BY, VISHNU.VS PGDM-IB-058 vishnuvs2007@gmail.

com

WHAT IS BANK

A bank is a financial institution that serves as a financial A bank is a financial institution that of severalas serves intermediary. The term "bank" may refer to one a financialof entities: related types intermediary. The term "bank" may A central one of several related types of entities: refer to bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary A central bank circulates money on behalf of a policy, which regulates the money supply.

government and acts as its monetary authority by implementing monetary policy, which regulates the money supply.

Banking provides a safe place to save excess cash, known as deposits. It also supplies liquidity to the economy by loaning this money out to help businesses grow and to allow consumers to purchase homes, cars and consumer products. Banks primarily make money by charging higher interest rates on their loans than they pay for deposits.

1.

2.

COMMERCIAL BANK SAVINGS BANK COMMERCIAL BANK

A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending, or indirectly by investing through the capital markets. Within the global financial markets, these institutions connect market participants with capital deficits (borrowers) to market participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets.

A savings bank (known as a "building society" in the United Kingdom) is similar to a savings and loan association (S&L). They can either be stockholder owned or mutually owned, in which case they are permitted to only borrow from members of the financial cooperative. The asset structure of savings banks and savings and loan associations is similar, with residential mortgage loans providing the principal assets of the institution's portfolio.

To do banking business on Co-operative Principles by accepting for the purpose of lending or investment of deposits of money from members as well as the public, repayable on demand or otherwise and with drawable by cheque, draft, pay order or pay order. To raise funds by issue of shares and/or any other securities as permitted by the Regulatory Authority. To encourage thrift, self-help and co-operation among members. To prevent members from falling into permanent indebtedness and to assist them financially in times of difficulty and to help them to get out of debt. To engage in any one or more of the following forms of business The granting and issuing of letters of credit, travellers` cheques and circular notes and to do all forms of foreign exchange business; The collecting and transmitting of money and securities;

1.

Moody's changes the Ratings of Indian Banks and Financial Institutions India's long term foreign currency rating upgraded to investment grade

2.

3.

Upgrade of India's Outlook to Stable From Negative Indian Banking -Moving towards Globalisation
Micro Finance: Issues & Recommendations Ratings of major Indian financial institutions/commercial Banks

4. 5.

Banking channels refer to the means by which customers access a banks products and services. While it is tempting for a bank to offer many channels, it is a big challenge to manage all of them due to cost and the fact that a unified view of client interactions becomes difficult.

Branch Banking ATMs Net Banking Phone Banking Mobile Banking

Branch Banking: This is still the most popular channel. (Note: include this as a pop-up: the total number of Scheduled Commercial Bank branches in India was 76,518 at end- June 2008 a growth of 5.2 per cent during the year. These comprised 31,127 rural branches, 17,858 semi-urban branches and 27,533 urban and metropolitan branches. The geographic distribution of branches, interestingly, is concentrated in Southern and Eastern India!

Source: RBI report ON TREND AND PROGRESS OF BANKING IN INDIA 2007-08 However, note that it is also the most expensive channel for a bank. It involves large investment in infrastructure and employees. In fact, banks like Citibank in India charge customers if they use branch banking! It is trying to move customers to more cost-effective channels for standard transactions which dont need a face-face interaction.

The functions of a branch are illustrated below. They can be divided into back-office or operations, and the front-office or customer interfacing functions. Most large banks today centralize operations. For example, if you walk into ICICI Bank to open your account, the branch will just accept the documents and verify them. The actual opening of the account on the system, generation of debit card, cheque book, etc. all happens in one centralized processing center. Hence for large banks, operations within each branch are minimal. The front office or customer facing functions are those of the Teller, Customer Service and Sales. Often, as shown, one person can have dual responsibilities: a Teller can also answer customer queries. A customer service staff can use his interaction time to sell a bank product.

(Note: What do we mean by a product and a service in the world of banking? A standardized set of services with standard fees/rates attached would be called a product. For example, a savings account is a standard set of services and would be called a product. A foreign currency transaction or a demand draft for a customer on the other hand, would be called a service.)

ATMs can be just cash dispensers or evolved facilities offering facilities such as:

Balance Enquiry Statement of Accounts Cash Withdrawal Cash deposit Check deposit Check cashing Funds transfer Bill Payment Currency Exchange Loan Application Investment Advice MF, Insurance sales Electronic Purse loading Ticketing

ATMs communicate with each other through a network. In India today we have a national-level ATM switch, which inter-connects nearly 35,000 ATMs of banks, across the country. Thats the reason why, even though you may be an Axis Bank employee, you can withdraw funds from an ATM managed by, say, HSBC. Earlier, such third-party ATM transactions would result in a fee income to the thirdparty bank (in the example above, HSBC), charged from the customer. A recent RBI circular allows customers to make 5 transactions at third party ATMs.

THE BIG BOYS CLUB

Heres a look at the large ATM players:

ATMs 11250 4600 3570 3,177* 2007

Banks with maximum number of ATMs

Bank

State Bank Group

CICI Bank

Axis Bank

HDFC Bank

Canara Bank

As on December 31, 2008

Internet Banking refers to the ability to access banking services/products via the internet. It is one of the cheapest channels for a bank Typical Internet Banking offerings include Static information about the banks offerings, application forms Specific account information: Statements, Alerts, Ability to change/edit account information Stop payments, cheque book requests/other instructions Payment transactions to other accounts within and external to the bank

Banking using a mobile phone network can use either SMS or WAP technology. Interactions can be classified as either transactions or enquiries; as also if they are bank initiated (Push) or Customer initiated (Pull), as shown in the table below.