Date post: | 02-Apr-2018 |
Category: |
Documents |
Upload: | tanmoy-chakraborty |
View: | 218 times |
Download: | 0 times |
of 53
7/27/2019 Meeeeeeeeee Project Final
1/53
E n r o l l m e n t n o : 0 5 2 5 0 5 0 1 7 1 2
M i n o r P r o j e c t R e p o r t
P e r s o n a l i t y D e v e l o p m e n t & C o m m u n i c a t i o n S k i l l s I I I
( B B A - 2 0 9 )
B B A I I I S e m e s t e r
N e e d o f I n f o r m a t i o n Te c h n o l o g y I n B a n k i n g S e c t o r
I n t e r n a l G u i d e : S u b m i t t e d B y :
D r. D e e p a l i S a l u j a P o o j a S a b h a r w a l
A s s i s t a n t P r o f e s s o r B a t c h : 2 0 1 2 - 1 5
S u b m i t t e d To :
Banarsidas Chandiwala Institute of Professional Studies, Dwarka, New
Delhi(Affiliated to Guru Gobind Singh Indraprastha University)
1
7/27/2019 Meeeeeeeeee Project Final
2/53
DECLARATION
I hereby declare that this Minor Project Report titled Ne ed o f I n f o r m a t i o n Te c h n o l o g y I n B a n k i n g S e c t o r submitted byme to Banarsidas Chandiwala Institute of Professional Studies,Dwarka is a bonafide work undertaken during the period from 20 th june to12 th august by me and has not been submitted to any other University or Institution for the award of any degree diploma / certificate or publishedany time before.
Name: Pooja Sabharwal
Enroll. No.: 05250501712Date: 12 / 08 / 2012
2
7/27/2019 Meeeeeeeeee Project Final
3/53
BONAFIDE CERTIFICATE
This is to certify that as per best of my belief the project entitled N e e do f I n f o r m a t i o n Te c h n o l o g y I n B a n k i n g S e c t o r is the
bonafide research work carried out by Pooja Sabharwal student of BBA,BCIPS, Dwarka, New Delhi, in partial fulfillment of the requirements for the Minor Project Report of the Degree of Bachelor of BusinessAdministration.She has worked under my guidance.
Project Guide :
Dr. Deepali Saluja
Date:
Counter signed by
Director:Dr. Satish Taneja
Date:
3
7/27/2019 Meeeeeeeeee Project Final
4/53
ACKNOWLEDGEMENT
I o w e a s i n c e r e t h a n k s t o m a n y p e o p l e w h o h e l p e d a n d s u p p o r t e d m ed u r i n g t h e m a k i n g o f t h i s p r o j e c t . M y d e e p e s t t h a n k s t o A s s i s t a n t
P r o f e s s o r D r. D e e p a l i S a l u j a t h e g u i d e o f t h e p r o j e c t f o r g u i d i n g a
c o r r e c t i n g v a r i o u s d o c u m e n t s o f m i n e w i t h a t t e n t i o n a n d c a r e . S h e
h as t ak en p ai n t o g o t hr ou gh t he p ro je ct a nd m ak e n ec es sa ry
c o r r ec t i o ns a s a n d w h e n n e e d e d . I e x p r e s s m y t h a n k s t o t h e D i r e c t o r
D r. S at is h Tan ej a , o f B an ar si da s C ha n di wa la I ns ti tu te o f
P r o f e s s i o n a l S t u d i e s , D w a r k a f o r e x t e n d i n g h i s s u p p o r t . I w o u l d
a l s o t h a n k m y i n s ti t u te a n d m y f a c u lt y m e m b e r s w i t h o u t w h o m t h i s
p r o je c t w o u ld h a v e b e e n a d i s t a n t r e a l i t y .
P o o j a S a b h a r w a l
( 0 5 2 5 0 5 0 1 7 1 2 )
4
7/27/2019 Meeeeeeeeee Project Final
5/53
INDEX
5
C H A P T E R P A G E
N O .C h a p t e r 1
1 . 1 O b j e c t i v e O f T h e P r o j e c t
R e p o r t
1 . 2 S c o p e O f T h e S t u d y
6 - 9
C h a p t e r 2
2 . 1 A b o u t T h e I n d u s t r y
2 . 2 P r o d u c t / S e r v i c e s O f f e r e d
2 . 3 G e o g r a p h i c a l A r e a
8 - 2 5
C h a p t e r 3
3 . 1 I n d u s t r y D e v e l o p m e n t s
3 . 2 R e c e n t t r e n d s a n d i n n o v a t i o n s
3 . 3 G o v e r n m e n t R e g u l a t i o n s
3 . 4 O p p o r t u n i t i e s a n d t h r e a t s
3 . 5 Gr o w th P o t e n t i a l a n d
P r o b l e m s F a c i n g
3 . 6 K e y s t a t i s t i c s a n d
C o n t r i b u t i o n t o I n d i a n E c o n o m y
2 7 - 3 9
C h a p t e r 4
4 . 1 K e y P l a y e r s i n t h e I n d u s t r y
4 . 2 M a r k e t S h a r e O f e a c h P l a y e r
4 .3 K ey c ha ll en ge s F ac in g T he
C o m p e p i t o r s
4 0 - 5 2
C h a p t e r 5
F i n d i n g s a n d c o n c l u s i o n sB i b l i o g r a p h y
7/27/2019 Meeeeeeeeee Project Final
6/53
Chapter 1:
Purpose of the Study
6
7/27/2019 Meeeeeeeeee Project Final
7/53
1 .1 Ob jec t ive o f t he p ro jec t :
1 . To s tu dy t he c on ce p t o f I nf or ma ti on Tec hn ol og y i n B an k in gS e c t o r.
2 . To S tu d y t he i mp or ta nc e I nf or ma ti on Tec hn o lo gy i n B an ki ng
S e c t o r.
3 . To i d e n t i f y t h e u s e o f I n f o r m a t i o n Te c h n o l o g y i n B a n k i n g S e c t o r.
4 . To d o t h e S W O T a n a l y s is o f I n f o rm a t io n Te c h n ol o g y i n B a n k in g
S e c t o r.
1 .2 Scope o f t he s tudy :
Now it is also called on line or home banking electronic banking was stared with the use
of proprietary software. Following are the important advantages of electronic banking
1. Paper Work Reduced
The traditional procedure of banking is manual and paper based. Electronic banking isgradually replacing the paper transactions in the banks which has reduced the paper work.
2. Easy Transactions
Electronic banking has reduced the problems of the customers like writing cheques, filing
taxes, and transforming of cash. Now in ATM facility there is no need of cheque book.
3. Security
Electronic banking provides the safe system of payment. Now transactions are made in
the accounts through internet.
7
7/27/2019 Meeeeeeeeee Project Final
8/53
7/27/2019 Meeeeeeeeee Project Final
9/53
Every customer can check his balance of account sitting at home and makes the payments
without traveling. It saves his time and expenses.
10. Utility Bills Payment
Bills, like telephone, gas, electricity and water can be easily paid to the concerned
departments without going to the bank physically. Even he is sitting in any other country,
he can make the payment.
11. Transferring Of Money
There is no need of writing the deposit slip cheques and drafts. By using the electronic banking money can be transferred easily.
12. Credit Cards
It is also very important facility for the customers that he can purchase the goods and ca
make the payment by using the credit cards.
To day the customer demands the services of banks 24 hours where he lives even he is inthe airplane. Now in this modern age the entire banking structure has been changed due
to widespread internet technology. Now all the business like commerce, trade, import,
export, purchase and sale of goods is relying upon electronic banking. By using the
advance electronic technology the banking services are fast and economical.
There is a saving time an saving of money in the use of E.banking. If any country wants
to work in the world market, it will have to improve the banking services at international
level because old traditional banking is not acceptable in the changing global economy.
The online banking facility has been provided by the large number of commercial banks.
On other hand credit card facility is also available in the various commercial banks. Now
every bank wants to attract the customers and for this purpose the offers the latest
facilities so i seems that no any bank will survive in the market if he fails to provide up
date facilities.
9
7/27/2019 Meeeeeeeeee Project Final
10/53
Chapter 2:
Introduction
10
7/27/2019 Meeeeeeeeee Project Final
11/53
2.1 About the Industry:
The banking system in India is significantly different from that of other Asian nations because of the countrys unique geographic, social, and economic characteristics. Indiahas a large population and land size, a diverse culture, and extreme disparities in income,which are marked among its regions. There are high levels of illiteracy among a large
percentage of its population but, at the same time, the country has a large reservoir of managerial and technologically advanced talents. Between about 30 and 35 percent of the
population resides in metro and urban cities and the rest is spread in several semi-urbanand rural centers. The countrys economic policy framework combines socialistic andcapitalistic features with a heavy bias towards public sector investment. India hasfollowed the path of growth-led exports rather than the exportled growth of other Asianeconomies, with emphasis on self-reliance through import substitution. These features are
reflected in the structure, size, and diversity of the countrys banking and financial sector.The banking system has had to serve the goals of economic policies enunciated insuccessive fiveyear development plans, particularly concerning equitable incomedistribution, balanced regional economic growth, and the reduction and elimination of
private sector monopolies in trade and industry. In order for the banking industry to serveas an instrument of state policy, it was subjected to various nationalization schemes indifferent phases (1955, 1969, and 1980). As a result, banking remained internationallyisolated (few Indian banks had presence abroad in international financial centers) becauseof preoccupations with domestic priorities, especially massive branch expansion andattracting more people to the system. Moreover, the sector has been assigned the role of
providing support to other economic sectors such as agriculture, small-scale industries,exports, and banking activities in the developed commercial centers (i.e., metro, urban,and a limited number of semi-urban centers). The banking systems internationalisolation was also due to strict branch licensing controls on foreign banks alreadyoperating in the country as well as entry restrictions facing new foreign banks. A criterionof reciprocity is required for any Indian bank to open an office abroad. These featureshave left the Indian banking sector with weaknesses and strengths. A big challenge facingIndian banks is how, under the current ownership structure, to attain operationalefficiency suitable for modern financial intermediation. On the other hand, it has beenrelatively easy for the public sector banks to recapitalize, given the increases innonperforming assets (NPAs), as their Governmentdominated ownership structurehas reduced the conflicts of interest that private banks would face. Banks andfinancial institutions are the backbone of the economy of the country. Implementation of Information Technology and communication networking has brought revolution in thefunctioning of the banks and the financial institutions. For the sound implementation of Information Technology in banks and financial institutions, necessary legal support is a
11
7/27/2019 Meeeeeeeeee Project Final
12/53
must. Legal issue relating to electronic transactions processing at banks is very much andthere was a need to address them by amending some of the existing Acts and introductionto new act. Necessary legislative support is essential to protect the interests as much of the customers as of the banks in several areas relating to electronic banking and paymentsystem. This is specially required to establish the credibility of Electronic ClearingSystem and Electronic Funds Transfer schemes based on the electronic massage transfer schemes based on the electronic massage transfer.
2 .2 P roduc t s and Serv ices Offe red
Banks offer the following services to account holders at their specified branches multi-city / Payable at Par (PAP) cheque facility, anywhere banking facility, trade
services, phone banking facility, internet banking facility, credit card, debit/ATM card,mobile banking and Real Time Gross Settlement (RTGS).Foreign banks are expanding the number of products on offer, their complexity such asderivatives, leverage financing. Doorstep banking facilities are being offered by some of these banks to cater to convenience lifestyle of its customers. Private banks are extendingservices including wealth management and equity trading apart from credit cards.In India e-banking is of recent origin. The traditional model for growth has been through
branch banking. Only in the early 1990s has there been a start in the non-branch bankingservices. The new private sector banks and the foreign banks are handicapped by the lack of a strong branch network in comparison with the public sector banks. In the absence of such networks, the market place has been the emergence of a lot of innovative services bythese players through direct distribution strategies of non-branch delivery. All these
banks are using home banking as a key pull factor to remove customers away from thewell entered public sector banks. Many banks have modernized their services with thefacilities of computer and electronic equipments. The electronics revolution has made it
possible to provide ease and flexibility in banking operations to the benefit of thecustomer. The e-banking has made the customer say good-bye to huge account registersand large paper bank accounts. The e-banks, which may call as easy bank offers thefollowing services to its customers:
12
7/27/2019 Meeeeeeeeee Project Final
13/53
Credit Cards/Debit Card/smart card
ATM
E-Cheques
EFT (Electronic Funds Transfer)
DE MAT Accounts
Mobile Banking
Telephone Banking
Internet Banking
EDI (Electronic Data Interchange)
13
7/27/2019 Meeeeeeeeee Project Final
14/53
SMART CARDS
It is a standard plastic card, except that it contains a micro-processor and a storage unit. It
can hold a lot of information about the card holder, including digital certificates. It can be
used in all banking transactions. It can also be used as an Electronic Purse in to which
monetary value has been loaded. Full range of cash management and foreign exchange
services are available over the Net to corporate users through the use of smart cards.
Smart Card sometimes called stored-value, have a specific amount of credit embedded
electronically in the card. A credit card with a built in micro-processor and memory is
used for identification or financial transaction. When inserted into a reader, it transfers
data to and from a central computer. It is more secure than a magnetic stripe card and can be programmed to self-destruct if thewrong password is entered too many times. As a
financial transaction card, it can be loaded with digital money and used like a travellers
cheque, except that variable amounts of money can be spent until the balance is zero.
These cards make the transaction fast, easy and convenient.
CREDIT CARD
Credit is a privilege and a convenience. Credit lets you charge a meal on a credit card,
pay for an appliance on an instalment plan, and take out a loan to buy a house, or pay for
schooling. Credit allows you to make a purchase without ready cash. A credit card
enables you to buy things now and pay for them later. You get credit by promising to pay
in the future for something you receive in the present. Credit usually costs something, and
what is borrowed must be paid back. Credit can be defined as a small plastic card that
allows its holder to buy goods and services on credit to pay at fixed intervals through the
cards issuing agency. Carrying a lot of cash on you can be cumbersome, risky and
sometimes, you run short of it, just when you most need it. Credit card is the smart
14
7/27/2019 Meeeeeeeeee Project Final
15/53
solution to these problems. It is a convenient and safe alternative for cash. Besides, it says
things about you. Most people associate a credit card with a prestige, which it most
certainly bestows on you, but more importantly, it says that you have taken the onus of
being responsible-to be extended credit! So During 1914, oil companies in the USA
issued the first credit card to their customers to purchase gas, oil, accessories etc. at the
gas stations. Thereafter, local department stores, airlines and railway companies also
started issuing their own credit cards.
DEBIT CARD
A Debit cards are also known as check cards. Debit cards look like credit cards or ATM
(automated teller machine) cards, but operate like cash or personal cheques. Debit cards
are different from credit cards. While a credit card is a way to pay later, a debit card is
a way to pay now. When you use a debit card, your money is quickly deducted from
your checking or savings account. Debit cards are accepted at many locations, including
grocery stores, retail stores, gasoline stations, and restaurants. You can use your card
anywhere merchants display your cards brand name or logo. They offer an alternative tocarrying a cheque book or cash.
AUTOMATED TELLER MACHINE (ATM)
ATM is a device; that allows customers who have an ATM card to perform routine
banking transactions without interacting with a human teller.ATMs are currently
becoming popular in India that enables the customer to withdraw their money 24 hours a
day, 7 days in a week. The simplest ATM allows a customer to withdraw cash up to
15
7/27/2019 Meeeeeeeeee Project Final
16/53
specified amount by operating the machine via a magnetic card to a host computer.
Updating of operations can be either off-line or on-line. In addition to cash withdraws,
ATMs can handle deposits and enquiries, arrange loans and insurance, arrange the buying
and selling of stocks and customers on different savings and investment schemes.
Terminals can be special task terminals such as cash deposit terminal or statement printer
terminal or full function terminals which can perform all the tasks.
An ATM is operated through the customers magnetic card. A personal identification
code allotted to a customer is magnetically needed by the ATM. When this identity is
established, he is allowed to carry out the operations. Generally 3 tracks are used for
transaction processing:
Track 1 for account code any bank code
Track 2 for credit card (shop centres)
Track 3 for debit cards purchaser/ATM card)
In the case of cash deposits, ATMs can issue a receipt to the customer acknowledgementreceipt of the cash. Cash withdraws can be made only in specified denominations. An
ATM could handle as many 5000 cash transactions without needing replenishment of
notes or journal paper.
16
7/27/2019 Meeeeeeeeee Project Final
17/53
E-CHEQUES SYSTEM
Electronic cheques are another form of Electronic tokens. They are designed to
accommodate the many individuals and entities that might prefer to pay on credit or
through some mechanism other than cash. Once registered, a buyer can then contact
sellers of goods and services. To complete a transaction, the buyer sends a check to the
seller for a certain amount of money. These checks may be sent using Email or other
Transport methods. When deposited, the cheque authorises the transfer of account
balances from the account against which the cheque was drawn to the account to which
the cheque was deposited. This method has been deliberately designed to work in the
manner conventional cheques work .
17
7/27/2019 Meeeeeeeeee Project Final
18/53
ELECTRONIC FUNDS TRANSFER (EFT)
Electronic funds transfer (EFT) is the electronic exchange, transfer of money from one
account to another, either within a single financial institution or across multiple
institutions, through computer -based systems.
The term covers a number of different concepts:
Cardholder-initiated transactions, where a cardholder makes use of a payment card Direct
deposit payroll payments for a business to its employees, possibly via a payroll service
bureau Direct debit payments, sometimes called electronic checks, for which a business
debits the consumer's bank accounts for payment for goods or services Electronic bill
payment in online banking , which may be delivered by EFT or paper check Transactions
18
http://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Computerhttp://en.wikipedia.org/wiki/Payment_cardhttp://en.wiktionary.org/wiki/direct_deposithttp://en.wiktionary.org/wiki/direct_deposithttp://en.wikipedia.org/wiki/Payroll_service_bureauhttp://en.wikipedia.org/wiki/Payroll_service_bureauhttp://en.wikipedia.org/wiki/Direct_debithttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Computerhttp://en.wikipedia.org/wiki/Payment_cardhttp://en.wiktionary.org/wiki/direct_deposithttp://en.wiktionary.org/wiki/direct_deposithttp://en.wikipedia.org/wiki/Payroll_service_bureauhttp://en.wikipedia.org/wiki/Payroll_service_bureauhttp://en.wikipedia.org/wiki/Direct_debithttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Online_banking7/27/2019 Meeeeeeeeee Project Final
19/53
involving stored value of electronic money , possibly in a private currency Wire transfer
via an international banking network Electronic Benefit Transfer .
DEMAT ACCOUNT
The term "demat", in India , refers to a dematerialized account for individual Indian
citizens to trade in listed stocks or debentures in electronic form rather than paper,
as required for investors by the Securities and Exchange Board of India ( SEBI ). In a
demat account, shares and securities are held electronically instead of the investor
taking physical possession of certificates. A demat account is opened by the investor
19
http://en.wikipedia.org/wiki/Electronic_moneyhttp://en.wikipedia.org/wiki/Private_currencyhttp://en.wikipedia.org/wiki/Wire_transferhttp://en.wikipedia.org/wiki/Electronic_Benefit_Transferhttp://en.wikipedia.org/wiki/Electronic_Benefit_Transferhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Debenturehttp://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Share_(finance)http://en.wikipedia.org/wiki/Electronic_moneyhttp://en.wikipedia.org/wiki/Private_currencyhttp://en.wikipedia.org/wiki/Wire_transferhttp://en.wikipedia.org/wiki/Electronic_Benefit_Transferhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Debenturehttp://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Share_(finance)7/27/2019 Meeeeeeeeee Project Final
20/53
while registering with an investment broker (or sub-broker). The demat account number
is
quoted for all transactions to enable electronic settl ements of trades to take
place.Access to the demat account requires an internet password and a transaction
password. Transfers or purchases of securities can then be initiated. Purchases and
sales of securities on the demat account are automatically made once transactions
are confirmed and completed.
20
http://en.wikipedia.org/wiki/Investment_brokerhttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Investment_brokerhttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Security_(finance)7/27/2019 Meeeeeeeeee Project Final
21/53
MOBILE BANKING
Mobile banking (also known as M-Banking) is a term used for performing balance
checks, account transactions, payments, credit applications and other banking
transactions through a mobile device such as a mobile phone or Personal Digital
Assistant (PDA). Mobile banking and Mobile payments are often, incorrectly, used
interchangeably. The two terms are differentiated by their service provider-to-
consumer relationship; financial institution-to-consumer versus commercial
institution-to-consumer for mobile banking and payments, respectively. Mobile
Banking involves using mobile devices gain to access financial services. Mobile
payments on the other hand may be defined as the use of mobile devices to pay for
goods or services either at the point of purchase or remotely. The earliest mobilebanking services were offered over SMS , a service known as SMS banking . With the
introduction of the first primitive smart phones with WAP support enabling the use
of the mobile web in 1999.
21
http://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Personal_Digital_Assistanthttp://en.wikipedia.org/wiki/Personal_Digital_Assistanthttp://en.wikipedia.org/wiki/Personal_Digital_Assistanthttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/SMS_bankinghttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Wireless_Application_Protocolhttp://en.wikipedia.org/wiki/Mobile_webhttp://en.wikipedia.org/wiki/Mobile_webhttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Personal_Digital_Assistanthttp://en.wikipedia.org/wiki/Personal_Digital_Assistanthttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/SMS_bankinghttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Wireless_Application_Protocolhttp://en.wikipedia.org/wiki/Mobile_web7/27/2019 Meeeeeeeeee Project Final
22/53
2.3 Geographical Area (local, reagional, statewise, national,
international)The Indian Banking industry, which is governed by the Banking Regulation Act of India,
1949 can be broadly classified into two major categories, non-scheduled banks and
scheduled banks. Scheduled banks comprise commercial banks and the co-operative
banks. In terms of ownership, commercial banks can be further grouped into nationalized
banks, the State Bank of India and its group banks, regional rural banks and private sector
banks (the old/ new domestic and foreign). The first phase of financial reforms resulted
in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical
coverage of banks. Every bank had to earmark a minimum percentage of their loan
portfolio to sectors identified as priority sectors. The manufacturing sector also grew
during the 1970s in protected environs and the banking sector was a critical source. The
next wave of reforms saw the nationalization of 6 more commercial banks in 1980.
After the second phase of financial sector reforms and liberalization of the sector in the
early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete
with the new private sector banks and the foreign banks. The new private sector banks
first made their appearance after the guidelines permitting them were issued in January
1993. Eight new private sector banks are presently in operation. During the year 2000,
the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent share in
deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2
percent of the deposits and 47.5 percent of credit during the same period. The share of
foreign banks (numbering 42), regional rural banks and other scheduled commercial
banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and8.41 percent, 3.14 percent and 12.85 percent respectively.
The industry is currently in a transition phase. On the one hand, the PSBs, which are the
mainstay of the Indian Banking system are in the process of shedding their flab in terms
of excessive manpower, excessive non Performing Assets (Npas) and excessive
22
7/27/2019 Meeeeeeeeee Project Final
23/53
governmental equity, while on the other hand the private sector banks are consolidating
themselves through mergers and acquisition.
PSBs, which currently account for more than 78 percent of total banking industry assets
are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from
traditional sources, lack of modern technology and a massive workforce while the new
private sector banks are forging ahead and rewriting the traditional banking business
model by way of their sheer innovation and service. The PSBs are of course currently
working out challenging strategies even as 20 percent of their massive employee strength
has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS)
schemes. The private players however cannot match the PSBs great reach, great size and
access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last two years, the
industry has witnessed several such instances. For instance, Hdfc Banks merger with
Times Bank Icici Banks acquisition of ITC Classic, Anagram Finance and Bank of
Madura. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on
the lookout. The UTI bank- Global Trust Bank merger however opened a pandoras box
and brought about the realization that all was not well in the functioning of many of the
private sector banks. Private sector Banks have pioneered internet banking, phone
banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines
(ATMs) and combined various other services and integrated them into the mainstream
banking arena, while the PSBs are still grappling with disgruntled employees in the
aftermath of successful VRS schemes. Meanwhile the economic and corporate sector
slowdown has led to an increasing number of banks focusing on the retail segment. Many
of them are also entering the new vistas of Insurance. Banks with their phenomenal reach
and a regular interface with the retail investor are the best placed to enter into the
insurance sector. Banks in India have been allowed to provide fee-based insuranceservices without risk participation, invest in an insurance company for providing
infrastructure and services support and set up of a separate joint-venture insurance
company with risk participation. Aggregate Performance of the Banking Industry
23
7/27/2019 Meeeeeeeeee Project Final
24/53
Aggregate deposits of scheduled commercial banks increased at a compounded annual
average growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expanded
at a Cagr of 16.3 percent per annum. Banks investments in government and other
approved securities recorded a Cagr of 18.8 percent per annum during the same period.
In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of
only 6.0 percent as against the previous years 6.4 percent. The WPI Index (a measure of
inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, money
supply (M3) grew by around 16.2 percent as against 14.6 percent a year ago.
The growth in aggregate deposits of the scheduled commercial banks at 15.4 percent inFY01 percent was lower than that of 19.3 percent in the previous year, while the growth
in credit by SCBs slowed down to 15.6 percent in FY01 against 23 percent a year ago.
The industrial slowdown also affected the earnings of listed banks. The net profits of 20
listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits grew
by 40.75 percent in the first quarter of 2000-2001, but dropped to 4.56 percent in the
fourth quarter of 2000-2001. .
Consequently, banks have been forced to explore other avenues to shore up their capital
base. While some are wooing foreign partners to add to the capital others are employing
the M& A route.
The two years, post the East Asian crises in 1997-98 saw a climb in the global interest
rates. It was only in the later half of FY01 that the US Fed cut interest rates. India has
however remained more or less insulated. The past 2 years in our country was
characterized by a mounting intention of the Reserve Bank Of India (RBI) to steadily
reduce interest rates resulting in a narrowing differential between global and domestic
rates.
After the first phase and second phase of financial reforms, in the 1980s commercial
banks began to function in a highly regulated environment, with administered interest
24
7/27/2019 Meeeeeeeeee Project Final
25/53
7/27/2019 Meeeeeeeeee Project Final
26/53
and transaction costs. The limit was thankfully partially restored to Rs 5000 at the time of
passing the Finance Bill in the Parliament. The rationalization of export credit norms in
will bestow greater operational flexibility on
banks, and also reduce the borrowing costs for exporters. Thus this move could trigger
exports growth in the future. Banks can also hope to earn increased revenue with the
interest paid by RBI on CRR balances being increased from 4.0 percent to 6.0 percent.
The stock market scam brought out the unholy nexus between the Cooperative banks and
stockbrokers. In order to usher in greater prudence in their operations, the RBI has barred
Urban Cooperative Banks from financing the stock market operations and is also in the
process of setting up of a new apex supervisory body for them. Meanwhile the foreign banks have a bone to pick with the RBI.
The interest rates are likely to remain stable this fiscal based on an expected downward
trend in inflation rate, sluggish pace of non-oil imports and likelihood of declining global
interest rates. The domestic banking industry is forecasted to witness a higher degree of
mergers and acquisitions in the future. Banks are likely to opt for the universal banking
approach with a stronger retail approach. Technology and superior customer service will
continue to be the imperatives for success in this industry.
Foreign banks are likely to succeed in their niche markets and be the innovators in terms
of technology introduction in the domestic scenario. The outlook for the private sector
banks indeed looks to be more promising vis--vis other banks. While their focused
operations, lower but more productive employee force etc will stand them good, possible
acquisitions of PSU banks will definitely give them the much needed scale of operations
and access to lower cost of funds. These banks will continue to be the early technology
adopters in the industry, thus increasing their efficiencies. Also, they have been amongst
the first movers in the lucrative insurance segment. Already, banks such as Icici Bank and
Hdfc Bank have forged alliances with Prudential Life and Standard Life respectively.
This is one segment that is likely to witness a greater deal of action in the future. In the
near term, the low interest rate scenario is likely to affect the spreads of majors. This is
likely to result in a greater focus on better asset-liability management procedures.
26
7/27/2019 Meeeeeeeeee Project Final
27/53
Consequently, only banks that strive hard to increase their share of fee-based revenues
are likely to do better in the future.
27
7/27/2019 Meeeeeeeeee Project Final
28/53
Chapter 3:
Industry overview
28
7/27/2019 Meeeeeeeeee Project Final
29/53
3.1 Industry Developments
CURRENT STATUS AND DEVELOPMENT OF THE INDIAN
BANKING SECTOR The Indian economys liberalisation in the early 1990s has resulted in the conception of
various private sector banks. This has sparked a boom in the countrys banking sector in
the past two decades4. The revenue of Indian banks grew four-fold from US$ 11.8 billion
to US$ 46.9 billion, whereas the profit after tax rose nearly nine-fold from US$ 1.4
billion to US$ 12 billion over 2001-105. This growth was driven primarily by two
factors. First, the influx of Foreign Direct Investment (FDI) of up to 74 per cent with
certain restrictions4. Second, the conservative policies of the Reserve Bank of India
(RBI), which have shielded Indian banks from recession and global economic turmoil.
Figure 1.1 and 1.2 compares the countrys Banking Index (Bankex) with the Sensex. The
Bankex is an index tracking the performance of important banking sector stocks, and has
grown at a compounded annual growth rate (CAGR) of approximately 20 per cent over
2003-126. The Figure below shows that the Bankex and the Sensex have had similar
growth trends over the past decade.
3.2 Recent Trends and Innovations
Today, we are having a fairly well developed banking system with different classes of banks public sector banks, foreign banks, private sector banks both old and newgeneration, regional rural banks and co-operative banks with the Reserve Bank of Indiaas the fountain Head of the system.In the banking field, there has been an unprecedented growth and diversification of
banking industry has been so stupendous that it has no parallel in the annals of bankinganywhere in the world.
During the last 41 years since 1969, tremendous changes have taken place in the bankingindustry. The banks have shed their traditional functions and have been innovating,improving and coming out with new types of the services to cater to the emerging needsof their customers.Massive branch expansion in the rural and underdeveloped areas, mobilisation of savingsand diversification of credit facilities to the either to neglected areas like small scale
29
7/27/2019 Meeeeeeeeee Project Final
30/53
7/27/2019 Meeeeeeeeee Project Final
31/53
7/27/2019 Meeeeeeeeee Project Final
32/53
3.4 Opportunities and Threats
Opportunities :
Banking industry depends on the overall growth of economy. Other sectors like cement,
steel and consumer durables are dependent on banking sector and move in tandem.
Although the Indian economy has done relatively better in 2008-09 compared to other
countries in the emerging markets peer group, the slowdown in fiscal 2009 was deeper
than anticipated. Accordingly, the estimates of GDP growth have been lowered to
between 6.50% and 7.00% in fiscal 2009, lower than the average growth rate of 8.50% of
the previous four years. Over the last few years, India has become increasingly integrated
with the global economy, both through trade and through exposure to
financial markets. The loss of export markets has consequently hit domestic demand
quite hard, particularly as many export segments are also employment intensive. The
performance of the Banks in 2008-09 should be viewed in the backdrop of the global
financial crisis that had its beginnings in the US sub-prime sector and broader financial
markets but spread throughout the world, turning into a full-blown global economiccrisis. Unlike developed economies, the slowdown in India has not been led by the
financial sector but affected by mainly the following :
(a) The sharp slowdown in global import demand resulted in an export slowdown,
(b) A contraction in the availability of global finance, particularly export finance, and an
increase in the costs of foreign currency funds
(c) Slowdown in investment plans of many corporate in anticipation of a demandslowdown.
32
7/27/2019 Meeeeeeeeee Project Final
33/53
Some Major areas of Banking are:
RETAIL BANKING
CORPORATE BANKING
CORPORATE CREDIT
TREASURY
CAPITAL MARKETS
LENDING TO MICRO, SMALL AND MEDIUM ENTERPRISES, AGRICULTURE
ANDMICRO FINANCE
INTERNATIONAL BANKING
The market is seeing discontinuous growth driven by new products and services that
include opportunities in credit cards, consumer finance and wealth management on the
retail side, and in fee-based income and investment banking
on the wholesale banking side. These require new skills in sales & marketing, credit andoperations.
With increased interest in India, competition from foreign banks will only intensify.
Given the demographic shifts resulting from changes in age profile and household
income, consumers will increasingly demand enhanced institutional capabilities
and service levels from banks.
New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably
serve segments like the rural/low income and affluent/HNI segments; actively adopting
acquisitions as a means to grow and reaching the next level of performance in their
service platforms. Attracting, developing and
33
7/27/2019 Meeeeeeeeee Project Final
34/53
retaining more leadership capacity.
Foreign banks committed to making a play in India will need to adopt alternative
approaches to win the race for the customer and build a value-creating customer
franchise in advance of regulations potentially opening up post 2009. At the same time,
they should stay in the game for potential acquisition opportunities as and when they
appear in the near term. Maintaining a fundamentally long-term value-creation mindset.
Reach in rural India for the private sector and foreign banks.
With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong.
Reserve Bank of India (RBI) has approved a proposal from the government to amend
the Banking Regulation Act to permit banks to trade in commodities and
commodity derivatives.
Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has
allowed them to raise perpetual bonds and other hybrid capital securities to shore
Yogendra Sisodia up their capital. If the new instruments find takers, it would help PSU
banks, left with little headroom for raising equity.
Threats :
Threat of stability of the system: failure of some weak banks has often threatened the
stability of the system.
Rise in inflation figures which would lead to increase in interest rates.
Increase in the number of foreign players would pose a threat to the PSB as well as the
private players.
BUDGET 2008 2009 PROPOSAL
IIFCL (Indian Infrastructure Financial Corporation Limited) to refinance 60% of bank
loans to critical sectors.
Debt Waiver and Debt Relief scheme to allow farmers to repay 75% of their loans
extended by six months thus higher NPA.
34
7/27/2019 Meeeeeeeeee Project Final
35/53
Banks and Insurance companies to remain under government ownership.
MAJOR PRIVATE PLAYERS
ICICI Bank
HDFC Bank
Kotak Mahindra
Yes Bank
Federal Bank
IndusInd Bank
JK Bank
ING Vysya Bank
Karur Vysya
3.5 Growth Potential and Problems Facing
The Indian banking sector has seen unprecedented growth along with remarkableimprovement in its quality of assets and efficiency since economic liberalization began inthe early 1990s. From providing plain vanilla banking services, banks have graduallytransformed themselves into universal banks. ATMs, Internet banking, mobile
banking and social banking have made "anytime anywhere banking" the norm now.
In 2011/12, non-cash payments comprised 91 per cent of total transactions in terms of value and 48 per cent in terms of volume. Within noncash payments, too, the share of
payments through cheques has come down from 85 per cent to nine per cent in value, and
83 per cent to 52 per cent in volume between 2005/06 and 2011/12. NON-CASH PAYMENTS COMPRISED 91 PER CENT OF VALUE AND 48 PER CENT OF VOLUME OF TOTAL TRANSACTIONSBanks have taken other measures to improve their functioning, too. As a result, there
were 20 Indian banks in the UK-based Brand Finance's annual international ranking of
top 500 in 2010, as compared to only six in 2007, according to a report in a leading
35
http://businesstoday.intoday.in/story/india-has-over-one-lakh-atms-psu-banks-have-lions-share/1/189840.htmlhttp://businesstoday.intoday.in/story/npa-of-banking-sector-up-1.28-pc-in-fy12/1/188736.htmlhttp://businesstoday.intoday.in/story/npa-of-banking-sector-up-1.28-pc-in-fy12/1/188736.htmlhttp://businesstoday.intoday.in/story/bank-deposit-growth-slows-down/1/23766.htmlhttp://businesstoday.intoday.in/story/india-has-over-one-lakh-atms-psu-banks-have-lions-share/1/189840.htmlhttp://businesstoday.intoday.in/story/npa-of-banking-sector-up-1.28-pc-in-fy12/1/188736.htmlhttp://businesstoday.intoday.in/story/npa-of-banking-sector-up-1.28-pc-in-fy12/1/188736.htmlhttp://businesstoday.intoday.in/story/bank-deposit-growth-slows-down/1/23766.html7/27/2019 Meeeeeeeeee Project Final
36/53
7/27/2019 Meeeeeeeeee Project Final
37/53
Restructuring of the banking system :
The committee recommended 4-tier structure of thebanking system consisting of : (a) :Three of Four Large (international) banks . (b) : Eight to tennational banks with anetwork of branches throughout the country . (c) : Local works withoperations confinedto a specific region. (d) : Rural Banks with operations confined to rural areasand businessconfined to agricultural and allied activities .
Enhancement of Capital Base of Bank :
The committee recommended that the banks shouldbe allowed to raise fresh capital fromthe public . Mutual Funds , profitable public sector unitsand employees can alsosubscribe to these issues .
Deregulation of Interest Rates :
The committee recommended deregulation of interest rate onloan so that they reflect theactual market conditions . The interest rate on governmentborrowings may also begradually deregulated to bring it in line with market rates . Howeverinterest rate on bank deposits may continue to be regulated .The first step was taken in October 1994 , whenrates were deregulated for advances more than 2lakh . In April 1998, under newregulations interest on credit limits up to Rs 25,000 was prescribed at 12% and for creditlimit between Rs 25,000 and Rs 2 lakh , the rate was not toexceed 13.5% per annum.
37
7/27/2019 Meeeeeeeeee Project Final
38/53
Chapter 4 :
Competitor Analysis
38
7/27/2019 Meeeeeeeeee Project Final
39/53
4.1 Key Players in the 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 infunctional state currently. It's the State Bank of India, which is currently the oldest bank in India in existence, established in 1806.
ICICI Bank is Indias second largest bank after the public sector State Bank of India, withtotal assets of Rs.3,44,658 crore ($79 billion) as on March 31, 2007. The bank has anetwork of more than 950 branches and 3,300 ATMs in India and a presence in 17countries. The bank offers several financial products, which include fixed deposits,
insurance, mutual funds, and retail loans such as those for homes and cars.
HDFC Standard Life Insurance was the first among private sector companies to get alicence to start operations after the industry was opened up. In the last seven years, thecompany has hired more than 10,000 employees and around 85,000 financial planners or agents.
Aviva Life Insurance is a 74:26 joint venture between Dabur and Aviva of the UK. Thecompany has 5,500 direct employees and around 30,000 financial planers.
Reliance Capital, controlled by Anil Ambani, offers complete financial solutionsincluding insurance, mutual funds and securities broking. Its brand, Reliance Money, isemerging as one of the largest retail brokers in the country with a daily turnover of around Rs. 600 crore. The company is building is footprint across the country.
Indiabulls has emerged as a strong player in the stock broking and investment servicessegment. It has 414 branches in 127 cities of India.
UTI Mutual Fund, Prudential ICICI and Franklin Templeton are among the leadingmutual funds in the country that run asset management companies to invest in stocks andother securities.
39
7/27/2019 Meeeeeeeeee Project Final
40/53
STATE BANK OF INDIA
No. of offices 11447
No. of employees 205896
Business per employee (in ` lakh) 556.00
Profit per employee (in ` lakh) 4.74
Capital and Reserves & surplus 57948
Deposits 742073
Investments 275954
Advances 542503
Interest income 63788
Other income 12691
Interest expended 42915
Operating expenses 15649
Cost of Funds (CoF) 5.85
Return on advances adjusted to CoF 3.83
Wages as % to total expenses 16.64
Return on Assets 1.04
CRAR 14.25
Net NPA ratio 1.76
40
7/27/2019 Meeeeeeeeee Project Final
41/53
HDFC BANK
No. of offices 1400
No. of employees 52687
Business per employee (in ` lakh) 446.00
Profit per employee (in ` lakh) 4.18
Capital and Reserves & surplus 14652
Deposits 142812
Investments 58818
Advances 98883
Interest income 16332
Other income 3291
Interest expended 8911
Operating expenses 5533
Cost of Funds (CoF) 6.83
Return on advances adjusted to CoF 8.12
Wages as % to total expenses 15.50
Return on Assets 1.28
CRAR 15.69
Net NPA ratio 0.63
41
7/27/2019 Meeeeeeeeee Project Final
42/53
7/27/2019 Meeeeeeeeee Project Final
43/53
7/27/2019 Meeeeeeeeee Project Final
44/53
Punjab National Bank
No. of offices 4323
No. of employees 54780
Business per employee (in ` lakh) 654.92
Profit per employee (in ` lakh) 5.64
Capital and Reserves & surplus 14654
Deposits 209760
Investments 63385
Advances 154703
Interest income 19326
Other income 2920
Interest expended 12295
Operating expenses 4206
Cost of Funds (CoF) 6.05
Return on advances adjusted to CoF 4.62
Wages as % to total expenses 17.72
Return on Assets 1.39
CRAR 14.03
Net NPA ratio 0.17
44
7/27/2019 Meeeeeeeeee Project Final
45/53
7/27/2019 Meeeeeeeeee Project Final
46/53
ICICI Bank
No. of offices 1408
No. of employees 34596
Business per employee (in ` lakh) 1154.00
Profit per employee (in ` lakh) 11.00
Capital and Reserves & surplus 49883
Deposits 218348
Investments 103058
Advances 218311
Interest income 31093
Other income 7604
Interest expended 22726
Operating expenses 7045
Cost of Funds (CoF) 5.97
Return on advances adjusted to CoF 4.09
Wages as % to total expenses 6.62
Return on Assets 0.98
CRAR 13.96
Net NPA ratio 2.09
46
7/27/2019 Meeeeeeeeee Project Final
47/53
Union Bank Of India
No. of offices 2569
No. of employees 29014
Business per employee (in ` lakh) 694.00
Profit per employee (in ` lakh) 6.28
Capital and Reserves & surplus 8740
Deposits 138703
Investments 42997
Advances 96534
Interest income 11889
Other income 1483
Interest expended 8076
Operating expenses 2214
Cost of Funds (CoF) 6.15
Return on advances adjusted to CoF 4.27
Wages as % to total expenses 11.19
Return on Assets 1.27
CRAR 12.01
Net NPA ratio 0.34
47
7/27/2019 Meeeeeeeeee Project Final
48/53
Citibank
No. of offices 41
No. of employees 4795
Business per employee (in lakh) 1880.10
Profit per employee (in lakh) 45.12
Capital and Reserves & surplus 11518
Deposits 51677
Investments 24519
Advances 39920
Interest income 6840
Other income 3582
Interest expended 2429
Operating expenses 2587
Cost of Funds (CoF) 3.57
Return on advances adjusted to CoF 9.04
Wages as % to total expenses 17.56
Return on Assets 2.12
CRAR 13.23
Net NPA ratio 2.63
48
7/27/2019 Meeeeeeeeee Project Final
49/53
Canara Bank
No. of offices 2740
No. of employees 44090
Business per employee (in lakh) 780.17
Profit per employee (in lakh) 4.97
Capital and Reserves & surplus 12208
Deposits 186893
Investments 57777
Advances 138219
Interest income 17119
Other income 2311
Interest expended 12401
Operating expenses 3065
Cost of Funds (CoF) 6.75
Return on advances adjusted to CoF 3.69
Wages as % to total expenses 12.14
Return on Assets 1.06
CRAR 14.1
Net NPA ratio 1.09
49
7/27/2019 Meeeeeeeeee Project Final
50/53
Chapter 5
Conclusion
50
7/27/2019 Meeeeeeeeee Project Final
51/53
Conclusion :
Indian public sector banks that hold around 75 % of market share do have taken initiative
in the field of IT. They are moving towards the centralized database and decentralizedecisions making process. They posses enviable quality manpower. Awareness and
appreciation of IT are very much there. What is needed is a big push the way it was
given in the post nationalization period for expansionary activities. IT and India have
become synonymous. Whether India becomes a destination for outsourcing or it becomes
a development centre is matter of debate. As far as banking industry in India is concerned
it can be said that although the Indian banks may not be as technologically advanced as
their counterparts in the developed world, they are following the majority of
international trends on the IT front. The strength of Indian banking lie in withering
storms and rising up to the expectations from all the quarters-catching up with all the
global trends is a matter of time.
1.) Technology has opened up new markets, new products, new services and efficient
delivery channels for the banking industry. Online electronics banking, mobile banking
and internet banking are just a few examples.
2). Information Technology has also provided banking industry with the wherewithal to
deal with the challenges the new economy poses. Information technology has been the
cornerstone of recent financial sector reforms aimed at increasing the speed and
reliability of financial operations and of initiatives to strengthen the banking sector.
3). The IT revolution has set the stage for unprecedented increase in financial activity
across the globe. The progress of technology and the development of world widenetworks have significantly reduced the cost of global funds transfer.
4). It is information technology which enables banks in meeting such high expectations of
the customers who are more demanding and are also more techno-savvy compared to
their counterparts of the yester years. They demand instant, anytime and anywhere
51
7/27/2019 Meeeeeeeeee Project Final
52/53
banking facilities.
5). IT has been providing solutions to banks to take care of their accounting and back
office requirements. This has, however, now given way to large scale usage in services
aimed at the customer of the banks. IT also facilitates the introduction of new delivery
channels--in the form of Automated Teller Machines, Net Banking, Mobile Banking and
the like. Further, IT deployment has assumed such high levels that it is no longer possible
for banks to manage their IT implementations on a stand alone basis with IT revolution,
banks are increasingly interconnecting their computer systems not only across branches
in a city but also to other geographic locations with high-speed network infrastructure,
and setting up local area and wide area networks and connecting them to the Internet. Asa result, information systems and networks are now exposed to a growing number.
From enabling banking services to driving transformation in the Industry. Information
Technology course do promise to change the pace of banking to the next few years.
Mobile bank and internet banking are going to make indoor in the banking sector in the
near future. Even though IT systems are complex and sophisticated but they are energy
guzzlers. Hence, the future for banking sector is going to make rapid straights in near
future.
52
7/27/2019 Meeeeeeeeee Project Final
53/53