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A Study
of Strength of appealof selected
Value Added Banking
Services inRanchi City
SUBMITTED BY:
AmitDubey
Nupur
MayankKumar Choudhary
DivyaAgarwal
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TABLE OF CONTENTS
1. INTRODUCTION
2. RESEARCH METHODOLOGY
3. LITERATURE REVIEW
Introduction to Banking Sector
Introduction to SBI
4. REFERENCES
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RESEARCH METHODOLOGY
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RESEARCH DESIGN:
The methodology for the research study is descriptive and is as follows:
Research Approach: Quantitative research
Objectives:
The main objective of our project is:
To study the strength of appeal of selected value added banking services in the Ranchi
City
To know in which service quality dimension the bank is performing well and in which
dimension it needs improvement.
To know customers requirements or expectation for service. .
Sampling:
Following sampling is designed in order to execute the survey.
Sample size: 100 SBI customers
Universe: SBI Customers all around the world
Population: SBI Customers in Ranchi City
Sample: based on quota sampling
Quotas will be made on the basis of income groups
Data Collection Method:
Data Collection Tool
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Secondary data: Various websites, articles from magazines and news papers, books
will be used for collecting secondary data.
Primary data: The primary data will be collected by us by designing structured
questionnaire with the relevant question to the project study and research.
Type of questionnaire: Structured questionnaire.
BENEFICIARIES OF PROJECT:
Beneficiary of this project is to the bank, to improve the customer
satisfaction in the dimension in which they are lagging.
Key findings and analysis will helpful to them for provide better
services to customers.
For researchers, to know the competitive advantage of both the
banks and their services.
HYPOTHESIS
Various e-banking value added services if provided by SBI to its
customers will provide a great appeal to the customer
Even if these services are provided at a cost Customers will be
ready to go for it
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INTRODUCTION
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INTRODUCTION
Our research deals with the problem of studying the strength of appeal of selected value
added banking services in the Ranchi City. For this purpose we have selected SBI as the bank
for which the research will be conducted.
We have selected four value added services on which the research will be conducted.
Following are the four services:
1. ATM (Automatic Teller Machine)
2. Net Banking
3. Phone Banking
4. Mobile Banking
A sample of 100 SBI customers will be selected and be given a questionnaire regarding these
four services. The responses of the respondents will be analysed to study the strength of
appeal of these four value added banking services.
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LITERATURE REVIEW
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A SNAPSHOT OF THE BANKING INDUSTRY:
The Reserve Bank of India (RBI), as the central bank of the country,
closely monitors developments in the whole financial sector.
The banking sector is dominated by Scheduled Commercial Banks (SCBs). As at end-March
2002, there were 296 Commercial banks operating in India. This included 27 Public Sector
Banks (PSBs), 31 Private, 42 Foreign and 196 Regional Rural Banks. Also, there were 67
scheduled co-operative banks consisting of 51 scheduled urban co-operative banks and 16
scheduled state co-operative banks.
Scheduled commercial banks touched, on the deposit front, a growth of 14% as against 18%
registered in the previous year. And on advances, the growth was 14.5% against 17.3% of the
earlier year.
State Bank of India is still the largest bank in India with the market share of 20% ICICI andits two subsidiaries merged with ICICI Bank, leading creating the second largest bank in
India with a balance sheet size of Rs. 1040bn.
Higher provisioning norms, tighter asset classification norms, dispensing with the concept of
past due for recognition of NPAs, lowering of ceiling on exposure to a single borrower and
group exposure etc., are among the measures in order to improve the banking sector.
A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to strengthen the
ability of banks to absorb losses and the ratio has subsequently been raised from 8% to 9%. It
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is proposed to hike the CAR to 12% by 2004 based on the Basle Committee
recommendations.
Retail Banking is the new mantra in the banking sector. The home loans alone account for
nearly two-third of the total retail portfolio of the bank. According to one estimate, the retail
segment is expected to grow at 30-40% in the coming years.
Net banking, phone banking, mobile banking, ATMs and bill payments are the new buzz
words that banks are using to lure customers.
With a view to provide an institutional mechanism for sharing of information on borrowers /
potential borrowers by banks and Financial Institutions, the Credit Information Bureau
(India) Ltd. (CIBIL) was set up in August 2000. The Bureau provides a framework for
collecting, processing and sharing credit information on borrowers of credit institutions. SBI
is a promoter of the CIBIL.
The RBI is now planning to transfer of its stakes in the SBI, NHB and National bank for
Agricultural and Rural Development to the private players. Also, the Government has sought
to lower its holding in PSBs to a minimum of 33% of total capital by allowing them to raisecapital from the market.
Banks are free to acquire shares, convertible debentures of corporate and units of equity-
oriented mutual funds, subject to a ceiling of 5% of the total outstanding advances (including
commercial paper) as on March 31 of the previous year.
The finance ministry spelt out structure of the government-sponsored ARC called the Asset
Reconstruction Company (India) Limited (ARCIL), this pilot project of the ministry would
pave way for smoother functioning of the credit market in the country. The government will
hold 49% stake and private players will hold the rest 51%- the majority being held by ICICI
Bank (24.5%).
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REFORMS IN THE BANKING SECTOR:
The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969
and resulted in a shift from Class banking to Mass banking. This in turn resulted in a
significant growth in the geographical coverage of banks. Every bank has to earmark a
minimum percentage of their loan portfolio to sectors identified as priority sectors. The
manufacturing sector also grew during the 1970s in protected environs and the banking sector
was a critical source. The next wave of reforms saw the nationalization of 6 morecommercial banks in 1980. Since then the number scheduled commercial banks increased
four-fold and the number of banks branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector in the early
nineties, the Public Sector Banks (PSB) s found it extremely difficult to complete with the
new private sector banks and the foreign banks. The new private sector banks first made their
appearance after the guidelines permitting them were issued in January 1993. Eight new
private sector banks are presently in operation. These banks due to their late start have access
to state-of-the-art technology, which in turn helps them to save on manpower costs and
provide better services.
During the year 2000, the State Bank of India (SBI) and its 7 associates accounted for a 25%
share in deposits and 28.1% share in credit. The 20 nationalized banks accounted for 53.5%
of the deposits and 47.5% of credit during the same period. The share of foreign banks
( numbering 42 ), regional rural banks and other scheduled commercial banks accounted for
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5.7%, 3.9% and 12.2% respectively in deposits and 8.41%, 3.14% and 12.85% respectively in
credit during the year 2000.
CLASSIFICATION OF BANKS:
The Indian banking industry, which is governed by the Banking Regulation Act of India,
1949 can be broadly classified into two major categories, non-scheduled banks and scheduled
banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of
ownership, commercial banks can be further grouped into nationalized banks, the State Bank
of India and its group banks, regional rural banks and private sector banks (the old / new
domestic and foreign). These banks have over 67,000 branches spread across the country.
The Indian banking industry is a mix of the public sector, private sector and foreign banks.
The private sector banks are again spilt into old banks and new banks.
Banking System in India
Reserve bank of India (Controlling Authority)
Development Financial institutions Banks
IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank ISIDBI
Commercial Regional Rural Land Development Co-operativeBanks Banks Banks Banks
Public Sector Banks Private Sector Banks
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SBI Groups Nationalized Banks Indian Banks Foreign Banks
CURRENT BANKING SCENARIO OF INDIA:
As per the Advance Estimates of GDP for 2008-09 released by the Central Statistical
Organization on 9, February, 2009, the growth of GDP at factor cost (at constant 99-2000
prices) is estimated to grow at 7.1% during the year. The growth of GDP during 2007-08
(Quick estimates) was 9.0%.
The International Monetary Fund (IMF) has forecast that Indias gross domestic product
(GDP) growth will slow dramatically to 6.25% in the fiscal year to March, and to 5.25% inthe following year. This is well below the 9% growth in the year to March 2008 and even
lower than the governments prediction of 7.1% growth in 2008-09.
The average growth in the first three quarters of the fiscal year was 6.9%. This effectively
means IMF expects the economy to grow only 4.4% in the last quarter.
As per the above estimates, the growth rate for Agriculture, Industry and Services is
estimated to be 2.6%, 4.8% and 9.6% respectively in 2008-09. In the quick estimates for
2007-08, the corresponding growth rates for these three sectors were 4.9, 8.1 and 10.9%
respectively.
After growing at 5.0% in 2006 and 4.9% in 2007, IMF estimates global GDP growth to
decelerate to 3.7% in 2008 in the wake of the current financial crisis. The financial market
turbulence in developed economies following the US sub-prime mortgage crisis has reduced
financial leverage, lowered credit availability and negative wealth effects have emerged as
risks to consumption and growth in advanced economies, especially in the US. Continuing
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inflationary pressures from food and commodity prices as well as high and volatile crude oil
prices are other risks being faced by the global economy.
India continued to be one of the fastest growing economies of the world. During 2007-08, the
Indian economy grew at a robust pace for the fifth consecutive year. Real GDP growth,
estimated at 8.7% in 2007-08, is in tune with the average annual GDP growth of 8.7% in the
five year period 2003-04 to 2007-08. Agriculture and allied activities are estimated to grow
by 2.6% in 2007-08, which is in line with the average growth of 2.6% per annum during
2000- 01 to 2007-08. Food grains production touched a record high in FY08, with total food
grains production placed at 227.3 million tones, surpassing the target of 221.5 million tones
and recording an increase of 4.6% over the previous year. Industrial growth at 8.6% during
2007-08 has moderated somewhat against 10.6% in the previous year.
The services sector maintained its double-digit growth at 10.6% during 2007-08, higher than
the long term average of 8.9% (2000-01 to 2007-08). Within services, transport and
communications and financial services recorded double-digit growth for the last two years
and are expected to maintain the growth momentum. Trade and hotels showed higher growth
of 12.1% in 2007-08 against 11.8% growth in 2006-07. Another positive feature
underpinning growth is the sharp rise in the rate of savings and investment in recent years,
which rose to 34.8% and 35.9% respectively in 2006-07.
Towards the close of the fiscal year, higher inflation rate was noticed due to rise in global
prices of food, metals and crude oil. Inflation based on WPI declined from 6.4% at the
beginning of the fiscal year to a low of 3.1% by mid-October 2007, partly reflecting
moderation in the prices of some primary food articles and manufactured products.
After hovering around 3% during November 2007, inflation began to edge up from early
December 2007 to touch 7.4% by 29 March 2008, mainly reflecting hardening in prices of
primary articles such as fruits and vegetables, oilseeds, raw cotton and iron ore, as well as
fuel and manufactured products such as edible oil/oil cakes and basic metals, partly due to
international commodity price pressures. However, fiscal and monetary measures are being
taken to contain inflation and maintain high growth.
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Despite Rupee appreciation, exports continued to show a healthy growth, rising by 23% in
dollar terms during 2007-08 against 22.6% in the previous year. Overall exports growth was
driven by petroleum and crude products, gems and jewellery, iron ore, non-basmati rice,
cotton, transport equipment, etc. While Indias exports to USA, its single largest trading
partner, showed deceleration, exports to UAE and China remained robust. In the same period,
imports increased by 27.0% against 24.5%, mainly due to higher oil imports; non-oil imports
were led by capital goods, chemicals and related products, edible oils, gold, silver and pearls,
precious and semiprecious stones. Due to higher growth in imports than exports, the trade
deficit widened by 35.5% to US$ 80.4 bn during 2007-08 from US$ 59.3 bn in the previous
year.
The overall stance of RBIs monetary and credit policy during the year was to ensure price
stability and financial system stability along with continuation of the growth momentum,
emphasis on credit quality and credit delivery including financial inclusion. During 2007-08,
the Bank Rate, Repo and Reverse Repo rates were kept unchanged. To manage the liquidity
in the economy, RBI raised the Cash Reserve Ratio four times: in April, August and
November 2007 from 6% to 7.50%. In line with liquidity tightening, PLRs and deposit rates
of major banks were hiked during the year. While lending rates rose to 12.25-12.75% from
12.25- 12.50%, deposit rates (for more than one year maturity) rose to 8.25-9.0% from 7.5-
9.0% in the previous financial year. However, in the month of February 2008, to keep up the
growth momentum in the economy, some banks announced cuts in their PLR and interest rate
on housing loans below Rs.20 lakh.
The tight monetary policy followed by RBI to control inflation and money supply had a
Moderating impact on credit growth, which increased by 21.6% in 2007-08 against 28.1% in
2006-07. Deposit growth also moderated to 22.2% in 2007-08 from 23.8% in 2006-07.
For the current year, despite slowdown in the major economies of the world, the Indian
economy will continue to grow at 8-8.5% driven by investment. Due to a number of fiscal
and monetary measures taken by the Government and RBI to put a check on prices, inflation
is expected to come down to 5-5.5% by March 2009.
Need for a revolutionary approach towards privatization
Nationalized banks such as State Bank Of India (SBI), though pygmies in the international
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banking market, are banking behemoths of India. They have branches spread over the entire
length and breadth of the country. SBI in particular is all-pervasive enjoying a sprawling
network of 9000 branches. Its blue and white shingle is visible to the smallest hamlet. It has
assets understood to be worth about Rs2,22,500 crore ($52 billion). SBI has a very
conservative approach to accounting particularly when it comes to declaration of its assets.
Probably modesty does not permit the bank to exhibit its strengths. In particular, it has real
estate properties some of which are heritage sites all over the country. These are estimated to
collectively command a value of Rs.30,000 crores. This, it is believed, does not get reflected
in its book of accounts.
SBI enjoys a monopoly of the government business. The Reserve Bank of India owns about
60% of the banks equity. To its credit, SBI mobilized $4.2 billion through the Resurgent
India Bonds (RIB) issue in just 3 months down the post-Pokhran sanction period. This was
the difficult time when the international credit rating agencies had downgraded the country.
SBI, time and again, does a rescue act in the forex market to contain any volatility of the
rupee.
SBI was formed under the SBI Act in 1955 with the takeover of Imperial Bank and
amalgamation of Bank of Bengal, Bank of Bombay, and Bank of Madras. The government
mopped up around 93% of the equity, leaving 7% to private ownership. By this act the
equity of RBI cannot be diluted below 55%.
SBI enjoys a pool of best managerial talent, assured government business, a countrywide
network of branches and strong brand credibility in the Indian market.
But, that numero uno position is sliding with the entry of sleeker private and foreign banks
into the Indian Banking scene. The bank is continuously restructuring itself and for this, they
even hire the services of foreign consultants but the pace has to be hastened.
With the government offering an assured business, nationalized banks and State Bank of
India in particular should not take a complacent view. They should evolve service-intensive
products and make their employees customer-friendly. With competition from private and
foreign banks knocking at the door, the banks should realize, size is no more an insurance
against the onslaught of competition from sleek private and foreign banks. A revolutionary
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approach to privatize ownership is the need of the hour.
Virtual Banking:
SBI has yet to computerize its operations and network all its branches. The computers
currently available serve only to relieve the burden of the clerical staff of maintaining
manual ledgers and not to penetrate into areas of customer service. ATMs, Anytime-
Anywhere, round the clock and telephone banking is still a far cry. These computers at the
best remain only as desk ornaments. With the New Telecom Policy (NTP) almost in place,
telecom sector will soon be revolutionized. E-commerce, telephone banking, consumer
banking, Internet banking, insurance et al are waiting just around the corner. At least in
major metros, virtual banking will soon take-over from the brick-mortar banks.
Privatization and Credit disbursement:
Talks about privatization of the banks ownership have been initiated but the SBI act of
1955 does not permit RBIs ownership to be diluted to below 55%. This act is outdated and
needs to be re-addressed. However, efforts have been initiated by SBI to privatize its non
banking subsidiaries like SBI Caps, SBI Gilts, SBI Funds Management, where SBIs
holding is about 85% of the equity. But the pace has to be hastened so that investments thus
released can migrate to more important areas like development of new technologies and
products in customer service and service intensive areas. Privatization also helps to
professionalize the banks day-to-day operation, which will allow the management more
freedom in decision making during credit disbursement.
To aid privatization and effect a better price realization, the bank is attempting to change
over its accounting and reporting procedures to comply with US GAAP norms. This is a
prerequisite for trying out the ADR route, as it is known that US market is by far the
undisputed biggest market and can offer the best price. At the moment, the SBI stock is
undervalued at Rs.240 whereas experts expect Rs.300 would be a more realistic value.
Action on this front at blitzkrieg pace is the need of the hour.
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Manpower Retraining and not Retrenchment:
As a hangover of the past socialistic mindset, all the nationalized banks have excess
workforce. This is indeed a hot potato for the management of many enterprises and is
therefore being handled with kid gloves. In India, it is everyones worry to look at business
as a source of employment, while making money is secondary. In this ocean of manpower,
every institution does have its share of highly skilled and talented manpower, which
contribute to asset building. It is the semi skilled manpower having outdated skills, which
form the excess baggage. All banks must invest in re-training the manpower so that they can
migrate from the areas that will be vacated by computerization. The level of Non-
Performing-Assets (NPAs) is still at very high levels and to start with, some of this excess
manpower can cover areas of debt recovery.
At the same time, one should also take note of the flight of talent from these nationalized
banks to newly set-up private and foreign banks. And, it is these new banks top officials
after migrating from the government banks are targeting at the top corporate clients and thus
poaching into the corporate business, which has been the mainstay of the nationalized banks.
This will soon become a problem of serious proportion unless the banks initiate steps to
stem the flow. It is difficult, to exclusively address the problem of excess manpower by
schemes such as voluntary retrenchment scheme (VRS) because while attempting to remove
dead wood, talent also takes an exit. Many industries have faced this problem. Also it will be
over simplicity to state that the salaries should be raised because that will only start a wage
war. Instead, the banks should involve the services of international consultants specialized in
this field and take a holistic view of the problem. Retraining and Rationalization of
manpower commands higher priority over Retrenchment of manpower.
New Products and New technologies:
Nationalized banks have generally been preoccupied with treasury business. The new
product areas that require greater penetration are personal banking, housing finance,
consumer durable finance, auto-finance, internet banking, insurance, telephone banking et
al. Development of these new areas call for heavy investments and this cash - flow can only
generated by privatization. In addition, surplus manpower once retrained can be absorbed in
the new ventures.
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All nationalized banks and SBI in particular has the advantage of vast network of branches
and can therefore carry the new business to the remotest corner, but to make this presence
felt the banks have to move at blitzkrieg pace.
BANKING IN THE NEW MILLENIUM
The banking environment has suddenly become quite challenging after the sub prime crisis
that surfaced last year and which has resulted in an unprecedented global liquidity crunch.
The flattening of the world has dramatically impacted both the dynamics and the pace ofglobal banking business. Mergers, acquisitions, consolidation, expansion, diversification of
lines of business, shifting customer orientation and the changing regulatory environment are
building up the pressure for banks to explore new possibilities by abandoning the familiar and
embracing the unconventional. Competition is compelling banks to be agile and innovate
everyday. In this milieu, what really enables banks to build a lasting competitive advantage is
the ability to continuously innovate, achieve differentiation and respond quickly to dynamic
business challenges.
The banking sector has witnessed wide ranging changes under the influence of the financial
Sector reforms initiated during 2008. The approach to such reforms in India has been one of
gradual and non-disruptive progress through a consultative process. The emphasis has been
on deregulation and opening up the banking sector to market forces. The Reserve Bank has
been consistently working towards the establishment of an enabling regulatory framework
with prompt and effective supervision as well as the development of technological and
institutional infrastructure. Persistent efforts have been made towards adoption of
international benchmarks as appropriate to Indian conditions. While certain changes in the
legal infrastructure are yet to be effected, the developments so far have brought the Indian
financial system closer to global standards.
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BANKING ACTIVITIES:
Banks' activities can be divided into retail banking, dealing directly with individuals; business
banking, providing services to mid-size business; corporate banking dealing with large
business entities; private banking, providing wealth management services to High Net Worth
Individuals; and investment banking, relates to helping customers raise funds in the Capital
Markets and advising on mergers and acquisitions. Banks are now moving towards Universal
Banking, which is a combination of commercial banking, investment banking and various
other activities including insurance.
TECHNOLOGICAL DEVELOPMENTS:
Technology has brought about strategic transformation in the working of banks. 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. With stiff competition and advancement of technology, the service provided by banks
has become more easy and convenient.
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Internet Banking (E-Banking)
Internet banking (or E-banking) means any user with a personal computer and a browser can
get connected to his banks website to perform any of the virtual banking functions. In internet
banking system the bank has a centralized database that is web-enabled. All the services that
the bank has permitted on the internet are displayed in menu. Any service can be selected and
further interaction is dictated by the nature of service. The traditional branch model of bank isnow giving place to an alternative delivery channels with ATM network. Once the branch
offices of bank are interconnected through terrestrial or satellite links, there would be no
physical identity for any branch.
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Internet banking in India
The Reserve Bank of India constituted a working group on Internet Banking. The group
divided the internet banking products in India into 3 types based on the levels of access
granted. They are:
Information Only System : General purpose information like interest rates, branch
location, bank products and their features, loan and deposit calculations are provided in
the banks website.
Electronic Information Transfer System : The system provides customer- specific
information in the form of account balances, transaction details, and statement of
accounts.
Fully Electronic Transactional System : This system allows bi-directional capabilities.
Transactions can be submitted by the customer for online update. This system
requires high degree of security and control
Automated Teller Machine (ATM) : ATM is designed to perform the most important
function of bank. It is operated by plastic card with its special features. The plastic
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card is replacing cheque, personal attendance of the customer, banking hours
restrictions and paper based verification.
Credit Cards/Debit Cards: The Credit Card holder is empowered to spend wherever
and whenever he wants with his Credit Card within the limits fixed by his bank. CreditCard is a post paid card. Debit Card, on the other hand, is a prepaid card with some
stored value.
Smart Card : Banks are adding chips to their current magnetic stripe cards to
enhance security and offer new service, called Smart Cards. Smart Cards
allow thousands of times of information storable on magnetic stripe cards.
Core Banking Solutions
Core Banking Solutions is new jargon frequently used in banking circles. The advancement
in technology especially internet and information technology has led to new way of doing
business in banking. The technologies have cut down time, working simultaneously ondifferent issues and increased efficiency. The platform where communication technology and
information technology are merged to suit core needs of banking is known as Core Banking
Solutions. Here computer software is developed to perform core operations of banking like
recording of transactions, passbook maintenance, interest calculations on loans and deposits,
customer records, balance of payments and withdrawal are done.
Real Time Gross Settlement (RTGS)
RTGS is an electronic settlement system of Reserve Bank of India without involvement of
papers. To facilitate an Efficient, Secure, Economical, Reliable and Expeditious System of
Fund transfer and clearing in the Banking sector throughout India. Real time gross settlement
systems (RTGS) are a funds transfer mechanism where transfer of money takes place from
one bank to another on a "real time" and on "gross" basis.
Electronic Clearing Service
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Electronic Clearing Service is another technology enhancement happened in the banking
industry. The customer willing to use this facility is required to fill in the mandate form from
the corporate/any utility service institution for ECS mode of credit and debit. The customer
needs to prepare the payment date and submit it to the sponsor Bank and after that
everything happened electronically. So customers can there by make payments as well as
receive all incomes electronically.
Mobile banking
Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for
performing balance checks, account transactions, payments etc. via a mobile device such as a
mobile phone.
BASEL II: HOW GEARED ARE BANKS??
BASEL II is a new capital adequacy frame work applicable to scheduled commercial banks in
India, as mandated by the RBI. The Basel capital accord (BASEL II) guideline promulgated by
the BIS to establish Capital adequacy requirements and supervisory standards for banks and
structured by three pillars.
In a nut-shell, BASEL II
Provide effective assessment method
Incorporates Sensitivity to banks.
Makes better business standards
Reduce losses to the banks
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The 3-Pillar Approach of BASEL II
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The BASELII is designed to facilitate a more comprehensive, sophisticated and risk sensitive
approach for banks to calculate regulatory capital. The basic objective of BASEL II is to
create an international standard
CAMEL: TOOL FOR MEASURING THE PERFORMANCE
OF BANKS
An international bank-rating system where bank supervisory authorities rate
institutions according to six factors. The six factors are represented by the acronym
"CAMELS." The six factors examined are as follows:
C - Capital adequacy : Reflects the overall financial condition of a bank & also
the ability of the management to meet the need for
additional capital.
A - Asset quality : To ascertain the component of non performing assets as
a percentage of the total asset
M - Management quality : To measure the efficiency of the management
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E - Earnings : To assess the quality of income generated by core
activity
L - Liquidity : To measure the ability of a bank to meet the demand
from demand deposits in a particular year
On the Basis of CAMEL rating Top Ten Banks in Performance
During 2008-2009
Public sector Banks Private sector Banks Foreign Banks
Bank of India Karur vysya bank Shinhan bank
Corporation Bank Yes bank Abu Dhabi commercial
bank
Union Bank of India City Union Bank Mashreqbank P S C
Andhra bank Tamil Nadu Mercantile
Bank
Antwerp Diamond bank N
V
State bank of Patiala South Indian bank Bank of Tokyo-Mitsubishi
U F J
Bank of Baroda Federal Bank Calyon Bank
Indian Overseas Bank Jammu & Kashmir Bank Krung Thai Bank Public Co.
State Bank of Hyderabad Dhanalakshmi Bank State Bank of Mauritius
Punjab & Sind Bank Karnataka Bank Bank of America National
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Trust
Indian Bank Kotak Mahindra Bank Mizutto Corporate Bank
Banking Review-2009
NPAs rise for Private Banks, stable for PSBs
Gross NPAs movement of banks in Q1 has shown an interesting trend
Gross NPAs of all Private Banks that we have covered have seen a sequential riseHowever, asset quality of most PSBs remained stable, with flat to lower Gross NPAs
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NIMs of most banks saw a sequential decline
Decline was largely due to PLR cuts by banks towards the end of Q4FY08Most banks have, however, raised their PLRs and deposit rates by 100-150bps in
June08 and Q1FY09
NIMs should see a marginal improvement in Q2 on account of PLR hikes
However, as deposit re-pricing kicks in with a lag effect, NIMs may again come under
pressure.
Credit spreads saw a decline after a long time
After a long time, the sector saw a decline in credit spreads (Yield on advances Cost
of deposits)
Decline in credit spreads was largely due to inability of most banks to raise PLR in Q1
even as interest rates were rising
BOB, IOB, Corpbank and BOI saw substantial fall in yields on credit book, resulting
in compression of credit spreads
Canbank, PNB, Union Bank saw sequential improvement in credit spreads in Q1
CASA saw a mixed trend
Among Public Sector Banks (PSBs), SBI, Canara and Union saw marginal
improvement in CASA on YoY basis
Others like BOB, BOI, OBC saw a decline on YoY basis
Among private banks, AXIS bank lost out due to CBOP merger, ICICI Bank saw
improvement both on YoY and sequential basis
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Overall credit growth was robust
Among PSBs BOI, BOB, SBI and IOB saw above 30% growth. Canbank, Union and
PNB were more moderate at 16-20%
Among Private banks, except for ICICI, most showed above 40+% growth
Even for ICICI, consolidated book (including overseas book) grew 20% YoY
Credit growth has been very robust at 26% inQ1 against 24.6% last year
Banks which witnessed high credit growth
Axis, AXIS Bank and Yes Bank among private
BOB, BOI and SBI among PSBs
SBI showed a robust growth across all segments, except for mortgages
International credit grew 46% YoY
SME credit grew 23% YoY
Mid Corporate credit grew 31% YoY
Home Loans grew 17% YoY
Axis among the private banks and BoI amongst
PSBs continues to deliver high NII growth
Credit growth of ICICI, Canara, Union, PNB, OBC was lower than the average
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Key Points:
Supply
Liquidity is controlled by the Reserve Bank of India (RBI).
Demand
India is a growing economy and demand for credit is high though it could be cyclical.
Barriers to entry
Licensing requirement, investment in technology and branch network.
Bargaining power of suppliers
High during periods of tight liquidity. Trade unions in public sector banks can be anti
reforms. Depositors may invest elsewhere if interest rates fall.
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Bargaining power of customers
For good creditworthy borrowers bargaining power is high due to the availability of large
number of banks
Competition - High
There are public sector banks, private sector and foreign banks along with non banking
finance companies competing in similar business lines.
RECENT TRENDS
I. Universal Banking
Universal banking refers to Financial Institution offering all types of financial
services under one roof. Thus, for example, besides borrowing and lending for
the long term, the Development Financial Institutions will be able to
borrow/lend for the short-term as well.
Impact on FDI:
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Two key aspects of the business are affected. The institution can have access
to cheap retail deposits and the breadth of its advances increase to include
short-term working capital loans to corporates. The Institution has greater
operational flexibility. Also they can now effectively compete with the
commercial banks.
Indian Scenario:
In India the five FDIs that are frontrunners in the race to
convert to Universal Bank are:
1. Industrial Credit and Investment Corporation of India
(ICICI)
2. Industrial Development Bank of India (IDBI)
3. Export Import Bank (EXIM Bank)
4. Industrial Finance Corporation of India (IFCI)
5. Industrial Investment Bank of India (IIBI)
ICICI is already a virtual bank with subsidiaries like ICICI
Bank engaged in banking business. Thus with clearing of legal
hurdles it just has to work out the modalities to formally call
itself a universal bank.
Similarly other FDIs are charting out aggressive plans to stay
ahead in this race.
Also recently Bank of Baroda, a commercial bank has indicated
its intention to convert to a Universal Bank.
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II. RBI Norms:
The norms stipulated by RBI treat FDIs at par with the existing commercial
banks. Thus all Universal banks have to maintain the CRR and the SLR requirement
on the same lines as the commercial banks. Also they have to fulfill the priority sector
lending norms applicable to the commercial banks. These are the major hurdles as
perceived by the institutions, as it is very difficult to fulfill such norms without
hurting the bottomline
Effect on the Banking Sector:
However, with large Term lenders converting into Commercial banks, the
existing players in the industry are likely to face stiff competition, lower bottom line
ultimately leading to a shakeout in the industry with only the operationally efficient
banks will stay into the business, irrespective to the size.
III. Mergers & Acquisition
The Indian Banking Sector is more overcrowded then ever. There are 96
commercial banks reporting to the RBI. Ever since the RBI opened up the sector to
private players, there have been nine new entrants. All of them are growing at a
scorching pace and redefining the rules of the business. However they are dwarfed bymany large public and old private sector banks with a large network of branches
spread over a diverse geographical area. Thus they are unable to make a significant
dent in the market share of the old players. Also it is impossible to exponentially
increase the number of branches. The only route available for these banks is to grow
inorganically via the M & A route. Hence the new banks are under a tremendous
pressure to acquire older banks and thus increase their business.
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Most of the institutionally promoted banks have already gobbled smaller banks. ICICI
Bank has acquired ITC Classic, Anagram Finance and Bank of Madura within a
period of two years. AXIS Bank has merged Times Bank with itself. UTI bank had
almost completed its merger with Global Trust Bank before it ran into rough weather.
Also Nationalised Banks like Bank of Punjab, Vyasa Bank are wooing IDBI Bank for
a merger. Among foreign banks, Standard & Chartered Bank has acquired ANZ
Grindlays Banks Asian and Middle East operations
The above happenings clearly indicate that the M & A scenario in the Indian banking
sector is far from over. Strong banks will continue to takeover weak and inefficient
banks to increase their size.
IV. Multiple Delivery Channels
Today the technology driven banks are finding various means to
reduce costs and reach out to as many customers as possible spread over adiverse area. This has led to using multiple channels of delivery of their
products.
1. ATM (Automatic Teller Machine):
An ATM is basically a machine that can deliver cash to the customers
on demand after authentication. However, nowadays we have ATMs
that are used to vend different FMCG products also. An ATM does the
basic function of a banks branch, i.e., delivering money on demand.
Hence setting of newer branches is not required thereby significantly
lowering infrastructure costs.
Cost reduction is however possible only when these machines are used.
In India, the average cash withdrawal per ATM per day has fallen from
100 last year to 70 this year. Though the number of ATMs has
increased since last year, it is not in sync with the number of cards
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issued. Also, there are many dormant cardholders who do not use the
ATMs and prefer the teller counters. Inspite of these odds, Indian
banks are increasing the number of ATMs at a feverish pace. These
machines also hold the keys to future operational efficiency.
2. Net Banking:
Net banking means carrying out banking transactions via the Internet.
Thus the need for a branch is completely eliminated by technology.
Also this helps in serving the customer better and tailoring products
better suited for the customer
A customer can view his account details, transaction history, order
drafts, electronically make payments, transfer funds, check his account
position and electronically communicate with the bank through the
Internet for which he may have wanted to visit the bank branch.
Net banking helps a bank spread its reach to the entire world at a
fraction of the cost.
3. Phone Banking:
This means carrying out of banking transaction through the telephone.
A customer can call up the banks helpline or phone banking number to
conduct transactions like transfer of funds, making payments, checking
of account balance, ordering cheques, etc,. This also eliminates thecustomer of the need to visit the banks branch.
4. Mobile Banking:
Banks can now help a customer conduct certain transactions
through the Mobile Phone with the help of technologies like
WAP, SMS, etc,. This helps a bank to combine the Internet and
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telephone and leverage it to cut costs and at the same time
provide its customer the convenience.
Thus it can be seen that tech savvy banks are tapping all the
above alternative channels to cut costs improve customer
satisfaction.
V. VRS (Voluntary Retirement Scheme):
VRS or the Golden Handshake is picking up very fast in the
recent times due to the serious attention of the government towards
overstaffing in the banks, especially among the public sector banks.
The government had also cleared a uniform VRS framework for the
sector giving the banks a seven months time frame to cut flab. The
scheme was open till 31st march, 2001.
Though many banks had announced different VRS schemes it
involved an outflow of huge sums of money. This could have had an
adverse impact on the Capital Adequacy Ratio (CAR). Hence the RBI
allowed the banks to write off the VRS expenses over a period of 5
years.
CHALLENGES:
Liberalization process has increasingly exposed Indian Industry to
international competition and banking being a service industry is also not an
exception. Banking Sector in India too faces same challenges at local,national and international level.
Indian Banks, functionally diverse and geographically widespread,
have played a crucial role in the socio-economic progress of the country after
independence. However, the growth led to strains in the operational efficiency
of banks and the accumulation of non-performing assets (NPAs) in their loan
portfolios.
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Banks face increasing pressure to stand out from the crowd. On the
Internet, this means offering your target customers an increasingly broader
range of services than your competitors and that too in unique way.
All this has resulted in a challenge to managers of banks to develop the
right mix of acquired and internally grown IT applications which suits
customers expectations.
Banking sector reforms and liberalisation process raised many
challenges before Indian Banks and for sustainable development it has become
necessary to face these challenges effectively:
Intense Competition: The RBI and Government of India kept banking industry open
for the participants of private sector banks and foreign banks. The foreign banks were
also permitted to set up shop on India either as branches or as subsidiaries. Due to this
lowered entry barriers many new players have entered the market such as privatebanks, foreign banks, non-banking finance companies, etc. The foreign banks and
new private sector banks have spearheaded the hi-tech revolution. Heavy weight
foreign banks with huge base, latest technology innovative and globally tested
products are spreading their wings and wooing away customers form other banks. For
survival and growth in highly competitive environment banks have to follow the new
Guru Mantra of prompt and efficient customer service, which calls for appropriate
customer centric policies and customer friendly procedures.
Technological Up gradation: Already electronic transfers, clearings, settlements
have reduced translation times. To face competition it is necessary for banks to absorb
the technology and upgrade their services.
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However use of High-Tech sophisticated technology leaves the predominantly rural,
poor and even illiterate mans in the lurch to which the level of automation and
efficiency of services are immaterial.
Privacy and Safety: Among the most important aspects, of savings, i.e., safety
liquidity and profitability, safety has to be accorded top most priority. The safety
aspect assumes more significance in the emerging scenario as the economic loss
caused internationally by these types of crimes might risk area and any lacunae is
safety would result in erosion of confidence and the same might possibly paralyse the
entire network. The areas among other things, which might endanger security in e-
banking can be:
Changes in input data such as changing the amount in ledges, increasing the
limits in accounts or face value of cheaques. Though these trends could be
detected consequently, prevention is a major problem with these types of
crimes.
Use of stolen or falsified cards in ATM machines.
Computer forgery could be committed by way of gaining access to
other account, deliberate damage through viruses on data stored in computers.
In this case, same criminals might gain entry into the computers and cause
damage to the system. This apart, another through which security and privacy
are maintained. If a hacker has found out the password, he can cause havoc to
the entire network. Also, if the password is stolen money could be transferred
from one account to another.
Software privacy is another area of potential danger faced by the
banking industry. In this the entire software could be stolen. If this is done, the
hackers could operate a parallel network.
Human Resources Management: In the recent past the human resource Policies in
banks were mainly guided by the comcept of permanent employment and its
necessary concomitants of creating career paths, terminal benfits, etc. for the
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employees. In todays fast-changing world of employee mobility both horizontally
and vertically and value systems, the public sector banks need to hire the right talent
at market related compensation and to shed surplus manpower/staff. Thus many banks
are going for URS schemes to reduce the burden of excessive staff. Schemes like
VRS are going to change the nature of workforce with many senior and experienced
persons opting for it.
The key elements that shall provide a competitive edge to banking sector will not be
physical assets but knowledge assets and information. Therefore, banks must
understand how to retain knowledge based employees and prevent them to migrating
to some other organisation. Banks must believe in people, customer orientation, and
continuous improvement of excellence. Therefore it becomes necessary for banks to
encourage all employees to take risks and work towards continuous improvements
and breakthroughs.
Successful banks overcoming the challenges will be those that harness technology in a
customer friendly yet cost effective way. This requires enormous internal and external
management and the crux of the solution lies in blending human resources with
information technology.
E merg i ng Issues i n I nternational Sc e nar i o:
B an k i ng and Fin a nc i al Sector R eform
Withtheevolvingglobalscenarioatthebackground,letusnowdiscuss
thechallengesandopportunities facing the financialsectoraround theglobe.
Thepresent trend towards financial sector liberalization and globalisation,
especially with respect to the EMEs has resulted in a overall trend
towards conglomeration, internationalisation and dollarisation in the financial
systems
ofmany of the countries notably the EMEs. Such trends have important
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implications for financial sector regulation. I would like to highlight the
main issuesinthisrespect:
It also needs tobe recognised that in recent times, there hasbeen
growing concern worldwide about the need for preserving financial
stability. This is true in the Indian context as well where the erstwhile
Government- dominated financial system was, so to speak, imparting
stability under rigid regulation, possibly at the cost of efficiency. In this
context, thepursuit of financialstabilityinIndia,viewedfromthestandpoint
of banking system, has sought to (a) ensure uninterrupted financial
transactions and (b) maintain confidence in the financial system amongst
all stakeholders.
When we talk of the major features of international banking
scenario,thefollowingobservationscomeimmediatelytomind.
First, the structure of the industry. In the worlds top 1000banks,
there are many more large and medium-sized domestic banks
from the developed countries than from the emerging
economies. Illustratively, according to The Banker 2004, out of thetop 1000banks globally, over 200 are located inUSA,justabove100
in Japan, over 80 in Germany, over 40 in Spain and around 40 in the
UK.EvenChinahasasmanyas16bankswithin the top 1000, out of
which, as many as 14 are in the top 500. India, on the other hand,
had20bankswithin the top1000outofwhichonly6werewithin the
top 500 banks. This is perhaps reflective of differences in size
of economiesandofthefinancialsectors.
Second, the share of bank asset in total financial sector
assets. In most emerging markets,banking sector assets comprise well
over80percentof total financial sector assets, whereas these figures
are much lower in developed economies. Thus, Banking Sector
reforms are ofparamount importanceinmanyemergingmarkets.
Third, industry concentration, measured by the percentage
of a countrys banking sector assets controlled by the largest
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banks. In most emerging market economies, the five largest
banks (usually domestic) account for over two-thirds of bank assets.
These figures tend to be much lowerindevelopedeconomies.
The four th factor is the growing internationalization of
banking operations. Internationalization, defined as the share of foreign-
ownedbanksintotalbankassets,is increasingfast inemergingeconomies
fromverylow levels not too long ago.
The phenomenon of internationalisation hasprimarilybeen
polarized on medium- to high-income countries, likely owing to
attractive risk-return investment opportunities for foreignbanks in
such countries. However, foreign banks are often viewed to be
cherry-picking host country corporations, leaving domestic banks
with less creditworthy customers, increasing the overall risk of
domestic bank portfolios. Additionally, increased competition arising
outof foreignbankentry could prompt domestic state-owned banks
to venture into high-risk areas inan attempt to maintain their
franchise value.
Fifthly, financial sectors across the globe has witnessed
increased conglomeration to survive in a milieu of financial
liberalization and technological improvements. Globalization of clients
of major financial instruments who, in turn, demand global access to
services and a wide product mix has also been a contributory factor.
The growth of such conglomeration has raised the possibility of
vulnerabilities including systemic risk due to contagion and the possibility
of opportunities for regulatory and supervisory arbitrage.
Further, the growing dollarisation, especially in Latin America
and transition economies raises several vulnerabilities in the financial
system, salient among thembeing (a) diminished role of centralbanks to
act as lenders of last resort, (b)possibilityof dollar depositsbeing subject to
runs since such deposits are usually close substitutes for deposits
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abroad or dollars cash and (c) limited ability of centralbanks to raise the
interestrateondollardeposits toactas interest ratedefensesagainstdeposit
withdrawals.
The global banking scenario is going to be influenced by
implementationoftheBaselIIAccord. ItseemsatthispointthatBaselIImaybe
beneficial to many of the EMEs including India. While the Pillar I of the New
Accord signifies a refinement of existing capital chargeby making it more
correlated with the credit risk of thebanks assets and an extension of the
capitalchargesforrisksnotconsideredinthecurrentAccord,suchasinterest rate
risk in thebankingbook, and operational risk, Pillar II, which focuses on the
supervisory reviewprocess, aims to ensure that a banks capitalposition is
consistent with its overall riskprofile. Finally, Pillar III aims at encouraging
banks to disclose information in order to enhance the role of market
participantsinmonitoringbanks
The recent survey by the IMF on the implementation of financial
sector regulation in 36 Fund member countries3 based on the Financial
Sector Assessment Programmes (FSAPs) completed over the period
2000-03 reveals the following interesting points about the global financial
system. On the positive side, there has been relatively high level of
implementation with respect to legal foundations , rationalisation of the
licensingprocess and minimumentrystandardsinmostcountries.
In terms of regulatory weaknesses, recent evidences point out to a
numberofdeficienciesincluding;
(i) Theproblemsassociatedwithregulatoryforbearance.
(ii)Deficiencieshavebeenobserved in theoversightofcountry risk, issues
ofconnectedlendingandcorporategovernancepractices.
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(iii)Deficiencieshavebeenobserved in respectof thedesign/implementation
ofconsolidatedsupervision.
(iv)With regard to financial integrity and development of safety net, the
observeddeficienciesmainly relate to timelinessofdisclosure,protection
of minority shareholders, accounting and auditing procedures and
proceduresfororderlywindingupoffailedinsurersandsecuritiesfirms.
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INTRODUCTION TO SBI
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S T A T E B A N K OF IN DIA
State Bank of Indias operating profit and net profit for Q209 surged
54.5% and 40.2% yoy, respectively, exhibiting a strong performance.
Advances growth to slow down: SBI recorded a handsome 37% yoy growth in
advances, translating into an 18% sequential growth in the first half. However, this
momentum is likely to decelerate considerably in the second half of 2008-09.
Robust rise in deposits: State Bank of Indias deposit base surged
28% yoy and its CASA ratio improved from 39.45% to 39.71% over the same period.
On a quarterly basis, the banks deposits grew by 10.3%.
Improvement in the credit-deposit ratio: The Banks credit-deposit ratio
increased from 68.9% in Q208 to 73.8% this quarter. This was following a
robust 37% yoy increase in advances, which exceeded the 28% growth in deposits
over the same period.
Increase in the NII and NIM: SBIs net interest income (NII) increased by 45% yoy
to reach Rs. 54.6 bn.
Profitability: The Ban k s ROE declin ed fro m 17.38 % for H1 08 to 14.63% for
H109. The return on assets (annualized), however, increased from 0.99% in
Q208 to 1.13% in Q209.
The State Bank of India, the countrys 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.
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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 Indias 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 programs 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.
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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.
ABOUT SBI:
The State Bank of India, the countrys 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 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 Indias growing mid / large Corporate with a complete array of products and
services. It is consolidating its global treasury operations and entering into structured
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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.
KEY AREAS OF OPERATION:
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The business operations of SBI can be broadly classified into the key income generating
areas such as National Banking, International Banking, Corporate Banking, & Treasury
operations. The functioning of some of the key divisions is enumerated below:
a) CORPORATE BANKING
The corporate banking segment of the bank has total business of around Rs1,193bn.
SBI has created various Strategic Business Units (SBU) in order to streamline its
operations.
These SBUs are as follows:
Corporate Accounts
Leasing
Project Finance
Mid Corporate Group
Stressed Assets Management
b) NATIONAL BANKING
The national banking group has 14 administrative circles encompassing a vast
network of 9,177 branches, 4 sub-offices, 12 exchange bureaus, 104 satellite officesand 679 extension counters, to reach out to customers, even in the remotest corners of
the country. Out of the total branches, 809 are specialized branches.
This group consists of four business group which are enumerated below:
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Personal Banking SBU
Small & Medium Enterprises
Agricultural Banking
Government Banking
c) INTERNATIONAL BANKING
SBI has a network of 73 overseas offices in 30 countries in all time zones and
correspondent relationship with 520 international banks in 123 countries. The bank is
keen to implement core banking solution to its international branches also. During
FY06, 25 foreign offices were successfully switched over to Finacle software. SBI has
installed ATMs at Male, Muscat and Colombo Offices. In recent years, SBI acquired
76% shareholding in Giro Commercial Bank Limited in Kenya and PT Indomonex
Bank Ltd. in Indonesia. The bank incorporated a company SBI Botswana Ltd. atGaborone.
d) TREASURY
The bank manages an integrated treasury covering both domestic and foreign
exchange markets. In recent years, the treasury operation of the bank has become
more active amidst rising interest rate scenario, robust credit growth and liquidity
constraints. The bank diversified its operations more actively into alternative assets
classes with a view to diversify the portfolio and build alternative revenue streams in
order to offset the losses in fixed income portfolio. Reorganization of the treasury
processes at domestic and global levels is also being undertaken to leverage on the
operational synergy between business units and network. The reorganization seeks to
enhance the efficiencies in use of manpower resources and increase maneuverability
of banks operations in the markets both domestic as well as international.
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e) ASSOCIATES & SUBSIDIARIES
The State Bank Group with a network of 14,061 branches including 4,755 branches of
its seven Associate Banks dominates the banking industry in India. In addition to
banking, the Group, through its various subsidiaries, provides a whole range of
financial services which includes Life Insurance, Merchant Banking, Mutual Funds,
Credit Card, Factoring, Security trading and primary dealership in the Money Market.
1) Associates Banks:
SBI has seven associate banks namely
State Bank of Indore
State Bank of Travancore
State Bank of Bikaner and Jaipur
State Bank of Mysore
State Bank of Patiala
State Bank of Hyderabad
State Bank of Saurashtra
All associate banks have migrated to Core Banking (CBS) platform. Single window
delivery system has been introduced in all associate banks. SBIs seven associate
banks are the first amongst the public sector banks in India to get fully networked
through CBS, providing anytime-anywhere banking to its customers to facilitate a
bouquet of innovative customer offerings.
2) Non-Banking Subsidiaries/Joint Ventures
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i) SBI Life:
ii) SBI Capital Markets Limited (SBICAP)
iii) SBI DFHI LTD
iv) SBI Cards & Payments Services Pvt. Ltd. (SBICSPL)
v) SBI Funds Management (P) Ltd. (SBIFMPL)
vi) Human Resources
NON BANKING SUBSIDIARIES:
The Bank has the following Non-Banking Subsidiaries in India :
SBI Capital Markets Ltd
SBI Funds Management Pvt Ltd
SBI Factors & Commercial Services Pvt Ltd
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REFERENCES
WEBSITES:
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1) business.mapsofindia.com/banks-in-india
2) rbidocs.rbi.org.in/rdocs/Speeches/PDFs/86160.pdf
3) www.researchandmarkets.com/reports/4020/indian_banking_industry
4) media.wiley.com/product_data/excerpt/34/04713931/0471393134.pdf
5) www.marketresearch.com/product/display.asp?productid=2156584&g=1
6) www.sbi.co.in/
7) www.experiencefestival.com/banking_in_india_-_current_scenario
8) http://www.pwc.com/en_TH/th/publications/assets/future-of-banking.pd
http://www.experiencefestival.com/banking_in_india_-_current_scenariohttp://www.experiencefestival.com/banking_in_india_-_current_scenario