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NEW TRENDS IN BANKING
SUBMITTED TO
UNIVERSITY OF MUMBAI
BY
VIRENDRA M JHA
GUIDED BY
PROF. BHAVANA CHAUHAN
VIDYAVARDHINIS
K.M. COLLEGE OF COMMERCE AND
VASAI ROAD 401 202
T.Y BANKING & INSURANCE
SEMESTER FIFTH
20010-11
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ACKNOWLEDGEMENT
I would like to take this opportunity to thank
everybody who helped through the successful completion of
this project. Many people have contributed to my
achievements during the project and take this opportunity
to thank each one of them at end of the project durations.
First I would like to thank the UNIVERSITY OF MUMBAI to
include this project in the curriculum which brings out our
observant analyzing and interpreting skills to the maximum.
I extend my sincere gratitude to the honorable
principal Dr.Sushil.S.kelkar for the work that I am able to
present would just not have been possible without her
guidelines.
I would also like to thank the project guide Mrs.
Bhavna Chauhan Lad for their constant encouragement,
intellectual solution and valuable suggestions throughout
the making of this project. I thank him for spending his
valuable time and efforts towards my cause.
I would like to thank to my friends and colleagues,
librarians for providing some valuable tips. I would also like
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to thank all those whose name may not have appeared here
but whose contributions have not gone unnoticed.
Last but not the list, I would like to thank my parents
for helping me in the completion of this project.
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SR. NO. TOPIC NAME PAGE NO
1. NEW TRENDS IN BANK
1.1 Introduction 1
1.2 History
1.3 Banking
1.4 Banking before Modernization
1.5 Banking after Modernization
2 Components of new Trends in Bank
2.1 Bancassurance
2.2 Mutual Banking
2.3Investment Banking
2.4 Universal banking
2.5 International Banking
2.6 Retail Banking
2.7 Demate Accounting
3 Challenges faced by Banks in Modernization services
4 Questionnaire
5 Conclusions
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INTRODUCTION
New Trends in Banking in this decade has come across many
products in the Banking sector which in turn got a bright surrounding
in the banking world. The products have been developed to meet all
the customer needs of their choice. And since last two decades the
new products have been launching to fulfill all the needs of the
customer.
New trends in Banking cover many points which are generally
in use in todays world. It covers the points related to how the banking
sector has reformed itself from old procedure of taking a deposit and
lending the money to many other activities such as internet banking,
mobile banking, tele-banking, overseas banking, etc. The reason for
this change includes the growth of banking technology that has
changed the face of this industry with a decreasing emphasis on
human intervention.
In todays banking transaction the customers can easily seat in
their home and transact their account operation without personally
visiting to the Bank through the new and recent trends in the Banking
world. And this has really motivated each and every Banks and
Customers. Customers can send SMS messages to banks to get
information and Banks can also make choice for self-regulation by
voluntarily adopting a code of conduct that has been laid down by the
Banking codes and Standards Board of India (BCSBI).
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HISTORY
Without a sound and effective banking system in India it cannot
have a healthy economy. The banking system of India should not only
be hassle free but it should be able to meet new challenges posed by
the technology and any other external and internal factor.
For the past three decades Indias banking system has several
outstanding achievement to its credit. The most striking is its
extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached
even to the remote areas of the country. This is one of the main
reasons of Indias growth process. The governments regular policy
for Indian bank since 1969 has paid rich dividends with the
nationalization of 14 major private banks of India.
No long ago, an account holder had to wait for hours in the
bank counters for getting a draft or for withdrawing his own money.
Today, he has a choice. Gone are days when the most efficient bank
transferred money from one branch to another in two days. Now it is
simple as instant messaging or dials a pizza. Money has become the
order of the money. Some of the basic points of History of Banking
and Finance were as follows :-
a) In the 18th century Bank notes were the greater part of themoney supply, being issued by the private banks.
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b) In the 19th century, the note issue was taken over by the Bank ofEngland, but bank deposits became the greater part of the
money supply. Joint-stock banks became overwhelmingly
important and private banks declined.
c) Last century saw the number of banks fall to a low point, butthen an influx of foreign banks swelled the numbers operating
in the new wholesale markets after about 1958. However, in the
retail market, competition came largely from building societies
and other new (British) entrants. In the late 1980s, two retail
banks were floated on the Stock Exchange TSB and the
Abbey National.
d) Building societies have grown in importance but fallen innumbers this century. Today, most are minor banks, although
they often do not seek business accounts.
e) The Bank of England was nationalized in 1946 bur this hardlychanged its manner of operating, although the Banking acts of
1979 and 1987 gave it more detailed statutory powers, most of
which have passed to the Financial Services Authority.
f) Plastic money began with cheque cards in 1965, followed byBarclaycard in 1966 and Access in 1972.
g) Selfregulation has been replaced by control by the FinancialServices Authority.
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BANKING
The development of Bank is evolutionary in nature. A Bank
performs multitude of functions and services which cannot be
crunched into a single definition. A Bank may mean different things
to different people. For some it is a store house of money, for others
an institution of funding or finance and yet to many others a bank is a
depository for their savings.
Bank as it is largely understood in English today is an
institution that accepts money as a deposit to further lend it out for
profit.
Indian Banking has evolved in its present form from the days of
the British raj. The structure and pattern of banking are based on the
British banking system.
Section 5 (b) defines Banking as accepting for the purpose of
lending or investment of deposits of money from the public, repayable
on demand or otherwise and withdrawable by cheque. Draft, order or
otherwise.
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BANKING -BEFORE MODERNIZATION
Banking before Modernization was merely considered as the
accepting deposits and lending the loans. Before modernization can be
understood by the following points :-
1. Focus on Expansion :-Banking before modernization used to give more focus on their
expansion rather than the customers needs. The customers used
to just deposit the money to safeguard and earn a interest on it
and take loan at the higher rate of interest along with their
principle amount. And the Banks also more focused on
expanding their banking business.
2. Labour Intensive :-At pre-modernized period the Banks were just a labour
intensive, for each and every work labours are needed. This is
an advantage for the labourers as the people can get their job,
but at the same time, it was costly and time consuming.
3. Low use of Technology :-There were not much use of Technology as the Banks were not
having much knowledge relating to technology. And because of
low use of technology the banking transactions were time
consuming.
4. Limited Areas :-The banking transactions was done in a limited areas, as the
scope of Banking at that time was limited and Bank find it very
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costly to move ahead. Basically they use to focus more on just
agriculture or some other field. They dont use to transact in
various fields.
5. More Government Control :-Before Modernization of Bank there were lots of Government
control in the Bank. There were lots of rules and regulations
regarding the transactions of Business. Bank were fully
dependent on Government.
6. No Globalization :-The banking before was not globalised. They just used to
transact their business in their regional or geographical area. As
there were lots of rules and regulations of the authority the
banks were not able to go beyond its limited area.
7. Monopoly :-This was the greatest advantage for the banks before
modernization as they had the full power to control the market
in the economy. The Banks used to charge high interest from
the consumers, the consumer were also manipulated by this and
they rule over the customers.
8. Focus on Government Policy :-Before modernization the banks used to focus only on the
government policy made by the authority. They were not
consumer oriented they just wanted to be ruled by the
Government.
9. Impact of Socialism :-
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Due to focus on Government policy there was a impact of
socialism in the country before modernization of the Bank. And
socialism in the country was beneficial but to the some extent.
10.Queue for every transaction :-As there were no technology and it was labour intensive the
customers have to make a queue for each and every
transactions. And the process was also very slow which was
time consuming.
BANKING - AFTER MODERNIZATION
After modernization of Banks many new concepts came into
existence which is beneficial for the Banks as well as the
customers. The Following points discuss about the modernization
of the Bank :-
1. Focus on Urban areas :-After modernization of the banks the bank used to focus more
on urban areas rather than just focusing on expansion. The
Banks also focus on Expansion but now the first preference is
given to the urban areas as their the peoples standard of living
will increase and is also beneficial for them.
2. Less Labour :-After modernization of the Banks the labours utilized by the
Banks is less as compared to pre modernized period as for each
and every transactions, the new technology has developed
which in turn was beneficial foe the banks but for the people it
is low efficacy of the job.
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3. Higher use of Technology :-There is a great demand of Technology in this world as each
and every work is done through technology now so there is a
higher use of technology in this era of post modernization
period of the world.
4. Venture Funding :-Information Technology becoming the new mantra in India,
Venture Capital has become more of an institutionalized
industry. Financed and managed by successful entrepreneurs
and professional, sophisticated investors, this industry are a
smooth blend of risk financing and hand holding of
entrepreneurs. Apart from financial support, venture capitalists
provide networking, management, and marketing support as
well. NASSCOM aims to make India as one of the top 5
locations for creation of technology ventures in the world and
ensure that the necessary venture capital funds flow in to the
country.
5. Insurance Services :-After Modernization of the banks, banks also started to give the
Insurance services to the customers along with their banking
transactions. Many Banks have came forward to tke this
services. For e.g. ICICI, HDFC, etc.
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6. Freedom:-Now after modernization the banks are more liberalized and
freed as compared to before from the rules and regulations of
the concerned authority and Government.
7. Less dependence on Government ;-Now the Banks are less dependent on Government, before the
banks used to be fully depended on Government as there were
lots of rules and regulations.
8. Becoming Global :-Banks after modernization is becoming globalized. The banks
are now performing their business at international level also.
The banks are providing services to each and every possible
country.
9. Foreign venture :-As the banks are going international, they started dealing withthe foreign venture capital fund also, by which the banks are
also in profit and as well as customers are also in their well
position.
10.Competition :-Due to lots of banks in this post modernization period there is
lots of competition in the market among the banks themselves.
Due to lots of competition the rate of interest differs and
customers get a choice of choosing their own banks for the
benefit of themselves.
11.Focus on customer service :-
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COMPONENTS OF NEW TRENDS IN BANKING
The components of new trends include many sub topics which are as
follows :-
1. Bancassurance
2. Mutual Banking
3. Investment Banking
4. Universal banking
5. International Banking
6. Retail Banking
7. Demate Accounting
The financial services segment has witnessed many trends in
recent times and this takes a comprehensive look at some of these
trends. The technological changes in the financial services segment
have been impressive. Though banking services are the major
adopters of high-end technology, other financial services like
insurance are also leveraging on technology for delighting customers
and gaining a competitive edge.
Kiosks are used as a cost-effective tool for product
communication, customer management, and brand building. Stored
Value Cards (SVC), also called electronic purses, eliminate the need
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to carry hard cash. Digital security is a technological endeavor that
enables safe and secure digital transactions and has gained legal
acceptance. Digital certificates will soon gain prominence with
increasing focus on e-governance, online trading, and online
transactions. Business intelligence is a widely implemented decision
making tool. It includes OLAP, data warehousing, and data mining.
Business intelligence systems help the marketer to analyze
information and take suitable decisions.
Enterprise-wide IT solutions, such as Core Banking Solutions,
have helped financial product marketers in streamlining their internal
operations and delivering greater value to the customers.
These all new trends we are going to discuss in detail below :-
1. BANCASSURANCE
Bancassurance simply means selling of insurance products
by banks. In this arrangement, insurance companies and banks
undergo a tie-up, thereby allowing banks to sell the insurance
products to its customers. This is a system in which a bank has a
corporate agency with one insurance company to sell its products.
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By selling insurance policies bank earns a revenue stream apart
from interest. It is called as fee-based income. This income is
purely risk free for the bank since the bank simply plays the role of
an intermediary for sourcing business to the insurance company.
Bancassurance has grown at different places and taken
shapes and forms in different countries depending upon
demography, economic and legislative prescriptions in that
country. It is most successful in Europe, especially in France, from
where it started, Italy, Belgium and Luxembourg. The concept of
bancassurance is relatively new in the USA. As mentioned above
bancassurance growth differs due to various reasons in different
countries. The Glass-Steagall Act of 1933 prevented the banks of
the USA from entering into alliance with different financial
services providers, thereby putting a barrier on bancassurance. As
a result of this life insurance was primarily sold through individual
agents, who focussed on wealthier individuals, leading to amajority of the American middle class households being under-
insured. With the US Government repealing the Act in 1999, the
concept of bancassurance started gaining grounds in the USA also.
Coming to Asia, it has been estimated that bancassurance would
contribute almost 16% of the life premium in the Asian markets in
the year 2006 primarily due to the growth expected in India and
China.
Coming to India, bancassurance is a new buzzword in India.
It originated in India in the year 2000 when the Government issued
notification under Banking Regulation Act which allowed Indian
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Banks to do insurance distribution. It started picking up after
Insurance Regulatory and Development Authority (IRDA) passed
a notification in October 2002 on 'Corporate Agency' regulations.
As per the concept of Corporate Agency, banks can act as an
agent of one life and one non-life insurer. Currently bancassurance
accounts for a share of almost 25-30% of the premium income
amongst the private players in India.
Bancassurance provides various advantages to banks,
insurers and the customers. For the banks, income from
bancassurance is the only non interest based income. Interest is
market driven and fluctuating and quite narrowing these days.
Banks do not get great margins because of the competition This is
why more and more banks are getting into bancassurance so as to
improve their incomes. Increased competition also makes it
difficult for banks to retain their customers. Banassurance comes
as a help in this direction also. Providing multiple services at one
place to the customers means enhanced customer satisfaction. For
example, through bancassurance a customer gets home loans along
with insurance at one single place as a combined product. Another
important advantage that bancassurance brings about in banks is
development of sales culture in their employees.
As for the insurance company the advantage that
bancassurance provides is evident. The insurance company gets
improved geographical reach without additional costs. In India
around 67,000 branches are there. If all 67,000 branches sell the
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insurance products one can see the reach. This is one method of
penetrating the market.
There is also another method called 'Bank Referral'. Here the
banks do not issue the policies, they only give the database to the
insurance companies. The companies issue the policies and pay the
commission to them. That is called referral basis.
India's rural market has huge potential that is still untapped by the
insurance companies. Setting up their own networks entails such a
huge cost, that no company would be interested in doing so.Bancassurance again comes as an answer. It helps the insurance
companies to tap the market at a much lower cost. As for the customer
the competitive nature of the Indian market ensures that the reduction
in costs would result in benefits in terms of lower premium rates being
passed on to him.
The penetration level of life insurance in the Indian market is
abysmally low at 2.3% of GDP with only 8% of the total population
currently insured. With almost half of the population likely to be in
the 'wage earner' bracket by 2010, there is every reason to be
optimistic that bancassurance in India will play a long inning.
The major contributing factors favouring bancassurance are as
follows:-
Wide Network of branches Existing wide range of Corporate and Retail clients of banks
with potential business opportunities.
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Wide customer database is an opportunity to study customerspending habits, investment preferences etc if the database is
properly utilized
Personalized single window service delivery system toexpertise in offering quality service by which cross selling
becomes easy.
Rural Penetration which is important for wide reach of banks inthe rural segment which is potential and untapped for insurance
business
Structure/design customer centric product and services to suitthe needs of every segment.
Bancassurance in future would be favorable as there will be :-
Entry of big players in life and non-life segment wouldimmense competition for better deal of the customers.
Collaboration of banks and insurance companies would haveprofound impact on financial services industry which is
enhanced for customer satisfaction.
There would be a vast potential for banks and insurancecompanies for partnership and to develop the under insured
market in India.
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2. MUTUAL BANKING
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Mutual Banking is a new concept which has emerged offering
new product and service innovations for the customers who avail
of mutual fund products through banks.
A mutual fund is a professionally managed type of collective
investment scheme that pools money from many investors and
invests it in stocks,bonds, short-term money market instruments,
and/or othersecurities. The mutual fund will have a fundmanager
that trades the pooled money on a regular basis. The net proceeds
or losses are then typically distributed to the investors annually. So
now this mutual fund business is also done by banks through
which customers are benefited.
The essential features of a Mutual Bank may be outlined as
follows:
a. Mutual Banking Associations is formed to do a general banking
business and to issue Bank cheques for the use of their members.
b. Members of such associations shall, upon admission, bind
themselves in due form to receive the cheques issued by the
association from all persons, in all payments, at par.
c. The associations should issue their currency cheques as loans to
their members to circulate as money among them and such otherpersons as are willing to receive it. These cheques are not a legal
tender.
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k. The money of the association shall be issued in denominations of
one, two, five, ten and twenty rupee bills; at least one-half of the issue
shall be in the first three denominations.
l. The cheque, draft, bill of exchange and travelers' cheques may be
adopted to facilitate exchanges between the various members of the
associations and between the associations themselves in specific part
of India only.
m. Associations may form clearing houses in a city where there is a
branch near the center of population.
Advantages of Mutual Bank are as follows:-
a. Mutual Bank cheques being secured credit, will take the placeof unsecured credit, and, in consequence, credit losses will be
practically eliminated. Interest will cease, and only the costs of
issuing, securing, and carrying Mutual Bank notes will be
charged, amounting to less than one percent.
b. Mutual Bank cheques, by their very nature, cannot depreciate.On this account, and because there will always be enough
Mutual Money for all industrial and commercial needs (due to
the flexibility of the issue), there will be no more money panics.
c. As money will be easy to get under the Mutual Banking system,sound enterprises will have no difficulty in getting financed.
This will eventually mean the disintegration of monopoly. It
will also mean the creation of many more jobs, and
consequently competition among employers for workers,
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resulting in increasingly better conditions of work land pay,
until at last the worker will receive the full product of his labour
3. INVESTMENT BANKING
An investment bank is a financial institution that helps
companies take new bond or stock issues to market, usually acting as
the intermediary between the issuer and investors.
Investment banks may underwrite the securities by buying all
the available shares at a set price and then reselling them to the public.
Or the banks may act as agents for the issuer and take a commission
on the securities they sell.
Investment banks are also responsible for preparing the
company prospectus, which presents important data about the
company to potential investors.
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In addition, investment banks handle the sales of large blocks of
previously issued securities, including sales to institutional investors,
such as mutual fund companies.
Unlike a commercial bank or a savings and loan company, an
investment bank doesn't usually provide retail banking services to
individuals.
The one of the trends that has been developing in the past few
years in the global nad Indian investment banking arena, is the strong
emergence of universal banks ahead of pure investment banks asmarket leaders. These universal Banks have the additional financial
muscle of their banking arms that add to their investment banking
strengths. Pure investment banks have found it unmanageable to
maintain leadership positions due to difficult market conditions and
the economic downturn.
The year 2002 has been dubbed as the watershed year in
investment banking for over a decade. Globally, universal banks such
as theCitigroup, JP Morgan chase and Deutsche bank are emerging
against pure investment banks such as Goldmanb Sachs and Morgan
Stanley. This trend could probably reappear in India as well with the
emergence of SBI, ICICI, idbi and Kotak Mahindra bank as strong
universal banks. However, in 2002 pure investment banks such as JMMorgan Stanley and DSP Merrill Lynchstill occupied top positions in
the investment banking league tables.
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d. DSP-ML de-listed from the stock exchanges since itspromoters, Hemendra Kothari and Merrill Lynch together held
more than 90% of the shares. DSP was rated The Best
Domestic Investment Bank in India for 2000 by Finance Asia.
Euro money voted it Best Domestic M&A House in India for
2000 by Finance Asia. Euro money voted it Best Domestic
M&A House in India in 2000. This distinction has returned for
three year in a row with DSP-ML, being named as the Best
Domestic Securities House and Best Domestic Investment
Bank for 2002-2003 by Asia money (May 2003 issue) and The
Asset (January 2003 issue) magazine respectively.
4. UNIVERSAL BANKING
The term Universal Bank has different meanings, but usuallyit refers to the combination of commercial banking (collecting
deposits and making loans) and investment banking, i.e. issuing,
underwriting and trading in securities. This is a narrow definition of
Universal banking. In a very broad sense, however the term
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Universal Bank refers to those banks that offer a wide range of
financial services such as commercial banking and investment
banking and other activities, especially insurance. Universal Banking
usually takes one of the three forms, i.e., in-house, through separately
capitalized subsidiaries, or through a holding company structure.
The era of universal banking in India has begun, as what one
find is that without being conscious about it, the banking system in
India has already started entering into Universal Banking either
through the route of subsidiarisation or by expanding the scope
existing banking activities. For example, credit card business is being
handled both in-house as also through a subsidiary.
Recently, India has also followed the practice of Universal
Banking in a broad sense by allowing banks and DFIs to undertake
insurance Business. An attempt was made to delineate some of the
major risks faced by Insurers so as to know as to whether and to what
extent such risks are familiar to commercial banks and DFIs. While
risks on the asset side of the balance sheet are quite familiar to banks
and DFIs risks are on the liability side, especially in the case of non-
life insurance business which are more serious, are not expected to be
familiar to banks/DFIs.
The most important challenge before universal banking is thatof regulatory. The main brake on the liberalization process has been
prudential concerns, notably the difficulty of devising appropriate
prudential safeguards in the light of the increased freedom. The major
issues involved in universal in universal banking are appropriate
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allocation of responsibilities among various regulators. To overcome
this problem, different countries have followed different approaches.
In the 1980s banks were allowed to undertake various non-
traditional activities through subsidiaries. This trend got momentum in
the early 1990s i.e. after initiation of economic reforms where banks
were allowed to undertake certain activities, such as, hire-purchase
and leasing in-house.
Universal Banking - Current position in India
In India, the financial system has traditionally been
compartmentalized with three main types of financial intermediaries
operating being Commercial Banks, DFIs and Investment Institutions
(two insurance institutions, viz. LIC, GIC and one mutual fund, viz.
UTI). All these institutions were required to confine their operations
strictly to their own areas, barring commercial banks which were
allowed to undertake some investment/ merchant banking activity and
project finance within the prescribed limits.
Recently, banks and DFIs have also been allowed to undertake
insurance business. It may thus, be seen from the above that the
practice of Universal Banking is already prevalent in India. It started
with Universal Banking in a narrow sense by allowing downstream
linkages later followed by upstream linkages. Recently, the practice of
universal banking in a broad sense with downstream linkages has also
been allowed. However, upstream linkages under broad universal
banking have yet to take place.
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The following diagram shows the present position in India
related to practice of Universal Banking. By which Universal Banking
represents combination of various activities and becoming almost
inevitable due to technological changes and competitive forces.
5. INTERNATIONAL BANKING
Banking transactions crossing national boundaries is termed as
International Banking. This is also one of the components under the
New Trends in Banking. Here transactions of Banks are done at a
International level.
Corporate explore foreign markets for trade. It is to sell products in
wider markets, procure raw material, or even to shift manufacturing
base to optimize labor and other costs. As these enterprises travel,
they need banking services in foreign markets. This is the basic
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motive for Banks to go International. But this is in basic and historical
perspective. In the era of globalization, many investment and
commercial banks have developed themselves as multinational
financial institution.
International Banking also includes Letter of Credit :-
In the world of finance, guarantee or confirmation by a bank has
more credibility than a guarantee given by an exporter or importer.
For better comfort to the party on the receiving side, bankers issue
such letters. Letter of credit is the most common of them. Importer hasto guarantee payment to the exporter. Hence LC is usually issued on
behalf of importer (applicant), by a bank, to the exporter (beneficiary).
A letter of credit is a written commitment by a bank to make
payment of a defined amount of money to a beneficiary (exporter)
according to the terms and conditioned specified by the importer
(applicant
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6. RETAIL BANKING
Retail Banking plays a very important role in the New Trends
in Banking as it provides all the facilities to the customers.
Consumers behavior is changing rapidly due to the development
of technology and the use of financial services is characterized by
individuality, mobility, independence of place and time, and
flexibility.
Retail Banking is the part of a bank that offers products and
services primarily to the individual customers, professionals, self-
employed individuals or small businesses. The focus is on creating
products and services that meet the needs of the target customers
and are profitable for the banks as well.
The approach to retail banking products is more on a mass
production basis wherein all risks and operations are based on and
geared to provide to a large number of customers. This is,
therefore, significantly different from corporate banking or
wholesale banking where focus is on large sized customer accounts
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rather than large numbers of customers.Retail Banking includes
following products to the customers :-
a. AUTOMATED TELLER MACHINE (ATM) :
The Trend in banking has evolved from a cash economy to
cheque economy and thereon to a plastic card economy. One of the
channels of banking service delivery is the Automated Teller
Machine (ATM), whose traditional and primary use is to dispense
cash upon insertion of a plastic card and its unique Pin or Personal
Identification number.
ATM is a user friendly, computer-driven system which operates
24 hours a day, 7 days a week. A totally menu-driven system. It
displays easy-to-follow, step-by-step instructions to the customers.
Current and Saving Account holders of a bank who hold a
certain minimum balance in their accounts are issued an ATM
card. The card is the plastic card with a magnetic strip with the
account number of the individual. When the card is inserted into
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the ATM, the machines sensing equipment identifies the account
holder and asks for his/ her identification code number. This is
referred to usually as the PIN and is issued by the banks
computers. This number is unknown to the banks staff and is
secret and unique to that individual
Many Banks have opened off-site ATMS at airports, railway
stations, petrol pumps, market centers, universities, etc.
b. TELE BANKING :
Tele-Banking or Phone Banking is a banking service offered by
banks to enable customers to assess their accounts for information
or transactions. Similar to the ATM PIN, a Telephone PIN (T-PIN)
is provided to each account holder.
The customer can call the exclusive Tele-Banking numbers and
provide the details to identify himself /herself to the automated
voice. Typically, the bank account number and the T-PIN are
asked for.
Upon verification, the customer is given access to his accounts
to query or transact on his account.
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Though cash withdrawal and deposit are not enabled through
his service to certain classes of customers.
c. INTERNET BANKING:
One of the channels of services delivery to a banking customers
is through the internet. The access to account information as well as
transaction is offered through the world-wide network of computers
on the internet. Every bank has a special firewalls and its own security
measures to protect the accounts from non-authentic use from
unauthorized users. Data are encoded using algorithms with a 128 bit
key or, in some cases, with a 1,024 bit encryption .
Each account holder is provided a PIN similar to that of the
ATM or Phone banking PIN.
The access to the account is allowed upon a match of the
account details and PIN entered on the computer system. A higher
level of security may be reached by an electronic finger-print. The
finger-print is taken before and after the transaction. The both
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versions are compared. In case of any differences, the transaction is
aborted.
This means that financial institutions may enlarge their market area
without building new offices or field services, respectively. Because
of its image as an innovative corporation, better interacting
possibilities, the usage of rationalization potential, promotion of self-
service ideas, the improvement of its competitive situation by
development of core competencies together with the construction of
market entry barriers, it may be possible to increase profits and market
shares
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d. CASH CARDS :
Cash card is also known as an ATM Card. A special plastic
card is used for getting currency notes from a machine known as
Automated Teller Machine.
e. DEBIT CARDS :
It is a card given to the customer by the bank that he must show
when he writes a cheque which promises that the bank will pay out
the money written on the cheque. Under Cheque Cards system, the
card-holder is given a card and a cheque book. He has to use the
cheques , while purchases are made and the trader gets guaranteed
payment . The customer does not get free credit, he has to keep
sufficient balance in his account or the bank will provide overdraft up
to a specified limit, of course on interest payment basis.
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f. CHARGE CARDS :
A small usually plastic card provided by an organization with
which one can buy goods from various shops, etc. The full amount
owed must then be paid on demand. In credit cards, the card-holders
get credit or loan for payment of periodical bills when sufficient
balance is not available in their accounts. In a charge card such credit
facility is not available. The periodical bill amount is paid off by
charging it to customers account. A fee is also payable by the card-
holder to the card issuing institution.
g. SMART CARDS :
With the use of credit cards, we may avail of credit facility on
our purchase of goods/services from approved sale outlets. A smart
card however, enables the card-holder to perform various other
banking functions apart from credit purchases. For example with
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smart cards, we can draw cash from ATMs, we can verify entries in
oue accounts, seek information pertaining to our accounts, etc. This is
possible because the card has an integrated circuit with
microprocessor chip embedded in the card for identification purposes.
The card can also perform calculations and maintain records.
h. CREDIT CARDS :
Credit cards operate quite differently from cheque cards. A
cheque card guarantees payment of a cheque, whereas a credit card
guarantees against a sales voucher signed by the Credit Card Holder.
Each credit card bears a specimen signature of its holder and is
embossed by the issuing bank with the holders name and number.
When goods or services are supplied, the holder gives his card to the
supplier who has agreed to join the scheme. The supplier places the
card in a special imprinter machine, which records the holders name
and number on a sales voucher. The particulars of the transaction are
added on the voucher. The holder signs the voucher and the supplier
compares the signature with that on the card.
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i. SAFE DEPOSITS AND LOCKER SERVICES :
Safe custody of valuables and important documents has been a
traditional service rendered by banks, on a fee basis. The customers
have faith in their banks about the safety, security and confidentiality
of the valuables kept with them. As these requirements are rarely met
elsewhere, banks have been the main repositories of customers
valuables. The duly sealed safe custody packets/ boxes are kept by the
bank in its strong room/ vault and a receipt is issued to the depositor
for presenting while taking delivery. As of now, most of the vaults
have been occupied and therefore many banks may have curbed this
service.
Banks also provide safe deposit lockers at many of its branches
which have adequate space and a strong room (other than its currency
chest vault). The safe deposit lockers are built of steel and have
reliable locking arrangements; these are kept in vaults of banks, to
provide double safety. Customers hire lockers by paying yearly
rentals. The lockers are operated by dual key systemone of which is
with the authorized bank officer and the other with the customer.
Since the Lockers are very much in demand, presently, many banks
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restrict this facility to their valuable customer or ask for certain fixed
deposits to be lodged by the customer. Locker rentals have also
increased substantially in metros and big cities.
j. ELECTRONIC FUNDS TRANSFER :
Traditionally, the funds are transferred by banks from one place
to another by mail transfer and telegraphic transfer, the latter being
faster than the former. In both kinds of transfer, banks use the post
&telegraph departments services and use certain codes to ensure
confidentiality and safety in transmission of the messages.
DEMATE ACCOUNTING
In India, a Demate account, the abbreviation for dematerialized
account, is a type of banking account which dematerializes paper-
based physical stock shares. The dematerialized account is used toavoid holding physical shares: the shares are bought and sold through
a stock broker.
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This account is popular in India. The Securities and Exchange Board
of India (SEBI) mandates a Demate account for share trading above
500 shares. As of April 2006, it became mandatory that any person
holding a Demate account should possess a Permanent Account
Number(PAN).
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7.CHALLENGES FACED BY BANKS INMODERNIZED SERVICES
It has been customary for writers on banking to compare a bankwith a laundry.
This comparison, based on the external outlook, goes as follows:
Both have counters, people working behind counters, clients
visiting the place and handing their assets over the counters and those
people behind the counters to use those assets safely and return them
to the clients as promised. Today, this comparison does not do justice
to what a bank actually does. The function it performs in the
contemporary society is more akin to the divine role played by God
Murugan with His multi-head and multi-hand personality. Just like
God Murugan is a god for all seasons, for all people and for all
purposes, a modern bank should have solutions for all types of
problems which their clients are faced with. Such problems usuallyrange from economic to financial and even to personal. Hence, its
foremost challenge has been to acquire the capacity to serve its
clientele efficiently. Efficiency here means the provision of its
services in time, in the demanded quality and in the required volume
at competitive prices.
A modern bank is, therefore, required to have an adequate outreach
capability to serve all those clients in places where they live. The
strategy adopted by banks in this connection has been to expand their
services both vertically and horizontally. In terms of this strategy,
while expanding geographically, it got itself fitted with various
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specialized divisions within a bank to tackle different types of
problems. This administrative structure, though helpful to meet
current challenges, entailed high costs on banks, raising both
sustainability and viability issues. It also could not provide a
satisfactory solution to the physical limitation problem which has
placed an effective barrier to its further expansion. Hence, this
banking model is inadequate to meet, in its present form, the new
challenges faced by banks.
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VISIT TO THE INDIA BANK
QUESTIONAIRE
Name :-M.V.Champaneri
Post:- branch Manager
Experience:-30 years
? Which types of services are provided by India bank?
1 ATM2. Debit Card
3. Credit Card
4. E-Banking
5. M-Banking
6. Gold card
7. Silver card
8. Multicity cheque facility.
9.Safe Deposits & Locker Services
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? Is there any facility charges? If yes then what?
Some services are charged except ATM , Debit card , E-Banking ,M-Banking & chargeable services are Gold card & Silver card after
two months charged services 11% , Multicity cheque facility
charged 30 Rs./ per book
?what are the much demanded services of your bank?
Debit come ATM card are very demanded services 100% costumeruse this services
?who are the competitor of your bank?
ICICI and HDFC
? What are your future plans?
To be best bank in the market.
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8.Conclusions :-New challenges which bankers have to take require them to be
vigilant on the entire banking system. In the past, when banking was
purely manually driven, there was no necessity for them to be mindful
of the developments in the entire system. In that era, one banks
failure did not matter much to the rest of the banking system, except
in cases where they had lent to each other. But today, banks are linked
electronically to each other and, therefore, they are vulnerable to the
shocks that occur in the rest of the financial system.
Banks should also be vigilant over the developments in the
global market as well. The current globalization wave has pushed the
financial markets toward the establishment of a global single financial
market. The business of banking is to be found everywhere in the
globe and bankers who confine themselves only to the domestic
banking business will have to pay the highest price. This is because
even without their knowledge, they would find that they have lost
business to other smart operators and are no longer able to survive in
this fierce global competition.
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