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Mar 01, 2016

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A Study on

J&K Bank

A Study

on

The Level of Customer Satisfaction

Conducted for

The Jammu & Kashmir Bank Ltd.Submitted to

Punjab Technical University

In Partial Fulfillment for the Award of the Degree of

Masters In Business AdministrationSubmitted by

Naseer Ahmad Malik Project Guide

Mr. Riaz Ahmad

M.D.(Prof. P. P, Arya)

The Dr. I.T. Group of Institutes

Banur Chandigarh (2009 2010) C o n t e n t sChapter 1

.... 1-8 Introduction

General Introduction

Theoretical background of the study

Chapter 2

.... 9-12

Design of the study

Brief interlocution of the background

Title of the study

Statement of the problem

Objectives of the study

Sampling Technique

Source of data

Methodology of the study

Limitations of the study

Operational definition of concepts.

Chapter 3

.... 13-37 Company Profile

Industry Profile

Chapter 4

.... 38-94

Analysis & Interpretation of Data

Chapter 5

.... 95-100

Summary of Findings

Chapter 6

.... 101-105

Recommendations

BibliographyAnnexureList of Tables

Table

No.DescriptionPage No

1.1Time span of respondents banking with the bank43

1.2Experience of respondents with the bank45

1.3Response of respondents whether the branch opens on time or not47

1.4 (a)Showing the actual time taken to deposit cash48

1.4 (b)Showing how much time it should take to make deposit50

1.5 (a)Showing the actual time taken to encash cheque/withdrawal form or any other payment instrument52

1.5 (b)Showing how much time it should take to encash cheque/withdrawal form or any other payment instrument.54

1.6 (a)Showing the actual time taken to make a demand draft.56

1.6 (b)Showing how much time it should take to make a demand draft.58

1.7 (a)Showing actual time taken to send a telegraphic transfer.60

1.7 (b)Showing how much time it should take to send a telegraphic transfer.62

1.8Showing the actual time taken to get the payment of outstation cheque.64

1.9 (a)Showing the actual time taken to get the payment of local cheque66

1.9 (b)Showing how much time it should take to get the payment of local cheque.68

2.1 (a)Showing the actual time taken to get a loan70

2.1 (b)Showing how much time it takes to get a loan.72

2.2Showing the level of information received by the customers.74

2.3Showing the opinion of respondents about the layout and other amenities at the branch premises76

2.4Showing the opinion of respondents how to make waiting time pleasurable.78

Table

No.DescriptionPage No

2.5Showing the various schemes availed by the respondents 80

2.6Showing the various loan products availed by customers82

2.7Showing the various sources of getting knowledge about the products/services offered by bank.84

2.8Showing ATM service availed by the respondents86

2.9Showing various bottlenecks in gathering information about bank products/services87

3.1Showing various reasons for not availing the products of the bank.89

3.2Showing the opinion of respondents about the attitude of banks staff.91

3.3Showing awareness of respondents about the childcare deposit scheme. 93

3.4Showing the percentage of respondents reporting their problem.94

ACKNOWLEDGEMENTI thank the almighty god for showing his grace and blessing on me.

As the old sayings goes,Ingratitude pierces the heart more than a spear.I will be piercing my heart,if I fail to thank such of those to whom the thanks are really due.

I am extremely indebted to Mr. Riaz. Ahmad cluster head,clusterhead 2nd Kashmir North my guide for his valuable advice and suggestions throughout the course of the project.

I would like to express my very special gratitude and heart felt thanks to Prof.P .P Arya (Managing Director) & Mr. Lincon Jeet Pal Singh. The Dr .I .T group of Institutes for guiding me,providing me the facilities and personal care of the completion of the project.

I am very grateful to Mr.Aslam & Mr .Javid Incharge of J & K Bank North Zone for providing me the opportunity to do this project. Lastly I am grateful to all respondants without whose help this project would have not possible.

Naseer Ahmad Malik I

Introduction:

The last few decades have seen companies operating in a highly comparative environment. The economy is referred to as Customer Driven one, with firms allowing consumers to dictate specification and quality standards and also working out strategies evolved around the consumer. Howe ever this is not easy task because the consumers are moving market and each consumer behaves uniquely at the market places. The ultimate success of any marketing programme will depend upon how the consumer behaves and whether his/her behavior is indicative of the acceptance of the product or service offerings from the firms. But consumer behavior is unpredictable. This is the reason why consumer behavior has emerged as a separate research area of study since the past few decades. Today even the companies are pouring in a lot of money for undertaking researches to have a better understanding of their consumers behavior.

Today in a customer driven economy, al firms are engaged in a rat race to attract consumers an build a long-term relationship with their loyal customer. The key to customer loyalty is through customer satisfaction. A satisfied customer will act as a spokesperson of the companys product, and bring in more buyers. There is a Pareto Principle or the 80/20 rule, it says that 80 percent of one thing comes from 20 percent of another. That is to say a small percentage of loyal customers will lend a large weight of companys sales. So marketers have to ensure customer value satisfaction.

All the efforts of the marketers at trying to understand buying motives, organizing buying behavior and working out suitable promotional strategy to suit the consumer behavior are to ensure customer satisfaction. In todays competitive environment, where companies are adopting various methods to woo the prospective consumers, marketers have to make all efforts to understand all the complexities, which go into the buying behavior and frame marketing programs suitable to the target market.

Customer & Customer Satisfaction:

Intense competition and over capacity in almost all-industrial sectors have brought the customer back to the forefront of organizational planning. Companies have been forced to elevate the customer from being Just a Customer to a part of the mission statement. There is no industry where the customer is not important. A quick scan of the quality policies of any ISO certified company would reveal this. Customer satisfaction has given ay to customer delight and this continues to be an evergreen buzzword.

Realizing the strategic significance of keeping the customer happy companies have adopted the path of customer relationship management in large numbers.

Who is a Customer?

The simple question, who is our customer? can stir lively debate. The end user, some will say. Others say distributor, often referred to as channel, are the customers. The there are dealers. Retailers who sell your product are also customers, in a sense.

A customer is the most important visitor on our premises. He is not dependent on us, we are dependent on him

.. Mahatma Gandhi

A customer may be either internal or external.

External customers are those who buy our products/service.

Internal customers are individuals/department who Use Companys output as their input and the company becomes their supplier.

Often overlooked or misunderstood is the importance of the internal customer, otherwise known as employees. It is impossible to external customer for long if the companys employees are not fulfilled, rewarded, listened to and happy in their work. It is as important to measure internal customers satisfaction, as it is external. Employees have their fingers on the pulse of the customer to a far greater degree than Management does. Employees are a source of knowledge, experience and ideas of incalculable value.What is Satisfaction?

Satisfaction is evaluation of an emotion.

Satisfaction is the outcome of the interaction between the expectation of customer and the performance of the product or service.

Satisfaction is the reward a customer gets for the choice made.The ten basic rules to customer satisfaction:

1. Involve top management.

2. Know the customers.

3. Let the customers define what attributes are important.

4. Know the customers requirement, expectations and wants.

5. Know the relative importance of customers decision criteria.

6. Gather and trust the data.

7. Benchmark the data against the competitors and identify the competitive strengths and weaknesses.

8. Develop cross-functional action plans that enhance strengths and correct weaknesses.

9. Measure performance continually and spread the data throughout the firm.

10. Be committed to getting better an better and better.

Customer Service:

Customer service arises whenever a purchaser and seller interact. This interaction can be voluntary at the time of purchase or forced at the times of Breakdown complaint.

Characteristics of excellent customer service (3Rs)

Excellent customer service should be the aim of suppliers of products/services. It has the following characteristics:-

Responsive:

Excellent customer service is responsive. A timely response is important. The customer had a requirement when they contacted you and they are likely to have delayed expressing their need. If you delay responding they will solve their problem in some other way. You will have missed an opportunity to serve that customer and the next person they call will probably be one of your competitors.

Reliable:

Excellent customer service consistently responsive, with continuously high levels of customer service, the only surprises that customers find welcome and positive are those that improve the service they receive and exceed their expectations. Customers want excellent customer service and they want it every time.

Respectful:

Informed, attentive, cheerful, polite and helpful customer service representatives should treat customers with respect. Excellent customer service is therefore reliable, respectful and responsive.

Customers in the service Sector:

A feature of the economies of the developing societies is the rapid growth of the services sector, which contributes almost 40% of the GNP, as in the case of India, and the trend for this is to grow even more in the future.

Services sector comprises activities such as transportation, public utilities, bank health services repair services, hotels, department stores and even municipal services. This sector is an organized system of special skills and facilities. By its very nature, the services sector tends to be more human oriented. In carrying out its activities, the service organization has many contacts with its customers. In general, it is the lower rungs of service organizations, which are in direct contact with the customer-like a counter clerk in a bank or a person at the reception of a hotel.Recent trends in the customer satisfaction area:

Customer Orientation:

Customer orientation means keeping customer requirements in mind or thinking about customers wants.

Right quality.

Right quantity.

Right time.

Right cost

Customer Satisfaction Measurement (CSM):

As the heading says CSM is measuring customers satisfaction, which is being adopted by companies. Needs and hence expectations of customers change due to various factors. Conventional customer satisfaction measures may indicate a satisfaction with the product/service but fail to measure the satisfaction of the need.

Customer Satisfaction Index (CSI):

A number of companies have developed customer satisfaction index approaches that help divisions, departments or other organizational entities keep score of their customer satisfaction performance the ones that have been most successful carefully guard against using CSI data punitively against employs or managers.

Employs respond will to measurement when they have latitude and encouragement to improve their performance and confidence that the measurements do not threaten their livelihood. Besides, peoples have a natural tendency to want to keep score.

Customer Relationship Management (CRM):

This is very recent development in attaining customer satisfaction and retaining customers. This is a way of describing how the company provides effective management of its responses and follow-ups with customers to preserve and build relationship and to increase knowledge about specific customers and about general customer expectation.

Customer Delight:

This is no more an unknown concepts and all the companies in India and abroad are trying to reach this height. Customer satisfaction has given way to customers delight and it has become the evergreen buzzword. What is customer delight? Customer delight is a step more than customer satisfaction. Customer delight is a stage where the customer is truly very happy rather delighted when gets something more than they expect.

In the present marketing scenario, customer has become the core of companies; customer satisfaction is being replaced by the neo concepts of customer delight very true to India also. Not only manufacturing companies but also service companies have to begin to think about customers and their satisfaction, delight. Companies are being ranked on the basis of their level of customer satisfaction.

Brief Introduction of the background:

Banking industry, one of the major contributors to the economy mainly depends on their customers. Customers are the major source who contributes to the growth and development of banks. Bank being a service provider should provide the service to the customers to a greater extent where in no customer is left with dissatisfaction. This is possible only when bank adopt good customer relations management. Under this study an attempt is made to know how the bank offers the services to the customer and also the level of customer satisfaction.Title of the Study:

A study on the level of customer satisfaction in Jammu & Kashmir Bank Ltd.

Statement of the Problem:

From the production-oriented market, the market has developed into a customer or consumer oriented market. Today customer is the king. Every industry has developed its products and provide service keeping the customer in mind. Customer has occupied the first place in the market.

Customer satisfaction and customer delight is of primary importance in any kind of company be it a profit seeking industry or a service industry. Banks, by nature are both profit oriented and service institutions. Customers are of greatest importance in banks.

Objectives of the study:

1. To assess the level of customer satisfaction.2. To study the timeliness of the services offered by the bank.

3. To study whether the customer is convenient with the layout of the bank.

4. To understand the awareness of customers about the various schemes offered by the bank.

5. To find the source where from the customer is getting the information about the various products/services offered by the bank.6. To make suggestions for better customer service.

Sampling Techniques:

Sample Size: 75

Sample Method: Random sampling method has been adopted to select the respondents.

Sample Unit: Present and prospective customers of the bank.

Sources of Data:

Primary Data: Primary data from customers has been collected through structured, open ended and close-ended questionnaire.

Secondary Data: Secondary data about the company has been collected through company prospectus, annual reports records of the company etc.Methodology:

The present study has been conducted through the primary and secondary sources of information. An interview schedule has been prepared to collect the responses form the respondents. The questionnaire contained the questions relating to the various services offered by the bank and the customers level of satisfaction of the same.

The collected response has been tabulated and the inferences have been drawn from the analysis of the data. Simple statistical tools and techniques like bar diagram, pie charts have been used to analyze the data.

Limitations of the Study:

1. Time is precious and it is a bing constraint in any study. Due to this the study was restricted only to few branches of the bank.

2. Another major limitation of the study is the sample size, results can not be generalized due to limitations of sample size.

3. Analysis and the recommendations are based on the data collected from respondents who are assumed to be unbiased.

4. The findings of the study cannot said to be static.

Operational Definition of Concepts:

Customer:

A customer is the most important visitor on your premises. From a banks point of view a customer is one who has regular transactions with the bank, in short an individual who has an account at the bank is known as a customer.

Customer Satisfaction:

Customer satisfaction is a state where the customers of an organization are very happy with the organizations products/services.

History Prelude:

The Jammu & Kashmir Bank Ltd. incorporated on October 1st 1938 commenced business on July 4th 1939. From a small beginning the bank has grown to become a giant with a network of 441 braches spread over the length and breadth of the country. A significant contributing factor for this fast growth is the solid founding principles, which are dedicated to the cause of transforming the bank not only as a financial heart but also the social heart of the community.

The J&K bank is the fist state owned bank of the country and 53% of equity is held by the Govt. of J&K. The bank has a consistent track record of growth and profitability. it has a unique distinction of being banker to the J&K state Govt. and has also been appointed by RBI as its agency in J&K, responsible for carrying general banking business of the Central Govt. and collection of Taxes pertaining to the Central Board of Direct Taxes.

The landmark achievements in the diversification of the banks including the sponsoring of two Regional Rural Banks viz Kamraz Rural Bank and Jammu Rural Bank; permission for dealing in foreign exchange, holding the lead bank responsibilities in eight of the fourteen districts in J&K convenorship of State Level Bankers Committee (SLBC) and State Level Export Promotion Committee (SLEPC). The bank is the only one non-nationalized sector, having been entrusted with such assignments and has come up to the expectations of RBI and other agencies like CBDT. The bank has been swift in responding to the need for technology adaptation in meeting its commitment to the customers and offers the best of services and a wide rage of products. The bank is investing in a big way in information technology; Installation of ATMs at Residency Road, Srinagar and Gandhi Nagar, Jammu, Ahmedabad and Mera Road Mumbai and at other important centers; introduction of EFT and e-mail services substantiate this fact. The number of computerized branches of the bank has risen to 246 as on March 2001, which accounts for 80 per cent of total bank business. The Tele-banking facilities are available at 23 branches with such services being extended to 65 branches in the near future. The anywhere banking facility available at 23 branches shall be raised to 65 soon. The bank is in the process of connecting its branches through VAST and lease lines from the existing 23 to 85. The number of ATMs which is most convenient system of extending 24 hour banking facility is 23. ATMs lat six locations including B/o Ansal Plaza, Delhi Corporate Headquarters, Srinagar, B/o Trikuta Nagar Jammu, B/o Government Medical College, Srinagar, B/o SSI Lal Chowk, Srinagar Kashmir, B/o SKIMS, Srinagar and B/o Ahmedabad, Are having 1st Switch connectivity. Once the data center is completed our bank shall be the first to introduce the Internet Banking in the J&K State. A new concept of customer facility Touch Screen Kiosks shall be installed at 65 branches of the bank.

J&K Bank is one of the few banks in the country which has been able to show exemplary performance in adjusting to the rigorous prudential norms that came into force during 1992-93 and has been able to achieve CAPITAL ADEQUACY RATIO of above 17.44 per cent as on 31st March 2001 which is far ahead of RBI stipulation and is one of the highest in the industry today.

Historical Background:

Entire banking in the state of Jammu & Kashmir was performed by traditional lenders till 1920-30 and that too at exorbitant interest rates. At the same time some banks functioned at a very limited scale, such as Punjab National Bank Limited Grind lays Bank and imperial Bank of India.

The role of these banks was reduced to the acceptance of deposits as they could not grant loans and advances to the people of the state owing to the statutory limitations. Under this scenario banks could not ameliorate the financial and social position of the people of the state. To overcome this critical situation the then Maharaja of the state conceived an idea of setting up of a state bank in the state. After a prolonged exercise and deliberations the assignment for establishment of The Jammu & Kashmir Bank Limited was given to the late Sir Sorabi N Pochkhanwala, the then Managing Director of the Central Bank of India.

Mr. Pochkhawala formulated a scheme on 24-09-1930, suggesting establishment of a semi state bank with participating in capital by state and the public under the control of state government. Thus the bank was formally incorporated on the 1st October 1938 and commenced business from 4th of July 1939 at its Registered Office Residency Road Srinagar Kashmir.

The Jammu & Kashmir Bank Limited has been the first of its nature and composition as a State owned bank in the country. In its formative years, the bank had to encounter several serious problems, particularly around the time of independence when out of its total of ten branches two branches of Muzaffarabad and Mirpur fell to the other side of other line of control (now Pak Administered Kashmir) along with cash and other assets in 1947.

However the State Government came to its rescue with the assistance of Rs. 6.00 Lacs to meet the claims however the bank stead fatly over came its difficulties and kept growing. Following the extension of Central Laws to the state of Jammu & Kashmir, the bank was defined as a government company as per the provisions of Indian Companies Act 1956. The bank has its first full time Chairman in 1971, following Social Central measures in banks. The year 1971 was turning point for the bank on conferment of scheduled bank status and witnessed remarkable progress in all the vital fields of operations.

The bank was declared as A Class Bank by Reserve Bank of India in 1976. In recognition of dominant role and exulted performance, Reserve Bank of India appointed the bank as its agent for performing the general banking business of the Central Government especially in maintaining currency chests and collection of taxes. The landmark achievements of the bank in some important fields of operation since its inception to March 1999 are detailed below.

Mission Statement:

Committed to Earning Your Trust

From a small beginning the bank has grown big and attained business turnover of Rs. 12940 Crores during last financial year.

Millions have placed their faith in J&K Bank, through the banks ever-expanding network of branches all over the country. A significant contribution factor for this fast growth is the trust people have reposed in and the banks reciprocation to serve them better and coming to there expectations in every activity.

Prime Objective:

Care and improvement in the quality of customer service with all available hi-tech means in tune with growing needs of customer, is the prime objective of the bank. The bank has adopted a policy of continuous upgradation of the quality of customer service through incorporation of the latest technology and streamlining of existing systems to meet such challenges.

Share Capital & Reserves:

The bank was incorporated with the authorized capital of Rs.200 Lacs shares of Rs. 25/- each amounting to Rs. 50,000 Lacs. The first issue comprised 80,000 shares amounting to Rs. 20,000 Lacs. A total number of 62716 shares of the value of Rs. 15, 67,900/ were authorized and Rs. 7.66 Lacs paid up as on 30-06-1940. The authorized capital was subsequently reduced to 1.20 Lacs share amounting to Rs.30.00 Lacs in 1958 and latter enhanced to 40.00 Lacs in 1992 and 80.00 Lacs in 1993 amounting to Rs.10.00 Crores and Rs.20.00 Crores respectively. The issue capital of 28.00 Lacs shares amounting to 7.00 Crores stands subscribed land paid up as on March 31, 1997 Rs.28/- per share. Thus where as the paid up capital would be increased to Rs. 48.50 Crores, simultaneously the bank be able to earn the share premium of Rs.86.80 Crores.

The bank has paid special attention to the vital aspect since its inception. The first reserves were created by the bank when amount of Rs.10,000/- were transferred to the account as on 30-06-1941. The reserves were created not only to meet the statutory requirements but also for bad and doubtful debts and for meeting other contingencies. The free reserves which were of the order of less than one Lac in 1944 and Rs. 7.00 Lac in 1966 stood at Rs. 42.50 Lacs in 1975 and less than one Crore in 1979. In a span of just over 16 years the reserves have grown ten thousand times and crossed Rs. 100 Crores mark in 1995, excluding those held for the risk weighted assets. The Capital & Reserves of the Bank witnessed as remarkable growth during the year 2000-2001. It increased to Rs. 700 Crores as on March 31-03-2001 as against Rs. 528 Crores as on 31-03-2000 registering a growth of 32.44%. The statutory and other Reserves increased to Rs. 651.41 Crores from 480.15 Crores of 31-03-2000.

The bank came out with unsecured non-convertible redeemable, subordinated tier-II Bond issue of Rs. 75 Crores in December 2000. The issue received an overwhelming response and the Bank mobilized Rs. 87 Crores against the size of Rs.75 Crores at 11.75% p.a. with tenure of 63 months.

Deposits:

The public has reposed its confidence in the standing of the bank from its very inception and the same has been growing ever since that dates despite the shocks it received as a consequence of partition because of loss of two branches within eight years. In the first year of its operation the bank succeeded mobilizing deposits to the tune of Rs. 14 Lacs after which there was no looking back. The deposits which stood at just over one Crores in 1949 and less than 100 Crores in 1978, grew with amazing pace within a span of 16 years. The growth of the deposits accelerated at an amazing pace for the decade 1980-1998, from Rs.191.67 Crores to Rs.1046.35 Crores. Barring few occasions, the growth rate has been more than the national average, doubling in 1991-1994 (in just four years) despite the slag economic trends in the state due to turmoil and difficult working conditions.

It will be in order to reveal that when all nationalized banks closed down their offices in valley in 1990; the J&K bank alone braved against all odds and discharged its banking services to the public at great risks. Not only in deposits, the bank discharged its duties under those difficult situations in all spheres and made inroads in multifarious levels in pattern of client base. The bank performed commendably during the year by registering the growth rate of 26.40% against the national average of 16.1%. The deposits of the bank stood at Rs.3658.14 Crores as March 31st 1997 against the Rs. 2895.18 Crores as on 31-03-1996. the deposit base of the bank touched new high at 11,168 Crores at the end of financial year 2000-01. The average deposits per branch work out to Rs. 30.15 Crores against the previous year figure of Rs. 26.17 Crores. The average deposit per employee stood at Rs.172 Lacs against Rs.150 Lacs of the previous year.

Credit dispensation:

The J&K Bank Ltd. was established with a sole aim of improving the economic conditions of the people of the state as then existing banks could not fulfill such needs because of various limitations as stated earlier. On the vary next day of opening a loan on Rs.1.20 Lacs was granted to the borrower. This may bee a laughable amount today but it carried a slogan that time. The people of the state regard J&K Bank as their own bank owing to its local orientation and characteristics and bank in turn has been fulfilling there aspirations by spear heading the credit dispensation not only under the normal lending schemes but also through the central and state government sponsored schemes. The bank has been instrumental in the economic upliftment of the people of the state which other wise would have been difficult in view of this backwardness topographical conditions and above all conservative attitude of other banks.

Bank has been playing its role devotedly towards the economic development not only on domestic front but also for the foreign exchange earnings. The bank disbursed advances to the tune of Rs.5.76 Lacs in first year, while as the one Crores mark was achieved after 25 years only. There after the credit disbursals gained momentum. The amount of advances stood at 131 Crores in 1980 recorded 10-fold increase and stood at Rs.1208 Crores at 31-03-1995. During the last two years the advance registered an emphatic growth and wre recorded at Rs. 4763 Crores as on 31-03-2001. J&K Bank is one of the few banks which have been able to show exemplary performance in adjusting to the rigorous prudential norms that came into force during 1992-93.

The bank as not only enhanced the quantitative but also qualitative approval of the credit portfolio, on some occasions the banks credit deposit ratio and priority sector lending has exceeded the desired or prescribed limits. Bank has not only fulfilled its commitments towards the Government of Jammu & Kashmir but also has come to its rescue in the hours of financial crises. The lending to the State Government has been a constant phenomenon for the decades now and in fact upsets various ratios related to credit on some occasions. The bank has witnessed a steady growth in the borrower client base, which is spread to more than one Lacs accounts presently.

The growth in the credit portfolio is commendable particularly in the state with vicious law and older problems because of turmoil through which the state has passed.

Investment:

Right from the beginning the liquidity, safety and profitability of the funds has remained and continue to be the focus of banks policies. During the first few years, the surplus funds were kept either in current or fixd deposit accounts with other banks. It was in the year 1944 when an amount of ten Lacs was invested in Government securities. There after the growth of investment portfolio has been phenomenal one. The investment holdings of the bank have been far beyond the statutory requirements. The total investments in government and other approved securities, bonds debentures was to the tune of Rs.792 Crores as on 31-03-1995. During the last few years banks investments portfolio grew at amazing pace as investments of the ban stood at Rs.5425 Crores.

In the falling interest rate scenario, when 10 year Fixed Income Money Market & Derivatives Association of India (FIMMDA) Bond Yield Curve has come down from 10.85% to 10.34% during the year 2000-2001 the bank has recorded an average yield of 13.49%.

The investment portfolio is bifurcated into categories of held till maturity available for sale and held for trading as per RBI guidelines.

Profitability:

Except for the first year of business, when bank suffered a loss of Rs. 0.07 Lacs as on 30-06-1947, the bank has a consistent track record of growth and profitability. In just the second year of commencement of business, it recorded an impressive profit of Rs.0.48 Lacs and wiped out the losses of previous year. With excellent fund management, the profits of the bank jumped from 177 Lacs in 1990 to 1251 Lacs in March in 1994 after providing for all the statutory and mandatory provisions.

The Bank recorded a net profit of Rs.168 Crores for the financial year 2000-01 registering an increase of 39.44% over the last year figure of Rs.120.17 Crores. The Banks total income at Rs.1157.28 Crores for 2000-01 recorded a growth of 16.93% over the previous year figure of Rs.989.72 Crores. The income per branch and per employee has increased to Rs.313 Lacs and Rs. 18 Lacs respectively from the previous figure of Rs. 275 Lacs and Rs. 15.76 Lacs.

Industry Profile:

Banks, organizations that carry out the business of banking, taking deposits and then using those deposits to make loan. In essence, a bank aims to make profit by paying depositors a lower rate of interest than the rate the bank charges borrowers. In accounting terms, deposits are considered liabilities (because they have to be repaid) and loans are considered assets, though some become bad debts. Banks in most countries are supervised by a central bank.

Banking Origin and Development:

In the past, economic advancement was unknown consequently the use of money for buying and selling was very much restricted with the development of communication, economic progress and the spread of science the use of money also expanded. The origin of modern financial institutions can be traced to antiquity, where the individuals used to accept money in the form of deposit and lend it to people who needed for meeting their requirements, which may be economic or social. As time advanced old order of lending and borrowing underwent metamorphic changes. In fact, the innovations in the fields of transport and communications, development of energy and manufacturing have resulted in innovations in the sphere of banking.

According to ancient European History the Babylonians were the earlier people to develop a systematized banking system. It is said that temples of Babylon were used as banks and as such the temples of Ephesus and Delphi were famous great banking institutions. The anti religious feelings that developed afterwards led to the collapse of public confidence in depositing money in temples and the priests seized to perform the banking business. However after the revival of civilization and with the development of social and economic institutions, money transactions were also revived. It was in the 12th century that some banks were established in Venice and Genoa. These banks were simply receiving deposits and lending money to the people.

The origin of modern banking may be traced to money dealers in Florence who received money in the form of deposits and lend it to be business people. At this time Florence was the center of money market in Europe. In England money changing became an important function of bankers during the reign of Edward III. Money changing refers to conversion of foreign coins into British money. The royal exchanger on behalf of the crown performed this function.

Gold smiths of England prepared the ground for modern banking in England during the period of Queen Elizabeth. The gold smiths used to receive valuables and funds of their customers and issue receipt acknowledging the same. These receipts in course of time became promissory notes. The bank notes were accepted in exchange of money and vice-verse and enjoyed considerable circulation. The gold smiths in due course found that the depositors of money were not withdrawing as often as possible. They realized that lending others money for a fixed period of time was profitable. This marked the beginning of banking in England.Bank of England:

The bank of England started its business in 1694 with a view to finance the government to carry on its war with France. The public distrust for the same was also responsible for this event. The bank received subscriptions from the people and provided loans to the government. The government enacted a legislation called the Tomage Act to form the Bank of England.

The Act provided certain benefit to the bank such as dealing in bills of exchange, gold or silver bullion etc. the new bank proved for better than the banking firms established by goldsmiths.

Modern Banking-its Evolution:

The growth of banking in England in the nineteenth century paved the way for the establishment of systematized banking system, performed limited functions such as receiving deposits against bank notes and then issuing notes in the country. As time advanced, commerce and industry expanded and the scope of banking also expanded. Banking institutions deal with a large number of services to customers.

The more highly developed a country is, the greater is the instrumentality of the banker utilized to carry through commercial transactions. From its original narrow scope and modest purpose, modern banking has developed into such a stature that it can truly be said that in countries such as England and United States of America, there is hardly a business deal in which the assistance of bank is not sought for.Foundation of Modern Banking:

Modern banking as a service institution is a large corporate giant with large resources and multifaceted activities. Since the nationalization of some big commercial banks in India, there has been a great surge in the banking industry throughout the world with the number of banking offices.

The banking business today has become highly critical and competitive between various classes of banks in offering a greater variety of services nationally and internationally. With the growth of trade an commerce, banks are also modernizing operations with a view to satisfying their customers. Indian banks have also realized that to cope with enormously increased volume of business in a timely and efficient manner and to do effective business, like their counterparts in the western countries, by modernizing their operations was deemed essential. Modern banking institutions have resorted to automation by means of introducing computers and equipment as well as the wealth of information technology.

The main aim of modernizing banking system is to improve bank operations with a view to maintaining high standard banking. This involves application of better management techniques. In India, class banking has given way to mass banking thereby bringing in its fold large number of customers.

Banks are now looked upon as developing agents instead of purveyors of credit to the large industries and big business companies. More and more functions are entrusted to banks. In India, the banks apart from providing credit to agriculture, trade, industry and commerce are offering a good number of services to the customers such as making pension payments to retired government servants and collection of water and electricity bills, telephone bills, taking buy and sell decisions on behalf of customers, managing public issues etc.

Banks today cater there services to laborers, petty wage earners, small traders, who once approached the money lenders for a small loan, who in turn took their gold and valuables and kept them till the loan was repaid. The rural credit system was such that farmers were perpetually bound to slavery that would see them moaning under the financial crisis with mute silence. With the emergence of modern banking system, the rural credit system with the money lender virtually collapsed. The modern banks have developed strategies to meet the requirements of common men in achieving economic and social development.

The arrival of banks brought about a rapid transformation in the farms, forests and fields. A few years ago, crude tools, superstitions and unpredictable rains would often throw rural development haywire. The winds really have begun to blow towards the amelioration of the poor and down trodden. The banks role in such transformations is really marvelous.Banking Scenario In India:

The most important constituents of the money market in India are the modern banks and the indigenous bankers. Modern market in India is the modern banks and the indigenous bankers. Modern banking became an effective force only after 1910. Before that the indigenous bankers dominated the scene. Until 1860, they financed trade, acted as bankers to the company government collected revenue on behalf of the government, managed the transfer of funds from one center to another, and some of them had the monopoly as mint masters and moneychangers.

In later years, their direct contacts with the government as financiers declined. They continued to perform other functions, albeit in a declining proportion. The financial instrument they have popularized is humid. A notable feature of this institution is that it functions with a personal touch that is often lacking in modern banking.

Structure & Growth:

The growth of the modern banking business in India was negligible till the beginning of the present century. During the second half of the 18th century agency houses used to perform banking business as an adjacent to their main business. The foundation of modern banking was laid during the early part of 19th century with the establishment of 3 presidency banks, namely the bank of Bengal (1806), bank of Bombay (1840), and the bank of madras (1846). During the second half of 19th century, some exchange banks and Indian joint stock banks were also set up in 1900. There were 9 Indian joint stock banks, 8 exchange banks and 3 presidency banks.

During the first of present century, the banking system progressed rapidly. The world was contributed to raising the level of economic activity and the monetary resources in the economy. In 1921, the 3 presidency banks were amalgamated to form the imperial bank of India (IBI). Although the RBI functioned as a quasi - central bank, the money market was with out proper central bank until 1935, when the reserve bank of India was established. After the establishment of RBI, the IBI used to act as the agent of the RBI in places where the RBI did not have any offices of its own. Similarly, even after 1935, the IBI continued to act as a banker for other banks (to a limited extent). It used to discount hundis and grant loans against government securities. All these functions are now performed by state bank of India (SBI), and the special position of SBI in the banking system today stems from these historical antecedents.

Around 1950 the banking system in India comprised of RBI, IBI, co-operative banks exchange banks and Indian joint stock banks. Were known as A2 banks.

Fig: 1: Structure of Banking System in IndiaCommercial banking:

Among all kinds of banks commercial banks are the oldest, biggest and fastest growing financial intermediaries in India. They are also the most important depositor of public saving and the most important disbursers of finance. Commercial banking in India is a unique system, the like of which exists nowhere in the world. The truth of this statement becomes clear, as one studies the philosophy and approaches that have contributed to the evolution of banking policy, programs and operations in India.

The banking system in India works under a constraint that goes with social control and public ownership. The public ownership has been achieved in three stages: 1955, July 1969 and April 1980. Not only the public sector banks but also the private sector and foreign banks are required to meet targets ion respect of sectoral deployment of credit deposit ratios. The operation of banks have been determined by lead bank scheme, differential rate of interest scheme, credit authorization scheme, inventory norms and lending systems prescribed by the authorities, the formulation of credit plans and service area approach.

Commercial banks ordinarily are simple business or commercial concerns which provide various types of financial services to customers in return for payments in one form or another, such as interest discounts, fees, commission and so on. Their objective is to make profits. However, what distinguished them from other business concerns (financial as well as manufacturing) is the degree to which they have to balance the profit maximization with certain other principles. In India, especially banks are required to modify their performance in profit making if that clashes with their obligations on such areas as social welfare, social justice and promotion of regional balance in development. In any case compared to other business concerns banks in general have to a pay much more attention to balancing profitability with liquidity constraint in various areas of their decision making and therefore they have to devote considerable attention to liquidity management. But with banks the need for maintenance of liquidity is much greater because of the nature of liabilities. Banks deal in other peoples money, a substantial part of which is repayable on demand. That is why for banks unlike other business concerns, liquidity management is as important as profitability management.

Table 1: Growth & Structure of Commercial Banks in India, 1951 to 1997 (Amount in Rs. Crores)S. No.Variable19511969198619961997

1Number of scheduled banks other than RRBs 92717991101

2Number of RRBs--194196196

3Total no, of scheduled banks (1+2)9271273287297

4No. of non-scheduled banks.47414321

5No. of all commercial banks (3+4)56685276290299

6No. of offices of non-scheduled banks.1504181428-

7Deposits of non-scheduled banks.-24292-

8No. of offices of RRBs--1284614716-

9Deposits of RRBs --178613835-

10No. of offices of all commercial banks.41519007409036309263724

11Deposits of all commercial banks9095319119606436956507533

12Credit of all commercial banks272381196713262414282702

13Investment in government securities of all commercial banks. 304105130553164782181457

There were 299 banks in 1997 as compared to 85 in 1969 and 566 in 1951. The higher number of banks in 1951 was due to the existence of a large number (474) of non-scheduled banks (NSBs) in the year. Due to the process of amalgamation, mergers and consolidation of banks, the number of NSBs decided drastically to just 14 by 1969. There was some decline in the number of other banks also during 1951-69. Thereafter, the total number of banks again increased to certain extent due to the setting up of Regional Rural Bank (RRBs).

The investment in government securities by banks has grown faster than their deposits or credit. The major part of the increase in the banking sector has occurred during the two decades after nationalization of banks.

The Indian banks include 27 public sector banks excluding RRBs 196 RRB and 34 private sector banks. The first group includes the State Bank of India (SBI), its associate banks (7), and other nationalization banks (19). The 27 nationalized banks accounts for 70 percent of bank offices in 1996, and 82 to 92 percent of bank deposits/credit during 1970 to 1996. The 34 private sector banks had 4266 offices (7 percent of the total) in 1996. Share of foreign banks in the total bank deposits and recdit declined during 1970 to 1996, after which it picked up again to reach the level of 8 to 9 percent in 1996.

The new economy policy of 1991 liberalized the entry of foreign banks and private sector Indian Banks. The establishment of latter is encouraged now, provided they conform to the norms and guidelines issued by the RBI for this purpose.

The banking system in India is characterized by excessive concentration of business in a small number of scheduled public sector banks. The banking in India as in United Kingdom is of the type called branch banking. If we exclude RRBs, a mere 27 banks are now opening a vast network of about 45000 branches over a vast geographical area that is India. This concentration of banking business has been brought about through the policy of mergers and consolidation of banks and their government ownership. The phenomenon of branch banking has aggravated the problem of organizational and operational inefficiency in the banking sector. There is a need to decide on the optimum size of a bank in Indian conditions. Some of the banks in India have become too big to function efficiently.Contribution of banks to the economy of India:

Banks are playing a crucial role in the economic development of the country. In fact, with out the development of commercial banking in the 18th century & 19th centuries, industrial revolution would not have taken place in England at all. It is equally true that economic development of underdeveloped countries depends entirely on the development of sound commercial banking. Banking, when properly organized aids and facilitates the growth of trade and industry and hence of national economy. In the modern economy, banks have been considered as leaders of development. The points following will examine how banks have been helping in the economic development of India.

Banks render valuable services to trade and industry. Industrial development can take place only if sufficient money is invested in industries. The available supply of money must be put to maximum possible use. Banks take this stupendous task by mobilizing the savings of the people and lending the same to the traders and industrialists.

The banks extend credit facilities to the right type of persons and assist in the development of the right of industries. In this way banks not only help in the industrialization of the country but they also have a say in the type of economic development required. Expansion of bank credit will provide more funds for the entrepreneurs start new industries, which results in more employment and income generation. It will increase the production of goods. On the other hand, a decline in bank credit will boomerang crisis fall in production, unemployment etc. commercial banks by providing funds encouraged production and cause an increase in national income by means of transferring surplus resources obtained from rural sector.

The banks help in the uniform development of the different region in the country. They help in transferring funds from one place to another. Money from the surplus is diverted to the backward area for the purpose of investment and development.

The mechanism of credit creation is used to expand the business. Expansion of bank credit is followed by increase in production employment, sales and prices. If the flow of credit is not smooth, it jeopardized the economy. If it is artificially curtailed, it affects the normal functioning of the economy. Banks convert the debts of other into money. They buy debts of others, which are not generally accepted as money. They discount bills of exchange and pay cash. Banks help in the capital formation. A high rate of savings and investment constitutes capital formation. The banks mobilize the small idle and dormant savings of the people and utilize the money for productive purposes.

Banks have now come toe occupy a very important position on the economy of the country. They play a very decisive role in the industrial development of the country. Finance is the lifeblood of every economic activity and it is supplied by the bank. The credit facilities extended by banks must be uniform and rotational; other wise there will be haphazard development in the country. If the powers of the banks to grant credit are not properly used, the economy of the country is likely to be affected badly. The flow of credit is very much like the circulation of blood. Just as the circulation of blood has to be smooth and uniform throughout all the organs of the human body, so also credit should flow steadily and evenly through various sectors of economy.

Profile of the Respondents on the basis of ageAgeNo. of RespondentsPercentage

21-301013.4%

31-402533.4%

41-502634.6%

Above 501418.6%

Pie Showing Age of the Respondents

>50

21-30

18.6%

13.4%

41-50

31-40

34.6%

33.4%

Profile of the Respondents on the Basis of SexSexNo. of RespondentsPercentage

Male6181.3%

Female1418.7%

Chart Showing Sex of the Respondents

Female

18.7%

Male

81.3%Profile of the Respondents on the Basis of OccupationOccupationNo. of RespondentsPercentage

Employee2330.6%

Business3242.66%

Student1013.4%

Retired56.67%

House Wife56.67%

Graph Shown the Occupation of Respondents

4540

35

25

20

15

10

5

0OccupationEmployeeBusinessStudentRetiredHouse Wife

Percentage30.642.6613.46.676.67

Profile of the Respondents on the Basis of Monthly IncomeIncomeNo. of RespondentsPercentage

150002128%

Pie Showing the Monthly Income of Respondents

>15000