds as NRI/PIO, without any lock-in-period, subject to the above limit of USD 1 million, per financial year. FOREIGN NATIONALS OF NON-INDIAN ORIGIN ON A VISIT TO INDIA NRO (current/savings) account can be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. The balance in the NRO account may be converted by the Authorized Dealer bank into foreign currency for payment to the account holder at the time of his departure from India provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon. In case the account has been maintained for a period more than six months, applications for repatriation of balance will have to be made by the account holder concerned on plain paper to the Regional Office concerned of the Reserve Bank. CHANGE OF RESIDENT STATUS OF ACCOUNT HOLDER From Resident to Non-resident- When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a NonResident (Ordinary) Account. When a person resident in India leaves for Nepal or Bhutan 50

for taking up employment or for carrying on business or vocation or for any other purposes indicating his intention to stay in Nepal or Bhutan for an uncertain period, his existing account will continue as a resident account. Such account should not be designated as Non-Resident (Ordinary) Account (NRO). From Non- resident to Resident-NRO accounts may be re-designated as resident Rupee accounts on return of the account holder to India for taking up employment, or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period. Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit. OPERATIONS OF NRO ACCOUNT BY POWER OF ATTORNEY HOLDER Powers have been delegated to the authorized dealers/banks to allow operations on an NRO account by Power of Attorney granted in favour of a resident by the non-resident individual account holder provided such operations are restricted to: (i) All local payments in Rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank; and (ii) Remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes. (iii) The resident Power of Attorney holder is not permitted to repatriate outside India funds held in the account other than to the non-resident individual account holder nor to make payment by way of gift to a resident on behalf of the non- resident account holder or transfer funds from the account to another NRO account.

2.8 Export Finance

PRE-SHIPMENT FINANCE POST-SHIPMENT FINANCE

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2.9 Pre-Shipment Finance Introduction

Pre-Shipment Finance is issued by a financial institution when the seller wants the payment of the goods before shipment. The main objectives behind pre-shipment finance or pre export finance are to enable exporter to:

Procure raw materials. Carry out manufacturing process. Provide a secure warehouse for goods and raw materials. Process and pack the goods. Ship the goods to the buyers. Meet other financial cost of the business.

Types of Pre Shipment Finance

Packing Credit Advance against Cheques/Draft etc. representing Advance Payments.

Pre shipment finance is extended in the following forms :

Packing Credit in Indian Rupee Packing Credit in Foreign Currency (PCFC)

Requirement for Getting Packing Credit This facility is provided to an exporter who satisfies the following criteria

A ten digit importer-exporter code number allotted by DGFT. Exporter should not be in the caution list of RBI. If the goods to be exported are not under OGL (Open General License), the exporter should have the required license /quota permit to export the goods. 52

Packing credit facility can be provided to an exporter on production of the following evidences to the bank: 1. Formal application for release the packing credit with undertaking to the effect that the exporter would be ship the goods within stipulated due date and submit the relevant shipping documents to the banks within prescribed time limit. 2. Firm order or irrevocable L/C or original cable / fax / telex message exchange between the exporter and the buyer. 3. License issued by DGFT if the goods to be exported fall under the restricted or canalized category. If the item falls under quota system, proper quota allotment proof needs to be submitted. The confirmed order received from the overseas buyer should reveal the information about the full name and address of the overseas buyer, description quantity and value of goods (FOB or CIF), destination port and the last date of payment. Eligibility Pre shipment credit is only issued to that exporter who has the export order in his own name. However, as an exception, financial institution can also grant credit to a third party manufacturer or supplier of goods who does not have export orders in their own name. In this case some of the responsibilities of meeting the export requirements have been out sourced to them by the main exporter. In other cases where the export order is divided between two more than two exporters, pre shipment credit can be shared between them Quantum of Finance The Quantum of Finance is granted to an exporter against the LC or an expected order. The only guideline principle is the concept of Need Based Finance. Banks determine the percentage of margin, depending on factors such as: The nature of Order.

The nature of the commodity 53

Different Stages of Pre Shipment Finance

Appraisal and Sanction of Limits 1. Before making any an allowance for Credit facilities banks need to check the different aspects like product profile, political and economic details about country. Apart from these things, the bank also looks in to the status report of the prospective buyer, with whom the exporter proposes to do the business. To check all these information, banks can seek the help of institution like ECGC or International consulting agencies like Dun and Brad street etc. The Bank extended the packing credit facilities after ensuring the following" a. The exporter is a regular customer, a bona fide exporter and has a good standing in the market. b. Whether the exporter has the necessary license and quota permit (as mentioned earlier) or not. c. Whether the country with which the exporter wants to deal is under the list of Restricted Cover Countries (RCC) or not. Disbursement of Packing Credit Advance 2. Once the proper sanctioning of the documents is done, bank ensures whether exporter has executed the list of documents mentioned earlier or not. Disbursement is normally allowed when all the documents are properly executed. Sometimes an exporter is not able to produce the export order at time of availing packing credit. So, in these cases, the bank provides a special packing credit facility and is known as Running Account Packing. Before disbursing the bank specifically check for the following particulars in the submitted documents a. Name of buyer 54

b. ,Commodity to be exported c. Quantity d. Value (either CIF or FOB) e. Last date of shipment / negotiation. f. Any other terms to be complied with The quantum of finance is fixed depending on the FOB value of contract /LC or the domestic values of goods, whichever is found to be lower. Normally insurance and freight charged are considered at a later stage, when the goods are ready to be shipped. The bank decides the duration of packing credit depending upon the time required by the exporter for processing of goods. The maximum duration of packing credit period is 180 days; however bank may provide a further 90 days extension on its own discretion, without referring to RBI. Follow up of Packing Credit Advance 3. Exporter needs to submit stock statement giving all the necessary information about the stocks. It is then used by the banks as a guarantee for securing the packing credit in advance. Bank also decides the rate of submission of these stocks. Apart from this, authorized dealers (banks) also physically inspect the stock at regular intervals. Liquidation of Packing Credit Advance 4. Packing Credit Advance needs be liquidated out of as the export proceeds of the relevant shipment, thereby converting preshipment credit into post shipment credit. This liquidation can also be done by the payment receivable from the Government of India and includes the duty drawback, payment from the Market Development Fund (MDF) of the Central Government or from any other relevant source. In case if the export does not take place then the entire advance can also be recovered at a certain interest rate. RBI has allowed some flexibility in to this regulation under which substitution of commodity or buyer can be allowed by a bank without any reference to RBI.

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Overdue Packing 5. Bank considers a packing credit as an overdue, if the borrower fails to liquidate the packing credit on the due date. And, if the condition persists then the bank takes the necessary step to recover its dues as per normal recovery procedure. Advance against Cheque/Drafts received as advance payment 6. Where exporters receive direct payments from abroad by means of cheques/drafts etc. the bank may grant export credit at concessional rate to the exporters of goods track record, till the time of realization of the proceeds of the cheques or draft etc. The Banks however, must satisfy themselves that the proceeds are against an export order. 2.10 Post-shipment Finance Introduction Post Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters dont wait for the importer to deposit the funds. Basic Features The features of post-shipment finance are:

Purpose of Finance Post-shipment finance is meant to finance export sales receivable after the date of shipment of goods to the date of realization of exports proceeds. In cases of deemed exports, it is extended to finance receivable against supplies made to designated agencies.

Basis of Finance Post-shipment finances is provided against evidence of shipment of goods or supplies made to the importer or seller or any other designated agency.

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Types of Finance Post-shipment finance can be secured or unsecured. Since the finance is extended against evidence of export shipment and bank obtains the documents of title of goods, the finance is normally self liquidating. Further, the finance is mostly a funded advance. In few cases, such as financing of project exports, the issue of guarantee (retention money guarantees) is involved and the financing is not funded in nature.

Quantum of Finance As a quantum of finance, post-shipment finance can be extended up to 100% of the invoice value of goods. In special cases, where the domestic value of the goods increases the value of the exporter order, finance for a price difference can also be extended and the price difference is covered by the government. This type of finance is not extended in case of pre-shipment stage. Banks can also finance undrawn balance. In such cases banks are free to stipulate margin requirements as per their usual lending norm.

Period of Finance Post-shipment finance can be off short terms or long term, depending on the payment terms offered by the exporter to the overseas importer. In case of cash exports, the maximum period allowed for realization of exports proceeds is six months from the date of shipment. Concessive rate of interest is available for a highest period of 180 days, opening from the date of surrender of documents. Usually, the documents need to be submitted within 21days from the date of shipment.

Financing For Various Types of Export Buyer's Credit Post-shipment finance can be provided for three types of export:

Physical exports: Finance is provided to the actual exporter or to the exporter in whose name the trade documents are transferred. Deemed export: Finance is provided to the supplier of the goods which are supplied to the designated agencies. Capital goods and project exports: Finance is sometimes extended in the name of overseas buyer. The disbursal of money is directly made to the domestic exporter.

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Supplier's Credit Buyer's Credit is a special type of loan that a bank offers to the buyers for large scale purchasing under a contract. Once the bank approved loans to the buyer, the seller shoulders all or part of the interests incurred. Types of Post Shipment Finance The post shipment finance can be classified as: 1. Export Bills Purchased/ Discounted (DP & DA Bills) Export bills (Non L/C Bills) is used in terms of sale contract/ order may be discounted or purchased by the banks. It is used in indisputable international trade transactions and the proper limit has to be sanctioned to the exporter for purchase of export bill facility. 2. Export Bills Negotiated (Bill under L/C) The risk of payment is less under the LC, as the issuing bank makes sure the payment. The risk is further reduced, if a bank guarantees the payments by confirming the LC. Because of the inborn security available in this method, banks often become ready to extend the finance against bills under LC. However, this arises two major risk factors for the banks: 1. The risk of nonperformance by the exporter, when he is unable to meet his terms and conditions. In this case, the issuing banks do not honor the letter of credit. 2. The bank also faces the documentary risk where the issuing bank refuses to honour its commitment. So, it is important for the for the negotiating bank, and the lending bank to properly check all the necessary documents before submission. 3. Advance against Export Bills Sent on Collection Basis Bills can only be sent on collection basis, if the bills drawn under LC have some discrepancies. Sometimes exporter requests the bill to be sent on the collection basis currency. Banks may allow advance against these collection bills to an exporter with a concessional rates of interest depending upon the transit period in case of DP Bills and transit period. The transit period is from the date of acceptance of the export documents at the banks branch for collection and not from the date of advance. 58

4. Advance against Export on Consignments Basis

Bank may choose to finance when the goods are exported on consignment basis at the risk of the exporter for sale and eventual payment of sale proceeds to him by the consignee. However, in this case bank instructs the overseas bank to deliver the document only against trust receipt /undertaking to deliver the sale proceeds by specified date, which should be within the prescribed date even if according to the practice in certain trades a bill for part of the estimated value. In case of export through approved Indian owned warehouses abroad the times limit for realization is 15 months.

5. Advance against Undrawn Balance

It is a very common practice in export to leave small part undrawn for payment after adjustment due to difference in rates, weight, quality etc. Banks do finance against the undrawn balance, if undrawn balance is in conformity with the normal level of balance left undrawn in the particular line of export, subject to a maximum of 10 percent of the export value. An undertaking is also obtained from the exporter that he will, within 6 months from due date of payment or the date of shipment of the goods, whichever is earlier surrender balance proceeds of the shipment.

6. Advance against Claims of Duty Drawback

Duty Drawback is a type of discount given to the exporter in his own country. This discount is given only, if the in house cost of production is higher in relation to international price. This type of financial support helps the exporter to fight successfully in the international markets. In such a situation, banks grants advances to exporters at lower rate of interest for a maximum period of 90 days. These are granted only if other types of export finance are also extended to the exporter by the same bank. After the shipment, the exporters lodge their claims, supported by the relevant documents to the relevant government authorities. These claims are processed and eligible amount is disbursed after making sure that the bank is authorized to receive the claim amount directly from the concerned government authorities.

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2.11 Forex Market

FOREX Market
Forex market is one of the largest financial markets in the world, where buyers and sellers conduct foreign exchange transactions. Its important in the international trade can be estimated with the fact that average daily trade in the global forex markets is over US $ 3 trillion.

Spot Rate
Also known as "benchmark rates", "straightforward rates" or "outright rates", spot rates is an agreement to buy or sell currency at the current exchange rate. The globally accepted settlement cycle for foreign exchange contracts is two days. Foreign exchange contracts are therefore settled on the second day after the day the deal is made.

Forward Price
Forward price is a fixed price at which a particular amount of a commodity, currency or security is to be delivered on a fixed date in the future, possibly as for as a year ahead. Traders agree to buy and sell currencies for settlement at least three days later, at predetermined exchange rates. This type of transaction often is used by business to reduce their exchange rate risk.

Forward Price vs. Spot Price

Theoretically it is possible for a forward price of a currency to equal its spot price However, interest rates must be considered. The interest rate can be earned by holding different currencies usually varies, therefore forward price can be higher or lower than (at premium or discount to) the spot prices.

RBI Reference Rate

There reference rate given by RBI is based on 12 noon rates of a few selected banks in Mumbai.

Inter Bank Rates

Interbank rates quote the bank for buying and selling foreign currency in the interbank market, which works on wafer thin margins. For inter bank transactions the quotation is up to four decimals with the last two digits in multiples of 25.

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Telegraphic Transfer
Telegraphic transfer or in short TT is a quick method of transfer money from one bank to another bank. TT method of money transfer has been introduced to solve the delay problems caused by cheques or demand drafts. In this method, money does not move physically and order to pay is wired to an institutions casher to make payment to a company or individual. A cipher code is appended to the text of the message to ensure its integrity and authenticity during transit.

Currency Rate
The Currency rate is the rate at which the authorized dealer buys and sells the currency notes to its customers. It depends on the TC rate and is more than the TC rate for the person who is buying them.

Cross Rate
In interbank transactions all currencies are normally traded against the US dollar, which becomes a frame of reference. So if one is buying with rupees a currency X which is not normally traded, one can arrive at a rupee exchange rate by relating the rupee $ rate to the $X rate . This is known as a cross rate.

Long and Short

When you go long on a currency, its means you bought it and are holding it in the expectation that it will appreciate in value. By contrast, going short means you reselling currency in the expectation that what you are selling will depreciate in value.

Bid and Ask

Bids are the highest price that the seller is offering for the particular currency. On the other hand, ask is the lowest priced acceptable to the buyer. Together, the two prices constitute a quotation and the difference between the price offered by a dealer willing to sell something and the price he is willing to pay to buy it back.

Buying and Selling

In terms of foreign exchange, buying means purchasing a certain amount of the foreign currency at the bid or buying price against the delivery /crediting of a second currency which is also called counter currency. 61

On the other hand, selling refers to a fix amount of foreign currency at the offered or selling price against the receipt / debiting of another currency.

FOREX Rates vs. Interest Rates

Forex rates or exchange rate is the price of a country's currency in terms of another country's currency. It specifies how much one currency is worth in terms of the other. For example a forex rate of 123 Japanese yen (JPY, ) to the United States dollar (USD, $) means that JPY 123 is worth the same as USD 1. Choice of currency and its interest rate is a major concern in the international trade. Investors are easily attracted by the higher interest rates which in turns also effects the economy of a nation and its currency value. For an example, if interest rate on INR were substantially higher than the interest rate on USD, more USD would be converted into INR and pumped into the Indian economic system. This would result in appreciation of the INR, resulting in lower conversion rates of USD against INR, at the time of reconversion into USD.

Guidelines of Various Authorities

UCPDC Guidelines Uniform Customs and Practice for Documentary Credit (UCPDC) is a set of predefined rules established by the International Chamber of Commerce (ICC) on Letters of Credit. The UCPDC is used by bankers and commercial parties in more than 200 countries including India to facilitate trade and payment through LC. UCPDC was first published in 1933 and subsequently updating it throughout the years. In 1994, UCPDC 500 was released with only 7 chapters containing in all 49 articles. The latest revision was approved by the Banking Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the UCPDC600, formally commenced on 1 July 62

2007. It contains a total of about 39 articles covering the following areas, which can be classified as 8 sections according to their functions and operational procedures.

ISBP 2002
The widely acclaimed International Standard Banking Practice (ISBP) for the Examination of Documents under Documentary Credits was selected in 2007 by the ICCs Banking Commission. First introduced in 2002, the ISBP contains a list of guidelines that an examiner needs to check the documents presented under the Letter of Credit. Its main objective is to reduce the number of documentary credits rejected by banks.

2.12 FEDAI Guidelines

Foreign Exchange Dealers Association of India (FEDAI) was established in 1958 under the Section 25 of the Companies Act (1956). It is an association of banks that deals in Indian foreign exchange and work in coordination with the Reserve Bank of India, other organizations like FIMMDA, the Forex Association of India and various market participants. FEDAI has issued rules for import LCs which is one of the important area of foreign currency exchanges. As the issuance of standby of letter of Credit including imports of goods is susceptible to some risk in the absence of evidence of shipment, therefore the importer should be advised that documentary credit under UCP 500/600 should be the preferred route for importers of goods. Below mention are some of the necessary precaution that should be taken by authorised dealers While issuing a stands by letter of credits: 1. The facility of issuing Commercial Standby shall be extended on a selective basis and to the following category of importers i. ii. Where such standby are required by applicant who are independent power producers/importers of crude oil and petroleum products Special category of importers namely export houses, trading houses, star trading houses, super star trading houses or 100% Export Oriented Units. 2. Satisfactory credit report on the overseas supplier should be obtained by the issuing banks before issuing Stands by Letter of Credit. 63

3. Invocation of the Commercial standby by the beneficiary is to be supported by proper evidence. The beneficiary of the Credit should furnish a declaration to the effect that the claim is made on account of failure of the importers to abide by his contractual obligation along with the following documents. i. ii. iii. A copy of invoice. Nonnegotiable set of documents including a copy of non negotiable bill of lading/transport document. A copy of Lloyds /SGS inspection certificate wherever provided for as per the underlying contract. 4. Incorporation of suitable clauses to the effect that in the event of such invoice /shipping documents has been paid by the authorized dealers earlier, Provisions to dishonor the claim quoting the date / manner of earlier payments of such documents may be considered. 5. The applicant of a commercial stand by letter of credit shall undertake to provide evidence of imports in respect of all payments made under standby. (Bill of Entry)

R-RETURN (Reporting to RBI)

PURPOSES: Reporting of all inflow and outflows of foreign exchange. Reporting of NOSTRO Account Follow up of over-due transaction.

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3 . Literature reviews
International banking operations are widely used both by practitioners and researchers. Historically one can observe several major themes in the financial analysis literature. An assessment of banking operation strategies of private banking institutions in the Philippines is done by( Liu, 2001) , If EDI is to succeed to a similar degree as paper-based systems then international harmonization and standardization must be achieved across all functional groups (banking, transport, insurance, customs) and industry sectors on message standard and structures ( Mulligan,1999).An analysis of domestic and foreign banks internal performance by investigating their financial ratios shows that banks in Bahrain, Oman, the United Arab Emirates (GCC countries) have improved their performance over the past several years. Commercial banks in these GCC economies are well capitalized and have adopted modern banking services. Most banks are found to be financially sound by international standards, measured by all key financial ratios (Islam,(2003). Many Thai banks are currently implementing Internet banking. Banks that offer service via this channel claim that it reduces costs and makes them more competitive. However, many corporate customers are not highly enthusiastic about Internet banking (Rotchanakitumnuai, 2003).The descriptive study was conducted to develop an understanding of consumers' attitudes and adoption of Internet banking among sophisticated consumers. Based on a random sample of academicians, demographic, attitudinal, and behavioral characteristics of Internet banking (IB) users and non-users were examined. The analyses revealed significant differences between the demographic profiles and attitudes of users and nonusers. IB users were further investigated, and three sub-segments were defined according to a set of bank selection criteria. Finally, based on the similarities between various Web-based bank services, four homogeneous categories of services were defined (Akinci, 2004). The purpose of this paper is both to determine Citibank's response to cultural diversity in the dynamic, highly competitive global market for online banking facilities and services, and whether or not international online bank web sites are constructed in a manner sensitive to the culture of their host country. The another purpose of paper presented by (Acharya, 2008) is to examine the impact of online banking intensity on the financial performance of community banks . The current exploratory study is an attempt to discover the factors affecting a bank's decision to adopt Internet banking in India. Particularly, it seeks to examine the relationship between the bank's adoption decision and various banks and market characteristics (Malhotra, 2007) .The another 65

paper deals with the paradigm of Islamic banking and finance. It constitutes a general review that bears special features, facts and figures over the recent developments of Islamic banking and finance across the globe. It takes stock of the growing institutional and infrastructure support for the Islamic banking and finance system in Muslim countries and Western financial markets (Khan, 2008) .The exploratory study is an attempt to present the present status of Internet banking in India and the extent of Internet banking services offered by Internet banks. In addition, it seeks to examine the factors affecting the extent of Internet banking services ( Malhotra, 2010). A questionnaire with four-point Likert scale is applied to 324 usable responses. Ten attributes are tested, namely convenience of usage, accessibility, features availability, bank management and image, security, privacy, design, content, speed, and fees and charges. Results indicate that all elements for ten identified factors are significant with respect to the users' adoption of e-banking services (Poon, 2007). It presented a paper,the purpose of which is to to examine the relationships among three dimensions of service quality that influence overall internet banking service quality and its subsequent effect on customer satisfaction in a New Zealand banking context (Rod, 2009).

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3.1 RESEARCH METHODOLOGY

Every project work is based on certain methodology, which is a way to systematically solve the problem or attain its objectives. It is a very important guideline and lead to completion of any project work through observation, data collection and data analysis. According to Clifford Woody, Research Methodology comprises of defining & redefining problems, collecting, organizing &evaluating data, making deductions &researching to conclusions.

3.2 OBJECTIVE OF THE STUDY:

The main objective of undergoing training of 6weeks is to: Understand how banking activities actually takes place. To gain an insight and in depth knowledge about International Banking Operations. To know how services provided by bank to its customer. To learn about corporate banking culture in India.

3.3 Meaning of Research: Research is Scientific and systematic search for gaining information and knowledge on a specific topic or phenomena .The method adopted to carry out this report was based on both the primary and secondary sources. 3.4 DATA COLLECTION To determine the appropriate data for research mainly two kinds of data was collected namely primary & secondary data as explained below:

PRIMARY DATA
Primary data are those, which were collected afresh & for the first time and thus happen to be original in character. However, there are many methods of collecting the primary data; all have not been used for the purpose of this project. The ones that have been used are: Questionnaire 67

 Informal Interviews Observation SECONDARY DATA Secondary data is collected from previous researches and literature to fill in the respective project. The secondary data was collected through:

Text Books Articles Journals Websites Primary Sources:

Interaction with the Forex Manager

Secondary sources:
Manuals of the bank Websites Journals R B I Circulars Annual Report

3.5 Limitation of the Study

Although every effort has been in to collect the relevant information through the sources available, still some relevant information could not be gathered. 1. Busy Schedule of Concerned Executives: The concerned executives were having very busy schedule because of which they were reluctant to give appointment. 2. Time: The time duration could not provide ample opportunity to study every detail of cash and receivable management of the company. 3. Unawareness: Executives were unaware of many terms related to international banking operations while asking to them.

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4. Confidential Information: As the company on account of confidential report has not disclosed some figures. Moreover, in some cases separate accounts of division are not separately maintained thereby, leading to restrictions in study.

4. Analysis and Interpretation

Treasury (54%)

1.

Interpretation
The AXIS Bank has A net revenue segmentation which is divided into 3 parts i.e. RETAIL BANKING comprising of 23% , CORPORATE BANKING comprising 23% and TREASURY comprising the highest 54% of the part and this integrated Treasury, which covers both domestic and Global markets andfundsthe balance sheet across locations.

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INTERPRETATION: Forex turnover for Axis Bank achieved a rise of 14% in Q4FY2011 to Rs. 128,855 CRORES from Rs. 1, 12,826 CRORES in Q4FY2010. And Forex turnover achieved a rise of 26% in FY11 compared to FY10.

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INTERPRETATION: FOREX trading improved 35% from Rs. 32 CRORES in Q4FY2011 to Rs. 2 CRORES in Q4FY2010. . Profit before Tax (PBT) from Treasury rose 135.75% to Rs. 8.09 billion in FY2011 from Rs. 3.43 billion in FY2011.

COMPETITION
State Bank of India - State Bank of India, a public sector bank, is the largest bank in India. Besides personal and corporate banking, SBI is also involved in NRI (Non Resident Indian) services through its network in India and overseas. Its 11,000 branches and 5,600 automatic teller machines give it a reach throughout the length and breadth of the country; its work force of 200,000 dwarfs all other banks in India.

ICICI Bank ICICI Bank is India's largest private sector bank and second largest overall in terms of assets. Together with its subsidiaries, ICICI Bank offers a complete spectrum of financial services and products ranging from commercial banking to investment banking, mutual fund to insurance. The bank, headquartered in Mumbai, has a network of about 1,400 branches and 4,530 ATMs in India and a presence in 18 countries. ICICI Bank is also the largest issuer of credit cards in India.

Punjab National bank - Punjab National Bank (PNB) is the second largest governmentowned commercial bank in India with about 4,500 branches across 764 cities. This financial institution offers services in personal and corporate banking, including industrial, agricultural, and export finance, as well as international banking. It competes with Axis mostly in retail lending and wholesale businesses.

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HDFC Bank - Housing Development Finance Corporation Limited Bank Limited

or HDFC Bank is one of the largest private banks in India. The company competes with Axis in each segment, over a wide range of banking services covering commercial and investment banking on the wholesale side and transactional/branch banking on the retail side. HDFC's Standard Life Insurance Company competes with ICICI's insurance subsidiaries. Their mutual fund and asset management businesses are also in direct tussle.

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Customer relationship management (CRM)

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5.CUSTOMER RELATIONSHIP MANAGEMENT

(CRM)

CRM is developing into a major element of corporate strategy for many organizations .CRM also known by other terms such as relationship marketing and customer management, is concerned with creation, development and enhancement of individualized customer relationship with carefully targeted customers and customer groups resulting in maximizing their customer life, time value. Industry leaders are now addressing how to transform their approach to customer management. A new form of cross functional marketing, i.e. CRM is replacing narrow functionally based traditional marketing. The traditional approach marketing has been continuously questioned in recent years. This approaches emphasized on the management of the key marketing mix elements such as product, price, promotion ,and place within the functional context of marketing department. The new CRM approach, while recognizing these key elements still need to be addressed reflect the need to create an integrated cross function which focus on marketing- one which emphasis keeping as well as wining customers. Thus the focus is shifting from customer acquisition to customer retention and ensuring the appropriate amount of time, money and managerial resources are directed towards these tasks. The adoption of CRM is being filled by recognition that long term relationship with customers is one of the most important assets of the organization and that informationenabled system must be developed that will give them customer ownership.

Successful ownership will create competitive advantage; will result in improved customer retention and profitability for the company.

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5.1CRM AN OVERVIEW:
Businesses today are continuously looking for ways to achieve competitive advantage. Margins are shrinking, competition is increasing and industries are consolidated. While customer expectation intensify for quality , service and delivery, businesses are reducing staff and the same time searching for ways to arm employees with information to make better decisions and innovate. Customer is the most important asset for the businesses .Consequently applying some management resources to improve the customers experience and maximize the profit, potential of that asset is important. The concept of CRM as a strategy reflects the business process and technology that can be combined to optimize revenue, profitability and customer loyalty. The CRM market is evolving rapidly and is one the fastest growing market segments in application software.CRM has captured the mind share of senior executives across the variety of industries. With rapid growth of e- customer application and increasing need to sell to and support customers through internet , CRM solutions must provide a focal point for all the customers- facing activities across the channels.

What is CRM?
It is a comprehensive approach that provides seamless coordination between sales , customer service, marketing and field support and other customer touching function.CRM integrates people, process and technology to maximize relationship with all customers e- customers, distribution channel and suppliers. It is customer focus business strategy design to optimize the revenue., profitability and customer loyalty .By implementing a CRM strategy, an organization can improve the business process and technology solution around selling and marketing and servicing functions approx. all customer touch-( for e.g.: web ,email ,phone ,fax, in person)

A primary objective of CRM is to provide the entire organization with a complete, 360degree view of the customer, no matter where the information resides or where the customer touch point occurred. Today, many businesses manage different CR with multiple information system, which weaken customer service and ultimate reduce total sales potential. To realize the benefits, it is important to have an integrated solution across all customers information systems, trying together the front and front officer for a complete view of the customers in order to serve them better.

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WHY IS IT NECESSARY?
Many companies are turning to customer relationship management system to better understand customer needs and wants. CRM applications often used in combination with data warehousing e-commerce application and call centre, which allows companies to access information about customer buying history, preferences , complains and other data so they can better anticipate what customer will want . The goal is to instill greater customer loyalty.

Other benefits includes 1- The ability to provide faster response to customer enquiries. 2- Increase efficiency trough automation. 3- Having a deeper knowledge of customer. 4- 4- getting more marketing of cross selling opportunities 5- Identify the most profitable customer 6- Receiving the customer feedback that leads to new and improved product and services. 7- Doing one to one marketing.

WHY NOW?
What makes CRM appropriate for todays environment?
While, there are many no of environmental factors and business advancement that impact and enable the real importance for CRM in todays environment is competitive and differentiation. CRM promises to be competitive and differentiation in todays environment. Organization today is finding it difficult to compete on the basis of product technology advancement has enabled the near immediate application of product features and functions. It is just a matter of weeks between a product launch and saturation of the market. Just think about it, are their many products out there that are purely unique?
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 Price, which has traditionally been another basis of competitive differentiation, is no longer a means for many to compete. Complex channel networks have caused parity pricing. Promotion strategies similarly lessened a means of differentiation .Clubs abound, special offers are the norm, and sales and continual. Place of distribution has likewise become less influential in the successor and failure of business. The internet has created an avenue for even the smallest business to compete.

While all this factors are still important, none of them can alone support the success of most business. CRM the ability to provide a more meaningful sales and service experience promises to be means of differentiating, of providing customer with a reason to frequent your business rather than that of your competitors. Ownership of customer relationship provides exponentially greater rewards than differences in product, price, place, promotion on distribution could ever offer. All of these factors can even be mitigated, if u can serve as the ones top provider that can identify, quantify and service customers need.

5.3 IMPLEMENTING CRM

If CRM involves optimsing product, price, place of distribution, promotion, sales and service, why are so many companies struggling? Has NOT anyone really mastered the art and science of CRM, if not, why is it so difficult?

CRM is difficult because it is an enterprise wide initiative.

CRM is not a technology initiative. Many have confused CRM as a technology initiative. Technology is needed in order to implement CRM, particularly the customization part but technology is not the driver of CRM, or the solution to the successful CRM implementation. CRM is not exclusively a marketing initiative. Many organizations have merely equated CRM with customer- focused marketing, or data driven /data base marketing. CRM requires marketing expertise. But CRM is not strictly a marketing initiative 77

 CRM is not exclusively a service initiative. As with sales and marketing, customer service is one functional aspect of successful CRM implementation. But customer service is not the sole driver of the process. CRM involves marketing, sales, service and technology, as well as the other inner workings of the organization. Thus is it properly described as an enterprise wide initiative. It involves all the areas of organization and all the functions of organization and it requires all areas of the organization to be working together in harmony .CRM requires all areas of the organization to not only exist in harmony, but to be working toward the common goal of stronger relationship.

5.3 IMPOTANCE OF CRM

VALUE OF CRM TO BUSINESS A CRM strategy is designed to increase revenue and profitability by attracting new customers, growing customer business, increasing satisfaction loyalty enabling mere efficient business processes and utilizing lower cost technologies. The primary goal of CRM is higher revenue, not cutting costs. CRM solutions improve sales and marketing efforts and enable organizations to provide superior services to customers. New customers are gained and existing are retained and by more in greater quantity and customers benefits are receiving superior customer services and getting the products and services they want, when they want them. An enterprise that does not have a CRM strategy or CRM applications is at a competitive disadvantage. Before engaging on a mission to implement a CRM strategy, it is critical to determine what the specific objectives are and how to measure the return on investment. There are sobering statistic that over one-half of CRM implementation fails primarily due to lack of consensus on agreed upon and more importantly, measurable goals. While objectives can address specific points of poor performance, they also address supporting the entire customer life cycle.

5.4 CRM in Banking

Banks become customer- centric. The post- liberalized banking sector in India has been witnessing spectacular changes. The major reasons for the recent radical changes in banking
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industrys portfolio are competition, consolidation, information technology and the need to be customer- centric.

Banks should improve the profitability by adopting strategies like market segmentation, innovation, price bundling and relationship. Technology has a major role to play in retail banking, but its role is complementary to customer service initiatives. Due to increased financial market products like commercial papers, and variety of financial instruments, big corporate clientele of several commercial banks have shifted their loyalty, and have been raising resources from the market directly and commercial banks have become more retail customer- centric by offering wide range of services. Banks have identified new customers segments like students, working women and high rich net worth individuals.

CUSTOMER RELATIONSHIP PROFITABILITY

Regulated era have given assured profits to banks, but in the cost deregulation period as margins are falling down substantially, as banks are concentrating on customer relationship. Banking services can be divided into three categories: 1. Core services, 2. Facilitating services 3. Supporting services. Core service is the reason for being in the market. Facilitating services are needed so that the core service can be used and supporting service exactly discriminates the service package from the services of competitors. CRM is the base on which the structure of retail banking will evolve. The cost to develop customer relationship is always higher than the revenue, but when the relationship rose, new demands will appear and then the incremental revenue would be higher than the incremental cost. The cost associated with building up of the relationship is huge. They are advertising costs, price incentives, set up costs for accounts and service costs etc. Customer service delivery is vital for the success of banking operations. This is not possible only through technology. Process consistency within and service channels is paramount. Banks are increasingly making investment in a single type of process rather investing in assets of processes that depend on human resource policies.
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5.5 WHO ARE HNI CUSTOMERS?

They are HIGH NET WORTH INDIVIDUAL Customers.

They are the major targets for private banks.

Banks provide premium class facilities to these clients and try to cater their

special needs related to financial and non- financial in nature. They are high profile customers.
They have income of above Rs. 10 laces p.a. The customer who can at least a very amount in their accounts.

Bank tries to maintain long term relationship with these clients. HNI customers have a relationship manager.

HOW TO APPROACH HNI CUSTOMERS?

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Approaching to prospective is very important for any organization. If banks rightly approach customers then a long term relationship can be expected. Following are the steps how a bank approaches to HNI customers:

1. DATA COLLECTION:
Normally banks maintain their data bank which is collected from various sources like credit cards holders, different account holders primary data, yellow pages, directories.

2-TELE CALLING:
Once a data is collected then the tele-callers call upon to these contacts and make the client aware about various facilities provided by the banks. If the clients show their inclination then an appointment is fixed with these clients and the relationship managers visits the clients.

3-ROLE OF RELATIONSHIP MANAGER:

This appointment is LEAD. This lead is transferred to other relationship manager and client is approached personally. Relationship manager explains the facilities provided and take note to the clients additional needs which can also be fulfilled by their services. If the client is convinced the lead converts in customer form.

4-CORPORATE BANKING:
Relationship manager analyses the requirement of a customer and provide the best suited products. The relationship manager explains the various investment options available in the market and gives the opportunity to select from the options which is suitable to him.

5-PORTFOLIO MANAGEMENT:

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If the customer has invested then the role of the manager is to design his portfolio keeping in mind the risk and return factors. Portfolio manager provide these customers the requisite information about the investment opportunities available in the market according to the profile of the customer.

6-HANDLING ENQUIRIES:
Frequent services and time to time updating of the market circumstances are shared with these customers. The relationship manager with the help of other officers clarifies the doubts and enquiries are handled with a special care.

DIAGRAM
HNI CUSTOMERS

GEMS & JEWELLARY INDUSTRY S

BUILDERS SUSPECT

LOCAL BUSINESSMAN

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PROSPECT S

FIRST TIME CUSTOMERS

5.6 What is electronic customer relationship (ECRM?)

Superior customer service is a critical differentiator in an increasingly competitively marketplace. Companies that give customer what they want it will increase customer

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satisfaction and ultimately gain greater market share, generating more revenue and enjoying higher profitability.

ECRM is a practice that encompasses all marketing activities directed toward establishing, developing and maintaining successful customer relationship. The focus of relationship marketing is on developing long-term relationships and improving corporate performance through customer loyalty and customer retention.

With the advent of the internet the dynamics of business have changed forever. Traditional business influences differentiators such as location; convenience and switching cost have become much less relevant. For businesses and organizations around the world, from banks and mortgage companies to manufactures, universities and service companies the playing field has been quickly and radically leveled.

In the new business environment, one of the only ways left to differentiate your organization from the competition is the quality of your customer service. Superior customer service gives customer real reasons for doing businesses with companies. Thats why industry analyst agree that inter based customer service is one of the biggest and most crucial opportunities available on web today. ECRM can be seen as a means of gaining competitive advantage, especially through the acquisition of intangible assets, such as knowledge, commitment and trust.Threfore, from a relationship marketing standpoint, particular importance is placed on achieving the goals of generating and increasing intangible resources.

Communications, transaction activities, information research are all parts of traditional marketing, but can marketers improve or streamline these traditional marketing processes? If we look toward and apply some of the ubiquitous electronic communications facilities, such as e-mail, online discussion groups and the World Wide Web readily at hand, and investigate some of the more esoteric electronic marketing resources, these processes can be improved or streamlined .With these tools you can better research your products or services industry, better research environmental trends ,better target your markets, maintain better knowledge of and communications with your
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current and prospective customers, and receive almost instantaneous feedback on new products and services.

Why employ ECRM?

Companies need to take firm initiatives on the ECRM frontier to Optimize the value of interactive relationship Enable the business to extend its personalized reach Company-ordinate marketing activities across all customer channels. Leverage customer information for more effective e-marketing and e-business Focus the business on improving customer relationship and earning a greater share of each customers business through consistent measurement, assessment and actionable customer strategies. The six Es of ECRM 1. Electronic channels 2. Enterprise 3. Empowerment 4. Economics 5. Evaluation 6. External Information

5.7

BENEFITS OF E-CRM E-CRM

E-CRM BENEFITS TO BANKS

E-CRM BENEFITS TO CUSTOMERS

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1. Relationship with the customers 2. Using e-mails for business communication 3. Personalized services 4. Websites to market product/services 5. Transaction security

1. Customer interaction & satisfaction 2. Convenience 3. Speed of processing transaction through e-response 4. Service quality & trust

6. REVIEW OF LITERATURE:
Previous studies have identified the benefits that customer satisfaction delivers to an organization. The longer customer stays with an organization the more profitability the organization generates (Reichheld & Sasser, 1990). In business where the underlined products have become commodity- like quality of service depends heavenly on the quality of its personnel. This is well documented in the study by LEEDS (1992), WHO DOCUMENTED that approximately 40% of customers switched banks because of what they considered to be poor service. LEEDS further agreed that nearly three- quarters of the banking customers mentioned teller courtesy as a prime consideration in choosing a bank. The study also showed that increased use of service quality/ sales and personal behavior (such as formal greetings) improve customer satisfaction and reduced customer attrition. REICHHELD (1996) suggests that satisfied customers may choose not to defect, because they dont not expert to receive better service anywhere else. Additionally, unsatisfied customers may look for other providers because they believe they might receive better services elsewhere. However, keeping customers is also depending on number of other factors. FORNELL(1992),in his study of Swedish customers , notes that although customer satisfaction and quality appear to be important for all firms , satisfaction is more important for loyalty in industries such as banks , insurance, mail- order and automobiles. IOANNA (2002) further proposed that service quality is an important element impacting customer satisfaction level in banking sector. To compete successfully in todays competitive market place, banks must focus on understanding the needs, attitudes, and satisfaction and behavior patterns of the market (KAYNAK AND KCKEMIROGL, 1992). Consumers evaluate a number of criteria when choosing a bank.

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KCKEMIROGL, 1992 study of the Hong Kong banking market discovered that customer choose their banks because of the convenience, long association, recommendation of friends and relatives, and accessibility to credit.

SCOPE AND OBJECTIVES

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7. SCOPE OF THE PROJECT:

THE scope of the project was quite wide because in this project an attempt was made to analyze of customer relationship management in AXIS BANK, therefore CRM is the heart of every business success. With CRM, we will easily understand customer requirement, needs effectively and predict market trends and conditions. A CRM program will allow a business to make new customers, service the customers, increase the value of customers to the company, retain good customers, and determine which customers can be retained to given a higher level of service and turning them into loyal customers and ultimately increasing the profit for banks. The customer satisfaction is also known why they preferred AXIS BANK and factor influencing their satisfaction level. As customer is very important for the banks and also they contribute profitability for them but it is not necessary that every customer generate revenue for the banks; hence the scope of the project is to identify the non- profitable customers and converting them profitable customers. Therefore, customer satisfaction is very necessary as when the customer delighted he switch to more product and services thus we can see that the scope of this research is very wide and comprehensive.

7.1 STATEMENT OF PROBLEM: WHAT is the effectiveness of CRM in development of customer satisfaction?

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The objective of the study is to identify how a customer is profitable to AXIS BANK and to enhance the profitability of the HNI customers.

7.2 OBJECTIVES OF THE STUDY

ASCERTAINING the behavior and perception of the existing customers

towards product and services in banking.

Study the value of existing customers and reduce cost associated with

servicing them and ways to increase the overall efficiency of bank performance.
Identifying the most profitable and least profitable customers for the bank.

To identify and study the various ways of ensuring customer satisfaction adopted by AXIS BANK. Receiving customer feedback.

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RESE ARCH METHODOLOGY

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8. Research methodology:
The research methodology used for the study is very rigorous. Questionnaire is made, interviews with customers are held and various books and websites are consulted for various types of information related to study. The methodology so applied is briefly discussed below step by step. Therefore, marketing research can be defined as the systematic design, collection, analysis, and reporting of the data and finding relevant to a specific marketing situation facing the bank.

8.1RESEARCH DESIGN
It is the basic plan which guides the researchers in the collection and analysis of data required for practicing the research product. In fact the research is the conceptual structure with which research is conducted. It consist the blue print for the collection, measurement and analysis of the data i.e. followed completing the study to ensure that study is relevant to the problem and will follow the pre-determine and set data.

8.2TYPE OF RESEARCH DESIGN

DESCRIPTIVE RESEARCHIt provides data about the population or universe being studied. it is used when we are interested in knowing the characteristics of certain groups such as age, sex, educational level, etc. but it can only describe the who, what , when , where and how of a situation , not what caused it. It is used when the objective is to provide a systematic description i.e. as factual and accurate as possible.

TEST OF HYPOTHESIS:
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The following hypothesis is made in the study: The customer gives the equal importance to all the attributes related to initial experience, service delivery experience, service experience, relationship experience and grievance handling in determining satisfaction level. The private sector banks are able to bring greater satisfaction to customer than public sector banks.

DATA COLLECTION TECHNIQUES

PRIMARY SOURCE
The data required for this stage is regarding the customer relationship and behavior and perception of the existing customers towards the products/services provided by the bank and also, to get their satisfaction level toward bank. The data could have been by collected by just interviewing the customers but to get a reasonable conclusion and fair accuracy, questionnaire is prepared and customers are interviewed. Some customers were very co-operative but some did not care to even listen. Overall the study is a success as far as primary source is concerned.

SECONDARY SOURCE
The secondary data is collected with the help of various books, bank journals, websites and staff of the bank. The data collected from the website and books are enough to be included in the study to analysis and concluded but the data collected from the staff members of the bank accurate and reliable. The secondary doesnt provide any personal views of the customers on the technological advancement but provides a great help in completing the report and getting the details about the bank history, products and services etc.

8.3SAMPLE DESCRIPTION
SAMPLE METHODRandom sampling was chosen as the sample selection procedure.

SAMPLE UNIVERSE92

My sample universe for research IS the HNI customer of AXIS BANK of PANIPAT CITY.

SAMPLE UNITThe respondents who are asked to fill out the questionnaire are the sampling unit. These comprise of govt. employees, self employed, housewives etc.

SAMPLE FRAME
The sample frame of this project is existing customers of AXIS BANK.

SAMPLE SIZEThe sample size is taken to be of 100 HNI customers and asked them to fill the questionnaire.

RANDOM SAMPLINGIt is the best sample procedure as individual customer in the bank is chosen and requested to take out certain time for an interview and filling of the questionnaire. A sample size of 100 HNI customers in taken randomly so that the conclusion is not biased and great care is taken while getting the questionnaire filled, so that the customer doesnt misunderstand the question and check the option that is applicable

ON THE WHOLE, such methodology is adopted that will give accurate result and the
study be a success.

8.4LIMITATIONS OF THE STUDY:

During the project following limitations are known:-

The area was large and it is not possible to deal with each and every customer. Time was the major constraint as, I have only 6 weeks and the area is very vast even though, I have put up the best of my efforts to cover all the areas given to me. Many of the customers were not co-operative.

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 As AXIS bank is a big brand, many times the answers of the respondents may be affected by his of good and bad experience about some other product. Geographical area is one of the constraints, as the study is limited only to the AXIS bank of Panipat branch. SOME of the customer shows biasness and give wrong information.

9. DATA INTERPRETATION AND ANALYSIS

1.

INTERPRETATION As Axis Bank was established in 1994, 8% customers are having accounts for more than 10 years with the bank and 45% of customers are having A/c with the bank for 3 to 5 years. The customers having A/c for 6 to 10 years are 15% only and having less than Account for 2 years are only 32% only as table 1 shows. As customers are very important for each and every industry so they are given important care of. In Axis bank also due consideration is given to their clients by the staff members regarding their management of accounts. According to the responses of the customers, the staff of the Axis Bank handles their A/c efficiently. 56% of the customers are thoroughly satisfied with way of handling their accounts and 7% of them are dissatisfied. And 1% of the customers have no experience; customers who are very satisfied are only 21%. 94

When Axis Bank commits any mistakes, it apologizes also for that as 40% customers are very satisfied for that. Customers having no experience are 4% and 37% customers are satisfied with that the bank apologizes for their mistakes. Only 19% of the customers are dissatisfied with them. The staff of Axis Bank whether perform their task well i.e. explain the charges clearly. It has been clearly find out with the help of the responses of the customers that 95% of the customers are satisfied with them (55% are very satisfied and 40% are satisfied). Customers who are dissatisfied with the Axis bank are only 5%.

2.

INTERPRETATION 2: Whether enquiries are carefully and efficiently handled by the staff of Axis Bank, in regard to this customers respond that 76% of customers are satisfied that appropriate time is given to the customers while handling the enquiries and also the voice of the staff member is also clear and answers the call kindly. Customers are also agree that it is very easy to approach the staff members and they also solve their queries quickly.23% of the customers are 95

dissatisfied with handling enquiries from the staff of the bank like less time is taken by staff members to answer the phone calls, non-clearness of the voice, not meeting of the staff members and delay in enquiry resolvance etc. .And 1% of the customers have no experience with these enquiries. After asking the respondents that when you call the Axis Bank, most of the responses are related to the last month i.e. regular phone calls is being done. In also for the letters enquiries, 76% of customers are thoroughly satisfied and 13% of the customers are dissatisfied and 1% has no experience. Banks whether commits mistakes or not, or whether the customers have made complaint about the mistakes, after asking this from the customers the responses are like 37%of the customers respond that mistake does not happen with their accounts and 63% of customers respond that they have complained about the mistakes i.e. mistake regarding account, instructions not carried out, misspell of the name or address on letters or unhelpful staff etc. After complaining about the mistakes, the mistakes were thoroughly handled by the experienced staff of Axis Bank. 75% of the customers are fully satisfied that their complaints are resolved efficiently and proper time is taken by the staff to sort out the complaint and 25% of them are dissatisfied.

3.

INTERPRETATION 3:

The staff members of the Axis Bank are fully efficient according to the feedback of the customers. 75% of the customers are fully satisfied with the services provided by the staff members. i.e. they have full potential and ability to give good advice and provide 100% attention to the customers, also have a pleasing behaviour in assisting their clients and these people are very smart and professionals. And 15% of customers are dissatisfied with the staff members of the bank

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4.

INTERPRETATION 4:
Regarding the satisfaction of the customers with the Axis Bank branch, 83% of them are satisfied with the performance of the branch in Panipat city (57% are satisfied and 26% are fully satisfied) i.e. fully privacy is given to their accounts, cleanliness of the branch, free flow of information are passed among the staff, efficient performance by the cashiers in carrying transactions and also the ATM machine perform well, cleanliness is there and provides readable printouts. 16% customers are dissatisfied (13% are dissatisfied and 3% are fully dissatisfied) with the performance of branch and 1% have no experience.

5.

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INTERPRETATION 5:
After getting satisfaction from the Axis bank, 94% of the existing customers also recommend their friends or relatives to open the A/c in this bank or to buy the product/ service and 6% of them does not recommend about this. 88 % of the customers buy another product from the bank like credit card, mutual funds etc. with the opening of the bank A/c. And 12% of them dont buy the product from the bank.

6.

INTERPRETATION 6:
With time to time the profitability of the bank rises as well the savings of the customers. After asking the respondents about the services of Axis Bank regarding previous year, the customers who experienced better services of the bank are 77% and 2% of the customers have worst experience. And 21% of the customers have experienced the same services i.e. no change in the bank services regarding previous years.

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10.FINDINGS
FINDINGS: ALL the private and public sector banks are recognizing the importance of relationship management in their growth and customer retention. The officials try to make best relation with the banks. The staff member gives regular updates to the customers and provides information of the product and the services. The registers and files are systematically maintained on a daily basis and in an organized manner. Most of the respondents are having more than 2 accounts and holds more than 2 products with AXIS BANK. BANK has shown better utilization of cash balance of customer by cross selling other products. 7-according to the feedback it is observed that bank is in need to increase their branches in Panipat city as well as to pay concern to increase their ATM networks.
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 With the help of the research it has been found that most of the customer

prefer brand name and service facilities and some of them is influenced by some existing customers. Greater retention of customer is being needed as they are offering various products and services .This enables a great understanding of what customer may expect from the bank and what to offer to them. This leads to defining where each customer is in relationship with the bank so that cross selling can be done.

45% of the customers are having account for 3-5 years and they are satisfied

with the way their accounts are managed.42% of customers is satisfied with the way their enquiries are handled through phones and letters. The staff of the axis bank is fully efficient according to the customers responses and they quickly sought out their grievances and mistakes. According to the customers feedback, the bank has improved its services and also the overall the satisfaction of the customers has also improved. AXIS BANK is efficiently maintaining its international banking operations as the FOREX turnover has increased by 26% in FY11 from FY10 .and FOREX trading has also increased by 43% in FY11 from FY11.

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10.1CONCLUSION:

INTERPRETATION:
FROM above diagram we can interpret ,that over the years the cusomer are more satisfied with the overall performance of the AXIS bank , as according to the 85% of respodents the services of the bank has got more better than before .They are more satisfied with the staff,branch,after-sale services,opening of accounts,products and services given by all department (INCLUDING FOREX) OF AXIS BANK to customers. According to the interpretations, AXIS BANK is working efficently in every field whether it is maintaining FOREX DEPARTMENT or satisfying their HNI customers.
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So we can conclude:
AXIS bank has a strong brand name in the Panipat city. The people of Panipat city are good in investment part and most of them go for FDS AND LIs rather investing in mutual fund products. Thus there is need to convert the people in mutual funds and credit cards for increasing the profitability of bank. AXIS bank sought profitable customer and generated profits from them and taken steps by converting the non- profitable customer to profitable customers. Customer can be pulled into profitability area when the customer is satisfied with the product and services which he or she is using. Customer satisfaction plays an important role as customers are satisfied and retained in the bank by which they will look for some other product also. At this state, relationship manager is very important who will serve the customers in best way and suggest the customers which products should they use with reference to their needs. Banks must maintain mutual relationship between the relationship manager and customer. ECRM, lead to better understanding of all aspect of customer behavior regarding issues and benefit offered by bank and helps to differentiate it-self from others.

The project was full of learning and experiments and provides me with a great knowledge about banking sector. I came to know about the export and import formality that a company has to perform when it export and import the goods. Through this I came to know about the operations and activities performed by axis bank and the kind of products and services provided by Axis Bank. It was a great opportunity to learn about corporate culture and etiquettes. I have interacted with a lot of people personally during these 6 weeks .study of company profile was done before starting the project which helps me a

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lot while interacting with people. During the course of time, I tried to get all the objectives of the project to be fulfilled

11. Suggestions and Recommendations

Continuous interaction with customer in necessary in order to continue with relationship building activities for long term perspective. The bank should come up with more branches in other location in Panipat city.
The banks should open ATM network. To increase the no of customers so AXIS bank should also offer some

products for small business like zero balance savings.

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 It is seen that some of the customers are not aware of product and services offered by axis bank .so it should pay attention on advertising. More number of training and educational programs should be included in Banks schedule.
Developing a learning culture through continuous learning process.

Net profit margin of the bank is quite low so the bank has to take necessary steps to improve it performance.

12. SWOT ANALYSIS

STRENGTH
1 Right strategy for the right products. 2 Extremely Competitive And Profitable Banking Franchise. 3 Superior customer services vs. competitors 4 Banking Services Include Corporate Credit, Retail Banking, Business Banking, Capital Markets, Treasury And International Banking. 5 Sound Technological Platform With Centralized Database And Operations
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6 7 8 9

Retail Savings Bank Deposits Grew. Corporate Banking: Current Account deposits grew by 24% Support of various Promoters. Dedicated workforce aiming at making a long-term career in the field.

2. WEAKNESS
1

2 3 4

Not having Image UTI (fraud) Higher cost Customer service Market Capitalization Very Low.

3. OPPORTUNITY
1 2 3 4 5 Large retail and corporate market Wide scope in rural India Other Activity (Non Banking Activity) People are become more service oriented New specialist applications

4. THREAT
1 Legislation could impact 2 Other better saving, investment option available (like Insurance, Mutulfund, Realestate, Gold) 3 Government Rules And Regulation 4 Very high competition with Private sector (ICICI Bank, HDFC bank) or public sector (BOB, PNB) Bank. 5 Capital Market slow-down 6 Rising Rates 7 Future Market Trends 8 Vulnerable to reactive attack by major competitors.

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13. BIBLIOGRAPHY
1. Books:

1. Research Methodology by; C. R. Kothari new age international publications 2. Tulsain p.c(2007), financial statement, financial accounting, Tata McGraw hill,2nd ed., pp.9.1-9.15

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3. Professor J. Jay Choi (2006) Emerging European Financial Markets: Independence and Integration Post-Enlargement (International Finance Review, Volume 6), Emerald Group Publishing Limited, pp.501-508 Franco Parisi, Carlos Maquieira, Antonino Parisi (2005), BANKRUPTCY IN BANKS FROM ECUADOR: SOLVENCY VERSUS PANIC THEORIES, in Professor J. Jay Choi (ed.) Latin American Financial Markets: Developments in Financial Innovations (International Finance Review, Volume 5), Emerald Group Publishing Limited, pp.231

4.

2.Websites:
1. www.google.com 2.

www.wikipidia.com

3. www.money.rediff.com 4. www.investorwords.co 5. www.axisbank.com 6. www.RBI.org.in

3.Journals:

1. Ricardo Baba, Hanudin Amin, (2009) "Offshore bankers' perception on Islamic banking niche for Labuan: an analysis", International Journal of Commerce and Management, Vol. 19 Iss: 4, pp.293 308

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2. Chu-Mei Liu, (2001) "An assessment of banking operation strategies of private banking institutions in the Philippines", Asia Pacific Journal of Marketing and Logistics, Vol. 13 Iss: 1, pp.57 71 3. Daniel Singer, Albert Avery, Babu Baradwaj, (2008) "Management innovation and cultural adaptivity in international online banking", Management Research News, Vol. 31 Iss: 4, pp.258 272 4. Pooja Malhotra, Balwinder Singh, (2010) "An analysis of Internet banking offerings and its determinants in India", Internet Research, Vol. 20 Iss: 1, pp.87 106 5. Philip Gerrard, J. Barton Cunningham, (2003) "The diffusion of Internet banking among Singapore consumers", International Journal of Bank Marketing, Vol. 21 Iss: 1, pp.16 28.

6. Wai-Ching Poon, (2007) "Users' adoption of e-banking services: the Malaysian perspective", Journal of Business & Industrial Marketing, Vol. 23 Iss: 1, pp.59 69 7. M. Mansoor Khan, M. Ishaq Bhatti, (2008) "Development in Islamic banking: a financial risk-allocation approach", Journal of Risk Finance, The, Vol. 9 Iss: 1, pp.40 51. 8. Michel Rod, Nicholas J. Ashill, Jinyi Shao, Janet Carruthers, (2009) "An examination of the relationship between service quality dimensions, overall internet banking service quality and customer satisfaction: A New Zealand study", Marketing Intelligence & Planning, Vol. 27 Iss: 1, pp.103 126. 9. Pooja Malhotra, Balwinder Singh, (2007) "Determinants of Internet banking adoption by banks in India", Internet Research, Vol. 17 Iss: 3, pp.323 339

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14. ANNEXURE

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CUSTOMER NAME

ACCOUNTS NUMBER

MOBILE NO:

PERMANENT ADDRESs:

Q1-Please indicate how long you have had an account with this bank?
1-2years: 3-5years 6-10years 10+years

Managing your account

Q2-How satisfied are you with the way we:
Very satisfied Handle your account efficiently, without Mistakes? Apologize for mistakes? Explain charges clearly? satisfied dissatisfied very dissatisfied no experience

Handling enquiries
Q3-How satisfied are you with:
Very satisfied The time taken by members of staff to answer the telephone? How quickly your enquiry was understood and responded to? satisfied dissatisfied very dissatisfied no experience

Q4-How satisfied are you with:

Very satisfied Time taken by us to respond to your letters? satisfied dissatisfied very dissatisfied no experience

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Very satisfied How clearly our letters answer your enquiry?

satisfied dissatisfied very dissatisfied no experience

Q5-Have you experienced any of the following issues in the last 6 months?
NOT Happened A mistake on your account? Instructions not carried out? Unhelpful staff Complained about

Q6-If you have complained, please tell us how satisfied you were with:
Very satisfied The way your complaint were handled? Time taken to sort out your complaint? satisfied dissatisfied very dissatisfied

Staff
Q7-How satisfied are you that we have staff who are:
Very satisfied Knowledgeable, Smart and professional? Able to give good advice and 100% ATTENTION? satisfie d dissatisfied very dissatisfied no experience

About the branch

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Q8-How satisfied are you with:

Very satisfied The level of privacy and cleanliness we offer in the branch? How often and for how long you have to queue? How quickly our cashiers carry out your instructions? satisfied dissatisfied very dissatisfied no experience

Q9-How satisfied are you with the branch cash machines:

Very satisfied Being open, clean and tidy? Providing readable printouts? satisfied Dissatisfied very dissatisfied no experience

General
Q10-How likely are you to:
very likely Recommend this bank to a friend or Relative or customer of this bank? Buy another product or service from this bank? likely unlikely very unlikely

Q11-Overall, how satisfied are you with the service you receive?
Very satisfied Satisfied Dissatisfied Very dissatisfied stayed the same Got the worse

Q12-Over the last year has our service:

Got better

THANKYOU FOR TAKING THE TIME TO FILL IN THIS SURVEY

CASE STUDY:
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Today, banks are facing an aggressive competition and they have to make efforts to survive in a competitive and uncertain market place. Banks have realized that managing customer relationships is a very important factor for their success. Customer relationship management (CRM) is a strategy that can help them to build long-lasting relationships with their customers and increase their prots through the right management system and the application of customer-focused strategies. CRM in the banking sector is of strategic importance. In this study, a single descriptive case study of one major Greek bank that has implemented CRM is presented. The aim of this study is to analyze the design and implementation of CRM in the bank, identify the benets, the problems, as well as the success and failure factors of the implementation and develop a better understanding of CRM impact on banking competitiveness as well as provide a greater understanding of what constitutes good CRM practices.

INTRODUCTION: Banking has traditionally operated in a relatively stable environment for decades. However, today, the industry is facing an aggressive competition and banks have lost a substantial proportion of their domestic business to essentially non-bank competition. Fighting competition is vital for the protability and ultimate survival of banks. Customer relationship management (CRM) has been adopted by many organizations in recent years because of their effort to become more customer focused to face the increasing competition. Many companies highlighted that they have applied CRM methods and experienced success. CRM is a growing trend in banks today and billions have already been spent on CRM systems. According to Raffaella Molignani, research analyst for the European IT Opportunity Financial Services research program, CRM is still at the top of banking priorities. In this study, a single descriptive case study of one major Greek bank that has implemented CRM is presented. The aim of this study is to analyze the design and implementation of CRM in the bank in real-life settings. It presents the benets, the problems as well as the success and failure factors of the implementation and develops a better understanding of CRM impact on banking competitiveness and provides a greater understanding of what constitutes good CRM practices. The empirical data are used to identify similarities and disparities with the existing literature to assess whether practitioners have a well-developed comprehension of CRM and whether they could be translated into a set of good CRM practices, beyond the specic context of nancial services.

WHAT IS CRM?
CRM evolves from business processes such as relationship marketing and the increased emphasis on improved customer retention through the effective management of customer
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relationships. One view of CRM is the utilization of customer-related information or knowledge to deliver relevant products or services to customers. Another view of CRM is that it is technologically orientated. Advances in database technologies such as data warehousing and data mining are crucial to the functionality and effectiveness of CRM systems. A study conducted in a UK-based manufacturing company demonstrates that in reality CRM is a complex combination of business and technological factors. In addition, CRM is considered a holistic process of acquiring, retaining and growing customers. Thus, CRM is not simply some applications or software but the philosophy, the way a company works so as to build long-lasting relationships with its customers. CRM is a comprehensive strategy and the process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer.

BENEFITS OF CRM:
CRM permits businesses to leverage information from their databases to achieve customer retention and to cross-sell new products and services to existing customers. Companies that implement CRM make better relationships with their customers, achieve loyal customers and a substantial payback, increased revenue and reduced cost. CRM when successfully deployed can have a dramatic effect on bottom-line performance. For example, Lowes Home Improvement Warehouse, in a span of 18 months, achieved a 265 per cent return on investment (ROI) on its $ 11m CRM investment. According to a study conducted in the sector of banking, convenience of location, price, recommendations from others and advertising are not important selection criteria for banks. From customers point of view, important criteria are: account and transaction accuracy and carefulness, efficiency in correcting mistakes and friendliness and helpfulness of personnel. Thus, CRM, high-quality attributes of the product / service and differentiation proved to be the most important factors for customers. Another study conducted in a European bank shows that with CRM, the bank was able to focus on protable clients through efficient segmentation according to individual behavior. Information about who buys what and how much enabled the bank to have a commercial approach based on the client and not solely on the product. Thus, the bank was able to better satisfy and retain its customers.

Success and failure factors of CRM implementation

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CRM should be placed at the heart of the organization and a holistic approach should be adopted because CRM reaches into many parts of the business. Thus, CRM should be beyond a front-office contact management system. Another issue is that of sourcing, since many organizations have few alternatives but to outsource a signicant proportion of their CRM solution as they lack the resources to develop CRM software. Managers have a basic understanding of CRM and the IT department has little time to research CRM or to develop software solutions. Thus, in many cases, external consultants should be used to acquire knowledge of CRM. In addition, best-practice examples, that is, the practical guidelines on how to design and implement CRM successfully are few within an industry. In CRM implementation, a vision or strategic direction for the project is highly important because else the project may fail. Furthermore, CRM involves business process change to align with the system. Another major problem is the selection of the appropriate project team. The integration of CRM systems is also essential, as well as the selection of a suitable .CRM software package, which is able to integrate with many other enterprise applications. Customers should not have to deal with the complexity of the companies and CRM should make things easier for them. Other success factors of CRM are: Process t, that is, the CRM system must be designed around an elaborate understanding of a CRM process so as to leverage the marketing and sales effort.Customer information quality that is, making effective use of customer information resources. System support, because only if the system has been implemented and adopted successfully, a rm is able to reap its benets. Another important factor is culture, because employees should accept the changes and be prepared for what the implementation of CRM will bring.

RESEARCH METHODOLOGY Case-study approach Taking into consideration that CRM is recently introduced in marketing, that there is yet little consensus as to what it constitutes and that there are so far no accepted CRM constructs or guiding principles yet established, it is difficult to begin with a theory or a set of hypotheses. Thus, to gain an initial understanding of CRM practices, it was decided to focus on a single Greek bank. Therefore, the case-study method is employed, since its fundamental characteristic is the focus on a particular setting or event.

SAMPLING METHOD

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Purposeful sampling is the most appropriate for the case study approach, because information-rich cases can be selected so as to learn much about the issues that are important to the study. Two types of purposeful sampling were used in combination: snowballs sampling and Maximum variation sampling. Snowball sampling relies on people identifying others to investigate. Thus, a gatekeeper was used to bring the researcher in contact with other participants in the bank. The maximum variation sampling was needed because it allows picking cases purposefully and illustrating a wide range of variation on dimensions of interest. Thus, the interviewees came from different departments in the bank. The director of the phone banking department was used as the gatekeeper and he suggested seven more people in the bank to be interviewed from different departments. In particular, eight in-depth interviews were conducted with the directors of the departments: phone banking, credit cards, customer relationships, strategic analysis and CRM, information technologies, marketing, human resources management and direct banking. DATA COLLECTION METHODS Several authors have suggested that it might be useful to gather data from multiple sources when conducting qualitative research. This phenomenon is called triangulation and is essential when undertaking a case study. In this study, three methods were employed to collect the appropriate data. In particular, eight in-depth interviews were conducted with the banks executives and secondary data concerning general information about the banks operations and organizational structure were gathered through press articles, the bank s leaets, newsletters and monthly reports and the bank s Web page. In-depth interviews are considered to be the most valuable data collection method, given that the aim was to investigate the underlying meaning of complex phenomena and processes. The in-depth interviews were based on a questionnaire that was developed around a list of topics regarding CRM. However, despite the fact that the focus was on issues central to the research questions, the type of questioning and discussion allowed for greater exibility. The questions were broad, to allow respondents as much freedom in their answers as possible and an effort was made to avoid leading questions and create an interpersonal and communicative climate with all the respondents. The summation of the responses was based on the content analysis method.

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Qualitative content analysis was applied and the material from the interviews was divided into content analytical units. Thus, the results were carefully put into categories according to the points of interest of this research (implementation, benets, and success and failure factors) and the strong points were presented.

CRM APPLICATION IN THE BANK

UNDER STUDY GENERAL INFORMATION The bank was established in July 1991 in Thessaloniki by a group of famous Greek entrepreneurs. The vision of its founders was to create a modern and exible bank, which would satisfy all the needs of its customers and would gain a signicant share of the Greek banking market. Today, the group has a network of 64 branches, four bank centers and seven affiliates. The bank having as competitive advantages its well-trained employees and its modern technological infrastructure offers a signicant range of innovative products and services and satises even the most specialized customer needs. The bank is customer focused and by applying modern management methods it has signicantly developed its nancial results, and it has established its presence through the long-term relationship it develops with customers. The revenues of the bank arrived at S192m in 2003 and its prots (PBT) at S29.6m. The bank is considered as innovative, using modern technology to create innovative products. Its strategy is focused on the following: continue to develop and increase its nancial results, establish collaborations for its affiliates, upgrade its personnel, and offer better services to its customers so that they feel the bank as their own, participate or establish real estate companies and investments portfolio.

THE SITUATION BEFORE CRM IMPLEMENTATION

In 2002, the bank had a small customer service department with only 15 employees not well trained. The waiting time to contact the phone centre (call centre) of the bank was long about 20 min, and the only information the customer could get was an account balance. Thus, the bank also faced the problem of long queues in its branches and dissatised customers who
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were obliged to come to the branches for their transactions. The percentage of dissatised customers was high and there were many resignations of employees in the customer service department. The cost of service was high. The duration of employee training was long (more than 2 months) and expensive. The working hours of customer service were few (9 a.m. to 5 p.m. from Monday to Friday). Thus, the bank recognized the need to improve the level of its services by implementing modern technology to differentiate and become an innovative bank. The bank was also suffering from high operational costs that reduced its prots. To solve the problem, the bank could hire more employees for the call centre, but this would increase its operational costs and reduce its prots. The implementation of a modern and exible call centre, with relatively low cost and the possibility to integrate new applications, would improve and strengthen the relationship with customers by offering them an alternative way of service apart from the branches and would increase the bank s productivity in all areas. As the phone banking manager stated: Before CRM, the services offered by the call centre concerned only the account balances, now we can serve our customers with various banking stock exchange and transactions as well as loans .

THE IMPLEMENTATION OF CRM

For the new call centre, a CRM solution offering a unique platform was preferred so as to have the possibility to integrate all the existing applications and databases. The discussions between the bank, CRM vendor and a consultancy company experienced in CRM implementation, started in May 2004. In July 2004, the consultancy company conducted interviews with executives of the bank and prepared a draft study, which was sent to the central offices of the bank for review and a week later the nal study was ready. The CRM project began in January 2004 and in October of the same year it was completely implemented.

THE BENFITS OF CRM

The bank had a lot of benets from the implementation of CRM: it reduced costs (one supplier with a long-term relationship), decreased complexity (a common platform for all the bank decreased the need for integration, offered one contact point and decreased the need for technical support) and improved operations (increased employees capabilities, decreased the problems of maintenance and support because of the unique platform).
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The integration of voice banking in CRM helped the bank to come closer to its customers and offer phone banking services (stock exchange transactions, loans, etc.). In addition, the bank did not have to hire additional personnel for its new call centre to satisfy the increasing incoming calls. Many operations were transferred from the branches to the call centre and the banks operational costs decreased (the cost of an employee in the call centre is half the cost of an employee in the branches). The branches now have the opportunity to deal with specialized products and with customer relationships. As a result of this re-organization, the bank increased its accounts per 5 per cent and reassured the value of the investment.

1. THE TECHNOLOGICAL BENEFITS OF THE BANK

The adoption of the CRM solution resulted in: an integrated platform for all the applications of the bank; easier architecture as far as the maintenance and the supporting operations are concerned (fewer components, higher responsibility, limited data management); a platform able to support future new applications (personnel, portal, platform outbound, etc.) and a platform costing less than those of competitors. The easier architecture is due to the decreased needs for integration and the low cost of maintenance and support for one platform. The cost is also reduced because the supplier undertakes a high degree of responsibility for the platform. There is also lower demand for specialized issues; however, in the case of multiple technologies, specialized personnel or consultancy services would be required. With the unique platform, the bank can offer a simple and integrated solution, which gathers together all the applications. The benets of the platform are: a decreased need for data management, because data are taken from the central system; up-to-date information and phone calls appearing on the screen of the employee to improve performance and high degree of coordination and services; all the networks are synchronized (telephone centre, IVR, branch ATM); the employees of the call center are better equipped for servicing customers and receive information to develop the level of service offered to customers; decrease training period, etc. As the IT Manager stated: the unique and integrated platform consists of the call center, G / L, stock exchange services, risk management services etc. Competition is far behind in many of these.

2. THE CORPORATE BENEFITS OF THE BANK

The banks investment in the new phone banking system reduced the cost of services by transferring some of the operations from the branches to the new call centre and transferred at least 70 employees from other activities to sales aiming at increasing the banks revenues.
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As the direct banking manager stated: CRM solution gave us the possibility to transfer more than 70 employees from other operations to sales, strengthening in this way the possibility for a further increase of the bank s nancial indices. CRM solution gave the bank a higher degree of effectiveness and performance and increased the level of service and response time. Waiting time decreased from about 20 min to less than 2 min, although the volume of telephone calls increased about 40 per cent. Despite the increase in the provision of services (banking, stock exchange transactions, loans, etc.), the conversation time decreased per 50 per cent due to the new call centre. With CRM, the bank is able to provide services 24h a day, 7 days a week with a success percentage of 92 per cent. More than 75 per cent of phone calls are done through the agents of the call centre and the rest through IVR and the voice banking system. The bank is now able to manage the increasing demand more effectively without hiring other seven employees who would be needed with its old system. In addition, CRM raised the capital value of the bank by means of: coordination between the departments of Marketing and Operations; the prospects for new marketing channels with Telesales; the possibility of promoting the increased service level as a differentiation from competitors and the emphasis given to customers instead of sales. As the Marketing Manager stated: Now with the various networks the emphasis is given to customers, face to face, before CRM everything was based on mass marketing per product The marketing campaign of the Bank changed after the implementation of CRM it is more focused and more powerful.

FUTURE OPPORTUNITIES
The successful application of CRM is expected to create revenues S10 + m in ve years. The areas that are expected to generate future value for the bank are:
CUSTOMER SEGMENTATION: The detailed information the bank has about its customers (characteristics, needs, habits, etc.) allows the bank to focus on the increase of sales, cross-selling, etc. DISTANCE SALES / OUTBOUND: The bank can change its call centre from a customer service point into a point of revenue creation. After rush hours, the bank can change the call centre into a sales point, to increase its revenues.

DELAYS: The bank is planning to integrate delays operations in CRM system, to take advantage of technology and the availability of the call centre agents.

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 HUMAN CAPITAL MANAGEMENT: There are plans to implement CRM in the Human Resources Department to achieve more protable human resources management and increase productivity. The initial investment on CRM was about S1.5m. The bank achieved a breakeven of CRM investment in nine months, and in the fth year, the ROI will arrive at 320 per cent and the Internal Rate of Return at 89 per cent.

SUCCESS AND FAILURE FACTORS OF CRM APPLICATION

Critical success factors for CRM applications are good project management, a realistic time schedule, perfect programming and not exceeding the predened budget. Good collaboration with the consultants and between the project team is also important factors for the success of the project. During the implementation of CRM project, programming was very good, there was a perfect collaboration between all the parts involved, there were no changes and delays and no problems occurred with the suppliers. However, as the interviewees argued, since it was the rst project in the eld of banking and very few CRM applications exist (mainly in USA), very little experience was available.Thus, having access to best business practices is an essential factor for the success of CRM. Integration of the existing systems is a factor that may result in the failure of the project. All the existing systems in the bank should be integrated, but the different versions did not have the same expiration date; thus, technical support was required. However, the CRM vendors team in Greece did not have the necessary experience and specialists from abroad should be invited. An important factor that may lead to failure is the capabilities of the consultant. During the project, the consultant should offer new ideas and solutions concerning the use of the technology.

DISCUSSION
The bank had a lot of benets from the implementation of CRM. One important benets was the reduction of costs. As seen in the literature, organizations by implementing CRM applications reduce costs. Another benets was reduced complexity since there was only one platform and one contact point. The integration of all the systems in one platform offered easier architecture and decreased the time needed for the support of various systems. The

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need for integration was also emphasized in the literature review, and it was also mentioned that customers should not deal with complexity. Furthermore, operations improved by increasing employees capabilities. Thus, effectiveness and performance were improved and the level of service and response time increased. Waiting time decreased, although the volume of telephone calls increased. CRM helped the bank to come closer to its customers and emphasis was given to customers instead of sales. The bank could provide services 24h a day, seven days a week with a success percentage of 92 per cent. The implementation of CRM resulted in a signicant increase in the banks revenues. As the interviewees stated, effective project management, realistic time scheduling, perfect programming and not exceeding the budget are critical success factors for CRM implementation. Another factor is good collaboration between the project team and with the external consultants. The bank used an experienced consultancy rm for CRM implementation. The need to employ experienced consultants was also emphasized as well as the need for system support to achieve a successful CRM implementation.In addition, having access to best business practices is crucial. The bank fully recognizes the value of CRM system for its development and success in the market and has established a Strategic Analysis and CRM department.

THE CONTRIBUTION OF THIS STUDY This study contributes to the nancial services literature as it is one of the very few that have examined CRM applications, a comparatively new technology, in the Greek banking sector, where very limited research has taken place on the implementation of CRM. The results of the study support the ndings of other studies mentioned in the literature and they can be of denite interest and potential value to managers responsible for implementing CRM in banking as well as beyond the specic context of nancial services.

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SYNOPSIS

AXIS BANK

INTERNATIONAL BANKING OPERATIONS $ ANALYSIS OF CRM.

Students Name:KANIKA SINGLA Industry Guide: MR.RAJIT SINGLA Faculty Guide: MS SHALINI GAUTAM OBJECTIVE OF THE STUDY:
The objective of my study is to understand how banking activities actually takes place and to gain an insight and in depth knowledge of the International banking operations viz., Export-Import Documentation, Letter of Credit, Inward-Outward Remittances, Export-Import Finance, NRI Deposits and guidelines of various authorities AND The how banks maintain relationship with customers AND Study the value of existing customers and reduce cost associated with servicing them and ways to increase the overall efficiency of bank performance.

KEY FINDINGS:
ALL the private and public sector banks are recognizing the

importance of relationship management in their growth and customer retention. 45% of the customers are having account for 3-5 years

and they are satisfied with the way their accounts are managed.42% of customers is satisfied with the way their enquiries
are handled through phones and letters. The staff of the axis bank is fully efficient according to the customers responses and they quickly sought out their grievances and mistakes. According to the customers
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feedback, the bank has improved its services and also the overall the satisfaction of the customers has also improved. AXIS BANK is efficiently maintaining its international banking operations as the FOREX turnover has increased by 26% in FY11 from FY10 .and FOREX trading has also increased by 43% in FY11 from FY11.

CONCLUSIONS:
ACC to the interpretations, we can conclude AXIS BANK is working efficently and effectively in every field whether it is maintaining FOREX DEPARTMENT or satisfying their HNI customers. AXIS bank has a strong brand name in the Panipat city. The people of Panipat city are good in investment part and most of them go for FDS AND LIs.

PERCEPTION ABOUT INDUSTRY GUIDE: MR RAJIT SINGLA is the branch manager of AXIS BANK, PANIPAT. He has the operational knowledge, and a faithful observance to
industrial standards, key processes indicators, quality assurance processes and industrial benchmarking to ensure business continuity and operational excellence. He is instrumental to ensure operational continuity and excellence; motivate to employees to achieve corporate goals and get them aligned with business strategy; he is helpful to preserve a good climate in the workplace and manages the knowledge, business practices and policies that defines culturally to any given organization. He is very good supervisor with Excellent communication skills, A great listener and Able to grow their associates in their job duties and to the next level if so desired. I express my sincere gratitude to my industry guide, for his able guidance, continuous support and cooperation throughout my project, without which the present work would not have been possible.

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