IB Project Indian banking industry.doc

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IB PROJECT REPORTON “THE INDIAN

BANKINGINDUSTRY”

201

5



Table of Contents

Introduction.........................................................................................................3Market Analysis..................................................................................................4

Phases Of The Banking Industry Lifecycle......................................................6

SOT Analysis...................................................................................................!

P"STL" Analysis of Indian Banking Industry..............................................##

$ey Trends.........................................................................................................#%

&o'(etition in The Indian Banking Industry...............................................#6

La)our &onditions............................................................................................#*

+inancial and +inancing Issues of a Bank......................................................,4

+uture Landsca(e of Indian Banking Industry.............................................,*

-eferences..........................................................................................................3,

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I/IA BA$I0 I/1ST-2

Introduction

The Indian banking system is financially stable and resilient to the shocks that may arise due

to higher non-performing assets (NPAs) and the global economic crisis, according to a stress

test done by the Resere !ank of India (R!I)" #ignificantly, the R!I has the tenth largest gold

reseres in the $orld after spending %#& '" billion to$ards the purchase of ** metric

tonnes of gold from the International +onetary und (I+) in Noember **" The purchase

has increased the country.s share of gold holdings in its foreign e/change reseres fromappro/imately 0 per cent to about ' per cent" In the annual international ranking conducted by

%1-based !rand inance Plc, * Indian banks hae been included in the !rand inance2

3lobal !anking 4**" In fact, the #tate !ank of India (#!I) has become the first Indian bank

to be ranked among the Top 4* banks in the $orld, capturing the 5'th rank, as per the !rand

inance study" The brand alue of #!I increased from %#& 6"4 billion in ** to %#& 0"'

billion in *6*" I7I7I !ank also made it to the Top 6** list $ith a brand alue of %#& "

billion" The total brand alue of the * Indian banks featured in the list stood at %#& 65

billion "The current market structure in the Indian banking industry falls under the

monopolistic competition type" This implies that there are numerous firms in the industry,

each selling similar or the same products, but presented to the consumers as entirely different

products" Post liberali8ation, the numbers of banks in the Indian conte/t hae increased

rapidly" 3oernmental barriers to the same hae been remoed, and the market itself has

imposed minor barriers"

inancial #ector Reforms set in motion in 66 hae greatly changed the face of Indian

!anking" The banking industry has moed gradually from a regulated enironment to a

deregulated market economy" The market deelopments kindled by liberali8ation and

globali8ation hae resulted in changes in the intermediation role of banks" The pace of

transformation has been more significant in recent times $ith technology acting as a catalyst"9hile the banking system has done fairly $ell in ad:usting to the ne$ market dynamics,

greater challenges lie ahead" 9T; and !asel II, the ree Trade Agreements (TAs) such as

$ith #ingapore, may hae an impact on the shape of the banking industry" !anks $ill also

hae to cope $ith challenges posed by technological innoations in banking" !anks need to

prepare for the changes" In this conte/t the need for dra$ing up a Road +ap to the future

assumes releance"

7ommercial !anks, 7o-operaties and Regional Rural !anks are the three ma:or segments of

rural financial sector in India" Rural financial system, in future has a challenging task of

facing the drastic changes taking place in the banking sector, especially in the $ake of

economic liberali8ation" There is an urgent need for rural financial system to enlarge their

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role functions and range of serices offered so as to emerge as <one stop destination for all

types of credit re=uirements of people in rural>semi-urban centres"

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Market Analysis

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Phases Of The Banking Industry Lifecycle

Indian banking industry is currently in its eolutionary phase $ith gro$ing liberali8ation,

?ntry of foreign banks, direct interention of state, rising technology etc

Phase I Indigenous )anks

@edas and the +anusmriti 1autalyaBs Arthashastra suggested +a/imum and +inimum

Interest rate" 1autalya, Ca:nyaalkya and +anu recommended 64 per cent interest per annum

on capital" !ritish rule almost $iped out these tribes by bringing ?uropean !anks from

urban"They moed to illages" They surie een today" Then came borro$ers kno$n as

#ahukaars $ho used lend money $ith ery little documentationand charged e/orbitant rates

of interests compounded on #horter Interals "#ahukars mostly +ortgaged lending on Dand,

Properties, Ee$els etc and in most cases poor borro$ers surrendered their properties"

Phase II /irect Interention

3oernment Interentions began in 65*s" The Resere !ank $hich is the 7entral !ank $as

created in 654 by passing R!I Act 650" The R!I is the sole authority for issuing bank

notes and the superisory body for banking operations in India " #uperising e/change

control and banking regulations, and administers the goernment.s monetary policy" 3ranting

licenses for ne$ bank branches"

Phase III 5 Li)eraliation

7onstitution of Narasimham committee and its report on !anking reforms in 66"It coered

the areas of interest rate deregulation F directed credit rules, #tatutory preemptions and entry

deregulation for both domestic and foreign banks "Do$ering of the 7RR and #DR "Interest

rate liberali8ation "Go a$ay $ith ?ntry barriers" !y +arch **0, the ne$ priate sector banks

and the foreign banks share shared almost *H of total assets "Prudential Norms act against

NPAs

Phase I7 Transition

+ost Indian banks lagging behind the areas of customer funds transfer and clearing systems "

;er-staffed and not able to compete $ith ne$ generation priate banks "9hile these ne$

banks and foreign banks still face restrictions in their actiities" Ne$ banks are $ell-

capitali8ed, use modern e=uipment and attract high-caliber employees" Indian banks $ere

gien time to strengthen their balance sheets, consolidate and oerall become more robust, so

that they could compete"

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Phase 7 "ntry of +oreign Banks

T$o of domestic banks in India hae turned like oreign !anks" About 0 per cent of

holdings of I7I7I and G7 bank are in the hands of foreigners" Phase II of roadmap foreign

banks may be permitted to hae oerall inestment of 0 per cent in the priate banks of

India in April **" Ne$ banks in India-Royal !ank of #cotland, #$it8erland.s %!# , %#-

based 3? 7apital ,7redit #uisse 3roup ,Industrial and 7ommercial !ank of 7hina "Areas of

7oncentration are Risk +anagement, customi8ing the products and @alue creation"

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SOT Analysis

Streangths

J Indian banks hae compared faourably on gro$th, asset =uality and profitability $ith other

regional banks oer the last fe$ years" The banking inde/ has gro$n at a compounded annual

rate of oer 46 per cent since April **6 as compared to a per cent gro$th in the market

inde/ for the same period"

J Policy makers hae made some notable changes in policy and regulation to help strengthen

the sector" These changes include strengthening prudential norms, enhancing the payments

system and integrating regulations bet$een commercial and co-operatie banks"

J !ank lending has been a significant drier of 3GP gro$th and employment"

J ?/tensie reach the ast net$orking F gro$ing number of branches F AT+s" Indian

banking system has reached een to the remote corners of the country"

J The goernment.s regular policy for Indian bank since 6' has paid rich diidends $ith the

nationalisation of 60 ma:or priate banks of India"

J In terms of =uality of assets and capital ade=uacy, Indian banks are considered to hae

clean, strong and transparent balance sheets relatie to other banks in comparable economies

in its region"

J India has KK scheduled commercial banks (#7!s) - public sector banks (that is $ith the

3oernment of India holding a stake)after merger of Ne$ !ank of India in Pun:ab National

!ank in 65, priate banks (these do not hae goernment stakeL they may be publicly

listed and traded on stock e/changes) and 56 foreign banks" They hae a combined net$ork

of oer 45,*** branches and 6,*** AT+s" According to a report by I7RA Dimited, a rating

agency, the public sector banks hold oer 4 percent of total assets of the banking industry,

$ith the priate and foreign banks holding 6K"H and '"4H respectiely"

oreign banks $ill hae the opportunity to o$n up to 0 per cent of Indian priate sector banks and * per cent of goernment o$ned banks"

eaknesses

J P#!s need to fundamentally strengthen institutional skill leels especially in sales and

marketing, serice operations, risk management and the oerall organisational performance

ethic F strengthen human capital"

J ;ld priate sector banks also hae the need to fundamentally strengthen skill leels"

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J The cost of intermediation remains high and bank penetration is limited to only a fe$

customer segments and geographies"

J #tructural $eaknesses such as a fragmented industry structure, restrictions on capital

aailability and deployment, lack of institutional support infrastructure, restrictie labour

la$s, $eak corporate goernance and ineffectie regulations beyond #cheduled 7ommercial

!anks (#7!s), unless industry utilities and serice bureaus"

J Refusal to dilute stake in P#% banks The goernment has refused to dilute its stake in P#%

banks belo$ 46H thus choking the headroom aailable to these banks for raining e=uity

capital"

J Impediments in sectoral reforms ;pposition from Deft and resultant cautious approach

from the North !lock in terms of approing merger of P#% banks may hamper their gro$th

prospects in the medium term"

O((ortunity

J The market is seeing discontinuous gro$th drien by ne$ products and serices that include

opportunities in credit cards, consumer finance and $ealth management on the retail side, and

in fee-based income and inestment banking on the $holesale banking side" These re=uire

ne$ skills in sales F marketing, credit and operations"

J banks $ill no longer en:oy $indfall treasury gains that the decade-long secular decline in

interest rates proided" This $ill e/pose the $eaker banks"

J 9ith increased interest in India, competition from foreign banks $ill only intensify"

J 3ien the demographic shifts resulting from changes in age profile and household income,

consumers $ill increasingly demand enhanced institutional capabilities and serice leels

from banks"

J Ne$ priate banks could reach the ne/t leel of their gro$th in the Indian banking sector by

continuing to innoate and deelop differentiated business models to profitably sere

segments like the rural>lo$ income and affluent>NI segmentsL actiely adopting ac=uisitions

as a means to gro$ and reaching the ne/t leel of performance in their serice platforms"

Attracting, deeloping and retaining more leadership capacity

J oreign banks committed to making a play in India $ill need to adopt alternatie

approaches to $in the Mrace for the customer and build a alue-creating customer franchise

in adance of regulations potentially opening up post **" At the same time, they should

stay in the game for potential ac=uisition opportunities as and $hen they appear in the near

term" +aintaining a fundamentally long-term alue-creation mindset"

J reach in rural India for the priate sector and foreign bank

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J 9ith the gro$th in the Indian economy e/pected to be strong for =uite some time-

especially in its serices sector-the demand for banking serices, especially retail banking,

mortgages and inestment serices are e/pected to be strong"

J the Resere !ank of India (R!I) has approed a proposal from the goernment to amend

the !anking Regulation Act to permit banks to trade in commodities and commodity

deriaties"

J Diberalisation of ?7! norms The goernment also liberalised the ?7! norms to permit

financial sector entities engaged in infrastructure funding to raise ?7!s" This enabled banks

and financial institutions, $hich $ere earlier not permitted to raise such funds, e/plore this

route for raising cheaper funds in the oerseas markets"

J ybrid capital In an attempt to reliee banks of their capital crunch, the R!I has allo$ed

them to raise perpetual bonds and other hybrid capital securities to shore up their capital" If

the ne$ instruments find takers, it $ould help P#% banks, left $ith little headroom for raisinge=uity" #ignificantly, II and NRI inestment limits in these securities hae been fi/ed at

0H, compared to *H foreign e=uity holding allo$ed in P#% banks"

Threats

J Threat of stability of the system failure of some $eak banks has often threatened the

stability of the system"

J Rise in inflation figures $hich $ould lead to increase in interest rates"

J Increase in the number of foreign players $ould pose a threat to the P#! as $ell as the

priate players"

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P"STL" Analysis of Indian Banking Industry

There e/ist seeral factors in the macro-enironment that influence the decisions of the

managers of any organisation" Ta/ changes, ne$ la$s, trade barriers, demographic change

and goernment policy changes are all e/amples of changes at a macro leel" To help analyse

these factors managers can categorise them using the P?#T?D model"

P"STL" analysis is an acronym for <Political, "conomic, Social, Technological, Legal and

"nironmental analysis< and describes a frame$ork of macro-enironmental factors used in

the enironmental scanning component of strategic management" It is $idely used by

managers and policy makers to analy8e the forces that are driing their industry and ho$these factors influence their businesses and the $hole industry in general"

Political factors

In India the focus of the policy makers is not solely on gro$th, but on sustained gro$th" This

re=uires a gro$th rate $hich is accompanied by moderate leels of inflation and a

manageable fiscal deficit" The key here lies in maintaining the balance bet$een gro$th and

monetary tightening" The baseline pro:ection of 9PI for C66 stands at 4"4H $hich $ould

re=uire significant monetary tightening" #tructural reforms also do affect the banking industry

significantly, there $ere a number of key policy deelopments in the banking sector duringfiscal *6*" In continuation of the liberali8ation of the bankingsector,inEune**,banks$ere

allo$ed to open offsite AT+s $ithout prior approal from R!I" The branch authori8ation

policy $as also liberali8ed in Gecember ** and banks $ere allo$ed to open branches in

Tier III-@I cities $ithout prior R!I approal" In August **, R!I also issued guidelines

relating to the issuance and operation of mobile phone based pre-paid payment instruments"

In Euly **, R!I issued a time schedule for the introduction of adanced approaches of the

!asel II frame$ork in India $hereby banks are re=uired to apply to R!I for migration to

internal models approach for market risk band the standardi8ed approach for operational risk

earliest by April 6, *6* and for adanced measurement approach for operational risk and

internal ratings based approaches for credit risk earliest by April 6, *6" R!I also initiated

seeral measures to increase systemic transparency and customer conenience" In April *6*,

R!I issued guidelines directing banks to replace the benchmark prime lending rate system

$ith a base rate systemeffectieEuly*6*"The guidelines recommend calculating the base rate

taking into consideration cost elements that can be clearly identified and are common across

borro$ers" R!I also issued guidelines reising the method of payment of interest on saings

accounts to a daily aerage basis effectie April 6, *6*"Guring fiscal *6*, $ith an

improement in market conditions, R!I also initiated seeral measures to maintain systemic

stability" In Noember **, the proisioning re=uirement for adances to commercial real

estate classified as standard assets $as increased from *"0H to 6"*H" In Gecember **, R!Idirected banks to achiee a total proisioning coerage ratio of *H by #eptember *6*" In

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ebruary *6*, in its master circular on capital ade=uacy, R!I increased the capital

re=uirements relating to securiti8ation e/posures and proided enhanced guidance on

aluation ad:ustments for illi=uid inestment and deriaties" The guidelines also increased

disclosure re=uirements for credit risk mitigations and securiti8ed e/posures

3oernment and R!I policies affects the banking sector sometimes looking into the political

adantage in a particular party the got" declares some measures to their benefits like $aer

of short term agricultural loans, to attract the farmers otes"

!y doing so the profits of the bank get lo$er do$n" @arious banks in the cooperatie sector

are open and run by the politicians" They e/ploit these banks for their benefits" @arious

chairmenBs of the bank are appointed by the goernment" @arious policies are framed by the

R!I looking at the present situation of the country for better control oer he banks"

"cono'ic factors

!anking is as old as authentic history and the modern commercial banking are traceable to

ancient times" In India banking has been e/isted in one form or the other from time to time"

The present era in banking may be taken to hae commenced

$ith establishment of bank of !engal in 6K*K under the goernment charter and $ith

goernment participation in share capital" Allah bad bank $as started in the year 6K'4 and

Pun:ab national bank in 6K4, etcO ?ery year R!I declares its ' monthly policy and

accordingly the arious measures and rates are implemented $hich has impact on the

banking" Also the union budget affects the banking sector to boost the economy by giing

certain concessions or facilities" If in budget saings are encouraged more deposits $ill

attract the banks and in turn they can lend more money to the agricultural sector andindustrial sector, therefore booming the economy" If the GI limits are rela/ed then more GI

are brought in India through banking channels"

Social factors

!efore nationali8ation of the banks the control of banks $ere in the hands of the priate

parties and only big business houses and the effluent sections of the society $ere getting

benefits of banking in India" In 6' goernment nationali8ed 60 banks" To adopt the social

deelopment in the banking sector it $as necessary for speedy economic progress consistent

$ith social :ustice in democratic politicalL system $hich is free from domination of la$ andin $hich opportunities are open to all" Accordingly $ith national and social ob:ectie bankers

$ere gien direction to help economically $eaker section of the society and also proide

need based finance to all the sectors of the economy $ith fle/ible and liberal attitude" No$

the banks proide arious types of loan to farmers, $orking $omen, professionals, and

traders" Also on apart from the recently education loan to the students and housing loans,

consumer loans, etc""" !anks haing big client or big companies say reliance etcOhae to

proide something like personali8ed banking to their clients because these customers do not

beliee in running about and $aiting in =ueues and getting their $ork done" The bankers hae

to proide these customers $ith special proisions and also at times benefits like food and

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organi8e parties for them" !ut the banks do not mind incurring these costs because of the kind

of business these clients bring for the bank

Technological factors

Indian banking industry, today is in the midst of an IT reolution "A combination of regulatory and competitie reasons hae led to increasing importance of total banking

automation in the Indian !anking Industry"

Information Technology has basically been used under t$o different aenues in !anking" ;ne

is 7ommunication and 7onnectiity and other is !usiness Process Reengineering"

Information technology enables sophisticated product deelopment, better market

infrastructure, implementation of reliable techni=ues for control of risks and helps the

financial intermediaries to reach geographically distant and diersified markets"

In ie$ of this, technology has changed the contours of three ma:or functions performed by

banks, i"e", access to li=uidity, transformation of assets and monitoring of risks" urther,Information technology and the communication net$orking systems hae a crucial bearing

on the efficiency of money, capital and foreign e/change markets"

The first set of applications that could benefit greatly from the use of technological adances

in the computer and communications area relate to the Payment systems $hich form the

lifeline of any banking actiity" The process of reforms in payment and settlement systems

has gained momentum $ith the implementation of pro:ects such as NG# ((Negotiated

Gealing #ystem), 7+# (7entralised unds +anagement #ystem) for better funds

management by banks and #+# (#tructured inancial +essaging #olution) for secure

message transfer" This $ould result in funds transfers and funds-related message transfer to be routed electronically across banks using the medium of the ININ?T" Negotiated dealing

system (NG#), $hich has become operational since ebruary ** and RT3# (Real Time

3ross #ettlement system) scheduled to$ards the end of **5 are other ma:or deelopments in

the area"

Internet has significantly influenced deliery channels of the banks" Internet has emerged as

an important medium for deliery of banking products F serices" Getailed guidelines of R!I

for Internet !anking has prepared the necessary ground for gro$th of Internet !anking in

India

Legal factors

The recent enactments like amendments to Gebt Recoery Tribunal (GRT) procedures and

passage of #ecuritisation and Reconstruction of inancial Assets and ?nforcement of #ecurity

Interest Act, ** (#ARA?#I Act) hae helped to improe the climate for recoery of bank

dues, their impact is yet to be felt at the ground leel" It $ould be necessary to gie further

teeth to the legislations, to ensure that recoery of dues by creditors is possible $ithin a

reasonable time" The procedure for $inding up of companies and sale of assets $ill also hae

to be streamlined"

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In the recent past, 7orporate Gebt Restructuring has eoled as an effectie oluntary

mechanism" This has helped the banking system to take timely correctie actions $hen

borro$ing corporates face difficulties" 9ith the borro$ers gaining confidence in the

mechanism, it is e/pected that 7GR setup $ould gain more prominence making NPA

management some$hat easier" It is e/pected that the issue of giing statutory backing for 7GR system $ill be debated in times to come" In the emerging banking and financial

enironment there is an increased need for self-regulation o$ing to $hich the role of Indian

!anksB Association has become more pronounced as a self regulatory body"

"niron'ental factors

The adent of liberali8ation and globali8ation has seen a lot of changes in the focus of

Resere !ank of India as a regulator of the banking industry" Ge-regulation of interest rates

and moing a$ay from issuing operational prescriptions hae been important changes" The

focus has clearly shifted from micro monitoring to macro management" #uperisory role isalso shifting more to$ards off-site sureillance rather than on-site inspections" The focus of

inspection is also shifting from transaction-based e/ercise to risk-based superision

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$ey Trends

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&o'(etition in The Indian Banking Industry

+orces for change in the industry

The long history of regulation and superision, Indian banks hae limited e/posure to

sensitie sectors such as real estate, e=uity, etc, strict control oer off-balance sheet actiities,

larger holdings of goernment bonds ($hich helps limit credit risk), relatiely $ell

diersified credit portfolios, statutory restrictions on connected lending, ade=uate control oer

currency and maturity mismatches, etc, $hich has insulated them from the aderse impact of

financial crisis and contagion" !anks in India hae played a significant role in the

deelopment of the Indian economy"

o$eer, $ith the structural reforms initiated in the real economy from the early 6*s, it

$as imperatie that a ibrant and competitie financial system should be put in place to

sustain the ongoing process of reforms in the real sector"

The financial sector reforms hae proided the necessary platform for the banking sector to

operate on the basis of operational fle/ibility and functional autonomy, thereby enhancing

efficiency, productiity and profitability" The reforms also brought about structural changes in

the financial sector and succeeded in easing e/ternal constraints on its operation, introducing

transparency in reporting procedures, restructuring and recapitali8ing banks and enhancing

the competitie element in the market through the entry of ne$ banks" The ongoing

reolution in information and communication technology has, ho$eer, largely bypassed the

Indian banking system gien the lo$ initial leel of automation" The competitie

enironment created by financial sector reforms has nonetheless compelled the banks to

gradually adopt modern technology, albeit to a limited e/tent, to maintain their market share"

The impact of the entry of foreign banks on domestic banks is likely to depend on arious

factors such as the structure, strength and competitieness of domestic banks, the share of

foreign banks, and the regulatory>superisory frame$ork" 9hile the entry of foreign bankscould definitely improe the competitie enironment, they are not likely to $eaken domestic

banks" 9ith better technology and e/pertise in offering speciali8ed banking products such as

deriaties, adisory serices, trade finance, etc, the entry of foreign banks can enhance

healthy competition and has a positie spilloer effect on the domestic banks" The domestic

banks $ould be under peer pressure to improe operational efficiency" It needs, ho$eer, to

be recogni8ed that the banking system in India is =uite competitie $ith the presence of

public, priate and foreign banks"

Thus, the ma:or forces for change in the Indian conte/t hae been the follo$ing• consistent and strong regulatory and superisory frame$orkL

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• structural reforms in the real and financial sectorsL

• commitment to adopt and refine regulatory and superisory standards on a par $ith

international best practicesL and

• competition from foreign banks and ne$-generation priate sector banks

Priatiation of state )anks

The optimal si8e of a bank depends on seeral factors and differs bet$een countries

depending on the leel of economic deelopment, the number and diersity of financial

institutions>instruments, the competitie situation in the market, etc" Dooking at the typical

Indian situation, the big banks operating in international markets hae to coe/ist $ith banks

operating only at the national leel, regional rural banks and cooperatie banks, $hich $ill

induce the necessary competition in the market" +ost of the state banks hae a strong

national presence and are catering to the needs of arious segments of the economy" 9e do

not e/pect to split the state banks into smaller entities een after the gradual disinestment of

goernment e=uity in them" Rather, there is a possibility of consolidation for synergi8ing

business>regional strengths, and efforts in this area may be board-drien $ith the functional

autonomy that $ill emerge as a result of such disinestment"

Issues in )ank8s 'ergers 9ith non:)anks

It has been our endeaor to presere the integrity and identity of banks" The actiities that the

banks and their subsidiaries can undertake are restrictie, to ensure that the interests of

e/isting and future depositors are fully protected" !anks are also not allo$ed to undertake

trading in commodities" In pursuit of these ob:ecties, the merger of a bank $ith a non-bank

is generally not faored" o$eer, the merger of a non-bank financial company $ith a bank

is allo$ed sub:ect to the prior approal of the Resere !ank of India and compliance $ith all

the regulatory and superisory standards applicable to banks" The issues that may arise in

such mergers $ould be the bankBs ability to comply $ith statutory and regulatory

re=uirements in respect of liabilities and assets taken oer by it from the non-bank"

Mechanis' for (resering co'(etition

There is no separate agency>mechanism for presering competition in the banking sector"

Promoting competition is, ho$eer, one of the key ob:ecties of financial sector reforms" The

entry of ne$ priate sector and foreign banks and introduction of ne$ products and

technology and operational freedom to banks hae ensured a competitie enironment in the

financial market"

&o'(etition fro' foreign )anks

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9hile entry of foreign banks is bound to affect the oerall competitie situation in the

market, much depends on the policy of the soereign in regard to their entry>e/pansion, the

e/isting share of domestic banks, etc" ;ne of the main thrusts of the banking sector reforms

in India has been to introduce more competition in the banking industry" 9ith regard tomergers, only ery fe$ foreign banks operating in India hae gone through the process of

global mergers" The impact of megamergers taking place at the global leel on the

competitie position of the Indian banking system has been minor, in ie$ of foreign bankBs

limited share in the financial system" At the same time, foreign banks hae the potential, een

$ithout megamergers, to improe their market share, gien their use of sophisticated

technology and capability of introducing innoatie products"

;ther competititors $hich affect banking sector in some $ay are

• Post offices

• +utual fund

• #hare market

• Insurance

• +oney lenders

• amily and riends

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La)our &onditions

;u'an -esources Manage'ent

In the recent past the human resource Policies in banks $ere mainly guided by the concept of permanent employment and its necessary concomitants of creating career paths, terminal

benefits, etc" for the employees" In todayBs fast-changing $orld of employee mobility both

hori8ontally and ertically and alue systems, the public sector banks need to hire the right

talent at market related compensation and to shed surplus manpo$er>staff" Thus many banks

are going for %R# schemes to reduce the burden of e/cessie staff" #chemes like @R# are

going to change the nature of $orkforce $ith many senior and e/perienced persons opting for

it" The key elements that shall proide a competitie edge to banking sector $ill not be

physical assets but kno$ledge assets and information" Therefore, banks must understand ho$

to retain kno$ledge based employees and preent them to migrating to some other

organi8ation" !anks must beliee in people, customer orientation, and continuous

improement of e/cellence" Therefore it becomes necessary for banks to encourage all

employees to take risks and $ork to$ards continuous improements and breakthroughs"

#uccessful banks oercoming the challenges $ill be those that harness technology in a

customer friendly yet cost effectie $ay" This re=uires enormous internal and e/ternal

management and the cru/ of the solution lies in blending human resources $ith information

technology" In the days to come, banks are e/pected to play a ery useful role in the

economic deelopment and the emerging market $ill proide ample business opportunities to

harness" uman Resources +anagement is assuming to be of greater importance" As bankingin India $ill become more and more kno$ledge supported, human capital $ill emerge as the

finest assets of the banking system" %ltimately banking is people and not :ust figures"

I'(ortant As(ects of the ;u'an -esource in Banking Industry

#ome of the general issues that hae concerned unions and employees, especially $omen, in

the recent times are

Increase in 9orkloads - Ne$ technology could lessen the repetitie and heay nature of

certain operations" o$eer, most employees in the insurance and banking industry,

especially in the foreign banks, hae e/perienced serious strain and heay $ork-loads"

According to an employee $orking in the cash department of the 7itibank,

“Before computerization we used to do 30-40 cash entries per day; now we have to do more

than 100. There is a greater pressure of wor more wor and more responsi!i"ity#

Pressure for fle<i)ility -;er the last decade and a half, management has consistently sought

to hae fle/ible manning leels" They hae argued that they need operational fle/ibility in

order to respond =uickly to changes in the market, to introduce technological innoations,and to deal $ith fluctuations in the flo$ of $ork" This, they say, can be achieed by

20 | P a g e



employing a core of secure, permanent, multiskilled, full-time employees and a .periphery. of

marginal, generally single-skilled $orkers $ho may be employed part-time or temporarily,

and directly or indirectly, in a ariety of .ne$. $ays"

&hanges in =o) content - 7hanges in $ork methods caused by the introduction of

computeri8ation affect the content of $ork as $ell as the skills needed by employees" The

direction of changes is, ho$eer, not uniform" T$o diergent tendencies can be obsered" In

routine transactions, certain skills of a mechanical nature, $hich neertheless re=uire a

measure of mental effort and concentration, are no longer re=uired or are needed less" The

skills replacing them are e=ually mechanical but call for less mental effort" The leel of skills

re=uired for the performance of routine transactions therefore actually falls, although the

degree of attention and concentration re=uired $ill be :ust as high or een higher" In contrast,

in the area of customer serices, computeri8ation offers potential for an increase in both the

necessary range and leel of skills, for e/ample, searching for, e/tracting and assimilating

releant information in response to a re=uest" Product innoations hae generally led to an

increase in the importance of formal skills" The informal skills, learned on the :ob that

characteri8ed $omen.s $ork are not seen as important" The professional and technical :obs

increase in number and importance, and formal theoretical kno$ledge is becoming more

important for employees in the banking sector (Tremblay, 66)

Increase in the (ro(ortion of >non:)argaina)le> staff - 7ontrol oer the $orkforce proides

the basis for controlling production processes, output leels, and scheduling" ;er the years,

this control has been loosened as unions hae come to play a role in areas such as $ork

intensity, output leels, health and safety, $hich $ere and still are considered to be.management prerogaties." ;ne of the strategies aailable to $rest control back is to $eaken

unions, both numerically and in terms of the functions $hich the unioni8ed $orkforce

performs" This is one reason behind the dramatic and continuous increase in the non-

bargainable category of $orkers, as compared to unionised $orkers" This casuali8ation

process has occurred in the banking and insurance industry as $ell as in manufacturing" In

almost eery industry in India, computer programmers are in the non-bargainable category"

7omputer programmers are usually in a position to anticipate changes and may use their

kno$ledge to keep other $orkers and unions informed"

;ealth and safety conditions The introduction of ne$ technology has also created a range of

ne$ ha8ards for the $orkers" The deelopment of ne$ materials, processes and substances,

$ithout ade=uate information being made aailable about their impact, may be creating

problems $hich $ill not be perceied for many years" Increases in the scale and pace of

production hae contributed to$ards stress, especially $here there is also inade=uate support

or training or an unfair distribution of $orkloads"

#ome specific health and safety problems hae been sho$n to arise from the introduction of

computer-based e=uipment" @isual Gisplay %nits (@G%s) hae been kno$n to cause a

number of health problems, especially if operated continuously for a long time" .@ideo blues.,eye problems, musculoskeletal problems, painful conditions such as tenosynoitis, aricose

21 | P a g e



eins, ulcers, nausea, headaches, and skin diseases as $ell as reproductie problems such as

miscarriages, stillbirths, birth defects, infertility, menstrual problems and lo$ sperm counts

hae been ery e/tensiely documented (Dabour Research Gepartment, 6K4)" o$eer,

none of the bank employees had been gien any health training"

o'en orkforce in the Banking Sector

There has been a marked increase in $omen.s employment in the financial sector since the 64*s, in

both public sector companies and priate foreign-controlled banks" The increase has been most

marked in metropolitan cities" !y the mid-6'*s the number of $omen entering the banks increased

significantly, intensifying in the 6*s end early 6K*s" o$eer, the general pattern of $omenBs

employment in this sector has sho$n that there has been a sort of persistent inisible glass ceiling

against $omen ac=uiring the top management positions in banking" A source from 7itibank points

out that in 6*, $omen comprised only 4H of the bankBs total $orkforce" !ut by the

6*Bs, $omen occupied a ma:ority of clerical and computer programming :obs at 7itibank" The

ong 1ong and #hanghai !anking 7orporation (#!7) India, also encourages a high recruitment

rate for $omen" #ources say that the bank beliees $omen tend to put in greater effort in their $ork,

and many times, are better =ualified to perform the :ob than their men counterparts" ortune

maga8ine in **4 ranked #!7 among the top 4* employers for $omenand minorities $orld$ide"

o'en e'(loyees organiing The interests of $omen employees hae been e/pressed in different

$ays" In the early 6K*s the 9omen.s 9ing of the All India 7onference of !ank ;fficers.

;rgani8ations (AI7;!;;), open to $omen officers only, $as formed" o$eer the issues that

concern them relate to all $omen employees" The discrimination e/perienced by $omen $orking in

banks is mainly in terms of the lack of infrastructural facilities, the transfer policy, and assumptions

that $omen $ould not be interested in training or in promotions" The 9omen.s 9ing of the

AI7;!;; has been taking up these issues systematically" " The unions in the DI7 hae begun to

organi8e $omen-only meetings and $orkshops" The Insurance ?mployees Association decided in

66 to organi8e $omen employees more effectiely, as the number of $omen employees $as

increasing day by day, $ith oer 4 per cent of the ne$ recruits being $omen" The association has

demanded crche facilities, special leae and better $orking conditions for $omen, and the remoal

of hidden discrimination"

orking conditions of the )anking industry

The aerage $ork$eek for nonsuperisory $orkers in banking $as 54" hours in **" #uperisory

and managerial employees, ho$eer, usually $ork substantially longer hours" T$ele percent of

employees in **, mostly tellers, $orked part-time"

9orking conditions also ary according to $here the employee $orks" ?mployees in a typical branch

$ork $eekdays, some eenings if the bank is open late, and #aturday mornings" ours may be longer

for $orkers in bank branches located in grocery stores and shopping malls, $hich are open most

eenings and $eekends" !ranch office :obs, particularly teller positions, re=uire continual

communication $ith customers, repetitie tasks, and a high leel of attention to security" Tellers also

must stand for long periods in a confined space"

22 | P a g e



To improe customer serice and proide greater access to bank personnel, banks are establishing

centrali8ed phone centers, staffed mainly by customer serice representaties" ?mployees of phone

centers spend most of their time ans$ering phone calls from customers and must be aailable to $ork

eening and $eekend shifts "Administratie support employees may $ork in large processing

facilities, in the banks. head=uarters, or in other administratie offices" +ost support staff $ork a

standard 0*-hour $eekL some may $ork oertime" Those support staff located in the processingfacilities may $ork eening shifts"

7ommercial and mortgage loan officers often $ork out of the office, isiting clients, checking out

loan applications, and soliciting ne$ business" Doan officers may be re=uired to trael if a client is out

of to$n, or to $ork eenings if that is the only time at $hich a client can meet" inancial serice sales

representaties also may isit clients in the eenings and on $eekends to go oer the client.s financial

needs"

The remaining employees located primarily at the head=uarters or other administratie offices usually

$ork in comfortable surroundings and put in a standard $ork$eek" In general, banks are relatielysafe places to $ork" In **, cases of $ork-related in:ury and illness aeraged 6"4 per 6** full-time

$orkers, among the lo$est in the priate sector, $here the rate $as 4"5"

"'(loy'ent in Banking Industry

9ith a steady gro$th in consumer banking sector, India !anking Eobs are emerging as the

most sought after by the :ob seekers" Indian banking industry not only facilitates the

community needs but also triggers economic e/pansion by financing infrastructure and

other deelopments" !anking employment is pro:ected to gro$ more slo$ly than aerage

as consolidation and automation make banks more efficient ";ffice and administratie

support $orkers constitute nearly out of 6* :obsL tellers account for more than6 out of 0

:obs "?mployment of tellers $ill increase more slo$ly than aerage, but :ob openings

should be plentiful because the occupation is large and many tellers leae their :obs eery

year and must be replaced "?mployment gro$th is e/pected in management and

professional :obs, as $ell as for customer serice representaties and securities and

financial serices sales representaties" Eobs aailable Profiles of financial managers, bill

and account collectors, book keeping and auditing clerks, financial serice

representaties, loan officers, bank tellers, etc" are aailable in this kind of banking"

!anking :obs in India hae been gro$ing manifold in spite of the global economicmeltdo$n" ?/perts beliee that :obs in banking are set to increase in ne/t t$o years, they

anticipate the need of almost 4*, *** more employees in this sector "Analytical skills,

communication e/cellence, understanding clientBs needs, operations management, etc" are

some of the =ualities re=uired to begin a career in banking"

23 | P a g e



&urrent ?o)s In Banks ,@#%

a'e of

the Bank 7acancies /esignations"ligi)ility

Syndicate

Bank 6***

Probationary

7lerks

• Age 3roup - 6Kyrs to Kyrs

• +inimum '*H marks in graduation and higher

secondary

• ?/cellent kno$ledge of ?nglish and ernacular

• !asic kno$ledge of computers

Aryaart

0ra'yaBank

A0B

65*

0* ;fficials

F *Probationary

7lerks

• Age 3roup - 6Kyrs to Kyrs

• 3raduate from an affiliated uniersity

• #hould be proficient in ?nglish and local languages

• +ust hae a sound kno$ledge in +# office internet

and net$orking"

&entral

Bank of

India

4**Probationary

;fficers

• Age 3roup - 6 - 5*yrs

• 3raduate from an affiliated uniersity $ith

minimum 44H of marks

•

Giploma in computer applications from a reno$nedtraining institute

;/+&

Bank

@arious

designations

Team Deader,

#erice

#upport

+anagers,

#ales

+anager,

!ranch

eads, etc

• @aries as per their designations

• or detailed information @isit

• http>>$$$"hdfcbank"com>aboutus>careers>career"ht

m

24 | P a g e

http://www.hdfcbank.com/aboutus/careers/career.htm






+inancial and +inancing Issues of a Bank

Bank LiCuidity

Di=uidity for a bank means the ability to meet its financial obligations as they come due"

!ank lending finances inestments in relatiely illi=uid assets, but it fund its loans $ith

mostly short term liabilities" Thus one of the main challenges to a bank is ensuring its o$n

li=uidity under all reasonable conditions"

As per the latest regulations, as on Euly *6*, the Repo rate is increased by *"4 percentage

points and is currently at 4"4H and Reerse Repo Rate is increased by 4* basis points and is

currently at 0"4H" These rates hae been increased to control the inflation in the Indian

?conomy" The increase in Repo Rates $ill make the aailability of cash to the commercial

banks e/pensie and hence they $ill be left $ith less li=uidity" In turn, these banks , haing

lo$ and e/pensie li=uid assets, $ill be forced to lend to the customers at higher lendingrates" The customers in turn $ill borro$ less and the money supply in the economy $ill be

reduced, thus reducing Inflation"

Asset Manage'ent Banking

7ommercial banks differ $idely in ho$ they manage li=uidity" A small bank deries its

funds primarily from customer deposits, normally a fairly stable source in the aggregate" Its

assets are mostly loans to small firms and households, and it usually has more deposits than it

can find credit$orthy borro$ers for" ?/cess funds are typically inested in assets that $ill

proide it $ith li=uidity such as ed funds loaned and goernment securities" The holding of assets that can readily be turned into cash $hen needed, is kno$n as asset management

banking"

Lia)ility Manage'ent Banking

In contrast, large banks generally lack sufficient deposits to fund their main business --

dealing $ith large companies, goernments, other financial institutions, and $ealthy

indiiduals" +ost borro$ the funds they need from other ma:or lenders in the form of short

term liabilities $hich must be continually rolled oer" This is kno$n as liability

management, a much riskier method than asset management" A small bank $ill lose potentialincome if gets its asset management $rong" A large bank that gets its liability management

$rong may fail"

Diability +anagent !anking for meeting the $orking capital re=uirements must be used

:udiciously as it is highly risky strategy" The Indian !anks, being conseratie by nature, use

liability management $ith caution "

$ey to Lia)ility Manage'ent

The key to liability management is al$ays being able to borro$" Therefore a bank.s mostital asset is its credit$orthiness" If there is any doubt about its credit, lenders can easily

25 | P a g e



s$itch to another bank" The rate a bank must pay to borro$ $ill go up rapidly $ith the

slightest suspicion of trouble" If there is serious doubt, it $ill be unable to borro$ at any rate,

and $ill go under" In recent years, large banks hae been making increasing use of asset

management in order to enhance li=uidity, holding a larger part of their assets as securities as

$ell as securiti8ing their loans to recycle borro$ed funds"

The credit $orthiness of banks is assessed and fre=uently reised by 7redit Rating agencies

like I7RA and 7RI#ID"

Bank -uns A situation of )ad liCuidity (osition of the )ank

A bank run is an oer$helming demand for cash by a bank.s depositors" 9ith the adent of

deposit insurance, bank runs by small depositors are largely a thing of the past" Insurance is

limited to &6**,*** per deposit, $hich proides complete coerage to about H of all

depositors" !ut it coers only about three-fourths of the total amount of deposits because

many accounts far e/ceed the insurance limits"

A large depositor assumes a risk and needs to kno$ something about the bank.s o$n balance

sheet" o$eer a healthy balance sheet does not eliminate all risk" ?en if the depositor

kno$s the bank has ade=uate li=uidity, others may not" Darge depositors must therefore be

concerned about $hat others are likely to beliee" A rumor about a bank, een though

unfounded, can trigger a run that causes a solent bank to fail"

Bank &a(ital

A bank.s capital is e=ual to its assets minus its liabilities" It is the margin by $hich itscreditors $ould be coered if assets $ere li=uidated and its liabilities paid off" A measure of

a bank.s financial health is its capital>asset ratio, $hich is re=uired to be aboe a prescribed

minimum"+any banks raise capital by the $ay of issuing IP;s in the stock market"

o$eer, the funds raised by the banks through e=uity are much less than those $hich are

there in the bank by the $ay of Geposits of the customers"

The minimum capital is specified as a percentage of the risk-$eighted assets of the bank"

The follo$ing table sho$s the $eight assigned to each type of asset"

Asset -isk eight

7ash and e=uialents *

3oernment securities *

Interbank loans *"

+ortgage loans *"4

26 | P a g e



;rdinary loans 6"*

#tandby letters of credit 6"*

The !I# rules set re=uirements on t$o categories of capital, Tier 6 capital and Total capital

• Tier 6 capital is the book alue of its stock plus retained earnings" Tier capital is

loan-loss reseres plus subordinated debt" Total capital is the sum of Tier 6 and Tier

capital"

• Tier 6 capital must be at least 0H of total risk-$eighted assets" Total capital must be

at least KH of total risk-$eighted assets"

#ubordinated debt is long term debt that, in case of insolency, is paid off only after

depositors and other creditors hae been paid" Thus it can be used like e=uity to proidethose creditors some protection against insolency"

Leerage -eCuire'ent

The leerage re=uirement on banks is based on the un$eighted sum of all balance sheet

assets" ;ff-balance sheet assets such as standby letters of credit are not counted" The

minimum allo$able ratio of Tier 6 capital to total assets is 5H" !ank regulators can increase

that to as much as 'H depending on the =uality of a bankBs assets" No leerage re=uirement

is specified for total capital"

Meeting the e9 Standards

If a bank is haing difficulty meeting the !I# capital ratio re=uirements, there are a number

of $ays for it to increase the ratio" If it is publicly traded, it can issue ne$ stock or sell more

subordinated debt" o$eer that may be costly if the bank is in a $eak position" #mall

banks generally do not hae the option of selling ne$ stock since most are not publicly

traded"

If the bank cannot increase its e=uity, it can reduce its assets to improe the capital ratio"

o$eer shrinking the balance sheet is not attractie because it hurts profitability" Another option is to seek a merger $ith a stronger bank"

Asset:Lia)ility Manage'ent

Actie management of a bank.s balance sheet is to maintain a mi/ of loans and deposits

consistent $ith its goals for long-term gro$th and risk management" !anks, in the normal

course of business, assume financial risk by making loans at interest rates that differ from

rates paid on deposits" Geposits often hae shorter maturities than loans and ad:ust to current

market rates faster than loans" The result is a balance sheet mismatch bet$een assets (loans)

and liabilities (deposits)"

2 | P a g e

http://www.allbusiness.com/glossaries/balance-sheet/4951809-1.html

http://www.allbusiness.com/glossaries/balance-sheet/4951809-1.html



The function of asset-liability management is to measure and control three leels of financial

risk interest rate risk (the pricing difference bet$een loans and deposits), credit risk (the

probability of default), and li=uidity risk (occurring $hen loans and deposits hae different

maturities)"

A primary ob:ectie in asset-liability management is managing Net Interest +argin (NI+) ,

that is, the net difference bet$een interest earning assets (loans) and interest paying liabilities

(deposits) to produce consistent gro$th in the loan portfolio and shareholder earnings,

regardless of short-term moement in interest rates" The dollar difference bet$een assets

(loans) maturing or repricing and liabilities (deposits) is kno$n as the rate

sensitiity gap (or maturity gap)" !anks attempt to manage this asset-liability gap by pricing

some of their loans at ariable interest rates"

A more precise measure of interest rate risk is duration , $hich measures the impact of

changes in interest rates on the e/pected maturities of both assets and liabilities" In essence,

duration takes the gap report data and conerts that information into present-alue $orth of

deposits and loans, $hich is more meaningful in estimating maturities and the probability that

either assets or liabilities $ill reprice during the period under reie$" !esides financial

institutions, nonfinancial companies also employ asset-liability management, mainly through

the use of deriatie contracts to minimi8e their e/posures on the liability side of the balance

sheet"

Mergers And AcCuisitions

2! | P a g e

http://www.allbusiness.com/glossaries/interest-rate-risk/4943665-1.html

http://www.allbusiness.com/glossaries/credit-risk/4950038-1.html

http://www.allbusiness.com/glossaries/liquidity-risk/4943267-1.html

http://www.allbusiness.com/glossaries/net-interest-cost-nic/4947993-1.html

http://www.allbusiness.com/glossaries/gap/4942811-1.html

http://www.allbusiness.com/glossaries/duration/4953290-1.html

http://www.allbusiness.com/glossaries/interest-rate-risk/4943665-1.html

http://www.allbusiness.com/glossaries/credit-risk/4950038-1.html

http://www.allbusiness.com/glossaries/liquidity-risk/4943267-1.html

http://www.allbusiness.com/glossaries/net-interest-cost-nic/4947993-1.html

http://www.allbusiness.com/glossaries/gap/4942811-1.html

http://www.allbusiness.com/glossaries/duration/4953290-1.html



2" | P a g e



+uture Landsca(e of Indian Banking Industry

our trends change the banking industry $orld oer

6) 7onsolidation of players through mergers and ac=uisitions

) 3lobalisation of operations

5) Geelopment of ne$ technology

0) %niersali8ation of banking

• +ergers and ac=uisitions $ould gather momentum as managements $ill strie to

meet the e/pectations of stakeholders" This could see the emergence of 0-4 $orld

class Indian !anks" As !anks seek niche areas, $e could see emergence of some

national banks of global scale and a number of regional players"

• 9ith increased competition in the banking Industry, the net interest margin of banks

has come do$n oer the last one decade" Diberali8ation $ith 3lobali8ation $ill see

the spreads narro$ing further to 6-6"4H as in the case of banks operating in

deeloped countries"

• Technology as an enabler is separately discussed in the report" It $ould not be out of

place, ho$eer, to state that most of the changes in the landscape of financial sector discussed aboe $ould be technology drien" In the ultimate analysis, successful

institutions $ill be those $hich continue to leerage the adancements in technology

in re-engineering processes and deliery modes and offering state-of-the-art products

and serices proiding complete financial solutions for different types of customers"

• International trade is an area $here IndiaBs presence is e/pected to sho$ appreciable

increase" Presently, Indian share in the global trade is :ust about *"KH "The long term

pro:ections for gro$th in international trade is placed at an aerage of 'H per annum"

9ith the gro$th in IT sector and other IT ?nabled #erices, there is tremendous

potential for business opportunities "1eeping in ie$ the 3GP gro$th forecast under

India @ision **, Indian e/ports can be e/pected to gro$ at a sustainable rate of

64H per annum in the period ending $ith *6* "This again $ill offer enormous scope

to !anks in India to increase their fore/ business and international presence

"3lobali8ation $ould proide opportunities for Indian corporate entities to e/pand

their business in other countries "!anks in India $anting to increase their international

presence could naturally be e/pected to follo$ these corporates and other trade flo$s

in and out of India

The traditional banking functions $ould gie $ay to a system geared to meet all the financial

needs of the customer" 9e could see emergence of highly aried financial products, $hich aretailored to meet specific needs of the customers in the retail as $ell as corporate segments"

30 | P a g e



The adent of ne$ technologies could see the emergence of ne$ financial players doing

financial intermediation"

Retail lending $ill receie greater focus" !anks $ould compete $ith one another to proide

full range of financial serices to this segment" !anks $ould use multiple deliery channels

to suit the re=uirements and tastes of customers "9hile some customers might alue

relationship banking (conentional branch banking), others might prefer conenience banking

(e-banking)"

#tructure and o$nership pattern $ould undergo changes" There $ould be greater presence of

international players in the Indian financial system" #imilarly, some of the Indian banks

$ould become global players" 3oernment is taking steps to reduce its holdings in Public

sector banks to 55H" o$eer the indications are that their P#! character may still be

retained" If the process of consolidation through mergers and ac=uisitions gains momentum,

$e could see the emergence of a fe$ large Indian banks $ith international character" There

could be some large national banks and seeral local leel banks"

Product innoation and (rocess re:engineering

As banks strie to proide alue added serices to customers, the market $ill see the

emergence of strong inestment and merchant banking entities" Ne$ products on the

liabilities side such as fore/ linked deposits, inestment-linked deposits, etc" are likely to be

introduced, as inestors $ith aried risk profiles $ill look for better yields" There $ill be

more and more of tie-ups bet$een banks, corporate clients and their retail outlets to share a

common platform to shore up reenue through increased olumes"

!anks $ill increasingly act as risk managers to corporate and other entities by offering a

ariety of risk management products like options, s$aps and other aspects of financial

management in a multi currency scenario" !anks $ill play an actie role in the deelopment

of deriatie products and $ill offer a ariety of hedge products to the corporate sector and

other inestors" or e/ample, Geriaties in emerging futures market for commodities

$ould be an area offering opportunities for banks" As the integration of markets takes place

internationally, sophistication in trading and speciali8ed e/changes for commodities $ill

e/pand"

Bancassurance is catching up and !anks > inancial Institutions hae started entering

insurance business" rom mere offering of insurance products through net$ork of bank

branches, the business is likely to e/pand through self-designed insurance products after

necessary legislatie changes" This could lead to a spurt in fee-based income of the banks"

The banking system is e/pected to reorient its approach to rural lending" M3oing Rural could

be the ne$ market mantra" Rural market comprises 0H of the population, 06H of +iddle

class and 4KH of disposable income" 7onsumer gro$th is taking place at a fast pace in 6665

illages $ith a population of more than 4*** ";f these, K illages are in #tates, namely

Andhra Pradesh, !ihar, 1erala, +aharashtra, Tamilnadu ,%ttar Pradesh and 9est !engal"

31 | P a g e



!anksB approach to the rural lending $ill be guided mainly by commercial considerations in

future"

#imilarly, !anks $ill look analytically into arious processes and practices as these e/ist

today and may make appropriate changes therein to cut costs and delays" ;utsourcing and

adoption of !P;s $ill become more and more releant, especially $hen !anks go in for

larger olumes of retail business"

32 | P a g e



-eferences

$m!erar% &. ' 1()* +% ,omen,s ing of $"" ndia /onfederation of Ban fficers

rganisation,. paper presented at the ationa" 2eminar on omen,s ovement in ndia- a

review of achievements and issues% 2T% Bom!ay

5ranthi 5iran% aret 2tructure of ndian Baning 2ector% 6an 7013

2.8. Ta"war% /ompetition% conso"idation and systemic sta!i"ity in the ndian !aning industry

$nantharam yer% T..% 9. :enateshwara ao% and . 2itaram urthy

'1((1+% /omputerisation in Baring ndustry in ndia% ndian Ban% adras

eeshit% &.. ' 1((1+% ,$n <neasy =oo at Ban ationa"isation,% paper presented at the

nationa" seminar on ,evita"isation of ndian Baning under Threat of 8rivatisation,%

organized !y the $"" ndia Ban 9mp"oyees $ssociation '$B9$+ in Bom!ay. 4

$pri" 9conomic Times '1((7+% 4 6anuary% Bom!ay

adhuar% .5. '1()>+% ,?uman esources in ndian Bans,% in ndian Bans $ssociation

Bu""etin% Bom!ay% 2eptem!er

2rinivasan% 5. ' 1((1+% ,omen in Baning and 8rofessiona" 2trugg"es,% in /hetana 5a"!agh'ed.+ omen and eve"opment% :o". % ew e"hi% iscovery

Trem!"ay% iane-&a!rie""e ' 1((1+% ,/omputerization% ?uman esources anagement and

edirection of omen,s 2i""s,% in .:. 9risson et a". 'eds+% omen% or and

/omputerization% $msterdam% orth ?o""and

ageswara ao% 5aturi% 700@ ndian /ommercia" Baning A The ew ynamics /$ <niv.

8ress% ?ydera!ad

.2 aghvan% Bans inancia" 2tructure% /hartered $ccountant% $ugust 700(

acroeconomic and onetary eve"opments - 2econd Cuarter eview 700(-10 % 'B+

2.= 2hetty% ndiaDs 9conomic 2tructure and inancia" $rchitecture% nternationa"

eve"opment 9conomics $ssociates '9$s+ %2eptem!er 17-13% 700)

&. ?. eo"a"ar% The /ommercia" Baning 2ector% cto!er 700)

http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/MMDSQ261009.pdf

http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/MMDSQ261009.pdf

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