31 Products and Services Offered by Banks

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Banks are the most signiIicant players in the Indian Iinancial market.
They are the biggest purveyors oI credit, and they also attract most oI the
savings Irom the population. Dominated by public sector, the banking
industry has so Iar acted as an eIIicient partner in the growth and the
development oI the country. Driven by the socialist ideologies and the
welIare state concept, public sector banks have long been the supporters
oI agriculture and other priority sectors. They act as crucial channels oI
the government in its eIIorts to ensure equitable economic development.

The Indian banking can be broadly categorized into nationalized
(government owned), private banks and specialized banking institutions.
The Reserve Bank oI India acts a centralized body monitoring any
discrepancies and shortcoming in the system. Since the nationalization oI
banks in 1969, the public sector banks or the nationalized banks have
acquired a place oI prominence and has since then seen tremendous
progress. The need to become highly customer Iocused has Iorced the
slow-moving public sector banks to adopt a Iast track approach. The
unleashing oI products and services through the net has galvanized players
at all levels oI the banking and Iinancial institutions market grid to look
anew at their existing portIolio oIIering. Conservative banking practices
allowed Indian banks to be insulated partially Irom the Asian currency
crisis. Indian banks are now quoting al higher valuation when compared to
banks in other Asian countries (viz. Hong Kong, Singapore, Philippines
etc.) that have major problems linked to huge Non PerIorming Assets
AN INTRODUCTION TO THE BANKING
SECTOR
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(NPAs) and payment deIaults. Co-operative banks are nimble Iooted in
approach and armed with eIIicient branch networks Iocus primarily on the
high revenue` niche retail segments.

The Indian banking has Iinally worked up to the competitive
dynamics oI the new` Indian market and is addressing the relevant issues
to take on the multiIarious challenges oI globalization. Banks that employ
IT solutions are perceived to be Iuturistic` and proactive players capable
oI meeting the multiIarious requirements oI the large customer`s base.
Private Banks have been Iast on the uptake and are reorienting their
strategies using the internet as a medium The Internet has emerged as the
new and challenging Irontier oI marketing with the conventional physical
world tenets being just as applicable like in any other marketing medium.

The Indian banking has come Irom a long way Irom being a sleepy
business institution to a highly proactive and dynamic entity. This
transIormation has been largely brought about by the large dose oI
liberalization and economic reIorms that allowed banks to explore new
business opportunities rather than generating revenues Irom conventional
streams (i.e. borrowing and lending). The banking in India is highly
Iragmented with 30 banking units contributing to almost 50° oI deposits
and 60° oI advances. Indian nationalized banks (banks owned by the
government) continue to be the major lenders in the economy due to their
sheer size and penetrative networks which assures them high deposit
mobilization. The Indian banking can be broadly categorized into
nationalized, private banks and specialized banking institutions.
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The Reserve Bank oI India acts as a centralized body monitoring any
discrepancies and shortcoming in the system. It is the Ioremost monitoring
body in the Indian Iinancial sector. The nationalized banks (i.e.
government-owned banks) continue to dominate the Indian banking arena.
Industry estimates indicate that out oI 274 commercial banks operating in
India, 223 banks are in the public sector and 51 are in the private sector.
The private sector bank grid also includes 24 Ioreign banks that have
started their operations here.

The liberalize policy oI Government oI India permitted entry to
private sector in the banking, the industry has witnessed the entry oI
nine new generation private banks. The major differentiating
parameter that distinguishes these banks from all the other
banks in the Indian banking is the level of service that is offered
to the customer. Their focus has always centered on the customer
- understanding his needs, preempting him and consequently
delighting him with various configurations of benefits and a wide
portfolio of products and services. These banks have generally
been established by promoters oI repute or by high value` domestic
Iinancial institutions.







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There are three diIIerent phases in the history oI banking in India.

1) Pre-Nationalization Era.
2) Nationalization Stage.
3) Post Liberalization Era.


1) Pre-Nationalization Era:

In India the business oI
banking and credit was practices even in
very early times. The remittance oI money through Hundies, an indigenous
credit instrument, was very popular. The hundies were issued by bankers
known as ShroIIs, Sahukars, Shahus or Mahajans in diIIerent parts oI the
country.
The modern type oI banking, however, was developed by the
Agency Houses oI Calcutta and Bombay aIter the establishment oI Rule by
the East India Company in 18
th
and 19
th
centuries.
During the early part oI the 19
th
Century, ht volume oI Ioreign
trade was relatively small. Later on as the trade expanded, the need Ior banks
oI the European type was Ielt and the government oI the East India
Company took interest in having its own bank. The government oI Bengal
took the initiative and the Iirst presidency bank, the Bank oI Calcutta (Bank
oI Bengal) was established in 180. In 1840, the Bank oI Bombay and IN
1843, the Bank oI Madras was also set up.
I. HISTORY OF BANKING IN INDIA

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These three banks also known as 'Presidency Bank¨.
The Presidency Banks had their branches in important trading centers but
mostly lacked in uniIormity in their operational policies. In 1899, the
Government proposed to amalgamate these three banks in to one so that it
could also Iunction as a Central Bank, but the Presidency Banks did not
Iavor the idea. However, the conditions obtaining during world war period
(1914-1918) emphasized the need Ior a uniIied banking institution, as a
result oI which the Imperial Bank was set up in1921. The Imperial Bank oI
India acted like a Central bank and as a banker Ior other banks.
The RBI (Reserve Bank oI India) was established in 1935 as the
Central Bank oI the Country. In 1949, the Banking Regulation act was
passed and the RBI was nationalized and acquired extensive regulatory
powers over the commercial banks.
In 1950, the Indian Banking system comprised oI the RBI, the
Imperial Bank oI India, Cooperative banks, Exchange banks and Indian Joint
Stock banks.

2) Nationalization Stages:
AIter Independence, in 1951, the All India Rural Credit survey,
committee oI Direction with Shri. A. D. Gorwala as Chairman recommended
amalgamation oI the Imperial Bank oI India and ten others banks into a
newly established bank called the State Bank oI India (SBI). The
Government oI India accepted the recommendations oI the committee and
introduced the State Bank oI India bill in the Lok Sabha on 16
th
April 1955
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and it was passed by Parliament and got the president`s assent on 8
th
May
1955. The Act came into Iorce on 1
st
July 1955, and the Imperial Bank oI
India was nationalized in 1955 as the State Bank oI India.
The main objective oI establishing SBI by nationalizing the Imperial Bank
oI India was 'to extend banking Iacilities on a large scale more particularly
in the rural and semi-urban areas and to diverse other public purposes.¨
In 1959, the SBI (Subsidiary Bank) act was proposed and the
Iollowing eight state-associated banks were taken over by the SBI as its
subsidiaries.
Name of the Bank Subsidiary with effect from
1. State Bank oI Hyderabad 1
st
October 1959
2. State Bank oI Bikaner 1
st
January 1960
3. State Bank oI Jaipur 1
st
January 1960
4. State Bank oI Saurashtra 1
st
May 1960
5. State Bank oI Patiala 1
st
April 1960
6. State Bank oI Mysore 1
st
March 1960
7. State Bank oI Indore 1
st
January 1968
8
.
State Bank oI Travancore 1
st
January 1960

With eIIect Irom 1st January 1963, the State Bank oI Bikaner
and State Bank oI Jaipur with head oIIice located at Jaipur. Thus, seven
subsidiary banks State Bank oI India Iormed the SBI Group.
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The SBI Group under statutory obligations was required to
open new oIIices in rural and semi-urban areas and modern banking was
taken to these unbanked remote areas.

On 19
th
July 1969, then the Prime Minister, Mrs. Indira Gandhi
announced the nationalization oI 14 major scheduled Commercial
Banks each having deposits worth Rs. 50 crore and above. This was a
turning point in the history oI commercial banking in India.
Later the Government Nationalized six more commercial
private sector banks with deposit liability oI not less than Rs. 200
crores on 15
th
April 1980, viz.
i) Andhra Bank.
ii) Corporation Bank.
iii) New Bank iI India.
iv) Oriental Bank oI Commerce.
v) Punjab and Sind Bank.
vi) Vijaya Bank.
In 1969, the Lead Bank Scheme was introduced to extend
banking Iacilities to every corner oI the country. Later in 1975, Regional
Rural Banks were set up to supplement the activities oI the commercial
banks and to especially meet the credit needs oI the weaker sections oI the
rural society.
Nationalization oI banks paved way Ior retail banking and as a
result there has been an alt round growth in the branch network, the deposit
mobilization, credit disposals and oI course employment.
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The Iirst year aIter nationalization witnessed the total growth in
the agricultural loans and the loans made to SSI by 87° and 48°
respectively. The overall growth in the deposits and the advances indicates
the improvement that has taken place in the banking habits oI the people in
the rural and semi-urban areas where the branch network has spread. Such
credit expansion enabled the banks to achieve the goals oI nationalization, it
was however, achieved at the coast oI proIitability oI the banks.

Consequences of Nationalization:
The quality oI credit assets Iell because oI liberal credit extension
policy.
Political interIerence has been as additional malady.
Poor appraisal involved during the loan meals conducted Ior credit
disbursals.
The credit Iacilities extended to the priority sector at concessional
rates.
The high level oI low yielding SLR investments adversely aIIected the
proIitability oI the banks.
The rapid branch expansion has been the squeeze on proIitability oI
banks emanating primarily due to the increase in the Iixed costs.
There was downward trend in the quality oI services and eIIiciency oI
the banks.





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3) Post-Liberalization Era---Thrust on Quality and
Profitability:
By the beginning oI 1990, the social banking goals set Ior the
banking industry made most oI the public sector resulted in the presumption
that there was no need to look at the Iundamental Iinancial strength oI this
bank. Consequently they remained undercapitalized. Revamping this
structure oI the banking industry was oI extreme importance, as the health oI
the Iinancial sector in particular and the economy was a whole would be
reIlected by its perIormance.
The need Ior restructuring the banking industry was Ielt greater
with the initiation oI the real sector reIorm process in 1992. the reIorms have
enhanced the opportunities and challenges Ior the real sector making them
operate in a borderless global market place. However, to harness the beneIits
oI globalization, there should be an eIIicient Iinancial sector to support the
structural reIorms taking place in the real economy. Hence, along with the
reIorms oI the real sector, the banking sector reIormation was also
addressed.
The route causes Ior the lackluster perIormance oI banks,
Iormed the elements oI the banking sector reIorms. Some oI the Iactors that
led to the dismal perIormance oI banks were.
Regulated interest rate structure.
Lack oI Iocus on proIitability.
Lack oI transparency in the bank`s balance sheet.
Lack oI competition.
Excessive regulation on organization structure and managerial
resource.
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Excessive support Irom government.
Against this background, the Iinancial sector reIorms were initiated to
bring about a paradigm shiIt in the banking industry, by addressing
the Iactors Ior its dismal perIormance.
In this context, the recommendations made by a high level
committee on Iinancial sector, chaired by M. Narasimham, laid the
Ioundation Ior the banking sector reIorms. These reIorms tried to
enhance the viability and eIIiciency oI the banking sector. The
Narasimham Committee suggested that there should be Iunctional
autonomy, Ilexibility in operations, dilution oI banking strangulations,
reduction in reserve requirements and adequate Iinancial inIrastructure in
terms oI supervision, audit and technology. The committee Iurther
advocated introduction oI prudential Iorms, transparency in operations
and improvement in productivity, only aimed at liberalizing the
regulatory Iramework, but also to keep them in time with international
standards. The emphasis shiIted to eIIicient and prudential banking
linked to better customer care and customer services.






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Private banking in India was practiced since the begining oI
banking system in India. The Iirst private bank in
India to be set up in Private Sector Banks in India
was Indus Ind Bank. It is one oI the Iastest
growing Bank Private Sector Banks in India. IDBI
ranks the tenth largest development bank in the
world as Private Banks in
India and has promoted a world class institutions in India.
The Iirst Private Bank in India to receive an in principle
approval Irom the Reserve Bank oI India was Housing Development
Finance Corporation Limited, to set up a bank in the private sector banks in
India as part oI the RBI's liberalization oI the Indian Banking Industry. It
was incorporated in August 1994 as HDFC Bank Limited with registered
oIIice in Mumbai and commenced operations as Scheduled Commercial
Bank in January 1995.
ING Vysya, yet another Private Bank oI India was incorporated
in the year 1930. Bangalore has a pride oI place Ior having the Iirst branch
inception in the year 1934. With successive years oI patronage and
constantly setting new standards in banking, ING Vaysya Bank has many
credits to its account.

Private Sector Banks
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Entry of Private Sector Banks:
There has been a paradigm shiIt in mindsets both at the
Government level in the banking industry over the years since
Nationalization oI Banks in 1969, particularly during the last decade (1990-
2000). Having achieved the objectives oI Nationalization, the most
important issue beIore the industry at present is survival and growth in the
environment generated by the economic liberalization greater competition
with a view to achieving higher productivity and eIIiciency in January 1993
Ior the entry oI Private Sector banks based on the Nationalization Committee
report oI 1991, which envisaged a larger role Ior Private Sector Banks.
The RBI prescribed a minimum paid up capital oI Rs. 100 crores Ior the new
bank and the shares are to be listed at stock exchange. Also the new bank
aIter being granted license under the Banking Regulation Act shall be
registered as a public limited company under the companies Act, 1956.


Subsequently 9 new commercial banks have been granted
license to start banking operations. The new private sector banks have been
ÞrlvaLe SecLor
8anks
Cld ÞvLŦ SecLor
8anks (23)
new ÞvLŦ SecLor
8anks (9)
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very aggressive in business expansion and is also reporting higher proIile
levels taking the advantage oI technology and skilled manpower. In certain
areas, these banks have even our crossed the other group oI banks including
Ioreign banks.
Current scenario
Currently (2007), overall, banking in India is considered as
Iairly mature in terms oI supply, product range and reach-even though reach
in rural India still remains a challenge Ior the private sector and Ioreign
banks. Even in terms oI quality oI assets and capital adequacy, Indian banks
are considered to have clean, strong and transparent balance sheets-as
compared to other banks in comparable economies in its region. The
Reserve Bank oI India is an autonomous body, with minimal pressure Irom
the government. The stated policy oI the Bank on the Indian Rupee is to
manage volatility-without any stated exchange rate-and this has mostly been
true. With the growth in the Indian economy expected to be strong Ior quite
some time-especially in its services sector, the demand Ior banking services-
especially retail banking, mortgages and investment services are expected to
be strong. M&As, takeovers, asset sales and much more action (as it is
unraveling in China) will happen on this Iront in India.
In March 2006, the Reserve Bank oI India allowed Warburg
Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank)
to 10°. This is the Iirst time an investor has been allowed to hold more than
5° in a private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5° in the private sector banks would need to be vetted by
them. Currently, India has 88 scheduled commercial banks (SCBs) - 28
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public sector banks (that is with the Government oI India holding a stake),
29 private banks (these do not have government stake; they may be publicly
listed and traded on They have a combined network oI over 53,000 branches
and 17,000 ATMs. According to a report by ICRA Limited, a rating agency,
the public sector banks hold over 75 percent oI total assets oI the banking
industry, with the private and Ioreign banks holding 18.2° and 6.5°
respectively stock exchanges) and 31 Ioreign banks.











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Overview of Banking:
Banking Regulation Act oI India, 1949 deIines Banking as
'accepting, Ior the purpose oI lending or oI investment oI deposits oI money
Irom the public, repayable on demand or otherwise or withdrawable by
cheque, draIt order or otherwise.¨ The Reserve Bank oI India Act, 1934 and
the Banking Regulation Act, 1949, govern the banking operations in India.
organizational Structure of Banks in India:
In India banks are classiIied in various categories according to diIIer rent
criteria. The Iollowing charts indicate the banking structure









Reserve Bank
oI India
Commercial Banks Co-operative Banks Development Banks
Nationalized Private Short-term
credit
Long-term
credit
Agricultural
Credit
Urban
Credit
EXIM Industrial Agricultural
II. BANKING IN INDIA
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ŵź





Broad Classification of Banks in India:
1) The RBI: The RBI is the supreme monetary and banking authority in
the country and has the responsibility to control the banking system in
the country. It keeps the reserves oI all scheduled banks and hence is
known as the 'Reserve Bank¨.
2) Public Sector Banks:
O State Bank oI India and its Associates (8)
O Nationalized Banks (19)
O Regional Rural Banks Sponsored by Public Sector Banks (196)
(3) Private Sector Banks:
O Old Generation Private Banks (22)
O Foreign New Generation Private Banks (8)
O Banks in India (40)
(4) Co-operative Sector Banks:
O State Co-operative Banks
O Central Co-operative Banks
O Primary Agricultural Credit Societies
O Land Development Banks
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O State Land Development Banks
(5) Development Banks: Development Banks mostly provide long term
Iinance Ior setting up industries. They also provide short-term Iinance (Ior
export and import activities)
O Industrial Finance Co-operation oI India (IFCI)
O Industrial Development oI India (IDBI)
O Industrial Investment Bank oI India (IIBI)
O Small Industries Development Bank oI India (SIDBI)
O National Bank Ior Agriculture and Rural Development (NABARD)
O Export-Import Bank oI India
Role of Banks:
Banks play a positive role in economic development oI a
country as repositories oI community`s savings and as purveyors oI credit.
Indian Banking has aided the economic development during the last IiIty
years in an eIIective way. The banking sector has shown a remarkable
responsiveness to the needs oI planned economy. It has brought about a
considerable progress in its eIIorts at deposit mobilization and has taken a
number oI measures in the recent past Ior accelerating the rate oI growth oI
deposits. As recourse to this, the commercial banks opened branches in
urban, semi-urban and rural areas and have introduced a number oI attractive
schemes to Ioster economic development.
The activities oI commercial banking have growth in multi-
directional ways as well as multi-dimensional manner. Banks have been
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playing a catalytic role in area development, backward area development,
extended assistance to rural development all along helping agriculture,
industry, international trade in a signiIicant manner. In a way, commercial
banks have emerged as key Iinancial agencies Ior rapid economic
development.
By pooling the savings together, banks can make available
Iunds to specialized institutions which Iinance diIIerent sectors oI the
economy, needing capital Ior various purposes, risks and durations. By
contributing to government securities, bonds and debentures oI term-lending
institutions in the Iields oI agriculture, industries and now housing, banks are
also providing these institutions with an access to the common pool oI
savings mobilized by them, to that extent relieving them oI the responsibility
oI directly approaching the saver. This intermediation role oI banks is
particularly important in the early stages oI economic development and
Iinancial speciIication. A country like India, with diIIerent regions at
diIIerent stages oI development, presents an interesting spectrum oI the
evolving role oI banks, in the matter oI inter-mediation and beyond.
Mobilization oI resources Iorms an integral part oI the
development process in India. In this process oI mobilization, banks are at a
great advantage, chieIly because oI their network oI branches in the country.
And banks have to place considerable reliance on the mobilization oI
deposits Irom the public to Iinance development programmes. Further,
deposit mobalization by banks in India acquired greater signiIicance in their
new role in economic development.
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Commercial banks provide short-term and medium-term
Iinancial assistance. The short-term credit Iacilities are granted Ior working
capital requirements. The medium-term loans are Ior the acquisition oI land,
construction oI Iactory premises and purchase oI machinery and equipment.
These loans are generally granted Ior periods ranging Irom Iive to seven
years. They also establish letters oI credit on behalI oI their clients Iavouring
suppliers oI raw materials/machinery (both Indian and Ioreign) which extend
the banker`s assurance Ior payment and thus help their delivery. Certain
transaction, particularly those in contracts oI sale oI Government
Departments, may require guarantees being issued in lieu oI security earnest
money deposits Ior years. release oI advance money, supply oI raw
materials Ior processing, Iull payment oI bills on the assurance oI the
perIormance etc. Commercial banks issue such guarantees also.








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The Role of Reserve Bank of India (RBI) - Banker`s Bank:
The Reserve Bank of India (RBI) is the central bank oI India,
and was established on April 1, 1935 in accordance with the provisions oI
the Reserve Bank oI India Act, 1934. Since its inception, it has been
headquartered in Mumbai. Though originally privately owned, RBI has been
Iully owned by the Government oI Indian since nationalization in 1949

Main Objective:
Monetary Authority
O Formulates, implements and monitors the monetary policy.
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O Objective: maintaining price stability and ensuring adequate Ilow oI
credit to productive sectors.
Regulator and supervisor of the financial system
O Prescribes broad parameters oI banking operations within which the
country`s banking and Iinancial system Iunctions.
O Objective: maintain public conIidence in the system, protect
depositors` interest and provide cost-eIIective banking services to the
public. The Banking Ombudsman Scheme has been Iormulated by the
Reserve Bank oI India (RBI) Ior eIIective redressal oI complaints by
bank customers
Manager of Exchange Control
O Manages the Foreign Exchange Management Act, 1999.
O Objective: to Iacilitate external trade and payment and promote
orderly development and maintenance oI Ioreign exchange market in
India.
Issuer of currency
O Issues and exchanges or destroys currency and coins not Iit Ior
circulation.
O Objective: to give the public adequate quantity oI supplies oI currency
notes and coins and in good quality.
Developmental role
O PerIorms a wide range oI promotional Iunctions to support national
objectives.
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Related Functions
O Banker to the Government: perIorms merchant banking Iunction Ior
the central and the state governments; also acts as their banker.
O Banker to banks: maintains banking accounts oI all scheduled banks.
O Owner and operator oI the depository (SGL) and exchange (NDS) Ior
government bonds.
There is now an international consensus about the need to Iocus the
tasks oI a central bank upon central banking. RBI is Iar out oI touch
with such a principle, owing to the sprawling mandate described
above.

Supervisory Functions:
In addition to its traditional central Iunctions, the Reserve bank
has certain non-monetary Iunctions oI the nature oI supervision oI banks and
promotion oI sound banking in India. The Reserve Bank Act, 1934, and the
Banking Regulation Act, 1949 have given the RBI wide powers oI
supervision and control over commercial and cooperative banks, relating to
licensing and establishments, branch expansion, liquidity oI their assets,
management and methods oI working, amalgamation, reconstruction and
liquidation. The RBI is authorized to carry out periodical inspections oI the
banks and to call Ior returns and necessary inIormation Irom them. The
nationalization oI 14 major Indian scheduled banks in July 1969 has
imposed new responsibilities on the RBI Ior directing the growth oI banking
and credit policies towards more rapid development oI the economy and
realization oI certain desired social objectives. The supervisory Iunctions oI
the RBI have helped a great deal in improving the standard oI banking in
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India to develop on sound lines and to improve the methods oI their
operation.
Promotional Functions:
With economic growth assuming a new urgency since
Independence, the range oI the Reserve Bank`s Iunctions have steadily
widened. The Bank now perIorms a variety oI developmental and
promotional Iunctions, which, at one time, were regarded as outside the
normal scope oI central banking. The Reserve Bank was asked to promote
banking habit, extend banking Iacilities to rural and semi-urban areas, and
establish and promote new specialized Iinancing agencies. Accordingly, the
Reserve bank has helped in the setting up oI the IFCI and the SFC: it set up
the Deposit Insurance Corporation oI India in 1963 and the Industrial
Reconstruction Corporation oI India in 1972. These institutions were set up
directly or indirectly by the Reserve Bank to promote saving habit and to
mobilize savings, and to provide industrial Iinance as well as agricultural
Iinance. As Iar back as 1935, the RBI set up the Agricultural Credit
Department to provide agricultural credit. But only since 1951 the Bank`s
role in this Iield has become extremely important. The Bank has developed
the co-operative credit movement to encourage saving, to eliminate money-
lenders Irom the villages and to route its short term credit to agriculture. The
RBI has set up the Agricultural ReIinance and Development Corporation to
provide long-term Iinance to Iarmers


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Co-operative Banks:
The Co-operative bank has a history oI almost 100 years. The
Co-operative banks are an important constituent oI the Indian Financial
System, judging by the role assigned to them, the
expectations they are supposed to IulIill, their number,
and the number oI oIIices they operate. The co-
operative movement originated in the West, but the
importance that such banks have assumed in India is
rarely paralleled anywhere else in the world. Their role in rural
Iinancing continues to be important even today, and their business in the
urban areas also has increased phenomenally in recent years mainly due to
the sharp increase in the number oI co-operative banks.
While the co-operative banks in rural areas mainly Iinance
agricultural based activities including Iarming, cattle, milk, hatchery,
personal Iinance etc. along with some small scale industries and selI-
employment driven activities, the co-operative banks in urban areas mainly
Iinance various categories oI people Ior selI-employment, industries, small
scale units, home Iinance, consumer Iinance, personal Iinance, etc. Some oI
the co-operative banks are quite Iorward looking and have developed
suIIicient core competencies to challenge state and private sector banks.
According to NAFCUB the total deposits & lending`s oI Co-
operative Banks is much more than Old Private Sector Banks & also the
New Private Sector Banks. This exponential growth oI Co-operative Banks
is attributed mainly to their much better local reach, personal interaction
with customers, their ability to catch the nerve oI the local clientele. Though
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ŶŹ
registered under the Co-operative Societies Act oI the Respective States
(where Iormed originally) the banking related activities oI the co-operative
banks are also regulated by the Reserve Bank oI India. They are governed by
the Banking Regulations Act 1949 and Banking Laws (Co-operative
Societies) Act, 1965.
There are two main categories of the co-operative banks.
(a) Short term lending oriented co-operative Banks within this
category there are three sub categories oI banks viz state co-operative banks,
District co-operative banks and Primary Agricultural co-operative societies.
(b) Long term lending oriented co-operative Banks within the
second category there are land development banks at three levels state level,
district level and village level.

Features of Cooperative Banks
Co-operative Banks are organized and managed on the principal oI co-
operation, selI-help, and mutual help. They Iunction with the rule oI 'one
member, one vote¨. Function on 'no proIit, no loss¨ basis. Co-operative
banks, as a principle, do not pursue the goal oI proIit maximization. Co-
operative bank perIorms all the main banking Iunctions oI deposit
mobilization, supply oI credit and provision oI remittance Iacilities. Co-
operative Banks provide limited banking products and are Iunctionally
specialists in agriculture related products. However, co-operative banks now
provide housing loans also.
Products and Services oIIered by bank


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UCBs provide working capital loans and term loan as well.
The State Co-operative Banks (SCBs), Central Co-operative Banks (CCBs)
and Urban Co-operative Banks (UCBs) can normally extend housing loans
upto Rs 1 lakh to an individual. The scheduled UCBs, however, can lend
upto Rs 3 lakh Ior housing purposes.
The UCBs can provide advances against shares and debentures
also. Co-operative bank do banking business mainly in the agriculture and
rural sector. However, UCBs, SCBs, and CCBs operate in semi urban,
urban, and metropolitan areas also.
The urban and non-agricultural business oI these banks has
grown over the years. The co-operative banks demonstrate a shiIt Irom rural
to urban, while the commercial banks, Irom urban to rural. Co-operative
banks are perhaps the Iirst government sponsored, government-supported,
and government-subsidized Iinancial agency in India. They get Iinancial and
other help Irom the Reserve Bank oI India NABARD, central government
and state governments. They constitute the 'most Iavoured¨ banking sector
with risk oI nationalization. For commercial banks, the Reserve Bank oI
India is lender oI last resort, but co-operative banks it is the lender oI Iirst
resort which provides Iinancial resources in the Iorm oI contribution to the
initial capital (through state government), working capital, reIinance.
Co-operative Banks belong to the money market as well as to
the capital market. Primary agricultural credit societies provide short term
and medium term loans. Land Development Banks (LDBs) provide long-
term loans. SCBs and CCBs also provide both short term and term loans.
Products and Services oIIered by bank


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Co-operative banks are Iinancial intermediaries only partially. The sources
oI their Iunds (resources) are (a) central and state government, (b) the
Reserve Bank oI India and NABARD, (c) other co-operative institutions, (d)
ownership Iunds and, (e) deposits or debenture issues. It is interesting to
note that intra-sectoral Ilows oI Iunds are much greater in co-operative
banking than in commercial banking. Inter-bank deposits, borrowings, and
credit Irom a signiIicant part oI assets and liabilities oI co-operative banks.
This means that intra-sectoral competition is absent and intra-sectoral
integration is high Ior co-operative bank.
Some co-operative banks are scheduled banks, while others are
non-scheduled banks. For instance, SCBs and some UCBs are scheduled
banks but other co-operative bank are non-scheduled banks. At present, 28
SCBs and 11 UCBs with Demand and Time Liabilities over Rs 50 crore
each included in the Second Schedule oI the Reserve Bank oI India Act.
Co-operative Banks are subject to CRR and liquidity requirements as other
scheduled and non-scheduled banks are. However, their requirements are
less than commercial banks. Since 1966 the lending and deposit rate oI
commercial banks have been directly regulated by the Reserve Bank oI
India. Although the Reserve Bank oI India had power to regulate the rate co-
operative bank but this have been exercised only aIter 1979 in respect oI
non-agricultural advances they were Iree to charge any rates at their
discretion. Although the main aim oI the co-operative bank is to provide
cheaper credit to their members and not to maximize proIits, they may
access the money market to improve their income so as to remain viable.

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Maketing concept



It is very important Ior any bank to identiIy the 7 P`s oI services so
was understands their customers better and provide them with best oI
service. The 7 P`s are:

1. PRODUCT MIX
2. PRICE MIX
3. PLACE
4. PROMOTION
5. PEOPLE
6. PROCESS
7. PHYSICAL EVIDENCE


PRODUC1 MIX

The product mix oI a company includes all diIIerent product lines
a company oIIers to its customers. The product line oI a bank might
easily include more than 100 diIIerent services. In today`s competitive
scenario it has become very necessary Ior a bank to provide it`s
customers with a wide variety oI services and the best technology in
order to attract them. Here is an example oI some oI the products
oIIered by UTI Bank to its customers.


P'S of BAAKIAC SEC1OR

Products and Services oIIered by bank


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PRODUC1 WID1H AAD DEP1H

Width

Width oI the product mix is the number oI product lines a
company is oIIering. The product width could be a narrow one or a
wide one depending Irom bank to bank. A wide mix encourages more
sales since the banks are able to diversiIy and provide more to their
customers and they also appeal to a larger target market.

05th

Depth oI the product mix is the number oI product items in
each product line. Banks with more schemes and services have more
depths than those oIIering only a Iew.

Here is table giving an example oI Width and Depth in the Product
Mix:



Products and Services oIIered by bank


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Similarly, diIIerent banks plan out their product portIolios and
based on that, the depth and width oI their product mix can be
determined.

In today`s scenario, where there is cutthroat competition and
new Ioreign banks entering the Indian markets, it has became more or
less like a law to have very wide product lines with more and more
number oI products in each line.


PRODUC1 LEJELS

470 B0301it.

It is the main or core reason why the customer will buy the
service oI the bank. More like the basic purpose or necessity.

Basic Product:

The core beneIit is converted into a basic product. That is the
service can used by the customer in order to IulIill his/her needs.

50.t0d P74du.t.

It reIers to the set oI attributes and conditions expected by the
customers when they purchase the service.

Augm03t0d P74du.t.

It is the additional Ieature that the banks provide which exceeds
the customer`s expectations.

Products and Services oIIered by bank


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P4t03tial P74du.t.

Innovations and product diIIerential is the bases oI a Potential
Product. II the banks alter its services according to the requirements oI
the individual customers it reaches this level.


Core
Product
Basic
Product
Expected
Product
Augmented
Product
Potential
Product
The basic
necessity
to use
banking
services
in order
to handle
finance
more
efficientl
y
Safety of
deposits
Loan able
funds etc.
Timely
service Long
banking
hours Low
interest rates
Goods waiting
rooms
Extensive ATM
network
Promotional
Discounts

Mobile and
internet
Banking New
Schemes
tailored for
specific
customers

Thus it can be seen how a particular product passes through
diIIerent levels. In today`s competitive scenario most banks try
oIIering services at the Augmented and Potential level.

PRICE MIX

The price mix in the banking sector is nothing but the interest
rates charged by the diIIerent banks. In today`s competitive scenario
where customer is the king, the banks have to charge them interest at a
rate in accordance with the RBI directives. Banks also compete in
terms oI annual Iees Ior s07;i.0s like credit cards, DMAT etc. Another
important aspect oI the bank`s pricing policy today is the interest
Products and Services oIIered by bank


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charged on the Home Loans and Car Loans. With India`s economy
progressing, there are more and more buyers seeking these loans but
at a very competitive interest rate.

Let`s understand this with an example. A particular buyer
approaches a bank Ior a car loan Ior a period oI 3 years. He is charged
Rs. 20,000 as interest. However, iI a sale representative oI another
bank comes to know oI this deal, he will try to attract the customer by
giving him a better deal i.e. a loan at a lower rate on interest. In this
way, it is the customer that ultimately beneIits.

Here is an example oI some oI the prices charged by sbi bank
Ior their services



ATM Card Issue Free 2 ATM cards issued Iree
iI it joint account
Add on Card RS. 100 Beyond 2 cards
Duplicate Card Rs. 100

Other General Charges

Current Account Savings Account

Transaction Charges NIL NIL
Charges Ior issue oI
Cheques book
NIL NIL
Issue oI duplicate
statement
Rs. 25 per page Rs. 25 per page
Account closure Rs.100 Rs.100

This example evinces some oI the charges that the customer has to pay
Ior the services provided by the bank.
Products and Services oIIered by bank


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The pricing Iactor is very important because oI the kind oI
competition that is prevailing today in the Indian market. However it
is very important to understand that in the banking sector, the main
pricing policy is concerned with the interest rate charged. This interest
rate is however regulated by the RESERVE BANK OF INDIA and
THE INDIAN BANKING ASSOCAITION. Any one particular bank
or a group oI banks does not regulate it. The interest rate charged
cannot be higher than that decide by the RBI and the INDIAN
BANKING ASSOCIATION.

Thus, inspite oI the constraints in the pricing policy due to the
RBI directives there are mainly three types oI pricing methods
adopted by banks. They are:

Jalu0 57i.i3g.

Banks having unique or diIIerent products or schemes mainly
do this type oI pricing. They usually charge a combination oI high and
low prices depending on the customer loyalty as well as the products.
This type oI pricing strategy is usually coupled with promotion
programmes.

G4i3g Rat0 57i.i3g.

The most commonly used pricing technique is the going rate
pricing. In going rate pricing, the bank bases its price largely
depending on the competitor`s prices. The banks however have to stay
within the RBI directives and compete. The banks may charge higher
Products and Services oIIered by bank


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or lower than their competitors. AIter 1991 when the Ioreign banks
entered the Indian market this method oI pricing has gained increasing
importance.




Ma7 u5 57i.i3g.

This is a pricing technique wherein the cost oI the service is determined
and a small margin is added to it and then the Iinal price is oIIered to the
customers. This type oI pricing is the not very popular since in the
banking sector it is not very easy to arrive at the cost oI the service. Thus
most banks use a combination oI mark up pricing and going rate
pricing.









Products and Services oIIered by bank


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This model shows a pricing strategy, which should be adopted
in order to ensure maximum satisIaction to both the bank as well as
the customers.

The price should be set in such a manner that the customer is assured that
he is not being cheated or overcharged by the bank and at the same time
the bank is able to reap maximum proIits. Such a pricing stand helps the
bank get maximum sales as well as proIits since the customer Ieels that
by entering such a transaction he is winning.
THE MOST FAVORABLE PRICING STRATEGY
Products and Services oIIered by bank


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PLACE MIX


Place mix is the location analysis Ior banks branches. There are
number a Iactors aIIecting the determination oI the location oI the
branch oI bank. It is very necessary a bank to situated at a location
where most oI its target population is located.

Some oI the important Iactors aIIecting the location analysis oI a bank
are:

1. Th0 t7ad0 a70a
2. P45ulati43 .ha7a.t07isti.s
3. 4mm07.ial st7u.tu70
4. I3dust7ial st7u.tu70
5. Ba3i3g st7u.tu70
6. P74imity t4 4th07 .43;03i03t 4utl0ts
7. R0al 0stat0 7at0s
8. P74imity t4 5ubli. t7a3s547tati43
9. 7awi3g tim0
10.L4.ati43 41 .4m50titi43
11.Jisibility
12.A..0ss
Products and Services oIIered by bank


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It is not necessary that all the above conditions have to be satisIied
while selecting the location but it should be tried to satisIy as many oI
them as possible.


1. Th0 T7ad0 A70a.

The trade area is a very important Iactor determining the place
where a bank branch should be set up. For e.g. a particular location
maybe a huge trading place Ior textiles, diamonds or Ior that case
even the stock market. Such locations are ideal Ior setting up oI bank
branches.


2. P45ulati43 ha7a.t07isti.s.

The demography oI a place is a very important Iactor. This
includes:
The income level oI the population
The average age
The average male Iemale population
The caste, religion, culture and customs
The average spending and saving habit oI the people.
These Iactors are very important Ior a bank as the help them
decide the kind oI business the branch will get.



3. 4mm07.ial St7u.tu70.

Products and Services oIIered by bank


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The commercial structure reIers to the level oI commerce i.e.
business activities taking place at a particular location. The higher the
level oI business activities taking place in a particular location the
more preIerable it is Ior setting up a bank branch.

4. I3dust7ial St7u.tu70.

This is nothing but a combination oI the trade area analysis and
the commercial structure. However the industrial structure Iocuses
more on the kind oI industries operating in a particular location. For
example, an area like SEEPZ is marked with a lot oI electronic
manuIacturing units. Thus the industrial stricture determines the kind
oI Iinancial transactions that could take place in a particular location.

5. Ba3i3g St7u.tu70.

The Banking structure reIers to the existence oI other banks in
the area. Whether there is already an eIIicient network oI other bank
branches operating at that particular area. Thus the overall
inIrastructure needed Ior the working oI a bank.


6. P74imity 41 4th07 .43;03i03t 4utl0ts.

This reIers to the other branches oI the same bank as well other
commercial, entertainment and industrial outlets.


7. R0al stat0 Rat0s.

Products and Services oIIered by bank


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This is mainly dealing with the cost Iactor involved in opening
up a bank branch at a particular location. The real estate rate is a very
strong Iactor inIluencing the location decision Ior a bank branch.





8. P74imity t4 5ubli. t7a3s547tati43.

The location should be proximate to public transportation
Iacilities. This means it should have bus stops close by as well as it
should be proximate to railway stations so as to make it convenient Ior
the common man.

9. 7awi3g Tim0.

Drawing time reIers to the time period during which a customer
can draw money Irom the banks. It should be convenient to the
customer and somewhat Ilexible to accommodate the customer`s
needs. No bank has more than a certain amount with them and in case
a customer wants to withdraw an amount more than that available
with the bank, the bank needs to draw that amount Irom other banks.
Hence, a location must be such that it Iacilitates minimum drawing
time.

10. L4.ati43 41 4m50titi43.

The existence oI other banks also means competition. II the level oI
competition is very high in a particular location, it is necessary that a bank does a
lot oI market research beIore opening a branch so as to estimate the kind oI
business it would get.
Products and Services oIIered by bank


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10. Jisibility

The location oI a branch should be such that it is visible and
easily noticed by the customers as well other people.

10. A..0ss.

The bank branch should be very easily accessible to the
customers. II this is not the case, the customer might switch to some
other bank, which is more convenient to him and very easily
accessible. The location should be such that it is very convenient Ior
the customer to reach.


Promotion Mix


Promotion is nothing but making the customer more and more
aware oI the services and beneIits provided by the bank. The banks
today can use a lot oI new technology to communicate to their
customers. Two oI the Iastest growing modern tools oI
communicating with the customers are:

1. I3t0730t Ba3i3g
2. M4bil0 Ba3i3g

This can be better explained with the example oI SBI bank.

Products and Services oIIered by bank


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SMS services

SMS Iunctions through simple text messages sent Irom your
cellular phone. These messages are recognized by ICICI bank to
provide you with the required inIormation.

For example, when you enter IBAL` your
cellular phone screen will display the current
balance in your primary account. Thus with the
help oI SMS a wide range oI query based
transactions can be perIormed without even
making a call.

ICICI was the Iirst organization in India to provide Wireless Application
Protocol (WAP) based services. Mobile commerce using WAP
technology, allows secure online access oI the web using mobile devices.
With WAP one can directly access the ICICI WAP server, check one`s
account details and use other value added services.

Thus diIIerent methods are used by diIIerent banks to promoter
its services.

Products and Services oIIered by bank


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A bank may have very attractive schemes and services to oIIer to their
customers but they are oI no use iI they are not communicated properly
to the customers. Promotion is o inIorm and remind the individuals and
persuade them to accept, recommend or use oI product, service or idea.
However there some very important points that is to be considered beIore
the promotion strategy is made. These points are:

Finalizing the Budget

BeIore the bank decides the kind oI promotion that should be done, it
very important to Iinalize the budget Ior it. The Iormulation oI a sound
budget is essential to remove the Iinancial constraints in the process. The
budget is determined on the basis oI volume oI business oI the bank. In
addition to this the intensity oI competition also plays a decisive role.

Selecting a suitable vehicle

Another very important task is to select a suitable vehicle Ior driving the message.
There are a number oI devices to advertise such as broadcast media, telecast media
and the print media. The selecting oI the mode oI advertising is strongly inIluenced
by the kind oI budget decided. Usually Ior promoting banks the most eIIective and
economical Iorm oI advertising has been the print media.

Making possible creativity

Making possible creativity is nothing but the kind oI slogans, punch lines
etc. that are supporting the message. They should be very creative but yet
simple to be understood by the common man. It should appeal to the
Products and Services oIIered by bank


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customers. It should be distinct Irom that oI the competitors and should
be successIul in inIorming and sensing the customers.




Testing the Effectiveness

It should be borne in mind that the advertisement is Iirst tested Ior its
eIIectiveness. This should be done with the help oI various techniques
like testing eIIectiveness on a sample group. This helps determine the
success oI the advertisement and in case oI any problem the
advertisement can be altered and remedied.

Instrumentality of Branch Managers

At a micro level, it is the responsibility oI the branch managers to
promote and drive the message to the people in the local area. They
should organize small programs in order to attract people and crate
awareness in the local area about the new schemes oI the bank.

Different Ways of Promotion

Public Relations:

In today`s competitive scenario developing strong public
relations is very important Ior any bank to be successIul. Most banks
today have a separate Public Relations department. However
primarily it is considered as a responsibility oI the various bank
Products and Services oIIered by bank


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managers to develop a steady and strong relationship with their
present customers as well as potential customers. This can be done by
a constant Iollow up, small programmes etc.



Personal Selling:

Personal selling is Iound to be one oI the most eIIective and
popular Iorms oI promoting bank business. The main reason Ior this is
that banking is a service in which trust plays a very important role. In
personal selling, a bank representative goes to the customers and
explains the scheme to the customers. Also he gives the customers any
kind consultation he might need. He provides the customers all the
inIormation sought by him. The representative tries to persuade the
customers to go Ior the scheme provided by the bank by telling him
all the beneIits. Here are some oI the important Ieatures oI personal
selling
It is a direct relation between the buyers and the seller
It is oral presentation in conversation
It is personal and social behavior
It is Iound to be more eIIective in service oriented organizations
It is based on the proIessional excellence or expertise oI an individual

Sales Promotion:

Sales promotions are basically giving the customers some
additional beneIits, maybe at times just some small giIts, in order to
Products and Services oIIered by bank


ŸŹ
promote the schemes. The more innovative the
sales promotions the more positive are the
results. Some oI the most popular sales
promotions techniques are giIts, contests, Iairs
and shows, discounts and commission,
entertainment and traveling plans Ior bankers,
additional allowance, low interest Iinancing etc.
It is very important that the sales promotions
beneIits are designed in such a manner that they are better than those
oI the competitors.

Word - of - mouth Promotion:

This Iorm oI promotions is not only very eIIective in banking
services but in any kind oI service. However it is more important in
banking Ior the only reason that this is a service where trust plays a
very important role. II a particular bank`s services are recommended
by Iriends, relatives, or other well wishers the person is more
inIluenced and inclined towards that bank. It is very important to note
that the internal employees oI the bank play a very important role in
word oI mouth promotion technique. This is because they can start
the process by recommending the bank to their Iriends and relatives
and aIter that it is like a chain, which spreads like a wild Iire.

1elemarketing:

In recent times telemarketing has gained increasing importance
as an eIIective tool Ior promotion. The telemarketing is a process oI
making use oI sophisticated communication network Ior promoting
Products and Services oIIered by bank


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the banks. This includes promoting through television, telephone, and
radio. Nowadays, cell phones are used extensively Ior the same. This
is the most popular Iorm oI promotion. Banks today
have started using SMS` and many other services
supported by cell phones to provide beneIits to their
customers and thus have tried to increase their
sales. In today`s competitive and modern scenario it
very important that banks makes use oI
telemarketing techniques very eIIiciently to have
desirable results.


Internet:

The use oI Internet as a promotional tool is increasing. More
and more banks are using Internet to promote their services. The
online banking has made it even easier Ior the customers to avail the
bank`s services. No longer do people have to go to their bank
branches Ior small petty matters like checking their balance etc. All
this can be done with the help oI a Iew clicks.

Thus, these were the numerous ways in which a bank can
promote its services and create more awareness amongst the people.


People

People are the employees that are the service providers. In a
banking sector, the service provider plays a very important and
Products and Services oIIered by bank


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determinant role in rendering the customers a satisIactory and a good
service. It is extremely essential that the service provider understand
what his customers expect Irom him. In the banking sector, the
customer needs to be guided in a lot oI matters, which is possible only
with the help oI the service provider.

The position in the eyes oI the customer will be perceived by
appearance, attitude and behavior oI the customer contact employees.
Not only does the customer contact employee inIluence the
customer`s perception but also the customer base oI the organization
does so.

Process Mix

The process mix constitutes the overall procedure involved in
using the services oIIered by the bank. It is very necessary that the
process is very customer Iriendly. In other words a process should be
such that the customer is easily able to understand and easy to Iollow.
Today iI particular banks Iormalities are long and the procedure very
complicated the overall process Iails an the customer may not be
inclined towards using that banks services.

Let`s take Ior example the process Ior application Ior a car loan.
Now this mainly involves 3 things.

1. Producing oI proper documents
2. Filling up oI application Iorm
3. Paying Ior the initial down payment.
Products and Services oIIered by bank


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Here the process may Iail in the Iollowing cases:

1. II the customer is asked to produce a number oI Iorms out oI which
some may not be necessary at all. Thus it is very necessary that the
customer be asked Ior the minimum but most necessary document and
not the other unnecessary documents.

2. In case oI application Iorm, the application Iorm must be in a
language best understood by the customers and it should not be very
lengthy one or demanding a lot oI unnecessary inIormation.

3. Finally the payment oI initial amount. The customer should be given
options as to how he would like to pay by cheques or by credit card.
Once again the amount should be very competitive not very high
above the regular rates prevailing in the markets.

The smaller and simpler the procedure, the better the process, and the
customer will be more satisIied.


PHYSICAL EJIDEACE

Physical evidence is the overall layout oI the place i.e. how the entire
bank has been designed. Physical evidence reIers to all those Iactors
that help make the process much easier and smoother. For example, in
case oI a bank, the physical evidence would be the placement oI the
customer service executive`s desk, or the location oI the place Ior
Products and Services oIIered by bank


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depositing cheques. It is very necessary that the place be designed in
such a manner so as to ensure maximum convenience to the customer
and cause no conIusion to him.

Let us see an example as to how banks try to make little changes so as to
make the service better Ior their customers.



The SBI has decided in introducing a common uniIorm Ior all the
employees in all its branches all over India. The plan is possibly in line
with the aggressive retail banking adopted by HSBC. A common uniIorm
its nothing like a revolutionary change but however this little change
makes it very easy Ior the customer to identiIy with his service provider
and makes the entire process very easy Ior him. The more the bank does
to make the service easier and better the more satisIied will be the
customer.

Thus, these are the 7 P`s oI services. Each oI them plays a very
important and a pivotal role in determining the quality oI the service
provided to the customer.






Products and Services oIIered by bank


ŹŴ



Broad Classification of Products in a bank:
The diIIerent products in a bank can be broadly classiIied into:
O Retail Banking.
O Trade Finance.
O Treasury Operations.
Retail Banking and Trade Iinance operations are conducted at the branch
level while the wholesale banking operations, which cover treasury
operations, are at the hand oIIice or a designated branch.
Retail Banking:
O Deposits
O Loans, Cash Credit and OverdraIt
O Negotiating Ior Loans and advances
O Remittances
O Book-Keeping (maintaining all accounting records)
O Receiving all kinds oI bonds valuable Ior saIe keeping
Trade Finance:
O Issuing and conIirming oI letter oI credit.
III. PRODUCTS AND SERVICES OFFERED BY BANKS
Products and Services oIIered by bank


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O Drawing, accepting, discounting, buying, selling, collecting oI bills oI
exchange, promissory notes, draIts, bill oI lading and other securities.
Some co-operative banks are scheduled banks, while others are non-
scheduled banks. For instance, SCBs and some UCBs are scheduled banks
but other co-operative bank are non-scheduled banks. At present, 28 SCBs
and 11 UCBs

O with Demand and Time Liabilities over Rs 50 crore each included in
the Second Schedule oI the Reserve Bank oI India Act.
O Co-operative Banks are subject to CRR and liquidity requirements as
other scheduled and non-scheduled banks are. However, their
requirements are less than commercial banks. Since 1966 the lending
and deposit rate oI commercial banks have been directly regulated by
the Reserve Bank oI India. Although the Reserve Bank oI India had
power to regulate the rate co-operative bank but this have been
exercised only aIter 1979 in respect oI non-agricultural advances they
were Iree to charge any rates at their discretion. Although the main
aim oI the co-operative bank is to provide cheaper credit to their
members and not to maximize proIits, they may access the money
market to improve their income so as to remain viable.



Products and Services oIIered by bank


ŹŶ


Treasury Operations:
O Buying and selling oI bullion. Foreign exchange
O Acquiring, holding, underwriting and dealing in shares, debentures,
etc.
O Purchasing and selling oI bonds and securities on behalI oI
constituents.
The banks can also act as an agent oI the Government or local
authority. They insure, guarantee, underwrite, participate in managing and
carrying out issue oI shares, debentures, etc.
Apart Irom the above-mentioned Iunctions oI the bank, the
bank provides a whole lot oI other services like investment counseling Ior
individuals, short-term Iunds management and portIolio management Ior
individual undertakes the inward and outward remittances with reIerence to
Ioreign exchange and collection oI varied types Ior the Government.
Common Banking Products Available:
Some oI common available banking products are explained
below:
1) Credit Card: Credit Card is 'post paid¨ or
'pay later¨ card that draws Irom a credit line-
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money made available by the card issuer (bank) and gives one a grace
period to pay. II the amount is not paid Iull by the end oI the period, one
is charged interest.
A credit card is nothing but a very small card containing a
means oI identiIication, such as a signature and a small photo. It authorizes
the holder to change goods or services to his account, on which he is billed.
The bank receives the bills Irom the merchants and pays on behalI oI the
card holder. These bills are assembled in the bank and the amount is paid to
the bank by the card holder totally or by installments. The bank charges the
customer a small amount Ior these services. The card holder need not have
to carry money/cash with him when he travels or goes Ior purchasing.
Credit cards have Iound wide spread acceptance in the metros`
and big cities. Credit cards are joining popularity Ior online payments. The
major players in the Credit Card market are the Ioreign banks and some big
public sector banks like SBI and Bank oI Baroda. India at present has about
3 million credit cards in circulation.
2) Debit Cards: Debit Card is a 'prepaid¨ or 'pay now¨ card with some
stored value. Debit Cards quickly debit or subtract money Irom one`s
savings account, or iI one were taking out cash.
Every time a person uses the card, the
merchant who in turn can get the money transIerred
to his account Irom the bank oI the buyers, by
debiting an exact amount oI purchase Irom the card.
To get a debit card along with a Personal
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IdentiIication Number (PIN).
When he makes a purchase, he enters this number on the shop`s
PIN pad. When the card is swiped through the electronic terminal, it dials
the acquiring bank system either Master Card or Visa that validates the
PIN and Iinds out Irom the issuing bank whether to accept or decline the
transaction. The customer never overspread because the amount spent is
debited immediately Irom the customers account. So, Ior the debit card to
work, one must already have the money in the account to cover the
transaction. There is no grace period Ior a debit card purchase. Some debit
cards have monthly or per transaction Iees.
Debit Card holder need not carry a bulky
checkbook or large sums oI cash when he/she goes at Ior shopping. This is a
Iast and easy way oI payment one can get debit card Iacility as debit cards
use one`s own money at the time oI sale, so they are oIten easier than credit
cards to obtain.
The major limitation oI Debit Card is that currently only some
3000-4000 shops country wide accepts it. Also, a person can`t operate it in
case the telephone lines are down.
3) Automatic Teller Machine: The
introduction oI ATM`s has given the customers the
Iacility oI round the clock banking. The ATM`s are
used by banks Ior making the customers dealing
easier. ATM card is a device that allows customer
who has an ATM card to perIorm routine banking
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transaction at any time without interacting with human teller. It provides
exchange services. This service helps the customer to withdraw money even
when the banks ate closed. This can be done by inserting the card in the
ATM and entering the Personal IdentiIication Number and secret Password.
ATM`s are currently becoming popular in India that enables the
customer to withdraw their money 24 hours a day and 365 days. It provides
the customers with the ability to withdraw or deposit Iunds, check account
balances, transIer Iunds and check statement inIormation. The advantages oI
ATM`s are many. It increases existing business and generates new business.
It allows the customers.
O To transIer money to and Irom accounts.
O To view account inIormation.
O To order cash.
O To receive cash.
Advantages of ATM`s:
To the Customers
O ATM`s provide 24 hrs., 7 days and 365 days a year service.
O Service is quick and eIIicient
O Privacy in transaction
O Wider Ilexibility in place and time oI withdrawals.
O The transaction is completely secure you need to key in Personal
IdentiIication Number (Unique number Ior every customer).
To Banks
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O Alternative to extend banking hours.
O Crowding at bank counters considerably reduced.
O Alternative to new branches and to reduce operating expenses.
O Relieves bank employees to Iocus an more analytical and innovative
work.
O Increased market penetration.
ATM`s can be installed anywhere like Airports, Railway
Stations, Petrol Pumps, Big Business arcades, markets, etc. Hence, it gives
easy access to the customers, Ior obtaining cash.
The ATM services provided Iirst by the Ioreign banks like
Citibank, Grind lays bank and now by many private and public sector banks
in India like ICICI Bank, HDFC Bank, SBI, UTI Bank etc. The ICICI has
launched ATM Services to its customers in all the Metropolitan Cities in
India. By the end oI 1990 Indian Private Banks and public sector banks have
come up with their own ATM Network in the Iorm oI 'SWADHAN¨. Over
the past year upto 44 banks in Mumbai, Vashi and Thane, have became a
part oI 'SWADHAN¨ a system oI shared payments networks, introduced by
the Indian Bank Association (IBA).
4) E-Cheaques: The e-cheaques consists Iive primary Iacts. They are the
consumers, the merchant, consumer`s bank the merchant`s bank and the e-
mint and the clearing process. This cheaquring system uses the network
services to issue and process payment that emulates real world chaquing.
The payer issue a digital cheaques to the payee ant the entire transactions are
done through internet. Electronic version oI cheaques are issued, received
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and processed. A typical electronic cheque transaction takes place in the
Iollowing manner:
O The customer accesses the merchant server and the merchant server
presents its goods to the customer.
O The consumer selects the goods and purchases them by sending an e-
cheque to the merchant.
O The merchant validates the e-cheque with its bank Ior payment
authorisation.
O The merchant electronically Iorwards the e-cheque to its bank.
O The merchant`s bank Iorwards the e-cheque to the clearing house Ior
cashing.
O The clearing house jointly works with the consumer`s bank clears the
cheque and transIers the money to the merchant`s banks.
O The merchant`s bank updates the merchant`s account.
O The consumer`s bank updates the consumer`s account with the
withdrawal inIormation.
The e-chequing is a great boon to big corporate as well as small
retailers. Most major banks accept e-cheques. Thus this system oIIers secure
means oI collecting payments, transIerring value and managing cash Ilows.
5) Electronic Funds Transfer (EFT): Many modern banks have
computerized their cheque handling process with computer networks and
other electronic equipments. These banks are dispensing with the use oI
paper cheques. The system called electronic Iund transIer (EFT)
automatically transIers money Irom one account to another. This system
Iacilitates speedier transIer oI Iunds electronically Irom any branch to any
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other branch. In this system the sender and the receiver oI Iunds may be
located in diIIerent cities and may even bank with diIIerent banks. Funds
transIer within the same city is also permitted. The scheme has been in
operation since February 7, 1996, in India.
The other important type oI Iacility in the EFT system is
automated clearing houses. These are the computer centers that handle the
bills meant Ior deposits and the bills meant Ior payment. In big companies
pay is not disbursed by issued cheques or issuing cash. The payment oIIice
directs the computer to credit an employee`s account with the person`s pay.
) Telebanking: Telebanking reIers to banking on phone services.. a
customer can access inIormation about his/her account through a telephone
call and by giving the coded Personal IdentiIication
Number (PIN) to the bank. Telebanking is
extensively user Iriendly and eIIective in nature.
O To get a particular work done through the
bank, the users may leave his instructions
in the Iorm oI message with bank.
O Facility to stop payment on request. One can easily know about the
cheque status.
O InIormation on the current interest rates.
O InIormation with regard to Ioreign exchange rates.
O Request Ior a DD or pay order.
O D-Mat Account related services.
O And other similar services.
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7 Mobile Banking: A new revolution in the realm oI e-banking is the
emergence oI mobile banking. On-line banking is now moving to the
mobile world, giving everybody with a mobile phone access to real-time
banking services, regardless oI their location. But there is much more to
mobile banking Irom just on-lie banking. It provides a new way to pick
up inIormation and interact with the banks to carry out the relevant
banking business. The potential oI mobile banking is limitless and is
expected to be a big success. Booking and
paying Ior travel and even tickets is also
expected to be a growth area.
According to this system,
customer can access account details on mobile using the Short Messaging
System (SMS) technology6 where select data is pushed to the mobile device.
The wireless application protocol (WAP) technology, which will allow user
to surI the net on their mobiles to access anything and everything. This is a
very Ilexible way oI transacting banking business.
Already ICICI and HDFC banks have tied up cellular service
provides such as Airtel, Orange, Sky Cell, etc. in Delhi and Mumbai to oIIer
these mobile banking services to their customers.
8 Internet Banking: Internet banking involves use oI internet Ior delivery
oI banking products and services. With internet banking is now no longer
conIirmed to the branches where one has to approach the branch in person,
to withdraw cash or deposits a cheque or request a statement oI accounts. In
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internet banking, any inquiry or transaction is processed online without any
reIerence to the branch (anywhere banking) at any time.
The Internet Banking now is more oI a normal rather than an
exception due to the Iact that it is the cheapest way oI providing banking
services. As indicated by McKinsey Quarterly research, presently traditional
banking costs the banks, more than a dollar per person, ATM banking costs
27 cents and internet banking costs below 4 cents approximately. ICICI bank
was the Iirst one to oIIer Internet Banking in India.
Benefits of Internet Banking:
O Reduce the transaction costs oI oIIering several banking services and
diminishes the need Ior longer numbers oI expensive brick and mortar
branches and staII.
O Increase convenience Ior customers, since they can conduct many
banking transaction 24 hours a day.
O Increase customer loyalty.
O Improve customer access.
O Attract new customers.
O Easy online application Ior all accounts, including personal loans and
mortgages

Financial Transaction on the Internet:
Electronic Cash: Companies are developing electronic replicas oI all
existing payment system: cash, cheque, credit cards and coins.
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Automatic Payments: Utility companies, loans payments, and other
businesses use on automatic payment system with bills paid through direct
withdrawal Irom a bank account.
Direct Deposits: Earnings (or Government payments) automatically
deposited into bank accounts, saving time, eIIort and money.
Stored Value Cards: Prepaid cards Ior telephone service, transit Iares,
highway tolls, laundry service, library Iees and school lunches.
Point of Sale transactions: Acceptance oI ATM/Cheque at retail stores and
restaurants Ior payment oI goods and services. This system has made
Iunctioning oI the stock Market very smooth and eIIicient
9) Demat: Demat is short Ior de-materialisation oI shares. In short,
Demat is a process where at the customer`s request the physical stock is
converted into electronic entries in the depository system.
In January 1998 SEBI (Securities and Exchange Board oI India)
initiated DEMAT ACCOUNTANCY System to regulate and to improve
stock investing. As on date, to trade on shares it has become compulsory to
have a share demat account and all trades take place through demat.




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How to Operate DEMAT ACCOUNT?
One needs to open a Demat Account with any oI the branches
oI the bank. AIter opening an account with any bank, by Iilling the demat
request Iorm one can handover the securities. The rest will be taken care by
the bank and the customer will receive credit oI shares as soon as it is
conIirmed by the Company/Register and TransIer Agent. There is no
physical movement oI share certiIication any more. Any buying or selling oI
shares is done via electronic transIers.
1) II the investor wants to sell his shares, he has to place an order with
his broker and give a 'Delivery Instruction¨ to his DP (Depository
Participant). The DP will debit hi s account with the number oI shares
sold by him.
2) II one wants to buy shares, he has to inIorm his broker about his
Depository Account Number so that the shares bought by him are
credited in to his account.
3) Payment Ior the electronic shares bought or sold is to be made in the
same way as in the case oI physical securities.





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BANKING SERVICES
Customer service is the service provided in support oI a bank`s core
products. Customer service oIten includes answering questions; handling
complaints. Customer service can occur on site (as when an onstage
employee helps a customer or answers a question) or it can occur over the
phone or the Internet. Quality customer service is essential to building
cordial customer relationship.
Banking being a service industry, a lot depends on eIIicient and
prompt customer service. Customer service is the most important duty oI the
banking operations. Prompt and eIIicient service with smile will develop
good public relations reduce complaints and increase business values.
Why is Customer Service Important?
Changing customer expectations: Today the customer is more
demanding and more sophisticated than he or she was thirty years ago.
The increased importance of customer service: With changing
customer expectations, competitors are seeing customer service as a
competitive weapon with which they diIIerentiate their products and
services.
The need for a relationship strategy: To ensure that a customer
service strategy that will create a value preposition Ior customers
should be Iormulated implemented and controlled. It is necessary to
give it a central role and not one that is subsumed in the various
elements oI the marketing mix.

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LEASING:
Leasing is a cost-eIIective method to Iinance your business equipment
needs. For many years, we have provided creative leasing solutions
Ior Canadian businesses looking to Iinance commercial equipment
such as medical equipment, construction equipment, commercial
aircraIt, oIIice Iurniture and much more. With our national network oI
specialists, and a comprehensive set oI products, we have competitive
lease rates and the expertise to suggest the right equipment lease Ior
your business.
Equipment leasing can help business by:
Allowing you to acquire equipment while preserving your working
capital.
SimpliIying your budget. RBC Royal Bank can structure the terms oI your
lease through regular Iixed monthly payments that can be matched to the
cash Ilows generated by the asset Iinanced and the useIul liIe oI your
equipment.
OIIering possible tax advantages. Lease payments can be tax deductible,
so the aIter-tax cost oI leasing equipment may be more beneIicial to you
than other Iinancing alternatives.

Merchant banking.:
. A merchant bank deals with the commercial banking needs oI
international Iinance, long-term company
loans, and stock underwriting. This type
oI bank does not have retail oIIices where
a customer can go and open a savings or
checking account. A merchant bank is
sometimes said to be a wh4l0sal0 ba3, or
in the business oI wholesale banking. This
is because merchant banks tend to deal
primarily with other merchant banks and other large Iinancial
institutions.
SOME OF THE IMPORTANT SERVICES ARE:
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The most Iamiliar role oI the merchant bank is stock underwriting. A
large company that wishes to raise money Irom investors through the
stock market can hire a merchant bank to implement and underwrite
the process. The merchant bank determines the number oI stocks to be
issued, the price at which the stock will be issued, and the timing oI
the release oI this new stock. The bank then Iiles all the paperwork
required with the various market authorities, and is also Irequently
responsible Ior marketing the new stock, though this may be a joint
eIIort with the company and managed by the merchant bank. For very
large stock oIIerings, several merchant banks may work together, with
one being the lead underwriter.
By limiting their scope to the needs oI large companies, merchant
banks can Iocus their knowledge and be oI speciIic use to such clients.
Some merchant banks specialize in a single area, such as underwriting
or international Iinance
Loan syndication.
A merchant banking subsidiary set up by several banks that may or
may not be oI the
same nationality. consortium banks are common in the Euromarket
and are active in loan syndication.
OTHER ADVANTAGES OF SYNDICATED LOANS
In addition, economists and syndicate
executives contend that there are other, less
obvious ssadvantages to going with a
syndicated loan. These beneIits include:
O Syndicated loan Iacilities can increase
competition Ior your business, prompting other
banks to increase their eIIorts to put market
inIormation in Iront oI you in hopes oI being recognized.
O Flexibility in structure and pricing. Borrowers have a variety oI
options in shaping their syndicated loan, including multicurrency
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options, risk management techniques, and prepayment rights without
penalty.
O Syndicated Iacilities bring businesses the best prices in aggregate and
spare companies the time and eIIort oI negotiating individually with
each bank.
O Loan terms can be abbreviated.
O Increased Ieedback. Syndicate banks sometimes are willing to share
perspectives on business issues with the agent that they would be
reluctant to share with the borrowing business.
O Syndicated loans bring the borrower greater visibility in the open
market. Bunn noted that "For commercial paper issuers, rating
agencies view a multi-year syndicated Iacility as stronger support than
several bilateral one-year lines oI credit."
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Internet banking

Internet banking is a system oI banking that enables customers to
perIorm various Iinancial transactions on a secure website via the
Internet. There are many banks and credit union that operate websites
Ior internet banking. Internet Banking is basically conducted via a
personal computer connected to Internet. Apart Irom it, people can
also do Iinancial transactions using Internet banking on their cellular
phones or personal digital assistants. Internet banking oIIers large
number oI beneIits Ior people involved in Iinancial transactions. There
is no need to visit your bank every time you need to transIer money.
You can do so by internet banking Irom the comIort oI your home.
With net banking Iacility, one can not only transIer money, but also
pay bills, check
bank
statements,
check account
balance,
request Ior
check book and
various other
Iinancial
transactions.
Internet
banking has become widely popular among the masses because oI its
wide array oI beneIits. All banks oIIer the online banking Iacility Ior
their customers nowadays. Online banking has made the lives easier
Ior people who are too busy to go to bank Ior conducting their
Iinancial transactions. Net banking oIIers the Ilexibility to do Iinancial
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transaction on any day irrespective oI the time. In today`s Iast paced
liIe, people are too much stressed out because oI their work pressure
and net banking oIIers them peace oI mind as they can pay their bills,
book their tickets, do online shopping, etc. by relaxing on couch in
their home. Best part oI net banking is that it is very easy to do any
transaction over the net and highly secure website takes care oI all
your worries.
All one need is a computer, PDA or cell phone with active internet
connection to get going with net banking. BeIore using net banking,
one needs to activate net banking Iacility with his/her bank. Bank
provides a unique user ID and password Ior its customers to login into
the bank website Ior conducting Iinancial transactions using net
banking. For any transaction, one should have an active bank account,
appropriate bank balance Ior transactions,bank account number,
customer`s user ID, debit/credit card number,and Internet banking
PIN number along with access to the internet.
Banks have designed their websites in a very user-Iriendly manner Ior
net banking Iacilities. Most oI the banking interIaces are easily
viewable and instructions are provided at every step so that people can
carry out any transaction almost eIIortlessly. In case, a person gets
stuck in any transaction due to internet Iailure or any other reason,
he/she can take assistance Irom phone banking Iacility oIIered by
banks. The phone banking Ieature allows the customers to call the
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bank`s toll-Iree number and get required assistance in Iinishing their
transactions. To avail the phone banking Iacility customers are
provided with phone banking PIN along with their ATM PIN and net
banking PIN.
When a customer opens an account with a bank, he/she receives a
welcome kit Irom the bank. This kit contains all the important
documents including conIidential inIormation required by the
customer including document with account number, Debit cum ATM
card, ATM PIN, customer`s user ID, online banking password, phone
banking password, checkbook, etc. Customer should ensure that all
the passwords or PIN should be received in a closed envelope Iailing
which he/she should report to the bank immediately. Customer need
to complete a Iorm Ior activating internet banking Iacility and submit
it in person at a bank`s branch. Only once the net banking Iacility gets
activated, customer can login to the website and enter user ID and
password to access his account details and conduct Iinancial
transactions.
Banks maintain high security regarding the password authentication and
encryption. Moreover, banks suggest customers to keep their password
secret and change it periodically. The Internet banking Iacilities varies Irom
bank to bank. One should read the net banking guidelines thoroughly beIore
conducting Iinancial transactions over the internet

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Factoring
Factoring is a Iinancial option Ior the management oI receivables. In
simple deIinition it is the conversion oI credit sales into cash. In
Iactoring, a Iinancial institution (Iactor) buys the accounts receivable
oI a company (Client) and pays up to 80 °( rarely up to 90°) oI the
amount immediately on agreement. Factoring company pays the
remaining amount (Balance 20°-Iinance cost-operating cost) to the
client when the customer pays the debt. Collection oI debt Irom the
customer is done either by the Iactor or the client depending upon the
type oI Iactoring. We will see diIIerent types oI Iactoring in this
article. The account receivable in Iactoring can either be Ior a product
or service. Examples are Iactoring against goods purchased, Iactoring
Ior construction services (usually Ior government contracts where the
government body is capable oI paying back the debt in the stipulated
period oI Iactoring. Contractors submit invoices to get cash instantly),
Iactoring against medical insurance etc. Let us see how Iactoring is
done against an invoice oI goods purchased.




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Characteristics of factoring
1. Usually the period Ior Iactoring is 90 to 150 days. Some Iactoring
companies allow even more than 150 days.
2. Factoring is considered to be a costly source oI Iinance compared to
other sources oI short term borrowings.
3. Factoring receivables is an ideal Iinancial solution Ior new and
emerging Iirms without strong Iinancials. This is because credit
worthiness is evaluated based on the Iinancial strength oI the customer
(debtor). Hence these companies can leverage on the Iinancial
strength oI their customers.
4. Bad debts will not be considered Ior Iactoring.
5. Credit rating is not mandatory. But the Iactoring companies usually
carry out credit risk analysis beIore entering into the agreement.
6. Factoring is a method oI oII balance sheet Iinancing.
7. Cost oI Iactoring÷Iinance cost ¹ operating cost. Factoring cost vary
according to the transaction size, Iinancial strength oI the customer
etc. The cost oI Iactoring varies Irom 1.5° to 3° per month
depending upon the Iinancial strength oI the client's customer.
8. Indian Iirms oIIer Iactoring Ior invoices as low as 1000Rs
9. For delayed payments beyond the approved credit period, penal
charge oI around 1-2° per month over and above the normal cost is
charged (it varies like 1° Ior the Iirst month and 2° aIterwards).



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Portfolio management
Third-Party PortIolio Management Services (PMS) are designed Ior a
select Iew who want more Irom their investments. You can consider
how more sophisticated investment strategies could be applied Ior
your beneIit, even iI it means taking on additional volatility in
investment returns. A reputed portIolio manager will then craIt a
portIolio especially Ior you, based on your speciIic objectives. Your
portIolio may combine a basket oI securities including derivatives,
stocks, bonds and money market instruments, and your portIolio
manager may take a more Iocused exposure in select securities at
times, to maximize your opportunity Irom them.


Some beneIits oI building an investment
portIolio comprising oI mutual Iunds and third-
party PMS through Standard Chartered Private
Bank:

· Fund & PortIolio ClassiIication
· Specialized Research
· Convenience
· ConIidentiality






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NRI SERVICES
The bank provides types oI accounts to nri

Non-resident (External) Rupee Accounts (NRE
A/cs.)


Non-resident (Ordinary) Rupee Accounts (NRO A/cs.)


Foreign Currency Non-resident Accounts (FCNR(B) A/c s) --


Resident Foreign Currency Account (RFC A/cs.)




Letter of credit

A letter oI credit is a promise to pay. Banks issue letters oI credit as a
way to ensure sellers that they will get paid as long as they do what
they've agreed to do.
Letters oI credit are common in international trade because the bank
acts as an uninterested party between buyer and seller. For example,
importers and exporters might use letters oI credit to protect
themselves. In addition, communication can be diIIicult across
thousands oI miles and diIIerent time zones. A letter oI credit spells
out the details so that everybody's on the same page.







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Mortgage bank

Mortgage bank specializes in originating
and/or servicing mortgage loans.
A mortgage bank is a state-licensed banking
entity that makes mortgage loans directly
to consumers. The diIIerence between a mortgage banker and
a mortgage broker is that the mortgage banker Iunds loans with its
own capital.
Generally, a mortgage bank originates a loan and places it on a pre-
established warehouse line oI credit until the loan can be sold to an
investor such as Fannie Mae, or Freddie Mac. The process oI selling a
loan Irom the mortgage bank to another investor is reIerred to as
selling the loan on the secondary market.
Mortgage banks Irequently use the secondary market to sell loans
because the Iunds received pay down their warehouse lines oI credit
which enables the mortgage bank to continue to lend. A mortgage
bank is not regulated as a Iederal or state bank and does not take
deposits Irom consumers or businesses. A mortgage bank raises some
equity which it uses to guarantee the warehouse line and the bulk oI
the Iunds are provided by the warehouse lender.

A line oI credit is any credit source extended to a government,
business or individual by a bank or other Iinancial institution. A line
oI credit may take several Iorms, such as overdraIt protection,
demand loan, special purpose, export packing credit, term loan,
discounting, purchase oI commercial bills, etc. It is eIIectively a bank
account that can readily be tapped at the borrower's
discretion. Interest is paid only on money actually withdrawn,
although the borrower may be required to pay an unused line Iee,
oIten an annualized percentage Iee on the money not withdrawn.
Lines oI credit can be secured by collateral or unsecured.
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Lines oI credit are oIten extended by banks, Iinancial institutions and
other licensed consumer lenders to creditworthy customers (though
certain special purpose lines oI credit may not have creditworthiness
requirements) to address liquidity problems; such a line oI credit is
oIten called a personal line oI credit. The term is also used to mean
the credit limit oI a customer, that is, the maximum amount oI credit a
customer is allowed.
Cash credits
A cash credit is a short-term cash loan to a company. A bank provides
this type oI Iunding, but only aIter the required security is given to
secure the loan. Once a security Ior repayment has been given, the
business that receives the loan can continuously draw Irom the bank
up to a certain speciIied amount.
Overdraft

An overdraft occurs when money is withdrawn Irom a bank account
and the available balance goes below zero. In this situation the
account is said to be "overdrawn". II there is a prior agreement with
the account provider Ior an overdraIt, and the amount overdrawn is
within the authorized overdraIt limit, then interest is normally charged
at the agreed rate. II the negative balance exceeds the agreed terms,
then additional Iees may be charged and higher interest rates may
apply.


Bill discounting
A debt is that which one party, the debtor, owes to a second party,
the creditor; usually this reIers to assets owed, but the term can also be
used metaphorically to cover moral obligations and other interactions
not based on economic value.
A debt is created when a creditor agrees to lend a sum oI assets to a
debtor. Debt is usually granted with expected repayment; in modern
society, in most cases, oI the original sum plus interest.
In Iinance, debt is a means oI using anticipated Iuture purchasing
power in the present beIore it has actually been earned.
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Some companies and corporations use debt as a part oI their
overall corporate Iinance strategy.

Mutual funds

ICICI Bank Mutual Funds services aim at helping
you design the ideal portIolio Ior your investment
requirements. At ICICI Bank, we help you identiIy
the appropriate mix oI Mutual Fund schemes on
the basis oI asset allocation strategies. Invest in
various schemes oI multiple mutual Iunds with a
satisIactory perIormance record and reap the
beneIits. Additionally, ICICI Bank Mutual Funds services also equip
you with various research reports to help you make an inIormed
decision.

Home loan
A home loan, or mortgage, is a secured loan that
borrowers obtain in order to purchase a home.
Because a home is the largest purchase many
individuals will ever make, most borrowers utilize
home loans to assist with their home purchase.
A home loan, or mortgage, is a secured loan that
borrowers obtain in order to purchase a home. Because a home is the
largest purchase many individuals will ever make, most borrowers
utilize home loans to assist with their home purchase.

Core banking

Core Banking is normally deIined as the business conducted by a
banking institution with its retail and small business customers. Many
banks treat the retail customers as
their core banking customers, and
have a separate line oI business to
manage small businesses. Larger
businesses are managed via the
corporate banking division oI the
institution. Core banking basically is
depositing and lending oI money.
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Nowadays, most banks use core banking applications to support their
operations where CORE stands Ior "centralized online real-time
exchange". This basically means that all the bank's branches access
applications Irom centralized datacenters. This means that the deposits
made are reIlected immediately on the bank's servers and the customer
can withdraw the deposited money Irom any oI the bank's branches
throughout the world. These applications now also have the capability
to address the needs oI corporate customers, providing a
comprehensive banking solution.
A Iew decades ago it used to take at least a day Ior a transaction to
reIlect in the account because each branch had their local servers, and
the data Irom the server in each branch was sent in a batch to the
servers in the datacenter only at the end oI the day (EoD).
Normal core banking Iunctions will include deposit accounts, loans,
mortgages and payments. Banks make these services available across
multiple channels like ATMs, Internet banking, and branches.










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Chapter 5


Interest rate risk
Interest rate risk can be deIined as exposure oI bank's net interest income to
adverse movements in interest rates. A bank's balance sheet consists mainly
oI rupee assets and liabilities. Any movement in domestic interest rate is the
main source oI interest rate risk.

Interest rates and non-performing assets
The best indicator oI the health oI the banking industry in a country is its
level oI NPAs. Given this Iact, Indian banks seem to be better placed than
they were in the past. A Iew banks have even managed to reduce their net
NPAs to less than one percent (beIore the merger oI Global Trust Bank into
Oriental Bank oI Commerce , But as the bond yields start to rise the chances
are the net NPAs will also start to go up. This will happen because the
banks have been making huge provisions against the money they made on
their bond portIolios in a scenario where bond yields were Ialling.
Reduced NPAs generally gives the impression that banks have strengthened
their credit appraisal processes over the years. This does not seem to be the
case. With increasing bond yields, treasury income will come down and iI
the banks wish to make large provisions, the money will have to come Irom
their interest income, and this in turn, shall bring down the proIitability oI
banks.

Competition in retail banking
The entry oI new generation private sector banks has changed the entire
scenario. Earlier the household savings went into banks and the banks then
lent out money to corporates. Now they need to sell banking. The retail
segment, which was earlier ignored, is now the most important oI the lot,
Challenges faced by banks
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with the banks jumping over one another to give out loans. The consumer
has never been so lucky with so many banks oIIering so many products to
choose Irom. With supply Iar exceeding demand it has been a race to the
bottom, with the banks undercutting one another. A lot oI Ioreign banks
have already burnt their Iingers in the retail game and have now decided to
get out oI a Iew retail segments completely.
The nimble Iooted new generation private sector banks have taken a lead on
this Iront and the public sector banks are trying to play catch up.
The PSBs have been losing business to the private sector banks in this
segment. PSBs need to Iigure out the means to generate proIitable business
Irom this segment in the days to come.
The urge to merge
In the recent past there has been a lot oI talk about Indian Banks lacking in
scale and size. The State Bank oI India | Get Quote | is the only bank Irom
India to make it to the list oI Top 100 banks, globally. Most oI the PSBs are
either looking to pick up a smaller bank or waiting to be picked up by a
larger bank.
.
Impact of BASEL-II norms
Banking is a commodity business. The margins on the products that banks
oIIer to its customers are extremely thin vis a vis other businesses. As a
result, Ior banks to earn an adequate return oI equity and compete Ior capital
along with other industries, they need to be highly leveraged.
This is not an eIIicient use oI capital. The company with the best credit
rating is more likely to repay the loan vis a vis the company with a low
credit rating. So the bank should be setting aside a Iar lesser amount oI
capital against the risk oI a company with the best credit rating deIaulting
vis a vis the company with a low credit rating. With the BASEL-II norms
the bank can decide on the amount oI capital to set aside depending on the
credit rating oI the company.
Credit risk is not the only type oI risk that banks Iace. These days the
operational risks that banks Iace are huge. The various risks that come under
operational risk are competition risk, technology risk, casualty risk, crime
risk etc. The original BASEL rules did not take into account the operational
Products and Services oIIered by bank


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risks. As per the BASEL-II norms, banks will have to set aside 15 per cent
oI net income to protect themselves against operational risks.
So to be ready Ior the new BASEL rules the banks will have to set aside
more capital because the new rules could lead to capital adequacy ratios oI
the banks Ialling. How the banks plan to go about meeting these
requirements is something that remains to be seen. A Iew banks are
planning initial public oIIerings to have enough capital on their books to
meet these new norms.













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The banking scenario has changed drastically. The changes which have
been took place in the last ten years are more than the changes took place in
last IiIty years because oI the institutionalization, liberalization,
globalization and automation in banking industry. Now, bank has spread out
in to remote areas oI our country through innovative technology.
To Iace competition it is necessary Ior banks to absorb the technology
and upgrade their services. Today bank is marked by customer expectation
and technological innovations. Various banks that have harnessed and
leveraged technology having innovative strategies.
In todays context are Iollowing the strategy oI 'innovative banking¨
than 'retail banking¨ which in need oI the hour. Banks retains their
customers according to their proIiles and preIerences. Prompt and eIIicient
banking service, thus has become very signiIicant.






Conclusion
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Bank details: state bank oI india
Branch: Ulhasnagar-3
Person visited: Mr.H.P DESHPANDE
ChieI manager
State bank oI india.








Topic: products and services oIIered by bank.
FIELD STUDY
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1.Are there any products or services that are specially
given to NRI`s ?
Yes through diIIerent types oI accounts like NRO, NRE, FCNR ETC.
2.What are the new products offered by bank ?
Atm , internet banking, mobile banking, green channel counter,etc.
3.What are the different types of services you provide ?
Savings bank a/c, current a/c, Iixed deposit a/c, loans and advances, sbi
liIe.,etc
4. What is the latest technology adopted by your bank ?
Issuing oI green channel counter.
5. What marketing strategy you adopted ?
Through advertisement , distributing brochures, sending letters to
existing customers.etc
. What strategies are adopted to retain the Customers ?
Better customer services, special products oI all categories.
QUESTIONNAIRE
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7. Is there any channels preferred for marketing services ?
SBI LIFE.
8. What are your future stratagies for enhancing the services ?
Issuing branches in remote areas, better customer services.
9. What challenges you face in retaining the Customers?
Competition, interest rate, crowd, etc
10.How many services does your bank provide ?
Almost 150.
11.Is customer services is an instrument to create a sense of
competition among banks ?
Yes deIinitely it is.






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Primary data : Visit at state bank oI india ,
Ulhasnagar-3 branch
And meeting with Mr. H.P.Deshpande
Secondary data:
Books and magazines
Innovations in banking and insurance
-Romeo mascarenhas
Environmental management and Iinancial services
- Romeo mascarenhas

News papers - economic times

Websites www.wikipedia.com
www.sbi.co.in.
Bipliography