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Indian Banking System

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CENTRE FOR MANAGEMENT STUDIESGANPAT UNIVERSITY Mehsana- Gozariya Highway, Kherva Mehsana - 382711, INDIA Tele Fax : +91-2762-286080, 286924

In Practical Fulfillment of Academic Requirement of PGDBRI Program SUBMITED BY TAUSIF BAIG (01) HARSHAD PATEL (06) PGDBRI ACADEMIC YEAR: 2008-091 |Page

AcknowledgementTo acknowledge all the persons who had helped for the fulfillment of the project is not possible for any researcher but in spite of all that it becomes the foremost responsibility of the researcher and also the part of research ethics to acknowledge those who had played a great role for the completion of the project. So in the same sequence at very first, I would like to acknowledge my parents because of whom I got the existence in the world for the inception and the conception of this project. Later on I would like to confer the flower of acknowledgement to Mrs. Akansha madam and other faculty members who taught me that how to do project through appropriate tools and techniques. Because IDBI bank has trusted me and given me a chance to do my integrated research study, I would like to give thanks to the organization and especially to Mr. Mahendra Sharma from the depth of my heart. Rest all those people who helped me are not only matter of acknowledgment but also authorized for sharing my success.

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PrefaceDecision making is a fundamental part of the research process. Decisions regarding that what you want to do, how you want to do, what tools and techniques must be used for the successful completion of the project. In fact it is the researchers efficiency as a decision maker that makes project fruitful for those who concern to the area of study. Basically when we are playing with computer in every part of life, I used it in my project not for the ease of my but for the ease of result explanation to those who will read this project. The project presents the role of financial system in life of persons. I had toiled to achieve the goals desired. Being a neophyte in this highly competitive world of business, I had come across several difficulties to make the objectives a reality. I am presenting this hand carved efforts in black and white. If anywhere something is found not in tandem to the theme then you are welcome with your valuable suggestions.

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Executive SummaryBanking Industry which is basically my concern industry around which my project has to be revolved is really a very complex industry. And to work for this was really a complex and hectic task and few times I felt so frustrated that I thought to left the project and go for any new industry and new project. Challenges which I faced while doing this project were followingBanking sector was quite similar in offering and products and because of that it was very difficult to discriminate between our product and products of the competitors. Sensitivity of the industry was also a very frequent factor which was very important to measure correctly.


Area covered for the project while doing job also was very large and it was very difficult to collect right information for report.

So above challenges some time forced me to leave the project but any how I did my project in all circumstances. Basically in this project I analyzed thatWhat factors are really responsible for performance of ICICI Banks performance in this competitive era?

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ParticularINDIAN BANKING SYSTEM History of Indian banking system Learning objectives The meaning of bank Banking system of India private banks in India Indian banks operation abroad Local area banks(LAB) Pre-reforms development Lead bank scheme Co-operative banks Regional rural bank(RRB) Some important financial institution National bank for agriculture and rural development(NABARD) Export import bank of India(EXIM Bank) National housing bank(NHB) Housing and urban development corporation ltd(HUDCO) Housing development finance corporation(HDFC) Industrial development bank of India(IDBI) Industrial finance corporation of India(IFCI)Ltd. Industrial investment bank of India(IRBI) Industrial credit and investment corporation of India(ICICI) Small industries development bank of India Infrastructure development finance co.(IDFC) Life insurance corporation of India General insurance corporation of India UTI Deposit insurance and credit guarantee corporation limited Credit guarantee fund trust for small industries Export credit guarantee corporation of India limited Current situation Conclusion

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History of Banking in IndiaWithout 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. 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:

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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.

The Bank of Bengal which later became the State Bank of India To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase-III. Phase-I the General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. 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 banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, 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 came in 1935. During those days public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Phase II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle

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banking transactions of the Union and State Governments all over the country. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:

1949: 1955: 1959: 1961: 1969: 1971: 1975: 1980:

Enactment of Banking Regulation Act. Nationalization of State Bank of India. Nationalization of SBI subsidiaries. Insurance cover extended to deposits. Nationalization of 14 major banks. Creation of credit guarantee corporation. Creation of regional rural banks. Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Phase -III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

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From the Italian banca meaning 'bench', the table at which a dealer in money worked. A bank is now a financial institution which offers savings and cheque accounts, makes loans and provides other financial services, making profits mainly from the difference between interest paid on deposits and charged for loans, plus fees for accepting bills and other services. Other relevant legislation includes the Banks (Shareholdings) Act

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