1.1 Scope of the study:
The study would try to throw some insights into the existing services provided by the banks and the gap between the customer expectations, perceptions and the actual state of performance. The results of the study would be able to recognize the lacunae in the system and thus provide key areas where improvement is required for better performance and success ratio.
1.2 Research Objectives:
(1) To find out the level of expectation and the level of perception of the customers from the services offered by the banks. (2) To compare the level of perception and expectation of the services offered by the banks. (3) To know which service quality dimension the bank is performing well and in which dimension it needs improvement. (4) To know the preference towards the public sector and private sector banks.
Targeted banks: ICICI,HDFC,SBI,BOB Sampling Frame: All the customers of four banks in Ahmedabad. Sampling Unit: Any customer of four banks in Ahmedabad. Sampling Area: Ahmedabad. Sampling Method: Non- Probability Convenience Sampling
Sample Size: 200 Respondents
Bank ICICI HDFC SBI BOB
Respondents 50 50 50 50
1.4 Data Sources:
Primary Data: It is collected through structured questionnaire by conducting survey. Secondary Data: Internet, journals, books, magazines, etc.....
1.5 Research Design:
Our research is Descriptive in nature as the banking industry is well-developed in India and lot of research has already been done in this area.
1.6 Research tool :
SERVQUAL is an instrument for measuring how customers perceive the quality of a service. In the mid-1980s Berry and his colleagues Parasuraman and Zeithaml began to investigate what determines service quality and how it is evaluated by customers. As a result of their study they developed the SERVQUAL instrument for measuring service quality, which initially included 10 service quality dimensions, which were later reduced to the following five: tangibles, reliability, responsiveness, assurance and empathy. The instrument is based on the idea of the disconfirmation model, in other words on the comparison of customers’ expectations with their experiences from the service. Usually, the five dimensions of the instrument are described through the use of 22 attributes an “respondents are asked to state (on a seven-point scale from “Strongly disagree” to “Strongly agree”) what they expected from the service and how they perceived the service.” This instrument has been widely used by researchers, but still, there are some controversies in its applicability across different service industries. In some studies the five dimensions of the instrument (determinants) have been found to be unstable across different types of services. Therefore, the SERVQUAL tool should be applied very carefully and the set of determinants and attributes used should be adapted to the specific situation. • Chi-Square test of independence
The test is applied when there are two categorical variables from a single population. It is used to determine whether there is a significant association between the two variables. For example, in an election survey, voters might be classified by gender (male or female) and voting preference (Democrat, Republican, or Independent). We could use a chi-square test for independence to determine whether gender is related to voting preference. This approach consists of four steps: (1) state the hypotheses, (2) formulate an analysis plan, (3) analyze sample data, and (4) interpret results.
A chi- square test for independence has been conducted for knowing the relation between the age group and the preference towards the two types of banks. Ho: Preference towards public/private sector banks and age group are independent of each other. H1: Preference towards public/private sector banks and age group are dependent of each other.
1.8 Limitations of the Study:
Respondents may give biased answers for the required data. Some of the respondents did not like to respond.
In our study we have included 50 customers of each bank because of time limit.
CHAPTER 2 GLOBAL BANKING INDUSTRY
The world of commercial banking is undergoing a deep transformation as a result of marketable instruments competing with loans and demand deposits. Because of this strong competition, commercial banks are struggling to make acceptable margins from their traditional business entering into investment banking. Increasing competition has forced banks to search for more income at the expense of more risk. Banks that lent heavily to Asia in search of better returns than those available in Western markets are now being blamed for bad credit decisions. The Asian crisis has renewed interest on credit risk management casting doubts on the effectiveness of current credit regulations. Technological changes have also heightened competition by making it easier to imitate bank services. The traditional advantage of physical proximity to clients given by extended networks of branches has vanished. Banks have to compete with money market mutual funds for deposit business, commercial papers, and medium-term notes for bank loans. As margins are squeezed, commercial banks in the United States and Europe have been forced to cut costs and branches while diversifying into pensions, insurance, asset management, and investment banking. In the United States, many banks call themselves financial service companies even in their reported financial statements. Diversification, however, has not always proved to be an effective strategy, and many banks have had to revert to a concentrated business. These
examples illustrate how commercial banks are reinventing themselves, not just once but many times. All these changes are creating an identity crisis for old-fashioned bankers, leading to the key question, “What is a bank today?” The question is difficult, but evidence suggests that the concept of banking is being modified and the traditional barriers among financial service Sub industries (retail banking, private banking, investment banking, asset management, insurance, etc.) are vanishing. Illustrating what an entity does or serves for often is a useful way to define it. The identity crisis of banks—especially commercial banks—stems from the deep and rapid changes in their traditional body of activities (particularly retail and corporate banking). On the other hand, investment banking, private banking, and banc assurance are the most profitable and fastest growing segments of the financial service industry. As banks undertake new activities, they also incur new risks. Since boundaries among sub industries are weakening, if not vanishing, banks— like all other financial service companies—must redefine themselves in terms of the products they offer and the customers they serve. The way banks pursue this redefinition is through a strategic repositioning in the financial service industry. All these factors represent a new challenge for commercial banks, provided this definition still has a unique meaning. Increased competition, diversification, new products, and new geographic markets mean that both the spectrum of risks and the risk profile for banks are dramatically changing.
DEFINING A BANK IN 2010
The scenario commercial banks face today differs greatly from that of the past. Diversification among sub industries is defining an environment where banks compete with other financial-service companies to provide mutually exclusive products and services to the same customers. Traditional branch banking is under the threat of new competitors and technological innovation, leading some analysts to wonder whether banks are dying. Most likely what is dying is the old-fashioned concept of the bank and a new scenario is emerging. Banks are changing as economic markets integrate, providing opportunities for diversification. Only 15 to 20 years ago, most Western banks generated 90% of revenue from interest income. Now this percentage has fallen to 60%, sometimes as low as 40%. New sources of income, such as fee-based income from investment services and derivatives, are becoming increasingly relevant for the income statements of commercial banks.
During the same period, the pattern of banking activities has changed through interactions with the developing security markets. The well-known phenomenon of disintermediation that has taken place in all Western countries since the 1970s has progressively reduced the monopoly of banks over the collection of savings from customers. This has created much tougher competition among financial service companies and has forced banks to find new and diversified sources of income. The traditional core business of commercial banks has been retail and corporate banking. As retail and corporate banking become less and less profitable, banks are diversifying into new businesses to stop the decline of profits. Investment banking, for example, is estimated to be worth US$14 million, with an annual growth rate of about 14% up to 2010. Derivative based earnings for larger commercial banks now account for about 15 to 20% of the total earnings. The drawback is that volatility of earnings has dramatically increased. The management of these new types of risk— typically, market risk and credit risk on traded assets—requires competence and expertise. Hence, the risk profile of commercial banks is changing as a consequence of diversification. Capital markets are playing a key role in defining the bank of the twenty-first century, but they are also making banks riskier. In fact, with a few exceptions, AAA ratings for banks have disappeared and consequently the importance of market risk management is being emphasized. Future competition will not be played in the classic retail banking industry that, at least in continental Europe (but not in the United Kingdom), is only slightly profitable. Global competition will take place in asset management and investment banking. Not casually, huge U.S. investment banks are merging among themselves and with asset management firms. Alliances and takeovers are occurring also on a transatlantic basis, confirming the global characters of these two sub industries (the most related to global capital markets). The following trends are affecting the banking industry and most likely will shape the competition in the next several years: • The market share for financial services that banks hold is declining, while securities firms, mutual funds, and finance companies are getting a growing share of available customers. In the United States, the share of total assets held by banks and other depository institutions relative to all financial intermediaries fell from 56% in 1982 to 42% in 1991, and this downward tendency is
likely to continue. Banks will face growing competition from financial service companies and nonbank firms. • Disintermediation is making traditional banking less and less necessary, leading to consolidation. The natural shrinkage of the market share held by commercial banks started this process in the past decade, but it has dramatically accelerated in the past few years because of global competition. • To remain competitive, commercial banks will have to exploit new sources of income: Offering new services (selling mutual funds or insurance policies).Charging customers with noninterest fees. Offering new services through the phone and the web, Entering into joint ventures with independent companies, Entering new geographic markets yielding higher returns. • Banks will need more expertise to manage new sources of risk. Market risk management models must become an integral part of a bank’s risk management culture.
The two main forces changing the competitive environment in retail banking are technological change and aggressive new competitors: 1. Technological change is creating huge problems for traditional banks with extended and costly branch networks. The major technological issues affecting the retail banking business are the rise of telephone banking and the impressive diffusion of the Web-based banking. These innovations make branch networks less important and national boundaries irrelevant. Computer banking, either through the Internet or proprietary networks, is gaining a growing and growing importance. 2. New unrelated competitors are entering the retail banking market. In the United Kingdom, the country’s two biggest retailers, Sainsbury’s and Tesco, have gone into partnership with the Bank of Scotland and the Royal Bank of Scotland, respectively. Sainsbury’s Bank offers a savings account, two credit cards, and personal loans and mortgages, with more services to follow. Tesco Personal Finance offers only a savings account and a credit card, but aims to expand its range. These trends do not indicate that traditional branch banking is going to die, but that the competitive scenario is changing. High-street banks have expensive branch networks and relatively outdated procedures, with far greater operating costs than their new, more flexible rivals.
One of the most interesting trends affecting the banking industry is the development of domestic private banking services. These services, once provided only to aristocrats, are gaining popularity and seem to be an attractive, fast-growing market. Retail banks are no longer targeting only the super rich, who hold a small proportion of the total wealth, but also people with, relatively speaking, high income. Private banking is basically an asset management service and represents a natural area for banks in time of margin squeezing and increased competition. Risks of adverse market movements are transferred, at least partially, to customers, while banks increase their feebased income. Nevertheless, commercial banks must be aware of actual and potential competitors including traditional private banks, investment banks, converted building societies, and insurers. Private banking creates opportunities for commercial banks, but also adds new problems in the following areas: • Bank organization. • Culture needed to manage private banking. • Risk management
GLOBAL INVESTMENT BANKING
Investment banking is by far the most globalized segment of the financial service industries. Commercial banks today are starting to offer investment-banking and merchant banking services to larger corporations, thus entering in direct competition with prestigious investment houses. These services include: • Identifying possible merger targets. • Financing acquisitions of other companies. • Dealing in customers’ securities (i.e., security underwritings). • Providing strategic advice. • Offering hedging services against market risk. To provide customers with a broader spectrum of services, commercial banks in search of globalization are boosting takeovers of investment banks. All the major competitors have developed, or are in the process of developing, facilities in the world’s leading markets. The aim is to provide multinational corporations with a broad range of financial service products, including conventional investment banking such as merger and acquisition (M&A) advice, market trading, financial lending and fund management, at both the institutional and retail levels. Relationship banking is replacing transaction-based banking: What is important is to increase the loyalty of the client to the bank, almost irrespectively of the service needed or required.
Diversification is not the whole story. To face the rising costs and squeezing margins created by competition, investment banks need partners with large amounts of available capital.
RECENT TRENDS IN THE GLOBAL BANKING INDUSTRY
The global banking industry has been undergoing deep transformation. The following trends can be outlined: • The technological breakthrough caused by the eruption of e-banking and e-finance. • Worldwide consolidation and consequent restructuring. • Increasing competition in terms of both markets (geographic diversification) and products. •“Contamination” among different industries, thanks to a progressive relaxation of regulations and huge inter-industry acquisitions. • A slowing population growth and increasing average life expectancy and per capita income. Since Western governments need to cut expenditures for old-age benefits to keep deficits under control, there will be an increase in the importance of private pensions, mutual funds, and private banking operations. • The growing importance of a clear strategic intent in the banking industry. Banks, especially commercial banks, will be obliged to rethink their strategic positioning. While some banks are opting to offer a vast variety of products/services on a global scale, others are focusing on some specific market segment (retail banking, private banking, corporate banking) or specific geographic area. • New competitors are entering the financial service business. In the retail banking industry, large department stores in the United Kingdom have entered the market for personal and mortgage loans, primarily to retain their customers.
These trends are having and will have a major impact on banks’ and financial institutions’ risk management process. Contamination also means that firms in the different sub industries will face risks that were once specific to another sub industry. The relaxation of the Glass-Steagall Act in the United States, and similar processes of deregulation in many other leading countries, is forcing even commercial banks to dedicate growing attention to market risk management and liquidity risk management, in addition to the more traditional credit risk and interest rate risk.
CONTAMINATION—THE RISE OF GLOBAL PLAYERS
Consolidation is also taking place also on an interindustry basis. By interindustry consolidation, we mean M&As taking place between firms of different sub industries in the financial service industry (e.g., insurance companies acquiring commercial banks or commercial banks acquiring Investment banks). There can be cost-saving potential, particularly in computer systems. But complexity explodes. Top managers have to handle a far more complicated business; front-line service staff has to sell a richer mix of products. To be a global player, a banking conglomerate must satisfy three characteristics: 1. Size. It must be big enough to play on a global basis. 2. High degree of contamination. It must cover the full spectrum of financial products and services. 3. High degree of geographic diversification. A significant portion of its assets must be outside its original domestic market.
CHAPTER 3 INDIAN BANKING INDUSTRY
Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the
development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts 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 of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look anew at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from 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 Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the ‘high revenue’ niche retail segments. The Indian banking has finally worked up to the competitive dynamics of the ‘new’ Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization. Banks that employ IT solutions are perceived to be ‘futuristic’ and proactive players capable of meeting the multifarious requirements of the large customer’s base. Private Banks have been fast on the uptake and are reorienting their strategies using the internet as a medium The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium. The Indian banking has come from a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units contributing to almost
50% of deposits and 60% of 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. The Reserve Bank of India acts as a centralized body monitoring any discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking arena. Industry estimates indicate that out of 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 foreign banks that have started their operations here. The liberalize policy of Government of India permitted entry to private sector in the banking, the industry has witnessed the entry of 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 around 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 of repute or by ‘high value’ domestic financial institutions. The popularity of these banks can be gauged by the fact that in a short span of time, these banks have gained considerable customer confidence and consequently have shown impressive growth rates. Today, the private banks corner almost four per cent share of the total share of deposits. Most of the banks in this category are concentrated in the high-growth urban areas in metros (that account for approximately 70% of the total banking business). With efficiency being the major focus, these banks have leveraged on their strengths and competencies viz. Management, operational efficiency and flexibility, superior product positioning and higher employee productivity skills.
The private banks with their focused business and service portfolio have a reputation of being niche players in the industry. A strategy that has allowed these banks to concentrate on few reliable high net worth companies and individuals rather than cater to the mass market. These well-chalked out integrates strategy plans have allowed most of these banks to deliver superlative levels of personalized services. With the Reserve Bank of India allowing these banks to operate 70% of their businesses in urban areas, this statutory requirement has translated into lower deposit mobilization costs and higher margins relative to public sector banks.
POLITICAL/ LEGAL ENVIROMENT
Government and RBI policies affect the banking sector. Sometimes looking into the political advantage of a particular party, the Government declares some measures to their benefits like waiver of short-term agricultural loans, to attract the farmer’s votes. By doing so the profits of the bank get affected. Various banks in the cooperative sector are open and run by the politicians. They exploit these banks for their benefits. Sometimes the government appoints various chairmen of the banks. Various policies are framed by the RBI looking at the present situation of the country for better control over the banks.
ECONOMICAL ENVIROMENT Banking is as old as authentic history and the modern commercial banking are traceable to ancient times. In India, banking has existed in one form or the other from time to time. The present era in banking may be taken to have commenced with establishment of bank of Bengal in 1809 under the government charter and with government participation in share capital. Allahabad bank was started in the year 1865 and Punjab national bank in 1895, and thus, others followed. Every year RBI declares its 6 monthly policy and accordingly the various measures and rates are implemented which has an impact on the banking sector. Also the Union budget affects the banking sector to boost the economy by giving certain concessions or facilities. If in the Budget savings are encouraged, then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore, booming the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking channels. SOCIAL ENVIROMENT Before nationalization of the banks, their control was in the hands of the private parties and only big business houses and the effluent sections of the society were getting benefits of banking in India. In 1969 government nationalized 14 banks. To adopt the social development in the banking sector it was necessary for speedy economic progress, consistent with social justice, in democratic political system, which is free from domination of law, and in which opportunities are open to all.
Accordingly, keeping in mind both the national and social objectives, bankers were given direction to help economically weaker section of the society and also provide need-based finance to all the sectors of the economy with flexible and liberal attitude. Now the banks provide various types of loans to farmers, working women, professionals, and traders. They also provide education loan to the students and housing loans, consumer loans, etc. Banks having big clients or big companies have to provide services like personalized banking to their clients because these customers do not believe in running about and waiting in queues for getting their work done. The bankers also have to provide these customers with special provisions and at times with benefits like food and parties. But the banks do not mind incurring these costs because of the kind of business these clients bring for the bank. Banks have changed the culture of human life in India and have made life much easier for the people.
TECHNOLOGICAL ENVIROMENT Technology plays a very important role in bank’s internal control mechanisms as well as services offered by them. It has in fact given new dimensions to the banks as well as services that they cater to and the banks are enthusiastically adopting new technological innovations for devising new products and service. The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. The use of ATM and Internet banking has allowed ‘anytime, anywhere banking’ facilities. Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and selfservice counters are now encouraged. Credit card facility has encouraged an era of cashless society. Today MasterCard and Visa card are the two most popular cards used world over. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. Some of the banks have also started home banking through
telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc. Through ECS we can receive the dividends and interest directly to our account avoiding the delay or chance of loosing the post. Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile. The messages are then recognized by the bank to provide you with the required information. All these technological changes have forced the bankers to adopt customer-based approach instead of product-based approach.
HISTORY OF BANKING IN INDIA
Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India’s growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dials a pizza. Money has become the order of the day.
From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:
• • •
Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking sector reforms after 1991.
To make this write-up more explanatory, we prefix the scenario as Phase I, Phase II and Phase III. PhaseI The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly European shareholders. Exclusively by Indians Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those day’s public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was
PhaseII Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalised. Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:
• • • • • • • •
1949: Enactment of Banking Regulation Act. 1955: Nationalisation of State Bank of India. 1959: Nationalisation of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalisation of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalisation of seven banks with deposits over 200 crore.
After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of institutions.
This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberisation of banking practices. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.
NATIONALIZATION OF BANKS IN INDIA
The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. It nationalized 14 banks then. These banks were mostly owned by businessmen and even managed by them.
• • •
Central Bank of India Bank of Maharashtra Dena Bank
• • •
Punjab National Bank Syndicate Bank Canara Bank
• • • •
Indian Bank Indian Overseas Bank Bank of Baroda Union Bank
• • • •
Allahabad Bank United Bank of India UCO Bank Bank of India
Before the steps of nationalization of Indian banks, only State Bank of India (SBI) was nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of Seven State Banks of India (formed subsidiary) took place on 19th July, 1960. The State Bank of India is India's largest commercial bank and is ranked one of the top five banks worldwide. It serves 90 million customers through a network of 9,000 branches and it offers -- either directly or through subsidiaries -- a wide range of banking services. The second phase of nationalisation of Indian banks took place in the year 1980. Seven more banks were nationalised with deposits over 200 crores. Till this year, approximately 80% of the banking segments in India were under government ownership. After the nationalisation of banks in India, the branches of the public sector banks rose to approximately 800% in deposits and advances took a huge jump by 11,000%.
The Indian banking industry, which has Reserve Bank of India as its regulatory authority, is a mix of the public sector, private sector, and foreign banks. The private sector banks are again split into old banks and new banks.
Scheduled commercial banks are those that come under the purview of the Second Schedule of Reserve Bank of India (RBI) Act, 1934. The banks that are included under this schedule are those that satisfy the criteria laid down vide section 42 (60 of the Act). Some co-operative banks come under the category of scheduled commercial banks though not all co-operative banks.
PUBLIC SECTOR BANKS
Public sector banks are those in which the Government of India or the RBI is a majority shareholder. These banks include the State Bank of India (SBI) and its subsidiaries, other nationalized banks, and Regional Rural Banks (RRBs). Over 70% of the aggregate branches in India are those of the public sector banks. Some of the leading banks in this segment include Allahabad Bank, Canara Bank, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank, State Bank of India, State Bank of Patiala, State Bank of Bikaner and
Jaipur, State Bank of Travancore, Bank of Baroda, Bank of India, Oriental Bank of Commerce, UCO Bank, Union Bank of India, Dena Bank and Corporation Bank.
PRIVATE SECTOR BANKS
Private Banks are essentially comprised of two types: the old and the new. The old private sector banks comprise those, which were operating before Banking Nationalization Act was passed in 1969. On account of their small size, and regional operations, these banks were not nationalized. These banks face intense rivalry from the new private banks and the foreign banks. The banks that are included in this segment include: Bank of Madura Ltd. (now a part of ICICI Bank), Bharat Overseas Bank Ltd., Bank of Rajasthan, Karnataka Bank Ltd., Lord Krishna Bank Ltd., The Catholic Syrian Bank Ltd., The Dhanalakshmi Bank Ltd., The Federal Bank Ltd., The Jammu & Kashmir Bank Ltd., The Karur Vysya Bank Ltd., The Lakshmi Vilas Bank Ltd., The Nedungadi Bank Ltd. and Vysya Bank. The new private sector banks were established when the Banking Regulation Act was amended in 1993. Financial institutions promoted several of these banks. After the initial licenses, the RBI has granted no more licenses. These banks are gearing up to face the foreign banks by focusing on service and technology. Currently, these banks are on an expansion spree, spreading into semi-urban areas and satellite towns. The leading banks that are included in this segment include Bank of Punjab Ltd., Centurion Bank Ltd., Global Trust Bank Ltd., HDFC Bank Ltd., ICICI Banking Corporation Ltd., IDBI Bank Ltd., IndusInd Bank Ltd. and UTI Bank Ltd.
The operations of foreign banks, though similar to that of other commercial Indian banks, are mainly confined to metropolitan areas. Foray of foreign banks depends on reciprocity, economic and political bilateral relations. An inter-departmental committee has been set up to endorse applications for entry and expansion. Foreign banks, in the wake of the liberalization era, are looking to expand and diversify. Some of the leading foreign banks that operate in India are Citibank, Standard Chartered Grindlays Bank, Hong Kong Shanghai Banking Corporation, Bank of America, Deutsche Bank, Development Bank of Singapore and Banque National De Paris.
INDIAN BANKS AND THE GLOBAL CHALLENGES
The enhanced role of the banking sector in the Indian economy, the increasing levels of deregulation along with the increasing levels of competition have facilitated globalisation of the India banking system and placed numerous demands on banks. Operating in this demanding environment has exposed banks to various challenges. The last decade has witnessed major changes in the financial sector - new banks, new financial institutions, new instruments,
new windows, and new opportunities - and, along with all this, new challenges. While deregulation has opened up new vistas for banks to augment revenues, it has entailed greater competition and consequently greater risks. Demand for new products, particularly derivatives, has required banks to diversify their product mix and also effect rapid changes in their processes and operations in order to remain competitive in the globalised environment. GLOBALISATION – A CHALLENGE AS WELL AS AN OPPORTUNITY The benefits of globalisation have been well documented and are being increasingly recognised. Globalisation of domestic banks has also been facilitated by tremendous advancement in information and communications technology. Globalisation has thrown up lot of opportunities but accompanied by concomitant risks. There is a growing realisation that the ability of countries to conduct business across national borders and the ability to cope with the possible downside risks would depend, inter-alia, on the soundness of the financial system and the strength of the individual participants. Adoption of appropriate prudential, regulatory, supervisory, and technological framework on par with international best practices enables strengthening of the domestic banking system, which would help in fortifying it against the risks that might arise out of globalisation. In India, strengthening of the banking sector for facing the pressures that may arise out of globalisation by adopting the banking sector reforms in a calibrated manner, which followed the twin governing principles of non-disruptive progress and consultative process.
GLOBAL CHALLENGES IN BANKING
Few broad challenges faced by the Indian banks in the following areas, viz., enhancement of customer service; application of technology; implementation of Basel II; improvement of risk management systems; implementation of new accounting standards; enhancement of transparency & disclosures; and compliance with KYC aspects. If we were to identify a few global challenges which banks face today, I am sure we would cover some common ground. An overview of the global challenges would include the following: Basel II implementation; enhancing corporate governance; alignment of regulatory and accounting requirements; outsourcing risks; and application of advanced technology. I propose to cover these aspects now. BASE II IMPLEMENTATION Basel II implementation is widely acknowledged as a significant challenge faced by both banks and the regulators internationally. It is true that Basel II implementation may be seen as a compliance challenge. While it may be so for some banks, Basel II implementation has another dimension which offers considerable opportunities to banks.Highlighting two opportunities that are offered to banks, viz., refinement of risk management systems; and improvement in capital efficiency. Comprehensive risk management: Under Basel I banks were focused on credit and market risks. Basel II has brought into focus a larger number of risks requiring banks to focus on a larger canvas. Besides the increase in the number of risks, banks are now beginning to focus on their inter-linkages with a view to achieve a more comprehensive risk management framework. Basel II implementation, therefore, is being increasingly seen as a medium through which banks constantly endeavour to upgrade the risk management systems to address the changing environment. Further, in the initial stages, banks were managing each risk in isolation. It is no longer adequate to manage each risk independently. Enterprises worldwide are, therefore, now putting in place an
integrated framework for risk management which is proactive, systematic and spans across the entire organisation. Banks in India are also moving from the individual silo system to an enterprise wide risk management system. While the first milestone would be risk integration across the entity, banks are also aware of the desirability of risk aggregation across the group both in the specific risk areas as also across the risks. Banks would, therefore, be required to allocate significant resources towards this endeavour. Capital efficiency: Basel II prescriptions have ushered in a transition from the traditional regulatory measure of capital adequacy to an evaluation of whether a bank has found the most efficient use of its capital to support its business i.e., a transition from capital adequacy to capital efficiency. In this transition, how effectively capital is used will determine return on equity and a consequent enhancement of shareholder value. In effect, banks may adopt a more dynamic approach to use of capital, in which capital will flow quickly to its most efficient use. This revised efficiency approach is expected to guide the return-on-equity strategy and influence banks’ business plans. With the extension of capital charge for market risks to the AFS portfolio this year and the coming into force of Basel II norms in March 2007, banks would need to shore up the capital levels not only for complying with these requirements but also for supporting the balance sheet growth. With a view to enhancing the options available to banks for augmenting their capital levels, the Reserve Bank has recently permitted banks to issue new capital instruments, including perpetual instruments. A notable feature of these instruments is that these are designed to help banks in not only managing their capital effectively but also efficiently.
ENHANCING CORPORATE GOVERNANCE
The issues related to corporate governance have continued to attract considerable national and international attention in light of a number of highprofile breakdowns in corporate governance. This becomes all the more relevant for banks since they not only accept and deploy large amount of uncollateralized public funds in fiduciary capacity, but also leverage such funds through credit creation. Banks are also important participants in the payment and settlement systems. In view of the above, legal prescriptions for ownership and governance of banks in Banking Regulation Act, 1949 have been supplemented by regulatory prescriptions issued by RBI from time to time. In view of the importance of the banking system for financial stability, sound corporate governance is not only relevant at the level of the individual bank, but is also a critical ingredient at the system level. Effective risk management systems determine the health of the financial system and its ability to survive economic shocks. To a large extent, many risk management failures reflect a breakdown in corporate governance which arise due to poor management of conflicts of interest, inadequate understanding of key banking risks, and poor Board oversight of the mechanisms for risk management and internal audit. Corporate governance is, therefore, the foundation for effective risk managements in banks and thus the foundation for a sound financial system2. Therefore, the choices which banks make when they establish their risk management and corporate governance systems have important ramifications for financial stability. These systems can affect how the institution functions and how others perceive it in the marketplace. A good “governance culture” is crucial for financial stability but since it is an ‘intangible’, rules may not be able to capture its essence effectively. Therefore, banks may have to cultivate a good governance culture building in appropriate checks and balances in their operations. There are four important forms of oversight that should be included in the organisational structure of
any bank in order to ensure appropriate checks and balances: (1) oversight by the board of directors or supervisory board; (2) oversight by individuals not involved in the day-to-day running of the various business areas; (3) direct line supervision of different business areas; and (4) independent risk management, compliance and audit functions. In addition, it is important that key personnel are fit and proper for their jobs. Although some ownership structures might have the potential to alter the strategies and objectives of a bank, these banks will also face many of the same risks associated with weak corporate governance.
COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARDS One of the prime international standards considered relevant for ensuring a safe and sound banking system is the ‘Core Principles for Effective Banking Supervision’ issued by the Basel Committee on Banking Supervision (BCBS). Accounting standards are now a part of the set of twelve standards that have been identified by the Financial Stability Forum as conducive to a robust financial infrastructure. Financial reporting and prudential supervision have slightly different perspectives. While the former is oriented towards capturing the historical position, the latter has a forward looking element particularly with reference to measurement of impairment and capital. An important challenge, therefore, is to ensure that accounting standards and prudential frameworks are mutually consistent. While working towards achieving this consistency between the two sets of standards, it is essential for the regulators
to be in a position to address any implications that the changes in accounting standards may have for the safety and soundness of banks. Derivative activity in banks in India has been increasing at a brisk pace. While the risk management framework for derivative trading, which is a relatively new area for Indian banks (particularly more in respect of structured products), is an essential pre-requisite, the absence of clear accounting guidelines in this area is matter of significant concern. It is widely accepted that as the volume of transactions increases, which is happening in the Indian banking system, the need to upgrade the accounting framework needs no emphasis. The World Bank’s ROSC on Accounting and Auditing in India has commented on the absence of an accounting standard which deals with recognition, measurement, presentation and disclosures pertaining to financial instruments. The Accounting Standards Board of the Institute of Chartered Accountants of India (ICAI) is considering issue of Accounting Standards on the above aspects pertaining to financial Instruments. These will be the Indian parallel to International Financial Reporting Standard 7, International Accounting Standards 32 and 39. The proposed Accounting Standards will be of considerable significance for financial entities and could therefore have implications for the financial sector. The formal introduction of these Accounting Standards by the ICAI is likely to take some time in view of the processes involved. In the meanwhile, the Reserve Bank is considering the need for banks and financial entities adopting the broad underlying principles of IAS 39. Since this is likely to give rise to some regulatory / prudential issues all relevant aspects are being comprehensively examined. The proposals in this regard would, as is normal, be discussed with the market participants before introduction. Adoption and implementation of these principles are likely to pose a great challenge to both the banks and the Reserve Bank.
OUTSOURCING RISKS Banks are increasingly using outsourcing for achieving strategic aims leading to either rationalisation of operational costs or tapping specialist expertise which is not available internally. 'Outsourcing' may be defined as a bank's use of a third party, including an affiliated entity within a corporate group, to perform activities on a continuing basis that would normally be undertaken by the bank itself. Typically outsourced financial services include applications processing (loan origination, credit card), document processing, investment management, marketing and research, supervision of loans, data processing and back office related activities etc. Outsourcing might give rise to several risks including, strategic risk, reputation risk, compliance risk, operational risk, exit strategy risk, counterparty risk, country risk, access risk, concentration risk and systemic risk. The failure of a service provider to provide a specified service, ensure security/ confidentiality, and comply with legal and regulatory requirements can lead to financial losses/ reputational risk for the bank and could also lead to systemic risks for the entire banking system in a country. It would therefore be imperative for the bank outsourcing its activities to ensure effective management of these risks. It is in this background that RBI has issued draft guidelines on outsourcing, which is intended to provide direction and guidance to banks to effectively manage risks arising from such outsourcing activities. The underlying principles for any outsourcing arrangement by a bank are that such arrangements should neither diminish the bank’s ability to fulfill its obligations to its customers and the RBI nor impede effective supervision by RBI. Outsourcing banks, therefore, should take steps to ensure that the service provider employs the same high standard of care in performing the services as would be employed by the banks if the activities were conducted within the
banks and not outsourced. Accordingly, banks are not expected to outsource any activity that would result in their internal control, business conduct, or reputation being compromised or weakened.
APPLICATION OF ADVANCED TECHNOLOGY
Technology is a key driver in the banking industry, which creates new business models and processes, and also revolutionises distribution channels. Banks which have made inadequate investment in technology have consequently faced an erosion of their market shares. The beneficiaries are those banks which have invested in technology. Adoption of technology also enhances the quality of risk management systems in banks. Recognising the benefits of modernising their technology infrastructure banks are taking the right initiatives. While doing so, banks have four options to choose from: they can build a new system themselves, or buy best of the modules, or buy a comprehensive solution, or outsource. In this context banks need to clearly define their core competencies to be sure that they are investing in areas that will distinguish them from other market players, and give them a competitive advantage6. A further challenge which banks face in this regard is to ensure that they derive maximum advantage from their investments in technology and avoid wasteful expenditure which might arise on account of uncoordinated and piecemeal adoption of technology; adoption of inappropriate/ inconsistent technology and adoption of obsolete technology.
CAPACITY BUILDING As dictated by the changing environment, banks need to focus on appropriate capacity building measures to equip their staff to handle advanced risk management systems and supervisors also need to equally equip themselves with appropriate skills to have effective supervision of banks adopting those systems. In the likelihood of a high level of attrition in the system, banks need to focus on motivating their skilled staff and retaining them7. Skill requirements would be significantly higher for banks planning to migrate to the advanced approaches under Basel II. Capacity building gains greater relevance in these banks, so as to equip themselves to take advantage of the incentives offered under the advanced approaches. A relevant point in this regard is that capacity building should be across the institution and not confined to any particular level or any particular area. The demand for better skills can be met either from within or from outside. It would perhaps be worthwhile to first glean through the existing resources to identify misplaced or hidden or forgotten resources and re-position them to boost the bank’s efforts to capitalise on available skills. This does not undermine the benefits that a bank may derive by meeting their requirements from the market, but is only intended to prioritise the process. CONCLUSION The global challenges which banks face are not confined only to the global banks. These aspects are also highly relevant for banks which are part of a globalised banking system. Further, overcoming these challenges by the other banks is expected to not only stand them in good stead during difficult times but also augurs well for the banking system to which they belong and will also equip them to launch themselves as a global bank.
TRANSFORMATION INITIATIVES NEEDED FOR BANKS
Strategy Sales & Marketing strategy for both retail & wholesale banking Expanding geographies Brand Understanding the values of the brand Repositioning the brand to communicate the values
Organization restructuring Re organization of the bank in line with the strategic thrust Re engineering of the key business processes Redesign of Sales processes to increase conversion ratio Six Sigma process improvements for branch channel, Call Center & back office processes Centralization of branch operations and deferred processes to free up resources Cost efficiency Reduction in Total cost of acquisition Reduction in transaction costs Reduction in fixed and overheads cost Right sizing and matching of skills Manpower modelling for branch & back office at various volume scenarios Productivity improvement for sales & service functions Competency Assessments & profiling Creating a high performing organization Define new roles & responsibilities, KRA
Assessing competencies of people across levels and match the position with the skill-set Designing and implementing a new PMS for restructured organization Change management & creating a new mind set Developing critical mass of champions and drive ‘Change’ across the organisation to move from conventional banking to new age banking.
BANKING SERVICES IN INDIA
With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India.
With stiff competition and advancement of technology, the services provided by banks have become more easy and convenient. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. The following are the major services provided by the Banks.
Open bank account - the most common and first service of the banking sector. There are different types of bank account in Indian banking sector. The bank accounts are as follows:
Bank Savings Account - Bank Savings Account can be opened for eligible person / persons and certain organisations / agencies (as advised by Reserve Bank of India (RBI) from time to time)
Bank Current Account - Bank Current Account can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs / Specified Associates / Societies / Trusts, etc.
Bank Term Deposits Account - Bank Term Deposits Account can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs/ Specified Associates / Societies / Trusts, etc.
Bank Account Online - With the advancement of technology, the major banks in the public and private sector has facilitated their customer to open bank account online. Bank account online is registered through a PC with an internet connection. The advent in opening an account.
Credit card Credit cards in India are gaining ground. A number of banks in India are encouraging people to use credit card. The concept of credit card was used in 1950 with the launch of charge cards in USA by Diners Club and American Express. Credit card however became more popular with use of magnetic strip in 1970. Credit card in India became popular with the introduction of foreign banks in the country. Credit cards are financial instruments, which can be used more than once to borrow money or buy products and services on credit. Basically banks, retail stores and other businesses issue these. Major Banks issuing Credit Card in India
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State Bank of India credit card (SBI credit card) Bank of Baroda credit card or Bob credit card ICICI credit card
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HDFC credit card IDBI credit card ABN AMRO credit card Standard Chartered credit card HSBC credit card
Global player in credit card market
MasterCard MasterCard is a product of MasterCard International and along with VISA are distributed by financial institutions around the world. Cardholders borrow money against a line of credit and pay it back with interest if the balance is carried over from month to month. Its products are issued by 23,000 financial institutions in 220 countries and territories. In 1998, it had almost 700 million cards in circulation, whose users spent $650 billion in more than 16.2 million locations.
VISA Card VISA cards is a product of VISA USA and along with MasterCard is distributed by financial institutions around the world. A VISA cardholder borrows money against a credit line and repays the money with interest if the balance is carried over from month to month in a revolving line of credit. Nearly 600 million cards carry one of the VISA brands and more than 14 million locations in the world. AmericanExpress
The world's favorite card is American Express Credit Card. More than 57 million cards are in circulation and growing and it is still growing further. Around US $ 123 billion was spent last year through American Express Cards and it is poised to be the world's No. 1 card in the near future. In a regressive US economy last year, the total amount spent on American Express cards rose by 4 percent. American Express cards are very popular in the U.S., Canada, Europe and Asia and are used widely in the retail and everyday expenses segment. DinersClubInternational Diners Club is the world's No. 1 Charge Card. Diners Club cardholders reside all over the world and the Diners Card is a all-time favourite for corporates. There are more than 8 million Diners Club cardholders. They are affluent and are frequent travelers in premier businesses and institutions, including Fortune 500 companies and leading global corporations. JCBCards The JCB Card has a merchant network of 10.93 million in approximately 189 countries. It is supported by over 320 financial institutions worldwide and serves more than 48 million cardholders in eighteen countries world wide. The JCB philosophy of "identify the customer's needs and please the customer with Service from the Heart" is paying rich dividends as their customers spend US$43 billion annually on their JCB cards. The following are some of the varieties of credit cards in India
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ANZ - Gold ANZ - Silver Bank Of India - Indiacard Bol - Taj Premium
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Bol - Gold BoB - Exclusive BoB - Premium Canara Bank - Cancard
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Citibank - Gold Citibank - Silver Citibank WWF Card Citibank Visa Card for Women
Citibank Cry Card Citibank International Credit Silver
Citibank Electronic Credit Card Citibank Times Card Citibank Citi Diners Club Card
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Debit Card Debit cards, also known as check cards look like credit cards or ATM cards (automated teller machine card). It operate like cash or a personal check. Debit cards are different from credit cards. Credit card is a way to "pay later," whereas debit card is a way to "pay now." When we use a debit card, our money is quickly deducted from the bank account. Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants. Its an alternative to carrying a checkbook or cash. With debit card, we use our own money and not the issuer's money. In India almost all the banks issue debit card to its account holders.
Features of Debit Card
Obtaining a debit card is often easier than obtaining a credit card. Using a debit card instead of writing checks saves you from showing identification or giving out personal information at the time of the transaction.
Using a debit card frees you from carrying cash or a checkbook. Using a debit card means you no longer have to stock up on traveler's checks or cash when you travel. Debit cards may be more readily accepted by merchants than checks, especially in other states or countries wherever your card brand is accepted.
The debit card is a quick, "pay now" product, giving you no grace period. Using a debit card may mean you have less protection than with a credit card purchase for items which are never delivered, are defective, or were misrepresented. But, as with credit cards, you may dispute unauthorized charges or other mistakes within 60 days. You should contact the card issuer if a problem cannot be resolved with the merchant.
Returning goods or canceling services purchased with a debit card is treated as if the purchase were made with cash or a check.
LOANS Banks in India with the way of development have become easy to apply in loan market. The following loans are given by almost all the banks in the country:
Personal Loan Car Loan or Auto Loan
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Loan against Shares Home Loan Education Loan or Student Loan
In Personal Loan, one can get a sanctioned loan amount between Rs 25,000 to 10,00,000 depending upon the profile of person applying for the loan. SBI, ICICI, HDFC, HSBC are some of the leading banks which deals in in personal loan. Almost all the banks have jumped into the market of car loan which is also sometimes termed as auto loan. It is one of the fast moving financial products of banks. Car loan / auto loan are sanctioned to the extent of 85% upon the exshowroom price of the car with some simple paper works and a small amount of processing fee. Loan against shares is very easy to get because liquid guarantee is involved in it. Home loan is the latest craze in the banking sector with the development of the infrastructure. Now people are moving to township outside the city. More number of townships are coming up to meet the demand of 'house for all'. The RBI has also liberalised the interest rates of home loan in order to match the repayment capability of even middle class people. Almost all banks are dealing in home loan. Again SBI , ICICI , HDFC , HSBC are leading. The educational loan, rather to be termed as student loan, is a good banking product for the mass. Students with certain academic brilliance, studying at recognized colleges/universities in India and abroad are generally given education loan / student loan so as to meet the expenses on tuition fee/ maintenance cost/books and other equipment. MONEY TRANSFER
Beside lending and depositing money, banks also carry money from one corner of the globe to another. This act of banks is known as transfer of money. This activity is termed as remittance business. Banks generally issue Demand Drafts, Banker's Cheques, Money Orders or other such instruments for transferring the money. This is a type of Telegraphic Transfer or Tele Cash Orders. It has been only a couple of years that banks have jumped into the money transfer businessess in India. The international money transfer market grew 9.3% from 2003 to 2004 i.e. from US$213 bn. to US$233 bn. in 2004. Economists say that the market of money transfer will further grow at cumulative 10.1% average growth rate through 2008. With the use of high technology and varieties of product it seems that "Free" money transfers will become commonplace. We will see more bundling of tailored money services by banks and non-traditional entrants that will include "free" money transfers. Many banks will even use money transfer services as loss-leaders inorder to generate account openings and cross-sell opportunities. The price evolution of money transfer products for banks will be similar to that of consumer bill pay-the product is worth giving away as an account acquisition relationships. ATM money transfer card products have had terrible bank adoption rates since being introduced in the last three to four years. Remittees who are highly educated and have been already been exposed to ATM technology in receiving countries tend to have an interest in this product. Money transfer to India is one of the most important part played by the banks. This service provide peace of mind to either the NRIs or to the visitors to India. Many Indian banks have ATM'S (automatic teller machine), enable to draw foreign currency in India.
overall market share and
By 2007, we will see a good percent of all foreign-born households doing some level of online banking. First-mover banks will start having a window of opportunity to include online transfer functionality within the next couple of years, which currently frequents traditional money transmitters such as Western Union. There is a terrific opportunity for banks and non-banks to offer more robust global inter-institutional funds transfer services online. More than half of Western Union's customers today are already banked, and most do not have an alternative product marketed by their bank that is painless, quick, and cost-effective. That will change as banks offer transfer services through their online channel. Visa has recently introduced the 'Visa Money Transfer' option for its savings and current account holder of any bank with a visa debit card. This facility helps its customer to transfer funds from his bank account to any visa card, either debit or credit within India. A Visa Money Transfer is of similar kind, in many respects, to the third-party fund transfer option given by some banks to its account holders through echeque, but this is restricted to only visa card holders. How to transfer money? •
Log on to your bank account through your respective bank websites. Fill the beneficiary details like visa card numbers, name, address and then specify the amount that needs to be transferred. For bank account specify the visa card number and credit card number for paying credit card bill.
Click on to VISA Transfer Payments button. Transfer immediately or on schedule date. Your account will be debited according to the date mentioned.
MOBILE BANKING Mobile Banking is a service that allows customers to do banking transactions on their mobile phone without making a call , using the SMS facility. Mobile Banking works on the 'Text Messaging Facility' also called the SMS that is available on mobile phones. This facility allows sending a short text message from mobile phone instead of making a phone call. All that is need to do is, to type out a short text message on mobile phone and send it out to a specific mobile banking number given by the bank .The response is sent as an SMS message, all in the matter of a few seconds. The following transactions are currently available across India • • • • • • • • • • • Balance Inquiry of all accounts linked to Customer Identification Number (maximun up to five accounts) Following transactions give information on primary account Checking the last 3 transactions in your primary account for MobileBanking Placing a Stop Payment on a cheque Requesting a cheque book Requesting an Account Statement Cheque Status inquiry Bill Presentment Fixed Deposit Inquiry A Help menu, which gives you the transaction codes for the various transactions IPIN Re-generation request
Mobile banking in India is set to explode - approximately 43 million urban Indians used their mobile phones to access banking services during quarter ending August, 2009, a reach of 15% among urban Indian mobile phone user. Most Popular Banking Service on Mobile Checking account balances is the most popular banking service used by urban Indians with almost 40 million users followed by checking last three transactions, 28 million and status of cheques with 21 million users. Usage Used mobile banking Checking account balance View last three transactions Status of cheques Payment reminders Request a cheque book Unique Users (In millions) 43.70 39.97 28.15 21.06 20.92 19.11
Mobile banking is popular among the Rs.1 to 5 lakhs per year income group with almost 60% of mobile banking users falling in the income bracket, an indicator of adoption of this service by younger generation. PHONE BANKING When one dials in to Phone Banking, a voice prompt will guide him through the various transactions. He may also talk to a Phone Banker, who will provide him with the required assistance.
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Check your account balance Enquire on the cheque status Order a Cheque Book / Account Statement Stop Payment
• • • • • • • •
Loan Related queries transfer Funds between accounts Open a Fixed deposit or Enquire on your Fixed deposits / TDS Pay bills Report loss of ATM / Debit Card / ForexPlus Card Enquire about latest Interest / Exchange rates Request a Demand Draft / Manager's Cheque Demat Related Queries
INTERNET BANKING Internet banking is the technology that allows banking customers to do the things they would normally do at their bank from the comfort of home with a connection to the Internet. Anything that would normally be done in the offshore bank account, which is done on the Internet, is considered Internet banking. With cybercafes and kiosks springing up in different cities access to the Net is going to be easy. Internet banking (also referred as e banking) is the latest in this series of technological wonders in the recent past involving use of Internet for delivery of banking products & services. Even the Morgan Stanley Dean Witter Internet research emphasised that Web is more important for retail financial services than for many other industries. Internet banking is changing the banking industry and is having the major effects on banking relationships. Banking is now no longer confined to the branches were one has to approach the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true Internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Providing Internet banking is
increasingly becoming a "need to have" than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception in many developed countries due to the fact that it is the cheapest way of providing banking services. Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts: • Throughout the country, the Internet Banking is in the nascent banking services).
stage of development (only 50 banks are offering varied kind of Internet In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions and cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development.
Following services can be availed on the internet:
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Bill Payment Funds Transfer Special Promotions & Offers Ticket Booking
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credit cards Online Shopping Online Tax payment
Chapter 4 Bank Profile
ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion (US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$ 648.8 million) for the nine months ended December 31, 2009. The Bank has a network of 1,654 branches and about 4,883 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and nonlife insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion (US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$ 648.8 million) for the
nine months ended December 31, 2009. The Bank has a network of 1,645 branches and about 4,883 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. UK subsidiary has established branches in Belgium and Germany.
Personal banking Services
Mobile Banking Services offered by ICICI Bank
Bank Account Funds Transfer* Bill Payment+ Balance Enquiry Last 5 Transactions Cheque Book Request Stop Cheque Request Cheque Status Enquiry Credit Card Balance Details Last Payment Details Payment Due Date Reward Point Status Demat Holding Enquiry Transaction Status Bill Enquiry ISIN Enquiry Loan Provisional Income Tax Certificate Final Income Tax Certificate Reset Letter Rescheduled Letter Loan Agreement Copy Other Services Locate Branch Locate ATM Phone Banking Number Prepaid Mobile Recharge* Apply for Bank Products Status of Service Request Raised
Benefits of using iMobile:
Secure access to your bank accounts anytime, anywhere Convenient menu based features designed for easy access Enjoy financial transactions worth Rs 50,000 per day for funds transfer to any account, bill payment and prepaid mobile recharge Continually updated services
Multiple service options with minimal effort
Services available with iMobile:
Payment of utility bills and credit card bills Transfer of funds to any bank account Payment of insurance premium
Placement of service request such us ordering of cheque books, bank account statements, cheque status and balance enquiry.
Tv banking at icici bank
At ICICI Bank, we've introduced India to an all new way of banking. TV Banking. This pioneering initiative now enables you to get information regarding loans, accounts, deposits and a lot more while you're watching that exciting cricket match or your favorite sitcom. Quite certainly, TV Banking has revolutionized banking by bringing it right into your living room. You can get details and information regarding all our services – everything from loans, accounts and deposits to additional services like financial counselling, interactive features like calculators for loans and premiums, and lots more.If your TV service is coming to you through Satellite DTH or Digital Cable, you can avail of our TV Banking from anywhere in India
It doesn’t require an Internet connection
It's available 24x7 Zero charges
You can obtain all the information you need about the available banking products and services on the TV screen itself
Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.
HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed
significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values Operational Excellence, Customer Focus, Product Leadership and People.
As on 31st December, 2009 the authorized share capital of the Bank is Rs. 550 crore. The paid-up capital as on said date is Rs. 455,23,65,640/- (45,52,36,564 equity shares of Rs. 10/- each). The HDFC Group holds 23.87 % of the Bank's equity and about 16.94 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.46 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 4,58,683 shareholders. The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.
On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP. The merged entity will have a strong deposit base of around Rs. 1,22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs. 1,63,000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower. In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New Generation Private Sector Banks. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. HDFC TECHNOLOGY HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was a deputy governor of the reserve bank of india. The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia. The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing Hdfc are also on the board. Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.
Products and Services at glance
Personal banking A. Accounts & Deposits Regular Savings Account Savings Plus Account SavingsMax Account Senior Citizens Account No Frills Account InstitutionalSavings Account Payroll Salary Account Classic Salary Account Regular Salary Account Premium Salary Account Many others
B. Loans Personal Loans Home Loans Two Wheeler Loans
New Car Loans Used Car Loans Overdraft against Car Express Loans Loan against Securities Loan against Property Commercial Vehicle Finance Working Capital Finance Construction Equipment Finance Offers & Deals CustomerCenter
C. Investments & Insurance Mutual Funds Insurance Bonds Financial Planning Knowledge Centre Equities & Derivatives Mudra gold bar E-Monies Electronic Funds Transfer Excise and Service Tax Payment
D. Forex Services Trade Finance Travelers’ Cheques Foreign Currency Cash Foreign Currency Drafts Foreign Currency Cheque Deposits Foreign Currency Remittances Cash To Master ForexPlus Card E. Payment Services Net Safe Prepaid Refill Bill Pay Direct Pay Visa Money Transfer
F. Access Your Bank One View Insta Alerts Mobile Banking ATM Phone Banking Branch Network
G. Cards Silver Credit Card Gold Credit Card Woman's Gold Credit Card Platinum plus Credit Card Titanium Credit Card Value plus Credit Card Health plus Credit Card HDFC Bank Idea Silver Card HDFC Bank Idea Gold Card Compare Cards Transfer & Safe TrackyourCreditCard
H. Get More from Your Card Offers & Savings My Rewards Insta Wonderz Add-On Cards Credit Card Usage Guide Easy EMI Net safe Smart Pay Secure Plus My City Benefit Card Debit Cards Easy ShopInternational Debit Card Easy Shop Gold Debit Card Easy ShopInternational Business Debit Card Easy ShopWoman's Advantage Debit Card
Prepaid Cards Forex Plus Card Kisan Card
State Bank of India
The State Bank of India, the country’s oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation – the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups – Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc – each one of these initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years.
It is also focusing at the top end of the market, on whole sale banking capabilities to provide India’s growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.
The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc
With four national level Apex Training Colleges and 54 learning Centres spread all over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programes are attended by bankers from banks in other countries.
The bank is also looking at opportunities to grow in size in India as well as Internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings.
Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all employees together on this exciting road to Transformation. In a recently concluded mass internal communication programme termed ‘Parivartan’ the Bank rolled out over 3300 two day workshops across the country and covered over 130,000 employees in a period of 100 days using about 400 Trainers, to drive home the message of Change and inclusiveness. The workshops fired the imagination of the employees with some other banks in India as well as other Public Sector Organizations seeking to emulate the programme.
State Bank of India offers a wide range of services in the Personal Banking Segment which are indexed here
YATRA FOREIGN TRAVEL CARD
GIFT CARDS GIFT CHEQUES INTERNET
SBI’s value proposition is based on Unmatched Expertise, State-Of-Art Technology And Operational Ease that will redefine the way india trades. State Bank of India in alliance with SBICap Securities Limitedand Motilal Oswal Securities Limited offers an online trading account which will let you trade from the comfort of your home or office either through the internet. This service provides you with a 3-in1 account which is an integrated platform of savings bank a/c, demat a/c and an online trading a/c to give you a convenient and paper free trading experience under one roof.
eZ -Pay Card
Payment of salaries to employees who will be required to work at different locations is generally a difficult proposition for Employers as a single Banking arrangement can not be made for all employees. The SBI eZ-Pay card , a prepaid plastic card issued in Indian Rupees in association with VISA international, is the right solution in such cases. Periodical payments like salary, payment of TA/ Medical/ incentives etc. can be loaded on to the card from a single point and the funds are available to the employees immediately. The SBI eZ-Pay card is a Pre-paid ATM-cum-Debit card usable at all VISA-enabled ATMs through PIN and at Merchant establishments/ Point of Sale through PIN/ Signature, in India, Nepal & Bhutan. The cardholder need not visit any Branch to withdraw his money. Balance enquiry can be made either through ATM or through Internet free of charge.
Mobile banking services
Away from home, bills can be paid or money sent to the loved ones or balance enquiries done anytime 24x7!!! That is what SBI FreedoM offers -convenience, simple, secure, anytime and anywhere banking. The service is presently available on java enabled mobile phones over SMS/ GPRS/ WAP as also non java phones with GPRS connection. The service can be availed over the free GPRS facilities offered by various mobile service providers. The services for other non-Java mobile phonesunder development and will be offered using Unstructured Supplementary Services Data (USSD).
State Bank offers convenience of over 8000 ATMs in India, the largest network in the country and continuing to expand fast! This means that you can transact free of cost at the ATMs of State Bank Group (This includes the ATMs of State Bank of India as well as the Associate Banks – namely, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra, and State Bank of Travancore) and wholly owned subsidiary viz. SBI Commercial and International Bank Ltd., using the State Bank ATM-cum-Debit (Cash Plus) card.
Presenting Gifts to Employees is an integral and unique culture in India. Traditionally, gifts have been given to employees in the form of cash or kind. With the advancement of Banking, Gift Cheques were introduced, allowing the employees to use the money according to their wishes. These cheques, however, are accepted at the issuing bank branches only. The SBI Gift Card, issued in association with VISA International, is one such product which gives the comfort of convenience and wide acceptability. Gift Card is a Pre-paid Plastic Card supported by Magnetic-strip based technology. It is usable at all VISA enabled Merchant Establishments and POS by signature/ PIN. It is a perfect substitute for Gift Vouchers sold by many retail houses as its use is not restricted to any particular Merchant Establishment/ Point of Sale.
Sbi Yuva Card
SBI Yuva Card is an International Debit Card on VISA platform, exclusively designed for vibrant youth of Indiabetween 18-30 years of Age. The card can be used at ATMs for cash withdrawal at all ATMs under bilateral arrangement. It can be used for dining, shopping and traveling at POS/MEs. This Card is available in all our branches free of cost. You can not only draw cash at ATM but also swipe it for. This card is PIN based on ATM and signature based at POS/MEs. This card can ‘be used for e-commerce i.e. for shopping through internet by using VbV (Verified by VISA) certified internet websites. Funds can also be transferred using VISA Monet Transfer
facility. Using our ATMs, card holder can also transfer funds to other VISA Debit/ Credit Cards issued by our Bank or any other Bank.
Simple, fast and convenient - anytime -anywhere - always open. You can now check your account balances, view your account, request for cheque book, drafts, Bankers cheques, stop cheque payment and issue standing instructions. You can also transfer funds to your other accounts at the Branch, request for third party transfers, invest and renew Term Deposits. RBIEFT Inter-bank Electronic Funds Transfer facility of the Reserve Bank of India (RBI - EFT) is available with our branches in the clearing zone of Service Branches at Kolkata, Mumbai ,New delhi and Chennai.
Bank of Baroda
Bank of Baroda India
The Bank of Baroda was established in the year 1908 in Baroda. Ever since its inception, the bank has been growing and expanding its branches successfully. At the turn of a century, the bank has its presence in 25 countries across the world. Bank of Baroda has progressively taken a step towards commitment and values by providing uncompromising standards of service to its customers, stakeholders, employees and the like.
Heritage & Ethics of Bank of Baroda:
The Bank of Baroda was started on 20th July 1908 under the Companies Act of 1887. The initial capital invested was Rs. 10 Lakhs. The Maharaja was none other than Sayajirao Gaekwad who, with his visionary insight, planned the beginning of a reputed journey which over the years, came to be known as the Bank of Baroda. It is interesting to note that during the period of 1913 to 1917; almost 87 banks in India succumbed to a financial crisis. However, the Bank of Baroda survived the economic depression by dint of its financial integrity, business prudence and concern uncompromising concern about its customers and clients. This has transcended down to the present ages and has become the motto of the bank.
Marketing-Initiatives The mid-eighties marked the beginning of the shift to a buyers` market. The Bank orchestrated its business strategies around the centrality of the customer. It diversified into areas of merchant banking, housing finance, credit cards and mutual funds. A string of segment specific branches entrenched operations in the profitable markets. Overseas operations were revamped and structural changes intensified in the territories to cater to second generation NRIs. Slowly but surely, the move to become a one stop financial supermarket had been set in motion. Service delivery standards were stipulated. Technology was adopted to add punch. Employees across the board were inculcated with the marketing concept. Aggressive marketing became the new business philosophy. People-Initiatives Bank of Baroda has always had an immense faith in the infinite potential of its people. This has been historically demonstrated in its recruitment practices, developmental initiatives, placement processes and promotion policies. Strategic HR interventions like, according cross border and cross cultural work exposure to its managers, hiring diverse functional specialists to support line functionaries and complementing the technical competencies of its people by imparting conceptual, managerial and leadership skills, gave the Bank competitive advantage. The elaborate man management policies also made the Bank a breeding ground for business leaders. The Bank provided around a dozen CEOs to the industry- men who went on to build other great institutions. People initiatives were blended with IR initiatives to create an effectively harmonious workplace, where everyone prospered. Financial-Initiatives New norms for capital adequacy required new capital management strategies. In 1995 the Bank raised Rs 300 crores through a Bond issue. In 1996 the Bank tapped the capital market with an IPO of Rs 850 crores, Despite adverse market conditions prevailing then, the issue was over subscribed, reflecting the positive public perception of the Bank's fundamental financial strength. Digital-Initiatives Bank of Baroda pioneered the shift from manual operating systems to a computerized work
environment. Starting with ledgers, to ledger posting machines, through ALPMs, the Bank graduated to the use of Unix based systems to Mainframes, to client server based Total Branch Mechanization Systems. Today, the Bank has 1918 computerized branches, covering 70% of its network and 91.64% of its business. Alive to the growing complexities of an intensely competitive marketplace and the mounting expectations of customers fuelled by this competition, the Bank reworked its distribution strategy. It ventured beyond the brick and mortar delivery channel into ATMs and the OmniBOB range of anytime, anywhere electronic channels of PC banking, telephone banking. The e-banking products used state of the art technologies like digital certificates, smart card authentication and secure networking. The new IT strategy, in the process of implementation will see the deployment of Core Banking Systems, Multi Service Transaction Switch, Payment Gateways - all geared to deliver convenience banking. Quality-Initiatives In its relentless striving for quality perfection, the Bank secured the ISO 9001:2000 certification for 15 branches. By end of the current financial, the Bank is targeting 54 more branches for this quality certification. The-Future Revolutionary and discontinuous changes in the operating environment are a stark reminder that business success is 'impermanent'. The emergence of IT as a major driver for change, has accentuated the need to initiate a major transformation program. The conversion to an IT savvy, market driven bank will be a prerequisite to survival and growth. A major and strategic step in hitech, was the establishment of the Integrated Treasury branch, as a forerunner to full-fledged global treasury operations. Towards creating a future Bank of Baroda, the Bank has adopted a revolutionary new business strategy that will be enabled by a revolutionary new IT strategy. Actioning this strategy will position Bank of Baroda as India's uncontested premier bank. At Bank of Baroda, change is a journey. It has a beginning. There will be no end. It will be a long and difficult march. And the Bank will emerge stronger, more resilient and positioned to become India's first bank of truly global standards. The relocation to the imposing Baroda Corporate
Centre, is a true reflection of the Bank's resolve to move ahead of the times. It will not be out of place now, as it stands on the threshold of a digital era, to echo the same sentiments that guided the Bank in its platinum jubilee year - 'a promising future is the sequel to a glorious past'.
Products & Services
ElectronicClearingServices(ECS) This is a unique system under which Bank of Baroda helps companies and institutions making heavy payments disburse these amounts directly into the bank accounts of the beneficiaries such as account holders, shareholders, investors etc. Key Benefits
Prompt payment on the due date. Convenient receipt of money reduces trips made to the bank for depositing dividend/interest warrants.
Elimination of fraudulent encashment against instruments lost in transit.
BOBCashReach: A tailor made product for customers, that enables faster remittance of funds. A more economic, convenient, smoother mode of operation which can be availed of by a well supported network of centres.
Smoother: Time and money spent on dispatches are saved More economic: Involves a premium service at nominal cost with a pickup service from the client's office. More Convenient: The collection and credit are both done on days convenient to the client.
Centred towards client benefits: All the benefits are passed on to the clients, in terms of enhanced quality, ease of liquidity and profit maximisation through better resource management. Spread over a good network: Initially launched at 5 centres, with the connectivity to be now fanned over to around 200 centres.
OutwardBillsforCollection: All branches of Bank of Baroda have the facility of collecting Cheques, Demand Drafts, Interest Warrants, Dividend Warrants, Refund Orders, Clean Bills and Documentary Bills from customers and various centres.. All Cheques and other instruments are collected into properly introduced accounts and sent for collection on the day of receipt from the customers or the next working day. TimeBoundCollection: All branches of Bank of Baroda are prompt in terms of the collections and forwarding of cheques and other instruments. For metro cities, when financial instruments are presented in a branch, the proceeds are credited to the customer's account on the same day in the following week. For state capitals, (and centres with more than 100 branches), amount is credited only after 10 days. If these instruments are not collected within 14 days of lodgement, interest @ 2% per annum over savings bank rate is paid and is credited to the customer's account, without the customer having to claim it. Branches also accept requests for collection of Loan Certificates / FDRs issued by Joint Stock Cos.; prize money of Lottery Tickets, Foreign Currency Notes etc. The bank levies service charges as stipulated from time to time. InwardBillsforCollection: Bills of Exchange, Promissory Notes, Hundi's etc. (Clean / Documentary), payable locally but received from outstation branches / banks / parties are treated as "Inward Bills for Collection".
Also, Bills received from Bank of Baroda branches and from other banks, directly from drawers or outstation parties are treated as Usance (??) Bills. BOBQuick: The Funds collected in this offering are credited to the customer's account within a guaranteed period of 7 days. Bank of Baroda's BOB Quick ensures a better collection service, which creates new avenues of income and ensures better investment of funds. All cheques amounting to Rs. 25000/- and above are drawn on select banks and are eligible for "Quick inter station clearing". Rs. 50/- per packet is charged for courier charges with an additional but nominal collection charge. NationalClearingSpecialFacilities: This product is an undertaking by the Reserve Bank of India, for inter city clearing of cheques between the four metropolitan centres of Delhi, Mumbai, Chennai and Calcutta. Key Benefits
Settlement of transactions on the basis of net value of instruments. All financial instruments are cleared promptly with the introduction of mechanised cheque processing, achieved through MICR technology. The concept of clearing has been extended to clearance of outstation cheques also. In addition to the four metropolitan centres, certain other centres have also been identified for "One Way National Clearing". These centres are Nagpur, Ahmedabad, Hyderabad, Bangalore, Pondicherry, Trichy, Trivandrum, Vellore, Baroda, Erode, Madurai, and more.
Baroda Internet Banking
"Baroda Connect" is an internet banking facility introduced as an alternative delivery channel for rendering effective customer service on 24 X 7 basis. It offers unique customized services to both Retail & Corporate customers. Under THIS facility customer can
View Account summary of all operative, deposit and loan accounts View all multiple Account information online with a single user id Get Account statements
Under Transaction facility customer can Transfer funds immediately or schedule for a future date to self linked and third party Pay through Online Tax - Direct and Indirect taxes online such as Excise Duty, Service Tax, Customs Duty, Income Tax etc. Pay through Baroda Easy Pay - utility bills like electricity, mobile etc , Donations, Subscription, Travel plan booking online Book Rail Ticket – IRCTC Additionally a Corporate user can
Set up multiple workflow of initiators and approvers for transactions and requests View all trade finance related facilities availed eg. Export / Import LC, Inland/ Export Bills, Forward Contracts Bank Guarantees, Packing Credit account etc Use upload facility for single debit-multiple credit, multiple debit-multiple credit and single credit-multiple debit.
CHAPTER 5 DATA ANALYSIS AND INTERPRETATION
ANALYSIS OF GENERAL QUESTIONS
1) Which type of service do you prefer the most from the banks? a ATM services b Internet banking c Mobile banking d Retail banking
M o s t Pre fe rre d Ba n kin g Se rv ic e A T M Serv ic e s In tern e t Ba n kin g 7% 14% M o b ile Ba n kin g Re ta il Ba n kin g
2) Your Account Decisions are influenced by: a Oneself b Market research c broker d friends/relatives
In flu en ce Of A cco u n t Decis io n s On es elf M arket Res earch 18% 2% 4% Bro ker Frien d s /Relativ es
3) Which factors do you consider before opening account or in purchasing new plan in a particular bank? A B C D E Financial position Current Market Position Goodwill Future prospects Services provided
Factors cons idered before opening an A ccount
12% 28% 8% Financial pos ition Current M arket Pos ition Goodwill 22% Future prospects Services provided
5) Which bank is more secure according to you? a ICICI b HDFC c SBI d BOB
M os t Secure Bank ICICI HDFC SBI BOB 20%
ANALYSIS OF CHI SQUARE TEST OF INDEPENDENCE
Chi square test of independence
H0: Preference towards public/private sector banks and age group are independent of each other. H1: Preference towards public/private sector banks and age group are dependent of each
where Fo= observed frequency Fe= expected frequency for each cell Fe=(frequency for the column)(frequency for the row)/n
Calculation observed frequency Age group Preference towards banks Public sector banks Private sector banks Total of column 18-25 13 22 35 26-35 21 16 37 36-45 31 23 54 46-55 36 19 55 55 and above 16 3 19 Total of raw 117 83 200
Fo 13 21 31 36 16 22
Fe 20.48 21.64 31.59 32.18 11.12 14.53
Fo-Fe -7.48 -0.64 -0.59 3.82 4.88 7.47
(Fo-Fe)^2 55.95 0.41 0.35 14.59 23.81 55.80
[(Fo-Fe)^2]/Fe 2.73 0.02 0.01 0.45 2.14 3.84
16 23 19 3
15.36 22.41 22.83 7.89
0.64 0.59 -3.83 -4.89
0.41 0.35 14.67 23.91
0.03 0.02 0.64 3.03 χ2Cal = 12.91
Degree of freedom=(R-1)*(C-1) = (2-1)*(5-1) =4 Confidence level = 95 % Therefore χ2tab = 9.49 Now in this case χ2cal > χ2tab hence null hypothesis is rejected and alternative hypothesis is accepted. Conclusion: Preference towards public/private sector banks and age group are dependent on each other.
Strenth of contingency co efficient: Cramour’s value =[Φ/Min (r-1) or (c-1)]^½ Now Φ = [χ2 / n ]½ = 0.25
Cramour’s value = [Φ/Min (r-1) or (c-1)] ^½ = 0.5 Upper limit = [(r-1)/r] ^½ = 0.70 Now Out of 0.70, strength = 0.5 Therefore strength = 0.5/0.70 = 71.42 %
Weightage given by respondents to different dimension 1.The bank's ability to perform the promised service dependably and accurately. 2. The appearance of the banks physical facilities, equipment, personnel and communication materials. 3. The banks willingness to help customers and provide prompt service.
Points 19.7 29.5 11.2
4. The knowledge and courtesy of the bank's employees and their ability to convey trust and confidence. 5. The caring individual attention the bank provides its customers. Total:
. Gap score Minimum Maximum Dimension Reliability Responsiveness
Weightage given by respondents to different dimension 1.The bank's ability to perform the promised service dependably and accurately. 2. The appearance of the banks physical facilities, equipment, personnel and communication materials. 3. The banks willingness to help customers and provide prompt service.
pa th y
Points 22.3 30 15.5
4. The knowledge and courtesy of the bank's employees and their ability to convey trust and confidence. 5. The caring individual attention the bank provides its customers. Total:
1.4 1.2 Average gap score 1 0.8 0.6 0.4 0.2 0
en es s y As su ra nc e Re lia bi lity Ta ng i pa th y bi lit
1.32 1.13 0.85
Re sp on siv
Gap score Minimum Maximum
Dimension Assurance Empathy
Weightage given by respondents to different dimension
1.The bank's ability to perform the promised service dependably and accurately. 2. The appearance of the banks physical facilities, equipment, personnel and communication materials. 3. The banks willingness to help customers and provide prompt service. 4. The knowledge and courtesy of the bank's employees and their ability to convey trust and confidence. 5. The caring individual attention the bank provides its customers. Total:
1 0.8 0.6 0.4 0.2 0
en es s y As su ra nc e Re lia bi lity Ta ng i pa th y bi lit
Re sp on siv
Gap score Minimum Maximum
Dimension Tangibility Responsiveness
Weightage given by respondents to different dimension 1.The bank's ability to perform the promised service dependably and accurately. 2. The appearance of the banks physical facilities, equipment, personnel and communication materials. 3. The banks willingness to help customers and provide prompt service. 4. The knowledge and courtesy of the bank's employees and their ability to convey trust and confidence. 5. The caring individual attention the bank provides its customers. Total:
HDFC is having highest average weighted score amongst all the four banks.
CHAPTER-6 KEY FINDINGS
Key Findings for general questions
According to respondents the most preferred banking service is ATM service followed by
mobile banking, internet banking and Retail banking.
Most of the respondent’s account decisions are influenced by themselves. Most important factor which respondent consider before opening an account is Future prospects followed by services provided, goodwill, financial position and current market position. According to respondents most secure bank is SBI followed by BOB, HDFC and ICICI.
From the Chi square test of independence, it has been found that Preference towards
public/private sector banks and age group are dependent on each other and the strength of the same is 71.42%.
Key Findings for servqual questions
Gap Score For ICICI bank, the gap score for tangibility is minimum followed by empathy ,reliability, responsiveness and assurance. For HDFC bank ,the gap score for reliability is minimum followed by tangibility, empathy, assurance and responsiveness. For SBI bank, the gap score for assurance is minimum followed by tangibility, reliability, responsiveness and empathy. For BOB bank, the gap score for tangibility is minimum followed by reliability ,assurance ,empathy and responsiveness.
Weight for five dimensions
For ICICI bank, the highest weight is given to tangibility followed by empathy, reliability, assurance and responsiveness. For HDFC bank, the highest weight is given to tangibility followed by reliability, empathy, responsiveness and assurance. For SBI bank, the highest weight is given to assurance followed by reliability, tangibility, empathy and responsiveness. For BOB bank, the highest weight is given to assurance followed by tangibility, reliability, responsiveness and empathy.
For ICICI bank, the highest weighted score is of dimension tangibility followed by empathy, reliability, assurance and responsiveness. For HDFC bank, the highest weighted score is of dimension tangibility followed by reliability, empathy, responsiveness and assurance. For SBI bank, the highest weighted score is of dimension assurance followed by reliability, tangibility, empathy and responsiveness. For BOB bank, the highest weighted score is of dimension assurance followed by tangibility, reliability, responsiveness and empathy.
Comparison amongst banks on different dimensions
For reliability the minimum gap score is for HDFC bank followed by BOB, SBI and ICICI. For tangibility the minimum gap score is for HDFC bank followed by BOB, ICICI and SBI. For responsiveness the minimum gap score is for BOB bank followed by HDFC, SBI and ICICI. For assurance the minimum gap score is for SBI bank followed by BOB, HDFC and ICICI. For empathy the minimum gap score is for BOB bank followed by ICICI, HDFC, and SBI. Unweighted average Gap score 1.14 0.68 1 0.67
Bank ICICI HDFC SBI BOB
BOB is having minimum unweighted average gap score amongst all the banks followed by HDFC ,SBI and ICICI.
For reliability the highest weighted score is of HDFC bank followed by BOB, SBI and ICICI. For tangibility the highest weighted score is of HDFC bank followed by ICICI, BOB and SBI. For responsiveness the highest weighted score is of BOB bank followed by HDFC, ICICI and SBI. For assurance the highest weighted score is of SBI followed by BOB, ICICI and HDFC. For empathy the highest weighted score is of ICICI followed by HDFC, SBI and BOB.
Bank ICICI HDFC SBI BOB BOB,SBI and ICICI.
Avg weighted score 1.19 1.28 1.23 1.27
HDFC is having highest weighted score amongst all the banks followed by
ATM is the preferred service.
SBI is the most secure bank. There is a dependency relationship between age group and preference towards public/private sector banks. For ICICI bank tangibility is best amongst all other dimensions, which shows that customers are satisfied with visually appealing facilities, online banking facilities, time saving technology facilities and facilities for senior citizens of the bank. For HDFC bank Reliability is best amongst all other dimensions, which shows that customers are satisfied with timely services, error free records and sincerity of solving customers problems of the bank. For SBI and BOB bank assurance is best amongst all other dimensions, which shows that customers are satisfied about the safety of their tranctions with the bank. BOB and HDFC have comparative lower unweighted average gap score. SBI and ICICI have comparative higher unweighted average gap score. HDFC bank has the highest weighted score amongst all the banks, which shows that customers are more satisfied with HDFC bank for the services provided by them.
ICICI and HDFC bank should emphasize on improving their services on responsiveness
SBI and BOB should emphasize on improving their services on responsiveness and
In general responsiveness is the dimension for which the weighted score of all the four
banks is less comparative to other dimension so every bank whether public sector or private sector should consider their responsibility towards their customers and should provide proper training to their employees so that they can satisfy their customer.
If we look at both the public sector banks, empathy is common dimension for which both
the banks have got less weighted score which shows that customers are not getting individual attention so SBI and BOB should improve their services on empathy dimension. In private sector banks, assurance is common dimension which have got less weighted score . ICICI and HDFC should build confidence and trust in their customers regarding the safety of their transactions and other services provided by the banks.
Though internet banking is convenient and user friendly, respondents don t prefer it more
because of safety issues so all the banks should make their customers aware about the benefits of internet banking and should provide accurate services .
Zeithmal V. A., GremblerD.D., Bitner M.j., and Pandit A.:Service Marketing Integrated customer Focus Across The Firm” , Fourth Edition Zillur Rahman, “Service Quality: Gap in the Indian Bank Industry” The ICFAI Journal of Marketing Management. Naresh K.Malhotra : Marketing Research – An applied orientation, Fifth Edition Richard I.Levin,David S.Rubin –Statistics For Management, Seventh Edition
CHAPTER-10 Annexure (Questionnaire) Questionnaire
Dear sir/madam We are students of NRIBM Ahmedabad, Presently working on a project on SERVQUAL Analysis of Banking services and comparative analysis of customer satisfaction of various banks. We request you to kindly fill the questionnaire below. We assure you that data provided by you shall be kept confidential.
Which type of service do you prefer the most from the banks? a ATM services b Internet banking c Mobile banking d Retail banking
2) Your account decisions are influenced by a Oneself b Market research
3) Which factors do you consider before opening account or in purchasing new plan in a particular bank? A Financial position B Current Market Position C Goodwill D Future prospects E Services provided
4) Which bank do you prefer the most from the following? a) Public sector bank b) Private sector bank 5) Which bank is more secure according to you? a ICICI b HDFC c SBI d BOB e others
SERVQUAL QUESTIONS The following statements relate to your feelings about the particular bank you have chosen. Please show the extent to which you believe this bank has the feature described in the statement. Here, we are interested in a number from 1 to 7 that shows your Expectations and perceptions about the bank. You should rank each statement as follows: Strongly Disagree 1 2 3 4 5 6 Strongly Agree 7
Statement Reliability 1. The Bank provides timely service. 2. The Bank insists on error free records services. 3. The Bank provides required and accurate information when needed. 4. The Bank shows sincere interest in solving a customer’s problem. Tangibility 5. The Bank maintains visually appealing physical facilities like Reception, sufficient seating arrangement, drinking water facility etc. 6. The Bank has accessible materials like forms, broachers, stationary associated with services. 7. The employees are decently dressed. 8. The Bank has different properly identified counters. 9. The Bank has good ATM’s services 10. The Bank maintains sufficient and easy to use Online Banking facility 11. The Bank is well equipped with the time saving technology facility like phone banking and mobile banking. 12. The Bank has enough provision for facilities for senior citizens in terms of management of queue, solving queries, etc. Responsiveness 13. Employees are good in explaining the various services the Bank provides. 14. Employees in the bank give you prompt service. 15. Employees in the bank are always willing to help you. 16. Employees in the bank are never too busy to respond to your request. 17. Employees give sufficient attention to properly respond to the senior citizens. Assurance 18. Employees instill confidence In the customers 19. Customers feel safe about their transactions 20. Employees are competent and knowledgeable.
Features 1. The appearance of the banks physical facilities, equipment, personnel and communication materials. 2. The bank's ability to perform the promised service dependably and accurately 3. The banks willingness to help customers and provide prompt service. 4. The knowledge and courtesy of the bank's employees and their ability to convey trust and confidence. 5. The caring individual attention the bank provides its customers. Total: