Banking Updates

Staff College, Ahmedabad Recent Updates in Banking Industry
Page 3 6 # '( '* .' .3 .3 Contents Module A Recent Important Changes Amendments in Banking Regulation Act and its impacts Introduction of Dynamic oan oss Provisioning !rame"ork for Banks in India BA$% III & Capital Management of Indian Banking $ector Introduction of !inancial )olding company structure in India i+erali,ation of Branch %-pansion Policy Deregulation of Interest on $avings Bank /nion Budget of India 0 .1'32'( $cope of Merger of Banks in India
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Module B Updates on !ey Banking Segments "rofitability 5IM 0 under stress6 )o" Banks "ill respond the situation Productivity and %fficiency Consumer "rotection !inancial Consumer Protection and its inkage to Management !unction !no# your Bank A"ards and accolades for the Bank in !7 .1'. 5e" Initiatives taken +y Bank Pro8ect 95A:5IRMAA5 0 Baroda 5e-t; Pro8ect $parsh SM$ % &ealth Management Ser'ices $M% Banking 0 An overvie" & Important <uidelines =ealth Management $ervices e(Business Bank>s e2Channel products "riority Sector )ending % *inancial Inclusion Revised Priority $ector <uidelines !inancial Inclusion 0 Recent /pdates Credit Monitoring % +"A Management RBI <uidelines for Restructuring 5on Performing Assets
Risk
Page *. *( #'
Module C *uture trends , Challenges )R Challenges of Decade .1.1 I? :ision for .1'' to .1.1 Banking +y the year .1'3
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M-.U)$ A R$C$+/ IM"-R/A+/ C0A+1$S Contemporary Banking Issues
?he Indian +anking system has seen a complete transformation during the last t"o decades@ in sync "ith the progress made +y the real economyA Almost every aspect of +anking operation has seen significant change during this period as +anks sought to reinvent themselves in an attempt to retain their pre2eminent position in the financial systemA ?he period sa" +anks moving +eyond +rick and mortar +ranches to adopt innovative delivery channels including internet +anking@ A?Ms@ call B contact centres@ kiosks@ Business Correspondents CBCsD@ etcA Retail +anking gained prominenceA Banks have sought to gro"@ not 8ust in terms of +alance sheet si,e@ +ut also in terms of greater penetration of +anking services to the hitherto un+anked segments of the populationA It is reasona+le to say that +anks have succeeded in rising up to the challenges posed +y the uniEue needs of a transforming economy and have@ in no small measure@ contri+uted to the nation>s economic progress during this periodA
)o"ever@ Indian Banking is also facing several challenges and they must address these challenges to sustain their e-cellent performanceA !ollo"ing are some Contemporary issues faced +y Banking in IndiaA
Amendments in Banking Regulation Act and its impacts ?he Banking Regulation Act@ '#(# +eing the la" relating to +anking has +een in force for more than si- decades@ "hich empo"ers the RBI to regulate and supervise the +anking sectorA ?he +anking companies are no" operating in a li+erali,ed environmentA In this scenario@ it has +ecome necessary that the +anking companies in India are ena+led to raise capital in accordance "ith the international Baroda Academy 3 Inventing Methods for Igniting Minds
+est practicesA ?herefore the Banking a"s CAmendmentD Bill .1'' "as introduced in order to amend the BA5FI5< R%</ A?IG5 AC?@ '#(#A
Some of the salient features of amendments #ith the impacts are as under ( +e# "o#er to RBI ( /nder the e-isting provision contained in section 36AA of the BR Act@ '#(#@ ?he RBI has @ inter alia @ po"er to remove any director or other officers of a +anking company @ +ut such po"er is not adeEuate if the entire Board of directors of a +anking company is functioning in a manner detrimental to the interest of the depositors or the +anking company itselfA It is therefore proposed to confer po"er upon the RBI to supersede the Board of directors of a +anking company for a total period not e-ceeding t"elve months and appoint an administrator to manage the +anking company during the said periodA %nactment of this +ill "ill provide ne" po"er to RBIA It proposes to confer upon the RBI the po"er to call for information and return from the associate enterprises of +anking companies and also to inspect the same@ if necessaryA Impact6 2 $uch po"er of RBI "ill help it in regulating ne" as "ell as e-isting entities in a +etter mannerA /o increase the cap on restrictions on 2oting Rights ( Another key feature of amendment is increasing the voting rights of all the shareholders of nationali,ed +ank to '1 per cent from ' percentA Impact 2 It is e-pected that higher voting rights "ill give investors more lee"ayA ?he increase in voting cap "ill help drive increased investors interest and hence facilitate raising additional capitalA
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/o enable banking companies to issue preference share sub3ect to regulatory guidelines by the RBI ?hus nationali,ed +anks may access the capital market to raise capital reEuired for e-pansion of +anking +usinessA /o create a .epositors $ducation and A#areness *und ( Insertion of ne" section .6 A@ the RBI shall esta+lish a !und to +e called the 9Depositor %ducation and A"areness !und; +y utili,ing the inoperative deposit accountsA ?here shall +e credited to the !und the amount to the credit of any account in India "ith a +anking company "hich has not +een operated upon for a period of ten years@ "ithin a period of three months from the e-piry of the said period of ten yearsA Impact6 2 ?his fund "ill +e used for promotion of depositors> interest and for such other purpose as may +e specified +y the RBI from time to timeA /o pro'ide for special audit of cooperati'e banks at instance of RBI by e4tending applicability of Section 56 to them Impact62 ?o more vigilant +y RBI to protect the depositors interestA -'erall impacts of changes in Banking )a# 7Amendment Bill8 96:9 pertaining to BR Act ( ?his amendment for the +anking sector is a long 0term positiveA ?his "ill gradually pave the "ay for more competition in the sector and as it seen that ne" licenses "ill given +y RBI to start ne" +anking +usiness in India "hich "ill carve out a more efficient and more valua+le +anking systemA
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Introduction of .ynamic )oan )oss "ro'isioning *rame#ork for Banks in India ?he prevailing 9incurred loss model; for provision on impaired loans came under severe criticism after the recent glo+al financial crisis for delaying loss recognitionA ?here is a vie" that earlier recognition of loan losses +ased on 9e-pected losses; could have potentially reduced the cyclical impacts of the recent crisisA In the immediate aftermath of the <lo+al Crisis@ the <2.1 leaders called upon the accounting standard setters to "ork urgently "ith +anking supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high Euality glo+al accounting standardsA Concepts and principles of .ynamic "ro'isioning Dynamic provisioning is a techniEue that allo"s +anks to +uild up loan loss provisions "hen their profits are gro"ing to dra" on these provisions during an economic do"nturnA ?he underlying principle +ehind dynamic provisioning is that provisions should +e set in line "ith estimates of long2run@ or through2the2cycle e-pected lossesA ?his "ill help in +reaking pro2cyclicality and creating countercyclical provision +uffersA ?his concept advocates the Provisioning norms +ased on 9%-pected oss; +asis in place of prevailing 9incurred loss; methodA Dynamic provisioning can +e generally e-pressed as6 .ynamic pro'ision ; $4pected loss pro'ision Specific pro'ision
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?hus@ a .ynamic "ro'isioning *rame#ork for )oan )oss "ro'isions for +anks in India@ consisting of t"o components@ may +e considered as under6 aD %-2post Specific "ro'isions <S"= made during a year as reEuired as per RBI guidelinesA ?hese provisions "ill +e de+ited to P& accountA +D .ynamic "ro'isions <."= eEual to the difference +et"een the long run average e-pected loss of the portfolio for one year and the incremental specific provisions made during the yearA Dynamic provisioning frame"ork in India is more or less +ased on the !$A model C/F model of dynamic provisioningDA Improvements in credit risk models have supported the concept of e-pected losses and une-pected lossesA !rom a conceptual point of vie"@ loan loss provisions should cover e-pected losses "hile capital provides an adeEuate +uffer for une-pected lossesA ?he internal rating +ased CIRBD model approach under Basel II credit risk capital computation gave a fillip to the e-pected loss +ased provisioning and une-pected loss +ased capitali,ationA /he pro'isioning frame#ork suggested by RBI has t#o components are CiD CiiD $pecific provisions and Dynamic provisionsA
=hile specific provisions "ould +e as per the RBI guidelines on 5PA provisioning@ dynamic provisions "ould +e the difference +et"een the long run 9average e-pected loss; of the portfolio for one year and specific provisions made during the yearA ?hus@ this "ill ensure that every year the charge to profit and loss account on account of specific provisions and dynamic provisions is maintained at a level of e-pected lossesA Dynamic provisions are created only "hen the specific provisions are lesser than the e-pected lossesA ?he frame"ork thus ensures that at any point of time@ provisioning eEuivalent to e-pected losses should +e madeA ?hus@ the o+8ective of Baroda Academy 3 Inventing Methods for Igniting Minds
the dynamic provisioning frame"ork is to smoothen the impact of incurred losses on the profit and loss account through the cycle@ and not to provide general provisioning cushion for e-pected lossesA ?hat is the essence of Indian dynamic provision frame"orkA
Impact of .ynamic "ro'isioning on Indian banks It "ill help in earlier recognition of loan losses +ased on 9e-pected losses; could have potentially reduced the cyclical impacts of the recent crisisA Dynamic provisions are created only "hen the specific provisions are lesser than the e-pected lossesA ?he frame"ork thus ensures that at any point of time@ provisioning eEuivalent to e-pected losses should +e madeA ?he o+8ective of the dynamic provisioning frame"ork is to smoothen the impact of incurred losses on the profit and loss account through the cycle@ and not to provide general provisioning cushion for e-pected lossesA oss given default C <DD used in the calculation of e-pected loss is +ased on do"nturn <D Cinstead of normal <DD as used in the internal ratings2+ased approach for credit risk CIRBD of Basel II "hich "ill give more accurate provisionsA Dynamic or e-pected loan loss provisioning can contri+ute to financial sta+ility +y recogni,ing the losses early in the cycle at the time of loan origination +y +uilding up +uffers in good times that can +e used in +ad times@ there+y limiting the conseEuences during a do"nturnA
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BAS$) III % Capital Management of Indian Banking Sector &hy Basel III> 'A %stimation of capital under Basel II is procyclicalA During good time +anks are doing "ell and market is "illing to invest capital in +anks +ut there "as no provision in Basel II for additional capital for stress time "hich is inevita+le in a +usiness cycleA .A Basel II "as more risk sensitive compare to Basel I@ ho"ever the composition of regulatory capital didn>t reflect the changing market dynamicsA ?his model "as not capa+le to handle comple- derivatives productsA 3A Basel II model demanded less capital on +ank>s trading +ook e-posure "ith arguments that it is liEuid in nature as +ank can un"ind the position rapidlyA Most of +anks shifted their +anking +ook e-posure to trading +ook e-posure to optimi,e the capitalA (A Basel II didn>t have any e-plicit regulation governing leverageA %-cessive leverage "as one of ma8or causes for economic crisisA It assumed that risk +ased capital reEuirement "ould automatically control e-cessive leverageA 3A iEuidity risk "as not covered under Pillar I of Basel II frame"orkA During financial crisis it cascaded into solvency risk and +ecame nightmare for most of the +anksA 6A ?he frame"ork has neglected the systemic risk or the risk emanated from interconnectedness of various institutes in a financial systemA 4A !inally Basel III has strongly advocated in favour of more risk a+sor+ing common capital in capital structure of a +ankA 0o# Basel III is superior to Basel II>
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'A Basel III is not a negation +ut an enhancement of Basel IIA essons from financial crisis have open the lids in four ma8or areas vi,@ augmentation of Euality capitals@ introduction of iEuidity standards@ modifications in provisioning norms & +etter & more comprehensive disclosureA
.A )igher Euality capitals $tructure Particulars of Capitals
AI BJCJD B C D % !
Minimum ?otal capital Minimum ?ier I capital Gf "hich Common %Euity Ma-imum Admitted ?ier II capital Capital conversion Buffer CCommon %EuityD Minimum Common eEuity C?ier I JCCBD Minimum ?otal capital J CCB
Capital reEuirement as H on R=A Basel II Basel III #A1 #A1 6A1 4A1 .A1 (A3 (A1 .A1 2 .A3 .A1 #A1 4A1 ''A3
3A Provision for countercyclical Capital Conversion Buffer of .A3 H of R=A in terms of common eEuity has prescri+ed to a+sor+ of e-tra shock "ithout +reaching the minimum capital level as "ell as it has considered the hardship of +anks to raise capital under stress situationA (A More common eEuity to a+sor+ loss internally rather "aiting for +udgetary +ailout packageA 3A ?o mitigate the risk of higher +uilt up leverage ratio@ Basel III contemplating a minimum ?ier I leverage ratio of 3H C33A3 times of o"n fundD "hich "ill eventually a ?ier I reEuirement as on Kanuary '@ .1'*A 6A /nlike Basel II@ Basel III enhances the loss a+sor+ing capacity of +anks against market riskA Basel III strengthens the counterparty credit risk frame"ork in market risk instrumentsA It has included use of stressed input parameters to determine capital reEuirements for counterparty credit default riskA Besides Credit valuation Ad8ustment CC:AD risk capital charge Baroda Academy 3 Inventing Methods for Igniting Minds
for G?C derivatives to protect +anks against the risk of decline in the credit Euality of the counter partyA 4A ?o mitigate liEuidity risk of +ank@ Basel III addressed +oth potential short term liEuidity stress and long term structural liEuidity mismatch in +ank>s +alance sheetA !or short term li?uidity stress @ +ank "ill reEuire to maintain sufficient high Euality unencum+ered liEuid assets to "ithstand any stress funding scenario over a 312days hori,on as measured +y the liEuid coverage ratio C CRD !or long term li?uidity mismatches @ +anks are reEuired to maintain net sta+le fund ratio C5$!RDA 5$!R "ill +e decided +ased on liEuidity profile of assets and liEuidity needs arising from off +alance sheet commitments over a one year hori,onA *A ?he Basel committee is supporting the proposal for adopting %-pected oss C% D +ased measure of provisioning "hich capture actual losses more transparently and is also less procyclical than the current 9incurred loss; approachA &hat are Challenges for implementing Basel III in India> 'A ?he additional reEuirement under Basel III is +ased on some assumptionsA ?he RBI has made some estimate of additional Capital reEuirement as on March 3' .1'* of RsA 3 trillion +ased on t"o assumptions6 aD ?he R=A of each +ank "ill increase at a rate of .1H per annum till March 3'@.1'* A +D Internal accrual "ill +e of the order of 'H of R=AA .A !urther@ the estimation of additional capital can +e +ifurcated +et"een non eEuity capital of RsA3A.3 trillion "hile common eEuity capital in tune of RsA 'A43 trillionA CRsA In BillionD Pu+lic $ectors Private Bank $ector Bank Capital '(112'311 .112.31 3 ?otal '6112'431
A Baroda Academy
Additional
%Euity
B C
ReEuirement under Basel III Additional %Euity Capital reEuirement /nder Basel II 5et additional reEuirement under Basel III Gf additional eEuity capital reEuirement under Basel III for Pu+lic sector +ank CAD <overnment share Cif present share holding pattern in maintainedD <overnment holding if share holding is +rought do"n to 3'H Market $hare Cif present share holding pattern of <ovtA maintainedD
6312411 4312*11
.12.3 '*12..3
64124.3 #312'1.3
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3A ?he challenges in front of Indian Bank are to raising fund in a magnitude from Capital marketA If "e consider the past trends of fe" years it may give a clear pictureA CRsA In +illionsD .11421* 4#3 .11*21# '(. .11#2'1 3(# .1'12'' 346
Resources Mo+ili,ed from Primary market Resource 3'1 Mo+ili,ed +y BankB!Is
5il
3.
'4.
C)and +ooks of statistics +y $%BID (A $ince .1112.11' till .1'12'' the entire +anking and financial sector raised capital from primary market is a+out RsA ''(3 +illion C)and +ooks of Baroda Academy 3 Inventing Methods for Igniting Minds
3A
6A 4A
*A
statistics +y $%BIDA Considering the present estimate it is not an insurmounta+le task for Indian +anking system to raise an amount of RsA 411 +illion for a span of five yearsA Moving to the second challenge of capitali,ation +y <overnment to P$Bs@ If government "ant to maintain the same level of holding@ it is reEuired to +e infuse a fresh fund of RsA #11 +illionA Considering the gross com+ine fiscal deficit of central & state government Ca+out RsA 6.11 +illionsD @ it is really a significant challenge for P$BsA But if <overnment is contemplating the concept of reducing its holding near to 3'H or even less than that@ then the +urden "ill +e reduce to halfA Increase capital reEuirement "ill increase the cost of capital of +ank at the same time it "ill affect the return on eEuity for investorsA Introduction of t"o liEuidity ratio "ill restrict +ank to raise short term funds for long term deployment as a result it "ill impacted the pricing and margin of credit facilities =idening !iscal deposit may degrade sovereign rating of Country in turn increase the cost of foreign fundsA
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Introduction of *inancial 0olding company structure in India

Recommendations of the &orking 1roup under the Chairpersonship of Smt Shyamala 1opinath, .y 1o'ernor 7RBI8
Gver the last t"o decades@ India has seen the emergence of !inancial Conglomerates C!CsD@ each operating in a different segment of the financial services sector0 a +ank@ housing finance company@ non2+anking financial company@ and insurance companyL or@ in some cases@ an industrial companyA In many countries@ deregulation and financial consolidation led to the development of !inancial )olding Companies C!)CsD there+y allo"ing commercial +anking@ insurance@ investment +anking@ and other financial activities to +e conducted under the same corporate um+rellaA ?he a+sence of the holding company structure in financial conglomerates e-poses investors@ depositors and the parent company to risks@ strains the parent company>s a+ility to fund its o"n core +usiness and could restrict the gro"th of the su+sidiary +usinessA Considering the comple-ity of the issues involved and implications of the !)C model for the financial system in general and +anking system in particular@ the Reserve Bank constituted a =orking <roup in Kune .1'1 under the Chairpersonship of $mtA $hyamala <opinath@ Deputy <overnor@ Reserve Bank of IndiaA /he &orking 1roup approached the issue from t#o fundamental perspecti'es first, the risk to bank balance sheets from affiliate non(bank entities and Baroda Academy Inventing Methods for Igniting Minds
second, the perspecti'e@
regulatory
o'ersight
of
financial
groups
from
systemic
Recommendations for mo'ing to a full(fledged *0C *rame#ork 2 ?he =orking <roup concluded that a holding company model may +e more suited in the Indian conte-tA It "as conscious of the fact that +anks cannot +e totally insulated from the risks of non2+anking activities undertaken +y their affiliatesA ?he =orking <roup also recogni,ed that there are divergent o"nership and governance norms for various sectorsL entities "ithin the sectorsL legacy issues concerning the e-isting conglomerates etcA Any frame"ork to harmonise them at the level of the !)C "ould +e a challenge and therefore the !)C as a preferred model "ill need to +e phased in graduallyA Recommendation : ?he !inancial )olding Company C!)CD model should +e pursued as a preferred model for the financial sector in IndiaA Recommendation 9 ?he !)C model can +e e-tended to all large financial groups 0 irrespective of "hether they contain a +ank or notA ?herefore@ there can +e Banking !)Cs controlling a +ank and 5on2+anking !)Cs "hich do not contain a +ank in the group Recommendation 5 ?here should +e a separate regulatory frame"ork for financial holding companiesA Recommendation A A separate ne" Act for regulation of financial holding companies should +e enactedA Recommendation B Amendments should also +e simultaneously made to other statutesBActs governing pu+lic sector +anks Recommendation C ?he Reserve Bank should +e designated as the regulator for financial holding companiesA
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Recommendation D ?he function of !)C regulation should +e undertaken +y a separate unit "ithin RBI "ith staff dra"n from +oth RBI as "ell as other regulatorsA Recommendation E ?he ne" !)C regulatory frame"ork should also formali,e a consolidated supervision mechanism through Memorandum of /nderstanding +et"een regulatorsA Recommendation F Intermediate holding companies "ithin the !)C should not +e permitted due to their contri+ution to the opacity and comple-ity in the organi,ational structureA Recommendation :6 ?he !)C should primarily +e a non2operating entity and should +e permitted only limited leverage as stipulated +y RBIA Recommendation :: ?he !)Cs should +e permitted to carry out all financial activities through su+sidiariesA Recommendation :9 ?he !)C should +e "ell diversified and su+8ect to strict o"nership and governance normsA Recommendation :5 Appropriate limits should +e fi-ed on cross2holding +et"een different !)CsA ?here should also +e limits on cross holding +et"een !)Cs on one hand and +anks@ 5B!Cs@ and other financial institutions outside the groupA Recommendation :A Presently@ under the Bank2$u+sidiary Model CB$MD@ the +anks> total investment in their su+sidiaries is capped at .1H of +anks> net "orthA /nder the !)C structure@ the allocation of eEuity capital +y Banking !)Cs to non2 +anking su+sidiaries should also +e capped at a limit as deemed appropriate +y RBI to ensure that the +anking continue to +e a dominant activity of the groupA Recommendation :B If the holding company is to function as an anchor for capital support for all its su+sidiaries@ reEuisite space needs to +e provided to the holding company for capital raising for its su+sidiariesA Baroda Academy Inventing Methods for Igniting Minds
Recommendation :C $uita+le amendments to various ta-ation provisions may +e made to make the transition from Bank2$u+sidiary Model to !)C modelA Recommendation :D Dividends paid +y su+sidiaries to the !)C may +e e-empt from the Dividend Distri+ution ?a- CDD?D to the e-tent these dividends are used +y the !)C for investment in other su+sidiariesA -perational Arrangements till the $nactment of the *0C Act 2 ?he =orking <roup recommends the follo"ing operational scheme till the enactment of ne" Act6 CiD Pending enactment of a separate Act@ the !)C model "ill +e registered as an 5B!C "ith the RBI and the RBI "ill frame a suita+le regulatory frame"orkA CiiD All identified financial conglomerates having a +ank "ithin the group "ill need to convert to the !)C model in a time +ound manner and in cases the a+ove conglomerates do not "ant to convert to !)Cs@ they should +e reEuired to confine only to those activities "hich the +anks are presently permitted +y RBIA CiiiD All ne" +anks and insurance companies@ as and "hen licensed@ "ill mandatorily need to operate under the !)C frame"orkA CivD Amendments to various ta-ation provisions to make the transition from Bank2 $u+sidiary model to !)C model ta- neutral "ould +e a +inding condition for operationalising this frame"orkA
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)iberaliGation of Branch $4pansion "olicy $ection .3 of Banking Regulation Act '#(# "hich states that 9 "ithout prior permission of RBI@ no +anking company shall open a ne" place of +usiness in India or change other"ise than "ithin the same city@ to"n or village@ the location of an e-isting place of +usiness situated in IndiaA 9 Bank plays a vital role in economic development of a countryA Bank provides credit to various segments in the society to start economic activities@ there+y helps the people to raise their income and standard of livingA In our country 41H populations "as staying in rural areaA Prior to '#6# Bank +ranches "ere mainly concentrated in /r+an and Metro areasA ?o provide +anking facilities to agriculture and small industries and to mo+ili,e the untapped resources in rural and semi ur+an areas@ nationalisation of '( +anks "as done in '#6#A ?o encourage +anks to open more and more +ranches in rural areas@ RBI introduced a policy to open ( +ranches in rural un+anked centres to get a license to open a +ranch in metro +anked centreA ?his policy "as successful and +y '##' around 61Hof +ank +ranches "ere in rural and semi ur+an areasA Penetration of Branch net "ork had helped the <overnment to implement su+sidised schemes for self employment and for rural development for eradication of poverty@ successfullyA ?he follo"ing ta+le "ill sho" the impact of policyA Rural Branches '*33 3 $emi /r+an Brs 33(. ?otal CRJ$/D 3'4.
Kune '#6# Baroda Academy
March '##'
33.16
''3((
(6331
In '##' !inancial sector reforms "ere introduced as per the recommendations of 5arasimham Committee recommendationsA ?he li+eral policy "as framed for foreign +anks and for entry of private sector +anksA ?he 5arahamsim committee also felt that the Bank Management takes its o"n 8udgement for assessing need of additional +ank +ranchesA the Branch icensing Policy in '##3A RBI "hile granting permission for ne" +ranch offices "as considering the financial condition and history of applicant +ank@ general character of its management@ adeEuacy of capital@ earning prospects and "hether ne" office "ill serve pu+lic interestA Feeping these aspects in mind@ RBI issued follo"ing guidelines "hile li+eralising the +ranch e-pansion policy in '##3A Bank fulfilling the follo"ing conditions can open ne" +ranch "ithout prior permission of RBIA 'A 5et profit for three years in a ro" .A Capital AdeEuacy Ratio Minimum *H 3A 5PA ess than '3H (A Minimum G"ned !unds Rs '11 crore After li+eralising the +ranch e-pansion policy as a+ove@ +anks focus again shifted to Metro and /r+an centresA Banks also closed the loss making +ranchesA ?he follo"ing the statistic "ill prove the impact of li+eralisationA Rural Branches Baroda Academy 3 $emi /r+an Brs ?otal CRJ$/D )ence RBI li+eralised
Kune '#6# '*33 March '##' 33.16 March .113 3.1*. March .114 3133' During '##' to .114 total Rural and
33(. 3'4. ''3(( (6331 '3(13 (4(*3 '636' (6#'. $emi /r+an +ank +ranches increased from
(6331 to (6#'.A ?he alarming thing is that num+er of rural +ranches reduced to 3133' from 33.16 and semi ur+an +ranches increased to '636' from ''3((A In vie" of a+ove trend RBI revised the policy in .113A Policy encouraged the +anks to open +ranches in un+anked and under2+anked centresA Private Banks "ere also asked to open .3H of their +ranches in semi ur+an and rural centresA Recent 1uidelines on Branch $4pansion "olicy ' Bank to su+mit Annual Branch %-pansion Plan duly approved +y BoardA
. ?o open +ranches in ?ier I centre C area "ith population of ' lac and a+ove D needs specific permissionA 3 ?o open +ranches in ?ier . to ?ier 6 centers general Permission "ill +e givenA ( .3H of the +ranches should +e opened in ?ier 3 and ?ier 6 centers "hich do not have a +rick and mortar structure of any schedule commercial +ankA 3 Bank can open administrative office @Processing CentreBBranches in ?ier . to ?ier 6 centres "ithout permission of RBI@ su+8ect to reportingA 6 ?otal num+er +ranches opened in ?ier I "ill not generally e-ceed the total num+er of +ranches to +e opened in ?ier . to ?ier 6 centresA 4 Authorisation "ill +e valid for one yearA /otal deregulation of Branch authoriGation Ad'antages Baroda Academy 3 Inventing Methods for Igniting Minds
'A ?ime taken to approach RBI to o+tain permission "ill +e savedA .A Gperational "ork load of RBI "ill +e reducedA
.eregulation of Interest on Sa'ings Bank *acts , 1uidelines %ffective from Gcto+er .3@ .1''@ Banks are free to determine their savings +ank deposit interest rate@ su+8ect to the follo"ing t"o conditions6 AA !irst@ each +ank "ill have to offer a uniform interest rate on savings +ank deposits up to RsA' lakh@ irrespective of the amount in the account "ithin this limitA BA $econd@ for savings +ank deposits over RsA' lakh@ a +ank may provide differential rates of interest@ if it so chooses@ su+8ect to the condition that +anks "ill not discriminate in the matter of interest paid on such deposits@ +et"een one deposit and another of similar amount@ accepted on the same date@ at any of its officesA "ros 'A It "ill enhance the return on $B deposit to the customers@ "hich in turn "ill contri+ute to an increase in financial savingsA
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.A It may lead to volume of $B portfolio of the +ank as a little more interest earning decision Cinterest on daily product +asisD increased the $B deposit of the Bank "ithin . yrs CRs''364 +illion in March .1'1 to RsA'33#. +illion March .1'.DA 3A It "ill trigger the product innovations related to $B segment in the Bank and a +etter opportunity for +anks to cross2sell (A It "ill provide the multiple opportunities to the customers to place their fundsA 3A ?his move may improve the effect of transmission of monetary system of the country@ as at present@ on any change in regulatory rate like Bank rate@ R%PG rate etcA@ $B interest is not responding in tandem "ith those changes due to its fi-ed rate natureA 'A It "ill increase the cost of funds for the +anksA .A It may lead to unhealthy competition amongst the +anksA 3A It may discriminate the return on investments of smaller & +igger customers due to permitted Mdifferential rate of interest> on $B segmentA (A It may adversely affect the small savers and lead to the challenge of Mfinancial e-clusion>A 3A Banks may face higher risk of asset2lia+ility mismatchBmanagementA Baroda Academy Inventing Methods for Igniting Minds
Cons
6A ?here could +e occasions@ especially in a surplus liEuidity situation@ "hen the savings deposit interest rate may decline even +elo" the present levelA
Union Budget of India 96:5(:A Ma3or 0ighlights of this Budget 96:5(:A are !iscal deficit seen at 3A. point of <DP in .1'.B'3 !iscal deficit seen at (A* point of <DP in .1'3B'( +o Change in Income /a4 Slabs ?a- credit of RsA .@111 for income upto RsA 3 lakh '1 H surcharge on persons "ith ta-a+le income of over Rs ' crore Direct ?a-es Code CD?CD +ill to +e introduced in current Parliament session Income limit for the ta-2saving Ra8iv <andhi %Euity $avings $cheme CR<%$$D is raised to RsA '. lakh from RsA '1 lakh Baroda Academy 3 Inventing Methods for Igniting Minds
!irst home loan of up to Rs .3 lakh to get e-tra interest deduction of up to Rs ' lakh Duty2free limits for <old raised to Rs 31111 for men and Rs ' lakh for "omen ?a- Deducted at $ource to +e fi-ed at 'H on land deals over Rs 31 lakh Proposal to launch Inflation Inde-ed Bonds or Inflation Inde-ed 5ational $ecurity Certificates to protect savings from inflationA All pu+lic2sector +anks have assured the !inance Minister that they "ill all have A?Ms in their +ranch areas +y .1'( Propose to reduce securities transaction ta- on eEuity futures to 1A1' point from 1A1'4 point ?ime to introduce commodities transaction ta- CC??DA C?? on non2 agriculture futures contracts at 1A1' point Propose to impose "ithholding ta- of .1 point on profit distri+ution to shareholders 5o change in peak custom@ e-cise ratesA %-cise duty on $/:s to +e increased to 31 per cent from .4 per cent@ $/:s registered as ta-is e-empted '*H rise in e-cise duty on Cigarattes@ cigars and cheerots $ervice ta- on all ABC restaurants ?o increase surcharge to '1 point on domestic companies "ith annual income of more than '11 million rupees
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!or foreign companies@ "ho pay the higher rate of corporate ta-@ the surcharge "ill increase from . pct to 3 per centA ?o continue '3 point ta- concession on dividend received +y India companies from foreign units for one more year
SC-"$ -* M$R1$R -* BA+!S I+ I+.IA India is the second largest emerging market destination@ after chinaA Feeping in vie" the huge potential for raising "orld class infrastructure the <ovtA is targeting infrastructure investment of the scale of /$D ' trillion in Baroda Academy 3 Inventing Methods for Igniting Minds
the '.th five year planA Banks "ill +e the primary de+t provider for almost half of this planned e-penditure amountA <lo+ali,ation has +een a ma8or driver of +oth Indian and Multinational corporation CM5CD investments@ merger and acEuisitionA Indian Banking $ystem must +e in position to support & gra+ the +usiness opportunities in funding these M & AA Banks "ill +e reEuired to raise their eEuity +ase as per the provisions of BA$% III normsA Banks "ith large capital +ase and huge si,e of Balance 0 $heet@ eEuipped "ith all risk mitigating system as "ell as tools@ offering good return to investor can only attract ne" investors for further raising the core capital +aseA Being a mem+er of =?G@ India "ill have to allo" foreign Banks to operate in India as per the prescri+ed norms of =?GA ConseEuently Indian Banks "ill have to compete "ith the +ig International Banks "ith huge capital and capacityA Market Dynamics may create pro+lem for small +anks to survive in those highly competitive environmentA ?hese facts have once again opened the discussion for Merger of Banks for creating Big Banks to compete at glo+al levelsA ?hough this issue of consolidation of P$Bs "as first recommended +y the 5arasimham Committee on !inancial $ystems C'##'D and "orking group "as constituted +y the government on +ank mergers@ "hich had su+mitted it recommendation in Gcto+er .11(A Post li+erali,ation a lot of changes took place in the +anking sector and the +iggest development is the adoption of CB$ operating platform in all Banks in IndiaA ?his uniform operating platform has made the consolidation task easy@ +ecause the integration of operating tools and procedures "as the ma8or challenge in the "ay of consolidationA -b3ecti'es that may be achie'ed through merger #ill be ( 5eed for strengthening core capital +ase and diversifying of risk in line "ith compliance of BA$% III guidelines in coming 3 yearsA ?o eliminate systemic risk due to failure of BankA ?o meet the reEuirement of lending for infrastructure creation Baroda Academy 3 Inventing Methods for Igniting Minds
$tepping up si,e Cmarket po"erD and ma-imi,ing value CrevenueD +y e-ploiting
economies of scaleA
Module B Updates on !ey Banking Segments "R-*I/ABI)I/H Baroda Academy 3 Inventing Methods for Igniting Minds
+IM under stress 0o# Banks #ill respond the situation Profita+ility is sine Eua non for any commercial organi,ation and +anking is not its e-ceptionA ?he most kno"n indices of measuring the efficiency on capacity utili,ation in +anks are spread, net interest margin, and intermediation ratio@ $pread and net interest margin are loosely interpreted one and same thing +ut +oth terms are defined differently for productivity and profita+ility measurement of +anksA $pread indicates efficiency of generating net interest income from the assets o"ned +y the +anks@ "hile net interest margin 7+IM8 is defined as the
difference +et"een the total interests earned on advances & investment and total interest paid on deposits & +orro"ings divided +y earning assets of +ank A
?his ratio indicates as to ho# effecti'ely the banks deploy all their deployable
funds iAeA +oth deposit and +orro"ings to generate income from credit and
investment operationsA )o"ever@ there is a classical argument "hich reinforce that +anks should strive to lo"er their 5IMs to +enefit their +orro"ers and depositors iAeA lend at lo"er rate for economic gro"th and pay high on deposits to re"ard the saversA ?he present 5IM of Indian +anks is e-pected to hit about 9 percent by 9696 o"ing to highly deregulated and competitive environmentA But an emerging economy like India "ith inclusiveness as a national priority@ it is not clear "hether lo" +anking margin C5IMD "ould +e a "orthy goal for survival of industryA
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5IM for all +anks fell do"n from 3A1(H C.114D to .A4(H C.1'1DA During the year .1''@ 5IM gre" to 3A'1H in year .1'' +ut further declined to 3A14H for the year end March .1'. "ith highest of (A#'H for foreign +anksA As o+served from the ?a+le2 that 5IM had increased during the year .1'' as compared to previous year level in .1'1 for all categories of +anks e-cept foreign +anks@ "ith a reco'ery in
economy and higher credit gro#th +ut further declined due to tighten interest
rate policy of regulatorsA ?he increase in 5IM from core +anking +usiness indicates that the cost of
financial intermediation increased in the economy @ Based on this rationale@ there

is a need to +ring do"n 5IM from an efficiency point of vie"@ nevertheless@ from a profita+ility point of vie"L there is a need to increase itA ?o achieve collective aspiration of dou+le digit and inclusive gro"th@ a nation needs to raise the level of national savings and channel those savings into investmentA ?his means +anks need to raise the interest rates on deposits and reduce the lending rates charged from +orro"ers 2 in other "ords@
reduce
their
intermediation costs, or in technical terminology, reduce the net interest margin@

A +alanced approach "ould +e to +ring do"n 5IM@ "hich "ill improve efficiency of financial intermediation@ along "ith an increase in income from other sources and reduction in operating e-penses to maintain profita+ility @ /he efficient financial intermediation is important from the point of 'ie# of economic gro#th@
/able 5IM Analysis of Indian Banks
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Bank <roup 0 3'st March CHageD
$BI & Its Associates 5ationali,ed Banks Pu+lic $ector Banks Gld Private Banks 5e" Private Banks Private $ector Banks !oreign Banks All $CBs
5et Interest Margin C5et Interest Income B %arning AssetsD .114 .11* .11# .1'1 .1'' .1'. 3A11 .A6( .A31 .A33 3A'1 3A(* .A#3 .A3# .A(1 .A33 .A*( .A66 .A#6 .A(4 .A(3 .A(1 .A#. .A#1 3A.( .A*' .A#6 .A41 3A1* .A#4 .A(# .A*3 3A.3 3A36 3A3' 3A.. .A66 .A*. 3A'# 3A.1 3A.6 3A'6 3A.. 3A3' 3A#. 3A(' (A#6 (A#' 3A1( .A43 .A*. .A4( 3A'1 3A14
Source Computed from pu+lished data of +anks in 9Profile of Banks; +y Reserve Bank of India CRBID
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"roducti'ity and $fficiency Banks play the critical role of financial intermediation +y performing the task of maturity and risk transformation@ +esides providing payment and settlement servicesA In order to effectively perform these functions@ +anks need to ensure that they maintain high levels of productivity and efficiency in their operationsA ?"o kinds of efficiency are essential for +anks6
Allocational $fficiency ?his reEuires +anks to ensure that the precious societal resources are allotted to the most productive activitiesA Besides@ "hile taking allocation decisions@ the interests of the most vulnera+le sections of the society should also +e taken into accountA -perational $fficiency Gperational %fficiency reEuires +anks to perform the financial intermediation function in a safe@ secure and speedy manner "hile ensuring that the cost of performing the intermediation function is minimi,edA =hile profit margins are important for sustaining +anking operations@ the cost of operational inefficiencies of +anks should not +e passed on to customers +y "ay of higher service charges and feesA
Indian +anks need to improve +oth@ allocational and operational efficiency@ so that the financial intermediation function is effectively performedA ?his "ould include reengineering of all critical products and processes +y leveraging on innovative technology2+ased solutions@ "hile retaining a strong customer2centric focusA
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C-+SUM$R "R-/$C/I-+ *inancial Consumer "rotection and its )inkage to Risk Management *unction !inancial Consumer Protection has emerged as a key area of supervisory focus glo+allyA ?he glo+al financial crisis has highlighted the vulnera+ility of the consumer class@ "hich has +een "orst hit in the crisisA ?he key feature of the e-ploitation has +een the discriminatory@ non2 transparent and illogical pricing "hich has affected the poor and vulnera+le consumers most emphaticallyA ?he product innovations have not focused on customer reEuirements and have@ instead@ aimed at serving the interests of the service providerA ?he +asic fact@ that the "ell +eing of the consumer is essential for the sustaina+ility and gro"th of the service provider@ has +een lost sight ofA As part of its regulatory reform agenda@ < .1 !inance Ministers and Central Bank <overnors have also endorsed a set of )igh2level Principles on !inancial Consumer Protection@ underlining its overall importance for financial sta+ilityA
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?he principles en8oin upon the supervisors and oversight +odies to ensure an eEuita+le and fair treatment of consumers@ disclosure and transparency in product and service offerings along "ith promotion of financial education and a"areness amongst the consumersA In this conte-t@ some important aspects of consumer protection and risk management that +anks need to im+i+e in their +usiness processes are as under6
Pricing of asset and lia+ility products should +e transparent and non2 discriminatoryA At a minimum@ it must +e ensured that poor do not su+sidi,e the provision of +anking services to the richA ?he +usiness operations of +anks should +e customer2centric in natureA ?his should +e reflected in all aspects of +anking operations including creation of customi,ed products and services@ pricing of services@ delivery channels@ etcA Banks should@ inherently@ +e fle-i+le in their operations so that they have the a+ility to meet the evolving stakeholder e-pectationsA Banks should +e a+le to appreciate the risk2return trade2off involved in various activitiesA ?he +asic premise that greater return "ould invaria+ly come from assumption of higher risk@ needs to +e appreciated and disseminated@ +oth "ithin the organi,ation and to +anks> customersA Banks need to develop the a+ility to discern good risk from +ad so that they selectively take on only those risks that are in alignment "ith the +ank>s long term strategic visionA ?he culture of efficient risk management needs to +e im+i+ed in the organi,ation>s ethos so that everyone from the top management to frontline managers in the field shares a common vision of risk managementA
A key related issue is the integrity of MI$ in +anksA %ach +ank claims to +e oriented to"ards its customersA Are the +anks a"are of the num+er of customers they haveN Moreover@ most of the +anks do not have a system of "orking out activity "ise costs and returnsA /nless +anks kno" the return on each and every product@ they cannot arrive at a truly risk +ased pricingA Baroda Academy Inventing Methods for Igniting Minds
!+-& H-UR BA+! <A&AR.S A+. ACC-)A.$S *-R /0$ BA+! I+ *H:9= Best Pu+lic $ector Bank CP$BD +y C5BC2?:'* & MCO <olden Peacock A"ard for %-cellence in Corporate <overnance +y Institute of Directors & =orld !orum for Corporate <overnance received in ondon Baroda Academy Inventing Methods for Igniting Minds
Dainik Bhaskar India Pride A"ard for .1'' Most %fficient Bank in Fenya Best Initiatives in Inclusive Banking 0 !IBC Banking A"ard Dun & BradstreetMs eading P$B in P<lo+al Business Development Category 5ational A"ard for Performance under $M% Business A"ard for Best /tilisation of Intellectual Resources Best <ro"ing arge Bank +y Business =orld2P=C Business eadership A"ard +y 5D?:2 Best P$B in .1'' A"ard for %-cellence in !inancial Reporting +y ICAI in P$B category !astest <ro"ing arge Bank +y Business =orld2P=C /?:2Bloom+erg !inancial eadership A"ard !M $tars Industry Brand eadership A"ard BGBMs Brand Ranking has increased +y (4 notches in a yearMs time in ?op 311 Banking Brands +y ?he Banker@ ondon Best Bank A"ard2.1'. A#ards for the Banks C$- 7CM.8 Gutstanding !inancial Professional2.1'1 +y C5BC2?:'* & MCO Best Banker A"ard C?A AA Pai Memorial A"ardD +y Farnataka $tate Gpen /niversity ifetime Achievement A"ard +y Dainik Bhaskar India Pride A"ards Banker of the 7ear +y Business =orld2P=
<+$& I+I/IA/I2$S /A!$+ BH BA+!= Ma3or technology Initiati'es
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As on 3'st Dec .1''@ the BankMs entire domestic@ overseas and RRBs QiAeA@ five sponsored RRBsR related operations "ere on the CBS platformA Bank has developed I? facilities for onlineBoffline account opening through Business Correspondents under *inancial InclusionA BankMs retail & corporate customers en8oy several facilities under its Internet Banking .eli'ery ChannelA ?he SMS alerts of transactions are also implemented in the Internet Banking PortalA Bank has implemented Internet Banking in :5 of its overseas territories@ nota+ly Gman@ ?an,ania@ /ganda@ Fenya@ Mauritius@ $eychelles@ Bots"ana@ 5e" Sealand@ /A%@ !i8i@ /F@ <hana &Australia Bank has also implemented Rapid*unds9India solution in all the ma8or territoriesA Bank has +uilt a State(of(the(Art .ata Centre conforming to /ptime Institute ?ier23 standard & a .isaster Reco'ery Site in different seismic ,ones to ensure uninterrupted +anking services delivery to customersA BankMs Mobile Banking 7Baroda M(Connect8 provides various facilities to its customersA Anti Money )aundering 7AM)8 has +een implemented in India and .3 of BankMs overseas territoriesA Bank has developed an Integrated 1lobal /reasury Solution in its ma8or territories like /AFA@ /A%@ Bahamas@ Bahrain@ )ong Fong@ $ingapore@ Belgium@ /$A and India to achieve reduced cost of operations & +etter fund managementA Bank has a centralised S&I*/ system for India & its .3 overseas territoriesA Internet "ayment 1ate#ay has +een implemented to facilitate e2commerce transactions in multi currencies across the glo+eA Bank has introduced the facility of Multiple Accounts +eing linked to a single De+it Card Cverified +y :isa@ C::.D and also Mo+ile 5um+er registration thruM A?Ms in CB$ for $M$ AlertsA $(ta4 payments thruM A?Ms are also facilitated and Mobile A/Ms are introduced in several citiesA ?o provide safe online +anking services to its customers & protect them from phishing attacks@ Bank has implemented a *raud Management SolutionA Baroda Academy 3 Inventing Methods for Igniting Minds
Bank has set up t"o Contact Centres in uckno" & Baroda to fast addresse the customer Eueries & grievancesA Back -ffice functions have +een centralised in the Bank at City Back Gffices & ten Regional Back Gffices C at Baroda@ Kaipur@ uckno"@ Bhopal@ Coim+tore@ Folkata@ Mum+ai@ Kamshedpur@ 5e" Delhi & PuneD to improve the delivery of servicesA Cash Management Solution is implemented to provide operational support to customersM A MA Baroda e(trading has +een launched for Retail and Corporate customersA Roll out of )RM$ and PayrollA Baroda e( "ay 2 %lectronic /tility Bill Payment -nline )oan Application 0 %ducational oan@ )ome oan@ Car oan aunching of Baroda 1ift Card Introduced <2isa "latinum= "remium .ebit CardT ?ravel Card in foreign currency is introducedA C/S (CheEue ?runcation $ystem implemented in Delhi and <rid +ased C?$ "as implemented in Chennai@ Coim+atore and BangaloreA C?$ "ill +e shortly implemented in =estern <rid alsoA
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"ro3ect <+A2+IRMAA+ Baroda +e4t= A comprehensive transformation programme called 95A:5IRMAA5; has launched +y our Bank for its domestic operations on .. Kune .11#A ?he Bank has partnered "ith Mckinsey & Company for this programme@ "hich is centered around our customers and our employees@ and has t"o core elements0 Business Process Re2engineering CBPRD & Grgani,ation Restructuring CGRDA &hy +a'nirmaan> 'A ess time spent on relationship management and +usiness development .A o" utili,ation of technology 3A ?o reach at noA' among P$/ Banks (A )igh aspirations 3A In previous .1 years@ +anking sector under"ent sea changes@ so@ it needs immediate attention to realign process changeA B"R 7Business "rocess Re(engineering8 Main -b3ecti'es Improvement in +ranch productivity on sales Best2in2class service levels for customer delight Redesign of front and +ack office processes and roles to reduce turnaround time Reduction in operating costs -rganiGation restructuring Main -b3ecti'es Appropriate organi,ation structure and systems to support BPR and +e in line "ith future +usiness plans@ at corporate@ ,onal and regional offices & at +ranches $ustaina+ility of change program through capa+ility +uildingA +a'nirmaan ha'ing B key elements Baroda Academy 3 Inventing Methods for Igniting Minds
'A $implified systems and processes at +ranches and other offices .A =orld2class +ack offices to support +ranch operations 3A Alternate Channel usage (A Redefined organi,ation structure and roles 3A ?raining to Barodians for ne" roles .e'elopment ,Repositioning under +a'nirmaan pro3ect Pro8ect 5avnirmaan has altogether '* activities covering +oth BPR & Grganisational Restructuring@ aimed at transforming the Bank>s +ranches into a sales & service centres to make possi+le a sustained sales gro"th@ superior customer e-perience and alternate channel migrationA ?he most important initiatives covers 6 o Conversion of all metro & ur+an +ranches into Baroda 5e-t +ranches "ithin a timeline Q over '3.* +ranches rolled out so far R o Creation of automated & leaner Back Gffices like6 City Back Gffice Regional Back Gffice C'1 functioningD %sta+lishment of t"o Call Centres Introduction of frontline automation Qvi,A Uueue Management $ystem and CheEue deposit MachinesR at select +ranches for customer convenience Conducting ?rainings and Boot campsA Grgani,ation Re2structuring Qcreation of $elling roles at +ranch@ RAGA and SAGAR ?he initial impact of Baroda 5e-t migration has +een found to +e re"arding +oth in terms of increased customer satisfaction and CA$A gro"thA ?he said impact has +een sustained at ''1 Baroda 5e-t +ranches evaluated on CaD sales and C+D customer satisfaction during first stage of evaluationA Another evaluation carried out recently on CaD Customer satisfaction Qat 2'442R and C+D %mployee satisfaction Qat 2'4'R Baroda 5e-t +ranches@ sho"s significant improvementA A certification procedure for Baroda 5e-t +ranches have +een introduced in terms of "hich process complianceB adherence are +eing evaluated +y Bank>s Baroda Academy Inventing Methods for Igniting Minds
Internal inspectors and C$A? B %$A? e-ternally evaluated +y engaging Market Research AgenciesA ?o sustain $ales <ro"th@ a ne" $ales Gperating Model has +een rolled out in 26.#2 +ranches in 2.32 Regions over .1 citiesA Gut of 2'32 Mid2corporate +ranches planned@ all are functionalA !urther centrali,ation initiatives are +eing piloted to ena+le the +ranches to +ecome a 9$ales2cum2$ervice Gutlet;A Bank>s )i2tech City +ranch@ )ydera+ad has +een transformed into an e2 +ranchA
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"ro3ect S"ARS0 A dedicated )R transformation pro8ect 0 M$PAR$) has +een initiated +y the Bank 2 to revamp its e-isting )R processes@ structures and policiesA :arious measures in the direction of talent management@ succession planning@ creating a scientific staffing model & manpo"er planning@ development and capa+ility +uilding@ performance management@ etcA have +een initiatedA Baroda Manipal School of Banking Gpening of the MBaroda Manipal $chool of Banking> as an innovative and ne" channel of resourcing of trained manpo"er in the BankA Around '*1 students are +eing inducted into this school every Euarter for a focussed grooming and for a one2year full2time P< course in +anking "hich is tailored to the Bank>s specific reEuirementsA Baroda Academy 3 Inventing Methods for Igniting Minds
SM$ % &$A)/0 MA+A1$M$+/ S$R2IC$S
SM$ Banking An -'er'ie# % Important 1uidelines
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$M% is a gro"th engine of economy for any nation across the "orldA ?he importance of this sector in India as compared to corporate giants "ith respect to its contri+ution to"ards Indian economy can +e +est understood that they contri+ute *H in <ross Domestic Product C<DPD@ (3H of manufactured output@ (1H of e-ports@ manufacture over 6111 products and provide employment to around 61 million person through .6 million enterprises as per latest ( th all India census of M$M%sA Recogni,ing the significant contri+ution of this sector in economic gro"th and also in employment generation in our country@ <overnment of India has taken good num+er of initiatives to develop the sector such as erst"hile definition of M$mall $cale Industries> "as enlarged +y increasing investment ceiling in plants & machineries from RsA Gne crore and trading activities have taken in the am+it of M$M%s +y enactment of Micro@ $mall & Medium %nterprises Development CM$M%DD Act from .nd Gcto+er .116A Also the Act recogni,es the term M%nterprises> instead of MIndustry> to include service in M$M% segmentA ?he units engaged in manufacturing or producing and providing or rendering of services has +een defined as micro@ small & medium under M$M%D Act on +asis of original investment in plant & machinery and eEuipment as under 0 %nterprises Micro %nterprises $mall %nterprises Medium %nterprises Manufacturing /p to RsA.3A11 lacs $ervice /p to RsA'1A11 lacs
A+ove RsA.3A11 lacs to A+ove RsA'1A11 lacs to RsA311A11 lacs RsA.11A11 lacs A+ove RsA311A11 lacs A+ove RsA.11A11 lacs to to RsA'111A11 lacs RsA311A11 lacs
ooking to the significance of $M% sector@ it is estimated that if India "ishes to have gro"th rate of *2'1H for ne-t couple of decades@ it needs a strong $M% sector@ "ithout "hich it "ould +e difficult to reali,eA ?oday there are a+out 31 Baroda Academy 3 Inventing Methods for Igniting Minds
million M$M%s in the country and this sector has sho"n an average gro"th of '*H over the last five yearsA In this +ackdrop@ M$M% is considered to +e fast gro"ing sector of economy and the sector gaining more importance to reali,e theme of '. th !ive 7ear Plan C.1'.2.1'4D approach paper 9faster@ sustaina+le & more inclusive gro"th;A Institutional, "olicy % 1o'ernment incenti'es $nhance 'iability of SM$ *inance 'D Banks have set up dedicated processing cell@ $M% oan !actory & $M% oan )u+ "ith a pool of speciali,ed skills of $M% creditA Also set up regional $M% care center giving different nomenclature +y the +anks to facilitate $M%s for Euick redressed of their grievancesA .D Banks to achieve mandatory lending to $M% for inclusive gro"th such as .1H 7o7 gro"th in credit to Micro & $mall enterprises@ 61H of M$% advance to Micro enterprises +y .1'.2'3 3D $tatutory provisions reEuirement for standard advances under $M% advances is merely 1A.3H as against 'A11H in case of real estate and 1A(1H for other advances "hich is a re"ard for +anks to make lo"er provision to"ards +uffer capital on $M% advances (D Collateral free loans up to RsA Gne crore are secured +y C<?M$% guarantee "hich is highly liEuid at par "ith cash security as compared to any other collateral in loan accounts 3D Allocation of Sero risk "eight to $M% loans guaranteed +y C<?M$% for capital adeEuacy reEuirement 6D $implified computation of "orking capital limit to M$% units on +asis of minimum .1H of their estimated annual turnover up to limit of RsA311 lacsA 4D /nion <overnment has schemes of felicitating Best Bank a"ards in recognition of contri+ution made +y +anks for promoting $M% sector that +uilds Corporate Brand "hich is invalua+le and add ne" feathers to the +usiness of "inner +anks *D Pu+lic Procurement Policy introduced "ith a provision that every Central Ministry B Department B P$/ shall set an annual goal for procurement from M$% sector at the +eginning of every financial yearA G+8ective is to achieve an overall procurement goal of minimum .1H of total annual purchases of products or services produced or rendered +y M$%sA Baroda Academy 3 Inventing Methods for Igniting Minds
#D imit of turnover for compulsory ta- audit of account has +een raised to RsA'11 lacs Cfrom RsA61 lacsD in +udget of .1'.2'3 '1DCapital gain ta- is e-empted on sale of residential property if sales consideration is used for su+scription in eEuity of a manufacturing $M% company for purchase of plant & machineryA ''D 5ational Manufacturing Policy has aim to increase share of manufacturing in <DP to .3H and create '11 Mn ne" 8o+s +y .1..L to achieve this target@ $M% gro"th is considered to +e an ans"erA
Important Committees +ayak Committee ( /o $4amine the Ade?uacy of Institutional Credit to SSI Sector 7no# MS$8 ( ?he Committee "as constituted +y Reserve Bank of India in Decem+er '##' under the Chairmanship of $hri PA RA 5ayak@ the then Deputy <overnor to e-amine the issues confronting $$Is Cno" M$%D in the matter of o+taining financeA All the ma8or recommendations of the Committee have +een accepted and the +anks have +een interalia advised to6 give preference to village industries@ tiny industries and other small scale units in that order@ "hile meeting the credit reEuirements of the small scale sectorL grant "orking capital credit limits to $$I Cno" M$%D units computed on the +asis of minimum .1H of their estimated annual turnover "hose credit limit in individual cases is upto RsA. crore Q since raised to RsA3 crore RL prepare annual credit +udget on the V+ottom up> +asis to ensure that the legitimate reEuirements of $$I Cno" M$%D sector are met in fullL e-tend M$ingle =indo" $cheme> of $IDBI to all districts to meet the financial reEuirements C+oth "orking capital and term loanD of $$IsCno" M$%DL %nsure that there should not +e any delay in sanctioning and dis+ursal of creditA In case of re8ectionBcurtailment of credit limit of the loan proposal@ a reference to higher authorities should +e madeL Baroda Academy 3 Inventing Methods for Igniting Minds
not to insist on compulsory deposit as a VEuid pro Euo> for sanctioning the creditL open specialised $$I Cno" M$%D +ank +ranches or convert those +ranches "hich have a fairly large num+er of $$I Cno" M$%D +orro"al accounts@ into specialised $$I Cno" M$%D +ranchesL identify sick $$I Cno" M$%D units and take urgent action to put them on nursing programmesL standardise loan application forms for $$I Cno" M$%D +orro"ersL &orking 1roup to Re'ie# the Credit 1uarantee Scheme for Micro and Small $nterprises A =orking <roup "as constituted +y the Reserve Bank of India under the Chairmanship of $hri :AFA $harma@ %-ecutive Director@ to revie" the "orking of the Credit <uarantee $cheme of C<?M$% and suggest measures to enhance its usage and facilitate increased flo" of collateral free loans to M$%sA ?he recommendations of the =orking <roup included@ inter alia@ mandatory dou+ling of the limit for collateral free loans to micro and small enterprises CM$%sD sector from RsA3 lakh to RsA'1 lakh and en8oining upon the Chief %-ecutive Gfficers of +anks to strongly encourage the +ranch level functionaries to avail of the C<$ cover and making performance in this regard a criterion in the evaluation of their field staff@ etcA have +een advised to all +anksA
&ealth Management Ser'ices Baroda Academy Inventing Methods for Igniting Minds
Gur Bank as part of customer centric measure initiated =ealth Management $ervices to provide to our )5I and affluent customer a complete financial solution at one stopA ?he service has ena+led our customers to +uy various investment products through our +ranches and is positioning our Bank as 9Gne $top !inancial $uper Market;A /nder =ealth Management $ervices currently "e are offering 3 rd party products in Bancassurance@ Mutual !und@ e2?rading etcA under tie up arrangement "ith various partnersA Segment +ame of /ie(up "artner "roducts ife India!irst ife Insurance CoA /nit inked Insurance Plan Insurance tdA CKoint :enture CoA of the ?erm Insurance Plan BankD %ndo"ment Plan <roup Insurance Plan & )ealth InsuranceWW <eneral 5ational Insurance CoA tdA 9Baroda )ealth; co2+randed Insurance medi2insurance products for hospitali,ation e-penses Insurance covered for assets such as vehicle@ +usiness & industries@ live stock etcA from various risksA Mutual Baroda Pioneer Mutual !und <ro"thB%Euity $cheme !und CKoint venture CoA of the BankD Income B De+t $cheme Balance !und /?I Mutual !und Money Market or iEuid Birla $unlife Mutual !und !und Reliance Mutual !und <ilt !und $undaram B5P Pari+as Inde- !und !ranklin ?empleton ?a- $aving $cheme Investments !i-ed Maturity Plan Fotak Mahindra Mutual !und %2Broking Baroda Academy ID!C Mutual !und India Infoline td 3 ?rading in eEuity@
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-ther Ma3or tie up , M-U of Bank #ith other Ser'ice pro'iders %OIM Bank@ ID!C and $IDBI for co2financing of pro8ectsA I!C for infrastructure development finance Bank of Baroda enters into an agreement "ith Bom+ay $tock %-change for clearing and settlement MBs Avenue CIndiaD PvtA td "ill ena+le customers of the Bank to shop opline@ and make payments through 5et Banking accountA MBs ?echprocess tdA !or providing online payment solution and direct de+it credit to its customersA ?his tie2up "ill ena+le Banks customers to shop on2 line through Banks e2+anking portal and also make utility +ill payments like telephone +ills@ electricity +ills etcA Car !inance "ith ?ata Motors tdA@ )yundai Motors India tdA@ Mahindra & Mahindra tdA@ Maruti $u,uki India tdA ?ie up "ith Fotak Mahindra Gld Mutual ife Insurance tdA !or providing ife Insurance Cover to %ducation oan +orro"ers and )ome oan +orro"ers sanctioned under a special packageA MG/ "ith C<?M$% for e-tending collateral free loans up to RsA '11 lacs under Risk $haring !acility scheme launched +y C<?M$%A
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e(BUSI+$SS <BA+!IS e(C0A++$) "R-.UC/S= 9Bank is providing various Alternate Delivery channels apart from Brick and mortar BankingA ?he purpose of these alternate delivery channels is to provide any"here any time +anking +y using technologyA Any"here +anking means no geographical restriction of +anking transactions "hether "ithin +anking hours or out side +anking hours@ "hether from the +ank premises or out side of the +anks premisesA Details of such alternate channels and Bank>s e +usiness products are 1 2 3 4 5 6 7 8 9 Automate ?eller Machine CA?MD Prepaid & De+it Cards Real ?ime <ross $ettlement $ystem CR?<$D 5ational %lectronics !und ?ransfer C5%!?D Baroda Connect C Internet BankingD Baroda M 0 Connect CMo+ile BankingD Contact Centre Baroda e2<ate"ay Baroda Cash Management $ervices CBCM$D
: AU/-MA/$. /$))$R MAC0I+$S 7A/Ms8 Banking sector is undergoing ma8or transformation to"ards convenience +anking through technology products and customer centric initiativesA :alue added services@ especially in the area of any time any"here +anking@ are essential to retain e-isting clientele and e-pand +usinessA Feeping this in vie" our +ank has introduced A?M CAutomated /eller MachineD facility in '##3A All our A?Ms prior to introduction of De+it Card "ere stand alone A?MsA Baroda Academy 3 Inventing Methods for Igniting Minds
ISSU$R In the card industry@ the issuer is an entity@ "hich issues the cardA In the de+it card segment@ this normally is a Banker@ "ho maintains the account of the customerA ACJUIR$R ?he acEuirer is an entity@ "hich makes the payment eAgA o"ners of A?Ms Cmostly +anksD to the Card holders to the mem+er esta+lishments S&I/C0 $"itch is a Computer "ith specially developed soft"are@ the main function of "hich is to route the transactionsA 0-S/ )ost is another computer@ "hich is installed at +ranchesBcentral location "hich maintains the Data and also issues the authorisations 9 "repiad Cards % .ebit Cards
$4isting S+ 2ISA Classic .ebit Cash limit at RsAA.3@111 ' A?M in RsA per day imit at PG$ RsAA31@111 . in RsA per day 3 C::. feature 7es Authenticatio ( $ignature n at PG$ $egmentation of customers 3 All customers in RsA 6 Annual fees In RsA
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Classic Maestro .ebit card RsAA.3@111 per day RsAA31@111 per day 7es PI5
2ISA 1old KCombiI K"latinumI .ebit card .ebit card RsAA31@111 per RsAA'@11@111 day per day RsAA'@11@111 RsAA.@11@111 per day per day 7es 7es PI5B $ignature $ignature
Annual income All Annual Income X RsAA3@11@111 customers X RsAA3@11@111A B )5I B 5RI customers !irst year !irst year !irst year free RsA .31B2 per free & then free & then & then RsAA'11 yearY 3 Inventing Methods for Igniting Minds
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RsAA'11 pAaA 4 PI5 change utility at A?M PI5 changeB Mini $tatement at other Bank A?M PI5 regeneration charges in RsA Card rene"al charges Card replacement charges CIndiaD in RsA Card num+er CdigitsD Cash at PG$ in RsA International usage charges CA?MD Charges for retrieval of charge slip in RsA 5um+er of transactions per day at A?Ms Accident 7es
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Baroda Academy
Insurance
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theft or misuse insurance of RsAA3@11@111B2 '1 years
L =aived after reaching a threshold spending of RsA 31@111B2 in PG$B e2commerce in a calendar yearA LL %-cluding $ervice charges Additional benefits,concessions 72isa "latinum8 In addition to support provided +y our De+it Card operations team@ :I$A also offers the follo"ing "hich are useful to the Card holders "hen traveling outside IndiaA :isa concierge for providing personali,ed customer service .(B4 <lo+al customer assistance service provided +y :I$A aA ostBstolen card reporting Cthrough :I$A on International travelD +A %mergency card replacement Cthrough :I$A on International travelD cA %mergency cash dis+ursement Cthrough :I$A on International travelD dA ?ravel assistance Cthrough :I$A on International travelD :arious re"ardBpromotional offers made availa+le +y :isa Cin and outside the countryD /arget customers 72isa "latinum8 $uper $aving Account holders Ce-isting & ne"DA Premium Current Account )older Ce-isting & ne"DA 5on resident ABc holders@ "hose accounts are active@ "ith a minimum turnover of RsA(@11@111 an year@ or "ho holds !i-ed deposit "ith our Bank to the tune of X RsARsA (@11@111A
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$aving Bank Account holders "ith average monthly +alance of RsA .3@111B2 Cprevious t"elve monthsD Current Account holders "ith average monthly +alance of RsA '@11@111B2 Cprevious t"elve monthsD $taff mem+ers6 Chief Managers and a+oveA /arget customers 71old ICombiI MasterCard8 $alary Accounts CBranches should ensure that salary is getting credited to this account and the total salary per year is X RsA 3@11@111B2D All $taff mem+ersA 5RI Account holders Ce-isting & ne"D
"re "aid Cards Introduction Gver the years "e have "itnessed gro"th of credit cards and De+it Cards as alternate payment options to conventional cash@ cheEue and demand draftA Pre paid cards are ne-t development in card +usiness "hich is gaining momentum in Indian market APrepaid cards are pre2funded cards mainly used for gift purpose@ making adhoc payment@ for online purchase etc and can +e used till +alance is availa+le in the cardA In pre2paid cards@ he Account is not e-posed and hence it protectedA G"nership can +e transferred and prepaid cards are safe and easy to handleA -pen $nded and Close $nded cards6 Prepaid cards are availa+le in non reloada+le Cuse and thro"D as "ell as reloada+le Cmulti useD category +ased on the type of card and associated regulationA Prepaid variants "hich can +e used at large num+er of merchant locations are called open ended cards and the ones "hich have accessi+ility at select centersBoutletsBC/< are classified under closeBsemi close cards Baroda 1ift Cards6 Bank of Baroda has launched gift variant of prepaid cards called 9Baroda <ift Card; on .1th Kuly .1''A ?his M:erified +y :I$A> ena+led prefunded card can +e Baroda Academy 3 Inventing Methods for Igniting Minds
used to make purchases at merchant outlets and online stores "hich accepts :I$A till availa+le amount on the cardA Pre2paid cards can +e issued to any+ody "ith a valid Bank of Baroda ABc or to a non customer for purchase of card up to RsA3111B2 having a valid <overnment issued Photo Id card @ !or non customer @ for amount higher than RsA3111B2@ regular F7C is reEuiredA Baroda <ift cards can +e good revenue stream for +ranches +y "ay of increase in non interest income@ +reakage income@ and float fundsA It also helps in increasing the foot falls at the +ranches and there+y helps the +ranches for up selling & cross selling of other products Salient features of Baroda 1ift Card Issued in Indian Rupee for a minimum amount of Rs311B2 and up to a ma-imum amount of RsA31111B2 in multiples of RsA' Card is valid for a period of one year /sa+le at :I$A card accepting merchant outlet across IndiaA Baroda <ift cards can +e used for making online purchase "hich "ould +e fully secured "ith M:erified +y :I$A authentication> Cash "ithdra"al at A?M is not allo"ed as per RBI guidelines Cards can +e activated on the same day of purchase 5o +alance transfer from one card to another card is permitted F7CBAM BC!? provisions of RBI "ill apply Card holders can reach the support team through the dedicated .(-4 toll free num+er or through e2mail to customer care team Baroda /ra'el $asy Cards6 Bank has launched foreign currency pre2paid card Baroda ?ravel %asy Card and the first release is /$ Dollar cardA Baroda ?ravel%asy card is presently issued in /$Z for minimum /$Z.11 and ma-imum as per !%MA guidelines issued from time to timeA ?ravel easy card is valid for three years from the date of issueA Baroda ?ravel %asy card is issued to Resident Indians and are usa+le a+road for A?M cash "ithdra"al and making merchant payments at physicalBonline stores Baroda Academy Inventing Methods for Igniting Minds
from the loaded currencyA Baroda ?ravel%asy Card "ill +e availa+le at 0 B Category +ranches for issuanceA Salient features of Baroda /ra'el$asy Card Issued in /$ DollarL minimum load value of /$D .11 Activation "ithin .( hours of purchase ?ravelers are relieved of the risk of carrying cash & travelers> cheEue during foreign visits !eesBcharges are lo"er than applica+le charges on domestic de+itBcredit cards used a+road Cards are valid for 232 yearsA In this period@ the card can +e reloaded Cardholder "ill have access to .(-4 Customer Care team as "ell as secured online portal for vie"ing their card +alance and transaction details Accounting@ reconciliation and customer support shall +e provided +y the Gperations team@ +ased at e2Business Department@ in colla+oration "ith the service provider F7C@ AM BC!? reEuirement are as per RBI guidelines Cards cannot +e used in India@ 5epal & Bhutan 5 Real /ime 1ross Settlement System 7R/1S8 R?<$ "as introduced in India +y RBI on .6 th March@ .11( and our +ank +ecame a R?<$ mem+er from *th May@ .11(A Real ?ime <ross $ettlement $ystem CR?<$D is an efficient@ secure@ economical and relia+le system of transfer of funds from +ank to +ank as "ell as from a remitter>s account in a particular +ank to the +eneficiary>s account in another +ank across the countryA ?he minimum amount of t-n under R?<$ for the customer is RsA . lakhA Another difference +et"een 5%!? and R?<$ is that transfer of funds up to a limit of RsA 31111 is allo"ed +y cash under 5%!? "hile it is strictly an account to account transfer in R?<$A Baroda Academy Inventing Methods for Igniting Minds
?he funds are made availa+le for immediate useA It is a cheaper remittance facility as compared to conventional remittance like DD or Collection of cheEuesA R?<$ system can reEuire relatively large amounts of intra2day liEuidity +ecause participants need sufficient funds in the settlement account to cover their outgoing paymentsA iEuidity can come from various sources@ including opening +alances@ or reserve +alances at the central +ank@ incoming payments and intraday credit C"hich is usually provided +y the central +ankDA AdeEuate liEuidity@ relative to the value and distri+ution of payments@ makes a smooth flo" of payments possi+le through such systems@ helping to avoid delays in individual payments and minimi,ing liEuidity risksA ?he cost of intra2 day liEuidity depends on varia+les such as amount reEuired@ the opportunity cost of maintaining liEuid +alances and the cost of intra2day creditA !ollo"ing are the pre2reEuisite for putting through a funds transfer transaction using R?<$ Griginating and destination +ank +ranches should +e part of the R?<$ net"ork Amount to +e remitted Remitting customer>s account num+er "hich is to +e de+ited 5ame of the +eneficiary +ank 5ame of the +eneficiary customer Account num+er of the +eneficiary customer $ender to receiver informations@ if any ?he I!$C num+er of the receiving +ranch !oe net +anking customers@ some +anks provide the facility to automatically pop2up the I!$C once name of the destination +ank and +ranch is highlighted B chosen B indicated B keyed inA I*SC ?he I!$C is Indian !inancial $ystem Code is an alpha numeric code that uniEuely identifies a +ank2+ranch participating in the R?<$ systemA
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I!$C is used +y the R?<$ system to identify the originating B destination +anks B +ranches and also to route the messages appropriately to the concerned +anks B +ranchesA ?his is an 2''2 digit code "ith the first four alpha characters indicate the BankA C!or our Bank it is BARBDA ?he fifth character is numeral Sero C1D reserved +y RBI for future useA ?he last si- characters identify the respective +ank>s +ranchA CGur Bank has adopted A P)A code of the respective +ranch for these last sicharactersDA In case the A P)A code is less than si- alpha+ets@ then suffi- +y O>s so as to make it si- charactersA !or e-ample in the case of Agra main +ranch@ the alpha code is A<RA and the I*S Code, thus, shall be ( BARB6A1RAMM@ A +ational $lectronics *und /ransfer 7+$*/8 ?he +ational $lectronic *unds /ransfer C+$*/D is a nation "ide Inter2+ank remittance system of Reserve Bank of India facilitating one2to2one funds transfer and has +een in operation since .' 5ovem+er .113A ?he facility is currently +eing offered across the country +y more than 4(@111 +ranches of various '.' mem+er +anksA 5%!? is +asically for transferring funds +et"een Banks only and not for inter2+ranch transfer "ithin our BankA ?ransaction per day in RsA 3*1*' +illion and num+er of per day transaction is 3*13*'(A ?his is a secure and trusted electronic funds transfer system and the credit has to +e passed on to the +eneficiary on the same day or at the most on ne-t "orking day on receipt of the messageA In case +eneficiary details are found to +e incorrect then the funds have to +e returned to the sending +ankB +ranchA ?he 5%!? is electronic fund transfer "hich operates on a deferred net settlement CD5$D +asis "hich settles transactions in +atchesA ?here is no minimum or ma-imum amount ceiling in case of 5%!? transactionsA %ach +ank>s +ranch@ participating in 5%!?@ is allotted a uniEue 2''2 digit Indian !inancial $ystem Code Ca++reviated as I*SCDA ?he fifth digit is SeroA Baroda Academy Inventing Methods for Igniting Minds
!or eAgA our Ashram Road +r Ahmeda+ad "ill have the I!$ Code as BARB1A$)RAM 5%!? is an account to account funds transfer systemA )o"ever@ it has +een decided by RBI to pro'ide remittance facility up to Rs@ B6,666,2 in cash to "alk2in customers iAeA customers not having an account "ith remitting +anksA !ull details of such remitters such as addresses@ telephone num+ers etcA are to +e collected@ if cash deposited is for an amount less than RsA .1@111B2 In case of of amount of RsA .1@111B2 to RsA 31@111B2 in addition to the a+ove collect photo ID from the customer such as PA5 card@ Driving licence@ %lection card@ Adhar card etcA
/imings Presently@ 5%!? operates in hourly +atches 0 there are t"elve settlements from * am to 4 pm on "eek days CMonday through !ridayD vi,A * AAML # AAMAL '1 AAMAL '' AAMAL '. 5oonL ' PAMAL . PAMAL 3 PAMAL ( PAMAL 3 PAMAL 6 PAMA and 4 PAMA and sisettlements from * am to ' pm on $aturdays vi,A * AAML # AAMAL '1 AAMAL '' AAMAL '. 5oon and ' PAMA Accordingly@ the 5%!? Cell at Mum+ai do"nloads the out"ard messages from CB$ at suita+le intervals and sends to RBI for settlementA In case of on2line 5%!? through Baroda connect or through M2connect after the a+ove cut2off time@ the account "ill +e de+ited on the same day +ut the funds "ill +e transferred in the first +atch of the ne-t "orking dayA B Baroda Connect 7Internet Banking8 Internet Banking CBaroda ConnectD6 Baroda Connect "as launched in our +ank on '(B1#B.116A It provides .(Y4Y363 service to our Retail & Corporate customersA Baroda connect can +e accessed from any "here using InternetA !eatures availa+le6 Mo+ile and /tility Payments Baroda Academy 3 Inventing Methods for Igniting Minds
Gnline +ooking of Rail"ay tickets Gnline DirectBIndirect ta-es & state :A? paymentA Gnline R?<$B5%!? Inter+ank !und transferA Institution !ee PaymentA $elf linked account & ?hird Party !und transfer "ithin BGBA Baroda e $hoppeA Gnline ?emple DonationA Application supported +y +locked account CA$BADB IPG Baroda easy pay@ Bill Payment for various vendorsA Account summary@ Mini $tatement Clast '1 transactionsD@ $tatement of accounts in e-cel@ PD! format@ ma- (11 transaction statement@ ?D$ inEuiry@ 5ominee details@ CheEue status inEuiry@ Koint holder details@ ?GD@ ien inEuiry etcA ReEuest availa+le for !DR Rene"al@ issue cheEues through R MsA $M$ alerts can receive on registered mo+ile for all su+scri+ed alerts transactionsA !inancial & 5onfinancial activities inEuiry through activity optionA Modelling of oan & !DR is also availa+leA !orm .6A$ for ?D$ Certificate from 5$D !raud Management $olutions Gnline !DR Gpening Gnline oan Payment ayer C$$ D
$ecurity6 Baroda Connect is secured +y '.* +it $ecured $ocket provided +y :eri$ignA C Baroda M Connect 7Mobile Banking8
Bank of Baroda offers you BARGDA M2CG55%C?@ the most convenient and secure "ay to +ank on the move .(O4A BARGDA M2CG55%C? is a +anking application that can +e do"nloaded on your mo+ile phone and can +e used to conduct +anking transactions in your Bank of Baroda account using your registered mo+ile phoneA =ith BARGDA M2CG55%C? you can access account information@ transfer funds@ pay utility +ills@ recharge mo+ile@ do airlineBmovie ticketing and many moreA Baroda Academy 3 Inventing Methods for Igniting Minds
.etails of Ser'ices -ffered BA A5C% %5U/IR7 MI5I $?A?%M%5? !/5D ?RA5$!%R C=I?)I5 BA5FD 1. MGBI % ?G MGBI % 2. MGBI % ?G ACCG/5? !/5D ?RA5$!%R C-U/SI.$ BA+!8 'A 5%!? C5ational %lectronic !und ?ransferD .A IMP$ CInter+ank Mo+ile Payment $erviceD BI PA7M%5? AIR I5% ?ICF%?I5< MG:I% ?ICF%?I5< $)GPPI5< C5%O? P)A$%D MGBI % R%C)AR<% $?GP C)%U/% C)%U/% $?A?/$ B GCF CARD GCA?GR USS. BAS$. M-BI)$ BA+!I+1 S$R2IC$ /nstructured $upplementary $ervices Data C/$$DD is a <$M service "hich allo"s high speed interactive communication +et"een the su+scri+er and applicationA /nlike $M$@ /$$D is a session oriented serviceA /$$D gate"ay ena+les operator to introduce messaging services and allo" up2to '*. characters on a net"ork +et"een mo+ile stations and applicationsA /$$D gate"ay uses the same application programming interface that the $hort Message $ervice C$M$D center doesA Currently the facility is availa+le "ith daily transaction limit of RsA 3@111B2 per customerA 5//P C5ational /nified /$$D PlatformD is real2time and session oriented platform for Mo+ile Banking transactionsA It "orks on mo+iles "ithout do"nloading application soft"areA It is initiated +y Y##[ short code and is availa+le across Baroda Academy 3 Inventing Methods for Igniting Minds
mo+ile operators and +anks through a common integration of 5PCIA It has +etter adoption rate due to non dependency on application and is e-pected to +road2+ase Mo+ile Banking and promote !inancial Inclusion .ifference bet#een applications based ser'ice and USS. based ser'ice Application based ser'ice USS. based ser'ice Mo+ile Banking application has to +e 5o application is reEuired do"nloaded and installed onto the mo+ile handset Mo+ile handset must +e 8ava ena+led Availa+le on any <$M mo+ile handset Mo+ile connection can +e CDMA or <$M Mo+ile connection to +e <$M D Contact Centre ?he Call Center@ christened as 9Contact Centre; that +ank has recently introduced is delivery of +anking services through /-)) *R$$ "0-+$A ?hrough these ?oll !ree 5um+ers@ Bank>s customers and mem+ers of general pu+lic can call the Bank>s Contact Centre and seek information on their accounts@ reEuest for +anking services@ enEuire on +ank>s products@ interest rates@ etcA All customers can avail contact centre services +y dialing any one of the follo"ing ?oll !ree 5um+ersA :E66 99 55 AA :E66 :69 AA BB
It #orks for 5CB days in a year 7$4cept national holidays8, from E@66 am to E@66 pm@ ?hough these t"o centers are housed in t"o geographies@ they are complimentary to each other and function as a single unitA ?hese contact centers are provided "ith necessary access to soft"are applications like CB$@ CRM@ 5et +anking portal@ etc@ for ena+ling them to service +ank>s customersA Baroda Academy 3 Inventing Methods for Igniting Minds
?he resources deployed@ called agents have +een trained to service the Bank>s customersA Benefits to the Bank Contact centre helps +ranches +y providing customer service over P)G5% "ithout intervention of the +ranchesA Provides information on routine Eueries such as 0 Account Balance@ transactions@ cheEue status@ product enEuiry@ interest rate enEuiry@ gold rate enEuiry@ etcA 0 instantlyA Provides guidance to customers on Baroda Connect servicesA It can also CaD activate pass"ords and C+D take reEuest for regeneration of pass"ordsA $tops the payment of cheEue and can take the reEuest for issuance of cheEue +ook in respect of RBG covered +ranchesA )otlists the De+it Card and takes reEuest for reissuance of PI5 or De+it CardA As the Contact Centers "ill +e a+le to address most of the common MEueries> and Mservice reEuests>@ Branches "ill +e relieved from such "orkload and "ould +e in a position to focus their attention more for +usiness promotion B developmentA !urther@ Bank proposes to e-tend functions like CaD Registration of De+it Card related complaints Ccash not dispensedD@ C+D out+ound recovery calls@ and CcD out+ound sales callsA ?he contact centre "ill "ork as e-tended arm of the +ranch facilitating marketing and sales of the +ank>s various productsA Benefits to the Customers Most convenient delivery channel $ervices are availa+le from * am to * pm 363 days a year@ Ce-cluding Independence Day and Repu+lic DayD Baroda Academy 3 Inventing Methods for Igniting Minds
!ree of CostA ?oll !ree 5um+er and hence 5o Cost ?=G ?oll !ree 5um+ers are availa+le to ensure uninterrupted service Customers are not reEuired to visit +ranch for any servicesA %mergency $ervices 0 De+it Card )ot2listing 0 is easy@ simple@ authentic All service reEuests are supported +y Docket 5um+er@ for further enEuiryA $ervices for all linked accounts are availa+le Professionally managed and ?echnology driven services
E Baroda e(gate#ay 7Internet "ayment 1ate#ay8 Internet payment gate"ay is an internet +ased payment system under e2commerce +usiness@ christened as 9Baroda e2<ate"ay; +y Bank of BarodaA It allo"s merchants to offer their goods and services through "e+sitesA ?he consumer is provided an opportunity to kno"@ compare and shop products on virtual stores round the clock from the convenience of their homeA $ince the concept of visiting a physical store is +ecoming time consuming and inconvenient especially at ma8or centersA ?he IP< infrastructure is usually comple- and e-pensiveA It provides an easy and secure mechanism to merchants for processing online payments +y shielding them from underlying comple-ity of payment transactions and integration "ith electronic fund transfer s"itchesA IP< service provider is responsi+le for settlement@ accounting@ reconciliation +et"een various agencies involved and merchant is free to concentrate on his +usinessA /arget Customer
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Merchants@ "ho have their "e+site and are in the +usiness of selling products B services through internetA Merchants@ "ho are interested in e-panding their e-isting +usiness using internet technologyA Benefits of Baroda e(1ate#ay G"ned infrastructure of hard"are@ soft"are and dedicated support system for Baroda e2<ate"ayA )osted from Bank>s tier23 data centre providing .(-4-363 <lo+al supportA %-clusive +usiness vertical for e2Business@ headed +y <eneral Manager@ emphasi,ing Bank>s focus to"ards e2channelsA Best availa+le technology and time +ound support in integration and operations at competitive ratesA Dedicated operations team to provide assistance in configuration@ day2to2day processing@ settlement and associated reconciliationA Merchants get credit as early as ne-t "orking day for I5R@ though Bank receives settlement su+seEuently after '2. daysA Merchant is shielded from installing and maintaining comple- technology and interacting "ith various agenciesA Payment is received in stipulated timeframe even though Bank receives the amount su+seEuentlyA Merchant can themselves vie"Bprint transactions carried out from their "e+siteA $imple interface "ith Bank>s systemA Dedicated support is provided to configure and test the setupA Cardholder is assured of the safety of their card detailsBusageA In addition@ they get convenience of purchasing goodsBservices from the comfort of their homeBofficeA Round the clock hassle free serviceA At present it is only accepting Master B :isa@ Credit B De+it Cards issued +y any +ank in IndiaA It has got $ecurity feature such as C::. & 3D security for transactionsA Baroda Academy Inventing Methods for Igniting Minds
Security *eatures /tili,es strong industry standard '.* +it $$ encryption 32D $ecure 6 Additional pass"ord compliant "ith :isa and MasterCard protocol specifications and Reserve Bank of India guidelines Creduces chances of fraud to almost negligi+leD McAfee $ecure 6 ?o prevent from Internet "orms and credit card thefts@ "e are using McAfee $ecure certified systemA It continuously scan messages coming to the server and send alerts to administratorA ?he data transmission is encrypted and storage is under strict data centre environmentA F Baroda Cash Management Ser'ices 7BCMS8 =hile Core Banking $olution CCB$D provides a means to s"ifter collections +ut there are a num+er of gaps vis2\2vis the corporate customers> reEuirementsA Baroda Cash Management $olution empo"ers the Bank to offer its corporate customers optimi,ed Cash Management services +y drastically improving their !unds Collection Inflo" forecasting $peed & Euality of information assisting the process 0 Customi,ed Reports "ith additional information Payment dispatch !unds utili,ation to minimi,e interest outflo" Baroda Cash Management $ervices is divided into t"o +road categories 0 C'D Gn2site Bank Gperations and C.D =e+ driven GperationsA Cash Management $ervices consist of three functional modules6 Collections Module Payment Module iEuidity Management Baroda Academy Inventing Methods for Igniting Minds
"RI-RI/H S$C/-R )$+.I+1 % *I+A+CIA) I+C)USI-+ Re'ised "riority Sector 1uidelines /arget for the "riority sector )ending Priority $ector credit should +e minimum (1 H for Domestic commercial +anks B !oreign +anks "ith .1 and a+ove +ranches & 3. H for !oreign +anks "ith less than .1 +ranches @ of their Ad8usted 5et Bank Credit CA5BCD or credit eEuivalent amount of Gff2Balance sheet e-posure "hichever is higher of previous financial years Cas on 3'st MarchDA Ad3usted +et Bank Credit 7A+BC8 !or the purpose of priority sector lending@ A5BC denotes the outstanding Bank Credit in India minus +ills rediscounted "ith RBI and other approved !inancial Institutions plus permitted non $ R investments in )eld to Maturity C)?MD
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category plus investments in other categories@ "hich are eligi+le to +e treated as part of priority sector lending CegA investments in securitised assetsDA .ifferent Components of ",S )ending ?he follo"ing categories of advances as mentioned +elo" "ould +e included in the Priority $ector endingA Agriculture CDirectBIndirectD Micro & $mall %nterprises CDirectBIndirect !inanceD %ducational oans )ousing oans %-port Credit Gthers =ithin the overall main lending target of (1 per cent of Ad8usted 5et Bank Credit CA5BCD or eEuivalent amount of Gff2Balance sheet e-posure@ it should +e ensured that6
/otal agriculture '* percent of A5BC or credit eEuivalent amount of Gff2Balance $heet %-posure@ "hichever is higherA Gf this@ indirect lending in e-cess of (A3H of A5BC or credit eEuivalent amount of Gff2Balance $heet %-posure@ "hichever is higher@ "ill not +e reckoned for computing achievement under '* percent targ etA )o"ever@ all agricultural loans under the categories ]direct] and ]indirect] "ill +e reckoned in computing achievement under the overall priority sector target of (1 percent of A5BC or credit eEuivalent amount of Gff2Balance $heet %-posure@ "hichever is higherA Micro % Small $nterprises 7MS$8 CiD Advances to micro and small enterprises sector "ill +e reckoned in computing achievement under the overall priority sector target of (1 percent of A5BC or credit eEuivalent amount of Gff2Balance $heet %-posure@ "hichever is higherA Baroda Academy Inventing Methods for Igniting Minds
CiiD (1 percent of total advances to micro and small enterprises sector should go to Micro CmanufacturingD enterprises having investment in plant and machinery up to 3 lakh and micro CserviceD enterprises having investment in eEuipment up to Rs . lakhL CiiD .1 percent of total advances to micro and small enterprises sector should go to Micro CmanufacturingD enterprises "ith investment in plant and machinery a+ove Rs 3 lakh and up to Rs .3 lakh@ and micro CserviceD enterprises "ith investment in eEuipment a+ove Rs . lakh and up to RsA'1 lakh "articulars In case of Mfg@ sector, original in'estment in " % M /pto RsA.3 lacs A+ove RsA.3 lacs and upto RsA311 lacs In case of Ser'ice sector 7)oan upto Rs@9@66 cr8, original in'estment in $?uipments /pto RsA'1 lacs A+ove RsA'1 lacs and upto RsA.11 lacs
Micro %nterprises $mall %nterprises
)oans for food and agro processing #ill be classified under Micro and Small $nterprises, pro'ided the units satisfy in'estments criteria prescribed for Micro and Small $nterprises, as pro'ided in MSM$. Act, 966C@ $ducation )oan lacs $tudy in India up to RsA'1 lacs and $tudy a+road 0 up to RsA.1
0ousing )oans /pto RsA.3 lac in Metro and RsA'3 lac in other centres@ for constructions of housesA !or %=$@ RsA3 lac per d"elling unit Cirrespective of area D "ill Eualify for PA$A classificationA oans for repair and renovations up to RsA . lac in Rural and $emi /r+an Area and upto RsA 3 lacs in /r+an AreasA $4port Credit %-port Credit e-tended +y foreign +anks "ith less than .1 +ranches "ill +e reckoned for priority sector target achievementA Baroda Academy Inventing Methods for Igniting Minds
As regards the domestic +anks and foreign +anks "ith .1 and a+ove +ranches@ e-port credit is not a separate category under priority sectorA -thers oans@ not e-ceeding Rs 31@111 per +orro"er provided directly +y +anks to individuals and their $)<BK <@ Gverdrafts@ up to Rs 31@111 Cper accountD@ granted against ]no2frills] B +asic +anking B savings accounts provided the +orro"er>s household annual income in rural areas does not e-ceed Rs 61@111B2 and for non2rural areas it should not e-ceed Rs '@.1@111B2A oans to distressed persons not e-ceeding Rs 31@111 per +orro"er to prepay their de+t to non2institutional lendersA oans outstanding under loans for general purposes under <eneral Credit Cards C<CCDA If the loans under <CC are sanctioned to Micro and $mall %nterprises@ such loans should +e classified under respective categories of M$%A oans sanctioned to $tate $ponsored Grganisations for $CB$? for the specific purpose of purchase and supply of inputs to andBor the marketing of the outputs of the +eneficiaries of these organisationsA oans sanctioned +y +anks directly to individuals for setting up off2grid solar and other off2grid rene"a+le energy solutions for householdsA
&eaker section In order to ensure proper attention in the matter of allocation of credit to follo"ing preferred sector@ Ckno"n as =%AF%R $%C?IG5 as per the recommendations of $hri Frishnas"ami CommitteeD RBI has stipulated that .3 H of Priority $ector advances iAeA '1 H of net +ank credit should go to these "eaker sections +eneficiariesA !ollo"ing types of finance are included under =eaker $ection finance6 Baroda Academy Inventing Methods for Igniting Minds
$mall and Marginal !armers6 !armers "ith landholding of up to ' hectare is considered as Marginal !armersA !armers "ith a landholding of more than ' hectare +ut less than . hectares are considered as $mall !armersA !or the purpose of priority sector loans Msmall and marginal farmers> include landless agricultural la+ourers@ tenant farmers@ oral lessees and share2croppers@ "hose share of landholding is "ithin a+ove limits prescri+ed for 9$mall and Marginal !armer;A
*inancial Inclusion Recent Updates A large section of the rural poor still does not have access to the formal +anking channelA !urther@ the +ack"ard regions of the country@ too@ lack +asic financial infrastructureA 3 Inventing Methods for Igniting Minds
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!inancial Inclusion is aimed at providing +anking services at an afforda+le cost to the disadvantaged and lo"2income groupsA Capital formation through credit and financial services essential prereEuisite for inclusive and sustaina+le gro"th can +e achieved through access to a "ell2 functioning financial system resulting into +etter integration of economically and socially e-cluded people into the economyA <lo+ally@ the triad of !inancial Inclusion@ !inancial iteracy and Consumer Protection has +een recogni,ed as intert"ining threads in pursuit of !inancial $ta+ilityA
$4tent of *inancial Inclusion 7Source RBI8 "arameter 5um+er of ha+itations )a+itations having access to commercial Bank Branch Population having +ank account Population having de+it card Population having credit card
611111 3H 34H '3H .H
?he penetration of financial services is very lo" in 5orth %astern statesA o" level of financial penetration compared to G%CD countriesA Access of +ank +ranches +etter compared to china +ut "orse off compared to Malaysia and ?hailandA A?M penetration poor compared to Asian peer group countriesA In vie" of poor financial inclusion status RBI accorded top priority to it and accordingly commercial +anks "ere advised to6 !ormulate specific Board approved !inancial Inclusion Plans C!IPD and to act on them on a mission modeA ?o provide +anking services in every village having a population of over .111 +y 3' March .1'.@ through +ank +ranches as "ell as through various IC?2+ased models including through Business Correspondents CBCsDA Inventing Methods for Igniting Minds
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Despite increased outreach of the +ranches in rural and semi ur+an areas and the implementation of directed credit@ farmers and rural artisans still did not receive adeEuate credit from +anks and accessi+ility of avenues for savings in formal +anking channels "ere limitedA In order to address this issue RBI li+eralised the +ranch authorisation policy in Decem+er .11# and domestic scheduled commercial +anks "ere given freedom to open +ranches in tier 3 to tier 6 centres Chaving population up to (#@### as per .11' censusD "ithout o+taining permission from RBI@ su+8ect to reportingA Committee on !inancial $ector Reforms C<overnment of India@ .11#D@ proposed that instead of focussing primarily at e-panding credit@ financial inclusion should +e vie"ed as e-panding access to financial services@ such as payments services@ savings products@ insurance products@ and inflation2protected pensionsA ?he focus also shifted from social +anking "ithout profita+ility concerns to profita+le +usiness propositions for the +anksA ?he delivery models instead of +eing cost centric should aim at generating revenue aimed at providing Euality +anking service to customers at their doorstep "ith a profita+le proposition for the +anksA CRBI .1''DA
Concept of ultra small branch 7USB8 /ltra small +ranches +e set up in all villages covered through BCA C Business correspondent agentD Branch to consist of small area '112.11 sEA feet "here officer designated +y the +ank "ill +e availa+le "ith a laptop on predetermined day and time in a "eekA ?his "ould ensure close supervision and mentoring of BCA and availa+ility of range of +anking services in villagesA Cash services "ould +e offered +y the BCA from the /$B premisesA ?he +ank officer "ould offer other services@ undertake field verification and follo" up the +anking transactionsA After periodic revie" the periodicity and duration of visit can +e progressively enhanced depending upon +usiness potentialA Presence of +ank officer at /$B "ill create confidence in the rural masses prompting them to shift to +anking channels and there+y reducing their Baroda Academy Inventing Methods for Igniting Minds
dependency on non institutional moneylendersA "rogress of financial inclusion plan
financial
channels
specially
the
Banking connectivity has +een e-tended to more than '@ ##@41. villages up to $eptem+er .1'. from 64@6#( villages in March .1'1A (*(* rural +ranches have +een openedA 5um+ers of Business Correspondents have increased from 3(@33. to '.*@13(A *3A41 million Basic $avings Bank Accounts C5!AsD have +een addedA 4A33 million FCCs and a+out 1A#* million <CCs have +een addedA A+out 34 million peopleBfamilies have +een credit2linkedA $hare of IC? +ased accounts have increased su+stantially 2 H of IC? accounts to 5!As has increased from .3H to (3HA Urban *inancial Inclusion /r+an !inancial Inclusion is an initiative +y the <overnment of India to inculcate saving ha+its and to e-tend financial services to migrant la+ourers and street vendorBha"kers in ur+an areasA ?he account opening drive is of paramount importance in achieving the +roader o+8ective of !inancial Inclusion@ "hich is very high on the agenda of the <overnmentA ?he <overnment desires to open +ank accounts for all migrant la+ors and street vendorsBha"kers "ho are "orking "ithin 311 meters of the +ranches@ in ur+an and metro areasA ?o achieve the /r+an !inancial Inclusion@ marketing staff of +ranches should personally contact all street vendorsBha"kers "ho are "orking "ithin 311 meters of +ranches@ to open their accountsA
"rogress of our Bank in Urban *inancial Inclusion Campaign launched in our $ BCs /P and Ra8asthanA Baroda Academy 3 Inventing Methods for Igniting Minds
!or convenience of customers@ a call centre is esta+lished +y putting up a ?oll2free line at $ BCs cell at Kaipur and uckno"A Mo+ile phones at ead District Managers Gffice are +eing provided for $M$ facility $eparate email2id created for /P and Ra8asthan $ BCA =ards allocated to the mem+er +anks of $ BC in /P and Ra8asthanA Pu+licity is +eing given to campaign +y issuing advertisement in the ne"spapersA &hy financial inclusion should be seen as an opportunity by the Banks> It "ill help the +anks to increase the customer +ase and reduction of dependency of rural masses on non institutional financial channelsA ?his "ill +e helpful in increasing the CA$A +ase of the +anksA As per CRI$I survey the consumption in rural area is gro"ing faster than in ur+an area@ during .11#2'1 to .1''2'.@ additional spending +y rural India "as RsA 3431 +illion@ significantly higher than RsA .@##( +illion +y ur+an populationA ?his untapped potential in rural area can +e utilised +y the +anks in increasing their +usinessA ?he lack of easy access to financial products and services creates demand for non financial products like gold and real estateA ?hrough com+ined effect of financial inclusion and financial literacy demand for financial products and services can +e created leading to a more sustaina+le gro"th of the financial sectorA !inancial inclusion "ill facilitate economic gro"th and financial deepening of the Indian economy there+y leading to +anking gro"thA
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CR$.I/ M-+I/-RI+1 % +"A MA+A1$M$+/ Reser'e Bank of India guidelines for Restructuring 1eneral "rinciples and "rudential +orms for Restructured Ad'ances ?he principles and prudential norms laid do"n here are applica+le to all advances including the +orro"ers@ "ho are eligi+le for special regulatory treatment for asset classificationA $ligibility criteria for restructuring of ad'ances ' Banks may restructure the accounts classified under ]standard]@ ]su+2
standard] and ]dou+tful] categoriesA . Banks can not reschedule B restructure B renegotiate +orro"al accounts "ith retrospective effectA =hile a restructuring proposal is under consideration@ the usual asset classification norms "ould continue to applyA ?he process of re2 classification of an asset should not stop merely +ecause restructuring proposal is under considerationA ?he asset classification status as on the date of approval of the restructured package +y the competent authority "ould +e relevant to decide the asset classification status of the account after restructuring B rescheduling B renegotiationA In case there is undue delay in sanctioning a restructuring package and in the meantime the asset classification status of the account undergoes deterioration@ it "ould +e a matter of supervisory concernA 3 5ormally@ restructuring can not take place unless alteration B changes in the original loan agreement are made "ith the formal consent B application of the de+torA )o"ever@ the process of restructuring can +e initiated +y the +ank in deserving cases su+8ect to customer agreeing to the terms and conditionsA
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( 5o account "ill +e taken up for restructuring +y the +anks unless the financial via+ility is esta+lished and there is a reasona+le certainty of repayment from the +orro"er@ as per the terms of restructuring packageA ?he via+ility should +e determined +y the +anks +ased on the accepta+le via+ility +enchmarks determined +y them@ "hich may +e applied on a case2+y2case +asis@ depending on merits of each caseA Illustratively@ the parameters may include the Return on Capital %mployed@ De+t $ervice Coverage Ratio@ <ap +et"een the Internal Rate of Return and Cost of !unds and the amount of provision reEuired in lieu of the diminution in the fair value of the restructured advanceA ?he accounts not considered via+le should not +e restructured and +anks should accelerate the recovery measures in respect of such accountsA Any restructuring done "ithout looking into cash flo"s of the +orro"er and assessing the via+ility of the pro8ects B activity financed +y +anks "ould +e treated as an attempt at ever greening a "eak credit facility and "ould invite supervisory concerns B actionA 3 =hile the +orro"ers indulging in frauds and malfeasance "ill continue to remain ineligi+le for restructuring@ +anks may revie" the reasons for classification of the +orro"ers as "illful defaulters specially in old cases "here the manner of classification of a +orro"er as a "illful defaulter "as not transparent and satisfy itself that the +orro"er is in a position to rectify the "ilful defaultA ?he restructuring of such cases may +e done "ith Board]s approval@ "hile for such accounts the restructuring under the CDR Mechanism may +e carried out "ith the approval of the Core <roup onlyA 6 BI!R cases are not eligi+le for restructuring "ithout their e-press approvalA CDR Core <roup in the case of advances restructured under CDR Mechanism B the lead +ank in the case of $M% De+t Restructuring Mechanism and the individual +anks in other cases@ may consider the proposals for restructuring in such cases@ after ensuring that all the formalities in seeking the approval from BI!R are completed +efore implementing the packageA Baroda Academy 3 Inventing Methods for Igniting Minds
Asset classification norms Restructuring of advances could take place in the follo"ing stages 6 CaD +efore commencement of commercial production B operation C+D after commencement of commercial production B operation +ut +efore the asset has +een classified as ]su+2standard] CcD after commencement of commercial production B operation and the asset has +een classified as ]su+2standard] or ]dou+tful]A ' ?he accounts classified as ]standard assets] should +e immediately re2 classified as ]su+2standard assets] upon restructuringA . ?he non2performing assets@ upon restructuring@ "ould continue to have the same asset classification as prior to restructuring and slip into further lo"er asset classification categories as per e-tant asset classification norms "ith reference to the pre2restructuring repayment scheduleA 3 All restructured accounts "hich have +een classified as non2performing assets upon restructuring@ "ould +e eligi+le for up2gradation to the ]standard] category after o+servation of ]satisfactory performance] during the ]specified period]A ( In case@ ho"ever@ satisfactory performance after the specified period is not evidenced@ the asset classification of the restructured account "ould +e governed as per the applica+le prudential norms "ith reference to the pre2 restructuring payment scheduleA 3 Any additional finance may +e treated as ]standard asset]@ up to a period of one year after the first interest B principal payment@ "hichever is earlier@ falls due under the approved restructuring packageA )o"ever@ in the case of accounts Baroda Academy 3 Inventing Methods for Igniting Minds
"here the prerestructuring facilities "ere classified as ]su+2standard] and ]dou+tful]@ interest income on the additional finance should +e recognised only on cash +asisA If the restructured asset does not Eualify for upgradation at the end of the a+ove specified one year period@ the additional finance shall +e placed in the same asset classification category as the restructured de+tA 6 In case a restructured asset@ "hich is a standard asset on restructuring@ is su+8ected to restructuring on a su+seEuent occasion@ it should +e classified as su+standardA If the restructured asset is a su+2standard or a dou+tful asset and is su+8ected to restructuring@ on a su+seEuent occasion@ its asset classification "ill +e reckoned from the date "hen it +ecame 5PA on the first occasionA )o"ever@ such advances restructured on second or more occasion may +e allo"ed to +e upgraded to standard category after one year from the date of first payment of interest or repayment of principal "hichever falls due earlier in terms of the current restructuring package su+8ect to satisfactory performanceA Income recognition norms Interest income in respect of restructured accounts classified as ]standard assets] "ill +e recogni,ed on accrual +asis and that in respect of the accounts classified as ]non2performing assets] "ill +e recogni,ed on cash +asisA "ro'isioning norms ' +ormal pro'isions Banks "ill hold provision against the restructured advances as per the e-isting provisioning normsA . "ro'ision for diminution in the fair 'alue of restructured ad'ances
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CiD Reduction in the rate of interest and B or reschedulement of the repayment of principal amount@ as part of the restructuring@ "ill result in diminution in the fair value of the advanceA $uch diminution in value is an economic loss for the +ank and "ill have impact on the +ank]s market value of eEuityA It is@ therefore@ necessary for +anks to measure such diminution in the fair value of the advance and make provisions for it +y de+it to Profit & oss AccountA $uch provision should +e held in addition to the provisions as per e-isting provisioning norms and in an account distinct from that for normal provisionsA !or this purpose@ the erosion in the fair value of the advance should +e computed as the difference +et"een the fair value of the loan +efore and after restructuringA !air value of the loan +efore restructuring "ill +e computed as the present value of cash flo"s representing the interest at the e-isting rate charged on the advance +efore restructuring and the principal@ discounted at a rate eEual to the +ank]s BP R as on the date of restructuring plus the appropriate term premium and credit risk premium for the +orro"er category on the date of restructuringA !air value of the loan after restructuring "ill +e computed as the present value of cash flo"s representing the interest at the rate charged on the advance on restructuring and the principal@ discounted at a rate eEual to the +ank]s BP R as on the date of restructuring plus the appropriate term premium and credit risk premium for the +orro"er category on the date of restructuringA ?he a+ove formula moderates the s"ing in the diminution of present value of loans "ith the interest rate cycle and "ill have to follo" consistently +y +anks in futureA !urther@ it is reiterated that the provisions reEuired as a+ove arise due to the action of the +anks resulting in change in contractual terms of the loan upon restructuring "hich are in the nature of financial concessionsA ?hese provisions are distinct from the provisions "hich are linked to the asset classification of the account classified as 5PA and reflect the impairment due to Baroda Academy 3 Inventing Methods for Igniting Minds
deterioration in the credit Euality of the loanA ?hus@ the t"o types of the provisions are not su+stitute for each otherA CiiD In the case of "orking capital facilities@ the diminution in the fair value of the cash credit B overdraft component may +e computed as indicated a+ove@ reckoning the higher of the outstanding amount or the limit sanctioned as the principal amount and taking the tenor of the advance as one yearA ?he term premium in the discount factor "ould +e as applica+le for one yearA ?he fair value of the term loan components C=orking Capital ?erm oan and !unded Interest ?erm oanD "ould +e computed as per actual cash flo"s and taking the term premium in the discount factor as applica+le for the maturity of the respective term loan componentsA CiiiD In the event any security is taken in lieu of the diminution in the fair value of the advance@ it should +e valued at ReA'B2 till maturity of the securityA ?his "ill ensure that the effect of charging off the economic sacrifice to the Profit & oss account is not negatedA CivD ?he diminution in the fair value may +e re2computed on each +alance sheet date till satisfactory completion of all repayment o+ligations and full repayment of the outstanding in the account@ so as to capture the changes in the fair value on account of changes in BP R@ term premium and the credit category of the +orro"erA ConseEuently@ +anks may provide for the shortfall in provision or reverse the amount of e-cess provision held in the distinct accountA CvD If due to lack of e-pertise B appropriate infrastructure@ a +ank finds it difficult to ensure computation of diminution in the fair value of advances e-tended +y small B rural +ranches@ as an alternative to the methodology prescri+ed a+ove for computing the amount of diminution in the fair value@ +anks "ill have the option of notionally computing the amount of diminution in the fair Baroda Academy Inventing Methods for Igniting Minds
value and providing therefore@ at five percent of the total e-posure@ in respect of all restructured accounts "here the total dues to +ankCsD are less than rupees one crore till the financial year ending March .1'3A ?he position "ould +e revie"ed thereafterA 3 ?he total provisions reEuired against an account C normal provisions '11H of the outstanding de+t amountA Special Regulatory /reatment for Asset Classification ' ?he special regulatory treatment for asset classification@ in modification to the provisions in this regard stipulated@ "ill +e availa+le to the +orro"ers engaged in important +usiness activities@ su+8ect to compliance "ith certain conditions as enumerated +elo"A $uch treatment is not e-tended to the follo"ing categories of advances6 iA Consumer and personal advancesL iiA Advances classified as Capital market e-posuresL iiiA Advances classified as commercial real estate e-posures ?he asset classification of these three categories accounts as "ell as that of other accounts "hich do not comply "ith the conditions enumerated +elo"@ "ill +e governed +y the prudential norms in this regard descri+ed a+oveA $lements of special regulatory frame#ork ?he special regulatory treatment has the follo"ing t"o components 6 CiD Incentive for Euick implementation of the restructuring packageA Baroda Academy 3 Inventing Methods for Igniting Minds plus
provisions in lieu of diminution in the fair value of the advanceD are capped at
CiiD Retention of the asset classification of the restructured account in the pre2 restructuring asset classification category Incenti'e for ?uick implementation of the restructuring package During the pendency of the application for restructuring of the advance "ith the +ank@ the usual asset classification norms "ould continue to applyA ?he process of reclassification of an asset should not stop merely +ecause the application is under considerationA )o"ever@ as an incentive for Euick implementation of the package@ if the approved package is implemented +y the +ank as per the follo"ing time schedule@ the asset classification status may +e restored to the position "hich e-isted "hen the reference "as made to the CDR Cell in respect of cases covered under the CDR Mechanism or "hen the restructuring application "as received +y the +ank in non2CDR cases6 CiD =ithin '.1 days from the date of approval under the CDR MechanismA CiiD =ithin #1 days from the date of receipt of application +y the +ank in cases other than those restructured under the CDR MechanismA Asset classification benefits $u+8ect to the compliance "ith the under noted conditions in addition to the adherence to the prudential frame"ork laid do"n6 CiD an e-isting ]standard asset] "ill not +e do"ngraded to the su+2standard category upon restructuringA CiiD during the specified period@ the asset classification of the su+2standard B dou+tful accounts "ill not deteriorate upon restructuring@ if satisfactory performance is demonstrated during the specified periodA Baroda Academy Inventing Methods for Igniting Minds
)o"ever@ these +enefits "ill +e availa+le su+8ect to compliance "ith the follo"ing conditions6 iD ?he dues to the +ank are ]fully secured]A ?he condition of +eing fully secured +y tangi+le security "ill not +e applica+le in the follo"ing cases6 CaD $$I +orro"ers@ "here the outstanding is up to RsA.3 lakhA C+D Infrastructure pro8ects@ provided the cash flo"s generated from these pro8ects are adeEuate for repayment of the advance@ the financing +ankCsD have in place an appropriate mechanism to escro" the cash flo"s@ and also have a clear and legal first claim on these cash flo"sA CcD Micro !inance Institution accounts@ "hich are standard at the time of
restructuring@ even if they are not fully securedA )o"ever@ this rela-ation is granted purely as a temporary measure and "ould +e applica+le to standard M!I accounts restructured +y +anks upto 3'st March .1''A iiD ?he unit +ecomes via+le in '1 years@ if it is engaged in infrastructure activities@ and in 4 years in the case of other unitsA iiiD ?he repayment period of the restructured advance including the moratorium@ if any@ does not e-ceed '3 years in the case of infrastructure advances and '1 years in the case of other advancesA ?he aforesaid ceiling of '1 years "ould not +e applica+le for restructured home loansL in these cases the Board of Director of the +anks should prescri+e the ma-imum period for restructured advance keeping in vie" the safety and soundness of the advancesA ending to individuals meant for acEuiring residential property "hich are fully secured +y mortgages on residential property that is or "ill +e occupied +y the +orro"er or that is rented are risk "eighted as under the ne" capital adeEuacy frame"ork@ provided the ?: is not more than 43H @ +ased on +oard approved valuation policyA )o"ever@ Baroda Academy 3 Inventing Methods for Igniting Minds
the restructured housing loans should +e risk "eighted "ith an additional risk "eight of .3 percentage points to the risk "eight prescri+ed alreadyA ivD Promoters] sacrifice and additional funds +rought +y them should +e a minimum of '3H of +anks] sacrificeA ?he term ]+ank]s sacrifice] means the amount of ^erosion in the fair value of the advance a+oveA !urther@ the additional funds reEuired to +e +rought in +y the promoter should generally +e +rought in up front A )o"ever@ if the +anks are convinced that the promoters face genuine difficulty in +ringing their share of the sacrifice immediately and need some e-tension of time to fulfill their commitments@ the promoters could +e allo"ed to +ring in 31H of their sacrifice @ iAeA 31H of '3H@ upfront and the +alance "ithin a period of one yearA !urther@ in case the promoters fail to +ring in their +alance share of sacrifice "ithin the e-tended time limit of one year@ the asset classification +enefits derived +y +anks "ill cease to accrue and the they "ill have to revert to classifying such accounts as per the asset classification normsA vD Personal guarantee is offered +y the promoter e-cept "hen the unit is affected +y e-ternal factors pertaining to the economy and industryA viD ?he restructuring under consideration is not a ]repeated restructuring]A
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+on "erforming Assets Another issue "hich is generating considera+le concern and is likely to impact +anks> a+ility to serve its stakeholders is the rising portfolio of non2 performing assets C5PAsD and restructured loansA =hile the do"nturn in +usiness environment glo+ally and in India has contri+uted to this rise@ "e need to reflect on "hy our risk management practices during +oom time "ere una+le to anticipate future do"nturns and +uild up suita+le safeguards "hile giving loansA ?he rising impaired assets is a 9governance; issue as +anks have forgotten the art of saying Mno>@ e-cept@ may +e@ to small +orro"ersA Banks need to significantly improve their risk assessment capa+ility and their a+ility to price risks@ so that they take on only those risks that they understand and can effectively manageA ?his need is all the more pronounced in the case of pu+lic sector +anks@ "hich@ at times@ end up "ith assets that have +een e-ited +y private sectorB foreign +anks on account of inherent "eaknessesA ?he a+ility to manage 5PAs is important in order to preserve the strength of +ank +alance sheets and to retain the appetite to take on good risksA An attitude of complete risk aversion "ould not +e appropriate as +anks are in the +usiness of taking risks@ +ut "ith adeEuate safeguardsA A Another issue is the element of discrimination practiced +y the +anks in restructuring of loansA Analysis of availa+le data indicates that the larger Baroda Academy 3 Inventing Methods for Igniting Minds
+orro"ers have invaria+ly received the +enefit of restructuring of loans@ "hile the restructuring in case of $M%B agriculture loans has remained a+ysmally lo"A ?imely intervention and support from the +anks@ this sector "ould have definitely sho"n much lo"er levels of impaired assets than it presently doesA
M-.U)$ C
*U/UR$ /R$+.S , C0A))$+1$S
0R Challenges of .ecade 9696 .e'elopment of kno#ledge and talent marketplace ?hough the face of +anking industry has undergone a sea change in the years that have gone +y@ one characteristic of the industry that has remained unchanged is peopleA ?he +anks succeed or fail depending on the Euality of their "orkforce talent at every level_the front lines@ middle management and e-ecutive leadershipA Banks should look at "orkforce talent as the primary engine for sustained@ competitive advantage and for creating a "orkforce in "hich people at every level are capa+le of contri+uting "ith high levels of performance leveraging on technologyA It]s a+out creating a I? culture of e-cellenceA It is the )R teams that "ill give +anks the competitive advantage in the years to comeA Skilling of #orkforce Baroda Academy 3 Inventing Methods for Igniting Minds
?here is shortage of trained manpo"er for the industry@ +oth at the +ottom of the pyramid and higher up the ladderA India is often considered to +e a source for skilled la+our supply to the rest of the "orld@ given its sheer si,e of manpo"erA It is often not recogni,ed that over four2fifths of our rural population and over half of our ur+an population remains unskilledA =omen participation rate in the la+our market remains poorA ?he +iggest pro+lem is the lack of focus on technical education that could a+sor+ a large chunk of unskilled la+our@ if +acked +y greater push to primary educationA ess than '' per cent of the 8o+2seeking population in the age group of '32.# receives any form of vocational training in India and only one of every three "ho do get vocational training receive it from speciali,ed training institutesA !urthermore@ even in the value added segment@ "here "e have the largest pool of skilled manpo"er iAeA in the area of information technology@ real "ages are rising at a pace that may impact our competitivenessA Impro'e producti'ity and efficiency
Productivity is an important driver of gro"thA Productivity depends on the efficiency "ith "hich scarce resources are allocated 0 +e it your time@ "ork effort@ natural resources@ capital or any other inputsA A great deal of the gro"th for most countries can +e e-plained +y productivity gro"th@ especially total factor productivity gro"th C?!P<DA !actor accumulation Csuch as increase in la+our or capitalD e-plains a smaller part of the gro"thA <iven this e-perience@ India "ould need to focus on technological developments to improve its rate of ?!P<A Capital deepening may also help@ +ut the key lies in overall productivity enhancementsA In India@ output per "orker has increased at an impressive rate in the services sector after the reforms initiated in early #1sA In this period@ ?!P< gro"th has also +een impressive for this sectorA ?!P< gro"th has also improved for the manufacturing sector since the '#*1sA $o@ progress is +eing madeA )o"ever@ the rate of this technical change@ still@ has +een lo"er than that for the %ast Asian economies during the period in "hich they earned the tag of +eing %ast Asian tigersA
Baroda Academy 3 Inventing Methods for Igniting Minds
Creating Synergy Bet#een Seniors and 1enne4t

Banking Industry is "itnessing the enormous diversity in the composition of the
"orkforceA More young officers including "omen are entering the "orkforce "ho are more technology2savvy@ people in hurry and difficult to satisfyA Bank is having +iggest challenge for creating synergy +et"een young "orkforce and e-perienced seniorsA Retention of /alent During last one & t"o years Banking Industry is e-periencing that the rate of attrition is increasing due to various reasons and almost all P$Bs are facing some degree of uncertainties in their humane +ase planning due to this attrition +ehavior prevalent in the marketA Attrition not only cost us in the form of time and money +ut also affects the momentum of our +usiness gro"thA
I/ 2ision for 96:: to 9696 *ocus for Banks Although +anks have deployed technology for transaction processing@ analytical processing +y +anks is still in a nascent stageA It is no" essential for +anks to look at improving the efficiency and effectiveness of the I? Infrastructure createdA ?echnology has its o"n set of challenges to +e addressedA ?hese are the need to have high availa+ility of I? systems@ efficient and effective +usiness continuity plans@ system of periodical assessment of the risks for I? and I$ systems@ conduct of regular audit@ taking care of I? o+solescence and the likesA 5e"er areas of technology initiatives apart from risk management of the enterprise include@ CRM using +usiness intelligence@ improving internal effectiveness and managing risks arising out of I? implementationA Indian payment systems Baroda Academy 3 Inventing Methods for Igniting Minds
Indian payment systems thus pose significant opportunities and challengesB threats in the coming yearsA An indication of the scope of the challenges and opportunities can +e gathered from the follo"ing fe" pointers6 CiD ?here is a huge potential of migrating government transactions Cpayments and receiptsD to electronic modeA It is estimated that <overnment su+sidies alone constitute more than RsA .A#3 trillion and if these payments are effected electronically@ it may translate to (A'3 +illion electronic transactions in a yearA In addition@ there is a large scope for further electronification of collection of <overnment receiptsA CiiD A fraction of the '1 million plus retailers in India have card payment acceptance infrastructure 0 presently this num+er stands at 8ust 1A6 million 2 and this infrastructure needs to +e gro"n e-ponentiallyA A ^point of purchase^ terminal has also +een envisioned to ensure seamless e2payments to sellers of goodsBfarm products at "holesale markets and government procurement programsA CiiiD ?he e2commerce and m2commerce platforms are poised for a +ig stride in coming yearsA $imilarly@ electronic +ill presentment and payments involving insurance@ utility +ills@ ta-es@ school fees@ etcA present a huge opportunityA CivD Currently@ the num+er of non2cash transactions per person stands at 8ust 6 per yearA If the efforts of financial inclusion +ear fruit and if each citi,en of the country undertakes a minimum of one transaction in month@ the total transactions in the country "ould reach an astronomical '. +illion transactions per annumA CvD ?o accomplish the vision of a less2cash society@ if not cashless society@ the key elements "hich "ould impact all our efforts to"ards creation of a modern and "idespread payment systemA $fficiency enhancement in the payment systems Che?ue Clearing -pportunity Gver the years efficiency in CheEue clearing has +een +rought +y "ay of introduction of MICR processing@ computerised clearing using the %-press CheEue Clearing $ystem C%CC$D "hich also facilitates speed clearing and introduction of cheEue truncation system CC?$DA ?he C?$ pro8ects have Baroda Academy 3 Inventing Methods for Igniting Minds
+een entrusted to 5PCI 0 the um+rella organisation for retail payments in the countryA Challenges ?he focus of cheEue clearing operations in the coming years "ould +e consolidation@ rationalisation and centralisation@ through the implementation of grid2+ased C?$ solution C"hich is Information ?echnology Act compliantD across the country +y 5PCIA ?he grid2+ased C?$ "ill usher in a standardised cheEue clearing scenario across the countryA ?he issuance of C?$ .1'1 standard cheEues "ill further facilitate this processA Dialogue "ith the <overnment "ill continue to +e pursued for issuance and adoption of C?$ .1'1 standard cheEues at the earliest and discontinue the e-isting practice of ^paper to follo"^ in C?$ +y seeking amendment of the treasury rulesA +ational $lectronic *unds /ransfer System 7+$*/8 <iven the reach of the system and increasing volumes +eing handled every day@ the system has +ecome an important payment systemA Introduction of user B customer friendly features and increasing the num+er of settlement cycles in 5%!? "ould +e further e-aminedA A -pportunity ?he positive confirmation feature in 5%!? has +een "ell appreciated +y the customersA Challenges there is a need for improving the visi+ility of the payment transactionA ?his "ould reEuire that the transaction reference num+er is uniEue and same throughout the life cycle of the transactions 2 from the point of origin to the destinationA !urther@ return transactions should carry the original transaction reference num+er to aid the reconciliation processA +ational $lectronic Clearing Ser'ices 7+$CS8 Currently there are many avatars of %C$ operating in the country "ith %C$ on a standalone mode availa+le in *' centresA ?he "ay for"ard "ould +e to consolidate local %C$ into R%C$ and ultimately to 5%C$A -pportunity Redesigning %C$ suite of products to function as an Automated Clearing )ouse CAC)D for +ulk transactions including +oth credit and de+it@ is an option that needs further e-aminationA )o"ever@ this needs to +e "eighed against Baroda Academy Inventing Methods for Igniting Minds
the roll out of AC) +y 5PCI as also the need to provide a +ackstop in the event of failure of any systemA Challenges Gne of the ma8or challenges faced in the %C$ schemes relates to mandate management and the ease "ith "hich the customers can manage their mandatesA %fforts "ould +e made to rationalise and strengthen the mandate management systemsA ?his could +e achieved through +usiness process re2 engineering resulting in an electronic CcentralisedB decentralisedD mandate management systemA In addition@ an electronic <IRG3 instrument for effecting credit transfer +y a payer from any +ranch of a +ank or from any other authorised non2+ank "ould also +e e-ploredA !urther@ considering the fact that cheEue continues to +e a dominant payment instrument in India@ the scope of implementing a cheEue +ased <IRG system "ould +e e-aminedA 0armonisation of routing codes -pportunity Currently different payment systems use different routing codesA ?he MICR code is used for cheEue clearing and %C$ operations@ the I!$C code is used for 5%!? and R?<$ operations and the B$R code is used for identification of a +ank +ranch for su+mission of returns to the RBI and is no" +eing used for reporting government +usiness details to <overnmentA Additionally@ Aadhaar num+er is sought to +e populated along "ith +ank account num+ers to ena+le electronic transfer of <overnment +enefitsA =ith the in2 principle approval for using $=I!? for domestic financial transactions@ the participants in the payment system should not +e +urdened "ith yet another routing codeA Challenges ?here is@ therefore@ a need to harmonise all these routing codes in co2operation and colla+oration "ith the stakeholders> vi,A@ +anks@ <overnment@ IBA@ IDRB?@ 5PCI@ $=I!?@ etcA and the departments concerned "ithin RBIA !urther@ any such e-ercise "ould involve +usiness process re2engineering at the application level for various payment systems as "ell as the core +anking solution of +anksA =hile this has ma8or cost implications the fructification of efforts to"ards a uniform routing code for +oth domestic as "ell as cross +order transactions "ould deliver ma8or cost savings in terms of enhancing $?P and minimising operational risksA Baroda Academy Inventing Methods for Igniting Minds
Standardisation of account numbers -pportunity Currently the account num+ers maintained across various +anks are different +ased on their reEuirements and range from '1 digits to '4 digitsA ack of uniformity in account num+ers hinders $?P and +anks have to either mask e-cess digits or add e-tra digits to facilitate this processA ?here is therefore a +usiness case for e-amining the need for developing a common account num+er across payment systemsA Challenges the adoption of International Bank Account 5um+er CIBA5DB Basic Bank Account 5um+er CBBA5D could +e e-ploredA IBA5BBBA5 provides a format for account identification and also contains validation information in the form of check digits "hich can +e validated at source +ased on a prescri+ed single standard procedureA ?he IBA5BBBA5 in itself contains all the routing information needed to get a payment from one +ank to anotherA
Standardisation of bill payments -pportunity It is estimated that a large portion of the +ill payments are done at +iller>s location Cgenerally "alk2in customersDA ?hus there is a huge opportunity for developing a +ill payment system for payments to"ards insurance premia@ utility payments@ ta-es@ school feesA Challenges ?o"ards this end@ there is a need for developing an electronic <IRG systemA Gne of the prereEuisites for developing an electronic <IRG system is the standardisation of +iller informationA "ayment 0ub -pportunity ?he concept of a 9payment hu+; is +eing perceived to allo" consolidation of multiple payment systems into one centrally managed mid2office payment systemA ?his "ould necessitate putting in a streamlined I? architecture "hich "ould eliminate point to point interfaces for various payment productsA $uch a 9payment hu+; "ith the latest technology "ould result in facilitating faster and smoother electronic payment transfers as opposed to the current system of Baroda Academy 3 Inventing Methods for Igniting Minds
individual interfaces +eing responsi+le for inputting electronic payment instructions into various systemsA Gnce a payment hu+ +ecomes functional an individual +ank "ould simply need to input an electronic payment instruction to the hu+ "hich "ould then automatically route the instructions to various payment systemsA Challenges ?he concept of payment hu+ is very much dependent on standardised message formats and uniform routing codesA ?his "ould also ena+le rationalisation of costs for the +anksA Manage Mobile ?he mo+ile revolution has created a sort of ne" "orld orderA It has the potential to change the "ay +anks do +usinessA It is up to the +anks to take cueA =hile +anks are em+racing the mo+ile channel 22 and continuing to support the old stand+y of online +anking 22 they are not integrating the technologies used to +uild e2+anking solutionsA Also as more people conduct their +anking on mo+ile devices@ these devices also "ill +ecome the gro"ing focus of hackers and fraudsters@ "ho are al"ays on the hunt for ripe targetsA Banks can "ork on t"o areas "ithin the mo+ile channel@ fraud prevention and marketing to customersA In fact@ "orld over mo+ile +anking already is playing a role in reducing fraud in a variety of "ays 22 ranging from simple transaction and security alerts to mo+ile authentication for +ank transfersA &hite )abel A/MS ?he Automated ?eller Machine CA?MD has +een hailed as one of the most innovative and revolutionary technological developments in the history of +ankingA ?he channel@ "hich "as initially a medium for dis+ursal of cash to customers at +ank +ranches@ has no" developed into a touch2point for delivery of a "ide variety of +anking services at +ranches and convenient off2site locationsA ?hough +anks initially o"ned and deployed their o"n A?Ms@ over time this has undergone a +road change@ "ith +anks no" preferring outsourcing all or many of the activities associated "ith A?M operations 2 starting from deployment@ maintenance@ cash Baroda Academy 3 Inventing Methods for Igniting Minds
loading and technology upgradingA ?his has helped them reduce their operational costs and stay more focused on their core +usinessA Internationally@ in addition to +ank2o"ned and deployed A?Ms@ Independent A?M Deployers CIADsD and Independent $ervice Grganisations CI$GsD are engaged in the A?M +usinessA $uch A?Ms are called =hite2la+el A?Ms C= AsDA IADs and I$Gs are almost similar in their operations@ +arring the follo"ing differences6 CiD I$Gs are usually larger operators that o"n and deploy A?Ms and the entire related infrastructureA ?hey have a sponsorship arrangement "ith the +anks for cash loading and servicesA ?he relationships "ith sponsor +anks are guided +y local regulatory reEuirementsA ?he I$G scheme "orks either through a single sponsor +ank or the multisponsor +ank modelA CiiD In the IAD model@ the entities concentrate on investment in the assets CA?MsDA ?hey o"n the A?M and connect to any e-isting net"ork provider for the payment infrastructureA ?he IADs can include entities ranging from individual +usiness o"ners to large retail outletsB supermarketsA $uch entities do not have a direct arrangement "ith any +ank for any aspect related to the operation of such A?Ms@ including cash loadingA A?Ms and = A $cheme in India ?he num+er of A?Ms in the country stands at more than ' lac@ of "hich 3* per cent are o"ned +y private sector +anks@ 33 per cent +y pu+lic sector +anks@ .4 per cent +y the $BI and Associates@ and . per cent +y foreign +anksA ?here has +een a 31 per cent year2on2year gro"th in the num+er of A?Ms deployed in the country since .11*@ +ut the penetration of A?Ms in ?ier III to ?ier :I centres remains +elo" the desired levelA In order to ensure deeper penetration of A?Ms
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in un+ankedB under2+anked areas@ the Reserve Bank has permitted =hite2 a+el A?Ms in the country to supplement the e-isting A?M schemes operated +y +anksA /nder the policy guidelines@ non2+ank entities incorporated in India under the Companies Act@ '#36 "ould +e authorised to set up@ o"n and operate A?Ms in India@ "hich "ill provide +anking services to the customers of +anks in India@ +ased on the cards Cde+itB creditB pre2paidD issued +y +anksA $uch non2+ank entities should have a minimum net "orth of Rs ' +illion as per the latest financial year>s audited +alance sheet@ "hich is to +e maintained at all timesA ?he model envisages that cash management and customer redressal "ould continue to +e the responsi+ility of the sponsor +anksA ?he scheme offers scope for large volumes@ especially in un+ankedB under2+anked areasA It is e-pected that = A operators in India "ill use the features of the IAD and I$G models@ as permitted under the guidelines@ and colla+orate closely "ith the sponsor +anksA
Banking by the year 96:B ?he survey "as conducted +y IBM research unit on future +anking scenario@ "hich revealed five key trends that "ill determine market success in .1'36 Customers take control( Customers "ill +e smart@ informed and savvy users of financial servicesA ?hey "ill only +e interested in service providers that can meet their very specific individual needsA SpecialiGed niche competitors( Market consolidation "ill continue@ making the mega +anks even +iggerA But they "ill face many competitors including community +anks@ industry specialists and non2+ank +anks that speciali,e in providing specific servicesA Partner2competitor relationships "ill ariseA A ne# #orkforce( ?he need for productivity and efficiency "ill create ne" la+our and "ork practicesA But there "ill also +e intense competition to attract and retain talentA Inventing Methods for Igniting Minds
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Regulated transparency( ?he need to comply "ith glo+ally enforced standards of transparency and accounta+ility "ill force the adoption +y +anks of integrated@ enterprise2"ide systems and processesA Sharply focused technology( ?he ena+ler of all this change "ill +e technology that supports rapid@ accurate decision making and greater operational fle-i+ility and efficiencyA ?he successful specialists "ill +e those "ho can track and analy,e specific customer needs and speedily meet them "ith profita+le@ relia+le productsA
%ven@ +anks "ill source products and services from many speciali,ed and +est2in2 class service providers@ including independents and other +anks providing "hite2 la+el products and servicesA Innovation in products@ processes@ relationships and +usiness models "ill +e the primary path to sustaina+le gro"thA
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Banking Updates

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Staff College, Ahmedabad Recent Updates in Banking Industry

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

M-.U)$ A R$C$+/ IM"-R/A+/ C0A+1$S Contemporary Banking Issues

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

.A )igher Euality capitals $tructure Particulars of Capitals

Inventing Methods for Igniting Minds

Resources Mo+ili,ed from Primary market Resource 3'1 Mo+ili,ed +y BankB!Is

Inventing Methods for Igniting Minds

Introduction of *inancial 0olding company structure in India

second, the perspecti'e@

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Kune '#6# Baroda Academy

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

$tepping up si,e Cmarket po"erD and ma-imi,ing value CrevenueD +y e-ploiting

Inventing Methods for Igniting Minds

financial intermediation increased in the economy @ Based on this rationale@ there

intermediation costs, or in technical terminology, reduce the net interest margin@

/able 5IM Analysis of Indian Banks

Inventing Methods for Igniting Minds

Bank <roup 0 3'st March CHageD

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

<+$& I+I/IA/I2$S /A!$+ BH BA+!= Ma3or technology Initiati'es

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Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

SM$ % &$A)/0 MA+A1$M$+/ S$R2IC$S

SM$ Banking An -'er'ie# % Important 1uidelines

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Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

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pAaA 7es 7es

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Mark up fee Mark up fee Mark up fee of Mark up fee of 3H of 3H 3H of 3A3H

Inventing Methods for Igniting Minds

theft or misuse insurance of RsAA3@11@111B2 '1 years

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Micro %nterprises $mall %nterprises

611111 3H 34H '3H .H

dependency on non institutional moneylendersA "rogress of financial inclusion plan

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Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

*U/UR$ /R$+.S , C0A))$+1$S

Creating Synergy Bet#een Seniors and 1enne4t

Inventing Methods for Igniting Minds

Inventing Methods for Igniting Minds

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