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PROJECT REPORT ON FEASIBILITY OF INDUSTRIALLOAN IN PUNJAB NATIONAL BANK
A Summer Training Project ReportSubmitted in partial fulfillment of the requirement for the
Award of Degree of Master of Business Administration
2014 – 2016
Under the !"d#n$e %&' S!()"tted (*'
PROF' +ONA K,ATRA A+IT +ITTAL
DEPART+ENT OF +ANAE+ENT
+A-ARAJA ARASEN INSTITUTE OF TEC-NOLOY
.A&&"/"#ted t% SIP Un"er"t*3
Se$t%r – 22 R%h"n" De/h" 511006
An ISO 7001'200 Cert"&"ed Int"t!te
AICTE NBA A$$red"ted Int"t!te
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PROJECT REPORT
ON
INDUSTRIAL LOAN
OF PUNJAB NATIONAL BANK
INDE8
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UIDE CERTIFICATE
ACKNO,LEDE+ENT
INTRODUCTION
CO+PANY PROFILE
PRODUCTS
LITERATURE RE9IE,
RESEARC- +ET-OLOY
DATA ANLYSIS
CONCLUSION
REFERENCE
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SELF ATTESTATION
I hereb declare that the dissertation called
!"""""""""""""""""""""""""""# embodies the original wor$ done b me
at """"""""""""""""""""""""""""""""% This wor$ in part or full has not
been submitted to an other uni&ersit
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CERTIFICATE
This is to certif that """"""""""""""""""" semester has completed his
project wor$ on during the ear """"""""""""""%
PR'()*T +,ID)
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ACKNO,LEDE+ENT
I would li$e to than$ all those who helped me through the project of
familiari-ation I would li$e to e.press m sincere appreciation to m guide
"""""""""""""""" for his enlightenment of m $nowledge of feed bac$
and the hotel industr/ &aluable ad&ice and $ind support throughout the
process of dissertation completion
Most importantl/ I would li$e to than$ m parents and sister who were
alwas there to moti&ate me% I would li$e to than$ all the focus group
members for gi&ing their &aluable time and thoughts to m project%
I would li$e to than$ all the customers and emploees of hotel for sharing
their &aluable thoughts which helped me shape this project
ABSTRACT
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0ationali-ation ga&e a great swimpetus and also ga&e a new orientation to
the ban$ing sstem% The importance of the ban$ing sstem as an
intermediar for channeli-ing the sa&ings of communit and its pi&otal role
in the econom made it necessar/ particularl in the conte.t of o&erall
usage of the resources in terms of mone to the industrial sectors% The
e.plosi&e growth econom and the fa&orable demographic profile continue
to dri&e consumption pattern of the people and it automaticall leads to a
mar$et for a wide range of manufactured goods% And there b/ we in&ite the
stepping up of the new industries to satisf the growing needs% Alread we
are in a position where industries are operating at near pea$ capacities and
sustained demand growth will require a rapid build up of production
capacities and infrastructure% But the industrial sectors are facing problems
in getting loans% This paper e.amines the process of sanctioning loans and
finding the criteria of financing the industrial sectors b the ban$ing
sector %The purpose of the present paper is to pro&ide a more comprehensi&estatistical
PREFACE
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Modern organi-ations are highl comple. ad dnamics sstems% The
operate under &er turbulent social economic and political en&ironment%
The are required to reconcile se&eral incompatible goals% *onflicting roles
and di&ergent interest the are also fraught with the use ris$ and
uncertainties/ hence tactful management of such organi-ation to plan to
e.ecute guide/ coordination and control the performance of people to
achie&e predetermined goals% Management has to $eep the organi-ation
&ibrant mo&ing and in equilibrium% It has to achie&e goal which themsel&es
are changing it is therefore a problem highl comple. and tic$lish%
This information will be asset to mar$eting manager in ma$ing effecti&e
decisions% The researches are used to acquire and anal-e information and to
ma$e suggestions to management as to how mar$eting problems should be
sol&ed%
The mar$eting research is the process which lin$s to manufacturer/ dealers
and indi&iduals through information in important part of curriculum of M%B%A% programme is project ta$en b the students to institute under which
he or she is studing/ after completion of third semester of the programme%
The objecti&e of this project is to enable the students to understand the
application of the academics in the real business life% I am full confident
that this project report will be e.tremel useful to the management%
:OOD T-INS IN LIFE BEIN
S+ALL#
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INTRODUCTION OF PUNJAB NATIONAL BANK
P0B was founded in the ear 1234 at 5ahore 6presentl in Pa$istan7 as an
off8shoot of the Swadeshi Mo&ement% Among the inspired founders were
Sardar Daal Singh Majithia/ 5ala 9ar:ishen 5al/ 5ala 5alchand/ Shri :ali
Prosanna Ro/ Shri )%*% (essawala/ Shri Prabhu Daal/ Ba$shi (aishi Ram/
5ala Dholan Dass%
;ith a common missionar -eal the set about establishing a national ban$<
the first one with Indian capital = owned/ managed and operated b the
Indians for the benefit of the Indians% The 5ion of Punjab/ 5ala 5ajpat Rai/
was acti&el associated with the management of the Ban$ in its formati&e
ears%
The Ban$ made stead progress right from its inception% It has shown
resilience to tide o&er man a crisis% It withstood the crisis in ban$ing
industr of 131> and the se&ere depression of the thirties%
It sur&i&ed the most critical period in its histor = the Partlition of
134? = when it was uprooted from its major area of operations% It was the
farsightedness of the management that the registered office of the Ban$ was
shifted from 5ahore to Delhi in (une 134? = e&en before the announcement
of the Partition%
LALA LAJPAT RAI
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;ith the passage of time the Ban$ grew to strength spreading its wings from
one corner of the countr to another% Some smaller ban$s li$e/ The Bhagwan
Dass Ban$ 5imited/ ,ni&ersal Ban$ of India/ The Bharat Ban$ 5imited/ The
Indo8*ommercial Ban$ 5imited/ The 9industan *ommercial Ban$ 5imited
and The 0edungadi Ban$ were brought within its fold%
P0B has the pri&ilege of maintaining accounts of the illustrious national
leaders li$e Mahatma +andhi/ Shri (awahar 5al 0ehru/ Shri 5al Bahadur
Shastri/ Shrimati Indira +andhi besides the account of the famous (alianwala
Bagh *ommittee%
0ationali-ation of the fourteen major ban$s on 13th (ul/ 13@3 was a major
step for the ban$ing industr% P0B was one amongst these% As a result/
ban$ing was gi&en a new direction and thrust%
The ban$s were e.pected to reach people in e&er noo$ and corner/ meet
their needs/ and wor$ for their economic enlistment% Remo&al of po&ert and
regional imbalances were accorded a high priorit%P0B has alwas responded enthusiasticall to the nations needs% It has been
earnestl engaged in the tas$ of national de&elopment% In the process/ the
ban$ has emerged as a major nationali-ed ban$%
Punjab 0ational Ban$ 6herein referred to as P0B7 is one of the leading
ban$s in India and offers a wide &ariet of ban$ing ser&ices/ which include
corporate and personal ban$ing/ industrial finance/ agricultural finance/
financing of trade and international ban$ing% Among the clients of the Ban$
are Indian conglomerates/ medium and small industrial units/ e.porters/ non8
resident Indians and multinational companies% Punjab 0ational Ban$ was
incorporated in the ear 123% Since its humble beginning o&er hundred
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ears ago/ the ban$ has grown in stature to become one of the leading
ban$ing institutions in India% P0B is the second largest PS, ban$ in India
with a dominant presence in north India% :eeping in tune with changing
times and to pro&ide its customers more efficient and speed ser&ice/ the
Ban$ has ta$en major initiati&e in the field of computeri-ation% All the
Branches of the Ban$ ha&e been computeri-ed% The Ban$ has also launched
aggressi&el the concept of CAn Time/ An ;here Ban$ingC through the
introduction of *entrali-ed Ban$ing Solution 6*BS7 and o&er EEE offices
ha&e alread been brought under its ambit%
CO+PANY PROFILE
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Punjab 0ational Ban$ is a state8owned commercial ban$ located in 0ew
Delhi% The Ban$ is one of the Big Four Ban$s of India% The offer ban$ing
products/ and also operate credit card and debit card business/ bullion
business/ life and non8life insurance business/ and gold coins and asset
management business% The are recogni-ed as the Ban$ offering highest
le&els of customer satisfaction in Delhi and *hennai% The Ban$ has the
largest domestic networ$ of 433? offices/ including 4@ e.tension counters
among 0ationali-ed Ban$s% All their branches offer *oreG *entrali-ed
Ban$ing Solution 6*BS7 along with a &ariet of financial products catering
to different mar$et segments% The has international presence in 3 countries/
with a branch at :abul/ branches in 9ong :ong/ representati&e offices at
Almat/ Dubai/ Shanghai and 'slo/ a wholl owned subsidiar in ,: 6with
branches7/ and a joint &enture with )&erest Ban$ 5td/ 0epal% Punjab
0ational Ban$ was incorporated in the ear 123 at 5ahore/ undi&ided India%
The Ban$ has the distinction of being the first Indian ban$ to ha&e beenstarted solel with Indian capital% In the ear 134E/ the Ban$ absorbed
Bhagwan Dass Ban$/ a scheduled ban$ located in Delhi circle% In the ear
131/ the acquired the >3 branches of Bharat Ban$ and in the ear 13@1/
the acquired ,ni&ersal Ban$ of India% Punjab 0ational Ban$ was
nationali-ed in (ul 13@3 along with 1> other ban$s% In the ear 132@/ the
acquired 9industan *ommercial/ which added 9industans 14 branches to
the Ban$s networ$% In the ear 133>/ the acquired 0ew Ban$ of India
which the +'I% During the ear 133@/ the de&eloped a pac$aged for
corporate customers for fast remittance of funds from different up8countr
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branches% In the ear/ the set up a representati&e office in Almat/
:a-a$hstan% In the ear EEE/ the Ban$ has introduced a scheme for
pro&iding finance against mortgage of immo&able propert% In September
EEE/ the commenced their gold business in the form of +old Import
Scheme% In 0o&ember EEE/ the launched an International *o8branded
*redit *ard of Punjab 0ational Ban$ and 9ong$ong H Shanghai Ban$ing
*orporation 69P0B*7 in 0ew Delhi% In March EE/ the Ban$ came out
with their first Initial public offer 6IP'7 for />E/@E/?EE equit shares of Rs
1E each which resulted in the reduction of the go&ernments shareholding in
the Ban$% During the ear EE/ the started their branch in M%+% Road/
Bangalore named as Mid8*orporate Branch 6M*D7 to pro&ide their
corporate clients with a credit limit of Rs >% crore and abo&e% The made
joint &enture with Infoss for the implementation of a *entrali-ed Ban$ing
Solution for them% Also/ the made a tie up with *isco Sstems for
networ$ing >/2?E branches as part of their Rs 1E crore plan% In the ear EE>/ the Ban$ too$ o&er :o-hi$ode8based 0edungadi Ban$ 5td 60B57%
The Ban$ entered into an alliance with 0ew India Assurance for selling their
general insurance products% Also/ the opened a representati&e office in
5ondon% During the ear/ P0B *apital Ser&ice 5td was amalgamated with
the Ban$% In (une EE>/ the Ban$ entered into an Mo, with Principal
Financial Ser&ices Inc 6,SA7 and ijaa Ban$ for joint &enture partnership
in 5ife Insurance/ Pensions and Asset Managements 6MF7 business% Also/
the formed a strategic alliance with Infrastructure 5easing and Financial
Ser&ices 5td 6I5HFS7 for setting up a pri&ate equit fund for in&esting in
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domestic companies% In the ear EE4/ the Ban$ acquired the assets of
9industan Transmission Product 5td% The signed a corporate agenc
agreement with ).port *redit +uarantee *orporation of India 5td 6)*+*7
for mar$eting )*+*s e.port credit insurance products through the networ$
of the ban$s branches% Also/ an Mo, was signed with Intel for the
deploment of &arious IT8related solutions% During the ear/ the Ban$ signed
an Mo, with I*I*I Ban$ for ATM networ$ sharing% The awarded a project
to Tata *onsultanc Ser&ices 6T*S7 for implement human capital
management and paroll solution% The established a branch office in :abul/
Afghanistan% Also/ the opened a representati&e office in Shanghai% The
ban$ established an alliance with )&erest Ban$ in 0epal that permits
migrants to transfer funds easil between India and )&erest Ban$s 1
branches in 0epal% In the ear EE/ the Ban$ un&eiled ATM at )dappal%
Also/ the opened a representati&e office in Dubai% In the ear EE@/ the
Ban$ made a tie up with Master*ard International to launch a signature8 based debit card% Also/ the made a tie up with Indian Airlines for online
boo$ing of air tic$ets% The opened a new branch in ,ttara$hand% In 'ctober
EE?/ the Ban$ entered into Mo, with India Infrastructure Finance
*ompan with an aim to e.tend their cooperation and support to IIF* in
areas of creating a deal flow of infrastructure projects% In (anuar EE2/ the
Ban$ commenced commercial ban$ing operations in 9ong :ong% During the
ear EE28E3/ the Ban$ opened 1@2 branches/ out of which 3E are new
branches and ?2 branches was added through upgradation of ).tension
*ounters% The made collaboration with 5I* for selling insurance policies
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and also made a toe up with 'riental Insurance for selling non8life policies
on a referral basis% In (une EE2/ the entered into an Mo, with I5FS
*luster De&elopment Initiati&e 5td for pro&iding finance for &arious
industrial infrastructure projects in the countr% In September EE2/ the
signed an Mo, with SM* +lobal Securities 5td and 0etworth Stoc$
Bro$ing 5td for pro&iding online trading facilit to *ompans customers%
The offered a unique > in 1 account comprising of Sa&ing/ Demat and
Trading account% In Februar EE3/ the commerciall launched their credit
cards with tpes of consumer credit cards/ namel +old and *lassic% Also/
the entered into an agreement with 'riental Insurance *ompan to mar$et
insurance products/ a practice also $nown as bancassurance% In March EE3/
the Ban$ entered into an understanding with Tata Motors for financing entire
range of passenger cars% Also/ the e.ecuted an agreement with The 5ife
Insurance *orporation of India for banc assurance/ life insurance under the
pro&isions of IRDAs Referral Arrangement% During the ear EE381E/ theBan$ opened 4 domestic branches/ out of which >4? are at new locations
while 1?? branches was added through up gradation of e.isting ).tension
*ounters% The deploed 14EE ATMs ta$ing the the total count of ATMs to
more than >EE 0os% The opened two o&erseas branches 1 in 9ong :ong
and another at DIF* Dubai and started a ( ban$ing subsidiar DR,: P0B
Ban$ 5td in Bhutan% Also/ the opened a representati&e office in 'slo/
0orwa% During the ear/ the Ban$ sold @%J of their sta$e in ,TI Assets
Management *o 5td and ,TI Trustee P&t 5td/ thus bringing down their
sta$e in both these companies to 12%J% The launched *orporate *redit
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*ard with Indi&idual liabilit% Also the launched Merchant Acquiring
Business through installation of Point of Sale 6PoS7 Terminals at Merchant
)stablishments and Internet Pament +atewa b integrating through
Merchant ;ebsite/ with Brand 0ame P0B Bi-% In Ma EE3/ the Ban$
incorporated a subsidiar compan namel P0B In&estment Ser&ices 5td% In
0o&ember EE3/ the entered into an agreement with FIM Ban$ 6Malta7/
Banca IFIS/ Ital and Blend Financial Ser&ices 5td/ Mumbai for setting up a
joint &enture compan for pro&iding factoring/ forfeiting and trade finance
related business% During the ear E1E811/ the Ban$ introduced new set of
products and ser&ices such as P0B ,phaar/ P0B Su&idha and ;orld Tra&el
*ard% In December 1>/ E1E/ the acquired @>%@4J sta$e in (S* Dana Ban$
of :a-a$hstan% In (anuar 1/ E11/ the Ban$s joint &enture India factoring
and Finance Solutions P&t 5td started its commercial operations from Delhi/
Mumbai H *hennai% The total number of branches at the end of March E11
rose to 123% The branch networ$ comprises E4? Rural/ 114 Semi ,rban/1111 ,rban and 2?? Metropolitan branches% During the re&iew period 1E
domestic branches were opened% ;ith 123 branches/ including 2
).tension *ounters/ the Ban$ has the largest networ$ amongst the
nationali-ed ban$s% As part of customer segmentation/ Ban$ has opened
speciali-ed Branches that include @ Micro Finance branches/ 3 SM)
branches/ 11 International Ban$ing Branches/ 1? Asset Reco&er
Management Branches/ 1> Mid *orporate Branches/ 11 5arge *orporate
Branches/ ?> Retail Asset Branches/ 11 Agriculture Finance Branches/ >
high8tech agriculture branches/ 1 *apital Mar$et Ser&ices Branch and 1
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International Ser&ice Branch% Besides/ 41 Bac$ 'ffices/ Special Foreign
).change 'ffices/ 1? Special MI*R *enters/ 41 Ser&ice 6Regional *learing
*entre7 centers/ 4 Financial Inclusion Ser&ice *enters/ > *entrali-ed Draft
Paable *enters/ 1 *entral *learing Ser&ice *entre and 1 Depositor Bac$
'ffice are established to reduce deli&er time and impro&e response time%
The Ban$ recei&ed permission from RBI for setting up a representati&e
office in Sdne/ Australia% Also/ the are in the process of entering into
*anada% The compan is ha&ing an aim to increase the customer base to 1E
million b the ear E1>
INTRODUCTION OF INDUSTRIAL LOAN
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'ne of the major areas of the econom that has recei&ed focus in recent
times is the financial sector% And within the broad domain of the financial
sector/ it is the ban$ing sector that has been the policma$ers% Therefore/ the
ban$ing sector in most emerging economies is passing through the
challenges and India is not e.ception to this rule% ;hen we consider
financial matters/ we thin$ of ban$s as the primar financial entit%
9owe&er/ the continuing wa&e of ban$ mergers and acquisitions has raised
concern about the a&ailabilit of debt capital/ especiall to business firms%
0ow this issue is more hotl debated in Indian ban$ing sector/ where small
firms dominate the business sector% In the light of the importance of financial
intermediation and the difficulties that se&eral countries ha&e encountered in
restructuring their fragile ban$ing sstems/ it would be useful to e.amine the
performance of the ban$ing sector with respect to the procedure of gi&ing
loan in India during the twenties% A loan is a legal contract between thelender and the debtors% The major business of ban$ing compan is to grant
loans and ad&ances to traders as well as commercial and industrial institutes%
The most important use of ban$s mone is lending% There are also some
ris$s in lending% ;hile lending loans the ban$s usuall $eep securities and
assets as a supports so that lending ma be safe and secured%
SCOPE OF T-E STUDY
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The scope of the stud is confined to the Punjab 0ational Ban$ in terms of
customer satisfaction% The stud has been underta$en on the basis of sample
sur&e%
INDUSTRIAL LOAN
In the present changing scenario of ban$ing industr it is the aim of all
financial institutions and ban$s to pro&ide all shorts of financial problems
and needs to its clients% Therefore in the recent de&elopments in the financial
sector we ha&e been witnessing the term lending institutions% The lending
institutions are earlier aiming at pro&iding long term credit requirement for
industr but now the are pro&iding wor$ing capital finance and also inland
as well as foreign letter of credit% Ban$s ha&e also started financing long
term credit needs of the industr% ;ith the ad&ent of financial sector reforms
ushered b go&t% of India and RBI to pro&ide liberali-ed en&ironment in ban$ing industr/ it has become imperati&e to create en&ironment to meet
financial needs of a client/ inland as well o&erseas b one institution onl% In
a nutshell !,ni&ersal Ban$ing# is the need of the hour to sur&i&e% As a step
in this direction some financial institue tionGban$s ha&e introduced the
scheme of pro&iding corporate loan%
T-E LENDIN DECISION
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A ban$Ks credit department will anal-e a borrower and pro&ide a credit
rating used in the lending decision% *reditworthiness of borrowers
determined b 6 *Ks7 is listed below%
1 C-ARACTER Ban$ers should continuall emphasi-e the importance of
the applicantKs credit histor% *haracter is the Prime determinant of a
borrowerKs willingness to repa a loan% It is nothing but the honest and the
integrit of the person requiring loan%
2 CAPACITY It is the firmKs abilit to generate liquidit in the loan
repament process% +enerating the cash flow and changing the capital
structure are the primar source of capital repament%
; CAPITAL This categor refers to the loan applicantKs abilit to create
incomeGcash flow% The !real# net worth of the firm is a good signal for
repament li$elihood%4 COLLATERAL Ban$ lenders alwas run with the ris$ of repament of
the loan b the borrowers% *ollateral pro&ides securit to loans made% As a
part of repament/ accounts recei&able/ equipment/ in&entor/ real estate and
buildings are all potential sources of collateral%
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the factors which influence the appro&al or denial of a business firmKs loan
application%
OBJECTI9ES
1% To $now the criteria for granting ban$ loans to the industrial sectors
% To identif the &ariable that the ban$ emphasi-es before gi&ing loans%
>% To find out the tpe of the business a&ailing the loan most%
4% To find out the tpe of the preferable product to a&ail the loan most%
% To find out which group 6minorit or majorit7 get the loan easil%
@% To access the association in between the go&ernment appro&al of the firm
and sanctioning the loan%
?% To $now the legal structure of the firm helps in getting the loan%
2% Analsis of the relationship of the si-e of the compan/ Financial Sstem/
Business ).perience with the chance of getting loan
Pr%d!$t
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P0B has a wide &ariet of products and ser&ices that meet di&erse
requirements of its &ast customer base% In the light of growing importance of
financial inclusion/ the ban$ has introduced P0B Mitra 8 a no8frills sa&ings
ban$ account that can be opened either b an indi&idual/ or jointl% A number
of deposit and loan schemes are a&ailable to customers such as housing
loans/ car finance/ customer finance/ personal and se&eral tpes of
educational loans% It has an international credit card/ issued in collaboration
with 9ong :ong and Shanghai Ban$ing *orporation% 9P0B* is the issuer
ban$ for the co branded credit card and it underta$es all front8end and bac$8
end operations relating to the co8branded credit card% Punjab 0ational Ban$
has formulated the +old *ard Scheme for its e.porter clients based on the
scheme drawn up b Reser&e Ban$ of India% The scheme ensures eas
a&ailabilit of e.port credit on best terms to credit worth e.porters with a
good trac$ record% The card offered b P0B is $nown as P0B ).po +old
*ard% The ban$ offers 18hour ban$ing ser&ices in ?? branches across India%
RE9IE, OF LITERATURE
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The first part deals with the flow of credit from organi-ed institutions to
&arious sectors li$e manufacturing industr/ pri&ate corporate sector and
&arious other industrial concerns% Studies on the institutional flow of credit
in Delhi are also discussed% The unorgani-ed sector consisting of indigenous
financial agencies is enumerated in the ne.t part% ,nderstanding the
operation of and the potential for housing finance is important/ since in
man de&eloping countries housing polic is about establishing new and
more inno&ati&e finance policies%
The ban$ing sstem in India comprises of the Reser&e Ban$ of India/
*ommercial ban$s and cooperati&e ban$s and credit societies% The
commercial ban$s are the premier institutional structure of the ban$ing
sstem% The principal function of these institutions is to satisf
simultaneousl the portfolio preferences of the borrowers on one side and
the lenders on the other% The mobili-e resources from the sa&ers in the form
of deposits and e.tend credit facilities to borrowers in the form of loans/ad&ances and securities% 5oans and ad&ances pro&ided b these institutions
can be categori-ed into short8term funds and long8term funds% The latter are
ad&anced for purchase of plant and machiner while the former are pro&ided
for purchase of raw materials/ stores/ spare parts and the li$e% 9owe&er
following the traditional British ban$ing practice/ commercial ban$s pro&ide
more short term funds to the in&estors in industr and trade than long term
loans% The pattern of credit disbursement has undergone substantial changes
since 13E%
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*ommercial ban$s e.tended credit to commerce and trade to a larger e.tend
than to manufacturing industr until 132% Since the commencement of the
second fi&e Lear Plan/ which laid emphasis on rapid industriali-ation/ the
pattern of credit flow too$ a new turn in fa&our of medium and large
industr% As a result/ the share of industr/ in public and pri&ate sectors in
total ban$ credit increased from >4%2J to @?%J during the period 134 to
13@2% Since nationali-ation of 14 major commercial ban$s in (ul 13@3/ the
+o&ernment of India assigned new priorities to commercial ban$s with
regard to the flow of credit to hitherto neglected sectors/ called Cpriorit
sectors%C The emphasis thus shifted from industr to the priorit sectors%
Further the suppl of credit was controlled through statutor regulations and
monetar regulations%
'n the other hand the demand for ban$ credit has also undergone substantial
increase% Factors such as/ large growth in the number of industrial units/
di&ersification of e.isting units/ increase in industrial and agricultural production/ increasing needs of short and long8term funds to maintain the
increased le&els of production/ pushed up the demand for ban$ credit%
'bser&ed that the use of funds from ban$s b the pri&ate corporate sector
had e.ceeded its in&entor formation% +upta/ has argued that a small portion
of such finance should ha&e gone to meet fi.ed in&estment% Further/ he
found the growth rate of phsical assets to be more directl and closel
related to securit issues than ban$ credit% 9ence/ he argued that the fast
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growing firms relied hea&il on securit issues than the use of ban$ credit%
Arnbegeo$ar found that the rate of rise in ban$ credit e.ceeded that of
in&entor/ sales and output%
Further he obser&ed Shett* assessed the dimensional changes in credit
deploment during the first fi&e ears of nationali-ation in relation to
changes in output and prices% The rationale for his analsis was the fact that/
in an accepted model of demand for mone/ one common &ariable is the
gross national product or some other &ariant of it in real terms%
*onsequentl/ he hpothesi-ed that credit for an sector or industr o&er a
period has to ha&e some relationship with its performance in real terms/
particularl output% 9e obser&ed a declining trend in the credit e.tended b
ban$s to industries since nationali-ation/ though it was higher than other
sectors% 'n finding that the share of manufacturing sector in ban$ credit is
higher than its share in 0et Domestic Product 60DP7 he concludes that
increase in ban$ credit has occurred far in e.cess of increase in outputduring the ears
In his other paper/ shett4 obser&ed that the share of medium and large
industr in total ban$ credit had declined due to priorit sector lending%
Another obser&ation in line with his earlier finding was that growth in ban$
credit had alwas been disproportionate to growth of their phsical output/
especiall in industries li$e cotton te.tiles% 9is obser&ation particularl for
the ears 13?8?@ and 13?@8?? re&ealed
6a7 Increase in a&erage ban$ credit had been higher than the growth of 0DP
originating in registered manufacturing sector e&en at current prices
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6b7 An appreciable increase in the rate of short8term ban$ credit to
in&entories< and
6c7 Relati&el higher reliance on trade credit% In line with these obser&ations/
he suggested policies to scrutini-e credit claims &igorousl and relate credit
to the genuine production requirements so that funds are not tied up with
these large borrowers%
:%S%R% carried out an econometric e.ercise on the determinants of demand
for ban$ credit of some selected industries for the period between 13?E8?1
and 132482% 9e obser&ed that output of these industries was the most
important factor in determining its demand for ban$ credit whereas/ interest
rate of ban$s and relati&e rate of interest of other sources of borrowing
plaed onl a secondar role% Price of output was also found to ha&e affected
the demand for credit significantl% The relati&e interest rate &ariable was
significant with respect to industries li$e te.tiles/ engineering and total
manufacturing/ while it was not significant for industries li$e sugar andother food products and chemicals%
Di&atia and shan$ar@ in their paper discussed the role of internal and
e.ternal sources of funds and their components in financing capital
formation of the pri&ate corporate sector% The stud was based on the RBI
compan finance studies relating to medium and large public and pri&ate
limited companies and co&ered the period 13@18?@% The also discussed the
trends and patterns of financing for four indi&idual industries/ &i-/ cotton
te.tiles/ jute/ sugar and cement%
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Some interesting findings in his article CFinancial Practices in Indian
*orporate Sector/C based on the RBI compan finance data% 9e underlined
the rising dependence on borrowed capital in relation to the total capital
emploed in the Indian corporate sector% Trade credit was pointed out to be
important sources of capital when the ban$ credit was squee-ed% Ma$ing an
industr8wise analsis/ the author came to the conclusion that the industries
with large profit margins and those with large depreciation and de&elopment
rebate reser&es had a relati&el lower order of o&erall indebtedness and
man of them also had a lower order of ban$ borrowings in relation to
o&erall indebtedness% Industries with high profit margin such as sil$ and
raon te.tiles/ aluminum/ basic industrial chemicals and medicine and
pharmaceutical preparations had lower proportion of borrowed funds as
compared to the a&erage of the medium and large public 5td% companies%
The e.tensi&e stud &iewed that the growth of institutional finance
emerged in India due to structural change for industrial financing sstemwith wide change of socio8political situations in India% 9e attempted to
measure o&erall impact of financial institutions on capital formation in the
organi-ed pri&ate sector as also the locati&e efficienc of financial sstem%
9e obser&ed that during the first planN financial assistance rendered b
special institutions represented onl 4%1 per cent of gross fi.ed in&estment in
pri&ate industr/ which rose to ?%3 per cent in the second plan and further to
12%1J in the third plan period% 9e also found that commercial ban$s
remained the most important single agenc for financing the pri&ate
corporate industr and 5I* was the single largest purchaser of industrial
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securities and the underwriter of new issues of large and established
companies%
RESEARC- +ET-ODOLOY
SA+PLE AND DATA COLLECTION
This sur&e was conducted in the conte.t of ban$ing ser&ices% The data were
collected in face8to face inter&iews of customers coming to ban$s% The stud
pro&ides a representati&e sample of &arious branches of Punjab 0ational
Ban$Ks customers in Delhi onl%
RESEARC- DESIN
The research design is relating to the collection and analsis of data% There is
Oualitati&e and Ouantitati&e Research design%
DATA COLLECTION
In qualitati&e research design/ for the collection of data Depth Inter&iews/Focus groups and Projecti&e techniques ha&e been used% In quantitati&e
research design the data ha&e been collected from primar source through
obser&ations/ e.perimentation and questionnaires%
SA+PLE SI=E'
The samples ha&e been selected on random basis% A sample of 1EE
respondents was be used in the research%
DATA SOURCES'
Both secondar and primar sources of data ha&e been used% The major tpe
of information used is primar data% This is done through primar sur&e%
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The literature re&iew contains a secondar data tpe% The sources include
boo$s/ periodicals websites/ printed literature etc%
TOOLS AND TEC-NI>UES TO BE USED TABLES?
Bar diagram and structures are used in e.planations to bring out the point
more clearl% Tabulation of the primar data was done% 'n the basis of these
tables/ trends came out more &isibl% 'ther statistical techniques those are to
be used are/
@ C-I5S>UARE – it is used to test the independence of the attributes%
@ RANKIN +ET-OD8its basic propert is to arrange a number of
attributes in a particular order%
@ KOL+OORO98 Smirno& test it is used to test the relationship
between the ran$ and the factors%
@ LARE SA+PLE TEST .=5TEST3 it is used to test the equalit of two population proportion%
@ ANO9A 8 it is used to test the significance of difference of the &ariabilit
@ +ULTIPLE RERESSION8 It is used to find out the relation of a
&ariable with a group of &ariables%
COLLECTION OF DATA
The wide &ariet of ban$ regulations along with the e.isting en&ironmental
condition suggests a number of factors that would influence to acceptGreject
commercial ban$ lending decision% Specificall/ the database includes such
information on ban$s who supplied the information about the strateg of
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getting loan from a local commercial ban$ such as P0B/ ,*'/ AQIS/
A0D9RA/ SBI/ 9DF* and their different branches% In order to achie&e the
identified objecti&e pertaining to priorities and preferences and &iews/ a
sample of 1EE ban$ers 6Managers7 ha&e been selected in the cit Mumbai/
Maharashtra from the different branches of P0B/ ,*'/ AQIS/ A0D9RA/
SBI/ 9DF* during December/ E1E%A pre8tested questionnaire was
administered to them/ personal inter&iews with the help of the pre8tested
inter&iew schedule/ designed for this purpose was ta$en% Besides/ personal
obser&ation was done where&er necessaril applicable% A pilot sur&e was
conducted in the cities and the questionnaire was impro&ed in that light% A
structured questionnaire was used as a data collection tool/ and the statistical
judgment sampling was resorted for the purpose of the stud%
DATA ANALYSIS
T#(/e5' St#te)ent h%"n d"&&erent /ee/ %& $!t%)er #t"$t"%n "n
P!n#( N#t"%n#/ B#n
ANALYSIS AND INTERPRETATION
1% Structure wise analsis It is important for the ban$ers to note down the
legal structure of a firm< that is/ whether it is a sole proprietorship/
partnership or corporation%
A one wa A0'A is performed to test whether there is an differences in
the structures while a&ailing the loan%
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NULL -YPOT-ESIS' -0'
There are no differences in the structure of the firm in getting the loan%
A0'A
Table81
Sources of &ariation d%f% Sum of Mean Sum of F*olumn 6tpe of the 2 2@%?3 4>%>3 F11%E?)rror 12 ?> @%E2 5555555
Total 14 55555 5555555 55555555F00< .2 123 ; C#/ F 555555 -0 " ree$ted
INTERPRETATION' There e.ist differences in the structures of the firm
in getting loan
The &%//%"n t#(/e h% the Ger$ent#e %& the reG%ne %(t#"ned
##"nt t% e#$h $#te%r*
TABLE52
Tpe of the structure PercentageSole Proprietorship 14JPartnership EJBig *orporation 2@JINTERPRETATION' 9ence/ it is interpreted that all most all the ban$ers
fa&or to the big corporation while gi&ing the loan%
O,NERS-IP ,ISE ANALYSIS
*onsidering the ownership of this firm/ it is important to note down the
nature of business such as minorit business 6that is/ fift percent or more
minorit owned7 or majorit business% For this purpose/ we ha&e performed
the large sample test 67 in order to $now whether the proportion of minorit
business owner is more important than that of majorit or not%
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0ull hpothesis 9E P E%E
Test statistic
p 8 P G UPO 61G n7V
P Population Proportion of the ban$ers fa&oring to majorit group
n sample si-e 1EE *alculation
*A5 p 8 P G UPO 61G n7V ;here/
P E%E/ O 18 P p Sample proportion of the ban$ers fa&oring to majorit
group 6?> G1EE7 E%?> *A5 E%?> E%EGUE%EW E%E 61G1EE7V 4%@
TAB 1%@4 at J le&el of significance%
As/ *A5 X TAB /9E is rejected and 91 is accepted%
INTERPRETATION'
9ence we can conclude that ban$ emphasi-es the majorit group while
sanctioning the loan%
>% Analsis of the relationship of the si-e of the compan/ Financial Sstem/Business ).perience with the chance of getting loan The chance of getting
the loan is correlated with the si-e of the compan/ Financial Sstem and
Business ).perience% 9ere the basic interest is to find out the weightage of
the independent &ariables 6Si-e of the compan/ Financial Sstem and
Business ).perience7 on the predictor/ the chance of getting the loan b
using the Multiple Regression technique%
5et L be the dependent &ariable the chances of getting 5oan B the
coefficient of determinant 6a constant &alue7 Q1 Si-e of the compan/
Q Financial Sstem/ Q> Business ).perience
L BE Y B1 Q1Y B QY B> Q>
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Step8b8Step Multiple Regression
T#(/e5 ;' +%de/ S!))#r*
Model R R Square Adjusted R Square Std% )rror of the )stimate1 %32? %3?4 %3@2 %@?Ea Predictors 6*onstant7/ Q>/ Q1/ Q
Adjusted R Square &alue tells us that our model accounts for 3@%2J of
&ariance and it signifies the model as good one%
TAB5)84 *'RR)5ATI'0S
L Q1 Q Q>
L 1%EEE %32E %3?? %4Q1 %32E 1%EEE %3@@ %1@Q %3?? %3@@ 1%EEE %41Q> %4 %1@ %41 1%EEEWW *orrelation is significant at E%E1 le&el 68tailed7
This table gi&es details of the correlation between each pair of &ariables%
There is a &er good correlation between the criterion and the predictor
&ariables% The &alues here are acceptable%
Table8 *oefficients,nstandardi-ed
*oefficients
Standardi-ed
*oefficients
t Sig%
B Std% )rror Beta6*onstant7 84%112 11%>12 8%1>1 %E1Q1 E%2E@ %E %>3 >% %EE@Q E%233 %>4 %44> %@E %E1Q> E%2EE> %E?? %E %4?2 %@4E# DeGendent 9#r"#(/e' Y
The Standardi-ed Beta *oefficients gi&e a measure of the contribution of each &ariable to the model% A large &alue indicates that a unit change in this
predictor &ariable has a large effect on the criterion &ariable% The t and Sig
6p7 &alues gi&e a rough indication of the impact of each predictor &ariable
a big absolute t &alue and small p &alue suggests that a predictor &ariables
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ha&ing a large impact on the criterion &ariable% Financial Sstem has the
highest beta &alue 6E%2337/ Si-e of the compan and the Business ).perience
ha&e the &alues of 6E%2337 and 6E%2EE>7%)rror &ariance is e.plained b
constant 611%>127/ followed b Financial Sstem 6E%>47/ Si-e of the
compan 6E%E7/ Business ).perience 6E%E??7% Sample t8test correlates
positi&el for Si-e of the compan 6>%7/ Financial Sstem 6%@E7 and
Business ).perience 6E%4?27 with the chance of a&ailing the loan%
Y 52411 H 00681H 07782 H0200;8;
It is e&ident that the ban$ers are gi&ing more importance on the financial
sstem/ si-e of the firm and less importance on business e.perience while
gi&ing the loan%
4% Analsis of the most important financial sstem of the firm to get the loan
Firms emploing a ear8end compilation accounting method for ta.
purposes can pro&ide little financial information to a prospecti&e lender%
9ere the basic purpose is to find out the tpe of the financial recordfa&orable to get the loan%
T#(/e56
Financial Sstem Percentag ea7 :eep documents which are compiled at the end of the ear for
ta. purposes%
J
b7 Maintain records which can pro&ide information about the
balance sheet along with ta. information at the end of the ear
>J
c7 9a&e a sstem which generates quarterl along with ear8end
financial statements and ta. information
1EJ
d7 ,tili-e a sstem which pro&ides monthl/ quarterl and ear 2J
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end financial statements and the ta. information from the ear
INTERPRETATION'
A majorit i%e% 2J of the ban$ers are in fa&or of the fact that the firm
should utili-e a sstem which pro&ides monthl/ quarterl and ear end
financial statements and the ta. information from the ear%
Analsis of the factors influencing for sanctioning the loan% It is necessar to
assess the important factors influencing to sanction the loan% There are so
man factors/ but we ha&e included the following factors onl% The dataha&e been collected on 8point li$ert tpe scale in all eight attributes% The
statements were measurable on a li$ert scale of 18< where indicates
strongl agree and 1 indicates strongl disagree%
T#(/e ' The !))#r"ed r#n %rder
Features 1 2 ; 4 < Ran$
Sum
Ran$
Ta.es 6 17 20 26 27 >> 4Poor Sales 2 20 21 26 ;1 >@4 ;
Financing and Interest Rates 2 10 12 ;< 41 4E> 2'perating and Production *ost 0 4 20 2; 43 <A&ailabilit and Oualit of 5abor 1< 1< 20 2< 2< >>E 6*ost of Insurance 20 1< 2< 20 20 >E Personal recommendation 1 20 2< 1 20 >E4
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INTERPRETATION'
From the abo&e analsis we conclude that the 'perating and Production
*osts/ Financing and Interest Rates/ Poor Sales are the more influencing
factors for the ban$ers to sanction the loan%
PRODUCT ,ISE ANALYSIS
The tpe of the product such as FM*+/ Petroleum and gasoline products/
Steel product/ and Te.tile product to be produced b the compan is of
prime consideration of getting loan%
The differences among the different products are anal-ed statisticall using
one8wa A0'A%
0ull 9pothesis 9E There is no difference in the products of getting the
loan%
ANO9A T#(/e5Sources of &ariation d%f Sum of Mean Sum of F*olumn 6tpe of 4 21%@? ?%E23 F1)rror 12 ??%12 @%4>44 5555Total 16 555 555555 55555
F00< .4 123 ;26 C#/ F 555555 -0 " ree$ted
InterGret#t"%n' There e"t d"&&eren$e "n the Gr%d!$t %& ett"n the
/%#n Let ! Gr%$eed &!rther t% n% th#t h"$h Gr%d!$t h# the
)#")!) e"ht #e t% et the /%#n
T#(/e57
Tpe of the Product PercentageFM*+ 12JPetroleum and gasoline products JSteel Product 1J
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Te.tile Product 1J'thers 1EJ
InterGret#t"%n' Majorit ban$ers 6J7 fa&ored to Petroleum and gasoline
products while sanctioning loan%
Analsis of ha&ing the go&ernment appro&al In order to access whether the
go&ernment appro&al is important for getting the loan or not we ha&e
performed chi8square test as follows% 0ull hpothesis 9E There is no
significant association between the go&ernment appro&al of the firm and
a&ailing loan Statistical test *hi square test is the most appropriate test for
this purpose%
TEST STATISTIC'
. 6*hi8square7 Z[6'8 )7 G)\ 1@%?@@ Tab% al of . 6E%E7 at > d%f is
%33
As/ . cal X . tab / 9E is rejected and 91 is acceptedInterGret#t"%n' So/ 9E is rejected and 91 is accepted% In other words/ there
is an association between the go&ernment appro&al of the firm and a&ailing
loan
BUSINESS ,ISE ANALYSIS
The nature of a firmKs business/ such as retail/ manufacturing or construction
could influence the probabilit of loan appro&al% The effect could be positi&eor negati&e% The differences among the different products are anal-ed
statisticall using one wa
ANO9A N!// -*G%the"'
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-0' There " n% d"&&eren$e "n the t*Ge %& the (!"ne %& ett"n the /%#n
ANO9A T#(/e510
Sources of &ariation d%f% Sum of squares Mean Sum of squares F*olumn 6tpe of product7 4 21%@? ?%E23 F14%1)rror 12 ??%12 @%4>44 555Total 1< 555555555 555555 5555
F00< .4 123 ;26 C#/ F 555555 -01 " ree$ted
5et us proceed further to $now that which tpe of the business has thema.imum weight age to get the loan%
T#(/e511
Tpe of the Product PercentageRetail EJManufacturing @J*onstruction 1J
InterGret#t"%n' Ma.imum ban$ers 6@J7 fa&ored to manufacturing unit business while sanctioning loan%
+EASURIN CUSTO+ER SATISFACTION IN T-E BANKIN
INDUSTRY
Ban$ing operations are becoming increasingl customer oriented% The
demand for ban$ing supermalls offering one8stop integrated financial
ser&ices is well on the rise% The abilit of ban$s to offer clients access to
se&eral mar$ets for different classes of financial instruments has become a
&aluable competiti&e edge% *on&ergence in the industr to cater to the
changing demographic e.pectations is now more than e&ident% Ban$
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assurance and other forms of cross selling and strategic alliances will soon
alter the business dnamics of ban$s and fuel the process of consolidation
for increased scope of business and re&enue% The thrust on farm sector/
health sector and ser&ices offers se&eral in&estment lin$ages% In short/ the
domestic econom is an increasing pie which offers e.tensi&e economies of
scale that onl large ban$s will be in a position to tap%
;ith the phenomenal increase in the countrs population and the increased
demand for ban$ing ser&ices< speed/ ser&ice qualit and customer
satisfaction are going to be $e differentiators for each ban$s future success%
Thus/ it is imperati&e for ban$s to get useful feedbac$ on their actual
response time and customer ser&ice qualit aspects of retail ban$ing/ which
in turn will help them ta$e positi&e steps to maintain a competiti&e edge%
T-E NEED TO +EASURE CUSTO+ER SATISFACTION
Satisfied customers are central to optimal performance and financial returns%In man places of the world/ business organi-ations ha&e been ele&ating the
role of the customer to that of a $e sta$eholder o&er the past twent ears%
*ustomers are &iewed as a group whose satisfaction with the enterprise must
be incorporated in strategic planning efforts% Forward8loo$ing companies are
finding &alue in directl measuring and trac$ing customer satisfaction as an
important strategic success indicator% )&idence is mounting that placing a
high priorit on customer satisfaction is critical to impro&ed organi-ational
performance in a global mar$et place% ;ith better understanding of
customers perceptions/ companies can determine the actions required to
meet the customers needs% The can identif their own strengths and
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wea$nesses/ where the stand in comparison to their competitors/ chart out
the path of future progress and impro&ement% *ustomer satisfaction
measurement helps to promote an increased focus on customer outcomes
and stimulate impro&ements in the wor$ practices and processes used within
the compan% ;hen buers are powerful/ the health and strength of the
compans relationship with its customers its most critical economic asset
is its best predictor of the future%
ASSETS ON T-E BALANCE S-EET – BASICALLY ASSETS OF
PRODUCTION are good predictors onl when buers are wea$% So it is
no wonder that the relationship between those assets and future income is
becoming more and more tenuous% As buers become empowered/ sellers
ha&e no choice but to adapt% Focusing on competition has its place/ but with
buer power on the rise/ it is more important to pa attention to the
customer% *ustomer satisfaction is quite a comple. issue and there is a lot of
debate and confusion about what e.actl is required and how to go about it%This article is an attempt to re&iew the necessar requirements/ and discuss
the steps that need to be ta$en in order to measure and trac$ customer
satisfaction%
,-AT CONSTITUTES SATISFACTION
T-E +EANIN OF SATISFACTION'
CSatisfiedC has a range of meanings to indi&iduals/ but it generall seems to
be a positi&e assessment of the ser&ices% The word CsatisfiedC itself had a
number of different meanings for respondents/ which can be split into the
broad themes of contentmentGhappiness/ relief/ achie&ing aims and happ
with outcome and the fact that the did not encounter an hassle
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-APPY CONTENT
9app/ prett happ/ quite happ
Pleased
;al$ed out of there feeling good
;al$ out of there chuffed
+rateful the ser&ice has been ':
SER9ICE >UALITY AND CUSTO+ER SATISFACTION
There is a great deal of discussion and disagreement in the literatureabout the distinction between ser&ice qualit and satisfaction% The ser&ice
qualit school &iew satisfaction as an antecedent of ser&ice qualit
satisfaction with a number of indi&idual transactions !deca# into an
o&erall attitude towards ser&ice qualit% The satisfaction school holds the
opposite &iew that assessments of ser&ice qualit lead to an o&erall
attitude towards the ser&ice the call satisfaction and customer retention
customerKs perception of Ser&ice and Oualit of product will determine
the success of the product or ser&ice in the mar$et% If e.perience of the
client from the pre&ious ser&ices/ greatl e.ceeds the e.pectations then
satisfaction will be high/ and &ice &ersa% In the ser&ice qualit literature/
perceptions of the ser&ice deli&er are measured separatel from
customer e.pectations/ and the gap between the two pro&ides a measure
of ser&ice qualit%E8PECTATIONS AND CUSTO+ER SATISFACTION
).pectations ha&e a central role in influencing satisfaction with ser&ices/
and these in turn are determined b a &er wide range of factors lower
e.pectations will result in higher satisfaction ratings for an gi&en le&el
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of ser&ice qualit% This would seen sensible< e%g%/ poor pre&ious
e.perience with the ser&ice or other similar ser&ice is li$el to result in it
being easier to pleasantl surprise customers% 9owe&er/ there are clearl
circumstance where negati&e preconceptions of a ser&ice pro&ider will
lead to lower e.pectations/ but will also ma$e it harder to achie&e high
satisfaction ratings and where positi&e preconception and high
e.pectations ma$e positi&e rating more li$el% The e.pectations theor in
much of the literature/ therefore/ seems to be an o&er simplification% %
BANKIN INDUSTRY' AN O9ER9IE,
For centuries ban$s ha&e plaed an important role in financial sstem of
the countr% The &ital role continues e&en toda although the form of
ban$ing has changed toda with changing need of the econom and
indi&iduals% ;ith e.pansion of trade and commerce/ the concept of
ban$ing gained importance% The ban$ing transcended from indi&iduals to
groups and later to companies% During the Mughal period the indigenous ban$ers plaed a &er important role in lending mone and financing
foreign trade in India% During British rule the agenc houses carried on
the ban$ing business% The Ban$ing sstem in India has three tiers% There
are scheduled commercial ban$s/ the regional rural ban$s< and the
cooperati&e ban$s% The scheduled commercial ban$s constitute those
ban$s which are included in the second schedule of RBI Act/ 13>4% In the
organi-ed segment/ ban$ing sstem occupies an important place in
nationKs econom% It plas a pi&otal role in the economic de&elopment of
a countr and forms the core of the mone mar$et in de&eloped countr%
The commercial ban$s in India comprise of both Public sector as well as
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pri&ate sector ban$s% There are total 2 Public sector and ? pri&ate
sector ban$s functioning in the countr presentl% Ban$s ha&e to deal
with man customers e&erda and render &arious tpes of ser&ices to its
customer% Its a well $nown fact that no business can e.ist without
customers%
PUNJAB NATIONAL BANK
Since its humble beginning in 123 with the distinction of being the first
Indian Ban$ to ha&e been started with Indian capital/ P0B has achie&ed
significant growth in business which at the end of March E11 amounted
to //EE crore% P0B is ran$ed as the nd largest ban$ in the countr
after SBI in terms of branch networ$/ business and man other
parameters% ;ith o&er @E million satisfied customers and more than 1EE
offices including o&erseas branches/ P0B has continued to retain its
leadership position amongst the nationali-ed ban$s% The ban$ enjos
strong fundamentals/ large franchise &alue and good brand image% Apartfrom offering ban$ing products/ the ban$ has also entered the credit card/
debit card< bullion business< life and non8life insurance< +old coins H
asset management business/ etc% P0B has earned man awards and
accolades during the ear in appreciation of e.cellence in ser&ices/
*orporate Social Responsibilit 6*SR7 practices/ transparent go&ernance
structure/ best use of technolog and good human resource management%
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CASE ON SUCCESSFUL S+E FINANCIN
;orldwide/ the wind has been changing in the finance sector in general
and ban$ing8in&estment sector in particular% Such a panorama teaches us
that now/ is the time of cooperation rather than a competition/ now itKs a
time of con&ergence rather than cutting each otherKs nec$ o&er customers
and mar$ets/ now itKs a time of consolidation rather than antagonism%
*uring the fatal disease requires the doses of small pills< impressi&e
thoughts come out from the small brain/ similarl/ India requires prominence of small and medium enterprises for curing its problem of
low economic growth &is8]8&is de&eloped nations% To cure the o&erall
disease of lac$ of appropriate growth of Indian SM)s Small and
Medium )nterprises/ India needs se&eral small pills such as adequate
credit deli&er to SM)s/ better ris$ management/ technological
upgradation of Ban$s esp% Public Sector Ban$s/ attitudinal change in
Ban$ers and so on% Among them/ the major problem of inadequate
financing to SM)s needs an urgent attention% 9a&ing said this/ it is
pertinent to mention that Small Industrial De&elopment Ban$ of India has
achie&ed landmar$ results in the domain of small and medium enterprise
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financing and fulfilling their credit requirements time to time in &arious
forms such as long term project finance/ wor$ing capital finance/ bill
discounting etc% 9owe&er considering the le&el of appetite for credit
facilities of Indian small and medium enterprises/ pri&ate and public
sector ban$s in India need to wor$ out an unique and inno&ati&e model of
financing to this &ital sector 6SM)7 of Indian )conom% In todaKs
changing world/ retail trading/ SM) financing/ rural credit and o&erseas
operations are the major growth dri&ers for Indian ban$ing industr% The
scene has changed since the adoption of financial sector restructuring
programme in 1331% The reform in the financial sector in India along
with the o&erall second generation economic reforms in Indian econom
has transformed the landscape of ban$ing industr and financial
institutions% +DP growth in the 1E ears after reforms a&eraged around @
J% ;ith the introduction of the reforms especiall in financial sector and
successful implementation of them resulted into the mar$ed impro&ementin the financial health of the commercial ban$s measured in terms of
capital adequac/ profitabilit/ asset qualit and pro&isioning for the
doubtful losses%
0ow/ the rules of the game ha&e completel changed% *onsolidation has
become the new mantra for sur&i&al% Due to the growing influence of
globali-ation on the Indian ban$ing industr/ the author is of the opinion
that the financial sector would be opened up for greater international
competition under ;T'% 'pening up of the financial sector from EE/
under ;T'/ would see a number of global ban$s ta$ing large sta$es and
control o&er ban$ing entities in the countr% The are e.pected to bring
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with them capital/ technolog/ and management s$ills which would
increase the competiti&e spirit in the sstem leading to greater efficienc%
+o&ernment policies to allow greater FDI in ban$ing industr and the
mo&e to amend Ban$ing regulations Act to remo&e the e.isting 1E per
cent cap on &oting rights of shareholders are pointer to these
de&elopments% The pressure on ban$s to gear up to meet stringent
prudential capital adequac norms under Basel II and the &arious Free
Trade Agreements 6FTAs7 that India is entering into with other countries/
such as Singapore/ will also impact on globali-ation of Indian ban$ing%
9owe&er/ the flow need not be one wa% Some of the Indian ban$s ma
also emerge as global plaers% As globali-ation opens up opportunities for
Indian corporate entities to e.pand their o&erseas operations/ ban$s in
India wanting to increase their international presence could naturall be
e.pected to follow these corporate entities and other trade flows out of
India% Alongside/ the growing pressure on capital structure of ban$s ise.pected to trigger a phase of consolidation in the ban$ing industr% In
the past mergers were initiated b regulators to protect the interest of
depositors of wea$ ban$s% In recent ears/ there ha&e been a number of
mar$et8led mergers between pri&ate ban$s% This process is e.pected to
gain momentum in the coming ears% A merger between two public sector
ban$s or between a public sector ban$ and a pri&ate ban$ could be the
ne.t logical de&elopment% *onsolidation could also ta$e place through
strategic alliances or partnerships co&ering specific areas of business
such as credit cards/ insurance/ SM)s financing etc% Secondl/ ris$
management has become the $e to success in which adoption of the
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state8of8the8art technolog and latest rating and management s$ills turn
out to be the significant aid for better ris$ management% The abilit to
gauge the ris$s and ta$e appropriate position will be the $e to successful
financing in the emerging Indian ban$ing scenario% Ris$8ta$ers will
sur&i&e/ effecti&e ris$ mangers will prosper and ris$8a&erse are li$el to
perish%
IN T-IS CONTE8T INDIAN BANKS -A9E TO ENSURE
1% Ris$ management has to tric$le down from the corporate office to
branches% The should be made more accountable and responsible
towards their duties% % As audit and super&ision shifts to a ris$8based
approach rather than transaction oriented/ the ris$ awareness le&els of
line functionaries also will ha&e to increase% >% There is a growing need
for ban$s to deal with issues relating to ^reputational ris$ to maintain ahigh degree of public confidence for raising capital and other resources%
In this process/ the technological ad&ancement of Indian ban$s would
create a soothing climate to manage their ris$ in a better wa% In the ears
to come/ technological de&elopments would render flow of information
and data faster/ leading to prompt appraisal and decision8ma$ing% This
would enable ban$s to ma$e credit management more effecti&e/ besides
leading to an appreciable reduction in transaction cost% In order to reduce
in&estment costs in technolog/ ban$s are li$el to resort sharing of
facilities such as ATM networ$s% Ban$s and financial institutions will
join together to share facilities in the areas of pament and settlement/
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bac$8office processing/ data warehousing/ and so on majorl for cost
effecti&eness and secondar motto would be to pro&ide e&erthing under
one head% The ad&ent of new technologies could see the emergence of
new plaers doing financial intermediation% For e.ample/ we could see
utilit ser&ice pro&iders offering/ sa/ bill pament ser&ices or
supermar$ets or retailers doing basic lending operations% So for better
profit margin/ with the help of technological inno&ation/ consolidation
and inno&ation in corporate lending/ the con&entional definition of
ban$ing might undergo changes% *onsidering such de&elopments in the
ban$ing industr of India/ it seems that the ne.t decade will be an era of
consolidation and integration% In such a scenario/ the e.pected integration
of &arious intermediaries in the financial sstem would require a strong
regulator framewor$% It would also require a number of legislati&e
changes to enable the ban$ing sstem to remain contemporar and
competiti&e% There would be an increased need for selfregulation amongIndian ban$s since de&elopment of best international standard practices
could e&ol&e better through this rather than based on mandator
regulator prescriptions% For instance/ to enlist the confidence of the
global in&estors and international mar$et plaers/ the ban$s will ha&e to
initiate adopting the best global practices of financial accounting and
reporting% It is e.pected that ban$s should migrate to global accounting
standards smoothl rather than waiting for the regulator circulars and
guidelines/ although it would mean greater disclosure and tighter norms%
5ast and the most important de&elopment in the Indian ban$ing industr
is its change of focus in corporate lending on account of abo&e mentioned
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changes and challenges% In the sheltered das of corporate lending b
ban$s/ when customers could be freel charged/ ban$s concerned
themsel&es with onl ^re&enue which was equal to cost plus profit% Post8
reforms8 after 1331/ when the cost of ser&ices became nearl equal across
ban$s and cost8control was a $e to higher profits/ the focus of financial
institutions especiall ban$s shifted to ^profit/ which was equal to
re&enue minus cost% This was an alternati&e measure of re&enue stream
which e&er ban$ thought of due to effects of e.ternal en&ironment on
their wor$ings% And in the future/ as domestic and international
competition hots up/ financial institutions including ban$s ma ha&e to
shift their focus to ^cost which will be determined b re&enue minus
profit% In other words/ cost8control in tandem with efficient use of
resources and increase in producti&it will determine the winners and
laggards in the future% The economic theor of _sur&i&al of the fittestK
wor$s e&erwhere it seems through this e.ample% The ra of hope isSmall and Medium )nterprises 6SM)s7
1 which is an emerging/ ine&itable and profitable target mar$et for the
financersK i%e% financial institutions and ban$s% 9owe&er/ that need not
mean ban$s and financial institutions will bac$8up the social ban$ing%
Rather than being seen as directed and philanthropic8li$e financing/ such
lending should ha&e been now more business dri&en% 'n the contrar/ the
authors belie&e that all the sources or mar$et of re&enues ha&e not been
&anished et% The SM)s sector is considered to be an untapped mar$et
for financial institutions in India% ;e just need to combat certain
obstacles% The hurdles which need to be remo&ed are8
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1% Minimi-ation of probabilities of s$ewed returns from SM)s b better
ris$ management
% )radicate inconsistenc in the $nowledge of SM)s business% For
e.ample/ entrepreneurs ma possess more information about the nature
and characteristics of their products and processes than potential
financiers%
>% Absence of managerial and technical e.pertise of intermediaries whose
role is to e&aluate and monitor companies
4% 5ac$ of international infrastructure and e.pertise in SM) financing
S+ES FINANCIN – :T-E RISINM India The onl wa out of the
mire is that the Indian manufacturing sector could be strengthened b the
e.isting rural sstems and ma$ing them self8sufficient% This could ta$e
place onl b helping Small and Medium )nterprises and the rural
artisans 6people with innate s$ills and talents7 in becoming effecti&e and
competiti&e enough to face the future% A number of issues and business practices of global plaers and mar$ets can be obser&ed/ learnt and
adapted for ensuring competiti&eness of Indian SM)s% 5et us ta$e an
anecdote/ which is a part of the school das about the meaning of
domestic and global competition% It is about two friends who while
wal$ing through a dense forest suddenl hear the roar of a bear% 'ne of
them immediatel changes his shoes that he is wearing in/ to the one/ he
uses for running% 9is friend as$ed him !If ou change our shoes/ do
ou thin$ ou can out beat the bearN# The other one replied !The idea is
not to beat the bear/ but ou%# The moral of the stor is that the Indian
SM) sector should be strong enough to out beat the other plaers in the
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econom and not the competition itself% SMA55 and M)DI,M
enterprises 6SM)s7 pla a cataltic role in the de&elopment of an
countr% The are the engines of growth in de&eloping and transition
economies% In India the account for a significant proportion in
manufacturing/ e.ports and emploment/ and are major contributors to
+DP%
*onsidering the growth potential of Indian SM)s/ the +o&ernment of
India has as$ed public sector ban$s to achie&e a minimum E per cent
ear8on8ear growth in the funding of SM)s that will lead to double the
flow of credit to the sector from Rs @?/EEE crore in EE48EE to Rs 1/
>/EEE crore b EE38E1E%
> A small8scale unit is defined as one ha&ing original in&estment in plant
and machiner not e.ceeding Rs 1 crore% ;hile recogni-ing the needs for
larger in&estment in some of the more important segments of small scale
industries 6SSIs7/ the +o&ernment has enhanced this to Rs crore for specified industries% The +o&ernment felt that a separate categor of
medium enterprises 6M)s7 needs to be recognised and/ accordingl/ the
new polic pac$age clearl defined the medium enterprises as those units
ha&ing in&estment in plant and machiner abo&e the small8scale industr
limit and up to Rs 1E crore/ as recommended b the ;or$ing +roup on
Flow of *redit to the SSI sector/ headed b Mr A% S% +angul
The Importance of Small and Medium )nterprises 6SM)s7 in an
econom cannot be o&erloo$ed as the form a major chun$ in the
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economic acti&it of nations% The pla a $e role in industriali-ation of
a de&eloping countr li$e India% The ha&e unique ad&antages due to8
Their si-e
Their comparati&el high labor8capital ratio
0eed a shorter gestation period
Focus on relati&el smaller mar$ets
0eed lower in&estments
)nsure a more equitable distribution of national income Facilitate an effecti&e mobili-ation of resources of capital and
s$ills which might otherwise remain unutili-ed and
Stimulate the growth of industrial entrepreneurship%
INDIAN S+E AT A LANCE In India/ SM) sector accounts for around
3J of the industrial units/ 4EJ of the &alue added in the manufacturing
sector output/ >4J of e.ports and pro&ides direct emploment to E million
persons in around >%@ million registered SM) units% The SM) sector in India
contributes to about ?J of IndiaKs +DP during EE8E>% 0ow/ the question
is/ *an it o&erta$e the in&asion of foreign companies through their
inno&ati&e/ qualit/ affordableGreasonable and readil a&ailable productsN
In de&eloping countries li$e India/ ma$ing the SM)s more competiti&e is
particularl pressing as trade liberali-ation and deregulation increase the
competiti&e pressures and reduce the direct subsidies and protection that
+o&ernments offer to SM)s% If our SM)s are to be competiti&e enough to
withstand and fight bac$ the foreign
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M0* products/ the ha&e to be nurtured% According to Porter/ !the onl
meaningful concept of competiti&eness at the national le&el is Producti&it/
which is the &alue of output produced b a unit of labor or capital%
Producti&it in turn depends on both the qualit and features of products
6which determines the prices that the can command7 and the efficienc with
which the can be produced% Producti&it is the prime determinant of a
nationKs long8run standard of li&ing< it is the root cause of national per capita
income#% Further/ !to find answers/ we must focus not on the econom as a
whole but on specific industries and industr segments% ;e must understand
how and wh commerciall &iable s$ills and technolog are created/ which
can onl be full understood at the le&el of particular industr#% International
trade and foreign in&estment can both impro&e a nationKs producti&it as
well as threaten it% The e.pose the nationKs industries to the test of
international standards of producti&it% An industr will lose out if its
producti&it is not sufficientl higher than its ri&als to offset an ad&antagein the local wage rates% As wage rates in India are sufficientl less to attract
multi8nationals/ the onl wa is to increase the producti&it of local small
industries% This means/ the increase in the producti&it of labor i%e% human
resources/ the producti&it of capital and that of the process/ which in turn
relates to the use of technolog that ields qualit and inno&ati&e products%
According to ).8*ommerce and Industr Minister and President of the
0ational Producti&it *ouncil/ Mr% Arun (aitle at the 4?th meeting of 0P*/
!It has become so competiti&e these das that bul$ of the labor/ for reasons
of higher producti&it/ has now shifted to female labor% If we loo$ at other
Asian economies/ Bangladesh or Srilan$a/ *ambodia or Manmar/ we find
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that in manufacturing/ it is female labor/ which is being encouraged because
the ha&e been found more disciplined and hence with higher Producti&it#%
As e&er coin has two sides/ similarl/ e&en SM) financing has a share in
the o&erall financing%
The following are the issues of SM) financing
The are unable to capture mar$et opportunities/ which require large
production facilities and thus could not achie&e economies of scale/
homogenous standards and regular suppl%
The are e.periencing difficulties in purchase of inputs such as raw
materials/ machiner and equipments/ finance/ consulting ser&ices/
new technolog/ highl s$illed labor etc%
Small si-e hinders the internali-ation of functions such as mar$et
research/ mar$et intelligence/ suppl chain/ technolog inno&ation/
training/ and di&ision of labor that impedes producti&it%
)mphasis to preser&e narrow profit margins ma$es the SM)s mopic
about the inno&ati&e impro&ements to their product and processes and
to capture new mar$ets%
The are unable to compete with big plaers in terms of product
qualit/ range of products/ mar$eting abilities and cost%
And most importantl/ absence of a wide range of Financing and
other ser&ices those are a&ailable to raise mone and sustain the business%
Absence of Infrastructure/ qualit labor/ Business acumen and limited
options G opportunities to widen the business%
Poor IT and :nowledge infrastructure%
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CASE STUDY PUNJAB NATIONAL BANK
About Punjab 0ational Ban$ Punjab 0ational Ban$ 6herein referred to as
P0B7 is one of the leading ban$s in India and offers a wide &ariet of
ban$ing ser&ices/ which include corporate and personal ban$ing/ industrial
finance/ agricultural finance/ financing of trade and international ban$ing%
Among the clients of the Ban$ are Indian conglomerates/ medium and small
industrial units/ e.porters/ non8resident Indians and multinational
companies% Punjab 0ational Ban$ was incorporated in the ear 123% Since
its humble beginning o&er hundred ears ago/ the ban$ has grown in stature
to become one of the leading ban$ing institutions in India% P0B is the
second largest PS, ban$ in India with a dominant presence in north India%
:eeping in tune with changing times and to pro&ide its customers more
efficient and speed ser&ice/ the Ban$ has ta$en major initiati&e in the field
of computeri-ation% All the Branches of the Ban$ ha&e been computeri-ed%
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The Ban$ has also launched aggressi&el the concept of CAn Time/ An
;here Ban$ingC through the introduction of *entrali-ed Ban$ing Solution
6*BS7 and o&er EEE offices ha&e alread been brought under its ambit%
Sstem Prior to the Introduction of FineDocs Document Management
Sstem Punjab 0ational Ban$ 6herein referred to as P0B7 is one of the
leading ban$s in India and offers a wide &ariet of ban$ing ser&ices% Punjab
0ational Ban$ is ser&ing o&er >% crore customers through 4E@ branches
and 44? e.tension counters P0B generates enormous amount of customer8
related documents and reports% For an new ban$ing ser&ices requested b
the customer a new application form is created with all his details% This
application form is the $e document that contains all information regarding
the customer/ for the purpose of customer ser&ice and settlement of legal
disputes% To access an &ital information related to the client/ the compan
had to retrie&e the original hard cop of the application% The regular
procedure included ta$ing out a page from the entire set of documents of original application forms% This page was either photocopied or used and
then $ept bac$ with the original form% This led to papers being misplaced or
left them in a dilapidated state/ due to constant wear and tear% Man a times
the original was missing and at times/ the photocop also got stapled to a
wrong application form%
PROBLE+S FACED BY PUNJAB NATIONAL BANK
Punjab 0ational Ban$ generates a lot of phsical documents for their
e.isting clients% Managing these documents 6Sorting/ Inde.ing and
Filing etc7 was a &er hectic process for them%
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The regular procedure included ta$ing out a page from the entire set
of documents of original application forms and then wor$ing on it%
This leads to papers being misplaced or left them in a dilapidated
state/ due to constant wear and tear%
For searching or locating an document G file was a hassle for the
staff in&ol&ed in this process%
Since paper based filesGdocuments were accessible to each and e&er
person/ the were liable to be tampered/ and resulted sharing of an
internal information with an unauthori-ed person%
Phsical documents were prone to damage with time/ moisture/
rodents etc%
Also there was a problem of disaster reco&er
PYRA+ID?S SOLUTION PYRA+ID IT *onsulting proposed Punjab
0ational Ban$ to automate manual Record G Document $eeping process b
pro&iding its Document Management Solution FineDocs H Scanning
Ser&ices FineScan% After the implementation of the DMS/ the application
form and other related documents got scanned and inde.ed with the user
defined inde.ed &alues% After this whene&er there was a need to refer to the
original document/ a search feature of the DMS helped to retrie&e the
scanned cop of the document to the user% Search in Document ManagementSolution has been carried out on the basis of title/ as well as/ $ewords% ;e
proposed a multi user web based Document Management Solution i%e%
FineDocs that encompass strong searching H distribution modules% All the
documents would be stored in a ser&er and thus this application shall act as a
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central repositor of storage of Data H Documents Document Retrie&al
;hene&er the document is required to be referred b the branch/ the user
logs in to our DMS and where able see the scanned cop of the original
document &er easil% The request for retrie&al of the document is routed to
the *entral FineDocs Database and Image Ser&er client while requesting for
a connection/ specifies a preferred site/ to which it wants to get connected%
For document retrie&al/ the user specifies the Inde. of the document he
wants to retrie&e% ;hene&er a request for document retrie&al is made/ the
Image ser&er chec$s whether the document resides on the clientKs preferred
site% If the document resides on the preferred site then it is fetched from there
else it is fetched from the 9ome site of the repositor
BENEFITS TO PUNJAB NATIONAL
BANK DOCU+ENTS SECURITY FineDocs sstem facilitated role
based access on all the records G documents through a user name and a password%
EASY S-ARIN AND COLLABORATION All documents were stored
in FineDocs with proper access control% This wa authori-ed users were able
to &iew Grefer G share and modif the documents%
AUDIT TRAIL' FineDocs has the functionalit b which each and e&er
operation/ e&ent performed b the user li$e/ user logins into the sstem/
action done etc were recorded with the time/ thus increasing the
accountabilit%
SA9ED COURIER COST FineDocs Sstem pro&ided an option to email
documents both within office and outside cutting down on courier cost% As
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the documents were in non8editable TIFF format/ users were in relief that
the will not be tampered and were as safe as an printed document%
SA9ES DUPLICATION AND P-OTOCOPYIN COST Since
electronic documents could be shared among se&eral users at the same time/
there was no need to photocop the documents for sharing/ thus resulting in
a huge sa&ing on the duplication of documents%
DISASTER +ANAE+ENT FineDocs pro&ided an all8in8one solution
for Punjab 0ational Ban$Ks document protection from disasters li$e 0atural
H accidental calamities etc% There is a full fledged bac$up and restore
facilit pro&ided%
RECO++ENDATIONS AND SUESTIONS
After anal-ing the facts and figures it can be recommended
The lending procedure of the selected public ban$s are improper/ as The ban$s are not ha&ing proper norms for reco&er of loans%
There un