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Project on Comparative study of Private Banks & Public Bank


1.1 Introduction to Banking

Bank is defined in many ways by various authors in the book son economics and commerce.
It is very difficult to define a bank; because a bank performs multifarious functions may be
defined in many ways according to their functions. The evolution of different types of banks,
each specializing in a particular field, gives emphasis on each and every kind of bank. A
general and comprehensive definition to cover all types of banking institutions would be
unscientific and probably impossible. Each type of bank should have its own definition,
explaining its specialized functions. Legislators have understood this difficulty and that is
why the bill of exchange Act 1882 (England) defines

A bank includes a body of persons, whether incorporated or not, who carry on the business
of banking

From this definition it is clear to us that any institution, which performs the various banking
functions, may be termed as bank. But in practice it is found that many banking functions
wary from time to time and country to country. It is not possible on the part of a single bank
to perform all the banking functions at a time. So there originated numbers of specialized
banks with the objective of performing one or more functions. As for example, Central Bank,
Commercial bank, Industrial Bank, Agricultural Bank, Co-operative Bank etc., are seen in the
practical field.

Dr. Herbert L. Hart has defined a banker as

A banker is one who in the ordinary course of business honours cheques drawn upon him
by persons for whom he receives money on current account

According to Sir John Paget

No one and nobody corporate and otherwise can be a banker who does not (i) take deposit
accounts (ii) take current accounts (iii) issue and pay cheques drawn upon him(iv) collect
cheques crossed and uncrossed for his customers

Hilton banking commission defines bank or banker in the following words:

Every person, firm or company using in the description or its title, bank or banker or
banking and accepting deposits of money subject to withdrawal by cheque, draft or order

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In view of the above definitions, a simple and short definition can be given as

Bank is an institution, which deals in money and credit

1.2 Banking in India

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 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 nationalized 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 the 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-
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
like microfinance.

Indian Banking Industry currently

employees 1,175,149 employees and
has a total of 109,811 branches in India
and 171 branches abroad and manages
an aggregate deposit of 67504.54

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billion (US$1.1 trillion or 820 billion) and bank credit of 52604.59 billion (US$880 billion
or 640 billion). The net profit of the banks operating in India was 1027.51 billion
(US$17 billion or 12 billion) against a turnover of 9148.59 billion (US$150 billion or
110 billion) for the fiscal year 2012-13.

1.3 Historyof banking in India

In ancient India there is evidence of loans from the Vedic period (beginning 1750 BC). Later
during the Maurya dynasty (321 to 185 BC), an instrument called adesha was in use, which
was an order on a banker desiring him to pay the money of the note to a third person, which
corresponds to the definition of a bill of exchange as we understand it today. During the
Buddhist period, there was considerable use of these instruments. Merchants in large towns
gave letters of credit to one another.

Colonial era

During the period of British rule merchants established the Union Bank of Calcutta in 1829,
first as a private joint stock association, then partnership. Its proprietors were the owners of
the earlier Commercial Bank and the Calcutta Bank, who by mutual consent created Union
Bank to replace these two banks. In 1840 it established an agency at Singapore, and closed
the one at Mirzapore that it had opened in the previous year. Also in 1840 the Bank revealed
that it had been the subject of a fraud by the bank's accountant. Union Bank was incorporated
in 1845 but failed in 1848, having been insolvent for some time and having used new money
from depositors to pay its dividends.

The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock
bank in India, it was not the first though. That honour belongs to the Bank of Upper India,
which was established in 1863, and which survived until 1913, when it failed, with some of
its assets and liabilities being transferred to the Alliance Bank of Simla.

Foreign banks too started to appear, particularly in Calcutta, in the 1860s.

The Comptoird'Escompte de Paris opened a branch in Calcutta in 1860, and another
in Bombay in 1862; branches in Madras and Pondicherry, then a French possession,
followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading
port in India, mainly due to the trade of the British Empire, and so became a banking centre.

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The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in
Lahore in 1895, which has survived to the present and is now one of the largest banks in

Around the turn of the 20th Century, the Indian economy was passing through a relative
period of stability. Around five decades had elapsed since the Indian Mutiny, and the social,
industrial and other infrastructure had improved. Indians had established small banks, most of
which served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks
and a number of Indian joint stock banks. All these banks operated in different segments of
the economy. The exchange banks, mostly owned by Europeans, concentrated on financing
foreign trade. Indian joint stock banks were generally under capitalized and lacked the
experience and maturity to compete with the presidency and exchange banks. This
segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the
times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into
separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and political
figures to found banks of and for the Indian community. A number of banks established then
have survived to the present such as Bank of India, Corporation Bank, Indian Bank,Bank of
Baroda, Canara Bank and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina
Kannada and Udupi district which were unified earlier and known by the name South
Canara ( South Kanara ) district. Four nationalised banks started in this district and also a
leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle
of Indian Banking".

During the First World War (19141918) through the end of the Second World War (1939
1945), and two years thereafter until the independence of India were challenging for Indian
banking. The years of the First World War were turbulent, and it took its toll with banks
simply collapsing despite the Indian economy gaining indirect boost due to war-related

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economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in
the following table:

Current period

All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934
are Scheduled Banks. These banks comprise Scheduled Commercial Banks and Scheduled
Co-operative Banks. Scheduled Commercial Banks in India are categorised into five different
groups according to their ownership and/or nature of operation. These bank groups are:

State Bank of India and its Associates

Nationalised Banks

Private Sector Banks

Foreign Banks

Regional Rural Banks.

In the bank group-wise classification, IDBI Bank Ltd. is included in Nationalised Banks.
Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled
Urban Cooperative Banks.

By 2010, banking in India was generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the private sector and
foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered
to have clean, strong and transparent balance sheets relative to other banks in comparable
economies in its region. The Reserve Bank of India is an autonomous body, with minimal
pressure from the government.

With the growth in the Indian economy expected to be strong for quite some time-especially
in its services sector-the demand for banking services, especially retail banking, mortgages
and investment services are expected to be strong. One may also expect M&As, takeovers,
and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake
in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has
been allowed to hold more than 5% in a private sector bank since the RBI announced norms

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in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by

1.4 Adoption of banking technology

The IT revolution has had a great impact on the Indian banking system. The use of computers
has led to the introduction of online banking in India. The use of computers in the banking
sector in India has increased many fold after the economic liberalisation of 1991 as the
country's banking sector has been exposed to the world's market. Indian banks were finding it
difficult to compete with the international banks in terms of customer service, without the use
of information technology.

The RBI set up a number of committees to define and co-ordinate banking technology. These
have included:

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

Table no. 1

Branches and ATMs of Scheduled Commercial Banks as on end March 2005

Number of On-site Off-site Total

Bank type
branches ATMs ATMs ATMs

Nationalised banks 33,627 3,205 1,567 4,772

State Bank of India 13,661 1,548 3,672 5,220

Old private sector

4,511 800 441 1,241

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Branches and ATMs of Scheduled Commercial Banks as on end March 2005

Number of On-site Off-site Total

Bank type
branches ATMs ATMs ATMs

New private sector

1,685 1,883 3,729 5,612

Foreign banks 242 218 582 800

TOTAL 53,726 7,654 9,409 17,645

1.5 Expansion of Banking Infrastructure

As per Census 2011, 58.7% households are availing banking services in the country. There
are 102,343 branches of Scheduled Commercial Banks (SCBs) in the country, out of which
37,953 (37%) bank branches are in the rural areas and 27,219 (26%) in semi-urban areas,
constituting 63% of the total numbers of branches in semi-urban and rural areas of the
country. However, a significant proportion of the households, especially in rural areas, are
still outside the formal fold of the banking system. To extend the reach of banking to those
outside the formal banking system, Government and Reserve Bank of India (RBI) are taking
various initiatives from time to time some of which are enumerated below:

Opening of Bank Branches: Government had issued detailed strategy and guidelines on
Financial Inclusion in October 2011, advising banks to open branches in all habitations of
5,000 or more population in under-banked districts and 10,000 or more population in other
districts. Out of 3,925 such identified villages/habitations, branches have been opened in
3,402 villages/habitations (including 2,121 Ultra Small Branches) by end of April, 2013.

Each household to have at least one bank account: Banks have been advised to ensure service
area bank in rural areas and banks assigned the responsibility in specific wards in urban area
to ensure that every household has at least one bank account.

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2.1 Types of Banks

Central bank

Development Bank

Investment Bank

Cooperative Credit Bank

Regional Rural Bank

Non Banking Financial Companies

Central Bank

The money market that acts as the central monetary authority of the country, serving as the
government bank as well as the bankers bank is known as a central bank of the country. The
main functions of central bank of a country are functions of note issue, bankers to
government, bankers bank etc.The RBI as the central bank of the country is the centre of the
Indian financial and monetary system. It has been guiding, monitoring, and regulating,
controlling, and promoting destiny of the IFS. It is quite young compared with such central
banks as the Bank of England, Risks bank of Sweden, and the Federal Reserve Board of the

2.2 Main Functions of The Reserve bank of India

As the central banking authority of India, the reserve Bank of India performs the following
traditional functions of the central bank:

It provides currency and operates the clearing system for the government and banks.

It formulates and implements monetary and credit policies.

It functions as the governments and bankers bank

It supervises the operations of credit institutions.

It regulates foreign exchange transactions.

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It moderates the fluctuations in the exchange value of the rupee.

In addition to the traditional functions of the central banking authority, the Reserve bank of
India performs several functions aimed at developing the Indian financial system:

It seeks to integrate the unorganized financial sector with the organized financial sector.

It encourages the extension of the commercial banking system in the rural areas.

It influences the allocation of credit.

It promotes the development of new institutions.

2.3 Development Banks

A development bank may be defined as a financial institution concerned with providing all
types of financial assistance to business units in the form of loans, underwriting, investment
and guarantee operations and promotional activities-economic development in general and
industrial development in particular.A development bank is basically a term lending
institution. It is a multipurpose financial institution with a broad development outlook. The
concept of development banks in a post independence phenomenon in India. With the end of
II World War there was an urgent need for speed industrial development in India. The usual
agencies that provided finance for large industries were inadequate. So the govt. of India
came forward to set-up a series of financial institution to provide funds to industries. The
industrial finance corporation of India, the first development bank was established in 1948.
Subsequently many other institutions were set-up. Ex. IDBI, IFCI, SIDBI etc.

Investment Banks

Financial intermediaries that acquire the savings of people and direct these funds into the
business enterprises seeking capital for the acquisition of plant and equipment and for
holding inventories are called investment banks.

Features:-Long term financing, Security, merchandiser, Security middlemen, Insurer,


2.4 Cooperative Banking Sector

These banks play a vital role in mobilizing savings and stimulating agricultural
investment.Co-operativecredit institutions account for the second largest proportion of 44.6%

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of total institutional credit of Rs.3854000 corer to agricultural and allied activities in the rural
sector in 1998 to 99.

Types of Co-operative Banking sector

The co-operative sector is very much useful for rural people. The co-operative banking sector
is divided into the following categories.

State co-operative Banks

Central co-operative banks

Primary Agriculture Credit Societies

Non Banking Finance companies

According to RBI it means financial institutions which is a company and a non banking
institution and which has as its principal business the receiving of deposits under any
schemes or arrangement or in any other manner or lending in any manner.

Merchant Banks

Institution that render wide range of services such as the management of customers
securities, portfolio management, counseling, insurance, etc are called Merchant Banks.

Functions: - Sponsoring issues, Loan syndication, Servicing of issues, Portfolio,

management, arranging fixed deposits, helps in merger& acquisition.

Commercial Banks

Commercial banks comprising public sector banks, foreign banks, and private sector banks
represent the most important financial intermediary in the Indian financial system.

The changes in banking structure and control have resulted dueto wider geographical spread
and deeper penetration of rural areas, higher mobilization of deposits, reallocation of bank
credit to priority activities, and lower operational autonomy for a bank management.

The largest commercial Banks in India, (SBI), was set up in 1955 when the Imperial Bank
was nationalized and merged with some banks of the princely states. In 1969, in one fell
swoop, the fourteen largest privately owned commercial banks were nationalized.
Subsequently, several other privately owned commercial banks were nationalized. As a

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result of these actions, public sector commercial banks, dominate the commercial banking
scene in the country.

Functions of commercial banks

Saving mobilization

Special loans

Bills discount

Credit creation

Agencies function

General utility function

1.8 Public Sector Banks in Cachar District

State Bank of India .

17 out of 20 nationalized banks except Andhra Bank , Bank of Maharashtra and

BharatiyaMahila Bank.

Regional rural banks, Assam GrameenVikasBank,sponsored by United Bank of India

Regional rural Bank They are oriented towards meeting the needs of the weaker section of
the rural population consisting of small and marginal farmers, agricultural laborerand small
entrepreneurs. These banks were set up after the nationalization of banks in 1969.

REGIONAL RURAL BANKS ACT, 1976 ACT NO. 21 OF 1976 [9th February, 1976.] An
Act to provide for the incorporation, regulation and winding up of Regional Rural Banks with
a view to developing the rural economy by providing, for the purpose of development of
agriculture, trade, commerce, industry and other productive activities in the rural areas, credit
and other facilities, particularly to the small and marginal farmers, agricultural laborers,
artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.

Definition of Public Sector Bank

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Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by
a government. The shares of these banks are listed on stock exchanges. There are a total of 21
PSBs in India..

Emergence of Public Sector Banks

The Central Government entered the banking business with the nationalization of the
Imperial Bank Of India in 1955. A 60% stake was taken by the Reserve Bank of India and the
new bank was named as the State Bank of India. The seven other state banks became the
subsidiaries of the new bank when nationalised on 19 July 1960. [2] The next major
nationalisation of banks took place in 1969 when the government of India, under prime
minister Indira Gandhi, nationalised an additional 14 major banks. The total deposits in the
banks nationalised in 1969 amounted to 50 crores. This move increased the presence of
nationalised banks in India, with 84% of the total branches coming under government

The next round of nationalisation took place in April 1980. The government nationalised six
banks. The total deposits of these banks amounted to around 200 crores. This move led to a
further increase in the number of branches in the market, increasing to 91% of the total
branch network of the country. The objectives behind nationalisation where:

To break the ownership and control of banks by a few business families,

To prevent the concentration of wealth and economic power,

To mobilize savings from masses from all parts of the country,

To cater to the needs of the priority sectors.....


A):- Primary functions

1):-Acceptance deposits

a) Time Deposit:-

These are deposit repayable after a certain fixed period. Deposits are not withdrawn able by
cheque, draft or by other means. It includes the following.

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Fixed Deposit :-
The deposit can be withdrawn only after expiry of certain period, say 3 years, 5 years or 10
years. The banker allows a higher rate of interest depending upon the amount and period of
time. Previously the rates of interest payable on fixed deposit were determined by RBI.
Presently banks are permitted to offer interest as determined by each bank. However, banks
are not permitted to offer different interest rates to different customers for deposits of same
maturity period, except in the case of deposit of RS. 15 lakhs and above. Fixed deposit
receipt can not be transferred to other persons.

Recurring Deposit :-
The customer opens an account & deposit a certain sum of money every month after a certain
period say 1 year or 3 years or 5 years. The accumulated amount along with interest is paid to
the customer. It is very helpful to the middle & poor sections of the people. This deposit
system is useful mechanism for regulars savers of money. Interest paid on such deposits is
generally on cumulative basic.

Cash certificates:-
Cash certificates are issued to the public for a longer period of time. It attracts the people
because its maturity value is in multiples of the sum invested. it is an attractive and high
yielding investment for those who can keep the funds for a long time . It is very useful
account for meeting future financial requirement at the occasion of marriage, education of
children etc. cash certificates are generally issued at discount to face value. It means a cash
certificate of RS.1 00 000 payable after 10 years can be purchased now, say for RS. 20000.

b):-Demand deposit:-

These are the deposit which may be withdrawn by the depositor at any time without previous
notice. it is withdraw able by cheque and draft.

Saving deposits :-
Saving deposit can only be held by individuals and non profit institutions. The rate of interest
paid on saving deposit is lower than that of time deposits. These account holders gets the
advantage of liquidity and small income in the form of interest but there are some restrictions
on withdrawals presently interest on saving bank account is determined by RBI.

Current account deposits :-

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These accounts are maintained by the people who need to have a liquid balance. Current
account offers high liquidity. No interest is paid on current deposits and these is no
restrictions on withdrawals from the current account.Thease account are generally in the case
of business firms, institutions and cooperative bodies. These schemes vary from bank to

2):-Advancing of loans:-

The commercial banks provide loans and advances in various forms.

They are given below,

Overdraft facility:-
This facility is given to holder of current account only. This is an arrangement with the
bankers thereby the customer is allowed to draw money over and above the balance in his/
her account. This facility of overdrawing his/her account is generally pre arranged with the
bank up to a certain limit. It is a short term temporary fund facility from bank and the bank
will charge interest over the amount overdrawn. This facility is generally available to
business firms and companies.

Cash credit :-
Cash credit is a form of working capital firms. The customer can operate that account within
the sanctioned limit as and when required. It is made against security of goods personal
security etc.on the basis of operation .The period of credit facility may be extended further
one advantage under this method is that bank charges interest only an account utilized and
not an total amount sanctioned or credited to the account.

Discounting of bills :-
It may be another form of bank credit. The bank may purchase inland and foreign bills before
are due for payment by the drawee. Debtors at discounted value. The bankers discount is
generally the interest on the full amount for the unexpired period of the bill, the account of
the customer in case the bill are ultimately not paid i.e. dishonoured.The bill passes to the
banker after endorsement. Banks will not dis-accomodation bills.

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Loans and advances :-

It includes both demand and term loans, direct loans and given to all type of customers
mainly to businessmen and investors against personal security or goods of movable in nature.
The loan amount is paid in cash or by credit to the customer account which the customer can
draw at any time.

Educational loan scheme :-

The RBI from August 1999 introduced a new educational loan scheme for students of full
time graduate / post graduate /professional courses in private professional colleges. Under the
scheme all public sector banks have been directed to provide educational loan up to RS.
15,000 for free seat and RS. 50,000 for payment seat student at interest not more than 12%
p.a. This loan is available only for students whose annual family income does not exceed RS.
1, 00,000. The loan has to be repaid together with interest within five years from the date of
completion of course. Students in respect of the following subjects/ areas are covered
Medical or dental course, Engineering or law studies, Chemical technology or, Management
course like MBA, Computer Science

Housing Finance :-
Nowadays the commercial banks are competing among themselves in providing housing
finance facilities to their customers. It is mainly to increase the housing facilities in the
country. State bank of India, Indian bank, Canara bank, Punjab national bank have formed
housing subsidiaries to provide housing finance. The others bank are also providing housing
finance. Housing finance up to RS. 5 lakhs is treated as priority sector advances for banks.
The limit has been raised to RS. 10 lakhs per borrower in cities.

Loans against saving certificates:-

Banks are also providing loans up to certain value of savings certificates like National
Savings Certificate, Fixed Deposit Receipt, Indira Vikas Patra, etc. the loan may be obtained
for personal or business purposes.

Consumer loans and advances:-

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One of the important areas for bank financing in recent years is towards purchase of
consumer durables like TV sets, Washing Machines, Micro Oven ,etc. Banks also provide
liberal Car finance. These days banks are competing with one another to lend money for these
purposes as default of payment is not high in these areas as the borrowers are usually salaried
persons having regular income. Bank rate is also higher.

Loans against shares / securities :-

Commercial banks provide loans against the security of shares / debentures of reputed
companies. Loans are usually given only up to 50 % value (market value) of the shares
subject to a maximum amount permissible as per RBI directives. Presently one can obtain a
loan up to Rs. 20 lakhs against the physical shares and up to RS. 20 lakhs against
dematerialized shares.

Securitization of loans :-
Banks are recently trying to securities a part of their part of loan portfolio and sell it to
another investor. Under this method, banks will convert their business loans into a security or
a document and sell it to some investment or fund Manager for cash to enhance their liquidity
position. It is a process of transferring the credit risk from the banker to the buyer of
securitised loans. It involves a cost to the bankers but it helps the bank to insure proper
recovery of loan.

Others :-
Commercial banks provide other type of advances such as venture capital advances, jewel
loans, etc

3):- Credit Creation

Credit Creation is one of the primary function of commercial banking when a bank sanction a
loan to the customer, it does not give cash to him, but a deposit account is opened in his name
and the amount is credited to his account he can withdraw the money whenever he needs. A
bank sanction loan it creates a deposit. In this way the bank increase the money supply of the
economy such functions is known as credit creation.

B):- Secondary functions

1):- Agency functions

Collection of cheques dividends interest :-

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As an agent the banks collects cheque, draft, promissory notes, interest, dividend etc. on
behalf of its customer and credit the amounts to their account. Customer may furnish their
bank details to corporate where investment is made in shares; debentures etc. as and when
dividend, interest is due the companies directly send the warrants / cheques to the bank for
credit to customer account.

Payment of rent ,insurance premiums :-

The bank makes the payments such as rent, insurance premiums, subscription on standing
instructions until further notice till the order is revoked the bank will continue to make such
payment regularly by debiting the customer account.

Dealing in foreign exchange :-

As an agent the commercial bank purchase and sell foreign exchange as well for customers as
per RBI exchange control regulations.

Purchase and sale of securities:-

Commercial banks undertake the purchase and sale of different securities such as shares,
debentures, bonds etc. on behalf of their customers. They run a separate Portfolio
management scheme for their big customers.

Act as correspondent :-
Commercial banks act as a correspondent of their customer. Small banks even get travel
tickets, book vehicles; receive letters etc. on behalf of the customers.

Preparation of income tax returns :-

They provide income tax returns and provide advice on tax matters for their customers. For
those purposes they employ tax experts and make their services available to their customers.

2) General utility services:-

Safety Locker Facility:-

Safe keeping of important document valuables like jewels is one of the oldest services
provided by commercial banks. Lockers are small receptacles which are fitted in steel racks
and kept inside strong rooms known as vaults. These lockers are available on half yearly or
annual rental basis. The bank merely provided lockers and the key but the valuable are

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always under the control of its users. Any customer of safety lockers after entering into a
register his name account number and time can enter into the vault.

Issue Travelers cheques :-

Banks issue travelers cheque to help carry money safely while traveling within India or
Abroad. Thus, the customer can travel without fear,theft or loss of money.

Payment Mechanism or Money transfer :-

Transfer of funds is one of the important functions performed by commercial banks. Cheques
and credit cards are two important payment mechanisms through banks. Despite an increase
in financial transactions, banks are managing the transfer of funds process very efficiently.
Cheques are also cleared through the banking sustem.correspondent banking is another
method of transferring funds over long distance, usually from one country to another. Banks,
these days employ computers to speed up money transfer and to reduce cost of transferring
funds. Electronic transfer of funds is also known as Chequeless banking where funds are
transferred through computers and sophisticated electronic system by using code words. They
offer Mail Transfer, Telegraphic Transfer Facility also.

Acting as referees :-
The banks act as referees and supply information about the business transactions and
financial standing of their customers on enquiries made by third parties. This is done on the
acceptance of the customers and help to increase the business activity in general.

Letters of credit :-
It is payment document provided by the buyers bankers in favour of seller. This document
guarantees payment to the seller upon production of document mentioned in the letter of
credit evidencing dispatch of goods to the buyer. The letter of credit is an assurance of
payment upon fulfilling conditions mentioned in the letter of credit. The letter of credit is an
important method of payment in international trade. There are primarily 4 parties to letter of
credit. The buyer or importer, the bank which issues the letter of credit ,known as opening
bank, the person in whose favour the letter of credit is issued or opened, and the credit
receiving/advising bank. The letter of credit is generally advised / sent through the sellers
bank known as Negotiating or advising bank.

Provide trade information :-

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The commercial banks collect information on business and financial conditions etc. and make
it available to their customers to help plan their strategy. Trade information service is very
useful for those customers going for cross border business. it will help traders to know the
exact business conditions , payment rules and buyers financial status in other countries.

ATM facilities :-
The banks .today has ATM facilities. Under this system the customers can withdrawn their
money easily and quickly and 24 hours a day. This is also known as Any Time Money
.Customers under this system can withdraw funds i.e. Currency notes with a help of certain
magnetic card issued by the bank and similarly deposit cash / cheque for credit to account.

Gift cheques :-
The commercial banks offer gift cheque facilities to the general public .these cheques
received a wider acceptance in India. Under this system by paying equivalent amount one can
buy gift cheque for presentation on occasions like wedding birthday.

Accepting bills :-
On behalf of their customers the banks accept bills drawn by third parties on its customers.
This resembles the letter of credit. While banks accept bills, they provide a better security for
payment to seller of goods or drawer of bills

Travelers cheques:
These are used by domestic travelers as well as by international travelers. However the use of
travelers cheque is more common by international travelers. However the use of travelers
cheques is more common by international travelers because of their safety and convenience.
These can be also termed as a modified of travelers letter of credit. A bank issuing travelers
cheque usually have banking arrangement with many of the foreign banks abroad, known as
correspondent banks.travellers cheque are not drawn on specific bank abroad. The cheques
are issued in foreign currency.

Merchant banking :-
The commercial banks provide valuables services through their merchant banking divisions
or through their subsidiaries to the traders. This is the function of underwriting of securities.
They underwrite a portion of the public issue of shares, debentures and bonds of joint stock
companies. Such underwriting ensures the expected minimum subscription and also convey

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to the investing public about the quality of the company issuing the securities. Currently this
type of services can be provided only by separate subsidiaries known as Merchant Bankers
as per SEBI regulation.

Advice on financial matters :-

The commercial banks also give advice to their customers on financial matters particularly on
investment decision such as expansion, diversification, new ventures, rising of funds etc.

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3.1 Foreign Banks in India

Foreign banks have brought latest technology and latest banking practices in India. They have helped
made Indian Banking system more
competitive and efficient.
Government has come up with a
road map for expansion of foreign
banks in India.

The road map has two phases.

During the first phase between
March 2005 and March 2009,
foreign banks may establish a
presence by way of setting up a
wholly owned subsidiary (WOS) or conversion of existing branches into a WOS. The second phase
will commence in April 2009 after a review of the experience gained after due consultation with all
the stake holders in the banking sector. The review would examine issues concerning extension of
national treatment to Wholly Owned Subsidiary, dilution of stake and permitting mergers /
acquisitions of any private sector banks in India by a foreign bank.

Major foreign banks in India are:

Abu Dhabi Commercial Bank Ltd.
American Express Bank Ltd
BNP Paribas
Standard Chartered Bank
DBS Bank Ltd
Deutsche Bank


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Scheduled Commercial Banks in India are categorised into five different groups according to
their ownership and / or nature of operation. These bank groups are i) State Bank of India and
its associates (ii) other nationalised banks (iii) regional rural banks (iv) foreign banks and (v)
other Indian SCBs (in the private sector). Scheduled commercial banks consist of 28 public
sector banks (State Bank of India and its seven associates, nationalised banks and other
public sector bank), 9 new private sector banks, 20 old private sector banks and 31 foreign
banks1. Public sector banks are the ones in which the government has a major holding. They
are divided into two groups i.e. Nationalized Bank of India and its associates.

Private sector banks came into existence to supplement the performance of Public sector
banks and serve the needs of the economy better. As the public sector banks were merely in
the hands of the government, banks had no incentive to make profits and improve the
financial health. Nationalization killed competition and stifled competition in banking. Banks
operated in regulatory environment with administered rate of interest structure, quantitative
restrictions on credit, high reserve requirements and significant proportion of bendable
resources going to the priority and government sectors. This resulted in low levels of
investment and growth, decline in productivity and erosion of profitability of banking sector.
Thus, Narasimham Committee I (1991) which recommended the free entry of new banks in
the financial market provided they confirm the minimum start up capital and other
requirements by the permission of Reserve Bank of India.

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3.3 Company Profile of SBI:

State Bank of India (SBI) is India's largest commercial bank. SBI has a vast domestic
network of over 9000 branches (approximately 14% of all bank branches) and commands
one-fifth of deposits and loans of all scheduled commercial banks in India. The State Bank
Group includes a network of eight banking subsidiaries and several non-banking subsidiaries
offering merchant banking services, fund management, factoring services, primary dealership
in government securities, credit cards and insurance.
The eight banking subsidiaries are:
1-State Bank of Bikaner and Jaipur (SBBJ)
2-State Bank of Hyderabad (SBH)
3-State Bank of India (SBI)
4-State Bank of Indore (SBIR)
5-State Bank of Mysore (SBM)
6-State Bank of Patiala (SBP)
7-State Bank of Saurashtra (SBS)
8-State Bank of Travancore (SBT)
The origins of State Bank of India date back to 1806 when the Bank of Calcutta (later called
the Bank of Bengal) was established. In 1921, the Bank of Bengal and two other Presidency
banks (Bank of Madras and Bank of Bombay) were amalgamated to form the Imperial Bank
of India. In 1955, the controlling interest in the Imperial Bank of India was acquired by the
Reserve Bank of India and the State Bank of India (SBI) came into existence by an act of
Parliament as successor to the Imperial Bank of India. Today, State Bank of India (SBI) has
spread its arms around the world and has a network of branches spanning all time zones.
SBI's International Banking Group delivers the full range of cross-border finance solutions
through its four wings - the Domestic division, the Foreign Offices division, the Foreign
Department and the International Services division.

State Bank of India (SBI) (LSE: SBID) is the largest bank in India. If one measures by the
number of branch offices and employees, SBI is the largest bank in the world. Established in
1806 as Bank of Calcutta, it is the oldest commercial bank in the Indian subcontinent. SBI
provides various domestic, international and NRIproducts 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 government nationalized the bank in 1955, with the Reserve Bank of

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India taking a 60% ownership stake. In recent years the bank has focused on
three priorities, 1), reducing its huge staff through Golden handshake schemes known as the
Voluntary Retirement Scheme, which saw many of its best and brightest defect to the private
sector, 2), computerizing its operations and 3), changing the attitude of its employees
(through an ambitious programme aptly named 'Parivartan' which means change) as a large
number of employees are very rude to customers.


The State Bank of India traces its roots to the first decade of 19th century,
when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2

June1806. The government amalgamated Bank of Bengal and two other

Presidency banks, namely, the Bank of Bombay (incorporated on 15 April1840) and the Bank
of Madras on 27 January1921, and named the reorganized banking entity the Imperial Bank
of India. All these Presidency banks had been incorporated as joint stock companies, and
were the result of the royal charters. The Imperial Bank of India continued as a joint stock
company. Until the establishment of a central bank in India the Imperial Bank and its early
predecessors served as India's central bank, at least in terms of issuing the currency. The State
Bank of India Act 1955, enacted by the Parliament of India, authorized the Reserve Bank of
India, which is the central banking organization of India, to acquire a controlling interest in

the Imperial Bank of India, which was renamed the State Bank of India on 30


June 2, 1806: The Bank of Calcutta established.

January 2, 1809: This became the Bank of Bengal.

April 15, 1840: Bank of Bombay established.

July 1, 1843: Bank of Madras established.

1861: Paper Currency Act passed.

January 27, 1921: all three banks amalgamated to form Imperial Bank of India.

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July 1, 1955: State Bank of India formed; becomes the first Indian bank to be

1959: State Bank of India (Subsidiary Banks) Act passed, enabling the

State Bank of India to take over eight former State-associated banks as its

1980s When Bank of Cochin in Kerala faced a financial crisis, the government

merged it with State Bank of India.

Associate banks:

There are seven other associate banks that fall under SBI. They all use the "State Bank of"
name followed by the regional headquarters' name. These were originally banks belonging to

princely states before the government nationalized them in 1959. In tune with

the first Five Year Plan, emphasizing the development of rural India, the

government integrated these banks with the State Bank of India to expand its
rural outreach. The State Bank group refers to the seven associates and the parent bank. All
the banks use the same logo of a blue keyhole. Currently, the group is merging all the
associate banks into SBI, which will create a "mega bank", and one hopes, streamline
operations and unlock value.

State Bank of Bikaner & Jaipur

State Bank of Hyderabad

State Bank of Indore

State Bank of Mysore

State Bank of Patiala

State Bank of Saurashtra

State Bank of Travancore

Foreign Offices:

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Mumbai, India location. 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. Following its arch-rival ICICI Bank, State Bank of
India has electronically networked most of its metropolitan, urban and semi-urban branches
under its Core Banking System (CBS), with over 4500 branches being incorporated so far.

The bank has the largest ATM network in the country having more than 5600

ATMs [1]. The State Bank of India has had steady growth over its history,

though the Harshad Mehta scam in 1992 marred its image. 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.

Fortune Global 500 Ranking 2007:

SBI debuted in the Fortune Global 500[2] at 498 in 2006. In 2007 it moved up to 495. As per
fortune 500-2007 following are the data for SBI in $ million. Revenues 15,119.4. Profits
1,407.3. Assets 187,547.1. Stockholders' Equity 9,786.2

Group companies:

SBI Capital Markets Ltd

SBI Mutual Fund (A Trust)

SBI Factors and Commercial Services Ltd


SBI Cards and Payment Services Pvt Ltd

SBI Life Insurance Co. Ltd - Bancassurance (Life Insurance)

SBI Funds Management Pvt Ltd

SBI Canada

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IT Initiatives:

According to PM Network (December 2006, Vol. 20, No. 12), 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 2007 raising the total number to
8,600. As of September 20, 2007 SBI has 7236 ATMs.

Corporate Details:

This site provides comprehensive information on State Bank of India or SBI Bank, the
premier Nationalized Indian Bank. State Bank of India is actively involved since 1973 in
non- profit activity called Community Services Banking.

State Bank of India is India's largest bank amongst all public and private sector banks
operating in India. State Bank of India owns and operates the following subsidiaries and Joint

State Bank Of India Credit Card

State Bank Of India Online

State Bank Of India USA

State Bank Of India Services

State Bank Of India Mutual Funds

State Bank Of India Branch

State Bank Of India NRI Account

Banking Subsidiaries:

State Bank of Bikaner and Jaipur (SBBJ)

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State Bank of Hyderabad (SBH)

State Bank of Indore (SBI)

State Bank of Mysore (SBM)

State Bank of Patiala (SBP)

State Bank of Saurashtra (SBS)

State Bank of Travancore (SBT)

Foreign Subsidiaries:

State bank of India International (Mauritius) Ltd.

State Bank of India (California).

State Bank of India (Canada).

INMB Bank Ltd, Lagos.

Non- banking Subsidiaries.

SBI Capital Markets Ltd (SBICAP)

SBI Funds Management Pvt Ltd (SBI FUNDS)


SBI Factors and Commercial Services Pvt Ltd (SBI FACTORS)

SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)

Joint ventures:

SBI Life Insurance Company Ltd (SBI LIFE).


State Bank of India administrative structure is well equipped to oversee the large network of
branches in India and abroad. The State Bank of India 14 Local Head Offices and 57 Zonal
Offices are located at important cities spread throughout the country. State Bank of India has
52 foreign offices in 34 countries across the globe. The Corporate Accounts Group is a

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Strategic Business Unit of the Bank set up exclusively to fulfill the specialized banking needs
of top corporate in the country.

The main activities of are into -

Personal Banking.

NRI Services.





Domestic Treasury.

State Bank of India offers the following services to its customers -

Domestic Treasury.

SBI Vishwa Yatra Foreign Travel Card.

Broking Services

Revised Service Charge.

ATM Services.

Internet Banking.




Safe Deposit Lockers.

Gift Cheques.

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MICR Codes.

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3.4 Company Profile of ICICI:

ICICI Bank is India's second-largest bank with total assets of Rs. 3,849.70 billion (US$ 82
billion) at September 30, 2008 and profit after tax Rs. 17.42 billion for the half year ended
September 30, 2008. The Bank has a network of about 1,400 branches and 4,530 ATMs in
India and presence in 18 countries. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery channels and
through its specialized subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital and asset management. The Bank currently has
subsidiaries in the United Kingdom, Russia and Canada, branches in United States,
Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre
and representative offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium
and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on
the New York Stock Exchange (NYSE).


ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at
the initiative of the World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses. In the 1990s,
ICICI transformed its business from a development financial institution offering only project
finance to a diversified financial services group offering a wide variety of products and
services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In
1999, ICICI become the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.

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After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities,
and would create the optimal legal structure for the ICICI group's universal banking strategy.
The merger would enhance value for ICICI shareholders through the merged entity's access
to low-cost deposits, greater opportunities for earning fee-based income and the ability to
participate in the payments system and provide transaction-banking services. The merger
would enhance value for ICICI Bank shareholders through a large capital base and scale of
operations, seamless access to ICICI's strong corporate relationships built up over five
decades, entry into new business segments, higher market share in various business segments,
particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of
ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial
Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of
Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, have been integrated in a single

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and

ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment Corporation of India) is
India's largest private sector bank in market capitalization and second largest overall in terms
of assets. Bank has total assets of about USD 100 billion (at the end of March 2008), a
network of over 1,399 branches, 22 regional offices and 49 regional processing centres, about
4,485 ATMs (at the end of September 2008), and 24 million customers (at the end of July
2007). ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and specialised
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance,
venture capital and asset management. (These data are dynamic.) ICICI Bank is also the
largest issuer of credit cards in India. . ICICI Bank has got its equity shares listed on the

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stock exchanges at Kolkata and Vadodara, Mumbai and the National Stock Exchange of India
Limited, and its ADRs on the New York Stock Exchange (NYSE).

The Bank is expanding in overseas markets and has the largest international balance sheet
among Indian banks. ICICI Bank now has wholly-owned subsidiaries, branches and
representatives offices in 18 countries, including an offshore unit in Mumbai. This includes
wholly owned subsidiaries in Canada, Russia and the UK, offshore banking units in Bahrain
and Singapore, an advisory branch in Dubai, branches in Belgium, Hong Kong and Sri
Lanka, and representative offices in Bangladesh, China, Malaysia, Indonesia, South Africa,
Thailand, the United Arab Emirates and USA. Overseas, the Bank is targeting the NRI (Non-
Resident Indian) population in particular.

ICICI reported a 1.15% rise in net profit to Rs. 1,014.21 crore on a 1.29% increase in total
income to Rs. 9,712.31 crore in Q2 September 2008 over Q2 September 2007.

1955: The Industrial Credit and Investment Corporation of India Limited (ICICI) was
incorporated at the initiative of World Bank, the Government of India and representatives of
Indian industry, with the objective of creating a development financial institution for
providing medium-term and long-term project financing to Indian businesses.
Mr.A.Ramaswami Mudaliar is elected as the first Chairman of ICICI Limited.

ICICI emerges as the major source of foreign currency loans to Indian industry. Besides
funding from World Bank and other multi-lateral agencies, ICICI was also among the first
Indian companies to raise funds from international markets.

1956: ICICI declared its first dividend, of 3.5%.

1958: Mr.G.L.Mehta appointed the second Chairman of ICICI Ltd.

1960: ICICI building at 163, Backbay Reclamation, inaugurated.

1961: The first West German loan of DM 5 million from Kredianstalt obtained.

1967: ICICI made its first debenture issue for Rs.6 crore, which was oversubscribed.

1969: The first two regional offices set up in Calcutta and Madras.

1972: ICICI becomes the second entity in India to set up merchant banking services.

Mr. H. T. Parekh appointed the third Chairman of ICICI.

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1977: ICICI sponsored the formation of Housing Development Finance Corporation and
manages its first equity public issue.

1978: Mr. James Raj appointed the fourth Chairman of ICICI.

1979: Mr.Siddharth Mehta appointed the fifth Chairman of ICICI.

1982: ICICI became the first ever Indian borrower to raise European Currency Units.

ICICI commences leasing business.

1984: Mr. S. Nadkarni appointed the sixth Chairman of ICICI.

1985: Mr. N.Vaghul appointed the seventh Chairman and Managing Director of ICICI.

1986: ICICI became the first Indian institution to receive ADB Loans.

ICICI, along with UTI, set up Credit Rating Information Services of India Limited, India's
first professional credit rating agency.

ICICI promotes Shipping Credit and Investment Company of India Limited.

The Corporation made a public issue of Swiss Franc 75 million in Switzerland, the first
public issue by any Indian entity in the Swiss Capital Market.

1987: ICICI signed a loan agreement for Sterling Pound 10 million with Commonwealth
Development Corporation (CDC), the first loan by CDC for financing projects in India.

1988: Promoted TDICI - India's first venture capital company.

1993: ICICI Securities and Finance Company Limited in joint venture with J. P. Morgan set

ICICI Asset Management Company set up.

1994: ICICI Bank set up.

1996: ICICI Ltd became the first company in the Indian financial sector to raise GDR.

SCICI merged with ICICI Ltd.

Mr. K.V.Kamath appointed the Managing Director and CEO of ICICI Ltd

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1997 : ICICI Ltd was the first intermediary to move away from a single prime rate structure
to a three-tier prime rates structure and introduced yield-curve-based pricing.

The name "The Industrial Credit and Investment Corporation of India Ltd" changed to "ICICI

ICICI Ltd. announced the takeover of ITC Classic Finance.

1998: A new logo symbolizing the common corporate identity for the ICICI Group was

ICICI announced takeover of Anagram Finance.

1999 : ICICI launched retail finance - car loans, home loans and loans for consumer durables.

ICICI becomes the first Indian company to get listed on the NYSE through an issue of
American Depositary Shares.

2000 : ICICI Bank became the first commercial bank from India to get its stock listed on the

ICICI Bank announces merger with Bank of Madura.

2001: The Boards of ICICI Ltd and ICICI Bank approved the merger of ICICI Ltd. with

2002: ICICI Ltd merged with ICICI Bank Ltd to create Indias second-largest bank in terms
of assets.

ICICI assigned higher than "Sovereign" rating by Moodys.

ICICI Bank launched Indias first CDO (Collateralised Debt Obligation) Fund named Indian
Corporate Collateralised Debt Obligation Fund (ICCDO Fund).

"E-Lobby", a self-service banking centre and a first of its kind in India, is inaugurated in

ICICI Bank launched Private Banking.

A 1,100-seat Call Centre for Customer Care by phone and e-mail was set up in Hyderabad.

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ICICI Bank Home Shoppe, the first-ever permanent aggregation and display of housing
projects in the county, launched in Pune.

ATM-on-Wheels, Indias first mobile ATM, launched in Mumbai.

2003: The first Integrated Currency Management Centre launched in Pune.

ICICI Bank announced the setting up of its first-ever offshore branch in Singapore.

The first offshore banking unit (OBU) at SEEPZ Special Economic Zone, Mumbai, was

ICICI Banks representative office inaugurated in Dubai.

Representative office set up in China.

ICICI Banks UK subsidiary launched.

Indias first ever "Visa Mini Credit Card", a credit card 43% smaller in dimensions was

A subsidiary of ICICI Bank was set up in Canada.

Temasek Holdings acquired 5.2% stake in ICICI Bank.

ICICI Bank became the market leader in retail credit in India.

2004: Max Money, a home loan product that offers the dual benefit of higher eligibility and
affordability to a customer, introduced.

Mobile banking service in India launched in association with Reliance Infocomm.

Indias first multi-branded credit card with HPCL and Airtel launched.

Kisan Loan Card and innovative, low-cost ATMs were launched in rural India.

ICICI Bank and CNBC TV 18 announced Indias first ever awards recognizing the
achievements of SMEs, a pioneering initiative to encourage the contribution of Small and
Medium Enterprises to the growth of the Indian economy.

ICICI Bank opened its 500th branch in India.

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ICICI Bank introduced partnership model wherein ICICI Bank would forge an alliance with
existing micro finance institutions (MFIs). The MFI would undertake the promotional role of
identifying, training and promoting the micro-finance clients and ICICI Bank would finance
the clients directly on the recommendation of the MFI.

ICICI Bank introduced 8 to 8 Banking wherein all the branches of the Bank would remain
open from 8a.m. to 8 p.m. from Monday to Saturday.

ICICI Bank introduced the concept of floating rate for home loans in India.

2005: First rural branch and ATM launched in Uttar Pradesh at Delpandarwa, Hardoi.

"Free for Life" credit cards launched wherein annual fees of all ICICI Bank Credit Cards
were waived off.

ICICI Bank and Visa jointly launched mChq a revolutionary credit card on the mobile

Private Banking Masters 2005, a nationwide Golf tournament for high networth clients of the
Private Banking division launched. This event is the largest domestic invitation amateur golf
event conducted in India.

Becomes the first Indian company to make a simultaneous equity offering of $1.8 billion in
India, the United States and Japan.

Acquired IvestitsionnoKreditny Bank of Russia.

ICICI Bank became the largest bank in India in terms of its market capitalization.

ICICI Bank became the first private entity in India to offer a discount to retail investors for its
follow-up offer.

2006: ICICI Bank became the first Indian bank to issue hybrid Tier-1 perpetual debt in the
international markets.

ICICI Bank subsidiary set up in Russia.

Introduced a new product - NRI smart save Deposits a unique fixed deposit scheme for
nonresident Indians.

Representative offices opened in Thailand, Indonesia and Malaysia.

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ICICI Bank became the largest retail player in the market to introduce a biometric enabled
smart card that allow banking transactions to be conducted on the field. A low-cost solution,
this became an effective delivery option for ICICI Banks micro-finance institution partners.

Financial counseling centre Disha launched. Disha provides free credit counseling, financial
planning and debt management services.

Bhoomi puja conducted for a regional hub in Hyderabad, Andhra Pradesh.

2007: ICICI Bank makes a USD 2 billion three-tranche international bond offering, which
becomes the largest bond offering by an Indian bank.

Sangli Bank was amalgamated with ICICI Bank.

ICICI Bank raised Rs 20,000 crore (approx $5 billion) from domestic and international
markets through a follow-on public offer.

ICICI Banks GBP 350 million international bond offering marked the inaugural deal in the
sterling market from an Indian issuer and also the largest deal in the sterling market from

Launched Indias first ever jewellery card in association with jewellery major Gitanjali

ICICI Bank became the first bank in India to launch a premium credit card -- The Visa
Signature Credit Card.

The foundation stone for a regional hub in Gandhinagar, Gujarat was laid.

ICICI Bank introduced SME Toolkit, an online resource centre, to help small and medium
enterprises start, finance and grow their business.

ICICI Bank signed a multi-tranche dual currency US$ 1.5 billion syndication loan agreement
in Singapore.

ICICI Bank became the first private bank in India to offer both floating and fixed rate on car
loans, commercial vehicles loans, construction equipment loans and professional equipment

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In a first-of-its-kind, nation wide initiative to attract bright graduate students to pursue a

careers in banking, ICICI Bank launched the "Probationary Officer Programme".

Launched Bank@Home services for all savings and current account customers residing in

ICICI Bank Eurasia LLC inaugurated its first branch at St Petersburg, Russia.

2008: ICICI Bank enters USA, launches its first branch in New York

ICICI Bank enters Germany, opens its first branch in Frankfurt

ICICI Bank launched iMobile, a breakthrough innovation in banking where practically all
Internet banking transactions can now be done easily on the mobile phone.

ICICI Bank concluded India's largest ever securitization transaction of a pool of retail loan
assets aggregating to Rs. 48.96 billion (equivalent of USD 1.21 billion) in a multi-tranche
issue backed by four different asset categories. It is also the largest deal in Asia (ex-Japan) in
2008 till date and the second largest deal in Asia (ex-Japan and Australia) since the beginning
of 2007.

ICICI Bank launches ICICIACTIVE-Banking Interactive Service - along with DISH TV,
which will allow viewers to see information about the Bank's products and services and
contact details on their DISH TV screens.

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Personal Banking:






Demat services

Wealth management

NRI Banking:

Money Transfer

Bank accounts


Property Solutions



Business Banking:

Corporate net banking

Cash Management

Trade services


SME services

Key Words:


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A bank is a financial institution whose primary activity is to act as a payment agent for
customers and to borrow and lend money. It is an institution for receiving, keeping, and
lending money.

Mobile Banking:

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for
performing balance checks, account transactions, payments etc. via a mobile device such as a
mobile phone. Mobile banking today (2007) is most often performed via SMS or the Mobile
Internet but can also use special programs called clients downloaded to the mobile device.

Internet Banking:

Online banking (or Internet banking) allows customers to conduct financial transactions on a
secure website operated by their retail or virtualbank, credit union or building society.

Core Banking System:

Core Banking is a general term used to describe the services provided by a group of
networked bank branches. Bank Customers may access their funds and other simple
transactions from any of the menber branch offices.


An automated teller machine (ATM) is a computerized telecommunications device that

provides the customers of a financial institution with access to financial transactions in a
public space without the need for a human clerk or bank teller. On most modern ATMs, the
customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic
smartcard with a chip, that contains a unique card number and some security information,
such as an expiration date or CVC (CVV). Security is provided by the customer entering a
personal identification number (PIN).

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Banking is the backbone of a modern economy. Health of banking industry is one of the most
important pre-conditions for sustained economic progress of any country. The world of
banking has assumed a new dimension at the dawn of the 21st century with the advent of tech
banking, thereby lending the industry a stamp of universality. In general, banking may be
classified as retail and corporate banking. Retail banking, which is designed to meet the
requirements of individual customers and encourage their savings, includes payment of utility
bills, consumer loans, credit cards, checking account balances, ATMs, transferring funds
between accounts and the like. Corporate banking, on the other hand, caters to the needs of
corporate customers like bills discounting, opening letters of credit and managing cash.

The Indian banking scene has changed drastically with the private sector making inroads in
an area hitherto dominated by large public sector banks. Growing disinvestment is likely to
impact the banking industry as well. There is every possibility of privatization of public
sector banks, leading to greater operational autonomy.

The development of the Indian banking sector has been accompanied by the introduction of
new norms such as Income Recognition and Capital Adequacy, by the government. The latter
implies that banks can lend on the basis of their respective capital base. These norms have
caused banks to construct equity on their own, before going in for debt. Disintermediation is
a real threat for banks. Of late, banks are adopting the EVA (Economic Value Added)
concept wherein revenues are viewed in the context of the risk associated with them

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Literature Review
Cho (1998) points out the reasons for which reforms were made in Indian capital
market stating the after reform developments. Shah (1999) describes the financial
sector reforms in India as an attempt at developing financial markets as an alternative
vehicle determining the allocation of capital in the economy.
Shah and Thomas (2003) review the changes which took place on Indias equity and
debt markets in the decade of the 1990s. This has focused on the importance of crises
as a mechanism for obtaining reforms.
Mohan (2004) provides the rationale of financial sector reforms in India, policy
reforms in the financial sector, and the outcomes of the financial sector reform
process in some detail.
Shirai (2004) examines the impact of financial and capital market reforms on
corporate finance in India. Indias financial and capital market reforms since the early
1990s have had a positive impact on both the banking sector and capital markets.
Nevertheless, the capital markets remain shallow, particularly when it comes to
differentiating high-quality firms from low-quality ones (and thus lowering capital
costs for the former compared with the latter). While some high-quality firms (e.g.,
large firms) have substituted bond finance for bank loans, this has not occurred to any
significant degree for many other types of firms (e.g., old, export-oriented and
commercial paper-issuing ones). This reflects the fact that most bonds are privately
placed, exempting issuers from the stringent accounting and disclosure requirements
necessary for public issues. As a result, banks remain major financiers for both high-
and low-quality firms. The paper argues that India should build an infrastructure that
will foster sound capital markets and strengthen banks incentives for better risk
Chakrabarti and Mohanty (2005) discuss how capital market in India is evolved in
the reform period. Thomas (2005) explains the financial sector reforms in India with
stories of success as well as failure.
Bajpai (2006) concludes that the capital market in India has gone through various
stages of liberalization, bringing about fundamental and structural changes in the
market design and operation, resulting in broader investment choices, drastic
reduction in transaction costs, and efficiency, transparency and safety as also

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increased integration with the global markets. The opening up of the economy for
investment and trade, the dismantling of administered interest and exchange rates
regimes and setting up of sound regulatory institutions have enabled time.
Gurumurthy (2006) arrives at the conclusion that the achievements in the financial
sector indicate that the financial sector could become competitive without involving
unhealthy competition, within the constraints imposed by the macro-economic policy
Mohan (2007) reviews Indias approach to financial sector reforms that set in process
since early 1990s. Allen, Chakrabarti, and De (2007) concludes that with recent
growth rates among large countries second only to Chinas, India has experienced
nothing short of an economic transformation since the liberalisation process began in
the early 1990s.
Chhaochharia (2008) arrives at the conclusion that India has a more modern
financial and banking system than China that allocates capital in a more efficient
manner. However, the study is skeptical about who would emerge with the stronger
capital market, as both the country is facing challenges regarding their capital
Prasad and Rajan (2008) argues that the time has come to make a more concerted
push toward the next generation of financial reforms. The study advocates that a
growing and increasingly complex market-oriented economy and its greater
integration with global trade and finance will require deeper, more efficient, and well-
regulated financial markets. The survey and review of literature about the financial
sector reforms in India reveals that the reforms have been pursued vigorously and the
results of the reforms have brought about improved efficiency and transparency in the
financial sector. The reforms also brought into inter-linkage of financial markets
across the globe leading to new product development and sophisticated risk
management tools. Derivatives in general perform as an instrument to hedge the risk
arising from movement in prices not only in commodity markets but also in securities
Bose, Suchismita conducted research on (2006) found that Derivatives products
provide certain important economic benefits such as risk management or
redistribution of risk away from risk-averse investors towards those more willing and
able to bear risk. Derivatives also help price discovery, i.e. the process of determining

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the price level for any asset based on supply and demand. These functions of
derivatives help in efficient capital allocation in the economy. At the same time their
misuse also poses threat to the stability of the financial sector and the overall
Routledge, Bryan and Zin, Stanley E of Carnegie Mellon University conducted
research on Model Uncertainty and Liquidity in year 2001. Extreme market
outcomes are often followed by a lack of liquidity and a lack of trade. This market
collapse seems particularly acute for markets where traders rely heavily on a specific
empirical model such as in derivative markets.
Sen Shankar Som and Ghosh Santanu Kumar (2006) studied the relationship
between stock market liquidity and volatility and risk. The paper also deals with time
series data by applying Cochrane Orchutt two step procedures. An effort has been
made to establish a relation between liquidity and volatility in their paper. It has been
found that there is a statistically significant negative relationship between risk and
stock market liquidity. Finally it is concluded that there is no significant relationship
between liquidity and trading activity in terms of turnover.

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Research Methodology decides the territory of proposed study and gives information to the
readers about adopted process of analysis for the respective study. This includes aims for which
the study is undertaken. This also clarify time, scope, data sources etc. of proposed study.
Another significant aspect is tools and techniques which are used for the study. In brief this
chapter helps to the researcher to decide his path of research work.

In the light of the above, the research study has been undertaken to study the selected banks to
know, what policies, structural and procedural changes taken place in these selected banks and
how these changes made impact on these banks. The other individual benefit of undertaking this
research to the researcher is to grab an opportunity to meet and discuss with Academic
Professional, Govt. Officials, regulatory Bodies of Government, Practical Bankers, Business and
Industry, Executives, State Government Officials, Researchers and Policy Makers on various
issues related to the banking sector reforms and their impacts in India.

The research will help the academic research scholars, policy makers, students and Government
Officials to gain an insight into the future challenges before Indian Banking System.

To conduct the research on the subject titled Critical Analysis of Financial Reforms in Banking
Sector in Post Liberalization Period- ( With respect to public and private sector banks) the
following thought provoking objectives were framed.

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The first part of the study has been done using an exploratory research process and structured
questionnaire was developed for this purpose and field visit was done.


The second part of the study has been sourced from the internet and from interest rates related
books and journals.


The processing, categorization, tabulation, psychoanalysis and understanding of data are
done with the help of Frequency distribution Analysis and Pie diagram. The following
statistical tools and mathematical techniques have been applied on the data collected
from the respondents.
Frequency distribution analysis; Frequency distribution analysis is applied to analyze
the descriptive study of Risk Management in Canara Bank
Pie Charts; A Pie chart (or a circle chart) is a circular statistical graphic, which illustrate
numerical proportion. In a pie chart, the arc length of each slice (and consequently
its central angle and area), is proportional to the quantity it represents. While it is named
for its resemblance to a pie which has been sliced, there are variations on the way it can
be presented.

1. Bar Chart; A bar chart or bar graph is a chart that presents grouped
data with rectangular bars with lengths proportional to the values that they represent. The
bars can be plotted vertically or horizontally. A vertical bar chart is sometimes called
a Line graph. A bar graph is a chart that use either horizontal or vertical bars to show
comparisons among categories. One axis of the chart shows the specific categories being
compared, and the other axis represents a discrete value. Some bar graphs present bars
clustered in groups of more than one.

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Project on Comparative study of Private Banks & Public Bank

Classification & Tabulation

1. Name of your bank:

2.Please indicate the name of the Name:

Person for this questionnaire and his/her
position in the Bank.

3.To which of the following types of o Public sector

Banks o Private sector
o Foreign Bank
Does your bank belong?

4.Where is your parent/head office located?

1. What is your assessment of your readiness for the new Basel proposals with respect to
capital requirements?
FULLY 5050 5050 5 50
PARTIALLY 3030 30 30

NOT 2020 2020 2020


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Project on Comparative study of Private Banks & Public Bank

2. Have you done a gap analysis between current risk management practice and new capital


YES 80 80 80

NO 20 20 20

3. Do you have assigned Credit risk, Market risk and Operational risk manager in your bank?


YES 50 50 50

NO 50 50 50

4. What is the assigned managers time dedicated to this activity?


0-20% 60 60 60

20-50% 40 40 40

>50% 70 70 70

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Project on Comparative study of Private Banks & Public Bank

5. How many people work in these department?


1-3 50 50 50

3-5 50 50 50

5-10 50 50 50

>10 50 50 50

6. Do you have a Risk Committee?


YES 50 50 50

NO 60 60 60

7. Are you produce reporting for





DECISION 60 60 60



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Project on Comparative study of Private Banks & Public Bank

8. Does external reporting drive your internal reporting?


VERY 60 60 60



NOT AT ALL 50 50 50


9. Will you develop an IT solution for Risk Management?


YES 50 50 50

NO 40 40 40

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Project on Comparative study of Private Banks & Public Bank

10. What difficulties do you foresee?





MODELS 30 30 30

BUDGET 20 20 20



OTHER (SPECIFY) 10 10 10

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Finding & Analysis

1. The respondents were asked about which banking sectors services do their avail.
Table1: banking sectors services which the respondents avail.

Banking sector Number of respondents

Public 32

Private 38

Both 30




15 Both


No of respondents

Graph 1: Banking Sectors services which the respondents avails

INTERTRETATION:-It was found that most of the respondents were availing services of
private sectors banks while those of the public sector banks were less as compare to public

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2. The respondents were Asked about the type of account they have in the public sector
as well as Private sector banks

Table 2.1 Number of type of account held in Public sectors banks

Type of Accounts

Name of Savings Current Demat Fixed Salary

Account deposits

Total no of 50 15 6 15 14

Total no of respondents



Total no of respondents


Saving Current Demat Fixed Salary

Graph 2.1 :- Number of type of accounts held in Public sector banks

Analysis: 50% people own Saving Account, 15% own Current account, 6% demat,15% fixed
deposits account and 14% salary Account

Interpretation: It was found that in case of public sector banks, maximum number of account
holders owns Saving Account. After Saving account most prefer account is salary account
prefer by people and the next priority goes to fixed deposits Accounts.

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3. The basic purpose of this question was to know the most preferred bank.

Table 3. Number of respondents preferring different banks

Names of Banks Number of respondents

ICICI Bank 24

HDFC Bank 22

State Bank Group 20

Punjab National Bank 28

Punjab And Sind Bank 6



20 ICICI bank
State Bank Group
Punjab and sind Bank

Number of respondents

Analysis: From above graph, it is seen that 28% stake of the respondents follows to Punjab
National bank followed byICICI bank. It is the bank which provide 12-hour banking.also the
ATM machine is more as compared to the other private sector banks.

Interpretation : From the above graph, it is seen that Punjab national is the most preferred
bank as compared to other Public and Private sector Banks.

The reason for preference of public sector bank is the minimum amount of deposit for saving

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4. The aim to ask this question was to know he reasons for their preference in different
banks :-

Table 4:- Reason for account in different banks

Reasons No of respondents

Friendly Behaviour of the Staff 16

Reliability/trust 14

Quick and fast services 55

Location 15

Friendly behaviour of the

Chart Title staff
Reliability/ Trust
Quick and fast services





No of respondents

Graph 4:-Reasons for account in different banks

Inpretation: By analyzing this graph, we can conclude that most of the people is influenced by
the quick and speedy services provided by the bank and location is given less preference than

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5.The respondents were asked about the facilities they were availing in public as well as
private sector banks :-

Table 5.1 Number of people availing different facilities at public sector banks:

Facilities Availed No of respondents

ATM/Debit card 60

Demat 5

Internet/Mobile/Phone Banking 15

Insurance 20



40 ATM/Debit card
30 Internet/Mobile/Phone banking


No of Respondents

Graph 5.1: Number of people availing different facilities at public sector banks

Interpretation: From the above graph, it was found that was availed by most of the people at
public sector banks was that of ATM/Debit cards which hold 90% of respondents. It is clearly
observed by the graph that Insurance are neck to neck holding 20% of respondent each.

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6. The purpose of this question is to know the satisfaction level they were having with
their banks overall performance:-

Public sector banks

Table 6.1 Satisfaction level of the customers regarding the facilities availed from the
public sector banks

Level of Satisfaction No.of respondents %age

Excellent 12 24%

Good 21 42%

Very Good 27 54%






Excellent Good Very Good

Series 1

Graph 6.1 Satisfaction level of Customers regarding the facilities availed from the public
sector banks.


It was found that in case of public sectors banks, 18% of the respondents were highly satisfied
ranked excellent from the products and services availed by them. 44% were just satisfied given
very good and 38% have moderate view.

Interpretation: People have mixed type of view regarding public sector banks.

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7. 7 The respondents were asked that if they have given option, would they like to shift
from the present banks:-

Table 7 Number of customers ready to shift from present bank.









Yes No

Graph 7:- Number of customers ready to shift from their present bank or not.


From this above Graph, we can conclude that the number of respondents ready to shift from
their present bank is 28% while 70% customers seems to be satisfied from their bank and
hence willing to shift from their present bank to other.

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8. The aim to ask this question was to know whether the respondents faces any problem
regarding the services provided them by their preferred bank :-

Table 8 Problem faced by customers.

Types of problem No of respondents

Time consuming 10

Introduction 8

Reference 15

Too many formalities 6

No facility of photograph instantly 4

No problem 6

Time Consuming

8% Introduction

12% Reference
Too many Formalities
No facilities of photograph
No problem


It was found that most of the respondents are facing problem of reference. Respondents also
find that the time and too much formalities also cause problem in banks.

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Findings of the Study

More number of people have account with private banks.

Majority of the respondents whether in public sectors or in private sector banks have savings
account with banks.

Number of problem faced by the people is more in public sector banks.

People want a change in the behavior of the staff of the public sector banks.

People are more satisfied form the private sector banks due to their better services provided
by them in terms of speedy transactions, fully computerized facilities, more working hours (in
case of ICICI bank, the number of working hour are 12), good investment Advisory services,
efficient and co-operative staff, better approach to Customer Relationship Management.

In private sector banks proper promotional activities should be taken up so as to make the
population aware of the services provided by the banks even in rural areas.

The facility that was availed by most of the people at public sector banks was that of
ATM/Debit cards. The least availed facility was that of Demat account and foreign transfer of

The facility that was availed by most of the people at private sector banks was that of
Internet/Phone banking by ATM/Debit card.

Majority of respondents do not want to shift from their present bank.

From the above study it is clear that private banks are providing better services than
nationalized banks. 95% respondents favored that private banks are providing better services
than nationalized banks while 5% respondents are not agree with it.

From the above study it is clear that majority of the respondents said that the average balance
requirement for operating their saving account is between 5000-10000. 20% said it is between
10000-20000 and remaining 5% said it is between 20000-50000 in private sector banks which
as compared to Public sector bank is very high.

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The customers now days are not only exposed of what type of service is being provided by banks in
India but in the world as a whole. They expect much more than what is actually being provided. So
the new coming banking sector has to provide and cater to all the needs of the customers otherwise it
is difficult to survive in the competition coming up.

They not only expect the safety of money but also best ways to invest that money which need needs to
be fulfilled. Banks need to have a better outlook towards to actually what customers are requiring.
Entries of the private sector banks have made the competition tougher. If a bank is not functioning
properly it is being closed. So it is difficult to face these types of conditions. Here a simple philosophy
can work that customers are God and we need to follow this to survive and serve better.

The banking sector is poised for explosive growth. In this, scenario, it is imperative that banks adopt
technology at an aggressive Pace, if they wish to remain competitive. Mani Mamallan makes a case
for banks to outsource their technology infrastructure requirement, thus enabling early adoption and
increased efficiencies.

In the prevailing scenario, a number of banks have adopt a new deployment strategy of infrastructure
outsourcing, to lower the cost of service channels. As a result, other banks too will need to align their
reinvented business models. The required changes at both the business and technology levels are
enormous. In a highly competitive banking markets, early adopters are profiting from increased

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Comparative Study on public and private sector banks

Q1. Which Sector bank do you have your account?

Public Private Both

Q2. Which type of account do you have in the bank?

Saving Current

Demat F.D


Q3. Rank the selection criteria for opening account with bank?

Brand Image Services

Location Charges

Q4. Kindly rank the reasons for yours preference in this particular bank?

Quick and fast services Location

Friendly Behavior Reliability

Q5. Which facilities are you availing at your bank?

Atm/Debit card Credit card

Insurance Mobile Banking

Q6.How often do you use debit card to shop?

Occasionally Never

Q7. How much Satisfied are you with your banks overall performance ?

Excellent Very Good


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Q8.If an option is given to you, would you like to shift from the present


Yes No

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