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A
PROJECT REPORT
ON
“EVALUATION, FUNCTION AND PERFORMANCE OF BANKING SYSTEM IN INDIA”
PREPARED FOR AND PRESENTED TO

“RESERVE BANK OF INDIA”
UNDER THE GUIDANCE OF

P.S.RAWAT
In-Charge(DEAP)
SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF MASTER OF BUSINESS

ADMINISTRATION
BY:
NAZIA NAEEM
MBA (FINANCE)
DEPARTMENT OF BUSINESS ADMINISTRATION

INTEGRAL UNIVERSITY
LUCKNOW
(2008-10)
BY
Our preamble
"...to regulate the issue of Bank Notes and keeping of reserves with a view to
securing monetary stability in India and generally to operate the currency and
credit system of the country to its advantage."
-Reserve Bank of India
PREFACE
The success of any healthy economy lies among other things in a sound and
effective banking system. The history of India’s economic success has proved this.
For the past three decades India's banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no
longer confined to only metropolitans or cosmopolitans in India. In fact, Indian
banking system has reached even to the remote corners of the country. This is one
of the main reasons of India's growth process. However, with the growth in size
and stature of the economy, globalization and entry of competition from foreign
banks, the banking system of India should also be hassle free and should be in a
position to meet new challenges posed by the technology and any other external and
internal factors.
Banking in India originated in the last decades of the 18th century. The
oldest bank in existence in India is the State Bank of India, a government-owned
bank that traces its origins back to June 1806 and that is the largest commercial
bank in the country. The government's regular policy for Indian bank since 1969
has paid rich dividends with the nationalisation of 14 major private banks of
India following it up with the nationalization of six more banks.
Not long ago, an account holder had to wait for hours at the bank counters
for getting a draft or for withdrawing his own money. Today, he has a choice. Gone
are the days when the most efficient bank transferred money from one branch to
other in two to three days. Now it is as simple as instant messaging or dialing
for a pizza. Money has become the order of the day and a highly technology driven
bank will definitely reap success.
ACKNOWLEDGEMENT
First of all I would like to thank to Reserve Bank of India to allow

me to be a part of such a reputed institution, the Central Bank of India, who gave
me the chance to work on the project titled " EVALUATION, PERFORMANCE AND
FUNCTION OF BANKING SYSTEM IN INDIA" in Lucknow city. I sincerely thank the
Governor, Reserve Bank of India and Shri D.P.S. Rathore, Regional Director,
Lucknow office for facilitating and providing an opportunity to learn in the form
of a training programme. I further thank Shri Jaikish sir, General Manager
department of banking supervision for helping me in the project along with RBI.
I would thank to my mentor Mr. P.S. RAWAT in-charge

D.E.A.P. for his untiring support through out my training. He helped me get a
greater insight into the topic and guided me wherever I got stuck. I thank him for
sharing his knowledge with me and be cherished by me throughout my life.
A special acknowledgement goes to Sri G.R.kotian, Assistant General

Manager, DBS for helping me to understand the various aspects related to banking
and guiding me to undertake the project in the right direction.
As a part of DBS, I owe my thanks to all other persons working in DBS

for providing me information, support and understanding related to different
aspects of banking system.
Significantly I am grateful to Mr. Purendra Kumar sir

Assistant general manager of DAPM, (personnel) for providing great support and
also for making me feel comfortable with the homely interaction with all other
staffs and the entire staffs of R.B.I
I also show my gratitude to all my fellow trainees for

making my stay at RBI so much more enriching and last but not the least I would
like to thank the entire staff of The Reserve Bank of India for their help and co-
operation.
DECLARATION
I, Nazia Naeem declare that this project titled “EVALUATION, FUNCTION AND
PERFORMANCE OF BANKING SYSTEM IN INDIA” has been completed by me at RESERVE BANK
OF INDIA, LUCKNOW under the esteemed guidance of Mr. P.S.RAWAT In-Charge
Department of Economic Analysis and Policy RBI, Lucknow. I further declare that it
is my original work as a part of my academic course.
Nazia Naeem
P.S.RAWAT
MBA (2008-10)
In-Charge
Department of Business Administration,
D.E.A.P
INTEGRAL UNIVERSITY, RESERVE BANK OF
Lucknow
INDIA (Lucknow)
INDEX
Subject…………………………………………………………Page number
1- Needs for the project……………………………………9

2- Objectives of the project………………………………..9
3- Overview of the department where I worked(DBS)…….10
4- What is Bank …………………………………………..11
5- Bank and Banking………………………………………12
6- Overview of Banking…………………………………...13
7- Banking in India………………………………………...14
8- History of banking in India……………………………..15
9- From world war 1st to independence……………………18
10- Post-independence……………………………………..19
11- Banking reforms in India………………………………20
• Nationalization
• Liberalization
• Current situation
12- Banks in India…………………………………………...23
13- Banking service in India………………………………..24
14- Function of a Bank……………………………………...25
15- Reserve Bank of India…………………………………..28
16- Function of Reserve Bank of India……………………..29
• Bank of Issue
• Banker to government
• Banker’s bank and lender of the last resort
• Controller of credit
• Custodian of foreign service
• Supervisory function
• Promotional function
17- Banking ombudsman scheme-2006…………………….37
• Powers and duties
• Grounds of complaints
• Procedure for filling complaint

• Power to call for information
• Awards by the banking ombudsman
• Appeal before the appellate authority
• Banks to display salient feature of the scheme
18- Banking sector in India…………………………………42
• Public sector Banks
• Private sector Banks
• Foreign sector Banks
• Co-operative Banks
• Regional rural banks
19- Structure of banking in India…………………………..47
• Scheduled Banks
• Scheduled Commercial Banks
• Scheduled co-operative Banks
• Non-Scheduled Banks
20- Nature of Banking in India…………………………….62
21- Kinds of Banks………………………………………...63
• Commercial Bank
• Co-operative Bank
• Specialized Bank
• Central Bank
22- Roles of Banks in a developing economy…………….65
• Promoting capital formation
• Encouraging innovation
• Monetization
• Influence economy activity
• Facilitator of monetary policy
23- Principles of Bank Lending policy…………………….67
• Safety
• Liquidity
• Profitability
• Purpose of loan
• Principle of diversification of Risk
24- Banking services Pertaining to the common man……..69
• Bank account
• General procedure to open an account
• General procedure for closing an account
25- Credit card………………………………………………71

• Major banks issuing credit card in India
• Global players in credit card market
• Grace periods
26- Debit card……………………………………………….73
• Features of credit card
27- Internet Banking…………………………………………74
28- Core Banking solution……………………………………75
29- Electronic clearing services(ECS)……………………….76
30- Retail Banking –The new flavor…………………………77
• The concept of retail banking
• Retail lending products
• Retail banking products for depositors
• Add-ons and freebies
• Other retail banking services
• Retail lending at point of sale
• New delivery channels for Retail Banking products and Services
• The impact of Retail Banking
• Draw- back of Retail Banking
• The future of Retail Banking
31- Strategic Issue in Banking Service………………………84
• Strategic planning
• Tactical planning
• Non-performing assets of the Banking sector
• Capital adequacy ratio
• Total quality management
32- Innovation in Bank……………………………………….91
• Some recent innovation in Indian Banking
33- Technology in Banking…………………………………..95
34- Conclusion ………………………………………………97
35- Bibliography………………………………………………98
NEEDS FOR THE PROJECT
Usually all persons want money for personal and commercial purposes. Banks are the
oldest lending institutions in Indian scenario. They are
providing all facilities to all citizens for their own purposes by their terms. To
survive in this modern market every bank implements so many new
innovative ideas, strategies, and advanced technologies. For that they give each
and every minute detail about their institution and projects to Public.
They are providing ample facilities to satisfy their

customers i.e. Net Banking, Mobile Banking, Door to Door facility, Instant
facility, Investment facility, Demat facility, Credit Card facility, Loans and
Advances, Account facility etc. And such banks get success to create their own
image in public and corporate world. These banks always accepts innovative notions
in Indian banking scenario like Credit Cards, ATM machines, Risk Management etc.
So, as a student of finance I take keen interest in banking.
So this must be the first choice for me to select this

topic. At this stage every person must know about new innovation, technology of
procedure new schemes and new ventures.
OBJECTIVES OF THE PROJECT
• Banking is an essential industry.

• It is where we often wind up when we are seeking a problem in financial
crisis and money related query.
• Banking is one of the most regulated businesses in the world.
• Banks remain important source for career opportunities for people.
• It is vital system for developing economy for the nation.
• Banks can play a dynamic role in delivery and purchase of consumer durables
Department of Banking Supervision
The Department of Banking Supervision has its Central Office in Mumbai

and 16 regional offices at various centres in the country. I worked in DBS,
Regional Office at Lucknow. Prior to 1993, the supervision and regulation of
commercial banks was handled by the Department of Banking Operations and
Development (DBOD).In December 1993 the Department of Supervision was carved out
of the DBOD with the objective of segregating the supervisory role from the
regulatory function of R.B. I.
The Department of Banking Supervision at present
exercises the supervisory role relating to commercial banks in the following
forms:
Preparing of independent inspection programmes for
different institutions. Inspection evaluates financial condition and performance
of the bank which includes judging asset quality, solvency and capital adequacy
earning performance and liquidity of the bank. Then seeing management and pirating
condition and compliance of the bank which includes Regulatory compliance and
Guidance compliance and finally doing summary assessment of the bank i.e.
identification of concerns and areas for corrective actions. Undertaking scheduled
and special on-site inspections, off-site surveillance, ensuring follow-up and
compliance. Determining the criteria for the appointment of statutory auditors and
special auditors and assessing audit performance and disclosure standards.
Exercising supervisory intervention in the implementation of

regulations which includes-recommendation for removal of managerial and other
persons, suspension of business, amalgamation, merger/winding up, issuance of
directives and imposition of penalties.The Department of Banking Supervision
follow CAMELS approach during its inspection of commercial banks. It judges banks
on the basis of the following six parameters:
WHAT IS BANKS
While the question may seem elementary, the answer can be quite complex.
Understanding what banking is all about will help the paper to illustrate the role
of banks better.
A bank is a financial institution where an individual can deposit money. Banks

provide a system for easily transferring money from one person or business to
another. Using banks and the many services they offer saves an incredible amount
of time, and ensures that the funds of micro as well as macroeconomic agents "pass
hands" in a legal and structured manner. There are also other types of financial
institutions that operate just like banks.
According to Britannica.com, a bank is

“an institution that deals in money and its substitutes and provides other
financial services. Banks accept deposits and make loans and derive a profit from
the difference in the interest rates paid and charged respectively”.
Under Indian banking regulation act, 1949
sec5( b) “Banking means accepting money for the purpose of lending and investment
or deposit of money from the public, repayable on demand or otherwise and withdraw
able by cheque, draft, order or otherwise”.
Bank and Banking
Banks play an important role in development of Indian economy. After

liberalization, the banking industry under went major changes. The economic
reforms totally have changed the banking sector. RBI permitted new banks to be
started in the private sector as per the recommendation of Narasimham committee.
The Indian banking industry was dominated by public sector banks. But now the
situations have changed. New generation banks with use of technology and
professional management has gained a reasonable position in the banking industry.
In this paper, we look at the type of banks, their role and functioning,
Establishment and Role of India’s Central Bank - RBI and the recent banking
reforms.
We perform a comparative data analysis between GDP and total advances & deposits.
We also check whether the Credit Deposit Ratio has any relationship with the GDP .
We then perform a regression analysis to check whether there is any relationship
between GDP and Bank lending interest rates. We also compare the Flow of credit to
Agricultural Sector with the Growth of Agriculture Sector. We conclude the
analysis by an overview and analysis of the sectorial devlopment of gross bank
credit over the last two financial years.
Overview of Banking
The banking system in India is significantly different from that of other Asian
nations because of the country’s unique geographic, social, and economic
characteristics. India has a large population and land size, a diverse culture,
and extreme disparities in income, which are marked among its regions. There are
high levels of illiteracy among a large percentage of its population but, at the
same time, the country has a large reservoir of managerial and technologically
advanced talents. Between about 30 and 35 percent of the population resides in
metro and urban cities and the rest is spread in several semi-urban rural centers.
The country’s economic policy framework combines socialistic features with a heavy
bias towards public sector investment.
The banking system’s international

isolation was due to strict branch licensing controls on foreign banks already
operating in the country as well as entry restriction facing new foreign banks. A
criterion of reciprocity is required for any Indian bank to open an office abroad.
These features have left the Indian banking sector with weaknesses and strengths.
A big challenge facing India banks is how, under the current ownership structure,
to attain operational efficiency suitable for modem financial intermediation. On
the other hand, it has been relatively easy for the public sector banks to
recapitalize, given the increase in nonperforming assets NPAs0, as their
government dominated ownership structure has reduced the conflicts of interest
that private banks would face.
BANKING IN INDIA
Banking in India originated in the last decades of the 18th century. The oldest
bank in existence in India is the State Bank of India, a government-owned bank
that traces its origins back to June 1806 and that is the largest commercial bank
in the country. Central banking is the responsibility of the Reserve Bank of
India, which in 1935 formally took over these responsibilities from the then
Imperial Bank of India, relegating it to commercial banking functions. After
India's independence in 1947, the Reserve Bank was nationalized and given broader
powers. In 1969 the government nationalized the 14 largest commercial banks; the
government nationalized the six next largest in 1980.
Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks
(that is with the Government of India holding a stake), 31 private banks (these do
not have government stake; they may be publicly listed and traded on stock
exchanges) and 38 foreign banks. They have a combined network of over 53,000
branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency,
the public sector banks hold over 75 percent of total assets of the banking
industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
HISTORY OF BANKING IN INDIA
Indian banking system,

over the years has gone through various phases after establishment of Reserve Bank
of India in 1935 during the British rule, to function as Central Bank of the
country. Earlier to creation of RBI, the central bank functions were being looked
after by the Imperial Bank of India. With the 5-year plan having acquired an
important place after the independence, the Govt. felt that the private banks may
not extend the kind of cooperation in providing credit support, the economy may
need. In 1954 the All India Rural Credit Survey Committee submitted its report
recommending creation of a strong, integrated, State-sponsored, State-partnered
commercial banking institution with an effective machinery of branches spread all
over the country. The recommendations of this committee led to establishment of
first Public Sector Bank in the name of State Bank of India on July 01, 1955 by
acquiring the substantial part of share capital by RBI, of the then Imperial Bank
of India. Similarly during 1956-59, as a result of re-organisation of princely
States, the associate banks came in to fold of public sector banking.
Another evaluation of the banking in India was undertaken during

1966 as the private banks were still not extending the required support in the
form of credit disbursal, more particularly to the unorganised sector. Each
leading industrial house in the country at that time was closely associated with
the promotion and control of one or more banking companies. The bulk of the
deposits collected, were being deployed in organised sectors of industry and
trade, while the farmers, small entrepreneurs, transporters , professionals and
self-employed had to depend on money lenders who used to exploit them by charging
higher interest rates. In February 1966, a Scheme of Social Control was set-up
whose main function was to periodically assess the demand for bank credit from
various sectors of the economy to determine the priorities for grant of loans and
advances so as to ensure optimum and efficient utilisation of resources. The
scheme however, did not provide any remedy. Though a no. of branches were opened
in rural area but the lending activities of the private banks were not oriented
towards meeting the credit requirements of the priority/weaker sectors.
On July 19, 1969, the Govt. promulgated Banking Companies

(Acquisition and Transfer of Undertakings) Ordinance 1969 to acquire 14 bigger
commercial bank with paid up capital of Rs.28.50 cr, deposits of Rs.2629 cr, loans
of Rs.1813 cr and with 4134 branches accounting for 80% of advances. Subsequently
in 1980, 6 more banks were nationalised which brought 91% of the deposits and 84%
of the advances in Public Sector Banking. During December 1969, RBI introduced the
Lead Bank Scheme on the recommendations of FK NarimanCommittee.
In the post-nationalisation period, there was substantial increase in the no.
of branches opened in rural/semi-urban centres bringing down the population per
bank branch to 12000 appx. During 1976, RRBs were established (on the
recommendations of M. Narasimham Committee report) under the sponsorship and
support of public sector banks as the 3rd component of multi-agency credit system
for agriculture and rural development. While the 1970s and 1980s saw the high
growth rate of branch banking net-work, the consolidation phase started in late
80s and more particularly during early 90s, with the submission of report by the
Narasimham Committee on Reforms in Financial Services Sector during 1991.
In these five decades
since independence, banking in India has evolved through four distinct phases:
Foundation phase can be considered to cover 1950s and 1960s

till the nationalisation of banks in 1969. The focus during this period was to lay
the foundation for a sound banking system in the country. As a result the phase
witnessed the development of necessary legislative framework for facilitating re-
organisation and consolidation of the banking system, for meeting the requirement
of Indian economy. A major development was transformation of Imperial Bank of
India into State Bank of India in 1955 and nationalisation of 14 major private
banks during 1969.
Expansion phase had begun in mid-60s but gained momentum after nationalisation of
banks and continued till 1984. A determined effort was made to make banking
facilities available to the masses. Branch network of the banks was widened at a
very fast pace covering the rural and semi-urban population, which had no access
to banking hitherto. Most importantly, credit flows were guided towards the
priority sectors. However this weakened the lines of supervision and affected the
quality of assets of banks and pressurized their profitability and brought
competitive efficiency of the system.
.
Consolidation phase: The phase started in 1985 when a

series of policy initiatives were taken by RBI which saw marked slowdown in the
branch expansion. Attention was paid to improving house-keeping, customer service,
credit management, staff productivity and profitability of banks. Measures were
also taken to reduce the structural constraints that obstructed the growth of
money market.
Reforms phase The macro-economic crisis faced by the

country in 1991 paved the way for extensive financial sector reforms which brought
deregulation of interest rates, more competition, technological changes,
prudential guidelines on asset classification and income recognition, capital
adequacy, autonomy packages etc.
From World War I to Independence
The period during the First World War (1914-1918) through the end of the Second
World War (1939-1945), and two years thereafter until the independence of India
were challenging for Indian banking. The years of the First World War were
turbulent, and it took its toll with banks simply collapsing despite the Indian
economy gaining indirect boost due to war-related economic activities. At least 94
banks in India failed between 1913 and 1918 as indicated in the following table:
Years Number of banks
that failed Authorized capital
(Rs. Lakhs) Paid-up Capital
(Rs. Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1
Post-independence
The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralyzing banking activities for months. India's independence marked the
end of a regime of the Laissez-faire for the Indian banking. The Government of
India initiated measures to play an active role in the economic life of the
nation, and the Industrial Policy Resolution adopted by the government in 1948
envisaged a mixed economy. This resulted into greater involvement of the state in
different segments of the
economy including banking and finance. The major steps to regulate

banking included:
• In 1948, the Reserve Bank of India, India's central banking authority, was
nationalized, and it became an institution owned by the Government of India.
• In 1949, the Banking Regulation Act was enacted which empowered the Reserve
Bank of India (RBI) "to regulate, control, and inspect the banks in India."
• The Banking Regulation Act also provided that no new bank or branch of an
existing bank could be opened without a license from the RBI, and no two banks
could have common directors.
However, despite these provisions, control and regulations, banks in India except
the State Bank of India, continued to be owned and operated by private persons.
This changed with the nationalisation of major banks in India on 19 July, 1969.
BANKING REFORMS IN INDIA
Nationalisation
By the 1960s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. At the same time, it has emerged
as a large employer, and a debate has ensued about the possibility to nationalize
the banking industry. Indira Gandhi, the-then Prime Minister of India expressed
the intention of the GOI in the annual conference of the All India Congress
Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper
was received with positive enthusiasm. Thereafter, her move was swift and sudden,
and the GOI issued an ordinance and nationalised the 14 largest commercial banks
with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national
leader of India, described the step as a "masterstroke of political sagacity."
Within two weeks of the issue of the ordinance, the Parliament passed the Banking
Companies (Acquition and Transfer of Undertaking) Bill, and it received the
presidential approval on 9th August 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The
stated reason for the nationalisation was to give the government more control of
credit delivery. With the second dose of nationalisation, the GOI controlled
around 91% of the banking business of India.
After this, until the 1990s, the nationalised banks grew at a pace of around 4%,
closer to the average growth rate of the Indian economy.
Liberalization
In the early 1990s the then Narasimha Rao government embarked on a policy of
liberalization and gave licences to a small number of private banks, which came to
be known as New Generation tech-savvy banks, which included banks such as UTI Bank
(now re-named as Axis Bank) (the first of such new generation banks to be set up),
ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of
India, kickstarted the banking sector in India, which has seen rapid growth with
strong contribution from all the three sectors of banks, namely, government banks,
private banks and foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation
in the norms for Foreign Direct Investment, where all Foreign Investors in banks
may be given voting rights which could exceed the present cap of 10%, at present
it has gone up to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this
time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People
not just demanded more from their banks but also received more.
Current situation
Currently (2008), banking in India is generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a challenge
for the private sector and foreign banks. In terms of quality of assets and
capital adequacy, Indian banks are considered to have clean, strong and
transparent balance sheets relative to other banks in comparable economies in its
region. The Reserve Bank of India is an autonomous body, with minimal pressure
from the government. The stated policy of the Bank on the Indian Rupee is to
manage volatility but without any fixed exchange rate-and this has mostly been
true.
With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially
retail banking, mortgages and investment services are expected to be strong. One
may also expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its
stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first
time an investor has been allowed to hold more than 5% in a private sector bank
since the RBI announced norms in 2005 that any stake exceeding 5% in the private
sector banks would need to be vetted by them.
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks
(that is with the Government of India holding a stake), 29 private banks (these do
not have government stake; they may be publicly listed and traded on stock
exchanges) and 31 foreign banks. They have a combined network of over 53,000
branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency,
the public sector banks hold over 75 percent of total assets of the banking
industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
BANKS IN INDIA
In India the banks are being segregated in different groups. Each group has their
own benefits and limitations in operating in India. Each has their own dedicated
target market. Few of them only work in rural sector while others in both rural as
well as urban. Many even are only catering in cities. Some are of Indian origin
and some are foreign players. All these details and many more are discussed over
here. The banks and its relation with the customers, their mode of operation, the
names of banks under different groups and other such useful information are talked
about.
One more section has been taken note of is the upcoming foreign banks
in India. The RBI has shown certain interest to involve more of foreign banks than
the existing one recently. This step has paved a way for few more foreign banks to
start business in India.
Major Banks in India
• ABN-AMRO Bank
• Abu Dhabi Commercial Bank
• American Express Bank
• Andhra Bank
• Allahabad Bank
• Axis Bank (Earlier UTI Bank)
• Bank of Baroda
• Bank of India
• Bank of Maharastra
• Bank of Punjab
• Bank of Rajasthan
• Bank of Ceylon
• BNP Paribas Bank
• Canara Bank
• Catholic Syrian Bank
• Central Bank of India
• Centurion Bank
• China Trust Commercial Bank
• Citi Bank
• City Union Bank
• Corporation Bank
• Dena Bank
• Development Credit Bank

• Dhanalakshmi Bank
• Federal Bank
• HDFC Bank
• HSBC
• ICICI Bank
• IDBI Bank
• Indian Bank
• Indian Overseas Bank
• IndusInd Bank
• ING Vysya Bank
• Jammu & Kashmir Bank
• JPMorgan Chase Bank
• Karnataka Bank
• Karur Vysya Bank
• Laxmi Vilas Bank
• Oriental Bank of Commerce
• Punjab National Bank
• Punjab & Sind Bank
• Scotia Bank
• South Indian Bank
• Standard Chartered Bank
• State Bank of India (SBI)
• State Bank of Bikaner & Jaipur
• State Bank of Hyderabad
• State Bank of Indore
• State Bank of Mysore
• State Bank of Saurastra
• State Bank of Travancore

• Syndicate Bank
• Taib Bank
• UCO Bank
• Union Bank of India
• United Bank of India
• United Western Bank
• Vijaya Bank
BANKING SERVICES IN INDIA:-
With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market. The customers have more
choices in choosing their banks. A competition has been established within the
banks operating in India.
With stiff competition and advancement of technology,

the service provided by banks has become more easy and convenient. The past days
are witness to an hour wait before withdrawing cash from accounts or a cheque from
north of the country being cleared in one month in the south.
This section of banking deals with the latest

discovery in the banking instruments along with the polished version of their old
systems.
Functions of a Banks
Functioning of a Bank is among the more complicated of corporate operations. Since

Banking involves dealing directly with money, governments in most countries
regulate this sector rather stringently. In India, the regulation traditionally
has been very strict and in the opinion of certain quarters, responsible for the
present condition of banks, where NPAs are of a very high order. The process of
financial reforms, which started in 1991, has cleared the cobwebs somewhat but a
lot remains to be done. The multiplicity of policy and regulations that a Bank has
to work with makes its operations even more complicated, sometimes bordering on
illogical. This section attempts to give an overview of the functions in as simple
manner as possible.
Banking Regulation Act of India, 1949 defines Banking as "accepting, for the
purpose of lending or investment of deposits of money from the public, repayable
on demand or otherwise and withdraw able by cheques, draft, order or otherwise".
Deriving from this definition and viewed solely from the point of view of the
customers, Banks essentially perform the following functions:
1. Accepting Deposits from public/others (Deposits)

2. Lending money to public (Loans)
3. Transferring money from one place to another (Remittances)
4. Credit Creation
5. Acting as trustees
6. Keeping valuables in safe custody
7. Investment Decisions and analysis
8. Government business
9. Other types of lending and transactions.
In addition to providing a safe custodian of money, banks also loan money to

businesses and consumers. A large portion of a bank's business is lending. How do
banks get the money they loan? The money comes from depositors who intend to save
a portion of their wealth. Banks acting as intermediaries use these deposits as
loans to prospective borrowers.
The objective of commercial banks like any other organization is profit

maximisation. This profit generally originates from the interest differential
between borrowers and lenders. In the present day, however, the banking operation
has extended much beyond simple lending exercise. So there are other different
channels of profit ensuing from other investment programmes as well. However, it
should be mentioned in this context that the entire deposit held by a bank cannot
be given as loans as the Central Bank retains a portion of this money in the form
of cash-reserve for unforeseen circumstances.
Banks create money in the economy by making loans. The amount of money that banks
can lend is directly affected by the reserve requirement set by the Federal
Reserve. The reserve requirement is currently 3 percent to 10 percent of a bank's
total deposits. This amount can be held either in cash on hand or in the bank's
reserve account with the Fed. To see how this affects the economy, think about it
like this. When a bank gets a deposit of $100, assuming a reserve requirement of
10 percent, the bank can then lend out $90. That $90 goes back into the economy,
purchasing goods or services, and usually ends up deposited in another bank. That
bank can then lend out $81 of that $90 deposit, and that $81 goes into the economy
to purchase goods or services and ultimately is deposited into another bank that
proceeds to lend out a percentage of it.
In this way, money grows and flows throughout the community in a much greater
amount than physically exists. That $100 makes a much larger ripple in the economy
than you may realize!
Other Services Offered by Banks

• Credit Cards
• Personal Loans
• Home and Car Loans
• Mutual Funds
• Business Loans
• Safe Deposit Boxes
• Debit Cards
• Trust Services
• Signature Guarantees
…and many other investment services.
RESERVE BANK OF INDIA (RBI)
The central bank of the country is the Reserve Bank of India (RBI). It was
established in April 1935 with a share capital of Rs. 5 crores on the basis of the
recommendations of the Hilton Young Commission. The share capital was divided into
shares of Rs. 100 each fully paid which was entirely owned by private shareholders
in the beginning. The Government held shares of nominal value of Rs. 2, 20,000.
Reserve Bank of India was nationalized in the year 1949. The

general superintendence and direction of the Bank is entrusted to Central Board of
Directors of 20 members, the Governor and four Deputy Governors, one Government
official from the Ministry of Finance, ten nominated Directors by the Government
to give representation to important elements in the economic life of the country,
and four nominated Directors by the Central Government to represent the four local
Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local
Boards consist of five members each Central Government appointed for a term of
four years to represent territorial and economic interests and the interests of
co-operative and indigenous banks.
The Reserve Bank of India Act, 1934 was commenced on April 1,

1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning
of the Bank. The Bank was constituted for the need of following:
To regulate the issue of banknotes

To maintain reserves with a view to securing monetary stability and
To operate the credit and currency system of the country to its advantage.
Functions of Reserve Bank of India
The Reserve Bank of India Act of 1934 entrust all the important functions of a
central bank the Reserve Bank of India.
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to
issue bank notes of all denominations. The distribution of one rupee notes and
coins and small coins all over the country is undertaken by the Reserve Bank as
agent of the Government. The Reserve Bank has a separate Issue Department which is
entrusted with the issue of currency notes. The assets and liabilities of the
Issue Department are kept separate from those of the Banking Department.
Originally, the assets of the Issue Department were to consist of not less than
two-fifths of gold coin, gold bullion or sterling securities provided the amount
of gold was not less than Rs. 40 crores in value. The remaining three-fifths of
the assets might be held in rupee coins, Government of India rupee securities,
eligible bills of exchange and promissory notes payable in India. Due to the
exigencies of the Second World War and the post-was period, these provisions were
considerably modified. Since 1957, the Reserve Bank of India is required to
maintain gold and foreign exchange reserves of Ra. 200 crores, of which at least
Rs. 115 crores should be in gold. The system as it exists today is known as the
minimum reserve system.
Banker to Government
The second important function of the Reserve Bank of India is to act as Government
banker, agent and adviser. The Reserve Bank is agent of Central Government and of
all State Governments in India excepting that of Jammu and Kashmir. The Reserve
Bank has the obligation to transact Government business, via. to keep the cash
balances as deposits free of interest, to receive and to make payments on behalf
of the Government and to carry out their exchange remittances and other banking
operations. The Reserve Bank of India helps the Government - both the Union and
the States to float new loans and to manage public debt. The Bank makes ways and
means advances to the Governments for 90 days. It makes loans and advances to the
States and local authorities. It acts as adviser to the Government on all monetary
and banking matters.
Bankers' Bank and Lender of the Last Resort
The Reserve Bank of India acts as the bankers' bank. According to the provisions
of the Banking Companies Act of 1949, every scheduled bank was required to
maintain with the Reserve Bank a cash balance equivalent to 5% of its demand
liabilities and 2 per cent of its time liabilities in India. By an amendment of
1962, the distinction between demand and time liabilities was abolished and banks
have been asked to keep cash reserves equal to 3 per cent of their aggregate
deposit liabilities. The minimum cash requirements can be changed by the Reserve
Bank of India.
The scheduled banks can borrow from the Reserve Bank of
India on the basis of eligible securities or get financial accommodation in times
of need or stringency by rediscounting bills of exchange. Since commercial banks
can always expect the Reserve Bank of India to come to their help in times of
banking crisis the Reserve Bank becomes not only the banker's bank but also the
lender of the last resort.
Controller of Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to
influence the volume of credit created by banks in India. It can do so through
changing the Bank rate or through open market operations. According to the Banking
Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or
the whole banking system not to lend to particular groups or persons on the basis
of certain types of securities. Since 1956, selective controls of credit are
increasingly being used by the Reserve Bank.
The Reserve Bank of
India is armed with many more powers to control the Indian money market. Every
bank has to get a license from the Reserve Bank of India to do banking business
within India, the license can be cancelled by the Reserve Bank of certain
stipulated conditions are not fulfilled. Every bank will have to get the
permission of the Reserve Bank before it can open a new branch. Each scheduled
bank must send a weekly return to the Reserve Bank showing, in detail, its assets
and liabilities. This power of the Bank to call for information is also intended
to give it effective control of the credit system. The Reserve Bank has also the
power to inspect the accounts of any commercial bank. As supreme banking authority
in the country, the Reserve Bank of India, therefore, has the following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and

qualitative controls.
(c) It controls the banking system through the system of licensing, inspection and
calling for information.
(d) It acts as the lender of the last resort by providing rediscount facilities to
scheduled banks.
Custodian of Foreign Reserves
The Reserve Bank of India has the responsibility to maintain the official rate of
exchange. According to the Reserve Bank of India Act of 1934, the Bank was
required to buy and sell at fixed rates any amount of sterling in lots of not less
than Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the
Bank was able to maintain the exchange rate fixed at lsh.6d. Though there were
periods of extreme pressure in favor of or against the rupee. After India became a
member of the International Monetary Fund in 1946, the Reserve Bank has the
responsibility of maintaining fixed exchange rates with all other member countries
of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve
Bank has to act as the custodian of India's reserve of international currencies.
The vast sterling balances were acquired and managed by the Bank. Further, the RBI
has the responsibility of administering the exchange controls of the country.
Supervisory functions
In addition to its traditional central banking functions, the Reserve bank has
certain non-monetary functions of the nature of supervision of banks and promotion
of sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation
Act, 1949 have given the RBI wide powers of supervision and control over
commercial and co-operative banks, relating to licensing and establishments,
branch expansion, liquidity of their assets, management and methods of working,
amalgamation, reconstruction, and liquidation. The RBI is authorized to carry out
periodical inspections of the banks and to call for returns and necessary
information from them. The nationalization of 14 major Indian scheduled banks in
July 1969 has imposed new responsibilities on the RBI for directing the growth of
banking and credit policies towards more rapid development of the economy and
realization of certain desired social objectives. The supervisory functions of the
RBI have helped a great deal in improving the standard of banking in India to
develop on sound lines and to improve the methods of their operation.
Promotional functions
With economic growth assuming a new urgency since Independence, the range of the
Reserve Bank's functions has steadily widened. The Bank now performs variety of
developmental and promotional functions, which, at one time, were regarded as
outside the normal scope of central banking. The Reserve Bank was asked to promote
banking habit, extend banking facilities to rural and semi-urban areas, and
establish and promote new specialized financing agencies. Accordingly, the Reserve
Bank has helped in the setting up of the IFCI and the SFC; it set up the Deposit
Insurance Corporation in 1962, the Unit Trust of India in 1964, the Industrial
Development Bank of India also in 1964, the Agricultural Refinance Corporation of
India in 1963 and the Industrial Reconstruction
Corporation of India in 1972. These institutions were set up directly or
indirectly by the Reserve Bank to promote saving habit and to mobilize savings,
and to provide industrial finance as well as agricultural finance. As far back as
1935, the Reserve Bank of India set up the Agricultural Credit Department to
provide agricultural credit. But only since 1951 the Bank's role in this field has
become extremely important. The Bank has developed the co-operative credit
movement to encourage saving, to eliminate moneylenders from the villages and to
route its short term credit to agriculture. The RBI has set up the Agricultural
Refinance and Development Corporation to provide long-term finance to farmers.
Classification of RBIs functions
The monetary functions also known as the central banking functions of the RBI are
related to control and regulation of money and credit, i.e., issue of currency,
control of bank credit, control of foreign exchange operations, banker to the
Government and to the money market. Monetary functions of the RBI are significant
as they control and regulate the volume of money and credit in the country.
Equally important, however, are the non-monetary functions of the RBI in
the context of India's economic backwardness. The supervisory function of the RBI
may be regarded as a non-monetary function (though many consider this a monetary
function). The promotion of sound banking in India is an important goal of the
RBI, the RBI has been given wide and drastic powers, under the Banking Regulation
Act of 1949 – these powers relate to licensing of banks, branch expansion,
liquidity of their assets, management and methods of working, inspection,
amalgamation, reconstruction and liquidation. Under the RBI's supervision and
inspection, the working of banks has greatly improved. Commercial banks have
developed into financially and operationally sound and viable units. The RBI's
powers of supervision have now been extended to non-banking financial
intermediaries. Since independence, particularly after its nationalization 1949,
the RBI has followed the promotional functions vigorously and has been responsible
for strong financial support to industrial and agricultural development in the
country
Functions of RBI
Monetary Authority:
The RBI is responsible for implementing, formulating and monitoring the monetary
policy of India.
Objective: Keeping this authority in mind the RBI is required to maintain price
stability and ensure adequate flow of credit to productive sectors.
Regulator and supervisor of the financial system:

The Supreme financial body sets down broad parameters of banking operations within
which the country's banking and financial system operates.
Objective: This reasonably helps in maintaining public confidence in the system.
It in turn protects depositors' interest and provides lucrative banking services
to the public.
Manager of Exchange Control:

The RBI is responsible for managing the Foreign Exchange Management Act, 1999.
Objective: It is the nodal agency, which facilitates external trade and payment
and promotes orderly development and maintenance of foreign exchange market in
India.
Issuer of currency:
It is the only supreme body, which issues and exchanges or destroy currency and
coins not fit for circulation.
Objective: This facilitates in giving the public adequate quantity of currency

notes and coins and in good quality.
Developmental role
The RBI since its inception performs a wide range of promotional functions to
support national objectives and generate goodwill among the citizens of the
country.
Related Functions
Banker to the Government: The RBI performs merchant banking function for the
central and the state governments and also acts as their banker. The RBI often
advises the Government of the current monetary condition in the state.
Banker to banks: maintains banking accounts of all scheduled banks. The RBI looks
after the functioning of the state banks and grants them license and even cancels
the same on account of fraud practice.
Subsidiaries of RBI
Fully owned:= National Housing Bank (NHB), National Bank for Agriculture and
Rural Development (NABARD), Deposit Insurance and Credit Guarantee Corporation of
India (DICGC), Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
Majority stake: = National Bank for Agriculture and Rural Development

(NABARD). The Reserve Bank of India has recently divested its Stake in
State Bank of India to the Government of India.
THE BANKING OMBUDSMAN SCHEME 2006
The Scheme is introduced with the object of enabling resolution of complaints

relating to certain services rendered by banks and to facilitate the satisfaction
or settlement of such complaints.
1-) POWERS AND DUTIES-
1. The Banking Ombudsman shall receive and consider complaints relating to the
deficiencies in banking or other services filed on the grounds mentioned in clause
8 and facilitate their satisfaction or settlement by agreement or through
conciliation and mediation between the bank concerned and the aggrieved parties or
by passing an Award in accordance with the Scheme.
2. The Banking Ombudsman shall send to the Governor, Reserve Bank, a

report, as on 30th June every year, containing a general review of the activities
of his Office during the preceding financial year and shall furnish such other
information as the Reserve Bank may direct and the Reserve Bank may, if it
considers necessary in the public interest so to do, publish the report and the
information received from the Banking Ombudsman in such consolidated form or
otherwise as it deems fit.
2-) GROUNDS OF COMPLAINT-

The Banking Ombudsman can receive and consider any complaint relating to the
following deficiency in banking services:
• Non-payment or inordinate delay in the payment or collection of cheques,
drafts, bills, etc;
• Non-acceptance, without sufficient cause, of small denomination notes
tendered for any purpose, and for charging of commission for this service;
•
• Non-acceptance, without sufficient cause, of coins tendered and for charging
of commission for this service;
• Non-payment or delay in payment of inward remittances;
• Failure to issue or delay in issue, of drafts, pay orders or bankers’
cheques;
• Non-adherence to prescribed working hours;
• Failure to honour guarantee or letter of credit commitments;
• Failure to provide or delay in providing a banking facility (other than
loans and advances) promised in writing by a bank or its direct selling agents;
• Delays, non-credit of proceeds to parties' accounts, non-payment of deposit
or non-observance of the Reserve Bank directives, if any, applicable to rate of
interest on deposits in any savings, current or other account maintained with a
bank;
• Delays in receipt of export proceeds, handling of export bills, collection
of bills etc., for exporters provided the said complaints pertain to the bank's
operations in India;
• Refusal to open deposit accounts without any valid reason for refusal;
• Levying of charges without adequate prior notice to the customer;
• Non-adherence by the bank or its subsidiaries to the instructions of Reserve
Bank on ATM/debit card operations or credit card operations;
• Non-disbursement or delay in disbursement of pension to the extent the
grievance can be attributed to the action on the part of the bank concerned, (but
not with regard to its employees);
• Refusal to accept or delay in accepting payment towards taxes, as required
by Reserve Bank/Government;
• Refusal to issue or delay in issuing, or failure to service or delay in
servicing or redemption of Government securities;
• Forced closure of deposit accounts without due notice or without sufficient
reason;
• Refusal to close or delay in closing the accounts;
• Non-adherence to the fair practices code as adopted by the bank; and
• Any other matter relating to the violation of the directives issued by the
Reserve Bank in relation to banking or other services.
3-) PROCEDURE FOR FILING COMPLAINT-
Any person who has a grievance against a bank on any one or more of the grounds
mentioned in Clause 8 of the Scheme may, himself or through his authorised
representative (other than an advocate), make a complaint to the Banking Ombudsman
within whose jurisdiction the branch or office of the bank complained against is
located. Provided that a complaint arising out of the operations of credit cards,
shall be filed before the Banking Ombudsman within whose territorial jurisdiction
the billing address of the card holder is located and not the place where the bank
concerned or the credit card processing unit is located.
4-) POWER TO CALL FOR INFORMATION

(1) For the purpose of carrying out his duties under this Scheme, a Banking
Ombudsman may require the bank against whom the complaint is made or any other
bank concerned with the complaint to provide any information or furnish certified
copies of any document relating to the complaint, which is or is alleged to be in
its possession. Provided that in the event of the failure of a bank to comply with
the requisition without sufficient cause, the Banking Ombudsman may, if he deems
fit, draw the inference that the information if provided or copies if Furnished
would be unfavorable to the bank.
(2) The Banking Ombudsman shall maintain confidentiality of any information or

document that may come into his knowledge or possession in the course of
discharging his duties and shall not disclose such information or document to any
person except with the consent of the person furnishing such information or
document.
5-) AWARD BY THE BANKING OMBUDSMAN
(1) If a complaint is not settled by agreement within a period of one month from
the date of receipt of the complaint or such further period as the Banking
Ombudsman may allow the parties, he may, after affording the parties a reasonable
opportunity to present their case, pass an Award or reject the complaint.
(2) The Banking Ombudsman shall take into account the evidence placed before him
by the parties, the principles of banking law and practice, directions,
instructions and guidelines issued by the Reserve Bank from time to time and such
other factors, which in his opinion are relevant to the complaint.
(3) The award shall state briefly the reasons for passing the award.
(4) The Award passed under sub-clause (1) shall specify the amount, if any, to be
paid by the bank to the complainant by way of compensation for the loss suffered
by him and may contain any direction to the bank.
(5) Notwithstanding anything contained in sub-clause (4), the Banking Ombudsman

shall not have the power to pass an award directing payment of an amount which is
more than the actual loss suffered by the complainant as a direct consequence of
the act of omission or commission of the bank, or ten lakh rupees whichever is
lower.
(6) In the case of complaints arising out of credit card operations, the Banking
Ombudsman shall, while determining the amount of compensation payable, take into
account the loss of the complainant’s time, expenses incurred by the complainant,
financial loss, harassment and mental anguish suffered by the complainant.
(7) A copy of the Award shall be sent to the complainant and the bank.
6-) APPEAL BEFORE THE APPELLATE AUTHORITY

Any person aggrieved by an Award under clause 12 or rejection of a complaint for
the reasons referred to in sub. Clauses (c) to (g) of clause 13 may within 30 days
of the date of receipt of communication of Award or rejection of complaint, prefer
an appeal before the Appellate Authority;
Provided that in case of appeal by a bank, the period of thirty days for filing an
appeal shall commence from the date on which the bank receives letter of
acceptance of Award by complainant under sub. Clause (8) of clause 12;
Provided that the Appellate Authority may, if he is satisfied that the applicant
had sufficient cause for not making the appeal within time, allow a further period
not exceeding 30 days; Provided further that appeal may be filed by a bank only
with the previous sanction of the Chairman or, in his absence, the Managing
Director or the Executive Director or the Chief Executive Officer or any other
officer of equal rank.”
7-) BANKS TO DISPLAY SALIENT FEATURES OF THE SCHEME FOR COMMON KNOWLEDGE OF
PUBLIC.
(1) The banks covered by the Scheme shall ensure that the purpose of the Scheme
and the name and address of the Banking Ombudsman to whom the complaints are to be
made by the aggrieved party are displayed prominently in all the offices and
branches of the bank in such manner that a person visiting the office or branch
has adequate information of the Scheme.
(2) The banks covered by the Scheme shall ensure that a copy of the Scheme is
available with the designated officer of the bank for perusal in the office
premises of the bank if anyone desires to do so and notice about the availability
of the Scheme with such designated officer shall be displayed along with the
notice under sub-clause (1) of this clause.
(3) The banks covered by the Scheme shall appoint Nodal Officers at their
Regional/Zonal Offices and inform the respective Office of the Banking Ombudsman
under whose jurisdiction the Regional/Zonal Office falls. The Nodal Officer so
appointed shall be responsible for representing the bank and furnishing
information to the Banking Ombudsman in respect of complaints filed against the
bank.
Banking sectors in India
PUBLIC SECTOR BANKS-The public sector is the one whose working is in the hands of
the government. the government holds a majority stake in public sector industries.
Their activities are mostly influenced by the government. But due to privatization
of public sector industries, their nimbler has reduced to a significant extent.
Indian railways, nuclear power industry, electricity board, etc. are still
included in the public sector. it may be defined as "an enterprise where there is
no private ownership but its activities are not mainly confined to the
maximization of profits and private interests of the enterprise but it is
influenced by social.
The term public sector bank by itself

connotes a situation where the government holds the major/full l stake in the
banks. Excepting the Reserve Bank of India, which was nationalized in 1949, there
was no other bank, which had the tag of public sector bank till 1969. With the
nationalization of banks brought in by Banking Companies Act, 1970, 14 Banks each
of which had a level of more than Rs 50 crores in time and demand liabilities
acquired the character of nationalized banks effective from 19 July 1969. This was
subsequently followed by nationalization of 6 more private Sector Commercial
banks, each of which had crossed the deposit limit of Rs 200 crore in the year
1980, effective from 15/4/1980. Thus, as on date there are totally 19 nationalized
banks existing as on date, consequent to the merger of New Bank of India with
Punjab National Bank in September 1993. Consequent to an Amendment made to the
Banking Companies Acts, 1970/1980 in 1994, nationalized banks have been permitted
to offer their equity shares to the public to the extent of 49% of their capital
.
Some public sector banks are given below-
• State Bank of India

• Allahabad bank
• Bank of India
• Bank of Baroda
• Dena Bank
PRIVATE BANKS- are banks that are not incorporated. A private bank is owned by
either an individual or a general partner(s) with limited partner(s). In any such
case, the creditors can look to both the "entirety of the bank's assets" as well
as the entirety of the sole-proprietor's/general-partners' assets.
By private sector banks we mean those banks where private

shareholders hold equity, that is to say there is no government holding of the
equity shares. This category of banks also occupies a significant position in the
banking scenario. Private Sector Banks have been rapidly increasing their presence
in the recent times and offering a variety of newer services to the customer and
posing a stiff competition to the group of public sector banks.
Some Private Sector banks are given below-
• Axis Bank
• HDFC Bank
• ICICI Bank
• IDBI Bank
• Indusland Bank
• ING Vysya Bank
• Kotak Mahindra Bank
FOREIGN SECTOR BANKS- Foreign sector banks are those banks which have their head
office in other countries outside India and branch is working in India.
Foreign Banks in India always brought an explanation about the prompt services to
customers. After the set up foreign banks in India, the banking sector in India
also become Competitive and accurative .
New rules announced by the Reserve Bank of India for the foreign banks in India in
this budget has put up great hopes among foreign banks, which allows them to grow,
unfettered. Now foreign banks in India are permitted to set up local subsidiaries.
The policy conveys that foreign banks in India may not acquire Indian ones (except
for weak banks identified by the RBI, on its terms) and their Indian subsidiaries
will not be able to open branches freely. Please see the list of foreign banks in
India till date.
Some foreign banks are given below-
• ABN AMRO Bank N.V.

• American Express Bank
• Bank of America
• Bank of Nova Scotia
• Bank of Tokyo Mitsubishi UFJ
• Barclays Bank
• BNP Paribas
• Citibank
• Deutsche Bank
• Societe Generale
• Standard Chartered Bank
CO-OPERATIVE SECTOR
The co-operative sector is very much useful for rural people. The co-operative
banking sector is divided into the following categories.
a. State co-operative Banks
b. Central co-operative banks
c. Primary Agriculture Credit Societies
The Cooperative bank is an important constituent of the Indian Financial System,
judging by the role assigned to co operative, the expectations the co operative is
supposed to fulfill, their number, and the number of offices the cooperative bank
operate. Though the co operative movement originated in the West, but the
importance of such banks have assumed in India is rarely paralleled anywhere else
in the world. The cooperative banks in India plays an important role even today in
rural financing. The businesses of cooperative bank in the urban areas also has
increased phenomenally in recent years due to the sharp increase in the number of
primary Co-operative banks
Co-operative Banks in India are registered
under the Co-operative Societies Act. The RBI also regulates the cooperative bank.
They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-
operative Societies) Act, 1965.
List of some co-operative banks in India
• Uttar Pradesh State Co-operative bank Ltd.

• New India Co-operative bank Ltd. Mumbai
• United Mercantile Co-operative Bank Ltd.
• United Co-operative Commercial (UCC) Bank Ltd.
• Development Co-operative Bank Ltd.
• Co-operative Bank of Ahmedabad Ltd.

• The Indian Mercantile Co-operative Bank Ltd.
Regional Rural Bank

A rural bank is a financial institution that helps rationalize the developing
regions or developing country to finance their needs specially the projects
regarding agricultural progress.
Rural banking in India started since the establishment of banking sector in India.
Rural Banks in those days mainly focused upon the agro sector. Regional rural
banks in India penetrated every corner of the country and extended a helping hand
in the growth process of the country.
SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI are
spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to
North East. The total number of SBIs Regional Rural Banks in India branches is
2349 (16%). Till date in rural banking in India, there are 14,475 rural banks in
the country of which 2126 91% are located in remote rural areas.
Apart from SBI, there are other few banks which functions for the development of
the rural areas in India. Few of them are as follows-
• Haryana state Co-operative Apex Bank Limited

• NABARD
• Sindhanur Urban Souhadra Co-operative Bank
• Syndicate Bank
Structure of Banking in India
Scheduled banks:
Scheduled Banks in India constitute those banks which have been included in the
Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section 42
(6) (a) of the Act.
The banks included in this schedule list should fulfil two conditions.
1. The paid capital and collected funds of bank should not be less than Rs. 5 lac.
2.Any activity of the bank will not adversely affect the interests of depositors.
Every Scheduled bank enjoys the following facilities.

1. Such bank becomes eligible for debts/loans on bank rate from the RBI
2. Such bank automatically acquire the membership of clearing house
Scheduled Commercial Banks

The commercial banking structure in India consists of:
• Scheduled Commercial Banks in India
• Unscheduled Banks in India
Scheduled Banks in India constitute those banks which have been included in the
Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section 42
(6) (a) of the Act.
As on 30th June, 1999, there were 300 scheduled banks in India having a total
network of 64,918 branches. The scheduled commercial banks in India comprise of
State bank of India and its associates (8), nationalised
banks(19), foreign banks (45), private sector banks (32), co-operative banks and
regional rural banks.
"Scheduled banks in India" means the State Bank of India constituted under the
State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the
State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new
bank constituted under section 3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or
any other bank being a bank included in the Second Schedule to the Reserve Bank of
India Act, 1934 (2 of 1934), but does not include a co-operative bank".
"Non-scheduled bank in India" means a banking company as defined in clause (c) of

section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a
scheduled bank".
Public sectors bank

The public sector is the one whose working is in the hands of the governments the
governments holds a majority stake in public sector industries. Their activities
are mostly influenced by the government. But due to privatization of public sector
industries, their nimbler has reduced to a significant extent. Indian railways,
nuclear power industry, electricity board, etc are still included in the public
sector. It may be defined as “an enterprise where there is no private ownership
but its activities are not mainly confined to the maximization of profits and
private interests of the enterprise but it is influenced by social.
The following are the list of Public Sector Banks in India

• Allahabad Bank
• Andhra Bank
• Bank of Baroda
• Bank of India
• Bank of Maharastra
• Canara Bank
-
• Corporation Bank
• Indian Bank
• Indian Overseas Bank
• Oriental Bank of Commerce
• Punjab & Sind Bank
• Syndicate Bank
• UCO Bank
• Vijaya Bank
Public sector banks consist of two things which are as under below:
Nationalized Bank
A federally chartered bank which is a member of the Federal Reserve System and the
Federal Deposit Insurance Corporation.
1. A bank in a system of federally chartered privately owned banks in the

United States, each required by law to be an investing member of its district
Federal Reserve Bank and insured by the Federal Deposit Insurance Corporation.
2. A bank associated with national finances and usually owned or controlled by
a government.
SBI an its associates
Sr.No Associate Banks of SBI

1 State Bank of Bikaner & Jaipur
2 State Bank of Hyderabad
3 State Bank of Indore
4 State Bank of Mysore
5 State Bank of Patiala
6 State Bank of Travancore

Private sector bank
Private banks are banks that are not incorporated. A private bank is owned by
either an individual or a general partner(s) with limited partner(s). In any such
case, the creditors can look to both the "entirety of the bank's assets" as well
as the entirety of the sole-proprietor's/general-partners' assets.
• The part of an economy in which goods and services are produced and
distributed by individuals and organizations that are not part of the government
or state bureaucracy
• The part of a nation's economy which is not controlled by the government
• Private sector schemes may give you the option of exchanging part of your
pension for a tax-free lump sum.
Private banking in India was practiced since the beginning of banking system in
India. The first private bank in India to be set up in Private Sector Banks in
India was IndusInd Bank. It is one of the fastest growing Bank Private Sector
Banks in India. IDBI ranks the tenth largest development bank in the world as
private banks.
The first Private Bank in India to receive an in principle approval from the
Reserve Bank of India was Housing Development Finance Corporation Limited, to set
up a bank in the private sector banks in India as part of the RBI's liberalisation
of the Indian Banking Industry. It was incorporated in August 1994 as HDFC Bank
Limited with registered office in Mumbai and commenced operations as Scheduled
Commercial Bank in January 1995.
ING Vysya, yet another Private Bank of India was incorporated in the year 1930.
Bangalore has a pride of place for having the first branch inception in the year
1934. With successive years of patronage and constantly setting new standards in
banking, ING Vysya Bank has many credits to its account.
List of Private Banks in India

• Bank of Punjab
• Bank of Rajasthan
• Catholic Syrian Bank
• Centurion Bank
• City Union Bank
• Dhanalakshmi Bank
• Development Credit Bank
• Federal Bank
• HDFC Bank
• ICICI Bank
• IDBI Bank
• IndusInd Bank
• ING Vysya Bank
• Jammu & Kashmir Bank
• Karnataka Bank
• Karur Vysya Bank
• Laxmi Vilas Bank
• South Indian Bank
• United Western Bank
• UTI Bank
Private sector banks consist of mainly two things:
Old Private Sector Banks
1. Bank of Rajasthan Ltd.
2. Catholic Syrian Bank Ltd.
3. City Union Bank Ltd
4. Dhanalakshmi Bank Ltd
5 Federal Bank Ltd
6. ING Vysya Bank Ltd
7. Jammu and Kashmir Bank Ltd
8 Karnataka Bank Ltd
9. Karur Vysya Bank Ltd
10. Lakshmi Vilas Bank Ltd
11. Nainital Bank Ltd
12. Ratnakar Bank Ltd.
13. SBI Commercial and International Bank Ltd
14. South Indian Bank Ltd
15. Tamilnad Mercantile Bank Ltd.
16. United Western Bank Ltd
New Private Sector Banks
o Kotak Mahindra Bank Ltd
o Yes Bank Ltd

-
Foreign sector banks
Foreign sector banks are those banks which have their head office in other
countries outside india and branch is working in india.
The following are the Scheduled Foreign Banks in India:

• American Express Bank Ltd.
• ANZ Gridlays Bank Plc.
• Bank of America NT & SA
• Bank of Tokyo Ltd.
• Banquc Nationale de Paris
• Barclays Bank Plc
• Citi Bank N.C.
• Deutsche Bank A.G.
• Hongkong and Shanghai Banking Corporation
• Standard Chartered Bank.
• The Chase Manhattan Bank Ltd.
• Dresdner Bank AG.
Regional Rural Banks

Rural banking in India started since the establishment of banking sector in India.
Rural Banks in those days mainly focussed upon the agro sector. Regional rural
banks in India penetrated every corner of the country and extended a helping hand
in the growth process of the country.
SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI is
spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to
North East. The total number of SBIs Regional Rural Banks in India branches is
2349 (16%). Till date in rural banking in India, there are 14,475 rural banks in
the country of which 2126 (91%) are located in remote rural areas.
Apart from SBI, there are other few banks which functions for the development of
the rural areas in India. Few of them are as follows.
Haryana State Cooperative Apex Bank Limited
The Haryana State Cooperative Apex Bank Ltd. commonly called as HARCOBANK plays a
vital role in rural banking in the economy of Haryana State and has been providing
aids and financing farmers, rural artisans, agricultural labourers, entrepreneurs,
etc. in the state and giving service to its depositors.
NABARD
National Bank for Agriculture and Rural Development (NABARD) is a development bank
in the sector of Regional Rural Banks in India. It provides and regulates credit
and gives service for the promotion and development of rural sectors mainly
agriculture, small scale industries, cottage and village industries, handicrafts.
It also finance rural crafts and other allied rural economic activities to promote
integrated rural development. It helps in securing rural prosperity and its
connected matters.
Sindhanur Urban Souharda Co-operative Bank
Sindhanur Urban Souharda Co-operative Bank, popularly known as SUCO BANK is the
first of its kind in rural banks of India. The impressive story of its inception
is interesting and inspiring for all the youth of this country.
United Bank of India
United Bank of India (UBI) also plays an important role in regional rural banks.
It has expanded its branch network in a big way to actively participate in the
developmental of the rural and semi-urban areas in conformity with the objectives
of nationalisation.
Syndicate Bank was firmly rooted in rural India as rural banking and have a clear
vision of future India by understanding the grassroot realities. Its progress has
been abreast of the phase of progressive banking in India especially in rural
banks.
Scheduled Cooperative Banks:
Co-operative Banks are organised and managed on the principal of co-operation,
self-help, and mutual help. They function with the rule of "one member, one vote".
function on "no profit, no loss" basis. Co-operative banks, as a principle, do not
pursue the goal of profit maximisation.
Co-operative bank performs all the main banking functions of deposit mobilisation,
supply of credit and provision of remittance facilities.
Co-operative Banks provide limited banking products and are functionally

specialists in agriculture related products. However, co-operative banks now
provide housing loans also.
Meaning And Definition of Co-operative Banks According to the International

Co-operative Association
A co-operative is an autonomous association of persons united voluntarily to meet

their common economic, social, and cultural needs and aspirations through a
jointly-owned and democratically-controlled enterprise. Co-operatives are based on
the values of self-help, self-responsibility, democracy, equality, equity and
solidarity. In the tradition of their founders, co-operative members believe in
the ethical values of honesty, openness, social responsibility and caring for
others.
The 7 co-operative principles are
• Voluntary and open membership

• Democratic member control
• Member economic participation
• Autonomy and independence
• Education, training and information
• Co-operation among Co-operatives
• Concern for Community
• Voluntary and open membership – Co-operative are voluntary organizations,

open to all persons able to use their services and willing to accept the
responsibilities of membership, without gender, social, racial, political or
religious discrimination.
• Democratic member control – Co-operative are democratic organizations
controlled by their members, who actively participate in setting their policies
and making decisions, men and women serving as elected representatives are
accountable to the membership. In primary co-operatives member have equal voting
rights and co-operatives at other levels are also organized in a democratic
manner.
• Member economic participation – Members contributes equitability to and
democratically controls the capital of their co-operative. At least part of the
capital is usually the common property of the co-operative members usually receive
limited compensation, if any, on capital subscribed as condition of membership.
Members allocate surpluses for any of the following purposes: developing their co-
operative, possibly by setting up reserves, part of which at least would be
indivisible, benefiting members in proportion to their transactions with the co-
operative, and supporting other activities approved by the membership.
• Autonomy and independence – Co-operative are autonomous, self-help
organizations controlled by their members. If they enter into agreements with
other organizations, including governments to raise capital from external sources,
they do so in terms that ensure democratic control by their members and maintain
their co-operative autonomy.
• Education, training and information – Co-operative provide education and
training for their members, elected representatives, managers and employees so
that, they can contribute effectively to the development of their co-operatives.
They inform the general public-
particularly young people and opinion leaders about the nature and benefit of Co-
operation.
• Co-operation among cooperativeness – Co-operatives serve their members most
effectively and strengthen the co-operative movements by workings together through
local, national, regional and international structures.
• Concern for community – Co-operatives work for the sustainable development
of their communities through policies approved by their members.
A co-operative bank is a financial entity which belongs to its members, who are at
the same time the owners and the customers of their bank. Co-operative banks are
often created by persons belonging to the same local or professional community or
sharing a common interest. Co-operative banks generally provide their members with
a wide range of banking and financial services (loans, deposits, banking
accounts…). Co-operative banks differ from stockholder banks by their
organization, their goals, their values and their governance. In most countries,
they are supervised and controlled by banking authorities and have to respect
prudential banking regulations, which put them at a level playing field with
stockholder banks. Depending on countries, this control and supervision can be
implemented directly by state entities or delegated to a co-operative federation
or central body.
Scheduled urban cooperative banks
The Urban Cooperative Banks (UCBs), along with other cooperative banks, were
brought
Under the regulatory ambit of RBI by extending certain provisions of Banking
Regulation Act, 1949, (B.R.Act) effective from March 1, 1966. Since then, the
urban banking sector has witnessed phenomenal growth in terms of reach, size,
volume of operations and the quantum of public deposits held by it. In the past,
two Expert Committees had examined the role assigned to UCBs and the regulatory
issues related to them. Report of the Committee on Urban Cooperative Banks, 1978
(Madhava Das Committee) provided a well-documented study of urban banking sector
in
India and set standards of viability for sustained growth of urban banks. The last
Committee on UCBs (Marathe Committee) which submitted its Report in 1992, had come
out with far reaching recommendations, and it had, primarily aimed at removal of
“fetters” on UCBs’ freedom. RBI has accepted most of these recommendations and
implemented them.
RBI felt that it should take stock of the performance of urban cooperative
banking sector after the introduction of a fairly deregulated regime in 1993 in
the light of the recommendations of Marathe Committee Report and the more
deregulated scenario of the commercial banking sector consequent to the
recommendations of Narasimham Committee Report on Banking Sector Reforms. This
review is to particularly focus on the entry point capital prescription,
proliferation of weak banks, implementation of prudential norms, inadequate legal
provisions and problems created by dual control of UCBs by RBI under B.R.Act, and
State Governments under the respective State Cooperative Societies Acts. While
announcing the monetary policy for the year 1999-2000, the Governor, Reserve Bank
of India desired to constitute a High Power Committee to address these issues.
Accordingly, the present High Power Committee was constituted by the Governor,
Reserve Bank of India, in May 1999 to review the performance of urban cooperative
banks and suggest necessary measures to strengthen them.
Non-Scheduled Banks
"Non-scheduled bank in India" means a banking company as defined in clause (c) of

section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a
scheduled bank”.
NATURE OF BANKING IN INDIA
A banking company in India has been defined in the banking companies act,1949.as
one “which transacts the business of banking which means the accepting, for the
purpose of lending or investment of deposits of money from the public, repayable
on demand or otherwise and withdraw able by cheque, draft, order or otherwise.”
Most of the activities a
Bank performs are derived from the above definition. In addition, Banks are
allowed to perform certain activities which are ancillary to this business of
accepting deposits and lending. A bank's relationship with the public, therefore,
revolves around accepting deposits and lending money. Another activity which is
assuming increasing importance is transfer of money - both domestic and foreign
-from one place to another. This activity is generally known as "remittance
business" in banking parlance. The so called forex (foreign exchange) business is
largely a part of remittance albeit it involves buying and selling of foreign
currencies.
KINDS OF BANKS
Financial requirements in a modern economy are of a diverse nature, distinctive

variety and large magnitude. Hence, different types of banks have been instituted
to cater to the varying needs of the community.
Banks in the organized sector may, however, be classified in to the
following major forms:
1. Commercial banks
2. Co-operative banks
3. Specialized banks
4. Central bank
-: COMMERCIAL BANKS:-
Commercial banks are joint stock companies dealing in money and credit. In
India, however there is a mixed banking system, prior to July 1969, all the
commercial banks-73 scheduled and 26 non-scheduled banks, except the state bank of
India and its subsidiaries-were under the control of private sector. On July 19,
1969, however, 14major commercial banks with deposits of over 50 Corers were
nationalized. In April 1980, another six commercial banks of high standing were
taken over by the government. At present, there are 20 nationalized banks plus the
state bank of India and its 7 subsidiaries constituting public sector banking
which controls over 90 per cent of the banking business in the country.
-:CO-OPERATIVE BANKS:-
Co-operative banks are a group of financial institutions organized under the

provisions of the Co-operative societies Act of the states. The main objective of
co-operative banks is to provide cheap credits to their members. They are based on
the principle of self-reliance and mutual co-operation. Co-operative banking
system in India has the shape of a pyramid a three tier structure, constituted by:
Primary credit societies [APEX]

Central co-operative banks [District level]
State co-operative banks [Villages, Towns, Cities]
-: SPECIALIZED BANKS:-
There are specialized forms of banks catering to some special needs with this
unique nature of activities. There are thus,
1. Foreign exchange banks,
2. Industrial banks,
3. Development banks,
4. Land development banks,
-: CENTRAL BANK:-
A central bank is the apex financial institution in the banking and financial
system of a country. It is regarded as the highest monetary authority in the
country. It acts as the leader of the money market. It supervises, control and
regulates the activities of the commercial banks. It is a service oriented
financial institution. India’s central bank is the Reserve Bank of India
established in 1935. A central bank is usually state owned but it may also be a
private organization. For instance, the reserve Bank of India (RBI), was started
as a shareholders’ organization in 1935, however, it was nationalized after
independence, in 1949.it is free from parliamentary control.
ROLE OF BANKS IN A DEVELOPING ECONOMY
Banks play a very useful and dynamic role in the economic life of every modern
state. A study of the economic history of western country shows that without the
evolution of commercial banks in the 18th and 19th centuries, the industrial
revolution would not have taken place in Europe. The economic importance of
commercial banks to the developing countries may be viewed thus:
1. Promoting capital formation
2. Encouraging innovation
3. Molestation
4. Influence economic activity
5. Facilitator of monetary policy
Above all view we can see in briefly, which are given below:
PROMOTING CAPITAL FORMATION:-
A developing economy needs a high rate of capital formation to accelerate the

tempo of economic development, but the rate of capital formation depends upon the
rate of saving. Unfortunately, in underdeveloped countries, saving is very low.
Banks afford facilities for saving and, thus encourage the habits of thrift and
industry in the community. They mobilize the ideal and dormant capital of the
country and make it available for productive purposes.
ENCOURAGING INNOVATION:-
Innovation is another factor responsible for economic development. The
entrepreneur in innovation is largely dependent on the manner in which bank credit
is allocated and utilized in the process of economic growth. Bank credit enables
entrepreneurs to innovate and invest, and thus uplift economic activity and
progress.
MONETSATION:-
Banks are the manufactures of money and they allow many to play its role freely in
the economy. Banks monetize debts and also assist the backward subsistence sector
of the rural economy by extending their branches in to the rural areas. They must
be replaced by the modern commercial bank’s branches.
INFLUENCE ECONOMIC ACTIVITY:-
Banks are in a position to influence economic activity in a country by their

influence on the rate interest. They can influence the rate of interest in the
money market through its supply of funds. Banks may follow a cheap money policy
with low interest rates which will tend to stimulate economic activity.
FACILITATOR OF MONETARY POLICY:-
Thus monetary policy of a country should be conductive to economic development.

But a well-developed banking system is on essential pre-condition to the effective
implementation of monetary policy. Under-developed countries cannot afford to
ignore this fact. A fine, an efficient and comprehensive banking system is a
crucial factor of the developmental process.
PRINCIPLES OF BANK LENDING POLICIES
The main business of banking company is to grant loans and advances to traders as
well as commercial and industrial institutes. The most important use of banks
money is lending. Yet, there are risks in lending. So the banks follow certain
principles to minimize the risk:
1. Safety
2. Liquidity
3. Profitability
4. Purpose of loan
5. Principle of diversification of risks
SAFETY:-
Normally the banker uses the money of depositors in granting loans and advances.
So first of all initially the banker while granting loans should think first of
the safety of depositor’s money. The purpose behind the safety is to see the
financial position of the borrower whether he can pay the debt as well as interest
easily.
LIQUIDITY:-
It is a legal duty of a banker to pay on demand the total deposited money to the
depositor. So the banker has to keep certain percent cash of the total deposits on
hand. Moreover the bank grants loan. It is also for the addition of short term or
productive capital. Such type of lending is recovered on demand.
PROFITABILITY:-
Commercial banking is profit earning institutes. Nationalized banks are also not
an exception. They should have planning of deposits in a profitability way pay
more interest to the depositors and more salary to the employees. Moreover the
banker can also incur business cost and can give more benefits to customer.
PURPOSE OF LOAN:-
Banks never lend or advance for any type of purpose. The banks grant loans and
advances for the safety of its wealth, and certainty of recovery of loan and the
bank lends only for productive purposes. For example, the bank gives such loan for
the requirement for unproductive purposes.
PRINCIPLE OF DIVERSIFICATION OF RISKS:-
While lending loans or advances the banks normally keep such securities and assets
as a supports so that lending may be safe and secured. Suppose, any particular
state is hit by disasters but the bank shall get benefits from the lending to
another states units. Thus, he effect on the entire business of banking is
reduced. There are proverbs that do not keep all the eggs in one basket.
---a principle of considerations of sound lending is:
1. Safety
2. Liquidity
3. Shift ability
4. Profitability.
BANKING SERVICES PERTANING TO THE COMMON PERSON
Bank Account
Open bank account - the most common and first service of the banking sector. There
are different types of bank account in Indian banking sector. The bank accounts
are as follows:
• Bank Savings Account - Bank Savings Account can be opened for eligible
person / persons and certain organisations / agencies (as advised by Reserve Bank
of India (RBI) from time to time)
• Bank Current Account - Bank Current Account can be opened by individuals /
partnership firms / Private and Public Limited Companies / HUFs / Specified
Associates / Societies / Trusts, etc.
• Bank Term Deposits Account - Bank Term Deposits Account can be opened by
individuals / partnership firms / Private and Public Limited Companies / HUFs/
Specified Associates / Societies / Trusts, etc.
• Bank Account Online - With the advancement of technology, the major banks in
the public and private sector has facilitated their customer to open bank account
online. Bank account online is registered through a PC with an Internet
connection. The advent of bank account online has saved both the cost of operation
for banks as well as the time taken in opening an account.
Note: - A minor account can be opened but jointly with a guardian and only the
guardian would is allowed to operate the account.
.
General procedure to open an account

• The Bank will provide you with details of various types of accounts that you
may open with the Bank.
• You can have your choice on what type of account would best suit you, based
on your needs and requirements
• The Bank will, prior to opening an account, require documentation and
information as prescribed by the "Know Your Customer" (KYC) guidelines issued by
RBI and or such other norms or procedures adopted by the Bank prior to opening the
account.
• The due diligence process that the Bank would follow, will involve providing
documentation verifying your identity, verifying your address, and information on
your occupation or business and source of funds. As part of the due diligence
process the Bank may also require an introduction from a person acceptable to the
Bank if they so deem necessary and will need your recent photographs.
• The Bank is required by law to obtain Permanent Account Number (PAN) or
General Index Register (GIR) Number or, where you do not possess such
registration, declaration in Form No. 60 or 61 as specified under the Income Tax
Rules.
• In the event that the account opening process is likely to take longer than
normal, the Bank will inform you of the revised timeline.
• You can also call your branch or the executive for any queries that you may
have and the branch / executive will revert on the query at the earliest.
• The Bank will provide you with the account opening forms and other relevant
material to enable you open the account. Bank personnel will advise you on the
complete details of information that would be required by the Bank for the
verification process.
The Bank reserves the right, at its sole discretion, to open any account and at
such terms as the Bank may prescribe from time to time.
General Procedure for closing an account-
• You have to fill a form or file an application for closing an account as per
the bank.
• You have to submit cheque book, passbook along with cancelled ATM card.
• There are some charges when you close your account within one-year/six
months. And after this duration there is no charge for closing an account.
Credit Card- Credit cards in India is gaining ground. A number of banks in India
are encouraging people to use credit card. Diners Club and American Express used
the concept of credit card in 1950 with the launch of charge cards in USA. Credit
card however became more popular with use of magnetic strip in 1970.
Credit card in India became popular with the introduction of foreign banks in the
country.
Credit cards are financial instruments, which can be used more than once to borrow
money or buy products and services on credit. Basically banks, retail stores and
other businesses issue these.
Major Banks issuing Credit Card in India
• State Bank of India credit card (SBI credit card)
• Bank of Baroda credit card or Bob credit card
• ICICI credit card
• HDFC credit card
• IDBI credit card
• ABN AMRO credit card
• Standard Chartered credit card
• HSBC credit card
• Citibank Credit Card
Global player in credit card market
• MasterCard
• VISA Card
• American Express
• Diners Club International
• JCB Cards
Grace Period
The number of days you have on a card before a card issuer starts charging you
interest is called grace period. Usually this period is the number of days between
the statement date and the due date of payment. Grace periods on credit cards are
usually 2-3 weeks. However, there is likely to be no grace for balances carried
forward from previous month and fresh purchases thereafter if any.
DEBIT CARD- Debit cards, also known as check cards look like credit cards or ATM
cards (automated teller machine card). It operates like cash or a personal check.
Debit cards are different from credit cards. Credit card is a way to "pay later,"
whereas debit card is a way to "pay now." When we use a debit card, our money is
quickly deducted from the bank account.
Debit cards are accepted at many locations, including grocery stores, retail
stores, gasoline stations, and restaurants. It's an alternative to carrying a
checkbook or a check
With debit card, we use our own money and not the issuer's money.
In India almost all the banks issue debit card to its account holders.
Features of Debit Card

• Obtaining a debit card is often easier than obtaining a credit card.
• Using a debit card instead of writing checks saves you from showing
identification or giving out personal information at the time of the transaction.
• Using a debit card frees you from carrying cash or a checkbook.
• Using a debit card means you no longer have to stock up on traveler's checks
or cash when you travel.
• Merchants may more readily accept debit cards than checks, especially in
other states or countries wherever your card brand is accepted.
• The debit card is a quick, "pay now" product, giving you no grace period.
• Using a debit card may mean you have less protection than with a credit card
purchase for items which are never delivered, are defective, or were
misrepresented. But, as with credit cards, you may dispute unauthorized charges or
other mistakes within 60 days. You should contact the card issuer if a problem
cannot be resolved with the merchant.
• Returning goods or canceling services purchased with a debit card is treated
as if the purchase were made with cash or a check.
Internet Banking-
Internet banking is the latest in this series of technological wonders in the
recent past involving use of Internet for delivery of banking products and
services. Internet banking is changing the banking industry and is having the
major effects on banking relationships. Banking is now no longer confined to the
branches were one has to approach the branch in person, to withdraw cash or
deposit a cheque or request a statement of accounts. In true Internet banking, any
inquiry or transaction is processed online without any reference to the branch
(anywhere banking) at any time. Providing Internet banking is increasingly
becoming a "need to have" than a "nice to have" service.
Core Banking Solution (CBS)

Core Banking Solution (CBS) is networking of branches, which enables Customers to
operate their accounts, and avail banking services from any branch of the Bank on
CBS network, regardless of where he maintains his account. The customer is no more
the customer of a Branch. He becomes the Bank’s Customer. Thus CBS is a step
towards enhancing customer convenience through anywhere and anytime banking.
All CBS branches are inter-connected with each other. Therefore, Customers of CBS
branches can avail various banking facilities from any other CBS branch located
any where in the world. These services are:
To make enquiries about the balance; debit or credit entries in the account.
To obtain cash payment out of his account by tendering a cheque.
To deposit a cheque for credit into his account.
To deposit cash into the account.
To deposit cheques / cash into account of some other person who has account
in a CBS branch.
To get statement of account.
To transfer funds from his account to some other account – his own or of
third party, provided both accounts are in CBS branches.
To obtain Demand Drafts or Banker’s Cheques from any branch on CBS – amount
shall be online debited to his account.
Customers can continue to use ATMs and other Delivery Channels, which are
also interfaced with CBS platform. Similarly, facilities like Bill Payment, I-Bob,
M-bob etc. shall also continue to be available. Bank is in the process of
launching Internet-banking facility shortly.
Electronic Clearing Service (ECS)-

It is a mode of electronic funds transfer from one bank account to another bank
account using the services of a Clearing House. This is normally for bulk
transfers from one account to many accounts or vice-versa. This can be used both
for making payments like distribution of dividend, interest, salary, pension, etc.
by institutions or for collection of amounts for purposes such as payments to
utility companies like telephone, electricity, or charges such as house tax, water
tax, etc or for loan installments of financial institutions/banks or regular
investments of persons.
There are two types of ECS called ECS (Credit) and ECS (Debit).
ECS (Credit) is used for affording credit to a large number of beneficiaries by

raising a single debit to an account, such as dividend, interest or salary
payment.
ECS (Debit) is used for raising debits to a number of accounts of consumers/
account holders for crediting a particular institution.
RETAIL BANKING-THE NEW FLAVOR

The Concept of Retail Banking:-
The retail banking encompasses deposit and assets linked products as well as
other financial services offered to individual for personal consumption.
Generally, the pure retail banking is conceived to be the provision of mass
banking products and services to private individuals as opposed to wholesale
banking which focuses on corporate clients. Over the years, the concept of retail
banking has been expanded to include in many cases the services provided to small
and medium sized businesses. Some banks in Europe even include their private
banking business i.e. services to high net worth net worth individuals in their
retail Banking portfolio.
The concept of Retail banking is not new to banks. it is only
now that it is being viewed as an attractive market segment, which offers
opportunities for growth with profits. The diversified portfolio characteristic of
retail banking gives better comfort and spreads the essence of retail banking lies
in individual customers. Though the term Retail Banking and retail lending are
often used synonymously, yet the later is lust one side of Retail Banking. In
retail banking, all the banking needs of individual customers are taken care of in
an integrated manner.
Retail Lending Products:-
Major retail lending products offered by banks are the following:

I. Housing Loans
II. Loan for Consumer goods
III. Personal Loans for marriage, honeymoon, medical treatment and holding etc.
IV. Education Loans
V. Auto Loans
VI. Gold Loans
VII. Event Loans
VIII. Festival Loans
IX. Insurance Products

X. Loan against Rent receivables
XI. Loan against Pension receivables to senior citizens
XII. Debit and Credit Cards
XIII. Global and International Cards
XIV. Loan to Doctors to set up their own Clinics or for purchase of medical
equipments
XV. Loan for Woman Empowerment for the Setting up of boutiques
 Setting up of beauty parlours
 Setting up of creches
 Setting up of flower shops
 For making jaipuri quilts etc.
 Preparation and supply of Food Tiffins
XVI. Loan for purchase of acoustic enclosures for Diesel Gen. Sets etc.
Retail Banking Products for Depositors:-

Retail banking products for depositors in various segments of customers like;
children, salaried persons. Senior citizens, professionals, technocrats’ business
men, retail traders and farmers etc. include:
a. Flexi deposit Accounts
b. Savings Bank Accounts
c. Recurring Deposit Accounts
d. Short Term Deposits
e. Deferred pension Linked Deposit Schemes
Today pure deposit type products are giving way to multi-benefit, multi-access
genres of banking products. Most of the innovation is taking place in saving bank
accounts to make the meager return of 3.5% p.a. that they earn, more attractive.
Most of the banks now offer Sweep in and sweep out account, called 2-in-1 accounts
or value added savings bank accounts. This account is a combination of savings
bank and term deposit accounts and offers twin benefit of liquidity of a savings
bank account and higher interest earning of term deposit accounts.
Add-ons and Freebies:-
To make their products and services more service more attractive so as to woo
maximum number of customers, the banks are vying with each other with whole lot
off rills, goodies, freebies are as under:
1. Free collection of specified number of outstation instruments

2. Instant credit of outstanding cheques up to Rs.15000/-
3. Concession in exchange on demand drafts and pay-orders and commission on bills
of exchange
4. Issuance of free personalized cheques books
5. Free issuance of ATM, Debit, Credit and add-on Cards
6. Free investment advisory services
7. Grant of redeemable reward points on use of credit cards
8. Free internet banking, phone banking and any where banking facilities
9. Issuance of discount coupons for purchase of various products like computer
accessories, music CDs, cassettes, books, toys, garments etc. etc.
10. Last but not the least, issuance of free PVR, Trade Fair tickets etc. etc.
11. Concession in rate of interest on Group advances
12. Exemption in upfront fees
These concessions, freebies and add-ons are based on the True Relationship Value
of customers and is calculated by the return on various products and services of
the banks availed by them. These concessions and freebies are usually offered for
purchase of consumer goods but now they have become an integral part of retail
Banking products and services also.
Other Retail Banking Services:-
Offer of several frills and goodies is not the end of the game. Banks also offer
following Retail Banking services free of charges to customers:
1. Payment of utility bills like water, electricity, telephone and mobile phone
bills
2. Payment of insurance premiums on due dates
3. Payment of monthly/quarterly education fee of children to their respective
schools
4. Remittance of funds from one account to another
5. Demating of shares, bonds, debentures, and mutual funds
6. Payment of credit card bills on due dates
7. Last but not the least, the filing of income tax returns and payment of income
tax
Retail Lending at Point of Sale:-
More and more banks have since entered into tie up arrangement with leading
automobile, electronic and consumer goods dealers, builders and real estate
agents, universities and colleges etc. for promoting and selling their Retail
Banking products including housing and educational loans to customer at the very
point of sale.
New delivery channels for Retail Banking Products and Services:-
The advent of new delivery channels viz. ATM, Interest and Telebanking have
revolutionalised the retail banking activities. These channels enable Banks to
deliver retail Banking products and services in an efficient and cost effective
manner. Now-a days the banks are under great pressure to attract new and retain
old customers, as margins are turning wafer thin. In these
circumstances reducing administrative a transaction cost has become crucial. Banks

are making special offerings to customers through these channels. Retail banking
has been immensely benefited with the revolution in IT. and communication
technology. The automation of the Banking processes is facilitating extension of
their reach and rationalization of their costs as well. They are the engine for
growth of retail banking business of Banks. The networking of branches has
extended the scope of banking to anywhere and anytime 24 * 7 days week banking. It
has enabled customer to be the customer of a bank rather then the customers of a
particular branch only. Customers can transact retail Banking transactions at any
of the networked branches without any extra cost. As a matter of fact the Retail
Banking per se has taken off because of the advent of multiple banking channels.
These channels have enabled banks to go on a massive customer acquisition mode
since transaction volumes spread over multiple channels lessen the load on the
brick and mortar bank branches.
The impact of Retail Banking:-
_ The major impact of Retail Banking is that, the customers have become the
emperors – the fulcrum of all banking activities, both on the asset side and the
liabilities front. The hitherto sellers market has transformed into buyers market.
The customers have multiple of choices before them now for cherry picking products
and services, which suit their life styles and tastes and financial requirements
as well. Banks now go to their customers more often than the customers go to their
banks. The non-banking finance Companies which have hitherto been thriving on
retail business due to high risk and high returns thereon have been dislodged from
their profit munching citadel.
_ Retail banking is transforming banks in to one stop financial super markets.
_ The share of retail loans is fast increasing in the loan books of banks.
_ Banks can foster lasting business relationship with customers and retain the
existing customers and attract new ones. There is a rise in their service levels
as well.
_ Banks can cut costs and achieve economies of scale and improve their revenues
and profits by robust growth in retail business. Reduction in costs offers a win
win situation both for banks and the customers.
_ It has affected the interface of banking system through different delivery
mechanism.
_ It is not that banks are sharing the same pie of retail business. The pie itself
is growing exponentially; retail banking has fueled a considerable quantum of
purchasing power through a slew of retail products.
_ Banks can diversify risks in their credit portfolio and contain the menace of
NPAs.
_ Re-engineering of business with sophisticated technology based products will
lead to business creation, reduction in transaction cost and enhancement in
efficiency of operations.
Draw-backs of Retail Banking :-
Despite the numerous advantage of Retail Banking there are some drew-Backs in this
business. These are as under:
a. Management of large number of clients may become a problem if IT systems are
not robust.
b. Rapid evolution of products can lead to IT complications.
c. The cost of maintaining large number of small value transactions in branch
networks will be relatively high, unless the customers use alternate delivery
channels like ATMs, internet and phone banking etc. for carrying out banking
transactions.
The Future of Retail Banking :-
Though at present Retail Banking appears to be the best bet for banks to improve
their top and bottom line, yet the future of Retail banking in general, may not be
all roses as it appears to be. There are signs of slowdown in customer growth in
some countries, which will inevitably have an impact on Retail Banking business
growth. Secondly the possibility of deterioration in asset quality cannot be ruled
out. With the boom in housing loan market, the sign of overheating has also
started surfacing with potential problem for banks that have not exercised
sufficient caution. Further the pressure on margins is mounting partly because of
fierce competition and partly as a result of falling interest rates environment
which has diminished to some extent the endowment effect of substantial deposit
bases from which most retail banks have been deriving benefits. But banks, which
have built a significant retail banking portfolio may fare relatively well in
the current fiscal. Those banks which have a dynamic retail strategy and are well
diversified in products, services and distribution channels and have at the same
time managed to achieve a good level of cost efficiency are the ones that are most
likely to succeed in the longer term.
STRATEGIC ISSUES IN BANKING SERVICES
Strategic Planning: is the process of analyzing the organizational external and

internal environments; developing the appropriate mission, vision, and overall
goals; identifying the general strategies to be pursued; and allocated resources.
Mission is an organization's current purpose or reason for existing.
Vision is an organization's fundamental aspirations and purpose that usually
appeals to its member's hearts and minds.
Goals are what an organization is committed to achieving.
Strategies are the major courses of action that an organization takes to
achieves goals.
Resource Allocation is the earmarking of money, through budgets, for various
purposes.
Downsizing Strategy signals an organization's intent to rely on fewer resources
primarily human-to accomplish its goals.
Tactical Planning: is the process of making detailed decisions about what to do,
which will do it, and how to do it-with a normal time and horizon of one year or
less. The process generally includes:
Choosing specific goals and the means of implementing the
organization's strategic plan,
Deciding on courses of action for improving current operations, and
Developing budgets for each department, division and project.
NON-PERFORMING ASSETS OF THE BANKING SECTOR:-
There was a significant decline in the non-performing assets (NPAs) of SCBs in

2003-04, despite adoption of 90 day delinquency norm from March 31, 2004. The
Gross NPAs of SCBs declined from 4.0 per cent of total assets in 2002-03 to 3.3
percent in 2003-04. The corresponding decline in net NPAs was from 1.9 per cent to
1.2 per cent. Both gross NPAs and net NPAs declined in absolute terms. While the
gross NPAs declined from Rs. 68,717 crore in 2002-03 to Rs. 64,787 crore in 2003-
04, net NPAs declined from Rs. 32,670 crore to Rs. 24,617 crore in the same
period. There was also a significant decline in the proportion of net NPAs to net
advances from 4.4 per cent in 2002-03 to 2.9 per cent in 2003-04. The significant
decline in the net NPAs by 24.7 percent in 2003-04 as compared to 8.1 per cent in
2002-03 was mainly on account of higher provisions (up to 40.0 per cent) for NPAs
made by SCBs. The decline in NPAs in 2003-04 was witnessed across all bank groups.
The decline in net NPAs as a proportion of total assets was quite significant in
the case of new private sector banks, followed by PSBs. The ratio of net NPAs to
net advances of SCBs declined from 4.4 per cent in 2002-03 to 2.9 per cent in
2003-04. Among the bank groups, old private sector banks had the highest ratio of
net NPAs to net advances at 3.8
per cent followed by PSBs (3.0 per cent) new private sector banks (2.4 per cent)
and foreign banks (1.5 per cent) An analysis of NPAs by sectors reveals that in
2003-04, advances to non-priority sectors accounted for bulk of the outstanding
NPAs in the case of PSBs (51.24 per cent of total) and for private sector banks
(75.30 per cent of total). While the share of NPAs in Agriculture sector and SSIs
of PSBs declined in 2003-04, the share of other priority sectors increased. The
share of loans to other priority sectors in priority sector lending also
increased. Measures taken to reduce NPAs include re schedulement, restructuring at
the bank level, corporate debt restructuring, and recovery through Loc Adulates,
Civil Courts, and debt recovery tribunals and compromise settlements. The
recovery management received a major fillip with the enactment of the
Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest (SARFAESI) Act, 2002 enabling banks to realize their dues without
intervention of courts and tribunals. The Supreme Court in its judgment dated
April 8, 2004, while upholding the constitutional validity of the Act,
struck down section 17 (2) of the Act as unconstitutional and contrary to Article
14 of the Constitution of India. The Government amended the relevant provisions of
the Act to address the concerns expressed by the Supreme Court regarding a fair
deal to borrowers through an ordinance dated November 11, 2004. It is expected
that the momentum in the recovery of NPAs will be resumed with the amendments to
the Act. The revised guidelines for compromise settlement of chronic NPAs of PSBs
were Issued in January 2003 and were extended from time to time till July 31,
2004. The cases filed by SCBs in Lok Adalats for recovery of NPAs stood at 5.20
lakh involving an amount of Rs. 2,674 crore (prov.). The recoveries effected in
1.69 lakh cases amounted to Rs.352 crore (prov.) as on September 30, 2004.The
number of cases filed in debt recovery tribunals stood at 64, 941 as on June 30,
2004, involving an amount of Rs.91,901 crore. Out of these, 29, 525 cases
involving an amount of Rs. 27,869 crore have been adjudicated. The amount
recovered was to Rs. 8,593 crore. Under the scheme of corporate debt restructuring
introduced in 2001, the number of cases and value of assets restructured stood at
121 and Rs. 69,575 crore, respectively, as on December 31, 2004. Iron and steel,
refinery, fertilizers and telecommunication sectors were the major beneficiaries
of the scheme. These sectors accounted for more than two-third of the values of
assets restructured. As credit information is crucial for the development of the
financial system and for addressing the problems of NPAs, dissemination of credit
information on suit-filed defaulters is being undertaken by the Credit Information
Bureau of India Ltd. (CIBIL) from March 2003. In its annual policy statement for
2004-05, the RBI advised banks and financial institutions to review the measures
taken for furnishing credit information in respect of all borrowers to CIBIL. In
its mid-term review, the RBI again urged the banks to make persistent efforts in
obtaining consent from all the borrowers, in order to establish an efficient
credit information system, which would help in enhancing the quality of credit
decisions, improve the asset quality, and facilitate faster credit delivery.
CAPITAL ADEQUACY RATIO:-

The concept of minimum capital to risk weighted assets ratio (CRAR) has been
developed to ensure that banks can absorb a reasonable level of losses.
Application of minimum CRAR protects the interest of depositors and promotes
stability and efficiency of the financial system. At the end of March 31, 2004,
CRAR of PSBs stood at 13.2 per cent, an improvement of 0.6 percentage point from
the previous year. There was also an improvement in the CRAR of old private sector
banks from 12.8 per cent in 2002-03 to 13.7 per cent in 2003-04. The CRAR of new
private sector banks and foreign banks registered a decline in 2003-04. For the
SCBs as a whole the CRAR improved from 12.7per cent in 2002-03 to 12.9 per cent in
2003-04. All the bank groups had CRAR above the minimum 9 per cent stipulated by
the RBI. During the current year, there was further improvement in the CRAR of
SCBs. The ratio in the first half of 2004-05 improved to 13.4 per cent as compared
to 12.9 per cent at the end of 2003-04. Among the bank groups, a substantial
improvement was witnessed in the case of new private sector banks from 10.2 per
cent as at the end of 2003-04 to 13.5 per cent in the first half of 2004-05. While
PSBs and old private banks maintained the CRAR at almost the same level as in the
previous year, the CRAR of foreign banks declined to 14.0 per cent in the first
half of 2004-05 as compared to 15.0 per cent as at the end of 2003-04.
TOTAL QUALITY MANAGEMENT:-
While Total Quality Management has proven to be an effective process for

improving organizational functioning, its value can only be assured through a
comprehensive and well thought out implementation process. The purpose of this
chapter is to outline key aspects of implementation of large scale organizational
change which may enable a practitioner to more thoughtfully and successfully
implement TQM. First, the context will be set. TQM is, in fact, a large scale
systems change, and guiding principles and considerations regarding this scale of
change will be presented. Without attention to contextual factors, well intended
changes may not be adequately designed. As another aspect of context, the
expectations and perceptions of employees (workers and managers) will be assessed,
so that the implementation plan
can address them. Specifically, sources of resistance to change and ways of

dealing with them will be discussed. This is important to allow a change agent to
anticipate resistances and design for them, so that the process does not bog down
or stall. Next, a model of implementation will be presented, including a
discussion of key principles. Visionary leadership will be offered as an
overriding perspective for someone instituting TQM. In recent years the has grown
steadily, and applications based on research findings will be more likely to
succeed. Use of tested principles will also enable the change agent to avoid
reinventing the proverbial wheel. Implementation principles will be followed by a
review of steps in managing the transition to the new system and ways of helping
institutionalize the process as part of the organization's culture. This section,
too, will be informed by current writing in transition management and
institutionalization of change. Finally, some miscellaneous do's and don’t will be
offered. Members of any organization have stories to tell of the introduction of
new programs, techniques, systems, or even, in current terminology, paradigms.
Usually the employee, who can be anywhere from the line worker to the executive
level, describes such an incident with a combination of cynicism and
disappointment: some manager went to a conference or in some other way got a
"great idea" (or did it based on threat or desperation such as an urgent need to
cut costs) and came back to work to enthusiastically present it, usually mandating
its implementation. The "program" probably raised people's expectations that this
time things would improve, that management would listen to their ideas. Such a
program usually is introduced with fanfare, plans are made, and things slowly
return to normal. The manager blames unresponsive employees, line workers blame
executives interested only in looking good, and all complain about the resistant
middle managers. Unfortunately, the program itself is usually seen as worthless:
"we tried team building (or organization development or quality circles or what
have you) and it didn't work; neither will TQM". Planned change processes often
work, if conceptualized and implemented properly; but, unfortunately, every
organization is different, and the processes are often adopted "off the shelf"
"the 'appliance model of organizational change': buy a complete program, like a
'quality circle package,' from a dealer, plug it in, and hope that it runs by
itself" (Kantar, 1983, 249). Alternatively, especially in the under funded public
and not for profit sectors, partial applications are tried, and in spite of
management and employee commitment do not bear fruit. This chapter will focus on
ways of preventing some of these disappointments. In summary, the purpose here is
to review principles of effective planned change implementation and suggest
specific TQM applications. Several assumptions are proposed:
1. TQM is a viable and effective planned change method, when properly installed
2. Not all organizations are appropriate or ready for TQM
3. Preconditions (appropriateness, readiness) for successful TQM can sometimes be
created
4. Leadership commitment to a large scale, long term, and cultural change is
necessary. While problems in adapting TQM in government and social service
organizations have been identified, TQM can be useful in such organizations if
properly modified. For survival, banks have to make efforts to improve their
quality and competitiveness by planning and taking innovative in fall areas:
Increase emphasis on customer focused activities
Intro a “total quality” program
Developing differential value added services
Educating employees through involvement programs
Increase quality through management and system
Increase effectiveness of product development
Developing product with lower uses costs
TQM principles
_ Customer satisfaction
_ Plan-do-check-act (PDCA) cycle
_ Management by 'fact' -- 5Ws (what, why, who, when, and where) + 1H
(how) approach
_ Respect for people
TQM elements
_ Total employee involvement (TEI)
_ Total waste elimination (TWE)
_ Total quality control (TQC)
TQM focus areas

_ Customer satisfaction
_ Product quality
_ Plant reliability
_ Waste elimination
Benefits achieved through TQM
_ Increased focus on the customer
_ Mindset of 'continuous improvement'
_ Better product quality
_ Better systems and procedures
_ Better cross-functional teamwork
_ Increased plant reliability
_ Waste elimination in offices and factories.
INNOVATION IN BANK
Innovation drives organizations to grow, prosper and transform in sync with the
changes in the environment, both internal and external. Banking is no exception to
this. In fact, this sector has witnessed radical transformation of late, based on
many innovations in products, processes, services, systems, business models,
technology, governance and regulation. A liberalized and globalize financial
infrastructure has provided an additional impetus to this gigantic effort. The
pervasive influence of in formation technology has revolutionaries banking.
Transaction costs have crumbled and handling of astronomical number of
transactions in no time has become a reality. Internationally, the number brick
and mortar structure has been rapidly yielding ground to click and order
electronic banking with a plethora of new products. Banking has become boundary
less and virtual with a 24 * 7 model. Banks who strongly rely on the merits of
relationship banking’ as a time tested way of targeting and serving clients, have
readily embraced Customer Relationship Management (CRM), with sharp focus on
customer centricity, facilitated by the availability of superior technology. CRM
has, therefore, become the new mantra in customer service management, which is
both relationship based and information intensive. Risk management is no longer a
mere regulatory issue.basel-2 has accorded a primacy of place to this fascinating
exercise by repositioning it as the core of banking. We now see the evolution of
many novel deferral products like credit derivatives, especially the Credit Risk
Transfer (CRT) mechanism, as a consequence. CRT, characterized by significant
product innovation, is a very useful credit risk management tool that enhances
liquidity and market efficiency. Securitization is yet another example in this
regard, whose strategic use has been rapidly rising globally. So is outsourcing.
SOME RECENT INNOVATIONS IN INDIAN BANKING:-
Tandon can, however, usefully cast an eye at one way of shopping without
revealing his credit card number. HDFC Bank’s ‘Net Safe’ card is a one-time use
card with a limit that’s specified, taken from Tendon’s credit or debit card. Even
if Tandon fails to utilize the full amount within 24 hours of creating the card,
the card simply dies and the unspent amount in the temporary card reverts to his
original credit or debit card. Welcome to one of
the myriad ways in which bankers have been trying to innovate. They’re bringing
ATMs, cash and even foreign exchange to their customers’ doorsteps. Indeed,
innovation has become the hottest banking game in town. Want to buy a house but
don’t want to go through the hassles of haggling with brokers and the mounds of
paperwork? Not to worry. Your bank will tackle all this. It’s ready to come every
step of the way for you to buy a house. Standard Chartered, for instance, has
property advisors to guide a customer through the entire process of selecting and
buying a house. They also lend a hand with the cumbersome documentation
formalities and the registration. Don’t fret if you’ve already bought your house
or car – you can do other things with both. You can leverage your new house or car
these days with banks like ICICI Bank and Stanchart ready to extend loans against
either, till it’s about five years old. Loans are available to all car owners for
almost all brands of cars manufactured in India that are up to five years old.
Still, innovation is more evident in retail banking. True, all banks offer pretty
much the same suite of asset and liability products. But it’s the small tweaking
here and there that makes all the difference. Take, for example, the once staid
deposits. Some bank accounts combine a savings deposit account with a fixed
deposit. A sweep-in account, as it is called, works like this: the account will
have a cut-off, say, Rs 25,000; any amount over and above that gets automatically
transferred to a fixed deposit which will earn the customer a clean 2 per cent
more than the returns that a savings account gives. Last month, Kotak Mahindra
Bank introduced a variant of the sweep-in account. If the balance tops Rs 1.5
lakh, the excess runs into Kotak’s liquid mutual fund. “Even if the money is there
only for the weekend, a liquid fund can earn you a clean 4.5 per cent per annum,”
points out Shashi Arora, vice president, marketing, Kotak Mahindra Bank. That’s
not a small gain considering that your current account does not pay you any
interest. And if, meanwhile, you want to buy a big-ticket home theatre system, the
minute you swipe your card the invested sum will return to your account. There’s
plenty of innovation on home loans. ABN Amro sent the home
mortgage market a fire with its 6 per cent home loan offering last year. The
product offers a 6 per cent interest rate for two years after which the interest
rate is reset in tune with the prevailing market rate. All the other big home loan
players slashed their rates after this was announced. Look too at the home saver
product and its variants from Citibank, HSBC and Stanchart. The interest rate on
the loan is determined by the balance you maintain in the savings account with the
bank. The home builder can maintain a higher balance in his or her savings account
and bring down the interest rate on the home loan. The rate is calculated on a
daily basis on the net loan amount. Stanchart claims that since the launch of its
home saver product in April
2002, close to 40 per cent of its customers have chosen it. Says Vishnu
Ramachandran, regional head, consumer banking, Standard Chartered:
“We believe that there are several ways to innovate and create value in the
process, even in developed product areas.” Banks are also attempting to reach out
to residents of metropolitan cities where people are pressed for time (what with
long commuting hours, traffic jams and both spouses working), beyond conventional
banking hours. ICICI Bank, for example, introduced eight to eight banking hours,
seven days of the week, in major cities. Not to be outdone, some of the other
private banks have also done this too. HDFC Bank even has a 24-hour branch at
Mumbai’s international airport. Several banks are even bringing ATMs to customer
doorsteps. ICICI Bank, State Bank of India and Bank of India now have mobile ATMs
or vans that go along a particular route in a city and are stationed at strategic
locations for a few hours every day. This saves the bank infrastructure costs
since it has one mobile ATM instead of multiple stationary ones. That’s not all.
Even money is delivered to customers at home. Kotak Mahindra Bank, a late entrant
into private banking, delivers cash at the doorstep. A customer can withdraw a
minimum of Rs 5,000 and up to a maximum of Rs 2 lakh and get the money at home.
And, mind you, Kotak is not alone. The list of banks offering a similar service
includes Citibank, Stanchart, ABN Amro and HDFC Bank. HDFC Bank brings even
foreign exchange, whether travellers cheques or cash, to your doorstep courtesy
its tie-up with Travelex India. All one has to do is call up the branch or HDFC
Bank’s phone banking number. The bank’s country head, retail, Neeraj Swaroop,
believes that continuous innovation will always make a difference, with customer
needs changing day by day. “Innovation will never become less important for us,”
he says. HDFC Bank has pioneered other innovations. Take point of sale (POS)
terminals, a prerequisite in any store or restaurant worth its name in the
country. Earlier this year, it tied up with Reliance Infocomm to offer
mobile POS terminals. Although this might sound a tad too fancy today, there could
soon be a day when you can swipe your card to pay your cabby,
the pizza home delivery boy and even for the groceries from the local kirana
store. But internet banking and shopping have been slow starters, given the low
computer penetration in the country but banks are going all out to get the
customer online. Not only is electronic fund transfer between banks across cities
possible through internet banking today but banks also offer other features that
benefit the customer. HDFC Bank, for instance, has an option called ‘One View’ on
its internet banking site which provides customers a comprehensive view of their
investments and fund movements. Customers can look at their accounts in six
different banks on one screen. These include HDFC Bank accounts and demat
accounts, ICICI Bank,
Citibank, HSBC and Standard Chartered Bank accounts, apart from details of
Citibank credit card dues and so on. Banks are also innovating on the company and
treasury operations fronts. In
corporate loans, plain loans are passe. Mumbai inter-bank offered rate (MIBOR)-
linked and commercial paper-linked interest rates on loans are common. MIBOR is a
reference rate arrived at every day at 4 pm by Reuters. It is the weighted average
rate of call money business transacted by 22 institutions, including banks,
primary dealers and financial institutions. The State Bank of India was the first
to usher in MIBOR-linked loans for top companies. Soon enough, other banks
followed. ICICI Bank carried out the world’s first ever securitization of a micro
finance portfolio last year. The bank securitized Rs 4.2 crore for Bharatiya
Samruddhi Finance Ltd for crop production. Banks, of course, realize that
innovation gives them only a first mover advantage until their rivals catch up.
But
then, they can console themselves. Isn’t imitation the best form of flattery
TECHNOLOGY IN BANKING
Nobel Laureate Robert Solow had once remarked that computers are seen
everywhere excepting in productivity statistics. More recent developments have
shown how far this state of affairs has changed. Innovation in technology and
worldwide revolution in information and communication technology (ICT) have
emerged as dynamic sources of productivity growth. The relationship between IT and
banking is fundamentally symbiotic. In the banking sector, IT can reduce costs,
increase volumes, and facilitate customized products; similarly, IT requires
banking and financial services to facilitate its growth. As far as the banking
system is concerned, the payment system is perhaps the most important mechanism
through which such interactive dynamics gets manifested.
Recognizing the importance of payments and settlement systems in the economy, we
have embarked on technology based solutions for the improvement of the payment and
settlement system infrastructure, coupled with the introduction of new payment
products such as the computerized settlement of clearing transactions, use of
Magnetic Ink Character Recognition (MICR) technology for cheque clearing which
currently accounts for 65 per cent of the value of cheques processed in the
country, the computerization of Government Accounts and Currency Chest
transactions, operationalisation of Delivery versus Payment (DvP) for Government
securities transactions. Two-way inter-city cheque collection and imaging have
been operationalised at the four metros. The coverage of Electronic Clearing
Service (Debit and Credit) has been significantly expanded to encourage non-paper
based funds movement and develop the provision of a centralized facility for
effecting payments. The scheme for Electronic Funds Transfer operated by the
Reserve Bank has been significantly augmented and is now available across thirteen
major cities. The scheme, which was originally intended for small value
transactions, is processing high value (up to Rs.2 crore) from October 1, 2001.
The Centralized Funds Management System (CFMS), which would enable banks to obtain
consolidated account-wise and centre-wise positions of their balances with all 17
offices of the Deposits Accounts Departments of the Reserve Bank, has begun to be
implemented in a phased manner from November 2001.
A holistic approach has been adopted towards designing and development of a
modern, robust, efficient, secure and integrated payment and settlement system
taking into account certain aspects relating to potential risks, legal
framework and the impact on the operational framework of monetary policy. The
approach to the modernization of the payment and settlement system in India has
been three-pronged: (a) consolidation, (b) development, and (c) integration. The
consolidation of the existing payment systems revolves around strengthening
Computerized Cheque clearing, expanding the reach of Electronic Clearing Services
and Electronic Funds Transfer by providing for systems with the latest levels of
technology. The critical elements in the developmental strategy are the opening of
new clearing houses, interconnection of clearing houses through the
INFINET; optimizing the deployment of resources by banks through Real Time Gross
Settlement System, Centralized Funds Management System (CFMS); Negotiated Dealing
System (NDS) and the Structured Financial Messaging Solution (SFMS). While
integration of the various payment products with the systems of individual banks
is the thrust area, it requires a high degree of standardization within a bank and
seamless interfaces across banks. The setting up of the apex-level National
Payments Council in May 1999 and the operationalisation of the INFINET by the
Institute for Development and Research in Banking Technology (IDRBT), Hyderabad
have been some important developments in the direction of providing a
communication network for the exclusive use of banks and financial institutions.
Membership in the INFINET has been opened up to all banks in addition to those in
the public sector. At the base of all inter-bank message transfers using the
INFINET is the Structured Financial Messaging System (SFMS). It would serve as a
secure communication carrier with templates for intra- and inter-bank messages in
fixed message formats that will facilitate ‘straight through processing’. All
inter-bank transactions would be stored and switched at the central hub at
Hyderabad while intrabank messages will be switched and stored by the bank
gateway. Security features of the SFMS would match international standards. In
order to maximize the benefits of such efforts, banks have to take pro-active
measures to:
_ further strengthen their infrastructure in respect of standardization, high
levels of security and communication and networking;
_ achieve inter-branch connectivity early;
_ popularize the usage of the scheme of electronic funds transfer (EFT); and
_ Institute arrangements for an RTGS environment online with a view to.
integrating into a secure and consolidated payment system. Information technology
has immense untapped potential in banking. Strengthening of information technology
in banks could improve the effectiveness of asset-liability management in banks.
Building up of a related data-base on a real time basis would enhance the
forecasting of liquidity greatly even at the branch level. This could contribute
to enhancing the risk management capabilities of banks.
Conclusion
The face of banking is changing rapidly competition is going to be tough and with
financial liberalization under the WTO, banks in India will have to benchmark
themselves against the best in the world. For a strong and resilient banking and
financial system, therefore, banks need to go beyond peripheral issues and tackle
significant issues like improvements in profitability, efficiency and technology,
while achieving economies of scale through consolidation and exploring available
cost effective solutions. These are the some of the issues that need to be
addressed, not just survive, in the changing milieu.
The banking system in India is significantly different
from that of other Asian nations because of the country’s unique geographic,
social and economic characteristics. India has a large population and land size, a
diverse culture, and extreme disparities in income, which are marked among its
regions. The country’s economic policy framework combine socialistic and
capitalistic features with a heavy bias towards public sector investment. India
has followed the path of growth-led exports rather than the “exported growth” of
other Asian economies, with emphasis on self reliance through import substitution.
Bibliography
1- www.rbi.org.in
2- www.bankingindia.update.com
3- Google search engine
4- www.wikipedia.org

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PREPARED FOR AND PRESENTED TO

UNDER THE GUIDANCE OF

SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF MASTER OF BUSINESS

DEPARTMENT OF BUSINESS ADMINISTRATION

-Reserve Bank of India

First of all I would like to thank to Reserve Bank of India to allow

I would thank to my mentor Mr. P.S. RAWAT in-charge

A special acknowledgement goes to Sri G.R.kotian, Assistant General

As a part of DBS, I owe my thanks to all other persons working in DBS

Significantly I am grateful to Mr. Purendra Kumar sir

I also show my gratitude to all my fellow trainees for

1- Needs for the project……………………………………9

• Procedure for filling complaint

25- Credit card………………………………………………71

NEEDS FOR THE PROJECT

They are providing ample facilities to satisfy their

So this must be the first choice for me to select this

OBJECTIVES OF THE PROJECT

• Banking is an essential industry.

Department of Banking Supervision

The Department of Banking Supervision has its Central Office in Mumbai

Exercising supervisory intervention in the implementation of

A bank is a financial institution where an individual can deposit money. Banks

According to Britannica.com, a bank is

Bank and Banking

Banks play an important role in development of Indian economy. After

The banking system’s international

Indian banking system,

Another evaluation of the banking in India was undertaken during

On July 19, 1969, the Govt. promulgated Banking Companies

Foundation phase can be considered to cover 1950s and 1960s

Consolidation phase: The phase started in 1985 when a

Reforms phase The macro-economic crisis faced by the

economy including banking and finance. The major steps to regulate

BANKING REFORMS IN INDIA

Major Banks in India

• Development Credit Bank

• State Bank of Travancore

BANKING SERVICES IN INDIA:-

With stiff competition and advancement of technology,

This section of banking deals with the latest

Functioning of a Bank is among the more complicated of corporate operations. Since

1. Accepting Deposits from public/others (Deposits)

In addition to providing a safe custodian of money, banks also loan money to

The objective of commercial banks like any other organization is profit

Other Services Offered by Banks

Reserve Bank of India was nationalized in the year 1949. The

The Reserve Bank of India Act, 1934 was commenced on April 1,

To regulate the issue of banknotes

Functions of Reserve Bank of India

Bankers' Bank and Lender of the Last Resort

(a) It holds the cash reserves of all the scheduled banks.

(b) It controls the credit operations of banks through quantitative and

Custodian of Foreign Reserves

Classification of RBIs functions

Regulator and supervisor of the financial system:

Manager of Exchange Control:

Objective: This facilitates in giving the public adequate quantity of currency

Majority stake: = National Bank for Agriculture and Rural Development

THE BANKING OMBUDSMAN SCHEME 2006

The Scheme is introduced with the object of enabling resolution of complaints

1-) POWERS AND DUTIES-