An Organizational Study at Indian Bank.docx

7/30/2019 An Organizational Study at Indian Bank.docx

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CHAPTER 1


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CHAPTER 1

1.1. Introduction:The Indian banking system is characterized by a large number of banks with

mixed ownership. The commercial banking segment comprises 27 public sector banks in which

the Government has majority ownership, 40 private sector banks, and 33 foreign banks. Total

bank assets constituted a little over 70 percent of GDP in 2003-04. Public sector banks had 75

percent of the assets of the banking system in 2003-04, while private and foreign banks held 25

percent. In 1991, by comparison, public sector banks share of the total assets of the banking

system was a little over 90 percent. Prior to the initiation of financial sector reforms in 1992, the

Indian financial system essentially catered to the needs of planned development, and thegovernment sector had a predominant role in every sphere of economic activity. The preemption

of a large proportion of bank deposits in the form of reserves and an administered interest rate

regime resulted in high-cost and low-quality financial intermediation. The existence of a

complex structure of interest rates arising from economic and social concerns about providing

concessional credit to certain sectors resulted in cross subsidization, which implied that higher

rates were charged to non-concessional borrowers. The system of administered interest rates was

characterized by detailed regulatory prescriptions on lending and deposits, leading to a

multiplicity of interest rates. As a result, the spreads between deposit and lending rates of

commercial banks increased, and the administered lending rates did not factor in credit risk.

The period 1992-97 laid the foundations for reform in the banking system

(Rangarajan, 1998). It saw the implementation of prudential norms pertaining to capital

adequacy, income recognition, asset classification, provisioning, and exposure norms. While

these reforms were being implemented, the world economy also witnessed significant changes,

coinciding with the movement towards global integration of financial services (Government of

India, 1998). Against such a backdrop, a second government-appointed committee on banking

sector reforms provided the blueprint for the current reform process (Government of India,

1998). Critical and noteworthy reforms in the financial system during the reform period included

the following (Bhide, Prasad, and Ghosh, 2001):

Lowering of statutory reserve requirements to the current levels of 5 percent for cashreserves and 25 percent for statutory liquidity ratios.

Liberalizing the interest rate regime, allowing banks the freedom to choose their depositand lending rates.

Infusing competition by allowing more liberal entry of foreign banks and permitting theestablishment of new private banks.


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Introducing micro-prudential measures such as capital adequacy requirements, incomerecognition, asset classification and provisioning norms for loans, exposure norms, and

accounting norms.

Diversifying ownership of public sector banks by enabling the state-owned banks to raiseup to 49 percent of their capital from the market. Seventeen state-owned banks accessed

the capital market and raised around 82 billion rupees (Rs) as of end-March 2004.

Mandating greater disclosure in the balance sheets to ensure greater transparency. Adopting a consultative approach to policy formulation with measures being ushered in

after discussions with market participants to provide useful lead time to market players to

make necessary adjustments.

As a consequence of the reforms, public sector banks share of total assets in the

banking system was reduced from 90 percent to 75 percent between 1991 and 2004. The five-

bank asset concentration ratio declined from 0.51 in 1991-92, to 0.44 in 1995-96, and to 0.43 in

2003-04 (Table 1). Even the five-bank loan concentration ratio showed a decline from 0.68 in

1991-92, to 0.48 in 1995-96, and further to 0.41 percent in 2003-04.

The entry of new banks in the private sector reduced asset concentration, which

may have strengthened competition. The general notion is that competition enhances efficiency.

This may not always be true. It is also argued that increased competition may lead to excessive

risk-taking. Others have argued that concentration/consolidation is needed to gain economies of

scale and scope so that increased concentration leads to efficiency improvements. This paper

does not attempt to discuss the pros and cons of competition. It evaluates the degree of

competition in the Indian banking system. A number of factors make the banking sector in India

an interesting case study. First, during the 1990s, India underwent liberalization of the banking

sector with the objective of enhancing efficiency, productivity, and profitability (Government of

India, 1991). Second, the banking sector underwent an important transformation, driven by the

need for creating a market-driven, productive, and competitive economy in order to support

higher investment levels and accentuate growth (Government of India, 1998).

1.2 Objectives of Study:

The objectives of this organizational study are:

To fulfill the requirement of the curriculum To study about the organization policies and procedures, its vision and mission To understand the organization hierarchy To study the functions of various departments To study about the products To understand the day to day activities of the departments and how they are inter-related.


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To analyze financial performance To know how the theory learned are practically applied in an organization To evaluate the strength, weakness, opportunity and threats of the company To study the overall performance of the company

1.3 Scope of Study:

The purpose of the study is to familiarize with the industry and attain a firsthand

experience of the functioning of the organization. It provides a chance to interact with the

different department and authorities in the organization, and also enable to know how the

theory learned are practically applied in an organization.

1.4 Period of Study:

The organization study was conducted at English Indian Bank, Villupuram for

period of 40 days from May 28 to July 06, 2012.

1.5 Data Collection:

There are two types of data collection methods available.

1. Primary data collection

2. Secondary data collection

1) Primary data:

The primary data is that data which is collected fresh or first hand, and for first

time which is original in nature. Primary data can collect through personal interview,

questionnaire etc. to support the secondary data.


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2) Secondary data collection method:

The secondary data are those which have already collected and stored. Secondary

data easily get those secondary data from records, journals, annual reports of the company etc. It

will save the time, money and efforts to collect the data. Secondary data also made available

through trade magazines, balance sheets, books etc.

Data Collection Sources:

This project is based on primary data collected through personal interview of

concerned staff member of the organization. Primary data collection had limitations such as

matter confidential information thus secondary information collected through various books and

internet sites are used. The data collection was aimed at organizational study at Indian Bank.

Primary Source:

Personal interview of staff members of the organization

Secondary Sources:

Books Websites Reports Research Papers

1.6 Limitation:

The study is conducted only in one branch on Indian Bank. Due to confidential information, most of the data are collected by means of secondary

source. The study is confined to Indian bank alone among the whole Indian banking industry The study is conducted only during the 40 days of internship, hence only General

banking procedures and familiar products were observed.


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CHAPTER 2


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CHAPTER 2

2.1 Industry Profile:

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should be able to

meet new challenges posed by the technology and any other external and internal factors. For the

past three decades India's banking system has several outstanding achievements to its credit. The

most striking is its extensive reach. It is no longer confined to only metropolitans or

cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of

the country. This is one of the main reasons of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich

dividends with the nationalization of 14 major private banks of India. Not long ago, an account

holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own

money. Today, he has a choice. Gone are days when the most efficient bank transferred money

from one branch to other in two days. Now it is simple as instant messaging or dials a pizza.

Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786

till today, the journey of Indian Banking System can be segregated into three distinct phases.

They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks; Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms; New phase of Indian Banking System with the advent of Indian Financial & Banking

Sector Reforms after 1991.

2.2. History of Banks:

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 the Bank of Hindustan, both of

which are now defunct. The oldest bank in existence in India is the State Bank of India, whichoriginated 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 1925 to form the Imperial Bank of India, which, upon

India's independence, became the State Bank of India.


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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. 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 in1862; branches in Madras and Pondicherry, 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 Bank of Bengal, which later became the State Bank of India. 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 arelative 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 undercapitalized 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 likesome 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


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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 fervor 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 nationalized banks started in this district and also a leadingprivate sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian

Banking".

2.2.1 Pre-Independence:

The period 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:

Table 1: Banks failed between 1913-1918

YEAR NUMBER OF

BANKS FAILED

AUTHORIZED

CAPITAL

PAID UP CAPITAL

1913 12 274 35

1914 42 710 109

1915 11 56 51916 13 231 4

1917 9 76 25

1918 7 209 1

Source: www.wikipedia.org

2.2.2 Post-independence:

The partition of India in 1947 adversely impacted the economies of Punjab and

West Bengal, paralyzing banking activities for months. India's independence marked the end of a

regime of the Laissez-faire for the Indian banking. The Government of India initiated measures

to play an active role in the economic life of the nation, and the Industrial Policy Resolution

adopted by the government in 1948 envisaged a mixed economy. This resulted into greater

involvement of the state in different segments of the economy including banking and finance.

The major steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized,and it became an institution owned by the Government of India.


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In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank ofIndia (RBI) "to regulate, control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or branch of an existingbank could be opened without a license from the RBI, and no two banks could have

common directors.

However, despite these provisions, control and regulations, banks in India except theState Bank of India, continued to be owned and operated by private persons. This

changed with the nationalization of major banks in India on 19 July, 1969.

2.2.3 Nationalization:

By the 1960s, the Indian banking industry has become an important tool to

facilitate the development of the Indian economy. At the same time, it has emerged as a large

employer, and a debate has ensued about the possibility to nationalize the banking industry.Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual

conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank

Nationalization." The paper was received with positive enthusiasm. Thereafter, her move was

swift and sudden, and the GOI issued an ordinance and nationalized the 14 largest commercial

banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of

India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue

of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of

Undertaking) Bill, and it received the presidential approval on 9 August, 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980.The stated reason for the nationalization was to give the government more control of credit

delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking

business of India. Later on, in the year 1993, the government merged New Bank of India with

Punjab National Bank. It was the only merger between nationalized banks and resulted in the

reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the

nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian

economy.

The nationalized banks were credited by some; including Home minister P.

Chidambaram, to have helped the Indian economy withstand the global financial crisis of 2007-2009.


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2.2.4 Liberalization:

Until 1991, the financial sector in India was heavily controlled, and commercial

banks and term lending institutions, the two dominant financial intermediaries, had mutually

exclusive roles and objectives and operated in a largely stable environment, with little or no

competition. Term lending institutions were focused on the achievement of the Indian

governments various socio-economic objectives, including balanced industrial growth and

employment creation, especially in areas requiring development. These lending institutions

provided access to long-term funds at subsidized rates through loans and equity from the

Government of India and from funds guaranteed by the Government of India originating from

commercial banks in India and foreign currency resources originating from multilateral and

bilateral agencies. The focus of the commercial banks was primarily to mobilize household

savings through demand and time deposits and to use these deposits to meet the short-term

financial needs of borrowers in industry, trade and agriculture. In addition, the commercial banks

provided a range of banking services to individuals and businesses. However, since 1991, there

have been comprehensive changes in the Indian financial system. Various financial sector

reforms, implemented since 1991, have transformed the operating environment of the banks and

long-term lending institutions. In particular, the deregulation of interest rates, the emergence of a

liberalized domestic capital market, and entry of new private sector banks, along with the

broadening of term lending institutions product portfolios, have progressively intensified the

competition among banks and term lending institutions. RBI has permitted the transformation of

term lending institutions into banks subject to compliance with the applicable law.

2.2.5 Banking Sector Reforms:

In the wake of the last decade of financial reforms, the banking industry in India

has undergone a significant transformation, which has covered almost all important facets of the

industry. Most large banks in India were nationalized by 1980 and thereafter were subject to a

high degree of control until reform began in 1991. In addition to controlling interest rates and

entry into the banking sector, the regulations also channeled lending into priority sectors. Banks

were required to fund the public sector through the mandatory acquisition of low interest-

bearing government securities or statutory liquidity ratio bonds to fulfill statutory liquidity

requirements. As a result, bank profitability was low, non-performing assets were comparatively

high, capital adequacy was diminished, and operational flexibility was hindered.

Recent Structural Reforms Proposed Amendments to the Banking Regulation Act

Legislation seeking to amend the Banking Regulation Act has been introduced in the Indian

Parliament. As presently drafted, the main amendments propose: to permit banking companies to

issue preference shares that will not carry any voting rights, make prior approval of the Reserve

Bank of India mandatory for the acquisition of more than 5.0% of a banking companys paid up


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capital or voting rights by any individual or firm or group, remove the minimum statutory

liquidity ratio requirement of 25.0%, giving the Reserve Bank of India discretion to reduce the

statutory liquidity ratio to less than 25.0%; and remove the limit of 10.0% on the maximum

voting power exercisable by a shareholder in a banking company.

2.2.6 Universal Banking Guidelines:

Universal banking in the Indian context means the transformation of long-term

lending institutions into banks. Pursuant to the recommendations of the Narasimham Committee

II and the Khan Working Group, the Reserve Bank of India, in its midterm review of monetary

and credit policy for fiscal 2000, announced that long-term lending institutions would have the

option of transforming themselves into banks subject to compliance with the prudential norms as

applicable to banks. If a long-term lending institution chose to exercise the option available to it

and formally decided to convert itself into a universal bank, it could formulate a plan for thetransition path and a strategy for smooth conversion into a universal bank over a specified time

frame. In April 2001, the Reserve Bank of India issued guidelines on several operational and

regulatory issues which were required to be addressed in evolving the path for transition of a

long-term lending institution into a universal bank.

2.2.7 Pension Reforms:

Currently, there are three categories of pension schemes in India: pension

schemes for government employees, pension schemes for employees in the organized sector and

voluntary pension schemes. In case of pension schemes for government employees, the

government pays its employees a defined periodic benefit upon their retirement. Further, the

contribution towards the pension scheme is funded solely by the government and not matched by

a contribution from the employees. The Employees Provident Fund, established in 1952, is a

mandatory programme for employees of certain establishments. It is a contributory programme

that provides for periodic contributions of 10% to 12% of the basic salary by both the employer

and the employees. The contribution is invested in prescribed securities and the accumulated

balance in the fund (including the accretion thereto) is paid to the employee as a lump sum on

retirement. Besides these, there are voluntary pension schemes administered by the government

(the Public Provident Fund, to which contribution may be made up to a maximum of Rs. 70,000)

or offered by insurance companies, where the contribution may be made on a voluntary basis.Such voluntary contributions are often driven by tax benefits offered under the scheme. In 1998,

the government commissioned the Old Age Social and Income Security (OASIS) project and

nominated an expert committee to suggest changes to the existing policy framework. The

committee submitted its report in January 2000, recommending a system for private sector

management of pension funds to provide market-linked returns. It also recommended the

establishment of a separate pensions regulatory authority to regulate the pensions system.


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Subsequently, in the budget for fiscal 2001, the government announced that a high level

committee would be formulated to design a contribution-based pension scheme for new

government recruits. The government also requested the Insurance Regulatory and Development.

Authority has to draw up a road-map for implementing the OASIS report. The

Insurance Regulatory and Development Authority submitted its report in October 2001. Thereport suggested that pension fund managers should constitute a separate legal entity to conduct

their pension business. In August 2003, the government announced that it would be mandatory

for its new employees (excluding defense personnel) to join a new defined contribution pension

scheme where both the government and the employee would make monthly contributions of 10%

of the employees salary. The government also announced that a Pension Fund Development and

Regulatory Authority would be set up to regulate the pension industry. The government

constituted the interim Pension Fund Development and Regulatory Authority on October 11,

2003. In December 2003, the government announced that the new pension scheme would be

applicable to all new recruits to Indian Government service (excluding defense personnel) from

January 1, 2004. Further, on December 30, 2004, the government promulgated an ordinance

establishing the statutory regulatory body, Pension Fund Regulatory and Development Authority

to undertake promotional, developmental and regulatory functions with respect to the pension

sector. In March 2005, the Government tabled the Pension Fund and Development Authority Bill

in Parliament. The Union Budget for fiscal 2006 has recognized the opportunities for foreign

direct investment in the pension sector and it has also announced that the government would

issue guidelines for such investment.

2.2.8 Technology:

Technology is emerging as a key-driver of business in the banking and financial services

industry. Banks are developing alternative channels of delivery like ATMs, tele-banking, remote

access and Internet banking etc. Indian banks have been making significant investments in

technology. Besides computerization of front-office operations, the banks have moved towards

back-office centralization. Banks are also implementing Core Banking or Centralized

Banking, which provides connectivity between branches and helps offer a large number of

value-added products, benefiting a larger number of customers. RBI Annual Report for the fiscal

2005 states that the use of ATMs has been growing rapidly and this has helped in optimizing the

investments made by banks in infrastructure. Banks have joined together in small clusters to

share their ATM networks during the year. There are five such ATM network clusters

functioning in India. The payment and settlement system is also being modernized. RBI is

actively pursuing the objective of establishing a Real Time Gross Settlement (RTGS) system, on

par with other developed economies.


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2.2.9 Corporate Governance:

Adoption of good corporate governance practices has been getting the attention of

banks as well as the regulators and owners in India. Banks in India now invariably have an Audit

Committee of the Board of directors which is entrusted with the task of overseeing the

organization, operationalisation and quality control of the internal audit function, reviewing

financial accounts and follow-up with the statutory and external auditors of the bank as well as

examinations by regulators. Disclosure levels in bank balance sheets have been enhanced, while

measures have also been initiated to strengthen corporate governance in banks.

2.3. Nature of Banking in India:

A banking company in India has been defined in the banking companies

act,1949.as one which transacts the business of banking which means the accepting, for the

purpose of lending or investment of deposits of money from the public, repayable on demand or

otherwise and withdraw able by cheque, draft, order or otherwise. Most of the activities a Bank

performs are derived from the above definition. In addition, Banks are allowed to perform certain

activities which are ancillary to this business of accepting deposits and lending. A bank's

relationship with the public, therefore, revolves around accepting deposits and lending money.

Another activity which is assuming increasing importance is transfer of money - both domestic

and foreign from one place to another. This activity is generally known as "remittance business"

in banking parlance. The so called FOREX (foreign exchange) business is largely a part of

remittance albeit it involves buying and selling of foreign currencies.

2.4. Types of Banks:

Indian banking industry has been divided into two parts, organized and

unorganized sectors. The organized sector consists of Reserve Bank of India, Commercial Banks

and Co-operative Banks, and Specialized Financial Institutions (IDBI, ICICI, IFC etc). The

unorganized sector, which is not homogeneous, is largely made up of money lenders and

indigenous bankers.


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An outline of the Indian Banking structure may be presented as follows:-

1. Reserve bank of India.

2. Indian Scheduled Commercial Banks.

a) State Bank of India and its associate banks.

b) Twenty nationalized banks.

c) Regional rural banks.

d) Other scheduled commercial banks.

3. Foreign Banks

4. Non-scheduled banks.

5. Co-operative banks.

2.4.1 Reserve Bank of India:

The central bank of the country is the Reserve Bank of India (RBI). It was

established in April 1935 with a share capital of Rs. 5 cores on the basis of the recommendations

of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully

paid which was entirely owned by private shareholders in the beginning. The Government held

shares of nominal value of Rs. 2, 20,000. Reserve Bank of India was nationalized in the year1949. The general superintendence and direction of the Bank is entrusted to Central Board of

Directors of 20 members, the Governor and four Deputy Governors, one Government official

from the Ministry of Finance, ten nominated Directors by the Government to give representation

to important elements in the economic life of the country, and four nominated Directors by the

Central Government to represent the four local Boards with the headquarters at Mumbai,

Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central

Government appointed for a term of four years to represent territorial and economic interests and

the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was

commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the

functioning of the Bank.

The Bank was constituted for the need of following:

To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage


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2.4.2 Commercial Banks:

Commercial banks in India have traditionally focused on meeting the short-term

financial needs of industry, trade and agriculture. At the end of March 2005 there were 284scheduled commercial banks and four non-scheduled commercial banks in the country, with a

network of 68,116 branches. Scheduled commercial banks are banks that are listed in the second

schedule to the RBI Act, and may further be classified as public sector banks, private sector

banks and foreign banks. Scheduled commercial banks have a presence throughout India, with

nearly 69.49% of bank branches located in rural or semi-urban areas of the country. A large

number of these branches belong to the public sector banks.

2.4.3 Public Sector Banks:

Public sector banks make up the largest category of banks in the Indian banking

system. There are 28 public sector banks in India. They include the SBI and its associate banks

and 19 nationalized banks. Nationalized banks are governed by the Banking Companies

(Acquisition and Transfer of Undertakings) Act 1970 and 1980. The banks nationalized under

the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 and 1980 are

referred to as corresponding new banks. At the end of March 2005, public sector banks had

47,320 branches and accounted for 74% of the aggregate deposits and 70.47% of the outstanding

gross bank credit of the scheduled commercial banks.

2.4.4 Regional Rural Banks:

Regional rural banks were established from 1976 to 1987 jointly by the Central

Government, State Governments and sponsoring public sector commercial banks with a view to

develop the rural economy. Regional rural banks provide credit to small farmers, artisans, small

entrepreneurs and agricultural laborers. There were 196 regional rural banks at the end of March

2005 with 14,433 branches, accounting for 3.50% of aggregate deposits and 2.81% of gross bank

credit outstanding of scheduled commercial banks.

2.4.5 Private Sector Banks:

After bank nationalization was completed in 1969 and 1980, the majority of

Indian banks were public sector banks. Some of the existing private sector banks, which showed

signs of an eventual default, were merged with state-owned banks. In July 1993, as part of the


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banking reform process and as a measure to induce competition in the banking sector, RBI

permitted entry by the private sector into the banking system. This resulted in the introduction of

nine private sector banks. These banks are collectively known as the new private sector banks.

At year-end fiscal 2005, private sector banks accounted for approximately 18.1% of aggregate

deposits and 20.0% of gross bank credit outstanding of the scheduled commercial banks. Their

network of 6,143 branches accounted for 9.0% of the total branch network of scheduled

commercial banks in the country.

2.4.6 Foreign Banks:

At the end of March 2005, there were 31 foreign banks with 220 branches

operating in India, accounting for 4.40% of aggregate deposits and 6.60% of outstanding gross

bank credit of scheduled commercial banks. The Government of India permits foreign banks to

operate through (i) branches; (ii) a wholly owned subsidiary; or (iii) a subsidiary with aggregateforeign investment of up to 74% in a private bank. The primary activity of most foreign banks in

India has been in the corporate segment. However, some of the larger foreign banks have made

consumer financing a significant part of their portfolios. These banks offer products such as

automobile finance, home loans, credit cards and household consumer finance. The Government

of India in 2003 announced that wholly-owned subsidiaries of foreign banks would be permitted

to incorporate wholly-owned subsidiaries in India. Subsidiaries of foreign banks will have to

adhere to all banking regulations, including priority sector lending norms, applicable to domestic

banks. In March 2004, the Ministry of Commerce and Industry, Government of India announced

that the foreign direct investment limit in private sector banks has been raised to 74% from the

existing 49% under the automatic route including investment by FIIs. The announcement also

stated that the aggregate of foreign investment in a private bank from all sources would be

allowed up to a maximum of 74% of the paid up capital of the bank.

2.4.7 Co-operative Banks:

Cooperative banks cater to the financing needs of agriculture, small industry and

self-employed businessmen in urban and semi-urban areas of India.

The state land development banks and the primary land development banks

provide long-term credit for agriculture. In the light of the liquidity and insolvency problems

experienced by some cooperative banks in fiscal 2001, RBI undertook several interim measures

to address the issues, pending formal legislative changes, including measures related to lending

against shares, borrowings in the call market and term deposits placed with other urban

cooperative banks. RBI is currently responsible for the supervision and regulation of urban co-

operative societies, the National Bank for Agriculture and Rural Development, state co-operative


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banks and district central co-operative banks. The Banking Regulation (Amendment) and

Miscellaneous Provisions Act, 2004 (which came into effect as of September 24, 2004), specifies

that all co-operative banks are under the supervision and regulation of RBI.

Until the early 1990s, the Indian financial system was strictly controlled. Interest

rates were administered, formal and informal parameters governed asset allocation, and strictcontrols limited entry into and expansion within the financial sector. The Government of Indias

economic reform program, which began in 1991, encompassed the financial sector. The first

phase of the reform process began with the implementation of the recommendations of the

Committee on the Financial System, the Narasimham Committee I. The second phase of the

reform process began in 1999. The discussion below presents an overview of the role and

activities of RBI and of each of the major participants in the Indian financial system, with a focus

on the commercial banks. This is followed by a brief summary of the banking reform process

along with the recommendations of various committees that have played a key role in the reform

process. A brief discussion on the impact of the liberalization process on commercial banks and

financial sector is then presented. Also, reforms in the non-banking financial sector are briefly

reviewed.

2.5. Functions of a Bank:

Banking Regulation Act in India, 1949 defines banking as Accepting for the

purpose of lending or investment of deposits of money from the public, repayable on demand

and withdrawal by cheque, drafts, orders etc. as per the above definition a bank essentially

performs the following functions:-

Accepting Deposits or savings functions from customers or public by providing bankaccount, current account, fixed deposit account, recurring accounts etc.

The payment transactions like lending money to the public. Bank provides an effectivecredit delivery system for loanable transactions.

Provide the facility of transferring of money from one place to another place. Forperforming this operation, bank issues demand drafts, bankers cheques, money orders

etc. for transferring the money. Bank also provides the facility of Telegraphic transfer or

tele-cash orders for quick transfer of money.

A bank performs a trustworthy business for various purposes. A bank also provides the safe custody facility to the money and valuables of the general

public. Bank offers various types of deposit schemes for security of money. For keeping

valuables bank provides locker facility. The lockers are small compartments with dual

locking system built into strong cupboards. These are stored in the banks strong room

and are fully secured.


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Banks act on behalf of the Govt. to accept its tax and non-tax receipt. Most of thegovernment disbursements like pension payments and tax refunds also take place

through banks.

Functioning of a Bank is among the more complicated of corporate operations.

Since Banking involves dealing directly with money, governments in most countries regulate thissector rather stringently.

In India, the regulation traditionally has been very strict and in the opinion of

certain quarters, responsible for the present condition of banks, where NPAs are of a very high

order. The process of financial reforms, which started in 1991, has cleared the cobwebs

somewhat but a lot remains to be done.

The multiplicity of policy and regulations that a Bank has to work with makes its

operations even more complicated, sometimes bordering on illogical. This section, which is also

intended for banking professional, attempts to give an overview of the functions in as simplemanner as possible.

Banking Regulation Act of India, 1949 defines Banking as "accepting, for the

purpose of lending or investment of deposits of money from the public, repayable on demand or

otherwise and withdraw able by cheques, draft, and order or otherwise."

2.6 Structure of Indian Banking System:

The banking system, largely, comprises of scheduled banks (banks that are listedunder the Second Schedule of the RBI Act, 1934). Unscheduled banks form a very small

component (function in the form of Local Area Bank). Scheduled banks are further classified

into commercial and cooperative banks, with the basic difference in their holding pattern.

Cooperative banks are cooperative credit institutions that are registered under the Cooperative

Societies Act and work according to the cooperative principles of mutual assistance.


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Figure 1: Structure of Indian Banking System.

Source: moneyworks4me.com

2.7 Major Players in Indian Banking Industry:

The banking in India started with the establishment of the General Bank of India

in 1786. Later the Bank of Hindustan was also established. However, both the banks are not in

functional state currently. It's the State Bank of India, which is currently the oldest bank in India

in existence, established in 1806.

Since the beginning, due to huge market potential, a number of banking

companies have come up in India, which include both, public sector as well as private sector

banks. However, the list of top 10 banking companies in India has mostly been dominated by the

State Bank of India (SBI).

Since the initial days, the State Bank of India has dominated the Indian banking

industry accounting for nearly 20% of the Indian banking system's deposit base. It also has got

almost 20% of the credit portfolio.The recent economic slowdown, like many other industries,

also affected the Indian banking industry. However, it showed resilience to the global recession.

Public Sector Banks (SBI and Nationalized banks) control more than 74-75% of

the total credit and deposits businesses in India whereas Private Sector Banks around 17-18%.


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Table 2: Major Players in Banking Sector

Source: moneyworks4me.com

2.8 Market Share of Indian Banks:

Table 3: Market share of Major Banks in India

Name Last Price Market Cap.

(Rs. Cr.)

Net Interest

Income

Net Profit Total

Assets

SBI 2,132.00 143,066.76 106,521.45 11,707.29 1,335,519.2

4

Bank of

Baroda

696.35 28,716.59 29,673.72 5,006.96 447,321.46

PNB 819.40 27,792.30 36,428.03 4,884.20 458,194.01

Bank ofIndia

324.55 18,646.05 28,480.67 2,677.52 384,535.47

Canara

Bank

402.40 17,826.32 30,850.62 3,282.72 374,160.20

IDBI Bank 92.65 11,844.45 23,369.93 2,031.61 253,376.80

Union

Bank

191.90 10,565.04 21,144.28 1,787.13 235,984.44

IndianBank

184.75 7,940.00 12,231.32 1,746.97 141,419.20

AllahabadBank

139.95 6,997.87 15,523.28 1,866.79 182,934.57

OrientalBank

238.65 6,962.88 15,814.88 1,141.56 178,130.17

Source: www.moneycontrol.com


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2.9Indian bank Profile:

Indian Bank was founded by Annamalai and Ramaswami Chettiar on 15August 1907.

This was in response to the financial crash faced by two leading companies in Madras,Arbuthnots and Binns. Indian Bank began its international expansion in 1932 when it opened a

branch in Colombo. A branch in jaffina followed three years later, but this was not successful

and was closed in 1939, just before World War 2 reached the region. The Indian Bank Ltd, was

born as Swadeshi Bank due to efforts of Shri. V Krishnaswamy Iyer and others in the wake of

widespread misery caused to the depositors by the failure of M/S Arbuthnot & Co. 1906. With

the support of cross section of community, the Indian Bank Ltd. Was born as on march 5, 1907

under the companies Act,1882. It started its transaction on 15/8/1907, the day that that happened

to be the memorable day of Independence Day for the republic of India forty years later. Indian

Bank is one of the indigenous banks of India that emerged as a result of the Swadeshi Movement

during the British Raj.

2.9.1 Global Presence:

The modest beginning made by the Indian Bank has come a long way since then,

with 1642 branches located nationwide within India and Overseas branches in Singapore and

Colombo as of April 2009. The bank also has 40 Overseas Correspondent banks in 70 countries,

giving a strong presence internationally. A 22,000 strong workforce of dedicated employees

takes pride in serving the Indian Bank.

2.9.2 Banking Activities:

Indian Bank offers a wide variety of Banking Products and Services to its

customers, including various Deposit Schemes, Loan Options, Financial Services, Stock

Investment Services and a number of specialized services such as Remittance, Collection, 7 Day

Banking Branches, Cash Management and Electronic Funds Transfer. As of April 2009, the bank

has Core Banking Solution (CBS) implemented in its 1642 branches and 66 extension counters.

The bank has 755 connected Automatic Teller Machines (ATMs) installed in 225 locationsnationwide.


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2.9.3 Subsidiary Companies:

Apart from its Regular Banking Services, the Indian Bank has also been offering

various other services through its 3 subsidiary companies, which are;

Indbank Merchant Banking Services Ltd., IndBank Housing Ltd. IndFund Management Ltd.

2.9.4 Rural Banking:

Indian Bank has been a leader in bringing new initiatives for development of rural

banking and extending help to the farmers of India. The bank has received award from

Honorable Union Minister of Finance for Excellence in Agricultural Lending. Apart from it, the

bank also received the Best Performer Award for Micro-Finance activities in Tamil Nadu and

Union Territory of Puducherry from National Bank for Agriculture and Rural Development

(NABARD).

2.9.5 Personal Banking:

Under this it offers fixed deposits, saving accounts, recurring accounts, saving

accounts for kids and senior citizens, internet banking, ATM facility, debit/credit cards, home

loans, personal loans.

2.9.6 NRI services:

It offers banking products and services to NRI clients such as saving accounts,

remittance facilities, forex advisory services, home loans, etc.

Indian Bank provides cash management services (CMS), eletronic funds transfer

schemes. It also provides seven-day banking at few of its branches.


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2.9.7 Time-line:

1932: Indian Bank opened a branch in Colombo.

1935: IB opened a branch in Jaffna.

1940: IB opened a branch in Rangoon (Yangon).

1941: IB closed the Rangoon branch but opened branches in Singapore (where future branch

manager KB Pisharody(1915-1998) started his career in the same

year), and in Kuala Lumpur, Ipoh, and Penang. The rapid advance of the Japanese Army

forced IB to close all its branches in Malaya and Singapore.

1942: IB closed the Colombo branch.

Post-WWII: IB reopened its Malayan and Singapore branches.

1948: IB reopened its branch in Colombo.

1960: IB acquired Mannargudi Bank (est. 1932) and Salem Bank (est. 1925).

1969: The Government of India nationalized 14 top banks, including Indian Bank.

1973: Indian Overseas Bank, Indian Bank and United Commercial Bank established United

Asian Bank Berhad in which IOB held 16.67% of the paid up capital, as a result of a new

banking law in Malaysia that prohibited foreign government banks from operating in the country.

1978: IB became a technical adviser to P T Bank Rama in Indonesia, the result of the merger of

P T Bank Masyarakat and P T Bank Ramayana.

1980: IB, Bank of Baroda, and Union Bank of India established IUB International Finance, a

licensed deposit taker in Hong Kong. Each of the three banks took an equal share in the joint

venture.

1987: IB acquired Bank of Tanjore (Bank of Thanjavur) in Tamil Nadu in a rescue.

1998: Bank of Baroda bought out its partners in IUB Intl. Fin. in Hong Kong. Apparently this

was a response to regulatory changes following Hong Kongs reversion. IUB became Bank of

Baroda (Hong Kong), a restricted license bank.

2007: IB celebrated its centenary year.


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2.9.8 International Presence:

Overseas branches in Singapore and Colombo including a Foreign Currency BankingUnit at Colombo

240 Overseas Correspondent banks in 70 countries

A front-runner in specialized banking:

90 Forex Authorized branches inclusive of 1 Specialized Overseas Branch at Chennaiexclusively for handling forex transactions arising out of Export, Import, Remittances

and Non Resident Indian business

One Small Scale Industries Branch extending finance exclusively to SSI units

Leadership in Rural Development:

Pioneer in introducing Self Help Groups and Financial Inclusion Project in the country Award winner for Excellence in Agricultural Lending from Honorable Union Minister

for Finance

Best Performer Award for Micro-Finance activities in Tamil Nadu and Union Territory ofPondicherry from NABARD

Established 7 specialized exclusive Microfinance branches called "Microstate" across thecountry to cater the needs of Urban poor through SHG (Self Help Group)/JLG (Joint

Liability Group) concepts

A special window for Micro finance viz., Micro Credit Kendras are functioning in 44Rural/Semi Urban branches

Harnessing ICT (Information and Communication Technology) for Rural Developmentand Inclusive Banking

Provision of technical assistance and project reports in Agriculture to entrepreneursthrough Agricultural Consultancy & Technical Services (ACTS)

A pioneer in introducing the latest technology in Banking

100% Business Computerization 168 Centers throughout the country covered under 'Anywhere Banking' Core Banking Solution (CBS) in 1648 branches and 61 extension counters. 775 connected Automated Teller Machines(ATM) in 250 cities/towns 24 x 7 Service through 40000 ATMs under shared network Internet and Tele Banking services to all Core Banking customers


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e-payment facility for Corporate customers Cash Management Services Depository Services Reuter Screen, Telerate, Reuter Monitors, Dealing System provided at Overseas Branch,

Chennai

Indian Bank Credit Card facility Launched I B Gold Coin system launched

Strategic Tie-Up with HDFC Standard Life Insurance Company:

Indian bank with over 90 years of standing in the financial market with the

reputation for excellent customer service has entered into a strategic tie-up with HDFC Standard

Life Insurance Company Ltd., the first in the private sector to receive the Certificate of

Registration for foray into Life Insurance business for distribution of latters insurance products.A Memorandum of understanding has been signed by the Bank with the Insurance Company on

8th February 2001 to this effect. The Bank has to its strength 1377 branches spread across the

country with ready built infrastructure and the expertise in marketing financial products. Initially

the insurance products will be marketed through select branches in the South where the Bank has

strong presence. The insurance products from HDFC Standard Life, will be competitive and

customer friendly. The tie-up would benefit the Bank's customers, as they will have wider

choice of life insurance policies at competitive premium.

2.9.9 Awards:

Indian Bank received the Skoch Challenger Award for its financial inclusion initiatives inPondicherry and Dharavi.

The bank bagged first prize for excellent performance under SHG-Bank LinkageProgramme conducted by NABARD.

Three branches of Indian Bank located in Tamil Nadu were awarded best performingcommercial bank.

Government of TamilNadu has conferred the Best Performing Bank Award to IndianBank for the outstanding achievement under Self Help Group (SHG)

INDIAN BANK was declared as a Winner in BEST BANKs category and BestEducation Loan category in the Banking Survey conducted by OUTLOOK MONEY

Award 2010 on the basis of its performance during the year 2009-10

Indian Bank Conferred with SKOCH Financial Inclusion Award 2011


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2.9.10 Financial Highlights:

The major highlights of the Banks performance are as follows:

Operating profit increased to 3463.17 crore as against 3291.68 crore for 2010-11. Net profit for 2011-12 stood at 1746.97 crore as compared to 1714.07 crore for 2010-11. Net Interest Margin was at 3.43 per cent. Return on average assets was at 1.31 per cent. Capital Adequacy Ratio was at 13.47 per cent as compared to 13.56 per cent as of March

2011.

Return on Net worth for FY2011-12 was at 18.73 per cent. Earnings per share were at 39.57 and Book value per share was 214.94 during 2011-12. Global Business of the Bank reached 2, 11,988 crore during the year, registering a

growth of 16.8 per cent.

Total Deposits grew by 15,000 crore to 1, 20,804 crore, a growth of 14.2 per cent for theyear 2011-12.

Gross Advances were at 91,184 crore, registering an increase of 15,458 crore (20.4 percent) as on 31.3.2012. Overall Credit Deposit ratio was at 75.5 per cent.

Priority Sector advances at 30,027 crore, grew by 4,058 crore (15.6 per cent). Agriculture credit grew by 2,306 crore (20.9 per cent) to 13,354 crore and accounted for

18.47 per cent of Adjusted Net Bank Credit.

During 2011-12, total recovery of NPAs (including AUC) amounted to 466.26 crore. Gross NPA was at 2.03 per cent and Net NPA was at 1.33 per cent in March 2012. Under Financial Inclusion project 5.98 lakh No-Frill accounts have been opened. The Net worth of the Bank improved to ` 9637.41 crore as on 31.3.2012 from `8326.55

crore as on 31.03.2011, reflecting a growth of 12.5 per cent


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2.9.11 Indian Bank Profile:

Date of Establishment 15-08 1907

Market Capital Rs. 7,940.00 cr.

Corporate Address PB No: 5555, 254-260, Avvai Shanmugam

Salai,

Royapettah, Chennai600 014

Head Office IndianBank, 66 Rajaji Salai, Chennai-600001.

Chairman & M.D Shri T.M. Bhasin

Executive Director Shri B Raj Kumar, Shri Rajeev Rishi

Directors Shri Shaktikanta Das Dr. N Krishna Mohan Shri M. Jayanath Prof. Narendra Kumar Agrawal Shri Chintaman Mahadeo Dixit Shri. Sanjay Maken, Shri Amarjit Chopra Shri. M. Butchi Rami Reddy

Business Operation Bank (Public)

Net Profit Rs. 1,746.97 cr.

Table 4: Indian Bank Profile.


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CHAPTER 3


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CHAPTER 3

3.1 Functional Areas:

There are various functional areas where different types of works are done.

Various sections and their function are listed below:

Deposit Section Clearance Section Loan Section Demand Draft Section

Systems Section

3.2 Deposit section:

There are various kinds of deposits the bank accepts, and each kind of deposit

differs from the other deposits. The various deposits the bank provides are Savings Bank

Account, Current Account, Fixed Deposit, Re-Investment Plan and Recurring Deposit among the

various other Term deposits which include Variable Recurring Deposit, Insured Recurring

Deposit, NRE SB And NRE Term Deposits. The major deposits that were opened were

Savings Bank Account Fixed Deposit Re-Investment Plan Recurring Deposit.

3.2.1 Savings Account:

The Savings Bank Account are for all kind of people who can be Individuals

(Single or Two or more individuals jointly), Minors through the natural guardians (either jointly

with the minor or singly or guardians appointed by a competent court), Illiterate people, blindpeople, Clubs, Societies, Associations, Places of religious worship, Charitable institutions (which

are approved by the bank), Trusts, HUF, SHGs, Government organizations mainly for the

purpose of saving money. The savings bank kind of account is offered for the people to cultivate

the habit of saving money.


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3.2.2 Current Account:

Current accounts are cheque operated accounts maintained for mainly business

purposes. Unlike savings bank account, no limits are fixed by banks on the number of

transactions permitted in the Account. Banks generally insist on a higher minimum balance to be

maintained in current account. Considering the large number of transactions in the account and

volatile nature of balances maintained overnight banks generally levy certain service charges for

operating a Current account. The Current Account deposits can be opened by a person in his/ her

own name, two or more than 2 people in their joint names with either or Survivor, Joint or

Survivor and anyone or survivor or survivors. Companies, partnership firms, Clubs,

Associations, Religious, educational, charitable and other institutions (on production of

necessary documents, copies of rules, byelaws duly attested by authorized people) can also open

Current Accounts. The bank does not offer interest to the current account balance.

3.2.3Fixed Deposit:

The fixed deposit can be opened by anyone from Individuals (a) single (b) Two or

more individuals severally or jointly (c) Minors (d) Illiterates (e) Blind people to Executors and

Administrators. Liquidators and Receivers, Sole Proprietorship concerns, Joint Hindu families,

Partnership firms, Limited Companies, Trusts, Non-Corporate bodies like Clubs, Committees,

Associations, Schools, Colleges, Government / Semi-Government bodies can also open a fixed

deposit with the bank for a minimum period of 15 days up to a maximum period of 120 months.

3.2.4 Re-Investment Plan:

Re-Investment Plan, a time deposit to earn cumulative compounded interest with

easy liquidity is also like fixed deposit but earns a cumulative interest. The minimum period for

this kind of deposit is 6 months.

3.2.5 Recurring Deposit:

The Recurring Deposit is a regular monthly savings grow into a large sum to meet

the financial needs at the end of the agreed period. Loan can be taken up to 90% of the principal

amount with rate of interest at 2% p.a. over the rate of interest payable to deposit.


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3.3 Clearance Section:

Clearance section deals with how the cheques and demand drafts are cleared

through the clearing house. Since the whole system of banking is computerized under the CBS

(Core Banking System), the work is less to do, but the details of the cheque and the drawee and

the drawer had to be feed into the system. The process of clearance and return of cheque and

traditional arrangements involved the exchange of cheques, computation of net payment

obligations among the participating banks and settlement of claims through funds transfers in the

books of the settling bank are learnt. The place where the exchange of instruments occurs and the

claims are settled is known as the Clearing House.

All payment instructions made through the medium of cheques are debit

transactions. A debit transaction occurs when the intended recipient initiates the payment

transaction by depositing the instrument in his bank. During the course of a business day a

number of instruments are deposited with a bank for collection by its customers. These

instruments may be drawn on different branches of various banks and a collecting bank has tophysically present the instruments for collection to each drawee bank/branch. The clearing

system provides a convenient and well established institutional mechanism to take care of the

problem of physical delivery of instruments as well as funds transfer between different banks.

The clearing process begins with the deposit of a cheque in a bank. The cheque

(along with other cheques) is delivered to the bank/branch where it is drawn. The cheque is

passed for payment if the funds are available and the banker is satisfied about the genuineness of

the instrument. The banker carefully scrutinizes the cheque drawn. The cheques that are unpaid

are returned to the presenting bank through another clearing called the Return Clearing. The

realisation of the funds occurs after the completion of return clearing and by the absence of an

unpaid cheque. The cheque number is noted and the 9-digit MICRnumber at the bottom of the

cheque refers to the particular branch. The first three digits is the area code, the next three are the

bank code and the final three refer to the branch code. The essential elements in a cheque are,

The date The amount in words as well as digits The signature The cheque number The MICR code

The settlement of funds in clearing occurs at several levels. The aggregate

amount or value of cheques presented by a bank on other banks represents the claim by that bank

on other banks. Similar claims are made by all the banks on every other bank in the clearing. A

net settlement is arrived at the clearinghouse and the debit or credit position of the bank is

determined. These are booked in their current accounts maintained by the settling bank. This

represents the inter-bank settlement. The settlement of funds between the service branch and the


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branch concerned represents the transfer of funds to the branch level. The payment process is

completed only when the funds are debited from the drawer's account and credited to the payee's

account.

Inter-branch clearing need not go to the clearinghouse. Cheques presented by

customers drawn on different branches of the same bank need not be sent to the clearinghouse, asthe transfer of funds is internal to the bank. The service branch usually acts as a settlement

branch for the branches and the instruments are sent to the drawee branches while the inter-

branch accounts are credited or debited internally.

3.4 Demand Draft Section:

Demand Draft sections, where works related to issuing of cheque book, pass

book, locker facility are done. This section needs lots of manual work and is one of the important

sections of the bank.

3.4.1 Demand draft:

The uses and the security of the Demand Draft are learnt. The Demand Draft is a

written order for making payments. The bank providing the service is called drawer bank.

The essentials of a DD should include Name of the recipient Name of the sender Amount to be transferred Place where the transferred money is to be paid, Mode in which money is to be paid i.e. in cash or through a Bank Account.

The demand draft is generally crossed for security purpose. This process is checked by an officer

and only then is the Demand Draft signed upon.


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3.4.2 Cheque Book:

The issuance of cheque book and pass book does not take much time but needs to

be carefully dealt with. The code of the cheque book is to be carefully noted in case of future

reference. The details are fed into the system as well as it is manually recorded.

There are cases where there is a change in address of a customer, or a single

account holder wants to add another person as a joint account. The formalities regarding these

changes are dealt with in this section.

3.4.3 Locker facility:

The bank also offers locker facility. This facility is also dealt with in this section.

The customers account number is recorded manually and the locker is opened with two keys-

one that the customer holds and another, the master key with the bank. In case if the key is lost

by the customer, the vault will be replaced by the bank for which the customer has to bear the

expense. To avail the locker facility the user must deposit an amount in the account which will

be able to give the locker rent as interest.

3.4.4 Cash counter:

This is the place where all the cash transactions of the bank takes place. The staffs

require special password and authority to do cash transactions. Third Party Cash withdrawal islimited to Rs.1000, where own withdrawal has no limit but it should be accompanied with

passbook.

Cash deposit to other account holder is limited to Rs.49, 999. To deposit more

than that pan card number should be accompanied.

3.5 Loan Section:

Loan Section was the most interesting department in the bank. The bank providesvarious kinds of loans tailor-made for various needs of the customer.

The various loans the bank offers include Home Loans, NRI Home Loans,

Vehicle Loan, Jewel Loans, Educational loans, Plot Loans, Pension Loans, Loans against

deposits, Loans to Small-Scale Industries, Holiday loans, Doctor Plus loans for the doctors.


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Among these loans, the most popular loans are,

Home loans

Educational loans Jewel loans

3.5.1 Home Loan:

Home loans are given for purchasing, or to construct a house / flat / renovate /

repair or alter an existing house / flat. The maximum permissible age at the time of applying is

50 years & at the end of repayment period is 60 years. The Quantum of Loan is 36 times of

Gross Monthly Income or 60 times of Net Monthly Income whichever is higher. Spouses

Income can be included for calculating eligible amount if he / she has steady income. The

security of the loan is Equitable Mortgage of Property purchased / constructed out of loan

proceeds registered at Applicants cost.

The following documents need to be submitted for processing the loan.

1. Completed Application Form with passport size photograph.

2. Proofof Identity such as PAN Card / Voters ID/Passport/Driving License.

3. Proof of residence such as Recent Telephone Bill / Electricity Bill / Property Tax Receipt /

Passport / Voters ID

4. Proof of business address in respect of businessmen / industrialists.

5. Proof of Employment.

6. Salary Certificate.

7. Proof of other income like rent, interest on investment, if any.

8. Balance Sheet for the past three financial years in the case of Professionals, Businessmen &

Self employed.

9. Income Tax / Wealth Tax (if applicable) Returns for the past 3 years

10. Agreement of Sale / Sale Deed.

11. Approved Building Plan.

12. Title Deed Documents for 30 years.


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13. Proof of title in the Revenue Records.(Legal Opinion from Advocate & Valuation of property

from Engineer will be arranged by Bank at applicants cost)

3.5.2 Jewel Loan:

Jewel loans are given to customers for providing short-term credit facility to

them. The Quantum of loan should be determined based on the net weight of the jewel/ornament

and rate per gram fixed from time to time or 70 % of market value of the jewels to be pledged

whichever is lower. The bank has its own appraiser for valuation of the jewel produced. The

jewel is the only security that the bank asks as security.

3.5.3 Educational Loan:

Educational loan is provided to meet the cost of education covering fee payable to

college/school/hostel, exam fees, purchase of books/equipments, travel expenses/passage money

for studies abroad, purchase of computers essential for completion of the course etc. of the

customer. For availing the loan, the applicant should be an Indian National. He/ She should have

secured admission to professional/technical courses in India/Abroad through Entrance Test/Merit

based selection process. The quantum of loan for Studies in India is Rs.10.00 lakhs and for

Studies Abroad is Rs.20.00 lakhs. Higher Quantum of loan subject to a maximum of Rs.15 lakhs

for studies in India and Rs.25 lakhs for studies abroad would also be considered in deserving and

meritorious cases at the discretion of the manager.

The security to be submitted for educational loan is Co obligation of parents and

no security for loan up to Rs. 4 lakhs. For loans above Rs.4 lakhs and up to Rs.7.50 lakhs, Co

obligation of parents together with collateral in the form of a satisfactory third party guarantee is

required. Loans above Rs.7.50 lakhs requires Co obligation of parents together with tangible

collateral security of suitable value along with the assignment of future income of the student for

payment of installments. The Student's Age should be 15 to 30 years for studying in India and 18

to 35 years for studying abroad.

The creditability of the borrower is carefully scrutinized and the documents are

verified carefully before the loan can be given. The officer scrutinizes the documents and sendsthe files to the head office for sanctioning of the loan. Then the branch disburses the loan amount

in installments. The banks job does not end with giving loan but also to check whether the loan

money is used properly for the said purpose.


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3.5.4 Other Loans:

There are special calculations that need to be worked out, in order to find the

capacity of the borrower to repay the loan in case of loans to Small-Scale Industries. The bank

offers loans to SSIs (Small Scale Industries) and SMEs (Small and Middle-sized Enterprises)

based on their credibility and their power to repay the loan.

3.6 System Section:

The System Managers desk, where all the transaction records and other records

are maintained. The branch records the transactions in the system as well as saves hard copies at

the branch for future reference. The bank at present contains records of transactions that

happened during the past ten years.

The banks ATM facilities are also taken care at this section. The customer needs

to given the ATM card and the PIN number. These are done in this section. Any problem with

the ATM machine the branch holds is also dealt with in this section. The branch makes sure that

the ATM card and the PIN number are not with the same officers. The customers application

for Internet Banking and Mobile Banking are also processed in this section.


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CHAPTER 4


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CHAPTER 4

4.1 Products:

Indian bank provides more products and services for their customers. Some of the

products, their eligibility criteria, salient features are discussed. Various products provided by the

Indian bank are:

Savings Bank Current Account Recurring Deposit Re-investment plan Educational loan Home loan IB Vehicle loan Plot loan

4.1.1 Savings Bank:

Interest Rates:

In January and July on a daily product basisSalient Features:

ECS/RTGS/NEFT facilities are available Two cheque books of 2x20 leaves free in a calendar year for cheque operated SB

accounts

Collection of local cheques free Collection of Outstation cheques with the presecibed charges No charges for Intra city transactions ICOOC ( Local / Outstation) facility available ATM cards/Debit cards are provided free of cost 24 hrs ATM facility with arrangements with various banks for sharing of their ATMs Multicity cheque facility Intra city, intercity transactions,Internet/ mobile /phone banking

facilities are available at all branches

50 withdrawals permitted free per half year No TDS on interest earned on SB deposits


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Min Amount:

Minimum amount- Rs.250/- for non cheque operation Minimum balance of Rs.500/- for cheque operation Lesser minimum balance for pensioners and bonafide students

4.1.2 Current Account:

Salient Features:

Ordinary Current AccountMinimum Amount:

Quarterly average balanceRs.5000 prescribedOther Requirements/Details:

Suitable for all type of customers ECS/RTGS/NEFT facilities are available Nomination facility for individuals and sole proprietor concerns, Multicity cheque

facility, Intra city, intercity transactions are permitted in CBS branches

Free ATM card cum Debit card No charges for Intra city transactions

4.1.3 Recurring Deposit:

Interest Application:

Quarterly compoundingSalient Features:

A regular monthly savings grow into a large sum to meet the financial needs at the end ofthe agreed period

Minimum Amount:

Monthly installment Rs.5 and in multiples thereof.


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Min Period:

Minimum 6 months In multiples of 3 months with a maximum of normally 10 years

Other Requirements/Details:

Loan, Foreclosure, Nomination facilities are available. TDS not applicable

4.1.4 Re-investment Plan:

Interest Application:

Quarterly compoundingMin Amt:

Minimum amountRs.100/- and in multiples of Rs.100/- No maximum amount

Min Period:

Minimum- 6 months. Maximum normally- 10 years


Automatic renewal facility for equal period. Loan. Foreclosure, Nomination facilities are available

4.1.5 Educational Loan:

Eligibility:

The applicant should be an Indian National. She/he should have secured admission toprofessional/technical courses in India/Abroad through Entrance Test/Merit basedselection process.

Amount of Loan:

For Studies in India: Rs.10.00lakhs and for Studies Abroad: Rs.20.00 lakhs. HigherQuantum of loan subject to a maximum of Rs.15 lakhs for studies in India and RS.25

lakhs for studies abroad also can be considered in deserving and meritorious cases


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Margin Upto Rs.4.00 lakhs - Nil. Above Rs.4.00 lakhs: For Studies in India - 5%. For Studies Abroad - 15%.

Repayment:

Maximum period The loan is to be repaid in 5-7 years after commencement ofrepayment.Security:

Up to Rs.4.00 lakhs - Co obligation of parents. No Security. Above Rs.4.00 lakhs and up to Rs.7.50 lakhs - Co obligation of parents together with

collateral in the form of a satisfactory third party guaranty.

Above Rs.7.50 lakhs - Co obligation of parents together with tangible collateral securityof suitable value along with the assignment of future income of the student for payment

of installments.

Salient Features:

To meet the cost of education covering fee payable to college/school/hostel, exam fees,purchase of books/equipments, travel expenses/passage money for studies abroad,

purchase of computers essential for completion of the course etc.


Holiday Period: The course period PLUS 1-year or 6 months after getting a job,whichever is earlier.

Family Income: There is no restriction. The main emphasis is that no deserving student isdenied an opportunity to pursue higher education for want for financial support.

Place of availment: The loan is to be availed from the branch nearest to the place ofdomicile of the student.

Course of study in India : Diploma/Graduation/Post graduation courses in variousdisciplines Computer Certificate courses in reputed institutes accredited to the

Department of Electronics.

Course of study abroad : Job-oriented professional/technical courses offered by reputeduniversities, MCA,MBA, MS etc. Courses conducted by CIMA - London, CPA in USA

etc.


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4.1.6 Home Loan 2011:

Eligibility:

Minimum entry age is 18 years and maximum exit age is 60 yearsAmount of Loan:

36 times of Gross Monthly Income or 60 times of Net Monthly Income whichever ishigher.

Spouse Income can be included for calculating eligible amount if he / she have steadyincome.

60% of future rental income, if any from the house property to be purchased / constructedshall also be included (quantum of rent receivable to be certified by our panel engineer).

(Take home Income should be more than 40% of gross monthly income after deduction

of EMI for the proposed loan, apart from other deductions.)

Margin:

For Loans upto Rs. 20 lakhs : 10% For Loans above Rs. 20 lakhs : 20%

Processing fee:

For limits upto 10.00 lakhs: 0.25% of loan amount ; For limits above 10.00 lakhs: 0.20% of loan amount with a minimum of Rs. 2,500/- and

maximum of Rs. 20,000/- (Non refundable)( to be remitted at the time of submission ofapplication)

Administrative fee:

For limits upto 10.00 lakhs: 0.32% of loan amount ; For limits above 10.00 lakhs: 0.25% of loan amount with a minimum of Rs. 3,200/- and

maximum of Rs. 25,000/- (at the time of acceptance of sanction)

Interest Rates:

Fixed rates are subject to reset once in 5 years After the account has run for 3 years, from the date of sanction, one time option can be

exercised for converting fixed rate into variable rate. For the said Switch over, a one time

fee of 1% on the outstanding balance in the loan account will be charged as service

charges.

If conversion of fixed rate to variable rate is sought after 5 years, from the date ofsanction, the onetime fee of 1% shall not be applicable.


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Conversion from floating to fixed rate is not permitted.Repayment:

Loans for purchase / construction of House / Flat: 20 years (including holiday period) Maximum Holiday Period of 18 months allowed for Home Loans for the purpose ofconstruction of House / Flat

Security:

Equitable Mortgage of Property purchased / constructed out of loan proceeds Equitable Mortgage to be registered (at Applicants cost) if there is a provision for the

same in the State where property is located

Documents to be submitted for processing the application :

1. Completed Application Form with 3 passport size photograph.2. Assets and liabilities statement in the Banks format from applicant(s), Co-applicant(s)and guarantor(s)

3. Proof of Identity such as PAN Card / Voters ID/Passport/Driving License.4. Proof of residence such as Recent Telephone Bill / Electricity Bill / Property Tax Receipt

/ Passport / Voters ID

5. Proof of business address in respect of businessmen / industrialists.6. Proof of Employment.7. Salary Certificate generally for the last 6 months.8. Statement of Bank account of the applicant(s) for a reasonable period, say 6 months for

verifying salary credit/other income/nature of transaction etc9. Proof of other income like rent, interest on investment, if any.10.Balance Sheet for the past three financial years in the case of Professionals, Businessmen

& Self employed.

11.A brief note on the nature of business/service, year of establishment, constitution,securities charged in respect of other loans availed from our Bank/other

Branches/Banks/Finance companies/Other sources.

12.Form16/Income Tax / Wealth Tax (if applicable) Returns for the past 3 years13.Agreement of Sale / Sale Deed.14.Approved Building Plan.15.Title Deed Documents for 13 years/30 years as the case may be.16.Proof of title in the Revenue Records.17.Property Tax receipts wherever applicable (Up-to-date EC, Legal Opinion from Advocate

& Valuation of property from Engineer will be arranged by Bank at applicants cost)


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Salient Features:

Home Loans can be considered

a) to purchase / construct a new house / flatb)

to purchase house site and construction of house thereonc) to purchase an existing house / flat

d) to extend an existing house/ additional constructione) to repair / renovate an existing house / flatf) to take over Home Loans from other Banks / Housing Finance Institutions approved by

National Housing Bank for Housing Finance/ Co-operative Societies.

g) For reimbursement of cost incurred for purchase/construction of house/flatInsurance:

Property (offered as security) to be insured at borrowers cost with Bank clause againstfire, flood, earthquake, riot and other risks, which are normally covered by insurance

companies.

4.1.7 IB Vehicle Loan:

Eligibility:

Salaried Class Individuals.

Businessmen, Professionals and Self-employed . Pensioners with repayment capacity. Minimum Gross monthly income for purchase of Four wheeler should be Rs.20,000/-.

Amount of Loan:

20 times of Gross Monthly Income Spouse Income can be included for calculatingeligible amount if he / she has steady income.

Take home Income should be more than 40% of gross income after deduction of EMI forthe proposed loan, apart from other deductions.

For Businessmen, Professionals & self-employed, based on their average income earnedin the last 3 years and capacity / ability to repay the loan.

Maximum Loan amount for purchase of Two Wheeler : Rs.75,000. Four Wheeler: Rs. 15,00,000 Margin : 15% for New Vehicle. 40% for used vehicle (Four wheeler).


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Processing fee:

0.30% of loan with a minimum of Rs. 300/-Repayment:

Four Wheeler: Maximum 84 EMIs (No holiday period) for salaried class individuals;Maximum 60 EMIs (No holiday period) for others.

For 2 wheeler: Maximum 60 EMIs (No holiday period)Security:

Hypothecation of Vehicle to be purchased out of Loan. If the loan amount exceeds Rs. 10.00 lakhs, additional security equivalent to amount

exceeding Rs. 10.00 lakhs to be provided in the form of Fixed Deposit Receipts / NSCs /

LIC Policy (with surrender value equivalent to the security to be provided) / Mortgage of

immovable property.

Documents to be submitted for processing the application :

1. Completed Application Form with passport size photograph.2. Proof of Identity such as PAN Card / Voters ID/Passport/Driving License.3. Proof of residence such as Recent Telephone Bill / Electricity Bill / Property Tax Receipt

/ Passport / Voters ID.

4. Proof of business address in respect of businessmen / industrialists.5. Proof of Employment.6. Salary Certificate.7. Proof of other income like rent, interest on investment, if any.8. Balance Sheet for the past three financial years in the case of Professionals, Businessmen

& Self employed.

9. Income Tax / Wealth Tax (if applicable) Returns for the past 3 years.10.Copy of Driving License.11.Quotation for Vehicle to be purchased from the authorized dealer

Salient Features:

For purchase of New Two Wheeler or New / Used Four Wheeler(Used four wheelershould not be more than 3 years and should be certified by reputed automobile engineer)


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4.2 Services:

The various services provided by Indian ban

Date post:	14-Apr-2018
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