Ten great innovation initiatives from banks around the world

As part of our efforts in keeping an eye on the future of banking, weve come across some great sites from banks trying to push back the boundaries of product innovation and collaborative working with their customers. Heres a list of ten of them. Not all of them are in English: if youre not multilingual, try typing the site URL into the Google Translate tool which will provide you with a translation of each page on-the-fly. 1. American Express Labs (USA) This site enables American Express cardmembers to sign up to pilot programmes which give them access to emerging technologies and innovative applications before they are made available to the public. The site also provides a forum for customers to share their feedback and comments on the beta services with others. 2. Bankinter Labs (Spain) Bankinter aims to be a market leader in Web 2.0 service innovation, and its Labs siteis where it shares its latest projects with its customers and enables them to participate in them. 3. Bank of America Center for Future Banking (USA) A collaboration between Bank of America and MIT, the Center for Future Banking has been set up to explore how emerging technologies and insights into human behavior can transform customers' experiences and elevate the role of the bank in their financial lives. Take a look at their recent research on Proverbial Wallets. 4. BBVA Plant 29 (Spain) BBVAs Plant 29 project comprises a number of components designed to nurture innovation within the bank, including Blogsfera BBVA: a collective blogging environment involving all employees of the bank (more than 110,000 employees in 35 countries) and designed to encourage proactivity, knowledge sharing and idea generation. 5. Le Lab Cofidis (France) Like American Express, French consumer credit provider, Cofidis, has created anonline Lab where customers can sign up to services and concepts before they are launched. Participants are invited to test, comment and vote on beta services in order to influence final product development. 6. The Umpqua Bank Innovation Lab (USA) Its been around for a couple of years now, but Umpqua banks Innovation Lab website and showcase physical branch are still pretty innovative. The site enables customers to book a visit to the branch which includes a 25-foot interactive touch screen, merchandise on display for purchase, customised computer stations, a collaborative workspace and free cappuccinos! 7. Wells Fargo Labs (USA) This site enables Wells Fargos customers to be one of the first to test its latest ideas and technologies from still-in-development beta offerings to newly launched products. These include a customised credit card design studio, an iPhone app, vSafe accounts, and Rapid Alert text messaging. 8, 9 and 10 These last three sites arent collaborative labs, but they are excellent examples of banks pushing back the traditional boundaries around how they connect with their customers.

Innovation in Banking - what's going to change in the next 5 years

Innovation in Banking is going to be the key in FY 2010-2011 and beyond! Innovation has always been an important area of focus for all industries, not just for Banks. However, in view of the economic slowdown, it is common knowledge that banks have been taking a very conservative approach over the last two years as many have been consolidating their portfolio and innovating products had lost its importance and has taken a back seat. We have not seen many innovative products designed for customers during the consolidation phase, and rightly so, as the primary focus of Banks has been in cleansing their portfolio and tightening credit extension apart from being extremely guarded in getting only credit worthy customers in their books. The scene in the Indian Banking industry is changing; the various global economies have started showing signs of revival leaving behind them the worst recessionary phase and moving towards growth. The Prime Minister of India, during the recent platinum jubilee celebrations of Reserve Bank of India, has encouraged Banks to be more innovative. Please recall the budgetary announcement by the Finance Minister on opening up the Banking space by offering additional banking licenses to private players and NBFC's. It is expected that at least 5 more International Banking giants will set up operations in India in the next 1-2 years, bringing with them superior technology. These are exciting times for customers in India and challenging times for existing Banks, more so for the Public Sector Banks. The choice before the customer today is far wider both in the selection of banks as well asproducts than ever before. The future growth is largely in retail banking. Innovating products backed by superior service are vital to provide the cutting edge. Here's a quick look at some factors which may probably be the key drivers for Innovation in Banking, keeping in mind customer expectations and behavior changes: 1. With intense competition between banks which is going to be more severe in the coming years and with more private players waiting to step in, adopting new technology has assumed added importance, especially for public sector banks. The key to success is adopting state-ofthe-art technology and continuously accelerating business processes.

2. Investment and innovation in technology will result in further advancement in credit analytics systems that will help them assess customer behavior and enhance portfolio profitability. Experience in matured markets has proven the value of credit bureaus in the development of consumer credit. With the possibility of more credit bureau's competing with CIBIL looming large, further advancement and innovation to quickly assess customer credit history will be a critical factor to provide convenience banking to customers. The day is not far away where you call up your Bank for a loan, provide your UID/PAN Number, your credit score verified, eligibility calculated and the processing is completed almost instantaneously and the loan amount gets credited to your account within 24 hours.

3. The 3G spectrum auction expected in mid 2010 across various circles to private telecom providers in India will further open up immense migration possibilities to more convenient channels. It may not be too long where the customer would access his bank account using a secured application through his mobile phone. Needless to say, a secured and fast internet banking platform will become a basic necessity.

4. RBI's recent directive on payment of interest on daily balance maintained in the savings account effective 1st April 2010 will result in higher outflow to Banks. This will also result in the interest rates for short term deposits (7 - 90 days) undergoing an upward revision as against the 2.5% - 3.5% being paid currently by banks on these deposits. While most Banks seem to have enhanced their technology to comply with this interest calculation methodology, this change however would result in an increased outflow of around 20% in interest credits. Banks will find ways to innovate and encourage customers to use their debit cards for purchases, bring the average daily balance down and gain the differential between interchange spend and interest payouts. These strategies of promoting debit card usage will also keeps the banking system going, interchange revenues flowing in and ensuring that credit exposure by way of credit cards is

minimized. 5. Continuous innovation on the product offerings by Banks is paramount to ensure that their products stand out from the crowd. A lot of effort and innovation from Banks is required to make their product the preferred choice of the customer. This needs to be backed by a powerful and customized loyalty program for customers to be continuously encouraged to keep using their card. Service is an extremely vital cog in the wheel and the Banks which make the investment to have superior service levels as their USP will have a clear advantage. Investment in providing a chat interface as a service channel for routine enquiries would be in line with times to come.

6. Ten years ago, a customer would have been happy to bank with those who provided just a fixed deposit or a recurring deposit in addition to his savings account and a credit card. Today, there is a need to spread the wealth around, diversify the savings into shares, fixed deposits, mutual funds, pension products and insurance. Banks have a choice offer all these as part of their Convenience Banking to customers or lose him. This desire and the compulsion to be the one-stop shop for the entire customer's investment and borrowing needs will ensure a lot of banks adopt this model increasingly. 7. Smart Cards embedded with microprocessors or memory chips will become tamper proof and replace the existing plastic cards, offering customers a secure digital identity. This will also provide convenience to customers; provide access to bank's website and individual accounts, accurate tracking of usage, spend analysis and manage long term customer relationships through efficient, timely and valuable services to them.

8. Biometric ATM's will replace the conventional ATM's across the country, apart from all banks investing in additional ATM's. Banks can authenticate the identity of the customer in three ways; most common being something the user knows (passwords or personal identification numbers), something the user has (a security token etc) or something the user is (a physical characteristic like fingerprint, palm geometry etc., called as biometric). With increasing threats on compromise of passwords and account take over's and misuse of cards, biometric form of authentication (which have withstood the test of scrutiny coming out as the most secure form) for ATM and POS transactions would be the way ahead. Statistics show that India's ATM density is around 35 ATM's per million people which is abysmally low compared to the US's ATM density of 1300. This is an area of focus for many banks clearly, offering a branding and marketing proposition for their investments apart from interchange revenues on usage.

9. Cheques will gradually be phased out and replaced by RTGS and NEFT and other electronic forms of money transfers and payment mechanisms offering superior turnaround times. Operational efficiency in processing electronic payment mechanisms will undergo a radical change, with the beneficiary receiving the credit real time online. 10. The 2010 Census process which has begun is going to throw up interesting focus areas for Banks. The demographics of our country, with 54% of the Indian population being under 25 years of age and 60% within 40 years of age, will be a key driver to create a large retail customer base. With increasing income levels and an annual GDP growth of 8.5-9% predicted for the next 2-3 years, this segment is a good target market to sell insurance, mutual funds, credit cards etc. With so much of talk about inclusive growth and focus on rural development, there is a considerable gap between demand and supply for all financial services, especially in rural segments. Almost 70% of the rural population does not have a bank account, 85% do not have access to credit and less than 10% have any kind of insurance (life, health, crop insurance etc). More importantly, still 60% of the rural poor borrow from moneylenders, friends and other sources.

While banks have largely stayed away from lending to this segment leaving it to the microfinance companies and institutions, the statistics suggest that non-performing loans in the rural sector are similar to urban averaging between 1-2%. It would make enormous business sense

for banks and over the next few years, we would be seeing many banks enter into micro finance which will, hopefully narrow the gap between banking services provided in urban and rural India. Here's a look at some statistics on how the various segments within the Banking industry today are placed in terms of financial strength to take on these challenges:

SBI & Associates have been aggressive in their ability to attract capital, deposits and investments and have been in the forefront in advances, followed by nationalized banks and other scheduled banks. This also shows in their increase in income from interest and other incomes. Foreign banks have been very cautious in their advances. Foreign Banks have a distinct advantage - their Business per employee is almost 100% better than most banks in India and their profit per employee is 400% higher. Their cost of funds (CoF) is also significantly lower by almost 25% compared to all banks and they have performed well to get superior returns on assets. A superior CRAR, higher than the overall industry average gives a lot of comfort but a significantly higher net NPA ratio at 1.80 is still a cause of concern.

Banking in India
Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India 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. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.

History
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor 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. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The

depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras andPuducherry, then a French colony, 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 center. 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 India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian 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 (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:

Yea rs

Number of banks that failed

Authorised capital (Rs. Lakhs)

Paid-up Capital (Rs. Lakhs)

191 3

12

274

35

191 4

42

710

109

191 5

11

56

191 6

13

231

191 7

76

25

191 8

209

PROCESS INNOVATION IN THE INDIAN BANKING INDUSTRY

Wednesday, 07 January 2009

The crisis in the international financial markets had been simmering for quite some time. However, its effects are now evident with the collapse of some of the leading financial institutions. While India has not been as seriously impacted by the global financial turmoil, the current credit crunch has affected all sectors of the Indian economy. On the one hand, the Indian banking industry is witnessing rapid change given the evolving regulatory environment, rapid technological advancements, heightened competition and consolidation. On the other hand, with the global recession looming, the industry is now exploring process innovation and is more aggressively adopting technology. ValueNotes along with the Indian Banks' Association (IBA) conducted a conference on "Process Outsourcing in the Indian Banking Industry" on January 6th to address the immediate issues concerning the banking industry. There were several speakers from the banking industry including HDFC Bank, Punjab National Bank, Bank of India, IDBI, who spoke on the issues and concerns of the banks. There were also some service providers such as Intelenet, MphasiS BPO, HTMT Global and Shell Transource who were present at the conference. These service providers talked about their experience with the international banks and spoke about issues related to vendor selection and process transition. Inaugurating the conference, Dr. K Ramakrishnan, Chief Executive, IBA talked about the economy and the banking sector in his opening remarks. He said "The country will see difficult times for at least another one year and in these trying times the question that most banks are asking themselves is - How do I still lend and keep the portfolio intact?" He emphasized that this is a time to look internally and examine and set processes in place. Outsourcing in the Indian Banking Industry Globally, the banking and financial services sector has been at the forefront of the outsourcing movement. Third party service providers have also built greater processing and analytical capabilities and are able to handle more complex functions like financial modeling and equity research. In contrast with global evolution of outsourcing, the Indian banking industry has been slower to outsource. The Indian banking Industry is highly fragmented. There are banks ranging from small co-operative banks (presence limited to a few branches in a city) to large nationalized commercial banks like SBI with over 10,000 branches (one of the largest banking network in the world). The Indian banking Industry is dominated by PSBs with 70% market share. Further, there are different issues that concern the Indian banks when outsourcing. Harsha Pai, General Manager, Sparsh BPO (part of Intelenet) touched upon the issue of vendor selection and the necessary parameters while selecting a suitable vendor. Several attendees said that Indian banks were wary of outsourcing especially given the client confidentiality issues and the associated risks. According to Pai, "Initially, international banks had also certain concerns about outsourcing, however, now a majority of the banks outsource a wide range of services to third-party service providers. Indian banks need to clearly understand and convey to the service providers what is truly confidential". While there were some apprehensions about outsourcing, there were also banks such as HDFC Bank, Bank of India and Punjab National Bank who shared their experiences about outsourcing and its rewards. BinduMadhav Tikekar, Senior Vice President & Regional Head - Wholesale banking Operations, HDFC Bank talked about the rewards in the form of cost effectiveness, reduction in technical staff and low implementation and operational costs. However, he also cautioned the banks about the risks associated with outsourcing. Gaurav Bhatia, Vice President) BFS Solutioning Head - BPO, spoke about process transition - possibility and plausibility. With the help of several

case studies he drove home the point that processes are crucial for outsourcing. Banks need to standardize and document every process before they can initiate outsourcing. Process Innovation and Technology In India, outsourcing of processes is largely constrained by the RBI regulations and resistance from trade unions. According to Arun Jethmalani, CEO, ValueNotes, "Aggressive adoption of IT and centralization of operations have served as a key enabler to outsourcing of business processes in the banking industry." Other factors such as growth in the banking industry, deregulation, increasing competition, consolidation and improving benchmarks in the industry are driving the outsourcing of business processes. PSBs have been sluggish in adopting new technology as compared to global banks. Post liberalization, with RBI tightening its regulations, PSBs have undertaken massive computerization to achieve 'Total Branch Automation'. With privatization and increasing competition, all the large banks are now aggressively implementing 'Core Banking Solutions'. There is increasing focus on technology as evidenced by more and more PSU banks going for aggressive computerization and transferring their processes into some technology platform or other. While a few large PSBs have been quick to respond to competitive pressures by introducing new services, investing in technology and acquiring capabilities like marketing and sales, others lag behind. Sanjay Sharma, MD & CEO, IDBI Intech Ltd spoke about leveraging technology for process innovation. He argued that "Banks still need to reach the level where processes are streamlined in a manner so that there is consistent customer service in every branch on any bank." P A Kalyanasundar, General Manager, Bank of India said that "Unlike the new generation private and foreign banks, PSBs come with a legacy. The biggest challenge that PSBs are faced with is completeness of data. This poses a hurdle when a bank decides to outsource." On similar lines, R I S Sidhu, Chief General Manager (IT), Punjab National Bank said that "While banks need to invest in technology, it is a challenge for them to implement technology and train their staff. Explaining the marked difference when talking about technology in a PSB, he said that until recently there was very little 'technology' for the banker and processes were largely manual procedures, however today technology implies enterprise wide data warehousing." Most banks have partially outsourced their IT related requirements and matured in terms of their understanding of risks and advantages in outsourcing. We believe that with greater success in IT outsourcing, banks will be more inclined to outsource their business processes and thus leverage on the benefits and economies gained through investments in IT.

INNOVATIONS IN INDIAN BANKING SECTOR:

Category I: Types Of Innovative Banking Category II: Types Of Product & Services Category III: Electronic System TYPES OF INNOVATINE BANKING: 1:E BANKING=Internet banking (or E-banking) means any user with a personal computer
and a browser can get connected to his bank -s website to perform any of the virtual banking functions. In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. Internet banking in india
The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into 3 types based on the levels of access granted. They are: i) Information Only System: General purpose information like interest rates, branch location, bank products and their features, loan and deposit calculations are provided in the banks website. There exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and bank's application system. No identification of the customer is done. In this system, there is no possibility of any unauthorized person getting into production systems of the bank through internet. ii) Electronic Information Transfer System: The system provides customer- specific

information in the form of account balances, transaction details, and statement of accounts. The information is still largely of the 'read only' format. Identification and authentication of the customer is through password. The information is fetched from the bank's application system either in batch mode or off-line. The application systems cannot directly access through the internet. iii) Fully Electronic Transactional System: This system allows bi-directional capabilities. Transactions can be submitted by the customer for online update. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security, interbank payment gateway and legal infrastructure.

Automated Teller Machine (ATM):

ATM is designed to perform the most important function of bank. It is operated by plastic card with its special features. The plastic card is replacing cheque, personal attendance of the customer, banking hours restrictions and paper based verification. There are debit cards. ATMs used as spring board for Electronic Fund Transfer. ATM itself can provide information about customers account and also receive instructions from customers - ATM cardholders. An ATM is an Electronic Fund Transfer terminal capable of handling cash deposits, transfer between accounts, balance enquiries, cash withdrawals and pay bills. It may be on-line or 0ff-line. The on-line ATN enables the customer to avail banking facilities from anywhere. In off-line the facilities are confined to that particular ATM assigned. Any customer possessing ATM card issued by the Shared Payment Network System can go to any ATM linked to Shared Payment Networks and perform his transactions.

Credit Cards/Debit Cards:

The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Card within the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is a prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer. The buyers account is debited with the exact amount of purchases. An individual has to open an account with the issuing bank which gives debit card with a Personal Identification Number (PIN). When he makes a purchase, he enters his PIN on shops PIN pad. When the card is slurped through the electronic terminal, it dials the acquiring bank system - either Master Card or VISA that validates the PIN and finds out from the issuing bank whether to accept or decline the transactions. The customer can never overspend because the system rejects any transaction which exceeds the balance in his account. The bank never faces a default because the amount spent is debited immediately from the customers account.

Smart Card:
Banks are adding chips to their current magnetic stripe cards to enhance security and offer new service, called Smart Cards. Smart Cards allow thousands of times of information storable on magnetic stripe cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They hold a large amount of personal information, from medical and health history to personal banking and personal preferences.

Core banking Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the corporate banking division of the institution. Core banking basically is depositing and lending of money. Nowadays, most banks use core banking applications to support their operations where CORE

stands for "centralized online real-time exchange". This basically means that all the bank's branches access applications from centralized datacenters. This means that the deposits made are reflected immediately on the bank's servers and the customer can withdraw the deposited money from any of the bank's branches throughout the world. These applications now also have the capability to address the needs of corporate customers, providing a comprehensive banking solution. A few decades ago it used to take at least a day for a transaction to reflect in the account because each branch had their local servers, and the data from the server in each branch was sent in a batch to the servers in the datacenter only at the end of the day (EoD). Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches.

What is corporate banking? Corporate banking is a generic term given to different banking services that large companies, governments, or other big institutions need in order to carry out daily functions. Corporate banking consists of simple business of issuing loans to more complex matters, such as helping minimize taxes paid by overseas subsidiaries, managing changes in foreign exchange rates, or working out the details of financing packages necessary for the construction of a new office, plant or other facility. In many cases, there is an overlap between corporate banking and capital markets. Bankers associated with capital markets help companies raise money by issuing equities or debt whereas corporate banking has the bankers who typically help clients raise money through loans. When necessary, corporate bankers will bring in the expertise of their capital markets colleagues. Corporate banking also needs an understanding of complex financing methods like securitization, where a company sells bonds based on the money it will earn in the future from assets such as rented shop space or a back catalogue of products. During the last five years, in an atmosphere of fierce competition, the corporate banking has changed considerably as there has been an enormous consolidation taking place. One of the most important among such

consolidations is UK based Royal Bank of Scotland integrating the operations of Dutch asset manager ABN Amro.

Investment banking:
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions, and provide ancillary services such as market making, trading of derivatives, fixed income instruments, foreign exchange, commodities, and equity securities. Unlike commercial banks and retail banks, investment banks do not take deposits. From 1933 (GlassSteagall Act) until 1999 (GrammLeachBliley Act), the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G8 countries, have historically not maintained such a separation. There are two main lines of business in investment banking. Trading securities for cash or for other securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) is the "sell side", while dealing with pension funds, mutual funds, hedge funds, and the investing public (who consume the products and services of the sell-side in order to maximize their return on investment) constitutes the "buy side". Many firms have buy and sell side components. An investment bank can also be split into private and public functions with a Chinese wall which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information. An advisor who provides investment banking services in the United States must be a licensed broker-dealer and subject to Securities & Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulation.

Rural Banking:
Rural banking in India started since the establishment of banking sector in India. Rural Banks in those days mainly focussed upon the agro sector. Regional rural banks in India penetrated every corner of the country and extended a helping hand in the growth process of the country. SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI is spread in 13 states

extending from Kashmir to Karnataka and Himachal Pradesh to North East. The total number of SBIs Regional Rural Banks in India branches is 2349 (16%). Till date in rural banking in India, there are 14,475 rural banks in the country of which 2126 (91%) are located in remote rural areas. Apart from SBI, there are many other banks which function for the development of the rural areas in India. These banks are listed below: Andhra Pradesh Andhra Pradesh Grameena Vikas Bank Andhra Pragathi Grameena Bank Deccan Grameena Bank Chaitanya Godavari Grameena Bank Saptagiri Grameena Bank Bihar Gujarat Dena Gujarat Gramin Bank Baroda Gujarat Gramin Bank Saurashtra Gramin Bank Madhya Bihar Gramin Bank Bihar Kshetriya Gramin Bank Uttar Bihar Kshetriya Gramin Bank Kosi Kshetriya Gramin Bank Samastipur Kshetriya Gramin Bank

Chhattisgarh Chhattisgarh Gramin Bank Surguja Kshetriya Gramin Bank Durg-Rajnandgaon Gramin Bank

Himachal Pradesh Punjab Kerala Punjab Gramin Bank Faridkot-Bhatinda Kshetriya Gramin Bank Malwa Gramin Bank Himachal Gramin Bank Parvatiya Gramin Bank

Haryana Harayana Gramin Bank Gurgaon Gramin Bank

Jammu & Kashmir Assam Assam Gramin Vikash Bank Langpi Dehangi Rural Bank Jammu Rural Bank Ellaquai Dehati Bank Kamraz Rural Bank

Narmada Malwa Gramin Bank North Malabar Gramin Bank

Jharkhand Jharkhand Gramin Bank Vananchal Gramin Bank

Tamil Nadu Pandyan Grama Bank Pallavan Grama Bank

Madhya Pradesh Narmada Malwa Gramin Bank Satpura Kshetriya Gramin Bank Madhya Bharath Gramin Bank Chambal-Gwalior Kshetriya Gramin Bank

Maharashtra Marathwada Gramin Bank Aurangabad -Jalna Gramin Bank Wainganga Kshetriya Gramin Bank Vidharbha Kshetriya Gramin Bank Solapur Gramin Bank

Rewa-Sidhi Gramin Bank Sharda Gramin Bank Ratlam- Mandsaur Kshetriya Gramin Bank Vidisha Bhopal Kshetriya Gramin Bank Mahakaushal Bank Kshetriya Gramin

Thane Gramin Bank Ratnagiri-Sindhudurg Gramin Bank

Jhabua Dhar Kshetriya Gramin Bank Rajasthan Baroda Rajasthan Gramin Bank Marwar Ganganagar Bikaner Gramin Bank Rajasthan Gramin Bank Jaipur Thar Gramin Bank Hodoti Kshetriya Gramin Bank Mewar Anchalik Gramin Bank

Karnataka
Orissa

Karnataka Vikas Grameena Bank Pragathi Gramin Bank Cauvery Kalpatharu Grameena Bank Krishna Grameena Bank Chikmagalur-Kodagu Bank Grameena

Visveshvaraya Gramin Bank

West Bengal

Meghalaya

Kalinga Gramya Bank Utkal Gramya Bank Baitarani Gramya Bank Neelachal Gramya Bank Rushikulya Gramya Bank

Bangiya Gramin Vikash Bank Paschim Banga Gramin Bank Uttar Banga Kshetriya Gramin Bank

Arunachal Pradesh

Nagaland

Ka Bank Nogkyndong Ri Khasi- Jaintia

Manipur

Arunachal Pradesh Rural Bank

Tripura

Nagaland Rural Bank

Mizoram

Manipur Rural Bank

Tripura Gramin Bank

Mizoram Rural Bank

Uttar Pradesh

Uttaranchal

Purvanchal Gramin Bank Kashi Gomti Samyut Gramin Bank Uttar Pradesh Gramin Bank Shreyas Gramin Bank Lucknow Kshetriya Gramin Bank Ballia Kshetriya Gramin Bank Triveni Kshetriya Gramin Bank

Uttaranchal Gramin Bank Nainital Almora Kshetriya Gramin Bank

Aryavart Gramin Bank Kisan Gramin Bank Kshetriya Kisan Gramin Bank Etawah Kshetriya Gramin Bank Rani Laxmi Bai Kshetriya Gramin Bank Baroda Western Uttar Pradesh Gramin Bank Devipatan Kshetriya Gramin Bank Prathama Bank Baroda Eastern Uttar Pradesh Gramin Bank

TYPES OF PRODUCTS AND SERVICES: Banks in India have traditionally offered mass banking products. Most common deposit products being Savings Bank, Current Account, Term deposit Account and lending products being Cash Credit and Term Loans. Due to Reserve Bank of India guidelines, Banks have had little to do besides accepting deposits at rates fixed by Reserve Bank of India and lend amount arrived by the formula stipulated by Reserve Bank of India at rates prescribed by the latter. PLR (Prime lending rate) was the benchmark for interest on the lending products. But PLR itself was, more often than not, dictated by RBI. Further, remittance products were limited to issuance of Drafts, Telegraphic Transfers, Bankers Cheque and Internal Transfer of funds. In view of several developments in the 1990s, the entire banking products structure has undergone a major change. As part of the economic reforms, banking industry has been deregulated and made competitive. New players have added to the competition. IT revolution has made it possible to provide ease and flexibility in operations to customers. Rapid strides in information technology have, in fact, redefined the role and structure of banking in India. Further, due to exposure to global trends after Information explosion led by Internet, customers - both Individuals and Corporates - are now demanding better services with more products from their banks. Financial market has turned into a buyer's market. Banks are also changing with time and are trying to become one-stop financial supermarkets. Market focus is shifting from mass banking products to class banking with introduction of value added and customised products. A few foreign & private sector banks have already introduced customised banking products like Investment Advisory Services, SGL II accounts, Photo-credit cards, Cash Management services, Investment products and Tax Advisory services. A few banks have gone in to market mutual fund schemes. Eventually, the Banks plan to market bonds and debentures, when allowed. Insurance peddling by Banks will be a reality

soon. The recent Credit Policy of RBI announced on 27.4.2000 has further facilitated the entry of banks in this sector. Banks also offer advisory services termed as 'private banking' - to "high relationship - value" clients.

The bank of the future has to be essentially a marketing organisation that also sells banking products. New distribution channels are being used; more & more banks are outsourcing services like disbursement and servicing of consumer loans, Credit card business. Direct Selling Agents (DSAs) of various Banks go out and sell their products. They make house calls to get the application form filled in properly and also take your passport-sized photo. Home banking has already become common, where you can order a draft or cash over phone/internet and have it delivered home. ICICI bank was the first among the new private banks to launch its net banking service, called Infinity. It allows the user to access account information over a secure line, request cheque books and stop payment, and even transfer funds between ICICI Bank accounts. Citibank has been offering net banking to its Suvidha program to customers. Products like debit cards, flexi deposits, ATM cards, personal loans including consumer loans, housing loans and vehicle loans have been introduced by a number of banks. Corporates are also deriving benefit from the increased variety of products and competition among the banks. Certificates of deposit, Commercial papers, Nonconvertible Debentures (NCDs) that can be traded in the secondary market are gaining popularity. Recently, market has also seen major developments in treasury advisory services. With the introduction of Rupee floating rates for deposits as well as advances, products like interest rate swaps and forward rate agreements for foreign exchange, risk management products like forward contract, option contract, currency swap are offered by almost every authorised dealer bank in the market. The list is growing. Public Sector Banks like SBI have also started focusing on this area. SBI plans to open 100 new branches called Personal Banking Branches (PBB) this year. The PBBs will also market SBI's entire spectrum of loan products: housing loans, car loans, personal

loans, consumer durable loans, education loans, loans against share, financing against gold. ELECTRONIC BANKING (E-BANKING): It is an powerful tenure for a routine by that a patron might perform promissory note exchange electronically but upon vacation a brickand-mortar institution. The following conditions all impute to a single form or an a single some-more of electronic banking: personal mechanism (PC) banking, Internet banking, practical banking, online banking, home banking, remote electronic banking, as well as phone banking. Personal Computer promissory note as well as Internet or online promissory note have been a many mostly used designations. It should be noted, however, that a conditions used to report a assorted sorts of electronic promissory note have been mostly used interchangeably. E-banking have been a buzzwords in a tellurian blurb activities currently E-banking or electronic promissory note refers to conducting promissory note activities with a assistance of report record as well as computers. E-banking is a brew of services that embody Internet banking, Mobile banking, ATM kiosks, Fund Transfer System, Real Time Gross Settlement (payment & allotment system), Credit/Debit/Smart/Kisan Cards, Cash government services, as well as Data warehousing, Operational interpretation for MIS as well as Customer Relationship Management. Latest innovations in record similar to broadband transmission, internet entrance around mobiles (GSM) as well as WebTV will suggest yield procedure to digital revolution. Further, banks have been seeking brazen to indicate a picture of a coupon that can be zapped to an a single some-more bank, in to a repository as well as behind to customers bank.(BSO,2006) Banking exchange can be carried out twenty-four hours a day regulating these methods. In actuality judgment of Anytime, Anywhere promissory note is creation it easy for commercial operation to entrance their income some-more conveniently. It has been determined that augmenting a purpose of record in a operate classification can suggest to revoke costs as well as mostly urge operate trustworthiness (Lee, 2002). Case study:
Case Details: Price:

Case Code

: BREP005

Case Length : 14 Pages Period Pub Date Teaching Note : 1991 - 2004 : 2004 : Not Available

For delivery in electronic format: Rs. 500; For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges
Themes

Organization : Industry Countries

Abstract:

: Banking : India

In the 1990s, the banking sector in India saw greater emphasis being placed on technology and innovation. Banks began to use technology to provide better quality of services at greater speed. Internet banking and mobile banking made it convenient for customers to do their banking from geographically diverse places. Banks also sharpened their focus on rural markets and introduced a variety of services geared to the special needs of their rural customers. Banking activities also transcended their traditional scope and new concepts like personal banking, retailing and banc assurance were introduced.
The sector was also moving rapidly towards universal banking and electronic transactions, which were expected to change the way banking would be perceived in the future.

Issues::
Examine the development of the banking system in India and understand the changes occurring in it. Understand the need for innovations in banking to create greater value for customers and enhanced efficiency for the banks. Appreciate the role of technology in increasing the convenience of customers and improving banking operations. Study the banking needs of rural India and the initiatives taken up by banks to cater to these needs. Analyze the changes occurring in the Indian banking sector and how these changes are likely to influence the way banking will be done in the future

Innovations in Banking in India

Over the years, the banking sector in India has seen a number of changes. Most of the banks have begun to take an innovative approach towards banking with the objective of creating more value for customers, and consequently, the banks. Some of the significant changes in the Indian banking sector are discussed below:

Technology for Value Creation

The use of information technology in the Indian banking sector was a corollary of the liberalization process initiated in the country in the early 1990s...
Rural India Catching Up

With a majority of the Indian population living in rural areas, rural banking forms a vital component of the Indian banking system. Besides, rural banking operations in India are rather different from urban operations, due to the strong disparity that exists between urban and rural life, and the needs of these two sections of people...
Banking Beyond Banking
While traditionally, banking meant 'borrowing and lending', in the latter part of the 20th century, the word took on a different meaning altogether. Banks no longer restricted themselves to traditional banking activities, but explored newer avenues to increase business and capture new markets...

The Changing Face of Banking

Many analysts predict still more revolutionary changes in the banking sector in India. The chief of these are likely to be the concept of Universal Banks and the introduction of Smart Card technology...
The Other Side

Although the Indian banking sector has made rapid progress particularly in the number of innovations introduced, some analysts are skeptical about the efficacy and practical use of many of these services...
Where is Indian banking heading?
Banking in India has already undergone a huge transformation in the years since Independence. The rate of transformation was particularly high in the 1990s and 2000s, when a number of innovations changed the way banking was perceived... Some of the systems implemented earlier included the electronic clearing service (1995), electronic funds transfer (EFT) facility (1997) and special electronic funds transfer system (2003). Changes in the Indian banking sector in the late 1990s and early 2000s, are expected to create high value for customers as well as the banks involved.

Background Note

While the history of banking in India can be traced back several centuries, banking in the modern sense of the word actually began towards the end of the 1700s. The Bank of Hindustan, set up in 1770, by the British rulers5 in India was the earliest bank in

the country. Over the years, the British set up several other banks, notable among which were the three Presidency Banks in the Presidencies of Bengal (in 1809), Bombay (in 1840) and Madras (in 1843). These three banks were very powerful in their respective Presidencies and functioned as quasicentral banks, having even the power to issue currency notes.
Joint stock banking companies with limited liability began to make their appearance in the early-1860s.Allahabad Bank Ltd. was the first joint stock bank established in India. The Swadeshi Movement6 in the early-1900s provided an impetus to the setting up of banks owned by Indians. In 1920, the British government in India passed the Imperial Bank of India Act and

After India became independent from British rule in 1947, the newly formed government of the country passed the Banking Regulations Act, 1949, laying down the guidelines for the operation of commercial banks in the country. This regulation brought RBI under government control (under the RBI Act, 1934, the RBI did not have any government ownership). The RBI was also made the supervisory and regulatory authority of the banking sector. In 1955, the Imperial Bank was converted into the State Bank of India (SBI), through the passing of the State Bank of India Act, 1955.
In 1959, SBI took over control of eight private banks floated in the erstwhile princely states, making them 100% subsidiaries. In 1969, the government of India (GoI) undertook a bank nationalization program with the objective of streamlining the banking operations in the country and strengthening the sector through government support... Excerpts>>

Top of Form
amalgamated the three Presidency banks.

Innovations In Banking Sector

INNOVATIONS IN BANKING SECTOR INTRODUCTION The term innovation meansto make something new. Banks no longer restricted themselves to traditional banking activities but explored newer avenues to increase business and capture new market. INDIAN BANKING SECTOR From 1806 qualitative & quantitative changes have been taken place. With 1935 regulation RBI was proclaimed as central bank of India. In 1990s greater emphasis was placed on technology & innovation. New concepts like personal banking, retail banking, total branch automation etc were

introduced. INNOVATIONS IN INDIAN BANKING SECTOR TYPES OF INNOVATIVE BANKING 1. E-BANKING Enables people to carry out most of their banking transactions using a safe website which is operated by the respected bank Advantage Faster & more convenient transaction No longer required waiting in long queues Opening of account simple & easy Apply for bank loan Cost effective for banker side Fund transfer become faster & convenient Stock trading, exchanging bonds& other investment 2. CORE BANKING Depositing and lending of money Core banking solution Knowing customers needs 2. CORPORATE BANKING Financial services to large corporate & MNCs Services: Overdraft facility Domestic and international payments Funding Channel financing Letters of guarantee Working capital facility for domestic & international trade 4. INVESTMENT BANKING Creating funds and wealth of clients Fund creating in two ways: Corporate Finance M & As Professional sales person providing advice on stock trading 5. RURAL BANKING It provides & regulates credit services for the promotion & development of rural sector mainly agriculture, SSI, cottage and village industries, handicrafts and many more. Examples Of Regional Rural Banks are NABARD, HARYANA STATE COPERATIVEAPEX BANK LIMITED, SYNDICATE BANK, UNITED BANK OF INDIA KIOSK BANKING 6. NRI BANKING...

READ FULL ESSAY Banking In India

India Banking 2010 The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector. The sector now compares favorably with banking sectors in the region on metrics like growth, profitability and non-performing assets (NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is reflected in their market valuation. However, improved regulations, innovation, growth and value creation in the sector remain limited to a small part of it. The cost of banking intermediation in India is higher and bank penetration is far Lower than in other markets. Indias banking industry must strengthen itself significantly if it has to support the modern and vibrant economy which India aspires to be. While the onus for this change lies mainly with bank managements, an also be critical to their success. The failure to respond to changing market realities has stunted the development of the financial sector in many developing countries. A weak banking structure has been unable to fuel continued growth, which has harmed the long-term health of their economies. In this white paper, we emphasize the need to act

both decisively and quickly to build an enabling, rather than a limiting, banking sector in India. GOOD PERFORMANCE, QUESTIONABLE HEALTH Indian banks have compared favorably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening...

History Of Banking In India

HISTORY OF BANKING IN INDIA Banking is an old as civilization. The practice of money lending, the predecessor of banking has been practiced in india from time immemorial. During the mughal period, the indigenous bankers were faintly prominent in financing the trade and use of instrument for trade. The first bank in india, through conservative was established in1786. From 1786 until today the journey of Indian banking system can be segregated into 3 distinct phase. They are mentioned below, Early phase from 1786 to1969 of Indian banks Nationalization of Indian banking sector reforms New phase of Indian banking system with the advent of Indian financial and banking sector reforms. To make this more explanatory, the scenario can be pre fixed as phase 1, phase 2, phase 3. Phase 1 (1789-1969) The general bank of India was set up in the year 1786. Next come the Bank of Hindustan and Bank of Bengal. The East India company established Bank of Bengal(1809) Bank of Bombay(1840) and Bank of Madras(1843) as independent units and called it presidency Banks. These three amalgamated in 1920 and Imperial Bank of India was established. In 1865, Allahabad Bank was established and first time exclusively by Indian, Punjab National Bank Ltd. Was set up in 1894 with headquarters at Lahore. Between 1906 and 1913 Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore were set up. Reserve Bank Of India come up in 1935. During the first phases the growth was very show and bank experienced periodic failure between 1913 and 1948. The govt. of India came up with Banking companies Act, 1949 as per amending Act 1965. Reserve Bank of India was vested with extensive over the supervision of banking in India as central banking activity. SECOND PHASE Government took major step in this Indian, banking sector reforms after independence in 1955, it nationalized imperial bank of India with extensive banking facilities on a large scale...

Banking In India
Banking System & all about Banks,insurance,mutual funds .. 2011 APURVA DUTTA 3/9/2011 Introduction:The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years. The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank. However, in the introduction part of the entire banking cosmos, the past has been well explained under three different heads namely: * History of Banking in India

* Nationalisation of Banks in India * Scheduled Commercial Banks in India The first deals with the history part since the dawn of banking system in India. Government took major step in the 1969 to put the banking sector into systems and it nationalised 14 privatebanks in the mentioned year. This has been elaborated in Nationalisationof Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial banks. The description along with a list of scheduled commercial banks are given on this page.

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