A

SEMINAR REPORT

ON

“RECENT DEVELOPMENT OF BANKING INDUSTRY”

Submitted in partial fulfillment for the award of degree of

MASTER IN BUSINESS ADMINISTRATION

Of

CHHATTISGARH SWAMI VIVEKANAND TECHNICAL UNIVERSITY,

BHILAI

(Session 2009-11)

SUBMITTED BY:
SUBMITTED TO:

P.SHIV KUMAR
MR.MANOJ VERGHESE
MBA 3rd Sem
MBA DEPTT.

DEPARTMENT OF MANAGEMENT

RUNGTA COLLEGE OF ENGINEERING & TECHNOLOGY, BHILAI.

(Accredited NBA-AICTE, An ISO 9002 certified institute)

 Kohka-Kurud road, Bhilai (C.G.) 490024

INTRODUCTION:-

Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of
the country. This is one of the main reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with the
nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or
for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient
bank transferred money from one branch to other in two days. Now it is simple as instant
messaging or dials a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of Indian Banking System can be segregated into three distinct phases. They are as
mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.

New phase of Indian Banking System with the advent of Indian Financial & Banking Sector
Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.

PhaseI

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National
Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of
India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore
were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the
functioning and activities of commercial banks, the Government of India came up with The
Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive
powers for the supervision of banking in india as the Central Banking Authority.

During those days public has lesser confidence in the banks. As an aftermath deposit
mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department
was comparatively safer. Moreover, funds were largely given to traders.

PhaseII

Government took major steps in this Indian Banking Sector Reform after independence. In 1955,
it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially
in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI
and to handle banking transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July,
1969, major process of nationalisation was carried out. It was the effort of the then Prime
Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was
nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with
seven more banks. This step brought 80% of the banking segment in India under Government
ownership.

The following are the steps taken by the Government of India to Regulate Banking Institutions in
the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalisation of State Bank of India.

1959: Nationalisation of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalisation of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and immense
confidence about the sustainability of these institutions.

PhaseIII

This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his
name which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and net banking is introduced. The entire
system became more convenient and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis
triggered by any external macroeconomics shock as other East Asian Countries suffered. This is
all due to a flexible exchangerate regime, the foreign reserves are high, the capital account is not
yet fully convertible, and banks and their customers have limited foreign exchange exposure.

Bank of India was founded on September 7, 1906 by a group of eminent businessmen from
Mumbai. In July 1969 Bank of India was nationalized along with 13 other banks.

Beginning with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid
growth over the years. It has evolved into a mighty institution with a strong national presence
and sizable international operations. In business volume, Bank of India occupies a premier
position among the nationalized banks.

Presently, Bank of India has 2609 branches in India spread over all states/ union territories
including 93 specialized branches. These branches are controlled through 48 Zonal Offices.
Bank of India has several firsts to its credit. The Bank has been the first among the nationalised
banks to establish a fully computerised branch and ATM facility at the Mahalaxmi Branch at
Mumbai way back in 1989. It pioneered the introduction of the Health Code System in 1982, for
evaluating/ rating its credit portfolio. Bank of India was the first Indian Bank to open a branch
outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in
1974. The Bank has sizable presence abroad, with a network of 23 branches (including three
representative office ) at key banking and financial centres viz. London, New York, Paris,
Tokyo, Hong-Kong, and Singapore.

RECENT DEVELOPMENT OF BANKING INDUSTRY

 In these we see that the recent development of banking industry. That

is:-

1) Universal Banking

2) E-Banking

3) Mobile banking

1) Universal Banking
 • As per the World Bank, "In Universal Banking, large banks operate extensive network
of branches, provide many different services, hold several claims on firms(including
equity and debt) and participate directly in the Corporate Governance of firms that rely
on the banks for funding or as insurance underwriters".

• Universal Banking includes not only services related to savings and loans but also
investments. However in practice the term 'universal banks' refers to those banks that
offer a wide range of financial services, beyond commercial banking and investment
banking, insurance etc.

• Universal banking is a combination of commercial banking, investment banking and

various other activities including insurance.

 UNIVERSAL BANKING – PROS AND CONS

The solution of Universal Banking was having many factors to deal with, which can be further
analyzed by the pros and cons.

Advantages of Universal Banking

• Economies of Scale. The main advantage of Universal Banking is that it results in

greater economic efficiency in the form of lower cost, higher output and better products.
Many Committees and reports by Reserve Bank of India are in favour of Universal
banking as it enables banks to explit economies of scale and scope.
• Profitable Diversions. By diversifying the activities, the bank can use its existing
expertise in one type of financial service in providing other types. So, it entails less cost
in performing all the functions by one entity instead of separate bodies.
 • Resource Utilization. A bank possesses the information on the risk characteristics of
the clients, which can be used to pursue other activities with the same clients. A data
collection about the market trends, risk and returns associated with portfolios of Mutual
Funds, diversifiable and non diversifiable risk analysis, etc, is useful for other clients and
information seekers. Automatically, a bank will get the benefit of being involved in the
researching
• Easy Marketing on the Foundation of a Brand Name. A bank's existing
branches can act as shops of selling for selling financial products like Insurance, Mutual
Funds without spending much efforts on marketing, as the branch will act here as a parent
company or source. In this way, a bank can reach the client even in the remotest area
without having to take resource to an agent.
• One-stop shopping. The idea of 'one-stop shopping' saves a lot of transaction costs
and increases the speed of economic activities. It is beneficial for the bank as well as its
customers.
• Investor Friendly Activities. Another manifestation of Universal Banking is bank
holding stakes in a form : a bank's equity holding in a borrower firm, acts as a signal for
other investor on to the health of the firm since the lending bank is in a better position to
monitor the firm's activities.

Disadvantages of Universal Banking

• Grey Area of Universal Bank. The path of universal banking for DFIs is strewn
with obstacles. The biggest one is overcoming the differences in regulatory requirement
for a bank and DFI. Unlike banks, DFIs are not required to keep a portion of their
deposits as cash reserves.
• No Expertise in Long term lending. In the case of traditional project finance, an
area where DFIs tread carefully, becoming a bank may not make a big difference to a
 DFI. Project finance and Infrastructure finance are generally long- gestation projects and
would require DFIs to borrow long- term. Therefore, the transformation into a bank may
not be of great assistance in lending long-term.
• NPA Problem Remained Intact. The most serious problem that the DFIs have had
to encounter is bad loans or Non-Performing Assets (NPAs). For the DFIs and Universal
Banking or installation of cutting-edge-technology in operations are unlikely to improve
the situation concerning NPAs.
2) E-Banking

• Internet banking (or E-banking) means any user with a personal computer and a browser
can get connected to his bank -s website to perform any of the virtual banking functions.

• In internet banking system the bank has a centralized database that is web-enabled. All
the services that the bank has permitted on the internet are displayed in menu.

• The traditional branch model of bank is now giving place to an alternative delivery
channels with ATM network. It would a borderless entity permitting anytime, anywhere
and anyhow banking.

 SERVICES THROUGH E BANKING

• Bill payment service,

• Fund transfer,

• Credit card customers,

• Railway pass,

• Investing through Internet banking ,

• Recharging your prepaid phone,

• Shopping

 ADVANTAGES OF E BANKING

• It is convenient, it isn't bound by operational timings, there are no geographical barriers

and the services can be offered at a miniscale cost.

• Through Internet banking, you can check your transactions at any time of the day, and as
many times as you want to.
 If the fund transfer has to be made outstation, where the bank does not have a branch, the
bank would demand outstation charges. Whereas with the help of online banking, it will
be absolutely free for you.

3) Mobile banking

• Mobile banking is a term used for performing balance checks, account transactions,
payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007)
is most often performed via SMS or the Mobile Internet but can also use special
programs called clients downloaded to the mobile device.

• MobileBanking is a service that allows you to do banking transactions on your mobile

phone without making a call , using the SMS facility.

 HOW ITS WORKS

• Mobile Banking works on the 'Text Messaging Facility' also called the SMS that is
available on mobile phones. This facility allows you to send a short text message from
your mobile phone instead of making a phone call.

• All you need to do is type out a short text message on your mobile phone and send it out
to 5676712 .The response is sent to you as an SMS message, all in the matter of a few
seconds.

• This message travels from your mobile phone to the SMS Centre of the Cellular Service
Provider, and from there it travels to the Bank's systems.

 SERVICES AVAILABLE THROUGH MOBILE BANKING

• You can get your Balance details

• Get last 3 Transaction details

• Request for a Cheque Book

• Stop a Cheque payment

• Inquire about a cheque status

• Request an account statement

• Get Fixed Deposit details

• Get Bill payment details for Electricity, Mobile phone and Telephone services

• Pay your bills

 MOBILE BANKING THROUGH SMS

• Mobile Banking with SMS is conducted through SMS codes sent to a particular number
as directed by your bank. You will receive the response in the form of a text message on
your mobile phone screen within a few seconds. For example to get details of your HDFC
bank account you will use codes like HDFCBAL, HDFCTXN, HDFCSTM,
HDFCSTP<6 digit cheque no.>, etc. for balance enquiry, last transaction details, account
statement, stop cheque payment etc. respectively.

 MOBILE BANKING THROUGH WAP

• Once you log onto your Bank's WAP site through your WAP/GPRS enabled mobile
phone, all you need to do is enter your Cust ID and Net Banking IPIN. Then go to the
Transactions Menu after selecting your account. Select any one of the Transactions like
Balance Inquiry, Mini Statement, Statement Request Stop Payment, Cheque Status
Inquiry Fixed Deposit Inquiry( can get information on account number, principal amount,
rate of interest, maturity date and maturity amount) etc.
CONCLUSION
Universal banks are financial institutions that may offer the entire range of financial
services. They may sell insurance, underwrite securities, and carry out securities
transactions on behalf of others. They may own equity interests in firms, including
nonfinancial firms. And so in conclusion e-banking creates issues for banks and
regulators alike. For our part we will continue our work, both national and international,
to identify and remove any unnecessary barriers to e-banking Mobile Banking came on to
mobile phones with a promise of convenience and comfort for banking transactions and it
did serve the purpose. A study by IBM finds that the mobile banking is widely being used
by youth these days.
 BIBLIOGRAPHY

WWW.MODERN BANKING.COM

WWW.UNIVERSAL BANKING.COM

WWW.E-BANKING.COM

WWW.MOBILE BANKING.COM