A PROJECT REPORT ON

STRATEGIC MANAGEMNT PROCEDURE IN A CRITICAL ANALYSIS ON

CHANGES OF BANKING SECTOR

SUBMITTED BY
MISS MANALI. RAMCHAND. GODHIA,
ROLL NO: 6212
M.Com. SEM- I
(STARTEGIC MANAGEMENT)
ACADEMIC YEAR: 2015-16

Under the guidance of PROJECT GUIDE

PROF. RAHUL. JAGPAT.

SUBMITTED TO UNIVERSITY OF MUMBAI

MULUND COLLEGE OF COMMERCE
S N ROAD, MULUND (WEST)
MUMBAI - 400080

Declaration from the Student

I, Manali. Ramchand. Godhia. R. No 6212. Student of Mulund College Of
Commerce, S. N. Road, Mulund (West) 400080, studying in M.Com PartI hereby declare that I have completed the project on STRATEGIC
MANAGEMNT PROCEDURE IN A CRITICAL ANALYSIS ON CHANGES OF
BANKING SECTOR under the guidance of project guide Prof. Rahul.
jagtap during the academic year 2015-16. The information submitted is
true to the best of my knowledge.

Date:
Signature
Place:

CERTIFICATE
I, Prof. Rahul. Jagtap, hereby certify that Mr/Miss Manali. Ramchand.
Godhia R.No. 6212 of Mulund College of Commerce, S. N. Road, Mulund
(West), Mumbai -400080 of M.com Part I (Advanced Accountancy) has
completed her project on STRATEGIC MANAGEMNT PROCEDURE IN A
CRITICAL ANALYSIS ON CHANGES OF BANKING SECTOR

during the

academic year 2015-16. The information submitted is true and original

to the best of my knowledge.

____________________
___________________
Project Guide

External
guide
_____________________
___________________

Co-coordinator

Principal

Date:

ACKNOWLEDGEMENT

I would like to express my sincere gratitude to Principal of Mulund

College of Commerce DR. (Mrs.) Parvathi Venkatesh, Course Coordinator Prof. Rane and our project guide Prof. RAHUL. JAGPAT,
for providing me an opportunity to do my project work on
STRATEGIC MANAGEMNT PROCEDURE IN A CRITICAL ANALYSIS ON
CHANGES OF BANKING SECTOR.I also wish to express my sincere
gratitude to the non - teaching staff of our college. I sincerely
thank to all of them in helping me to carrying out this project
work. Last but not the least, I wish to avail myself of this
opportunity, to express a sense of gratitude and love to my
friends and my beloved parents for their mutual support,
strength, help and for everything.

PLACE:
Signature
DATE:

INDEX

1. OBJECTIVE
2. INDRODUCTION OF BANKING SECTOR
3. STRUCTURE OF BANKING
Indigenous Banking.
Defects
Suggestions for Improvements
Structure of Organised Indian Banking System
Reserve Bank of India (RBI)
Commercial Banks:
Scheduled and Non-Scheduled Banks
Regional Rural Banks
Other special features of these banks
Cooperative Banks
4. HISTORY OF BANKING SECTOR
Ancient India
Medieval era
Colonial era
Post-Independence
Nationalization in the 1960s

5.

6.
7.

8.

Liberalization in the 1990s

Current period
Pradhan Mantri Jan Dhan Yojana
Adoption of banking technology
Automated teller machine growth
Indian Banking System
Phase I
Phase II
Phase III
RBI'S RAJAN SEES 'GREAT' CHANGES IN BANKING SECTOR
CHANGES IN BANKING SECTOR
banking sector has seen unprecedented growth
ATMs, Internet banking, mobile banking
non-cash payments comprised 91 per cent
Basel III
New banks
norms for issuing new banking licences,
Foreign banks
Developing corporate bond markets
Unique Identification (UID) project
Social media
COMPARISON OF INTERNATIONAL BANK & PRIVATE BANK
Bank of Baroda V/S HDFC Bank
ATM & Credit/Debit Card Complaints
Deposit Account Complaints
Pension Related Complaints
Non-Observance of Fair Practice Code Complaints
Loans & Advances Complaints
Non-Adherence to BCBSI Codes:
Non-Adherence to DSA Instruction Complaints:
Total Complaints:
Number of Offices & Branches
Number of Employeees
Capital and Reserve & Surplus
Deposits
Investments
Advances
Interest Income
Other Income
Interest Expended
Operating Expenses

Cost of Funds

OBJECTIVE

My objective of taking this project is I want to grab the knowledge of

banking sector. And I want to know what are the issues are in banking
sector now a days. I have choosen this project because , banking
sector is one of the best sector as per my opinion.though we are not
aware about banks then too we can explain and even it will b useful for
our career because in bankng sector each and every step is taken with
changes. If you see the change from ancient period till now
uncountable changes were held. And another reason to takethis topic
is I want to become a banker in my future career so this is the best
way to grab the knowledge of banking sector. Like in this project I have
done lots of browsing about banking. I come to know Bank of
Hindustan the first bank and which was established in 1770 and
liquidated in 1829-32. And after that so many banks has started and
even further they classied in different types. Even I have learned the
history of banks how in ancient period people using banks and there
are not so many facilities, And maximum peoples
dont know what
is banks and what to do in banks. I have learned there are three
distinct phase of banking systems i.e. PHASE-I, PHASE II and PHASE
III.

Changes in banking sector like banking sector has seen unprecedented

growth, ATMs, Internet banking, mobile banking, non-cash payments
comprised 91 per cent, corporate bond markets is an important link,
etc.
Further I have learned about banks activities when I have started
comparison between two banks i.e. international bank and private
bank. Both are providing enormous services. And services are also
divided in different parts like Ancillary Services, Financial Services,
Financial intermediary, Payment services. Even there are lots of
difference between two banks. I never know that there is lots of
difference between two types of banks.
Even I would like to do other projects on banks like make a
questionnaire on different banks, visit at banks and taking an
interviews of bankers, etc. I would like to do research on banking
issues so that in future it will help me for better career.
I would like to know more on this even on deep, though in future I am
not able to became a banker then too i will happy because I have the
knowledge of which was gain by project without giving any services to
the banks.

INTRODUCTION OF BANKING SECTOR

Banking in India in the modern sense originated in the last decades

of the 18th century. Among the first banks were the Bank of Hindustan,
which was established in 1770 and liquidated in 1829-32; and the
General Bank of India, established 1786 but failed in 1791.
The largest bank, and the oldest still in existence, is the State Bank of
India. It originated as the Bank of Calcutta in June 1806. In 1809, it was
renamed as the Bank of Bengal. This was one of the three banks
funded by a presidency government, the other two were the Bank of
Bombay and the Bank of Madras. The three banks were merged in
1921 to form the Imperial Bank of India, which upon India's

independence, became the State Bank of India in 1955. For many

years the presidency banks had acted as quasi-central banks, as did
their successors, until the Reserve Bank of India was established in
1935, under the Reserve Bank of India Act, 1934.
In 1960, the State Banks of India was given control of eight stateassociated banks under the State Bank of India (Subsidiary Banks) Act,
1959. These are now called its associate banks. In 1969 the Indian
government nationalised 14 major private banks. In 1980, 6 more
private banks were nationalized. These nationalized banks are the
majority of lenders in the Indian economy. They dominate the banking
sector because of their large size and widespread networks.
The Indian banking sector is broadly classified into scheduled
banks and non-scheduled banks. The scheduled banks are those which
are included under the 2nd Schedule of the Reserve Bank of India Act,
1934. The scheduled banks are further classified into: nationalised
banks; State Bank of India and its associates; Regional Rural
Banks (RRBs); foreign banks; and other Indian private sector
banks. The term commercial banks refers to both scheduled and nonscheduled commercial banks which are regulated under the Banking
Regulation Act, 1949.
Generally banking in India was fairly mature in terms of supply,
product range and reach-even though reach in rural India and to the
poor still remains a challenge. The government has developed
initiatives to address this through the State Bank of India expanding its
branch network and through the National Bank for Agriculture and
Rural Development with things likemicrofinance.

STRUCTURE OF BANKING

Bank is an institution that accepts deposits of money from the public.

Anybody who has account in the bank can withdraw money. Bank also
lends money.

Indigenous Banking:
The exact date of existence of indigenous bank is not known. But, it is
certain that the old banking system has been functioning for centuries.
Some people trace the presence of indigenous banks to the Vedic
times of 2000-1400 BC. It has admirably fulfilled the needs of the
country in the past.
However, with the coming of the British, its decline started. Despite the
fast growth of modern commercial banks, however, the indigenous
banks continue to hold a prominent position in the Indian money
market even in the present times. It includes shroffs, seths, mahajans,

chettis, etc. The indigenous bankers lend money; act as money

changers and finance internal trade of India by means of hundis or
internal bills of exchange.
Defects:
The main defects of indigenous banking are:
(i) They are unorganised and do not have any contact with other
sections of the banking world.
(ii) They combine banking with trading and commission business and
thus have introduced trade risks into their banking business.
(iii) They do not distinguish between short term and long term finance
and also between the purpose of finance.
(iv) They follow vernacular methods of keeping accounts. They do not
give receipts in most cases and interest which they charge is out of
proportion to the rate of interest charged by other banking institutions
in the country.
Suggestions for Improvements:
(i) The banking practices need to be upgraded.
(ii) Encouraging them to avail of certain facilities from the banking
system, including the RBI.
(iii) These banks should be linked with commercial banks on the basis
of certain understanding in the respect of interest charged from the
borrowers, the verification of the same by the commercial banks and
the passing of the concessions to the priority sectors etc.

(iv) These banks should be encouraged to become corporate bodies

rather than continuing as family based enterprises.
Structure of Organised Indian Banking System:
The organised banking system in India can be classified as
given below:

Reserve Bank of India (RBI):

The country had no central bank prior to the establishment of the RBI.
The RBI is the supreme monetary and banking authority in the country
and controls the banking system in India. It is called the Reserve Bank
as it keeps the reserves of all commercial banks.
Commercial Banks:

Commercial banks mobilise savings of general public and make them

available to large and small industrial and trading units mainly for
working capital requirements.
Commercial banks in India are largely Indian-public sector and private
sector with a few foreign banks. The public sector banks account for
more than 92 percent of the entire banking business in India
occupying a dominant position in the commercial banking. The State
Bank of India and its 7 associate banks along with another 19 banks
are the public sector banks.
Scheduled and Non-Scheduled Banks:
The scheduled banks are those which are enshrined in the second
schedule of the RBI Act, 1934. These banks have a paid-up capital and
reserves of an aggregate value of not less than Rs. 5 lakhs, hey have
to satisfy the RBI that their affairs are carried out in the interest of their
depositors.
All commercial banks (Indian and foreign), regional rural banks, and
state cooperative banks are scheduled banks. Non- scheduled banks
are those which are not included in the second schedule of the RBI Act,
1934. At present these are only three such banks in the country.
Regional Rural Banks:
The Regional Rural Banks (RRBs) the newest form of banks, came into
existence in the middle of 1970s (sponsored by individual nationalised
commercial banks) with the objective of developing rural economy by
providing credit and deposit facilities for agriculture and other
productive activities of al kinds in rural areas.

The emphasis is on providing such facilities to small and marginal

farmers, agricultural labourers, rural artisans and other small
entrepreneurs in rural areas.
Other special features of these banks are:
(i) their area of operation is limited to a specified region, comprising
one or more districts in any state; (ii) their lending rates cannot be
higher than the prevailing lending rates of cooperative credit societies
in any particular state; (iii) the paid-up capital of each rural bank is Rs.
25 lakh, 50 percent of which has been contributed by the Central
Government, 15 percent by State Government and 35 percent by
sponsoring public sector commercial banks which are also responsible
for actual setting up of the RRBs.
These banks are helped by higher-level agencies: the sponsoring banks
lend them funds and advise and train their senior staff, the NABARD
(National Bank for Agriculture and Rural Development) gives them
short-term and medium, term loans: the RBI has kept CRR (Cash
Reserve Requirements) of them at 3% and SLR (Statutory Liquidity
Requirement) at 25% of their total net liabilities, whereas for other
commercial banks the required minimum ratios have been varied over
time.
Cooperative Banks:
Cooperative banks are so-called because they are organised under the
provisions of the Cooperative Credit Societies Act of the states. The
major beneficiary of the Cooperative Banking is the agricultural sector
in particular and the rural sector in general.
The cooperative credit institutions operating in the country are mainly
of two kinds: agricultural (dominant) and non-agricultural. There are

two separate cooperative agencies for the provision of agricultural

credit: one for short and medium-term credit, and the other for longterm credit. The former has three tier and federal structure.
At the apex is the State Co-operative Bank (SCB) (cooperation being a
state subject in India), at the intermediate (district) level are the
Central Cooperative Banks (CCBs) and at the village level are Primary
Agricultural Credit Societies (PACs).
Long-term agriculture credit is provided by the Land Development
Banks. The funds of the RBI meant for the agriculture sector actually
pass through SCBs and CCBs. Originally based in rural sector, the
cooperative credit movement has now spread to urban areas also and
there are many urban cooperative banks coming under SCBs.

HISTORY OF BANKING SECTOR

Ancient India
The Vedas (20
00-1400 BCE) are earliest Indian texts to mention the
concept of usury. The word kusidin is translated as usurer.
The Sutras (700-100 BCE) and the Jatakas (600-400 BCE) also mention
usury. Also, during this period, texts began to condemn
usury. Vasishtha forbade Brahmin and Kshatriya varnas from
participating in usury. By 2nd century CE, usury seems to have become
more acceptable. The Manusmriti considers usury an acceptable
means of acquiring wealth or leading a livelihood.It also considers
money lending above a certain rate, different ceiling rates for different
caste, a grave sin.
The Jatakas also mention the existence of loan deeds. These were
called rnapatra or rnapanna. The Dharmashastras also supported the
use of loan deeds. Kautilya has also mentioned the usage of loan
deeds. Loans deeds were also calledrnalekhaya.

Later during the Mauryan period (321-185 BCE), an instrument

called adesha was in use, which was an order on a banker directing
him to pay the sum on the note to a third person, which corresponds to
the definition of a modern bill of exchange. The considerable use of
these instruments have been recorded. In large towns, merchants also
gave letters of credit to one another.
Medieval era
The use of loan deeds continued into the Mughal era and were
called dastawez. Two types of loans deeds have been recorded.
The dastawez-e-indultalab was payable on demand and dastawez-emiadi was payable after a stipulated time. The use of payment
orders by royal treasuries, called barattes, have been also recorded.
There are also records of Indian bankers using issuing bills of exchange
on foreign countries. The evolution of hundis, a type of credit
instrument, also occurred during this period and they continue to be in
use today.
Colonial era
During the period of British rule merchants established the Union Bank
of Calcutta in 1869, first as a private joint stock association, then
partnership. Its proprietors were the owners of the earlier Commercial
Bank and the Calcutta Bank, who by mutual consent created Union
Bank to replace these two banks. In 1840 it established an agency at
Singapore, and closed the one at Mirzapore that it had opened in the
previous year. Also in 1840 the Bank revealed that it had been the
subject of a fraud by the bank's accountant. Union Bank was
incorporated in 1845 but failed in 1848, having been insolvent for
some time and having used new money from depositors to pay its
dividends.
The Allahabad Bank, established in 1865 and still functioning today, is
the oldest Joint Stock bank in India, it was not the first though. That
honour belongs to the Bank of Upper India, which was established in
1863, and which survived until 1913, when it failed, with some of its
assets and liabilities being transferred to the Alliance Bank of Simla.
Foreign banks too started to appear, particularly in Calcutta, in the
1860s. The Comptoir d'Escompte de Paris opened a branch in Calcutta
in 1860, and another in Bombay in 1862; branches

in Madras and Pondicherry, then a French possession,

followed. HSBC established itself in Bengal in 1869. Calcutta was the
most active trading port in India, mainly due to the trade of the British
Empire, and so became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial
Bank, established in 1881 in Faizabad. It failed in 1958. The next was
the Punjab National Bank, established in Lahore in 1894, which has
survived to the present and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing
through a relative period of stability. Around five decades had elapsed
since the Indian rebellion, and the social, industrial and other
infrastructure had improved. Indians had established small banks, most
of which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also
some exchange banks and a number of Indian joint stock banks. All
these banks operated in different segments of the economy. The
exchange banks, mostly owned by Europeans, concentrated on
financing foreign trade. Indian joint stock banks were generally under
capitalised and lacked the experience and maturity to compete with
the presidency and exchange banks. This segmentation let Lord Curzon
to observe, "In respect of banking it seems we are behind the times.
We are like some old fashioned sailing ship, divided by solid wooden
bulkheads into separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks
inspired by the Swadeshi movement. The Swadeshi movement inspired
local businessmen and political figures to found banks of and for the
Indian community. A number of banks established then have survived
to the present such as Bank of India, Corporation Bank, Indian
Bank, Bank of Baroda,Canara Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of many
private banks in Dakshina Kannada and Udupi districtwhich were
unified earlier and known by the name South Canara ( South Kanara )
district. Four nationalised banks started in this district and also a
leading private sector bank. Hence undivided Dakshina Kannada
district is known as "Cradle of Indian Banking".

During the First World War (19141918) through the end of the Second
World War (19391945), 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:

Year
s

Number of
banks
that failed

Authorised
Capital
( Lakhs)

Paid-up
Capital
( Lakhs)

1913

12

274

35

1914

42

710

109

1915

11

56

1916

13

231

1917

76

25

1918

209

Post-Independence
The partition of India in 1947 adversely impacted the economies
of Punjab and West Bengal, paralysing banking activities for months.
India's independence marked the end of a regime of the Laissezfaire 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:

The Reserve Bank of India, India's central banking authority, was

established in April 1935, but was nationalised on 1 January 1949
under the terms of the Reserve Bank of India (Transfer to Public
Ownership) Act, 1948 (RBI, 2005b).

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.
Nationalization in the 1960s
Despite the provisions, control and regulations of the Reserve Bank of
India, banks in India except the State Bank of India(SBI), continued to
be owned and operated by private persons. By the 1960s, the Indian
banking industry had become an important tool to facilitate the
development of the Indian economy. At the same time, it had emerged
as a large employer, and a debate had ensued about the
nationalization of the banking industry. Indira Gandhi, the then Prime
Minister of India, expressed the intention of the Government of India in
the annual conference of the All India Congress Meeting in a paper
entitled "Stray thoughts on Bank Nationalization." The meeting
received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India
issued an ordinance ('Banking Companies (Acquisition and Transfer of
Undertakings) Ordinance, 1969') and nationalised the 14 largest
commercial banks with effect from the midnight of 19 July 1969. These
banks contained 85 percent of bank deposits in the
country. 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
(Acquisition and Transfer of Undertaking) Bill, and it received
the presidential approval on 9 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 Government of India controlled around 91% of the
banking business of India. Later on, in the year 1993, the government
merged New Bank of India with Punjab National Bank. It was the only
merger between nationalised banks and resulted in the reduction of
the number of nationalised banks from 20 to 19. 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 1990s
In the early 1990s, the then government embarked on a policy
of liberalization, licensing a small number of private banks. These
came to be known as New Generation tech-savvy banks, and included
Global Trust Bank (the first of such new generation banks to be set up),
which later amalgamated with Oriental Bank of Commerce, UTI
Bank (since renamed Axis Bank), ICICI Bank and HDFC Bank. This
move, along with the rapid growth in the economy of India, revitalised
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 set up 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 74% with
some restrictions.
The new policy shook the Banking sector in India completely. Bankers,
till this time, were used to the 464 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 demanded more from their
banks and received more.
Current period
Main article: List of Banks in India
All banks which are included in the Second Schedule to the Reserve
Bank of India Act, 1934 are Scheduled Banks. These banks comprise

Scheduled Commercial Banks and Scheduled Co-operative Banks.

Scheduled Commercial Banks in India are categorized into five different
groups according to their ownership and/or nature of operation. These
bank groups are:

State Bank of India and its Associates

Nationalised Banks

Private Sector Banks

Foreign Banks

Regional Rural Banks.

Cooperative Banks

Scheduled Bank

In the bank group-wise classification, IDBI Bank Ltd. is included in

Nationalised Banks. Scheduled Co-operative Banks consist of
Scheduled State Co-operative Banks and Scheduled Urban Cooperative
Banks.
Growth of Banking in India of Scheduled Commercial
Banks[19]

I
n
d
ic
a
t
o
r
s

Nu

31 March of

20
05

284

20
06

218

20
07

178

20
08

169

20
09

166

20
10

163

20
11

163

20
12

169

20
13

151

Growth of Banking in India of Scheduled Commercial

Banks[19]

I
n
d
ic
a
t

31 March of

20
05

20
06

20
07

20
08

20
09

20
10

20
11

20
12

20
13

mb
er
of
Co
m
me
rcia
l
Ba
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Nu
mb
er
70,37 72,07 74,65 78,78 82,89 88,20 94,01 102,3 109,8
of
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Bra
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Pop
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per
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16

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Growth of Banking in India of Scheduled Commercial

Banks[19]

I
n
d
ic
a
t

31 March of

20
05

20
06

20
07

20
08

20
09

20
10

20
11

20
12

20
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nks
(in
tho
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)

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170 210 261 319 383 449 520 590 675
gre
02
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19
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41
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91 04.54
gat
billio billio billio billio billio billio billio billio billio
e
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62%

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73%

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78%

78%

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Growth of Banking in India of Scheduled Commercial

Banks[19]

I
n
d
ic
a
t

31 March of

20
05

20
06

20
07

20
08

20
09

20
10

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11

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12

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13

Per
Ca
pit
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it

162
81(U
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0)

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82(U
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286
10(U
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19(U
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391
07(U
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0)

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Growth of Banking in India of Scheduled Commercial

Banks[19]

I
n
d
ic
a
t

31 March of

20
05

20
06

20
07

20
08

20
09

20
10

20
11

20
12

20
13

Ca
pit
a
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dit

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0)

69(U
S$21
0)

41(U
S$26
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18(U
S$32
0)

17(U
S$37
0)

31(U
S$43
0)

87(U
S$52
0)

74(U
S$59
0)

28(U
S$66
0)

Cre
dit
De
pos
it
Rat
io

63%

70%

74%

75%

74%

74%

76%

79%

79%

By 2010, banking in India was 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.
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.
In recent years critics have charged that the non-government owned
banks are too aggressive in their loan recovery efforts in connexion
with housing, vehicle and personal loans. There are press reports that
the banks' loan recovery efforts have driven defaulting borrowers to
suicide.
By 2013 the Indian Banking Industry employed 1,175,149 employees
and had a total of 109,811 branches in India and 171 branches abroad
and manages an aggregate deposit of 67504.54 billion (US$1.0 trillion
or 1.0 trillion) and bank credit of52604.59 billion (US$790 billion or
780 billion). The net profit of the banks operating in India
was 1027.51 billion(US$16 billion or 15 billion) against a turnover
of 9148.59 billion (US$140 billion or 140 billion) for the financial
year2012-13.[19]

On 28 Aug, 2014,Pradhan Mantri Jan Dhan Yojana (Hindi:

, English: Prime Minister's People Money Scheme) is a
scheme for comprehensivefinancial inclusion launched by the Prime
Minister of India, Narendra Modi. Run by Department of Financial
Services, Ministry of Finance, on the inauguration day, 1.5 Crore (15
million) bank accounts were opened under this scheme. By 15 July
2015, 16.92 crore accounts were opened, with
around 20288.37 crore(US$3.1 billion) were deposited under the
scheme, which also has an option for opening new bank accounts with
zero balance.

Adoption of banking technology

The IT[clarification needed] revolution has had a great impact on the Indian
banking system. The use of computers has led to the introduction
of online banking in India. The use of computers in the banking sector
in India has increased many fold after the economic liberalisation of
1991 as the country's banking sector has been exposed to the world's
market. Indian banks were finding it difficult to compete with the
international banks in terms of customer service, without the use of
information technology.
The RBI set up a number of committees to define and co-ordinate
banking technology. These have included:

In 1984 was formed the Committee on Mechanisation in the

Banking Industry (1984) whose chairman was Dr. C Rangarajan,
Deputy Governor, Reserve Bank of India. The major
recommendations of this committee were
introducingMICR technology in all the banks in the metropolises in
India. This provided for the use of standardized cheque forms and
encoders.

In 1988, the RBI set up the Committee on Computerisation in

Banks (1988) headed by Dr. C Rangarajan. It emphasized that
settlement operation must be computerized in the clearing
houses of RBI

in Bhubaneshwar, Guwahati,Jaipur, Patna and Thiruvananthapuram.

It further stated that there should be National Clearing of intercity cheques atKolkata, Mumbai, Delhi, Chennai and MICR should be
made operational. It also focused on computerisation of branches
and increasing connectivity among branches through computers. It
also suggested modalities for implementing on-line banking. The
committee submitted its reports in 1989 and computerisation
began from 1993 with the settlement between IBA and bank
employees' associations.

In 1994, the Committee on Technology Issues relating

to Payment systems, Cheque Clearing and Securities Settlementin
the Banking Industry (1994) was set up under Chairman W S Saraf.
It emphasized Electronic Funds Transfer(EFT) system, with the
BANKNET communications network as its carrier. It also said that
MICR clearing should be set up in all branches of all those banks
with more than 100 branches.

In 1995, the Committee for proposing Legislation on Electronic

Funds Transfer and other Electronic Payments (1995) again
emphasized EFT system.
Automated teller machine growth
The total number of automated teller machines (ATMs) installed in
India by various banks as of end June 2012 was 99,218. The new
private sector banks in India have the most ATMs, followed by off-site
ATMs belonging to SBI and its subsidiaries and then by nationalised
banks and foreign banks, while on-site is highest for the nationalised
banks of India.
Branches and ATMs of Scheduled Commercial Banks as of
end December, 2014

Bank type

Nationalised

Number of
branches

33,627

On-site
ATMs

38,606

Off-site
ATMs

22,265

Total
ATMs

60,871

Branches and ATMs of Scheduled Commercial Banks as of

end December, 2014

Bank type

Number of
branches

On-site
ATMs

Off-site
ATMs

Total
ATMs

banks

State Bank of
India

13,661

28,926

22,827

51,753

Old private
sector banks

4,511

4,761

4,624

9,385

New private
sector banks

1,685

12,546

26,839

39,385

242

295

854

1,149

Foreign banks

TOTAL

53,726

85,134

77,409

1,62,543

Cheque truncation initiative

In 2008 the Reserve Bank of India introduced a system to allow cheque
truncation in India, the cheque truncation system as it was known was
first rolled out in the National Capital Region and then rolled out
nationally.
Expansion of banking infrastructure
Physical as well as virtual expansion of banking through mobile
banking, internet banking, tele banking, bio-metric and mobile ATMs is
taking place since last decade and has gained momentum in last few
years.

Indian Banking System

Phases of Indian Banking System are summarized below:

Without a sound and effective banking system in India it cannot have a
healthy economy. The banking system of India should not only be
hassle free but it should be able to meet new challenges posed by the
technology and any other external and internal factors.
For the past three decades Indias 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 the remote comers of the country. This is one of the main reasons
of Indias growth process.
The governments regular policy for Indian bank since 1969 has paid
rich dividends with the nationalisation of 14 major private banks of
India.
Not long ago, an account holder had to wait for hours at the bank
counters for getting a draft or for withdrawing his own money. Today,
he has a choice, Gone are days when the most efficient bank
transferred money from one branch to other in two days. Now it is
simple as instant messaging or dial a pizza. Money have become the
order of the day.

The first bank in India, though conservative, was established in 1786.

From 1786 till today, the journey of Indian Banking System can be
segregated into three distinct phases.
They are as mentioned below:
i. Early phase from 1786 to 1969 of Indian banks.
ii. Nationalisation of Indian Banks and up to 1991 prior to Indian
banking sector Reforms.
iii. New phase of Indian Banking System with the advent of Indian
Financial and Banking Sector Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase
I, Phase II and Phase III.

Phase I:
The Genera; Bank of India was set up in the year 1786. Next came
Bank of Hindustan and Bengal Bank. The East India Company
established Bank of Bengal (1806), Bank of Bombay (1840) and Bank
of Madras (1843) as independent units and called them Presidency

Banks. These three banks were amalgamated m 1921 and imperial

Bank of India was established which started as private shareholders
banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by
Indians, Punjab National Bank Ltd. was set up in 1894 with
headquarters at Lahore. Between 1885 and 1913, Bank of India Central
Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of
Mysore were set up Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also
experienced periodic failures between 1913 and 1948. There were
approximately 1100 banks, mostly small. To streamline the functioning
and activities of commercial banks, the Government of India came up
with the Banking Companies Act, 1949 which was later changed to
Banking Regulation Act, 1949 as per amending Act of 1965 (Act No. 23
of 1965). Reserve Bank of India was vested with extensive power for
the supervision of banking in India as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an
aftermath deposit mobilisation was slow. Abreast of it the savings bank
facility provided by the Postal department was comparatively safer.
Moreover, funds were largely given to traders.
Phase II:
Government took major steps in the Indian Banking Sector Reform
after independence. In 1955, it nationalised Imperial Bank of India with
extensive banking facilities on a large scale specially in rural and semi

urban areas. It formed State Bank of India to act as the principal agent
of RBI and to handle banking transactions of the Union and State
Governments all over the country.
Seven banks forming subsidiary of State Bank of India were
nationalised on 19th July 1959. In 1969, major process of
nationalisation was carried out. It was the effort of the then Prime
Minister of India, Mrs. Indira Gandhi 14 major commercial banks in the
country was nationalised.
Second phase of nationalisation in Indian Banking Sector Reform was
carried out in 1980 with six more banks. This step brought 80% of the
banking segment in India under Government ownership.
The following are the steps taken by the Government of India to
Regulate Banking Institutions in the country.
i. 1949: Enactment of Banking Regulation Act.
ii. 1955: Nationalisation of State Bank of India.
iii. 1959: Nationalisation of SBI subsidiaries.
iv. 1961: Insurance cover extended to deposits.
v. 1969: Nationalisation of 14 major banks.
vi. 1971: Creation of credit guarantee corporation.
vii. 1975: Creation of regional rural banks.

viii. 1980: Nationalisation of 6 banks with deposits over 200 crore.

After the nationalisation the branches of the public sector banks in
India rose to approximately 800% and deposits and advances took a
huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public
implicit faith and immense confidence about the sustainability of these
institutions.
Phase III:
This phase has introduced many more products and facilities in the
banking sector in its reforms measure. In 1991, under the
chairmanship of M Narasimham, a committee was setup by his name
which worked for the liberalisation of banking practices.
The country is flooded with foreign banks and their ATM stations.
Efforts are being made to give a satisfactory service to customers.
Phone banking and net banking is introduced. The entire system
became more convenient and swift. Time is given more importance
than money.
The financial system of India has shown a great deal of resilience. It is
sheltered from any crisis triggered by any external macro-economics
shock as other East Asian Countries suffered. This is all due to a
flexible exchange rate regime, the foreign reserves are high, the
capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure

RBI'S RAJAN SEES 'GREAT' CHANGES IN BANKING SECTOR

"Information technology used by the banks, by the banking
correspondents and the clients is going to be made different from what
it was in the past," Rajan said, adding "but there will be many
opportunities outside of the derivatives and the IT sector."

RBI governor Raghuram Rajan

Reserve Bank Governor Raghuram Rajantoday said banking
sector will see major changes in the coming years with the entry of
new players, including a postal bank possibly, while public sector
lenders will be the biggest "change agents".
"The banking sector is set to undergo great changes in the next few
years. We are going to have a whole set of new institutions, payments
banks, small finance banks, and we are going to possibly have postal
bank. The existing institutions are going to change tremendously.
Public sector banks are going to be a tremendous change agent," Rajan
said.
The governor, who was addressing the students of National Institute of
Bank Management on its 11th convocation, also said the change will
be witnessed mostly in the social banking. "Most banks will do work
with the social sector because that is where new business is to be
obtained."
Rajan also said that "between these banks there are so many different
opportunities that are going to arise, for example the derivatives
markets are going to be much more vibrant".
Raghuram Rajan RBI governor

We are oil-importing country and oil prices are down. It gives us a lot of
room. And also in a deeper sense, I think if you look around the world,
we are one of the few bright spots.
"Information technology used by the banks, by the banking
correspondents and the clients is going to be made different from what
it was in the past," Rajan said, adding "but there will be many
opportunities outside of the derivatives and the IT sector."
Last December, RBI received 40 applications for payment banks and
31 applications for small banks. Recently, India Post also applied for a
payment bank licence.
On April 1 last year, RBI allowed IDFC and micro-lender Bandhan to
enter the banking business, and promised on-tap licences going
forward.
Chief economic adviser Arvind Subramanian said on this occasion that
the international environment is relatively benign towards India.
"We are oil-importing country and oil prices are down. It gives us a lot
of room. And also in a deeper sense, I think if you look around the
world, we are one of the few bright spots," he said.
Noting that India is one of the few countries which export foreign direct
investment, he said in 2012 the country exported more FDI as a share
of GDP than China.

CHANGES IN BANKING SECTOR

The Indian banking sector has seen unprecedented growth along

with remarkable improvement in its quality of assets and efficiency
since economic liberalisation began in the early 1990s.
From providing plain vanilla banking services, banks have gradually
transformed themselves into universal banks. ATMs, Internet
banking, mobile banking and social banking have made "anytime
anywhere banking" the norm now.
In 2011/12, non-cash payments comprised 91 per cent of total
transactions in terms of value and 48 per cent in terms of volume.
Within noncash payments, too, the share of payments through cheques
has come down from 85 per cent to nine per cent in value, and 83 per
cent to 52 per cent in volume between 2005/06 and 2011/12.
Banks have taken other measures to improve their functioning, too.
As a result, there were 20 Indian banks in the UK-based Brand
Finance's annual international ranking of top 500 in 2010, as
compared to only six in 2007, according to a report in a leading
financial daily.
For example, a financial daily reported that Aryavart Gramin Bank, a
regional rural bank sponsored by Bank of India, tied up with Tata BP
Solar to finance "Solar Home Lighting System" for village homes in
Uttar Pradesh. It extended finance of around Rs 10,000 with Rs 3,000
as margin money to be contributed by the beneficiary.

NON-CASH PAYMENTS COMPRISED 91 PER CENT OF VALUE AND 48

PER CENT OF VOLUME OF TOTAL TRANSACTIONS
The equated monthly installment towards the repayment of the loan
amount was less than the amount the villagers had to spend on
kerosene requirements per month. The bank's initiative resulted in
20,000 houses getting solar power. It also meant an annual saving of
about 192 tanker loads of kerosene.
India's banking system was probably one of the few large banking
systems which remained unscathed by the 2008 global financial crisis.
However, there is a lot more to be done to make it a truly worldclass
sector.
Some of the key developments which could shape the future
are:
Basel III:
India figures among the very few countries which have issuedfinal
guidelines on Basel III implementation so far. The Reserve Bank of
India has given five years for the gradual achievement of Basel III
global banking standard. But it seems a tall order for many banks. The
challenges of implementing Basel III are further accentuated by the
fact that the law mandates the Central government to hold a majority
share in public sector banks (PSBs), which control more than 70 per
cent of the banking business in India. Further, the high fiscal deficit is
likely to limit the government's ability to infuse capital in the PSBs to
meet Basel III guidelines, which will require approximately Rs 4.05
trillion to Rs 4.25 trillion over the next five to six years. (One trillion

equals to Rs 100,000 crore.) The high capital requirement will also add
pressure on return of equity of banks.
New banks:
BANKS OF THE FUTURE WILL NEED TO UNDERSTAND THE TECHSAVVY GEN-Y CUSTOMERS AND DESIGN PRODUCTS ACCORDINGLY
Although there has been little progress on the draft norms for issuing
new banking licences, the entry of new banks could have a
significant impact on the Indian banking system. Given the huge
unbanked population, there is surely a scope for more banks .
Foreign banks:
RBI has been keen on allowing foreign banks a larger role in the Indian
banking system since February 2005, when it first issued the road map
for presence of foreign banks in India. In May 2012, the government
also facilitated the process by proposing to exempt foreign banks from
the 30 per cent tax on capital gains and stamp duty while converting
branches into a new entity. RBI has also mandated foreign banks with
20 and more branches to achieve priority sector targets and subtargets at par with their domestic counterparts.
Developing corporate bond markets:
Developing corporate bond markets is an important link in a well
developed financial market. Although the government has taken some
steps in this direction, a lot more needs to be done.
Unique Identification (UID) project:
Among the many initiatives, the government's UID project is likely to
have significant impact. Given the numbers out of the reach of
organised banking, it can prove to be transformational by giving banks
an access to a large untapped customer base. The whole range of
government payments - under subsidies and benefits of various
welfare schemes - will be routed through banks.
Social media:
This adds another dimension for banks to manage their relationship
with customers. It already had over 45 million users in India in 2011,
which is expected to grow to over 88 million by the next year with over
75 per cent under the age of 35, according to media reports. Although
banks in India have been a little late in using social media, they have
been making fast progress.
With increasing volume and complexity of the banking business, it will
be imperative for the regulator to move gradually towards more offsite

monitoring than onsite. Technology will play a much larger role in the
overall supervision of the banking system. There are likely to be
transformational changes in the entire regulatory system for financial
services.
Given the significant overlap between various sub-sectors, the
Financial Sector Legislative Reforms Commission, headed by former
Justice B.N. Srikrishna, in its approach paper, had suggested large
scale consolidation. This is expected to lead to reduced intermediation
cost, benefit from the economies of scale and consistent treatment
across sub-sectors.
"The future belongs to those who prepare for it today," goes a famous
quote. The changes in the banking landscape will require banks to also
adapt to their new environment. Banks of the future will have to be
nimble and lean organisations with technology integrated to support a
sustainable and scalable business.
They will need to have a flexible organisational structure with
decentralised decision making to reduce turnaround time for various
processes. This will be especially true when a number of new entities
including non-banking finance companies (NBFCs), large corporate
houses and microfinance institutions (MFIs) get banking licences.
In order to serve potential customers in unbanked areas, banks should
be willing to experiment with various business models to build a
scalable and profitable business. Technology resources will have to be
shared to reduce cost.
At the same time, banks of the future will need to understand the
technology-savvy Gen-Y customers and design products accordingly.
Banks will have to deploy the majority of their employees in sales and
marketing roles to cross-sell services to existing customers.
There will be an increased demand for skilled personnel from other
disciplines. Banks will have to use data analytics tools to gain insights
from their existing customers' data to increase their business and
customer loyalty. One of the prominent ingredients for the success of a
bank will be its ability to partner with multiple agencies to increase its
business .

The Indian banking landscape is expected to evolve to have regional as

well as national players. Except for a few large banks having pan-India
presence, many of the mid and small banks will specialise in certain
functions/regions in diverse markets.
Rather than every bank trying to carry out all the banking functions
throughout the country, banks are likely to identify their core
competencies and build on those. A bank that avoids "one-size-fits-all
products", acts as a knowledge banker, provides all financial needs at a
click, is fundamentally strong, manages risk and adheres to global
regulations, harness iOS and Android platforms to the fullest, design
better, faster and convenient delivery channels will no doubt be called
a successful bank.

COMPARISON OF INTERNATIONAL BANK & PRIVATE BANK

There are so many types of banks in India. Following are the some
types of banks:
I. In-corporate banks,
II. Corporate banks,
III. Nationalied banks,
IV. International banks,
V. Private banks.

Bank of Baroda V/S HDFC Bank

Introduction of bank of baroda:
Bank of Baroda is an Indian state-owned banking and financial
servicescompany headquartered in Vadodara (earlier known as Baroda)
in Gujarat, India. It is the second-largest bank in India, after State Bank
of India, and offers a range of banking products and financial services
to corporate and retail customers through its branches and through its

specialised subsidiaries and affiliates. In addition to its headquarters in

its home state of Gujarat, it has a corporate headquarters in
the Bandra Kurla Complex in Mumbai.

Based on 2014 data, it is ranked 801 on Forbes Global 2000 list. BoB
has total assets in excess of 3.58 trillion, a network of 5307 branches
in India and abroad, and over 8000 ATMs.
The bank was founded by the Maratha, Maharaja of Baroda, H. H. Sir
Sayajirao Gaekwad III on 20 July 1908 in the Princely State of Baroda,
inGujarat. The bank, along with 13 other major commercial banks of
India, was nationalised on 19 July 1969, by the Government of
India and has been designated as a profit-making public sector
undertaking (PSU).

Introduction of HDFC bank:

HDFC Bank Limited is an Indian banking and financial

services company headquartered in Mumbai, Maharashtra.
Incorporated in 1994, it is the fifth largest bank in India as measured
by assets. It is the largest private sector bank in India by market
capitalization as of February 2014. The bank was promoted by
the Housing Development Finance Corporation, a premier housing
finance company (set up in 1977) of India, According to the Brand Trust
Report 2014, HDFC was ranked 32nd among India's most trusted
brands. HDFC was ranked 45th on the list of top 50 Banks in the world
in terms of their market capitalization.

As of 31 March 2013, the bank had assets of INR 4.08 trillion. For the
fiscal year 2012-13, the bank has reported net profit of INR 69 billion,
up 31% from the previous fiscal year. Its customer base stood at
28.7 million customers on 31 March 2013.

1. ATM & Credit/Debit Card Complaints:

Bank of baroda have complaints about ATM & Credit/Debit Card

is 291.
HDFC bank have complaints about ATM & Credit/Debit Card is
1842.

2. Deposit Account Complaints:

In bank of baroda over all deposit complaint is 87.

In HDFC bank over all deposit complaint is 268.

3. Pension Related Complaints:

Pension Related Complaints in bank of baroda 150.

Pension Related Complaints in HDFC bank just 6.

4. Non-Observance of Fair Practice Code Complaints:

In bank of baroda Non-Observance of Fair Practice Code 479

Complaints are there.
In HDFC bank Non-Observance of Fair Practice Code 979
Complaints are there.

5. Loans & Advances Complaints

Bank of baroda have Loans & Advances Complaints 206.

HDFC bank have Loans & Advances Complaints 286.

6. Non-Adherence to BCBSI Codes:

Bank of baroda have Non-Adherence to BCBSI Codes complaints

is 368.
HDFC bank have Non-Adherence to BCBSI Codes complaints is
433.

7. Non-Adherence to DSA Instruction Complaints:

Bank of baroda have just 1 complaint about Non-Adherence to

DSA Instruction Complaints.
HDFC Bank have 82 comaplaints about Non-Adherence to DSA
Instruction Complaints.

8. Total Complaints:

Bank of baroda have total number of complaints is 2117.

HDFC bank have total number of complaint is 5143.

9. Number of Offices & Branches:

Bank of baroda have all over India 4550 branches.

HDFC bank have all over India 3303.

10. Number of Employeees:

Bank of broad have total number of employees is 43,108

HDFC bank have total number of employees in India is 69,401.

11. Capital and Reserve & Surplus:

Bank of baroda have 319,694rs. of Capital and Reserve &

Surplus.
HDFC bank have 362,141rs. of Capital and Reserve & Surplus.

12. Deposits:

Bank of baroda have deposits of rs. 4,738,833.

HDFC bank have deposits of rs. 2962470.

13. Investments:

Bank of baroda have total investments of rs.1,213,937.

HDFC bank have total investments of rs. 1,116,136.

14. Advances:

Bank of baroda have total advances of rs. 3,281,858.

HDFC bank have total advances of rs. 2,397,206.

15. Interest Income:

Bank of baroda have total Interest Income of rs. 350,649.

HDFC bank have total Interest Income of rs. 351,967.

16. Other Income:

Bank of baroda have total Other Income of rs. 36,306.

HDFC bank have total Other Income of rs. 68,526.

17. Interest Expended:

Bank of baroda have total Interest Expended of rs. 238,814.

HDFC bank have total Interest Expended of rs. 192,538.

18. Operating Expenses:

Bank of baroda have total Operating Expenses of rs. 59,467.

HDFC bank have total Operating Expenses of rs. 112,361.

19. Cost of Funds:

Bank of baroda have total Cost of Funds of rs. 5.0.

HDFC bank have total Cost of Funds of rs. 6.4.

20. Return on Advances Adjusted to CoF:

Bank of baroda have total Return on Advances Adjusted to CoF of

rs. 0.90.
HDFC bank have total Return on Advances Adjusted to CoF of rs.
1.90.

21. Wages as % of Total Expenses:

Bank of baroda have 11.6% of wages as of total expenses.

HDFC bank have 113.0% of wages as of total expenses.

22. Capital to Risk Assets Ratio(CRAR):

Bank of baroda have 13.3 of Capital to Risk Assets Ratio(CRAR).

HDFC bank have 16.8 of Capital to Risk Assets Ratio(CRAR).

23. Net NPA Ratio:

Bank of baroda have 1.3 of Net NPA Ratio.

HDFC bank have 0.2 of Net NPA Ratio.

If we can see the overall comparison of BANK OF BORODA & HDFC

BANK. Bank of baroda is much better then HDFC bank most of items of
bank of baroda have much more then HDFC bank. In complaints also
HDFC bank have more complaints then bank of baroda.