Indian Banking System

INDIAN BANKING SYSTEM T.Y.
BBI
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. Boththese 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 sector from 1935.
After India's independence 1947, the Reserve Bank wasnationalized and

given broader powers. Currently (2007), banking in India is generally fairly mature
in terms of supply, productrange and reach-even though reach in rural India still
remains a challenge for the privatesector and foreign banks. In terms of quality of
assets and capital adequacy, Indian banksare considered to have clean, strong and
transparent balance sheets relative to other banking in comparable economies in its
region. The Reserve Bank of India is anautonomous body, with minimal pressure
from the government. The stated policy of theBank on the Indian Rupee is to
manage volatility but without any fixed exchange rate-and this has mostly been
true.
The Modern Banking Functions are Fund based and Non-Fund based
functions. Thesefunctions of a bank are those in which banks extend various
services to their customersor add their commitments to certain transactions
undertaken by their clients and chargetheir fees/ commissions for the services
rendered by them / their commitments added tothe transactions undertaken by the
clients. The activities popularly known as Non-fundfacilities provided by Banks.
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INDIAN BANKING SYSTEM T.Y.BBI
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.
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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 keydevelopment
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.
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Limitation Of The Study :
Every work has its own limitation. Limitationsare extent to which

the process should not exceed. Limitations of this project are:-
1.The project was constrained by time limit of two months.
2. The major limitation of this study shall be data availability as the data is propriet
ary and not readily shared for dissemination.
3. 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 up graduation
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.
4. Each bank, in conforming to the RBI guidelines, may develop its own
methodsfor measuring and managing risk.
5.The project study is restricted to banking sector used in India only.
6. The conclusion made is based on a sample study and does not apply to all the
Individuals.
7. In India the banks are being segregated in different groups. Each group has
their own benefits and limitations in operating in India.
8.All banks are not included.
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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.
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RESEARCH METHODOLOGY:-
The first stage included the introduction of Indian Banks and how they work
in India.
Ichoose five criteria Growth, Credit quality, Strength, Profitability, Efficienc

y /Profitability. The next stage involved determining the objectives of the study,
drafting a questionnarie will be designed keeping in mind the target audience and
objectives of thestudy. It will non-disguised in nature and will include a few open-
ended questions.
DATA COLLECTIONS
The data from such organization has also been collected.
Primary data
The primary data will be collected through the questionnaire designed. In the
process of data collection we went to the respective bank to get the questionnaire
filled. The preparation of the project report required me to visit the various other
companies like Punjab National Bank, ICICI bank , State Bank of India, Central
Bank, IDBI bank etc.in order to collect data.
Secondary data
The Preparation of the project report also required data from various journals
,newspapers ( like The Economic Times, Times of India etc.) books ( like
WorkingCapital Management written by Sarbesh Mishra and Financial Service
written by M Y Khan etc.)11
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INTRODUCTION TO BANKING SECTOR
A snapshot of the banking industry
The Reserve Bank of India (RBI), as the central bank of the country, closely
monitors developments in the whole financial sector.
The banking sector is dominated by Scheduled Commercial Banks (SBCs).

As at end March 2002, there were 296 Commercial banks operating in India. This
included 27 Public Sector Banks (PSBs), 31 Private, 42 Foreign and 196 Regional
Rural Banks. Also, there were 67 scheduled co-operative banks consisting of 51
scheduled urban cooperative banks and 16 scheduled state co-operative banks.
Scheduled commercial banks touched, on the deposit front, a growth of 14%

as against 18% registered in the previous year. And on advances, the growth was
14.5% against 17.3% of the earlier year.
State Bank of India is still the largest bank in India with the market share of
20% ICICI and its two subsidiaries merged with ICICI Bank, leading creating the
second largest bank in India with a balance sheet size of Rs. 1040bn.
Higher provisioning norms, tighter asset classification norms, dispensing with

the concept of past due for recognition of NPAs, lowering of ceiling on exposure
to a single borrower and group exposure etc., are among the measures in order to
improve the banking sector.
A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to

strengthen the ability of banks to absorb losses and the ratio has subsequently been
raised from 8% to 9%. It is proposed to hike the CAR to 12% by 2004 based on the
Basle Committee recommendations.
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Retail Banking is the new mantra in the banking sector. The home Loans
alone account for nearly two-third of the total retail portfolio of the bank.
According to one estimate, the retail segment is expected to grow at 30-40% in the
coming years.
Net banking, phone banking, mobile banking, ATMs and bill payments are
the new buzz words that banks are using to lure customers.
With a view to provide an institutional mechanism for sharing of

information on borrowers / potential borrowers by banks and Financial Institutions,
the Credit Information Bureau (India) Ltd. (CIBIL) was set up in August 2000. The
Bureau provides a framework for collecting, processing and sharing credit
information on borrowers of credit institutions. SBI and HDFC are the promoters
of the CIBIL.
The RBI is now planning to transfer of its stakes in the SBI, NHB and
National bank for Agricultural and Rural Development to the private players. Also,
the Government has sought to lower its holding in PSBs to a minimum of 33% of
total capital by allowing them to raise capital from the market. Banks are free to
acquire shares, convertible debentures of corporate and units of equity oriented
mutual funds, subject to a ceiling of 5% of the total outstanding advances
(including commercial paper) as on March 31 of the previous year.
The finance ministry spelt out structure of the government-sponsored ARC

called the Asset Reconstruction Company (India) Limited (ARCIL), this pilot
project of the ministry would pave way for smoother functioning of the credit
market in the country. The government will hold 49% stake and private players
will hold the rest 51%- the majority being held by ICICI Bank (24.5%).
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BANKING EVOLUTION AND REGULATORY

FRAMEWORK
Financial Sector Reforms set in motion in 1991 have greatly changed the
face of Indian Banking.The banking industry has moved gradually from a
regulated environment to a deregulated market economy. The market
developments kindled by liberalization and globalization have resulted in
changes in the intermediation role of banks. The pace of transformation has signifi
cant in recent times with technology acting as a catalyst.While the banking system
has done fairly well in adjusting to the new market dynamics, greater challenges
lie ahead. Financial sector would be opened up for greater international
competition under WTO. Banks will have to gear up to meet stringent prudential
capital adequacy norms under Basel II. In addition to WTO and Basel II, the Free
Trade Agreements (FTAs) such as with Singapore, may have an impact on the
shape of the banking industry. Banks will also have tocope with challenges posed
by technological innovations in banking. Banks need to prepare for the changes. In
this context the need for drawing up a Road Map to the future assumes
relevance.The last decade has seen many positive developments in
the Indian Banking Sector. The policy makers, which comprise the Reserve Bank
of India (RBI), Ministry of Finance and related government and financial sector
regulatory entities, have made several notable efforts to improve regulation in the
sector.The sector now compares favorably with banking sectors in the region on
metrics like growth, profitability and non-performing assets (NPAs). A few banks
have established an outstanding track record of innovation, growth and value
creation. This is reflected in their market valuation.
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SCOPE OF BANKING SECTOR

Banking business has a history of over 200 years. From the times of theBank
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 anda 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 sites have networked banking facility as well as
internet banking facility. A customer is empowered to operate his account from
any part of 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 State Bank of India being established as "The Bank of Bengal" in

Calcuttain June 1806. 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.
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INTRODUCTION
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.
Banking was originated in 18Th 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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TYPES/ CLASSIFICATIONS OF BANKS

The Indian banking industry, which is governed by the Banking Regulation
Act, 1949 can be broadly classified into two major categories, non-scheduled banks
and scheduled banks. Scheduled banks comprise commercial banks and the co-
operative banks. In Terms of ownership, commercial bank can further grouped into
nationalized banks. The State Bank of India and its group banks, regional rural
banks and private sector banks (the old / new domestic and foreign). These banks
have over 67,000 branches spread across the country. The Indian banking industry is
a mix of the public sector , private sector and foreign banks.
Banking Systemin India

Reserve bank of India (Controlling Authority)
Development Financial institutions Banks
IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank SIDBI
Commercial Regional Rural Land Development Cooperative

Banks Banks Banks Banks
Public Sector Banks Private Sector Banks
SBI Groups Nationalized Banks Indian Banks Foreign Banks
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COMMERCIAL BANK
Commercial bank has 2 meanings:
It is the term used for normal banks to distinguish it from
investment bank.
It is also reffered for a bank to divisional of bank that mostly
deals with deposits and loans for corporation or large business,
as opposed to normal individual member of public, it is the
most successful department of banking.
COMMUNITY DEVELOPMENT BANK
Community development bank are REGULATED BANK that

are provided financial services and credit to understand population.
PRIVATE BANK
Private bank manage the ASSET of high individual net worth.
OFF-SHORE BANK
Offshore bank is located with jurisdiction of with low taxation
and regulation.
SAVING BANK
Saving bank accepts saving deposits.
POSTAL SAVING BANK
Postal Saving bank are Saving bank associated with national
postal system.
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There are some examples of private sector banks:
PRIVATE SECTOR BANKS: HDFC, ICICI,Yes Bank, KOTAK

MAHINDRA Bank,
RURAL BANK; United Bank Of India, Syndicate Bank, NABARD.
COMMERCIAL BANK: SBI, CENTRAL Bank, PNB, HSBC, ICICI,

HDFC etc.
RETAIL BANK; BOB, PNB
UNIVERSAL BANK; Deutsche Bank
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SERVICES PROVIDED BY BANK:

Banks Provide 2 Types Of Services
Fund based
Non-fund based
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 SERVICES
Fund based function of a bank are those in which bank makes deployment of
their funds either by granting advances or by giving or by making investment for
meeting gaps in funds requirement of their customer borrrowers.
It classified in 2 ways:
1. Granting Of Loans and Advances
2.Making Investment In Shares/Debentures/Bonds.
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Fund Based Services
I. LOANS AND ADVANCES:
Commercial loan segment:
A.working capital;
Working capital is current assets minus current liabilities. it measures how

much liquid asset a company have available to build its business.it can be
negative/possitive depending upon company debt carrying
A loan whose purpose is to finance everyday operation of a company. A

workingcapital loan is not used to buy long term assets or investments. Instead it's
used to clear up accounts payable, wages, etc
B.Cash Credit:
This facility is given by the banker to the customer by way of

ascertain amount of credit facility. Its limit is fixed on the basis of security
of the company`s current assets.
C. Overdraft:
Banks allow selected customers to write cheques in excess of

the balance in their current account, i.e, to overdraw. Overdrafts are arranged
up tolimits which depend on the customer'screditstanding and
the bank manager'shumour. The arrangements allow flexibility in the
amount spent and, equally, allowflexibility in repayments (although
technically a bank can demand repayment of anoverdraft within 24 hours).
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In that respect overdrafts are unlike personal loans,which are structured with
regular repayments.Intereston overdrafts is charged on the fluctuating daily
balance.
D. Bills Finance, Bills Purchase, 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 and services.
Bill discounting:
Definition:
As per Negotiable Instrument Act, The bill of exchange is an instrument in

writing containing an unconditional order, signed by the maker, directing a certain
person to pay a certain sum of money only to, or to the order of, a certain person,
or to the bearer of that instrument.
Discounting of bill of exchange:
A seller (Drawer) if need cash, may handover the B/E to the Bank, NBFC, a
company or a high Net worth Individual and obtain ready cash this is known as
discounting of bill. the practice in India is that, the financing organization holds the
original B/E till the drawee pays on maturity. For discounting the bill, financiers
charge an interest on the bill amount for the duration of the bill which is called
discount charges.normal maturity periods are 30, 60, 90, 120 days.
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Types of Bills
1. Demand Bill
2. Usance Bill
3. Documentary Bills
a. Documents against acceptance (D/A) bills
b. Documents against payment (D/P) bills
4. Clean Bills
Advantages
To Investors
1. Short Term source of finance
2. Outside the purview of Section 370 of Indian Companies Act 1956
3. No tax deducted at source
4. Flexibility
To Banks
1. Safety of funds
2. Certainty of payment
3. Profitability
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NON FUND BASED
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 FACILITIES:-
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, berioted that while calculating exposure, the Non-fund
based facilities are to be taken at 50 percentof the sanctioned limit.
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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
theBuyer's Banker (BBK) gives an undertaking to the Seller(S) that, in the event of
theSeller tendering the Bill of Exchange to the Seller's Banker (SBK), along with
all there 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. Thethird party who seeks the guarantee, not being aware of the
customers financial standing prefers a bank guarantee. In turn the Bank, which
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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 this service, which depends on the security
available and the financial stability of the customer.
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
E-BANKING
Electronic payment system
ATM
Tele-banking
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Credit card and debit card

Online banking
MOBILE BANKING
Account Services
Credit Card Services
Demat A/C
Loan A/C Service
Bill Services
Other Services
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GLOBAL SCENARIO OF BANKING

General Banking Scenario
The pace of development for the Indian banking industry has been
tremendous over the past decade. As the world reels from the global financial
meltdown, Indias banking sector has been one of the very few to actually maintain
resilience while continuing to provide growth opportunities, a feat unlikely to be
matched by other developed markets around the world. FICCI conducted a survey
on the Indian Banking Industry to assess the competitive advantage offered by the
banking sector, as well as the policies and structures required to further stimulate
the pace of growth.
The predicament of the banks in the developed countries owing to excessive

leverage and lax regulatory system has time and again been compared with some
what unscathed Indian Banking Sector. An attempt has been made to understand
the general sentiment with regards to the performance, the challenges and the
opportunities ahead for the Indian Banking Sector.
A majority of the respondents, almost 69% of them, felt that the Indian
banking Industry was in a very good to excellent shape, with a further 25% feeling
it was in good shape and only 6% of the respondents feeling that the performance
of the industry was just average. In fact, an overwhelming majority (93.33%) of
the respondents felt that the banking industry compared with the best of the sectors
of the economy, including pharmaceuticals, infrastructure, etc.
Most of the respondents were positive with regard to the growth rate
attainable by the Indian banking industry for the year 2009-10 and 2014-15, with
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53.33% of the view that growth would be between 15-20% for the year 2009-10
and greater than 20% for 2014-15.
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SWOT ANALYSIS
The banking sector is also taken as a proxy for the economy as a whole. The
performance of bank should therefore, reflect Trends in the Indian Economy.
Due to the reforms in the financial sector, banking industry has changed drastically
with the opportunities to the work with, new accounting standards new entrants
and information technology. The deregulation of the interest rate, participation of
banks in project financing has changed in the environment of banks.
The performance of banking industry is done through SWOT Analysis. It

mainly helps to know the strengths and Weakness of the industry and to improve
will be known through converting the opportunities into strengths. It also helps for
the competitive environment among the banks.
a) STRENGTHS
1. Greater securities of Funds
Compared to other investment options banks since its inception has been a
better avenue in terms of securities. Due to satisfactory implementation of RBIs
prudential norms banks have won public confidence over several years.
2. Banking network
After nationalization, banks have expanded their branches in the country, which
has helped banks build large networks in the rural and urban areas. Private banks
allowed to operate but they mainly concentrate in metropolis.
3. Large Customer Base

This is mainly attributed to the large network of the banking sector.
Depositors in rural areas prefer banks because of the failure of the NBFCs.
4.Low Cost of Capital
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Corporate prefers borrowing money from banks because of low cost of capital.
Middle income people who want money for personal financing can look to banks
as they offer at very low rates of interests. Consumer credit forms the major source
of financing by banks.
b) WEAKNESS
1. Basel Committee
The banks need to comply with the norms of Basel committee but before that it is
challenge for banks to implement the Basel committee standard, which are of
international standard.
2. Powerful Unions
Nationalization of banks had a positive outcome in helping the Indian Economy

as a whole. But this had also proved detrimental in the form of strong unions,
which have a major influence in decision-making. They are against automation.
3. Priority Sector Lending
To uplift the society, priority sector lending was brought in during nationalization.
This is good for the economy but banks have failed to manage the asset quality and
their intensions were more towards fulfilling government norms. As a result
lending was done for non-productive purposes.
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4. High Non-Performing Assets
Non-Performing Assets (NPAs) have become a matter of concern in the banking

industry. This is because reduced to meet the international standardsof change in
the total outstanding advances, which has to be reduced to meet the international
standards.
c) OPPORTUNITIES
1. Universal Banking
Banks have moved along the value chain to provide their customers more products
and services. like home finance, Capital Markets, Bonds etc. Every Indian bank
has an opportunity to become universal bank, which provides every financial
service under one roof.
2. Differential Interest Rates

As RBI control over bank reduces, they will have greater flexibility to fix their
own interest rates which depends on the profitability of the banks
3. High Household Savings

Household savings has been increasing drastically. Investment in financial assets
has also increased. Banks should use this opportunity for raising funds.
4. Untapped Foreign Markets

Many Indian banks have not sufficiently penetrated in foreign markets to generate
satisfactory business therefore, it can be concluded clear opportunity exists in such
markets.
5. Interest Banking
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The advance in information technology has made banking easier. Business can
Effectively carried out through internet banking.
d) THREATS
1. NBFCs, Capital Markets and Mutual funds
There is a huge investment of household savings. The investments in NBFCs
deposits, Capital Market Instruments and Mutual Funds are increasing. Normally
these instruments offer better return to investors.
2. Changes in the Government Policy

The change in the government policy has proved to be a threat to the banking
sector. Due to some major changes in policies related to deposits mobilization
credit deployment, interest rates- the whole scenario of banking industry may
change.
3. Inflation
The interest rates go down with a fall in inflation. Thus, the investors will shift his
investments to the other profitable sectors.
4. Recession
Due to the recession in the business cycle the economy functions poorly and this
has proved to be a threat to the banking sector. The market oriented economy and
globalization has resulted into competition for market share. The spread in the
banking sector is very narrow. To meet the competition the banks has to grow at a
faster rates and reduce the overheads. They can introduce the new products and
develop the existing services.
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RESERVE BANK OF INDIA:
ESTABLISHMENT:
The bank was established in 1.april.1935 accordance with provision of RBI

act 1934.the central office of RBI was established in Calcutta but was permanently
moved to Mumbai in 1937. The central officer where government sits and where
policies are formed.
Though it was privately owned. Since nationalisation in 1949, the RBI is

fully owed by GOI.
Guidelines of ownership & governance in pvt sector banks.
Banks are special as they not only accept and deploy large amount of
uncollatoralised public funds in fiduciary capacity, but also they leverage such
funds through credit creation.
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1. The existing legal framework and significant current practices in particular

cover the following aspects:
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
byvarious 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
declarationand undertaking by directors, etc., were issued by RBI on June
20, 2002 and June25, 2004, based on the recommendations of Ganguly
Committee and a review bythe 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
March5, 2004 issued by the Government of India, Ministry of Commerce
and Industries.
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v. The earlier practice of RBI nominating directors on the Boards of all

privatesector 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.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 in the banking sector. The pursuit of the goal of
diversified ownership will take account of these basic objectives, in a
systematic manner and the process will bespread 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
acknowledgementfor 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.
32
(iv) Private sector banks have minimum capital/net worth for optimal
operationsand 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 increaseto 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 bankswhich are yet to achieve the required level of net worth will
have to submit a time- bound programme for capital augmentation to RBI. Where
the net worth decides to a level before Rs.300 crore, it should be restored to Rs.
500 crore within the 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 32 of RBI and in accordance with the guidelines of February 3, 2004 for
grant of acknowledgement for acquisition of shares.
33
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 thatentity. Where the ownership is that of a financial entity the
objective will be to ensure that it is a wellestablished regulated entity, widely held,
publicly listed andenjoys good standing in the financial community.
iv, Banks (including foreign banks having branch presence in India)/FIs

should notacquire any fresh stake in a banks equity
shares, if by such acquisition, theinvesting banks/FIs holding exceeds 5 per cent
of the investee banks equitycapital as indicated in RBI circular dated July 6, 2004.
v. As per existing policy, large industrial houses will be allowed to acquire,

by wayof 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.
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.
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 there spective entities should perform the roles envisaged for them, private
sector banks will be required to ensure that the directors on their Boards
34
representing specificsectors 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 forDetermining 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 aclose 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
propercriteria 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
approvalof appointment of Chairman/CEO.
35
HDFC BANK
ORGANIZATION PROFILE
FORMATION OF THE COMPANY
The Housing Development Finance Corporation Limited (HDFC) was

amongst the firstto 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.
PRODUCTS AND SERVICES AT A GLANCE
a) PERSONAL BANKING.
A. Accounts & Deposits
36
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-
Max Current Account-
Reimbursement Current Account-
Domestic Account-
Regular Fixed Deposit-
Super Saver Account-
Sweep-in Account-
37
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
C. Investments & Insurance
Mutual Funds-
Insurance-
Bonds-
Financial Planning-
Knowledge Centre-
Equities & Derivatives-
38
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
Prepaid Refill-
Net Safe-
Bill Pay-
Direct Pay-
Visa Money Transfer
E-Monies Electronic Funds Transfer
Excise & Service Tax Payment
F. Access Your Bank
39
Insta Alerts
Mobile Banking-
ATM-
Phone Banking-
Branch Network
G. Card
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
40
HDFC Bank Idea Silver Card-

HDFC Bank Idea Gold Card-
Compare Cards-
Transfer & Safe-

Track your Credit Card
H. Get More from Your Card
My Rewards-
Insta Wonderz-
Offers & Savings
Add-On Cards-
Credit Card Usage Guide-
Easy EMI-
Net safe-
Smart Pay-
41
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
42
INDIAN BANKING INDUSTRY

In India, given the relatively under developed capital market and with little
internal resources,firms and economic entities depend, largely, on financial
intermediaries to meet their fund requirements. In terms of supply of credit,
financial intermediaries can broadly be categorized as institutional and non-
institutional. The major institutional suppliers of credit in India are banks and non-
bank financial institutions (that is, development financial institutions or DFIs),
other financial institutions (FIs), and non-banking finance companies (NBFCs).
The non-institutional or unorganized sources of credit include indigenous bankers
and money-lenders. Information about the unorganized sector is limited and not
readily available.An important feature of the credit market is its term structure:(a)
Short-term credit(b) Medium-term credit(c) Long-term credit.While banks and
NBFCs predominantly cater for short-term needs, FIs provide mostly medium and
long-term funds
43
LOAN ADMINISTRATION AND SANCTION

PROCESS
APPRAISAL, ASSESSMENT AND SANCTION FUNCTIONS
1. Appraisal
A. Preliminary appraisal
Sound credit appraisal involves analysis of the viability of operations of a
business and the capacity of the promoters to run it profitably and repay the
bank the dues as and when they fall
Towards this end the preliminary appraisal will examine the following aspects
of a proposal.
Banks lending policy and other relevant guidelines/RBI guidelines,
Prudential Exposure norms,
Industry Exposure restrictions,
Group Exposure restrictions,
Industry related risk factors,
Credit risk rating,
Profile of the promoters/senior management personnel of the project,
List of defaulters,
Caution lists,
Acceptability of the promoters,
Compliance regarding transfer of borrower accounts from one bank to
another, if applicable;
Government regulations/legislation impacting on the industry; e.g., ban on
financing of industries producing/ consuming Ozone depleting substances;
44
Applicants status vis--vis other units in the industry,

Financial status in broad Terms and whether it is acceptable The Companys
Memorandum and Articles of Association should be scrutinized carefully to
ensure (i) that there are no clauses prejudicial to the Banks interests, (ii) no
limitations have been placed on the Companys borrowing powers and
operations and (iii) the scope of activity of the company.
Further, if the proposal is to finance a project, the following aspects have to be

examined:
Whether project cost is prima facie acceptable
Debt/equity gearing proposed and whether acceptable
Promoters ability to access capital market for debt/equity support
Whether critical aspects of project - demand, cost of production,
profitability, etc. are prima facie in order
Required Documents for Process of Loan

a) Application for requirement of loan
b) Copy of Memorandum & Article of Association
c) Copy of incorporation of business
d) Copy of commencement of business
e) Copy of resolution regarding the requirement of credit facilities
f) Brief history of company, its customers & supplies, previous track records,
orders In hand. Also provide some information about the directors of the
company
g) Financial statements of last 3 years including the provisional financial
statement for the year 2007-08
45
h) Copy of PAN/TAN number of company

i) Copy of last Electricity bill of company
j) Copy of GST/CST number
k) Copy of Excise number
l) Photo I.D. of all the directors
m) Address proof of all the directors
n) Copies related to the property such as 7/12 & 8A utara, lease/ sales deed, 2R
Permission, Allotment letter, Possession
o) Bio-data form of all the directors duly filled & notarized
p) Financial statements of associate concern for the last 3 years
After undertaking the above preliminary examination of the proposal, the

branch will arrive at a decision whether to support the request or not. If the
branch (a reference to the branch includes a reference to SECC/CPC etc. as the
case may be) finds the proposal acceptable, it will call for from the applicant(s),
a comprehensive application in the prescribed proforma, along with a copy of
the proposal/project report, covering specific credit requirement of the company
and other essential data/ information. The information, among other things,
should include:
Organizational set up with a list of Board of Directors and indicating the
qualifications, experience and competence of the key personnel in charge of
the main functional areas
e.g., purchase, production, marketing and finance; in other words a brief on
the managerial resources and whether these are compatible with the size and
scope of the proposed activity.
46
Demand and supply projections based on the overall market prospects

together with a copy of the market survey report. The report may comment
on the geographic spread of the market where the unit proposes to operate,
demand and supply gap, the competitors share, competitive advantage of
the applicant, proposed marketing arrangement, etc.
Current practices for the particular product/service especially relating to
Terms of credit sales, probability of bad debts, etc.
Estimates of sales cost of production and profitability.
Projected profit and loss account and balance sheet for the operating years
during the
Currency of the Bank assistance.
If request includes financing of project(s), branch should obtain
additionally
a) Appraisal report from any other bank/financial institution in case appraisal
has been done by them.
b) No Objection Certificate from Term lenders if already financed by them
and
c) Report from Merchant bankers in case the company plans to access capital
market, wherever necessary.
In respect of existing concerns, in addition to the above, particulars regarding

the history of the concern, its past performance, present financial position, etc.
should also be called for. This data/information should be supplemented by the
supporting statements
Such as:
47
a) Audited profit loss account and balance sheet for the past three years (if the
latest audited balance sheet is more than 6 months old, a pro-forma balance
sheet as on a recent date should be obtained and analysed). For non-
corporate borrowers, irrespective of market segment, enjoying credit limits
of Rs.10 lacs and above from the banking system, audited balance sheet in
the IBA approved formats should be submitted by the borrowers.
b) Details of existing borrowing arrangements, if any,
c) Credit information reports from the existing bankers on the applicant
Company, and
d) Financial statements and borrowing relationship of Associate firms/Group
Companies.
B. Detailed Appraisal
The viability of a project is examined to ascertain that the company would
have the ability to service its Loan and interest obligations out of cash
accruals from the business. While appraising a project or a Loan proposal,
all the data/information furnished by the borrower should be counter
checked and, wherever possible, inter-firm and inter-industry comparisons
should be made to establish their veracity.
The financial analysis carried out on the basis of the companys audited
balance sheets and profit and loss accounts for the last three years should
help to establish the current viability.
In addition to the financials, the following aspects should also be examined:
48
The method of depreciation followed by the company-whether the company

is following straight line method or written down value method and
whether the company has changed the method of depreciation in the past
and, if so, the reason therefore;
Whether the company has revalued any of its fixed assets any time in the
past and the present status of the revaluation reserve, if any created for the
purpose;
Record of major defaults, if any, in repayment in the past and history of past
sickness,
If any;
The position regarding the companys tax assessment - whether the
provisions made in the balance sheets are adequate to take care of the
companys tax liabilities;
The nature and purpose of the contingent liabilities, together with comments
thereon;
Pending suits by or against the company and their financial implications
(e.g. cases relating to customs and excise, sales tax, etc.);
Qualifications/adverse remarks, if any, made by the statutory auditors on the
companys accounts;
Dividend policy;
Apart from financial ratios, other ratios relevant to the project;
Trends in sales and profitability, past deviations in sales and profit
projections, and estimates/projections of sales values;
Production capacity & use: past and projected;
o Estimated requirement of working capital finance with reference to
acceptable build up of inventory/ receivables/ other current assets;
49
Projected levels: whether acceptable; and

Compliance with lending norms and other mandatory guidelines as
applicable
Project financing:
If the proposal involves financing a new project, the commercial, economic and
Financial viability and other aspects are to be examined as indicated below:
Statutory clearances from various Government Depts. / Agencies

Licenses/permits/approvals/clearances/NOCs/Collaboration agreements, as
applicable
Details of sourcing of energy requirements, power, fuel etc.
Pollution control clearance
Cost of project and source of finance
Build-up of fixed assets (requirement of funds for investments in fixed
assets to be critically examined with regard to production factors,
improvement in quality of products, economies of scale etc.)
Arrangements proposed for raising debt and equity
Capital structure (position of Authorized, Issued/ Paid-up Capital,
Redeemable
Preference Shares, etc.)
Debt component i.e., debentures, Term Loans, deferred payment facilities,

unsecured Loans/ deposits. All unsecured Loans/ deposits raised by the
company for financing a project should be subordinate to the Term Loans of
the banks/ financial institutions and should be permitted to be repaid only
50
with the prior approval of all the banks and the financial institutions
concerned. Where central or state sales tax Loan or developmental Loan is
taken as source of financing the project, furnish details of the Terms and
conditions governing the Loan like the rate of interest (if applicable), the
manner of repayment, etc.
Feasibility of arrangements to access capital market
Feasibility of the projections/ estimates of sales, cost of production and
profits covering the period of repayment
Break Even Point in Terms of sales value and percentage of installed
capacity under a Normal production year
Cash flows and fund flows
Proposed amortization schedule
Whether profitability is adequate to meet stipulated repayments with
reference to Debt Service Coverage Ratio, Return on Investment
Industry profile & prospects
Critical factors of the industry and whether the assessment of these and
management plans in this regard are acceptable
Technical feasibility with reference to report of technical consultants, if
available
Management quality, competence, track record
Companys structure & systems
Applicants strength on inter-firm comparisons
For the purpose of inter-firm comparison and other information, where

necessary, source data from Stock Exchange Directory, financial journals/
51
publications, professional entities like CRIS-INFAC, CMIE, etc. with emphasis on

following aspects:
o Market share of the units under comparison

o Unique features
o Profitability factors
o Financing pattern of the business
o Inventory/Receivable levels
o Capacity utilization
o Production efficiency and costs
o Bank borrowings patterns
o Financial ratios & other relevant ratios
o Capital Market Perceptions
o Current price
o 52week high and low of the share price
o P/E ratio or P/E Multiple
o Yield (%)- half yearly and yearly
Also examine and comment on the status of approvals from other Term
lenders, market view (if anything adverse), and project implementation schedule. A
pre-sanction inspection of the project site or the factory should be carried out in the
case of existing units. To ensure a higher degree of commitment from the
promoters, the portion of the equity / Loans which is proposed to be brought in by
the promoters, their family members, friends and relatives will have to be brought
upfront. However, relaxation in this regard may be considered on a case to case
52
basis for genuine and acceptable reasons. Under such circumstances, the promoter
should furnish a definite plan indicating clearly the sources for meeting his
contribution. The balance amount proposed to be raised from other sources, viz.,
debentures, public equity etc., should also be fully tied up.
C. Present relationship with Bank:
Compile for existing customers, profile of present exposures:

Credit facilities now granted
Conduct of the existing account
Utilization of limits - FB & NFB
Occurrence of irregularities, if any
Frequency of irregularity i.e., number of times and total number of days the
account was irregular during the last twelve months
Repayment of Term commitments
Compliance with requirements regarding submission of stock statements,
Financial
Follow-up Reports, renewal data, etc.
Stock turnover, realization of book debts
Value of account with break-up of income earned
Pro-rata share of non-fund and foreign exchange business
Concessions extended and value thereof
Compliance with other Terms and conditions
Action taken on Comments/observations contained in RBI Inspection
Reports: CO Inspection & Audit Reports
53
D. Credit risk rating: Draw up rating for (i) Working Capital and (ii) Term
Finance.
E. Opinion Reports: Compile opinion reports on the company, partners/

promoters and The proposed guarantors.
F. Existing charges on assets of the unit: If a company, report on search of

charges with ROC.
G. Structure of facilities and Terms of Sanction:
Fix Terms and conditions for exposures proposed - facility wise and overall:
Limit for each facility sub-limits

Security - Primary & Collateral, Guarantee
Margins - For each facility as applicable
Rate of interest
Rate of commission/exchange/other fees
Concessional facilities and value thereof
Repayment Terms, where applicable
ECGC cover where applicable
Other standard covenants
54
H. Review of the proposal:
Review of the proposal should be done covering (i) strengths and weaknesses of
the exposure proposed (ii) risk factors and steps proposed to mitigate them
(ii) Deviations, if any, proposed from usual norms of the Bank and the reasons
therefore
I. Proposal for sanction:
Prepare a draft proposal in prescribed format with required backup details and with
recommendations for sanction.
J. Assistance to Assessment:
Interact with the assessor, provide additional inputs arising from the assessment,
incorporate these and required modifications in the draft proposal and generate an
integrated final proposal for sanction.
2. Assessment:
Indicative List of Activities Involved in Assessment Function is given below:
Review the draft proposal together with the back-up details/notes, and the
borrowers application, financial statements and other reports/documents
examined by the appraiser.
Interact with the borrower and the appraiser.
55
Carry out pre-sanction visit to the applicant company and their

project/factory site.
Peruse the financial analysis (Balance Sheet/ Operating Statement/ Ratio
Analysis/
Fund Flow Statement/ Working Capital assessment/Project cost & sources/
Break Even analysis/Debt Service/Security Cover, etc.) to see if this is prima
facie in order. If any deficiencies are seen, arrange with the appraiser for the
analysis on the correct lines.
Examine critically the following aspects of the proposed exposure.
o Banks lending policy and other guidelines issued by the Bank from
time to time
o RBI guidelines
o Background of promoters/ senior management
o Inter-firm comparison
o Technology in use in the company
o Market conditions
o Projected performance of the borrower vis--vis past estimates and
performance
o Viability of the project
o Strengths and Weaknesses of the borrower entity.
o Proposed structure of facilities.
o Adequacy/ correctness of limits/ sub limits, margins, moratorium and
repayment schedule
o Adequacy of proposed security cover o Credit risk rating
o Pricing and other charges and concessions, if any, proposed for the
facilities
56
o Risk factors of the proposal and steps proposed to mitigate the risk
o Deviations proposed from the norms of the Bank and justifications
therefore.
To the extent the inputs/comments are in adequate or require modification,
arrange for additional inputs/ modifications to be incorporated in the
proposal, with any required modification to the initial recommendation by
the Appraiser
Arrange with the Appraiser to draw up the proposal in the final form.
Recommendation for sanction: Recapitulate briefly the conclusions of the
appraisal and state whether the proposal is economically viable. Recount
briefly the value of the companys (and the Groups) connections. State
whether, all considered, the proposal is a fair banking risk. Finally, give
recommendations for grant of the requisite fund-based and non-fund based
credit facilities.
3. Sanction:
Indicative list of activities involved in the sanction function is given below:
Peruse the proposal to see if the report prima facie presents the proposal in a
comprehensive manner as required. If any critical information is not
provided in the proposal, remit it back to the Assessor for supply of the
required data/clarifications.
Examine critically the following aspects of the proposed exposure in the

light of corresponding instructions in force:
57
Banks lending policy and other relevant guidelines

RBI guidelines
Borrowers status in the industry
Industry prospects
Experience of the Bank with other units in similar industry
Overall strength of the borrower
Projected level of operations
Risk factors critical to the exposure and adequacy of safeguards
proposed
There against
Value of the existing connection with the borrower
Credit risk rating
Security, pricing, charges and concessions proposed for the exposure
and covenants
o Stipulated vis--vis the risk perception.
Accord sanction of the proposal on the Terms proposed or by stipulating

modified or additional conditions/ safeguards, or Defer decision on the
proposal and return it for additional data/clarifications, or Reject the
proposal, if it is not acceptable, setting out the reasons.
58
CONCLUSION
The project involves valuation of major Indian Banks including ICICI Bank,
SBI and HDFC Bank. The methodology followed is Target Pricing,
which including estimating growth rate by regression on historical sales to forecast
next year sales, earning and Profit and Loss account.Then EPS is calculated which
is multiplied to Historical P/E to forecast intrinsic value of share.All shares are
undervalued and expected to give positive risk adjusted returns to investors. Since
the intrinsic value is more than current market price for all the companies, the
share can be recommended to conservative investors.
59
15. ANNEXURE
QUESTIONNAIRE
Dear Respondent,
I am student of B.N.N COLLEGE; I am doing this research to compare

different services provided by bank to its clients.
1. Your annual household income?
a) Less than 2 lakhs.

b) 2 lakhs 3 lakhs.
c) 3 lakhs 5 lakhs.
d) Above 5 lakhs.
2. Do you have a saving habit?
a) Yes
b) No
3. In which bank do you have your account?
(a) Private Bank
(B) Public Bank
(C) Nationalized Bank
(D) Other Bank
60
4. Would you prefer using internet banking instead of visiting your bank
every now and then?
(a) Yes
(b) No
5. Does you have a credit card?
(a) Yes
(b) No
6. Is Central banking system would helpful to you?
(a) Yes
(b) No
7. Are you satisfied with your bank services?
(a) Yes
(b) No
8. What are your main transactions you would prefer to do by

internet?
(a) Money transfers
(b) Checking of your current balance
(c) Create Fixed Deposits Online
(d) Request a Demand Draft
(e) Pay Bills
61
(f) Order a Cheque Book
(g) Request Stop Payment on a Cheque
9. What benefits do you see in internet banking?
(a) Convenience
(b) Speed
(c) Transparency
(d) Time
10. Are you aware of all the methods, which can be taken up to secure
your transaction?
(a) Yes
(b) No
11 .Personal Information
Name: Age:
Sex: ( ) Male ( ) Female
Phone No:
Occupation:
Signature of Respondent
62
WEBLIOGRAPHY
www.managementparadise.com
www.personnel.online.com
www.scribd.com
www.bussinessweak.com
www. Indian banking.co.in
63

Indian Banking System

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Indian Banking System

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INDIAN BANKING SYSTEM T.Y.

After India's independence 1947, the Reserve Bank wasnationalized and

Objectives Of The Study

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

Scope Of The Study

A healthy banking system is essential for any economy striving to achieve

Limitation Of The Study :

Every work has its own limitation. Limitationsare extent to which

1.The project was constrained by time limit of two months.

3. Due to the ongoing process of globalization and increasing competition, no one

5.The project study is restricted to banking sector used in India only.

8.All banks are not included.

Ichoose five criteria Growth, Credit quality, Strength, Profitability, Efficienc

The data from such organization has also been collected.

INTRODUCTION TO BANKING SECTOR

A snapshot of the banking industry

The banking sector is dominated by Scheduled Commercial Banks (SBCs).

Scheduled commercial banks touched, on the deposit front, a growth of 14%

Higher provisioning norms, tighter asset classification norms, dispensing with

A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to

With a view to provide an institutional mechanism for sharing of

The finance ministry spelt out structure of the government-sponsored ARC

BANKING EVOLUTION AND REGULATORY

SCOPE OF BANKING SECTOR

Banking in India originated in the first decade of 18th century with

The State Bank of India being established as "The Bank of Bengal" in

Definition of the Bank :

Financial institution whose primary activity is to act as a payment agent for

Banking was originated in 18Th century

TYPES/ CLASSIFICATIONS OF BANKS

Banking Systemin India

Development Financial institutions Banks

IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank SIDBI

Commercial Regional Rural Land Development Cooperative

Public Sector Banks Private Sector Banks

SBI Groups Nationalized Banks Indian Banks Foreign Banks

Community development bank are REGULATED BANK that

There are some examples of private sector banks:

PRIVATE SECTOR BANKS: HDFC, ICICI,Yes Bank, KOTAK

RURAL BANK; United Bank Of India, Syndicate Bank, NABARD.

COMMERCIAL BANK: SBI, CENTRAL Bank, PNB, HSBC, ICICI,

RETAIL BANK; BOB, PNB

UNIVERSAL BANK; Deutsche Bank

SERVICES PROVIDED BY BANK:

FUND BASED AND NON-FUND BASED FUNCTIONS

FUND BASED SERVICES

1. Granting Of Loans and Advances

2.Making Investment In Shares/Debentures/Bonds.

Fund Based Services

I. LOANS AND ADVANCES:

Commercial loan segment:

Working capital is current assets minus current liabilities. it measures how

A loan whose purpose is to finance everyday operation of a company. A

This facility is given by the banker to the customer by way of

Banks allow selected customers to write cheques in excess of

D. Bills Finance, Bills Purchase, Bills Discounting:-

This is the most important form in which a bank lends without

As per Negotiable Instrument Act, The bill of exchange is an instrument in

Discounting of bill of exchange:

NON FUND BASED

It is generally perceived that the non-fund based business is very

PURPOSE FOR NON-FUND BASED FACILITIES:-

Prudential exposure norms as per extant guidelines of Reserve Bank of India

Funds Remittance/ Transfer Facilities