AProject Study ReportOn Comparative Analysis Of Fixed Deposits,
Home Loan & Personal Loan Of HDFC Bank with PSUsSubmitted in
partial fulfilment for theAward of degree ofMaster of Business
Administration (MBA)
Submitted By: -Submitted To: -KISHAN DAUSAYADr. Manish JainMBA
2nd year (Sem. 4th)Head of DepartmentRTU Roll No.
11MAIXX611Department of Management
ARYA INSTITUTE OF ENGINEERING AND TECHNOLOGYKUKAS,
JAIPUR2011-2013
PREFACEThe successful completion of this project was a unique
experience for me because by visiting many place and interacting
various person, I achieved a better knowledge about financial
services. The experience which I gained by introduction about the
deposits and loans. Then it contains findings of the research and
analysis of the findings and finally conclusion. Apart from all the
perceptions and the findings that I have read in annual reports of
HDFC LTD about the history and current position of fixed deposits,
I have done personal interviews of the customers through
questionnaire. I have also put forward recommendations that will
help to Bank to expand its Market.Doing this project was essential
at this turning point of my career this project is being submitted
which content detailed analysis of the research under taken by
me.The Subject of my study was COMPARATIVE ANALYSIS OF HDFC FIXED
DEPOSITS, PERSONAL LOANS AND HOME LOANS with PSUs. It Studies the
various criteria of the customers, which they consider while
depositing their money in fixed deposits.The report contains first
of all brief
ACKNOWLEDGEMENTI express my warmest thanks & deep sense of
gratitude to the individuals for their generous help in discussing
the project and giving their valuable time in successful completion
of this project. Time to time I got constructive suggestions,
guidance and encouragement.I would like to express my deep thanks
to Dr. Arvind Agarwal, President, Arya Group of Colleges and Prof.
M. L. Gupta, Principal, Arya Institute of Engineering &
Technology, Jaipur for extending me the opportunity of presenting
the Final year project and providing all the necessary resources
for this purpose.With much pride and delight I would like to
express my sincere thanks to Dr. Manish Jain (Head of the
department) for his excellent guidance and valuable suggestions
throughout the project work. I express heartfelt thanks to Ms Padma
Sharma (Project Guide) for her wonderful support and for giving me
an opportunity to present project report on COMPARATIVE ANALYSIS OF
HDFC FIXED DEPOSITS, PERSONAL LOANS AND HOME LOANS with PSUsI also
want to give my humble regards to Ms. Gundeep (Head- Training &
Placement Cell), Ms. Padma Sharma, Mr. Pramod Sharma, Ms. Nisha
Goyal, Ms. Ankita Pareek , Ms. Anchal, Mr. Hitesh Tikyani and Mr.
Harinder Singh for their valuable support and believe in my work.
Without their sustained interest and encouragement, this work could
not have been possible to reach the state of completion with
satisfaction. In fact it is their real devotion to the development
work, which instilled in me, the need of a passionate commitment to
pursue this project.I am also grateful to all my friends for
providing critical feedback and support whenever required. There
are times in such projects when the clock beats you time and again
and you run out of energy, you just want to finish it once and
forever. Parents made me endure such times with their unfailing
humour and warm wishes.I regret for any inadvertent omissions. Name
of Student KISHAN DAUSAYAClass MBA IV SEM.RTU Roll No.
11MAIXX611
EXECUTIVE SUMMARYThe banking industry like many other financial
services industries is facing a rapidly changing market, new
technologies, economic uncertainties, fierce competition and more
demanding customers ; and the changing climate has presented an
unprecedented set of challenges. Topic of the project is
Comparative Analysis Of Fixed Deposits, Home Loan & Personal
Loan Of HDFC Bank with PSUs. The analysis of the project was based
on the Information fetched from various depositors coming to the
banks. For the study of fixed deposits, home loan, personal loan
the primary data was collected based on a survey research, using a
structured questionnaire with closed ended questions.The sample
size was around 100 customers of different banks. The study was
conducted using questionnaire prepared with the help of experts.
Secondary data was also taken from the various annual reports,
brochures of different banks and the Internet.
After analysis, findings are being presented in such a form so
that it can give proper results easily understandable by layman.
The project concludes with results and findings of the analysis,
which I hope, will provide enough information about the factors
influencing deposits coming to any bank.
INDEX
S.N.ParticularsP. No.
1Introduction to the Industry6
2Introduction to the Organization38
3Company Profile42
4Comparative Study of FD,HL,PL74
5Research Methodology79
5.1Title of the Study80
5.3Objective of Study80
5.4Type of Research82
5.5Sample Size and method of selecting sample
82
5.6Scope of Study82
5.7Limitation of Study81
6.Facts and Findings83
7.Analysis and Interpretation86
8.SWOT99
9.Conclusion105
10.Recommendation and Suggestions
106
11.Questionnaire108
12.Bibliography111
INTRODUCTION OF INDIAN BANKING INDUSTRYBanking in India
originated in the first decade of 18th century with The General
Bank of India coming into existence in 1786. This was followed by
Bank of Hindustan. Both these banks are now defunct. The oldest
bank in existence in India is the State Bank of India being
established as "The Bank of Bengal" in Calcutta in June 1806. A
couple of decades later, foreign banks started their Calcutta
operations in the 1850s. At that point of time, Calcutta was the
most active trading port, mainly due to the trade of the British
Empire, and due to which banking activity took roots there and
prospered. The first fully Indian owned bank was the Allahabad
Bank, which was established in 1865.By the 1900s, the market
expanded with the establishment of banks such as Punjab National
Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai -
both of which were founded under private ownership. The Reserve
Bank of India formally took on the responsibility of regulating the
Indian banking sector from 1935. After India's independence in
1947, the Reserve Bank was nationalized and given broader powers.At
the end of late-18th century, there were hardly any bank in India
in the modern sense of the term. At the time of the American Civil
War, a void was created as the supply of cotton to Lancashire
stopped from the Americas. Some banks were opened at that time
which functioned as entities to finance industry, including
speculative trades in cotton. With large exposure to speculative
ventures, most of the banks opened in India during that period
could not survive and failed. The depositors lost money and lost
interest in keeping deposits with banks. Subsequently, banking in
India remained the exclusive domain of Europeans for next several
decades until the beginning of the 20th century.The Bank of Bengal,
which later became the State Bank of India.
BANKINGBanks have played a pivotal role in the process of
development of the district over the years, especially after the
formation of the district in 1993. Apart from dispensing credit,
the Banks have also brought about social changes. The contribution
of the banking sector in the field of overall development of the
district is elaborated in the following paragraphs.At the beginning
of the 20th century, Indian economy was passing through a relative
period of stability. Around five decades have elapsed since the
India's First war of Independence, and the social, industrial and
other infrastructure have developed. At that time there were very
small banks operated by Indians, and most of them were owned and
operated by particular communities. The banking in India was
controlled and dominated by the presidency banks, namely, the Bank
of Bombay, the Bank of Bengal, and the Bank of Madras - which later
on merged to form the Imperial Bank of India, and Imperial Bank of
India, upon India's independence, was renamed the State Bank of
India. There were also some exchange banks, as also a number of
Indian joint stock banks. All these banks operated in different
segments of the economy.The presidency banks were like the central
banks and discharged most of the functions of central banks. They
were established under charters from the British East India
Company. The exchange banks, mostly owned by the Europeans,
concentrated on financing of foreign trade. Indian joint stock
banks were generally undercapitalized and lacked the experience and
maturity to compete with the presidency banks, and the exchange
banks. There was potential for many new banks as the economy was
growing. Lord Carson had observed then in the context of Indian
banking: "In respect of banking it seems we are behind the times.
We are like some old fashioned sailing ship, divided by solid
wooden bulkheads into separate and cumbersome compartments.Under
these circumstances, many Indians came forward to set up banks, and
many banks were set up at that time, a number of which have
survived to the present such as Bank of India and Corporation Bank,
Indian Bank, Bank of Baroda, and Canara Bank.Indian banking sector
can be divided mainly into four broad categories namely public
sector Banks, old private sector banks, new private sector banks,
and foreign banks. The other categories of banks include
co-operative banks and regional rural banks. Since these banks dont
form a substantial chunk of the banking system, we will focus on
the first four categories.BANKING SYSTEM IN INDIA
BANKS IN INDIA
FOREIGN BANKSCENTRAL BANKNATIONALISEDBANKSPRIVATE BANKS
CENTRAL BANK: RESERVE BANK OF INDIANATIONALISED BANK IN INDIAThe
Banking System in India is dominated by nationalized banks. The
Nationalization of Banks in India took place in 1969 by Mrs. Indira
Gandhi the then Prime Minister. The major objective Behind
Nationalization Banks was to spread banking Infrastructure in Rural
areas and make available cheap finance to Indian farmers. Fourteen
banks were nationalized in 1969. These Banks were State Bank of
India Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank
of Maharashtra Canara Bank Central Bank of India Corporation Bank
Dena Bank Indian Bank Oriental Bank of Commerce Punjab & Sind
Bank Punjab National Bank Syndicate Bank Union Bank of India
PRIVATE BANK IN INDIAAll the banks in India were earlier private
banks. They were founded in the pre-independence era to cater to
the banking needs of the people. But after nationalization of banks
in 1969 public sector banks came to occupy dominant role in the
banking structure. Private sector banking in India received a
fillip in 1994 when Reserve Bank of India encouraged setting up of
private banks as part of its policy of liberalization of the Indian
Banking Industry. Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an 'in principle' approval
from the Reserve Bank of India (RBI) to set up a bank in the
private sector. Axis Bank Bank of Rajasthan Catholic Syrian Bank
Centurion Bank of Punjab City Union Bank Development Credit Bank
Dhanalakshmi Bank Federal Bank Ganesh Bank of Kurundwad HDFC Bank
ICICI Bank IDBI Bank IndusInd Bank ING Vysya Bank Jammu &
Kashmir Bank Karnataka Bank Limited KarurVysya Bank Kotak Mahindra
Bank Lakshmi Vilas Bank Lord Krishna Bank Nainital Bank Ratnakar
Bank SBI Commercial and International Bank
FOREIGN BANKS IN INDIAForeign 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. Standard charted Bank
Deutsche Bank Bank of America Citi Bank ABN Amro Bank HSBC Bank
CBS NETWORKINGCore Banking Solutions is new jargon frequently
used in banking circles of India.The advancement in technology
especially internet and information technology has led to new way
of doing business in banking. The technologies have cut down time
,working simultaneously on different issues and increased
efficiency. The platform where communication technology and
information technology are merged to suit core needs of banking is
known as Core Banking Solutions. Here computer software is
developed to perform core operations of banking like recording of
transactions, passbook maintenance, interest calculations on loans
and deposits, customer records, balance of payments and withdrawal
are done. This software is installed at different branches of bank
and then interconnected by means of communication lines like
telephones, satellite, internet etc. It allows the user (customers)
to operate accounts from any branch if it has installed core
banking solutions. This new platform has changed the way banks are
working.
HISTORY OF BANKINGThe period during the First World War
(1914-1918) through the end of the Second World War (1939-1945),
and two years thereafter until the independence of India were
challenging for the Indian banking. The years of the First World
War were turbulent, and it took toll of many banks which simply
collapsed despite the Indian economy gaining indirect boost due to
war-related economic activities. At least 94 banks in India failed
during the years 1913 to 1918 as indicated in the following
table:YearsNumber of banksthat failedAuthorized capital(Rs.
Lacs)Paid-up Capital(Rs. Lac)
19131227435
191442710109
191511565
1916132314
191797625
191872091
POSTINDEPENDENCEThe partition of India in 1947 had adversely
impacted the economies of Punjab and West Bengal, and banking
activities had remained paralyzed for months. India's independence
marked the end of a regime of the Laissez-faire for the Indian
banking. The Government of India initiated measures to play an
active role in the economic life of the nation, and the Industrial
Policy Resolution adopted by the government in 1948 envisaged a
mixed economy. This resulted into greater involvement of the state
in different segments of the economy including banking and finance.
The major steps to regulate banking included:1. In 1948, the
Reserve Bank of India, India's central banking authority, was
nationalized, and it became an institution owned by the Government
of India.2. In 1949, the Banking Regulation Act was enacted which
empowered the Reserve Bank of India (RBI) "to regulate, control,
and inspect the banks in India."3. The Banking Regulation Act also
provided that no new bank or branch of an existing bank may be
opened without a license from the RBI, and no two banks could have
common directors.However, despite these provisions, control and
regulations, banks in India except the State Bank of India,
continued to be owned and operated by private persons. This changed
with the nationalization of major banks in India on 19th July,
1969NATIONALISATIONBy the 1960s, the Indian banking industry has
become an important tool to facilitate the development of the
Indian economy. At the same time, it has emerged as a large
employer, and a debate has ensued about the possibility to
nationalize the banking industry. Indira Gandhi, the-then Prime
Minister of India expressed the intention of the GOI in the annual
conference of the All India Congress Meeting in a paper entitled
"Stray thoughts on Bank Nationalisation." The paper was received
with positive enthusiasm. Thereafter, her move was swift and
sudden, and the GOI issued an ordinance and nationalized the 14
largest commercial banks with effect from the midnight of July 19,
1969. Jayaprakash Narayan, a national leader of India, described
the step as a "masterstroke of political sagacity." Within two
weeks of the issue of the ordinance, the Parliament passed the
Banking Companies (Actuation and Transfer of Undertaking) Bill, and
it received the presidential approval on 9th August, 1969.A second
dose of nationalization of 6 more commercial banks followed in
1980. The stated reason for the nationalization was to give the
government more control of credit delivery. With the second dose of
nationalization, the GOI controlled around 91% of the banking
business of India.After this, until the 1990s, the nationalized
banks grew at a pace of around 4%, closer to the average growth
rate of the Indian economy.
LIBERALISATIONIn the early 1990s the then NarasimhaRao
government embarked on a policy of liberalization and gave licenses
to a small number of private banks, which came to be known as New
Generation tech-savvy banks, which included banks such as UTI
Bank(now re-named as Axis Bank) (the first of such new generation
banks to be set up), ICICI Bank and HDFC Bank. This move, along
with the rapid growth in the economy of India, kick started the
banking sector in India, which has seen rapid growth with strong
contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.The next stage
for the Indian banking has been setup with the proposed relaxation
in the norms for Foreign Direct Investment, where all Foreign
Investors in banks may be given voting rights which could exceed
the present cap of 10%, at present it has gone up to 49% with some
restrictions.The new policy shook the Banking sector in India
completely. Bankers, till this time, were used to the 4-6-4 method
(Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new
wave ushered in a modern outlook and tech-savvy methods of working
for traditional banks. All this led to the retail boom in India.
People not just demanded more from their banks but also received
more.CURRENT SITUATIONCurrently (2007), banking in India is
generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge
for the private sector and foreign banks. In terms of quality of
assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other
banks in comparable economies in its region. The Reserve Bank of
India is an autonomousBody with minimal pressure from the
government. The stated policy of the Bank on the Indian Rupee is to
manage volatility but without any fixed exchange rate-and this has
mostly been true. 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. One may also
expect M & A as, takeovers, and asset sales.In March 2006, the
Reserve Bank of India allowed Warburg Pincus to increase its stake
in Kotak Mahindra Bank (a private sector bank) to 10%. This is the
first time an investor has been allowed to hold more than 5% in a
private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need to be
vetted by them.Currently, India has 88 scheduled commercial banks
(SCBs) - 28 public sector banks (that is with the Government of
India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock
exchanges) and 31 foreign banks. They have a combined network of
over 53,000 branches and 17,000 ATMs. According to a report by ICRA
Limited, a rating agency, the public sector banks hold over 75
percent of total assets of the banking industry, with the private
and foreign banks holding 18.2% and 6.5% respectively. BANKING
NETWORKThe total number of branches has gone up from 81 to 93
during the last decade to cater to the banking need of thegrowing
population of the district. The number of branches of each bank
operating in the district is as under.S NoName of the BanksNo. of
Branches.
1.Andhra Bank2
2.Bank of Baroda4
3.Bank of India1
4.Canara Bank1
5.Indian Overseas Bank5
6.Indian Bank1
7.Punjab National Bank1
8.State Bank of India14
9.United Bank3
10.United Commercial Bank14
11.Union Bank2
12.Syndicate Bank1
13.DhenkanalGramya Bank27
14.Angul United Central Co-op.Bank12
15.CARD Bank4
16.Orissa State Co-op. Bank1
17.Orissa State Financial Corporation1
T o t a l93
Apart from a good network of Bank branches, NABARD is having its
district office at Dhenkanal with operational area in Angul
district also. The major activities of NABARD in the areas of
Planning, Coordination, Monitoring and Development is being
accomplished through preparation of Potential Linked Credit Plan as
a fore runner of SAP, participation in various meetings and with an
effective rapport with the officials of government, banks, NGOs
etc.Under the Lead Bank Scheme evolved by Reserve Bank of India,
the lead bank responsibility is shouldered by United Commercial
Bank having its office at Angul. The Lead District Manager
coordinates and monitors the preparation and implementation of
Annual Credit Plans and various government programmes. Dhenkanal
Gramya Banksponsored by Indian Overseas Bank is operating in this
district.DEPOSITSThe overall deposits of the banks together has
increased manifold during the last decade. The total deposits of
Rs.161.45 crores at the end ofMarch, 1994 have swelled to a tune of
Rs.961.99 crores by the endof financial year 2002-2003. The
Commercial Banks have a lions share in the deposit portfolio having
80% of the market share followed by RRB and CCB with 11% and 9%
market share respectively.
ADVANCESThe overall advances of the banks have shown an
increasingtrend during the last decade. At the end of March 1994
the total outstanding advances stood at a level of Rs.62.41 crores,
which has gone up to a level of Rs.390.96 croresat the end of
March, 2003. The priority sector has a share of Rs.259.29 crores
i.e. 66% of the total advances, of which Agriculture constitute
Rs.87.93 crores i.e. 22% of the total advances.The Commercial Banks
have the maximum share of 55% in the advances portfolio, followed
by RRB, CCB and other financing institutions with 22%, 15% and 8%
share respectively.The credit dispensed has also increased manifold
during the last decade. Rs.154.99 crores of credit was dispensed
during 2002-03 compared to Rs.16.02 crores dispensed during
1993-94. Under this portfolio, the share of commercial banks was
also highest at Rs.85.30 crores constituting 55% of the total
credit deployment followed by RRB, CCB and other financial
institutions with a share of 27%, 17% & 1% respectively. The
trend in credit deployment under various purposes has also
undergone change by addition of new areas of financing like
housing, education, consumer durable, transport etc. Nevertheless
agriculture enjoys due importance. Rs. 42.95 crores has gone to
this sector during 2002-03 as against Rs. 3.66 crores in
1993-94.GOVERNMENT SPONSORED PROGRAMMESIn order to fulfill social
commitments, the banks in the district have come forward to extend
financial assistance in respect of a plethora of government
sponsored programmes so as to improve the living condition of the
targetgroups through gainful employment. Some of the major
programmes having the participation of banks are as under.The
details of credit deployment of various banks operating in the
district under the annual credit plans during the last decade are
as under.(Rs.in lakes)Year/SectorsParticularsAgricultureNon-Farm
sectorOther prioritySectorTotal priority sectorNon priority
sectorTotal advance
1993-94Target5761322971,0054551,460
Achievement3661283758697331,602
1994-95Target4711873269842631,247
Achievement5721916101,3735971,970
1995-96Target8592557051,8193042,123
Achievement1,0242721,0652,3615442,905
1996-97Target1,1374201,1882,7453803,125
Achievement1,2353531,3482,9361,0914,027
1997-98Target1,8815311,8554,2674924,759
Achievement1,6682051,9623,8351,5115,346
1998-99Target2,1832892,0744,5451,9986,543
Achievement2,1822892,0744,5451,9986,543
1999-2000Target2,7478572,3345,9381,2387,176
Achievement2,6022672,0894,9582,5227,470
2000-2001Target2,5387192,7447,0011,7048,705
Achievement2,7824782,3915,6513,7759,426
2001-2002Target4,1268212,9487,8952,20010,095
Achievement3,3403465,4799,1655,60714,772
2002-2003Target48908954,32310,0982,94513,043
Achievement42952115,1769,6825,81715,499
RECOVERY OF BANK DUESThe recovery of bank dues has not been
commensurate with the growth of loans and advances. Though in terms
of absolute figures the recovery has gone up substantially, the
same in percentage term has shown a moderate change and has settled
at 45-50% during the last few years. The poor recovery has
adversely affected the CARD bank, which has weakened the financial
strength of this part of the banking structure. The liberal
measures to augment recovery like One Time Settlement Scheme of RBI
and the various compromise settlement schemes of respective banks
have contributed in the percentage increase in recovery of bank
dues.
MAJOR PLAYERS OF BANKING SECTORPRIVATE BANK IN INDIA ICICI Bank
HDFC Bank IDBI Bank Indusland Bank Centurian Bank Axis Bank
PUBLIC BANKS IN INDIA State bank of India Bank of Baroda Bank of
India Corporation Bank Oriental Bank of commerce State Bank of
Hyderabad Dena BankFOREIGN BANKS IN INDIA Standard charted Bank
Deutsche Bank Bank of America Citi Bank ABN Amero Bank HSBC
BankBanks play a positive role in economic development of a country
as repositories of communitys savings and as purveyors of credit.
Indian Banking has aided the economic development during the last
fifty years in an effective way. As recourse to this, the
commercial banks opened branches in urban, semi-urban and rural
areas and have introduced a number of attractive schemes to foster
economic development. Banks have been playing a catalytic role in
area development, backward area development, extended assistance to
rural development all along helping agriculture, industry,
international trade in a significant manner. In a way, commercial
banks have emerged as key financial agencies for rapid economic
development. By contributing to government securities, bonds and
debentures of term-lending institutions in the fields of
agriculture, industries and now housing, banks are also providing
these institutions with an access to the common pool of savings
mobilized by them, to that extent relieving them of the
responsibility of directly approaching the saver. A country like
India, with different regions at different stages of development,
presents an interesting spectrum of the evolving role of banks, in
the matter of inter-mediation and beyond. And banks have to place
considerable reliance on the mobilization of deposits from the
public to finance development programmes.Commercial banks provide
short-term and medium-term financial assistance. The short-term
credit facilities are granted for working capital requirements. The
medium-term loans are for the acquisition of land, construction of
factory premises and purchase of machinery and equipment. These
loans are generally granted for periods ranging from five to seven
years. Certain transaction, particularly those in contracts of sale
of Government Departments, may require guarantees being issued in
lieu of security earnest money deposits for release of advance
money, supply of raw materials for processing, full payment of
bills on the assurance of the performance etc. Commercial banks
issue such guarantees also.The Role of Reserve Bank of India (RBI)
Bankers Bank:The Reserve Bank of India (RBI) is the central bank of
India, and was established on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India Act, 1934. Since its
inception, it has been headquartered in Mumbai. Though originally
privately owned, RBI has been fully owned by the Government of
India since nationalization in 1949. The current governor of RBI is
Dr.Y.Venugopal Reddy (who succeeded Dr. BimalJalan on September 6,
2003). RBI has 22 regional offices across India.Main
Objective:Monetary Authority Formulates, implements and monitors
the monetary policy. Objective: maintaining price stability and
ensuring adequate flow of credit to productive sectors.
Regulator and supervisor of the financial system Prescribes
broad parameters of banking operations within which the countrys
banking and financial system functions. Objective: maintain public
confidence in the system, protect depositors interest and provide
cost-effective banking services to the public. The Banking
Ombudsman Scheme has been formulated by the Reserve Bank of India
(RBI) for effective redressal of complaints by bank customers
Manager of Exchange Control Manages the Foreign Exchange
Management Act, 1999. Objective: to facilitate external trade and
payment and promote orderly development and maintenance of foreign
exchange market in India.Issuer of currency Issues and exchanges or
destroys currency and coins not fit for circulation. Objective: to
give the public adequate quantity of supplies of currency notes and
coins and in good quality.Developmental role Performs a wide range
of promotional functions to support national objectives.Related
Functions Banker to the Government: performs merchant banking
function for the central and the state governments; also acts as
their banker. Banker to banks: maintains banking accounts of all
scheduled banks. Owner and operator of the depository (SGL) and
exchange (NDS) for government bonds.There is now an international
consensus about the need to focus the tasks of a central bank upon
central banking. RBI is far out of touch with such a principle,
owing to the sprawling mandate described above.
In addition to its traditional central functions, the Reserve
bank has certain non-monetary functions of the nature of
supervision of banks and promotion of sound banking in India. The
RBI is authorized to carry out periodical inspections of the banks
and to call for returns and necessary information from them.The
supervisory functions of the RBI have helped a great deal in
improving the standard of banking in India to develop on sound
lines and to improve the methods of their operation.With economic
growth assuming a new urgency since Independence, the range of the
Reserve Banks functions have steadily widened. The Reserve Bank was
asked to promote banking habit, extend banking facilities to rural
and semi-urban areas, and establish and promote new specialized
financing agencies. These institutions were set up directly or
indirectly by the Reserve Bank to promote saving habit and to
mobilize savings, and to provide industrial finance as well as
agricultural finance.The Bank has developed the co-operative credit
movement to encourage saving, to eliminate money-lenders from the
villages and to route its short term credit to agriculture. The RBI
has set up the Agricultural Refinance and Development Corporation
to provide long-term finance to farmers.The Co-operative bank has a
history of almost 100 years. The Co-operative banks are an
important constituent of the Indian Financial System, judging by
the role assigned to them, the expectations they are supposed to
fulfill, their number, and the number of offices they operate.
Their role in rural financing continues to be important even today,
and their business in the urban areas also has increased
phenomenally in recent years mainly due to the sharp increase in
the number of co-operative banks. along with some small scale
industries and self-employment driven activities, the co-operative
banks in urban areas mainly finance various categories of people
for self-employment, industries, small scale units, home finance,
consumer finance, personal finance, etc.According to NAFCUB the
total deposits &lendings of Co-operative Banks is much more
than Old Private Sector Banks & also the New Private Sector
Banks.Though registered under the Co-operative Societies Act of the
Respective States (where formed originally) the banking related
activities of the co-operative banks are also regulated by the
Reserve Bank of India. They are governed by the Banking Regulations
Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.(a)
Short term lending oriented co-operative Banks within this category
there are three sub categories of banks viz state co-operative
banks, District co-operative banks and Primary Agricultural
co-operative societies.Features of Cooperative Banks They function
with the rule of one member, one vote. Function on no profit, no
loss basis. Co-operative banks, as a principle, do not pursue the
goal of profit maximization. Co-operative bank performs all the
main banking functions of deposit mobilization, supply of credit
and provision of remittance facilities.Co-operative Banks provide
limited banking products and are functionally specialists in
agriculture related products. However, co-operative banks now
provide housing loans also.The State Co-operative Banks (SCBs),
Central Co-operative Banks (CCBs) and Urban Co-operative Banks
(UCBs) can normally extend housing loans uptoRs 1 lakh to an
individual. The scheduled UCBs, however, can lend uptoRs 3 lakh for
housing purposes. The urban and non-agricultural business of these
banks has grown over the years. The co-operative banks demonstrate
a shift from rural to urban, while the commercial banks, from urban
to rural. They get financial and other help from the Reserve Bank
of India NABARD, central government and state governments. For
commercial banks, the Reserve Bank of India is lender of last
resort, but co-operative banks it is the lender of first resort
which provides financial resources in the form of contribution to
the initial capital (through state government), working capital,
refinance. Primary agricultural credit societies provide short term
and medium term loans.The sources of their funds (resources) are
(a) central and state government, (b) the Reserve Bank of India and
NABARD, (c) other co-operative institutions, (d) ownership funds
and, (e) deposits or debenture issues.Inter-bank deposits,
borrowings, and credit from a significant part of assets and
liabilities of co-operative banks. Some co-operative banks are
scheduled banks, while others are non-scheduled banks.Co-operative
Banks are subject to CRR and liquidity requirements as other
scheduled and non-scheduled banks are. Since 1966 the lending and
deposit rate of commercial banks have been directly regulated by
the Reserve Bank of India.Although the main aim of the co-operative
bank is to provide cheaper credit to their members and not to
maximize profits, they may access the money market to improve their
income so as to remain viable.Broad Classification of Products in a
bank: Retail Banking. Treasury Operations.Retail Banking: Loans,
Cash Credit and Overdraft Remittances Receiving all kinds of bonds
valuable for safe keepingTrade Finance: Drawing, accepting,
discounting, buying, selling, collecting of bills of exchange,
promissory notes, drafts, bill of lading and other securities.
Buying and selling of bullion. Foreign exchange Purchasing and
selling of bonds and securities on behalf of constituents.Apart
from the above-mentioned functions of the bank, the bank provides a
whole lot of other services like investment counseling for
individuals, short-term funds management and portfolio management
for individuals and companies.
Some of common available banking products are explained below:A
credit card is nothing but a very small card containing a means of
identification, such as a signature and a small photo.These bills
are assembled in the bank and the amount is paid to the bank by the
card holder totally or by installments. The bank charges the
customer a small amount for these services. The card holder need
not have to carry money/cash with him when he travels or goes for
purchasing. The major players in the Credit Card market are the
foreign banks and some big public sector banks like SBI and Bank of
Baroda.2)Debit Cards: Debit Card is a prepaid or pay now card with
some stored value. Debit Cards quickly debit or subtract money from
ones savings account,or if one were taking out cash. To get a debit
card along with a Personal Identification Number (PIN). The
customer never overspread because the amount spent is debited
immediately from the customers account. So, for the debit card to
work, one must already have the money in the account to cover the
transaction. Debit Card holder need not carry a bulky checkbook or
large sums of cash when he/she goes at for shopping. The major
limitation of Debit Card is that currently only some 3000-4000
shops country wide accepts it. Also, a person cant operate it in
case the telephone lines are down.The ATMs are used by banks for
making the customers dealing easier. ATM card is a device that
allows customer who has an ATM card to perform routine banking
transaction at any time without interacting with human teller. This
can be done by inserting the card in the ATM and entering the
Personal Identification Number and secret Password. It provides the
customers with the ability to withdraw or deposit funds, check
account balances, transfer funds and check statement information.
To transfer money to and from accounts. To order cash.
To the Customers Service is quick and efficient Wider
flexibility in place and time of withdrawals.To Banks Crowding at
bank counters considerably reduced. Relieves bank employees to
focus a more analytical and innovative work.ATMs can be installed
anywhere like Airports, Railway Stations, Petrol Pumps, Big
Business arcades, markets, etc. Hence, it gives easy access to the
customers, for obtaining cash. The ICICI has launched ATM Services
to its customers in all the Metropolitan Cities in India. By the
end of 1990 Indian Private Banks and public sector banks have come
up with their own ATM Network in the form of SWADHAN.4) E-Cheques:
The chequing system uses the network services to issue and process
payment that emulates real world chequing. A typical electronic
cheque transaction takes place in the following manner: The
consumer selects the goods and purchases them by sending an
e-cheque to the merchant. The merchant electronically forwards the
e-cheque to its bank. The clearing house jointly works with the
consumers bank clears the cheque and transfers the money to the
merchants banks. The consumers bank updates the consumers account
with the withdrawal information.(5) Electronic Funds Transfer
(EFT): Many modern banks have computerised their cheque handling
process with computer networks and other electronic equipments.
This system facilitates speedier transfer of funds electronically
from any branch to any other branch. Funds transfer within the same
city is also permitted. The scheme has been in operation since
February 7, 1996, in India. The payment office directs the computer
to credit an employees account with the persons pay. Telebanking is
extensively user friendly and effective in nature. Facility to stop
payment on request. One can easily know about the cheque status.
Information with regard to foreign exchange rates. D-Mat Account
related services.
This is a very flexible way of transacting banking business.7)
Internet Banking: Internet banking involves use of internet for
delivery of banking products and services. With internet banking is
now no longer confirmed to the branches where one has to approach
the branch in person, to withdraw cash or deposits a cheque or
request a statement of accounts. In internet banking, any inquiry
or transaction is processed online without any reference to the
branch (anywhere banking) at any time.Benefits of Internet Banking:
Increase convenience for customers, since they can conduct many
banking transaction 24 hours a day. Improve customer access. Easy
online application for all accounts, including personal loans and
mortgagesFinancial Transaction on the Internet:Automatic Payments:
Utility companies, loans payments, and other businesses use on
automatic payment system with bills paid through direct withdrawal
from a bank account.Stored Value Cards: Prepaid cards for telephone
service, transit fares, highway tolls, laundry service, library
fees and school lunches.Cyber Banking: It refers to banking through
online services. Banks with web site Cyber branches allowed
customers to check balances, pay bills, transfer funds, and apply
for loans on the Internet.In January 1998 SEBI (Securities and
Exchange Board of India) initiated DEMAT ACCOUNTANCY System to
regulate and to improve stock investing. As on date, to trade on
shares it has become compulsory to have a share demat account and
all trades take place through demat.One needs to open a Demat
Account with any of the branches of the bank. The rest will be
taken care by the bank and the customer will receive credit of
shares as soon as it is confirmed by the Company/Register and
Transfer Agent.1) If the investor wants to sell his shares, he has
to place an order with his broker and give a Delivery Instruction
to his DP (Depository Participant). 3) If one wants to buy shares,
he has to inform his broker about his Depository Account Number so
that the shares bought by him are credited in to his account.
Banking covers so many services that it is difficult to define
it. However, these basic services have always been recognized as
the hallmark of the genuine banker. These are The collection of his
cheques drawn on other banksThere are other various types of
banking services like:2) Deposits Saving Account, Current Account,
etc.4) Foreign Services Providing foreign currency, travelers
cheques, etc.6) Savings Fixed deposits, etc.8) Status Debit Cards,
Credit Cards, etc.Customer Services in Commercial Banks: Customer
service can occur on site (as when an onstage employee helps a
customer or answers a question) or it can occur over the phone or
the Internet.Banking being a service industry, a lot depends on
efficient and prompt customer service. Why is Customer Service
Important? The increased importance of customer service: With
changing customer expectations, competitors are seeing customer
service as a competitive weapon with which they differentiate their
products and services. The customer is the kingpim in growth
organizations like commercial banks. Only those institutions which
work according to his dictates will flourish. Customer
responsiveness must be quick and also competent. Speed, performance
and cost wll be the new values mantra for success.i. Submission of
statement of A/Cs to customersiii. Teller system efficiency.v.
Intermediate Credit for institution cheques/land bills.vii. Advance
for Debit/credit to accounts. Punctuality of staff.