banking financial institutes in india
TRANSCRIPT
Subject:-
Management of Financial Institution and Services.
Prepared by:-
Gajera Dipak M.
Submitted to:-
Prof. Mr. Lalit Tank
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 1
Que No.
Topic Page
No.
1. Banking Financial Institute in India
Commercial Bank
Private Banks in India
Foreign Bank
Co-operative Banks
3.
3.
15.
21.
25.
2. Future Opportunities for Financial Services and Sector in India? 31.
INDEX
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 2
Que:- 1- Banking Financial Institutes in India?
Ans:-
Commercial Bank
The act of borrowing and landing and there by the creation of credit is a special
type of exchange transaction which involves future payment of the principal sum
borrowed as well as the rate of interest on it.
Different credit institution lends money for different purposes and is collectively
called the financial system.
Function of Commercial Bank
1) Accepting Deposits
The bank borrow in the form of the deposits. This function is important because
banks mainly depend on the funds deposited with them by the public. The deposit
received by the banks may be of the following types.
a) Demand or current account deposit
If a deposits money in the bank in the current account, he can withdraw it in part or
in full at any time he likes without notice. These accounts are generally kept by
businessman whose requirements of making business payment are quite uncertain.
Usually no interest is paid on them because bank can not utilize these short-term
deposit and must keep almost cent percent received again them.
b) Fixed deposit or time deposit
These deposits are made for a fixed period of time, which varies from fifteen days
to a few years. These deposit cannot be withdraw before the expiry of that period.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 3
However, a loan can be taken from the against the security of this deposits within
the period. A higher rate of interest is paid on the fixed deposit carry a good rate of
interest they are good source of investment by the people who are in a position to
save.
c) Saving bank deposit
In this case the depositor can withdraw the case usually once a week. Sometimes
there are also restrictions as to the total amount that can be withdrawn at one time
and the total amount that can be place in one deposit. These deposits are generally
made by the people of small means, usually, people with fixed salaries, for holding
their short-term saving. Like the current account deposits, the saving bank deposits
are payable on demand and also they can be drawn upon through cheques. But in
order to discourage people to use the saving bank deposits very frequently, there
are some restrictions on the number of times withdrawn that can be made from this
account.
2) Advancing Loan
Another function of the bank is to give the loans to others. If the bank does not
lend the deposited money to others, how can it pay the interest on the deposit to
depository?
Banks give loan to businessmen and firms usually for short period only. This is so
because the bank must keep itself ready to meet the demand of the people who
have deposited money for short period only.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 4
The bank must strike a fine balance between liquidity and profitability.
a) By allowing an overdraft
Those people who keep current account with the bank are sometimes given the
right to over draft their account. In other words; people make arrangements with
banks that if a cheque has been drawn by them which is not covered by the deposit,
then the bank should grant the overdraft and honor the cheque. Thus under
overdraft arrangement people can get more than they have deposited but they have
to pay interest on the extra amount which has to be paid back with in a short
period.
b) Loans by creating a deposit
The bank advances money not only in the form of overdraft but also in the form of
loan given by creating a deposit. When a businessman wants to gat a loan from the
bank he has to satisfy the manager about his ability to pay, the soundness of his
venture. It will be seen that when the loan has been granted a deposit has been
created. That is why it is said that in modern time “every bank credit creates a
deposit or that, deposit of cash have changed into deposit of credit”.
3) Discounting Bills of Exchange or Hundies
A very important function of a modern bank is to discount bills or hundies of
businessman. It is like this. A businessman buys goods and is granted credit say,
for a month. The seller of the goods drew bills of exchange which the purchaser is
asked to sign. The bill order the purchaser to pay a certain sum after the expiry of
one month if the seller goes on selling goods on this basis, he will soon find that all
his stock is gone and he has got only these hundies in his cash box, unless these
hundies are changed into cash his business will come to a standstill. He therefore
does not keep these hundies which him till they mature for payment. But he take
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 5
them to the bank and get the present worth of the hundies leaving the bank to
realize them when the date of payment comes. This called discounting a bill it is
obvious that has advanced money to the businessmen for the period of the currency
of the bill.
4) Transfer of Money
Banks transfer money from one place to another place for their customer’s banks
remit the funds of the people by means of a bank draft or a cheque. This is a cheap
as well as safe method of transferring money from one place to another.
5) Miscellaneous Functions
a bank now a days serves its customers in various other ways. It has ‘safe deposit
vaults’ which are also called lockers. They are meant to keep the valuables of
customers as well as pays dividends on behalf of Joint Stock Companies. It
purchases and sells stock and shares of companies for its clients. It pays insurance
premium on behalf of their customers from their deposits. It executes the wills of
deceased customers and acts for them as a trustee.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 6
Role of Commercial Banks in Economy Development
The rate of capital formation in turn depends on the rate of savings, and investment
and proper allocation of investible funds among different sectors and user.
1) Promotion of Saving
People save for various reasons. Thus people save to provide for future needs, such
as period of unemployment, old age, sickness, to provide for education and
marriage their children, to own property such as real estate, houses etc. in future ,
and to purchase durable consumer goods. But they require assets in the form of
which they should keep their saving in safe custody and earn a rate of return as
well. Commercial banks promote saving by providing a wide range of deposits
with varying combinations of liquidity and rate of interest of suit the needs and
preferences of different saver. It has been found that with the growth of
commercial banking in unbanked and under-banked regions, the house hold saving
go up. As a store of value, bank deposits enjoy certain advantages over tangible
assets and other financial assets. This underlines the importance of keeping price
stable, if saving by house hold is to be promoted.
2) Mobilization of Savings
Not only do the banks encourage savings but they also mobilize savings done by
several households and make them available for production and investment to the
entrepreneurs various sectors of the economy. This function of mobilizing savings
is of crucial important because in the modern monetary economy, the act of saving
has been separated from: real investment. Savings are done by millions of
households and firms, who are individual saving, may be very small, savings of
some may be of short-term and of others of long-term nature. Banks and other
financial intermediaries collect or mobilize these savings before these can be made
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 7
available to the producers or investors. Without the banks these savings would have
remained scattered and also idle, that is, would not have been utilized for productive
and investment purposes.
3) Allocation of Fund
Allocation of funds or economic surplus among different sectors, users and
producers so as to make maximum social return and thus to ensure optimum
utilization of savings is an other important function performed by the banks.
Whereas the corporate firms can raise resources through sale of equity shares
and debentures, the non corporate firms and borrowers depend greatly on banks
for financing the needs of both working capital and fixed capital. Through the
landing rates of interest determined by market mechanism or fixed by the Central
Bank of the country credit advanced by the banks get rationed among various
potential borrowers and sectors. Further. Before lending banks take into account
the credit-worthiness or capacity to pay back the leans. Thus the banks are in a
better position to judge the returns or productivity from the uses for which the
funds are lent out. This helps in maximization of returns from scarce financial
resources. However, it may be mentioned, that commercial banks do not always
work and allocate resources in the way that maximizes production or social welfare.
4) Promotion of trade, production and investment
By encouraging inducement to save and also mobilizing savings from the public.
Banks to increase the aggregate rate of investment in the economy. It may also
be noted that bank not only mobilize the saved funds from the public, but also
themselves create deposits or credit which serve as money. The new deposits are
created by the banks when they lend money to the investors or other users. These
deposits are created by the banks in excess of the cash reserve they obtain
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 8
through deposits by the public. These days, the bank deposits, especially demand
deposits, are as much good money as the currency issued by the Government or
Reserve bank of India. This creation of credit, if it is used for productive
purposes, greatly enlarges production and investment and thus promotes
economic growth.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 9
Name of the Commercial Banks
1) United Bank of India (UBI)
Founded
Headquarters
Key people
Industry
1950, India
Kolkata
P.K Gupta, Chairman & MD
Financial Commercial banks
2) Reserve Bank of India (RBI)
Founded
Headquarters
Governor
Central Bank of
April 1, 1935
Mumbai, India
Dr. Duvvuri Subbarao
India
3) Allahabad Bank
Founded
Headquarters
Key people
Industry
April 24, 1865
Kolkata
K.R. Kamath Chairman & MD
Financial Commercial banks
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 10
4) Andhra Bank
Founded
Headquarters
Key people
Industry
Products
November 20,1923
Hyderabad
K Ramakrishna (CMD)
Financial
Private Banking
5) Bank of Baroda
Founded
Headquarters
Key people
Industry
July 20, 1908
Mumbai, India
M D Mallya, Chairman & MD
Banking, Capital Markets and allied industries
6) Bank of Maharashtra (BOM)
Founded
Headquarters
Key people
Industry
16th September, 1935
Mumbai, India
Government of India
Financial Commercial banks
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 11
7) Canara Bank
Founded
Headquarters
Key people
Industry
Canara Bank Hindu Permanent Fund (1906)
Canara Bank Ltd (1910)
Canara Bank (1969)
Bangalore, India
A C Mahajan, Chairman & Managing
Director, D L Rawal, Executive Director
G S Vedi, Executive Director.
Financial Commercial banks
8) Central Bank of India
Founded
Headquarters
Key people
Industry
1911
Mumbai, India
Ms. Homi. A. Daruwala,Chairman & MD
Financial Commercial banks
9) Corporation Bank
Founded
Headquarters
Key people
Industry
Udipi, 1906
Mangalore, India
B. Sambamurthy, Chairman
Banking
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 12
10) Dena Bank
Founded
Headquarters
Key people
Industry
26th May, 1938
Mumbai, India
Shri. P. L. GAIROLA Chairman & MD
Commercial Banking
11) Indian Bank
Founded
Headquarters
Key people
Industry
1907
Chennai, India
Mr.M.S.Sundara Rajan (Chairman and MD)
Banking
12) Indian Overseas Bank ( IOB )
Founded
Headquarters
Key people
Industry
Madras, February 10, 1937
Chennai, India
Chairman & MD S A Bhatt
Banking Capital Markets
13) Oriental Bank of Commerce
Founded
Headquarters
19th February, 1943, in Lahore
Pakistan
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 13
14) Punjab and Sind Bank
Founded
Headquarters
1908
New Delhi.
15) Punjab National Bank
Founded
Headquarters
Key people
Industry
Lahore, 1895 (British India)
New Delhi, India
Dr. K.C. Chakrabarty Chairman and M.D.
Banking Insurance Capital Markets
16) Syndicate Bank
Founded
Headquarters
Key people
Industry
Udupi, 1925 (as Canara Industrial and Banking
Syndicate Limited)
Manipal, Karnataka State, India
George Joseph, Chairman & M.D.
Banking, Insurance, Capital Markets
17) Union Bank of India (UBI)
Founded
Headquarters
Key people
Industry
Mumbai, India
Mavila Vishwanathan Nair Chairman &MD
Financial Commercial banks
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 14
18) UCO Bank
Founded
Headquarters
Key people
Industry
1943
Kolkata
Shri S.K. Goel Chairman & MD
Financial commercial bank
19) Vijaya Bank
Founded
Headquarters
Key people
Industry
1931 at Mangalore, India.
Bangalore, India
Albert Tauro, Chairman & M.D.
Financial Commercial banks
20) IDBI Bank
Founded
Headquarters
Key people
Industry
1964
India
Yogesh Agarwal — Chairman
Finance
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 15
Private Banks in India
1) Axis Bank
Founded
Headquarters
Key people
Industry
1994, India.
India
P.J. Nayak, Chairman & CEO
Financial Commercial banks
2) Bank of Rajasthan
Founded
Headquarters
Key people
Industry
Udaipur in 1943
Jaipur
R.K.Jain
Private Banking
3) Bharat Overseas Bank Ltd
Founded
Headquarters
Key people
Industry
Chennai,
Indian overseas bank
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 16
4) Catholic Syrian Bank
Founded
Headquarters
Key people
Industry
26th November 1920 at Thrissur
Thrissur, India
Shri.R.Venkataraman , Chairman
Financial Commercial banks
5) Centurion Bank of Punjab
Founded
Headquarters
Key people
Industry
Panaji, 1994
Mumbai, India
Mr. Rana Talwar, Chairman
Banking Insurance Capital Markets
6) City Union Bank
Founded
Headquarters
Key people
Industry
31st October1904
Tamil Nadu, India
Shri. S. Balasubramanian, Chairman
Private Banking
7) Development Credit Bank
Founded
Headquarters
Key people
Industry
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 17
8) Dhanlakshmi Bank
Founded
Headquarters
Key people
14th November 1927
Thrissur , Kerela, India
Sri Ghyanendra Nath Bajpai as Chairman , Sri
P.S.Prasad as Managing Director & CEO.
9) Federal Bank
Founded
Headquarters
Key people
Aluva, Kerala.
10) HDFC Bank
Founded
Headquarters
Key people
Industry
August, 1994
Mumbai, India
Mr. Aditya Purii, MD
Banking, Insurance, Capital Markets.
11) ICICI Bank
Founded
Headquarters
Key people
Industry
1955
Mumbai, India
N Vaghul, K.V.Kamath, Chanda Kochhar, Kalpana
Morparia, V Vaidyanathan, Madhabi Puri
Loans, Credit Cards, Savings, Investment vehicles,
Insurance
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 18
12) Indusind Bank
Founded
Headquarters
Key people
Industry
1994
Mumbai, India
Mr. R. Seshasayee MD
Private Bank
13) ING Vysya Bank
Founded
Headquarters
Key people
Industry
1930,India.
India
Vaughn Richtor, MD & CEO
K.R Ramamoorthy, Non-Executive Part-time
Chairman
Financial Commercial banks
14) Jammu & Kashmir Bank
Founded
Headquarters
Key people
Industry
1938
India
Financial industries
15) Karnataka Bank
Founded
Headquarters
Key people
February 18th, 1924
Kodialbail, India
Shri Ananthakrishna, Chairman & CEO
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 19
16) Karur Vysya Bank
Founded
Headquarters
Key people
Industry
1916
Karur, Tamil Nadu, India
P. T. Kuppuswamy Group Chairman
Banking.
17) Kotak Mahindra Bank
Founded
Headquarters
Key people
Industry
1985 (as Kotak Mahindra Finance Ltd)
Mumbai, India
Mr. K.M. Gherda, Mr. Uday Kotak, Dr. Shankar
Acharya
Banking
18) Lakshmi Vilas Bank
19) Nainital Bank
20) Ratnakar Bank
21) SBI Commercial and International Bank
22) South Indian Bank
23) Amazing Mercantile Bank
24) Yes Bank
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 20
Foreign Bank
Foreign banking in India
In India Development financial institutions and refinancing institutions were
meeting specific sectoral needs and also providing long-term resources at
concessional terms, while the commercial banks in general, by and large, confined
themselves to the core banking functions of accepting deposits and providing
working capital finance to industry, trade and agriculture. Consequent to the
liberalization and deregulation of financial sector, there has been blurring of
distinction between the commercial banking and investment banking.
Reserve Bank of India constituted on December 8, 1997, a Working Group under
the Chairmanship of Shri S.H. Khan to bring about greater clarity in the respective
roles of banks and financial institutions for greater harmonization of facilities and
obligations. Also report of the Committee on Banking Sector Reforms or
Narasimham Committee (NC) has major bearing on the issues considered by the
Khan Working Group.
The issue of universal banking resurfaced in Year 2000, when ICICI gave a
presentation to RBI to discuss the time frame and possible options for transforming
itself into an universal bank. Reserve Bank of India also spelt out to Parliamentary
Standing Committee on Finance, its proposed policy for universal banking,
including a case-by-case approach towards allowing domestic financial institutions
to become universal banks.
Now RBI has asked FIs, which are interested to convert itself into a universal
bank, to submit their plans for transition to a universal bank for consideration and
further discussions. FIs need to formulate a road map for the transition path and
strategy for smooth conversion into an universal bank over a specified time frame.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 21
The plan should specifically provide for full compliance with prudential norms as
applicable to banks over the proposed period.
Following are the list of the Foreign Bank
1) ABN- AMRO Bank
Founded
Headquarters
Key people
Industry
1991
Amsterdam, Netherlands
Mark Fisher (CEO)
Financial services
2) Barclays Bank
Founded
Headquarters
Key people
Industry
1690
London, England, UK
Marcus Agius, Chairman
John Varley, Chief Executive
Robert Diamond, President
Banking
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 22
3) Citibank
Founded
Headquarters
Key people
Industry
1812
New York City, New York
Vikram Pandit — CEO,
Gary Crittenden CFO,
John Ferderson — COO.
William R. Rhodes — Chairman
Finance
4) HSBC
Founded
Headquarters
Key people
Industry
Hong Kong (1865)
London, England, UK
Stephen Green, Group Chairman
Michael Geoghegan, Group Chief Executive
Finance and insurance
5) Standard Chartered Bank
Founded
Headquarters
Key people
Industry
1853
London, England, UK
E.Mervyn Davies CBE, Chairman
Peter Sands, Chief Executive
Banking
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 23
6) Deutsche Bank
Founded
Headquarters
Key people
Industry
1870
Frankfurt am Main, Germany
Josef Ackermann, Chief Executive Officer and
Chairman of the Management Board
Finance and insurance
7) Abu Dhabi Commercial Bank Ltd
Headquarters
Key people
Industry
Mumbai, India
Bahri & Mazroei Group Chairman & Managing
Director
Banking
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 24
Co-operative Banks
In States
Andhra Pradesh
1. The Adilabad District Central Co-operative Bank Ltd.
2. The Anantapur District Central Co-operative Bank Ltd.
3. Chittoor District Co-operative Bank Ltd.
4. Cuddapah District Central Co-operative Bank Ltd.
5. Eluru District Central Co-operative Bank Ltd.
6. Guntur District Co-operative Bank Ltd.
7. Hyderabad District Central Co-operative Bank Ltd.
8. Kakinada Co-operative Central Bank Ltd.
9. Karimnagar District co-operative Bank Ltd.
10. Khammam District Co-operative Central Bank Ltd.
11. Krishna District Co-operative Central Bank Ltd.
Arunachal Pradesh
The Arunachal Pradesh State co-operative Apex Bank Ltd.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 25
Assam
The Assam Co-operative Apex Bank Ltd.
Bihar
The Bihar State Co-Operative Bank Ltd.
Arrah-Buxer District Central Co-operative Bank Ltd.
Aurangabad District Co-operative Bank Ltd.
Begusarai District Central Co-operative Bank Ltd.
The National Central Co-operative Bank Ltd.
Bhagalpur Central Co-operative Bank Ltd.
Gopalganj District Central Co-operative Bank Ltd.
Katihar District Central Co-operative Bank Ltd.
Chhattisgarh
The Chhattisgarh RajyaSahakari Bank Maryadit
Goa
The Bicholim Urban Co-operative Bank Ltd.
The Goa state co-operative bank ltd.
The Margao Urban co-operative bank ltd
Candolin Urban Co-operative Credit Society
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 26
Citizen Co-op Bank
Goa Urban Co-operative Bank
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 27
Gujarat
The Mehsana Urban Co-operative Bank Ltd.
Ahmedabad District Cooperative Bank Ltd.
Amreli Dist Co-Operative Bank Ltd.
Junagadh Commercial Co-operative Bank Ltd.
Mahesana Nagrik Co-operative Bank Ltd
MERCANTILE CO-OPERATIVE BANK LTD
Nagrik Bank LTD. (Rajkot)
The Navnirman Co-operative Bank Ltd
SEWA Cooperative Bank Ltd
Surat national co-operative bank Ltd.
Textile Traders Co-operative Bank Ltd
Valsad District Central Co-operative Banks Ltd
Haryana
The Haryana State Co-operative Apex Bank Ltd.
Himachal Pradesh
Kangra Co-operative Bank Ltd.
Jammu and Kashmir
The Jammu and Kashmir State Co-operative Bank Ltd.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 28
Karnataka
Sirsi Urban Bank
Suco Bank
The Karnataka State Co-operative Apex Bank Ltd
Guardian Souharda Sahakari Bank Niyamitha
Kerala
Kerala State Co-Op Bank
Dist. Co-Op Bank,Trivandrum
Dist. Co-Op Bank,Quilon (Kollam)
Dist. Co-Op Bank,Pathanamthitta
Pala Urban Co-Op Bank
Madhya Pradesh
The Madhya Pradesh Rajya Sahakari Bank
Bhopal Cooperative Central Bank
Maharashtra
The Nasik District Central Co-op Bank Ltd., Nasik.
The Bassein Catholic Co-Operative Bank Ltd., Papdy, Vasai.
Abhyudaya Co-op. Bank Ltd.
Bharat Co-op. Bank Ltd.
The Deccan Merchants Co-operative Bank Ltd., Mumbai
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 29
Meghalaya
THE TURA URBAN CO-OPERATIVE BANK LTD (TURA)
Rajasthan
The Rajasthan State Co-operative Bank Ltd.
Integral co op bank
Jaipur central co-oprative bank
The thane bharat sahakari bank
Madhav nagrik sahkari bank
Tripura
The Tripura State Co-operative Bank Ltd.
Tamil Nadu
Chennai Central cooperative bank Ltd.(Chennai)
The Tamil Nadu State Apex Cooperative Bank Ltd.
Uttar Pradesh
Banda District Coperative Bank Ltd
West Bengal
The West Bengal State Co-operative Bank Ltd.
The Burdwan District Central Cooperative Bank
In Union Territories
Andaman and Nicobar Islands
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 30
Andaman and Nicobar State Co-operative Bank Ltd. Maulana Azad Road,
Portblair. (India) It has around 41 branches on these islands.
Chandigarh
Chandigarh Urban Cooperative Bank
Punjab State Cooperative Bank
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 31
Pondicherry
Pondicherry State Cooperative Bank
Mahe Service Co-operative Bank, Mahe
National Capital Territory of Delhi
Delhi State Co-operative Bank
Jain Co-operative Bank Ltd.
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 32
Que:- 2- Future opportunities for financial services and sector in India
The financial system in India comprises of financial institutions, financial markets,
financial instruments and services. The Indian financial system is characterized by
its two major segments - an organized sector and a traditional sector that is also
known as informal credit market. Financial intermediation in the organized sector
is conducted by a large number of financial institutions which business
organizations are providing financial services to the community. Financial
institutions whose activities may be either specialized or may overlap are further
classified as banking and non-banking entities. The Reserve Bank of India (RBI) as
the main regulator of credit is the apex institution in the financial system. Other
important financial institutions are the commercial banks (in the public and private
sector), cooperative banks, regional rural banks and development banks. Non-bank
financial institutions include finance and leasing companies and other institutions
like LIC, GIC, UTI, Mutual funds, Provident Funds, Post Office Banks etc.
Infrastructure services have generally been provided by the public sector all over
the world for a large part of the twentieth century as most of these services have an
element of public good in them. It was only in the closing years of the century that
private financing of infrastructure made substantial progress. It may be relevant to
point out that infrastructure was largely privately financed in the nineteenth
century. The twenty-first century would, therefore, be more like the nineteenth
than the twentieth century.
This trend has been visible in India as well where financing of infrastructure was
till recently a Government activity. This has been so because infrastructure
services are difficult to price so as to fully cover all costs thereby making it
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 33
unattractive for private sector participation. Also the provisions of infrastructure
usually involve high upfront costs and long payback periods and the private
investor is often unable to provide the large initial capital required and is not
capable of obtaining matching long-term finance. Finally cross subsidization,
which forms an important part of infrastructure provision, is easier done by public
sector than the private.
The wide area covered by the financial sector in terms of an array of products and
geographical reach makes regulation critical and both institutional regulation and
self-regulation assume importance. The regulatory system today is far more
conscious and better equipped, institutionally and legally, to demand and enforce
necessary disclosures and compliance with laid norms for protection of the users of
the system as well as the credibility and efficacy of the system itself. The aim
would be to achieve international standards in this area within the shortest possible
time frame.
In the field of technology based banking, information technology and electronic
funds transfer system have emerged as the twin pillars of modern banking
development. Products offered by banks have moved way beyond conventional
banking and access to these services have become round the clock . This, indeed, is
a revolution in Indian banking but some systemic changes are urgently required.
Cyber laws and other procedures which are commensurate with modern
technology based banking have to be put in place immediately and sufficient
regulatory mechanism has to be instituted so that the fast strides in banking
automation does not go on undesirable lines.
Corporate governance in banks and financial institutions has assumed great
importance in India and there is still some ground to cover to making all banking
BHAGVAN MAHAVIR COLLEGE OF MANAGEMENT 34
institutions safe, sound and efficient. It is necessary that institutions, which form a
part of the financial system, have internal management, governance and
accountability structures, which measure up to the highest standards. Some of the
issues, which need to be debated are those of compatibility of corporate
governance with public ownership of banks and making the system accountable to
economic institutions and regulators. It is also imperative that there is complete
alignment between the goals of the management of the banks and the goals of
shareholders.
The various steps taken by the Government to meet the challenges of a complex
financial architecture have ensured that a new face of the Indian financial sector is
emerging to culminate into a strong, transparent and resilient system. The situation
however is quite dynamic and there would be changes, which we are unable to
anticipate now. It is clear, however, that the financial sector players of the future
will emerge larger in size, technologically better equipped and stronger in capital
base. The regulatory as well as the self regulatory mechanisms will match up to the
best worldwide thereby ensuring that the health of the Indian financial system is
not only preserved but improved upon and its ability to withstand shocks, which
are inevitable with global integration, remains strong.
Future of Banking in India
EXECUTIVE SUMMARY
A healthy banking system is essential for any economy striving to achieve good
growth and yet remain stable in an increasingly global business environment. The
Indian banking system has witnessed a series of reforms in the past, like
deregulation of interest rates, dilution of government stake in PSBs, and increased
participation of private sector banks. It has also undergone rapid changes,
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reflecting a number of underlying developments. This trend has created new
competitive threats as well as new opportunities. This paper aims to foresee major
future banking trends, based on these past and current movements in the market.
Given the competitive market, banking will (and to a great extent already has)
become a process of choice and convenience. The future of banking would be in
terms of integration. This is already becoming a reality with new-age banks such as
YES Bank, and others too adopting a single-PIN. Geography will no longer be an
inhibitor. Technology will prove to be the differentiator in the short-term but the
dynamic environment will soon lead to its saturation and what will ultimately be
the key to success will be a better relationship management.
OVERVIEW
If one were to say that the future of banking in India is bright, it would be a gross
understatement. With the growing competition and convergence of services, the
customers (you and I) stand only to benefit more to say the least. At the same time,
emergence of a multitude of complex financial instruments is foreseen in the near
future (the trend is visible in the current scenario too) which is bound to confuse
the customer more than ever unless she spends hours (maybe days) to understand
the same. Hence, I see a growing trend towards the importance of relationship
managers. The success (or failure) of any bank would depend not only on tapping
the untapped customer base (from other departments of the same bank, customers
of related similar institutions or those of the competitors) but also on the
effectiveness in retaining the existing base.
India has witness to a sea change in the way banking is done in the past more than
two decades. Since 1991, the Reserve Bank of India (RBI) took steps to reform the
Indian banking system at a measured pace so that growth could be achieved
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without exposure to any macro-environment and systemic risks. Some of these
initiatives were deregulation of interest rates, dilution of the government stake in
public sector banks (PSBs), guidelines being issued for risk management, asset
classification, and provisioning. Technology has made tremendous impact in
banking. ‘Anywhere banking’ and ‘Anytime banking’ have become a reality. The
financial sector now operates in a more competitive environment than before and
intermediates relatively large volume of international financial flows. In the wake
of greater financial deregulation and global financial integration, the biggest
challenge before the regulators is of avoiding instability in the financial system.
The Retail Banking is witnessing a 30 % Growth in India, with the top banks
experiencing a rise as much of 70%. Insurance is growing by 50%, Mutual Funds
growing by 33%, Credit Cards by 35%. Today Banking sector employs about
900000 people and with full reforms it can employ 15, 00,000 people. However
one of the crucial impediments to growth for this sector is the acute shortage of
manpower talent of this specific nature.
Further, India can grab jobs from other countries. A.T. Kearney Inc. predicts that
half a million financial-services jobs will go offshore to India by 2008. The
employers are hunting for skilled employees creating great opportunities for young
graduates. In the wake of a severe manpower shortage, India is witnessing the
highest growth rate in the salaries in the world! According to the 2006 Salary
Guide issued by Kelly Services India, the country has the highest average salary
increase at 13.9 %. Wage rises in Hong Kong are forecast at 1.5%, while those in
Japan, Taiwan, South Korea and Malaysia are likely to be between 2% and
3.5%.Indeed, an acute manpower shortage especially in the finance and analytics
sector has resulted in a peculiar situation of unrelated sectors competing with one
another.
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