ON

INDIAN BANKING SYSTEM

BACHELOR OF BUSINESS ADMINISTRATION

(SESSION: 2011-2014)
KUNTI NAMAN INSTITUTE OF PHARMA TECHNOLOGY AND SCIENCE ROORKEE

HEMVATI NANDAN BAHUGUNA GARHWAL UNIVERITY

Srinagar

SUBMITTED TO:
Miss. Tusika Mehta

submitted by:
Shashank Kushwaha
BBA Vth Semester

ACKNOWLEDGEMENT
I express my heartiest gratitude to Miss. Reena (Faculty Member KNI, Roorkee)
for giving me an opportunity to prepare a report on the project assigned to me.
I am also thankful to Miss. Tu s i ka M e h t a (Faculty Member KNI, Roorkee)
under their guidance I undertook this project, for extending the advice and
direction that is required to carry on a study of this nature, and for helping
me with the intricate details of the project at every step.
Without their support and able guidance,
it would have been very difficult to finish this work in the way I have done it.
Lastly I would like to thank all the respondents who offered their opinions and
suggestions through the survey that was conducted by me.

However, I accept the sole responsibility of any possible errors of omission.

(SHASHANK KUSHWAHA)

EXECUTIVE SUMMARY

Banking in India originated in the first decade of 18 century with The General Bank of
India coming into existence in1786. This was followed by Bank of Hindustan. Both
these banks are now defunct. The oldest bank in existence in India is the State Bank of
India being established as "The Bank of Bengal" in Calcutta in June 1806.

The Reserve Bank of India formally took on the responsibility of regulating the Indian
banking sectorfrom1935. After India's independence 1947, the Reserve Bank was
nationalized and given broader powers.

Currently (2007), 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 rateand this has mostly been true.

The Modern Banking Functions are Fund based and Non-Fund based functions. These
functions of a bank are those in which banks extend various services to their customers
or add their commitments to certain transactions undertaken by their clients and charge
their fees/ commissions for the services rendered by them / their commitments added to
the transactions undertaken by the clients. The activities popularly known as Non-fund
facilities provided by Banks.

Thus, we conclude

CONTENTS
INTRODUCTION

Objectives of the study

Scope of study
Limitations of study

INDIAN BANKS
Scope of Indian Bank
Banking in India
Definition of Banks
Types of Bank

Services Provided by Banks

RESERVE BANK OF INDIA

Establishment

Guidelines Provided by the RBI

Guidelines on Fair Practices Code

 STUDY OF HDFC BANK

Organizational Profile

Product & Services at Glance

Milestones in the History

Awards & Achievements of HDFC

Merger

Suggestions

STUDY OF PNB BANK

Origin

Profile

Vission & Mission

Awards & Achievements of PNB

Swot Analysis

Product & Services

STUDY OF SBI

Origin

Product and Services

OBJECTIVES OF THE STUDY

To study broad outline of management of credit, market and operational risks

associated with banking sector.
To understand the importance of banking sector.
To study the Indian bank scenario and its problem.
Long Term and Short Term Finances.
To study the role of bank in Indian Market.
Different types of services provided by the banks.
To study various bank, Corporate and Commercial.
To study the Indian bank scenario and its problem.
Though the Indian Banking System is very wide and elaborated, still the project
covers whole subject in concise manner.
The study aims at learning the techniques involved to manage the various types
of Banks, various methodologies undertaken.
To offer suggestions based upon the findings

SCOPE OF THE STUDY

A healthy banking system is essential for any economy striving to achieve
good growth and yet remain stable in an increasingly global business
environment. The Indian banking system, with one of the largest banking
networks in the world, has witnessed a series of reforms over the past few
years like the deregulation of interest rates, dilution of the government stake in
public sector banks (PSBs), and the increased participation of private sector
banks. The growth of the retail financial services sector has been a key
development on the market front. Indian banks (both public and private) have
not only been keen to tap the domestic market but also to compete in the global
market place.
Studying the increasing business scope of the bank.
Market segmentation to find the potential customers for the bank.
Customers perception on the various products of the bank.
The corporate sector has stepped up its demand for credit to fund its expansion
plans; there has also been a growth in retail banking.
The report seeks to present a comprehensive picture of the various types of
bank. The banks can be broadly classified into two categories:

Nationalise Bank

Private Bank

Within each of these broad groups, an attempt has been made to cover as
comprehensively as possible, under the various sub-groups.

LIMITATION OF THE STUDY:

Every work has its own limitation. Limitations
are extent to which the process should not exceed. Limitations of this project are:1. The major limitation of this study shall be data availability as the data is
proprietary and not readily shared for dissemination.
2. Due to the ongoing process of globalization and increasing competition, no one
model or method will suffice over a long period of time and constant upgradation
will be required. As such the project can be considered as an overview of the
various banks prevailing in Punjab National Bank and in the Banking Industry.
3. Each bank, in conforming to the RBI guidelines, may develop its own methods
for measuring and managing risk.
4. The project study is restricted to banking sector used in India only.
5. The conclusion made is based on a sample study and does not apply to all the
Individuals.
6. In India the banks are being segregated in different groups. Each group has their
own benefits and limitations in operating in India.
7. All banks are not included.

PROBLEMS: -- The corporate sector has stepped up its demand for credit to fund its
expansion plans, there has also been a growth in retail banking. However, even as the
opportunities increase, there are some issues and challenges that Indian banks will have
to contend with if they are to emerge successful in the medium to long term.

INDIAN BANKS
SCOPE OF BANKING SECTOR

Banking business has a history of over 200 years. From the times of

the

Bank of Bengal (1806) the sector has been witnessing qualitative and quantitative
changes. Main players during the pre-independence period were Credit Lyonnais,
Allahabad Bank, Punjab National Bank and Bank of India. With 1935 regulation the
Reserve Bank of India was proclaimed the Central Bank of India and was vested
with controlling powers over the commercial banks.
The drastic development taken place during the first 25 years since
independence was Nationalization of many private banks. With this, the central
government became major policy maker for these nationalized banks
With economic liberalization measures many private and foreign banking
companies were allowed to operate in the country. Favorable economic climate and
a variety of other factors such as demand for wide range of financial products from
various sections of the society led to mutually beneficial growth to the banking
sector and economic growth process. This was coincided by technology
development in the banking operations. Today most of the Indian cities have
networked banking facility as well as Internet banking facility. A customer is
empowered to operate his account from any part of the country. UTI Bank, ICICI,
HDFC Bank and Bank of Punjab are the main winners of the race.

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BANKING IN INDIA
Banking in India originated in the first decade of 18th century with TheGeneral
Bank of

India coming into existence in 1786. This was followed by Bank of

Hindustan. Both these banks are now defunct. The oldest bank in existence in India
is the StateBank of India being established as "The Bank of Bengal" in Calcutta
in June1806.
A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta
operations in the 1850s. At that point of time, Calcutta was the most active trading
port, mainly due to the trade of the British Empire, and due to which banking
activity took roots there and prospered. The first fully Indian owned bank was the
Allahabad Bank, which was established in 1865.
By the 1900s, the market expanded with the establishment of banks such as
Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai both of which were founded under private ownership. The Reserve Bank of India
formally took on the responsibility of regulating the Indian banking sector from 1935.
After India's independence in 1947, the Reserve Bank was nationalized and given
broader powers.

11

12

INTRODUCION
Banking in India in the modern sense originated in the last decades of the 18th century.
The first banks were Bank of Hindustan (1770-1829) and The General Bank of India,
established 1786 and since defunct.
The largest bank, and the oldest still in existence, is the State Bank of India, which
Originated in the Bank of Calcutta in June 1806, which almost immediately became the
Bank of Bengal. This was one of the three presidency banks, the other two being the
Bank of Bombay and the Bank of Madras, all three of which were established under
charters from the British East India Company. The three banks 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 acted as quasi-central banks, as did
their successors, until the Reserve Bank of India was established in 1935.
In 1969 the Indian government nationalised all the major banks that it did not already
own and these have remained under government ownership. They are run under a structure
know as 'profit-making public sector undertaking' (PSU) and are allowed to compete and
operate as commercial banks. The Indian banking sector is made up of four types of
banks, as well as the PSUs and the state banks, they have been joined since 1990s by
new private commercial banks and a number of foreign banks.
Banking in India was generally fairly mature in terms of supply, product range and reach-

13

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.

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Definition of the Bank:- Financial institution whose primary activity is to act as a

payment agent for customers and to borrow and lend money. Banks are important
players of the market and offer services as loans and funds.
th

Banking was originated in 18 century

First bank were General Bank of India and Bank of Hindustan,
now defunct.
Punjab National Bank and Bank of India was the only private
bank in 1906.
Allahabad bank first fully India owned bank in 1865.

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Typesofbanking
Commercial bank has two meanings:
Commercial bank is the term used for a normal bank to distinguish it
from an investment bank. (After the great depression, the U.S.
Congress required that banks only engage in banking activities,
whereas investment banks were limited to capital markets activities.
This separation is no longer mandatory.)
Commercial bank can also refer to a bank or a division of a bank that
mostly deals with deposits and loans from corporations or large
businesses, as opposed to normal individual members of the public
(retail banking). It is the most successful department of banking.

Community development bank are regulated banks that provide financial

services and credit to underserved markets or populations.

Private banks manage the assets of high net worth individuals.

Offshore banks are banks located in jurisdictions with low taxation and
regulation. Many offshore banks are essentially private banks.

Savings banks accept savings deposits.

Postal savings banks are savings banks associated with national postal
systems.

There are some examples of banks in India: Private sector bank

HDFC, ICICI, Axis bank, Yes bank, Kotak Mahindra bank, Bank of
Rajasthan

Rural bank

United bank of India, Syndicate bank, National bank for agriculture

and rural development (NABARD)

Commercial bank
State Bank, Central Bank, Punjab National Bank, HSBC, ICICI,

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HDFC etc.
Retail bank
BOB, PNB
Universal bank

Deutsche bank

Services provided by the bank

Banks provide two types of services
1. Fund Based
2. Non-Fund Based
Banking
services

Non-fund
based
services

Fund
Based
Service

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FUND BASED AND NON-FUND BASED FUNCTIONS

The difference between fund-based and non-fund based credit assistance lies mainly
in the cash outflow. While the former involves all immediate cash outflow, the latter
may or may not involve cash outflow from a banker. In other words, a fund based
credit facility to a borrower would result in depletion of actual liquidity of a banker
immediately whereas grant of non-fund based credit facilities to a borrower may or
may not affect the bankers liquidity.

FUND BASED FACILITY

Fund based functions of a bank are those in which banks make deployment of
Their funds either by granting advances or by making investments for meeting
gaps in funds requirements of their customers/ borrowers. Fund-based functions
of a bank may be classified into two parts:

Granting of Loans and Advances

Making Investments in shares/ debentures/ bonds.

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FUND BASED SREVICES

I.

LOANS AND ADVANCES

1. Commercial Loans Segment

A. Working Capital:- Working Capital is Current assets minus current

liabilities. Working capital measures how much in liquid assets a company has
available to build its business. The number can be positive or negative,
depending on how much debt the company is carrying. In general, companies
that have a lot of working capital will be more successful since they can expand
and improve their

operations. Companies with negative working capital may

lack the funds necessary for growth, also called net current assets or current capital.
A loan whose purpose is to finance everyday operation of a company. A working
capital loan is not used to buy long term assets or investments. Instead it's used to
clear up accounts payable, wages, etc.

I. Cash Credit:- This facility is given by the banker to the customer by way of a
certain amount of credit facility. Its limit is fixed on the basis of security of the
company`s current assets.

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II. Overdraft:- Banks allow selected customers to write cheques in excess of the
balance in their current account, ie, to overdraw. Overdrafts are arranged up to
limits which depend on the customer's credit standing and the bank manager's
humour. The arrangements allow flexibility in the amount spent and, equally, allow
flexibility in repayments (although technically a bank can demand repayment of an
overdraft within 24 hours). In that respect overdrafts are unlike personal loans,
which are structured with regular repayments. Interest on overdrafts is charged on
the fluctuating daily balance.

III. Bills Finance:- Bank of India offers finance against commercial bills in addition
to collection services at competitive rates. Finance is available to all our existing
customersas well as new customers. The finance is available against both demand and
usance billsas well as secured and clean bills. With all important branches networked,
the realization of your bills will be faster. If the bills are drawn under letters of Credit
opened by Prime Banks, the interest rate would be much less.

IV. Bills Purchase:- Bill purchase refers to the service that Bank discounts bank draft
under clean collection and other settlement transaction without trade documents in
order to offer financing service to customers.
The product is used to meet the short-term financing requirement for exporter under
clean collection.

V. Bills Discounting:-This is the most important form in which a bank lends

without any collateral security. The seller draws bills of exchange on the buyer of
goods on credit. Such a bill may either be a clean bill or documentary bill which is

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accompanied by documents of title to goods,viz railway receipts. The bank

purchase bills payable on demand and credit the customer`s account with the
amount of bills less the discount. On maturity of the bills, the bank present them to
its acceptor for payment. In case the discounted bill is dishonored by the nonpayment, the bank can recovers the full amount from the customer along with the
expense in that connection.

B. Tem Loans:-

A bank loan to a company, with a fixed maturity and often

Featuring amortization of principal. If this loan is in the form of a line of credit,

the funds are drawn down shortly after the agreement is signed. Otherwise, the
borrower usually uses the funds from the loan soon after they become available.
Bank term loans are very a common kind of lending.

I. Capital Expenditure:- Money spent to acquire or upgrade physical assets

such as buildings and machinery. also called capital spending or capital
expense.

II. Fixed Assets Finance:- Fixed asset finance refers to the finance for real
estate and equipment needs of a business. This type of finance includes long-term
borrowings
to purchase
or refinance new or used equipment.
spending or used
cazczpital
expense.

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III. Project Finance:- Financing arrangements where the funds are made available for a
specific purpose (the project), with the loan repayments geared to the project's cashflow.
Project finance is used in connection with raising large amounts of money for big-ticket,
energy-related facilities. The term has come to be loosely applied to various forms of
financing. 'A financing of a particular economic unit in which a lender is satisfied to
look initially to the cashflows and earnings of that economic unit as the source of funds
from which a loan will be repaid and to the assets of the economic unit as collateral for
the loan.'

IV. Consumer Loans Advance against Shares:- The loan is given for any of the
purposes broadly categorized as under:
Personal Purposes: For meeting personal expenses like for marriage, housing, education,
medical etc.
Business Purposes: For meeting financial requirements for your professional or business
purposes other than operations on stock markets.

V. Housing Loans:- Housing Loans are taken by borrowers to finance the purchase of
properties either for lodging or investment purposes. Housing loans tend to be large and
banks often provide a margin of financing of up to 80% of the value of the house.
financing. 'A financing of a particular economic unit in which a lender is satisfied to

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Non-Fund based services

It is generally perceived that the non-fund based business is very remunerative to
bank and the borrowers. The banks, besides getting handsome commission or fee
and some other service charges, also get the low cost deposits in the shape of
margin and ancillary business. The funds of the borrower are not blocked in the
advances to be given to the suppliers or beneficiaries and this keeps his liquidity
position comfortable, production smooth and costs low.

PURPOSE FOR NON-FUND BASED F ACILITIES

The borrowers need such facilities not only for purchases of current assets or
financing there of or take benefit of certain services with the help of non-fund based
facilities. They also need the facilities for acquisition of fixed assets including their
financing.

RBI NORMS

Prudential exposure norms as per extant guidelines of Reserve Bank of India provides
that the maximum exposure of a bank for all its Fund based and Non-fund based credit
facilities, investments, underwriting, investments in Bonds and commercial paper and
any other commitment should not exceed 25 percent of its (bank's) net worth to an
individual borrower and 50 percent of its, net worth to a 'group'. It may however, be
rioted that while calculating exposure, the Non-fund based facilities are to be taken at
50 percent of the sanctioned limit. To illustrate the point let us consider the following
example:-

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Example:

Particulars

Rs.

Net worth of the bank

Rs.
In crores
700

Maximum exposure permitted for an individual

borrower (25% of net worth of the bank) Working

175

Capital Control and Banking Policy

Maximum exposure permitted for all borrowers

657

Under the same group (50% of net worth of the bank)

350

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Example:

Particulars

Rs.

Limits sanctioned to borrower

Fund Based

100

Non-Fund Based

100

Total

200

Total Exposure

100

For Fund Based limits

@ 50% of limits

50

For Non-Fund based limits 50

@ 50% of limits

Total

150

25

Total credit limits to the above borrower are Rs.200 crores which are in excess of the
maximum exposure norm of Rs. 175 crores. but for the purpose of determining exposure
we have taken non-fund based limits at 50 percent of itsvalue and total exposure is taken
at 150 crores which is well within the norm.

FUNDS REMITTANCE/ TRANSFER FACILITIES

Issue of demand draft

Collection of bills and cheques

ESTABLISHMENT OF LC/ BG
Letter of credit:- A Letter of Credit (L/C) is a written document issued by the Buyers'
Banker (BBK), at a request of the Buyer (B), in favour of the Seller(S), whereby the
Buyer's Banker (BBK) gives an undertaking to the Seller(S) that, in the event of the
Seller tendering the Bill of Exchange to the Seller's Banker (SBK), along with all the
required documents, in strict compliance of all the terms and conditions stipulated in the
L/C, the entire amount of the bill will be paid to the Seller (S) by the Seller's Banker
(SBK), on behalf of the Buyer's Banker (BBK) immediately, as has been, in turn,
undertaken by the buyer to his own Banker(BBK).

Bank guarantee: - It is customary for the Bank, in normal course of business, to issue
and execute guarantees in favor of third parties on behalf of the customers. The Bank
guarantees are governed by various provisions as contained in the Indian Contract Act,
1872. The commercial transactions, banks customers are sometimes required to give a
Bank Guarantee. This is mostly as an alternate to keep cash as a security deposit. The
Third party who seeks the guarantee, not being aware of the customers financial
standing prefers a bank guarantee. In turn the Bank, which very well understands the
financial standing of the customer, undertakes the guarantee of the customers financial
commitments or performance of contracts by him. The bank charges commission for the
service, which depends on the security available and the financial stability of the
customer.
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AGENCY FUNCTIONS

Collecting of B/E, P-notes, cheques & securities

Selling of products of insurance co./ MF

Granting & issuing LC, traveler's cheque

Agent for any govt., local authority, etc

MERCHANT BANKING

Syndication of loans

Venture capital finance

Public issue management

Corporate counseling

Mergers & acquisitions

Portfolio management services

Investment counseling

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E-BANKING

Electronic payment system

ATM

Tele-banking

Credit card and debit card

Online banking

MOBILE BANKING

Account services

Credit card services

DEMAT account

Loan account services

Bill services

Other services

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DEPOSIT SCHEMES FOR NRI's

Foreign Currency Nonresident (FCNR-B) Deposits :

Tax Exemption

Choice of Currency

Remit in any Currency

Minimum & Maximum Amount

Joint account

Power of Attorney (P/A)

Nomination

RESIDENT FOREIGN CURRENCY (RFC)

Deposits Returning Indians for permanent
settlement, after staying abroad for not less than one year, can Retain their savings in foreign currency in a RFC account.
Get the proceeds of FCNR (B)/NRE Deposits credited to this account.

NON RESIDENT EXTERNAL (NRE)

Deposits can be placed in
Savings Bank A/c
Fixed Deposit A/c

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Non Resident Ordinary (NRO) Deposits:-Where an Indian citizen having a resident

Account leaves India and becomes non-resident, his resident account should be
designated as NRO account.
Where non-resident Indian receives income in India, he can open a NRO a/c with such
funds.

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Reserve Banks of India

Establishment

The Reserve Bank of India was established on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India Act, 1934.
The Central Office of the Reserve Bank was initially established in Calcutta but was
permanently moved to Mumbai in 1937. The Central Office is where the Governor
sits and where policies are formulated.
Though originally privately owned, since nationalisation in 1949, the Reserve Bank
is fully owned by the Government of India.

GuidelinesonOwnershipandGovernanceinPrivate
SectorBanks

Banks are "special" as they not only accept and deploy large amount of
uncollateralized public funds in fiduciary capacity, but they also leverage such
funds through credit creation. The banks are also important for smooth functioning
of the payment system. In view of the above, legal prescriptions for ownership and
governance of banks laid down in Banking Regulation Act, 1949 have been
supplemented by regulatory prescriptions issued by RBI from time to time. The
existing legal framework and significant current practices in particular cover the
following aspects:

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i. The composition of Board of Directors comprising members with demonstrable

professional and other experience in specific sectors like agriculture, rural economy,
co-operation, SSI, law, etc., approval of Reserve Bank of India for appointment of
CEO as well as terms and conditions thereof, and powers for removal of managerial
personnel, CEO and directors, etc. in the interest of depositors are governed by
various sections of the B.R. Act, 1949.

ii. Guidelines on corporate governance covering criteria for appointment of

directors, role and responsibilities of directors and the Board, signing of declaration
and undertaking by directors, etc., were issued by RBI on June 20, 2002 and June
25, 2004, based on the recommendations of Ganguly Committee and a review by
the BFS.

iii. Guidelines for acknowledgement of transfer/allotment of shares in private sector

banks were issued in the interest of transparency by RBI on February 3, 2004.

iv. Foreign investment in the banking sector is governed by Press Note dated March
5, 2004 issued by the Government of India, Ministry of Commerce and Industries.

v. The earlier practice of RBI nominating directors on the Boards of all private
sector banks has yielded place to such nomination in select private sector banks.

2. Against this background, it is considered necessary to lay down a comprehensive

framework of policy in a transparent manner relating to ownership and governance
in the Indian private sector banks as described below.

3. The broad principles underlying the framework of policy relating to ownership

and governance of private sector banks would have to ensure that

(i) The ultimate ownership and control of private sector banks is well diversified.
32

While diversified ownership minimises the risk of misuse or imprudent use

of leveraged funds, it is no substitute for effective regulation.
Further, the fit and proper criterion, on a continuing basis, has to be the over-riding
consideration in the path of ensuring adequate investments, appropriate restructuring
and consolidation account of these basic objectives, in a systematic manner and the
process will be spread over time as appropriate.

(ii) Important Shareholders (i.e., shareholding of 5 per cent and above) are fit and
proper, as laid down in the guidelines dated February 3, 2004 on acknowledgement
for allotment and transfer of shares.

(iii) The directors and the CEO who manage the affairs of the bank are fit and
proper as indicated in circular dated June 25, 2004 and observe sound corporate
governance principles.

(iv) Private sector banks have minimum capital/net worth for optimal operations
and systemic stability.

(v) The policy and the processes are transparent and fair.

4. Minimum capital
The capital requirement of existing private sector banks should be on par with the
entry capital requirement for new private sector banks prescribed in RBI guidelines
of January 3, 2001, which is initially Rs.200 crore, with a commitment to increase
to Rs.300 crore within three years. In order to meet with this requirement, all banks
in private sector should have a net worth of Rs.300 crore at all times. The banks
which are yet to achieve the required level of net worth will have to submit a timebound programme for capital augmentation to RBI. Where the net worth declines to
a level below Rs.300 crore, it should be restored to Rs. 300 crore within a
33

reasonable time.

5. Shareholding
i. The RBI guidelines on acknowledgement for acquisition or transfer of shares
issued on February 3, 2004 will be applicable for any acquisition of shares of 5 per
cent and above of the paid up capital of the private sector bank.

ii. In the interest of diversified ownership of banks, the objective will be to ensure
that no single entity or group of related entities has shareholding or control, directly
or indirectly, in any bank in excess of 10 per cent of the paid up capital of the
private sector bank. Any higher level of acquisition will be with the prior approval
of RBI and in accordance with the guidelines of February 3, 2004 for grant of
acknowledgement for acquisition of shares.

iii. Where ownership is that of a corporate entity, the objective will be to ensure that
no single individual/entity has ownership and control in excess of 10 per cent of that
entity. Where the ownership is that of a financial entity the objective will be to
ensure that it is a well established regulated entity, widely held, publicly listed and
enjoys good standing in the financial community.

iv, Banks (including foreign banks having branch presence in India)/FIs should not
acquire any fresh stake in a banks equity shares, if by such acquisition, the
investing banks/FIs holding exceeds 5 per cent of the investee banks equity
capital as indicated in RBI circular dated July 6, 2004.

v. As per existing policy, large industrial houses will be allowed to acquire, by way
of strategic investment, shares not exceeding 10 per cent of the paid up capital of
the bank subject to RBIs prior approval. Furthermore, such a limitation will also be
considered if appropriate, in regard to important shareholders with other
commercial affiliations.
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vi. In case of restructuring of problem/weak banks or in the interest of consolidation

in the banking sector, RBI may permit a higher level of shareholding, including by a
bank.
in the banking sector. The
pursuit of the goal of diversified ownership will t

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6. Directors and Corporate Governance

i. The recommendations of the Ganguly Committee on corporate governance in
banks have highlighted the role envisaged for the Board of Directors. The Board of
Directors should ensure that the responsibilities of directors are well defined and the
banks should arrange need-based training for the directors in this regard. While the
respective entities should perform the roles envisaged for them, private sector banks
will be required to ensure that the directors on their Boards representing specific
sectors as provided under the B.R. Act, are indeed representatives of those sectors in
a demonstrable fashion, they fulfil the criteria under corporate governance norms
provided by the Ganguly Committee and they also fulfil the criteria applicable for
determining fit and proper status of Important Shareholders (i.e., shareholding of 5
per cent and above) as laid down in RBI Circular dated June 25, 2004.

ii. As a matter of desirable practice,not more than one member of a family or a

close relative (as defined under Section 6 of the Companies Act, 1956) or an
associate (partner, employee, director, etc.) should be on the Board of a bank.

iii. Guidelines have been provided in respect of 'Fit and Proper' criteria for directors
of banks by RBI circular dated June 25, 2004 in accordance with the
recommendations of the Ganguly Committee on Corporate Governance. For this
purpose a declaration and undertaking is required to be obtained from the proposed /
existing directors
iv. Being a Director, the CEO should satisfy the requirements of the fit and proper
criteria applicable for directors. In addition, RBI may apply any additional
requirements for the Chairman and CEO. The banks will be required to provide all
information that may be required while making an application to RBI for approval
of appointment of Chairman/CEO.

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7. Foreign investment in private sector banks

In terms of the Government of India press note the aggregate foreign investment in
private banks from all sources (FDI, FII, NRI) cannot exceed 74 per cent. At all
times, at least 26 per cent of the paid up capital of the private sector banks will have
to be held by resident Indians.

7.1 Foreign Direct Investment (FDI) (other than by foreign banks or

foreign bank group)
i. The policy already articulated in guidelines for determining fit and proper status
of shareholding of 5 per cent and above will be equally applicable for FDI. Hence
any FDI in private banks where shareholding reaches and exceeds 5 per cent either
individually or as a group will have to comply with the criteria indicated in the
aforesaid guidelines and get RBI acknowledgement for transfer of shares.
ii. To enable assessment of fit and proper the information on ownership/beneficial
ownership as well as other relevant aspects will be extensive.

7.2 Foreign Institutional Investors (FIIs)

i. Currently there is a limit of 10 per cent for individual FII investment with the
aggregate limit for all FIIs restricted to 24 per cent which can be raised to 49 per
cent with the approval of Board/General Body. This dispensation will continue.
ii. The present policy requires RBIs acknowledgement for acquisition/transfer of
shares of 5 per cent and more of a private sector bank by FIIs based upon the policy
guidelines on acknowledgement of acquisition/transfer of shares issued. For this
purpose RBI may seek certification from the concerned FII of all beneficial interest.

37

7.3 Non-Resident Indians (NRIs)

Currently there is a limit of 5 per cent for individual NRI portfolio investment with
the aggregate limit for all NRIs restricted to 10 per cent which can be raised to 24
per cent with the approval of Board/General Body. Further, the policy guidelines on
acknowledgement for acquisition/transfer will be applied.

8. Due diligence process

The process of due diligence in all cases of shareholders and directors as above, will
involve reference to the relevant regulator, revenue authorities, investigation
agencies and independent credit reference agencies as considered appropriate.

9. Transition arrangements
i. The current minimum capital requirements for entry of new banks is Rs.200 crore
to be increased to Rs.300 crore within three years of commencement of business. A
few private sector banks which have been in existence before these capital
requirements were prescribed have less than Rs.200 crore net worth. In the interest
of having sufficient minimum size for financial stability, all the existing private
banks should also be able to fulfil the minimum net worth requirement of Rs.300
crore required for a new entry. Hence any bank with net worth below this level will
be required to submit a time bound programme for capital augmentation to RBI for
approval.

ii. Where any existing shareholding of any individual entity/group of entities is 5

per cent and above, due diligence outlined in the guidelines will be undertaken to
ensure fulfillment of fit and proper criteria.

iii. Where any existing shareholding by any individual entity/group of related

38

entities is in excess of 10 per cent, the bank will be required to indicate a time table
for reduction of holding to the permissible level. While considering such cases, RBI
will also take into account the terms and conditions of the banking licences.

iv. Any bank having shareholding in excess of 5 per cent in any other bank in India
will be required to indicate a time bound plan for reduction in such investments to
the permissible limit. The parent of any foreign bank having presence in India,
having shareholding directly or indirectly through any other entity in the banking
group in excess of 5 per cent in any other bank in India will be similarly required to
indicate a time bound plan for reduction of such holding to 5 per cent.

v. Banks will be required to undertake due diligence before appointment of directors

and Chairman/CEO on the basis of criteria that will be separately indicated and
provide all the necessary certifications/information to RBI.

vi. Banks having more than one member of a family, or close relatives or associates
on the Board will be required to ensure compliance with these requirements at the
time of considering any induction or renewal of terms of such directors.

vii. Action plans submitted by private sector banks outlining the milestones for
compliance with the various requirements for ownership and governance will be
examined by RBI for consideration and approval.

39

10. Continuous monitoring arrangements

i. Where RBI acknowledgement has already been obtained for transfer of shares of
5 per cent and above, it will be the banks responsibility to ensure continuing
compliance of the fit and proper criteria and provide an annual certificate to the
RBI of having undertaken such continuing due diligence.

ii. Similar continuing due diligence on compliance with the fit and proper criteria
for directors/CEO of the bank will have to be undertaken by the bank and certified
to RBI annually.

iii. RBI may, when considered necessary, undertake independent verification of fit
and proper test conducted by banks through a process of due diligence.
11. On the basis of such continuous monitoring, RBI will consider appropriate
measures to enforce compliance.

Guidelines on Fair Practices Code

Loan application forms shall be comprehensive to include information about rate

of interest (fixed/floating) and manner of charging (monthly/quarterly/half
yearly/ rest), process fees and other charges, penal interest rates, pre-payment
options and any other matter which affects the interest of the borrower, so that a
meaningful comparison with that of other banks can be made and informed
decision can be taken by the borrower.
Banks and Financial Institution should devise a system of giving
acknowledgement for receipt of all loans application. Banks/ Financial
40

Institutions should verify the loan application within a reasonable period of time.
If additional details / documents are required, they should intimate the borrowers
immediately. If all the requirements are complied with the borrowers, banks/
Financial Institution should acknowledge for the same and state the specific time
period from the date of acknowledgement within which a decision on the specific
loan request will be conveyed to the borrowers.
Acknowledgement should also state the amount of process fees paid or to be
paid and the extent to which such fees shall be refunded in the event of rejection
of any application for loan.

In the case of rejection of any loan application, lenders should convey in writing
the specific reasons thereof.
Lenders should ensure that there is proper assessment of credit requirement of
borrowers. The credit limit, which may be sanctioned, should be mutually
settled.

In the case of rejection of any loan application, lenders should convey in writing
the specific reasons thereof.
Lenders should ensure that there is proper assessment of credit requirement of
borrowers. The credit limit, which may be sanctioned, should be mutually
settled.
Terms and conditions and other caveats governing credit facilities given by
banks / Financial Institution arrived at after negotiation by the lending institution
and the borrower should be reduced in writing duly witnessed and certified by
the authorised sanctioning authority; in respect of advances sanctioned by the
Board of Directors or its committee the documents of understanding should be
certified by the authorised signatory preferably at company secretary level. A
copy of such agreement should be made available to the borrowers for their
41

record.
Lenders should ensure timely disbursement of loans sanctioned.
Stipulation of margin and security should be based on due diligence and credit
worthiness of borrowers.
Lenders should keep the borrowers apprised of the state of their accounts from
time to time and shall give notice of any change in the terms and conditions
including interest rates and charges are effected only prospectively. To ensure the
above, Banks / Financial Institution should create appropriate information
dissemination mechanism.
The loan agreement should clearly specify the liability of lenders to borrowers in
regard to allowing drawings beyond the sanctioned limits, honouring the cheques
issued for the purpose other than agreed, disallowing large cash withdrawals and
obligation to meet further requirements of the borrowers on account of growth in
business etc. without proper revision and sanction in credit limits, and
disallowing drawings on a borrower account on its classification as a nonperforming assets or on account of non-compliance with the terms of sanction.

Lenders should give reasonable notice to borrowers before taking decision to

recall / accelerate payment or performance under the agreement or seeking
additional securities

42

.
Lenders should release all securities on receiving payment of loan or realisation
of loan subject to any legitimate right of lien for any other claim lenders may
have against borrowers. If such right of set off is to be exercised, borrowers shall
be given notice about the same with full particulars about the remaining claims
and the documents under which lenders are entitled to retain the securities till the
relevant claims are settled / paid.

43

HDFC BANK

ORGANIZATIONPROFILE
FORMATION OF THE COMPANY
The Housing Development Finance Corporation Limited (HDFC) was amongst the first
to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI's liberalization of the Indian Banking
Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC
Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced
operations as a Scheduled Commercial Bank in January 1995.

PROMOTER
HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
Corporation
has maintained
a consistent
and
healthy
the market leader in mortgages.
Its outstanding
loan portfolio
covers
well
over agrowth
millionin its operations to remain

44

dwelling units. HDFC has developed significant expertise in retail mortgage loans to
different market segments and also has a large corporate client base for its housing
related credit facilities. With its experience in the financial markets, a strong market
reputation, large shareholder base and unique consumer franchise, HDFC was ideally
positioned to promote a bank in the Indian environment.

BUSINESS FOCUS
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank's risk appetite. The bank is
committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. HDFC Bank's business philosophy is
based on four core values Operational Excellence, Customer Focus, Product
Leadership and People.

CAPITAL STRUCTURE
The authorized capital of HDFC Bank is Rs550 crore (Rs5.5 billion). The paid-up
capital is Rs424.6 crore (Rs.4.2 billion). The HDFC Group holds 19.4% of the bank's
equity and about 17.6% of the equity is held by the ADS Depository (in respect of the
bank's American Depository Shares (ADS) Issue). Roughly 28% of the equity is held by
Foreign Institutional Investors (FIIs) and the bank has about 570,000 shareholders. The
shares are listed on the Stock Exchange, Mumbai and the National Stock Exchange. The
bank's American Depository Shares are listed on the New York Stock Exchange (NYSE)
under the symbol 'HDB'.

45

 TIMES BANK AMALGAMATION

In a milestone transaction in the Indian banking industry, Times Bank Limited (another
new private sector bank promoted by Bennett, Coleman & Co./Times Group) was
merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of
amalgamation approved by the shareholders of both banks and the Reserve Bank of
India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares
of Times Bank. The acquisition added significant value to HDFC Bank in terms of
increased branch network, expanded geographic reach, enhanced customer base, skilled
manpower and the opportunity to cross-sell and leverage
alternative delivery channels.

DISTRIBUTION NETWORK
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network
of over 1229 branches spread over 444 cities across India. All branches are linked on an
online real-time basis. Customers in over 120 locations are also serviced through
Telephone Banking. The Bank's expansion plans take into account the need to have a
presence in all major industrial and commercial centers where its corporate customers
are located as well as the need to build a strong retail customer base for both deposits
and loan products. Being a clearing/settlement bank to various leading stock exchanges,
the Bank has branches in the centers where the NSE/BSE has a strong and active
member base. The Bank also has a network of about over 2526 networked ATMs across
these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and
international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus
Express Credit/Charge cardholders.

46

and American

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

BUSINESS FOCUS
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank's risk appetite. The bank is
committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. HDFC Bank's business philosophy is
based on four core values- Operational Excellence, Customer Focus, Product Leadership
and People.
people.
The company cares for both, individuals as well as corporate and small and

47

 PRODUCT SCOPE:

HDFC Bank offers a bunch of products and services to meet the every need of the
medium enterprises. For individuals, the company has a range accounts, investment, and
pension scheme, different types of loans and cards that assist the customers. The
customers can choose the suitable one from a range of products which will suit their lifestage and needs. For organizations the company has a host of customized solutions that
range from
Funded services, Non-funded services, Value addition services, Mutual fund etc. These
affordable plans apart from providing long term value to the employees help in
enhancing
goodwill of the company. The products of the company are categorized into various
sections which are as follows:
Accounts and deposits.
Loans.
Investments and Insurance.
Forex and payment services.
Cards.
Customer center.

48

PRODUCTSANDSERVICESATAGLANCE
1. PERSONAL BANKING
A. Accounts & Deposits

- Regular Savings Account

- Savings Plus Account
- SavingsMax Account
- Senior Citizens Account
- No Frills Account
- Institutional Savings Account
- Payroll Salary Account
- Classic Salary Account
- Regular Salary Account
- Premium Salary Account
- Defence Salary Account
- Kid's Advantage Account
- Pension Saving Bank Account
- Family Savings Account
- Kisan No Frills Savings Account
- Kisan Club Savings Account
- Plus Current Account
- Trade Current Account
- Premium Current Account

- Regular Current Account

- Apex Current Account

49

- Max Current Account

- Reimbursement Current Account
- RFC - Domestic Account
- Regular Fixed Deposit
- Super Saver Account
- Sweep-in Account
- HDFC Bank Preferred
- Private Banking

B. Loans
- Personal Loans
- Home Loans
- Two Wheeler Loans
- New Car Loans
- Used Car Loans
- Overdraft against Car
- Express Loans
- Loan against Securities
- Loan against Property
- Commercial Vehicle Finance
- Working Capital Finance
- Construction Equipment Finance
- Offers & Deals
- Customer Center

50

C. Investments & Insurance

- Mutual Funds
- Insurance
- Bonds
- Financial Planning
- Knowledge Centre
- Equities & Derivatives
- Mudra Gold Bar

D. Forex Services
- Trade Finance
- Travelers Cheques
- Foreign Currency Cash
- Foreign Currency Drafts
- Foreign Currency Cheque Deposits
- Foreign Currency Remittances
- Cash To Master
- ForexPlus Card

E. Payment Services
- Net Safe
- Prepaid Refill
- Bill Pay
- Direct Pay
- Visa Money Transfer
- E-Monies Electronic Funds Transfer
51

- Excise & Service Tax Payment

F. Access Your Bank

- One View
- Insta Alerts
- Mobile Banking
- ATM
- Phone Banking
- Branch Network

G. Cards
- Silver Credit Card
- Gold Credit Card
- Woman's Gold Credit Card
- Platinum plus Credit Card
- Titanium Credit Card
- Value plus Credit Card
- Health plus Credit Card
- HDFC Bank Idea Silver Card
- HDFC Bank Idea Gold Card
- Compare Cards
- Transfer & Safe
- Track your Credit Card

52

H. Get More from Your Card

- Offers & Savings
- My Rewards
- Insta Wonderz
- Add-On Cards
- Credit Card Usage Guide
- Easy EMI
- Net safe
- Smart Pay
- Secure Plus
- My City Benefit Card
- Debit Cards
- Easy ShopInternational Debit Card
- Easy Shop Gold Debit Card
- Easy ShopInternational Business Debit Card
- Easy ShopWoman's Advantage Debit Card
- Prepaid Cards
- Forex Plus Card
- Kisan Card

I. Customer Centre
- Offers & Deals
- Winners of Contests & Promotions

53

2. Wholesale Banking
A. Corporate
Funded Services
Non Funded Services
Value Added Services
Internet Banking

B. Small & Medium Enterprises

Funded Services
Non-Funded Services
Specialized Services
Internet Banking

C. Financial Institutions & Trusts

Banks
Financial Institutions
Mutual Funds
Stock Brokers

54

MILESTONESINTHEHISTORY
HDFC Bank began its operations in 1995 with a simple mission: to be a "World-class
Indian Bank". They realized that only a single-minded focus on product quality and
service excellence would help us get there. Today, they are proud to say that they are
well on our way towards that goal.
It is extremely gratifying that their efforts towards providing customer convenience have
been appreciated both nationally and internationally.

AWARDS&ACHIEVEMENTSofHDFCBANK

One of India's "Most Innovative

Business Today-Monitor Group survey

Companies".
Best Bank Award in the Private Sector

Financial Express-Ernst & Young Award

category

The Asian Banker Excellence in Retail

Financial Services Awards

Best Retail Bank in India

Managing Director Aditya Puri won the

Asian Banker

Leadership achievement Award for

India
Best Bank Award in the Private sector

utlook Money & NDTV Profit

category

55

MERGER
HDFC Bank and Centurion Bank of Punjab merger at share swap ratio of 1:29.The
Boards of HDFC Bank and Centurion Bank of Punjab met on 25 February, 2008 and
approved, subject to due diligence, the share swap ratio for the proposed merger of
Centurion Bank of Punjab with HDFC Bank. The Scheme of Amalgamation envisages a
share exchange ratio of one share of HDFC Bank for twenty nine shares of Centurion
Bank of Punjab.
The combined entity would have a nationwide network of 1,148 branches (the largest
amongst private sector Banks) a strong deposit base of around Rs. 1,200 billion and net
advances of around Rs. 850billion. The balance sheet size of the combined entity would
be over Rs. 1,500 billion.
Mr. Shailendra Bhandari, Managing Director and CEO, Centurion Bank of Punjab
said, We are extremely pleased to receive the go ahead from our board to pursue this
opportunity. A merger between the banks provides significant synergies to the combined
entity. The proposed merger would further improve the franchise and customer
proposition offered by the individual
Bank of Punjab.

banks.

56

SUGGESTIONS:
Finally some recommendations for the company are as follows:

To make people aware about the benefit of becoming HDFC Banks Sales

Executive, following activities of advertisement should be done through

1. Print Media.
2. Hoarding & Banners.
3. Stalls in Trade Fares
4. Distribution of leaflets containing details information.

The bank should provide life time valid ATM card to all its customers.
Minimum balance for savings account in metro branches should be reduced
from Rs 10000 to Rs1000, so that people who are not financially strong enough
can maintain their account properly.

The company should provide a pass book to all its customers

Make people understand about the various benefits of its products.

Company should organize the program in the society, so that people will be
aware about the company and different products of the bank

Company should open more branches in different cities.

57

PUNJAB NATIONAL BANK

ORIGIN
Punjab national bank was established in 1895 at Lahore, undivided India, Punjab
National Bank (PNB) has the distinction of being the first Indian bank to have been
started solely with Indian capital. The bank was nationalized in July 1969 along with 13
other banks. From its modest beginning, the bank has grown in size and stature to
become a front-line banking institution in India at present.

PROFILE
With its presence virtually in all the important centers of the country, Punjab
National Bank offers a wide variety of banking services which include corporate and
personal banking, industrial finance, agricultural finance, financing of trade and
international banking. Among the clients of the Bank are Indian conglomerates, medium
and small industrial units, exporters, non-resident Indians and multinational companies.
The large presence and vast resource base have helped the Bank to build strong links
with trade and industry.
Punjab National Bank is serving over 3.5 crore customers through 4540 Offices
including 421 extension counters - largest amongst Nationalized Banks.
Punjab National Bank with 112 year tradition of sound and prudent banking is one
among 300 global companies and seven Indian companies which are expected to emerge
as challengers to Worlds leading blue chip companies. While among top 1000 world
banks, The Banker, the leading magazine in London, has placed PNB at the 248th
position, the bank features at 1308th position among Forbes Global 2000 list of global
giants and fast growing companies.
58

At the same time, the bank has been conscious of its social responsibilities by
financing agriculture and allied activities and small scale industries (SSI). Considering
the importance of small scale industries bank has established 31 specialised branches to
finance exclusively such industries.
Strong correspondent banking relationship which Punjab National Bank maintains
with over 200 leading international banks all over the world enhances its capabilities to
handle transactions world-wide. Besides, bank has Rupee Drawing Arrangements with
15 exchange companies in the Gulf and one in Singapore. Bank is a member of the
SWIFT and over 150 branches of the bank are connected through its computer-based
terminal at Mumbai. With its state-of-art dealing rooms and w-trained dealers, the
bank offers efficient forex dealing operations in India.
The bank has been focusing on expanding its operations outside India and has
identified some of the emerging economies which offer large business potential. Bank
has set up representative offices at Almaty: Kazakhistan, Shanghai: China and in
London. Besides, Bank has opened a fully fledged Branch in Kabul, Afghanistan.
Keeping in tune with changing times and to provide its customers more efficient
and speedy service, the Bank has taken major initiative in the field of computerization.

59

All the Branches of the Bank have been computerized. The Bank has also launched
aggressively the concept of "Any Time, Any Where Banking" through the introduction
of Centralized Banking Solution (CBS) and over 2409 offices have already been brought
under its ambit.
PNB also offers Internet Banking services in the country for Corporates as well as
individuals. Internet Banking services are available through all Branches of the Bank
networked under CBS. Providing 24 hours, 365 days banking right from the PC of the
user, Internet Banking offers world class banking facilities like anytime, anywhere
access to account, complete details of transactions, and statement of account, online
information of deposits, loans overdraft account etc. PNB has recently introduced
Online Payment Facility for railway reservation through IRCTC Payment Gateway
Project and Online Utility Bill Payment Services which allows Internet Banking account
holders to pay their telephone, mobile, electricity, insurance and other bills anytime from
anywhere from their desktop.
Another step taken by PNB in meeting the changing aspirations of its clientele is
the launch of its Debit card, which is also an ATM card. It enables the card holder to buy
goods and services at over 99270 merchant establishments across the country. Besides,
the card can be used to withdraw cash at more than 25000 ATMs, where the 'Maestro'
logo is displayed, apart from the PNB's over 1094 ATMs and tie up arrangements with
other Banks.

60

VISION AND MISSION

VISION
To evolve and position

the Bank as a world class progressive

cost effective and

customer friendly institution providing comprehensive financial and
related services;
integrating frontiers of technology and serving various segments of
society especially
the weaker section; committed to excellence in serving the public and
also excellence in
serving the public and also excelling in corporate values.

MISSION

To provide excellent professional services and improve its position as

a leader in the
field of financial and related services; build and maintain a team
of motivated and

61

committed workforce with high work ethos; use latest technology

aimed at customer

satisfaction and act as an effective catalyst for socio-economic development

62

AWARDS&ACHIEVEMENTSofPUNJABNATIONALBANK

"Best IT Team of the Year Award"

One of India's "Most Innovative Companies"

Best IT User in Banking & Financial

Services Industry - 2004

by NASSCOM in partnership with

Economic Times

Golden Peacock Award

for Excellence in Corporate Governance -2005

by Institute of Directors

National Award for Excellence in SSI

Lending

Ranked 2nd for 4 consecutive years - 2002,

2003, 2004 & 2005

Money Outlook Award 2004

Runner up in 'Best Bank (public Sector) of the

year Award' -2005

63

SWOT ANALYSIS
STRENGTHS:
Strong growth in business
Good branch network
Highest CASA among PSU
Highest NIMs compared to peers
Fine growth in fee income last year
De-risked investment portfolio
Adequate Capital
Proactive on technology front.

WEAKNESS:

Higher Delinquencies
Higher provisions deterring growth in net profits
No development on insurance venture
Slower growth on international front
Slow-down in treasury profits
Its subsidiaries PNB Housing Finance & PNB Gilts are not impressive

64

OPPORTUNITIES:

Expansion on international front

Ample opportunity to expand business, as the economy is doing well.
Growth in Insurance and Mutual Fund business

THREATS:
Entry of foreign banks
Sharp rise in interest rates can hamper economic growth
Regulatory amendments
Implementation of Basel II requires higher capital
Downturn in Agriculture growth

PRODUCTSANDSERVICES:
65

PRODUCTS:
Personal banking
Corporate banking
Home loans
About loan
ATM/DEBIT cards
Deposit interest rates

SERVICES
Locker facilities
Depository services
Senior citizen scheme
RTGS/NEFT/SFMS:PNB
Merchant banking
Online tax accounting system
Electronic fund transfer
Electronic clearing service
Offshore banking
12 hours banking

66

STATE BANK OF INDIA

PROFILE
State Bank of India (SBI) is the largest bank in India. It is also, measured by the
number of branch offices and employees, the largest bank in the world. Established
in 1806 as Bank of Bengal, it remains the oldest commercial bank in the Indian
Subcontinent and also the most successful one providing various

domestic,

international and NRI products and services, through its vast network in India and
overseas. With an asset base of $126 billion and its reach, it is a regional banking
behemoth. The bank was nationalized in 1955 with the Reserve Bank of India having
a 60% stake. It has laid emphasis on reducing the huge man power through Golden
handshake schemes and computerizing its operations.
State Bank of India has often acted as guarantor to the Indian Government, most
notably during Chandra Shekhar's tenure as Prime Minister of India. With more than
9400 branches and a further 4000+ associate bank branches, the SBI has extensive
coverage. State Bank of India has electronically networked most of its metropolitan,
urban and semi-urban branches under Core Banking System (CBS). The bank has
the largest ATM network in the country having more than 5600 in number [1]. The
State Bank of India has had steady growth over its history, though it was marred by
the Harshad Mehta scam in 1992. Following its arch-rival ICICI Bank, the bank
has started Core banking process by which more than 4400+ branched have

67

been completed so far. In recent years, the bank has sought to expand its overseas
operations by buying foreign banks. It is the only Indian bank to feature in the
top 100 world banks in the Fortune Global 500 rating and various other rankings.
According to the Forbes 2000 listing it tops all Indian companies.

Group companies
SBI Capital Markets Ltd
SBI Mutual Fund (A Trust)
SBI Factors and Commercial Services Ltd
SBI DFHI Ltd
SBI Cards and Payment Services Pvt Ltd
SBI Life Insurance Co. Ltd - Bancassurance (Life Insurance)
SBI Funds Management Pvt Ltd

According to PM Network, State Bank of India launched a project in 2002 to network

more than 14,000 domestic and 70 foreign offices and branches. The first and the
second phases of the project have already been completed and the third phase is still in
progress. As of December 2006, over 10,000 branches have been covered. The new
infrastructure serves as the bank's backbone, carrying all applications, such as the
IP telephone network, ATM network, Internet banking and internal e-mail. The new
infrastructure has enabled the bank to further grow its ATM network with plans to
add another 3,000 by the end of 2008 raising the total number to 8,600.

68

PRODUCTSANDSERVICES:

PRODUCTS:
Personal banking
Corporate banking
Home loans
About loan
ATM/DEBIT cards
Deposit interest rates

SERVICES
Locker facilities
Depository services
Senior citizen scheme
RTGS/NEFT/SFMS:PNB
Merchant banking
Online tax accounting system
Electronic fund transfer
Electronic clearing service
Offshore banking
12 hours banking

69

BIBLIOGRAPHY

REFERENCE BOOKS & ARTICLES

Financial management for managers ICFAI University

Modern Banking D. Muraleedharan
Indias banking and financial sector in the new millennium Raj kapila
Rubinstein on Derivatives Mark Rubinstein

World Wide Web:

www.rbi.org.in
www.derivativesindia.com
www.sebi.gov.in
www.indiainfoline.com
www.wikipedia.org
www.inovafcu.org

70