Transcript
Management of Financial Services
Mini Project – Interviewing managers in
Banking, Insurance & Mutual Fund sectors
Project done by:
Under guidance of:
MFS – Mini Project
2 TKM Institute of Management
Table of Contents
1. Introduction 3
2. Sector Overview 4
3. Insurance Company 13
4. Mutual Fund Company 23
5. Bank 27
6. Conclusion 31
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1. Introduction
The theory what budding managers learn can only be applied in the
industry. Any real scenario in the industry can only provide real time learning.
The project is intended to provide an understanding of the industry and its
working pattern.
Objective
The objective of the project is to understand the various aspects of
Banking, Mutual funds and Insurance sectors including the products and
services offered by each of the sectors.
Methodology
The methodology adopted was direct interview and company
documentation to collect all the required information. The manager of the
office visited was interviewed to collect maximum and accurate information.
Details like the products and services offered were collected using company
documentation.
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2. Sector Overview
Mutual Funds
The mutual fund industry started in India in a small way with the UTI Act
creating what was effectively a small savings division within the RBI. Over a
period of 25 years this grew fairly successfully and gave investors a good
return, and therefore in 1989, as the next logical step, public sector banks and
financial institutions were allowed to float mutual funds and their success
emboldened the government to allow the private sector to foray into this area.
The initial years of the industry also saw the emerging years of the Indian
equity market, when a number of mistakes were made and hence the mutual
fund schemes, which invested in lesser-known stocks and at very high levels,
became loss leaders for retail investors. From those days to today the retail
investor, for whom the mutual fund is actually intended, has not yet returned
to the industry in a big way. But to be fair, the industry too has focused on
bringing in the large investor, so that it can create a significant base corpus,
which can make the retail investor feel more secure.
India has been amongst the fastest growing markets for mutual funds
since 2004 witnessing a CAGR of 29 Percent in the five-year period from
2004 to 2008 as against the global average of4 percent. The increase in
revenue and profitability, however, has not been commensurate with the AUM
growth in the last five years. Low share of global assets under management,
low penetration levels, limited share of mutual funds in the household financial
savings and the climbing growth rates in the last few years that are amongst
the highest in the world, all point to the future potential of the Indian mutual
fund.
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Challenges and Issues
Challenges and issues faced by the sector are mentioned below. Low
customer awareness levels and financial literacy pose the biggest challenge
to channelizing household savings into mutual funds. Further, fund houses
have shown limited focus on increasing retail penetration and building retail
AUM. Most AMCs and distributors have a limited focus beyond the top 20
cities that is manifested in limited distribution channels and investor servicing.
The Indian Mutual fund industry has largely been product- led and not
sufficiently customer focused with limited focus being accorded by players to
innovation and new product development.
Further there is limited flexibility in fees and pricing structures currently.
Distributors and the mutual fund houses have exhibited limited interest in
continuously engaging with customers post closure of sale as the
commissions and incentives have been largely in the form of upfront fees from
product sales. Limited focus of the public sector network including public
sector banks, India Post etc on distribution of mutual funds has also impeded
the growth of the industry. Further multiple regulatory frameworks govern
different verticals within the financial services sector, such as differential
policies pertaining to the PAN card requirement, mode of payment (cash vs.
cheque), funds management by insurance companies and commission
structures, among others.
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Banking Sector
Banking in one form or another was in existence even in ancient times.
As early as 2000 B.C Babylonians had developed a system of banks. The
writings of Manu (he maker of Hindu Law) and Kautilya (the minister of
Chandragupta Maurya) and the teachings of Christ contained references to
banking. However modern banking came into existence only after the
industrial revolution. There was a need for the formation of financial
institutions that could collect the surplus funds of the people on terms
acceptable to them and make them available to the needy for productive
purposes. Accordingly a large number of such financial institutions called joint
stock banks were set up after the industrial revolution
The banking system in India is significantly different from that of other
Asian nations because of the country’s unique geographic, social, and
economic characteristics. India has 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-urban and rural centers. The country’s economic
policy framework combines socialistic and capitalistic features with a heavy
bias towards public sector investment. India has followed the path of growth-
led exports rather than the “export led growth” of other Asian economies, with
emphasis on self-reliance through import substitution. These features are
reflected in the structure, size, and diversity of the country’s banking and
financial sector.
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The banking system has had to serve the goals of economic policies
enunciated in successive five year development plans, particularly concerning
equitable income distribution, balanced regional economic growth, and the
reduction and elimination of private sector monopolies in trade and industry.
In order for the banking industry to serve as an instrument of state policy, it
was subjected to various nationalization schemes in different phases (1955,
1969, and 1980). As a result, banking remained internationally isolated (few
Indian banks had presence abroad in international financial centers) because
of preoccupations with domestic priorities, especially massive branch
expansion and attracting 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 system’s
international isolation was also due to strict branch licensing controls on
foreign banks already operating in the country as well as entry restrictions
facing new foreign banks. A criterion of reciprocity is required for any Indian
bank to open an office abroad. These features have left the Indian banking
sector with weaknesses and strengths. A big challenge facing Indian banks is
how, under the current ownership structure, to attain operational efficiency
suitable for modern financial intermediation. On the other hand, it has been
relatively easy for the public sector banks to recapitalize, given the increases
in nonperforming assets (NPAs), as their Government dominated ownership
structure has reduced the conflicts of interest that private banks would face.
About 92 percent of the country’s banking segment is under State control
while the balance comprises private sector and foreign banks. The public
sector commercial banks are divided into three categories such as State Bank
group, nationalized banks and Regional Rural Banks.
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Porters 5 forces analysis – Banking Sector
• Threat of New Entrants
The average person can't come along and start up a bank, but there
are services, such as internet bill payment, on which entrepreneurs can
capitalize. Banks are fearful of being squeezed out of the payments
business, because it is a good source of fee-based revenue. Another trend
that poses a threat is companies offering other financial services. What
would it take for an insurance company to start offering mortgage and loan
services? Not much. Also, when analyzing a regional bank, remember that
the possibility of a mega bank entering into the market poses a real threat.
• Power of Suppliers
The suppliers of capital might not pose a big threat, but the threat of
suppliers luring away human capital does. If a talented individual is
working in a smaller regional bank, there is the chance that person will be
enticed away by bigger banks, investment firms, etc.
• Power of Buyers
The individual doesn't pose much of a threat to the banking industry,
but one major factor affecting the power of buyers is relatively high
switching costs. If a person has a mortgage, car loan, credit card, checking
account and mutual funds with one particular bank, it can be extremely
tough for that person to switch to another bank. In an attempt to lure in
customers, banks try to lower the price of switching, but many people
would still rather stick with their current bank. On the other hand, large
corporate clients have banks wrapped around their little fingers. Financial
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institutions - by offering better exchange rates, more services, and
exposure to foreign capital markets - work extremely hard to get high-
margin corporate clients.
• Availability of Substitutes
As you can probably imagine, there are plenty of substitutes in the
banking industry. Banks offer a suite of services over and above taking
deposits and lending money, but whether it is insurance, mutual funds or
fixed income securities, chances are there is a non-banking financial
services company that can offer similar services. On the lending side of the
business, banks are seeing competition rise from unconventional
companies.
• Competitive Rivalry
The banking industry is highly competitive. The financial services
industry has been around for hundreds of years and just about everyone
who needs banking services already has them. Because of this, banks
must attempt to lure clients away from competitor banks. They do this by
offering lower financing, preferred rates and investment services. The
banking sector is in a race to see who can offer both the best and fastest
services, but this also causes banks to experience a lower ROA. They then
have an incentive to take on high-risk projects. In the long run, we're likely
to see more consolidation in the banking industry. Larger banks would
prefer to take over or merge with another bank rather than spend the
money to market and advertise to people.
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INSURANCE SECTOR
The Insurance sector in India governed by Insurance Act, 1938, the Life
Insurance Corporation Act, 1956 and General Insurance Business
(Nationalisation) Act, 1972, Insurance Regulatory and Development Authority
(IRDA) Act, 1999 and other related Acts. With such a large population and the
untapped market area of this population Insurance happens to be a very big
opportunity in India. Today it stands as a business growing at the rate of 15-
20 per cent annually. Together with banking services, it adds about 7 per cent
to the country’s GDP .In spite of all this growth the statistics of the penetration
of the insurance in the country is very poor. Nearly 80% of Indian populations
are without Life insurance cover and the Health insurance. This is an indicator
that growth potential for the insurance sector is immense in India. It was due
to this immense growth that the regulations were introduced in the insurance
sector and in continuation “Malhotra Committee” was constituted by the
government in 1993 to examine the various aspects of the industry.
The key element of the reform process was Participation of overseas
insurance companies with 26% capital. Creating a more efficient and
competitive financial system suitable for the requirements of the economy was
the main idea behind this reform. Since then the insurance industry has gone
through many changes .The competition LIC started facing from these
companies were threatening to the existence of LIC .since the liberalization of
the insurance industry has never looked back and today stand as the one of
the most competitive and exploring industry in India. The entry of the private
players and the increased use of the new distribution are in the limelight
today. The use of new distribution techniques and the IT tools has increased
the scope of the industry in the longer run.
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India had the nineteenth largest insurance market in the world in 2003.
Strong economic growth in the last decade combined with a population of
over a billion makes it one of the potentially largest markets in the future.
Insurance in India has gone through two radical transformations. Before 1956,
insurance was private with minimal government intervention. In 1956, life
insurance was nationalized and a monopoly was created. In 1972, general
insurance was nationalized as well (endnote 1). But, unlike life insurance, a
different structure was created for the industry. One holding company was
formed with four subsidiaries. As a part of the general opening up of the
economy after 1992, a Government appointed committee recommended that
private companies should be allowed to operate. It took six years to
implement the recommendation. Private sector was allowed into insurance
business in 2000.
However, foreign ownership was restricted. No more than 26% of any
company can be foreign-owned. In what follows, we examine the insurance
industry in India through different regulatory regimes. A totally regulation free
regime ended in 1912 with the introduction of regulation of life insurance. A
comprehensive regulatory scheme came into place in 1938. This was
disabled through nationalization. But, the Insurance Act of 1938 became
relevant again in 2000 with deregulation. With a strong hint of sustained
growth of the economy in the recent past, the Indian market is likely to grow
substantially over the next few decades.
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Porters 5 forces analysis – Insurance Sector
• Threat of New Entrants
The average entrepreneur can't come along and start a large
insurance company. The threat of new entrants lies within the insurance
industry itself. Some companies have carved out niche areas in which they
underwrite insurance. These insurance companies are fearful of being
squeezed out by the big players. Another threat for many insurance
companies is other financial services companies entering the market. In
some countries, regulations prevent banks and other financial firms from
entering the industry.
• Power of Suppliers
The suppliers of capital might not pose a big threat, but the threat of
suppliers luring away human capital does. If a talented insurance
underwriter is working for a smaller insurance company (or one in a niche
industry), there is the chance that person will be enticed away by larger
companies looking to move into a particular market.
• Power of Buyers
The individual doesn't pose much of a threat to the insurance
industry. Large corporate clients have a lot more bargaining power with
insurance companies. Large corporate clients like airlines and
pharmaceutical companies pay millions of dollars a year in premiums.
Insurance companies try extremely hard to get high-margin corporate
clients.
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• Availability of Substitutes
This one is pretty straight forward, for there are plenty of substitutes
in the insurance industry. Most large insurance companies offer similar
suites of services. Whether it is auto, home, commercial, health or life
insurance, chances are there are competitors that can offer similar
services. In some areas of insurance, however, the availability of
substitutes are few and far between. Companies focusing on niche areas
usually have a competitive advantage, but this advantage depends entirely
on the size of the niche and on whether there are any barriers preventing
other firms from entering.
• Competitive Rivalry
The insurance industry is becoming highly competitive. The
difference between one insurance company and another is usually not that
great. As a result, insurance has become more like a commodity - an area
in which the insurance company with the low cost structure, greater
efficiency and better customer service will beat out competitors. Insurance
companies also use higher investment returns and a variety of insurance
investment products to try to lure in customers. In the long run, we're likely
to see more consolidation in the insurance industry. Larger companies
prefer to take over or merge with other companies rather than spend the
money to market and advertise to people.
3. Insurance Company
BIRLA SUN LIFE INSURANCE
Company profile
Established in 2000, Birla Sun Life Insurance Company Limited (BSLI)
is a joint venture between the Aditya Birla Group, a well known and trusted
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name globally amongst Indian conglomerates and Sun Life Financial Inc,
leading international financial services organization from Canada. The local
knowledge of the Aditya Birla Group combined with the domain expertise of
Sun Life Financial Inc., offers a formidable protection for its customers' future.
With an experience of over 10 years, BSLI has contributed significantly
to the growth and development of the life insurance industry in India and
currently ranks amongst the top 6 private life insurance companies in the
country. Known for its innovation and creating industry benchmarks, BSLI has
several firsts to its credit. It was the first Indian Insurance Company to
introduce "Free Look Period" and the same was made mandatory by IRDA for
all other life insurance companies. Additionally, BSLI pioneered the launch of
Unit Linked Life Insurance plans amongst the private players in India. To
establish credibility and further transparency, BSLI also enjoys the prestige to
be the originator of practice to disclose portfolio on monthly basis. These
category development initiatives have helped BSLI be closer to its policy
holders' expectations, which gets further accentuated by the complete
bouquet of insurance products (viz. pure term plan, life stage products, health
plan and retirement plan) that the company offers.
Added to this, the company has extensive reach through its network of
600 branches and 1, 47,900 empanelled advisors. This impressive
combination of domain expertise, product range, reach and ears on ground,
helped BSLI cover more than 2.4 million lives since it commenced operations
and establish a customer base spread across more than 1500 towns and
cities in India. To ensure that our customers have an impeccable experience,
BSLI has ensured that it has lowest outstanding claims ratio of 0.00% for FY
2010-11. Additionally, BSLI has the best Turn Around Time according to
LOMA on all claims Parameters. Such services are well supported by sound
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financials that the Company has. The AUM of BSLI stood at 19725 crs as on
April 30, 2011.
The various products are categorized into:
• Protection solutions
• Children's future solutions
• Wealth with protection
• Health and wellness
• Retirement solutions
The Aditya Birla Group
The Aditya Birla Group is one of India's largest business houses. Global
in vision, rooted in Indian values, the Group is driven by a performance ethic
pegged on value creation for its multiple stakeholders. The Group operates in
26 countries – India, UK, Germany, Hungary, Brazil, Italy, France,
Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand,
Laos, Indonesia, Philippines, UAE, Singapore, Myanmar, Bangladesh,
Vietnam, Malaysia, Bahrain and Korea.
A US $29 billion corporation in the League of Fortune 500, the Aditya
Birla Group is anchored by an extraordinary work force of 130,000
employees, belonging to 40 different nationalities. Over 60 per cent of its
revenues flow from its operations across the world. The Aditya Birla Group is
a dominant player in all its areas of operations viz; Aluminium, Copper,
Cement, Viscose Staple Fibre, Carbon Black, Viscose Filament Yarn,
Fertilisers, Insulators, Sponge Iron, Chemicals, Branded Apparels, Insurance,
Mutual Funds, Software and Telecom. The Group has strategic joint ventures
with global majors such as Sun Life (Canada), AT&T (USA), the Tata Group
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and NGK Insulators (Japan), and has ventured into the BPO sector with the
acquisition of TransWorks, a leading ITES/BPO company.
Sun Life Financial
Sun Life Financial Inc is a leading international financial services
organization providing a diverse range of wealth accumulation and protection
products and services to individuals and corporate customers. Chartered in
1865, Sun Life Financial Inc and its partners today have operations in key
markets worldwide, including Canada, the United States, the United Kingdom,
Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda.
Products and Solutions
• Protection solution
• Group solution
• Individual solution
• NRI solution
Protection solution
1. Protection Solution- Birla Sun Life Insurance Protection Solutions
help to meet the need for financial security for loved ones. The plans
are designed to give a life cover as per need at a reasonable
premium.
2. Children future plan- Birla Sun Life Insurance Children’s Future
Solutions are designed to help build a corpus that allows to meet the
major expenses of child in future. Besides providing life cover to
ensure that your child’s dream is secured, they also offer the choice
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of guaranteed returns or the flexibility to manage fund options to
make money grow as per needs.
3. Wealth with protection scheme- Offer flexible plan suited to ones
goal.
4. Health and wellness solution- Birla Sun Life Insurance Health &
Wellness Solutions ensure that the insurer never lack the funds to go
in for quality treatment in case of medical emergencies. The plans
help you insure yourself and your family for an adequate sum,
against major illnesses and injuries. Insurer even has a choice of
plans that offer the cashless facility.
5. Retirement solution- During retirement, income stops but the
expenses don’t. With inflation increasing the cost of basic essentials,
your savings today might not suffice meeting the cost of necessities
throughout the retired life. It is therefore important to start saving
early and in a planned manner for a comfortable, stress-free retired
life. What is also important is to determine your goal for the
retirement corpus basis your projected needs during retired life. Birla
Sun Life Insurance Retirement Solutions ensure that insurer enjoys
a secure and happy retired life. The retirement plans that help
insured build a corpus that lasts throughout ones retired life. So,
whether one wish to retire early and start their own business or lead
a leisurely retired life, can be sure of the funds that make it the best
years of their life.
6. Rider- Riders are the additional benefits that you may buy and add
to your policy at a nominal cost. They allow you to enhance your
insurance cover, qualitatively and quantitatively.
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GROUP SOLUTION
BSLI believe that employee benefit plans provided by employers to
their employees play a very important role in increasing employee loyalty
and productivity. Birla Sun Life uses its vast expertise in helping
organizations and groups design customized solutions to their employees.
1. Retirement Solution - BSLI employee benefit solutions are designed
to enable organizations and groups to offer superior benefits to their
employees to meet both statutory requirements like gratuity and
retirement solutions.
(1) Gratuity solution- While Gratuity is a statutory obligation it is also a
very important tool today to create employee loyalty. A
comprehensive gratuity plan can help organizations reduce both
business costs and corporate tax. Birla Sun Life’s gratuity solution
manages your gratuity liability effectively and also helps you release
resources for other business activities.
(2) Super Annuation- Today while there is a high awareness of the
impact of inflation and its affect on retirement savings among
employees, very few would have adopted a systematic and
disciplined savings plan to counter its effect. Organizations can play
a key role in helping employees to build the desired retirement
corpus while at the same time increasing employee loyalty. Birla Sun
Life’s solutions can be customized to effectively meet both employer
and employee requirements.
(3) Leave Encashment- Leave encashment liabilities for organization
keep growing with time thus straing the organizations resources.
These liabilities can bee effectively met through the management of
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a dedicated fund for leave encashment. Birla Sun Life vast
experience in effectively managing funds and delivering superior
returns can help organizations effectively manage these liabilities.
2. Protection Solution - Birla Sun Life Insurance Group Protection
Solutions provide the benefit of an insurance cover to an entire group of
people as a single unit.
(1) Employer-Employee- At Birla Sun Life Insurance (BSLI), the goal is
to help client ensure your employees’ well being so that they can
enhance their performance & potential. BSLI protection solutions
combine new innovations in organizational benefits with the
traditional strength of employee assistance to help you. Protect your
investment in your people Reduce the liability, cost and negative
impact of mental reassures in the work place Maintain your position
as employer of choice; and Incorporate employer protection &
wellness into your core business practices.
(2) Affinity- An affinity group is a group consisting of persons who
assemble together with a commonality of purpose or engaging in a
common economic activity. In Insurance parlance Non-employer-
employee groups like employee welfare associations, borrowers of a
bank, professional associations or societies may also be treated as
affinity groups provided the president/ secretary/ manager/ group
organizer in his capacity as organizer of the group has an authority
from majority of the members of the group to arrange insurance on
their behalf.
3. Rural Insurance
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A large population of India lives in the rural areas. The impact of risks
associated with life and health are far more severe on this population as
compared to the urban population with higher levels of income. Birla Sun
Life launched its rural program in 2001 to provide insurance to the rural
populace of India. This includes the endowment product that provides life
cover and guarantees returns to the insured on maturity. By virtue of the
benefits it provides, this product has been very well accepted and has
gone on to become the most popular product in the rural areas.
With changing times and with increasing disposable incomes in rural
areas, BSLI improved their solutions to the rural population and launched
two Micro Insurance Products in 2008 which include a pure term and
return of premium products. One of the unique features of these products
is that they provide a grace period of 180 days as opposed to 30 days for
other similar plans in the market. This gives policyholders the flexibility to
pay premiums.
4. NRI Solutions
Birla Sun Life's unique NRI solutions can help client ensure that
dreams and aspirations are not compromised even while you stay away
from your family. BSLI solutions can help you plan and fulfil all your goals
like planning for your child's education, planning for your retirement,
building a house, caring for your parents back home and more.
MARKETING OF BSLI PRODUCTS AND SERVICES
Marketing of their product is usually done by intermediaries called
Agents and Brokers. Agency manager and assistant agency manager monitor
the business performance of agents. Agents are known as insurance advisor.
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The company has a marketing department which looks after the marketing
activities of the company. The entire marketing plan is prepared and
implemented by the marketing department. The marketing and finance
department collectively identify the target for each individual agents, assistant
agency manager and the agency manager usually based on the geography.
The functions of the agent include:
•Collecting database of prospect
•Meeting the client and explaining about the product and services based on
client requirements
•Negotiating with the client
•Assisting client in paying the premium
•Assisting in documentation process etc.
INTERVIEW EXCERPT
Person: Mr. Ambu S G
Position: Senior Agency Manager
Birla Sun Life Insurance is one of the leading insurance companies in
India. It’s a joint venture between Aditya Birla Group and Sun life financials.
Insurance industry is one of the fastest growing industries in India. There is
ample opportunity for MBA graduates in BSLI. Fresh MBAs are recruited in
two posts;
• Agency Manager-
• There should be at least 12 agents under him
• The annual target is minimum of 24 lakh per annum.
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• Should have to get at least 100 policies
• Will get an initial salary of 2.17 lakh per annum
• Assistant Agency Manager
• There should be at least 6 agents working under him
• The annual target is minimum 6 lakh per annum
• Should have to get at least 50 policies
• Will get an initial salary of 1.85 lakh per annum.
• Sales Supportive Executive (SSE)
• Will have to do advisory recruitment
• Enact reward and recognition policy
• Enacting policy related to commission payable
• Account Management etc
• Branch Operation Executive (BOE)
• Will have to ensure smooth operation of the branch and formulate
branch operational policies.
� To become an insurance agent IRDA certification is mandatory
About job profile and job security in insurance business
Insurance job is one of the risky and high pressure jobs. Here only the
fittest will survive. Job security and career development is solely based on the
performance of the employee. If an employee is not performing up to the
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mark, he cannot sustain in this field. If the employee is not able to meet the
target, he is asked why? As the disparity between actual and expected target
increases the number of why is also increased and finally he is forced to quit
the job.
To what extend recession has effected BSLI
Recession has definitely affected our business but we were in a
much better position compared to many peers and other international
insurance company. The lowering of business was due to psychological
fear more than technical. But at the same time this was the period when
we saw maximum growth in our unit linked insurance plan (ULIP). There
were educated clients who took this as an opportunity to invest and pooled
in lots of money.
4. Mutual Fund Company
HDFC ASSET MANAGEMENT COMPANY LTD
Company Profile
HDFC Asset Management Company Ltd (AMC) was incorporated under
the Companies Act, 1956, on December 10, 1999, and was approved to act
as an Asset Management Company for the HDFC Mutual Fund by SEBI vide
its letter dated July 3, 2000. The registered office of the AMC is situated at
Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation,
Churchgate, Mumbai - 400 020. In terms of the Investment Management
Agreement, the Trustee has appointed the HDFC Asset Management
Company Limited to manage the Mutual Fund. HDFC Mutual Fund is one of
the largest mutual funds and well-established fund house in the country with
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consistent and above average fund performance across categories since its
incorporation on December 10, 1999.
HDFC Mutual Fund has been one of the best performing mutual funds
in the last few years. HDFC Asset Management Company Limited (AMC)
functions as an Asset Management Company for the HDFC Mutual Fund.
AMC is a joint venture between housing finance giant HDFC and British
investment firm Standard Life Investments Limited. It conducts the operations
of the Mutual Fund and manages assets of the schemes, including the
schemes launched from time to time. As of Aug 2006, the fund has assets of
Rs.25,892 crores under management. In 2003, following a decision by the
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, to
divest its asset management business in India, AMC had entered into an
agreement with ZIC to acquire the asset management business.
Consequently, all the schemes of Zurich Mutual Fund in India had been
transferred to HDFC Mutual Fund and renamed as HDFC schemes
Products Offered
• Children’s Gift Fund - Children's Gift Fund with an objective to obtain
long term capital appreciation
• Debt/Income Fund - Invest in money market and debt instruments and
provide optimum balance of yield.
• Fund of Fund Schemes - Invests primarily in other scheme(s) of the
same mutual fund or other mutual funds
• Equity/Growth Fund - Invest primarily in equity and equity related instruments
• Fixed Maturity Plan - Invest primarily in Debt / Money Market
Instruments and Government Securities.
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• Exchange Traded Funds - Invest primarily in equity and equity related
instruments
• Liquidity funds - Provide high level of liquidity by investing in money
market and debt instruments.
• Quarterly Interval Fund - Generate regular income through investments
in Debt / Money Market Instruments.
INTERVIEW EXCERPT
HDFC Mutual Fund, Kollam, located near the Andamukkam bus stand,
is headed by Mr. Manoj Mathew. An interview with Branch Manager, Mr.
Manoj Mathew and head in charge, Mr. Manoranj S.C helped us to
understand better the functioning of the organization and also the marketing
of mutual funds.
What are the main role & activities of HDFC-AMC?
There are eight branches of HDFC AMC in Kerala and every branch act
as an Investor Service Center (ISC). The main purpose of Investor Service
Centers is to provide services and to communicate with the existing and
potential investors within and outside India, about the performance of the
schemes, ownership details, finding new customers, disclosures made on an
ongoing basis and answers to frequently asked questions etc.
How does HDFC Mutual fund differentiated from other mutual funds?
HDFC follows a unique investment policy that ensures maximum return
with less return. The investment philosophy relies extensively on fundamental
research. It is driven by the belief that over time stock prices reflect a
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business’ underlying intrinsic values and its long-term prospects. Some of the
basic principles for equity schemes include focus on long term, managing risk
and maintaining balanced outlook on the market. Similarly other schemes also
have such unique investment philosophy.
How is mutual funds marketed in HDFC-AMC?
HDFC Mutual Fund is one of the largest mutual funds in India with an
investor base of over 25lakh which is serviced primarily by their wide network
of distributors. HDFC AMC markets their products through channel sales like
all other asset management companies. Thus no direct sales are involved in
mutual fund marketing. HDFC Mutual Fund considers their distributors as the
most important link between the investors and them. To help distributors to
advise and service their clients better, the AMC together with the registrar
(CAMS) offer a range of facilities to the distributors. The main distributors of
mutual fund include broking firms, banks and individual financial advisors.
HDFC AMC mainly focuses on banks for their distribution. Country’s top
banks like HDFC bank, IndusInd Bank, Axis Bank, ICICI Bank, SBI Bank are
in the list. By partnering with banks for distribution, mutual funds expect to
reverse the distributor-induced portfolio churning by investors. Also, banks
charge a lower distribution fee compared with national distributors and some
independent financial advisors. By partnering with the banks HDFC has an
advantage of widening the reach of mutual funds in India.
What are the activities conducted to widen mutual fund reach?
Association of Mutual Funds in India (AMFI) has introduced many
programmes for the promotion of mutual funds in India. One among them is
Investor Awareness Programme, where a free training is to be given to the
interested investors and meet their queries, which is to be done every month
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as per AMFI guidelines. Similarly, Distributors Training is conducted to have a
good rapport with the distributors, so that they can boost up the sales.
Conclusion
For HDFC AMC customers always comes first. Operations and
Customer Service are our key focus area and play an instrumental role in our
success. The organisation is dedicated towards customer satisfaction and
work hard to cater to their unique requirements. HDFC-AMC was the first
AMC to be assigned “Fund House Level 1 Rating” by Crisil. The rating reflects
highest fund governance levels and fund management practices at HDFC
AMC.
5. Banking Company
STATE BANK OF TRAVANCORE
Company Profile
The bank was established in 1945 as the Travancore Bank Ltd, at the
initiative of C. P. Ramaswami Iyer, then Divan of Travancore. Although the
Travancore government put up only 25% of the capital, the bank undertook
government treasury work and foreign exchange business, apart from its
general banking business. Its registered office was at Madras. In 1960, it
became a subsidiary of State Bank of India under the SBI Subsidiary Banks
Act, 1959, enacted by the Parliament of India. SBT is now headed by Mr.
Pradip Chaudhuri as Chairman and Mr. P Nanda Kumaran as the Managing
Director.
Products and Services
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The bank offers various products and services. The banking services
are mainly catered through three heads, Personal banking, NRI banking and
Business banking. Bank also actively take part in Financial Inclusion
measures as well as Social and Rural banking. The services mainly include e-
payment facility for paying income tax, service tax and customs and duties;
remittance of money to and from other nations; insurance; mutual funds;
demat services; custodial services; international debit card; pilgrim service
centers and Viswa yatra card.
INTERVIEW EXCERPT
Manager: Mr Satisan M
Position: Assistant General Manager
Your association with SBT
I am with SBT for the past 33 years. I joined SBT as a clerk in the year
1978 and I am extremely satisfied with the association with SBT.
What are the normal functions of your branch?
As every bank we basically perform three functions-
o Accepting Deposit
o Lending Money
o Facilitating Fund Transfer
Do you believe increasing interest rate is solution for controlling
inflation?
I am not the right person to talk about this but I personally believe that
rising interest rate is not the right way to go. The current inflation is due to
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rising demand and the major contributor to increasing demand is raising
consumption by lower income group. Many programs like Mahatma Gandhi
Rural Employment Program of central government has increased the living
standard of rural population drastically this in turn has resulted in increasing
demand. So we cannot complain about this. Another two factors which are
adding fuel to the fire are
� Low production level
� Poor supply chain management
Low production level and poor supply chain management has resulted
in high inflation. Therefore increasing the interest rate beyond a saturation
point is not going to help.
To what extend the recent recession affected SBT
Recession has affected the entire country as whole. But we are proud
to say that in the banking sector, we were the least affected.
Why SBT employees are opposing the proposal of merger with SBI
The reluctant to merger is purely because of personal reasons. Few
middle and top level management people believe that if the merger happens
they will lose their power. They will come under the direct discretion of SBI
officials. There is no chances of job lose at all but there will be a reshuffle and
nobody wants to lose their power. It’s completely because of personal gain
that they are reluctant to merger. But merger will happen in the next 2 or 3
years.
Difference between nationalized bank and new generation private bank
New generation private bank pays much more than the nationalized
bank but the output they expect from there employee is much more. Working
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in a new generation bank is like a pressure cooker, the employee has to
deliver otherwise will be shown the doors. There is no job security in private
banks. In contrast the basic pay given in nationalized bank is less but when
we compare the amenities and other benefits it comes out to be par with what
is paid in private bank, moreover your job is secured here. Nationalized bank
is much better than private bank.
Working in SBT provides ample opportunity. A person joined as PO can
reach up to the position of General Manager. Moreover one may get an
opportunity to work in any of the SBT branch from Osaka to Alaska. So one
can also get international assignment during his tenure. Nationalized bank
perform both mass banking and class banking where as private bank
performs only class banking.
Entry options for MBAs in SBT
The only way to get into SBT is through bank exam. The post for which
MBAs can look for are-
� Probationary Officer (PO)
� Specialist Officer (SO)
The basic qualification required for PO is graduation with knowledge in
computer. A PO today is considered as blue eyed boy. The basic qualification
required SO is post graduation preferably MBAs, CAs etc.
Now the role of a bank employee has changed drastically, it’s no more
a monotonous job. A PO need to perform multitask. So he should be
extremely versatile. They are also allowed to do Cross selling business.
Views about resent downgrading of banking industry by credit rating
agencies
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The downgrading of Indian banking industry is not at all going to affect
the banking sector in India. Our policies are much better and are at par with
international standard. Our profit margin is extremely good, also our economy
is expected to grow at the rate of 7.5% which is much better compared to
many developed and developing country, given the current scenario. So, we
are in a much stable position.
Concerns regarding NPA
NPAs will be there, be it any bank in the world. But our policies are so
stringent that our NPAs will not affect our financial stability. We have a well
laid down procedure in place for recovering NPAs. NPA and pension
commitment are not at all going to affect as in the coming future.
6. Conclusion
The project has given immense exposure in the various sectors such as
Banking, Insurance and Mutual Funds. The managers have shared much
information and shared their experiences.
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