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A
PROJECT REPORT
ON
“INDIAN BANKING SYSTEM”
UNDER THE GUIDENCE OF:
MRS. ELINA KANUNGO (COLLEGE FACULTY)
SUBMITTED TO:- SUBMITTED BY:-
CHITRAREKHA KALIA
RAMADEVI WOMENS AUTONOMOUS COLLAGE(BHUBANESWAR)
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ACKNOWLEDGEMENT
I would take this opportunity to thank Mrs. Elina kanungo, Faculty, R.D. Women’s collage,
Bhubaneswar for being cooperative and helpful guide.
A note of thanks is due to all those, too many to single out by names, which have helped in no
small measure by cooperating during by providing their valuable time, inputs and assistance.
Their support, guidance and motivation were very valuable and encouraging.
Chitrarekha Kalia
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PREFACE
The introduction and application of the concept of customer services entered in a welcoming way
in India only after independence. The banking system in India has come a long way during the
last two centuries. Its growth was faster and the coverage wider since 1969. In 1969a major
position of banking sector was entrusted to the public sector. This process continued and
embraced few private banks in 1980.
The transfer of ownership of banks from the public to private was aimed at entrusting the banks
with greater responsibilities for the economic development of India by taking banking services to
the masses and taking special care of the weaker section of the society and the priority sector of
the economy. Though the number of banks offices magnitude and the variety of their operations
has grown considerably during the period of near about three decades, but it appears that the
banking sector has entered into serious among customers.
For overcoming this problem, banking industry should seek introspection and adopt refined
management techniques. It has been endeavor of this study to analyze the present state of various
banks keeping in view the primary data has been collected regarding the present state of loan
schemes in various banks by using a questionnaire.
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DECLARATION
I undersigned Chitrarekha Kalia The student of B-Com 3rd Sem. hereby declare that the
project work in my own work and has been carried out under the guidance of Mrs. Elina
Kanungo Faculty Member of R.D. Women’s collage, Bhubaneswar. This Report has been
submitted to R.D. Women’s collage for evaluation .
Date:
Place:
Chitrarekha Kalia
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Table of contentsS. No. Particulars Pages
1. EXECUTIVE SUMMERY 07-08
2. INTRODUCTION:
REVIEW OF LITERATURE
OBJECTIVES OF THE STUDY
SIGNIFICANCE OF THE STUDY
CONCEPTULIZATION
FOCUS OF THE PROBLEM LIMITATION OF THE STUDY
09-16
3. RESEARCH METHODOLOGY:
RESEARCH DESIGN
SAMPLING: DESIGN AND PROCEDURE
17-20
4. VALUATION TOOLS:
ICICI BANK
HDFC BANK
SBI BANK
21-28
5. MAJOR FINDING 29-31
6. CONCLUSION 32-33
7. BIBLIOGRAPHY 34
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CHAPTER-1
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The Indian Economy is driven by strong fundamentals with GDP growth at 9.1% for H1 FY07 –
strongest growth in any six months since H1 FY04 and uptrend in Industrial Cycle with Average
Index of Industrial Production growth at 10.2% being the strongest run in the past 11 years.
On political front, the Indian Government has signed nuclear deal with America indicating
India‟s importance in the global context opening up many opportunities. Along with this,
Chinese President Hu is expected to visit India. This will improve trade and other ties between
two of the fastest growing economies.
In Capital Market, Strong foreign inflows with Portfolio flows of nearby USD 9.2bn took BSE
Sensex to 14,000 + (50% higher) compared to FY 05-06. The Indian corporate raised USD 6bn
by issuing Initial public offer in India and abroad. High Credit growth at 30%, it continued the
trend of last 5 years where it has averaged around 25% and lastly M&A activity which was at its
peak with sectors beyond IT and Pharma making global & domestic acquisitions.
The high growth sectors are Power where power ministry and local private players
announce 9 ultra mega projects (4,000 MW each) provides visibility on power & infra
front.
Retail - a Point of inflection with major Indian corporate announcing plans, entry of
world majors like Wal-Mart & foreign investment allowed in single brand retail and Real
Estate with major huge build-out plans and Special Economic Zone policy of government
is major driver of growth.
Banking in which Banks are allowed to raise hybrid capital which opens new avenues forfunding credit growth.
As such, the report focus on change factors in Banking Industry as this industry is expected to
have major impact on Indian Economy.
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CHAPTER-2
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In India, given the relatively underdeveloped capital market and with little internal resources,
firms and economic entities depend, largely, on financial intermediaries to meet their fund
requirements. In terms of supply of credit, financial intermediaries can broadly be categorized as
institutional and non-institutional. The major institutional suppliers of credit in India are banks
and non-bank financial institutions (that is, development financial institutions or DFIs), other
financial institutions (FIs), and non-banking finance companies (NBFCs). The non-institutional
or unorganized sources of credit include indigenous bankers and money-lenders. Information
about the unorganized sector is limited and not readily available.
An important feature of the credit market is its term structure:
(a) Short-term credit
(b) Medium-term credit
(c) Long-term credit.
While banks and NBFCs predominantly cater for short-term needs, FIs provide mostly medium
NEW JERSEY: Indus American Bank has tied up with State Bank of India to offer money
transfer services to India for its clients. Under the new money transfer service, which willprovide expanded services to Indus American Bank customers can expect service at over 14,000
branch locations of State Bank of India within India, and at over 14,000 additional RTGS
participating banks.
Funds remitted from Indus American Bank would reach recipients typically within 24 hours. As
the largest bank in India, State Bank of India offers excellent exchange rates which are now
available to Indus American Bank customers. India is one of the biggest destinations for foreign
remittances.
ICICI Bank allots equity shares
ICICI Bank allotted 17,800 equity shares of face value of Rs 10 each on Sep. 18, 2007 under the
employees stock option sceme, 2000 (ESOS).ICICI Bank (ICICIBANK) was promoted in 1994
by ICICI, an Indian development financial institution. The two entities subsequently merged to
become the largest commercial bank in the private sector.
Shares of the company gained Rs 7.75, or 1.38%, to settle at Rs 569.9. The total volume of
shares traded was 173,655 at the BSE.(Tuesday)
HDFC Asset Management to launch debt fund on Sept 27
MUMBAI (Reuters) - HDFC Asset Management Co Ltd said on Tuesday that it will launch a
close-ended debt fund on Sept. 27.
The fund, HDFC FMP 18M September 2007, will be open for subscription till Oct. 8. It will
invest at least 60 percent of the assets in debt and money market instruments and the rest in
To study effective and most popular bank among the customers regarding its services.
To find out the rate of interest of banks and reaction of customers on it.
To make analysis on the economic benefits provided by various banks.
Suggest the investors whether to invest in shares of Banking Companies.
CONCEPTUALIZATION
The last decade has seen many positive developments in the Indian banking sector. The policy
makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related
government and financial sector regulatory entities, have made several notable efforts to improve
regulation in the sector. The sector now compares favourably with banking sectors in the region
on metrics like growth, profitability and non-performing assets (NPAs). A few banks have
established an outstanding track record of innovation, growth and value creation. This is
reflected in their market valuation. However, improved regulations, innovation, growth and
value creation in the sector remain limited to a small part of it.
The cost of banking intermediation in India is higher and bank penetration is far lower than inother markets. India‟s banking industry must strengthen itself significantly if it has to support the
modern and vibrant economy which India aspires to be. While the onus for this change lies
mainly with bank managements, an enabling policy and regulatory framework will also be
critical to their success.
The failure to respond to changing market realities has stunted the development of the financial
sector in many developing countries. A weak banking structure has been unable to fuel continued
growth, which has harmed the long-term health of their economies. In this “white paper”, weemphasize the need to act both decisively and quickly to build an enabling, rather than a limiting,
The research report concentrates on macro and micro factors affecting Banking Industry,Evolution of Banking Industry and its current status. Various regulatory and reform processes
also affect banking industry. The report also throws a light on them.
The report finally ends with valuation of major players in banking Industry and the major
challenges faced by this industry.
1.
Banking Challenges
It is expected that the Indian banking and finance system will be globally competitive. For this
the market players will have to be financially strong and operationally efficient. Capital would be
a key factor in building a successful institution. The banking and finance system will improve
competitiveness through a process of consolidation, either through mergers and acquisitions
through strategic alliances. Technology would be the key to the competitiveness of banking and
finance system. Indian players will keep pace with global leaders in the use of banking
technology.
In such a scenario, on-line accessibility will be available to the customers from any part of the
globe; „Anywhere‟ and „Anytime‟ banking will be realized truly and fully. In this context, the
research paper approached “Indian Banking System” as the shape of the banking sector will be
the result of a strong interplay between the decisions taken by policy makers and actions of bank
Lack of time availability with the people involved in any manner with the research
especially when decisions were to be made quickly.
Difficulty in application of Statistical Tools.
Difficulty in making accurate forecasts because of presence of Economic impediments
like inflation, RBI policies etc.
SAMPLING: DESIGN AND PROCEDURE:
Sampling Technique:
“Convenience Sampling” as a part of Non-Probability sampling by taking the three banks asthe major performers in the Indian Banking Sector and highlighters of sector‟s overall
performance.
Sample Size:
Sample Size was restricted to 3, including ICICI Bank, HDFC Bank and State Bank of India.
Executing the Sampling Process:
Through making a comparison among the various key figures of sales, profits and accounting
ratios deduced from accounting statements.
Method of Data Collection:-Secondary Data is collected to carry out the study. To review the
literature available regarding the subject; various journals, magazines, related research papers
Technology:HDFC Bank operates in a highly automated environment in terms of information technology and
communication systems. All the bank's branches have online connectivity, which enables the
bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also
provided to retail customers through the branch network and Automated Teller Machines
(ATMs).
The Bank has made substantial efforts and investments in acquiring the best technology available
internationally, to build the infrastructure for a world class bank. The Bank's business is
supported by scalable and robust systems which ensure that our clients always get the finest
services we offer.
The Bank has prioritised its engagement in technology and the internet as one of its key goals
and has already made significant progress in web-enabling its core businesses. In each of its
businesses, the Bank has succeeded in leveraging its market position, expertise and technology to
create a competitive advantage and build market share.
Business:
HDFC Bank offers a wide range of commercial and transactional banking services and treasury
products to wholesale and retail customers. The bank has three key business segments:
Wholesale Banking Services:
The Bank's target market ranges from large, blue-chip manufacturing companies in the
Indian corporate to small & mid-sized corporates and agri-based businesses. For these
customers, the Bank provides a wide range of commercial and transactional banking
services, including working capital finance, trade services, transactional services, cashmanagement, etc. The bank is also a leading provider of structured solutions, which
combine cash management services with vendor and distributor finance for facilitating
superior supply chain management for its corporate customers.
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on
various treasury products are provided through the bank's Treasury team. To comply with
statutory reserve requirements, the bank is required to hold 25% of its deposits in
government securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.
Management:
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was
a Deputy Governor of the Reserve Bank of India. The Managing Director, Mr. Aditya Puri, has
been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was
heading Citibank's operations in Malaysia. The Bank's Board of Directors is composed of
eminent individuals with a wealth of experience in public policy, administration, industry and
commercial banking. Senior executives representing HDFC are also on the Board.Senior banking professionals with substantial experience in India and abroad head various
businesses and functions and report to the Managing Director. Given the professional expertise
of the management team and the overall focus on recruiting and retaining the best talent in the
industry, the bank believes that its people are a significant competitive strength.
SBI :
State Bank of India (SBI) is the largest bank in India. It is also, measured by the number of
branch offices and employees, the largest bank in the world. Established in 1806 as Bank of
Bengal, it remains the oldest commercial bank in the Indian Subcontinent and also the most
successful one providing various domestic, international and NRI products and services, through
its vast network in India and overseas. With an asset base of $126 billion and its reach, it is a
regional banking behemoth. The bank was nationalized in 1955 with the Reserve Bank of India
Government of India, 1998, Report of the Committee on Banking Sector Reforms Government of India, 1991, Report of the Committee on the Financial System
IMF Working Paper - Competition in Indian Banking by A. Prasad and Saibal Ghosh
Indian Banks Association, Various Years, Performance Highlights of Banks (Mumbai).
Indian Banking Association
Ministry of commerce and Industry Reserve Bank of India, 2008, “Annual Policy Statement for the year 2007-08” (Mumbai).
Reserve Bank of India (a), Various Years, Report on Trend and Progress of Banking in
India (Mumbai).
Reserve Bank of India (b), Various Years, (Mumbai).